Internet IPO K-12 Inc. Competes With Pearson, McGraw-Hill

K12 Inc (LRN) is expected to make a public offering of its stock this week. The company offers proprietary curriculum and educational services to virtual public schools serving children in kindergarten through grade 12.

All quotes are taken from the company's most recent SEC filing.

K12 Inc. (LRN)
Business Overview (from prospectus)

We are a technology-based education company. We offer proprietary curriculum and educational services created for online delivery to students in kindergarten through 12th grade, or K-12. Our mission is to maximize a child’s potential by providing access to an engaging and effective education, regardless of geographic location or socio-economic background. Since our inception, we have invested more than $100 million to develop curriculum and an online learning platform that promotes mastery of core concepts and skills for students of all abilities. This learning system combines a cognitive research-based curriculum with an individualized learning approach well-suited for virtual schools and other educational applications. From fiscal year 2004 to fiscal year 2007, we increased average enrollments in the virtual public schools we serve from approximately 11,000 students to 27,000 students, representing a compound annual growth rate of approximately 35%.

Offering: 6.0 million shares at $16.00 - $18.00 per share. Net proceeds of approximately $67.4 million will be used for general corporate purposes, including working capital, capital expenditures and the development of new courses and product offerings, in addition to the repayment of company debt.

Lead Underwriters: Morgan Stanley, Credit Suisse

Financial Highlights:

Our revenues for the year ended June 30, 2007 were $140.6 million, representing an increase of $23.7 million, or 20.3%, as compared to revenues of $116.9 million for the year ended June 30, 2006... Instructional costs and services expenses for the year ended June 30, 2007 were $76.1 million, representing an increase of $11.3 million, or 17.4% as compared to instructional costs and services of $64.8 million for the year ended June 30, 2006... Net income for the year ended June 30, 2007 was $3.9 million, representing an increase of $2.5 million, or 179%, as compared to net income of $1.4 million for the year ended June 30, 2006. Net income as a percentage of revenues increased to 2.8% for the year ended June 30, 2007, as compared to 1.2% for the year ended June 30, 2006...

Competition:

We face varying degrees of competition from a variety of education companies because our learning system encompasses many components of the educational development and delivery process. We compete primarily with companies that provide online curriculum and school support services to K-12 virtual public schools. These companies include Connections Academy, LLC, White Hat Management, LLC and National Network of Digital Schools. We also face competition from curriculum developers, including traditional textbook publishers such as the McGraw-Hill Companies (MHP), Harcourt Inc. (RUK), Pearson plc (PSO) and Houghton Mifflin Riverdeep Group plc. Additionally, we expect increased competition from post-secondary and supplementary education providers that have begun to establish a presence in the K-12 virtual school sector, including Apollo Group (APOL), Pearson plc and Kaplan, Inc.

Additional Resources:

• Company website
• Online road show
• edbizbuzz.com: 'Would-Be K12 IPO Investors: Is Cyber-Ed A Cutting Edge Business?'
• 24/7 Wall Street: 'IPO Filing: K12 , Inc. (LRN)'
• Washington Business Journal: 'Online education firm's growth adds up to an IPO'
• Tom Taulli: 'K12 : Moving to the NYSE playground'