What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-02-17 compared with 2020-02-20 · 222 added, 199 removed, 826 unchanged (34% of the section changed)

4 unchanged sentences

Market risk .

In 2013 we entered into an interest rate corridor to manage our 30-day LIBOR interest exposure from variable rate debt, which matured in December 2019.

The corridor instrument hedged variable interest rate risk starting March 1, 2013 through its expiration date of December 20, 2019 and permitted us to hedge our interest rate risk at several thresholds.

Under this arrangement, in addition to the credit spread, we paid variable interest rates based on the 30-day LIBOR rates monthly until that index reached 1.5%.

If 30-day LIBOR was equal to 1.5% through 3.0%, we continued to pay 1.5%.

If the 30-day LIBOR exceeded 3.0%, we paid actual 30-day LIBOR less 1.5%.

As of December 31, 2020, we have no derivative financial instruments or derivative commodity instruments.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 17, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Adoption of New Accounting Pronouncement

As discussed in Note 4 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842) .

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of Orbis Education Services, LLC

As discussed in Note 3 to the consolidated financial statements, the Company acquired Orbis Education Services, LLC (“Orbis”) for $366 million on January 22, 2019.

The Company applied the acquisition method of accounting and allocated the purchase price to the assets acquired and liabilities assumed based on their estimated acquisition date fair value.

The Company recorded tangible assets of $29.3 million, customer relationships of $210.3 million,

liabilities assumed of $31.4 million, and goodwill of $157.8 million.

The determination of the fair value of acquired customer relationships involved significant estimation uncertainty.

We identified the assessment of the initial fair value measurement of the customer relationships acquired in this transaction as a critical audit matter.

Testing the assumptions regarding forecasted revenue growth rates, customer attrition rates and discount rates, which were used to calculate the fair values, involved a high degree of subjectivity.

In addition, the fair values of the customer relationships were challenging to audit due to the sensitivity of the fair value determination to changes in the assumptions.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s acquisition date valuation process, including controls related to the forecasted revenue growth rates, customer attrition rates and discount rates.

We performed sensitivity analyses to assess the impact of reasonably possible changes to the revenue growth rates.

We challenged the Company’s revenue growth rates, including those related to customer attrition, by comparing the growth assumptions to peer companies’ forecasted growth rates and historical growth rates.

We compared the Company’s forecasted revenue to actual results for the same period to assess the Company’s ability to accurately forecast.

We involved valuation professionals with specialized skills and knowledge who assisted in:

performing sensitivity analyses over customer attrition rates and discount rates to assess the impact of reasonably possible changes in the respective rate;

evaluating the Company’s discount rate, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the sufficiency of audit evidence over service revenue

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The transaction price for support services is based on the Company receiving a contracted percentage of the University Partner’s tuition and fee revenue.

The tuition and fee information received varies depending on the respective University Partner’s reporting processes and the services provided.

The tuition and fee information received varies depending

on the respective University Partner’s reporting processes and the services provided.

The Company recorded $844 million of service revenue for the year ended December 31, 2020.

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This included determining the nature and extent of procedures to be performed and evaluating the evidence obtained over the tuition and fee information.

The primary procedures we performed to address this critical audit matter included the following.

The following are the primary procedures we performed to address this critical audit matter.

We applied auditor judgment to determine the nature and extent of procedures to be performed over tuition and fee information of the University Partners.

We tested certain internal controls over the Company’s service revenue processes, including the Company’s controls over the accurate recording of amounts.

We assessed the recorded service revenues by selecting a sample of transactions and compared the amounts recognized for consistency with underlying documentation, including contracts with University Partners and student enrollment documentation.

In addition, we evaluated the overall sufficiency of audit evidence obtained over service revenues.

We evaluated the design and tested the operating effectiveness of certain internal controls related to service revenue.

This included controls related to the accurate recording of amounts dependent on University Partners’ tuition and fee revenue information.

For a sample of transactions, we compared the amounts recognized as service revenue for consistency with underlying documentation, including contracts with University Partners and student enrollment documentation.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the nature of such evidence.

We have served as the Company’s auditor since 2012.

Phoenix, Arizona

Tempe, Arizona

February 17, 2021

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Right-of-use assets

Secured Note receivable

Secured Note receivable, net

Amortizable intangible assets, net

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Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

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University related revenue

Service revenue

Costs and expenses:

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Unrealized gains (losses) on hedging derivatives, net of taxes of $ 107 and $ 39 for the years ended December 31, 2019 and 2018, respectively

Unrealized gains (losses) on available for sale securities, net of taxes of $ 0 , $ 103 and $ 108 for the years ended December 31, 2019, 2018 and 2017, respectively

Reclassification of expired interest rate corridor to interest expense, net of taxes of $ 257

Unrealized gains (losses) on available for sale securities, net of taxes of $ 103 for the year ended December 31, 2018

Reclassification of expired interest rate corridor to interest expense, net of taxes of $ 257 for the year ended December 31, 2019

Comprehensive income

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(In thousands)

Year Ended December 31, 2020

Treasury Stock

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Balance at December 31, 2017

Cumulative effect from the adoption of accounting pronouncements, net of taxes

Cumulative effect from the adoption of accounting pronouncements, net of taxes of $ 390

Comprehensive income

Adoption impact – ASU 2018-02

Common stock purchased for treasury

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Balance at December 31, 2018

Cumulative effect from the adoption of accounting pronouncements, net of taxes

Comprehensive income

Adoption impact – ASU 2018-02

Common stock purchased for treasury

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Balance at December 31, 2019

Cumulative effect from the adoption of accounting pronouncements, net of taxes of $ 1,168

Comprehensive income

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Deferred income taxes

Loss on transaction, net of costs and asset impairment

Loss on transaction

Other, including fixed asset impairments

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Accounts receivable

Prepaid expenses and other

Right-of-use assets and lease liabilities

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Deferred rent

Deferred revenue

Student deposits

Deferred revenue

Net cash provided by operating activities

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Repayment of excess funds by GCU

Funding to GCU for capital expenditures

Repayment by GCU for capital expenditures

Return of equity method investment

Funding to GCU

Repayment by GCU

Purchases of investments

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Net cash used in investing activities

Cash flows provided by (used in) financing activities:

Cash flows (used in) provided by financing activities:

Principal payments on notes payable

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Net proceeds from exercise of stock options

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents and restricted cash

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of period

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Purchases of property and equipment included in accounts payable

Allowance for credit losses of $ 5,000 , net of taxes of $ 1,168 from adoption of ASU 2016-13

Reclassification of capitalized costs - adoption of ASC 606

Reclassification of deferred revenue – adoption of ASC 606

Lease adoption - gross up of right of use assets and lease liabilities

ROU Asset and Liability gross up

Lease adoption - recognition of right of use assets and lease liabilities

ROU Asset and Liability recognition

Reclassification of interest rate corridor due to expiration

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Grand Canyon Education, Inc.

(together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company.

Prior to July 1, 2018, GCE owned and operated Grand Canyon University (the “University”), 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, at leased facilities and at facilities owned by third party employers of its students.

On July 1, 2018, the Company sold the University to Grand Canyon University, an Arizona non-profit corporation formerly known as Gazelle University (“GCU”).

(together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company dedicated to serving colleges and universities.

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

GCE’s most significant university partner is Grand Canyon University (“GCU”), 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.

Prior to July 1, 2018, GCE owned and operated Grand Canyon University (the “University”).

On July 1, 2018, the Company sold the University to GCU.

As a result of this transaction (the “Transaction”), GCE became an education services company focused on providing a full array of support services to institutions in the post-secondary education sector.

GCE provides education services that include technology and academic services, counseling services and support, marketing and communication services, and for its largest university partner several back-office services such as accounting, reporting, tax, human resources, and procurement services.

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

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

On January 22, 2019, GCE acquired, by merger, all of the outstanding equity interest of Orbis Education Services, LLC (“Orbis Education”), an education services company that supports healthcare education programs for 22 university partners across the United States, for $ 361,184 , net of cash acquired (the “Acquisition”).

In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly-owned subsidiary, Orbis Education, which we acquired, by merger on January 22, 2019 for $ 361,184 , net of cash acquired (the “Acquisition”).

Therefore, the results of operations for the year ended December 31, 2019 include Orbis Education’s financial results for the period from January 22, 2019 to December 31, 2019.

The Company financed a portion of the purchase price through a credit facility provided by a consortium of banks led by our existing bank group.

See Note 3 to our consolidated financial statement for a full description of the Acquisition.

As a result of the Transaction and Acquisition, the Company no longer owns and operates an institution of higher education, but instead provides a bundle of services in support of its 22 university partners.

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 health care 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 provides education services to 25 university partners across the Unites States .

GCE was formed in Delaware in November 2003 as a limited liability company, under the name Significant Education, LLC, for the purchase of acquiring the assets of the University from a non-profit foundation on February 2, 2004.

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The Secured Note provides for GCU to make interest only payments during the term, with all principal and accrued and unpaid interest due at maturity and also provides that we may loan additional amounts to GCU to fund approved capital expenditures during the first three years of the term.

As of December 31, 2019, the Company had loaned $ 99,815 to GCU for capital expenditures, which is net of GCU’s repayment of $ 100,000 during the year ended December 31, 2019.

In connection with the closing of the Asset Purchase Agreement, the Company and GCU entered into a long-term master services agreement pursuant to which the Company provides identified technology and academic services, counseling services and support, marketing and communication services, and several back-office services to GCU in return for 60 % of GCU’s tuition and fee revenue.

Grand Canyon Education, Inc.

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(In thousands, except per share data)

December 31, 2020, the Company had loaned $ 99,815 to GCU for capital expenditures, which is net of repayments made by GCU.

The Company was a party to a credit agreement with Bank of America, N.A.

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Included in the university related expenses for the six months ended December 31, 2018 is $ 7,880 of share-based compensation expense resulting from the modification and vesting of previously issued restricted stock grants held by Transferred Employees, employer tax expense of $ 191 related to the share-based compensation modification, net of reversals of employee related liabilities that were not part of the Transferred Assets for the Transaction of $ 1,907 .

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Variable Interest Entity and Related Party Considerations

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● GCU is a separate non-profit entity under the control of an independent board of trustees, none of whose members have ever served in a management or corporate board role at the Company.

GCU’s board of

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

trustees has adopted bylaws and a related conflict of interest policy that, among other things, (i) prevents any trustee of GCU from attending any meeting, or voting on any matter, as to which such trustee has a conflict of interest, (ii) establishes a special committee of independent trustees to oversee on behalf of GCU all matters related to the Master Services Agreement and GCU’s relationship with the Company, and (iii) prohibits any trustee from having any financial interest in, or role with, the Company.

GCU’s board of trustees has adopted bylaws and a related conflict of interest policy that, among other things, (i) prevents any trustee of GCU from attending any meeting, or voting on any matter, as to which such trustee has a conflict of interest, (ii) establishes a special committee of independent trustees to oversee on behalf of GCU all matters related to the Master Services Agreement and GCU’s relationship with the Company, and (iii) prohibits any trustee from having any financial interest in, or role with, the Company.

Accordingly, the Company’s relationship with GCU, both pursuant to the Master Services Agreement and operationally, is no longer as owner and operator, but as a third-party service provider to an independent customer.

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Mueller from participating in operational matters involving the Company and GCU, including with respect to the Master Services Agreement.

● The terms of the Master Services Agreement vest in GCU and its board of trustees full authority over decision making related to the day-to-day operations of GCU, including, without limitation, (i) selecting, hiring and firing its personnel, (ii) selecting and adopting academic programs and courses, (iii) establishing admission standards and admitting students, (iv) overseeing instruction, (v) setting credit and student performance requirements, (vi) determining graduation requirements, and (vii) conferring degrees.

● The terms of the Master Services Agreement vest in GCU and its board of trustees has full authority over decision making related to the day-to-day operations of GCU, including, without limitation, (i) selecting, hiring and firing its personnel, (ii) selecting and adopting academic programs and courses, (iii) establishing admission standards and admitting students, (iv) overseeing instruction, (v) setting credit and student performance requirements, (vi) determining graduation requirements, and (vii) conferring degrees.

Per the terms of the MSA, GCE has no authority over GCU’s day-to-day operations.

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● The Company and GCU both engaged their own outside corporate counsel, outside regulatory counsel, and financial advisors to represent each party’s interest during the Transaction.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

On January 22, 2019, GCE acquired Orbis Education for $ 361,184 (inclusive of closing date adjustments and net of cash acquired).

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Transaction costs for the Acquisition for the year ended December 31, 2018 were $ 808 and for the year ended December 31, 2019 were $ 3,966 , which are included in the loss on transaction in our consolidated income statement.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

The Acquisition was accounted for in accordance with the acquisition method of accounting.

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The Company has consolidated the results of operations for Orbis Education since its Acquisition on January 22, 2019.

Consolidated net revenue and consolidated net income for the year ended December 31, 2019 include $ 85,869 of service revenue and a loss, net of taxes, of $ 2,588 from Orbis Education, which includes $ 8,223 of amortization of intangible assets.

The following table reports pro forma information as if the Acquisition of Orbis Education had been completed at the beginning of the earliest period presented:

Three Months Ended December 31,

Year Ended December 31,

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

The pro forma information above for the three months and years ended December 31, 2019 and 2018 includes acquisition related costs in both periods, amortization of intangible assets as a result of the Acquisition, additional interest expense on the debt issued to finance the Acquisition, depreciation expense based on the estimated fair value of the assets acquired, and warrant expense and related tax effects.

intangible assets.

The following table reports pro forma information as if the Acquisition of Orbis Education had been completed at the beginning of the earliest period presented:

Three Months Ended December 31,

Year Ended December 31,

The pro forma information above for the three months ended and the years ended December 31, 2019 and 2018 includes acquisition related costs in both periods, amortization of intangible assets as a result of the Acquisition, additional interest expense on the debt issued to finance the Acquisition, depreciation expense based on the estimated fair value of the assets acquired, and warrant expense and related tax effects.

The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been consummated on January 1, 2019 and 2018.

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Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents at December 31, 2018 represents the cash collateral on the credit agreement, which was released as part of the amended and restated credit agreement on January 22, 2019.

Restricted cash and cash equivalents at December 31, 2019 represents cash pledged for leased office space.

The Company considers its investments in municipal bonds, mutual funds, municipal securities, certificates of deposit and commercial paper as available-for-sale securities based on the Company’s intent for the respective security.

Available-for-sale securities are carried at fair value, determined using Level 1 and Level 2 of the hierarchy of valuation inputs, with the use of quoted market prices and inputs other than quoted prices that are observable for the assets, with unrealized gains and losses, net of tax, reported as a separate component of other comprehensive income.

Unrealized losses considered to be other-than-temporary are recognized currently in earnings.

Amortization of premiums, accretion of discounts, interest and dividend income and realized gains and losses are included in interest and other income.

Restricted cash and cash equivalents at December 31, 2019 represents cash pledged for leased office space, which cash was released during the year ended December 31, 2020.

At December 31, 2020 and 2019, the Company considers its investments in municipal bonds, mutual funds, municipal securities, corporate bonds, collateralized mortgage obligations, certificates of deposit and commercial paper as trading securities based on the Company’s intent for the respective security.

Trading securities are carried at fair value determined using Level 1 and Level 2 of the hierarchy of valuation inputs, with the use of quoted market prices and

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

inputs other than quoted prices that are observable for the assets and unrealized holding gains and losses are included in earnings.

As of December 31, 2018, the Company transferred its investments from available-for-sale to trading, due to the Company’s decision to liquidate all investments to fund a portion of the purchase price paid in the Acquisition.

Trading securities are carried at fair value and unrealized holding gains and losses are included in earnings.

Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported as a separate component of other comprehensive income.

Comprehensive income and unrealized losses considered to be other-than-temporary are recognized currently in earnings.

Amortization of premiums, accretion of discounts, interest and dividend income and realized gains and losses are included in interest and other income.

As a result of the transfer to trading, the Company recorded a loss of $ 372 in investment interest and other for the year ended December 31, 2018.

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Expenditures that materially extend the useful life of an asset are capitalized.

Construction in progress represents items not yet placed in service and are not

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

The majority of the Company’s historical capitalized interest was related to the construction of GCU’s campus improvements.

The Company capitalizes interest using its interest rates on the specific borrowings used to finance the improvements, which approximated 3.7 % in 2018, and 2.8 % in 2017.

Construction in progress represents items not yet placed in service and are not depreciated.

The majority of the Company’s historical capitalized interest was related to the construction of the University’s campus improvements.

The Company capitalizes interest using its interest rates on the specific borrowings used to finance the improvements, which approximated 3.7 % in 2018.

Interest cost capitalized and incurred in the years ended December 31, 2020, 2019, and 2018 are as follows:

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We also capitalize the creation of learning objects which are digital assets such as online demonstrations, simulations, and case studies used to obtain learning objectives.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Costs that are capitalized include payroll and payroll-related costs for employees who are directly associated and spend time producing content and payments to faculty and subject matter experts involved in the process.

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The Company has concluded that the most appropriate method to amortize the deferred content assets is on a straight-line basis over the estimated life of the course, which is generally four years which corresponds with course’s review and major revision cycle.

As of December 31, 2019, $ 1,077 , net of amortization, of deferred content assets are included in other assets, long-term in the Company’s consolidated balance sheets and amortization is included in technical and academic services where the costs originated.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

As of December 31, 2020 and 2019, $ 1,198 and $ 1,077 , respectively, net of amortization, of deferred content assets are included in other assets in the Company’s consolidated balance sheets and amortization is included in technical and academic services where the costs originated.

Long-Lived Assets

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The Company has lease agreements with lease and non-lease components, and the non-lease components are accounted for separately and not included in our ROU assets and lease liabilities.

Leases primarily consist of classroom site locations and office space.

The Company developed our online delivery platform with a third-party and put this platform into full production in 2011.

Leases primarily consist of off-campus classroom and laboratory site locations and office space.

The Company developed its online delivery platform with a third-party and put this platform into full production in 2011.

The Company has prepaid perpetual license fees and source code rights for the software developed, and has prepaid maintenance and service fees.

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At the completion of the Transaction on July 1, 2018, the remaining prepaid royalty assets were deemed impaired and $ 3,037 was expensed and included in loss on transaction in the consolidated income statement.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Business Combinations

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The net assets and result of operations of an acquired entity are included on the Company's consolidated financial statements from the acquisition date.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Goodwill and Intangible Assets

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Stock-based compensation expense related to restricted stock grants is expensed over the vesting period using the straight-line method for Company employees and the Company’s board of directors.

Starting January 1, 2017 with the adoption of the share-based compensation accounting standard, the Company made an accounting policy election to account for forfeitures as they occur, prior to 2017 these forfeitures were estimated and reported net of the expense.

The Company recognizes forfeitures as they occur.

Derivatives and Hedging

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Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Derivative financial instruments enable the Company to manage its exposure to interest rate risk.

The Company does not engage in any derivative instrument trading activity.

Credit risk associated with the Company’s derivatives is limited to the risk that a derivative counterparty will not perform in accordance with the terms of the contract.

Exposure to counterparty credit risk is considered low because these agreements have been entered into with institutions with Aa or higher credit ratings, and they are expected to perform fully under the terms of the agreements.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and benefits and accrued liabilities approximate their fair value based on the liquidity or the short-term maturities of these

Grand Canyon Education, Inc.

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(In thousands, except per share data)

The carrying value of Secured Note receivable, non-current approximates fair value as the Secured Note resulted from the Transaction and was negotiated at fair market value.

Although the Company currently does not have any derivative financial instruments, derivative financial instruments have been used in the past to manage its exposure to interest rate risk.

The Company does not engage in any derivative instrument trading activity.

Fair Value of Financial Instruments

As of December 31, 2020 the carrying value and fair value of the Company’s Secured Note was $ 964,912 and $ 1,049,458 , respectively.

Fair value of the Secured Note was estimated based upon average yields of similar debt arrangements in the marketplace.

As of December 31, 2019, the Secured Note approximated fair market value since it was recently negotiated in the Transaction at the fair market value.

The carrying value of notes payable approximate fair value based on its variable rate index.

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See Note 12, Derivative Instruments.

The fair value of investments, primarily municipal securities, were determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets.

The fair value of investments was determined using Level 1 and Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets.

The unit of account used for valuation is the individual underlying security.

The municipal securities are comprised of city and county bonds related to schools, water and sewer, utilities, transportation, healthcare and housing.

The municipal securities are comprised of city and county bonds related to schools, water and sewer, utilities, transportation, healthcare and housing and corporate securities consisting of bank and financial institution bonds and securities.

The Company accounts for income taxes payable or refundable for the current year and deferred tax assets and liabilities for future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns.

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The Company expenses legal fees as incurred.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Revenue Recognition

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A contract was entered into with a student and covered a course or semester.

Revenue recognition occurred once a student

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

started attending a course.

Revenue recognition occurred once a student started attending a course.

The University also charged online students an upfront learning management fee, which was deferred and recognized over the initial course.

1 unchanged sentence

Ancillary revenues included housing and fee revenues that were recognized over the period the services were provided and also included revenues from sales and services such as food and beverage, merchandise, hotel, golf and arena events that were recognized as sales occurred or services were performed as these services were transferred at a point in time.

For the six months ended June 30, 2018 and the year ended December 31, 2017, the Company’s revenue was reduced by approximately $ 101,176 and $ 196,334 , respectively, as a result of scholarships that the Company offered to students.

For the six months ended June 30, 2018, the Company’s revenue was reduced by approximately $ 101,176 as a result of scholarships that the Company offered to students.

Sales tax collected from students is excluded from net revenues.

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Certain states in which students reside impose separate, mandatory refund policies, which overrode the Company’s policy to the extent in conflict.

If a student withdrew at a time when only a portion, or none of the tuition was refundable, then in accordance with its revenue recognition policy, the Company continued to recognize the tuition that was not refunded pro-rata over the applicable period of instruction.

The Company did not record revenue on amounts that may be refunded.

However, for students that had taken out financial aid to pay their tuition and for which a return of such money to ED under Title IV was required as a result of his or her withdrawal, the Company reassessed collectability for these students each quarter for the estimated revenue that will be returned and recognized the revenue in future periods when payment was received.

The Company had elected the short-term contract exemption with respect to its performance obligations under its contracts with students as all such contracts had original terms of less than one year.

If a student withdrew at a time when only a portion, or none of the tuition was refundable, then in accordance with its revenue recognition policy, the Company

Grand Canyon Education, Inc.

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(In thousands, except per share data)

continued to recognize the tuition that was not refunded pro-rata over the applicable period of instruction.

The Company did not record revenue on amounts that may be refunded.

The Company had elected the short-term contract exemption with respect to its performance obligations under its contracts with students as all such contracts had original terms of less than one year.

Service revenue commenced July 1, 2018

Starting July 1, 2018, the Company generates all of its revenue through services agreements with its university partners (“Services Agreements”), pursuant to which the Company provides integrated technology and academic services, marketing and communication services, and back office services to its university partners in return for a percentage of tuition and fee revenue.

Effective July 1, 2018, as an education services company, the Company adopted “ Revenue from Contracts with Customers ” which it applies to its Services Agreements.

The Company’s Services Agreements have initial terms ranging from 7 - 15 years , subject to renewal options, although certain agreements may give the university partners the right to terminate early if certain conditions are met.

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Billings for some university partners do not occur until after the service period has commenced and final enrollment information is available.

Our unbilled revenue of $ 118 as of December 31, 2019 are included in accounts receivable in our consolidated balance sheets.

Our unbilled revenue of $ 294 and $ 118 as of December 31, 2020 and 2019, respectively, are included in accounts receivable in our consolidated balance sheets.

Deferred revenue represents the excess of amounts received as compared to amounts recognized in revenue on our consolidated statements of income as of the end of the reporting period, and such amounts are reflected as a current liability on our consolidated balance sheets.

We generally receive payments for our services billed within 30 days of invoice.

These payments are recorded as deferred revenue until the services are delivered and revenue is recognized.

Technology and Academic Services

Technology and academic services consist primarily of costs related to ongoing maintenance of educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems.

This also includes costs to provide support for content

We generally receive

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

development, faculty training, development and other faculty support, technology support, rent and occupancy costs for university partners’ off-campus locations, and assistance with state compliance.

payments for our services billed within 30 days of invoice.

These payments are recorded as deferred revenue until the services are delivered and revenue is recognized.

Allowance for Credit Losses

The Company records its accounts receivable and Secured Note receivable at the net amount expected to be collected.

Our accounts receivable are derived through education services provided to university partners.

Our Secured Note receivable was derived through the sale of university-related assets to our most significant university partner, GCU.

The Company maintains an allowance for credit losses resulting from our university partners not making payments.

The Company determines the adequacy of the allowance by periodically evaluating each university partner’s balance, considering their financial condition and credit history, and considering current and forecasted economic conditions.

Since our transition to an education services company on July 1, 2018 through December 31, 2019, and continued growth to 25 university partners, the Company has no credit losses with any of our university partners.

In the first quarter of 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments using a modified retrospective approach.

This model requires consideration of a broader range of reasonable and supportable information and requires the Company to estimate expected credit losses including a measure of the expected risk of credit loss even if that risk is remote over the lifetime of the asset.

Upon adoption, the Company recorded a reserve of $ 5,000 on its long-term Secured Note receivable.

The cumulative effect for the Company upon adoption of this new standard was $ 3,832 , net of taxes of $ 1,168 .

Bad debt expense is recorded as a technology and academic services expense in the consolidated income statement.

The Company will continue to actively monitor the impact of the COVID-19 pandemic on expected credit losses.

Technology and Academic Services

This also includes costs to provide support for content development, faculty training, development and other faculty support, technology support, rent and occupancy costs for university partners’ off-campus locations, and assistance with state compliance.

This expense category includes salaries, benefits and share-based compensation, information technology costs, amortization of content development costs and other costs associated with these support services.

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Advertising costs are expensed as incurred.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

General and Administrative

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There may be differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in expense once a probable amount is known.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Concentration of Credit Risk

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Additionally, the Company utilizes more than one financial institution to conduct initial and ongoing credit analysis on its investment portfolio to monitor and lower the potential impact of market risk associated with its cash equivalents and investment portfolio.

The Company is also subject to credit risk for its accounts receivable balance.

The Company has not experienced any losses on receivables since July 1, 2018, the date the Company transitioned to an education service company.

The Company is also subject to credit risk for its accounts receivable balance and its Secured Note.

The Company has not experienced any losses on accounts receivables since July 1, 2018, the date the Company transitioned to an education service company.

To manage accounts receivable risk, the Company maintains an allowance for doubtful accounts, if needed.

Our dependence on our largest university partner subjects us to the risk that declines in that partner’s operations would result in a sustained reduction in revenues and interest income on Secured Note for the Company.

The Company monitors the credit risk exposure of the counterparty of the Secured Note to determine whether an adjustment to allowance for credit loss is necessary.

A significant deterioration in the financial viability of our counterparty and corresponding decline in the fair value of the collateralized assets could impact the collectability risk of the Secured Note.

Our dependence on our largest university partner, which is also the counterparty to the Secured Note, with 86.8 % and 89.0 % of total service revenue for the years ended December 31, 2020 and 2019, respectively, subjects us to the risk that declines in our customer’s operations would result in a sustained reduction in service revenue and interest income on Secured Note for the Company.

Segment Information

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The Company’s Chief Executive Officer manages the Company’s operations as a whole and no expense or operating income information is generated or evaluated on any component level.

Accounting Pronouncements Adopted in 2019

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) , which introduced a lessee model that requires the majority of leases to be recognized on the balance sheet.

On January 1, 2019, the Company adopted the ASU using the modified retrospective transition approach and elected the transition option to recognize the adjustment in the period of adoption rather than in the earliest period presented.

Adoption of the new guidance resulted in an immaterial amount of right-of-use (“ROU”) assets and lease liabilities of $ 498 .

Subsequent to adoption, the Company recognized ROU assets of $ 13,069 and lease liabilities of $ 13,069 acquired in the Acquisition.

As part of the adoption process the Company made the following elections:

● The Company elected the hindsight practical expedient, for all leases.

● The Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs for all leases.

● The Company elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The Company’s leases do not provide an implicit rate.

The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Refer to Note 10 to our consolidated financial statements for further disclosures regarding the impact of adopting this standard.

In August 2017, the FASB issued “ Targeted Improvements to Accounting for Hedging Activities .” This standard targets improvements in the hedge relationship documentation, testing and disclosures for derivatives.

This standard is effective for fiscal years and interim periods within those years, beginning after December 15, 2018.

Accordingly, the standard was adopted by us as of January 1, 2019.

The adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or statement of cash flows.

The Company elected a qualitative approach starting in 2019 to assess its hedge effectiveness and included updated disclosures as required by the standard.

Grand Canyon Education, Inc.

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(In thousands, except per share data)

Recent Accounting Pronouncements

Accounting Pronouncements Adopted in 2020

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments .

This guidance revises the accounting requirements related to the measurement of credit losses on financial instruments and the timing of when such losses are recorded.

Under this guidance, the Company is required to utilize an “expected credit loss model” on certain financial instruments, including receivables and the Secured note receivable.

The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019.

Accordingly, the standard is effective for us on January 1, 2020 using a modified retrospective approach.

The Company continues to evaluate the impact that the future adoption of this standard will have on our consolidated financial statements, cash flows or results of operations.

Accordingly, the standard was adopted by the Company as of January 1, 2020 using a modified retrospective approach.

Upon adoption, the Company recorded a reserve of $ 5,000 on its long-term Secured Note receivable.

The cumulative effect for the Company upon adoption of this new standard was $ 3,832 , net of tax.

The adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or statements of cash flows.

The Company will continue to actively monitor the impact of the COVID-19 pandemic on expected credit losses.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments .

The amendments in the ASU improve the Codification by eliminating inconsistencies and providing clarifications.

Under this guidance, the Company made an election not to measure an allowance for credit losses on its accrued interest receivable amounts earned on the Secured Note receivable.

The Company will write off any uncollectible accrued interest in a timely manner.

The adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or statements of cash flows.

In January 2017, the FASB issued ASU No.

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The amendments in this standard are effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

The Company expects that the adoption of this standard will impact its consolidated financial statements and related disclosures only to the extent that a future goodwill impairment test results in the recognition of an impairment charge.

Accordingly, the standard was adopted by us as of January 1, 2020.

The adoption of this guidance did not have a material impact on the Company’s financial condition, results of operations or statements of cash flows.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted.

An entity that elects early adoption must adopt all the amendments in the same period.

Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company is currently evaluating the impact of the new standard on our consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

The amendments in this update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effect of) reference rate reform on financial reporting.

It provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022.

The Company plans to elect the optional expedient for its credit facility by prospectively adjusting the effective interest rate if the cessation of the London Interbank Offered Rate (LIBOR) occurs.

The Company does not believe the adoption

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

of the reference rate reform will have a material impact on the Company’s financial condition, results of operations or statements of cash flows.

The Company has determined that no other recent accounting pronouncements apply to its operations or could otherwise have a material impact on its consolidated financial statements.

The Company classifies its investments as trading.

At December 31, 2020 and 2019, the Company had $ 10,840 and $ 21,601 , respectively, of investments.

At December 31, 2018, the Company transferred its investments from available-for-sale classification to trading, due to the Company's decision to liquidate all investments to complete the Acquisition in the first quarter of 2019.

As a result of the transfer to trading, the Company recorded a loss of $ 372 in investment interest and other for the year ended December 31, 2018 and there was no unrealized gain or loss as of December 31, 2019 and 2018.

Prior to December 2018, the Company considered all investments as available for sale.

These investments were held in municipal and corporate securities as of December 31, 2020 and 2019.

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All municipal securities and certificate of deposit are due in one year or less as of December 31, 2020.

Valuation and Qualifying Accounts

Allowance for Credit Losses

Transfers (2)(3)

Allowance for doubtful accounts receivable

Allowance for credit losses

Year ended December 31, 2020

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Year ended December 31, 2018

(1) Amount in the year ended December 31, 2020 represents the cumulative effect of the adoption of ASU No.

2016-13 on the Secured Note receivable.

(2) Deductions represent accounts written off, net of recoveries.

(3) $ 6,093 included in the deductions column for the year ended December 31, 2018, represents the allowance that was transferred to GCU with other educational assets and liabilities on July 1, 2018.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Property and Equipment

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Property and equipment, net

Depreciation expense associated with property and equipment totaled $ 18,393 for the year ended December 31, 2019.

Depreciation and amortization expense associated with property and equipment, including assets under capital lease, totaled $ 35,525 , and $ 53,607 for the years ended December 31, 2018, and 2017, respectively.

Depreciation expense associated with property and equipment totaled $ 20,830 and $ 18,393 for the years ended December 31, 2020 and 2019, respectively.

Depreciation and amortization expense associated with property and equipment, including assets under capital lease, totaled $ 35,525 for the year ended December 31, 2018.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Intangible Assets

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Amortization expense for university partner relationships and trade names for the years ending December 31:

The Company has operating leases for classroom site locations, office space, office equipment, and optical fiber communication lines.

These leases have terms that range from 3 months to 10 years .

At lease inception, we determined

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

the lease term by assuming no exercises of renewal options, due to the Company’s constantly changing geographical needs for its university partners.

The Company has operating leases for off-campus classroom and laboratory site locations, office space, office equipment, and optical fiber communication lines.

These leases have terms that range from 1.5 years to 11 years .

At lease inception, we determine the lease term by assuming no exercises of renewal options, due to the Company’s constantly changing geographical needs for its university partners.

Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheets and we recognize lease expense for these leases on a straight-line basis over the lease term.

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The majority of leases that existed for the year ended December 31, 2018 were assigned to GCU in the Transaction that occurred on July 1, 2018.

As of December 31, 2019, the Company had $ 16,135 of non-cancelable operating lease commitments, primarily for new office space in Indianapolis, Indiana and classroom site locations, that have not yet commenced.

These operating leases will commence in 2020 with an average lease term of 10.5 years.

The Company’s weighted-average remaining lease term relating to its operating leases is 8.5 years, with a weighted-average discount rate of 3.27 % .

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Present value of lease liabilities

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Notes Payable and Other Noncurrent Liabilities

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The Company concluded that this amendment is considered a loan modification.

The amended and restated credit agreement contains standard covenants that, among other things, restrict the Company’s ability to incur additional

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

debt or make certain investments, and require the Company to achieve certain financial ratios and maintain certain financial conditions.

The amended and restated credit agreement contains standard covenants that, among other things, restrict the Company’s ability to incur additional debt or make certain investments, and require the Company to achieve certain financial ratios and maintain certain financial conditions.

The Company’s obligations under the credit facility are secured by its assets, including all rights, benefits and payments under the Secured Note and the Services Agreements.

As of December 31, 2020, the Company is in compliance with its debt covenants.

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Payments due under the notes payable obligations are as follows as of December 31, 2020:

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Commitments and Contingencies

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Management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

COVID-19 Considerations

In March 2020, the World Health Organization declared COVID-19 a global pandemic.

This contagious outbreak and the related adverse public health developments, including orders to shelter-in-place, travel restrictions and mandated non-essential business closures, have adversely affected our business, primarily through reduced room and board and other ancillary revenue at our most significant partner, GCU and as a result of certain other partner institutions’ students deferring the start of their program in the Summer and Fall semesters.

The pandemic could result in further reductions in education service revenue, operating income and margins in the Spring of 2021.

At this time there remains considerable uncertainty around the duration of the COVID-19 pandemic.

If some of our university partners are not able to allow their students to return to their campus locations in the Spring of 2021 this will have a further impact on our service revenue, operating income and margins.

These factors, and/or material changes in the fair value of the collateral underlying our Secured Note receivable and accounts receivable, could also materially impact the allowance for expected credit losses on our Secured Note receivable and our accounts receivable.

However, the related financial impact and duration of the COVID-19 pandemic cannot be reasonably estimated at this time.

Tax, Income Tax Related

During the first quarter of 2019, the Company reached an agreement with the Arizona Department of Revenue regarding previously filed refund claims related to income tax obligations for calendar year 2008 through calendar year 2013.

As a result of the agreement, the Company received a refund of $ 7,500 , inclusive of both tax and interest.

Net of the federal tax benefit, the refund has a favorable tax impact of $ 5,925 .

The Company recorded the impact of this discrete tax item in its first quarter 2019 financials.

Tax Reserves, Non-Income Tax Related

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In 2013, the Company entered into an interest rate corridor to manage its 30-day LIBOR interest exposure related to its variable rate debt.

In December 2019 this cash flow hedge expired, $ 1,100 was reclassified from accumulated other

In December 2019 this cash flow hedge expired, and $ 1,100 was reclassified from accumulated other comprehensive income into interest expense in the consolidated income statement.

The fair value of the derivative

Grand Canyon Education, Inc.

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(In thousands, except per share data)

comprehensive income into interest expense in the consolidated income statement.

The fair value of the interest rate corridor instrument as of December 31, 2018 was $ 600 , which was included in other assets.

The fair value of the derivative instrument was determined using a hypothetical derivative transaction and Level 2 of the hierarchy of valuation inputs.

The adjustments of $ 497 , $ 157 , and $ 17 for the years ended December 31, 2019, 2018 and 2017, respectively, for the effective portion of the gain/loss on the derivative is included as a component of other comprehensive income, net of taxes.

instrument was determined using a hypothetical derivative transaction and Level 2 of the hierarchy of valuation inputs.

The adjustments of $ 497 and $ 157 for the years ended December 31, 2019 and 2018, respectively, for the effective portion of the gain/loss on the derivative are included as a component of other comprehensive income, net of taxes.

The interest rate corridor instrument reduced variable interest rate risk starting March 1, 2013 through December 20, 2019.

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Diluted weighted average shares outstanding excludes the incremental effect of unvested restricted stock and shares that would be issued upon the assumed exercise of stock options in accordance with the treasury stock method.

For each of the years ended December 31, 2019, 2018 and 2017, approximately 1 , 0 and 2 , respectively, of the Company’s stock options and restricted stock awards outstanding were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive.

For each of the years ended December 31, 2020, 2019 and 2018, approximately 142 , 1 , and 0 , respectively, of the Company’s restricted stock awards outstanding were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive.

These options and restricted stock awards could be dilutive in the future.

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The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Treasury Stock

The Board of Directors has authorized the Company to repurchase up to $ 175,000 in aggregate of common stock, from time to time, depending on market conditions and other considerations.

In July 2020, December 2020 and January 2021, the Board of Directors increased the authorization under our existing stock repurchase program by $ 50,000 , $ 100,000 and $ 100,000 , respectively, reflecting an aggregate authorization for share repurchases since the initiation of our program of $ 500,000 .

The expiration date on the repurchase authorization is December 31, 2021 .

Repurchases occur at the Company’s discretion.

Repurchases may be made in the open market.

Repurchases may be

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

made in the open market.

or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules.

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During the year ended December 31, 2020 the Company repurchased 1,602 shares of common stock at an aggregate cost of $ 129,045 .

At December 31, 2019, there remained $ 52,316 available under its current share repurchase authorization.

At December 31, 2020, there remained $ 148,271 available under its current share repurchase authorization (which authorization was increased to $ 248,271 in January 2021).

Shares repurchased in lieu of taxes are not included in the repurchase plan totals as they were approved in conjunction with the restricted share awards.

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As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted though income tax expense.

The Company’s net deferred tax liability was revalued as of December 22, 2017.

The Company recorded a $ 10.7 million income tax benefit related to the revaluation of its net deferred tax liabilities.

Excluding this income tax benefit in 2017, our effective tax rate would have been 32.1 %.

The components of income tax expense (benefit) are as follows:

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Excess tax benefits

Deferred tax revaluation (Federal Rate change)

Nondeductible expenses

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Employee compensation

Allowance for credit losses

Deferred tax assets

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Stock-based compensation expense related to restricted stock grants is expensed over the vesting period using the straight-line method for Company employees and the Company’s board of directors.

The Company recognizes forfeitures as they occur.

The restricted shares have voting rights.

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Technology and academic services

Counseling support and services

Counseling services and support

Marketing and communication

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The Company made discretionary matching contributions to the Plan of $ 2,529 and $ 1,625 for the years ended December 31, 2019 and 2018, respectively.

Related Party Transactions

Related party transactions include transactions between the Company and certain of its affiliates.

The following transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the parties.

As of and for the years ended December 31, 2020, 2019 and 2018, related party transactions consisted of the following:

GCE Community Fund (“GCECF”) - GCECF was initially formed in 2014.

GCECF makes grants for charitable, educational, literary, religious or scientific purposes within the meaning of Section 501(c ) (3) of the Internal Revenue Code, including for such purposes as the making of distributions to organizations that qualify as exempt organizations under Section 501 (c ) (3) of the Code.

The Company’s CEO and Director serves as the president of GCECF.

All of the board seats are taken by Company executives.

The Company is not the primary beneficiary of GCECF, and accordingly, the Company does not consolidate GCECF’s statement of activities with its financial results.

The Company contributed $ 1,100 for the year ended December 31, 2020, of which no amounts were owed at December 31, 2020.

Grand Canyon Education, Inc.

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Service revenue

University related revenue

Costs and expenses:

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General and administrative

University related expenses

Amortization of intangible assets

Loss on transaction

14 unchanged sentences

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 7A. Quantitative and Qualitative Disclosures About Market Risk