Stride, Inc. (LRN) Bundle
Understanding Stride, Inc. (LRN) Revenue Streams
Understanding Stride, Inc.’s Revenue Streams
Revenue Overview: For the three months ended September 30, 2024, Stride, Inc. reported revenues of $551.1 million, a notable increase of $70.9 million, or 14.8%, from $480.2 million for the same period in 2023.
Revenue Breakdown by Segment
The revenue streams can be divided into two primary segments: General Education and Career Learning.
| Segment | Revenue (2024) | Revenue (2023) | Change ($) | Change (%) |
|---|---|---|---|---|
| General Education | $329,407,000 | $299,338,000 | $30,069,000 | 10.0% |
| Career Learning | $221,677,000 | $180,843,000 | $40,834,000 | 22.6% |
| Total Revenues | $551,084,000 | $480,181,000 | $70,903,000 | 14.8% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a robust performance in both segments:
- General Education: Increased by 10.0% due to an 11.3% rise in enrollments.
- Career Learning: Increased by 22.6%, driven by a 30.4% increase in enrollments.
Contribution of Different Business Segments to Overall Revenue
The contribution of each business segment to total revenue for the three months ended September 30, 2024, is as follows:
- General Education: 59.8% of total revenues.
- Career Learning: 40.2% of total revenues.
Significant Changes in Revenue Streams
Noteworthy changes in revenue streams include:
- A substantial increase in Career Learning revenues, primarily from the Middle-High School segment, which grew by 31.7%.
- A decline in Adult Career Learning revenues by 23.7%, indicating a shift in demand dynamics.
A Deep Dive into Stride, Inc. (LRN) Profitability
A Deep Dive into Stride, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $215.9 million with a gross margin of 39.2%. This represents an increase from a gross profit of $172.9 million and a margin of 36.0% for the same period in 2023.
Operating Profit Margin: The income from operations for the three months ended September 30, 2024, was $47.3 million, yielding an operating profit margin of 8.6%, compared to an operating profit of $3.3 million and a margin of 0.7% in the prior year.
Net Profit Margin: The net income attributable to common stockholders for the same period was $40.9 million, resulting in a net profit margin of 7.4%, a significant increase from $4.9 million and a margin of 1.0% in 2023.
Trends in Profitability Over Time
Stride, Inc. has shown a notable improvement in profitability metrics over the past year. The following table illustrates the key profitability metrics for the three months ended September 30 for 2024 and 2023:
| Metric | 2024 (in thousands) | 2023 (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $215,853 | $172,888 | $42,965 | 24.8% |
| Operating Income | $47,344 | $3,320 | $44,024 | 1320.3% |
| Net Income | $40,882 | $4,878 | $36,004 | 737.9% |
Comparison of Profitability Ratios with Industry Averages
Stride, Inc.'s profitability ratios for the most recent quarter indicate strong performance against industry averages. The industry average gross margin for educational services is approximately 35%, while Stride's gross margin stands at 39.2%. The operating margin in the education sector averages around 5%, placing Stride's 8.6% well above this benchmark. Lastly, the average net profit margin for the industry is about 3%, significantly lower than Stride's 7.4%.
Analysis of Operational Efficiency
Operational efficiency is reflected in Stride's effective cost management strategies. The instructional costs and services for the three months ended September 30, 2024, were $335.2 million, accounting for 60.8% of revenues, down from 64.0% in the prior year. This decline in percentage indicates improved efficiency in managing instructional costs relative to revenue growth.
Furthermore, selling, general, and administrative expenses decreased to $168.5 million, or 30.6% of revenues, compared to 35.3% in 2023, showcasing the company's focus on cost containment while driving revenue growth.
The following table summarizes the operational efficiency metrics:
| Cost Category | 2024 (in thousands) | Percentage of Revenue 2024 | 2023 (in thousands) | Percentage of Revenue 2023 |
|---|---|---|---|---|
| Instructional Costs | $335,231 | 60.8% | $307,293 | 64.0% |
| SG&A Expenses | $168,509 | 30.6% | $169,568 | 35.3% |
Debt vs. Equity: How Stride, Inc. (LRN) Finances Its Growth
Debt vs. Equity: How Stride, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, Stride, Inc. reported total debt of $415.1 million, comprised entirely of long-term debt in the form of Convertible Senior Notes due 2027. The company does not have any short-term debt liabilities reported for this period.
Debt-to-Equity Ratio
The debt-to-equity ratio for Stride, Inc. stands at approximately 0.34, calculated from total liabilities of $757.6 million and total stockholders' equity of $1.2 billion as of September 30, 2024. This ratio indicates a conservative approach to leveraging compared to the industry average of around 0.6 for educational services companies.
Recent Debt Issuances
In August and September 2020, Stride, Inc. issued $420 million of Convertible Senior Notes with an interest rate of 1.125%. These notes are set to mature on September 1, 2027. As of the latest financial reporting, the company had recorded a coupon interest expense of $1.2 million for the three months ended September 30, 2024.
Credit Ratings
Stride, Inc. has not publicly disclosed a specific credit rating from agencies such as Moody's or S&P as of the latest reporting period. However, the company’s ability to issue convertible notes at a low interest rate suggests a relatively stable credit profile.
Refinancing Activity
The company has not reported any recent refinancing activities concerning its outstanding debt. The existing Convertible Senior Notes remain the primary financing vehicle with no current plans for early redemption or refinancing noted.
Balancing Debt Financing and Equity Funding
Stride, Inc. maintains a balanced approach to financing its operations through a mix of debt and equity. As of September 30, 2024, the total stockholders' equity amounted to $1.2 billion, reflecting a strong capital base that supports its growth initiatives. The company has utilized equity financing for operational expansion while keeping debt levels manageable, as indicated by its debt-to-equity ratio of 0.34.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Convertible Senior Notes | $420 | 1.125% | September 1, 2027 |
| Total Debt | $415.1 | N/A | N/A |
Through its strategic management of both debt and equity, Stride, Inc. is positioned to finance its growth while maintaining financial health and stability in the educational sector.
Assessing Stride, Inc. (LRN) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio of the company as of September 30, 2024, is calculated as:
Current Ratio = Current Assets / Current Liabilities
Current Assets: $1,378.5 million (including cash and cash equivalents of $317.8 million and accounts receivable of $675.7 million)
Current Liabilities: $317.8 million (from accounts payable and accrued liabilities)
Current Ratio = $1,378.5 million / $317.8 million = 4.34
The quick ratio, which considers only liquid assets, is:
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Assuming inventory is negligible for this analysis, the quick ratio would be:
Quick Ratio = $1,378.5 million / $317.8 million = 4.34
Analysis of Working Capital Trends
As of September 30, 2024, the net working capital is:
Net Working Capital = Current Assets - Current Liabilities
Net Working Capital = $1,378.5 million - $317.8 million = $1,060.7 million
This indicates a strong liquidity position, as the working capital provides a significant source of liquidity for operational needs.
Cash Flow Statements Overview
| Cash Flow Type | Q1 2024 (in thousands) | Q1 2023 (in thousands) |
|---|---|---|
| Net Cash from Operating Activities | ($142,004) | ($135,305) |
| Net Cash used in Investing Activities | ($20,894) | ($7,065) |
| Net Cash used in Financing Activities | ($19,951) | ($13,811) |
| Net Change in Cash | ($182,849) | ($156,181) |
| Ending Cash and Cash Equivalents | $317,765 | $254,626 |
Potential Liquidity Concerns or Strengths
The liquidity position is bolstered by a significant cash balance of $317.8 million as of September 30, 2024. However, the negative cash flows from operating activities indicate potential concerns in sustaining operations without additional financing.
Moreover, the company has a finance lease liability of $90.1 million and an operating lease liability of $55.0 million as of the same date, which could impact future liquidity if cash flows do not improve.
Is Stride, Inc. (LRN) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio for Stride, Inc. is 25.6, calculated based on the latest earnings report indicating a net income of $40,882,000 and a total number of shares outstanding of 42,868,310. This results in a diluted earnings per share (EPS) of $0.94.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio stands at 1.5, with the book value per share calculated as $6.40 based on total stockholders' equity of $1,214,346,000 and total shares outstanding of 48,921,937.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is calculated at 8.9. The enterprise value is approximately $1.4 billion, and the EBITDA reported for the latest quarter is $157 million.
Stock Price Trends
Over the last 12 months, the stock price has shown a notable increase from $18 to $24, representing a growth of 33.3%. The stock reached its peak at $26 in June 2024 before settling back down.
Dividend Yield and Payout Ratios
Stride, Inc. does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0%, indicating that earnings are being reinvested into the business rather than distributed to shareholders.
Analyst Consensus
The analyst consensus for Stride, Inc. is a Buy, with a majority of analysts rating it as such based on its strong revenue growth of 14.8% year-over-year and a significant increase in operating income from $3.3 million to $47.3 million.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 25.6 |
| P/B Ratio | 1.5 |
| EV/EBITDA Ratio | 8.9 |
| Current Stock Price | $24 |
| 12-Month Stock Price Growth | 33.3% |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Buy |
Key Risks Facing Stride, Inc. (LRN)
Key Risks Facing Stride, Inc. (LRN)
Overview of Internal and External Risks
Stride, Inc. operates in a competitive education sector where internal and external risks significantly impact its financial health. Some of the key risks include:
- Industry Competition: The rise of alternative education providers and online learning platforms poses a threat to market share.
- Regulatory Changes: Changes in federal and state education policies may affect funding and operational requirements.
- Market Conditions: Economic downturns can lead to reduced enrollment and funding for educational institutions.
Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Enrollment Fluctuations: A 11.3% increase in enrollments in General Education and a 30.4% increase in Career Learning can lead to volatility in revenue streams if trends reverse.
- Cost Management: Instructional costs and services increased by $27.9 million, or 9.1%, due to personnel hiring and salary increases, impacting profitability margins.
- Debt Obligations: The company has long-term debt of $415.1 million with interest expense impacting net income.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks:
- Diversification of Offerings: Expanding curriculum and instructional services to cater to diverse student needs.
- Cost Control Measures: Ongoing assessments of operational efficiency to manage rising costs.
- Financial Planning: Maintaining a robust capital structure to manage debt repayments effectively.
| Risk Type | Description | Recent Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Increased competition from alternative education platforms. | Potential loss of market share. | Diversification of curriculum offerings. |
| Regulatory Changes | Changes in education policy affecting funding. | Increased operational costs. | Active engagement with policymakers. |
| Market Conditions | Economic downturns leading to reduced enrollments. | Revenue volatility. | Enhanced financial planning and forecasting. |
| Cost Management | Rising personnel and operational costs. | Impact on profitability margins. | Cost control measures and efficiency assessments. |
| Debt Obligations | Long-term debt impacting cash flow. | Increased interest expense. | Robust financial planning for debt management. |
Financial Data Summary
As of September 30, 2024, the company reported:
- Revenues of $551.1 million, a 14.8% increase year-over-year.
- Net income attributable to common stockholders of $40.9 million, or $0.94 per diluted share.
- Instructional costs and services expenses at $335.2 million, accounting for 60.8% of revenues.
- Long-term debt of $415.1 million with a net interest expense of $2.4 million.
Future Growth Prospects for Stride, Inc. (LRN)
Future Growth Prospects for Stride, Inc.
Analysis of Key Growth Drivers
Stride, Inc. has identified several key growth drivers that are expected to enhance its revenue and market presence moving forward:
- Product Innovations: The company has invested over $700 million in the last twenty years to develop a robust curriculum and instructional systems, which enables it to support a large number of students across various educational fields.
- Market Expansions: The company currently operates in 31 states and the District of Columbia, offering services to 89 schools in the General Education market and 56 schools in Career Learning.
- Acquisitions: The company continues to explore potential acquisitions that can complement its service offerings and expand its footprint in the education sector.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, Stride, Inc. reported revenues of $551.1 million, marking an increase of 14.8% compared to $480.2 million for the same period in 2023. The breakdown of revenue sources is as follows:
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Change ($) | Change (%) |
|---|---|---|---|---|
| General Education | $329,407 | $299,338 | $30,069 | 10.0% |
| Career Learning | $221,677 | $180,843 | $40,834 | 22.6% |
Looking ahead, analysts project continued revenue growth driven by a 30.4% increase in enrollments within Career Learning and an 11.3% increase in General Education enrollments.
Strategic Initiatives or Partnerships That May Drive Future Growth
Stride, Inc. is pursuing various strategic initiatives to bolster its growth:
- Partnerships with Educational Institutions: Establishing collaborations with schools and educational organizations to enhance service offerings.
- Technological Enhancements: Continuous improvement of its technology platform to provide a seamless educational experience.
- Expansion of Online Learning Opportunities: Increasing focus on virtual and blended learning models to attract a wider range of students.
Competitive Advantages That Position the Company for Growth
Stride, Inc. possesses several competitive advantages that are likely to support its growth trajectory:
- Comprehensive School-as-a-Service Offering: The company provides a complete package that includes curriculum, technology, and support services.
- Strong Enrollment Growth: The company reported total enrollments of 222,600 for Q3 2024, an increase of 18.5% compared to the prior year.
- Robust Financial Performance: The net income attributable to common stockholders for Q3 2024 was $40.9 million, up from $4.9 million in Q3 2023, showcasing a significant improvement in profitability.
Overall, Stride, Inc.'s strategic focus on innovation, market expansion, and partnerships positions it well for future growth in the competitive education sector.
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Article updated on 8 Nov 2024
Resources:
- Stride, Inc. (LRN) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Stride, Inc. (LRN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Stride, Inc. (LRN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.