Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2019 | Jul. 31, 2019 | Dec. 31, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | K12 INC | ||
Entity Central Index Key | 0001157408 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 704,767,553 | ||
Entity Common Stock, Shares Outstanding | 40,245,366 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Current assets | ||
Cash and cash equivalents | $ 283,121 | $ 231,113 |
Accounts receivable, net of allowance of $11,766 and $12,384 at June 30, 2019 and 2018, respectively | 191,639 | 176,319 |
Inventories, net | 29,946 | 25,916 |
Prepaid expenses | 12,643 | 10,278 |
Other current assets | 12,307 | 10,388 |
Total current assets | 529,656 | 454,014 |
Property and equipment, net | 31,980 | 28,868 |
Capitalized software, net | 51,165 | 55,488 |
Capitalized curriculum development costs, net | 53,297 | 53,558 |
Intangible assets, net | 14,981 | 17,951 |
Goodwill | 90,197 | 90,197 |
Deposits and other assets | 48,330 | 41,887 |
Total assets | 819,606 | 741,963 |
Current liabilities | ||
Current portion of capital lease obligations | 19,588 | 13,353 |
Accounts payable | 50,488 | 29,362 |
Accrued liabilities | 20,685 | 14,345 |
Accrued compensation and benefits | 41,998 | 36,050 |
Deferred revenue | 22,828 | 23,114 |
Total current liabilities | 155,587 | 116,224 |
Capital lease obligations, net of current portion | 5,060 | 12,665 |
Deferred rent, net of current portion | 2,269 | 3,270 |
Deferred tax liability | 16,670 | 12,577 |
Other long-term liabilities | 6,655 | 10,038 |
Total liabilities | 186,241 | 154,774 |
Commitments and contingencies | ||
Stockholders’ equity | ||
Common stock, par value $0.0001; 100,000,000 shares authorized; 45,575,236 and 44,902,567 shares issued; and 40,240,493 and 39,567,824 shares outstanding at June 30, 2019 and 2018, respectively | 4 | 4 |
Additional paid-in capital | 713,436 | 703,351 |
Accumulated other comprehensive loss | (40) | (252) |
Retained earnings (accumulated deficit) | 22,447 | (13,432) |
Treasury stock of 5,334,743 shares at cost at June 30, 2019 and 2018 | (102,482) | (102,482) |
Total stockholders’ equity | 633,365 | 587,189 |
Total liabilities and stockholders' equity | $ 819,606 | $ 741,963 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance (in dollars) | $ 11,766 | $ 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 | 45,575,236 | 44,902,567 |
Common stock, shares outstanding | 40,240,493 | 39,567,824 |
Treasury stock, shares | 5,334,743 | 5,334,743 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
Revenues | $ 1,015,752 | $ 917,734 | $ 888,519 | ||
Cost and expenses | |||||
Instructional costs and services | 663,437 | 592,495 | 557,316 | ||
Selling, administrative, and other operating expenses | 297,350 | 290,446 | 305,617 | ||
Product development expenses | 9,479 | 9,248 | 12,457 | ||
Total costs and expenses | 970,266 | 892,189 | 875,390 | ||
Income from operations | 45,486 | 25,545 | 13,129 | ||
Impairment of investment in Web International Education Group, Ltd. | (10,000) | ||||
Interest income, net | 2,761 | 965 | 1,808 | ||
Other income, net | 114 | ||||
Income before income taxes, loss from equity method investments and noncontrolling interest | 48,361 | 26,510 | 4,937 | ||
Income tax benefit (expense) | (10,520) | 910 | (5,396) | ||
Loss from equity method investments | (632) | ||||
Net income (loss) | 37,209 | 27,420 | (459) | ||
Add net loss attributable to noncontrolling interest | 200 | 910 | |||
Net income attributable to common stockholders | $ 37,209 | $ 27,620 | [1] | $ 451 | [1] |
Net income attributable to common stockholders per share: | |||||
Basic (in dollars per share) | $ 0.96 | $ 0.70 | $ 0.01 | ||
Diluted (in dollars per share) | $ 0.91 | $ 0.68 | $ 0.01 | ||
Weighted average shares used in computing per share amounts: | |||||
Basic (in shares) | 38,848,780 | 39,282,674 | 38,298,581 | ||
Diluted (in shares) | 40,944,800 | 40,637,744 | 39,500,934 | ||
[1] | Net income excludes $0.2 million and $0.9 million for the years ended June 30, 2018 and 2017, respectively, due to the redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop, which is reported outside of permanent equity in the accompanying consolidated balance sheets (See Note 9, “Redeemable Noncontrolling Interest”). |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net income (loss) | $ 37,209 | $ 27,420 | $ (459) |
Other comprehensive income, net of tax: | |||
Foreign currency translation adjustment | 212 | (82) | 123 |
Total other comprehensive income, net of tax | 37,421 | 27,338 | (336) |
Comprehensive loss attributable to noncontrolling interest | 200 | 910 | |
Comprehensive income attributable to common stockholders | $ 37,421 | $ 27,538 | $ 574 |
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, 2016 | $ 4 | $ 675,436 | $ (293) | $ (41,427) | $ (75,000) | $ 558,720 | |
Balance (in shares) at Jun. 30, 2016 | 43,184,068 | (3,502,598) | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Net income (loss) | [1] | 451 | 451 | ||||
Foreign currency translation adjustment | 123 | 123 | |||||
Stock-based compensation expense | 22,598 | 22,598 | |||||
Exercise of stock options | 6,953 | $ 6,953 | |||||
Exercise of stock options (in shares) | 425,180 | 425,180 | |||||
Excess tax expense from stock-based compensation | (5,063) | $ (5,063) | |||||
Issuance of restricted stock awards (in shares) | 1,268,311 | ||||||
Forfeiture of restricted stock awards (in shares) | (175,008) | ||||||
Adjustments to redeemable noncontrolling interests to estimated redemption value | (3,245) | (3,245) | |||||
Repurchase of restricted stock for tax withholding | (6,191) | (6,191) | |||||
Repurchase of restricted stock for tax withholding (in shares) | (376,779) | ||||||
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 | |||||||
Adjustment related to new stock-based compensation guidance | 112 | (76) | 36 | ||||
Net income (loss) | [1] | 27,620 | 27,620 | ||||
Foreign currency translation adjustment | (82) | (82) | |||||
Purchase of treasury stock | $ (27,482) | (27,482) | |||||
Purchase of treasury stock (in shares) | (1,832,145) | ||||||
Stock-based compensation expense | 22,869 | 22,869 | |||||
Exercise of stock options | 196 | $ 196 | |||||
Exercise of stock options (in shares) | 14,600 | 14,600 | |||||
Vesting of performance share units, net of tax withholding (in shares) | 199,769 | ||||||
Issuance of restricted stock awards (in shares) | 1,210,502 | ||||||
Forfeiture of restricted stock awards (in shares) | (335,150) | ||||||
Repurchase of restricted stock for tax withholding | (10,314) | $ (10,314) | |||||
Repurchase of restricted stock for tax withholding (in shares) | (512,926) | ||||||
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) | 37,209 | 37,209 | |||||
Foreign currency translation adjustment | 212 | 212 | |||||
Stock-based compensation expense | 17,013 | 17,013 | |||||
Exercise of stock options | 3,030 | $ 3,030 | |||||
Exercise of stock options (in shares) | 150,290 | 150,290 | |||||
Vesting of performance share units, net of tax withholding (in shares) | 258,263 | ||||||
Issuance of restricted stock awards (in shares) | 828,833 | ||||||
Forfeiture of restricted stock awards (in shares) | (235,485) | ||||||
Repurchase of restricted stock for tax withholding | (9,958) | $ (9,958) | |||||
Repurchase of restricted stock for tax withholding (in shares) | (329,232) | ||||||
Balance at Jun. 30, 2019 | $ 4 | $ 713,436 | $ (40) | 22,447 | $ (102,482) | 633,365 | |
Balance (in shares) at Jun. 30, 2019 | 45,575,236 | (5,334,743) | |||||
Increase (Decrease) in Stockholders' Equity | |||||||
Adjustment related to new accounting guidance | $ (1,330) | $ (1,330) | |||||
[1] | Net income excludes $0.2 million and $0.9 million for the years ended June 30, 2018 and 2017, respectively, due to the redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop, which is reported outside of permanent equity in the accompanying consolidated balance sheets (See Note 9, “Redeemable Noncontrolling Interest”). |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CONDENSED CONSOLIDATED STATEMENT OF EQUITY | ||
Redeemable noncontrolling interest related to LearnBop | $ 0.2 | $ 0.9 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities | |||
Net income (loss) | $ 37,209 | $ 27,420 | $ (459) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization expense | 71,400 | 75,260 | 74,280 |
Stock-based compensation expense | 16,676 | 20,817 | 22,598 |
Deferred income taxes | 3,693 | (4,015) | (7,065) |
Provision for doubtful accounts | 6,325 | 4,089 | 4,512 |
Impairment of investment in Web International Education Group, Ltd. | 10,000 | ||
Other | 3,985 | 4,822 | 4,286 |
Changes in assets and liabilities: | |||
Accounts receivable | (21,637) | 11,987 | (27,745) |
Inventories, prepaid expenses, deposits and other current and long-term assets | (3,321) | (28,491) | 11,343 |
Accounts payable | 20,174 | (2,336) | 5,317 |
Accrued liabilities | 8,295 | (6,273) | (4,963) |
Accrued compensation and benefits | 5,948 | 6,672 | (1,674) |
Deferred revenue, rent and other liabilities | (7,141) | (4,506) | (1,702) |
Net cash provided by operating activities | 141,606 | 105,446 | 88,728 |
Cash flows from investing activities | |||
Purchase of property and equipment | (5,477) | (8,743) | (2,174) |
Capitalized software development costs | (26,318) | (24,533) | (26,918) |
Capitalized curriculum development costs | (16,611) | (9,927) | (19,132) |
Sale of long-lived assets | 389 | 89 | |
Acquisitions and investments | (13,092) | (7,274) | (9,063) |
Net cash used in investing activities | (61,109) | (50,477) | (57,198) |
Cash flows from financing activities | |||
Repayments on capital lease obligations | (21,034) | (13,301) | (15,697) |
Payments of contingent consideration | (1,027) | (1,819) | |
Purchase of treasury stock | (27,482) | ||
Proceeds from exercise of stock options | 3,030 | 196 | 6,953 |
Excess tax benefit from stock-based compensation | 291 | ||
Repurchase of restricted stock for income tax withholding | (9,958) | (10,314) | (6,191) |
Net cash used in financing activities | (28,989) | (52,720) | (14,644) |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | (11) | ||
Net change in cash, cash equivalents and restricted cash | 51,508 | 2,249 | 16,875 |
Cash, cash equivalents and restricted cash, beginning of period | 233,113 | 230,864 | 213,989 |
Cash, cash equivalents and restricted cash, end of period | $ 284,621 | $ 233,113 | $ 230,864 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of June 30th: | ||
Cash and cash equivalents | $ 283,121 | $ 231,113 |
Total cash, cash equivalents and restricted cash | 284,621 | 233,113 |
Other current assets | ||
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of June 30th: | ||
Restricted cash | 500 | |
Deposits and other assets | ||
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of June 30th: | ||
Restricted cash | $ 1,000 | $ 2,000 |
Description of the Business
Description of the Business | 12 Months Ended |
Jun. 30, 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. The Company’s learning systems are 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 administers to support an online or blended public school, including: administrative support (e.g., budget proposals, financial reporting, student data reporting, and staff recruitment), information technology and provisioning, academic support services, curriculum, learning systems, 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 | 12 Months Ended |
Jun. 30, 2019 | |
Basis of Presentation | |
Basis of Presentation | 2. Basis of Presentation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. 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 | 12 Months Ended |
Jun. 30, 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 as of July 1, 2018. 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 consolidated statements of operations for the year ended June 30, 2019 was as follows: Year Ended June 30, 2019 As Reported Adjustment Amounts Under due to ASC under ASC 606 606 ASC 605 (In thousands) Revenues $ 1,015,752 $ (203) $ 1,015,549 Selling, administrative, and other operating expenses 297,350 (263) 297,087 Income from operations 45,486 60 45,546 Net income 37,209 60 37,269 Net income attributable to common stockholders $ 37,209 $ 60 $ 37,269 The impact of adoption on the Company’s consolidated balance sheets as of June 30, 2019 was as follows: June 30, 2019 As Reported Adjustment Amounts Under ASC due to ASC under ASC 606 606 605 (In thousands) Other current assets $ 12,307 $ (273) $ 12,034 Deposits and other assets 48,330 (629) 47,701 Total assets 819,606 (902) 818,704 Deferred revenue 22,828 (2,263) 20,565 Total liabilities 186,241 (2,263) 183,978 Retained earnings (accumulated deficit) 22,447 60 22,507 Total stockholders' equity 633,365 60 633,425 The following table presents the Company’s revenues disaggregated based on its three lines of business for the year ended June 30, 2019 Year Ended June 30, 2019 (In thousands) Managed Public School Programs $ 890,275 Institutional Non-managed Public School Programs 50,623 Institutional Software & Services 39,330 Total Institutional 89,953 Private Pay Schools and Other 35,524 Total Revenues $ 1,015,752 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 of approximately $23 million and a ROU asset of approximately $18 million. The impact on the statements of operations is expected to be immaterial. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016‑13”) related to the methodology for recognizing credit losses. The new standard revises the accounting requirements related to the measurement of credit losses and will require organizations to measure all expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts about collectability. Assets must be presented in the financial statements at the net amount expected to be collected. This ASU will be effective for the Company in the first quarter of fiscal year 2021, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) (“ASU 2017‑04”) . This amendment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. An entity should apply the amendments in this update on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating this standard, as well as the effect on its 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; however, the Company plans to early adopt this standard in the first quarter of fiscal year 2020. The Company believes that the adoption of ASU 2018-15 will not have a significant impact on its consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to the allowance for doubtful accounts, inventory reserves, amortization periods, the allocation of purchase price to the fair value of net assets and liabilities acquired in business combinations, fair values used in asset impairment evaluations, valuation of long-lived assets, accrual for incurred but not reported (“IBNR”) claims, fair value of redeemable noncontrolling interest, fair value of lease exit liabilities, contingencies, income taxes and stock-based compensation expense. The Company bases its estimates on historical experience and various assumptions that it believes are reasonable under the circumstances. The results of the analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. 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 administer to support an online or blended public school. 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, and for the years ended June 30, 2018, 2017 and 2016, the Company’s aggregate funding estimates differed from actual reimbursements impacting total reported revenue by approximately 0.4%, (0.3)%, and (0.1)%, respectively. 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 years ended June 30, 2019, 2018 and 2017, the Company’s revenues included a reduction for these school operating losses of $54.7 million, $66.7 million, and $61.0 million, 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 years ended June 30, 2019, 2018 and 2017, were $342.7 million, $314.8 million and $292.0 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 years ended June 30, 2019, 2018 and 2017, approximately 88%, 85% and 83%, respectively, of the Company’s revenues were recognized from schools that contracted with the Company for Managed Public School Programs. During the years ended June 30, 2019, 2018 and 2017, the Company had one, zero and zero contracts, respectively, that represented greater than 10% of total revenues. In fiscal year 2018, the Company and Agora entered into an agreement related to its outstanding receivable of $28.7 million at June 30, 2018 to be paid over a four-year period. In addition, the term of the service agreement was extended through June 30, 2022. The Company reclassified the long-term portion of $23.2 million to deposits and other assets on the consolidated balance sheets as of June 30, 2018. The aggregate current and long-term balance as of June 30, 2019 was $25.1 million. The Company accrues interest on its long-term receivables based on contracted terms. 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 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 probable 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. June 30, July 1, 2019 2018 (In thousands) Accounts receivable $ 191,639 $ 176,319 Unbilled receivables (included in accounts receivable) 16,189 12,143 Deferred revenue 22,828 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 service periods 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 year ended June 30, 2019 that was included in the opening July 1, 2018 deferred revenue balance was $23.7 million. During the year ended June 30, 2019, the Company recorded revenues of $4.1 million 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, not to 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 June 30, 2019 was $1.5 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. Enrollment is a key input to this estimate. To the extent the estimates change during the year, the cumulative impact of the change is recognized over the remaining service period. Sales Taxes Sales tax collected from customers is excluded from revenues. Collected but unremitted sales tax is included as part of accrued liabilities in the accompanying consolidated balance sheets. Revenues do not include sales tax as the Company considers itself a pass‑through conduit for collecting and remitting sales tax. 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 consolidated balance sheets. The amortization of deferred commissions is recorded as selling, administrative and other operating expenses. Shipping and Handling Costs Shipping and handling costs are expensed when incurred and are classified as instructional costs and services in the accompanying consolidated statements of operations. Shipping and handling charges invoiced to a customer are included in revenues. Research and Development Costs All research and development costs, including patent application costs, are expensed as incurred. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents generally consist of cash on hand and cash held in money market and demand deposit accounts. The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company periodically has cash balances which exceed federally insured limits. Restricted cash consists of amounts held in escrow related to the Company’s settlement agreement with Agora. The restricted cash which is short-term in nature is included in other current assets, while the portion that is long-term is included in deposits and other assets on the consolidated balance sheets. Allowance for Doubtful Accounts The Company maintains an allowance for uncollectible accounts primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company analyzes accounts receivable, historical percentages of uncollectible accounts, and changes in payment history when evaluating the adequacy of the allowance for uncollectible accounts. The Company writes-off accounts receivable based on the age of the receivable and the facts and circumstances surrounding the customer and reasons for non-payment. The Company records an allowance for estimated uncollectible accounts in an amount approximating estimated losses. Actual write-offs might differ from the recorded allowance. 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 Company classifies its inventory as current or long-term based on the holding period. As of June 30, 2019 and 2018, $4.1 million and $5.2 million, respectively, of inventory was deemed long-term and included in deposits and other assets on the consolidated balance sheets. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. During the years ended June 30, 2019 and 2018, the Company increased the provision for excess and obsolete inventory by $0.6 million and $1.2 million, respectively, primarily related to inventory in excess of anticipated demand and the decision to discontinue certain products. The Company decreased the provision during the year ended June 30, 2017 by $0.3 million. The excess and obsolete inventory reserve was $4.1 million and $3.5 million at June 30, 2019 and 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. In addition, during fiscal year 2017, the Company accelerated depreciation on property and equipment associated with the operating leases that were exited during that period (see Note 11, “Restructuring”). The Company recorded accelerated depreciation of $2.3 million, $2.1 million and $3.5 million for the years ended June 30, 2019, 2018 and 2017, respectively, related to the leases exited and unreturned student computers. The Company fully expenses computer peripheral equipment (e.g. keyboards, mouses) upon purchase as recovery has been determined to be uneconomical. These expenses totaled $4.1 million, $3.4 million and $3.5 million for the years ended June 30, 2019, 2018 and 2017, 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 $26.3 million, $24.5 million and $26.9 million for the years ended June 30, 2019, 2018 and 2017, respectively. There were no material write-downs of capitalized software projects for the years ended June 30, 2019, 2018 and 2017. 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 increased net income by $1.4 million for the year. 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 Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108 and concluded that the errors were not material to any o |
Property and Equipment and Capi
Property and Equipment and Capitalized Software and Curriculum | 12 Months Ended |
Jun. 30, 2019 | |
Property and Equipment and Capitalized Software and Curriculum | |
Property and Equipment and Capitalized Software and Curriculum | 4. Property and Equipment and Capitalized Software and Curriculum Property and equipment consists of the following at: June 30, 2019 2018 (In thousands) Student computers $ 43,845 $ 35,375 Computer software 17,999 15,313 Computer hardware 14,118 12,889 Leasehold improvements 10,364 11,779 State testing computers 7,470 6,816 Furniture and fixtures 4,058 4,127 Office equipment 1,382 1,476 99,236 87,775 Less accumulated depreciation and amortization (67,256) (58,907) $ 31,980 $ 28,868 The Company recorded depreciation expense related to property and equipment reflected in selling, administrative and other operating expenses of $5.2 million, $5.1 million and $6.7 million during the years ended June 30, 2019, 2018 and 2017, respectively. Depreciation expense of $15.0 million, $12.4 million and $11.2 million related to computers leased to students is reflected in instructional costs and services during the years ended June 30, 2019, 2018 and 2017, respectively. Amortization expense of $0.0 million, $0.5 million and $0.6 million related to student software costs is reflected in instructional costs and services during the years ended June 30, 2019, 2018 and 2017, respectively. In the course of its normal operations, the Company incurs maintenance and repair expenses, which are expensed as incurred and totaled $13.7 million, $12.1 million and $11.7 million for the years ended June 30, 2019, 2018 and 2017, respectively. Capitalized software costs consist of the following at: June 30, 2019 2018 (In thousands) Capitalized software $ 226,503 $ 201,348 Less accumulated depreciation and amortization (175,338) (145,860) $ 51,165 $ 55,488 The Company recorded amortization expense of $22.3 million, $25.8 million and $25.1 million related to capitalized software reflected in instructional costs and services and $7.4 million, $9.1 million and $7.9 million reflected in selling, administrative and other operating expenses during the years ended June 30, 2019, 2018 and 2017, respectively. Capitalized curriculum development costs consist of the following at: June 30, 2019 2018 (In thousands) Capitalized curriculum development costs $ 156,671 $ 185,520 Less accumulated depreciation and amortization (103,374) (131,962) $ 53,297 $ 53,558 The Company recorded amortization expense of $18.5 million, $19.4 million and $19.9 million related to capitalized curriculum development cost reflected in instructional costs and services during the years ended June 30, 2019, 2018 and 2017, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Income Taxes | 5. Income Taxes The provision for income taxes is based on earnings reported in the 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 year. 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 consolidated financial statements for the year ended June 30, 2019. The SEC staff issued SAB 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. Deferred tax assets and liabilities result primarily from temporary differences in book versus tax basis accounting. Deferred tax assets and liabilities consist of the following: June 30, 2019 2018 (In thousands) Deferred tax assets Net operating loss carryforward $ 4,923 $ 5,047 Reserves 4,769 4,618 Accrued expenses 3,492 3,156 Stock compensation expense 5,992 8,293 Other assets 1,524 1,289 Deferred rent 1,056 1,502 Deferred revenue 461 673 Federal tax credits 20 20 State tax credits 363 431 Total deferred tax assets 22,600 25,029 Deferred tax liabilities Capitalized curriculum development (10,143) (9,890) Capitalized software and website development costs (12,659) (13,734) Property and equipment (5,166) (2,573) Returned materials (2,643) (2,452) Purchased intangibles (4,110) (4,498) Total deferred tax liabilities (34,721) (33,147) Net deferred tax liability before valuation allowance (12,121) (8,118) Valuation allowance (4,549) (4,459) Net deferred tax liability $ (16,670) $ (12,577) Reported as: Long-term deferred tax liabilities $ (16,670) $ (12,577) The Company maintained a valuation allowance on net noncurrent deferred tax assets of $4.5 million and $4.5 million as of June 30, 2019 and 2018, respectively, predominantly related to foreign income tax net operating losses ("NOL"). At June 30, 2019, the Company had available federal and state NOL carryforwards of $0.1 million and $0.3 million, respectively, net of valuation allowances. The federal NOLs, if unused, expire in 2020 and the state NOLs expire on various dates. For the years ended June 30, 2019 and 2018, the Company has evaluated whether a change in the Company's ownership of outstanding classes of stock as defined in Internal Revenue Code Section 382 could prohibit or limit the Company's ability to utilize its NOLs. The Company has concluded it is more likely than not that the Company will be able to fully utilize its NOLs subject to the Section 382 limitation. The components of the income tax (benefit) expense for the years ended June 30, 2019, 2018 and 2017 were as follows: Year Ended June 30, 2019 2018 2017 (In thousands) Current: Federal $ 3,919 $ 887 $ 8,756 State 1,988 774 3,153 Foreign 920 1,444 552 Total current 6,827 3,105 12,461 Deferred: Federal 3,412 (4,769) (6,505) State 281 754 (560) Total deferred 3,693 (4,015) (7,065) Total income tax expense (benefit) $ 10,520 $ (910) $ 5,396 The (benefit) provision for income taxes can be reconciled to the income tax that would result from applying the statutory rate to the net income before income taxes as follows: Year Ended June 30, 2019 2018 2017 U.S. federal tax at statutory rates (1) 21.0 % 28.0 % 35.0 % Permanent items 2.1 0.9 7.1 Lobbying 0.4 1.2 7.2 State taxes, net of federal benefit 4.3 3.1 19.5 Research and development tax credits (0.5) - (8.2) Domestic production activities deduction - (0.1) (22.9) Change in valuation allowance 0.2 (7.2) 53.3 Effects of foreign operations 0.1 - 2.6 Reserve for unrecognized tax benefits (2.1) 0.9 3.3 Noncontrolling interests - 0.4 12.5 Other (0.4) (3.9) (0.1) Impact of federal tax rate reduction - (25.4) - Repatriation transition tax - 6.4 - Stock-based compensation (3.1) (7.7) - Provision (benefit) for income taxes 22.0 % (3.4) % % (1) The corporate tax rate was lowered from 35% to 21%, effective as of January 1, 2018. Under IRC §15 which governs rate changes, fiscal year taxpayers are subject to a “blended” tax rate for tax years that include January 1, 2018. Using the weighted average calculation, the company’s blended federal tax rate for the year ended June 30, 2018 is 28%. The increase in the effective income tax rate for the year ended June 30, 2019 was primarily due to the impact of the Tax Act in the prior year. Tax Uncertainties The Company follows the provisions of ASC 740-10 which applies to all tax positions related to income taxes. ASC 740-10 provides a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. ASC 740-10 clarifies accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. If the probability for sustaining a tax position is greater than 50%, then the tax position is warranted and recognition should be at the highest amount which would be expected to be realized upon ultimate settlement related to unrecognized tax benefits. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of June 30, 2019, 2018 and 2017, the Company had $0.2 million, $0.2 million and $0.1 million in accrued interest and penalties, respectively. The unrecognized tax benefits for the years ended June 30, 2019, 2018 and 2017 were as follows: Year Ended June 30, 2019 2018 2017 (In thousands) Balance at beginning of the year $ 2,392 $ 2,260 $ 2,224 Additions for prior year tax positions 194 585 951 Additions for current year tax positions 87 8 241 Reductions for prior year tax positions (1,128) (461) (1,156) Balance at end of the year $ 1,545 $ 2,392 $ 2,260 If recognized, all of the $1.5 million balance of unrecognized tax benefits as of June 30, 2019 would affect the effective tax rate. The Company does not anticipate a significant increase or decrease in unrecognized tax benefits in the next twelve months. The Company remains subject to audit by the Internal Revenue Service for federal tax purposes for tax years after June 30, 2015. Certain state and foreign tax jurisdictions are also either currently under audit or remain open under the statute of limitations for the tax years after June 30, 2013. |
Lease Commitments
Lease Commitments | 12 Months Ended |
Jun. 30, 2019 | |
Lease Commitments. | |
Lease Commitments | 6. Lease Commitments 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 June 30, 2019 and 2018, the outstanding balance of capital leases (as discussed in more detail below) was $24.6 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 June 30, 2019 and 2018 was $51.3 million and $42.2 million, respectively. The accumulated depreciation of leased student computers as of June 30, 2019 and 2018 was $31.5 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 $25.0 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 June 30, 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) 2020 $ 20,070 2021 4,819 2022 340 Total minimum payments 25,229 Less amount representing interest (imputed weighted average capital lease interest rate of 3.66%) (581) Net minimum payments 24,648 Less current portion (19,588) Present value of minimum payments, less current portion $ 5,060 Operating Leases The Company has fixed non‑cancelable operating leases with terms expiring through fiscal year 2024 for facility leases. Facility leases generally contain renewal options and certain leases provide for scheduled rate increases over the lease terms. Rent expense was $7.2 million, $6.8 million and $6.3 million for the years ended June 30, 2019, 2018 and 2017, respectively. Future minimum lease payments and sublease income, under non-cancelable operating leases with initial or remaining non-cancelable lease terms of one year or more are as follows: Year Ended June 30, ($ in thousands) Minimum Lease Payments Sublease Income Net 2020 $ 8,441 $ (930) $ 7,511 2021 8,229 (961) 7,268 2022 6,735 (528) 6,207 2023 550 — 550 2024 137 — 137 Totals $ 24,092 $ (2,419) $ 21,673 |
Equity Transactions
Equity Transactions | 12 Months Ended |
Jun. 30, 2019 | |
Equity Transactions | |
Equity Transactions | 7. Equity Transactions The Company’s Fourth Amended and Restated Certificate of Incorporation authorizes the Company to issue 100,000,000 shares of common stock and 10,000,000 shares of preferred stock. No preferred stock was issued or outstanding as of June 30, 2019 or 2018. Common Stock Repurchases On May 16, 2018, the Company entered into a stock repurchase agreement pursuant to which the Company repurchased 1,832,145 shares of its common stock in a single transaction at a purchase price of $15.00 per share, representing aggregate consideration of $27.5 million. |
Equity Incentive Plan
Equity Incentive Plan | 12 Months Ended |
Jun. 30, 2019 | |
Equity Incentive Plan | |
Equity Incentive Plan | 8. Equity Incentive Plan 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 was set to expire in October 2017; however, with the approval of the Plan, the Company will no longer award equity from the Prior Plan. At June 30, 2019, the remaining aggregate number of shares of the Company’s common stock authorized for future issuance under the Plan was 2,108,868. At June 30, 2019, there were 4,749,068 shares of the Company’s common stock that remain outstanding or nonvested under the Plan and Prior Plan. Compensation expense for all equity-based compensation awards is based on the grant-date fair value estimated in accordance with the provisions of ASC 718. The Company recognizes these compensation costs on a straight-line basis over the requisite service period, which is generally the vesting period of the award. Stock Options Each stock option is exercisable pursuant to the vesting schedule set forth in the stock option agreement granting such stock option, generally over four years. No stock option shall be exercisable after the expiration of its option term. The Company has granted stock options under the Prior Plan and the Company has also granted stock options to executive officers under stand-alone agreements outside the Prior Plan. Stock option activity including stand‑alone agreements during the years ended June 30, 2019, 2018 and 2017 was as follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Life (Years) Value Outstanding, June 30, 2016 2,350,175 $ 20.20 Granted — — Exercised (425,180) 16.35 Forfeited or canceled (568,467) 23.12 Outstanding, June 30, 2017 1,356,528 $ 20.19 Granted — — Exercised (14,600) 13.45 Forfeited or canceled (142,621) 22.71 Outstanding, June 30, 2018 1,199,307 $ 19.97 Granted — — Exercised (150,290) 20.16 Forfeited or canceled (13,000) 29.82 Outstanding, June 30, 2019 1,036,017 $ 19.82 2.64 $ 11,312,871 Exercisable, June 30, 2019 1,019,822 $ 19.92 2.62 $ 11,054,860 The aggregate intrinsic value in the table above represents the total pre‑tax intrinsic value (the difference between the Company’s closing stock price on the last day of the year and the exercise price, multiplied by the number of in‑the‑money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2019. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s stock. The total intrinsic value of options exercised for the years ended June 30, 2019, 2018 and 2017 was $1.2 million, $0.0 million, and $1.3 million, respectively. As of June 30, 2019, there was $0.1 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 0.2 years. During the years ended June 30, 2019, 2018 and 2017, the Company recognized $0.6 million, $1.2 million and $2.0 million, respectively, of stock-based compensation expense related to stock options. Restricted Stock Awards The Company has approved grants of restricted stock awards (“RSA”) pursuant to the Plan and Prior Plan. Under the Plan and Prior Plan, employees, outside directors and independent contractors are able to participate in the Company’s future performance through the awards of restricted stock. Each RSA vests pursuant to the vesting schedule set forth in the restricted stock agreement granting such RSAs, generally over three years. Under the Plan and Prior Plan, there have been no awards of restricted stock to independent contractors. Restricted stock award activity during the years ended June 30, 2019, 2018 and 2017 was as follows: Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2016 2,131,790 $ 12.46 Granted 1,268,311 12.70 Vested (1,084,046) 12.94 Canceled (175,008) 12.69 Nonvested, June 30, 2017 2,141,047 $ 12.34 Granted 1,210,502 16.68 Vested (1,339,492) 12.29 Canceled (335,150) 14.31 Nonvested, June 30, 2018 1,676,907 $ 15.12 Granted 828,833 18.44 Vested (947,703) 14.72 Canceled (235,485) 17.40 Nonvested, June 30, 2019 1,322,552 $ 17.08 Performance Based Restricted Stock Awards (included above) During the year ended June 30, 2019, 37,378 new performance based restricted stock awards were granted and 271,455 remain nonvested at June 30, 2019. During the year ended June 30, 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 year ended June 30, 2019, 18,400 of these equity incentive market based restricted stock awards vested. As of June 30, 2019, 6,800 equity incentive market based restricted stock awards remain nonvested. Service Based Restricted Stock Awards (included above) During the year ended June 30, 2019, 791,455 new service based restricted stock awards were granted and 1,044,297 remain nonvested at June 30, 2019. During the year ended June 30, 2019, 616,920 service based restricted stock awards vested. Summary of All Restricted Stock Awards As of June 30, 2019, there was $14.4 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 1.5 years. The fair value of restricted stock awards granted for the years ended June 30, 2019 and 2018 was $15.3 million and $20.2 million, respectively. The total fair value of shares vested for the years ended June 30, 2019 and 2018 was $20.6 million and $22.1 million, respectively. During the years ended June 30, 2019, 2018 and 2017, the Company recognized $12.3 million, $15.7 million and $16.8 million, respectively, of stock-based compensation expense related to restricted stock awards. 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 year 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”) and 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 year ended June 30, 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 June 30, 2019, there was $13.4 million of total unrecognized compensation expense related to nonvested PSUs. The cost is expected to be recognized over a weighted average period of 2.2 years. During the years ended June 30, 2019, 2018 and 2017, the Company recognized $3.9 million, $5.9 million and $3.8 million, respectively, of stock-based compensation expense related to PSUs. Performance share unit activity during the years ended June 30, 2019, 2018 and 2017 was as follows: Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2016 1,089,602 $ 12.91 Granted 52,000 18.97 Vested — — Canceled (98,000) 13.45 Nonvested, June 30, 2017 1,043,602 $ 13.16 Granted 138,241 12.81 Vested (320,340) 12.62 Canceled (152,524) 14.00 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, June 30, 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 June 30, 2019, 18,258 DSUs remain nonvested. |
Redeemable Noncontrolling Inter
Redeemable Noncontrolling Interest | 12 Months Ended |
Jun. 30, 2019 | |
Redeemable Noncontrolling Interest | |
Redeemable Noncontrolling Interest | 9. Redeemable Noncontrolling Interest Investment in LearnBop, Inc. On July 31, 2014, the Company acquired a majority interest in LearnBop, Inc. (“LearnBop”), for $6.5 million in cash in return for a 51% interest in LearnBop. The purpose of the acquisition was to complement the Company’s K-12 math curriculum as LearnBop has developed an adaptive math curriculum learning software. As part of this transaction, the minority shareholders have a non-transferable put right, which was exercisable between July 31, 2018 and December 31, 2018 for the remaining minority interest. In January 2018, prior to the commencement of the exercise period, the Company and the minority shareholders entered into a stock purchase agreement to purchase the remaining 49% interest for $0.5 million. As a result, LearnBop became a wholly-owned subsidiary of the Company. Middlebury College Joint Venture In May 2010, the Company entered into an agreement to establish a joint venture with Middlebury College (“Middlebury”) to form Middlebury Interactive Languages LLC (“MIL”). The venture created and distributed innovative, online language courses under the trademark Middlebury and other marks. The joint venture agreement provided Middlebury with the right at any time after the fifth (5th) anniversary of forming the joint venture, to irrevocably elect to sell all of its membership interest to the Company (put right) at the fair market value of Middlebury’s membership interest. Additionally, Middlebury had an option to repurchase the camp programs at fair market value along with other contractual rights as certain milestones associated with its Language Academy summer camp programs were not met. On May 4, 2015, Middlebury exercised its right to require the Company to purchase all of its ownership interest in the joint venture, and on December 27, 2016, the Company consummated the acquisition of the remaining 40% noncontrolling interest for $9.1 million in cash. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 10. 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 vigorously defends these claims; however, no assurances can be given as to the outcome of any pending legal proceedings. The Company believes, based on currently available information, that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on its 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 the Company believes that the remaining claim in this matter lacked merit, it agreed to settle the case to avoid continued distraction and management time, and the Company’s insurance carriers agreed to pay $3.5 million into a settlement fund for the alleged class and attorneys’ fees and costs. The Court preliminarily approved the proposed settlement on February 14, 2019, and granted the plaintiffs’ motion for final settlement approval on July 10, 2019. On May 10, 2019, K12 Virtual Schools LLC filed a demand for arbitration with the American Arbitration Association (“AAA”), Case No. 01-19-001-4778, naming Georgia Cyber Academy, Inc. (“GCA”) and Georgia Cyber Academy Board as the respondents. The demand asserts claims for GCA’s breach and anticipatory breach of the Educational Products and Services Agreement between Georgia Cyber Academy Inc. and K12 Virtual Schools LLC, as amended on January 4, 2019, based on GCA’s engagement of other educational products and service providers for the school year 2019-2020. On May 29, 2019, GCA filed counterclaims against K12 Virtual Schools, LLC for breach of contract, fraud, breach of the duty of good faith and fair dealing, and negligent misrepresentation. On June 12, 2019, the AAA appointed an arbitrator. The Company is presently unable to predict the outcome of this arbitration, though it does not expect that the outcome will have a material adverse effect on our financial condition or results of operations for the year ended June 30, 2019. K12 intends to pursue vigorously its claims against GCA, and defend vigorously against each and every counterclaim set forth by GCA. 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 June 30, 2019, the Company provided guarantees of approximately $1.5 million related to lease commitments on the buildings for certain of the Company’s schools. Previously, the Company had guaranteed two leases which are excluded from the number above, and discussed in more detail below. During the year ended June 30, 2017, the lessee on one of the leases in which the Company served as guarantor defaulted, and under the terms of the guarantee, the obligation was assigned to the Company. Since the default occurred, the Company has taken steps to exit this facility and entered into an agreement to sublet the space. Additionally, during the year ended June 30, 2017, the Company entered into a lease buyout agreement with the landlord on another guaranteed space to exit the lease early under the terms of the original lease (see Note 11, “Restructuring”). 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 | 12 Months Ended |
Jun. 30, 2019 | |
Restructuring | |
Restructuring | 11. Restructuring In the third and fourth quarters of fiscal year 2017, the Company exited three facilities (which included the subleased facility above) that were no longer being utilized and entered into a lease buyout agreement (discussed above), 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 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 consolidated statements of operations. Additionally, the lease buyout was $0.7 million and was included in instructional costs and services in the consolidated statements of operations. There were no similar charges recorded during the years ended June 30, 2019 or 2018. The following table summarizes the activity during the year ended June 30, 2019: Balance at Payments, net of Accretion Balance at Description Initial Value June 30, 2018 sublease income Expense Adjustments June 30, 2019 (In thousands) Lease #1 $ 1,652 $ 1,092 $ (403) $ 28 $ — $ 717 Lease #2 1,311 475 (452) 6 — 29 Lease #3 2,443 1,191 (188) 30 — 1,033 Total $ 5,406 $ 2,758 $ (1,043) $ 64 $ — $ 1,779 |
Severance
Severance | 12 Months Ended |
Jun. 30, 2019 | |
Severance | |
Severance | 12. Severance During the years ended June 30, 2019, 2018 and 2017, the Company reduced its workforce, as well as provided severance to its former CEO pursuant to his employment agreement in the form of compensation and an acceleration of certain equity awards (fiscal year 2018 only), resulting in severance of $1.0 million, $6.3 million and $4.4 million, respectively. Included in severance expense for the years ended June 30, 2019, 2018 and 2017 is $0.1 million, $2.4 million and $1.0 million, respectively, associated with accelerated vesting of equity awards to former executives and other employees. |
Acquisitions and Investments
Acquisitions and Investments | 12 Months Ended |
Jun. 30, 2019 | |
Acquisitions and Investments | |
Acquisitions and Investments | 13. Acquisitions and Investments Investment in Tallo, 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 consolidated balance sheets. Investment in Web International Education Group, Ltd. (“Web”) In January 2011, the Company invested $10.0 million to obtain a 20% minority interest in Web International Education Group, Ltd. (“Web”), a provider of English language learning centers in cities throughout China. On May 6, 2013, the Company exercised its right to put its investment back to Web for return of its original $10.0 million investment. The Company reclassified this $10.0 million investment, recording it in other current assets. During the fourth quarter of fiscal year 2017, the Company recorded an impairment of $10.0 million in the consolidated statement of operations. The Company continues to work with Web, and to the extent it collects in a subsequent period, the Company will record the amount collected in other income in the period received. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions | |
Related Party Transactions | 14. Related Party Transactions During the years ended June 30, 2019, 2018 and 2017, the Company contributed $1.4 million, $0.3 million, and $0.5 million, respectively to The Foundation for Blended and Online Learning (“Foundation”). Additionally, the Company accrued $2.5 million for contributions to be made in subsequent years. The Foundation is a related party as an executive officer of the Company serves on the Board of the Foundation. |
Employee Benefits
Employee Benefits | 12 Months Ended |
Jun. 30, 2019 | |
Employee Benefits | |
Employee Benefits | 15. Employee Benefits The Company maintains a 401(k) salary deferral plan (the “401(k) Plan”) for its employees. Employees who have been employed for at least 30 days may voluntarily contribute to the 401(k) Plan on a pretax basis, up to the maximum allowed by the Internal Revenue Service. The 401(k) Plan provides for a matching Company contribution of 25% of the first 4% of each participant’s compensation. The Company expensed $1.6 million, $1.4 million and $1.6 million during the years ended June 30, 2019, 2018 and 2017, respectively, under the 401(k) Plan. |
Supplemental Disclosure of Cash
Supplemental Disclosure of Cash Flow Information | 12 Months Ended |
Jun. 30, 2019 | |
Supplemental Disclosure of Cash Flow Information | |
Supplemental Disclosure of Cash Flow Information | 16. Supplemental Disclosure of Cash Flow Information Year Ended June 30, 2019 2018 2017 Cash paid for interest $ 1,108 $ 778 $ 750 Cash paid for taxes $ 4,453 $ 12,210 $ 8,052 Supplemental disclosure of non-cash financing activities: Property and equipment financed by capital lease obligations, including student peripherals $ 19,664 $ 17,414 $ 14,469 Supplemental disclosure of non-cash investing activities: Stock-based compensation expense capitalized on software development $ 167 $ 1,083 $ — Stock-based compensation expense capitalized on curriculum development $ 170 $ 969 $ — Business combinations: Current assets $ — $ 209 $ — Intangible assets — 695 — Goodwill — 2,983 — Assumed liabilities — (734) — Deferred revenue — (361) — |
Quarterly Results of Operations
Quarterly Results of Operations (Unaudited) | 12 Months Ended |
Jun. 30, 2019 | |
Quarterly Results of Operations (Unaudited) | |
Quarterly Results of Operations (Unaudited) | 17. Quarterly Results of Operations (Unaudited) The unaudited consolidated interim financial information presented should be read in conjunction with other information included in the Company’s consolidated financial statements. The following unaudited consolidated financial information reflects all adjustments necessary for the fair presentation of the results of interim periods. The following tables set forth selected unaudited quarterly financial information for each of the Company’s last eight quarters. Fiscal Year 2019 Jun 30, Mar 31, Dec 31, Sep 30, 2019 2019 2018 2018 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ 256,314 $ 253,252 $ 254,872 $ 251,314 Cost and expenses Instructional costs and services 175,863 168,260 160,329 158,985 Selling, administrative and other operating expenses 75,207 59,382 60,183 102,578 Product development expenses 2,563 2,343 1,070 3,503 Total costs and expenses 253,633 229,985 221,582 265,066 Income (loss) from operations 2,681 23,267 33,290 (13,752) Interest income, net 1,214 754 477 316 Other income (expense), net 154 556 (789) 193 Income (loss) before income taxes, loss from equity method investments and noncontrolling interest 4,049 24,577 32,978 (13,243) Income tax (expense) benefit (662) (5,842) (9,074) 5,058 Loss from equity method investments (70) (273) (192) (97) Net income (loss) attributable to common stockholders $ 3,317 $ 18,462 $ 23,712 $ (8,282) Net income (loss) attributable to common stockholders per share: Basic $ 0.08 $ 0.47 $ 0.61 $ (0.22) Diluted $ 0.08 $ 0.44 $ 0.59 $ (0.22) Weighted average shares used in computing per share amounts: Basic 39,135,413 39,008,990 38,816,669 38,434,049 Diluted 41,667,000 41,753,323 40,325,260 38,434,049 Fiscal Year 2018 Jun 30, Mar 31, Dec 31, Sep 30, 2018 2018 2017 2017 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ 238,874 $ 232,864 $ 217,211 $ 228,785 Cost and expenses Instructional costs and services 157,087 148,878 139,163 147,367 Selling, administrative and other operating expenses 69,939 62,267 61,958 96,282 Product development expenses 1,972 2,002 2,376 2,898 Total costs and expenses 228,998 213,147 203,497 246,547 Income (loss) from operations 9,876 19,717 13,714 (17,762) Interest income, net 430 261 39 235 Income (loss) before income taxes and noncontrolling interest 10,306 19,978 13,753 (17,527) Income tax (expense) benefit (959) (6,935) (564) 9,368 Net income (loss) 9,347 13,043 13,189 (8,159) Add net loss attributable to noncontrolling interest — 27 70 103 Net income (loss) attributable to common stockholders $ 9,347 $ 13,070 $ 13,259 $ (8,056) Net income (loss) attributable to common stockholders per share: Basic $ 0.24 $ 0.33 $ 0.34 $ (0.21) Diluted $ 0.23 $ 0.32 $ 0.33 $ (0.21) Weighted average shares used in computing per share amounts: Basic 39,031,207 39,644,074 39,347,244 39,108,172 Diluted 39,976,593 40,766,203 40,685,667 39,108,172 |
SCHEDULE II VALUATION AND QUALI
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Jun. 30, 2019 | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | SCHEDULE II K12 INC. VALUATION AND QUALIFYING ACCOUNTS Years Ending June 30, 2019, 2018 and 2017 1. ALLOWANCE FOR DOUBTFUL ACCOUNTS Additions Balance at Charged to Deductions Beginning Cost and from Balance at of Period Expenses Allowance End of Period June 30, 2019 $ 12,384,279 6,325,188 6,943,598 $ 11,765,869 June 30, 2018 $ 14,791,171 4,088,592 6,495,484 $ 12,384,279 June 30, 2017 $ 10,813,394 4,512,899 535,122 $ 14,791,171 2. INVENTORY RESERVES Balance at Charged to Deductions, Beginning Cost and Shrinkage and Balance at of Period Expenses Obsolescence End of Period June 30, 2019 $ 3,491,655 1,359,595 719,864 $ 4,131,386 June 30, 2018 $ 2,310,309 1,314,225 132,879 $ 3,491,655 June 30, 2017 $ 2,642,547 475,218 807,456 $ 2,310,309 3. COMPUTER RESERVE (1) Additions Balance at Charged to Deductions, Beginning Cost and Shrinkage and Balance at of Period Expenses Obsolescence End of Period June 30, 2019 $ 899,654 383,770 495,194 $ 788,230 June 30, 2018 $ 819,042 550,142 469,530 $ 899,654 June 30, 2017 $ 573,444 595,876 350,278 $ 819,042 (1) A reserve account is maintained against potential obsolescence of, and damage beyond economic repair to, computers provided to the Company’s students. The reserve is calculated based upon several factors including historical percentages, the net book value and the remaining useful life. During fiscal years 2019, 2018 and 2017, certain computers were written off against the reserve. 4. INCOME TAX VALUATION ALLOWANCE Additions to Deductions in Balance at Net Deferred Net Deferred Beginning Tax Asset Tax Asset Balance at of Period Allowance Allowance End of Period June 30, 2019 $ 4,458,517 90,383 — $ 4,548,900 June 30, 2018 $ 7,152,860 22,388 2,716,731 $ 4,458,517 June 30, 2017 $ 4,338,653 3,296,617 482,410 $ 7,152,860 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 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 as of July 1, 2018. 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 consolidated statements of operations for the year ended June 30, 2019 was as follows: Year Ended June 30, 2019 As Reported Adjustment Amounts Under due to ASC under ASC 606 606 ASC 605 (In thousands) Revenues $ 1,015,752 $ (203) $ 1,015,549 Selling, administrative, and other operating expenses 297,350 (263) 297,087 Income from operations 45,486 60 45,546 Net income 37,209 60 37,269 Net income attributable to common stockholders $ 37,209 $ 60 $ 37,269 The impact of adoption on the Company’s consolidated balance sheets as of June 30, 2019 was as follows: June 30, 2019 As Reported Adjustment Amounts Under ASC due to ASC under ASC 606 606 605 (In thousands) Other current assets $ 12,307 $ (273) $ 12,034 Deposits and other assets 48,330 (629) 47,701 Total assets 819,606 (902) 818,704 Deferred revenue 22,828 (2,263) 20,565 Total liabilities 186,241 (2,263) 183,978 Retained earnings (accumulated deficit) 22,447 60 22,507 Total stockholders' equity 633,365 60 633,425 The following table presents the Company’s revenues disaggregated based on its three lines of business for the year ended June 30, 2019 Year Ended June 30, 2019 (In thousands) Managed Public School Programs $ 890,275 Institutional Non-managed Public School Programs 50,623 Institutional Software & Services 39,330 Total Institutional 89,953 Private Pay Schools and Other 35,524 Total Revenues $ 1,015,752 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 of approximately $23 million and a ROU asset of approximately $18 million. The impact on the statements of operations is expected to be immaterial. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016‑13”) related to the methodology for recognizing credit losses. The new standard revises the accounting requirements related to the measurement of credit losses and will require organizations to measure all expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts about collectability. Assets must be presented in the financial statements at the net amount expected to be collected. This ASU will be effective for the Company in the first quarter of fiscal year 2021, and early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) (“ASU 2017‑04”) . This amendment simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. An entity should apply the amendments in this update on a prospective basis. An entity is required to disclose the nature of and reason for the change in accounting principle upon transition. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating this standard, as well as the effect on its 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; however, the Company plans to early adopt this standard in the first quarter of fiscal year 2020. The Company believes that the adoption of ASU 2018-15 will not have a significant impact on its consolidated financial statements. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to the allowance for doubtful accounts, inventory reserves, amortization periods, the allocation of purchase price to the fair value of net assets and liabilities acquired in business combinations, fair values used in asset impairment evaluations, valuation of long-lived assets, accrual for incurred but not reported (“IBNR”) claims, fair value of redeemable noncontrolling interest, fair value of lease exit liabilities, contingencies, income taxes and stock-based compensation expense. The Company bases its estimates on historical experience and various assumptions that it believes are reasonable under the circumstances. The results of the analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. |
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 administer to support an online or blended public school. 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, and for the years ended June 30, 2018, 2017 and 2016, the Company’s aggregate funding estimates differed from actual reimbursements impacting total reported revenue by approximately 0.4%, (0.3)%, and (0.1)%, respectively. 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 years ended June 30, 2019, 2018 and 2017, the Company’s revenues included a reduction for these school operating losses of $54.7 million, $66.7 million, and $61.0 million, 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 years ended June 30, 2019, 2018 and 2017, were $342.7 million, $314.8 million and $292.0 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 years ended June 30, 2019, 2018 and 2017, approximately 88%, 85% and 83%, respectively, of the Company’s revenues were recognized from schools that contracted with the Company for Managed Public School Programs. During the years ended June 30, 2019, 2018 and 2017, the Company had one, zero and zero contracts, respectively, that represented greater than 10% of total revenues. In fiscal year 2018, the Company and Agora entered into an agreement related to its outstanding receivable of $28.7 million at June 30, 2018 to be paid over a four-year period. In addition, the term of the service agreement was extended through June 30, 2022. The Company reclassified the long-term portion of $23.2 million to deposits and other assets on the consolidated balance sheets as of June 30, 2018. The aggregate current and long-term balance as of June 30, 2019 was $25.1 million. The Company accrues interest on its long-term receivables based on contracted terms. 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 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 probable 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. June 30, July 1, 2019 2018 (In thousands) Accounts receivable $ 191,639 $ 176,319 Unbilled receivables (included in accounts receivable) 16,189 12,143 Deferred revenue 22,828 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 service periods 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 year ended June 30, 2019 that was included in the opening July 1, 2018 deferred revenue balance was $23.7 million. During the year ended June 30, 2019, the Company recorded revenues of $4.1 million 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, not to 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 June 30, 2019 was $1.5 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. Enrollment is a key input to this estimate. To the extent the estimates change during the year, the cumulative impact of the change is recognized over the remaining service period. Sales Taxes Sales tax collected from customers is excluded from revenues. Collected but unremitted sales tax is included as part of accrued liabilities in the accompanying consolidated balance sheets. Revenues do not include sales tax as the Company considers itself a pass‑through conduit for collecting and remitting sales tax. 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 consolidated balance sheets. The amortization of deferred commissions is recorded as selling, administrative and other operating expenses. |
Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs are expensed when incurred and are classified as instructional costs and services in the accompanying consolidated statements of operations. Shipping and handling charges invoiced to a customer are included in revenues. |
Research and Developments Costs | Research and Development Costs All research and development costs, including patent application costs, are expensed as incurred. |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents generally consist of cash on hand and cash held in money market and demand deposit accounts. The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company periodically has cash balances which exceed federally insured limits. Restricted cash consists of amounts held in escrow related to the Company’s settlement agreement with Agora. The restricted cash which is short-term in nature is included in other current assets, while the portion that is long-term is included in deposits and other assets on the consolidated balance sheets. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company maintains an allowance for uncollectible accounts primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company analyzes accounts receivable, historical percentages of uncollectible accounts, and changes in payment history when evaluating the adequacy of the allowance for uncollectible accounts. The Company writes-off accounts receivable based on the age of the receivable and the facts and circumstances surrounding the customer and reasons for non-payment. The Company records an allowance for estimated uncollectible accounts in an amount approximating estimated losses. Actual write-offs might differ from the recorded allowance. |
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 Company classifies its inventory as current or long-term based on the holding period. As of June 30, 2019 and 2018, $4.1 million and $5.2 million, respectively, of inventory was deemed long-term and included in deposits and other assets on the consolidated balance sheets. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. During the years ended June 30, 2019 and 2018, the Company increased the provision for excess and obsolete inventory by $0.6 million and $1.2 million, respectively, primarily related to inventory in excess of anticipated demand and the decision to discontinue certain products. The Company decreased the provision during the year ended June 30, 2017 by $0.3 million. The excess and obsolete inventory reserve was $4.1 million and $3.5 million at June 30, 2019 and 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. In addition, during fiscal year 2017, the Company accelerated depreciation on property and equipment associated with the operating leases that were exited during that period (see Note 11, “Restructuring”). The Company recorded accelerated depreciation of $2.3 million, $2.1 million and $3.5 million for the years ended June 30, 2019, 2018 and 2017, respectively, related to the leases exited and unreturned student computers. The Company fully expenses computer peripheral equipment (e.g. keyboards, mouses) upon purchase as recovery has been determined to be uneconomical. These expenses totaled $4.1 million, $3.4 million and $3.5 million for the years ended June 30, 2019, 2018 and 2017, 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 $26.3 million, $24.5 million and $26.9 million for the years ended June 30, 2019, 2018 and 2017, respectively. There were no material write-downs of capitalized software projects for the years ended June 30, 2019, 2018 and 2017. 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 increased net income by $1.4 million for the year. 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 Securities and Exchange Commission’s (“SEC”) 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 $16.6 million, $9.9 million and $19.1 million for the years ended June 30, 2019, 2018 and 2017, respectively. These amounts are recorded on the accompanying consolidated balance sheets, net of amortization charges. There were no material write‑downs of capitalized curriculum development costs for the years ended June 30, 2019, 2018 and 2017. As mentioned above, capitalized curriculum development additions included an out of period adjustment of $0.6 million. |
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 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 years ended June 30, 2019, 2018 and 2017 was $3.0 million, $3.0 million and $2.9 million, respectively. Future amortization of intangible assets is expected to be $2.9 million, $2.4 million, $2.2 million, $2.0 million and $1.4 million in the fiscal years ending June 30, 2020 through June 30, 2024, respectively and $3.8 million thereafter. As of June 30, 2019 and 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 year ended June 30, 2019. Goodwill and intangible assets deemed to have an indefinite life are tested for impairment on an annual basis, or earlier when events or changes in circumstances suggest the carrying amount may not be fully recoverable. Examples of such events or circumstances include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of acquired assets or the strategy for the Company’s business, significant negative industry or economic trends, and/or a significant decline in the Company’s stock price for a sustained period. 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 31 st . Under the two-step process, the first step tests for potential impairment by comparing the fair value of reporting units with reporting units’ net asset values. If the fair value of a reporting unit exceeds the carrying value of the reporting unit’s net assets, then goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is below the reporting unit’s carrying value, then the second step is required to measure the amount of potential impairment. The second step requires an assignment of the reporting unit’s fair value to the reporting unit’s assets and liabilities, using the initial acquisition accounting guidance related to business combinations, to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is then compared with the carrying amount of the reporting unit’s goodwill to determine the goodwill impairment loss to be recognized, if any. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, an impairment loss equal to the difference is recorded. As of June 30, 2019, 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. On October 2, 2017, the Company acquired 100% interest in Big Universe, Inc. for $3.3 million in cash and contingent consideration. The following table represents goodwill additions/reductions resulting from the acquisition mentioned above during the years ended June 30, 2019, 2018 and 2017: ($ in millions) Amount Goodwill Balance as of June 30, 2016 $ 87.3 Adjustment to purchase price of LTS Education Systems ("LTS") (0.1) Balance as of June 30, 2017 $ 87.2 Acquisition of Big Universe, Inc. 3.0 Balance as of June 30, 2018 $ 90.2 Adjustments — Balance as of June 30, 2019 $ 90.2 The following table represents the balance of the Company’s intangible assets as of June 30, 2019 and 2018: June 30, 2019 June 30, 2018 ($ in millions) Gross Accumulated Net Gross Accumulated Net Trade names $ 17.6 $ (9.4) $ 8.2 $ 17.6 $ (8.5) $ 9.1 Customer and distributor relationships 20.5 (14.7) 5.8 20.5 (13.4) 7.1 Developed technology 3.2 (2.8) 0.4 3.2 (2.2) 1.0 Other 1.4 (0.8) 0.6 1.4 (0.6) 0.8 Total $ 42.7 $ (27.7) $ 15.0 $ 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 year ended June 30, 2019. |
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. |
Stock-Based Compensation | Stock‑Based Compensation The Company estimates the fair value of share-based awards on the date of grant. The fair value of restricted stock awards is based on the closing price of the Company’s common stock on the date of grant. Certain restricted stock awards with a market-based performance component are valued using a Monte Carlo simulation model that considers a variety of factors including, but not limited to, the Company’s common stock price, risk-free rate, and expected stock price volatility over the expected life of awards. The Company recognizes forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. |
Advertising and Marketing Costs | Advertising and Marketing Costs Advertising and marketing costs consist primarily of internet advertising, online marketing, direct mail, print media and television commercials and are expensed when incurred. Advertising costs totaled $38.0 million, $37.5 million and $36.8 million for the years ended June 30, 2019, 2018 and 2017, respectively, and are included within s elling, administrative, and other operating expenses in the consolidated statements of operations . |
Net Income Per Common Share | Net Income 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 consolidated balance sheets includes restricted stock awards outstanding. The following schedule presents the calculation of basic and diluted net income per share: Year Ended June 30, 2019 2018 2017 (In thousands except share and per share data) Basic net income per share computation: Net income attributable to common stockholders $ 37,209 $ 27,620 $ 451 Weighted average common shares — basic 38,848,780 39,282,674 38,298,581 Basic net income per share $ 0.96 $ 0.70 $ 0.01 Diluted net income per share computation: Net income attributable to common stockholders $ 37,209 $ 27,620 $ 451 Share computation: Weighted average common shares — basic 38,848,780 39,282,674 38,298,581 Effect of dilutive stock options and restricted stock awards 2,096,020 1,355,070 1,202,353 Weighted average common shares — diluted 40,944,800 40,637,744 39,500,934 Diluted net income per share $ 0.91 $ 0.68 $ 0.01 For the years ended June 30, 2019, 2018 and 2017, shares issuable in connection with stock options and restricted stock of 140,657, 1,026,472 and 1,965,283 respectively, were excluded from the diluted income per common share calculation because the effect would have been antidilutive. As of June 30, 2019, the Company had 45,575,236 shares of common stock issued and 40,240,493 shares outstanding. |
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 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 11, “Restructuring.” The Tallo, Inc. convertible note is discussed in more detail in Note 13, “Acquisitions and Investments.” The following table summarizes certain fair value information at June 30, 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 $ 1,779 $ — $ — $ 1,779 The following table summarizes certain fair value information at June 30, 2018 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 $ 2,758 $ — $ — $ 2,758 The following table summarizes certain fair value information at June 30, 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 received in acquisition $ 5,006 — — 5,006 The following table summarizes certain fair value information at June 30, 2018 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) Contingent consideration associated with acquisitions $ 1,345 $ — $ — $ 1,345 The following table presents activity related to the Company’s fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2019. Year Ended June 30, 2019 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2018 and Settlements Gains (Losses) June 30, 2019 (In thousands) Contingent consideration associated with acquisitions $ 1,345 $ (1,347) $ 2 $ — Convertible note received in acquisition — 5,006 — 5,006 The following table presents activity related to the Company’s fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2018. Year Ended June 30, 2018 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2017 and Settlements Gains (Losses) June 30, 2018 (In thousands) Contingent consideration associated with acquisitions 2,806 (1,319) (142) 1,345 The following table presents activity related to the Company’s fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2017. Year Ended June 30, 2017 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2016 and Settlements Gains (Losses) June 30, 2017 (In thousands) Redeemable noncontrolling interest in Middlebury Interactive Learning $ 6,801 $ (9,134) $ 2,333 $ — Contingent consideration associated with acquisitions 2,947 — (141) 2,806 Total $ 9,748 $ (9,134) $ 2,192 $ 2,806 The redeemable noncontrolling interest includes the Company’s joint venture with Middlebury College to form Middlebury Interactive Languages (“MIL”). Under the agreement, Middlebury College had an irrevocable election to sell all of its membership interest to the Company (put right). Middlebury College exercised its put right on May 4, 2015 and a transaction to acquire the remaining 40% noncontrolling interest for $9.1 million in cash was consummated on December 27, 2016. |
Revision to Previously Issued Financial Statements | Revision to Previously Issued Financial Statements Inventory of $5.2 million was moved to deposits and other assets on the June 30, 2018 balance sheet to correctly classify a portion of inventory as long-term. In addition, certain items in the statement of cash flows were revised to conform with current year presentations. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policy (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Summary of Significant Accounting Policies | |
Schedule of impact of adoption of ASU 606 | The impact of adoption on the Company’s consolidated statements of operations for the year ended June 30, 2019 was as follows: Year Ended June 30, 2019 As Reported Adjustment Amounts Under due to ASC under ASC 606 606 ASC 605 (In thousands) Revenues $ 1,015,752 $ (203) $ 1,015,549 Selling, administrative, and other operating expenses 297,350 (263) 297,087 Income from operations 45,486 60 45,546 Net income 37,209 60 37,269 Net income attributable to common stockholders $ 37,209 $ 60 $ 37,269 The impact of adoption on the Company’s consolidated balance sheets as of June 30, 2019 was as follows: June 30, 2019 As Reported Adjustment Amounts Under ASC due to ASC under ASC 606 606 605 (In thousands) Other current assets $ 12,307 $ (273) $ 12,034 Deposits and other assets 48,330 (629) 47,701 Total assets 819,606 (902) 818,704 Deferred revenue 22,828 (2,263) 20,565 Total liabilities 186,241 (2,263) 183,978 Retained earnings (accumulated deficit) 22,447 60 22,507 Total stockholders' equity 633,365 60 633,425 |
Schedule of disaggregation of revenue | Year Ended June 30, 2019 (In thousands) Managed Public School Programs $ 890,275 Institutional Non-managed Public School Programs 50,623 Institutional Software & Services 39,330 Total Institutional 89,953 Private Pay Schools and Other 35,524 Total Revenues $ 1,015,752 |
Schedule of accounts receivables, contract assets and deferred revenue | June 30, July 1, 2019 2018 (In thousands) Accounts receivable $ 191,639 $ 176,319 Unbilled receivables (included in accounts receivable) 16,189 12,143 Deferred revenue 22,828 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 goodwill activity | ($ in millions) Amount Goodwill Balance as of June 30, 2016 $ 87.3 Adjustment to purchase price of LTS Education Systems ("LTS") (0.1) Balance as of June 30, 2017 $ 87.2 Acquisition of Big Universe, Inc. 3.0 Balance as of June 30, 2018 $ 90.2 Adjustments — Balance as of June 30, 2019 $ 90.2 |
Schedule of intangible assets | June 30, 2019 June 30, 2018 ($ in millions) Gross Accumulated Net Gross Accumulated Net Trade names $ 17.6 $ (9.4) $ 8.2 $ 17.6 $ (8.5) $ 9.1 Customer and distributor relationships 20.5 (14.7) 5.8 20.5 (13.4) 7.1 Developed technology 3.2 (2.8) 0.4 3.2 (2.2) 1.0 Other 1.4 (0.8) 0.6 1.4 (0.6) 0.8 Total $ 42.7 $ (27.7) $ 15.0 $ 42.7 $ (24.7) $ 18.0 |
Schedule of calculation of basic and diluted net income (loss) per share | Year Ended June 30, 2019 2018 2017 (In thousands except share and per share data) Basic net income per share computation: Net income attributable to common stockholders $ 37,209 $ 27,620 $ 451 Weighted average common shares — basic 38,848,780 39,282,674 38,298,581 Basic net income per share $ 0.96 $ 0.70 $ 0.01 Diluted net income per share computation: Net income attributable to common stockholders $ 37,209 $ 27,620 $ 451 Share computation: Weighted average common shares — basic 38,848,780 39,282,674 38,298,581 Effect of dilutive stock options and restricted stock awards 2,096,020 1,355,070 1,202,353 Weighted average common shares — diluted 40,944,800 40,637,744 39,500,934 Diluted net income per share $ 0.91 $ 0.68 $ 0.01 |
Schedule of assets and liabilities measured at fair value on a nonrecurring basis | The following table summarizes certain fair value information at June 30, 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 $ 1,779 $ — $ — $ 1,779 The following table summarizes certain fair value information at June 30, 2018 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 $ 2,758 $ — $ — $ 2,758 |
Schedule of 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) Lease exit liability $ 2,758 $ — $ — $ 2,758 The following table summarizes certain fair value information at June 30, 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 received in acquisition $ 5,006 — — 5,006 The following table summarizes certain fair value information at June 30, 2018 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) 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 | 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 table presents activity related to the Company’s fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2019. Year Ended June 30, 2019 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2018 and Settlements Gains (Losses) June 30, 2019 (In thousands) Contingent consideration associated with acquisitions $ 1,345 $ (1,347) $ 2 $ — Convertible note received in acquisition — 5,006 — 5,006 The following table presents activity related to the Company’s fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2018. Year Ended June 30, 2018 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2017 and Settlements Gains (Losses) June 30, 2018 (In thousands) Contingent consideration associated with acquisitions 2,806 (1,319) (142) 1,345 The following table presents activity related to the Company’s fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2017. Year Ended June 30, 2017 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2016 and Settlements Gains (Losses) June 30, 2017 (In thousands) Redeemable noncontrolling interest in Middlebury Interactive Learning $ 6,801 $ (9,134) $ 2,333 $ — Contingent consideration associated with acquisitions 2,947 — (141) 2,806 Total $ 9,748 $ (9,134) $ 2,192 $ 2,806 |
Property and Equipment and Ca_2
Property and Equipment and Capitalized Software and Curriculum (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Property and Equipment and Capitalized Software and Curriculum | |
Schedule of property and equipment | June 30, 2019 2018 (In thousands) Student computers $ 43,845 $ 35,375 Computer software 17,999 15,313 Computer hardware 14,118 12,889 Leasehold improvements 10,364 11,779 State testing computers 7,470 6,816 Furniture and fixtures 4,058 4,127 Office equipment 1,382 1,476 99,236 87,775 Less accumulated depreciation and amortization (67,256) (58,907) $ 31,980 $ 28,868 |
Schedule of capitalized software | June 30, 2019 2018 (In thousands) Capitalized software $ 226,503 $ 201,348 Less accumulated depreciation and amortization (175,338) (145,860) $ 51,165 $ 55,488 |
Schedule of capitalized curriculum development costs | June 30, 2019 2018 (In thousands) Capitalized curriculum development costs $ 156,671 $ 185,520 Less accumulated depreciation and amortization (103,374) (131,962) $ 53,297 $ 53,558 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Schedule of deferred tax assets and liabilities | June 30, 2019 2018 (In thousands) Deferred tax assets Net operating loss carryforward $ 4,923 $ 5,047 Reserves 4,769 4,618 Accrued expenses 3,492 3,156 Stock compensation expense 5,992 8,293 Other assets 1,524 1,289 Deferred rent 1,056 1,502 Deferred revenue 461 673 Federal tax credits 20 20 State tax credits 363 431 Total deferred tax assets 22,600 25,029 Deferred tax liabilities Capitalized curriculum development (10,143) (9,890) Capitalized software and website development costs (12,659) (13,734) Property and equipment (5,166) (2,573) Returned materials (2,643) (2,452) Purchased intangibles (4,110) (4,498) Total deferred tax liabilities (34,721) (33,147) Net deferred tax liability before valuation allowance (12,121) (8,118) Valuation allowance (4,549) (4,459) Net deferred tax liability $ (16,670) $ (12,577) Reported as: Long-term deferred tax liabilities $ (16,670) $ (12,577) |
Schedule of related components of the income tax expense | Year Ended June 30, 2019 2018 2017 (In thousands) Current: Federal $ 3,919 $ 887 $ 8,756 State 1,988 774 3,153 Foreign 920 1,444 552 Total current 6,827 3,105 12,461 Deferred: Federal 3,412 (4,769) (6,505) State 281 754 (560) Total deferred 3,693 (4,015) (7,065) Total income tax expense (benefit) $ 10,520 $ (910) $ 5,396 |
Schedule of reconciliation of provision for income taxes to the income tax from applying the statutory rate | Year Ended June 30, 2019 2018 2017 U.S. federal tax at statutory rates (1) 21.0 % 28.0 % 35.0 % Permanent items 2.1 0.9 7.1 Lobbying 0.4 1.2 7.2 State taxes, net of federal benefit 4.3 3.1 19.5 Research and development tax credits (0.5) - (8.2) Domestic production activities deduction - (0.1) (22.9) Change in valuation allowance 0.2 (7.2) 53.3 Effects of foreign operations 0.1 - 2.6 Reserve for unrecognized tax benefits (2.1) 0.9 3.3 Noncontrolling interests - 0.4 12.5 Other (0.4) (3.9) (0.1) Impact of federal tax rate reduction - (25.4) - Repatriation transition tax - 6.4 - Stock-based compensation (3.1) (7.7) - Provision (benefit) for income taxes 22.0 % (3.4) % % (1) The corporate tax rate was lowered from 35% to 21%, effective as of January 1, 2018. Under IRC §15 which governs rate changes, fiscal year taxpayers are subject to a “blended” tax rate for tax years that include January 1, 2018. Using the weighted average calculation, the company’s blended federal tax rate for the year ended June 30, 2018 is 28%. |
Schedule of adjusted research and development credit carryforward | Year Ended June 30, 2019 2018 2017 (In thousands) Balance at beginning of the year $ 2,392 $ 2,260 $ 2,224 Additions for prior year tax positions 194 585 951 Additions for current year tax positions 87 8 241 Reductions for prior year tax positions (1,128) (461) (1,156) Balance at end of the year $ 1,545 $ 2,392 $ 2,260 |
Lease Commitments (Tables)
Lease Commitments (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Lease Commitments. | |
Summary of the present value of the net minimum lease payments due on capital leases | As of June 30, Capital Leases (in thousands) 2020 $ 20,070 2021 4,819 2022 340 Total minimum payments 25,229 Less amount representing interest (imputed weighted average capital lease interest rate of 3.66%) (581) Net minimum payments 24,648 Less current portion (19,588) Present value of minimum payments, less current portion $ 5,060 |
Schedule of future minimum lease payments and sublease income under non-cancelable operating leases | Year Ended June 30, ($ in thousands) Minimum Lease Payments Sublease Income Net 2020 $ 8,441 $ (930) $ 7,511 2021 8,229 (961) 7,268 2022 6,735 (528) 6,207 2023 550 — 550 2024 137 — 137 Totals $ 24,092 $ (2,419) $ 21,673 |
Equity Incentive Plan (Tables)
Equity Incentive Plan (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Equity Incentive Plan | |
Schedule of stock option activity | Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Life (Years) Value Outstanding, June 30, 2016 2,350,175 $ 20.20 Granted — — Exercised (425,180) 16.35 Forfeited or canceled (568,467) 23.12 Outstanding, June 30, 2017 1,356,528 $ 20.19 Granted — — Exercised (14,600) 13.45 Forfeited or canceled (142,621) 22.71 Outstanding, June 30, 2018 1,199,307 $ 19.97 Granted — — Exercised (150,290) 20.16 Forfeited or canceled (13,000) 29.82 Outstanding, June 30, 2019 1,036,017 $ 19.82 2.64 $ 11,312,871 Exercisable, June 30, 2019 1,019,822 $ 19.92 2.62 $ 11,054,860 |
Schedule of restricted stock award activity | Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2016 2,131,790 $ 12.46 Granted 1,268,311 12.70 Vested (1,084,046) 12.94 Canceled (175,008) 12.69 Nonvested, June 30, 2017 2,141,047 $ 12.34 Granted 1,210,502 16.68 Vested (1,339,492) 12.29 Canceled (335,150) 14.31 Nonvested, June 30, 2018 1,676,907 $ 15.12 Granted 828,833 18.44 Vested (947,703) 14.72 Canceled (235,485) 17.40 Nonvested, June 30, 2019 1,322,552 $ 17.08 |
Schedule of performance share units award activity | Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2016 1,089,602 $ 12.91 Granted 52,000 18.97 Vested — — Canceled (98,000) 13.45 Nonvested, June 30, 2017 1,043,602 $ 13.16 Granted 138,241 12.81 Vested (320,340) 12.62 Canceled (152,524) 14.00 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, June 30, 2019 2,372,241 $ 10.61 |
Restructuring (Tables)
Restructuring (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Restructuring | |
Schedule of operating leases | Balance at Payments, net of Accretion Balance at Description Initial Value June 30, 2018 sublease income Expense Adjustments June 30, 2019 (In thousands) Lease #1 $ 1,652 $ 1,092 $ (403) $ 28 $ — $ 717 Lease #2 1,311 475 (452) 6 — 29 Lease #3 2,443 1,191 (188) 30 — 1,033 Total $ 5,406 $ 2,758 $ (1,043) $ 64 $ — $ 1,779 |
Supplemental Disclosure of Ca_2
Supplemental Disclosure of Cash Flow Information (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Supplemental Disclosure of Cash Flow Information | |
Schedule of supplemental disclosure of cash flow information | Year Ended June 30, 2019 2018 2017 Cash paid for interest $ 1,108 $ 778 $ 750 Cash paid for taxes $ 4,453 $ 12,210 $ 8,052 Supplemental disclosure of non-cash financing activities: Property and equipment financed by capital lease obligations, including student peripherals $ 19,664 $ 17,414 $ 14,469 Supplemental disclosure of non-cash investing activities: Stock-based compensation expense capitalized on software development $ 167 $ 1,083 $ — Stock-based compensation expense capitalized on curriculum development $ 170 $ 969 $ — Business combinations: Current assets $ — $ 209 $ — Intangible assets — 695 — Goodwill — 2,983 — Assumed liabilities — (734) — Deferred revenue — (361) — |
Quarterly Results of Operatio_2
Quarterly Results of Operations (Tables) | 12 Months Ended |
Jun. 30, 2019 | |
Quarterly Results of Operations (Unaudited) | |
Schedule of selected unaudited quarterly financial information | Fiscal Year 2019 Jun 30, Mar 31, Dec 31, Sep 30, 2019 2019 2018 2018 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ 256,314 $ 253,252 $ 254,872 $ 251,314 Cost and expenses Instructional costs and services 175,863 168,260 160,329 158,985 Selling, administrative and other operating expenses 75,207 59,382 60,183 102,578 Product development expenses 2,563 2,343 1,070 3,503 Total costs and expenses 253,633 229,985 221,582 265,066 Income (loss) from operations 2,681 23,267 33,290 (13,752) Interest income, net 1,214 754 477 316 Other income (expense), net 154 556 (789) 193 Income (loss) before income taxes, loss from equity method investments and noncontrolling interest 4,049 24,577 32,978 (13,243) Income tax (expense) benefit (662) (5,842) (9,074) 5,058 Loss from equity method investments (70) (273) (192) (97) Net income (loss) attributable to common stockholders $ 3,317 $ 18,462 $ 23,712 $ (8,282) Net income (loss) attributable to common stockholders per share: Basic $ 0.08 $ 0.47 $ 0.61 $ (0.22) Diluted $ 0.08 $ 0.44 $ 0.59 $ (0.22) Weighted average shares used in computing per share amounts: Basic 39,135,413 39,008,990 38,816,669 38,434,049 Diluted 41,667,000 41,753,323 40,325,260 38,434,049 Fiscal Year 2018 Jun 30, Mar 31, Dec 31, Sep 30, 2018 2018 2017 2017 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ 238,874 $ 232,864 $ 217,211 $ 228,785 Cost and expenses Instructional costs and services 157,087 148,878 139,163 147,367 Selling, administrative and other operating expenses 69,939 62,267 61,958 96,282 Product development expenses 1,972 2,002 2,376 2,898 Total costs and expenses 228,998 213,147 203,497 246,547 Income (loss) from operations 9,876 19,717 13,714 (17,762) Interest income, net 430 261 39 235 Income (loss) before income taxes and noncontrolling interest 10,306 19,978 13,753 (17,527) Income tax (expense) benefit (959) (6,935) (564) 9,368 Net income (loss) 9,347 13,043 13,189 (8,159) Add net loss attributable to noncontrolling interest — 27 70 103 Net income (loss) attributable to common stockholders $ 9,347 $ 13,070 $ 13,259 $ (8,056) Net income (loss) attributable to common stockholders per share: Basic $ 0.24 $ 0.33 $ 0.34 $ (0.21) Diluted $ 0.23 $ 0.32 $ 0.33 $ (0.21) Weighted average shares used in computing per share amounts: Basic 39,031,207 39,644,074 39,347,244 39,108,172 Diluted 39,976,593 40,766,203 40,685,667 39,108,172 |
Description of the Business (De
Description of the Business (Details) - item | 6 Months Ended | 12 Months Ended |
Dec. 31, 2018 | Jun. 30, 2019 | |
Description of the Business | ||
Number of lines of business | 3 | 3 |
Basis of Presentation (Details)
Basis of Presentation (Details) | 12 Months Ended |
Jun. 30, 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 | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Sep. 30, 2018 | |
Summary of Significant Accounting Policies | ||||
Cash flows from operations | $ 141,606 | $ 105,446 | $ 88,728 | |
Cash flows from financing activities | (28,989) | (52,720) | $ (14,644) | |
Retained earnings | 22,447 | (13,432) | ||
Lease liability | 1,779 | 2,758 | ||
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 | ||||
ROU asset | 18,000 | |||
ASU 2016-02 | Scenario Forecast Adjustment | Maximum | ||||
Summary of Significant Accounting Policies | ||||
Lease liability | 23,000 | |||
Adjustment due to ASC 606 | ||||
Summary of Significant Accounting Policies | ||||
Retained earnings | $ 60 | |||
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 | 12 Months Ended | |||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2016 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jul. 01, 2018 | Jun. 30, 2016 | |||
Summary of Significant Accounting Policies | |||||||||||||||
Length of the school year that revenues were recognized over prior to adoption of ASC 606 | 10 months | ||||||||||||||
Revenues | $ 256,314 | $ 253,252 | $ 254,872 | $ 251,314 | $ 238,874 | $ 232,864 | $ 217,211 | $ 228,785 | $ 1,015,752 | $ 917,734 | $ 888,519 | ||||
Selling, administrative, and other operating expenses | 75,207 | 59,382 | 60,183 | 102,578 | 69,939 | 62,267 | 61,958 | 96,282 | 297,350 | 290,446 | 305,617 | ||||
Loss from operations | 2,681 | 23,267 | 33,290 | (13,752) | 9,876 | 19,717 | 13,714 | (17,762) | 45,486 | 25,545 | 13,129 | ||||
Net income | 9,347 | 13,043 | 13,189 | (8,159) | 37,209 | 27,420 | (459) | ||||||||
Net income attributable to common stockholders | 3,317 | $ 18,462 | $ 23,712 | $ (8,282) | 9,347 | $ 13,070 | $ 13,259 | $ (8,056) | 37,209 | 27,620 | [1] | 451 | [1] | ||
Other current assets | 12,307 | 10,388 | 12,307 | 10,388 | |||||||||||
Deposits and other assets | 48,330 | 41,887 | 48,330 | 41,887 | |||||||||||
Total assets | 819,606 | 741,963 | 819,606 | 741,963 | |||||||||||
Deferred revenue | 22,828 | 23,114 | 22,828 | 23,114 | $ 25,580 | ||||||||||
Total liabilities | 186,241 | 154,774 | 186,241 | 154,774 | |||||||||||
Retained earnings (accumulated deficit) | 22,447 | (13,432) | 22,447 | (13,432) | |||||||||||
Total stockholders’ equity | 633,365 | $ 587,189 | 633,365 | $ 587,189 | $ 574,346 | $ 558,720 | |||||||||
Adjustment due to ASC 606 | |||||||||||||||
Summary of Significant Accounting Policies | |||||||||||||||
Revenues | (203) | ||||||||||||||
Selling, administrative, and other operating expenses | (263) | ||||||||||||||
Loss from operations | 60 | ||||||||||||||
Net income | 60 | ||||||||||||||
Net income attributable to common stockholders | 60 | ||||||||||||||
Other current assets | (273) | (273) | |||||||||||||
Deposits and other assets | (629) | (629) | |||||||||||||
Total assets | (902) | (902) | |||||||||||||
Deferred revenue | (2,263) | (2,263) | |||||||||||||
Total liabilities | (2,263) | (2,263) | |||||||||||||
Retained earnings (accumulated deficit) | 60 | 60 | |||||||||||||
Total stockholders’ equity | 60 | 60 | |||||||||||||
Amounts under ASC 605 | |||||||||||||||
Summary of Significant Accounting Policies | |||||||||||||||
Revenues | 1,015,549 | ||||||||||||||
Selling, administrative, and other operating expenses | 297,087 | ||||||||||||||
Loss from operations | 45,546 | ||||||||||||||
Net income | 37,269 | ||||||||||||||
Net income attributable to common stockholders | 37,269 | ||||||||||||||
Other current assets | 12,034 | 12,034 | |||||||||||||
Deposits and other assets | 47,701 | 47,701 | |||||||||||||
Total assets | 818,704 | 818,704 | |||||||||||||
Deferred revenue | 20,565 | 20,565 | |||||||||||||
Total liabilities | 183,978 | 183,978 | |||||||||||||
Retained earnings (accumulated deficit) | 22,507 | 22,507 | |||||||||||||
Total stockholders’ equity | $ 633,425 | $ 633,425 | |||||||||||||
[1] | Net income excludes $0.2 million and $0.9 million for the years ended June 30, 2018 and 2017, respectively, due to the redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop, which is reported outside of permanent equity in the accompanying consolidated balance sheets (See Note 9, “Redeemable Noncontrolling Interest”). |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Disaggregation of revenue (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2018item | Jun. 30, 2019USD ($)item | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | |
Summary of Significant Accounting Policies | ||||||||||||
Number of lines of business | item | 3 | 3 | ||||||||||
Total Revenues | $ 256,314 | $ 253,252 | $ 254,872 | $ 251,314 | $ 238,874 | $ 232,864 | $ 217,211 | $ 228,785 | $ 1,015,752 | $ 917,734 | $ 888,519 | |
Managed Public School Programs | ||||||||||||
Summary of Significant Accounting Policies | ||||||||||||
Total Revenues | 890,275 | |||||||||||
Institutional | ||||||||||||
Summary of Significant Accounting Policies | ||||||||||||
Total Revenues | 89,953 | |||||||||||
Non-managed Public School Programs | ||||||||||||
Summary of Significant Accounting Policies | ||||||||||||
Total Revenues | 50,623 | |||||||||||
Institutional Software & Services | ||||||||||||
Summary of Significant Accounting Policies | ||||||||||||
Total Revenues | 39,330 | |||||||||||
Private Pay Schools and Other | ||||||||||||
Summary of Significant Accounting Policies | ||||||||||||
Total Revenues | $ 35,524 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Concentration Risk and Inventories (Details) $ in Thousands | 12 Months Ended | ||||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jul. 01, 2018USD ($) | |
Concentration of revenues | |||||
Concentration risk (as a percent) | 10.00% | 10.00% | 10.00% | ||
Accounts receivable | $ 191,639 | $ 176,319 | $ 176,319 | ||
Deposits and other assets | 48,330 | 41,887 | |||
Current and long-term balance | 25,100 | ||||
Inventories | |||||
Inventory deemed long-term and included in deposits and other assets | 4,100 | 5,200 | |||
Increase (decrease) in provision for excess and obsolete inventory | 600 | $ (300) | $ 1,200 | ||
Excess and obsolete inventory reserve | $ 4,100 | 3,500 | |||
Agora | |||||
Concentration of revenues | |||||
Accounts receivable | $ 28,700 | ||||
Settlement repayment period | 4 years | ||||
Revenue | Customer Concentration Risk | |||||
Concentration of revenues | |||||
Number of customers with concentration | 1 | 0 | 0 | ||
Revenue | Customer Concentration Risk | Managed Schools | |||||
Concentration of revenues | |||||
Concentration risk (as a percent) | 88.00% | 85.00% | 83.00% | ||
Agora | |||||
Concentration of revenues | |||||
Deposits and other assets | $ 23,200 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Revenue Recognition (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||
Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016 | |
Summary of Significant Accounting Policies | ||||||||||||
Revenues | $ 256,314 | $ 253,252 | $ 254,872 | $ 251,314 | $ 238,874 | $ 232,864 | $ 217,211 | $ 228,785 | $ 1,015,752 | $ 917,734 | $ 888,519 | |
Percentage of impact on total revenue | 0.40% | 0.30% | 0.10% | |||||||||
Reduction in school operating losses included in the entity's revenue | $ 54,700 | $ 66,700 | $ 61,000 | |||||||||
Concentration risk (as a percent) | 10.00% | 10.00% | 10.00% | |||||||||
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 | $ 342,700 | $ 314,800 | $ 292,000 | |||||||||
Revenue | Customer Concentration Risk | ||||||||||||
Summary of Significant Accounting Policies | ||||||||||||
Number of customers with concentration | 1 | 0 | 0 | |||||||||
Revenue | Customer Concentration Risk | Managed Schools | ||||||||||||
Summary of Significant Accounting Policies | ||||||||||||
Concentration risk (as a percent) | 88.00% | 85.00% | 83.00% |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Contract Balances (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jul. 01, 2018 | Jun. 30, 2018 | |
Accounts receivables, contract assets and deferred revenue | |||
Accounts receivable | $ 191,639 | $ 176,319 | $ 176,319 |
Unbilled receivables (included in accounts receivable) | 16,189 | 12,143 | |
Deferred revenue | 22,828 | $ 25,580 | $ 23,114 |
Revenue recognized that was included in opening deferred revenue balance | 23,700 | ||
Revenue recognized from performance obligation satisfied in prior periods | $ 4,100 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Costs to Obtain a Contract with a Customer (Details) | 12 Months Ended |
Jun. 30, 2019 | |
Practical expedient | |
Commission paid on contract not capitalized | true |
Amortization period | 4 years |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Intangibles and Goodwill (Details) $ in Thousands | Oct. 02, 2017USD ($) | Dec. 27, 2016USD ($) | Jul. 31, 2014USD ($) | Jan. 31, 2018USD ($) | Jun. 30, 2019USD ($)item | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) |
Intangible Assets: | ||||||||
Amortization expense | $ 3,000 | $ 3,000 | $ 2,900 | |||||
Number of reporting units | item | 1 | |||||||
Future amortization of intangible assets | ||||||||
2020 | 2,900 | |||||||
2021 | 2,400 | |||||||
2022 | 2,200 | |||||||
2023 | 2,000 | |||||||
2024 | 1,400 | |||||||
Thereafter | 3,800 | |||||||
Rollforward of Goodwill | ||||||||
Balance at the beginning of the period | $ 90,197 | 87,200 | $ 87,300 | |||||
Acquisition | 2,983 | |||||||
Balance at the end of the period | 90,197 | 90,197 | 87,200 | $ 87,300 | ||||
Intangible Assets | ||||||||
Gross Carrying Amount | 42,700 | 42,700 | ||||||
Accumulated Amortization | (27,700) | (24,700) | ||||||
Net Carrying Value | 15,000 | 18,000 | ||||||
Middlebury Interactive Languages LLC | ||||||||
Intangible Assets: | ||||||||
Ownership percentage acquired (as a percent) | 40.00% | |||||||
Cash purchase price | $ 9,100 | |||||||
Trade names | ||||||||
Intangible Assets | ||||||||
Gross Carrying Amount | 17,600 | 17,600 | ||||||
Accumulated Amortization | (9,400) | (8,500) | ||||||
Net Carrying Value | 8,200 | 9,100 | ||||||
Customer and distributor relationships | ||||||||
Intangible Assets | ||||||||
Gross Carrying Amount | 20,500 | 20,500 | ||||||
Accumulated Amortization | (14,700) | (13,400) | ||||||
Net Carrying Value | 5,800 | 7,100 | ||||||
Developed technology | ||||||||
Intangible Assets | ||||||||
Gross Carrying Amount | 3,200 | 3,200 | ||||||
Accumulated Amortization | (2,800) | (2,200) | ||||||
Net Carrying Value | 400 | 1,000 | ||||||
Other | ||||||||
Intangible Assets | ||||||||
Gross Carrying Amount | 1,400 | 1,400 | ||||||
Accumulated Amortization | (800) | (600) | ||||||
Net Carrying Value | $ 600 | 800 | ||||||
LearnBop | ||||||||
Intangible Assets: | ||||||||
Ownership percentage acquired (as a percent) | 51.00% | 49.00% | ||||||
Cash purchase price | $ 6,500 | $ 500 | ||||||
LTS | ||||||||
Rollforward of Goodwill | ||||||||
Acquisition | $ 100 | |||||||
Adjustments | $ 3,000 | |||||||
Big Universe Inc. | ||||||||
Intangible Assets: | ||||||||
Ownership percentage acquired (as a percent) | 100.00% | |||||||
Cash and contingent consideration paid | $ 3,300 |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Performance Obligations (Details) $ in Millions | 12 Months Ended |
Jun. 30, 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 | $ 1.5 |
Summary of Significant Accou_13
Summary of Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||
Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Property and equipment | |||||||||
Equipment expense | $ 4,100 | $ 3,400 | $ 3,500 | ||||||
Capitalized software development costs | 26,318 | 24,533 | $ 26,918 | ||||||
Net income | $ 9,347 | $ 13,043 | $ 13,189 | $ (8,159) | $ 37,209 | 27,420 | (459) | ||
Capitalized Curriculum Development Costs | |||||||||
Estimated useful life of the software | 5 years | ||||||||
Capitalized curriculum development costs | $ 16,611 | 9,927 | $ 19,132 | ||||||
Out of period adjustment | |||||||||
Property and equipment | |||||||||
Capitalized software development costs | $ 2,300 | ||||||||
Net income | 1,400 | ||||||||
Capitalized Curriculum Development Costs | |||||||||
Capitalized curriculum development costs | 600 | ||||||||
Capitalized curriculum development costs write down | $ 600 | ||||||||
Student and state testing computers | Minimum | |||||||||
Property and equipment | |||||||||
Useful Life | 3 years | ||||||||
Student and state testing computers | Maximum | |||||||||
Property and equipment | |||||||||
Useful Life | 5 years | ||||||||
Student computers | |||||||||
Property and equipment | |||||||||
Accelerated depreciation | $ 2,300 | 2,100 | 3,500 | ||||||
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 | ||||||||
Capitalized software development additions | $ 26,300 | $ 24,500 | $ 26,900 |
Summary of Significant Accou_14
Summary of Significant Accounting Policies - Advertising and Marketing Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2016 | |
Advertising and Marketing Costs | |||
Advertising costs | $ 38 | $ 37.5 | $ 36.8 |
Summary of Significant Accou_15
Summary of Significant Accounting Policies - Net Income Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2016 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |||
Basic and diluted income (loss) per share computation: | ||||||||||||||
Net income attributable to common stockholders | $ 3,317 | $ 18,462 | $ 23,712 | $ (8,282) | $ 9,347 | $ 13,070 | $ 13,259 | $ (8,056) | $ 37,209 | $ 27,620 | [1] | $ 451 | [1] | |
Weighted average common shares—basic | 39,135,413 | 39,008,990 | 38,816,669 | 38,434,049 | 39,031,207 | 39,644,074 | 39,347,244 | 39,108,172 | 38,848,780 | 39,282,674 | 38,298,581 | |||
Basic net income per share (in dollars per share) | $ 0.08 | $ 0.47 | $ 0.61 | $ (0.22) | $ 0.24 | $ 0.33 | $ 0.34 | $ (0.21) | $ 0.96 | $ 0.70 | $ 0.01 | |||
Dilutive earnings per share computation: | ||||||||||||||
Net income attributable to common stockholders | $ 3,317 | $ 18,462 | $ 23,712 | $ (8,282) | $ 9,347 | $ 13,070 | $ 13,259 | $ (8,056) | $ 37,209 | $ 27,620 | [1] | $ 451 | [1] | |
Additional disclosures | ||||||||||||||
Weighted average common shares—basic | 39,135,413 | 39,008,990 | 38,816,669 | 38,434,049 | 39,031,207 | 39,644,074 | 39,347,244 | 39,108,172 | 38,848,780 | 39,282,674 | 38,298,581 | |||
Effect of dilutive stock options and restricted stock awards (in shares) | 2,096,020 | 1,355,070 | 1,202,353 | |||||||||||
Weighted average common shares—diluted | 41,667,000 | 41,753,323 | 40,325,260 | 38,434,049 | 39,976,593 | 40,766,203 | 40,685,667 | 39,108,172 | 40,944,800 | 40,637,744 | 39,500,934 | |||
Diluted net income per share (in dollars per share) | $ 0.08 | $ 0.44 | $ 0.59 | $ (0.22) | $ 0.23 | $ 0.32 | $ 0.33 | $ (0.21) | $ 0.91 | $ 0.68 | $ 0.01 | |||
Common stock, shares issued | 45,575,236 | 44,902,567 | 45,575,236 | 44,902,567 | ||||||||||
Common stock, shares outstanding | 40,240,493 | 39,567,824 | 40,240,493 | 39,567,824 | ||||||||||
Anti-dilutive shares | 140,657 | 1,026,472 | 1,965,283 | |||||||||||
[1] | Net income excludes $0.2 million and $0.9 million for the years ended June 30, 2018 and 2017, respectively, due to the redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop, which is reported outside of permanent equity in the accompanying consolidated balance sheets (See Note 9, “Redeemable Noncontrolling Interest”). |
Summary of Significant Accou_16
Summary of Significant Accounting Policies - Fair Value (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 |
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Middlebury Interactive Languages LLC | ||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||
Redeemable Noncontrolling Interest Fair Value | $ 6,801 | |||
Measured on a nonrecurring basis | ||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||
Lease exit liability | $ 1,779 | $ 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 | 1,779 | 2,758 | ||
Acquisitions | Measured on a recurring basis | ||||
Assets and liabilities measured at fair value on a recurring and nonrecurring basis | ||||
Contingent consideration | 1,345 | |||
Convertible note | 5,006 | |||
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 | $ 2,806 | $ 2,947 | |
Convertible note | 5,006 | |||
Acquisitions | Corporate Note Securities [Member] | 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 |
Summary of Significant Accou_17
Summary of Significant Accounting Policies - Fair Value Measurements (Details) - USD ($) $ in Thousands | Dec. 27, 2016 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 |
Middlebury Interactive Languages LLC | ||||
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Ownership percentage acquired (as a percent) | 40.00% | |||
Cash purchase price | $ 9,100 | |||
Significant Unobservable Inputs (Level 3) | Measured on a recurring basis | ||||
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Fair Value, beginning of period | $ 2,806 | $ 9,748 | ||
Purchases, Issuances and Settlements | (9,134) | |||
Unrealized Gains/(Losses) | 2,192 | |||
Fair Value, end of period | 2,806 | |||
Significant Unobservable Inputs (Level 3) | Measured on a recurring basis | Middlebury Interactive Languages LLC | ||||
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Redeemable noncontrolling interest fair value, beginning balance | 6,801 | |||
Purchases, Issuances and Settlements | (9,134) | |||
Unrealized Gains/(Losses) | 2,333 | |||
Redeemable noncontrolling interest fair value, ending balance | 6,801 | |||
Acquisitions | Measured on a recurring basis | ||||
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Contingent consideration, fair value, beginning balance | $ 1,345 | |||
Contingent consideration, fair value, ending balance | 1,345 | |||
Acquisitions | Significant Unobservable Inputs (Level 3) | Measured on a recurring basis | ||||
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | ||||
Contingent consideration, fair value, beginning balance | 1,345 | 2,806 | 2,947 | |
Purchases, Issuances and Settlements | (1,347) | (1,319) | ||
Unrealized Gains/(Losses) | $ 2 | (142) | (141) | |
Contingent consideration, fair value, ending balance | $ 1,345 | $ 2,806 |
Summary of Significant Accou_18
Summary of Significant Accounting Policies - Reclassification (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Summary of Significant Accounting Policies | ||
Inventory | $ 29,946 | $ 25,916 |
Deposits and other assets | 48,330 | $ 41,887 |
Out of period adjustment | ||
Summary of Significant Accounting Policies | ||
Inventory | (5,200) | |
Deposits and other assets | $ 5,200 |
Property and Equipment and Ca_3
Property and Equipment and Capitalized Software and Curriculum (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2016 | |
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | $ 99,236 | $ 87,775 | |
Less accumulated depreciation and amortization | (67,256) | (58,907) | |
Property and equipment and capitalized software, Net | 31,980 | 28,868 | |
Maintenance and repair expenses | 13,700 | 12,100 | $ 11,700 |
Selling, administrative and other operating expenses | |||
Property and equipment and capitalized software | |||
Depreciation expense | 5,200 | 5,100 | 6,700 |
Student computers | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 43,845 | 35,375 | |
Student computers | Instructional costs and services | |||
Property and equipment and capitalized software | |||
Depreciation expense | 15,000 | 12,400 | 11,200 |
Amortization expense | 0 | 500 | 600 |
Computer software | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 17,999 | 15,313 | |
Computer hardware | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 14,118 | 12,889 | |
Leasehold improvements | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 10,364 | 11,779 | |
Office equipment | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 1,382 | 1,476 | |
Furniture and fixtures | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 4,058 | 4,127 | |
State testing computers | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 7,470 | 6,816 | |
Capitalized software | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 226,503 | 201,348 | |
Less accumulated depreciation and amortization | (175,338) | (145,860) | |
Property and equipment and capitalized software, Net | 51,165 | 55,488 | |
Capitalized software | Selling, administrative and other operating expenses | |||
Property and equipment and capitalized software | |||
Amortization expense | 7,400 | 9,100 | 7,900 |
Capitalized software | Instructional costs and services | |||
Property and equipment and capitalized software | |||
Amortization expense | 22,300 | 25,800 | 25,100 |
Capitalized curriculum | |||
Property and equipment and capitalized software | |||
Property and equipment and capitalized software, gross | 156,671 | 185,520 | |
Less accumulated depreciation and amortization | (103,374) | (131,962) | |
Property and equipment and capitalized software, Net | 53,297 | 53,558 | |
Amortization expense | $ 18,500 | $ 19,400 | $ 19,900 |
Income Taxes - Deferred (Detail
Income Taxes - Deferred (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Deferred tax assets: | ||
Net operating loss carryforward | $ 4,923 | $ 5,047 |
Reserves | 4,769 | 4,618 |
Accrued expenses | 3,492 | 3,156 |
Stock compensation expense | 5,992 | 8,293 |
Other assets | 1,524 | 1,289 |
Deferred rent | 1,056 | 1,502 |
Deferred revenue | 461 | 673 |
Federal tax credits | 20 | 20 |
State tax credits | 363 | 431 |
Total deferred tax assets | 22,600 | 25,029 |
Deferred tax liabilities: | ||
Capitalized curriculum development | (10,143) | (9,890) |
Capitalized software and website development costs | (12,659) | (13,734) |
Property and equipment | (5,166) | (2,573) |
Returned materials | (2,643) | (2,452) |
Purchased intangibles | (4,110) | (4,498) |
Total deferred tax liabilities | (34,721) | (33,147) |
Net deferred tax liability before valuation allowance | (12,121) | (8,118) |
Valuation Allowance | (4,549) | (4,459) |
Net deferred tax liability | (16,670) | (12,577) |
Reported as: | ||
Long-term deferred tax liabilities | $ (16,670) | $ (12,577) |
Income Taxes - Carryforward (De
Income Taxes - Carryforward (Details) $ in Millions | Jun. 30, 2019USD ($) |
Federal | |
Tax Carryforwards | |
NOL carryforward | $ 0.1 |
State | |
Tax Carryforwards | |
NOL carryforward | $ 0.3 |
Income Taxes - Other (Details)
Income Taxes - Other (Details) - USD ($) $ in Thousands | Jan. 01, 2018 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2016 | Dec. 31, 2017 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 |
Current: | ||||||||||||||
Federal | $ 3,919 | $ 887 | $ 8,756 | |||||||||||
State | 1,988 | 774 | 3,153 | |||||||||||
Foreign | 920 | 1,444 | 552 | |||||||||||
Total current | 6,827 | 3,105 | 12,461 | |||||||||||
Deferred: | ||||||||||||||
Federal | 3,412 | (4,769) | (6,505) | |||||||||||
State | 281 | 754 | (560) | |||||||||||
Total deferred | 3,693 | (4,015) | $ (7,065) | (7,065) | ||||||||||
Total income tax (benefit) expense | $ 662 | $ 5,842 | $ 9,074 | $ (5,058) | $ 959 | $ 6,935 | $ 564 | $ (9,368) | $ 10,520 | $ (910) | $ 5,396 | $ 5,396 | ||
Reconciliation to income tax at the statutory rate: | ||||||||||||||
U.S. Federal tax at statutory rates (as a percent) | 35.00% | 21.00% | 21.00% | 28.00% | 35.00% | |||||||||
Permanent items (as a percent) | 2.10% | 0.90% | 7.10% | |||||||||||
Lobbying (as a percent) | 0.40% | 1.20% | 7.20% | |||||||||||
State taxes, net of federal benefit (as a percent) | 4.30% | 3.10% | 19.50% | |||||||||||
Research and development tax credits (as a percent) | (0.50%) | (8.20%) | ||||||||||||
Domestic production activities deduction (as a percent) | (0.10%) | (22.90%) | ||||||||||||
Change in valuation allowance (as a percent) | 0.20% | (7.20%) | 53.30% | |||||||||||
Effects of foreign operations (as a percent) | 0.10% | 2.60% | ||||||||||||
Reserve for unrecognized tax benefits (as a percent) | (2.10%) | 0.90% | 3.30% | |||||||||||
Noncontrolling Interests (as a percent) | 0.40% | 12.50% | ||||||||||||
Other (as a percent) | (0.40%) | (3.90%) | (0.10%) | |||||||||||
Impact of federal tax rate reduction | (25.40%) | |||||||||||||
Repatriation transition tax | 6.40% | |||||||||||||
Stock-based compensation | (3.10%) | (7.70%) | ||||||||||||
(Benefit) provision for income taxes | 22.00% | (3.40%) | 109.30% | |||||||||||
Blended federal tax rate | 28.00% |
Income Taxes - Tax Uncertaintie
Income Taxes - Tax Uncertainties (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Tax Uncertainties | ||||
Interest and penalties accrued | $ 200 | $ 200 | $ 100 | |
Balance at beginning of the year | 2,392 | 2,260 | $ 2,224 | |
Additions for prior year tax returns | 194 | 585 | 951 | |
Additions for current year tax positions | 87 | 8 | 241 | |
Reductions for prior year tax positions | (1,128) | (461) | (1,156) | |
Balance at end of the year | 1,545 | $ 2,392 | $ 2,260 | |
Unrecognized tax benefits that would affect the effective tax rate | $ 1,500 |
Lease Commitments - Capital Lea
Lease Commitments - Capital Leases (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
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 | Line of Credit | ||
Long-term obligations | ||
Line of credit, amount outstanding | $ 24,600,000 | 26,000,000 |
Gross carrying value of leased computers | 51,300,000 | 42,200,000 |
Accumulated depreciation of leased student computers | $ 31,500,000 | $ 26,000,000 |
Computer hardware | Line of Credit | Minimum | ||
Long-term obligations | ||
Interest rate (as a percent) | 1.97% | |
Computer hardware | Line of Credit | Maximum | ||
Long-term obligations | ||
Interest rate (as a percent) | 4.05% |
Lease Commitments - Net Minimum
Lease Commitments - Net Minimum Lease Payments on Capital Leases (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jun. 30, 2018 |
Minimum lease payments on capital leases | ||
2020 | $ 20,070 | |
2021 | 4,819 | |
2022 | 340 | |
Total minimum payments | 25,229 | |
Less amount representing interest (imputed weighted average capital lease interest rate of 3.66%) | (581) | |
Net minimum payments | 24,648 | |
Less current portion | (19,588) | $ (13,353) |
Present value of minimum payments, less current portion | $ 5,060 | $ 12,665 |
Weighted average interest rate (as a percent) | 3.66% |
Lease Commitments - Operating L
Lease Commitments - Operating Leases (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Lease Commitments. | |||
Lease rent expense | $ 7,200 | $ 6,800 | $ 6,300 |
Minimum Lease Payments | |||
2020 | 8,441 | ||
2021 | 8,229 | ||
2022 | 6,735 | ||
2023 | 550 | ||
2024 | 137 | ||
Total | 24,092 | ||
Sublease Income | |||
2020 | (930) | ||
2021 | (961) | ||
2022 | (528) | ||
Total | (2,419) | ||
Net | |||
2020 | 7,511 | ||
2021 | 7,268 | ||
2022 | 6,207 | ||
2023 | 550 | ||
2024 | 137 | ||
Total future minimum lease payments | $ 21,673 |
Equity Transactions (Details)
Equity Transactions (Details) - USD ($) $ / shares in Units, $ in Thousands | May 16, 2018 | Jun. 30, 2018 | Jun. 30, 2019 |
Series A Special Stock | |||
Amount paid to repurchase common stock | $ 27,500 | $ 27,482 | |
Common stock redeemed (in shares) | 1,832,145 | ||
Common stock redeemed, average price (in dollars per share) | $ 15 | ||
Equity Transactions | |||
Common stock authorized (in shares) | 100,000,000 | 100,000,000 | |
Preferred stock authorized (in shares) | 10,000,000 | 10,000,000 | |
Preferred stock issued (in shares) | 0 | 0 | |
Preferred stock outstanding (in shares) | 0 | 0 | |
Treasury Stock | |||
Series A Special Stock | |||
Common stock redeemed (in shares) | 1,832,145 |
Equity Incentive Plan (Details)
Equity Incentive Plan (Details) - shares | 12 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Equity Transactions | ||||
Options outstanding (in shares) | 1,036,017 | 1,199,307 | 1,356,528 | 2,350,175 |
Exercisable (in shares) | 1,019,822 | |||
Employee and Non Employees Stock Option | ||||
Equity Transactions | ||||
Vesting period | 4 years | |||
Stock option plan | Employee and Non Employees Stock Option | ||||
Equity Transactions | ||||
Exercisable (in shares) | 0 | |||
Plan | ||||
Equity Transactions | ||||
Shares reserved for issuance | 2,108,868 | |||
Plan and prior plan | ||||
Equity Transactions | ||||
Options outstanding (in shares) | 4,749,068 |
Equity Incentive Plan - Activit
Equity Incentive Plan - Activity (Details) - USD ($) | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Shares | |||
Outstanding at the beginning of the period (in shares) | 1,199,307 | 1,356,528 | 2,350,175 |
Exercised (in shares) | (150,290) | (14,600) | (425,180) |
Forfeited or canceled (in shares) | (13,000) | (142,621) | (568,467) |
Outstanding at the end of the period (in shares) | 1,036,017 | 1,199,307 | 1,356,528 |
Weighted-Average Exercise Price | |||
Outstanding at the beginning of the period (in dollars per share) | $ 19.97 | $ 20.19 | $ 20.20 |
Exercised (in dollars per share) | 20.16 | 13.45 | 16.35 |
Forfeited or canceled (in dollars per share) | 29.82 | 22.71 | 23.12 |
Outstanding at the end of the period (in dollars per share) | $ 19.82 | $ 19.97 | $ 20.19 |
Additional information | |||
Weighted Average Remaining Contractual Life | 2 years 7 months 21 days | ||
Aggregate Intrinsic Value | $ 11,312,871 | ||
Exercisable (in shares) | 1,019,822 | ||
Stock options exercisable, Weighted Average Exercise Price (in dollars per share) | $ 19.92 | ||
Stock options exercisable, Weighted Average Remaining Contractual Life (Years) | 2 years 7 months 13 days | ||
Stock options exercisable, Aggregate Intrinsic Value | $ 11,054,860 |
Equity Incentive Plan - Relatio
Equity Incentive Plan - Relationship (Details) - Employee and Non Employees Stock Option - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2016 | |
Equity Transactions | |||
Intrinsic value of options exercised | $ 1.2 | $ 0 | $ 1.3 |
Unrecognized compensation | $ 0.1 | ||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 months 12 days | ||
Stock based compensation expense | $ 0.6 | $ 1.2 | $ 2 |
Equity Incentive Plan - Other (
Equity Incentive Plan - Other (Details) $ / shares in Units, $ in Millions | Aug. 01, 2018shares | Aug. 02, 2017shares | Aug. 01, 2017 | Mar. 31, 2019USD ($)$ / sharesshares | Sep. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2019USD ($)$ / sharesshares | Jun. 30, 2018USD ($)item$ / sharesshares | Jun. 30, 2017USD ($)$ / sharesshares | Jun. 30, 2016USD ($)$ / sharesshares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2019USD ($)shares |
Equity Incentive Market Based Restricted Stock Awards | |||||||||||
Equity Transactions | |||||||||||
Performance shares | 6,800 | 6,800 | |||||||||
Number of consecutive days considered for the computation of average closing stock prices | 30 days | ||||||||||
Granted (in shares) | 14.35 | ||||||||||
Vested (in shares) | (18,400) | ||||||||||
Nonvested at the end of the period (in shares) | 6,800 | ||||||||||
Restricted Stock | |||||||||||
Equity Transactions | |||||||||||
Stock based compensation expense | $ | $ 12.3 | $ 15.7 | $ 16.8 | ||||||||
Fair value of share-based compensation awards granted in period | $ | 15.3 | 20.2 | |||||||||
Fair value of share-based compensation awards vested in period | $ | $ 20.6 | $ 22.1 | |||||||||
Performance shares | 1,676,907 | 1,676,907 | 2,141,047 | 2,131,790 | 2,131,790 | 1,676,907 | 1,322,552 | ||||
Unrecognized compensation | $ | $ 14.4 | ||||||||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 1 year 6 months | ||||||||||
Nonvested at the beginning of the period (in shares) | 1,676,907 | 1,676,907 | 2,141,047 | 2,131,790 | |||||||
Granted (in shares) | 828,833 | 1,210,502 | 1,268,311 | ||||||||
Vested (in shares) | (947,703) | (1,339,492) | (1,084,046) | ||||||||
Forfeited or canceled (in shares) | (235,485) | (335,150) | (175,008) | ||||||||
Nonvested at the end of the period (in shares) | 1,322,552 | 1,676,907 | 2,141,047 | 2,131,790 | 1,676,907 | ||||||
Nonvested at the beginning of the period (in dollars per share) | $ / shares | $ 15.12 | $ 15.12 | $ 12.34 | $ 12.46 | |||||||
Granted (in dollars per share) | $ / shares | 18.44 | 16.68 | 12.70 | ||||||||
Vested (in dollars per share) | $ / shares | 14.72 | 12.29 | 12.94 | ||||||||
Forfeited or canceled (in dollars per share) | $ / shares | 17.40 | 14.31 | 12.69 | ||||||||
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 17.08 | $ 15.12 | $ 12.34 | $ 12.46 | $ 15.12 | ||||||
Restricted Stock | Vesting Performance | |||||||||||
Equity Transactions | |||||||||||
Performance shares | 271,455 | 271,455 | |||||||||
Granted (in shares) | 37,378 | ||||||||||
Nonvested at the end of the period (in shares) | 271,455 | ||||||||||
Percentage of target that the stock awards were granted at | 100.00% | ||||||||||
Number of shares earned upon reaching performance threshold | 46,845 | ||||||||||
Restricted Stock | Service based awards | |||||||||||
Equity Transactions | |||||||||||
Performance shares | 1,044,297 | 1,044,297 | |||||||||
Granted (in shares) | 791,455 | ||||||||||
Vested (in shares) | (616,920) | ||||||||||
Nonvested at the end of the period (in shares) | 1,044,297 | ||||||||||
Performance Share Units | |||||||||||
Equity Transactions | |||||||||||
Stock based compensation expense | $ | $ 3.9 | $ 5.9 | $ 3.8 | ||||||||
Performance shares | 708,979 | 708,979 | 1,043,602 | 1,089,602 | 1,089,602 | 708,979 | 2,372,241 | ||||
Unrecognized compensation | $ | $ 13.4 | ||||||||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 years 2 months 12 days | ||||||||||
Nonvested at the beginning of the period (in shares) | 708,979 | 708,979 | 1,043,602 | 1,089,602 | |||||||
Granted (in shares) | 2,372,241 | 138,241 | 52,000 | ||||||||
Vested (in shares) | (427,954) | (320,340) | |||||||||
Forfeited or canceled (in shares) | (281,025) | (152,524) | (98,000) | ||||||||
Nonvested at the end of the period (in shares) | 2,372,241 | 708,979 | 1,043,602 | 1,089,602 | 708,979 | ||||||
Nonvested at the beginning of the period (in dollars per share) | $ / shares | $ 13.15 | $ 13.15 | $ 13.16 | $ 12.91 | |||||||
Granted (in dollars per share) | $ / shares | 10.61 | 12.81 | 18.97 | ||||||||
Vested (in dollars per share) | $ / shares | 13.24 | 12.62 | |||||||||
Forfeited or canceled (in dollars per share) | $ / shares | 13.02 | 14 | 13.45 | ||||||||
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 10.61 | $ 13.15 | $ 13.16 | $ 12.91 | $ 13.15 | ||||||
Performance Share Units | 2019 SPP | |||||||||||
Equity Transactions | |||||||||||
Granted (in shares) | 1,766,932 | ||||||||||
Performance Share Units | Fiscal Year 2019 LTIP | |||||||||||
Equity Transactions | |||||||||||
Stock based compensation expense | $ | $ 0 | ||||||||||
Fair value | $ | $ 7.9 | ||||||||||
Granted (in shares) | 263,936 | ||||||||||
Granted (in dollars per share) | $ / shares | $ 30.05 | ||||||||||
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 | |||||||||||
Equity Transactions | |||||||||||
Percentage of MPS schools that were not in academic jeopardy | 97.00% | ||||||||||
Granted (in shares) | 446,221 | ||||||||||
Granted due to the Outperform level (in shares) | 138,241 | ||||||||||
Performance Shares Tranche #1 | Fiscal Year 2019 LTIP | |||||||||||
Equity Transactions | |||||||||||
Earned award vesting percentage | 45.00% | ||||||||||
Performance Shares Tranche #1 | Quarterly Period Beginning November 15, 2017 | |||||||||||
Equity Transactions | |||||||||||
Earned award vesting percentage | 30.00% | ||||||||||
Performance Shares Tranche #1 | Stock price performance target one | |||||||||||
Equity Transactions | |||||||||||
Stock based compensation expense | $ | $ 3.8 | ||||||||||
Earned award vesting percentage | 150.00% | ||||||||||
Performance Shares Tranche #2 | |||||||||||
Equity Transactions | |||||||||||
Number of performance conditions achievement deemed probable | item | 1 | ||||||||||
Number of performance measures | item | 2 | ||||||||||
Stock based compensation expense | $ | $ 3.9 | ||||||||||
Percentage below target for academic measure | 1 | ||||||||||
Performance Shares Tranche #2 | Fiscal Year 2019 LTIP | |||||||||||
Equity Transactions | |||||||||||
Earned award vesting percentage | 25.00% | ||||||||||
Performance Shares Tranche #2 | Period After August 15, 2018 | |||||||||||
Equity Transactions | |||||||||||
Earned award vesting percentage | 70.00% | ||||||||||
Performance Shares Tranche #2 - Academic Measure | |||||||||||
Equity Transactions | |||||||||||
Granted (in shares) | 349,996 | ||||||||||
Reduction in shares due to below target performance (in shares) | 15,345 | ||||||||||
Performance Shares Tranche #3 | Fiscal Year 2019 LTIP | |||||||||||
Equity Transactions | |||||||||||
Earned award vesting percentage | 30.00% | ||||||||||
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 | ||||||||||
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% | |||||||||||
Equity Transactions | |||||||||||
Amount earned as percentage of total value growth | 6.00% | ||||||||||
Percentage of total stock price growth | 33.00% | ||||||||||
Senior Executives | Performance Share Units | Total stock price growth 33% | 2019 SPP | |||||||||||
Equity Transactions | |||||||||||
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 | |||||||||||
Equity Transactions | |||||||||||
Granted (in shares) | 90,000 | ||||||||||
Mr. Davis | Performance Shares Tranche #2 - Academic Measure | |||||||||||
Equity Transactions | |||||||||||
Percentage below target for academic measure | 76,640 | ||||||||||
Mr. Udell | Performance Shares Tranche #1 | |||||||||||
Equity Transactions | |||||||||||
Granted (in shares) | 70,021 | ||||||||||
Mr. Udell | Performance Shares Tranche #2 - Academic Measure | |||||||||||
Equity Transactions | |||||||||||
Granted (in shares) | 59,626 |
Equity Incentive Plan - Vesting
Equity Incentive Plan - Vesting (Details) - $ / shares | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Restricted Stock | ||||
Equity Transactions | ||||
Vesting period | 3 years | |||
Shares | ||||
Nonvested at the beginning of the period (in shares) | 1,676,907 | 1,676,907 | 2,141,047 | 2,131,790 |
Granted (in shares) | 828,833 | 1,210,502 | 1,268,311 | |
Vested (in shares) | (947,703) | (1,339,492) | (1,084,046) | |
Forfeited or canceled (in shares) | (235,485) | (335,150) | (175,008) | |
Nonvested at the end of the period (in shares) | 1,322,552 | 1,676,907 | 2,141,047 | |
Weighted-Average Grant Date Fair Value | ||||
Nonvested at the beginning of the period (in dollars per share) | $ 15.12 | $ 15.12 | $ 12.34 | $ 12.46 |
Granted (in dollars per share) | 18.44 | 16.68 | 12.70 | |
Vested (in dollars per share) | 14.72 | 12.29 | 12.94 | |
Forfeited or canceled (in dollars per share) | 17.40 | 14.31 | 12.69 | |
Nonvested at the end of the period (in dollars per share) | $ 17.08 | $ 15.12 | $ 12.34 | |
Restricted Stock | Independent contractors | ||||
Shares | ||||
Granted (in shares) | 0 | |||
Restricted Stock | Vesting Performance | ||||
Shares | ||||
Granted (in shares) | 37,378 | |||
Nonvested at the end of the period (in shares) | 271,455 | |||
Restricted Stock | Vesting Based On Performance And Service | ||||
Shares | ||||
Vested (in shares) | (312,383) | |||
Performance Share Units | ||||
Shares | ||||
Nonvested at the beginning of the period (in shares) | 708,979 | 708,979 | 1,043,602 | 1,089,602 |
Granted (in shares) | 2,372,241 | 138,241 | 52,000 | |
Vested (in shares) | (427,954) | (320,340) | ||
Forfeited or canceled (in shares) | (281,025) | (152,524) | (98,000) | |
Nonvested at the end of the period (in shares) | 2,372,241 | 708,979 | 1,043,602 | |
Weighted-Average Grant Date Fair Value | ||||
Nonvested at the beginning of the period (in dollars per share) | $ 13.15 | $ 13.15 | $ 13.16 | $ 12.91 |
Granted (in dollars per share) | 10.61 | 12.81 | 18.97 | |
Vested (in dollars per share) | 13.24 | 12.62 | ||
Forfeited or canceled (in dollars per share) | 13.02 | 14 | 13.45 | |
Nonvested at the end of the period (in dollars per share) | $ 10.61 | $ 13.15 | $ 13.16 | |
Option holders right (per option) | 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 |
Redeemable Noncontrolling Int_2
Redeemable Noncontrolling Interest (Details) - USD ($) $ in Thousands | Dec. 27, 2016 | Jul. 31, 2014 | Jan. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2016 | Jun. 30, 2018 | Jun. 30, 2017 |
Purchase price allocation for LearnBop | ||||||||
Current assets | $ 209 | |||||||
Intangible assets | 695 | |||||||
Summary of activity of the redeemable noncontrolling interest | ||||||||
Net loss | $ (27) | $ (70) | $ (103) | $ (200) | $ (910) | |||
Adjustments to redemption value | $ 3,245 | |||||||
LearnBop | ||||||||
Cash purchase price | $ 6,500 | $ 500 | ||||||
Ownership percentage acquired (as a percent) | 51.00% | 49.00% | ||||||
Middlebury Interactive Languages LLC | ||||||||
Cash purchase price | $ 9,100 | |||||||
Ownership percentage acquired (as a percent) | 40.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Sep. 05, 2018USD ($) | Sep. 15, 2016item | Jun. 30, 2019USD ($) | Jun. 30, 2018lease | Jun. 30, 2017lease |
Commitments and contingencies | |||||
Number of leases in which the Company served as guarantor | lease | 2 | ||||
Number of leases in which the Company served as guarantor defaulted | lease | 1 | ||||
Buildings | |||||
Commitments and contingencies | |||||
Guarantees related to lease commitments | $ | $ 1.5 | ||||
Babulal Tarapara v. 12 Inc. and Gil Tuinenburg v. K12 Inc. | Pending Litigation | |||||
Commitments and contingencies | |||||
Number of securities class action lawsuits | 2 | ||||
Number of officers against whom lawsuit is filed | 2 | ||||
Number of former officers against whom lawsuit is filed | 1 | ||||
Babulal Tarapara v. 12 Inc. and Gil Tuinenburg v. K12 Inc. | Settled Litigation | Insurance company | |||||
Commitments and contingencies | |||||
Settlement payment | $ | $ 3.5 |
Restructuring (Details)
Restructuring (Details) $ in Millions | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017USD ($)facility | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | |
Restructuring | |||
Lease buyout | $ 0.7 | $ 0 | $ 0 |
Facility closing | |||
Restructuring | |||
Number of facilities being exited | facility | 3 | ||
Exit costs | $ 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 | ||
Net impact of facility exit activity | $ 4.9 |
Restructuring - operating expen
Restructuring - operating expenses (Details) $ in Thousands | 12 Months Ended |
Jun. 30, 2019USD ($) | |
Restructuring | |
Initial Value | $ 5,406 |
Beginning Balance | 2,758 |
Payments, net of sublease income | (1,043) |
Accretion Expense | 64 |
Ending Balance | 1,779 |
Lease 1 | |
Restructuring | |
Initial Value | 1,652 |
Beginning Balance | 1,092 |
Payments, net of sublease income | (403) |
Accretion Expense | 28 |
Ending Balance | 717 |
Lease 2 | |
Restructuring | |
Initial Value | 1,311 |
Beginning Balance | 475 |
Payments, net of sublease income | (452) |
Accretion Expense | 6 |
Ending Balance | 29 |
Lease 3 | |
Restructuring | |
Initial Value | 2,443 |
Beginning Balance | 1,191 |
Payments, net of sublease income | (188) |
Accretion Expense | 30 |
Ending Balance | $ 1,033 |
Severance (Details)
Severance (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Former CEO | |||
Severance | |||
Severance costs | $ 1 | $ 6.3 | $ 4.4 |
Executives and other employees | |||
Severance | |||
Costs associated with accelerated vesting of equity awards | $ 0.1 | $ 2.4 | $ 1 |
Acquisitions and Investments -
Acquisitions and Investments - Investments (Details) $ in Thousands | May 06, 2013USD ($) | Aug. 31, 2018USD ($) | Jan. 31, 2011USD ($) | Jun. 30, 2018USD ($) |
Investments | ||||
Investment | $ 6,700 | |||
Ownership percentage | 39.50% | |||
Convertible note | $ 5,000 | |||
Ownership percentage on an if-converted basis | 56.00% | |||
Term of debt | 48 months | |||
Investment reclassified | $ 10,000 | |||
Series D Preferred shares | ||||
Investments | ||||
Convertible into Series D Preferred shares | 3,670 | |||
Base Rate | ||||
Investments | ||||
Interest rate spread added to base rate (as a percent) | 25.00% | |||
Web International Education Group, Ltd. (Web) | ||||
Investments | ||||
Ownership percentage | 20.00% | |||
Convertible note | $ 10,000 | |||
Web International Education Group, Ltd. (Web) | Other current assets | ||||
Investments | ||||
Investment reclassified | $ 10,000 | $ 10,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - Foundation For Online and Blended Learning - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Related Party Transactions | |||
Contributions made to related party | $ 1.4 | $ 0.3 | $ 0.5 |
Accrued contributions to related party | $ 2.5 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Employee Benefits | |||
Minimum length of service for participation | 30 days | ||
Maximum annual contribution as percentage of compensation | 25.00% | ||
Company matching contribution percent | 4.00% | ||
401(k) Plan expense | $ 1.6 | $ 1.4 | $ 1.6 |
Supplemental Disclosure of Ca_3
Supplemental Disclosure of Cash Flow Information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
Supplemental Disclosure of Cash Flow Information | |||
Cash paid for interest | $ 1,108 | $ 778 | $ 750 |
Cash paid for taxes | 4,453 | 12,210 | 8,052 |
Supplemental disclosure of non cash investing and financing activities: | |||
Property and equipment financed by capital lease obligations, including student peripherals | 19,664 | 17,414 | $ 14,469 |
Stock-based compensation expense capitalized on software development | 167 | 1,083 | |
Stock-based compensation expense capitalized on curriculum development | $ 170 | 969 | |
Business Combinations: | |||
Current assets | 209 | ||
Intangible assets | 695 | ||
Goodwill | 2,983 | ||
Assumed liabilities | (734) | ||
Deferred revenue | $ (361) |
Quarterly Results of Operatio_3
Quarterly Results of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||||
Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2016 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |||
Consolidated Quarterly Statements of Operations | ||||||||||||||
Revenues | $ 256,314 | $ 253,252 | $ 254,872 | $ 251,314 | $ 238,874 | $ 232,864 | $ 217,211 | $ 228,785 | $ 1,015,752 | $ 917,734 | $ 888,519 | |||
Amounts recorded as revenues and school operating expenses | 175,863 | 168,260 | 160,329 | 158,985 | 157,087 | 148,878 | 139,163 | 147,367 | 663,437 | 592,495 | 557,316 | |||
Selling, administrative, and other operating expenses | 75,207 | 59,382 | 60,183 | 102,578 | 69,939 | 62,267 | 61,958 | 96,282 | 297,350 | 290,446 | 305,617 | |||
Product development expenses | 2,563 | 2,343 | 1,070 | 3,503 | 1,972 | 2,002 | 2,376 | 2,898 | 9,479 | 9,248 | 12,457 | |||
Total costs and expenses | 253,633 | 229,985 | 221,582 | 265,066 | 228,998 | 213,147 | 203,497 | 246,547 | 970,266 | 892,189 | 875,390 | |||
Income from operations | 2,681 | 23,267 | 33,290 | (13,752) | 9,876 | 19,717 | 13,714 | (17,762) | 45,486 | 25,545 | 13,129 | |||
Interest expense, net and other | 1,214 | 754 | 477 | 316 | 430 | 261 | 39 | 235 | ||||||
Other income (expense), net | 154 | 556 | (789) | 193 | 114 | |||||||||
Income before income taxes, loss from equity method investments and noncontrolling interest | 4,049 | 24,577 | 32,978 | (13,243) | 10,306 | 19,978 | 13,753 | (17,527) | 48,361 | 26,510 | 4,937 | |||
Income tax benefit (expense), net | (662) | (5,842) | (9,074) | 5,058 | (959) | (6,935) | (564) | 9,368 | (10,520) | 910 | (5,396) | $ (5,396) | ||
Loss from equity method investments | (70) | (273) | (192) | (97) | (632) | |||||||||
Net income (loss) | 9,347 | 13,043 | 13,189 | (8,159) | 37,209 | 27,420 | (459) | |||||||
Add net income (loss) attributable to noncontrolling interest | 27 | 70 | 103 | 200 | 910 | |||||||||
Net income attributable to common stockholders | $ 3,317 | $ 18,462 | $ 23,712 | $ (8,282) | $ 9,347 | $ 13,070 | $ 13,259 | $ (8,056) | $ 37,209 | $ 27,620 | [1] | $ 451 | [1] | |
Net income (loss) attributable to common stockholders per share: | ||||||||||||||
Basic (in dollars per share) | $ 0.08 | $ 0.47 | $ 0.61 | $ (0.22) | $ 0.24 | $ 0.33 | $ 0.34 | $ (0.21) | $ 0.96 | $ 0.70 | $ 0.01 | |||
Diluted (in dollars per share) | $ 0.08 | $ 0.44 | $ 0.59 | $ (0.22) | $ 0.23 | $ 0.32 | $ 0.33 | $ (0.21) | $ 0.91 | $ 0.68 | $ 0.01 | |||
Weighted average shares used in computing per share amounts: | ||||||||||||||
Basic (in shares) | 39,135,413 | 39,008,990 | 38,816,669 | 38,434,049 | 39,031,207 | 39,644,074 | 39,347,244 | 39,108,172 | 38,848,780 | 39,282,674 | 38,298,581 | |||
Diluted (in shares) | 41,667,000 | 41,753,323 | 40,325,260 | 38,434,049 | 39,976,593 | 40,766,203 | 40,685,667 | 39,108,172 | 40,944,800 | 40,637,744 | 39,500,934 | |||
[1] | Net income excludes $0.2 million and $0.9 million for the years ended June 30, 2018 and 2017, respectively, due to the redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop, which is reported outside of permanent equity in the accompanying consolidated balance sheets (See Note 9, “Redeemable Noncontrolling Interest”). |
SCHEDULE II - VALUATION AND QUA
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) 10K - USD ($) | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | |
ALLOWANCE FOR DOUBTFUL ACCOUNTS | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | $ 12,384,279 | $ 14,791,171 | $ 10,813,394 |
Additions (Deductions) Charged to Cost and Expenses | 6,325,188 | 4,088,592 | 4,512,899 |
Deductions from Allowance | 6,943,598 | 6,495,484 | 535,122 |
Balance at End of Period | 11,765,869 | 12,384,279 | 14,791,171 |
INVENTORY RESERVE | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | 3,491,655 | 2,310,309 | 2,642,547 |
Additions (Deductions) Charged to Cost and Expenses | 1,359,595 | 1,314,225 | 475,218 |
Deductions from Allowance | 719,864 | 132,879 | 807,456 |
Balance at End of Period | 4,131,386 | 3,491,655 | 2,310,309 |
COMPUTER RESERVE | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | 899,654 | 819,042 | 573,444 |
Additions (Deductions) Charged to Cost and Expenses | 383,770 | 550,142 | 595,876 |
Deductions from Allowance | 495,194 | 469,530 | 350,278 |
Balance at End of Period | 788,230 | 899,654 | 819,042 |
INCOME TAX VALUATION ALLOWANCE | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | 4,458,517 | 7,152,860 | 4,338,653 |
Additions to Net Deferred Tax Asset Allowance | 90,383 | 22,388 | 3,296,617 |
Deductions from Allowance | 2,716,731 | 482,410 | |
Balance at End of Period | $ 4,548,900 | $ 4,458,517 | $ 7,152,860 |