Strategic Education, Inc. (STRA) Q4 2020 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Strategic Education's Fourth Quarter 2020 Results Conference Call. I will now turn the call over to Terese Wilke, Manager of Investor Relations for Strategic Education. Ms. Wilke, please go ahead.

Thank you. Good morning, everyone and welcome to Strategic Education's conference call, in which we will discuss fourth quarter 2020 results. With us today are; Robert Silberman, Executive Chairman; Karl McDonnell, President and Chief Executive Officer; and Daniel Jackson, Executive Vice President and Chief Financial Officer. Following today's remarks, we will open the call for questions. Please note that this call may include forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements are based on current expectations and are subject to a number of assumptions, uncertainties and risks that Strategic Education has identified in today's press release that could cause actual results to differ materially. Further information about these and the other relevant uncertainties may be found in Strategic Education's annual report on Form 10-K to be filed, the most recent 10-Q and other filings with the Securities and Exchange Commission, as well as Strategic Education's future 8-Ks and 10-Qs and 10-Ks. Copies of these filings and the full press release are available for viewing on the website at strategiceducation.com. And now, I'd like to turn the call over to Rob. Rob, please go ahead.

Thank you, Terese. And good morning, ladies and gentlemen. After a fairly eventful year, we have quite a lot of material to cover this morning. Karl will go over our operating and academic performance for 2020 and our plans for 2021. Dan will cover our detailed financial results and finally I will have some brief remarks on our capital allocation. And of course, we will stay for as long as you have questions. Karl?

Thank you, Rob and good morning, everyone. Obviously 2020 was a unique and challenging year and certainly unlike any year that I've ever had to manage through. At the beginning of 2020, both Strayer and Capella universities were performing at peak level. Initiatives to drive improve learning outcomes and higher retention were effectively improving results, following years of investments in new tools and technologies, so simultaneously improve learning while increasing productivity. As the pandemic spread, along with its associated economic impact, Strayer and Capella's performance began to diverge quite significantly, driven by their differing student body composition with Strayer serving predominantly an undergraduate population, the segment of the population most prone to adverse impacts from a deteriorating labor market. Significant new student declines in the third and fourth quarter lead to a decline of 9% in Strayer's total enrollment for the fourth quarter. Over the same period, Capella's new student growth remains strong, resulting in total enrollment growth of 5% from the prior year. Notwithstanding, Strayer's adverse second half performance, SEI's overall revenue and adjusted earnings per share both increased 1% for the full year 2020. Part of that performance was driven by our ability to reduce the operating expenses. And later this quarter, meaning, the first quarter of 2021, we will complete the restructuring that began in the third quarter of last year. That reduces our annual run rate operating expenses by $40 million. Some of those savings are being reinvested into our new alternative learning segment, which is intended to further diversify our company. Net of these reinvestments as well as some annualization of 2020 expenses, we expect 2021 annual operating expenses, excluding Australia and New Zealand to be down between 3% and 4% over the prior year. In November of last year, we closed our purchase of Torrens University, Think Education, and the New Zealand based Media Design School from Laureate Education. Given the timing of that close, which was midway through the fourth quarter, their overall financial contribution was minimal and included a small $0.06 cents earnings dilution, as no classes were actively being taught over the holidays. But on a pro forma basis, collectively, these assets grew revenue for the full year by 27% and EBITDA by 70%. We expect these Australia and New Zealand assets to show continued solid revenue and income growth this year. Notwithstanding the fact that we are assuming from a planning perspective, their borders will remain close to foreign students through at least the third quarter. For 2021, we expect Torrens' Think Education and the Media Design School will contribute more than $1.15 of earnings per share. Sophia Learning, our low-cost college course alternative portal continues to perform very well since its relaunch with a monthly paid subscription for unlimited access, the pricing model that we launched last August. Today, more than 26,000 people have subscribed, and we expect Sophia's revenue to triple in 2021 to over $10 million. Our Employer Solutions team also had a tremendous year in 2020. Employer affiliated new enrollments grew 1% overall, but increased 25% at Capella University. In the fourth quarter, we successfully launched our new Workforce Edge product, which is our education benefits management solution for Fortune 1000 companies and connects these companies to our proprietary network of universities which includes Strayer and Capella universities, as well as the schools from Noodle Partners. We expect to have more than 250,000 total employees' education benefits being managed in Workforce Edge this year, ultimately serving as a low-cost source of new enrollments for both Strayer and Capella. In March of 2020, we were saddened by the passing of our business partner, Jack Welch. The school that we founded with Jack, the Jack Welch Management Institute had perhaps its strongest year ever in 2020. The school increased its ranking to number 15 on the Princeton Review list of top online global MBA programs. It ranked first overall in six different categories within poet and quants rankings, more than any other business school. JWMI's net promoter score of 79 is nearly three times higher than the business school average and the institute graduated 664 students, a 14% increase from the prior year. I know that Jack would be beyond proud of these results. And turning now to our notional outlook for 2021. We continue to see revenue growth of 15% driven by continued strong performance of Capella University as well as growth in Australia and New Zealand, as well as our new alternative learning segment, partially offset by weaker performance at Strayer University. Our internal plans model continued soft new enrollment at Strayer University through the first half of 2021 and returning to positive new student growth in the second half of the year, with total enrollment growth returning in 2022. We expect adjusted EBITDA to be flat year-over-year roughly $55 million in capital expenditures and yearend liquidity of $500 million. For modeling purposes, we assume a 29.5% tax rate and a share count of 24.2 million. Finally, you will notice this morning's results are presented in the same format we use throughout last year, we decided to wait to institute our new segment level reporting in 2021, to allow our owners to assess our fourth quarter results in the same format we use throughout 2020. We do intend to begin the new segment level reporting with our first quarter release on April 29th. And we will be reporting three segments, US higher education, which will include Strayer and Capella universities as well as the Jack Welch Management Institute. Alternative learning which will include Sophia Learning, Employer Solutions [sic - Employee Solutions], including Workforce Edge, and our Digital Enablement Partnerships, and Australia/New Zealand or ANZ as we refer to it internally, which includes Torrens University, Think Education and the Media Design School. In early April, we will be releasing a schedule, which will include a pro forma presentation of key financial metrics for these three segments to allow our owners the ability to familiarize themselves with the data well in advance of our earnings release. And before I turn the call over to Dan, I want to thank all of my colleagues within SEI. Throughout 2020, they continue to exhibit tremendous resilience, strength and professionalism, and it's an absolute honor to work alongside them. And with that, I'll ask Dan to run through the financial results.

Thank you, Karl. And good morning, everyone. I want to first point out that our consolidated results for the fourth quarter and the full year 2020 exclude the financial results of the Australia/New Zealand acquisition prior to November 3rd, 2020. For a pro forma view of our full year 2020 segment level results, please see the fourth quarter slide deck that we just posted to the Investor Relations section of our website. I also want to remind everyone that our adjusted results which are non-GAAP, exclude charges and expenses that are non-recurring, including merger, acquisition and restructuring related costs. Moving on to our fourth quarter results. Adjusted revenue for the fourth quarter grew 6% to $278.8 million compared to $263.8 million in 2019, driven primarily by the inclusion of $35 million of revenue from our new Australia/New Zealand division offset by a 13% decline in revenue at Strayer University. Capella University revenue was flat year-over-year, as total enrollment growth of 5% was offset by lower revenue per student. The revenue per student decline at Capella was driven by growth an employer affiliated enrollment, a trend we expect to continue into 2021. Our adjusted revenue for the quarter and the full year excludes the impact of $11 million deferred revenue adjustment related to the purchase accounting for our Australia/New Zealand acquisition. Our adjusted operating expenses for the fourth quarter increased 15% to $231.6 million driven by the inclusion of Australia/New Zealand and partially offset by expense savings at Strayer University, which were primarily related to the restructuring that commenced in the third quarter of last year. The increase in operating expense resulted in a decline in adjusted operating income to $47.1 million from $62.9 million in 2019. Our bad debt expense for the quarter was 5.3% of adjusted revenue, slightly higher than 2019, due primarily to student relief measures we implemented as a result of the pandemic. We expect bad debt to improve slightly in 2021 due to better collections in the US as some of the 2020 relief measures have expired, and also historically lower bad debt in Australia/New Zealand. Our adjusted diluted earnings per share for the quarter declined to $1.39 compared to $2.13 in 2019, reflecting the impact of weaker Strayer performance, the shift from net investment income to net interest expense and higher share count related to our Q3 stock offering. Additionally, due to the unfavorable timing of expenses for Australia/New Zealand in the last two months of the year, and as we projected in November, the impact of Australia, New Zealand on our Q4 and full year 2020 earnings per share was slightly negative. Moving on to the full year results. Our adjusted revenue for the year increased 4% to $1,038.9 million from $997.1 million in 2019, reflecting a very strong first half at both Strayer and Capella, and the inclusion of Australia/New Zealand offset by weakness in the second half primarily at Strayer. Our adjusted income from operations for 2020 grew 9% to $211.1 million from $194.1 million in 2019. Adjusted earnings per share increased slightly to $6.68 from $6.67 in 2019. Our adjusted effective tax rate for the year was 28.5%. And we expect our full year adjusted effective tax rate in 2021 to be approximately 29.5%, which assumes the higher corporate income tax rate of 30% in Australia, and no changes to statutory rates in the US. Capital expenditures for 2020 were $46.8 million compared to $38.7 million for the same period of 2019. And we ended the quarter with $225.3 million of cash, cash equivalents and marketable securities, and approximately $210 million of available credit on our $350 million revolver. Rob?

Thank you, Dan. So just a few comments on capital allocation from my perspective. When you cut through a lot of the financial statistics that Dan reported, we generated roughly $6.60 per share of what we call, owners distributable cash in 2020. And based on our current enrollment trends, we expect that to be flat to down in 2021, say, $5.50 to $6.50 per share. Based on that projection, our Board has kept our annual dividend in 2021 at $2.40 per share or roughly 35% to 45% payout ratio. Now our priority for the remaining capitals that we expect to generate through the year is first, to invest in our academic outcomes at all of our universities. And second, to build up our balance sheet after the Australian acquisition and return to a 3.0 financial composite score. I would point out that based on the capital allocation decisions we've made over the last four years, primarily our merger with Capella Education, and the acquisition of the Australian assets. The impact of the downturn in Australia University's enrollment on our overall financial results is significantly ameliorated. We are a stronger, more resilient, and a more diversified enterprise than we have ever been in the past and that positions us well for the future. And with that, operator we'd be pleased to answer any questions.

Thank you. [Operator Instructions] Our first question or comment comes from the line of Jeff Silber from BMO Capital Markets. Your line is open.

Thank you so much. I believe you typically disclosed new and continuing enrollment in your press release. I didn't see it this time. Can you give us a little bit of color on how it did for both Strayer and Capella University? And also just the reasoning why it wasn't disclosed? Thanks.

Yeah, sure, Jeff, happy to. First, regarding the actual performance. Strayer's new student performance in the fourth quarter was essentially in line with the performance they had in the third quarter. Cappella was slightly better so they got a little bit stronger. And the reason that we've adjusted our release is that, we just feel like total enrollment is ultimately what drives revenue. It's what we focus on from a management standpoint. Most of the students that are enrolled at any given time are continuing students and we want to focus on their retention. And so it just reflects the way that we think about the organization and how we actually manage it.

Okay, Karl fair enough. You know, there's been a lot of noise about some of the proposals coming out in Washington that might seem to be favoring some of the non-profit schools like community colleges, state universities. I'm just curious if you see more funding for those schools, what do you think it does to your company from a competitive perspective?

Well we're confident that the value that we create for our students is quite high. And we're always looking for ways to enhance the student experience with better teaching methodologies and other ways that we can enrich their experience. We've long now focused on the concept of creating economic mobility for students through education, and we feel as long as that we're fulfilling that part of our mission, we'll continue to create a lot of value for our students and be fine.

Okay. And then finally, I'm sorry, the new segmentation, first of all, thank you in advance for releasing the data before you record earnings. I'm sure we'll all appreciate that. But you know now that you're going to highlight the alternative learning segment a little bit more, can we just get a little bit of a, Karl you talked about Sophia Learning. We've got some good data over the past few years, but some of the new products that you're offering are still relatively new to investors. Can we just get a little bit more color about what you have and how it stands out from a competitive area? Thanks.

Sure, happy to. The largest part of what will be alternative learning is what we refer to internally as Employer Solutions. And this is the group of people who work to liaise and work with the more than 900 corporate partners that we have in the organization. And so what we intend to do is to effectively transfer the revenue from the US higher education division into alternative learning, because it's the alternative learning group that's actually generating those corporate affiliated enrollments that will be the largest part of their revenue. But you also have Sophia and you'll also have ultimately enrollments coming out of Workforce Edge, which is this education benefits management solution that we've rolled out quite successfully, even though it's only been about a quarter. And part of that could be fees that we receive from Noodle Partner Institution. So if an employee that's covered under Workforce Edge elects to not enroll in Capella or Strayer University, and instead enroll in one of the Noodle Partner universities, that receiving institution of that new student pays us a fee. So it would be the combination of transfer pricing revenue from Employer Solutions, Sophia, Workforce Edge, all of that will comprise the alternative learning revenue base and, of course, their direct expenses.

Okay, great. And I know that we still haven't gotten that data. Will you be releasing enrollment data going forward as well?

We're going to be releasing total enrollment within the division.

Okay. All right, fantastic. I'll jump back in the queue. Thanks so much.

Thanks, Jeff.

Thank you. Our next question or comment comes from the line of Tobey Sommer from Truist Securities. Your line is open.

Thank you. I was hoping you could discuss regulatory changes that you might expect, in particular changes to 9010 and what percentage of enrollments are veterans for Strayer and Capella?

Yeah, well specifically with respect to 90/10 Capella University, first of all, would have no issue there in the low 70s today. They have a much smaller percentage of their total enrollment as either being active duty military or veterans. STRADER percentage is historically and currently higher and so they would be in the mid-to-high 80s. But we're confident in our ability to manage that, particularly with respect to growing employer affiliated enrollments, which has always been one of our priorities and continues to be a priority for us this year.

And to be clear, it's mid-to-high 80s, including all the VA funded students. Slower than that now.

Okay, thank you. And do you think on-campus activities may be back to normal for the fall semester, or is that something you contemplated in the arc of guidance this year?

We are optimistic that our campus network will be open by the end of the year. We have a couple of facilities that are open now. So we've taken a lot of precautions, both in terms of physical layout of space to make sure that we're maximizing the safety of these physical locations. So we are actually now in the process of opening some. And it is our hope that the full network would be open hopefully, maybe or perhaps in the latter half of the third quarter into the fourth quarter.

Okay. And could you talk about the, what your expectation is for the resumption of international travel into Australia and New Zealand and what your plans are around that business and maybe broadening its geographic reach outside of those borders?

Well with respect to broadening the reach outside of their borders, they've effectively done that in 2020. So the Australian government provided relief from their educational visas, which allowed foreign students who historically would have to be in country to enroll in an Australian university. The government allowed them to stay in their native country and take Australian classes online. That already happened last year. We think that will continue at least through the first part of 2021. And based you know just on our sort of informal conversations with our local management team there, it's our hope that the borders would begin to open to both foreign students and international travel in the second half of the year. And should it open sooner than the second half of the year, we think that that obviously would be favorable in terms of potential additional enrollment and revenue growth.

Thank you very much.

Sure.

Thank you. [Operator Instructions] Our next question or comment comes from the line of Gary Bisbee from Bank of America. Your line is open.

Hey, Gary.

Finally I'm back. I don't know if you guys are happy about that or probably saying, Jesus.

Delighted.

This guy again. But at any way, it's good to hear all your voices. And let me start with something that was - has been a big part of the business, you know, even back in the days when I followed the company before which is just this whole concept of serving employers in the employer market. You know it sounds to me, and in looking about how you've discussed that over the last year, that you're actually undergoing a pretty significant change, you know, if the plan historically was to pursue partnerships with corporates to help educate their employees, now you're going out and trying to sell them a software platform, you know some of those students may probably get higher margin fee, but you could lose some revenue and profits, I would guess if they enroll at those partner institutions. And so really what I'm trying to get at is, how much change is this put through the organization? Do you have the people in the seats to execute that? And what - how should we think about, you know, sort of the keys to succeeding with that strategy? And then lastly, you know, are you cannibalizing, do you think you're really going to cannibalize a portion of enrollment, you know, if they choose those partner institution? Thank you. I know that's multipart, but trying to understand the strategy. Thanks.

Thank you, Gary and you're right, it is a big change for us. But it also is completely congruent with our long-term strategy that over time, we want to diversify our tuition revenue base into private sector funded sources of capital. And we absolutely have a great team in place. I think there's almost no risk on cannibalizing Strayer or Capella enrollments vis-a-vis the Noodle Partnership, because there's just almost no overlap from a program standpoint. And what we've realized, post-Capella merger is that, we now have the ability to vertically integrate our assets in such a way that really provides us with a very significant competitive advantage. So for example, we can begin to package Sophia access into employers for general ed courses, we've got all the technology that enabled us to drive productivity gains through our instructional model. And so we're able to create significant value for employers, albeit discounting the tuition, but discounting tuition is completely aligned with our long-term goal to ultimately try to bring down the cost of education for students. And because we have this vertical integration, we're able to offer employers very compelling tuition levels that enables them to essentially effectively cover their entire workforce, and enable the workforce to have no out of pocket expenses for their education and degree. So I wouldn't describe it necessarily as a change in any way to our strategy. It is a significant investment that we're making in it. And we're definitely leaning into that employer market. And we think it's one of the things that ultimately will differentiate our organization moving forward.

So historically, you've had a couple of really big wins in that space. But I, you know, my understanding is an awful lot of the basis is smaller agreements, get a few students here and there. What's the focus going forward? Is it these big you know companywide agreements, and every once in a while, you get a big fish? Or is it you know, as Workforce Edge and this new focus, can that go across the spectrum of - corporate opportunities, you know, from big to small?

They're not necessarily mutually exclusive. So within the last year, we did get two very large enterprise level exclusive contracts. We got one with BestBuy, the retailer we got another one with CBS. But we very much think that Workforce Edge could be a real differentiator for us. So as I said in my prepared remarks, our first goal is to have at least a quarter of a million employees collectively from multiple employers enrolled in that platform. And ultimately, what we think is by and large, and certainly at the undergraduate level, Strayer and/or Capella University would be the most compelling, because it's the institution that would have most likely either zero or very little out of pocket costs for the employees. And so I think, as we set goals as we've done in 2021 to continue to increase the mix of our students that come to us from the private sector, Workforce Edge is likely to be the vehicle through which that happens.

Okay, great. And then just one last one on Strayer. The - do you have a sensor? Can you share with us a sense of end market exposure of your enrollments clearly, you know, the employment impact that we've seen from the pandemic is highly concentrated in a few markets? And there's some end markets that really haven't been impacted given, you know, just given the importance of potential students, you know, confidence in their employment prospects, I suspect that, that mix actually will have a lot to do with how quickly this can rebound. So can you share any of that with us? Thanks.

Yeah, I mean, first, I think the juxtaposition of Strayer's results vis-a-vis Capella is an indication that they're serving vastly different student bodies, which are dealing with the pandemic quite differently. And we know actually, from polling and sampling existing Strayer students, there's a high degree of anxiety, even now about labor market job, their ability to, you know, maintain their income through the coming year. So there's no doubt that that's had a major impact on the results that we've seen. We're certainly hopeful that as the pandemic begins to ease and vaccinations begin to spread, and the labor market continues to recover, that ultimately that will start to show a return to growth at Strayer. And frankly, as I said in my prepared remarks, that's what we are planning for. We are planning for that recovery to begin happening in the third quarter of this year. So we'll have to wait and see.

Hey, Gary it's Rob. The - there is some geographic dispersity in those states that remained open, there's a little bit less pressure. But that kind of the key shorthand way to think about it is, if somebody was in a job that they could do from home, that it was a digitally enabled job, then they generally were able to keep their job and their employment confidence stayed high, a large part of the Strayer undergraduate pool of either the current students or prospective students or in jobs where that was not the case. They were not jobs that could be done from home. They weren't digitally enabled. And as those as their places of work shut down, their employment shut down and that's really what reverberated through the Strayer new student enrollment.

Yep. Yep, makes sense. All right. Thanks, guys.

Thanks, Gary.

Thanks, Gary.

Thank you. Our next question or comment comes from the line of Greg Pendy from Sidoti. Your line is open.

Hey, guys. Thanks for taking my question. Just kind of wanted to dig into, I think you mentioned Australia and New Zealand for the New Year would do $1.15 at EPS. Just wanted to understand, I guess, with the new administration how much of their growth was being fueled by foreign students you know choosing Australia. And is there any risk if the US becomes more relaxed on international student visas that they may be looking to choose US schools over the Australia New Zealand schools?

I personally think that's very unlikely. Australia has always been a major attraction for foreign students, for quality of life. The government has crafted a visa program that if you agree as a foreign student, to study one of, say, 30 or 40 different programs where the Australian government believes there's significant job growth. If a student completes his or her study in that program, they're granted residency - permanent residency status in Australia. Additionally, I think the way that they've handled the pandemic, both Australia and New Zealand would provide them with a safety premium, if you will, particularly against Western Europe, perhaps the United States for foreign students interested in migrating somewhere to attain a degree. So our view is that the foreign students will continue to have high demand, ultimately studying in Australia. And just for context, foreign students make up just over half of their student body. And as we've said, we expect certainly by the second half of this year for those students to be able to continue to immigrate into Australia and for that to continue to be a large source of their future growth.

Okay -

Greg it's also geographically a lot closer to the major sources of international students. I think that's an important point.

Sure. No, that makes sense. So then I guess within that you mentioned the $1.15 in EPS. I'm assuming that's all Australia, New Zealand, not just Torrens. Correct me if I'm wrong, but then in addition. So can you just give us a little bit of big picture color? I mean, the international student trends, do you think will remain healthy, what the key drivers are, because it's been a very high growth asset in the past in terms of enrollments, it looks like. So just trying to understand, you know, what can help create healthy growth in the future as well?

Sure. It's well, it is all three assets, so it's Torrens University, Think Education and the Media Design School in New Zealand. And there's only 43, I guess, universities in Australia. So our combined assets have less than a 2% market share. The Australian higher education market continues to grow, you know, mid to high single-digits annually. We think that it's unlikely that you're going to have other new entrants. And so the fact that you've got certainly with the case of Torrens, which is by far the largest of these three assets, delivering very high quality programs, which they continue to roll out new programs, we think that these assets will continue to grow both by continuing to attract foreign students, but also by continuing to grow the domestic student base as Torrens graduates more students and those students fare well in the labor market and the reputation continues to grow on top of already being strong. We just think that it's a great set of assets. The fundamentals are very sound from a supply-demand standpoint, and we're very confident in their long-term growth.

Yeah, just one other sort of point to illuminate that is, is that, the international students were cut off for most of 2020. A great deal of them were able to maintain enrollment through the online portal, as Karl said. But in the meantime, Torrens was able to grow at a very healthy rate, which meant that they were actually recruiting more students domestically in Australia.

That's very helpful. Thanks a lot.

Sure, you bet.

Thank you. We have a follow-up question from Mr. Tobey Sommer from Truist Securities. Your line is open.

Thanks. I just wanted to revisit a topic, historically, have new student enrollments been a good leading indicator for total enrollments?

Well, sure. It depends a little bit on seasonality, because some quarters are larger than others. But in our experience, it takes a relatively long time for a new student trend to ultimately shape the total enrollment, because it's as I said earlier, it's a small part of the total enrollment. So we would estimate that it would take anywhere from five to seven quarters of a particular new student trend to ultimately shape the total enrollment trend meaningfully.

That arguably makes it a better leading indicator. So my follow-up is, why are you comfortable removing a leading indicator from the mosaic of investor information you know about the company's performance while the company is in a difficult period?

Well first off, I wouldn't say we're in a difficult period. We're very comfortable with wide ranging variability in student enrollment. And one of the most important things to understand about us as an enterprise is that, we don't try and drive student enrollment against underlying demand. In the long run, we find it's the worst thing you can do for a university. You end up with underprepared students or students that aren't committed in the way they need to be to be successful. So we have the financial strength and the diversity that we can, whether through wide variations as we have in the past. And to Karl's answers to just illuminate a little bit more on Karl's answer. The best way to think about the leading indicator is depends on the average tenure of a student. If a student's average tenure at a particular institution is, say, 10 quarters. Then the individual new student enrollment in any given quarter is about one tenth of what that impact might be. And so, you know, it takes roughly a year or so of trend for it to have a meaningful impact. But the bottom line is, yes, it is a leading indicator from a financial standpoint, and you'll see that flow through with regard to the total student enrollment.

And Toby, small changes in retention of existing students is a much bigger driver than new students.

Historically is there - are they two correlated you know positive changes in new student enrollment, in accompanying positive changes in retention? Or historically, do they move in different directions?

They can move in different directions. In many quarters they can both be up. It'd be quite rare to have a sustained trend where they were both down. I can't really remember one, but they absolutely can move in different direction because there's different things driving the behavior of the students.

Right. Okay, thank you for your help.

You bet.

Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference over back to Mr. Rob Silberman - CEO for any closing remarks.

Thank you, operator and thanks to all of our shareholders. And if anybody has further questions, feel free to contact us and we'll look forward to talking to you again in April at the Annual Meeting. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.