What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-02-16 compared with 2022-02-16 · 131 added, 239 removed, 575 unchanged (39% of the section changed)

64 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

7 unchanged sentences

( 1,711,423 )

( 1,107,211 )

Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

13 unchanged sentences

Amortization of intangible assets

Loss on transaction

Total costs and expenses

16 unchanged sentences

Other comprehensive income, net of tax:

Unrealized losses on hedging derivatives, net of taxes of $ 107 for the year ended December 31, 2019

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

Unrealized losses on available-for-sale securities, net of taxes of $ 168 for the year ended December 31, 2022

Comprehensive income

7 unchanged sentences

Balance at December 31, 2019

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

Comprehensive income

4 unchanged sentences

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 December 31, 2021

( 1,107,211 )

Comprehensive income

2 unchanged sentences

Share-based compensation

Exercise of stock options

Balance at December 31, 2022

12 unchanged sentences

Deferred income taxes

Loss on transaction

Other, including fixed asset impairments

5 unchanged sentences

Income taxes receivable/payable

Student deposits

Deferred rent

Deferred revenue

Net cash provided by operating activities

Cash flows provided by (used in) investing activities:

Cash flows (used in) provided by investing activities:

Capital expenditures

Additions of amortizable content

Acquisition, net of cash acquired

Funding to GCU

2 unchanged sentences

Proceeds from sale or maturity of investments

Net cash provided by (used in) investing activities

Cash flows (used in) provided by financing activities:

Net cash (used in) provided by investing activities

Cash flows used in financing activities:

Principal payments on notes payable

Debt issuance costs

Proceeds from notes payable

Net borrowings from revolving line of credit

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) provided by financing activities

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

Net cash used in financing activities

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

Cash and cash equivalents and restricted cash, beginning of period

6 unchanged sentences

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

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

ROU Asset and Liability recognition

Reclassification of interest rate corridor due to expiration

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

6 unchanged sentences

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.

In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs.

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

2 unchanged sentences

On May 9, 2008, the Company changed its name to Grand Canyon Education, Inc.

On July 1, 2018, the Company sold the university to GCU (the “Transaction”).

The Company’s wholly owned subsidiaries were historically used to facilitate expansion of the university campus prior to the Transaction.

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.

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.

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

Accounts receivable, net of allowance of $ 0

Property and equipment

Right-of-use assets

Intangible assets

Liabilities assumed

Accounts payable

Accrued and other liabilities

Lease liability

Deferred tax liability

Deferred revenue

Total net asset or liability purchased and assumed

Purchase price

Excess of fair value of net assets acquired over consideration given

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

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,

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.

Summary of Significant Accounting Policies

9 unchanged sentences

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

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

As of December 31, 2022, the Company considered its investments in corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations as available-for-

Grand Canyon Education, Inc.

1 unchanged sentence

(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.

sale securities based on the Company’s intent for the respective securities.

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

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 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.

9 unchanged sentences

Land improvements and buildings are depreciated over lives ranging from 10 to 40 years .

Transaction and 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 in the initial principal amount of $ 870,097 (the “Secured Note”) which was repaid by GCU in the fourth quarter of 2021.

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.

Internally Developed Technology

11 unchanged sentences

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.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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.

2 unchanged sentences

As of December 31, 2022 and 2021, $ 910 and $ 1,168 , 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.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Long-Lived Assets

21 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 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

The Financial Accounting Standards Board (“FASB”) has issued guidance that permits an entity to first

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

relationships and trade names.

assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.

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 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.

2 unchanged sentences

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).

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 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.

The fair value of the assets acquired, less the liabilities assumed, exceeded the purchase price by $ 157,825 , which was recorded as goodwill.

Share-Based Compensation

3 unchanged sentences

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.

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.

The basis of fair value measurements for each level is described below, with Level 1 having the highest priority.

-Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Grand Canyon Education, Inc.

1 unchanged sentence

(In thousands, except per share data)

-Level 2 – inputs are quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in non-active markets;

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.

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.

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.

16 unchanged sentences

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.

Service revenue is recognized over time using the output method of measuring progress towards complete satisfaction of

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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.

6 unchanged sentences

There are no refunds or return rights under the Services Agreements.

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.

21 unchanged sentences

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.

In the fourth quarter of 2021, the Secured Note receivable was paid off in full and the credit loss reserve of $ 5,000 was reversed.

The Company will continue to actively monitor other factors on expected credit losses.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Technology and Academic Services

6 unchanged sentences

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

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.

This category also 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

7 unchanged sentences

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.

The Company uses a combination of insurance and self-insurance for a number of risks, including claims related to employee healthcare, 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.

3 unchanged sentences

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

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Concentration of Credit Risk

1 unchanged sentence

All of the Company’s cash equivalents and investments as of December 31, 2022 and 2021 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.

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 December 31, 2022 and December 31, 2021, the Company had $ 119,639 and $ 600,130 , respectively, in excess of the FDIC insured limit .

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

1 unchanged sentence

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.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Our dependence on our most significant university partner, with 85.8 % and 85.9 % of total service revenue for the years ended December 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.

Segment Information

1 unchanged sentence

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.

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

As of December 31, 2022, the Company had investments of $ 61,295 , classified as available-for sale securities.

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

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

As of December 31, 2022

Corporate bonds

Total investments

For the year ended December 31, 2022, the net unrealized losses were $ 533 , net of taxes.

Available-for-sale 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.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

consolidated income statements.

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 securities maturing as of December 31:

Allowance for Credit Losses

6 unchanged sentences

2016-13 on the Secured Note receivable.

(2) In the fourth quarter of 2021, the Secured Note receivable was paid off in full and the credit loss reserve of $ 5,000 was reversed .

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

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Property and Equipment

10 unchanged sentences

Depreciation expense associated with property and equipment totaled $ 22,115 , $ 21,441 and $ 20,830 for the years ended December 31, 2022, 2021 and 2020, respectively.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Intangible Assets

7 unchanged sentences

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.

These leases have terms that range from two months to ten years and eight months.

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

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

over the lease term.

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 has operating lease costs of $ 10,666 , $ 9,723 and $ 7,594 for the years ended December 31, 2022, 2021 and 2020, 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.

As of December 31, 2022, the Company had $ 23,310 of non-cancelable operating lease commitments for four off-campus classroom and laboratory sites and $ 192 for optical fiber communication lines that had not yet commenced.

The Company’s weighted-average remaining lease term relating to its operating leases is 8.04 years, with a weighted-average discount rate of 3.35 % .

5 unchanged sentences

Present value of lease liabilities

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Notes Payable and Other Noncurrent Liabilities

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.

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 costs of $ 1,028 to interest expense.

Commitments and Contingencies

2 unchanged sentences

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

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 it is probable that a loss will result and the amount of 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.

2 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.

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

1 unchanged sentence

At both December 31, 2022 and 2021, the Company has no reserve for tax matters where its ultimate exposure is considered probable and the potential loss can be reasonably estimated.

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.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Earnings Per Share

9 unchanged sentences

For each of the years ended December 31, 2022, 2021 and 2020, approximately 58 , 79 , and 142 , 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.

These restricted stock awards could be dilutive in the future.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Equity Transactions

4 unchanged sentences

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 .

In January 2021, July 2021, January 2022 and October 2022 the Board of Directors increased the authorization under its existing stock repurchase program by $ 100,000 , $ 970,000 , $ 175,000 and $ 200,000 , respectively, reflecting an aggregate authorization for share repurchases since the initiation of our program of $ 1,845,000 .

The expiration date on the repurchase authorization is December 31, 2023 .

5 unchanged sentences

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

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

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.

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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) .

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

During the year ended December 31, 2022, the Company repurchased 6,795 shares of common stock at an aggregate cost of $ 599,587 .

As of December 31, 2022, there remained $ 195,847 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.

6 unchanged sentences

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

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:

11 unchanged sentences

Effective income tax rate

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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:

4 unchanged sentences

Employee compensation

Allowance for credit losses

Deferred tax assets

3 unchanged sentences

Net deferred tax liability

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:

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Unrecognized tax benefits, end of year

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

As of December 31, 2022 and 2021, the unrecognized tax benefit recorded of $ 15,862 and $ 14,108 , 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.

At December 31, 2022 and 2021, the Company had accrued $ 93 and $ 0 , respectively, in interest and $ 112 and $ 0 , respectively, 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.

7 unchanged sentences

During fiscal years 2022, 2021, and 2020, the Company granted 189 , 180 , and 164 shares of common stock, respectively, with a service vesting condition to certain of its executives, officers, and employees.

The restricted shares

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 .

The restricted shares 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.

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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.

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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

13 unchanged sentences

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.

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.

6 unchanged sentences

Outstanding as of December 31, 2021

Forfeited, canceled or expired

Outstanding as of December 31, 2021

Exercisable as of December 31, 2021

Share-based Compensation

1 unchanged sentence

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.

The fair value of the Company’s restricted stock awards is based on the market price of its

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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.

12 unchanged sentences

All employees over the age of 21 are eligible to participate in the plan.

The Plan allows

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 Plan allows 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 $ 2,662 for the year ended December 31, 2022.

9 unchanged sentences

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.

The Company contributed $ 1,150 and $ 1,100 for the years ended December 31, 2022 and 2020, respectively, of which no amounts were owed as of December 31, 2022 and 2020.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk