Q4 2020 Zovio Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Silvio Q4 2020 earnings Conference call. At this time, all participants are in a listen only mode.

After the Speakers' presentation, there will be a question and answer session to ask a question. During the session you will need to press Star then one on your telephone.

Require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today <unk> VP of corporate communications.

Thank you and good afternoon, there'll be as fourth quarter and full year 'twenty 'twenty earnings release was issued earlier today and is posted on the company's website at www Dot dot.

Dot Com joining me on the call today are Andrew Clark founder, President and Chief Executive Officer, and Kevin Royal Chief Financial Officer.

We would like to remind you that some of the statements. We make today may be considered forward looking including statements regarding new enrollment growth student retention University partners and other programs and services our ability to grow through acquisition, our ability to successfully integrate and leverage acquired companies future.

Revenue growth EBITDA financial and related guidance and commentary regarding fiscal year 'twenty 'twenty, one and later.

These forward looking statements are subject to a number of risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward looking statements.

Please note that these forward looking statements speak only as of the date of this presentation and we undertake no obligation to update these forward looking statements in light of new information or future events.

To the extent required by applicable securities laws.

On the call today, we will also discuss certain non-GAAP financial measures.

In our earnings release, you will find additional disclosures regarding these measures, including reconciliations of these measures with U S. GAAP.

Note that these non-GAAP financial measures are intended to supplement GAAP financial information and should not be considered as a substitute for our GAAP results.

Please refer to our SEC filings, including our annual report from form 10-K for the year ended December 31st 2020, which we filed with the SEC earlier today for a more detailed description of the risk factors that may affect our results.

You may obtain copies from the SEC or by visiting the Investor Relations section of our website at this time. It is my pleasure to introduce there'll be as founder President and CEO Andrew Clark.

Thank you Ilana and welcome to <unk> fourth quarter and full year 2020 earnings call.

On the call today, Kevin and I will discuss our results as well as other business developments. After our remarks, we will open the call to your questions.

We had a strong end to our fiscal 2020 for.

For the fourth quarter of 2020, we reported revenue of $93 1 million and non-GAAP diluted income per share of <unk> III.

Which exceeded expectations.

Today marks our first earnings call since completing the sale of the University to the University of Arizona Global campus or you Hec.

This was a key inflection point for Zalviso as a world class Education Technology services company.

Given the sale of the University, our reporting structure has changed both from a segment and key metrics standpoint, which I will outline in a bit more detail shortly.

During the fourth quarter. We are pleased to report that new enrollment grew more in the fourth quarter of 2020 than the third quarter and we saw the best one year cohort retention metric in the fourth quarter in our recent history of tracking this metric in addition, inquiries new enrollment and total enrollment exceeded our.

Patients for December so first bonds following the close of the transaction.

As an education technology services company, we will begin to report more in line with others in the industry.

Therefore, we will not be reporting new and total enrollment in the future.

That said, we cannot be happier with the progress we have experienced over the last several quarters.

To provide investors with a better understanding of study as growth drivers that highlight the unrealized value of our platform and offering as well as our progress to capture the untapped value creation opportunity for the company, we have aligned our reporting segments to be Zalviso growth and University partners and.

In addition, we will be providing key metrics. We believe we will show our progress against our strategic vision for Zalviso.

Strategically as an organization, we are aligned to deliver significant growth the majority of which in the near term will come from what we call aveo growth, which includes full stack and tutor me and.

In 2020, we saw robust growth from Zalviso growth, including accelerating top line, new University partnerships acquisitions and better than anticipated enrollment for.

For our University partners group in the coming year, we will be focused on building off the strong foundation, we have created to build a robust partner network and drive long term growth.

Before I discuss each segment in more detail, let me touch on what we're seeing in the marketplace today.

As we have discussed before the way winters access education has been changing rapidly and was only accelerated by the COVID-19 pandemic.

Universities are feverishly, adding and enhancing their online programs to meet learners, where they are.

And today that is on line.

Further expanding educational opportunities for underrepresented students in non traditional students who work for parents full time is driving structural changes and the education landscape.

With an ever growing student population educators, who seek to expand the potential for all students are delivering classes online and embracing new and innovative learning formats.

To meet this rapid shifts educators are looking for strong partners that have demonstrated a track record supporting student lifecycle and delivering strong student outcomes.

Oh is that perfect partner today, we serve more than 200 institutional customers covering 44 states and the Zalviso ecosystem and that number is growing every day.

With a differentiated and flexible value proposition that spans the student lifecycle Silvio as a thought leader we are meeting the growing needs our current and future partners. Both had a graduate level, but even more importantly at the undergraduate level, where we believe there is relatively untapped opportunity.

Turning to our <unk> segment, which includes our subsidiaries full stack and tutor Mi continued to perform exceptionally well.

In 2020, Zilvia growth delivered revenues of $20 9 million growing 105% year over year.

The services that these subsidiaries provide enhanced <unk> ecosystem to support learners education and career aspirations by building on our existing capabilities to meaningfully serve higher Ed institutions bridge, the education to employment GAAP and help enterprises Upskill and.

<unk> per people.

As students and experienced professionals continue to look for opportunities to Upskill, we're seeing increased opportunity for our offerings.

During the fourth quarter full stack continue to leverage the new partnerships that came online in 2020, including Virginia Tech and Emory University. Among many others in total will stack nearly doubled our expectations for new partnerships, adding eight new universities during the year.

For context, the average University partner agreement is five years with an average revenue contribution of $10 million per partner over the term of the contract.

The revenue is generated once the class starts and as a result, it typically takes 18 months from the start of marketing to become profitable.

Given the momentum we've seen thus far combined with the strong institutional pipeline for new partners. We're excited for what lies ahead for full stack.

As students parents and teachers continue with remote learning the importance of online educational resources like tutor me Hal.

Become necessary to support learners.

Given the dynamic of remote learning companies are providing tutoring support as an employee benefit while educational institutions from higher education to K 12 districts are leveraging tutor me to ensure their students have helped when and where they need it.

In this vein tutor me continued to execute new partnership agreements during the quarter from universities to corporations to school districts.

Tudor Me added another 23 partners during the fourth quarter of 2020, bringing the total to 199, an increase of nearly 230% year over year.

Further as the Covid pandemic has driven increased demand remote learning has continued to support explosive growth for online tutoring services.

In the fourth quarter total customer and partner hours usage increased nearly 400% year over year, continuing the strong momentum we saw earlier in the year.

Our outlook for <unk> growth remains strong.

For 2021, we anticipate full stack, adding between seven and 10, New University partners and tutor me, adding between 50 and 60 new partners.

We will continue to invest for growth in this segment, including strategic sales and marketing initiatives to bring our new partners online while at the same time, maintaining our momentum of new partner acquisition.

Given these investments for the segment in 2021, we expect there will be a growth revenues to grow approximately 30% year over year and anticipate generating an EBITDA loss of between six and $8 million.

This planned investment will decrease consolidated EBITDA margins in the near term longer term. We expect this segment to grow 30% plus through 2025 and be profitable beginning in 2023.

Turning to the University partner group, we have a strong foundation from which we plan to pursue diversified growth, providing technology and services to institutions corporations and learners.

We provide our university clients with our enterprise education technology and services.

Leverage our unique advanced data analytics platform to provide personalized and innovative online education that enhance the student engagement and improves the likelihood of student success.

<unk> remains well positioned as we bring a clearly differentiated offering to our clients.

First we provide an end to end solution that spans the entire student lifecycle marketing and recruitment to retention and course development tools.

Second our offerings are tailored and flexible and can be unbundled or bundled enterprise solutions.

Third we are aligned to operate at scale to support our clients' rapid growth objectives.

Additionally, all of our solutions are powered by signals.

Our proprietary predictive analytics platform.

Signals provides data driven insights to enhance our clients' offerings and improve overall results and outcomes.

<unk> enables aveo to develop solutions and engineering workflows that optimize performance metrics from marketing through graduation.

We have also enhanced the leadership of this segment, bringing together a team that will leverage significant leadership to execute a clear roadmap for growth.

As such we will further cultivate an already robust pipeline of potential University partners.

Or 2021, we expect to bring on one to three new small to medium sized partnerships before the end of the year.

To give you a bit of perspective, the size and scope of our partnerships will vary.

At a high level, our small to medium sized deals are generally under $1 million.

And have an engagement length of one year or less.

Could include project based work such as learner outreach, our course development or strategically targeted deals, including marketing recruitment our student support services.

Large deals between one and $5 million are typically multi year deals but vary in length and could include services from our bundled solutions for watching online programs or enrollment continuity.

And lastly, our enterprise deals will utilize savviest full end to end service offering these.

These engagements will range between five and seven years with a mature contract value of greater than $5 million annually.

Given the strong momentum we have experienced in our continued optimism as we look forward. We are raising our 2021 full year revenue outlook on a consolidated basis. We now expect total revenues to be in the range of 305 million to $315 million and non-GAAP EBITDA.

Margins in the mid single digits.

<unk> is positioned well to continue as a world class Education Technology services company.

And we are poised for continued growth as we move forward, we have a robust offering to meet the needs of learners. We have built a strong ecosystem of clients and our network of partners is growing rapidly.

The shift to a more virtual world has accelerated the opportunity for us.

Now more than ever it is critical to provide students with a robust online platform that meets them, where they are and enables them to achieve success.

At the same time, the employed and unemployed workforce is seeking opportunities to upskill we remain.

<unk> squarely focused on executing our long term strategy in order to deliver education services that meet the diverse and large scale needs of higher education institutions.

Accelerate growth businesses through ongoing investment to support strong growth expectations and diversification.

Expand our skills to employment b to B and B to C offerings too.

Empower learners to better connect with in demand jobs, leveraging our University partners.

And establish our leadership position as a data driven services provider utilizing signals to offer institutions, a technology and data driven suite of solutions that will further differentiate <unk> offerings.

With that I'll turn the call over to Kevin Royal to review, our financial and operating results.

Andrew.

Andrew had mentioned this is our first earnings call post sale of the University as a result, our fourth quarter 2020 results include two months that included the University results in one month as a Standalone education technology services company.

For comparative purposes, we have reclassified 2019 revenues and expenses to be consistent with the 2020 presentation and classification for this discussion.

For the fourth quarter of 2020 revenue was $93 1 million compared to $96 3 million for the same period in the prior year.

The decrease is primarily due to lower average weekly enrollment year over year.

As a result of the sale of the University to you Hec on December one 2020, and the completion of our transition to an education technology services provider.

We have reclassified the cost structure of the Companys operations into the following categories.

Technology and academic services for the fourth quarter of 2020 were $19 6 million or 21% of revenue compared to $17 9 million or 18, 6% per revenue for the comparable prior year period, the increase in the fourth quarter as a percent.

<unk> revenue was primarily due to employee costs and outside services, partially offset by a decrease in facilities cost.

Counseling services and support costs from the fourth quarter of 2020 were $25 5 million or 27, 3% of revenue compared to $25 2 million or 26, 2% of revenue for the comparable prior year period.

These costs as a percentage of revenue increased due to employee costs, partially offset by a decrease in facilities cost.

Marketing and communication expenses for the fourth quarter of 2020 were $21 6 million or 23, 2% from revenue compared to $19 5 million or 22 percentage of revenue for the comparable prior year period.

These costs as a percentage of revenue increased due to increased employee costs and higher advertising costs due to lead inquiry mix and volume.

General and administrative expenses for the fourth quarter of 2020 were $10 9 million or 11, 8% from revenue compared to $13 million or 13, 5% of revenue for the comparable prior year period.

These expenses as a percentage of revenue decreased due to certain nonrecurring prior acquisition cost, partially offset by an increase in employee costs and professional fees.

University related expenses were $16 7 million or 17, 9% revenue for the fourth quarter of 2020 compared to $28 3 million or 29, 4% of revenue for the comparable prior period.

These expenses represent costs related to the University prior to the sale in December 2020, and there were only two months of these expenses in 2020 as compared to three months in 2019.

We recorded $1 4 million of restructuring and impairment charges in the fourth quarter of 2020 as compared to $13 6 million in the fourth quarter of the prior year.

The restructuring and impairment charges in the fourth quarter of 2020 related primarily to the termination of a contract.

We also recorded $54 8 million as the loss on transaction in the fourth quarter of 2020 for the transaction completed with global campus in December 2020.

As a result, the net loss for the fourth quarter from 2020 was $57 2 million or a loss of $1 75 per diluted share compared with net loss of $23 million or a loss of <unk> 76 cents per diluted share for the same period in the prior year.

Excluding the loss on transaction separation costs restructuring costs acquisition costs and related tax impacts the non-GAAP net income for the fourth quarter of 2020 was <unk> 9 million from <unk> <unk> per diluted share compared to a non-GAAP net loss of $4.

$5 million or a loss of <unk> 15 per diluted share for the same periods from the prior year.

Regarding the full year results revenue for the year ended December 31, 2020 was $397 1 million compared with revenue of $417 8 million for the year ended December 31 2019.

The decrease is primarily due to lower average weekly enrollment year over year.

Net loss for the full year ended December 31, 2020 was $49 million or diluted loss per share of $1 53, compared with net loss of $54 8 million per diluted loss per share of $1 86 for the year ended December 31 2019.

Excluding the loss on transaction separation costs restructuring costs acquisition costs and related tax impacts to non-GAAP net income for the year ended December 31, 2020 was $8 6 million or non-GAAP diluted income per share 27 cents.

Compared with a non-GAAP net loss of $13 9 million or non-GAAP diluted loss per share of <unk> 47.

For the year ended December 31.

2019.

Income tax benefit for the full year ended December 31, 2020 was $13 1 million, which primarily related to tax benefits associated with the cares Act.

The company had $25 3 million provided by cash from operating activities. During the 12 months ended December 31 2020.

By comparison, the company used $46 1 million of cash in operating activities. During the same period in 2019.

The improvement is due to the lower net loss year over year, excluding the loss from the sale of the University to UA GC.

Capital expenditures for the 12 months ended December 31, 2020 were $3 2 million as compared to $31 million in the comparable period last year.

The decrease was primarily due to the 2019 capital expenditures associated with the <unk> headquarters facility in Chandler, Arizona.

As of December 31, 2020, the company had combined cash and cash equivalents of $35 5 million as compared to $69 3 million as of December 31, 2019.

This decrease is primarily related to the transaction completed with global campus in December 2020.

As Andrew noted for 2021 on a consolidated basis, we now expect total revenues to be in the range of $305 million to $315 million and non-GAAP EBITDA margin in the mid single digits.

Now I will turn the call back over to Andrew for his closing comments.

Thank you Kevin Zalviso is in an enviable position as we embark on this new chapter as a leading education technology services business.

Leveraging our 17 plus years, providing technology services that fuels student success, we have the opportunity to be a premier player in a large evolving and growing industry.

Our track record of innovation, driven by advanced data and analytics will allow us to offer services to our University partners that spanned the student journey and support the best possible outcomes. Additionally, our strong culture and shared vision across our organization. We will continue to support the more than 200 institutional custom.

Mers in this day.

<unk> ecosystem as.

As we enter 2021, we remain poised for long term growth and value creation as we capture the rapid changes in education to empower all learners at this time I'll ask our operator to open the phone lines for your questions.

Certainly at this time as a reminder, if you would like to ask a question. Please.

Well number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Alex Paris from Barrington Research. Your line is open.

Hey, guys. Thanks for taking my call and congratulations on the earnings beat and getting your most significantly you UA Juicy transaction completed during the quarter.

Thanks, Alex.

Quick question, you beat me by a wide margin on adjusted EBITDA and non-GAAP EPS revenues were a little light versus my published estimate, but my published estimate was not guided and it was.

Free.

The University of Arizona Global campus sale.

You know Kevin.

Revenues would have been for the fourth quarter had you had.

Had it been status quo had you not sold the University.

I don't know I don't have that with me.

<unk>.

Okay.

That's alright.

Can follow up on that one also and then.

I'm sorry.

No. That's fine I think that explains why your revenue number was a little lighter.

Yes, exactly because you had two months of owning the university, one month, but not on the.

Not only the University and at one month was subject to the Master services agreement under which you hit 19, 5% of revenue and then reimbursement of direct cost I would think that would account for the.

Paul or more of it.

Quick question on <unk>.

New enrollment you said the growth accelerated from the third quarter is that how youre going to leave it.

We're low single digits in the third quarter, you sort of guided to mid single digits in the fourth quarter did you hit that.

Yes, I think we're going to leave it at at what we what we said earlier that we exceeded.

Our third quarter results.

I'll just say, we're really pleased.

With how the.

Transition has gone with UA Casey.

Alex I mean.

I think the most relevant example out there for US has been in a lot of people have used. This example, Purdue Kaplan.

And <unk> is certainly in our opinion performing much better.

At the beginning.

Of.

The institution, then then Purdue was what day for Scot out of the gates and I.

I think <unk> benefited.

Probably from.

Witnessing some of the pitfalls that experienced and as a result, I think as partners we've done a really good job.

<unk> avoiding some of the challenges that Purdue had.

Great.

And then just moving to <unk>.

Other than getting into the details of the rearview mirror.

Under a different business model I wanted to talk more about growth going forward and in the various segments.

You said in 2021, you expect to add wonderfully small to medium size University partnerships within the University partnerships segment.

These could be enterprise or I'll, let Howard I'm, assuming whereas.

What you are.

Projecting is they'd be more of the olive garden variety in 2021.

Given the small and medium size as opposed to enterprise or large yeah exactly Alex we are projecting these will be small to medium sized clients. So generally under a million dollars.

Revenue on an annualized basis, and probably a year or less in terms of their length in and we just look at the University partnership.

Group in 'twenty. One is it was really just a foundational year, where I'm confident they'll take on.

As we said.

One to three new partners.

Uhm C.

Well.

<unk> continued to move forward.

And is off to a fantastic start, but I think zilvia growth is really going to be that that group is going to be the highlight for.

For Zalviso throughout 'twenty one.

We've seen tremendous performance out of that group in 2020.

And have a lot of confidence and what 'twenty, one looks like for them and what that will mean to the overall.

Soviet story.

Yeah.

Right.

And then.

Without a doubt Silvio growth will be the bigger driver of growth for the near term as you have a foundational year for the University partner segment Youll add one to three University partners low and mid size in the coming year and then.

I presume, we should expect bigger and more in 'twenty two and beyond.

Yes, absolutely I mean, the University partners.

Expect a lot more in 'twenty two and beyond.

Our key strategic focus really for the University partner group over the longer term, it's going to be client partner diversification. So I think.

We've got an excellent leader running that group.

Have hired a leader of a business development and we're in active conversations with a variety of.

University partners as we speak.

Can you characterize that activity I.

I would assume you have a lot of inbound activity for a couple of reasons, one COVID-19 and then to the high profile transaction you did with the University of Arizona are you actually reaching out as the University partners team led by Matt Hillman, reaching out.

<unk> bold relationships.

How would you characterize the pipeline I guess is what I mentioned, yes.

No I would characterize that Matt and Jim or not.

Board, they're very busy.

We've got a strong combination of institutions that have reached out to us.

Youre, absolutely right <unk> did put on.

On the radar of a lot of institutions.

As well as just.

Going in reaching back out to a variety of different.

Clients.

Through through our network and not just.

The gentleman at University partners, but really bit network that many.

The leaders in.

And even directors of Zalviso.

Half.

Out there in higher education, so it's a combination of both.

And those gentlemen are quite busy right now.

Good glad to hear it.

This is a question I get a lot and I'd like to hear your answer why can't Big public land grant institutions like University of Arizona or in the case of Purdue and Kaplan what can't they do this themselves.

What is the challenge and why do they generally seek.

Ed Tech partners like Silvio.

To help them do that.

Yeah, It's a great question I think.

While it's not rocket science.

Lot of people.

Underestimate really the complexity.

Of.

Especially.

A large online.

So if you are establishing and want to the institution has goals and objectives.

Grow their online presence both undergraduate and graduate to 10 15 20000 students.

There's a lot of complexity a lot of expertise that's required to accomplish that.

I think what we do see institutions doing more today than they used to is really looking for.

<unk> zalviso to provide.

Some of the services not necessarily the full enterprise suite of services.

Now that's very situational it depends on on the institution and some absolutely would take you up on the enterprise solution.

Solution I don't think thats in the cards for Zalviso total probably 'twenty two maybe.

Maybe even 'twenty three to have a big enterprise client.

But there is a skill set here that we spent.

Almost 18 years developing and building there is technology that we've built.

Data analytics.

And an incredible investment we have around that.

Debt supports what we do that it's just difficult for any institution and land grant institutions are no exception.

To try to.

Make a go of that from.

Standstill start.

It takes a lot of investment on a lot of expertise.

And I think there is an element out there were these large public universities are realizing that.

To remain competitive.

<unk> need to have a very strong presence from an online perspective, it needs to be part of their overall.

<unk> strategy and vision as an institution.

And.

They might already be a little bit behind as it has.

If you look at some of this very successful large state universities with online presence today and so they are better off reaching out to a company like Silvio who can get them in.

And their plans and their strategy accelerated much more quickly than they could otherwise do on their own.

Great. Thanks.

And then Kevin.

You increased guidance from a range of $2 90 to $3 10, or a midpoint of 300 to a midpoint of $310 million for 2021 total rubbish.

Is that.

Outperformance coming from this is that the zilvia growth side or is it the better than expected launch with uhm.

Yes.

Net.

Yes, I would say, it's really coming from both.

Alex.

From an absolute dollar standpoint, a little bit more from <unk>, but those segments are contributing to that.

Outperformance.

Okay, Great and then and then the target for adjusted EBITDA margins in 2021, you're saying mid single digits. I think you previously said.

Mid to high single digits whats the Delta there.

Yes, So let me take that one Alex so.

One of the things we've tried to do for you and investors is separate out the two business groups here at Savio. So if you look at University partners today.

That margin is in the high single digits on a standalone basis. If you look at our <unk> growth and what we're investing towards the revenue growth that full stack in tutor me are generating.

As I said earlier, it's about $6 million to $8 million loss. So you shave a few points off of the margin in reinvestment really and Silvio growth business and.

In that business.

We're seeing tremendous acceleration.

As I commented earlier.

Today, our partners are well over 200.

Not just universities, but corporations in K 12 districts.

I think we're going to be.

At.

At least at 280 by the end of 'twenty one.

Close to 300, perhaps so.

So you see a little bit of our margin being reinvested.

However, because our revenue guidance is up the effective kind of profitability that I think you were thinking of.

Or at least kind of forecasting out.

For 'twenty, one as kind of relatively unchanged.

No I agree with that I just was wondering what the day. So that's understandable.

Growth investments on these OBL growth side.

Mary a reason for the.

Slightly lower adjusted EBITDA margin expectation, although adjusted EBITDA dollars are not as dramatically changed.

Yes.

Given the higher relative expectations.

That's a good precise summary of what I just said.

That's all it was doing just to make sure I had it strength alright, great guys. Thank you very much.

I'll follow up with you after the call for some modeling related questions.

Your next question comes from the line of Terry view from what water total research. Your line is open.

Alright, Thank you greetings, Andrew and Kevin.

Alex covered a lot of ground. So I just said.

Two or three additional questions.

On the <unk>.

T phone.

And you made you any notable changes with the new owner has made to the to the way the University functions.

<unk> been able to maybe tap a new group of potential students.

Any.

Commentary around that.

Yes, Terry first thanks.

For <unk>.

Calling in today and for your questions.

I would say, it's too early yet to describe any kind of new changes.

As you know they became the owners view.

See on December 1st so.

We're kind of at the better part of almost 90 days into them owning the institution.

I am sure and confident that <unk> will make changes.

Cut throughout 'twenty, one and beyond.

As they codify.

Our vision in their strategy for the institution.

I think the thing to really emphasize with you today and with investors is that we've gotten off to a really nice start.

<unk>.

December.

Was surprisingly.

Much better than even we had anticipated.

And we have taken into consideration that.

There is an effort and rebranding the institution and that effort would take time in that.

And that there would be an impact.

To some extent and prospective new students at least initially.

There was an impact but it just was not as great as we had anticipated.

For a variety of reasons I think the partnership is off to a really good start and good beginning.

And we're just we're just having a lot of funds supporting.

The institutional right now in.

Helping them to achieve their.

Their objectives and goals for the long term.

Well, that's good to hear I'm excited to see how it all day.

That business stable.

Hi.

A quick question on full stack I think one of the campuses was close.

Positive last year can you give us an update there in terms of the two physical campuses.

Yes, certainly so there were just two physical.

Kind of retail locations.

Where students would do in class learning before the pandemic and that was in New York and Chicago.

Of course, the New York line has been closed since the pandemic those students have been.

Taking their curriculum online and then the one in Chicago. They took we took a similar approach with online, but then also decided to close that Chicago location because.

University of Illinois, Chicago is one of our new clients. So.

It made sense for us.

For full set to consolidate their offerings around UIC.

Okay. So the.

Way forward.

Key new partner is not.

Can truly opening new locations like.

Adding Chicago and New York.

Absolutely I mean, the entire business model and the reason Terry we acquired full stack.

Going back in time, they had one university partner relationship with Cal poly, but but have plans to.

To partner with many more institutions they exceeded our expectations, we'd hoped they'd be at six by the end of 'twenty and they they were at 12.

And just have some fantastic.

Institutions.

Brand names that they support.

We see them continuing to be successful there.

I would expect that they would add probably at least probably two new.

University partners, our quarter one to two.

I think overall our guidance today was was 7% to 10 more partners.

For full stack and that's where.

A majority of the growth is going to be generated from and really the entire plan. Their business plan is around supporting additional university partner clients.

Okay and then.

Finally, maybe an accounting question for Kevin.

<unk> guidance.

Obviously.

I would think implies some type of revenue share from.

<unk>.

<unk>, yes.

Is it is it something you will you will estimate on a quarterly basis.

Thing that happens in the fourth quarter.

Yes.

<unk> take place on a quarterly basis.

We would be in communication to understand.

Therefore, casting and planning and then we would record our share of the actual revenues for the quarter.

Okay, great well debt does it for me. Thank you very much.

Thanks Jerry.

I turn the call back to you for closing remarks.

Thank you we'd like to thank all of today's callers for your interest in <unk> and for your participation on the call today.

That concludes today's conference call you may now disconnect.

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