MARKETING & FINANCE CONSOLIDATED REPORT IN ADVANCE OF 2021 BUDGET PREP

March 2020

Macro Trends

Shrinking competitor base due to governmental action: school closures, no new independent study schools

Less competition

Districts fighting back against enrollment loss using legislation and litigation, and now diversification

Districts fighting back

Increasing independent study student market size due to more parents working from home

addressable Market size increase

Pent up demand, then public backlash due to lack of school choice

PUBLIC BACKLASH

MICRO TRENDS

Teachers are becoming less presenters and more personal consultants for students. Families who choose Method expect a personal relationship with not only the student, but with the student's family. Waiting until parent-teacher conference to get acquainted and share updates isn't acceptable anymore. 

TEACHERS MATTER MORE THAN EVER

Online school is a perfect fit for student athletes. At Method, we've seen dramatic enrollment increases of students in team sports, olympic sports, and extreme sports. 

student athletes love method

In 2019-20, for the first time, Method's LA charter overtook the San Diego charter. We expect the gap to widen as San Diego county districts are increasingly anti-charter and not open to partnerships. And although Orange County (which could count for either charter) is counted toward San Diego enrollment, the LA charter draws from a substantially larger population base. 

METHOD LA OVERTAKES METHOD SD in enrollment 

"Summer school" was a mechanism for fraud by one organization, and restrictions are likely coming as a result. School districts are already feeling the pinch. One well-known LA county high school who works closely with Method confided that "without summer school, our graduation rates would plummet." 

PERCENTAGE OF SHORT-TERM ENROLLMENT DECREASING

FINANCIAL POSITION REMAINS STRONG;

STORM ON HORIZON

Fund balance of $9.7 million; $4.6m Dehesa, $5.1m Acton charters; original savings plan for learning centers for both charters has been scrapped due to AB 1507. Funds will be allocated elsewhere.

RAINY DAY FUND

Low overhead, no debt, and using our own online curriculum leads to margins >20% (>25% with AB 1507 enacted); more investment in curriculum, stem vans, tech, and lower class sizes planned

OUR MODEL SCALES

No debt, including receivables, provides fiscal flexibility and security.

NO DEBT

Slowing economy*, population growth growth slowing in California, political uncertainty; deferrals?

ECONOMIC UNCERTAINTY PERSISTS

Anti-charter legislation authored by unions, scandals with far-reaching impacts on charters, legal challenges, new governor

FISCAL POLICY SHIFT AWAY FROM CHARTERS

LOW OVERHEAD, LACK OF LEGACY COSTS

DEVELOPMENT PLATEAU

We're reaching a point where we need to invest more into systems to get them where we want, but laws don't allow for much flexibility in this budget area

No pension or OPEB, no large restricted fund balances, no maintenance costs related to aging facilities

MARKETING STRATEGY EVOLVING

Focus on student & family experience; bring school to the students

Experience

Customer satisfaction research. NPS, course and teacher feedback

RESEARCH

More traffic to website, better traffic

WEB TRAFFIC

Better follow up with traffic using bots, live chat, automation

CHAT & FOLLOW UP

Our goal has always been 2/3 of our students through word of mouth

WORD OF MOUTH

Product and service enhancements are continual and informed

IT'S THE PRODUCT

TRAFFIC, CHATS, TICKETS UP

FOCUS ON THE CX IS PAYING OFF

ONGOING RESEARCH

KEY LCAP COMPONENT

2018

2019

2020

n =186

n =2968

n = 191

Most recent parent-only  NPS (January 2020): 59

Includes students and parents