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, 2025
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)
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 25, 2025, the Registrant had 43,523,253 shares of common stock, $0.0001 par value per share outstanding.
Stride, Inc.
Form 10-Q
For the Quarterly Period Ended March 31, 2025
Index
Page | ||
| Number | |
3 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 | |
39 | ||
39 | ||
41 | ||
41 | ||
41 | ||
41 | ||
41 | ||
41 | ||
41 | ||
42 | ||
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
STRIDE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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, | ||||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
(In thousands except share and per share data) | ||||||||||||
Revenues | $ | 613,376 | $ | 520,837 | $ | 1,751,670 | $ | 1,505,886 | ||||
Instructional costs and services | 364,086 | 319,508 | 1,046,670 | 930,495 | ||||||||
Gross margin | 249,290 | 201,329 | 705,000 | 575,391 | ||||||||
Selling, general, and administrative expenses | 118,504 | 113,016 | 401,771 | 399,469 | ||||||||
Income from operations | 130,786 | 88,313 | 303,229 | 175,922 | ||||||||
Interest expense, net | (2,787) | (2,404) | (7,810) | (6,494) | ||||||||
Other income, net | 7,360 | 7,678 | 23,469 | 19,381 | ||||||||
Income before income taxes and income (loss) from equity method investments | 135,359 | 93,587 | 318,888 | 188,809 | ||||||||
Income tax expense | (35,450) | (24,657) | (80,088) | (48,383) | ||||||||
Income (loss) from equity method investments | (563) | 757 | (2,179) | 975 | ||||||||
Net income attributable to common stockholders | $ | 99,346 | $ | 69,687 | $ | 236,621 | $ | 141,401 | ||||
Net income attributable to common stockholders per share: | ||||||||||||
Basic | $ | 2.31 | $ | 1.63 | $ | 5.50 | $ | 3.32 | ||||
Diluted | $ | 2.02 | $ | 1.60 | $ | 4.95 | $ | 3.26 | ||||
Weighted average shares used in computing per share amounts: | ||||||||||||
Basic | 43,092,682 | 42,684,561 | 42,992,727 | 42,581,869 | ||||||||
Diluted | 49,181,728 | 43,655,841 | 47,798,923 | 43,389,903 | ||||||||
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, | ||||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
(In thousands) | ||||||||||||
Net income | $ | 99,346 | $ | 69,687 | $ | 236,621 | $ | 141,401 | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Foreign currency translation adjustment | (7) | 2 | (8) | (7) | ||||||||
Comprehensive income attributable to common stockholders | $ | 99,339 | $ | 69,689 | $ | 236,613 | $ | 141,394 | ||||
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 | Accumulated Other | Retained | Treasury Stock | |||||||||||||||||
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| Earnings |
| Shares |
| Amount |
| Total | |||||||
Balance, June 30, 2024 | 48,576,164 | $ | 4 | $ | 720,033 | $ | (42) | $ | 558,512 | (5,334,743) | $ | (102,482) | $ | 1,176,025 | ||||||||
Net income | — | — | — | — | 40,882 | — | — | 40,882 | ||||||||||||||
Foreign currency translation adjustment | — | — | — | (16) | — | — | — | (16) | ||||||||||||||
Stock-based compensation expense | — | — | 8,592 | — | — | — | — | 8,592 | ||||||||||||||
Vesting of performance share units, net of tax withholding | 135,921 | — | — | — | — | — | — | — | ||||||||||||||
Issuance of restricted stock awards | 278,234 | — | — | — | — | — | — | — | ||||||||||||||
Forfeiture of restricted stock awards | (14,037) | — | — | — | — | — | — | — | ||||||||||||||
Repurchase of restricted stock for tax withholding | (54,345) | — | (11,137) | — | — | — | — | (11,137) | ||||||||||||||
Balance, September 30, 2024 | 48,921,937 | $ | 4 | $ | 717,488 | $ | (58) | $ | 599,394 | (5,334,743) | $ | (102,482) | $ | 1,214,346 | ||||||||
Net income | — | — | — | — | 96,393 | — | — | 96,393 | ||||||||||||||
Foreign currency translation adjustment | — | — | — | 15 | — | — | — | 15 | ||||||||||||||
Stock-based compensation expense | — | — | 8,110 | — | — | — | — | 8,110 | ||||||||||||||
Vesting of performance share units, net of tax withholding | 3,437 | — | — | — | — | — | — | — | ||||||||||||||
Issuance of restricted stock awards | 18,998 | — | — | — | — | — | — | — | ||||||||||||||
Forfeiture of restricted stock awards | (47,472) | — | — | — | — | — | — | — | ||||||||||||||
Repurchase of restricted stock for tax withholding | (6,557) | — | (759) | — | — | — | — | (759) | ||||||||||||||
Balance, December 31, 2024 | 48,890,343 | $ | 4 | $ | 724,839 | $ | (43) | $ | 695,787 | (5,334,743) | $ | (102,482) | $ | 1,318,105 | ||||||||
Net income | — | — | — | — | 99,346 | — | — | 99,346 | ||||||||||||||
Foreign currency translation adjustment | — | — | — | (7) | — | — | — | (7) | ||||||||||||||
Stock-based compensation expense | — | — | 8,637 | — | — | — | — | 8,637 | ||||||||||||||
Issuance of restricted stock awards | 16,898 | — | — | — | — | — | — | — | ||||||||||||||
Forfeiture of restricted stock awards | (19,825) | — | — | — | — | — | — | — | ||||||||||||||
Repurchase of restricted stock for tax withholding | (62,794) | — | (8,709) | — | — | — | — | (8,709) | ||||||||||||||
Balance, March 31, 2025 | 48,824,622 | $ | 4 | $ | 724,767 | $ | (50) | $ | 795,133 | (5,334,743) | $ | (102,482) | $ | 1,417,372 | ||||||||
6
See accompanying notes to unaudited condensed consolidated financial statements.
7
STRIDE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, | ||||||
| 2025 |
| 2024 | |||
(In thousands) | ||||||
Cash flows from operating activities | ||||||
Net income | $ | 236,621 | $ | 141,401 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization expense | 84,470 | 81,464 | ||||
Stock-based compensation expense | 24,922 | 21,272 | ||||
Deferred income taxes | 5,655 | (4,629) | ||||
Provision for credit losses | 13,357 | 18,895 | ||||
Amortization of fees on debt | 1,238 | 1,236 | ||||
Noncash operating lease expense | 9,230 | 11,055 | ||||
Other | 1,712 | 1,444 | ||||
Changes in assets and liabilities: | ||||||
Accounts receivable | (240,429) | (133,144) | ||||
Inventories, prepaid expenses, deposits and other current and long-term assets | (3,643) | (2,763) | ||||
Accounts payable | (528) | (11,585) | ||||
Accrued liabilities | 8,463 | (9,875) | ||||
Accrued compensation and benefits | 4,149 | 4,834 | ||||
Operating lease liability | (9,583) | (11,695) | ||||
Deferred revenue and other liabilities | (1,142) | (1,315) | ||||
Net cash provided by operating activities | 134,492 | 106,595 | ||||
Cash flows from investing activities | ||||||
Purchase of property and equipment | (1,350) | (1,500) | ||||
Capitalized software development costs | (28,605) | (30,130) | ||||
Capitalized curriculum development costs | (15,451) | (13,534) | ||||
Other acquisitions, loans and investments, net of distributions | (1,681) | (693) | ||||
Proceeds from the maturity of marketable securities | 221,530 | 107,020 | ||||
Purchases of marketable securities | (227,786) | (162,179) | ||||
Net cash used in investing activities | (53,343) | (101,016) | ||||
Cash flows from financing activities | ||||||
Repayments on finance lease obligations | (29,957) | (32,212) | ||||
Repurchase of restricted stock for income tax withholding | (20,672) | (7,597) | ||||
Net cash used in financing activities | (50,629) | (39,809) | ||||
Net change in cash, cash equivalents and restricted cash | 30,520 | (34,230) | ||||
Cash, cash equivalents and restricted cash, beginning of period | 500,614 | 410,807 | ||||
Cash, cash equivalents and restricted cash, end of period | $ | 531,134 | $ | 376,577 | ||
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of March 31st: | ||||||
Cash and cash equivalents | $ | 528,547 | $ | 376,577 | ||
Other current assets (restricted cash) | 476 | — | ||||
Deposits and other assets (restricted cash) | 2,111 | — | ||||
Total cash, cash equivalents and restricted cash | $ | 531,134 | $ | 376,577 | ||
See accompanying notes to unaudited condensed consolidated financial statements.
8
1. Description of the Business
Stride, Inc., together with its subsidiaries (“Stride” or the “Company”) is a technology company providing an educational platform to deliver online learning to students throughout the U.S. The brand reflects the Company’s continued growth into lifelong learning, regardless of a student’s age or location. The Company’s platform hosts products and services 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 provides 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. Products and services are delivered as a comprehensive school-as-a-service offering for schools or as stand-alone products and services. A student enrolled in a school that offers Stride’s General Education program may elect to take career courses, but that student and the associated revenue is reported as a General Education enrollment and General Education revenue. |
| ● | 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. Stride offers multiple career pathways through a broad catalog of 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 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 is reported as a Career Learning enrollment and associated Career Learning revenue only if the student is enrolled in a Career Learning program. Like General Education products and services, the products and services for Career Learning are sold as a comprehensive school-as-a-service offering or as stand-alone products and services. The Company also provides focused post-secondary career learning programs to adult learners, for the software engineering, healthcare, and medical fields. These programs are sold directly to consumers, employers and government agencies. |
2. Basis of Presentation
The accompanying condensed consolidated balance sheet as of March 31, 2025, the condensed consolidated statements of operations and comprehensive income for the three and nine months ended March 31, 2025 and 2024, the condensed consolidated statements of cash flows for the nine months ended March 31, 2025 and 2024, and the condensed consolidated statements of stockholders’ equity for the three and nine months ended March 31, 2025 and 2024 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, 2025 are not necessarily indicative of the results to be expected for the year ending June 30, 2025, for any other interim period or for any other future fiscal year. The condensed consolidated balance sheet as of June 30, 2024 has been derived from the audited consolidated financial statements at that date.
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
9
STRIDE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
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 6, 2024, which contains the Company’s audited financial statements for the fiscal year ended June 30, 2024.
The Company operates in one operating and reportable business segment as a technology company providing an educational platform to deliver 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 provided relief to companies that would have been 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 extended the provisions of Topic 848 to December 31, 2024. The Company’s senior secured revolving credit facility included the use of alternate rates when LIBOR was not available. The Company’s senior secured revolving credit facility expired on January 27, 2025 and the Company did not have any contract modifications which required the application of this guidance prior to its expiration.
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 is reviewing the extent of new disclosures necessary prior to implementation for 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.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) ("ASU 2024-03"). This update provides investors with enhanced detail regarding components of expenses presented in the income statement, aiming to improve transparency and enable precise understanding of a company’s cost structure. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company will review the extent of new disclosures necessary in the coming quarters, prior to implementation during fiscal year 2028.
10
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
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, 2025 and 2024. Historically, aggregate funding estimates have differed from actual reimbursements, generally in the range of 2% of annual revenue or less, 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, 2025 and 2024, the Company’s revenues included a reduction for net school operating losses at the schools of $4.2 million and $3.3 million, respectively, and $12.9 million and $11.6 million for the nine months ended March 31, 2025 and 2024, 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, 2025 and 2024 were $165.5 million and $147.6 million, respectively, and for the nine months ended March 31, 2025 and 2024 were $477.2 million and $426.3 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 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
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, 2025 and 2024, approximately 95% and 94%, 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. During the nine months ended March 31, 2025 and 2024, approximately 95% and 93%, respectively, of the Company’s General Education revenues, and 100% and 100%, 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, 2025 and 2024:
Concentration of Customers
During the three and nine months ended March 31, 2025 and 2024, 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
The opening and closing balance of the Company’s accounts receivable, unbilled receivables and deferred revenue are as follows:
| March 31, | June 30, | June 30, | ||||||
2025 |
| 2024 | 2023 | ||||||
(In thousands) | |||||||||
Accounts receivable | $ | 699,817 | $ | 472,754 | $ | 463,722 | |||
Unbilled receivables (included in accounts receivable) | 22,598 | 19,499 | 20,647 | ||||||
Deferred revenue | 32,902 | 35,742 | 76,159 | ||||||
Deferred revenue, long-term (included in other long-term liabilities) | 610 | 1,097 | 2,061 | ||||||
The difference between the opening and closing balance of the accounts receivable and unbilled receivables relates to the timing of the Company’s billing in relation to month end and contractual agreements. The difference between the opening and closing balance of the deferred revenue relates to the timing difference between billings to customers and the service periods under the contract, as well as changes in the estimates of variable consideration. Typically, each of these balances are at their highest during the first quarter of the fiscal year and lowest at the end of the fiscal year. The amount of revenue recognized during the three months ended March 31, 2025 and 2024 that was included in the previous January 1st deferred revenue balance was $11.4 million and $21.1 million, respectively. The amount of revenue recognized during the nine months ended March 31, 2025 and 2024 that was included in the previous July 1st deferred revenue balance was $29.4 million and $40.1 million, respectively. During the three months ended March 31, 2025 and 2024, the Company recorded revenues of $12.8 million and $4.3 million, respectively, and $22.4 million and $8.8 million, respectively, during the nine months ended March 31, 2025 and 2024, related to performance obligations satisfied in prior periods.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the majority of its contracts, the Company’s performance obligations are satisfied over time, as the Company delivers, and the customer receives the services, over the service period of the contract. The Company’s payment terms are generally net or net , but can vary depending on the customer or when the school receives its funding from the state.
The Company has elected, as a practical expedient, not to report the value of unsatisfied performance obligations for contracts with customers that have an expected duration of one year or less. The amount of unsatisfied performance obligations for contracts with customers which extend beyond one year as of March 31, 2025 was $0.6 million.
Significant Judgments
The Company determined that the majority of its contracts with customers contain one performance obligation. The Company markets the products and services as an integrated package building off its curriculum offerings. It does not market distinct products or services to be sold independently from the curriculum offering. The Company provides the significant service of integrating the goods and services into the operation of the school and education of its students, for which the customer has contracted.
The Company has determined that the time elapsed method is the most appropriate measure of progress towards the satisfaction of the performance obligation. Generally, the Company delivers the integrated products and services package over the course of the Company’s fiscal year. This package includes enrollment, marketing, teacher training, etc. in addition to the core curriculum and instruction. All of these activities are necessary and contribute to the overall education of its students, which occurs evenly throughout the year. Accordingly, the Company recognizes revenue on a straight-line basis.
The Company determined that the expected value method is the most appropriate method to account for variable consideration and the Company’s forecasting method is an estimation process that uses probability to determine expected
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funding. On a monthly basis, the Company estimates the total funds each school will receive in a particular school year and the amount of full-year school revenues and operating expenses to determine the amount of revenue the Company will recognize. Enrollment and state funding rates are key inputs to this estimate. The estimates are adjusted monthly, and a cumulative catch-up adjustment is recorded to revenue as necessary to reflect the total revenues earned to date to be proportional to the total revenues to be earned in the fiscal year. The Company builds in known constraints (i.e., enrollment, funding, net operating losses, etc.) into the estimate of the variable consideration to record the most probable amount.
Sales Taxes
Sales tax collected from customers is excluded from revenues. Collected but unremitted sales tax is included as part of accrued liabilities in the condensed consolidated balance sheets. Revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales tax.
Consolidation
The condensed consolidated financial statements include the accounts of the Company, the wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Investments in Marketable Securities
The Company’s marketable securities generally consist of bonds and other securities which are classified as held-to-maturity. The securities with maturities between three months and one year are classified as short-term and are included in marketable securities on the condensed consolidated balance sheets. The securities with maturities greater than one year are classified as long-term and are included in deposits and other assets on the condensed consolidated balance sheets. Held-to-maturity securities are recorded at their amortized cost. The Company recorded interest income of $7.7 million and $6.9 million for the three months ended March 31, 2025 and 2024, respectively, and $23.3 million and $18.1 million for the nine months ended March 31, 2025 and 2024, respectively. This activity is recorded within other income (expense) within the condensed consolidated statements of operations.
The Company reviews the held-to-maturity debt securities for declines in fair value below the amortized cost basis under the credit loss model of Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses (“ASC 326”). Any decline in fair value related to a credit loss is recognized in the condensed consolidated statements of operations, with the amount of the loss limited to the difference between fair value and amortized cost. As of March 31, 2025 and June 30, 2024, the allowance for credit losses recognized related to held-to-maturity debt securities was zero.
As of March 31, 2025, the Company’s marketable securities consisted of investments in corporate bonds, U.S. treasury notes and commercial paper. The short-term and long-term portions were $195.1 million and $31.0 million, respectively. The maturities of the Company’s long-term marketable debt securities range from to two years. The following table summarizes the amortized cost, net carrying amount, and fair value disaggregated by class of instrument (in thousands).
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As of June 30, 2024, the Company’s marketable securities consisted of investments in corporate bonds, U.S. treasury notes and commercial paper. The short-term and long-term portions were $191.7 million and $21.9 million, respectively. The maturities of the Company’s long-term marketable debt securities range from to two years. The following table summarizes the amortized cost, net carrying amount, and fair value disaggregated by class of instrument (in thousands).
Allowance for | Net Carrying | Gross Unrealized | ||||||||||||
Amortized Cost | Credit Losses | Amount | Gains (Losses) | Fair Value | ||||||||||
Corporate Bonds | $ | 45,752 | $ | - | $ | 45,752 | $ | (95) | $ | 45,657 | ||||
U.S. Treasury Notes | 46,760 | - | 46,760 | (71) | 46,689 | |||||||||
Commercial Paper | 121,077 | - | 121,077 | 2 | 121,079 | |||||||||
Total | $ | 213,589 | $ | - | $ | 213,589 | $ | (164) | $ | 213,425 |
Allowance for Credit Losses
The Company maintains an allowance for credit losses primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company maintains an allowance under ASC 326 based on historical losses, changes in payment history, customer-specific information, current economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are incurred or information becomes available related to the customer or economic conditions.
The Company’s allowance for credit losses increased from $31.3 million as of June 30, 2024 to $34.7 million as of March 31, 2025. The increase of $3.4 million is due primarily to a $13.4 million current year provision, less $10.0 million in amounts written off.
The Company writes off accounts receivable based on the age of the receivable and the facts and circumstances surrounding the customer and reasons for non-payment. Actual write-offs might differ from the recorded allowance.
Inventories
Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual and blended public schools, and utilized directly by students. Inventories represent items that are purchased and held for sale and are recorded at the lower of cost (first-in, first-out method) or net realizable value. The Company classifies its inventory as current or long-term based on the holding period. As of March 31, 2025 and June 30, 2024, $12.6 million and $12.5 million, respectively, of inventory, net of reserves, was deemed long-term and included in deposits and other assets on the condensed consolidated balance sheets. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. The excess and obsolete inventory reserve was $6.6 million and $5.9 million at March 31, 2025 and June 30, 2024, respectively.
Other Current Assets
Other current assets primarily include textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services.
Capitalized Software-as-a-Service Costs
The Company capitalizes Software-as-a-Service (“SaaS”) license and implementation costs incurred in cloud computing contracts that are service contracts if they meet certain requirements. Those requirements are similar to the requirements for capitalizing costs incurred to develop internal-use software. Capitalization of SaaS costs ceases once the project is substantially complete and the software is ready for its intended purpose. Amortization is computed using the straight-line method over the term of the associated hosting contract, usually between and five years. The Company classifies its SaaS implementation costs as current or long-term based on the terms of the associated hosting contract. SaaS implementation costs deemed short-term are included in prepaid expenses, and those deemed long-term are included in
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deposits and other assets, on the condensed consolidated balance sheets. Impairment is recognized when it is no longer probable that the SaaS project will be completed and placed in service.
As of March 31, 2025 and June 30, 2024, the Company recorded $17.5 million and $13.3 million, respectively, of costs related to SaaS implementation within prepaid expenses in the condensed consolidated balance sheets. As of March 31, 2025 and June 30, 2024, the Company recorded $41.6 million and $44.1 million, respectively, of costs related to SaaS implementation within deposits and other assets in the condensed consolidated balance sheets.
Amortization expense reflected within instructional costs and services related to SaaS implementation costs was $0.9 million and zero during the three months ended March 31, 2025 and 2024, respectively, and $2.5 million and zero during the nine months ended March 31, 2025 and 2024, respectively. Amortization expense reflected within selling, general and administrative expenses related to SaaS implementation costs was $3.8 million and $4.1 million during the three months ended March 31, 2025 and 2024, respectively, and $12.0 million and $11.2 million during the nine months ended March 31, 2025 and 2024, respectively. There were no material impairments of SaaS implementation costs during the three and nine months ended March 31, 2025 and 2024, respectively.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under the finance lease). Amortization of assets capitalized under finance lease arrangements is included in depreciation expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The determination of the lease term is discussed below under “Leases.”
Property and equipment are depreciated over the following useful lives:
The Company makes an estimate of unreturned student computers and printers based on an analysis of recent trends of returns. The Company recorded accelerated depreciation of $1.2 million and $1.0 million for the three months ended March 31, 2025 and 2024, respectively, and $3.4 million and $3.3 million for the nine months ended March 31, 2025 and 2024, respectively, related to unreturned student computers and printers.
Depreciation expense, including accelerated depreciation, related to computers and printers provided to students reflected in instructional costs and services for the three months ended March 31, 2025 and 2024 was $11.0 million and $8.2 million, respectively, and $28.3 million and $25.2 million, respectively, during the nine months ended March 31, 2025 and 2024. Depreciation expense related to property and equipment reflected in selling, general, and administrative expenses for the three months ended March 31, 2025 and 2024 was $0.7 million and $1.0 million, respectively, and $2.1 million and $3.0 million, respectively, during the nine months ended March 31, 2025 and 2024.
The Company fully expenses computer peripheral equipment (e.g., keyboards, mouses) upon purchase as recovery has been determined to be uneconomical. These expenses totaled $0.4 million and $0.7 million for the three months ended March 31, 2025 and 2024, respectively, and $3.5 million and $3.7 million for the nine months ended March 31, 2025 and 2024, respectively, and are recorded as instructional costs and services.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Capitalized Software Costs
The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized. The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization.
Capitalized software additions totaled $28.6 million and $30.1 million for the nine months ended March 31, 2025 and 2024, respectively. The Company recorded amortization expense related to capitalized software of $8.2 million and $8.6 million during the three months ended March 31, 2025 and 2024, respectively, and $27.1 million and $25.4 million during the nine months ended March 31, 2025 and 2024, respectively, within instructional costs and services. Amortization expense related to capitalized software reflected in selling, general, and administrative expenses during the three months ended March 31, 2025 and 2024 was $2.5 million and $2.1 million, respectively, and $6.5 million and $5.7 million, respectively, during the nine months ended March 31, 2025 and 2024.
Capitalized Curriculum Development Costs
The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content.
The Company capitalizes curriculum development costs incurred during the application development stage, as well as the design and deployment phases of the project. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs are amortized is generally five years.
Total capitalized curriculum development additions were $15.5 million and $13.5 million for the nine months ended March 31, 2025 and 2024, respectively. These amounts are recorded on the condensed consolidated balance sheets net of amortization charges. Amortization expense for the three months ended March 31, 2025 and 2024 was $4.2 million and $4.3 million, respectively, and $13.0 million and $13.3 million for the nine months ended March 31, 2025 and 2024, respectively, and is recorded in instructional costs and services.
Leases
The Company’s principal leasing activities include student computers and peripherals, classified as finance leases, and facilities, classified as operating leases.
Leases are classified as operating leases unless they meet any of the criteria below to be classified as a finance lease:
| ● | the lease transfers ownership of the asset at the end of the lease; |
| ● | the lease grants an option to purchase the asset which the lessee is expected to exercise; |
| ● | the lease term reflects a major part of the asset’s economic life; |
| ● | the present value of the lease payments equals or exceeds the fair value of the asset; or |
| ● | the asset is specialized with no alternative use to the lessor at the end of the term. |
Finance Leases
The Company enters into agreements to finance the purchase of student computers and peripherals provided to students of its schools. Individual leases typically include 3-year payment terms. The Company pledges the assets financed to secure the outstanding leases.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Operating Leases
The Company enters into agreements for facilities that serve as offices for its headquarters and school operations. Lease terms vary between and 9 years. Certain leases include renewal options, usually based upon current market rates, as well as termination rights. The Company performs an evaluation of each lease to determine if the lease payments included in the renewal option should be included in the initial measurement of the lease liability.
Discount Rate
The present value of the lease payments is calculated using either the rate implicit in the lease, or the lessee’s incremental borrowing rate, over the lease term. For the majority of the Company’s finance and operating leases, the stated rate is not defined within the lease terms. Therefore, the Company uses its incremental borrowing rate as the discount rate. The incremental borrowing rate is defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment and is calculated using comparative credit ratings.
Policy Elections
Short-term Leases
The Company has elected as an on-going accounting policy election not to record a right-of-use asset or lease liability on its short-term facility leases of 12 months or less, and will expense its lease payments on a straight-line basis over the lease term. The accounting policy election is made by class of underlying asset to which the right of use relates. The Company has elected to apply the accounting policy election only to operating leases.
Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. The net deferred tax asset is reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized.
Goodwill and Intangible Assets
The Company records as goodwill the excess of the purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and distributors, developed technology and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended March 31, 2025 and 2024 was $2.4 million and $2.8 million, respectively, and $7.5 million and $8.8 million for the nine months ended March 31, 2025 and 2024, respectively, and is included within selling, general, and administrative expenses in the condensed consolidated statements of operations. Future amortization of intangible assets is expected to be $2.3 million, $8.7 million, $7.1 million, $5.3 million, and $4.5 million in the fiscal years ending June 30, 2025 through June 30, 2029, respectively, and $24.6 million thereafter.
The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset.
The Company has one reporting unit. The process for testing goodwill and intangible assets with indefinite lives for impairment is performed annually, as well as when an event triggering impairment may have occurred. Companies are also allowed to qualitatively assess goodwill impairment through a screening process which would permit companies to
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forgo the quantitative impairment test as part of their annual goodwill impairment process. The Company performs its annual assessment on May 31st, which is then updated for any changes in condition as of June 30th.
During the three and nine months ended March 31, 2025 and 2024, there were no events or changes in circumstances that would indicate that the carrying amount of the goodwill was impaired.
The following table represents the balance of the Company’s intangible assets as of March 31, 2025 and June 30, 2024:
Impairment of Long-Lived Assets
Long-lived assets include property, equipment, right-of-use assets, capitalized curriculum and software developed or obtained for internal use. Management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. During the three and nine months ended March 31, 2025 and 2024, there were no events or changes in circumstances that may indicate that the carrying amount of the long-lived assets may not be recoverable.
Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. Measurements are described in a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The three levels of inputs used to measure fair value are:
Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date;
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and
Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.
The carrying values reflected in the condensed consolidated balance sheets for cash and cash equivalents, receivables, and short-term obligations approximate their fair values, as they are largely short-term in nature. As of March 31, 2025, the estimated fair value of the long-term debt was $1,012.8 million. The Company estimated the fair value based on the
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quoted market prices in an inactive market (Level 2). The long-term debt, comprised of the Company’s convertible senior notes due 2027, is recorded at face value less the unamortized debt issuance costs on its condensed consolidated balance sheet, and is discussed in more detail in Note 6, “Debt.” As of March 31, 2025, the estimated fair value of the Company’s marketable securities was $226.2 million. The Company estimated the fair value based on the quoted market prices in an inactive market (Level 2). The marketable securities are discussed in more detail in Note 3, “Summary of Significant Accounting Policies - Investments in Marketable Securities.”
There were no assets or liabilities measured at fair value on a recurring basis as of March 31, 2024 or June 30, 2024. There was no activity related to the Company’s fair value measurements categorized as Level 3 in the valuation hierarchy, valued on a recurring basis, during the three and nine months ended March 31, 2025 and 2024.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share (“EPS”) reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options and vesting of all dilutive unvested restricted stock awards. The dilutive effect of stock options and restricted stock awards was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded as income tax expense when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company’s common stock. Stock options and restricted stock awards are not included in the computation of diluted net income (loss) per share when they are anti-dilutive. Common stock outstanding reflected in the Company’s condensed consolidated balance sheets includes restricted stock awards outstanding. The dilutive effect of the Company’s convertible debt is determined using the if-converted method when the Company’s stock is trading above the conversion price. However, based on the structure of the instrument and how it is settled upon conversion, it would produce a similar result as the previously applied treasury stock method.
The following schedule presents the calculation of basic and diluted net income (loss) per share:
For the three months ended March 31, 2025 and 2024, 2,095,666 and 3,149 shares, respectively, that were issuable in connection with restricted stock and convertible debt were excluded from the diluted income per common share calculation because the effect would have been anti-dilutive. For the nine months ended March 31, 2025 and 2024, 2,672,952 and 6,818 shares, respectively, were excluded. In connection with the issuance of the 1.125% Convertible Senior Notes due 2027 (“Notes”), the Company entered into capped call transactions (the “Capped Call Transactions”) as described further
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in Note 6, “Debt.” The Capped Call Transactions are expected to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes. Prior to actual conversion, the Capped Call Transactions are not considered in calculating diluted earnings per share, as their impact would be anti-dilutive. The dilutive shares impact is based on the initial conversion rate associated with the Notes.
4. Income Taxes
The provision for income taxes is based on earnings reported in the condensed consolidated financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense or benefit is measured by the change in the deferred income tax asset or liability during the period. For the three months ended March 31, 2025 and 2024, the Company’s effective income tax rate was 26.3% and 26.1%, respectively, and for the nine months ended March 31, 2025 and 2024, the rate was 25.3% and 25.5%, respectively. As of March 31, 2025, and June 30, 2024, the balance of income taxes payable was $20.3 million and $10.7 million, respectively. Income taxes payable is recorded within accrued liabilities on the condensed consolidated balance sheets.
5. Finance and Operating Leases
Finance Leases
The Company is a lessee under finance leases for student computers and peripherals under agreements with Banc of America Leasing & Capital, LLC (“BALC”) and CSI Leasing, Inc. (“CSI Leasing”). As of March 31, 2025 and June 30, 2024, the finance lease liability was $96.8 million and $55.6 million, respectively, with lease interest rates ranging from 3.95% to 6.72%. As of March 31, 2025 and June 30, 2024, the balance of the associated right-of-use assets was $78.3 million and $39.8 million, respectively. The right-of-use asset is recorded within property and equipment, net on the condensed consolidated balance sheets. Lease amortization expense associated with the Company’s finance leases is recorded within instructional costs and services on the condensed consolidated statements of operations.
The Company entered into agreements with BALC and CSI Leasing in April 2020 and August 2022, respectively, to provide financing for its student computers and peripherals. Individual leases with BALC include 36-month payment terms, fixed rates ranging from 3.95% to 6.72%, and a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases. Individual leases under the agreement with CSI Leasing include 36-month payment terms, but do not include a stated interest rate. The Company uses its incremental borrowing rate as the implied interest rate and the total lease payments to calculate its lease liability.
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The following is a summary, as of March 31, 2025 and June 30, 2024, respectively, of the present value of the net minimum lease payments under the Company’s finance leases:
| March 31, 2025 |
| June 30, 2024 | |||
| (in thousands) | |||||
2025 | $ | 12,666 | $ | 31,655 | ||
2026 | 45,454 | 19,880 | ||||
2027 | 33,265 | 7,691 | ||||
2028 | 11,542 | 82 | ||||
Total minimum payments | 102,927 | 59,308 | ||||
Less: imputed interest | (6,153) | (3,710) | ||||
Finance lease liability | 96,774 | 55,598 | ||||
Less: current portion of finance lease liability | (44,011) | (29,146) | ||||
Long-term finance lease liability | $ | 52,763 | $ | 26,452 | ||
Operating Leases
The Company is a lessee under operating leases for various facilities to support the Company’s operations. As of March 31, 2025 and June 30, 2024, the operating lease liability was $49.1 million and $57.9 million, respectively. As of March 31, 2025 and June 30, 2024, the balance of the associated right-of-use assets was $46.0 million and $54.5 million, respectively. Lease expense associated with the Company’s operating leases is recorded within both instructional costs and services and selling, general, and administrative expenses on the condensed consolidated statements of operations.
Individual operating leases range in terms of to 9 years and expire on various dates through fiscal year 2034 and the minimum lease payments are discounted using the Company’s incremental borrowing rate.
The following is a summary as of March 31, 2025 and June 30, 2024, respectively, of the present value of the minimum lease payments under the Company’s operating leases:
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The Company is subleasing one of its facilities through December 2025. Sublease income is recorded as an offset to the related lease expense within both instructional costs and services and selling, general, and administrative expenses on the condensed consolidated statements of operations. The following is a summary as of March 31, 2025 and June 30, 2024, respectively, of the expected sublease income:
| ||||||
| March 31, 2025 |
| June 30, 2024 | |||
(in thousands) | ||||||
2025 | $ | 70 | $ | 455 | ||
2026 | 139 | 139 | ||||
Total sublease income | $ | 209 | $ | 594 | ||
The following is a summary of the Company’s lease cost, weighted-average remaining lease term, weighted-average discount rate and certain other cash flows as it relates to its operating and finance leases for the three and nine months ended March 31, 2025 and 2024:
24
6. Debt
The following is a summary, as of March 31, 2025 and June 30, 2024, respectively, of the components of the Company’s outstanding long-term debt:
March 31, 2025 | June 30, 2024 | |||||
(in thousands) | ||||||
Convertible Senior Notes due 2027 | $ | 420,000 | $ | 420,000 | ||
Less: unamortized debt issuance costs | (4,087) | (5,325) | ||||
Total debt | 415,913 | 414,675 | ||||
Less: current portion of debt | — | — | ||||
Long-term debt | $ | 415,913 | $ | 414,675 | ||
Convertible Senior Notes due 2027
In August and September 2020, the Company issued $420.0 million aggregate principal amount of Notes. The Notes are governed by an indenture (the “Indenture”) between the Company and U.S. Bank National Association, as trustee. The net proceeds from the offering of the Notes were approximately $408.6 million after deducting the underwriting fees and other expenses paid by the Company.
The Notes bear interest at a rate of 1.125% per annum, payable semi-annually in arrears on March 1st and September 1st of each year, beginning on March 1, 2021. The Notes will mature on September 1, 2027. The Company recorded coupon interest expense of $1.2 million during each of the three months ended March 31, 2025 and 2024, and $3.5 million during each of the nine months ended March 31, 2025 and 2024.
The Company incurred debt issuance costs of $11.4 million which are amortized over the contractual term of the Notes. The Company recorded interest expense of $0.4 million related to the amortization of the debt issuance costs during each of the three months ended March 31, 2025 and 2024, and $1.2 million during each of the nine months ended March 31, 2025 and 2024.
Before June 1, 2027, noteholders will have the right to convert their Notes only upon the occurrence of certain events. After June 1, 2027, noteholders may convert their Notes at any time at their election until two days prior to the maturity date. The Company will settle conversions by paying cash up to the outstanding principal amount, and at the Company’s election, will settle the conversion spread by paying or delivering cash or shares of its common stock, or a combination of cash and shares of its common stock. The initial conversion rate is 18.9109 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $52.88 per share of common stock (lower strike price). The Notes will be redeemable at the Company’s option at any time after September 6, 2024 at a cash redemption price equal to the principal amount of the Notes, plus accrued and unpaid interest, subject to certain stock price hurdles as discussed in the Indenture.
In connection with the Notes, the Company entered into privately negotiated Capped Call Transactions with certain counterparties. The Capped Call Transactions are expected to cover the aggregate number of shares of the Company’s common stock that initially underlie the Notes, and are expected to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes. The upper strike price of the Capped Call Transactions is $86.174 per share. The cost of the Capped Call Transactions was $60.4 million and was recorded within additional paid-in capital.
7. Credit Facility
On January 27, 2020, the Company entered into a $100.0 million senior secured revolving credit facility (“Credit Facility”) to be used for general corporate operating purposes with PNC Capital Markets LLC. The Credit Facility had a five-year term and incorporated customary financial and other covenants, including but not limited to a maximum leverage ratio and a minimum interest coverage ratio. The majority of the Company’s borrowings under the Credit Facility were at
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
plus an additional rate ranging from 0.875% - 1.50% based on the Company’s leverage ratio as defined in the agreement. The Credit Facility was secured by the Company’s assets. The Credit Facility agreement allowed for an amendment to establish a new benchmark interest rate when LIBOR is discontinued during the five-year term. Up through its expiration, the Company was in compliance with the financial covenants. As part of the proceeds received from the Notes, the Company repaid its $100.0 million outstanding balance under the Credit Facility. The Credit Facility also included a $200.0 million accordion feature. The Credit Facility expired on January 27, 2025 and was not renewed.
8. Equity Incentive Plan
On December 9, 2022, the Company’s stockholders approved an amendment and restatement of the 2016 Equity Incentive Award Plan (the “amended and restated 2016 Plan”). The amended and restated 2016 Plan reflects an increase in the number of shares of common stock available for issuance by 1,045,000 shares, the removal of certain provisions that were otherwise required for awards to qualify as performance-based compensation under an exception to Section 162(m) of the Internal Revenue Code of 1986, as amended, prior to its repeal, an extension of the term of the amended and restated 2016 Plan to October 7, 2032, an increase to the limit on the number of shares that may be issued upon the exercise of incentive stock options, and a prohibition on the payment of dividends and dividend equivalents on unvested awards.
The amended and restated 2016 Plan is designed to attract, retain and motivate employees who make important contributions to the Company by providing such individuals with equity ownership opportunities. Awards granted under the amended and restated 2016 Plan may include stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. Under the amended and restated 2016 Plan, unissued shares related to forfeited or cancelled awards granted under the amended and restated 2016 Plan or awards granted under the Company’s 2007 Equity Incentive Award Plan (the “Prior Plan”) (to the extent such awards granted under the Prior Plan were outstanding as of December 15, 2016 and were forfeited or cancelled prior to September 19, 2022), will again be available for issuance under the amended and restated 2016 Plan. Notwithstanding the foregoing, shares tendered to pay the exercise price or tax withholding with respect to a stock option, or shares that are not issued in connection with the settlement of a stock appreciation right on exercise thereof, or shares purchased on the open market with the cash proceeds from the exercise of options will not again be available for issuance under the amended and restated 2016 Plan.
As of March 31, 2025, the remaining aggregate number of shares of the Company’s common stock authorized for future issuance under the amended and restated 2016 Plan was 1,869,226. As of March 31, 2025, there were 1,406,298 shares of the Company’s common stock that remain outstanding or nonvested under the amended and restated 2016 Plan and Prior Plan.
Compensation expense for all equity-based compensation awards is based on the grant-date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The vesting of performance-based awards is contingent on the achievement of certain performance metrics. Compensation expense is recognized retroactively, through a cumulative catch-up adjustment, when the performance conditions are satisfied or when the Company determines that it is probable that the performance conditions will be satisfied. The amount of compensation expense recognized for a performance-based award is affected by the level of achievement attained. Management has established three levels of attainment: threshold, target, and outperform. Stock-based compensation expense is recorded within selling, general, and administrative expenses on the condensed consolidated statements of operations.
Restricted Stock Awards
The Company has approved grants of restricted stock awards (“RSA”) pursuant to the amended and restated 2016 Plan and Prior Plan. Under the amended and restated 2016 Plan and Prior Plan, employees, outside directors and independent contractors are able to participate in the Company’s future performance through the awards of restricted stock. Each RSA vests pursuant to the vesting schedule set forth in the restricted stock agreement granting such RSAs, generally over three years.
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Restricted stock award activity during the nine months ended March 31, 2025 was as follows:
|
| Weighted | |||
Average | |||||
Grant-Date | |||||
Shares | Fair Value | ||||
Nonvested, June 30, 2024 | 731,224 | $ | 40.60 | ||
Granted | 314,130 | 85.22 | |||
Vested | (362,838) | 42.22 | |||
Canceled | (81,334) | 49.04 | |||
Nonvested, March 31, 2025 | 601,182 | $ | 61.80 | ||
During the nine months ended March 31, 2025, 314,130 new service-based restricted stock awards were granted, and 601,182 remained nonvested at March 31, 2025. During the nine months ended March 31, 2025, 362,838 service-based restricted stock awards vested.
Summary of All Restricted Stock Awards
As of March 31, 2025, there was $30.1 million of total unrecognized compensation expense related to nonvested restricted stock awards. The cost is expected to be recognized over a weighted average period of 1.7 years. The fair value of restricted stock awards granted for the nine months ended March 31, 2025 and 2024 was $26.8 million and $20.4 million, respectively. The total fair value of shares vested for the nine months ended March 31, 2025 and 2024 was $40.0 million and $21.6 million, respectively. During the three months ended March 31, 2025 and 2024, the Company recognized $5.8 million and $4.1 million, respectively, of stock-based compensation expense related to restricted stock awards. During the nine months ended March 31, 2025 and 2024, the expense was $15.4 million and $12.4 million, respectively.
Performance Share Units
The Company has approved grants of performance share units (“PSUs”) pursuant to the amended and restated 2016 Plan. Each PSU is earned through the achievement of a performance-based metric, combined with the continuation of employee service over a defined period. The level of performance determines the number of PSUs earned, and is generally measured against threshold, target and outperform achievement levels of the award. Each PSU represents the right to receive one share of the Company’s common stock, or at the option of the Company, an equivalent amount of cash, and is classified as an equity or liability award. When the grant is a fixed monetary amount, and the number of shares is not determined until achievement and the value of the Company’s stock on that day, the PSU is a liability-classified award. Each PSU vests pursuant to the vesting schedule found in the respective PSU agreement.
In addition to the performance conditions of the PSUs, there is a service vesting condition which is dependent upon continuing service by the grantee as an employee of the Company, unless the grantee is eligible for earlier vesting upon a change in control and qualifying termination, as defined by the PSU agreement. PSUs are generally subject to graduated vesting schedules and stock-based compensation expense is computed by tranche and recognized on a straight-line basis over the tranches’ applicable vesting period based on the expected achievement level.
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Performance share unit activity (excluding liability-classified awards) during the nine months ended March 31, 2025 was as follows:
Weighted | |||||
Average | |||||
Grant-Date | |||||
| Shares |
| Fair Value | ||
Nonvested, June 30, 2024 | 759,531 | $ | 37.73 | ||
Granted | 299,908 | 71.40 | |||
Vested | (223,241) | 37.44 | |||
Canceled | (134,291) | 42.60 | |||
Nonvested, March 31, 2025 | 701,907 | $ | 51.27 | ||
Fiscal Year 2025 LTIP
During the nine months ended March 31, 2025, the Company granted 210,620 PSUs at target under a Long-Term Incentive Plan (“LTIP”) which are tied to operating income targets and stock price performance. These PSUs had a grant date fair value of $17.0 million, or a weighted average grant-date fair value of $80.89 per share. Seventy-five percent of the earned award is based on operating income performance (“Tranche #1”) and twenty-five percent is based on the performance of the Company’s stock price (“Tranche #2”), both of which will vest after achievement is certified during the first quarter of fiscal year 2028. For Tranche #1, the level of performance will determine the number of PSUs earned as measured against threshold, target and outperform achievement levels. For Tranche #2, the number of PSUs will be earned based on the Company’s compounded annual stock price growth over a completed three-year performance period. In all cases, vesting is dependent upon continuing service by the grantee as an employee of the Company. The fair value of Tranche #2 was determined using a Monte Carlo simulation model and is amortized on a straight-line basis over the vesting period. Tranche #2 is a market-based award, and therefore is not subject to any probability assessment by the Company. The Company is currently amortizing Tranche #1 over the vesting period because it believes that it is probable that the metric will be achieved at target.
Fiscal Year 2024 LTIP
During fiscal year 2024, the Company granted 354,090 PSUs at target under an LTIP which are tied to operating income targets and stock price performance. These PSUs had a grant date fair value of $14.4 million, or a weighted average grant-date fair value of $40.84 per share. Seventy-five percent of the earned award is based on operating income performance (“Tranche #1”) and twenty-five percent is based on the performance of the Company’s stock price (“Tranche #2”), both of which will vest after achievement is certified during the first quarter of fiscal year 2027. For Tranche #1, the level of performance will determine the number of PSUs earned as measured against threshold, target and outperform achievement levels. For Tranche #2, the number of PSUs will be earned based on the Company’s compounded annual stock price growth over a completed three-year performance period. In all cases, vesting is dependent upon continuing service by the grantee as an employee of the Company. The fair value of Tranche #2 was determined using a Monte Carlo simulation model and is amortized on a straight-line basis over the vesting period. Tranche #2 is a market-based award, and therefore is not subject to any probability assessment by the Company. The Company is currently amortizing Tranche #1 over the vesting period because it believes that it is probable that the metric will be achieved at outperform.
Fiscal Year 2023 LTIP
During fiscal year 2023, the Company granted 289,640 PSUs at target under an LTIP which are tied to operating income targets and stock price performance. These PSUs had a grant date fair value of $10.0 million, or a weighted average grant-date fair value of $34.41 per share. Fifty percent of the earned award is based on operating income performance (“Tranche #1”) and fifty percent is based on the performance of the Company’s stock price (“Tranche #2”), both of which will vest after achievement is certified during the first quarter of fiscal year 2026. The grant date fair value of Tranche #1 was remeasured in October 2022 as a result of a modification of the terms of the award. Originally, performance was tied
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STRIDE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
to gross margin. The metric was changed to operating income to better align with shareholder feedback and technology industry and peer group common practice. The modification of the performance criteria from gross margin to operating income resulted in a new fair market value as of the modification date of $4.8 million, a decrease of $0.8 million. For Tranche #1, the level of performance will determine the number of PSUs earned as measured against threshold, target and outperform achievement levels. For Tranche #2, the number of PSUs will be earned based on the Company’s compounded annual stock price growth over a completed three-year performance period. In all cases, vesting is dependent upon continuing service by the grantee as an employee of the Company. The fair value of Tranche #2 was determined using a Monte Carlo simulation model and is amortized on a straight-line basis over the vesting period. Tranche #2 is a market-based award, and therefore is not subject to any probability assessment by the Company. The Company is currently amortizing Tranche #1 over the vesting period because it believes that it is probable that the metric will be achieved at outperform.
Fiscal Year 2022 LTIP
During fiscal year 2022, the Company granted 250,250 PSUs at target under an LTIP which are tied to gross margin targets and stock price performance. These PSUs had a grant date fair value of $9.1 million, or a weighted average grant-date fair value of $36.30 per share. Fifty percent of the earned award is based on gross margin performance (“Tranche #1”) and fifty percent is based on the performance of the Company’s stock price (“Tranche #2”), both of which will vest after achievement is certified during the first quarter of fiscal year 2025. For Tranche #1, the level of performance will determine the number of PSUs earned as measured against threshold, target and outperform achievement levels. For Tranche #2, the number of PSUs will be earned based on the Company’s compounded annual stock price growth over a completed three-year performance period. In all cases, vesting is dependent upon continuing service by the grantee as an employee of the Company. The fair value of Tranche #2 was determined using a Monte Carlo simulation model and is amortized on a straight-line basis over the vesting period. Tranche #2 is a market-based award, and therefore is not subject to any probability assessment by the Company. In July 2024, achievement was certified at 70% of target for Tranche #1, which resulted in the vesting of 62,379 shares. In September 2024, achievement was certified at 175.0% of target for Tranche #2, which resulted in the vesting of 155,946 shares.
Summary of All Performance Share Units
As of March 31, 2025, there was $23.4 million of total unrecognized compensation expense related to nonvested PSUs that are expected to vest based on the Company’s probability assumptions discussed above. The cost is expected to be recognized over a weighted average period of 1.4 years. During the three months ended March 31, 2025 and 2024, the Company recognized $2.8 million and $1.2 million, respectively, of stock-based compensation expense related to PSUs. During the nine months ended March 31, 2025 and 2024, the expense was $9.5 million and $8.7 million, respectively. Included in the stock-based compensation expense above, for each of the three months ended March 31, 2025 and 2024 is zero, and for the nine months ended March 31, 2025 and 2024 is zero and $0.3 million, respectively, related to the Tech Elevator time-based portion of the Management Incentive Plan. The time-based portion of the MIP fully vested during the second quarter of fiscal year 2024 and was settled with the issuance of PSUs. Therefore, the amount recorded in accrued liabilities for future issuances is zero.
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STRIDE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Deferred Stock Units (“DSUs”)
The DSUs vest on the grant-date anniversary and are settled in the form of shares of common stock issued to the holder upon separation from the Company. DSUs are specific only to board members.
Deferred stock unit activity during the nine months ended March 31, 2025 was as follows:
Weighted | |||||
Average | |||||
Grant-Date | |||||
| Shares |
| Fair Value | ||
Nonvested, June 30, 2024 | 96,604 | $ | 32.49 | ||
Granted | 6,605 | 108.86 | |||
Vested | — | — | |||
Canceled | — | — | |||
Nonvested, March 31, 2025 | 103,209 | $ | 37.37 | ||
Summary of All Deferred Stock Units
As of March 31, 2025, there was $0.5 million of total unrecognized compensation expense related to nonvested DSUs. The cost is expected to be recognized over a weighted average period of 0.7 years. During the three months ended March 31, 2025 and 2024, the Company recognized $0.2 million of stock-based compensation expense related to DSUs. During the nine months ended March 31, 2025 and 2024, the expense was $0.6 million and $0.7 million, respectively.
9. Related Party Transactions
The Company contributed to Future of School, a charity focused on access to quality education. Future of School is a related party because a former executive officer of the Company formerly served on its Board of Directors. For the three and nine months ended March 31, 2025 and 2024, contributions made by the Company to Future of School were zero. In fiscal year 2019 and 2021, the Company accrued $2.5 million and $3.5 million, respectively, for contributions expected to be made in subsequent years. As of March 31, 2025, $2.3 million remains outstanding as related to the fiscal year 2021 accrual.
10. Commitments and Contingencies
Litigation
In the ordinary conduct of the Company’s business, the Company is subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company vigorously defends these claims; however, no assurances can be given as to the outcome of any pending legal proceedings. The Company believes, based on currently available information, that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on its business, financial condition, liquidity or results of operations.
Employment Arrangements
The Company has entered into employment arrangements with certain executive officers that provide for severance payments and, in some cases other benefits, upon certain terminations of employment. All arrangements provide for employment on an “at-will” basis. If the employee resigns for “good reason” or is terminated without cause, the employee is entitled to salary continuation, and in some cases benefit continuation, for varying periods depending on the arrangement.
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STRIDE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Off-Balance Sheet Arrangements
As of March 31, 2025, the Company provided guarantees of approximately $0.1 million related to lease commitments on the buildings for certain of the Company’s schools.
In addition, the Company contractually guarantees that certain schools under the Company’s management will not have annual operating deficits and the Company’s management fees from these schools may be reduced accordingly to cover any school operating deficits.
Other than these lease and operating deficit guarantees, the Company did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
11. Supplemental Disclosure of Cash Flow Information
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 June 30, 2024, which we refer to as our Annual Report, and in Part II, Item 1A of this Quarterly Report. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance or achievements.
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 Stride, Inc. and its consolidated subsidiaries. This MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this report, as well as the consolidated financial statements and MD&A of our Annual Report. The following overview provides a summary of the sections included in our MD&A:
| ● | Executive Summary — a general description of our business and key highlights of the three and nine months ended March 31, 2025. |
| ● | Critical Accounting Estimates — a discussion of critical accounting estimates requiring judgments and the application of critical accounting policies. |
| ● | 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 a technology company providing an educational platform to deliver online learning to students throughout the U.S. Our platform hosts products and services 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 provide solutions to employers, government agencies and consumers.
We provide a wide range of products and services across our platform with the ability to deliver customized solutions. Our comprehensive school-as-a-service offering supports our clients in operating full-time virtual schools in the K-12 market. Together with our network of online schools, Stride has served millions of students with our products and services. In our most recent academic year ended June 30, 2024, we graduated 15,987 high school students from our partner schools.
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Our platform addresses two markets in the K-12 space: General Education and Career Learning.
General Education
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. Products and services are delivered as a comprehensive school-as-a-service offering for schools or as stand-alone products and services. A student enrolled in a school that offers Stride’s General Education program may elect to take career courses, but that student and the associated revenue is reported as a General Education enrollment and General Education revenue.
Career Learning
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. We provide middle and high school students with Career Learning programs that complement their core general education coursework. Stride offers multiple career pathways through a broad catalog of 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 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 is reported as a Career Learning enrollment and associated Career Learning revenue only if the student is enrolled in a Career Learning program. Like General Education products and services, the products and services for Career Learning are sold as a comprehensive school-as-a-service offering or as stand-alone products and services.
We also provide focused post-secondary career learning programs to adult learners, for the software engineering, healthcare, and medical fields. These programs are sold directly to consumers, employers and government agencies.
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 of non-renewal. For the 2024-2025 school year, we provide our school-as-a-service offering to 89 schools in 31 states and the District of Columbia in the General Education market, and 56 schools or programs in 27 states and the District of Columbia in the Career Learning market.
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 negotiated time frame.
The two key financial metrics that we use to assess financial performance are revenues and operating income. For the nine months ended March 31, 2025, revenues increased to $1,751.7 million from $1,505.9 million in the prior year, an increase of 16.3%. Over the same period, operating income increased to $303.2 million from $175.9 million in the prior year. The increase in operating income was driven by revenue growth and an increase in gross margin. Additionally, we use the non-financial metric of total enrollments to assess performance, as enrollment is a key driver of our revenues. Total enrollments for the nine months ended March 31, 2025 were 233.5 thousand, an increase of 38.9 thousand, or 20.0%, over the prior year. Our revenues are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results from these audits and other routine changes in funding estimates are incorporated into the Company’s monthly funding estimates for the current and prior periods. Historically, aggregate funding estimates have differed from actual reimbursements, generally in the range of 2% of annual revenue or less, which may vary from quarter to quarter.
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Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to our condensed consolidated financial statements. Critical accounting policies and estimates are disclosed in our Annual Report. There have been no significant updates to our critical accounting estimates disclosed in our Annual Report.
Results of Operations
Lines of Revenue
We operate in one operating and reportable business segment as a technology company providing an educational platform to deliver 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:
| (1) | Enrollments reported for the first quarter are equal to the official count date number, which was September 30, 2024 for the first quarter of fiscal year 2025 and September 30, 2023 for the first quarter of fiscal year 2024. |
| (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 for which each student is enrolled. All kindergarten through fifth grade students are considered General Education students. Periodically, a middle school or high school student enrollment may change line of revenue classification.
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The following represents our current revenues for each of the periods indicated:
Products and Services
Stride has invested over $700 million in the last twenty years to develop curriculum, systems, instructional practices and support services that enable us to support hundreds of thousands of students. The following describes the various products and services that we provide to customers. Products and services are provided on an individual basis 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. Stride is continuously innovating to remain at the forefront of effective educational techniques to meet students’ needs. It continues to expand upon its personalized learning model, improve the user experience of its products, and develop tools and partnerships to more effectively engage and serve students, teachers, and administrators.
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. We provide high-quality, engaging, online coursework and content in software engineering, 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. Stand-alone products and services can provide curriculum and content hosting on customers’ learning management systems, or integration with customers’ student information systems.
Instructional Services – We provide 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 provide 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 March 31, | Nine Months Ended March 31, | ||||||||||||||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||
Revenues | $ | 613,376 |
| 100.0 | % | $ | 520,837 |
| 100.0 | % | $ | 1,751,670 |
| 100.0 | % | $ | 1,505,886 |
| 100.0 | % | ||
Instructional costs and services | 364,086 | 59.4 | 319,508 | 61.3 | 1,046,670 | 59.8 | 930,495 | 61.8 | ||||||||||||||
Gross margin | 249,290 | 40.6 | 201,329 | 38.7 | 705,000 | 40.2 | 575,391 | 38.2 | ||||||||||||||
Selling, general, and administrative expenses | 118,504 | 19.3 | 113,016 | 21.7 | 401,771 | 22.9 | 399,469 | 26.5 | ||||||||||||||
Income from operations | 130,786 | 21.3 | 88,313 | 17.0 | 303,229 | 17.3 | 175,922 | 11.7 | ||||||||||||||
Interest expense, net | (2,787) | (0.5) | (2,404) | (0.5) | (7,810) | (0.4) | (6,494) | (0.4) | ||||||||||||||
Other income, net | 7,360 | 1.2 | 7,678 | 1.5 | 23,469 | 1.3 | 19,381 | 1.3 | ||||||||||||||
Income before income taxes and income (loss) from equity method investments | 135,359 | 22.1 | 93,587 | 18.0 | 318,888 | 18.2 | 188,809 | 12.5 | ||||||||||||||
Income tax expense | (35,450) | (5.8) | (24,657) | (4.7) | (80,088) | (4.6) | (48,383) | (3.2) | ||||||||||||||
Income (loss) from equity method investments | (563) | (0.1) | 757 | 0.1 | (2,179) | (0.1) | 975 | 0.1 | ||||||||||||||
Net income attributable to common stockholders | $ | 99,346 | 16.2 | % | $ | 69,687 | 13.4 | % | $ | 236,621 | 13.5 | % | $ | 141,401 | 9.4 | % | ||||||
Comparison of the Three Months Ended March 31, 2025 and 2024
Revenues. Our revenues for the three months ended March 31, 2025 were $613.4 million, representing an increase of $92.6 million, or 17.8%, from $520.8 million for the same period in the prior year. General Education revenues increased $41.9 million, or 12.7%, year over year. The increase in General Education revenues was primarily due to the 13.6% increase in enrollments, and school mix (distribution of enrollments by school). Career Learning revenues increased $50.6 million, or 26.4%, primarily due to a 33.7% increase in enrollments and school mix.
Instructional costs and services expenses. Instructional costs and services expenses for the three months ended March 31, 2025 were $364.1 million, representing an increase of $44.6 million, or 14.0%, from $319.5 million for the same period in the prior year. This increase in expense was due to hiring of personnel in growth states and salary increases. Instructional costs and services expenses were 59.4% of revenues during the three months ended March 31, 2025, a decrease from 61.3% for the three months ended March 31, 2024.
Selling, general, and administrative expenses. Selling, general, and administrative expenses for the three months ended March 31, 2025 were $118.5 million, representing an increase of $5.5 million, or 4.9% from $113.0 million for the same period in the prior year. The increase was primarily due to an increase of $7.8 million in personnel and related benefit costs, including stock-based compensation, partially offset by a decrease of $1.0 million in professional services. Selling, general, and administrative expenses were 19.3% of revenues during the three months ended March 31, 2025, a decrease from 21.7% for the three months ended March 31, 2024.
Interest expense, net. Net interest expense for the three months ended March 31, 2025 was $2.8 million as compared to $2.4 million for the same period in the prior year. The increase in net interest expense was primarily due to our finance leases.
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Other income, net. Other income, net for the three months ended March 31, 2025 was $7.4 million as compared to $7.7 million for the same period in the prior year. The decrease in other income, net was primarily due to lower other non-operating income, partially offset by an increase in our investments in marketable securities and the returns on those investments year over year.
Income tax expense. Income tax expense was $35.5 million for the three months ended March 31, 2025, or 26.3% of income before income taxes, as compared to $24.7 million, or 26.1% of income before income taxes for the same period in the prior year.
Comparison of the Nine Months Ended March 31, 2025 and 2024
Revenues. Our revenues for the nine months ended March 31, 2025 were $1,751.7 million, representing an increase of $245.8 million, or 16.3%, from $1,505.9 million for the same period in the prior year. General Education revenues increased $112.4 million, or 11.9%, year over year. The increase in General Education revenues was primarily due to the 12.8% increase in enrollments, and school mix (distribution of enrollments by school). Career Learning revenues increased $133.4 million, or 23.7%, primarily due to a 32.0% increase in enrollments and school mix.
Instructional costs and services expenses. Instructional costs and services expenses for the nine months ended March 31, 2025 were $1,046.7 million, representing an increase of $116.2 million, or 12.5%, from $930.5 million for the same period in the prior year. This increase in expense was due to hiring of personnel in growth states and salary increases. Instructional costs and services expenses were 59.8% of revenues during the nine months ended March 31, 2025, a decrease from 61.8% for the nine months ended March 31, 2024.
Selling, general, and administrative expenses. Selling, general, and administrative expenses for the nine months ended March 31, 2025 were $401.8 million, representing an increase of $2.3 million, or 0.6% from $399.5 million for the same period in the prior year. Selling, general, and administrative expenses were 22.9% of revenues during the nine months ended March 31, 2025, a decrease from 26.5% for the nine months ended March 31, 2024.
Interest expense, net. Net interest expense for the nine months ended March 31, 2025 was $7.8 million as compared to $6.5 million for the same period in the prior year. The increase in net interest expense was primarily due to our finance leases.
Other income, net. Other income, net for the nine months ended March 31, 2025 was $23.5 million as compared to $19.4 million for the same period in the prior year. The increase in other income, net was primarily due to the increase in our investments in marketable securities and the returns on those investments year over year, partially offset by lower other non-operating income.
Income tax expense. Income tax expense was $80.1 million for the nine months ended March 31, 2025, or 25.3% of income before income taxes, as compared to $48.4 million, or 25.5% of income before income taxes for the same period in the prior year.
Liquidity and Capital Resources
As of March 31, 2025, we had net working capital, or current assets minus current liabilities, of $1,243.4 million. Our working capital includes cash and cash equivalents of $528.6 million and accounts receivable of $699.8 million. Our working capital provides a significant source of liquidity for our normal operating needs. Our accounts receivable balance fluctuates throughout the fiscal year based on the timing of customer billings and collections and tends to be highest in our 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 March 31, 2025.
During the first quarter of fiscal year 2021, we issued $420.0 million aggregate principal amount of 1.125% Convertible Senior Notes due 2027 (“Notes”). The Notes are governed by an indenture (the “Indenture”) between us and U.S. Bank National Association, as trustee. The net proceeds from the offering of the Notes were approximately $408.6 million after deducting the underwriting fees and other expenses paid by the Company. The Notes bear interest at a rate of 1.125% per annum, payable semi-annually in arrears on March 1st and September 1st of each year, beginning on March 1, 2021. The Notes will mature on September 1, 2027. In connection with the Notes, we entered into privately
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negotiated capped call transactions (the “Capped Call Transactions”) with certain counterparties. The Capped Call Transactions are expected to cover the aggregate number of shares of the Company’s common stock that initially underlie the Notes, and are expected to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes. The upper strike price of the Capped Call Transactions is $86.174 per share. The cost of the Capped Call Transactions was $60.4 million and was recorded within additional paid-in capital.
Before June 1, 2027, noteholders will have the right to convert their Notes only upon the occurrence of certain events. After June 1, 2027, noteholders may convert their Notes at any time at their election until two days prior to the maturity date. We will settle conversions by paying cash up to the outstanding principal amount, and at our election, will settle the conversion spread by paying or delivering cash or shares of our common stock, or a combination of cash and shares of our common stock. The initial conversion rate is 18.9109 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $52.88 per share of common stock. The Notes will be redeemable at our option at any time after September 6, 2024 at a cash redemption price equal to the principal amount of the Notes, plus accrued and unpaid interest, subject to certain stock price hurdles as discussed in the Indenture.
On January 27, 2020, we entered into a $100.0 million senior secured revolving credit facility (“Credit Facility”) to be used for general corporate operating purposes with PNC Capital Markets LLC. The Credit Facility had a five-year term and incorporated customary financial and other covenants, including but not limited to a maximum leverage ratio and a minimum interest coverage ratio. The majority of our borrowings under the Credit Facility were at LIBOR plus an additional rate ranging from 0.875% - 1.50% based on our leverage ratio as defined in the agreement. The Credit Facility was secured by our assets. The Credit Facility agreement allowed for an amendment to establish a new benchmark interest rate when LIBOR is discontinued during the five-year term. Up through its expiration, we were in compliance with the financial covenants. As part of the proceeds received from the Notes, we repaid our $100.0 million outstanding balance under the Credit Facility. The Credit Facility also included a $200.0 million accordion feature. The Credit Facility expired on January 27, 2025 and was not renewed.
We are a lessee under finance leases for student computers and peripherals under agreements with Banc of America Leasing & Capital, LLC (“BALC”) and CSI Leasing, Inc. (“CSI Leasing”). As of March 31, 2025 and June 30, 2024, the finance lease liability was $96.8 million and $55.6 million, respectively, with lease interest rates ranging from 3.95% to 6.72%.
We entered into agreements with BALC and CSI Leasing in April 2020 and August 2022, respectively, to provide financing for our student computers and peripherals. Individual leases with BALC include 36-month payment terms, fixed rates ranging from 3.95% to 6.72%, and a $1 purchase option at the end of each lease term. We pledged the assets financed to secure the outstanding leases. Individual leases under the agreement with CSI Leasing include 36-month payment terms, but do not include a stated interest rate. We use our incremental borrowing rate as the implied interest rate and the total lease payments to calculate our lease liability.
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 and net working capital on hand will be adequate to finance our ongoing operations on a short-term (the next 12 months) and long-term (beyond the next 12 months) basis. 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.
Operating Activities
Net cash provided by operating activities for the nine months ended March 31, 2025 was $134.5 million compared to $106.6 million for the nine months ended March 31, 2024. The $27.9 million increase in cash provided by operating activities was primarily due to higher net income in the current period as compared to the prior period, partially offset by changes in working capital resulting from seasonal fluctuations in accounts receivable, accrued liabilities, and accounts payable.
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Investing Activities
Net cash used in investing activities for the nine months ended March 31, 2025 was $53.3 million compared to $101.0 million for the nine months ended March 31, 2024, a decrease of $47.7 million. The decrease was primarily due to a decrease in net purchases of marketable securities of $48.9 million partially offset by an increase in capital expenditures year over year of $0.2 million.
Financing Activities
Net cash used in financing activities for the nine months ended March 31, 2025 was $50.6 million compared to $39.8 million during the nine months ended March 31, 2024, an increase of $10.8 million. The increase was primarily due to an increase in the repurchase of restricted stock for income tax withholding of $13.1 million partially offset by a decrease in the repayment of finance lease obligations incurred for the acquisition of student computers of $2.2 million.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Inflation Risk
Current inflation has resulted in higher personnel costs, marketing expenses and supply chain expenses. There can be no assurance that future inflation will not have an adverse or material impact on our operating results and financial condition.
Interest Rate Risk
As of March 31, 2025 and June 30, 2024, we had cash and cash equivalents totaling $528.6 million and $500.6 million, respectively. Our excess cash has been invested in money market funds, government securities, corporate debt securities and similar investments. At March 31, 2025, a 1% gross increase in interest rates for our variable-interest instruments would result in a $5.3 million annualized increase in interest income. Additionally, the fair value of our investment portfolio is subject to changes in market interest rates.
Foreign Currency Exchange Risk
We currently operate in several foreign countries, but we do not transact a material amount of business in a foreign currency. If we enter into any material transactions in a foreign currency or establish or acquire any subsidiaries that measure and record their financial condition and results of operations in a foreign currency, we will be exposed to currency transaction risk and/or currency translation risk. Exchange rates between U.S. dollars and many foreign currencies have fluctuated significantly over the last few years and may continue to do so in the future. Accordingly, we may decide in the future to undertake hedging strategies to minimize the effect of currency fluctuations on our financial condition and results of operations.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (the “SEC”) rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.
We carried out an evaluation, required by paragraph (b) of Rule 13a-15 under the Exchange Act, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end
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of the period covered by this Quarterly Report on Form 10-Q. Based on this review, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings.
See Item 1 of Part I, “Financial Statements – Note 10 – Commitments and Contingencies - Litigation.”
Item 1A. Risk Factors.
There have been no material changes to the risk factors disclosed in “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, as filed with the SEC on August 6, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
During the period covered by this Quarterly Report on Form 10-Q, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits.
(a) Exhibits.
Number |
| Description |
10.1* | ||
10.2* | ||
10.3* | Amended and Restated Stride, Inc. Executive Deferred Compensation Plan. | |
31.1 | ||
31.2 | ||
32.1** | ||
32.2** | ||
101 | The following financial statements and footnotes from the Stride, Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025, formatted in Inline XBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Operations (unaudited), (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statement of Stockholders’ Equity (unaudited), (v) Condensed Consolidated Statements of Cash Flows (unaudited), and (vi) Notes to Condensed Consolidated Financial Statements (unaudited). | |
104 | The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL (contained in Exhibit 101). |
* Denotes management contract or compensation plan, contract or arrangement.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Stride, Inc. | ||
/s/ DONNA M. BLACKMAN | ||
Name: | Donna M. Blackman | |
Title: | Chief Financial Officer, Principal Accounting Officer and Authorized Signatory | |
Date: April 29, 2025
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Exhibit 10.1
FIRST AMENDMENT TO THE
EMPLOYMENT AGREEMENT BETWEEN
STRIDE, INC. AND JAMES RHYU
This Amendment (the “Amendment”) to that certain amended and restated employment letter agreement between Stride, Inc., a Delaware corporation (together with any successor thereto, the “Company”), and James Rhyu (the “Executive”) dated as of February 25, 2022 (the “Employment Agreement”) is made as of this 25th day of March, 2025 (the “Amendment Date”), by and among the Company and the Executive. Except as set forth in this Amendment, capitalized terms used but not defined herein shall have the meanings ascribed to them in the Employment Agreement.
WITNESSETH
WHEREAS, the Company and the Executive desire to amend the terms of the Employment Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Executive and the Company (collectively the “Parties”) hereby agree to the following:
1. Section 10.7 of the Employment Agreement is hereby amended to replace the third sentence in its entirety as follows:
Executive and the Company further agree that in the event Executive’s employment is terminated by the Company without Cause pursuant to Section 10.4 or by Executive for Good Reason pursuant to Section 10.5.1 above, in either case within two years after the date of a Change in Control, and provided that such termination constitutes a Separation from Service, then Executive shall receive the same severance benefits as are set forth in Section 10.6 above and subject to the same requirement to sign and not revoke a general release of claims within thirty (30) days following the date of termination; provided, however, that (i) Severance Pay shall be paid in a single lump sum as soon as practicable after the date of termination, (ii) the Pro Rata Bonus shall be based on Executive’s target annual bonus amount and paid as soon as practicable after the date of termination, (iii) Executive shall additionally receive an amount equal to 200% of Executive’s target annual bonus for the year of the Separation of Service, paid as soon as practicable after the date of termination, (iv) all unvested equity or equity-based awards granted under any equity compensation plans of the Company shall immediately become 100% vested, provided that, unless a provision more favorable to Executive is included in an applicable award agreement, any such awards that are subject to performance-based vesting conditions shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement, and (v) the maximum period of reimbursement of the Company-paid portion of the applicable COBRA premiums shall be twenty-four (24) months following the Executive’s Separation from Service (and, for the avoidance of doubt, such period shall remain subject to earlier termination as set forth in Section 10.6 above).
2. No Other Amendment. Except as expressly set forth in this Amendment, the Employment Agreement shall remain unchanged and shall continue in full force and effect according to its terms.
3. Acknowledgement. The Executive acknowledges and agrees that he has carefully read this Amendment in its entirety, fully understands and agrees to its terms and provisions and intends and agrees that it be final and legally binding on the Executive and the Company.
4. Governing Law; Counterparts. This Amendment shall be construed in accordance with the laws of the Commonwealth of Virginia without reference to principles of conflicts of law and may be executed in several counterparts by the Parties.
[Signature Page Follows]
IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and the Company has caused this Amendment to be executed in its name on its behalf, all as of the Amendment Date.
STRIDE, INC. | ||
By: | /s/ ROBERT E. KNOWLING, JR. | |
Name: | Robert E. Knowling, Jr. | |
Title: | Chair of the Compensation Committee of the Board of Directors | |
EXECUTIVE | ||
/s/ JAMES RHYU | ||
James Rhyu | ||
Exhibit 10.2
EXECUTIVE CHANGE IN CONTROL SEVERANCE AGREEMENT
This Executive Change in Control Severance Agreement (“Agreement”) is made effective as of [_________] (“Effective Date”), by and between Stride, Inc., a Delaware corporation (the “Company”), and [_______] (“Executive”). For purposes of this Agreement (other than Section 1(c) below), the “Company” shall mean the Company and its subsidiaries.
WHEREAS, Executive is a key employee of the Company and the Company and Executive desire to set forth herein the terms and conditions of Executive's compensation in the event of a termination of Executive's employment under certain circumstances; and
WHEREAS, in the event of a Change in Control (as defined below), Executive may be vulnerable to dismissal without regard to the quality of Executive's service, and the Company believes that it is in the best interest of the Company to enter into this Agreement in order to ensure fair treatment of Executive and to reduce the distractions and other adverse effects upon such Executive's performance which are inherent in the event of such a Change in Control.
The parties agree as follows:
1.Definitions. For purposes of this Agreement, the following terms shall have the following meanings:
(a)“Board” shall mean the Board of Directors of the Company.
(b)“Cause” shall mean any of the following: (i) Executive’s failure in any material respect to carry out or comply with any lawful and reasonable directive of the Board or Executive’s direct supervisor; (ii) Executive’s willful misconduct, gross negligence or breach of fiduciary duty with respect to the Company or any of its affiliates that, in each case or in the aggregate, results in material harm to the Company or any of its affiliates; (iii) Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crime involving moral turpitude; (iv) Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s (or any of its affiliate’s) premises or while performing Executive’s duties and responsibilities; or (v) Executive’s commission of an act of fraud, embezzlement or misappropriation against the Company or any of its affiliates. Notwithstanding the foregoing, in the event of any circumstance described in clause (i) of the foregoing sentence, the Company may not terminate Executive’s employment for Cause unless, to the extent such failure can be fully cured, the Company has provided Executive with at least thirty (30) days’ notice of such failure and Executive has not remedied the failure within the 30-day period.
(c)“Change in Control” shall mean and includes each of the following:
(i)A transaction or series of transactions occurring after the Effective Date whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such transaction; or
(ii)The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) after the Effective Date of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(A)Which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and
(B)After which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 1(c)(ii)(B) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.
Notwithstanding the foregoing, no transaction, event or occurrence shall constitute a Change in Control for purposes of this Agreement, unless such transaction, event or occurrence also constitutes a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5).
(d)“Code” shall mean the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other interpretive guidance thereunder.
(e)“Good Reason” shall mean the occurrence of any of the following events or conditions without Executive’s written consent:
(i)a material diminution in Executive’s authority, duties or responsibilities; provided, that, it shall not be considered “Good Reason” if, following a Change in Control, Executive remains in a position with the Company or its successor (or any other entity that owns substantially all of the Company’s business after such Change in Control) that is substantially equivalent in duties, rank, reporting structure and authority with Executive’s position prior to such Change in Control, solely as such duties, rank, reporting structure and authority relate to the Company’s business even though executive may not hold such position in the organization of the acquirer or any applicable parent entity or with respect to the entire combined business that may result following such Change in Control;
(ii)a material diminution in Executive’s base salary or target annual bonus level; (for this purpose, a reduction of 5% or more from the level in effect as of the date of the Change in Control shall be considered material);
(iii)a material change in the geographic location at which Executive must perform his or her duties, which shall not include a relocation of Executive’s principal place of employment to any location within a fifty (50) mile radius of the location from which Executive served the Company immediately prior to the relocation; or
(iv)the failure of the Company to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Section 9(a) of this Agreement.
Executive must provide written notice to the Company of the occurrence of any of the foregoing events or conditions within ninety (90) days of the occurrence of such event or the date upon which Executive reasonably became aware that such an event or condition had occurred. The Company or any successor or affiliate shall have a period of thirty (30) days to cure such event or condition after receipt of written notice of such event from Executive. Any voluntary termination for “Good Reason” following such thirty (30) day cure period must occur no later than the date that is six (6) months following the date notice was provided by Executive. Executive’s voluntary Separation from Service by reason of resignation from employment with the Company for Good Reason shall be treated as involuntary.
(f)“Permanent Disability” means at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’s employees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits, provided, however, if the long-term disability plan
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contains multiple definitions of disability, “Permanent Disability” shall refer to that definition of disability which, if Executive qualified for such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Permanent Disability shall be made by the person or persons required to make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-term disability plan for its employees, Permanent Disability shall mean Executive’s inability to perform, with or without reasonable accommodation, the essential functions of his position hereunder for a total of three months during any six-month period as a result of incapacity due to mental or physical illness as determined by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative, with such agreement as to acceptability not to be unreasonably withheld or delayed.
(g)“Qualifying Termination” means (i) a termination by Executive of Executive’s employment with the Company for Good Reason or (ii) a termination by the Company of Executive’s employment with the Company without Cause. Neither a termination of Executive's employment due to Permanent Disability nor a termination of Executive's employment due to death shall constitute a Qualifying Termination.
(h)“Standard Severance” means the applicable severance amount that would apply for the Executive as set forth on Exhibit A attached hereto, as such Exhibit may be updated by the Company from time to time to reflect the Company’s then-prevailing severance practices, provided that Exhibit A may not be modified in a manner adverse to the Executive during the 90 day period preceding or at any time after the occurrence of a Change in Control.
2.Term. The initial term of this Agreement (the “Initial Term”) shall be for a period beginning on the Effective Date and ending on the three-year anniversary of the Effective Date. On the three-year anniversary of the Effective Date and each successive anniversary of the Effective Date, the term of this Agreement shall automatically be extended for an additional one-year period (“Extension Terms” and, collectively with the Initial Term, the “Term”) unless the Company gives Executive a written notice of non-extension no later than ninety (90) days prior to the then-applicable anniversary of the Effective Date. Upon the occurrence of a Change in Control during the Term, the Term shall automatically be extended until the two-year anniversary of the date on which the Change in Control occurs, provided that if Executive incurs a Qualifying Termination during the Term of this Agreement, the Term shall be further automatically extended for such additional period as necessary to provide that each party’s rights and obligations are fully satisfied hereunder.
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3.Severance.
(a)Severance Upon Qualifying Termination Occurring Within Two Years Following a Change in Control. If Executive has a Qualifying Termination that occurs within two years following a Change in Control, then subject to the requirements of this Section 3, the Executive’s continued compliance with Section 4 and the terms of Section 5, Executive shall be entitled to receive, in lieu of any severance payments or other severance benefits to which Executive may otherwise be entitled under any other agreement with or plan, policy or arrangement of the Company, the following payments and benefits:
(i)The Company shall pay to Executive his or her fully earned but unpaid base salary, when due, through the date of Executive’s Qualifying Termination at the rate then in effect, plus all other benefits, if any, under any Company group retirement plan, nonqualified deferred compensation plan, equity award plan or agreement, health benefits plan or other Company group benefit plan to which Executive may be entitled pursuant to the terms of such plans or agreements;
(ii)Subject to Section 3(c) and Section 5, Executive shall be entitled to receive severance pay in an amount equal to one and one half times (1.5x) the Standard Severance and one and one half (1.5x) target annual bonus, payable in a single lump sum as soon as practicable after the date of Executive’s Qualifying Termination;
(iii)Subject to Section 3(c) and Section 5, if Executive elects to receive continued medical, dental or vision coverage under one or more of the Company’s group medical, dental or vision plans pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), reimbursement (or direct payment to the carrier) for the Company-paid portion of the applicable COBRA premiums for Executive and Executive’s covered dependents under such plans (at the same cost sharing levels as in effect for similarly-situated active employees) during a period commencing immediately upon the Termination Date and ending on the earliest of (x) the end of one and one half (1.5x) the Standard Severance period, (y) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRA and (z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility); and
(iv)Subject to Section 3(c) and Section 5, all unvested equity or equity-based awards granted under any equity compensation plans of the Company shall immediately become 100% vested, provided that, unless a provision more favorable to Executive is included in an applicable award agreement, any such awards that are subject to performance-based vesting conditions shall only be payable subject to the attainment of the performance measures for the applicable performance period as provided under the terms of the applicable award agreement.
(b)Other Terminations. Upon Executive’s termination of employment for any reason other than as set forth in Section 3(a), the Company shall not have any other or further obligations to Executive under this Agreement (including any financial obligations) except that Executive shall be entitled to receive (i) Executive’s fully earned but unpaid base salary, through the date of termination at the rate then in effect and (ii) all other amounts or benefits to which Executive is entitled under any compensation, retirement or benefit plan or practice of the Company at the time of termination in accordance with the terms of such plans or practices, including, without limitation, any continuation of benefits required by COBRA or applicable law. The foregoing shall be in addition to, and not in lieu of, any and all other rights and remedies which may be available to the Company under the circumstances, whether at law or in equity.
(c)Release. As a condition to Executive’s receipt of any amounts set forth in Section 3(a) above, Executive shall execute and not revoke a general release of all claims in favor of the Company (the “Release”) in the form substantially similar to the form attached hereto as Exhibit B (and any statutorily prescribed revocation period applicable to such Release shall have expired) within the sixty (60) day period following the date of Executive’s Qualifying Termination.
(d)Exclusive Remedy; Other Arrangements. Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts (if any) accruing after the termination of Executive’s employment shall cease upon such termination.
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In addition, the severance payments provided for in Section 3(a) above are intended to be paid in lieu of any severance payments Executive may otherwise be entitled to receive under any other plan, program, policy or agreement with the Company or any of its affiliates (collectively, “Other Arrangements”). Therefore, in the event Executive becomes entitled to receive the severance payments and benefits provided under Section 3(a) of this Agreement, he or she shall receive the amounts provided under that section of this Agreement and shall not be entitled to receive any severance payments or severance benefits pursuant to any Other Arrangements. In addition, to the extent the Executive is a party to any employment agreement, offer letter or other agreement or arrangement with the Company or any of its affiliates, in each case that was entered into prior to the date of this Agreement, and that provides for the payment or provision of severance pay or severance benefits upon an involuntary termination or a resignation of employment for good reason (or term of similar meaning) in connection with a change in control (or term of similar meaning) (such agreement a “Prior Agreement”), the Executive hereby agrees that the severance pay and severance benefit provisions of such Prior Agreement shall be and hereby are superseded by this Agreement and from and after the date of this Agreement, such severance pay and severance benefit provisions of the Prior Agreement shall be and are null and void and of no further force or effect, in each case, only to the extent such severance pay and severance benefit provisions are applicable to a termination occurring in connection with a change in control. For the avoidance of doubt, except as may otherwise be agreed in writing between the Executive and the Company or one of its affiliates after the date of this Agreement, it is intended that the other terms and conditions of any Prior Agreement that do not provide for severance pay or severance benefits, including any non-competition, non-solicitation, non-disparagement, confidentiality, assignment of inventions covenants and other similar covenants contained therein, shall remain in effect in accordance with their terms (and shall not be limited by the provisions of any similar covenants set forth herein) for the periods set forth in the Prior Agreement.
(e)No Mitigation. Executive shall not be required to mitigate the amount of any payment provided for in this Section 3 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 3 be reduced by any compensation earned by Executive as the result of employment by another employer or self-employment or by retirement benefits; provided, however, that loans, advances or other amounts owed by Executive to the Company may be offset by the Company against amounts payable to Executive under this Section 3.
(f)Return of the Company’s Property. If Executive’s employment is terminated for any reason, the Company shall have the right, at its option, to require Executive to vacate his or her offices prior to or on the effective date of termination and to cease all activities on the Company’s behalf. Upon the termination of his or her employment in any manner, as a condition to Executive’s receipt of any post-termination benefits described in this Agreement, Executive shall immediately surrender to the Company all lists, books and records of, or in connection with, the Company’s business, and all other property belonging to the Company, it being distinctly understood that all such lists, books and records, and other documents, are the property of the Company. Executive shall deliver to the Company a signed statement certifying compliance with this Section 3(f) prior to the receipt of any post-termination benefits described in this Agreement.
(g)Parachute Payments.
(i) It is the objective of this Agreement to maximize Executive’s Net After-Tax Benefit (as defined herein) if payments or benefits provided under this Agreement are subject to excise tax under Section 4999 of the Code. Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit by the Company or otherwise to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (all such payments and benefits, including the payments and benefits under Section 3(a) hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments shall be subject to the Excise Tax, but only if the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after
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taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
(ii) The Total Payments shall be reduced by the Company in the following order: (w) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (x) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting or payments with respect to any equity award with respect to the Company’s common stock that is exempt from Section 409A of the Code, (y) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payments attributable to the acceleration of vesting and payments with respect to any equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, and (z) reduction of any payments attributable to the acceleration of vesting or payments with respect to any other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.
(iii)All determinations regarding the application of this Section 3(g) shall be made by an accounting firm with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax selected by the Company (“Independent Advisors”). For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (x) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (y) no portion of the Total Payments shall be taken into account which, in the opinion of the Independent Advisors, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation and (z) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The costs of obtaining such determination and all related fees and expenses (including related fees and expenses incurred in any later audit) shall be borne by the Company.
(iv)In the event it is later determined that a greater reduction in the Total Payments should have been made to implement the objective and intent of this Section 3(g), the excess amount shall be returned immediately by Executive to the Company, plus interest at a rate equal to 120% of the semi-annual applicable federal rate as in effect at the time of the Change in Control.
(h)Withholding. All compensation and benefits to Executive hereunder shall be reduced by all federal, state, local and other withholdings and similar taxes and payments required by applicable law.
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(a)Successors and Assigns. The rights of the Company under this Agreement may, without the consent of Executive, be assigned by the Company, in its sole and unfettered discretion, to any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly, acquires all or substantially all of the assets or business of the Company. The Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The failure of any such successor to so assume this Agreement shall constitute a material breach of this Agreement by the Company, it being understood that the Executive’s exclusive remedy for such material breach is to treat such failure to assume this Agreement as a “Good Reason” event as contemplated by Section 1(e)(iv) of this Agreement. As used in this Agreement, the “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(b)Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.
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(c)Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.
(d)Governing Law and Venue. This Agreement will be governed by and construed in accordance with the laws of the United States and the Commonwealth of Virginia applicable to contracts made and to be performed wholly within such state, and without regard to the conflicts of laws principles thereof. Any suit brought hereon shall be brought in the state or federal courts sitting in the Commonwealth of Virginia, the parties hereby waiving any claim or defense that such forum is not convenient or proper. Each party hereby agrees that any such court shall have in personam jurisdiction over it and consents to service of process in any manner authorized by Virginia law.
(e)Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to Executive at the address set forth below and to the Company at its principal place of business, or such other address as either party may specify in writing.
(f)Survival. Sections 1 (“Definitions”), 3 (“Severance”), 4 (“Non-Disparagement”), 5 (“Condition to Severance Obligations”), 6 (“Injunctive Relief”), 7 (“Agreement to Arbitrate”) and 9 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment with the Company.
(g)Entire Agreement. This Agreement and any covenants and agreements incorporated herein by reference as set forth in Section 5 and Section 7 together constitute the entire agreement between the parties in respect of the subject matter contained herein and therein and supersede all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral, provided, however, that for the avoidance of doubt, all Other Arrangements (as such Other Arrangements may be amended, modified or terminated from time to time) shall remain in effect in accordance with their terms, subject to Section 3(d) hereof. This Agreement may be amended or modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.
(h)Code Section 409A.
(i)The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.
(ii)Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that is considered nonqualified deferred compensation under Section 409A and is designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the sixtieth (60th) day following Executive’s Separation from Service (the “First Payment Date”). Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First Payment Date and the remaining payments shall be made as provided in this Agreement.
(iii)Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (x) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (y) the date of Executive’s death.
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Upon the first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate or beneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.
(iv)Executive’s right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.
(v)To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred; provided, that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one year and the amount of in-kind benefits provided in one year shall not affect the amount eligible for reimbursement or in-kind benefits to be provided in any subsequent year, other than medical expenses referred to in Section 105(b) of the Code, and Executive’s right to reimbursement or in-kind benefits under this Agreement will not be subject to liquidation or exchange for another benefit.
(i)Administration. This Agreement shall be interpreted and administered by the Board or a committee thereof to which the Board may delegate such function (the “Committee”). The Board or the Committee shall have the exclusive power, subject to and within the limitations of the express provisions of this Agreement, to interpret this Agreement and to make factual findings and determinations and take such action in connection with the Agreement as it, in its sole discretion, deems appropriate. The Board’s or the Committee's determination shall be binding and conclusive on all parties, and the Board or the Committee shall not be liable for any action or determination made in good faith with respect to this Agreement.
(j)Source of Funds. Amounts payable to Executive under this Agreement shall be from the general funds of the Company. Executive's rights to unpaid amounts under this Agreement shall be solely those of an unsecured creditor of the Company.
(k)Consultation with Legal and Financial Advisors. By executing this Agreement, Executive acknowledges that this Agreement confers significant legal rights, and may also involve the waiver of rights under other agreements; that the Company has encouraged Executive to consult with Executive’s personal legal and financial advisors; and that Executive has had adequate time to consult with Executive’s advisors before executing this Agreement.
(l)Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
(Signature Page Follows)
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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.
STRIDE, INC.
Dated: By:
Name:
Title:
Executive
Address:
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Exhibit A
STANDARD SEVERANCE
| Severance Pay (Months of Base Salary) | |
Severance | Benefits Continuation | |
Executive Officer (Not Including CEO) | 12 Months | 12 months |
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Exhibit B
GENERAL RELEASE OF CLAIMS
[The language in this Release may change based on legal developments and evolving best practices; this form is provided as an example of what will be included in the final Release document.]
This General Release of Claims (“Release”) is entered into as of this _____ day of ________, ____, between ________ (“Executive”), and Stride, Inc., a Delaware corporation (the “Company”) (collectively referred to herein as the “Parties”).
WHEREAS, Executive and the Company are parties to that certain Executive Change in Control Severance Agreement dated as of __________, ____ (the “Agreement”);
WHEREAS, the Parties agree that Executive is entitled to certain severance benefits under the Agreement, subject to Executive’s execution of this Release; and
WHEREAS, the Company and Executive now wish to fully and finally resolve all matters between them.
NOW, THEREFORE, in consideration of, and subject to, the severance benefits payable to Executive pursuant to the Agreement, the adequacy of which is hereby acknowledged by Executive, and which Executive acknowledges that he or she would not otherwise be entitled to receive, Executive and the Company hereby agree as follows:
1.General Release of Claims by Executive.
(a)Executive, on behalf of himself or herself and his or her executors, heirs, administrators, representatives and assigns, hereby agrees to release and forever discharge the Company and all predecessors, successors and their respective parent corporations, affiliates, related, and/or subsidiary entities, and all of their past and present investors, directors, shareholders, officers, general or limited partners, employees, attorneys, creditors, agents and representatives, and the employee benefit plans in which Executive is or has been a participant by virtue of his or her employment with or service to the Company (collectively, the “Company Releasees”), from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys’ fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected (collectively, “Claims”), which Executive has or may have had against such entities based on any events or circumstances arising or occurring on or prior to the date hereof, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever Executive’s employment by or service to the Company or the termination thereof, including any and all claims arising under federal, state, or local laws relating to employment, including without limitation claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, or liability in tort, and claims of any kind that may be brought in any court or administrative agency including, without limitation, claims under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000, et seq.; the Americans with Disabilities Act, as amended, 42 U.S.C. § 12101 et seq.; the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq.; the Civil Rights Act of 1866, and the Civil Rights Act of 1991; 42 U.S.C. Section 1981, et seq.; the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621, et seq. (the “ADEA”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq.; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq.; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; and any similar state or local law.
Notwithstanding the generality of the foregoing, Executive does not release the following:
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(i)Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;
(ii)Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;
(iii)Claims pursuant to the terms and conditions of the federal law known as COBRA;
(iv)Claims for indemnity under the bylaws of the Company or its affiliates, as provided for by law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company pursuant to which Executive is covered as of the effective date of Executive’s termination of employment with the Company and its subsidiaries;
(v)Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement;
(vi)Claims Executive may have to vested or earned compensation and benefits; and
(vii)Any rights that cannot be released as a matter of applicable law, but only to the extent such rights may not be released under such applicable law.
(b)Executive acknowledges that this Release was presented to him or her on the date indicated above and that Executive is entitled to have [twenty-one (21)/forty-five (45)] days’ time in which to consider it. Executive further acknowledges that the Company has advised him or her that he or she is waiving his or her rights under the ADEA, and that Executive should consult with an attorney of his or her choice before signing this Release, and Executive has had sufficient time to consider the terms of this Release. Executive represents and acknowledges that if Executive executes this Release before [twenty-one (21)/forty-five (45)] days have elapsed, Executive does so knowingly, voluntarily, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period.
(c) Executive understands that after executing this Release, Executive has the right to revoke it within seven (7) days after his or her execution of it. Executive understands that this Release will not become effective and enforceable unless the seven (7) day revocation period passes and Executive does not revoke the Release in writing. Executive understands that this Release may not be revoked after the seven (7) day revocation period has passed. Executive also understands that any revocation of this Release must be made in writing and delivered to the Company at its principal place of business within the seven (7) day period.
(d) Executive understands that this Release shall become effective, irrevocable, and binding upon Executive on the eighth (8th) day after his or her execution of it, so long as Executive has not revoked it within the time period and in the manner specified in clause (c) above. Executive further understands that Executive will not be given any severance benefits under the Agreement unless this Release is effective on or before the date that is sixty (60) days following the date of Executive’s termination of employment.
2.No Assignment. Executive represents and warrants to the Company Releasees that there has been no assignment or other transfer of any interest in any Claim that Executive may have against the Company Releasees. Executive agrees to indemnify and hold harmless the Company Releasees from any liability, claims, demands, damages, costs, expenses and attorneys’ fees incurred as a result of any such assignment or transfer from Executive.
3.Severability. In the event any provision of this Release is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.
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4.Interpretation; Construction. The headings set forth in this Release are for convenience only and shall not be used in interpreting this agreement. Either party’s failure to enforce any provision of this Release shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Release.
5.Governing Law and Venue. This Release will be governed by and construed in accordance with the laws of the United States of America and the Commonwealth of Virginia applicable to contracts made and to be performed wholly within such state, and without regard to the conflicts of laws principles thereof. Any suit brought hereon shall be brought in the state or federal courts sitting in the Commonwealth of Virginia, the Parties hereby waiving any claim or defense that such forum is not convenient or proper. Each party hereby agrees that any such court shall have in personam jurisdiction over it and consents to service of process in any manner authorized by Virginia law.
6.Entire Agreement. This Release and the Agreement constitute the entire agreement of the Parties in respect of the subject matter contained herein and therein and supersede all prior or simultaneous representations, discussions, negotiations and agreements, whether written or oral. This Release may be amended or modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.
7.Counterparts. This Release may be executed in multiple counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
(Signature Page Follows)
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IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing Release as of the date first written above.
Executive | STRIDE, INC. |
By:
Print Name: Print Name:
Title:
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Exhibit 10.3
AMENDED AND RESTATED
STRIDE, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED
STRIDE, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Table of Contents
i
AMENDED AND RESTATED
STRIDE, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
PURPOSE
Stride, Inc. (formerly known as K12, Inc.) (the “Company”) established the K12, Inc. Executive Deferred Compensation Plan (the “Plan”) effective as of June 30, 2008, to retain and reward a select group of management or highly compensated employees of the Company. The Plan is hereby amended and restated effective February 20, 2025.
The Plan is an unfunded plan established and maintained for the primary purpose of providing certain key employees who contribute or who are expected to contribute substantially to the success of the Company with the opportunity to defer the receipt of compensation.
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2
1
2
1
1
1
2
1
Such election shall be made in accordance with a manner prescribed by the Plan Administrator.
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3
1
1
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer on this 5th day of March, 2025.
STRIDE, INC.
Title: Chief Executive Officer_______________
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, James J. Rhyu, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Stride, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 29, 2025
/s/ JAMES J. RHYU | |
James J. Rhyu | |
Chief Executive Officer | |
(Principal Executive Officer) | |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Donna M. Blackman, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Stride, Inc.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: April 29, 2025
/s/ DONNA M. BLACKMAN | |
Donna M. Blackman | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) | |
Exhibit 32.1
The following certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350 and in accordance with SEC Release No. 33-8238. This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Section 906 Certification
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Stride, Inc., a Delaware corporation (the “Company”), hereby certifies, to such officer’s knowledge, that:
| (1) | the accompanying Quarterly Report of the Company on Form 10-Q for the quarterly period ended March 31, 2025 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 29, 2025
/s/ JAMES J. RHYU | |
James J. Rhyu | |
Chief Executive Officer | |
(Principal Executive Officer) | |
Exhibit 32.2
The following certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350 and in accordance with SEC Release No. 33-8238. This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Section 906 Certification
Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Stride, Inc., a Delaware corporation (the “Company”), hereby certifies, to such officer’s knowledge, that:
(1) | the accompanying Quarterly Report of the Company on Form 10-Q for the quarterly period ended March 31, 2025 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 29, 2025
/s/ DONNA M. BLACKMAN | |
Donna M. Blackman | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) | |