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What changed in Grand Canyon Education, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Grand Canyon Education, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+360 added−410 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-13)

Top changes in Grand Canyon Education, Inc.'s 2024 10-K

360 paragraphs added · 410 removed · 301 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

107 edited+15 added−72 removed136 unchanged
Biggest changeIn its program participation agreement with ED, each higher education institution agrees that it will not “provide any commission, bonus, or other incentive payment based in any part, directly or indirectly, upon success in securing enrollments or the award of financial aid, to any person or entity who is engaged in any student recruitment or admission activity, or in making decisions regarding the award of Title IV, HEA program funds.” Pursuant to this rule, we are prohibited from offering our covered employees, who are those employees involved with or responsible for recruiting or admissions activities, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.
Biggest changeSince we are involved in recruiting and admission activities on behalf of our university partners, under current regulations, we are prohibited from offering our covered employees, who are those employees involved with or responsible for recruiting or admissions activities, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.
In addition, they must comply with the requirements of 34 C.F.R. § 668.25 , which among other things, requires third-party servicers, in their contracts with institutions, to be contractually obligated to, among other things: o Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV, HEA program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program; o Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV, HEA program or an applicant for Title IV, HEA program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application; and o Be jointly and severally liable with the institution to the Secretary for any violation by the servicer of any statutory provision of or applicable to Title IV of the HEA, any regulatory provision prescribed under that statutory authority, and any applicable special arrangement, agreement, or limitation entered into under the authority of statutes applicable to Title IV of the HEA.
In addition, they must comply with the requirements of 34 C.F.R. § 668.25 , which among other things, requires third-party servicers, in their contracts with institutions, to be contractually obligated to, among other things: o Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program; o Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV program or an applicant for Title IV program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application; and o Be jointly and severally liable with the institution to the Secretary for any violation by the servicer of any statutory provision of or applicable to Title IV of the HEA, any regulatory provision prescribed under that statutory authority, and any applicable special arrangement, agreement, or limitation entered into under the authority of statutes applicable to Title IV of the HEA.
Thus, the implementation of the new gainful employment regulations could require GCU to eliminate or modify these educational programs, could result in the loss Title IV Program funds for the affected programs, and could have a significant impact on the rate at which students enroll in these programs.
Thus, the implementation of the new gainful employment regulations could require GCU to eliminate or modify these educational programs, could result in the loss of Title IV program funds for the affected programs, and could have a significant impact on the rate at which students enroll in these programs.
ED has changed its regulations, and may make other changes in the future, in a manner which could require us to incur additional costs in connection with providing the services that we provide our partners affect their ability to remain eligible to participate in the Title IV programs, impose restrictions on their participation in the Title IV programs, affect the rate at which students enroll in our partners’ programs, or otherwise have a significant impact on our business and results of operations.
ED has changed its regulations, and may make other changes in the future, in a manner which could require us to incur additional costs in connection with providing the services that we provide our university partners affect their ability to remain eligible to participate in the Title IV programs, impose restrictions on their participation in the Title IV programs, affect the rate at which students enroll in our partners’ programs, or otherwise have a significant impact on our business and results of operations.
Other legislation has been introduced in both chambers of Congress that seeks to further modify the 90/10 Rule, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue), or to eliminate the 90/10 Rule. We cannot predict whether or how legislative or regulatory changes will affect the 90/10 Rule. Student loan defaults .
Legislation has been introduced in both chambers of Congress that seeks to further modify the 90/10 Rule, including proposals to change the ratio requirement to 85/15 (federal to nonfederal revenue), or to eliminate the 90/10 Rule. We cannot predict whether or how legislative or regulatory changes will affect the 90/10 Rule. Student loan defaults .
For example, GCU, our most significant university partner, is authorized to offer programs by the Arizona State Board for Private Postsecondary Education, the regulatory agency governing private post-secondary educational institutions in the State of Arizona, where it is located. This authorization is very important to our university partners and, as a result, to our business.
For example, GCU, our most significant university partner, is authorized to offer programs by the Arizona State Board for Private Postsecondary Education, the regulatory agency governing private post-secondary educational institutions in the State of Arizona, where it is located. State authorization is very important to our university partners and, as a result, to our business.
To meet the administrative capability standards, an institution must, among other things: ● comply with all applicable Title IV program requirements; ● have an adequate number of qualified personnel to administer the Title IV programs; ● have acceptable standards for measuring the satisfactory academic progress of its students; 21 Table of Contents ● not have student loan cohort default rates above specified levels; ● have various procedures in place for awarding, disbursing and safeguarding Title IV funds and for maintaining required records; ● administer the Title IV programs with adequate checks and balances in its system of internal controls; ● not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension; ● provide financial aid counseling to its students; ● refer to ED’s Office of Inspector General any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving the Title IV programs; ● submit all required reports and consolidated financial statements in a timely manner; and ● not otherwise appear to lack administrative capability.
To meet the administrative capability standards, an institution must, among other things: ● comply with all applicable Title IV program requirements; ● have an adequate number of qualified personnel to administer the Title IV programs; ● have acceptable standards for measuring the satisfactory academic progress of its students; ● not have student loan cohort default rates above specified levels; ● have various procedures in place for awarding, disbursing and safeguarding Title IV funds and for maintaining required records; ● administer the Title IV programs with adequate checks and balances in its system of internal controls; ● not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension; ● provide financial aid counseling to its students; ● refer to ED’s Office of Inspector General any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving the Title IV programs; ● submit all required reports and consolidated financial statements in a timely manner; and ● not otherwise appear to lack administrative capability.
Our employees take advantage of these opportunities and share our commitment to and enthusiasm for community service projects, as well as charitable organizations throughout the Phoenix area. Through these activities, our employees have the opportunity to volunteer and provide servant leadership that benefits the surrounding neighborhoods and West Phoenix community. Our Commitment to Diversity.
Our employees take advantage of these opportunities and share our commitment to and enthusiasm for community service projects, as well as charitable organizations throughout the Phoenix area. Through these activities, our employees have the opportunity to volunteer and provide servant leadership that benefits the surrounding neighborhoods and West Phoenix community.
Also on October 6, 2021, in an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued notice to the 70 largest for-profit schools based on enrollment and revenues.
Also in October 2021, in an effort to establish actual knowledge and create a pathway for penalties in the event of post-notice acts or practices, the FTC issued notice to the 70 largest for-profit schools based on enrollment and revenues.
However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV 22 Table of Contents program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and comply with or accept other limitations on the ability to increase the number of programs it offers or the number of students it enrolls, any of which sanctions on our university partners could also adversely affect our business.
However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and comply with or accept other limitations on the ability to increase the number of programs it offers or the number of students it enrolls, any of which sanctions on our university partners could also adversely affect our business.
However, on November 6, 2019, in connection with its approval of the Transaction without conditions, ED informed GCU that GCU does not satisfy ED’s definition of a non-profit entity and, as a result, that ED will continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.
However, in November 2019, in connection with its approval of the Transaction without conditions, ED informed GCU that GCU does not satisfy ED’s definition of a non-profit entity and, as a result, that ED will continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.
Example 2-B in the DCL is described as a “possible business model” developed “with the statutory mandate in mind.” Example 2-B describes the following as a possible business model: “A third-party that is not affiliated with the institution it serves and is not affiliated with any other institution that provides educational services, provides bundled services to the institution including marketing, enrollment application assistance, recruitment services, course support for online delivery of courses, the provision of technology, placement services for internships, and student career counseling.
Example 2-B in the DCL is described as a “possible business model” developed “with the statutory mandate in mind.” Example 2-B describes the following as a possible business model: “A third-party that is not affiliated with the institution it serves and is not affiliated with any other institution that provides educational services, provides bundled services to the institution including marketing, enrollment application assistance, recruitment services, course support for online delivery of courses, the provision of 21 Table of Contents technology, placement services for internships, and student career counseling.
Nonetheless, if our university partners are determined to have violated this regulation there could be significant sanctions imposed, whether related to the recoupment of any loans extinguished by the Department, the imposition of letters of credit, or other sanctions under the financial responsibility or administrative capability regulations (among others).
Nonetheless, if our university partners are determined to have violated this regulation there could be significant sanctions imposed, whether related to the recoupment of any loans extinguished by ED, the imposition of letters of credit, or other sanctions under the financial responsibility or administrative capability regulations (among others).
The Masters of Counseling programs that are in jeopardy of failing are long duration programs as required by the programmatic accreditation standards and the Title IV regulations allow graduate students to borrow substantially more than is required to pay tuition. Accordingly, the debt levels for these programs are higher than the university’s average.
The Master’s of Counseling programs that are in jeopardy of failing are long duration programs as required by the programmatic accreditation standards and the Title IV regulations allow graduate students to borrow substantially more than is required to pay tuition. Accordingly, the debt levels for these programs are higher than the university’s average.
Finally, other 14 Table of Contents industry providers affiliate with university partners to offer massive open online courses, which are aimed at unlimited participation and open access via the web at little or no cost to the student. The education services market is changing and expanding.
Finally, other industry providers affiliate with university partners to offer massive open online courses, which are aimed at unlimited participation and open access via the web at little or no cost to the student. 13 Table of Contents The education services market is changing and expanding.
For example, some states have considered new requirements that would dictate what information GCE must convey to students and prospective students and impose reporting requirements related to the nature of our services. To the extent such requirements were ultimately enacted into law, they could significantly affect our business.
For example, some states have considered new requirements that would dictate what information we must convey to students and prospective students and impose reporting requirements related to the nature of our services. To the extent such requirements were ultimately enacted into law, they could significantly affect our business.
Note, the borrower defense to repayment regulations discussed herein were and are extensive and this does not attempt to discuss all the facets of any of the versions of these regulations. We cannot determine what effect, if any, these regulations may have on out university partners or on GCE. Compliance reviews.
Note, the borrower defense to repayment regulations discussed herein were and are extensive and this does not attempt to discuss all the facets of any of the versions of these regulations. We cannot determine what effect, if any, these regulations may have on out university partners or on us. Compliance reviews.
While we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs, regulatory matters that materially affect GCU and our other university partners will, necessarily, have a material impact on us.
Although we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs, regulatory matters that materially affect GCU and our other university partners will, necessarily, have a material impact on us.
GCU, because it is currently certified to participate in the Title IV programs on a provisional basis, is required to obtain ED approval for new programs, which requirement could impede GCU’s ability to introduce new programs and slow its growth. 31 Table of Contents
GCU, because it is currently certified to participate in the Title IV programs on a provisional basis, is required to obtain ED approval for new programs, which requirement could impede GCU’s ability to introduce new programs and slow its growth. 25 Table of Contents
We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (hereafter, the SEC).
We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
In addition to having an acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations, including required refunds to students and any Title IV liabilities and debts, be current in its debt payments, and not receive an adverse, qualified, or disclaimed opinion by its accountants in its audited consolidated financial statements.
In addition to having an 19 Table of Contents acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations, including required refunds to students and any Title IV liabilities and debts, be current in its debt payments, and not receive an adverse, qualified, or disclaimed opinion by its accountants in its audited consolidated financial statements.
Although it is currently licensed, authorized, in-process, or exempt in all non-SARA jurisdictions in which it operates, if it fails to comply with state licensing or authorization requirements for a state, or fails to obtain licenses or authorizations when required, it could lose its state license or authorization by that state or be subject to other sanctions, including restrictions on our activities in, and fines and penalties imposed by, that state, as well as fines, penalties, and sanctions imposed by ED.
Although it is currently licensed, authorized, in-process, or exempt in all non-SARA jurisdictions in which it operates, if GCU fails to comply with state licensing or authorization requirements for a non-SARA jurisdiction, or fails to obtain licenses or authorizations when required, it could lose its license or authorization by that jurisdiction or be subject to other sanctions, including restrictions on its activities in, and fines and penalties imposed by, that jurisdiction, as well as fines, penalties, and sanctions imposed by ED.
The contents of these websites are not incorporated into this filing and our references to the URLs for these websites are intended to be inactive textual references only. ​ 15 Table of Contents REGULATION OF OUR EDUCATION SERVICES BUSINESS Prior to July 1, 2018, GCE, owned and operated GCU.
The contents of these websites are not incorporated into this filing and our references to the URLs for these websites are intended to be inactive textual references only. ​ 14 Table of Contents REGULATION OF OUR EDUCATION SERVICES BUSINESS Prior to July 1, 2018, GCE, owned and operated GCU.
Institutional accreditation by a recognized accreditation agency is one of the prerequisites for an institution of higher education to be eligible to disburse Title IV aid to students. In addition, GCU holds a number of programmatic accreditations related to the conduct of specific programs of the college.
Institutional accreditation by a recognized accreditation agency is one of the prerequisites for an institution of higher education to be eligible to disburse Title IV aid to students. In addition, GCU holds a number of programmatic accreditations related to the conduct of specific programs of the university.
Despite our best efforts, we may face complaints from students and prospective students of our university partners over statements made by us and our agents throughout the conduct of our services which would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.
Despite our best efforts, we or our university partners may face complaints from our university partners’ students and prospective students over statements made by us and our agents throughout the conduct of our services that would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.
Upon receipt of this determination, GCU and GCE entered into ongoing discussions and negotiations that were then provided by GCU to ED regarding proposed changes to the services agreement between GCU and GCE and providing ED, upon request, with an updated transfer pricing study demonstrating that the revenue sharing arrangement reflected in the services agreement reflected fair market value for the services we provide.
Upon receipt of this determination, GCU and GCE entered into ongoing discussions 24 Table of Contents and negotiations that were then provided by GCU to ED regarding proposed changes to the services agreement between GCU and GCE and providing ED, upon request, with an updated transfer pricing study demonstrating that the revenue sharing arrangement reflected in the services agreement reflected fair market value for the services we provide.
In addition, because other regulators may use the composite score for their purposes, a poor composite score could have additional effects. For example, NC-SARA utilizes the composite score in determining whether an institution is eligible to participate in SARA.
In addition, because other regulators may use the composite score for their purposes, a poor composite score could have additional effects. For example, NC-SARA utilizes an institution’s composite score in determining whether such institution is eligible to participate in SARA.
Litigation related to the various iterations of the BDTR regulations, and the enforcement of these regulations has made this area complicated for all parties to understand and assess. Further, the lack of adjudications in this area has also made things less clear.
Litigation related to the various iterations of the BDR regulations, and the enforcement of these regulations has made this area complicated for all parties to understand and assess. Further, the lack of adjudications in this area has also made things less clear.
GCU, for example, currently enrolls students in all 50 states and the District of Columbia.
GCU, for example, enrolls students in all 50 states and the District of Columbia.
Despite the ongoing discussions and negotiations, ED again denied GCU’s non-profit status in January 2021. Thereafter, in order to pursue all available avenues for recourse on this matter, GCU opted to file a lawsuit against the ED, alleging that its 2019 and 2021 decisions overstepped its authority. That litigation currently remains ongoing.
Despite the ongoing discussions and negotiations, ED again denied GCU’s non-profit status in January 2021. Thereafter, in order to pursue all available avenues for recourse on this matter, GCU opted to file a lawsuit against the ED, alleging that its 2019 and 2021 decisions overstepped its authority.
Three of our five directors are diverse persons, and one of our directors identifies with an under-represented diverse ethnicity. ● We Have Majority Voting for Directors - We have adopted majority voting for directors pursuant to which nominees who fail to achieve an affirmative majority of votes cast must submit their resignation. ● We Hold Annual Elections for Directors - We do not have a staggered board. ● We Assess Board Performance - We conduct regular evaluations of our Board and Committees. ● Our Independent Directors Meet Without Management - Our independent directors meet regularly in executive sessions without management present. ● We Have a Stock Ownership Policy - We require both our named executive officers and our directors to maintain a meaningful ownership stake at levels specified in our stock ownership policy. ● Our Key Committees are Independent - We have fully independent Audit, Compensation and Nominating and Corporate Governance Committees. ● We Do Not Have a “Poison Pill” - We do not maintain a stockholder rights plan.
Three of our six directors are diverse persons, and two of our directors identify with an under-represented diverse ethnicity. ● We Have Majority Voting for Directors - We have adopted majority voting for directors pursuant to which nominees who fail to achieve an affirmative majority of votes cast must submit their resignation. ● We Hold Annual Elections for Directors - We do not have a staggered board. ● We Assess Board Performance - We conduct regular evaluations of our Board of Directors and Committees. ● Our Independent Directors Meet Without Management - Our independent directors meet regularly in executive sessions without management present. ● We Have a Stock Ownership Policy - We require both our named executive officers and our directors to maintain a meaningful ownership stake at levels specified in our stock ownership policy. ● Our Key Committees are Independent - We have fully independent Audit, Compensation and Nominating and Corporate Governance Committees. ● We Do Not Have a “Poison Pill” - We do not maintain a stockholder rights plan.
Climate Disclosures We do not operate in a high-risk industry for climate risks. We believe that we have low climate risk with respect to our physical environment (e.g., fires, drought, hailstorms, increasing weather pattern changes). A significant percentage of our workforce is continuing to work remotely.
Climate Disclosures We do not operate in a high-risk industry for climate risks. We believe that we have low climate risk with respect to our physical environment (e.g., fires, drought, hailstorms, increasing weather pattern changes). A significant 12 Table of Contents percentage of our workforce is continuing to work remotely.
In addition, ED is independently conducting an ongoing series of rulemakings intended to assure the integrity of the Title IV programs. ED 16 Table of Contents also frequently issues formal and informal guidance instructing institutions of higher education and other covered entities how to comply with various federal laws and regulations.
In addition, ED is independently conducting an ongoing series of rulemakings intended to assure the integrity of the Title IV programs. ED also frequently issues formal and informal guidance instructing institutions of higher education and other covered entities how to comply with various federal laws and regulations.
The reauthorized HEA 19 Table of Contents reauthorized all of the Title IV programs in which institutions participate but made numerous revisions to the requirements governing the Title IV programs, including provisions relating to student loan default rates and the formula for determining the maximum amount of revenue that institutions are permitted to derive from the Title IV programs.
The reauthorized HEA reauthorized all of the Title IV programs in which institutions participate but made numerous revisions to the requirements governing the Title IV programs, including provisions relating to student loan default rates and the formula for determining the maximum amount of revenue that institutions are permitted to derive from the Title IV programs.
Although we cannot predict how GCU’s programs will perform under the new gainful employment metrics, the performance data released suggests that in general the programs that were in the “Zone” under the previous gainful employment rules - certain undergraduate teacher education and theology programs as well as certain Masters in Counseling programs - were in jeopardy of failing under the new rules.
Although we cannot predict how GCU’s programs will perform under the new gainful employment metrics, the performance data released suggests that in general the programs that were in the “Zone” under the previous gainful employment rules - certain undergraduate teacher education and theology programs as well as certain Master’s in Counseling programs - are in jeopardy of failing under the new rules.
In 2023 and 2022, we contributed $3.5 million and $5.0 million, respectively, to these organizations. ● Encouraging Employee Giving - We participate in Donate to Elevate, a program that encourages employees to participate in the Arizona individual tax credit program, which allows individual taxpayers to contribute money in lieu of state income tax payments to benefit private schools and other non-profit entities in Arizona, as well as local public schools and public charter schools.
In 2024 and 2023, we contributed $4.5 million and $3.5 million, respectively, to these organizations. ● Encouraging Employee Giving - We participate in Donate to Elevate, a program that encourages employees to participate in the Arizona individual tax credit program, which allows individual taxpayers to contribute money in lieu of state income tax payments to benefit private schools and other non-profit entities in Arizona, as well as local public schools and public charter schools.
GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is administered by the Western Interstate Commission for Higher Education (referred to as W-SARA). There is a yearly renewal for participating in NC-SARA and AZ-SARA and institutions must agree to meet certain requirements to participate.
GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is administered by the Western Interstate Commission for Higher Education (referred to as W-SARA). There is a yearly renewal for 16 Table of Contents participating in NC-SARA and AZ-SARA and institutions must agree to meet certain requirements to participate.
While we are not directly subject to those laws, those laws may inhibit our university partners from expanding or operating in those states, limiting our ability to serve our university partners, which could significantly affect our business. In addition, state laws can indirectly regulate how GCE provides its services to its university partners.
While we are not directly subject to those laws, those laws may inhibit our university partners from expanding or operating in those states, limiting our ability to serve our university partners, which could significantly affect our business. In addition, state laws can indirectly regulate how we provide its services to its university partners.
In addition, the incentive compensation rule raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners. On March 17, 2011, ED 24 Table of Contents issued official agency guidance, known as a “Dear Colleague Letter,” or a DCL, providing guidance on this point.
In addition, the incentive compensation rule raises the question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners. On March 17, 2011, ED issued official agency guidance, known as a “Dear Colleague Letter,” or a DCL, providing guidance on this point.
Imposition of these sanctions could have a negative impact on our ability to conduct our business. Financial responsibility. The HEA and ED regulations establish extensive standards of financial responsibility that institutions must satisfy in order to participate in the Title IV programs.
Imposition of these sanctions on any of our university partners could have a negative impact on our ability to conduct our business. Financial responsibility. The HEA and ED regulations establish extensive standards of financial responsibility that institutions must satisfy in order to participate in the Title IV programs.
Thereafter, i n October 2021, at the same time that the FTC issued the notice to the 70 for-profit schools as mentioned above, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities in furtherance of the notice.
In October 2021, at the same time that the FTC issued the notice to the 70 for-profit schools as mentioned above, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities in furtherance of the notice.
While we are watching this process closely, we cannot determine what the outcome will be or the effect of these regulations on out university partners or on GCE.
While we are watching this process closely, we cannot determine what the outcome will be or the effect of these regulations on our university partners or on GCE.
Our client institutions are subject to announced and unannounced compliance reviews and audits by various external agencies, including ED, its Office of Inspector General, state licensing agencies, the applicable state approving agencies for financial assistance to veterans, and accrediting commissions.
Our university partners institutions are subject to announced and unannounced compliance reviews and audits by various external agencies, including ED, its Office of Inspector General, state licensing agencies, the applicable state approving agencies for financial assistance to veterans, and accrediting commissions.
This has not only increased employee satisfaction but has also resulted in savings in the areas of waste, janitorial costs, and travel costs related to business travel and commuting. Our off-campus classroom and laboratory sites are all designed with the same efficient footprint in the 40 sites opened as of December 31, 2023.
This has not only increased employee satisfaction but has also resulted in savings in the areas of waste, janitorial costs, and travel costs related to business travel and commuting. Our off-campus classroom and laboratory sites are all designed with the same efficient footprint in the 45 sites opened as of December 31, 2024.
Based on the data derived from the audited financial statements of GCU as of each of June 30, 2023 and 2022, GCU’s composite score was 1.8, using the proprietary school calculation methodology. If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions.
Based on the data derived from the audited financial statements of GCU as of each of June 30, 2024 and 2023, GCU’s composite score was 1.9 and 1.8, respectively, using the proprietary school calculation methodology. If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions.
On July 1, 2019, ED rescinded the previously enacted gainful employment regulations. 27 Table of Contents While this change was effective July 1, 2020, ED also permitted institutions to enact this change as early as July 1, 2019, so long as any such institution made manifest its intention to be subject to the rescinded regulations.
On July 1, 2019, ED rescinded the previously enacted gainful employment regulations. While this change was effective July 1, 2020, ED also permitted institutions to enact this change as early as July 1, 2019, so long as any such institution made manifest its intention to be subject to the rescinded regulations.
As of December 31, 2023, GCE employed approximately 4,068 professional and administrative personnel, including technical and academic advisors, counseling advisors, marketing and communication professionals, and personnel that handle financial aid processing, information technology, human resources, corporate accounting, finance, and other administrative functions.
As of December 31, 2024, GCE employed approximately 4,092 professional and administrative personnel, including technical and academic advisors, counseling advisors, marketing and communication professionals, and personnel that handle financial aid processing, information technology, human resources, corporate accounting, finance, and other administrative functions.
We constructed these facilities in 2016 and, as with every one of our projects over the past 12 years, we designed them to maximize energy 12 Table of Contents efficiency and minimize electricity usage and environmental impact, which ultimately lowers our operating costs.
We constructed these facilities in 2016 and, as with every one of our projects over the past 16 years, we designed them to maximize energy efficiency and minimize electricity usage and environmental impact, which ultimately lowers our operating costs.
Alternatively, a state regulatory body could restrict our university partners’ ability to offer new or certain degree and non-degree programs, which may impair our ability to grow. 17 Table of Contents State regulatory requirements for online education have historically varied among the states.
Alternatively, a state regulatory body could restrict our university partners’ ability to offer new or certain degree and non-degree programs, which may impair our ability to grow. State regulatory requirements for online education have historically varied among the states.
The HEA prohibits an institution that participates in Title IV programs from engaging in “substantial misrepresentation” of the nature of its educational program, its financial charges, or the employability of its graduates.
The HEA prohibits an institution that participates in Title IV programs from engaging in “substantial misrepresentation” of the nature of its educational program, its financial charges, or the 23 Table of Contents employability of its graduates.
Further, we also have an obligation to annually submit to ED a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and ED audit standards. Gainful employment rule s.
Further, we 22 Table of Contents also have an obligation to annually submit to ED a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and ED audit standards. Gainful employment rule s.
Similar rules apply under state laws or are incorporated in institutional accreditation standards, and the FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector. On October 6, 2021 the FTC announced that it is resurrecting Penalty Offense Authority under Section 5(m) of the FTC Act.
Similar rules apply under state laws or are incorporated in institutional accreditation standards, and the FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector. In October 2021, the FTC announced that it was resurrecting its Penalty Offense Authority under Section 5(m) of the FTC Act.
In addition, as of December 31, 2023, GCE employed approximately 1,732 part-time employees most of whom are student workers. None of our employees are a party to any collective bargaining or similar agreement with us.
In addition, as of December 31, 2024, GCE employed approximately 1,738 part-time employees most of whom are student workers. None of our employees are a party to any collective bargaining or similar agreement with us.
Vincent de Paul, Young Life, Elevate Phoenix, Back to School Clothing Drive and St. 10 Table of Contents Mary’s Food Bank. Our employees also went out into our surrounding neighborhoods to participate in programs such as Serve the City, Canyon Kids, Salute Our Troops, Colter Commons senior home visits and the Run to Fight Children’s Cancer.
Vincent de Paul, Young Life, Elevate Phoenix, Back to School Clothing Drive and St. Mary’s Food Bank. Our employees also went out into our surrounding neighborhoods to participate in programs such as Serve the City, Canyon Kids, Salute Our Troops, Colter Commons senior home visits and the Run to Fight Children’s Cancer. Our Commitment to Diversity.
To address this issue and to meet ED requirements many schools have applied and sought to become an approved institutional participant in the State Authorization Reciprocity Agreement (“SARA”). SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs.
To address this issue and to meet ED requirements many schools have applied and been approved to be institutional participants in the State Authorization Reciprocity Agreement (“SARA”). SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs.
For a school that is provisionally certified on a month-to-month basis, ED may allow the institution’s certification to expire at the end of any month without advance notice, and without any formal procedure for review of such action.
For an institution that is certified on a month-to-month basis, ED may allow the institution’s certification to expire at the end of any month without advance notice, and without any formal procedure for review of such action.
Coordinated actions by certain federal agencies . The Transaction was approved by GCU’s Board of Trustees based on its conclusion that it would be in the best interest of GCU’s students, faculty and staff for GCU to operate under the non-profit status that it previously held prior to 2004.
The Transaction was approved by GCU’s board of trustees based on its conclusion that it would be in the best interest of GCU’s students, faculty and staff for GCU to operate under the non-profit status that it previously held prior to 2004.
To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and we carefully monitor our subcontractors. Additionally, matters regarding substantial misrepresentation, and defining what constitutes “aggressive recruiting,” are currently the subject of negotiated rulemaking.
To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and subcontractors in their conversations with students and prospective students. Additionally, matters regarding substantial misrepresentation, and defining what constitutes “aggressive recruiting,” are currently the subject of negotiated rulemaking.
We are also regulated (depending upon the applicable activity being regulated) by other federal agencies or departments including the Securities and Exchange Commission (“SEC”), the Internal Revenue Service (“IRS”), and the Federal Trade Commission (“FTC”).
We are also regulated (depending upon the applicable activity being regulated) by other federal agencies or departments including the SEC, the Internal Revenue Service (“IRS”), and the Federal Trade Commission (“FTC”).
The following section describes regulatory matters that affect our university partners and that may affect us as an education service company to institutions of higher education generally. State Post-Secondary Education Regulation Our university partners are authorized to offer education by the relevant state authorizing agencies for the state in which the client is located.
The following section describes regulatory matters that affect our university partners and that may affect us as an education services provider to institutions of higher education generally. State Post-Secondary Education Regulation Our university partners are authorized to offer education by the relevant state authorizing agencies for the state in which such university partner is located.
Similarly, a court could invalidate the rule in an action involving our company or our university partners, or in action that does not involve us at all. The revision, removal or invalidation of the bundled services rule by Congress, ED or a court could require us to change our business model. Borrower Defense to Repayment regulations .
Similarly, a court could invalidate the rule in an action involving our company or our university partners, or in action that does not involve us at all. The revision, removal or invalidation of the bundled services rule by Congress, ED or a court could require us to change our business model in ways that could be detrimental to our business.
To serve our clients and community, we seek donations to fund this neighborhood scholarship program. ● Sponsoring K-12 Educational Development - GCE supports GCU’s K-12 Educational Development Department through sponsorship of GCU’s Canyon Professional Development and K-12 Targeted School Assistance programs.
To serve our university partners and community, we seek donations to fund this neighborhood scholarship program. 10 Table of Contents ● Sponsoring K-12 Educational Development - GCE supports GCU’s K-12 Educational Development Department through sponsorship of GCU’s Canyon Professional Development and K-12 Targeted School Assistance programs.
In sum, GCE values diversity because it values every employee and university partners’ students entrusted to its care. ● Our Diverse Leadership - Our ability to attract and retain diverse talent is reflected at both the Board and management levels. Three of our five directors are women and one director identifies with an underrepresented diverse ethnicity.
In sum, GCE values diversity because it values every employee and university partners’ students entrusted to its care. ● Our Diverse Leadership - Our ability to attract and retain diverse talent is reflected at both our Board of Directors (the “Board”) and management levels. Three of our six directors are women and two directors identify with an underrepresented diverse ethnicity.
As of December 31, 2023, all states other than California are members of SARA. Any state that does not participate in SARA may impose regulatory requirements on out-of-state higher education institutions operating within their boundaries, such as those having a physical facility or conducting certain academic activities within the state.
As of December 31, 2024, all states other than California are members of SARA. Any state that does not participate in SARA may impose regulatory requirements on out-of-state post-secondary institutions operating within its boundaries, such as those having a physical facility or conducting certain academic activities within the state.
This means that institutions subject to the 90/10 Rule will be required to limit the combined amount of Title IV funds and applicable “Federal funds” revenue in a fiscal year to no more than 90% in a fiscal year as calculated under the rule.
This means that institutions subject to the 90/10 Rule will be required to limit the combined amount of Title IV funds and applicable “Federal funds” revenue in a fiscal year to no more than 90% in a fiscal year as calculated under the rule, and the change to the 90/10 Rule is thus expected to increase the 90/10 Rule calculations for institutions subject to the rule.
In addition, a significant number of our university partners’ students utilize an ebook format versus paper textbooks, which is more environmentally friendly in that it saves paper and other materials and there is no shipment required.
A majority of our university partners’ students are enrolled in hybrid or online educational models. In addition, a significant number of our university partners’ students utilize an ebook format versus paper textbooks, which is more environmentally friendly in that it saves paper and other materials and there is no shipment required.
Using ED’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU, our most significant client, derived approximately 65.5% and 66.2% of its 90/10 Rule revenue from Title IV program funds for the fiscal years ended June 30, 2023 and 2022, respectively, per GCU’s audited financial statements.
Using ED’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU derived approximately 67.2% and 65.5% of its 90/10 Rule revenue from Title IV program funds for the fiscal years ended June 30, 2024 and 2023, respectively, per 20 Table of Contents GCU’s audited financial statements.
We are evaluating emissions reduction requirements with key suppliers for costs such as information security systems, communication and marketing costs, travel costs, and continued expansion of our off-campus classroom and laboratory sites.
We are evaluating emissions reduction requirements with key suppliers for costs such as information security systems, communication and marketing costs, travel costs, and continued expansion of our off-campus classroom and laboratory sites. We currently do not have any regulatory emissions reporting obligations.
We cannot predict with certainty the ultimate combined impact of the regulatory changes which have occurred in recent years and that may occur as a result of the upcoming negotiated rulemaking, nor can we predict the effect of future legislative or regulatory action by federal, state or other agencies regulating our education programs or other aspects of our operations, how any resulting regulations will be interpreted or whether we and our partner institutions will be able to comply with these requirements in the future.
We cannot predict with certainty the ultimate combined impact of the regulatory changes which have occurred in recent years, nor can we predict the effect of future legislative or regulatory action by federal, state or other agencies regulating our operations or those of our university partners, how any resulting regulations will be interpreted or whether we and our university partner institutions will be able to comply with these requirements in the future.
This can delay the site opening and timing can vary based on the state and the university partner. Although not directly regulated by these entities, we must be mindful of the requirements placed by state professional licensure bodies on our university partner institutions to ensure those institutions maintain that licensure.
Although not directly regulated by these entities, we must be mindful of the requirements placed by state professional licensure bodies on our university partner institutions to ensure those institutions maintain that licensure.
We believe that our success in attracting, retaining, and developing human capital is directly correlated to our ability to provide employees both an interesting and engaging work experience as well as opportunities for meaningful involvement in the surrounding community.
We provide employees with training, development, and educational resources that promote learning and lead to real career advancement opportunities. We believe that our success in attracting, retaining, and developing human capital is directly correlated to our ability to provide employees both an interesting and engaging work experience as well as opportunities for meaningful involvement in the surrounding community.
The whistleblower policy is disclosed on the GCE intranet for employees and disclosed on the GCE investor relations website for external parties. Hotline activity is managed by a third party and all claims are reviewed and monitored by the Chief Risk Officer and General Counsel. All claims are discussed at the quarterly Audit Committee meetings.
Whistleblower hotline – GCE has a whistleblower hotline available to both internal and external parties. The whistleblower policy is disclosed on the GCE intranet for employees and disclosed on the GCE investor relations website for external parties. Hotline activity is managed by a third party and all claims are reviewed and monitored by the Chief Risk Officer and General Counsel.
The largest companies in this sector have historically been Pearson Online Learning Services, Wiley Education Services, and 2U.
The largest companies in this sector have historically been Pearson Online Learning Services, Academic Partnerships and 2U, Inc.
See “Coordinated actions by federal agencies.” Administrative capability . ED regulations specify extensive criteria by which an institution must establish that it has the requisite “administrative capability” to participate in the Title IV programs.
ED regulations specify extensive criteria by which an institution must establish that it has the requisite “administrative capability” to participate in the Title IV programs.
Many states also require that graduates pass a state test or examination as a prerequisite to becoming certified in certain fields, such as nursing and teaching.
Many states also require that graduates pass a state test or examination as a prerequisite to becoming certified in certain fields, such as nursing and teaching. Many states will certify individuals if they have already been certified in another state.
The loss of licensure or authorization by a university partner in any non-SARA state could prohibit us from recruiting prospective students or offering services to current students in that state on behalf of such university partner, which could significantly affect our business.
The loss of licensure or authorization in any non-SARA jurisdiction by a university partner institution could prohibit us from recruiting prospective students or offering services to current students in that jurisdiction, which could significantly reduce such university partner’s enrollments.
The survey asked a number of questions regarding employee engagement and satisfaction including whether they are actively engaged with their work, whether they have a sense of pride in what they do and whether they enjoy the type of work assigned to them. The responses to each question were overwhelmingly positive.
GCE received responses from 1,330 employees on the 2024 survey. The survey asked a number of questions regarding employee engagement and satisfaction including whether they are actively engaged with their work, whether they have a sense of pride in what they do and whether they enjoy the type of work assigned to them.
In addition, given ED continues to 28 Table of Contents refuse to recognize GCU’s non-profit status, students in GCU programs that fail the new metrics may lose Title IV eligibility. Substantial misrepresentation .
In addition, given ED’s continued refusal to recognize GCU’s non-profit status, students in GCU programs that fail the new metrics may lose Title IV eligibility. Substantial misrepresentation .
We believe that we must have the best talent, including employees who possess a diverse range of experiences, backgrounds and skills, in order to anticipate and meet the needs of our business and those of our university partners.
GCE is committed to hiring policies and practices that identify the most qualified candidate for a given position. We believe that we must have the best talent, including employees who possess a diverse range of experiences, backgrounds and skills, in order to anticipate and meet the needs of our business and those of our university partners.
An eligible employee’s spouse or child admitted to GCU receives a 100% tuition reduction on undergraduate programs and a 50% tuition reduction on graduate programs. Monitoring employee engagement and satisfaction – GCE administered a survey with all of its employees to assess employee engagement and satisfaction. GCE received responses from 1,835 employees on the 2022 survey.
An eligible employee’s spouse or child 9 Table of Contents admitted to GCU receives a 100% tuition reduction on undergraduate programs and a 50% tuition reduction on graduate programs. Monitoring employee engagement and satisfaction – GCE administers an annual survey of all of its employees to assess employee engagement and satisfaction.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA decline in the overall growth of enrollment in post-secondary institutions, or in the number of students seeking degrees online, could cause our university partner institutions to experience lower enrollment, which could negatively impact our future growth. ● We face competition from established and other emerging companies, which could divert university partners to our competitors, result in pricing pressure and significantly reduce our revenue. ● We are subject to laws and regulations as a result of our collection and use of personal information, and any violations of such laws or regulations, or any breach, theft, or loss of such information, could adversely affect our reputation and operations. ● We are required to comply with The Family Educational Rights and Privacy Act, or FERPA, and failure to do so could harm our reputation and negatively affect our business. 32 Table of Contents ● Capacity constraints, system disruptions, or security breaches in our online computer networks and phone systems could have a material adverse effect on our ability to attract and retain students. ● We may have difficulty integrating future acquisitions, which would reduce the anticipated benefits of those transactions. ● Our failure, or our university partners’ failure, to comply with the extensive regulatory requirements governing institutions of higher education could result in financial penalties, restrictions on our operations or growth, or loss of external financial aid funding for our university partners’ students. ● Rulemaking by ED could materially and adversely affect our business. ● Recently published regulations could materially and adversely affect our business. ● If ED does not recertify a university partner institution to continue participating in the Title IV programs, the students we assist would lose their access to Title IV program funds, or a university partner institution could be recertified but be required to accept significant limitations as a condition of its continued participation in the Title IV programs. ● A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a client institution fails to maintain any of its accreditations or approvals. ● A university partner institution may lose eligibility to participate in the Title IV programs if its student loan default rates are too high. ● A finding by ED or other regulators that we or our university partner institutions misrepresented the nature of our partner institutions’ educational programs could materially and adversely affect our business. ● A reduction in funding or new restrictions on eligibility for the Federal Pell Grant Program, or the elimination of subsidized Stafford loans, could make college less affordable for certain students at our university partner institutions, which could negatively impact our university partner institutions’ enrollments, and thus our revenue and results of operations. ● If our university partner institutions do not maintain state authorization, they may not operate or participate in the Title IV programs. ● Government agencies, regulatory agencies, and third parties may conduct compliance reviews, bring claims, or initiate litigation against us or our university partners based on alleged violations of the extensive regulatory requirements applicable to us and our university partners. ● The regulatory guidance governing third-party servicers imposes a number of requirements on our business and may expose us to liability for certain regulatory violations that are coextensive with our university partner institutions.
Biggest changeRisk Factor Summary The following is a summary of the material risk factors that could adversely affect our business, financial condition, and operating results: ● We earn a large percentage of our revenue through our contractual relationship as a service provider to GCU, and a decline in GCU’s enrollment could significantly reduce our revenue and impact our overall financial performance. ● GCU’s board of trustees and management have fiduciary and other duties that require them to focus on the best interests of GCU and, over time, those interests could diverge from those of GCE. ● Our Chief Executive Officer’s role as President of GCU may adversely affect his ability to run GCE. ● If we are determined to have paid improper incentive compensation to our covered employees, or tuition sharing arrangements are deemed to violate the incentive compensation regulations, our business will be impaired. ● Our success depends, in part, on our ability to recruit new students to enroll with our university partners. ● A decline in the overall growth of enrollment in post-secondary institutions, or in the number of students seeking degrees online, could cause our university partner institutions to experience lower enrollment, which could negatively impact our future growth. ● We face competition from established and other emerging companies, which could divert university partners to our competitors, result in pricing pressure and significantly reduce our revenue. ● We are subject to laws and regulations as a result of our collection and use of personal information, and any violations of such laws or regulations, or any breach, theft, or loss of such information, could adversely affect our reputation and operations. ● We are required to comply with The Family Educational Rights and Privacy Act, or FERPA, and failure to do so could harm our reputation and negatively affect our business. ● Capacity constraints, system disruptions, or security breaches in our online computer networks and phone systems could have a material adverse effect on our ability to attract and retain students. ● We may have difficulty integrating future acquisitions, which would reduce the anticipated benefits of those transactions. 26 Table of Contents ● Our failure, or our university partners’ failure, to comply with the extensive regulatory requirements governing institutions of higher education could result in financial penalties, restrictions on our operations or growth, or loss of external financial aid funding for our university partners’ students. ● Rulemaking by ED could materially and adversely affect our business. ● Recently published regulations could materially and adversely affect our business. ● If ED does not recertify a university partner institution to continue participating in the Title IV programs, the students we assist would lose their access to Title IV program funds, or a university partner institution could be recertified but be required to accept significant limitations as a condition of its continued participation in the Title IV programs. ● A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a university partner institution fails to maintain any of its accreditations or approvals. ● A university partner institution may lose eligibility to participate in the Title IV programs if its student loan default rates are too high. ● A finding by ED or other regulators that we or our university partner institutions misrepresented the nature of our partner institutions’ educational programs could materially and adversely affect our business. ● A reduction in funding or new restrictions on eligibility for the Federal Pell Grant Program, or the elimination of subsidized Stafford loans, could make college less affordable for certain students at our university partner institutions, which could negatively impact our university partner institutions’ enrollments, and thus our revenue and results of operations. ● If our university partner institutions do not maintain state authorization, they may not operate or participate in the Title IV programs. ● Government agencies, regulatory agencies, and third parties may conduct compliance reviews, bring claims, or initiate litigation against us or our university partners based on alleged violations of the extensive regulatory requirements applicable to us and our university partners. ● The regulatory guidance governing third-party servicers imposes a number of requirements on our business and may expose us to liability for certain regulatory violations that are coextensive with our university partner institutions.
Mueller has served as the Chief Executive Officer of GCE since 2008, the Chairman of the Board of GCE since 2017 and the President of GCU since 2012. In connection with the Transaction, the Board of Directors of GCE and the board of trustees of GCU each independently determined that Mr. Mueller should retain those roles. Accordingly, Mr.
Mueller has served as the Chief Executive Officer of GCE since 2008, the Chairman of the Board of Directors since 2017 and the President of GCU since 2012. In connection with the Transaction, the Board of Directors of GCE and the board of trustees of GCU each independently determined that Mr. Mueller should retain those roles. Accordingly, Mr.
If we violate FERPA, it could result in a material breach of contract with one or more of our university partners and could harm our reputation.
If we violate FERPA, it could result in a material breach of our contract with one or more of our university partners and could harm our reputation.
The performance and reliability of the infrastructure of our computer networks and phone systems, including the online programs of our university partners, is critical to our operations, reputation and to our ability to attract and retain students on our university partners’ behalf.
The performance and reliability of the infrastructure of our computer networks and phone systems, including the online programs of our university partners, is critical to our operations, our reputation and our ability to attract and retain students on our university partners’ behalf.
In addition, any significant failure of our computer networks or servers, whether as a result of third-party actions or in connection with planned upgrades and conversions, could disrupt our operations. Individual, sustained, or repeated occurrences could significantly damage the reputation of our technology/services and result in a loss of potential or existing students of our university partner institutions.
In addition, any significant failure of our computer networks or servers, whether as a result of third-party actions or in connection with planned upgrades and conversions, could disrupt our operations. Individual, sustained, or repeated occurrences could significantly damage the reputation of our technology and services and result in a loss of potential or existing students of our university partner institutions.
In addition, the operations and programs of our university partners, and any future university partners, are regulated by other state education agencies and additional accrediting commissions. As a result of these requirements, we are subject to extensive regulation from state entities, institutional accrediting commissions, specialized accrediting commissions, and ED.
In addition, the operations and programs of our university partners, and any future university partners, are regulated by other state education agencies and additional specialized accrediting commissions. As a result of these requirements, we are subject to extensive regulation from state entities, institutional accrediting commissions, specialized accrediting commissions, and ED.
In addition, they must comply with the requirements of 34 C.F.R. § 668.25, which requires third-party servicers, in their contracts with institutions, to be contractually obligated to, among other things: ● Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV, HEA program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program; ● Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV, HEA program or an applicant for Title IV, HEA program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application; and ● Be jointly and severally liable with the institution to the Secretary for any violation by the servicer of any statutory provision of or applicable to Title IV of the HEA, any regulatory provision prescribed under that statutory authority, and any applicable special arrangement, agreement, or limitation entered into under the authority of statutes applicable to Title IV of the HEA.
In addition, they must comply with the requirements of 34 C.F.R. § 668.25, which requires third-party servicers, in their contracts with institutions, to be contractually obligated to, among other things: ● Comply with all statutory provisions of or applicable to Title IV of the HEA, including the requirement to use any funds that the servicer administers under any Title IV program and any interest or other earnings thereon solely for the purposes specified in and in accordance with that program; ● Refer to the Office of Inspector General of ED for investigation any information indicating there is reasonable cause to believe that the institution might have engaged in fraud or other criminal misconduct in connection with the institution’s administration of any Title IV program or an applicant for Title IV program assistance might have engaged in fraud or other criminal misconduct in connection with his or her application; and ● Be jointly and severally liable with the institution to the Secretary for any violation by the servicer of any statutory provision of or applicable to Title IV of the HEA, any regulatory provision prescribed under that statutory authority, and any applicable special arrangement, agreement, or limitation entered into under the authority of statutes applicable to Title IV of the HEA.
The final regulations expand the types of conditions ED can impose on provisionally certified institutions including, for example, restrictions on the addition of new programs or locations, restrictions on the rate of growth or new enrollment of students or of Title IV volume, restrictions on the institution providing a teach-out on behalf of another institution, restrictions on the acquisition of another participating institution (including financial protection requirements), additional reporting requirements, limitations on entering into certain written arrangements with institutions or entities for providing part of an educational program, requirements to submit marketing and recruiting materials to ED for approval (if the institution is alleged or found to have engaged in substantial misrepresentations to students, engaged in aggressive recruiting practices, or violated incentive compensation rules), reporting requirements for institutions that received a government formal inquiry such as a subpoena related to its marketing or recruitment or its federal financial aid, and other potential conditions imposed by ED.
These final regulations expand the types of conditions ED can impose on provisionally certified institutions including, for example, restrictions on the addition of new programs or locations; restrictions on the rate of growth or new enrollment of students or of Title IV volume; restrictions on the institution providing a teach-out on behalf of another institution; restrictions on the acquisition of another participating institution (including financial protection requirements); additional reporting requirements; limitations on entering into certain written arrangements with institutions or entities for providing part of an educational program, requirements to submit marketing and recruiting materials to ED for approval (if the institution is alleged or found to have engaged in substantial misrepresentations to students, engaged in aggressive recruiting practices, or violated incentive compensation rules); reporting requirements for institutions that received a government formal inquiry such as a subpoena related to its marketing or recruitment or its federal financial aid, and other potential conditions imposed by ED.
However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and to comply with or accept other limitations on the ability to increase the number of programs offered by our client institutions or the number of students they enroll, any of which sanctions could have an adverse impact on our business.
However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and to comply with or accept other limitations on the ability to increase the number of programs offered by our university partner institutions or the number of students they enroll, any of which sanctions could have an adverse impact on our business.
On February 9, 2023, ED issued Electronic Announcement GEN 23-09 stating, among other items “The Department will issue guidance on NIST 800-171 compliance in a future Electronic Announcement, but again encourages institutions to begin incorporating the information security controls required under NIST 800-171 into the written information security program required under GLBA as soon as possible.” While details related to this announcement are few, it does suggest that ED will be taking a greater role in ensuring universities and their service providers meet NIST standards and are protecting the students and ED data received.
In February 2023, ED issued Electronic Announcement GEN 23-09 stating, among other items “The Department will issue guidance on NIST 800-171 compliance in a future Electronic Announcement, but again encourages institutions to begin incorporating the information security controls required under NIST 800-171 into the written information security program required under GLBA as soon as possible.” While details related to this announcement are few, it does suggest that ED will be taking a greater role in ensuring universities and their service providers meet NIST standards and are protecting the students and ED data received.
Natural events, health epidemics (such as the COVID-19 pandemic), acts of God, terrorist attacks and other acts of violence, computer cyber-terrorism or other catastrophes could result in significant worker absenteeism, increased student attrition rates for our university partners, lower asset utilization rates, voluntary or mandatory closure of facilities, our inability to meet dynamic employee health and safety requirements, our inability to meet contractual service levels, our inability to procure essential supplies, travel restrictions on our employees and other disruptions to our business.
Natural events, health epidemics (such as the COVID-19 pandemic), acts of God, terrorist attacks and other acts of violence, cyber-terrorism or other catastrophes could result in significant worker absenteeism, increased student attrition rates for our university partners, lower asset utilization rates, voluntary or mandatory closure of facilities, our inability to meet dynamic employee health and safety requirements, our inability to meet contractual service levels, our inability to procure essential supplies, travel restrictions on our employees and other disruptions to our business.
Although it is currently licensed, authorized, in-process, or exempt in all non-SARA jurisdictions in which it operates, if GCU fails to comply with state licensing or authorization requirements for a state, or fails to obtain licenses or authorizations when required, it could lose its state license or authorization by that state or be subject to other sanctions, including restrictions on its activities in, and fines and penalties imposed by, that state, as well as fines, penalties, and sanctions imposed by ED.
Although it is currently licensed, authorized, in-process, or exempt in all non-SARA jurisdictions in which it operates, if GCU fails to comply with state licensing or authorization requirements for a non-SARA jurisdiction, or fails to obtain licenses or authorizations when required, it could lose its license or authorization by that jurisdiction or be subject to other sanctions, including restrictions on its activities in, and fines and penalties imposed by, that jurisdiction, as well as fines, penalties, and sanctions imposed by ED.
The final regulations also allow ED to determine whether to certify or impose conditions on an institution based on consideration of factors including, for example, the institution’s withdrawal rate, the amounts the institution spent on recruiting activities, advertising, and other pre-enrollment activities, and the passage rate for licensure exams for programs that are designed to meet the educational requirements for a professional license required for employment in an occupation.
These final regulations also allow ED to determine whether to certify or impose conditions on an institution based on consideration of factors including, for example, the institution’s withdrawal rate, the amounts the institution spent on recruiting activities, advertising, and other pre-enrollment activities, and the passage rate for licensure exams for programs that are designed to meet the educational requirements for a professional license required for employment in an occupation.
In addition, if we or any university partner are charged with regulatory violations, our reputation could be damaged, which could have a negative impact on our stock price and enrollments at university partner institutions. ED and other regulators have increased the frequency and severity of their enforcement actions against post-secondary schools, including our primary university partners.
In addition, if we or any university partner are charged with regulatory violations, our reputation could be damaged, which could have a negative impact on our stock price and enrollments at university partner institutions. ED and other regulators have increased the frequency and severity of their enforcement actions against post-secondary schools, including our primary university partner.
In addition, we and GCU also jointly imposed a structure, through GCU’s governance documents and through express provisions of the Master Services Agreement, that prevent Mr. Mueller from participating in day-to-day management of, or negotiations between GCE and GCU relating to, the Master Services Agreement . While we believe that these safeguards have worked well to date, and that Mr.
In addition, we and GCU also jointly imposed a structure, through GCU’s governance documents and through express provisions of the Master Services Agreement, which prevent Mr. Mueller from participating in day-to-day management of, or negotiations between GCE and GCU relating to, the Master Services Agreement . While we believe that these safeguards have worked well to date, and that Mr.
Our primary competitors have historically included EmbanetCompass (formerly owned by Pearson), Wiley Education Services, and 2U. There are also several new and existing vendors providing some or all of the services we provide to other segments of the education market, and these vendors may pursue the institutions we target.
Our primary competitors have historically included EmbanetCompass (formerly owned by Pearson) and Wiley Education Services. There are also several new and existing vendors providing some or all of the services we provide to other segments of the education market, and these vendors may pursue the institutions we target.
To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and we carefully monitor our employees and subcontractors conversations with students and prospective students.
To avoid an issue under the misrepresentation rule and similar rules, we assure that all marketing materials are approved in advance by our university partners before they are used by our employees and we carefully monitor our employees and subcontractors in their conversations with students and prospective students.
To the extent our services for a university partner include conducting returns to Title IV, as they do with our primary university partner, GCU, we would likely be jointly and severally liable to ED, along with the relevant client, for return of those funds.
To the extent our services for a university partner include conducting returns to Title IV, as they do with our primary university partner, GCU, we would likely be jointly and severally liable to ED, along with the relevant university partner, for return of those funds.
Mueller serves as the Chairman of the Board and Chief Executive Officer of GCE and as the President of GCU, although he is prohibited from serving on the board of trustees of GCU. In continuing to retain Mr. Mueller’s services, our Board and the board of trustees of GCU each recognize that Mr.
Mueller serves as the Chairman of the Board of Directors and Chief Executive Officer of GCE and as the President of GCU, although he is prohibited from serving on the board of trustees of GCU. In continuing to retain Mr. Mueller’s services, our Board of Directors and the board of trustees of GCU each recognize that Mr.
If we fail, or any university partner institution fails, to comply with any of these regulatory requirements, we or any university partner could suffer financial penalties, limitations on our operations, or other sanctions, each of which could materially adversely affect us.
If we fail, or any university partner institution fails, to comply with any of these regulatory requirements, we or any university partner could suffer financial penalties, limitations on operations, or other sanctions, each of which could materially adversely affect us.
ED specifically said it was “committed to fully advancing and encouraging all postsecondary institutions implementation of NIST 800-171 controls.” This announcement was addressed both to institutions of higher education and their third-party servicers.
ED specifically said it was “committed to fully advancing and encouraging all postsecondary institutions’ implementation of NIST 800-171 controls.” This announcement was addressed both to institutions of higher education and their third-party servicers.
The final regulations would, among other things, modify and substantially expand the number of triggers and, as a result, increase the likelihood that ED could impose a financial protection requirement and other conditions on our university partners.
The final regulations, among other things, modify and substantially expand the number of triggers and, as a result, increase the likelihood that ED could impose a financial protection requirement and other conditions on our university partners.
These regulations were also recently revised, as discussed, and there may be additional restrictions or requirements that may create additional hurdles to compliance or otherwise materially adversely affect us.
These regulations were also recently revised, as discussed above, and there may be additional restrictions or requirements that may create additional hurdles to compliance or otherwise materially adversely affect us.
If any such sanctions were imposed on GCU or one of our other partners, it could have a negative impact on our ability to conduct our business.
If any such sanctions were imposed on GCU or one of our other university partners, it could have a negative impact on our ability to conduct our business.
If these systems do not effectively collect, store and process relevant data for the operation of our business, whether due to equipment malfunctions or constraints, software deficiencies, or human error, our ability to effectively report, plan, forecast and execute our business plan and comply with applicable laws and regulations, including the HEA, as reauthorized, and the regulations thereunder, will be impaired, perhaps materially.
If these systems do not effectively collect, store and process relevant data for the operation of our business, whether due to equipment malfunctions or constraints, software deficiencies, or human error, our ability to effectively report, plan, forecast and execute our business plan and comply with applicable laws and regulations, including the HEA and the regulations thereunder, will be impaired, perhaps materially.
Any state that does not participate in SARA may impose regulatory requirements on out-of-state post-secondary institutions operating within their boundaries, such as those having a physical facility or conducting certain academic activities within the state. GCU, for example, enrolls students in all 50 states and the District of Columbia.
Any state that does not participate in SARA may impose regulatory requirements on out-of-state post-secondary institutions operating within its boundaries, such as those having a physical facility or conducting certain academic activities within the state. GCU, for example, enrolls students in all 50 states and the District of Columbia.
We could fail to respond in a timely manner for future technological developments in our industry. Should our actions or failure to act impair or render our information technology less effective, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We also could fail to respond in a timely manner to future technological developments in our industry. Should our actions or failure to act impair or render our information technology less effective, this could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Certification Regulations : The final regulations expand the grounds for placing institutions on provisional certification, expand the types of conditions ED may impose on provisionally certified institutions, and expand the number of requirements contained in the institution’s program participation agreement with ED (including, among other requirements, an obligation to comply with all state laws related to closure).
Certification Regulations : The final regulations expanded the grounds for placing institutions on provisional certification, expanded the types of conditions ED may impose on provisionally certified institutions, and expanded the number of requirements contained in the institution’s program participation agreement with ED (including, among other requirements, an obligation to comply with all state laws related to closure).
The institution may pay the entity an amount based on tuition generated for the institution by the entity’s activities for all the bundled services that are offered and provided collectively, as long as the entity does not make prohibited compensation payments to its employees, and the institution does not pay the entity separately for student recruitment services provided by the entity.” The DCL guidance indicates that an arrangement that complies with Example 2-B will be deemed to be in compliance with the incentive compensation provisions of the HEA and ED’s regulations.
The institution may pay the entity an amount based on tuition generated for the institution by the entity’s activities for all the bundled services that are offered and provided collectively, as long as the entity does not make prohibited compensation 28 Table of Contents payments to its employees, and the institution does not pay the entity separately for student recruitment services provided by the entity.” The DCL guidance indicates that an arrangement that complies with Example 2-B will be deemed to be in compliance with the incentive compensation provisions of the HEA and ED’s regulations.
If ED or another regulator determines that statements made by us or on our university partner’s behalf are in violation of the regulations, we could be subject to sanctions, legal actions, and other liability, which could have a material adverse effect on our business.
If ED or another regulator determines that statements made by us or on our university partners’ behalf are in violation of the regulations, we could be subject to sanctions, legal actions, and other liability, which could have a material adverse effect on our business.
In addition, if job growth in the fields related to our university partners’ core disciplines is weaker than expected, as a result of any regional or national economic downturn or otherwise, fewer students may seek the types of degrees that our clients offer.
In addition, if job growth in the fields related to our university partners’ core disciplines is weaker than expected, as a result of any regional or national economic downturn or otherwise, fewer students may seek the types of degrees that our university partners offer.
The final rules add more standards related to topics such as the provision of adequate financial aid counseling and career services, ensuring the availability of clinical and externship opportunities, the disbursement of Title IV funds in a timely manner, compliance with high school diploma requirements, preventing substantial misrepresentations, complying with gainful employment requirements, and avoiding significant negative actions with a federal, state, or accrediting agency.
The final rules add more standards related to topics such as the provision of adequate financial aid counseling and career services, ensuring the availability of clinical and externship opportunities, the 34 Table of Contents disbursement of Title IV funds in a timely manner, compliance with high school diploma requirements, preventing substantial misrepresentations, complying with gainful employment requirements, and avoiding significant negative actions with a federal, state, or accrediting agency.
If it were determined that any of our compensation practices violated the incentive compensation law, we could experience an adverse outcome in pending litigation and be subject to substantial monetary liabilities, fines, and other sanctions, any of which could have a material adverse effect on our business, 34 Table of Contents prospects, financial condition and results of operations and could adversely affect our stock price.
If it were determined that any of our compensation practices violated the incentive compensation law, we could experience an adverse outcome in pending litigation and be subject to substantial monetary liabilities, fines, and other sanctions, any of which could have a material adverse effect on our business, prospects, financial condition and results of operations and could adversely affect our stock price.
A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a client institution fails to maintain any of its accreditations or approvals.
A university partner institution could lose the ability to participate in the Title IV programs if it fails to maintain its institutional accreditation, and our university partners’ student enrollments could decline if a university partner institution fails to maintain any of its specialized accreditations or approvals.
Despite our best efforts, we or our university partners may face complaints from our university partners’ students and prospective students over statements made by us and our agents throughout the conduct of all our services which would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.
Despite our best efforts, we or our university partners may face complaints from our university partners’ students and prospective students over statements made by us and our agents throughout the conduct of our services that would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act.
The final regulations also establish new rules for evaluating financial responsibility during a change in ownership. Administrative Capability : ED assesses the administrative capability of each institution that participates in Title IV Programs under a series of separate standards.
The final regulations also established new rules for evaluating financial responsibility during a change in ownership. Administrative Capability : ED assesses the administrative capability of each institution that participates in Title IV programs under a series of separate standards.
For example , GCU, calculated its composite score with respect to its fiscal years ending June 30, 2023 and 2022. As of June 30, 2023 and 2022, GCU’s composite score per GCU’s audited financial statements was 1.8 and 1.8, respectively, using the proprietary school calculation. If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions.
For example , GCU, calculated its composite score with respect to its fiscal years ending June 30, 2024 and 2023. As of June 30, 2024 and 2023, GCU’s composite score per GCU’s audited financial statements was 1.9 and 1.8, respectively, using the proprietary school calculation. If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions.
The U.S. Congress must periodically reauthorize the HEA and annually determine the funding level for each Title IV program. In 2008, the HEA was reauthorized through September 30, 2013 by the Higher Education Opportunity Act.
Congress must periodically reauthorize the HEA and annually determine the funding level for each Title IV program. In 2008, the HEA was reauthorized through September 30, 2013 by the Higher Education Opportunity Act.
Similarly, California passed the California Consumer Privacy Act (CCPA) in 2018 (which went into effect in 2020), and there are similar bills that have been passed or are pending in a number of other states, as well. These state laws represent a trend toward stronger privacy protections and greater data transparency in the U.S.
Similarly, California passed the California Consumer Privacy Act (CCPA) in 2018 (which went into effect in 2020), and there are similar bills that have been passed or are pending in a number of other states, as well. These state laws represent a trend toward stronger privacy protections and greater data transparency in the United States.
Such privacy laws could impose conditions that limit the way we market and provide our services. 37 Table of Contents Our computer networks and the networks of certain of our vendors that hold and manage confidential information on our behalf may be vulnerable to unauthorized access, employee theft or misuse, computer hackers, computer viruses, and other security threats.
Such privacy laws could impose conditions that limit the way we market and provide our services. Our computer networks and the networks of certain of our vendors that hold and manage confidential information on our behalf may be vulnerable to unauthorized access, employee theft or misuse, computer hackers, computer viruses, and other security threats.
An institution that is provisionally certified receives fewer due process rights than those received by other institutions in the event ED takes certain adverse actions against the institution, is required to obtain prior ED approvals 41 Table of Contents of new campuses and educational programs and may be subject to heightened scrutiny by ED.
An institution that is provisionally certified receives fewer due process rights than those received by other institutions in the event ED takes certain adverse actions against the institution, is required to obtain prior ED approvals of new campuses and educational programs and may be subject to heightened scrutiny by ED.
Criticisms of the overall student lending and post-secondary education sectors may impact general public perceptions of educational institutions, including our university partner institutions and us, in a negative manner. Adverse media coverage regarding educational institutions – whether or not a university partner – or regarding third party services such as us directly could damage our reputation.
Criticisms of the overall student lending and post-secondary education sectors may impact general public perceptions of educational institutions, including our university partner institutions and us, in a negative manner. Adverse media coverage regarding educational institutions – whether or not a university partner – or regarding third party servicers such as us could damage our reputation.
We currently provide services to 25 university partners across the United States, GCU is, and will for the foreseeable future remain, our most significant university partner. Accordingly, the risk factors set forth below also include risks attributable to GCU’s operations, which could materially affect us.
Although we currently provide services to 22 university partners across the United States, GCU is, and will for the foreseeable future remain, our most significant university partner. Accordingly, the risk factors set forth below also include risks attributable to GCU’s operations, which could materially affect us.
SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs. It is intended to make it easier for students to take online courses 46 Table of Contents offered by post-secondary institutions based in another state.
SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs. It is intended to make it easier for students to take online courses offered by post-secondary institutions based in another state.
We have invested significant resources to develop and implement features that enhance the online classroom experience, such as delivering course content through streaming video, simulations, and other interactive enhancements as well as technology to meet the back-office support needs of our client institutions’ students.
We have invested significant resources to develop and implement features that enhance the online classroom experience, such as delivering course content through streaming video, simulations, and other interactive enhancements as well as technology to meet the back-office support needs of our university partners institutions’ students.
If any client institution fails to satisfy the relevant accrediting standards, it could lose accreditation, which would cause a revocation of its eligibility to participate in the Title IV programs. This could cause a significant decline in student enrollments and could have a material adverse effect on us.
If any university partner institution fails to satisfy the relevant accrediting standards, it could lose accreditation, which would cause a revocation of its eligibility to participate in the Title IV programs. This could cause a significant decline in student enrollments and could have a material adverse effect on us.
In some cases, these enforcement actions have resulted in material sanctions, loss of Title IV eligibility, or closure in schools. We cannot predict with certainty how all of these regulatory requirements will be applied, or whether we will be able to comply with all of the applicable requirements in the future.
In some cases, these enforcement actions have resulted in material sanctions, loss of Title IV eligibility, or closure in 33 Table of Contents schools. We cannot predict with certainty how all of these regulatory requirements will be applied, or whether we will be able to comply with all of the applicable requirements in the future.
If our client institutions fail to satisfy any of these standards, they could lose state authorization to offer educational programs, which would also cause them to lose eligibility to participate in the Title IV programs and have a material adverse effect on us.
If our university partner institutions fail to satisfy any of these standards, they could lose state authorization to offer educational programs, which would also cause them to lose eligibility to participate in the Title IV programs and have a material adverse effect on us.
Any action by Congress that significantly reduces Title IV program funding, whether through across-the-board funding reductions, sequestration or otherwise, or materially impacts the eligibility of our client institutions or students to participate in Title IV programs would have a material adverse effect on our client institutions enrollment, financial condition, results of operations and cash flows.
Any action by Congress that significantly reduces Title IV program funding, whether through across-the-board funding reductions, sequestration or otherwise, or materially impacts the eligibility of our university partner institutions or students to participate in Title IV programs would have a material adverse effect on our university partner institutions’ enrollment, financial condition, results of operations and cash flows.
Any decline in reputation or changes in policies of GCU that 33 Table of Contents adversely affect its student enrollment and its overall financial and operating results, including as a result of adverse government actions taken against GCU, could materially impact us.
Any decline in reputation or changes in GCU policies that adversely affect its student enrollment and its overall financial and operating results, including as a result of adverse government actions taken against GCU, could materially impact us.
Since the FTC’s statement, ED, the VA and the FTC have initiated multiple actions against GCU, including audits, compliance reviews, civil investigative demands, fines and lawsuits, and the FTC has initiated civil investigative demands and a lawsuit against us, that allege, among other things, misrepresentations made in connection with marketing activities, including statements made related to GCU’s non-profit status.
In the period following the FTC’s statement, ED, the VA and the FTC initiated multiple actions against GCU, including audits, compliance reviews, civil investigative demands, fines and lawsuits, and the FTC has initiated civil investigative demands and a lawsuit against us, that allege, among other things, misrepresentations made in connection with marketing activities, including statements made related to GCU’s non-profit status.
Changing requirements related to data privacy may create increased costs and operational difficulties for university partner institutions and, potentially, for GCE. On December 18, 2020, ED announced that it was finalizing a new Campus Cybersecurity Program framework.
Changing requirements related to data privacy may create increased costs and operational difficulties for university partner institutions and, potentially, for GCE. In December 2020, ED announced that it was finalizing a new Campus Cybersecurity Program framework.
An institution must be accredited by an accrediting commission recognized by ED in order to participate in the Title IV programs. Our primary university partner, GCU, has been regionally accredited by the HLC and its predecessor since 1968, most recently obtaining reaccreditation in 2017 for the ten-year period through 2027, and the HLC approved the Transaction in February 2018.
An institution must be accredited by an accrediting commission recognized by ED in order to participate in the Title IV programs. Our primary university partner, GCU, has been regionally accredited by the HLC and its predecessor since 1968, most recently obtaining reaccreditation in 2017 for the ten-year period through 2027.
State regulatory requirements for online education have historically varied among the states. To address this issue and to meet new ED requirements many schools have applied and have been approved to be an approved institutional participant in the State Authorization Reciprocity Agreement (“SARA”).
State regulatory requirements for online education have historically varied among the states. To address this issue and to meet new ED requirements many schools have applied and have been approved to be approved institutional participants in the State Authorization Reciprocity Agreement (“SARA”).
SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts. GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is administered by the Western Interstate Commission for Higher Education (referred to as W-SARA).
SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts. GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is 39 Table of Contents administered by the Western Interstate Commission for Higher Education (referred to as W-SARA).
See Part 1, Item 3 – Litigation for a discussion of certain litigation matters to which we are a party. In addition, the regulation raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners.
See Part 1, Item 3 – Litigation for a discussion of certain litigation matters to which we are a party. In addition, the incentive compensation rule raises a question as to whether companies like ours, as an entity, are prohibited from entering into tuition revenue-sharing arrangements with university partners.
In addition, other than non-compete agreements of limited duration that we have with certain executive officers, we have 49 Table of Contents not historically sought non-compete agreements with key personnel and they may leave and subsequently compete against us.
In addition, other than non-compete agreements of limited duration that we have with certain executive officers, we have not historically sought non-compete agreements with key personnel and they may leave and subsequently compete against us.
Should those interests diverge in a meaningful way, it could lead to changes in the relationship that would be adverse to GCE. Our Chief Executive Officer’s role as President of GCU may adversely affect his ability to run GCE . Mr. Brian E.
Should those interests diverge in a meaningful way, it could lead to changes in the relationship that would be adverse to us. 27 Table of Contents Our Chief Executive Officer’s role as President of GCU may adversely affect his ability to run GCE . Mr. Brian E.
See “– Regulation of Our University Partners - Coordinated action by federal agencies.” These actions, taken as a whole, appear to be coordinated in the manner described in the 2021 FTC statement.
See “– Regulation of Our University Partners - Coordinated action by federal agencies.” These actions, taken as 40 Table of Contents a whole, appear to be coordinated in the manner described in the 2021 FTC statement.
Additionally, our operations are vulnerable to interruption or malfunction due to events beyond our control, including natural disasters and network and telecommunications failures. Our computer networks may also be vulnerable to unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems.
Additionally, our operations are vulnerable to interruption or malfunction due to events beyond our control, including natural disasters and network and 32 Table of Contents telecommunications failures. Our computer networks may also be vulnerable to unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems.
It is also critical to our success that we convert prospective students to enrolled students in a cost-effective manner and that these enrolled students remain active in the programs of our client institutions.
It is also critical to our success that we convert prospective students to enrolled students in a cost-effective manner and that these enrolled students remain active in the programs of our university partner institutions.
As a service provider, we assist our university partners with some facets of these areas. As such, we must be mindful of, and compliant with, the administrative capability requirements.
As a service provider, we assist our university partners with some facets of these areas. As such, we must be mindful of, and 37 Table of Contents compliant with, the administrative capability requirements.
An institution may lose its eligibility to participate in some or all of the Title IV programs if, for three consecutive years, 30% or more of its students who were required to begin repayment on their student loans in one year default on their payment by the end of the second year.
An institution may lose its eligibility to participate in some or all of the Title IV programs if, for three consecutive years, 30% or more of its students who were required to begin repayment on their student loans in one year default on their payment by the end of the second full year after such repayment start date.
The loss of licensure or authorization in any non-SARA state by a client institution could prohibit us from recruiting prospective students or offering services to current students in that state, which could significantly reduce our university partner’s enrollments.
The loss of licensure or authorization in any non-SARA jurisdiction by a university partner institution could prohibit us from recruiting prospective students or offering services to current students in that jurisdiction, which could significantly reduce our university partner’s enrollments.
In order to maintain current growth rates, we will need to attract a larger percentage of students in existing markets to our client institutions and work with university partner institutions to 36 Table of Contents create new academic programs to attract those students.
In order to maintain current growth rates, we will need to attract a larger percentage of students in existing markets to our university partner institutions and work with our university partner institutions to create new academic programs to attract those students.
The risks we may encounter in acquisitions include: ● i f we incur significant debt to finance a future acquisition and our business does not perform as expected, we may have difficulty complying with debt covenants; ● w e may be unable to make a future acquisition which is in our best interest due to our existing indebtedness; ● i f we use our stock to make a future acquisition, it will dilute existing stockholders; ● w e may have difficulty integrating the operations and personnel of any acquired company; ● t he challenge and additional investment involved with integrating new products, services and technologies into our sales and marketing process; ● o ur ongoing business may be disrupted by transition and integration issues; ● t he costs and complexity of integrating the internal information technology infrastructure of each acquired business with ours may be greater than expected and may require additional capital investments; ● w e may be unable to achieve the financial and strategic goals for any acquired businesses; ● w e may have difficulty in maintaining controls, procedures and policies during the transition and integration period following a future acquisition; ● o ur relationships with existing clients could be adversely affected; and ● a s successor we may be subject to certain liabilities of our acquisition targets.
The risks we may encounter in acquisitions include: ● i f we incur significant debt to finance a future acquisition and our business does not perform as expected, we may have difficulty complying with debt covenants; ● i f we use our stock to make a future acquisition, it will dilute existing stockholders; ● w e may have difficulty integrating the operations and personnel of any acquired company; ● we may face t he challenges and additional investments involved with integrating new products, services and technologies into our sales and marketing process associated with any acquired business; ● o ur ongoing business may be disrupted by transition and integration issues with any acquired business; ● t he costs and complexity of integrating the internal information technology infrastructure of each acquired business with ours may be greater than expected and may require additional capital investments; ● w e may be unable to achieve the financial and strategic goals for any acquired businesses; ● w e may have difficulty in maintaining controls, procedures and policies during the transition and integration period following a future acquisition; ● o ur relationships with existing university partners could be adversely affected following an acquisition; and ● a s successor we may be subject to certain liabilities of our acquisition targets.
If GCU were to terminate or not renew its relationship with us, or if its programs were to materially underperform for any reason, it could negatively affect our reputation and materially adversely impact our revenue and operating results.
If GCU were to terminate or not renew its relationship with us, or if its enrollment were to materially decline for any reason, it could negatively affect our reputation and materially adversely impact our revenue and operating results.
GCU’s board of trustees and management have fiduciary and other duties that require them to focus on the best interests of GCU and, over time, those interests could diverge from those of GCE. GCE believes that its relationship with GCU is and will remain strong.
GCU’s board of trustees and management have fiduciary and other duties that require them to focus on the best interests of GCU and, over time, those interests could diverge from those of GCE. We believe that our relationship with GCU is and will remain strong.
In addition, the terms of our prior credit facility limited, and the terms of any future debt agreements are likely to similarly limit, our ability to pay dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Investors seeking cash dividends should not purchase our common stock.
In addition, the terms of our prior credit facility limited, and the terms of any future debt agreements are likely to similarly limit, our ability to pay dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students to enroll with our university partners. Building awareness of our university partner institutions, and the programs they offer, is critical to our ability to attract prospective students to those institutions.
Our success depends, in part, on our ability to recruit new students to enroll with our university partners. Building awareness of our university partner institutions, and the programs they offer, is critical to our ability to attract prospective students to those institutions.
This may require us to incur substantial additional professional fees and internal costs to further expand our accounting and finance functions and expend significant management efforts.
This may require us to incur substantial additional 42 Table of Contents professional fees and internal costs to further expand our accounting and finance functions and expend significant management efforts.
We are still reviewing the final regulations and cannot predict the ultimate impact of the final regulations on gainful employment and the other topics discussed above, but the final regulations impose a broad range of additional requirements on institutions, which increase the possibility that our university partners could be subject to additional reporting requirements, potential liabilities and sanctions, and potential loss of Title IV eligibility if our efforts, or the efforts of our university partners, to modify operations to comply with the new regulations are unsuccessful, which could have a significant impact on our business and results of operations.
We are still reviewing the final regulations and cannot predict the ultimate impact of the final regulations discussed above, but the final regulations do impose a broad range of additional requirements on institutions, which increases the possibility that our university partners could be subject to additional reporting requirements, potential 35 Table of Contents liabilities and sanctions, and potential loss of Title IV eligibility if our efforts, or the efforts of our university partners, to modify operations to comply with the new regulations are unsuccessful, which could have a significant impact on our business and results of operations.
The FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector and recently filed a complaint against us and GCU related in part to these matters. See Part I, Item 3 – Legal Proceedings – FTC Complaint .
The FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector and has pursued litigation against us and GCU related in part to these matters. See Part I, Item 3 – Legal Proceedings – FTC Complaint .
House of Representatives Committee on Education and the Workforce and other Congressional committees regarding various aspects of the education industry, including accreditation matters, student debt, student recruiting, cost of tuition, distance learning, competency-based learning, student success and outcomes and other matters.
Senate Committee on Health, Education, Labor and Pensions, the U.S. House of Representatives Committee on Education and the Workforce and other Congressional committees regarding various aspects of the education industry, including accreditation matters, student debt, student recruiting, cost of tuition, distance learning, competency-based learning, student success and outcomes and other matters.
In October 2021, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities, a category that includes GCU due to ED’s 2019 decision that GCU does not satisfy ED’s definition of a non-profit entity and, as a 47 Table of Contents result, that ED will continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.
In October 2021, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities, a category that at that time included GCU due to ED’s 2019 decision that GCU did not satisfy ED’s definition of a non-profit entity and, as a result, that ED would continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs.
These and other regulations and guidance documents, including those discussed above under “Business – Regulation,” can increase our operating costs and, in some cases, change the manner in which we operate our business.
These and other regulations and guidance documents, including those discussed above under “Regulation of our Education Services Business,” can increase our operating costs and, in some cases, change the manner in which we operate our business.
A number of competitive factors could cause us to lose potential university partner opportunities or force us to offer our solutions on less favorable economic terms, including: ● c ompetitors may develop service offerings that our potential university partners find to be more compelling than ours; ● c ompetitors may adopt more aggressive pricing policies and offer more attractive sales terms, adapt more quickly to new technologies and changes in university partner and student requirements, and devote greater resources to the acquisition of qualified students than we can; and ● c urrent and potential competitors may establish cooperative relationships among themselves or with third parties to enhance their products and expand their markets, and our industry is likely to see an increasing number of new entrants and increased consolidation.
The competitive landscape may also result in longer and more complex sales cycles with prospective university partners, which would negatively affect our ability to add additional university partners and thus our ability to grow our business. 30 Table of Contents A number of competitive factors could cause us to lose potential university partner opportunities or force us to offer our solutions on less favorable economic terms, including: ● c ompetitors may develop service offerings that our potential university partners find to be more compelling than ours; ● c ompetitors may adopt more aggressive pricing policies and offer more attractive sales terms, adapt more quickly to new technologies and changes in university partner and student requirements, and devote greater resources to the acquisition of qualified students than we can; and ● c urrent and potential competitors may establish cooperative relationships among themselves or with third parties to enhance their products and expand their markets, and our industry is likely to see an increasing number of new entrants and increased consolidation.
The regulations have a general effective date of July 1, 2024. 40 Table of Contents Financial Responsibility : The final regulations include an expanded list of mandatory and discretionary triggering events that could result in ED determining that an institution lacks financial responsibility and must submit to ED a letter of credit or other form of acceptable financial protection and accept other conditions on the institution’s Title IV Program eligibility.
Financial Responsibility : The final regulations include an expanded list of mandatory and discretionary triggering events that could result in ED determining that an institution lacks financial responsibility and must submit to ED a letter of credit or other form of acceptable financial protection and accept other conditions on the institution’s Title IV Program eligibility.
Some of the other factors that could prevent us from successfully recruiting, enrolling, and retaining students in those programs include: ● t he reduced availability of, or higher interest rates and other costs associated with, Title IV loan funds or other sources of financial aid; ● t he emergence of more successful competitors; ● f actors related to our marketing, including the costs and effectiveness of Internet advertising and broad-based branding campaigns and recruiting efforts; ● p erformance problems with our online systems; ● f ailure of our client institutions to maintain institutional and specialized accreditations; ● t he requirements of the education agencies that regulate our client institutions which could restrict their initiation of new programs and modification of existing programs; ● t he requirements of the education agencies that regulate our university partner institutions which restrict the ways schools can compensate their recruitment personnel; ● i ncreased regulation of online education, including in states in which our university partner institutions do not have a physical presence; ● r estrictions that may be imposed on graduates of online programs that seek certification or licensure in certain states; ● s tudent dissatisfaction with our services and programs; ● d amage to our reputation, or to the reputations of our university partners or other adverse effects as a result of negative publicity in the media, in industry or governmental reports, or otherwise, affecting us or other companies in the post-secondary education sector; ● p rice reductions by competitors that we are unwilling or unable to match; ● a decline in the acceptance of online education; ● a n adverse economic or other development that affects job prospects in our core disciplines; and ● a decrease in the perceived or actual economic benefits that students derive from the programs offered by any university partner institution.
Some of the other factors that could prevent us from successfully recruiting, enrolling, and retaining students in those programs include: ● t he reduced availability of, or higher interest rates and other costs associated with, Title IV loan funds or other sources of financial aid; ● t he emergence of more successful competitors; ● f actors related to our marketing, including the costs and effectiveness of Internet advertising and broad-based branding campaigns and recruiting efforts; ● p erformance problems with our online systems; ● f ailure of our university partner institutions to maintain institutional and specialized accreditations; ● t he requirements of the education agencies that regulate our university partner institutions which could restrict their initiation of new programs and modification of existing programs; ● t he requirements of the education agencies that regulate our university partner institutions which restrict the ways schools can compensate persons involved in their recruiting activities; ● i ncreased regulation of online education, including in states in which our university partner institutions do not have a physical presence; ● r estrictions that may be imposed on graduates of online programs that seek certification or licensure in certain states; ● s tudent dissatisfaction with our services and programs; ● lack of employment opportunities for graduates of our university partners in fields related to their educational programs: ● d amage to our reputation, or to the reputations of our university partners or other adverse effects as a result of negative publicity in the media, in industry or governmental reports, or otherwise, affecting us or other companies in the post-secondary education sector; ● p rice reductions by competitors that we are unwilling or unable to match; ● a decline in the acceptance of online education; and ● a decrease in the perceived or actual economic benefits that students derive from the programs offered by any university partner institution. 29 Table of Contents If we are unable to continue to develop awareness of the programs of our university partners, and to provide services to successfully recruit, enroll, and retain students on their behalf, enrollments at our university partners would suffer and our ability to increase revenues and maintain profitability would be significantly impaired.
Government agencies, regulatory agencies, and third parties may conduct compliance reviews, bring claims, or initiate litigation against us or our university partners based on alleged violations of the extensive regulatory requirements applicable to us and our university partners.
This could greatly affect our ability to market our university partners’ online programs. Government agencies, regulatory agencies, and third parties may conduct compliance reviews, bring claims, or initiate litigation against us or our university partners based on alleged violations of the extensive regulatory requirements applicable to us and our university partners.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe can provide no assurance that there will not be incidents in the future or that past or future attacks will not materially affect us, including our business strategy, results of operations, or financial condition. ​ Risk Management and Strategy ​ At a high level, the key objectives for the Company’s cybersecurity program are to implement and sustain effective security controls to stop intrusion attempts and to maintain and continuously improve its ability to respond to 51 Table of Contents attacks and incidents.
Biggest changeRisk Management and Strategy At a high level, the key objectives for the Company’s cybersecurity program are to implement and sustain effective security controls to stop intrusion attempts and to maintain and continuously improve its ability to respond to attacks and incidents.
The Audit Committee receives regular updates from management on cybersecurity risk resulting from risk assessments, progress of risk reduction initiatives, external auditor feedback, control maturity assessments, and relevant internal and industry cybersecurity incidents. ​ Management’s Role : The Company employs a dedicated Chief Information Security Officer (“CISO”) who has primary responsibility for assessing and managing material cybersecurity risks.
The Audit Committee additionally receives regular updates from management on cybersecurity risk resulting from risk assessments, progress of risk reduction initiatives, external auditor feedback, control maturity assessments, and relevant internal and industry cybersecurity incidents. Management’s Role : The Company employs a dedicated Chief Information Security Officer (“CISO”) who has primary responsibility for assessing and managing material cybersecurity risks.
Item 1C. Cybersecurity Like all companies that utilize technology, we are subject to threats of breaches of our technology systems. To mitigate the threat to our business, we take a comprehensive approach to cybersecurity risk management. Our Board and our management actively oversee our risk management program, including the management of cybersecurity risks.
Item 1C. Cybersecurity Like all companies that utilize technology, we are subject to threats of breaches of our technology systems. To mitigate the threat to our business, we take a comprehensive approach to cybersecurity risk management. Our Board of Directors and our management actively oversee our risk management program, including the management of cybersecurity risks.
Our CISO reports to the Audit Committee of the Board quarterly, to provide updates on any new developments and about the effectiveness of the security program.
Our CISO reports to the Audit Committee quarterly, to provide updates on any new developments and about the effectiveness of the security program.
He is also a co-author/contributor for the joint book project, Understanding New Security Threats published by Routledge in 2019, and has published articles and made conference keynote and podcast appearances over the years on cybersecurity topics. ​ For more information regarding the risks we face from cybersecurity threats, please see “Risk Factors.”
He is also a co-author/contributor for the joint book project, Understanding New Security Threats published by Routledge in 2019, and has published articles and made conference keynote and podcast appearances over the years on cybersecurity topics. For more information regarding the risks we face from cybersecurity threats, please see “Item 1A, Risk Factors .”
Prior to joining the Company, he served as a Subject Mater Expert for Threat Prevention at a cyber security firm, consulted for local government, held other security and technology roles in higher education, and served in the US Navy.
Prior to joining the Company, he served as a Subject Mater Expert for Threat Prevention at a cyber security firm, consulted for local government, held other security and technology roles in higher education, and served in the U.S. Navy.
We have established policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats, including those discussed in our Risk Factors.
We have established policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats, including those discussed in Item 1A, Risk Factors .
They receive regular reports from management about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities. Our Audit Committee directly oversees our cybersecurity program.
Both the Board of Directors and the Audit Committee receive regular reports from management about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities. Our Audit Committee directly oversees our cybersecurity program.
Such safeguards are regularly evaluated and improved based on vulnerability assessments, cybersecurity threat intelligence and incident response experience. ​ Incident Response and Recovery Planning : We have established comprehensive incident response and recovery plans that guide our response in the event of a cybersecurity incident.
Such safeguards are regularly evaluated and improved based on vulnerability assessments, cybersecurity threat intelligence and incident response experience. Incident Response and Recovery Planning : We have established comprehensive incident response and recovery plans that guide our response in the event of a cybersecurity incident. We continuously test and evaluate the effectiveness of those plans.
In this regard, the Company has implemented policies and procedures for all employees including: (i) information security/cybersecurity policies, which are internally available for all employees, (ii) information security/cybersecurity awareness training; (iii) a clear escalation process which employees can follow in the event an employee notices something suspicious; and (iv) ensuring that information security/cybersecurity is part of the employee performance evaluation and/or disciplinary process. ​ Governance Disclosure ​ Board Oversight : The Board, in coordination with the Audit Committee of the Board, has responsibility for managing the overall risk strategy for the Company, including cyber security risk.
In this regard, the Company has implemented policies and procedures for all employees including: (i) information security/cybersecurity policies, which are internally available for all employees, (ii) information security/cybersecurity 44 Table of Contents awareness training; (iii) a clear escalation process which employees can follow in the event an employee notices something suspicious; and (iv) ensuring that information security/cybersecurity is part of the employee performance evaluation and/or disciplinary process.
Chief Information Security Officer : Our CISO has led the Company’s security team for almost seven years, overseeing the implementation of multiple new technologies and processes to help protect the organization.
Cybersecurity and Infrastructure Security Agency. Our CISO works closely with our Chief Risk Officer to provide risk reporting and ensure security and compliance. Chief Information Security Officer : Our CISO has led the Company’s security team for more than seven years, overseeing the implementation of multiple new technologies and processes to help protect the organization.
We continuously test and evaluate the effectiveness of those plans. ​ Vendor Risk Management : We have implemented a robust vendor risk management program, which is designed to identify and mitigate cybersecurity threats associated with our use of third-party service providers.
Vendor Risk Management : We have implemented a robust vendor risk management program, which is designed to identify and mitigate cybersecurity threats associated with our use of third-party service providers. Such providers are subject to security risk assessments at the time of onboarding, contract renewal, and upon detection of an increase in risk profile.
Our CISO is supported by a highly skilled team of information security 52 Table of Contents professionals, many of whom have advanced certifications and/or graduate degrees relevant to their job requirements.
Our CISO is supported by a highly skilled team of information security professionals, many of whom have advanced certifications and/or graduate degrees relevant to their job requirements. Our team has participated in multiple national and international cyber security exercises, including Cyber Storm, the national training exercise run by the U.S. Department of Homeland Security in conjunction the U.S.
In addition, we require our providers to meet appropriate security requirements, controls and responsibilities and investigate security incidents that have impacted our third-party providers, as appropriate.
We use a variety of inputs in such risk assessments, including information supplied by providers in response to detailed questionnaires and meetings as well as information from third parties. In addition, we require our providers to meet appropriate security requirements, controls and responsibilities and investigate security incidents that have impacted our third-party providers, as appropriate.
Removed
Such providers are subject to security risk assessments at the time of onboarding, contract renewal, and upon detection of an increase in risk profile. We use a variety of inputs in such risk assessments, including information supplied by providers in response to detailed questionnaires and meetings as well as information from third parties.
Added
We can provide no assurance that there will not be incidents in the future or that past or future attacks will not materially affect us, including our business strategy, results of operations, or financial condition.
Removed
Our team has participated in multiple national and international cyber security exercises, including Cyber Storm, the national training exercise run by the US Department of Homeland Security in conjunction the US Cybersecurity and Infrastructure Security Agency. Our CISO works closely with our Chief Risk Officer to provide risk reporting and ensure security and compliance.
Added
Governance Disclosure Board Oversight : The Board of Directors, in coordination with the Audit Committee of the Board, has responsibility for managing the overall risk strategy for the Company, including cyber security risk.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeGCE has commitments to add more off-campus classroom and laboratory sites as of December 31, 2023 that have not yet commenced and plans to add additional off-campus classroom and laboratory sites in Arizona and in other states in the U.S. to accommodate our growth plans in 2024 and beyond.
Biggest changeGCE has commitments to add more off-campus classroom and laboratory sites as of December 31, 2024 that have not yet commenced and plans to add additional off-campus classroom and laboratory sites in Arizona and in other states in the 45 Table of Contents U.S. to accommodate our growth plans in 2025 and beyond.
In addition to its owned facilities, GCE leases 35 off-campus classroom and laboratory sites for use in serving its university partners, four office locations in California, and office space in Indianapolis, Indiana.
In addition to its owned facilities, GCE leases 39 off-campus classroom and laboratory sites for use in serving its university partners, four office locations in California, and office space in Indianapolis, Indiana.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For information regarding our other material pending legal proceedings, see the sections entitled Pending Litigation Matters within Note 8 Commitments and Contingencies of our notes to consolidated financial statements included in Part IV, Item 15 of this report, which section is incorporated by reference into this Part I, Item 3. Item 4.
Biggest changeItem 3. Legal Proceedings For information regarding our other material pending legal proceedings, see the sections entitled Pending Litigation Matters within Note 7 Commitments and Contingencies of our notes to consolidated financial statements included in Part IV, Item 15 of this report, which section is incorporated by reference into this Part I, Item 3. Item 4.
Removed
Mine Safety Disclosures Not applicable. 53 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+2 added−1 removed5 unchanged
Biggest changeDuring the fourth quarter and the year ended December 31, 2023, GCE repurchased 134,747 and 1,169,396 shares of common stock, respectively, at an aggregate cost of $16.8 million and $130.8 million, respectively. 54 Table of Contents The following table sets forth our share repurchases of common stock and our share repurchases in lieu of taxes, which are not included in the repurchase plan totals as they were effected in conjunction with the vesting of restricted share awards, during each period in the fourth quarter of fiscal 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Maximum Dollar ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ Value of Shares ​ ​ ​ ​ Average ​ Part of Publicly ​ That May Yet Be ​ ​ Total Number of ​ Price Paid ​ Announced ​ Purchased Under Period ​ Shares Purchased ​ Per Share ​ Program ​ the Program Share Repurchases ​ ​ October 1, 2023 – October 31, 2023 81,543 ​ $ 116.45 81,543 ​ $ 272,400,000 November 1, 2023 – November 30, 2023 19,235 ​ $ 137.07 19,235 ​ $ 269,800,000 December 1, 2023 – December 31, 2023 33,969 ​ $ 138.56 33,969 ​ $ 265,100,000 Total 134,747 ​ $ 124.97 134,747 ​ $ 265,100,000 Tax Withholdings ​ ​ October 1, 2023 – October 31, 2023 — ​ $ — — ​ $ — November 1, 2023 – November 30, 2023 — ​ $ — — ​ $ — December 1, 2023 – December 31, 2023 — ​ $ — — ​ $ — Total — ​ $ — — ​ $ — ​ GCE Stock Performance The following graph compares the cumulative total return of our common stock with the cumulative total returns of the S&P 500 Index and our education services peer group of eight companies that includes: Wiley Education Services, Pearson plc, CHEGG, Inc., Laureate Education, Inc., Strategic Education, Inc., Adtalum Global Education, Inc., 2U, Inc. and Coursera.
Biggest changeThe following table sets forth our share repurchases of common stock and our share repurchases in lieu of taxes, which are not included in the repurchase plan totals as they were effected in conjunction with the vesting of restricted share awards, during each period in the fourth quarter of fiscal 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Maximum Dollar ​ ​ ​ ​ ​ ​ ​ Shares Purchased as ​ Value of Shares ​ ​ ​ ​ Average ​ Part of Publicly ​ That May Yet Be ​ ​ Total Number of ​ Price Paid ​ Announced ​ Purchased Under Period ​ Shares Purchased ​ Per Share ​ Program ​ the Program Share Repurchases ​ ​ October 1, 2024 – October 31, 2024 117,477 ​ $ 134.95 117,477 ​ $ 148,600,000 November 1, 2024 – November 30, 2024 139,251 ​ $ 161.54 139,251 ​ $ 126,100,000 December 1, 2024 – December 31, 2024 159,769 ​ $ 165.85 159,769 ​ $ 99,600,000 Total 416,497 ​ $ 155.69 416,497 ​ $ 99,600,000 Tax Withholdings ​ ​ October 1, 2024 – October 31, 2024 — ​ $ — — ​ $ — November 1, 2024 – November 30, 2024 — ​ $ — — ​ $ — December 1, 2024 – December 31, 2024 — ​ $ — — ​ $ — Total — ​ $ — — ​ $ — ​ GCE Stock Performance The following graph compares the cumulative total return of our common stock with the cumulative total returns of the S&P 500 Index and our education services peer group of seven companies that includes: Wiley Education Services, Pearson plc, CHEGG, Inc., Laureate Education, Inc., Strategic Education, Inc., Adtalum Global Education, Inc. and Coursera.
The stock price performance included in this graph is not necessarily indicative of future stock price performance. Item 6. [Reserved] ​ 56 Table of Contents
The stock price performance included in this graph is not necessarily indicative of future stock price performance. Item 6. [Reserved] ​ 48 Table of Contents
Holders As of December 31, 2023, there were approximately 171 registered holders of record of common stock. A substantially greater number of holders of common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
Holders As of December 31, 2024, there were approximately 176 registered holders of record of common stock. A substantially greater number of holders of common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
The current expiration date on the repurchase authorization by our Board of 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. Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable Securities and Exchange Commission rules.
The current expiration date on the repurchase authorization by the Board of Directors is March 1, 2026. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time. Repurchases may be made in the open market or in privately negotiated transactions, pursuant to the applicable SEC rules.
Since the initial approval of our share repurchase plan, we have repurchased 22,741,679 shares of common stock at an aggregate cost of $1,779.9 billion, which purchases are recorded at cost in the accompanying December 31, 2023 consolidated balance sheet and statement of stockholders’ equity. At December 31, 2023, there remained $265.1 million available under our current share repurchase authorization.
Since the initial approval of our share repurchase plan, we have repurchased 23,883,357 shares of common stock at an aggregate cost of $1,945.4 billion, which purchases are recorded at cost in the accompanying December 31, 2024 consolidated balance sheet and statement of stockholders’ equity.
This chart assumes that an investment of $100 was made in our common stock, in the index, and in the peer group on December 31, 2018 and that all dividends paid (if any) were reinvested, and tracks the relative performance of such investments through December 31, 2023. ​ 55 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/18 12/19 12/20 12/21 12/22 12/23 Grand Canyon Education, Inc. 100.00 99.64 96.85 89.15 109.90 137.34 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 2023 Peer Group 100.00 92.63 115.69 92.75 85.84 91.41 ​ The information contained in the performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC nor shall such information be deemed incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
This chart assumes that an investment of $100 was made in our common stock, in the index, and in the peer group on December 31, 2019 and that all dividends paid (if any) were reinvested, and tracks the relative performance of such investments through December 31, 2024. 47 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/19 12/20 12/21 12/22 12/23 12/24 Grand Canyon Education, Inc. 100.00 97.20 89.48 110.30 137.84 171.00 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 2024 Peer Group 100.00 122.18 92.11 90.83 100.46 113.82 ​ The information contained in the performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC nor shall such information be deemed incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In January 2021, July 2021, January 2022, October 2022 and October 2023 our Board of Directors increased the authorization under its existing stock repurchase program by $100.0 million, $970.0 million, $175.0 million, $200.0 million and $200.0 million respectively, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,045.0 million.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers On January 29, 2025, our Board of Directors approved a $200.0 million increase under the Company’s existing stock repurchase program, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,245.0 million.
Removed
The graph also includes for the required transition year, our 2020 selected education peer group of seven companies that includes: Wiley Education Services, Pearson plc, CHEGG, Inc., Laureate Education, Inc., Strategic Education, Inc., Adtalum Global Education, Inc., and 2U, Inc.
Added
At December 31, 2024, there remained $99.6 million available under our current share repurchase authorization (which authorization was increased to $299.6 million in January 2025).
Added
During the fourth quarter and the year ended December 31, 2024, GCE repurchased 416,497 46 Table of Contents and 1,141,678 shares of common stock, respectively, at an aggregate cost of $64.8 million and $165.4 million, respectively.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] ​ 56 ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 57 ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk ​ 64 ​ Item 8. Consolidated Financial Statements and Supplementary Data ​ 65 ​
Biggest changeItem 6. [Reserved] ​ 48 ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 49 ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk ​ 56 ​ Item 8. Consolidated Financial Statements and Supplementary Data ​ 57 ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

61 edited+18 added−6 removed41 unchanged
Biggest changeThe following table reconciles net income to Adjusted EBITDA for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Net income ​ $ 204,985 ​ $ 184,675 ​ Plus: interest expense ​ 33 ​ 2 ​ Less: investment interest and other ​ (10,452) ​ (2,621) ​ Plus: income tax expense ​ 54,690 ​ 55,444 ​ Plus: amortization of intangible assets ​ ​ 8,419 ​ ​ 8,419 ​ Plus: depreciation and amortization ​ 23,554 ​ 22,758 ​ EBITDA ​ 281,229 ​ 268,677 ​ Plus: contributions in lieu of state income taxes (a) ​ 3,500 ​ 5,000 ​ Plus: loss on fixed asset disposal (b) ​ ​ 741 ​ ​ 1,249 ​ Plus: share-based compensation (c) ​ 13,204 ​ 12,642 ​ Plus: litigation and regulatory reserves (d) ​ ​ 3,628 ​ ​ 3,768 ​ Adjusted EBITDA ​ $ 302,302 ​ $ 291,336 ​ (a) Represents contributions to various private Arizona school tuition organizations to assist with funding for education.
Biggest changeFor more information, see our consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 55 Table of Contents The following table reconciles net income to Adjusted EBITDA for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 Net income ​ $ 226,234 ​ $ 204,985 ​ Plus: interest expense ​ 4 ​ 33 ​ Less: investment interest and other ​ (15,920) ​ (10,452) ​ Plus: income tax expense ​ 65,081 ​ 54,690 ​ Plus: amortization of intangible assets ​ ​ 8,419 ​ ​ 8,419 ​ Plus: depreciation and amortization ​ 28,135 ​ 23,554 ​ EBITDA ​ 311,953 ​ 281,229 ​ Plus: contributions in lieu of state income taxes (a) ​ 4,500 ​ 3,500 ​ Plus: share-based compensation (b) ​ ​ 14,225 ​ ​ 13,204 ​ Plus: litigation and regulatory costs (c) ​ ​ 6,203 ​ ​ 3,628 ​ Plus: impairment and other (d) ​ 1,897 ​ — ​ Plus: loss on fixed asset disposal (e) ​ ​ 102 ​ ​ 741 ​ Plus: severance costs (f) ​ ​ 1,133 ​ ​ — ​ Adjusted EBITDA ​ $ 340,013 ​ $ 302,302 ​ (a) Represents contributions to various private Arizona school tuition organizations to assist with funding for education.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2022 incorporated herein by reference. The following table sets forth certain income statement data as a percentage of revenue for each of the periods indicated.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2023 incorporated herein by reference. The following table sets forth certain income statement data as a percentage of revenue for each of the periods indicated.
Amortization of intangible assets for the years ended December 31, 2023 and 2022 were $8.4 million for both periods. As a result of the Acquisition, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives. Investment interest and other .
Amortization of intangible assets for the years ended December 31, 2024 and 2023 were $8.4 million for both periods. As a result of the Acquisition, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives. Investment interest and other .
Item 7. 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 for the years ended December 31, 2023 and 2022 should be read in conjunction with our consolidated financial statements and related notes that appear in Item 8, Consolidated Financial Statements and Supplementary Data .
Item 7. 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 for the years ended December 31, 2024 and 2023 should be read in conjunction with our consolidated financial statements and related notes that appear in Item 8, Consolidated Financial Statements and Supplementary Data .
The current expiration date on the repurchase authorization by our Board of 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.
The current expiration date on the repurchase authorization by our Board of Directors is March 1, 2026. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time.
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.
To address this challenge, we have been working with 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 output method provides a faithful depiction of the performance toward complete satisfaction of the performance obligation and can be tied to the time elapsed which is consumed evenly over the service period and is a direct measurement of the value provided to our partners.
The output method provides a faithful depiction of the performance toward complete 49 Table of Contents 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.
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 .
We anticipate that technology and academic services expenses as a percentage of revenue will increase in the future as we open more off-site classroom and laboratory sites and the growing curriculum cost reimbursements although these increases might be offset by lower faculty reimbursements if more partners choose to adjust their contracts. Counseling services and support .
In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of December 31, 2023, GCE provides education services to 25 university partners across the United States. We seek to add additional university partners and to introduce additional programs with both our existing partners and with new partners.
In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of December 31, 2024, GCE provides education services to 22 university partners across the United States. We seek to add additional university partners and to introduce additional programs with both our existing partners and with new partners.
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.
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 as of December 31, 2024.
During the year ended December 31, 2023 and 2022, $130.8 million and $599.6 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program. In 2023 and 2022, $6.3 million and $4.6 million, respectively, of cash was utilized to purchase common shares withheld in lieu of income taxes resulting from the vesting of restricted share awards.
During the year ended December 31, 2024 and 2023, $165.4 million and $130.8 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program. In 2024 and 2023, $7.8 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.
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.
We believe the growth in the number of ABSN students continues to be 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.
In connection with such contributions made, we received a dollar-for-dollar state income tax credit, which resulted in a reduction in our effective income tax rate to 21.1% and 23.1% for the years ended December 31, 2023 and 2022, respectively. Had these contributions not been made, our effective tax rate would have been 22.1% and 24.7% for 2023 and 2022, respectively.
In connection with such contributions made, we received a dollar-for-dollar state income tax credit, which resulted in a reduction in our effective income tax rate to 22.3% and 21.1% for the years ended December 31, 2024 and 2023, respectively. Had these contributions not been made, our effective tax rate would have been 23.5% and 22.1% for 2024 and 2023, respectively.
As of December 31, 2023 and 2022, GCE has reserved approximately $13,631 and $15,862, respectively, for uncertain tax positions, including interest and penalties. Results of Operations For a discussion of the results of operations for fiscal year 2022 vs 2021, see “Item 7.
As of December 31, 2024 and 2023, GCE has reserved approximately $14,626 and $13,631, respectively, for uncertain tax positions, including interest and penalties. Results of Operations For a discussion of the results of operations for fiscal year 2023 vs 2022, see “Item 7.
Such contributions are viewed by our management to be made in lieu of payments of state income taxes and are therefore excluded from evaluation of our core operating performance. (b) Represent loss on fixed asset disposals. (c) Reflects share-based compensation expense. (d) Reflects primarily regulatory litigation.
Such contributions are viewed by our management to be made in lieu of payments of state income taxes and are therefore excluded from evaluation of our core operating performance. (b) Reflects share-based compensation expense. (c) Reflects primarily regulatory litigation.
Amortization of intangible assets have been excluded from the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 Costs and expenses Technology and academic services 16.1 % 16.5 % Counseling services and support 31.5 30.0 Marketing and communication 21.1 21.5 General and administrative 4.5 5.0 ​ 58 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Service revenue .
Amortization of intangible assets have been excluded from the table below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2024 2023 Costs and expenses Technology and academic services 16.0 % 16.1 % Counseling services and support 31.3 31.5 Marketing and communication 20.6 21.1 General and administrative 4.5 4.5 ​ Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Service revenue .
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 increases in employee compensation including share-based compensation and benefits were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments, benefit costs and the increased number of off-campus classroom and laboratory sites open year over year.
This increase was primarily due to increases in occupancy and depreciation and other technology and academic costs of $4.2 million and $1.9 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation and benefit costs of $1.7 million.
This increase was primarily due to increases in other technology and academic costs and in occupancy and depreciation of $8.3 million and $4.9 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation of $3.0 million.
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 Fall 2023 semester.
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 Summer and Fall 2024 semesters.
Liquidity and Capital Resources ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, (In thousands) ​ 2023 ​ 2022 Cash, cash equivalents and investments ​ $ 244,506 ​ $ 181,704 Overview Our liquidity position, as measured by cash and cash equivalents and investments increased by $62.8 million between December 31, 2022 and December 31, 2023, which was largely attributable to cash flows from operations exceeding share repurchases, investment purchases, net of proceeds and capital expenditures during the year ended December 31, 2023 .
Liquidity and Capital Resources ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, (In thousands) ​ 2024 ​ 2023 Cash, cash equivalents and investments ​ $ 324,623 ​ $ 244,506 Overview Our liquidity position, as measured by cash and cash equivalents and investments increased by $80.1 million between December 31, 2023 and December 31, 2024, which was largely attributable to cash flows from operations exceeding share repurchases, investment purchases, net of proceeds and capital expenditures during the year ended December 31, 2024 .
Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2023 ​ 2022 Net cash used in financing activities ​ $ (137,124) ​ $ (604,212) Financing activities consumed $137.1 million of cash in the year ended December 31, 2023 compared to $604.2 million in the year ended December 31, 2022.
Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2024 ​ 2023 Net cash used in financing activities ​ $ (173,175) ​ $ (137,124) Financing activities consumed $173.2 million of cash in the year ended December 31, 2024 compared to $137.1 million in the year ended December 31, 2023.
Our marketing and communication expenses for the year ended December 31, 2023 were $202.8 million, an increase of $6.7 million, or 3.4%, as compared to marketing and communication expenses of $196.1 million for the year ended December 31, 2022.
Our marketing and communication expenses for the year ended December 31, 2024 were $212.4 million, an increase of $9.6 million, or 4.7%, as compared to marketing and communication expenses of $202.8 million for the year ended December 31, 2023.
Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2023 ​ 2022 Net cash provided by operating activities ​ $ 243,662 ​ $ 220,819 The increase in cash generated from operating activities between the year ended December 31, 2022 and the year ended December 31, 2023 was primarily due to increased income and changes in working capital balances, primarily accounts receivable and income taxes receivable/payable.
Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2024 ​ 2023 Net cash provided by operating activities ​ $ 289,958 ​ $ 243,662 The increase in cash generated from operating activities between the year ended December 31, 2023 and the year ended December 31, 2024 was primarily due to increased income and changes in working capital balances, primarily accounts payable and accrued liabilities.
Adjusted EBITDA has limitations as an analytical tool in that, among other things, it does not reflect: ● cash expenditures for capital expenditures or contractual commitments; ● changes in, or cash requirements for, our working capital requirements; ● interest expense, or the cash required to replace assets that are being depreciated or amortized; and ● the impact on our reported results of earnings or charges resulting from the items for which we make adjustments to our EBITDA, as described above and set forth in the table below. 63 Table of Contents In addition, other companies, including other companies in our industry, may calculate these measures differently than we do, limiting the usefulness of Adjusted EBITDA as a comparative measure.
Adjusted EBITDA has limitations as an analytical tool in that, among other things, it does not reflect: ● cash expenditures for capital expenditures or contractual commitments; ● changes in, or cash requirements for, our working capital requirements; ● interest expense, or the cash required to replace assets that are being depreciated or amortized; and ● the impact on our reported results of earnings or charges resulting from the items for which we make adjustments to our EBITDA, as described above and set forth in the table below.
Our marketing and communication expenses as a percentage of service revenue decreased by 0.4% to 21.1% for the year ended December 31, 2023, from 21.5% for the year ended December 31, 2022, primarily due to our ability to leverage marketing and communications costs over an increasing revenue base.
Our marketing and communication expenses as a percentage of revenue decreased by 0.5% to 20.6% for the year ended December 31, 2024, from 21.1% for the year ended December 31, 2023, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base.
Our partners’ enrollment varies as a result of new enrollments, graduations, and student attrition. Service revenues in the summer months (May through August) are lower primarily due to the majority of GCU’s traditional ground students not attending courses during the summer months, which affects our results for our second and third fiscal quarters.
Service revenues in the summer months (May through August) are lower primarily due to the majority of GCU’s traditional ground students not attending courses during the summer months, which affects our results for our second and third fiscal quarters.
GCE’s most significant university partner is GCU, a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online, on ground at its campus in Phoenix, Arizona and at six off-campus classroom and laboratory sites.
GCE’s most significant university partner is GCU, a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online, on ground at its campus in Phoenix, Arizona and at eight off-campus classroom and laboratory sites. We also provide education services to numerous university partners across the United States.
Our technology and academic services expenses for the year ended December 31, 2023 were $154.9 million, an increase of $4.4 million, or 2.9%, as compared to technology and academic services expenses of $150.5 million for the year ended December 31, 2022.
Our technology and academic services expenses for the year ended December 31, 2024 were $165.1 million, an increase of $10.2 million, or 6.6%, as compared to technology and academic services expenses of $154.9 million for the year ended December 31, 2023.
Our unrestricted cash and cash equivalents and investments were $244.5 million and $181.7 million at December 31, 2023 and 2022, respectively.
Our unrestricted cash and cash equivalents and investments were $324.6 million and $244.5 million at December 31, 2024 and 2023, respectively.
The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 117,279 at December 31, 2023, an increase of 8.0% over enrollments at December 31, 2022. Partner enrollments totaled 121,250 at December 31, 2023 as compared to 112,955 at December 31, 2022.
The increase year over year in service revenue was primarily due to an increase in GCU enrollments to 123,149 at December 31, 2024, an increase of 5.0% over enrollments at December 31, 2023. Partner enrollments totaled 127,155 at December 31, 2024 as compared to 121,250 at December 31, 2023.
GCU online enrollments were 92,070 at December 31, 2023, up from 83,696 at December 31, 2022, an increase of 10.0% between years Technology and academic services .
GCU online enrollments were 98,597 at December 31, 2024, up from 92,070 at December 31, 2023, an increase of 7.1% between years. Technology and academic services .
In the year ended December 31, 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 $35.0 million and $61.5 million, respectively.
In the year ended December 31, 2023, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $35.0 million. In the year ended December 31, 2024 and 2023 cash used in investing activities also included capital expenditures totaling $37.2 million and $44.5 million, respectively.
GCE generates all of its revenue through services agreements with its university partners (“Services Agreements”), pursuant to which GCE provides integrated technology and academic services, marketing and communication services, and as applicable, certain back office services to its university partners in return for a percentage of tuition and fee revenue. 57 Table of Contents GCE’s Services Agreements have a single performance obligation, as the promises to provide the identified services are not distinct within the context of these agreements.
GCE generates all of its revenue through services agreements with its university partners (“Services Agreements”), pursuant to which GCE provides integrated technology and academic services, marketing and communication services, and as applicable, certain back office services to its university partners in return for a percentage of tuition and fee revenue.
Our technology and academic services expenses as a percentage of service revenue decreased 0.4% to 16.1% for the year ended December 31, 2023, from 16.5% for the year ended December 31, 2022 due primarily to the decreased faculty reimbursements between years.
Our technology and academic services expenses as a percentage of revenue decreased by 0.1% to 16.0% for the year ended December 31, 2024, from 16.1% for the year ended December 31, 2023. This decrease was primarily due to the decreased faculty reimbursements between years partially offset by the growing curriculum cost reimbursement.
This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefit expenses and increases in other counseling services and support expenses of $25.3 million and $4.1 million, respectively. These increases were partially offset by decreases in depreciation, amortization and occupancy costs of $0.4 million.
This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefits, in occupancy and depreciation costs and in other counseling services and support expenses of $18.0 million, $2.9 million and $0.3 million, respectively.
We anticipate that counseling services and support expenses 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 .
We anticipate that counseling services and support expense will increase in the future as we continue to invest to meet our partners’ needs although we might continue to have a decline in these costs as a percentage of revenue. Marketing and communication .
Our general and administrative expenses for the year ended December 31, 2023 were $43.2 million, a decrease of $2.3 million, or 5.0%, as compared to general and administrative expenses of $45.5 million for the year ended December 31, 2022.
Our general and administrative expenses for the year ended December 31, 2024 were $46.3 million, an increase of $3.1 million, or 7.1%, as compared to general and administrative expenses of $43.2 million for the year ended December 31, 2023.
Our counseling services and support expenses for the year ended December 31, 2023 were $302.3 million, an increase of $29.0 million, or 10.6%, as compared to counseling services and support expenses of $273.3 million for the year ended December 31, 2022.
Our counseling services and support expenses for the year ended December 31, 2024 were $323.5 million, an increase of $21.2 million, or 7.0%, as compared to counseling services and support 51 Table of Contents expenses of $302.3 million for the year ended December 31, 2023.
Our service revenue for the year ended December 31, 2023 was $960.9 million, an increase of $49.6 million, or 5.4%, as compared to service revenue of $911.3 million for the year ended December 31, 2022.
Our service revenue for the year ended December 31, 2024 was $1,033.0 billion, an increase of $72.1 million, or 7.5%, as compared to service revenue of $960.9 million for the year ended December 31, 2023.
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 increases in other technology and academic costs and occupancy and depreciation 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 as well as an increase in curriculum cost reimbursement to our university partners.
Investment interest and other for the year ended December 31, 2023 was $10.5 million, an increase of $7.9 million, as compared to $2.6 million for the year ended December 31, 2022. Interest rates have increased in 2023 resulting in increased investment interest income. Income tax expense .
Investment interest and other for the year ended December 31, 2024 was $15.9 million, an increase of $5.4 million, as compared to $10.5 million for the year ended December 31, 2023 due to higher investment balances and higher returns on those balances. Income tax expense .
Income tax expense for the year ended December 31, 2023 was $54.7 million, a decrease of $0.7 million, or 1.4%, as compared to income tax expense of $55.4 million for the year ended December 31, 2022. Our effective tax rate was 21.1% during the year ended December 31, 2023 compared to 23.1% during the year ended December 31, 2022.
Income tax expense for the year ended December 31, 2024 was $65.1 million, an increase of $10.4 million, or 19.0%, as compared to income tax expense of $54.7 million for the year ended December 31, 2023.
This increase was primarily attributable to the increased cost to market our university partners’ programs and due to the marketing of new university partners and new off-campus classroom and laboratory sites which resulted in increased advertising of $6.4 million and increased employee compensation expenses and related expenses including share-based compensation of $0.6 million, partially offset by a decrease in other marketing supplies of $0.3 million.
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 $7.7 million, increased employee compensation, including share-based compensation and benefits of $1.1 million, an increase in other marketing and communication expenses of $0.5 million and an increase in occupancy and depreciation costs of $0.3 million.
The decrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements to our university partners 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.
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, partially offset by increased headcount to support our 22 university partners and their increased enrollment growth, tenure-based salary adjustments, benefit costs and the increased number of off-campus classroom and laboratory sites year over year.
The increase in other counseling services and support expenses is primarily the result of increased travel costs for our university partners.
The increase in occupancy and depreciation is primarily related to higher depreciation expense associated with our continued enhancements to technology infrastructure and internal-use software development. The increase in other counseling services and support expenses is primarily the result of increased travel costs for our 22 university partners.
We compensate for these limitations by relying primarily on our GAAP results and use Adjusted EBITDA only as a supplemental performance measure. For more information, see our consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We compensate for these limitations by relying primarily on our GAAP results and use Adjusted EBITDA only as a supplemental performance measure.
University partner enrollments at our off-campus classroom and laboratory sites were 4,481, a decrease of 3.3% over enrollments at December 31, 2022, which includes 510 and 320 GCU students at December 31, 2023 and 2022, respectively.
University partner enrollments at our off-campus classroom 50 Table of Contents and laboratory sites were 4,919, an increase of 9.8% over enrollments at December 31, 2023, which includes 913 and 510 GCU students at December 31, 2024 and 2023, respectively, and an increase in revenue per student year over year.
The decrease in our effective tax rate between periods is attributable to other discrete tax items recorded in the respective periods and higher excess tax benefits of $0.9 million compared to excess tax benefits of $0.1 million for the year ended December 31, 2022, partially offset by a lower contribution in lieu of state income taxes of $3.5 million in 2023 compared to $5.0 million in 2022.
This was partially offset by an increase in excess tax benefits of $1.5 million as compared to $0.9 million in the years ended December 31, 2024 and 2023, respectively, and a higher contribution in lieu of state income taxes of $4.5 million in 2024 compared to $3.5 million in 2023.
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.
GCE’s Services Agreements have a single performance obligation, as the promises to provide the identified services are not distinct within the context of these agreements. The single performance obligation is delivered as our partners receive and consume benefits, which occurs ratably over a series of distinct service periods (daily or semester).
Changes in these balances are included in the changes in assets and liabilities presented in the consolidated statement of cash flows . ​ 61 Table of Contents Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2023 ​ 2022 Net cash used in investing activities ​ $ (80,472) ​ $ (97,139) Investing activities consumed $80.5 million of cash in the year ended December 31, 2023 compared to $97.1 million in the year ended December 31, 2022.
Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2024 ​ 2023 Net cash provided by (used in) investing activities ​ $ 61,365 ​ $ (80,472) Investing activities provided $61.4 million of cash in the year ended December 31, 2024 compared to consuming $80.5 million in the year ended December 31, 2023.
Share Repurchase Program In January 2021, July 2021, January 2022, October 2022 and October 2023 our Board of Directors increased the authorization under its existing stock repurchase program by $100.0 million, $970.0 million, $175.0 million, $200.0 million and $200.0 million respectively, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,045.0 million.
The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares. Share Repurchase Program On January 29, 2025, 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 $2,245.0 million.
Our general and administrative expenses as a percentage of service revenue decreased by 0.5% to 4.5% for the year ended December 31, 2023, from 5.0% for the year ended December 31, 2022. General and administrative expenses as a percentage of revenue could increase in 2024 due to higher expected legal costs. Amortization of intangible assets .
Our general and administrative expenses as a percentage of revenue stayed flat at 4.5% for the years ended December 31, 2024 and 2023 due to our ability to leverage our general and administrative expenses across an increasing revenue base partially offset by the severance costs and the increase in professional fees including legal costs.
See Note 9 - Leases , in Item 8, Consolidated Financial Statements and Supplementary Data. There are no other material contractual obligations or commitments for the Company.
There are no other material contractual obligations or commitments for the Company.
Accounts receivable increased between December 31, 2022 and December 31, 2023 by $1.4 million which was lower than the increase between December 31, 2021 and December 31, 2022 of $7.4 million due to the timing of collections on receivables.
Accounts payable increased between December 31, 2023 and December 31, 2024 by $9.7 million compared to the decrease between December 31, 2022 and December 31, 2023 of $3.1 million due to the timing of vendor payments.
Since 2011, we have repurchased 22.7 million shares of common stock at an aggregate cost of $1,779.9 billion, which includes 1,169,396 shares of common stock at an aggregate cost of $130.8 million during the year ended December 31, 2023. 62 Table of Contents Contractual Obligations Our contractual obligations primarily consist of capital expenditures primarily for new off-campus classroom and laboratory sites opening and continued spend on computer equipment, software licenses, internal software development and furniture and equipment to support our increasing employee headcount.
Contractual Obligations Our contractual obligations primarily consist of capital expenditures primarily for new off-campus classroom and laboratory sites opening and continued spend on computer equipment, software licenses, internal software development and furniture and equipment to support our increasing employee headcount. See Note 6 - Leases , in Item 8, 54 Table of Contents Consolidated Financial Statements and Supplementary Data.
Our net income for the year ended December 31, 2023 was $205.0 million, an increase of $20.3 million, or 11.0% as compared to $184.7 million for the year ended December 31, 2022, due to the factors discussed above. 60 Table of Contents Seasonality Our service 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 net income for the year ended December 31, 2024 was $226.2 million, an increase of $21.2 million, or 10.4% as compared to $205.0 million for the year ended December 31, 2023, due to the factors discussed above.
This decrease was primarily attributable to a decrease in the contribution made in lieu of state income taxes, decreased employee compensation, including share-based compensation and benefit expenses and a decrease in professional fees of $1.5 million, $0.7 million and $0.2 million, respectively, partially offset by an increase in other administrative expenses of $0.1 million.
This increase was primarily attributable to an increase in professional fees including legal costs of $2.2 million, employee compensation, including share-based compensation and benefits of $1.4 million, which includes $1.1 million in severance costs recorded for an executive that resigned June 30, 2024, an increase in contributions in lieu of state income taxes of $1.0 million and increases in occupancy and depreciation costs of $0.2 million.
We opened six new off-campus classroom and laboratory sites in the year ended December 31, 2022 and five sites in the year ended December 31, 2023 increasing the total number of these sites to 40 at December 31, 2023. Enrollments for GCU ground students were 25,209 at December 31, 2023 up from 24,943 at December 31, 2022.
We opened five sites in the year ended December 31, 2023, six sites in the year ended December 31, 2024 and closed one site increasing the total number of these sites to 45 at December 31, 2024, which has also positively impacted the enrollment growth.
Our counseling services and support expenses as a percentage of service revenue increased 1.5% to 31.5% for the year ended December 31, 2023, from 30.0% for the year ended December 31, 2022 primarily due to increased travel costs and the increase in our employee base and their compensation to meet our university partners’ growth expectations and retain our employees increasing at 59 Table of Contents a faster rate than revenue growth as our partners’ programs that are growing at a more accelerated rate generally cost more to service.
Our counseling services and support expenses as a percentage of revenue decreased 0.2% to 31.3% for the year ended December 31, 2024, from 31.5% for the year ended December 31, 2023 primarily due to our ability to leverage our counseling services and support expenses across an increasing revenue base.
Income taxes receivable/payable decreased by $0.4 million between December 31, 2022 and December 31, 2023 whereas it increased by $4.8 million between December 31, 2021 and December 31, 2022. We define working capital as the assets and liabilities, other than cash, generated through the Company’s primary operating activities.
We define working capital as the 53 Table of Contents 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 .
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 .
We anticipate that marketing and communication expenses will increase in the future as we continue to invest to meet our partners’ needs although we might continue to have a decline in these costs as a percentage of revenue. General and administrative .
Removed
In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly owned subsidiary, Orbis Education .
Added
Service revenue is recognized over time using the output method of measuring progress towards complete satisfaction of the single performance obligation.
Removed
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.
Added
Excluding sites closing in 2024 to new enrollments, total enrollments at our off-campus classroom and laboratory sites increased 14.9% between years.
Removed
Such decreases were partially offset by increased headcount to support our 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.
Added
The increase in revenue per student between years is primarily due to the s ervice revenue per student for ABSN students at off-campus classroom and laboratory sites generating 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 our partners’ students take more credits on average per semester.
Removed
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.
Added
The increase in revenue per student in the year ended December 31, 2024 was also due to the additional day for leap year in 2024 which added additional service revenue of $1.5 million as compared to the prior year and we earned revenue in 2024 with a university partner in which we helped the partner develop an ABSN program under a cost plus arrangement.
Removed
In the year ended December 31, 2023 and 2022 cash used in investing activities also included capital expenditures totaling $44.5 million and $35.2 million, respectively.
Added
We will earn limited revenue with this partner going forward.
Removed
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 portion of its cash flows from operations to repurchase its shares.
Added
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.
Added
Partner enrollments totaled 127,155 at December 31, 2024 as compared to 121,250 at December 31, 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.
Added
Enrollments for GCU ground students were 24,552 at December 31, 2024 down from 25,209 at December 31, 2023 due to a small decline in traditional ground students year over year and the continued decline in professional studies students (working adults attending the university’s traditional campus at night), partially offset by an increase in ABSN students between years.
Added
These increases were partially offset by a decrease in other administrative expenses of $1.7 million primarily due to lower travel costs.
Added
We anticipate that general and administrative expenses will increase in the future and these costs as a percentage of revenue might increase if legal costs continue to rise faster than our revenue growth rate. Impairment and other.
Added
Impairment and other expenses of $1.9 million for the year ended December 31, 2024 primarily includes the write-off of an internal use software project that the Company had been attempting to develop for its other university partners that has been terminated and costs relating to exiting certain off-campus classroom and laboratory sites. Amortization of intangible assets .
Added
Our effective tax rate was 22.3% during the year ended December 31, 2024 compared to 21.1% during the year ended 52 Table of Contents December 31, 2023. The effective tax rate increased year over year due to higher state income taxes.
Added
Seasonality Our service 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk . As of December 31, 2023, we have no derivative financial instruments or derivative commodity instruments. We invest cash in excess of current operating requirements in short term certificates of deposit and money market instruments, municipal bond portfolios, or municipal mutual funds at multiple financial institutions.
Biggest changeAlthough we do not currently have any investments, we have historically, and may in the future invest cash in excess of current operating requirements in short term certificates of deposit and money market instruments, municipal bond portfolios, or municipal mutual funds at multiple financial institutions. Interest rate risk .
Interest rate risk . We manage interest rate risk by investing excess funds in cash equivalents, BBB or higher rated corporate bonds, commercial paper, agency bonds, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations bearing variable interest rates, which are tied to various market indices or individual bond coupon rates.
We manage interest rate risk by investing excess funds in cash equivalents, BBB or higher rated corporate bonds, commercial paper, agency bonds, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations bearing variable interest rates, which are tied to various market indices or individual bond coupon rates.
At December 31, 2023, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows. 64 Table of Contents
At December 31, 2024, we do not currently have any investments, and therefore a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows. 56 Table of Contents
Added
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk . As of December 31, 2024, we have no derivative financial instruments or derivative commodity instruments.

Other LOPE 10-K year-over-year comparisons