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Posted at 11:22 AM ET, 05/09/2012

K12 Inc., Virginia-based virtual schools operator, reports third quarter growth

Herndon-based K12 Inc., the nation’s largest operator of public virtual schools, continues to grow despite questions about whether its full-time online education is effective for students and taxpayers.


(Scott Roberson - Associated Press)
The company reported third quarter revenue of $178 million, up nearly 37 percent over the same period last year. Enrollments across the country were up 46 percent to 147,700 students.

Profit was also up despite the company’s investments in infrastructure, such as a new data center and data-management system. Net income to shareholders in the third quarter, which ended March 31, was $7 million, a 25 percent increase over last year’s third quarter.

“We’ve literally just finished one of the best, if not the best, business development years in our history,” Chief Executive Ronald J. Packard told investors in a conference call Tuesday.

The bulk of K12’s business is running full-time virtual public schools with tax dollars. Packard and other senior executives told investors that the company expects revenues this year of about $700 million, up from $522 million last year.

K12 has grown quickly since it went public in 2007, aided by lobbyists who have worked to do away with state laws that discourage virtual schooling. By the end of 2011, the company was operating schools in 29 states and the District of Columbia. Next year, it expects to open schools in three new states: Iowa, New Jersey and New Mexico.

K12 also plans next fall to begin offering online preschool classes, Packard told investors Tuesday.

Education activists, journalists, politicians and others have raised questions about whether such full-time virtual schools, which are clearly profitable for K12, are also good for students and fair to taxpayers.

There is no conclusive research on the effectiveness of full-time virtual schools. Last year, about one-third of schools run by K12 met achievement goals under the federal No Child Left Behind Law.

The New York Times published a particularly critical story in December that raised a number of questions about the company’s dealings, including about whether Packard was being honest with investors about K12 students’ performance.

While the Times story made waves — and sparked a class-action lawsuit by shareholders who have accused the company of deception — it’s had no lasting political fallout, Packard said.

“We haven’t seen the slightest slowdown in our ability to deliver educational liberty to more families,” he said. “We haven’t seen the slightest slowdown in student demand.”

K12 has maintained that the Times story was “unfair and one-sided.” The company recently published its own far more positive analysis of student performance based on internally-administered standardized tests.

The story also affected the company’s stock price, which plummeted 34 percent in the aftermath of that story, from $28.79 to $18.90 per share. It has yet to fully recover and was trading at $19.89 Wednesday morning.

Related: Virtual schools are multiplying, but some question their educational value

By  |  11:22 AM ET, 05/09/2012

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