Good day, ladies and gentlemen, and welcome to the Q3 2013 K12 Inc. Earnings Conference Call. My name is Catherine, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Christi Parker, Vice President of Investor Relations. Please proceed, ma'am.

Thank you, and good morning. Welcome to K12's Third Quarter Fiscal 2013 Earnings Conference Call. Before we begin, the company would like to remind you that statements made during this conference call that are not historical facts may be considered forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied. In addition, this conference call contains time-sensitive information that reflects management's best analysis only as of the day of this live call. K12 does not undertake any obligation to publicly update or revise any forward-looking statements. For further information concerning issues that could materially affect financial performance related to forward-looking statements, please refer to our filings with the SEC. These filings can be found on the Investor Relations section of our website at www.k12.com. In addition to disclosing results in accordance with generally accepted accounting principles in the U.S., or GAAP, we will discuss certain information that is considered non-GAAP financial information. A reconciliation of this non-GAAP financial information to the most closely comparable GAAP information was included in our earnings release and is also posted on our website. This call is open to the public and is being webcast. The call will be available for replay on our website for 60 days. With me on today's call is Nate Davis, Executive Chairman; Ron Packard, Founder and Chief Executive Officer; Tim Murray, President and Chief Operating Officer; and Harry Hawks, Chief Financial Officer. Following our prepared remarks, we will answer any questions you may have. I would now like to turn the call over to Nate.

Good morning. Thank you for joining us today. Since joining the executive team, I've gained a deep perspective and understanding of our strengths and our challenges as a company leading the transformation to online education solutions for students in Pre-K to high school. As the industry leader, K12 often takes the brunt of assaults for online education as our integrity and our effectiveness are sometimes questioned. This is to be expected. But I'm very proud of our employees, their resolve and all that we accomplished even in the face of these challenges. This quarter highlighted 2 important examples of the real truth about K12 and what we stand for and what we believe in. In early March, we announced that after reviewing more than 1 million pages of discovery, the lead plaintiff in a class-action lawsuit against the company, voluntarily and permanently dismissed the claims it made about the academic performance and educational quality of K12 Managed Schools, a very powerful indication [ph] of the company. And just last week, the draft reported the Florida Department of Education's Office of Inspector General conclusively established that the primary allegations made by Seminole County Public Schools were unsubstantiated. K12 did not implement a system to intentionally avoid Florida's teacher certification requirements. And that report found only a few record-keeping and reporting errors. We've already improved and implemented changes in our student data management system and teacher-training procedures to make improvements. In spite of these headwinds, the demand for educational choice is growing and K12 continues to meet and exceed its financial targets, increasing operating income, cash flow and operating margins. I'm very pleased with our third quarter financial results and excited about our performance, as we believe we are on track to continually improve in our operational, academic and financial results. Tim,…

Thanks, Nate, good morning. Our third quarter results reflect continued progress to improve our financial and operational performance as we strive to increase both academic excellence as well as operational excellence. Revenue of $218 million grew 22.3% compared to the prior-year period. Operating income of $19.4 million grew 67.2% year-over-year, reflecting EBITDA margin improvement and deceleration of D&A growth rate as forecast. Operating income margin increased from 6.5% to 8.9% for the quarter on a year-over-year basis and from 7.9% on a sequential basis. SG&A as a percent of revenue, dropped from 34% to 32.5% on a year-over-year basis. And marketing costs increased 8.3% year-over-year but were down as a percent of revenue versus prior year. Turning to our school results. Average student enrollments on our Managed Public Schools grew 12.2% during the 3-month period or 13.1% for the 9 months, as compared to revenue growth of 26%, we're again 23.1% for 9 months for those same schools. As we have said previously, this aligns with our stated plan to focus on higher funding states, improve revenue capture rates and reduce the number of unfunded enrollments. We also benefited from rate and mix changes in the quarter. In our International and Private Pay schools, revenue increased 9.5%, with total semester course enrollments growing by 8.3%. While total student enrollments decreased by 10.5%, the mix shifted to more full-time students in the higher-priced iAcademy schools and the George Washington University online school. Looking at our marketing and enrollment performance, our internally tracked in-year withdrawal rate for Managed Public Schools was down 1.4% compared to the prior-year quarter. Our cost per acquisition was down 2.6% compared to the prior year quarter, aided by the implementation of further SEO improvements and more robust display advertising, auditing and attribution analytics to strengthen our marketing…

Thanks, Tim. Good morning. As we indicated at academic day, we are continually working to improve academic performance, and our goal remains the same, to make available to every child an opportunity for a high-quality, individualized education regardless of geographic location or economic circumstances. By doing this, we create a world where all children can pursue their dreams. We recently convened an academic team at K12 that's focused on improving our academic results. The team created an exciting plan, and that plan is being operationalized as we speak. These changes should make our strong results in the Scantron tests even stronger and should also improve our performance on state tests. We're looking forward to the common core assessments, which we will -- believe will be an improvement over most of the current data assessment systems and allow us to optimize for one assessment and set of standards. We are moving purposely and rapidly to meet the needs of our customers as most of them transition to the common core state standards and assessments. In addition to preparing for common core, we're continuing to offer more engaging, more rigorous and more impactful instruction, as well as increasing the personalization of education so that we can enable all students to be college and career ready. To accomplish this individualization, we're moving towards individual learning plans for every student in our school and are particularly focused on high school, where we believe these individualized plans will have a big impact. We are now building ubiquitous, individualized learning plans into our national structuring model so that every child's education is individualized. In reality, technology is enabling the individualization of education in ways that would have been impossible just a few years ago. In addition to an individualized plan for every child, we are also…

Thank you, Ron. Good morning to everyone participating in our earnings call and webcast. This morning, for the third fiscal quarter ended March 31, we are reporting revenue of $218 million, an increase of $39.8 million or 22.3%. EBITDA of $35.6 million, an increase of $9.4 million or 35.9%. Operating income of $19.4 million, a $7.8 million increase or 67.2%. Net income attributable to common of $12 million, a $5 million increase or 71.4%. EPS of $0.31, a $0.13 increase or 72%. For the 9 months, year-to-date period ended March 31, we're reporting revenue of $645.1 million, an increase of $107 million or nearly 20%. EBITDA of $92.5 million, an increase of over $23 million or more than 33%. Operating income of $44.3 million, more than a $17 million increase or nearly 65%. Net income attributable to common of $25.8 million, a $10.1 million increase or more than 64%. And EPS of $0.66, a $0.25 increase or 61%. Based upon our reported results for 9 months ended March 31 and our outlook for our fourth quarter, we're also updating our full year guidance for fiscal '13, which we last updated on February 5 in connection with our the second quarter earnings release, as follows: revenue range of $840 million to $850 million, indicating year-over-year growth of between 18.6% to 20% as compared to the revenue last year of $708.4 million; EBITDA in a range of $108 million to $112 million, indicating year-over-year growth of 24.1% to 28.7% as compared to $87 million last year; depreciation and amortization expense estimated at $65 million, indicating year-over-year growth of 12% as compared to $58 million last year; operating income in a range of $43 million to $47 million, indicating year-over-year growth of from 48.3% to 62% as compared to $29 million last year.…

Thank you, Harry. Before I turn the call over to questions, I want to congratulate all of our employees as well as the management team for a very solid quarter. I'm very proud of what we've accomplished. I'd also like to sincerely thank Harry for his dedication and hard work over the last 3 years. Harry has been a key member of the senior management team during the period of rapid and substantial growth, and he's made a significant contribution to the company during his tenure. Harry's commitment to K12 is continuing and ongoing. He's demonstrated that by his willingness to serve as a consultant to ensure a smooth transition to our new CEO, James Rhyu. We wish Harry every success in the future endeavors that he's going to take on and we're thankful for all that he's done to help make K12 what it is today. Operator, at this time, we'd like to open the call to questions.

[Operator Instructions] First question is from the line of Sara Gubins.

This is Kelly Metzler for Sara. Average revenue for student was up nicely again this quarter. I know there's many factors that go into it, but what were the largest drivers? And then how should we think about it in fiscal '14 in terms of maybe unfunded students and per-pupil funding that you just talked about?

Certainly. This is Harry, thanks for the question. You will note the revenue increase for this quarter was actually significantly greater than the enrollment increase, a clear sign that -- of the revenue increase that we had, perhaps just shy of half of it is due to volume or increased enrollment. Therefore, the other half is due to, as referenced in Ron's comments and mine, we actually had a positive funding environment resulting in increased funding in a number of states, as well as increased capture. As you know, we've made a real effort this year to reduce the amount of, if you will, unfunded students. I think that's responsive to your question.

Great. And I know it's a small part of business, but in terms of International and Private Pay, enrollment was down year-over-year while course enrollment was up. What's the bigger driver of revenue? Is it courses or enrollment?

Well, it's -- actually, something or else. The private school business has very different price points. If you look at what the price points are in IS Berne versus iAcademy versus Keystone, they're significant. So an enrollment shift to the higher-priced options makes probably the biggest difference in terms of what the revenue is relative to enrollment. So it's really -- was driven by a relatively higher growth and the higher-priced options.

The next question is from the line of Tori (sic) [Corey] Greendale.

Thanks for all the color on kind of the moving pieces between Q3 and Q4. There was one I was just hoping for some elaboration on. You mentioned it sounded like funding increases were a positive in Q3 and a negative in Q4. Can you just elaborate on that?

Go ahead, Harry.

It's not a negative in Q4 in an absolute sense, only in a -- in our forecast, we got less funding increase than we had -- than had been indicated by the state and districts where we work. It just got delayed to a future period. In the quarter, there actually will be realization of funding increases, just not as much as we had expected.

Okay. And in the Institutional business, I'm curious how you're responding to the market weakness. Are you in kind of lockdown mode and cost-cutting mode? Or is it more investing in approach to market by adding sales people?

As you can imagine, we've adjusted our expenses in accordance with our revenue outlook throughout the year, but we're still very bullish on the opportunity here. We're in a transition year on a number of bases, as we think about products transitioning from perpetual sales to annual license sales [indiscernible].

And question for [indiscernible] kind of what happened in Florida. And for the most part, it seems like your position has been borne out. Increasingly, you see headlines in one state that reference issues in other states. It seems like there is more kind of national publicity going on. Can you just talk about your approach to the market and making sure that people get the perspective on K12 that you think they ought to be getting, and how that might be changing if there's more kind of national headlines?

Well, I think what you're saying is right in that one thing seems to happen in one state seems to get it picked up in other states. I mean, our approach is hopefully, that -- the truth of what we said is being borne out. And I think are beginning with the academic -- and we reported the academic that we had in the academic day is a good way of communicating what we do. So I think what we're trying to do is be much more proactive about the academic truth about K12, what we offer students. And we're going to be continuing to, I think, escalate our communication of those positive aspects of K12. It seems to be -- we seem -- the truth seems to be getting known by the people that matter as the fact that students are continuing to come to us at high rates. And as I mentioned, this business development year is pretty much close to unprecedented. So we're going to be more proactive. We've -- I've been doing this for 13 years, extremely proud of the employees at K12, who everyone at K12 shares that passion for educating children. And we're doing society an incredible value for it in terms of making integrated education available to everybody. And also using technology to drive that personalization of education. So I think it's continuing to get known, and that's why we're having the business development success. And we're going to keep doing it, because what we do is a great thing for kids. And you'll see more research coming out of academic institutions with regard to K12 and our work, and we're just going to keep pushing out the truth.

Tori (sic) [Corey] [ph] this is Nate Davis. I'd also comment that we're very much a grassroots communication organization as well. So we have newsletters and communications that go to all the parents, and go to all the teacher organizations, that go to all of the -- our boards of education. So make sure that they understand and putting context to all of the news they hear, whether it's positive or negative. And we get positive news, we get negative news, but we try to make sure they're all getting the communication directly from us about the things we're doing and the truth and the facts about some of these accusations that come out sometimes.

The next question is from the line of Jeff Silber.

Just a follow-up on that last question. Obviously, with your company being the largest in the space, you tend to attract more attention, whether it's positive or negative. But I'm just wondering, are there others in the industry that you're working with to help combat the negative publicity?

We have conversations, but obviously, for antitrust reasons, we can't -- we can only go so far. The industry association is small and really is not well funded to be able to make a big difference. We have conversations with connections about some industry trends. But overall, we know that this is battle that we may have to fight largely by ourselves, and so we're out communicating. Now, rather than just people inside the industry, though, the people who are our allies, are many of the board of education that work with us are partners -- because they're our partners, and many of them are substantial business leaders in their community. In addition to that, there are a number of state senators who understand our products and services and who also are good advocates for us. So our reach and our communication and our teamwork goes beyond just the industry players, it goes outside the industry.

And I'd also say, we're now seeing serious interest from very high-quality education schools with regard to online education and really becoming experts in doing research in that field. I also think we're benefiting a lot from -- now, we're seeing the nation's most selective colleges with mooks to a lot online. So I think the mainstream of online education has been greatly accelerated over the past several years by what's happening with Stanford and MIT and Harvard all going online. And really, everybody -- I don't hear anybody is saying it's not a credible education anymore.

All right, that's great to hear. You have mentioned in your prepared remarks about increases in caps for next year, I think it was about close to 13,000. Besides Michigan, can you just give us some color on the other states where caps are increasing?

I'd rather not get into the individual states, that's why we did it as a total. But I will say this, that number is from 3 different states, and I expect more to happen.

The next question is from Jerry Herman. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: I just wanted to pursue the fourth quarter a little bit and in the hopes that you might be able to disaggregate some of these fourth quarter inputs. You mentioned, I guess, sort of timing issues on funding as Item A. The management changes were also mentioned. Ron, you mentioned the marketing spend increase potentially in the fourth quarter, which I'd like to maybe hopefully get some color on. And then talk, if you will, about the Institutional and Private Pay business -- or Private School business in terms of what it's doing to operating performance, dilutive or the negative year-over-year swing, perhaps, some color on that.

I'll start with the marketing spend and the correlation. With the way our business works is we end up spending a lot of money in the fourth quarter recruiting students for the next year. So we incur a lot of expenses that have no revenue impact on this fiscal year. And when we go through our guidance and modeling it at the beginning of the year, we expect a certain amount of new states and cap expansion. Obviously, this year has exceeded our expectations. And if we have additional cap expansion or additional new states, it would be beyond what we had ever anticipated. So we would incur significantly higher marketing expense -- or higher marketing expense in the fourth quarter than we had originally planned. So that's what I mean by that, and if it's a new state, there's also hiring and building up the staff for that state in the fourth quarter would already begin, depending on when we get approval for that state. So ironically, our success in the business development year adversely affects our fourth quarter expenses.

Regarding your other question about Q4, we have just -- I think you mentioned or you had a question about the timing of funding. We have, through the course of the year, communications with states, school districts, et cetera, where we established budgets and forecasts. And as it turns out, one of -- a couple of states where we were actually informed us of a delay in some of that. So we still have a very positive story to tell about the core business, but just some of the funding increases we had expected for Q4 have just been pushed into the future. Notwithstanding, we're enjoying a very good funding year. So that's basically the comment there. And I think, Tim, you want to comment on Institutional?

Yes. Jerry, to the third part of your question relative to impact of International and Private Pay and Institutional in the fourth quarter, as you know, we don't really comment on the profitability of those segments per se, so I don't want to go there. But to the point of what do we expect the impact to be in Q4, we're effectively extrapolating current performance from both of those segments into the Q4. Back to Institutional for just a second, there are 2 real reasons for the shortfall. One is at the beginning of the year, we filled fewer seats in our highest revenue per student product, in other words, a full-time student for the year. And then second, the impact of this transition away from perpetual licenses. If we look at the health of that business on a more relevant metric, how is the growth rate in recurring revenues, we see mid-teen performance there. And so we're comfortable with that going forward.

And Jerry, Nate Davis speaking here. Just put them in priority order for you, the largest issue, of course, is the delay in the student reimbursement rate that Harry talked about. The second most important, just to give you some color on that, was the Institutional business, and third would have been the International and Private Pay. But the first 2 are really the cause of us looking at a different set of numbers in the fourth quarter. But also, I've mentioned that this is actually good news, because our -- only operational miss [ph] or concern for the next quarter is that a revenue stream that accounts for less than 10% of our business is Institutional. So that means we're in good shape in Managed Schools. It's performing as we expected, as a matter of fact, better than we expected. And that remains our focus for the next few years. So we're actually pretty proud that we have no concerns in the Managed School area. It's really just some work we have to do in the Institutional business. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: And then just -- if could follow with sort of a qualitative question. You guys have spent a lot on systems and controls, the architecture. And also, I guess, people in the financial area. Harry, maybe it's an opportunity for you to sort of describe where you're at relative to where you need to be, and Nate, you might also want to comment.

Okay. Let me start, Harry. You want to start?

Go ahead.

Let me tell you what, I think, where we are in the systems area. And I think we're now at a stage where the finance team is about staffed where we need it to be. I think it's a strong team. I think that most of the support function in the organization, the general and administrative costs, those organizations are not going to see growth. But I will tell you that I believe that we will see some shifting from the money we spend on curriculum development and put a little bit more of that in the infrastructure of our systems, both internal business systems as well as learning systems. We want to upgrade those some from the past [ph]. I don't think it's a dramatic overall increase, but a slight shift in the expenses there. So I think we still have more work to do in the infrastructure systems to bring them up to where we want to be for the future.

And I'll just follow with a couple of comments after Nate. Yes, over the past couple of years, we've significantly increased the headcount in the Finance group. We have some growth-related needs for the next fiscal year, but the rate of growth of headcount in finance will decelerate because we're approaching the level of staffing that is appropriate for the company. On a go-forward basis, a couple of targeted hires are needed to go into next year. So from a personnel point of view, and pretty good shape in trending in the right direction. Financial system's point of view, the effort today is shifting where it's most value-added, which is the timeliness and quality of actionable information that Nate and Tim and Ron can use to manage the business. And, if you will, sort of in the Business Intelligence area. It wasn't that long ago when it was mostly focused on debits and credits and accounting, but now the emphasis is on quality and timeliness of actionable information. So I will...

To the extent you were asking about Oracle, I don't know if you were, but I'll just make it clear. Oracle is now fully implemented in the finance part of our business. We continue to see some enhancements we may do, but we're using it -- that we're largely through that implementation. So when you saw the increase in expense, because of Oracle, we're through that part of it that it's about finance. We're now beginning to use it for the business information systems as Harry mentioned. We've put several customer data and student data, data depositories up on Oracle, and it allows us to pull data more accurately and faster across more of the organization. So that's the infrastructure part that I mentioned we're going to be spending some more time on, but it's largely done for finance. Did I answer your question? Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Yes, yes.

The next question is from Trace Urdan.

Ron, I know that it came as a surprise, but I wondered if you could unpack the Virginia decision a little bit for us and decipher some of the reasons that they offered for not wanting to participate. And specifically, a thing that surprised me was that I had always understood that situations like that where a district is sponsoring you but has fewer students enrolled in the school was actually sort of a financial benefit to them because they would essentially get some amount of overhead per student that was incremental to -- and additive to the funds that they have in the district. So can you help us understand what's going on there? And if there are any implications that we might read from that decision?

Yes, I'm happy to. First, I wouldn't read any implications from that decision. It was a very unusual circumstance. I'm not sure that the reasons have been clearly articulated to us. And I will say that was a school board with just about an entire, if not entire, new membership. So the entire membership of the school board had changed. And it also has a new superintendent, so you literally were dealing with a completely different set of people that have been operating the school. There are some unique things to Virginia that make it a little different to operate here. I'm really happy that we've had interest from many other districts now in taking on those -- the programs, so I would expect that we'll be able to serve most of those kids. But I wouldn't read anything from this. It was a very unusual circumstance. And while districts do get an overset fee in certain cases, I'd like to believe the main motivation for doing it with most districts is they want to serve and help as many children as possible to get a great education. But there's nothing to read in from this. It was a surprise to us and I'm not -- and again, I'm not sure we know the reasons.

Okay. And then it seems like there might have been an illusion in their press release, and I know this has come up in the case of Pennsylvania where there's some, I guess, confusion or concern over the application of federal funds in the context of your running virtual schools. And when you've addressed this in the past, you've suggested that on the contrary, you actually feel like you not only do not make more money from the application Title I fund, but you might make less money from the application Title I funds. And I wonder if you've been able to kind of make any progress in terms of making a quantitative case in that respect. Because it feels like -- to the points that were raised earlier about national criticisms coming up, it seems like this is an issue that's emerging, and I'm wondering if you have a more pointed response to it.

Well, as I -- I think I told you before, Trace, federal funds, the Title I funds are designed to spend a very specific way to help a certain type of average child. And we spend that money on extra programs for those children. So I don't think there's really much of an issue with Title I. It allows us to do what regular schools or what I would say, brick-and-mortar schools to do, which is apply additional resources to students who are at risk. I think, again, it can't be said enough that we're often operating at 60% or less of the funds per child that a brick-and-mortar school gets and deliver great education. I think we could do a lot more for these at-risk children if we would closer to funding parity, because I have some fantastic ideas on how you can actually engage students who are not fully engaged, which is one of the more significant issues we face. And I think even with close to the same funding, we could do dramatic things to improve that student engagement.

I'm not questioning any of that, Ron. It just feels like this issue, it kind of continues to surface. And I'm wondering if there's some more definitive way that you guys have to address it. Or do you think my read on that is wrong, and that it's not emerging as an area of criticism.

I don't believe we've seen it emerge as a significant area, federal funding at least.

The next question is from Jeff Meuler. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Sorry to revisit this, but I just want to make sure I have it right. On the Q3, Q4 funding, it sounds like Q3, part of the upside was driven by funding being better than your expectations. But that is not being pulled forward from Q4, that's kind of separate states or separate issues. And then with Q4, it's just pushed back. It's not lost, but you still expect to realize a similar amount to your prior expectations. It's just timing that you expect to realize in 2014 instead of Q4. Is that all correct?

I think the way you just said it is pretty much in line with our message.

That's correct, yes. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Perfect. And then, Ron, obviously, kudos on the business development year to you and the team. It sounds like there's still some more opportunities that could be live for next school year. At what point of the year or summer should we think about kind of business development being, I'll call it, locked in for next school year, where if you're going to get a new state or you're going to get a cap increase, are they kind of in place by July? Or how should we think about the timing of that?

For the most part, they're usually in place by July. I would expect the additional cap expansion that we're expecting to be in place by July. With new states, it has happened in the past where we actually got final notification as late as the end of August and could open a school. That's not ideal and we know it creates a wrap engagement year like you've never seen before. But at the end of the day, I would expect by -- certainly by early August, everything is wrapped down. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: And then any change in terms of marketing, messaging? Or in terms of how you operationally go after enrolling new students and doing reregistrations for next school year, and I ask that in the context of the Moyler [ph] family advertising from K12 seems to be focused more on the quality of the education this year than I remember last year. So just any change in marketing message or operations around that process?

Yes, you can expect to see a shift in balance from less national advertising to more localized advertising and more localized tactics. We're finding, for some of the schools and some of the geographies, that where grassroots activities can be very beneficial in terms of bringing new students into the schools at a lower cost. So there will be some shift in balance, but not a major change.

[Operator Instructions] The next question is from Alex Paris.

Yes, this is Joe Janssen filling in for Alex Paris. Just one last question there. With caps, the expansion has been a big driver here in future years. Maybe if you could just put some color around it. I was curious, you used Michigan as an example, in terms of enrollment growth kind of ramp up expectations. How typical do you -- Michigan's going from 1,000 to 10,000. It sounds like there's a 6,000 students on a waiting list. You add 60%, 70% capacity typically in year 1 when these caps get lifted, and by year 2, you're pretty much maxed out again? Is that -- how do that work?

Usually and historically, we've received cap expansions, we've actually generally gone to 100% the first year. However, we've never experienced anything as large as Michigan where you're going from 1,000 to 10,000. So I think being at 60%, 70% may actually be a reasonable estimate. We don't know, because it's really is an unprecedented amount of growth in a single year. But we would anticipate the -- obviously, Michigan is a big enough state that we could get to that 10,000 in year 2. But generally, we only fill them up right away, because we haven't had -- because we're usually looking at 2,000, 3,000 kids at most, not 9,000.

Okay. And then also, what was driving retention rate higher in the quarter?

We have put a concerted effort in the schools themselves to engage with families and students to address the issues that they've identified that could have caused a student to leave in the past. It's just stronger touch points, more touch points. So we're focused on it quite frankly.

Are you seeing a behavioral shift? My understanding was students were running to you from something. And then typically, parents would go to K12, get a good quality education, get their student, get their child up to par and then transfer back into, let's say, a public institution. Are you seeing, once they come in, they see the high quality, the high touch, that they're starting to change that perspective. Are you seeing some dynamic shifts there?

I don't think we're seeing a dynamic shift in that way, no. I think we're still going to get a number of students who come to us. And after they've repaired whatever the issue may be, they still may be leaving us. What we're seeing though is those that were leaving because we weren't touching them right or they may have had a systems issue, them may have not understood how to land on the system, we're doing a better job, as Tim said, of touching them, resolving their issue. And I think those are the things that we're really seeing the benefits sort of on the edge, the students that are coming in and leaving in short period. Those that are behavioral, they're coming in because they need to fix something, they're still going to leave in the time frames that they were going to leave before, at least in this year.

I would now like to turn the call over to Nate Davis, Executive Chairman, for closing remarks.

Okay. I want to thank everybody, again for joining us today. We don't have any long closing remarks. So as you've heard us all say though we're very proud of what we've done. I'd like to mention one thing. On May 22, we will be participating in the Bank of America Merrill Lynch conference in New York. And other than that, thank you for your time and we look forward to speaking with you more in upcoming sessions. Good-bye.

Thank you for joining today's conference. This concludes the presentation. You may now disconnect, and have a very good day.