Good day, ladies and gentlemen, and welcome to the K12, Inc. Fourth Quarter and Full Year 2013 Earnings Conference Call. My name is Mark, and I will be your operator for today's call. [Operator Instructions] And as a reminder, this call is being recorded for replay purposes. I would now 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 Fourth 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 date 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 United States, 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. This 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 James Rhyu, 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, and thanks for joining us on the call today. I'd like to start things off by first welcoming all of our students, dedicated teachers and school administrators, back to school. I'm very excited about the start of this new school year, and we'll share with you this morning some of the innovative programs we are launching this fall to further demonstrate our commitment to academic excellence. I'm also very proud of the financial accomplishments of our team over the past fiscal year. Here's a quick summary of those results. Revenue growth of $139.8 million or 19.7%; net income grew by $12 million or 60.6%; EBITDA grew to $111.4 million or 28%; operating income grew to $45.7 million or 57.6%; and our cash balance increased to $181.5 million, which is a growth of almost $37 million. As our new CFO, James Rhyu will discuss in further detail later on this call, we've seen improvement in operating income, margins and cash this year, expanding operating income margin by more than 1.3%. Our focus on improving operating efficiencies, improving margins and cash flow was really starting to demonstrate some tangible results. As these numbers will show, we're committed to earning a return for our investors, but we're equally committed to our mission of improving academic performance for every child, including students who come to us behind grade level. These 2 goals continue to be -- to go hand-in-hand, because the better our students perform, the more demand there will be for K12 education. In fact, this year, we will be evaluating and paying our entire senior management team on both operating income and improved academic outcomes in the schools we manage. Our goal is aligned with our various school boards, the state boards of education and our investors. We strongly believe…

Thanks, Nate, and good morning, everyone. I'm pleased to report that our annual results reflect continued progress, improving our financial and operational performance as we strive to increase both academic excellence and operational excellence. Let me start with our all-important school results. Average student enrollments in our Managed Public Schools grew 12.7% during fiscal 2013, as compared to revenue growth of 22.6% for those schools. These results reflect the impact of rate improvements, fewer unfunded enrollments, improved revenue capture and mix changes across states, schools, grade levels and student types. In our International and Private Pay schools, revenue increased 12.9%, while total semester course enrollments grew by 12% -- I'm sorry, 2%. This is primarily as a result of the mix shift to more full-time students, particularly in the higher-priced iAcademy school and the George Washington University Online High School. As Nate said, throughout the year, we are focused on improving our student retention rates. Our internally tracked in-year withdrawal rates for Managed Public Schools in fiscal 2013 decreased 1% compared to the prior year, and by an even greater amount on a full-year basis. We also see a correlation between student tenure and academic growth. We had a very focused effort in all of our schools to reregister students for the 2014 school year. We've implemented a number of measures to increase it. Further, we want to help prospective students better understand our offerings and the fit with their needs and unique situations. We are piloting preenrollment approval diagnostic tests in several states. This is an online experience that helps the family of our students sample online learning, while also providing us valuable input into the individual learning plan for the student, should they choose to enroll. In addition, working with our nonprofit boards and district sponsors, we have…

Good morning. As we begin the 2014 school year, I would like to take a moment to reflect on one of my fondest memories of this past year, the graduation of the first students to complete their entire K through 12 education in one of our Managed Public schools. I had the honor of speaking at the graduation of the Colorado Virtual Academy in May and was impressed with the accomplishments and dedication of the students, especially the 4 graduates who had attended our schools since kindergarten. Hearing their success stories and how online education have made such a difference in their lives was truly inspirational and reminded me of what all of us at K12 are dedicated to, offering a high-quality, individualized education for all students. When one realizes that these students were born about the time the Internet was commercialized, it's remarkable to think that they began their education 5 years later and completed their entire education online. Hearing from these graduates first hand how we changed their lives, makes all the hard work over the past 13 years worthwhile. As Nate mentioned, we have launched several exciting pilots this fall as we strive to continually improve academic performance. Together with our educational advisory committee, we are developing a blueprint on how to improve our academic results, and those plans are already being implemented in schools this fall. For example, we are piloting a diagnostic assessment tool that allows us to develop Individualized Learning Plans, or known as ILPs, for new students who often start school with us before their academic records arrive. We are working towards introducing ILPs for every student, with a specific focus on high school students, where we believe these ILPs will have a significant impact as we prepare these students for college and…

Thank you, Ron. Good morning, everybody. This morning, I'm pleased to report a strong fiscal '13 that was at the upper end of our most recent guidance range. As a reminder, last quarter, we guided to $840 million to $850 million of revenue, $108 million to $112 million in EBITDA, $43 million to $47 million in operating income. And as Nate mentioned earlier, we ended fiscal year 2013 with revenue of $848.2 million, an increase of $139.8 million or almost 20%; EBITDA of $111.4 million, an increase of $24.4 million or 28%; operating income of $45.7 million, an increase of $16.7 million or up 57.6%; net income of $28.1 million, an increase of $12 million or 60.6%; and diluted EPS of $0.72, an improvement of $0.27 or 60%. And for our seasonally low fourth quarter, we have revenues increasing $32.7 million, or 19.2%, to $203 million; EBITDA increased $1.2 million, or 7%, to $19 million; and operating income came in at $1.3 million, which was down a little over $0.5 million from the prior year. Net income increased $0.5 million, or 27.8%, to $2.3 million; and diluted EPS increased 20% to $0.06 a share. Let me give you a little color on our full-year results. We had healthy revenue growth close to $140 million or 20%. In 2013, our revenue growth was driven primarily by our Managed Public Schools. We saw an increase of almost $135 million or 22.6%. This was a result of a 12.7% increase in average enrollments, combined with an 8% increase in average rate. Enrollment growth is primarily from existing states, demonstrating our ability to grow revenue organically. The increased rates were a combination of higher revenue capture and some mix shifts, as Tim noted earlier. Our Institutional business was flat for the year. However, Q4…

Thank you, James. Before I turn the call over for Q&A, I want to thank all of our dedicated employees and partners for a very solid year. I'm very proud of the organization and proud of all the partners. Operator, at this time, we would like to open the call to questions.

[Operator Instructions] And the first question comes from the line of Sara Gubins of Bank of America.

Do you think that the additional enrollment slots that you're getting in the Managed Schools, I'm wondering if that would be enough to be able to give you accelerating enrollment growth next year, particularly given your comment that -- about being comfortable with consensus revenue, which would suggest a slower revenue growth rate?

Sara, this is Nate Davis speaking. Welcome to the call this morning. And what you're asking is a question that requires us to project that we're going to be better than some of the estimates out there. I think we ought to be smart and cautious right now and say, the answer to that question would be no. That doesn't mean we're not working on it. We have a significant marketing effort going on right now to try to capture many of these new enrollments, particularly in spaces like Michigan and Texas and in Florida. But it would be wrong of me to try to project it that we're going to accelerate enrollment growth on the basis of those things. I think it's going to allow us to stay on track from where we were.

Okay. And then you mentioned 10 new schools this year, should we think of that as being maybe 500 students per school?

I wouldn't think of it that way. A lot of these schools are second schools in existing -- in the existing states like Insight Schools opening. So I wouldn't necessarily take those new schools to be a significant increase in enrollment growth necessarily.

Okay. And then you benefited quite a bit in revenue per student this year given the change in the approach around unfunded students. Could you maybe just tell us how many or what percentage of your students in fiscal '13 were unfunded? And how you're thinking about that for next year?

Sara, I don't think we've been -- this is Tim Murray. I don't think we've been explicit about the numbers of unfunded students in the past. But we saw a significant -- we put significant focus, as we came into this year, on managing that to a lower number. As we look at 2014, we don't see any change in terms of the level of unfunded students, so the pick up, if you will, that we saw in 2013, we are not projecting for 2014. We're holding where we're at in terms of the mix of unfunded versus funded students.

Next question comes from the line of Suzi Stein of Morgan Stanley.

You talked about the success that you had in renewing contracts, can you just talk about the kinds of changes that you're seeing in these contracts as they come up for renewal?

Sure. You want to go, Tim[ph]?

Let me just make sure, Suzi, we're talking about -- are we talking about the renewal contracts for Managed Schools, not...?

Yes, exactly, for Managed Schools.

I think we're renewing the contracts on terms that are not that different than they were before. So we're not seeing a significant shift in terms of the contracts. They're usually between 5 and 10 years and we're not seeing much of a change.

Okay, great. And can you just talk about who your biggest competitors are in the Institutional business? And has there been any change there competitively?

Suzi, it's Tim again. No, there really hasn't been any change competitively. This is a market that doesn't have very many very large players. The largest, as you know, is a publicly-traded company who also competes with us in the Managed Public Schools space. The textbook providers are all trying to sell digital solutions, so they are large competitors. And I prefer not to name specific smaller competitors, but there are many, many, many small competitors providing point solutions across the provision of remediation solutions, individual curriculum solutions. But overall, very fragmented market. That's why we see opportunity in it, quite frankly.

Okay. And I know you're not giving guidance yet, although that was very helpful kind of talking around consensus. Can you just maybe talk about what your expectation is for the tax rate for fiscal '14?

Suzi, it's James. We're not giving guidance on the tax rate yet, but I would think about it in a range that was similar to fiscal 2013.

Next question comes from the line of Jeff Meuler of Baird. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: I guess just a follow-up on that first question around if new or if total enrollment growth should accelerate. If we look at the cap increases, and I know you're not expecting to fill them all, but they're still meaningfully greater than last year. It sounds like all of the commentary on retention and reregistration and what you're doing there, is positive. I guess, if you could just help us kind of think about what are the offsetting factors. I know graduates is a bigger number this year or, I guess, last spring, graduates were a bigger number, and you have some schools that are maybe maturing in terms of enrollment growth in uncap states that have been around for a while. But could you just help us think about what are all the offsetting factors that should lead it not to accelerate, given all of the positive commentary on retention, cap expansion, et cetera?

Well, this is Nate speaking, and I think Tim and Ron will also have some comments on this. First of all, I want to make sure you get an impression and understanding, we are optimistic that we will do a great job with enrollment. It's not that we're pessimistic and we think it's going to decline, it's just that I don't want to get out in front of our headlights and try to signal that we're going to be accelerating growth when we really haven't gotten to finish through the enrollment season yet. Some of the things, as you already know, is we didn't -- we're not going to opening up any brand-new large state. Even though we're opening up a significant number of new schools and new cap expansions in existing states, we're not getting new states. And so that'll be a little bit of an offset. I think that retention, as you mentioned, retention will be slightly better. I think that the re-enrollment process will be slightly better. But one of the things we are seeing is a little competitiveness in the price of the, and as Tim talked a little bit about this, the cost of enrollments. So when we get out there and where we got search terms with Google and we're trying to do a lot of digital marketing, we're seeing the cost of that be a little higher. And so we have a choice at that point. Do we put more money into it to try to continue to drive high enrollment, or do we maintain a focus on profitability? And as we make that decision, that might cause us to be a little bit more conservative on the amount of growth, but driving it to be more profitable growth and talk about enrollment growth. So those are some of the factors we think about. Not new states. We think about the competitiveness of the search terms, and those things cause us not to -- I don't want to get too optimistic yet. So that's my view. Tim and Ron, you have ...

Yes, I would just add the other macro issue here is we really are working hard to work with our prospective families and students to look at goodness of fit of our solution with their needs. We want the right students to come to us, so the students that have the greatest chances of success. And so we are doing more face-to-face interviews as part of the enrollment process. We are doing various pilots of efforts or changes in our enrollment process to improve the way students can decide whether they want to enroll or not. So we're willing to gamble some growth in enrollments to be able to have students that have a greater likelihood of actually being successful with us. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Okay. And on the SEM rates, is that being driven up more by your large national competitor, or is it more the state-run schools in some of your largest states that are driving that up?

We can't tell for sure exactly who it is. I think I know who it is, but I can't tell you for sure. I think I know who it is. And by the way, it's not across-the-board. It's in a couple of states where I know we're highly competing for some of the same students in those states. So it's not across-the-board. But there are a couple of states I know where the rates have gone up some. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Got it. And then finally, Ron, obviously, kudos on the big business development year. Can you just talk about what the pipeline looks like for business development activities over the next 12 months? And what I'm wondering is, did you work through a lot of the pipeline in 2013? Or is it just kind of continually expanding and there's a chance for another similar size business development year?

Well, the next 12 months, I mean, obviously, particularly with regard to cap expansion, this year was just unbelievably successful. When I look at some of the states like Texas, which is the largest market in the country and having to work there for 12 years, it was gratifying. I think what I'm looking at going forward is, I don't know if you'll see the same kind of cap expansion because like I said, Michigan and Texas are so large, it's tough to duplicate a feat like that. What I do think you'll see though is an increased -- is hopefully, more states, right? This year was -- we had got very close in a few places and didn't get it over the finish line, so I'm hoping in the coming year, we can get several more states over the finish line and we have a large queue of new states in process. So you never know for certain you'll get those or when that'll happen, but I think I would expect to see probably less success with regard to cap expansion and more success with regard to new states. I also think we continue the addition of more counties in Florida because these counties often have 200,000-plus children in them. So continually getting more coverage in Florida will be a big boost that will happen for years to come. So I think we're looking good, but again it's always very hard to predict these things.

The next question comes from the line of Corey Greendale of First Analysis.

This is David Warner for Corey. I was wondering if you could comment a bit on your margin expectations for 2014? Maybe some areas where you think you have the opportunity for leverage on some of the expected growth. Maybe specifically talk about S&A since you mentioned that you've seen some higher admission costs there.

Yes, I mean, I think -- again, we're not really going to give some guidance today. But I think we all believe there's continued growth expansion opportunities in our margins. And I think we're going to try to modulate some of these S&A costs as we go forward. So I think you're going to see continued improvement in the margin.

Okay. But you wouldn't...?

David, there's one other thing that Ron talked about a little bit in his call -- in his comments and I know his mentioned in -- publicly before and I think it's important to factor in. Looking at the difference between what student enrollment rates have done in previous years versus where they are, the stabilization and slight increases to enrollment rates will also affect margins. And so that's -- we're optimistic about that. The states are not under the same kind of pressure they were 3 or 4 years ago when budgets were tight and the economy was tight. And so what happens is parents go and say, "Hey, I want you to improve my education." We are a public school and when those funds go to public schools, they come to us as well. So we see some margin expansion from that.

Okay. And you had quite a bit a fluctuation in the revenue per student over the past couple of years, would you expect that to normalize? Or is there any specific headwind that you see in 2014 that would affect that -- that would really affect that either way? Or can we model maybe just something along the lines of overall state allocation funding growth? Or is there any...?

We would expect it to be more normalized, because what you've seen in the past is, in the past 4 to 5 years, we've had the large headwind, obviously, from the state budgets, and we also had the unfunded students. So given that we now see rates stabilizing to slightly increasing and we have a, really, a constant percentage of unfunded students, barring any unforeseen changes, I would expect that to become much more normalized. Also as your portfolio of states gets much larger, the impact of new states mix becomes smaller on it, so you should see an increased stabilization in that rate.

Last year, FY '12 over '11, we were down -- rates were down in the neighborhood of 6%. And then looking at this year, the reimbursement rates were, I think James mentioned, they were up like almost 8%. We don't expect that kind of improvement, but we expect it not to go back to the negative. So I would think a number, positive, but not nearly where we were this year.

The next question comes from Jerry Herman of Stifel. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Just a follow-up on that, Nate, you said that the rates last year were up 8% as a component of your RPS change, is that -- did I hear that correctly?

That's right. Rates were up about 8% year-over-year. Average rates were up 8% year-over-year in our Managed Public Schools business. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Great. And what about the impact of the unfunded students, if you will, which should now, I guess, normalize? What was the impact of that, or is that encapsulized in the rate?

That's really encapsulized in the rate.

Yes, the number you're quoting of the 8% number, that includes all of the various functions unfunded students per pupil increases. So that's just a mathematical calculation. It's not the per funding per child in states, which is different, which is a small component of that.

It means our rates are up, total -- reimbursed. Everything we do together. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And can you quantify the impact of the unfunded students in that 8%?

It would be a larger part of it than the per pupil funding, I can tell you that much. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. Very helpful. And Tim, question for you with regard to the Institutional business, and as you transition there. When should that normalize, if you will? When should the numbers that you report become more reflective of what's really going on as you transition to a sub-model?

Sure. I think we're starting to see that now. 2013 was our first full year post the acquisitions of KCDL and AEC. So we've made great progress, I think, in terms of rationalizing our sales model, how we go to market. As we've noted, we've seen the percentage of, or the proportion of perpetual revenues decrease substantially from where they were 2 years ago and 1 year ago. So I think we'll continue to feel the effects this year of the continued decline in perpetuals, and next year, I think that will be much less of an effect than what we've seen. So we feel good about how the sales team is focused. We feel good about the changes we're making to enhance our product suite, adding additional content of K12 content, as well as third-party content. And we also feel good about the work we're doing in the back-office to simplify and integrate some of the billing and fulfillment capabilities. So it continues to get better each quarter. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: Great. And James, as -- I realize you guys are going to give guidance because of the unknowns in enrollment, but can you give us some guidance on some of the things that are known, like D&A and your estimate of stock comp and CapEx and capitalized software curriculum development for this year?

Yes, I mean I think we'd rather hold off and give a complete suite of guidance in October. But I think we're going to hold off and wait until that time.

It's only 6 weeks. Jerry R. Herman - Stifel, Nicolaus & Co., Inc., Research Division: We just can't wait, I guess. And then my last -- last question and I'll turn it over. Again, how do you guys think about the long-term margin potential of this business, again, given all the dynamics that go into that? What do you think is reasonable over the longer-term?

We won't give you a number. But if you ask the question, how do we think about it, I look at every line item in the business and ask the question, what do we think happens with reimbursement rates? What do we think happens with how well we do in retention? Can we improve retention and re-enrollment? If we look at the marketing cost, can we be more and more efficient? As we get larger, is there a better scale? Do we have better referral of students from the existing students we have through our reputation? If I look at going behind -- beyond EBITDA margins, going all the way down, if I look at how we deploy capital, I think that we're going to get more cost-efficient. I think we're going to get better retention. And I do think that there will be less pressure than in previous years on rates. Now I'm not going to give you a number, but I'm giving you, directionally, how we think about it. When we look at all of those positive factors over the long run, margins continue to have some ability to grow. But I can't tell you the numbers going to be, instead of 13.5% EBITDA margin, it goes to x margin. But I can tell you that I think that margin continues to increase over a multi-year period. And then lastly, I do believe that while the Institutional business is still young and growing, it's a market that is developing, long run, that is a market that's going to have higher margins than the current markets that we're in, because that's a softer market, it has higher leverage. That's some reason we want to be in that market, is that is another reason why our margins will get better. So I'm optimistic that margins will continue to improve over a multi-year period.

The next question comes from the line of Jeff Silber of BMO Capital Markets.

Just some numbers-related question and just going back to the quarter that you just reported. If I remember correctly, you expected SG&A in the quarter to be sizably higher, and I know it came in below our expectations. Were there any costs that were deferred from the fourth quarter into the first quarter of this year?

There are always -- there's always some timing-related cost, but I don't think there's anything that significant that was deferred specifically from the fourth quarter into the first quarter.

Okay. And then looking at gross margins, just taking a look at the impact of instructional costs and services, gross margins went down pretty significantly year-over-year compared to what we saw in prior quarters this year. You may have explained it at the beginning and I might have missed it, but if you can go that over again, I'd appreciate it.

Well, our gross margins, we had -- we made some investments, I think, in our instructional costs, which are pressuring some of our gross margins. Those are investments that we think we're going to improve academic performance. But I don't see those -- I don't see that rate of investment increasing in any way. So I don't think that you're going to see continued pressure downward over a longer period of time.

Okay, great. And then the share count was a bit higher than I had modeled. Was it the impact of the put back with the Chinese investment?

No. The put with Chinese investment's unrelated to the share count. The share count is really just a function of new issuances of grants for various management personnel.

And should this be the starting point we should use for next year?

Yes, that's a good starting point for the [indiscernible].

Okay, great. And then just finally, one more. I know you gave your managed enrollments for the year, is it possible to get the average enrollments in the Managed Public Schools for the quarter?

Managed enrollments, is that something we disclose?

We can certainly provide that.

Yes, we can provide that [indiscernible].

Okay. I guess, I'll get that when I follow up.

Next question comes from the line of Trace Urdan of Wells Fargo Securities.

I wondered if you could take a few -- just a couple minutes and talk about the Insight Schools strategy, sort of the long-term goals for that? How you feel it's progressing? And do you ultimately see sort of an Insight School option available as commonly as a K12 academy option for the student areas that you're serving?

The answer is yes. So the Insight strategy is moving along nicely, and we're excited to be opening the Insight in Ohio. And we're putting a lot of human brain capital into developing the right model for academically at-risk kids. And the beautiful thing about the Insight model and the strategy is we want to have schools whose entire culture, from the teachers to administration to the curriculum, is built around taking children who are behind grade level and bring them up to grade level, taking students who are coming to high school, credit deficient who would likely be high school dropouts and graduating them from high school. So it's a very different culture that you would have than what we traditionally had originally in our virtual academy. So the idea is absolutely to have 1 school of each type in every single state we operate in and make sure that students find the right option for them.

And Ron, in those areas where you have an Insight school as an option right now, I mean, how does it work out in terms of trying to, I don't know, gently persuade or redirect students into the school that's right for them? Are you having success with that?

The answer is, it's working very well where the model's now full up and gear. And it really isn't persuading or dissuading. What it really is, is explaining to prospective students what each school is. And our observation is, 90% of the students will choose the right school for them, and we take everyone who wants to come in either school. But our observation is the people will choose the right school for them. They know where they are and what they need. So if presented properly, we don't need to do any persuasion or dissuasion, they'll choose the school that's right for them. And if they choose the wrong one, there's nothing we can do about it but it seems to be working.

The next question comes from the line of Jeff Meuler of Baird. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: You guys have not been as acquisitions -- or acquisitive over the last year as you were prior to that. Obviously, you have a great balance sheet and you've been the slope of the curve in terms of CapEx expense. Nate, how are you thinking about the usage of that balance sheet?

I believe there's -- well, first of all, you always like to have a lot of liquidity and flexibility, and so I think the company is in a great financial position to have that. But there's no doubt about the fact that we believe, long-term, that we should go back to acquisitions. Now the question is when and what type and what companies and what profiles would they have. I'm not adverse to it. As a matter of fact, we believe that we should do some acquisitions. I don't want to sit here and talk about M&A strategy at this point, but I would say I think about the balance sheet as a strong balance sheet that allows us to do acquisitions. But as you know, the key for our businesses in the last 18 months, 12 months, has been, we need to make sure the core business is running well. We need to make sure the academics are strong. We need to sure the management team is as strong as possible, so when we do an acquisition, we don't distract ourselves and our core business. And that's why we've held off in acquisitions for a while. That does not mean long-term we won't do it. Building a strong balance sheet, I think, will allow us to be in a great position to do that. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then just a follow up on the Individualized Learning Plans. I guess, what's the process for teacher, call it, training and management to kind of shift increasingly towards the ILP type of model? And what are the implications for teacher-to-student ratios, if any, of having that type of model?

Jeff, it's Tim. We've been doing ILPs for a number of years across K through 8, as well as high school. The changes we've made this year is to have looked at what we think is best practice and trying to standardize on that nationally. We have a stated goal that we measure all of our schools against 100% ILPs this year. It's the first time we've ever have that as a measured goal. So we're trying to, first of all, just execute more effectively. In order to do that, it's required setting clear expectations, measuring the organization, but also giving them the tools to be able to create these ILPs, and we don't see it at this point in time, as having an effect on student-teacher ratios. We'll be assessing that as we go forward, of course. And we're -- as both Ron and I mentioned, we're doing some preenrollment exercises with prospective students that provides us input to those ILPs, where in many cases, we are delayed in getting transcripts and other school records for our student until they're 4, 5, 6, 7, even 8 weeks into the school year at some time -- in some cases, and we'd really like to have that ILP set at the beginning of the year. Jeffrey P. Meuler - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then for the preenrollment exercises, can you give us any sort of rough order of magnitude of what percentage of prospective students are self-screening out when they go through those exercises?

I can't. I can tell you that -- well...

It's really hard to isolate that data, because you never really know what is doing it. You can only look at changes and a chain of small changes, so I don't think we could answer that question. I don't believe data's precise enough.

Before we get another question, we'd like to go back and make sure we provide an answer to, I think it was Jeff who asked the question. James?

Yes. So I think the question about the Q4 Managed Public School enrollments number, we had for -- you need to remember that because of the seasonality of the quarter, the enrollments will go down a little bit in each Q4 and it hasn't in each of the past couple of years by about the same percentage. So you'll see our Q4 enrollments were just a hair above 111,000 on average for Q4. And again, I think that's consistent with what you would have seen in previous years.

You have no further questions at this time.

Great. Well, before I wrap up, I'd like to mention that on September 4, we will be participating in the Barrington Research Growth Conference in Chicago. And on September 12, we will be presenting at the BMO Capital Market Back-to-School Conference in New York. So with that, I want to thank you for your time today. I look forward to meeting most of you and speaking more in detail in the upcoming months. So thanks, again, for your time this morning.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.