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What changed in Grand Canyon Education, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Grand Canyon Education, Inc.'s 2022 and 2023 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 2023 report.

+387 added−357 removedSource: 10-K (2024-02-13) vs 10-K (2023-02-16)

Top changes in Grand Canyon Education, Inc.'s 2023 10-K

387 paragraphs added · 357 removed · 270 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

106 edited+45 added−40 removed164 unchanged
Biggest changeTo the extent our services for a university partner include conducting returns to Title IV, as they do with GCU, we would likely be jointly and severally liable to ED, along with the relevant university partner, for return of those funds. 24 Table of Contents The “90/10 Rule.” A requirement of the HEA, commonly referred to as the “90/10 Rule,” that is applicable only to proprietary, post-secondary educational institutions, provides that an institution loses its eligibility to participate in the Title IV programs if the institution derives more than 90% of its revenue for each of two consecutive fiscal years from Title IV program funds.
Biggest changeThe “90/10 Rule.” A requirement of the HEA, commonly referred to as the “90/10 Rule,” that is applicable only to proprietary, post-secondary educational institutions, provides that an institution loses its eligibility to participate in the Title IV programs if the institution derives more than 90% of its revenue for each of two consecutive fiscal years from Title IV program funds.
Ensuring the Best Schools for Veterans Act of 2022 On August 26, 2022, President Biden signed into law the Ensuring the Best Schools for Veterans Act of 2022, which amended prior statutory language and made modifications to how the VA operationalizes the 85/15 requirement (that is, the rule that generally forbids use of Department of Veterans Affairs benefits for students enrolling in a program in which more than 85% of students enrolled in the program have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA).
On August 26, 2022, President Biden signed into law the Ensuring the Best Schools for Veterans Act of 2022, which amended prior statutory language and made modifications to how the VA operationalizes the 85/15 requirement (that is, the rule that generally forbids use of Department of Veterans Affairs benefits for students enrolling in a program in which more than 85% of students enrolled in the program have any portion of their tuition, fees, or other charges paid to or for them by the institution or by the VA).
If an institution exceeds the 90% threshold for two consecutive fiscal years and it and its students have received Title IV funds during the subsequent period of ineligibility, the institution will be required to return those Title IV funds to the applicable lender or the ED.
If an institution exceeds the 90% threshold for two consecutive fiscal years and it and its students have received Title IV funds during the subsequent period of ineligibility, the institution will be required to return those Title IV funds to the applicable lender or ED.
If the ED official or hearing official approves the borrower’s defense to repayment through the applicable administrative process established in the proposed regulations, ED may discharge the borrower’s obligation to repay some or all of the borrower’s student loans, may return to the borrower amounts already paid by the borrower toward the discharged portion of the loan, and may initiate a separate proceeding to collect the discharged and returned amounts from the institution.
If ED official or hearing official approves the borrower’s defense to repayment through the applicable administrative process established in the proposed regulations, ED may discharge the borrower’s obligation to repay some or all of the borrower’s student loans, may return to the borrower amounts already paid by the borrower toward the discharged portion of the loan, and may initiate a separate proceeding to collect the discharged and returned amounts from the institution.
On August 10, 2021, the ED announced its intention to establish a negotiated rulemaking committee to develop proposed regulations for borrower defenses to repayment and other topics related to programs authorized under Title IV of the HEA.
On August 10, 2021, ED announced its intention to establish a negotiated rulemaking committee to develop proposed regulations for borrower defenses to repayment and other topics related to programs authorized under Title IV of the HEA.
The final rule also sets the expectation that the ED will hold colleges accountable for the cost of discharges, including establishing a recoupment process separate from the approval of BDTR claims.
The final rule also sets the expectation that ED will hold colleges accountable for the cost of discharges, including establishing a recoupment process separate from the approval of BDTR claims.
Under the Act, the FTC may secure penalties against entities not a party to an original proceeding if the FTC can show that the entity had actual knowledge that the conduct in question was found to be unfair or deceptive.
Under the FTC Act, the FTC may secure penalties against entities not a party to an original proceeding if the FTC can show that the entity had actual knowledge that the conduct in question was found to be unfair or deceptive.
THRIVE Act On June 8, 2021, President Biden signed into law the Training in High-Demand Roles to Improve Veteran Employment Act (the “THRIVE Act”), which amended provisions of the Veterans Health Care and Benefits Improvement Act and the American Rescue Plan Act. The law requires the U.S.
On June 8, 2021, President Biden signed into law the Training in High-Demand Roles to Improve Veteran Employment Act (the “THRIVE Act”), which amended provisions of the Veterans Health Care and Benefits Improvement Act and the American Rescue Plan Act. The law requires the U.S.
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.
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.
Additionally, on January 4, 2023, the ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking, including on Return to Title IV funds. No specific proposals have been put forth at this time.
Additionally, on January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking, including on Return to Title IV funds. No specific proposals have been put forth at this time.
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, 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.
The THRIVE Act requires the VA to take disciplinary action if a person with whom an institution has a recruiting or educational services agreement violates the VA’s incentive compensation bans.
The THRIVE Act requires the VA to take disciplinary action if a person with whom an institution has a recruiting or educational services agreement violates the VA’s incentive compensation bans. REMOTE Act.
REGULATION OF OUR UNIVERSITY PARTNERS Our current university partners and all likely future university partners are required to be authorized by appropriate state post-secondary, licensure, and certification authorities. In addition, in order to participate in the federal student financial aid programs, our university partners will need to be accredited by an accrediting commission recognized by ED.
Our current university partners and all likely future university partners are required to be authorized by appropriate state post-secondary, licensure, and certification authorities. In addition, in order to participate in the federal student financial aid programs, our university partners will need to be accredited by an accrediting commission recognized by ED.
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 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 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.
The ARPA amends the 90/10 rule by treating other “Federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution” in the same way as Title IV funds are currently treated in the 90/10 rule calculation.
The ARPA amended the 90/10 rule by treating other “Federal funds that are disbursed or delivered to or on behalf of a student to be used to attend such institution” in the same way as Title IV funds are currently treated in the 90/10 rule calculation.
If ED notifies an institution that its cohort default rates exceeded 30%, for each of its three most recent federal fiscal years, the institution’s participation in the 25 Table of Contents FDL Program and the Pell grant program would end 30 days after that notification, unless the institution appeals that determination in a timely manner on specified grounds and according to specified procedures.
If ED notifies an institution that its cohort default rates exceeded 30%, for each of its three most recent federal fiscal years, the institution’s participation in the FDL Program and the Pell grant program would end 30 days after that notification, unless the institution appeals that determination in a timely manner on specified grounds and according to specified procedures.
REMOTE Act On December 21, 2021, President Biden signed into law the Responsible Education Mitigating Options and Technical Extensions (“REMOTE”) Act, which amended provisions of the Veterans Health Care and Benefits Improvement Act, the American Rescue Plan Act, and the THRIVE Act.
On December 21, 2021, President Biden signed into law the Responsible Education Mitigating Options and Technical Extensions Act, which amended provisions of the Veterans Health Care and Benefits Improvement Act, the American Rescue Plan Act, and the THRIVE Act.
For a school that is provisionally certified on a month-to-month basis, like GCU, 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 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.
According to the DCL, ED does not consider payment based on the amount of tuition generated by an institution to violate the incentive compensation ban if the payment compensates an “unaffiliated third party” that provides a set of “bundled services” that includes recruitment services, such as those we 26 Table of Contents provide.
According to the DCL, ED does not consider payment based on the amount of tuition generated by an institution to violate the incentive compensation ban if the payment compensates an “unaffiliated third party” that provides a set of “bundled services” that includes recruitment services, such as those we provide.
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 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 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.
GCE’s commitment to fostering diversity in its community is evident in the following: ● Our Diversity Statement - Grand Canyon Education is a faith-friendly shared services provider that embraces a world-view which outlines a responsibility to both charity and stewardship which simply stated is, ‘to love others as yourself’.
GCE’s commitment to fostering diversity in its community is evident in the following: ● Our Diversity Statement - Grand Canyon Education is a faith-friendly shared services provider that embraces a worldview which outlines a responsibility to both charity and stewardship which simply stated is, ‘to love others as yourself’.
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.
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.
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 of these regulations 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 GCE. Compliance reviews.
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 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 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.
Imposition of these sanctions could have a negative impact on our ability to conduct our business. 23 Table of Contents 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 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.
Any such actions by legislative or regulatory bodies that 31 Table of Contents affect our programs and operations could have a material adverse effect on our student population and our partner institutions, including the need to cease offering a number of programs.
Any such actions by legislative or regulatory bodies that affect our programs and operations could have a material adverse effect on our student population and our partner institutions, including the need to cease offering a number of programs.
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 rules.
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.
While GCU largely complied with the previously published gainful employment rules, the previously published draft rates did indicate that four current degree programs were in the “Zone” – that is, potentially faced sanctions in the future if GCU could not reform the program to comply with the regulations – including three undergraduate education programs and the Masters in Theology.
While GCU largely complied with the previously published gainful employment rules, those rules did indicate that four current degree programs were in the “Zone” – that is, potentially faced sanctions in the future if GCU could not reform the programs to comply with the regulations – including three undergraduate education programs and the Masters in Theology.
In each of 2022 and 2021, we contributed $5.0 million 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 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.
The topics include: ● Distance Education ● Accreditation and Related Issues ● State Authorization ● Third-Party Servicers and Related Agencies ● Cash Management ● Return to Title IV ● Federal TRIO Programs ● Improving Use of Deferments and Forbearances.
The topics include: ● Distance Education 30 Table of Contents ● Accreditation and Related Issues ● State Authorization ● Third-Party Servicers and Related Agencies ● Cash Management ● Return to Title IV ● Federal TRIO Programs ● Improving Use of Deferments and Forbearances.
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). Approximately 90% 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 percentage of our workforce is continuing to work remotely.
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.
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 .
The FTC made clear that receipt of the notice itself does not reflect any assessment as to whether GCU has engaged in deceptive or unfair conduct. 30 Table of Contents If ED or another regulator determines that statements made by us or on our behalf are in violation of the regulations, we could be subject to sanctions and other liability, which could have a material adverse effect on our business.
The FTC made clear at that time that receipt of the notice itself did not reflect any assessment as to whether GCU has engaged in deceptive or unfair conduct. 29 Table of Contents If ED or another regulator determines that statements made by us or on our behalf are in violation of the regulations, we could be subject to sanctions and other liability, which could have a material adverse effect on our business.
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. The education services market is changing and expanding.
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.
Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending BDTR claims as of July 1, 28 Table of Contents 2023, instead of various standards based on the date of the borrower’s first loan disbursement; define what kinds of misconduct could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final ED actions that could give rise to a BDTR claim; establish a reconsideration process for borrowers whose claims are not approved for a full discharge; and create a process for forming groups of borrowers and adjudicating claims based on the common facts of those group claims.
Among other things, the final rule sets a single standard and streamlined process for relief that will apply to all future and pending BDTR claims as of July 1, 2023, instead of various standards based on the date of the borrower’s first loan disbursement; defines what kinds of misconduct could lead to borrower defense discharges, including substantial misrepresentations, substantial omissions of fact, breaches of contract, aggressive and deceptive recruitment, and state or federal judgments or final ED actions that could give rise to a BDTR claim; establishes a reconsideration process for borrowers whose claims are not approved for a full discharge; and creates a process for forming groups of borrowers and adjudicating claims based on the common facts of those group claims.
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.
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.
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.
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.
Negotiated rulemaking for the Affordability and Student Loans Committee began in October 2021 and concluded in December 2021, with the committee failing to reach consensus on Borrower Defense to Repayment (“BDTR”). On October 31, 2022, the ED released final BDTR regulations.
Negotiated rulemaking for the Affordability and Student Loans Committee began in October 2021 and 26 Table of Contents concluded in December 2021, with the committee failing to reach consensus on Borrower Defense to Repayment (“BDTR”). On October 31, 2022, ED released final BDTR regulations.
Using the ED’s cash-basis, regulatory formula under the 90/10 Rule as currently in effect, GCU, our most significant client, derived approximately 66.2% and 69.7% of its 90/10 Rule revenue from Title IV program funds for the fiscal years ended June 30, 2022 and 2021, respectively, per GCU’s audited financial statements.
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.
Nonetheless, if a university partner institution exceeded the threshold under the three-year method, the sanction imposed could have a negative impact on our ability to conduct our business. While GCU’s cohort default rates have historically been significantly below these levels, we cannot assure you that this will continue to be the case. Student Loan Relief.
Nonetheless, if a university partner institution exceeded the threshold under the three-year method, the sanction imposed could have a negative impact on our ability to conduct our business. While GCU’s cohort default rates have historically been significantly below these levels, we cannot assure you that this will continue to be the case. Incentive compensation rule .
The law also extended remote learning waivers through June 1, 2022, simplified the VA verification process for tuition reimbursement, and fixed a technical error to ensure U.S. institutions of higher education can continue to use incentive compensation to recruit foreign students without losing GI Bill funding for their students.
The law also extended remote learning waivers through June 1, 2022, simplified the VA verification process for tuition reimbursement, and fixed a technical error to ensure U.S. institutions of higher education can continue to use incentive compensation to recruit foreign students without losing GI Bill funding for their students. 20 Table of Contents Consolidated Appropriations Act, 2022.
Similar rules apply under state laws or are incorporated in institutional accreditation standards and the Federal Trade Commission (“ 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 (the “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. On October 6, 2021 the FTC announced that it is resurrecting Penalty Offense Authority under Section 5(m) of the FTC Act.
The rules established varying, borrower-favorable statutes of limitations for the initiation of claims and, in some cases, 27 Table of Contents imposed an unlimited statute of limitations.
The rules established varying, borrower-favorable statutes of limitations for the initiation of claims and, in some cases, imposed an unlimited statute of limitations.
Instead, we operate as an education service 16 Table of Contents company to institutions of higher education that do participate in Title IV programs.
Instead, we operate as an education service company to institutions of higher education that do participate in Title IV programs.
In 2016, ED published a regulatory package related to “Borrower Defense to Repayment.” This was a highly consequential rule that, among other things, would make it easier for borrowers – individually or in groups – to extinguish, in whole or in part, their student loans based on whether: ● The borrower or a governmental agency, has obtained against the school a nondefault, favorable contested judgment based on state or federal law in a court of administrative tribunal; ● The institution failed to perform its obligations under the terms of a contract with the student; or ● The school or any of its representatives (including contractors) or any institution, organization, or person with whom the school has an agreement to provide educational programs, or to provide marketing, advertising, recruiting or admissions services, made a substantial misrepresentation (as defined by ED regulations) that the borrower reasonably relied on to the borrower’s detriment when the borrower decided to attend, or to continue attending, the school or decided to take out a Direct Loan.
In 2016, ED published a regulatory package related to “Borrower Defense to Repayment.” This was a highly consequential rule that, among other things, would make it easier for borrowers – individually or in groups – to extinguish, in whole or in part, their student loans based on whether: ● The borrower or a governmental agency, has obtained against the school a nondefault, favorable contested judgment based on state or federal law in a court of administrative tribunal; ● The institution failed to perform its obligations under the terms of a contract with the student; or ● The school or any of its representatives (including contractors) or any institution, organization, or person with whom the school has an agreement to provide educational programs, or to provide marketing, advertising, recruiting or admissions services, made a substantial misrepresentation (as defined by ED regulations) that the borrower reasonably relied on to the borrower’s detriment when the borrower decided to attend, or to continue attending, the school or decided to take out a Direct Loan. 25 Table of Contents These regulations also established separate procedures for claims initiated for individual borrowers and claims initiated for groups of borrowers as well as separate procedures in the event that the institution is open or closed.
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 six directors are women and two directors identify 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 the Board and management levels. Three of our five directors are women and one director identifies with an underrepresented diverse ethnicity.
University partners other than GCU may be accredited by different accrediting bodies that are likely to have standards that are different from those of the HLC. Moreover, other university partners may also hold various programmatic accreditations that set additional requirements related to specific programs.
University partners other than GCU may be accredited by different accrediting bodies that are likely to have standards that are different from those of the HLC. Moreover, our other university partners hold various programmatic accreditations that set additional requirements related to specific programs, including for their nursing programs.
Most 21 Table of Contents provisions became effective August 1, 2021. Institutions were permitted to seek waivers for certain sections of the new law if they were not able to satisfy compliance requirements by August 1, 2021.
Most provisions became effective August 1, 2021. Institutions were permitted to seek waivers for certain sections of the new law if they were not able to satisfy compliance requirements by August 1, 2021. THRIVE Act.
The notice included a list of acts and practices that the FTC has determined are unfair or deceptive, including but not limited to acts relating to misrepresentation of employment opportunities and other benefits, together with citation to various prior determinations from cases previously litigated by the FTC. GCU received the FTC’s notice on October 7, 2021.
The notice included a list of acts and practices that the FTC has determined are unfair or deceptive, including but not limited to acts relating to misrepresentation of employment opportunities and other benefits, together with citation to various prior determinations from cases previously litigated by the FTC.
As of December 31, 2022, GCE employed approximately 3,920 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, 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.
GCU, because it is currently certified to participate in the Title IV programs on a month-to-month 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.
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
In March 2022, the negotiated rulemaking committee reached consensus on changes to the 90/10 Rule. On July 26, 2022, ED released proposed 90/10 regulations consistent with this consensus language which revised the definition of “federal education assistance” that will include tuition assistance programs offered by the U.S. Department of Defense and U.S.
ED started the negotiated rulemaking process in January 2022. In March 2022, the negotiated rulemaking committee reached consensus on changes to the 90/10 Rule. On July 26, 2022, ED released proposed 90/10 regulations consistent with this consensus language which revised the definition of “federal education assistance” to include tuition assistance programs offered by the U.S.
Prior to July 1, 2018, GCE, operated GCU. On July 1, 2018, GCE sold GCU to an independent, Arizona non-profit corporation (the “Transaction”). As a result of the Transaction, we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs.
On July 1, 2018, GCE sold GCU to an independent, Arizona non-profit corporation (the “Transaction”). As a result of the Transaction, we no longer own and operate an institution of higher education, nor do we directly participate in Title IV programs regulated and overseen by ED under the Higher Education Act (“HEA”).
The bill also dictated ED requirements related to federal loan servicing, including appropriations for just over $2 billion for expenses related to the administration of the federal loan program, and made a number of changes to the FAFSA Simplification Act. Eligibility and certification procedures.
The bill also dictated ED requirements related to federal loan servicing, including appropriations for just over $2 billion for expenses related to the administration of the federal loan program, and made a number of changes to the FAFSA Simplification Act. Ensuring the Best Schools for Veterans Act of 2022.
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. ED guidance is subject to frequent change and may impact our business model.
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, at December 31, 2022, GCE employed approximately 1,580 11 Table of Contents 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, 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.
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.
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.
This has not only allowed our employees to remain physically safe 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 35 sites opened as of December 31, 2022.
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.
Among the largest companies in this sector are Pearson Online Learning Services, Wiley Education Services, and 2U.
The largest companies in this sector have historically been Pearson Online Learning Services, Wiley Education Services, and 2U.
New hires all complete anti-discrimination and harassment training within 3 months of starting at GCE. Thereafter, all employees complete the training every other year, while management undertakes it annually. We have also provided Implicit Bias Training to all employees. Employee Learning and Development (ELD) Services. We provide learning and development support to our employees through numerous ELD initiatives.
Thereafter, all employees complete the training every other year, while management undertakes it annually. We have also provided Implicit Bias Training to all employees. Employee Learning and Development (ELD) Services. We provide learning and development support to our employees through numerous ELD initiatives.
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.
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.
The bill allocated $76.4 billion to the Department of Education and its programs, including an increase to the maximum Pell Grant award, bringing the total to $6,895 for the 2022-23 award year.
On March 15, 2022, President Biden signed into law the Consolidated Appropriations Act of 2022. The bill allocated $76.4 billion to the Department of Education and its programs, including an increase to the maximum Pell Grant award, bringing the total to $6,895 for the 2022-23 award year.
In addition, for all of our employees at the level of manager and above totaling 605 persons, 68.8% are held by women and other diverse persons, collectively, an increase of 1.2% over 2021. ● Our Diverse Workforce - As of December 31, 2022, for all of our employees totaling 5,500, 79.8% are women and other diverse persons, collectively, an increase of 1.5% over 2021.
In addition, for all of our employees at the level of manager and above totaling 618 persons, 72.2% are held by women and other diverse persons, collectively, an increase of 4.9% over 2022. ● Our Diverse Workforce - As of December 31, 2023, for all of our employees totaling 5,800, 83.2% are women and other diverse persons, collectively, an increase of 4.1% over 2022.
The top five selected in the survey by employees were Employee Health and Wellbeing (56%), Community Engagement (55%), Human Capital Management (51%), Workforce Diversity and Engagement (33%) and Professional Integrity (32%).
The top five selected in the survey by employees were Employee Health and Wellbeing (56%), Community Engagement (55%), Human Capital Management (51%), Workforce Diversity and Engagement (33%) and Professional Integrity (32%). Whistleblower hotline – GCE has a whistleblower hotline available to both internal and external parties.
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.
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.
Department of Veterans Affairs (“VA”), in addition to the Title IV programs already covered by the 90/10 Rule. On October 27, 2022, following a 30 day comment period that ended August 26, 2022, ED released final 90/10 regulations, which are consistent with the consensus language.
Department of Defense and VA, in addition to the Title IV programs already covered by the 90/10 Rule. On October 27, 2022, following a 30-day comment period that ended August 26, 2022, ED released final 90/10 regulations, which are consistent with the consensus language. The new 90/10 regulations are effective for fiscal years beginning on or after January 1, 2023.
It is intended to make it easier for students to take online courses offered by post-secondary institutions based in another state. SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts. GCU 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).
It is intended to make it easier for students to take online courses offered by post-secondary institutions based in another state. SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts.
In November 2019, GCU received a new provisional Program Participation Agreement (“PPA”), which granted GCU the ability to participate in the Title IV programs on a provisional basis through September 30, 2022. As required, GCU filed a renewal application three months in advance of the scheduled expiration date.
In November 2019, GCU received a new provisional Program Participation Agreement (“PPA”), which granted GCU the ability to participate in the Title IV programs on a provisional basis through September 30, 2022.
Both initiatives elevate public, private, charter and home schools in the form of scholarships, program discounts, professional development, events, and more. 10 Table of Contents ● Continuing Community Involvement - GCE and our employees partner in countless other community events and projects throughout the year.
Both initiatives elevate public, private, charter and home schools in the form of scholarships, program discounts, professional development, events, and more. ● Continuing Community Involvement - GCE and our employees partner in countless other community events and projects throughout the year. We offer our full-time employees a maximum of 16 hours of PTO annually for community service.
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. GCU, for example, currently enrolls students in all 50 states and the District of Columbia.
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.
The negotiated rulemaking process could lead to future ED regulations that could adversely impact our partner institutions. On January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking.
On January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking.
We believe that the competitive factors in the education services market include: ● reputation and brand awareness; ● quality of university partner base and performance track record; ● the effectiveness of marketing and sales efforts; ● robustness and evolution of technology solutions; ● breadth and depth of services offerings; ● convenient, flexible and dependable access to programs and classes; ● level of student support services; ● quality of student and faculty experience; ● cost of programs; and ● the time necessary to earn a degree. 15 Table of Contents Proprietary Rights We have developed and own, or are licensed to use, intellectual property that is or will be the subject of copyright, trademark, service mark, patent, trade secret, or other protections.
We believe that the competitive factors in the education services market include: ● reputation and brand awareness; ● quality of university partner base and performance track record; ● the effectiveness of marketing and sales efforts; ● robustness and evolution of technology solutions; ● breadth and depth of services offerings; ● convenient, flexible and dependable access to programs and classes; ● level of student support services; ● quality of student and faculty experience; ● cost of programs; and ● the time necessary to earn a degree.
To the extent such requirements were ultimately enacted into law, they could significantly affect our business. 18 Table of Contents State Professional Licensure Many states have specific requirements that an individual must satisfy in order to be licensed as a professional in specified fields, including fields such as healthcare, education, and counseling. These requirements vary by state and by field.
State Professional Licensure Many states have specific requirements that an individual must satisfy in order to be licensed as a professional in specified fields, including fields such as healthcare, education, and counseling. These requirements vary by state and by field.
As of December 31, 2022, 1,109 projects have been completed in which 30,000 hours have been logged by volunteers.
As of December 31, 2023, 1,388 projects have been completed in which 35,250 hours have been logged by volunteers.
In addition, as more fully described below, we are subject to some of the regulations imposed on our university partners by virtue of the nature of the services we provide. This area is evolving, however, and the scope of services covered by regulations may change.
In addition, as more fully described below, we are subject to some of the regulations imposed on our university partners by virtue of the nature of the services we provide. The HEA and the regulations promulgated thereunder are frequently revised, repealed or expanded and the scope of services covered by regulations may evolve and change over time.
These efforts, combined with GCE and GCU’s expanded presence in the community, have contributed to a significant increase in home values since 2011 in the 85017 zip code. ● Furthering Job Creation - We, along with GCU have launched a number of new business enterprises that have reduced costs, provided management opportunities for recent graduates and employment opportunities for students and neighborhood residents, while spurring economic growth in the area. ● Special Olympics - We participate in the annual Plane Pull Challenge, which benefits Special Olympics Indiana (SOIN) athletes.
These efforts, combined with GCE and GCU’s expanded presence in the community, have contributed to a significant increase in home values since 2011 in the 85017 zip code. ● Furthering Job Creation - We, along with GCU have launched a number of new business enterprises that have reduced costs, provided management opportunities for recent graduates and employment opportunities for students and neighborhood residents, while spurring economic growth in the area. ● Youth Opportunity Foundation - Our employees volunteer and donate time and funds to the Youth Opportunity Foundation which provides advocacy, clinical treatment, education and workforce development for at-risk young people in underprivileged areas.
The ARPA states that the amendments to the 90/10 rule apply to institutional fiscal years beginning on or after January 1, 2023 and are subject to the HEA’s negotiated rulemaking process which may not commence earlier than October 1, 2021. ED started the negotiated rulemaking process in January 2022.
Consequently, the ARPA change to the 90/10 rule is expected to increase the 90/10 rule calculations at GCU. 23 Table of Contents The ARPA stated that the amendments to the 90/10 rule apply to institutional fiscal years beginning on or after January 1, 2023 and were subject to the HEA’s negotiated rulemaking process which may not commence earlier than October 1, 2021.
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. 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.
In addition, our earnings conference calls are web cast live via our website. In addition to visiting our website, you may obtain any document we file with the SEC at www.sec.gov. 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.
In addition, our earnings conference calls are web cast live via our website. In addition to visiting our website, you may obtain any document we file with the SEC at www.sec.gov.
As we work with university partners in different regions we will need to work with those accrediting bodies and tailor our services to meet the requirements of those accreditors. 19 Table of Contents Regulation of Federal Student Financial Aid Programs To be eligible to participate in the Title IV programs, an institution must comply with specific requirements contained in the HEA and the regulations issued thereunder by ED.
Regulation of Federal Student Financial Aid Programs To be eligible to participate in the Title IV programs, an institution must comply with specific requirements contained in the HEA and the regulations issued thereunder by ED.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile 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.
Biggest changeOn 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.
Based on industry analyses, enrollment growth in degree-granting, post-secondary institutions is slowing and that the number of high school graduates that are eligible to enroll in degree-granting, post-secondary institutions is expected to continue to decrease over the next few years.
Based on industry analyses, enrollment growth in degree-granting, post-secondary institutions is slowing and the number of high school graduates that are eligible to enroll in degree-granting, post-secondary institutions is expected to continue to decrease over the next few years.
Despite our best efforts, we 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 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.
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 assimilating 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; ● 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.
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 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 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.
A user who circumvents security measures could misappropriate sensitive information or cause interruptions or malfunctions in our operations. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy.
A user who circumvents security measures could misappropriate sensitive information or cause interruptions or malfunctions in our operations. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee data and privacy.
This PPA, which was automatically granted on a provisional basis due to the fact that the Transaction constituted a change of control of GCU, was granted without any requirement to post a letter of credit or any growth restrictions. Accordingly, GCU is authorized to participate in Title IV, HEA programs for the stated period.
This PPA, which was granted on a provisional basis due to the fact that the Transaction constituted a change of control of GCU, was granted without any requirement to post a letter of credit or any growth restrictions. Accordingly, GCU is authorized to participate in Title IV, HEA programs for the stated period.
Some of our other partners are accredited by HLC while the others are accredited by different accrediting bodies that are likely to have standards that are different from those of the HLC. Accrediting bodies review the accredited status of institutions periodically (for example, the HLC reviews institutions every ten years, along with a mid-term report in year four).
Some of our other university partners are accredited by HLC while the others are accredited by different accrediting bodies that are likely to have standards that are different from those of the HLC. Accrediting bodies review the accredited status of institutions periodically (for example, the HLC reviews institutions every ten years, along with a mid-term report in year four).
Item 1A. Risk Factors There are many factors that affect our business, financial condition, operating results, cash flows and distributions, as well as the market price for our securities.
Item 1A. Risk Factors There are many factors that affect our business, financial condition, operating results, and cash flows as well as the market price for our securities.
We currently provide services to 27 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.
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.
If the 43 Table of Contents result of any such proceeding is unfavorable to our university partners, they may lose or have limitations imposed on their state licensing, accreditation, or Title IV program participation; be required to pay monetary damages (including triple damages in certain whistleblower suits); or be subject to fines, injunctions, or other penalties, any of which could have a material adverse effect on their business, prospects, financial condition, and results of operations.
If the result of any such proceeding is unfavorable to our university partners, they may lose or have limitations imposed on their state licensing, accreditation, or Title IV program participation; be required to pay monetary damages (including triple damages in certain whistleblower suits); or be subject to fines, injunctions, or other penalties, any of which could have a material adverse effect on their business, prospects, financial condition, and results of operations.
In addition, the operations and programs of our primary university partner, 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 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.
A “Third-party servicer” is any person or entity used by “any eligible institution of higher education to administer, through either manual or automated processing, any aspect of such institution’s student assistance programs.” Third party servicers have a number of requirements. For example, they must conduct and submit to ED compliance audits under 34 C.F.R. § 668.23.
A “Third-party servicer” is any person or entity used by “any eligible institution of higher education to administer, through either manual or automated processing, any aspect of such institution’s student assistance programs.” Third party servicers must comply with a number of requirements. For example, they must conduct and submit to ED compliance audits under 34 C.F.R. § 668.23.
While GCE believes that its relationship with GCU 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.
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.
Changing requirements related to data privacy may create increased costs and operational difficulties for university partner institutions and, potential 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. On December 18, 2020, ED announced that it was finalizing a new Campus Cybersecurity Program framework.
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, 46 Table of Contents 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, as reauthorized, and the regulations thereunder, will be impaired, perhaps materially.
These administrative capability criteria require, among other things, the institution to have an adequate number of qualified 40 Table of Contents personnel to administer the Title IV programs, have adequate procedures for disbursing and safeguarding Title IV funds and for maintaining records, submit all required reports and consolidated financial statements in a timely manner, and not have significant problems that affect the institution’s ability to administer the Title IV programs.
These administrative capability criteria require, among other things, that the institution have an adequate number of qualified personnel to administer the Title IV programs, have adequate procedures for disbursing and safeguarding Title IV funds and for maintaining records, submit all required reports and consolidated financial statements in a timely manner, and not have significant problems that affect the institution’s ability to administer the Title IV programs.
Natural events, health epidemics (including the outbreak of 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, 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.
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.
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.
For example , GCU, calculated its composite score with respect to its fiscal years ending June 30, 2022 and 2021. As of June 30, 2022 and 2021, GCU’s composite score per GCU’s audited financial statements was 1.8 and 1.9, 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, 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.
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.
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.
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.
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.
There can be no assurance that ED will recertify any university partner institution at that time or that it will not impose conditions or other restrictions on any university partner institution as a condition of approving any future recertification.
There can be no assurance that ED will recertify any university partner institution or that it will not impose conditions or other restrictions on any university partner institution as a condition of approving any future recertification.
If our university partner institutions fail to satisfy the standards of any of those specialized 39 Table of Contents accrediting commissions or state agencies, the institution could lose the specialized accreditation or approval for the affected programs, which could result in materially reduced student enrollments in those programs and have a material adverse effect on us.
If our university partner institutions fail to satisfy the standards of any of those specialized accrediting commissions or state agencies, the institution could lose the specialized accreditation or approval for the affected programs, which could result in materially reduced student enrollments in those programs and have a material adverse effect on us.
Possession and use of personal information in our operations subjects us to risks and costs that could harm our business. We collect, use, and retain large amounts of personal information regarding our primary university partner’s applicants and students, including social security numbers, tax return information, personal and family financial data, 36 Table of Contents and credit card numbers.
Possession and use of personal information in our operations subjects us to risks and costs that could harm our business. We collect, use, and retain large amounts of personal information regarding our primary university partner’s applicants and students, including social security numbers, tax return information, personal and family financial data, and credit card numbers.
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.
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.
Alternatively, ED could renew a university partner institution’s certification, but restrict or delay students’ receipt of Title IV funds, limit the number of students to whom it can disburse such funds, place other restrictions on the institution, or it could delay recertification after any university partners’ program participation agreement expires, in which case our university partner’s certification would continue on a month-to-month basis, which is GCU’s current status.
Alternatively, ED could renew a university partner institution’s certification, but restrict or delay students’ receipt of Title IV funds, limit the number of students to whom it can disburse such funds, or place other restrictions on the institution, or it could delay recertification after any university partners’ program participation agreement expires, in which case our university partner’s certification would continue on a month-to-month basis.
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.
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.
If ED or other 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 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 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.
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 41 Table of Contents 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 client, for return of those funds.
Current regulations provide that higher education institutions agree 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 regulation, we are prohibited from offering our covered employees, which are those 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.
Current regulations provide that higher education institutions agree 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 regulation, we are prohibited from offering our “ covered employees, ” who are generally those GCE employees involved with or responsible for recruiting or admissions activities on behalf of our university partners, any bonus or incentive-based compensation based on the successful recruitment, admission or enrollment of students into a postsecondary institution.
Considering the breadth of the definition of “substantial misrepresentation,” it is possible that despite our efforts to prevent such misrepresentations, our employees or contractors may make statements that could be construed as substantial misrepresentations for which our current and any future university partners would be held responsible by ED.
Considering the breadth of the definition of “substantial misrepresentation,” it is possible that despite our efforts to prevent such misrepresentations, our employees or contractors may make statements on behalf of our university partner institutions that could be construed as substantial misrepresentations for which our current and any future university partners would be held responsible by ED.
If analysts cease coverage of us or additional analysts cease coverage of our sector, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline. If one or more of the analysts covering us downgrade their estimates or evaluations of our stock, the price of our stock could decline.
If analysts cease coverage of us or our sector, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline. In addition, if one or more of the analysts covering us were to downgrade their estimates or evaluations of our stock, the price of our stock could decline.
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.
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.
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 37 Table of Contents 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, reputation and to our ability to attract and retain students on our university partners’ behalf.
Several states have sought to assert jurisdiction over educational institutions offering online degree programs that have no physical location in the state but that have some 42 Table of Contents activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state, or advertising to or recruiting prospective students in the state.
Several states have sought to assert jurisdiction over educational institutions offering online degree programs that have no physical location in the state but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state, or advertising to or recruiting prospective students in the state.
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 create new academic programs.
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.
There is a yearly renewal for participating in NC-SARA and AZ-SARA and institutions must agree to meet certain requirements to participate. As of June 30, 2018, all states other than California are members of SARA.
There is a yearly renewal for participating in NC-SARA and AZ-SARA and institutions must agree to meet certain requirements to participate. All states other than California are members of SARA.
Claims and lawsuits brought against us or our university partners, even if they are without merit, may also result in adverse publicity, damage our reputation, negatively affect the market price of our stock, adversely affect student enrollments, and reduce the willingness of third parties to do business with us.
Claims and lawsuits, and other regulatory actions, brought or taken against us or our university partners, even if they are without merit, may also result in adverse publicity, negatively affect the market price of our stock, adversely affect student enrollments, and reduce the willingness of third parties to do business with us.
In addition, these events could adversely affect the economy, financial markets and activity levels of our university partners. Any of these events, their consequences or the costs related to mitigation or remediation could have a material adverse effect on our business, financial condition, results of operations and prospects. Item 1B. Unresolved Staff Comments None.
In addition, these events could adversely affect the economy, financial markets and activity levels of our university partners. Any of these events, their consequences or the costs related to mitigation or remediation could have a material adverse effect on our business, financial condition, results of operations and prospects.
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, which could cause the imposition of sanctions against us or our university partners.
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 environment surrounding access to and the costs of 44 Table of Contents student loans remains in a state of flux.
The environment surrounding access to and the costs of student loans remains in a state of flux.
If we are unable to continue to develop awareness of the programs of our university partners, and to recruit, enroll, and retain students, enrollments would suffer and our ability to increase revenues and maintain profitability would be significantly impaired.
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.
Building awareness of our university partner institutions, and the programs they offer, is critical to our ability to attract prospective students. 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 client institutions.
In addition, the terms of our existing credit facility preclude, and the terms of any future debt agreements is likely to similarly preclude, us from paying 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. Investors seeking cash dividends should not purchase our common stock.
Historically the percentage of students we recruited that were re-careering was low but with the increase in university partners and off-campus classroom and laboratory sites and the growth in new online licensure programs by GCU, the number of students we recruit that are re-careering is growing. Therefore, changes in the job market will impact our ability to recruit students.
Historically the percentage of students we recruited that were re-careering was low but with the increase in university partners and off-campus classroom and laboratory sites and the growth in new online licensure programs by GCU, the number of students we recruit that are re- 35 Table of Contents careering is growing.
As a third-party servicer, if we are the cause of the administrative deficiency, we may also face monetary sanctions and actions to limit, suspend, or terminate our ability to offer those and other services to institutions of higher education. A finding that our university partner institutions violated ED’s substantial misrepresentation regulation could materially and adversely affect our business.
As a third-party servicer, if we are the cause of the administrative deficiency, we may also face monetary sanctions and actions to limit, suspend, or terminate our ability to offer those and other services to institutions of higher education. 44 Table of Contents 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.
Increased competition may result in changes in the revenue share percentage we are able to negotiate to receive from a university partner. The competitive landscape may also result in longer and more complex sales cycles with a prospective university partner, which would negatively affect our ability to add additional university partners and thus our ability to grow our business.
The competitive landscape may also result in longer and more complex sales cycles with a prospective university partner, which would negatively affect our ability to add additional university partners and thus our ability to grow our business.
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.
However, GCU has an independent board of trustees that, along with its management, have fiduciary and other duties that require them to focus on the best interests of GCU. Over time, and for various reasons, those interests could diverge from the interests of GCE.
If GCU were to terminate or not renew its relationship with us, or if certain of the programs offered by GCU pursuant to the Master Services Agreement were to materially underperform for any reason, it could negatively affect our reputation, revenue and future operating results.
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.
New or amended regulations in the future, particularly regulations focused on third-party servicers, could further negatively impact our business. 38 Table of Contents 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 required to accept significant limitations as a condition of its continued participation in the Title IV programs.
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.
If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, or other regulatory authorities.
If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, or other regulatory authorities. Occurrence of natural or man-made catastrophes could materially and adversely affect our business, financial condition, results of operations and prospects.
The activity within the trading market for our common stock depends in part on the research and reports that industry or financial analysts publish about us, our business and the for-profit education sector. In recent periods, a number of analysts have dropped coverage of the sector.
The activity within the trading market for our common stock depends in part on the research and reports that industry or financial analysts publish about us, our business and the education services sector in which we operate.
In addition, if its composite score dropped low enough, it could cause GCU to be ineligible for participation in NC-SARA, which would require GCU to become authorized in numerous states in which it operates or has students. If our university partner institutions do not comply with ED’s administrative capability standards, we could suffer harm.
In addition, if its composite score dropped low enough, it could cause GCU to be ineligible for participation in NC-SARA, which would require GCU to become authorized in numerous states in which it operates or has students.
The authority of our Board of Directors to issue undesignated preferred or other capital stock and the anti-takeover provisions of the DGCL, as well as other current and any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter, or prevent takeover attempts and other changes in control of the company not approved by our Board of Directors. 45 Table of Contents If securities analysts do not publish research or reports about our business or industry or if they downgrade their evaluations of our stock, the price of our stock could decline.
The authority of our Board of Directors to issue undesignated preferred or other capital stock and the anti-takeover provisions of the DGCL, as well as other current and any future anti-takeover measures adopted by us, may, in certain circumstances, delay, deter, or prevent takeover attempts and other changes in control of the company not approved by our Board of Directors.
Although management is reviewing this letter and the issues it raises, compliance with NIST will likely increase operational cost if required to come into compliance.
Although management is reviewing this letter and the issues it raises, compliance with NIST will likely increase operational cost if required to come into compliance. Other General Risks Our success depends upon our ability to recruit and retain key personnel.
According to the DCL, ED does not consider payment based on the amount of tuition generated by an institution to violate the incentive compensation ban if the payment compensates an “unaffiliated third party” that provides a set of “bundled services” that includes recruitment services, such as those we provide. 33 Table of Contents 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 technology, placement services for internships, and student career counseling.
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. Our Board and the board of trustees of GCU each recognized that Mr. Mueller’s dual role could raise conflict of interest issues.
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.
In addition, because certain of these regulations have been vacated or blocked as a result of litigation challenging the regulations, there remains substantial uncertainty regarding their present or future effectiveness or enforcement.
In addition, because certain of these regulations have been vacated or blocked as a result of litigation challenging the regulations, there remains substantial uncertainty regarding their present or future effectiveness or enforcement. New or amended regulations in the future, particularly regulations focused on third-party service providers, could further negatively impact our business.
We may have difficulty integrating future acquisitions, which would reduce the anticipated benefits of those transactions. We intend to continually evaluate potential acquisitions of complementary businesses, products, services and technologies, including those that are significant in size and scope.
We intend to continually evaluate potential acquisitions of complementary businesses, products, services and technologies, including those that are significant in size and scope.
Even if we adequately address the issues raised by any such proceeding and successfully defend against it, we may have to devote significant financial and management resources to address these issues, which could harm our business.
Even if we or our university partners adequately address the issues raised by any such proceeding and successfully defend against it, we may have to devote significant financial and management resources to address these issues, which could harm our business. See Part 1, Item 3 – Litigation for a discussion of certain litigation matters to which we are a party.
If our university partner institutions do not meet specific financial responsibility standards established by ED, they may be required to post a letter of credit or accept other limitations in order to continue participating in the Title IV programs, or could lose eligibility to participate in the Title IV programs.
Any future changes in the formula for calculating student loan default rates, economic conditions, or other factors that cause default rates to increase, could materially adversely affect us. 43 Table of Contents If our university partner institutions do not meet specific financial responsibility standards established by ED, they may be required to post a letter of credit or accept other limitations in order to continue participating in the Title IV programs, or could lose eligibility to participate in the Title IV programs.
A violation of any laws or regulations relating to the collection or use of personal information could result in the imposition of fines against us. As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches.
As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches.
In connection with the Transaction, the Board of Directors of GCE and the board of trustees of GCU each 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 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.
Additionally, regulatory agencies may sometimes disagree with the way we have interpreted or applied these requirements. Any misinterpretation by us of these regulatory requirements or adverse changes in regulations or interpretations thereof by regulators could materially adversely affect us.
Any misinterpretation by us of these regulatory requirements or adverse changes in regulations or interpretations thereof by regulators could materially adversely affect us.
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, revenue and results of operations. The U.S.
Further, a failure to comply with these regulatory requirements could result in termination of our ability to continue providing these services to other university partner institutions, which would materially affect us. 45 Table of Contents 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.
Additionally, o n January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking including those regulations related to third-party services. ED has not put forth any specific proposals at this time. We will monitor this rulemaking as it develops. Proposed legislation, additional rulemaking or additional examinations from U.S.
Additionally, o n January 4, 2023, ED announced their intention to issue new regulations in eight different areas of higher education regulations via negotiated rulemaking including those regulations related to third-party services. ED has not put forth any specific proposals at this time, although it has indicated an intent to publish sub-regulatory guidance on this topic some time in 2024.
Without an overarching federal law driving privacy compliance, the risk is high of a patchwork of privacy legislation formed by individual state laws, similar to the states’ approach to breach notification obligations. This could not only increase costs for compliance but also raise the risk of enforcement by individual state Attorneys General.
Currently, federal law legislates privacy on an industry-by-industry basis. Without an overarching federal law driving privacy compliance, the risk is high of a patchwork of privacy legislation formed by individual state laws, similar to the states’ approach to breach notification obligations.
Any interruption to our operations could have a material adverse effect on our ability to attract students to our university partner’s programs and to retain those students.
Any interruption to our operations could have a material adverse effect on our ability to attract students to our university partner’s programs and to retain those students. We may have difficulty integrating future acquisitions, which would reduce the anticipated benefits of those transactions.
To continue participating in the Title IV programs, an institution must demonstrate to ED that the institution is capable of adequately administering the Title IV programs under specific standards prescribed by ED.
If our university partner institutions do not comply with ED’s administrative capability standards, we could suffer harm. To continue participating in the Title IV programs, an institution must demonstrate to ED that the institution is capable of adequately administering the Title IV programs under specific standards prescribed by ED.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act and the rules and regulations of The Nasdaq Global Select Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
To our knowledge, such action is very rare and has only occurred upon a determination that an institution is in substantial violation of material Title IV requirements .
For a school that is certified on a provisional basis, ED may revoke the institution’s certification without advance notice or advance opportunity for the institution to challenge that action. To our knowledge, such action is very rare and has only occurred upon a determination that an institution is in substantial violation of material Title IV requirements.
Our failure to effectively integrate any future acquisition would adversely affect the benefit of such transaction, including potential synergies or sales growth opportunities, in the time frame anticipated. 34 Table of Contents Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students.
Our failure to effectively integrate any future acquisition would adversely affect the benefit of such transaction, including potential synergies or sales growth opportunities, in the time frame anticipated. Our cash and cash equivalents are held at three financial institutions.
Any decline in reputation or changes in policies of GCU could adversely affect its student enrollment and its overall financial and operating results, which could materially impact us. 32 Table of Contents Furthermore, GCU has the right to terminate the Master Services Agreement early after seven (7) years and, upon the termination or expiration of the Master Services Agreement, GCU is not required to continue using us as the provider of the services set forth thereunder.
Furthermore, GCU has the right to terminate the Master Services Agreement early after seven (7) years and, upon the termination or expiration of the Master Services Agreement, GCU is not required to continue using us as the provider of the services thereunder.
Our failure to attract new students for our university partners, or the decisions by prospective students to seek degrees in other disciplines, would have an adverse impact on 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.
Our failure to attract new students for our university partners, or the decisions by prospective students to seek degrees in disciplines not offered by our university partners, would have an adverse impact on our future growth.
In addition, our bylaws provide for an advance notice procedure for nomination of candidates to our Board of Directors that could have the effect of delaying, deterring, or preventing a change in control. Further, as a Delaware corporation, we are subject to provisions of the DGCL regarding “business combinations,” which can deter attempted takeovers in certain situations.
In addition, our bylaws provide for an 50 Table of Contents advance notice procedure for nomination of candidates to our Board of Directors that could have the effect of delaying, deterring, or preventing a change in control.
Further, we could be fined or otherwise sanctioned by ED, which could increase our cost of regulatory compliance and materially adversely affect us. Further, a failure to comply with these regulatory requirements could result in termination of our ability to continue providing these services to other university partner institutions, which would materially affect us.
Further, we could be fined or otherwise sanctioned by ED, which could increase our cost of regulatory compliance and materially adversely affect us.
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. Further, in the event that we disclose student information in violation of FERPA, ED could require a university partner to suspend our access to their student information for at least five years.
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.
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. 35 Table of Contents 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.
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.
Similarly, California passed the California Consumer Privacy Act (CCPA) in 2018 (which went into effect in 2020), and Massachusetts recently proposed MA Bill SD 341, “An Act relative to consumer data privacy.” There are similar bills pending in a number of other states, as well.
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.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed6 unchanged
Biggest changeIn addition to its owned facilities, GCE leases 28 off-campus classroom and laboratory sites for use in serving its university partners, four office locations in California, one office location in Colorado, and office space in Indianapolis, Indiana.
Biggest changeIn 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.
GCE has commitments to add more off-campus classroom and laboratory sites as of December 31, 2022 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 2023 and beyond.
GCE 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−1 removed0 unchanged
Biggest changeMine Safety Disclosures Not applicable. 47 Table of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 53 Table of Contents PART II
Removed
Item 3. Legal Proceedings From time to time, we are subject to ordinary and routine litigation incidental to our business. While the outcomes of these matters are uncertain, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our financial position, results of operations or cash flows. Item 4.
Added
Item 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring the fourth quarter and the year ended December 31, 2022, GCE repurchased 318,935 and 6,794,693 shares of common stock, respectively, at an aggregate cost of $28.0 million and $599.6 million, respectively. 48 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 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2022 – October 31, 2022 271,382 ​ $ 84.53 271,382 ​ $ 200,900,000 November 1, 2022 – November 30, 2022 — ​ $ — — ​ $ 200,900,000 December 1, 2022 – December 31, 2022 47,553 ​ $ 106.55 47,553 ​ $ 195,800,000 Total 318,935 ​ $ 87.81 318,935 ​ $ 195,800,000 Tax Withholdings ​ ​ October 1, 2022 – October 31, 2022 — ​ $ — — ​ $ — November 1, 2022 – November 30, 2022 — ​ $ — — ​ $ — December 1, 2022 – December 31, 2022 — ​ $ — — ​ $ — 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 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.
The stock price performance included in this graph is not necessarily indicative of future stock price performance. Item 6. [Reserved] ​ 50 Table of Contents
The stock price performance included in this graph is not necessarily indicative of future stock price performance. Item 6. [Reserved] ​ 56 Table of Contents
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In January 2021, July 2021, January 2022 and October 2022 our Board of Directors increased the authorization under its existing stock repurchase program by $100.0 million, $970.0 million, $175.0 million and $200.0 million respectively, reflecting an aggregate authorization for share repurchases since the initiation of the program of $1,845.0 million.
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.
Holders As of December 31, 2022, there were approximately 165 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, 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.
The current expiration date on the repurchase authorization by our Board of Directors is December 31, 2023. 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 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.
Since the initial approval of our share repurchase plan, we have purchased 21,572,283 shares of common stock at an aggregate cost of $1,649.2 billion, which purchases are recorded at cost in the accompanying December 31, 2022 consolidated balance sheet and statement of stockholders’ equity. At December 31, 2022, there remained $195.8 million available under our current share repurchase authorization.
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.
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, 2017 and that all dividends paid by us and such companies were reinvested, and tracks the relative performance of such investments through December 31, 2022. ​ 49 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/17 12/18 12/19 12/20 12/21 12/22 Grand Canyon Education, Inc. 100.00 107.38 106.99 104.00 95.73 118.02 S&P 500 100.00 95.62 125.72 148.85 191.58 156.89 2022 Peer Group 100.00 104.68 96.97 121.11 97.10 89.87 ​ 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, 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.

Item 6. [Reserved]

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

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Biggest changeItem 6. [Reserved] ​ 50 ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 51 ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk ​ 60 ​ Item 8. Consolidated Financial Statements and Supplementary Data ​ 61 ​
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 ​

Item 7. Management's Discussion & Analysis

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

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Biggest changeContractual 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 9 - Leases , in Item 8, Consolidated Financial Statements and Supplementary Data.
Biggest changeSince 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.
Based on our current level of operations and anticipated growth, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations, planned capital expenditures, and working capital requirements for at least the next 24 months.
Based on our current level of operations and anticipated growth, we believe that our cash flow from operations and other sources of liquidity, including cash and cash equivalents and investments, will provide adequate funds for ongoing operations, planned capital expenditures, and working capital requirements for at least the next 24 months.
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, 2022 and 2021 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, 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 .
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 $10.6 million and increased employee compensation expenses and related expenses including share-based compensation of $2.9 million, partially offset by a decrease in other marketing supplies of $0.4 million.
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.
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, 2021 incorporated herein by reference. 52 Table of Contents 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, 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.
This increase in enrollments also has occurred in the first quarter, corresponding to calendar year matriculation. Thus, we experience higher net revenue in the fourth quarter due to its overlap with the semester encompassing the traditional fall school start and in the first quarter due to its overlap 55 Table of Contents with the first semester of the calendar year.
This increase in enrollments also has occurred in the first quarter, corresponding to calendar year matriculation. Thus, we experience higher net revenue in the fourth quarter due to its overlap with the semester encompassing the traditional fall school start and in the first quarter due to its overlap with the first semester of the calendar year.
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 23.1% and 21.4% for the years ended December 31, 2022 and 2021, respectively. Had these contributions not been made, our effective tax rate would have been 24.7% and 22.6% for 2022 and 2021, 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 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 the healthcare field, we work in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates, who enter the workforce ready to meet the demands of the healthcare industry.
In the healthcare field, we work in partnership with universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates, who enter the workforce ready to meet the demands of the healthcare industry.
GCE’s most significant university partner is GCU, a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across nine colleges both online, on ground at its campus in Phoenix, Arizona and at four 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 six off-campus classroom and laboratory sites.
Recent Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies , in Item 8, Consolidated Financial Statements and Supplementary Data. 59 Table of Contents
Recent Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies , in Item 8, Consolidated Financial Statements and Supplementary Data.
The inclusion of excess tax benefits and deficiencies as a component of our income tax expense increases the volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from share-based compensation awards are dependent on our stock price at the date the restricted awards vest, our stock price on the date an option is exercised, and the quantity of options exercised.
The inclusion of excess tax benefits and deficiencies as a component of our income tax expense increases the volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from share-based compensation awards are dependent on our stock price at the date the restricted awards vest.
In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of December 31, 2022, GCE provides education services to 27 university partners across the United States. We plan to continue to add additional university partners and to introduce additional programs with both our existing partners and with new partners.
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.
Share Repurchase Program In January 2021, July 2021, and January 2022 our Board of Directors increased the authorization under its existing stock repurchase program by $100.0 million, $970.0 million and $175.0 million respectively, reflecting an aggregate authorization for share repurchases since the initiation of the program of $1,645.0 million.
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.
None of our ABSN partners have stopped admitting new students due to the clinical faculty challenges that began during the pandemic, however some locations that were scheduled to open in 2021 and 2022 have been pushed back and some existing partners have reduced incoming cohort sizes which has slowed the growth.
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.
The current expiration date on the repurchase authorization by our Board of Directors is December 31, 2023. 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, 2025. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time.
Investment interest and other for the year ended December 31, 2022 was $2.6 million, an increase of $2.0 million, as compared to $0.6 million for the year ended December 31, 2021. Interest rates have increased in 2022 resulting in increased investment interest income. Income tax expense .
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 .
There are no other material contractual obligations or commitments for the Company. 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.
Amortization of intangible assets have been excluded from the table below: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 2021 Costs and expenses Technology and academic services 16.5 % 14.7 % Counseling services and support 30.0 27.8 Marketing and communication 21.5 20.4 General and administrative 5.0 4.7 ​ Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Service revenue .
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 .
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; 58 Table of Contents ● 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.
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.
During fiscal 2022 and 2021, $599.6 million and $797.8 million, respectively, was used to purchase treasury stock in accordance with GCE’s share repurchase program. In 2022 and 2021, $4.6 million and $6.0 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, 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.
Our technology and academic services expenses for the year ended December 31, 2022 were $150.5 million, an increase of $18.4 million, or 13.9%, as compared to technology and academic services expenses of $132.1 million for the year ended December 31, 2021.
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.
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.
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.
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.
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.
Our counseling services and support expenses as a percentage of service revenue increased 2.2% to 30.0% for the year ended December 31, 2022, from 27.8% for the year ended December 31, 2021 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 a faster rate than revenue 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 unrestricted cash and cash equivalents and investments were $181.7 million and $600.9 million at December 31, 2022 and 2021, respectively.
Our unrestricted cash and cash equivalents and investments were $244.5 million and $181.7 million at December 31, 2023 and 2022, 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 51 Table of Contents communication services, and as applicable, certain back office services to its university partners in return for a percentage of tuition and fee revenue.
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.
Marketing and communication . Our marketing and communication expenses for the year ended December 31, 2022 were $196.1 million, an increase of $13.2 million, or 7.2%, as compared to marketing and communication expenses of $182.9 million for the year ended December 31, 2021.
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.
The following table reconciles net income to Adjusted EBITDA for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Net income ​ $ 184,675 ​ $ 260,344 ​ Plus: interest expense ​ 2 ​ 3,601 ​ Less: interest income on Secured Note ​ — ​ (52,090) ​ Less: investment interest and other ​ (2,621) ​ (610) ​ Plus: income tax expense ​ 55,444 ​ 70,945 ​ Plus: amortization of intangible assets ​ ​ 8,419 ​ ​ 8,419 ​ Plus: depreciation and amortization ​ 22,758 ​ 21,994 ​ EBITDA ​ 268,677 ​ 312,603 ​ Plus: contributions in lieu of state income taxes (a) ​ 5,000 ​ 5,000 ​ Plus: loss on fixed asset disposal (b) ​ ​ 1,249 ​ ​ — ​ Less: reversal of credit loss reserve (c) ​ — ​ (5,000) ​ Plus: share-based compensation (d) ​ 12,642 ​ 11,526 ​ Plus: litigation and regulatory reserves (e) ​ ​ 3,768 ​ ​ 3,225 ​ Adjusted EBITDA ​ $ 291,336 ​ $ 327,354 ​ (a) Represents contributions to various private Arizona school tuition organizations to assist with funding for education.
The 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.
Our service revenue for the year ended December 31, 2022 was $911.3 million, an increase of $14.7 million, or 1.6%, as compared to service revenue of $896.6 million for the year ended December 31, 2021.
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.
This increase was 53 Table of Contents primarily due to increases in employee compensation and related expenses including share-based compensation, in other technology and academic supply costs, and in occupancy and depreciation including lease expenses of $9.2 million, $2.6 million and $1.6 million, respectively.
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.
Cash Flows from Operating Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2022 ​ 2021 Net cash provided by operating activities ​ $ 220,819 ​ $ 313,119 The decrease in cash generated from operating activities between the years ended December 31, 2021 and 2022 was primarily due to a decrease in net income and changes in other working capital balances.
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.
The increases were primarily due to increased headcount to support our 27 university partners, and their increased enrollment growth, tenure-based salary adjustments, an increase in benefit costs and the increased number of off-campus classroom and laboratory sites open between years.
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.
This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation, increases in other counseling services and support expenses and in depreciation, amortization and occupancy costs of $13.6 million, $9.8 million and $0.8 million, respectively.
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.
Our counseling services and support expenses for the year ended December 31, 2022 were $273.3 million, an increase of $24.1 million, or 9.7%, as compared to counseling services and support expenses of $249.2 million for the year ended December 31, 2021.
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 general and administrative expenses for the year ended December 31, 2022 were $45.5 million, an increase of $3.7 million, or 8.8%, as compared to general and administrative expenses of $41.8 million for the year ended December 31, 2021.
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.
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. Counseling services and support .
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 .
In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly-owned subsidiary, Orbis Education, which we acquired on January 22, 2019. Since the Acquisition, GCE, together with Orbis Education, has continued to add additional university partners.
In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly owned subsidiary, Orbis Education .
Partner enrollments totaled 112,955 at December 31, 2022 as compared to 112,554 at December 31, 2021. University partner enrollments at our off-campus classroom and laboratory sites were 4,636, a decrease of 1.0% over enrollments at December 31, 2021, which includes 320 and 269 GCU students at December 31, 2022 and 2021, respectively.
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.
Capital expenditures for both fiscal years primarily consisted of leasehold improvements and equipment for new off-campus classroom and laboratory sites, as well as purchases of computer equipment, internal use software projects and furniture and equipment to support our increasing employee headcount. The Company intends to continue to spend approximately $30.0 million to $35.0 million per year for capital expenditures.
Capital expenditures for both periods primarily consisted of leasehold improvements and equipment for new off-campus classroom and laboratory sites, as well as purchases of computer equipment, internal use software projects and furniture and equipment to support our increasing employee headcount. The Company incurs upfront expenses and capital expenditures prior to an off-campus classroom and laboratory site being opened.
Income tax expense for the year ended December 31, 2022 was $55.4 million, a decrease of $15.5 million, or 21.9%, as compared to income tax expense of $70.9 million for the year ended December 31, 2021.
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.
As a result of the Acquisition, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives. Interest income on Secured Note . Interest income on the Secured Note for the year ended December 31, 2022 was nil as compared to $52.1 million for the year ended December 31, 2021.
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 .
As of December 31, 2022 and 2021, GCE has reserved approximately $15,862 and $14,108, respectively, for uncertain tax positions, including interest and penalties.
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.
The Company intends to continue using a portion of its cash flows from operations to repurchase its shares.
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.
Liquidity and Capital Resources ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, (In thousands) ​ 2022 ​ 2021 Cash, cash equivalents and investments ​ $ 181,704 ​ $ 600,941 Overview Our liquidity position, as measured by cash and cash equivalents and investments decreased by $419.2 million between December 31, 2021 and December 31, 2022, which was largely attributable to share repurchases in accordance with our share repurchase program and capital expenditures during the year ended December 31, 2022 of $604.2 million and $35.2 million, respectively, partially offset by cash provided by operating activities of $220.8 million.
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 .
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).
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.
Although we will continue to invest heavily in this area, we are hopeful that the growth rate will be more in line with our revenue growth in 2023. General and administrative .
Although we will continue to invest heavily in this area, we are hopeful that we will see leverage in marketing and communication costs in 2024. General and administrative .
Our general and administrative expenses as a percentage of service revenue increased by 0.3% to 5.0% for the year ended December 31, 2022, from 4.7% for the year ended December 31, 2021 due to the other general and administrative expense and 54 Table of Contents employee compensation costs growing at a faster rate than our revenue growth.
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 .
Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2022 ​ 2021 Net cash (used in) provided by investing activities ​ $ (97,139) ​ $ 950,979 Investing activities consumed $97.1 million of cash in fiscal 2022.
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.
Our marketing and communication expenses as a percentage of service revenue increased by 1.1% to 21.5% for the year ended December 31, 2022, from 20.4% for the year ended December 31, 2021, primarily due to the increase in the number of new university partners and their growth expectations and increased off-campus classroom and laboratory sites open between years.
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.
We did open six new off-campus classroom and laboratory sites in the year ended December 31, 2022 increasing the total number of these sites to 35 at December 31, 2022 and we anticipate opening six to eight more in 2023 which should re-accelerate the ABSN student enrollment growth.
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 anticipate that counseling services and support expenses as a percentage of revenue will continue to increase on a year over year basis in the first half of 2023 as a result of the investments made primarily in the second half of 2022, but are hopeful that the growth rate will be more in line with our revenue growth in the second half of 2023.
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 .
Our technology and academic services expenses as a percentage of service revenue, excluding the reversal of the $5.0 million credit loss in 2021 increased 1.3% to 16.5% for the year ended December 31, 2022, from 15.2% for the year ended December 31, 2021 primarily due to our services agreements with university partners that provide for off-campus classroom and laboratory sites, which necessitate a higher level of technology and academic services than does our agreement with GCU.
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 net income for the year ended December 31, 2022 was $184.7 million, a decrease of $75.6 million, or 29.1% as compared to $260.3 million for the year ended December 31, 2021, due to the factors discussed above.
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.
The effective tax rate in 2021 was favorably impacted by higher excess tax benefits of $4.4 million compared to excess tax benefits of $0.1 million for the year ended December 31, 2022.
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 increase was primarily due to increases in other general and administrative expenses of $2.0 million and increases in employee compensation and related expenses including share-based compensation of $1.7 million. The increase in other general and administrative expenses is primarily due to continued increases in travel costs and increases in charitable contributions over the prior year.
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.
The increase in other counseling services and support expenses is primarily the result of increased travel costs to service our 27 university partners as compared to the COVID-19 impacted 2021, during which significantly lower travel costs were incurred. Occupancy and depreciation costs increased slightly due to the increased number of off-campus classroom and laboratory sites open year over year.
The increase in other counseling services and support expenses is primarily the result of increased travel costs for our university partners.
The increases in employee compensation and related expenses were primarily due to increased headcount to support our 27 university partners, and their increased enrollment growth, tenure-based salary adjustments, and an increase in benefit costs.
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.
In 2022 and 2021, the Company elected to utilize its excess cash balances from both operating cash flows and the payoff of the Secured Note to repurchase its shares. 56 Table of Contents Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (In thousands) ​ 2022 ​ 2021 Net cash used in financing activities ​ $ (604,212) ​ $ (908,926) Financing activities consumed $604.2 million of cash in fiscal 2022 compared to $908.9 in fiscal 2021.
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.
We define working capital as the assets and liabilities, other than cash, generated through GCE’s primary operating activities. Changes in these balances are included in the changes in assets and liabilities presented in the statement of cash flows.
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.
Removed
Service revenue is recognized over time using the output method of measuring progress towards complete satisfaction of the single performance obligation.
Added
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.
Removed
Results of Operations In July 2019, the FASB issued Accounting Standards Update 2019-07, “Codification Updates to SEC Sections- Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification” , which makes a number of changes meant to simplify certain disclosures in financial condition and results of operations, particularly by eliminating year-to-year comparisons between prior periods previously disclosed.
Added
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.
Removed
In complying with the relevant aspects of the rule covering the current year annual report, we now include disclosures on results of operations for fiscal year 2022 versus 2021 only. For a discussion of the results of operations for fiscal year 2021 vs 2020, see “Item 7.
Added
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.
Removed
The increase year over year in service revenue was primarily due to increases in GCU traditional campus enrollments and revenue per student year over year partially offset by a decrease in online enrollments at GCU of 1.6% and to a lesser extent, students in a university partner’s Occupational Therapy Assistants (“OTA”) program in which enrollment declined 11.3% between December 31, 2022 and 2021.
Added
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.
Removed
The increase in revenue per student between years is primarily due to the service revenue impact of the increased ground campus enrollments which generates higher revenue per student due to the room, board and other ancillary revenues earned by GCU and the higher revenue per student at off-campus classroom and laboratory sites .
Added
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 .
Removed
S ervice revenue per student for Accelerated Bachelor of Science in Nursing (“ABSN”) program students at off-campus classroom and laboratory sites generates a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of their students take more credits on average per semester.
Added
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.
Removed
This growth rate has slowed over the past year primarily due to the 11.3% decline in OTA students as the university partner stopped admitting new students for most of 2021 due to clinical placement backlog . Year over year ABSN students decreased 0.3% at December 31, 2022.
Added
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.
Removed
In addition, in a joint decision between us and one of our university partners, two ABSN off-campus classroom and laboratory sites were closed at the beginning of this year to allow the university partner to focus its resources closer to its home location.
Added
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.
Removed
Excluding the prior year enrollments from locations that have been closed in the past twelve months, ABSN students grew by 3.6% year over year.
Added
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.
Removed
Enrollments at GCU increased to 108,639 at December 31, 2022, a slight increase of 0.5% over enrollments at December 31, 2021 primarily due to the increase in ground traditional and ABSN off-campus enrollments partially offset by the decrease in GCU online enrollments between years.
Added
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.
Removed
The decline in GCU online enrollments between years is primarily due to recruitment challenges caused by reduced access to schools, hospitals, and businesses where our potential students work due to COVID-19. In the second half of 2022, we have seen an online new student increase over the prior year.

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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 changeInterest rate risk . We manage interest rate risk by investing excess funds in cash equivalents, BBB or higher rated municipal bonds, municipal mutual funds and commercial paper bearing variable interest rates, which are tied to various market indices or individual bond coupon rates.
Biggest changeInterest 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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk . As of December 31, 2022, 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.
Item 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.
At December 31, 2022, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows. ​ 60 Table of Contents
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

Other LOPE 10-K year-over-year comparisons