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K12 Incorporated (NYSE:LRN)
Q2 2020 Earnings Call
Aug 11, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to K12 Fourth Quarter Fiscal 2020 Earnings Conference Call. [Operator Instructions]. A question-and-answer session will follow the formal presentation. [Operator Instructions].

I would now like to turn this conference over to your host, Mr. Mike Kraft, Head of Investor Relations. Thank you. You may begin.

Mike Kraft -- Senior Vice President, Corporate Communications

Thank you, and good afternoon. Welcome to K12's fourth quarter and year-end earnings conference call for fiscal year 2020.

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 provisions 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 2020 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 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 Tim Medina, Chief Financial Officer. Following our prepared remarks, we will answer any questions you may have.

I'd like to now turn the call over to Nate. Nate?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Thank you, Mike. Good afternoon, everyone, and thanks for joining us on the call today. It's year-end, so my comments will be a little longer than normal, but I wanted to give you a complete picture of the year-end review and the direction we're headed.

First, on behalf of my entire team here at K12, I'd like to begin by extending my thoughts and prayers to those of you who are suffering and have experienced loss because of coronavirus pandemic. Throughout my talk today, I'll cover what our business has been hurt by the pandemic and also how it's withdrawn more customers to our technology and services. So let's get started.

I'm pleased to report that K12 ended fiscal year 2020 with a strong financial performance, for both the quarter and the year, and we met or beat our guidance across the board for revenue, adjusted operating income and capital expenditures. As most of you know, we are now seeing increased interest from online school options across the nation, and we expect to see even stronger trends as we enter FY '21.

Our fiscal year 2020 revenue was $1,040.8 million. Keep in mind that those revenues were largely by enrollment -- driven by enrollment trends before the pandemic hit. That's because due to state laws and policies by authorizers and local school boards, many K12 powered schools were restricted from taking new enrollment later in the school year, just before the pandemic hit the country. Therefore, the fiscal '20 impact on our revenues was very small. However, we do anticipate a more significant revenue growth in FY '21, which I will discuss in a few moments.

Turning to profitability. Adjusted operating income for the year was $56.1 million. Excluding the impact of Galvanize acquisition, adjusted operating income would have been $74.1 million, an increase of more than 19% year-over-year. It's worth noting that the $74.1 million would have beaten our original guidance for the full year of $68 million to $72 million. This shows the strength and predictability of our core business.

Our adjusted operating income growth was driven both by revenue growth, as well as by ongoing focus on cost reduction and operating efficiencies. Also, I want to note that capital expenditures for the year came in at lower than -- lower end of our guidance range. As we do every year, our investment is focused on improving the user experience, enhancing teacher tools and strengthening student engagement.

Some key investments include a new mobile learning management system for the kindergarten to fifth grade learners, an adaptive algorithm that gauges and adjust the students reading levels and matches them to appropriate texts and new courses for our career pathways. Importantly, we also migrated most customer-facing applications to Amazon Web Services, or AWS. This change, in particular, supports our efforts to scale our business in a more cost-effective way as we ramp up enrollments and expand our business in the coming years.

And finally, we ended the year with a strong liquidity position. Our cash, cash equivalents and restricted cash was $213.3 million at year-end. Now this balance includes both the drawdown of $100 million of our revolving credit facilities and the use of $165 million for the purchase of Galvanize. So we enter FY '21 with our revenue and adjusted operating income increasing, the capacity across our business to support high enrollment growth, a career learning business reaching even more of the addressable market and funding for our long-term growth initiatives.

As I noted a minute ago, our results underscore the strength of the core of our business and the continued demand for blended online learning options. More than 100,000 students in K12's powered schools completed this school year on schedule and with little interruption. We saw over 8,000 new students graduate from high school this year, bringing the total number of students who graduated from our K12 powered high school to more than 50,000.

Importantly, we ended the year with student retention rates at our highest level ever. Over the past three years, we've improved the student retention by 550 basis points. Now to put that in perspective, improved retention equates to more than $100 million in revenue that would have been lost over this three year period. It also had the effect of lowering marketing cost per enrollment. Our entire team is really proud of these numbers. But I have to tell you, our team also knows we have to continue to improve, and we have to deliver great service. That's especially important for larger than ever number of new students coming into our program this coming year.

The pandemic has driven more parents and families to explore online learning options, more school districts to use online learning and more policymakers to understand the value of an online learning option in their state.

Starting with consumers. A recent poll conducted by Morning Consult showed that 71% of parents felt that online education should be an ongoing option for students, even after the pandemic subsides. As for school districts, more and more of them now plan to use online learning as an alternative to in-person classes. One such school district is Miami-Dade County Public Schools, a district we've had a relationship for more than a decade.

With Superintendent Carvalho and his staff's guidance, K12 will provide customized services, including curriculum, assessment tools, teacher training and data management. This will ensure a strong start to the new year for both educators and Miami-Dade's more than 270,000 students that we'll serve. The teachers already employed by Miami-Dade will combine their great teaching with our technology and expertise to provide high-quality instruction in a safe environment. This allows Miami-Dade to retain both teacher jobs and the all-important existing student-teacher relationships.

In alignment with their existing learning goals, Miami-Dade Public Schools teachers and administrators can also customize the online curriculum we're providing, including core subjects and hundreds of electives. This shows the flexibility of the K12's technical platform. We're thrilled to support Superintendent Carvalho and the innovative solution he and his team has designed. This is just one example of how a large school district can rise to meet the unprecedented challenges of school closures caused by the COVID-19 pandemic. We're working with other school districts on their own customized solutions for the fall as well. And we stand ready to support schools and school districts of any size during this critical time.

This quarter, we also continued to make our products available for free on a trial basis. To date, more than 200,000 families, teachers, students and schools have signed up for these programs in webinar. This is more than twice the number who took advantage of it last quarter. We believe this outreach, the public discussion around online schooling, our own marketing efforts have all increased the number of families who are looking at enrolling their students in our schools this fall.

In the fourth quarter of our fiscal year, we saw lead volumes in enrollment applications rising more than 50% compared to the same period last year. Now we caution that it's still too early to know how many of the applications will result in final school enrollment for the 2021 school year. With many parents still finalizing their students' plans, we can't be sure of how much of this interest will translate into a final enrollment.

That being said, we believe that many of the families who have begun the enrollment process will complete the enrollment process for the fall. And a little later, I'm going to give you even more quantitative understanding of our current enrollment status.

With the potential for significant increases in enrollment, we're taking steps to prepare for the upcoming school year. This includes proactively hiring 1,300 incremental teachers and educational staff members, building education additional server capacity, buying thousands of new student computers and stocking offline materials so that they're ready to go when students enroll. And most importantly, we're focused on ensuring families have an outstanding academic experience when they enroll in the K12 powered program with early start programs, welcoming programs and other ways of reaching new teachers and their administrators.

Now I'd like to turn to our Career Learning offerings. This year, we hit a significant milestone. We ended the year with revenues with $107 million, inclusive of Galvanize. This is an increase of 115% year-over-year. In a little more than three years, we've built a comprehensive and innovative approach to Career Learning that serves more than 13,000 students this past year and posted more than $100 million in revenue. We believe that Career Learning increases our addressable market by more than tenfold and will be a driver for revenue growth and profitability in the years to come.

Our nation has approximately 15 million high-school students. Our market surveys show that over 12% of these students will consider full-time online public schools and their parents also concurred that they would consider full-time online public schools. And it's the schools that combine traditional core academics, such as Math and English, with online career readiness education.

And other statistics reinforce our belief in the long-term growth potential for this business. For example, research conducted by Burning Glass Technologies over the last 90 days shows that 56% of job openings required less than a full-year college degree. Our Career Learning programs for both secondary students and adults, closely in line with this market demand and today's tech-first job market.

So a quick commentary on some of the accomplishments in this area over the last 12 months. First, we opened destination of career academies, or DCAs, as you might hear me say, in New Mexico, Kansas, Missouri and Wyoming. And it brings the total number of DCAs to 24 for the start of the school year. Additionally, we expanded programs into middle school grades in seven schools, allowing students to get a jump start on career exploration and what Career Learning is all about. In total, more than 9 million students across the nation now have access to our Career Learning options. Over the next two to three years, we plan on expanding our coverage across all of the states that we serve public schools in.

Secondly, we enrolled 16 new project based -- I'm sorry, we rolled out 16 new project-based learning courses in subjects like entrepreneurship, marketing, healthcare and computer literacy, just to name a few. This learning approach keep students more engaged and makes classes more collaborative. We're also seeing a link between increased DCA student engagement and retention. At the end of the year, student retention in DCA programs was nearly 10% better than in the non-DCA counterparts. While there are many factors that contributed to the change, this kind of change is significant. For some time, we speculated that DCA experience will help to further engage and retain students at a higher rate, and we're now seeing the results of our efforts.

Third, an important part of the Career Learning program involves opportunities for students to explore careers through exposure to industry experts. This includes chats delivered on the [Indecipherable] virtual platform. This opportunity complements real-world work experiences in the form of job shadowing and internships. In fact, K12's Annual Job Shadow Week, which is only in its second year had over 2,500 student participants this year, and that's up from just a few hundred last year. Companies like Google, Salesforce, Google's subsidiary YouTube, the Motion Picture Association of America, all connected with students from across the country, exposing them to the professional skills and expertise they'll need to succeed.

Fourth, our clear learning -- clear networking partner, Tallo. They reached a significant milestone as they surpass 1 million talent users on their platform. That's almost double the number of uses the platform compared to a year ago. This quarter, Tallo also saw colleges and universities turn to them as an alternative to the in-person recruiting initiatives that got canceled because of COVID. Tallo is now serving new partners ranging from Texas Tech University and the Medical University of South Carolina to smaller specialized schools like the College of Creative Services and Creative Studies in Detroit. However, the Tallo proposition is it's just more than just adding students and partners. It's about how these constituencies are leveraging the platform.

During the past year, Tallo made more than 180 direct engagement, what we call matches, between institutions seeking students for scholarships or jobs, to Tallo members who are looking for those scholarships and jobs. Again, this is just the beginning. In the future, I see even more growth opportunities and new applications for the platform as part of our Career Learning experience.

And finally, a valuable new part of our Career Learning business is Galvanize. Market demand for software engineers and data scientists continues even during this pandemic. In the same Burning Glass Technologies Research I mentioned earlier, more than 27% of recent job openings across a diverse set of industries are IT related.

The immersive boot camp from Galvanize continues to be a 100% live, plus it's now online rather than in-building. And while students have selected to defer, some students have selected to defer their admissions into a in-building classes have resumed, their focus on remote learning has expanded our potential student population.

One example is the recently announced part-time data science program, which is available nationwide. This online program provides the same curriculum, program structure and quality as Galvanize's full-time program, but over a 30-week timeframe instead of intensive 12-week full-time program. Our hope is that working parents, veterans and anyone who wants to keep their current job and keep their current earnings, while they're going on with their learning can take advantage of this program.

On the enterprise side of Galvanize's business, we've seen corporate opportunities slow down. As corporations have workers working from home and they're not willing to spend as much money in these tight liquidity times. So in this market, the enterprise market has slowed and will remain that way until concerns about COVID-19 subside.

But even during the market fall due to COVID, we've had recent wins, large wins. For instance, USAA, T-Mobile and Ally Financial have hired Galvanize to upskill portions of their IT talent base. In addition, Galvanize is not limited its enterprise efforts to the US. This quarter, Galvanize team addressed interest from companies in Germany, Mexico, Saudi Arabia, Pakistan and India. And as the economy begins to recover, we believe we'll continue to see increased interest from enterprises across the globe.

As you might imagine, the community business is the other part of Galvanize's business that has been slowed by COVID. As we've said before publicly, the community business will not deliver on expectations in the short term. Due to COVID-19 mandated restrictions, general worker concerns, many workers simply will not be back in physical offices at the numbers they used to, and that's to be expected. However, we believe that Galvanize's immersive boot camps for consumers can and will continue to deliver strong growth, and we're confident in Galvanize's business prospects over the long term.

Now before I leave my discussion on Galvanize, I want to briefly mention one other milestone. For the spring semester, we plan to roll out our first high-school course based on Galvanize's content. In just six months after the acquisition, we've completed the course design. This is a core synergy from this acquisition. A key differentiator for our Career Learning business is to be able to use Galvanize content at the high-school level. We're planning to create additional courses at the high-school level using the Galvanize personnel and Galvanize expertise.

As I've outlined today, we're building on a strong year, and we're looking even stronger growth next year and over the long term. The early indicators for FY '21 are all positive. Enrollment growth is increasing, and we're seeing increased interest in K12 solutions. But I want to be clear here, our Managed Public Schools have already enrolled 150,000 students as of last week. That's a 23% increase so far from the 122,000 enrollments we posted the first quarter of fiscal '20.

Traditionally, the final weeks of the enrollment season drive even more enrollment. With about eight weeks remaining in this year's enrollment season, we expect to be fairly busy. Now still unclear when the pandemic will subside, it's unclear what student retention rates will be. It's unclear what effect of state budget allocations for education might have on people reimbursement rates. But even with all these unknowns, we believe we are positioned and well positioned to deliver [Indecipherable] growth well into the double digits in both revenue and adjusted operating income in fiscal '21.

Keep in mind, this is only in statement of enrollment growth so far to date as of last week and not formal guidance for the coming year. As we do every year, we will provide formal guidance for the fiscal year in late October when we announce first quarter earnings.

Okay. I'm getting close to closing. I warned you this is going to be long because it's the end of the year, and there's a lot to say. To wrap it up, we've always maintained distance learning technology as a key to the way education will be delivered in the future. It happened at the corporate level. It happened at the college level. And it's at the grade school level as well. Our company is clearly no longer just a kindergarten to 12th grade general education platform provider. We're positioned to be a leader and an innovator in this space across different age groups and different applications. We're in the right market at the right time with the right experience and technology to take advantage of a large addressable market.

There is increased awareness and acceptance of online and blended options. School districts are embracing online learning. Many districts now understand the need for blended and distance learning technical platforms and are out buying them not only for their short-term needs, but on an ongoing basis. And corporations are partnering with us, not only to hire these students, but to use our services to upskill and reskill their software engineering and data science department. It all bodes well for us in fiscal '21, but also for the long-term future as well. We've successfully transitioned in this company from an education platform -- to an education platform that drives lifelong learning.

Let me end my comments by briefly mentioning the role we play as educators in this turbulent time that surrounds systemic racism and blatant disregard for the welfare of some minorities, particularly black people in parts of our country. We have a role to play and I hope you saw our announcement around social and environmental responsibility. Our Board, our management team and all of our employees represent the kind of diversity that I think all companies should display.

We announced even more scholarships, law enforcement pathways, a national forum on educational equal access, a commitment to more diversity in our teacher ranks. We've dedicated employee teams to each of these initiatives and giving them time off to pursue these community activities. Please take a look at our website for more information about our commitment in this area. We so strongly believe it's important that everybody in our organization is committed to racial equality.

Everyone, thank you again for your time today. Now I'll hand the call over to Tim who will elaborate on fourth quarter and full year financial results. Tim?

Timothy J. Medina -- Chief Financial Officer

Thank you, Nate. And good afternoon, everyone. As you can see from our results, we had strong financial performance in fiscal 2020. We exited the year with great momentum leading into fiscal 2021, and we are well positioned for higher growth. In addition to reviewing our fourth quarter and full fiscal year results, I also wanted to provide some commentary on fiscal 2021 trends and discuss changes that we'll be making to our fiscal '21 reporting.

First, to recap our reported results. Revenue for the quarter was $268.9 million, an increase of 4.9% from the prior year. For the full year, revenue was $1,040.8 million, an increase of 2.5% from fiscal year 2019. For the quarter, income from operations was $7 million, an increase of $4.3 million from the prior year. For the full year, income from operations was $32.5 million, down $13 million compared to fiscal year 2019.

Adjusted operating income was $12.9 million for the quarter, an increase of $5.7 million from the prior year. For the full year, adjusted operating income was $56.1 million, a decrease of $6.1 million from fiscal 2019. Capital expenditures for the year were $45 million, a decrease of $3.4 million from the prior year.

As Nate mentioned, in each case, our results met or beat the expectations we provided in our guidance. In fact, we met or beat guidance every quarter this year as well as for the full year, and that holds whether you include or exclude the impact of the Galvanize acquisition.

Now some additional details for the fourth quarter and the full year. The $25 million increase in revenue for the year was driven by the strength of our core Managed Public School business and our acquisition of Galvanize. This was somewhat offset by declines in our non-Managed Public School business.

In Managed Public School Programs, revenue for the year increased $29.8 million or 3.3% to $920.1 million. This growth was driven by increased enrollment and improved student retention. Revenue per enrollment for these programs grew to $7,758 for the year. This is in line with our historical average of 0% to 2% growth in revenue per enrollment.

Given the ongoing COVID-19 pandemic and its impact on state budgets, we could see some negative impacts to revenue per enrollment in fiscal 2021. We are monitoring the ongoing state budget discussions, and we'll have a more complete picture for our first quarter earnings. With the increased enrollment we are seeing, we believe that volume gains will far outpace any potential downward pressure on our revenue per employment.

For the fourth quarter, revenue in Managed Public School Programs increased $10.3 million to $234.6 million. In addition to enrollment trends and stronger-than-expected student retention, this increase was driven by -- most partly driven by revenue we recognized related to services provided in prior periods of fiscal 2020. We recognize this revenue following the resolution of claims with Georgia Cyber Academy.

Moving to our Institutional Business, which includes both non-Managed Public School Programs and Institutional Software and Services. Revenue for the year declined 16.7% from the prior year. This was in line with the expectations we outlined at the beginning of the year. Non-Managed Public School Program revenue declined 28.5% for the year, largely due to the contract terminations we have previously discussed. Institutional Software and Services revenue were down 1.4% for the year.

As Nate mentioned, because of the COVID-19 pandemic, we've seen an increase in schools and districts reaching out to K12 to provide online options for students and families. While some contracts are signed, some conversations are still ongoing and it is still too early to know the impact on this business. However, we believe that this business will grow in fiscal 2021 after several years of declining revenue.

Private Pay revenue was $16.4 million for the quarter and $45.7 million for the year. The Galvanize acquisition added $11 million in revenue to this business since the acquisition. The Galvanize revenue is somewhat reduced by the impact of purchase price accounting. Excluding those impacts, Galvanize revenue for fiscal 2020, since our acquisition, would have been $13.6 million.

Gross margins for the year were 33.4%, 130 basis points lower than the prior year. Margins were impacted by Galvanize as well as lower institutional sales. It is worth noting that excluding the impact of the Galvanize acquisition, gross margins would have been 34.5%. Over the long term, we look for improving gross margins as our business mix shifts toward higher margin revenues and funding levels for public school programs continue to rise.

For the year, selling, general and administrative expenses were $315.1 million. Excluding the Galvanize acquisition, these expenses were $304.2 million, a decrease of 0.8% from the prior year. We continue to focus on driving a more efficient organization through increased automation and process improvements while maintaining our investments in growth areas like career readiness.

For the year, adjusted EBITDA was $128.2 million. Excluding the impact of the Galvanize acquisition, adjusted EBITDA was $142 million, an increase of 6.3% from the prior year. This improvement was driven by our growth and focus on cost efficiencies.

Adjusted operating income was $56.1 million. Excluding the Galvanize acquisition, adjusted operating income for the year was $74.1 million, an increase of $11.9 million or 19.1% from the prior year. Our improvements in profitability underscore the strength of our Managed Public School business and effective management of our cost structure.

Stock-based compensation for fiscal year '20 totaled $23.6 million. A few years ago, we implemented a long-term incentive based on growth in our Career Learning Solutions business. In fiscal '21, more information about the likelihood of achieving some of the targets in that plan may be available. Therefore, we could begin to record the expense and see an increase in stock-based compensation in fiscal year '21.

Some other items to note. We ended the year with cash and cash equivalents of $213.3 million, a decrease of $71.3 million from the prior year. This increase was driven by our acquisition of Galvanize, partly offset by the draw against our credit facility.

During last quarter's earnings call, I mentioned that we saw strong enrollment growth in states that typically pay all public schools after the school year. This resulted in lower free cash flow for fiscal year 2020. However, based on the shift in these payments and the early indicators in July and August, we expect to see substantially stronger cash flow in fiscal year 2021.

Turning to capital expenditures. Capex, which includes curriculum and software development and infrastructure was $45 million, a decrease of $3.4 million compared to last year. Over the past couple of years, we've maintained capex in this range of $45 million to $50 million a year. Going forward, we believe this level of capital outlay is sufficient to support our core business, as well as the growth in Career Learning, inclusive of the Galvanize acquisition.

Our effective tax rate for the year was 25.8%. We had some positive tax benefits related to prior year returns in fiscal 2020 that will not recur in fiscal 2021. Additionally, we expect to see an increase in nondeductible compensation. Therefore, expect that for next year or this year, fiscal '21, our tax rate will be closer to 30%.

Now I want to outline some changes we will be making in our reporting for fiscal year 2021. First, we're going to update the way we report lines of revenue. Over the past few years, our business has evolved, as you heard Nate explain, where we used to be a company focused on one market, general education, we have since added a second, Career Learning. In just a few short years, Career Learning has already topped $100 million in revenues and is the fastest-growing portion of our business.

To reflect this evolution, our reporting will shift from a product focus such as managed schools, institutional, etc, to a market focus, general education and career learning. We believe this new reporting will provide investors with better insight into our operations and clarity into the key drivers of growth.

Second, we have been evaluating ways to better highlight our underlying business performance, especially our profitability metrics. We also want to make changes that will better align our results to how other similar companies are reporting. This issue has become more apparent with the acquisition of Galvanize and will be magnified if we make additional acquisitions.

To that end, we will be updating our definition of adjusted operating income, which presently excludes stock-based compensation to also exclude amortization of intangible assets. We believe this will allow investors to better understand our operating and financial performance without the impact of these noncash charges. Look for more details on both the new lines of reporting and the changes to our adjusted operating income calculations in our first quarter results report. We will provide the necessary information to allow investors to bridge from the old to the new reportings.

Overall, we are very pleased with our performance this year. We saw our fourth straight year of revenue growth. We were able to continue to make investments to improve the academic outcomes for the students we serve, while also growing our core and Career Learning businesses. We also acquired Galvanize to expand our Career Learning offerings into the adult and corporate training markets and to enrich our high-school IT career pathways with Galvanize content.

Our core business and our growing Career Learning business put us in a strong position going into fiscal 2021. We are making investments now to ensure that we can serve all the families who choose to attend a K12 powered school. We believe these early indications show we are on track for strong revenue and profitability growth in fiscal 2021. Additionally, we continue to have a strong cash position, which allows us to fund both organic growth in our businesses as well as to pursue inorganic growth opportunities that may arise.

Thank you for your support, and I'll hand the call back over to Nate. Nate? Okay. Thank you, Tim. Laura, if you are still there, I think we can move to Q&A with the end of our prepared comments.

Questions and Answers:

Operator

At this time we'll be conducting a questio-and-answer session. [Operator Instructions] Our first question comes from the line of Jeff Silber with BMO Capital Markets. Yor may proceed with your questions.

Jeff Silber -- BMO Capital Markets -- Analyst

Thank you so much and congrats on the strong finish and the momentum going into this current year. You provided some color on demand trends and enrollment so far. You mentioned, I think there's about eight weeks left in the enrollment season. In a normal year, what percentage of your enrollments do you have by now? And do you think it will be higher or lower than that this year?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Jeff, how are you doing? We anticipated that everybody's question would be how can you get at what the final enrollment number is going to be. And I'm going to try to be disciplined and not give you that, because we don't know what it's going to be. And this year doesn't look like previous years, and we haven't disclosed what the weekly, monthly growth trends would be. So I don't want to be evasive. Bottom line is, we gave the stats because we wanted to give people an understanding of where we are today. But I don't know how fast it's going to happen, and I don't know how this three years is going to relate to previous years. So we're going to decline to give more detail than just to say we're at 150,000 now. And we know it's continuing to grow.

As you might imagine, we're seeing more demand this year than we've ever seen before. But I don't know how much that demand continues. I just wanted to give a little more color to investors than we've given in the past. But it's just too hard to predict what's going to happen in this -- rest of this year. So I really can't try to contrast this year to previous years and go through that math.

Jeff Silber -- BMO Capital Markets -- Analyst

All right. You can't blame me for asking. Let me ask -- I'll ask another question about the enrollment trends, and I'm not looking for a specific number. But the type of demand that you're getting, is it coming more from parents? Is it coming more from your school district partnerships? Are you seeing an impact to some of the new schools that you're opening? Any color there would be helpful.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Sure. And yes, we can answer that one. It's coming -- the primary growth is coming from parents who want to have an option for their kids. It's enrollment in our -- what we traditionally have called managed schools. That's the primary growth. We are seeing increase, however, in school districts who call us and want to use our content and our curriculum with more of those contracts this year than we've ever had in any one year before. I mentioned Miami-Dade, there's others we're working on, not yet disclosed, but maybe not as large as Miami-Dade. I said they are 270,000 students. There are others that are literally anywhere from 10,000 to 100,000 students. So we're seeing more demand there as well. But by far, the biggest demand, the individual parents saying, I need to get my kid into a safe environment.

And in new schools, the new schools that we're turning up are doing well. They're in smaller states, obviously. They're not in the bigger state, but they're filling pretty fast. So we're filling those schools up kind of faster than we thought we would. So they're all doing well as well, but they're small. It's the existing -- Jeff, it's the existing states that you might imagine. It's the Floridas and Texas and Ohios, Michigans, all of the big states in the country where we provide tools. That's where we're seeing the greatest amount of growth.

Jeff Silber -- BMO Capital Markets -- Analyst

All right. Great. Let me sneak in one more and then I'll jump back to the queue. So what do you say to those folks that think this might just be a one year spike, and hopefully, we get a vaccine and a year from now, schools are open as regular and all those students will return to their old school? How will you grow post pandemic?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Yes, that's an excellent question, Jeff. And we think about that on a constant basis. We're actually focused as a team on what we can do in FY '22. Right now, we've had that conversation [Indecipherable] conversation about it earlier today. I'd say a couple of things. There are five major factors to how we continue to grow. The first is retention. And I mentioned in my script that everybody in the organization knows we got to provide a great experience for our -- all these parents. They're going to come in and they're going to say, I thought I was going to one kind of program. We want to show them it's better than they thought it could be that they're learning more, there's great flexibility in this program. They can do things that they couldn't have done in [Indecipherable]. Are we going to lose some whenever schools open back up? Absolutely. But when we lose them all? I don't think so. I think we've got a good program, and we're going to keep that.

The second is socialization. That's number two. We have a number of programs that we are focused on so that when we have the opportunity just like when regular schools have the opportunity to open up, we're going to have a number of socialization programs, some of which we are seeding now but they're online. And then we'll have people in person interfacing with each other whenever COVID begins to subside.

Third is Galvanize growth. We will continue to see Galvanize accelerate its growth in the consumer business. And by the way, once COVID subsides, while you might say the core business might lose some students, Galvanize gets back to even higher growth because not only will they have online and remote, it will now have the brick-and-mortar students back in.

Fourth would be learning solutions. And learning solutions is growing again. It's getting market recognition. And what we're finding is that, that the deals that we're doing and the people we're talking to are not doing it for one year. They're realizing this is an ongoing opportunity for them to include distance learning and their capabilities. And you got to think about the backup programs that are necessary for hurricanes and snowstorms and sicknesses, all of those situations require having back up facilities. And they're all realizing online can do that. But the biggest one, yes, about my five, the single biggest one is the growth in Career Learning. We have a lot of energy effort put into that. We're opening up more schools. And we think we're going to see continued growth in Career Learning at a higher rate than we've seen in the core business. So when you add improvements and focus on retention, socialization, learning solutions growth, Galvanize growth and Career Learning growth, you see that we believe that we will not -- this is not just a onetime year, we're going to continue to grow. Does that help you?

Jeff Silber -- BMO Capital Markets -- Analyst

Yes, it really did. Appreciate the color. Thank you so much.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Thank you, Jeff.

Operator

Our next question comes from the line of Stephen Sheldon with William Blair. You may proceed with your questions.

Stephen Sheldon -- William Blair -- Analyst

Hey, thanks. Good to hear on the enrollment momentum. I was curious if there's anything notable about the grade levels where you're seeing higher enrollment growth? Are the enrollment skewing kind of older or younger? And can you also talk about enrollment trends through August between career readiness and your traditional programs?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

The percentage growth between the two is about equal. We're not seeing one grow faster than the other at this point in time. But in terms of -- I'm sorry, the first part of your question was..,

Stephen Sheldon -- William Blair -- Analyst

Kind of -- so a breakdown, I guess, with the enrollment momentum between the age of students and then career readiness versus traditional?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

I'm sorry. Yes. So it's kind of across the board. We -- there's a slight difference in the high school students and the product that they're going after. So we actually see a little more growth in high school. Primarily, we have more of the high schools. But generally, we're seeing it across the board. I mean, I'm not seeing a dramatic difference between high school students, middle school and grade school. I would say, it's across the board.

Stephen Sheldon -- William Blair -- Analyst

Got it. And then on teacher hiring, I guess, how much progress have you made on that front so far? How long does it take them to get up to speed? And how are you thinking about teacher-to-student ratios in this environment?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Teacher hiring is going well. Amazing how we -- when you need to hire more teachers, you go after them more aggressively. We also have -- I don't know if you noticed, we have a part-time workforce that learning solutions grew upon whenever they needed to. We've engaged those teachers. But by the way, there are a couple of thousands of them. We engage those part-time teachers to try to convince many of them to become full-time for the year. We have gone to colleges and universities to hire more from those sources. We've worked for Teach for America to try to take more of their graduates that are coming out of their programs. So teacher hiring is actually going pretty well. Make no mistake though, we still got a lot of hiring still to get done for the rest of the year.

In terms of how fast they can get up to speed, our program has a standard set of training that we've honed over many years, and it only takes them about two weeks to go through the training. The teaching techniques themselves, they already understand because they're experienced teachers. What's happening is they have to learn our system, and they don't have to know all of the system the day they start. What they need to know is, what's the beginning of the content in the program. And as the students are learning throughout the year, the teachers are also getting more and more familiar with it. So we've got professional development sessions for all the new teachers to get them through their first couple of weeks of training and then we will continue that development all throughout the year.

Stephen Sheldon -- William Blair -- Analyst

Got it. And I guess just a last one for me. I think, Tim, you might have mentioned that there was -- in this quarter, some revenue from services to the Georgia Cyber Academy. Did I hear that correctly? And if so, can you quantify that?

Timothy J. Medina -- Chief Financial Officer

Yeah, it was $4 million.

Stephen Sheldon -- William Blair -- Analyst

Okay. Perfect. Thanks. Congrats on the results and the momentum.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Thank you.

Operator

Our next question comes from the line of Greg Pendy with Sidoti. You may proceed with your questions.

Greg Pendy -- Sidoti -- Analyst

Hi, guys. Thanks for taking my question. Just if I understand this correctly in the commitment to break out Career Learning, does that mean if we were to run through this quarter, the 160,700 students, you break that out into 103,700, I guess, traditional general education and then you'd have, say, 13,000 or so in the Career Learning, is that the commitment you guys will be reporting next year?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

So what you're asking, Greg, is you're saying, from our 122,300 that we reported in the first quarter of this year, 13,500 were Career Learning students and the remainder were general education.

Greg Pendy -- Sidoti -- Analyst

Okay. Yeah, yeah, you're working out first, I was working on it before. Okay. That's fine. I got it. And then I guess just the next question, I mean, just going back to that article that you guys put out a while back on the teachers, the 1,300 teacher hires. I mean, what is the general philosophy ahead of arguably uncertainty in terms of enrollment? Are you guys willing to spend ahead of growth? Or are you going to be more prudent, I guess, even if some of the demand is there and pare back just from your spend? I mean how are you guys just big picture thinking about an arguably very big fall from an expense standpoint?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Yeah. I got it. Big picture is this. Quality is more important. We have to deliver a good service. So we're hiring teachers ahead of the demand. That means we take some financial risk. The fact that we may have more teachers than the demand supplies. But so far, we haven't been wrong. Demand is strong. So we try our best to hire ahead of it. I don't know if that answers your question. But yeah, that means there is some risk that we'll have more teachers than we need. I don't think that risk is high. I think it's a pretty low risk because for what we've seen -- the 150,000 number we reported today shows that the demand continues to grow. And we're not going to end up with too many teachers. We're going to end up with the right number. But philosophically, how to approach the problem, to answer your question directly, we try to hire ahead of demand. We're doing our best to get out in front of the demand because the quality is just important.

At the end of the day, if we have to have a couple of million more in expense than we'd like to have, but what we did was, we had the right set of teachers on board before the students got there, that to me is more important, because the opposite means you're going to have bad academic results and poor retention. And we just can't afford that.

Greg Pendy -- Sidoti -- Analyst

Yeah, that makes a lot of sense. And I'm assuming teachers are the main hiring risk that your -- expense that you're looking into the fall, correct?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

That's correct. And then -- and also remember that the number is not just teachers. It's teachers and administrators. Now the bulk of it is teachers, but there are some administrators in there. Academic administrators and counselors and things like that, that also get factored into the number.

Greg Pendy -- Sidoti -- Analyst

Okay, great. That's very helpful. Thanks a lot.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Thanks, Greg.

Operator

Our next question comes from the line of Alex Paris with Barrington Research. You may proceed with you questions.

Alex Paris -- Barrington Research. -- Analyst

Hi, guys. Thanks for taking my question. Congratulations on the strong finish to the year and it looks like a great year coming up. So just to pick on you a little bit, what are you seeing in terms of -- from the states in which you operate in, any telegraphing or signaling on what school funding might look like in the coming year, revenue per student and that sort of thing? Obviously, there could be some pressure there, but do you have any anecdotal information that you're seeing operating in that space?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Yes. And Alex, you said thanks for taking your question. We always take your question, buddy.

Alex Paris -- Barrington Research. -- Analyst

Absolutely. Thank you.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

So yes, we are seeing some signals from states. Some states are struggling with the issue more than others. We think that, on average, rates will not go up. We're going to have a year when people are struggling with their economies, they're struggling with their taxes. And so we're not going to see rates go up. But we also know that every jurisdiction is struggling with, they don't want their kids to lose a year of growth. So we're basically seeing most states saying, we're going to find a way to fund the education. They're not backing off funding education. Now you might see small differences in the 1%, 2% kind of change. But we're not seeing anybody say, hey, we're going to drop our rates and drop our reimbursement rates, any significant number. We're not seeing anybody say that. We're not hearing that from states. They're all committed. They have to fund education and they have to find a way to get that done.

In addition to that, CARES funding has really helped the states. The federal government has dropped a lot of funds into the states to help them. And many of the states are counting on even more CARES funding to help them through the year. And then they've done some savings. Candidly, they saved a little bit of money for some of the things they didn't spend money on. There are sports and there are buildings and things like that, and they're taking that money and they're putting that money into online. So we're not seeing any dramatic reduction in rates. Although I want to be cautionary there, we know that everybody is down on taxes because people -- there are less people working and more people on unemployment. So there's less revenues to the states and the states are struggling with how do we solve this problem, but they're not backing off education to do it. So I don't know if I'm giving you enough color, but that's how we see it.

Alex Paris -- Barrington Research. -- Analyst

No, that's great and helpful. I appreciate it. And then I guess my last question is about the point that you made that you have over 150,000 students enrolled in Managed Public Schools for the coming year. Is there -- what are the variables in terms of those enrollments starting? And what is your historical experience there?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Good try, Alex. I'm not going to give numbers on it, but I'll give you color. And I'll tell you how we think about it and how we're analyzing it. But the numbers, to be very honest with you, they're surprising us. Each time we look at the numbers, they're different than our previous year's trends. But we know that every year, when parents enroll in our system throughout that season, there is some percentage of them, relatively small percentage, who then decide they're not going to show up. So there's what we call a melt, right? So if there's X number, it will be X minus number who actually show up, but it's a smaller percentage. At the same time, we also know that we get a lot of enrollments that happen through the end of the season, especially as parents figure out whatever their other option wasn't available, I need to get into something.

And lastly, we're seeing -- from all of our surveys, we're seeing a number of parents say, I don't know what my public school district is going to do. I'm a little worried about that. And so we're seeing kind of an increased demand in the last few weeks as people worry about the health issues. So while none of our trends look like the trends from previous years. We do look at all of these factors, and we look at them, quite honestly, every day. We're tracking the numbers every day.

And while I'm not going to give you how did they do this year versus it did last year. I'm going to tell you, we monitor, and when I say we're going to be in strong double digits, that's based upon looking at the trends we've had in the past, the trends we're looking at today. We analyze this pretty closely. I'm going to be consistent here. I'm not going to disclose all of the specific trends. I'm just going to tell you, we monitor those trends very closely, and we wouldn't make the statement we made if we weren't comfortable that we've got a good handle on where the enrollments are start coming out.

Alex Paris -- Barrington Research. -- Analyst

That sounds reasonable. I appreciate the extra color. Thanks guys and good luck.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Thank you, Alex.

Operator

[Operator Instructions] Our next question comes from the line of [Indecipherable]. You may proceed with your questions.

Unidentified Participant

Hello.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Hi, Troy [Phonetic].

Unidentified Participant

Hi. I'm in the education industry. And so I was just wondering what the -- similar question before with the parents driving the demand, what percentage of your services are offered directly to the parents? And what percentage are going through the actual public or private school systems?

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Well, in our public reporting, we do disclose how much of our revenues come from what we call managed schools and how much of it comes from private schools and how much it comes from the institutional business. And so I don't know the percentage right off the top of my head, but some in the range of 85% comes from the, what we call, the managed schools, the schools where we are offering -- our schools are offering a service directly to consumers. Another maybe 7% or 8% are coming from what we'll call the institutional and then a slightly smaller percentage are coming from private schools. So that's generally how it breaks out.

Unidentified Participant

Okay. Thank you for the general statistics.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Okay. Thanks, Troy. I appreciate you being on the call.

Operator

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn the call back over to Mr. Davis for closing remarks.

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Well, I want to thank everybody for listening to the call and staying with me as I had longer than normal comments today, but we had a lot to report on. We obviously gave a little different stat than we normally do, but we thought it was important in this unprecedented time to give you some sense of where we are. I appreciate everybody being on the call, and I hope everybody is safe and sound and has a great rest of the week. Thank you.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Mike Kraft -- Senior Vice President, Corporate Communications

Nathaniel Alonzo Davis -- Chief Executive Officer and Executive Chairman

Timothy J. Medina -- Chief Financial Officer

Jeff Silber -- BMO Capital Markets -- Analyst

Stephen Sheldon -- William Blair -- Analyst

Greg Pendy -- Sidoti -- Analyst

Alex Paris -- Barrington Research. -- Analyst

Unidentified Participant

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