Grand Canyon Education, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk . As of December 31, 2021, we have no derivative financial instruments or derivative commodity instruments. We invest cash in excess of current operating requirements in short term certificates of deposit and money market instruments, municipal bond portfolios, or municipal mutual funds at multiple financial institutions. Interest rate risk . We manage interest rate risk by investing excess funds in cash equivalents, BBB or higher rated municipal bonds, municipal mutual funds and commercial paper bearing variable interest rates, which are tied to various market indices or individual bond coupon rates. Our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities before their maturity date that have declined in market value due to changes in interest rates. At December 31, 2021, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows. ​ 60 Table of Contents Item 8. Consolidated Financial Statements and Supplementary Data Page ​ ​ ​ Report of Independent Registered Public Accounting Firm ( KPMG LLP , Phoenix, Arizona , Auditor Firm: 185 ) ​ 62 ​ Consolidated Balance Sheets as of December 31, 2021 and 2020 ​ 64 ​ Consolidated Income Statements for the years ended December 31, 2021, 2020 and 2019 ​ 65 ​ Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 ​ 66 ​ Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019 ​ 67 ​ Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 ​ 68 ​ Notes to Consolidated Financial Statements ​ 69 ​ ​ ​ 61 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Grand Canyon Education, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Grand Canyon Education, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. 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, 2021, 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 16, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 As discussed in Note 4 to the consolidated financial statements, service revenue is recognized from the delivery of support services to institutions in the post-secondary education sector of the United States (University Partners). 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 62 Table of Contents on the respective University Partner’s reporting processes and the services provided. The Company recorded $897 million of service revenue for the year ended December 31, 2021. We identified the evaluation of the sufficiency of audit evidence over service revenue as a critical audit matter. This required especially subjective auditor judgment because service revenue recorded by the Company is dependent on the tuition and fee information of the University Partners. This included determining the nature and extent of procedures to be performed and evaluating the evidence obtained over the tuition and fee information. 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 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. /s/ KPMG LLP ​ We have served as the Company’s auditor since 2012. ​ Phoenix, Arizona February 16, 2022 ​ ​ 63 Table of Contents Grand Canyon Education, Inc. Consolidated Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ (In thousands, except par value) ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ASSETS: ​ ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ Cash and cash equivalents ​ $ 600,941 ​ $ 245,769 ​ Investments ​ — ​ 10,840 ​ Accounts receivable, net ​ 70,063 ​ 62,189 ​ Interest receivable on Secured Note ​ — ​ 5,011 ​ Income tax receivable ​ 1,275 ​ 1,294 ​ Other current assets ​ 8,766 ​ 8,639 ​ Total current assets ​ 681,045 ​ 333,742 ​ Property and equipment, net ​ 136,120 ​ 128,657 ​ Right-of-use assets ​ ​ 57,652 ​ ​ 61,020 ​ Secured Note receivable, net ​ — ​ 964,912 ​ Amortizable intangible assets, net ​ ​ 185,219 ​ ​ 193,638 ​ Goodwill ​ 160,766 ​ 160,766 ​ Other assets ​ 1,943 ​ 1,844 ​ Total assets ​ $ 1,222,745 ​ $ 1,844,579 ​ LIABILITIES AND STOCKHOLDERS’ EQUITY: ​ ​ ​ Current liabilities ​ ​ ​ Accounts payable ​ $ 24,306 ​ $ 16,583 ​ Accrued compensation and benefits ​ 32,714 ​ 34,248 ​ Accrued liabilities ​ 27,593 ​ 21,945 ​ Income taxes payable ​ 5,895 ​ 5,405 ​ Deferred revenue ​ 10 ​ — ​ Current portion of lease liability ​ ​ 7,426 ​ ​ 7,393 ​ Current portion of notes payable ​ — ​ 33,144 ​ Total current liabilities ​ 97,944 ​ 118,718 ​ Deferred income taxes, noncurrent ​ 25,962 ​ 20,288 ​ Other long term liability ​ ​ 37 ​ ​ 3 ​ Lease liability, less current portion ​ ​ 53,755 ​ ​ 56,611 ​ Notes payable, less current portion ​ — ​ 74,630 ​ Total liabilities ​ 177,698 ​ 270,250 ​ Commitments and contingencies ​ ​ ​ Stockholders’ equity ​ ​ ​ Preferred stock, $ 0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at December 31, 2021 and December 31, 2020 ​ — ​ — ​ Common stock, $ 0.01 par value, 100,000 shares authorized; 53,637 and 53,277 shares issued and 37,722 and 46,649 shares outstanding at December 31, 2021 and December 31, 2020, respectively ​ 536 ​ 533 ​ Treasury stock, at cost, 15,915 and 6,628 shares of common stock at December 31, 2021 and December 31, 2020, respectively ​ ( 1,107,211 ) ​ ( 303,379 ) ​ Additional paid-in capital ​ 296,670 ​ 282,467 ​ Retained earnings ​ 1,855,052 ​ 1,594,708 ​ Total stockholders’ equity ​ 1,045,047 ​ 1,574,329 ​ Total liabilities and stockholders’ equity ​ $ 1,222,745 ​ $ 1,844,579 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. 64 Table of Contents Grand Canyon Education, Inc. Consolidated Income Statements ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ (In thousands, except per share data) 2021 2020 2019 Service revenue ​ $ 896,564 ​ $ 844,096 ​ $ 778,643 ​ Costs and expenses: ​ ​ ​ ​ Technology and academic services ​ 132,078 ​ 116,012 ​ 90,512 ​ Counseling services and support ​ 249,179 ​ 234,534 ​ 223,598 ​ Marketing and communication ​ 182,872 ​ 164,334 ​ 142,896 ​ General and administrative ​ 41,826 ​ 43,360 ​ 44,317 ​ Amortization of intangible assets ​ 8,419 ​ 8,419 ​ 8,223 ​ Loss on transaction ​ — ​ — ​ 3,966 ​ Total costs and expenses ​ 614,374 ​ 566,659 ​ 513,512 ​ Operating income ​ 282,190 ​ 277,437 ​ 265,131 ​ Interest income on Secured Note ​ 52,090 ​ 59,190 ​ 59,297 ​ Interest expense ​ ( 3,601 ) ​ ( 4,402 ) ​ ( 11,311 ) ​ Investment interest and other ​ 610 ​ 915 ​ 4,385 ​ Income before income taxes ​ 331,289 ​ 333,140 ​ 317,502 ​ Income tax expense ​ 70,945 ​ 75,944 ​ 58,327 ​ Net income ​ $ 260,344 ​ $ 257,196 ​ $ 259,175 ​ Earnings per share: ​ ​ ​ ​ Basic income per share ​ $ 5.94 ​ $ 5.49 ​ $ 5.42 ​ Diluted income per share ​ $ 5.92 ​ $ 5.45 ​ $ 5.37 ​ Basic weighted average shares outstanding ​ 43,835 ​ 46,880 ​ 47,814 ​ Diluted weighted average shares outstanding ​ 43,958 ​ 47,165 ​ 48,266 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 65 Table of Contents Grand Canyon Education, Inc. Consolidated Statements of Comprehensive Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) 2021 2020 2019 ​ Net income ​ $ 260,344 ​ $ 257,196 ​ $ 259,175 ​ Other comprehensive income, net of tax: ​ ​ ​ ​ Unrealized losses on hedging derivatives, net of taxes of $ 107 for the year ended December 31, 2019 ​ ​ — ​ ​ — ​ ​ ( 390 ) ​ Reclassification of expired interest rate corridor to interest expense, net of taxes of $ 257 for the year ended December 31, 2019 ​ ​ — ​ ​ — ​ ​ 843 ​ Comprehensive income ​ $ 260,344 ​ $ 257,196 ​ $ 259,628 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 66 Table of Contents Grand Canyon Education, Inc. Consolidated Statements of Stockholders’ Equity (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Treasury Stock ​ Paid-in ​ Comprehensive ​ Retained ​ ​ ​ ​ Shares Par Value Shares Cost Capital Loss Earnings Total Balance at December 31, 2018 52,690 ​ $ 527 4,489 ​ $ ( 125,452 ) ​ $ 256,806 ​ $ ( 453 ) ​ $ 1,082,169 ​ $ 1,213,597 Comprehensive income — ​ — — ​ — ​ — ​ 453 ​ 259,175 ​ 259,628 Common stock purchased for treasury — ​ — 376 ​ ( 35,786 ) ​ — ​ — ​ — ​ ( 35,786 ) Restricted shares forfeited — ​ — 16 ​ — ​ — ​ — ​ — ​ — Share-based compensation 152 ​ 2 68 ​ ( 8,127 ) ​ 10,298 ​ — ​ — ​ 2,173 Exercise of stock options ​ 212 ​ ​ 2 ​ — ​ ​ — ​ ​ 3,819 ​ ​ — ​ ​ — ​ ​ 3,821 Balance at December 31, 2019 53,054 ​ $ 531 4,949 ​ $ ( 169,365 ) ​ $ 270,923 ​ $ — ​ $ 1,341,344 ​ $ 1,443,433 Cumulative effect from the adoption of accounting pronouncements, net of taxes of $ 1,168 — ​ — — ​ — ​ — ​ — ​ ( 3,832 ) ​ ( 3,832 ) Comprehensive income — ​ — — ​ — ​ — ​ — ​ 257,196 ​ 257,196 Common stock purchased for treasury — ​ — 1,602 ​ ( 129,045 ) ​ — ​ — ​ — ​ ( 129,045 ) Restricted shares forfeited — ​ — 15 ​ — ​ — ​ — ​ — ​ — Share-based compensation 167 ​ 1 62 ​ ( 4,969 ) ​ 10,662 ​ — ​ — ​ 5,694 Exercise of stock options 56 ​ 1 — ​ — ​ 882 ​ — ​ — ​ 883 Balance at December 31, 2020 53,277 ​ $ 533 6,628 ​ $ ( 303,379 ) ​ $ 282,467 ​ $ — ​ $ 1,594,708 ​ $ 1,574,329 Comprehensive income ​ — ​ — — ​ — ​ — ​ — ​ 260,344 ​ 260,344 Common stock purchased for treasury ​ — ​ — 9,199 ​ ( 797,838 ) ​ — ​ — ​ — ​ ( 797,838 ) Restricted shares forfeited ​ — ​ — 32 ​ — ​ — ​ — ​ — ​ — Share-based compensation ​ 184 ​ 1 56 ​ ( 5,994 ) ​ 11,525 ​ — ​ — ​ 5,532 Exercise of stock options ​ 176 ​ ​ 2 ​ — ​ ​ — ​ ​ 2,678 ​ ​ — ​ ​ — ​ ​ 2,680 Balance at December 31, 2021 ​ 53,637 ​ $ 536 ​ 15,915 ​ $ ( 1,107,211 ) ​ $ 296,670 ​ $ — ​ $ 1,855,052 ​ $ 1,045,047 The accompanying notes are an integral part of these consolidated financial statements. ​ 67 Table of Contents Grand Canyon Education, Inc. Consolidated Statements of Cash Flows ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) 2021 2020 2019 ​ Cash flows provided by operating activities: ​ ​ ​ ​ ​ Net income ​ $ 260,344 ​ $ 257,196 ​ $ 259,175 ​ Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ Share-based compensation ​ 11,526 ​ 10,663 ​ 10,300 ​ Reversal of credit loss reserve ​ ( 5,000 ) ​ — ​ — ​ Depreciation and amortization ​ 21,994 ​ 21,233 ​ 18,696 ​ Amortization of intangible assets ​ ​ 8,419 ​ ​ 8,419 ​ ​ 8,223 ​ Deferred income taxes ​ 5,674 ​ 3,136 ​ 1,670 ​ Loss on transaction ​ — ​ — ​ 3,966 ​ Other, including fixed asset impairments ​ 677 ​ 571 ​ ( 335 ) ​ Changes in assets and liabilities: ​ ​ ​ ​ ​ ​ ​ Accounts receivable and interest receivable from university partners ​ ( 2,863 ) ​ ( 13,250 ) ​ 766 ​ Other assets ​ ( 256 ) ​ ( 621 ) ​ 2,136 ​ Right-of-use assets and lease liabilities ​ ​ 545 ​ ​ 2,151 ​ ​ 833 ​ Accounts payable ​ 7,392 ​ 1,012 ​ ( 3,095 ) ​ Accrued liabilities ​ 4,148 ​ 18,612 ​ 5,078 ​ Income taxes receivable/payable ​ 509 ​ ( 279 ) ​ ( 1,044 ) ​ Student deposits ​ — ​ — ​ ( 25 ) ​ Deferred rent ​ 10 ​ ( 20 ) ​ — ​ Net cash provided by operating activities ​ 313,119 ​ 308,823 ​ 306,344 ​ Cash flows provided by (used in) investing activities: ​ ​ ​ ​ Capital expenditures ​ ( 28,875 ) ​ ( 29,418 ) ​ ( 22,391 ) ​ Additions of amortizable content ​ ( 515 ) ​ ( 524 ) ​ ( 260 ) ​ Acquisition, net of cash acquired ​ ​ — ​ ​ — ​ ​ ( 361,184 ) ​ Funding to GCU ​ ( 190,000 ) ​ ( 75,000 ) ​ ( 169,819 ) ​ Repayment by GCU ​ ​ 1,159,912 ​ ​ 75,000 ​ ​ 100,000 ​ Purchases of investments ​ ( 56,335 ) ​ — ​ ( 9,384 ) ​ Proceeds from sale or maturity of investments ​ 66,792 ​ 10,591 ​ 57,163 ​ Net cash provided by (used in) investing activities ​ 950,979 ​ ( 19,351 ) ​ ( 405,875 ) ​ Cash flows (used in) provided by financing activities: ​ ​ ​ ​ Principal payments on notes payable ​ ( 107,774 ) ​ ( 33,144 ) ​ ( 92,433 ) ​ Debt issuance costs ​ ​ — ​ ​ — ​ ​ ( 2,385 ) ​ Proceeds from notes payable ​ ​ — ​ ​ — ​ ​ 243,750 ​ Net borrowings from revolving line of credit ​ — ​ — ​ ( 68,750 ) ​ Repurchase of common shares including shares withheld in lieu of income taxes ​ ( 803,832 ) ​ ( 134,014 ) ​ ( 43,913 ) ​ Net proceeds from exercise of stock options ​ 2,680 ​ 883 ​ 3,821 ​ Net cash (used in) provided by financing activities ​ ( 908,926 ) ​ ( 166,275 ) ​ 40,090 ​ Net increase (decrease) in cash and cash equivalents and restricted cash ​ 355,172 ​ 123,197 ​ ( 59,441 ) ​ Cash and cash equivalents and restricted cash, beginning of period ​ 245,769 ​ 122,572 ​ 182,013 ​ Cash and cash equivalents and restricted cash, end of period ​ $ 600,941 ​ $ 245,769 ​ $ 122,572 ​ Supplemental disclosure of cash flow information ​ ​ ​ ​ Cash paid for interest ​ $ 3,697 ​ $ 4,306 ​ $ 11,516 ​ Cash paid for income taxes ​ $ 61,900 ​ $ 68,381 ​ $ 59,903 ​ Supplemental disclosure of non-cash investing and financing activities ​ ​ ​ ​ Purchases of property and equipment included in accounts payable ​ $ 1,536 ​ $ 1,206 ​ $ 469 ​ Allowance for credit losses of $ 5,000 , net of taxes of $ 1,168 from adoption of ASU 2016-13 ​ $ — ​ $ 3,832 ​ $ — ​ Lease adoption - recognition of right of use assets and lease liabilities ​ $ — ​ $ — ​ $ 498 ​ ROU Asset and Liability recognition ​ $ 3,368 ​ $ 33,250 ​ $ 14,203 ​ Reclassification of interest rate corridor due to expiration ​ $ — ​ $ — ​ $ 1,100 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 68 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) 1. Nature of Business Grand Canyon Education, Inc. (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, on ground at its campus in Phoenix, Arizona and at two off-site classroom and laboratory sites. 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. See Note 2 to our consolidated financial statements for a full description of the Transaction. 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. Since the Acquisition, GCE, together with Orbis Education, has continued to add additional university partners. In the healthcare field, we work 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. In addition, we have begun providing certain services to a university partner to assist them in expanding their online graduate programs. As of December 31, 2021, GCE provides education services to 27 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. On August 24, 2005, the Company converted from a limited liability company to a corporation and changed its name to Significant Education, Inc. On May 9, 2008, the Company changed its name to Grand Canyon Education, Inc. The Company’s wholly owned subsidiaries were historically used to facilitate expansion of the university campus prior to the Transaction. 2. The Transaction On July 1, 2018, the Company consummated an Asset Purchase Agreement (the “Asset Purchase Agreement”) with GCU. In conjunction with the Asset Purchase Agreement, we received a secured note from GCU as consideration for the transferred assets (the “Transferred Assets”) in the initial principal amount of $ 870,097 (the “Secured Note”). The Secured Note contained customary commercial credit terms, including affirmative and negative covenants applicable to GCU, and provided that the Secured Note bore interest at an annual rate of 6.0 %, had a maturity date of June 30, 2025, and was secured by all of the assets of GCU. The Secured Note provided 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. As of December 31, 2021, the Secured Note receivable had been fully paid including loans for capital expenditures and all pledged assets from GCU have been released. 69 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) 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. Except for identified liabilities assumed by GCU, GCE retained responsibility for all liabilities of the business arising from pre-closing operations. 3. Acquisition On January 22, 2019, GCE acquired Orbis Education for $ 361,184 (inclusive of closing date adjustments and net of cash acquired). Orbis Education is an education services company that supports healthcare education programs for university partners across the United States. Concurrent with the closing of the Acquisition, GCE entered into an amended and restated credit agreement and used $ 191,000 from the amended and restated credit agreement and $ 171,034 of operating cash on hand to complete the purchase. See Note 10 of our consolidated financial statements for a description of the amended and restated credit agreement. The fair value of the assets acquired, less the liabilities assumed exceeded the purchase price by $ 157,825 which was recorded as goodwill. Transaction costs for the Acquisition for the year ended December 31, 2019 were $ 3,966 , which are included in the loss on transaction in our consolidated income statement. The Acquisition was accounted for in accordance with the acquisition method of accounting. Under this method the cost of the target is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The following table provides a tabular depiction of the Company’s allocation of the total purchase price to each of the assets acquired and liabilities assumed based on the Company’s fair value estimates. ​ ​ ​ ​ ​ Assets acquired ​ ​ Cash, including $ 300 of pledged collateral ​ $ 4,793 Accounts receivable, net of allowance of $ 0 ​ $ 3,236 Property and equipment ​ $ 5,392 Right-of-use assets ​ $ 13,069 Intangible assets ​ $ 210,280 Other assets ​ $ 2,793 Liabilities assumed ​ ​ ​ Accounts payable ​ $ 4,308 Accrued and other liabilities ​ $ 4,451 Lease liability ​ $ 13,069 Deferred tax liability ​ $ 9,538 Deferred revenue ​ $ 45 Total net asset or liability purchased and assumed ​ $ 208,152 ​ ​ ​ ​ Purchase price ​ $ 365,977 ​ ​ ​ ​ Excess of fair value of net assets acquired over consideration given ​ $ 157,825 ​ The estimated fair values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. The majority of property and equipment were also estimated based upon historical costs as they approximated fair value. Identified intangible assets of $ 210,280 consisted primarily of university partner relationships that were valued at $ 210,000 . The fair value of university partner relationships was determined using the multiple-period excess earnings method. Subsequent to the closing of the Acquisition, the Company revised its allocation of the purchase price by $ 9,538 during the year ended December 31, 2019, primarily as the result of the tax effect of a lower tax basis in the 70 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) acquired assets. The Company has completed the allocation of the purchase price of the Acquisition as of December 31, 2019. 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, ​ 2019 2019 Net revenue ​ ​ ​ ​ ​ ​ ​ As Reported ​ $ 213,247 ​ $ 778,643 ​ Pro forma ​ $ 213,247 ​ $ 781,893 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ ​ ​ ​ As Reported ​ $ 76,669 ​ $ 259,175 ​ Pro forma ​ $ 76,669 ​ $ 247,930 ​ ​ The pro forma information above for the three months ended and the year ended December 31, 2019 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. 4. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes, including the collection of accounts receivables and reserves associated with uncertain tax positions. Actual results could differ from those estimates. Cash and Cash Equivalents The Company invests a portion of its cash in excess of current operating requirements in short term certificates of deposit and money market instruments. The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. Investments As of December 31, 2021, the Company had no investments. As of December 31, 2020, 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 71 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) 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 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. Property and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method. Normal repairs and maintenance are expensed as incurred. 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 depreciated. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Furniture and fixtures, computer equipment, and vehicles generally have estimated useful lives of ten , four , and five years , respectively. Leasehold improvements are depreciated over the shorter of their lease term or their useful life. Land improvements and buildings are depreciated over lives ranging from 10 to 40 years . Internally Developed Technology The Company capitalizes certain costs related to internal-use software, primarily consisting of direct labor associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation or operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs of design, coding, integration, and testing of the software developed. Capitalization of costs requires judgment in determining when a project has reached the application development stage and the period over which we expect to benefit from the use of that software. Once the software is placed in service, these costs are amortized over the estimated useful life of the software, which is generally three years . These assets are a component of our property and equipment, net in our consolidated balance sheets. Capitalized Content Development The Company capitalizes certain costs to fulfill a contract related to the development and digital creation of content on a course-by-course basis for each university partner, many times in conjunction with faculty and subject matter experts. The Company is responsible for the conversion of instructional materials to an on-line format, including outlines, quizzes, lectures, and articles in accordance with the educational guidelines provided to us by our university partners, prior to the respective course commencing. 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. 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. The Company starts capitalizing content costs when it begins to develop or to convert a particular course, resources have been assigned and a timeline has been set. The content asset is placed in service when all work is complete and the curriculum could be used for instruction. Capitalized content development assets are included in other assets in our consolidated balance sheets. 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, 2021 and 2020, $ 1,168 and $ 1,198 , 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. 72 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) Long-Lived Assets The Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 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 assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Leases 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. Right-of-use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement to determine the present value of lease payments over the lease term. At lease inception, the Company determines 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 are recognized as lease expense on a straight-line basis over the lease term. 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 off-campus classroom and laboratory site locations and office space. Business Combinations The purchase price of an acquisition is allocated to the assets acquired, including tangible and intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. Transaction costs associated with business combinations are expensed as incurred and are recorded in the loss on transaction in the consolidated financial statements. The determination of the value and useful lives of the intangible assets acquired involves certain judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital. The net assets and result of operations of an acquired entity are included on the Company's consolidated financial statements from the acquisition date. Goodwill and Amortizable Intangible Assets Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the tangible and intangible assets acquired and liabilities assumed. Goodwill is assessed at least annually for impairment during the fourth quarter, or more frequently if circumstances indicate potential impairment. Goodwill is allocated to our reporting unit at the education services segment, which is the same as the entity as a whole (entity level reporting unit). 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 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. Following this assessment, the Company determined that it is more likely than not that its fair value exceeds its carrying amount. Finite-lived intangible assets that are acquired in a business combination are recorded at fair value on their acquisition dates and are amortized using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or on a straight-line basis over the estimated useful life of the intangible asset if the pattern of economic benefit cannot be reliability determined. Finite-lived intangible assets consist of university partner 73 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) relationships and trade names. 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 as of December 31, 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 recoverable, a potential impairment loss is recognized to the extent the carrying amounts of the assets exceeds the fair value of the assets. ​ Share-Based Compensation The Company measures and recognizes compensation expense for share-based payment awards made to employees and directors. The fair value of the Company’s restricted stock awards is based on the market price of its common stock on the date of grant. 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. Derivatives and Hedging Derivative financial instruments are recorded on the consolidated balance sheet as assets or liabilities and re-measured at fair value at each reporting date. For derivatives designated as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or period during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. 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 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 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, 2020 the carrying value of notes payable approximate fair value based on its variable rate index. 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 and corporate securities consisting of bank and financial institution bonds and securities. Income Taxes 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. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be realized. 74 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) The Company applies a more-likely-than-not threshold for financial statement recognition and measurement of an uncertain tax position taken or expected to be taken in a tax return. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2021 and 2020, the Company has reserved approximately $ 14,108 and $ 11,318 , respectively, for uncertain tax positions, including interest and penalties, which is classified within accrued liabilities on the accompanying consolidated balance sheet. The Company has deferred tax assets, which are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. Realization of the deferred tax assets is principally dependent upon achievement of projected future taxable income. Commitments and Contingencies The Company accrues for a contingent obligation when it is probable that a liability has been incurred and the amount is reasonably estimable. When the Company becomes aware of a claim or potential claim, the likelihood of any loss exposure is assessed. If it is probable that a loss will result and the amount of the loss is estimable, the Company records a liability for the estimated loss. If the loss is not probable or the amount of the potential loss is not estimable, the Company will disclose the claim if the likelihood of a potential loss is reasonably possible and the amount of the potential loss could be material. Estimates that are particularly sensitive to future changes include tax, legal, and other regulatory matters, which are subject to change as events evolve, and as additional information becomes available during the administrative and litigation process. The Company expenses legal fees as incurred. Revenue Recognition 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. 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. The Company’s Services Agreements have a single performance obligation, as the promises to provide the identified services are not distinct within the context of these agreements. The single performance obligation is delivered as our partners receive and consume benefits, which occurs ratably over a series of distinct service periods (daily or semester). Service revenue is recognized over time using the output method of measuring progress towards complete satisfaction of the single performance obligation. The output method provides a faithful depiction of the performance toward complete satisfaction of the performance obligation and can be tied to the time elapsed which is consumed evenly over the service period and is a direct measurement of the value provided to our partners. The service fees received from our partners over the term of the agreement are variable in nature in that they are dependent upon the number of students attending the university partner’s program and revenues generated from those students during the service period. Due to the variable nature of the consideration over the life of the service arrangement, the Company considered forming an expectation of the variable consideration to be received over the service life of this one performance obligation. However, since the performance obligation represents a series of distinct services, the Company recognizes the variable consideration that becomes known and billable because these fees relate to the distinct service period in which the fees are earned. The Company meets the criteria in the standard and exercises the practical expedient to not disclose the aggregate amount of the transaction price allocated to the single performance obligation that is unsatisfied as of the end of the reporting period. The Company does not disclose the value of unsatisfied performance obligations because the directly allocable variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The service fees are calculated and settled per the terms of the Services Agreements and result in a settlement duration of less than one year for all partners. There are no refunds or return rights under the Services Agreements. 75 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) The Company’s receivables represent unconditional rights to consideration from our Services Agreements with our university partners. Accounts receivable, net is stated at net realizable value and contains billed and unbilled revenue. The Company utilizes the allowance method to provide for doubtful accounts based on its evaluation of the collectability of the amounts due. There have been no amounts written off and no reserves established as of December 31, 2021 given historical collection experience. The Company will continue to review and revise its allowance methodology based on its collection experience with its partners. ​ For our partners with unbilled revenue, revenue recognition occurs in advance of billings. 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 $ 3,841 and $ 294 as of December 31, 2021 and 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. 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. Allowance for Credit Losses The Company records its accounts receivable and previously had recorded its 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. 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. In the fourth quarter of 2021, the Secured Note receivable was paid off and the credit loss reserve of $ 5,000 was reversed. The Company will continue to actively monitor the impact of the COVID-19 pandemic as well as other factors on expected credit losses. 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 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. This category also includes an allocation of depreciation, amortization, and occupancy costs attributable to the provision of these services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations. Counseling Services and Support Counseling services and support consist primarily of costs including team-based counseling and other support to prospective and current students as well as financial aid processing. This expense category includes salaries, benefits and share-based compensation, and other costs such as dues, fees and subscriptions and travel costs. This category also 76 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) includes an allocation of depreciation, amortization, rent, and occupancy costs attributable to the provision of these services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations. Marketing and Communication Marketing and communication includes lead acquisition, digital communication strategies, brand identity advertising, media planning and strategy, video, data science and analysis, marketing to potential students and other promotional and communication services. This expense category includes salaries, benefits and share-based compensation for marketing and communication personnel, brand advertising, marketing leads and other promotional and communication expenses. This category also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of these services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations. Advertising costs are expensed as incurred. General and Administrative General and administrative expenses include salaries, benefits and share-based compensation of employees engaged in corporate management, finance, human resources, compliance, and other corporate functions. This category also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of these services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations. Insurance/Self-Insurance The Company uses a combination of insurance and self-insurance for a number of risks, including claims related to employee health care, workers’ compensation, general liability, and business interruption. Liabilities associated with these risks are estimated based on, among other things, historical claims experience, severity factors, and other actuarial assumptions. The Company’s loss exposure related to self-insurance is limited by stop loss coverage on a per occurrence and aggregate basis. The Company regularly analyzes its reserves for incurred but not reported claims, and for reported but not paid claims related to self-funded insurance programs. While the Company believes reserves are adequate, significant judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims. 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. Concentration of Credit Risk The Company believes the credit risk related to cash equivalents and investments is limited due to its adherence to an investment policy that required 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 December 31, 2021 and 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. Our cash balances are primarily invested in money market funds or on deposit at high credit quality financial institutions in the U.S. These deposits are typically in excess of insured limits. The Company is also subject to credit risk for its accounts receivable balance. 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, with 85.9 % and 86.8 % of total service revenue for the years ended December 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 for the Company. 77 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) Segment Information The Company operates as a single education services company using a core infrastructure that serves the curriculum and educational delivery needs of its university partners. 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 2021 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. Accordingly, the standard was adopted by the Company as of January 1, 2021. 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 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 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. 5. Investments As of December 31, 2020, the Company had investments of $ 10,840 classified as trading. The trading investments were held in municipal and corporate securities. The cash flows of municipal securities were backed by the issuing municipality’s creditworthiness. As of December 31, 2021, there were no unrealized gains or losses for available-for sale debt securities as all matured or were sold by December 31, 2021. Available-for-sale debt securities are carried at fair value on the consolidated balance sheets. The Company estimates the lifetime 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. The Company had no investments as of December 31, 2021. 6. Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ Balance at ​ ​ Beginning of ​ Charged to ​ Deductions/ ​ End of ​ ​ Period (1) ​ Expense ​ Transfers (2) ​ Period Allowance for credit losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, 2021 ​ $ 5,000 ( 5,000 ) — ​ $ — Year ended December 31, 2020 ​ $ 5,000 — — ​ $ 5,000 Year ended December 31, 2019 ​ $ — — — ​ $ — (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. ​ 78 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) 7. Property and Equipment ​ Property and equipment consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2021 2020 ​ Land ​ $ 5,579 ​ $ 5,579 ​ Land improvements ​ 2,242 ​ 2,242 ​ Buildings ​ 51,399 ​ 51,399 ​ Buildings and leasehold improvements ​ 17,161 ​ 14,352 ​ Computer equipment ​ 113,680 ​ 100,575 ​ Furniture, fixtures and equipment ​ 17,921 ​ 15,439 ​ Internally developed software ​ 55,083 ​ 46,981 ​ Construction in progress ​ 3,381 ​ 5,043 ​ ​ ​ 266,446 ​ 241,610 ​ Less accumulated depreciation and amortization ​ ( 130,326 ) ​ ( 112,953 ) ​ Property and equipment, net ​ $ 136,120 ​ $ 128,657 ​ ​ Depreciation expense associated with property and equipment totaled $ 21,441 , $ 20,830 and $ 18,393 for the years ended December 31, 2021, 2020 and 2019, respectively. 8. Intangible Assets Amortizable intangible assets consist of the following as of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Estimated ​ Gross ​ ​ ​ ​ Net ​ Average Useful ​ Carrying ​ Accumulated ​ Carrying ​ Life (in years) ​ Amount ​ Amortization ​ Amount University partner relationships 25 $ 210,000 $ ( 24,781 ) $ 185,219 Trade names 1 ​ ​ 280 ​ ​ ( 280 ) ​ — Total amortizable intangible assets, net ​ ​ $ 210,280 ​ $ ( 25,061 ) ​ $ 185,219 ​ Amortization expense for university partner relationships and trade names for the years ending December 31: ​ ​ ​ ​ 2022 $ 8,419 2023 8,419 2024 ​ 8,419 2025 ​ 8,419 2026 ​ 8,419 Thereafter 143,124 ​ $ 185,219 ​ ​ 9. Leases 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 4 months to 10.75 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 79 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) over the lease term. The Company has operating lease costs of $ 9,723 , $ 7,594 and $ 4,084 for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, the Company had $5,672 of non-cancelable operating lease commitments for two off-campus classroom and laboratory sites that had not yet commenced. The Company’s weighted-average remaining lease term relating to its operating leases is 7.95 years, with a weighted-average discount rate of 3.06 % . As of December 31, 2021, the Company had no financing leases. Future payment obligations with respect to the Company’s operating leases, which were existing at December 31, 2021, by year and in the aggregate, are as follows: ​ ​ ​ ​ ​ Year Ending December 31, Amount 2022 ​ $ 9,085 2023 ​ ​ 8,931 2024 ​ ​ 8,439 2025 ​ ​ 8,128 2026 ​ ​ 8,012 Thereafter ​ ​ 26,294 Total lease payments ​ $ 68,889 Less interest ​ ​ 7,708 Present value of lease liabilities ​ $ 61,181 ​ 10. Notes Payable and Other Noncurrent Liabilities We entered into an amended and restated credit agreement dated January 22, 2019 and two related amendments dated January 31, 2019 and dated February 1, 2019, respectively, that together provided a credit facility of $ 325,000 comprised of a term loan facility of $ 243,750 and a revolving credit facility of $ 81,250 , both with a five-year maturity date. The proceeds of the term loan, together with $ 6,250 drawn under the revolver and operating cash on hand were used to complete the Acquisition. Concurrent with the amendment of the credit agreement and Acquisition, we repaid our existing term loan of $ 59,850 and our cash collateral of $ 61,667 was released. The Company concluded that the amended and restated credit agreement was considered a loan modification. Accordingly, the Company allocated the costs paid to the bank consortium based on the borrowing dollars and recorded an asset of $ 596 and a contra liability of $ 1,639 , which was related to a revolver and term loan, respectively, that was being amortized to interest expense over the five-year maturity date. Additionally, the Company expensed $ 150 of third-party costs in the first quarter 2019 related to this loan modification. The Company entered into a further amendment for the credit facility on October 31, 2019. This amendment increased the revolving commitment by $ 68,750 to $ 150,000 , while reducing the term loan by the same $ 68,750 to $ 150,625 . The Company concluded that this amendment was a loan modification. The Company upon its receipt of the proceeds from GCU of $ 500 million in October 2021 repaid all amounts due under the outstanding term loan and revolving credit facilities, terminated the credit agreement and expensed all remaining capitalized loan costs of $ 1,028 to interest expense. 11. Commitments and Contingencies Legal Matters From time to time, the Company is party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which are covered by insurance. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of 80 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) the loss can be reasonably estimated, the Company records a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible and the amount involved is material. With respect to the majority of pending litigation matters, the Company’s ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential losses related to those matters are not considered probable. Upon resolution of any pending legal matters, the Company may incur charges in excess of presently established reserves. 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 in a number of ways. The pandemic continues to result in reductions in education service revenue, operating income and margins in the Spring of 2022. At this time there remains considerable uncertainty around the duration of the COVID-19 pandemic. These factors, and/or material changes in the fair value of our accounts receivable, could also materially impact the allowance for expected credit losses on 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 From time to time the Company has exposure to various non-income tax related matters that arise in the ordinary course of business. At both December 31, 2021 and 2020, the Company has no reserve for tax matters where its ultimate exposure is considered probable and the potential loss can be reasonably estimated. 12. Derivative Instruments 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, and $ 1,100 was reclassified from accumulated other comprehensive income into interest expense in the consolidated income statement. 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 for the year ended December 31, 2019, 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. The corridor instrument’s terms permitted the Company to hedge its interest rate risk at several thresholds; the Company paid variable interest monthly based on the 30-day LIBOR rates until that index reached 1.5 %. If 30-day LIBOR was equal to 1.5 % through 3.0 %, the Company paid 1.5 %. If 30-day LIBOR exceeded 3.0 %, the Company paid actual 30-day LIBOR less 1.5 %. Therefore, the Company hedged its exposure to future variable rate cash flows through December 20, 2019. 81 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) 13. Earnings Per Share Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the assumed conversion of all potentially dilutive securities, consisting of stock options and restricted stock awards, for which the estimated fair value exceeds the exercise price, less shares which could have been purchased with the related proceeds, unless anti-dilutive. For employee equity awards, repurchased shares are also included for any unearned compensation adjusted for tax. The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted earnings per common share. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 Denominator: Basic weighted average shares outstanding 43,835 46,880 47,814 Effect of dilutive stock options and restricted stock 123 285 452 Diluted weighted average shares outstanding 43,958 47,165 48,266 ​ 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, 2021, 2020 and 2019, approximately 79 , 142 , and 1 , 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. 14. Equity Transactions Preferred Stock As of December 31, 2021 and 2020, the Company had 10,000 shares of authorized but unissued and undesignated preferred stock. The Company’s charter provides that the board of directors has authority to issue preferred stock, with voting powers, designations, preferences, and special rights, qualifications, limitation, or restrictions as permitted by law as determined by the board of directors, without stockholder approval. 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. Treasury Stock In January 2021, July 2021, and January 2022 the Board of Directors increased the authorization under its existing stock repurchase program by $ 100,000 , $ 970,000 and $ 175,000 , respectively, reflecting an aggregate authorization for share repurchases since the initiation of our program of $ 1,645,000 . The expiration date on the repurchase authorization is December 31, 2022 . Repurchases occur at the Company’s discretion. Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant. ​ On March 10, 2021, the Company entered into an accelerated share repurchase (“ASR”) agreement with Morgan Stanley & Co. LLC (“Morgan Stanley”) to repurchase up to $ 35,000 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 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. 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 82 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) 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 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 . 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 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 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 August 13, 2021 with additional delivery of 139 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 $ 10,000 related to the remaining delivery of shares. The ASR agreement resulted in a total of 558 shares repurchased at an average cost of $ 89.68 . During the year ended December 31, 2021 the Company repurchased 9,199 shares of common stock, which includes shares received as of December 31, 2021 under the ASR on March 10, 2021 and shares received under the ASR on May 17, 2021, at an aggregate cost of $ 797,838 . As of December 31, 2021, there remained $ 420,433 available under its current share repurchase authorization (which authorization was increased to $ 595,433 in January 2022) . 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. 15. Income Taxes The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities is principally dependent upon achievement of projected future taxable income. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more-likely-than-not that the Company will realize the benefits of these deductible differences. The Company has no valuation allowance at December 31, 2021 and 2020. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted though income tax expense. 83 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) The components of income tax expense (benefit) are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Current: ​ ​ ​ Federal ​ $ 59,450 ​ $ 63,932 ​ $ 57,354 State ​ 5,822 ​ 8,875 ​ ( 1,344 ) ​ ​ 65,272 ​ 72,807 ​ 56,010 Deferred: ​ ​ ​ Federal ​ 5,050 ​ 2,842 ​ 2,804 State ​ 623 ​ 295 ​ ( 487 ) ​ ​ 5,673 ​ 3,137 ​ 2,317 Tax expense recorded as an increase of paid-in capital ​ — ​ — ​ — ​ ​ $ 70,945 ​ $ 75,944 ​ $ 58,327 ​ A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Statutory U.S. federal income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit 2.4 2.4 2.4 ​ State tax credits, net of federal effect ( 1.2 ) ( 1.2 ) ( 1.0 ) ​ Excess tax benefits ( 1.3 ) ( 0.4 ) ( 2.3 ) ​ Nondeductible expenses 0.1 — 0.1 ​ Other 0.4 1.0 ( 1.8 ) ​ Effective income tax rate 21.4 % 22.8 % 18.4 % ​ Significant components of the Company’s deferred income tax assets and liabilities, included in Deferred income taxes, non-current on the consolidated balance sheets are as follows: ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, As of December 31, ​ 2021 2020 Deferred tax assets: ​ ​ Share-based compensation ​ $ 2,422 ​ $ 2,535 Employee compensation ​ 802 ​ 832 Allowance for credit losses ​ — ​ 1,200 Intangibles ​ 17,598 ​ 20,633 State taxes ​ 3,508 ​ 2,787 Other ​ 1,046 ​ 964 Deferred tax assets ​ 25,376 ​ 28,951 ​ ​ ​ ​ ​ ​ ​ Deferred tax liability: ​ ​ Property and equipment ​ ( 14,905 ) ​ ( 12,764 ) Goodwill ​ ( 36,295 ) ​ ( 36,295 ) Other ​ ( 138 ) ​ ( 180 ) Deferred tax liability ​ ( 51,338 ) ​ ( 49,239 ) Net deferred tax liability ​ $ ( 25,962 ) ​ $ ( 20,288 ) ​ 84 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) The net deferred tax liability on the accompanying consolidated balance sheet is comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, As of December 31, ​ 2021 2020 Deferred income taxes, current ​ $ 4,172 ​ $ 4,639 Deferred income taxes, non-current ​ ( 30,134 ) ​ ( 24,927 ) Net deferred tax liability ​ $ ( 25,962 ) ​ $ ( 20,288 ) ​ The Company recognizes the impact of a tax position in its financial statements if that position is more-likely-than-not to be sustained on audit, based on the technical merits of the position. The Company discloses all unrecognized tax benefits, which includes the reserves recorded for uncertain tax positions on filed tax returns and the unrecognized portion of affirmative claims. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Unrecognized tax benefits as of December 31, 2021 and 2020 were $ 14,108 and $ 11,318 , respectively. The reconciliation of the beginning and ending balance of unrecognized tax benefits at December 31, is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 Unrecognized tax benefits, beginning of year ​ $ 11,318 ​ $ 6,773 Tax positions taken during the current year ​ ​ Increases ​ 3,973 ​ 4,521 Decreases ​ — ​ — Tax positions taken during a prior year ​ ​ Increases ​ 262 ​ 962 Decreases ​ ( 1,064 ) ​ — Decreases for settlements during the period ​ ( 74 ) ​ ( 235 ) Reductions for lapses of applicable statute of limitations ​ ( 307 ) ​ ( 703 ) Unrecognized tax benefits, end of year ​ $ 14,108 ​ $ 11,318 ​ As of December 31, 2021 and 2020, the unrecognized tax benefit recorded of $ 14,108 and $ 11,318 , respectively, if reversed, would impact the effective tax rate. At December 31, 2021 and 2020, the Company had accrued $ 0 and $ 46 , respectively, in interest and $ 0 , in penalties. It is reasonably possible that the amount of the unrecognized tax benefit will change during the next 12 months, however management does not expect the potential change to have a material effect on the results of operations or financial position. The Company’s uncertain tax positions were related to tax years that remained subject to examination by tax authorities. As of December 31, 2021, the earliest tax year still subject to examination for federal and state purposes is 2018 and 2017, respectively. 16. Share-Based Compensation Plans Incentive Plans 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 December 31, 2021, 1,414 shares were available for grants under the 2017 Plan. Restricted Stock During fiscal years 2021, 2020, and 2019, the Company granted 180 , 164 , and 149 shares of common stock, respectively, with a service vesting condition to certain of its executives, officers, and employees. The restricted shares 85 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) have voting rights and vest evenly at 20 % over each of the next five years . Upon vesting, shares will be held in lieu of taxes equivalent to the statutory tax withholding required to be paid when the restricted stock vests. During the years ended December 31, 2021, 2020 and 2019, the Company withheld 56 , 62 , and 68 shares of common stock in lieu of taxes at a cost of $ 5,994 , $ 4,969 , and $ 8,127 , on the restricted stock vesting dates, respectively. During 2021, 2020 and 2019, following the annual stockholders meeting, the Company granted 4 , 3 and 3 shares of common stock to the non-employee members of the Company’s Board of Directors. The restricted shares granted to these directors 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. Included in the 2021 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 2021 newly appointed non-employee director also received an annual grant of restricted shares. The initial award of shares that were granted in 2021 to the newly appointed non-employee director have voting rights and vest on the one year anniversary of the date of grant. Included in the 2019 amount are shares of common stock granted in August 2019 to two new non-employee members of the Company’s Board of Directors. The restricted shares granted to these directors 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 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ Total ​ Grant Date ​ ​ Shares ​ Fair Value per Share Outstanding as of December 31, 2018 460 ​ $ 63.28 Granted 152 ​ $ 93.62 Vested ( 174 ) ​ $ 56.14 Forfeited, canceled or expired ( 16 ) ​ $ 82.11 Outstanding as of December 31, 2019 422 ​ $ 76.43 Granted 167 ​ $ 84.31 Vested ( 155 ) ​ $ 65.19 Forfeited, canceled or expired ( 15 ) ​ $ 84.64 Outstanding as of December 31, 2020 419 ​ $ 83.43 Granted 184 ​ $ 86.05 Vested ( 144 ) ​ $ 74.90 Forfeited, canceled or expired ( 32 ) ​ $ 87.00 Outstanding as of December 31, 2021 427 ​ $ 86.24 ​ As of December 31, 2021, there was approximately $ 26,974 of total unrecognized share-based compensation cost related to unvested restricted stock awards. These costs are expected to be recognized over a weighted average period of 2.08 years. Stock Options No options were granted in 2021, 2020 and 2019. Prior to 2012, the Company granted time vested options to purchase shares of common stock with an exercise price equal to the fair market value on the date of grant to employees. 86 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) These time vested options vested ratably over a period of five years and expire ten years from the date of grant. A summary of the activity related to stock options granted under the Company’s Incentive Plan is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Summary of Stock Options Outstanding ​ ​ Weighted Weighted ​ ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ ​ ​ Exercise ​ Remaining ​ Aggregate ​ ​ Total ​ Price per ​ Contractual ​ Intrinsic ​ ​ Shares ​ Share ​ Term (Years) ​ Value ($) Outstanding as of December 31, 2018 444 ​ $ 16.66 ​ ​ ​ ​ ​ Granted — ​ $ — ​ Exercised ( 212 ) ​ $ 18.01 ​ Forfeited, canceled or expired — ​ $ — ​ Outstanding as of December 31, 2019 232 ​ $ 15.42 ​ ​ ​ ​ ​ Granted — ​ $ — ​ Exercised ( 56 ) ​ $ 15.66 ​ Forfeited, canceled or expired — ​ $ — ​ Outstanding as of December 31, 2020 176 ​ $ 15.34 ​ ​ ​ ​ ​ Granted — ​ $ — ​ Exercised ( 176 ) ​ $ 15.34 ​ Forfeited, canceled or expired — ​ $ — ​ Outstanding as of December 31, 2021 — ​ $ — — ​ $ — Exercisable as of December 31, 2021 — ​ $ — — ​ $ — ​ Share-based Compensation Share-based Compensation Expense Assumptions – Restricted Stock Awards The Company measures and recognizes compensation expense for share-based payment awards made to employees and directors. The fair value of the Company’s restricted stock awards is based on the market price of its common stock on the date of grant. 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. The table below outlines share-based compensation expense for the fiscal years ended December 31, 2021, 2020 and 2019 related to restricted stock and stock options granted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2020 2019 Technology and academic services ​ $ 2,112 ​ $ 2,049 ​ $ 1,721 ​ Counseling services and support ​ 5,749 ​ 5,364 ​ 5,297 ​ Marketing and communication ​ 101 ​ 100 ​ 87 ​ General and administrative ​ 3,564 ​ 3,150 ​ 3,195 ​ Share-based compensation expense included in operating expenses ​ 11,526 ​ 10,663 ​ 10,300 ​ Tax effect of share-based compensation ​ ( 2,882 ) ​ ( 2,666 ) ​ ( 2,575 ) ​ Share-based compensation expense, net of tax ​ $ 8,644 ​ $ 7,997 ​ $ 7,725 ​ ​ 401(k) Plan The Company has established a 401(k) Defined Contribution Benefit Plan (the “Plan”). The Plan provides eligible employees, upon date of hire, with an opportunity to make tax-deferred contributions into a long-term investment and savings program. All employees over the age of 21 are eligible to participate in the plan. The Plan allows 87 Table of Contents Grand Canyon Education, Inc. Notes to Consolidated Financial Statements (In thousands, except per share data) eligible employees to contribute to the Plan subject to Internal Revenue Code restrictions and the Plan allows the Company to make discretionary matching contributions. The Company plans to make a matching contribution to the Plan of approximately $ 2,389 for the year ended December 31, 2021. The Company made discretionary matching contributions to the Plan of $ 2,225 and $ 2,529 for the years ended December 31, 2020 and 2019, respectively. 17. 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, 2021, 2020 and 2019, related party transactions consisted of the following: ​ Affiliates ​ 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 as of December 31, 2020. ​ ​ ​ 88 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.