STRIDE, INC. 
By 
Stride is a leading online education company, provides a learning platform and services to students of all ages and educational institutions. The group offers a full range of educational programs, from kindergarten to adult professional training. Its goal is to transform the learning experience by providing interactive online courses, digital learning resources, and personalized support.
Revenue is generated through two main lines of business. The first line includes products and services tailored to the General Education market, covering core subjects such as math, English, science, and history for kindergarten through twelfth-grade students. These programs offer alternative schooling options to address a range of student needs, such as safety concerns, academic support, flexibility, and advanced learning. Stride offers comprehensive school-as-a-service packages or individual offerings to educational institutions.
It provides middle and high school students with Career Learning programs that complement their core general education coursework. These programs expose students to a variety of career options, offer skill development opportunities, and provide industry-specific content pathways. High school students can engage in project-based learning, and career development services, and participate in work-based learning experiences to prepare for success in the digital, tech-enabled economy.
In addition to its educational offerings, Stride also offers post-secondary career learning programs through subsidiary companies, including Galvanize, Tech Elevator, and MedCerts. These programs provide skills training in software engineering, healthcare, and medical fields, and offer staffing and talent development services to employers.
An unexpected opportunity:
The Covid-19 pandemic and subsequent lockdowns had a notable impact on Stride from a financial perspective. As schools worldwide shifted to remote learning, there was a surge in demand for online education solutions, leading to increased enrollments. The company's established virtual learning platforms and comprehensive support services positioned it well to meet this demand. This resulted in revenue growth and enhanced market recognition as a reliable online education provider. Moreover, the pandemic accelerated investments in technology and infrastructure, with it making significant upgrades to its platforms and systems to deliver a seamless virtual learning experience. While the pandemic presented opportunities for growth, it also brought challenges such as adapting to changing educational policies and addressing the unique needs of students with limited technology access.
Risks:
It operates in a highly competitive online education market, where the presence of numerous established and emerging players can put pressure on the company's market share and margins. In addition, governmental regulations in the field of education may have a significant impact on Stride's operations. Changes in educational policies, certification, and compliance requirements may require significant adjustments in the Company's programs and processes. In addition, the business is exposed to technology dependency as it relies on advanced infrastructure and systems to deliver its online services. Any technical problem, major outage, or cyber-attack could result in service interruptions, data loss, and reputational damage. Cost volatility, fluctuating customer needs, economic risks, reputation and trust, and the effective management of these risks are all challenges that the company faces in maintaining its competitive position and growth in the online education industry. It is also exposed to risks associated with the use of artificial intelligence (AI) in its online learning platforms, including potential inaccuracies and biases in AI algorithms used for personalized learning and concerns regarding data privacy and security.
Financial Results
Stride's balance sheet is rather neat with net debt at $88.3 million against EBITDA at $273 million. Return on equity (ROE) stabilizes at around 13.2% in 2022 (analysts forecast 13.8% in 2025). Return on net assets (ROA) is 4.53% in 2021.
It reported revenues of $1.6 billion, reflecting a 9.8% increase compared to the previous year. General Education revenues decreased by 0.5%, primarily due to a decline in enrollments. However, Career Learning revenues saw a significant growth of 60.9%, driven by increased enrollments and acquisitions of MedCerts and Tech Elevator.
The group also reported an increase in instructional costs and services expenses to $1.090 billion, up by 8.8% compared to the previous year. This was mainly due to hiring personnel in growth states and salary increases. Selling, general, and administrative expenses also rose to $439.8 million, a 3.6% increase, driven by factors such as bad debt expenses, licensing fees, and professional services and marketing expenses. Net interest expense decreased to $8.3 million, and income tax expense was $40.1 million, accounting for 27.2% of income before taxes. These financial figures indicate the company's efforts to manage expenses while pursuing growth opportunities.
After a year of record-breaking operations in 2022, Stride enters 2023 on a solid footing. The company has improved its financial position, creating opportunities for acquiring new companies and consolidating its leadership position. It demonstrates growth and profitability surpassing its peers, while also generating high cash flow, with FCF increasing by 292% over the period 2020-2022. This cash flow is utilized to finance its growth, particularly through external acquisitions.
It has a balance sheet that should allow it to seize organic and external growth opportunities in the future. But to remain competitive, it should focus on differentiation and innovation, invest in robust technological infrastructure and cybersecurity measures, and explore strategic partnerships and acquisitions to expand its market presence while diversifying its offerings.
