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K12 Offers Guidance For FY 2014

Stocks in this article: LRN

K12 Inc. (NYSE: 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 guidance for the full fiscal year ending June 30, 2014 (“FY 2014”) and the first fiscal quarter of 2014.

Fiscal Year 2014 Outlook

The Company is forecasting the following for FY 2014:

  • Revenue of $905 million to $925 million.
  • Operating income in the range of $53 million to $57 million, with a corresponding expansion of operating margin to a range of 5.7% to 6.3% in fiscal 2014.
  • Capital expenditures, defined as curriculum development, software development, purchases of property and equipment and capitalized leases for student computers, of $75 million to $85 million.
  • Income tax rate of 40% to 42%.

The Company also reported on October 8, 2013 that its Q1 FY 2014 average student enrollments in Managed Public Schools were 128,550, an increase of 5.7% over Q1 FY 2013. Applications for enrollment into the Company’s Managed Public Schools, which is a major indicator of demand for the Company’s products and services, rose 11% for the 2013 enrollment period versus the same period in the prior year.

The increase in Managed Public School enrollments fell short of previous expectations due to several factors, which include, among others:

  • The Company’s inability to convert the increased volume of student applications into enrollments at a level achieved during previous years due to performance in its enrollment centers and, to a lesser extent;
  • The delayed start of the open enrollment period for certain schools.

First Quarter Fiscal 2014 Outlook

The Company is forecasting the following for the first quarter of FY 2014:

  • Revenues to increase 3% to 4% over first quarter FY 2013. This is lower than the Company’s full year growth mainly due to timing of school openings and revenue recognition rules.
  • Operating loss in the range of $8 million to $10 million. Operating income / (loss) in the first quarter is negatively impacted by timing of revenue and seasonality of SG&A costs which includes enrollment center and promotional expenses.

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