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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission file number: 001-33883

Stride, Inc.

(Exact name of registrant as specified in its charter)

Delaware

95-4774688

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

2300 Corporate Park Drive

Herndon, VA 20171

(703483-7000

(Address of Principal Executive Offices)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.0001 par value

LRN

New York Stock Exchange (NYSE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 

As of April 16, 2021, the Registrant had 41,541,982 shares of common stock, $0.0001 par value per share outstanding.

PART I — FINANCIAL INFORMATION

Item 1.    Financial Statements (Unaudited).

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 

June 30,

    

2021

    

2020

(audited)

(In thousands except share and per share data)

ASSETS

Current assets

Cash and cash equivalents

$

329,031

$

212,299

Accounts receivable, net of allowance of $21,697 and $6,808

422,786

236,134

Inventories, net

28,814

28,300

Prepaid expenses

26,656

13,058

Other current assets

22,918

11,480

Total current assets

830,205

501,271

Operating lease right-of-use assets, net

100,027

111,768

Property and equipment, net

82,918

38,668

Capitalized software, net

51,922

48,493

Capitalized curriculum development costs, net

48,482

48,849

Intangible assets, net

103,047

77,451

Goodwill

240,251

174,939

Deposits and other assets

77,316

71,824

Total assets

$

1,534,168

$

1,073,263

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

47,043

$

40,428

Accrued liabilities

44,199

27,351

Accrued compensation and benefits

62,816

47,227

Deferred revenue

53,449

24,417

Credit facility

100,000

Current portion of finance lease liability

26,036

13,304

Current portion of operating lease liability

21,259

20,689

Total current liabilities

254,802

273,416

Long-term finance lease liability

43,117

4,634

Long-term operating lease liability

82,600

96,544

Long-term debt

295,388

Deferred tax liability

31,531

13,771

Other long-term liabilities

39,951

9,569

Total liabilities

747,389

397,934

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; 46,877,934 and 46,341,627 shares issued; and 41,543,191 and 41,006,884 shares outstanding

4

4

Additional paid-in capital

788,028

730,761

Accumulated other comprehensive income (loss)

(427)

93

Retained earnings

101,656

46,953

Treasury stock of 5,334,743 shares at cost

(102,482)

(102,482)

Total stockholders’ equity

786,779

675,329

Total liabilities and stockholders' equity

$

1,534,168

$

1,073,263

See accompanying notes to unaudited condensed consolidated financial statements.

3

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 

Nine Months Ended March 31, 

    

2021

    

2020

    

2021

    

2020

    

(In thousands except share and per share data)

Revenues

$

392,145

$

257,154

$

1,139,250

$

771,834

Instructional costs and services

253,128

178,968

740,951

515,796

Gross margin

139,017

78,186

398,299

256,038

Selling, general, and administrative expenses

100,464

63,687

309,230

230,622

Income from operations

38,553

14,499

89,069

25,416

Interest income (expense), net

(5,371)

(76)

(12,502)

1,275

Other income (expense), net

486

(1,093)

2,276

(736)

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

33,668

13,330

78,843

25,955

Income tax expense

(10,275)

(4,419)

(18,541)

(5,993)

Income (loss) from equity method investments

396

(157)

654

(344)

Net income attributable to common stockholders

$

23,789

$

8,754

$

60,956

$

19,618

Net income attributable to common stockholders per share:

Basic

$

0.59

$

0.22

$

1.52

$

0.50

Diluted

$

0.57

$

0.22

$

1.46

$

0.48

Weighted average shares used in computing per share amounts:

Basic

40,286,109

39,539,791

40,143,610

39,426,121

Diluted

41,690,509

39,938,898

41,701,955

40,461,290

See accompanying notes to unaudited condensed consolidated financial statements.

4

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31, 

Nine Months Ended March 31, 

    

2021

    

2020

    

2021

    

2020

(In thousands)

Net income

$

23,789

$

8,754

$

60,956

$

19,618

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

(58)

237

(520)

89

Comprehensive income attributable to common stockholders

$

23,731

$

8,991

$

60,436

$

19,707

See accompanying notes to unaudited condensed consolidated financial statements.

5

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Stride, Inc. Stockholders' Equity

(In thousands except share data)

Common Stock

Additional
Paid-in

Accumulated Other
Comprehensive

Retained

Treasury Stock

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Earnings

    

Shares

    

Amount

    

Total

Balance, June 30, 2020

46,341,627

$

4

$

730,761

$

93

$

46,953

(5,334,743)

$

(102,482)

$

675,329

Adjustment related to new credit losses guidance

(6,253)

(6,253)

Net income

12,666

12,666

Foreign currency translation adjustment

(192)

(192)

Stock-based compensation expense

9,009

9,009

Exercise of stock options

948,867

32

32

Withholding of stock options for tax withholding

(655,219)

(10,885)

(10,885)

Equity component of convertible senior notes, net of issuance costs and taxes

105,477

105,477

Purchases of capped calls in connection with convertible senior notes

(60,354)

(60,354)

Issuance of restricted stock awards

383,223

Forfeiture of restricted stock awards

(9,329)

Repurchase of restricted stock for tax withholding

(136,194)

(5,808)

(5,808)

Balance, September 30, 2020

46,872,975

$

4

$

768,232

$

(99)

$

53,366

(5,334,743)

$

(102,482)

$

719,021

Net income

24,501

24,501

Foreign currency translation adjustment

(270)

(270)

Stock-based compensation expense

9,181

9,181

Exercise of stock options

15,000

271

271

Equity component of convertible senior notes, net of issuance costs and taxes

25

25

Issuance of restricted stock awards

19,500

Forfeiture of restricted stock awards

(2,122)

Repurchase of restricted stock for tax withholding

(11,419)

(300)

(300)

Balance, December 31, 2020

46,893,934

$

4

$

777,409

$

(369)

$

77,867

(5,334,743)

$

(102,482)

$

752,429

Net income

23,789

23,789

Foreign currency translation adjustment

(58)

(58)

Stock-based compensation expense

12,962

12,962

Exercise of stock options

24,450

421

421

Issuance of restricted stock awards

117,085

Forfeiture of restricted stock awards

(57,435)

Repurchase of restricted stock for tax withholding

(100,100)

(2,764)

(2,764)

Balance, March 31, 2021

46,877,934

$

4

$

788,028

$

(427)

$

101,656

(5,334,743)

$

(102,482)

$

786,779

6

Stride, Inc. Stockholders' Equity

(In thousands except share data)

Common Stock

Additional
Paid-in

Accumulated Other
Comprehensive

Retained Earnings (Accumulated

Treasury Stock

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit)

    

Shares

    

Amount

    

Total

Balance, June 30, 2019

45,575,236

$

4

$

713,436

$

(40)

$

22,447

(5,334,743)

$

(102,482)

$

633,365

Net loss

(9,730)

(9,730)

Foreign currency translation adjustment

139

139

Stock-based compensation expense

5,594

5,594

Exercise of stock options

2,500

42

42

Issuance of restricted stock awards

918,702

Forfeiture of restricted stock awards

(34,090)

Repurchase of restricted stock for tax withholding

(171,778)

(4,698)

(4,698)

Balance, September 30, 2019

46,290,570

$

4

$

714,374

$

99

$

12,717

(5,334,743)

$

(102,482)

$

624,712

Net income

20,594

20,594

Foreign currency translation adjustment

(287)

(287)

Stock-based compensation expense

6,256

6,256

Exercise of stock options

500

6

6

Issuance of restricted stock awards

18,000

Forfeiture of restricted stock awards

(18,019)

Repurchase of restricted stock for tax withholding

(8,878)

(185)

(185)

Balance, December 31, 2019

46,282,173

$

4

$

720,451

$

(188)

$

33,311

(5,334,743)

$

(102,482)

$

651,096

Net income

8,754

8,754

Foreign currency translation adjustment

237

237

Stock-based compensation expense

6,162

6,162

Exercise of stock options

Issuance of restricted stock awards

108,959

Forfeiture of restricted stock awards

(23,900)

Repurchase of restricted stock for tax withholding

(92,962)

(1,621)

(1,621)

Balance, March 31, 2020

46,274,270

$

4

$

724,992

$

49

$

42,065

(5,334,743)

$

(102,482)

$

664,628

See accompanying notes to unaudited condensed consolidated financial statements.

7

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended March 31, 

    

2021

    

2020

(In thousands)

Cash flows from operating activities

Net income

$

60,956

$

19,618

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense

65,038

52,790

Stock-based compensation expense

30,821

17,785

Deferred income taxes

2,256

1,151

Provision for (recovery of) doubtful accounts

7,635

(88)

Amortization of discount and fees on debt

8,737

Other

22,456

11,605

Changes in assets and liabilities:

Accounts receivable

(197,659)

(76,187)

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

(27,798)

240

Accounts payable

(913)

(20,066)

Accrued liabilities

8,850

6,260

Accrued compensation and benefits

14,913

(15,543)

Operating lease liability

(15,650)

(8,151)

Deferred revenue and other liabilities

31,480

13,611

Net cash provided by operating activities

11,122

3,025

Cash flows from investing activities

Purchase of property and equipment

(2,967)

(1,493)

Capitalized software development costs

(20,189)

(18,825)

Capitalized curriculum development costs

(11,742)

(15,463)

Sale of long-lived assets

223

Acquisition of Galvanize, Inc., net of cash acquired

(167,995)

Acquisition of MedCerts, LLC, net of cash acquired

(54,795)

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

(16,030)

Other acquisitions and investments, net of distributions

(1,008)

(4,277)

Net cash used in investing activities

(106,508)

(208,053)

Cash flows from financing activities

Repayments on finance lease obligations

(17,103)

(21,603)

Borrowing from credit facility

105,000

Repayments on credit facility

(100,000)

(5,000)

Issuance of convertible senior notes

408,610

Purchases of capped calls in connection with convertible senior notes

(60,354)

Proceeds from exercise of stock options

724

48

Withholding of stock options for tax withholding

(10,885)

Repurchase of restricted stock for income tax withholding

(8,872)

(6,504)

Net cash provided by financing activities

212,120

71,941

Net change in cash, cash equivalents and restricted cash

116,734

(133,087)

Cash, cash equivalents and restricted cash, beginning of period

213,299

284,621

Cash, cash equivalents and restricted cash, end of period

$

330,033

$

151,534

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

Cash and cash equivalents

$

329,031

$

150,034

Other current assets (restricted cash)

502

500

Deposits and other assets (restricted cash)

500

1,000

Total cash, cash equivalents and restricted cash

$

330,033

$

151,534

See accompanying notes to unaudited condensed consolidated financial statements.

8