Table of Contents

GRAND CANYON EDUCATION, INC.

FORM10-Q

INDEX


	Page
PART I – FINANCIAL INFORMATION		3

Item 1 Financial Statements		3
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		17	22
Item 3 Quantitative and Qualitative Disclosures About Market Risk		25	30
Item 4 Controls and Procedures		26	30

PART II – OTHER INFORMATION		26	31

Item 1 Legal Proceedings		26	31
Item 1A Risk Factors		26	31
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		26	31
Item 3 Defaults Upon Senior Securities		27	32
Item 4 Mine Safety Disclosures		27	32
Item 5 Other Information		27	32
Item 6 Exhibits		28	32
SIGNATURES		29	34
~~101.INS XBRL Instance Document~~ ~~101.SCH XBRL Taxonomy Extension Schema~~ ~~101.CAL XBRL Taxonomy Extension Calculation Linkbase~~ ~~101.LAB XBRL Taxonomy Extension Label Linkbase~~ ~~101.PRE XBRL Taxonomy Extension Presentation Linkbase~~ ~~101.DEF XBRL Taxonomy Extension Definition Linkbase~~

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PART I – FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements~~

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)	2023		2022		2023		2022
Service revenue	$	221,913	$	208,720	$	682,615	$	652,606
Costs and expenses:
Technology and academic services		39,174		37,641		115,643		112,136
Counseling services and support		73,824		67,235		219,565		200,773
Marketing and communication		53,097		50,651		156,797		151,237
General and administrative		12,175		15,576		32,838		35,323
Amortization of intangible assets		2,105		2,105		6,315		6,315
Total costs and expenses		180,375		173,208		531,158		505,784
Operating income		41,538		35,512		151,457		146,822
Interest expense		(1)		—		(27)		(5)
Investment interest and other		2,739		745		7,482		1,294
Income before income taxes		44,276		36,257		158,912		148,111
Income tax expense		8,537		6,249		34,636		34,463
Net income	$	35,739	$	30,008	$	124,276	$	113,648
Earnings per share:
Basic income per share	$	1.20	$	0.96	$	4.12	$	3.48
Diluted income per share	$	1.19	$	0.96	$	4.10	$	3.47
Basic weighted average shares outstanding		29,776		31,302		30,138		32,623
Diluted weighted average shares outstanding		29,912		31,387		30,277		32,709

   Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands, except per share data)
   2017 2016 2017 2016
Net revenue
   $ 236,209 $ 210,444 $ 702,716 $ 628,681
Costs and expenses:

Instructional costs and services
   104,303 91,748 301,907 271,001
Admissions advisory and related
   31,426 28,814 94,483 87,224
Advertising
   25,523 23,896 74,930 67,152
Marketing and promotional
   2,350 2,127 7,074 6,477
General and administrative
   12,915 13,430 32,914 32,959
Lease termination costs
   —   3,363 —   3,363


Total costs and expenses
   176,517 163,378 511,308 468,176


Operating income
   59,692 47,066 191,408 160,505
Interest expense
   (567 ) (344 ) (1,642 ) (831 )
Interest and other income
   1,445 (2,291 ) 2,186 50


Income before income taxes
   60,570 44,431 191,952 159,724
Income tax expense
   21,266 15,187 56,889 59,189


Net income
   $ 39,304 $ 29,244 $ 135,063 $ 100,535


Earnings per share:

Basic income per share
   $ 0.83 $ 0.63 $ 2.87 $ 2.19


Diluted income per share
   $ 0.81 $ 0.62 $ 2.80 $ 2.14


Basic weighted average shares outstanding
   47,316 46,231 47,083 45,953


Diluted weighted average shares outstanding
   48,292 47,175 48,197 47,009

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

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GRAND CANYON EDUCATION, INC.

Consolidated ~~Statements of Comprehensive Income~~Balance Sheets


	September 30,		December 31,
(In thousands, except par value)	2023		2022
	(Unaudited)
ASSETS:
Current assets
Cash and cash equivalents	$	56,871	$	120,409
Investments		97,553		61,295
Accounts receivable, net		104,475		77,413
Income tax receivable		3,770		2,788
Other current assets		12,069		11,368
Total current assets		274,738		273,273
Property and equipment, net		164,638		147,504
Right-of-use assets		90,393		72,719
Amortizable intangible assets, net		170,485		176,800
Goodwill		160,766		160,766
Other assets		2,136		1,687
Total assets	$	863,156	$	832,749
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities
Accounts payable	$	23,696	$	20,006
Accrued compensation and benefits		25,446		36,412
Accrued liabilities		33,527		22,473
Income taxes payable		91		12,167
Deferred revenue		6,237		—
Current portion of lease liability		10,518		8,648
Total current liabilities		99,515		99,706
Deferred income taxes, noncurrent		26,694		26,195
Other long-term liability		416		436
Lease liability, less current portion		86,001		68,793
Total liabilities		212,626		195,130
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022		—		—
Common stock, $0.01 par value, 100,000 shares authorized; 53,970 and 53,830 shares issued and 30,092 and 31,058 shares outstanding at September 30, 2023 and December 31, 2022, respectively		540		538
Treasury stock, at cost, 23,878 and 22,772 shares of common stock at September 30, 2023 and December 31, 2022, respectively		(1,832,686)		(1,711,423)
Additional paid-in capital		319,266		309,310
Accumulated other comprehensive loss		(593)		(533)
Retained earnings		2,164,003		2,039,727
Total stockholders’ equity		650,530		637,619
Total liabilities and stockholders’ equity	$	863,156	$	832,749

~~(Unaudited)~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
(In thousands)
   2017 2016 2017 2016
Net income
   $ 39,304 $ 29,244 $ 135,063 $ 100,535
Other comprehensive income, net of tax:

Unrealized gains (losses) onavailable-for-sale securities, net of taxes of $25 and $88 for the three months ended September 30, 2017 and 2016, respectively, and $257 and $5 for the nine months ended September 30, 2017 and 2016, respectively
   40 (142 ) 416 (6 )
Unrealized losses on hedging derivatives, net of taxes of $20 and $2 for the three months ended September 30, 2017 and 2016, respectively, and $65 and $203 for the nine months ended September 30, 2017 and 2016, respectively
   (30 ) (4 ) (104 ) (328 )


Comprehensive income
   $ 39,314 $ 29,098 $ 135,375 $ 100,201

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

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GRAND CANYON EDUCATION, INC.

Consolidated ~~Balance Sheets~~Statements of Comprehensive Income

(Unaudited)

   September 30, December 31,
(In thousands, except par value)
   2017 2016
   (Unaudited)
ASSETS:
Current assets

Cash and cash equivalents
   $ 180,142 $ 45,976
Restricted cash and cash equivalents
   75,604 84,931
Investments
   89,609 62,596
Accounts receivable, net
   12,243 9,999
Income tax receivable
   4,546 4,686
Other current assets
   24,702 21,880


Total current assets
   386,846 230,068
Property and equipment, net
   897,540 855,528
Prepaid royalties
   2,837 3,059
Goodwill
   2,941 2,941
Other assets
   766 897


Total assets
   $ 1,290,930 $ 1,092,493


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities

Accounts payable
   $ 27,523 $ 24,824
Accrued compensation and benefits
   24,377 19,697
Accrued liabilities
   23,184 21,283
Income taxes payable
   10,750 2,734
Student deposits
   76,111 85,881
Deferred revenue
   116,438 40,739
Current portion of notes payable
   6,680 31,636


Total current liabilities
   285,063 226,794
Other noncurrent liabilities
   1,341 1,689
Deferred income taxes, noncurrent
   27,209 23,708
Notes payable, less current portion
   61,596 66,616


Total liabilities
   375,209 318,807


Commitments and contingencies

Stockholders’ equity

Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at September 30, 2017 and December 31, 2016
   —   —
Common stock, $0.01 par value, 100,000 shares authorized; 52,238 and 51,509 shares issued and 48,120 and 47,559 shares outstanding at September 30, 2017 and December 31, 2016, respectively
   522 515
Treasury stock, at cost, 4,118 and 3,950 shares of common stock at September 30, 2017 and December 31, 2016, respectively
   (99,051 ) (89,394 )
Additionalpaid-in capital
   228,928 212,559
Accumulated other comprehensive loss
   (598 ) (910 )
Retained earnings
   785,920 650,916


Total stockholders’ equity
   915,721 773,686


Total liabilities and stockholders’ equity
   $ 1,290,930 $ 1,092,493


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2023		2022		2023		2022
Net income	$	35,739	$	30,008	$	124,276	$	113,648
Other comprehensive income, net of tax:
Unrealized gains (losses) on available-for-sale securities, net of taxes of $30 and $8 for the three months ended September 30, 2023 and 2022, respectively, and $19 and $131 for the nine months ended September 30, 2023 and 2022, respectively		97		(19)		(60)		(417)
Comprehensive income	$	35,836	$	29,989	$	124,216	$	113,231

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

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GRAND CANYON EDUCATION, INC.

Consolidated Statement of Stockholders’ Equity

(In thousands)

(Unaudited)


	Nine Months Ended September 30, 2023
									Accumulated
							Additional		Other
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Retained
	Shares	Par Value		Shares	Cost		Capital		Loss		Earnings		Total
Balance at December 31, 2022	53,830	$	538	22,772	$	(1,711,423)	$	309,310	$	(533)	$	2,039,727	$	637,619
Comprehensive income	—		—	—		—		—		119		59,564		59,683
Common stock purchased for treasury	—		—	310		(35,090)		—		—		—		(35,090)
Restricted shares forfeited	—		—	5		—		—		—		—		—
Share-based compensation	136		2	56		(6,331)		3,367		—		—		(2,962)
Balance at March 31, 2023	53,966	$	540	23,143	$	(1,752,844)	$	312,677	$	(414)	$	2,099,291	$	659,250
Comprehensive income	—		—	—		—		—		(276)		28,973		28,697
Common stock purchased for treasury	—		—	419		(45,775)		—		—		—		(45,775)
Restricted shares forfeited	—		—	10		—		—		—		—		—
Share-based compensation	4		—	—		—		3,253		—		—		3,253
Balance at June 30, 2023	53,970	$	540	23,572	$	(1,798,619)	$	315,930	$	(690)	$	2,128,264	$	645,425
Comprehensive income	—		—	—		—		—		97		35,739		35,836
Common stock purchased for treasury	—		—	306		(34,067)		—		—		—		(34,067)
Restricted shares forfeited	—		—	—		—		—		—		—		—
Share-based compensation	—		—	—		—		3,336		—		—		3,336
Balance at September 30, 2023	53,970	$	540	23,878	$	(1,832,686)	$	319,266	$	(593)	$	2,164,003	$	650,530

               Accumulated
            Additional    Other
   Common Stock    Treasury Stock Paid-in    Comprehensive Retained
   Shares    Par Value    Shares    Cost Capital    Loss Earnings Total
Balance at December 31, 2016    51,509    $ 515    3,950    $ (89,394 ) $ 212,559    $ (910 ) $ 650,916 $ 773,686
Cumulative effect from the adoption of accounting pronouncements, net of taxes
   —      —      —      —   59    —   (59 ) —
Comprehensive income    —      —      —      —   —      312 135,063 135,375
Restricted shares forfeited    —      —      19    —   —      —   —   —
Share-based compensation    192    2    149    (9,657 ) 9,560    —   —   (95 )
Exercise of stock options    537    5    —      —   6,750    —   —   6,755










Balance at September 30, 2017
   52,238    $ 522    4,118    $ (99,051 ) $ 228,928    $ (598 ) $ 785,920 $ 915,721

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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)
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

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

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GRAND CANYON EDUCATION, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended
	September 30,
(In thousands)	2023		2022
Cash flows provided by operating activities:
Net income	$	124,276	$	113,648
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation		9,958		9,484
Depreciation and amortization		16,994		17,023
Amortization of intangible assets		6,315		6,315
Deferred income taxes		517		368
Other, including fixed asset impairments		(134)		1,013
Changes in assets and liabilities:
Accounts receivable from university partners		(27,062)		(31,107)
Other assets		(1,154)		(1,288)
Right-of-use assets and lease liabilities		1,404		700
Accounts payable		3,894		(5,768)
Accrued liabilities		(910)		2,162
Income taxes receivable/payable		(13,058)		(8,172)
Deferred revenue		6,237		6,092
Net cash provided by operating activities		127,277		110,470
Cash flows used in investing activities:
Capital expenditures		(34,186)		(26,301)
Additions of amortizable content		(809)		(294)
Purchases of investments		(73,462)		(132,096)
Proceeds from sale or maturity of investments		37,927		63,373
Net cash used in investing activities		(70,530)		(95,318)
Cash flows used in financing activities:
Repurchase of common shares and shares withheld in lieu of income taxes		(120,285)		(576,206)
Net cash used in financing activities		(120,285)		(576,206)
Net decrease in cash and cash equivalents and restricted cash		(63,538)		(561,054)
Cash and cash equivalents and restricted cash, beginning of period		120,409		600,941
Cash and cash equivalents and restricted cash, end of period	$	56,871	$	39,887
Supplemental disclosure of cash flow information
Cash paid for interest	$	27	$	5
Cash paid for income taxes	$	47,654	$	41,118
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment included in accounts payable	$	927	$	1,827
ROU Asset and Liability recognition	$	17,674	$	17,434
Excise tax on treasury stock repurchases	$	978	$	—

   Nine Months Ended
September 30,
(In thousands)
   2017 2016
Cash flows provided by operating activities:

Net income
   $ 135,063 $ 100,535
Adjustments to reconcile net income to net cash provided by operating activities:

Share-based compensation
   9,562 9,034
Provision for bad debts
   13,351 12,812
Depreciation and amortization
   40,467 32,744
Deferred income taxes
   3,813 2,132
Other
   1,751 917
Changes in assets and liabilities:

Accounts receivable
   (15,595 ) (14,876 )
Prepaid expenses and other
   (3,016 ) (2,173 )
Accounts payable
   4,007 (3,756 )
Accrued liabilities and employee related liabilities
   6,710 11,127
Income taxes receivable/payable
   8,156 5,315
Deferred rent
   (271 ) (790 )
Deferred revenue
   75,699 66,818
Student deposits
   (9,770 ) (6,574 )


Net cash provided by operating activities
   269,927 213,265


Cash flows used in investing activities:

Capital expenditures
   (75,604 ) (157,584 )
Purchases of land, building and golf course improvements related tooff-site development
   (10,152 ) (41,876 )
Proceeds received from note receivable
   —   501
Return of equity method investment
   685 1,749
Purchases of investments
   (76,630 ) (32,097 )
Proceeds from sale or maturity of investments
   49,617 65,807


Net cash used in investing activities
   (112,084 ) (163,500 )


Cash flows used in financing activities:

Principal payments on notes payable and capital lease obligations
   (5,102 ) (5,527 )
Debt issuance costs
   —   (194 )
Net borrowings from revolving line of credit
   (25,000 ) 12,000
Repurchase of common shares including shares withheld in lieu of income taxes
   (9,657 ) (20,009 )
Net proceeds from exercise of stock options
   6,755 10,016


Net cash used in financing activities
   (33,004 ) (3,714 )


Net increase in cash and cash equivalents and restricted cash
   124,839 46,051
Cash and cash equivalents and restricted cash, beginning of period
   130,907 98,420


Cash and cash equivalents and restricted cash, end of period
   $ 255,746 $ 144,471


Supplemental disclosure of cash flow information

Cash paid for interest
   $ 1,633 $ 791
Cash paid for income taxes
   $ 45,413 $ 50,826
Supplemental disclosure ofnon-cash investing and financing activities

Purchases of property and equipment included in accounts payable
   $ 6,437 $ 10,735
Tax benefit of Spirit warrant intangible
   $ —   $ 190
Shortfall tax expense from share-based compensation
   $ —   $ 264

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

~~GRAND CANYON EDUCATION, INC.~~8

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

~~(Unaudited)~~

1. Nature of Business

Grand Canyon Education, Inc. (together with its subsidiaries, the ~~“University”~~“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 ~~over 220~~ graduate and undergraduate degree programs, emphases and certificates across nine colleges both online, ~~and~~ on ground at ~~our over 270 acre~~its campus in Phoenix, Arizona ~~at leased facilities~~ and at ~~facilities~~six off-campus classroom and laboratory sites.

In January 2019, GCE began providing education services to numerous university partners across the United States, through our wholly owned subsidiary, Orbis Education, which we acquired, by ~~third party employers. Our undergraduate~~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 ~~are designed to be innovative~~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 future needs of employers, while providing students with the needed critical thinking and effective communication skills developed through a Christian-oriented, liberal arts foundation. We offer master’s and doctoral degrees in contemporary fields that are designed to provide students with the capacity for transformational leadership in their chosen industry, emphasizing the immediate relevance of theory, application, and evaluation to promote personal and organizational change. The University is accredited by The Higher Learning Commission. The University’s wholly-owned subsidiaries are primarily used to facilitate expansiondemands of the ~~University campus.~~healthcare industry. In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of September 30, 2023, GCE provides education services to 25 university partners across the United States.

2. Summary of Significant Accounting Policies

Principles of Consolidation

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

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements of the ~~University~~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 Form10-Q and Article ~~10.~~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, 2022. 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 ~~University’s~~Company’s audited financial statements and footnotes included in its Annual Report on Form10-K for the fiscal year ended December 31, ~~2016~~2022 from which the December 31, ~~2016~~2022 balance sheet information was derived.

~~Restricted Cash~~Investments

As of September 30, 2023 and ~~Cash Equivalents~~

~~A significant portion of~~December 31, 2022, the University’s revenue is received from students who participate in government financial aid and assistance programs. Restricted cash and cash equivalents primarily represent amounts received from the federal and state governments under various student aid grant and loan programs, such as Title IV. The University receives these funds subsequent to the completion of the authorization and disbursement process and holds them for the benefit of the student. The U.S. Department of Education (“Department of Education”) requires Title IV funds collected in advance of student billings to be restricted until the course begins. The University records all of these amounts as a current asset in restricted cash and cash equivalents. The majority of these funds remains as restricted for an average of 60 to 90 days from the date of receipt.

~~Investments~~

~~The University considers~~Company considered its investments in ~~municipal~~corporate bonds, agency bonds and commercial paper as available-for-sale securities as~~available-for-sale~~based on the Company’s intent for the respective securities.Available-for-sale securities are carried at fair value, determined using Level 1 and Level 2 of the hierarchy of valuation inputs, with the use of ~~quoted market prices and~~ 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 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.

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~~Derivatives and Hedging~~Grand Canyon Education, Inc.

~~Derivative financial instruments are recorded on the balance sheet as assets or liabilities andre-measured~~ at fair value at each reporting date. For derivatives designated as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

~~GRAND CANYON EDUCATION, INC.~~

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Arrangements with GCU

~~(Unaudited)~~

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

~~Derivative financial instruments enable the University~~The Company capitalizes certain costs related to ~~manage its exposure to interest rate risk. The University does not engage in any derivative instrument trading activity. Credit risk~~internal-use software, primarily consisting of direct labor associated with creating the ~~University’s derivatives~~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 ~~limited~~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 ~~risk that~~development and digital creation of content on a ~~derivative counterparty will not perform~~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 ~~terms~~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 ~~contract. Exposure~~process. The Company starts capitalizing content costs when it begins to ~~counterparty credit risk is considered low because these agreements~~develop or to convert a particular course, resources have been ~~entered into with institutions with strong credit ratings,~~assigned and ~~they~~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 ~~expected to perform fully under the terms of the agreements.~~

On February 27, 2013, the University entered into an interest rate corridor to manage its 30 Day LIBOR interest exposure related to its variable rate debt. The fair value of the interest rate corridor instrument as of September 30, 2017 and December 31, 2016 was $322 and $490, respectively, which is included in other ~~assets.~~assets in our consolidated balance sheets. The ~~fair value~~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 ~~derivative instrument was determined using a hypothetical derivative transaction~~course, which is generally four years which corresponds with course’s review and Level 2 of the hierarchy of valuation inputs. This derivative instrument was originally designated as a cash flow hedge of variable rate debt obligations. The adjustment of $169 and $531 for the nine months ended September 30, 2017 and 2016, respectively, for the effective portion of the losses on the derivatives is included as a component of other comprehensive income, net of taxes.

The interest rate corridor instrument reduces variable interest rate risk starting March 1, 2013 through December 20, 2019 with a notional amount of $68,333 as of September 30, 2017. The corridor instrument’s terms permits the University to hedge its interest rate risk at several thresholds; the University pays variable interest monthly based on the 30 Day LIBOR rates until that index reaches 1.5%. If 30 Day LIBOR is equal to 1.5% through 3.0%, the University pays 1.5%. If 30 Day LIBOR exceeds 3.0%, the University pays actual 30 Day LIBOR less 1.5%.

major revision cycle. As of September 30, ~~2017, no derivative ineffectiveness was identified. Any ineffectiveness~~2023 and December 31, 2022, $906 and $910, respectively, net of amortization, of deferred content assets are included in other assets, long-term in the University’s derivative instrument designated as a hedge is reported in interest expense in the income statement. At September 30, 2017, the University does not expect to reclassify gains or losses on derivative instruments from accumulated other comprehensive income (loss) into earnings during the next 12 months.

~~Fair Value of Financial Instruments~~

~~The carrying value of cash~~Company’s consolidated balance sheets and cash equivalents, investments, 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 carrying value of notes payable approximates fair value as it is based on variable rate index. Derivative financial instruments 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 asset or liability.

The fair value of investments, primarily municipal securities, were 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. The unit of account used for valuation is the individual underlying security. The municipal securities are comprised of city and county bonds related to schools, water and sewer, utilities, transportation, healthcare and housing.

~~Revenue Recognition~~

Net revenues consist primarily of tuition and fees derived from courses taught by the University online, on ground at its over 270 acre campus in Phoenix, Arizona, and at facilities it leases or those of employers, as well as from related educational resources that the University provides to its students, such as access to online materials. Tuition revenue and most fees from related educational resources are recognized~~pro-rata~~ over the applicable period of instruction, net of scholarships provided by the University. For the nine months ended September 30, 2017 and 2016, the University’s revenue was reduced by approximately $135,630 and $123,112, respectively, as a result of scholarships that the University offered to students. The University maintains an institutional tuition refund policy, which provides for all or a portion of tuition to be refunded if a student withdraws during stated refund periods. Certain states in which students reside impose separate, mandatory refund policies, which override the University’s policy to the extent in conflict. If a student withdraws at a time when only a portion, or none of the tuition is refundable, then in accordance with its revenue recognition policy, the University continues to recognize the tuition that was not refunded~~pro-rata~~ over the applicable period of instruction. However, for students that have taken out financial aid to pay their tuition and for which a return of such money to the Department of Education under Title IV is required as a result of his or her withdrawal, the University recognizes revenue after a student withdraws only at the time of cash collection. Sales tax collected from students is excluded from net revenues. Collected but unremitted sales taxamortization is included ~~as an accrued liability~~ in technical and academic services where the consolidated balance sheets. The University also charges online students an upfront learning management fee, which is deferred and recognized over the average expected term of a student. Costs that are direct and incremental to new online students are also deferred and recognized ratably over the average expected term of a student. Deferred revenue andcosts originated.

~~GRAND CANYON EDUCATION, INC.~~

~~Notes to Consolidated Financial Statements~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

student deposits in any period represent the excess of tuition, fees, and other student payments received as compared to amounts recognized as revenue on the income statement and are reflected as current liabilities in the accompanying consolidated balance sheet. The University’s educational programs have starting and ending dates that differ from its fiscal quarters. Therefore, at the end of each fiscal quarter, a portion of revenue from these programs is not yet earned. Other revenues may be recognized as sales occur or services are performed.

~~Allowance for Doubtful Accounts~~

The University records an allowance for doubtful accounts for estimated losses resulting from the inability, failure or refusal of its students to make required payments, which includes the recovery of financial aid funds advanced to a student for amounts in excess of the student’s cost of tuition and related fees. The University determines the adequacy of its allowance for doubtful accounts based on an analysis of its historical bad debt experience, current economic trends, the aging of the accounts receivable and student status. The University applies reserves to its receivables based upon an estimate of the risk presented by the age of the receivables and student status. The University writes off accounts receivable balances at the earlier of the time the balances were deemed uncollectible, or one year after the revenue is generated. The University accelerates the write off of inactive student accounts such that the accounts are written off by day 150. The University reflects accounts receivable with an offsetting allowance as long as management believes there is a reasonable possibility of collection. Bad debt expense is recorded as an instructional costs and services expense in the consolidated income statement.

Long-Lived Assets ~~(other than goodwill)~~

The ~~University~~Company evaluates the recoverability of ~~our~~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

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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. 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 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, 2023. 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,

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~~Instructional Costs~~Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

a potential impairment loss is recognized to the extent the carrying amounts of the assets exceeds the fair value of the assets.

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 and agency bonds.

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

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Grand Canyon Education, Inc.

~~Instructional costs~~Notes to Consolidated Financial Statements

(In thousands, except per share data)

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, 2023. 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 $7,778 and $5,560 as of September 30, 2023 and December 31, 2022, 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 at the net amount expected to be collected. Our accounts receivable are derived through education services provided to university partners. 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. Bad debt expense is recorded as a technology and academic services expense in the consolidated income statements. The Company monitors the impact of 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 ~~administration~~provision of certain services, primarily at the Company’s Phoenix, Arizona and ~~delivery~~Indianapolis, Indiana locations.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

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 ~~University’s educational programs.~~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 ~~full-time~~marketing and ~~adjunct faculty and administrative~~communication personnel, information technology costs, bad debt expense, curriculum and new program development costs (which are expensed as incurred) and costs associated with other support groups that provide services directly to the students. This category also includes an allocation of depreciation, amortization, rent, and occupancy costs attributable to the provision of educational services, primarily at the University’s Phoenix, Arizona campus.

~~Admissions Advisory and Related~~

Admissions advisory and related expenses include salaries and benefits for admissions advisory personnel as well as an allocation of depreciation, amortization, rent and occupancy costs attributable to the admissions advisory personnel.

~~Advertising~~

~~Advertising expenses include~~ brand advertising, marketing leads and other ~~branding activities. Advertising costs are expensed as incurred.~~

~~Marketing~~promotional and ~~Promotional~~

~~Marketing and promotional expenses include salaries, benefits and share-based compensation for marketing personnel, and other promotional~~communication expenses. This category also includes an allocation of depreciation, amortization, ~~rent,~~lease expense, and occupancy costs attributable to ~~marketing~~the provision of certain services, primarily at the Company’s Phoenix, Arizona and ~~promotional activities. Marketing and promotional~~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. ~~General and administrative expenses~~This category also ~~include~~includes an allocation of depreciation, amortization, ~~rent,~~lease expense, and occupancy costs attributable to the ~~departments providing general~~provision of these services, primarily at the Company’s Phoenix, Arizona and ~~administrative functions.~~Indianapolis, Indiana locations.

~~GRAND CANYON EDUCATION, INC.~~

~~Notes to Consolidated Financial Statements~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

Commitments and Contingencies

The ~~University~~Company accrues for contingent obligations when it is probable that a liability has been incurred and the amount is reasonably estimable. When the ~~University~~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 ~~University~~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 ~~University~~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 ~~University~~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 at least one major rating agency at the time of purchase. All of the Company’s cash equivalents and investments as of September 30, 2023 and December 31, 2022 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, 2023 and December 31, 2022, the Company had $56,119 and $119,639, 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 87.0% and 84.9% of total service revenue for

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

the nine-month periods ended September 30, 2023 and 2022, 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 ~~University~~Company operates as a single ~~educational delivery operation~~education services company using a core infrastructure that serves the curriculum and educational delivery needs of ~~both~~ its ~~ground and online students regardless of geography.~~university partners. The ~~University’s~~Company’s Chief Executive Officer manages the ~~University’s~~Company’s operations as a whole and no expense or operating income information is generated or evaluated on any component level.

~~Accounting Pronouncements Adopted in 2017~~

In March 2016, the FASB issued “Compensation – Stock Compensation: Improvement to Employee Share-Based Payment Accounting,” to simplify certain aspects of the accounting for share-based payment transactions to employees. The new standard requires excess tax benefits and tax deficiencies to be recorded in the consolidated statements of income as a component of the provision for income taxes when stock awards vest or options are exercised. In addition, it eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the consolidated statements of cash flows. The standard also provides an accounting policy election to account for forfeitures as they occur, allows us to withhold more of an employee’s vesting shares for tax withholding purposes without triggering liability accounting, and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on our consolidated cash flows statement.

The University adopted the new guidance in the first quarter of 2017 which required us to reflect any adjustments as of January 1, 2017. Upon adoption, excess tax benefits or deficiencies from share-based awards or options are now reflected in the consolidated statement of income as a component of the provision for income taxes, whereas previously they were recognized in equity. The University elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The net cumulative effect of this change increased additional~~paid-in~~ capital and decreased retained earnings as of January 1, 2017 by $59, net of tax. The University did not have any previously unrecognized excess tax effects that had not been recorded as a reduction to tax liability.

The University adopted the provisions of the standard impacting the cash flow presentation retrospectively, and accordingly, to conform to the current period presentation, we reclassified $7,370 of excess tax benefits which had been included as a financing activity to an operating activity for the nine months ended September 30, 2016 in our consolidated statement of cash flows. The presentation requirement for cash flows related to employee taxes paid for withheld shares had no impact on our consolidated statement of cash flows since such cash flows have historically been presented as a financing activity.

Adoption of the provision of the new standard related to income taxes was adopted prospectively and resulted in a reduction to our provision for income taxes of $15,374 for the nine months ended September 30, 2017, due to the recognition of excess tax benefits from restricted stock awards that vested or stock options that were exercised in 2017. Our restricted stock awards vest in March each year so the excess tax benefits and deficiencies is greatest in the first quarter each year. The inclusion of excess tax benefits and deficiencies as a component of our income tax expense will increase 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.

~~GRAND CANYON EDUCATION, INC.~~

~~Notes to Consolidated Financial Statements~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

In August 2016, the FASB issued a new standard that clarifies how certain cash receipts and cash payments are presented and classified in the consolidated statement of cash flows. The University elected to early adopt this guidance in the first quarter of 2017 on a retrospective basis. There was no reclassification impact of the adoption on our consolidated statement of cash flows for the nine months ended September 30, 2017 and 2016, as our historical statements have been presented in accordance with this new guidance.

In November 2016, the FASB issued a new standard that requires restricted cash and cash equivalents to be included with the amount of cash and cash equivalents that are reconciled on the consolidated statement of cash flows. The University elected to early adopt this guidance in the first quarter of 2017 on a retrospective basis, and accordingly, to conform to the current period presentation, we reclassified our restricted cash and cash equivalents to be included in the total of cash and cash equivalents presented at the bottom of our consolidated statement of cash flows for both the beginning and ending periods for our nine months ended September 30, 2017 and 2016. As a result, the amount of the change in our net cash provided by operating activities no longer includes the impact of the change in restricted cash and cash equivalents for either period.

The following table summarizes the effects related to the adoption of both accounting standards (share-based compensation and restricted cash and cash equivalents) for the nine months ended September 30, 2016:

~~Consolidated Statement of Cash Flows Data:~~

   September 30, 2016
   As reported    As adjusted
Net cash provided by operating activities
   $ 214,451    $ 213,265
Net cash used in investing activities
   $ (166,000 )    $ (163,500 )
Net cash provided by (used in) financing activities
   $ 3,656    $ (3,714 )
Net increase in cash and cash equivalents and restricted cash
   $ 52,107    $ 46,051
Cash and cash equivalents and restricted cash, beginning of period
   $ 23,036    $ 98,420
Cash and cash equivalents and restricted cash, end of period
   $ 75,143    $ 144,471

Recent Accounting Pronouncements

In May 2014, the FASB issued “Revenue from Contracts with Customers, as amended.” The standard is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The accounting guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgements and changes in judgements and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB approved a one-year delay in the effective date. The University will adopt this new standard January 1, 2018 using the modified retrospective method and providing certain additional disclosure as defined within the standard. The University has elected to apply this guidance retrospectively to all contracts at the date of initial application. Management has undertaken a review of contracts and revenue streams for all of our net revenues. The majority of our revenues are related to tuition, net of scholarships, due from our students. Tuition revenues, net of scholarships, are currently recognized pro-rata over the applicable period of instruction which the University believes is consistent with the revenue recognition method required by the new standard. The University will provide expanded disclosures pertaining to revenue recognition in our quarterly filings beginning in the period of adoption. The University will clarify further its receivables and contract liabilities reported in its consolidated balance sheets. The University does not expect to have any contract assets. The University will elect the short-term contract exemption with respect to its performance obligations as all performance obligations as of the end of any reporting period are completed within less than a year. We anticipate the adoption of this standard will not have a material impact on our consolidated financial statements, cash flows or results of operations. The University is continuing to evaluate the impact the adoption of this standard will have on our accounting systems and system of internal controls and does not anticipate significant changes to our accounting systems and expects that there may be some enhancements in internal controls as a result of implementing the new standard.

~~GRAND CANYON EDUCATION, INC.~~

~~Notes to Consolidated Financial Statements~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

~~In January 2016, the FASB issued “~~~~Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities~~.” The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most prominent among the amendments is the requirement for changes in the fair value of equity investments, with certain exceptions, to be recognized through net income rather than other comprehensive income (“OCI”). This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is not permitted. Accordingly, the standard is effective for us on January 1, 2018. We are currently evaluating the impact that the standard will have on our consolidated financial statements.

~~In February 2016, the FASB issued “~~~~Leases~~~~.” The standard establishes aright-of-use~~ (“ROU”) model that requires a lessee to recognize a ROU asset and a lease liability on the balance sheet for all leases with lease terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Accordingly, the standard is effective for us on January 1, 2019 using a modified retrospective transition approach. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The University has begun evaluating the impact that the future adoption of this standard will have on our consolidated financial statements and we believe the adoption will slightly increase our assets and liabilities, and will increase our financial statement disclosures.

~~In June 2016, the FASB issued “~~~~Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments~~”. The new guidance revises the accounting requirements related to the measurement of credit losses on financial instruments and the timing of when such losses are recorded. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years and interim periods within those years, beginning after December 15, 2018. Accordingly, the standard is effective for us on January 1, 2020 using a modified retrospective approach, and we are currently evaluating the impact that the standard will have on our consolidated financial statements.

The ~~University~~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.

3. Investments

~~The following is a summary of investments as~~As of September 30, ~~2017~~2023 and December 31, ~~2016. The University considers all~~2022, the Company had investments of $97,553 and $61,295, respectively, classified as ~~available for sale.~~available-for-sale securities.

   As of September 30, 2017
   Adjusted
Cost    Gross
Unrealized
Gains    Gross
Unrealized
(Losses)    Estimated
Fair
Value
Municipal securities
   $ 89,631    $ 57    $ (79 )    $ 89,609








   As of December 31, 2016
   Adjusted
Cost    Gross
Unrealized
Gains    Gross
Unrealized
(Losses)    Estimated
Fair
Value
Municipal securities
   $ 62,769    $ 12    $ (185 )    $ 62,596

~~The cash flows of municipal securities are backed by the issuing municipality’s credit worthiness. All municipal securities are due in one year or less as~~As of September 30, ~~2017.~~ 2023, the Company had available-for-sale investments comprised of the following:


	As of September 30, 2023
			Gross		Gross
	Adjusted		Unrealized		Unrealized		Estimated
	Cost		Gains		(Losses)		Fair Value
Corporate bonds	$	74,323	$	—	$	(742)	$	73,581
Commercial Paper		4,988		—		(1)		4,987
Agency bonds		19,020		—		(35)		18,985
Total investments	$	98,331	$	—	$	(778)	$	97,553

For the nine months ended September 30, ~~2017,~~2023 and 2022, the net unrealized losses on~~available-for-sale~~ ~~securities was $14,~~were $60 and $417, respectively, 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. The Company has the ability and intent to hold these investments until recovery or maturity.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)


Available-for-sale securities maturing as of December 31:
2023	$	25,659
2024		39,002
2025		24,366
2026		5,844
2027		2,682
Total	$	97,553

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 ~~stock options and~~ 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

~~GRAND CANYON EDUCATION, INC.~~

~~Notes to Consolidated Financial Statements~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

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,
	2017		2016		2017		2016

									Three Months Ended		Nine Months Ended
									September 30,		September 30,
									2023	2022	2023	2022
Denominator:
Basic weighted average shares outstanding		47,316		46,231		47,083		45,953	29,776	31,302	30,138	32,623
Effect of dilutive stock options and restricted stock		976		944		1,114		1,056	136	85	139	86

Diluted weighted average shares outstanding		48,292		47,175		48,197		47,009	29,912	31,387	30,277	32,709

Diluted weighted average shares outstanding ~~exclude~~excludes the incremental effect of unvested restricted stock ~~and shares that would be issued upon the assumed exercise of stock options~~ in accordance with the treasury stock method. For the ~~nine months~~three-month periods ended September 30, ~~2017~~2023 and ~~2016,~~2022, approximately 32 and ~~458,~~25, respectively, and for the nine-month periods ended September 30, 2023 and 2022, approximately 70 and 77, respectively, of the ~~University’s stock options and~~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 ~~options and~~ restricted stock awards could be dilutive in the future.

~~5. Allowance for Doubtful Accounts~~

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Grand Canyon Education, Inc.

   Balance at
Beginning of
Period    Charged to
Expense    Deductions⁽¹⁾    Balance at
End of
Period
Nine months ended September 30, 2017
   $ 5,918    13,351    (12,978 )    $ 6,291
Nine months ended September 30, 2016
   $ 5,137    12,812    (11,766 )    $ 6,183

Notes to Consolidated Financial Statements

~~(1)~~

~~Deductions represent accounts written off, net of recoveries.~~

6.(In thousands, except per share data)

5. Property and Equipment

Property and equipment consist of the following:


	September 30, 2017			December 31, 2016

							September 30,		December 31,
							2023		2022
Land	$	142,013		$	127,769		$	5,098	$	5,098
Land improvements		25,119			23,158			2,242		2,242
Buildings		593,913			559,791			51,399		51,399
Buildings and leasehold improvements		116,935			105,168			30,389		21,911
Equipment under capital leases		5,937			5,943
Computer equipment		116,650			108,551			133,391		119,316
Furniture, fixtures and equipment		62,651			59,300			25,361		21,323
Internally developed software		34,729			30,407			67,626		58,904
Other		1,176			1,176
Construction in progress		18,898			19,112			13,238		16,336

		1,118,021			1,040,375
								328,744		296,529
Less accumulated depreciation and amortization		(220,481	)		(184,847	)		(164,106)		(149,025)

Property and equipment, net	$	897,540		$	855,528		$	164,638	$	147,504

6. Amortizable Intangible Assets

In January 2019, GCE completed the Acquisition. 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. 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.

Amortizable intangible assets consist of the following as of:


	September 30, 2023
	Estimated	Gross				Net
	Average Useful	Carrying		Accumulated		Carrying
	Life (in years)	Amount		Amortization		Amount
University partner relationships	25	$	210,000	$	(39,515)	$	170,485
Trade names	1		280		(280)		—
Total amortizable intangible assets, net		$	210,280	$	(39,795)	$	170,485

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


2023	$	2,104
2024		8,419
2025		8,419
2026		8,419
2027		8,419
Thereafter		134,705
	$	170,485

7. 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 eight

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

months to 10 years and eight 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 $3,525 and $2,789 for the three-month periods ended September 30, 2023 and 2022, respectively, and $9,695 and $7,596 for the nine-month periods ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, the Company had $24,077 of non-cancelable operating lease commitments for four off-campus classroom and laboratory sites and $192 for optical fiber communication lines that had not yet commenced. The Company’s weighted-average remaining lease term relating to its operating leases is 7.99 years, with a weighted-average discount rate of 3.78%. As of September 30, 2023, the Company had no financing leases.

Future payment obligations with respect to the Company’s operating leases, which were existing at September 30, 2023, by year and in the aggregate, are as follows:


Year Ending December 31,	Amount
2023	$	2,990
2024		14,102
2025		14,015
2026		13,992
2027		13,385
Thereafter		54,657
Total lease payments	$	113,141
Less interest		16,622
Present value of lease liabilities	$	96,519

8. Commitments and Contingencies

Legal Matters

From time to time, the ~~University~~Company is a party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which are covered by insurance. When the ~~University~~Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the ~~University~~Company records a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the ~~University~~Company discloses the nature of the specific claim if the likelihood of a potential loss is reasonably possible, and the amount involved could be material. With respect to the majority of pending litigation matters, the ~~University’s~~Company’s ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential losses related to those matters are not considered probable.

~~GRAND CANYON EDUCATION, INC.~~

~~Notes to Consolidated Financial Statements~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

Upon resolution of any pending legal matters, the ~~University~~Company may incur charges in excess of presently established reserves. Management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on the ~~University’s~~Company’s financial condition, results of operations or cash flows.

~~Tax Reserves,Non-Income~~ ~~Tax Related~~Litigation

~~From time~~

On May 12, 2020, a securities class action complaint was filed in the U.S. District Court for the District of Delaware by the City of Hialeah Employees’ Retirement System naming the Company, Brian E. Mueller and Daniel E. Bachus as defendants for allegedly making false and materially misleading statements regarding the circumstances surrounding the Company’s sale of Grand Canyon University (the “University”) to ~~time~~a non-profit entity on July 1, 2018 and the subsequent decision of the U.S. Department of Education to continue to treat the University ~~has exposure~~as a for-profit

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Grand Canyon Education, Inc.

Notes to ~~variousnon-income~~ ~~tax related matters~~Consolidated Financial Statements

(In thousands, except per share data)

institution for education regulatory purposes (collectively, the “Conversion”). The complaint asserted a putative class period stemming from January 5, 2018, the date when the Company announced that ~~arise~~it had applied to the University’s accreditor for approval of the Conversion, to January 27, 2020, the date prior to the publication of a short-seller report focused on the Conversion. A substantially similar complaint was filed in the ~~ordinary course~~same court by Grant Walsh on June 12, 2020 making similar allegations against the Company, Mr. Mueller and Mr. Bachus. Both complaints alleged violations of ~~business. The University reserve is not material for tax matters where its ultimate exposure is considered probable~~Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder and sought unspecified monetary relief, interest, and attorneys’ fees.

On August 13, 2020, the two cases were consolidated and the ~~potential~~Fire and Police Association of Colorado, the Oakland County Employees’ Retirement System and the Oakland County Voluntary Employees’ Beneficiary Association Trust were appointed as lead plaintiffs. Thereafter, the plaintiffs filed a consolidated amended complaint on October 20, 2020 and the Company filed a motion to dismiss on December 21, 2020. On August 23, 2021, the Court granted the Company’s motion to dismiss in its entirety but permitted plaintiffs to file a further amended complaint to correct deficiencies in the initial complaint. The plaintiffs filed further amended complaints on September 28, 2021 and January 21, 2022, and the Company filed a further motion to dismiss on March 15, 2022. On March 28, 2023, the Company’s motion to dismiss was denied.

The Company believes that plaintiffs’ claims are without merit and it intends to defend itself in this legal proceeding vigorously. The outcome of this legal proceeding is uncertain at this point. At present, the Company cannot reasonably estimate a range of loss ~~can be reasonably estimated.~~for this action based on the information available to the Company. Accordingly, the Company has not accrued any liability associated with this action.

8.

Other Matters

In May 2022, we received a civil investigative demand (“CID”) from the Federal Trade Commission (“FTC”) related to the marketing services that we provide on behalf of GCU, and related activities. The CID requests the production of documents and answers to written questions. In January 2023, we received a further CID from the FTC requesting testimony on the same topic. We are cooperating with the FTC in connection with each of these CIDs.

9. Share-Based Compensation

Incentive ~~Plans~~Plan

The ~~University has made~~Company makes equity incentive grants of restricted stock and stock options under its 2008 Equity Incentive Plan (the “2008 Plan”). In January 2017, the Board of Directors of the University approved, and at the University’s 2017 annual meeting of stockholders held on June 14, 2017, the University’s stockholders adopted, apursuant to our 2017 Equity Incentive Plan (the “2017 Plan”)~~. All future~~ under which a maximum of 3,000 shares may be granted. As of September 30, 2023, 1,081 shares were available for grants ~~of equity incentives will be made from~~under the 2017 Plan.

Restricted Stock

During the nine months ended September 30, ~~2017,~~2023, the ~~University~~Company granted ~~188~~136 shares of common stock ~~under the 2008 Plan~~ with a service vesting condition to certain of its executives, officers ~~faculty~~ and employees. The restricted shares have voting rights and vest in five annual installments of 20%, with ~~this~~ thefirstinstallment vesting in March of the calendar year following the date of grant (the “first vesting date”) and subsequent installments vesting on each of the four anniversaries of the first vesting date. Upon vesting, shares will be ~~held~~withheld in lieu of taxes equivalent to the minimum statutory tax withholding required to be paid when the restricted stock vests. During the nine months ended September 30, ~~2017,~~2023, the ~~University~~Company withheld ~~149~~56 shares of common stock in lieu of taxes at a cost of ~~$9,657~~$6,331 on the restricted stock vesting dates. In June ~~2017,~~2023, following the annual stockholders meeting, the ~~University~~Company granted 4 shares of common stock ~~under~~to the ~~2017 Plan to the~~non-employee members of the ~~University’s board~~Company’s Board of ~~directors.~~Directors. The restricted shares granted to these directors have voting rights and vest on the earlier of (a) the one year anniversary of the date of grant or (b) immediately prior to the ~~following year’s~~next annual ~~stockholders’~~stockholders meeting.

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

A summary of the activity related to restricted stock granted under the ~~2008 Plan and the 2017~~Company’s Incentive Plan since December 31, ~~2016~~2022 is as follows:


	Total Shares			Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2016		993		$	38.32

							Weighted Average
						Total	Grant Date
						Shares	Fair Value per Share
Outstanding as of December 31, 2022						476	$	85.32
Granted		192		$	70.44	140	$	112.60
Vested		(371	)	$	32.38	(147)	$	86.94
Forfeited, canceled or expired		(19	)	$	41.77	(15)	$	85.90

Outstanding as of September 30, 2017		795		$	48.79

Outstanding as of September 30, 2023						454	$	93.18

~~GRAND CANYON EDUCATION, INC.~~

~~Notes to Consolidated Financial Statements~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

~~Stock Options~~

~~During the nine months ended September 30, 2017, no options were granted. A summary of the activity since December 31, 2016 related to stock options granted under the 2008 Plan is as follows:~~

   Summary of Stock Options Outstanding
   Total
Shares    Weighted
Average
Exercise
Price per
Share    Weighted
Average
Remaining
Contractual
Term (Years)    Aggregate
Intrinsic
Value ($)(1)
Outstanding as of December 31, 2016
   1,272    $ 15.26
Granted
   —      $ —
Exercised
   (537 )    $ 12.57
Forfeited, canceled or expired
   (2 )    $ 16.35



Outstanding as of September 30, 2017
   733    $ 17.23    2.92    $ 53,939








Exercisable as of September 30, 2017
   733    $ 17.23    2.92    $ 53,939

~~(1)~~

Aggregate intrinsic value represents the value of the University’s closing stock price on September 29, 2017 ($90.82) in excess of the exercise price multiplied by the number of shares underlying options outstanding or exercisable, as applicable.

Share-based Compensation Expense

The table below outlines share-based compensation expense for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 related to restricted stock ~~and~~granted:


	2023		2022
Technology and academic services	$	1,814	$	1,812
Counseling services and support		5,155		4,720
Marketing and communication		143		114
General and administrative		2,846		2,838
Share-based compensation expense included in operating expenses		9,958		9,484
Tax effect of share-based compensation		(2,489)		(2,371)
Share-based compensation expense, net of tax	$	7,469	$	7,113

10. Treasury Stock

On October 25, 2023, the Board of Directors increased the authorization under its existing stock ~~options granted:~~

2017 2016
Instructional costs and services
$ 5,992 $ 5,462
Admissions advisory and related expenses
144 169
Marketing and promotional
123 92
General and administrative
3,303 3,311

Share-based compensation expense included in operating expenses
9,562 9,034
Tax effect of share-based compensation
(3,825 ) (3,614 )

Share-based compensation expense, net of tax
$ 5,737 $ 5,420

~~9. Regulatory~~

repurchase program by $200,000 reflecting an aggregate authorization for share repurchases since the initiation of our program of $2,045,000. The University is subject to extensive regulation by federal and state governmental agencies and accrediting bodies. In particular, the Higher Education Act of 1965, as amended (the “Higher Education Act”), and the regulations promulgated thereunder by the Department of Education, subject the University to significant regulatory scrutinyexpiration date on the ~~basis of numerous standards that schools must satisfy in order to participate~~repurchase authorization is March 1, 2025. Repurchases occur at the Company’s discretion. Repurchases may be made in the ~~various federal student financial assistance programs under Title IV of the Higher Education Act.~~

~~To participate~~open market or in the Title IV programs, an institution must be authorized to offer its programs of instruction by the relevant agency of the state in which it is located, accredited by an accrediting agency recognized by the Department of Education and certified as eligible by the Department of Education. The Department of Education will certify an institution to participate in the Title IV programs only after the institution has demonstrated compliance with the Higher Education Act and the Department of Education’s extensive regulations regarding institutional eligibility. An institution must also demonstrate its complianceprivately negotiated transactions, pursuant to the ~~Department~~applicable Securities and Exchange Commission rules. The amount and timing of ~~Education on~~future share repurchases, if any, will be made as market and business conditions warrant.

During the nine months ended September 30, 2023 the Company repurchased 1,035 shares of common stock, at an ~~ongoing basis. The University’s accreditation has been reaffirmed by the Higher Learning Commission (“HLC”) after a comprehensive review~~aggregate cost of ~~the institution’s academic offerings, governance and administration, mission, finances and resources during anon-site~~ visit in November 2016. The accreditation was reaffirmed by the HLC’s Institutional Actions council at its meeting on February 28, 2017 with no requirements for any monitoring or interim reports. The comprehensive review occurs every 10 years, along with a~~mid-term~~ ~~report in year four.~~$113,954. As of September 30, ~~2017, management believes~~2023, there remained $81,892 available under its current share repurchase authorization (which authorization was increased to $281,892 in October 2023). Shares repurchased in lieu of taxes are not included in the ~~University is~~repurchase plan totals as they were approved in ~~compliance~~conjunction with the ~~applicable regulations in all material respects. The University has a program participation agreement with full certification from the Department~~restricted share awards. Excise taxes of ~~Education, which gives the University the ability to participate~~$978 are not included in the ~~Title IV programs through December 31, 2020.~~repurchase plan totals but are included in the total cost of net share repurchases in the consolidated statement of stockholders’ equity.

~~Because~~

11. Related Party Transactions

Related party transactions include transactions between the ~~University operates~~Company and certain of its affiliates. The following transactions were in ~~a highly regulated industry, it, like other industry participants, may be subject from time to time to investigations, claims ofnon-compliance,~~ or lawsuits by governmental agencies or third parties, which allege statutory violations, regulatory infractions, or common law causes of action. While there can be no assurance that regulatory agencies or third parties will not undertake investigations or make claims against the ~~University, or that such claims, if made, will not have a material adverse effect on the University’s business, results~~normal course of operations and were measured at the exchange amount, which was the amount of consideration established and agreed to by the parties.

As of and for the nine months ended September 30, 2023 and 2022, related party transactions consisted of the following:

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Grand Canyon Education, Inc.

Notes to Consolidated Financial Statements

(In thousands, except per share data)

Affiliates

GCE Community Fund (“GCECF”) - GCECF was initially formed in 2014. GCECF makes grants for charitable, educational, literary, religious or scientific purposes within the meaning of Section 501(c ) (3) of the Internal Revenue Code (the “Code”), including for such purposes as the making of distributions to organizations that qualify as exempt organizations under Section 501 (c ) (3) of the Code. The Company’s Chief Executive Officer serves as the president of GCECF and GCECF’s board of directors is comprised entirely of Company executives. The Company is not the primary beneficiary of GCECF, and accordingly, the Company does not consolidate GCECF’s activities with its financial ~~condition, management believes~~results. The Company made voluntary charitable contributions of $700 and $200 for each of the ~~University is in compliance with applicable regulations in all material respects.~~nine months ended September 30, 2023 and 2022, respectively, of which no amounts were owed as of September 30, 2023 and 2022.

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~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes that appear elsewhere in this report.

Forward-Looking Statements

This Quarterly Report on Form10-Q, including Item 2,Management’s Discussion and Analysis of FinancialCondition and Results of Operations, contains certain “forward-looking ~~statements,” which include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation,~~statements” within the meaning of Section 27A of Securities Act of 1933, as amended, and ~~availability~~Section 21E of ~~resources.~~the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements include, without limitation, statements regarding: proposed new programs; statements as to whether regulatory developments or other matters may or may not have a material adverse effect on our financial position, results of operations, or liquidity; statements concerning projections, predictions, expectations, estimates, or forecasts as to our business, financial and operational results, and future economic performance; and statements of management’s goals and objectives and other similar expressions concerning matters that are not historical facts. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, the negative of these expressions, as well as statements in future tense, identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions of management.

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause ~~such differences~~our actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, include, but are not limited to:

~~our failure to comply with the extensive regulatory framework applicable to our industry,~~

●

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

●

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

●

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

●

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

●

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

●

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

●

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

22

Table of ~~the Higher Education Act and the regulations thereunder, state laws and regulatory requirements, and accrediting commission requirements;~~Contents

~~the ability of our students to obtain federal Title IV funds, state financial aid, and private financing;~~

●

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

●

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

●

our expected tax payments and tax rate;

●

our ability to hire and train new, and develop and train existing, employees;

●

the pace of growth of our university partners’ enrollment and its effect on the pace of our own growth;

●

fluctuations in our revenues due to seasonality;

●

our ability to, on behalf of our university partners, convert prospective students to enrolled students and to retain active students to graduation;

●

our success in updating and expanding the content of existing programs and developing new programs in a cost-effective manner or on a timely basis for our university partners;

●

risks associated with the competitive environment for marketing the programs of our university partners;

●

failure on our part to keep up with advances in technology that could enhance the experience for our university partners’ students;

●

our ability to manage future growth effectively;

●

the impact of any natural disasters or public health emergencies; and

●

general adverse economic conditions or other developments that affect the job prospects of our university partners’ students.

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

~~risks associated with changes in applicable federal and state laws and regulations and accrediting commission standards including pending rulemaking by the Department of Education;~~

~~competition from other universities in our geographic region and market sector, including competition for students, qualified executives and other personnel;~~

our ability to properly manage risks and challenges associated with strategic initiatives, including the expansion of our campus, potential acquisitions or divestitures of, or investments in, new businesses, acquisitions of new properties, or the development of new campuses;

~~our ability to hire and train new, and develop and train existing employees and faculty;~~

~~the pace of growth of our enrollment;~~

~~our ability to convert prospective students to enrolled students and to retain active students;~~

~~our success in updating and expanding the content of existing programs and developing new programs in a cost-effective manner or on a timely basis;~~

~~industry competition, including competition for students and for qualified executives and other personnel;~~

~~risks associated with the competitive environment for marketing our programs;~~

~~failure on our part to keep up with advances in technology that could enhance the online experience for our students;~~

the extent to which obligations under our credit agreement, including the need to comply with restrictive and financial covenants and to pay principal and interest payments, limits our ability to conduct our operations or seek new business opportunities;

~~our ability to manage future growth effectively; and~~

~~general adverse economic conditions or other developments that affect the job prospects of our students.~~

Additional factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those described in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in “Risk Factors” in Part I, Item 1A of our Annual Report on Form10-K (the “2022 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended December 31, ~~2016,~~2022, as updated in our subsequent reports filed with the ~~Securities and Exchange Commission (“SEC”),~~SEC, including any updates found in Part II, Item 1A of this Quarterly Report on Form10-Q or our other reports on Form10-Q. You should not put undue reliance on any forward-looking statements. Forward-looking statements speak only as of the date the statements are made and we assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Explanatory Note

~~Overview~~

~~We are~~Grand Canyon Education, Inc. (together with its subsidiaries, the “Company” or “GCE”) is a publicly traded education services company dedicated to serving colleges and universities. GCE has developed significant technological solutions, infrastructure and operational processes to provide services to these institutions on a large scale. GCE’s most significant university partner is Grand Canyon University (“GCU”), a comprehensive regionally accredited university that offers ~~over 220~~ graduate and undergraduate degree programs, emphases and certificates across nine colleges both online and on ground at our over 270 acre campus in Phoenix, Arizona, at leased facilities and at facilities owned by third party employers of our students. We are committed to providing an academically rigorous educational experience with a focus on professionally relevant programs that meet the objectives of our students. Our undergraduate programs are designed to be innovative and meet the future needs of employers, while providing students with the needed critical thinking and effective communication skills developed through a Christian-oriented, liberal arts foundation. We offer master’s and doctoral degrees in contemporary fields that are designed to provide students with the capacity for transformational leadership in their chosen industry, emphasizing the immediate relevance of theory, application, and evaluation to promote personal and organizational change. We believe the growing brand of the University and the value proposition for both traditional aged students attending on ourits campus in Phoenix, Arizona, and ~~working adult students attending on~~at six off-campus classroom and laboratory sites.

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In January 2019, GCE began providing education services to numerous university partners across the United States, through our ~~campus or~~wholly owned subsidiary, Orbis Education. 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-site~~ ~~locations~~ 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 ~~cohorts (referred to by us as professional studies students) or~~expanding their online ~~has enabled us to increase enrollment to approximately 91,200 at~~graduate programs. As of September 30, ~~2017.~~2023, GCE provides education services to 25 university partners across the United States.

~~End-of-period~~ ~~enrollment increased 10.7% between September 30, 2017~~We plan to continue to add additional university partners and ~~September 30, 2016,~~to introduce additional programs with both our existing partners and with new partners. We may engage with both new and existing university partners to offer healthcare programs, online only or hybrid programs, or, as ~~ground enrollment increased 9.5%~~is the case for our most significant partner, GCU, both healthcare and ~~online enrollment increased 11.0% over the prior year.~~other programs. In addition, we have centralized a number of services that historically were provided separately to university partners of Orbis Education. Therefore, we refer to all university partners as “GCE partners” or “our partners”. We ~~attribute the growth~~do disclose significant information for GCU, such as enrollments, due to its size in ~~our ground enrollment between years~~comparison to our increasing brand recognition and the value proposition that our ground traditional campus affords to traditional-aged students and their parents. After scholarships, our ground traditional students pay tuition, room, board, and fees in an amount that is often half to a third of what it costs to attend a private, traditionalother university in another state and an amount comparable to what it costs to attend a public university. Our online students pay tuition and fees in an amount that is often less than the cost of other high service online programs such as ours. For example, our largest local competitor’s undergraduate tuition for online programs ranges from $510 to $718 per credit hour and its graduate tuition for online programs ranges from $512 to $1,312 per credit hour while our online tuition per credit hour ranges from $355 to $470 for undergraduate programs and $330 to $640 for graduate programs. There are online programs that are less expensive than ours but those programs generally do not provide the full level of support services that we provide to our students. Although our online enrollment continues to grow, as the proportion of traditional colleges and universities providing alternative learning modalities increases, we will face increasing competition for working adult students from such institutions, including those with well-established reputations for excellence. Net revenues increased 11.8% over the first nine months of the prior year primarily due to the enrollment growth and due to an increase in ancillary revenues resulting from the increased traditional student enrollment (e.g. housing, food, etc.). The increase in revenue per student between years is primarily due to a higher percentage of students residing on campus resulting in higher room and board related revenue as compared to the prior year. Additionally, we recognized one additional day of traditional campus revenue in the fall semester of 2017 as compared to 2016 due to a favorable shift in the timing of our residential traditional campus start dates. We have not raised our tuition for our traditional ground programs in nine years and we have not raised tuition for our working adult students since September 2015. Operating income was $191.4 million for the nine months ended September 30, 2017, an increase of 19.3% over the $160.5 million in operating income for the nine months ended September 30, 2016.partners.

~~The following is a summary of our student enrollment at September 30, 2017 and 2016 by degree type and by instructional delivery method:~~

   2017⁽¹⁾ 2016⁽¹⁾
   # of Students    % of Total # of Students    % of Total
Graduate degrees⁽²⁾
   38,059    41.7 % 33,337    40.4 %
Undergraduate degree
   53,171    58.3 % 49,085    59.6 %






Total
   91,230    100.0 % 82,422    100.0 %






   2017⁽¹⁾ 2016⁽¹⁾
   # of Students    % of Total # of Students    % of Total
Online⁽³⁾
   72,188    79.1 % 65,038    78.9 %
Ground⁽⁴⁾
   19,042    20.9 % 17,384    21.1 %






Total
   91,230    100.0 % 82,422    100.0 %

⁽¹⁾	Enrollment at September 30, 2017 and 2016 represents individual students who attended a course during the last two months of the calendar quarter. Included in enrollment at September 30, 2017 and 2016 are students pursuing~~non-degree~~ ~~certificates of 1,063 and 932, respectively.~~

⁽²⁾	~~Includes 7,781 and 7,213 students pursuing doctoral degrees at September 30, 2017 and 2016, respectively.~~

⁽³⁾	~~As of September 30, 2017 and 2016, 50.8% and 49.3%, respectively, of our working adult students (online and professional studies students) were pursuing graduate degrees.~~

⁽⁴⁾	~~Includes both our traditionalon-campus~~ ~~ground students and our professional studies students.~~

Critical Accounting Policies and Use of Estimates

Our critical accounting policies are disclosed in ~~our Annual Report on~~the 2022 Form10-K for the fiscal year ended December 31, ~~2016.~~2022. During the nine months ended September 30, ~~2017,~~2023, there ~~have been~~were no significant changes in our critical accounting policies.

~~Key Trends, Developments and Challenges~~

~~The key trends, developments and challenges facing the University are disclosed in our Annual Report on Form10-K~~ for the fiscal year ended December 31, 2016. During the nine months ended September 30, 2017, there have been no significant changes in these trends. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Trends, Developments and Challenges” in our Annual Report on Form~~10-K~~ ~~for our fiscal year ended December 31, 2016, which is incorporated herein by reference.~~

Results of Operations

The following table sets forth certain income statement data as a percentage of ~~net~~ revenue for each of the periods ~~indicated:~~indicated. Amortization of intangible assets has been excluded from the table below:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Costs and expenses
Technology and academic services	17.7	%	18.0	%	16.9	%	17.2	%
Counseling services and support	33.3		32.2		32.2		30.8
Marketing and communication	23.9		24.3		23.0		23.2
General and administrative	5.5		7.5		4.8		5.4

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2017 2016 2017 2016
Net revenue
   100.0 % 100.0 % 100.0 % 100.0 %
Operating expenses

Instructional costs and services
   44.2 43.6 43.0 43.1
Admissions advisory and related
   13.3 13.7 13.4 13.9
Advertising
   10.8 11.4 10.7 10.7
Marketing and promotional
   1.0 1.0 1.0 1.0
General and administrative
   5.5 6.4 4.7 5.2
Lease termination costs
   0.0 1.6 0.0 0.5


Total operating expenses
   74.7 77.6 72.8 74.5


Operating income
   25.3 22.4 27.2 25.5
Interest expense
   (0.2 ) (0.2 ) (0.2 ) (0.1 )
Interest and other income
   0.6 (1.1 ) 0.3 0.0


Income before income taxes
   25.6 21.1 27.3 25.4
Income tax expense
   9.0 7.2 8.1 9.4


Net income
   16.6 13.9 19.2 16.0

Three Months Ended September 30, ~~2017~~2023 Compared to Three Months Ended September 30, ~~2016~~2022

~~Net~~Service revenue. Our ~~net~~service revenue for the three months ended September 30, ~~2017~~2023 was ~~$236.2~~$221.9 million, an increase of ~~$25.8~~$13.2 million, or ~~12.2%~~6.3%, as compared to ~~net~~service revenue of ~~$210.4~~$208.7 million for the three months ended September 30, ~~2016. This~~2022. The increase year over year in service revenue was primarily due to an increase in ~~ground~~GCU enrollments to 118,227 at September 30, 2023, an increase of 6.6% over enrollments at September 30, 2022 and ~~online enrollment and, to a lesser extent,~~ an increase in ~~room and board and other~~revenue per student fees and ancillary revenues, partially offset by an increase in institutional scholarships. We have not raised our tuition for our traditional ground program in nine years and we have not raised tuition for our working adult students since September 2015.~~End-of-period~~ ~~enrollment increased 10.7% between September 30, 2017 and September 30, 2016, as ground enrollment increased 9.5%, and online enrollment increased 11.0%~~year over ~~the prior~~ year. The majority of the ground enrollment growth between September 30, 2016 and September 30, 2017 is due to an increase in the number of residential students at our ground traditional campus in Phoenix, Arizona. We attribute the growth in our enrollment between years to our increasing brand recognition and the value proposition we believe we provide to students and their parents. Although our online enrollment continues to grow, as the proportion of traditional colleges and universities providing alternative learning modalities increases, we will face increasing competition for working adult students from such institutions, including those with well-established reputations for excellence. The increase in revenue per student between years is primarily due to ~~one additional day~~the service revenue impact of ~~traditional campus revenue in~~ the fall semester of 2017 as compared to 2016 due to a favorable shift in the timing of our residential traditional campus start dates, and six additional days of revenue from our Summer term in 2017 as compared to 2016. Additionally, we have a higher percentage of students residing on campus resulting in higherincreased room, ~~and~~ board and other ~~related~~ancillary revenues at GCU in the third quarter of 2023 as compared to the prior year period. In addition, service revenue per student for Accelerated Bachelor of Science in Nursing (“ABSN”) students at off-campus classroom and laboratory sites generates a significantly higher revenue per student than we earn under our agreement with GCU, as these agreements generally provide us with a higher revenue share percentage, the partners have higher tuition rates than GCU and the majority of their students take more credits on average per semester. The increase in revenue per student in the three months ended September 30, 2023 was also positively impacted by the timing of the Fall semester for the ground traditional campus. The Fall semester started one day earlier in 2023 than in 2022, which had the effect of shifting $1.2 million in service revenue from the fourth quarter of 2023 to the third quarter of 2023 in comparison to the prior year. Partner enrollments totaled 123,165 at September 30, 2023 as compared to 116,202 at September 30, 2022. University partner enrollments at our off-campus classroom

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and laboratory sites were 5,448, a decrease of 4.3% over enrollments at September 30, 2022, which includes 510 and 421 GCU students at September 30, 2023 and 2022, respectively. None of our ABSN partners stopped admitting new students due to the clinical faculty challenges that began during the pandemic, however some locations that were scheduled to open were delayed and some existing partners have experienced reduced incoming cohort sizes which has slowed the growth. We believe the growth in the number of ABSN students is also being negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions. To address this challenge, we have been working with a number of our university partners to adjust their programs to allow students with the required education experience but without a complete bachelor’s degree to enter their programs. We did open six new off-campus classroom and laboratory sites in the year ended December 31, 2022 and five sites in the nine months ended September 30, 2023 increasing the total number of these sites to 40 at September 30, 2023. Enrollments for GCU ground students were 25,232 at September 30, 2023 up from 25,083 at September 30, 2022. GCU online enrollments were 92,995 at September 30, 2023, up from 85,845 at September 30, 2022, an increase of 8.3% between years.

~~Instructional costs~~Technology and academic services ~~expenses.~~. Our ~~instructional costs~~technology and academic services expenses for the three months ended September 30, ~~2017~~2023 were ~~$104.3~~$39.2 million, an increase of ~~$12.6~~$1.6 million, or ~~13.7%~~4.1%, as compared to ~~instructional costs~~technology and academic services expenses of ~~$91.7~~$37.6 million for the three months ended September 30, ~~2016.~~2022. This increase was primarily due to increases in ~~employee compensation~~occupancy and ~~related expenses including share based compensation, faculty compensation,~~ depreciation and ~~amortization~~in other technology and ~~occupancy expense~~

~~including disposals, and other instructional~~academic costs ~~and services,~~ of ~~$4.0 million, $2.6 million, $3.3~~$1.2 million and ~~$2.7~~$1.0 million, respectively. The increase in employee compensation and related expenses and faculty compensation are primarily due to the increase in the number of staff and faculty needed to support the increasing number of students attending the University. In addition, we have incurred an increase in benefit costs between years. The increase in depreciation, amortization and occupancy costs including disposals is the result of our placing into service additional buildings to support the growing number of students. In addition, during the third quarter of 2017 we~~wrote-off~~ ~~the remaining book value of two buildings that will be replaced~~respectively, partially offset by a new classroom building that is needed for Fall 2018. The increase in other instructional costs and services is primarily due to higher food and other expenses as a result of the increased ancillary revenues. Our instructional costs and services expenses as a percentage of net revenues increased 0.6% to 44.2% for the three months ended September 30, 2017, from 43.6% for the three months ended September 30, 2016 primarily due to an increase in depreciation, amortization and occupancy costs including disposals as a percentage of revenue over the prior year primarily due to the asset disposal as well as depreciation increasing at a rate higher than net revenues due to significant fixed asset additions during the past twelve months, as well as an increase in employee compensation and related expenses primarily due to an increase in benefit costs over the prior year. Bad debt expense stayed flat at 2.3% for the three months ended September 30, 2017 and 2016, while other instructional costs and services were down as a percentage of net revenue over the prior year.

~~Admissions advisory and related expenses~~. Our admissions advisory and related expenses for the three months ended September 30, 2017 were $31.4 million, an increase of $2.6 million, or 9.1%, as compared to admissions advisory and related expenses of $28.8 million for the three months ended September 30, 2016. This increase is primarily the result of increasesdecrease in employee compensation and related expenses, including ~~share based~~share-based compensation and benefit costs of ~~$2.5 million,~~$0.6 million. The increased occupancy and depreciation and other technology and academic costs were primarily due to ~~tenure based salary adjustments~~the costs associated with the increased number of off-campus classroom and ~~an increase in benefits costs over the prior year. Our admissions advisory~~laboratory sites to support our 25 university partners, and related expenses as a percentage of revenue decreased 0.4% to 13.3% for the three months ended September 30, 2017, from 13.7% for the three months ended September 30, 2016 primarily due to our ability to leverage our admissions advisory personnel across an increasing revenue base.

~~Advertising expenses~~. Our advertising expenses for the three months ended September 30, 2017 were $25.5 million, an increase of $1.6 million, or 6.8%, as compared to advertising expenses of $23.9 million for the three months ended September 30, 2016. This increase is primarily the result oftheir increased national brand advertising. Our advertising expenses as a percentage of net revenue decreased by 0.6% to 10.8% for the three months ended September 30, 2017, from 11.4% for the three months ended September 30, 2016.

~~Marketing and promotional expenses~~. Our marketing and promotional expenses for the three months ended September 30, 2017 were $2.3 million, an increase of $0.2 million, or 10.5%, as compared to marketing and promotional expenses of $2.1 million for the three months ended September 30, 2016. This increase is primarily the result of increases in employee compensation and related expenses including stock based compensation of $0.3 million, partially offset by decreases in other promotional expenses of $0.1 million. Our marketing and promotional expenses as a percentage of net revenue stayed flat at 1.0% for the three months ended September 30, 2017 and 2016.

~~General and administrative expenses~~~~. Our general and administrative expenses for the three months ended September 30, 2017 were $12.9 million, a~~enrollment growth. The decrease of $0.5 million, or 3.8%, as compared to general and administrative expenses of $13.4 million for the three months ended September 30, 2016. This decrease was primarily due to a decrease in contributions made in lieu of state income taxes to school sponsoring organizations from $4.0 million in the three months ended September 30, 2016 to $2.0 million for the three months ended September 30, 2017. This decrease was partially offset by increases in employee compensation and related expenses including stock based compensation, and increases in other general and administrative costs of $0.8 million, and $0.7 million, respectively. The increase in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to the decline in some of our other partners’ enrollments and changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs partially offset by increased headcount ~~increases~~ to support our ~~growing~~25 university partners, and their increased enrollment growth, tenure-based salary adjustments and ~~higher benefit costs.~~the increased number of off-campus classroom and laboratory sites year over year. Our technology and academic services expenses as a percentage of revenue decreased by 0.3% to 17.7% for the three months ended September 30, 2023, from 18.0% for the three months ended September 30, 2022. This decrease was primarily due to the decreased faculty reimbursements between years. We anticipate that technology and academic services expenses will increase in the future as we open more off-campus classroom and laboratory sites and our other partners’ enrollments grow.

Counseling services and support. Our counseling services and support expenses for the three months ended September 30, 2023 were $73.8 million, an increase of $6.6 million, or 9.8%, as compared to counseling services and support expenses of $67.2 million for the three months ended September 30, 2022. This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and in other counseling services and support expenses of $6.4 million and $0.2 million, respectively. The increases in employee compensation and related expenses were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites open year over year. The increase in other counseling services and support expenses is primarily the result of increased travel costs for our 25 university partners. Our counseling services and support expenses as a percentage of revenue increased by 1.1% to 33.3% for the three months ended September 30, 2023, from 32.2% for the three months ended September 30, 2022 primarily due to the significant increase year over year in headcount. We anticipate that counseling services and support expense will continue to be higher in 2023 than in 2022 as travel expenses will continue to be higher than in the prior year and we continue to grow our employee base and their compensation to meet our university partners’ growth expectations and retain our employees.

Marketing and communication. Our marketing and communication expenses for the three months ended September 30, 2023 were $53.1 million, an increase of $2.4 million, or 4.8%, as compared to marketing and communication expenses of $50.7 million for the three months ended September 30, 2022. This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $2.2 million, increased employee compensation, including share-based compensation of $0.1 million, and an increase in other marketing and communication expenses of $0.1 million. Our marketing and communication expenses as a percentage of revenue decreased by 0.4% to 23.9% for

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

General and administrative. Our general and administrative ~~costs is~~expenses for the three months ended September 30, 2023 were $12.2 million, a decrease of $3.4 million, or 21.8%, as compared to general and administrative expenses of $15.6 million for the three months ended September 30, 2022. This decrease was primarily attributable to a decrease in the contribution made in lieu of state income taxes, decreased professional fees, decreased other administrative expenses, and decreased employee compensation, including share-based expenses and benefits of $1.5 million, $1.2 million, $0.5 million and $0.2 million respectively. We decreased our contribution made in lieu of state income taxes from $5.0 million in 2022 to $3.5 million in 2023. Our professional fees declined between years primarily due to ~~higher~~lower legal costs as we met our insurance ~~and other expenses.~~retention cap on a litigation matter. Our general and administrative expenses as a percentage of ~~net~~ revenue decreased by 2.0% to 5.5% for the three months ended September 30, ~~2017,~~2023, from ~~6.4%~~7.5% for the three months ended September 30, ~~2016 primarily due to the lower contributions made in lieu~~2022.

Amortization of ~~state income taxes.~~

~~Lease termination costs~~intangible assets. ~~In July 2016, we notified a current landlord or our intent to vacate leased space by the fourth quarter~~Amortization of ~~2016. As a result, we were required to pay a termination fee to terminate the lease resulting in $3.4 million of expense in~~intangible assets for the three months ended September 30, ~~2016.~~2023 and 2022 were $2.1 million for both periods. As a result of the acquisition of our wholly owned subsidiary, Orbis Education, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

~~Interest expense~~Investment interest and other. ~~Interest expense~~Investment interest and other for the three months ended September 30, ~~2017~~2023 was ~~$0.6 million, an increase of $0.3~~$2.7 million, as compared to investment interest ~~expense of $0.3 million~~and other for the three months ended September 30, ~~2016. This increase was primarily due to lower capitalized interest as compared to the prior year due to a decrease in capital spending in 2017, partially offset by the decrease in the average balance~~2022 of ~~our loan facility. Our interest expense as a percentage of net revenue stayed flat at 0.2% for the three months ended September 30, 2017 and 2016.~~

~~Interest and other income~~~~. Interest and other income for the three months ended September 30, 2017 was $1.4~~$0.7 million ~~an increase of $3.7 million, as compared to a loss of $2.3 million in the three months ended September 30, 2016. Interest income was higher in 2017 as compared to 2016 primarily~~ due to higher ~~average~~ investment balances between years. Included in 2017 is our proportional share of equity income of $0.7 million related to our former ownership interest in LoudCloud that was received in the third quarter of 2017. The loss in the prior year was primarily due to an impairment chargeand higher returns on ~~an investment recorded in the third quarter of 2016.~~those balances.

Income tax expense. Income tax expense for the three months ended September 30, ~~2017~~2023 was ~~$21.3~~$8.5 million, an increase of ~~$6.1~~$2.3 million, or ~~40.0%~~36.6%, as compared to income tax expense of ~~$15.2~~$6.2 million for the three months ended September 30, ~~2016. This increase is the result of higher taxable income between periods. The~~2022. Our effective tax ~~rates for both quarters were lower than~~rate was 19.3% during the third quarter of 2023 compared to 17.2% during the third quarter of 2022. The increase in our ~~annual~~ effective tax ~~rates due to~~rate between periods was primarily driven by changes in the magnitude of contributions ~~made~~ in lieu of state income taxes as compared to school sponsoring organizations. Our contributions decreased from $4.0 million in the three months ended September 30, 2016 to $2.0 million for the three months ended September 30, 2017. The decrease in contributions over the prior year was partially offset by the adoption of the share-based compensation standard in the first quarter of 2017, which resulted in the recognition of excess tax benefits from share-based compensation awards that vested or settled in 2017 in the consolidated income statement. The inclusion of excess tax benefits and deficiencies as a component of our income tax expense will increase 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.periods.

Net income. Our net income for the three months ended September 30, ~~2017~~2023 was ~~$39.3~~$35.7 million, an increase of ~~$10.1~~$5.7 million, or 19.1%, as compared to ~~$29.2~~$30.0 million for the three months ended September 30, ~~2016,~~2022, due to the factors discussed above.

Nine Months Ended September 30, ~~2017~~2023 Compared to Nine Months Ended September 30, ~~2016~~2022

~~Net~~Service revenue. Our ~~net~~service revenue for the nine months ended September 30, ~~2017~~2023 was ~~$702.7~~$682.6 million, an increase of ~~$74.0~~$30.0 million, or ~~11.8%~~4.6%, as compared to ~~net~~service revenue of ~~$628.7~~$652.6 million for the nine months ended September 30, ~~2016. This~~2022. The increase year over year in service revenue was primarily due to an increase in ~~ground and online enrollment and,~~GCU enrollments to ~~a lesser extent,~~118,227 at September 30, 2023, an increase in room and board and other student fees and ancillary revenues, partially offset by an increase in institutional scholarships. We have not raised our tuition for our traditional ground program in nine years and we have not raised tuition for our working adult students since September 2015.~~End-of-period~~ ~~enrollment increased 10.7% between~~of 6.6% over enrollments at September 30, ~~2017 and~~2022. Partner enrollments totaled 123,165 at September 30, ~~2016,~~2023 as ~~ground enrollment increased 9.5%, and online enrollment increased 11.0% over the prior year. The majority of the ground enrollment growth between~~compared to 116,202 at September 30, ~~2016~~2022. University partner enrollments at our off-campus classroom and laboratory sites were 5,448, a decrease of 4.3% over enrollments at September 30, ~~2017 is~~2022, which includes 510 and 421 GCU students at September 30, 2023 and 2022, respectively. None of our ABSN partners stopped admitting new students due to ~~an increase~~the clinical faculty challenges that began during the pandemic, however some locations that were scheduled to open were delayed and some existing partners have experienced reduced incoming cohort sizes which has slowed the growth. We believe the growth in the number of ~~residential~~ABSN students atis also being negatively impacted by the strong job market as these students have historically been individuals with already completed bachelor’s degrees choosing to re-career into one of these health professions. To address this challenge, we have been working with a number of our ~~ground traditional campus in Phoenix, Arizona.~~university partners to adjust their programs to allow students with the required education experience but without a complete bachelor’s degree to enter their programs. We ~~attribute the growth in our enrollment between years to our increasing brand recognition~~did open six new off-campus classroom and the value proposition we believe we provide to students and their parents. Although our online enrollment continues to grow, as the proportion of traditional colleges and universities providing alternative learning modalities increases, we will face increasing competition for working adult students from such institutions, including those with well-established reputations for excellence. The increase in revenue per student between years is primarily due to a higher percentage of students residing on campus resulting in higher room and board and related revenue as compared to the prior year, Additionally, we recognized one additional day of traditional campus revenuelaboratory sites in the ~~fall semester of 2017 as compared to 2016 due to a favorable shift~~year ended December 31, 2022 and five sites in the ~~timing~~nine months ended September 30, 2023 increasing the total number of ~~our residential traditional campus start dates.~~these sites to 40 at September 30, 2023. Enrollments for GCU ground students were 25,232 at September 30, 2023 up from 25,083 at September 30, 2022. GCU

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

~~Instructional costs~~Technology and academic services ~~expenses~~. Our ~~instructional costs~~technology and academic services expenses for the nine months ended September 30, ~~2017~~2023 were ~~$301.9~~$115.6 million, an increase of ~~$30.9~~$3.5 million, or ~~11.4%~~3.1%, as compared to ~~instructional costs~~technology and academic services expenses of ~~$271.0~~$112.1 million for the nine months ended September 30, ~~2016.~~2022. This increase was primarily due to increases in ~~employee compensation~~occupancy and ~~related expenses including share based compensation, faculty compensation,~~ depreciation and ~~amortization~~other technology and ~~occupancy expense including disposals, and other instructional~~academic costs ~~and services,~~ of ~~$8.5 million, $7.8 million, $9.0~~$3.2 million and ~~$5.6~~$1.5 million, respectively. The increase in employee compensation and related expenses and faculty compensation are primarily due to the increase in the number of staff and faculty needed to support the increasing number of students attending the University. In addition, we have incurred an increase in benefit costs between years. The increase in depreciation, amortization and occupancy costs including disposals is the result of our placing into service additional buildings to support the growing number of students. In addition, during the third quarter of 2017 we~~wrote-off~~ ~~the remaining book value of two buildings that will be replaced~~respectively, partially offset by a new classroom building that is needed for Fall 2018. The increase in other instructional costs and services is primarily due to higher food and other expenses as a result of the increased ancillary revenues. Our instructional costs and services expenses as a percentage of net revenues decreased 0.1% to 43.0% for the nine months ended September 30, 2017, from 43.1% for the nine months ended September 30, 2016 primarily due to a decrease in employee compensation and related expenses, including share-based compensation and benefit costs of $1.2 million. These increases in occupancy and depreciation and other ~~instructional~~technology and academic costs and services as a percentage of net revenues partially offset by an increase in depreciation, amortization and occupancy expense including disposals as a percentage of revenue over the prior year. The decrease in these expenses as a percentage of revenue between years is due to our ability to leverage them across an increasing revenue base. The increase in depreciation, amortization and occupancy expenses iswere primarily due to the ~~asset disposal as well as depreciation increasing at a rate higher than net revenues due to significant fixed asset additions during~~costs associated with the ~~past twelve months. Bad debt expense decreased to 1.9% for the nine months ended September 30, 2017 from 2.0% for the nine months ended September 30, 2016.~~

~~Admissions advisory~~increased number of off-campus classroom and ~~related expenses~~. Our admissions advisory and related expenses for the nine months ended September 30, 2017 were $94.5 million, an increase of $7.3 million, or 8.3%, as compared to admissions advisory and related expenses of $87.2 million for the nine months ended September 30, 2016. This increase is primarily the result of increases in employee compensation and related expenses including share based compensation of $7.5 million, partially offset by alaboratory sites. The decrease ~~in other advisory related expenses of $0.2 million. The increase~~ in employee compensation and related expenses is primarily due to ~~tenure based~~decreased faculty reimbursements due to the decline in some of our other partners’ enrollments and changes in our agreements with certain university partners whereby we no longer reimburse these partners for their faculty costs partially offset by increased headcount to support our 25 university partners, and their increased enrollment growth, tenure-based salary adjustments and ~~an increase in benefit costs between years.~~the increased number of off-campus classroom and laboratory sites year over year. Our ~~admissions advisory~~technology and ~~related~~academic services expenses as a percentage of revenue decreased ~~0.5%~~by 0.3% to ~~13.4%~~16.9% for the nine months ended September 30, ~~2017,~~2023, from ~~13.9%~~17.2% for the nine months ended September 30, ~~2016~~2022 due primarily to the decreased faculty reimbursements between years. We anticipate that technology and academic services expenses will increase in the future as we open more off-campus classroom and laboratory sites and as our other partners’ enrollment returns to growth.

Counseling services and support. Our counseling services and support expenses for the nine months ended September 30, 2023 were $219.6 million, an increase of $18.8 million, or 9.4%, as compared to counseling services and support expenses of $200.8 million for the nine months ended September 30, 2022. This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and in other counseling services and support expenses of $17.8 million and $1.8 million, respectively, partially offset by a decrease in occupancy and depreciation of $0.8 million. The increases in employee compensation and related expenses were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments and the increased number of off-campus classroom and laboratory sites open year over year. The increase in other counseling services and support expenses is primarily the result of increased travel costs for our 25 university partners. Our counseling services and support expenses as a percentage of revenue increased by 1.4% to 32.2% for the nine months ended September 30, 2023, from 30.8% for the nine months ended September 30, 2022 primarily due to the significant increase year over year in headcount and travel costs. We anticipate that counseling services and support expense will continue to be higher in 2023 than in 2022 as travel expenses will continue to be higher than in the prior year and we continue to grow our employee base and their compensation to meet our university partners’ growth expectations and retain our employees.

Marketing and communication. Our marketing and communication expenses for the nine months ended September 30, 2023 were $156.8 million, an increase of $5.6 million, or 3.7%, as compared to marketing and communication expenses of $151.2 million for the nine months ended September 30, 2022. This increase was primarily attributable to the increased cost to market our university partners’ programs and to the marketing of new university partners and new locations which resulted in increased advertising of $5.4 million and increased employee compensation, including share-based compensation of $0.6 million, partially offset by a decrease in other marketing and communication expenses of $0.4 million. Our marketing and communication expenses as a percentage of revenue decreased by 0.2% to 23.0% for the nine months ended September 30, 2023, from 23.2% for the nine months ended September 30, 2022, primarily due to our ability to leverage our ~~admissions advisory personnel~~marketing and communication expenses across an increasing revenue ~~base.~~

~~Advertising expenses~~. Our advertising expenses for the nine months ended September 30, 2017 were $74.9 million, an increase of $7.7 million, or 11.6%, as compared to advertising expenses of $67.2 million for the nine months ended September 30, 2016. This increase is primarily the result of increased national brand advertising. Our advertising expenses as a percentage of net revenue stayed flat at 10.7% for both the nine months ended September 30, 2017 and 2016.

~~Marketing and promotional expenses~~. Our marketing and promotional expenses for the nine months ended September 30, 2017 were $7.1 million, an increase of $0.6 million, or 9.2%, as compared to marketing and promotional expenses of $6.5 million for the nine months ended September 30, 2016. This increase is primarily the result of increases in employee compensation and related expenses including stock based compensation of $0.8 million,base, partially offset by ~~a decrease~~the number of university partners and their growth expectations and increased off-campus classroom and laboratory sites opened and sites planned to open in ~~other promotional expenses of $0.2 million. Our marketing and promotional expenses as a percentage of net revenue stayed flat at 1.0% for both~~ the ~~nine months ended September 30, 2017 and 2016.~~next 12 months.

General and administrative ~~expenses~~. Our general and administrative expenses for the nine months ended September 30, ~~2017~~2023 were ~~$32.9~~$32.8 million, a decrease of ~~$0.1~~$2.5 million, or 7.0%, as compared to general and administrative expenses of ~~$33.0~~$35.3 million for the nine months ended September 30, ~~2016.~~2022. This decrease was primarily ~~due~~attributable to a decrease in ~~our contributions~~the contribution made in lieu of state income taxes, ~~to school sponsoring organizations from $4.0 million in the nine months ended September 30, 2016 to $2.0 million for the nine months ended September 30, 2017~~decreased professional fees and a decrease in ~~other general~~employee compensation, including share-based compensation and ~~administrative costs~~benefit expenses of ~~$0.1~~$1.5 million, $0.7 million and $0.5 million, respectively, partially offset by ana increase in ~~employee compensation and related~~other administrative expenses ~~including shared based compensation~~ of ~~$2.0~~$0.2 million. ~~The increase~~We decreased our

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contribution made in ~~employee compensation and related expenses is~~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 ~~headcount increases to support~~lower legal costs as we met our ~~growing enrollment and higher benefit costs.~~insurance retention cap on a litigation matter. Our general and administrative expenses as a percentage of ~~net~~ revenue decreased by ~~0.5%~~0.6% to ~~4.7%~~4.8% for the nine months ended September 30, ~~2017,~~2023, from ~~5.2%~~5.4% for the nine months ended September 30, ~~2016 due to the decreased contributions made in lieu~~2022.

Amortization of ~~state income taxes and our ability to leverage our general and administrative costs across an increasing revenue base.~~

~~Lease termination costs~~intangible assets. ~~In July 2016, we notified a current landlord or our intent to vacate leased space by the fourth quarter~~Amortization of ~~2016. As a result, we were required to pay a termination fee to terminate the lease resulting in $3.4 million of expense in~~intangible assets for the nine months ended September 30, ~~2016.~~2023 and 2022 were $6.3 million for both periods. As a result of the acquisition of our wholly owned subsidiary, Orbis Education, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

~~Interest expense~~Investment interest and other. ~~Interest expense~~Investment interest and other for the nine months ended September 30, ~~2017~~2023 was ~~$1.6 million, an increase of $0.8~~$7.5 million, as compared to investment interest ~~expense of $0.8 million~~and other for the nine months ended September 30, ~~2016. This increase was primarily~~2022 of $1.3 million due to higher interest costs from the draw on our revolving line of credit during the first quarter of 2017 and lower capitalized interest due to a decrease in capital spending in 2017. Our interest expense increased as a percentage of net revenue by 0.1% to 0.2% for the nine months ended September 30, 2017, from 0.1% for the nine months ended September 30, 2016.

~~Interest and other income~~. Interest and other income for the nine months ended September 30, 2017 was $2.2 million, an increase of $2.1 million, as compared to interest and other income of $0.1 million in the nine months ended September 30, 2016. Interest income was higher primarily due to higher average investment balances between years. Included in 2017 interest income is our proportional share of equity income of $0.7 million related to our former ownership interest in LoudCloud that was received in the third quarter of 2017. In the first nine months of 2016, interest income and the University’s proportional share of equity income related to our former ownership interest in LoudCloud of $1.8 million that was received in the first quarter of 2016 was offset by an impairment chargehigher returns on ~~an investment of $2.5 million included in the nine months ended September 30, 2016.~~those balances.

Income tax expense. Income tax expense for the nine months ended September 30, ~~2017~~2023 was ~~$56.9~~$34.6 million, ~~a decrease~~an increase of ~~$2.3~~$0.1 million, or ~~3.9%~~0.5%, as compared to income tax expense of ~~$59.2~~$34.5 million for the nine months ended September 30, 2022. Our effective tax rate was 21.8% during the nine months ended September 30, ~~2016. This decrease is~~2023 compared to 23.3% during the ~~result of a~~nine months ended September 30, 2022. The slight decrease in our effective tax rate ~~from 37.1%~~between periods is attributable to changes in the ~~first nine months~~magnitude of 2016 to 29.6% during the first nine months of 2017 partially offset by higher taxable income between periods. The lower effective tax rate year over year is due to our adoption of the share-based compensation standard in the first quarter of 2017, which resulted in the recognition of excess tax benefits from share-based compensation awards that vested or settled in 2017 in the consolidated income statement. The inclusion of excess tax benefits and deficiencies as a component of our income tax expense will increase 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. Our restricted

stock vests in March each year so the favorable benefit is greatest in the first quarter each year. The decrease in the effective tax rate from excess tax benefits was partially offset by a lower contributioncontributions in lieu of state income taxes ~~to school sponsoring organizations~~as well as a mix of other discrete tax items recorded in the ~~nine months ended September 30, 2017 of $2.0 million as compared to the $4.0 million contribution made in the nine months ended September 30, 2016.~~respective periods.

Net income. Our net income for the nine months ended September 30, ~~2017~~2023 was ~~$135.1~~$124.3 million, an increase of ~~$34.6~~$10.7 million, or 9.4%, as compared to ~~$100.5~~$113.6 million for the nine months ended September 30, ~~2016,~~2022, due to the factors discussed above.

Seasonality

Our net revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in our university partners’ enrollment. ~~Student population~~Our partners’ enrollment varies as a result of new enrollments, graduations, and student attrition. ~~The majority of our traditional ground students do not attend courses during~~Revenues in the summer months (May through August), are lower primarily due to the majority of GCU’s traditional ground university students not attending courses during the summer months, which affects our results for our second and third fiscal quarters. Since a significant amount of our ~~campus~~ costs are fixed, the lower revenue resulting from the decreased ~~ground student~~summer enrollment has historically contributed to lower operating margins during those periods. ~~We intend to continue to increase the relative proportion of our students that are ground traditional students. Thus, we expect this summer effect to become more pronounced in future years.~~ Partially offsetting this summer effect ~~in the third quarter~~ has been the sequential quarterly increase in enrollments that has occurred as a result of the traditional fall school start. This increase in enrollments also has occurred in the first quarter, corresponding to calendar year matriculation. ~~In addition,~~Thus, we ~~typically~~ experience higher net revenue in the fourth quarter due to its overlap with the semester encompassing the traditional fall school start and in the first quarter due to its overlap with the first semester of the calendar year. A portion of our expenses do not vary proportionately with these fluctuations in ~~net~~service revenue, resulting in higher operating income in the first and fourth quarters relative to other quarters. We expect quarterly fluctuation in operating results to continue as a result of these seasonal patterns.

Liquidity and Capital Resources

As of September 30,

As of December 31,
(In thousands)

2023

2022
Cash, cash equivalents and investments

$
154,424

$
181,704
~~Liquidity~~~~. We financed our operating activities~~Overview
Our liquidity position, as measured by cash and cash equivalents and investments decreased by $27.3 million between December 31, 2022 and September 30, 2023, which was largely attributable to share repurchases, investment

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purchases, net of proceeds and capital expenditures exceeding cash flows from operations during the nine months ended September 30, 2017 and 2016 primarily through cash provided by operating activities. Our unrestricted cash and cash equivalents and investments were $269.8 million and $108.6 million at September 30, 2017 and December 31, 2016, respectively. Our restricted cash and cash equivalents at September 30, 2017 and December 31, 2016 were $75.6 million and $84.9 million, respectively. In December 2012, we entered into a new credit agreement, which increased our term loan to $100 million with a maturity date of December 2019. Additionally, this facility, as amended in January 2016, provides a revolving line of credit in the amount of $150 million through December 2017 to be utilized for working capital, capital expenditures and other general corporate purposes. Indebtedness under the credit facility is secured by our assets and is guaranteed by certain of our subsidiaries. No amounts were drawn on the revolver as of September 30, 2017.2023.

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

Cash Flows from Operating Activities

Nine Months Ended September 30,
(In thousands)

2023

2022
Net cash provided by operating activities

$
127,277

$
110,470
The increase in cash generated from operating activities between the nine months ended September 30, 2022 and the nine months ended September 30, 2023 was primarily due to increased income and changes in working capital balances, primarily accounts payable, accrued liabilities and income tax payables. Accounts payable increased between December 31, 2022 and September 30, 2023 by $9.7 million more than it did between December 31, 2021 and September 30, 2022 due to the timing of check runs during those periods and accrued liabilities decreased by $3.0 million more than it did between December 31, 2021 and September 30, 2022 due to the timing of payroll disbursements. Income tax receivables/payables decreased by $4.9 million more than it did between December 31, 2021 and September 30, 2022 as the Company made a larger estimated tax payment in 2023 compared to 2022. We define working capital as the assets and liabilities, other than cash, generated through the Company’s primary operating activities. Changes in these balances are included in the changes in assets and liabilities presented in the consolidated statement of cash flows.
Cash Flows from Investing Activities

Nine Months Ended September 30,
(In thousands)

2023

2022
Net cash used in investing activities

$
(70,530)

$
(95,318)
Investing activities consumed $70.4 million of cash in the nine months ended September 30, 2023 compared to $95.3 million in the nine months ended September 30, 2022.
In the first nine months of 2023 and 2022 cash used in investing activities consisted of the purchase of available-for-sale securities, net of proceeds from the sale of investments of $35.5 million and $68.7 million, respectively.
In the first nine months of 2023 and 2022 cash used in investing activities also included capital expenditures totaling $34.2 million and $26.3 million, respectively. Capital expenditures for both periods primarily consisted of leasehold improvements and equipment for new off-campus classroom and laboratory sites, as well as purchases of computer equipment, internal use software projects and furniture and equipment to support our increasing employee headcount. The Company incurs upfront expenses and capital expenditures prior to an off-campus classroom and laboratory site being opened. The Company intends to continue to spend approximately $30.0 million to $35.0 million per year for capital expenditures although it is likely that we will spend $40.0 million in 2023 as we spent slightly more than we expected on internal use software this year.
Cash Flows from Financing Activities

Nine Months Ended September 30,
(In thousands)

2023

2022
Net cash used in financing activities

$
(120,285)

$
(576,206)
Financing activities consumed $120.3 million of cash in the nine months ended September 30, 2023 compared to $576.2 million in the nine months ended September 30, 2022.

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During the nine months ended September 30, 2023 and 2022, $114.0 million and $571.6 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program. 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. A significant amount of the share repurchases in 2022 were from the proceeds received on the repayment of the Secured Note. The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares but share repurchases in future years will be less than in 2022.

Share Repurchase Program

~~Our~~On October 25, 2023, our Board of Directors ~~has authorized~~increased the ~~University to~~authorization under its existing stock repurchase ~~up to~~program by $200.0 million, reflecting an aggregate authorization for share repurchases since the initiation of ~~$175.0 million~~the program of ~~our common stock, from time to time, depending on market conditions and other considerations.~~$2,045.0 million. The current expiration date on the repurchase authorization by our Board of Directors is ~~December 31, 2018.~~March 1, 2025. Repurchases occur at the ~~University’s discretion.~~Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time.

Under our share ~~purchase~~repurchase authorization, we may purchase shares in the open market or in privately negotiated transactions, pursuant to the applicable ~~Securities and Exchange Commission~~SEC rules. The amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.

~~Since the inception of our share repurchase program, the University has purchased 3.5 million~~We repurchased 1,034,649 shares of common stock ~~at an aggregate cost of $75.8 million. During~~in the nine months ended September 30, ~~2017 no shares were repurchased by the University.~~2023. At September 30, ~~2017,~~2023, there remains ~~$99.2~~$81.9 million available under our share repurchase ~~authorization.~~

~~Cash Flows~~

~~Operating Activities~~~~. Net cash provided by operating activities for the nine months ended September 30, 2017~~authorization (which authorization was ~~$269.9 million as compared~~increased to $213.3 million for the nine months ended September 30, 2016. The increase in cash generated from operating activities between the nine months ended September 30, 2016 and the nine months ended September 30, 2017 is primarily due to increased net income and~~non-cash~~ ~~charges such as depreciation expense as well as changes in other working capital such as accounts payable, accrued liabilities and deferred revenue.~~

~~Investing Activities~~. Net cash used in investing activities was $112.1 million and $163.5 million for the nine months ended September 30, 2017 and 2016, respectively. Our cash used in investing activities was primarily related to the purchase of short-term investments and capital expenditures. Purchases of short-term investments, net of proceeds of these investments, was $27.0 million for the nine months ended September 30, 2017. Proceeds from investment, net of purchases of short term investments, was $33.7 million for the nine months ended September 30, 2016. Capital expenditures were $75.6 million and $157.6 million for the nine months ended September 30, 2017 and 2016, respectively. During the nine-month period for 2017, capital expenditures primarily consisted of the construction of an additional dormitory, other ground campus building projects and land acquisitions adjacent to our campus to support our growing traditional student enrollment, as well as purchases of computer equipment, other internal use software projects and furniture and equipment to support our increasing employee headcount. Included in~~off-site~~ development for 2017 is $10.2 million we spent to finish the building and parking garage in close proximity to our ground traditional campus. Employees that work in two leased office buildings in the Phoenix area were relocated to this new building by the end of 2016. During the nine-month period for 2016, capital expenditures primarily consisted of ground campus building projects that started in late 2015 such as three more apartment style residence halls, a 170,000 square foot classroom building for our College of Science, Engineering and Technology, a student service center, and a fourth parking structure, as well as land purchases adjacent to or near our Phoenix campus, and purchases of computer equipment, other internal use software projects and furniture and equipment to support our increasing employee headcount. Included in~~off-site~~ ~~development during 2016 is $41.9 million related to theoff-site~~ office building and parking garage. In addition, during the first nine months of 2017 and 2016, we received a $0.7 million and $1.8 million, respectively, distribution related to our ownership interest in LoudCloud upon its sale to a third party.

~~Financing Activities~~. Net cash used in financing activities was $33.0 million and $3.7 million for the nine months ended September 30, 2017 and 2016, respectively. During the nine-month period for 2017, $25.0 million was used to repay the revolving line of credit, $9.7 million was used to purchase common shares withheld in lieu of income taxes resulting from restricted share awards and principal payments on notes payable and capital leases totaled $5.1 million, which amounts were partially offset by proceeds from the exercise of stock options of $6.8 million. During the nine-month period for 2016, $20.0 million was used to purchase common shares withheld in lieu of income taxes resulting from restricted share awards and principal payments on notes payable and capital leases totaled $5.5 million and debt issuance costs for the increase in our revolving line of credit totaled $0.2 million, which amounts were partially offset by proceeds of $12.0 million from net borrowings from the revolving line of credit and $10.0$281.9 million in ~~proceeds from the exercise of stock options.~~October 2023).

~~Contractual Obligations~~

The following table sets forth, as of September 30, 2017, the aggregate amounts of our significant contractual obligations and commitments with definitive payment terms due in each of the periods presented (in millions):

      Payments Due by Period
   Total    Less than
1 Year (1)    2-3 Years    4-5 Years    More than
5 Years
Long term notes payable
   $ 68.3    $ 1.7    $ 66.6    $ 0.0    $ 0.0
Capital lease obligations
   0.4    0.1    0.3    0.0    0.0
Purchase obligations(2)
   25.6    11.3    10.8    3.0    0.5
Operating lease obligations
   2.7    0.4    1.4    0.8    0.1










Total contractual obligations
   $ 97.0    $ 13.5    $ 79.1    $ 3.8    $ 0.6










~~(1)~~ ~~Payments due in less than one year represent expected expenditures from October 1, 2017 through December 31, 2017.~~
~~(2)~~ ~~The purchase obligation amounts include expected spending by period under contracts that were in effect at September 30, 2017.~~
Off-Balance Sheet Arrangements
We do not have anyoff-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.
~~Item 3.~~
Item 3.   Quantitative ~~and Qualitative Disclosures About Market Risk~~
~~Impact of inflation.~~We believe that inflation has not had a material impact on our results of operations for the nine months ended September 30, 2017 or 2016. There can be no assurance that future inflation will not have an adverse impact on our operating results and ~~financial condition.~~Qualitative Disclosures About Market Risk
Market risk. On February 27, 2013, we entered into an interest rate corridor to manage our 30 Day LIBOR interest exposure from the variable rate debt, which debt matures in December 2019. The corridor instrument, which hedges variable interest rate risk starting March 1, 2013 through December 20, 2019 with a notional amount of $68.3 million asAs of September 30, 2017, permits us to hedge our interest rate risk at several thresholds. Under this arrangement, in addition to the credit spread we will pay variable interest rates based on the 30 Day LIBOR rates monthly until that index reaches 1.5%. If 30 Day LIBOR is equal to 1.5% through 3.0%, we will continue to pay 1.5%. If 30 Day LIBOR exceeds 3.0%, we will pay actual 30 Day LIBOR less 1.5%.
~~Except with respect to the foregoing,~~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 inand commercial paper at multiple financial institutions.
Interest rate risk. We manage interest rate risk ~~through the instruments noted above and~~ by investing excess funds in cash equivalents, ~~such as~~BBB or higher rated corporate bonds, commercial paper, agency bonds, municipal ~~mutual funds~~securities, asset backed securities, municipal bonds, and collateralized mortgage obligations bearing variable interest rates, which are tied to various market indices ~~and municipal bonds with a BBB rating or higher bearing variable interest rates,~~ or individual bond coupon rates. Our future ~~interest~~investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities before their maturity date that have declined in market value due to changes in interest rates. At September 30, ~~2017,~~2023, a 10% increase or decrease in interest rates would not have a material impact on our future earnings, fair values, or cash flows. ~~For information regarding our variable rate debt, see “Market risk” above.~~
~~Item 4.~~ ~~Controls and Procedures~~
Item 4.   Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules13a-15(e) and15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”).~~Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective, as of September 30, ~~2017,~~2023, in ensuring that material information relating to us required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in

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reports it files or submits under the Exchange Act is accumulated and communicated to management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

Based on an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (who is our principal executive officer) and our Chief Financial Officer (who is our principal financial officer), there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule13a-15(d) and15d-15(d) of the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

~~Item 1.~~ ~~Legal Proceedings~~
Item 1. Legal Proceedings
None.
~~Item 1A.~~ ~~Risk Factors~~
~~There~~Item 1A. Risk Factors
The following additional risk factor should be read in conjunction with the risk factors previously disclosed in Part1, Item 1A, “Risk Factors,” of the 2022 Form 10-K, the information contained in this Quarterly Report on Form 10-Q and our other reports and registration statements filed with the SEC. Except as described herein, there have been no material changes to the risk factors disclosed in the ~~“Risk Factors” section~~2022 Form 10-K.
Our cash and cash equivalents are held at three financial institutions.
Approximately 75% of our ~~Annual Report on Form10-K~~ ~~for~~cash and cash equivalents are held at a single financial institution and are in excess of amounts insured by the ~~year ended December 31, 2016.~~Federal Deposit Insurance Corporation (“FDIC”). This financial institution is among the largest in the United States, and we therefore believe that such funds are stable and at very low risk. The remaining approximately 25% of our cash and cash equivalents are held at two regional banks. We believe that both of these regional banks have strong balance sheets with high liquidity and low debt, and that their percentage of total uninsured deposits are similar or better than the nation’s largest banks. We believe that we have mitigated as much risk as possible by dispersing the operating funds between three banks. However, we may be subject to losses in excess of the FDIC insured limit in the event of a failure of any of these financial institutions and the subsequent lack of intervention by the federal government.

In the first quarter of 2023, we moved the majority of our operational banking services to one of the aforementioned regional banks; therefore, a larger portion of our cash and cash equivalents may be transferred to the same regional bank’s institutional sweep and depository accounts in the future. We will continually review all three institutions’ financial conditions to ensure that our assets are as safeguarded as possible.

~~Item 2.~~ ~~Unregistered Sales of Equity Securities and Use of Proceeds~~
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
~~Our~~On October 25, 2023, our Board of Directors ~~has authorized~~increased the ~~University to~~authorization under its existing stock repurchase ~~up to~~program by $200.0 million, reflecting an aggregate authorization for share repurchases since the initiation of ~~$175.0 million~~the program of ~~common stock, from time to time, depending on market conditions and other considerations.~~$2,045.0 million. The current expiration date on the repurchase authorization by our Board of Directors is ~~December~~

31 ~~2018.~~

Table of Contents

March 1, 2025. Repurchases occur at the ~~University’s discretion.~~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 amount and timing of future share repurchases, if any, will be made as market and business conditions warrant.

During the nine months ended September 30, ~~2017, we did not repurchase any~~2023, 1,034,649 shares of common ~~stock.~~stock were repurchased by the Company. At September 30, ~~2017,~~2023, there remains ~~$99.2~~$81.9 million available under our share repurchase ~~authorization.~~authorization (which authorization was increased to $281.9 million in October 2023).

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 approved in conjunction with the restricted share awards, during each period in the third quarter of fiscal ~~2017:~~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








July 1, 2023 – July 31, 2023

118,835

$
105.97

118,835

$
103,000,000
August 1, 2023 – August 31, 2023

107,607

$
111.82

107,607

$
91,000,000
September 1, 2023 – September 30, 2023

79,797

$
114.10

79,797

$
81,900,000
Total

306,239

$
110.14

306,239

$
81,900,000
Tax Withholdings








July 1, 2023 – July 31, 2023

—

$
—

—

$
—
August 1, 2023 – August 31, 2023

—

$
—

—

$
—
September 1, 2023 – September 30, 2023

—

$
—

—

$
—
Total

—

$
—

—

$
—

Period
Total Number of
Shares Purchased Average
Price Paid
Per Share Total Number of
Shares Purchased as
Part of Publicly
Announced
Program Maximum Dollar
Value of Shares
That May Yet Be
Purchased Under
the Program
Share Repurchases

July 1, 2017 – July 31, 2017
—   $ —   —   $ 99,200,000
August 1, 2017 – August 31, 2017
—   $ —   —   $ 99,200,000
September 1, 2017 – September 30, 2017
—   $ —   —   $ 99,200,000

Total
—   $ —   —   $ 99,200,000

Tax Withholdings

July 1, 2017 – July 31, 2017
—   $ —   —   $ —
August 1, 2017 – August 31, 2017
—   $ —   —   $ —
September 1, 2017 – September 30, 2017
—   $ —   —   $ —

Total
—   $ —   —   $ —

~~Item 3.~~ ~~Defaults Upon Senior Securities~~
Item 3.   Defaults Upon Senior Securities
None.
~~Item 4.~~ ~~Mine Safety Disclosures~~
Item 4.   Mine Safety Disclosures
None.
Item 5.   Other Information
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

~~Item 5.~~ ~~Other Information~~
~~None.~~
~~Item 6.~~ ~~Exhibits~~
Item 6.   Exhibits
(a)   Exhibits
Number
~~Description~~
Description
Method of Filing
3.1

    ~~3.1~~
Amended and Restated Certificate of Incorporation.

~~Incorporated by reference to Exhibit 3.1 to Amendment No. 6 to the University’s Registration Statement on FormS-1~~ ~~filed with the SEC on November 12, 2008.~~
    ~~3.1.1~~ ~~Certificate of Amendment of Amended and Restated Certificate of Incorporation.~~ ~~Incorporated by reference to Appendix A to the University’s Proxy Statement for its 2016 Annual meeting of Stockholders, filed with the SEC on April 29, 2016.~~
    ~~3.2~~ ~~Third Amended and Restated Bylaws.~~
Incorporated by reference to Exhibit 3.1 to the ~~University’s~~Company’s Annual Report on Form 10-K filed with the SEC on February 20, 2019.

3.2

Third Amended and Restated Bylaws.

Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form8-K filed with the SEC on October 29, 2014.

32

Table of Contents

4.1	Specimen of Stock Certificate.	Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to the ~~University’s~~Company’s Registration Statement on FormS-1 filed with the SEC on September 29, 2008.

31.1	Certification of Principal Executive Officer pursuant to Rules13a-14(a) and15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

31.2	Certification of Principal Financial Officer pursuant to Rules13a-14(a) and15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed herewith.

32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ††	Filed herewith.

32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ††	Filed herewith.

~~101.INS~~ 101	~~XBRL Instance Document~~ The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) Consolidated Income Statements, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements tagged as blocks of text and including detailed tags.	Filed herewith.

~~101.SCH~~ 104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL ~~Taxonomy Extension Schema~~(included as Exhibit 101).	Filed herewith.

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase~~	~~Filed herewith.~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase~~	~~Filed herewith.~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase~~	~~Filed herewith.~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase~~	~~Filed herewith.~~

†	~~Indicates a management contract or any compensatory plan, contract or arrangement.~~

††

This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filings of the University,†† This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350 and is not being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

33

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRAND CANYON EDUCATION, INC.

Date: November ~~1, 2017~~2, 2023

By:
/s/ Daniel E. Bachus

Daniel E. Bachus

Chief Financial Officer

(Principal Financial ~~Officer and Principal Accounting~~ Officer)

29

34

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

	For the transition period from to


~~DELAWARE~~		~~20-3356009~~
Delaware		20-3356009
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	LOPE	Nasdaq Global Select Market

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

	For the quarterly period ended September 30, 2023


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share data)	2017			2016			2017			2016
Net revenue	$	236,209		$	210,444		$	702,716		$	628,681
Costs and expenses:
Instructional costs and services		104,303			91,748			301,907			271,001
Admissions advisory and related		31,426			28,814			94,483			87,224
Advertising		25,523			23,896			74,930			67,152
Marketing and promotional		2,350			2,127			7,074			6,477
General and administrative		12,915			13,430			32,914			32,959
Lease termination costs		—			3,363			—			3,363

Total costs and expenses		176,517			163,378			511,308			468,176

Operating income		59,692			47,066			191,408			160,505
Interest expense		(567	)		(344	)		(1,642	)		(831	)
Interest and other income		1,445			(2,291	)		2,186			50

Income before income taxes		60,570			44,431			191,952			159,724
Income tax expense		21,266			15,187			56,889			59,189

Net income	$	39,304		$	29,244		$	135,063		$	100,535

Earnings per share:
Basic income per share	$	0.83		$	0.63		$	2.87		$	2.19

Diluted income per share	$	0.81		$	0.62		$	2.80		$	2.14

Basic weighted average shares outstanding		47,316			46,231			47,083			45,953

Diluted weighted average shares outstanding		48,292			47,175			48,197			47,009


	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Net income	$	39,304		$	29,244		$	135,063		$	100,535
Other comprehensive income, net of tax:
Unrealized gains (losses) onavailable-for-sale securities, net of taxes of $25 and $88 for the three months ended September 30, 2017 and 2016, respectively, and $257 and $5 for the nine months ended September 30, 2017 and 2016, respectively		40			(142	)		416			(6	)
Unrealized losses on hedging derivatives, net of taxes of $20 and $2 for the three months ended September 30, 2017 and 2016, respectively, and $65 and $203 for the nine months ended September 30, 2017 and 2016, respectively		(30	)		(4	)		(104	)		(328	)

Comprehensive income	$	39,314		$	29,098		$	135,375		$	100,201


	September 30,			December 31,
(In thousands, except par value)	2017			2016
	(Unaudited)
ASSETS:
Current assets
Cash and cash equivalents	$	180,142		$	45,976
Restricted cash and cash equivalents		75,604			84,931
Investments		89,609			62,596
Accounts receivable, net		12,243			9,999
Income tax receivable		4,546			4,686
Other current assets		24,702			21,880

Total current assets		386,846			230,068
Property and equipment, net		897,540			855,528
Prepaid royalties		2,837			3,059
Goodwill		2,941			2,941
Other assets		766			897

Total assets	$	1,290,930		$	1,092,493

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities
Accounts payable	$	27,523		$	24,824
Accrued compensation and benefits		24,377			19,697
Accrued liabilities		23,184			21,283
Income taxes payable		10,750			2,734
Student deposits		76,111			85,881
Deferred revenue		116,438			40,739
Current portion of notes payable		6,680			31,636

Total current liabilities		285,063			226,794
Other noncurrent liabilities		1,341			1,689
Deferred income taxes, noncurrent		27,209			23,708
Notes payable, less current portion		61,596			66,616

Total liabilities		375,209			318,807

Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding at September 30, 2017 and December 31, 2016		—			—
Common stock, $0.01 par value, 100,000 shares authorized; 52,238 and 51,509 shares issued and 48,120 and 47,559 shares outstanding at September 30, 2017 and December 31, 2016, respectively		522			515
Treasury stock, at cost, 4,118 and 3,950 shares of common stock at September 30, 2017 and December 31, 2016, respectively		(99,051	)		(89,394	)
Additionalpaid-in capital		228,928			212,559
Accumulated other comprehensive loss		(598	)		(910	)
Retained earnings		785,920			650,916

Total stockholders’ equity		915,721			773,686

Total liabilities and stockholders’ equity	$	1,290,930		$	1,092,493


												Accumulated
										Additional		Other
	Common Stock				Treasury Stock					Paid-in		Comprehensive			Retained
	Shares		Par Value		Shares		Cost			Capital		Loss			Earnings			Total
Balance at December 31, 2016		51,509	$	515		3,950	$	(89,394	)	$	212,559	$	(910	)	$	650,916		$	773,686
Cumulative effect from the adoption of accounting pronouncements, net of taxes		—		—		—		—			59		—			(59	)		—
Comprehensive income		—		—		—		—			—		312			135,063			135,375
Restricted shares forfeited		—		—		19		—			—		—			—			—
Share-based compensation		192		2		149		(9,657	)		9,560		—			—			(95	)
Exercise of stock options		537		5		—		—			6,750		—			—			6,755

Balance at September 30, 2017		52,238	$	522		4,118	$	(99,051	)	$	228,928	$	(598	)	$	785,920		$	915,721


	September 30, 2016
	As reported			As adjusted
Net cash provided by operating activities	$	214,451		$	213,265
Net cash used in investing activities	$	(166,000	)	$	(163,500	)
Net cash provided by (used in) financing activities	$	3,656		$	(3,714	)
Net increase in cash and cash equivalents and restricted cash	$	52,107		$	46,051
Cash and cash equivalents and restricted cash, beginning of period	$	23,036		$	98,420
Cash and cash equivalents and restricted cash, end of period	$	75,143		$	144,471


	As of September 30, 2017
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
Municipal securities	$	89,631	$	57	$	(79	)	$	89,609


	As of December 31, 2016
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
Municipal securities	$	62,769	$	12	$	(185	)	$	62,596


	Balance at Beginning of Period		Charged to Expense		Deductions⁽¹⁾			Balance at End of Period
Nine months ended September 30, 2017	$	5,918		13,351		(12,978	)	$	6,291
Nine months ended September 30, 2016	$	5,137		12,812		(11,766	)	$	6,183


	Summary of Stock Options Outstanding
	Total Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value ($)(1)
Outstanding as of December 31, 2016		1,272		$	15.26
Granted		—		$	—
Exercised		(537	)	$	12.57
Forfeited, canceled or expired		(2	)	$	16.35

Outstanding as of September 30, 2017		733		$	17.23		2.92	$	53,939

Exercisable as of September 30, 2017		733		$	17.23		2.92	$	53,939


	2017⁽¹⁾					2016⁽¹⁾
	# of Students		% of Total			# of Students		% of Total
Graduate degrees⁽²⁾		38,059		41.7	%		33,337		40.4	%
Undergraduate degree		53,171		58.3	%		49,085		59.6	%

Total		91,230		100.0	%		82,422		100.0	%


	2017⁽¹⁾					2016⁽¹⁾
	# of Students		% of Total			# of Students		% of Total
Online⁽³⁾		72,188		79.1	%		65,038		78.9	%
Ground⁽⁴⁾		19,042		20.9	%		17,384		21.1	%

Total		91,230		100.0	%		82,422		100.0	%


	As of September 30,		As of December 31,
(In thousands)	2023		2022
Cash, cash equivalents and investments	$	154,424	$	181,704


	Nine Months Ended September 30,
(In thousands)	2023		2022
Net cash provided by operating activities	$	127,277	$	110,470


			Payments Due by Period
	Total		Less than 1 Year (1)		2-3 Years		4-5 Years		More than 5 Years
Long term notes payable	$	68.3	$	1.7	$	66.6	$	0.0	$	0.0
Capital lease obligations		0.4		0.1		0.3		0.0		0.0
Purchase obligations(2)		25.6		11.3		10.8		3.0		0.5
Operating lease obligations		2.7		0.4		1.4		0.8		0.1

Total contractual obligations	$	97.0	$	13.5	$	79.1	$	3.8	$	0.6


				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
July 1, 2023 – July 31, 2023	118,835	$	105.97	118,835	$	103,000,000
August 1, 2023 – August 31, 2023	107,607	$	111.82	107,607	$	91,000,000
September 1, 2023 – September 30, 2023	79,797	$	114.10	79,797	$	81,900,000
Total	306,239	$	110.14	306,239	$	81,900,000
Tax Withholdings
July 1, 2023 – July 31, 2023	—	$	—	—	$	—
August 1, 2023 – August 31, 2023	—	$	—	—	$	—
September 1, 2023 – September 30, 2023	—	$	—	—	$	—
Total	—	$	—	—	$	—


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program
Share Repurchases
July 1, 2017 – July 31, 2017		—	$	—		—	$	99,200,000
August 1, 2017 – August 31, 2017		—	$	—		—	$	99,200,000
September 1, 2017 – September 30, 2017		—	$	—		—	$	99,200,000

Total		—	$	—		—	$	99,200,000

Tax Withholdings
July 1, 2017 – July 31, 2017		—	$	—		—	$	—
August 1, 2017 – August 31, 2017		—	$	—		—	$	—
September 1, 2017 – September 30, 2017		—	$	—		—	$	—

Total		—	$	—		—	$	—


Number	~~Description~~	Description		Method of Filing
3.1
~~3.1~~	Amended and Restated Certificate of Incorporation.		~~Incorporated by reference to Exhibit 3.1 to Amendment No. 6 to the University’s Registration Statement on FormS-1~~ ~~filed with the SEC on November 12, 2008.~~

~~3.1.1~~	~~Certificate of Amendment of Amended and Restated Certificate of Incorporation.~~		~~Incorporated by reference to Appendix A to the University’s Proxy Statement for its 2016 Annual meeting of Stockholders, filed with the SEC on April 29, 2016.~~

~~3.2~~	~~Third Amended and Restated Bylaws.~~		Incorporated by reference to Exhibit 3.1 to the ~~University’s~~Company’s Annual Report on Form 10-K filed with the SEC on February 20, 2019.

3.2	Third Amended and Restated Bylaws.		Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form8-K filed with the SEC on October 29, 2014.


	GRAND CANYON EDUCATION, INC.

Date: November ~~1, 2017~~2, 2023		By:		/s/ Daniel E. Bachus
			Daniel E. Bachus
			Chief Financial Officer
			(Principal Financial ~~Officer and Principal Accounting~~ Officer)

Large ~~accelerated filer~~Accelerated Filer ☒

Accelerated ~~filer~~

Non-accelerated Filer ☐

Smaller Reporting Company ☐

~~Non-accelerated~~ ~~filer~~

~~☐ (Do not check if a smaller reporting company)~~

~~Smaller reporting company~~

Emerging ~~growth company~~

Growth Company ☐