Grand Canyon Education, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes that appear elsewhere in this report. Forward-Looking Statements This Quarterly Report on Form 10-Q, including Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations , contains certain “forward-looking statements” within the meaning of Section 27A of Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, without limitation, statements regarding: proposed new programs; statements as to whether regulatory developments or other matters may or may not have a material adverse effect on our financial position, results of operations, or liquidity; statements concerning projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, and future economic performance; and statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, the negative of these expressions, as well as statements in future tense, identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause our actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, include, but are not limited to: ● legal and regulatory actions taken against us related to our services business, or against our university partners that impact their businesses and that directly or indirectly reduce the service revenue we can earn under our master services agreements; ● the occurrence of any event, change or other circumstance that could give rise to the termination of any of the key university partner agreements; ● our ability to properly manage risks and challenges associated with strategic initiatives, including potential acquisitions or divestitures of, or investments in, new businesses, acquisitions of new properties and new university partners, and expansion of services provided to our existing university partners; ● our failure to comply with the extensive regulatory framework applicable to us either directly as a third-party service provider or indirectly through our university partners, including Title IV of the Higher Education Act and the regulations thereunder, state laws and regulatory requirements, and accrediting commission requirements, and the results of related legal and regulatory actions that arise from such failures; ● the harm to our business, results of operations, and financial condition, and harm to our university partners resulting from epidemics, pandemics, or public health crises; ● the harm to our business and our ability to retract and retain students resulting from capacity constraints, system disruptions, or security breaches in our online computer networks and phone systems; ● the ability of our university partners’ students to obtain federal Title IV funds, state financial aid, and private financing; ● potential damage to our reputation or other adverse effects as a result of negative publicity in the media, in the industry or in connection with governmental reports or investigations or otherwise, affecting us or other companies in the education services sector; ● risks associated with changes in applicable federal and state laws and regulations and accrediting commission standards, including pending rulemaking by the United States Department of Education applicable to us directly or indirectly through our university partners; 22 Table of Contents ● competition from other education service companies in our geographic region and market sector, including competition for students, qualified executives and other personnel; ● our expected tax payments and tax rate; ● our ability to hire and train new employees, and develop and train existing employees; ● the pace of growth of our university partners’ enrollment and its effect on the pace of our own growth; ● fluctuations in our revenues due to seasonality; ● our ability, on behalf of our university partners, to convert prospective students to enrolled students and to retain active students to graduation; ● our success in updating and expanding the content of existing programs and developing new programs in a cost-effective manner or on a timely basis for our university partners; ● risks associated with the competitive environment for marketing the programs of our university partners; ● failure on our part to keep up with advances in technology that could enhance the experience for our university partners’ students; ● our ability to manage future growth effectively; ● the impact of any natural disasters or public health emergencies; and ● general adverse economic conditions or other developments that affect the job prospects of our university partners’ students. Additional factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K (the “2024 Form 10-K”) for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on February 19, 2025, and as updated in our subsequent reports filed with the SEC, including any updates found in Part II, Item 1A of this Quarterly Report on Form 10-Q or our other reports on Form 10- Q. Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Executive Overview Grand Canyon Education, Inc. (together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company dedicated to serving colleges and universities. GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale. GCE’s most significant university partner is Grand Canyon University (“GCU”), a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online and on ground at its campus in Phoenix, Arizona, and at eleven off-campus classroom and laboratory sites. We also provide education services to numerous university partners across the United States. In the healthcare field, we wo rk 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, 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. We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or, as is the case for our most significant partner, GCU, both 23 Table of Contents healthcare and other programs. We do disclose significant information for GCU, such as enrollments, due to its size in comparison to our other university partners. Critical Accounting Policies and Use of Estimates Our critical accounting policies are disclosed in the 2024 Form 10-K for the fiscal year ended December 31, 2024. During the nine months ended September 30, 2025, there were no significant changes in our critical accounting policies. Results of Operations The following table sets forth certain income statement data as a percentage of revenue for each of the periods indicated. Amortization of intangible assets has been excluded from the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ Nine Months Ended ​ ​ ​ ​ September 30, ​ ​ September 30, ​ ​ ​ 2025 2024 2025 2024 Costs and expenses Technology and academic services 17.2 % 17.6 % 16.3 % 16.5 % Counseling services and support 32.3 32.4 31.9 32.2 Marketing and communication 22.6 22.9 22.0 22.0 General and administrative 5.8 6.0 4.6 4.8 ​ Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 Service revenue . 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 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. We believe the growth in the number of ABSN students continues to be negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions. To address this challenge, we have been working with 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 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 24 Table of Contents 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 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. 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 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 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 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 September 30, 2025 were $15.2 million, an increase of $0.8 million, or 5.5%, as compared to general and administrative expenses of 25 Table of Contents $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 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 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 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 . Net income . 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 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. 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 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 26 Table of Contents 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. 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. We believe the growth in the number of ABSN students continues to be negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions. To address this challenge, we have been working with 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 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 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. 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. 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 0.2% 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. 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 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 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 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 to service our 20 27 Table of Contents 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. 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 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 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 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 $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 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 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 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. Our 28 Table of Contents 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 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. Net income . 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. Seasonality Our net revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in our university partners’ enrollment. Our partners’ enrollment varies as a result of new enrollments, graduations, and student attrition. Revenues in the Summer months (May through August) are lower primarily due to the majority of GCU’s traditional ground university students not attending courses during the Summer months, which affects our results for our second and third fiscal quarters. Since a significant amount of our costs are fixed, the lower revenue resulting from the decreased Summer enrollment has historically contributed to lower operating margins during those periods. Partially offsetting this Summer effect has been the sequential quarterly increase in enrollments that has occurred as a result of the traditional Fall school start. This increase in enrollments also has occurred in the first quarter, corresponding to calendar year matriculation. Thus, we experience higher net revenue in the fourth quarter due to its overlap with the semester encompassing the traditional Fall school start and in the first quarter due to its overlap with the first semester of the calendar year. A portion of our expenses do not vary proportionately with these fluctuations in service revenue, resulting in higher operating income in the first and fourth quarters relative to other quarters. We expect quarterly fluctuation in operating results to continue as a result of these seasonal patterns. Liquidity and Capital Resources ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, As of December 31, (In thousands) ​ 2025 ​ 2024 Cash, cash equivalents and investments ​ $ 276,975 ​ $ 324,623 Overview 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, (In thousands) ​ 2025 ​ 2024 Net cash provided by operating activities ​ $ 143,006 ​ $ 154,141 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 29 Table of Contents 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. Changes in these balances are included in the changes in assets and liabilities presented in the consolidated statement of cash flows. Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, (In thousands) ​ 2025 ​ 2024 Net cash (used in) provided by investing activities ​ $ (205,615) ​ $ 71,297 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. The Company incurs upfront expenses and capital expenditures prior to an off-campus classroom and laboratory site being opened. The Company intends to continue to spend approximately $30.0 million to $40.0 million per year for capital expenditures. Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, (In thousands) ​ 2025 ​ 2024 Net cash used in financing activities ​ $ (164,730) ​ $ (108,329) 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. The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares. Share Repurchase Program The Board of Directors has authorized share repurchases of up to $2,245.0 million since the initiation of the Company’s stock repurchase program. The expiration date on the current repurchase authorization by our Board of Directors is March 1, 2026. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time. Under our share repurchase authorization, we may purchase shares in the open market or in privately negotiated transactions, pursuant to the applicable SEC rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant. We repurchased 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 . 30 Table of Contents Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.