[Financial Highlights](index=2&type=section&id=Financial%20Highlights) GCE reported strong financial growth in Q2 and H1 2025, driven by a 10.3% increase in partner enrollments [Second Quarter 2025 Performance (Three Months Ended June 30, 2025)](index=2&type=section&id=Second%20Quarter%202025%20Performance%20(Three%20Months%20Ended%20June%2030%2C%202025)) In Q2 2025, GCE's service revenue increased by 8.8% year-over-year to $247.5 million, with operating income up 21.2% to $51.8 million and net income growing 19.1% to $41.5 million Q2 2025 Financial Performance | Financial Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Service Revenue | $247.5M | $227.5M | +8.8% | | Operating Income | $51.8M | $42.7M | +21.2% | | Net Income | $41.5M | $34.9M | +19.1% | | Diluted EPS | $1.48 | $1.19 | +24.4% | | Adjusted EBITDA | $67.4M | $58.5M | +15.2% | - The primary driver for revenue growth was a **10.3% increase in partner enrollments**, reaching **117,283 students** as of June 30, 2025[5](index=5&type=chunk) - GCU enrollments, the most significant partner, increased by **10.5% to 113,435**, with enrollments at off-campus classroom and laboratory sites growing by **14.0%**[5](index=5&type=chunk) - Operating margin improved to **20.9%** from **18.8%** year-over-year, positively impacted by contract modifications where GCE no longer reimburses partners for certain faculty costs[5](index=5&type=chunk) [First Half 2025 Performance (Six Months Ended June 30, 2025)](index=2&type=section&id=First%20Half%202025%20Performance%20(Six%20Months%20Ended%20June%2030%2C%202025)) For the first six months of 2025, service revenue grew 6.9% to $536.8 million, operating income increased 9.9% to $139.8 million, and net income rose 10.0% to $113.2 million H1 2025 Financial Performance | Financial Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Service Revenue | $536.8M | $502.1M | +6.9% | | Operating Income | $139.8M | $127.2M | +9.9% | | Net Income | $113.2M | $102.9M | +10.0% | | Diluted EPS | $4.00 | $3.48 | +14.9% | | Adjusted EBITDA | $169.4M | $157.1M | +7.8% | - Revenue growth was driven by a **10.3% increase in partner enrollments**, though revenue per student slightly decreased due to the 2024 leap year adding $1.5 million in revenue and certain contract modifications[4](index=4&type=chunk)[6](index=6&type=chunk) - The effective tax rate decreased to **22.7%** from **23.8%** in the prior year, primarily due to an increase in excess tax benefits[8](index=8&type=chunk) [Liquidity and Capital Resources](index=4&type=section&id=Liquidity%20and%20Capital%20Resources) GCE's liquidity strengthened in H1 2025, with cash and investments increasing by $49.3 million, driven by strong operating cash flow Liquidity Position | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Unrestricted Cash, Cash Equivalents, and Investments | $373.9M | $324.6M | +$49.3M | - The increase in liquidity is attributed to **cash provided by operations exceeding outlays for share repurchases and capital expenditures** during the first six months of 2025[7](index=7&type=chunk) [2025 Financial Outlook](index=5&type=section&id=2025%20Financial%20Outlook) GCE projects full-year 2025 service revenue between $1,100.3M and $1,107.3M, with diluted EPS ranging from $8.75 to $8.90 2025 Financial Guidance | Guidance | Q3 2025 | Q4 2025 | Full Year 2025 | | :--- | :--- | :--- | :--- | | Service Revenue | $258.5M - $260.5M | $305.0M - $310.0M | $1,100.3M - $1,107.3M | | Operating Margin | 21.8% - 22.2% | 35.1% - 35.8% | 27.5% - 27.9% | | Diluted EPS | $1.69 - $1.74 | $3.07 - $3.18 | $8.75 - $8.90 | - Adjusted non-GAAP diluted EPS guidance is projected to be between **$1.75 and $1.80 for Q3**, **$3.13 and $3.24 for Q4**, and **$8.98 and $9.14 for the full year 2025**[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) GCE's unaudited consolidated financial statements detail strong performance, stable assets, and operating cash flow used for investments and share repurchases [Consolidated Income Statements](index=8&type=section&id=Consolidated%20Income%20Statements) For Q2 2025, service revenue grew to $247.5 million with net income of $41.5 million, while H1 revenue reached $536.8 million with net income of $113.2 million Consolidated Income Statement Summary | (In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Service revenue | $247,499 | $227,463 | $536,809 | $502,138 | | Operating income | $51,789 | $42,719 | $139,812 | $127,197 | | Net income | $41,546 | $34,878 | $113,164 | $102,888 | [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, GCE's total assets were $1.021 billion, with cash and cash equivalents at $192.3 million and total stockholders' equity at $778.0 million Consolidated Balance Sheet Summary | (In thousands) | As of June 30, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $422,481 | $419,976 | | Total assets | $1,021,007 | $1,018,425 | | Total current liabilities | $118,990 | $110,966 | | Total liabilities | $243,031 | $234,572 | | Total stockholders' equity | $777,976 | $783,853 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For H1 2025, GCE generated $191.6 million in operating cash flow, used $198.7 million in investing activities, and $125.2 million in financing activities Consolidated Cash Flow Summary | (In thousands) | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | | Net cash provided by operating activities | $191,639 | $183,526 | | Net cash used in investing activities | ($198,748) | ($19,989) | | Net cash used in financing activities | ($125,236) | ($68,695) | | Net (decrease) increase in cash | ($132,345) | $94,842 | [Non-GAAP Financial Measures](index=11&type=section&id=Non-GAAP%20Financial%20Measures) GCE provides non-GAAP measures, including Adjusted EBITDA, to offer a clearer view of core operating performance, with Q2 2025 Adjusted EBITDA up 15.2% to $67.4 million [Reconciliation of Net Income to Adjusted EBITDA](index=11&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) For Q2 2025, net income of $41.5 million was adjusted to an Adjusted EBITDA of $67.4 million, reflecting a 15.2% increase from Q2 2024 Adjusted EBITDA Reconciliation | (In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Net income | $41,546 | $34,878 | $113,164 | $102,888 | | Adjusted EBITDA | $67,411 | $58,526 | $169,379 | $157,115 | - Management uses Adjusted EBITDA as a supplemental measure of operating performance for internal decision-making and believes it helps investors compare results with historical periods and other companies[31](index=31&type=chunk)[32](index=32&type=chunk) [Reconciliation of GAAP to Non-GAAP Net Income and EPS](index=12&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Net%20Income%20and%20EPS) For Q2 2025, As Adjusted Non-GAAP Net Income was $43.2 million ($1.53 per share), compared to GAAP Net Income of $41.5 million ($1.48 per share) GAAP to Non-GAAP Reconciliation | (In thousands, except per share) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | GAAP Net income | $41,546 | $113,164 | | As Adjusted, Non-GAAP Net income | $43,182 | $116,478 | | GAAP Diluted income per share | $1.48 | $4.00 | | As Adjusted, Non-GAAP Diluted income per share | $1.53 | $4.12 | [Other Information](index=5&type=section&id=Other%20Information) This section includes important disclosures, forward-looking statements outlining potential risks, and details for the Q2 2025 earnings conference call [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements subject to risks and uncertainties, including legal actions, partner agreement terminations, and competition - The report includes forward-looking statements that are subject to risks and uncertainties and should not be read as a guarantee of future performance[12](index=12&type=chunk)[13](index=13&type=chunk) - Important risk factors include: (i) legal and regulatory actions, (ii) termination of key university partner agreements, (iii) ability to comply with regulations, and (iv) competition from other education service companies[13](index=13&type=chunk)[15](index=15&type=chunk) [Conference Call Information](index=7&type=section&id=Conference%20Call%20Information) GCE will host a conference call on August 6, 2025, at 4:30 p.m. ET to discuss Q2 2025 results and full-year outlook, with a live webcast available - A conference call to discuss Q2 2025 results is scheduled for **August 6, 2025, at 4:30 p.m. ET**[18](index=18&type=chunk) - A live webcast and replay of the event will be available online[20](index=20&type=chunk)

Financial Performance - Service revenue for Q2 2025 was $247.5 million, an increase of $20.0 million, or 8.8%, compared to $227.5 million in Q2 2024, driven by a 10.3% increase in partner enrollments to 117,283 [2][20] - Operating income for Q2 2025 was $51.8 million, an increase of $9.1 million, or 21.2%, compared to $42.7 million in Q2 2024, with an operating margin of 20.9% [2][20] - Net income for Q2 2025 was $41.5 million, an increase of $6.6 million, or 19.1%, compared to $34.9 million in Q2 2024, with diluted net income per share rising to $1.48 from $1.19 [2][20] Enrollment Growth - GCU enrollments increased to 113,435 at June 30, 2025, a 10.5% increase from 102,600 at June 30, 2024 [2] - University partner enrollments at off-campus sites were 4,990, a 14.0% increase from the previous year, contributing to overall enrollment growth [2] Liquidity and Capital Resources - The liquidity position increased by $49.3 million between December 31, 2024, and June 30, 2025, with unrestricted cash and cash equivalents at $373.9 million [4] - Cash provided by operations exceeded share repurchases and capital expenditures during the six months ended June 30, 2025 [4] Full Year Outlook - For Q3 2025, the company expects diluted EPS guidance of between $1.75 and $1.80, adjusted for non-cash amortization of intangible assets [5] - For the full year 2025, the diluted EPS guidance is between $8.98 and $9.14, also adjusted for non-cash amortization [7]

Company Overview - Grand Canyon Education, Inc. (GCE) is a publicly traded education services company incorporated in 2008, providing services to 20 university partners [4] - The company has 30 years of proven expertise in delivering a full array of support services in the post-secondary education sector, including technological solutions and operational processes [4] - Services offered by GCE include marketing, strategic enrollment management, counseling services, financial services, technology support, compliance, human resources, classroom operations, curriculum development, and faculty recruitment and training [4] Upcoming Financial Results - GCE will report its 2025 second quarter results after market close on August 6, 2025 [1] - A conference call to discuss the results in detail will be held at 1:30 P.M. (4:30 P.M. ET) on the same day [1] Conference Call Participation - Interested participants can register for the call to receive dial-in numbers and a unique PIN for seamless access [2] - Participants are advised to dial in at least ten minutes prior to the start of the call, with journalists invited to listen only [2] Webcast Information - A live webcast of the earnings conference call will be available for investors, journalists, and the general public [3] - A replay of the webcast will be accessible approximately two hours after the conclusion of the call [3]

Core Insights - Investors in the Schools sector may consider Afya (AFYA) and Grand Canyon Education (LOPE) as potential investment opportunities [1] - The Zacks Rank system, which emphasizes positive earnings estimate revisions, is a key tool for identifying value opportunities [2] Valuation Metrics - Afya has a Zacks Rank of 1 (Strong Buy), while Grand Canyon Education has a Zacks Rank of 3 (Hold), indicating a stronger earnings outlook for AFYA [3] - AFYA's forward P/E ratio is 10.16, significantly lower than LOPE's forward P/E of 20.16, suggesting AFYA may be undervalued [5] - The PEG ratio for AFYA is 0.55, compared to LOPE's PEG ratio of 1.34, indicating better expected earnings growth relative to its price [5] - AFYA's P/B ratio is 2.02, while LOPE's P/B ratio is 6.42, further highlighting AFYA's relative valuation advantage [6] - Based on these metrics, AFYA holds a Value grade of A, while LOPE has a Value grade of C, making AFYA the more attractive option for value investors [6]

Core Insights - The demand for digital educational alternatives is increasing as parents and students seek seamless ways to earn degrees, with a notable shift towards technology-driven and AI-focused options [1][4] - Key education providers like Stride, Inc. (LRN) and Grand Canyon Education, Inc. (LOPE) are transforming education through technology [1] Stride, Inc. (LRN) - Stride offers full-time online K-12 programs and is expanding its focus on career learning and adult certification programs [2] - The company has a market cap of approximately $6.03 billion and is experiencing record enrollment growth, particularly in its Career Learning segment, which saw a 32% year-over-year growth [4][5] - Stride raised its fiscal 2025 revenue guidance to $2.37-$2.385 billion, indicating a year-over-year growth of 16.2-16.9% [6] - The company is focused on enhancing its career education offerings, which aligns with the ongoing regulatory reforms in the U.S. education industry [5][6] Grand Canyon Education, Inc. (LOPE) - Grand Canyon Education has a market cap of about $5.2 billion and is benefiting from diversified university partnerships and tech-based offerings [8] - The company reported a 5.8% year-over-year enrollment growth at Grand Canyon University and a 12.1% increase in enrollments from university partners [10] - LOPE has launched 48 new programs since 2023, focusing on high-demand fields to align with workforce requirements [11] - For fiscal 2025, LOPE expects service revenues between $1,079.8 million and $1,099.8 million, reflecting a year-over-year growth of 4.5-6.5% [12] Stock Performance & Valuation - Year-to-date, Stride's share price performance has outperformed Grand Canyon Education [13] - Stride trades below LOPE on a forward price-to-sales (P/S) basis, suggesting a more attractive valuation for investors [14] - The Zacks Consensus Estimate indicates LRN's fiscal 2025 EPS will grow by 51.2% year-over-year, while LOPE's EPS is expected to grow by 8.8% [18][20] Return on Equity (ROE) - Grand Canyon Education's trailing 12-month ROE is 30.9%, significantly higher than Stride's average of 23.4%, indicating better efficiency in generating shareholder returns [20] Conclusion - Both Stride and Grand Canyon Education present strong opportunities in the online education market, but Stride is highlighted as the stronger investment case due to superior near-term earnings growth estimates and more attractive valuation [21][22]

Core Viewpoint - Investors in the Schools sector should consider American Public Education (APEI) and Grand Canyon Education (LOPE) as potential undervalued stocks [1] Valuation Metrics - APEI has a forward P/E ratio of 20.95, while LOPE has a forward P/E of 21.55 [5] - APEI's PEG ratio is 1.40, compared to LOPE's PEG ratio of 1.44 [5] - APEI's P/B ratio is 1.99, significantly lower than LOPE's P/B of 6.87 [6] Investment Grades - Both APEI and LOPE have a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions [3] - APEI holds a Value grade of A, while LOPE has a Value grade of C, suggesting APEI is the superior value option [6][7]

Core Insights - The article compares American Public Education (APEI) and Grand Canyon Education (LOPE) to determine which stock offers better value for investors [1] Valuation Metrics - APEI has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook compared to LOPE, which has a Zacks Rank of 3 (Hold) [3] - APEI's forward P/E ratio is 19.47, while LOPE's forward P/E ratio is 22.55, suggesting APEI may be undervalued [5] - APEI has a PEG ratio of 1.30, compared to LOPE's PEG ratio of 1.50, indicating APEI's expected earnings growth is more favorable [5] - APEI's P/B ratio is 1.85, significantly lower than LOPE's P/B ratio of 7.09, further supporting APEI's valuation attractiveness [6] Value Grades - APEI holds a Value grade of A, while LOPE has a Value grade of D, indicating APEI is considered a better value investment [6] - APEI has experienced stronger estimate revision activity and more attractive valuation metrics than LOPE, leading to the conclusion that APEI is the superior option for value investors [7]

Financial Data and Key Metrics Changes - Grand Canyon Education reported service revenue of $289.3 million for Q1 2025, an increase of $14.6 million or 5.3% compared to $274.7 million in Q1 2024 [21] - Operating income for the three months ended March 31, 2025, was $88 million with an operating margin of 30.4%, compared to $84.5 million and 30.8% for the same period in 2024 [22] - Net income increased by 5.3% to $71.6 million for Q1 2025 compared to $68 million for Q1 2024 [22] Business Line Data and Key Metrics Changes - Online enrollment growth was 7.9% in Q1 2025, exceeding long-term objectives, while hybrid enrollment growth was 16.5% year over year, excluding closed sites [5][11] - New starts from workforce development initiatives increased by 18.2% year over year [8] - Traditional campus enrollments saw a slight decline year over year, but new student registrations for fall 2025 are ahead of last year [10][11] Market Data and Key Metrics Changes - The company continues to address workforce shortages in various industries, including education, healthcare, and technology, which has positively impacted enrollment [8][15] - The company has rolled out 48 new programs since January 1, 2023, contributing to the increase in enrollment [7] Company Strategy and Development Direction - Grand Canyon Education aims to grow by addressing challenges in higher education, such as high tuition rates and student debt [6] - The company plans to expand its traditional campus to 50,000 students and is optimistic about meeting enrollment growth goals [10][11] - The focus remains on building partnerships with employers and educational institutions to enhance program offerings and address labor market needs [19][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that funding for higher education will remain stable, despite concerns about potential cuts [39][41] - The company anticipates continued growth in online and hybrid enrollments, projecting mid to high single-digit growth rates for 2025 [27][29] - There is optimism about margin expansion in the second half of 2025, contingent on enrollment growth in traditional campuses [30] Other Important Information - The effective tax rate for Q1 2025 was 21.6%, down from 22.9% in Q1 2024, primarily due to increased excess tax benefits [25] - The company repurchased 3,395,426 shares at a cost of approximately $68.4 million, with $209.4 million remaining under the share repurchase authorization [25][26] Q&A Session Summary Question: Source of better-than-expected enrollment in Q1 - Management attributed the increase to lead flow and interest in new programs, as well as contracts with school districts and military bases [35][37] Question: Concerns about potential funding cuts - Management believes funding for higher education will remain stable and is not expected to impact the company [39][41] Question: Long-term enrollment targets - The long-term enrollment goal is 7%, with current performance slightly above that at 7.9% [45] Question: M&A considerations - The company prefers building over acquisitions, focusing on internal growth and partnerships [52][55] Question: Converting prerequisite students to ABSN programs - The process involves a significant time frame for students to complete prerequisites before entering ABSN programs, with a goal of having more students in the pipeline [60][62]

Financial Data and Key Metrics Changes - Grand Canyon Education reported service revenue of $289.3 million for Q1 2025, an increase of $14.6 million or 5.3% compared to $274.7 million in Q1 2024 [20] - Operating income for the three months ended March 31, 2025, was $88 million with an operating margin of 30.4%, compared to $84.5 million and 30.8% for the same period in 2024 [21] - Net income increased by 5.3% to $71.6 million for Q1 2025 compared to $68 million for Q1 2024 [21] Business Line Data and Key Metrics Changes - Online enrollment growth was 7.9% in Q1 2025, slightly exceeding long-term objectives, while hybrid enrollment growth, excluding closed sites, was 16.5% [3][10] - New starts from employer partnerships increased by 18.2% year over year, contributing to overall enrollment growth [6] - The hybrid campus saw a year-over-year enrollment increase of 12.1% in Q1 2025 [10] Market Data and Key Metrics Changes - The company continues to address workforce shortages in various industries, including education, healthcare, and technology, which has positively impacted enrollment [6][14] - The company anticipates that total online enrollments will remain in the mid to high single digits year over year throughout 2025, despite pressures from increasing graduation rates [26] Company Strategy and Development Direction - Grand Canyon Education aims to grow by addressing challenges in higher education, such as rising tuition and debt levels, while continuing to roll out new programs [4][5] - The company plans to expand its traditional campus to 50,000 students and is optimistic about growth due to its low tuition and debt levels [9] - The focus remains on building rather than acquiring, with an emphasis on workforce development and partnerships with various organizations [52][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that funding for higher education will remain stable, despite concerns about potential cuts from Washington [39][40] - The company is optimistic about enrollment trends and believes it is well-positioned to attract students due to its value proposition [48] - Management anticipates a slight decline in margins in the second quarter due to investments but expects margins to expand in the second half of the year [29] Other Important Information - The effective tax rate for Q1 2025 was 21.6%, a decrease from 22.9% in the previous year, primarily due to increased excess tax benefits [24] - The company repurchased 3,395,426 shares at a cost of approximately $68.4 million, with $209.4 million remaining under its share repurchase authorization [25] Q&A Session Summary Question: Where did the better-than-expected enrollment in Q1 come from? - Management attributed the increase to lead flow and interest in new programs, as well as contracts with school districts and military bases [34][36] Question: Are students worried about potential funding cuts from Washington? - Management believes funding for higher education will remain stable and does not expect it to impact the company [39][40] Question: What are the long-term enrollment targets for different pillars? - The long-term enrollment goal is 7%, with current performance slightly above that at 7.9% [45] Question: What are the expectations for enrollment this year? - Management confirmed that expectations for GCU online starts remain in the mid to high single digits for 2025 [50] Question: Thoughts on M&A? - Management prefers building over acquiring and sees more potential in developing programs directly with companies [52][54] Question: What is the process for converting students in prerequisite programs to ABSN programs? - Management explained that it takes time for students to complete prerequisite courses before entering ABSN programs, and they aim to have more students enrolled in prerequisites to fill slots [58][60]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Q1 2025, including income statements, balance sheets, and cash flows, along with detailed notes on accounting policies and financial figures [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Q1 2025 and 2024, summarizing the company's financial performance, position, and cash flows | Financial Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Service Revenue** | $289,310 | $274,675 | | **Operating Income** | $88,023 | $84,478 | | **Net Income** | $71,618 | $68,010 | | **Diluted EPS** | $2.52 | $2.29 | | Balance Sheet Item | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | $1,031,448 | $1,018,425 | | **Total Liabilities** | $250,744 | $234,572 | | **Total Stockholders' Equity** | $780,704 | $783,853 | | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Net Cash from Operations** | $67,631 | $84,963 | | **Net Cash used in Investing** | ($169,888) | ($5,260) | | **Net Cash used in Financing** | ($77,857) | ($29,970) | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's business model, accounting policies, and specific financial items, including the significant service agreement with Grand Canyon University and intangible assets - GCE is an education services company serving 22 university partners, with Grand Canyon University (GCU) being its most significant partner[23](index=23&type=chunk)[24](index=24&type=chunk) - Under a long-term master services agreement, GCE provides a suite of services to GCU in exchange for **60% of GCU's tuition and fee revenue**[28](index=28&type=chunk) - Revenue from GCU represents a significant concentration of credit risk, accounting for **90.4% of total service revenue in Q1 2025**, up from **89.7% in Q1 2024**[57](index=57&type=chunk) - Amortizable intangible assets of **$157.9 million** as of March 31, 2025, primarily consist of university partner relationships acquired in the Orbis Education acquisition in 2019, which are being amortized over **25 years**[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2025 financial results, detailing revenue and expense drivers, segment performance, liquidity, and capital expenditure plans [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Q1 2025 service revenue grew **5.3% to $289.3 million** driven by enrollment growth, while expenses increased across categories, leading to a **5.3% rise in net income** | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | **Service Revenue** | $289.3M | $274.7M | +5.3% | | **Partner Enrollments** | 127,779 | 120,788 | +5.8% | | **GCU Enrollments** | 123,773 | 117,000 (approx) | +5.8% | | **Off-campus Enrollments** | 5,027 | 4,484 (approx) | +12.1% | - Marketing and communication expenses increased by **9.0% to $60.3 million** due to higher advertising costs to support enrollment growth goals[116](index=116&type=chunk) - Technology and academic services expenses rose **6.5% to $41.7 million**, driven by costs associated with an increased number of off-campus classroom and laboratory sites[114](index=114&type=chunk) - The effective tax rate decreased to **21.6% in Q1 2025** from **22.9% in Q1 2024**, primarily due to higher excess tax benefits from share-based compensation[121](index=121&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity decreased to **$304.7 million** in Q1 2025, primarily due to significant share repurchases and investment activities, partially offset by operating cash flow | (In thousands) | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | **Cash, cash equivalents and investments** | $304,653 | $324,623 | - Net cash from operating activities decreased to **$67.6 million in Q1 2025** from **$85.0 million in Q1 2024**, mainly due to changes in working capital balances like accounts payable[127](index=127&type=chunk) - Cash used in financing activities increased significantly to **$77.9 million in Q1 2025** from **$30.0 million in Q1 2024**, driven by a higher volume of share repurchases (**$68.4 million in Q1 2025** vs. **$22.6 million in Q1 2024**)[131](index=131&type=chunk)[132](index=132&type=chunk) - Capital expenditures were **$8.9 million in Q1 2025**, consistent with the prior year, and are expected to be **$30.0 to $40.0 million annually**[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure is primarily interest rate risk from its investment portfolio, with no material impact expected from a 10% interest rate change - The company's primary market risk is interest rate risk from its investment portfolio[139](index=139&type=chunk) - GCE manages credit risk by investing in instruments rated **BBB or higher** and does not hold any derivative instruments[138](index=138&type=chunk)[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective as of the end of the quarter[140](index=140&type=chunk) - There were no material changes in the company's internal control over financial reporting during the first quarter of 2025[141](index=141&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in material legal proceedings, including a False Claims Act lawsuit and FTC actions regarding GCU's programs, for which no liability has been accrued - The company is defending a *qui tam* lawsuit under the False Claims Act concerning its enrollment counselor compensation practices, with a trial set for **October 2025**[82](index=82&type=chunk)[85](index=85&type=chunk) - GCE is a party to several legal matters, including a lawsuit from the Federal Trade Commission (FTC) and multiple class actions, alleging misleading representations regarding GCU's graduate programs, non-profit status, and telemarketing activities[87](index=87&type=chunk)[89](index=89&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the 2024 Annual Report on Form 10-K have been reported - There have been no material changes to the risk factors disclosed in the **2024 Form 10-K**[143](index=143&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, the company repurchased **395,426 shares** at an average price of **$172.96**, with **$231.3 million** remaining under the repurchase authorization | Period (2025) | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January | 150,517 | $167.74 | | February | 117,590 | $181.76 | | March | 127,319 | $171.01 | | **Total Q1** | **395,426** | **$172.96** | - As of March 31, 2025, **$231.3 million** remained available for future purchases under the company's share repurchase program[146](index=146&type=chunk) [Other Items (3, 4, 5, 6)](index=44&type=section&id=Other%20Items%20(3,%204,%205,%206)) This section confirms no defaults on senior securities, no mine safety disclosures, and no new or terminated 10b5-1 trading plans by insiders during the quarter - The company reported no defaults upon senior securities, no mine safety disclosures, and no new or terminated **10b5-1** trading arrangements by insiders during the quarter[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)