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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, 2022

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 15, 2022, the Registrant had 42,752,884 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,

    

2022

    

2021

(audited)

(In thousands except share and per share data)

ASSETS

Current assets

Cash and cash equivalents

$

308,564

$

386,080

Accounts receivable, net of allowance of $20,641 and $21,384

422,615

369,303

Inventories, net

23,986

39,690

Prepaid expenses

35,861

19,453

Other current assets

80,553

43,004

Total current assets

871,579

857,530

Operating lease right-of-use assets, net

87,516

94,671

Property and equipment, net

67,565

72,069

Capitalized software, net

64,921

57,308

Capitalized curriculum development costs, net

50,476

50,376

Intangible assets, net

91,940

99,480

Goodwill

240,952

240,353

Deposits and other assets

99,583

105,510

Total assets

$

1,574,532

$

1,577,297

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

32,848

$

62,144

Accrued liabilities

55,152

77,642

Accrued compensation and benefits

59,843

80,363

Deferred revenue

51,530

38,110

Current portion of finance lease liability

37,016

27,336

Current portion of operating lease liability

13,790

20,649

Total current liabilities

250,179

306,244

Long-term finance lease liability

37,566

41,568

Long-term operating lease liability

76,342

77,458

Long-term debt

411,047

299,271

Deferred tax liability

9,034

31,853

Other long-term liabilities

9,794

16,255

Total liabilities

793,962

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; 48,102,945 and 46,911,527 shares issued; and 42,768,202 and 41,576,784 shares outstanding, respectively

4

4

Additional paid-in capital

683,892

795,449

Accumulated other comprehensive income (loss)

(216)

(474)

Retained earnings

199,372

112,151

Treasury stock of 5,334,743 shares at cost

(102,482)

(102,482)

Total stockholders’ equity

780,570

804,648

Total liabilities and stockholders' equity

$

1,574,532

$

1,577,297

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, 

    

2022

    

2021

    

2022

    

2021

    

(In thousands except share and per share data)

Revenues

$

421,722

$

392,145

$

1,231,455

$

1,139,250

Instructional costs and services

266,883

253,128

802,657

740,951

Gross margin

154,839

139,017

428,798

398,299

Selling, general, and administrative expenses

94,245

100,464

318,266

309,230

Income from operations

60,594

38,553

110,532

89,069

Interest expense, net

(2,373)

(5,371)

(6,241)

(12,502)

Other income, net

496

486

4,291

2,276

Income before income taxes and income from equity method investments

58,717

33,668

108,582

78,843

Income tax expense

(16,716)

(10,275)

(29,751)

(18,541)

Income from equity method investments

918

396

209

654

Net income attributable to common stockholders

$

42,919

$

23,789

$

79,040

$

60,956

Net income attributable to common stockholders per share:

Basic

$

1.03

$

0.59

$

1.91

$

1.52

Diluted

$

1.02

$

0.57

$

1.87

$

1.46

Weighted average shares used in computing per share amounts:

Basic

41,823,564

40,286,109

41,302,789

40,143,610

Diluted

42,136,042

41,690,509

42,351,877

41,701,955

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, 

    

2022

    

2021

    

2022

    

2021

(In thousands)

Net income

$

42,919

$

23,789

$

79,040

$

60,956

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

127

(58)

258

(520)

Comprehensive income attributable to common stockholders

$

43,046

$

23,731

$

79,298

$

60,436

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

Net income

42,919

42,919

Foreign currency translation adjustment

127

127

Stock-based compensation expense

5,347

5,347

Exercise of stock options

10,075

145

145

Vesting of deferred stock units

5,006

Issuance of restricted stock awards

100,080

Forfeiture of restricted stock awards

(31,287)

Repurchase of restricted stock for tax withholding

(65,339)

(2,201)

(2,201)

Balance, March 31, 2022

48,102,945

$

4

$

683,892

$

(216)

$

199,372

(5,334,743)

$

(102,482)

$

780,570

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

7

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended March 31, 

    

2022

    

2021

(In thousands)

Cash flows from operating activities

Net income

$

79,040

$

60,956

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

Depreciation and amortization expense

73,464

65,038

Stock-based compensation expense

14,464

30,821

Deferred income taxes

6,572

2,256

Provision for doubtful accounts

7,047

7,635

Amortization of discount and fees on debt

1,182

8,737

Noncash operating lease expense

15,084

14,573

Other

4,675

7,883

Changes in assets and liabilities:

Accounts receivable

(56,072)

(197,659)

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

7,967

(27,798)

Accounts payable

(26,761)

(913)

Accrued liabilities

(14,630)

8,850

Accrued compensation and benefits

(20,652)

14,913

Operating lease liability

(15,899)

(15,650)

Deferred revenue and other liabilities

5,922

31,480

Net cash provided by operating activities

81,403

11,122

Cash flows from investing activities

Purchase of property and equipment

(4,734)

(2,967)

Capitalized software development costs

(30,837)

(20,189)

Capitalized curriculum development costs

(12,361)

(11,742)

Sale of long-lived assets

223

Sale of other investments

5,261

Acquisition of MedCerts, LLC, net of cash acquired

(54,795)

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

(16,030)

Other acquisitions, loans and investments, net of distributions

(3,654)

(1,008)

Proceeds from the maturity of marketable securities

19,904

Purchases of marketable securities

(64,151)

Net cash used in investing activities

(90,572)

(106,508)

Cash flows from financing activities

Repayments on finance lease obligations

(23,919)

(17,103)

Repayments on credit facility

(100,000)

Issuance of convertible senior notes, net of issuance costs