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K12 released their quarterly results, causing a significant dip in the share price. These results featured quarterly revenues that were slightly off from both consensus and our estimates, but margin expansion that has also bested both for the fiscal year. The accounting loss that stemmed from the increase in expenses appear to be right on target with both our estimates and the consensus. This makes the expected growth prospects of this young, high growth company that much cheaper on a per share basis.

From the downloadable Q4 review (available for free download): LRN 4Q09 review_091009 LRN 4Q09 review_091009 2009-09-11 01:19:01 118.42 Kb 

 K12 reported results for FY09 on September 09, 2009. The company delivered robust sales growth as well as improvement in operating margins in FY09, in line with our expectations. Penetration in the existing markets as well as foray in the new states has fuelled the growth, with the Company’s average enrolments increasing 34.5% (y-o-y) in FY09. Growth in average enrolments along with 3.7% increase in revenue per enrolment resulted in about 40% (y-o-y) growth in revenues to $315.6 mn in FY09 compared to $226.2 mn in FY08. Further, the operating margin improved 130 basis points to 7.1% in FY09 versus 5.8% in FY08. Growth in the top line coupled with expansion in operating margin resulted in 72% ( y-o-y) increase in operating income to $22.3 mn in FY09 compared to $13.0 mn in FY08. Net income grew 81.1% (y-o-y) to $12.3 mn in FY09 against $6.8 mn in FY08 (after excluding one time income tax benefit of $27 mn recorded in FY08). K12’s results were in line with our expectations, the variation between the actual and projected operational performance being only marginal. Average enrolments and revenue per enrolment were 0.6% and 1.4% lower than our estimates, respectively. Although the revenues in FY09 were 2.0% lower than our estimates, the higher than expected expansion in operating margins resulted in 5.0% higher than expected operating profit. Net income of $12.3 mn is exactly in line with our estimates with a variation of just 0.2%.

For 4Q09, while our estimated revenues were higher than the actual revenue by 8.3%, the estimated operating income at negative $1.4 million was in line reported operating income figure of negative $0.3 million. The Company reported net income of negative $0.7 million (versus our estimate of negative $0.6 million) with EPS of negative $0.02 (same as our estimate).

I do recommend that those who are interested in my opinion on this company read the download linked above, particularly the strengths and caveats sections.