Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

CEO Exclusive: K12 Set to Boom Amid Virtual Schooling as Covid Keeps Us Home

Stock MarketsJul 25, 2020 06:03AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Christiana Sciaudone

Investing.com -- K12 (NYSE:LRN) Inc. runs online public schools and, accordingly, business is booming.

“The growth in enrollments that we’re seeing is shocking even to us,” Chief Executive Officer Nathaniel Davis said in a Zoom interview with Investing.com this week. 

Covid-19 stay-at-home mandates and school closures have forced parents to seek out alternatives to traditional in-person school, boosting K12’s fortunes. The company gets the lion’s share of its revenue from operating virtual public schools, with the first quarter bringing in $228,335 for the segment out of a total $257,154. Investors are seeing the same opportunity, tripling K12’s share price this year. 

“They are in the right place at the right time,” said Jeff Silber, an analyst at BMO Capital Markets who has a buy rating on K12. “This is likely to be the best year in company history.”

K12 is a 20-year-old venture, and operates more than 70 schools in 35 states, with an enrollment of 122,800 as of fall 2019. It also provides the curriculum and services necessary for public and private schools to set up their own customized full-time and part-time online programs, and for supplemental online and blended education. In total, K12 works with 6,000 teachers, of which approximately 2,000 are K12 employees. That will grow this year, with plans to hire as many as 1,300 teachers.

Visits to the website are up 90% from February through now, and applications are up 60%, Davis said. The company is poised to announce a major deal with one of the country’s largest school districts, for which it will provide software and services. Local teachers will remain.

K12 is targeting expansion in big markets like New York and New Jersey, and will continue opening schools in states where it already operates. 

“Based on the kinda applications we are seeing, the estimates in the marketplace are modest,” Davis said. 

Online school is still a limited market, however, Silber said. While there are more than 50 million students in U.S. public schools, not everyone can adjust well to the virtual environment. In 2017-18, 298,000 students were enrolled in full-time virtual schools, Silber said, citing the most recent information available from the National Education Policy Center. It’s a tiny niche, he said. Even if it doubled, 99% of students would still be enrolled in regular schools.  

Pearson’s Connections Academy is K12’s biggest peer, and it also reported strong revenue growth, with applications up 61% in the first half compared to 2019. Pearson said in its half-year results statement on July 24 that it is increasing capacity in existing schools and seeing interest from states that haven’t yet initiated virtual schooling. In the upcoming school year, Connections will have 32 partner schools in 29 states.           

While the short-term looks positive, long-term growth will come from K12's career readiness segment, Davis said. While K-12 education is a market estimated to be worth $11 billion, the potential market for career readiness totals almost $100 billion, according to a K12 presentation.

In January, K12 bought career readiness company Galvanize Inc. for $165 million in a cash deal. The acquisition of Galvanize positions K12 as a provider of career readiness education services, including skills training, technology staffing and developing talent and capabilities for Fortune 500 companies.

Davis recounted a recent management meeting with four big corporations, and their frustration at finding qualified talent. 

“Half the jobs they are going to fill don’t require college education, but they do need skills,” Davis said. “The corporations are all telling us ‘I care more about skills than I do about degrees.’”

Companies want employees who can get to work on time, be organized, handle spreadsheets, and perform other tasks. Those things aren’t being taught in college, though some are adapting, Davis said. With the coronavirus sending kids home, families are starting to question the tens of thousands of dollars they are spending on traditional college experiences.

“A liberal arts education may not help you get a job,” Davis said.  

Among the strategies in building a successful company is, evidently, finding the right people. While diversity is on everyone’s mind of late, Davis has made it a priority since he took charge in 2013. White men are outnumbered on K12’s management team and the board of directors, which includes African-Americans, Asians and Hispanics.

“I am a person who has benefited from people giving me a chance. I want to give others a chance,” Davis said. Candidates, including for the board of directors, have to be qualified, but Davis keeps an open mind in terms of experience and exact skills. Even if they have never served on a board, they will have something else to contribute. “You have to be committed to it and you open your mind up to the other skills of individuals.”

A recent example of the difference diversity brings to the board came after a look at the mix of students showed a dearth of Latinos. Two Hispanic board members were consulted, and they reached out through their contacts to help the company reach Latino families. As a result, K12 saw a jump in the number of Latino students enrolled.

“It comes from the top,” Davis said. “It’s how you set the tone.”

CEO Exclusive: K12 Set to Boom Amid Virtual Schooling as Covid Keeps Us Home
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Tom Jones
Tom Jones Jul 26, 2020 12:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I read the Edgar filings on LRN, and while the do some online instruction and classes, much of their business is in-home tutoring, which will be shrinking, not growing. They’re hiring 1,300 teachers, though, so I’m not sure what the plan is because they shouldn’t need 1300 Teachers for online classes. Perhaps they’re transforming into online tutoring, in which case 2U (TWOU) is a company that helps schools put their curriculums online. LRN has skyrocketed, so there is a LOT of upside priced in. Careful with this one.
Darian Gray
Darian Gray Jul 26, 2020 12:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what, they are specifically an online public/private school. If you went to their website you would see completely different
Ludovic Raymond
Ludovic Raymond Jul 25, 2020 5:26PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Any other competitor, alternative?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email