What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-06 · 128 added, 108 removed, 134 unchanged (64% of the section changed)

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GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale.

GCE’s most significant university partner is Grand Canyon University (“GCU”), a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online and on ground at its campus in Phoenix, Arizona, and at ten off-campus classroom and laboratory sites.

We also provide education services to numerous university partners across the United States.

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In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs.

As of June 30, 2025, GCE provides education services to 20 university partners across the United States.

As of September 30, 2025, GCE provides education services to 20 university partners across the United States.

We plan to continue to add additional university partners and to introduce additional programs with both our existing partners and with new partners.

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Our critical accounting policies are disclosed in the 2024 Form 10-K for the fiscal year ended December 31, 2024.

During the six months ended June 30, 2025, there were no significant changes in our critical accounting policies.

During the nine months ended September 30, 2025, there were no significant changes in our critical accounting policies.

Results of Operations

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Costs and expenses

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General and administrative

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Service revenue .

Our service revenue for the three months ended June 30, 2025 was $247.5 million, an increase of $20.0 million, or 8.8%, as compared to service revenue of $227.5 million for the three months ended June 30, 2024.

The increase year over year in service revenue was primarily due to an increase in partner enrollments of 10.3% to 117,283 at June 30, 2025 as compared to 106,307 at June 30, 2024.

GCU enrollments increased to 113,435 at June 30, 2025, an increase of 10.5% over enrollments at June 30, 2024.

University partner enrollments at our off-campus classroom and laboratory sites were 4,990, an increase of 14.0% over enrollments at June 30, 2024, which includes 1,142 and 746 GCU students at June 30, 2025 and 2024, respectively.

Our service revenue for the three months ended September 30, 2025 was $261.1 million, an increase of $22.8 million, or 9.6%, as compared to service revenue of $238.3 million for the three months ended September 30, 2024.

The increase year over year in service revenue was primarily due to an increase in partner enrollments of 7.9% to 138,073 at September 30, 2025 as compared to 127,977 at September 30, 2024.

GCU enrollments increased to 132,486 at September 30, 2025, an increase of 7.7% over enrollments at September 30, 2024.

University partner enrollments at our off-campus classroom and laboratory sites were 6,912, an increase of 17.4% over enrollments at September 30, 2024, which includes 1,325 and 913 GCU students at September 30, 2025 and 2024, respectively.

Excluding sites closing in 2024 to new enrollments, total enrollments at our off-campus classroom and laboratory sites increased 19.3% between years.

Revenue per student decreased slightly between years primarily due to contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing these partners for certain faculty costs both of which had the effect of reducing revenue per student and a slight decline year over year in revenue per student for online students due to the continued mix shift to students that have a slightly lower net tuition rate.

These decreases were partially offset by the service revenue per student for accelerated Bachelor of Science in Nursing (“ ABSN”) students at off-campus classroom and laboratory sites generating a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of our partners’ students take more credits on average per semester.

Revenue per student decreased slightly between years primarily due to contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing these partners for certain faculty costs which had the effect of reducing revenue per student and a slight decline year over year in revenue per student for online students due to the continued mix shift to students that have a slightly lower net tuition rate.

These decreases were partially offset by an additional day of revenue for the ground campus due to the start date shifting one day of revenue from the fourth quarter to the third quarter in 2025 which had a $0.9 million impact and the service revenue per student for accelerated Bachelor of Science in Nursing (“ABSN”) students at off-campus classroom and laboratory sites generating a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of our partners’ students take more credits on average per semester.

Although partner enrollments at our off-campus classroom and laboratory sites returned to year over year growth, some existing partners continue to experience reduced incoming cohort sizes which has slowed the growth.

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To address this challenge, we have been working with our university partners to adjust their programs to allow students with the required education experience but without a completed bachelor’s degree to enter their programs.

The majority of those partners that have made the adjustment to admit students without a completed bachelor’s degree had new enrollment growth on a year over year basis in the Spring and Summer 2025 semester.

We opened six sites in the year ended December 31, 2024 and opened two new sites in the six months ended June 30, 2025 while closing two sites in which we stopped recruiting new students in 2024 bringing the total number of these sites to 45 at June 30, 2025, which has also positively impacted the enrollment growth.

Enrollments for GCU ground students were 8,579 at June 30, 2025 up from 7,397 at June 30, 2024.

GCU online enrollments were 104,856 at June 30, 2025, up from 95,279 at June 30, 2024, an increase of 10.1% between years.

GCU enrollment declines between March 31 and June 30 of each year as ground traditional enrollment at GCU at June 30 of each year only includes

traditional-aged students taking summer school classes, which is a small percentage GCU’s traditional-aged student body.

The Spring semester for GCU’s traditional-aged student body ends near the end of April each year.

The majority of those partners that have made the adjustment to admit students without a completed bachelor’s degree had new enrollment growth on a year over year basis in the Summer and Fall 2025 semester.

We opened six sites in the year ended December 31, 2024 and opened five new sites in the nine months ended September 30, 2025 while closing two sites in which we stopped recruiting new students in 2024 and merged two sited that were located in the same market bringing the total number of these sites to 47 at September 30, 2025, which has also

positively impacted the enrollment growth.

Enrollments for GCU ground students were 24,671 at September 30, 2025 up from 24,657 at September 30, 2024.

GCU online enrollments were 107,815 at September 30, 2025, up from 98,345 at September 30, 2024, an increase of 9.6% between years.

Technology and academic services .

Our technology and academic services expenses for the three months ended June 30, 2025 were $43.1 million, an increase of $2.1 million, or 5.2%, as compared to technology and academic services expenses of $41.0 million for the three months ended June 30, 2024.

This increase was primarily due to increases in other technology and academic costs and in occupancy and depreciation of $2.3 million and $0.1 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation, of $0.3 million.

Our technology and academic services expenses for the three months ended September 30, 2025 were $44.9 million, an increase of $2.9 million, or 7.0%, as compared to technology and academic services expenses of $42.0 million for the three months ended September 30, 2024.

This increase was primarily due to increases in other technology and academic costs, in employee compensation and related expenses, including share-based compensation and benefit costs and in occupancy and depreciation costs of $1.2 million, $1.1 million and $0.6 million, respectively.

The increases in other technology and academic costs and occupancy and depreciation were primarily due to the costs associated with the increased number of off-campus classroom and laboratory sites to support our 20 university partners and their increased enrollment growth as well as an increase in technology costs and curriculum cost reimbursements to our university partners.

The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs, partially offset by increased headcount to support our 20 university partners and their increased enrollment growth, tenure-based salary adjustments, a significant year over year increase in benefit costs and the increased number of off-campus classroom and laboratory sites year over year.

Our technology and academic services expenses as a percentage of revenue decreased by 0.6% to 17.4% for the three months ended June 30, 2025, from 18.0% for the three months ended June 30, 2024.

This decrease was primarily due to decreased faculty reimbursements between years partially offset by the technology costs and curriculum cost reimbursements.

We anticipate that technology and academic services expenses as a percentage of revenue will increase in the future as we open more off-site classroom and laboratory sites and the growing technology costs and curriculum cost reimbursements.

We also wrote-off $0.4 million in fixed assets at closed sites during the third quarter of 2025.

The increase in employee compensation and related expenses is primarily due to increased headcount to support our 20 university partners and their increased enrollment growth, tenure-based salary adjustments, a significant year over year increase in benefit costs and the increased number of off-campus classroom and laboratory sites year over year.

Our technology and academic services expenses as a percentage of revenue decreased by 0.4% to 17.2% for the three months ended September 30, 2025, from 17.6% for the three months ended September 30, 2024.

This decrease was primarily due to our ability to leverage our technology and academic service expenses across an increasing revenue base, partially offset by increased technology costs and curriculum cost reimbursements and fixed asset disposals.

We anticipate that technology and academic services expenses will increase in the future as we open more off-site classroom and laboratory sites and the growing technology costs and curriculum cost reimbursements and these costs as a percentage of revenue could increase in the future.

Counseling services and support .

Our counseling services and support expenses for the three months ended June 30, 2025 were $83.0 million, an increase of $4.9 million, or 6.3%, as compared to counseling services and support expenses of $78.1 million for the three months ended June 30, 2024.

This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefits, and in occupancy and depreciation costs of $4.9 million, $0.4 million, respectively, partially offset by decreases in other counseling services and support expenses of $0.4 million.

The increases in employee compensation including share-based compensation and benefits were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments, a significant year over year increase in benefit costs and the increased number of off-campus classroom and laboratory sites open year over year.

Our counseling services and support expenses for the three months ended September 30, 2025 were $84.4 million, an increase of $7.2 million, or 9.4%, as compared to counseling services and support expenses of $77.2 million for the three months ended September 30, 2024.

This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefits, in occupancy and depreciation costs and in other counseling services and support expenses of $6.3 million, $0.5 million and $0.4 million, respectively.

The increases in employee compensation including share-based compensation and benefits were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments, a significant year over year increase in benefit costs, severance costs of $0.3 million and the increased number of off-campus classroom and laboratory sites open year over year.

The increase in occupancy and depreciation is primarily related to higher depreciation expense associated with our continued enhancements to technology infrastructure and internal-use software development.

The decrease in other counseling services and support expenses is primarily the result of lower travel costs for our 20 university partners.

Our counseling services and support expenses as a percentage of revenue decreased 0.8% to 33.5% for the three months ended June 30, 2025, from 34.3% for the three months ended June 30, 2024 primarily due to our ability to leverage our counseling services and support expenses across an increasing revenue base.

We anticipate that counseling services and support expense will increase in the future as we continue to invest to meet our partners’ needs although we might continue to have a decline in these costs as a percentage of revenue.

The increase in other counseling services and support expenses is primarily the result of higher travel costs to service our 20 university partners.

Our counseling services and support expenses as a percentage of revenue decreased 0.1% to 32.3% for the three months ended September 30, 2025, from 32.4% for the three months ended September 30, 2024 primarily due to our ability to leverage our counseling services and support expenses across an increasing revenue base.

We anticipate that counseling services and support expense will increase in the future as we continue to invest to meet our partners’ needs and these costs as a percentage of revenue could increase in the future.

Marketing and communication .

Our marketing and communication expenses for the three months ended June 30, 2025 were $56.0 million, an increase of $3.1 million, or 5.9%, as compared to marketing and communication expenses of $52.9 million for the three months ended June 30, 2024.

This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $2.6 million and increased employee compensation, including share-based compensation and benefits of $0.5 million.

Our marketing and communication expenses as a percentage of revenue decreased by 0.7% to 22.6% for the three months ended June 30, 2025, from 23.3% for the three months ended June 30, 2024, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base.

We anticipate that marketing and communication expenses will increase in the future as we continue to invest to meet our partners’ needs although we anticipate a continued decline in these costs as a percentage of revenue in the second half of 2025.

Our marketing and communication expenses for the three months ended September 30, 2025 were $59.1 million, an increase of $4.6 million, or 8.5%, as compared to marketing and communication expenses of $54.5 million for the three months ended September 30, 2024.

This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $4.1 million, increased employee compensation, including share-based compensation and benefits of $0.4 million and increased occupancy and depreciation expenses of $0.1 million.

Our marketing and communication expenses as a percentage of revenue decreased by 0.3% to 22.6% for the three months ended September 30, 2025, from 22.9% for the three months ended September 30, 2024, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base.

We anticipate that marketing and communication expenses will increase in the future as we continue to invest to meet our partners’ needs and these costs as a percentage of revenue could increase in the future.

General and administrative .

Our general and administrative expenses for the three months ended June 30, 2025 were $11.4 million, an increase of $0.8 million, or 7.3%, as compared to general and administrative expenses of $10.6 million for the three months ended June 30, 2024.

This increase was primarily attributable to an increase in professional

fees, including legal costs of $1.4 million, an increase in other general and administrative costs of $0.5 million and an increase in occupancy and depreciation expense of $0.2 million.

These increases were partially offset by a decrease in employee compensation, including share-based compensation of $1.3 million, which is primarily due to a $1.1 million in severance costs recorded in the second quarter of 2024 related to an executive officer that resigned effective June 30, 2024.

The increases in professional fees were due to higher litigation services.

The increase in other general and administrative costs was due to higher charitable contributions.

Our general and administrative expenses as a percentage of revenue decreased by 0.1% to 4.6% for the three months ended June 30, 2025, from 4.7% for the three months ended June 30, 2024 primarily due to our ability to leverage our general and administrative expenses across an increasing revenue base.

We anticipate that general and administrative expenses will increase in the future and these costs as a percentage of revenue might increase if legal costs rise faster than our revenue growth rate.

Our general and administrative expenses for the three months ended September 30, 2025 were $15.2 million, an increase of $0.8 million, or 5.5%, as compared to general and administrative expenses of

$14.4 million for the three months ended September 30, 2024.

This increase was primarily attributable to an increase in contributions in lieu of state income taxes of $0.5 million, an increase in professional fees, including legal costs of $0.3 million and an increase in employee compensation, including share-based compensation and benefit costs of $0.1 million.

These increases were partially offset by a decrease in occupancy and depreciation expense of $0.1 million.

The increases in professional fees was primarily due to higher legal costs between years.

Our general and administrative expenses as a percentage of revenue decreased by 0.2% to 5.8% for the three months ended September 30, 2025, from 6.0% for the three months ended September 30, 2024 primarily due to our ability to leverage our general and administrative expenses across an increasing revenue base.

We anticipate that general and administrative expenses will increase in the future and these costs as a percentage of revenue could increase in the future.

Reserve for litigation settlement .

A reserve for litigation settlement of $35.0 million was recorded in the three months ended September 30, 2025 related to the settlement of the qui tam lawsuit.

See Note 8 – Commitments and Contingencies , in Notes to Consolidated Financial Statements for further discussion.

Lease termination, impairment and other .

We incurred $2.4 million in lease termination and impairment charges in the third quarter of 2025 related to leases.

In the third quarter of 2025, we agreed to pay $1.3 million for our Indiana office space to early terminate our lease effective in June 2027.

We also entered into a sublease of that space for the period from January 2026 to June 2027 and entered into a new lease for a much smaller space effective January 2026.

Additionally, an impairment was recorded in the amount of $1.1 million in the three months ended September 30, 2025 for the two off-campus classroom and laboratory sites that were closed during the quarter.

Amortization of intangible assets .

Amortization of intangible assets for the three months ended June 30, 2025 and 2024 were $2.1 million for both periods.

Amortization of intangible assets for the three months ended September 30, 2025 and 2024 were $2.1 million for both periods.

As a result of the Orbis Education acquisition in 2019, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

Investment interest and other .

Investment interest and other for the three months ended June 30, 2025 was $3.2 million, a decrease of $0.9 million, as compared to $4.1 million for the three months ended June 30, 2024 due to slightly lower returns on our investment balances and the recognition of a loss on an equity investment in the second quarter of 2025 of $0.5 million.

Investment interest and other for the three months ended September 30, 2025 was $3.6 million, a decrease of $0.6 million, as compared to $4.2 million for the three months ended September 30, 2024 due to slightly lower returns on our investment balances.

Income tax expense .

Income tax expense for the three months ended June 30, 2025 was $13.5 million, an increase of $1.5 million, or 12.7%, as compared to income tax expense of $12.0 million for the three months ended June 30, 2024.

Our effective tax rate was 24.5% during the three months ended June 30, 2025 compared to 25.5% during the three months ended June 30, 2024.

The effective tax rate decreased year over year due to changes in state income taxes .

Our net income for the three months ended June 30, 2025 was $41.5 million, an increase of $6.6 million, or 19.1% as compared to $34.9 million for the three months ended June 30, 2024, due to the factors discussed above.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Income tax expense for the three months ended September 30, 2025 was $5.4 million, a decrease of $5.5 million, or 50.4%, as compared to income tax expense of $10.9 million for the three months ended September 30, 2024.

The decrease in income tax expense is due to the decrease in income before taxes partially offset by a higher effective tax rate.

Our effective tax rate was 24.9% during the three months ended September 30, 2025 compared to 20.8% during the three months ended September 30, 2024.

The effective tax rate increased year over year due to the tax treatment of the litigation settlement recorded in the third quarter and changes in state income taxes partially offset by an increase in the contributions made in lieu of state income taxes from $4.5 million in the third quarter of 2024 to $5.0 million in the third quarter of 2025 .

Our net income for the three months ended September 30, 2025 was $16.3 million, a decrease of $25.2 million, or 60.8% as compared to $41.5 million for the three months ended September 30, 2024, due to the factors discussed above.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Service revenue .

Our service revenue for the six months ended June 30, 2025 was $536.8 million, an increase of $34.7 million, or 6.9%, as compared to service revenue of $502.1 million for the six months ended June 30, 2024.

The increase year over year in service revenue was primarily due to an increase in partner enrollments of 10.3% to 117,283 at June 30, 2025 as compared to 106,307 at June 30, 2024.

GCU enrollments increased to 113,435 at June 30, 2025, an increase of 10.5% over enrollments at June 30, 2024.

Our service revenue for the nine months ended September 30, 2025 was $798.0 million, an increase of $57.6 million, or 7.8%, as compared to service revenue of $740.4 million for the nine months ended September 30, 2024.

The increase year over year in service revenue was primarily due to an increase in partner enrollments of 7.9% to 138,073 at September 30, 2025 as compared to 127,977 at September 30, 2024.

GCU enrollments increased to 132,486 at September 30, 2025, an increase of 7.7% over enrollments at September 30, 2024.

Excluding sites closing in 2024 to new enrollments, total enrollments at our off-campus classroom and laboratory sites increased 19.3% between years.

Revenue per student decreased slightly between years primarily due to the additional day for leap year in 2024 which added additional service revenue of $1.5 million as compared to the current year and contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing these partners for certain faculty costs, both of which had the effect of reducing revenue per student and a slight decline year over year in revenue per student for online students due to the continued mix shift to students that have a slightly lower net tuition rate .

These decreases were partially offset by the s ervice revenue per student for ABSN students at off-campus classroom and laboratory sites generating a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of our partners’ students take more credits on average per semester.

continued mix shift to students that have a slightly lower net tuition rate.

These decreases were partially offset by an additional day of revenue for the ground campus due to the start date shifting one day of revenue from the fourth quarter to the third quarter in 2025 which had a $0.9 million impact and the service revenue per student for ABSN students at off-campus classroom and laboratory sites generating a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of our partners’ students take more credits on average per semester.

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We opened six sites in the year ended December 31, 2024 and opened two sites in the six months ended June 30, 2025 while closing two sites in which we stopped recruiting new students in 2024 bringing the total number of these sites to 45 at June 30, 2025, which has also positively impacted the enrollment growth.

Enrollments for GCU ground students were 8,579 at June 30, 2025 up from 7,397 at June 30, 2024.

GCU online enrollments were 104,856 at June 30, 2025, up from 95,279 at June 30, 2024, an increase of 10.1% between years.

GCU enrollment declines between March 31 and June 30 of each year as ground traditional enrollment at GCU at June 30 of each year only includes traditional-aged students taking summer school classes, which is a small percentage GCU’s traditional-aged student body.

The Spring semester for GCU’s traditional-aged student body ends near the end of April each year.

Enrollments for GCU ground students were 24,671 at September 30, 2025 up from 24,657 at September 30, 2024.

GCU online enrollments were 107,815 at September 30, 2025, up from 98,345 at September 30, 2024, an increase of 9.6% between years.

Technology and academic services .

Our technology and academic services expenses for the six months ended June 30, 2025 were $84.8 million, an increase of $4.7 million, or 5.8%, as compared to technology and academic services expenses of $80.1 million for the six months ended June 30, 2024.

This increase was primarily due to increases in other technology and academic costs and in occupancy and depreciation of $4.3 million and $0.8 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation, of $0.4 million.

Our technology and academic services expenses for the nine months ended September 30, 2025 were $129.7 million, an increase of $7.6 million, or 6.2%, as compared to technology and academic services expenses of $122.1 million for the nine months ended September 30, 2024.

This increase was primarily due to increases in other technology and academic costs, in occupancy and depreciation costs and in employee compensation and related expenses, including share-based compensation and increased benefit costs of $5.5 million, $1.4 million and $0.7 million, respectively.

Our technology and academic services expenses as a percentage of revenue decreased by 0.2% to 15.8% for the six months ended June 30, 2025, from 16.0% for the six months ended June 30, 2024.

This decrease was primarily due to decreased faculty reimbursements between years partially offset by the technology costs and curriculum cost reimbursements.

We also wrote-off $0.4 million in fixed assets at closed sites during the third quarter of 2025.

Our technology and academic services expenses as a percentage of revenue decreased by 0.2% to 16.3% for the nine months ended September 30, 2025, from 16.5% for the nine months ended September 30, 2024.

This decrease was primarily due to our ability to spread increased technology and academic service costs across an increasing revenue base, partially offset by increased technology costs and curriculum cost reimbursements and fixed asset disposals.

Counseling services and support .

Our counseling services and support expenses for the six months ended June 30, 2025 were $169.8 million, an increase of $8.8 million, or 5.5%, as compared to counseling services and support expenses of $161.0 million for the six months ended June 30, 2024.

Our counseling services and support expenses for the nine months ended September 30, 2025 were $254.3 million, an increase of $16.1 million, or 6.8%, as compared to counseling services and support expenses of $238.2 million for the nine months ended September 30, 2024.

This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefits, and in occupancy and depreciation costs of $15.8 million and $1.3 million, respectively, partially offset by decreases in other counseling services and support expenses of $1.0 million.

The increases in employee compensation including share-based compensation and benefits were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments, a significant year over year increase in benefit costs, severance costs of $0.3 million and the increased number of off-campus classroom and laboratory sites open year over year.

The decrease in other counseling services and support expenses is primarily the result of lower travel costs for our 20 university partners.

Our counseling services and support expenses as a percentage of revenue decreased 0.5% to 31.6% for the six months ended June 30, 2025, from 32.1% for the six months ended June 30, 2024 primarily due to our ability to leverage our counseling services and support expenses across an increasing revenue base.

The decrease in other counseling services and support expenses is primarily the result of lower travel costs to service our 20

university partners.

Our counseling services and support expenses as a percentage of revenue decreased 0.3% to 31.9% for the nine months ended September 30, 2025, from 32.2% for the nine months ended September 30, 2024 primarily due to our ability to leverage our counseling services and support expenses across an increasing revenue base.

Marketing and communication .

Our marketing and communication expenses for the six months ended June 30, 2025 were $116.4 million, an increase of $8.2 million, or 7.5%, as compared to marketing and communication expenses of $108.2 million for the six months ended June 30, 2024.

Our marketing and communication expenses for the nine months ended September 30, 2025 were $175.5 million, an increase of $12.7 million, or 7.8%, as compared to marketing and communication expenses of $162.8 million for the nine months ended September 30, 2024.

This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $11.3 million, increased employee compensation, including share-based compensation and benefits of $1.3 million and increased occupancy and depreciation costs of $0.1 million.

Our marketing and communication expenses as a percentage of revenue increased by 0.1% to 21.7% for the six months ended June 30, 2025, from 21.6% for the six months ended June 30, 2024, primarily due to increased advertising to achieve our university partners’ enrollment goals.

We anticipate that marketing and communication expenses will increase in the

future as we continue to invest to meet our partners’ needs although we anticipate a decline in these costs as a percentage of revenue in the second half of 2025.

Our marketing and communication expenses as a percentage of revenue stayed flat at 22.0% for both the nine months ended September 30, 2025 and 2024.

We anticipate that marketing and communication expenses will increase in the future as we continue to invest to meet our partners’ needs and these costs as percentage of revenue could increase in the future.

General and administrative .

Our general and administrative expenses for the six months ended June 30, 2025 were $21.8 million, an increase of $0.4 million, or 1.9%, as compared to general and administrative expenses of $21.4 million for the six months ended June 30, 2024.

Our general and administrative expenses for the nine months ended September 30, 2025 were $36.9 million, an increase of $1.2 million, or 3.3%, as compared to general and administrative expenses of $35.7 million for the nine months ended September 30, 2024.

This increase was primarily attributable to an increase in professional fees, including legal costs of $1.3 million, an increase in other general and administrative costs of $1.0 million and an increase in occupancy and depreciation expense of $0.1 million.

These increases were partially offset by a decrease in employee compensation, including share-based compensation of $1.2 million, which is primarily due to a $1.1 million in severance costs recorded in the second quarter of 2024 related to an executive officer that resigned effective June 30, 2024.

The increases in professional fees were due to higher litigation services.

The increase in other general and administrative costs was due to higher charitable contributions.

Our general and administrative expenses as a percentage of revenue decreased by 0.2% to 4.1% for the six months ended June 30, 2025, from 4.3% for the six months ended June 30, 2024 primarily due to our ability to leverage our general and administrative expenses across an increasing revenue base.

We anticipate that general and administrative expenses will increase in the future and these costs as a percentage of revenue might increase if legal costs rise faster than our revenue growth rate.

These increases were partially offset by a decrease in employee compensation, including share-based compensation of $1.2 million, which is primarily due to $1.1 million in severance costs recorded in the second quarter of 2024 related to an executive officer that resigned effective June 30, 2024.

The increases in professional fees was primarily due to higher legal costs between years.

The increase in other general and administrative costs was due to higher contributions in lieu of state income taxes from $4.5 million in the first nine months of 2024 to $5.0 million in the first nine months of 2025 and higher charitable contributions.

Our general and administrative expenses as a percentage of revenue decreased by 0.2% to 4.6% for the nine months ended September 30, 2025, from 4.8% for the nine months ended September 30, 2024 primarily due to our ability to leverage our general and administrative expenses across an increasing revenue base.

We anticipate that general and administrative expenses will increase in the future and these costs as a percentage of revenue could increase in the future.

Reserve for litigation settlement .

A reserve for litigation settlement of $35.0 million was recorded in the nine months ended September 30, 2025 related to the settlement of the qui tam lawsuit.

See Note 8 – Commitments and Contingencies , in Notes to Consolidated Financial Statements for further discussion.

Lease termination, impairment and other .

We incurred $2.4 million in lease termination and impairment charges in the nine months ended September 30, 2025 related to leases.

In the third quarter of 2025, we agreed to pay $1.3 million for our Indiana office space to early terminate our lease effective in June 2027.

We also entered into a sublease of that space for the period from January 2026 to June 2027 and entered into a new lease for a much smaller space effective January 2026.

Additionally, an impairment was recorded in the amount of $1.1 million in the nine months ended September 30, 2025 for the two off-campus classroom and laboratory sites that were closed during the quarter.

Amortization of intangible assets .

Amortization of intangible assets for the six months ended June 30, 2025 and 2024 were $4.2 million for both periods.

Amortization of intangible assets for the nine months ended September 30, 2025 and 2024 were $6.3 million for both periods.

As a result of the Orbis Education acquisition in 2019, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

Investment interest and other .

Investment interest and other for the six months ended June 30, 2025 was $6.6 million, a decrease of $1.2 million, as compared to $7.8 million for the six months ended June 30, 2024 due to slightly lower returns on our investment balances and the recognition of a loss on an equity investment in the second quarter of 2025 of $0.5 million.

Investment interest and other for the nine months ended September 30, 2025 was $10.2 million, a decrease of $1.8 million, as compared to $12.0 million for the nine months ended September 30, 2024 due to slightly lower returns on our investment balances and the recognition of a loss on an equity investment in the second quarter of 2025 of $0.5 million.

Income tax expense .

Income tax expense for the six months ended June 30, 2025 was $33.3 million, an increase of $1.2 million, or 3.5%, as compared to income tax expense of $32.1 million for the six months ended June 30, 2024.

Our effective tax rate was 22.7% during the six months ended June 30, 2025 compared to 23.8% during the six months ended June 30, 2024.

The effective tax rate decreased year over year primarily due to an increase in excess tax benefits of $2.7 million as compared to $1.5 million in the six months ended June 30, 2025 and 2024, respectively.

Income tax expense for the nine months ended September 30, 2025 was $38.6 million, a decrease of $4.4 million, or 10.2%, as compared to income tax expense of $43.0 million for the nine months ended September 30, 2024.

This decrease is primarily due to the decrease in our income before taxes between years.

effective tax rate was 23.0% during the nine months ended September 30, 2025 compared to 23.0% during the nine months ended September 30, 2024.

The effective tax rate was favorably impacted year over year primarily due to an increase in excess tax benefits of $2.7 million as compared to $1.5 million in the nine months ended September 30, 2025 and 2024, respectively.

The inclusion of excess tax benefits and deficiencies as a component of our income tax expense increases the volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from share-based compensation awards are dependent on our stock price at the date the restricted stock awards vest.

Our restricted stock awards vest in March each year so any benefit or expense will primarily impact the first quarter each year.

The effective tax rate was also impacted by changes in state income taxes.

Our net income for the six months ended June 30, 2025 was $113.2 million, an increase of $10.3 million, or 10.0% as compared to $102.9 million for the six months ended June 30, 2024, due to the factors discussed above.

The effective tax rate was also favorably impacted by an increase in contributions made in lieu of state income taxes to $5.0 million as compared to $4.5 million in the prior year.

These increases were offset by a higher effective tax rate due to the tax treatment of the litigation settlement recorded in the third quarter and changes in state income taxes.

Our net income for the nine months ended September 30, 2025 was $129.4 million, a decrease of $15.0 million, or 10.3% as compared to $144.4 million for the nine months ended September 30, 2024, due to the factors discussed above.

Our net revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in our university partners’ enrollment.

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Liquidity and Capital Resources

As of June 30,

As of September 30,

As of December 31,

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Cash, cash equivalents and investments

Our liquidity position, as measured by cash and cash equivalents and investments increased by $49.3 million between December 31, 2024 and June 30, 2025, which was largely attributable to cash provided by operations exceeding our share repurchases, changes in our investment balance and capital expenditures during the six months ended June 30, 2025.

Our liquidity position, as measured by cash and cash equivalents and investments decreased by $47.6 million between December 31, 2024 and September 30, 2025, which was largely attributable to cash expended for investing activities, capital expenditures and share repurchases exceeding our cash provided by operations during the nine months ended September 30, 2025.

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

Cash Flows from Operating Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

Net cash provided by operating activities

The increase in cash generated from operating activities between the six months ended June 30, 2024 and the six months ended June 30, 2025 was primarily due to increased income slightly offset by changes in working capital balances.

Accounts payable and accrued liabilities increased by $0.4 million between December 31, 2024 and June 30, 2025 compared to the increase of $13.3 million between December 31, 2023 and June 30, 2024, a decline year over year in cash provided by operating activities of $12.9 million due to timing of vendor payments and timing differences between the last pay period at the end of each fiscal quarter.

Prepaid expenses and other assets increased $4.7 million between December 31, 2024 and June 30, 2025 compared to an increase of $0.7 million between December 31, 2023 and June 30, 2024, a decline year over year in cash provided by operating activities of $4.0 million.

Accounts receivable decreased by $55.2 million between December 31, 2024 and June 30, 2025 compared to the decrease of $49.4 million between December 31, 2023 and June 30, 2024, a $5.8 million increase year over year in cash provided by operating activities due to the timing of collections on receivable.

Deferred revenue increased by $14.2 million between December 31, 2024 and June 30, 2025 compared to the increase of $7.2 million between December 31, 2023 and June 30, 2024, a $7.0 million increase year over year in cash provided by operating activities, due to the timing of instructional courses completion dates.

The decrease in cash generated from operating activities between the nine months ended September 30, 2024 and the nine months ended September 30, 2025 was primarily due to changes in working capital balances partially offset by increased net income when adding back the reserve for litigation settlement.

Accounts payable increased by $10.7 million between December 31, 2023 and September 30, 2024 compared to the decrease of $8.5 million between December 31, 2024 and September 30, 2025, a decline year over year in cash provided by operating activities of $19.2

million due to timing of vendor payments.

Income tax receivable/payable amounts decreased by $10.6 million between December 31, 2023 and September 30, 2024 compared to the decrease of $30.6 million between December 31, 2024 and September 30, 2025, a $20.0 million decrease year over year in cash provided by operating activities due to timing of income tax payments.

The decrease in the income tax payable relates to third quarter transactions that reduced pre-tax book income and accelerated certain tax deductions, primarily the reserve for the Qui Tam settlement and the passage of the One Big Beautiful Bill Act on July 4, 2025.

We define working capital as the assets and liabilities, other than cash, generated through the Company’s primary operating activities.

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Cash Flows from Investing Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

Net cash used in investing activities

Investing activities consumed $198.7 million of cash in the six months ended June 30, 2025 compared to $20.0 million in the six months ended June 30, 2024.

Cash used in investing activities includes net investment activity.

In the six months ended June 30, 2025 and 2024, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $180.7 million and $1.9 million, respectively.

In the first six months of 2025 and 2024 cash used in investing activities also included capital expenditures totaling $17.6 million and $17.9 million, respectively.

Net cash (used in) provided by investing activities

Investing activities consumed $205.6 million of cash in the nine months ended September 30, 2025 compared to providing $71.3 million of cash in the nine months ended September 30, 2024.

Cash used in investing activities includes investment activity and the change between years in net investing activities is primarily due to investment activity.

In the nine months ended September 30, 2025, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $177.8 million.

In the nine months ended September 30, 2024, proceeds from the sale of investments, net of purchases of available-for-sale securities were $99.0 million.

In the first nine months of 2025 and 2024 cash used in investing activities also included capital expenditures totaling $27.2 million and $27.5 million, respectively.

Capital expenditures for both periods primarily consisted of leasehold improvements and equipment for new off-campus classroom and laboratory sites, as well as purchases of computer equipment, internal use software projects and furniture and equipment to support our increasing employee headcount.

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Cash Flows from Financing Activities

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

Net cash used in financing activities

Financing activities consumed $125.2 million of cash in the six months ended June 30, 2025 compared to $68.7 million in the six months ended June 30, 2024.

During the six months ended June 30, 2025 and 2024, $115.7 million and $61.3 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program.

Financing activities consumed $164.7 million of cash in the nine months ended September 30, 2025 compared to $108.3 million in the nine months ended September 30, 2024.

During the nine months ended September 30, 2025 and 2024, $155.2 million and $100.5 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program.

In 2025 and 2024, $9.5 million and $7.8 million, respectively, of cash was utilized to purchase common shares withheld in lieu of income taxes resulting from the vesting of restricted share awards.

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The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.

We repurchased 654,697 shares of common stock in the six months ended June 30, 2025.

At June 30, 2025, there remains $183.9 million available under our share repurchase authorization .

We repurchased 874,066 shares of common stock in the nine months ended September 30, 2025.

At September 30, 2025, there remains $144.4 million available under our share repurchase authorization .

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis