K12 Inc. is a for-profit virtual charter school chain that trades on the New York Stock Exchange. It was founded by Michael Milken and Lloyd Milken. It is funded with taxpayer dollars. It advertises and recruits heavily to keep enrollment up. It has a high attrition rate.

Its cash-cow operation is the Ohio Virtual Academy. Look for significant lobbying in New Jersey, Illinois, Connecticut, Kentucky and New York, according to the investor conference call.

I don’t know about you, but I had a hard time reading this transcript. They might just as well have been discussing a corporation that sells tires, toothpaste, bundled mortgages, or manure. These guys are profiting from taxpayer dollars that are supposed. To pay for public schools, for bands, for nurses, for guidance counselors, for reduced class sizes, for libraries. They are taking money away from real instruction, real children, real schools. Have they no sense of shame? Would any of the investors on this call put their own children in a K12 virtual charter school? Bet not. Bet their kids are in really nice suburban schools or elite private schools.Not sitting in front of a computer and calling it a “school.” It’s not. It’s a business, and the kids it recruits don’t get an education.

NOTE: I just learned that I am allowed to quote only 400 words from the transcript, so accordingly, I will count 400 words and delete what remains.

http://investors.k12.com/phoenix.zhtml?c=214389&p=irol-reportsannual

RISK FACTORS (Page 33-48)

Page 42

“We generate significant revenues from two virtual public schools, and the termination, revocation, expiration or modification of our contracts with these virtual public schools could adversely affect our business, financial condition and results of operation.

“In fiscal year 2013, we derived approximately 11% and 14% of our revenues, respectively, from the Ohio Virtual Academy and the Agora Cyber Charter School in Pennsylvania. In aggregate, these schools accounted for approximately 25% of our total revenues. If our contracts with either of these virtual public schools are terminated, the charters to operate either of these schools are not renewed or are revoked, enrollments decline substantially, funding is reduced, or more restrictive legislation is enacted, our business, financial condition and results of operations could be adversely affected.

“Note at a k12, inc investor conference call on 10/9 the company addressed the loss of the management agreement for Agora Cyber Charter School in PA. http://www.huffingtonpost.com/2014/10/01/charter-schools-k12_n_5914580.html

“The school will continue to use the k12, inc curriculum, but will self-manage.
http://www.marketwatch.com/story/k12-inc-awarded-contract-to-be-curriculum-provider-for-agora-cyber-charter-school-2014-10-09”

Here is the transcript of the investor conference call. Grab your vomit bag.

http://seekingalpha.com/article/2559155-k12-inc-2015-guidance-update-call-oct-09-2014?part=single

K12, Inc., 2015 Guidance/Update Call, Oct 09, 2014

Oct. 9, 2014 3:30 PM ET | About: K12 Inc. (LRN)

K12 Inc. (NYSE:LRN)

October 09, 2014 8:30 am ET

Executives

Mike Kraft – Vice President of Investor Relations

Nathaniel Alonzo Davis – Executive Chairman and Chief Executive Officer

James J. Rhyu – Chief Financial Officer and Executive Vice President

Timothy L. Murray – President and Chief Operating Officer

Analysts
Jeffrey P. Meuler – Robert W. Baird & Co. Incorporated, Research Division
Corey Greendale – First Analysis Securities Corporation, Research Division
Jason P. Anderson – Stifel, Nicolaus & Company, Incorporated, Research Division
Trace A. Urdan – Wells Fargo Securities, LLC, Research Division
Sou Chien – BMO Capital Markets Canada

Operator

Greetings, and welcome to the K12 Inc. Guidance Conference Call for Fiscal Year 2015. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mike Kraft, Vice President of Finance. Please go ahead, sir.

Mike Kraft – Vice President of Investor Relations

Thank you, and good morning. Welcome to K12’s Fiscal Year 2015 Guidance Conference Call. Before we begin, I would like to remind you that in addition to historical information, certain comments made during this conference call may be considered forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and should be considered in conjunction with cautionary statements contained in our guidance release in the company’s periodic filings with the SEC.

Forward-looking statements involve risks and uncertainties that may cause actual performance or results to differ materially from those expressed or implied by such statements.

In addition, this conference call contains time-sensitive information that reflects management’s best analysis only as of the day of this live call. K12 does not undertake any obligation to publicly update or revise any forward-looking statements.

For further information concerning risks and uncertainties that could materially affect financial and operating performance and results, please refer to our reports filed with the SEC, including, without limitation, cautionary statements made in K12’s 2014 Annual Report on Form 10-K. These filings can be found on the Investor Relations section of our website at http://www.k12.com.

This call is open to the public and is being webcast. The call will be available for replay on our website for 60 days.

With me on today’s call is Nate Davis, Chief Executive Officer and Chairman; Tim Murray, President and Chief Operating Officer; and James Rhyu, Chief Financial Officer. Following our prepared remarks, we will answer any questions you may have.
I would now like to turn the call over to Nate. Nate?

Nathaniel Alonzo Davis – Executive Chairman and Chief Executive Officer

Thank you, Mike. Good morning, everyone. Thanks for joining us on the call today. We wanted to provide you with an update on our fiscal year 2015 count date enrollment as well as a guidance for the first quarter and for the full year.

Today’s guidance is a reflection of the trends in the markets that I outlined during our fourth quarter earnings call. Specifically, we saw a couple of our charter schools deciding to self manage their online learning programs. We’re also seeing more traditional school districts offering their own full-time online programs, along with supplemental learning options and online summer courses.
Education is evolving for the better, and families today have more choices in choosing full-time or part time virtual programs for their child. We believe that overall demand for virtual options in education is increasing, and this is translated into stronger demand for our institutional group, Fuel Education or FuelEd, which provides content and curriculum to school districts as well as private and charter school operators. At the same time, these market dynamics have also created a challenge to enrolling students in our traditional managed programs. And to help you understand this transition, we’re providing new guidance on student enrollment and revenue to clearly outline how K12 is participating in the growth of online learning use in public school classrooms.

Student enrollment and revenue data will now be provided for Managed and Non-managed Programs. Managed Programs are where K12 provides substantially all of the administration and education program management for an online program. Non-managed Programs include schools where K12 is the primary provider of content and technology and we may even provide instruction, management or other educational services, but K12 is not providing primary administrative oversight for the virtual school program.
And as you can see from the data we provided in this morning’s release, the 4.7% reduction in student enrollment from managed schools reflects this new market dynamic. It also reflects the events in Tennessee, where the state imposed an arbitrary enrollment cap midway through the enrollment season; and in Colorado, where our school partner took longer than expected to finalize their charter and subsequently, the curriculum contract with K12. We believe that enrollment in these 2 states were impacted by over 4,000 students this season. Also, this year, K12, in collaboration with the school boards we serve, made a concerted effort to keep students enrolled only if they were truly engaged and ready to learn, which also affected Managed Program enrollments.

Our partners are serious about running high-quality charter schools, with students who realize this is hard work. And they want to succeed by putting in the work. And while this is slow to growth in the near term, it better matches students to our core curriculum strengths and improves our reputation as a firm who is serious about providing high-quality education.

Even with the market evolution that’s beginning to unfold, we continue to see strong demand in Managed Public Schools. This year, we saw solid growth in select markets, including Texas, Michigan, Florida and Georgia. And at some point, we believe states like New Jersey, Illinois, Connecticut, Kentucky and New York will become states that allow online charter schools, although these states could take quite some time before opening up.

We will also attempt to be one of the educational management organizations chosen in North Carolina as that market commences an online charter trial next year.

[NOTE: I deleted the remainder of the conference call to abide by the guidelines of the company that supplied the transcript. It was hard to know which words count towards the 400 permissible, like instructions, the operator’s comments, the names of participants, etc. I cut copiously.]