Stride Reports Record Full Year Revenue and Profitability

Fiscal 2022 Career Learning Revenue Grows More Than 60%, Exceeding $400 Million

RESTON, Va.--(BUSINESS WIRE)--Stride, Inc. (NYSE: LRN), one of the nation’s leading technology-based education companies, today announced its results for the fourth fiscal quarter and full fiscal year ended June 30, 2022.

Fiscal 2022 Highlights Compared to 2021

• Revenue of $1,686.7 million, compared with $1,536.8 million, driven by Career Learning enrollment strength, Adult Learning, and increases in revenue per enrollment.
• Income from operations of $156.6 million, compared with $110.5 million, due to revenue growth and improved gross margins.
• Net income of $107.1 million, compared with $71.5 million.
• Diluted net income per share of $2.52, compared with $1.71.
• Adjusted operating income of $188.2 million, compared with $161.4 million. (1)
• Adjusted EBITDA of $273.1 million, compared with $239.9 million. (1)

Fiscal 2022 Summary Financial Metrics

	Year Ended June 30,				Change 2022/2021
	2022		2021		$		%
	(In thousands, except percentages and per share data)
Revenues	$	1,686,666	$	1,536,760	$	149,906	9.8%
Income from operations		156,628		110,456		46,172	41.8%
Adjusted operating income (1)		188,166		161,431		26,735	16.6%
Net income		107,130		71,451		35,679	49.9%
Net income per share, diluted		2.52		1.71		0.81	47.4%
EBITDA (1)		254,542		200,533		54,009	26.9%
Adjusted EBITDA (1)		273,112		239,866		33,246	13.9%

(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, 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.

Fourth Quarter Fiscal 2022 Highlights Compared to 2021

• Revenue of $455.2 million, compared with $397.5 million.
• Income from operations of $46.1 million, compared with $21.4 million.
• Net income of $28.1 million, compared with $10.5 million.
• Diluted net income per share of $0.66, compared with $0.25.
• Adjusted operating income of $53.5 million, compared with $33.5 million. (1)
• Adjusted EBITDA of $74.7 million, compared with $54.9 million. (1)

Fourth Quarter Fiscal 2022 Summary Financial Metrics

	Three Months Ended June 30,				Change 2022/2021
	2022		2021		$		%
	(In thousands, except percentages and per share data)
Revenues	$	455,211	$	397,510	$	57,701	14.5%
Income from operations		46,096		21,387		24,709	115.5%
Adjusted operating income (1)		53,473		33,466		20,007	59.8%
Net income		28,090		10,495		17,595	167.7%
Net income per share, diluted		0.66		0.25		0.41	164.0%
EBITDA (1)		70,546		46,426		24,120	52.0%
Adjusted EBITDA (1)		74,652		54,938		19,714	35.9%

(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, 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								Year Ended
	June 30,				Change 2022 / 2021				June 30,				Change 2022 / 2021
	2022		2021		$		%		2022		2021		$			%
	(In thousands, except percentages)
General Education	$	338,343	$	330,058	$	8,285	2.5	%	$	1,273,783	$	1,280,199	$	(6,416	)	(0.5	%)
Career Learning
Middle - High School		91,479		48,245		43,234	89.6	%		321,416		200,774		120,642		60.1	%
Adult		25,389		19,207		6,182	32.2	%		91,467		55,787		35,680		64.0	%
Total Career Learning		116,868		67,452		49,416	73.3	%		412,883		256,561		156,322		60.9	%
Total Revenues	$	455,211	$	397,510	$	57,701	14.5	%	$	1,686,666	$	1,536,760	$	149,906		9.8	%

Enrollment Data

The following table sets forth total enrollment data for students in our General Education and Career Learning lines of revenue. Enrollments for General Education and Career Learning 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				Year Ended		Change
	June 30,		2022 / 2021				June 30,		2022 / 2021
	2022	2021	#		%		2022	2021	#		%
	(In thousands, except percentages)
General Education (1)	136.5	147.2	(10.7	)	(7.3	%)	143.2	156.7	(13.5	)	(8.6	%)
Career Learning (1)(2)	41.9	28.2	13.7		48.6	%	41.9	29.6	12.3		41.6	%
Total Enrollment	178.4	175.4	3.0		1.7	%	185.1	186.3	(1.2	)	(0.6	%)

(1)	This data includes enrollments for which Stride receives no public funding or revenue.
(2)	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				Year Ended				Change
	June 30,				2022 / 2021				June 30,				2022 / 2021
	2022		2021		$		%		2022		2021		$		%
General Education	$	2,266	$	2,035	$	231	11.4	%	$	8,104	$	7,389	$	715	9.7	%
Career Learning		2,177		1,690		487	28.8	%		7,640		6,711		929	13.8	%

Cash Flow and Capital Allocation

As of June 30, 2022, the Company’s cash and cash equivalents totaled $389.4 million, compared with $386.1 million reported at June 30, 2021.

Capital expenditures for fiscal 2022 were $67.6 million, compared to $52.3 million in fiscal 2021, and were comprised of $9.7 million of property and equipment, $42.2 million of capitalized software development, and $15.7 million of capitalized curriculum development.

Fiscal Year 2023 Outlook

The Company will provide an outlook for fiscal year 2023 when it reports results for the first quarter fiscal year 2023, currently anticipated to be released in October 2022. No separate guidance communication, or enrollment counts, for fiscal 2023 will be provided before that time.

Conference Call

The Company will discuss its fourth quarter and full fiscal year 2022 financial results during a conference call scheduled for Tuesday, August 9, 2022 at 5:00 p.m. eastern time (ET).

A live webcast of the call will be available at https://events.q4inc.com/attendee/647846054. To participate in the live call, investors and analysts should dial [phone] (domestic) or 1 [phone] (international) at 4:45 p.m. ET. The conference ID number is 4812941. Please access the website at least 15 minutes prior to the start of the call.

A replay of the call will be available starting on August 9, 2022 at 8:00 p.m. ET through September 9, 2022 at 8:00 p.m. ET by dialing (800) 770- 2030 (domestic) or 1 [phone] (international) and entering the conference ID 4812941. A webcast replay will be available at https://events.q4inc.com/attendee/647846054 for 30 days.

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 the teaching and learning experience for millions of people by providing innovative, high-quality, tech-enabled education solutions, curriculum, and programs directly to students, schools, the military, and enterprises in primary, secondary, and post-secondary settings. 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. The company is a proud sponsor of the Future of School, a nonprofit organization dedicated to closing the gap between the pace of technology and the pace of change in education. More information can be found at stridelearning.com, K12.com, galvanize.com, techelevator.com, and medcerts.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. 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,” “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, such as coronavirus disease 2019 (“COVID-19”); 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, resulting from cybersecurity attacks; misuse or unauthorized disclosure of student and personal data; and failure to mitigate or prevent 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 presentation 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 months and full fiscal year ended June 30, 2022 and are presented below without footnotes. Readers are encouraged to obtain and carefully review Stride Inc.’s Annual Report on Form 10-K for the year ended June 30, 2022, 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended						Year Ended
	June 30,						June 30,
	2022			2021			2022			2021
	(In thousands except share and per share data)
Revenues	$	455,211		$	397,510		$	1,686,666		$	1,536,760
Instructional costs and services		287,534			260,909			1,090,191			1,001,860
Gross margin		167,677			136,601			596,475			534,900
Selling, general, and administrative expenses		121,581			115,214			439,847			424,444
Income from operations		46,096			21,387			156,628			110,456
Interest income (expense), net		(2,036	)		(5,477	)		(8,277	)		(17,979	)
Other income (expense), net		(5,568	)		553			(1,277	)		2,829
Income before income taxes and income (loss) from equity method investments		38,492			16,463			147,074			95,306
Income tax expense		(10,337	)		(5,998	)		(40,088	)		(24,539	)
Income (loss) from equity method investments		(65	)		30			144			684
Net income attributable to common stockholders	$	28,090		$	10,495		$	107,130		$	71,451
Net income attributable to common stockholders per share:
Basic	$	0.67		$	0.26		$	2.58		$	1.78
Diluted	$	0.66		$	0.25		$	2.52		$	1.71
Weighted average shares used in computing per share amounts:
Basic		41,896,039			40,413,235			41,451,101			40,211,016
Diluted		42,574,712			42,251,633			42,441,524			41,868,580

STRIDE, INC.
CONSOLIDATED BALANCE SHEETS
	June 30,			June 30,
	2022			2021
	(In thousands except share and per share data)
ASSETS
Current assets
Cash and cash equivalents	$	389,398		$	386,080
Accounts receivable, net of allowance of $26,993 and $21,384		418,558			369,303
Inventories, net		36,003			39,690
Prepaid expenses		25,974			19,453
Other current assets		80,601			43,004
Total current assets		950,534			857,530
Operating lease right-of-use assets, net		85,457			94,671
Property and equipment, net		61,537			72,069
Capitalized software, net		71,800			57,308
Capitalized curriculum development costs, net		50,580			50,376
Intangible assets, net		88,669			99,480
Goodwill		241,022			240,353
Deposits and other assets		93,946			105,510
Total assets	$	1,643,545		$	1,577,297
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	61,997		$	62,144
Accrued liabilities		63,200			77,642
Accrued compensation and benefits		73,027			80,363
Deferred revenue		53,630			38,110
Current portion of finance lease liability		37,389			27,336
Current portion of operating lease liability		12,830			20,649
Total current liabilities		302,073			306,244
Long-term finance lease liability		28,888			41,568
Long-term operating lease liability		75,127			77,458
Long-term debt		411,438			299,271
Deferred tax liability		3,205			31,853
Other long-term liabilities		10,233			16,255
Total liabilities		830,964			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; 48,112,664 and 46,911,527 shares issued; and 42,777,921 and 41,576,784 shares outstanding, respectively		4			4
Additional paid-in capital		687,454			795,449
Accumulated other comprehensive income (loss)		143			(474	)
Retained earnings		227,462			112,151
Treasury stock of 5,334,743 shares at cost		(102,482	)		(102,482	)
Total stockholders’ equity		812,581			804,648
Total liabilities and stockholders' equity	$	1,643,545		$	1,577,297

STRIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Year Ended
	June 30,
	2022			2021
	(In thousands)
Cash flows from operating activities
Net income	$	107,130		$	71,451
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		97,914			90,077
Stock-based compensation expense		18,570			39,333
Deferred income taxes		1,190			2,549
Provision for doubtful accounts		15,673			6,561
Amortization of discount and fees on debt		1,573			12,620
Noncash operating lease expense		19,810			19,567
Other		9,949			9,766
Changes in assets and liabilities:
Accounts receivable		(57,501	)		(143,073	)
Inventories, prepaid expenses, deposits and other current and long-term assets		4,798			(39,164	)
Accounts payable		11			18,930
Accrued liabilities		7,598			15,899
Accrued compensation and benefits		(7,465	)		32,437
Operating lease liability		(20,742	)		(21,025	)
Deferred revenue and other liabilities		8,376			18,222
Net cash provided by operating activities		206,884			134,150
Cash flows from investing activities
Purchase of property and equipment		(9,748	)		(3,567	)
Capitalized software development costs		(42,191	)		(31,264	)
Capitalized curriculum development costs		(15,687	)		(17,432	)
Sale of long-lived assets		—			223
Sale of other investments		5,261			—
Acquisition of MedCerts, LLC, net of cash acquired		—			(55,031	)
Acquisition of Tech Elevator, Inc., net of cash acquired		—			(16,107	)
Other acquisitions, loans and investments, net of distributions		(3,899	)		(1,723	)
Proceeds from the maturity of marketable securities		40,163			—
Purchases of marketable securities		(84,657	)		(40,542	)
Net cash used in investing activities		(110,758	)		(165,443	)
Cash flows from financing activities
Repayments on finance lease obligations		(33,011	)		(24,315	)
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		(22,858	)		—
Proceeds from exercise of stock options		414			748
Withholding of stock options for tax withholding		—			(10,885	)
Repurchase of restricted stock for income tax withholding		(37,855	)		(9,228	)
Net cash provided by (used in) financing activities		(93,310	)		204,576
Net change in cash, cash equivalents and restricted cash		2,816			173,283
Cash, cash equivalents and restricted cash, beginning of period		386,582			213,299
Cash, cash equivalents and restricted cash, end of period	$	389,398		$	386,582
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of June 30th:
Cash and cash equivalents	$	389,398		$	386,080
Other current assets (restricted cash)		—			502
Deposits and other assets (restricted cash)		—			—
Total cash, cash equivalents and restricted cash	$	389,398		$	386,582

Non-GAAP Financial Measures

To supplement our financial statements presented in accordance with GAAP, we have presented adjusted operating income, 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), 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.

	Three Months Ended				Year Ended
	June 30,				June 30,
	2022		2021		2022		2021
	(In thousands)
Income from operations	$	46,096	$	21,387	$	156,628	$	110,456
Stock-based compensation expense		4,106		8,512		18,570		39,333
Amortization of intangible assets		3,271		3,567		12,968		11,642
Adjusted operating income		53,473		33,466		188,166		161,431
Depreciation and other amortization		21,179		21,472		84,946		78,435
Adjusted EBITDA	$	74,652	$	54,938	$	273,112	$	239,866
EBITDA	$	70,546	$	46,426	$	254,542	$	200,533