Stride, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Stride Incorporated's second quarter fiscal 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then zero. 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 of the company's periodic filings with the SEC. Overlooking 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., 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 Roux, 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 be concise. Starting with performance, as you saw in today's press release, revenue was $308. $76.1 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 and 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 the board of directors and I have been working toward for quite some time. Three 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, actually 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 it 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. It establishes our presence in the adult learning and corporate training markets. It further expands our addressable market as well. The first was Galvanize and the two most recent were TechElevator and MedSearch. 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 skills development for full stack higher end software engineers. TechElevator adds training for entry-level software engineers, while also expanding our footprint into smaller and regional markets. Our MedCerts enters us into the healthcare 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 expanding our middle and high school programs. For instance, we have a current pilot for high school students enrolled in Colorado Learning Program who are taking med cert courses for EKG technology and phlebotomy. 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 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 has included a careful succession plan that gives us flexibility to promote within, to go outside to 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. Sean McCalmont, a 25-year veteran of career education. Sean subsequently added dedicated executives with lead partnerships, they design curriculum, They design content, they conduct business planning, and more. These talented individuals, 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 technologies. And outside of career learning, we added executives like Kevin Chavis, 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 strategically created an organization that's built to scale this business, achieve greater and 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, count-date 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, 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 requirements have doubled since 2017. And of the 33 schools that are in-state, where they've published graduation data for the prior year, 82% of our schools saw graduation rate improvements on a year-over-year basis. Now, we still have a lot of work to do, but these results, paired with improved satisfaction, stronger 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 low interest rates. Then we took advantage of the recent red-hot financing market to execute on a $420 million convertible note with 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 a cap call transaction, pay down a revolving credit facility, and acquire MedSearch and TechElevator, we believe we will end this fiscal year, 21, with more than $400 million in cash on hand. Now, having achieved all these goals, we wanted the market to understand that we're now more than that charter school business that has all the regulatory risks. We're no longer that kindergarten to 12th grade charter school operator chasing the $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 addressable markets valued in excess of $100 billion instead of $11 billion. To make this message clear, we first went on a communication campaign that included partners, influencers and federal government and state government and long-term investors. We then took the next step to rebrand our company from K-12 to Stride. Today, at Stride, we're 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, 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 under their way. So I see this as the perfect time to step back to my old role as executive chairman and turn over the reins of the CEO role. I've had many partners at all levels who helped make strides a great company it is today. But the most accomplished and longstanding of those partners is James Ruhl. During my first tenure, about seven years ago, I asked James, I called him and said, James, I need some help. I want you to create a world-class finance organization with no accounting issues, no deficiencies, a well-run machine. I asked him to establish the financial and operational rigor across our company to ensure we could meet and beat financial guidance quarter after quarter after quarter, which I'm proud to say we've done. 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 our 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 it's been a major contributor to success of the company and my vision over the years. So today I'm proud to announce that my partner, James Rue, has been named Chief Executive Officer of Stride Incorporated. 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 so 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've 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 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, 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. and 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 the student's first high integrity 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. Of course, I'll be leading the board of directors and fulfilling our fiduciary responsibilities. I've enjoyed being part of and leading a 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, 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 Rue. James? Thank you, Nate. It's an honor to run 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. And what that means to me 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 whose stride it is. Now, how will we enable that? We will continue to develop our leading education services platform. 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 in just 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've spent the past few years putting the building blocks in place to drive this acceleration. We've launched career learning in high schools. We've invested in adult career learning and acknowledging healthcare fields with the acquisitions of Galvanize, TechElevator, and MedCerts. These acquisitions are not only giving us new capabilities, but they're 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 galvanizing 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, TALO, that connects these new-collar workers to employers. Since our investment in Tallow 18 months ago, they had 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 shadow, 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. and we will continue to innovate, as Nate said. More to come in 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 but can still highlight their skills and qualifications in a proprietary app. And last year, nearly 50,000 direct engagements were made. between this community of talent and companies on talent that we're looking to fill jobs in their company. 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. And parents agree that online education is the new normal. A recent poll conducted by Morning Consult showed that 71% of parents felt that online education should be an ongoing option for students. 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 strengths 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 that divide us, 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, but our shareholders and stakeholders will benefit. Also, I briefly want to mention that on February 3rd, we're hosting the first National Forum on Equity in 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. In 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 margins 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. Can't really express how fortunate I've been to be able to count Nate as a confidant, to be able to learn from him, from my professional and personal development over the past 15 years. I'm more fortunate in knowing that he doesn't go away today. Nate wants me to succeed in my new role. He wants 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, we'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 selected 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 10Qs. And 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 you can now find on our website to complement our earnings release in 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 for 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 TechElevator and MedCerts combined after the effects of purchase accounting. Both these businesses were acquired on November 30, 2020. Excluding the effects of purchase accounting, TechElevator and MedSearch generated $1 million and $2.5 million of revenue, respectively, in the month of December. And both are EBITDA-positive and generate free cash flow. This is the fifth consecutive year that STRI 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 in 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 enrollments in our middle and high school career learning programs to double or more this fiscal year, consistent with the growth rates 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 1 to 2 percent 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 through 12, 12th 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%, 60 basis points lower than the prior year. Excluding the galvanized 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 is 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-month ending in December. And in fact, gross profit margin for the six-month period ending December 2020 of 34.7% is slightly higher than last year. And 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 SGA 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 FY21 versus FY20. Now, for the full year of FY21, 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 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 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 used to acquire tech elevator and med certs. 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 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 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. And 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 Strides Growth and the future with you at the helm. Now I'll hand the call back to you, Nate. Hey, operator. I don't have any closing remarks. We've talked long enough, probably. Why don't we go straight to Q&A?