By Christiana Sciaudone
Investing.com – K12 (NYSE 🙂 Inc. runs online public schools and business is booming accordingly.
"The growth in enrollments we see is shocking even for us," said CEO Nathaniel Davis in a Zoom interview with Investing.com this week.
Covid-19 mandates to stay at home and school closures have forced parents to look for alternatives to traditional personal school, increasing K12's fortune. The company generates the lion's share of its sales from operating virtual public schools. The segment generated $ 228,335 in the first quarter for a total of $ 257,154. Investors see the same opportunity and triple K12's share price this year.
"You're in the right place at the right time," said Jeff Silber, a BMO Capital Markets analyst with a buy rating for K12. "This is probably the best year in the company's history."
K12 is a 20 year old company and operates more than 70 schools in 35 states with an enrollment of 122,800 in Fall 2019. It also provides the curricula and services that public and private schools need to set up their own bespoke online and part-time schools -Online programs as well as complementary online and blended education. In total, K12 works with 6,000 teachers, of whom around 2,000 are K12 employees. That will increase this year, with plans to hire up to 1,300 teachers.
Visits to the website have increased 90% from February to now, and requests have increased 60%, Davis said. The company is ready to sign a key contract with one of the country's largest school districts, for which it will provide software and services. Local teachers stay.
K12 is expanding into major markets such as New York and New Jersey and will continue to open schools in countries where it already operates.
"Based on the applications we see, the estimates in the market are modest," said Davis.
Online school is still a limited market, said Silver. While there are more than 50 million students in public schools in the United States, not everyone can adapt well to the virtual environment. From 2017 to 18, 298,000 students were enrolled in full-time virtual schools, Silver said, citing the latest information from the National Education Policy Center. It's a tiny niche, he said. Even if it doubled, 99% of the students would still be enrolled in regular schools.
The Pearson Connections Academy is K12's largest partner and has also seen strong sales growth. Applications increased 61% in the first half of 2019 compared to 2019. Pearson said in its July 24 half-year results statement that capacity in existing schools and schools will increase interest from states that have not yet initiated a virtual school. In the coming school year, Connections will have 32 partner schools in 29 states.
While short-term development is positive, long-term growth will come from K12's career-ready segment, Davis said. While K-12 education is an estimated $ 11 billion market, the potential career development market is close to $ 100 billion, according to a K12 presentation.
In January, K12 bought the career standby company Galvanize Inc. for $ 165 million in cash. The acquisition of Galvanize positions K12 as a provider of pre-career education services, including skills, technology staff, and talent and skill development for Fortune 500 companies.
Davis reported on a recent management meeting with four large companies and their frustration at finding qualified talent.
"Half of the jobs they will fill do not require college education, but they do require skills," said Davis. "The companies all tell us:" I'm more interested in skills than degrees. "
Companies want people who can get to work on time, be organized, work on spreadsheets, and perform other tasks. These things are not taught in college, although some are adapting, Davis said. With the corona virus sending children home, families are beginning to question the tens of thousands of dollars they spend on traditional college experiences.
"Training in the liberal arts may not help you find a job," said Davis.
The strategies for building a successful company obviously include finding the right people. While diversity has been on everyone's lips lately, Davis has made it a priority since taking office in 2013. White men outnumber the K12 management team and the Board of Directors, which includes African Americans, Asians, and Hispanics.
“I am a person who has benefited from people who give me a chance. I want to give others a chance, ”said Davis. Candidates, including for the board of directors, must be qualified, but Davis is open to experience and accurate skills. Even if you have never served on a board, you can still contribute. "You have to commit yourself and open yourself to the other skills of the individual."
A recent example of the difference that diversity brings to the board came after a look at the student mix showed a lack of Latinos. Two Hispanic board members were consulted and reached through their contacts to help the company reach out to Latino families. As a result, K12 saw an increase in the number of Latino students enrolled.
"It comes from above," said Davis. "So you set the tone."