STRIDE, INC. Certain statements in Management's Discussion and Analysis or MD&A, other than
purely historical information, including estimates, projections, statements
relating to our business plans, objectives and expected operating results, and
the assumptions upon which those statements are based, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended, or the
Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act. These forward-looking statements generally are
identified by the words "believe," "project," "expect," "anticipate,"
"estimate," "intend," "strategy," "plan," "may," "should," "will," "would,"
"will be," "will continue," "will likely result," and similar expressions.
Historical results may not indicate future performance. Our forward-looking
statements reflect our current views about future events, are based on
assumptions and are subject to known and unknown risks and uncertainties that
could cause actual results to differ materially from those contemplated by these
statements. Factors that may cause differences between actual results and those
contemplated by forward-looking statements include, but are not limited to,
those discussed in "Risk Factors" in Part I, Item 1A, of our Annual Report on
Form 10-K for the fiscal year ended
This MD&A is intended to assist in understanding and assessing the trends and
significant changes in our results of operations and financial condition. As
used in this MD&A, the words, "we," "our" and "us" refer to
? Executive Summary - a general description of our business and key highlights of
the three months ended
? Critical Accounting Policies and Estimates - a discussion of critical
accounting policies requiring judgments and estimates.
? Results of Operations - an analysis of our results of operations in our
condensed consolidated financial statements.
Liquidity and Capital Resources - an analysis of cash flows, sources and uses
? of cash, commitments and contingencies, and quantitative and qualitative
disclosures about market risk.
Executive Summary
We are an education services company providing virtual and blended learning. Our technology-based products and services enable our 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.
Our clients are primarily public and private schools, school districts, and charter boards. Additionally, we offer solutions to employers, government agencies and consumers.
We offer a wide range of individual products and services, as well as customized
solutions, such as our most comprehensive school-as-a-service offering which
supports our clients in operating full-time virtual or blended schools. More
than three million students have attended schools powered by Stride curriculum
and services since our inception. In our most recent academic year ended
Our solutions address two growing markets: General Education and Career
Learning.
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General Education Career Learning
? School-as-a-service ? Stride Career Prep
school-as-a-service
? Stride Private Schools ? Learning Solutions Career Learning
software and services sales
? Learning Solutions software and
services sales ? Adult Learning
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. Programs utilizing General Education products and services are for students that are not specializing in any particular curriculum or course of study. 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, health care and general business. We provide 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 are required to succeed 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 not reported as a Career
Learning enrollment or Career Learning revenue. However, a student and the
associated revenue is counted as a Career Learning enrollment or Career Learning
revenue if the student is enrolled in a Career Learning program. 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. We also offer focused post-secondary career learning programs to adult
learners, through our
For both the General Education and Career Learning markets, the majority of
revenue is derived from our comprehensive school-as-a-service offering which
includes an integrated package of curriculum, technology systems, instruction,
and support services that we administer on behalf of our customers. The average
duration of the agreements for our school-as-a-service offering is greater than
five years, and most provide for automatic renewals absent a customer
notification within a negotiated time frame. During any fiscal year, we may
enter into new agreements, receive non-automatic renewal notices, negotiate
replacement agreements, terminate such agreements or receive notices of
termination, or customers may transition a school to a different offering. For
the 2021-2022 school year, we provide our school-as-a-service offering for 80
schools in 30 states and the
We generate a significant portion of our revenues from the sale of curriculum, administration support and technology services to virtual and blended public schools. The amount of revenue generated from these contracts is impacted largely by the number of enrollments, the mix of enrollments across grades and states, state or district per student funding levels and attendance requirement, among other items. The average duration of the agreements for our school-as-a-service offering is greater than five years, and most provide for automatic renewals absent a customer notification within a
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negotiated time frame.
The two key financial metrics that we use to assess financial performance are
revenues and operating income. For the three months ended
While the long-term impact of the global emergence of COVID-19 is not estimable or determinable, beginning in late fiscal year 2020, we experienced an increase in demand for our products and services.
Environmental, Social and Governance
As overseers of risk and stewards of long-term enterprise value, Stride's Board
of Directors plays a vital role in assessing our organization's environmental
and social impacts. They are also responsible for understanding the potential
impact and related risks of environmental, social and governance ("ESG") issues
on the organization's operating model. Our Board and management are committed to
identifying those ESG issues most likely to impact business operations and
growth. We craft policies that are appropriate for our industry and that are of
concern to our employees, investors, customers and other key stakeholders. Our
Board ensures that the Company's leaders have ample opportunity to leverage ESG
for the long-term good of the organization, its stakeholders, and society. Each
Committee of the Board monitors ESG efforts in their respective areas, with the
Since our inception twenty years ago, we have removed barriers that impact
academic equity. We provide high-quality education for anyone-particularly those
in underserved communities-as a means to foster economic empowerment and address
societal inequities from kindergarten all the way through college and career
readiness. We recently reinforced our commitment in this area by launching
several initiatives including initially offering scholarships to advance
education and career opportunities for black students, expanding career pathways
in socially responsible law enforcement and increasing employment of black
teachers at Stride-powered schools. We are also designing interactive courses on
the history of systemic racism that we will make available for free to every
public school. On
Among the many ESG issues we support within the Company, we endeavor to promote
diversity and inclusion across every aspect of the organization. We sponsor
employee resource groups to provide support for female, minority, differently
abled, LGBTQ+, and veteran employees and support employee volunteer efforts. Our
commitment is evident in the make-up of our leadership team. We have more
minorities in executive management and more women in executive management than
the representative population. Importantly, our Board of Directors is also
diverse with female, Hispanic, and
Our commitment to ESG initiatives is an endeavor both the Board and management undertake for the general betterment of those both inside and outside of our Company.
The nature of our business supports environmental sustainability. Most of our employees work from home and most students at Stride-powered schools attend virtual classes, even prior to the COVID-19 crisis, reducing the carbon output from commuting in cars or buses. Our online curriculum reduces the need for paper. Our meetings are most often held virtually using digital first presentations rather than paper.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in
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results could differ from those estimates, and any such differences may be material to our consolidated financial statements. Critical accounting policies are disclosed in our Annual Report. There have been no significant updates to our critical accounting policies disclosed in our Annual Report.
Results of Operations
Impacts of COVID-19 on Stride's Business
While the long-term impact of the global emergence of COVID-19 is not estimable or determinable, beginning in late fiscal year 2020, we experienced an increase in demand for our products and services.
We continue to conduct business as usual with some modifications to employee travel, employee work locations, and cancellation of certain events. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers and prospects, or on our long-term financial results.
Lines of Revenue
We operate 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. The Chief Operating Decision Maker evaluates profitability based on consolidated results. We have two lines of revenue: (i) General Education and (ii) Career Learning.
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 only 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. No enrollments are included in Career Learning for Galvanize, Tech Elevator or MedCerts. This data includes enrollments for which Stride receives no public funding or revenue.
If the mix of enrollments changes, our revenues will be impacted to the extent the average revenue per enrollment is significantly different. We do not award or permit incentive compensation to be paid to our public school program enrollment staff or contractors based on the number of students enrolled.
The following represents our current enrollment for each of the periods
indicated:
Three Months Ended
September 30, 2021 / 2020
2021 2020 Change Change %
(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)%
Enrollments reported for the first quarter are equal to the official count
(1) date number, which was
year 2022 and
(2) No enrollments are included in Career Learning for Galvanize, Tech Elevator
or MedCerts.
Revenue Data
Revenues are captured by market based on the underlying customer contractual agreements. Where customers purchase products and services for both General Education and Career Learning markets we allocate revenues based on the program each student selects for enrollment. All kindergarten through fifth grade students are considered General
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Education students. Periodically, a middle school or high school student enrollment may change line of revenue classification.
The following represents our current revenues for each of 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%
Products and Services
Stride has invested over
Curriculum and Content - Stride has one of the largest digital research-based curriculum portfolios for the K-12 online education industry that includes some of the best in class content available in the market. Our customers can select from hundreds of high-quality, engaging, online coursework and content, as well as many state customized versions of those courses, electives, and instructional supports. Since our inception, we have built core courses on a foundation of rigorous standards, following the guidance and recommendations of leading educational organizations at the national and state levels. State standards are continually evolving, and we continually invest in our curriculum to meet these changing requirements. Through our subsidiaries Galvanize, Tech Elevator and MedCerts, we have added high-quality, engaging, online coursework and content in software engineering, data science, healthcare, and medical fields.
Systems - We have established a secure and reliable technology platform, which integrates proprietary and third-party systems, to provide a high-quality educational environment and gives us the capability to grow our customer programs and enrollment. Our end-to-end platform includes single-sign on capability for our content management, learning management, student information, data reporting and analytics, and various support systems that allow customers to provide a high-quality and personalized educational experience for students. A la carte offerings can provide curriculum and content hosting on customers' learning management systems, or integration with customers' student information systems.
Instructional Services - We offer a broad range of instructional services that includes customer support for instructional teams, including recruitment of state certified teachers, training in research-based online instruction methods and Stride systems, oversight and evaluation services, and ongoing professional development. Stride also provides training options to support teachers and parents to meet students' learning needs. Stride's range of training options are designed to enhance skills needed to teach using an online learning platform, and include hands-on training, on-demand courses, and support materials.
Support Services - We offer a broad range of support services, including marketing and enrollment, supporting prospective students through the admission process, assessment management, administrative support (e.g., budget proposals, financial reporting, and student data reporting), and technology and materials support (e.g., provisioning of student computers, offline learning kits, internet access and technology support services).
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Financial Information
The following table sets forth statements of operations data and the amounts as a percentage of revenues for each of the periods indicated:
Three Months Ended September 30,
2021 2020
(Dollars in thousands)
Revenues $ 400,226 100.0 % $ 370,960 100.0 %
Instructional costs and services 273,824 68.4 241,069 65.0
Gross margin 126,402 31.6 129,891 35.0
Selling, general, and administrative
expenses 133,379 33.3 117,827 31.8
Income (loss) from operations (6,977) (1.7) 12,064 3.3
Interest expense, net (1,993) (0.5) (2,107) (0.6)
Other income (expense), net (89) (0.0) 429 0.1
Income (loss) before income taxes and
income (loss) from equity method
investments (9,059) (2.3) 10,386 2.8
Income tax benefit 2,893 0.7 2,376 0.6
Income (loss) from equity method
investments 283 0.1 (96) (0.0)
Net income (loss) attributable to common
stockholders $ (5,883) (1.5) % $ 12,666 3.4 %
Comparison of the Three Months Ended
Revenues. Our revenues for the three months ended
Instructional costs and services expenses. Instructional costs and services
expenses for the three months ended
Selling, general, and administrative expenses. Selling, general, and
administrative expenses for the three months ended
Income tax benefit. Income tax benefit was
Liquidity and Capital Resources
As of
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first fiscal quarter as we begin billing for students. In addition, our cash and
accounts receivable were significantly in excess of our accounts payable and
short-term accrued liabilities at
During the first quarter of fiscal year 2021, we issued
Before
On
We are a lessee under finance lease obligations for student computers and
peripherals under loan agreements with
We entered into an agreement with BALC in
Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to interest on our Notes, office facility leases, capital equipment leases and other operating leases. We expect to make future payments on existing leases from cash generated from operations. We believe that the combination of funds to be generated from operations, proceeds from our Notes, borrowing on our Credit Facility and net working capital on hand will be adequate to finance our ongoing operations for the foreseeable future. In addition, we continue to explore acquisitions, strategic investments and joint ventures related to our business that we may acquire using cash, stock, debt, contribution of assets or a combination thereof.
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Operating Activities
Net cash used in operating activities for the three months ended
Investing Activities
Net cash used in investing activities for the three months ended
Financing Activities
Net cash used in financing activities for the three months ended
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