Greetings and welcome to the K12 Fourth Quarter Fiscal 2019 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host Mike Kraft, Senior Vice President of Corporate Communications. Thank you, Mr. Kraft, you may begin.

Thank you and good afternoon. Welcome to K12's fourth quarter and year end conference call for fiscal year 2019. Before we begin, I would like to remind you that in addition to historical information, certain comments made during this conference call may be considered forward-looking statements. These statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. They should be considered in conjunction with cautionary statements contained in our earnings release and the Company's periodic filings with the SEC. Forward-looking statements involve risks and uncertainties that may cause actual performance or results to differ materially from those expressed or implied by such statements. 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 risks and uncertainties that could materially affect financial and operational performance and results, please refer to our reports filed with the SEC. These reports include without limitation, cautionary statements made in K12's 2019 Annual Report on Form 10-K. These filings can be found on the Investor Relations section of our website at www.k12.com. In addition to disclosing financial results in accordance with generally accepted accounting principles in the US 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 for 30 days. With me on today's call is Nate Davis, Chief Executive Officer and Chairman of the Board; and James Rhyu, Chief Financial Officer and President, Product and Technology. Following our prepared remarks, we will answer any questions you may have. I'd like to now turn the call over to Nate. Nate?

Thank you, Mike. Good afternoon, everyone and thanks for joining us on the call. I'm pleased to report that K12 ended fiscal year 2019 with solid financial results that exceeded our expectations, both for the quarter and the full year. We surpassed $1 billion revenue mark for the first time, increasing 10.7% year-over-year. The strength of our revenue growth is based on the Managed Public Schools program. This again demonstrates the strength of our core public school business and the underlying demand for blended and online school option. Adjusted operating income for the year was $62.2 million, an increase of 34.1% year-over-year. Capital expenditures were $48.4 million for the year. And note that our capital spend is focused on providing interactive virtual lab and more adaptive and personalized lessons for each students learning level. In addition to teacher and learning coach tools, we've been working to introduce 20 new project-based learning courses for the upcoming school year. These courses are all part of our important career readiness initiative. As a result of the revenue growth and expense management, we produced more than $93 million in free cash flow, this was an increase of 49% year-over-year. In fact, this is the second year in a row in which we grew free cash flow at that pace. Overall, our results this year met or beat the guidance we gave you each quarter as well as for the full year. Now let me turn some commentary to our business operations. First, we remain dedicated to helping students grow in every way, especially in their academic endeavors. For instance, this year we double down our focus on student in year growth. We established an internal goal that every student enrolled in a K12-powered partner school achieves at least a year's growth or more for…

Thank you, Nate. Good afternoon. First, let me recap our reported results. Revenue for the quarter was $256.3 million, an increase of 7.3% from the prior year. For the year, as Nate stated, revenue was $1.016 billion increase of 10.7%. I want to remind everyone that the new accounting standards we implemented this year affected the seasonality of revenue recognition and impacted the year-over-year quarterly comparisons. However, revenue recognition over the full fiscal year is largely not impacted. For the quarter, operating income was $2.7 million, a decrease of $7.2 million. For the full year, operating income was $45.5 million, an increase of $20 million or 78.4% compared to last year. Adjusted operating income of $7.2 million for the quarter, a decrease of $8.6 million for the year. Adjusted operating income was $62.2 million, an increase of 15.8% or 34% from last year. As a reminder, adjusted operating income excluded stock-based compensation. Capital expenditures for the year were $48.4 million, an increase of $5.3 million. And already mentioned, in each case, our results met or beat the expectations we provided in our original guidance. Now this is now the sixth year in a row where we have met or exceeded our annual guidance numbers for revenue, profitability and capital expenditures. Now I'll turn to some additional details for the fourth quarter and the full year. For the quarter, Managed Public School programs revenue increased $16 million or 7.7% to $224.3 million and for the year, revenue increased to $109.5 million or 14%. The year-over-year growth in this business was driven by strong enrollment growth of 6.3% and an increase in revenue per enrollment of 7.2%. This revenue per enrollment growth was driven by strong mix and an improved funding environment. As we've mentioned previously, we expected this to be a…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Corey Greendale with First Analysis. Please proceed with your question.

Hey, guys. This is Logan Bender on for Corey. Congratulations on the quarter. As far as the career readiness, what are some industries that you see in high demand and you see that being geographically concentrated as you roll it out?

Hi, Corey. Thanks for the comment and the question. Yes, we do see it geographic. The highest demand is most likely in the IT areas and we're clearly seeing so many jobs, not just in programming, but in software and hardware maintenance and network support, network communications equipment, cyber security, those areas are all the highest growth areas that we see. Health care administration is the second highest growth area we see. Obviously the healthcare overall but high school students can be doctor, so we're talking about health care administration and that's the areas we see for them. Beyond that area, there's some work in manufacturing and in agriculture, but primarily it's health care and IT. And it does, it does show itself in geographic areas. Obviously, across this country with some of the high IT areas are, a lot of them are in Texas and Southern California and the Utah area, so we see up in the North east a lot. Then you don't see agriculture nearly as much in those areas. You just see it more probably in the middle of the country. Health Care administration is everywhere. So all of our schools have to be focused on what's the high need in their particular area and that's how we do, what we call centers of excellence. And we focus our centers of excellence that way.

Okay. That's great. And then as far as the GCA goes, it looks like you where -- you think you can grow adjusted operating income and it can exceed consensus. What are some of the levers that you would go about that. Is that just managing cost structure more tightly or could you just give us little bit more color on that?

Yeah. And I'm sorry, I thought that was Corey, but I guess it's Logan is for Corey, right.

Hi, team.

The first thing to remember is that we are spending a lot of money on GCA toward the latter part of the year and we won't have to spend that money. So then school wasn't really that profitable. A matter of fact, it was getting breakeven for us. The second thing is to remember, we have new statewide schools in Florida and Texas. We have a new school in Missouri. We've got eight new Destinations Career Academies and three expansions I mentioned 11 total but it's made up of eight new and three expansion. And then we're seeing some good same-store growth in some of the existing schools. So that growth is really what's driving our ability to drive some profitability. And, yeah, we're always focused on expense controls. And I think we've seen some efficiencies and some of the things we're doing.

All right. Thank you.

[Operator Instructions] There are no further questions in the queue, I'd like to hand the call back to management for closing comments.

Okay. And thanks everybody for being on the call today. We don't have any additional comments. We are finished. So, everybody have a great day and thanks for being on. Bye-bye.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at time and have a wonderful day.