Tom Singlehurst: It’s Tom here from Citi. A congratulations on the results. I had a couple of questions on the school side and then 1 on adult learning, if that’s okay. You talked about the funding environment sort of being largely green. I’m just interested in the sort of broader political risk, whether you can — I know it’s difficult across the entire sort of footprint but I was wondering whether — so maybe difficult to generalize. I was just wondering whether you can give us a quick run through of how you see sort of the landscape in terms of risk around changes in the policy environment? That would be my first question, so I’ll come back with a second if it’s okay.
James Rhyu: Yes. So I would say the broader political environment for us, I would — in general terms, prepandemic to post pandemic actually has improved. I think — and I think it continues to sustain that improvement. We see across the sort of the landscape of education, we see policy that both directly and indirectly looks to be in our favor generically. One fairly predominant example is laws around voucher type of programs and there’s different names for you, obviously, but they seem to be gaining more traction that tends to benefit our types of programs, not exactly targeted towards our programs, but the ability for families to have greater choice in how educational funds get applied and used where we are one of the options that they can apply to tends to be good for our business.
So that’s one that there’s several states that have enacted laws in that favor and I think more to come in the future. So I think from the broad political risk standpoint, I think we see less overarching risk in general than we did pre pandemic today. So I think our risk profile has improved. And that doesn’t mean that there are not pockets of risk. There are pockets of risk. But I think just as a general statement, we feel like our general risk profile has improved over the past several years.
Tom Singlehurst: The second question is on the competitive landscape. Pearson have announced effectively that they’re going to follow a similar strategy to yours and explore launching career-focused structural schools. I mean, obviously, invitation is the sincerest form of flattery, but I’m wondering whether that has any impact on the competitive tension within the market? Does it make a difference? Or how should we think about the competitive landscape?
James Rhyu: Yes. So I guess what I would say is I’m hopeful that Pearson’s successful. I think it grows the pie. I think we’re more interested in having a larger pie as opposed to splitting up a smaller pie more ways. I think that whether it’s a career program, which I do think this country needs a lot more of, and I think that all the research all surveys indicate that that’s true. I mentioned some of my comments earlier today. But I think competition is good for our industry. I think that it will create greater awareness. It creates greater validity for our programs. So I’m actually encouraged by the competition, not just because it’s whatever you said, imitation is a form of flattery, but more for, I think, the validation in the marketplace.
Clearly, the opportunity keeps growing for all of us and I think it’s healthy. So I welcome it. I’m hoping Pearson is very successful at their programs. I think it’s going to grow the pie for all of us, and I think there’s more than enough to go around.
Tom Singlehurst: And one final one quickly. Given we haven’t talked about it yet, adult learning and in particular, Tech Elevator and MedCerts, I mean, they seem to be going great, which is obviously great. I’m just wondering whether we’re overdue sort of allocating capital — more capital to that area. Can you just talk about your philosophy on that?
James Rhyu: Yes. I wouldn’t say we’re overdue. What I would say, I think, is that we continue to look for ways to allocate capital to all parts of our business that have opportunity. Those are included. And that means both internal investment as well as sort of more strategic M&A type investment. We have a pretty robust pipeline of companies that we monitor that for the right deal, the right price, we would certainly deploy capital for an acquisition. But we also think that there are internal investments that we can make as well to deploy capital to expand product line to invest behind different services not just for the adult learning category, but for the K-12 category. I talked a little bit about our Learning Hub investment.
I think that can be really significant across the broad spectrum of both K-12, core education but also supplemental, tutoring, et cetera. So I just think that there’s a lot of opportunity to invest and I don’t think that there’s a singular category of investment that’s more attractive than others. I think that we want to play within the education, training, skilling space broadly, and we’ll look to invest behind those themes where the equation is right for us, where valuations have historically been really, I think, pricing folks like us out of the market, we’re not going to try to — we’re not going to overpay. We’re going to try to be really disciplined. So I think that the valuations have to be reasonable enough to give us what we believe is the right return for our shareholders.
Operator: Your next question comes from the line of Stephen Sheldon with William Blair. Your line is now open.
Pat McIlwee: This is Pat McIlwee on for Stephen. So last quarter, you mentioned that you were comfortable with your teacher capacity. And more recently, James, I think you actually mentioned that you’re somewhat oversubscribed in terms of teacher capacity. And with that being said, can you just talk a little bit about the trends you’re seeing there in terms of teacher salaries and staffing? And if some of that wage inflation you’ve seen in the past quarters has begun to subside at all?
James Rhyu: Yes. I mean I guess here’s what I would say. I mean, I mentioned, I think what you just said, I mentioned at ASU GSV just the day, which is what you might be referring to. But what I would say is that, first of all, a shut out to our teachers, we have the best teacher workforce, I think, in the country. They are phenomenal. I get notes from teachers all the time, many of them thanking me for giving them an opportunity to serve kids in the way that we allow them to serve kids. So — and I think because of that and because of our unique model and because of some of the sort of the flexibility we provide, yes, we don’t have a teacher shortage. I mean I know a lot of districts are starting with it, and I’m actually hopeful we can help some of these districts.
We’ve helped a number of districts this past year with feature shortage. We hope to continue to help more districts with their teacher shortages. I really emphasize with those districts that have that shortage. I think it hurts kids and hurts the customers and I think that it’s incumbent upon all of us to help that situation. But for our programs, by and large, we do not have a shortage. We have had the ability to hire more teachers than we need. So when I say we’ve been oversubscribing, we have more applications and more opportunities to hire teachers than the teachers that we actually need to run our programs. So for us, at least, we happen to be, at least this past year in a pretty good situation where we’re not struggling to meet the teacher side of the equation.
Now in previous years to this year, particularly the first year of the pandemic when we saw really explosive growth, we got a little bit caught flat footed in hiring up teachers ourselves. So it’s not that we have not ever had a shortage, we got caught a little flatfoot operationally a few years ago when we had that explosive growth for the pandemic. But since then, we’ve sort of normalized, I think, we continue to be able to hire and recruit I think, very effectively. And hopefully, that continues. And I think the benefits that we can offer for our teachers, forget about just pure compensation for a second, but we offer them trajectories, professional trajectories. We offer them professional development opportunities. We have many executives within our building.
who are in various roles who came up through the school ranks, whether that be teacher, administrator or whatever, many of our executives have a trajectory of career development here that I think would be hard to replicate in other places, particularly in a school district that doesn’t have sort of a corporate structure like we have that offers some of those opportunities. And it’s just by the fact that we are a corporate entity, so we operate a little bit differently. And so I think all those things help attract teachers. And it’s not for everybody. But we’ve been very, very fortunate, I’m very grateful for the wonderful features that we have. that really help our students out and help our customers.
