Archipelago Learning, Inc. (ARCL, Financial) filed Quarterly Report for the period ended 2010-09-30.
Archipelago Learning, Inc. has a market cap of $252.2 million; its shares were traded at around $9.57 with a P/E ratio of 27.3 and P/S ratio of 5.9. ARCL is in the portfolios of Pioneer Investments, Jim Simons of Renaissance Technologies LLC.
To help offset state budget shortfalls, the U.S. Department of Education released approximately $5.0 billion in additional AARA stimulus funds to 21 states during the first and second quarters of 2010, primarily in the form of school improvement grants to turn around persistently lowest achieving schools. Another approximate $0.9 billion in grants was released to states in July to save teachers jobs, help improve the lowest performing schools, enhance education through technology, and drive other innovative educational reforms. In addition, the U.S. Department of Education announced in early August the top 49 scoring applicants that will be receiving $650 million of Investing in Innovation (I3) grants, to be funded after their 20 percent matching fund grants are secured by September 2010. Also, in late July the Senate and House passed a $26 billion aid bill that provides $10 billion to states for education jobs. President Obama signed the bill on August 11, 2010. The $10 billion in education job funds was distributed to states in September and October, with states distributing such funds to districts via the Title I formula, and will be used within the 2010-2011 school year. Funds may only be used for expenses necessary to retain existing school employees or to hire new employees for early childhood or K-12 education services. Additionally, in order to receive this Federal funding, states are required to maintain their funding of education at 2009 levels for 2010 and at 2010 levels for 2011.
The U.S. Department of Education is also in the process of implementing its highly publicized Race to the Top (RttT) competition whereby winning states were awarded funds totaling $3.4 billion in aggregate for agreeing to implement bold educational reforms. In Phase I, completed in March 2010, Tennessee and Delaware were the only winning states and were awarded approximately $500 million and $100 million, respectively. In Phase II, 9 states and the District of Columbia received the following grants: Florida: $700 million; New York: $700 million; Georgia: $400 million; North Carolina: $400 million; Ohio: $400 million; Maryland: $250 million; Massachusetts: $250 million; District of Columbia: $75 million; Hawaii: $75 million; and Rhode Island: $75 million. States receiving these RttT funds are expected to implement educational reforms over the next several years, in order to: achieve teacher mastery and delivery of common standards and assessments; use, learn and leverage high quality assessment information to drive increased student performance; ensure all students have access to effective teachers and principals; turn around persistently lowest-achieving schools; and improve the high school graduation rate and ensure each student is college and career ready.
Revenue for the three months ended September 30, 2010 was $15.4 million, representing an increase of $4.8 million, or 45.7%, as compared to revenue of $10.6 million for the three months ended September 30, 2009. Subscription and training revenue is recognized over the term of the subscription, which averages 15 months. Consequently, our revenue in any month is impacted by invoiced sales from subscriptions purchased or renewed during the current and prior periods. The increase in revenue during the period is due to increased traction in states newly entered in the prior year, increased products in our more mature states leading to additional sales to existing customers, our increased focus on existing customers and renewal efforts, and our our sales force expansion, as well as $2.1 million in revenues attributable to EducationCity.
Due to purchase accounting for the acquisition of EducationCity, we do not recognize the full amounts paid by customers for acquired subscriptions prior to the acquisition. Consequently, the deferred revenue balance at the date of acquisition was reduced from $15.6 million to $9.9 million. The purchase accounting adjustment reduced our revenues by $1.0 million for the three months ended September 30, 2010.
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Archipelago Learning, Inc. has a market cap of $252.2 million; its shares were traded at around $9.57 with a P/E ratio of 27.3 and P/S ratio of 5.9. ARCL is in the portfolios of Pioneer Investments, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
State and federal educational funding is primarily funded through income taxes, and local educational funding is primarily funded through property taxes. As a result of the ongoing recession, income tax revenue for the 2008 and 2009 tax years has decreased, which has put pressure on state and federal budgets. In addition, with the recent decline in real estate values in almost every state and the resulting reassessments, property tax revenue is expected to decline over the next few years. According to the Nelson A. Rockefeller Institute of Government, the second quarter of 2010 represented the second period in a row that states reported overall gains in tax collections following five straight quarters of decline. Yet when the full 2009-10 fiscal year is considered, overall tax collections for the states declined from the previous year and remain below pre-recession levels. For the year ending in June 2010 the period corresponding to most states fiscal years tax collections declined by $19 billion or 2.7 percent from the preceding year, and were down $84 billion or 10.8 percent compared to fiscal year 2008. With revenue growth still below historical averages, many states will likely be forced to make more budget cuts and to consider further increases in taxes and charges.To help offset state budget shortfalls, the U.S. Department of Education released approximately $5.0 billion in additional AARA stimulus funds to 21 states during the first and second quarters of 2010, primarily in the form of school improvement grants to turn around persistently lowest achieving schools. Another approximate $0.9 billion in grants was released to states in July to save teachers jobs, help improve the lowest performing schools, enhance education through technology, and drive other innovative educational reforms. In addition, the U.S. Department of Education announced in early August the top 49 scoring applicants that will be receiving $650 million of Investing in Innovation (I3) grants, to be funded after their 20 percent matching fund grants are secured by September 2010. Also, in late July the Senate and House passed a $26 billion aid bill that provides $10 billion to states for education jobs. President Obama signed the bill on August 11, 2010. The $10 billion in education job funds was distributed to states in September and October, with states distributing such funds to districts via the Title I formula, and will be used within the 2010-2011 school year. Funds may only be used for expenses necessary to retain existing school employees or to hire new employees for early childhood or K-12 education services. Additionally, in order to receive this Federal funding, states are required to maintain their funding of education at 2009 levels for 2010 and at 2010 levels for 2011.
The U.S. Department of Education is also in the process of implementing its highly publicized Race to the Top (RttT) competition whereby winning states were awarded funds totaling $3.4 billion in aggregate for agreeing to implement bold educational reforms. In Phase I, completed in March 2010, Tennessee and Delaware were the only winning states and were awarded approximately $500 million and $100 million, respectively. In Phase II, 9 states and the District of Columbia received the following grants: Florida: $700 million; New York: $700 million; Georgia: $400 million; North Carolina: $400 million; Ohio: $400 million; Maryland: $250 million; Massachusetts: $250 million; District of Columbia: $75 million; Hawaii: $75 million; and Rhode Island: $75 million. States receiving these RttT funds are expected to implement educational reforms over the next several years, in order to: achieve teacher mastery and delivery of common standards and assessments; use, learn and leverage high quality assessment information to drive increased student performance; ensure all students have access to effective teachers and principals; turn around persistently lowest-achieving schools; and improve the high school graduation rate and ensure each student is college and career ready.
Revenue for the three months ended September 30, 2010 was $15.4 million, representing an increase of $4.8 million, or 45.7%, as compared to revenue of $10.6 million for the three months ended September 30, 2009. Subscription and training revenue is recognized over the term of the subscription, which averages 15 months. Consequently, our revenue in any month is impacted by invoiced sales from subscriptions purchased or renewed during the current and prior periods. The increase in revenue during the period is due to increased traction in states newly entered in the prior year, increased products in our more mature states leading to additional sales to existing customers, our increased focus on existing customers and renewal efforts, and our our sales force expansion, as well as $2.1 million in revenues attributable to EducationCity.
Due to purchase accounting for the acquisition of EducationCity, we do not recognize the full amounts paid by customers for acquired subscriptions prior to the acquisition. Consequently, the deferred revenue balance at the date of acquisition was reduced from $15.6 million to $9.9 million. The purchase accounting adjustment reduced our revenues by $1.0 million for the three months ended September 30, 2010.
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