Stride, Inc. (NYSE: LRN), one of the nation’s leading
technology-based education companies, today announced its results
for the first fiscal quarter ended September 30, 2021.
First Quarter Fiscal 2022 Highlights Compared to 2021
- Revenue of $400.2 million, compared with $371.0 million, driven
by improved revenue per enrollment, strong middle and high school
Career Learning enrollments, and growth in Adult Learning.
- Loss from operations of $7.0 million, compared with income from
operations of $12.1 million, due to the return to normal
seasonality in upfront school year expenses.
- Net loss of $5.9 million, compared with net income of $12.7
million.
- Diluted net loss per share of $0.15, compared with diluted net
income per share of $0.30.
- Adjusted operating income of $4.5 million, compared with $23.0
million. (1)
- Adjusted EBITDA of $25.5 million, compared with $39.2 million.
(1)
First Quarter Fiscal 2022 Summary Financial Metrics
Three Months Ended September
30,
Change 2021/2020
2021
2020
$
%
(In thousands, except percentages and per share data)
Revenues $
400,226
$
370,960
$
29,266
7.9
%
Income (loss) from operations
(6,977
)
12,064
(19,041
)
-157.8
%
Adjusted operating income (1)
4,522
23,009
(18,487
)
-80.3
%
Net income (loss)
(5,883
)
12,666
(18,549
)
-146.4
%
Net income (loss) per share, diluted
(0.15
)
0.30
(0.45
)
-150.0
%
EBITDA (1)
17,170
30,341
(13,171
)
-43.4
%
Adjusted EBITDA (1)
25,456
39,234
(13,778
)
-35.1
%
(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.
Cash Flow and Capital Allocation
As of September 30, 2021, the Company’s cash and cash
equivalents totaled $218.5 million, compared with $386.1 million
reported at June 30, 2021. The decrease is largely the result of
normal seasonal expenditures incurred at the start of the school
year.
Capital expenditures for the quarter were $15.4 million,
compared to $12.8 million in the first fiscal quarter 2021, and
were comprised of $1.3 million of property and equipment, $9.7
million of capitalized software development, and $4.4 million of
capitalized curriculum development.
Early Adoption of Accounting Standards Update 2020-06 (“ASU
2020-06”)
During the quarter, the Company early adopted ASU 2020-06, which
resulted in a change in accounting for the convertible notes. As of
September 30, 2021, the impact to long-term debt was a non-cash
increase from $299.3 million to $410.3 million. Other impacts to
the balance sheet were a decrease of $89.5 million to additional
paid-in capital, a decrease of $29.3 million to deferred tax
liability, and an increase to retained earnings of $8.2
million.
This early adoption also results in the elimination of the
non-cash interest expense related to the amortization of the debt
discount from the Company’s consolidated statement of
operations.
Revenue and Enrollment Data
Revenue
The following table sets forth the Company’s revenues for the
periods indicated:
Three Months Ended
September 30,
Change 2021 / 2020
2021
2020
$
%
(In thousands, except
percentages)
General Education $
306,341
$
313,848
$
(7,507
)
(2.4
%)
Career Learning Middle - High School
71,411
48,771
22,640
46.4
%
Adult
22,474
8,341
14,133
169.4
%
Total Career Learning
93,885
57,112
36,773
64.4
%
Total Revenues $
400,226
$
370,960
$
29,266
7.9
%
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
September 30,
2021 / 2020
2021
2020
#
%
(In thousands, except
percentages)
General Education (1)
147.6
164.6
(17.0
)
(10.3
%)
Career Learning (1)(2)
42.0
30.8
11.2
36.4
%
Total Enrollment
189.6
195.4
(5.8
)
(3.0
%)
(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
September 30,
2021 / 2020
2021
2020
#
%
General Education $
1,885
$
1,718
$
167
9.7%
Career Learning
1,688
1,564
124
7.9%
Fiscal Year 2022 Outlook
The Company is forecasting the following for the full fiscal
year 2022:
- Revenue in the range of $1.56 billion to $1.60 billion.
- Capital expenditures in the range of $65 million to $75
million. Note that capital expenditures include the purchase of
property and equipment, capitalized software, and curriculum
development costs as defined on our Statement of Cash Flows.
- Effective tax rate of 28% to 30%.
- Adjusted operating income in the range of $165 million to $180
million. (1)
The Company is forecasting the following for the second quarter
fiscal 2022:
- Revenue in the range of $390 million to $400 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 $55 million to $60
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 first quarter fiscal year 2022
financial results during a conference call scheduled for Tuesday,
October 19, 2021 at 5:00 p.m. eastern time (ET).
A live webcast of the call will be available at
https://event.on24.com/wcc/r/3424006/15C710CEDD571AAF3D7E93B85DF67FFF.
To participate in the live call, investors and analysts should dial
(833) 900-1536 (domestic) or (236) 712-2276 (international) at 4:45
p.m. (ET). The conference ID number is 7562832. 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 October 19,
2021 at 8:00 p.m. (ET) through November 19, 2021 at 8:00 p.m. (ET)
by dialing (800) 585-8367 (domestic) or (416) 621-4642
(international) and entering the conference ID 7562832. A webcast
replay will be available at
https://event.on24.com/wcc/r/3424006/15C710CEDD571AAF3D7E93B85DF67FFF
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 predict
how the COVID-19 pandemic will continue to impact our business;
inability to achieve a sufficient level of new enrollments to
sustain our business model; failure to replace students who have
graduated from the terminal grade in a school or have left our
programs for other reasons with new students of a sufficient
number; inability to maintain our current rate of retention of
students enrolled in our courses; an increase in the amount of
failures to enter into new school contracts or renew existing
contracts, in part or in their entirety; the failure of perceived
industry trends and projections resulting from the expected effects
of COVID-19 on virtual education; 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 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 education 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 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
ended September 30, 2021 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 September 30,
2021, 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
September 30,
2021
2020
(In thousands except share and per share data)
Revenues $
400,226
$
370,960
Instructional costs and services
273,824
241,069
Gross margin
126,402
129,891
Selling, general, and administrative expenses
133,379
117,827
Income (loss) from operations
(6,977
)
12,064
Interest expense, net
(1,993
)
(2,107
)
Other income (expense), net
(89
)
429
Income (loss) before income taxes and income (loss) from equity
method investments
(9,059
)
10,386
Income tax benefit
2,893
2,376
Income (loss) from equity method investments
283
(96
)
Net income (loss) attributable to common stockholders $
(5,883
)
$
12,666
Net income (loss) attributable to common stockholders per
share: Diluted $
(0.15
)
$
0.30
Weighted average shares used in computing per share amounts:
Diluted
40,559,066
42,189,673
STRIDE INC.
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
September 30,
June 30,
2021
2021
(audited) (In thousands except share and per share
data) ASSETS Current assets Cash and cash
equivalents $
218,519
$
386,080
Accounts receivable, net of allowance of $21,935 and $21,384
519,393
369,303
Inventories, net
24,873
39,690
Prepaid expenses
38,358
19,453
Other current assets
56,436
43,004
Total current assets
857,579
857,530
Operating lease right-of-use assets, net
96,471
94,671
Property and equipment, net
76,884
72,069
Capitalized software, net
57,965
57,308
Capitalized curriculum development costs, net
49,866
50,376
Intangible assets, net
96,267
99,480
Goodwill
240,353
240,353
Deposits and other assets
94,980
105,510
Total assets $
1,570,365
$
1,577,297
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable $
58,589
$
62,144
Accrued liabilities
75,746
77,642
Accrued compensation and benefits
35,945
80,363
Deferred revenue
64,918
38,110
Current portion of finance lease liability
32,413
27,336
Current portion of operating lease liability
17,023
20,649
Total current liabilities
284,634
306,244
Long-term finance lease liability
46,747
41,568
Long-term operating lease liability
82,568
77,458
Long-term debt
410,269
299,271
Deferred tax liability
7,783
31,853
Other long-term liabilities
18,458
16,255
Total liabilities
850,459
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;
47,111,604 and 46,911,527 shares issued; and 41,776,861 and
41,576,784 shares outstanding, respectively
4
4
Additional paid-in capital
708,265
795,449
Accumulated other comprehensive income (loss)
(330
)
(474
)
Retained earnings
114,449
112,151
Treasury stock of 5,334,743 shares at cost
(102,482
)
(102,482
)
Total stockholders’ equity
719,906
804,648
Total liabilities and stockholders' equity $
1,570,365
$
1,577,297
STRIDE INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
2021
2020
(In thousands)
Cash flows from operating activities Net income (loss) $
(5,883
)
$
12,666
Adjustments to reconcile net income (loss) to net cash used in
operating activities: Depreciation and amortization expense
24,147
18,277
Stock-based compensation expense
8,286
8,893
Deferred income taxes
5,484
8,065
Provision for doubtful accounts
152
4,875
Amortization of discount and fees on debt
404
1,219
Noncash operating lease expense
5,005
4,789
Other
4,325
6,003
Changes in assets and liabilities: Accounts receivable
(150,263
)
(196,953
)
Inventories, prepaid expenses, deposits and other current and
long-term assets
1,260
(23,975
)
Accounts payable
(1,256
)
30,893
Accrued liabilities
(2,464
)
(1,883
)
Accrued compensation and benefits
(44,395
)
(19,629
)
Operating lease liability
(5,321
)
(5,165
)
Deferred revenue and other liabilities
29,009
37,392
Net cash used in operating activities
(131,510
)
(114,533
)
Cash flows from investing activities Purchase of property
and equipment
(1,278
)
(1,106
)
Capitalized software development costs
(9,690
)
(7,204
)
Capitalized curriculum development costs
(4,376
)
(4,488
)
Sale of long-lived assets
—
223
Other acquisitions and investments, net of distributions
(192
)
(3,113
)
Proceeds from the maturity of marketable securities
1,501
—
Purchases of marketable securities
(9,196
)
—
Net cash used in investing activities
(23,231
)
(15,688
)
Cash flows from financing activities Repayments on finance
lease obligations
(7,020
)
(5,669
)
Repayments on credit facility
—
(100,000
)
Issuance of convertible senior notes, net of issuance costs
—
409,390
Purchases of capped calls in connection with convertible senior
notes
—
(60,354
)
Proceeds from exercise of stock options
246
32
Withholding of stock options for tax withholding
—
(10,885
)
Repurchase of restricted stock for income tax withholding
(6,043
)
(5,808
)
Net cash provided by (used in) financing activities
(12,817
)
226,706
Net change in cash, cash equivalents and restricted cash
(167,558
)
96,485
Cash, cash equivalents and restricted cash, beginning of
period
386,582
213,299
Cash, cash equivalents and restricted cash, end of period $
219,024
$
309,784
Reconciliation of cash, cash equivalents and restricted
cash to balance sheet as of September 30th: Cash and cash
equivalents $
218,519
$
308,784
Other current assets (restricted cash)
505
500
Deposits and other assets (restricted cash)
—
500
Total cash, cash equivalents and restricted cash $
219,024
$
309,784
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance
with GAAP, we have presented adjusted operating income (loss), 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.
- 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. These measures remove
stock-based compensation, which is a non-cash charge that varies
based on market volatility and the terms and conditions of the
awards. Adjusted EBITDA also removes depreciation and amortization,
which can vary depending upon accounting methods and the book value
of assets. Adjusted EBITDA provides 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.
First Quarter Fiscal 2022
Three Months Ended
September 30,
2021
2020
(In thousands)
Income (loss) from operations
$
(6,977
)
$
12,064
Stock-based compensation expense
8,286
8,893
Amortization of intangible assets
3,213
2,052
Adjusted operating income
4,522
23,009
Depreciation and other amortization
20,934
16,225
Adjusted EBITDA
$
25,456
$
39,234
EBITDA
$
17,170
$
30,341
Fiscal Year 2022 Outlook
Three Months EndedDecember 31, 2021 Year EndedJune 30,
2022 Low High Low High (In
millions) Income from operations
$
44.3
$
48.8
$
123.0
$
136.0
Stock-based compensation expense
7.5
8.0
29.0
31.0
Amortization of intangible assets
3.2
3.2
13.0
13.0
Adjusted operating income
$
55.0
$
60.0
$
165.0
$
180.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211019005782/en/
Investor Contact Timothy Casey Vice President, Investor
Relations Stride, Inc. tcasey@k12.com
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