10-Q 1 lope-20220930x10q.htm 10-Q
00P10Y9MP5Y0.200.200.200.207000000100000000001434588--12-312022Q3false0001434588us-gaap:TreasuryStockCommonMember2022-04-012022-06-300001434588lope:CommonStockRepurchaseAuthorizationMember2022-01-012022-09-300001434588lope:CommonStockRepurchaseAuthorizationMember2022-09-300001434588lope:CommonStockRepurchaseAuthorizationMember2022-10-260001434588us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001434588us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001434588us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001434588us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001434588us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001434588us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001434588us-gaap:CommonStockMember2022-04-012022-06-300001434588us-gaap:CommonStockMember2022-01-012022-03-310001434588us-gaap:CommonStockMember2021-04-012021-06-300001434588us-gaap:TreasuryStockCommonMember2021-01-012021-03-310001434588us-gaap:CommonStockMember2021-01-012021-03-310001434588us-gaap:TreasuryStockCommonMember2022-07-012022-09-300001434588us-gaap:TreasuryStockCommonMember2022-01-012022-03-310001434588us-gaap:TreasuryStockCommonMember2021-07-012021-09-300001434588us-gaap:TreasuryStockCommonMember2021-04-012021-06-300001434588us-gaap:TreasuryStockCommonMember2022-09-300001434588us-gaap:RetainedEarningsMember2022-09-300001434588us-gaap:AdditionalPaidInCapitalMember2022-09-300001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001434588us-gaap:TreasuryStockCommonMember2022-06-300001434588us-gaap:RetainedEarningsMember2022-06-300001434588us-gaap:AdditionalPaidInCapitalMember2022-06-300001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-3000014345882022-06-300001434588us-gaap:TreasuryStockCommonMember2022-03-310001434588us-gaap:RetainedEarningsMember2022-03-310001434588us-gaap:AdditionalPaidInCapitalMember2022-03-310001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100014345882022-03-310001434588us-gaap:TreasuryStockCommonMember2021-12-310001434588us-gaap:RetainedEarningsMember2021-12-310001434588us-gaap:AdditionalPaidInCapitalMember2021-12-310001434588us-gaap:TreasuryStockCommonMember2021-09-300001434588us-gaap:RetainedEarningsMember2021-09-300001434588us-gaap:AdditionalPaidInCapitalMember2021-09-300001434588us-gaap:TreasuryStockCommonMember2021-06-300001434588us-gaap:RetainedEarningsMember2021-06-300001434588us-gaap:AdditionalPaidInCapitalMember2021-06-300001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-3000014345882021-06-300001434588us-gaap:TreasuryStockCommonMember2021-03-310001434588us-gaap:RetainedEarningsMember2021-03-310001434588us-gaap:AdditionalPaidInCapitalMember2021-03-310001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100014345882021-03-310001434588us-gaap:TreasuryStockCommonMember2020-12-310001434588us-gaap:RetainedEarningsMember2020-12-310001434588us-gaap:AdditionalPaidInCapitalMember2020-12-310001434588srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2019-12-310001434588us-gaap:CommonStockMember2022-09-300001434588us-gaap:CommonStockMember2022-06-300001434588us-gaap:CommonStockMember2022-03-310001434588us-gaap:CommonStockMember2021-12-310001434588us-gaap:CommonStockMember2021-09-300001434588us-gaap:CommonStockMember2021-06-300001434588us-gaap:CommonStockMember2021-03-310001434588us-gaap:CommonStockMember2020-12-310001434588us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001434588srt:MaximumMemberlope:TwoThousandAndSeventeenEquityIncentivePlanMember2022-09-300001434588lope:TwoThousandAndSeventeenEquityIncentivePlanMember2022-09-300001434588us-gaap:RestrictedStockMember2022-09-300001434588us-gaap:RestrictedStockMember2021-12-310001434588us-gaap:ShareBasedPaymentArrangementNonemployeeMember2022-06-012022-06-300001434588us-gaap:RestrictedStockMemberlope:TwoThousandEightEquityIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2022-01-012022-09-300001434588us-gaap:RestrictedStockMemberlope:TwoThousandEightEquityIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheThreeMember2022-01-012022-09-300001434588us-gaap:RestrictedStockMemberlope:TwoThousandEightEquityIncentivePlanMemberus-gaap:ShareBasedCompensationAwardTrancheOneMember2022-01-012022-09-300001434588us-gaap:RestrictedStockMemberlope:TwoThousandEightEquityIncentivePlanMemberlope:ShareBasedCompensationAwardTrancheFourMember2022-01-012022-09-300001434588us-gaap:RestrictedStockMemberlope:TwoThousandEightEquityIncentivePlanMemberlope:ShareBasedCompensationAwardTrancheFiveMember2022-01-012022-09-300001434588srt:AffiliatedEntityMember2022-01-012022-09-3000014345882021-10-012021-12-310001434588us-gaap:SoftwareDevelopmentMember2022-09-300001434588us-gaap:LeaseholdImprovementsMember2022-09-300001434588us-gaap:LandMember2022-09-300001434588us-gaap:LandImprovementsMember2022-09-300001434588us-gaap:FurnitureAndFixturesMember2022-09-300001434588us-gaap:ConstructionInProgressMember2022-09-300001434588us-gaap:ComputerEquipmentMember2022-09-300001434588us-gaap:BuildingMember2022-09-300001434588us-gaap:SoftwareDevelopmentMember2021-12-310001434588us-gaap:LeaseholdImprovementsMember2021-12-310001434588us-gaap:LandMember2021-12-310001434588us-gaap:LandImprovementsMember2021-12-310001434588us-gaap:FurnitureAndFixturesMember2021-12-310001434588us-gaap:ConstructionInProgressMember2021-12-310001434588us-gaap:ComputerEquipmentMember2021-12-310001434588us-gaap:BuildingMember2021-12-310001434588lope:OrbisEducationServicesLlcMember2019-01-222019-01-220001434588lope:CapitalizedContentDevelopmentMember2022-09-300001434588lope:CapitalizedContentDevelopmentMember2021-12-310001434588srt:MinimumMember2022-09-300001434588srt:MaximumMember2022-09-300001434588srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2019-01-012019-12-310001434588us-gaap:TradeNamesMember2022-01-012022-09-300001434588us-gaap:ComputerSoftwareIntangibleAssetMember2022-01-012022-09-300001434588lope:UniversityPartnerRelationshipIntangibleAssetsMember2022-01-012022-09-300001434588lope:CapitalizedContentDevelopmentMember2022-01-012022-09-300001434588us-gaap:TradeNamesMember2022-09-300001434588lope:UniversityPartnerRelationshipIntangibleAssetsMember2022-09-300001434588srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2020-12-310001434588srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201613Member2020-03-310001434588srt:AffiliatedEntityMember2022-09-300001434588lope:GrandCanyonUniversityMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-09-300001434588lope:GrandCanyonUniversityMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-09-300001434588us-gaap:RetainedEarningsMember2022-07-012022-09-300001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001434588us-gaap:RetainedEarningsMember2022-04-012022-06-300001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-3000014345882022-04-012022-06-300001434588us-gaap:RetainedEarningsMember2022-01-012022-03-310001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-3100014345882022-01-012022-03-310001434588us-gaap:RetainedEarningsMember2021-07-012021-09-300001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001434588us-gaap:RetainedEarningsMember2021-04-012021-06-300001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-3000014345882021-04-012021-06-300001434588us-gaap:RetainedEarningsMember2021-01-012021-03-310001434588us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-3100014345882021-01-012021-03-3100014345882021-09-3000014345882020-12-310001434588lope:OrbisEducationServicesLlcMemberlope:UniversityPartnerRelationshipIntangibleAssetsMember2019-01-220001434588lope:OrbisEducationServicesLlcMember2019-01-220001434588us-gaap:CommercialPaperMember2022-01-012022-09-300001434588us-gaap:CorporateBondSecuritiesMember2022-01-012022-09-300001434588us-gaap:CorporateBondSecuritiesMember2022-09-300001434588us-gaap:CommercialPaperMember2022-09-300001434588us-gaap:RestrictedStockMember2022-07-012022-09-300001434588us-gaap:RestrictedStockMember2022-01-012022-09-300001434588us-gaap:RestrictedStockMember2021-07-012021-09-300001434588us-gaap:RestrictedStockMember2021-01-012021-09-3000014345882021-10-012021-10-310001434588us-gaap:SellingAndMarketingExpenseMember2022-01-012022-09-300001434588us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-09-300001434588lope:TechnicalAndAcademicServicesMember2022-01-012022-09-300001434588lope:CounselingSupportAndServicesMember2022-01-012022-09-300001434588us-gaap:SellingAndMarketingExpenseMember2021-01-012021-09-300001434588us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001434588lope:TechnicalAndAcademicServicesMember2021-01-012021-09-300001434588lope:CounselingSupportAndServicesMember2021-01-012021-09-300001434588us-gaap:RestrictedStockMember2022-01-012022-09-300001434588lope:AcceleratedShareRepurchase2021May14Member2021-08-130001434588lope:AcceleratedShareRepurchase2021May14Member2021-05-140001434588lope:AcceleratedShareRepurchase2021March10Member2021-05-040001434588lope:AcceleratedShareRepurchase2021March10Member2021-03-1000014345882021-12-310001434588srt:MinimumMember2022-01-012022-09-300001434588srt:MaximumMember2022-01-012022-09-300001434588lope:CommonStockRepurchaseAuthorizationMember2022-10-262022-10-260001434588lope:GrandCanyonUniversityMember2018-07-012018-07-010001434588lope:GrandCanyonUniversityMemberlope:MasterServicesAgreementMember2018-07-012018-07-010001434588lope:GrandCanyonUniversityMember2022-01-012022-09-300001434588lope:GrandCanyonUniversityMember2022-09-300001434588us-gaap:RestrictedStockMemberlope:TwoThousandEightEquityIncentivePlanMember2022-01-012022-09-300001434588lope:UniversityPartnerRelationshipsAndTradeNamesMember2022-09-3000014345882022-09-3000014345882022-07-012022-09-3000014345882021-07-012021-09-3000014345882021-01-012021-09-300001434588srt:MaximumMemberlope:AcceleratedShareRepurchase2021May14Member2021-05-140001434588srt:MaximumMemberlope:AcceleratedShareRepurchase2021March10Member2021-03-100001434588lope:AcceleratedShareRepurchase2021March10Member2021-05-042021-05-040001434588lope:AcceleratedShareRepurchase2021May14Member2021-08-132021-08-130001434588lope:AcceleratedShareRepurchase2021March10Member2021-03-102021-05-040001434588lope:AcceleratedShareRepurchase2021May14Member2021-05-142021-05-140001434588lope:AcceleratedShareRepurchase2021March10Member2021-03-102021-03-1000014345882022-10-2500014345882022-01-012022-09-30xbrli:sharesxbrli:pureiso4217:USDlope:itemlope:leaseiso4217:USDxbrli:shareslope:segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34211

GRAND CANYON EDUCATION, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

20-3356009

(State or other jurisdiction of
Incorporation or organization)

(I.R.S. Employer
Identification No.)

2600 W. Camelback Road

Phoenix, Arizona 85017

(Address, including zip code, of principal executive offices)

(602) 247-4400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

LOPE

Nasdaq Global Select Market

​ ​​ ​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large Accelerated Filer     

    

Accelerated Filer                      

Non-accelerated Filer       

Smaller Reporting Company     

Emerging Growth Company     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

The total number of shares of common stock outstanding as of October 25, 2022, was 31,147,188.

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

GRAND CANYON EDUCATION, INC.

Consolidated Income Statements

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

(In thousands, except per share data)

 

2022

    

2021

    

2022

    

2021

Service revenue

$

208,720

$

206,767

$

652,606

$

645,188

Costs and expenses:

 

  

 

  

 

  

 

  

Technology and academic services

 

37,641

 

35,536

 

112,136

 

101,263

Counseling services and support

 

67,235

 

62,209

 

200,773

 

184,380

Marketing and communication

 

50,651

 

47,150

 

151,237

 

140,326

General and administrative

 

15,576

 

14,451

 

35,323

 

33,114

Amortization of intangible assets

 

2,105

 

2,105

 

6,315

 

6,315

Total costs and expenses

 

173,208

 

161,451

 

505,784

 

465,398

Operating income

 

35,512

 

45,316

 

146,822

 

179,790

Interest income on Secured Note

 

 

15,031

 

 

44,353

Interest expense

 

 

(741)

 

(5)

 

(2,303)

Investment interest and other

 

745

 

218

 

1,294

 

577

Income before income taxes

 

36,257

 

59,824

 

148,111

 

222,417

Income tax expense

 

6,249

 

12,166

 

34,463

 

47,186

Net income

$

30,008

$

47,658

$

113,648

$

175,231

Earnings per share:

 

  

 

  

 

  

 

  

Basic income per share

$

0.96

$

1.08

$

3.48

$

3.87

Diluted income per share

$

0.96

$

1.08

$

3.47

$

3.86

Basic weighted average shares outstanding

 

31,302

 

44,212

 

32,623

 

45,272

Diluted weighted average shares outstanding

 

31,387

 

44,298

 

32,709

 

45,404

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

3

GRAND CANYON EDUCATION, INC.

Consolidated Balance Sheets

September 30, 

    

December 31, 

(In thousands, except par value)

 

2022

2021

(Unaudited)

ASSETS:

Current assets

 

  

Cash and cash equivalents

$

39,887

$

600,941

Investments

 

68,403

 

Accounts receivable, net

 

101,170

 

70,063

Income tax receivable

 

3,589

 

1,275

Other current assets

 

10,184

 

8,766

Total current assets

 

223,233

 

681,045

Property and equipment, net

 

144,872

 

136,120

Right-of-use assets

75,086

57,652

Amortizable intangible assets, net

178,904

185,219

Goodwill

 

160,766

 

160,766

Other assets

 

1,683

 

1,943

Total assets

$

784,544

$

1,222,745

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

18,829

$

24,306

Accrued compensation and benefits

 

33,100

 

32,714

Accrued liabilities

 

28,964

 

27,593

Income taxes payable

 

37

 

5,895

Deferred revenue

 

6,102

 

10

Current portion of lease liability

 

8,555

 

7,426

Total current liabilities

 

95,587

 

97,944

Deferred income taxes, noncurrent

 

26,199

 

25,962

Other long-term liability

442

37

Lease liability, less current portion

 

70,760

 

53,755

Total liabilities

 

192,988

 

177,698

Commitments and contingencies

 

  

 

  

Stockholders’ equity

 

  

 

  

Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at September 30, 2022 and December 31, 2021

 

 

Common stock, $0.01 par value, 100,000 shares authorized; 53,830 and 53,637 shares issued and 31,377 and 37,722 shares outstanding at September 30, 2022 and December 31, 2021, respectively

 

538

 

536

Treasury stock, at cost, 22,453 and 15,915 shares of common stock at September 30, 2022 and December 31, 2021, respectively

 

(1,683,417)

 

(1,107,211)

Additional paid-in capital

 

306,152

 

296,670

Accumulated other comprehensive loss

 

(417)

 

Retained earnings

 

1,968,700

 

1,855,052

Total stockholders’ equity

 

591,556

 

1,045,047

Total liabilities and stockholders’ equity

$

784,544

$

1,222,745

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

4

GRAND CANYON EDUCATION, INC.

Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

Nine Months Ended

 

September 30, 

September 30, 

(In thousands)

2022

    

2021

    

2022

    

2021

Net income

$

30,008

$

47,658

$

113,648

$

175,231

Other comprehensive income, net of tax:

 

  

 

  

 

  

 

  

Unrealized losses on available-for-sale securities, net of taxes of $8 and $56 for the three months ended September 30, 2022 and 2021, respectively, and $131 for the nine months ended September 30, 2022

 

(19)

 

185

 

(417)

 

Comprehensive income

$

29,989

$

47,843

$

113,231

$

175,231

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

5

GRAND CANYON EDUCATION, INC.

Consolidated Statement of Stockholders’ Equity

(In thousands)

(Unaudited)

Nine Months Ended September 30, 2022

Accumulated

Additional

Other

Common Stock

Treasury Stock

Paid-in

Comprehensive

Retained

  

Shares

  

Par Value

  

Shares

  

Cost

  

Capital

  

Loss

  

Earnings

  

Total

Balance at December 31, 2021

53,637

$

536

15,915

$

(1,107,211)

$

296,670

$

$

1,855,052

$

1,045,047

Comprehensive income

(323)

58,078

57,755

Common stock purchased for treasury

4,575

(394,930)

(394,930)

Restricted shares forfeited

6

Share-based compensation

189

2

52

(4,625)

3,188

(1,435)

Balance at March 31, 2022

53,826

$

538

20,548

$

(1,506,766)

$

299,858

$

(323)

$

1,913,130

$

706,437

Comprehensive income

(75)

25,562

25,487

Common stock purchased for treasury

1,319

(128,457)

(128,457)

Restricted shares forfeited

Share-based compensation

4

3,171

3,171

Balance at June 30, 2022

53,830

$

538

21,867

$

(1,635,223)

$

303,029

$

(398)

$

1,938,692

$

606,638

Comprehensive income

(19)

30,008

29,989

Common stock purchased for treasury

582

(48,194)

(48,194)

Restricted shares forfeited

4

Share-based compensation

3,123

3,123

Balance at September 30, 2022

53,830

$

538

 

22,453

$

(1,683,417)

$

306,152

$

(417)

$

1,968,700

$

591,556

6

GRAND CANYON EDUCATION, INC.

Consolidated Statement of Stockholders’ Equity

(In thousands)

(Unaudited)

Nine Months Ended September 30, 2021

Accumulated

Additional

Other

Common Stock

Treasury Stock

Paid-in

Comprehensive

Retained

  

Shares

  

Par Value

  

Shares

  

Cost

  

Capital

  

Loss

  

Earnings

  

Total

Balance at December 31, 2020

53,277

$

533

 

6,628

$

(303,379)

$

282,467

$

$

1,594,708

$

1,574,329

Comprehensive income

 

 

 

 

 

(120)

 

78,112

 

77,992

Common stock purchased for treasury

 

 

567

 

(56,348)

 

(7,000)

 

 

 

(63,348)

Restricted shares forfeited

 

 

 

 

 

 

 

Share-based compensation

180

 

1

 

56

 

(5,994)

 

3,018

 

 

 

(2,975)

Exercise of stock options

176

2

2,678

2,680

Balance at March 31, 2021

53,633

$

536

7,251

$

(365,721)

$

281,163

$

(120)

$

1,672,820

$

1,588,678

Comprehensive income

(65)

49,461

49,396

Common stock purchased for treasury

982

(95,331)

(3,000)

(98,331)

Restricted shares forfeited

8

Share-based compensation

4

2,940

2,940

Balance at June 30, 2021

53,637

$

536

8,241

$

(461,052)

$

281,103

$

(185)

$

1,722,281

$

1,542,683

Comprehensive income

185

47,658

47,843

Common stock purchased for treasury

2,324

(202,506)

10,000

(192,506)

Restricted shares forfeited

18

Share-based compensation

 

 

 

 

2,756

 

 

 

2,756

Balance at September 30, 2021

53,637

$

536

 

10,583

$

(663,558)

$

293,859

$

$

1,769,939

$

1,400,776

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

7

GRAND CANYON EDUCATION, INC.

Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

 

September 30, 

(In thousands)

2022

    

2021

Cash flows provided by operating activities:

  

 

  

Net income

$

113,648

$

175,231

Adjustments to reconcile net income to net cash provided by operating activities:

 

  

 

  

Share-based compensation

 

9,484

 

8,715

Depreciation and amortization

 

17,023

 

16,401

Amortization of intangible assets

6,315

6,315

Deferred income taxes

 

368

 

2,333

Other, including fixed asset impairments

 

1,013

 

478

Changes in assets and liabilities:

 

  

 

  

Accounts receivable and interest receivable from university partners

 

(31,107)

 

(32,815)

Other assets

 

(1,288)

 

(2,451)

Right-of-use assets and lease liabilities

700

445

Accounts payable

 

(5,768)

 

23,487

Accrued liabilities

 

2,162

 

13,358

Income taxes receivable/payable

 

(8,172)

 

(5,806)

Deferred revenue

 

6,092

 

3,204

Net cash provided by operating activities

 

110,470

 

208,895

Cash flows used in investing activities:

 

  

 

  

Capital expenditures

 

(26,301)

 

(21,352)

Additions of amortizable content

 

(294)

 

(409)

Funding to GCU

 

 

(190,000)

Repayment by GCU

190,000

Purchases of investments

 

(132,096)

 

(56,335)

Proceeds from sale or maturity of investments

 

63,373

 

66,792

Net cash used in investing activities

 

(95,318)

 

(11,304)

Cash flows used in financing activities:

 

  

 

  

Principal payments on notes payable

 

 

(24,859)

Repurchase of common shares and shares withheld in lieu of income taxes

 

(576,206)

 

(360,179)

Net proceeds from exercise of stock options

 

 

2,680

Net cash used in financing activities

 

(576,206)

 

(382,358)

Net decrease in cash and cash equivalents and restricted cash

 

(561,054)

 

(184,767)

Cash and cash equivalents and restricted cash, beginning of period

 

600,941

 

245,769

Cash and cash equivalents and restricted cash, end of period

$

39,887

$

61,002

Supplemental disclosure of cash flow information

 

  

 

  

Cash paid for interest

$

5

$

2,399

Cash paid for income taxes

$

41,118

$

48,408

Supplemental disclosure of non-cash investing and financing activities

 

  

 

  

Purchases of property and equipment included in accounts payable

$

1,827

$

1,802

ROU Asset and Liability recognition

$

17,434

$

3,775

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

8

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

1. Nature of Business

Grand Canyon Education, Inc. (together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company dedicated to serving colleges and universities. GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale. GCE’s most significant university partner is Grand Canyon University (“GCU”), an Arizona non-profit corporation, 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.

In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly owned subsidiary, Orbis Education, which we acquired, by merger on January 22, 2019 (the “Acquisition”). Since the Acquisition, GCE, together with Orbis Education, has continued to add additional university partners. In the healthcare field, we work in partnership with a growing number of top universities and healthcare networks across the country, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry. In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of September 30, 2022, GCE provides education services to 27 university partners across the United States.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions have been eliminated in consolidation.

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles and pursuant to the rules and regulations of the United States Securities and Exchange Commission and the instructions to Form 10-Q and Article 10, consistent in all material respects with those applied in its financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021. They do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management are necessary for the fair presentation of the interim periods presented. Interim results are not necessarily indicative of results for a full year. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and footnotes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021 from which the December 31, 2021 balance sheet information was derived.

Investments

As of September 30, 2022 and 2021, the Company considered its investments in corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations as available-for-sale securities based on the Company’s intent for the respective securities. Available-for-sale securities are carried at fair value, determined using Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets, with unrealized gains and losses, net of tax, reported as a separate component of other comprehensive income. Unrealized losses considered to be other-than-temporary are recognized

9

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

currently in earnings. Amortization of premiums, accretion of discounts, interest and dividend income and realized gains and losses are included in interest and other income. As of December 31, 2021, the Company had no investments.

Arrangements with GCU

On July 1, 2018, the Company consummated an Asset Purchase Agreement (the “Asset Purchase Agreement”) with GCU. In conjunction with the Asset Purchase Agreement, we received a secured note from GCU as consideration for the transferred assets in the initial principal amount of $870,097 (the “Secured Note”) which was repaid by GCU in the fourth quarter of 2021. In connection therewith, the Company and GCU entered into a long-term master services agreement (the “Master Services Agreement”) pursuant to which the Company provides identified technology and academic services, counseling services and support, marketing and communication services, and several back-office services to GCU in return for 60% of GCU’s tuition and fee revenue. Except for identified liabilities assumed by GCU, GCE retained responsibility for all liabilities of the business arising from pre-closing operations.

Internally Developed Software

The Company capitalizes certain costs related to internal-use software, primarily consisting of direct labor associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation or operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs of design, coding, integration, and testing of the software developed. Capitalization of costs requires judgment in determining when a project has reached the application development stage and the period over which we expect to benefit from the use of that software. Once the software is placed in service, these costs are amortized straight-line over the estimated useful life of the software, which is generally three years. These assets are a component of our property and equipment, net in our consolidated balance sheets.

Capitalized Content Development

The Company capitalizes certain costs to fulfill a contract related to the development and digital creation of content on a course-by-course basis for each university partner, many times in conjunction with faculty and subject matter experts. The Company is responsible for the conversion of instructional materials to an on-line format, including outlines, quizzes, lectures, and articles in accordance with the educational guidelines provided to us by our university partners, prior to the respective course commencing. We also capitalize the creation of learning objects which are digital assets such as online demonstrations, simulations, and case studies used to obtain learning objectives.

Costs that are capitalized include payroll and payroll-related costs for employees who are directly associated and spend time producing content and payments to faculty and subject matter experts involved in the process.  The Company starts capitalizing content costs when it begins to develop or to convert a particular course, resources have been assigned and a timeline has been set. The content asset is placed in service when all work is complete, and the curriculum could be used for instruction. Capitalized content development assets are included in other assets in our consolidated balance sheets. The Company has concluded that the most appropriate method to amortize the deferred content assets is on a straight-line basis over the estimated life of the course, which is generally four years which corresponds with course’s review and major revision cycle. As of September 30, 2022 and December 31, 2021, $1,038 and $1,168, respectively, net of amortization, of deferred content assets are included in other assets, long-term in the Company’s consolidated balance sheets and amortization is included in technical and academic services where the costs originated.

10

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets for impairment, other than goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Leases

The Company determines if an arrangement is a lease at inception and evaluates the lease agreement to determine whether the lease is a finance or operating lease. Right-of-use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement to determine the present value of lease payments over the lease term. At lease inception, the Company determines the lease term by assuming no exercises of renewal options, due to the Company’s constantly changing geographical needs for its university partners. Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheets and are recognized as lease expense on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, and the non-lease components are accounted for separately and not included in our ROU assets and lease liabilities. Leases primarily consist of off-campus classroom and laboratory site locations and office space.

Business Combinations

The purchase price of an acquisition is allocated to the assets acquired, including tangible and intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. Transaction costs associated with business combinations are expensed as incurred and are recorded in the loss on transaction in the consolidated financial statements. The determination of the fair value and useful lives of the intangible assets acquired involves certain judgments and estimates. These judgements can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital. The net assets and result of operations of an acquired entity are included in the Company’s consolidated financial statements from the acquisition date.

Goodwill and Amortizable Intangible Assets

Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the tangible and intangible assets acquired and liabilities assumed. Goodwill is assessed at least annually for impairment during the fourth quarter, or more frequently if circumstances indicate potential impairment. Goodwill is allocated to our reporting unit at the education services segment, which is the same as the entity as a whole (entity level reporting unit). The Company has concluded there is one operating segment and one reporting unit for goodwill impairment consideration. The Financial Accounting Standards Board has issued guidance that permits an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. The Company reviews goodwill at least annually or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

Finite-lived intangible assets that are acquired in a business combination are recorded at fair value on their acquisition dates and are amortized using a method that reflects the pattern in which the economic benefits of the intangible assets are consumed or on a straight-line basis over the estimated useful life of the intangible asset if the pattern of economic benefit cannot be reliability determined. Finite-lived intangible assets consist of university partner

11

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

relationships and trade names. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. There were no indicators that the carrying amount of the finite-lived intangible assets were impaired as of September 30, 2022. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the assets. If such intangible assets are not recoverable, a potential impairment loss is recognized to the extent the carrying amounts of the assets exceeds the fair value of the assets.

Acquisition

On January 22, 2019, GCE acquired Orbis Education for $361,184 (inclusive of closing date adjustments and net of cash acquired). The Acquisition was accounted for in accordance with the acquisition method of accounting. Under this method the cost of the target is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The estimated fair values of current assets and liabilities were based upon their historical costs on the date of acquisition due to their short-term nature. The majority of property and equipment were also estimated based upon historical costs as they approximated fair value. Identified intangible assets of $210,280 consisted primarily of university partner relationships that were valued at $210,000. The fair value of university partner relationships was determined using the multiple-period excess earnings method. The fair value of the assets acquired, less the liabilities assumed, exceeded the purchase price by $157,825 which was recorded as goodwill.

Share-Based Compensation

The Company measures and recognizes compensation expense for share-based payment awards made to employees and directors. The fair value of the Company’s restricted stock awards is based on the market price of its common stock on the date of grant. Stock-based compensation expense related to restricted stock grants is expensed over the vesting period using the straight-line method for Company employees and the Company’s board of directors. The Company recognizes forfeitures as they occur.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued compensation and benefits and accrued liabilities expenses approximate their fair value based on the liquidity or the short-term maturities of these instruments.

The fair value of investments was determined using Level 1 and Level 2 of the hierarchy of valuation inputs, with the use of inputs other than quoted prices that are observable for the assets. The unit of account used for valuation is the individual underlying security. The basis for fair value measurements for each level is described below, with Level 1 having the highest priority.

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

-Level 2 – inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in non-active markets; and model-derived valuations whose inputs are observable or whose significant valuation drivers are observable.

-Level 3 – unobservable inputs that are not corroborated by market data.

Investments are comprised of corporate bonds, commercial paper, municipal securities, asset backed securities, municipal bonds, and collateralized mortgage obligations.

12

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Revenue Recognition

The Company generates all of its revenue through services agreements with its university partners (“Services Agreements”), pursuant to which the Company provides integrated technology and academic services, marketing and communication services, and back-office services to its university partners in return for a percentage of tuition and fee revenue.

The Company’s Services Agreements have initial terms ranging from 7-15 years, subject to renewal options, although certain agreements may give the university partners the right to terminate early if certain conditions are met. The Company’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). Service revenue is recognized over time using the output method of measuring progress towards complete satisfaction of the single performance obligation. The output method provides a faithful depiction of the performance toward complete satisfaction of the performance obligation and can be tied to the time elapsed which is consumed evenly over the service period and is a direct measurement of the value provided to our partners. The service fees received from our partners over the term of the agreement are variable in nature in that they are dependent upon the number of students attending the university partner’s program and revenues generated from those students during the service period. Due to the variable nature of the consideration over the life of the service arrangement, the Company considered forming an expectation of the variable consideration to be received over the service life of this one performance obligation. However, since the performance obligation represents a series of distinct services, the Company recognizes the variable consideration that becomes known and billable because these fees relate to the distinct service period in which the fees are earned. The Company meets the criteria in the standard and exercises the practical expedient to not disclose the aggregate amount of the transaction price allocated to the single performance obligation that is unsatisfied as of the end of the reporting period. The Company does not disclose the value of unsatisfied performance obligations because the directly allocable variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation. The service fees are calculated and settled per the terms of the Services Agreements and result in a settlement duration of less than one year for all partners. There are no refunds or return rights under the Services Agreements.

The Company’s receivables represent unconditional rights to consideration from our Services Agreements with our university partners. Accounts receivable, net is stated at net realizable value and contains billed and unbilled revenue. The Company utilizes the allowance method to provide for doubtful accounts based on its evaluation of the expected credit losses. There have been no amounts written off and no reserves established as of September 30, 2022. The Company will continue to review and revise its allowance methodology based on its collection experience with its partners.

For our partners with unbilled revenue, revenue recognition occurs in advance of billings. Billings for some university partners do not occur until after the service period has commenced and final enrollment information is available. Our unbilled revenue of $11,973 and $3,841 as of September 30, 2022 and December 31, 2021, respectively, are included in accounts receivable in our consolidated balance sheets. Deferred revenue represents the excess of amounts received as compared to amounts recognized in revenue on our consolidated statements of income as of the end of the reporting period, and such amounts are reflected as a current liability on our consolidated balance sheets. We generally receive payments for our services billed within 30 days of invoice. These payments are recorded as deferred revenue until the services are delivered and revenue is recognized.

Allowance for Credit Losses

The Company records its accounts receivable and previously had recorded its Secured Note (as defined above) receivable at the net amount expected to be collected. Our accounts receivable are derived through education services

13

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

provided to university partners. Our Secured Note receivable was derived through the sale of university-related assets to our most significant university partner, GCU. The Company maintains an allowance for credit losses resulting from our university partners not making payments. The Company determines the adequacy of the allowance by periodically evaluating each university partners balance, considering their financial condition and credit history, and considering current and forecasted economic conditions. In the first quarter of 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments using a modified retrospective approach. This model requires consideration of a broader range of reasonable and supportable information and requires the Company to estimate expected credit losses including a measure of the expected risk of credit loss even if that risk is remote over the lifetime of the asset. Upon adoption, the Company recorded a reserve of $5,000 on its long-term Secured Note receivable. The cumulative effect for the Company upon adoption of this new standard was $3,832, net of taxes of $1,168. Bad debt expense is recorded as a technology and academic services expense in the consolidated income statements. In the fourth quarter of 2021, the Secured Note receivable was paid off and the credit loss reserve of $5,000 was reversed. The Company will also continue to actively monitor the impact of the COVID-19 pandemic as well as other factors on expected credit losses.

Technology and Academic Services

Technology and academic services consist primarily of costs related to ongoing maintenance of educational infrastructure, including online course delivery and management, student records, assessment, customer relations management and other internal administrative systems. This also includes costs to provide support for content development, faculty training, development and other faculty support, technology support, rent and occupancy costs for university partners’ off-campus classroom and laboratory sites, and assistance with state compliance. This expense category includes salaries, benefits and share-based compensation, information technology costs, amortization of content development costs and other costs associated with these support services. This category also includes an allocation of depreciation, amortization, and occupancy costs attributable to the provision of certain services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations.

Counseling Services and Support

Counseling services and support consist primarily of costs including team-based counseling and other support to prospective and current students as well as financial aid processing. This expense category includes salaries, benefits and share-based compensation, and other costs such as dues, fees and subscriptions and travel costs. This category also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of certain services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations.

Marketing and Communication

Marketing and communication includes lead acquisition, digital communication strategies, brand identity advertising, media planning and strategy, video, data science and analysis, marketing to potential students and other promotional and communication services. This expense category includes salaries, benefits and share-based compensation for marketing and communication personnel, brand advertising, marketing leads and other promotional and communication expenses. This category also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of certain services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations. Advertising costs are expensed as incurred.

General and Administrative

General and administrative expenses include salaries, benefits and share-based compensation of employees engaged in corporate management, finance, human resources, compliance, and other corporate functions. This category

14

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

also includes an allocation of depreciation, amortization, lease expense, and occupancy costs attributable to the provision of these services, primarily at the Company’s Phoenix, Arizona and Indianapolis, Indiana locations.

Commitments and Contingencies

The Company accrues for contingent obligations when it is probable that a liability has been incurred and the amount is reasonably estimable. When the Company becomes aware of a claim or potential claim, the likelihood of any loss exposure is assessed. If it is probable that a loss will result and the amount of the loss is estimable, the Company records a liability for the estimated loss. If the loss is not probable or the amount of the potential loss is not estimable, the Company will disclose the claim if the likelihood of a potential loss is reasonably possible and the amount of the potential loss could be material. Estimates that are particularly sensitive to future changes include tax, legal, and other regulatory matters, which are subject to change as events evolve, and as additional information becomes available during the administrative and litigation process. The Company expenses legal fees as incurred.

Concentration of Credit Risk

The Company believes the credit risk related to cash equivalents and investments is limited due to its adherence to an investment policy that requires investments to have a minimum BBB rating, depending on the type of security, by one major rating agency at the time of purchase. All of the Company’s cash equivalents and investments as of September 30, 2022 and December 31, 2021 consist of investments rated BBB or higher by at least one rating agency. Additionally, the Company utilizes at least one financial institution to conduct initial and ongoing credit analysis on its investment portfolio to monitor and lower the potential impact of market risk associated with its cash equivalents and investment portfolio. Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances, which are primarily invested in money market funds or on deposit at high credit quality financial institutions in the U.S. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2022 and December 31, 2021, the Company had $38,851 and $600,130, respectively, in excess of the FDIC insured limit. The Company is also subject to credit risk for its accounts receivable balance. Our dependence on our most significant university partner, with 84.8% and 85.0% of total service revenue for the nine-month periods ended September 30, 2022 and 2021, respectively, subjects us to the risk that declines in our customer’s operations would result in a sustained reduction in service revenue for the Company.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Segment Information

The Company operates as a single education services company using a core infrastructure that serves the curriculum and educational delivery needs of its university partners. The Company’s Chief Executive Officer manages the Company’s operations as a whole and no expense or operating income information is generated or evaluated on any component level.

Recent Accounting Pronouncements

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

15

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

3. Investments

As of September 30, 2022, the Company had investments of $68,403, classified as available-for-sale securities. As of December 31, 2021, the Company had no investments.

As of September 30, 2022, the Company had available-for-sale investments comprised of the following:

As of September 30, 2022

    

    

Gross

    

Gross

    

Estimated

Adjusted

Unrealized

Unrealized

Fair

Cost

Gains

(Losses)

Value

Corporate bonds

$

34,120

$

11

$

(473)

$

33,658

Commercial paper

34,831

(86)

34,745

Total investments

$

68,951

$

11

$

(559)

$

68,403

For the nine months ended September 30, 2022, the net unrealized losses were $417, net of taxes. Available-for-sale debt securities are carried at fair value on the consolidated balance sheets. The Company estimates the lifetime expected credit losses for all available-for sale debt securities in an unrealized loss position. If our assessment indicates that an expected credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record a reserve for the expected credit loss in the allowance for credit losses in technology and academic services in our consolidated income statements.

Available-for-sale securities maturing as of December 31:

2022 (Remainder of year)

$

46,199

2023

7,376

2024

6,715

2025

8,113

Total

$

68,403

4. Net Income Per Common Share

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the assumed conversion of all potentially dilutive securities, consisting of restricted stock awards, for which the estimated fair value exceeds the exercise price, less shares which could have been purchased with the related proceeds, unless anti-dilutive. For employee equity awards, repurchased shares are also included for any unearned compensation adjusted for tax. The table below reflects the calculation of the weighted average number of common shares outstanding, on an as if converted basis, used in computing basic and diluted earnings per common share.

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

 

2022

    

2021

    

2022

    

2021

Denominator:

 

  

 

  

 

  

 

  

Basic weighted average shares outstanding

 

31,302

 

44,212

 

32,623

 

45,272

Effect of dilutive stock options and restricted stock

 

85

 

86

 

86

 

132

Diluted weighted average shares outstanding

 

31,387

 

44,298

 

32,709

 

45,404

Diluted weighted average shares outstanding excludes the incremental effect of unvested restricted stock in accordance with the treasury stock method. For the three-month periods ended September 30, 2022 and 2021, approximately 25 and 73, respectively, and for the nine-month periods ended September 30, 2022 and 2021,

16

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

approximately 77 and 25, respectively, of the Company’s restricted stock awards outstanding were excluded from the calculation of diluted earnings per share as their inclusion would have been anti-dilutive. These restricted stock awards could be dilutive in the future.

5. Allowance for Credit Losses

Balance at

    

    

    

Balance at

Beginning of

Charged to

Deductions/

End of

Period (1)

Expense

Transfers (2)

Period

Allowance for credit losses

Nine months ended September 30, 2022

$

 

 

$

Nine months ended September 30, 2021

$

5,000

 

 

$

5,000

(1)Amount represents the cumulative effect of the adoption of ASU No. 2016-13 on the Secured Note.
(2)Deductions represent accounts written off, net of recoveries.

6. Property and Equipment

Property and equipment consist of the following:

 

September 30, 

    

December 31, 

2022

2021

Land

$

5,098

$

5,579

Land improvements

 

2,242

 

2,242

Buildings

 

51,399

 

51,399

Buildings and leasehold improvements

 

21,719

 

17,161

Computer equipment

 

117,793

 

113,680

Furniture, fixtures and equipment

 

20,359

 

17,921

Internally developed software

 

56,471

 

55,083

Construction in progress

 

13,415

 

3,381

 

288,496

 

266,446

Less accumulated depreciation and amortization

 

(143,624)

 

(130,326)

Property and equipment, net

$

144,872

$

136,120

7. Amortizable Intangible Assets

Amortizable intangible assets consist of the following as of:

September 30, 2022

Estimated

Gross

Net

Average Useful

Carrying

Accumulated

Carrying

Life (in years)

Amount

Amortization

Amount

University partner relationships

25

  

$

210,000

  

$

(31,096)

  

$

178,904

Trade names

1

280

(280)

 

Total amortizable intangible assets, net

$

210,280

$

(31,376)

$

178,904

17

Table of Contents

Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Amortization expense for university partner relationships and trade names for the years ending December 31:

Remainder of 2022

$

2,104

2023

 

8,419

2024

8,419

2025

8,419

2026

8,419

Thereafter

 

143,124

$

178,904

8. Leases

The Company has operating leases for off-campus classroom and laboratory sites, office space, office equipment, and optical fiber communication lines. These leases have remaining lease terms that range from one month to 10 years and 9 months. At lease inception, we determine the lease term by assuming no exercises of renewal options, due to the Company’s constantly changing geographical needs for its university partners. Leases with an initial term of 12 months or less are not recorded in the consolidated balance sheets and we recognize lease expense for these leases on a straight-line basis over the lease term. The Company had operating lease costs of $7,596 and $7,371 for the nine-month periods ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the Company had $9,569 of non-cancelable operating lease commitments for one off-campus classroom and laboratory sites that had not yet commenced. The Company’s weighted-average remaining lease term relating to its operating leases is 8.22 years, with a weighted-average discount rate of 3.35%. As of September 30, 2022, the Company had no financing leases.

Future payment obligations with respect to the Company’s operating leases, which were existing at September 30, 2022, by year and in the aggregate, are as follows:

Year Ending December 31,

    

Amount

Remainder of 2022

$

2,523

2023

10,907

2024

11,144

2025

10,869

2026

10,807

Thereafter

45,229

Total lease payments

$

91,479

Less interest