Stride, Inc. [LRN] Filings

10-Q 1 lrn-20220331x10q.htm 10-Q

Table of Contents

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

☐

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		(703) 483-7000
(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.

Table of Contents

Stride, Inc.

Form 10-Q

For the Quarterly Period Ended March 31, 2022

Index

		Page
		Number

PART I.	Financial Information
Item 1.	Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49

PART II.	Other Information
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5.	Other Information	50
Item 6.	Exhibits	50

Signatures		51

Table of Contents

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.

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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.

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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.

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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

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	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.

Table of Contents

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

Stride, Inc. [LRN] Filings
10-Q	[2022-04-20]
10-Q	[2022-01-26]
10-Q	[2021-10-20]
10-K	[2021-08-11]
10-Q	[2021-04-21]
10-Q	[2021-01-27]
10-Q	[2020-10-27]
10-K	[2020-08-12]
10-Q	[2020-04-28]
10-Q	[2020-01-28]
10-Q	[2019-10-23]
10-K	[2019-08-07]
10-Q	[2019-04-24]
10-Q	[2019-01-23]
10-Q	[2018-10-24]
10-K	[2018-08-08]
10-Q	[2018-04-25]
10-Q	[2018-01-26]
10-Q	[2017-10-27]
10-K	[2017-08-09]
10-Q	[2017-04-28]
10-Q	[2017-01-27]
10-Q	[2016-10-26]
10-K	[2016-08-09]
10-Q	[2016-04-27]
10-Q	[2016-01-28]
10-Q	[2015-10-27]
10-K	[2015-08-04]
10-Q	[2015-04-28]
10-Q	[2015-01-29]
10-Q	[2014-10-30]
10-K	[2014-08-15]
10-Q	[2014-04-29]
10-Q	[2014-02-04]
10-Q	[2013-11-07]
10-K	[2013-08-29]
10-Q	[2013-05-03]
10-Q	[2013-02-05]
10-Q	[2012-11-09]
10-K	[2012-09-12]
10-Q	[2012-05-09]
10-Q	[2012-02-09]