Ladies and gentlemen, thank you for standing by, and welcome to the Stride, Inc First Quarter Fiscal 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Tim Casey, Vice President of Investor Relations, you may begin your conference. Thank you and good afternoon. Welcome to Stride's first quarter earnings call for fiscal year 2023. With me on today's call are James Rhyu, Chief Executive Officer, and Donna Blackman, Chief Financial Officer. As a reminder, today's conference call and webcast are accompanied by a presentation that can be found on the Stride Investor Relations website. Please be advised that today's discussion of our financial results may include certain non-GAAP financial measures. A reconciliation of these measures is provided in the earnings release issued this afternoon and can also be found on our investor relations website. In addition to historical information, this call may also involve forward-looking statements. The company's actual results could differ materially from any forward-looking statements due to several important factors as described in the company's latest SEC filings. These statements are made on the basis of our views and assumptions regarding future events and business performance at the time we make them, and the company assumes no obligation to update any forward-looking statements made during this call. Following our prepared remarks, we will answer any questions you may have. I will now turn the call over to James. James. Thank you, Tim, and good afternoon, everyone. The world has been volatile, to say the least, these past few years, with many companies reeling from the impact of that volatility. When the COVID pandemic first hit, we were coming off a decade of strong economic growth, a long bull market, and historically low inflation, interest rates, and unemployment, and a relatively peaceful global environment. Fast-forward a couple of years, and we've experienced not one, but two stock market corrections, almost double-digit inflation, interest rates that have tripled, and heightened global tensions. Amid all this turmoil, there is one constant that gives me optimism, the resilience, ingenuity, and resolve of America, and in particular, its younger generations. In this environment, for us to continue to provide opportunities for this country to prosper, we need to ensure we are adapting to an increasingly diverse and evolving world. I believe part of that evolution is changing how we think about education. We need to focus our younger generations on skills and tools that will help them succeed in a digital world, and this requires rethinking some of the norms that we've held dear for generations. The model Stride has built in online and career learning has taught us a lot about some of the vulnerabilities in our education system. First and foremost, we need to begin treating our customers like customers. We should be listening to them and innovating to meet them at their point of need. Those customers extend beyond the students to include the families, teachers, and employers who will empower the next generation and build on America's legacy. As we have listened to our customers, a few key themes emerge. Students and parents need more options, not just online and brick-and-mortar programs, but options around what our children learn, how they learn, and even when they learn. Teachers continue to be the backbone of each child's education, even as the role of a teacher is evolving. Many teachers are reeling from the stresses of the pandemic and questioning their role in education, so we need to find ways to further support and enable them. Students are also telling us that they learn in different ways than their parents did. They want more say in what they learn, and they want their education to be practical and digital. They want technology infused throughout the experience, and they want that technology to be on par with the technology they use in their everyday lives. Over the past several years, the rollout of our Career Learning programs has tried to address some of this feedback. Our programs deliver in-demand career certifications for students in middle and high school. We saw that employers were struggling to hire talent with the right hard and soft skills, and we knew we could help. In 2018, we enrolled less than 2,000 students in these nascent programs. This year, we have over 60,000 students in these programs, and we're just now starting to get enough scale to really have an impact on the talent gap. While it is still only a small fraction of our 2030 goal to have more than 100,000 graduates from our Career Learning programs, we are making good progress. Additionally, the pandemic has exacerbated both the need we see in the marketplace and our resolve to deliver on our programs. Employers are still struggling to identify, recruit, and hire skilled workers. Numerous studies have confirmed these challenges and demonstrate the importance of our career learning programs. We offer programs that teach real skills that are in high demand in the current environment and will be in high demand for years to come. Computer and IT-related jobs will continue to drive a digital economy. Healthcare positions are expected to add 26 million jobs by 2030. We will be part of training these future employees. An investment in our career programs achieved a significant step forward this fall. We launched the pilot of our new career platform that provides what our customers have been asking for, an all-inclusive solution for career education. The platform leads students through personalized career exploration to help them decide which career path may be right for them. They are directed to self-paced training to develop the skills they need to be successful, and they are able to obtain industry-recognized certifications and use these skills and certifications to access internship and job opportunities. That seamless customer journey from exploration to job provides a new paradigm for students to succeed. The best part is that we intend to make this free to all students. No more college debt. The platform also helps schools and districts solve their own set of challenges. Schools believe that preparation for the workforce is the number one measure of success for their programs. 90% of school districts say that career learning is their top priority.75% percent of school districts are considering outsourcing their career learning options. With our platform, schools don't have to increase spending as we are offering this to school districts at no cost. Given the current staffing challenges and desire to recruit skilled staff, we can monetize the platform through placement and recruiting fees that employers are already conditioned to pay. This means that schools can address their challenges without budget impact, students can get the training and certifications they need at no cost to them, and employers can access highly skilled and certified employees without increasing HR budgets. It's a win for everyone involved. We've already received some extremely positive feedback from our pilots, which span major metro areas to rural school districts. In addition to our fast-growing middle and high school business, our adult learning business is growing at over 25% a year. We are now on a run rate of over $100 million and on pace to hit $200 million over the next several years. Each of our product lines will grow this year for the first time. We are also investing in both our professional development and tutoring platforms. That tutoring platform will match students with certified U.S.-based teachers, so not tutors on the other side of the world. We want to enable the teachers right here in the U.S. to earn more. Speaking of teachers, we realize that we can also help with the teacher shortage problem plaguing many school districts in our country. Over the summer, we rolled out a teacher shortage hybrid solution that can supplement a district's local teachers. We continue to provide more and more tools for teachers to help them be more efficient and effective. We just completed our first gaming series using the Minecraft game to provide lessons in history, geography, and science. This and other co-curricular offerings are growing at an exponential pace. Our art and photography contests are drawing interest from tens of thousands of entrants versus just a few thousand last year. Our esports leagues and programs just completed a summer school program that was oversubscribed many times over and now counts tens of thousands of users. By listening to our customers, we've delivered these programs and shown the ability to dramatically improve retention compared to pre-pandemic levels. Our new enrollment withdrawals are at all-time lows, and we welcomed our largest cohort of re-registrations this fall. It's all about focusing on our customers and their outcomes. That includes more job placements than ever and stronger academic outcomes as well. We all know about the learning loss that most schools experienced during the pandemic that has been written about extensively this week. Well, over the past two years, the programs we manage have seen improving graduation rates, improved course pass rates, increasing retention rates, and positive increases in ELA, reading, math, science, and social studies. Our model has proven itself in the face of the pandemic. Parents and students continue to demand more choice in their education. 70% of parents want schools to offer multiple learning modes, including in-person, online, and hybrid options. However, school districts are starting to move away from offering more choice that they offered during the pandemic. In January 2022, 40% of public schools offered full-time remote instruction. By June of this year, that number had dropped to 33%. Meanwhile, only 10% of public schools offer a hybrid option. Stride will continue to offer parents and students multiple options for their education, and the landscape appears to be supporting us. Over just the past two years, 20 states have started to expand voucher-type programs. This is a great start, but we believe more can be done to allow families to attend their preferred school. While our General Education enrollments have fallen more than we'd hoped, much of that is because families are embracing our career programs. But we can still do a better job in attracting a broader range of new families to our programs in both career education and General Education. While overall enrollments are up around 40% from pre-pandemic levels, our revenue is up over 70% and operating income is up over 500%. We have demonstrated an ability to scale extremely profitably while also investing in innovation at the same time. Now for this fiscal year, just like last year, we said our intent is to grow and our first quarter results and full year guidance indicates we will. While enrollments overall are lower, we are finding ways to make up for that shortfall with other products and growth vectors. We think General Education enrollments have probably bottomed out at these levels and the other growth areas will continue, which sets us up for a longer term trajectory of growth. In addition, in spite of the tremendous pressures we're feeling from inflation, we are finding ways to be more efficient and find more leverage in our business. On both the top and bottom lines, our guidance range this year is a little larger than most because we see opportunity in year to find ways to improve our results. We believe you will see that improvement as the year progresses, and we will narrow in our guidance range accordingly. One early example is that our enrollment numbers since September 30. Pre-pandemic, October is a month that sees a deterioration in enrollments. That trend returned last fall. So far this October, we have seen net increases in enrollments. As you may remember, last year, we saw in-year demand as measured by application volumes be 20%-30% higher than the previous year. Well, so far this year, we are seeing application volumes several percentage points higher than even last year. In-year new enrollment volumes for the first few weeks of October are more than 20% higher than last year and well over 50% higher than pre-pandemic levels. Ultimately, our goal for the year will be to continue to expand on the top-line growth and aim to achieve a basically flat year-over-year adjusted operating income, plus or minus a few percent. Longer term, we remain committed to the 2025 targets we previously communicated. Given the range of products and services we're putting in the market that we were not aware of when we set our original 2025 targets, I see the opportunity to create even greater value for our customers and stakeholders than when we issued them. It's the incredible people in the Stride community that make all of this possible. From educators to administrators, there isn't a more passionate and dedicated team in the industry. We are still at just the beginning of our journey to disrupt the education system. More to come. Thank you so much for your time today. Now I'll pass the call over to our CFO, Donna Blackman. Donna? Thank you, James, and good afternoon, everyone. I want to start by thanking all of Stride's employees for another successful school launch and enrollment season. It always impresses me that we can enroll and onboard hundreds of thousands of students onto our platforms. We know how important it is for students and families to have a smooth start to the school year. I thank all of the Stride teachers, administrators, and support staff for their hard work. Now turning to our reported results. Revenue for the quarter was $425.2 million, an increase of 6% over the same period last year. Adjusted operating loss of $19.9 million was down compared to last year. Capital expenditures were $16.8 million, an increase of $1.4 million over last year. Career Learning strong enrollment growth, coupled with increases in revenue per enrollment, delivered another quarter of revenue growth for Stride. General Education enrollments and revenue declined but remain above pre-pandemic levels. These results demonstrate what we have been saying for the past two years. Stride will emerge from the pandemic as a stronger company with a fast-growing Career Learning and Adult Learning business and a solid core General Education business. Overall, Career Learning revenue for the first quarter increased 63% to $153.5 million, driven by strength in middle and high school career enrollment and Adult Learning growth. Career Learning middle and high school revenues were $125.5 million. Enrollments for middle and high school reached 61,600, a 47% increase from last year. We are incredibly impressed with the continued enrollment growth in this business and believe it will be a growth driver for many years to come. Revenue per enrollment for the quarter was $2,029, up 20.2%. Some of this strength is timing related, and we anticipate finishing the year up 7%-10%. Adult Learning also continued to show strong gains with $28 million in revenue, up 24% from last year. This business is on track to achieve over 30% growth year-over-year for the full year. General Education revenue decreased to $271.7 million or 11%. This was due to a decline in enrollments from our pandemic high. Gen Ed enrollments decreased to 112,300 thousand, still up almost 2,000 enrollments from pre-pandemic levels. It's important to note that even with the Gen Ed declines, our overall enrollments, including career learning, are up significantly from before the pandemic. We believe that as we've expanded our career learning options, some of the students and families who would otherwise have chosen Gen Ed have opted for career learning offerings. The decline in Gen Ed enrollment is somewhat offset by an increase in revenue per enrollment of $2,216, up 18% from last year. Similar to career learning, the strength in revenue per enrollment was partially timing, and we would expect to finish the year up 7%-10%. Gross margin for the quarter was 30.5%, down 110 basis points compared to the first quarter of 2022. As with last year, we expect a normal seasonal pattern in our spending and profitability this year. However, as we mentioned last quarter, we do think there will be some tightening of our gross margins for the full year. Given inflationary pressures, which I'll discuss more shortly, we believe we could see a reduction of up to 200 basis points for our full year gross margin. Selling, general, and administrative expenses for the quarter were $158.4 million, up $25 million from last year. The increase in SG&A is primarily driven by higher costs associated with marketing and enrollment, as well as increases in our adult businesses as they continue to scale. Stock-based compensation expense for the quarter was $5.5 million, down from last year due to the timing of stock-based grants tied to our career learning business. We expect fiscal year 2023 stock-based compensation expense to increase marginally from last year in the range of $20 million-$25 million. Adjusted operating loss for the quarter was $19.9 million. Adjusted EBITDA was $3 million. Profitability for the quarter was impacted by increased marketing expenses as well as earlier teacher hiring. As we anticipated, inflation has driven up our costs faster than revenue per enrollment funding increases. Inflation has impacted all companies, and we are not immune. As we said last quarter, we are fully funding teacher and staff salary increases because it is important for students to have instructional consistency. We made these decisions even in the face of increasing materials and marketing expenses because we believe it is the right thing for the company in the long term. We're not just standing idly by. We are continuing to drive efficiencies throughout the company by finding scale across our nationwide footprint and increasing materials-free courses. Moreover, we are still in a strong financial position, and we remain committed to investing in our new products. These initial investments will ensure market fit through pilot programs and drive early awareness, and we believe the investment will deliver long-term growth opportunities. While we expect to see a decline in both growth and operating margins this year, we believe we will be able to offset these declines during the year through ongoing efficiency efforts. However, there is still work to be done, and we will need to execute on these efficiency efforts to continue to drive margin improvements in the year. I want to emphasize that we still believe we can achieve our 2025 targets. Inflationary pressures and a looming potential recession will make it a challenge, but we strongly believe we are up for the task. An improving funding environment, strength in Career and Adult Learning, new products, and a return to moderate growth in Gen Ed enrollment position us for success in the years ahead. While we may achieve the targets in a slightly different way than we originally anticipated, we believe there are ample opportunities for us to meet and exceed our original targets. Interest expense for the first quarter totaled $2 million. We expect full-year interest expense to be between $7 million and $9 million. Our effective tax rate for the quarter was 25%. For the full year, we believe we will finish with a tax rate in the 27%-29% range, similar to prior years. Diluted loss per share was $0.54. Capital expenditures in the quarter totaled $16.8 million, up $1.4 million from last year. As you can see from our guidance, we will continue to invest behind our new, more mainstream products this year. We believe these products will expand our addressable market and expect them to impact growth in the coming years. Free cash flow in the first quarter, defined as cash from operations less CapEx, was - $160 million as compared to - $146.9 million in the prior year period. This is our normal seasonality of cash flows and relates to school launch enrollment and onboarding of new students. As is typical, we expect to see positive cash flow for the next three quarters. We ended the quarter with cash and cash equivalents of $194.5 million. Our strong cash position allows us to continue to invest in organic growth opportunities. Turning to our guidance, for the second quarter of the fiscal year 2023, we are forecasting revenue in the range of $435 million-$465 million, adjusted operating income between $70 million-$80 million, and capital expenditures between $17 million-$20 million. For the full year, we forecast revenue in the range of $1.71 billion-$1.79 billion, adjusted operating income between $160 million-$190 million, capital expenditures between $70 million-$80 million, and an effective tax rate between 27%-29%. To summarize, we anticipate another year of growth for Stride, driven by strong career and adult learning results. While short-term margins have been pressured by inflation and investments in new products, we are still in a strong financial position with an excellent balance sheet. We believe our shift towards career learning six years ago has set us up for long-term success. We are also excited about the next few years as we begin to see how our new products succeed in the market. Thank you for your time. Now I'll turn it over to the operator for Q&A. Operator? At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Jeff Silber with BMO Capital Markets. Your line is open. Thank you so much. I know the focus of the call was mostly on Career Learning. I completely understand it, but I'm going to start with General Education. You know, obviously the enrollment decline was pretty surprising, at least to us. Can we get into a little bit more color there? Did you lose any contracts? Is it more of a competitive issue? Any, you know, color on that would be great. Yeah, I think, first of all, I think that the Gen Ed enrollments sort of have bottomed out, and if you look pre-pandemic, you know, where our general education business is at, sort of around those pre-pandemic numbers. We feel pretty good that it's bottomed out at this level. We certainly see the return to school post-pandemic having an impact. I think we see some fatigue in the marketplace around online learning, and we see some sort of increased competition from local brick-and-mortar schools. Having said all that, I also think that our execution this summer could have been better. I think it's a combination of factors. Overall, I think we see overall demand in the markets for online education continuing to increase post-pandemic. I think that we probably did lose a little bit of market share, and I think that's on us to improve. I think the overall market for us continues to improve, and I think the overall market opportunity in both General Education and Career Learning is going to continue to improve. You know, I think that we've got some work to do to improve our execution, but I think the market's there for us, and I think that you know, we gotta execute better. let me just dig into those comments just a little bit. Maybe we can talk about some of the execution. Can you give us some examples of things that you might need to improve? Yeah, I mean, I think, for example, we went into this year, I think, less clear about the messaging we were putting into the market post-pandemic. I think we also had a number of situations throughout the country that either a teacher strike or uncertainty around school situations where we could have been more localized in how we communicated with a certain market. I think part of it is really just adapting better to being a national footprint player, but having more localized messaging because, you know, the reality is, we're particularly with the pandemic, the sensitivities around school options and school choice have become very localized. I think that, a lot of what our messaging needs to do is to actually drive into that local resonance as opposed to sort of the national, cookie cutter, if you will, approach. In your comments like that, some of the reasons why you think enrollments may have bottomed out? You think there could be room for some improvement if you do improve the execution next year? Yeah, I give you even a couple of examples very recently, which I sort of referred to in my remarks. Just in the past, you know, it's been 24 days, I guess, of information that we've got since the quarter end. We actually see improvement in the numbers. Excluding the pandemic year, you know, October is generally a time where we bring on a lot of enrollments for the fall, and then we do see some attrition through October into November. We actually have gained enrollments in October. I think little by little, our execution is starting to improve. I think that just the circumstances around education continue to work in our favor in that I think parents and customers you know they continue to look for options, and they continue to be, I think, disappointed with the options that they're getting in some of their brick-and-mortar districts, and I think we continue to be a good viable option. You know, so I do think that there's evidence that suggests that even in the past few weeks that we've got some room, some upside here in year and going into next year. Okay, great. Thanks for the color. I'll jump back in the queue. Your next question comes from the line of Greg Parrish with Morgan Stanley. Your line is open. Hey, thanks for taking my question. I mean, sorry to kind of double down on this, but I mean, why is this the new baseline in Gen Ed? Because, I mean, you mentioned a couple of things, that there's competition from brick-and-mortar, and brick-and-mortar knows how to do this now. There's also, and you mentioned this in your remarks as well, is some cannibalization to middle and high school. I mean, I guess, what gives you such confidence that, like, you know, this is the new baseline going forward? Well, I guess the first thing I would say is that I think the general public and most customers would disagree with you that brick-and-mortar has figured this out. I think at least from all the information, research, studies that we can see and find, in fact, most brick-and-mortar schools have not figured it out. There's not a lot of satisfaction with the programs from brick-and-mortar schools that are out there. I think that's the first data point. I think you see brick-and-mortar schools somewhat retreating from even putting an emphasis on their ability to do virtual programs. Some of them still have programs, but you see, I think, some of the retreat in the emphasis on those programs. I think you also are gonna start seeing a little bit more emphasis on outsourcing some of those programs because I think they realize that they're just not gonna be good at it. I think your other piece of the comment's fair. I think we are seeing some cannibalization. I think that while there is cannibalization, I think just the strength in what we're seeing this fall in terms of the pipeline does tell us, I think, that there's probably a bottoming out here. I think uncertainty in the marketplace tends to work in our favor. I think that the ongoing continued uncertainty in the marketplace, you know, there's some new variants of the virus. We're seeing spikes because of that. I just think that, you know, the uncertainty that's happening in the marketplace works in our favor, and I'm just not sure that. You know, we've been saying now for two years that that's gonna go away, and we really haven't seen that go away. We think that this is probably a point at which we've got a floor underneath us. You know, I think it's a fair question, and I think we'll see. Okay. That's very helpful. Thanks. Now I want to talk about the operating income margin guidance because, I mean, it sounds like you need a couple things to happen to get that. You know, maybe that's wrong, and correct me, but you talked about a couple things. You talked about, you know, in-year revenue acceleration. You talked about gaining efficiencies on the expense line throughout the year. I guess, I mean, do those have to happen to meet your guidance, or is that just upside? Yeah. No, I do think it actually has to. We have work to do, and I don't think it's a slam dunk. Here's what I would say, and this is just historical framing, is that I think in the 10 years that I've been with the company, we have yet to miss guidance. You know, I think we tend to put guidance out that we feel even if we have still work to do, we still feel comfortable in our ability to execute against that. You know, I think we feel pretty good. I mentioned in my comments our goal, which is also within the range of our guidance, is to be flat plus or minus a couple percent on adjusted operating income. That's above the midpoint, you know. I think we're shooting for above the midpoint, and, you know, we're working hard every day to make sure that we drive the cost structure to achieve that. Okay, great. Then help me. Maybe this is sort of an ignorant question. I mean, you have a pretty big step down in kind of overall enrollments, but you have a pretty big step up in some of your teacher costs, and you had a pretty big teacher base last year. I mean, I guess I mean, was there no kind of mark to market in teachers? I mean, how do you kinda assess that internally? Are you sort of overstaffed in Gen Ed, or are they allocated somewhere else? I know you have some sort of you know, other areas where you want to sort of monetize those teachers with school districts. Maybe that's the answer. Maybe kinda help me help me kind of fill the gaps there. Yeah, I think it's a little bit of a mix. We certainly are investing in certain places, but also, which, you know, is a little bit of a nuance that maybe not everybody's aware of. Oftentimes when we get funding increases, those funding increases come with pre-prescribed costs associated with them, often at zero margin to us. You know, there's some of that that's at play here that the way that the funding works is that we have to spend against it. There's a mix of that in there, as well as I think just, you know, we are investing in certain things. I do think that we were fully staffed. In most years, we go into the year a little bit understaffed. This year we wanted to make sure we were fully staffed. I think there's a number of things at play there. Okay, great. Thanks. As a reminder, if you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. Your next question comes from Tom Singlehurst with Citi. Your line is open. Yeah. Good evening. It's Tom here from Citi. Thanks for taking the question. Apologies, I missed this at the beginning, so I'm sorry if I'm covering old ground. I just wanted to understand, firstly, just sort of tracking the development of the General Ed enrollment trend. You know, I recall, I think at the full year, you talked about relatively robust sort of survey work in terms of sort of indicating that enrollment would be fairly resilient. I suppose the question there is, you know, A, was that did that just turn out not to be the case and the survey work didn't work? Or, you know, coming back to your point about execution, do you think that was enough to sort of take the shine off there? Just interested in sort of exactly what, you know, whether it was a function of you guys not, you know, as I say, executing 100% or whether there's generally been a pullback in sort of industry-level demand. In that context, I was interested in something that Pearson said, that links to revenue per enrollment because they indicated that there had been a sort of revenue mix effect in the course of their virtual school business whereby enrollments were relatively weak, but the average revenue per student was very favorable. I was wondering whether there was anything sort of underlying that explains that sort of jaws effect in aggregate. Those are the two questions for the moment. Thank you. Yeah, I mean, I think for sure, we have also, much like Pearson, and I think our business is probably mixed similarly to them, that we've got some revenue per enrollment strength that's due both to the overall funding environment, but also to the mix. So I think there's sort of both components there. Yeah, I think it's probably fairly similar. I think to your earlier or your first part of the question, you know, last year we saw in-year demand be very strong relative to the prior year. I think we continue to tell people that on our earnings calls. When we got into the summer season, we didn't see that in-year strength translate as much in the summer season. I do think that some of that was execution. Some of that was a little bit of sort of, I keep calling this fatigue that people have had around enrolling for some of these programs. I think the overall market continues to grow, while the overall market continues to grow. I think what we saw is, you know, a little bit of a softness, I'll say, in our execution. You know, and we're talking, you know, several thousand enrollments, you know, can push us, you know, down, you know, a few percent to down 8%, right? It's not a huge swing we have to have for us to be down, you know, the 8%. You know, I think that it's a combination of factors, but I definitely think that some of the execution played into it. I think that the market continues actually to be robust for these programs. I think the behaviors we're seeing, where historically a lot of the behaviors of families we saw happened sort of between 4th July and Labor Day. We're seeing now some of the behaviors shift to more in-year behaviors. You know, I think early indications are that families, I think, wanna believe that sort of the default should be to go back into their brick-and-mortar school district. I think when they go back in, sometimes they realize that, oh, things haven't changed, things haven't improved. They're not meeting the needs that I have as a customer. Therefore, they look for new options, you know, September into October. I think, you know, again, for the at least small sample size of the first several weeks of this sort of post count day season, post Q1 season, we're seeing some relative strength even above and beyond last year where we saw some strength and well above pre-pandemic levels. That's why I think we might see consumer behavior shift a little bit into season from relative to pre-pandemic levels. We're seeing a much higher level of demand than we did pre-pandemic, so. Perfect. One follow-up, if it's okay, on I suppose the cyclicality of the, I was gonna say the career learning business, but I'm really talking about the adult learning business and in particular the sort of institutional sort of offering, I presume within Galvanize. Should we be worried at all about sort of organizations and enterprise becoming more circumspect about sort of procuring sort of enterprise L&D resources? Yeah. tools in this environment, or do you think that will remain robust despite the macro? Yes, I'm sorry. I thought you were finished. Go ahead. I was gonna say, do you think it'll remain robust despite the macro challenges? Yeah. I think the good news, bad news for us is that, within the context of our adult businesses, we didn't have a material amount of that enterprise side business. We, when we did some of these acquisitions, we were actually pretty bullish that that would materialize. They didn't. Therefore, I think the risk of the macro, trends working against us there is just mitigated by the fact that we just didn't have a material amount of business there. As it turns out, what we are seeing is, still some healthy opportunity on the enterprise side for those businesses. I think as companies try to figure out what their staffing and hiring needs are, particularly in the technology space, technology tends to be prioritized. There still I think is a lot of demand that employers don't know how to fill appropriately. I think there still is a lot of opportunity there for us, but it's just not material enough one way or the other to impact us too much at this stage. Very clear. Thank you. As a reminder, if you would like to ask a question at this time, please press star followed by the number one on your telephone keypad. Your next question comes from the line of Stephen Sheldon with William Blair. Your line is open. Hi, team. This is actually Matt Filek on for Stephen Sheldon. To start, was wondering if you can talk about what drove the increase in SG&A expense relative to the prior year. Sounds like higher marketing costs is driving some of that, but any additional detail would be helpful. As a second part, how should we think about SG&A looking ahead over the next several quarters? Yeah, I think, you know, the higher SG&A, it's really a function of two things. I think you captured one piece of it, which is, you know, I think the marketing expense did tick up a little bit for us, but I think there's inflation. I think that's, you know, the big story right now is you've got inflation across the board on almost every cost item that we've got. You know, I think that's. I don't know, Donna, if you had any of it, but I think that's really the two big drivers. No, I think, yes, I would sort of add the timing of hiring had some impact on our numbers. With respect to the SG&A, I think the inflation on not only the marketing, but also on the salary and wages. As you sort of think about the rest of the year, I would think about that increase being more in line with inflation. Got it. That's helpful. Thank you. Then switching gears here, how have application to enrollment conversion rates been trending relative to your expectation? If you could, what are some of the underlying forces driving those trends? Yeah, I think what we see. I'll actually start from the top of the funnel. You know, you'd get traffic. Traffic converts to a lead converts to an application converts to enrollment. I think what we're seeing is actually strong conversion rates and improving conversion rates. What we see in our enrollment center is that families have a better appreciation and understanding of the programs that we're offering. Therefore, they're converting at higher rates. We saw that improve during the pandemic, through the pandemic, and now we see that sustained level because the families still have that appreciation and understanding of what the programs are and why they may or may not be a good fit for their needs. We are seeing higher conversion rates all through the funnel, including application to enrollment, and we're seeing that on a pretty sustained level. Great. Thank you. There are no further questions. This does conclude today's conference call. Thank you for joining. You may now disconnect.