Grand Canyon Education, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes that appear elsewhere in this report. Forward-Looking Statements This Quarterly Report on Form 10-Q, including Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations , contains certain “forward-looking statements” within the meaning of Section 27A of Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, without limitation, statements regarding: proposed new programs; statements as to whether regulatory developments or other matters may or may not have a material adverse effect on our financial position, results of operations, or liquidity; statements concerning projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, and future economic performance; and statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, the negative of these expressions, as well as statements in future tense, identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. 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: ● 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, and the results of related legal and regulatory actions that arise from such failures; ● 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 United States Department of Education applicable to us directly or indirectly through our university partners; 20 Table of Contents ● competition from other education service companies in our geographic region and market sector, including competition for students, qualified executives and other personnel; ● our expected tax payments and tax rate; ● our ability to hire and train new, and develop and train existing employees; ● the pace of growth of our university partners’ enrollment and its effect on the pace of our own growth; ● fluctuations in our revenues due to seasonality; ● our ability to, on behalf of our university partners, convert prospective students to enrolled students and to retain active students to graduation; ● our success in updating and expanding the content of existing programs and developing new programs in a cost-effective manner or on a timely basis for our university partners; ● risks associated with the competitive environment for marketing the programs of our university partners; ● failure on our part to keep up with advances in technology that could enhance the experience for our university partners’ students; ● our ability to manage future growth effectively; ● the impact of any natural disasters or public health emergencies; and ● general adverse economic conditions or other developments that affect the job prospects of our university partners’ students. 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. 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. Explanatory Note Grand Canyon Education, Inc. (together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company dedicated to serving colleges and universities. GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale. GCE’s most significant university partner is Grand Canyon University (“GCU”), 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. In the healthcare field, we wo rk in partnership with a number of top universities and healthcare networks, 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 June 30, 2024, GCE provides education services to 22 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 21 Table of Contents 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. Critical Accounting Policies and Use of Estimates Our critical accounting policies are disclosed in the 2023 Form 10-K for the fiscal year ended December 31, 2023. During the six months ended June 30, 2024, there were no significant changes in our critical accounting policies. Results of Operations The following table sets forth certain income statement data as a percentage of revenue for each of the periods indicated. Amortization of intangible assets has been excluded from the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ Six Months Ended ​ ​ ​ June 30, ​ ​ June 30, ​ ​ 2024 2023 2024 2023 Costs and expenses Technology and academic services 18.0 % 18.5 % 16.0 % 16.6 % Counseling services and support 34.3 34.4 32.1 31.6 Marketing and communication 23.3 24.1 21.6 22.5 General and administrative 4.7 5.2 4.3 4.5 ​ Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023 Service revenue . Our service revenue for the three months ended June 30, 2024 was $227.5 million, an increase of $16.9 million, or 8.0%, as compared to service revenue of $210.6 million for the three months ended June 30, 2023. The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 102,676 at June 30, 2024, an increase of 7.0% over enrollments at June 30, 2023, an increase in university partner enrollments at our off-campus classroom and laboratory sites to 4,377 at June 30, 2024, an increase of 12.1% over enrollments at June 30, 2023, which includes 746 and 350 GCU students at June 30, 2024 and 2023, respectively, 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 second 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 June 30, 2024 was lessened somewhat 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. In addition, contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing the partner for certain faculty costs and the termination of one university partner contract at the end of the Spring 2024 semester had the effect of reducing revenue per student. Partner enrollments totaled 106,307 at June 30, 2024 as compared to 99,526 at June 30, 2023. Although partner enrollments at our off-campus classroom and laboratory sites returned to year over year growth in 2024, 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. 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 completed bachelor’s degree to enter their programs. 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 and Summer 2024 semesters. We opened five sites in the year ended December 31, 2023 and four sites in the six months ended June 30, 2024 increasing the total number of these sites to 43 at June 30, 2024, which has also positively impacted the enrollment growth. Enrollments for GCU ground students were 7,397 at June 30, 2024 up from 7,327 at June 30, 2023 primarily due to the increase in ABSN students between years. GCU online enrollments were 95,279 at June 30, 2024, up from 22 Table of Contents 88,645 at June 30, 2023, an increase of 7.5% between years. GCU enrollment declines between March 31 and June 30 of each year as ground traditional enrollment at GCU at June 30 of each year only includes traditional-aged students taking summer school classes, which is a small percentage of GCU’s traditional-aged student body. The Spring semester for GCU’s traditional-aged student body ends near the end of April each year. Technology and academic services . Our technology and academic services expenses for the three months ended June 30, 2024 were $41.0 million, an increase of $2.0 million, or 5.2%, as compared to technology and academic services expenses of $39.0 million for the three months ended June 30, 2023. This increase was primarily due to increases in occupancy and depreciation and in other technology and academic costs of $1.5 million and $1.3 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 22 university partners, and their increased enrollment growth. The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs and the decline in some of our other partners’ enrollments partially offset by increased headcount to support our 22 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 0.5% to 18.0% for the three months ended June 30, 2024, from 18.5% for the three months ended June 30, 2023. This decrease was primarily due to the decreased faculty reimbursements between years. 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 three months ended June 30, 2024 were $78.1 million, an increase of $5.7 million, or 7.9%, as compared to counseling services and support expenses of $72.4 million for the three months ended June 30, 2023. This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation, in occupancy and depreciation costs and in other counseling services and support expenses of $4.4 million, $1.1 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 occupancy and depreciation is primarily related to higher depreciation expense associated with our continued enhancements to IT infrastructure and internal-use software development. The increase in other counseling services and support expenses is primarily the result of increased travel costs in support of servicing our 22 university partners. Our counseling services and support expenses as a percentage of revenue decreased by 0.1% to 34.3% for the three months ended June 30, 2024, from 34.4% for the three months ended June 30, 2023 primarily due our ability to leverage our counseling services and support expenses across an increasing revenue base. 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. Marketing and communication . Our marketing and communication expenses for the three months ended June 30, 2024 were $52.9 million, an increase of $2.1 million, or 4.1%, as compared to marketing and communication expenses of $50.8 million for the three months ended June 30, 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 $1.7 million, increased employee compensation, including share-based compensation 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 0.8% to 23.3% for the three months ended June 30, 2024, from 24.1% for the three months ended June 30, 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 three months ended June 30, 2024 were $10.6 million, a decrease of $0.3 million, or 2.2%, as compared to general and administrative expenses of $10.9 million for the three months ended June 30, 2023. This decrease was primarily attributable to a decrease in professional fees, primarily lower legal costs, and in other administrative expenses, primarily lower travel and charitable 23 Table of Contents contributions of $0.8 million and $0.8 million, respectively. These decreases were partially offset by an increase in employee compensation, including share-based compensation of $1.3 million, which includes $1.1 million in severance costs recorded in the second quarter of 2024 related to an executive that resigned effective June 30, 2024. Our general and administrative expenses as a percentage of revenue decreased by 0.5% to 4.7% for the three months ended June 30, 2024, from 5.2% for the three months ended June 30, 2023, primarily due to our ability to leverage our general and administrative expenses across an increasing revenue base and the lower professional fees partially offset by the severance costs. General and administrative expenses as a percentage of revenue could increase in 2024 if legal costs rise in the second half of the year. Amortization of intangible assets . Amortization of intangible assets for the three months ended June 30, 2024 and 2023 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 June 30, 2024 was $4.1 million, as compared to investment interest and other for the three months ended June 30, 2023 of $2.6 million due to higher investment balances and higher returns on those balances. Income tax expense . Income tax expense for the three months ended June 30, 2024 was $12.0 million, an increase of $2.9 million, or 32.0%, as compared to income tax expense of $9.1 million for the three months ended June 30, 2023. Our effective tax rate was 25.5% during the second quarter of 2024 compared to 23.8% during the second quarter of 2023. The effective tax rate increased year over year due to higher state income taxes. Net income . Our net income for the three months ended June 30, 2024 was $34.9 million, an increase of $5.9 million, or 20.4%, as compared to $29.0 million for the three months ended June 30, 2023, due to the factors discussed above. Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023 Service revenue . Our service revenue for the six months ended June 30, 2024 was $502.1 million, an increase of $41.4 million, or 9.0%, as compared to service revenue of $460.7 million for the six months ended June 30, 2023. The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 102,676 at June 30, 2024, an increase of 7.0% over enrollments at June 30, 2023, an increase in university partner enrollments at our off-campus classroom and laboratory sites to 4,377 at June 30, 2024, an increase of 12.1% over enrollments at June 30, 2023, which includes 746 and 350 GCU students at June 30, 2024 and 2023, respectively, 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 six months ended June 30, 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 additional day for leap year in 2024 added additional service revenue of $1.5 million as compared to the prior year. Contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing the partner for certain faculty costs and the termination of one university partner contract at the end of the Spring 2024 semester had the effect of reducing revenue per student. Partner enrollments totaled 106,307 at June 30, 2024 as compared to 99,526 at June 30, 2023. Although partner enrollments at our off-campus classroom and laboratory sites returned to year over year growth in 2024, 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. 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 completed bachelor’s degree to enter their programs. 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 and Summer 2024 semesters. We opened five sites in the year ended December 31, 2023 and four sites in the six months ended June 30, 2024 increasing the total number of these sites to 43 at June 30, 2024, which has also positively impacted the enrollment 24 Table of Contents growth. Enrollments for GCU ground students were 7,397 at June 30, 2024 up from 7,327 at June 30, 2023. GCU online enrollments were 95,279 at June 30, 2024, up from 88,645 at June 30, 2023, an increase of 7.5% between years. GCU enrollment declines between March 31 and June 30 of each year as ground traditional enrollment at GCU at June 30 of each year only includes traditional-aged students taking summer school classes, which is a small percentage of GCU’s traditional-aged student body. The Spring semester for GCU’s traditional-aged student body ends near the end of April each year. Technology and academic services . Our technology and academic services expenses for the six months ended June 30, 2024 were $80.1 million, an increase of $3.6 million, or 4.8%, as compared to technology and academic services expenses of $76.5 million for the six months ended June 30, 2023. This increase was primarily due to increases in occupancy and depreciation and in other technology and academic costs of $2.8 million and $2.4 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation of $1.6 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 22 university partners, and their increased enrollment growth. The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs and the decline in some of our other partners’ enrollments partially offset by increased headcount to support our 22 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 0.6% to 16.0% for the six months ended June 30, 2024, from 16.6% for the six months ended June 30, 2023. This decrease was primarily due to the decreased faculty reimbursements between years. 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 six months ended June 30, 2024 were $161.0 million, an increase of $15.3 million, or 10.5%, as compared to counseling services and support expenses of $145.7 million for the six months ended June 30, 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 $11.6 million, $2.0 million and $1.7 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 22 university partners. 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 0.5% to 32.1% for the six months ended June 30, 2024, from 31.6% for the six months ended June 30, 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. Marketing and communication . Our marketing and communication expenses for the six months ended June 30, 2024 were $108.2 million, an increase of $4.5 million, or 4.4%, as compared to marketing and communication expenses of $103.7 million for the six months ended June 30, 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 $3.8 million, increased employee compensation, including share-based compensation and benefits of $0.2 million, an increase in occupancy and depreciation of $0.2 million and an increase in other marketing and communication expenses of $0.3 million. Our marketing and communication expenses as a percentage of revenue decreased by 0.9% to 21.6% for the six months ended June 30, 2024, from 22.5% for the six months ended June 30, 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 six months ended June 30, 2024 were $21.4 million, an increase of $0.7 million, or 3.4%, as compared to general and administrative expenses of $20.7 25 Table of Contents million for the six months ended June 30, 2023. This increase was primarily attributable to an increase in employee compensation, including share-based compensation and benefits of $1.6 million, which includes $1.1 million in severance costs recorded for an executive that resigned June 30, 2024. These increases were partially offset by a decrease in other administrative expenses of $0.9 million primarily due to lower travel and timing on charitable contributions. Our general and administrative expenses as a percentage of revenue decreased by 0.2% to 4.3% for the six months ended June 30, 2024, as compared to 4.5% for the six months ended June 30, 2023 due to our ability to leverage our general and administrative expenses across an increasing revenue base partially offset by the severance costs. General and administrative expenses as a percentage of revenue could increase in 2024 if legal costs rise in the second half of 2024. Amortization of intangible assets . Amortization of intangible assets for the six months ended June 30, 2024 and 2023 were $4.2 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 six months ended June 30, 2024 was $7.8 million, as compared to investment interest and other for the six months ended June 30, 2023 of $4.7 million due to higher investment balances and higher returns on those balances. Income tax expense . Income tax expense for the six months ended June 30, 2024 was $32.1 million, an increase of $6.0 million, or 23.2%, as compared to income tax expense of $26.1 million for the six months ended June 30, 2023. Our effective tax rate was 23.8% during the six months ended June 30, 2024 compared to 22.8% during the six months ended June 30, 2023. In the six months ended June 30, 2024, the effective tax rate was favorably impacted by excess tax benefits of $1.5 million as compared to $0.9 million in the six months ended June 30, 2023. The effective tax rate increased year over year due to higher state income taxes. Net income . Our net income for the six months ended June 30, 2024 was $102.9 million, an increase of $14.4 million, or 16.2%, as compared to $88.5 million for the six months ended June 30, 2023, due to the factors discussed above. Seasonality 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. Our partners’ enrollment varies as a result of new enrollments, graduations, and student attrition. Revenues in the summer months (May through August) are lower primarily due to the majority of GCU’s traditional ground university students not attending courses during the summer months, which affects our results for our second and third fiscal quarters. Since a significant amount of our costs are fixed, the lower revenue resulting from the decreased summer enrollment has historically contributed to lower operating margins during those periods. Partially offsetting this summer effect has been the sequential quarterly increase in enrollments that has occurred as a result of the traditional fall school start. This increase in enrollments also has occurred in the first quarter, corresponding to calendar year matriculation. Thus, we experience higher net revenue in the fourth quarter due to its overlap with the semester encompassing the traditional fall school start and in the first quarter due to its overlap with the first semester of the calendar year. A portion of our expenses do not vary proportionately with these fluctuations in service revenue, resulting in higher operating income in the first and fourth quarters relative to other quarters. We expect quarterly fluctuation in operating results to continue as a result of these seasonal patterns. Liquidity and Capital Resources ​ ​ ​ ​ ​ ​ ​ ​ ​ As of June 30, ​ As of December 31, (In thousands) ​ 2024 ​ 2023 Cash, cash equivalents and investments ​ $ 341,815 ​ $ 244,506 Overview Our liquidity position, as measured by cash and cash equivalents and investments increased by $97.3 million between December 31, 2023 and June 30, 2024, which was largely attributable to cash flows from operations during the six months ended June 30, 2024 exceeding share repurchases, changes in our investment balances and capital expenditures. 26 Table of Contents 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, (In thousands) ​ 2024 ​ 2023 Net cash provided by operating activities ​ $ 183,526 ​ $ 157,128 The increase in cash generated from operating activities between the six months ended June 30, 2023 and the six months ended June 30, 2024 was primarily due to increased income and changes in working capital balances, primarily accrued liabilities, income taxes receivable/payable and accounts receivable. Accrued liabilities increased between December 31, 2023 and June 30, 2024 by $8.8 million more than it did between December 31, 2022 and June 30, 2023 due to the timing of payroll disbursements. Income taxes receivable/payable increased between December 31, 2023 and June 30, 2024 by $4.0 million more than it did between December 31, 2022 and June 30, 2023 due to timing of income tax payments. These increases were partially offset by accounts receivable decreasing by $3.4 million more than it did between December 31, 2022 and June 30, 2023 due primarily to timing of the collections of our other university partners. We define working capital as the assets and liabilities, other than cash, generated through the Company’s primary operating activities. Changes in these balances are included in the changes in assets and liabilities presented in the consolidated statement of cash flows. Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, (In thousands) ​ 2024 ​ 2023 Net cash used in investing activities ​ $ (19,989) ​ $ (48,057) Investing activities consumed $20.0 million of cash in the six months ended June 30, 2024 compared to $48.1 million in the six months ended June 30, 2023. In the first six months of 2024 and 2023 cash used in investing activities included capital expenditures totaling $17.9 million and $17.6 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 $40.0 million per year for capital expenditures. Cash used in investing activities also includes net investment activity. In the six months ended June 30, 2024 and 2023, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $1.9 million and $30.0 million, respectively. Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, (In thousands) ​ 2024 ​ 2023 Net cash used in financing activities ​ $ (68,695) ​ $ (86,555) Financing activities consumed $68.7 million of cash in the six months ended June 30, 2024 compared to $86.6 million in the six months ended June 30, 2023. During the six months ended June 30, 2024 and 2023, $61.3 million and $80.3 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. The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares. Share Repurchase Program The Board of Directors has authorized share repurchases of up to $2,045,000 since the initiation of the Company’s stock repurchase program. The expiration date on the current repurchase authorization by our Board of 27 Table of Contents Directors is March 1, 2025. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time. Under our share repurchase authorization, we may purchase shares in the open market or in privately negotiated transactions, pursuant to the applicable SEC rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant. We repurchased 452,684 shares of common stock in the six months ended June 30, 2024. At June 30, 2024, there remains $203.8 million available under our share repurchase authorization . Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.