What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-03 · 117 added, 182 removed, 378 unchanged (44% of the section changed)

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

21 unchanged sentences

Consolidated Balance Sheets

September 30,

(In thousands, except par value)

2 unchanged sentences

Accounts receivable, net

Interest receivable on Secured Note

Income tax receivable

3 unchanged sentences

Right-of-use assets

Secured Note receivable, net

Amortizable intangible assets, net

7 unchanged sentences

Current portion of lease liability

Current portion of notes payable

Total current liabilities

2 unchanged sentences

Lease liability, less current portion

Notes payable, less current portion

Total liabilities

2 unchanged sentences

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

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

0 shares issued and outstanding at March 31, 2022 and December 31, 2021

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

53,637 and 53,277 shares issued and 43,054 and 46,649 shares outstanding at September 30, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 10,583 and 6,628 shares of common stock at September 30, 2021 and December 31, 2020, respectively

53,826 and 53,637 shares issued and 33,278 and 37,722 shares outstanding at March 31, 2022 and December 31, 2021, respectively

Treasury stock, at cost, 20,548 and 15,915 shares of common stock at March 31, 2022 and December 31, 2021, respectively

( 1,506,766 )

( 1,107,211 )

Additional paid-in capital

5 unchanged sentences

GRAND CANYON EDUCATION, INC.

Consolidated Statements of Comprehensive Income

Three Months Ended

(In thousands)

Other comprehensive income, net of tax:

Unrealized losses on available-for-sale securities, net of taxes of $ 99 and $ 35 for the three months ended March 31, 2022 and 2021, respectively

Comprehensive income

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

GRAND CANYON EDUCATION, INC.

Consolidated Statement of Stockholders’ Equity

(In thousands)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Treasury Stock

1 unchanged sentence

Balance at December 31, 2021

Comprehensive income

Common stock purchased for treasury

Share-based compensation

Exercise of stock options

Balance at March 31, 2021

Comprehensive income

Common stock purchased for treasury

Restricted shares forfeited

Share-based compensation

Balance at June 30, 2021

( 1,107,211 )

Comprehensive income

2 unchanged sentences

Share-based compensation

Balance at September 30, 2021

Nine Months Ended September 30, 2020

Balance at March 31, 2022

( 1,506,766 )

Three Months Ended March 31, 2021

Treasury Stock

1 unchanged sentence

Balance at December 31, 2020

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

Comprehensive income

4 unchanged sentences

Balance at March 31, 2021

Comprehensive income

Common stock purchased for treasury

Share-based compensation

Exercise of stock options

Balance at June 30, 2020

Comprehensive income

Common stock purchased for treasury

Restricted shares forfeited

Share-based compensation

Exercise of stock options

Balance at September 30, 2020

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

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(In thousands)

17 unchanged sentences

Additions of amortizable content

Funding to GCU

Repayment by GCU

Purchases of investments

3 unchanged sentences

Principal payments on notes payable

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

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

Net proceeds from exercise of stock options

Net cash used in financing activities

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

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of period

5 unchanged sentences

Purchases of property and equipment included in accounts payable

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

ROU Asset and Liability recognition

8 unchanged sentences

GCE’s most significant university partner is Grand Canyon University (“GCU”), an Arizona non-profit corporation, 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-campus classroom and laboratory sites.

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”).

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

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 provided certain services to a university partner to assist them in expanding their online graduate programs.

As of March 31, 2022, GCE provides education services to 27 university partners across the United States.

Summary of Significant Accounting Policies

2 unchanged sentences

Intercompany transactions have been eliminated in consolidation.

The Company has no components of other comprehensive income (loss), and therefore, comprehensive income equals net income.

Unaudited Interim Financial Information

6 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, 2021 from which the December 31, 2021 balance sheet information was derived.

At December 31, 2020, the Company considered its investments in corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations as trading securities.

These securities were 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.

As of March 31, 2022 and 2021, the Company considered its investments in corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations as available-for-sale securities based on the Company’s intent for the respective securities.

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

Unrealized losses considered to be other-than-temporary are recognized

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

currently in earnings.

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

As of December 31, 2021, the Company had no investments.

Arrangements with GCU

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 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.

As of September 30, 2021, the Company had loaned $ 99,815 to GCU, net of repayments.

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.

On July 1, 2018, the Company consummated as 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 in the initial principal amount of $ 870,097 (the “Secured Note”).

In connection therewith, the Company and GCU entered into a long-term master services agreement (the “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.

16 unchanged sentences

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 September 30, 2021 and December 31, 2020, $ 1,209 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 March 31, 2022 and December 31, 2021, $ 969 and $ 1,168 , 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.

Grand Canyon Education, Inc.

1 unchanged sentence

(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.

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 quantitative goodwill impairment test.

The Financial Accounting Standards Board 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.

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

Finite-lived intangible assets consist of university partner

Grand Canyon Education, Inc.

1 unchanged sentence

(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 March 31, 2022.

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.

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 September 30, 2021 and December 31, 2020 the fair value of the Company’s Secured Note was $ 1,037,256 and $ 1,049,458 , respectively.

As of September 30, 2021 and December 31, 2020 the carrying value of Secured Note receivable was $ 964,912 for both periods.

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

5 unchanged sentences

and model-derived valuations whose inputs are observable or whose significant valuation drivers are observable.

-Level 3 – unobservable inputs that are not corroborated by market data.

Investments are comprised of corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations.

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.

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

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.

11 unchanged sentences

The Company’s receivables represent unconditional rights to consideration from our Services Agreements with our university partners.

Accounts receivable, net is stated at amortized cost, net of any allowance for credit losses and contains billed and unbilled revenue.

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 September 30, 2021 given historical collection experience.

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 expected credit losses.

There have been no amounts written off and no reserves established as of March 31, 2022.

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 $ 11,604 and $ 294 as of September 30, 2021 and December 31, 2020, respectively, are included in accounts receivable in our consolidated balance sheets.

Our unbilled revenue of $ 141 and $ 3,841 as of March 31, 2022 and December 31, 2021, 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.

2 unchanged sentences

Allowance for Credit Losses

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

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

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

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

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

Since our transition to an education services company on July 1, 2018, and continued growth to 27 university partners,

The Company records its accounts receivable and previously had recorded its Secured Note (as defined above) receivable at the net amount expected to be collected.

Our accounts receivable are derived through education services

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

the Company has no credit losses with any of our university partners.

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.

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

4 unchanged sentences

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

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

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 also 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.

11 unchanged sentences

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.

This category

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

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.

Commitments and Contingencies

7 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 September 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.

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

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

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

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

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

Our dependence on our most significant university partner, which is also the counterparty to the Secured Note, with 85.0 % and 86.5 % of total service revenue for the nine-month periods ended September 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.

All of the Company’s cash equivalents and investments as of March 31, 2022 and December 31, 2021 consist of investments rated BBB or higher by at least one rating agency.

Additionally, the Company utilizes at least 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.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances, which are primarily invested in money market funds or on deposit at high credit quality financial institutions in the U.S.

Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

At March 31 2022 and December 31, 2021, the Company had $ 200,926 and $ 600,130 in excess of the FDIC insured limit.

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

Our dependence on our most significant university partner, with 87.6 % and 87.4 % of total service revenue for the three month periods ended March 31, 2022 and 2021, 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.

Use of Estimates

5 unchanged sentences

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.

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.

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

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.

At December 31, 2020, the Company had investments of $ 10,840 classified as trading.

The trading investments are held in municipal and corporate securities.

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

As of September 30, 2021, there were no unrealized gains or losses for available-for sale debt securities as all matured or were sold by September 30, 2021.

As of March 31, 2022, the Company had investments of $ 62,396 , classified as available-for-sale securities.

As of December 31, 2021, the Company had no investments.

As of March 31, 2022, the Company had available-for-sale investments comprised of the following:

As of March 31, 2022

Corporate bonds

Commercial paper

Total investments

For the three months ended March 31, 2022, the net unrealized losses were $ 323 , net of taxes.

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

1 unchanged sentence

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.

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

2022 (Remainder of year)

Net Income Per Common 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.

Diluted earnings per common share reflects the assumed conversion of all potentially dilutive securities, consisting of 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.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Basic weighted average shares outstanding

1 unchanged sentence

Diluted weighted average shares outstanding

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.

Diluted weighted average shares outstanding excludes the incremental effect of unvested restricted stock in accordance with the treasury stock method.

For the three-month periods ended March 31, 2022 and 2021, approximately 206 and 1 , respectively, of the Company’s restricted stock awards outstanding were excluded from the calculation of

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

For the three month periods ended September 30, 2021 and 2020, approximately 73 and 79 , respectively, and for the nine month periods ended September 30, 2021 and 2020, approximately 25 and 148 , 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.

diluted earnings per share as their inclusion would have been anti-dilutive.

These restricted stock awards could be dilutive in the future.

2 unchanged sentences

Allowance for credit losses

Nine months ended September 30, 2021

Nine months ended September 30, 2020

Three months ended March 31, 2022

Three months ended March 31, 2021

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

3 unchanged sentences

Property and equipment consist of the following:

September 30,

Land improvements

8 unchanged sentences

Amortizable intangible assets consist of the following as of:

September 30, 2021

March 31, 2022

Average Useful

7 unchanged sentences

Remainder of 2022

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

These leases have terms that range from four months to ten years .

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

These leases have terms that range from one month to 10.3 years.

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

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

The Company had operating lease costs of $ 7,371 and $ 5,244 for the nine-month periods ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, the Company had no non-cancelable operating lease commitments that had not yet commenced.

The Company had operating lease costs of $ 2,396 and $ 2,435 for the three-month periods ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the Company had $ 14,871 of non-cancelable operating lease commitments for three off-campus classroom and laboratory sites and an office equipment lease that had not yet commenced.

The Company’s weighted-average remaining lease term relating to its operating leases is 7.75 years, with a weighted-average discount rate of 3.06 %.

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

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

As of March 31, 2022, the Company had no financing leases.

Future payment obligations with respect to the Company’s operating leases, which were existing at March 31, 2022, by year and in the aggregate, are as follows:

Year Ending December 31,

4 unchanged sentences

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 provide 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 Company concluded that the amended and restated credit agreement is 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 are related to our revolver and term loan, respectively, that is being amortized to interest expense over the five-year maturity date.

The Company upon its receipt of the paydown of $ 500,000 on the Secured Note 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 cost of $ 1,028 to interest expense.

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

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 is considered a loan modification.

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

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

As of September 30, 2021, the Company is in compliance with its financial covenants and the note payable totals $ 83,680 , excluding the contra liability of $ 765 .

As of September 30,

As of December 31,

Notes Payable

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

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

Current portion

Commitments and Contingencies

7 unchanged sentences

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.

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.

The Company reserve is not material for tax matters where its ultimate exposure is considered probable and the potential loss can be reasonably estimated.

COVID-19 Considerations

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

The 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.

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

Share-Based Compensation

1 unchanged sentence

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 September 30, 2021, 1,414 shares were available for grants under the 2017 Plan.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

As of March 31, 2022, 1,225 shares were available for grants under the 2017 Plan.

Restricted Stock

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

During the three months ended March 31, 2022, the Company granted 189 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 nine months ended September 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.

During the three months ended March 31, 2022, the Company withheld 52 shares of common stock in lieu of taxes at a cost of $ 4,625 on the restricted stock vesting dates.

A summary of the activity related to restricted stock granted under the Company’s Incentive Plan since December 31, 2021 is as follows:

2 unchanged sentences

Outstanding as of December 31, 2021

Forfeited, canceled or expired

Outstanding as of September 30, 2021

Stock Options

During the nine months ended September 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:

Summary of Stock Options Outstanding

Outstanding as of December 31, 2020

Forfeited, canceled or expired

Outstanding as of September 30, 2021

Exercisable as of September 30, 2021

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

Forfeited, canceled or expired

Outstanding as of March 31, 2022

Stock Options

During the three months ended March 31, 2022, no options were granted.

As of December 31, 2021, all options have been exercised or expired.

Share-based Compensation Expense

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

The table below outlines share-based compensation expense for the three months ended March 31, 2022 and 2021 related to restricted stock granted:

Technology and academic services

6 unchanged sentences

Treasury Stock

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 Board of Directors has authorized under its existing stock repurchase program, 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.

9 unchanged sentences

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 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.

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

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

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

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 nine months ended September 30, 2021 the Company repurchased 3,873 shares of common stock, which includes shares received as of September 30, 2021 under the ASR on March 10, 2021 and shares received under the ASR on May 17, 2021, at an aggregate cost of $ 354,185 .

At September 30, 2021, there remained $ 864,085 available under its current share repurchase authorization.

During the three months ended March 31, 2022 the Company repurchased 4,575 shares of common stock, at an aggregate cost of $ 394,930 .

As of March 31, 2022, there remained $ 200,503 available under its current share repurchase authorization.

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.

Subsequent Events

Modification of Credit Agreement with Grand Canyon University.

On October 28, 2021, the Company received formal notice from GCU of GCU’s entry into a refinancing transaction (the “Refinancing”) the proceeds of which will be used to repay $ 500.0 million of the outstanding balance of the Secured Note on October 29, 2021.

In connection with the Refinancing and related partial repayment of the Secured Note, the Company entered into a Modification of Credit Agreement with GCU (the “Modification”).

The Modification provides that, in exchange for the partial repayment, (i) the Company will release its first priority lien on GCU’s assets, (ii) GCU will grant a first priority lien to a financial institution as master trustee under a master trust indenture (the “Master Trust Indenture”), and (iii) the Company will receive an obligation from the master trust evidencing the remaining balance of the Secured Note due to the Company (the “Trust Obligation”).

The Trust Obligation continues to bear interest at an annual rate of 6.0 %, has a maturity date of June 30, 2025, and is secured on an equal and proportional basis with all other obligations issued under the Master Trust Indenture by all of the assets of GCU.

Termination of GCE Credit Agreement .

The Company is a party to that certain Amended and Restated Credit Agreement, dated as of January 22, 2019, among the Company, Orbis Education Services, LLC, a wholly owned subsidiary of the Company, as guarantor, Bank of America, N.A.

as administrative agent, swing line lender and letter of credit issuers, and the other lenders names therein (as amended, the “GCE Credit Agreement”).

Upon its receipt of the proceeds from the Refinancing in partial payment of the Secured Note, the Company repaid all amounts due under the outstanding term loan and revolving credit facilities of, and terminated, the GCE Credit Agreement and plans to use the balance of such proceeds for general corporate purposes, including repurchases of shares under the Company’s share repurchase program.

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