Ladies and gentlemen, thank you for standing by, and welcome to the Stride, Inc.'s Second Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, the Vice President of Investor Relations, Mr. Mike Lawson. Thank you. Please go ahead, sir.

Thank you, Jason, and good afternoon. Welcome to Stride's second 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 with 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 www.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. This call will be available for replay for 30 days. With me on today's call is Nate Davis, Executive Chairman of the Board; 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 our Executive Chairman, Mr. Nate Davis. Nate?

Thank you, Mike. Good morning, everyone. I should say afternoon, and thanks for joining our call today. There will be three of us speaking today; it may take a bit longer than normal, but we'll do our best to be direct and concise. Starting with performance, as you saw in today's press release, revenue was $376.1 million in the second quarter of fiscal '21, an increase of 46% year-over-year. Tied to our revenue growth, adjusted operating income for the quarter was $50.1 million, a 34.5% increase year-over-year. Adjusted EBITDA for the quarter of $70.7 million improved 31.6% over the same period last year. Note also that adjusted operating income margins on a year-to-date basis increased from 4.7% to 9.8%. This demonstrates the tremendous leverage in our business as it grows, and we believe there's even more improvement to be had over the next few years. In each case, we've met or exceeded the guidance we provided last quarter. In addition, based on these results and the ongoing trends we see in our business, we're raising our full year guidance for both revenue and adjusted operating income. We now expect revenues in the range of $1.5 billion to $1.525 billion, and full year adjusted operating income in the range of $145 million to $155 million. Tim will provide more color and additional details on our quarterly financial performance. However, I first want to say that I couldn't be more excited about the trends we're seeing across this company. Even with the uncertainty of the pandemic and its impact on public schools, I continue to believe that we have the opportunity to grow revenues into fiscal year '22. Now as I'm sure you've seen, today is the last earnings call I will be chairing as CEO of Stride. This is a day that the Board of Directors and I have been working toward for quite some time. A few years ago, when I came back into the CEO role, the Board and I had a new vision for this company. That vision was to be more aggressive about building a profitable $2 billion revenue business by the midpoint of this decade. To do that, I laid out to the public a strategy around three key sets of goals. These goals centered around the following areas: career learning growth; strengthening and preparing our management team for that growth; and maintaining a strong core business in general education. First, Career Learning. Our expansion in Career Learning has added more than $65 billion to our addressable market. Not only has this effort put us squarely in the midst of one of the fastest-growing segments in education, but it's also a bipartisan way to improve the U.S. economy. A recent study by Qualtrics shows that at least 80% of parents, both Republicans and Democrats, agree that career learning programs can help prepare the American workforce to contribute to the world economy and that the U.S. should invest even more in career learning. This bipartisan support clearly reduces our regulatory risk going forward. Today, our Career Learning business for kindergarten through 12th-grade students, as in middle school and high school, delivered over 90% enrollment growth for three consecutive years. Student enrollment now tops 30,000 students from about 2,000 just three years ago. Our initiative now supports 32 programs and schools within a reach of over 60% of high school students across the nation. And importantly, these programs have already delivered a comprehensive education that included over 7,500 work-based learning experiences, and more than 2,000 certifications for students. Studies have shown that career learning increases student engagement and reduces student dropout rates. At Stride, even though our program is fairly new, we're already seeing retention rates that are about 500 basis points higher than those in general education programs. With our country facing a skills gap, we're also witnessing how the adult learning market in career development, reskilling, and upskilling employees is an additional opportunity for us. After careful evaluation, we made three strategic acquisitions in calendar year 2020. They established our presence in the adult learning and corporate training markets. The first was Galvanize, and the two most recent were Tech Elevator and MedCerts. I won't review these again in detail because we reviewed them in our Investor Day in November. But in summary, Galvanize continues the career and skill development for full stack, high-end software engineers. Tech Elevator adds training for entry-level software engineers, while also expanding our footprint into smaller and regional markets. While MedCerts enters us into the health care education sector at a time when the world's attention is rightfully focused on the gaps in our healthcare industry. Today, the healthcare sector employs more than 11% of American workers and is projected to add nearly 2.4 million jobs according to the U.S. Bureau of Labor Statistics. As I've mentioned before, these acquisitions will also provide content for our expanding middle and high school programs. For instance, we have a current pilot for high school students in Littleton, Colorado learning program who are taking MedCerts courses for EKG technology and lobotomy. This is just the beginning. We also plan on using our acquisitions to create a host of new courses for secondary school students. In short, in just a few years, we've built a career learning business that will top $250 million in revenue this fiscal year, and we're targeting it to grow to upwards of $800 million in revenue by fiscal year '25. Again, this is essentially from nothing three years ago. The second point I want to make is about building a management team with the expertise to lead our Career Learning effort while also supporting our overall business. This effort included a careful succession plan that gives us the flexibility to promote within and to go outside of the company and to ensure that we seamlessly transition and grow over time in all of our management positions. As part of this goal, we welcome Dr. Shaun McAlmont, a 25-year veteran of career education. Shaun subsequently added dedicated executives to lead partnerships, design curriculum, design content, conduct business planning, and more. This talented team has been successful at implementing innovative models of education for schools and businesses across the nation. They have a depth of experience in building relationships with external commercial partners as well. With our recent acquisitions, we've also added breadth and subject matter expertise in key verticals such as healthcare and information technology. And outside of Career Learning, we added executives like Kevin Chavous, Esquire; and Dr. Tony Bennett to bolster our already deep and strong school operations, public policy, and academic teams. Vince Mathis, and more recently, Tim Medina, added new perspectives and experience in legal and finance teams. I could go on from marketing to product development to accounting, from senior leaders at first level of management to executives. We've strategically created an organization that's built to scale this business, achieve greater success, and achieve the aggressive goals we set out for the next five years. Now I want to move to my third point. While we were building the career learning business and building the management team, we also wanted to continue growing our core education business. Over the past three years, we've done just that. In the area of general education, account data enrollments have grown more than 48%. Even though this year's total was impacted by the pandemic, I believe we would have still seen strong double-digit growth over this multi-year period. But growth alone was not our only objective. Our focus has been on growing enrollments, but simultaneously improving the customer experience, increasing retention, and enhancing academic performance. And I believe we've seen gains in all three areas. Just to quote a few stats, our most recent survey of parents showed that 84% were satisfied with the overall education experience. That's up from 76% three years ago. Our annual withdrawal rate has dropped more than 350 basis points since fiscal year '17. On the academic front, the number of schools that have met the Every Student Succeeds Act requirement have doubled since 2017. And of the 33 schools that are in states where they've published graduation data for the prior year, 82% of our schools saw a graduation rate improvement on a year-over-year basis. Now we still have a lot of work to do, but these results paired with improved satisfaction, strong retention, and increased enrollment demonstrate our operational excellence. And fourth, even with the strong cash flow of our core business, we wanted to further strengthen the balance sheet to give this company and shareholders the flexibility to expand and grow. That's why we first executed a $100 million revolving credit facility with favorable terms and lower interest rates. Then we took advantage of the recent red-hot financing market to execute on a $420 million convertible note with a very low interest burden that is easily serviced by the organic cash that comes out of our business. And even though we subsequently used some of these funds to fund the capped call transaction, pay down a revolving credit facility, and acquire MedCerts and Tech Elevator, we believe we will end this fiscal year '21 with more than $400 million in cash on hand. Now that we have achieved all these goals, we wanted the market to understand that we're now more than just that charter school business that has all the regulatory risk. We're no longer that kindergarten-to-12th-grade charter school operator chasing an $11 billion market. We've strategically grown and positioned ourselves as an industry-leading education technology and services provider, serving students of all ages in an addressable market valued in excess of $100 billion instead of $11 billion. To make this message clear, we first went on communication campaigns that included partners, influencers, the federal government, state government, and long-term investors. We then took a next step to rebrand our company from K12 to Stride. Today, at Stride, we are reimagining lifelong learning as a rich, deeply personal experience with great instructors at the adult and secondary school level that prepares learners for the jobs of tomorrow. I'm so proud of everything we've accomplished. I simply love this company. I love its people. We've had great partners and school boards, meeting our students, and I'm so proud to say that I've had a role in their success academically, professionally, and personally. The goals that the Board and I set out three years ago are well underway. So I see this as the perfect time to step back to my old role as Executive Chairman and turn over the reins of CEO. I had many partners at all levels who helped make Stride the great company it is today. But the most accomplished and long-standing of those partners is James Rhyu. During my first tenure, about seven years ago, I asked James to help create a world-class finance organization with no accounting issues or deficiencies, a well-run machine. I asked him to establish the financial and operational rigor across our company to ensure we can meet and beat financial guidance quarter after quarter. I'm proud to say we've done that. About two years ago, I asked James to also take on the lead for our product development and information technology functions, all while he was still retaining his CFO role. Then after Tim Medina joined as CFO last year, I asked James to take on corporate development and acquisitions, marketing, strategic planning, customer experience, and the quality initiatives that I'd started. In every case, with every function he managed, James has taken the team to the next level and has been a major contributor to the success of the company and my vision over the years. So today, I'm proud to announce that my partner, James Rhyu, has been named Chief Executive Officer of Stride, Inc. Congratulations, James. I couldn't be more proud of him. He's not only uniquely qualified to carry on what I created and what this company has been doing, but to improve on it, to accelerate our success, and to drive even greater innovation. James is a person who strongly believes in innovation. I think the market is going to see a company moving aggressively in that front. And from an investor standpoint, James will provide the consistency and reliability of someone who's been intimately involved in creating and executing what we have built at Stride and expanding on our success. The Board and I do not take this responsibility for succession planning lightly, nor did we make this decision without careful thought and planning. We've worked on succession planning for three years. It was a part of our goal when I came back as CEO. Organizational changes, hiring new executives, career development, Board evaluations, and market scans have all led us to this point. This has been done with a full view of all options. The Board and I are unanimous in our view and support that James is the right person for this job. We have complete faith in his ability to deliver shareholder value while maintaining a students-first, high activity culture of our company. I will remain Executive Chairman, and I will assist him when he asks for my help. I will be focused on public policy and the regulatory arena. I'll focus on corporate strategy and M&A, transferring relationships with our school boards from me to James. And of course, I'll be leading the Board of Directors in fulfilling our fiduciary responsibilities. I've enjoyed being part of a media company whose mission is to help learners of all ages achieve great success. There's no greater responsibility than helping young people grow and learn. There's no greater joy than supporting learners as they achieve their career goals and their life goals. I want to end by thanking all of the Stride employees for tolerating me and for putting me in a position to help learners, families, schools, and customers that we support. And thanks to all of you in the investor community for your support throughout the years as well. Now I want to turn it over to Stride's new CEO, James Rhyu. James?

Thank you, Nate. It's an honor to earn the trust of our Board, on behalf of the shareholders, to step into the very large shoes Nate has left for me to fill. As Nate mentioned, I've worked alongside him here at Stride for the past seven years plus as he set us upon our current strategic direction. I've been a vocal supporter of this strategy, and therefore, I do not intend to deviate course in any material way for the foreseeable future. Simply put, I see our strategy as follows: we are an outcomes-based company focused on career learning. What that means to me is we're trying to enable learners of all ages to gain the skills that will ultimately lead to a better job and therefore, a better financial and economic future for themselves and their families. Now that can take many forms, from high school training to prepare a student for a job in the IT or healthcare field right out of school to a retired worker looking for a second career in programming and everything in between. We're putting our students on a trajectory. For some, that will require ongoing training, education, certifications, and experiences to continue on that trajectory. And for others, they will leverage the skills we provide them into a well-paying job immediately with the opportunity for continued upward mobility. Fundamentally, to me, that is who Stride is. Now how will we enable that? We will continue to develop our leading education services platform with the scale and expertise to support our growth objectives. Over the past 20 years, our platforms have enabled over 2 million learners, and I believe we can enable millions more in the coming years. In just this past year, our portfolio has helped over 1 million users. So 20 years to get to 2 million, and over 1 million just in the past year alone. I think that's tremendous progress, and I think we're just beginning. So why am I so optimistic? Well, driven by Nate's leadership, we spent the past few years putting the building blocks in place to drive this acceleration. We've launched Career Learning at high schools. We've invested in Adult Career Learning, the technology and healthcare fields with the acquisitions of Galvanize, Tech Elevator, and MedCerts. These acquisitions are not only giving us new capabilities, but they are platforms upon which we will build scale businesses serving the highest demand jobs in the country with the ability to continue to add additional competencies and skills. For example, through our Galvanize and Tech Elevator platforms that already serve the computer engineering and data science fields, we will build out verticals for other high-demand jobs in cybersecurity, mobile application development, and gaming, just to name a few. We've invested in a platform Tallo that connects these new college graduates to employers. Since our investment in Tallo 18 months ago, they have grown their user base by about 400% to over 1.3 million users. We're investing in our own platform and capabilities to enable real-world experiences like project-based learning, job shadowing, and connecting students to industry professionals. We've made some core investments in our data infrastructure, which I believe will enable us to serve our users even better in the future with data insights that will help guide, remediate, nurture, and inspire their trajectory. We will continue to innovate, as Nate said. More to come on innovation, but by way of example, we are enabling virtual job matches across the country to dozens of employers who are looking to fill good-paying jobs with applicants who don't necessarily need a college degree. We can still highlight their skills and qualifications in a proprietary app. Last year, 50,000 direct engagements were made between this community of talent and companies looking to fill jobs in their companies. I will look to continue investing in new technologies, products, and services. Also, let me be clear, while we will aggressively look for investment opportunities to achieve our goals, we will be disciplined in the deployment of capital. While we continue to pursue our strategic imperative in Career Learning, we will also be driving long-term growth in our core general education business. Today, more than ever, our country needs educational alternatives to meet the diverse needs of families across the country. While a portion of current students may choose to return to brick-and-mortar schools after the pandemic has lifted, we believe we're experiencing a permanent shift in how families, educators, and legislators view remote learning. In fact, the recent survey by the RAND Corporation supports this view. One in five districts either already have or will likely adopt a virtual school or fully online option. That means over 10 million K-12 students need an online learning ecosystem like the one Stride provides. Parents agree that online education is the new normal. The recent poll conducted by Morning Consult showed 71% of parents felt that online education should be an ongoing option for students, and 85% agree that school districts should have an online backup plan even after students return to school. Now Nate, as he mentioned, has built a talented team that I'm very fortunate to inherit. I will look forward to build on the strength of this team. One key component of that strength is its diversity. To this end, before the end of the fiscal year, we plan to publish our first ever corporate sustainability report. ESG is a top priority. This year, we launched a program, We Stand Together. This initiative intends to foster stronger communities, bridge the differences at the bias and engage others who have different experiences than our own. We've committed $10 million in scholarships and investment into this program, and I believe not only is this the right thing to do that our shareholders and stakeholders will benefit. Also, I briefly want to mention that on February 3, we are hosting the First National Forum on Equity and Education. This is a Stride-led forum focused on key conversations on diversity and education. I welcome each of you to join us for this event. Taken in total, our strategy and the progress we've made to date have a much larger addressable market than ever in the history of the company. Just a few short years, we've increased our market opportunity by tenfold to over $100 billion. I believe this opportunity will support sustained growth across our business units with improved margin and free cash flow. I would encourage you, if you have not already, to take a look at our recent investor presentation for additional color. I'm committed to those goals for our shareholders. In closing, I want to thank you again, Nate, for your support and your leadership. Nate already said, this is not necessarily goodbye. He will continue to serve our shareholders as Executive Chair. He will continue to be my friend and mentor, someone I can trust and rely on to give me direct and honest feedback and advice. I can't really express how fortunate I've been to be an accountant made as a confidant, to be able to learn from him for my professional and personal development over the past 15 years. Now I'm more fortunate in knowing that he doesn't go away today. Nate wants me to succeed in my new role; we want the company to succeed for our shareholders. Our shared goal is to continue to provide the best possible outcomes for our customers, the best possible services for our partners, and the best possible returns for our shareholders. Thank you, and I look forward to meeting with many of you in my new capacity in the near future. Now I'll hand the call over to Tim. Tim?

Thank you, James, and good afternoon, everyone. We are pleased to report very strong second quarter results and raise our guidance for the third quarter and fiscal year ending in June. First, I want to draw your attention to the changes we made this past calendar year to make our business and strategy easier for investors to understand and follow. We included a supplemental slide deck to accompany selective financial topics covered in our quarterly earnings call scripts. We implemented new lines of revenue aligned with the markets we are addressing, including historical reporting data reconciling the old reporting with the new format. We believe this reporting helps our stakeholders better understand performance, better assess our future cash flows, and make more informed judgments regarding the company. We created a senior management ESG task force and initiated ESG disclosures in our 10-Qs. In November at Investor Day, we announced the new Stride brand, heard several hours of presentations from the executive management team, launched a new website, and communicated long-term forecast targets. Making our business easier to understand and analyze will continue to be a priority in 2021. This quarter, for example, we are upgrading the supplemental presentation deck introduced last year with an earnings presentation that you can now find on our website to complement our earnings release and the live conference call scripts. Now let me turn to our financial results. Starting with the income statement. Revenue for the quarter was $376 million, an increase of 46% from the prior year. Revenue in the quarter for our General Education business totaled $314 million, a 35% improvement over the same period last year. This increase was driven primarily by a 51% increase in full-time K-12 student enrollment, partially offset by a 10% reduction in revenue per enrollment. Revenue for our Career Learning business increased nearly 150% compared with the prior year to $62 million. This increase was driven primarily by a 131% increase in full time, middle school, and high school enrollments. Career Learning revenue also includes Adult Learning revenue, with more than $9 million of revenue from Galvanize acquired on January 27, 2020. Additionally, Adult Learning includes $1.6 million of revenue from Tech Elevator and MedCerts combined after the effects of purchase accounting. Both these businesses were acquired on November 30, 2020. Excluding the effects of purchase accounting, Tech Elevator and MedCerts generated $1 million and $2.5 million of revenue, respectively, in the month of December. Both our EBITDA are positive and generate free cash flow. This is the fifth consecutive year that Stride grew its K-12 student enrollments. This consistent performance reflects the long-term ongoing trend of greater acceptance of online learning and improving student retention rates. Certainly, COVID-19 has been a strong tailwind for top-line growth and enrollments in fiscal 2021. However, without the effect of the pandemic, we believe general education, K-12 enrollment still would have grown in the mid-single-digit range or higher, consistent with pre-pandemic levels of growth. Furthermore, before the effect of the pandemic, we were expecting enrollment in our middle and high school career learning programs to double or more this fiscal year, consistent with the growth rate for the past several years. On the topic of revenue per enrollment, the current results are largely due to state budgetary pressures in the wake of COVID-19, particularly in California. In addition, the impact of school mix was a significant factor as a substantial portion of our growth is occurring in lower funded states. Over the longer term, we believe revenue per enrollment will continue to rise by 1% to 2%, in line with historical trends. Our enrollment metrics reflect very strong retention results. This includes re-registration of last year's enrollments as well as retention during the current school year. Retention rates have improved in both K-12, post-grade general education, and in the middle and high school career learning programs. Pre-pandemic and currently during the pandemic, the Career Learning program continues to have a retention rate that is significantly higher than general education. Gross margin for the quarter was 34%, 50 basis points lower than the prior year. Excluding the Galvanize co-working business, which has been the area of our business most negatively impacted by the pandemic, Stride's overall gross margin would be 60 basis points higher than last year or about 35.6%. Another factor impacting gross margin during the quarter was a higher level of student material and computer costs in Q2 than normal due to the higher levels of enrollment and the timing of those shipments to students. Now, these timing issues are more smoothed out in the results for the six months ending in December. In fact, gross profit margin for the six-month period ending December 2020 of 34.7% is slightly higher than last year. As I communicated in last quarter's conference call, we expect gross margins for the full year will be higher on a year-over-year basis than last year. Over the longer term, we see many opportunities for further gross margin expansion, including from growing our higher gross margin adult learning revenue, from capturing efficiencies from automation we are driving into our operations, and from efficiencies from a digital-first strategy to replace a portion of the student physical materials footprint. Similar to my comments on gross margin, as we scale the career business, we expect to continue to see increased operating leverage and cost efficiencies in our SG&A cost structure. This operating leverage in our SG&A is demonstrated in our performance for the six-month period ending December 2020 with SG&A as a percent of revenue of 28% compared to 32% for the same six-month period one year ago, a 400 basis point improvement. In the three-month period ending December, however, our SG&A of $91 million was 100 basis points higher as a percent of total revenue than the second quarter, one year ago. This was due primarily to the timing of the adult learning acquisitions and higher compensation expenses as a percent of revenue this quarter in FY '21 versus FY '20. Now for the full year of FY '21, we do expect SG&A expense to decline as a percent of revenue compared to last year. Adjusted EBITDA for the quarter was $71 million compared with $54 million for the prior year, driven by the higher gross profit. Adjusted operating income for the quarter was $50 million compared with $37 million in the second quarter of fiscal 2020. Adjusted operating income excludes stock-based compensation expense and amortization of acquisition intangibles. Stock-based compensation expense for the quarter totaled $9.1 million compared with $6.2 million for the same period last year. We have increased the midpoint of the stock-based compensation portion of our outlook by $7 million from $37 million to $44 million. This increase primarily is related to higher performance-based stock compensation that will now more likely be achieved given our strong performance. Free cash flow in the second quarter was $24 million compared to $56 million in the prior year. This year, the timing of outflows in the second quarter associated with the higher enrollments caused the positive free cash flow to be lower than in the prior year. Due to the seasonality of higher cash outflows in the first and second quarter for school launch activities, with the timing of cash receipts later in the year, we expect to generate substantially more free cash flow in the second half of this fiscal year than during the same period last year. We expect our full year free cash flow to be in line with our AOI guidance. Cash and cash equivalents on December 31, 2020, totaled $258 million, compared with $212 million reported at June 30, 2020. The increase in the cash balance is largely the result of the $348 million in proceeds the company received from the issuance of convertible senior notes during the quarter, partially offset by the use of $100 million to pay down our revolving credit facility and $73 million used in cash to acquire Tech Elevator and MedCerts. CapEx for the six months ended December 31, 2020, was $24 million, a decrease of $3 million from the same period one year ago. We are investing more in the second half of this year, consistent with our comments last quarter when we raised our full-year CapEx guidance to $50 million to $60 million, which continues to be our guidance. Our primary uses of investment capital are for capitalized software and curriculum development. We also are focused on integration initiatives to achieve synergies from our adult learning acquisitions. Turning to our updated and increased guidance. For the third quarter of fiscal 2021, the company is forecasting revenue in the range of $375 million to $385 million. Capital expenditures are expected to range between $12 million and $15 million. Adjusted operating income is anticipated to range between $47 million and $52 million. For the full year, the company is forecasting revenue in the range of $1.5 billion to $1.525 billion. Adjusted operating income is anticipated to range between $145 million and $155 million. Capital expenditures are expected to range between $50 million and $60 million as we guided previously. The effective tax rate guidance for the full year also is unchanged. It is expected to range between 26% and 29% after discrete items. And that wraps up my prepared comments for the quarter. Before handing the call back to James and Nate, I want to say thanks to each of them for the trust and confidence they gave me last April with this opportunity. Nate, I've enjoyed working with you tremendously. And now, James, I'm equally excited about the next stage of Stride's growth in the future with you at the helm. Now I'll hand the call back to you, Nate.

Okay, operator, I don't have any closing remarks. We've talked long enough, probably. And we go straight to Q&A.

[Operator Instructions] Your first question comes from the line of Jeff Silber from BMO Capital Markets.

Nate, I wanted to focus first on your retirement. Now while you and your Board may have been working on this for some time, the timing is a bit surprising, especially after your recent Investor Day, where you talked about the long-term goals. And basically some of the emails I've been getting from some of your shareholders, I think they're surprised as well. So if you can talk a little bit about why now and why you're not at least giving us some sort of transition period for this move?

We've thought about that. It actually was a transition period for the last six months. We have been -- many of the things I've been working on, I wanted to complete. James knew this was coming, and I've been giving him authority and responsibility. We hired Tim Medina knowing that James was a candidate, knowing that we needed to put him in a position where he could show what he could do, but also put ourselves in a position where we had a CFO. If I was leaving right now, and James was CFO, and we were promoting James right now, we wouldn't have a CFO behind us. So we did that to make sure that we had backup plans. On a personal level, the reason right now is, I'm going to be honest and candid with you, I reached a birthday and that birthday puts me at an age that I just said I can't continue to work these kinds of hours much longer. I'm still young enough to do it, but I'm old enough to know that this is not the right thing for me to be doing at this stage of my life. For personal reasons in my family, I want to spend more time with them. So we could have let this go on for another six months. But I thought it was time, and James was ready. The Board felt it was time and James was ready. I felt we've put all the steps in place. The management team is strong. The branding is redone, the acquisitions putting us on the stage of getting ready for Career Learning is done. I know some shareholders will think that we did this by surprise. But in my script, I was very careful to make sure they understood we've been thinking about this for a while. We've been planning this for a while. We thought this through. The only thing we didn't do was I didn't tell everybody that I was leaving three months ago. But three months ago, I still had work to do. And so I wanted to make sure that work was getting done.

All right. That's understandable. I really appreciate the candor. If I can move on just to the operating results, which were really great. Can you give us a little bit more color on what drove the beat versus your guidance?

Sure. This is Tim. Primarily, it's the revenue expectation from higher retention of our current enrollments.

I was going to ask, is that also the reason for the higher-than-expected outlook for the year?

Yes, exactly, both for the third quarter and for the beat and for the whole year, yes.

Okay. That's great. I know it's a bit too early to talk about the fall, but I've been getting a lot of questions. What are you seeing -- again, I know it's early, what are your expectations for your general education enrollment and just as importantly, revenue per student?

Yes, that's a very tough question. You know that we can't give you guidance because we don't know. I don't think there's anybody in this country that knows exactly how many vaccines are going to get done, what the effect of the vaccine is, when the COVID rate will drop, when schools will open, how many people decide to go back to schools, and I can go on with all the unknowns that we're all dealing with. We still believe that we can grow and the reasons we believe we can grow is that the Career Learning business is growing not because of COVID. It was pre-COVID we were experiencing this growth and opening up new schools, adding new content, adding adult learning, that means that business is growing. So that's the number one reason we think we can grow next year. In the general education space, remember that we have a chance to meet all of these parents that we didn't meet before. I mean, we were trying to convince them to look at the general education and join our program. Now they're in the program. We can talk to them. We can show them what the program is like. We can have teachers talk to them. So we have a chance to retain more of them where we'd be trying to sell them brand new. I think that's a winning opportunity for us to keep some of those. And we're going to keep more of those than the market thinks. So between the ability to retain some because we're talking to them now, the ability to grow outside of general education, we still think there's overall growth in this company going into FY '22. But I can't promise that. I can't give you guidance that says that's going to happen, because there's so many unknowns. So Jeff, I hope that's the best answer I can give at this point in time in January of 2021 as to what's going to happen in October of 2021. It's just too far away for us to know.

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

First, congrats, Nate, on your retirement, although it sounds like you'll still be somewhat active here and congrats to James, who is taking over the CEO role. I guess, first question, I just wanted to ask Nate, I'm hearing a lot about K-12 teacher turnover trending higher broadly in the U.S. I'm guessing some of that is related to burnout teaching in a remote setting with minimal resources. Curious what you've seen in terms of teacher satisfaction on your platform? And have you seen any notable changes in terms of hiring and retention trends within your teacher base?

Yes. We certainly have seen teachers more stressed than they have been in other times because we took on a lot of students and we had a lot of hiring that we did, but we didn't get all the hiring done and we wanted to because there's a teacher shortage in this country. So we are seeing teachers more stressed. However, surprisingly, we're not seeing increased withdrawal of the teachers. We're not seeing turnover of teachers. And the reason I think we're not, and at least what we're hearing from the teachers, is they are more prepared in our environment than they would have been if they were in a brick-and-mortar environment. This whole going to online -- remember, when you come into our program doing that, we've been doing this for years. So the tools were available to the teachers. Yes, they have more students, but they have more tools available to them as well. Whether it be automated grade books or the automated rating or the things that track the student's performance, knowing what they're doing when they're an online curriculum, having an IT department that supports all their log-ons, having a single log on. All of those little things matter that the teacher is not doing that work. So we're seeing teacher stress by volume but not stressed by the tools. And so we're seeing better retention of teachers than we had in previous years.

Very helpful. And then follow-up questions there. Just wanted to ask about the update on the potential for more states to open up to fully online schools. Seems like I think you guys gave some metrics on demand as you're seeing from school districts. Just curious what you're seeing from a conversation standpoint with some of these states that have been, I guess, pushed back against allowing you to operate in their states previously?

Yes. You're absolutely right. We are seeing a greater opportunity. And James, you may expand on this a little bit. Greater opportunity to see states open up. One of the reasons we're seeing that is that there are new models. States are looking at not the traditional, let me open a charter school or don't open up a charter school. They're now saying, how can I add an online program to an existing school district. Both of these schools are saying, how can I add the online capability to the other services that they offer. So we are seeing a number of states, and there's about four or five of them that we're in conversations with now who were in conversations with us just literally a year ago. They won't even consider it. Now they're considering different kinds of programs. Again, it's not the traditional open up a charter school law, it's more district partnerships that we're seeing beginning to open up.

Yes. I would only add, Nate, I think the one thing for Stride that this pandemic has really, I think, helped us structurally long-term is, I think, the recognition that online remote learning is an important component of our educational system and our educational network. I think, as Nate said, there's going to be different forms of how that manifests itself. But there is, I think, a structural shift in this country around how we view education. That benefits all of our businesses. It benefits new opportunities for us; we're going to have an opportunity to innovate around that. So I just -- I see not just in our general education business, not just in our Career Learning, and not just in our K-12 side, in our adult side as well, we see tremendous adoption of online learning in our adult side businesses. It's just -- there's a shift in the way education is happening in this country, and I think we're well-positioned to take advantage of that.

Your next question comes from the line of Alex Paris from Barrington Research.

First, I want to offer my congratulations as well to both Nate and James. Nate, on your second shift to the role of Executive Chairman, and James, I can't think of another person better suited to taking on the CEO role. Furthermore, I'm happy to hear that no material changes in course are planned going forward. I'm too getting lots of questions from investors about fiscal '22. Your Investor Day did a great job in telling why revenues are going to continue to grow through 2025. But obviously, the short-termism of the stock market, we want to see what fiscal '22 looks like. And I think I heard your answer there. It's tough to make a call on general education. There's things you don't know at this point. But to a certain extent, Career Learning and potentially Learning Solutions is going to help to offset that in fiscal '22. Are there anything -- did I get that right? Or are there other things to be considered for fiscal '22?

I think there is one other thing to be considered in fiscal '22. In addition to the retention I talked about as well, and that is revenue per student. Revenue per student this year dropped as states faced the very real budget crisis. They were all short of money. The federal government’s CARES Act tried its best to bolster school districts, but let's face it, there was less taxes coming in, fewer people working, and states were -- even if they didn't run out of money, they were worried they were going to run out of money, and therefore, they didn't put rate increases in place. I don't think that continues into FY '22. As we -- as everybody wants schools to open back up, there is a strong push in this country to fund schools better, to give schools more capability to have more distance learning capabilities so they can open up to be better prepared in case they have sicknesses to be able to open up. All of those things say it will be a positive environment for us because they put more money into schools. We are supporters of public schools. Therefore, we get better revenue per student. Number two, if they have models that have more online capabilities for a public school district, we're a provider of that. So again, we benefit from that. So I think that's the other factor to consider that we're in the best position to leverage both of those, increasing revenue per student and increase in online programs at schools.

Let me also just add that I do agree with Nate. There's uncertainty. I think we all know it's there for what's going to happen in the balance of this school year over the summer going into next school year. Irrespective of that, I think we do know that our various career-oriented businesses are running on all six cylinders. Enrollments in our middle school and high school programs continue to grow. We should see no abatement in growth next year. The acquisitions that we've done around adult learning, they're all performing well. We continue to see great trajectory for all of them. They have outstanding management teams. They've been able to very quickly accelerate their growth through this pandemic. So we believe our shareholders long-term are going to have tremendous benefits from the career-related businesses that we've entered into in the past few years. The trajectory of all of those will continue into next year, I think, irrespective of what happens to the pandemic.

And I want you all to know that what you just heard was James, the CEO, because two years ago, James as CFO would have been more conservative. But now he's been running those businesses; he knows how to drive the businesses now. So I'm happy to see that.

That's great, and that's very helpful. And then I guess, one other big picture question. This is the other question that I get frequently besides growth in '22, is regulatory. Obviously, it's a different Stride, Inc. than it was three years ago, five years ago, with broader offerings, not just charter schools any longer. I realize that this is more of a state regulatory situation than federal. But I'm wondering about your thoughts about the Biden Administration, about the nominee to the Secretary of Education, tone at the top counts? And then very specifically, in the 30-plus states that you operate in, were there any significant changes in governorships or state legislatures?

Let me answer both of those. So first, we'll start with the second question. At the state level, of course, there was turnover, but there was no material change. There's the mix between Democratic and Republican administration, especially in the Houses and the Senate of the states. There were a couple of governors that changed over, but we had a couple of governors who were Republicans changeover. So there was a balance. And the balance has not really changed. So we don't see any material change at the state level. As a matter of fact, we think that many of the Republican organizations want to see something that they can win. They want to have a win. One of the wins for them is to be able to say that school choice is still there. So I think that that's a positive for us because there's going to be more push to make sure that school choice is there. When you look at the minority communities, surprisingly, there's this push and pull between what's happening with unions and what's happening with the minority communities that want to have more choice. One of the things that came out of all of the demonstrations last year is we all know that education equality is something that we want to see more of. That means more choice. So more organizations at the state level are pushing for that kind of choice. In addition, we looked at the Secretary of Education from Connecticut and the Biden Administration. We looked at the policies. And we don't see any hardened positions for school choice or against school choice. He's relatively neutral. We look at the assistant sector of education as well from San Diego, who is more tied to unions but again does not have a vent against charter schools or against school choice. So we, again, don't see that at the federal level. We also think that the policy office of the federal government is also going to make an influence some of that. And we don't know, but we certainly have not seen any signals. We've met with the transition teams, and there's -- we don't make their decisions. They don't tell us all the decisions. But clearly, we're not at the top of their list. The last point I would raise is to remember that we are not-for-profit colleges. It's hard because there are no other public K-12 general education companies out there. So we get lumped in with the for-profit colleges, but we're not-for-profit colleges. We don't provide the same kind of funding; we're not in the same kind of loan situations that they were in. So even if they were to come after some of the for-profits, we are not -- we don't own schools. But we own private schools, but we don't own any of the public schools. We provide a service to the public school districts. As such, for them to go after our business, they'd have to go after public school districts. And as such, we don't see the regulatory risk that maybe people are worried about. That's not to say that there won't be issues we face; there are always issues we face. But we have a strong policy regulatory team that is involved with the federal government listening to them, and we react when we have to. We've even changed business plans before when we have to, to continue to grow, and we will continue to do that. We'll be nimble enough to handle things that come our way, although we don't think there'll be very many changes -- negative changes that come our way.

I also think that you have to keep in mind that only a small single-digit proportion of our revenues come from federal dollars. So just in terms of concentration of risk, we have somewhat limited concentration of risk. I think more importantly, though, for me is that what we're -- what our strategy really is all about and how we're going to create value for our shareholders is really about enabling jobs and careers throughout the country. And I think that's a pretty bipartisan issue. So from my perspective, at least, and I hope that this administration supports this, that putting people to work is important. Filling the millions of jobs that are unfilled right now in the highest demand areas like technology and healthcare is important. I think our mission is to help this country fill those jobs. It's just -- I just can't see any administration that would be politically against that.

Totally agree. Thank you both for your comments. I appreciate it. And Nate, good luck to you in retirement. I'm sure we'll still see you around as Executive Chairman and James, look forward to continuing to work closely with you.

Alex, can I go back to Jeff's question for a minute because you just raised what I think is part of the answer to Jeff and to shareholders who might be asking Jeff the question, why now and what does this mean? Part of the why now is that I'm not leaving. I'm moving -- changing my role from being a full-time CEO to being Executive Chairman, but I'm still here, as I mentioned in my comments, for James to help James in any way he needs it, wants it, when he asks for it. Having been my partner, the continuity, I think, is important. It was important to the Board. It's important to me, and I think James is fully aligned with the Board. So I'm still here. I'm still involved. I was still help him when he needs it; he will make all the decisions that CEO makes. But when he needs my help, I'm still here.

I would also add that I think for a CEO like Nate, who's so involved in the business and I think has led this company for so long, it's never going to be a good time. I do think that Nate and the Board have really carefully considered this, but Nate has spent a lot of time helping prepare me for this moment. He's very committed to our shareholders and to our Board for the long-term. So I really don't see this as maybe as big a transition as maybe some people are making out to be because the strategy is not going to change. As Nate said earlier, we've put an executive team in place in both functional areas and business unit leading different business units that is as strong as it's ever been. If there's any time for a leadership transition, actually, this is probably the time; we're at our strength right now. I think it's good to have a transition when you're at your strength. So I actually think it's a good time. I'm happy for Nate's next phase of life, but I'm also confident that he will be standing next to me for a long time.

Your final question today comes from the line of Greg Pendy from Sidoti.

It just seems to me, you've now done three acquisitions, I guess, starting with Galvanize over about a 16-month period, and it seems to be one of the pushbacks is, you as a company right now are trading under one-time sales. It looks like your acquisition targets in the private markets are roughly three times sales. So just kind of wondering how we should be thinking about that? Is that because these are career-oriented adult learners and they're worth, say, more than what you are trading at right now? When you mentioned earlier on the call, being disciplined about targets going forward, is that the wrong metric to focus on? How should we be thinking about that?

Greg, I'm smiling because the number one answer to your question is we're undervalued. That's why the things we buy are higher because they're valued more fairly and we're not valued properly. I think it's our job to make sure that we continue to convey to shareholders the positive news in this company, the growth factors, the margin factors, the cash flow we generate, the strength of the balance sheet. But if you look at any of those metrics and compare them to anybody else who had these kinds of financial metrics, they will be valued much higher. Somehow, we've got to continue to explain to shareholders that the way you're looking at it is, I think, undervaluing this company. In terms of the acquisitions that we purchased, part of it is that you're right about the industries that they're in. We always do comparable analysis. We do discounted cash flow. We do comps against previous sales. We look at forward-looking growth; we look at all the factors when we value someone. All of those values say that we paid a fair price. So I think it is really a matter of, in the private market, those institutions are valued a little differently from the way we're valued in the public market. And we talked about some of the issues here. There is a worry about are we going to grow next year? There is, well, what's going to happen with the regulatory environment? None of those things really strongly affect our current financials, but they affect the worry of the shareholder about the stock price, and I think they're holding us back a little bit. We will continue to demonstrate strong performance. I think the market will eventually say, hey, that's a company I want to invest in. It's our job as executives to deliver that kind of performance. But there's no doubt we believe we're undervalued.

I also think that if you look at what we laid out in our investor presentation, we've got, I think, a path with our acquisitions, by the way, helping us to the metrics that Tim laid out in November, $2 billion of revenue plus improved gross margins. It implies, I think, a doubling of our free cash flow from where we'll be this year. Our shareholders will benefit over time. I think we are playing a little bit of catch-up here on our share price. We -- when we deliver those consistent returns over the quarters and years to come, I think our shareholders are going to benefit.

All right. And then I guess just one final one though to -- not to jump on that. But your stock got all the way down to 20; like you said, you're generating free cash flow. How do you view -- and I know in the past, you've been vocal that free cash flow would be targeting acquisitions, but how would you view maybe a buyback potential at any point in time authorizing some share repurchase?

I think that if I look at capital allocation philosophically and how we would look at things, our first interest is always going to be investing in the business that we're in. So whether we're investing in greater amounts of content, we're investing in systems that make us more efficient and reduce our period costs. We'll be investing in the core business opportunities. We think there are more states we can go into to expand the business we're in, especially the Career Learning business. I think investing in the core business is number one. Number two would be, we still think there might be some acquisitions to be done. We don't think there are any. At least I don't think there are any that we will do in the next six months, 12 months. We need to integrate what we've got. We need to prove that it works. But down the line, we still think there are going to be opportunities to grow inorganically as well. I would say between share buybacks and dividends, I'm going to say this that later will get me in trouble with some people, but I'm a candid guy, so I'm going to be candid. I would always favor dividends over share buybacks. Share buybacks tend to be very short-term benefits. It's a financial game you play. Dividends give shareholder return on a long-term basis. You issue a dividend; we have new kinds of investors that can buy into the stock. We're showing them an ongoing return on investment, so I would always say that dividends over buybacks. Share buyback feels real good for a day or two or a month, and then it does nothing for you long-term. So we would probably find our Board not overly interested in share buyback, but much more interested in dividends over the long-term. So that's how we view capital allocation. I don't know if there's much more I could say.

There are no further questions. I'll turn the call back to management for closing remarks.

Okay. We have talked long enough. We're almost still to close as we talked so long. So I don't think there's anything else to say. I do appreciate everybody joining the call today; I especially appreciate the shareholders who hung in there with us, who have some faith in us, and we are working hard to deliver for you. So with that, I wanted one more time to congratulate James Rhyu. I think James is going to do an excellent job for this shareholder base, and I will be right by his side helping him all the way. So with that, I thank everybody for your time. Take care.

That concludes today's conference call. Thank you, everyone, for joining today. You may now disconnect.