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Stride Guides to Revenue and Profitability Growth for Fiscal 2022 Driven by Career Learning Demand

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HERNDON, Va., October 19, 2021--(BUSINESS WIRE)--Stride, Inc. (NYSE: LRN), one of the nation’s leading technology-based education companies, today announced its results for the first fiscal quarter ended September 30, 2021.

First Quarter Fiscal 2022 Highlights Compared to 2021

  • Revenue of $400.2 million, compared with $371.0 million, driven by improved revenue per enrollment, strong middle and high school Career Learning enrollments, and growth in Adult Learning.

  • Loss from operations of $7.0 million, compared with income from operations of $12.1 million, due to the return to normal seasonality in upfront school year expenses.

  • Net loss of $5.9 million, compared with net income of $12.7 million.

  • Diluted net loss per share of $0.15, compared with diluted net income per share of $0.30.

  • Adjusted operating income of $4.5 million, compared with $23.0 million. (1)

  • Adjusted EBITDA of $25.5 million, compared with $39.2 million. (1)

First Quarter Fiscal 2022 Summary Financial Metrics

Three Months Ended September 30,

Change 2021/2020

2021

2020

$

%

(In thousands, except percentages and per share data)

Revenues

$

400,226

$

370,960

$

29,266

7.9

%

Income (loss) from operations

(6,977

)

12,064

(19,041

)

-157.8

%

Adjusted operating income (1)

4,522

23,009

(18,487

)

-80.3

%

Net income (loss)

(5,883

)

12,666

(18,549

)

-146.4

%

Net income (loss) per share, diluted

(0.15

)

0.30

(0.45

)

-150.0

%

EBITDA (1)

17,170

30,341

(13,171

)

-43.4

%

Adjusted EBITDA (1)

25,456

39,234

(13,778

)

-35.1

%

(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.

Cash Flow and Capital Allocation

As of September 30, 2021, the Company’s cash and cash equivalents totaled $218.5 million, compared with $386.1 million reported at June 30, 2021. The decrease is largely the result of normal seasonal expenditures incurred at the start of the school year.

Capital expenditures for the quarter were $15.4 million, compared to $12.8 million in the first fiscal quarter 2021, and were comprised of $1.3 million of property and equipment, $9.7 million of capitalized software development, and $4.4 million of capitalized curriculum development.

Early Adoption of Accounting Standards Update 2020-06 ("ASU 2020-06")

During the quarter, the Company early adopted ASU 2020-06, which resulted in a change in accounting for the convertible notes. As of September 30, 2021, the impact to long-term debt was a non-cash increase from $299.3 million to $410.3 million. Other impacts to the balance sheet were a decrease of $89.5 million to additional paid-in capital, a decrease of $29.3 million to deferred tax liability, and an increase to retained earnings of $8.2 million.

This early adoption also results in the elimination of the non-cash interest expense related to the amortization of the debt discount from the Company’s consolidated statement of operations.

Revenue and Enrollment Data

Revenue

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

Three Months Ended

September 30,

Change 2021 / 2020

2021

2020

$

%

(In thousands, except percentages)

General Education

$

306,341

$

313,848

$

(7,507

)

(2.4

%)

Career Learning

Middle - High School

71,411

48,771

22,640

46.4

%

Adult

22,474

8,341

14,133

169.4

%

Total Career Learning

93,885

57,112

36,773

64.4

%

Total Revenues

$

400,226

$

370,960

$

29,266

7.9

%

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

September 30,

2021 / 2020

2021

2020

#

%

(In thousands, except percentages)

General Education (1)

147.6

164.6

(17.0

)

(10.3

%)

Career Learning (1)(2)

42.0

30.8

11.2

36.4

%

Total Enrollment

189.6

195.4

(5.8

)

(3.0

%)

(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

September 30,

2021 / 2020

2021

2020

#

%

General Education

$

1,885

$

1,718

$

167

9.7%

Career Learning

1,688

1,564

124

7.9%

Fiscal Year 2022 Outlook

The Company is forecasting the following for the full fiscal year 2022:

  • Revenue in the range of $1.56 billion to $1.60 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 28% to 30%.

  • Adjusted operating income in the range of $165 million to $180 million. (1)

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

  • Revenue in the range of $390 million to $400 million.

  • Capital expenditures in the range of $14 million to $17 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 $55 million to $60 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 first quarter fiscal year 2022 financial results during a conference call scheduled for Tuesday, October 19, 2021 at 5:00 p.m. eastern time (ET).

A live webcast of the call will be available at https://event.on24.com/wcc/r/3424006/15C710CEDD571AAF3D7E93B85DF67FFF. To participate in the live call, investors and analysts should dial (833) 900-1536 (domestic) or (236) 712-2276 (international) at 4:45 p.m. (ET). The conference ID number is 7562832. 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 October 19, 2021 at 8:00 p.m. (ET) through November 19, 2021 at 8:00 p.m. (ET) by dialing (800) 585-8367 (domestic) or (416) 621-4642 (international) and entering the conference ID 7562832. A webcast replay will be available at https://event.on24.com/wcc/r/3424006/15C710CEDD571AAF3D7E93B85DF67FFF 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 predict how the COVID-19 pandemic will continue to impact our business; inability to achieve a sufficient level of new enrollments to sustain our business model; failure to replace students who have graduated from the terminal grade in a school or have left our programs for other reasons with new students of a sufficient number; inability to maintain our current rate of retention of students enrolled in our courses; an increase in the amount of failures to enter into new school contracts or renew existing contracts, in part or in their entirety; the failure of perceived industry trends and projections resulting from the expected effects of COVID-19 on virtual education; 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 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 learning 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 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 months ended September 30, 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 September 30, 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

September 30,

2021

2020

(In thousands except share and per share data)

Revenues

$

400,226

$

370,960

Instructional costs and services

273,824

241,069

Gross margin

126,402

129,891

Selling, general, and administrative expenses

133,379

117,827

Income (loss) from operations

(6,977

)

12,064

Interest expense, net

(1,993

)

(2,107

)

Other income (expense), net

(89

)

429

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

(9,059

)

10,386

Income tax benefit

2,893

2,376

Income (loss) from equity method investments

283

(96

)

Net income (loss) attributable to common stockholders

$

(5,883

)

$

12,666

Net income (loss) attributable to common stockholders per share:

Diluted

$

(0.15

)

$

0.30

Weighted average shares used in computing per share amounts:

Diluted

40,559,066

42,189,673

STRIDE INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

June 30,

2021

2021

(audited)

(In thousands except share and per share data)

ASSETS

Current assets

Cash and cash equivalents

$

218,519

$

386,080

Accounts receivable, net of allowance of $21,935 and $21,384

519,393

369,303

Inventories, net

24,873

39,690

Prepaid expenses

38,358

19,453

Other current assets

56,436

43,004

Total current assets

857,579

857,530

Operating lease right-of-use assets, net

96,471

94,671

Property and equipment, net

76,884

72,069

Capitalized software, net

57,965

57,308

Capitalized curriculum development costs, net

49,866

50,376

Intangible assets, net

96,267

99,480

Goodwill

240,353

240,353

Deposits and other assets

94,980

105,510

Total assets

$

1,570,365

$

1,577,297

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

58,589

$

62,144

Accrued liabilities

75,746

77,642

Accrued compensation and benefits

35,945

80,363

Deferred revenue

64,918

38,110

Current portion of finance lease liability

32,413

27,336

Current portion of operating lease liability

17,023

20,649

Total current liabilities

284,634

306,244

Long-term finance lease liability

46,747

41,568

Long-term operating lease liability

82,568

77,458

Long-term debt

410,269

299,271

Deferred tax liability

7,783

31,853

Other long-term liabilities

18,458

16,255

Total liabilities

850,459

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; 47,111,604 and 46,911,527 shares issued; and 41,776,861 and 41,576,784 shares outstanding, respectively

4

4

Additional paid-in capital

708,265

795,449

Accumulated other comprehensive income (loss)

(330

)

(474

)

Retained earnings

114,449

112,151

Treasury stock of 5,334,743 shares at cost

(102,482

)

(102,482

)

Total stockholders’ equity

719,906

804,648

Total liabilities and stockholders' equity

$

1,570,365

$

1,577,297

STRIDE INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

September 30,

2021

2020

(In thousands)

Cash flows from operating activities

Net income (loss)

$

(5,883

)

$

12,666

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization expense

24,147

18,277

Stock-based compensation expense

8,286

8,893

Deferred income taxes

5,484

8,065

Provision for doubtful accounts

152

4,875

Amortization of discount and fees on debt

404

1,219

Noncash operating lease expense

5,005

4,789

Other

4,325

6,003

Changes in assets and liabilities:

Accounts receivable

(150,263

)

(196,953

)

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

1,260

(23,975

)

Accounts payable

(1,256

)

30,893

Accrued liabilities

(2,464

)

(1,883

)

Accrued compensation and benefits

(44,395

)

(19,629

)

Operating lease liability

(5,321

)

(5,165

)

Deferred revenue and other liabilities

29,009

37,392

Net cash used in operating activities

(131,510

)

(114,533

)

Cash flows from investing activities

Purchase of property and equipment

(1,278

)

(1,106

)

Capitalized software development costs

(9,690

)

(7,204

)

Capitalized curriculum development costs

(4,376

)

(4,488

)

Sale of long-lived assets

223

Other acquisitions and investments, net of distributions

(192

)

(3,113

)

Proceeds from the maturity of marketable securities

1,501

Purchases of marketable securities

(9,196

)

Net cash used in investing activities

(23,231

)

(15,688

)

Cash flows from financing activities

Repayments on finance lease obligations

(7,020

)

(5,669

)

Repayments on credit facility

(100,000

)

Issuance of convertible senior notes, net of issuance costs

409,390

Purchases of capped calls in connection with convertible senior notes

(60,354

)

Proceeds from exercise of stock options

246

32

Withholding of stock options for tax withholding

(10,885

)

Repurchase of restricted stock for income tax withholding

(6,043

)

(5,808

)

Net cash provided by (used in) financing activities

(12,817

)

226,706

Net change in cash, cash equivalents and restricted cash

(167,558

)

96,485

Cash, cash equivalents and restricted cash, beginning of period

386,582

213,299

Cash, cash equivalents and restricted cash, end of period

$

219,024

$

309,784

Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of September 30th:

Cash and cash equivalents

$

218,519

$

308,784

Other current assets (restricted cash)

505

500

Deposits and other assets (restricted cash)

500

Total cash, cash equivalents and restricted cash

$

219,024

$

309,784

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we have presented adjusted operating income (loss), 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.

First Quarter Fiscal 2022

Three Months Ended

September 30,

2021

2020

(In thousands)

Income (loss) from operations

$

(6,977

)

$

12,064

Stock-based compensation expense

8,286

8,893

Amortization of intangible assets

3,213

2,052

Adjusted operating income

4,522

23,009

Depreciation and other amortization

20,934

16,225

Adjusted EBITDA

$

25,456

$

39,234

EBITDA

$

17,170

$

30,341

Fiscal Year 2022 Outlook

Three Months Ended
December 31, 2021

Year Ended
June 30, 2022

Low

High

Low

High

(In millions)

Income from operations

$

44.3

$

48.8

$

123.0

$

136.0

Stock-based compensation expense

7.5

8.0

29.0

31.0

Amortization of intangible assets

3.2

3.2

13.0

13.0

Adjusted operating income

$

55.0

$

60.0

$

165.0

$

180.0

View source version on businesswire.com: https://www.businesswire.com/news/home/20211019005782/en/

Contacts

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

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