Stride Posts Another Record Quarter - Form 8-K

Stride Posts Another Record Quarter

RESTON, Va., April 23, 2024 (GLOBE NEWSWIRE) -- 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, 2024.

Third Quarter Fiscal 2024 Highlights Compared to 2023

• Revenue of $520.8 million, compared with $470.3 million, driven by continued strong enrollment trends.
• Income from operations of $88.3 million, compared with $72.2 million.
• Net income of $69.7 million, compared with $55.5 million.
• Diluted net income per share of $1.60 compared with $1.30.
• Adjusted operating income of $96.4 million, compared with $80.2 million. (1)
• Adjusted EBITDA of $120.5 million, compared with $103.9 million. (1)

Third Quarter Fiscal 2024 Summary Financial Metrics

	Three Months Ended March 31,		Change 2024/2023
	2024		2023			$		%
	(In thousands, except percentages and per share data)
Revenues	$	520,837		$	470,284		$	50,553		10.7	%
Income from operations		88,313			72,199			16,114		22.3	%
Adjusted operating income (1)		96,410			80,224			16,186		20.2	%
Net income		69,687			55,462			14,225		25.6	%
Net income per share, diluted		1.60			1.30			0.30		23.1	%
EBITDA (1)		115,297			99,141			16,156		16.3	%
Adjusted EBITDA (1)		120,547			103,886			16,661		16.0	%

(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 2024 Highlights Compared to 2023

• Revenue of $1,505.9 million, compared with $1,353.9 million.
• Income from operations of $175.9 million, compared with $111.6 million.
• Net income of $141.4 million, compared with $83.5 million.
• Diluted net income per share of $3.26, compared with $1.96.
• Adjusted operating income of $206.0 million, compared with $136.6 million. (1)
• Adjusted EBITDA of $278.7 million, compared with $207.4 million. (1)

Nine Month Fiscal 2024 Summary Financial Metrics

	Nine Months Ended March 31,		Change 2024/2023
	2024		2023			$		%
	(In thousands, except percentages and per share data)
Revenues	$	1,505,886			1,353,869			152,017		11.2	%
Income from operations		175,922			111,553			64,369		57.7	%
Adjusted operating income (1)		206,044			136,597			69,447		50.8	%
Net income		141,401			83,495			57,906		69.4	%
Net income per share, diluted		3.26			1.96			1.30		66.3	%
EBITDA (1)		257,386			192,209			65,177		33.9	%
Adjusted EBITDA (1)		278,658			207,405			71,253		34.4	%

(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 2024 / 2023		March 31,		Change 2024 / 2023
		2024		2023		$		%		2024		2023		$		%
		(In thousands, except percentages)
General Education		$	328,894		$	289,566		$	39,328			13.6	%		$	942,135		$	835,989		$	106,146			12.7	%
Career Learning
Middle - High School			167,919			150,772			17,147			11.4	%			483,972			430,101			53,871			12.5	%
Adult			24,024			29,946			(5,922	)		(19.8	%)			79,779			87,779			(8,000	)		(9.1	%)
Total Career Learning			191,943			180,718			11,225			6.2	%			563,751			517,880			45,871			8.9	%
Total Revenues		$	520,837		$	470,284		$	50,553			10.7	%		$	1,505,886		$	1,353,869		$	152,017			11.2	%

Enrollment Data¹

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,		2024 / 2023		March 31,		2024 / 2023
		2024		2023		#		%		2024		2023		#		%
		(In thousands, except percentages)
General Education (2)			124.6			114.6			10.0		8.7	%			121.9			112.8			9.1		8.1	%
Career Learning (2)(3)			73.8			67.2			6.6		9.8	%			72.7			66.0			6.7		10.2	%
Average Enrollment			198.4			181.8			16.6		9.1	%			194.6			178.8			15.8		8.8	%

(1) Enrollments are presented as the average monthly enrollments during the third quarter fiscal year 2024.
(2) This data includes enrollments for which Stride receives no public funding or revenue.
(3) No enrollments are included in Career Learning for the Adult Learning offerings.

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,		2024 / 2023		March 31,		2024 / 2023
		2024		2023		$		%		2024		2023		$		%
General Education		$	2,507		$	2,332		$	175		7.5	%		$	7,298		$	6,823		$	475		7.0	%
Career Learning			2,272			2,237			35		1.6	%			6,652			6,500			152		2.3	%

Cash Flow and Capital Allocation

As of March 31, 2024, the Company's cash and cash equivalents and marketable securities totaled $570.7 million, compared with $545.5 million reported at June 30, 2023.

Capital expenditures for three months ended March 31, 2024 were $16.3 million, compared to $15.2 million in the third quarter of fiscal year 2023, and were comprised of ($0.2) million of property and equipment, $11.7 million of capitalized software development and $4.8 million of capitalized curriculum development.

Fiscal Year 2024 Outlook

The Company is raising its adjusted operating and tightening its revenue forecast for the full year fiscal 2024:

• Revenue in the range of $2.025 billion to $2.040 billion.
• Capital expenditures in the range of $60 million to $65 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 24% to 26%.
• Adjusted operating income in the range of $280 million to $290 million. (1)

Conference Call

The Company will discuss its third quarter fiscal year 2024 financial results during a conference call scheduled for Tuesday, April 23, 2024 at 5:00 p.m. eastern time (ET).

A live webcast of the call will be available at https://events.q4inc.com/attendee/945956563. To participate in the live call, investors and analysts should dial (800) 715-9871 (domestic) or +1 (646) 307-1963 (international) and provide the conference ID number 8901384. 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/945956563 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, curriculum, and programs directly to students, schools, the military, and enterprises in primary, secondary, and postsecondary settings. Through K12, 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. More information can be found at stridelearning.com.

Investor Contact
Timothy Casey
Vice President, Investor Relations
Stride, Inc.
[email protected]

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," "will be," "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; 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 and third-party cloud facilities, 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 press release 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, 2024 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, 2024, 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,
		2024		2023		2024		2023
		(In thousands except share and per share data)
Revenues		$	520,837			$	470,284			$	1,505,886			$	1,353,869
Instructional costs and services			319,508				295,032				930,495				878,880
Gross margin			201,329				175,252				575,391				474,989
Selling, general, and administrative expenses			113,016				103,053				399,469				363,436
Income from operations			88,313				72,199				175,922				111,553
Interest expense, net			(2,404	)			(2,206	)			(6,494	)			(6,334	)
Other income, net			7,678				4,587				19,381				9,594
Income before income taxes and income (loss) from equity method investments			93,587				74,580				188,809				114,813
Income tax expense			(24,657	)			(19,525	)			(48,383	)			(30,878	)
Income (loss) from equity method investments			757				407				975				(440	)
Net income attributable to common stockholders		$	69,687			$	55,462			$	141,401			$	83,495
Net income attributable to common stockholders per share:
Basic		$	1.63			$	1.31			$	3.32			$	1.98
Diluted		$	1.60			$	1.30			$	3.26			$	1.96
Weighted average shares used in computing per share amounts:
Basic			42,684,561				42,375,480				42,581,869				42,237,056
Diluted			43,655,841				42,714,090				43,389,903				42,652,223

STRIDE, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
		March 31,		June 30,
		2024		2023
					(audited)
		(In thousands except share and per share data)
ASSETS
Current assets
Cash and cash equivalents		$	376,577			$	410,807
Accounts receivable, net of allowance of $34,852 and $30,031			577,792				463,722
Inventories, net			21,038				36,716
Prepaid expenses			40,127				24,817
Other current assets			193,547				129,137
Total current assets			1,209,081				1,065,199
Operating lease right-of-use assets, net			57,725				69,508
Property and equipment, net			57,213				52,332
Capitalized software, net			83,320				83,465
Capitalized curriculum development costs, net			51,451				50,787
Intangible assets, net			64,668				74,771
Goodwill			246,676				246,676
Deferred tax asset			14,773				8,776
Deposits and other assets			107,306				109,152
Total assets		$	1,892,213			$	1,760,666
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	37,156			$	48,854
Accrued liabilities			67,671				76,626
Accrued compensation and benefits			62,383				57,426
Deferred revenue			70,907				76,159
Current portion of finance lease liability			30,991				35,621
Current portion of operating lease liability			12,853				14,449
Total current liabilities			281,961				309,135
Long-term finance lease liability			29,920				21,278
Long-term operating lease liability			48,418				59,425
Long-term debt			414,271				413,035
Other long-term liabilities			14,436				10,497
Total liabilities			789,006				813,370
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; 48,586,413 and 48,339,048 shares issued; and 43,251,670 and 43,004,305 shares outstanding, respectively			4				4
Additional paid-in capital			709,997				695,480
Accumulated other comprehensive loss			(42	)			(35	)
Retained earnings			495,730				354,329
Treasury stock of 5,334,743 shares at cost			(102,482	)			(102,482	)
Total stockholders' equity			1,103,207				947,296
Total liabilities and stockholders' equity		$	1,892,213			$	1,760,666

STRIDE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		Nine Months Ended
		March 31,
		2024		2023
		(Inthousands)
Cash flows from operating activities
Net income		$	141,401			$	83,495
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			81,464				80,656
Stock-based compensation expense			21,272				15,196
Deferred income taxes			(4,629	)			2,982
Provision for credit losses			18,895				5,939
Amortization of fees on debt			1,236				1,200
Noncash operating lease expense			11,055				11,039
Other			1,444				(2,015	)
Changes in assets and liabilities:
Accounts receivable			(133,144	)			(61,949	)
Inventories, prepaid expenses, deposits and other current and long-term assets			(2,763	)			(9,966	)
Accounts payable			(11,585	)			(26,101	)
Accrued liabilities			(9,875	)			(6,455	)
Accrued compensation and benefits			4,834				(19,130	)
Operating lease liability			(11,695	)			(8,602	)
Deferred revenue and other liabilities			(1,315	)			39,931
Net cash provided by operating activities			106,595				106,220
Cash flows from investing activities
Purchase of property and equipment			(1,500	)			(3,579	)
Capitalized software development costs			(30,130	)			(32,574	)
Capitalized curriculum development costs			(13,534	)			(12,798	)
Sale of other investments			-				60
Acquisition of assets			-				(1,409	)
Other acquisitions, loans and investments, net of distributions			(693	)			(1,377	)
Proceeds from the maturity of marketable securities			107,020				66,204
Purchases of marketable securities			(162,179	)			(85,289	)
Net cash used in investing activities			(101,016	)			(70,762	)
Cash flows from financing activities
Repayments on finance lease obligations			(32,212	)			(31,238	)
Payments of contingent consideration			-				(7,024	)
Proceeds from exercise of stock options			-				20
Repurchase of restricted stock for income tax withholding			(7,597	)			(12,936	)
Net cash used in financing activities			(39,809	)			(51,178	)
Net change in cash, cash equivalents and restricted cash			(34,230	)			(15,720	)
Cash, cash equivalents and restricted cash, beginning of period			410,807				389,398
Cash, cash equivalents and restricted cash, end of period		$	376,577			$	373,678

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.

Third Quarter and Nine Months Fiscal Year 2024

Reconciliation of Income from Operations to Adjusted Operating Income

	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2024		2023		2024		2023
	(In thousands)
Income from operations	$	88,313		$	72,199		$	175,922		$	111,553
Amortization of intangible assets		2,847			3,280			8,850			9,848
Stock-based compensation expense		5,250			4,745			21,272			15,196
Adjusted operating income		96,410			80,224			206,044			136,597

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

	Three Months Ended March 31,		Nine Months Ended March 31,
		2024				2023				2024				2023
	(In thousands)
Net income	$	69,687			$	55,462			$	141,401			$	83,495
Interest expense, net		2,404				2,206				6,494				6,334
Other income, net		(7,678	)			(4,587	)			(19,381	)			(9,594	)
Income tax expense		24,657				19,525				48,383				30,878
(Income) loss from equity method investments		(757	)			(407	)			(975	)			440
Depreciation and amortization		26,984				26,942				81,464				80,656
EBITDA		115,297				99,141				257,386				192,209
Stock-based compensation expense		5,250				4,745				21,272				15,196
Adjusted EBITDA	$	120,547			$	103,886			$	278,658			$	207,405

Fiscal Year 2024 Outlook

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

	Year Ended June 30, 2024
	Low		High
	(In millions)
Income from operations	$	240.5		$	247.0
Stock-based compensation expense		28.0			31.0
Amortization of intangible assets		11.5			12.0
Adjusted operating income	$	280.0		$	290.0

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