Press release

Another Quarter of Record Revenue and Profitability for Stride

0
Sponsored by Businesswire

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

Second Quarter Fiscal 2024 Highlights Compared to 2023

  • Revenue of $504.9 million, compared with $458.4 million, driven by strong enrollment trends.

  • Income from operations of $84.3 million, compared with $68.1 million.

  • Net income of $66.8 million, compared with $50.7 million.

  • Diluted net income per share of $1.54 compared with $1.19.

  • Adjusted operating income of $94.9 million, compared with $76.3 million. (1)

  • Adjusted EBITDA of $118.3 million, compared with $100.5 million. (1)

Second Quarter Fiscal 2024 Summary Financial Metrics

Three Months Ended December 31, Change 2023/2022

2023

2022

$

%

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

504,868

 

$

458,435

 

$

46,433

 

10.1

%

 

 

 

 

Income from operations

84,289

 

68,073

 

16,216

 

23.8

%

Adjusted operating income (1)

94,873

 

76,293

 

18,580

 

24.4

%

 

 

 

 

Net income

66,836

 

50,705

 

16,131

 

31.8

%

Net income per share, diluted

1.54

 

1.19

 

0.35

 

29.4

%

 

 

 

 

EBITDA (1)

110,752

 

95,536

 

15,216

 

15.9

%

Adjusted EBITDA (1)

118,348

 

100,477

 

17,871

 

17.8

%

(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.

Six Month Fiscal 2024 Highlights Compared to 2023

  • Revenue of $985.0 million, compared with $883.6 million.

  • Income from operations of $87.6 million, compared with $39.4 million.

  • Net income of $71.7 million, compared with $28.0 million.

  • Diluted net income per share of $1.66, compared with $0.66.

  • Adjusted operating income of $109.6 million, compared with $56.4 million. (1)

  • Adjusted EBITDA of $158.1 million, compared with $103.5 million. (1)

Six Month Fiscal 2024 Summary Financial Metrics

Six Months Ended December 31, Change 2023/2022

2023

2022

$

%

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

985,049

883,585

101,464

11.5

%

 
Income from operations

87,609

39,354

48,255

122.6

%

Adjusted operating income (1)

109,634

56,373

53,261

94.5

%

 
Net income

71,714

28,033

43,681

155.8

%

Net income per share, diluted

1.66

0.66

1.00

151.5

%

 
EBITDA (1)

142,089

93,068

49,021

52.7

%

Adjusted EBITDA (1)

158,111

103,519

54,592

52.7

%

(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

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

December 31,

 

Change 2023 / 2022

 

December 31,

 

Change 2023 / 2022

2023

 

2022

 

$

 

%

 

2023

 

2022

 

$

 

%

(In thousands, except percentages)
 
General Education $

313,902

$

274,764

$

39,138

 

14.2

%

$

613,241

$

546,422

$

66,819

 

12.2

%

Career Learning
Middle – High School

165,080

153,795

11,285

 

7.3

%

316,053

279,330

36,723

 

13.1

%

Adult

25,886

29,876

(3,990

)

(13.4

%)

55,755

57,833

(2,078

)

(3.6

%)

Total Career Learning

190,966

183,671

7,295

 

4.0

%

371,808

337,163

34,645

 

10.3

%

Total Revenues $

504,868

$

458,435

$

46,433

 

10.1

%

$

985,049

$

883,585

$

101,464

 

11.5

%

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 Six Months Ended Change
December 31, 2023 / 2022 December 31, 2023 / 2022

2023

2022

#

%

2023

2022

# %
(In thousands, except percentages)
 
General Education (2)

120.7

111.2

9.5

8.5

%

119.9

111.5

8.4

7.5

%

Career Learning (2)(3)

72.4

66.3

6.1

9.2

%

71.9

65.1

6.8

10.4

%

Average Enrollment

193.1

177.5

15.6

8.8

%

191.8

176.6

15.2

8.6

%

(1)

Enrollments are presented as the average monthly enrollments during the second quarter fiscal year 2024. Total ending enrollments were 196.5 thousand and 180.3 thousand, as of December 31, 2023 and 2022, respectively. General Education enrollments were 123.0 thousand and 112.8 thousand and Career Learning enrollments were 73.5 thousand and 67.5 thousand as of December 31, 2023 and 2022, respectively.

(2)

This data includes enrollments for which Stride receives no public funding or revenue.

(3)

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

 

Six Months Ended

 

Change

December 31,

 

2023 / 2022

 

December 31,

 

2023 / 2022

2023

 

2022

 

$

 

%

 

2023

 

2022

 

$

 

%

 
General Education $

2,465

$

2,281

$

184

 

8.1

%

$

4,816

$

4,508

$

308

6.8

%

Career Learning

2,281

2,319

(38

)

(1.6

%)

4,395

4,280

115

2.7

%

Cash Flow and Capital Allocation

As of December 31, 2023, the Company’s cash and cash equivalents totaled $354.4 million, compared with $410.8 million reported at June 30, 2023. The decrease is largely the result of normal seasonal trends.

Capital expenditures for three months ended December 31, 2023 were $12.7 million, compared to $16.9 million in the second quarter of fiscal year 2023, and were comprised of $8.4 million of capitalized software development and $4.3 million of capitalized curriculum development.

Fiscal Year 2024 Outlook

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

  • Revenue in the range of $1.99 billion to $2.04 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 25% to 27%.

  • Adjusted operating income in the range of $265 million to $285 million. (1)

The Company is forecasting the following for the third quarter fiscal year 2024:

  • Revenue in the range of $500 million to $520 million.

  • Capital expenditures in the range of $14 million to $17 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.

  • Adjusted operating income in the range of $85 million to $95 million. (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 second quarter fiscal year 2024 financial results during a conference call scheduled for Tuesday, January 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/460100403. 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/460100403 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.

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 six months ended December 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 December 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

 

Six Months Ended

December 31,

 

December 31,

2023

 

2022

 

2023

 

2022

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

504,868

 

$

458,435

 

$

985,049

 

$

883,585

 

Instructional costs and services

303,694

 

288,347

 

610,987

 

583,848

 

Gross margin

201,174

 

170,088

 

374,062

 

299,737

 

Selling, general, and administrative expenses

116,885

 

102,015

 

286,453

 

260,383

 

Income from operations

84,289

 

68,073

 

87,609

 

39,354

 

Interest expense, net

(2,022

)

(2,082

)

(4,090

)

(4,128

)

Other income, net

6,538

 

3,970

 

11,703

 

5,007

 

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

88,805

 

69,961

 

95,222

 

40,233

 

Income tax expense

(22,190

)

(18,860

)

(23,726

)

(11,353

)

Income (loss) from equity method investments

221

 

(396

)

218

 

(847

)

Net income attributable to common stockholders $

66,836

 

$

50,705

 

$

71,714

 

$

28,033

 

Net income attributable to common stockholders per share:
Basic $

1.57

 

$

1.20

 

$

1.69

 

$

0.66

 

Diluted $

1.54

 

$

1.19

 

$

1.66

 

$

0.66

 

Weighted average shares used in computing per share amounts:
Basic

42,561,035

 

42,259,061

 

42,530,523

 

42,167,844

 

Diluted

43,463,763

 

42,547,334

 

43,214,119

 

42,602,405

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

December 31,

 

June 30,

2023

 

2023

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

354,387

 

$

410,807

 

Accounts receivable, net of allowance of $35,880 and $30,031

509,635

 

463,722

 

Inventories, net

19,506

 

36,716

 

Prepaid expenses

35,529

 

24,817

 

Other current assets

169,815

 

129,137

 

Total current assets

1,088,872

 

1,065,199

 

Operating lease right-of-use assets, net

60,687

 

69,508

 

Property and equipment, net

60,555

 

52,332

 

Capitalized software, net

81,413

 

83,465

 

Capitalized curriculum development costs, net

50,290

 

50,787

 

Intangible assets, net

68,768

 

74,771

 

Goodwill

246,676

 

246,676

 

Deferred tax asset

9,499

 

8,776

 

Deposits and other assets

115,436

 

109,152

 

Total assets $

1,782,196

 

$

1,760,666

 

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $

31,319

 

$

48,854

 

Accrued liabilities

56,334

 

76,626

 

Accrued compensation and benefits

43,076

 

57,426

 

Deferred revenue

64,237

 

76,159

 

Current portion of finance lease liability

33,108

 

35,621

 

Current portion of operating lease liability

12,828

 

14,449

 

Total current liabilities

240,902

 

309,135

 

Long-term finance lease liability

30,623

 

21,278

 

Long-term operating lease liability

51,552

 

59,425

 

Long-term debt

413,869

 

413,035

 

Other long-term liabilities

12,572

 

10,497

 

Total liabilities

749,518

 

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; 48,718,413 and 48,339,048 shares issued; and 43,383,670 and 43,004,305 shares outstanding, respectively

4

 

4

 

Additional paid-in capital

709,157

 

695,480

 

Accumulated other comprehensive loss

(44

)

(35

)

Retained earnings

426,043

 

354,329

 

Treasury stock of 5,334,743 shares at cost

(102,482

)

(102,482

)

Total stockholders’ equity

1,032,678

 

947,296

 

Total liabilities and stockholders’ equity $

1,782,196

 

$

1,760,666

 

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Six Months Ended
December 31,

2023

2022

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

71,714

 

$

28,033

 

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

54,480

 

53,714

 

Stock-based compensation expense

16,022

 

10,451

 

Deferred income taxes

425

 

7,995

 

Provision for credit losses

15,332

 

2,173

 

Amortization of fees on debt

834

 

822

 

Noncash operating lease expense

7,913

 

7,369

 

Other

1,430

 

(2,869

)

Changes in assets and liabilities:
Accounts receivable

(61,247

)

(25,680

)

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

883

 

(9,177

)

Accounts payable

(15,994

)

(26,059

)

Accrued liabilities

(20,987

)

(10,681

)

Accrued compensation and benefits

(14,340

)

(38,806

)

Operating lease liability

(8,587

)

(5,966

)

Deferred revenue and other liabilities

(9,849

)

29,863

 

Net cash provided by operating activities

38,029

 

21,182

 

Cash flows from investing activities
Purchase of property and equipment

(1,703

)

(2,823

)

Capitalized software development costs

(18,402

)

(21,399

)

Capitalized curriculum development costs

(8,731

)

(9,527

)

Sale of other investments

 

60

 

Acquisition of assets

 

(1,409

)

Other acquisitions, loans and investments, net of distributions

(275

)

(767

)

Proceeds from the maturity of marketable securities

80,361

 

36,729

 

Purchases of marketable securities

(120,047

)

(55,879

)

Net cash used in investing activities

(68,797

)

(55,015

)

Cash flows from financing activities
Repayments on finance lease obligations

(22,491

)

(19,938

)

Payments of contingent consideration

 

(7,024

)

Proceeds from exercise of stock options

 

10

 

Repurchase of restricted stock for income tax withholding

(3,161

)

(10,334

)

Net cash used in financing activities

(25,652

)

(37,286

)

Net change in cash, cash equivalents and restricted cash

(56,420

)

(71,119

)

Cash, cash equivalents and restricted cash, beginning of period

410,807

 

389,398

 

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

354,387

 

$

318,279

 

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.

Second Quarter and Six Months Fiscal Year 2024

Reconciliation of Income from Operations to Adjusted Operating Income

Three Months Ended

 

Six Months Ended

December 31,

 

December 31,

2023

 

2022

 

2023

 

2022

(In thousands)
Income from operations

$

84,289

$

68,073

$

87,609

$

39,354

Amortization of intangible assets

 

2,988

 

3,279

 

6,003

 

6,568

Stock-based compensation expense

 

7,596

 

4,941

 

16,022

 

10,451

Adjusted operating income

 

94,873

 

76,293

 

109,634

 

56,373

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Three Months Ended
December 31,
Six Months Ended
December 31,

2023

 

2022

 

2023

 

2022

(In thousands)
Net income

$

66,836

 

$

50,705

 

$

71,714

 

$

28,033

 

Interest expense, net

 

2,022

 

 

2,082

 

 

4,090

 

 

4,128

 

Other income, net

 

(6,538

)

 

(3,970

)

 

(11,703

)

 

(5,007

)

Income tax expense

 

22,190

 

 

18,860

 

 

23,726

 

 

11,353

 

(Income) loss from equity method investments

 

(221

)

 

396

 

 

(218

)

 

847

 

Depreciation and amortization

 

26,463

 

 

27,463

 

 

54,480

 

 

53,714

 

EBITDA

 

110,752

 

 

95,536

 

 

142,089

 

 

93,068

 

Stock-based compensation expense

 

7,596

 

 

4,941

 

 

16,022

 

 

10,451

 

Adjusted EBITDA

$

118,348

 

$

100,477

 

$

158,111

 

$

103,519

 

Fiscal Year 2024 Outlook

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

Three Months Ended
March 31, 2024
Year Ended
June 30, 2024
Low High Low High
(In millions)
Income from operations

$

76.0

$

83.0

$

224.5

$

238.5

Stock-based compensation expense

 

6.5

 

8.5

 

29.0

 

33.0

Amortization of intangible assets

 

2.5

 

3.5

 

11.5

 

13.5

Adjusted operating income

$

85.0

$

95.0

$

265.0

$

285.0