Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2019 | Apr. 19, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | K12 INC | |
Entity Central Index Key | 0001157408 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 40,201,223 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2019 | Jun. 30, 2018 |
Current assets | ||
Cash and cash equivalents | $ 234,025 | $ 231,113 |
Accounts receivable, net of allowance of $9,008 and $12,384 at March 31, 2019 and June 30, 2018, respectively | 238,614 | 176,319 |
Inventories, net | 17,195 | 31,134 |
Prepaid expenses | 17,958 | 10,278 |
Other current assets | 14,181 | 10,388 |
Total current assets | 521,973 | 459,232 |
Property and equipment, net | 32,778 | 28,868 |
Capitalized software, net | 51,693 | 55,488 |
Capitalized curriculum development costs, net | 51,160 | 53,558 |
Intangible assets, net | 15,723 | 17,951 |
Goodwill | 90,197 | 90,197 |
Deposits and other assets | 45,486 | 36,669 |
Total assets | 809,010 | 741,963 |
Current liabilities | ||
Current portion of capital lease obligations | 24,499 | 13,353 |
Accounts payable | 23,208 | 29,362 |
Accrued liabilities | 17,706 | 14,345 |
Accrued compensation and benefits | 30,549 | 36,050 |
Deferred revenue | 52,827 | 23,114 |
Total current liabilities | 148,789 | 116,224 |
Capital lease obligations, net of current portion | 6,698 | 12,665 |
Deferred rent, net of current portion | 2,524 | 3,270 |
Deferred tax liability | 18,211 | 12,577 |
Other long-term liabilities | 8,048 | 10,038 |
Total liabilities | 184,270 | 154,774 |
Commitments and contingencies | ||
Stockholders’ equity | ||
Common stock, par value $0.0001; 100,000,000 shares authorized; 45,542,026 and 44,902,567 shares issued; and 40,207,283 and 39,567,824 shares outstanding at March 31, 2019 and June 30, 2018, respectively | 4 | 4 |
Additional paid-in capital | 708,269 | 703,351 |
Accumulated other comprehensive loss | (181) | (252) |
Retained earnings (accumulated deficit) | 19,130 | (13,432) |
Treasury stock of 5,334,743 shares at cost at March 31, 2019 and June 30, 2018 | (102,482) | (102,482) |
Total stockholders’ equity | 624,740 | 587,189 |
Total liabilities and stockholders' equity | $ 809,010 | $ 741,963 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2019 | Jun. 30, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance (in dollars) | $ 9,008 | $ 12,384 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 45,542,026 | 44,902,567 |
Common stock, shares outstanding | 40,207,283 | 39,567,824 |
Treasury stock, shares | 5,334,743 | 5,334,743 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Revenues | $ 253,252 | $ 232,864 | $ 759,438 | $ 678,860 |
Cost and expenses | ||||
Instructional costs and services | 168,260 | 148,878 | 487,574 | 435,408 |
Selling, administrative, and other operating expenses | 59,382 | 62,267 | 222,143 | 220,507 |
Product development expenses | 2,343 | 2,002 | 6,916 | 7,276 |
Total costs and expenses | 229,985 | 213,147 | 716,633 | 663,191 |
Income from operations | 23,267 | 19,717 | 42,805 | 15,669 |
Interest income, net | 754 | 261 | 1,547 | 535 |
Other income (expense), net | 556 | (40) | ||
Income before income taxes, loss from equity method investments and noncontrolling interest | 24,577 | 19,978 | 44,312 | 16,204 |
Income tax benefit (expense) | (5,842) | (6,935) | (9,858) | 1,869 |
Loss from equity method investments | (273) | (562) | ||
Net income | 18,462 | 13,043 | 33,892 | 18,073 |
Add net income attributable to noncontrolling interest | 27 | 200 | ||
Net income attributable to common stockholders | $ 18,462 | $ 13,070 | $ 33,892 | $ 18,273 |
Net income attributable to common stockholders per share: | ||||
Basic (in dollars per share) | $ 0.47 | $ 0.33 | $ 0.87 | $ 0.46 |
Diluted (in dollars per share) | $ 0.44 | $ 0.32 | $ 0.84 | $ 0.45 |
Weighted average shares used in computing per share amounts: | ||||
Basic (in shares) | 39,008,990 | 39,644,074 | 38,753,236 | 39,366,497 |
Diluted (in shares) | 41,753,323 | 40,766,203 | 40,548,959 | 40,771,437 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 18,462 | $ 13,043 | $ 33,892 | $ 18,073 |
Other comprehensive income, net of tax: | ||||
Foreign currency translation adjustment | (122) | (198) | 71 | (392) |
Total other comprehensive income, net of tax | 18,340 | 12,845 | 33,963 | 17,681 |
Comprehensive loss attributable to noncontrolling interest | 27 | 200 | ||
Comprehensive income attributable to common stockholders | $ 18,340 | $ 12,872 | $ 33,963 | $ 17,881 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Earnings (Accumulated Deficit) | Treasury Stock | Total |
Balance at Jun. 30, 2017 | $ 4 | $ 690,488 | $ (170) | $ (40,976) | $ (75,000) | $ 574,346 |
Balance (in shares) at Jun. 30, 2017 | 44,325,772 | (3,502,598) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | (8,056) | (8,056) | ||||
Foreign currency translation adjustment | (155) | (155) | ||||
Stock-based compensation expense | 4,832 | 4,832 | ||||
Exercise of stock options | 58 | 58 | ||||
Exercise of stock options (in shares) | 3,350 | |||||
Issuance of restricted stock awards (in shares) | 867,388 | |||||
Forfeiture of restricted stock awards (in shares) | (129,286) | |||||
Adjustments to redeemable noncontrolling interests to estimated redemption value | (103) | (103) | ||||
Repurchase of restricted stock for tax withholding | (4,093) | (4,093) | ||||
Repurchase of restricted stock for tax withholding (in shares) | (230,158) | |||||
Balance at Sep. 30, 2017 | $ 4 | 691,294 | (325) | (49,101) | $ (75,000) | 566,872 |
Balance (in shares) at Sep. 30, 2017 | 44,837,066 | (3,502,598) | ||||
Balance at Jun. 30, 2017 | $ 4 | 690,488 | (170) | (40,976) | $ (75,000) | 574,346 |
Balance (in shares) at Jun. 30, 2017 | 44,325,772 | (3,502,598) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 18,273 | |||||
Balance at Mar. 31, 2018 | $ 4 | 697,762 | (562) | (22,772) | $ (75,000) | 599,432 |
Balance (in shares) at Mar. 31, 2018 | 44,664,798 | (3,502,598) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Adjustment related to new accounting guidance | 112 | (69) | 43 | |||
Balance at Sep. 30, 2017 | $ 4 | 691,294 | (325) | (49,101) | $ (75,000) | 566,872 |
Balance (in shares) at Sep. 30, 2017 | 44,837,066 | (3,502,598) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 13,259 | 13,259 | ||||
Foreign currency translation adjustment | (39) | (39) | ||||
Stock-based compensation expense | 7,284 | 7,284 | ||||
Vesting of performance share units, net of tax withholding (in shares) | 60,324 | |||||
Issuance of restricted stock awards (in shares) | 88,924 | |||||
Forfeiture of restricted stock awards (in shares) | (28,438) | |||||
Adjustments to redeemable noncontrolling interests to estimated redemption value | 130 | 130 | ||||
Repurchase of restricted stock for tax withholding | (1,664) | (1,664) | ||||
Repurchase of restricted stock for tax withholding (in shares) | (59,446) | |||||
Balance at Dec. 31, 2017 | $ 4 | 697,044 | (364) | (35,842) | $ (75,000) | 585,842 |
Balance (in shares) at Dec. 31, 2017 | 44,898,430 | (3,502,598) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 13,070 | 13,070 | ||||
Foreign currency translation adjustment | (198) | (198) | ||||
Stock-based compensation expense | 4,625 | 4,625 | ||||
Exercise of stock options | 126 | 126 | ||||
Exercise of stock options (in shares) | 10,250 | |||||
Vesting of performance share units, net of tax withholding (in shares) | 89,352 | |||||
Issuance of restricted stock awards (in shares) | 55,293 | |||||
Forfeiture of restricted stock awards (in shares) | (173,539) | |||||
Adjustments to redeemable noncontrolling interests to estimated redemption value | (27) | (27) | ||||
Repurchase of restricted stock for tax withholding | (4,006) | (4,006) | ||||
Repurchase of restricted stock for tax withholding (in shares) | (214,988) | |||||
Balance at Mar. 31, 2018 | $ 4 | 697,762 | (562) | (22,772) | $ (75,000) | 599,432 |
Balance (in shares) at Mar. 31, 2018 | 44,664,798 | (3,502,598) | ||||
Balance at Jun. 30, 2018 | $ 4 | 703,351 | (252) | (13,432) | $ (102,482) | 587,189 |
Balance (in shares) at Jun. 30, 2018 | 44,902,567 | (5,334,743) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | (8,282) | (8,282) | ||||
Foreign currency translation adjustment | 72 | 72 | ||||
Stock-based compensation expense | 4,109 | 4,109 | ||||
Exercise of stock options | 10 | 10 | ||||
Exercise of stock options (in shares) | 687 | |||||
Vesting of performance share units, net of tax withholding (in shares) | 258,263 | |||||
Issuance of restricted stock awards (in shares) | 722,809 | |||||
Forfeiture of restricted stock awards (in shares) | (122,242) | |||||
Repurchase of restricted stock for tax withholding | (6,072) | (6,072) | ||||
Repurchase of restricted stock for tax withholding (in shares) | (188,804) | |||||
Balance at Sep. 30, 2018 | $ 4 | 701,398 | (180) | (23,044) | $ (102,482) | 575,696 |
Balance (in shares) at Sep. 30, 2018 | 45,573,280 | (5,334,743) | ||||
Balance at Jun. 30, 2018 | $ 4 | 703,351 | (252) | (13,432) | $ (102,482) | 587,189 |
Balance (in shares) at Jun. 30, 2018 | 44,902,567 | (5,334,743) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 33,892 | |||||
Balance at Mar. 31, 2019 | $ 4 | 708,269 | (181) | 19,130 | $ (102,482) | 624,740 |
Balance (in shares) at Mar. 31, 2019 | 45,542,026 | (5,334,743) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Adjustment related to new accounting guidance | (1,330) | (1,330) | ||||
Balance at Sep. 30, 2018 | $ 4 | 701,398 | (180) | (23,044) | $ (102,482) | 575,696 |
Balance (in shares) at Sep. 30, 2018 | 45,573,280 | (5,334,743) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 23,712 | 23,712 | ||||
Foreign currency translation adjustment | 121 | 121 | ||||
Stock-based compensation expense | 4,235 | 4,235 | ||||
Exercise of stock options | 1,025 | 1,025 | ||||
Exercise of stock options (in shares) | 51,050 | |||||
Issuance of restricted stock awards (in shares) | 26,000 | |||||
Forfeiture of restricted stock awards (in shares) | (54,054) | |||||
Repurchase of restricted stock for tax withholding | (833) | (833) | ||||
Repurchase of restricted stock for tax withholding (in shares) | (45,960) | |||||
Balance at Dec. 31, 2018 | $ 4 | 705,825 | (59) | 668 | $ (102,482) | 603,956 |
Balance (in shares) at Dec. 31, 2018 | 45,550,316 | (5,334,743) | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | 18,462 | 18,462 | ||||
Foreign currency translation adjustment | (122) | (122) | ||||
Stock-based compensation expense | 4,047 | 4,047 | ||||
Exercise of stock options | 1,148 | 1,148 | ||||
Exercise of stock options (in shares) | 54,753 | |||||
Issuance of restricted stock awards (in shares) | 73,524 | |||||
Forfeiture of restricted stock awards (in shares) | (51,435) | |||||
Repurchase of restricted stock for tax withholding | (2,751) | (2,751) | ||||
Repurchase of restricted stock for tax withholding (in shares) | (85,132) | |||||
Balance at Mar. 31, 2019 | $ 4 | $ 708,269 | $ (181) | $ 19,130 | $ (102,482) | $ 624,740 |
Balance (in shares) at Mar. 31, 2019 | 45,542,026 | (5,334,743) |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities | ||
Net income | $ 33,892 | $ 18,073 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Depreciation and amortization expense | 53,259 | 57,612 |
Stock-based compensation expense | 12,114 | 14,853 |
Deferred income taxes | 5,327 | (4,978) |
Provision for doubtful accounts | 2,854 | 605 |
Other | 5,291 | 4,757 |
Changes in assets and liabilities: | ||
Accounts receivable | (65,147) | (16,220) |
Inventories, prepaid expenses, deposits and other current and long-term assets | 4,620 | (24,138) |
Accounts payable | (3,134) | (9,215) |
Accrued liabilities | 5,211 | (7,364) |
Accrued compensation and benefits | (5,501) | 111 |
Deferred revenue, rent and other liabilities | 24,510 | 21,134 |
Net cash provided by operating activities | 73,296 | 55,230 |
Cash flows from investing activities | ||
Purchase of property and equipment | (2,397) | (6,580) |
Capitalized software development costs | (20,580) | (18,852) |
Capitalized curriculum development costs | (13,746) | (7,770) |
Sale of long-lived assets | 389 | |
Acquisitions and investments | (11,652) | (3,274) |
Net cash used in investing activities | (47,986) | (36,476) |
Cash flows from financing activities | ||
Repayments on capital lease obligations | (13,898) | (10,313) |
Payments of contingent consideration | (1,027) | (1,819) |
Proceeds from exercise of stock options | 2,183 | 184 |
Repurchase of restricted stock for income tax withholding | (9,656) | (9,763) |
Net cash used in financing activities | (22,398) | (21,711) |
Net change in cash, cash equivalents and restricted cash | 2,912 | (2,957) |
Cash, cash equivalents and restricted cash, beginning of period | 233,113 | 230,864 |
Cash, cash equivalents and restricted cash, end of period | $ 236,025 | $ 227,907 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands | Mar. 31, 2019USD ($) |
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of September 30th: | |
Cash and cash equivalents | $ 234,025 |
Deposits and other assets (restricted cash) | 2,000 |
Total cash, cash equivalents and restricted cash | $ 236,025 |
Description of the Business
Description of the Business | 9 Months Ended |
Mar. 31, 2019 | |
Description of the Business | |
Description of the Business | 1. Description of the Business K12 Inc., together with its subsidiaries (“K12” or the “Company”), is a technology-based education company. The Company offers proprietary and third party curriculum, software systems and educational services designed to facilitate individualized learning for students primarily in kindergarten through 12th grade, or K-12. The Company’s learning systems combine curriculum, instruction, and related support services to create an individualized learning approach well-suited for virtual and blended public schools, school districts, charter schools, and private schools that utilize varying degrees of online and traditional classroom instruction, and other educational applications. These products and services are provided through three lines of business: · Managed Public School Programs (programs which offer an integrated package of systems, services, products, and professional expertise that K12 manages in order to support an online or blended public school, including administrative support, information technology, academic support services, online curriculum, learning system platforms, and instructional services); · Institutional (Non-managed Public School Programs – programs which provide instruction, curriculum, supplemental courses, marketing, enrollment and other educational services where K12 does not provide primary administrative support services, and Institutional Software and Services – educational software and services provided to school districts, public schools and other educational institutions); and · Private Pay Schools and Other (private schools for which the Company charges student tuition and makes direct consumer sales). The Company works closely as a partner with public schools, school districts, charter schools, and private schools, enabling them to offer their students an array of solutions, including full-time virtual programs, semester courses and supplemental solutions. In addition to curriculum, systems and programs, the Company provides teacher training, teaching services, and other academic and technology support services. |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Mar. 31, 2019 | |
Basis of Presentation | |
Basis of Presentation | 2. Basis of Presentation The accompanying condensed consolidated balance sheet as of March 31, 2019, the condensed consolidated statements of operations and comprehensive income for the three and nine months ended March 31, 2019 and 2018, the condensed consolidated statements of cash flows for the nine months ended March 31, 2019 and 2018, and the condensed consolidated statements of stockholders’ equity for the three and nine months ended March 31, 2019 and 2018 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations for the periods presented. The results for the three and nine months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending June 30, 2019, for any other interim period or for any other future fiscal year. The condensed consolidated balance sheet as of June 30, 2018 has been derived from the audited consolidated financial statements at that date. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, the Company does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s condensed consolidated results of operations, financial position and cash flows. Preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and footnotes. Actual results could differ from those estimates. This quarterly report on Form 10-Q should be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2018, which contains the Company’s audited financial statements for the fiscal year ended June 30, 2018. The Company operates in one operating and reportable business segment as a technology-based education company providing proprietary and third party curriculum, software systems and educational services designed to facilitate individualized learning for students primarily in kindergarten through 12th grade. The Chief Operating Decision Maker evaluates profitability based on consolidated results. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Mar. 31, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Recent Accounting Pronouncements Accounting Standards Adopted In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”) to establish the classification of certain cash receipts and disbursements into the appropriate operating, investing, or financing categories; where there was diversity in practice previously. The Company has evaluated the standard and determined that the classification of contingent consideration payments should be moved from operating activities to financing activities. The Company retrospectively adopted this standard during the first quarter of fiscal year 2019. The adoption required the restatement of $1.8 million from cash flows from operations to cash flows from financing activities in fiscal year 2018. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) , also known as Accounting Standards Codification Topic 606 (“ASC 606”) , which supersedes most existing revenue recognition guidance under ASC Topic 605 (“ASC 605”) . The core principal of ASC 606 is to recognize revenues when contracted goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASC 606 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than were required under previous GAAP. The Company performed a detailed review of each of its revenue streams by comparing historical accounting policies and practices to the new standard. The majority of the Company’s business is based on contracts where annual revenue is recognized within each fiscal year, mirroring the school year. The Company adopted this standard during the first quarter of fiscal year 2019 using the modified retrospective approach. Under this method, the Company applied ASC 606 to those contracts whose terms extend beyond July 1, 2018. The comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of ASC 606 resulted in an adjustment to decrease retained earnings by $1.3 million. The key impact of ASC 606 was to streamline the recognition of all revenues from the Company’s lines of businesses over the service period, including: · Revenues that had been previously recognized over a 10-month school year; · Revenues from materials, supplies and professional services that had been previously recognized upon delivery; and · Revenues in which the Company is the primary obligor, and were recognized when expenses were incurred. In addition, the adoption of ASC 606 impacted how the Company accounts for its sales commissions. See “Costs to Obtain a Contract with a Customer” section below. The impact of adoption on the Company’s condensed consolidated statements of operations for the three and nine months ended March 31, 2019 was as follows: Three Months Ended March 31, 2019 Nine Months Ended March 31, 2019 As As Reported Adjustment Amounts Reported Adjustment Amounts Under ASC due to ASC under ASC Under due to ASC under 606 606 605 ASC 606 606 ASC 605 (In thousands) Revenues $ 253,252 $ 6,536 $ 259,788 $ 759,438 $ 3,799 $ 763,237 Selling, administrative, and other operating expenses 59,382 (68) 59,314 222,143 (193) 221,950 Income from operations 23,267 6,604 29,871 42,805 3,992 46,797 Net income 18,462 6,604 25,066 33,892 3,992 37,884 Net income attributable to common stockholders $ 18,462 $ 6,604 $ 25,066 $ 33,892 $ 3,992 $ 37,884 The impact of adoption on the Company’s condensed consolidated balance sheets as of March 31, 2019 was as follows: March 31, 2019 As Reported Adjustment Amounts Under ASC due to ASC under ASC 606 606 605 (In thousands) Other current assets $ 14,181 $ (266) $ 13,915 Deposits and other assets 45,486 (574) 44,912 Total assets 809,010 (840) 808,170 Deferred revenue 52,827 (6,264) 46,563 Total liabilities 184,270 (6,264) 178,006 Retained earnings (accumulated deficit) 19,130 3,992 23,122 Total stockholders' equity 624,740 3,992 628,732 The following table presents the Company’s revenues disaggregated based on its three lines of business for the three and nine months ended March 31, 2019: Three Months Ended Nine Months Ended March 31, 2019 March 31, 2019 (In thousands) Managed Public School Programs $ 222,645 $ 665,981 Institutional Non-managed Public School Programs 12,776 37,398 Institutional Software & Services 8,530 29,515 Total Institutional 21,306 66,913 Private Pay Schools and Other 9,301 26,544 Total Revenues $ 253,252 $ 759,438 For more discussion surrounding the Company’s revenue recognition accounting policies, please refer to the “Contracts with Customers” section below. Accounting Standards Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02” or “Topic 842”) . The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”) to provide additional guidance for the adoption of Topic 842 . ASU 2018-10 clarifies certain provisions and corrects unintended applications of the guidance such as the application of implicit rate; lessee reassessment of lease classification; lease term or bargain purchase option; variable lease payments; and certain transition guidance. ASU 2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic 842 . ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “ASC 842”) are effective for the Company’s fiscal year beginning July 1, 2019, including interim periods therein. The modified retrospective transition approach under ASU 2016-02 requires lessees to include capital and operating leases that exist at, or are entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. ASU 2018-11 allows lessees to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company anticipates that the impact of ASC 842 will be centered around its facility leases. The Company will record a lease liability with an expected present value in the range of $22 - $25 million and a ROU asset in the range of $17 - $20 million, based on its current leasing arrangements. The impact on the statements of operations is expected to be immaterial. The Company continues to evaluate ASC 842, as well as the effect on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). It requires an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 is effective for the Company’s fiscal year beginning July 1, 2020. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements. Contracts with Customers Revenues are principally earned from contractual agreements to provide online curriculum, books, materials, computers and management services to virtual and blended schools, traditional public schools, school districts, and private schools through its three lines of business; Managed Public School Programs, Institutional, and Private Pay and Other. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services using the following steps: · identify the contract, or contracts, with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to the performance obligations in the contract; and · recognize revenue when, or as, the Company satisfies a performance obligation. Revenue Recognition Managed Public School Programs The Company provides an integrated package of systems, services, products, and professional expertise that we manage to support online or blended public schools. Contractual agreements generally span multiple years with performance obligations being isolated to annual periods. Customers for these programs can obtain the administrative support, information technology, academic support services, online curriculum, learning systems platforms and instructional services under the terms of a negotiated service agreement. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenue. The Company generates revenues under contracts with virtual and blended public schools and include the following components, where required: · providing each of a school’s students with access to the Company’s online school and lessons; · offline learning kits, which include books and materials to supplement the online lessons; · the use of a personal computer and associated reclamation services; · internet access and technology support services; · instruction by a state-certified teacher; and · management and technology services necessary to support a virtual public or blended school. In certain managed school contracts, revenues are determined directly by per enrollment funding. To determine the pro rata amount of revenue to recognize in a fiscal quarter, the Company estimates the total funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels, which are generally published on an annual basis by the state or school district. The Company reviews its estimates of funding periodically, and revises as necessary, amortizing any adjustments to earned revenues over the remaining portion of the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company’s results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company’s services to the schools plus other costs the schools may incur) in the calculation of school operating losses. The Company’s schools’ reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company’s monthly funding estimates for the three and nine months ended March 31, 2019 and 2018. Each state and/or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company estimates funding for each school, it takes into account the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, average daily attendance, special needs enrollment, student demographics, academic progress and historical completion, student location, funding caps and other state specified categorical program funding. Under the contracts where the Company provides services to schools, the Company has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school as reflected on its respective financial statements, including Company charges to the schools. To the extent a school does not receive funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenues and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are reduced accordingly to reflect the expected cash collections from such schools. The Company amortizes the estimated school operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. Management periodically reviews its estimates of full-year school revenues and operating expenses, and amortizes the net impact of any changes to these estimates over the remainder of the fiscal year. Actual school operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. For the three months ended March 31, 2019 and 2018, the Company’s revenues included a reduction for these school operating losses for $9.2 million and $18.7 million, respectively, and $ 43.2 million and $50.2 million for the nine months ended March 31, 2019 and 2018, respectively. The Company has certain contracts where it is responsible for substantially all of the expenses incurred by the school. For these contracts, the Company records both revenue and expenses incurred by the schools. Amounts recorded as revenues for the three months ended March 31, 2019 and 2018 were $85.8 million and $81.4 million, respectively, and for the nine months ended March 31, 2019 and 2018 were $259.9 million and $221.0 million, respectively. Institutional The products and services delivered to the Company’s Institutional customers include curriculum and technology for full-time virtual and blended programs, as well as instruction, curriculum and associated materials, supplemental courses, marketing, enrollment and other educational services. Each of these contracts are considered to be one performance obligation under ASC 606. The Company provides certain online curriculum and services to schools and school districts under subscription agreements. Revenues from the licensing of curriculum under subscription arrangements are recognized on a ratable basis over the subscription period. Revenues from professional consulting, training and support services are deferred and recognized ratably over the service period. Private Pay Schools and Other Private Pay Schools and Other revenues are generated from individual customers who prepay and have access for one to two years to company-provided online curriculum. Each of these contracts are considered to be one performance obligation under ASC 606. The Company recognizes these revenues pro rata over the maximum term of the customer contract. Concentration of Customers During the three and nine months ended March 31, 2019 and nine months ended March 31, 2018, the Company had one contract that represented 10% of revenues. For the three months ended March 31, 2018, the Company had no contracts greater than 10% of revenues. Contract Balances The timing of revenue recognition, invoicing, and cash collection results in accounts receivable, unbilled receivables (a contract asset) and deferred revenue (a contract liability) in the condensed consolidated balance sheets. Accounts receivable is recorded when there is an executed customer contract and the customer is billed. The collectability of outstanding receivables is evaluated regularly by the Company and an allowance is recorded to reflect anticipated losses. Unbilled receivables are created when revenue is earned prior to the customer being billed. Deferred revenue is recorded when customers are billed in advance of services being provided. The opening and closing balances of the Company’s accounts receivable, unbilled receivables and deferred revenue are as follows: March 31, July 1, 2019 2018 (In thousands) Accounts receivable $ 238,614 $ 176,319 Unbilled receivables (included in accounts receivable) 22,617 12,143 Deferred revenue 52,827 25,580 The difference between the opening and closing balance of the accounts receivable and unbilled receivables relates to the timing of the Company’s billing in relation to month end and contractual agreements. The difference between the opening and closing balance of the deferred revenue relates to the timing difference between billings to customers and the Company’s performance under the contract. Typically, each of these balances are at their highest during the first quarter of the fiscal year and lowest at the end of the fiscal year. The amount of revenue recognized during the three months ended March 31, 2019 that was included in the opening January 1, 2019 deferred revenue balance was $24.9 million. The amount of revenue recognized during the nine months ended March 31, 2019 that was included in the opening July 1, 2018 deferred revenue balance was $21.5 million. During the three and nine months ended March 31, 2019, the Company recorded revenues of $3.2 million and $3.7 million, respectively, related to performance obligations satisfied in prior periods. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the majority of its contracts, the Company’s performance obligations are satisfied over time, as the Company delivers, and the customer receives the services, over the service period of the contract. The Company’s payment terms are generally net 30 or net 45, but can vary depending on when the school receives its funding from the state. The Company has elected, as a practical expedient, to not report the value of unsatisfied performance obligations for contracts with customers that have an expected duration of one year or less. The amount of unsatisfied performance obligations for contracts with customers which extend beyond one year as of March 31, 2019 was $1.7 million. Significant Judgments The Company determined that the majority of its contracts with customers contain one performance obligation. The Company markets the products and services as an integrated package building off its curriculum offerings. It does not market distinct products or services to be sold independently from the curriculum offering. The Company has determined that the time elapsed method as described under ASC 606 is the most appropriate measure of progress towards the satisfaction of the performance obligation. The Company delivers the integrated products and services package related to its Managed Public School Programs largely over the course of the Company’s fiscal year. This package includes enrollment, marketing, teacher training, etc. in addition to the core curriculum and instruction. All of these activities are necessary and contribute to the overall education of its students, which occurs evenly throughout the year. Accordingly, the Company will recognize revenue on a straight-line basis. As discussed above, the Company estimates the total funds each school will receive in a particular school year and the amount of full-year school revenues and operating expenses to determine the amount of revenue the Company will receive. To the extent the estimates change during the year, the cumulative impact of the change is recognized over the remaining service period. Costs to Obtain a Contract with a Customer Where permitted, the Company pays commissions on certain sales contracts to its employees and third parties. Commissions that are directly tied to a particular sale are capitalized if they relate to either new business or a renewal whose contract has a duration of greater than one year. The Company has elected, as a practical expedient, to not capitalize commissions paid on contracts that have a duration of one year or less. Commissions that are not directly tied to a particular sale are expensed as incurred. Commissions related to new business are amortized over a four year life which represents the average life of customers in the institutional and private pay businesses, while commissions related to renewals greater than one year are amortized over the contract life. The current portion of deferred commissions is recorded within other current assets and the long-term portion of deferred commissions is recorded within deposits and other assets on the condensed consolidated balance sheets. The amortization of deferred commissions is recorded as selling, administrative and other operating expenses. Consolidation The condensed consolidated financial statements include the accounts of the Company, the wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Inventories Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual public schools and blended public schools, and utilized directly by students. Inventories represent items that are purchased and held for sale and are recorded at the lower of cost (first-in, first-out method) or net realizable value. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. The excess and obsolete inventory reserve was $4.1 million and $3.5 million at March 31, 2019 and June 30, 2018, respectively. Other Current Assets Other current assets consist primarily of textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under capital lease). Amortization of assets capitalized under capital lease arrangements is included in depreciation expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The Company determines the lease term in accordance with ASC 840, Leases (“ASC 840”) , as the fixed non-cancelable term of the lease plus all periods for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured. Property and equipment are depreciated over the following useful lives: Useful Life Student and state testing computers 3 - 5 years Computer hardware 3 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements 3 - 12 years The Company makes an estimate of unreturned student computers based on an analysis of recent trends of returns. The Company recorded accelerated depreciation of $0.5 million and $0.8 million for the three months ended March 31, 2019 and 2018, respectively, and $1.6 million and $1.7 million for the nine months ended March 31, 2019 and 2018, respectively, related to unreturned student computers. Depreciation expense for property and equipment, including accelerated depreciation, for the three months ended March 31, 2019 and 2018 was $4.9 million and $4.8 million, respectively, and $15.2 million and $13.7 million for the nine months ended March 31, 2019 and 2018, respectively. The Company fully expenses computer peripheral equipment (e.g. keyboards, mouses) upon purchase as recovery has been determined to be uneconomical. These expenses totaled $0.7 million and $0.8 million for the three months ended March 31, 2019 and 2018, respectively, and $4.0 million and $3.3 million for the nine months ended March 31, 2019 and 2018, respectively, and are recorded as instructional costs and services. Capitalized Software Costs The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”) . The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization. Capitalized software additions totaled $20.6 million and $18.9 million for the nine months ended March 31, 2019 and 2018, respectively. Amortization expense for the three months ended March 31, 2019 and 2018 was $7.0 million and $8.2 million, respectively, and $22.4 million and $26.9 million for the nine months ended March 31, 2019 and 2018, respectively. During the three months ended September 30, 2017, the Company recorded an out of period adjustment related to the capitalization of software and curriculum development. The adjustment increased capitalized software development costs and capitalized curriculum development costs by $2.3 million and $0.6 million, respectively, and decreased net loss by $1.4 million for the period. The Company assessed the materiality of these errors on its prior quarterly and annual financial statements, assessing materiality both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108 and concluded that the errors were not material to any of its previously issued financial statements. Capitalized Curriculum Development Costs The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. The Company capitalizes curriculum development costs incurred during the application development stage in accordance with ASC 350. The Company capitalizes curriculum development costs during the design and deployment phases of the project. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs are amortized is generally five years. Total capitalized curriculum development additions were $13.7 million and $7.8 million for the nine months ended March 31, 2019 and 2018, respectively. These amounts are recorded on the accompanying condensed consolidated balance sheets net of amortization charges. Amortization is recorded in instructional costs and services on the accompanying condensed consolidated statements of operations. Amortization expense for the three months ended March 31, 2019 and 2018 was $4.5 million and $4.7 million, respectively, and $13.5 million and $14.8 million for the nine months ended March 31, 2019 and 2018, respectively. As mentioned above, capitalized curriculum development additions for the nine months ended March 31, 2018 included an out of period adjustment of $0.6 million. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”) . Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Redeemable Noncontrolling Interests Earnings or losses attributable to minority shareholders of a consolidated affiliated company are classified separately as “noncontrolling interest” in the Company’s condensed consolidated statements of operations. Noncontrolling interests in subsidiaries that are redeemable outside of the Company’s control for cash or other assets are classified outside of permanent equity at redeemable value, which approximates fair value. If the redemption amount is other than fair value (e.g. fixed or variable), the redeemable noncontrolling interest is accounted for at the fixed or variable redeemable value. The redeemable noncontrolling interests are adjusted to their redeemable value at each balance sheet date. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in capital. Goodwill and Intangible Assets The Company records as goodwill the excess of the purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and distributors, developed technology and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended March 31, 2019 and 2018 was $0.7 million and $0.7 million, respectively, and for the nine months ended March 31, 2019 and 2018 was $2.2 million and $2.2 million, respectively. Future amortization of intangible assets is expected to be $0.7 million, $2.9 million, $2.4 million, $2.2 million, and $2.0 million in the fiscal years ending June 30, 2019 through June 30, 2023, respectively and $5.2 million thereafter. At March 31, 2019 and June 30, 2018, the goodwill balance was $90.2 million. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. There were no such events during the three and nine months ended March 31, 2019 and 2018. ASC 350 prescribes a two-step process for impairment testing of goodwill and intangible assets with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred based on one reporting unit. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as “Step 0”. The Company performs its annual assessment on May 31st. During the year ended June 30, 2018, the Company performed “Step 0” of the impairment test and determined that there were no facts and circumstances that indicated that the fair value |
Income Taxes
Income Taxes | 9 Months Ended |
Mar. 31, 2019 | |
Income Taxes | |
Income Taxes | 4. Income Taxes The provision for income taxes is based on earnings reported in the condensed consolidated financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense or benefit is measured by the change in the deferred income tax asset or liability during the period. For the three months ended March 31, 2019 and 2018, the Company’s effective income tax rate was 23.8% and 34.7%, respectively, and for the nine months ended March 31, 2019 and 2018, the rate was 22.2% and (11.5)%, respectively. On December 22, 2017, the Tax Cuts and Job Act (the “Tax Act”) was enacted into law, which among other provisions, reduced the U.S. statutory federal income tax rate from 35% to 21%. The Company has included the amount for the impact of the re-measurement of the Company’s net U.S. deferred tax liabilities and the transition tax on the Company’s accumulated unremitted foreign earnings in the Company’s financial statements for the year ended June 30, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to allow the registrant to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. The Company has included in its taxable income the provisional impact related to the one-time transition tax and the revaluation of deferred tax balances and included these estimates in its consolidated financial statements for the year ended June 30, 2018. During the three months ended December 31, 2018, the Company completed the analysis of the various provisions of the Tax Act and recognized immaterial adjustments to the provisional amounts. The Company included these adjustments within income tax expense from continuing operations. |
Long-term Obligations
Long-term Obligations | 9 Months Ended |
Mar. 31, 2019 | |
Long-term Obligations | |
Long-term Obligations | 5. Long-term Obligations Capital Leases The Company incurs capital lease obligations for student computers and peripherals under agreements with PNC Equipment Finance, LLC (“PNC”) and Banc of America Leasing & Capital, LLC (“BALC”). As of March 31, 2019 and June 30, 2018, the outstanding balance of capital leases (as discussed in more detail below) was $31.2 million and $26.0 million, respectively, with lease interest rates ranging from 1.97% to 4.05%. The gross carrying value of leased student computers as of March 31, 2019 and June 30, 2018 was $52.9 million and $42.2 million, respectively. The accumulated depreciation of leased student computers as of March 31, 2019 and June 30, 2018 was $30.1 million and $26.0 million, respectively. Individual leases under the agreement with PNC include 36-month payment terms, at varying rates, with a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases. The Company’s $16.0 million agreement with BALC that was executed in December 2018, was increased to $25 million in February 2019 and extended through December 2019 at a fluctuating rate of LIBOR plus 1.25%. Individual leases with BALC include 12-month payment terms, a fixed rate of 4.05%, and a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases. The following is a summary as of March 31, 2019 of the present value of the net minimum lease payments on capital leases under the Company’s commitments: As of June 30, Capital Leases (in thousands) 2019 (remaining three months) $ 7,859 2020 18,987 2021 4,819 2022 340 Total minimum payments 32,005 Less amount representing interest (imputed weighted average capital lease interest rate of 3.67%) (808) Net minimum payments 31,197 Less current portion (24,499) Present value of minimum payments, less current portion $ 6,698 |
Equity Transactions
Equity Transactions | 9 Months Ended |
Mar. 31, 2019 | |
Equity Transactions | |
Equity Transactions | 6. Equity Transactions On December 15, 2016 (the “Effective Date”), the Company’s stockholders approved the 2016 Incentive Award Plan (the “Plan”). The Plan is designed to attract, retain and motivate employees who make important contributions to the Company by providing such individuals with equity ownership opportunities. Awards granted under the Plan may include stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. Under the Plan, the following types of shares go back into the pool of shares available for issuance: · unissued shares related to forfeited or cancelled restricted stock and stock options from Plan awards and Prior Plan awards (that were outstanding as of the Effective Date); and · shares tendered to satisfy the tax withholding obligation related to the vesting of restricted stock (but not stock options). Unlike the Company’s 2007 Equity Incentive Award Plan (the “Prior Plan”), the Plan has no evergreen provision to increase the shares available for issuance; any new shares would require stockholder approval. The Prior Plan expired in October 2017; however, with the approval of the Plan, the Company will no longer award equity from the Prior Plan. As of March 31, 2019, the remaining aggregate number of shares of the Company’s common stock authorized for future issuance under the Plan was 2,098,278. As of March 31, 2019, there were 4,823,629 shares of the Company’s common stock that remain outstanding or nonvested under the Plan and Prior Plan. Stock Options Stock option activity including stand-alone agreements during the nine months ended March 31, 2019 was as follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Life (Years) Value Outstanding, June 30, 2018 1,199,307 $ 19.97 Granted — — Exercised (106,490) 20.50 Forfeited or canceled (13,000) 29.82 Outstanding, March 31, 2019 1,079,817 $ 19.80 2.91 $ 15,457,203 Exercisable, March 31, 2019 1,046,552 $ 20.00 2.86 $ 14,792,194 The total intrinsic value of options exercised during the nine months ended March 31, 2019 and 2018 was $0.7 million and zero, respectively. As of March 31, 2019, there was $0.2 million of total unrecognized compensation expense related to nonvested stock options granted. The cost is expected to be recognized over a weighted average period of 0.4 years. During the three months ended March 31, 2019 and 2018, the Company recognized $0.2 million and $0.2 million, respectively, of stock-based compensation expense related to stock options. During the nine months ended March 31, 2019 and 2018, the expense was $0.5 million and $1.0 million, respectively. Restricted Stock Awards Restricted stock award activity during the nine months ended March 31, 2019 was as follows: Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2018 1,676,907 $ 15.12 Granted 822,333 18.34 Vested (918,196) 14.67 Canceled (227,731) 17.42 Nonvested, March 31, 2019 1,353,313 $ 16.99 Performance Based Restricted Stock Awards (included above) During the nine months ended March 31, 2019, 37,378 new performance based restricted stock awards were granted and 271,455 remain nonvested at March 31, 2019. During the nine months ended March 31, 2019, 312,383 performance based restricted stock awards vested. Vesting of the performance based restricted stock awards is contingent on the achievement of certain financial performance goals and service vesting conditions. During fiscal year 2018, the Company granted performance based restricted stock awards which were subject to the achievement of a target free cash flow metric in fiscal year 2018 and adjusted upwards or downwards based on the Company’s relative total shareholder return for fiscal year 2018 ranked against other companies in the Russell 2000 Index. On August 1, 2018, the free cash flow metric was certified by the Compensation Committee of the Board of Directors as Outperform and the total shareholder return metric was certified as below Threshold resulting in the performance based restricted stock awards granted at 100% of target, or 46,845 shares earned by Company executives. Equity Incentive Market Based Restricted Stock Awards (included above) During fiscal year 2017, the Company granted equity incentive market based restricted stock awards which were subject to the attainment of an average stock price of $14.35 for 30 consecutive days after the date of the Company’s earnings release for the fourth quarter and fiscal year ended June 30, 2017. During the nine months ended March 31, 2019, 18,400 of these equity incentive market based restricted stock awards vested. As of March 31, 2019, 6,800 equity incentive market based restricted stock awards remain nonvested. Service Based Restricted Stock Awards (included above) During the nine months ended March 31, 2019, 784,955 new service based restricted stock awards were granted and 1,075,058 remain nonvested at March 31, 2019. During the nine months ended March 31, 2019, 587,413 service based restricted stock awards vested. Summary of All Restricted Stock Awards As of March 31, 2019, there was $17.2 million of total unrecognized compensation expense related to nonvested restricted stock awards. The cost is expected to be recognized over a weighted average period of 1.7 years. The fair value of restricted stock awards granted for the nine months ended March 31, 2019 and 2018 was $15.1 million and $17.5 million, respectively. The total fair value of shares vested for the nine months ended March 31, 2019 and 2018 was $19.6 million and $21.7 million, respectively. During the three months ended March 31, 2019 and 2018, the Company recognized $2.6 million and $3.9 million, respectively, of stock-based compensation expense related to restricted stock awards. During the nine months ended March 31, 2019 and 2018, the expense was $9.5 million and $11.7 million, respectively. Performance Share Units (“PSU”) Certain PSUs vest upon achievement of performance criteria associated with a Board-approved Long Term Incentive Plan (“LTIP”) and continuation of employee service over a defined period. The level of performance will determine the number of PSUs earned as measured against threshold, target and outperform achievement levels of the LTIP. Each PSU represents the right to receive one share of the Company’s common stock, or at the option of the Company, an equivalent amount of cash, and is classified as an equity award in accordance with ASC 718. In addition to the LTIP performance conditions, there is a service vesting condition which is dependent upon continuing service by the grantee as an employee of the Company, unless the grantee is eligible for earlier vesting upon a change in control and qualifying termination, as defined by the PSU agreement. For equity performance awards, including the PSUs, subject to graduated vesting schedules for which vesting is based on achievement of a performance metric in addition to grantee service, stock-based compensation expense is recognized on an accelerated basis by treating each vesting tranche as if it was a separate grant. Fiscal Year 2016 LTIP During fiscal year 2016, the Company granted PSUs under a LTIP that was driven by an academic measure and a lifetime value measure. Thirty percent of the earned award (“Tranche #1”) vested quarterly beginning November 15, 2017 and seventy percent of the earned award (“Tranche #2”) vested on August 15, 2018, in both cases dependent upon continuing service by the grantee as an employee of the Company. For the year ended June 30, 2017, the Company determined the achievement of the performance condition was probable on Tranche #1. Achievement was believed to be probable at the highest level which equals 150% of the target award. Therefore, the Company recorded $3.8 million of expense for the period of grant date (September 2015) through June 2017. On August 2, 2017, the Compensation Committee of the Company’s Board of Directors certified that as of August 1, 2017, 97% of the MPS schools were not in academic jeopardy, as determined by the independent members of the Academic Committee of the Board of Directors on that date, and that the Academic Metric for Tranche #1 of the LTIP was achieved at the Outperform level. This resulted in 446,221 PSUs (including 138,241 additional PSUs due to the Outperform level) earned by the participants, consisting of 90,000 PSUs for Mr. Davis and 70,021 PSUs for Mr. Udell. For the year ended June 30, 2018, the Company determined the achievement of one of the two performance conditions were probable on Tranche #2 at Target. Tranche #2 is comprised of two performance measures, an academic measure (similar to Tranche #1) and a lifetime value measure. Therefore, the Company recorded $3.9 million of expense for the period of grant date (September 2015) through June 2018. On August 1, 2018, the Compensation Committee of the Company’s Board of Directors certified that as of August 1, 2018, the Company achieved less than 1% below Target for the academic measure. This resulted in 349,996 PSUs (including a reduction of 15,345 PSUs due to the below Target performance) earned by the participants, consisting of 76,640 PSUs for Mr. Davis and 59,626 PSUs for Mr. Udell. The Compensation Committee also certified that achievement of the performance conditions associated with the lifetime value measure of Tranche #2 were not met and therefore no expense was recorded. Fiscal Year 2019 LTIP During the third quarter of fiscal 2019, the Company granted 263,936 PSUs at target under a LTIP that was driven by certain revenue targets and enrollment levels, as well as students’ academic progress. These PSUs had a grant date fair value of $7.9 million, or $30.05 per share. Forty-five percent of the earned award is based on students’ academic progress (“Tranche #1”) and twenty-five percent of the earned award is based on certain enrollment levels (“Tranche 2”), both of which will vest on October 15, 2021. The remaining thirty percent of the earned award is based on certain revenue targets (“Tranche #3”) will vest on August 15, 2022. In all cases, vesting is dependent upon continuing service by the grantee as an employee of the Company. The Company determined the achievement of the performance conditions associated with all three tranches were not probable and therefore no expense was recorded during the three and nine months ended March 31, 2019. Fiscal Year 2019 SPP During fiscal year 2019, the Company adopted a new long-term shareholder performance plan (“2019 SPP”) that provides for incentive award opportunities to its key senior executives. The awards were granted in the form of PSUs and will be earned based on the Company’s market capitalization growth over a completed three-year performance period. The 2019 SPP was designed to provide the executives with a percentage of shareholder value growth. No amounts will be earned if total stock price growth over the three-year period is below 25% (7.6% annualized). An amount of 6% of total value growth will be earned based on achieving total stock price growth of 33% (10% annualized) and a maximum of 7.5% of total value growth will be earned if total stock price growth equals or exceeds 95% (25% annualized). During the first quarter of fiscal year 2019, the Company granted 1,766,932 PSUs from the 2019 SPP with a grant date fair value of $10.5 million, or $5.97 per share, based on the highest level of performance. During the third quarter of fiscal year 2019, there was a modification of certain terms of the original grant which resulted in an increase of 23,670 shares with a fair value of $0.4 million, or $17.45 per share. Additionally, the Company granted 317,703 PSUs from the 2019 SPP with a grant date fair value of $6.3 million, or $19.76 per share, based on the highest level of performance. The final amount of PSUs will be determined (and vesting will occur) based on the 30-day average price of the Company’s stock subsequent to seven days after the release of fiscal year 2021 results. The fair value was determined using a Monte Carlo simulation model and will be amortized on a straight-line basis over the vesting period. Summary of All Performance Share Units As of March 31, 2019, there was $14.9 million of total unrecognized compensation expense related to nonvested PSUs. The cost is expected to be recognized over a weighted average period of 2.5 years. During the three months ended March 31, 2019 and 2018, the Company recognized $1.3 million and $0.6 million, respectively, of stock-based compensation expense related to PSUs. During the nine months ended March 31, 2019 and 2018, the expense was $2.4 million and $4.1 million, respectively. Performance share unit activity during the nine months ended March 31, 2019 was as follows: Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2018 708,979 $ 13.15 Granted 2,372,241 10.61 Vested (427,954) 13.24 Canceled (281,025) 13.02 Nonvested, March 31, 2019 2,372,241 $ 10.61 Deferred Stock Units (“DSU”) During fiscal year 2019, the Company granted 18,258 DSUs at a weighted average grant-date fair value of $25.41. The DSUs vest on the grant-date anniversary and are settled in the form of shares of common stock issued to the holder upon separation from the Company. The DSUs are excluded from the tables above. As of March 31, 2019, 18,258 DSUs remain nonvested. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions | |
Related Party Transactions | 7. Related Party Transactions During fiscal years 2019 and 2018, the Company contributed to The Foundation for Blended and Online Learning (“Foundation”). The Foundation is a related party as an executive officer of the Company serves on the Board of the Foundation. For the three months ended March 31, 2019 and 2018, contributions made by the Company to the Foundation were $0.1 million and $0.0 million, respectively , and $0.9 million and $0.3 million for the nine months ended March 31, 2019 and 2018, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 8. Commitments and Contingencies Litigation In the ordinary conduct of the Company’s business, the Company is subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company believes that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on the Company’s business, financial condition, liquidity or results of operations. On July 20 and September 15, 2016, two securities class action lawsuits—captioned Babulal Tarapara v. K12 Inc., et al. , Case No. 3:16-cv-04069, and Gil Tuinenburg v. K12 Inc., et al. , Case No. 3:16-cv-05305, respectively—were filed against the Company, two of its officers and one of its former officers in the United States District Court for the Northern District of California. On October 6, 2016, the Court consolidated the cases and recaptioned the matter as In Re K12 Inc. Securities Litigation , Master File No. 4:16-cv-04069-PJH. On August 30, 2017, the Court dismissed the plaintiffs’ claims alleging false or misleading statements and omissions related to Scantron results and the quality and effectiveness of K12’s academic services and offerings. On September 5, 2018, and as a result of a Court ordered mediation, the parties reached an agreement in principle to settle the remaining claim concerning disclosure of a notice of non-automatic renewal of a managed school contract. Although we believe that the remaining claim in this matter lacked merit, we agreed to settle the case to avoid continued distraction and management time, and our insurance carriers agreed to pay $3.5 million into a settlement fund for the alleged class and attorneys’ fees and costs. The Court granted preliminary approval of the settlement on February 14, 2019, and a final hearing is scheduled for July 10, 2019. Employment Agreements The Company has entered into employment agreements with certain executive officers that provide for severance payments and, in some cases other benefits, upon certain terminations of employment. Except for the agreement with the Company’s Chairman and Chief Executive Officer with an amended extended term to September 30, 2019, all other agreements provide for employment on an “at-will” basis. If the employee resigns for “good reason” or is terminated without cause, the employee is entitled to salary continuation, and in some cases benefit continuation, for varying periods depending on the agreement. Off-Balance Sheet Arrangements As of March 31, 2019, the Company provided guarantees of approximately $1.7 million related to lease commitments on the buildings for certain of the Company’s schools. In addition, the Company contractually guarantees that certain schools under the Company’s management will not have annual operating deficits and the Company’s management fees from these schools may be reduced accordingly to cover any school operating deficits. Other than these lease and operating deficit guarantees, the Company did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. |
Restructuring
Restructuring | 9 Months Ended |
Mar. 31, 2019 | |
Restructuring | |
Restructuring | 9. Restructuring In the third quarter of fiscal year 2017, the Company exited three facilities that were no longer being utilized, which were subject to operating leases. The present value of the remaining lease payments was calculated using a credit adjusted risk-free rate and estimated sublease rentals for each lease. In aggregate, during fiscal year 2017, the Company recorded an impairment of $5.4 million for the three leases. The current portion of the liability of $1.7 million was included in accrued liabilities and the long-term portion of $3.7 million was included in other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2017. In addition to the lease impairment, the Company accelerated the useful life of each lease’s property and equipment to the cease-use date and recorded accelerated depreciation of $1.4 million. The Company also wrote off the deferred rent and the liability for tenant improvements associated with each lease which resulted in income of $1.9 million. The $4.9 million net impact of these actions was recorded in s elling, administrative, and other operating expenses in the condensed consolidated statements of operations. The following table summarizes the activity during the nine months ended March 31, 2019: Balance at Payments, net of Accretion Balance at Description Initial Value June 30, 2018 sublease income Expense Adjustments March 31, 2019 (In thousands) Lease #1 $ 1,652 $ 1,092 $ (275) $ 22 $ — $ 839 Lease #2 1,311 475 (355) 5 — 125 Lease #3 2,443 1,191 6 24 — 1,221 Total $ 5,406 $ 2,758 $ (624) $ 51 $ — $ 2,185 |
Investments
Investments | 9 Months Ended |
Mar. 31, 2019 | |
Investments | |
Investments | 10. Investments Investment in Tallo (FKA STEM Premier Inc.) In August 2018, the Company invested $6.7 million for a 39.5% minority interest in Tallo, Inc. (“Tallo”). This investment in preferred stock that contains additional rights over common stock and has no readily determinable fair value, was recorded at cost and will be adjusted, as necessary, for impairment. In the event Tallo issues equity at a materially different price than what the Company paid, the Company would also assess changing the carrying value. Tallo also issued a convertible note to the Company for $5.0 million that will be accounted for as an available-for-sale debt security and adjusted to fair value quarterly. The note bears interest at the mid-term Applicable Federal Rate plus 25 bps per annum with a maturity of 48 months. The note is convertible at the Company’s option into 3.67 million Series D Preferred Shares that would give the Company an effective ownership of 56% if exercised. The Company’s investment in Tallo is included in deposits and other assets on the condensed consolidated balance sheet. |
Supplemental Disclosure of Cash
Supplemental Disclosure of Cash Flow Information | 9 Months Ended |
Mar. 31, 2019 | |
Supplemental Disclosure of Cash Flow Information | |
Supplemental Disclosure of Cash Flow Information | 11. Supplemental Disclosure of Cash Flow Information Nine Months Ended March 31, 2019 2018 (In thousands) Cash paid for interest $ 862 $ 546 Cash paid for taxes $ 1,010 $ 11,211 Supplemental disclosure of non-cash financing activities: Property and equipment financed by capital lease obligations, including student peripherals $ 19,076 $ 16,119 Supplemental disclosure of non-cash investing activities: Stock-based compensation expense capitalized on software development $ 101 $ 1,053 Stock-based compensation expense capitalized on curriculum development $ 176 $ 835 Business combinations: Current assets $ — $ 209 Intangible assets — 695 Goodwill — 2,983 Assumed liabilities — (734) Deferred revenue — (361) |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2019 | |
Summary of Significant Accounting Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounting Standards Adopted In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”) to establish the classification of certain cash receipts and disbursements into the appropriate operating, investing, or financing categories; where there was diversity in practice previously. The Company has evaluated the standard and determined that the classification of contingent consideration payments should be moved from operating activities to financing activities. The Company retrospectively adopted this standard during the first quarter of fiscal year 2019. The adoption required the restatement of $1.8 million from cash flows from operations to cash flows from financing activities in fiscal year 2018. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) , also known as Accounting Standards Codification Topic 606 (“ASC 606”) , which supersedes most existing revenue recognition guidance under ASC Topic 605 (“ASC 605”) . The core principal of ASC 606 is to recognize revenues when contracted goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASC 606 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than were required under previous GAAP. The Company performed a detailed review of each of its revenue streams by comparing historical accounting policies and practices to the new standard. The majority of the Company’s business is based on contracts where annual revenue is recognized within each fiscal year, mirroring the school year. The Company adopted this standard during the first quarter of fiscal year 2019 using the modified retrospective approach. Under this method, the Company applied ASC 606 to those contracts whose terms extend beyond July 1, 2018. The comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of ASC 606 resulted in an adjustment to decrease retained earnings by $1.3 million. The key impact of ASC 606 was to streamline the recognition of all revenues from the Company’s lines of businesses over the service period, including: · Revenues that had been previously recognized over a 10-month school year; · Revenues from materials, supplies and professional services that had been previously recognized upon delivery; and · Revenues in which the Company is the primary obligor, and were recognized when expenses were incurred. In addition, the adoption of ASC 606 impacted how the Company accounts for its sales commissions. See “Costs to Obtain a Contract with a Customer” section below. The impact of adoption on the Company’s condensed consolidated statements of operations for the three and nine months ended March 31, 2019 was as follows: Three Months Ended March 31, 2019 Nine Months Ended March 31, 2019 As As Reported Adjustment Amounts Reported Adjustment Amounts Under ASC due to ASC under ASC Under due to ASC under 606 606 605 ASC 606 606 ASC 605 (In thousands) Revenues $ 253,252 $ 6,536 $ 259,788 $ 759,438 $ 3,799 $ 763,237 Selling, administrative, and other operating expenses 59,382 (68) 59,314 222,143 (193) 221,950 Income from operations 23,267 6,604 29,871 42,805 3,992 46,797 Net income 18,462 6,604 25,066 33,892 3,992 37,884 Net income attributable to common stockholders $ 18,462 $ 6,604 $ 25,066 $ 33,892 $ 3,992 $ 37,884 The impact of adoption on the Company’s condensed consolidated balance sheets as of March 31, 2019 was as follows: March 31, 2019 As Reported Adjustment Amounts Under ASC due to ASC under ASC 606 606 605 (In thousands) Other current assets $ 14,181 $ (266) $ 13,915 Deposits and other assets 45,486 (574) 44,912 Total assets 809,010 (840) 808,170 Deferred revenue 52,827 (6,264) 46,563 Total liabilities 184,270 (6,264) 178,006 Retained earnings (accumulated deficit) 19,130 3,992 23,122 Total stockholders' equity 624,740 3,992 628,732 The following table presents the Company’s revenues disaggregated based on its three lines of business for the three and nine months ended March 31, 2019: Three Months Ended Nine Months Ended March 31, 2019 March 31, 2019 (In thousands) Managed Public School Programs $ 222,645 $ 665,981 Institutional Non-managed Public School Programs 12,776 37,398 Institutional Software & Services 8,530 29,515 Total Institutional 21,306 66,913 Private Pay Schools and Other 9,301 26,544 Total Revenues $ 253,252 $ 759,438 For more discussion surrounding the Company’s revenue recognition accounting policies, please refer to the “Contracts with Customers” section below. Accounting Standards Not Yet Adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02” or “Topic 842”) . The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11, Leases (Topic 842), Targeted Improvements (“ASU 2018-11”) to provide additional guidance for the adoption of Topic 842 . ASU 2018-10 clarifies certain provisions and corrects unintended applications of the guidance such as the application of implicit rate; lessee reassessment of lease classification; lease term or bargain purchase option; variable lease payments; and certain transition guidance. ASU 2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic 842 . ASU 2018-11, ASU 2018-10, and ASU 2016-02 (collectively, “ASC 842”) are effective for the Company’s fiscal year beginning July 1, 2019, including interim periods therein. The modified retrospective transition approach under ASU 2016-02 requires lessees to include capital and operating leases that exist at, or are entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. ASU 2018-11 allows lessees to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company anticipates that the impact of ASC 842 will be centered around its facility leases. The Company will record a lease liability with an expected present value in the range of $22 - $25 million and a ROU asset in the range of $17 - $20 million, based on its current leasing arrangements. The impact on the statements of operations is expected to be immaterial. The Company continues to evaluate ASC 842, as well as the effect on its condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). It requires an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 is effective for the Company’s fiscal year beginning July 1, 2020. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements. |
Contracts with Customers | Contracts with Customers Revenues are principally earned from contractual agreements to provide online curriculum, books, materials, computers and management services to virtual and blended schools, traditional public schools, school districts, and private schools through its three lines of business; Managed Public School Programs, Institutional, and Private Pay and Other. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services using the following steps: · identify the contract, or contracts, with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to the performance obligations in the contract; and · recognize revenue when, or as, the Company satisfies a performance obligation. Revenue Recognition Managed Public School Programs The Company provides an integrated package of systems, services, products, and professional expertise that we manage to support online or blended public schools. Contractual agreements generally span multiple years with performance obligations being isolated to annual periods. Customers for these programs can obtain the administrative support, information technology, academic support services, online curriculum, learning systems platforms and instructional services under the terms of a negotiated service agreement. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenue. The Company generates revenues under contracts with virtual and blended public schools and include the following components, where required: · providing each of a school’s students with access to the Company’s online school and lessons; · offline learning kits, which include books and materials to supplement the online lessons; · the use of a personal computer and associated reclamation services; · internet access and technology support services; · instruction by a state-certified teacher; and · management and technology services necessary to support a virtual public or blended school. In certain managed school contracts, revenues are determined directly by per enrollment funding. To determine the pro rata amount of revenue to recognize in a fiscal quarter, the Company estimates the total funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels, which are generally published on an annual basis by the state or school district. The Company reviews its estimates of funding periodically, and revises as necessary, amortizing any adjustments to earned revenues over the remaining portion of the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company’s results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company’s services to the schools plus other costs the schools may incur) in the calculation of school operating losses. The Company’s schools’ reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company’s monthly funding estimates for the three and nine months ended March 31, 2019 and 2018. Each state and/or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company estimates funding for each school, it takes into account the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, average daily attendance, special needs enrollment, student demographics, academic progress and historical completion, student location, funding caps and other state specified categorical program funding. Under the contracts where the Company provides services to schools, the Company has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school as reflected on its respective financial statements, including Company charges to the schools. To the extent a school does not receive funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenues and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are reduced accordingly to reflect the expected cash collections from such schools. The Company amortizes the estimated school operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. Management periodically reviews its estimates of full-year school revenues and operating expenses, and amortizes the net impact of any changes to these estimates over the remainder of the fiscal year. Actual school operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. For the three months ended March 31, 2019 and 2018, the Company’s revenues included a reduction for these school operating losses for $9.2 million and $18.7 million, respectively, and $ 43.2 million and $50.2 million for the nine months ended March 31, 2019 and 2018, respectively. The Company has certain contracts where it is responsible for substantially all of the expenses incurred by the school. For these contracts, the Company records both revenue and expenses incurred by the schools. Amounts recorded as revenues for the three months ended March 31, 2019 and 2018 were $85.8 million and $81.4 million, respectively, and for the nine months ended March 31, 2019 and 2018 were $259.9 million and $221.0 million, respectively. Institutional The products and services delivered to the Company’s Institutional customers include curriculum and technology for full-time virtual and blended programs, as well as instruction, curriculum and associated materials, supplemental courses, marketing, enrollment and other educational services. Each of these contracts are considered to be one performance obligation under ASC 606. The Company provides certain online curriculum and services to schools and school districts under subscription agreements. Revenues from the licensing of curriculum under subscription arrangements are recognized on a ratable basis over the subscription period. Revenues from professional consulting, training and support services are deferred and recognized ratably over the service period. Private Pay Schools and Other Private Pay Schools and Other revenues are generated from individual customers who prepay and have access for one to two years to company-provided online curriculum. Each of these contracts are considered to be one performance obligation under ASC 606. The Company recognizes these revenues pro rata over the maximum term of the customer contract. Concentration of Customers During the three and nine months ended March 31, 2019 and nine months ended March 31, 2018, the Company had one contract that represented 10% of revenues. For the three months ended March 31, 2018, the Company had no contracts greater than 10% of revenues. Contract Balances The timing of revenue recognition, invoicing, and cash collection results in accounts receivable, unbilled receivables (a contract asset) and deferred revenue (a contract liability) in the condensed consolidated balance sheets. Accounts receivable is recorded when there is an executed customer contract and the customer is billed. The collectability of outstanding receivables is evaluated regularly by the Company and an allowance is recorded to reflect anticipated losses. Unbilled receivables are created when revenue is earned prior to the customer being billed. Deferred revenue is recorded when customers are billed in advance of services being provided. The opening and closing balances of the Company’s accounts receivable, unbilled receivables and deferred revenue are as follows: March 31, July 1, 2019 2018 (In thousands) Accounts receivable $ 238,614 $ 176,319 Unbilled receivables (included in accounts receivable) 22,617 12,143 Deferred revenue 52,827 25,580 The difference between the opening and closing balance of the accounts receivable and unbilled receivables relates to the timing of the Company’s billing in relation to month end and contractual agreements. The difference between the opening and closing balance of the deferred revenue relates to the timing difference between billings to customers and the Company’s performance under the contract. Typically, each of these balances are at their highest during the first quarter of the fiscal year and lowest at the end of the fiscal year. The amount of revenue recognized during the three months ended March 31, 2019 that was included in the opening January 1, 2019 deferred revenue balance was $24.9 million. The amount of revenue recognized during the nine months ended March 31, 2019 that was included in the opening July 1, 2018 deferred revenue balance was $21.5 million. During the three and nine months ended March 31, 2019, the Company recorded revenues of $3.2 million and $3.7 million, respectively, related to performance obligations satisfied in prior periods. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the majority of its contracts, the Company’s performance obligations are satisfied over time, as the Company delivers, and the customer receives the services, over the service period of the contract. The Company’s payment terms are generally net 30 or net 45, but can vary depending on when the school receives its funding from the state. The Company has elected, as a practical expedient, to not report the value of unsatisfied performance obligations for contracts with customers that have an expected duration of one year or less. The amount of unsatisfied performance obligations for contracts with customers which extend beyond one year as of March 31, 2019 was $1.7 million. Significant Judgments The Company determined that the majority of its contracts with customers contain one performance obligation. The Company markets the products and services as an integrated package building off its curriculum offerings. It does not market distinct products or services to be sold independently from the curriculum offering. The Company has determined that the time elapsed method as described under ASC 606 is the most appropriate measure of progress towards the satisfaction of the performance obligation. The Company delivers the integrated products and services package related to its Managed Public School Programs largely over the course of the Company’s fiscal year. This package includes enrollment, marketing, teacher training, etc. in addition to the core curriculum and instruction. All of these activities are necessary and contribute to the overall education of its students, which occurs evenly throughout the year. Accordingly, the Company will recognize revenue on a straight-line basis. As discussed above, the Company estimates the total funds each school will receive in a particular school year and the amount of full-year school revenues and operating expenses to determine the amount of revenue the Company will receive. To the extent the estimates change during the year, the cumulative impact of the change is recognized over the remaining service period. Costs to Obtain a Contract with a Customer Where permitted, the Company pays commissions on certain sales contracts to its employees and third parties. Commissions that are directly tied to a particular sale are capitalized if they relate to either new business or a renewal whose contract has a duration of greater than one year. The Company has elected, as a practical expedient, to not capitalize commissions paid on contracts that have a duration of one year or less. Commissions that are not directly tied to a particular sale are expensed as incurred. Commissions related to new business are amortized over a four year life which represents the average life of customers in the institutional and private pay businesses, while commissions related to renewals greater than one year are amortized over the contract life. The current portion of deferred commissions is recorded within other current assets and the long-term portion of deferred commissions is recorded within deposits and other assets on the condensed consolidated balance sheets. The amortization of deferred commissions is recorded as selling, administrative and other operating expenses. |
Consolidation | Consolidation The condensed consolidated financial statements include the accounts of the Company, the wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. |
Inventories | Inventories Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual public schools and blended public schools, and utilized directly by students. Inventories represent items that are purchased and held for sale and are recorded at the lower of cost (first-in, first-out method) or net realizable value. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. The excess and obsolete inventory reserve was $4.1 million and $3.5 million at March 31, 2019 and June 30, 2018, respectively. |
Other Current Assets | Other Current Assets Other current assets consist primarily of textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under capital lease). Amortization of assets capitalized under capital lease arrangements is included in depreciation expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The Company determines the lease term in accordance with ASC 840, Leases (“ASC 840”) , as the fixed non-cancelable term of the lease plus all periods for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured. Property and equipment are depreciated over the following useful lives: Useful Life Student and state testing computers 3 - 5 years Computer hardware 3 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements 3 - 12 years The Company makes an estimate of unreturned student computers based on an analysis of recent trends of returns. The Company recorded accelerated depreciation of $0.5 million and $0.8 million for the three months ended March 31, 2019 and 2018, respectively, and $1.6 million and $1.7 million for the nine months ended March 31, 2019 and 2018, respectively, related to unreturned student computers. Depreciation expense for property and equipment, including accelerated depreciation, for the three months ended March 31, 2019 and 2018 was $4.9 million and $4.8 million, respectively, and $15.2 million and $13.7 million for the nine months ended March 31, 2019 and 2018, respectively. The Company fully expenses computer peripheral equipment (e.g. keyboards, mouses) upon purchase as recovery has been determined to be uneconomical. These expenses totaled $0.7 million and $0.8 million for the three months ended March 31, 2019 and 2018, respectively, and $4.0 million and $3.3 million for the nine months ended March 31, 2019 and 2018, respectively, and are recorded as instructional costs and services. |
Capitalized Software Costs | Capitalized Software Costs The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized in accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”) . The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization. Capitalized software additions totaled $20.6 million and $18.9 million for the nine months ended March 31, 2019 and 2018, respectively. Amortization expense for the three months ended March 31, 2019 and 2018 was $7.0 million and $8.2 million, respectively, and $22.4 million and $26.9 million for the nine months ended March 31, 2019 and 2018, respectively. During the three months ended September 30, 2017, the Company recorded an out of period adjustment related to the capitalization of software and curriculum development. The adjustment increased capitalized software development costs and capitalized curriculum development costs by $2.3 million and $0.6 million, respectively, and decreased net loss by $1.4 million for the period. The Company assessed the materiality of these errors on its prior quarterly and annual financial statements, assessing materiality both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108 and concluded that the errors were not material to any of its previously issued financial statements. |
Capitalized Curriculum Development Costs | Capitalized Curriculum Development Costs The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. The Company capitalizes curriculum development costs incurred during the application development stage in accordance with ASC 350. The Company capitalizes curriculum development costs during the design and deployment phases of the project. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs are amortized is generally five years. Total capitalized curriculum development additions were $13.7 million and $7.8 million for the nine months ended March 31, 2019 and 2018, respectively. These amounts are recorded on the accompanying condensed consolidated balance sheets net of amortization charges. Amortization is recorded in instructional costs and services on the accompanying condensed consolidated statements of operations. Amortization expense for the three months ended March 31, 2019 and 2018 was $4.5 million and $4.7 million, respectively, and $13.5 million and $14.8 million for the nine months ended March 31, 2019 and 2018, respectively. As mentioned above, capitalized curriculum development additions for the nine months ended March 31, 2018 included an out of period adjustment of $0.6 million. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”) . Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. |
Redeemable Noncontrolling Interests | Redeemable Noncontrolling Interests Earnings or losses attributable to minority shareholders of a consolidated affiliated company are classified separately as “noncontrolling interest” in the Company’s condensed consolidated statements of operations. Noncontrolling interests in subsidiaries that are redeemable outside of the Company’s control for cash or other assets are classified outside of permanent equity at redeemable value, which approximates fair value. If the redemption amount is other than fair value (e.g. fixed or variable), the redeemable noncontrolling interest is accounted for at the fixed or variable redeemable value. The redeemable noncontrolling interests are adjusted to their redeemable value at each balance sheet date. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in capital. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company records as goodwill the excess of the purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and distributors, developed technology and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended March 31, 2019 and 2018 was $0.7 million and $0.7 million, respectively, and for the nine months ended March 31, 2019 and 2018 was $2.2 million and $2.2 million, respectively. Future amortization of intangible assets is expected to be $0.7 million, $2.9 million, $2.4 million, $2.2 million, and $2.0 million in the fiscal years ending June 30, 2019 through June 30, 2023, respectively and $5.2 million thereafter. At March 31, 2019 and June 30, 2018, the goodwill balance was $90.2 million. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. There were no such events during the three and nine months ended March 31, 2019 and 2018. ASC 350 prescribes a two-step process for impairment testing of goodwill and intangible assets with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred based on one reporting unit. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as “Step 0”. The Company performs its annual assessment on May 31st. During the year ended June 30, 2018, the Company performed “Step 0” of the impairment test and determined that there were no facts and circumstances that indicated that the fair value of the reporting unit may be less than its carrying amount, and as a result, the Company determined that no impairment was required. During the three and nine months ended March 31, 2019 and 2018, there were no events or changes in circumstances that would indicate that the carrying amount of the goodwill was impaired. The following table represents the balance of the Company’s intangible assets as of March 31, 2019 and June 30, 2018: March 31, 2019 June 30, 2018 ($ in millions) Gross Accumulated Net Gross Accumulated Net Trade names $ 17.6 $ (9.2) $ 8.4 $ 17.6 $ (8.5) $ 9.1 Customer and distributor relationships 20.5 (14.4) 6.1 20.5 (13.4) 7.1 Developed technology 3.2 (2.6) 0.6 3.2 (2.2) 1.0 Other 1.4 (0.8) 0.6 1.4 (0.6) 0.8 Total $ 42.7 $ (27.0) $ 15.7 $ 42.7 $ (24.7) $ 18.0 |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets include property, equipment, capitalized curriculum and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment (“ASC 360”) , management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. There was no such impairment charge during the three and nine months ended March 31, 2019 and 2018. |
Fair Value Measurements | Fair Value Measurements ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation. The carrying values reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, receivables, and short and long term debt approximate their fair values. The lease exit liability is discussed in more detail in Note 9, “Restructuring.” The Tallo, Inc. convertible note is discussed in more detail in Note 10, “Investments.” T he following table summarizes certain fair value information at March 31, 2019 for assets or liabilities measured at fair value on a nonrecurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Lease exit liability $ 2,185 $ — $ — $ 2,185 T he following table summarizes certain fair value information at June 30, 2018 for assets and liabilities measured at fair value on a nonrecurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Lease exit liability $ 2,758 $ — $ — $ 2,758 T he following table summarizes certain fair value information at March 31, 2019 for assets or liabilities measured at fair value on a recurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Convertible note $ 5,006 $ — $ — $ 5,006 T he following table summarizes certain fair value information at June 30, 2018 for assets and liabilities measured at fair value on a recurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Contingent consideration associated with acquisitions $ 1,345 $ — $ — $ 1,345 The following tables summarize the activity during the three and nine months ended March 31, 2019 and 2018 for assets and liabilities measured at fair value on a recurring basis: Three Months Ended March 31, 2019 Purchases, Fair Value Issuances, Unrealized Fair Value Description December 31, 2018 and Settlements Gains/(Losses) March 31, 2019 (In thousands) Contingent consideration associated with acquisitions $ 40 $ (40) $ — $ — Convertible note 5,006 — — 5,006 Three Months Ended March 31, 2018 Purchases, Fair Value Issuances, Unrealized Fair Value Description December 31, 2017 and Settlements Gains/(Losses) March 31, 2018 (In thousands) Contingent consideration associated with acquisitions $ 1,340 $ — $ 2 $ 1,342 Nine Months Ended March 31, 2019 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2018 and Settlements Gains (Losses) March 31, 2019 (In thousands) Contingent consideration associated with acquisitions $ 1,345 $ (1,347) $ 2 $ — Convertible note — 5,006 — 5,006 Nine Months Ended March 31, 2018 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2017 and Settlements Gains (Losses) March 31, 2018 (In thousands) Contingent consideration associated with acquisitions 2,806 (1,319) (145) 1,342 |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share (“ASC 260”). Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share (“EPS”) reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options. The dilutive effect of stock options and restricted stock awards was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded as income tax expense when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company’s common stock. Stock options and restricted stock awards are not included in the computation of diluted net income (loss) per share when they are antidilutive. Common stock outstanding reflected in the Company’s condensed consolidated balance sheets includes restricted stock awards outstanding. Securities that may participate in undistributed net income with common stock are considered participating securities. The following schedule presents the calculation of basic and diluted net income per share: Three Months Ended Nine Months Ended March 31, March 31, 2019 2018 2019 2018 (In thousands except share and per share data) Basic net income per share computation: Net income attributable to common stockholders $ 18,462 $ 13,070 $ 33,892 $ 18,273 Weighted average common shares — basic 39,008,990 39,644,074 38,753,236 39,366,497 Basic net income per share $ 0.47 $ 0.33 $ 0.87 $ 0.46 Diluted net income per share computation: Net income attributable to common stockholders $ 18,462 $ 13,070 $ 33,892 $ 18,273 Share computation: Weighted average common shares — basic 39,008,990 39,644,074 38,753,236 39,366,497 Effect of dilutive stock options and restricted stock awards 2,744,333 1,122,129 1,795,723 1,404,940 Weighted average common shares — diluted 41,753,323 40,766,203 40,548,959 40,771,437 Diluted net income per share $ 0.44 $ 0.32 $ 0.84 $ 0.45 During the three months ended March 31, 2019 and 2018, 119,343 and 1,422,500 shares issuable in connection with stock options and restricted stock were excluded from the diluted income per share calculation because the effect would have been antidilutive. During the nine months ended March 31, 2019 and 2018, 148,355 and 1,086,880 shares were excluded, respectively. As of March 31, 2019, the Company had 45,542,026 shares issued and 40,207,283 shares outstanding. |
Reclassification | Reclassification Certain previous year amounts have been reclassified to conform with current year presentations, as related to the statement of cash flows. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policy (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Summary of Significant Accounting Policies | |
Schedule of impact of adoption of ASU 606 | The impact of adoption on the Company’s condensed consolidated statements of operations for the three and nine months ended March 31, 2019 was as follows: Three Months Ended March 31, 2019 Nine Months Ended March 31, 2019 As As Reported Adjustment Amounts Reported Adjustment Amounts Under ASC due to ASC under ASC Under due to ASC under 606 606 605 ASC 606 606 ASC 605 (In thousands) Revenues $ 253,252 $ 6,536 $ 259,788 $ 759,438 $ 3,799 $ 763,237 Selling, administrative, and other operating expenses 59,382 (68) 59,314 222,143 (193) 221,950 Income from operations 23,267 6,604 29,871 42,805 3,992 46,797 Net income 18,462 6,604 25,066 33,892 3,992 37,884 Net income attributable to common stockholders $ 18,462 $ 6,604 $ 25,066 $ 33,892 $ 3,992 $ 37,884 The impact of adoption on the Company’s condensed consolidated balance sheets as of March 31, 2019 was as follows: March 31, 2019 As Reported Adjustment Amounts Under ASC due to ASC under ASC 606 606 605 (In thousands) Other current assets $ 14,181 $ (266) $ 13,915 Deposits and other assets 45,486 (574) 44,912 Total assets 809,010 (840) 808,170 Deferred revenue 52,827 (6,264) 46,563 Total liabilities 184,270 (6,264) 178,006 Retained earnings (accumulated deficit) 19,130 3,992 23,122 Total stockholders' equity 624,740 3,992 628,732 |
Schedule of disaggregation of revenue | Three Months Ended Nine Months Ended March 31, 2019 March 31, 2019 (In thousands) Managed Public School Programs $ 222,645 $ 665,981 Institutional Non-managed Public School Programs 12,776 37,398 Institutional Software & Services 8,530 29,515 Total Institutional 21,306 66,913 Private Pay Schools and Other 9,301 26,544 Total Revenues $ 253,252 $ 759,438 |
Schedule of accounts receivables, contract assets and deferred revenue | March 31, July 1, 2019 2018 (In thousands) Accounts receivable $ 238,614 $ 176,319 Unbilled receivables (included in accounts receivable) 22,617 12,143 Deferred revenue 52,827 25,580 |
Schedule of useful lives of property and equipment | Useful Life Student and state testing computers 3 - 5 years Computer hardware 3 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements 3 - 12 years |
Schedule of intangible assets | March 31, 2019 June 30, 2018 ($ in millions) Gross Accumulated Net Gross Accumulated Net Trade names $ 17.6 $ (9.2) $ 8.4 $ 17.6 $ (8.5) $ 9.1 Customer and distributor relationships 20.5 (14.4) 6.1 20.5 (13.4) 7.1 Developed technology 3.2 (2.6) 0.6 3.2 (2.2) 1.0 Other 1.4 (0.8) 0.6 1.4 (0.6) 0.8 Total $ 42.7 $ (27.0) $ 15.7 $ 42.7 $ (24.7) $ 18.0 |
Schedule of assets and liabilities measured at fair value on a nonrecurring basis | T he following table summarizes certain fair value information at March 31, 2019 for assets or liabilities measured at fair value on a nonrecurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Lease exit liability $ 2,185 $ — $ — $ 2,185 T he following table summarizes certain fair value information at June 30, 2018 for assets and liabilities measured at fair value on a nonrecurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Lease exit liability $ 2,758 $ — $ — $ 2,758 |
Schedule of assets and liabilities measured at fair value on a recurring basis | T he following table summarizes certain fair value information at March 31, 2019 for assets or liabilities measured at fair value on a recurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Convertible note $ 5,006 $ — $ — $ 5,006 T he following table summarizes certain fair value information at June 30, 2018 for assets and liabilities measured at fair value on a recurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Contingent consideration associated with acquisitions $ 1,345 $ — $ — $ 1,345 |
Schedule of activity related to fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | The following tables summarize the activity during the three and nine months ended March 31, 2019 and 2018 for assets and liabilities measured at fair value on a recurring basis: Three Months Ended March 31, 2019 Purchases, Fair Value Issuances, Unrealized Fair Value Description December 31, 2018 and Settlements Gains/(Losses) March 31, 2019 (In thousands) Contingent consideration associated with acquisitions $ 40 $ (40) $ — $ — Convertible note 5,006 — — 5,006 Three Months Ended March 31, 2018 Purchases, Fair Value Issuances, Unrealized Fair Value Description December 31, 2017 and Settlements Gains/(Losses) March 31, 2018 (In thousands) Contingent consideration associated with acquisitions $ 1,340 $ — $ 2 $ 1,342 Nine Months Ended March 31, 2019 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2018 and Settlements Gains (Losses) March 31, 2019 (In thousands) Contingent consideration associated with acquisitions $ 1,345 $ (1,347) $ 2 $ — Convertible note — 5,006 — 5,006 Nine Months Ended March 31, 2018 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2017 and Settlements Gains (Losses) March 31, 2018 (In thousands) Contingent consideration associated with acquisitions 2,806 (1,319) (145) 1,342 |
Schedule of calculation of basic and diluted net income (loss) per share | Three Months Ended Nine Months Ended March 31, March 31, 2019 2018 2019 2018 (In thousands except share and per share data) Basic net income per share computation: Net income attributable to common stockholders $ 18,462 $ 13,070 $ 33,892 $ 18,273 Weighted average common shares — basic 39,008,990 39,644,074 38,753,236 39,366,497 Basic net income per share $ 0.47 $ 0.33 $ 0.87 $ 0.46 Diluted net income per share computation: Net income attributable to common stockholders $ 18,462 $ 13,070 $ 33,892 $ 18,273 Share computation: Weighted average common shares — basic 39,008,990 39,644,074 38,753,236 39,366,497 Effect of dilutive stock options and restricted stock awards 2,744,333 1,122,129 1,795,723 1,404,940 Weighted average common shares — diluted 41,753,323 40,766,203 40,548,959 40,771,437 Diluted net income per share $ 0.44 $ 0.32 $ 0.84 $ 0.45 |
Long-term Obligations (Tables)
Long-term Obligations (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Long-term Obligations | |
Summary of present value of the net minimum payments due on outstanding capital leases | As of June 30, Capital Leases (in thousands) 2019 (remaining three months) $ 7,859 2020 18,987 2021 4,819 2022 340 Total minimum payments 32,005 Less amount representing interest (imputed weighted average capital lease interest rate of 3.67%) (808) Net minimum payments 31,197 Less current portion (24,499) Present value of minimum payments, less current portion $ 6,698 |
Equity Transactions (Tables)
Equity Transactions (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Equity Transactions | |
Schedule of stock option activity | Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Life (Years) Value Outstanding, June 30, 2018 1,199,307 $ 19.97 Granted — — Exercised (106,490) 20.50 Forfeited or canceled (13,000) 29.82 Outstanding, March 31, 2019 1,079,817 $ 19.80 2.91 $ 15,457,203 Exercisable, March 31, 2019 1,046,552 $ 20.00 2.86 $ 14,792,194 |
Schedule of restricted stock award activity | Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2018 1,676,907 $ 15.12 Granted 822,333 18.34 Vested (918,196) 14.67 Canceled (227,731) 17.42 Nonvested, March 31, 2019 1,353,313 $ 16.99 |
Schedule of performance share units award activity | Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2018 708,979 $ 13.15 Granted 2,372,241 10.61 Vested (427,954) 13.24 Canceled (281,025) 13.02 Nonvested, March 31, 2019 2,372,241 $ 10.61 |
Restructuring (Tables)
Restructuring (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Restructuring | |
Schedule of lease exit liability | Balance at Payments, net of Accretion Balance at Description Initial Value June 30, 2018 sublease income Expense Adjustments March 31, 2019 (In thousands) Lease #1 $ 1,652 $ 1,092 $ (275) $ 22 $ — $ 839 Lease #2 1,311 475 (355) 5 — 125 Lease #3 2,443 1,191 6 24 — 1,221 Total $ 5,406 $ 2,758 $ (624) $ 51 $ — $ 2,185 |
Supplemental Disclosure of Ca_2
Supplemental Disclosure of Cash Flow Information (Tables) | 9 Months Ended |
Mar. 31, 2019 | |
Supplemental Disclosure of Cash Flow Information | |
Schedule of supplemental disclosure of cash flow information | Nine Months Ended March 31, 2019 2018 (In thousands) Cash paid for interest $ 862 $ 546 Cash paid for taxes $ 1,010 $ 11,211 Supplemental disclosure of non-cash financing activities: Property and equipment financed by capital lease obligations, including student peripherals $ 19,076 $ 16,119 Supplemental disclosure of non-cash investing activities: Stock-based compensation expense capitalized on software development $ 101 $ 1,053 Stock-based compensation expense capitalized on curriculum development $ 176 $ 835 Business combinations: Current assets $ — $ 209 Intangible assets — 695 Goodwill — 2,983 Assumed liabilities — (734) Deferred revenue — (361) |
Description of the Business (De
Description of the Business (Details) | 9 Months Ended |
Mar. 31, 2019item | |
Description of the Business | |
Number of lines of business | 3 |
Basis of Presentation (Details)
Basis of Presentation (Details) | 9 Months Ended |
Mar. 31, 2019segment | |
Basis of Presentation | |
Number of operating segments | 1 |
Number of reportable business segments | 1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - ASU (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Jun. 30, 2018 | Jul. 01, 2019 | Sep. 30, 2018 | |
Summary of Significant Accounting Policies | |||||
Cash flows from operations | $ 73,296 | $ 55,230 | |||
Cash flows from financing activities | (22,398) | $ (21,711) | |||
Retained earnings | 19,130 | $ (13,432) | |||
ASU 2016-15 | |||||
Summary of Significant Accounting Policies | |||||
Cash flows from operations | (1,800) | ||||
Cash flows from financing activities | $ 1,800 | ||||
ASU 2016-02 | Scenario Forecast Adjustment | Minimum | |||||
Summary of Significant Accounting Policies | |||||
Lease liability | $ 22,000 | ||||
ROU asset | 17,000 | ||||
ASU 2016-02 | Scenario Forecast Adjustment | Maximum | |||||
Summary of Significant Accounting Policies | |||||
Lease liability | 25,000 | ||||
ROU asset | $ 20,000 | ||||
Adjustment due to ASC 606 | |||||
Summary of Significant Accounting Policies | |||||
Retained earnings | $ 3,992 | ||||
Adjustment due to ASC 606 | ASU 2014-09 | |||||
Summary of Significant Accounting Policies | |||||
Retained earnings | $ (1,300) |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Impact on adoption of revenue recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||||
Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | Jul. 01, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | |
Summary of Significant Accounting Policies | |||||||||||
Length of the school year that revenues were recognized over prior to adoption of ASC 606 | 10 months | ||||||||||
Revenues | $ 253,252 | $ 232,864 | $ 759,438 | $ 678,860 | |||||||
Selling, administrative, and other operating expenses | 59,382 | 62,267 | 222,143 | 220,507 | |||||||
Loss from operations | 23,267 | 19,717 | 42,805 | 15,669 | |||||||
Net loss | 18,462 | 13,043 | 33,892 | 18,073 | |||||||
Net income attributable to common stockholders | 18,462 | $ 23,712 | $ (8,282) | 13,070 | $ 13,259 | $ (8,056) | 33,892 | 18,273 | |||
Other current assets | 14,181 | 14,181 | $ 10,388 | ||||||||
Deposits and other assets | 45,486 | 45,486 | 36,669 | ||||||||
Total assets | 809,010 | 809,010 | 741,963 | ||||||||
Deferred revenue | 52,827 | 52,827 | $ 25,580 | 23,114 | |||||||
Total liabilities | 184,270 | 184,270 | 154,774 | ||||||||
Retained earnings (accumulated deficit) | 19,130 | 19,130 | (13,432) | ||||||||
Total stockholders’ equity | 624,740 | $ 603,956 | $ 575,696 | $ 599,432 | $ 585,842 | $ 566,872 | 624,740 | $ 599,432 | $ 587,189 | $ 574,346 | |
Adjustment due to ASC 606 | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Revenues | 6,536 | 3,799 | |||||||||
Selling, administrative, and other operating expenses | (68) | (193) | |||||||||
Loss from operations | 6,604 | 3,992 | |||||||||
Net loss | 6,604 | 3,992 | |||||||||
Net income attributable to common stockholders | 6,604 | 3,992 | |||||||||
Other current assets | (266) | (266) | |||||||||
Deposits and other assets | (574) | (574) | |||||||||
Total assets | (840) | (840) | |||||||||
Deferred revenue | (6,264) | (6,264) | |||||||||
Total liabilities | (6,264) | (6,264) | |||||||||
Retained earnings (accumulated deficit) | 3,992 | 3,992 | |||||||||
Total stockholders’ equity | 3,992 | 3,992 | |||||||||
Amounts under ASC 605 | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Revenues | 259,788 | 763,237 | |||||||||
Selling, administrative, and other operating expenses | 59,314 | 221,950 | |||||||||
Loss from operations | 29,871 | 46,797 | |||||||||
Net loss | 25,066 | 37,884 | |||||||||
Net income attributable to common stockholders | 25,066 | 37,884 | |||||||||
Other current assets | 13,915 | 13,915 | |||||||||
Deposits and other assets | 44,912 | 44,912 | |||||||||
Total assets | 808,170 | 808,170 | |||||||||
Deferred revenue | 46,563 | 46,563 | |||||||||
Total liabilities | 178,006 | 178,006 | |||||||||
Retained earnings (accumulated deficit) | 23,122 | 23,122 | |||||||||
Total stockholders’ equity | $ 628,732 | $ 628,732 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Disaggregation of revenue (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019USD ($) | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($)item | Mar. 31, 2018USD ($) | |
Summary of Significant Accounting Policies | ||||
Number of lines of business | item | 3 | |||
Total Revenues | $ 253,252 | $ 232,864 | $ 759,438 | $ 678,860 |
Managed Public School Programs | ||||
Summary of Significant Accounting Policies | ||||
Total Revenues | 222,645 | 665,981 | ||
Institutional | ||||
Summary of Significant Accounting Policies | ||||
Total Revenues | 21,306 | 66,913 | ||
Non-managed Public School Programs | ||||
Summary of Significant Accounting Policies | ||||
Total Revenues | 12,776 | 37,398 | ||
Institutional Software & Services | ||||
Summary of Significant Accounting Policies | ||||
Total Revenues | 8,530 | 29,515 | ||
Private Pay Schools and Other | ||||
Summary of Significant Accounting Policies | ||||
Total Revenues | $ 9,301 | $ 26,544 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Revenue Recognition (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019USD ($)contract | Mar. 31, 2018USD ($)contract | Mar. 31, 2019USD ($)contract | Mar. 31, 2018USD ($)contract | |
Summary of Significant Accounting Policies | ||||
Revenues | $ 253,252 | $ 232,864 | $ 759,438 | $ 678,860 |
Reduction in school operating losses included in the entity's revenue | 9,200 | 18,700 | $ 43,200 | 50,200 |
Minimum | ||||
Summary of Significant Accounting Policies | ||||
Duration of contracts providing access to curriculum via the entity's Web site | 1 year | |||
Maximum | ||||
Summary of Significant Accounting Policies | ||||
Duration of contracts providing access to curriculum via the entity's Web site | 2 years | |||
Primary Obligor | ||||
Summary of Significant Accounting Policies | ||||
Revenues | $ 85,800 | $ 81,400 | $ 259,900 | $ 221,000 |
Revenue | Customer Concentration Risk | ||||
Summary of Significant Accounting Policies | ||||
Number of customers with concentration | contract | 1 | 0 | 1 | 1 |
Concentration risk (as a percent) | 10.00% | 10.00% | 10.00% | 10.00% |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2019 | Jul. 01, 2018 | Jun. 30, 2018 | |
Accounts receivables, contract assets and deferred revenue | ||||
Accounts receivable | $ 238,614 | $ 238,614 | $ 176,319 | $ 176,319 |
Unbilled receivables (included in accounts receivable) | 22,617 | 22,617 | 12,143 | |
Deferred revenue | 52,827 | 52,827 | $ 25,580 | $ 23,114 |
Revenue recognized that was included in opening deferred revenue balance | 24,900 | 21,500 | ||
Revenue recognized from performance obligation satisfied in prior periods | $ 3,200 | $ 3,700 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Performance Obligations (Details) $ in Millions | 9 Months Ended |
Mar. 31, 2019USD ($) | |
Summary of Significant Accounting Policies | |
Minimum payment term | 30 days |
Maximum payment term | 45 days |
Practical expedient | |
Unsatisfied performance obligations | true |
Unsatisfied performance obligations amount | $ 1.7 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Costs to Obtain a Contract with a Customer (Details) | 9 Months Ended |
Mar. 31, 2019 | |
Practical expedient | |
Commission paid on contract not capitalized | true |
Amortization period | 4 years |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Millions | Mar. 31, 2019 | Jun. 30, 2018 |
Summary of Significant Accounting Policies | ||
Excess and obsolete inventory reserve | $ 4.1 | $ 3.5 |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Sep. 30, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | |
Property and equipment | |||||
Depreciation expense | $ 4,900 | $ 4,800 | $ 15,200 | $ 13,700 | |
Peripheral equipment write down | 700 | 800 | 4,000 | 3,300 | |
Capitalized software development costs | 20,580 | 18,852 | |||
Net income | 18,462 | 13,043 | $ 33,892 | 18,073 | |
Capitalized Curriculum Development Costs | |||||
Estimated useful life of the software | 5 years | ||||
Capitalized curriculum development additions | $ 13,746 | 7,770 | |||
Amortization expense | 4,500 | 4,700 | 13,500 | 14,800 | |
Out of period adjustment | |||||
Property and equipment | |||||
Capitalized software development costs | $ 2,300 | ||||
Net income | 1,400 | ||||
Capitalized Curriculum Development Costs | |||||
Capitalized curriculum development additions | $ 600 | ||||
Capitalized curriculum development costs write down | 600 | ||||
Student computers | |||||
Property and equipment | |||||
Accelerated depreciation | 500 | 800 | $ 1,600 | 1,700 | |
Student computers | Minimum | |||||
Property and equipment | |||||
Useful Life | 3 years | ||||
Student computers | Maximum | |||||
Property and equipment | |||||
Useful Life | 5 years | ||||
Computer hardware | |||||
Property and equipment | |||||
Useful Life | 3 years | ||||
Computer software | Minimum | |||||
Property and equipment | |||||
Useful Life | 3 years | ||||
Computer software | Maximum | |||||
Property and equipment | |||||
Useful Life | 5 years | ||||
Web site development costs | |||||
Property and equipment | |||||
Useful Life | 3 years | ||||
Office equipment | |||||
Property and equipment | |||||
Useful Life | 5 years | ||||
Furniture and fixtures | |||||
Property and equipment | |||||
Useful Life | 7 years | ||||
Leasehold improvements | Minimum | |||||
Property and equipment | |||||
Useful Life | 3 years | ||||
Leasehold improvements | Maximum | |||||
Property and equipment | |||||
Useful Life | 12 years | ||||
Capitalized software | |||||
Property and equipment | |||||
Useful Life | 3 years | ||||
Amortization expense | $ 7,000 | $ 8,200 | $ 22,400 | $ 26,900 |
Summary of Significant Accou_13
Summary of Significant Accounting Policies - Goodwill and Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Jun. 30, 2018 | |
Intangible Assets: | |||||
Amortization expense | $ 700 | $ 700 | $ 2,200 | $ 2,200 | |
Goodwill | 90,197 | 90,197 | $ 90,197 | ||
Intangible assets, net | 15,723 | 15,723 | 17,951 | ||
Gross Carrying Amount | 42,700 | 42,700 | 42,700 | ||
Accumulated Amortization | (27,000) | (27,000) | (24,700) | ||
Net Carrying Value | 15,700 | 15,700 | 18,000 | ||
Impairment of goodwill | 0 | ||||
Future amortization of intangible assets | |||||
2019 | 700 | 700 | |||
2020 | 2,900 | 2,900 | |||
2021 | 2,400 | 2,400 | |||
2022 | 2,200 | 2,200 | |||
2023 | 2,000 | 2,000 | |||
Thereafter | 5,200 | 5,200 | |||
Impairment of Long-Lived Assets | |||||
Impairment expense | 0 | $ 0 | 0 | $ 0 | |
Trade names | |||||
Intangible Assets: | |||||
Gross Carrying Amount | 17,600 | 17,600 | 17,600 | ||
Accumulated Amortization | (9,200) | (9,200) | (8,500) | ||
Net Carrying Value | 8,400 | 8,400 | 9,100 | ||
Customer and distributor relationships | |||||
Intangible Assets: | |||||
Gross Carrying Amount | 20,500 | 20,500 | 20,500 | ||
Accumulated Amortization | (14,400) | (14,400) | (13,400) | ||
Net Carrying Value | 6,100 | 6,100 | 7,100 | ||
Developed technology | |||||
Intangible Assets: | |||||
Gross Carrying Amount | 3,200 | 3,200 | 3,200 | ||
Accumulated Amortization | (2,600) | (2,600) | (2,200) | ||
Net Carrying Value | 600 | 600 | 1,000 | ||
Other | |||||
Intangible Assets: | |||||
Gross Carrying Amount | 1,400 | 1,400 | 1,400 | ||
Accumulated Amortization | (800) | (800) | (600) | ||
Net Carrying Value | $ 600 | $ 600 | $ 800 |
Summary of Significant Accou_14
Summary of Significant Accounting Policies - Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
Measured on a recurring basis | ||||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||||
Convertible note | $ 5,006 | |||||
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | ||||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||||
Convertible note | 5,006 | |||||
Measured on a nonrecurring basis | ||||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||||
Lease exit liability | 2,185 | $ 2,758 | ||||
Measured on a nonrecurring basis | Significant Unobservable Inputs (Level 3) | ||||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||||
Lease exit liability | $ 2,185 | 2,758 | ||||
Acquisitions | Measured on a recurring basis | ||||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||||
Contingent consideration | $ 40 | 1,345 | $ 1,342 | $ 1,340 | $ 2,806 | |
Acquisitions | Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | ||||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||||
Contingent consideration | $ 1,345 |
Summary of Significant Accou_15
Summary of Significant Accounting Policies - Fair Value Measurements (Details) - Measured on a recurring basis - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Fair Value, beginning of period | $ 5,006 | |||
Purchases, Issuances and Settlements | $ 5,006 | |||
Fair Value, end of period | 5,006 | 5,006 | ||
Acquisitions | ||||
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Contingent consideration, fair value, beginning balance | 40 | $ 1,340 | 1,345 | $ 2,806 |
Purchases, Issuances and Settlements | $ (40) | (1,347) | (1,319) | |
Unrealized Gains/(Losses) | 2 | 2 | (145) | |
Contingent consideration, fair value, ending balance | $ 1,342 | $ 1,342 | ||
Acquisitions | Significant Unobservable Inputs (Level 3) | ||||
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Contingent consideration, fair value, beginning balance | $ 1,345 |
Summary of Significant Accou_16
Summary of Significant Accounting Policies - Net Income Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Mar. 31, 2019 | Mar. 31, 2018 | Jun. 30, 2018 | |
Basic and diluted income (loss) per share computation: | |||||||||
Net income attributable to common stockholders | $ 18,462 | $ 23,712 | $ (8,282) | $ 13,070 | $ 13,259 | $ (8,056) | $ 33,892 | $ 18,273 | |
Weighted average common shares—basic | 39,008,990 | 39,644,074 | 38,753,236 | 39,366,497 | |||||
Effect of dilutive stock options and restricted stock awards (in shares) | 2,744,333 | 1,122,129 | 1,795,723 | 1,404,940 | |||||
Weighted average common shares—diluted | 41,753,323 | 40,766,203 | 40,548,959 | 40,771,437 | |||||
Basic net income per share (in dollars per share) | $ 0.47 | $ 0.33 | $ 0.87 | $ 0.46 | |||||
Diluted net income per share (in dollars per share) | $ 0.44 | $ 0.32 | $ 0.84 | $ 0.45 | |||||
Additional disclosures | |||||||||
Common stock, shares issued | 45,542,026 | 45,542,026 | 44,902,567 | ||||||
Common stock, shares outstanding | 40,207,283 | 40,207,283 | 39,567,824 | ||||||
Stock options and restricted stock | |||||||||
Basic and diluted income (loss) per share computation: | |||||||||
Anti-dilutive shares | 119,343 | 1,422,500 | 148,355 | 1,086,880 |
Income Taxes (Details)
Income Taxes (Details) | Jan. 01, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2019 | Mar. 31, 2018 |
Reconciliation to income tax at the statutory rate: | ||||||
Effective income tax rate (as a percent) | 23.80% | 34.70% | 22.20% | (11.50%) | ||
U.S. Federal tax at statutory rates (as a percent) | 21.00% | 35.00% |
Long-term Obligations - Capital
Long-term Obligations - Capital Leases (Details) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Feb. 28, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | |
PNC and BALC | ||||
Long-term obligations | ||||
Line of credit, amount outstanding | $ 31,200,000 | $ 26,000,000 | ||
PNC and BALC | Minimum | ||||
Long-term obligations | ||||
Interest rate (as a percent) | 1.97% | |||
PNC and BALC | Maximum | ||||
Long-term obligations | ||||
Interest rate (as a percent) | 4.05% | |||
PNC | ||||
Long-term obligations | ||||
Payment terms of equipment lease line of credit | 36 months | |||
Purchase option at the end of payment terms | $ 1 | |||
BALC | ||||
Long-term obligations | ||||
Maximum borrowing capacity | $ 25,000,000 | $ 16,000,000 | ||
Interest rate (as a percent) | 4.05% | |||
Payment terms of equipment lease line of credit | 12 months | |||
Purchase option at the end of payment terms | $ 1 | |||
BALC | LIBOR | ||||
Long-term obligations | ||||
Interest rate spread added to base rate (as a percent) | 1.25% | |||
Computer hardware | PNC and BALC | ||||
Long-term obligations | ||||
Gross carrying value of leased computers | 52,900,000 | 42,200,000 | ||
Accumulated depreciation of leased student computers | $ 30,100,000 | $ 26,000,000 |
Long-term Obligations- Net Mini
Long-term Obligations- Net Minimum Lease Payments on Capital Leases (Details) - USD ($) $ in Thousands | Mar. 31, 2019 | Jun. 30, 2018 |
Minimum lease payments on capital leases | ||
2019 (remaining six months) | $ 7,859 | |
2020 | 18,987 | |
2021 | 4,819 | |
2022 | 340 | |
Total minimum payments | 32,005 | |
Less amount representing interest (imputed weighted average capital lease interest rate of 3.67%) | (808) | |
Net minimum payments | 31,197 | |
Less current portion | (24,499) | $ (13,353) |
Present value of minimum payments, less current portion | $ 6,698 | $ 12,665 |
Weighted average interest rate (as a percent) | 3.67% |
Equity Transactions - Share Bas
Equity Transactions - Share Based Compensation (Details) - USD ($) | 9 Months Ended |
Mar. 31, 2019 | |
Employee and Non Employees Stock Option | |
Shares | |
Outstanding at the beginning of the period (in shares) | 1,199,307 |
Exercised (in shares) | (106,490) |
Forfeited or canceled (in shares) | (13,000) |
Outstanding at the end of the period (in shares) | 1,079,817 |
Exercisable (in shares) | 1,046,552 |
Weighted-Average Exercise Price | |
Outstanding at the beginning of the period (in dollars per share) | $ 19.97 |
Exercised (in dollars per share) | 20.50 |
Forfeited or canceled (in dollars per share) | 29.82 |
Outstanding at the end of the period (in dollars per share) | 19.80 |
Stock options exercisable, Weighted Average Exercise Price (in dollars per share) | $ 20 |
Additional information | |
Weighted Average Remaining Contractual Life | 2 years 10 months 28 days |
Aggregate Intrinsic Value | $ 15,457,203 |
Stock options exercisable, Weighted Average Remaining Contractual Life (Years) | 2 years 10 months 10 days |
Stock options exercisable, Aggregate Intrinsic Value | $ 14,792,194 |
Plan | |
Stock option activity | |
Shares reserved for issuance | 2,098,278 |
Plan and Prior Plan | |
Shares | |
Outstanding at the end of the period (in shares) | 4,823,629 |
Equity Transactions - Vesting (
Equity Transactions - Vesting (Details) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | 22 Months Ended | |||
Mar. 31, 2019USD ($)$ / sharesshares | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($)$ / sharesshares | Mar. 31, 2018USD ($) | Jun. 30, 2018item | Jun. 30, 2016 | Jun. 30, 2017USD ($) | |
Employee and Non Employees Stock Option | |||||||
Equity Transactions | |||||||
Intrinsic value of options exercised | $ 0.7 | $ 0 | |||||
Unrecognized compensation | $ 0.2 | $ 0.2 | |||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 4 months 24 days | ||||||
Stock based compensation expense | 0.2 | $ 0.2 | $ 0.5 | 1 | |||
Restricted Stock | |||||||
Equity Transactions | |||||||
Unrecognized compensation | 17.2 | $ 17.2 | |||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 1 year 8 months 12 days | ||||||
Stock based compensation expense | 2.6 | 3.9 | $ 9.5 | 11.7 | |||
Granted (in shares) | shares | 822,333 | ||||||
Granted (in dollars per share) | $ / shares | $ 18.34 | ||||||
Performance Share Units | |||||||
Equity Transactions | |||||||
Unrecognized compensation | 14.9 | $ 14.9 | |||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 years 6 months | ||||||
Stock based compensation expense | 1.3 | $ 0.6 | $ 2.4 | $ 4.1 | $ 3.8 | ||
Granted (in shares) | shares | 2,372,241 | ||||||
Granted (in dollars per share) | $ / shares | $ 10.61 | ||||||
Performance Share Units | Fiscal Year 2019 LTIP | |||||||
Equity Transactions | |||||||
Stock based compensation expense | $ 0 | $ 0 | |||||
Granted (in shares) | shares | 263,936 | ||||||
Fair value | $ 7.9 | $ 7.9 | |||||
Granted (in dollars per share) | $ / shares | $ 30.05 | ||||||
Performance Shares Tranche #1 | Fiscal Year 2019 LTIP | |||||||
Equity Transactions | |||||||
Earned award vesting percentage | 45.00% | ||||||
Performance Shares Tranche #2 | |||||||
Equity Transactions | |||||||
Number of performance measures | item | 2 | ||||||
Performance Shares Tranche #2 | Fiscal Year 2019 LTIP | |||||||
Equity Transactions | |||||||
Earned award vesting percentage | 25.00% | ||||||
Performance Shares Tranche #3 | Fiscal Year 2019 LTIP | |||||||
Equity Transactions | |||||||
Earned award vesting percentage | 30.00% | ||||||
Quarterly Period Beginning November 15, 2017 | Performance Shares Tranche #1 | |||||||
Equity Transactions | |||||||
Earned award vesting percentage | 30.00% | ||||||
Period After August 15, 2018 | Performance Shares Tranche #2 | |||||||
Equity Transactions | |||||||
Earned award vesting percentage | 70.00% |
Equity Transactions - Restricte
Equity Transactions - Restricted Stock (Details) - $ / shares | Aug. 01, 2018 | Mar. 31, 2019 | Mar. 31, 2019 |
Restricted Stock | |||
Shares | |||
Nonvested at the beginning of the period (in shares) | 1,676,907 | ||
Granted (in shares) | 822,333 | ||
Vested (in shares) | (918,196) | ||
Forfeited or canceled (in shares) | (227,731) | ||
Nonvested at the end of the period (in shares) | 1,353,313 | 1,353,313 | |
Weighted-Average Grant Date Fair Value | |||
Nonvested at the beginning of the period (in dollars per share) | $ 15.12 | ||
Granted (in dollars per share) | 18.34 | ||
Vested (in dollars per share) | 14.67 | ||
Forfeited or canceled (in dollars per share) | 17.42 | ||
Nonvested at the end of the period (in dollars per share) | $ 16.99 | $ 16.99 | |
Restricted Stock | Vesting Based On Performance And Service | |||
Shares | |||
Vested (in shares) | (312,383) | ||
Restricted Stock | Vesting Performance | |||
Shares | |||
Granted (in shares) | 37,378 | ||
Nonvested at the end of the period (in shares) | 271,455 | 271,455 | |
Weighted-Average Grant Date Fair Value | |||
Percentage of target that the stock awards were granted at | 100.00% | ||
Number of shares earned upon reaching performance threshold | 46,845 | ||
Performance Share Units | |||
Shares | |||
Nonvested at the beginning of the period (in shares) | 708,979 | ||
Granted (in shares) | 2,372,241 | ||
Vested (in shares) | (427,954) | ||
Forfeited or canceled (in shares) | (281,025) | ||
Nonvested at the end of the period (in shares) | 2,372,241 | 2,372,241 | |
Weighted-Average Grant Date Fair Value | |||
Nonvested at the beginning of the period (in dollars per share) | $ 13.15 | ||
Granted (in dollars per share) | 10.61 | ||
Vested (in dollars per share) | 13.24 | ||
Forfeited or canceled (in dollars per share) | 13.02 | ||
Nonvested at the end of the period (in dollars per share) | $ 10.61 | $ 10.61 | |
Right to receive number of shares | 1 | ||
Performance Share Units | Vesting Performance | |||
Shares | |||
Granted (in shares) | 317,703 | ||
Weighted-Average Grant Date Fair Value | |||
Granted (in dollars per share) | $ 19.76 |
Equity Transactions - Other (De
Equity Transactions - Other (Details) $ / shares in Units, $ in Millions | Aug. 01, 2018USD ($)shares | Aug. 02, 2017shares | Mar. 31, 2019USD ($)$ / sharesshares | Sep. 30, 2018$ / sharesshares | Mar. 31, 2018USD ($) | Mar. 31, 2019USD ($)$ / sharesshares | Mar. 31, 2018USD ($) | Jun. 30, 2018item$ / sharesshares | Jun. 30, 2017$ / shares | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)$ / sharesshares | Mar. 31, 2019USD ($)shares |
Equity Transactions | ||||||||||||
Fair value of share-based compensation awards granted in period | $ | $ 15.1 | $ 17.5 | ||||||||||
Fair value of share-based compensation awards vested in period | $ | $ 19.6 | 21.7 | ||||||||||
Vesting Performance | ||||||||||||
Equity Transactions | ||||||||||||
Number of consecutive days considered for the computation of average closing stock prices | 30 days | |||||||||||
Equity Incentive Market Based Restricted Stock Awards | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in dollars per share) | $ / shares | $ 14.35 | |||||||||||
Equity Incentive Market Based Restricted Stock Awards | Vesting Performance | ||||||||||||
Equity Transactions | ||||||||||||
Performance shares | 6,800 | 6,800 | 6,800 | |||||||||
Nonvested at the end of the period (in shares) | 6,800 | 6,800 | ||||||||||
Equity Incentive Market Based Restricted Stock Awards | Stock price performance target one | ||||||||||||
Equity Transactions | ||||||||||||
Vested (in shares) | (18,400) | |||||||||||
Restricted Stock | ||||||||||||
Equity Transactions | ||||||||||||
Stock based compensation expense | $ | $ 2.6 | $ 3.9 | $ 9.5 | 11.7 | ||||||||
Performance shares | 1,353,313 | 1,676,907 | 1,676,907 | 1,676,907 | 1,676,907 | 1,353,313 | ||||||
Unrecognized compensation | $ | $ 17.2 | |||||||||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 1 year 8 months 12 days | |||||||||||
Nonvested at the beginning of the period (in shares) | 1,676,907 | 1,676,907 | ||||||||||
Granted (in shares) | 822,333 | |||||||||||
Vested (in shares) | (918,196) | |||||||||||
Forfeited or canceled (in shares) | (227,731) | |||||||||||
Nonvested at the end of the period (in shares) | 1,353,313 | 1,353,313 | 1,676,907 | 1,676,907 | ||||||||
Nonvested at the beginning of the period (in dollars per share) | $ / shares | $ 15.12 | $ 15.12 | ||||||||||
Granted (in dollars per share) | $ / shares | 18.34 | |||||||||||
Vested (in dollars per share) | $ / shares | 14.67 | |||||||||||
Forfeited or canceled (in dollars per share) | $ / shares | 17.42 | |||||||||||
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 16.99 | $ 16.99 | $ 15.12 | $ 15.12 | ||||||||
Restricted Stock | Vesting Performance | ||||||||||||
Equity Transactions | ||||||||||||
Performance shares | 271,455 | 271,455 | 271,455 | |||||||||
Granted (in shares) | 37,378 | |||||||||||
Nonvested at the end of the period (in shares) | 271,455 | 271,455 | ||||||||||
Restricted Stock | Service based awards | ||||||||||||
Equity Transactions | ||||||||||||
Performance shares | 1,075,058 | 1,075,058 | 1,075,058 | |||||||||
Granted (in shares) | 784,955 | |||||||||||
Vested (in shares) | (587,413) | |||||||||||
Nonvested at the end of the period (in shares) | 1,075,058 | 1,075,058 | ||||||||||
Performance Share Units | ||||||||||||
Equity Transactions | ||||||||||||
Stock based compensation expense | $ | $ 1.3 | $ 0.6 | $ 2.4 | $ 4.1 | $ 3.8 | |||||||
Percentage of target award probable at the highest level | 150.00% | |||||||||||
Percentage of MPS schools that were not in academic jeopardy | 97.00% | |||||||||||
Performance shares | 2,372,241 | 708,979 | 708,979 | 708,979 | 708,979 | 2,372,241 | ||||||
Unrecognized compensation | $ | $ 14.9 | |||||||||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 years 6 months | |||||||||||
Nonvested at the beginning of the period (in shares) | 708,979 | 708,979 | ||||||||||
Granted (in shares) | 2,372,241 | |||||||||||
Vested (in shares) | (427,954) | |||||||||||
Forfeited or canceled (in shares) | (281,025) | |||||||||||
Nonvested at the end of the period (in shares) | 2,372,241 | 2,372,241 | 708,979 | 708,979 | ||||||||
Nonvested at the beginning of the period (in dollars per share) | $ / shares | $ 13.15 | $ 13.15 | ||||||||||
Granted (in dollars per share) | $ / shares | 10.61 | |||||||||||
Vested (in dollars per share) | $ / shares | 13.24 | |||||||||||
Forfeited or canceled (in dollars per share) | $ / shares | 13.02 | |||||||||||
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 10.61 | $ 10.61 | $ 13.15 | $ 13.15 | ||||||||
Performance Share Units | 2019 SPP | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in shares) | 1,766,932 | |||||||||||
Performance Share Units | Modification | ||||||||||||
Equity Transactions | ||||||||||||
Fair value | $ | 0.4 | |||||||||||
Granted (in shares) | 23,670 | |||||||||||
Granted (in dollars per share) | $ / shares | $ 17.45 | |||||||||||
Performance Share Units | Vesting Performance | ||||||||||||
Equity Transactions | ||||||||||||
Fair value | $ | 6.3 | |||||||||||
Granted (in shares) | 317,703 | |||||||||||
Granted (in dollars per share) | $ / shares | $ 19.76 | |||||||||||
Performance Shares Tranche #1 - Academic Measure | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in shares) | 446,221 | |||||||||||
Granted due to the Outperform level (in shares) | 138,241 | |||||||||||
Performance Shares Tranche #2 | ||||||||||||
Equity Transactions | ||||||||||||
Number of performance conditions achievement deemed probable | item | 1 | |||||||||||
Number of performance measures | item | 2 | |||||||||||
Percentage below target for academic measure | 1 | |||||||||||
Performance Shares Tranche #2 - Academic Measure | ||||||||||||
Equity Transactions | ||||||||||||
Stock based compensation expense | $ | $ 3.9 | |||||||||||
Granted (in shares) | 349,996 | |||||||||||
Reduction in shares due to below target performance (in shares) | 15,345 | |||||||||||
Performance Shares Tranche#2 - Lifetime Value Measure | ||||||||||||
Equity Transactions | ||||||||||||
Stock based compensation expense | $ | $ 0 | |||||||||||
Deferred Stock Units | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in shares) | 18,258 | |||||||||||
Granted (in dollars per share) | $ / shares | $ 25.41 | |||||||||||
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 18,258 | $ 18,258 | ||||||||||
Senior Executives | Performance Share Units | 2019 SPP | ||||||||||||
Equity Transactions | ||||||||||||
Market capitalization growth performance period | 3 years | |||||||||||
Fair value | $ | $ 10.5 | |||||||||||
Threshold period average price of stock to determine final amount | 30 days | |||||||||||
Threshold days after release of fiscal year 2021 results to calculate average price of stock | 7 days | |||||||||||
Granted (in dollars per share) | $ / shares | $ 5.97 | |||||||||||
Senior Executives | Performance Share Units | Total stock price growth less than 25% | 2019 SPP | ||||||||||||
Equity Transactions | ||||||||||||
Percentage of total stock price growth | 25.00% | |||||||||||
Annualized percentage of total stock price growth | 7.60% | |||||||||||
Senior Executives | Performance Share Units | Total stock price growth 33% | 2019 SPP | ||||||||||||
Equity Transactions | ||||||||||||
Amount earned as percentage of total value growth | 6.00% | |||||||||||
Percentage of total stock price growth | 33.00% | |||||||||||
Annualized percentage of total stock price growth | 10.00% | |||||||||||
Senior Executives | Performance Share Units | Total stock price growth equals or greater than 95% | 2019 SPP | ||||||||||||
Equity Transactions | ||||||||||||
Amount earned as percentage of total value growth | 7.50% | |||||||||||
Percentage of total stock price growth | 95.00% | |||||||||||
Annualized percentage of total stock price growth | 25.00% | |||||||||||
Mr. Davis | Performance Shares Tranche #1 - Academic Measure | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in shares) | 90,000 | |||||||||||
Mr. Davis | Performance Shares Tranche #2 - Academic Measure | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in shares) | 76,640 | |||||||||||
Mr. Udell | Performance Shares Tranche #1 - Academic Measure | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in shares) | 70,021 | |||||||||||
Mr. Udell | Performance Shares Tranche #2 - Academic Measure | ||||||||||||
Equity Transactions | ||||||||||||
Granted (in shares) | 59,626 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
Foundation For Online and Blended Learning | ||||
Related Party Transactions | ||||
Contributions made to related party | $ 0.1 | $ 0 | $ 0.9 | $ 0.3 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | 2 Months Ended | |
Sep. 15, 2016USD ($)claimitem | Mar. 31, 2019USD ($) | |
Buildings | ||
Commitments and contingencies | ||
Guarantees related to lease commitments | $ | $ 1.7 | |
Babulal Tarapara v. K12 Inc. | ||
Commitments and contingencies | ||
Number of securities class action lawsuits | claim | 2 | |
Number of officers against whom lawsuit is filed | item | 2 | |
Number of former officers against whom lawsuit is filed | item | 1 | |
Babulal Tarapara v. K12 Inc. | Settled Litigation | Insurance company | ||
Commitments and contingencies | ||
Settlement payment | $ | $ 3.5 |
Restructuring (Details)
Restructuring (Details) - Facility closing $ in Millions | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017USD ($)facility | Jun. 30, 2017USD ($) | |
Restructuring | ||
Number of facilities being exited | facility | 3 | |
Impairment of leases | $ 5.4 | |
Lease liability current | $ 1.7 | |
Lease liability noncurrent | 3.7 | |
Accelerated depreciation | 1.4 | |
Deferred rent and tenant improvements written off | 1.9 | |
Selling, administrative and other operating expenses | ||
Restructuring | ||
Net impact of facility exit activity | $ 4.9 |
Restructuring - operating expen
Restructuring - operating expenses (Details) $ in Thousands | 9 Months Ended |
Mar. 31, 2019USD ($) | |
Total | |
Restructuring | |
Initial Value | $ 5,406 |
Beginning Balance | 2,758 |
Payments, net of sublease income | 624 |
Accretion Expense | 51 |
Ending Balance | 2,185 |
Lease 1 | |
Restructuring | |
Initial Value | 1,652 |
Beginning Balance | 1,092 |
Payments, net of sublease income | 275 |
Accretion Expense | 22 |
Ending Balance | 839 |
Lease 2 | |
Restructuring | |
Initial Value | 1,311 |
Beginning Balance | 475 |
Payments, net of sublease income | 355 |
Accretion Expense | 5 |
Ending Balance | 125 |
Lease 3 | |
Restructuring | |
Initial Value | 2,443 |
Beginning Balance | 1,191 |
Payments, net of sublease income | (6) |
Accretion Expense | 24 |
Ending Balance | $ 1,221 |
Investments (Details)
Investments (Details) - STEM Premier, Inc item in Thousands, $ in Millions | 1 Months Ended |
Aug. 31, 2018USD ($)item | |
Investments | |
Investment | $ 6.7 |
Ownership percentage | 39.50% |
Convertible note | $ 5 |
Ownership percentage on an if-converted basis | 56.00% |
Term of debt | 48 months |
Series D Preferred shares | |
Investments | |
Convertible into Series D Preferred shares | item | 3,670 |
Base Rate | |
Investments | |
Interest rate spread added to base rate (as a percent) | 0.25% |
Supplemental Disclosure of Ca_3
Supplemental Disclosure of Cash Flow Information (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid for interest | $ 862 | $ 546 |
Cash paid for taxes | 1,010 | 11,211 |
Supplemental disclosure of non-cash financing activities: | ||
Property and equipment financed by capital lease obligations, including student peripherals | 19,076 | 16,119 |
Supplemental disclosure of non-cash investing activities: | ||
Stock-based compensation expense capitalized on software development | 101 | 1,053 |
Stock-based compensation expense capitalized on curriculum development | $ 176 | 835 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets [Abstract] | ||
Current assets | 209 | |
Intangible assets | 695 | |
Goodwill | 2,983 | |
Assumed liabilities | (734) | |
Deferred revenue | $ (361) |