Q4 2020 Strategic Education Inc Earnings Call
Good day, ladies and gentlemen, and thank you for standing by welcome to strategic Education's fourth quarter 2020 results Conference call I will now turn the call over to Teresa Wilkie manager of Investor Relations for strategic Education. This Wilkie. Please go ahead.
Thank you good morning, everyone and welcome to strategic Education's Conference call in which we will discuss fourth quarter 2020 results with US today are Robert Silberman Executive Chairman, Karl Mcdonnell President and Chief Executive Officer, and Daniel Jackson, Executive Vice President and Chief Financial Officer.
Following today's remarks, we will open the call for questions.
Please note that this call may include forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
The statements are based on current expectations and are subject to a number of assumptions uncertainties and risks that strategic education has identified in today's press release.
That could cause actual results to differ materially.
Further information about these and other relevant uncertainties, maybe found in strategic Education's annual report on form 10-K to be filed.
And the most recent 10-Q and other filings with the Securities and Exchange Commission as well as strategic Education's future eight Ks and Qs and 10 Ks copies of these filings and the full press release are available for viewing on the website at strategic education Dotcom.
And now I'd like to turn the call over to Rob Rob. Please go ahead.
Thank you Teresa and good morning, ladies and gentlemen, after a fairly eventful year, we have quite a lot of material to cover. This morning, Karl will go over our operating and academic performance for 'twenty and 'twenty and our plans for 'twenty and 'twenty, one Dan will cover our detailed financial results and finally I will have some brief remarks on our capital allocation.
And of course, we will stay for as long as you have questions Karl Thank.
Thank you, Rob and good morning, everyone.
Obviously 2020 was a unique and challenging year and certainly unlike any year that I've ever had to manage through.
At the beginning of 2020, both strayer and Capella universities were performing at peak level.
Initiatives to drive improved learning outcomes and higher retention, we're effectively improving results following years of investments and new tools and technology technologies to simultaneously improve learning while increasing productivity.
And as the pandemic spread along with its associated economic impact.
And Capella is performance began to diverge quite significantly driven by their differing student body composition with strayer, serving predominantly and undergraduate population. The segment of the population most prone to adverse impacts from of deteriorating labor market <unk>.
Significant new student declines and the third and fourth quarter led to a decline of 9% in Australia as total enrollment for the fourth quarter.
Over the same period Capella as new student growth remained strong, resulting in total enrollment growth of 5% from the prior year.
Notwithstanding strayer and adverse second half performance S. C is overall revenue and adjusted earnings per share of both increased 1% for the full year 2020.
Part of that performance was driven by our ability to reduce operating expenses and later this quarter, meaning the first quarter of 2021, we will complete our restructuring that began in the third quarter of last year that reduces our annual run rate operating expenses by $40 million some of those savings are being reinvest.
It into our new alternative learning segment, which is intended to further diversify our company net.
Net of these reinvestments as well as some and utilization of 2000 and 'twenty expenses. We expect 2021 annual operating expenses, excluding Australia, and New Zealand to be down between three and 4% over the prior year.
And in November of last year, we closed our purchase of Torrance University think education and the New Zealand based media design School from Laureate education, given the timing of that close which was midway through the fourth quarter and their overall financial contribution was minimal and included a small six cents earnings dilution.
And as know classes, we're actively being taught over the holidays, but on a pro forma basis collectively these assets grew revenue for the full year by 27% and EBITDA by 70%.
We expect these Australian and New Zealand assets to show continued solid revenue and income growth. This year notwithstanding the fact that we are assuming from a planning perspective their borders will remain close to foreign students through at least the third quarter.
For 2021, we expect tour and think education and the media design school will contribute more than a dollar of 15 of earnings per share.
Sofia alerting.
Our low cost College course alternative portal continues to perform very well since its relaunch with of monthly paid subscription for unlimited access the pricing model that we launched last August.
Date more than 26000 people have subscribed and we expect to see as revenue to triple and 2021 to over $10 million. Our employer solutions team also had a tremendous year and 2020 employer affiliate of new enrollments grew 1% overall, but increased 25% of Capella University.
And the fourth quarter, we successfully launched our new workforce edge product, which is our education benefits management solution for Fortune 1000 companies and connects these companies to our proprietary network of universities, which includes strayer and capella universities as well as the schools from noodle partners, we expect to have more.
More than 250000 total employees education benefits being managed and work force edge. This year ultimately serving as a low cost low cost source of new enrollments for both strayer and capella.
In March of 2020, we were saddened by the passing of our business partner Jack Welch The school that we founded with Jack The Jack Welch Management Institute had perhaps its strongest year ever in 2022.
And the school increased its ranking to number 15 on the Princeton review list of top online global MBA programs.
It ranked first overall in six different categories within poet and Quants rankings more than any other business school.
J W. M is net promoter score of 79 is nearly three times higher than the business School average and the Institute graduated 664 students of 14% increase from the prior year.
I know the Jack would be beyond proud of these results.
And turning now to our notional outlook for 2021, we continue to see revenue growth of 15% driven by continued strong performance of Capella University as well as growth in Australia, and New Zealand as well as our new alternative learning segment, partially offset by weaker performance at Strayer University.
Our internal plans of model continued soft new enrollment at Strayer University through the first half of 2021, and returning to positive new student growth and the second half of the year with total enrollment growth returning in 2022.
We expect adjusted EBITDA to be flat year over year, roughly $55 million and capital expenditures and year end liquidity of $500 million for modeling purposes, we assume of 29, 5% tax rate and a share count of $24 2 million.
Finally, you will notice this morning's results are presented and the same format. We used throughout last year, we decided to wait to institute, our new segment level reporting in 2021 to allow our owners to assess our fourth quarter results and the same format. We used throughout 2020, we.
We do intend to begin the new segment level reporting with our first quarter release on April 29th and we will be reporting three segments U S higher education, which will include strayer and capella universities as well as the Jack Welch Management Institute.
Alternative learning, which will include Sophia learning employer solutions, including work force edge and our digital enablement partnerships.
And Australia, and New Zealand, or a and Z as we refer to it internally, which includes towards University think education and the media design School.
In early April we will be releasing a schedule, which will include a pro forma presentation of key financial metrics for these three segments to allow our owners the ability to familiarize themselves with the data well in advance of our earnings release.
And before I turn the call over to Dan I want to thank all of my colleagues within Sci.
Throughout 2020, they continued to exhibit tremendous resilience and strength and professionalism and it's an absolute honor to work alongside them and.
And with that I'll ask Stan to run through the financial results. Thank you Karl and good morning, everyone I want to first point out that our consolidated results for the fourth quarter and the full year 2020 exclude the financial results of the Australia and New Zealand acquisition. Prior to November 3rd 2024 of pro forma view of our full year 'twenty and 'twenty.
Net level results. Please see the fourth quarter slide deck that we just posted to the Investor Relations section of our website I also want to remind everyone that our adjusted results, which are non-GAAP exclude charges and expenses that are nonrecurring, including merger acquisition and restructuring related costs.
Moving onto our our fourth quarter results adjusted revenue for the fourth quarter grew 6% to $278 8 million compared to $263 8.002 million 19, driven primarily by the inclusion of $35 million of revenue from our New Australia, New Zealand division offset by a 13% decline and revenue.
At Strayer University Capella.
All of the University revenue was flat year over year as total enrollment growth of 5% was offset by lower revenue per student the revenue per student decline of Capella was driven by growth and employer of affiliated enrollment and <unk>.
And we expect to continue into 2021.
Our adjusted revenue for the quarter and the full year excludes the impact of and $11 million deferred revenue adjustment related to the purchase accounting for our Australia, and New Zealand acquisition.
Our adjusted operating expenses for the fourth quarter increased 15% to 231 6 million driven by the inclusion of Australia, and New Zealand and partially offset by expense savings at Strayer University, which were primarily related to the restructuring that commenced and the third quarter of last year.
The increase in operating expense resulted in a decline and adjusted operating income to $47 1 million from $62 9.002 million 19.
Our bad debt expense for the quarter was five 3% of adjusted revenue slightly higher than 2019, due primarily to student relief measures. We implemented as a result of the pandemic, we expect bad debt to improve slightly in 2021 due to better collections and the U S. As some of the 'twenty and 'twenty relief measures of expired.
And also historically lower bad debt and Australia, and New Zealand.
Our adjusted diluted earnings per share for the quarter declined to $1 39 compared to $2.13 in 2019, reflecting the impact of weaker strayer performance. The shift from net investment income to net interest expense and higher share count related to our Q3 stock offering. Additionally, due to the.
Timing of expenses for Australia, and New Zealand and the last two months of the year and as we projected in November the impact of Australia, New Zealand on our Q4 and full year 'twenty and 'twenty earnings per share was slightly negative.
Moving onto the full year results, our adjusted revenue for the year increased 4% to 1 billion $38 9 million from $997 1.002 million 19, reflecting a very strong first half of it both strayer and capella and the inclusion of Australia, and New Zealand offset by weakness and the second half primarily at Strayer.
Our adjusted income from operations for 'twenty, and 'twenty grew 9% to $211 1 million from $194 1.002 million 19 adjusted earnings per share increased slightly to $6.68 from $6 67 and 2019.
Our adjusted effective tax rate for the year was 28, 5% and we expect our full year adjusted effective tax rate in 2021 to be approximately 29, 5%, which assumes the higher corporate income tax rate of 30% and Australia and no changes to statutory rates and the U S capital expenditures for 'twenty and 'twenty.
$46 8 million compared to $38 7 million for the same period of 2019, and we ended the quarter with $225 3 million of cash cash equivalents in marketable securities and approximately $210 million of available credit on our $350 million revolver.
Rob.
Thank you Dan So just a few comments on capital allocation from my perspective.
When you cut through a lot of the financial statistics.
Statistics that Dan reported.
We generated roughly $6.60 per share of what we call owners' distributable cash in 'twenty and 'twenty.
And based on our current enrollment trends, we expect that to be flat to down in 'twenty and 'twenty, one and say $5 50 to $6 50 per share.
Based on that projection and our board has kept our annual dividend in 'twenty and 'twenty, one at $2 40 per share or of roughly 35% of 45% payout ratio.
Now our priority for the remaining capital that we expect to generate through the year is first to invest and our academic outcomes at all of our universities and second to build up our balance sheet. After the Australian acquisition and returned two of three point O financial composite score.
I would point out that based on the capital allocation decisions. We've made over the last four years, primarily our merger with Capella education and the acquisition of the Australian assets the impact of the downturn and Strayer university's enrollment on our overall financial results is significantly ameliorated.
We are a stronger more resilient and a more diversified enterprise and we have ever been and the pass and that positions us well for the future.
And with that operator, we'd be pleased to answer any questions.
Thank you ladies and gentlemen, if you of a question of comment at this time. Please press Star then one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue simply press the pound key.
And if you are of a question or comment at this time. Please press Star then one on your telephone keypad.
Our first question of comment comes from the line of Jeff Silber from BMO capital markets. Your line is open.
Thank you so much.
I believe you typically disclose new and continuing enrollment in your press release I didn't see it. This time can you give us a little bit of color and how it day for both Strayer and Capella University and also just the reasoning why it wasn't disclosed thanks.
Yeah sure Jeff Happy to first regarding the actual performance strayer as new student performance and the fourth quarter was essentially in line with the performance they had and the third quarter Capella was slightly better so they got a little bit stronger.
And the reason that we've adjusted our release is that we just feel like total enrollment is ultimately what drives revenue. It's what we focus on from a management standpoint, most of the students that are enrolled at any given time are continuing students and we want to focus on their retention and so it just reflects the way that we think about the organization and how we act.
We manage it.
Okay fair enough.
There's been a lot of noise about palette and proposals coming out in Washington that might seem to be favoring some of that the nonprofit schools like community colleges State University.
I'm just curious if you see more funding for those schools. What do you think it does seem of your company from a competitive perspective.
Well, we're confident that the value that we create for our students is quite high and we're always looking for ways to enhance the student experience with better teaching methodologies and other ways that we can enrich their experience. We've long now focused on the concept of creating economic mobility for students through edge.
<unk> and we feel as long as that we're fulfilling that part of our mission, we'll continue to create a lot of value for our students and and be fine.
Okay, and then finally I'm sorry.
The the new segmentation and first of all thank you and advance for releasing the data before you report earnings I'm sure, we'll all appreciate that but.
But now that you're going to highlight the alternative learning segment, a little bit more and can we just get a little bit of a I'll call you've talked about the fee of learning. We've got some good data over the past few years, but some of the new products that you're offering are still relatively new to investors can we just get a little bit more color about what you have and and how it stands out from a competitive area.
Sure happy to the largest part of what will be alternative learning is what we referred to internally as employer solutions and this is the group of people, who work to liaise and and work with the more than 900 and corporate partners that we have and the organization and.
And so what we intend to do is to effectively transfer the revenue from the U S higher education division into alternative learning because it's the alternative learning group, that's actually generating those corporate affiliated enrollment that will be the largest part of their revenue.
But you also have Sofia and you'll also have ultimately enrollments coming out of work force edge, which is this education benefits management solution that we've rolled out a quite successfully even though it's only been about a quarter.
And part of that could be fees that we receive from noodle partner institution. So if an employee that's covered and to work force edge elect to not enroll and capella of Strayer University and instead enroll and one of the noodle partner universities that receiving institution of that new student pays us.
A fee so it would be the combination of transfer pricing revenue from employer solutions Sophia workforce edge all of that will comprise the alternative learning revenue base and of course their direct expenses.
Oh.
Great and I know you gave was sold and gotten that data will you be releasing enrollment data going forward as well.
Gonna be releasing total enrollment within the division.
Okay, Alright, fantastic I'll jump back in the queue. Thanks, so much thanks, Jeff.
Thank you. Our next question of comment comes from the line of Tobey Sommer from choice Securities. Your line is open.
Yeah.
Yes.
Thank you I was hoping you could discuss a.
Regulatory changes that you might expect and in particular changes too.
90, 10, and what percentage of enrollments are veterans for Strayer and Capella.
Yeah, well, specifically with respect to 90 10 Capella University of first of all would have no issue there and the low seventy's today. They have a much smaller percentage of their total enrollment is either being active duty military or veterans Strayer percentage is historically and <unk>.
Currently higher and.
And so they would be in the mid to high Eighty's, but we're confident and our ability to manage that particularly with respect to growing employer affiliated enrollments, which has always been one of our priorities and continues to be a priority for us this year and to be clear, it's mid to high eighty's, including all of the V. A.
Funded students, it's lower than that now.
Okay. Thank you and.
Do you think.
On campus activities may be back to normal for the fall semester and is that something that you'd contemplate and the arc of of guidance. This year.
We are optimistic that our campus network will be opened by the end of the year. We have a couple of facilities that are open now.
So we've taken a lot of precautions both in terms of physical layout of space to make sure that we're maximizing the safety of these physical locations.
So we are actually now and the process of opening some and it is our hope that the full network would be open hopefully maybe or perhaps in the latter half of the third quarter into the fourth quarter.
Okay.
Could you talk about of the.
And what your expectation is for the resumption of international travel and.
To Australia, and New Zealand.
And what's your plans are around that business and maybe broadening its geographic reach outside of those borders.
Well with respect to broadening the reach outside of their borders they they've effectively done that.
In 2020, so the Australia and government provided relief from their educational visas, which allowed foreign students, who historically would have to be in country to enroll and in Australia and University of the government allowed them to stay in their native country, and take Australia and classes online and that that already happened last year.
We think that will continue at least through the first part of 2021 and based just on our sort of informal conversations with our local management team. There. It's our hope that the borders will begin to open to both foreign and students and international travel and the second half of the year and should it open sooner than the second half.
Of the year, we think that that obviously would be favorable in terms of potential additional enrollment and revenue growth.
Thank you very much.
Sure.
Thank you again, ladies and gentlemen, if you have a question of comment at this time. Please press Star then zero start in one of your telephone keypad. Our next question of comment comes from the line of Gary Bisbee from Bank of America. Your line is open.
And Gary.
[laughter] I don't know if you guys are happy about that.
Delighted.
And then.
And it's good to hear all of your voices and.
Let me start with.
Something that was it.
It's been a big part of the business.
And even back in the days when I follow the company before which is just this whole concept of.
And serving employers and the employer market.
It sounds to me and and looking about how you've discussed that over the last year.
Youre actually undergoing a pretty significant change.
And if the plan historically was to pursue partnerships with corporates to.
Help educate their employees.
And out and trying to sell them of software platform. Some of those students may probably get higher margin fee.
And you could lose some revenue and profit.
Yes, if they enroll at those partner institutions and.
And so really what I'm trying to get at is how much changes put through the organization of people and the seats to execute that and.
And what how should we think about.
And now sort of the keys to succeeding with that strategy.
And then lastly are you cannibalizing do you think you're really going to cannibalize.
A portion of enrollment.
If they choose those partner institutions.
Multipart, but I'm trying to understand and strategy. Thank.
Thank you, Gary and and you're right. It is a big change for us, but it also is completely congruent.
With our long term strategy that over time, we want to diversify our tuition revenue base into private sector funded sources of capital.
And we absolutely have a great team in place I think there's almost no risk on cannibalizing strayer of capella enrollment vis vis the noodle partnership because there's just almost no overlap from a programs standpoint.
And what we've realized a post capella merger is that we now have the ability to vertically integrate our assets and such a way that really provides us with a very significant competitive advantage. So for example.
We can begin to package a sofia access into employers for general Ed courses. We've got all of the technology that enabled us to drive productivity gains through our instructional model and so we're able to create significant value for employers.
And albeit discounting the tuition, but discounting tuition is completely aligned with our long term goal to ultimately try to bring down the cost of education for students.
And because we have this vertical integration, we're able to offer employers and very compelling tuition levels that enables them to essentially effectively cover their entire workforce and enable the work force to have no out of pocket expenses for their education and degree so I wouldn't I wouldn't.
Bribe it necessarily as a change in any way to our strategy. It is of significant.
Investment that we're making and and and we're definitely leaning into that employer market and we think it's one of the things that ultimately will differentiate our organization moving forward.
So historically you've had a couple of really big wins in that space.
And my understanding is an awful lot of the basin.
Moller agreements.
Whats the focus going forward is it.
The.
Company wide agreements and every once in a while you get a big fish or is it.
Workforce edge and this new focus.
Go across the spectrum of.
Corporate opportunities.
Small, they're they're not necessarily mutually exclusive so within the last year, we did get to very large enterprise level of exclusive contracts. We got one with best buy the retailer we got another one with Cvs.
But we very much think that work force edge could be of real differentiator for us. So as I said in my prepared remarks. Our first goal is to have at least a quarter of of million employees collectively from multiple employers enrolled and that platform and ultimately what we think is by and large and certainly at the.
Under graduate level, Strayer, and Capella University would be the most compelling because it's the institution that would have most likely either zero or very little out of pocket costs for the employees.
And so I think as we set goals as we've done in 2021 to continue to increase the mix of our students that come to us from the private sector work force edge is likely to be the vehicle through which that happens.
Okay, Great and then just one last one on strayer.
Do you have of sensor can you share with us.
Sense of.
Of end market exposure of your enrollment clearly.
Appointment of impact that we've seen from the pandemic is highly concentrated and a few markets and there are some end markets that really haven't been impacted given.
Just given the importance of.
And potential students confidence in there and there are.
Employment prospects.
Back then.
That mix actually we'll have a lot to do with how quickly this can rebound.
Can you share any of that with us.
Yeah, I mean first I think the juxtaposition of strayer as a result of needs of the Capella is an indication that they're serving vastly different student bodies, which are dealing with the pandemic quite differently and we know actually from polling and sampling existing strayer students. There there's a high degree of anxiety.
And even now about labor market job.
Their ability to maintain their income through the coming year. So there's no doubt that that has had a major impact on the results that we've seen.
We're certainly hopeful that as the pandemic begins to ease and vaccinations and begin to spread and the labor market continues to recover that ultimately that will start to show a return to growth at Strayer and frankly as I said in my prepared remarks, that's what we are planning for and we are planning for that recovery to begin happened.
And the third quarter of this year, so we'll have to wait and see and.
And it's dropped.
There is some geographic diversity and in those states that remained open and there's a little bit less pressure.
But kind of the key short hand way to think about it is if somebody was and a job that they could do from home that it was a digitally enabled job and then they generally we're able to keep their job and their employment confidence stayed high and large part of the strayer undergraduate.
Pool of of either the current students are prospective students.
We're in jobs, where that was not the case. They they were not jobs that could be done from home. They werent digitally enabled.
And as those as their places of work shut down their employment shut down and and that's really what reverberated through the strayer and new student enrollment.
Yes that makes sense alright, thanks, guys. Thanks, Gary Thanks, Gary.
Thank you. Our next question of comment comes from the line of Greg <unk> from Sidoti Your line is open.
Hey, guys. Thanks for taking my question I'm, just kind of wanted to dig into I think you mentioned, Australia, New Zealand for the new year would do about $1 15, and EPS just wanted to understand I guess with a new administrators and how much of their growth was being fueled by foreign.
Foreign students.
And you have choosing Australia and is there any risk if the U S becomes more relaxed on international student visas that they may be.
Looking to choose U S schools over the Australia, and New Zealand and schools.
I personally think that's very unlikely Australia.
<unk> has always been a major attraction for foreign students for quality of life the.
And the government has crafted of visa program that if you agree is a foreign student to study one of say 30 or 40 different programs, where the Australia and government believes there is significant job growth if a student complete.
Completes his or her study and that program. They are granted residency of permanent residency status in Australia and.
Additionally, I think the way that they've handled the pandemic, both Australia and New Zealand would provide them with a safety premium if you will particularly against Western Europe, perhaps the United States for foreign students interested and migrating somewhere to attain a degree so our view is that the foreign <unk>.
Students will continue to have high demand and ultimately studying and Australia and just for context foreign students make up just over half of their student body.
And as we've said, we expect certainly by the second half of this year for those students to be able to continue to immigrate into Australia and for that to continue to be of large source of their future growth.
Greg and also it's also geographically a lot closer to the major sources of international students and that's an important point.
Sure no that makes sense. So then I guess within that you mentioned of $1 15, and EPS I'm, assuming that's all Australia, and New Zealand and that just Torrens a correct me if I'm wrong, but then in addition, so can you just give us a little bit of Big picture color I mean, the international student trends, you think will remain healthy.
And what what the key drivers are because it's been a very high growth assets and the past in terms of enrollments. It looks like so I'm just trying to understand you know.
What can what can help Cree.
And healthy growth and the future as well.
Sure. It's well it is all three assets so it's toward New University education, and the media design School in New Zealand and.
Only 43, I guess universities and Australia, so our combined assets have less and a 2% market share the Australia and higher education market continues to grow mid to high single digits annually.
And we think that it's unlikely that youre going to have other new entrants and so the fact that you've got certainly with the case of towards which is by far the largest of these three assets delivering very high quality programs, which they continue to rollout of new programs.
We think that these assets will continue to grow both by continuing to attract foreign students, but also by continuing to grow the domestic student base as Torrance graduates more students and those students farewell and the labor market and the reputation continues to grow on top of already being strong. We just think that it's of great great set of assets.
The fundamentals are very sound from a supply demand standpoint, and we're very confident and their long term growth.
And just one other sort of point to illuminate that is is that the international students were cut off for most of 'twenty and 'twenty.
A great deal of and we're able to maintain enrollment through the online portal as Karl said, but in the meantime.
Torrance was able to grow at a very healthy rate, which meant that they were actually.
Recruiting more students domestically and Australia.
That's very helpful. Thanks, a lot of sure you bet.
Thank you we have a follow up question from Mr. Tobey Sommer from true of Securities. Your line is open.
Thanks, I just wanted to revisit of topic historically have new student enrollment has been a good leading indicator for total enrollment.
Well sure it.
It depends a little bit on the seasonality because some quarters are larger than others.
But and our experience it takes a relatively.
Long time for a new student trends of ultimately shape. The total enrollment because it's as I said earlier, it's a small part of the total enrollment so we would estimate that.
It would take anywhere from call it five to seven quarters of a particular, new student and trend ultimately shape, the total enrollment trend meaningfully.
It also really that argues that arguably makes it a better leading indicators. So my follow up is.
Why are you comfortable removing a leading indicator from the mosaic of investor information about the company's performance, while the companies and of a difficult period.
Well first of all thought I wouldn't say, we're in a difficult period, we're very comfortable with wide ranging variability and student enrollment and one of the most important things to understand about us as an enterprise is that we don't try and drive student enrollment against underlying demand and the long run we.
And it's the worst thing you can do for a university of you end up with Underprepared students or students that aren't committed and the way they need to be to be successful. So we have the financial strength and the diversity that we can weather true wide variations as we have and the past and.
And to Karl as answers to just illuminate a little bit more on Carl's answer the best way to think about the leading indicator is depends on the average tenure of the student if of students average tenure of it at a particular institution is say 10 quarters than the individual new student enrollment in any given quarter is about one.
10th of what that impact might be and so you know it takes roughly a year or so of trend for it to have a meaningful impact but the bottom line is yes. It is a leading indicator from a financial standpoint.
And you'll see that flow through with regard to the total student enrollment.
And and Toby small changes and retention of existing students is a much bigger driver the new students.
And historically as there are they are the two correlated.
The positive changes and new student enrollment and accompanying positive changes and in retention or historically do they move in different directions. They can move in different directions and in many quarters. They can both be up.
It would be quite rare to have a sustained trend where they were both down and I can't really remember one.
But they they absolutely can move in different directions, because there's different things driving the behavior of the students.
Right. Okay. Thank you for your help you bet.
Thank you I'm.
I'm showing no additional questions in the queue at this time I would like to turn the conference over back to Mr. Rob some of them of FERC CEO for any closing remarks.
And operator, and thanks to all of our shareholders.
And if anybody has further questions feel free to contact us and we'll look forward to talking to you again in April at the annual meeting. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
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