K12 Inc. Reports Full Fiscal Year 2013 Financial Results

K12 Inc. Reports Full Fiscal Year 2013 Financial Results

EPS Increases 60.0% to $0.72 on Revenue Growth of Nearly 20.0% to $848.2 Million

HERNDON, Va.--(BUSINESS WIRE)-- K12 Inc. (NYS: LRN) , a leading provider of proprietary, technology-based curriculum, software and education services created for individualized learning for students primarily in kindergarten through 12th grade, today announced its results for the fourth fiscal quarter and full fiscal year ended June 30, 2013.


Financial Highlights for the Fiscal Year Ended June 30, 2013

  • Revenues for the fiscal year ended June 30, 2013 grew 19.7% to $848.2 million, primarily due to a 12.7% increase in average student enrollments and an increase in average revenue per student in our managed public schools business.
  • EBITDA, a non-GAAP measure (see reconciliation below), for the fiscal year ended June 30, 2013 increased 28.0% to $111.4 million and EBITDA margin grew to 13.1%.
  • Operating income grew 57.6% to $45.7 million.
  • Net income attributable to common and Series A stockholders grew by 60.6% to $28.1 million.
  • Diluted net income attributable to common stockholders per share, which reflects a pro rata allocation of net income to Series A stockholders, grew 60.0% to $0.72.

Financial Highlights for the Three Months Ended June 30, 2013 (Fourth Quarter Fiscal Year 2013)

  • Revenues for the fourth quarter of FY 2013 increased 19.2% to $203.1 million, primarily due to organic revenue growth of 20.8% in our core Managed Public Schools business.
  • EBITDA, a non-GAAP measure (see reconciliation below), for the fourth quarter of FY 2013 grew 7.3% to $19.0 million.
  • Operating income decreased 30.0% to $1.4 million.
  • Net income attributable to common and Series A stockholders grew by 27.8% to $2.3 million.
  • Diluted net income attributable to common stockholders per share, which reflects a pro rata allocation of net income to Series A stockholders, grew by 20.0% to $0.06.

Comments from Management

Nate Davis, Executive Chairman of the Board, commented: "I am very pleased with the financial results K12 delivered in fiscal 2013. We remain intensely focused on improving academics and, to that end, we have introduced innovative academic pilots to improve our learning model and have launched new diagnostic assessment tools. We are excited about the new school year and grateful to have the opportunity to offer an individualized and adaptive education to students around the world."

Cash, Capital Expenditures and Capital Leases

As of June 30, 2013, the Company had cash and cash equivalents of $181.5 million, reflecting an increase of $36.8 million from June 30, 2012.

Capital expenditures for the fiscal year ended June 30, 2013 were $50.3 million, reflecting an increase of $1.7 million, and was comprised of:

  • $8.3 million for property and equipment,
  • $23.4 million for capitalized software development, and
  • $18.6 million for capitalized curriculum.

Capital leases financed additional purchases of $24.7 million during the fiscal year ended June 30, 2013, primarily for computers and software for students.

Revenue and Enrollment Data

Revenue by Business Line

The following table sets forth revenue for the Company's three lines of business -- Managed Public Schools (turn-key management services provided to public schools), Institutional Sales (educational products and services provided to school districts, public schools and other educational institutions that it does not manage), and International and Private Pay Schools (private schools for which it charges student tuition and makes direct consumer sales) -- for the periods indicated:

    

Year Ended June 30,

2013 / 20122012 / 2011

($ in thousands)

2013

 

2012

2011

Change Change%Change Change%
Managed Public Schools$730,800$596,142$454,001$134,65822.6%$142,14131.3%
Institutional Business73,26973,15046,7561190.2%26,39456.5%
International and Private Pay Business 44,151 39,115 21,677 5,03612.9% 17,43880.4%
Total$848,220$708,407$522,434$139,81319.7%$185,97335.6%
 

Enrollment Data

The following table sets forth average enrollment data for students in Managed Public Schools and total enrollment data for students in the International and Private Pay Schools for the periods indicated. These figures exclude enrollments from classroom pilot programs and consumer programs.

   
Year Ended June 30,2013 / 20122012 / 2011

2013

 

2012

 

2011

Change 

Change %

Change 

Change %

Average Student Enrollments*117,563104,28974,75513,27412.7%29,53439.5%
 
 
Year Ended June 30,2013 / 20122012 / 2011

2013

2012

2011

Change

Change %

ChangeChange%
Student Enrollments31,61931,83028,777(211)-0.7%3,05310.6%
Semester Course Enrollments84,64283,51968,2301,1231.3%15,28922.4%
 
* The Managed Public Schools average student enrollments include enrollments for which we received no public funding.
 

Fiscal Year 2014 Outlook

The Company intends to issue guidance for the current fiscal year in mid-October 2013.

Special Note on Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have tried, whenever possible, to identify these forward-looking statements using words such as "anticipates," "believes," "estimates," "continues," "likely," "may," "opportunity," "potential," "projects," "will," "expects," "plans," "intends" and similar expressions to identify forward looking statements, whether in the negative or the affirmative. These statements reflect our current beliefs and are based upon information currently available to us. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties, factors and contingencies include, but are not limited to: our potential inability to further develop, maintain and enhance our products and brands; the reduction of per pupil funding amounts at the schools we serve; reputation harm resulting from poor performance or misconduct by operators in any school in our industry and in any school in which we operate; challenges from virtual public school or hybrid school opponents; failure of the schools we serve to comply with regulations resulting in a loss of funding or an obligation to repay funds previously received; discrepancies in interpretation of legislation by regulatory agencies that may lead to payment or funding disputes; termination of our contracts with schools due to a loss of authorizing charter; failure to enter into new contracts or renew existing contracts with schools; risks associated with entering into and executing mergers, acquisitions and joint ventures; failure to successfully integrate mergers, acquisitions and joint ventures; inability to recruit, train and retain quality teachers and employees; uncertainty regarding our ability to protect our proprietary technologies; risks of new, changing and competitive technologies; increased competition in our industry; and other risks and uncertainties associated with our business described in the Company's filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of August 29, 2013, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

Conference Call

The Company will discuss its fourth quarter 2013 financial results during a conference call scheduled for Thursday, August 29, 2013 at 8:30 a.m. eastern time (ET).

The conference call will be webcast and available on the K12 web site at www.k12.com through the Investor Relations link. Please access the web site at least 15 minutes prior to the start of the call to register and download and install any necessary software.

To participate in the live call, investors and analysts should dial (866) 825-1709 (domestic) or (617) 213-8060 at 8:20 a.m. (ET). The participant pass code is 82179632. A replay of the call will be available starting on August 29, 2013, through September 5, 2013, at (888) 286-8010 (domestic) or (617) 801-6888 (international) pass code 35861153. It will also be archived at www.k12.com in the Investor Relations section for 60 days.

Financial Statements

The financial statements set forth below are not the complete set of K12 Inc.'s financial statements for the quarter and year and are presented below without footnotes. Readers are encouraged to obtain and carefully review K12 Inc.'s Annual Report on Form 10-K for the year ended June 30, 2013, including all financial statements contained therein and the footnotes thereto, filed with the SEC. The Form 10-K may be retrieved from the SEC's website at www.sec.gov or from K12 Inc.'s website at www.k12.com.

  
K12 INC.
CONSOLIDATED BALANCE SHEETS
 
June 30,

2013

2012

(In thousands, except share and per share data)
ASSETS
Current assets
Cash and cash equivalents$181,480$144,652
Restricted cash and cash equivalents-1,501

Accounts receivable, net of allowance of $2,560 and $1,624 at June 30, 2013 and June 30, 2012, respectively

186,459160,922
Inventories, net44,39537,853
Current portion of deferred tax asset11,36816,140
Prepaid expenses10,33111,173
Other current assets 23,916  14,598 
Total current assets457,949386,839
Property and equipment, net56,14255,903
Capitalized software, net43,50434,709
Capitalized curriculum development costs, net64,59960,345
Intangible assets, net32,13936,736
Goodwill61,41361,619
Investment in Web International-10,000
Deposits and other assets 3,150  2,684 
Total assets$718,896 $648,835 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current liabilities
Accounts payable$21,838$23,951
Accrued liabilities17,02713,802
Accrued compensation and benefits21,97017,355
Deferred revenue28,56725,410
Current portion of capital lease obligations19,39515,950
Current portion of note payable 390  1,145 
Total current liabilities109,18797,613
Deferred rent, net of current portion8,8336,974
Capital lease obligations, net of current portion16,10715,124
Note payable, net of current portion-777
Deferred tax liability33,29931,591
Other long term liabilities 2,512  1,908 
Total liabilities 169,938  153,987 
Commitments and contingencies--
Redeemable noncontrolling interest 15,200  17,200 
Equity:
K12 Inc. stockholders' equity

Common stock, par value $0.0001; 100,000,000 shares authorized; 37,440,662 and 36,436,933 shares issued and outstanding at June 30, 2013 and June 30, 2012, respectively

44
Additional paid-in capital548,390519,439

Series A Special Stock, par value $0.0001; 2,750,000 shares issued and outstanding at June 30, 2013 and 2012

63,11263,112
Accumulated Other Comprehensive Income (Loss)(294)100
Accumulated deficit (81,050) (109,161)
Total K12 Inc. stockholders' equity530,162473,494
Noncontrolling interest 3,596  4,154 
Total equity 533,758  477,648 
Total liabilities, redeemable noncontrolling interest and equity$718,896 $648,835 

 
K12 INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
    
Three Months Ended June 30,Year Ended June 30,
 2013  2012  2013  2012 
(In thousands, except share and per share data)
Revenues$203,087 $170,402 $848,220 $708,407 
Cost and expenses
Instructional costs and services129,192102,617498,398408,560
Selling, administrative and other operating expenses66,20660,970283,032245,274
Product development expenses 6,268  4,783  21,084  25,593 
Total costs and expenses 201,666  168,370  802,514  679,427 
Income from operations1,4212,03245,70628,980
Interest income (expense), net 1,657  (267) 851  (989)
Income before income tax expense and noncontrolling interest3,0781,76546,55727,991
Income tax expense (1,828) (571) (20,023) (11,882)
Net income1,2501,19426,534 Read Full Story

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