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Item 5. Market for Registrant’s Common Equity

2021-02-17 compared with 2020-02-20 · 14 added, 71 removed, 76 unchanged (53% of the section changed)

6 unchanged sentences

A substantially greater number of holders of common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.

We currently intend to retain all future earnings for the operation and expansion of our business and do not anticipate paying cash dividends on our common stock in the foreseeable future.

We currently do not anticipate paying cash dividends on our common stock in the foreseeable future.

Recent Sales of Unregistered Securities

2 unchanged sentences

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Our Board of Directors has authorized us to repurchase up to $175.0 million in aggregate of our common stock, from time to time, depending on market conditions and other considerations.

In July 2020, December 2020 and January 2021, our Board of Directors increased the authorization under its existing stock repurchase program by $50.0 million, $100.0 million and $100.0 million, respectively, reflecting an aggregate authorization for share repurchases since the initiation of our program of $500.0 million.

The current expiration date on the repurchase authorization by our Board of Directors is December 31, 2021.

Repurchases occur at our discretion.

Repurchases occur at GCE’s discretion and GCE may modify, suspend or discontinue the repurchase authorization at any time.

Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable SEC rules.

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

Since the approval of our share repurchase plan, we have purchased 4.0 million shares of common stock at an aggregate cost of $122.7 million, which purchases are recorded at cost in the accompanying December 31, 2019 consolidated balance sheet and statement of stockholders’ equity.

At December 31, 2019, there remained $52.3 million available under our current share repurchase authorization.

Since the initial approval of our share repurchase plan, we have purchased 5,578,141 shares of common stock at an aggregate cost of $251.7 million, which purchases are recorded at cost in the accompanying December 31, 2020 consolidated balance sheet and statement of stockholders’ equity.

At December 31, 2020, there remained $148.3 million available under our current share repurchase authorization (which authorization was increased to $248.3 million in January 2021).

During the fourth quarter and the year ended December 31, 2020, GCE repurchased 437,544 and 1,601,788 shares of common stock, respectively, at an aggregate cost of $36.7 million and $129.0 million, respectively.

18 unchanged sentences

GCE Stock Performance

The following graph compares the cumulative total return of our common stock with the cumulative total returns of the S&P 500 Index and our education services peer group of nine companies that includes:

Wiley Education Services, Pearson plc., CHEGG, Inc., Instructure Inc., Pluralsight Inc., Laureate Education, Inc., Strategic Education, Inc., Adtalum Global Education, Inc, and 2U, Inc..

This chart assumes that an investment of $100 was made in our common

stock, in the index, and in the peer group on December 31, 2014 and that all dividends paid by us and such companies were reinvested, and tracks the relative performance of such investments through December 31, 2019.

The following graph compares the cumulative total return of our common stock with the cumulative total returns of the S&P 500 Index and our education services peer group of seven companies that includes:

Wiley Education Services, Pearson plc., CHEGG, Inc., Laureate Education, Inc., Strategic Education, Inc., Adtalum Global Education, Inc, and 2U, Inc.

This chart assumes that an investment of $100 was made in our common stock, in the index, and in the peer group on December 31, 2015 and that all dividends paid by us and such companies were reinvested, and tracks the relative performance of such investments through December 31, 2020.

Grand Canyon Education, Inc.

3 unchanged sentences

Selected Consolidated Financial and Other Data

Financial Condition and Results of Operations , to fully understand the information presented below.

The selected consolidated income statement data and other data, excluding period end enrollment, for the years ended December 31, 2019, 2018, and 2017, and the selected consolidated balance sheet data as of December 31, 2019, and 2018, have been derived from our audited consolidated financial statements for such years, which are included herein.

The following selected consolidated financial and other data should be read in conjunction with Item 8, Consolidated Financial Statements and Supplementary Data , and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , to fully understand the information presented below.

The selected consolidated income statement data and other data, excluding period end enrollment, for the years ended December 31, 2020, 2019 and 2018, and the selected consolidated balance sheet data as of December 31, 2020 and 2019, have been

derived from our audited consolidated financial statements for such years, which are included herein.

The selected consolidated income statement data and other data, excluding period end enrollment, for the years ended December 31 2017 and 2016, and the selected consolidated balance sheet data as of December 31, 2018, 2017 and 2016, have been derived from our audited consolidated financial statements for such years, which are not included herein.

25 unchanged sentences

Intangible asset amortization

Adjusted EBITDA (2)

Period end enrollment (2)

2 unchanged sentences

Restricted cash, cash equivalents and investments

Secured Note receivable

Secured Note receivable, net

Total assets (3)

1 unchanged sentence

Total stockholders’ equity

(1) During the third quarter of 2018, the Company made changes in its presentation of operating expenses and reclassified prior periods to conform to the current presentation.

(1) During the third quarter of 2018, GCE made changes in its presentation of operating expenses and reclassified prior periods to conform to the current presentation.

All years in the five (5) year table were reclassified to conform to the current presentation.

(2) Adjusted EBITDA is a non-GAAP financial measure that we define as net income plus interest expense, less interest income and other gain (loss) recognized on investments, plus income tax expense, plus depreciation and amortization (but excluding depreciation and amortization included in university related expenses) (EBITDA), as adjusted for (i) contributions to private Arizona school tuition organizations in lieu of the payment of state income taxes;

(ii) loss on transaction;

(iii) university related expenses;

(iv) share-based compensation, (v) the revenue share rate on the Master Services Agreement, and (vi) unusual charges or gains, such as litigation and regulatory reserves, impairment charges and asset write-offs, and exit or lease termination costs.

We have reclassified depreciation and amortization related to university assets and share-based compensation for former GCE employees who are employed by GCU to university related expenses to provide comparability between periods.

(3) Enrollment represents individual students who attended a course during the last two months of the calendar quarter.

(2) Enrollment represents individual students who attended a course during the last two months of the calendar year.

(3) During the first quarter of 2016, GCE made changes in its presentation of deferred tax assets and liabilities to comply with a new accounting standard.

Accordingly, we reclassified the current deferred taxes to net against noncurrent deferred tax liabilities for all prior periods to conform to the current presentation.

We present Adjusted EBITDA, a non-GAAP financial measure, because we consider it to be an important supplemental measure of our operating performance.

We also make certain compensation decisions based, in part, on our operating performance, as measured by Adjusted EBITDA, and our credit agreement requires us to comply with covenants that include performance metrics substantially similar to Adjusted EBITDA.

All of the adjustments made in our calculation of Adjusted EBITDA are adjustments to items that management does not consider to be reflective of our core operating performance.

Management considers our core operating performance to be that which can be affected by our managers in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period and does not consider the items for which we make adjustments (as listed above) to be reflective of our core performance.

We believe Adjusted EBITDA allows us to compare our current operating results with corresponding historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by variations in capital structures (affecting relative interest expense, including the impact of write-offs of deferred financing costs when companies refinance their indebtedness), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), the book amortization of intangibles (affecting relative amortization expense), and other items that we do not consider reflective of underlying operating performance.

We also present Adjusted EBITDA because we believe it is frequently used by securities analysts, investors, and other interested parties as a measure of performance.

In evaluating Adjusted EBITDA, investors should be aware that in the future we may incur expenses similar to the adjustments described above.

Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by expenses that are unusual, non-routine, or non-recurring.

Adjusted EBITDA has limitations as an analytical tool in that, among other things, it does not reflect:

● cash expenditures for capital expenditures or contractual commitments;

● changes in, or cash requirements for, our working capital requirements;

● interest expense, or the cash required to replace assets that are being depreciated or amortized;

● the impact on our reported results of earnings or charges resulting from the items for which we make adjustments to our EBITDA, as described above and set forth in the table below.

In addition, other companies, including other companies in our industry, may calculate these measures differently than we do, limiting the usefulness of Adjusted EBITDA as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as a substitute for net income, operating income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity.

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.

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

Year Ended December 31,

interest expense

interest income on Secured Note

investment interest and other

income tax expense

amortization of intangible assets

depreciation and amortization (a)

EBITDA, excluding university related depreciation and amortization

contributions in lieu of state income taxes (b)

loss on transaction (c)

university related expenses (d)

40% of university related revenue (e)

share-based compensation (f)

estimated litigation and regulatory reserves(g)

Adjusted EBITDA

(a) Represents depreciation and amortization related to GCE assets.

Depreciation and amortization amounts related to university assets have been reclassified to university related expenses.

(b) Represents contributions to various private Arizona school tuition organizations to assist with funding for education.

In connection with such contributions made, we received a dollar-for-dollar state income tax credit, which resulted in a reduction in our effective income tax rate to 18.4%, 20.2% and 28.3% for the years ended December 31, 2019, 2018 and 2017, respectively.

Had these contributions not been made, our effective tax rate would have been 19.3%, 21.2% and 28.8%, for 2019, 2018 and 2017, respectively.

Such contributions are viewed by our management to be made in lieu of payments of state income taxes and are therefore excluded from evaluation of our core operating performance.

Costs incurred during 2019 include legal and other third-party costs related to the Orbis Education acquisition.

2018 amounts are primarily related to the GCU transaction and include legal and other third-party expenses of $5.8 million, an asset impairment of $3.0 million, and $9.6 million for a deferred compensation plan for GCU employees that were formerly GCE employees (the “Transferred Employees”) and that held unvested restricted stock of GCE that was forfeited upon the transaction in 2018.

Costs incurred prior to 2018 primarily represent legal costs related to the GCU transaction.

(d) Reflects costs that were transferred to GCU in the Transaction that are no longer incurred by GCE.

Includes $3,523 of costs related to the early termination of leased space in 2016.

(e) Reflects adjustment to reduce as reported university related revenue by 40% to reflect revenue share percentage of 60% under the Master Services Agreement.

(f) Reflects share-based compensation expense related to GCE employees;

amounts related to Transferred Employees that now work for the university were reclassified to university related expense to provide comparability between periods.

(g) Reflects primarily regulatory litigation as GCE retained responsibility for all liabilities of the business arising from pre-closing date of the transaction.

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

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 5. Market for Registrant’s Common Equity