LOPE 10-K & 10-Q changes, risk factors and insider trading

We have made, and expect to continue making, investments in the integration of artificial intelligence (“AI”) into our platforms, products, and services. However,While we expect our use of AI to help grow our business and benefit our university partners, the use of AI presents various risks, challenges, and potential unintended consequences that could disrupt our ability to effectively integrate and leverage these technologies.technologies and it is not certain that we will realize our desired or anticipated benefits. The process of refining and expanding AI-driven offerings may involve significant costs, and there can be no assurance that our efforts will ultimately succeed.

Additionally, competitors may develop more effective or efficient AI solutions, potentially undermining our competitive position. The regulatory environment surrounding AI is still in development, and new laws or regulations could emerge that require substantial adjustments to our business practices. These changes could impose unexpected costs or operational disruptions, and the full scope and impact of such regulatory developments remain uncertain. AI technologies also carry the risk of generating content that is or is alleged to be deficient, biased, factually incorrect or infringing on third-party intellectual property rights.rights, which may in turn make us subject to private lawsuits, regulatory scrutiny, or reputational harm. Furthermore, the use of AI may result in incidents that compromise the confidentiality of data, including personal data. If we suffer adverse consequences due to any of these factors, it could in turn have a material adverse effect on our reputation, financial performance, and operations.

We are subject to rapidly changing laws and regulations relating to privacy and data security as a result of our collection and use of personal information, and any violationsfailure ofto comply with such laws or regulations,regulations could lead to government enforcement actions or anyprivate breach, theft,litigation or loss of such information, could adversely affect our reputation and operations.

Due to the sensitive nature of the personal information stored on our servers, our networks may be targeted by hackers seeking to access this data. A user who circumvents security measures could misappropriate sensitive information or cause interruptions or malfunctions in our operations. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee data and privacy. In addition, errors in the storage, use, or transmission of personal information could result in a breach of privacy for current or prospective students or employees. Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could require us to implement certain policies and procedures, such as the procedures we adopted to comply with the Red Flags Rule that was promulgated by the FTC under the federal Fair Credit Reporting Act and that requires the establishment of guidelines and policies regarding identity theft related to student credit accounts, and could require us to make certain notifications of data breaches and restrict our use of personal information. Similarly, California passed the California Consumer Privacy Act (CCPA) in 2018 (which went into effect in 2020), and there are similar bills that have been passed or are pending in a number of other states, as well. These state laws represent a trend toward stronger privacy protections and greater data transparency in the United States. Currently, federal law legislates privacy on an industry-by-industry basis. Without an overarching federal law driving privacy compliance, the risk is high of a patchwork of privacy legislation formed by individual state laws, similar to the states’ approach to breach notification obligations. This could not only increase costs for compliance but also raise the risk of enforcement by individual state Attorneys General. A violation of any laws or regulations relating to the collection or use of personal information, including the Gramm-Leach-Bliley Act’s Safeguards Rule, could result in the imposition of fines against us. Moreover, ED has published extensive requirements for the protection of student data and has indicated such requirements may be strengthened in the future.

Additionally, university personnel or students,students of our university partners, or our employees or independent contractors, could use our online learning platform to store or process regulated personal information without our knowledge. In the event that our systems experience a data security incident, or an individual or entity accesses information without, or in excess of, proper authorization, we could be subject to data security incident notification laws, which may require prompt remediation and notification to individuals. If we are unaware of the data and information stored on our systems, we may be unable to appropriately comply with all legal obligations, and we may be exposed to governmental enforcement or prosecution actions, private litigation, fines and penalties or adverse publicity that could harm our reputation and business. As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches. A major breach, theft, or loss of personal information regarding our university partner’spartners’ students and their families or our employees that is held by us or our vendors, or a violation of laws or regulations relating to the same, could have a material adverse effect on our reputation and result in further regulation and oversight by federal and state authorities and increased costs of compliance.

Rulemaking by ED and Congressional legislation could materially and adversely affect our business.

In addition to other regulations discussed elsewhere (such as those related to the new Gainful Employment regulationsOBBBA), on July 1, 2024 new regulations became effective covering the areas of financial responsibility, administrative capability, certification standards and procedures, and ability to benefit.

To participate in the Title IV programs, an institution must either satisfy specific quantitative standards of financial responsibility prescribed by ED or post a letter of credit in favor of ED and possibly accept operating restrictions as well. These financial responsibility tests are applied to each institution on an annual basis based on the institution’s audited consolidated financial statements, and may be applied at other times, such as if the institution undergoes a change in control. These tests may also be applied to an institution’s parent company or other related entity. As a service provider, we are not directly subject to this regulation. However, if ED were to determine that a university partner institution did not meet the financial responsibility standards due to a failure to meet the composite score or other financial responsibility factors, ED could impose a range of sanctions on the institution, such as requiring the institution to post a letter of credit, accept provisional certification (which would hamper the ability of the institution to add new programs), comply with additional ED monitoring requirements, agree to receive Title IV program funds under an arrangement other than ED’s standard advance funding arrangement, such as the reimbursement system of payment or heightened cash monitoring, and to comply with or accept other limitations on the ability to increase the number of programs offered by our university partner institutions or the number of students they enroll, any of which sanctions could have an adverse impact on our business. For example, GCU, calculated its composite score with respect to its fiscal years ending June 30, 20242025 and 2023.2024. As of June 30, 20242025 and 2023,2024, GCU’s composite score per GCU’s audited financial statements was 1.9 andfor 1.8,both respectively,years, using the proprietary school calculation. If GCU’s future composite scores do not exceed 1.5, ED could impose sanctions. If any such sanctions were imposed on GCU or one of our other university partners, it could have a negative impact on our ability to conduct our business. In addition, if its composite score dropped low enough, it could cause GCU to be ineligible for participation in NC-SARA, which would require GCU to become authorized in numerous states in which it operates or has students.

Despite our best efforts, we or our university partners may face complaints from our university partners’ students and prospective students over statements made by us and our agents throughout the conduct of our services that would expose our university partners, and derivatively us, to increased risk of enforcement action and applicable sanctions or other penalties and increased risk of private qui tam actions under the Federal False Claims Act. Also, if ED determines that an institution (including its contractors) has engaged in substantial misrepresentation, ED may revoke an institution’s program participation agreement, impose limitations on the institution’s participation in Title IV programs, deny applications from the institution for approval of new programs or locations or other matters, or initiate proceedings to fine the institution or limit, suspend, or terminate its eligibility to participate in Title IV programs. For example, in October 2023, ED imposed a fine of $37 million on GCU (which GCU is appealing) related to alleged misrepresentation by GCU regarding the costs of certain doctorate programs. Similar rules apply under state laws or are incorporated in institutional accreditation standards. The FTC applies similar rules prohibiting any unfair or deceptive marketing practices to the education sector and has pursued litigation against us and GCU related in part to these matters. See Part I, Item 3 – Legal Proceedings – FTC Complaint. If ED or another regulator determines that statements made by us or on our university partners’ behalf are in violation of the regulations, we could be subject to sanctions, legal actions, and other liability, which could have a material adverse effect on our business.

A school participating in the Title IV programs must calculate the amount of unearned Title IV program funds that it has disbursed to students who withdraw from their educational programs before completing such programs and must return those unearned funds to the appropriate lender or ED in a timely manner, generally within 45 days of the date the school determines that the student has withdrawn. To the extent our services for a university partner include conducting returns to Title IV, as they do with our primary university partner, GCU, we would likely be jointly and severally liable to ED, along with the relevant university partner, for return of those funds. Further, we could be fined or otherwise sanctioned by ED, which could increase our cost of regulatory compliance and materially adversely affect us. Further, a failure to comply with these regulatory requirements could result in termination of our ability to continue providing these services to other university partner institutions, which would materially adversely affect us.

State regulatory requirements for online education have historically varied among the states. To address this issue and to meet new ED requirements many schools have applied and have been approved to be approved institutional participants in the State Authorization Reciprocity Agreement (“SARA”).SARA. SARA is an agreement among member states, districts and territories that establishes comparable national standards for interstate offering of post-secondary distance education courses and programs. It is intended to make it easier for students to take online courses offered by post-secondary institutions based in another state. SARA is overseen by a national council (NC-SARA) and administered by four regional education compacts. GCU, for example, is a member of SARA in Arizona (AZ-SARA), which is administered by the Western Interstate Commission for Higher Education (referred to as W-SARA). There is a yearly renewal for participating in NC-SARA and AZ-SARA and institutions must agree to meet certain requirements to participate. AllAs of December 31, 2025, all states other than California are members of SARA.

Laws, regulations, or interpretations related to doing business over the Internet could also increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, negatively affect enrollments and revenues and have a material adverse effect on our business. As discussed, ED has startedinitiated a new negotiated rulemaking process addressing state authorization which implicates SARA. While no regulationscould have beenimplicated published,SARA but published a notice in December 2024 terminating that negotiated rulemaking process. ED may revisit state authorization requirements through future rulemaking or other guidance, and any regulationsuch changes could have a material adverse effect on our business.

Because our university partner institutions operate in a highly regulated industry, they are subject to program reviews, audits, investigations, claims of non-compliance, and lawsuits by government agencies, regulatory agencies, students, employees, stockholders, and other third parties alleging non-compliance with applicable legal requirements, many of which are imprecise and subject to interpretation. Similarly, we could be subject to those same reviews. If the result of any such proceeding is unfavorable to our university partners, they may lose or have limitations imposed on their state licensing, accreditation, or Title IV program participation; be required to pay monetary damages (including triple damages in certain whistleblower suits); or be subject to fines, injunctions, or other penalties, any of which could have a material adverse effect on their business, prospects, financial condition, and results of operations. In addition, our largest university partner, GCU, has been subject to additional scrutiny. In October 2021, the FTC issued a public statement indicating that it would coordinate efforts with ED and the VA to investigate for-profit universities, a category that at that time included GCU due to ED’s 2019 decision that GCU did not satisfy ED’s definition of a non-profit entity and, as a result, that ED would continue to treat GCU as a proprietary institution for purposes of its continued participation in Title IV programs. In the period following the FTC’s statement, ED, the VA and the FTC initiated multiple actions against GCU, including audits, compliance reviews, civil investigative demands, fines and lawsuits, and the FTC has initiated civil investigative demands and a lawsuit against us, that allege, among other things, misrepresentations made in connection with marketing activities, including statements made related to GCU’s non-profit status. See “– Regulation of Our University Partners - Coordinated action by federal agencies.” These actions, taken as a whole, appear to be coordinated in the manner described in the 2021 FTC statement. These actions, or any future actions by ED, FTC or any other federal or state government agencies or accrediting bodies with oversight over us or GCU, if ultimately resolved adversely to us or GCU, could result in monetary penalties and liabilities, further impact GCU’s non-profit status, and/or cause reputational harm. At this time, we cannot predict what changes those could be or what effect any of those outcomes could have on our business. Claims and lawsuits, and other regulatory actions, brought or taken against us or our university partners, even if they are without merit, may also result in adverse publicity, negatively affect the market price of our stock, adversely affect student enrollments, and reduce the willingness of third parties to do business with us. Even if we or our university partners adequately address the issues raised by any such proceeding and successfully defend against it, we may have to devote significant financial and management resources to address these issues, which could harm our business. See Part 1, Item 3 – Litigation for a discussion of certain litigation matters to which we are a party.

The processHigher ofEducation re-authorizationAct ofhas not been comprehensively reauthorized since 2008, and Congress has periodically considered proposals to reauthorize and amend the HEA began in 2014 and is ongoing.statute. Congressional hearings began in 2013 and will continue to be scheduled by the U.S. Senate Committee on Health, Education, Labor and Pensions, the U.S. House of Representatives Committee on Education and the Workforce and other Congressional committees regarding various aspects of the education industry, including accreditation matters, student debt, student recruiting, cost of tuition, distance learning, competency-based learning, student success and outcomes and other matters.

Our success depends upon our ability and our university partners’ ability to recruit and retain key personnel.

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 GCU, a comprehensive regionally accredited university that offers graduate and undergraduate degree programs, emphases and certificates across ten colleges both online, on ground at its campus in Phoenix, Arizona and at eight11 off-campus classroom and laboratory sites.

Service revenue. Our service revenue for the year ended December 31, 20242025 was $1,033.0$1,106.1 billion,million, an increase of $72.1$73.1 million, or 7.5%,7.1%, as compared to service revenue of $960.9$1,033.0 million for the year ended December 31, 2023.2024. The increase year over year in service revenue was primarily due to an increase in GCUpartner enrollments of 7.1% to 123,149136,239 at December 31, 2024,2025 as compared to 127,155 at December 31, 2024. GCU enrollments increased to 131,826 at December 31, 2025, an increase of 5.0%7.0% over enrollments at December 31, 2023. Partner enrollments totaled 127,155 at December 31, 2024 as compared to 121,250 at December 31, 2023.2024. University partner enrollments at our off-campus classroom and laboratory sites were 4,919,5,738, an increase of 9.8%16.6% over enrollments at December 31, 2023,2024, which includes 9131,325 and 510913 GCU students at December 31, 20242025 and 2023,2024, respectively, and an increase in revenue per student year over year.respectively. Excluding sites closingclosed in 2024 to new enrollments, total enrollments at our off-campus classroom and laboratory sites increased 14.9%18.7% between years. TheRevenue increaseper student was flat between years primarily due to the additional day for leap year in 2024 which added additional service revenue of $1.5 million as compared to the current year, due to contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing these partners for certain faculty costs, a slight decline year over year in revenue per student betweenfor yearsonline is primarilystudents due to the continued mix shift to students that have a slightly lower net tuition rate, and due to a slight decline in residential students between years. These decreases were offset by the service revenue per student for ABSN students at off-campus classroom and laboratory sites generating 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 our partners’ students take more credits on average per semester. The increase in revenue per student in the year ended December 31, 2024 was also due to the additional day for leap year in 2024 which added additional service revenue of $1.5 million as compared to the prior year and we earned revenue in 2024 with a university partner in which we helped the partner develop an ABSN program under a cost plus arrangement. We will earn limited revenue with this partner going forward. Contract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing the partner for certain faculty costs and the termination of one university partner contract at the end of the Spring 2024 semester had the effect of reducing revenue per student.

We opened five sites in the year ended December 31, 2023, six sites in the year ended December 31, 2024 and closedopened onefive sitenew increasingsites in the year ended December 31, 2025 while closing two sites in which we stopped recruiting new students in 2024 and merged two sites that were located in the same market bringing the total number of these sites to 4547 at December 31, 2024,2025. whichThis has also positively impacted the enrollment growth. Enrollments for GCU ground students were 24,678 at December 31, 2025 up from 24,552 at December 31, 2024 down from 25,209 at December 31, 2023 due to a small decline in traditional ground students year over year and the continued decline in professional studies students (working adults attending the university’s traditional campus at night), partially offset by an increase in ABSN students between years.2024. GCU online enrollments were 107,148 at December 31, 2025, up from 98,597 at December 31, 2024, up from 92,070 at December 31, 2023, an increase of 7.1%8.7% between years.

Technology and academic services. Our technology and academic services expenses for the year ended December 31, 20242025 were $165.1$175.1 million, an increase of $10.2$10.0 million, or 6.6%,6.0%, as compared to technology and academic services expenses of $154.9$165.1 million for the year ended December 31, 2023.2024. This increase was primarily due to increases in other technology and academic costs andcosts, in occupancy and depreciation of $8.3 millioncosts and $4.9 million, respectively, partially offset by a decrease in employee compensation and related expenses, including share-based compensation and benefit costs of $3.0$6.2 million.million, $1.9 million and $1.9 million, respectively. The increases in other technology and academic costs and occupancy and depreciation were primarily due to the costs associated with the increased number of off-campus classroom and laboratory sites to support our 2220 university partners and their increased enrollment growth as well as an increase in technology costs and curriculum cost reimbursementreimbursements to our university partners. The decreaseincrease in employee compensation and related expenses is primarily due to decreased faculty reimbursements due to 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 2220 university partners and their increased enrollment growth, tenure-based salary adjustments, a significant year over year increase in benefit costs and 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 0.1%0.2% to 15.8% for the year ended December 31, 2025, from 16.0% for the year ended December 31, 2024, from 16.1% for the year ended December 31, 2023.2024. This decrease was primarily due to the decreasedcontract modifications for some of our university partners in which the revenue share percentage was reduced in exchange for us no longer reimbursing these partners for certain faculty reimbursements between yearscosts, partially offset by theincreased growingtechnology costs and curriculum cost reimbursement.reimbursements. We anticipate that technology and academic services expenses as a percentage of revenue will increase in the future as we open more off-site classroom and laboratory sites and thedue growingto increased technology costs and curriculum cost reimbursements althoughand that these increasescosts mightas bea offsetpercentage byof lowerrevenue facultycould reimbursementsgrow ifas morethese partnerscosts choosegrow toat adjustrates theirhigher contracts.than revenue growth.

Counseling services and support. Our counseling services and support expenses for the year ended December 31, 20242025 were $323.5$342.7 million, an increase of $21.2$19.2 million, or 7.0%,5.9%, as compared to counseling services and support expenses of $302.3$323.5 million for the year ended December 31, 2023.2024. This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefits,benefits and in occupancy and depreciation costs of $18.9 million and $1.6 million, respectively. These increases were partially offset by a decrease in other counseling services and support expenses of $18.0 million, $2.9 million and $0.3$1.3 million, respectively. The increases in employee compensation including share-based compensation and benefits were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments, a significant year over year increase in benefit costs and the increased number of off-campus classroom and laboratory sites open year over year. The increase in occupancy and depreciation is primarily related to higher depreciation expense associated with our continued enhancements to technology infrastructure and internal-use software development. The increasedecrease in other counseling services and support expenses is primarily the result of increaseddecreased travel costs for our 2220 university partners. Our counseling services and support expenses as a percentage of revenue decreased 0.2%0.3% to 31.0% for the year ended December 31, 2025, from 31.3% for the year ended December 31, 2024, from 31.5% for the year ended December 31, 20232024 primarily due to our ability to leverage our counseling services and support expenses across an increasing revenue base. We anticipate that counseling services and support expense will increase in the future as we continue to invest to meet our partners’ needs although we might continue to have a decline inand these costs as a percentage of revenue.revenue could increase in the future.

Marketing and communication. Our marketing and communication expenses for the year ended December 31, 20242025 were $212.4$229.2 million, an increase of $9.6$16.8 million, or 4.7%,7.9%, as compared to marketing and communication expenses of $202.8$212.4 million for the year ended December 31, 2023.2024. 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 $7.7$15.2 million, increased employee compensation, including share-based compensation and benefits of $1.1 million, an increase in other marketing and communication expenses of $0.5$1.5 million and an increase in occupancy and depreciation costs of $0.3$0.1 million. Our marketing and communication expenses as a percentage of revenue decreasedslightly increased by 0.5%0.1% to 20.7% for the year ended December 31, 2025, from 20.6% for the year ended December 31, 2024, from 21.1% for the year ended December 31, 2023, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base.2024. We anticipate that marketing and communication expenses will increase in the future as we continue to invest to meet our partners’ needs although we might continue to have a decline inand these costs as a percentage of revenue.revenue could increase in the future.

General and administrative. Our general and administrative expenses for the year ended December 31, 20242025 were $46.3$47.4 million, an increase of $3.1$1.1 million, or 7.1%,2.4%, as compared to general and administrative expenses of $43.2$46.3 million for the year ended December 31, 2023.2024. This increase was primarily attributable to an increase in other general and administrative expenses of $1.7 million and an increase in professional fees including legal costs of $2.2$0.3 million,million. These increases were partially offset by a decrease in employee compensation, including share-based compensation and benefits of $1.4$0.9 million, which includesis primarily due to $1.1 million in severance costs recorded in the prior year for an executive that resigned June 30, 2024,2024. The increase in other general and administrative expenses is due to an increase in contributions in lieu of state income taxes of $1.0$0.5 million, an increase in charitable contributions of $0.5 million and increasesan increase in occupancyfixed andasset depreciation costsdisposals of $0.2$0.5 million.million Thesefrom increasesthe were partially offset by a decrease in other administrative expensesdownsizing of $1.7our millionIndiana primarilyoffice due to lower travel costs.space. Our general and administrative expenses as a percentage of revenue stayeddecreased flatby at0.2% to 4.3% for the year ended December 31, 2025, from 4.5% for the yearsyear ended December 31, 20242024, and 2023primarily due to our ability to leverage our general and administrative expenses across an increasing revenue base partially offset by the severance costs and the increase in professional fees including legal costs.base. We anticipate that general and administrative expenses will increase in the future and these costs as a percentage of revenue mightcould increase ifin legalthe costs continue to rise faster than our revenue growth rate.future.

ImpairmentLease termination, impairment and other. ImpairmentWe incurred $2.4 million in lease termination and impairment charges in the year ended December 31, 2025 related to leases. In the third quarter of 2025, we agreed to pay $1.3 million to early terminate our Indiana office space lease effective in June 2027. We also entered into a sublease of that space for the period from January 2026 to June 2027 and entered into a new lease for a much smaller space effective January 2026. Additionally, an impairment was recorded in the amount of $1.1 million in the year ended December 31, 2025 for the two off-campus classroom and laboratory sites that were closed during the year. We incurred impairment and other expenses of $1.9 million for the year ended December 31, 2024 primarilydue includesto the write-off of an internal use software project that the Company had been attempting to develop for its other university partners that has been terminated and costs relating to exiting certain off-campus classroom and laboratory sites.

Amortization of intangible assets. Amortization of intangible assets for the years ended December 31, 20242025 and 20232024 were $8.4 million for both periods. As a result of the Acquisition,Orbis Education acquisition in 2019, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

Investment interest and other. Investment interest and other for the year ended December 31, 20242025 was $15.9$13.9 million, ana increasedecrease of $5.4$2.0 million, as compared to $10.5$15.9 million for the year ended December 31, 20232024 due to higherslightly lower investment balances and higher returns on thoseour balances.investment balances and the recognition of a loss on an equity investment in the second quarter of 2025 of $0.5 million.

Income tax expense. Income tax expense for the year ended December 31, 20242025 was $65.1$63.7 million, ana increasedecrease of $10.4$1.4 million, or 19.0%,2.2%, as compared to income tax expense of $54.7$65.1 million for the year ended December 31, 2023.2024. Our effective tax rate was 22.8% during the year ended December 31, 2025 compared to 22.3% during the year ended December 31, 20242024. comparedThe increase in the effective tax rate was primarily due to 21.1%the duringtax treatment of the litigation settlement recorded in the year ended December 31, 2023.2025 and changes in state income taxes. The effective tax rate increasedincreases year over year due to higher state income taxes. This waswere partially offset bydue to an increase in excess tax benefits of $1.5$2.7 million as compared to $0.9$1.5 million in the years ended December 31, 20242025 and 2023,2024, respectively, and a higher contribution in lieu of state income taxes of $4.5 million in 2024 compared to $3.5 million in 2023.respectively. The inclusion of excess tax benefits and deficiencies as a component of our income tax expense increases the volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from share-based compensation awards are dependent on our stock price at the date the restricted stock awards vest. Our restricted stock vestsawards vest in March each year so any benefit or expense will primarily impact the first quarter each year. The effective tax rate was also favorably impacted by an increase in contributions made in lieu of state income taxes to $5.0 million as compared to $4.5 million in the prior year.

Net income. Our net income for the year ended December 31, 20242025 was $226.2$216.2 million, ana increasedecrease of $21.2$10.0 million, or 10.4%4.4% as compared to $205.0$226.2 million for the year ended December 31, 2023,2024, due primarily to the litigation settlement and the other factors discussed above.

Our liquidity position, as measured by cash and cash equivalents and investments increaseddecreased by $80.1$24.5 million between December 31, 20232024 and December 31, 2024,2025, which was largely attributable to cash flowsexpended from operations exceedingfor share repurchases, investment purchases, net of proceedsrepurchases and capital expenditures exceeding our cash provided by operations during the year ended December 31, 2024.2025. Our unrestricted cash and cash equivalents and investments were $324.6$300.1 million and $244.5$324.6 million at December 31, 20242025 and 2023,2024, respectively.

The increasedecrease in cash generated from operating activities between the year ended December 31, 20232024 and the year ended December 31, 20242025 was primarily due to increasedthe decline in net income between years due primarily to the litigation settlement and changes in working capital balances, primarily accounts payable and accrued liabilities.balances. Accounts payable increased between December 31, 2023 and December 31, 2024 by $9.7 million compared to the decrease between December 31, 2022 and December 31, 2023 of $3.1 million due to the timing of vendor payments. Accrued liabilities increased by $4.3 million between December 31, 2023 and December 31, 2024 whereascompared itto decreasedthe bydecrease $2.0of $3.4 million between December 31, 20222024 and December 31, 20232025, a decline year over year in cash provided by operating activities of $13.1 million due to timing differencesof vendor payments. Income tax receivable/payable amounts decreased by $0.9 million between theDecember last31, pay2023 periodand atDecember 31, 2024 compared to the enddecrease of each$7.1 fiscalmillion year.between December 31, 2024 and December 31, 2025, a $6.2 million decrease year over year in cash provided by operating activities due to timing of income tax payments. Deferred tax liability amounts decreased by $0.2 million between December 31, 2023 and December 31, 2024 compared to the increase of $14.7 million between December 31, 2024 and December 31, 2025, representing an increase in cash provided by operating activities of $14.9 million due to the acceleration of certain tax deductions and the passage of the One Big Beautiful Bill Act on July 3, 2025. 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.

Investing activities providedconsumed $221.6 million of cash in the year ended December 31, 2025 compared to providing $61.4 million of cash in the year ended December 31, 2024 compared to consuming $80.5 million in the year ended December 31, 2023.2024.

Cash provided by or used in investing activities includes net investment activity. In the year ended December 31, 2025, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $186.2 million. In the year ended December 31, 2024, proceeds from the sale of investments, net of purchases of available-for-sale securities were $99.0 million as the Company sold all its investments in the third quarter of 2024 and the proceeds were investedheld in cash and cash equivalents.equivalents Inuntil thebeing yearreinvested endedin Decemberearly 31, 2023, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $35.0 million.2025.

On JanuaryDecember 29,10, 2025, our Board of Directors increased the authorization under its existing stock repurchase program by $200.0$300.0 million, reflecting an aggregate authorization for share repurchases since the initiation of the program of $2,245.0$2,545.0 million. The current expiration date on the repurchase authorization by our Board of Directors is March 1, 2026.2027. Repurchases occur at the Company’s discretion and the Company may modify, suspend or discontinue the repurchase authorization at any time.

We also provide education services to numerous university partners across the United States. In the healthcare field, we work in partnership with a number of top universities and healthcare networks, offering healthcare-related academic programs at off-campus classroom and laboratory sites located near healthcare providers and developing high-quality, career-ready graduates who enter the workforce ready to meet the demands of the healthcare industry. In addition, we have provided certain services to a university partner to assist them in expanding their online graduate programs. As of MarchJune 31,30, 2026, GCE provides education services to 20 university partners across the United States.

Our critical accounting policies are disclosed in the 2025 Form 10-K for the fiscal year ended December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, there were no significant changes in our critical accounting policies.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Service revenue. Our service revenue for the three months ended MarchJune 31,30, 2026 was $308.8$264.0 million, an increase of $19.5$16.5 million, or 6.7%, as compared to service revenue of $289.3$247.5 million for the three months ended MarchJune 31,30, 2025. The increase year over year in service revenue was primarily due to an increase in university partner enrollments of 7.1%7.6% to 136,884126,231 at MarchJune 31,30, 2026 as compared to 127,779117,283 at MarchJune 31,30, 2025. GCU enrollments increased to 132,354121,921 at MarchJune 31,30, 2026, an increase of 6.9%7.5% over enrollments at MarchJune 31,30, 2025. University partner enrollments at our off-campus classroom and laboratory sites were 5,961,5,829, an increase of 18.6%16.8% over enrollments at MarchJune 31,30, 2025, which includes 1,4311,519 and 1,0211,142 GCU students at MarchJune 31,30, 2026 and 2025, respectively. Excluding sites that have been closed or are in teach out, total enrollments at our off-campus classroom and laboratory sites increased 20.3%18.5% between years. Revenue per student decreased slightly between years primarily due to contract modifications with someone of our university partners in which our revenue share percentage was reduced in exchange for us no longer reimbursing thesethis partnerspartner for certain faculty costs which had the effect of reducing revenue per student and a slight decline year over year in revenue per student for online students due to the continued mix shift to students that have a slightly lower net tuition rate and a slight decline year over year in Spring semester ground traditional students which generate a higher revenue per student than online students. TheseIn decreasesaddition werethere partiallywas offsetone by an additionalless day of revenue for the ground campus due to the start date shifting one day of revenue from the second quarter to the first quarter in 2026 which had a $1.0 million impactimpact. andThese decreases were partially offset by the service revenue per student for accelerated Bachelor of Science in Nursing (“ABSN”) students at off-campus classroom and laboratory sites generating 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 our partners’ students take more credits on average per semester.

We opened fiveone new sitessite in the yearsix months ended DecemberJune 31,30, 20252026 and closed twoone sitessite in which we stopped recruiting new students in 20242025, and merged two sites that were located in the same market bringingthus the total number of these sites toremains at 47 at DecemberJune 31,30, 2025, which has also positively impacted the enrollment growth.2026. We plan to open one to two additional sitessite in the second half of 2026 while mutually agreeing with one partner to stop the recruiting of new students and begin teach outs at its three sites during the first quarterFall of 2026. Enrollments for GCU ground students were 21,9488,910 at MarchJune 31,30, 2026, downup slightly3.9% from 22,3308,579 at MarchJune 31,30, 2025. TheGCU numberground enrollment declines between March 31 and June 30 of each year as ground traditional enrollment at GCU at June 30 of each year only includes traditional-aged students hastaking historicallysummer declinedschool betweenclasses, which is a small percentage of GCU’s traditional-aged student body. The Spring semester for GCU’s traditional-aged student body ends near the Fallend andof SpringApril semesterseach due to graduations significantly exceeding Spring new enrollments.year. GCU online enrollments were 110,406113,011 at MarchJune 31,30, 2026, up from 101,443104,856 at MarchJune 31,30, 2025, an increase of 8.8%7.8% between years.

Technology and academic services. Our technology and academic services expenses for the three months ended MarchJune 31,30, 2026 were $45.0$45.6 million, an increase of $3.3$2.5 million, or 8.1%,5.8%, as compared to technology and academic services expenses of $41.7$43.1 million for the three months ended MarchJune 31,30, 2025. This increase was primarily due to increases in other technology and academic costs, in employee compensation and related expenses, including share-based compensation and benefit costscosts, in other technology and academic costs, and in occupancy and depreciation costs of $1.6$0.9 million, $1.2$0.8 million and $0.5$0.8 million, respectively. The increase in employee compensation and related expenses is primarily due to increased headcount to support our 20 university partners and their increased enrollment growth, tenure-based salary adjustments and a significant year-over-year increase in benefit costs. The increases in other technology and academic costs and occupancy and depreciation were primarily due to the costs associated with the increased enrollment growth at our off-campus classroom and laboratory sites to support our 20 university partners as well as an increase in technology costs and curriculum cost reimbursements to our university partners. The increase in employee compensation and related expenses is primarily due to increased headcount to support our 20 university partners and their increased enrollment growth, tenure-based salary adjustments and a significant year-over-year increase in benefit costs. Our technology and academic services expenses as a percentage of revenue increaseddecreased by 0.2%0.1% to 14.6%17.3% for the three months ended MarchJune 31,30, 2026, from 14.4%17.4% for the three months ended MarchJune 31,30, 2025. This increasedecrease was primarily due to the increased technology costs and curriculum cost reimbursements, partially offset by our ability to leverage our technology and academic service expenses across an increasing revenue base.base offset by the increased technology costs and curriculum cost reimbursements. We anticipate that technology and academic services expenses will increase in the future as we open more off-site classroom and laboratory sites and the growing technology costs andcontinue to grow, partially offset by a decrease in curriculum cost reimbursements due to the Amended Master Services Agreement, and these costs as a percentage of revenue could increase in the future.

Counseling services and support. Our counseling services and support expenses for the three months ended MarchJune 31,30, 2026 were $91.9$88.1 million, an increase of $5.1 million, or 5.8%,6.1%, as compared to counseling services and support expenses of $86.8$83.0 million for the three months ended MarchJune 31,30, 2025. This increase was primarily attributable to increases in employee compensation and related expenses including share-based compensation and benefits and in occupancy and depreciation costs of $4.7 million and $0.6 million, respectively, partially offset by a decrease in other counseling services and support expenses of $0.2 million. The increases in employee compensation including share-based compensation and benefits were primarily due to increased headcount to support our university partners, and their planned increases in enrollment, tenure-based salary adjustments and a significant year over year increase in benefit costs. The increase in occupancy and depreciation is primarily related to higherthe depreciationincreased expenseheadcount associated with ourand continued enhancements to technology infrastructure and internal-use software development.development for employees that service students. The decrease in other counseling services and support expenses is primarily the result of lower travel costs to service our 20 university partners. Our counseling services and support expenses as a percentage of revenue decreased 0.2%0.1% to 29.8%33.4% for the three months ended MarchJune 31,30, 2026, from 30.0%33.5% for the three months ended MarchJune 31,30, 2025 primarily due to our ability to leverage our counseling services and support expenses across an increasing revenue base.base offset by the increased costs described above. We anticipate that counseling services and support expense will increase in the future as we continue to invest to meet our partners’ needs and these costs as a percentage of revenue could increase in the future.

Marketing and communication. Our marketing and communication expenses for the three months ended MarchJune 31,30, 2026 were $64.0$60.0 million, an increase of $3.7$4.0 million, or 6.1%,7.0%, as compared to marketing and communication expenses of $60.3$56.0 million for the three months ended MarchJune 31,30, 2025. This increase was primarily attributable to the increased costspend to market our university partners’ programs and due to the marketing of new locations which resulted in increased advertising of $3.1$3.6 million, increased employee compensation, including share-based compensation and benefits of $0.4$0.2 million, increased occupancy and depreciation expense of $0.1 million and increased other communication expenses of $0.1 million. Our marketing and communication expenses as a percentage of revenue decreasedincreased by 0.2%0.1% to 20.7%22.7% for the three months ended MarchJune 31,30, 2026, from 20.9%22.6% for the three months ended MarchJune 3130, 2025, primarily due to our ability to leverage our marketing and communication expenses across an increasing revenue base.2025. We anticipate that marketing and communication expenses will increase in the future as we continue to invest to meet our partners’ needs and these costs as a percentage of revenue could increase in the future.

General and administrative. Our general and administrative expenses for the three months ended MarchJune 31,30, 2026 were $10.3$10.1 million, a decrease of $0.1$1.3 million, or 11.4%, as compared to general and administrative expenses of $10.4$11.4 million for the three months ended MarchJune 31,30, 2025. This decrease was primarily attributable to a decrease in professional feesfees, in other administrative expenses and in occupancy and depreciation expenses of $0.3$0.9 million, $0.4 million and $0.1$0.2 million, respectively. These decreases were partially offset by increases in employee compensation, including share-based compensation and benefit costs and in other administrative expenses of $0.2 million and $0.1 million, respectively.million. The decrease in professional fees was primarily due to lower legal costs between years. Our general and administrative expenses as a percentage of revenue decreased by 0.3%0.8% to 3.3%3.8% for the three months ended MarchJune 31,30, 2026, from 3.6%4.6% for the three months ended MarchJune 31,30, 2025, primarily due to the decreased legal fees and our ability to leverage our general and administrative expenses across an increasing revenue base. We anticipate that generalGeneral and administrative expenses willcould increase in the future and these costs as a percentage of revenue could increase in the future.

Amortization of intangible assets. Amortization of intangible assets for the three months ended MarchJune 31,30, 2026 and 2025 were $2.1 million for both periods. As a result of the Orbis Education acquisition in 2019, certain identifiable intangible assets were created (primarily customer relationships) that will be amortized over their expected lives.

Investment interest and other. Investment interest and other for the three months ended MarchJune 31,30, 2026 was $3.0$2.7 million, a decrease of $0.4$0.5 million, as compared to $3.4$3.2 million for the three months ended MarchJune 31,30, 2025 due to slightly lower returns and lower investment balances.

Income tax expense. Income tax expense for the three months ended MarchJune 31,30, 2026 was $23.1$15.0 million, an increase of $3.3$1.5 million, or 16.9%,11.4%, as compared to income tax expense of $19.8$13.5 million for the three months ended MarchJune 31,30, 2025. The increase in income tax expense is due to the increase in income before taxes and a higher effective tax rate. Our effective tax rate was 23.5%24.7% during the three months ended MarchJune 31,30, 2026 compared to 21.6%24.5% during the three months ended MarchJune 31,30, 2025. The effective tax rate increased year over year due to changes in state income taxes and a decrease in excess tax benefits of $1.4 million as compared to $2.7 million in the three months ended March 31, 2026 and 2025, respectively. The inclusion of excess tax benefits and deficiencies as a component of our income tax expense increases the volatility within our provision for income taxes as the amount of excess tax benefits or deficiencies from share-based compensation awards are dependent on our stock price at the date the restricted stock awards vest. Our restricted stock awards vest in March each year so any benefit or expense will primarily impact the first quarter each year.taxes.

Net income. Our net income for the three months ended MarchJune 31,30, 2026 was $75.3$45.9 million, an increase of $3.7$4.4 million, or 5.2%10.4% as compared to $71.6$41.5 million for the three months ended MarchJune 31,30, 2025, due to the factors discussed above.

Our liquidity position, as measured by cash and cash equivalents and investments decreased by $48.4$25.6 million between December 31, 2025 and MarchJune 31,30, 2026, which was largely attributable to cash expended for share repurchases and capital expenditures exceeding our cash provided by operations during the threesix months ended MarchJune 31,30, 2026.

The increase in cash generated from operating activities between the threesix months ended MarchJune 31,30, 2025 and the threesix months ended MarchJune 31,30, 2026 was primarily due to increased income and depreciation expense partially offset by net changes in working capital balances. Accounts payable increased by $4.0 million between December 31, 2025 and March 31, 2026 compared to the decrease of $2.0 million between December 31, 2024 and March 31, 2025, an increase year over year in cash provided by operating activities of $6.0 million due to timing of vendor payments. Income tax receivable/payable amounts increased by $19.6$8.7 million between December 31, 2025 and MarchJune 31,30, 2026 compared to the increase of $16.0$14.6 million between December 31, 2024 and MarchJune 31,30, 2025, a $3.6$5.9 million increase year over year in cash provided by operating activities due to the increased taxable income. Accounts receivable increased $29.0$50.0 million between December 31, 2025 and MarchJune 31,30, 2026 compared to the increase of $32.7$55.2 million between December 31, 2024 and MarchJune 31,30, 2025, a $3.7$5.2 million increasedecrease year over year in cash provided by operating activities due to the timing of collections. OtherAccounts assetspayable increaseddecreased $1.8by $7.8 million between December 31, 2025 and MarchJune 31,30, 2026 compared to the increasedecrease of $4.4$2.6 million between December 31, 2024 and MarchJune 31,30, 2025, a $2.6 million increasedecrease year over year in cash provided by operating activities of $5.2 million due to timing of vendor payments. 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.

Investing activities provided $24.1$65.6 million of cash in the threesix months ended MarchJune 31,30, 2026 compared to consuming $169.9$198.7 million of cash in the threesix months ended MarchJune 31,30, 2025.

Cash used in investing activities includes investment activity and the change between years in net investing activities is primarily due to investment activity. In the threesix months ended MarchJune 31,30, 2026, the proceeds from the sale of investments, net of purchases of available-for-sale securities were $32.1$84.4 million. In the threesix months ended MarchJune 31,30, 2025, the purchase of available-for-sale securities, net of proceeds from the sale of investments were $159.9$180.7 million.

In the first threesix months of 2026 and 2025 cash used in investing activities also included capital expenditures totaling $8.1$18.9 million and $8.9$17.6 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.

Financing activities consumed $127.9$203.2 million of cash in the threesix months ended MarchJune 31,30, 2026 compared to $77.9$125.2 million in the threesix months ended MarchJune 31,30, 2025.

During the threesix months ended MarchJune 31,30, 2026 and 2025, $120.4$195.7 million and $68.4$115.7 million, respectively was used to purchase treasury stock in accordance with GCE’s share repurchase program. In 2026 and 2025, $7.5 million and $9.5 million, respectively, of cash was utilized to purchase common shares withheld in lieu of income taxes resulting from the vesting of restricted share awards. The Company intends to continue using a significant portion of its cash flows from operations to repurchase its shares.

We repurchased 724,4081,195,897 shares of common stock in the threesix months ended MarchJune 31,30, 2026. At MarchJune 31,30, 2026, there remains $224.0$148.7 million available under our share repurchase authorization.