What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-02 · 77 added, 122 removed, 101 unchanged (66% of the section changed)

13 unchanged sentences

Important factors that could cause our actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, include, but are not limited to:

● the harm to our business, results of operations, and financial condition, and harm to our university partners resulting from epidemics, pandemics, or public health crises;

● legal and regulatory actions taken against our university partners that impact their businesses and that directly or indirectly reduce the service revenue we can earn under our master services agreements;

● the occurrence of any event, change or other circumstance that could give rise to the termination of any of the key university partner agreements;

● our ability to properly manage risks and challenges associated with strategic initiatives, including potential acquisitions or divestitures of, or investments in, new businesses, acquisitions of new properties and new university partners, and expansion of services provided to our existing university partners;

● our failure to comply with the extensive regulatory framework applicable to us either directly as a third-party service provider or indirectly through our university partners, including Title IV of the Higher Education Act and the regulations thereunder, state laws and regulatory requirements, and accrediting commission requirements;

● regulatory actions taken against our university partners that impact their businesses and that directly or indirectly reduce the service revenue we can earn under our master services agreements;

● the harm to our business, results of operations, and financial condition, and harm to our university partners resulting from epidemics, pandemics, or public health crises;

● the harm to our business and our ability to retract and retain students resulting from capacity constraints, system disruptions, or security breaches in our online computer networks and phone systems:

● the ability of our university partners’ students to obtain federal Title IV funds, state financial aid, and private financing;

● potential damage to our reputation or other adverse effects as a result of negative publicity in the media, in the industry or in connection with governmental reports or investigations or otherwise, affecting us or other companies in the education services sector;

● risks associated with changes in applicable federal and state laws and regulations and accrediting commission standards, including pending rulemaking by the Department of Education applicable to us directly or indirectly through our university partners;

● risks associated with changes in applicable federal and state laws and regulations and accrediting commission standards, including pending rulemaking by the United States Department of Education applicable to us directly or indirectly through our university partners;

● competition from other education service companies in our geographic region and market sector, including competition for students, qualified executives and other personnel;

11 unchanged sentences

Additional factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K (the “2023 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, 2023, as updated in our subsequent reports filed with the SEC, including any updates found in Part II, Item 1A of this Quarterly Report on Form 10-Q or our other reports on Form 10- Q.

Forward-looking statements speak only as of the date the statements are made.

You should not put undue reliance on any forward-looking statements.

Forward-looking statements speak only as of the date the statements are made and we assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.

If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

3 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”), a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across nine colleges both online and on ground at its campus in Phoenix, Arizona, and at six 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.

GCE, together with Orbis Education, has continued to add additional university partners.

GCE’s most significant university partner is Grand Canyon University (“GCU”), a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online and on ground at its campus in Phoenix, Arizona, and at six off-campus classroom and laboratory sites.

We also provide education services to numerous university partners across the United States.

GCE has continued to add additional university partners.

In the healthcare field, we wo rk 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 provided certain services to a university partner to assist them in expanding their online graduate programs.

As of September 30, 2023, GCE provides education services to 25 university partners across the United States.

As of March 31, 2024, GCE provides education services to 23 university partners across the United States.

We plan to continue to add additional university partners and to introduce additional programs with both our existing partners and with new partners.

We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or, as is the case for our most significant partner, GCU, both healthcare and other programs.

In addition, we have centralized a number of services that historically were provided separately to university partners of Orbis Education.

Therefore, we refer to all university partners as “GCE partners” or “our partners”.

We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or, as is the case for our most significant partner, GCU, both

healthcare and other programs.

We do disclose significant information for GCU, such as enrollments, due to its size in comparison to our other university partners.

1 unchanged sentence

Our critical accounting policies are disclosed in the 2023 Form 10-K for the fiscal year ended December 31, 2023.

During the nine months ended September 30, 2023, there were no significant changes in our critical accounting policies.

During the three months ended March 31, 2024, there were no significant changes in our critical accounting policies.

Results of Operations

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Costs and expenses

3 unchanged sentences

General and administrative

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Service revenue .

Our service revenue for the three months ended September 30, 2023 was $221.9 million, an increase of $13.2 million, or 6.3%, as compared to service revenue of $208.7 million for the three months ended September 30, 2022.

The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 118,227 at September 30, 2023, an increase of 6.6% over enrollments at September 30, 2022 and an increase in revenue per student year over year.

The increase in revenue per student between years is primarily due to the service revenue impact of the increased room, board and other ancillary revenues at GCU in the third quarter of 2023 as compared to the prior year period .

Our service revenue for the three months ended March 31, 2024 was $274.7 million, an increase of $24.6 million, or 9.8%, as compared to service revenue of $250.1 million for the three months ended March 31, 2023.

The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 116,952 at March 31, 2024, an increase of 7.7% over enrollments at March 31, 2023 and an increase in revenue per student year over year.

The increase in revenue per student between years is primarily due to the service revenue impact of the increased room, board and other ancillary revenues at GCU in the first quarter of 2024 as compared to the prior year period .

In addition, s ervice revenue per student for Accelerated Bachelor of Science in Nursing (“ABSN”) students at off-campus classroom and laboratory sites generates a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of their students take more credits on average per semester.

The increase in revenue per student in the three months ended September 30, 2023 was also positively impacted by the timing of the Fall semester for the ground traditional campus.

The Fall semester started one day earlier in 2023 than in 2022, which had the effect of shifting $1.2 million in service revenue from the fourth quarter of 2023 to the third quarter of 2023 in comparison to the prior year.

Partner enrollments totaled 123,165 at September 30, 2023 as compared to 116,202 at September 30, 2022.

University partner enrollments at our off-campus classroom

and laboratory sites were 5,448, a decrease of 4.3% over enrollments at September 30, 2022, which includes 510 and 421 GCU students at September 30, 2023 and 2022, respectively.

None of our ABSN partners stopped admitting new students due to the clinical faculty challenges that began during the pandemic, however some locations that were scheduled to open were delayed and some existing partners have experienced reduced incoming cohort sizes which has slowed the growth.

We believe the growth in the number of ABSN students is also being negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions.

To address this challenge, we have been working with a number of our university partners to adjust their programs to allow students with the required education experience but without a complete bachelor’s degree to enter their programs.

We did open six new off-campus classroom and laboratory sites in the year ended December 31, 2022 and five sites in the nine months ended September 30, 2023 increasing the total number of these sites to 40 at September 30, 2023.

Enrollments for GCU ground students were 25,232 at September 30, 2023 up from 25,083 at September 30, 2022.

GCU online enrollments were 92,995 at September 30, 2023, up from 85,845 at September 30, 2022, an increase of 8.3% between years.

The increase in revenue per student in the three months ended March 31, 2024 was also positively impacted by the timing of the Spring semester for the ground traditional campus.

The Spring semester started one day earlier in 2024 than in 2023, which had the effect of shifting $2.1 million in service revenue from the second quarter of 2024 to the first quarter of 2024 in comparison to the prior year.

The additional day for leap year in 2024 added additional service revenue of $1.5 million as compared to the prior year.

Partner enrollments totaled 120,788 at March 31, 2024 as compared to 112,588 at March 31, 2023.

University partner enrollments at our off-campus classroom and laboratory sites were 4,486, an increase of 4.0% over enrollments at March 31, 2023, which includes 650 and 360 GCU students at March 31, 2024 and 2023, respectively.

Although partner enrollments at our off-campus classroom and laboratory sites returned to year over year growth this quarter, some existing partners continue to experience reduced incoming cohort sizes which has slowed the growth.

We believe the growth in the number of ABSN students is being negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions.

The majority of those partners that have made the adjustment to admit students without a completed bachelor’s degree had new enrollment growth on a year over year basis in the Spring 2023 semester.

We opened five sites in the year ended December 31, 2023 and two sites in the three months ended March 31, 2024 increasing the total number of these sites to 42 at March 31, 2024, which has also positively impacted the enrollment growth.

Enrollments for GCU ground students were 22,965 at March 31, 2024 up from 22,568 at March 31, 2023.

GCU online enrollments were 93,987 at March 31, 2024, up from 86,065 at March 31, 2023, an increase of 9.2% between years.

Technology and academic services .

Our technology and academic services expenses for the three months ended September 30, 2023 were $39.2 million, an increase of $1.6 million, or 4.1%, as compared to technology and academic services expenses of $37.6 million for the three months ended September 30, 2022.

This increase was primarily due to increases in occupancy and depreciation and in other technology and academic costs of $1.2 million and $1.0 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation and benefit costs of $0.6 million.

Our technology and academic services expenses for the three months ended March 31, 2024 were $39.1 million, an increase of $1.6 million, or 4.3%, as compared to technology and academic

services expenses of $37.5 million for the three months ended March 31, 2023.

This increase was primarily due to increases in occupancy and depreciation and in other technology and academic costs of $1.3 million and $1.1 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation of $0.8 million.

The increased occupancy and depreciation and other technology and academic costs were primarily due to the costs associated with the increased number of off-campus classroom and laboratory sites to support our 23 university partners, and their increased enrollment growth.

The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to the decline in some of our other partners’ enrollments and changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs partially offset by increased headcount to support our 23 university partners, and their increased enrollment growth, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites year over year.

Our technology and academic services expenses as a percentage of revenue decreased by 0.3% to 17.7% for the three months ended September 30, 2023, from 18.0% for the three months ended September 30, 2022.

Our technology and academic services expenses as a percentage of revenue decreased by 0.8% to 14.2% for the three months ended March 31, 2024, from 15.0% for the three months ended March 31, 2023.

This decrease was primarily due to the decreased faculty reimbursements between years.

We anticipate that technology and academic services expenses will increase in the future as we open more off-campus classroom and laboratory sites and our other partners’ enrollments grow.

Counseling services and support .

Our counseling services and support expenses for the three months ended September 30, 2023 were $73.8 million, an increase of $6.6 million, or 9.8%, as compared to counseling services and support expenses of $67.2 million for the three months ended September 30, 2022.

This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and in other counseling services and support expenses of $6.4 million and $0.2 million, respectively.

The increases in employee compensation and related expenses were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites open year over year.

The increase in other counseling services and support expenses is primarily the result of increased travel costs for our 25 university partners.

Our counseling services and support expenses as a percentage of revenue increased by 1.1% to 33.3% for the three months ended September 30, 2023, from 32.2% for the three months ended September 30, 2022 primarily due to the significant increase year over year in headcount.

We anticipate that counseling services and support expense will continue to be higher in 2023 than in 2022 as travel expenses will continue to be higher than in the prior year and we continue to grow our employee base and their compensation to meet our university partners’ growth expectations and retain our employees.

Marketing and communication .

Our marketing and communication expenses for the three months ended September 30, 2023 were $53.1 million, an increase of $2.4 million, or 4.8%, as compared to marketing and communication expenses of $50.7 million for the three months ended September 30, 2022.

This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $2.2 million, increased employee compensation, including share-based compensation of $0.1 million, and an increase in other marketing and communication expenses of $0.1 million.

Our marketing and communication expenses as a percentage of revenue decreased by 0.4% to 23.9% for

the three months ended September 30, 2023, from 24.3% for the three months ended September 30, 2022, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base, partially offset by the number of university partners and their growth expectations and increased off-campus classroom and laboratory sites opened and sites planned to open in the next 12 months.

General and administrative .

Our general and administrative expenses for the three months ended September 30, 2023 were $12.2 million, a decrease of $3.4 million, or 21.8%, as compared to general and administrative expenses of $15.6 million for the three months ended September 30, 2022.

This decrease was primarily attributable to a decrease in the contribution made in lieu of state income taxes, decreased professional fees, decreased other administrative expenses, and decreased employee compensation, including share-based expenses and benefits of $1.5 million, $1.2 million, $0.5 million and $0.2 million respectively.

We decreased our contribution made in lieu of state income taxes from $5.0 million in 2022 to $3.5 million in 2023.

Our professional fees declined between years primarily due to lower legal costs as we met our insurance retention cap on a litigation matter.

Our general and administrative expenses as a percentage of revenue decreased by 2.0% to 5.5% for the three months ended September 30, 2023, from 7.5% for the three months ended September 30, 2022.

Amortization of intangible assets .

Amortization of intangible assets for the three months ended September 30, 2023 and 2022 were $2.1 million for both periods.

As a result of the acquisition of our wholly owned subsidiary, Orbis Education, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

Investment interest and other .

Investment interest and other for the three months ended September 30, 2023 was $2.7 million, as compared to investment interest and other for the three months ended September 30, 2022 of $0.7 million due to higher investment balances and higher returns on those balances.

Income tax expense .

Income tax expense for the three months ended September 30, 2023 was $8.5 million, an increase of $2.3 million, or 36.6%, as compared to income tax expense of $6.2 million for the three months ended September 30, 2022.

Our effective tax rate was 19.3% during the third quarter of 2023 compared to 17.2% during the third quarter of 2022.

The increase in our effective tax rate between periods was primarily driven by changes in the magnitude of contributions in lieu of state income taxes as compared to prior periods.

Our net income for the three months ended September 30, 2023 was $35.7 million, an increase of $5.7 million, or 19.1%, as compared to $30.0 million for the three months ended September 30, 2022, due to the factors discussed above.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Service revenue .

Our service revenue for the nine months ended September 30, 2023 was $682.6 million, an increase of $30.0 million, or 4.6%, as compared to service revenue of $652.6 million for the nine months ended September 30, 2022.

The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 118,227 at September 30, 2023, an increase of 6.6% over enrollments at September 30, 2022.

Partner enrollments totaled 123,165 at September 30, 2023 as compared to 116,202 at September 30, 2022.

University partner enrollments at our off-campus classroom and laboratory sites were 5,448, a decrease of 4.3% over enrollments at September 30, 2022, which includes 510 and 421 GCU students at September 30, 2023 and 2022, respectively.

Enrollments for GCU ground students were 25,232 at September 30, 2023 up from 25,083 at September 30, 2022.

online enrollments were 92,995 at September 30, 2023, up from 85,845 at September 30, 2022, an increase of 8.3% between years.

Technology and academic services .

Our technology and academic services expenses for the nine months ended September 30, 2023 were $115.6 million, an increase of $3.5 million, or 3.1%, as compared to technology and academic services expenses of $112.1 million for the nine months ended September 30, 2022.

This increase was primarily due to increases in occupancy and depreciation and other technology and academic costs of $3.2 million and $1.5 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation and benefit costs of $1.2 million.

These increases in occupancy and depreciation and other technology and academic costs were primarily due to the costs associated with the increased number of off-campus classroom and laboratory sites.

The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to the decline in some of our other partners’ enrollments and changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs partially offset by increased headcount to support our 25 university partners, and their increased enrollment growth, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites year over year.

Our technology and academic services expenses as a percentage of revenue decreased by 0.3% to 16.9% for the nine months ended September 30, 2023, from 17.2% for the nine months ended September 30, 2022 due primarily to the decreased faculty reimbursements between years.

We anticipate that technology and academic services expenses will increase in the future as we open more off-campus classroom and laboratory sites and as our other partners’ enrollment returns to growth.

We anticipate that technology and academic services expenses as a percentage of revenue will continue to increase in the future as we open more off-site classroom and laboratory sites although these increases might be offset by lower faculty reimbursements if more partners choose to adjust their contracts.

Counseling services and support .

Our counseling services and support expenses for the nine months ended September 30, 2023 were $219.6 million, an increase of $18.8 million, or 9.4%, as compared to counseling services and support expenses of $200.8 million for the nine months ended September 30, 2022.

Our counseling services and support expenses for the three months ended March 31, 2024 were $82.9 million, an increase of $9.6 million, or 13.0%, as compared to counseling services and support expenses of $73.3 million for the three months ended March 31, 2023.

This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefits, in other counseling services and support expenses and in occupancy and depreciation costs of $7.2 million, $1.8 million and $0.6 million, respectively.

The increase in other counseling services and support expenses is primarily the result of increased travel costs for our 23 university partners.

Our counseling services and support expenses as a percentage of revenue increased by 1.4% to 32.2% for the nine months ended September 30, 2023, from 30.8% for the nine months ended September 30, 2022 primarily due to the significant increase year over year in headcount and travel costs.

The increase in occupancy and depreciation is primarily related to higher depreciation expense associated with our continued enhancements to IT infrastructure and internal-use software development.

Our counseling services and support expenses as a percentage of revenue increased by 0.9% to 30.2% for the three months ended March 31, 2024, from 29.3% for the three months ended March 31, 2023 primarily due to the significant increase year over year in travel expenses and headcount.

We anticipate that counseling services and support expense will continue to increase in the future as we continue to invest to meet our partners’ needs but are hopeful that we will see leverage in counseling services and support expenses as a percentage of revenue in 2024.

Marketing and communication .

Our marketing and communication expenses for the nine months ended September 30, 2023 were $156.8 million, an increase of $5.6 million, or 3.7%, as compared to marketing and communication expenses of $151.2 million for the nine months ended September 30, 2022.

This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $5.4 million and increased employee compensation, including share-based compensation of $0.6 million, partially offset by a decrease in other marketing and communication expenses of $0.4 million.

Our marketing and communication expenses as a percentage of revenue decreased by 0.2% to 23.0% for the nine months ended September 30, 2023, from 23.2% for the nine months ended September 30, 2022, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base, partially offset by the number of university partners and their growth expectations and increased off-campus classroom and laboratory sites opened and sites planned to open in the next 12 months.

Our marketing and communication expenses for the three months ended March 31, 2024 were $55.4 million, an increase of $2.5 million, or 4.6%, as compared to marketing and communication expenses of $52.9 million for the three months ended March 31, 2023.

This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $2.1 million, increased employee compensation, including share-based compensation and benefits of $0.2 million, an increase in occupancy and depreciation of $0.1 million and an increase in other marketing and communication expenses of $0.1 million.

Our marketing and communication expenses as a percentage of revenue decreased by 0.9% to 20.2% for the three months ended March 31, 2024, from 21.1% for the three months ended March 31, 2023, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base.

Although we will continue to invest heavily in this area, we are hopeful that we will see leverage in marketing and communication costs in 2024.

General and administrative .

Our general and administrative expenses for the nine months ended September 30, 2023 were $32.8 million, a decrease of $2.5 million, or 7.0%, as compared to general and administrative expenses of $35.3 million for the nine months ended September 30, 2022.

This decrease was primarily attributable to a decrease in the contribution made in lieu of state income taxes, decreased professional fees and a decrease in employee compensation, including share-based compensation and benefit expenses of $1.5 million, $0.7 million and $0.5 million, respectively, partially offset by a increase in other administrative expenses of $0.2 million.

We decreased our

contribution made in lieu of state income taxes from $5.0 million in 2022 to $3.5 million in 2023.

Our professional fees declined between years primarily due to lower legal costs as we met our insurance retention cap on a litigation matter.

Our general and administrative expenses as a percentage of revenue decreased by 0.6% to 4.8% for the nine months ended September 30, 2023, from 5.4% for the nine months ended September 30, 2022.

Our general and administrative expenses for the three months ended March 31, 2024 were $10.7 million, an increase of $0.9 million, or 9.6%, as compared to general and administrative expenses of $9.8 million for the three months ended March 31, 2023.

This increase was primarily attributable to an increase in professional fees and an increase in employee compensation, including share-based compensation and benefits of $0.8 million and $0.2 million respectively.

These increases were partially offset by a decrease in other administrative expenses of $0.1 million.

Our professional fees increased between years primarily due to higher legal costs.

Our general and administrative expenses as a percentage of revenue stayed flat at 3.9% for both of the three months ended March 31, 2024 and 2023 due to our ability to leverage our general and administrative expenses across an increasing revenue base.

General and administrative expenses as a percentage of revenue could increase in 2024 due to higher expected legal costs.

Amortization of intangible assets .

Amortization of intangible assets for the nine months ended September 30, 2023 and 2022 were $6.3 million for both periods.

Amortization of intangible assets for the three months ended March 31, 2024 and 2023 were $2.1 million for both periods.

Investment interest and other .

Investment interest and other for the nine months ended September 30, 2023 was $7.5 million, as compared to investment interest and other for the nine months ended September 30, 2022 of $1.3 million due to higher investment balances and higher returns on those balances.

Investment interest and other for the three months ended March 31, 2024 was $3.7 million, as compared to investment interest and other for the three months ended March 31, 2023 of $2.2 million due to higher investment balances and higher returns on those balances.

Income tax expense .

Income tax expense for the nine months ended September 30, 2023 was $34.6 million, an increase of $0.1 million, or 0.5%, as compared to income tax expense of $34.5 million for the nine months ended September 30, 2022.

Our effective tax rate was 21.8% during the nine months ended September 30, 2023 compared to 23.3% during the nine months ended September 30, 2022.

The slight decrease in our effective tax rate between periods is attributable to changes in the magnitude of contributions in lieu of state income taxes as well as a mix of other discrete tax items recorded in the respective periods.

Our net income for the nine months ended September 30, 2023 was $124.3 million, an increase of $10.7 million, or 9.4%, as compared to $113.6 million for the nine months ended September 30, 2022, due to the factors discussed above.

Income tax expense for the three months ended March 31, 2024 was $20.2 million, an increase of $3.2 million, or 18.5%, as compared to income tax expense of $17.0 million for the three months ended March 31, 2023.

Our effective tax rate was 22.9% during the first quarter of 2024 compared to 22.3% during the first quarter of 2023.

In the first quarter of 2024, the effective tax rate was favorably impacted by excess tax benefits of $1.5 million as compared to $0.9 million in the first quarter of 2023.

The effective tax rate increased year over year due to higher taxable income and in the first quarter of 2023 the effective tax rate was favorably impacted by state income tax refunds.

Our net income for the three months ended March 31, 2024 was $68.0 million, an increase of $8.4 million, or 14.2%, as compared to $59.6 million for the three months ended March 31, 2023, due to the factors discussed above.

Our net revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in our university partners’ enrollment.

8 unchanged sentences

Liquidity and Capital Resources

As of September 30,

As of March 31,

As of December 31,

1 unchanged sentence

Cash, cash equivalents and investments

Our liquidity position, as measured by cash and cash equivalents and investments decreased by $27.3 million between December 31, 2022 and September 30, 2023, which was largely attributable to share repurchases, investment

purchases, net of proceeds and capital expenditures exceeding cash flows from operations during the nine months ended September 30, 2023.

Based on our current level of operations and anticipated growth, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations, planned capital expenditures, and working capital requirements for at least the next 24 months.

Our liquidity position, as measured by cash and cash equivalents and investments increased by $46.2 million between December 31, 2023 and March 31, 2024, which was largely attributable to cash flows from operations during the three months ended March 31, 2024 exceeding share repurchases, changes in our investment balances and capital expenditures.

Based on our current level of operations and anticipated growth, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents and investments, will provide adequate funds for ongoing operations, planned capital expenditures, and working capital requirements for at least the next 24 months.

Cash Flows from Operating Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Net cash provided by operating activities

The increase in cash generated from operating activities between the nine months ended September 30, 2022 and the nine months ended September 30, 2023 was primarily due to increased income and changes in working capital balances, primarily accounts payable, accrued liabilities and income tax payables.

Accounts payable increased between December 31, 2022 and September 30, 2023 by $9.7 million more than it did between December 31, 2021 and September 30, 2022 due to the timing of check runs during those periods and accrued liabilities decreased by $3.0 million more than it did between December 31, 2021 and September 30, 2022 due to the timing of payroll disbursements.

Income tax receivables/payables decreased by $4.9 million more than it did between December 31, 2021 and September 30, 2022 as the Company made a larger estimated tax payment in 2023 compared to 2022.

The increase in cash generated from operating activities between the three months ended March 31, 2023 and the three months ended March 31, 2024 was primarily due to increased income and changes in working capital balances, primarily accounts payable, accrued liabilities and accounts receivable.

Accounts payable increased between December 31, 2023 and March 31, 2024 by $10.0 million more than it did between December 31, 2022 and March 31, 2023 due to the timing of check runs during those periods and accrued liabilities decreased by $6.2 million less than it did between December 31, 2022 and March 31, 2023 due to the timing of payroll disbursements.

Accounts receivable increased by $7.7 million more than it did between December 31, 2022 and March 31, 2023 due primarily to higher revenues between periods.

We define working capital as the assets and liabilities, other than cash, generated through the Company’s primary operating activities.

1 unchanged sentence

Cash Flows from Investing Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Net cash used in investing activities

Investing activities consumed $70.4 million of cash in the nine months ended September 30, 2023 compared to $95.3 million in the nine months ended September 30, 2022.

In the first nine months of 2023 and 2022 cash used in investing activities consisted of the purchase of available-for-sale securities, net of proceeds from the sale of investments of $35.5 million and $68.7 million, respectively.

In the first nine months of 2023 and 2022 cash used in investing activities also included capital expenditures totaling $34.2 million and $26.3 million, respectively.

Investing activities consumed $5.3 million of cash in the three months ended March 31, 2024 compared to $37.1 million in the three months ended March 31, 2023.

In the first three months of 2024 and 2023 cash used in investing activities included capital expenditures totaling $9.0 million and $8.6 million, respectively.

Capital expenditures for both periods primarily consisted of leasehold improvements and equipment for new off-campus classroom and laboratory sites, as well as purchases of computer equipment, internal use software projects and furniture and equipment to support our increasing employee headcount.

The Company incurs upfront expenses and capital expenditures prior to an off-campus classroom and laboratory site being opened.

The Company intends to continue to spend approximately $30.0 million to $35.0 million per year for capital expenditures although it is likely that we will spend $40.0 million in 2023 as we spent slightly more than we expected on internal use software this year.

The Company intends to continue to spend approximately $30.0 million to $40.0 million per year for capital expenditures.

Cash used in investing activities also includes net investment activity.

In the first three months of 2024, proceeds, net of purchases of available-for sale securities were $3.8 million, while in the first three months of 2023 the purchase of available-for-sale securities, net of proceeds from the sale of investments of $28.3 million.

Cash Flows from Financing Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Net cash used in financing activities

Financing activities consumed $120.3 million of cash in the nine months ended September 30, 2023 compared to $576.2 million in the nine months ended September 30, 2022.

During the nine months ended September 30, 2023 and 2022, $114.0 million and $571.6 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program.

Financing activities consumed $30.0 million of cash in the three months ended March 31, 2024 compared to $41.2 million in the three months ended March 31, 2023.

During the three months ended March 31, 2024 and 2023, $22.6 million and $34.9 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program.

In 2024 and 2023, $7.4 million and $6.3 million, respectively, of cash was utilized to purchase common shares withheld in lieu of income taxes resulting from the vesting of restricted share awards.

A significant amount of the share repurchases in 2022 were from the proceeds received on the repayment of the Secured Note.

The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares but share repurchases in future years will be less than in 2022.

The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares.

Share Repurchase Program

On October 25, 2023, our Board of Directors increased the authorization under its existing stock repurchase program by $200.0 million, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,045.0 million.

The Board of Directors has authorized under its existing stock repurchase program, an aggregate authorization for share repurchases since the initiation of the program of $2,045.0 million.

The current expiration date on the repurchase authorization by our Board of Directors is March 1, 2025.

2 unchanged sentences

The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.

We repurchased 1,034,649 shares of common stock in the nine months ended September 30, 2023.

At September 30, 2023, there remains $81.9 million available under our share repurchase authorization (which authorization was increased to $281.9 million in October 2023) .

We repurchased 171,670 shares of common stock in the three months ended March 31, 2024.

At March 31, 2024, there remains $242.5 million available under our share repurchase authorization .

Off-Balance Sheet Arrangements

1 unchanged sentence

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 2. Management’s Discussion and Analysis