K12 Inc. is growing up, at least in terms of the kinds of students it wants to reach. And with that comes a name change, as its offerings now extend beyond operating online schools for K-12 districts, which has long been its flagship business.
Earlier this week, the Herndon, Va.-based company agreed to acquire Tech Elevator, which offers coding bootcamp online and across eight cities, in a $23.5 million all-cash deal. If approved, this would mark the second such purchase this year for the publicly traded company, which bought Galvanize for $165 million in January.
Coding bootcamps cater to adult learners, a market that K12 officials say it has been aspiring to serve. As if to double down on that effort, the company also struck a deal this week to acquire MedCerts, a provider of workforce development and training for the healthcare industry, for $70 million in cash.
On Dec. 16, K12 will officially become “Stride,” a name that “recognizes that, as a company, we are no longer limited by the boundaries of the K-12 market, and that we are dedicated to supporting lifelong learning and providing personalized, high-quality education in important career pathways that launch good paying careers,” said K12 CEO Nate Davis in a prepared statement.
Why does K12 need two coding bootcamps? “Where Galvanize bootcamps enroll advanced beginners in software engineering and data science bootcamps, Tech Elevator expands Stride’s total addressable market by admitting students across the country with no coding experience,” the company said in a statement.
A new name could also create some brand separation from some of the bad news associated with the company in the past. K12 has been in the crosshairs of public officials, researchers and investors alike for operating several virtual charter schools that post dismal results. It has been fined by then-California Attorney General Kamala Harris as part of a settlement into allegations of false claims and advertising.
Most recently, issues with its online learning platform mired the remote learning experience for many students and teachers in Miami-Dade County Public Schools, leading the district to terminate its contract. That high-profile announcement was followed by a selloff in company shares. The company’s stock was trading at $24 a share at Thursday’s close, about half of its peak value over the summer.
That has not slowed the company’s growth, though. According to its latest financial update, K12 reported $314 million in revenue from its K-12 programs in the third quarter of 2020, marking a 34 percent increase from the same period in 2019. Revenue from its career learning offerings for middle school, high school and adult learners more than doubled, to $57 million, over the same period.
Altogether, the company generated $371 million in revenue, or a 44 percent increase from the previous period. Enrollment in its K-12 and career programs grew by 57 percent, to over 195,000, over the same time period.
In the 12 months ending Sept. 30, 2020, Medcerts and Tech Elevator generated approximately $19 million and $11 million, respectively.
On an earnings call, Davis said the company is looking to expand its partnerships with community organizations like churches and YMCAs to lease their facilities to provide a hybrid learning experience for students.
“I do think that students who go to an online school, need to go to some place periodically, where they’re facing the rest of their peers and facing their teachers. And so I believe it’s a big part of what we’re going to do, especially in career learning because there is going to need to be more hands on experience,” said Davis.
“For the [community partners] it’s incremental revenue. For us, it’s a low-cost way of having these blended operations occur,” he added.