What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-18 compared with 2025-02-19 · 74 added, 69 removed, 167 unchanged (46% 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 GCU, a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online, on ground at its campus in Phoenix, Arizona and at eight off-campus classroom and laboratory sites.

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

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Service revenue .

Our service revenue for the year ended December 31, 2024 was $1,033.0 billion, an increase of $72.1 million, or 7.5%, as compared to service revenue of $960.9 million for the year ended December 31, 2023.

The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 123,149 at December 31, 2024, an increase of 5.0% over enrollments at December 31, 2023.

Partner enrollments totaled 127,155 at December 31, 2024 as compared to 121,250 at December 31, 2023.

University partner enrollments at our off-campus classroom

and laboratory sites were 4,919, an increase of 9.8% over enrollments at December 31, 2023, which includes 913 and 510 GCU students at December 31, 2024 and 2023, respectively, and an increase in revenue per student year over year.

Excluding sites closing in 2024 to new enrollments, total enrollments at our off-campus classroom and laboratory sites increased 14.9% between years.

The increase in revenue per student between years is primarily due to 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.

The increase in revenue per student in the year ended December 31, 2024 was also due to the additional day for leap year in 2024 which added additional service revenue of $1.5 million as compared to the prior year and we earned revenue in 2024 with a university partner in which we helped the partner develop an ABSN program under a cost plus arrangement.

We will earn limited revenue with this partner going forward.

Contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing the partner for certain faculty costs and the termination of one university partner contract at the end of the Spring 2024 semester had the effect of reducing revenue per student.

Partner enrollments totaled 127,155 at December 31, 2024 as compared to 121,250 at December 31, 2023.

Although partner enrollments at our off-campus classroom and laboratory sites returned to year over year growth in 2024, 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 2024 semesters.

We opened five sites in the year ended December 31, 2023, six sites in the year ended December 31, 2024 and closed one site increasing the total number of these sites to 45 at December 31, 2024, which has also positively impacted the enrollment growth.

Enrollments for GCU ground students were 24,552 at December 31, 2024 down from 25,209 at December 31, 2023 due to a small decline in traditional ground students year over year and the continued decline in professional studies students (working adults attending the university’s traditional campus at night), partially offset by an increase in ABSN students between years.

Our service revenue for the year ended December 31, 2025 was $1,106.1 million, an increase of $73.1 million, or 7.1%, as compared to service revenue of $1,033.0 million for the year ended December 31, 2024.

The increase year over year in service revenue was primarily due to an increase in partner enrollments of 7.1% to 136,239 at December 31, 2025 as compared to 127,155 at December 31, 2024.

GCU enrollments increased to 131,826 at December 31, 2025, an increase of 7.0% over enrollments at December 31, 2024.

University partner enrollments at our off-campus

classroom and laboratory sites were 5,738, an increase of 16.6% over enrollments at December 31, 2024, which includes 1,325 and 913 GCU students at December 31, 2025 and 2024, respectively.

Excluding sites closed in 2024 to new enrollments, total enrollments at our off-campus classroom and laboratory sites increased 18.7% between years.

Revenue per student was flat 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, 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, 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, and due to a slight decline in residential students between years.

These decreases were offset by 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.

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

This has also positively impacted the enrollment growth.

Enrollments for GCU ground students were 24,678 at December 31, 2025 up from 24,552 at December 31, 2024.

GCU online enrollments were 107,148 at December 31, 2025, up from 98,597 at December 31, 2024, an increase of 8.7% between years.

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Our technology and academic services expenses for the year ended December 31, 2025 were $175.1 million, an increase of $10.0 million, or 6.0%, as compared to technology and academic services expenses of $165.1 million for the year ended December 31, 2024.

This increase was primarily due to increases in other technology and academic costs and in occupancy and depreciation of $8.3 million and $4.9 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation of $3.0 million.

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 22 university partners and their increased enrollment growth as well as an increase in curriculum cost reimbursement 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 22 university partners and their increased enrollment growth, tenure-based salary adjustments, benefit costs and the increased number of off-campus classroom and laboratory sites year over year.

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 benefit costs of $6.2 million, $1.9 million and $1.9 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 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 15.8% for the year ended December 31, 2025, from 16.0% for the year ended December 31, 2024.

This decrease was primarily due to the decreased faculty reimbursements between years partially offset by the growing curriculum cost reimbursement.

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 curriculum cost reimbursements although these increases might be offset by lower faculty reimbursements if more partners choose to adjust their contracts.

This decrease was primarily due to the 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, partially offset by increased technology costs and curriculum cost reimbursements.

We anticipate that technology and academic services expenses will increase in the future as we open more off-site classroom and laboratory sites and due to increased technology costs and curriculum cost reimbursements and that these costs as a percentage of revenue could grow as these costs grow at rates higher than revenue growth.

Counseling services and support .

Our counseling services and support expenses for the year ended December 31, 2024 were $323.5 million, an increase of $21.2 million, or 7.0%, as compared to counseling services and support

expenses of $302.3 million for the year ended December 31, 2023.

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 $18.0 million, $2.9 million and $0.3 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, 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 year ended December 31, 2025 were $342.7 million, an increase of $19.2 million, or 5.9%, as compared to counseling services and support expenses of $323.5 million for the year ended December 31, 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 $18.9 million and $1.6 million, respectively.

These increases were partially offset by a decrease in other counseling services and support expenses of $1.3 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 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 increased travel costs for our 22 university partners.

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

Our counseling services and support expenses as a percentage of revenue decreased 0.3% to 31.0% for the year ended December 31, 2025, from 31.3% for the year ended December 31, 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.

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 year ended December 31, 2025 were $229.2 million, an increase of $16.8 million, or 7.9%, as compared to marketing and communication expenses of $212.4 million for the year ended December 31, 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 $7.7 million, increased employee compensation, including share-based compensation and benefits of $1.1 million, an increase in other marketing and communication expenses of $0.5 million and an increase in occupancy and depreciation costs of $0.3 million.

Our marketing and communication expenses as a percentage of revenue decreased by 0.5% to 20.6% for the year ended December 31, 2024, from 21.1% for the year ended December 31, 2023, 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 might continue to have a decline in these costs as a percentage of revenue.

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 $15.2 million, increased employee compensation, including share-based compensation and benefits of $1.5 million and an increase in occupancy and depreciation costs of $0.1 million.

Our marketing and communication expenses as a percentage of revenue slightly increased by 0.1% to 20.7% for the year ended December 31, 2025, from 20.6% for the year ended December 31, 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 a percentage of revenue could increase in the future.

General and administrative .

Our general and administrative expenses for the year ended December 31, 2025 were $47.4 million, an increase of $1.1 million, or 2.4%, as compared to general and administrative expenses of $46.3 million for the year ended December 31, 2024.

This increase was primarily attributable to an increase in professional fees including legal costs of $2.2 million, employee compensation, including share-based compensation and benefits of $1.4 million, which includes $1.1 million in severance costs recorded for an executive that resigned June 30, 2024, an increase in contributions in lieu of state income taxes of $1.0 million and increases in occupancy and depreciation costs of $0.2 million.

These increases were partially offset by a decrease in other administrative expenses of $1.7 million primarily due to lower travel costs.

Our general and administrative expenses as a percentage of revenue stayed flat at 4.5% for the years ended December 31, 2024 and 2023 due to our ability to leverage our general and administrative expenses across an increasing revenue base partially offset by the severance costs and the increase in professional fees including legal costs.

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 continue to rise faster than our revenue growth rate.

Impairment and other.

Impairment and other expenses of $1.9 million for the year ended December 31, 2024 primarily includes the write-off of an internal use software project that the Company had been attempting to develop for its other university partners that has been terminated and costs relating to exiting certain off-campus classroom and laboratory sites.

This increase was primarily attributable to an increase in other general and administrative expenses of $1.7 million and an increase in professional fees including legal costs of $0.3 million.

These increases were partially offset by a decrease in employee compensation, including share-based compensation of $0.9 million, which is primarily due to $1.1 million in severance costs recorded in the prior year for an executive that resigned June 30, 2024.

The increase in other general and administrative expenses is due to an increase in contributions in lieu of state income taxes of $0.5 million, an increase in charitable contributions of $0.5 million and an increase in fixed asset disposals of $0.5 million from the downsizing of our Indiana office space.

Our general and administrative expenses as a percentage of revenue decreased by 0.2% to 4.3% for the year ended December 31, 2025, from 4.5% for the year ended December 31, 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.

Litigation settlement.

A litigation settlement of $35.0 million was recorded in the year ended December 31, 2025 related to the settlement of the qui tam lawsuit.

Lease termination, impairment and other.

We incurred $2.4 million in lease termination and impairment charges in the year ended December 31, 2025 related to leases.

In the third quarter of 2025, we agreed to pay $1.3 million to early terminate our Indiana office space 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 year ended December 31, 2025 for the two off-campus classroom and laboratory sites that were closed during the year.

We incurred i mpairment and other expenses of $1.9 million for the year ended December 31, 2024 due to the write-off of an internal use software project that the Company had been attempting to develop for its other university partners that has been terminated and costs relating to exiting certain off-campus classroom and laboratory sites.

Amortization of intangible assets .

Amortization of intangible assets for the years ended December 31, 2025 and 2024 were $8.4 million for both periods.

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

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 year ended December 31, 2024 was $15.9 million, an increase of $5.4 million, as compared to $10.5 million for the year ended December 31, 2023 due to higher investment balances and higher returns on those balances.

Investment interest and other for the year ended December 31, 2025 was $13.9 million, a decrease of $2.0 million, as compared to $15.9 million for the year ended December 31, 2024 due to slightly lower investment balances and 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 year ended December 31, 2024 was $65.1 million, an increase of $10.4 million, or 19.0%, as compared to income tax expense of $54.7 million for the year ended December 31, 2023.

Our effective tax rate was 22.3% during the year ended December 31, 2024 compared to 21.1% during the year ended

December 31, 2023.

The effective tax rate increased year over year due to higher state income taxes.

This was partially offset by an increase in excess tax benefits of $1.5 million as compared to $0.9 million in the years ended December 31, 2024 and 2023, respectively, and a higher contribution in lieu of state income taxes of $4.5 million in 2024 compared to $3.5 million in 2023.

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 awards vest.

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

Our net income for the year ended December 31, 2024 was $226.2 million, an increase of $21.2 million, or 10.4% as compared to $205.0 million for the year ended December 31, 2023, due to the factors discussed above.

Income tax expense for the year ended December 31, 2025 was $63.7 million, a decrease of $1.4 million, or 2.2%, as compared to income tax expense of $65.1 million for the year ended December 31, 2024.

Our effective tax rate was 22.8% during the year ended December 31, 2025 compared to 22.3% during the year ended December 31, 2024.

The increase in the effective tax rate was primarily due to the tax treatment of the litigation settlement recorded in the year ended December 31, 2025 and changes in state income taxes.

The effective tax rate increases were partially offset due to an increase in excess tax benefits of $2.7 million as compared to $1.5 million in the years ended December 31, 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.

Our net income for the year ended December 31, 2025 was $216.2 million, a decrease of $10.0 million, or 4.4% as compared to $226.2 million for the year ended December 31, 2024, due primarily to the litigation settlement and the other factors discussed above.

Our service 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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Cash, cash equivalents and investments

Our liquidity position, as measured by cash and cash equivalents and investments increased by $80.1 million between December 31, 2023 and December 31, 2024, which was largely attributable to cash flows from operations exceeding share repurchases, investment purchases, net of proceeds and capital expenditures during the year ended December 31, 2024 .

Our liquidity position, as measured by cash and cash equivalents and investments decreased by $24.5 million between December 31, 2024 and December 31, 2025, which was largely attributable to cash expended for share repurchases and capital expenditures exceeding our cash provided by operations during the year ended December 31, 2025 .

Our unrestricted cash and cash equivalents and investments were $300.1 million and $324.6 million at December 31, 2025 and 2024, respectively.

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Net cash provided by operating activities

The increase in cash generated from operating activities between the year ended December 31, 2023 and the year ended December 31, 2024 was primarily due to increased income and changes in working capital balances, primarily accounts payable and accrued liabilities.

Accounts payable increased between December 31, 2023 and December 31, 2024 by $9.7 million compared to the decrease between December 31, 2022 and December 31, 2023 of $3.1 million due to the timing of vendor payments.

Accrued liabilities increased by $4.3 million between December 31, 2023 and December 31, 2024 whereas it decreased by $2.0 million between December 31, 2022 and December 31, 2023 due to timing differences between the last pay period at the end of each fiscal year.

We define working capital as the

assets and liabilities, other than cash, generated through the Company’s primary operating activities.

The decrease in cash generated from operating activities between the year ended December 31, 2024 and the year ended December 31, 2025 was primarily due to the decline in net income between years due primarily to the litigation settlement and changes in working capital balances.

Accounts payable increased by $9.7 million between December 31, 2023 and December 31, 2024 compared to the decrease of $3.4 million between December 31, 2024 and December 31, 2025, a decline year over year in cash provided by operating activities of $13.1 million due to timing of vendor payments.

Income tax receivable/payable amounts decreased by $0.9 million between December 31, 2023 and December 31, 2024 compared to the decrease of $7.1 million between December 31, 2024 and December 31, 2025, a $6.2 million decrease year over year in cash provided by operating activities due to timing of income tax payments.

Deferred tax liability amounts decreased by $0.2 million between December 31, 2023 and December 31, 2024 compared to the increase of $14.7 million between December 31, 2024 and December 31, 2025, representing an increase in cash provided by operating activities of $14.9 million due to the acceleration of certain tax deductions and the passage of the

One Big Beautiful Bill Act on July 3, 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 .

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(In thousands)

Net cash provided by (used in) investing activities

Investing activities provided $61.4 million of cash in the year ended December 31, 2024 compared to consuming $80.5 million in the year ended December 31, 2023.

Net cash (used in) provided by investing activities

Investing activities consumed $221.6 million of cash in the year ended December 31, 2025 compared to providing $61.4 million of cash in the year ended December 31, 2024.

Cash provided by or used in investing activities includes net investment activity.

In the year ended December 31, 2024, proceeds from the sale of investments, net of purchases of available-for-sale securities were $99.0 million as the Company sold all its investments in the third quarter of 2024 and the proceeds were invested in cash and cash equivalents.

In the year ended December 31, 2025, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $186.2 million.

In the year ended December 31, 2025 and 2024 cash used in investing activities also included capital expenditures totaling $34.8 million and $37.2 million, respectively.

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Share Repurchase Program

On January 29, 2025, our Board of Directors increased the authorization under its existing stock repurchase program by $200.0 million, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,245.0 million.

On December 10, 2025, our Board of Directors increased the authorization under its existing stock repurchase program by $300.0 million, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,545.0 million.

The current expiration date on the repurchase authorization by our Board of Directors is March 1, 2027.

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Contractual Obligations

Our contractual obligations primarily consist of capital expenditures primarily for new off-campus classroom and laboratory sites opening and continued spend on computer equipment, software licenses, internal software development and furniture and equipment to support our increasing employee headcount.

See Note 6 - Leases , in Item 8,

Consolidated Financial Statements and Supplementary Data.

development and furniture and equipment to support our increasing employee headcount.

See Note 6 - Leases , in Item 8, Consolidated Financial Statements and Supplementary Data.

There are no other material contractual obligations or commitments for the Company.

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We compensate for these limitations by relying primarily on our GAAP results and use Adjusted EBITDA only as a supplemental performance measure.

For more information, see our consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

For more information, see our consolidated financial

statements and the notes to those consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The following table reconciles net income to Adjusted EBITDA for the periods indicated:

Year Ended December 31,

interest expense

investment interest and other

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litigation and regulatory costs (c)

impairment and other (d)

loss on fixed asset disposal (e)

lease termination, impairment and other (d)

loss on disposal of fixed assets (e)

severance costs (f)

5 unchanged sentences

(b) Reflects share-based compensation expense.

(d) Reflects primarily the write-off of an internal use software project and costs related to exiting from off-campus classroom and laboratory sites.

(e) Represent loss on fixed asset disposals.

(f) Represents severance costs related to an executive that resigned effective June 30, 2024.

(d) Reflects $2.4 million in lease termination and impairment charges in the year ended December 31, 2025, related to leases from the termination of our Indiana office space and exit from two off-campus classroom and laboratory sites in 2025.

In 2024, reflects the write-off of an internal use software project that the Company had been attempting to develop for its other university partners that has been terminated and costs relating to exiting certain off-campus classroom and laboratory sites .

(e) Represents loss on fixed asset disposals.

(f) Represents severance costs.

Recent Accounting Pronouncements

1 unchanged sentence

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-K

Item 7. Management’s Discussion and Analysis