Is it seasonal when you are doing the agreements with the schools and the districts? And what is your answer when investors ask you that, oh, it's a seasonal business?

Max BrunCEO at MConsulting

Joanna McFarland Q&A On Marketplace Seasonality

8 Sept 2024 · 2 min

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1:41

In this Q&A segment, an audience member asks whether agreements with schools and districts are seasonal and how to address investor concerns about seasonality. The respondent explains that seasonality is acceptable to investors if it is clearly explained and predictable. He cites Intuit’s TurboTax as an example of extreme seasonality that investors still support. He notes that while summer sees lower volume, the company’s consumption‑based contracts generate usage throughout the school year, and an increasing number of districts are adopting extended school year programs, which adds some summer volume. The key message is that demonstrating predictable patterns—such as a consistently lower third quarter—allows investors to understand and accept the seasonal nature of the business.

Questions this video answers

Seasonality is acceptable to investors as long as you can explain it and show predictable patterns. For example, Intuit’s TurboTax makes 90% of its profit in one month yet investors understand it. Our contracts are consumption‑based, so usage occurs throughout the school year, with lower volume in summer, but extended school year programs are adding some summer usage. By showing that the third quarter is consistently lower because schools are out, we demonstrate predictability, which satisfies investors.

Chapters

My question is that, is it seasonal when you are doing the agreements with the schools and the districts? And what is your answer when investors ask you that, oh, it's a seasonal business? I want to learn that.
I'm going to take the second part of that question first. What would investors ask you if it's seasonal? I think as long as you can explain seasonality, I think that's totally fine and investors understand that. Um, you know, I, I was talking to someone, they said, look, Intel— not Intel, Intuit, the tax TurboTax, they make like 90% of their profit in like one month. That is as seasonal as it gets. And that's a very successful company and investors understand that. And so, you know, we explain the same thing to investors. Look, summer there is volume, but it is much lower than what you're going to see through the rest of the year. And as long as you can point to that and explain it and show it, I think that's okay because then it becomes predictable, right? What they're looking for is predictability. And so you can say, look, yeah, The third quarter is always going to look like this because there's no school in June and July. And I think with school districts, yes, our contracts are consumption-based. So they use us when they need us. And so that is very much kind of throughout the school year. What is interesting is more and more with a lot of the populations we serve, they're doing extended school year. So there is actually summer volume as they're taking, you know, they're making sure that those kids are continuing on in their learning journey. Does June look anything like October? No. But as long as we can explain that, I think that's— that works. It's all about, you know, at this stage, it's all about getting very predictable.