Greetings, and welcome to the K-12 third quarter fiscal 2020 earnings conference call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Kraft, Head of Investor Relations. Thank you. Mr. Kraft, you may begin.

Thank you, and good afternoon. Welcome to K12's third quarter earnings 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 2019 annual report on Form 10-K. These filings can be found on the Investor Relations section of our website at www.k12.com. In addition to disclosing financial results in accordance with generally accepted accounting principles in the 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 is Nate Davis, Chief Executive Officer and Chairman of the Board; Tim Medina, Chief Financial Officer; and James Ru, President, Corporate Strategy, Marketing and Technology. I'd like to now turn over the call to Nate. Nate?

Thank you, Mike. Good afternoon, everyone, and thanks for joining us on our quarterly call. Such a challenging time for our country. I'm sure everybody is busy. But hopefully, you're safe and sound in your own studies as you listen to this call. I'm sure I join everyone on the call in saying that we continue to extend our thoughts and prayers to those impacted by this virus, both in the U.S. and around the world. The good news is times like this bring us together. Everywhere I look I see goodwill and good intentions, people concerned about each other's health, both physical and emotional, and everybody coming together. It's wonderful the country is coming together. I'd like to get started with a brief summary of this quarter's financial results. Our new CFO, Tim Medina, will follow up with more detailed comments. As you saw in today's press release, revenue was $257.2 million in the third quarter of fiscal '20, an increase of 1.5% year-over-year. Our adjusted operating income for the quarter was $20.6 million, and capital expenditures for the quarter were $9.5 million. Now looking at results in comparison to the guidance we provided last quarter, we beat our estimates across the board: revenue, adjusted operating income, and capital expenditures, with limited impact from COVID-19 in these numbers, our results underscore the ongoing strength of our core business, and that's very important. The underlying fundamentals of our core business remain strong. This is due in part to three factors. First, we saw student retention improved by 200 basis points versus last quarter. While some of this improvement relates to the impact of the pandemic, we saw improving retention trends even earlier in the quarter. Last quarter, I mentioned that we had implemented steps to help students determine if our program was right for them early on, and the effect of that would be to drive withdrawals up and retention down in the second quarter of fiscal '20, but would allow for lower withdrawals and better retention in the third quarter and fourth quarter. It's also notable that we saw retention improvement in all grade levels and in most of the schools we serve. Second, when we set guidance in January, we anticipated strong growth in new enrollment, and that happened as we internally planned. And third, customer satisfaction with K12 powered programs is increasing. Based on a recent parent survey, all satisfaction and loyalty metrics have increased from fall 2018. Parent satisfaction with K12 powered schools and the curriculum rose to 82%. And the likelihood of those parents reenrolling their students topped 89%, both for all-time highs. More importantly, ratings in nearly all key drivers of Net Promoter Score have improved year-over-year to 61, and this puts us in line with other major national brands. Importantly, in our press release today, we have reaffirmed the full year guidance we provided last quarter. We often receive questions about COVID-19's impact on our business, both short-term and long-term. And I'd like to make some comments to answer that question. The pandemic has disrupted academic plans and goals for so many students across the U.S. and around the globe. All brick-and-mortar schools closed in the U.S., and it was a scramble by many to figure out just how this virtual schooling works. However, the academic experience for most K12 powered programs is essentially school as usual. School as usual includes students with special needs and those in rural and underserved communities, just as the U.S. Department of Education clarified in its guidelines. Also for the current school year, we do not anticipate changes in funding for public schools as a result of COVID-19. We've had communications with state authorities. We've monitored public statements by a number of policymakers. All indications are that schools we support will be funded. As such, K12's revenue for fiscal '20 should not be negatively impacted for the services we provide. However, with certain school functions being curtailed this year, the number of services we'll provide will be reduced. An example would be that we provide end-of-year testing in all schools that we support. Leasing computers, assembling testing sites, and things like that. While states have suspended end-of-year state assessments, we cannot provide those services, and therefore, we cannot realize that revenue. You may have heard us talk about terms like this, such as revenue capture in previous years. As such, revenues from these services will be somewhat lower than anticipated, and we, therefore, expect to achieve revenues for the full year at the lower end of our guidance range. At the same time, the pandemic is also driving cost savings across our business. When coupled with our ongoing focus on cost reductions and efficiencies prior to the pandemic, we're realizing some cost reductions in a number of areas. Therefore, we anticipate achieving adjusted operating income at the high end, or even possibly exceeding our guidance range for the full year. Now again, this is not a change in guidance, but I'm just giving you more specific direction within the guidance we've already issued. Let's talk about the upside of the pandemic on our business. As I've already said, it's horribly unfortunate for so many people all around the world. But we're in the business that helps schools and students in situations exactly like this. When the pandemic first started to impact brick-and-mortar schools, our phones began to ring off the hook. We saw a sharp increase in traffic on our website. We reached nearly 1 million unique visitors to the K12.com website in February and March, which is a 49% increase year-over-year. Many of those visitors filled out lead submission forms. In fact, more than 100,000 lead submission forms were completed by parents in the last 2 months, a 57% increase over the same time last year. The majority of the increase in inquiries we received related to families looking for options for students to complete the current school year. Most schools we support are unable to accept enrollments this late in the full year due to authorizer or local school board policies. However, for the schools that were open for enrollment during this period, we've received more than 6,000 applications, which is more than we had last year. Now the impact of these students will eventually be enrolled, but it's not going to have a great impact on our revenue because they were enrolled very late in the school year. Some of the inbound inquiries, however, concerned options for the next school year. While the enrollment season is just now starting, applications have already topped 14,000, which is a 16% increase compared to this time last year. At this point, no one knows how many of these applications will result in student enrollment in 2021's school year. However, we believe that some of these students will choose to stay with the program even if traditional schools open in the fall. Additionally, we hope some who expressed interest and investigated this choice for this spring will now choose online learning for the fall. Our company has also stepped up in support of communities that were impacted by the nationwide school closures. This includes offering free online curriculum platforms, training, and technical assistance to students, their families, and school districts. We're also offering free webinars on best practices for teachers and families who have been thrust into an online environment for the very first time. To date, nearly 70,000 students, teachers, and families have signed up for these programs and webinars. These efforts continue to raise interest in and awareness of the blended and online classroom and K12's expertise in this area. Lastly, we're working closely with dozens of school districts on solutions that will help them educate students remotely. Some school districts are already using our curriculum under the 30-day free offer I mentioned. Others are using our supplemental content, such as Stride and Big Universe. Many are using a mixture of both. So far, more than 30,000 students are being supported by these promotional programs in the current school year. We believe a longer-term opportunity exists as districts figure out how they will incorporate online learning into their regular curriculum and enter this full continuity plan. Now I'd like to turn to Galvanize. As many of you may remember, we acquired Galvanize back in January. In their core immersive boot camp and enterprise businesses, Galvanize moved all programs fully online in mid-March. The good news here is that the majority of the students stayed with the program. While some had decided to defer until in-person sessions resumed, students are committed to staying with Galvanize. We saw very few cancellations of admissions or students dropping from existing classes. In their community business, which manages co-working space in eight locations, Galvanize strongly encouraged all team members to work from home and to follow local health guidance. As you would expect, there are fewer new leases in the Galvanize community business given that all states have implemented work-from-home requirements. This caused the community business to remain flat in Q3 and will likely shrink a bit in the next quarter. None of us can predict when things will come back to normal, if ever, but when we'll see small businesses entering into more leases in the Galvanize community business. While the pandemic will be a headwind to Galvanize’s community business in the short term, we do not feel it dampens the prospects of this total business over the long haul. In fact, the immersive boot camp business can be counter-cyclical during recessionary-like periods when people are looking to upskill or position themselves for new jobs after being laid off or out of work. The bottom line is we predict that Galvanize's Boot camp and enterprise business will continue to deliver strong growth into fiscal '21. In fact, while the community business will not deliver against expectations, the consumer business is slightly exceeding our expectations at this time. Before I leave my discussion of Galvanize, I also want to provide more detail on the impact of the acquisition on FY '20 and FY '21 financial results. As we mentioned last quarter, the adjustment to our operating income guidance for fiscal '20 was largely a result of purchase accounting related to the acquisition. $8 million to $9 million of the reduction in our adjusted operating income guidance related to Galvanize's negative operating income and to short-term operational investments we plan to make. But the remaining $11 million to $12 million was related to purchase accounting adjustments. Specifically, all assets and liabilities on Galvanize’s balance sheet, including deferred revenue were required by accounting standards to be recorded at fair value. When deferred revenue is recorded at fair value, it lowers revenue and profitability for the acquired business until the liability comes off the balance sheet. And I promise that is the last accounting list I’ll give today. Overall, the gross prospects for Galvanize remain solid, and I'm confirming what I said last quarter. I expect Galvanize to deliver positive EBITDA in FY '21 and, therefore, be accretive to K12 EBITDA in FY '21. So as you think about the impact that the pandemic is having on our country and our communities, and I believe it to be horrific. It’s a similar moment for online education. This moment will permanently change how the general public school district and regulators think about our business and how online education and blended education should be incorporated into the ongoing learning process. This is not just my personal opinion. This view is informed by recent studies we commissioned with parents of students in kindergarten to 12. We asked them a series of questions regarding their views on online education in the post-pandemic environment. The results were eye-opening. 88% of parents agreed that online learning should be an option for families. In addition, more than 68% of the parents are either somewhat or very reluctant to send their students back to school with other students, even after the pandemic subsides. Prospective parents believe career readiness education is an important way for their children to learn real-world skills and be prepared for the future. More than 30% of high school parents want school options with online career readiness education offerings. While the short-term positive impact of the pandemic may be modest to K12's current financials, the long-term effect we see providing a great tailwind to our business model. The pandemic has crystallized four things for us. It's increased the awareness and acceptance of online options. It's helped break down the preconceived notions about online learning and highlighted the difference between a simple digital video session and a comprehensive online learning program with teaching, instruction, and measurements. Third, it's made school districts examine their preparedness for disasters and highlighted how online learning can and should be a part of their ongoing plan. And fourth, it's increased brand recognition for K12. We believe that over the long haul, these are all good trends for our business. So in summary, our core business is strong, the underlying trends are improving, and it shows in our results this quarter as we exceeded the guidance we provided. I'll wrap up my longer-than-normal comment by talking about an important organizational change in K12. As you may have seen in our leadership organization released a few weeks ago, James Ru has assumed a new role at K12 as President, Corporate Strategy, Marketing, and Technology. For the past 7 years as CFO, James has helped implement my vision for our company. And more importantly, he has added responsibility as President of Products and Technology, while holding down the CFO job. That's a lot to ask of any one person. Now, I personally hired James because in a previous life, I knew all about his work ethic, intelligence, skills beyond finance, and his ability to help strategically drive innovation in any business he is involved with. By every measure, he's been an instrumental part of our company's trajectory and a tremendous help to me personally. During his tenure, we've grown into a world-class education services company, and we've launched the company's entry into career learning and the adult education market. I've asked James to help drive even more strategy, new strategy, marketing, and technology expansions in a brand-new world. James will be partnering with leaders across the company to expand the market for K12 to reach new students, students who traditionally didn't or wouldn't consider online education from kindergartens to adult learners. They will also lead the teams that drive product innovation and improvements in customer experience, all with the goal of attracting and retaining more students. We'll also develop the marketing and messaging to support these new expansions and execute mergers and acquisitions and partnering opportunities to support the growth strategy. I'm lucky to have someone with his depth of experience ready to step in and help me increase shareholder value and provide great services to our students of all ages. James, thank you for your incredible contribution. I know you're leaving the finance organization and the financial health of K12 in great shape. As I already mentioned, we are joined today by our new Chief Financial Officer, Tim Medina. Tim joins K12 with more than 3 decades of financial and capital markets experience, both domestically and internationally. He has an extensive background in accounting, operations, management, strategy, and a deep understanding of high-growth technology sector companies, including important experience in acquisitions. Most recently, he served as Executive Vice President and Chief Financial Officer of TPX Communications. Prior to his role at TPX Communications, Tim served as CFO and in leadership positions at ECI Conference Call Services, Independent Wireless One Holding, Verizon Communications, and GTE Corporation with CTI Holdings. I'm excited for someone with Tim's experience and background to join K12. So thanks, everyone, for your time today. I'm going to turn the call over to Tim. He'll elaborate on the third quarter financial results. Tim?

Thank you, Nate. And good afternoon to our shareholders, analysts, employees, and others who are joining us on the call today. I'm very grateful to Nate and the entire board for this important opportunity. With so much change unfolding in our communities and our country, this is a unique time to serve as CFO for the market leader in online education. I'm proud to join the K12 team and our shared mission to provide a personalized learning experience for students of all ages and all backgrounds across the nation. I also am very excited about our opportunity to expand K12's leadership in the tech-enabled education market and help lead K12's next phase of growth and value creation. I also look forward to getting better acquainted with all of you. Now I'll quickly recap our reported results. Revenue for the quarter was $257.2 million, an increase of 1.5% from last year. Adjusted operating income was $20.6 million, a decrease of 24.3%. Capital expenditures were $9.5 million, largely flat to last year. As Nate mentioned, in each case, these results beat the expectations we provided in our guidance last quarter. Our core business continues to perform well, and the increased awareness of our virtual options positions us for accelerating growth over the long term. Moving to our results for the quarter. Revenue for our managed public school programs increased $5.7 million, or 2.6%, to $228.3 million. The growth in this business was driven by increased enrollments. Enrollments were up 2.2% year-over-year. Revenue per enrollment was largely flat, and we still believe that revenue per enrollment will be roughly flat for the full year. Institutional revenue in the quarter was $16.8 million, a decline of $4.5 million. This is in line with the trends we have previously outlined. Private pay revenues were $12.1 million, an increase of $2.8 million, mainly as a result of the Galvanize acquisition. As Nate mentioned, we believe that the Galvanize immersive boot camp and enterprise businesses will see positive trends in fiscal 2021, even in the current economic environment. The business is still targeted to be accretive to EBITDA in next year's financials. Before factoring in the operational effects of Galvanize and $0.3 million of reductions in gross profit due to purchase accounting, gross margin would have been 32.8%. Reported gross margin, including Galvanize, was 30.4%, down from the second quarter. We expect full-year gross margin to be 33%, plus or minus 100 basis points. Selling, general, and administrative expenses, excluding the Galvanize acquisition, were $59.5 million, down $2.2 million from last year. The acquisition of Galvanize added $4.2 million in SG&A costs in the quarter, including legal expenses from the acquisition. Reported SG&A expenses were $63.7 million. Even with the acquisition, we expect full-year SG&A to be relatively flat to last year, plus or minus a couple of hundred basis points. EBITDA for the quarter was $32.9 million. Adjusted EBITDA was $39 million, an improvement of $2.6 million before the effect of the Galvanize transaction. Operating income for the quarter was $14.5 million, and adjusted operating income was $20.6 million, an improvement of $2.6 million before the effect of the Galvanize transaction. The improvement in both adjusted EBITDA and adjusted operating income reflects the improving trends in Managed Public Schools. Some other items to note. We ended the quarter with cash, cash equivalents, and restricted cash of $151.5 million, a decrease of $61.6 million compared to the second quarter. The decrease is largely the result of our all-cash purchase of Galvanize during the quarter, offset by a $100 million draw against our credit facility. In response to the COVID-19 crisis, we borrowed against our existing credit facility as a preemptive measure. We continue to be in a very strong cash position, both short-term in the fourth quarter and long-term in fiscal '21 and beyond. Additionally, several states where we saw strong enrollment growth in fiscal 2020, like Texas, are states that typically pay all public schools after the school year ends. This may increase our accounts receivable balance and depress our free cash flow for fiscal 2020. However, I want to be clear that this is a timing issue only. We are closely following the policies of each state and all have publicly committed to continue funding their schools. Based on this timing shift, we correspondingly expect stronger free cash flow in fiscal 2021. Turning back to our results. Capitalized costs of $9.5 million for the quarter were relatively flat to last year. We continue to expect capital expenditures to be $45 million to $49 million for the year. Our effective tax rate for the quarter was 33.5%. We still expect our full-year tax rate to be in the 28% to 30% range. As detailed in our press release, we are reaffirming our full-year guidance from last quarter. So for the year, we're looking at revenue in the range of $1,033,000,000 to $1,040,000,000, capital expenditures of $45 million to $49 million. As mentioned, a tax rate of 28% to 30% and adjusted operating income in the range of $48 million to $52 million. Now let me wrap up with a few final remarks. First, our core business is strong, and student retention and enrollments are both trending in a positive direction. Second, we have ramped our career readiness strategy at just the right time. In these economic times, students are looking for ways to ensure they have the right skills to enter or advance in the workforce. Both our destinations career academy and Galvanize are uniquely positioned to support that demand. Lastly, I want to reiterate that K12 is very well positioned to grow in spite of the uncertainty in the general economy. We are in a strong financial position and have a solid balance sheet with a strong cash position. States have committed to fund public schools during the crisis, and we are seeing increased demand for our services. We believe the effects of COVID-19 will be a lasting tailwind to online education and especially K12's business model. Thank you very much for your time today, and we'll now move on to our Q&A session. Operator, we're ready to begin Q&A.

Our first question comes from Jeff Silber with BMO Capital Markets.

Thank you for your comments regarding the current impact and potential future impact. In your prepared remarks, you mentioned that you did not expect any funding impact for the current school year. Have you received any updates about the upcoming school year for your fiscal 2021?

Jeff, excellent question. This is Nate speaking. We have not gotten any negative or positive indications. Everything we've seen so far and everything we said is that the Federal government wants to put more money into some of their early programs and some of the later programs they're now talking about. They want to put more federal funds into education so that education doesn't stop. The states have said they want to continue education, and their economies are very dependent upon kids being in full classrooms and teachers receiving salaries. All the policymakers have talked about what they need to do. Now, we all know that balances by the fact that if they don't get taxes from citizens, that reduces their budgets and they have to take it out of transportation, health care, or education or something. But so far, it looks like the federal government and state governments are all motivated to get as much money into the education system as they can to keep it going. So we don't see any negative long-term impact today from what we know.

Okay, great. That's helpful. Now I know it usually takes some lead time before you get permission to open up a new school. So I'm not assuming that anything that had not been in progress beforehand. I'm assuming anything you've had in progress before will obviously continue. But has there been any indication that either you could ramp up a new school fairly quickly if you weren't thinking about it beforehand or maybe get a cap raise? Anything along those lines would be helpful.

Yes, we have, Jeff. We have seen a number of the school boards that we've been talking to. We've said to them, we really want to be in a position to help students and help your community, help your state as more students want to be safe and want to be in an online tool. So a number of our partners have upped their cap so far, and we're talking to all of them. Anyone who has a cap, we're having a conversation with them about it. That issue will probably be resolved all within the next 60 days. All are having school board meetings over the next 60 days and will be discussing it. We also see a couple of states who are opening their minds and beginning to talk to us about opening up schools where they weren't before. I can't give names because I don't want to put a legislator in a position that I've said something on an earnings call where they haven't sorted it at the state level. I can tell you that one of the reasons I made my comments that I think this is a positive tailwind is that we've seen states come to us and say, 'Hey, can we do something here?' It remains to be seen that someone will actually approve something in a short period of time, but those conversations are being had, for sure.

Okay, great. That's helpful. And then just one more question before I go back in the queue. Regarding Galvanize, you mentioned the consumer versus the community business. Could you provide some details on the sizes of these different business segments, their actual performance, and how that compares to your initial expectations?

Yes. I don't know how much detail we've disclosed before, but the community business is slightly below $20 million. I think it'll shrink a bit. The community business is the largest business. It's well over $20 million. And the enterprise business is the smallest business but the fastest growing.

Just to clarify that the community business was less than 20%. The remainder, the enterprise business is smaller, but the remainder is the consumer business.

Our next question comes from Chris Howe with Barrington Research.

As far as Galvanize, could you provide some color or clarity on what percentage of revenue or what percentage of enrollments was in online coding boot camp prior to the current environment where we saw the transition to online? And in light of that and in light of the current COVID-19 environment, I know you had mentioned positive EBITDA in FY '21. But any change to your prior expectation for 2020 as far as Galvanize is concerned or any slight adjustments there?

Yes. This is James. To your first question on the online. Before we acquired them, they were starting to Galvanize online, but less than 10% was really done online when we acquired them. The good news is that they were already on a trajectory to move more online, and they've accelerated that. They've shown great adoption with that. So I think they're on a really good trajectory to deliver their programs online ongoing. When we get back to hopefully some sense of normalcy, they'll be delivering some blended and online versions, but the trajectory is really nice there. As for your second question regarding just the financial projection for the year, as Nate said, certainly, their community business in Q4 will likely suffer the most, just for the obvious reasons that folks are less willing to go into offices. We don't see as much impact on their consumer businesses. If anything, I think, as Nate mentioned, that business is holding up fairly well. If anything, it's exceeding our expectations. I would say on the enterprise business, they're probably a little bit below what our original expectation is. So net-net, predominantly driven by the community business, we are anticipating it to be a little bit lower.

Great. Very helpful. And my next question, you mentioned applications were up, and you're seeing an increased overall level of interest as we head into the fall. Can you perhaps add some color as to any changes that you're making to the marketing strategy? I can imagine that given the current environment, your conversion rate should be increasing as we look forward to the fall.

That's true. We're seeing more in terms of top of the funnel, and we're seeing a better conversion rate now than we saw last year at this time. As you know, conversion gets higher as you get closer to the enrollment season and parents are making their final decisions. But yes, we are seeing greater top of the funnel and greater conversion. These additional enrollments, what we expect to see is a lot of interest early in the season. Then we'll see some of that tail off as schools open. What's going to happen as brick-and-mortar opens is that some of the folks in the funnel might say, 'Oh, my school is open; I'll go back.' But we don't think all of them will, because as our survey data shows, many of them will still be worried about whether they should go back.

I think I would just add that from a macro trend perspective, what we're seeing in our schools and our enrollment center, I think most of you know that a large portion of kids who come to the schools that we manage are sort of running away from something. Now, we see a lot of students running towards us. They see us as a viable alternative. From the long-term macro trend, I think just building out awareness and viability of our product in a more mainstream way is going to carry over into the next few years.

In response to your question about changing our marketing techniques, we have two key initiatives planned for this year. First, we will increase our digital and viral messaging more than ever before, with a stronger focus on YouTube and Facebook. While we have engaged in these platforms previously, we are allocating a larger portion of our overall budget to them this time around. Secondly, we plan to collaborate on marketing efforts with organizations that have connections to school districts, as we believe there will be greater demand from those districts. Additionally, we will emphasize image advertising this year instead of direct response advertising. Image advertising focuses on explaining our services, whereas direct response seeks immediate engagement like 'call us now.' Given the current softer market conditions, we aim to provide more detailed information about our online offerings, as we believe this will draw in more interest. I hope that clarifies things.

Our next question comes from Stephen Sheldon with William Blair.

First here within the increased number of applications year-over-year, can you talk some about what you've been seeing specifically for interest in Career Readiness programs? I don't know if you get into that level of specificity with families this early, but what demand trends are you seeing for at this point?

We do look at that level of detail, and there are two ways we look at enrollment. One are the people who come to us because they're just interested in online or career readiness, and then we talk to them about whether they want to be in a regular school or a readiness school. The second, what we'll call funnel, consists of those who came to us simply because they heard about the Destination Career Academy, which is our readiness school. We are seeing an increase in top of the funnel at Destination Career Academy, and we are seeing greater conversion than we saw last year. That funnel is still not as large as I'd like it to be, and that requires us to ensure our advertising is geared toward messaging about what career readiness is all about.

I would add that we've run some early tests this season specifically targeting Career Ready students, and we’re getting a lot of traction. While the overall halo around our business is strong, I think the specific actions we will continue to take through the summer around career readiness will drive a lot of traction.

An example of that would be, if you look at our Destination Career Academy's website from a year ago, it had what I might call level 1 or 2-level information. Now it's much more flushed out. There are examples of students there and more details about what the trick is like, more examples of what project-based learning is like. There's more for the person investigating to understand about these categories, and therefore, more interest.

Got it. That's helpful. And then second here, just wanted to ask what COVID-19 meant to your FuelEd business. I know you've been giving free trials for certain offerings. But have you seen any increased inbound interest from districts or charter boards to purchase ala carte services as they move their classrooms online? Could this be better environment for that business to stabilize some as we look out over the next year or so?

The answer is yes. We have. Our tiny sales force, which we had reduced in size, is now overwhelmed by the number of opportunities and inquiries they're getting. I really wish the COVID situation were over, so they could travel, because they are receiving lots of requests for presentations at full districts. We are seeing more and more interest in that area. Not only for ala carte offerings but also particularly for training their teachers in district schools on how to teach in an online environment and how to implement a full program in place, not just, 'I want to buy your course.' To be honest with you, we're not seeing a dramatic increase in requests to buy an individual course. If anything, we're seeing more interest around understanding how to run a full program.

Our next question comes from Alex Paris with Barrington Research.

I have a couple, it's one kind of dovetails well with the last question asked. Within managed public schools, as I recall, 2/3 are roughly charter school board and 1/3 are school districts. And these are, you're actually running these online schools for school districts. These wouldn't be considered charter schools. These would just be considered a division of the school district, correct?

That's correct. You have a great memory, Alex. The numbers are correct, about 2/3 are charter schools and about 1/3 are our district partnerships. Those district partnerships were the first ones that we approached and said, as a partner of ours, we're going to offer you free access to content. You're absolutely right about the first part.

So as your top of funnel grows from consumers and that sort of thing, this is parents looking for online alternatives during COVID and then potentially beyond. The 1/3 of your contracts that are district partners, I would think this would have a bigger impact on these because if they have a license to do so, and they have not done so. This is not only an opportunity for them to grow their enrollment on a statewide basis, but also they have a plan B in case another pandemic, God forbid, would come down the road.

That's exactly right. And all of the large school district partners we've talked to were the first ones to sit down with us and talk about what their backup plan should be and how they can incorporate. They want to be ready to move easily from their 100% brick-and-mortar to a more blended kind of environment. Those are the first people we've engaged with because they know us the best. Now, what they're not doing, by the way, and you would expect them not to do this, is they're not saying, 'I'm going to shift my student away from my brick-and-mortar completely over to that online program.' Instead, what they want is to set up a separate online program for their kids and a blended program for students in their district.

So I know you're giving a lot of free stuff away right now, which is the right thing to do as a good corporate citizen, but how would you check for these Plan B sort of schools? It wouldn't be the same as your typical partner arrangement?

Yes. So Alex, the good news is we've got tens of thousands of kids that are having access to our free programs now, and we're really happy with the traction we're getting. I think, first and foremost, that's the most important right now. I think from a pricing perspective, a lot of our products have existing pricing structures. So there's a starting point for that. In terms of the contingency planning that Nate talked about, I think the way we view pricing is a little bit fluid right now because we're not really sure what's going to take hold in the marketplace. But our initial belief is, at least, is that the clinical premium, if you consider it as an insurance product, should be fairly small.

Competitors listen to these calls too, so I'm not going to disclose too much here. I've given a lot of thought to those pricing decisions, and we have provided those prices to those large school districts already. We have had some conversations with a couple of very large cities who have also requested bids. In those conversations, we looked at a volume discount basis for pricing. We have been very thoughtful, and we have also given some of them a price for the full year. The largest districts generally receive better rates per course and additional ancillary services.

That's great. And then on the Destination Career Academies, can you refresh my memory? I think you had 6 stood up in fiscal '18, 13 stood up in fiscal '19, '20? That might have been '19, 2021. First of all, what is your cadence for opening new DCAs? And has it changed?

Alex, this is Mike. We're still looking at about 3 to 5 new ones for fiscal '21.

And how many do you have right now?

20.

Okay. And then for my last question, I was considering that with COVID, many parents have been reaching out for alternatives for their kids. However, since most of the schools you operate had closed enrollment, were you able to see any increase in your private pay schools? Or did you experience similar enrollment limitations?

No, private pay was -- we got a very small lift there. We did get some, but we promoted a lot of it. We gave free access to Keystone for 30 days. We offered access to iCAD at a 50% discount. So we secured some interest, but we had to discount it heavily. Again, the goal for us was exposure. We figured it was going to be late in the year. It wasn't going to be big revenue anyway, so why not just get more exposure and do the right thing for the community. We didn't receive a revenue lift from private pay for that, but we did gain more exposure. Congratulations on the quarter. Thanks for the additional color.

Our next question comes from Greg Pendy with Sidoti.

I think you mentioned in your comments about selling this year, and I could be mistaken, but could you remind us how things were last year? It seems like the second half was particularly strong in the fourth quarter. How should we be thinking about that as we approach the end of 2020?

Greg, sorry. We had some problem hearing you. Can you just repeat your question quickly? We couldn't hear you very well.

Yes. Sure. So I think in your comments you said selling and administration to be flat year-over-year? If so, can you just talk about how we should think about the cadence? I think last year, you had an abnormal 3Q and 4Q. I think you overspent in 4Q, if I'm not mistaken. But just kind of how should we think about that?

Sorry. Yes. All right. So yes, you are correct. In Q4 of last fiscal year, our uptick in SG&A was a little bit abnormally high. We do normally have an uptick in Q4, though. You will still see a seasonal uptick in Q4 as we start to prepare for the fall enrollment season, but it will be less than we saw in the previous fiscal year.

Okay. And you're expecting that line item to be flat for the year? Or it was around $300 million last year. Is that correct?

Yes. I think we expect it to be flattish year-over-year.

Our next question comes from Steven Weber with Climbing Rose Capital.

I know you've already gone over some of this, but could you just give a little more color? A lot of people have felt that the virus will return in the fall, and perhaps with people starting earlier than anticipated, the probability of that happening is higher. Just how that would all play out for you? If you can just give as much color on that as you could?

Sure. Stephen, we haven't talked before, but I look forward to meeting you one day. If unlike this spring, our schools will all be open for enrollment this fall. Any of those applications we receive while schools are closed, we can take all of the allocations. The only time we wouldn't be able to take them is when there is a cap by one of their boards that they've decided does not want to take more students. However, we have had conversations with them and told them that our recommendation is to do the right thing for the state and the right thing for citizens in the state, which means opening up their caps and allowing more students in. Additionally, states may open schools rapidly if they find that their brick-and-mortar schools are closed. There is a significant opportunity for us in the institutional business. We would provide a program that they run themselves. We teach their teachers how to teach in an online environment, providing them the ability to enroll students in the curriculum of content and then allowing them to go teach in that environment. They've got to get ready about how do they connect disadvantaged businesses in rural areas and ensure everyone else has access to the Internet, but it's clear that if they're not able to go back to school, they will want to provide some sort of education. They're not going to let kids sit at home doing nothing, and they will want their teachers to be employed. Every state wants this for their economy.

In that scenario, I’m sure you have run models on the impact. What is the possible range of results? How much could that affect your finances if that scenario were to happen?

Yes. It's James. I think for right now, we're trying to clearly line up. It's a large opportunity for us. We think it's a structural tailwind for us. We're actually not ready to provide any specific guidance around what the fall might look like, but it's certainly a large opportunity and will accelerate our growth into next year.

There are no further questions at this time. I would now like to turn the floor back over to Mr. Davis for closing remarks.

Very engaging call. I really appreciate everybody asking questions and being engaged. It's probably our most engaging call. Forgive me for being longer-winded than normal; I was longer-winded today, but I thought you wanted to know how COVID was impacting us. The Q&A proved you wanted to know that. With that, I hope everybody stays safe and is following all the guidelines. Let's see if we can all get through this together. Thank you for your time today. Everybody, have a great day.

Ladies and gentlemen, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.