Q1 2020 Earnings Call
[music].
Greetings and welcome to the checking first quarter 2020 earnings conference call. At this time of participants are only listen only mode, Oh questionnaires recession will follow the formal presentation.
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But afternoon. Thanks for joining Tregs first quarter 2020 conference call on today's call again, Rosensweig co chairperson, a C.E.O. and Andy Brown, Chief Financial Officer, a copy of our earnings press release, along with the Investor presentation is available on our Investor Relations website investors dot.
Dot com.
Replay of this call will also be available on our website.
Excuse me post information on our website and it tends to make important announcements on our media Center website, <unk> Dot Com Flashed media Center.
We encourage you to make use of these resources.
Before we begin I would like to point out that during the course of this call. We will make forward looking statements regarding featured Ben including the future financial and operating performance of the company.
Forward looking statements are subject to mature you'll rest that I'm certain keys that could cause actual was all two different materially from those forward looking statements because she knew to consider the important factors that could cause actually results to different materially those on the forward looking statements in particular, we refer you to a cautionary language included in today's.
Earnings relief and the risk factors just tried <unk> annual report and foreign 10, K. filed with the security in Exchange Commission on February 20 up 2020, it's wild our other filing took the F.C.C. any forward looking statements that we make today are based on assumptions that we believe to be reasonable as of the state we undertake no.
Allegation to update these statements as a result of deal information future.
During this call we will present, both gap and non get financial measures.
Gap was vault and gap to Nongaap reconciliation can be found in our earnings press really an investor slide deck found on I, our website investors dot <unk> dot com.
We also recommend you've reviewed the investor data sheet, which is also posted an I.R. upside down.
No I will turn to call over to them.
Thank you Tracy and welcome everyone to Cheggs Q. on 2020 earnings call.
We are living through an unprecedented time and we want to take a moment to acknowledge the tremendous challenges that our society's face.
First we want to give our heartfelt thanks to all the front line workers first responders Ain't caregivers, we're putting themselves in harm's way for all of US I also want attacked the institutions professors and administrators, who were able to rapidly shift the curriculum online to continue supporting their students.
All of us have been impacted by cope with 19, some much more adversely than others.
With the many ripple effects now impacting our economy and our education system, we feel fortunate to be able to report that our check employees and their families are helping and then our business is performing at an accelerated level.
We also hope that all of you listening in today are healthy safe and well.
In mid March as we started navigating the impact to cope with 19, where we prioritize the health and wellbeing of our employees and their families.
We then move quickly to set up our teams to work remotely and we're able to seamlessly continue providing chegg products and services to our students.
That that we were able to execute this transition so effectively is a testament to be adaptability of our employees and the investments we have made our technology infrastructure.
More importantly, due to the strength of our business and our balance sheet, we had been able to retain our staff meet the increased needs of our business as it grows and continue to make important investments in our future.
As a student first company. We can appreciate there there are many underserved students who depend on their institutions for support and now must seek help elsewhere. Our goal. During this crisis is to do all we can't to help the most students which is why we partnered with <unk>, where together, we're providing the most in needs to.
In their network free access to our check study pack.
I'm finished their semester.
However for many students the impact of covert 19 goes beyond just affecting their academics. Some I've lost their jobs, some fear, losing them and many may not be able to find the jobs.
When they graduate.
So we are ramping up our efforts through thankful as we recognize our responsibility to help as many students is possible get the skills they need to prepare them for the post coded 19 workforce, specifically, we are expanding our curriculum substantially increasing access to our scholarships and we are working to reduce prices even.
Further, which we plan to roll out later this summer.
Our goal is to help more students have more diverse backgrounds to get the in demand skills they need to compete in today's economy.
Cheggs Division has always been to increase access to high quality learning content with on demand support.
Oh, Wow lowering the financial risk to our students.
We are a global companies and our teams around the world are committed to investing in their communities. So long with our employees. We're proud to have stepped up our support for nonprofit too we're focusing on issues like food insecurity. During this crisis.
So many students lost access to on campus food banks when their schools had to close we feel fortunate that we can provide this help.
To date, we have already committed approximately $1 million to help students and our local communities impacted by the effects of covered 90th.
Clearly the education, it's history was hit hard in schools had to act immediately without any precedent for moving exclusively online students were required to leave campus and learn from home.
And to see some remarkable trends.
We saw a substantial increase in new subscribers, both domestically and globally.
We saw a mark increase engagement from our existing subscribers and we are seeing a meaningful increase in the take rate of our new check study pack much earlier than we expected.
The financial impact on our business is quite meaningful so I want to turn it over to Andy to walk you should be details and our guidance Andy.
Thanks, Dan <unk> afternoon, everyone.
That's been mentioned are.
You and your family's remain healthy and safe. During these unusual times. This is clearly a global situation along with the pandemic economies are slowing up unprecedented rates on unemployment is sawing upping it profound impact on People's lives.
While many traditional companies are unfortunately being picked as a result.
We believe the direct to consumer companies like check that our digital pens Sylvan essential need.
Experiencing increase levels since the outbreak of the Kobe 19 virus.
Since mid March who's getting mixed shipped in our business as advertising revenue pets decrease from an industry wide slowdown.
While at the same time, we have also see a substantial increase you know subscription services, driven by new <unk> and international subscribes to our platform.
Well it increased success their account sharing it splits.
And we see these trends continuing into cute too.
The first you must have a quarter started strong subscriber growth at 33%.
<unk> acceleration of world since mid March.
Additional two points in the quarter increasing growth to 35%.
Discontinued celebration is having a profound impact on Q.T. as we now expect cute to subscribe to grow to be greater than 45%.
Well, we are comfortable providing guidance what cute too.
Many unknown such at school start dates enrollment trends and whether schools will be taught on campus online or both.
Such.
It is difficult to <unk>, how much it any checks first half momentum will continue.
Well, we believe it is premature update on guidance for the second half the figure.
With that as a backdrop, let me walk you through the Q1 results.
Q too.
Four Q1 total revenue group, 35% 132 million.
This was primarily driven by subscribing both the 35%.
<unk> services retinue of one.
Required materials categories from spring rush at the transition to textbook ownership and to our new logistics partners Fedex has gone exceedingly will so.
<unk> 12, adjusted <unk> 32 million ahead of what we expect it.
Looking at the balance sheet, we ended the quarter with 1 billion cashed in investments.
We believe the combination upper director student model balance sheet, and cash flows or the strongest into education industry.
Isn't the best position for a post <unk> 19 education environment.
Moving to cute too, which incorporates the changes the environment, we discussed earlier.
We expect total revenue to be between 135 and 137 million.
<unk> check service revenue between 115 and 117 million.
Gross margin between 74, and 75% and adjusted EBITDA between 48 and 50 million.
Before I turned the call back over to Dan I want to give a big shot out the might be Nancy because it's the first time our company has had to close the bucks produce financials get statements reviewed by all it does anyone earnings call all from our home an outsider offices.
Level of detail coordination and nights and weekends, it's up to do this was extraordinary I didn't want to think everyone. On my team you guys rock with that <unk>.
Thank you Andy and thank you are finance team you do rock.
As you can see from our numbers tag is experiencing dramatic growth during this time.
And because we sort of millions of students across the globe. Many people have asked us what the lessons from covert 19 are and its impact on the future of higher education.
I believe that in every industry a crisis often accelerates the inevitable and that is what we are seeing happening now in higher education.
Reality is students were already learning online where under supported by their schools, who had diminishing budgets. So that the need for virtual learning support was already expanded.
But almost overnight when schools around the world had to move 100 per cent online <unk> that trend accelerated and has revealed the true potential and the value of what check has to offer.
The numbers say at best and what they reflect that students have an even greater need for high quality low cost personalized and adaptive online education to help them learn and mastered their curriculum.
As we think about the lasting impact on the future of higher education globally. We we see these trends continuing.
The student population is more diverse and more global.
They have different socioeconomic backgrounds and or many different ages.
They also come with various skills and experiences, but what they have in common he's the need for more online support because the fact is they are increasingly learning on their own less support from their schools.
We also believe more students are going to do we need to learn a variety of new skills over the course of their careers.
And we'll need to access will need access to low cost on demand high quality skills online.
However ability to meet student's needs due to the incredible work <unk>.
We're grateful for the dedication of our employees as they take on many new responsibilities at home and still maintain their focus on our student first mission.
It is they're passionate commitment is built our culture.
Which has permeated from our physical offices to our virtual offices around the world. So I want to tank demo.
I also want to encourage everyone to continue to do your job and do your part to keep our community say by staying home and staying well as a company and as a society. We know we will get through this together and I look forward to updating you on our progress this summer.
This time I will turn the call over to the operator for questions. Thank you.
Thank you end up to your question answer session.
Replacing the question to please press score one on your telephone keypad.
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One moment, please when we pull for questions.
The first question traced coming from Doug loose from J.P. Morgan.
Great. Thanks for taking the question. So maybe two questions first I realized through a lot of unknowns just around schools for the fall, but you talk about how you're preparing across a range of on and off campus learning scenarios and does the product shifted all to meet the different needs of students and then.
I guess related to that.
Just curious more about your comments on thankful around hobby integrations going and just how you're expanding the the curriculum there. Thank you.
Yeah. He does hope you're well hopefully we we passed so.
What I would say is the only part of our business that on campus all campus can affect would be textbooks.
And honestly.
Fields is there a off campus affects it in a good way on campus. We continue to take market share. So I don't know that really matters. What we've done is we prepared to own fewer textbooks for the time being because there will be very inexpensive to buy and we'll just meet demand if we need to but our tech services business.
Will continue to grow whether it's on campus off campus, whether they do a hybrid what we believe there's you're going to see a hybrid probably more so in the blue states and the Red state the Red States will probably be more on campus.
All the schools will open because if they don't they will run out.
The real issue is how many students will come to campus and what we're seeing is a real surging online curriculum, whether they go on the community colleges or any other source and check is benefiting from that so we're prepared regardless of which way it goes but it shouldn't have a meaningful impacts a one way or the other given the momentum.
<unk>.
So I'm thankful.
Okay.
<unk> is experiencing what you would think your experience. We we knew what we bodies that we wanted one that was only online.
Not online or offline and online it turns out that during this period, having it off line business as you know leads to zero. So thankful is benefiting from the fact that more people are.
<unk> online class. It was the second thing is we recognize that our responsibility is because.
Students may not get jobs that they thought they have people have been promoted people have lost their jobs that they are now moving as rapidly as they can to learn to necessarily technology skills to be able to get the jobs more for the post Kobe environment.
And we're seen that in thing for our view is now's the time to really establishing pulling the primary player. We believe the one with the biggest brand name the highest quality content the greatest amount of support the lowest cost and the least rest to the students is the one that's kind of when and when big and so we're doubling down on the amount of content that we <unk>.
And we're going to double the amount of concept, but there are certain fourth quarter got we offer we are going to continue to add scholarships and lower prices because we want students to to think of the same way D.C. check.
Do do first so they right now need to get these classes they need to pay less they need to have fewer risks and we think we're just going to continue to pick up significant market share. If we do it and so we want to be the company that does these things for students and we think will win both in the short term and the long term as a result of it.
Great. Thank you done.
Thanks.
Thank goodness question today is coming from jumps sober from I.B.M. Old Cup remote control why does that line.
Thank you so much I'm just wondering if we could just draw down a bit within check services beyond stink pull up you can just tell us what the impact has been some of the different products, whether it's you know check study check Tudor, you're writing tools your math tools any color would be great.
Sure so.
Everything.
Is accelerating.
And.
So we're seeing with the exception of ads, which is a small part of that business and you know we talked about at once before ads quarter came down in March they stabilized in April and we'll see whether or not they pick up through the courts of the year, but if you look at check services.
Study accelerated growth.
<unk> is the check bundle has accelerated two to three quarters ahead of where we expected it to be at this point as you may recall, we said that we were really going to see the impact of it beginning a cute for but the demand has been significantly higher than we anticipated international is growing we're always going to record rates because it was coming from a small.
But it has really accelerated and not just for the English speaking countries for countries all around the world the rest of the world business is.
About the size of England, France, or England, U.K. and Australia. So we're seeing a pick up from everywhere on the engagement side, we've seen more students overall subscribe as you can tell by the numbers. We've seen renewal go up cancels go down and utilization of the services themselves pick up quite sick.
Differently so.
Every metric that we look at that we would want to.
Onto the future is going up into the right.
But it's it's great to here, let me just stepped pushed back a little bit on V. engagement metrics I'm sure do you think it's sustainable.
What's going to take some time to kind of quote unquote normalize, but as you know higher education goes back to where it was maybe never does do you think the the type of interest engagement that you've seen it's sustainable if we kind of return to some some some kind of normalcy.
I do and the reason I do is because our product is great and we continued to invest significantly and we expand the number of subject. We explained the way people can learn we've kept the price you're 14 95 for nearly 10 years.
On demand you could do step by step solutions, you can watch videos on the subjects that you want a master you could ask expert you in a which now has access to 40 million questions. We're seeing a record number of questions. You know record number of subjects from a record number of countries and so once you've experienced the power of Cheggs learning tool.
<unk>.
There's no reason not to use it more if the question is on the subscriber growth.
What we believe is that we've hit another inflection pointed our business, particularly internationally, which is the way we built the business in the U.S. user was very carefully crappy by word of mouth school by school and what what the situation has presented to us.
International also closed all their schools their students for the first time started to look for online tools, they discovered check and they're using it at the same level that domestic students are using it so it might be repairs as we add more subjects as we add more content as we go for higher grades lower grade.
Response time continues to go up our quality is as top notch there'd be no reason for the engagement to go down now there are students that we believe that we picked up who used to use on on campus services like labs tutors and other things. Unfortunately, if you look at the state of.
<unk> every budget is being cut and sadly those will be amongst the first services that will be cut but even if they weren't once you've used experience check and once you've learned how it can help you and once you've given teaches you when you master the subject. There's really no reason given the price is only 14 95 or 1995 and she bought the Thunder, which gives you writing and math laptop.
That for you to stop using it and every indication that we see suggest that the more they the more they experience at the more they use it and the better results I guess.
Okay. That's very helpful. Thanks, so much yep.
They could next question today is coming from Ryan Mcdonald's from need him in company here why does that life.
Okay. Good afternoon in every one congrats on a quarter first one is real.
Recently.
On an H.U.G.S.V. webcasted online tutoring was growing quite fast and peculiar around 4000% I think is that what you said I'm just curious to see you know what sort of initiatives you've put in place to maybe that writing students more to the tutoring solution and and any changes that you're making that solution to prepare for the fall less.
We you know in any event that we do stay more online.
Yeah, and and again, it's not even in the event if we stay more online we aren't online support service, it's not what do the curriculum is taught offline or online Biden schoolers check is the beneficiary and the fact that more and more students need more and more help and there's only one service that has the incredibly high quality has the integrity.
He is on demand is low cost and covers every conceivable subject that you can imagine whether it's by step by step solution video and those things so.
How is that we're experiencing now is a great one to experience with chaired how do we make sure that are infrastructure can scale would the demand that we're experiencing because his Andy pointed out is prepared remarks, we saw significant pick up the last two weeks marks but that has can change.
And so we're seeing record days a question to ask up response time and so for the challenge is making sure that.
We have enough tutors in the system that we can be responsive within five minutes of any request you any subject get any language and we're a distance from that so it's not going to be a demand problem as much as there's gonna be supplied problem for awhile, but what happens at any good two sided marketplaces. When the demand comes in is supplied follows it and we're beginning to see that so what we've done is.
We've expanded chat based tutoring, which means that students can can at any time ask any questions. You actually have a live interaction if they prefer to do that versus search the database, which has nearly 40 million questions are already so.
So.
No I don't I don't know what else to say, except what do you believe that check has been <unk> I mean look we've been growing this business for nearly 30% for over six years.
Another inflection point for us because people, we evaluate they understand that those who may have been reluctant or now trying it and they're trying to get at the same level renewing at the same level. So we're very pleased with all the results and I think the addition of the bundle rolling it out faster when students needed. It even the engagement there I mean, you see that those people who use the bond.
No actually ask more questions no people, who don't use the buttons. So it's attracting the right kind of people and we're seeing that same response globally.
Excellent and then just in terms of follow up I'm talking about thankful, obviously, there's some favorable demand trends there. He just kind of kind of talk to <unk>. What that's look like as we went through sort of late March and April <unk> into April and and what demand you're seeing there and then as you're thinking about expanding the career.
<unk> topics or subjects that you're looking to expand for that business. Thanks.
Yeah, I know, we don't break up the business, specifically, so I'll be I'll be sort of careful there and I don't want to Preannounce. Our plan. So that competitors can can you know try to match or sort of try to get there sooner, but what I would say is of the five courses that we teach they are attracting higher top end.
The final and higher conversion rates and we've experienced since we've all got which has only been since last October but this is you know we're seeing new trends that are ahead of what we expected you see at this point in our ownership. What we're also seeing no. It there's demand for probably is at least two times as many kinds of classes because.
People need to learn these skills now in order to be employable, and so we're seeing a crossover from the check audience for the first time now remember thing for one is more expensive so the fewer customers, but our belief is as we as we integrate in experts you would aim chat picks tutoring to sport students, we can lower the cost.
And actually increase our margins. So it's one of those businesses that were just doing everything we can to move up the time wise to me if demand.
Excellent. Thank you very much.
Yep.
Thanks for next question today is coming from Stephen shoulder from William Blair. Your line is that line.
Hi, Thanks.
Great to hear about the I've taken the Bondo, which curious if there's any way to quantify what t. uptake look like for the check study pack. This year, both with the variety in opera and then maybe excluding and has there been anything notable about the types of students that are maybe signing up for the bond or so far.
I'll take the last one in a turn it over to Andy in terms of characterizing it because.
He's more straight down the middle.
So.
What we can tell you, which we can't tell you that the demographics are different but on the upside to the surprise did take rate has been higher than we expected at this point.
Did take raiders been glow.
Which was better than we expected at this point and the customers that used to bundle. So far remember it's only a couple of months now so we'll have to see whether it's sustains itself, but they're they're engagement is as good and some cases slightly better.
Q, an eight site and that we've math and writing map seems to be the first thing that they move into and then writing it the second thing that they move into and I don't know if that's because that's when things get assigned a or there's more people that need map and writing it's way too early to know any of that but what we see arbiter.
Friends are better than we expected them to be at this point, we were expecting needs to be the trends as we sorted out towards the end of the year, but but he was being really just surprisingly good.
Yeah, I mean, I mean, I mean that Steven Yeah, I mean to dance point.
You know we thought we'd have you know like very moderate contribution to the financial performance in the first half the year is clearly better than that we so we started to see the type.
Contribution that we would've expected maybe two three a few for kind of accelerating into the to the first huh quickly as we get into cute too.
Got it it's it's good to hear and then just there's a follow up has the traction that you've seen internationally I guess changes how you plan to invest in those countries I mean, you'd talked about the three initial countries that you'd you'd you'd make those kind of three different types of investments and then then expanding that's I think.
Seven others I guess are you may be in a push that a little bit more just get an attraction you're saying.
So I'll do the first part I'll, let any talk about sort of the actual investment dollars, what what I would say that that I think.
Those investors that follow is most closely understand.
We have a very unique content model, which is we're fortunate that overwhelmingly the same top five publishers that published for the U.S. are also the major publishers in in South America and Europe.
And.
And in parts of Asia. So we don't have to reinvent the wheel with the with the core base or content to begin with stem is down and the major publishers are the same around the world where we have also so that's a benefit to us in terms of the the time and the cost to take some of the second thing is we have been working on localized content we have.
<unk> and we know part two content that we want to add over the next few years and we will continue to do that country by country.
What's changed a little bit is that certain countries have gotten on the radar faster than other countries and so we will just adjust our efforts to meet the demands of countries that are growing faster than we ever would have expected at this point the third thing in the real magic to our motto is the overwhelming content investments.
In response to expert <unk> and so we don't have to guess what the questions are the question gets asked first.
And then we respond to it so it's an incredibly economic strong economic model of efficiency and then each of those questions in those countries just like they are in the U.S. getting index in search and drive more customers and so you know if you look at the guidance for two to it's not only the revenue went up a deep it though.
Because this is this model has it.
Really outstanding leverage so and you ought to know if you want to talk about changing up priorities investment capital.
No I mean, yeah, and I think you've made it I think you clearly you're seeing the leveraging the model isn't to scale. The other thing we're doing Dan's point is is to the extent, we can accelerate investments and international we're doing that because we we believe we have the room in the the model to do it and and why not take advantage of upbringing, you know more and.
More countries and students online and so that's the those are the things we're looking Adam that.
So that's baked into the guidance for Q. too.
Great. Thank you can grab on the results.
Thank you. Thank you.
Thank you ladies and gentlemen interested currently a few please ask one question number turn to the queue or next question is coming from Prince still from Jeffries. Your wine is not alive.
He then you've always run a strong offense spayed.
You feel that you can double down here on hiring lemonade and make them bigger investment you know to continue that it at this point I know next quarter.
You know close to 300 basis points, a margin improvement and I I understand you can't making it.
That quick to impact the margin for this current corner, but any thoughts in terms of how how you think about.
Yeah. This this impact which see we don't want to see but there's.
A great opportunity do you think every shape, how you think about the adoptions back into the business.
So what I would say is what it doesn't change is our vision mission at our strategy.
That we want to be primarily if not for as long as we can director the student that we look for the highest quality assets.
If our brand and our reach in our data and our commerce technology can accelerate it's grown and increase its margins and it's an asset that unfortunately for them. Unfortunately for us she's been under invested or Undercapitalize. Then then then we spent a lot of time with them with the hope to.
Ultimately acquire them.
And.
As our market cap and got bigger and Andy and Tracy arranged to have a billion dollars on our balance sheet, you've seen we've been very patient and knock on the outside those lines still to this day I think the most expensive acquisition. We've made is $100 million and so as a result of that.
We you know we're not looking to grow the company non organically by buying large companies that are slower growth or don't have our margins because part of the reason. They don't have it is because we think that they're in the wrong part of the value creation channel. So we're more likely in the short term to <unk>.
Do what we've been doing what she was looking looking for a plus assets that haven't yet really fleshed out their business model to the degree that we can do it and can accelerate their grows. So I think we'll continue to be smart and careful and and we don't we don't see a reason we've looked at.
Every conceivable asset.
Saw that some of them and put themselves up for sale. Some didn't trade some traded we chose not to do those things.
The momentum we haven't our core business is one where we're not looking for reasons to change what we do we're looking for reasons too Bold trust, what we do and add more value to our students.
And the I don't know if you want to add to that.
No I mean, I think I think we're you know like Dan said, what we're we're we're we're patient buyers right if something comes and the like Dan says fits specific specific need we'll do it but we <unk>, we just don't need anything to meet our our financial objectives as we've as we got wind themselves, but it does a great out that comes along yeah, we will.
Leaves the balance sheet.
As appropriate just a click follow the acceleration Dan you mentioned you saw did did you see that accelerate evenly throughout the month of April or G.P., a spike in this kind of tapered off.
I I will.
I I will do my best is not say more than I should what I would say is what we saw we saw an immediate up chicken March and I think what we say in our prepared remarks is that sustained and at least through April.
And which is allowed us to take our guidance up well we didn't take it up so we didn't have gotten sport person consensus.
It's up nearly $10 million, which is a reflection of the fact that the gross has been quite remarkable during the mathematical.
Yeah.
Thanks for the car.
Yep.
Break or that's question to me is coming from my Crago from Brooklyn capital markets realize there's no line.
Yeah. Thank you congratulations guys with the benchmark bundle.
Study pack.
Well that's strange.
<unk> quarter.
That kind of just start in March.
No I mean.
<unk>.
Yeah, we <unk>, we we we really started to see strength before March in the bundle up any <unk> you can see that when you look at our overall numbers, we what 30.
You know, even but or the <unk>. We saw at the end of the the middle of March we have 33% a year over year growth of subs and so then that that also reflected itself in the in the bundle. So we've we've we've seen strengthen the bundle throughout the quarterback continued into continued into April.
Okay, great. Thanks, a lot.
So I could next question is coming from Alex Fuhrman from Craig How underlined is now line.
Great. Thanks, very much for taking my question I'm just wanted to ask about the marketing strategy as you approach in new semester of education in the fall, presumably if there's a good chunk of students who aren't on campus and might not have the opportunity to hear about shag through word of mouth. What's your strategy does to reach out to those new studio.
Too who might not hear about you otherwise.
Yeah, <unk>, if if anybody wants to get an understanding of how we see the the education market evolving right now I'm weird, here's a and given the volume of customers that we have I think we have a pretty good insight into at least a student perspective, we of course track every school by every now it's what they make and start dates and on and off camp.
But I recently had an article published in Fortune magazine, we'd sort it gives the lay the land of of how we see it. So you know I think.
<unk>.
What I just forgot that.
I just lost to track on the keys question what are we ask it.
Yeah, just the but my question was just from a marketing perspective, how how you plan to exactly yeah. Yeah. No. Yeah. So the reason I said that is because we have been focusing as you know because you'd ask questions on previous calls we've been focused on community colleges.
We've been focused on not for profit on line International World and so we're not we don't have to make any special leopard starting today, because we need that effort starting in the middle last year to build the relationship where we can start to get better and bigger word of mouth, because as you point out when students are not on campus. They don't all to each other using it.
But we are supervising deal was extraordinarily helpful for that there are other opportunities of school systems were working with to give their neediest customers, who have no money opportunities you see what we've done we are working.
It's a lot of the environments in terms of what we think is going to happen is online community colleges, where their costs per credit is so much lower I think you're going to start to see a price morbid online school. So we are positioned well wins all of those environments and building relationships with students on those campuses to actually be x. sort of like random.
<unk>, but that's not something we just started now it's something we started the into last year.
Right. That's really helpful. Thank you very much.
Thank goodness question is coming from Josh Bear from Morgan Stanley Your learned is not alive.
Hi, Thanks for the question I congratulate on a strong quarter. A question is on that account sharing you mentioned that some of those efforts were successful I was hoping you could expand to bed.
To what extent has the focus spin on all the new subscribers that have come in or are you actually making changes to existing accounts.
Okay. So.
So we have been investing heavily in understanding the impact if account sharing.
For the better part of a year.
And really at the end of last year, and we have made significant improvements in identifying all the different rate of ways that people can take advantage of the system and we have successfully blocks many of those things that actually.
Prior to <unk>, we were going that we were on a path you have an extraordinary first quarter anyway, and a lot of that is because it a power the product International Grove and our efforts is Andy pointed out and it's prepared marks against account sharing <unk>.
What this.
Identifies though is that there that we can now excellarate going to to step authentication and other areas, where we were focussing first on new customers than we were focussing on really use of customers and now this moment in time gives us an opportunity to suit.
Accelerate.
And.
Our efforts to block it from existing customers as well.
That's great. Thanks, and I'm just wondering if if there's any more color you could give on the horizon partnership.
Know what that means for <unk> customers, but not from Ah checks perspective around the comics or the the pipeline or the K.P.S.
It was one of those things where.
A rare situation, where company bar size gets contacted or how's the relationship and it can do something in in less than 48 hours, which is where I credit variety and for wanting to acknowledge that they have you know what they do is essential to everybody who was going to be quarantining, oh needed access to the internet.
And they were looking for a series of things to be able to do for their customers. We agreed immediately what we wanted them to do was focused on their most needy customers. The one that even have trouble praying for broadband because you've probably seen in a lot of states. There's a lot of issues getting technology out the students. So the the economics of the deal weren't going to be one.
We didn't do it for the economics, we did it before it can be able to offer students who need our help immediately the opportunity to do so and build our brands against students that was meant mentioned earlier online schools students going online community College students those things and so it's it's obviously way too early to.
<unk>, it's going to always be a net positive there's no reason that it wouldn't be but I think collectively every channel that we've been working with his chest accelerated faster than anticipated.
And so.
It's gonna be hard for any one particular channel to make that much more of a meaningful impact right now.
Okay. Thanks.
I go next question today is coming from Britain, a block from <unk>.
Hi, guys. This one if you could touch on.
Gross margins a bit and you know how we should think about improvements from here I know this year is kind of a transition your as you as reentered the textbook business and that'll be it. Thank you.
Yeah. So so so when you think about gross margins we talked about this on the last call just for the whole for the whole year, we we anticipated approximately about five five percentage point.
Change and but more importantly seasonality right. So you see you're you're likely to see more sees melting gross margin in Q1 being cued three words be slightly lower whereas if you tune queue for be slightly higher because you've got a bigger percentage of overall services retinue associated with those those quarters, but nothing is.
Changed from what we talked about on the last last call.
Probably thanks guys.
Thank you we really should have our question answer session of like to turn the poor back over the management pretty further closing comments.
Listen I want to thank everybody. These are complicated times for families for people and for all of you. It affects all of US differently, we kept our focus on the students and damp rewarded us by being great customers.
You know, we believe and what we should not prepared remarks that we're seeing another acceleration of an industry trend check has focused on putting the student first having on demand low cost high quality multi modality ways for students to learn.
And I think for the first time, a subset of investors are seen just how big this couldn't be and how global this can be.
And our dedication and focus is going to be on making sure that we can meet demand that we.
Keep our prices well our quality high.
And and deliver on them to students, who unfortunately, no matter whether they go back to campus or not are not going to have to support systems, even though they had before which were already diminishing. So you know we wished none of this had happened. This is just accelerated what we always believe what's gonna happen in our business and we're just going to get back.
To work and and I look forward to update you on how we think about the second half as we know more on the next started his call, but thank you all stay saying and we'll see we'll see in July or August.
Thank you that doesn't do drink teleconference to me just <unk> at this time and have a wonderful great. Thank you for your participation today.
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