Grand Canyon Education : 2020 Annual Report

D E A R S T O C K H O L D E R S ,

During a year in which the COVID-19 pandemic adversely affected organizations and economies worldwide, Grand Canyon Education was able to successfully navigate these challenges due to our business model and investments in technology.

We also strengthened our focus on our core tenets including social responsibility, human capital development, environmental awareness and resiliency.

Our business continues to grow and evolve to meet the needs of our local communities but also remains focused on addressing what we believe to be the core issues that exist in higher education:

• College education is often too expensive and takes too long to complete;
• Students are taking on too much debt in their pursuit of a degree;
• Research shows that as college tuition increases, diversity decreases as higher education is not attainable for all socioeconomic classes;
• Bachelor's degrees are not always targeted toward in-demand careers;
• Universities have inadequate counseling and support services, especially for distanced learners;
• Most university professors have no formal training in online teaching, learning or course design.
• Universities are under significant financial pressure, which has only been accelerated during the pandemic.

GCE is in a leadership position to provide the capital, technology and expertise to university partners to solve these educational challenges. We've developed classroom, hybrid and fully online educational models that allow our partners to build more successful and sustainable models. We also support thousands of high schools across the country with initiatives such as dual credit, online prerequisite courses and other programs that shorten the time to completion, thereby lowering tuition and debt. Our university partners focus on programs where demand is high, such as health care, teacher education, science, technology, engineering and math.

GCE provides expanded academic counseling services and support, including field experience solutions such as student teaching and clinicals, to our university partners which has proven to increase student retention and degree completion. Our faculty services and curriculum development teams assist our university partners, as well as other universities and K-12 schools, in improving their online education pedagogy. When the pandemic put pressure on their financial position, our business model helped educators adapt more quickly to changes in the educational landscape.

Our university partners were able to grow their enrollments during 2020 such that we now service 116,000 students. Given the structure of our partnerships, this has resulted in much needed income for the university partners during a period that has been very difficult financially.

GCE supports community involvement through contributions and volunteer hours that benefit many non-profit organizations such as Habitat for Humanity, Special Olympics and the Youth Opportunity Foundation. GCE supports community giving with its contributions to private school tuition organizations, encouraging employee giving, soliciting donations for student scholarships, and sponsoring K-12 Education Development. Our employees, as well as our partners' students, faculty and staff, have volunteered at COVID Point of Distribution (POD) vaccine sites. This includes the Grand Canyon University (GCU) POD, which is jointly operated by GCU and GCE at no cost to the state of Arizona, and other PODs including those run by our hospital partners.

During the COVID-19 pandemic, employee health and safety were prioritized across GCE and its partners. Grand Canyon Education was able to support a seamless transition for its partner schools from traditional campus-based classes to 100% online. A company-widework-from-home policy was implemented for employees. These transitions were made possible due to our significant investment in technology and infrastructure. In addition, by saving on physical building expenses and limiting non-essential travel, we shifted our business model and directed spending to other areas to help meet university partner growth goals. We plan to continue the work-from-home policy for most employees which is good for our employees and good for the environment.

GCE fosters a culture of workforce diversity. Diversity in the workplace ensures a variety of different perspectives and ensures employees will have different characteristics and backgrounds as well as a variety of different skills and experiences. Of GCE's 4,625 employees, 76% are either women or individuals of color. Among GCE employees who are manager level and above, totaling 522 persons, 65% are held by women or people of color. We believe diversity not only enriches the workplace and the educational endeavors of our partners, it is critical to it.

GCE is proud to have continued to demonstrate its ability to grow and serve as a technology leader in the education services industry - a dynamic environment that continues to evolve as we move forward through 2021.

/s/ Brian E. Mueller

Chief Executive Officer and Chairman

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2020
  OR

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

For the transition period from [	] to [	]
Commission file number: 001-34211

GRAND CANYON EDUCATION, INC.

(Exact name of registrant as specified in its charter)

Delaware				20-3356009
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
	2600 W. Camelback Road, Phoenix, Arizona 85017
	(Address of principal executive offices, including zip code)
	Registrant's telephone number, including area code: [phone]
	Securities registered pursuant to Section 12(b) of the Act:
Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		LOPE		Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒	No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐	No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past

90 days. Yes ☒ No ☐

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

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

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes ☐ No ☒ The total number of shares of common stock outstanding as of February 12, 2021 was 46,873,732.

As of June 30, 2020, the last business day of the registrant's most recently completed second fiscal quarter, the registrant's common stock was listed on the NASDAQ Global Market. As of June 30, 2020, the aggregate market value of the registrant's common stock held by non-affiliates was approximately $4.2 billion.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant's Definitive Proxy Statement for its 2021 Annual Meeting of Stockholders (which is expected to be filed with the Commission within 120 days after the end of the registrant's 2020 fiscal year) are incorporated by reference into Part III of this Report.

GRAND CANYON EDUCATION, INC.

FORM 10-K

INDEX

	Page
Special Note Regarding Forward-Looking Statements	3
PART I	5
Item 1. Business	5
Item 1A. Risk Factors	26
Item 1B. Unresolved Staff Comments	42
Item 2. Properties	42
Item 3. Legal Proceedings	42
Item 4. Mine Safety Disclosures	42
PART II	43
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities	43
Item 6. Selected Consolidated Financial and Other Data	45
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	47
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	58
Item 8. Consolidated Financial Statements and Supplementary Data	59
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	94
Item 9A. Controls and Procedures	94
Item 9B. Other Information	98
PART III	98
Item 10. Directors, Executive Officers and Corporate Governance	98
Item 11. Executive Compensation	98
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters	98
Item 13. Certain Relationships and Related Transactions, and Director Independence	99
Item 14. Principal Accounting Fees and Services	99
PART IV	99
Item 15. Exhibits and Consolidated Financial Statement Schedules	99
Exhibit Index	99
SIGNATURES	103

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Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K, including Item 1, Business; Item 1A, Risk Factors; and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, contains certain "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of 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, 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. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward- looking statements is the potential adverse effects of the COVID-19 pandemic, and federal, state and/or local regulatory guidelines and private business actions to control it, on our financial condition, operating results and cash flows, our university partners, the higher education industry in which we operate, the global economy and the financial markets. The extent to which the COVID-19 pandemic will continue to impact us and our university partners will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, and the resulting economic impacts and potential changes in behavior, among others. Important factors that could cause such differences, and which may be further heightened by the COVID-19 pandemic, include, but are not limited to:

• the harm to our business, results of operations, and financial condition, and harm to our university partners resulting from epidemics, pandemics, including the COVID-19 outbreak, 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 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;
• 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;
• risks associated with changes in applicable federal and state laws and regulations and accrediting commission standards, including pending rulemaking by the United States 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;

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