Stride Posts Record Quarterly Revenue and Profitability

April 25, 2023

In-Year Enrollment Momentum Continues

Stride, Inc. (NYSE: LRN), one of the nation’s leading technology-based education companies, today announced its results for the third fiscal quarter ended March 31, 2023.

Third Quarter Fiscal 2023 Highlights Compared to 2022

  • Revenue of $470.3 million, compared with $421.7 million, driven by continued enrollment strength, increases in revenue per enrollment, and Adult Learning growth.
  • Income from operations of $72.2 million, compared with $60.6 million.
  • Net income of $55.5 million, compared with $42.9 million.
  • Diluted net income per share of $1.30, compared with $1.02.
  • Adjusted operating income of $80.2 million, compared with $69.4 million. (1)
  • Adjusted EBITDA of $103.9 million, compared with $90.3 million. (1)

Third Quarter Fiscal 2023 Summary Financial Metrics

 
 
Three Months Ended March 31, Change 2023/2022

2023

2022

$ %
(In thousands, except percentages and per share data)
Revenues $

470,284

$

421,722

$

48,562

11.5

%

 
Income from operations

72,199

60,594

11,605

19.2

%

Adjusted operating income (1)

80,224

69,440

10,784

15.5

%

 
Net income

55,462

42,919

12,543

29.2

%

Net income per share, diluted

1.30

1.02

0.28

27.5

%

 
EBITDA (1)

99,141

84,731

14,410

17.0

%

Adjusted EBITDA (1)

103,886

90,307

13,579

15.0

%

(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 (loss), 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.

Nine Month Fiscal 2023 Highlights Compared to 2022

  • Revenue of $1,353.9 million, compared with $1,231.5 million.
  • Income from operations of $111.6 million, compared with $110.5 million.
  • Net income of $83.5 million, compared with $79.0 million.
  • Diluted net income per share of $1.96, compared with $1.87.
  • Adjusted operating income of $136.6 million, compared with $134.7 million. (1)
  • Adjusted EBITDA of $207.4 million, compared with $198.5 million. (1)

Nine Month Fiscal 2023 Summary Financial Metrics

 
 
Nine Months Ended March 31, Change 2023/2022

2023

2022

$ %
(In thousands, except percentages and per share data)
Revenues $

1,353,869

1,231,455

122,414

9.9

%

 
Income from operations

111,553

110,532

1,021

0.9

%

Adjusted operating income (1)

136,597

134,693

1,904

1.4

%

 
Net income

83,495

79,040

4,455

5.6

%

Net income per share, diluted

1.96

1.87

0.09

4.8

%

 
EBITDA (1)

192,209

183,996

8,213

4.5

%

Adjusted EBITDA (1)

207,405

198,460

8,945

4.5

%

(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 (loss), 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 Nine Months Ended
March 31, Change 2023 / 2022 March 31, Change 2023 / 2022

2023

2022

$ %

2023

2022

$ %
(In thousands, except percentages)
 
General Education $

289,566

$

315,858

$

(26,292

)

(8.3

%)

$

835,989

$

935,440

$

(99,451

)

(10.6

%)

Career Learning
Middle - High School

150,772

83,238

67,534

 

81.1

%

430,101

229,937

200,164

 

87.1

%

Adult

29,946

22,626

7,320

 

32.4

%

87,779

66,078

21,701

 

32.8

%

Total Career Learning

180,718

105,864

74,854

 

70.7

%

517,880

296,015

221,865

 

75.0

%

Total Revenues $

470,284

$

421,722

$

48,562

 

11.5

%

$

1,353,869

$

1,231,455

$

122,414

 

9.9

%

Enrollment Data

The following table sets forth enrollment data for students in our General Education and Career Learning lines of revenue. Enrollments for General Education and Career Learning only 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 Nine Months Ended Change
March 31, 2023 / 2022 March 31, 2023 / 2022

2023

2022

# %

2023

2022

# %
(In thousands, except percentages)
 
General Education (1)

114.6

143.8

(29.2

)

(20.3

%)

112.8

145.1

(32.3

)

(22.3

%)

Career Learning (1)(2)

67.2

42.0

25.2

 

60.0

%

66.0

41.9

24.1

 

57.5

%

Average Enrollment

181.8

185.8

(4.0

)

(2.2

%)

178.8

187.0

(8.2

)

(4.4

%)

(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 Nine Months Ended Change
March 31,

2023 / 2022

March 31,

2023 / 2022

2023

2022

$ %

2023

2022

$ %
 
General Education $

2,332

$

2,006

$

326

16.3

%

$

6,823

$

5,867

$

956

16.3

%

Career Learning

2,237

1,981

256

12.9

%

6,500

5,463

1,037

19.0

%

Cash Flow and Capital Allocation

As of March 31, 2023, the Company’s cash and cash equivalents totaled $373.7 million, compared with $389.4 million reported at June 30, 2022. The decrease is largely the result of normal seasonal trends.

Capital expenditures for three months ended March 31, 2023 were $15.2 million, compared to $18.4 million in the third quarter of fiscal year 2022, and were comprised of $0.7 million of property and equipment, $11.2 million of capitalized software development, and $3.3 million of capitalized curriculum development.

Fiscal Year 2023 Outlook

The Company is raising its revenue forecast and tightening its adjusted operating income forecast for the full year fiscal 2023:

  • Revenue in the range of $1.805 billion to $1.825 billion, up from $1.775 billion to $1.815 billion previously.
  • Capital expenditures in the range of $65.0 million to $70.0 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.
  • Effective tax rate of 26% to 28%.
  • Adjusted operating income in the range of $193.0 million to $200.0 million, from $180.0 million to $200.0 million previously. (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 third quarter fiscal year 2023 financial results during a conference call scheduled for Tuesday, April 25, 2023 at 5:00 p.m. eastern time (ET).

A live webcast of the call will be available at https://events.q4inc.com/attendee/303582920. To participate in the live call, investors and analysts should dial (888) 210-2831 (domestic) or 1 (289) 514-2968 (international) and provide the conference ID number 4812941. Please access the website at least 15 minutes prior to the start of the call.

A replay of the call will be posted at https://events.q4inc.com/attendee/303582920 as soon as it is available.

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 millions of people’s teaching and learning experiences by providing innovative, high-quality, tech-enabled education solutions, curriculums, and programs directly to students, schools, the military, and enterprises in primary, secondary, and postsecondary settings. Stride is a premier provider of K–12 education for students, schools, and districts, including career learning services through middle and high school curriculums. 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. 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 that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release are forward-looking statements. 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 Learning 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 or mitigate 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 nine months ended March 31, 2023 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 March 31, 2023, 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

 

Nine Months Ended

March 31,

 

March 31,

2023

 

2022

 

2023

 

2022

(In thousands except share and per share data)
Revenues $

470,284

 

$

421,722

 

$

1,353,869

 

$

1,231,455

 

Instructional costs and services

295,032

 

266,883

 

878,880

 

802,657

 

Gross margin

175,252

 

154,839

 

474,989

 

428,798

 

Selling, general, and administrative expenses

103,053

 

94,245

 

363,436

 

318,266

 

Income from operations

72,199

 

60,594

 

111,553

 

110,532

 

Interest expense, net

(2,206

)

(2,373

)

(6,334

)

(6,241

)

Other income, net

4,587

 

496

 

9,594

 

4,291

 

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

74,580

 

58,717

 

114,813

 

108,582

 

Income tax expense

(19,525

)

(16,716

)

(30,878

)

(29,751

)

Income (loss) from equity method investments

407

 

918

 

(440

)

209

 

Net income attributable to common stockholders $

55,462

 

$

42,919

 

$

83,495

 

$

79,040

 

Net income attributable to common stockholders per share:
Basic $

1.31

 

$

1.03

 

$

1.98

 

$

1.91

 

Diluted $

1.30

 

$

1.02

 

$

1.96

 

$

1.87

 

Weighted average shares used in computing per share amounts:
Basic

42,375,480

 

41,823,564

 

42,237,056

 

41,302,789

 

Diluted

42,714,090

 

42,136,042

 

42,652,223

 

42,351,877

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

March 31,

June 30,

2023

2022

(audited)
(In thousands except share and per share data)
ASSETS
Current assets
Cash and cash equivalents $

373,678

 

$

389,398

 

Accounts receivable, net of allowance of $28,994 and $26,993

474,663

 

418,558

 

Inventories, net

22,884

 

36,003

 

Prepaid expenses

39,012

 

25,974

 

Other current assets

96,569

 

80,601

 

Total current assets

1,006,806

 

950,534

 

Operating lease right-of-use assets, net

72,154

 

85,457

 

Property and equipment, net

61,326

 

61,537

 

Capitalized software, net

80,360

 

71,800

 

Capitalized curriculum development costs, net

50,970

 

50,580

 

Intangible assets, net

80,131

 

88,669

 

Goodwill

246,676

 

241,022

 

Deposits and other assets

101,425

 

93,946

 

Total assets $

1,699,848

 

$

1,643,545

 

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $

35,252

 

$

61,997

 

Accrued liabilities

45,745

 

63,200

 

Accrued compensation and benefits

53,761

 

73,027

 

Deferred revenue

94,342

 

53,630

 

Current portion of finance lease liability

40,971

 

37,389

 

Current portion of operating lease liability

14,176

 

12,830

 

Total current liabilities

284,247

 

302,073

 

Long-term finance lease liability

26,059

 

28,888

 

Long-term operating lease liability

62,295

 

75,127

 

Long-term debt

412,638

 

411,438

 

Deferred tax liability

5,351

 

3,205

 

Other long-term liabilities

9,897

 

10,233

 

Total liabilities

800,487

 

830,964

 

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; 48,376,408 and 48,112,664 shares issued; and 43,041,665 and 42,777,921 shares outstanding, respectively

4

 

4

 

Additional paid-in capital

690,823

 

687,454

 

Accumulated other comprehensive income (loss)

59

 

143

 

Retained earnings

310,957

 

227,462

 

Treasury stock of 5,334,743 shares at cost

(102,482

)

(102,482

)

Total stockholders’ equity

899,361

 

812,581

 

Total liabilities and stockholders' equity $

1,699,848

 

$

1,643,545

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Nine Months Ended
March 31,

2023

2022

(In thousands)
Cash flows from operating activities
Net income $

83,495

 

$

79,040

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense

80,656

 

73,464

 

Stock-based compensation expense

15,196

 

14,464

 

Deferred income taxes

2,982

 

6,572

 

Provision for credit losses

5,939

 

7,047

 

Amortization of fees on debt

1,200

 

1,182

 

Noncash operating lease expense

11,039

 

15,084

 

Other

(2,015

)

4,675

 

Changes in assets and liabilities:
Accounts receivable

(61,949

)

(56,072

)

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

(9,966

)

7,967

 

Accounts payable

(26,101

)

(26,761

)

Accrued liabilities

(6,455

)

(14,630

)

Accrued compensation and benefits

(19,130

)

(20,652

)

Operating lease liability

(8,602

)

(15,899

)

Deferred revenue and other liabilities

39,931

 

5,922

 

Net cash provided by operating activities

106,220

 

81,403

 

Cash flows from investing activities
Purchase of property and equipment

(3,579

)

(4,734

)

Capitalized software development costs

(32,574

)

(30,837

)

Capitalized curriculum development costs

(12,798

)

(12,361

)

Sale of other investments

60

 

5,261

 

Acquisition of assets

(1,409

)

 

Other acquisitions, loans and investments, net of distributions

(1,377

)

(3,654

)

Proceeds from the maturity of marketable securities

66,204

 

19,904

 

Purchases of marketable securities

(85,289

)

(64,151

)

Net cash used in investing activities

(70,762

)

(90,572

)

Cash flows from financing activities
Repayments on finance lease obligations

(31,238

)

(23,919

)

Payments of contingent consideration

(7,024

)

 

Payments of deferred purchase consideration

 

(7,858

)

Proceeds from exercise of stock options

20

 

391

 

Repurchase of restricted stock for income tax withholding

(12,936

)

(37,463

)

Net cash used in financing activities

(51,178

)

(68,849

)

Net change in cash, cash equivalents and restricted cash

(15,720

)

(78,018

)

Cash, cash equivalents and restricted cash, beginning of period

389,398

 

386,582

 

Cash, cash equivalents and restricted cash, end of period $

373,678

 

$

308,564

 

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we have presented adjusted operating income (loss), EBITDA, 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.
  • EBITDA is defined as income (loss) from operations as adjusted for depreciation and amortization.
  • 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. Adjusted operating income (loss) and Adjusted EBITDA remove stock-based compensation, which is a non-cash charge that varies based on market volatility and the terms and conditions of the awards. EBITDA and Adjusted EBITDA remove depreciation and amortization, which can vary depending upon accounting methods and the book value of assets. EBITDA and Adjusted EBITDA provide 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) from operations, 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.

Reconciliation of Income from Operations to Adjusted Operating Income, EBITDA and Adjusted EBITDA

Third Quarter and Fiscal Year 2023

 
Three Months Ended Nine Months Ended
March 31, March 31,

2023

2022

2023

2022

(In thousands)
Income from operations

$

72,199

$

60,594

$

111,553

$

110,532

Stock-based compensation expense

 

4,745

 

5,576

 

15,196

 

14,464

Amortization of intangible assets

 

3,280

 

3,270

 

9,848

 

9,697

Adjusted operating income

 

80,224

 

69,440

 

136,597

 

134,693

Depreciation and other amortization

 

23,662

 

20,867

 

70,808

 

63,767

Adjusted EBITDA

$

103,886

$

90,307

$

207,405

$

198,460

 
EBITDA

$

99,141

$

84,731

$

192,209

$

183,996

Reconciliation of Income from Operations to Adjusted Operating Income (unaudited)

Fiscal Year 2023 Outlook

 
Year Ended

June 30, 2023

Low High
(In millions)
Income from operations

$

161.0

$

165.5

Stock-based compensation expense

 

19.0

 

21.0

Amortization of intangible assets

 

13.0

 

13.5

Adjusted operating income

$

193.0

$

200.0

 

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

Source: Stride, Inc.