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K12, Inc. Message Board

  • Claim_Digger Claim_Digger Jul 26, 2010 2:30 PM Flag

    KCDL Acquisition

    The market seems to like the KCDL acquisition even though it may be slightly dilutive in the first year. On the surface it appears to be a wise move. KCDL is a private company so its financials are not fully known but the announced yearly revenue of $35 million (with 47% yearly growth!) prices the deal at a price to sales ratio of 1.8, which happens to be the exact same as that of LRN.

    On another metric the press release says that KCDL services about 5,000 students compared to 67,000 for LRN. Thus revenues per student for KCDL are about $7,000 per year, more than the $5,600 LRN will do this year. This might be perhaps because KCDL seems to get revenue from a private charter school.

    The synergies obviously come from spreading the cost of operation over a wider base. Their markets seem very complimentary although I am not sure if LRN will have to offer two different curriculums for awhile. Perhaps that is why the deal is only accretive over the longer term.

    Overall the deal is evidence that LRN's market is starting to consolidate among larger players and that LRN is going to be the big dog in their educational space. They don't compete directly with many other education providers such as Phoenix or Blackboard. LRN has their own niche. It is a big one, a profitable one and apparently one in which LRN is going to dominate. The shareholders are and should be pleased. I fully expect that the shares will be over 30 within 6 months.


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