What changed in this filing

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Item 1. Business

2021-02-17 compared with 2020-02-20 · 195 added, 104 removed, 357 unchanged (46% of the section changed)

Grand Canyon Education, Inc., a Delaware corporation (“GCE” or the “Company) is a publicly traded education services company dedicated to serving colleges and universities.

Grand Canyon Education, Inc., a Delaware corporation (“GCE”) is a publicly traded education services company dedicated to serving colleges and universities.

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

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

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

As of December 31, 2020, GCE provided education services and support to more than 111,600 students enrolled in GCU’s programs, emphases and certificates.

In January 2019, GCE began providing education services to numerous university partners across the United States through our wholly owned subsidiary, Orbis Education Services LLC (“Orbis Education”), which we acquired on January 22, 2019.

See Note 3 – Acquisition to consolidated financial statements for a full description of this acquisition.

Orbis Education works in partnership with a growing number of top universities and healthcare networks across the country to develop high-quality, career-ready graduates in four primary academic programs to meet the healthcare industry’s demands.

As of December 31, 2019, Orbis Education provides education services to 22 university partners, at 24 locations, in 20 states throughout the country.

In January 2019, GCE began providing education services to numerous university partners across the United States through our wholly-owned subsidiary, Orbis Education Services LLC (“Orbis Education”), which we acquired on January 22, 2019 (the “Acquisition”).

See Note 3 – Acquisition to consolidated financial statements for a full description of the Acquisition.

In the healthcare field, GCE, together with Orbis Education, works in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry.

As of December 31, 2020, GCE provided education services to 25 university partners across the United States.

Prior to July 1, 2018, GCE operated GCU.

On July 1, 2018, the Company sold GCU to an independent, nonprofit entity (the “Transaction”).

See Note 2 – The Transaction to consolidated financial statements for a full description of the Transaction.

Accordingly, the results of operations discussed herein for the twelve-month period ended December 31, 2018 reflect the Company’s operations prior to July 1, 2018 which were made up exclusively of the operations of GCU.

For the period from July 1, 2018 to December 31, 2018 and for the year ended December 31, 2019, results of operations do not include the operations of GCU but rather reflect the operations of the Company as an educational services company.

As reported net revenue for the year ended December 31, 2019 was $778.6 million, representing a decrease of 7.9% over the year ended December 31, 2018.

The reduction in as reported net revenue from 2018 to 2019 is driven by our transition from owning and operating a university to becoming an education services company as of July 1, 2018.

As an education services company for GCU, the Company receives, as service revenue, 60% of GCU’s tuition and fee revenue and no longer has university related revenue, thus resulting in the decrease from the prior period.

On a comparable basis, adjusted net revenue for the year ended December 31, 2018 was $640.5 million.

The 21.6% increase year over year in comparable service fee revenue for the year ended December 31, 2019 and 2018 was primarily due to our Orbis Education acquisition on January 22, 2019 and the increase in GCU enrollments between years.

For information on how we calculate as adjusted net revenue for comparison purposes, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operation – Results of Operations.

” The partnership agreements that were acquired as part of the Acquisition generally generate a higher revenue per student than our agreement with GCU as these agreements generally have a higher percentage of service revenue, the partners have higher tuition rates than GCU and the majority of these students are studying in the Accelerated Bachelor of Science in Nursing program so these students take on average more credits per semester.

As reported operating income was $265.1 million and increased 2.7% for the year ended December 31, 2019 as compared to 2018.

As adjusted operating income and operating margin, which excludes university related revenue and expenses, the loss on transaction, amortization of intangible assets and the contributions made to private school tuition organizations in lieu of state income taxes of $4.0 million in 2019 and $3.7 million in 2018 was $281.3 million and 36.1%, respectively in 2019 compared to $248.6 million and 38.8%, respectively, in 2018.

The 13.2% increase in adjusted operating income year over year is driven by our ability to leverage our operating expenses across an increasing revenue base.

On July 1, 2018, GCE sold GCU to an independent, non-profit entity (the “Transaction.”) See Note 2 – The Transaction to consolidated financial statements for a full description of the Transaction.

Accordingly, results of operations for the year ended December 31, 2018 reflect GCE’s operations prior to July 1, 2018 which were made up exclusively of the operations of GCU.

For the period from July 1, 2018 to December 31, 2018, results of operations do not include the operations of GCU but rather reflect the operations of GCE as an educational services company.

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

We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or as is the case for our most significant partner, GCU, both healthcare and other programs.

Therefore, we will refer to all university partners as “GCE partners” or “our partners” and will no longer differentiate between partners of GCE and partners of Orbis Education;

we will, however, continue to disclose significant information for GCU, such as enrollments, due to its size in comparison to our other university partners.

GCE is an education services company with 25 university partners as of December 31, 2020.

We have invested over $200 million in the last eleven years to develop systems that automate key processes and enable us to scale these processes to hundreds of thousands of students.

We have invested over $250 million in the last 12 years to develop systems that automate key processes and enable us to scale these processes to hundreds of thousands of students.

GCE is capable of supporting not just core academic functions, technology and marketing but many additional key processes that surround those functions, such as faculty recruiting and training, admissions, financial aid, accounting, and technical support.

We provide these services to our university partners pursuant to master services agreements that define the scope of our engagement, the types of services provided and other key terms of the engagement.

Suite of Services

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● Class Scheduling – GCE has a class scheduling department and has developed a proprietary system to provide these services to our university partners.

Our scheduling software provides students the ability to set their class schedule and flexibility to make changes and create opportunities to complete courses in a myriad of online or onsite options.

Our scheduling software provides students the

ability to set their class schedule and flexibility to make changes and create opportunities to complete courses in a myriad of online or onsite options.

We optimize class size prior to course starts based on university partner standards, in order to maximize class resources and faculty utilization.

● Skills and Simulation Lab Sites – GCE secures and develops skills labs for use by the four Orbis Education programs including the accelerated Bachelor of Science in Nursing (ABSN).

Lab sites are branded for specific university partners and all classrooms, faculty, counselors, staff and specialized equipment are centralized and made accessible to every university partner student.

● Skills and Simulation Lab Sites – GCE secures and develops off-campus classroom and laboratory sites for use in various programs offered by our university partners, including the accelerated Bachelor of Science in Nursing (ABSN).

Off-campus classroom and laboratory sites are branded for specific university partners and all classrooms, faculty, counselors, staff and specialized equipment are centralized and made accessible to every university partner student.

Counseling Services and Support

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We provide marketing and communication services that include lead acquisition, digital communication strategies, brand identity advertising, media planning and strategy, video, data science and analysis, marketing to potential students and other promotional and communication services.

The Company’s marketing leadership team approaches the marketplace with an outlook that applies the latest advancements in integrated marketing strategy and new and emerging technologies while leveraging GCE’s buying power.

GCE’s marketing leadership team approaches the marketplace with an outlook that applies the latest advancements in integrated marketing strategy and new and emerging technologies while leveraging GCE’s buying power.

This methodology embraces proven traditional and online solutions that are developed in conjunction with our university partners.

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In addition, we currently provide certain requested back office services to GCU that include finance, human resources, audit, and other corporate functions.

● Finance and accounting services include administration of payroll, accounts payable, general ledger, student accounting, financial reporting, budgeting and taxes at the direction of GCU.

● Human resources services include administration of performance management, personnel policies, recruitment and onboarding of new personnel, and benefit plan design and procurement, among others.

● Audit services include development and administration of a GCU approved annual internal audit plan and execution of the audit plan for the service period.

● Procurement services include management of purchasing and vendor relationships, including travel services, review of vendor contracts, and maintenance of contracts in the procurement system.

As of December 31, 2019, GCE employed approximately 3,400 professional and administrative personnel, including technical and academic advisors, counseling advisors, marketing and communication professionals, and personnel that handle financial aid processing, information technology, human resources, corporate accounting, finance, and other administrative functions.

In addition, at December 31, 2019, GCE employed approximately 950 part-time employees most of which are student workers.

None of our employees are a party to any collective bargaining or similar agreement with us.

We consider our relations with our employees to be good.

Community Involvement and the Public Good

The Company had developed and is executing on a five-point plan to revitalize its West Phoenix neighborhood in partnership with its client, GCU.

Increased home values .

Together with Habitat for Humanity, we are participating in the largest home renovation project in the country in the West Phoenix area surrounding GCU’s campus.

As of December 31, 2019, 285 different projects have been completed.

These efforts, combined with GCU’s expanded presence in the community, resulted in a significant increase in home values in the 85017 zip code.

Job creation .

At December 31, 2019, we employed approximately 4,350 persons (including 950 part-time employees and student workers), which is approximately four times more persons than were employed by GCE in comparable positions eleven years ago.

We have launched a number of new business enterprises that reduced costs for GCU, provided management opportunities for recent GCU graduates and employment opportunities for students and neighborhood residents, while spurring economic growth in the area.

GCE continues to partner in countless community events and projects throughout the year, helping organizations such as the Phoenix Rescue Mission, Feed My Starving Children, Arizona Foster Care, Boy/Girl Scouts, Goodwill Arizona, St.

Vincent de Paul, Young Life, Elevate Phoenix, Back to School Clothing Drive and St.

Mary’s Food Bank.

Our employees also went out into our surrounding neighborhoods to participate in GCU-sponsored programs such as Serve the City, Canyon Kids, Salute Our Troops, Colter Commons senior home visits and the Run to Fight Children’s Cancer.

The Company also invests in the following activities that benefit the community.

Student Tuition Organization contributions.

The Company contributes to private school tuition organizations and in 2019 increased its annual contribution to $4.0 million from $3.7 million in 2018.

Financial contributions are allocated toward tuition assistance and awarding Arizona students with scholarships to attend Arizona private schools.

Donate to Elevate.

Donate to Elevate is a program that allows employees to contribute money in lieu of state income tax payments to three projects.

This program benefits private schools in Arizona and the partnership with Habitat for Humanity, as well as local public schools and public charter schools through extracurricular activities that require students to pay a fee.

● Finance and accounting - Finance and accounting services include administration of payroll, accounts payable, general ledger, student accounting, financial reporting, budgeting and taxes at the direction of GCU.

● Human Resources - Human resources services include administration of performance management, personnel policies, recruitment and onboarding of new personnel, and benefit plan design and procurement, among others.

● Audit - Audit services include development and administration of a GCU approved annual internal audit plan and execution of the audit plan for the service period.

● Procurement - Procurement services include management of purchasing and vendor relationships, including travel services, review of vendor contracts, and maintenance of contracts in the procurement system.

Social Responsibility and Human Capital Development

Our business was created and continues to evolve to meet the needs of the local community in which we operate as well as those outside our community.

We started by identifying what we believe to be the educational challenges that our country is facing and then worked to find solutions to these challenges.

We believe these challenges include:

● University education is too expensive;

● Students are taking on too much debt;

● Bachelor degrees are taking too long to complete;

● Programs are not targeted enough toward careers.

Recent surveys show that a large percentage of college students would change majors if starting over, and a significant number of recent graduates are under employed or are in jobs that don’t required degrees

● As tuition increases, diversity decreases;

● Universities have inadequate counseling and support services, especially for distanced learners;

● Most university professors have no formal training in teaching, learning or course design.

● Universities are under significant financial pressure, which has only been enhanced during 2020 due to the pandemic;

We provide the capital, technology and expertise to our university partners to lessen the challenges in each of the areas listed above (see Item 1.

Business – Suite of Services ).

We work with these university partners to develop hybrid educational models that allow them the ability to decrease tuition or increase scholarships to their students which will often lower the debt their students incur.

We work with our university partners and thousands of high schools across the country on dual credit, online prerequisite courses and other programs that shorten the time to completion thereby lowering cost and debt levels.

We focus with our university partners on programs where there are skills shortages such as health care, teacher education, science, technology, engineering and math.

GCE provides expanded academic counseling services and support to the students of our university partners which has proven to increase retention and completion.

Our faculty services and curriculum development teams assist not only our university partners but other universities and K12 schools in improving their online education pedagogy.

And our business model has helped our university partners as changes in the educational landscape and the pandemic has put pressure on their financial condition.

Community Involvement by GCE and its Employees.

Examples of activities in which we and our employees participate include:

● Improving Our Neighborhood and Increased Home Values - Together with Habitat for Humanity and in concert with our largest university partner, we are participating in the largest home renovation project in the country in the West Phoenix area surrounding GCU’s campus.

As of December 31, 2020, 792 different projects have been completed in which 26,000 hours have been logged by volunteers.

These efforts, combined with GCU’s expanded presence in the community, have resulted in a significant increase in home values in the 85017 zip code.

● Furthering Job Creation - We, along with GCU have launched a number of new business enterprises that have reduced costs, provided management opportunities for recent graduates and employment opportunities for students and neighborhood residents, while spurring economic growth in the area.

● Special Olympics - We participate in the annual Plane Pull Challenge, which benefits Special Olympics Indiana (SOIN) athletes.

The “Orbeasts” go head to head in a tug of war with a Boeing FedEx 757 jetliner in SOIN’s largest single-day fundraiser.

This event offers a unique opportunity for organizations to team build and work together to raise important funds for SOIN athletes.

The vision of Special Olympics Indiana

is that sport will open hearts and minds towards people with intellectual disabilities and create inclusive communities across the state and throughout the world.

● Youth Opportunity Foundation - Our employees volunteer and donate time and funds to the Youth Opportunity Foundation which provides advocacy, clinical treatment, education and workforce development for at-risk young people in underprivileged areas.

● Covid-19 Response :

Our employees and the students of our university partners volunteered at COVID Point of Distribution sites (“POD”), including the GCU POD, which is being jointly operated by GCU and GCE at no cost to the state of Arizona, and other PODs including those run by our hospital partners.

The students of our university partners assisted the clinical staff at the PODs in clinical positions including vaccine dilution, vaccine administration and patient observation or in non-clinical positions such as checking in vaccine recipients, documenting vaccinations, traffic flow and sitting with recipients after administration.

Our employees also performed these non-clinical roles.

These volunteers, especially the students of our university partners, allowed other direct caregivers to be reassigned from vaccine administration back to the bedside to care for the influx of COVID patients.

GCE also invests in the following activities that benefit the community.

● Funding of Student Tuition Organizations - GCE contributes to private school tuition organizations, which are entities that allocate financial contributions toward tuition assistance and scholarships for disadvantaged students to attend Arizona private schools.

In 2020, we increased our annual contribution to $5.0 million from $4.0 million in 2019.

● Encouraging Employee Giving - We participate in Donate to Elevate, a program that encourages employees to participate in the Arizona individual tax credit program, which allows individual taxpayers to contribute money in lieu of state income tax payments to benefit private schools and other non-profit entities in Arizona, as well as local public schools and public charter schools.

Employees are encouraged to designate tax dollars to the school or program of their choice.

Students Inspiring Students .

The Company continues to support GCU’s free tutoring/mentoring program that serves Phoenix-area K-12 schools.

Students who seek academic assistance in the GCU Learning Lounge may become eligible

to receive the Students Inspiring Students full-tuition scholarship.

To serve its client and community, the Company seeks donations to fund this neighborhood scholarship program.

Sponsoring K-12 Educational Development.

The Company supports its client’s K-12 Educational Development Department through sponsorship of GCU’s Canyon Professional Development and K-12 Targeted School Assistance programs.

● Students Inspiring Students - GCE continues to support GCU’s free tutoring/mentoring program that serves Phoenix-area K-12 schools.

Students who seek academic assistance in the GCU Learning Lounge may become eligible to receive the Students Inspiring Students full-tuition scholarship.

To serve our clients and community, we seek donations to fund this neighborhood scholarship program.

● Sponsoring K-12 Educational Development - GCE supports GCU’s K-12 Educational Development Department through sponsorship of GCU’s Canyon Professional Development and K-12 Targeted School Assistance programs.

Canyon Professional Development offers professional development opportunities for educators and administrators, and their student/parent engagement programs aim to help students become college ready.

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Both initiatives elevate public, private, charter and home schools in the form of scholarships, program discounts, professional development, events, and more.

Employee Opportunities for Community Service.

The Company’s charitable contribution program offers its full-time employees a maximum of 16 hours of PTO annually for community service.

● Continuing Community Involvement - GCE and our employees partner in countless other community events and projects throughout the year.

We offer our full-time employees a maximum of 16 hours of PTO annually for community service.

This time is used to volunteer at an approved charitable organization.

Over 40 organizations are approved for employee volunteerism, including Habitat for Humanity.

The Company’s employees continue to share a commitment to and enthusiasm for GCU-sponsored community service projects, as well as charitable organizations throughout the Valley.

In addition, GCE continues to partner in countless community events and projects throughout the year, helping organizations such as the Phoenix Rescue Mission, Feed My Starving Children, Arizona Foster Care, Boy/Girl Scouts, Goodwill Arizona, St.

Vincent de Paul, Young Life, Elevate Phoenix, Back to School Clothing Drive and St.

Our employees also went out into our surrounding neighborhoods to participate in programs such as Serve the City, Canyon Kids, Salute Our Troops, Colter Commons senior home visits and the Run to Fight Children’s Cancer.

We believe that we must have the best talent, including employees who possess a diverse range of experiences, backgrounds and skills, in order to anticipate and meet the needs of our business and those of our university partners.

Over time, we have hired, developed and retained a diverse management and workforce that reflects our surrounding community and that is a key component in GCE’s success and an important part of our culture.

We provide employees with training, development, and educational resources that promote learning and lead to real career advancement opportunities.

We believe that our success in attracting, retaining, and developing human capital is directly correlated to our ability to provide employees both an interesting and engaging work experience as well as opportunities for meaningful involvement in the surrounding community.

Our employees take advantage of these opportunities and share our commitment to and enthusiasm for community service projects, as well as charitable organizations throughout the Phoenix area.

Through these activities, our employees have the opportunity to volunteer and provide servant leadership that benefits the surrounding neighborhoods and West Phoenix community.

Our net revenue and operating results normally fluctuate due to changes in our university partners’ enrollment.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Seasonality.”

Our Commitment to Diversity.

A growing body of evidence suggests that diverse teams improve financial outcomes and support innovation, resiliency, and productivity.

GCE’s commitment to fostering diversity in its community is evident in the following:

● Our Diversity Statement - Grand Canyon Education is a faith-friendly shared services provider that embraces a world-view which outlines a responsibility to both charity and stewardship which simply stated is, ‘to love others as yourself’.

We are a community of people who value the pursuit of truth and find great understanding in the convergence of differing viewpoints, backgrounds and ideas.

We welcome employees from all walks of life which has contributed to a growing diversity within our population.

Our diversity encompasses a multitude of dimensions, including age, disability, national origin, race, color, religion, gender, veteran status and more.

Our Christian perspective compels us to treat every individual equally with respect and compassion.

All community members deserve a comfortable space to express their feelings, so that every voice is heard.

All members of the Company will be welcomed, valued, and provided safety in this community.

Finally, diversity not only enriches the workplace and the educational endeavors of our partners, it is critical to it.

Maintaining a diverse environment requires a measure of tolerance and understanding commensurate with the dignity and value of all human life.

In sum, GCE values diversity because it values every employee and university partners’ students entrusted to its care.

● Our Diverse Leadership - Our ability to attract and retain diverse talent is reflected at both the Board and management levels.

Three of our five directors are women and one director identifies with an underrepresented diverse ethnicity.

In addition, for all of our employees at the level of manager and above totaling 522 persons, 65.9% are held by women and other diverse persons, collectively.

● Our Diverse Workforce - As of December 31, 2020, for all of our employees totaling 4,625, 76.1% are women and other diverse persons, collectively.

As of December 31, 2020, GCE employed approximately 3,650 professional and administrative personnel, including technical and academic advisors, counseling advisors, marketing and communication professionals, and personnel that handle financial aid processing, information technology, human resources, corporate accounting, finance, and other administrative functions.

In addition, at December 31, 2020, GCE employed approximately 975 part-time employees most of whom are student workers.

None of our employees are a party to any collective bargaining or similar agreement with us.

We consider our relations with our employees to be strong.

● Our Hiring Practices and Policies - GCE ensures company diversity through hiring policies and practices that support diversity such as the Equal Employment Opportunity Policy, Nondiscrimination and Anti-Harassment Policy and Complaint Procedure, and the Disability Accommodation Policy.

We post all open positions to a variety of diversity-related job boards to ensure we attract diverse candidates.

We also collect and analyze employee demographic data to identify current trends and areas of opportunity in regards to our diversity efforts.

● Diversity Training - We provide employees and management with regular diversity training.

New hires all complete anti-discrimination and harassment training within 3 months of starting at GCE.

Thereafter, all employees complete the training every other year, while management undertakes it annually.

We have also provided Implicit Bias Training to hiring managers, and in 2021 this training will be expanded to include all employees.

Employee Learning and Development (ELD) Services.

We provide learning and development support to our employees through numerous ELD initiatives.

Onboarding Programs provide new employees a foundation from which one can progress in his or her career at GCE.

Leadership Development, Team Development, Advanced Skills, and Self-Development Programs help employees improve their skills, assist management in identifying potential talent for leadership roles, and support those employees already in leadership roles.

Finally, our Compliance Curriculum ensures that employee stays current with regulatory and other compliance requirements.

These programs and curricula are offered virtually as both synchronous and self-paced.

Employee Tuition Benefit – GCE promotes the concept of lifelong learning and supports this concept by offering its employees a generous Tuition Benefit program through its university partner, GCU.

After 3 months of continuous service, fulltime employees admitted to GCU receive a 100% tuition reduction on undergraduate and graduate programs Additionally, the tuition benefit is available for an eligible employee’s spouse or up to two children with no more than two participants receiving the benefits at any one time.

An eligible employee’s spouse or child admitted to GCU receives a 100% tuition reduction on undergraduate programs and a 50% tuition reduction on graduate programs.

Working to Mitigate COVID-19.

During 2020 and 2021, GCE has taken numerous steps to protect our employees and mitigate the spread of the virus, including implementation of remote work arrangements, restrictions on employee travel, and guidance to those employees experiencing symptoms.

We are continuing to communicate with government and health officials, and to adapt our efforts and responses as needed.

Environmental Awareness

GCE owns a four-story 325,000 square foot administrative building, which includes office space for approximately 2,700 employees, and a parking garage at our headquarters in Phoenix, Arizona.

We constructed these facilities in 2016 and, as with every one of our projects over the past 11 years, we designed them to maximize energy efficiency and minimize electricity usage and environmental impact, which ultimately lowers our operating costs.

Our headquarters building includes the following design features:

● North/South Building Orientation - GCE’s office building is orientated with north/south exposure in order to minimize direct sun and thereby reduce power usage.

Exterior courtyards were arranged to ensure summer shade thus creating outdoor areas that can be used by our employees throughout the year.

● Use of Window Glazing - Our building utilizes significant window glazing to allow for daylighting thus reducing the need for supplemental electrical lighting.

As a result, the building is designed to use just .41 watts per square foot of electrical energy for lighting, which is half of what a typical environmentally efficient building uses.

● Reducing Water Consumption - Water usage is another environmental factor for office space that is magnified by the Arizona weather.

GCE’s office building utilizes numerous water conservation methods including push-tap faucets, waterless urinals, and a rooftop rain water collection system for irrigating the landscaping below, which significantly reduces our water consumption.

● Other Design Features -.

Additional environment-friendly design features include low VOC paints, use of recycled building materials, interior and exterior LED light bulbs, motion sensor lighting and implementation of an energy-efficient VRF mechanical system.

In addition to our efficient facilities, we have undertaken other measures to minimize our environmental impact, including, among others:

● implementing a Trip Reduction Program, which provides incentives to employees who participate in carpooling or take public transportation to work;

● providing a telecommute option for a significant number of positions;

● participating in a recycling program aimed at minimizing the volume of waste products generated by GCE.

Due to our significant investment in infrastructure, since March 2020, when the World Health Organization declared the COVID-19 a global pandemic, over 95% of our diverse workforce has been able to work remotely.

This has not only allowed our employees to remain physically safe, but has also resulted in savings in the areas of waste, janitorial costs, and travel costs related to business travel and commuting.

Most employees will continue to work from home until at least July 1, 2021.

Our off-campus classroom and laboratory sites are all designed with the same efficient footprint in the 30 sites opened as of December 31, 2020.

Corporate Governance

We believe that effective corporate governance is critical to our ability to create long term value for our stockholders.

The following highlights certain key aspects of our corporate governance framework:

o We Have an Independent and Diverse Board - Four of our five directors are independent.

Three of our five directors are diverse persons, and one of the three diverse directors identifies with an under represented diverse ethnicity.

o We Have Majority Voting for Directors - We have adopted majority voting for directors pursuant to which nominees who fail to achieve an affirmative majority of votes cast must submit their resignation.

o We Hold Annual Elections for Directors - We do not have a staggered board.

o We Assess Board Performance - We conduct regular evaluations of our Board and Committees.

o Our Independent Directors Meet Without Management - Our independent directors meet regularly in executive sessions without management present.

o We Have a Stock Ownership Policy - We require both our named executive officers and our directors to maintain a meaningful ownership stake at levels specified in our stock ownership policy.

o Our Key Committees are Independent - We have fully independent Audit, Compensation and Nominating and Corporate Governance Committees.

o We Do Not Have a “Poison Pill” - We do not maintain a stockholder rights plan.

You can learn more about GCE, view our governance materials and much more by visiting our website, www.gce.com.

Our service revenue normally fluctuates due to changes in our university partners’ enrollment which tends to be higher in the Spring and Fall periods and lower in the Summer.

Our expenses do not normally fluctuate significantly during the year which results in fluctuations in operating income between quarters.

See “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Seasonality .”

There are dozens of companies that seek to partner with non-profit schools and state universities to assist in the development and operation of their educational programs.

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● reputation and brand awareness;

● quality of university client base and performance track record;

● quality of university partner base and performance track record;

● the effectiveness of marketing and sales efforts;

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ED guidance is subject to frequent change and may impact our business model.

Prior to July 1, 2018, GCE, operated GCU.

On July 1, 2018, GCE sold GCU to an independent, Arizona non-profit corporation (the “Transaction”).

See Note 2 – The Transaction to consolidated financial statements for a full description of the Transaction.

As a result of the Transaction, we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs.

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§ 668.25 , which among other things, requires third-party servicers, in their contracts with institutions, to be contractually obligated to, among other things:

o Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV, HEA program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program;

o Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV, HEA program and

any interest or other earnings thereon solely for the purposes specified in and in accordance with that program;

o Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV, HEA program or an applicant for Title IV, HEA program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application;

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Accreditation is a private, non-governmental process for evaluating the quality of educational institutions and their programs in areas including student performance, governance, integrity, educational quality, faculty, physical resources, administrative capability and resources, and financial stability.

The HEA requires accrediting commissions recognized

by ED to review and monitor many aspects of an institution’s operations and to take appropriate action if the institution fails to meet the accrediting commission’s standards.

The HEA requires accrediting commissions recognized by ED to review and monitor many aspects of an institution’s operations and to take appropriate action if the institution fails to meet the accrediting commission’s standards.

While we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs, regulatory matters that materially affect GCU and our other university partners will, necessarily, have a material impact on us.

The following section describes regulatory matters that affect our university partners and that may affect us an education service company to institutions of higher education generally.

The following section describes regulatory matters that affect our university partners and that may affect us as an education service company to institutions of higher education generally.

State Post-Secondary Education Regulation

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State regulatory requirements for online education have historically varied among the states.

To address this issue and to meet new ED requirements many schools have applied and sought to become an approved institutional participant in the State Authorization Reciprocity Agreement (“SARA”).

To address this issue and to meet new ED requirements many schools have applied and sought to become an approved institutional participant

in the State Authorization Reciprocity Agreement (“SARA”).

SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs.

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Many states will certify individuals if they have already been certified in another state.

Prior to opening a new site, Orbis Education’s university partners often require approval from the applicable state board to offer its programs at that location.

Prior to opening a new off-campus classroom and laboratory site, university partners often require approval from the applicable state board to offer its programs at that location.

This can delay the site opening and timing can vary based on the state and the university partner.

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Our most significant university partner, GCU has been regionally accredited by the HLC and its predecessor since 1968, most recently obtaining reaccreditation in 2017 for the ten-year period through 2027.

The HLC is a regional accrediting agency recognized by the Secretary of Education and accredits entire institutions of higher education.

The HLC is an accrediting agency recognized by the Secretary of Education and accredits entire institutions of higher education.

The HLC has historically been categorized as a regional accreditor.

Institutional accreditation by a recognized accreditation agency is one of the prerequisites for an institution of higher education to be eligible to disburse Title IV aid to students.

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Congressional action.

Congress must reauthorize the HEA on a periodic basis, usually every five to six years, and the most recent reauthorization occurred in August 2008.

Congress must reauthorize the HEA on a periodic basis, usually every five to six years, and the most recent reauthorization through September 30, 2013, occurred in August 2008.

The reauthorized HEA reauthorized all of the Title IV programs in which institutions participate but made numerous revisions to the requirements governing the Title IV programs, including provisions relating to student loan default rates and the formula for determining the maximum amount of revenue that institutions are permitted to derive from the Title IV programs.

In addition, members of Congress periodically introduce legislation that would impact Title IV programs and the higher education industry generally.

In addition, members of Congress periodically introduce legislation that would impact Title IV programs and the higher

education industry generally.

Because a significant percentage of our revenue is indirectly derived from the Title IV programs, any action by Congress that significantly reduces Title IV program funding or the ability of our university partners to participate in the Title IV programs could reduce the ability of some students to finance their education at our university partner institutions and materially decrease their student enrollment.

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In November 2019, GCU received a new provisional program participation agreement, which granted GCU the ability to participate in the Title IV programs on a provisional basis through September 30, 2022.

ED also informed GCU at that time, however, that GCU does not satisfy ED’s definition of a nonprofit institution and, as a result, that ED will continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs See “Risk Factors – Risks Related to Our Business - ED’s determination to treat GCU as a proprietary institution for Title IV, HEA purposes could adversely impact GCU’s enrollment.”

Administrative capability.

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In addition to having an acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations, including required refunds to students and any Title IV liabilities and debts, be current in its debt payments, and not receive an adverse, qualified, or disclaimed opinion by its accountants in its audited consolidated financial statements.

As a education service company, we are not directly subject to this regulation.

However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and comply with or accept other limitations on the ability to increase the

number of programs it offers or the number of students it enrolls, any of which sanctions on our university partners could also adversely affect our business.

Our most significant university partner, GCU, calculated its first composite score following the Transaction with respect to its fiscal year ending June 30, 2019, which score must be provided to ED by March 31, 2020.

As of June 30, 2019, GCU’s composite score was 2.2 using the proprietary school calculation methodology.

As an education service company, we are not directly subject to this regulation.

In addition, because other regulators may use the composite score for their purposes, a poor composite score could have additional effects.

For example, NC-SARA utilizes the composite score in determining whether an institution is eligible to participate in SARA.

Our most significant university partner, GCU, calculated its composite score following the Transaction with respect to its fiscal years ending June 30, 2020 and June 30, 2019.

As of June 30, 2020 and 2019, GCU’s composite score was 1.5 and 2.2, respectively, using the proprietary school calculation methodology.

If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions.

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To the extent our services for a university partner include conducting returns to Title IV, as they do with GCU, we would likely be jointly and severally liable to ED, along with the relevant university partner, for return of those funds.

The ”90/10 Rule.” A requirement of the Higher Education Act, commonly referred to as the “90/10 Rule,” that is applicable only to proprietary, post-secondary educational institutions, provides that an institution loses its eligibility to participate in the Title IV programs if the institution derives more than 90% of its revenue for each of two consecutive fiscal years from Title IV program funds.

The ”90/10 Rule.” A requirement of the HEA, commonly referred to as the “90/10 Rule,” that is applicable only to proprietary, post-secondary educational institutions, provides that an institution loses its eligibility to participate in the Title IV programs if the institution derives more than 90% of its revenue for each of two consecutive fiscal years from Title IV program funds.

For purposes of the 90/10 Rule, revenue is calculated under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of an institution’s revenue under generally accepted accounting principles that appears in its consolidated financial statements.

Under the 90/10 Rule, an institution becomes ineligible to participate in the Title IV programs as of the first day of the fiscal year following the second consecutive fiscal year in which it exceeds the 90% threshold, and its period of ineligibility extends for at least two consecutive fiscal years.

If an institution exceeds the 90% threshold for two consecutive fiscal years and it and its students have received Title IV funds during the subsequent period of ineligibility, the institution will be required to return those Title IV funds to the applicable lender or the Department of Education.

If an institution’s rate exceeds 90% for any single fiscal year, it will be placed on provisional certification for at least two fiscal years.

Using the Department of Education’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU, our most significant client, derived approximately 73.0%, of its 90/10 Rule revenue from Title IV program funds for the fiscal year ended June 30, 2019.

Using the ED’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU, our most significant client, derived approximately 71.8% and 73.0%, of its 90/10 Rule revenue from Title IV program funds for the fiscal years ended June 30, 2020 and 2019, respectively.

Accordingly, even if ED continues to treat GCU as a proprietary institution for nonprofit purposes, we do not expect this rule to have any material impact on GCU.

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In addition, an institution’s participation in the FDL Program would end 30 days after notification by ED that its most recent cohort default rate, is greater than 40%, unless the institution timely appeals that determination on specified grounds and according to specified procedures.

An institution whose participation ends under either of these provisions may not

participate in the relevant programs for the remainder of the fiscal year in which the institution receives the notification or for the next two fiscal years.

An institution whose participation ends under either of these provisions may not participate in the relevant programs for the remainder of the fiscal year in which the institution receives the notification or for the next two fiscal years.

If an institution’s cohort default rate for any single federal fiscal year equals or exceeds 30%, ED may place the institution on provisional certification status.

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Pursuant to this rule, we are prohibited from offering our covered employees, who are those employees involved with or responsible for recruiting or admissions activities, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.

We are also precluded from offering our covered employees who work on financial aid matters (if any), any bonus or incentive-based compensation based on the award of financial aid to students enrolled in a postsecondary institution.

We are also precluded from offering our covered employees who

work on financial aid matters (if any), any bonus or incentive-based compensation based on the award of financial aid to students enrolled in a postsecondary institution.

In addition, the incentive compensation rule raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners.

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Because the bundled services rule was promulgated in the form of agency guidance issued by ED in the form of a DCL and is not codified by statute or regulation, the rule could be altered or removed without prior notice, public comment period or other administrative procedural requirements that accompany formal agency rulemaking.

court could invalidate the rule in an action involving our company or our university partners, or in action that does not involve us at all.

Similarly, a court could invalidate the rule in an action involving our company or our university partners, or in action that does not involve us at all.

The revision, removal or invalidation of the bundled services rule by Congress, ED or a court could require us to change our business model.

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Among other things, the new regulations modify the procedures and standards for borrowers to assert through an ED-administered process a defense to the borrowers’ obligation to repay certain Title IV loans first disbursed on or after July 1, 2020, based on certain acts or omissions by the institution or a covered party.

reasonably relied in deciding to obtain a covered loan, where such misrepresentation directly and clearly relates to enrollment or continuing enrollment at the institution or to the provision of educational services for which the loan was made, and where the borrower was financially harmed by the misrepresentation.

The procedures establish a process for students to obtain a loan discharge by establishing by a preponderance of the evidence that the institution made a misrepresentation of material fact, upon which the borrower reasonably relied in deciding to obtain a covered loan, where such misrepresentation directly and clearly relates to enrollment or continuing enrollment at the institution or to the provision of educational services for which the loan was made, and where the borrower was financially harmed by the misrepresentation.

The regulations establish revised definitions for misrepresentation and financial harm, identify a nonexclusive list of items that may be evidence that a misrepresentation occurred, identify a list of items that do not constitute a basis for a defense to repayment.

The regulations also set forth rules on a limitations period for submitting claims and circumstances for extending this period, on the requirements for submitting an application for a discharge, on the consideration of the application by ED, on the opportunities for the institution to respond and submit evidence, and on the process for discharging the borrower’s loan and for ED to seek recovery of the discharged amounts from the institution.

The current Borrower Defense to Repayment regulations, which are scheduled to remain in effect until July 1, 2020, revise the financial responsibility regulations to expand the list of actions or events that would require an institution to provide ED with a letter of credit or another form of acceptable financial protection and potentially be subject to other conditions and requirements.

The specified list of events is extensive and includes events that ED contends might result in actual or potential debts, liabilities or losses and other events that ED contends might result in the institution being unable to meet all of its financial obligations and otherwise provide the administrative resources necessary to comply with the Title IV programs.

The current regulations require institutions to notify ED and current and prospective students within specified timeframes of the occurrence of one or more of these events.

If one or more of these events occur, ED recalculates the institution’s composite score by estimating the amount of actual and potential losses resulting from the events and determining whether the recalculated composite score is less than 1.0 and the institution fails the financial responsibility standards as a result.

The current regulations could require institutions we service – like GCU – to submit a letter of credit or other form of acceptable financial protection and accept other conditions or requirements.

This could put financial strain on our university partners and negatively affect our business.

The regulations published on September 23, 2019 with an effective date of July 1, 2020 shorten and reduce the scope of the list of events that could result in ED determining that an institution has failed ED’s financial responsibility standards and requiring a letter of credit or other form of acceptable financial protection and the acceptance of other conditions or requirements.

In addition to revising the claims for defenses to repayment, the 2019 Borrower Defense to Repayment regulations that became effective on July 1, 2020, revises the financial responsibility regulations that were a part of the 2016 version of those regulations.

The 2019 regulation shortens and reduces the scope of the list of events that could result in ED determining that an institution has failed ED’s financial responsibility standards and requiring a letter of credit or other form of acceptable financial protection and the acceptance of other conditions or requirements.

Specifically, the regulations establish revised lists of mandatory triggering events and discretionary triggering events.

The regulation also establishes discretionary triggering events for which ED may determine that an institution is not able to meet its financial or administrative obligations if the events are likely to have a material adverse effect on the financial condition of the institution.

The regulations require the institution to notify ED of the occurrence of a mandatory or discretionary event in accordance with procedures established by ED, typically within 10 days of the occurrence of the event with certain exceptions.

ED may make a determination that an institution fails to meet the financial responsibility standards based on the occurrence of one or more mandatory or discretionary triggers and impose a letter of credit and/or other conditions upon the institution.

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As a third-party servicer, not only are our university partners subject to reviews and audits that may require our involvement, but we are also subject to program reviews from ED and the Office of the Inspector General.

also have an obligation to annually submit to ED a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and ED audit standards.

Further, we also have an obligation to annually submit to ED a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and ED audit standards.

Gainful employment rules.

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While this change is effective July 1, 2020, ED also permitted institutions to enact this change as early as July 1, 2019, so long as any such institution made manifest its intention to be subject to the rescinded regulations.

It is our understanding that GCU had made manifest that intention and, as of July 1, 2019, is no longer subject the gainful employment rules.

It is our understanding that GCU had made manifest that intention and, as of July 1, 2019, is no longer subject to the gainful employment rules.

While GCU largely complied with the previously published gainful employment rules, the previously published draft rates did indicate that four current degree programs were in the “Zone” – that is, potentially faced sanctions in the future if GCU could not reform the program to comply with the regulations – including three undergraduate education programs and the Masters in Theology.

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We and our employees and subcontractors, as agents of our university partners, must use a high degree of care to comply with such rules and are prohibited by contract from making any false, erroneous or misleading statements about our university partners.

To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and we carefully monitor our subcontractors.

To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are

approved in advance by our university partners before they are used by our employees and we carefully monitor our subcontractors.

Despite our best efforts, we may face complaints from students and prospective students of our university partners over statements made by us and our agents throughout the conduct of our services which would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.

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Many actions that our university partners may wish to take in connection with expanding their operations or other changes are subject to review or approval by the applicable regulatory agencies.

For example, requirements and standards of state post-secondary agencies, accrediting commissions, and ED limit an institution’s ability in certain

instances to establish additional teaching locations, implement new educational programs, or increase enrollment in certain programs.

For example, requirements and standards of state post-secondary agencies, accrediting commissions, and ED limit an institution’s ability in certain instances to establish additional teaching locations, implement new educational programs, or increase enrollment in certain programs.

Many states require review and approval before institutions can add new locations or programs, and many states limit the number of pre-licensure professional students (such as nursing) colleges may enroll.

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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-K

Item 1. Business