HERNDON, Va., Aug. 09, 2016 (GLOBE NEWSWIRE) -- K12 Inc. (NYSE:LRN), a technology-based education company and leading provider of proprietary curriculum and online school programs for students in pre-K through high school, today announced its results for the fourth fiscal quarter and full fiscal year ended June 30, 2016.
Financial Highlights for the Three Months Ended June 30, 2016 (Fourth Quarter Fiscal Year 2016)
- Revenues of $221.3 million, compared to $235.7 million in the fourth quarter of FY 2015.
- Operating income of $0.5 million, compared to an operating loss of $16.3 million in the fourth quarter of FY 2015.
- Net loss attributable to common stockholders of $1.0 million, compared to net loss of $11.6 million in the fourth quarter of FY 2015.
- Diluted net loss attributable to common stockholders per share of $0.03, compared to net loss of $0.31 in the fourth quarter of FY 2015.
- EBITDA, a non-GAAP measure (see reconciliation below), of $18.1 million, compared to $15.2 million in the fourth quarter of FY 2015.
Financial Highlights for the Year Ended June 30, 2016
- Revenues of $872.7 million, compared to $948.3 million for the full fiscal year of 2015.
- Operating income of $13.9 million, compared to $18.4 million for the full fiscal year of 2015.
- Net income attributable to common stockholders of $9.0 million, compared to $11.0 million for the full fiscal year of 2015.
- Diluted net income attributable to common stockholders per share was $0.23, compared to $0.29 for the full fiscal year of 2015.
- EBITDA, a non-GAAP measure (see reconciliation below), of $82.1 million, compared to $102.2 million for the full fiscal year of 2015.
On July 8, 2016, K12 announced that it had reached a settlement with the State of California resolving all claims related to an Attorney General inquiry with no admission of liability or wrongdoing, and no fines or penalties. K12 took a net charge during the fourth quarter of fiscal 2016 related to this settlement of $7.1 million. The $7.1 million is comprised of: $2.6 million settlement payments; $6.0 million to defray the cost to taxpayers for the Attorney General's expenses related to its investigation of K12 Inc. as part of an industry-wide probe of for profit virtual schools; and a $1.5 million insurance reimbursement related to these events.
During the quarter ended June 30, 2015, the Company incurred charges totaling $28.4 million (products, software and inventory reserve of $14.3 million, accounts receivable reserves of $10.7 million, and severance costs of $3.4 million).
Excluding the impact of those charges, and the aforementioned net settlement costs, for the three months ended June 30, 2016 the comparisons to prior year results would have been as follows (see Appendix A, B and C below for more details).
- Operating income of $7.6 million, compared to operating income of $8.9 million for the fourth quarter of FY 2015.
- Net income attributable to common stockholders of $3.5 million, compared to net income of $6.8 million for the fourth quarter of FY 2015.
- Diluted net income attributable to common stockholders per share of $0.09 as compared to diluted net income attributable to common stockholders per share of $0.18 for the fourth quarter of FY 2015.
- EBITDA of $25.2 million, compared to the $26.6 million for the fourth quarter of FY 2015.
For the full year, excluding the impact of the aforementioned net settlement and charges, the comparisons to prior year results would have been as follows. (see Appendix A, B and C below for more details).
- Operating income of $21.0 million compared to $43.7 million for the full fiscal year of 2015.
- Net income attributable to common stockholders of $13.5 million compared to $29.4 million for the full fiscal year of 2015.
- Diluted net income attributable to common stockholders per share would have been $0.35, compared to $0.78 for the full fiscal year of 2015.
- EBITDA of $89.2 million compared to $113.6 million for the full fiscal year of 2015.
Comments from Management
“We continue to focus on improving academic outcomes for the students we serve,” said Stuart Udell, Chief Executive Officer. “At the same time, we selectively invested in strategic growth areas, including expanding our state and school footprint, launching new program offerings, and executing on a strategic acquisition,” added Udell.
Cash, Capital Expenditures and Capital Leases
For the year ended June 30, 2016, the Company had cash and cash equivalents of $214.0 million, an increase of $18.1 million compared to the $195.9 million reported at June 30, 2015.
Capital expenditures for the year ended June 30, 2016 were $62.9 million, an increase of $1.1 million from the prior year’s full fiscal year, and was comprised of:
- $5.0 million for property and equipment,
- $36.3 million for capitalized software development, and
- $21.6 million for capitalized curriculum
Capital leases financed additional purchases of $10.9 million during the year ended June 30, 2016, primarily for student computers. This compares to capital leases financed during the year ended June 30, 2015 of $14.7 million.
Revenue and Enrollment Data
Revenue
The Company’s revenues are generally in three categories -- Managed Public School Programs (management, technology and academic support services provided to public schools), Institutional (Non-managed Public School Programs – curriculum, technology and other educational services where K12 does not provide primary administrative oversight, and Institutional Software and Services – educational software and services provided to school districts, public schools and other educational institutions), and Private Pay Schools and Other (private schools for which it charges student tuition and makes direct consumer sales) – The following table sets forth the Company’s revenues for the periods indicated:
| Three Months Ended | Change | Year Ended | Change | ||||||||||||||||||||||||
| June 30, | 2016 / 2015 | June 30, | 2016 / 2015 | ||||||||||||||||||||||||
| ($ in thousands) | 2016 | 2015 | $ | % | 2016 | 2015 | $ | % | |||||||||||||||||||
| Managed Public School Programs (1) | $ | 183,426 | $ | 201,333 | $ | (17,907 | ) | -8.9 | % | $ | 717,059 | $ | 813,677 | $ | (96,618 | ) | -11.9 | % | |||||||||
| Institutional | |||||||||||||||||||||||||||
| Non-managed Public School Programs (1) | 11,160 | 8,312 | 2,848 | 34.3 | % | 55,601 | 39,321 | 16,280 | 41.4 | % | |||||||||||||||||
| Institutional Software & Services | 16,856 | 13,101 | 3,755 | 28.7 | % | 52,990 | 48,770 | 4,220 | 8.7 | % | |||||||||||||||||
| Total Institutional | 28,016 | 21,413 | 6,603 | 30.8 | % | 108,591 | 88,091 | 20,500 | 23.3 | % | |||||||||||||||||
| Private Pay Schools and Other | 9,877 | 12,909 | (3,032 | ) | -23.5 | % | 47,050 | 46,526 | 524 | 1.1 | % | ||||||||||||||||
| Total | $ | 221,319 | $ | 235,655 | $ | (14,336 | ) | -6.1 | % | $ | 872,700 | $ | 948,294 | $ | (75,594 | ) | -8.0 | % | |||||||||
Enrollment Data
The following table sets forth average enrollment data for the periods indicated. These figures exclude enrollments from classroom pilot programs and consumer programs.
| Three Months Ended June 30, | 2016 / 2015 | Year Ended June 30, | 2016 / 2015 | |||||||||||||||||||||
| 2016 | 2015 | Change | Change % | 2016 | 2015 | Change | Change % | |||||||||||||||||
| Managed Public School Programs (1,2,3) | 98,406 | 108,913 | (10,507 | ) | -9.6 | % | 102,935 | 114,579 | (11,644 | ) | -10.2 | % | ||||||||||||
| Non-managed Public School Programs (1) | 25,723 | 19,044 | 6,679 | 35.1 | % | 26,970 | 20,053 | 6,917 | 34.5 | % | ||||||||||||||
| (1 | ) | If a school changes from a Managed to a Non-managed program, the corresponding enrollment classification would change in the period in which the contract arrangement changed. | |
| (2 | ) | Managed Public School Programs include enrollments for which K12 receives no public funding or revenue. | |
| (3 | ) | Managed Public School Program enrollments are lower than those reported in our historical average student enrollments for Managed Public Schools due to reclassifying certain schools that meet the current definition of Non-managed Programs. |
Revenue per Enrollment Data
The following table sets forth revenue per average enrollment data for students in Public School Programs for the periods indicated.
| Three Months Ended | Change | Year Ended | Change | ||||||||||||||||||||||||||||
| June 30, | 2016 / 2015 | June 30, | 2016 / 2015 | ||||||||||||||||||||||||||||
| 2016 | 2015 | $ | % | 2016 | 2015 | $ | % | ||||||||||||||||||||||||
| Managed Public School Programs | $ | 1,864 | $ | 1,849 | $ | 15 | 0.8 | % | $ | 6,966 | $ | 7,101 | $ | (135 | ) | -1.9 | % | ||||||||||||||
| Non-managed Public School Programs | 434 | 436 | (2 | ) | -0.5 | % | 2,062 | 1,961 | 101 | 5.2 | % | ||||||||||||||||||||
Fiscal Year 2017 Outlook
As previously disclosed, the Company will provide an outlook for fiscal 2017 results as part of the first quarter results report for fiscal year 2017. This first quarter results is planned to be published at or near the end of October 2016. No separate guidance communication, or enrollment counts, for fiscal 2017 will be provided before that time.
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: reduction of per pupil funding amounts at the schools we serve; inability to achieve sufficient levels of new enrollments to sustain or to grow our business model; failure of the schools we serve to comply with regulations resulting in a loss of funding or an obligation to repay funds previously received; declines or variations in academic performance outcomes as curriculum and testing standards evolve; harm to our reputation resulting from poor performance or misconduct by operators or us in any school in our industry and in any school in which we operate; legal and regulatory challenges from opponents of virtual public education, public charter schools or for-profit education companies; 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 school contracts or renew existing contracts, in part or in their entirety; unsuccessful integration of mergers, acquisitions and joint ventures; failure to further develop, maintain and enhance our technology, products, services and brands; inadequate recruiting, training and retention of effective teachers and employees; infringement of our intellectual property; non-compliance with laws and regulations related to operating schools in a foreign jurisdiction; entry of new competitors with superior competitive technologies and lower prices; 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 9, 2016, 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 and full year fiscal year 2016 financial results during a conference call scheduled for Tuesday, August 9, 2016 at 8:30 a.m. eastern time (ET).
The conference call will be webcast and available at http://public.viavid.com/index.php?id=120283. Please access the web site at least 15 minutes prior to the start of the call.
To participate in the live call, investors and analysts should dial (877) 407-4019 (domestic) or (201) 689-8337 (international) at 8:15 a.m. (ET). No passcode is required.
A replay of the call will be available starting on August 9, 2016 at 11:00 a.m. ET through September 9, 2016 at 11:00 a.m. ET, at (877) 660-6853 (domestic) or (201) 612-7415 (international) using conference ID 13640973. A webcast replay of the call will be available at http://public.viavid.com/index.php?id=120283 for 30 days.
Financial Statements
The financial statements set forth below are not the complete set of K12 Inc.’s financial statements for the three months and full fiscal year ended June 30, 2016, and is presented below without footnotes. Readers are encouraged to obtain and carefully review K12 Inc.’s Form 10-K for the year ended June 30, 2016, 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. | |||||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| June 30, | |||||||
| 2016 | 2015 | ||||||
| (In thousands, except share and per share data) | |||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 213,989 | $ | 195,852 | |||
| Accounts receivable, net of allowance of $10,813 and $9,657 at June 30, 2016 and June 30, 2015, respectively | 169,554 | 188,246 | |||||
| Inventories, net | 30,631 | 29,571 | |||||
| Deferred tax asset | - | 8,989 | |||||
| Prepaid expenses | 9,634 | 11,428 | |||||
| Other current assets | 22,047 | 24,877 | |||||
| Total current assets | 445,855 | 458,963 | |||||
| Property and equipment, net | 28,447 | 34,407 | |||||
| Capitalized software, net | 70,055 | 62,683 | |||||
| Capitalized curriculum development costs, net | 63,367 | 58,696 | |||||
| Intangible assets, net | 23,102 | 21,195 | |||||
| Goodwill | 87,285 | 66,160 | |||||
| Deposits and other assets | 15,944 | 6,495 | |||||
| Total assets | $ | 734,055 | $ | 708,599 | |||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY | |||||||
| Current liabilities | |||||||
| Current portion of capital lease obligations | $ | 13,210 | $ | 16,635 | |||
| Accounts payable | 25,919 | 29,819 | |||||
| Accrued liabilities | 26,877 | 12,486 | |||||
| Accrued compensation and benefits | 31,042 | 26,790 | |||||
| Deferred revenue | 25,964 | 24,927 | |||||
| Total current liabilities | 123,012 | 110,657 | |||||
| Capital lease obligations, net of current portion | 9,922 | 13,022 | |||||
| Deferred rent, net of current portion | 6,661 | 7,692 | |||||
| Deferred tax liability | 18,458 | 22,456 | |||||
| Other long term liabilities | 9,780 | 8,233 | |||||
| Total liabilities | 167,833 | 162,060 | |||||
| Commitments and contingencies | - | - | |||||
| Redeemable noncontrolling interest | 7,502 | 9,601 | |||||
| Equity: | |||||||
| K12 Inc. stockholders’ equity | |||||||
| Common stock, par value $0.0001; 100,000,000 shares authorized; 43,184,068 and 41,837,894 shares issued and 39,681,470 and 38,335,296 shares outstanding at June 30, 2016 and June 30, 2015, respectively | 4 | 4 | |||||
| Additional paid-in capital | 675,436 | 663,461 | |||||
| Accumulated other comprehensive loss | (293 | ) | (1,065 | ) | |||
| Accumulated deficit | (41,427 | ) | (50,462 | ) | |||
| Treasury stock of 3,502,598 and 2,195,196 shares at cost at June 30, 2015 and June 30, 2014, respectively | (75,000 | ) | (75,000 | ) | |||
| Total K12 Inc. stockholders’ equity | 558,720 | 536,938 | |||||
| Total liabilities, redeemable noncontrolling interest and equity | $ | 734,055 | $ | 708,599 | |||
| K12 INC. | |||||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| (In thousands, except share and per share data) | |||||||||||||||
| Revenues | $ | 221,319 | $ | 235,655 | $ | 872,700 | $ | 948,294 | |||||||
| Cost and expenses | |||||||||||||||
| Instructional costs and services | 143,136 | 166,900 | 546,510 | 607,756 | |||||||||||
| Selling, administrative, and other operating expenses | 76,606 | 80,756 | 302,205 | 307,730 | |||||||||||
| Product development expenses | 1,067 | 4,317 | 10,071 | 14,381 | |||||||||||
| Total costs and expenses | 220,809 | 251,973 | 858,786 | 929,867 | |||||||||||
| Income (Loss) from operations | 510 | (16,318 | ) | 13,914 | 18,427 | ||||||||||
| Interest expense, net | (21 | ) | (3,158 | ) | (617 | ) | (3,291 | ) | |||||||
| Income (Loss) before income tax expense and noncontrolling interest | 489 | (19,476 | ) | 13,297 | 15,136 | ||||||||||
| Income tax expense | (822 | ) | 6,901 | (4,746 | ) | (5,810 | ) | ||||||||
| Net income (loss) | (333 | ) | (12,575 | ) | 8,551 | 9,326 | |||||||||
| Adjust net (income) loss attributable to noncontrolling interest | (649 | ) | 995 | 484 | 1,662 | ||||||||||
| Net income (loss) attributable to common stockholders | $ | (982 | ) | $ | (11,580 | ) | $ | 9,035 | $ | 10,988 | |||||
| Net income (loss) attributable to common stockholders per share | |||||||||||||||
| Basic | $ | (0.03 | ) | $ | (0.31 | ) | $ | 0.24 | $ | 0.29 | |||||
| Diluted | $ | (0.03 | ) | $ | (0.31 | ) | $ | 0.23 | $ | 0.29 | |||||
| Weighted average shares used in computing per share amounts: | |||||||||||||||
| Basic | 37,768,812 | 37,318,085 | 37,613,782 | 37,330,569 | |||||||||||
| Diluted | 37,768,812 | 37,318,085 | 38,850,388 | 37,625,425 | |||||||||||
| K12 INC. | |||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| Year Ended June 30, | |||||||
| 2016 | 2015 | ||||||
| (In thousands) | |||||||
| Cash flows from operating activities | |||||||
| Net income | $ | 8,551 | $ | 9,326 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization expense | 68,225 | 80,282 | |||||
| Stock-based compensation expense | 18,616 | 21,299 | |||||
| Excess tax benefit from stock-based compensation | (6 | ) | (118 | ) | |||
| Deferred income taxes | (3,818 | ) | (3,094 | ) | |||
| Provision for doubtful accounts | 4,610 | 9,300 | |||||
| Provision for inventory obsolescence | 691 | 1,406 | |||||
| Provision for student computer shrinkage and obsolescence | (459 | ) | (430 | ) | |||
| Impairment loss on other assets | 200 | 3,200 | |||||
| Expensed computer peripherals | 2,625 | 3,519 | |||||
| Changes in assets and liabilities: | |||||||
| Accounts receivable | 14,463 | (1,892 | ) | ||||
| Inventories | (1,751 | ) | 2,853 | ||||
| Prepaid expenses | 1,860 | (4,073 | ) | ||||
| Other current assets | 2,830 | (2,579 | ) | ||||
| Deposits and other assets | (8,910 | ) | (1,440 | ) | |||
| Accounts payable | (3,900 | ) | (1,192 | ) | |||
| Accrued liabilities | 15,497 | (7,854 | ) | ||||
| Accrued compensation and benefits | 4,255 | 9,389 | |||||
| Deferred revenue | 636 | 621 | |||||
| Deferred rent and other liabilities | (2,437 | ) | 1,562 | ||||
| Net cash provided by operating activities | 121,778 | 120,085 | |||||
| Cash flows from investing activities | |||||||
| Purchases of property and equipment | (5,008 | ) | (9,928 | ) | |||
| Capitalized software development costs | (36,265 | ) | (33,755 | ) | |||
| Capitalized curriculum development costs | (21,627 | ) | (18,057 | ) | |||
| Acquisition of LearnBop Inc. | - | (6,512 | ) | ||||
| Acquisition of LTS Education Systems, net of cash acquired | (19,953 | ) | - | ||||
| Net cash used in investing activities | (82,853 | ) | (68,252 | ) | |||
| Cash flows from financing activities | |||||||
| Repayments on capital lease obligations | (17,402 | ) | (21,939 | ) | |||
| Purchase of treasury stock | - | (26,452 | ) | ||||
| Proceeds from exercise of stock options | 14 | 553 | |||||
| Excess tax benefit from stock-based compensation | 6 | 118 | |||||
| Retirement of restricted stock for tax withholding | (3,394 | ) | (2,672 | ) | |||
| Net cash used in financing activities | (20,776 | ) | (50,392 | ) | |||
| Effect of foreign exchange rate changes on cash and cash equivalents | (12 | ) | (1,698 | ) | |||
| Net change in cash and cash equivalents | 18,137 | (257 | ) | ||||
| Cash and cash equivalents, beginning of year | 195,852 | 196,109 | |||||
| Cash and cash equivalents, end of year | $ | 213,989 | $ | 195,852 | |||
Non-GAAP Financial Measures
EBITDA
EBITDA consists of net income plus net interest expense and other, plus income tax expense, minus income tax benefit, plus depreciation and amortization and non-controlling interest. Interest expense primarily consists of interest expense for capital leases. We use EBITDA in addition to income from operations and net income as a measure of operating performance. However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, net income as determined in accordance with GAAP. Not all companies use identical calculations for EBITDA, therefore our presentation of EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not consider certain cash requirements such as capital expenditures, tax payments, interest payments, or other working capital.
We believe EBITDA is useful to an investor in evaluating our operating performance because it is widely used to measure a company's operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of our capital structure and the method by which assets were acquired. Our management uses EBITDA:
- as an additional measurement of operating performance because it assists us in comparing our performance on a consistent basis; and
- in presentations to the members of our Board of Directors to enable our Board to have the same measurement basis of operating performance as is used by management to compare our current operating results with corresponding prior periods and with the results of other companies in our industry.
The following tables provide a reconciliation of net income (loss) to EBITDA:
| Three Months Ended June 30, | Year Ended June 30, | ||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||
| (In thousands) | (In thousands) | ||||||||||||
| Net income (loss) — K12 Inc. | $ | (982 | ) | $ | (11,580 | ) | $ | 9,035 | $ | 10,988 | |||
| Interest income (expense), net and other | 21 | 3,158 | 617 | 3,291 | |||||||||
| Income tax expense (benefit) | 822 | (6,901 | ) | 4,746 | 5,810 | ||||||||
| Depreciation and amortization | 17,603 | 31,528 | 68,225 | 83,801 | |||||||||
| Net income (loss) attributable to noncontrolling interest | 649 | (995 | ) | (484 | ) | (1,662 | ) | ||||||
| EBITDA | $ | 18,113 | $ | 15,210 | $ | 82,139 | $ | 102,228 | |||||
Appendix
| (A) | The following summary table is provided as reference only and compares fourth quarter and full year 2016 results with the same periods in 2015 adjusted for the $7.1 million net settlement incurred in the fourth quarter of 2016, and the $28.4 million in charges incurred in fourth quarter of FY 2015. |
| Three Months Ended | Change | Year Ended | Change | ||||||||||||||||||||||||
| June 30, | 2016 / 2015 | June 30, | 2016 / 2015 | ||||||||||||||||||||||||
| ($ in millions except per share amounts) | 2016 | 2015 | $ | % | 2016 | 2015 | $ | % | |||||||||||||||||||
| Operating Income | $ | 7.6 | $ | 8.9 | $ | (1.3 | ) | -14.6 | % | $ | 21.0 | $ | 43.7 | $ | (22.7 | ) | -51.9 | % | |||||||||
| Net Income attributable to common and Series A stockholders | $ | 3.5 | $ | 6.8 | $ | (3.3 | ) | -48.5 | % | $ | 13.5 | $ | 29.4 | $ | (15.9 | ) | -54.1 | % | |||||||||
| Diluted net income attributable to common stockholders per share, excluding Series A stockholders | $ | 0.09 | $ | 0.18 | $ | (0.09 | ) | -50.0 | % | $ | 0.35 | $ | 0.78 | $ | (0.43 | ) | -55.1 | % | |||||||||
| EBITDA | $ | 25.2 | $ | 26.6 | $ | (1.4 | ) | -5.3 | % | $ | 89.2 | $ | 113.6 | $ | (24.4 | ) | -21.5 | % | |||||||||
| (B) | The following tables are provided as reference only and adjust fourth quarter and full year 2016 results for the $7.1 million net settlement incurred in the fourth quarter of FY 2016. |
| Three Months Ended June 30, 2016 | ||||||||||||||||||||
| Reported Results | Net Settlement Impact | Results Excluding Settlement | Reported Results | Results Excluding Settlement | ||||||||||||||||
| (In thousands, except share and per share data) | (% of Revenue) | |||||||||||||||||||
| Revenues | $ | 221,319 | $ | - | $ | 221,319 | 100.0 | % | 100.0 | % | ||||||||||
| Cost and expenses | ||||||||||||||||||||
| Instructional costs and services | 143,136 | - | 143,136 | 64.7 | % | 64.7 | % | |||||||||||||
| Selling, administrative, and other operating expenses | 76,606 | 7,080 | 69,526 | 34.6 | % | 31.4 | % | |||||||||||||
| Product development expenses | 1,067 | - | 1,067 | 0.5 | % | 0.5 | % | |||||||||||||
| Total costs and expenses | 220,809 | 7,080 | 213,729 | 99.8 | % | 96.6 | % | |||||||||||||
| Income (loss) from operations | 510 | (7,080 | ) | 7,590 | 0.2 | % | 3.4 | % | ||||||||||||
| Interest (expense), net and other | (21 | ) | - | (21 | ) | (0.0 | %) | (0.0 | %) | |||||||||||
| Income (loss) before income tax expense and noncontrolling interest | 489 | (7,080 | ) | 7,569 | 0.2 | % | 3.4 | % | ||||||||||||
| Income tax (expense) benefit | (822 | ) | 2,613 | (3,435 | ) | (0.4 | %) | (1.6 | %) | |||||||||||
| Net income (loss) | (333 | ) | (4,467 | ) | 4,134 | (0.2 | %) | 1.9 | % | |||||||||||
| Adjust net income attributable to noncontrolling interest | (649 | ) | - | (649 | ) | (0.3 | %) | (0.3 | %) | |||||||||||
| Net income (loss) attributable to common stockholders | $ | (982 | ) | $ | (4,467 | ) | $ | 3,485 | (0.4 | %) | 1.6 | % | ||||||||
| Net income (loss) attributable to common stockholders per share | ||||||||||||||||||||
| Basic | $ | (0.03 | ) | $ | (0.12 | ) | $ | 0.09 | ||||||||||||
| Diluted | $ | (0.03 | ) | $ | (0.12 | ) | $ | 0.09 | ||||||||||||
| Weighted average shares used in computing per share amounts: | ||||||||||||||||||||
| Basic | 37,768,812 | 37,768,812 | 37,768,812 | |||||||||||||||||
| Diluted | 37,768,812 | 37,768,812 | 37,768,812 | |||||||||||||||||
| Year Ended June 30, 2016 | |||||||||||||||||||
| Reported Results | Net Settlement Impact | Results Excluding Settlement | Reported Results | Results Excluding Settlement | |||||||||||||||
| (In thousands, except share and per share data) | (% of Revenue) | ||||||||||||||||||
| Revenues | $ | 872,700 | $ | - | $ | 872,700 | 100.0 | % | 100.0 | % | |||||||||
| Cost and expenses | |||||||||||||||||||
| Instructional costs and services | 546,510 | - | 546,510 | 62.6 | % | 62.6 | % | ||||||||||||
| Selling, administrative, and other operating expenses | 302,205 | 7,080 | 295,125 | 34.6 | % | 33.8 | % | ||||||||||||
| Product development expenses | 10,071 | - | 10,071 | 1.2 | % | 1.2 | % | ||||||||||||
| Total costs and expenses | 858,786 | 7,080 | 851,706 | 98.4 | % | 97.6 | % | ||||||||||||
| Income (loss) from operations | 13,914 | (7,080 | ) | 20,994 | 1.6 | % | 2.4 | % | |||||||||||
| Interest (expense), net and other | (617 | ) | - | (617 | ) | (0.1 | %) | (0.1 | %) | ||||||||||
| Income (loss) before income tax expense and noncontrolling interest | 13,297 | (7,080 | ) | 20,377 | 1.5 | % | 2.3 | % | |||||||||||
| Income tax (expense) benefit | (4,746 | ) | 2,613 | (7,359 | ) | (0.5 | %) | (0.8 | %) | ||||||||||
| Net income (loss) | 8,551 | (4,467 | ) | 13,018 | 1.0 | % | 1.5 | % | |||||||||||
| Adjust net loss attributable to noncontrolling interest | 484 | - | 484 | 0.1 | % | 0.1 | % | ||||||||||||
| Net income (loss) attributable to common stockholders | $ | 9,035 | $ | (4,467 | ) | $ | 13,502 | 1.0 | % | 1.5 | % | ||||||||
| Net income (loss) attributable to common stockholders per share | |||||||||||||||||||
| Basic | $ | 0.24 | $ | (0.12 | ) | $ | 0.36 | ||||||||||||
| Diluted | $ | 0.23 | $ | (0.11 | ) | $ | 0.35 | ||||||||||||
| Weighted average shares used in computing per share amounts: | |||||||||||||||||||
| Basic | 37,613,782 | 37,613,782 | 37,613,782 | ||||||||||||||||
| Diluted | 38,850,388 | 38,850,388 | 38,850,388 | ||||||||||||||||
| (C) | During the quarter ended June 30, 2015, the Company incurred the following charges totaling $28.4 million of which $0.5 million were cash charges. | |||
| • | Reserves and write downs related to end of life products, software and inventory of $14.3 million. | |||
| • | Incremental accounts receivable reserves of $10.7 million, primarily related to closed schools, a funding deficit in one state and the interest on a receivable. | |||
| • | Severance costs of $3.4 million. | |||
| The following tables are provided as reference only and adjust fourth quarter and full year 2015 results for the removal of $28.4 million charges incurred in the fourth quarter of FY 2015. | ||||
The following tables are provided as reference only and adjust fourth quarter and full year 2015 results for the removal of $28.4 million charges incurred in the fourth quarter of FY 2015.
| Three Months Ended June 30, 2015 | ||||||||||||||||||||
| Reported Results | Specific Charges | Results Excluding Charges | Reported Results | Results Excluding Charges | ||||||||||||||||
| (In thousands, except share and per share data) | (% of Revenue) | |||||||||||||||||||
| Revenues | $ | 235,655 | $ | - | $ | 235,655 | 100.0 | % | 100.0 | % | ||||||||||
| Cost and expenses | ||||||||||||||||||||
| Instructional costs and services | 166,900 | 9,565 | 157,335 | 70.8 | % | 66.8 | % | |||||||||||||
| Selling, administrative, and other operating expenses | 80,756 | 15,670 | 65,086 | 34.3 | % | 27.6 | % | |||||||||||||
| Product development expenses | 4,317 | - | 4,317 | 1.8 | % | 1.8 | % | |||||||||||||
| Total costs and expenses | 251,973 | 25,235 | 226,738 | 106.9 | % | 96.2 | % | |||||||||||||
| Income (loss) from operations | (16,318 | ) | (25,235 | ) | 8,917 | (6.9 | %) | 3.8 | % | |||||||||||
| Realized gain on sale of assets | - | - | - | 0.0 | % | 0.0 | % | |||||||||||||
| Interest (expense), net and other | (3,158 | ) | (3,200 | ) | 42 | (1.3 | %) | 0.0 | % | |||||||||||
| Income (loss) before income tax expense and noncontrolling interest | (19,476 | ) | (28,435 | ) | 8,959 | (8.3 | %) | 3.8 | % | |||||||||||
| Income tax (expense) benefit | 6,901 | 10,006 | (3,105 | ) | 2.9 | % | (1.3 | %) | ||||||||||||
| Net income (loss) | (12,575 | ) | (18,429 | ) | 5,854 | (5.3 | %) | 2.5 | % | |||||||||||
| Adjust net loss attributable to noncontrolling interest | 995 | - | 995 | 0.4 | % | 0.4 | % | |||||||||||||
| Net income (loss) attributable to common stockholders | $ | (11,580 | ) | $ | (18,429 | ) | $ | 6,849 | (4.9 | %) | 2.9 | % | ||||||||
| Net income (loss) attributable to common stockholders per share | ||||||||||||||||||||
| Basic | $ | (0.31 | ) | $ | (0.49 | ) | $ | 0.18 | ||||||||||||
| Diluted | $ | (0.31 | ) | $ | (0.49 | ) | $ | 0.18 | ||||||||||||
| Weighted average shares used in computing per share amounts: | ||||||||||||||||||||
| Basic | 37,318,085 | 37,318,085 | 37,318,085 | |||||||||||||||||
| Diluted | 37,318,085 | 37,318,085 | 37,318,085 | |||||||||||||||||
| Year Ended June 30, 2015 | ||||||||||||||||||||
| Reported Results | Specific Charges | Results Excluding Charges | Reported Results | Results Excluding Charges | ||||||||||||||||
| (In thousands, except share and per share data) | (% of Revenue) | |||||||||||||||||||
| Revenues | $ | 948,294 | $ | - | $ | 948,294 | 100.0 | % | 100.0 | % | ||||||||||
| Cost and expenses | ||||||||||||||||||||
| Instructional costs and services | 607,756 | 9,565 | 598,191 | 64.1 | % | 63.1 | % | |||||||||||||
| Selling, administrative, and other operating expenses | 307,730 | 15,670 | 292,060 | 32.5 | % | 30.8 | % | |||||||||||||
| Product development expenses | 14,381 | - | 14,381 | 1.5 | % | 1.5 | % | |||||||||||||
| Total costs and expenses | 929,867 | 25,235 | 904,632 | 98.1 | % | 95.4 | % | |||||||||||||
| Income (loss) from operations | 18,427 | (25,235 | ) | 43,662 | 1.9 | % | 4.6 | % | ||||||||||||
| Realized gain on sale of assets | - | - | - | 0.0 | % | 0.0 | % | |||||||||||||
| Interest (expense), net and other | (3,291 | ) | (3,200 | ) | (91 | ) | (0.3 | %) | (0.0 | %) | ||||||||||
| Income (loss) before income tax expense and noncontrolling interest | 15,136 | (28,435 | ) | 43,571 | 1.6 | % | 4.6 | % | ||||||||||||
| Income tax (expense) benefit | (5,810 | ) | 10,006 | (15,816 | ) | (0.6 | %) | (1.7 | %) | |||||||||||
| Net income (loss) | 9,326 | (18,429 | ) | 27,755 | 1.0 | % | 2.9 | % | ||||||||||||
| Adjust net loss attributable to noncontrolling interest | 1,662 | - | 1,662 | 0.2 | % | 0.2 | % | |||||||||||||
| Net income (loss) attributable to common stockholders | $ | 10,988 | $ | (18,429 | ) | $ | 29,417 | 1.2 | % | 3.1 | % | |||||||||
| Net income (loss) attributable to common stockholders per share | ||||||||||||||||||||
| Basic | $ | 0.29 | $ | (0.49 | ) | $ | 0.79 | |||||||||||||
| Diluted | $ | 0.29 | $ | (0.49 | ) | $ | 0.78 | |||||||||||||
| Weighted average shares used in computing per share amounts: | ||||||||||||||||||||
| Basic | 37,330,569 | 37,330,569 | 37,330,569 | |||||||||||||||||
| Diluted | 37,625,425 | 37,625,425 | 37,625,425 | |||||||||||||||||
About K12 Inc.
K12 Inc. (NYSE:LRN) is driving innovation and advancing the quality of education by delivering state-of-the-art, digital learning platforms and technology to students and school districts across the globe. K12’s award winning curriculum serves over 2,000 schools and school districts and has delivered more than four million courses over the past decade. K12 is a company of educators with the nation's largest network of K-12 online school teachers, providing instruction, academic services, and learning solutions to public schools and districts, traditional classrooms, blended school programs, and directly to families. The K12 program is offered through K12 partner public schools in approximately two-thirds of the states and the District of Columbia, and through private schools serving students in all 50 states and more than 100 countries. More information can be found at K12.com.