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Demand for Stride Career Learning Continues to Drive Strong Performance

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HERNDON, Va., January 25, 2022--(BUSINESS WIRE)--Stride, Inc. (NYSE: LRN), one of the nation’s leading technology-based education companies, today announced its results for the second fiscal quarter ended December 31, 2021.

Second Quarter Fiscal 2022 Highlights Compared to 2021

  • Revenue of $409.5 million, compared with $376.1 million, driven by continued strength in middle and high school Career Learning enrollments, growth in Adult Learning, and increases in revenue per enrollment.

  • Income from operations of $56.9 million, compared with $38.5 million, due to improved gross margins and flat selling, general and administrative expenses.

  • Net income of $42.0 million, compared with $24.5 million.

  • Diluted net income per share of $1.00, compared with $0.60.

  • Adjusted operating income of $60.7 million, compared with $50.1 million. (1)

  • Adjusted EBITDA of $82.7 million, compared with $70.7 million. (1)

Second Quarter Fiscal 2022 Summary Financial Metrics

Three Months Ended December 31,

Change 2021/2020

2021

2020

$

%

(In thousands, except percentages and per share data)

Revenues

$

409,507

$

376,145

$

33,362

8.9

%

Income from operations

56,915

38,452

18,463

48.0

%

Adjusted operating income (1)

60,731

50,050

10,681

21.3

%

Net income

42,004

24,501

17,503

71.4

%

Net income per share, diluted

1.00

0.60

0.40

66.7

%

EBITDA (1)

82,095

61,613

20,482

33.2

%

Adjusted EBITDA (1)

82,697

70,687

12,010

17.0

%

Six Month Fiscal 2022 Highlights Compared to 2021

  • Revenue of $809.7 million, compared with $747.1 million.

  • Income from operations of $49.9 million, compared with $50.5 million.

  • Net income of $36.1 million, compared with $37.2 million.

  • Diluted net income per share of $0.85, compared with $0.89.

  • Adjusted operating income of $65.3 million, compared with $73.1 million. (1)

  • Adjusted EBITDA of $108.2 million, compared with $109.9 million. (1)

Six Month Fiscal 2022 Summary Financial Metrics

Six Months Ended December 31,

Change 2021/2020

2021

2020

$

%

(In thousands, except percentages and per share data)

Revenues

$

809,733

$

747,105

$

62,628

8.4

%

Income from operations

49,938

50,516

(578

)

-1.1

%

Adjusted operating income (1)

65,253

73,059

(7,806

)

-10.7

%

Net income

36,121

37,167

(1,046

)

-2.8

%

Net income per share, diluted

0.85

0.89

(0.04

)

-4.5

%

EBITDA (1)

99,265

91,954

7,311

8.0

%

Adjusted EBITDA (1)

108,153

109,921

(1,768

)

-1.6

%

(1)

To supplement our financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we also present non-GAAP financial measures including adjusted operating income, EBITDA and adjusted EBITDA. Management believes that these additional metrics provide useful information to investors relating to our financial performance. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Revenue and Enrollment Data

Revenue

The following table sets forth the Company’s revenues for the periods indicated:

Three Months Ended

Six Months Ended

December 31,

Change 2021 / 2020

December 31,

Change 2021 / 2020

2021

2020

$

%

2021

2020

$

%

(In thousands, except percentages)

General Education

$

313,241

$

313,989

$

(748

)

(0.2

%)

$

619,582

$

627,838

$

(8,256

)

(1.3

%)

Career Learning

Middle - High School

75,287

51,376

23,911

46.5

%

146,699

100,147

46,552

46.5

%

Adult

20,979

10,780

10,199

94.6

%

43,452

19,120

24,332

127.3

%

Total Career Learning

96,266

62,156

34,110

54.9

%

190,151

119,267

70,884

59.4

%

Total Revenues

$

409,507

$

376,145

$

33,362

8.9

%

$

809,733

$

747,105

$

62,628

8.4

%

Enrollment Data

The following table sets forth total enrollment data for students in our General Education and Career Learning lines of revenue. Enrollments for General Education and Career Learning include those students in full service public or private programs where Stride provides a combination of curriculum, technology, instructional and support services inclusive of administrative support.

Three Months Ended

Change

Six Months Ended

Change

December 31,

2021 / 2020

December 31,

2021 / 2020

2021

2020

#

%

2021

2020

#

%

(In thousands, except percentages)

General Education (1)

145.6

161.2

(15.6

)

(9.7

%)

146.1

162.0

(15.9

)

(9.8

%)

Career Learning (1)(2)

41.9

30.3

11.6

38.3

%

41.9

30.4

11.5

37.8

%

Total Enrollment

187.5

191.5

(4.0

)

(2.1

%)

188.0

192.4

(4.4

)

(2.3

%)

(1)

This data includes enrollments for which Stride receives no public funding or revenue.

(2)

No enrollments are included in Career Learning for Galvanize, Tech Elevator or MedCerts.

Revenue per Enrollment Data

The following table sets forth revenue per average enrollment data for students for the period indicated. If the mix of enrollments changes, our revenues will be impacted to the extent the average revenues per enrollments are significantly different.

Three Months Ended

Change

Six Months Ended

Change

December 31,

2021 / 2020

December 31,

2021 / 2020

2021

2020

#

%

2021

2020

#

%

General Education

$

1,953

$

1,755

$

198

11.3

%

$

3,852

$

3,491

$

361

10.3

%

Career Learning

1,794

1,681

113

6.7

%

3,482

3,258

224

6.9

%

Cash Flow and Capital Allocation

As of December 31, 2021, the Company’s cash and cash equivalents totaled $257.0 million, compared with $386.1 million reported at June 30, 2021. The decrease is largely the result of normal seasonal trends.

Capital expenditures for the first six months of fiscal 2022 were $29.5 million, compared to $23.6 million in the first six months of fiscal 2021, and were comprised of $2.7 million of property and equipment, $19.3 million of capitalized software development, and $7.5 million of capitalized curriculum development.

Fiscal Year 2022 Outlook

The Company is raising its forecast for the full fiscal year 2022:

  • Revenue in the range of $1.62 billion to $1.64 billion.

  • Capital expenditures in the range of $65 million to $75 million. Note that capital expenditures include the purchase of property and equipment, capitalized software, and curriculum development costs as defined on our Statement of Cash Flows.

  • Effective tax rate of 27% to 30%.

  • Adjusted operating income in the range of $175 million to $185 million. (1)

The Company is forecasting the following for the third quarter fiscal 2022:

  • Revenue in the range of $405 million to $415 million.

  • Capital expenditures in the range of $15 million to $18 million. Note that capital expenditures include the purchase of property and equipment, and capitalized software and curriculum development costs as defined on our Statement of Cash Flows.

  • Adjusted operating income in the range of $60 million to $65 million. (1)

(1)

In addition to providing an outlook for revenue and capital expenditures, adjusted operating income is provided as a supplemental non-GAAP financial measure as management believes that it provides useful information to our investors. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below. Please also see Special Note on Forward Looking Statements below.

Conference Call

The Company will discuss its second quarter fiscal year 2022 financial results during a conference call scheduled for Tuesday, January 25, 2022 at 5:00 p.m. eastern time (ET).

A live webcast of the call will be available at https://events.q4inc.com/attendee/148057977. To participate in the live call, investors and analysts should dial (888) 210-2831 (domestic) or 1 (289) 514-2968 (international) at 4:45 p.m. ET. The conference ID number is 4812941. Please access the website at least 15 minutes prior to the start of the call.

A replay of the call will be available starting on January 25, 2022 at 8:00 p.m. ET through February 25, 2022 at 8:00 p.m. ET by dialing (800) 770- 2030 (domestic) or 1 (647) 362 9199 (international) and entering the conference ID 4812941. A webcast replay will be available at https://events.q4inc.com/attendee/148057977 for 30 days.

About Stride Inc.

At Stride, Inc. (NYSE: LRN) we are reimagining learning – where learning is lifelong, deeply personal, and prepares learners for tomorrow. The company has transformed the teaching and learning experience for millions of people by providing innovative, high-quality, tech-enabled education solutions, curriculum, and programs directly to students, schools, the military, and enterprises in primary, secondary, and post-secondary settings. Stride is a premier provider of K-12 education for students, schools, and districts, including career learning services through middle and high school curriculum. For adult learners, Stride delivers professional skills training in healthcare and technology, as well as staffing and talent development for Fortune 500 companies. Stride has delivered millions of courses over the past decade and serves learners in all 50 states and more than 100 countries. The company is a proud sponsor of the Future of School, a nonprofit organization dedicated to closing the gap between the pace of technology and the pace of change in education. More information can be found at stridelearning.com, K12.com, galvanize.com, techelevator.com, and medcerts.com.

Special Note on Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have tried, whenever possible, to identify these forward-looking statements using words such as "anticipates," "believes," "estimates," "continues," "likely," "may," "opportunity," "potential," "projects," "will," "expects," "plans," "intends" and similar expressions to identify forward looking statements, whether in the negative or the affirmative. These statements reflect our current beliefs and are based upon information currently available to us. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties, factors and contingencies include, but are not limited to: reduction of per pupil funding amounts at the schools we serve; inability to achieve a sufficient level of new enrollments to sustain our business model; limitations of the enrollment data we present, which may not fully capture trends in the performance of our business; failure to enter into new school contracts or renew existing contracts, in part or in their entirety; failure of the schools we serve or us to comply with federal, state and local regulations, resulting in a loss of funding, an obligation to repay funds previously received, or contractual remedies; governmental investigations that could result in fines, penalties, settlements, or injunctive relief; declines or variations in academic performance outcomes of the students and schools we serve as curriculum standards, testing programs and state accountability metrics evolve; harm to our reputation resulting from poor performance or misconduct by operators or us in any school in our industry and/or in any school in which we operate; legal and regulatory challenges from opponents of virtual public education or for-profit education companies; changes in national and local economic and business conditions and other factors, such as natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as coronavirus disease 2019 ("COVID-19"); discrepancies in interpretation of legislation by regulatory agencies that may lead to payment or funding disputes; termination of our contracts, or a reduction in the scope of services, with schools; failure to develop the career readiness education business; entry of new competitors with superior technologies and lower prices; unsuccessful integration of mergers, acquisitions and joint ventures; failure to further develop, maintain and enhance our technology, products, services and brands; inadequate recruiting, training and retention of effective teachers and employees; infringement of our intellectual property; disruptions to our Internet-based learning and delivery systems, including, but not limited to, our data storage systems, resulting from cybersecurity attacks; misuse or unauthorized disclosure of student and personal data; and failure to prevent a cybersecurity incident that affects our systems; and other risks and uncertainties associated with our business described in the Company’s filings with the Securities and Exchange Commission. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this presentation is as of today’s date, and the Company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

Financial Statements

The financial statements set forth below are not the complete set of Stride Inc.’s financial statements for the three and six months ended December 31, 2021 and are presented below without footnotes. Readers are encouraged to obtain and carefully review Stride Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2021, including all financial statements contained therein and the footnotes thereto, filed with the SEC, which may be retrieved from the SEC’s website at www.sec.gov or from Stride Inc.’s website at www.stridelearning.com.

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Six Months Ended

December 31,

December 31,

2021

2020

2021

2020

(In thousands except share and per share
data)

Revenues

$

409,507

$

376,145

$

809,733

$

747,105

Instructional costs and services

261,950

246,754

535,774

487,823

Gross margin

147,557

129,391

273,959

259,282

Selling, general, and administrative expenses

90,642

90,939

224,021

208,766

Income from operations

56,915

38,452

49,938

50,516

Interest expense, net

(1,875

)

(5,024

)

(3,868

)

(7,131

)

Other income, net

3,884

1,361

3,795

1,790

Income before income taxes and income (loss) from equity method investments

58,924

34,789

49,865

45,175

Income tax expense

(15,928

)

(10,642

)

(13,035

)

(8,266

)

Income (loss) from equity method investments

(992

)

354

(709

)

258

Net income attributable to common stockholders

$

42,004

$

24,501

$

36,121

$

37,167

Net income attributable to common stockholders per share:

Basic

$

1.01

$

0.61

$

0.88

$

0.93

Diluted

$

1.00

$

0.60

$

0.85

$

0.89

Weighted average shares used in computing per share amounts:

Basic

41,525,736

40,160,362

41,042,401

40,072,360

Diluted

41,963,399

41,102,425

42,413,828

41,681,061

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

December 31,

June 30,

2021

2021

(audited)

(In thousands except share and
per share data)

ASSETS

Current assets

Cash and cash equivalents

$

256,986

$

386,080

Accounts receivable, net of allowance of $26,305 and $21,384

430,436

369,303

Inventories, net

23,941

39,690

Prepaid expenses

29,240

19,453

Other current assets

75,528

43,004

Total current assets

816,131

857,530

Operating lease right-of-use assets, net

91,410

94,671

Property and equipment, net

74,149

72,069

Capitalized software, net

60,520

57,308

Capitalized curriculum development costs, net

49,787

50,376

Intangible assets, net

95,210

99,480

Goodwill

240,921

240,353

Deposits and other assets

97,617

105,510

Total assets

$

1,525,745

$

1,577,297

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

33,821

$

62,144

Accrued liabilities

61,462

77,642

Accrued compensation and benefits

41,193

80,363

Deferred revenue

50,409

38,110

Current portion of finance lease liability

36,080

27,336

Current portion of operating lease liability

15,233

20,649

Total current liabilities

238,198

306,244

Long-term finance lease liability

44,612

41,568

Long-term operating lease liability

79,020

77,458

Long-term debt

410,674

299,271

Deferred tax liability

8,282

31,853

Other long-term liabilities

10,726

16,255

Total liabilities

791,512

772,649

Commitments and contingencies

Stockholders’ equity

Preferred stock, par value $0.0001; 10,000,000 shares authorized; zero shares issued or outstanding

Common stock, par value $0.0001; 100,000,000 shares authorized; 48,084,410 and 46,911,527 shares issued; and 42,749,667 and 41,576,784 shares outstanding, respectively

4

4

Additional paid-in capital

680,601

795,449

Accumulated other comprehensive income (loss)

(343

)

(474

)

Retained earnings

156,453

112,151

Treasury stock of 5,334,743 shares at cost

(102,482

)

(102,482

)

Total stockholders’ equity

734,233

804,648

Total liabilities and stockholders' equity

$

1,525,745

$

1,577,297

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

December 31,

2021

2020

(In thousands)

Cash flows from operating activities

Net income

$

36,121

$

37,167

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization expense

49,327

41,438

Stock-based compensation expense

8,888

17,967

Deferred income taxes

6,008

5,375

Provision for doubtful accounts

4,730

6,382

Amortization of discount and fees on debt

809

4,973

Noncash operating lease expense

10,074

9,627

Other

5,550

7,244

Changes in assets and liabilities:

Accounts receivable

(65,606

)

(208,870

)

Inventories, prepaid expenses, deposits and other current and long-term assets

11,944

(23,231

)

Accounts payable

(26,810

)

(7,202

)

Accrued liabilities

(8,570

)

4,346

Accrued compensation and benefits

(39,157

)

(5,401

)

Operating lease liability

(10,662

)

(10,364

)

Deferred revenue and other liabilities

5,686

40,592

Net cash used in operating activities

(11,668

)

(79,957

)

Cash flows from investing activities

Purchase of property and equipment

(2,705

)

(1,969

)

Capitalized software development costs

(19,330

)

(14,061

)

Capitalized curriculum development costs

(7,461

)

(7,524

)

Sale of long-lived assets

223

Sale of other investments

5,261

Acquisition of MedCerts, LLC, net of cash acquired

(54,775

)

Acquisition of Tech Elevator, Inc., net of cash acquired

(15,981

)

Other acquisitions, loans and investments, net of distributions

(3,956

)

(188

)

Proceeds from the maturity of marketable securities

7,248

Purchases of marketable securities

(38,720

)

Net cash used in investing activities

(59,663

)

(94,275

)

Cash flows from financing activities

Repayments on finance lease obligations

(14,744

)

(11,455

)

Repayments on credit facility

(100,000

)

Issuance of convertible senior notes, net of issuance costs

408,610

Purchases of capped calls in connection with convertible senior notes

(60,354

)

Payments of deferred purchase consideration

(7,858

)

Proceeds from exercise of stock options

246

303

Withholding of stock options for tax withholding

(10,885

)

Repurchase of restricted stock for income tax withholding

(35,404

)

(6,108

)

Net cash provided by (used in) financing activities

(57,760

)

220,111

Net change in cash, cash equivalents and restricted cash

(129,091

)

45,879

Cash, cash equivalents and restricted cash, beginning of period

386,582

213,299

Cash, cash equivalents and restricted cash, end of period

$

257,491

$

259,178

Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of December 31st:

Cash and cash equivalents

$

256,986

$

258,107

Other current assets (restricted cash)

505

571

Deposits and other assets (restricted cash)

500

Total cash, cash equivalents and restricted cash

$

257,491

$

259,178

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we have presented adjusted operating income, and adjusted EBITDA, which are not presented in accordance with GAAP.

  • Adjusted operating income (loss) is defined as income (loss) from operations as adjusted for stock-based compensation and the amortization of intangible assets.

  • Adjusted EBITDA is defined as income (loss) from operations as adjusted for stock-based compensation and depreciation and amortization.

  • Adjusted EBITDA and adjusted operating income (loss) exclude stock-based compensation, which consists of expenses for stock options, restricted stock, restricted stock units, and performance stock units.

Management believes that the presentation of these non-GAAP financial measures provides useful information to investors relating to our financial performance. These measures remove stock-based compensation, which is a non-cash charge that varies based on market volatility and the terms and conditions of the awards. Adjusted EBITDA also removes depreciation and amortization, which can vary depending upon accounting methods and the book value of assets. Adjusted EBITDA provides a measure of corporate performance exclusive of capital structure and the method by which assets were acquired.

Our management uses these non-GAAP financial measures:

  • as additional measures of operating performance because they assist us in comparing our performance on a consistent basis; and

  • in presentations to the members of our Board of Directors to enable our Board to review the same measures used by management to compare our current operating results with corresponding prior periods.

Other companies may define these non-GAAP financial measures differently and, as a result, our use of these non-GAAP financial measures may not be directly comparable to similar non-GAAP financial measures used by other companies. Although we use these non-GAAP financial measures to assess the performance of our business, the use of non-GAAP financial measures is limited as they include and/or do not include certain items not included and/or included in the most directly comparable GAAP financial measure.

These non-GAAP financial measures should be considered in addition to, and not as a substitute for, revenues, income (loss), net income (loss) and net income (loss) per share or other related financial information prepared in accordance with GAAP. Adjusted EBITDA is not intended to be a measure of liquidity. You are cautioned not to place undue reliance on these non-GAAP financial measures.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided below.

Second Quarter Fiscal 2022

Three Months Ended

Six Months Ended

December 31,

December 31,

2021

2020

2021

2020

(In thousands)

Income from operations

$

56,915

$

38,452

$

49,938

$

50,516

Stock-based compensation expense

602

9,074

8,888

17,967

Amortization of intangible assets

3,214

2,524

6,427

4,576

Adjusted operating income

60,731

50,050

65,253

73,059

Depreciation and other amortization

21,966

20,637

42,900

36,862

Adjusted EBITDA

$

82,697

$

70,687

$

108,153

$

109,921

EBITDA

$

82,095

$

61,613

$

99,265

$

91,954

Fiscal Year 2022 Outlook

Three Months Ended
March 31, 2022

Year Ended
June 30, 2022

Low

High

Low

High

(In millions)

Income from operations

$

50.7

$

54.7

$

142.0

$

150.0

Stock-based compensation expense

6.0

7.0

20.0

22.0

Amortization of intangible assets

3.3

3.3

13.0

13.0

Adjusted operating income

$

60.0

$

65.0

$

175.0

$

185.0

View source version on businesswire.com: https://www.businesswire.com/news/home/20220125005106/en/

Contacts

Investor Contact
Timothy Casey
Vice President, Investor Relations
Stride, Inc.
tcasey@k12.com