Q4 2020 K12 Inc Earnings Call
Greetings and welcome to K 12 fourth quarter fiscal 2020, <unk> earnings Conference call.
At this site all participants are they listen only mode.
<unk> answer session will follow the formal presentation, if anyone should require Alfredo during the conference. Please press star zero on your telephone keypad.
This conference is being recorded I'd now like turn this conference over to your host let's jump like craft.
Mr relation. Thank you you may begin.
Thank you and good afternoon, welcome to pay Twelves fourth quarter and you're in earnings conference call for fiscal year 2020.
Before we begin I'd like to remind you that in addition to historical information certain comments made during this conference call maybe considered forward looking statements.
These statements are made pursuant to the safe Harbor provisions the private Securities Litigation Reform Act of 1995.
It should be considered in conjunction with cautionary statements contained in our earnings release and the company's periodic filings with the FCC.
But we're looking statements involve risks and uncertainties that may cause actual performance or results to differ materially from those expressed or implied by such statements. In addition, it's conference call contains time sensitive information that reflects management's best analysis only as of the day of this life.
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K 12 does not undertake any obligation to publicly update or revise any forward looking statements.
For further information concerning risks and uncertainties that could materially affect financial and operational performance and results. Please refer to our reports filed with the FCC.
Deep excuse me. These reports include without limitation cautionary statements made gay Twelves 2020.
We're [noise].
Report on form 10-K.
[noise]. These filings can be found on the Investor Relations section of our website at Www Dot K 12 Dot Com. In addition, disclosing financial results in accordance with generally accepted accounting principles in U.S. or gap, we will discuss certain information that is considered non.
GAAP financial information a reconciliation of this non-GAAP financial information and the most closely comparable GAAP information. What's included in our earnings release and it's also posted on our website. This call is open to the public and is being webcast.
I will be available for replay for 30 days.
With me on today's call is neat Davis, Chief Executive Officer, and Chairman of the Board and Tim Medina, Chief Financial Officer. Following our prepared remarks, we will answer any questions. You may have I'd like now turn the call over Denise Nate.
Thank you Mike.
Good afternoon, everyone and thanks for joining us on the call today.
It's year end, so my comments will be a little longer than normal.
I wanted to give you a complete picture of year in review and the direction we're headed.
First on behalf of my entire team your K 12, I'd like to begin by extending my thoughts and prayers to those who you are suffering.
And have experienced lost because its cobalt car buyers pandemic.
Throughout my talk today, I'll cover where our business is going to hurt by the been demick and also how it's been drawn more customers who are technology and services.
So let's get started.
I'm pleased to report the K 12 ended fiscal year 2020, with a strong financial performance for both the quarter end the year.
We met or beat our guidance across the board.
Revenue adjusted operating income and capital expenditures as most of you know we're now seeing increased interest some online school options across the nation.
We expect to see even stronger trends as we enter F. why 21.
Our fiscal year 2020 revenue was 1 billion 40.8 million.
Keep in mind that those revenues were largely by robust driven by roaming trends before the pandemic kit.
That's because do state laws in policies by Authorizers and local school boards. Many K 12 powered schools were restricted from taking new enrollments late in school year, just endemic kit the country.
Therefore, the fiscal 20 impact on our revenues was very small however, we do anticipate a more significant revenue growth and that's why 21.
I will discuss in a few moments.
Turning to profitability adjusted operating income for the year was 56.1 million.
Excluding the impact of galvanize acquisition adjusted operating income would have been 74.1 billion, an increase of more than 19% year over year.
It's worth noting that the 74.1 million would it be our original guidance for the full year.
68 to 72 million.
This shows the strength and predictability of our core business.
Our adjusted operating income growth was driven both by revenue growth as loved by ongoing focus on cost reduction.
Operating efficiencies.
Also on a note the capital expenditures for the year came in at lower than low end of our guidance range as we do every year.
That's focused on improving the user experience enhancing teacher tools and strengthening student engagement.
Some key investments include a new mobile learning management system for the kindergarten through fifth grade learners, an adaptive algorithm the gauges and adjust the students reading levels and matches into appropriate text.
And new courses for career pathways.
Importantly, we also migrated most customer facing applications to Amazon web services or ADW S.
This change in particular sports our efforts to scale our business in a more cost effective way as we ramp up enrollments and expand our business in coming years.
And finally, we ended the year with a strong liquidity prison position.
Our cash cash equivalents and restricted cash was $213.3 million at year end.
Now. This also includes both the drawdown of $100 million of on of our revolving credit facility and the use of 165 million for the purchase of governance.
So we entered fiscal year 21, with our revenue and adjusted operating income increasing the capacity across our businesses support high in high enrollment growth.
Career learning business, reaching even more of the addressable market.
And funding for a long term growth initiatives.
As I noted a minute ago, our results underscore the strength of the core of our business.
And the continued demand for blended learning options.
More than 100000 students in K 12.
Howard schools completed the school year on schedule little little interruption.
We saw were 8000, new students graduate from high school this year.
Bringing the total number students who graduated from a K 12 power High school.
More than 50000.
Importantly, we ended the year with student retention rates at our highest level ever over the past three years need improving student retention by 550 basis points.
But that in perspective improve retention equates to more than 100 million in revenue that would've been lost.
Over this three year period.
It also had the effect of Loring marketing cost for enrollment.
Our entire team is really part of these numbers, but at the tell you. Our team also knows we have to continue to improve we have to deliver great service.
That is especially important the larger than ever number of new students coming into our programs this coming year.
The pandemic has driven more parents and families to explore online learning options more school districts to use online learning and more policymakers to understand the value of online learning option in their state.
Starting with consumers a recent poll conducted by morning console showed that 71% of Paris felt that online education should be an ongoing option for students even after the pandemic society.
After school districts more and more of them.
Now plan to use online learning as an alternative to in class in person.
Once such school District is Miami Dade County, public schools, a district, we've had a relationship for more than a decade.
The superintendent Carvallo and his staff guidance K 12 will provide customized services, including curriculum.
Settlement tools teacher training and data management.
This will ensure a strong start to the new year for both educators and Miami Dade more than 270000 students that will serve.
Teachers are really employed by Miami Dade will combine their great teaching.
Our technology and expertise to provide high quality instruction in a safe environment.
This allows miami Dade to retain both teacher jobs and the all important existing student teacher relationships.
In alignment with the with their existing learning goals Miami Dade Public school teachers and administrators can also customized the online curriculum will provide.
Including core subjects and hundreds of elected.
This shows the flexibility of the K 12 technical platform.
We're thrilled to support superintendent Cavallo, and the innovative solution he and his team at design.
This is just one example of how large school district in wise to meet the unprecedented challenges.
School closures caused by the local they'd like to pandemic.
We're working with other school districts on their own customized solutions for the fall as well and we stand ready to support schools and school districts of any size. During this critical time.
[noise]. This quarter. We also continued to make our products available for free on the trial basis.
Today more than 200000 families teachers students and schools the signed up for these programs and Webinars.
This is more than twice the number who took advantage of it last quarter.
We believe this outreach to the public discussion around online school.
Our own marketing efforts have all increased the number of families who are looking at enrolling students in our schools. This fall.
The fourth quarter by fiscal year, we saw a lead volumes in enrollment applications rising more than 50 per cent compared to the same period last year.
Now we caution that it's still too early to know how many of the applications will result in final school enrollments for the 2021 school year. Many parents still finalizing this students plans you can't be sure how much of this interest will translate into a final alone.
That being said, we believe the many of the families who have begun enrollment process, we'll complete the enrollment process for the fall and little later I'm going to give you even more quantities understanding of our current enrollment status.
With the potential for significant increases enrollment, we're taking steps to prepare for the upcoming school year.
This includes proactively hiring 1300 incremental teachers and education staff members.
Building education additional service capacity.
By thousands of new student computers.
And stocking offline material so that they are ready to go on students enrolled.
And most importantly, we're focused on ensuring family seven outstanding academic experience when they enroll in the K 12, <unk> K 12 power program.
Early start programs welcoming programs and other ways of reaching new teachers and administrators.
Now I'd like to turn to our career learning offerings. This year, we hit a significant milestone.
We ended the year with revenues of $107 billion inclusive of doubtless.
This is an increase of 115% year over year and a little more than three years, we've built a comprehensive in innovative opposed to career learning.
Serves more than 13000 students this past year.
Posted more than 100 million in revenues.
We believe the career learning in pieces, our addressable market by more than 10 fold will be a driver for revenue growth and profitability in years to come.
Our nation has approximately 15 million high school students.
Our market showed surveys show that over 12% of these students.
We'll consider full time online public schools and their parents.
Also concur that they would consider full time online public schools.
As the schools that combine traditional core academics, such as math, an English with online career readiness education.
In other statistics reinforced our belief in the long term growth potential for this business for example research conducted by burning glass technologies.
Over the last 90 days shows the 56% of job openings required less than a four year College degree.
Our career learning programs for both second [noise] secondary students and adults.
Closely aligns with this market demand and todays check first job market.
So quick commentary on some of their accomplishments.
In this area over the last 12 months.
First we opened destination of clear academies or DCH as you might hear me say in New Mexico, Kansas, Missouri and Wyoming.
And it brings the total number of DC eight to 24, but it's started this school year. Additionally, we expanded programs in the Middle school grades in seven schools, allowing students to get a jumpstart on Chris exploration and what career learning is all about.
In total more than nine means students across the nation now have access to our career learning options.
Over the next two to three years, we plan on expanding our coverage across all the states.
We serve.
Public schools in.
Secondly.
We enrolled 16, new project based I'm, sorry rolled out 16, New project based learning courses in subjects like entrepreneurship marketing health care.
Computer literacy just to name a few.
This learning post keeps students more engaged and makes class is more collaborative.
We're also seeing a link between increased GCA student engagement and retention at the ended the year student retention and GCA programs was nearly 10% better than in the non VCA counterparts.
While there are many factors that contributed to change this kind of change is significant for some time, we speculated the DCH experience.
Helped to further engage and retain students at a higher rate.
We're now seeing results of our efforts.
Third an important part of the career learning program involves opportunities for students to explore careers exposure to industry experts.
This includes chat delivered on the depressed neptunes virtual platform.
This opportunity complements real world works experiences in the form job shadowing and internships in fact, K 12 annual job shut a week, which is only in a second year had over 2500 student participant this year that's up from just a few hundred last year.
Companies like Google Salesforce, Google subsidiary, you to the Motion Picture Association of America, all connected with students from across the country.
Closing them to the professional skills and expertise they will need to succeed.
Fourth our career learning clear networking part Mattel.
They reached a significant milestones as they surpassed 1 million talent users on their platform. That's almost doubled the number uses the platform compared to year ago.
This quarter Tallow also saw colleges and universities turn to them as an alternative to the in person recruiting initiatives.
Got canceled because of Cowen.
Hello is now serving new partners, ranging from Texas Tech University and the medical University is South Carolina to smaller specialized schools like the college accretive services.
Studies in Detroit.
However, the Taliban proposition is it's just more than just adding students in partners.
It's about how these constituencies our leveraging the Pat.
During the past year Telo made more than 180 direct engagement, what we call matches, which we institution seeking students for scholarships of jobs.
To tallow members, who are looking for those scholarships and jobs.
Again this is just beginning.
If you try to even more growth opportunities and new applications, where the platform as part of that crude learning experience.
And finally, a valuable new part of our pre learning businesses galvanize.
Market demand for software engineers and data scientist continues even during the pending.
And the same burning glass technologies research I mentioned earlier more than 27% a recent job openings across a diverse set of industries I T related.
The immersive boot camp galvanized.
Tends to be 100% lot.
But it's now online rather than in building.
While students have selected to defer some students of the elected to defer their admissions into in building classes have resumed the focus our remote learning has expanded our potential student population.
One example is the recently announced part time data Science program, which is available nationwide.
This online program provides the same curriculum program structure and quality as Galvanizers fulltime program, but over a 30 week timeframe instead of an intensive 12 week full time program.
Our hope is that working parents veteran in anyone who wants to keep the current job.
And keep the current earnings.
While they're going on that they're learning can take advantage of this program.
On the enterprise side of Galvanizes business, we've seen corporate opportunities slowdown as corporations. If work is working from home and they're not willing to spend as much money. These tight liquidity today. So in this market.
The enterprise market has slowed and will remain that way into concerns about global 19th side.
But even during the market stall doing due to cobot.
We've had recent mins large wins for instance, USA T mobile and ally financial have hired galvanized the upskill portions of their rights you talent base [noise].
In addition, galvanized not limited.
Its enterprise efforts to the U.S. this quarter galvanize team address interest from companies in Germany, Mexico, Saudi Arabia, Pakistan and India.
As the economy begins to recover we believe will continue see increased interest from enterprise across the globe.
As you might imagine community businesses. The other part of galvanizing business that had been slowed by cycle as we said before publicly the community business will not deliver on expectations in short term.
Due to cope with 19 mandated restrictions general worker concerns.
Many workers simply will not be back in fiscal offices at the numbers they used to and that's to be expect.
However, we believe the Galvanizes immersive food cans for consumers can and will continue to deliver strong growth.
Competent and Galileo Galvanizes business prospects.
Over the long term.
Now before I leave my discussion on galvanize I want to briefly mentioned one other milestones.
For the spring semester.
We plan to rollout our first high school course based on galvanize is content.
In just six months after the acquisition we've completed the course design.
The core synergy from this acquisition a key differentiator for our career learning business is to be able to use galvanize content at the high school level.
We're planning to create additional courses at the high school level, using the galvanized personnel and galvanize expertise.
As I've outlined today, we're building on a strong year.
And we're looking even stronger growth next year and over the long term.
The early indicators for F. Why 21 are all positive enrollment growth is increasing and we're seeing increased interest in K 12 solution.
But I want to be clear here.
Our managed public schools have already enrolled 150000 students as of last week.
At the 23% increase so far from the 122000 enrollments, we posted the first quarter fiscal 2000.
Traditionally the final weeks of the enrollment season drive even more enrollment with about eight weeks remaining in this year's enrollment season, we expect to be fairly this.
That's still unclear when depend Demichele subside.
It's unclear what student retention rates will be it's unclear what the effect the state budget allocations for education might have on people reimbursement rates.
But even with all these unknowns, we believe we are positioned and well positioned to deliver percentages growth well into the double digits, both revenue and adjusted operating income in fiscal 21.
Keep in mind. This is only instate bit of enrollment broke so far today as of last week and not formal guidance for the coming year.
As we do every year, we will provide formal guidance for the fiscal year in late October when we announced first quarter earnings.
Okay, I'm getting close to closing I want you. This is gonna be long because it's the end the year, there's a lot to say.
Wrap it up we've always maintained distance learning technology is the key to the way education will be delivered in the future. It happened at the corporate level.
It happened at the college level, and that's a great school level as well.
Our company is clearly no longer just the kindergarten to Twelveth grade General education platform provider, we're positioned to be a leader in an innovator in this space across different age groups and different applications.
When the right market at the right time with the right experience and technology to take advantage of a large addressable market.
There is increased awareness and acceptance of online and blended options.
School districts are embracing online learning many districts now understand the need for blended in different learning technical platforms, and our alpine not only for the short term needs, but on an ongoing basis.
Ratios of partnering with us not only to higher these students but to use our services the upskill and we skill their software engineering and data Science Department. It all bodes well for us in fiscal 2001, but also for the long term future as well.
We successfully transitioned this coming from an education platform to an education platform that drives lifelong learning.
Let me in my comments by briefly mentioned the role we play is educators and this turbulent time, that's around systemic racism and blatant disregard for the welfare of somebody annuities, particularly black people and parts of our country.
We have a role to play.
I hope you saw our announcement around social and environmental responsibility.
Our board our management team and all of our employees represent the kinds of diversity that I think all company should display.
We announced even more scholarships.
Law enforcement pathways.
A national form an educational equal access a commitment to more diversity.
And our teacher lakes.
We've dedicated employee teams to each of these initiatives and given in time off to pursue these community activities.
Let's take a look at our website for more information about our commitment in this area. We so strongly believe it's important that everybody in the organization is committed to ratio quality.
Everyone. Thank you again for your time today I'll hand, the call over to Tim you will elaborate on fourth quarter and full year financial results Jim.
Thank you Nate and good afternoon, everyone.
As you can see for more results, we had strong financial performance in fiscal 2020, we exited the year with great momentum leading into fiscal 2021, and we're well positioned for higher growth.
In addition to reviewing our fourth quarter ends just full fiscal year results. I also want to provide some commentary on fiscal 2021 trends and discuss changes will be making to our fiscal 21 reporting.
First to recap our reported results revenue for the quarter was 268.9 million an increase of 4.9% from the prior year.
For the full year revenue was 1 billion and 40.8 million.
An increase of 2.5% from fiscal year 2019.
For the quarter income from operations was $7 million, an increase of 4.3 million from the prior year.
For the full year income from operations was 32.5 million down 13 million compared to fiscal year 2019.
Adjusted operating income was 12.9 million for the quarter, an increase of 5.7 million from the prior year.
For the full year adjusted operating income was 56.1 million a decrease of 6.1 million from fiscal 2019.
Capital expenditures for the year were 45 million a decrease of 3.4 million from the prior year.
As Nate mentioned in each case, our results met or beat the expectations. We provided in our guidance in fact, we met or beat guidance every quarter this year as well as for the full year.
And that holds whether you include or exclude the impact of the galvanized acquisition.
Now some additional details for the fourth quarter and the full year.
The 25 million increase in revenue for the year was driven by the strength of our core managed public school business and our acquisition of galvanize.
This was somewhat offset by declines in our non managed public school business.
And managed public school programs revenue for the year increased 29.8 million or 3.3% to 920.1 million.
This growth was driven by increased enrollment and improve student retention.
Revenue per enrollment for these programs grew to $7758 for the year.
This is in line with our historical average of zero to 2% growth in revenue per enrollment.
Given the ongoing covert 19 pandemic and its impact on state budgets, we could see some negative impacts to revenue per enrollment in fiscal 2021.
We are monitoring the ongoing state budget discussions and we'll have a more complete picture for our first quarter earnings.
With the increased enrollment we are saying, we believe that volume gains will far outpace any potential downward pressure on our revenue per employment.
For the fourth quarter revenue and managed public school programs increased 10.3 million to 234.6 million.
In addition to enrollment trends and stronger than expected student retention. This increase was driven by most partly driven by revenue we recognized related services provided in prior periods of fiscal 2020.
We recognize this revenue following the resolution of claims with Georgia Cyber Academy.
Moving to our institutional business, which includes both non managed public school programs and institutional software and services.
Revenue for the year declined 16.7% from the prior year.
This was in line with the expectations, we outlined at the beginning of the year.
Non managed public school program revenue declined 28.5% for the year largely due to the contract terminations. We approved previously discussed.
Institutional software and services revenue were down 1.4% for the year.
As Nate mentioned because of the covert 19 pandemic, we've seen an increase in schools and districts, reaching out to K 12 to provide online auctions for students and families.
While some contracts are signed some conversations are still ongoing and it is still too early to know the impact on this business.
However, we believe that this business will grow in fiscal 2021 after several years of declining revenue.
[noise] private pay revenue was 16.4 million for the quarter and 45.7 million for the year.
The galvanize acquisition added 11 million and rather than it should this business since the acquisition.
The galvanize revenue is somewhat reduced by the impact the purchase price accounting.
Moving those impacts galvanized revenue for fiscal 220 20.
Since our acquisition would have been 13.6 million.
Gross margins for the year were 33.4% 130 basis points lower than the prior year.
Margins were impacted by galvanize as well as lower institutional sales.
It is worth noting that excluding the impact of the galvanize acquisition gross margins would've been 34.5%.
Over the long term, we look for improving gross margins as our business mix shifts toward higher margin revenues and funding levels for public school programs continue to rise.
For the year, selling general and administrative expenses were 315.1 million.
Excluding the galvanize acquisition. These expenses were 304.2 million a decrease of <unk>, 0.8% from the prior year.
We continue to focus on driving a more efficient organization through increased automation and process improvements, while maintaining our investments in growth areas like career readiness.
For the year adjusted EBITDA was 128.2 million.
Excluding the impact of the galvanize acquisition adjusted EBITDA was 142 million an increase of 6.3% from the prior year.
This is Bruce improvement was driven by our growth and focus on cost efficiencies.
Adjusted operating income was 56.1 million.
Excluding the galvanize acquisition adjusted operating income for the year was 74.1 million, an increase of 11.9 million or 19.1% from the prior year.
Our improvements in profitability underscore the strength of our managed public school business and effective management of our cost structure.
Stock based compensation for fiscal year, 20 totaled 23.6 million.
A few years ago, we implemented a long term incentive based on growth and our career learning solutions business.
In fiscal 2001 more information about the likelihood of achieving some of the targets and that plan may be available.
Before we could begin to record the expense and see an increase in stock based compensation in fiscal year 21.
Some other items to note.
We ended the year with cash and cash equivalents of 213.3 million a decrease of 71.3 million from the prior year.
Then this increase was driven by our acquisition of galvanize, partly offset by the draw against our credit facility.
During last quarters earnings call I mentioned that we saw strong enrollment growth in states that typically pay all public schools after the school year.
This resulted in lower free cash flow for fiscal year 2020.
However, based on the shift in these payments and the early indicators in July and August we expect to see substantially stronger cash flow in fiscal year 2021.
Turning to capital expenditures Capex, which includes curriculum and software development and infrastructure was 45 million a decrease of 3.4 million compared to last year.
Over the past couple of years, we've maintained capex in this range of 45 million to $50 million a year.
Going forward, we believe this level of capital outlay is sufficient to support our core business as well as the growth and career learning inclusive of the galvanize acquisition.
Our effective tax rate for the year was 25.8%.
We had some positive tax benefits related to prior year returns in fiscal 2020 that will not recur in fiscal 2021.
Additionally, we expect to see an increase in nondeductible compensation.
Therefore expect that for next year or this year fiscal 21, our tax rate will be closer to 30%.
Now I want to outline some changes will be making in our reporting for fiscal year 2021.
First we're going to update the way we report lines of revenue.
Over the past few years, our business has evolved as you heard Nate explain.
Where we used to be a company focused on one market General education, we have sense added a second career learning.
And just a few short years career learning has already topped 100 million in revenues and is the fastest growing portion of our business.
To reflect this evolution are reporting will shift from a product focus such as managed schools institutional et cetera, So market focus general education and career learning.
We believe this new reporting will provide investors with better insight into our operations and clarity into the key drivers of growth.
Second we have been evaluating ways to better highlight our underlying business performance, especially our profitability metrics.
We also want to make changes that will better align our results to how other similar companies are reporting.
This issue has become more apparent with the acquisition of galvanized and when would be magnified if we make additional acquisitions.
To that end, we will be updating our definition of adjusted operating income, which presently excludes stock based compensation to also exclude amortization of intangible assets.
We believe this will allow investors to better understand our operating and financial performance without the impact of these noncash charges.
Look for more details on both the new lines of reporting and the changes to our adjusted operating income calculations and our first quarter results report.
We will provide the necessary information to allow investors to bridge from the old to the new reporting.
Overall, we're very pleased with our performance. This year, we saw a fourth straight year of revenue growth.
We were able to continue to make investments to improve the academic outcomes for the students. We serve while also growing our core and career learning businesses.
We also acquired galvanize to expand our career learning offerings into the adult and corporate training markets and to enrich our high school I T career pathways with galvanized content.
Our core business in our growing career learning business put us in a strong position going into fiscal 2021.
We were making investments now to ensure that we can serve all the families who choose to attend a K 12 powered school.
We believe these early indications show we're on track for strong revenue and profitability growth in fiscal 2021.
Additionally, we continue to have a strong cash position, which allows us to fund both organic growth in our businesses as well as to pursue inorganic growth opportunities that may arise.
Thank you for your support and I'll hand, the call back over to Nate Nate.
Okay. Thank you Tim Laura if you are still there I think we can move to today with the end of our prepared comments.
At this I will be conducting a question answer session.
Back to ask a question. Please press star one on your telephone keypad confirmation somewhat indicate your line is in the question Q.
Hi, Joe if you would like to love your question from the Kim well participants using speaker equipment and may be necessary for you to pick up your handset before passing the Starkey one moment please poll for questions.
[noise]. Our first question comes from the line of Jeff Silber BMO capital markets. You May proceed with your question.
Thanks, so much and and congrats on the strong finish in the momentum going into the current year.
You provided some color on demand trends and enrollment. So far you mentioned I think there's lot of eight weeks less than the enrollment season.
Name normal year, what percentage of your enrollments do you have by now and do you think it will be higher or lower than that this year.
Jeff how are you doing.
We anticipated.
We anticipated that everybody question would be how can you give that with the final enrollment number was going to be and.
Im going to try to be disciplined to not give you that because we don't know what it's going to be this year doesn't look like previous years.
And we haven't disclosed what the weekly monthly growth trends would be so I don't want to be evasive. The bottom line is.
We gave the stat, because we wanted to give people an understanding where we are today, but I don't know how fast is going to happen and I don't know how this really is going to relate to previous years. So we're going to decline to give more detailed and just to say we're at 150 now and we know it's continuing to grow.
You know as you might imagine we're seeing more demand this year than we've ever seen before but I don't know how much that demand continues I just wanted to give it a little more color to investors and then given in the path, but it's it's just too hard to predict what's going to happen. It's best to this year. So I can really can't try to contrast issued a previous.
Use and go through that math.
Are you can't blame me for asking.
Let me ask it.
I'll ask another question about the enrollment trends and im not looking for a specific number but.
The type of demand that you're getting is it coming more.
From parents is it coming more from your school district partnerships are you seeing it impacted some of the new schools that you're opening any color there would be helpful.
Sure and yes, we can answer that one.
Incoming the primary growth is coming from parents, who want to have an option for their kids. It's it's enrollment in our are what we traditionally have call managed schools.
Thats the primary growth we are seeing increase however in school districts, who call us and want to use our content in our quick and.
More of those contracts this year than we've ever had in any one you before.
Mentioned, Miami Dade, there's others were working on not yet disclosed, but but maybe not as large as Miami Dade I said. They are 270000 students. There are others that are literally anywhere from 10000 to 100000 students. So we're seeing more demand there as well, but by far the biggest demand the individual parents, saying.
I need to get might get into a into it a safe environment.
And the new schools and the new schools that we were turning up are doing well there in smaller states, obviously, they're not in the bigger state, but they're feeling pretty fast. So we're filling those schools up kind of faster than we thought we would so they're all doing well as well, but but they're small is the new existing Jeff it's the existing state.
You might imagine, it's the Florida is in Texas and Ohio.
Michigan.
All of the Big States in the country, where we provide that's what we're seeing base.
Alright, Great. Let me sneak in a little more then I'll jump back to the Q. So.
What do you say to those folks that think this might just be a one year spike and hopefully we get a vaccine and a year from now schools are open as regular and all those students or returned to their old school, how you grow post pandemic.
Yes, there's no question Jeff.
And we think about that on a constant basis, we're actually focus as a team of what we can do in F. Why 22, right now we have that conversation metric we had conversation about it earlier today I'd say a couple of things there are five major factors to how we continue to growth. The first is retention and I mentioned in my script.
That.
Everybody in the organization those we've got to provide a great experience for all these parents, they're going to come in and they're going to say I thought I was going to one kind of program, we want to show better than anybody can be that's a learning more there's great flexibility in this program. They can do think that they could have done in.
Are we going to lose some wind whenever schools opened backup absolutely, but when we lose them. All I don't think so I think we've got a good program and we're going to keep up the second and socialization. That's number two we have a number of program that we're focused on so that when we have the opportunity just like when regular schools had the opportunity to open up we're going to have a number.
Socialization programs, some of which we're seeing now but their online and then we'll have people in person.
Interfaces with each other when ever cold begins to subside.
Third is galvanized growth.
We will continue to see galvanize accelerated growth in the consumer business and by the way one covances size, while you might say the core business might loosen students galvanize gets back to even higher growth because not only will have online remote you will now have the the brick and mortar students Becky.
Fourth would be learning solutions and learning solutions.
Is growing again, it getting market recognition and what we're finding is that that the deals we are doing and the people were talking to we're not doing it for one year. They're realizing this is an ongoing opportunity for them to include distance learning in their capabilities and got to think about.
The backup programs that are necessary for hurricanes, and snow storms and and sickness is.
All of those situations require having backup dsos and there are realizing online can do that.
But the biggest one yet about my five the single biggest one is the growth in career learning.
We have a lot of energy effort put into that we're opening up more schools and we think we're going to see could see continued growth in Korea and learning at a higher rate than we've seen in the core business. So when you add improve improvements and focus on retention socialization.
Turning solutions growth galvanized growth and career learning growth you see that we believe that we will not does not just the onetime year, we're going to continue to go.
That helps really krish, yeah, I really appreciate the color. Thanks, so much.
Thank you Jeff.
Our next question comes from a line of Stephen Sheldon with William Blair. You May proceed with your question.
Hey, Thanks, good to hear on the enrollment momentum just curious if anything notable about the grade levels, where you're seeing higher enrollment growth are the enrollment skewing kind of older or younger and can you also talk about enrollment trends through August between Kerr readiness and your traditional programs.
The percentage growth between the two is about equal.
We're not seeing one go faster together.
On time.
But.
In terms of.
I'm sorry.
Second question was.
Kind of any sort of breakdown I guess, what the enrollment momentum between the ages student and then CRE readiness versus traditional.
Yes so.
We.
It's kind of across the board, we there's a slight difference.
In the high school students and product that they're going after so we actually see a little more growth and in high school.
We have more of the of the high schools.
But generally we're seeing it across the board I mean, I'm not seeing a dramatic difference between high school students Middle School Grade School.
I would say it's across the board.
Got it.
And then on teacher hiring I guess, how much progress you have you made on that pump so far.
How long does it take them to get up to speed and how are you thinking about it teacher student ratios in this environment.
Teacher hiring has gone well, it's amazing how we when you when you need to hire more two years you go after them more aggressively.
We also have I don't have you noticed we have a part time workforce that learning solutions groupon whenever they need to leave engage those teachers that by the way. There. There are a couple of thousand of them. We engage those parts on teachers to try to convince as many of them full time for the year, we have gone to colleges and universities to hire more from.
From those sources, we've worked for a teach for America to try to take more the graduates they're coming out of their their programs.
So teacher hiring is actually going pretty well make no mistake, though we we still got a lot of hiring still to get done for the rest of the year in terms of how fast they can get up to speed. Our program has the standards that have trained that we've honed over many years and it only takes him about two weeks to go through the training the teaching techniques themselves they already understand.
Because they are experienced teachers.
What's happened do they have to learn our system and they don't happen, though all of the system to David part, but they need to know is.
What's the beginning of the of the content in the program and as students are learning throughout the year. The teachers are also getting more and more familiar with it. So we've got professional development sessions fall into teachers to gets into the first week of weeks and training and then we will continue that development all throughout the year.
Okay.
Got it.
Any I guess just last one for me I think I think Tim you might have mentioned that they're raising.
This quarter.
Revenue from services.
Georgia, Cyber Khattami Becker that correctly and if so can you quantify that.
Yes, it was $4 million.
Okay perfect. Thanks, Congrats on the results from the momentum.
Thank you David.
Our next question comes on line of Greg Pendy with quality you May proceed with your question.
Hi, guys. Thanks for taking my questions I'm, just if I understand this correctly in the commitment to breakout career learning does that mean if were to run for this quarter was 160007, hundreds don't break that out into a 103007 I guess.
Traditional.
General education that you'd have to say 13000, ASO and occur learning that said commitment you guys will be reporting next year.
So what you're asking a Greg is you're saying from our 122 Dot 3000 that we reported in first quarter of this year 13 point, yes.
Were 13 point yeah.
Their career learning students and the remainder were general education.
Okay. Yeah. Your work out the first I was working off before okay. That's that's fine I got it.
I guess just your next question I mean, just going back to that article that you guys put out a while back on the teachers.
200 teacher higher I mean, what does the general philosophy ahead of arguably uncertainty in terms of enrollment or you guys willing to spend ahead of growth.
Are you going to be more prudent.
I guess, even if it even if some of the enroll double onto their own pare back.
Just from your spend I mean, how are you guys just big picture thinking about.
You know in arguably very big fall.
Yes, but from an expense standpoint.
I got it Big picture this quality is more important.
We have to deliver good service. So we're hiring teachers ahead of the demand that means we take some financial risk. The effective we may have more teachers than than to advance supplies, but so far we haven't been wrong demand is demand is strong. So we try our best the higher ahead of it.
I don't know if that answers your question, but yes that means there is some risk that we will have more teachers than we need I don't think that risk is high I think it's a pretty low risk because all for what we've seen in the 150000 them. When we reported today shows that the demand continues to grow and we're not going to end up with with too many teachers were going into right number but.
Philosophically how to approach the problem to answer your question directly we try to higher ahead of demand, we're doing our best to get out in front of demand because the quality is important.
At the end of the day, if we have to have a couple of million more in expense than we'd like to have.
But what we did was we had the right to the teachers onboard before the students got there that to me is more important.
Because the opposite means you're going to have bad academic results and and port retention and we just can't afford that.
Yeah. It makes total sense and I'm, assuming teachers are the main at the name.
Hiring our risk that your expense that you're looking into into the fall correct.
That's correct and then and also remember that number is not just teachers. This teachers and administrators now the bulk of it is teachers, but there are some administrators in their academic administrators and encounters and things like that also get factored into them.
Okay, Great. That's very helpful. Thanks, a lot.
Thanks, Greg.
Our next question comes from line of Alex Paris with Barrington Research you May proceed with your question.
Hi, guys. Thanks for taking my questions.
Congratulations on a strong finish the year and what looks like.
Great year coming up.
So.
Just to pick I knew a little bit what are you seeing in terms of.
From the states in which you operate in any telegraphing are signaling.
What a school funding might look like in the coming year revenue per student that sort of thing, obviously, oh, there could be some pressure there, but again you have any anecdotal information that you're seeing operating in that space.
Yes, and Alex.
You said thanks for taking your question, yes, we always take your question, but [laughter] absolutely. Thank you yeah. So yes, we are seeing some signals from from states. Some states are struggling with the issue more than others, we think that.
That on average rates will will not go up we're going to every year. When people are struggling with their economies are struggling with your taxes and so we're not going to see rates go up but we also know that that every jurisdiction is struggling with they don't want their kids to lose a year of growth. So.
We're basically seeing most states, saying, we're going to find a way to fund education, the not backing off on the education now.
You might see small differences in the into one to present to 2% kind of change, but we're not seen anybody say, hey, we're going to drop or rates.
Dropping reimbursement rates any significant levels not seen anybody say that.
Hearing that from states, they're all committed to have to funded allocation and finally get that done. In addition to that tiers funding. It really help the state. The federal government has dropped a lot of funds into the states to help them and many of the states are are counting on even more shares funding to help them through the year and then they've done some.
Savings can lead a.
They save a little bit of money from something that didnt spend money on.
There are sports in their buildings and things like that and they've taken that money in putting that money into online. So we're not seeing any dramatic.
Reduction.
In rate, although I want to be costs cautionary there.
We know that everybody is down on on taxes, because people. They are less people working and more people on employment. So there is less revenue to states in the states are struggling with how do we solve this problem, but they're not backing off education to do it. So I don't know if I'm, giving you enough color.
But thats how is it.
Oh, that's great and helpful. I appreciate it.
And then.
That's my last question it's about.
The point that you made that you have over 150000 students enrolled in managed public schools for the coming here.
Yes there.
What are the variables.
In terms of those enrollment started and what is your historical experience there.
[laughter] good good try out [laughter] I'm not going to give numbers on it but I am I'll give you color.
Okay.
I'd say, how we think about it and how we're analyzing it but the numbers to be very honest with you. This surprising us each time, we look at the numbers are different than our previous years trends, but we know that every year when when parents.
Enrolled in our system throughout that season, there is some percentage of them relatively small percentage, who then decide they're not going to show up. So there is what we call a mill. So theres X number it'll be X minus number who actually show up but it's a small percentage at the same time. We also know that we get a lot of enrollments that happen through the ended.
Yes, especially as parents figure out whatever their other option wasn't available I need to get into something and lastly, we're seeing from all of our surveys were seeing a number parents A. I don't know what my public School district is going to do.
Im a little worried about that and so we're seeing kind of an increased demand in the last few weeks as people worry about health issues.
So while none of our trends look like the trends from previous years, we do look at all these factors and look at him quite honestly every day, we track and then.
The numbers every day and while I'm not going to give you. The how does it do this year versus the last year I'm going to tell you, we monitored and and what I'd say, we're going to be in strong double digits.
That's based upon looking at the trends we've had in the past the trends were looking at today, we analyze is pretty closely.
I'm going to be consistent here I'm not going to disclose.
All of that specific trends I'm, just going to tell you. We monitor those trends very closely we wouldn't make the stated we may if we weren't comfortable that that.
We've got a good handle on winning moments are coming out.
Yes.
Seasonal I appreciate the extra color, thanks, guys and good luck.
Thank you.
As a reminder, I'd like to ask questions. Please press star one on your telephone keypad one moment please poll for questions.
Our next question comes on line of Choice Adams, Fred You May proceed with your question.
Thanks.
Yes Hello.
Hi, Troy.
Hi, I'm in the education industry.
So I was just wondering.
What a similar questions before with preparing striving to demand.
What percentage of your services are offered directly to the parents and what percentage are going through the actual public or private school systems.
Well you know not publicly reporting we do disclose.
How much of our revenues come from what we call managed schools and how much it becomes and private schools and how much it comes from the institutional visits and so.
I don't know the percentage right up stops my headset. Some in the range of 85% comes from the what we call that many schools the schools, where we're offering our schools are offering a service directly to consumers.
Another maybe seven or 8% are coming from what we'll call. The institutional and then at a slightly smaller percentage are coming from private schools. So that's just shy of breaks out.
Okay. Thank you for the general.
Okay. Thanks drew I appreciate you being on the call.
Can you.
Ladies and gentlemen, we have reached the end of today's question and answer session I would like to turn the call back over to Mr. Davis for closing remarks.
Well I want to thank everybody for listening to the call and staying with me as I had longer than normal comments today, but we had a lot to report on.
We obviously gave a little different stat than we normally do but we we thought it was important in this unprecedented time to give you some sense of where we are.
I appreciate everybody being on the call and I hope everybody is safe and.
Around them has a great rested we thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for participation have a great Deb.
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