Stride, Inc. · NYSE:LRN
Stride — K12 — Investor Presentation (December 2016)
27 slides from Stride's investor presentation, Dec 15, 2016
Slide 1: Forward Looking Statements
Forward Looking Statements In this presentation, the use of words such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “intend,” “future,” “potential” or “continue” and other similar expressions are intended to identify forward-looking statements. All o
Slide 2: K12 – Who are we?
3 K12 – Who are we? K12 is A Technology-BASED education company We offer our proprietary curriculum, software systems and educational services to public and private schools nationwide and across the globe
Slide 3: How K12 Serves the Market
4 How K12 Serves the Market Managed Public School Programs Private Pay Schools FY 16 Revenue: $717 million FY 16 Revenue: $47 million FY 16 Revenue: $109 million K12 serves the education market through three lines of business Institutional State-funded public schools managed by K12 for non-profit bo
Slide 4: Managed public schools & related programs
Managed public schools & related programs 5
Slide 5: K12 Managed Public School Programs
K12 Managed Public School Programs 6 K12 remains bullish on the long-term opportunities in the managed public school market Largest provider of education management solutions for full-time online schools Low penetration in large existing market with potential for 30%+ growth in market size over time
Slide 6: K12 Managed Public School Programs: footprint and scope
7 K12 Managed Public School Programs MD Statewide Full-time Managed Programs Full-time Managed Programs – County based Blended/Hybrid or District Program No Program K12 provides a turnkey operation, including, but not limited to, curriculum, technology, teachers, financial support, administration, p
Slide 7: Why parents choose full-time online school
K12 Managed Public School Programs 8 Student Issues / Circumstances Struggled in traditional school Advanced learner Bullied Negative social experience Pursuing profession Athlete / Artist Military Religious Health Special education Parents choose a full-time online school option for a variety of re
Slide 8: Full-time online school market potential $7B-$11B
9 K12 Managed Public School Programs Today’s Market: 33 states + D.C. Potential market: 50 states + D.C. The full-time online school market potential is $7B-$11B Significant growth exists in today’s states with further potential as all states adopt full-time online options Market potential (assume $
Slide 9: Barriers to entry in managed school solutions
10 K12 Managed Public School Programs Large investment in high-quality platform, curriculum and educational services to support all grades/subjects Significant back office, marketing/enrollment, public affairs and other administrative infrastructure required Depth of experience in working with indep
Slide 10: Multi-year investment plan and enrollment growth
K12 Managed Public School Programs 11 K12 has invested in a multi-year plan to establish a foundation for sustained long-term growth Managed Public School Enrollments – Count Date (Q1) Invested in Teachers & Leaders Increased Student Engagement Expanded Program Options Refined Marketing Strategy Pro
Slide 11: Favorable policy environment for school choice
K12 Managed Public School Programs 12 Department of Education – Betsy DeVos: pro-school choice & virtual options Republican majority at state-level: 34 governorships; 25 state legislatures Post-election, with Republican wins, policy environment more favorable for school choice at federal/state level
Slide 12: Institutional
Institutional 13 Content sales to Public School Districts Services sold to non-school related Institutions (e.g. corrections departments, other education management companies, etc. K12’s brand for the Institutional Market: Fuel Education or FuelEd
Slide 13: K12 Institutional growth potential
K12 Institutional 14 K12 Institutional provides strong growth potential for the Company over the long-term Competing in a ~$6.5B market today growing at ~10% Leveraging one of the industry’s largest curriculum, technology and educational solution suites recently upgraded for ELL and CTE markets Ente
Slide 14: Education Delivery System Evolving & Embracing Technology
K12 Institutional 15 Education Delivery System Evolving & Embracing Technology School Districts Expanding Digital Learning Prevalence of state & district-administered virtual learning programs increasing Range from supplementing classroom instruction to full-time programs More Technology in the Clas
Slide 15: Shift to digital
16 Shift to digital More Scheduling Options Math In School Teacher Print Textbook English In School Teacher Print Textbook Science In School Teacher Teacher Lessons Social Studies In School Teacher Teacher Lessons Foreign Language In School Teacher Teacher Lessons In Classroom Models New Classroom M
Slide 16: Fuel Education simplifies multiple learning models
17 Peak, an easy-to-use technology platform that simplifies administration and makes monitoring and reporting more efficient The industry’s largest catalog of flexible digital curriculum aligned to national and state standards A full range of educational services, including certified instruction and
Slide 17: Expanding into new institutional market segments
18 K12 is expanding into new segments of the institutional market that provide additional growth potential for the long-term K12 Institutional Career Technical Education $0.2B market today with potential $2B market expansion; directly supports “get America back to work” focus Supplemental Courses $1
Slide 18: Expanding into new institutional market segments
K?2 is expanding into new segments of the institutional market that provide additional growth potential for the long-term Career Technical Education + §0.2B market today with potential $2B market expansion; directly supports “get America back to work” focus Supplemental Courses + $1.38 market - Lear
Slide 19: Private school market growth
Private School market to grow from ~125K students in 2013 to ~370K in 2018 Today K12 has ~3% revenue market share and is the #12 player in the market 60-70 schools comprise 90+% of the market K12 has ~4% student market share and is the #8 player in the market 20 K12 Private Pay Est. Market Size in U
Slide 20: K12 Private Pay segments
21 K12 Private Pay College prep students targeting top 4-year colleges & universities Holistic, individualized college prep high school program from trusted experts Students seeking a better educational option, diverse learners, ex-pats, foreign nationals High-quality K-12 U.S. education with extens
Slide 21: Expanding into new private pay market segments
K22 Private Pay Re K?2 is expanding into new segments of the private pay market that provides additional growth potential for the long-term @ International * Focus on partnership strategy leveraging K12’s core competencies - $100M near-term market with focus on LATAM and APAC countries Adult Learnin
Slide 22: K12 Financials: Revenue
K12 Financials 24 Revenue K12 financials met expectations in FY16 with improving trends in FY17E K12 guidance – increasing revenue and operating income in FY17 Increasing operating leverage During fiscal year 2014, the Company incurred charges relating to additional reserves, accelerated amortizatio
Slide 23: K12 Financials: Balance Sheet and Free Cash Flow
K12 Financials 25 Balance Sheet – Q4 Fiscal 2016 Free Cash Flow Strong balance sheet and stock valuation Potential for improving free cash flow over time with cycle of capital investment tapering down * FY17E consensus reflects the average of the three analysts covering K12 Inc.
Slide 24: K12 Summary
K12 Summary 26 Large and growing managed public school program business Over last 3 years took steps to address outcomes, content, curriculum and tools Enrollments grew in FY17 with untapped potential in existing and new markets/states Results: Guidance for revenue and operating income in FY17 shows
Slide 25: Summary
Psummary LARGE AND GROWING MANAGED PUBLIC SCHOOL PROGRAM BUSINESS * Over last 3 years took steps to address outcomes, content, curriculum and tools * Enrollments grew in FY17 with untapped potential in existing and new markets/states * Results: Guidance for revenue and operating income in FY17 shows
Slide 26: K12 – Additional Information
28 K12 – Additional Information Reconciliation of GAAP to non-GAAP measures referenced on page 24 * FY17E consensus reflects the average of the three analysts covering K12 Inc.
Slide 27: K12 – Additional Information
K12 — Additional Information Reconciliation of GAAP to non-GAAP measures referenced on page 24 (sm) Fy14 FYIS —-FY16 17E Net income - K12 Inc. $ 196 $ 110 $ 90 Interest expense (income), net - 3.3 06 Income tax expense 14a 58 48 Noncontrolling interest (1.5) (1.7) (0.5) Operating Income 29.2 18.4 13