10-Q 1 lrn-20240331x10q.htm 10-Q
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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, 2024

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.)

11720 Plaza America 9th Floor

Reston, VA 20190

(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 19, 2024, the Registrant had 43,254,938 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,

    

2024

    

2023

(audited)

(In thousands except share and per share data)

ASSETS

Current assets

Cash and cash equivalents

$

376,577

$

410,807

Accounts receivable, net of allowance of $34,852 and $30,031

577,792

463,722

Inventories, net

21,038

36,716

Prepaid expenses

40,127

24,817

Other current assets

193,547

129,137

Total current assets

1,209,081

1,065,199

Operating lease right-of-use assets, net

57,725

69,508

Property and equipment, net

57,213

52,332

Capitalized software, net

83,320

83,465

Capitalized curriculum development costs, net

51,451

50,787

Intangible assets, net

64,668

74,771

Goodwill

246,676

246,676

Deferred tax asset

14,773

8,776

Deposits and other assets

107,306

109,152

Total assets

$

1,892,213

$

1,760,666

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

37,156

$

48,854

Accrued liabilities

67,671

76,626

Accrued compensation and benefits

62,383

57,426

Deferred revenue

70,907

76,159

Current portion of finance lease liability

30,991

35,621

Current portion of operating lease liability

12,853

14,449

Total current liabilities

281,961

309,135

Long-term finance lease liability

29,920

21,278

Long-term operating lease liability

48,418

59,425

Long-term debt

414,271

413,035

Other long-term liabilities

14,436

10,497

Total liabilities

789,006

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; 48,586,413 and 48,339,048 shares issued; and 43,251,670 and 43,004,305 shares outstanding, respectively

4

4

Additional paid-in capital

709,997

695,480

Accumulated other comprehensive loss

(42)

(35)

Retained earnings

495,730

354,329

Treasury stock of 5,334,743 shares at cost

(102,482)

(102,482)

Total stockholders’ equity

1,103,207

947,296

Total liabilities and stockholders' equity

$

1,892,213

$

1,760,666

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, 

    

2024

    

2023

    

2024

    

2023

    

(In thousands except share and per share data)

Revenues

$

520,837

$

470,284

$

1,505,886

$

1,353,869

Instructional costs and services

319,508

295,032

930,495

878,880

Gross margin

201,329

175,252

575,391

474,989

Selling, general, and administrative expenses

113,016

103,053

399,469

363,436

Income from operations

88,313

72,199

175,922

111,553

Interest expense, net

(2,404)

(2,206)

(6,494)

(6,334)

Other income, net

7,678

4,587

19,381

9,594

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

93,587

74,580

188,809

114,813

Income tax expense

(24,657)

(19,525)

(48,383)

(30,878)

Income (loss) from equity method investments

757

407

975

(440)

Net income attributable to common stockholders

$

69,687

$

55,462

$

141,401

$

83,495

Net income attributable to common stockholders per share:

Basic

$

1.63

$

1.31

$

3.32

$

1.98

Diluted

$

1.60

$

1.30

$

3.26

$

1.96

Weighted average shares used in computing per share amounts:

Basic

42,684,561

42,375,480

42,581,869

42,237,056

Diluted

43,655,841

42,714,090

43,389,903

42,652,223

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, 

    

2024

    

2023

    

2024

    

2023

(In thousands)

Net income

$

69,687

$

55,462

$

141,401

$

83,495

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment

2

(128)

(7)

(84)

Comprehensive income attributable to common stockholders

$

69,689

$

55,334

$

141,394

$

83,411

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, 2023

48,339,048

$

4

$

695,480

$

(35)

$

354,329

(5,334,743)

$

(102,482)

$

947,296

Net income

4,878

4,878

Stock-based compensation expense

8,399

8,399

Issuance of restricted stock awards

424,909

Forfeiture of restricted stock awards

(30,085)

Repurchase of restricted stock for tax withholding

(52,592)

(2,080)

(2,080)

Balance, September 30, 2023

48,681,280

$

4

$

701,799

$

(35)

$

359,207

(5,334,743)

$

(102,482)

$

958,493

Net income

66,836

66,836

Foreign currency translation adjustment

(9)

(9)

Stock-based compensation expense

8,429

8,429

Vesting of performance share units, net of tax withholding

15,324

Issuance of restricted stock awards

42,701

Forfeiture of restricted stock awards

(9,656)

Repurchase of restricted stock for tax withholding

(11,236)

(1,071)

(1,071)

Balance, December 31, 2023

48,718,413

$

4

$

709,157

$

(44)

$

426,043

(5,334,743)

$

(102,482)

$

1,032,678

Net income

69,687

69,687

Foreign currency translation adjustment

2

2

Stock-based compensation expense

5,409

5,409

Vesting of performance share units, net of tax withholding

16,102

Issuance of restricted stock awards

19,108

Forfeiture of restricted stock awards

(91,156)

Repurchase of restricted stock for tax withholding

(76,054)

(4,569)

(4,569)

Balance, March 31, 2024

48,586,413

$

4

$

709,997

$

(42)

$

495,730

(5,334,743)

$

(102,482)

$

1,103,207

6

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, 2022

48,112,664

$

4

$

687,454

$

143

$

227,462

(5,334,743)

$

(102,482)

$

812,581

Net loss

(22,672)

(22,672)

Foreign currency translation adjustment

375

375

Stock-based compensation expense

5,295

5,295

Exercise of stock options

675

10

10

Vesting of performance share units, net of tax withholding

48,916

Issuance of restricted stock awards

460,411

Forfeiture of restricted stock awards

(27,184)

Repurchase of restricted stock for tax withholding

(209,010)

(8,766)

(8,766)

Balance, September 30, 2022

48,386,472

$

4

$

683,993

$

518

$

204,790

(5,334,743)

$

(102,482)

$

786,823

Net income

50,705

50,705

Foreign currency translation adjustment

(331)

(331)

Stock-based compensation expense

6,132

6,132

Vesting of performance share units, net of tax withholding

31,088

Issuance of restricted stock awards

76,685

Forfeiture of restricted stock awards

(36,820)

Repurchase of restricted stock for tax withholding

(25,849)

(1,430)

(1,430)

Balance, December 31, 2022

48,431,576

$

4

$

688,695

$

187

$

255,495

(5,334,743)

$

(102,482)

$

841,899

Net income

55,462

55,462

Foreign currency translation adjustment

(128)

(128)

Stock-based compensation expense

4,722

4,722

Exercise of stock options

675

10

10

Issuance of restricted stock awards

21,472

Forfeiture of restricted stock awards

(14,382)

Repurchase of restricted stock for tax withholding

(62,933)

(2,604)

(2,604)

Balance, March 31, 2023

48,376,408

$

4

$

690,823

$

59

$

310,957

(5,334,743)

$

(102,482)

$

899,361

See accompanying notes to unaudited condensed consolidated financial statements.

7

STRIDE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended March 31, 

    

2024

    

2023

(In thousands)

Cash flows from operating activities

Net income

$

141,401

$

83,495

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

Depreciation and amortization expense

81,464

80,656

Stock-based compensation expense

21,272

15,196

Deferred income taxes

(4,629)

2,982

Provision for credit losses

18,895

5,939

Amortization of fees on debt

1,236

1,200

Noncash operating lease expense

11,055

11,039

Other

1,444

(2,015)

Changes in assets and liabilities:

Accounts receivable

(133,144)

(61,949)

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

(2,763)

(9,966)

Accounts payable

(11,585)

(26,101)

Accrued liabilities

(9,875)

(6,455)

Accrued compensation and benefits

4,834

(19,130)

Operating lease liability

(11,695)

(8,602)

Deferred revenue and other liabilities

(1,315)

39,931

Net cash provided by operating activities

106,595

106,220

Cash flows from investing activities

Purchase of property and equipment

(1,500)

(3,579)

Capitalized software development costs

(30,130)

(32,574)

Capitalized curriculum development costs

(13,534)

(12,798)

Sale of other investments

60

Acquisition of assets

(1,409)

Other acquisitions, loans and investments, net of distributions

(693)

(1,377)

Proceeds from the maturity of marketable securities

107,020

66,204

Purchases of marketable securities

(162,179)

(85,289)

Net cash used in investing activities

(101,016)

(70,762)

Cash flows from financing activities

Repayments on finance lease obligations

(32,212)

(31,238)

Payments of contingent consideration

(7,024)

Proceeds from exercise of stock options

20

Repurchase of restricted stock for income tax withholding

(7,597)

(12,936)

Net cash used in financing activities

(39,809)

(51,178)

Net change in cash, cash equivalents and restricted cash

(34,230)

(15,720)

Cash, cash equivalents and restricted cash, beginning of period

410,807

389,398

Cash, cash equivalents and restricted cash, end of period

$

376,577

$

373,678

See accompanying notes to unaudited condensed consolidated financial statements.

8

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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. 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.  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, healthcare 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 facilitate success 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 reported as a General Education enrollment and General Education revenue. A student and the associated revenue is counted as a Career Learning enrollment or Career Learning revenue only if the student is enrolled in a Career Learning program or school. 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 Galvanize, Inc. (“Galvanize”), Tech Elevator, Inc. (“Tech Elevator”), and MedCerts, LLC (“MedCerts”). These include skills training in the 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 March 31, 2024, the condensed consolidated statements of operations and comprehensive income for the three and nine months ended March 31, 2024 and 2023, the condensed consolidated statements of cash flows for the nine months ended March 31, 2024 and 2023, and the condensed consolidated statements of stockholders’ equity for the three and nine months ended March 31, 2024 and 2023 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 nine months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending June 30, 2024, for any other interim period or for any other future fiscal year. The condensed consolidated balance sheet as of June 30, 2023 has been derived from the audited consolidated financial statements at that date.

9

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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 16, 2023, which contains the Company’s audited financial statements for the fiscal year ended June 30, 2023.

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 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 was tentatively planned for the end of fiscal year 2023. The ASU permitted an entity to consider contract modifications due to reference rate reform to be an event that did not require contract remeasurement. This ASU was applicable from March 12, 2020 through December 31, 2022 and adoption was permitted at any time during the period on a prospective basis. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the provisions of Topic 848 to December 31, 2024. The Company’s senior secured revolving credit facility includes the use of alternate rates when LIBOR is not available. The Company does not expect the change from LIBOR to an alternate rate will have a material impact to the condensed consolidated financial statements and, to the extent it enters into modifications of agreements that are impacted by the LIBOR phase-out, the Company will apply such guidance to those contract modifications.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) ("ASU 2023-07"). This update provides, among other things, enhanced segment disclosure requirements including disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. There are aspects of ASU 2023-07 that apply to entities with one reportable segment. The Company will review the extent of new disclosures necessary in the coming quarters, prior to implementation during fiscal year 2025. Other than additional disclosure, we do not expect a change to our condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and for interim periods for fiscal years beginning after December 15, 2025. The Company will review the extent of new disclosures necessary in the coming quarters, prior to implementation during fiscal year 2026. Other than additional disclosure, we do not expect a change to our condensed consolidated financial statements.

10

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STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

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, healthcare and general business, 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.

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

11

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STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

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 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 nine months ended March 31, 2024 and 2023. Historically, aggregate funding estimates differed from actual reimbursements by less than 2% of annual revenue, which may vary from quarter to quarter.

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 March 31, 2024 and 2023, the Company’s revenues included a reduction for net school operating losses at the schools of $3.3 million and $2.7 million, respectively, and $11.6 million and $19.2 million for the nine months ended March 31, 2024 and 2023, 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 March 31, 2024 and 2023 were $147.6 million and $126.0 million, respectively, and for the nine months ended March 31, 2024 and 2023 were $426.3 million and $374.3 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

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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 March 31, 2024 and 2023, approximately 94% and 90%, respectively, of the Company’s General Education revenues, and 99% and 99%, respectively, of the Company’s Middle – High School Career Learning revenues, were from funding-based contracts. During the nine months ended March 31, 2024 and 2023, approximately 93% and 90%, respectively, of the Company’s General Education revenues, and 100% and 99%, 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 nine months ended March 31, 2024 and 2023:

Three Months Ended March 31, 

Nine Months Ended March 31, 

2024

   

2023

2024

2023

(In thousands)

General Education

$

328,894

$

289,566

$

942,135

$

835,989

Career Learning

Middle - High School

167,919

150,772

483,972

430,101

Adult

24,024

29,946

79,779

87,779

Total Career Learning

191,943

180,718

563,751

517,880

Total Revenues

$

520,837

$

470,284

$

1,505,886

$

1,353,869

Concentration of Customers

During the three and nine months ended March 31, 2024 and 2023, the Company had no contracts that represented greater than 10% of total revenues.

Contract Balances

The timing of revenue recognition, invoicing, and cash collection results in accounts receivable, unbilled receivables (a contract asset) and deferred revenue (a contract liability) in the condensed consolidated balance sheets. Accounts receivable are recorded when there is an executed customer contract and the customer is billed. An allowance is recorded to reflect expected losses at the time the receivable is recorded. The collectability of outstanding receivables is evaluated regularly by the Company to determine if additional allowances are needed. Unbilled receivables are created when revenue is earned prior to the customer being billed. Deferred revenue is recorded when customers are billed or cash is collected in advance of services being provided.

13

Table of Contents 

STRIDE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

The opening and closing balance of the Company’s accounts receivable, unbilled receivables and deferred revenue are as follows: