Q3 2019 Earnings Call

Q3, 2019 Korea education.

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I would now like to turn the conference all that to Mr., Chris is on event with Alpha <unk>.

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Thank you Ashley good afternoon, everyone and thank you for joining us for third quarter 2019 earnings call with me on the call today's Todd Nelson, President and Chief Executive Officer, and as she she a senior Vice President and Chief Financial Officer.

This call carbon scores being broadcast live within the Investor Relations section at <unk> Dot com.

Cast replay will also be available on our site and you can always contact the Alpha IR group for Investor Relations support.

Let me remind you that this afternoons earnings release and remarks made today include forward looking statements.

Alright, and section 21 E. The Securities Exchange Act. These statements are based on assumptions made by an information currently available to career education and involve risks and uncertainties that could cause actual future results performance and business prospects and opportunities to differ materially from those expressed in or implied.

These statements.

These risks and uncertainties include but are not limited to those factors identified and career Education's annual report on Form 10-K for the year in December 30, Onest 2018, and other filings with the Securities and Exchange Commission.

Except as expressly required by these securities laws. The company undertakes no obligation to update those factors or any forward looking statements to reflect.

Sure events developments are changed circumstances for any other reason.

In addition, today's remarks refer to non-GAAP financial measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The earnings release that accompanies todays call contains financial and other quantitative information to be discussed today as was the reconciliation of GAAP to non-GAAP measures.

And is available within the Investor Relations page of the company's website at Www dot career Red Dot com.

With that I'd like to turn the call over to Todd Nelson Todd.

Thank you, Chris and good afternoon, everyone and thank you for joining us on todays call. We're pleased with a third quarter and year to date results that have been supported by positive operating trends, we have and will continue to focus on further enhancing the academic quality of institutions, while improving student experiences retention and academic outcomes.

Our operating results, thus far underscored those efforts.

Some key highlights for the quarter include first revenue was up 6.4% primarily supported by total student enrollment growth of 6.1% with both universities contributing to this growth.

Second we are experiencing better than expected improvements and retention a trend that has continued into the third quarter.

Driven by these improvements that we now expect our full year 2019, adjusted operating income and enrollment outlook to be ahead of our previously provided outlook Ashish will provide more color on these updates during his remarks third we continue to seek consistent levels of prospective student interest and are being well served by our admission.

Ones and advising support centers.

And although our investments has mostly annualized we're increasingly using technology and data analytics to optimize our student enrollment onboarding and learning processes.

Lastly, as it relates to try and University, we're diligently working through the remaining two regulatory approvals from the higher Learning Commission and the Department of Education will also planning for an efficient and effective integration into our you that will focus on maintaining and most importantly, enhancing student experiences and academic outcomes for student.

From both universities.

I will further expand on some of the highlights for the quarter. Shortly Ashish will then cover more details around the financials and provide an update of our 2019 outlook before I had some closing thoughts.

Now to our operating performance for the quarter.

We reported net income of 18.2 million or 25 cents per diluted share while adjusted earnings per diluted share, which excludes certain significant it a noncash items was 33 cents as compared to 25 cents in the prior year quarter.

Adjusted operating income was 34 million an increase of 31.7% from 25.8 million in the prior year quarter with the improvement primarily driven by revenue growth at our universities.

The quarter was also benefited by the timing of certain operating expenses that Ashish will address later.

Both universities contributed to this growth with total student enrollments up 6.1% supported by year to date, new enrollment growth of 16.2% as well as improving student retention.

Some initiatives and theme supporting these trends were.

Consistent levels of per Specing student interest, which is being well served by efficient and effective student enrollment process, and which is being increasingly supported by technology technology and data analytics.

Also improved productivity and service levels within our admissions and advising student support centers in part driven by tenure and increased training and development next improvements in student retention and engagement that we believe is primarily driven by our students serving initiatives and investments we have made over the past few years.

And lastly, the timing impact of values academic calendar resign positively impacted new enrollment trends in the first half of 2019.

Moving to our segments at Cts total enrollments grew 3.2%, primarily driven by year to date growth in new enrollments and supported by improving student retention.

Most of the operational enhancements CD you see to you focus on further improving student experiences retention and academic outcomes.

Some of these initiatives and enhancements worth mentioning our.

Increased staffing training and development within our student advising functions that further improve the support and guidance provided to our students focus is on direct personal and relevant interaction with students second reporting and technology enhancements that a further enablement admissions and advising staff.

Customize their student outreach and engagement strategies based on specific characteristics, that's providing a more meaningful and relevant interacts with the students next.

Ongoing optimization of course pairing and sequencing that we believe it's driving better academic outcomes and student engagement. Our teams have also begun to redesign and optimize cost structure and content to improve the overall classroom and learning experience.

A quick comment on corporate partnerships at sea to you we continue to further support and grow our partnership program.

And are looking to incrementally invest in initiative as well as we enter 2020.

New partnerships and relationships take time to develop but as previously discussed these students have relatively higher persistence and our that's becoming a larger percentage of our overall total enrollments.

Driven by the success at the various initiatives and investments and supported by consistent levels of for specialty prospective student interest for programs. We expect C. You to experience new student enrollment growth for the fourth quarter and full year 2019.

Now turning to add value.

As a reminder, quarterly enrollment results at a are you can be significantly impacted by its academic calendar and the number of enrollment base in any given quarter.

We've been working on optimizing the academic calendar.

So that the magnitude of frequency of this calendar driven variability is less frequent going forward. We're pleased to share for the third quarter. A are you experienced 10% growth in new enrollments, primarily driven by organic growth initiatives.

Which is encouraging given the academic calendar, having comparable number going on Mondays versus the prior year quarter.

This demonstrates the underlying operating momentum, but they are you beyond the quarterly counter driven variability some of the initiatives and enhancements worth highlighting our first ongoing refinement and optimization of the graduate team model with the goal of enhancing experiences three students entire lifecycle.

Teams are encouraged to build critical thinking and then interactions with students. There's also significant focus on training and development training and development that has been improving tenure on the team.

Continued optimization of course pairing sequencing and of course content based on student feedback.

And performance with the ultimate goal to further refine our learnings centric model, where there is significant focus on step by step learning finally, our financial aid teams are focused on getting students financially prepared before they start school.

In general are you as expiries executing well against its objectives as sustainable and responsible growth and we expect new student enrollments to experience growth for the fourth quarter and full year 2019. Please also note the academic calendar in the second half is relatively comparable to the prior year and enrollment trends should be.

Primarily driven by underlining.

Organic growth initiatives and investments.

Finally, a few observations regarding technology initiatives at our universities.

Having primarily online academic institutions, serving non traditional students, including adult learners technology is a key differentiator and the neighbor to serve current and prospective students.

We have fully rolled out and updated version of our mobile application for both students and faculty overall App usage is high both universities with an approximately 89% adoption rate.

The two way messaging App is increasingly used for communication with students on a variety of academic and related topics and students now have the ability to upload required financially documentation to assist with their overall application process.

We also are up in this opportunistically looking to expand the use of artificial intelligence and machine learning supported by Google analytics throughout a student lifecycle from orientation and Onboarding to ongoing coaching support and advising for example, our AI based chat box Lucy has streamlined the process for bridge.

Spec this students who want to learn about our university and is able to answer questions with over 90% accuracy, while continuing to less than her interactions.

We're also using machine learning and automation technologies to enhance the functionality and sophistication of our online outreach program to identify prospective students lastly, we continue to refine technology within the student enrollment process.

That customizes, our outreach to prospective students based on their prior student experience and program of interest as a result, we're seeing improved efficiency within our enrollment process and are able to more effectively provide prospective students with relevant information to help them make informed academic decisions.

To summarize both universities remain focused on student experiences retention and academic outcomes that support the objective of sustainable and responsible growth.

Overall operating performance. This year has provided further reaffirmation around our strategy of prioritizing investments in students serving processes and initiatives and has given us the necessary financial and operating confidence to continue investing in our universities.

With that I like the hand, the call or two she's for more detailed review of our third quarter 2019 results and balance sheet as well as the 2019 outlook Ashish. Thank you Doug I will start with a review of our third quarter results and then discuss our balance sheet and updated 2019 outlook before handing the call.

Back to thought for his closing remarks.

All comparisons versus the comparative prior year period, unless otherwise stated.

As a reminder, effective Jan first of this year, we changed our segment presentation. After the responsible completion upper teach outs.

As such the all other campuses segment, which included the schools is no longer in operating segment.

As a result residue losses associated with these close campuses have now been included within the corporate and other category.

Prior periods have been recast to maintain comparable city.

Now a quick overview of our strong third quarter results.

Total company operating income was $24.3 million compared to an operating income of $19.3 million.

We believe adjusted operating income, which excludes certain significant and noncash items is more reflective of the underlying operating performance.

Third quarter experienced strong results with this adjusted measure at $34 million growing 31.7% versus the prior year quarter.

It was also above the high end of our previously provided outlook range of 26 million to $27 million.

Net income for the quarter was $18.2 million for 25 cents per diluted share.

Adjusted earnings per diluted share was 33 cents as compared to 25 cents in the prior year quarter.

The most significant adjusting item for the quarter, what the 7.1 million dollar legal settlement.

Related to the remaining individual arbitration claims, which we collectively referred to as the Oregon Arbitrations.

The settlement is subject to final court approval and we expect to pay this amount in the first quarter of 2020.

Please also note that the adjustments related to vacated space will continue to become smaller as we approach the tail end of the remaining leases for close campuses.

Excluding these adjustments the improvement in operating performance was primarily driven by revenue growth at both universities as well as reduced losses associated with our closed campuses.

The quarterly performance was also benefited by approximately two and a half million dollars due to timing of certain operating expenses associated with employee related insurance programs and bad debt.

Some or all of which may be incurred in future quarters.

I will comment more on these trends shortly.

Moving onto some more details around a third quarter financials.

Total company revenue increased by 6.4% $255 million as compared to the prior year quarter.

Both universities contributed to the revenue growth that has been supported by the ongoing strategic initiatives that Todd discussed as well as underlying student retention trends that further improved for the quarter.

As it relates to our segments revenue at sea deal was up 3.1% for the quarter relatively inline with the total enrollment growth of 3.2%.

Operating income at seats, you grew 14% to $29.9 million compared to $26.3 million.

Absent the restructuring charges that were recorded in the prior year operating expenses for the quarter were relatively flat with efficiencies across various student processes offsetting incremental investments in marketing.

Now to we are you.

Revenue increased by $6.4 million or 12.2% to $58.9 million supported by growth in underlying enrollment trends as well as higher student retention for the third quarter.

Please note that for the third quarter, both revenue and enrollment days were comparable to the prior year quarter.

Operating income at E. R U was $7.3 million as compared to $1.1 million in the prior quarter.

Operating leverage was strong with most of the revenue growth, resulting in operating income growth was bad debt and marketing investments were the primary offset.

Also note that the prior year included $1.1 million of restructuring charges related related to our process Reengineering initiative.

A quick note on bad debt.

We continue to invest resources to help students financially prepare for school and be successful in completing that programs are study.

We did see sequential improvement in quarterly bad debt expense in part driven by improved retention and financially processing of our students.

As previously mentioned bad debt for the quarter was positively impacted by timing issues that are typically associated with this expense.

There are several factors impacting quarterly bad debt, including the are you academic calendar cash collections department of education verification requirements.

In student account balances to name a few.

Note that the current quarter bad debt expense was benefited by these factors and we believe these factors could continue to drive variability in future quarters bad debt expenses.

In general we are focused on managing bad debt within the overall constructs of our financial and operating framework and are making investments to support student retention and academic outcomes.

I also wanted to share that the department of Education released the 2016 cohort default rates for both our academic institutions.

We are pleased to report that C. You any are you saw a reduction of 70 basis points and 50 basis points, respectively in the default rates where since 2015.

Moving to enrollments.

Total enrollments at CTO grew by 3.2% as of the end of the quarter, primarily supported by year to date, new enrollment growth as well as improving student retention.

As expected new enrollments were relatively flat for the quarter.

Please keep in mind that these results were moderated by strong performance in the competitive prior year period during which new enrollments were 9% higher as compared to the third quarter of 2017.

As taught outlying enrollment growth at sea to you what supported by consistent levels of prospective student interest.

We are well served by investments in the Illinois in Arizona support centers that have now mostly annualized.

Also contributing to this positive performance was the continued progress and growth within our corporate partnership program.

Driven by these initiatives, including improved efficiencies within our student enrollment process.

We expect seating you to experience new enrollment growth for the fourth quarter and full year 2019.

Total enrollments at AIU increased 11.3% for the quarter, well, new enrollments were up 10% as compared to the prior year.

On a positive note the third quarter academic calendar was relatively comparable to the prior year and enrollment trends for the most part reflect underlying organic growth.

Consistent levels of prospective student and Chris.

Well well served by our graduate teams as well as improving retention trends contributed to the growth in the third quarter.

Also for the fourth quarter and full year 2019, we expect new enrollments so growth versus the prior year.

To further put this in context of AI use academic calendar and on a positive note, we expect new enrollment growth in the fourth quarter, which will also have a comparable number of enrollment days versus the prior year quarter.

A quick update on corporate and other.

This category now includes residue will operating losses associated with close campuses and reported an operating loss of $13 million in the third quarter as compared to an operating loss of $8 million.

Current quarter operating losses related to close campuses, including a legal settlement of $7.1 million related to the Oregon arbitration matter.

Gross campus losses for future quarters will primarily into resi deal expenses, such as speeds for legal and professional services and some occupancy related items.

Corporate overhead expenses were relatively inline with the prior year.

No income taxes.

We recorded a provision for income taxes of $7.7 million for the current quarter, which resulted in an effective tax rate of 29.4% for the quarter.

Please note that the tax rate for the quarter was negatively impacted by 5.7% due to the $30 million FTC settlement reserve.

Which was mostly non deductible and is a permanent difference for the year the impact of which is spread across all quarters.

For 2019, we expect or tax rate to be between 29% entity and a half percent, which includes the impact from the partial non deductibility of the FTC settlement.

Separately, we ended 2018 with approximately $193.6 million a federal net operating loss carryforwards.

Which are available to offset future taxable income.

As a result, specifically as it relates to 2019, we do not expect to pay any federal income taxes.

Moving onto our balance sheet.

We ended third quarter with approximately $312 million of cash cash equivalents restricted cash and available for sale short term investments, which will be referred to as cash balances for the remainder of today's discussion.

This represents an increase up $82.7 million over.

Over the year end 2018, and was primarily driven by positive cash flows from core operations offset by cash outflows related to the attorney General settlement payments, a $5 million as well as vessels you will lease obligations associated with our close campuses.

Please note that the September Thirtyth cash balances include $30 million of restricted funds related to the FTC settlement.

Which was subsequently paid during October 2019.

Capital expenditures were approximately $1.8 million in the third quarter as compared to $1.2 million in the prior year quarter.

For the full year 2019, we foresee capital expenditures to be approximately 1% of revenue.

Overall, the company's executing well against this objective of sustainable and responsible growth with investments in student service initiatives and technology showing positive results.

The improved performance and efficiency off our operations, Illinois, as allowing us to maintain and balance investments within our two universities.

Helping us create better experiences and academic outcomes for our students.

Our goal is to maintain optimum staffing levels within the students are being operations that we believe will enable us to efficiently serve prospective student interest, while providing superior experiences to our current students.

Finally to our 2019 outlook.

We are updating our full year 2019 outlook as follows.

Increasing full year adjusted operating income outlook to be in the range of 130 million $232 million as compared to $105 million in 2018.

Reflecting expected growth of approximately 24% to 26% versus the prior year.

This is primarily driven by the year to date operating performance.

This outlook reflects our expectation of new enrollment growth for both universities in 2019, which we believe will lead to revenue growth at each University.

For full year 2019, we expect revenue growth to be in the range of 6% to 6.5% and new enrollments to grow approximately 12% to 13%.

Again supported by our strong year to date performance.

Adjusted earnings per diluted share to range between $1.32 to $1.34 per diluted share versus the dollar fight in 2018.

For the fourth quarter, we expect adjusted operating income to be in the range of 30.2 million to 32.2 million as compared to $29.7 million in the prior year quarter.

Please refer to our earnings release file today for important information about key assumptions and factors underlying this outlook and other expectation discussed on today's call as well as the GAAP to non-GAAP reconciliations.

I will close with an important interim update on our capital allocation priorities.

We maintain a balanced capital allocation strategy that focuses on building a strong balance sheet, while prudently investing in organic growth projects and also have committed capital to the pending acquisition of Trident University.

Our ultimate goal is to effectively and efficiently deploy resources in a way that we believe will lead to increase shareholder value. While further supporting an end to enhancing the academic quality of our institutions.

With that in mind, we are pleased to announce that the company's board of directors have authorized the share repurchase up to $50 million of companies common stock through the end of 2021.

The spent off our balance sheet supported by stability and consistency in our operating performance gives us the confidence to consider a direct return of capital to our shareholders as part of the capital allocation strategy.

With that I'll turn the call back over to Todd for his closing remarks thought.

Thanks Ashish.

We are on track to enter 2020 on a strong know we've worked very hard to support our students as they learn and progress through their field of study.

We are executing well against our overall strategy of sustainable and responsible golf, which is driven by our focus on student experiences retention an academic outcomes.

I believe we're well positioned both from a competitive and operating standpoint to serve and educate current and prospective students non traditional students, including adult learners and build a leadership position in post secondary education.

I'm proud of the entire career education team for their focus hard work and determination.

That is helping drive quality academic outcomes for our students.

Thank you again for joining us van will now open the call for any analysts questions.

Thank you we will now begin the question Association Sophocles, Sir you May play staffing and one on your attach Tyneside, if you're using a speakerphone. Please pick up you'll have a full pricing in the case.

At any time your question has seen a trees and you would like to withdraw your question. Please press Star then Terry.

At this time, we will pause momentarily to assemble a roster.

Your first question comes from Alex Paris with Barrington Research. Please go ahead.

Hi, Todd English how are you.

Good good ducks.

Good. Thanks, congratulations on the very strong third quarter I could find anything.

To criticize there it looks like you're above my expectations on every item.

According to more of that going forward.

I get all of a few questions I'm not in the order here, but I just saw they asked for an update on Trident.

You announced that acquisition in March you said at the time that it was going to be closed by the end of the year what milestones do we have to satisfy to get it closed by the end of the or what are we waiting on and then maybe just an overall update on how they are doing operationally in 2000 and located.

Okay.

Well again, we're still very excited about this opportunity for us and.

As we mentioned that really just working through the final approvals of both the department of Education, and the higher Learning Commission, which as you know the higher learning Commission approval has to take place before the department is able to prove that and our understanding is that should be considered shortly or you have to follow as you know the calendar that they provide and were.

We're hoping again for a positive outcome with that once that's done and then it goes to the department and again, we'll work through that processes as quickly as we can obviously, it's hard to to say exactly when that will take place, but would love to see it by the end of the year and but again, it's just hard to know how long that will take at.

And as far as the confidentiality, we can't really comment on their performance, but I'll, just say that where again were as we were at the beginning we continue to be very excited about them and the potential to have them as part of Cc.

Great. So I know the intention is once close to combine the operations of Trident and AI yields and just looking at the the the profitability of the two universities that you on today's sheets, you and you obviously sheets you has margins at least in the most recent.

We completed year or close to 30%.

Well Yeah, you in a 2018 was mid single digits ops, what's the difference between the two universities in terms of profitability. It's what's it going to take to get you up to the level of C to you in terms of margin performance.

Well that's a great question I think you know our main focus has been with a are you is too obviously make sure that they have and we believe they have the the high level of a quality operation and academic infrastructure as well as programs and they have that in place and so now again I think it's just been a a matter of execution and.

Scale and again, they have a very strong management team there and a as you know they just recently went through their HFC visit and was you know again as we reported a positive outcome there and again now I believe the biggest issue will continue to be scale and as you can see from the prior year versus what we've really.

Adjusted year to date, you can say, a nice increase and a you know we would obviously hope that that would continue and I think their trajectory of improvement as far as their margin, we would hope to see that continue.

Yes definitely on it is absolutely has approved is there any structural reason why are you, particularly.

Integrating trident couldn't overtime will move to similar margin profile a city.

Well, but yes, there is always that possibility and I think that one of the things that was very appealing that.

You know from from the profile of tried is there a number of graduate programs in their doctoral programs and I think if you look at the programmatic mix that exist and they are you I think that enhances that and ER.

The breadth and depth that the program offerings, which I think is very a very appealing. So I think it does give adds to the profile of a are you too.

We will continue to grow and ER and also as far as I think allowing them to access different different markets are that the current programs that are you has doesn't allow them to do that all of which again I think that contributors that sustainable and and responsible growth.

Well I'm like we were told a few times on the call out in your prepared comments to corporate partnership. So I'm wondering what our corporate partnerships as a percentage of total enrollment.

Now either for CE CE, all in total or <unk> or by by University.

Alex This is ashish so we did not disclose those percentages for this quarter, but what we have set as a last year.

During our year end call. We did say that see to you is about around that 16% range for total enrollments to.

Come from corporate partnerships and we are seeing continued progress and we hope to update on that too much of our yearend call and I'll just say one thing. We did mention is obviously, we're supporting that interest with continued investment there and very encouraged by that yes.

Look the cluster of corporate partnership is that a tuition discounts or does it Oh Oh Oh.

Are there more than one way to be a corporate partner and saw a C C University.

Yeah, I think the yes, there are multiple ways I think the number one driving factor, though is the quality of the education and then level of student services that you provide to their employees and it may range from being listed as one of their approved universities and one of their preferred universities to act.

Assessing maybe access to their their tuition reimbursement or direct billing programs.

To all the way to being an exclusive program provider for a particular program. So it really does range, depending on the company, but I think it all boils down to.

The quality of the program, which includes the faculty the curriculum the execution of the academic team and then a augmenting that with good student services, because I think thats at least my experience has been over the years, that's where.

You know there maybe you have good reputation of it institution academically, but if they don't provide the level of service to their employees.

It doesn't doing a lot of good and so it's a combination of the too that I think has allowed us to you know to have some success and you know that really want to continue to invest in that going forward and Alex keep in mind de students do have relatively stronger retention profile versus our overall population.

And then I would assume a lower student acquisition cost because of the corporate relationship and longer.

And then she said better retention, so better better lifetime value from a corporate partnerships student.

That's correct.

Gotcha, Alright last question based on Kashi, you have a ton of it finished quarter with 312 million even after the 30 million dollar FTC settlement you're at 280.

Based on my estimate you're going to generate $100 million and free cash flow next year, you got to put even if you executed on the entire 50 million share repurchase during 2020 and paid for Trident cash is not really going to go down from year end 19 to year end 20 again based on my estimates I'm wondering.

Are you still interested in other inorganic growth opportunities, making other acquisitions of title for institutions I would assume it continues to be a buyers market.

Yeah, I mean, I first of I agree, especially with your last statement. It does continue to be a buyers market out there I think there are lot of quality institutions out there a title for and also a those that are a education related and and obviously I think it's very prudent to continue to look at that but our number one goal still is the continued investment in organic growth.

And we feel like given the the current.

Level of interest for prospective students were encouraged by that obviously tried in which you mentioned, which is a nice.

In addition to a are you into a overall CDC I do believe that there are other opportunities that I think it's very good for us to look at because I feel like we've developed a lot of as you know shared service.

Functions with in the institution that are I think really we have the capacity to serve additional students very effectively and you know I believe with our academic infrastructure as well as our technology platforms. I think we I think we can really help serve the higher education industry and if if you know there are other things that we can add.

To to see you see I think that would be a a good investment for us and and I would help the overall education industry.

Well very good. Thank you very much for taking my questions on again, Chris Congratulations.

Thanks, Alex Thank you.

Your next question comes from Greg <unk>.

Please go ahead.

Hi, guys. Thanks for taking my questions Tonight, I think earlier on the call you mentioned sort of the tech spend winding down can you just give us a big picture a sort of the lifecycle of the tech spend when you guys really kind of started initiate ramping up the investments you've made when it may have peaked in kind of a one we've started to see a tail off.

Right, you're talking about the technology spend correct.

Correct, Yeah, just kind of bring us through when you guys really started putting the money behind that.

Kind of when what when it started to wind down.

You know we continue to invest in technology, we started that about as we said a few years back that coincided with the completion of our teach outs schools and we started investing in technology and really speaking, it's an ongoing spend and we continue to invest that so they're not necessarily peaks and troughs and that there.

As a stable level of technology spend that we continue to invest in our students and ER and that's what will you will see that going forward. Yes, I think you know it really starts at the beginning we're you know again the the platform that you used to deliver the education and you know we continue to enhance that'll continue to do that and that's an ongoing thing because the more robust and.

And enhance you can do that I think that it helps with the retention the outcomes through stood the second is really helping them with the onboarding process and we made a major investment this year in that front end technology and it allows us to be more efficient and effective with our students provide better information you know more timely and.

And that when that comes more kind of in a instead of a constant that's kind of more of a stair step type investment. We've just completed them you know again, the major investment in that and probably you know we'll see more that is that occurs later next year as we add up the next level the business that we would bring into that and then the last part is again just the data and.

Let ics that we've invested in.

Not only does that help us with prospective students, but it allows us to again much like our Intel platform to really fine tune the education away that helps the students a master the material better and so again those investments I don't I see them continuing again I think some of those bigger projects like our front end.

Those are kind of more over time, you'll see those investments versus the steady where you have that with your learning platform as well as the data analytics technology and Greg keep in mind as far as the spend levels are concerned we will continue to manage those spend within the oral constructs off our financial and operating commitments and make sure.

That we are very opportunistically investing in capital and in technology as we go forward.

Okay got it that's helpful. And then just one final one I appreciate all the color earlier on bad debt.

But can you just kinda give us what are the key drivers that that you know move bad debt and your I guess in your view I mean is it is it really retention is it sort of the financial aid I know, you're making a lot of initiatives that can impact. It but you know is there is there's a certain things that drive it more than others.

Well I think there's there's it is a very complex actual process because it's not only that are things you can control and things you can control. On example would be if for example, there's a change in the level of verification of your students that the department of education is implementing that the bear, but there's more verification that.

Takes longer and so that obviously would drive up that your bad debt as a percent of revenue.

That's number one I think you know you look at your composition of students again, if you against certain programs doctoral graduate programs. They tend to be have a better approach a stronger profile financially and so as a result, you probably have a little less bad that there. So you you have that affecting it and then again, yes retail.

It is something that obviously has an impact on it and as we continue to see retention go up that will affect it but you have a lot of other things that are really impacting that and one thing. That's artificially affected ours has been the academic calendar of a are you and you know over time I think you'll see some of that variability.

We go but we saw good improvement this quarter.

I think because of some of these other timing issues, you'll see variability on a quarter by quarter basis, but but the main commitment. We have is to do what and have the really practices that are best for students to help them.

Get through in graduate and if that means affecting you know bad debt levels I think thats the right decision to help.

Perfect. That's helpful. Thanks, a lot.

Thanks, Greg.

Again, if you have a question. Please press Star then one.

I will now give you a short mine that's to read the steel questions.

Okay.

This concludes our question and office he said I would like to turn the conference back over to Mr., Todd Nelson for any closing remarks.

Well again, we thank you for joining us for the results and we look forward to speaking with you next quarter.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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