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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 December 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 January 21, 2022, the Registrant had 42,787,741 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

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

See accompanying notes to unaudited condensed consolidated financial statements.

3

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended December 31, 

Six Months Ended 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

See accompanying notes to unaudited condensed consolidated financial statements.

4

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended December 31, 

Six Months Ended December 31, 

    

2021

    

2020

    

2021

    

2020

(In thousands)

Net income

$

42,004

$

24,501

$

36,121

$

37,167

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

(13)

(270)

131

(462)

Comprehensive income attributable to common stockholders

$

41,991

$

24,231

$

36,252

$

36,705

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, 2021

46,911,527

$

4

$

795,449

$

(474)

$

112,151

(5,334,743)

$

(102,482)

$

804,648

Adjustment related to new convertible debt guidance

(89,460)

8,181

(81,279)

Net loss

(5,883)

(5,883)

Foreign currency translation adjustment

144

144

Stock-based compensation expense

8,050

8,050

Exercise of stock options

15,025

246

246

Issuance of restricted stock awards

398,943

Forfeiture of restricted stock awards

(34,740)

Repurchase of restricted stock for tax withholding

(179,151)

(6,020)

(6,020)

Balance, September 30, 2021

47,111,604

$

4

$

708,265

$

(330)

$

114,449

(5,334,743)

$

(102,482)

$

719,906

Net income

42,004

42,004

Foreign currency translation adjustment

(13)

(13)

Stock-based compensation expense

1,697

1,697

Exercise of stock options

Vesting of performance share units, net of tax withholding

1,012,374

Issuance of restricted stock awards

27,750

Forfeiture of restricted stock awards

(57,480)

Repurchase of restricted stock for tax withholding

(9,838)

(29,361)

(29,361)

Balance, December 31, 2021

48,084,410

$

4

$

680,601

$

(343)

$

156,453

(5,334,743)

$

(102,482)

$

734,233

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

    

Income (Loss)

    

Deficit)

    

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

See accompanying notes to unaudited condensed consolidated financial statements.

7

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

See accompanying notes to unaudited condensed consolidated financial statements.

8

Table of Contents

STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Description of the Business

Stride, Inc., together with its subsidiaries (“Stride” or the “Company”) is an education services company providing virtual and blended learning. On December 16, 2020, the Company changed its name from K12 Inc. to Stride, Inc. The brand reflects the Company’s continued growth into lifelong learning, regardless of a student’s age or location. The Company’s technology-based products and services enable its clients to attract, enroll, educate, track progress, and support students. These products and services, spanning curriculum, systems, instruction, and support services are designed to help learners of all ages reach their full potential through inspired teaching and personalized learning. The Company’s clients are primarily public and private schools, school districts, and charter boards. Additionally, it offers solutions to employers, government agencies and consumers. These products and services are provided through two lines of revenue:

Products and services for the General Education market are predominantly focused on core subjects, including math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of knowledge.  Programs utilizing General Education products and services are for students that are not specializing in any particular curriculum or course of study.  These programs provide an alternative to traditional school options and address a range of student needs including, safety concerns, increased academic support, scheduling flexibility, physical/health restrictions or advanced learning. Products and services are sold as a comprehensive school-as-a-service offering or à la carte.

Career Learning products and services are focused on developing skills to enter and succeed in careers in high-growth, in-demand industries—including information technology, health care and general business.  The Company provides middle and high school students with Career Learning programs that complement their core general education coursework in math, English, science and history. Stride offers multiple career pathways supported by a diverse catalog of Career Learning courses. The middle school program exposes students to a variety of career options and introduces career skill development. In high school, students may engage in industry content pathway courses, project-based learning in virtual teams, and career development services. High school students also have the opportunity to progress toward certifications, connect with industry professionals, earn college credits while in high school, and participate in job shadowing and/or work-based learning experiences that are required to succeed in today’s digital, tech-enabled economy.  A student enrolled in a school that offers Stride’s General Education program may elect to take Career Learning courses, but that student and the associated revenue is not reported as a Career Learning enrollment or Career Learning revenue. However, a student and the associated revenue is counted as a Career Learning enrollment or Career Learning revenue if the student is enrolled in a Career Learning program. Like General Education products and services, the products and services for the Career Learning market are sold as a comprehensive school-as-a-service offering or à la carte.  The Company also offers focused post-secondary career learning programs to adult learners, through its Galvanize, Inc. (“Galvanize”), Tech Elevator, Inc. (“Tech Elevator”), and MedCerts, LLC (“MedCerts”) brands. These include skills training in the data science, software engineering, healthcare, and medical fields, as well as providing staffing and talent development services to employers. These programs are offered directly to consumers, as well as to employers and government agencies.

2.   Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2021, the condensed consolidated statements of operations and comprehensive income for the three and six months ended December 31, 2021 and 2020, the condensed consolidated statements of cash flows for the six months ended December 31, 2021 and 2020, and the condensed consolidated statements of stockholders’ equity for the three and six months ended December 31, 2021 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations for the periods presented. The results for the three and six months ended December 31, 2021 are not necessarily indicative of the results to be expected for the year ending June 30, 2022, for any other interim period or for any other future fiscal year. The condensed consolidated balance sheet as of June 30, 2021 has been derived from the audited consolidated financial statements at that date.

9

Table of Contents 

STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, the Company does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s condensed consolidated results of operations, financial position and cash flows. Preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and footnotes. Actual results could differ from those estimates. This quarterly report on Form 10-Q should be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on August 11, 2021, which contains the Company’s audited financial statements for the fiscal year ended June 30, 2021.

The Company operates in one operating and reportable business segment as a technology-based education company providing proprietary and third party curriculum, software systems and educational services designed to facilitate individualized learning for students and adults. The Chief Operating Decision Maker evaluates profitability based on consolidated results.

3.   Summary of Significant Accounting Policies

Recent Accounting Pronouncements

Accounting Standards Adopted

On July 1, 2021, the Company early adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) which, among other things, simplifies the accounting for convertible instruments by eliminating the requirement to separate conversion features from the host contract. Consequently, a convertible debt instrument is accounted for as a single liability measured at its amortized cost and interest expense will be recognized at the coupon rate. The adoption resulted in the elimination of the debt discount (and related deferred tax liability) that had been recorded within equity (see Note 6, “Debt”). The net impact of the adjustments was recorded to the opening balance of retained earnings, as presented in the statement of stockholders’ equity. The impacts to the consolidated balance sheet were the following: (1) increase of $110.6 million to long-term debt, (2) decrease of $89.5 million to additional paid-in capital, (3) decrease of $29.3 million to deferred tax liability, and (4) increase to retained earnings of $8.2 million.

During the second quarter of fiscal year 2022, the Company early adopted ASU 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) which, among other things, simplifies the accounting for deferred revenue (a contract liability) that is measured and recognized as part of a business combination. ASU 2021-08 requires that deferred revenue be measured as if the acquirer had originated the contracts, which, for the most part, results in no change to the value of deferred revenue when measured in purchase accounting. The Company was required to adopt ASU 2021-08 on a retrospective basis for any acquisitions that occurred since July 1, 2021, and prospectively to future acquisitions. The adoption of this standard did not have a material impact to the condensed consolidated financial statements and there were no acquisitions from July 1, 2021 to adoption.

Accounting Standards Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”) which provides relief to companies that will be impacted by the cessation of reference rate reform, e.g. LIBOR, that is tentatively planned for the end of calendar year 2022. The ASU permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement. This ASU will be effective for the Company as of March 12, 2020 through December 31, 2022 and adoption is permitted at any time

10

Table of Contents 

STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

during the period on a prospective basis. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services using the following steps:

identify the contract, or contracts, with a customer;
identify the performance obligations in the contract;
determine the transaction price;
allocate the transaction price to the performance obligations in the contract; and
recognize revenue when, or as, the Company satisfies a performance obligation.

Revenues related to the products and services that the Company provides to students in kindergarten through twelfth grade or adult learners are considered to be General Education or Career Learning based on the school or adult program in which the student is enrolled. General Education products and services are focused on core subjects, including math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of knowledge. Career Learning products and services are focused on developing skills to enter and succeed in careers in high-growth, in-demand industries—including information technology, business, and health services, for students in middle school through high school and adult learners.

The majority of the Company’s contracts are with the following types of customers:

a virtual or blended school whereby the amount of revenue is primarily determined by funding the school receives;
a school or individual who licenses certain curriculum on a subscription or course-by-course basis; or
an enterprise who contracts with the Company to provide job training.

Funding-based Contracts

The Company provides an integrated package of systems, services, products, and professional expertise that is administered together to support a virtual or blended public school. Contractual agreements generally span multiple years with performance obligations being isolated to annual periods which generally coincide with the Company’s fiscal year. Customers of these programs can obtain administrative support, information technology, academic support services, online curriculum, learning systems platforms and instructional services under the terms of a negotiated service agreement. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenue.

The Company generates revenues under contracts with virtual and blended public schools and include the following components, where required:

providing each of a school’s students with access to the Company’s online school and lessons;
offline learning kits, which include books and materials to supplement the online lessons;
the use of a personal computer and associated reclamation services;
internet access and technology support services;
instruction by a state-certified teacher; and
management and technology services necessary to support a virtual or blended school. In certain contracts, revenues are determined directly by per enrollment funding.

11

Table of Contents 

STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

To determine the pro rata amount of revenue to recognize in a fiscal quarter, the Company estimates the total expected funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels, which are generally published on an annual basis by the state or school district. The Company reviews its estimates of funding periodically, and updates as necessary, by adjusting its year-to-date earned revenues to be proportional to the total expected revenues to be earned during the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company’s results of operations. Since the end of the school year coincides with the end of the Company’s fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company’s services to the schools plus other costs the schools may incur). The Company’s schools’ reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company’s monthly funding estimates for the three and six months ended December 31, 2021 and 2020.

Each state and/or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company estimates funding for each school, it takes into account the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, new registrations, average daily attendance, special needs enrollment, academic progress, historical completion, student location, funding caps and other state specified categorical program funding.

Under the contracts where the Company provides products and services to schools, the Company is responsible for substantially all of the expenses incurred by the school and has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school (the school’s expected funding), as reflected in its respective financial statements, including Company charges to the schools. To the extent a school does not receive sufficient funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenues and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school’s net operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are constrained to reflect the expected cash collections from such schools. The Company records the school’s estimated net operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. Actual school net operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. For the three months ended December 31, 2021 and 2020, the Company’s revenues included a reduction for net school operating losses at the schools of $12.3 million and $24.2 million, respectively, and $25.2 million and $44.2 million for the six months ended December 31, 2021 and 2020, respectively. Because the Company has agreed to absorb any operating losses of the schools, the Company records the expenses incurred by the school as both revenue and expenses in the condensed consolidated statements of operations. Amounts recorded as revenues and expenses for the three months ended December 31, 2021 and 2020 were $117.7 million and $102.4 million, respectively, and for the six months ended December 31, 2021 and 2020 were $231.6 million and $212.1 million, respectively.

Subscription-based Contracts

The Company provides certain online curriculum and services to schools and school districts under subscription agreements. Revenues from the licensing of curriculum under subscription arrangements are recognized on a ratable basis over the subscription period. Revenues from professional consulting, training and support services are deferred and recognized ratably over the service period.

In addition, the Company contracts with individual customers who have access for one to two years to company-provided online curriculum and generally prepay for services to be received. Adult learners enroll in courses that provide specialized training in a specific industry. Each of these contracts are considered to be one performance obligation. The Company recognizes these revenues pro rata over the maximum term of the customer contract based on the defined contract price.

12

Table of Contents 

STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

Enterprise Contracts

The Company provides job training over a specified contract period to enterprises. Each of these contracts are considered to be one performance obligation. The Company recognizes these revenues based on the number of students trained during the term of the contract based on the defined contract price.

Disaggregated Revenues

The revenue recognition related to the types of contracts discussed above can span both of the Company’s lines of revenue as shown below. For example, a funding-based contract may include both General Education and Career Learning students. In total, there is one performance obligation and revenue is recognized over the Company’s fiscal year. The revenue is then disaggregated between General Education and Career Learning based on the Company’s estimated full-year enrollment totals of each category. During the three months ended December 31, 2021 and 2020, approximately 88% and 88%, respectively, of the Company’s General Education revenues, and 99% and 98%, respectively, of the Company’s Middle – High School Career Learning revenues, were from funding-based contracts. During the six months ended December 31, 2021 and 2020, approximately 89% and 88%, respectively, of the Company’s General Education revenues, and 99% and 98%, respectively, of the Company’s Middle – High School Career Learning revenues, were from funding-based contracts.

The following table presents the Company’s revenues disaggregated based on its two lines of revenue for the three and six months ended December 31, 2021 and 2020:

Three Months Ended December 31, 

Six Months Ended December 31, 

2021

   

2020

2021

  

2020

(In thousands)

General Education

$

313,241

$

313,989

$

619,582

$

627,838

Career Learning

Middle - High School

75,287

51,376

146,699

100,147

Adult

20,979

10,780

43,452

19,120

Total Career Learning

96,266

62,156

190,151

119,267

Total Revenues

$

409,507

$

376,145

$

809,733

$

747,105

Concentration of Customers

During the three and six months ended December 31, 2021 and 2020, the Company had