What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-05 · 95 added, 64 removed, 475 unchanged (25% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share data)

51 unchanged sentences

Preferred stock, $ 0.01 par value, 10,000 shares authorized;

0 shares issued and outstanding at March 31, 2021 and December 31, 2020

0 shares issued and outstanding at June 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 100,000 shares authorized;

53,633 and 53,277 shares issued and 46,382 and 46,649 shares outstanding at March 31, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 7,251 and 6,628 shares of common stock at March 31, 2021 and December 31, 2020, respectively

53,637 and 53,277 shares issued and 45,396 and 46,649 shares outstanding at June 30, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 8,241 and 6,628 shares of common stock at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Other comprehensive income, net of tax:

Unrealized losses on available-for-sale securities, net of taxes of $ 35 for the three months ended March 31, 2021

Unrealized losses on available-for-sale securities, net of taxes of $ 22 for the three months ended June 30, 2021 and $ 57 for the six months ended June 30, 2021

Comprehensive income

2 unchanged sentences

(In thousands)

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Treasury Stock

3 unchanged sentences

Common stock purchased for treasury

Restricted shares forfeited

Share-based compensation

1 unchanged sentence

Balance at March 31, 2021

Three Months Ended March 31, 2020

Comprehensive income

Common stock purchased for treasury

Restricted shares forfeited

Share-based compensation

Exercise of stock options

Balance at June 30, 2021

Six Months Ended June 30, 2020

Treasury Stock

8 unchanged sentences

Balance at March 31, 2020

Comprehensive income

Common stock purchased for treasury

Share-based compensation

Exercise of stock options

Balance at June 30, 2020

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(In thousands)

17 unchanged sentences

Additions of amortizable content

Funding to GCU

Purchases of investments

3 unchanged sentences

Principal payments on notes payable

Net borrowings from revolving line of credit

Repurchase of common shares including shares withheld in lieu of income taxes

1 unchanged sentence

Net cash used in financing activities

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

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

Cash and cash equivalents and restricted cash, beginning of period

18 unchanged sentences

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 March 31, 2021, GCE provides education services to 26 university partners across the United States.

As of June 30, 2021, GCE provides education services to 27 university partners across the United States.

Summary of Significant Accounting Policies

10 unchanged sentences

These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 from which the December 31, 2020 balance sheet information was derived.

At March 31, 2021 and December 31, 2020, the Company considers its investments in corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations either as trading securities or available-for-sale securities based on the Company’s intent for the respective security.

At June 30, 2021 and December 31, 2020, the Company considers its investments in corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations either as trading securities or available-for-sale 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 inputs other than quoted prices that are observable for the assets.

10 unchanged sentences

The Secured Note contains customary commercial credit terms, including affirmative and negative covenants applicable to GCU, and provides that the Secured Note bears interest at an annual rate of 6.0 %, has a maturity date of June 30, 2025, and is secured by all of the assets of GCU.

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 March 31, 2021, the Company had loaned $ 99,815 to GCU, net of repayments.

As of June 30, 2021, the Company had loaned $ 289,815 to GCU, net of repayments, including $ 190,000 in June 2021.

The $ 190,000 that was borrowed in June 2021 was repaid in July 2021.

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.

21 unchanged sentences

corresponds with course’s review and major revision cycle.

As of March 31, 2021 and December 31, 2020, $ 1,166 and $ 1,198 , respectively, 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.

As of June 30, 2021 and December 31, 2020, $ 1,214 and $ 1,198 , respectively, 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.

The Company determines if an arrangement is a lease at inception and evaluates the lease agreement to determine whether the lease is a finance or operating lease.

17 unchanged sentences

The Company has concluded there is one operating segment and one reporting unit for goodwill impairment consideration.

The Financial Accounting Standards Board (“FASB”) has issued guidance that permits an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.

The Company reviews goodwill at least annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

2 unchanged sentences

The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable.

There were no indicators that the carrying amount of the finite-lived intangible assets were impaired.

There were no indicators that the carrying amount of the finite-lived intangible assets were impaired as of June 30, 2021.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets.

If such intangible assets are not

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

recoverable, a potential impairment loss is recognized to the extent the carrying amounts of the assets exceeds the fair value of the assets.

intangible assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amounts of the assets exceeds the fair value of the assets.

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

13 unchanged sentences

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

As of March 31, 2021 and December 31, 2020 the fair value of the Company’s Secured Note was $ 1,045,591 and $ 1,049,458 , respectively.

As of March 31, 2021 and December 31, 2020 the carrying value of Secured Note receivable for both periods was $ 964,912 .

As of June 30, 2021 and December 31, 2020 the fair value of the Company’s Secured Note was $ 1,231,524 and $ 1,049,458 , respectively.

As of June 30, 2021 and December 31, 2020 the carrying value of Secured Note receivable was $ 1,154,912 and $ 964,912 , respectively.

The carrying value of notes payable approximates fair value as it is based on variable rate index.

27 unchanged sentences

The Company evaluates the need for an allowance for credit losses using relevant available information about expected credit losses, including information about historical credit losses, past events, current conditions, and other factors which may affect the collectability of receivables.

There have been no amounts written off and no allowance for credit losses established as of March 31, 2021 given historical collection experience.

There have been no amounts written off and no allowance for credit losses established as of June 30, 2021 given historical collection experience.

The Company will continue to review and revise its allowance methodology based on its collection experience with its partners.

1 unchanged sentence

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 $ 10,132 and $ 294 as of March 31, 2021 and December 31, 2020, respectively, are included in accounts receivable in our consolidated balance sheets.

Our unbilled revenue of $ 8,811 and $ 294 as of June 30, 2021 and December 31, 2020, 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.

47 unchanged sentences

The Company believes the credit risk related to cash equivalents and investments is limited due to its adherence to an investment policy that requires investments to have a minimum BBB rating, depending on the type of security, by one major rating agency at the time of purchase.

All of the Company’s cash equivalents and investments as of March 31, 2021 and December 31, 2020 consist of investments rated BBB or higher by at least one rating agency.

All of the Company’s cash equivalents and investments as of June 30, 2021 and December 31, 2020 consist of investments rated BBB or higher by at least one rating agency.

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.

4 unchanged sentences

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 most significant university partner, which is also the counterparty to the Secured Note, with 87.4 % and 87.9 % of total service revenue for the three-month periods ended March 31, 2021 and 2020, 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 the Secured Note for the Company.

Our dependence on our most significant university partner, which is also the counterparty to the Secured Note, with 85.7 % and 87.0 % of total service revenue for the six-month periods ended June 30, 2021 and 2020, 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 the Secured Note for the Company.

Use of Estimates

27 unchanged sentences

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.

At March 31, 2021 and December 31, 2020, the Company had investments of $ 8,015 and $ 10,840 , respectively, classified as trading.

The trading investments are held in municipal and corporate securities as of March 31, 2021 and December 31, 2020 and are due in one year or less as of March 31, 2021.

At June 30, 2021 and December 31, 2020, the Company had investments of $ 3,006 and $ 10,840 , respectively, classified as trading.

The trading investments are held in municipal and corporate securities as of June 30, 2021 and December 31, 2020 and are due in one year or less as of June 30, 2021.

The cash flows of municipal securities are backed by the issuing municipality’s credit-worthiness.

At March 31, 2021, the Company had available-for-sale investments of $ 28,428 , comprised of the following:

As of March 31, 2021

At June 30, 2021, the Company had available-for-sale investments of $ 41,409 , comprised of the following:

As of June 30, 2021

Corporate bonds

3 unchanged sentences

Total investments

For the three months ended March 31, 2021, the net unrealized gains or (losses) were $ 120 , net of taxes.

For the six months ended June 30, 2021, the net unrealized gains or (losses) were $ 185 , net of taxes.

Available-for-sale debt securities are carried at fair value on the consolidated balance sheets.

The Company estimates

The Company estimates the lifetime

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

the lifetime expected credit losses for all available-for sale debt securities in an unrealized loss position.

expected credit losses for all available-for sale debt securities in an unrealized loss position.

If our assessment indicates that an expected credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record a reserve for the expected credit loss in the allowance for credit losses in technology and academic services in our consolidated income statements.

As of March 31, 2021, there were no credit losses for our available-for-sale debt securities.

As of June 30, 2021, there were no credit losses for our available-for-sale debt securities.

Available-for-sale securities maturing as of December 31:

6 unchanged sentences

Three Months Ended

Six Months Ended

Basic weighted average shares outstanding

2 unchanged sentences

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 the three month periods ended March 31, 2021 and 2020, approximately 1 and 284 , 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.

For the three month periods ended June 30, 2021 and 2020, approximately 1 and 81 , respectively, and for the six month perioded ended June 30, 2021 and 2020, approximately 2 and 182 , 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 restricted stock awards could be dilutive in the future.

Allowance for Credit Losses

Transfers (2)

Allowance for credit losses

Three months ended March 31, 2021

Three months ended March 31, 2020

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

Transfers (2)

Allowance for credit losses

Six months ended June 30, 2021

Six months ended June 30, 2020

(1) Amount represents the cumulative effect of the adoption of ASU No.

13 unchanged sentences

Amortizable intangible assets consist of the following as of:

March 31, 2021

June 30, 2021

Average Useful

4 unchanged sentences

Remainder of 2021

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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

2 unchanged sentences

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.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Company had operating lease costs of $ 2,435 and $ 1,441 for the three-month periods ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, the Company had no non-cancelable operating lease commitments that had not yet commenced.

The Company had operating lease costs of $ 4,862 and $ 3,055 for the six-month periods ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, the Company had $ 4,183 of non-cancelable operating lease commitments for a classroom site location, that had not yet commenced.

The Company’s weighted-average remaining lease term relating to its operating leases is 8.13 years, with a weighted-average discount rate of 3.17 %.

As of March 31, 2021, the Company had no financing leases.

Future payment obligations with respect to the Company’s operating leases, which were existing at March 31, 2021, by year and in the aggregate, are as follows:

As of June 30, 2021, the Company had no financing leases.

Future payment obligations with respect to the Company’s operating leases, which were existing at June 30, 2021, by year and in the aggregate, are as follows:

Year Ending December 31,

16 unchanged sentences

benefits and payments under the Secured Note and the Master Services Agreement.

As of March 31, 2021, the Company is in compliance with its debt covenants.

As of March 31,

As of June 30, 2021, the Company is in compliance with its debt covenants and the note payable totals $ 92,049 , excluding the contra liability of $ 847 .

As of June 30,

As of December 31,

1 unchanged sentence

Note payable, quarterly payment of $ 8,368 starting December 31, 2019;

interest at 30-Day LIBOR plus 2.00 % ( 2.12 % at March 31, 2021) through January 22, 2024

interest at 30-Day LIBOR plus 2.00 % ( 2.09 % at June 30, 2021) through January 22, 2024

Revolving line of credit;

interest at 30-Day LIBOR plus 2.0 % ( 2.12 % at March 31, 2021)

interest at Base Rate ( 4.0 % at June 30, 2021)

Current portion

19 unchanged sentences

The Company makes equity incentive grants pursuant to our 2017 Equity Incentive Plan (the “2017 Plan”) under which a maximum of 3,000 shares may be granted.

As of March 31, 2021, 1,418 shares were available for grants under the 2017 Plan.

As of June 30, 2021, 1,414 shares were available for grants under the 2017 Plan.

Restricted Stock

During the three months ended March 31, 2021, the Company granted 180 shares of common stock with a service vesting condition to certain of its executives, officers and employees.

During the six months ended June 30, 2021, the Company granted 180 shares of common stock with a service vesting condition to certain of its executives, officers and employees.

The restricted shares have voting rights and vest in five annual installments of 20 %, with the first installment vesting in March of the calendar year following the date of grant (the “first vesting date”) and subsequent installments vesting on each of the four anniversaries of the first vesting date.

Upon vesting, shares will be withheld in lieu of taxes equivalent to the minimum statutory tax withholding required to be paid when the restricted stock vests.

During the three months ended March 31, 2021, the Company withheld 56 shares of common stock in lieu of taxes at a cost of $ 5,994 on the restricted stock vesting dates.

During the six months ended June 30, 2021, the Company withheld 56 shares of common stock in lieu of taxes at a cost of $ 5,994 on the restricted stock vesting dates.

In June 2021, following the annual stockholders meeting, the Company granted 4 shares of common stock to the non-employee members of the Company’s Board of Directors.

Included in this amount is an initial award of shares that was granted to a newly appointed non-employee director pursuant to the Company’s compensation program.

The newly appointed non-employee director also received an annual grant of restricted shares.

The restricted shares granted to these directors under the annual restricted shares grant have voting rights and vest on the earlier of (a) the one year anniversary of the date of grant or (b) immediately prior to the following year’s annual stockholders’ meeting.

The initial award of shares that were granted to the newly appointed non-employee director have voting rights and vest on the one year anniversary of the date of grant.

A summary of the activity related to restricted stock granted under the Company’s Incentive Plan since December 31, 2020 is as follows:

3 unchanged sentences

Forfeited, canceled or expired

Outstanding as of March 31, 2021

Outstanding as of June 30, 2021

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Stock Options

During the three months ended March 31, 2021, no options were granted.

During the six months ended June 30, 2021, no options were granted.

A summary of the activity since December 31, 2020 related to stock options granted under the Company’s Incentive Plan is as follows:

2 unchanged sentences

Forfeited, canceled or expired

Outstanding as of March 31, 2021

Exercisable as of March 31, 2021

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Outstanding as of June 30, 2021

Exercisable as of June 30, 2021

Share-based Compensation Expense

The table below outlines share-based compensation expense for the three months ended March 31, 2021 and 2020 related to restricted stock granted:

The table below outlines share-based compensation expense for the six months ended June 30, 2021 and 2020 related to restricted stock granted:

Technology and academic services

6 unchanged sentences

Treasury Stock

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

In January 2021 and July 2021, the Board of Directors increased the authorization under its existing stock repurchase program by $ 100,000 and $ 970,000 , respectively, reflecting an aggregate authorization for share repurchases since the initiation of our program of $ 1,470,000 .

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

5 unchanged sentences

Under the ASR agreement, the Company received initial delivery of approximately 276 shares of common stock, representing approximately 80 % of the number of shares of common stock initially underlying the ASR agreement based on the closing price of the common stock of $ 101.49 , on March 9, 2021.

The total number of shares that the Company will repurchase under the ASR program will be based on the volume-weighted average price of the common stock during the term of the ASR agreement, less a discount, and subject to potential adjustments pursuant to the terms and conditions of the ASR agreement.

At inception of the ASR agreement, the Company recognized the initial delivery of shares as treasury stock of $ 28,000 , and recognized the remaining amount underlying the ASR agreement as a reduction of additional paid in capital of $ 7,000 .

The total number of shares that the Company repurchased under the ASR program was based on the volume-weighted average price of the common stock during the term of the ASR agreement, less a discount, and subject

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

to potential adjustments pursuant to the terms and conditions of the ASR agreement.

The final settlement of the share repurchases under the ASR agreement was completed on May 4, 2021 with additional delivery of 46 shares of common stock.

At settlement of the ASR agreement, the Company recognized an increase to additional paid in capital and a decrease in treasury stock of $ 7,000 related to the remaining delivery of shares.

The ASR agreement resulted in a total of 322 shares repurchased at an average cost of $ 108.76 .

During the three months ended March 31, 2021 the Company repurchased 567 shares of common stock, which includes shares received under the ASR on March 10, 2021, at an aggregate cost of $ 56,348 .

At March 31, 2021, there remained $ 191,924 available under its current share repurchase authorization.

On May 14, 2021, the Company entered into an ASR agreement with Morgan Stanley to repurchase up to $ 50,000 of its outstanding shares of common stock as part of the Company’s share repurchase program.

Under the ASR agreement, the Company received initial delivery on May 17, 2021 of approximately 418 shares of common stock, representing approximately 80 % of the number of shares of common stock initially underlying the ASR agreement based on the closing price of the common stock of $ 95.63 , on May 14, 2021.

At inception of the ASR agreement, the Company recognized the initial delivery of shares as treasury stock of $ 40,000 , and recognized the remaining amount underlying the ASR agreement as a reduction to additional paid in capital of $ 10,000 .

The final settlement of the share repurchases under the ASR agreement will be completed no later than September 9, 2021.

During the six months ended June 30, 2021 the Company repurchased 1,549 shares of common stock, which includes shares received as of June 30, 2021 under the ASR on March 10, 2021 and shares received under the ASR on May 17, 2021, at an aggregate cost of $ 151,679 .

At June 30, 2021, there remained $ 96,592 available under its current share repurchase authorization (which authorization was increased to $ 1,066,592 in July 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.

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-Q

Item 1. Financial Statements