Welcome to the Q4 2020 Franklin Covey Earnings Conference Call. My name is Tia, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session. [Operator Instructions] Please note this conference is being recorded. I'll now turn the call over to Corporate Controller, Derek Hatch. Derek Hatch, you may begin.

Thank you. Good afternoon, ladies and gentlemen. On behalf of Franklin Covey, I'd like to welcome you to our earnings call for our fourth quarter and full fiscal year 2020. I hope you're all doing well and are staying safe. Before we begin today's presentation, I would like to remind everyone that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's current expectations and are subject to various risks and uncertainties, including, but not limited to, the ability of the company to stabilize and grow revenues; the acceptance of and renewal rates for our subscription offerings, including the All Access Pass and Leader in Me memberships; the duration and recovery from the COVID-19 pandemic; the ability of the company to hire productive sales professionals; general economic conditions; competition in the company's targeted marketplace; market acceptance of new offerings or services and marketing strategies; changes in the company's market share; changes in the size of the overall market for the company's products; changes in the training and spending policies of the company's clients; and other factors identified and discussed in the company's most recent annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond our control or influence, any one of which may cause future results to differ materially from the company's current expectations. And there can be no assurance the company's actual future performance will meet management's expectations. These forward-looking statements are based on management's current expectations, and we undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of today's presentation, except as required by the law. With that out of the way, we'd like to turn the time over to Mr. Bob Whitman, our Chairman and Chief Executive Officer. Bob?

Thanks, Derek. Hello, everyone. We're happy to have the opportunity to talk to you today. Thank you for joining us. We're pleased that in the fourth quarter, Franklin Covey's operations demonstrated their strength, agility and ability to progress even in the midst of the pandemic. We're grateful for that. Specifically, our revenue was stronger than expected. Gross margins increased substantially. Our SG&A declined. Our adjusted EBITDA was $8.9 million in the quarter versus an expectation of $4 million, bringing – that brought full year adjusted EBITDA to $14.3 million, which also exceeded our expectation of $9.4 million. Our cash flow was strong, and we're grateful we ended the quarter and year with approximately $42 million in liquidity, a level higher than when the pandemic started. We'll discuss these details and results in more detail in just a moment, but first, maybe provide some context. At the onset of the pandemic, we communicated that although everything was in flux and was uncertain, we believe, as shown on Slide 3, as you can see there that, that All Access Pass subscription and related revenue would continue to be strong and durable and that this would continue to drive strong performance in our core North American operations, which accounted for 70% of our total enterprise sales and in which All Access Pass and related sales account for approximately 80% of the total revenue in North America. As indicated in the Chart 1A on Slide 3, we believe that All Access Pass subscription sales would not only be very strong and durable, it would continue to grow throughout the pandemic that, as indicated in 1B, that as for All Access Pass add-on services after the initial disruption of the delivery of live on-site services, we believe that our pivot to delivering add-on coaching and…

Thank you, Bob, and good afternoon, everyone. So yes, to the question, what is behind All Access Pass's strong resiliency and its durability. And in our experience, there are three key reasons why All Access Pass is both growing rapidly and at the same time proving to be quite resilient. During the pandemic, our clients are wrestling through the same historic challenges that each of us is experiencing. They move large populations of employees to remote work environments. They're attempting to get their remote teams to focus efforts on the most important must-do activities. They're working hard to increase revenue and retain customers, and they're rapidly trying to enhance their culture, including thoughtfully addressing topics such as diversity, equity, inclusion and bias. And in this environment, of course, the need for more capable leaders has never been more important. And these, among many others, are what our clients see as really must-win games for them, the very important challenges that they're trying to address. And helping our clients successfully address challenges like these and doing it at scale, is exactly where Franklin Covey shines. A key reason for the All Access Pass's growth is that both before and during the pandemic, our clients needed solutions to these challenges. And frankly, Franklin Covey's best-in-class solutions are best in class at addressing just those very problems. In our July call, you'll remember we reported that through the early months of the pandemic, almost all of our existing All Access Pass holders that renewed their passes as they come out of renewal with many of them choosing to either expand the population or extend the duration of their pass. We shared a couple of examples then. One was a major airline that when airline traffic was off 90% made the decision to continue…

Thanks, Paul, very much. I'll just now turn the time to Steve to review our guidance and outlook. Steve?

Okay. Thank you, Bob, and Paul, and good afternoon, everyone. It's nice to be with you today. As you recall, when we reported our third quarter results, we said that because there was so much uncertainty in the external environment, our outlook would not constitute guidance. The external environment continues to have substantial uncertainty. However, given the four quarters of additional – four months of additional history that we have and the fact that we continue to see positive trends in the business driven by the strength of the All Access Pass, we now feel that we can provide guidance for FY 2021. Our guidance for FY 2021 is that we expect to generate adjusted EBITDA of between $20 million and $22 million. This result would reflect an approximately 50% increase in adjusted EBITDA next year compared to the $14.3 million of adjusted EBITDA achieved in FY 2020. This expected growth reflects the continued strong performance of our North America operations, who our All Access Pass and related sales account for approximately 80% of sales. Underpinning this guidance are the following expectations. First, the recognition during FY 2021 of more than $60.6 million of deferred revenue already on the balance sheet and a portion of the $39.6 million of unbilled deferred revenue, which has been contracted. This provides significant visibility into our revenue and gross margin for FY 2021. Second, in addition to the recognition of the deferred revenue, the factor which is expected to have the greatest impact in our FY 2020 run result is also one in which we have high confidence, and that is the strength of the All Access Pass and related sales. We expect that All Access Pass will continue to achieve, one, strong growth in both sales and invoiced sales; two, high revenue retention…

I think that's it. Thank you so much, Steve. Why don't we just open it now? Thanks, everyone. We'll open it for your questions at this point.

[Operator Instructions] And our first question comes from Andrew Nicholas from William Blair. Your line is open.

Hi, thank you. It's actually Trevor Romeo in for Andrew.

Hi, Trevor. How are you?

Thanks guys for taking the questions. You guys are doing well, too. I just had a few questions here. I think first one, I think last quarter, you had mentioned about $20 million worth of training engagements that was either postponed or delayed from the third quarter. Just wondering if any of that was recognized in the fourth quarter and whether you still expect about 70% of that to ultimately be realized over time?

Yes. I think the – it's a little hard to track as we found because the same clients that had things booked in the third quarter and canceled. Sometimes it was a rescheduling of their exact thing that they had. And in other cases, they just went ahead with a different initiative or they view it as it was a new booking. And so I think dividing exactly what it is we attempted to do to kind of parse that. But certainly, the same clients that retain – where they renewed their All Access Pass and who did have services in place are the same clients who are now booking new services. So I think what's recognized for the first little while, we were able to track that they were, in fact, rescheduled engagements. And we mentioned that we thought that about 70% of those engagements would rescheduled because they were attached to an All Access Pass that had the existing initiative scoring and think that's really probably still right but were not able to exactly reconcile whether the – whether it was exactly that group in that location or not. And so I think the main thing is that our booking pace in an initial few weeks and maybe in the first month or so, we could track it now didn't and believe that now almost all of the new bookings that we're having are, in fact, all new. And so it's hard to kind of parse that. But thankfully, it's the same customers and same clients moving forward and booking at a pace higher now than even in last year at this time.

Okay. Understood. Thanks. And then just, I guess, a follow-up on the cost side. The margins in the quarter were pretty solid despite the revenue decline year-over-year. You pointed out a number of expenses that were reduced, some of which I'd assume are probably temporary, some of which you said were already in the plan prior to COVID. I just wanted to ask how quickly you'd see or you'd expect to see, I guess, some of those expenses come back online to the extent some of them are temporary. And how much – if you see any of those as permanent savings going forward.

Yes, thanks. It is great question. I'd say the majority of these, we think, will be permanent. Here is the reason. We, every year, have been pushing. We have this goal that Steve spoke about that is to get to an EBITDA margin of 20%. And so every year, we – well, we don't expect there in a year. Every year, we take on projects. And this year, we redid a lot of our IT infrastructure, some supply chain infrastructure. We redid part of our innovation alignment and technology groups. We've challenged as part of the normal business planning process in February and March, a lot of those costs and the millions have been taken out of that $1.5 billion in education just in permanent cost structure. The part that will come back is that around 10% of our commission – I mean, the commission expense, let's say, is 15%. About 10% of it is truly variable, the rest being out draws and so forth. And so as revenue comes back, that of the $5-plus million of costs that were lower in fourth quarter, that related to a $15 million decline in revenue, $1.5 million that would come back, will come back in the form of commissions. And our travel expenses, we think, won't need to recover to the same level they were before. But because our sales force is actually doing very well at making lots and lots of sales calls, but that will come back some, too. And so if you think of it as the $7 million for the year that was taken out, a little less than half of it would probably $2 million, $2.5 million will come back and the rest of it with the permanent reduction. Steve, I don't know if you want to add to that or fix that?

No fixing. I think that's exactly right, Bob.

Great.

Okay, great. Well, thank you.

Great questions, Trevor. Thanks very much.

And our next question comes from Marco Rodriguez from Stonegate Capital. Your line is open.

Hey, Marco.

Sorry. Can you guys hear me?

Yes.

Now we can. Hey, Marco.

Hey, guys. Sorry about that. I was wondering if maybe you can talk a little bit more, Bob, on the transition to the online delivery for your training and coaching. Maybe if you can talk to the feedback you may receive from customers. Was it an easy transition? Was there some difficulties? And then did you ever get kind of sense that you guys could possibly transition that business to more of a permanent, nature online when things return to normal? Or is this just sort of kind of a temporary solution to a particular problem that everyone is operating under now?

Yes. I'll just give a little color and then ask Paul maybe to give a little bit more. But I think this is a capability that we've had for more than a decade. And whenever we've implemented it, which is often in a circumstance where a team is a remote team or it's a team that doesn't work all in the same location or it might include international teams, whenever we've done it over the years, our feedback, which we collect Net Promoter Scores from the participants and about the – both the – about the material they went through in the instructure, and it's always been very high. But nevertheless, people have just been had been used to doing everything on site. I think people have recognized that actually we're getting the same Net Promoter Scores on both the instructure and on the content, maybe even a little higher because of the flexibility actually is good. And so I think the fact that probably more groups will be working remotely in the future will mean that probably there's a permanent piece that will be – where this will just be the way people do it. I think also the flexibility where you're not paying the travel cost and having to get a conference room and people missing the whole day, you can do these things, break them up into three segments during a day, giving a half hour in between these. It gives people flexibility where they can actually – we think more people are actually at a higher level in the organization are also attending the training. So our guess is this will be a permanent shift. Of course, people – some of it will come back on site. But we think there's a permanent shift in this capability that we developed right after actually the mirrors epidemic we felt we need to really be good at this. We have our own platform called live clicks that actually many clients prefer, but all of our consultants and coaches have always been able to do this on multiple platforms as they become experts of doing it here. So Paul, I don't know what color you'd add to that?

I don't think I would, Bob. It was really complete. Maybe one thing, Marco, is as this has shifted permanently, not all of it. I'm sure some of it will come back, as Bob said, back to live in person, but I think a substantial amount of this will be delivered in the future like it's being delivered today, live online. That – we think that actually could be a driver of more services for us in the future than what we've sold in the past because we'll now have this blended mix of clients delivering live online. And then some still going back to the old way of live in person, but the net – we think there's a net gain for us here in more services days in the future because of the new flexibility and the ways that clients can utilize these days in ways that, frankly, you couldn't have when it was in person. So we see it as a very positive trend. Maybe add to that, Marco, just what's happening there marketing events and also sales calls with salespeople, so yes, sure. So of course, the same thing is happening in the delivery for which we charge clients, and we've also made the same shift in our marketing events. And you'll know from past calls, we've talked about the hundreds of marketing events we hold where people traditionally would gather in a hotel ballroom and get an executive overview of one of our solutions and how it could address the challenge they have. We've converted all of those to live online. And the number of registrations in the attendance rate is not a little bit more. It's many multiples more than what we used to drive to our live in-person events. And so from a…

Got it. Very helpful. And then I'm not sure if I missed this, but on the bookings strength you guys saw in the enterprise side of the business, can you maybe talk a little bit more about the drivers behind that? Is that just sort of a function of clients like you had pointed out when the pandemic kind of started, but you kind of seen some volatility in the past where clients will just kind of press pause and try to figure where things are. And then kind of resume on their normal way once they've kind of got to lay the land. So wondering if that is basically kind of helping that snapback in the booking strength that you saw? Or if maybe there's some other items, some other sales and marketing items that maybe you've been pushing here in the last few months to kind of bring that back up.

Paul?

Sure. I think it's a combination of the two things you said, in the early days, back in March, very early part of April, there was a lot of uncertainty. And people were spending their time, getting their employees out of the office and home to work. And so there just was not capacity or bandwidth on the client side to do. They just – they put on hold from the training things they had planned. As that has settled down and as people have become accustomed to and comfortable working at home, because the things we were trying to address with them were important, and they did not want to cancel those forever. They needed to get them back on the calendar. And so that's certainly driving some of it is while the world is not normal for many of our clients, they're now in a more normalized mode working from home, and they want – they need to make progress. They – some of the challenges they were facing before are only more acutely felt now. And so they kind of need to get on with solving those. So that's driving, I would say, the lion's share of it is just the importance of the problem. They need our help. They want our help, and they're comfortable now doing it live online. We have done some things, marketing and sales-wise to tout what we think is some differential capability to deliver these services live online, whether it be coaching or training. And we've equipped our salespeople with that. We've done quite a bit on the marketing front out there on social media, et cetera, having some of our clients share their experiences, and that's helped as well, especially those clients who maybe aren't quite as technically savvy, trying to understand, well, how would this work in a live online environment. And once we get in there and do the first session, they routinely say, that was fantastic. Let's keep doing this. And so we think, and Bob mentioned earlier in the prepared remarks that is the strength of that, that kind of whatever twist and turns might come next pandemic wise, we've now transitioned almost all of the delivery to live online. We don't have a lot of sessions booked out there that are scheduled to be live in person. And so we don't see really susceptibility of the cancellations in the future now that these clients are comfortable and we're very comfortable delivering that way.

Got it. And last quick question. Just wondering if you can maybe talk – give us a little update on the client partner hiring expectations for this fiscal year? I know that this last one, there were some challenges there. But any sort of update there?

Paul, do you want to continue?

Bob, do you want me to take that? Sure. You'll see in the slides, we're at 254 client partners currently. And as we mentioned in our July call, we're exactly on track with what we shared with you then that we were going to intentionally pause in Q3 and Q4 last year, we've resumed, we're recruiting, and we have our next batch of sales academy, which is what we call our sales school. Is scheduled for early in January. We'll recruit through the fall here, fill that up, and then we expect to be back on the same quarterly cadence that was getting us to approximately net 30 client partners a year and so that will begin again in January. So we're recruiting right now. We have hired a couple of folks over the last month or two when we've seen somebody we just had to get – we don't want to lose them. And now all the efforts going into that January kind of fire the engine back up.

Got it. Thanks, Paul. I really appreciate the time.

Thanks, Marco. And maybe just on this general topic of changes in delivery, one thing that might be interesting is that actually, we believe – we've always had these tremendous coaches and facilitators that are just some of the best people in the world at facilitating content. What's happened is I think there are a lot of people who might have said, well, gosh, I'll have my employees just do live on – I mean, just online training are now recognized when you have an option of having really a world-class facilitator and then – you can still do it remotely, they can do it from their home, that it actually is giving us a big leg up versus those who just have these online subscriptions, you get the benefit of the online subscription, which we have, too, all the content digitally, but with somebody who can come in and coach for an hour, an teach for half day, whatever, it's really been a great pivot I think so.

Okay.

And our next question comes from Jeff Martin from ROTH Capital. Your line is open.

Hey, Good Afternoon. Hey Bob, how are you doing?

Great. How are you? Doing well. Thanks.

Was just curious to get your perspective on the potential shift in the value proposition as a result of working under these conditions and the issues that – are there new issues with new opportunities to use your content in different ways? And how do you see that continuing to shift over time.

Maybe Paul and Sean can address it. One of the things that I think has happened, Jeff, most people, just like they thought they needed to be in the office all the time. And just like the thought that if you went to training, that was okay, I'm going to go off-site, and therefore, something all do once or twice a year. I think people are recognizing that, wow, there's a lot they can do. We implemented a big execution engagement, which with our most senior consultants as a major company. Who first are thinking, gosh, I don't know that I can really do it this way. And now they can see how flexible it is and how many more of their leaders they can involve how the levels they can take it to with for some additional budget, but not much more, particularly if they expand the pass. And I think that's what I think it's changing the value proposition. I think it's changed in the paradigm of how many people in the organization might be going through regular training has changed the paradigm about the time segments in which that train can occur that, hey, you got to do it all day training. There's a couple of hours in the morning. That can happen. The level of people that can be involved and benefit from it has led us to have a lot of passes expanded where people say, "Gosh, I can see taking this now to a lot more people. And I think finally, the breadth of the content, so for the people who have recognized the Pass has resulted in a number of a value proposition that says, hey, I'm going to consolidate my spend. I might be spending less, but I'm going to consolidate my spend in fewer suppliers and use All Access Pass as the foundation for it. We've had a number of clients in this environment who have maybe – they've all been in budget constraints. Of course, but they've increased their budget with us. So I don't know if that's responsive, Jeff. But those are some ways in which I think there's a – the value proposition probably has changed some.

Yes. That is exactly what I was looking for. And I wanted to touch on sales effectiveness and efficiency. I don't know if you have looked at your client partners versus your traditional matrix of what you expect them to contribute in years one through five. Is there any shift in that as a result of selling remotely environment?

Paul and Sean or Jen, do you want to?

Sure. I'll respond for enterprise, and then Sean can for education. So from an expectation of the five-year ramp we talk about that a client partner as they work their way up to being fully ramped. We're not seeing the need to change those expectations at all. I think what will be interesting to see play out over time, not because of the current pandemic situation. But just as we – as these new client partners are only selling All Access Pass and building up this base of subscription revenue that repeats at such a high rate in those future years, years three, four, five, we may see that client partners can do more revenue than they used to do under the old model, and that's something we continue to look at carefully. But we wouldn't certainly bring the ramp rates down at all or the expectations down. In terms of just the overall effectiveness of the sales force, as I mentioned with Marco's question a minute ago, we're seeing – and we have such a great sales force. They're incredibly effective. They work tirelessly. And their – the rates – the level, the things we look at, the indicators, both of activity and output are as high or higher right now as they were pre pandemic. They've been very creative and focused on improving skills to hold meetings live online and it is a little bit more difficult to get to customers. We have to be more creative to get to a brand-new customer in this environment than we did before. But through social media, and I mentioned all of the people coming to marketing events, significantly more coming that way, creates a lot of inbound flow to them. So we're really pleased with what they're doing and I think the ramp rates are still the ramp rates. Sean, I don't know if anything different for education?

I'd just echo pretty much what you said, Paul. I think we expect the rent price to be the same. In many ways, doing everything virtually creates more efficiency and less wear and tear our client partners. With education, you've got a lot of – every client partner has a lot of schools. There's a lot of travel involved. So in many ways, it's been a nice break from all the travel. We are right now finding it. It has been hard the first couple of months this fiscal year to get a hold of schools because of so many changes and some much chaos at the school level trying to figure everything out. We found in the last few weeks of starting to open up more. People are kind of settled into learning how to do livening learning. And so it's kind of smoothing out now.

Great. That's helpful. And then last question on the slow rebound in the international business. I was curious what kind of level you think it gets back to by the end of fiscal 2021 relative to a pre pandemic levels.

Paul, do you want to spoke?

Yes. So you first of all, you saw the really pretty significant improvement from Q3 to Q4, we shared earlier. And into our Q1, that continues to be the case that the business is strengthening and rebounding in those international offices. It's a little bit different by office. So in the UK, for example, they will mirror the North American operation very, very closely, and they are mirroring it closely. And the reason for that is they have so much of their business is subscription. Similarly, Australia will fall while Australia is not a big operation for us, it will follow a similar curve as North America. China and Japan are the two places where it fell off the most. It's coming back nicely. We won't be all the way back certainly to fiscal 2020 levels by the end of the year. But we believe by the end of the year, we'll be back up to where we were fiscal 2019 and back up to those levels. But the good news is that the business, as it comes back, we're significantly making sure that it comes back as All Access Pass business. And so that will – while the business is down and they start to build it back up, we don't want to build it back up with the old traditional business, you want to build it back up with the new All Access Pass subscription business. We can do that now because our portals are up and running in China. And the folks are – they're actually having a nice Q1 All Access Pass quarter in Japan right now. And so back up to 2019 levels by the end of 2021 with a much greater mix of All Access Pass subscription business in those offices, which should really help us in the years in 2022 and beyond.

And Jeff, just one addition. We think we'll be at the booking pace. I mean, we'll be at the run rate. If you can look at Slide 7, you're seeing that the – even the expectation of Q1 is back to almost $9 million versus a normal of $12 million. And so we think in the next few quarters, you'll get back to that normal pace in the quarter, but just not for the year. So the run rate, we'll get back at it.

Okay. Thanks for your time guys.

Thanks so much, Jeff.

And our next question comes from Samir Patel from Askeladden Capital. Your line is open.

Hey.

Hey, Samir.

I know it's cliche, but great quarter guys. So three questions. The first you maintained guidance for 2021 at $20 million or so, even though you performed last quarter's expectations for Q4 and you have continuing momentum into Q1. So are there negative offsets I'm missing? Or are you just being conservative? And then also, Steve, do you have guidance for deferred revenue build?

Yes. I think that last half of the question is probably the reason for being a little more conservative is that we feel really good about, as we said, North America, which is the main engine, we think we'll get back and even be above where it was targeted to be originally in 2020. And the – because of the slower build in international and because it will be All Access Pass that helps and when it rebounds, we want it to rebound with subscription revenue, not the old traditional revenue, that revenue won't show up in the year as much. And so there'll be more deferred revenue put on the books and therefore, less recognized. We're being conserved, we hope, to start with, but part of it is just because as these rebounds, we want to use this time to transition those international operations over and Steve, on the deferred revenue question.

Hi, Samir. So as you recall, our deferred revenue added to the balance sheet last year was more than $8 million. The year before, it was like $11 million. And this year, it was just over $2 million added to the balance sheet. So we think in the coming years that the amount we added the balance sheet, as Bob was talking about, would be more like the 8% to 11%. And we're not giving specific guidance on that, but it will be significantly more we think than it was this year, reflecting everything that Bob and Paul just talked about. And the other thing related to this guidance, whether it's conservative or not, one of the things might not be able to emphasize enough is that Q1 of Q2 of last year, FY 2020, were very, very strong quarters. We were on a path that we thought we were going to have an extremely good year. And so for our first two quarters, we're comping against those two quarters. And then we'll – so we'll be – we expect to be behind last year, halfway through the year. And the fact that we then still have significant growth in the year shows that everything we're talking about will pop out and be more visible in the third and fourth quarters.

Perfect. Okay, cool. Second question, Paul, with regards to the international business, you seem to have a pretty confident recovery outlook despite the new wave of lockdowns in Europe, for example. You've talked about it a few times but maybe go over again; what changed for those customers since March until now where the COVID spikes and restrictions and whatnot don't actually impact the sales is it essentially just them being comfortable with live online now and also having the lay of the land and not deferring decisions?

Yes, I think that's part of it. And so take Europe, for example, Europe and Germany is where our direct operation, Germany and the UK. We've got – the live online capability is there. It's primarily what we sell is All Access Pass. And so the uncertainty that they saw over there and we saw over here, think as they go back into lockdown, it will be – it remains to be seen exactly what happens, but they're more comfortable and accustomed delivering. And what we don't have this time, when we went to the pandemic back in March and into lockdowns, everything we had on the books was – substantially, everything we had in the books was live in person delivery. And so the choice the clients had was convert to live online, which they weren't sure about, weren't sure if that was going to work. And also they were trying to make that decision while sending everybody home or just cancel the session. And so many at that point chose to cancel, the different circumstance now where a lot of these employees haven't even returned to the office, they're accustomed to working from home, and the sessions we have on the books aren't booked live in person. They're booked live online already to begin with. And so we expect that they'll continue with those, and we won't see anywhere near the kind of disruption now that we saw then. Remains to be seen what happens throughout Asia, where we don't have China and Japan. I hope they don't go back into the same kinds of lockdowns they had before because our business there is not as live online. Delivery friendly yet, not so much our capability, we have the capability to do it. But in a place like…

Okay. Perfect. Third and final question for Sean or Bob. Education margins are still a bit of a drag. I know you guys did that sales reorg a while back. Any comments on how that's going, whether the selling process has improved in efficiency?

Sean, do you want to address?

Yes. Sure, sure. Hi. Yes. So we feel really good about it. We reorganized went to one sales team, one sales leader. And so far, it's been really good. We feel like the communication has been better. The person that is leading Meg Thompson is leading ourselves team now is kind of our expert on district focus selling to districts. And I think that is a very important part of our future. We find our districts or – that's where we get the highest retention rate. And so we're really using that advantage and training everybody on how to get the districts. And this is why – this is one of the reasons why we feel like this year, we can bring on more schools. Even in this tough environment, we can bring in more schools than last year is through our district focus. So that is off to a really good start. We're glad we did it. We feel like it's the right decision, and I think it's going to show up down the road.

Samir, there's been about, as I said, about $1.5 billion of just permanent costs taken out of that infrastructure, independent of sales levels. That will at least improve the margins by a few hundred basis points. We think the main thing will be to Sean's point, the ramp-up of salespeople we've already hired under this new structure and with the new models we expect to improve this year. Although I'd say, as I did say, I think the environment won't be friendly, but our efforts will be good. Our efforts and capabilities are stronger in an environment that's probably not that much more friendly?

Yes, yes. Just to add to what Bob said on the retention side, just retaining all the memberships that we have, the subscription business, that came in pretty solid last year, and we expect that to continue this year. The more challenging thing would just be bringing on new schools and new districts? Yes. But we have seen in the last few weeks that things are opening up some – a lot more willingness to talk and explore with us, which is great.

Understood, thanks. Appreciate the color.

Thank you, Samir.

And our next question comes from Patrick Retzer from Retzer Capital. Your line is open.

Hi, good afternoon gentlemen. I don't have any questions. Everything has been covered. I just wanted to compliment you guys on the effective reaction and adjustment of the business to the pandemic, and let you know I love the guidance for the current year. So congratulations and keep up the good work.

Thanks very much, Pat. That's very nice of you. Thank you.

And we have no further questions. I'll turn the call back over to Bob Whitman for final remarks.

Thanks very much. I just want to express to each of you. I actually appreciate you through this whole period. We've had many discussions with both our great analysts, who spent enormous amounts of effort to really understand and model this. And I want to thank each of you for the really remarkable efforts and detail into which you've gone truly understand the business. Also for our shareholders, we have so many sophisticated investors, as our shareholders, which we're grateful for and we admire, your questions have been great. And also, I think just the recognition that you know what, this may be a good time to be a – I think many of you have expressed that you see this as an opportunity, and we do too, but we appreciate you. And thanks for making the time to join us today. We, of course, delighted to answer any individual questions offline. Thanks very much, and we'll talk soon. Thank you.

Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. And you may now disconnect.