K12 Incorporated (LRN) Q3 2021 Earnings Call Transcript

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K12 Incorporated (LRN 2.78%)
Q3 2021 Earnings Call
Apr 20, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Stride Third Quarter Fiscal Year 2021 Earnings Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Tim Casey, Senior Director, Investor Relations. Please go ahead.

Timothy Casey -- Senior Director, Investor Relations

Thank you, and good afternoon. Welcome to Stride's third quarter earnings call for fiscal year 2021. 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. Stride 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 Stride's 2020 annual report on Form 10-K. These filings can be found on the Investor Relations section of our website at stridelearning.com. In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. or GAAP, we will discuss certain information that is considered non-GAAP financial information. A reconciliation of this non-GAAP financial information to the most closely comparable GAAP information was included in our earnings release and is also posted on our website. This call is open to the public and is being webcast. The call will be available for replay for 30 days.

With me on today's call are James Rhyu, Chief Executive Officer, and Tim Medina, Chief Financial Officer. Following our prepared remarks, we will answer any questions you may have. I would now like to turn the call over to James. James?

James Rhyu -- Chief Executive Officer

Thank you. Good afternoon, everyone. Since I became CEO three months ago, I heard one consistent question. What will happen with education after the pandemic is over? Well, we're soon approaching that point it looks like, and I don't think any of us know. But many credible thought leaders seem to believe the shift to online learning is not temporary. In fact, a lot of the key trends we are seeing from recent research on education, careers and the economy, support side view. A recent New York Times article carried the headline, online schools are here to stay even after the pandemic. The premise to the article was that the ongoing pandemic has changed the landscape of education permanently. One quote, "A subset of families who have come to prefer online learning are pushing to keep it going." Additionally, a recent study by the Society for Industrial and Applied Mathematics found that one-third of high school students would choose a fully online or hybrid education even after things return to normal. These and other research like them support my long held belief, that the momentum in digital transformation is difficult to reverse and that the trend toward online and hybrid education will continue. And more students are recognizing that college is not the only effective or most affordable path to a career.

The ECMC Group released findings from a study it conducted that showed today's high school students are seeking lower cost, quicker paths to careers. In the study, 25% of Gen Z teens said they were more likely to attend a career and technical education school due to their pandemic experience. This trend is playing out in college as well. Last fall there was a 7% drop in enrollments in higher education. This means more students will seek out other educational paths. In a recent article in New York magazine, they make the following case, I quote, "People under the age of 40 are fed up. They have less than half of the economic security than their parents did at the same age" For the first time in our nation's history, a 30-year-old isn't doing as well as his or her parents at age 30. So the paradigm of offering opportunities needs to shift.

In our adult learning business, we are seeing people moving toward non-traditional educational apps. Strada Education Network surveys have shown that adult learners who are looking for educational training options are focused on gaining certification and licensure rather than traditional degrees, and they prefer to get this training through online programs or directly from their employer. Importantly, companies are beginning to recognize that non-traditional educational paths can be success -- as successful as college graduates. Large corporations like Facebook, Google and Amazon and others have begun programs to hire non-college graduates, and in many cases, students right out of high school into professional high-paying technology jobs. And all the indications suggest these professionals are excelling. As such, companies are expanding these programs.

These transport our strategy of providing career skills. The pandemic has accelerated the shift in modality to a more digital approach. As these markets are poised to grow at increasing rates, Stride is well-positioned to benefit for many years to come. The immediate impact of these trends are evident in our results for this quarter and in our fiscal 2021 guidance. We've raised our guidance for the full year in each of the past two quarters. Year-to-date, our Stride career revenue enrollments are up over 120%. The ECMC study I mentioned above, also found that 61% of Gen Z teens believe a skill-based education makes sense in today's world and our Stride career programs offer a clear solution for these students. The programs provide access to career-ready skills and certifications. This allows students develop skills they can -- that can lead directly to a career or better prepare them for post-secondary education.

Regardless of which path they choose, we want to provide them with an education that will prepare them for careers in high growth areas like healthcare, technology and business. Our adult acquisitions are doing well and growing at double-digit rates even though some of them have traditionally focused on in-classroom teaching. Their shift to online programs has gone smoothly and we feel good about our future growth prospects. Specifically, our two most recent acquisitions, Tech Elevator and MedCerts are performing against our acquisition plans, but more important, these companies serve mainstream markets at large scale future opportunities in front of them. As we begin to invest in our Stride brand, we believe we will be able to generate meaningful growth for these products, incremental to what they would have been able to do as stand-alone businesses.

As more employers start to take notice of these kinds of pathways, they are looking to partner with training providers, to ensure they are hiring the right skilled workers. For instance, MedCerts recently announced a partnership with Equus Workforce Solutions to offer a registered apprenticeship opportunities to employers seeking employees in high-demand fields. These types of programs demonstrate that Stride's offerings address both learner and employer needs.

Beyond that, we can have [Indecipherable] build recruitment pipelines with our Tallo partnership. Tallo now boasts 1.5 million users on their platform. This community of both users and employers will help ensure that we are developing the right training programs, while giving them and others a path to employment. And as we said during our Investor Day in November, we expect this growth and the trends we are seeing in the market to lead to overall career learning revenues, a $650 million to $800 million by fiscal 2025.

And as excited as we are about the prospects in our career and adult learning businesses, we are also focused on our general education business. Unfortunately for many students the pandemic has caused a decline in academic achievement. A recent study by NWEA showed that number of students who regressed academically increased significantly nationwide during the last year. Fortunately, for students have found that attending established virtual programs like ours, they have been able to attend school uninterrupted. Our partners have provided seamless education in a completely disrupted world. We owe our gratitude to them.

The impact translated into academic outcomes as well. In a recent study we conducted, programs managed by Stride, handily outpace schools like the ones in the NWEA study. Not all online programs are created equal. We believe ours is a gold standard, the data backs that up. How does all of this translate into future trends,? Just a little over a year ago we conducted a survey that validate the trends we've seen for many years. An approximately 2% to 3% of families were considering a fully online high school option. I just today received results of our most recent study that indicated that, that 2% to 3% had jumped to over 10%. Similarly consideration for online career programs jumped from 15% to 25%. The shift online school from home means that more families are seeking out Stride's offering of digital solutions. Although online school might not be for everyone, many more families now recognize it as an option.

In addition to the increase in awareness, the pandemic has brought about structural changes to other parts of our lives. It wasn't just students who were impacted. It was parents, families, teachers, and administrators. Many of these individuals have come to appreciate the flexibility that comes from working and schooling from home. This shift gives more parents and families the opportunity to support their children's learning at home while they're also working there. Or for teachers, they can teach at home. We hired and managed more teachers than ever this year. The flexibility for teachers to work out of their homes is another clear trend that provides great opportunities.

Overall, this means that Stride's offerings are more accessible to more families. Now I know many of you are focused on what will happen with our enrollments this coming fall as the rollout of the vaccine proceeds and most school districts announced plans to get back into the classroom. First of all, let me be clear that we support the reopening of brick-and-mortar schools. In fact, we penned an open letter supporting President Biden's bipartisan push to get schools reopened. Additionally, it's far too early in our enrollment season to know how many new students will come to our programs in the fall. In fact, less than 10% of our normal overall enrollment volume happens before the end of April.

However, we do have some early indications of the rate at which existing families are indicating their return for the fall. As of right now, the percentage of existing families that are responding to our outreach for returning in the fall is at an all-time high and the percentage that have indicated they are returning is at an multi-year high. So far, we are seeing the opposite of a mass exodus back to brick-and-mortar schools that some have predicted. This is some very early encouraging news. However, I want to stress this is still very early in our enrollment season.

Finally, I want to highlight some existing -- sorry, some exciting upcoming programs from Stride. Recently a survey we conducted found that over 65% of parents agreed that their children need additional educational curriculum over the summer to make up for lost time due to the pandemic. Given the significant need, this summer we are going to offer free summer career experiences for students in Grade 7 through 12. These programs are an excellent opportunity for current and prospective students to gain exposure to career skills, while engaging in exciting activities.

For example, in our Esports experience students work on coding skills in the morning while spending the afternoon gaming with their friends. We plan to offer programs in nursing, theatre, Esports and even a JAM Camp for musicians. We will also offer programs for recent Stride career graduates to further hone their career rating skills they learned in high school. All these programs will help make Stride more accessible to more students, while teaching them valuable career skills. So I believe the trends in our business as well as the overall macro conditions and our addressable market continue to work in our favor and grow as time passes. Thank you for your time today.

I'll now turn the call over to Tim to discuss our quarterly results. Tim?

Timothy Medina -- Chief Financial Officer

Thank you, James, and good afternoon, everyone. Revenue for the quarter was $392.1 million, an increase of 52% from last year. Adjusted operating income was $54.9 million, an increase of 146% and capital expenditures were $11.3 million, an increase of $1.9 million versus Q3 last year. In each case, these results met or beat the expectations we provided in our guidance last quarter. As James mentioned, our General Education business continues to perform very well, and Career Learning remains on a strong growth trajectory as it has been for this past several years. Given the strength in these businesses, we have raised our guidance again for the full fiscal year.

Returning to our results for the quarter. Revenue from our General Education business increased $89.2 million or 38% to $322.3 million. This was due primarily to higher enrollments, partially offset by lower revenue per enrollment. General Ed enrollments rose 43% year-over-year, while revenue per enrollment declined 4%. For the full year, we expect revenue per enrollment to be down compared to last year due to state budgetary pressures resulting from COVID-19 and a higher mix of lower-funded states. We do not however expect this decline to become a trend into next year. In fact, we are confident, given what we know today about state policy, that enrollment funding should improve next year.

Career Learning revenue rose to $69.8 million, an increase of 191%. This was largely driven by significantly higher volumes in our Stride Career Prep programs, formerly known as Destinations Career Academies as well as growth in our Adult Learning businesses, including the effect of MedCerts and Tech Elevator acquired in November 2020, and Galvanize acquired in late January 2020.

Gross margins were 35.5% in the quarter, up approximately 500 basis points from the same period last year. For the full fiscal year, we expect gross margins to be approximately 34% plus or minus 50 basis points. We believe this improvement will continue into next year. Last November, at Investor Day, I laid out a 2025 goal for gross margin percent of 36% to 39%, and I expect us to get there much faster.

Selling, general and administrative expenses in the quarter were $100.5 million, up 58% in the year-ago period. The increase in SG&A was driven primarily by higher costs associated with the growth in enrollments and higher stock-based compensation expense as well as the expenses for our adult learning businesses. We expect SG&A for the full fiscal year 2021 to be in the range of $420 million to $425 million. Up from fiscal 2020 due to higher costs associated with the growth in enrollments, higher stock-based comp expense as well as the inclusion of the SG&A associated with Galvanize, MedCerts and Tech Elevator.

Our expectation for fiscal year '21 interest expense is that it will be between $17 million and $18 million including approximately $4 million in cash interest and $12 million in non-cash amortization of the discount on our convertible senior notes, and another $1 million of non-cash amortization of debt issuance costs. Our convertible notes are subject to new accounting guidance, which can be adopted in FY '22 and no later than FY '23. Once the guidance is adopted, the debt discount will be eliminated from the balance sheet and the associated non-cash amortization expenses are eliminated from the P&L on a going forwards basis.

EBITDA for the third quarter was $62.2 million, up 89% from the third quarter of fiscal 2020. Adjusted EBITDA was $75 million, up 92% from the same period a year ago. Operating income was $38.6 million, adjusted operating income was $54.9 million, an increase of 146%. Additionally, we are raising our guidance for adjusted operating income to $156 million to $159 million for the full fiscal year 2021, and that's up from our previous guidance of $145 million to $155 million.

We ended the quarter with cash and cash equivalent at $329 million, an increase of $70.9 million compared to the second quarter. We expect working capital to be a significant source of cash in the fourth quarter, primarily due to accounts receivable. So we expect our cash balance at the end of fiscal 2021 to increase significantly. We believe that our strong free cash flow generation and liquidity will continue to provide the financial flexibility to fund our existing operations and to pursue strategic acquisitions.

Capital expenditures for the quarter totaled $11.3 million below the range of $12 million to $15 million we guided to last quarter. We expect full year capex to be in the range of $50 million to $55 million. Our effective tax rate for the quarter was 30.2% and we expect our full year tax rate to be in the 27% to 29% range. We expect that free cash flow defined as cash from operations less capex will trail our adjusted operating income. This timing difference is primarily due to working capital changes related to the timing of payments from certain states, some of which are associated with our growth in states that regularly pay in the following year. And some of which is related to delayed payments due to COVID.

Now returning to our updated guidance. To summarize, we expect the following for the full year fiscal 2021. Revenue in the range of $1.525 billion to $1.530 billion. Adjusted operating income between $156 million and $159 million. Capital expenditures of $50 million to $55 million and a tax rate of 27% to 29%. In Q3, we saw another successful quarter owing to the tremendous demand for our products and services, both in General Education and Career Learning. We delivered double-digit or better growth in revenue adjusted operating income and adjusted EBITDA, while significantly improving our gross margins and our robust cash and liquidity position. We remain very excited about the prospects for our business as a whole and will continue to execute on our high growth Career Learning strategy.

And with that, I'll turn it over to the operator. Operator?

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from the line of Jeff Goldstein from [Technical Issues] Hello, can you hear me?

[Technical Issues]

[Operator Instructions]

[Technical Issues]

And your first question comes from the line of Jeff Goldstein from Morgan Stanley. Your line is open.

Jeffrey Goldstein -- Morgan Stanley -- Analyst

Hey guys, good evening. Can you hear me OK?

James Rhyu -- Chief Executive Officer

Apparently, you can hear me, many of you can hear the operator, I think some of you can hear us as well, but we cannot hear you or the operator, so we're trying to work through here the technical difficulties, if you just give us a moment.

[Technical Issues]

Operator

Ladies and gentlemen, we apologize for that technical delay. [Operator Instructions] And your first question comes from Jeff Goldstein from Morgan Stanley. Your line is open.

Jeffrey Goldstein -- Morgan Stanley -- Analyst

Hey guys, can you hear me OK now?

James Rhyu -- Chief Executive Officer

Yeah, hey, there. We can hear you. We've actually had to dial in from a mobile phone here, so I apologize if there is a little bit of -- if the sound quality isn't good. We still have a little bit of technical difficulty on our end. But we can hear you now. Go ahead.

Jeffrey Goldstein -- Morgan Stanley -- Analyst

Okay, perfect. So I just had a question on revenue per enrollment. That figure seemed to recover in the quarter within both General Education and Career Learning when comparing it to last quarter. So I was just hoping you could expand on drivers of that recovery. And is some of that recovery in the quarter, what's giving you confidence for further improvement into next year?

James Rhyu -- Chief Executive Officer

Let me just try to take maybe half of that question and then I'll hand it over to Tim. I think, first of all, lot of factors happen in here, so I sort of -- I think it's probably better to focus on the full year number. But the confidence in next year actually doesn't really have much to do with this year. This year, we were negatively impacted by, you may recall, California being funded new enrollments and some other sort of mix issues. When we look at next year, really what we look at is, I'll say the policy landscape across states in which we manage programs. And from that perspective, we think that our overall -- the overall environment looks pretty strong, pretty stable. So it's really nothing to do with how this year's shaping up, it's really based on what we see across the landscape for next year policy wise. Tim, I don't know if you want to add anything?

Timothy Medina -- Chief Financial Officer

Yeah, the only thing I would add in terms of sequential improvement is that, as we get into the year, our revenue -- we've earned revenue in some cases where we tread [Technical Issues] small amounts of enrollments, normal course. And that's really the driver overall of this modest sequential stabilization in that metric.

Jeffrey Goldstein -- Morgan Stanley -- Analyst

Okay, got it. And then, I appreciate your comments in the prepared remarks around just optimism you have around returning students for next year. I was curious though, if the churn you saw in the quarter in General Education this past quarter, was in line or was that more than you were anticipating given students could potentially be returning to their traditional schools? I mean were you seeing that in any particular age group or is that not the case and it was all just kind of normal course? I was just curious for your thoughts on churn in the quarter.

James Rhyu -- Chief Executive Officer

Yeah. So I think there is -- if anything, churn continues to be better than previous years. I think in that respect, it was, I would say somewhat better than we expected, originally when we set up the year but we are seeing, I think, just the tendency -- and we've seen this over the years, the tendency for -- in the middle of a semester, families do have some reticence. Even as schools are opening back up, I think we see -- we saw families have some reticence just to disrupt the flow of the educational program that their child's in. So -- but we were a little bit pleasantly surprised, I would say. We have been pleasantly surprised throughout the course of the year on the trajectory the churn has taken for us.

Jeffrey Goldstein -- Morgan Stanley -- Analyst

Okay. I appreciate the color.

Operator

Your next question comes from the line of Jeff Silber from BMO Capital. Your line is open.

Jeffery Silber -- BMO Capital Markets -- Analyst

Thanks so much. The results were much better than expected, both on the top line and bottom line. Can you focus what was the reason for the beat or reasons for the beat?

Timothy Medina -- Chief Financial Officer

The reason for the beat is that -- is really the point just James just made. It's better retention performance during the quarter really is the primary driver of that improvement on the top line and that really fell to the bottom line.

Jeffery Silber -- BMO Capital Markets -- Analyst

Okay. So it's fairly similar to what we saw last quarter as well?

Timothy Medina -- Chief Financial Officer

Yes.

Jeffery Silber -- BMO Capital Markets -- Analyst

Okay, that's great. I appreciate the color you gave us on the call. I know it's still very early. Can you talk about at least the potential for either new states or new schools, how that pipeline is going?

James Rhyu -- Chief Executive Officer

Yeah, I think unlike probably previous years, our approach to new states and new schools is actually evolving. And I think it's evolving in a positive way, meaning there are increasingly more opportunities for us to enter new programs, new states with partners. It -- we're approaching it from the perspective that we don't always need a new policy or law or legislation to be passed. So we are continuing to work to open particularly, career education programs. We expect to open a small handful this coming fall. We expect programs in general in a number of states to -- new states to open or expand. And so, we're pretty bullish. West Virginia, Missouri places like that, that we expect at least some type of expansion or new program to be open for the fall.

Jeffery Silber -- BMO Capital Markets -- Analyst

Okay, great. In your prepared remarks you also talked about academic outcomes. I know it maybe too early to get this kind of data, but I'm just curious. In the pandemic have you seen your outcome increase relative to some of the traditional schools that went online? Is there any data that shows that?

James Rhyu -- Chief Executive Officer

Yes, for sure. We have -- we definitely -- there is some data trickling in that suggest -- and obviously not surprising that most of the brick-and-mortar schools took a pretty significant step back on average in academic outcomes. And we did, in fact in our schools, our data suggests that we outperformed that significantly. [Technical Issues] So, at least from our perspective and our data would suggest that based on what we see and what we can -- I'd say, the data that is available, is that our performance has outperformed and outpaced most other brick-and-mortar schools that did online learning over this past year.

Jeffery Silber -- BMO Capital Markets -- Analyst

Okay. I appreciate the color. I'll jump back in the queue. Thanks so much.

James Rhyu -- Chief Executive Officer

Thanks, Jeff.

Operator

Your next question comes from the line of Stephen Sheldon from William Blair. Your line is open.

Stephen Sheldon -- William Blair and Company -- Analyst

Hi, thanks. Firstly, great to hear about the higher new registration, I guess, indication. Is there anyway to roughly frame or quantify how much higher the percentage of families indicating they'd return compares to the normal trend that you see?

James Rhyu -- Chief Executive Officer

Well, so I'm reluctant to start providing that type of guidance at this point. I will tell you that our response rates are -- have been materially higher and I think that, for me at least, the signs that point positively is the engagement, the engagement levels we're getting. And particularly, I'll give you one as a tidbit of information. We did track, I'll say, COVID-related types of enrollments, meaning some families did very specifically indicate to us that they were coming to us this year specifically for COVID.

Now of course, a lot of families didn't indicate that and so that doesn't capture maybe the entire population. But a very significant proportion of those families who said that they came to us because of COVID have been engaged with us and have indicated that they expect to return in the fall. So again in our prepared remarks, I indicated that we're not seeing this, I would say, mass exodus of families just riding it out with us until the brick-and-mortar schools came back online, and then sort of all exiting back to the brick-and-mortar programs. So we see that as a pretty positive trend that families -- at least a significant number of families have appreciated the experience enough to indicate that they are sticking with it.

Stephen Sheldon -- William Blair and Company -- Analyst

Got it. Really helpful. And I know you guys can help students that have fallen behind academically try to catch up, especially with some of the personalized learning you provide online. With some students at local options falling behind over the last year, I guess, we've seen that increase demand at all for General Education especially as you think about indications heading into next fall?

James Rhyu -- Chief Executive Officer

Yeah, I think the slide that's happened -- I was just actually -- before we came into this call, there was -- Sal Khan from Khan Academy was on CNBC mentioning that 15% to 20%, I think was the number of the extent that he gave. 15% or so of kids have gotten lost in the public school systems. And so not just -- they're not just a slide of the kids who have been in the system, you see a large number of students who have gone missing in a way, right? And so we do think and we do see that there is a very large opportunity and good demand for not just our programs, our full-time online programs and kids coming into those programs, but just in school districts more broadly looking for a way to meet that demand or to meet that gap.

And so I think you should remember that we're not just running full-time programs. We offer a suite of solutions that also helps districts with their problems. And I think that in some way, that's going to be an ongoing opportunity for us because I really empathize with these school districts. They really need to make sure that they can reach a lot of these kids who have somehow gone missing in their systems and they need to provide some alternatives for them as well. And I'm hopeful that they are looking at alternatives like online alternatives for those kids as well and we can certainly help there.

Stephen Sheldon -- William Blair and Company -- Analyst

Makes sense. Last one for me just on the guidance. It seems like the guidance implies a sequential step down in revenue in the fourth quarter relative to the third quarter. I think the normal progression over the last few years has been for a sequential uptick. Anything notable to call out on what would drive a sequential decline this year in the fiscal fourth quarter?

Timothy Medina -- Chief Financial Officer

Nothing notable to note there. It is fair that we squeeze out another quarter just like this, so we would be at the very tippy top of our guidance range. So there is nothing in particular to call out there. No particular concern or anything like that.

Stephen Sheldon -- William Blair and Company -- Analyst

Great. Thank you. Appreciate it.

Operator

[Operator Instructions] Your next question comes from the line of Greg Pendy from Sidoti. Your line is open.

Gregory Pendy -- Sidoti & Company -- Analyst

Hey there. Thanks for taking my question. Just real quick on the summer courses that you'll be offering. Is that going to create any notable shifts in expenses on a year-over-year basis and especially in structure costs?

Timothy Medina -- Chief Financial Officer

Yes -- no. The answer is no. We shouldn't have any material change in costs over the summer due to those programs. Those programs -- they're not -- they do have some marginal costs to us. It's not significant. We think it won't change the overall profit or gross margin trajectory that we're headed on but we also think it's important. It's important to help with the summer gap, if you will and bridge kids over the summer. We think it's an important offering to get kids to have awareness around some of these opportunities that we can provide them. So I don't think it's going to be material cost, but I think irrespective it's just an important service that we need provide the country right now.

Gregory Pendy -- Sidoti & Company -- Analyst

And then just one final one, just on the revenue per student in terms of next year. Assuming -- would it be a positive benefit if you have a higher mix of special-needs students next year in your revenue? I'm not saying that you are foreseeing that, but just given the trends of some students falling behind. Is that typically a higher revenue per student?

James Rhyu -- Chief Executive Officer

Not materially. So, I wouldn't pretend that our revenue percent trend next year is going to be impacted by that [inaudible] In any given year I think sort of all fall down with the washing and our overall revenue pursuing trend get more impacted by things like mix or what happened in California this year, and not by the mix of specialized versus non-specialized students.

Gregory Pendy -- Sidoti & Company -- Analyst

Okay, great, thanks a lot.

James Rhyu -- Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Timothy Casey -- Senior Director, Investor Relations

James Rhyu -- Chief Executive Officer

Timothy Medina -- Chief Financial Officer

Jeffrey Goldstein -- Morgan Stanley -- Analyst

Jeffery Silber -- BMO Capital Markets -- Analyst

Stephen Sheldon -- William Blair and Company -- Analyst

Gregory Pendy -- Sidoti & Company -- Analyst

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