Stride Annual Report 2022

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FY2022 Annual Report · Stride

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Annual Report

2022

Learning at

Every Step

Stride’s mission is to

help learners of all

ages reach their full

potential through

inspired teaching

and personalized

learning.

CEO WELCOME LETTER

TO OUR FELLOW
SHAREHOLDERS,

More than 20 years ago, Stride, Inc. emerged as a pioneer in online
education. Today, millions of students and families later, we are still
the gold standard and continuing to expand our impact.

We have a strong network of industry-leading teachers, staff, tools, and resources.
Our interactive, digital-ﬁrst curriculum and platforms include award-winning
technology and products. And our career learning model and professional
development platforms are transforming the idea of what’s possible—from the
classroom to the workplace.

Amid the shadow of the pandemic, online learning is becoming an even more
integral part of mainstream culture. Seventy percent of parents1 now say they want
options, including in-person, online, and hybrid learning options, and they want the
ability to decide for themselves what academic option works best for their families.
Meanwhile, more and more learners are demanding ﬂexibility and accessibility.

The backdrop of uncertainty, customer demand, and macro factors present long-
term opportunities for us to leverage our core capabilities to deliver products and
services to a more mainstream audience. And we will continue to invest in our
product set and innovate while we listen to customers and try to meet their needs.

Along the way, we’re continuing to focus on two key areas: driving innovation to
support the learning experience and preparing the next generation for the jobs of
today and tomorrow.

We believe that these focus areas, which represent our dedication to student
excellence and professional success, will help build long-term value for our
shareholders—in the months and years to come. Thank you for joining us on this
exciting journey.

James Rhyu
Chief Executive Officer, Stride, Inc.

1 National Parents Union, “Mask up! Majority of parents want masks to be mandatory in schools,” October 2021.

STRIDE ANNUAL REPORT 2022

WE ARE INNOVATORS

DRIVING INNOVATION
to Support the Learning Experience

A vital part of our commitment to innovation is our investment in new tech
tools that improve our core curriculum and the classroom experience. As part
of this goal, we strengthened our award-winning K–5 curriculum with more
independent learning mechanisms.

These changes help provide more
personalized support for students and their
learning coaches. They also transitioned us
from a model that relied on learning coaches
at home to deliver key instruction more than
50 percent of the time to reimagined, fully
independent courses, even for the youngest
learners. Importantly, these updates
have helped decrease learning coach
instructional involvement.

Beyond the K–5 level, this year, we expanded
the use of the Stride Skills Arcade2: an
award-winning adaptive learning tool that

uses video lessons and tech-enhanced
skills practice lessons to help bring
struggling learners to grade level. With
the Skills Arcade, kindergarten through 8th
grade students now have access to a virtual
tutor at their ﬁngertips.

In addition to our innovative updates to our
core curriculum, we’re also building on our
work to reach students through game-based
learning. Without a doubt, gamiﬁcation is
transforming the classroom experience,
helping students stay more engaged, and
optimizing the learning process.

Stride Skills

Arcade

We expanded the use of the Stride Skills Arcade,
an award-winning adaptive learning tool that uses
video and tech-enhanced skills practice lessons to
help bring struggling students to grade level.

2 Stride, Inc. “Stride Skills Arcade,” 2022.

III

WE ARE INNOVATORS

In fact, Massachusetts Institute of
Technology research explains that
game-based learning supports the
development of “new cognitive abilities.”
This includes but is not limited to: “the
ability to process information very quickly”
and learning how to solve problems in
a collaborative way.3 From curriculum
upgrades to sustainability lessons to our
e-sports offerings, game-based learning
plays a key role in our commitment to
student success.

E-sports has emerged as one of the
world’s fastest-growing industries and
serves as a learning staple in many Stride
K12-powered schools. Our position as a
leading online education provider means
there are opportunities for us to bring
together learning and gaming to

motivate and better prepare students for
a successful future.

This year we did just that with Stride’s
e-Sports4 Summer Camp, through which
more than 4,000 students across the
country—including those outside the Stride
and K12 family—learned coding, automation,
physics, and engineering principles.

At the same time, they worked with some
of the world’s most popular video games,
including Fortnite® and League of Legends®.
Participating students also honed valuable
leadership, sportsmanship, teamwork,
and strategy skills. This successful initiative
supported our efforts to better position the
company within mainstream culture. We’re
looking forward to expanding our e-sports
initiative in the near future.

4,000+
students

learned coding, automation, physics, and
engineering principles at Stride’s e-Sports
Summer Camp in 2022.

3 Massachusetts Institute of Technology’s Education Arcade, “Using the technology of today, in the classroom today.”
4 Stride, Inc. “2022 FREE VIRTUAL SUMMER CAMP,” 2022.

STRIDE ANNUAL REPORT 2022

WE ARE INSPIRING STUDENTS

Students Propose Creative
Solutions for Our Environment

Stride and The Nature Conservancy invited students in grades 9–12

nationwide to participate in the ﬁrst-ever Stride Innovation Challenge.

The theme for the inaugural event was “My Planet, My Neighborhood.”

Students were invited to identify environmental challenges in

their communities, nationally, or globally, and propose innovative

solutions that considered implementation, creativity, and impact.

Students could compete individually or in groups of up to three

people. The Nature Conservancy, a global environmental nonproﬁt

working to create a world where people and nature can thrive,

provided their expertise in science to help students with their projects.

More than 400 entries came in from across the country. Nine

projects were selected, and the students received an all-expense

paid trip to the Washington, D.C. area, where they presented their

ideas in front of a panel of educators and leaders from Stride and

The Nature Conservancy. Students with the winning projects

received cash prizes.

400+
entries

WE ARE AWARD-WINNING

Sparking a Joy for Learning in Our
Youngest Students

Stride, Inc. won the top prize for K–12 Education Technology

Innovation in the 2022 EdTech Breakthrough Awards Program

for our updated K–5 curriculum.

The improved curriculum provides more personalized support

for students and their learning coaches. They also transitioned

us from a model that relied on learning coaches at home to

deliver key instruction more than 50 percent of the time to

reimagined, fully independent courses, even for the youngest

learners. Importantly, these updates have helped decrease

learning coach instructional involvement.

STRIDE ANNUAL REPORT 2022

WE ARE ECO-MINDED

Game-based learning also underscores
our efforts to foster innovation in ways
that promote sustainability. Through our
new partnership with Ocean Visions, a
nonproﬁt network of leading research and
academic institutions, we’re supporting
the goals of the United Nations Decade
of Ocean Science for Sustainable
Development.5 We’re proud to serve as
the initiative’s Lead Education Partner; and
through the gaming platform Minecraft®,
we’re helping students develop concrete
solutions for our world’s most pressing
environmental challenges.

To ensure a lasting impact of this effort, we’re
embedding Minecraft® challenges, content,
and lesson plans into our K–12 curricula
so students understand environmental
sustainability issues better. In addition to this
content, students will also have the chance
to hone their problem-solving and critical
thinking skills through Minecraft® lessons in
social studies and science.

Programs like Minecraft® and other
extracurricular activities help improve

student engagement, support learners in
making connections between
classwork and daily life, and strengthen
academic outcomes.

Some of our programs
are doubling their
participation rates, with
some even seeing
participation grow by
more than 80 percent.

To this end, we’ve focused on boosting our
club, competition, and enrichment offerings
for students. And the results speak for
themselves: some of our programs are
doubling their participation rates, with
some even seeing participation grow by
more than 80 percent. This school year,
we’re poised to offer more than 30 additional
enrichment programs.

With these innovative efforts and more, we’re
continuing to create and reﬁne some of our
industry’s best digital learning products.

Yahoo News, “(cid:75)(cid:272)(cid:286)(cid:258)(cid:374)(cid:3)(cid:115)(cid:349)(cid:400)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:100)(cid:258)(cid:393)(cid:400)(cid:3)(cid:94)(cid:410)(cid:396)(cid:349)(cid:282)(cid:286)(cid:853)(cid:3)(cid:47)(cid:374)(cid:272)(cid:856)(cid:3)(cid:410)(cid:381)(cid:3)(cid:87)(cid:381)(cid:449)(cid:286)(cid:396)(cid:3)(cid:94)(cid:437)(cid:400)(cid:410)(cid:258)(cid:349)(cid:374)(cid:258)(cid:271)(cid:349)(cid:367)(cid:349)(cid:410)(cid:455)(cid:3)(cid:28)(cid:282)(cid:437)(cid:272)(cid:258)(cid:415)(cid:381)(cid:374),” April 19, 2022.

Ocean
Visions

We are supporting the goals of the
United Nations Decade of Ocean Science
for Sustainable Development through our
new partnership with Ocean Visions,
a nonproﬁt network of leading research and
academic institutions.

VII

VIII

STRIDE ANNUAL REPORT 2022

WE ARE TRAILBLAZERS

PREPARING THE
NEXT GENERATION
for the Jobs of Tomorrow

Consider this: More than half of jobs6 today don’t require a four-year college
degree. That compares to just over 40 percent from four years ago, and we
expect this trend to continue. Additionally, with Americans collectively owing
more than $1.7 trillion dollars7 in college debt, many students across the country
are forgoing the conventional high school to college to workforce route.

These numbers demonstrate that more
and more employers and learners are
realizing the conventional route of pursuing
a college degree simply isn’t the only path
to professional success nor the most cost-
effective. With 87 percent8 of companies
saying “they either are experiencing skills
gaps now or expect them within a few
years,” it’s becoming even more vital that we
prepare students and adult learners to take
advantage of our changing workforce reality.

89 percent of employers are more likely to
hire high school graduates if the students
learn real-world skills, according to the 2021
Future of Learning Research Survey.

Our Stride K12-powered career learning
programs are designed to help bridge the
disparities we see in a variety of industries—
from manufacturing to healthcare to IT. By
exploring career options in middle or high
school, students can make better-informed

89% of

employers

are more likely to hire high school graduates if
the students learn real-world skills, according
to the 2021 Future of Learning Research Survey.

6 The Burning Glass Institute, “The Emerging Degree Reset,” February 2022.
7 Forbes, “(cid:94)(cid:410)(cid:437)(cid:282)(cid:286)(cid:374)(cid:410)(cid:3)(cid:62)(cid:381)(cid:258)(cid:374)(cid:3)(cid:24)(cid:286)(cid:271)(cid:410)(cid:3)(cid:94)(cid:410)(cid:258)(cid:415)(cid:400)(cid:415)(cid:272)(cid:400)(cid:3)(cid:47)(cid:374)(cid:3)(cid:1006)(cid:1004)(cid:1006)(cid:1006)(cid:855)(cid:3)(cid:4)(cid:3)(cid:90)(cid:286)(cid:272)(cid:381)(cid:396)(cid:282)(cid:3)(cid:936)(cid:1005)(cid:856)(cid:1011)(cid:3)(cid:100)(cid:396)(cid:349)(cid:367)(cid:367)(cid:349)(cid:381)(cid:374),” May 16, 2022.
8 McKinsey and Company, “(cid:17)(cid:286)(cid:455)(cid:381)(cid:374)(cid:282)(cid:3)(cid:346)(cid:349)(cid:396)(cid:349)(cid:374)(cid:336)(cid:855)(cid:3)(cid:44)(cid:381)(cid:449)(cid:3)(cid:272)(cid:381)(cid:373)(cid:393)(cid:258)(cid:374)(cid:349)(cid:286)(cid:400)(cid:3)(cid:258)(cid:396)(cid:286)(cid:3)(cid:396)(cid:286)(cid:400)(cid:364)(cid:349)(cid:367)(cid:367)(cid:349)(cid:374)(cid:336)(cid:3)(cid:410)(cid:381)(cid:3)(cid:258)(cid:282)(cid:282)(cid:396)(cid:286)(cid:400)(cid:400)(cid:3)(cid:410)(cid:258)(cid:367)(cid:286)(cid:374)(cid:410)(cid:3)(cid:336)(cid:258)(cid:393)(cid:400),” February 12, 2020.

WE ARE TRAILBLAZERS

decisions about their higher education
options or even entering the workforce right
after earning their high school diploma.

Three of our newest and innovative
initiatives build on this work:

To support this endeavor, we launched
sixteen new career-focused programs
and schools during the 2021–2022 school
year. These programs prepare students
for the real world—whether that means
going to college or straight into a career
after graduation.

This year, we’re offering 400+
courses in 10 high-demand
career ﬁelds to help students
prepare for life after high school.

During the 2022–2023 school year, we’re
offering more than 400 courses and
expanding to 10 industry sectors to address
the growing demand for high schoolers
seeking career skills.

• Our Career Services Center features
access to nationally renowned career
coaches, an internship ﬁnder tool, videos
about job search skill building, and
resources for employers;

• Our Entrepreneurship Resource Center

helps teens start their own business
ventures and build valuable business skills
while they’re still in high school; and

• Alongside select school districts,

during the summer of 2022, we offered
students a single platform to engage
in career discovery and exploration;
supported their enrollment in career-
focused courses; helped them work
toward earning industry certiﬁcates;
and connected them with businesses
that offer well-paying jobs.

Total enrollment in our career learning
programs topped 42,000 students this year—
a 36 percent increase from last year.

42,000+
students

STRIDE ANNUAL REPORT 2022

WE ARE PREPARING STUDENTS FOR SUCCESS

Our Students Are
Future-Ready

Though we’re looking forward to expanding these opportunities in the

months ahead, the verdict is already in—our career learning programs

are working. According to a recent survey9, graduates from Stride

K12-powered schools feel more prepared than their brick-and-mortar

peers to tackle the road ahead:

74%

of graduates from Stride K12-powered schools feel
optimistic about their career direction, compared to just
over half (56%) of their peers.

74%

Stride K12-Powered Schools

56%

Brick-and-Mortar Schools

78%

More than three-quarters (78%) of graduates from
Stride K12-powered schools believe they are excelling at
their current job, compared to 46% of other young adults.

78%

Stride K12-Powered Graduates

46%

Other Young Adults

71%

of graduates from Stride K12-powered schools say their school
taught them the importance of a strong work ethic, and two-
thirds (66%) say they learned complex problem-solving skills.

71%

66%

Strong Work Ethic

Problem-Solving Skills

9 Stride, Inc. “(cid:38)(cid:437)(cid:410)(cid:437)(cid:396)(cid:286)(cid:3)(cid:94)(cid:437)(cid:272)(cid:272)(cid:286)(cid:400)(cid:400)(cid:3)(cid:75)(cid:437)(cid:410)(cid:272)(cid:381)(cid:373)(cid:286)(cid:400)(cid:3)(cid:90)(cid:258)(cid:374)(cid:364)(cid:3)(cid:44)(cid:349)(cid:336)(cid:346)(cid:286)(cid:396)(cid:3)
(cid:296)(cid:381)(cid:396)(cid:3)(cid:94)(cid:410)(cid:396)(cid:349)(cid:282)(cid:286)(cid:3)(cid:60)(cid:1005)(cid:1006)(cid:3)(cid:410)(cid:346)(cid:258)(cid:374)(cid:3)(cid:17)(cid:396)(cid:349)(cid:272)(cid:364)(cid:882)(cid:258)(cid:374)(cid:282)(cid:882)(cid:68)(cid:381)(cid:396)(cid:410)(cid:258)(cid:396),” July 2022.

need for future success.

This research conﬁrms what we’ve known for years: online learning not only

works for students during their K–12 journey, it also gives them what they

WE ARE PARTNERING WITH LEADERS

To further our impact and to advance our
overall career business, we also expanded
the reach of our adult learning offerings.

MedCerts and Tech Elevator
grew by more than 30 percent
and 50 percent, respectively,
in the last year.

We’ve seized on this momentum by amplifying
one key thing: partnerships, partnerships,
partnerships. A few examples include:

• With an anticipated nationwide shortage
of 500,000 nurses by 203010, an aging
population, persistent issues related
to healthcare equity, and heightened
demands on the country’s healthcare
system, our country is facing a critical need
to attract more learners to the nursing ﬁeld.

To help ﬁll this gap, we’re partnering
with Chamberlain University11 to design
high school courses for students who
want to earn college-level credits in
nursing. This partnership combines
industry-relevant coursework, networking
opportunities, and job shadowing
experiences to help learners explore
various career options in the nursing ﬁeld.
The overall goal is to reduce students’
required time-to-completion of a bachelor’s
degree in nursing.

• As part of its partnership with the Defense

Logistics Agency (DLA), Galvanize is
training DLA personnel in data analytics
and data science.12 This partnership
supports DLA’s goal of becoming a more
data-literate organization.

• Goshen Health13, a network of health

services and physicians, is partnering
with MedCerts for its train-and-hire
initiative. This partnership supports
the recruitment and clinical training for
medical assistants and medical billing
positions at all Goshen locations. By
collaborating with MedCerts, Goshen
is creating a talent pipeline to staff its
outpatient clinics while also providing
growth and development opportunities
for those interested in getting a start
in the medical ﬁeld.

In addition to establishing new partnerships,
we created unique learning opportunities for
busy, working professionals. Tech Elevator’s
ﬁrst-ever fully remote part-time program14
provides a more ﬂexible path for working
adults seeking a tech career. The 30-week
program includes self-study structure,
cohort-based peer learning, and one-to-one
sessions with expert software development
instructors with real-world experiences in
the ﬁeld.

While we continue to provide much-needed
support services, expand our core business,
and help students across the country access
quality education, we are laser-focused on
preparing learners of all ages for the ever-
changing workforce.

At Stride, we believe that each student
deserves every opportunity to succeed
in their chosen career ﬁeld regardless of
their age, background, or where they live.
Whether a learner is a middle schooler or a
mid-career professional, we’re committed
to helping them achieve their academic
and professional dreams.

10 Association of American Medical Colleges, “(cid:44)(cid:381)(cid:400)(cid:393)(cid:349)(cid:410)(cid:258)(cid:367)(cid:400)(cid:3)(cid:349)(cid:374)(cid:374)(cid:381)(cid:448)(cid:258)(cid:410)(cid:286)(cid:3)(cid:258)(cid:373)(cid:349)(cid:282)(cid:3)(cid:282)(cid:349)(cid:396)(cid:286)(cid:3)(cid:374)(cid:437)(cid:396)(cid:400)(cid:349)(cid:374)(cid:336)(cid:3)(cid:400)(cid:346)(cid:381)(cid:396)(cid:410)(cid:258)(cid:336)(cid:286)(cid:400),” September 7, 2021.
11 Chamberlain University, “(cid:18)(cid:346)(cid:258)(cid:373)(cid:271)(cid:286)(cid:396)(cid:367)(cid:258)(cid:349)(cid:374)(cid:3)(cid:104)(cid:374)(cid:349)(cid:448)(cid:286)(cid:396)(cid:400)(cid:349)(cid:410)(cid:455)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:94)(cid:410)(cid:396)(cid:349)(cid:282)(cid:286)(cid:3)(cid:94)(cid:286)(cid:410)(cid:3)(cid:44)(cid:349)(cid:336)(cid:346)(cid:3)(cid:94)(cid:272)(cid:346)(cid:381)(cid:381)(cid:367)(cid:3)(cid:94)(cid:410)(cid:437)(cid:282)(cid:286)(cid:374)(cid:410)(cid:400)(cid:3)(cid:381)(cid:374)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:87)(cid:258)(cid:410)(cid:346)(cid:3)(cid:410)(cid:381)(cid:3)(cid:69)(cid:437)(cid:396)(cid:400)(cid:349)(cid:374)(cid:336)(cid:3)(cid:18)(cid:258)(cid:396)(cid:286)(cid:286)(cid:396)(cid:400),” August 17, 2021.
12 Bloomberg News, “(cid:39)(cid:258)(cid:367)(cid:448)(cid:258)(cid:374)(cid:349)(cid:460)(cid:286)(cid:3)(cid:410)(cid:381)(cid:3)(cid:4)(cid:349)(cid:282)(cid:3)(cid:24)(cid:286)(cid:296)(cid:286)(cid:374)(cid:400)(cid:286)(cid:3)(cid:62)(cid:381)(cid:336)(cid:349)(cid:400)(cid:415)(cid:272)(cid:400)(cid:3)(cid:4)(cid:336)(cid:286)(cid:374)(cid:272)(cid:455)(cid:859)(cid:400)(cid:3)(cid:24)(cid:349)(cid:336)(cid:349)(cid:410)(cid:258)(cid:367)(cid:3)(cid:17)(cid:437)(cid:400)(cid:349)(cid:374)(cid:286)(cid:400)(cid:400)(cid:3)(cid:100)(cid:396)(cid:258)(cid:374)(cid:400)(cid:296)(cid:381)(cid:396)(cid:373)(cid:258)(cid:415)(cid:381)(cid:374)(cid:3)(cid:258)(cid:400)(cid:3)(cid:39)(cid:367)(cid:381)(cid:271)(cid:258)(cid:367)(cid:3)(cid:94)(cid:437)(cid:393)(cid:393)(cid:367)(cid:455)(cid:3)(cid:18)(cid:346)(cid:258)(cid:349)(cid:374)(cid:3)(cid:62)(cid:286)(cid:258)(cid:282)(cid:286)(cid:396),” November 16, 2021.
13 MedCerts, “(cid:68)(cid:286)(cid:282)(cid:349)(cid:272)(cid:258)(cid:367)(cid:3)(cid:4)(cid:400)(cid:400)(cid:349)(cid:400)(cid:410)(cid:258)(cid:374)(cid:410)(cid:3)(cid:100)(cid:396)(cid:258)(cid:349)(cid:374)(cid:3)(cid:920)(cid:3)(cid:44)(cid:349)(cid:396)(cid:286)(cid:3)(cid:87)(cid:396)(cid:381)(cid:336)(cid:396)(cid:258)(cid:373),” 2022.
14 Tech Elevator, “(cid:100)(cid:346)(cid:286)(cid:3)(cid:87)(cid:258)(cid:396)(cid:410)(cid:882)(cid:100)(cid:349)(cid:373)(cid:286)(cid:3)(cid:18)(cid:381)(cid:282)(cid:349)(cid:374)(cid:336)(cid:3)(cid:17)(cid:381)(cid:381)(cid:410)(cid:272)(cid:258)(cid:373)(cid:393)(cid:3)(cid:24)(cid:286)(cid:400)(cid:349)(cid:336)(cid:374)(cid:286)(cid:282)(cid:3)(cid:38)(cid:381)(cid:396)(cid:3)(cid:122)(cid:381)(cid:437),” February 2022.

XII

STRIDE ANNUAL REPORT 2022

WE ARE EDUCATORS

Supporting Teachers on Their Professional
Learning Journey

It’s vital to note that our incredible network of 7,000+ teachers—the

cornerstone of the student learning experience—has truly made our

continuous growth possible. To better support them and their needs,

we’ve focused on improving professional development opportunities

and access to state-of-the-art teaching tools.

The new Stride Professional Development Center was officially launched

in May 2022. It includes a growing content library of on-demand professional

development courses, hands-on training, and live events for educators

seeking ways to advance their expertise and optimize student outcomes.

Through this center, we aim to provide high-quality professional

development and training in more accessible and affordable ways.

To introduce our professional development expertise to a broader

audience, we opened our Stride Promising Practices virtual conference

to the public in March 2022. Teachers, school administrators, and

counselors from around the country were invited to attend this year’s

conference at no cost.

Conference attendees heard experts from Stride K12-powered schools

share best practices on teaching effectiveness, student socialization,

leadership, and special programs. A virtual exhibitor hall also featured

demonstrations of Stride’s interactive platforms and content.

7,000+
teachers in our
network

XIII

WE ARE PROUD OF OUR SUCCESS

FINANCIAL
RESULTS

At the end of Fiscal Year 2022, Stride reported revenue
of $1.69 billion, growing almost 10 percent year-over-
year. Our adjusted operating income was $188.2 million,
up 16.6 percent year-over-year. Our strong results allow
us to continue to invest in new products and offerings
to support more learners. Additionally, we remain well
positioned in a challenging macroeconomic environment,
ending the year with cash, cash equivalents, and
restricted cash of $389 million.

$1.69
billion

At the end of Fiscal Year 2022, Stride
reported revenue of $1.69 billion, growing
almost 10 percent year-over-year.

XIV

STRIDE ANNUAL REPORT 2022

2022
HIGHLIGHTS

Revenue

2022

2021

2020

$1,686.7M

$1,536.8M

$1,040.8M

Adjusted
Operating Income1

2022

2021

2020

$188.2M

$161.4M

$62.1M

Adjusted EBITDA2

2022

2021

2020

$273.1M

$239.9M

$128.2M

Free Cash Flow3

2022

2021

2020

$139.3M

$81.9M

$35.4M

1 Adjusted operating income is deﬁned as income from operations adjusted for stock-based compensation and the amortization of intangible assets.

2 Adjusted EBITDA is deﬁned as income from operations adjusted for stock-based compensation expense and depreciation and amortization.

3 Free Cash Flow is deﬁned as net cash provided by operating activities, less purchases of property and equipment, capitalized software development
costs, and capitalized curriculum development costs.

A reconciliation of Adjusted Operating Income, Adjusted EBITDA and Free Cash Flow metrics to GAAP results can be found on page 117.

WE ARE EXCITED ABOUT OUR FUTURE

LOOKING
AHEAD

No matter where a learner’s path led in 2022, our single
most important job was to help them get there. At Stride,
we know this path rests on the belief that the needs of the
families and customers we serve are paramount. Both
now and in the future, we’re committed to ensuring that
students, families, and educators have the best possible
experience in the classrooms we support.

As I embark on another year as CEO, I want to especially thank the
thousands of Stride employees who have worked hard to make this
past year so successful. Our incredible teams are committed to
ensuring that every student we serve achieves their goals, and I’m so
proud to work alongside them.

Mainstream culture’s embrace of online learning will continue to
inform our company’s path forward. Like me, I know you’re looking
forward to everything that lies ahead.

Warmest regards,

James Rhyu
Chief Executive Officer

XVI

STRIDE ANNUAL REPORT 2022

FORM 10-K

tec

(cid:1409)

(cid:1407)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2022

For the transition period from to

Commission file number 001-33883

Stride, Inc.
(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

11720 Plaza America 9th Floor
Reston, VA 20190
(Address of Principal Executive Offices)

95-4774688
(I.R.S. Employer
Identification No.)

(703) 483-7000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $0.0001 par value

Trading Symbol
LRN

Name of each exchange on which registered
New York Stock Exchange (NYSE)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:134) No (cid:95)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:134) No (cid:95)

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 (cid:95)
No (cid:134)

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 (cid:95) No (cid:134)

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 (cid:95)(cid:95)
Non-accelerated filer (cid:133)(cid:133)

Accelerated filer (cid:1407)(cid:1407)
Smaller reporting company (cid:1407)(cid:1407)(cid:3)(cid:3)
Emerging growth company (cid:1407)(cid:1407)

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. (cid:133)(cid:133)

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:1409)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1407)(cid:1407) No (cid:1409)

The aggregate market value of the registrant’s voting and non-voting stock held by non-affiliates of the registrant as of December 31, 2021 was $1,015,445,000. Aggregate
market value excludes an aggregate of approximately 12,283,269 shares of common stock held by officers and directors and by each person known by the registrant to own
5% or more of the outstanding common stock on such date. Exclusion of shares held by any of these persons should not be construed to indicate that such person possesses the
power, direct or indirect, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the
registrant.

The number of shares of the registrant’s common stock outstanding as of July 29, 2022 was 42,770,888.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the registrant’s definitive proxy statement for its 2022 annual meeting of stockholders to be filed pursuant to Regulation 14A with the Securities and Exchange
Commission not later than 120 days after the registrant’s fiscal year ended June 30, 2022, are incorporated by reference into Part III of this Form 10-K.

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38
39
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39

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57
58
105
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108
108

109
109

109
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110

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PART I

TABLE OF CONTENTS

Business

ITEM 1.
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
ITEM 3.
ITEM 4 Mine Safety Disclosures

Properties
Legal Proceedings

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities
Selected Financial Data

ITEM 6.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
ITEM 8.
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and, Management and Related Stockholder

Matters

ITEM 13. Certain Relationships and Related Transactions, and Director Independence
ITEM 14. Principal Accountant Fees and Services

PART IV

ITEM 15. Exhibit and Financial Statement Schedules
ITEM 16. Form 10-K Summary

CERTAIN DEFINITIONS

Unless the context requires otherwise, all references in this Annual Report on Form 10-K (the “Annual Report”)

to “Stride,” “Company,” “we,” “our” and “us” refer to Stride, Inc. and its consolidated subsidiaries.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve substantial risks and uncertainties. All statements other than statements of historical facts
contained in this Annual Report on Form 10-K are forward-looking statements. We have tried, whenever possible, to
identify these forward-looking statements using words such as “anticipates,” “believes,” “estimates,” “continues,”
“likely,” “may,” “opportunity,” “potential,” “projects,” “will,” “will be,” “expects,” “plans,” “intends,” “should,” “would”
and similar expressions to identify forward-looking statements, whether in the negative or the affirmative. These
statements reflect our current beliefs and are based upon information currently available to us. Accordingly, such
forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause our
actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements.
These risks, uncertainties, factors and contingencies include, but are not limited to:

(cid:120)

reduction of per pupil funding amounts at the schools we serve;

inability to achieve a sufficient level of new enrollments to sustain our business model;

limitations of the enrollment data we present, which may not fully capture trends in the performance of our
business;

failure to enter into new school contracts or renew existing contracts, in part or in their entirety;

failure of the schools we serve or us to comply with federal, state and local regulations, resulting in a loss of
funding, an obligation to repay funds previously received, or contractual remedies;

governmental investigations that could result in fines, penalties, settlements, or injunctive relief;

declines or variations in academic performance outcomes of the students and schools we serve as curriculum
standards, testing programs and state accountability metrics evolve;

harm to our reputation resulting from poor performance or misconduct by operators or us in any school in
our industry and/or in any school in which we operate;

legal and regulatory challenges from opponents of virtual public education or for-profit education companies;

changes in national and local economic and business conditions and other factors, such as natural disasters,
pandemics and outbreaks of contagious diseases and other adverse public health developments, such as
coronavirus disease 2019 (“COVID-19”);

discrepancies in interpretation of legislation by regulatory agencies that may lead to payment or funding
disputes;

termination of our contracts, or a reduction in the scope of services, with schools;

failure to develop the Career Learning business;

entry of new competitors with superior technologies and lower prices;

unsuccessful integration of mergers, acquisitions and joint ventures;

failure to further develop, maintain and enhance our technology, products, services and brands;

(cid:120)

inadequate recruiting, training and retention of effective teachers and employees;

infringement of our intellectual property;

disruptions to our Internet-based learning and delivery systems, including, but not limited to, our data storage
systems, resulting from cybersecurity attacks;

(cid:120) misuse or unauthorized disclosure of student and personal data; and

(cid:120)

failure to prevent or mitigate a cybersecurity incident that affects our systems.

Forward-looking statements reflect our management’s expectations or predictions of future conditions, events or
results based on various assumptions and management’s estimates of trends and economic and regulatory factors in the
markets in which we are active, as well as our business plans. They are not guarantees of future performance. By their
nature, forward-looking statements are subject to risks and uncertainties. Our actual results and financial condition may
differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking
statements. There are a number of factors that could cause actual conditions, events or results to differ materially from
those described in the forward-looking statements contained in this Annual Report. A discussion of factors that could cause
actual conditions, events or results to differ materially from those expressed in any forward-looking statements appears in
“Part 1—Item 1A—Risk Factors.”

Readers are cautioned not to place undue reliance on forward-looking statements in this Annual Report or that
we make from time to time, and to consider carefully the factors discussed in “Part 1—Item 1A—Risk Factors” of this
Annual Report in evaluating these forward-looking statements. These forward-looking statements are representative only
as of the date they are made, and we undertake no obligation to update any forward-looking statement as a result of new
information, future events or otherwise.

PART I

ITEM 1. BUSINESS

Company Overview

We are an education services company providing virtual and blended learning. Our technology-based products
and services enable our clients to attract, enroll, educate, track progress, and support students. These products and services,
spanning curriculum, systems, instruction, and support services are designed to help learners of all ages reach their full
potential through inspired teaching and personalized learning. Our clients are primarily public and private schools, school
districts, and charter boards. Additionally, we offer solutions to employers, government agencies and consumers.

We offer a wide range of individual products and services, as well as customized solutions, such as our most
comprehensive school-as-a-service offering which supports our clients in operating full-time virtual or blended schools.
More than three million students have attended schools powered by Stride curriculum and services since our inception.

Our solutions address two growing markets: General Education and Career Learning.

General Education

Career Learning

(cid:120) School-as-a-service
(cid:120) Stride Private Schools

(cid:120) Stride Career Prep school-as-a-service
(cid:120) Learning Solutions Career Learning software and

(cid:120) Learning Solutions software and services sales

services sales
(cid:120) Adult Learning

Products and services for the General Education market are predominantly focused on core subjects, including
math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of
knowledge. Programs utilizing General Education products and services are for students that are not specializing in any
particular curriculum or course of study. These programs provide an alternative to traditional “brick-and-mortar” school
options and address a range of student needs including, safety concerns, increased academic support, scheduling flexibility,

physical/health restrictions or advanced learning. Products and services are sold as a comprehensive school-as-a-service
offering or à la carte.

Career Learning products and services are focused on developing skills to enter and succeed in careers in high-
growth, in-demand industries—including information technology, health care and business. Through our Career Learning
programs, we offer middle and high school students content pathways that include job-ready skills and work experiences
and, for high school students, that can lead toward an industry certification and(cid:18)or college credits. (cid:3031) (cid:47)ike (cid:42)eneral Education
products and services, the products and services for the Career Learning market are sold as a comprehensive school-as-a-
service offering or à la carte. Through our Adult Learning brands, we also offer in-person and remote immersive programs
and self-paced, structured online Career Learning programs to adult learners in software engineering, healthcare, and
medical fields, as well as providing staffing and talent development services to employers. These programs are offered
directly to consumers, as well as to 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. During any fiscal year, we may enter into new agreements, receive non-automatic renewal
notices, negotiate replacement agreements, terminate such agreements or receive notices of termination, or customers may
transition a school to a different offering.

Our History

We were founded in 2000 to utilize advances in technology to provide children with access to a high-quality
education regardless of their geographic location or socioeconomic background. Given the geographic flexibility of
technology-based education, we believed we could help address the growing concerns regarding the regionalized disparity
in the quality and breadth of available curriculum and instruction, both in the United States and abroad. The convergence
of these factors and rapid advances in Internet networks created the opportunity to make a significant impact by deploying
online learning software and systems on a flexible, online platform.

In September 2001, we introduced our kindergarten through 2nd grade offering in Pennsylvania and Colorado,
serving approximately 900 students in the two states combined. We subsequently added new grades and new schools in
additional states. We also launched blended public schools that combine face-to-face time in the classroom with online
instruction and opened an online private school to reach students worldwide. For the 2021-2022 school year, we provided
our school-as-a-service offering to 80 schools in 30 states and the District of Columbia in the General Education market,
and 42 schools in 24 states in the Career Learning market. We also serve schools in 49 states and the District of Columbia
through our Learning Solutions sales channel.

In 2020, we acquired three adult learning companies, Galvanize, Tech Elevator, and MedCerts to enter into and
expand the Company’s offerings. These Adult Learning brands deliver a mix of in-person and remote training in software
engineering and allied healthcare to consumers and enterprises..

Our Market

The U.S. market for K-12 education is large and virtual and blended learning has gained broader usage due to the

impact of the COVID-19 pandemic. For example:

(cid:120) According to a May 2021 report of the (cid:49)ational Education Policy Center (“(cid:49)EPC”) entitled “(cid:57)irtual Schools
in the (cid:56).S. 2021,” in 2019-20, 477 full-time virtual schools enrolled 332,279 students, and 306 blended
schools enrolled 152,530 students. The NEPC report further states forty states had either virtual or blended
schools.

(cid:120)

In an April 2021 study of 16 to 18 year old students in the U.S. and U.K., the Society for Industrial and
Applied Mathematics found that one-third of students would choose either full-time or part-time online
education even after things return to normal after the pandemic. This included 29% of students who preferred
a hybrid approach, and 4% of students who preferred a full-time virtual education.

(cid:120)

In 2021, the National Home Education Research Institute estimated that there were approximately 3.7 million
home-educated students in the United States during School Year 2020-2021. Prior to the COVID-19
pandemic, the number of students was 2.5 million, and estimates showed home-educated student enrollments
growing by 2% per year since 2016.

(cid:120) April 2022 data from the Bureau of Labor Statistics estimates that demand for occupations that require

nondegree postsecondary education will grow 9.7% by 2030, a faster rate than overall employment.

Demand for Education Alternatives: The Market Opportunity

As evidenced by the rapid evolution of education technology and varying educational options being offered to
learners of all ages, no single learning model has been found that works equally well for every student. Learners today
utilize technology in all aspects of their lives, and we expect this reality to extend to their education. Our business has been
built on the premise that every learner, regardless of geographic location or socioeconomic background, is entitled to a
high-quality education that is individualized and adaptable based on the student’s unique needs. We also believe all
learners can benefit from more engaging technology-enriched educational content.

We anticipate that full-time online public schools will meet the needs of a small percentage of the overall United
States K-12 student population, but that segment will still represent a large and growing opportunity for us in absolute
terms. Across our educational programs, learners come from a broad range of social, economic and academic backgrounds.
Examples of students for whom our full-time virtual or blended solutions may fit include, but are not limited to, families
with: (i) students seeking to learn in a way that better accommodates their individual needs; (ii) safety, social and health
concerns about their local school, including students who are being bullied or are subjected to discrimination; (iii) students
with disabilities who are seeking alternatives to traditional classrooms; (iv) students for whom the local public school is
not meeting their needs; (v) students who seek or need greater flexibility than other alternatives, such as student-athletes
and performers who are not able to attend regularly scheduled classes; (vi) college-bound students who want to bolster
their college readiness and application appeal by taking additional Advanced Placement (“AP”), honors and/or elective
courses; (vii) students seeking career and technical skills; (viii) high school dropouts who have decided to re-enroll in
school to earn a diploma; and (ix) students of military families who desire high-quality, consistent education as they
relocate to new locations. Our individualized learning approach allows students to optimize their educational experience
and, therefore, their chances of achieving their goals.

Although the COVID-19 pandemic changed the awareness and acceptance of virtual and blended learning, we
continue to expect most students in the United States will be educated in traditional school buildings and classrooms.
However, we believe that certain student segments will benefit from the availability to choose an online public education
(including blended learning models), and that states and districts will seek to incorporate virtual and blended solutions into
their school-based programs. Our school-as-a-service offering offers a full service, integrated program, and a complete
solution for districts and schools that desire a comprehensive option. For public school customers who need less than a
full service offering, our Learning Solutions sales channel provides online curriculum and services on a solutions-oriented,
customized basis. We continue to invest significant resources, organically and through licensing or acquisitions, in
developing product offerings that afford us the flexibility to serve different types of customers with varying value
propositions and price points that are adaptable to an institution’s and individuals’ capabilities and needs. These
investments are intended to expand our current assets into markets that have appeal to today’s education consumers.
Moreover, we have pursued, and will continue to pursue, selected markets outside the United States where we believe our
products and services can address local foreign market needs.

We believe the growth in careers requiring non degree post-secondary awards will drive more adult learners to
seek training solutions that lead to credentials or certifications. It is anticipated that these learners will seek lower cost,
more accessible training solutions that prepare them for the workforce in less time than traditional post-secondary degree
programs. Our adult learning solutions provide these types of learners with content, instruction, and career placement
services to help them achieve their career goals. Additionally, according to the Society for Human Resource Management,
recruiting and hiring remains one of the top challenges for companies. To address this challenge, companies are beginning
to cover the cost of training for entry-level positions as well as increasing budgets for upskilling and reskilling of their
existing workforce. Stride’s adult learning solutions address these employer needs by providing training and job placement
and recruitment services. We anticipate that this market will continue to grow as more employers recognize the benefits
of retaining existing talent rather than sourcing new talent.

Our Lines of Revenue

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. Programs utilizing General Education products and services are for students that are not specializing in any
particular curriculum or course of study. These programs provide an alternative to traditional school options and address
a range of student needs including, safety concerns, increased academic support, scheduling flexibility, physical/health
restrictions or advanced learning. Products and services are sold as a comprehensive school-as-a-service offering or à la
carte.

Career Learning

Career Learning products and services are focused on developing skills to enter and succeed in careers in high-

growth, in-demand industries—including information technology, health care and business. We provide middle and
high school students with Career Learning programs that complement their core general education coursework in math,
English, science and history. Stride offers multiple career pathways supported by a diverse catalog of Career Learning
courses. The middle school program exposes students to a variety of career options and introduces career skill
development. In high school, students may engage in industry content pathway courses, project-based learning in virtual
teams, and career development services. High school students have the opportunity to progress toward certifications,
connect with industry professionals, earn college credits while in high school, and participate in job shadowing and/or
work-based learning experiences that are required to succeed in today’s digital, tech-enabled economy. A student
enrolled in a school offering Stride’s General Education program may take Career Learning courses, but that student and
the associated revenue is not reported as a Career Learning enrollment or Career Learning revenue. However, a student
and the associated revenue, whether in middle or high school, is counted as a Career Learning enrollment or Career
Learning revenue if the student is enrolled in a Career Learning program.

Like General Education products and services, the products and services for the Career Learning market are sold
as a comprehensive school-as-a-service offering or à la carte. We also offer focused post-secondary career learning
programs to adult learners, through our Galvanize, Tech Elevator, and MedCerts brands. These include skills training for
the software engineering, healthcare, and medical fields, as well as staffing and talent development services to employers.
These programs are offered directly to consumers, as well as to employers and government agencies.

Our Sales Channels

Virtual and Blended Schools

The Virtual and Blended Public Schools we serve offer an integrated package of systems, services, products, and
professional expertise that we administer to support a virtual or blended public school. Customers of these programs can
obtain the administrative support, information technology, academic support services, online curriculum, learning system
platforms and instructional services under the terms of a negotiated service and product agreement. We provide our school-
as-a-service offerings to virtual and blended public charter schools and school districts. These contracts are negotiated
with, and approved by, the governing authorities of the customer. The duration of these service and product agreements
are typically greater than five years, and most provide for automatic renewals absent a customer notification of non-
renewal. During any fiscal year, the Company may enter into new agreements, receive non-automatic renewal
notices, negotiate replacement agreements, terminate such agreements or receive notice of termination, or customers may
transition a school to a different offering. The governing boards may also establish school policies and other terms and
conditions over the course of a contract, such as enrollment parameters. The authorizers who issue the charters to our
school-as-a-service customers can renew, revoke, or modify those charters as well.

The majority of our revenue is derived from these school-as-a-service agreements with the governing authorities
of the public schools we serve. In addition to providing a comprehensive course catalog, related books and physical
materials, a learning management system for online learning, and, in certain cases, student computers, we also offer these
schools a variety of administrative support, technology and academic support services. Full-time virtual and blended school
students access online lessons over the internet and utilize offline learning materials we provide. Students receive
assignments, complete lessons, take assessments, and are instructed by teachers with whom they interact via email,

telephonically, in synchronous virtual classroom environments, and sometimes face-to-face. In either case, for parents who
believe their child is not thriving in their current school or for students and families who require time or location flexibility
in their schooling, virtual and blended public schools can provide a compelling choice. Students attending many of these
schools are also provided the opportunity to participate in a wide variety of school activities, including field trips, service
learning opportunities, honor societies, and clubs. In addition to school-level activities, we sponsor a wide variety of
extracurricular activities on a national basis, such as clubs, contests and college and career planning sessions.

These virtual public schools operate under different brands including Virtual Academies (our General Education
offering), Stride Career Prep (including Destinations Career Academies, which focus on career pathways), Insight schools
(which tend to focus on particular student segments, such as only middle and high school grade levels, at-risk students and
career readiness programs), and iQ Academy Minnesota (where responsibility for academic program and regulatory
compliance rests with the school district).

In addition to our full-time virtual programs, we offer a variety of support services and sell our products to blended
schools, which are schools that combine online and face-to-face instruction for students in a variety of ways with varying
amounts of time spent by students in a physical learning center. In contrast to a typical brick and mortar public school,
blended schools can provide a greater selection of available courses, increased opportunities for self-paced, individualized
instruction and greater scheduling flexibility. These blended programs bring students and teachers physically together
more often than a purely online program. In some blended schools we support, students attend a learning center on a
part-time basis, where they receive face-to-face instruction, in addition to their online virtual curriculum and instruction.

Learning Solutions

Our Learning Solutions sales channel distributes our software and services to schools and school districts across
the U.S. Over the past few years, both as a result of the COVID-19 pandemic and continuing trends toward digital
solutions, public schools and school districts have been increasingly adopting online solutions to augment teaching
practices, launch new learning models, cost-effectively expand course offerings, provide schedule flexibility, improve
student engagement, increase graduation rates, replace textbooks, and retain students. State education funds traditionally
allocated for textbook and print materials have also been authorized for the purchase of digital content, including online
courses, and in some cases mandated access to online courses. Additionally, districts are seeking support for
implementations that blend virtual and in-person instruction.

To address the growing need for digital solutions and the emerging need for comprehensive virtual solutions, our
Learning Solutions team provides curriculum and technology solutions, packaged in a portfolio of flexible learning and
delivery models mapped to specific student and/or district needs. This portfolio approach provides a continuum of delivery
models, from full-time programs to individual course sales and supplemental options that can be used in traditional
classrooms to differentiate instruction. Our Learning Solutions team strives to partner with public schools and school
districts, primarily in the U.S., to provide more options and better tools to empower teachers to improve student
achievement through personalized learning in traditional, blended and online learning environments and to provide
comprehensive support for teachers and administrators to deliver effective virtual and blended instructions.

Private Programs

We also operate tuition-based private schools that meet a range of student needs from individual course credit
recovery to college preparatory programs. These programs address students and families in the states in which we do not
offer a free public option, as well as students looking for additional flexibility. Additionally, many families can use
education savings accounts, tax credits and vouchers to attend these schools for low or no cost. We also pursue
international opportunities where we believe there is significant demand for a quality online education. Our international
students are typically from expatriate families who wish to study in English and foreign students who desire a U.S. high
school diploma. In addition, we have entered into agreements that enable us to distribute our products and services to our
international school partners who use our courses to provide broad elective offerings and dual diploma programs.

Consumer Sales

We also offer individual online courses and supplemental educational products directly to families. These
purchasers desire to educate their children as homeschoolers, outside of the traditional school system or to supplement
their child’s existing public or private school education without the aid of an online teacher. Customers of our consumer

products have the option of purchasing a complete curriculum, individual courses, or a variety of other supplemental
products, covering various subjects depending on their child’s needs. Typical applications include summer school course
work, home-schooling, enrichment, and educational supplements.

Adult Learning

We offer adult learning training programs through Galvanize, Tech Elevator, and MedCerts, which provide
programs that address the skills gap facing companies in the information technology and health care sectors. Galvanize
and Tech Elevator offer in-person and remote immersive full-time software engineering programs designed for adult
learners looking to advance their technology careers by providing such learners with skills and real-world experiences.
MedCerts provides self-paced, fully online structured training programs that lead to certifications in the health care field.
These brands also work directly with enterprises to create customized, tailored education plans to help companies train,
upskill, and reskill their employees.

Our Business Strategy

We are committed to maximizing every learner’s potential by personalizing their educational experience,
delivering a quality education to schools and students, and supporting our customers in their quest to improve academic
outcomes and prepare them for college and future careers. In furtherance of those objectives, we plan to continue investing
in our curriculum and learning systems. These investments include initiatives to create and deploy a next generation
curriculum and learning platform, improve the effectiveness of our school workforce, develop new instructional
approaches to increase student and parental engagement, and improve our systems and security architecture. This strategy
consists of the following key elements:

Affect Better Student Outcomes. We are committed to improving student outcomes for every student in the
schools we serve. To achieve this goal we: (i) invest in training and professional development for teachers and school
leaders, which may include a competency-based Master’s Graduate Degree in Online Teaching K-12 though our
partnership with Southern New Hampshire University; (ii) develop programs and initiatives designed to improve the
learning experience, such as our interactive media projects, virtual science labs and AP test prep; (iii) enhance our
curriculum to make it more engaging, adaptive and available to all students anywhere; and (iv) update our content as state
standards and state assessments change. We also will focus our marketing and enrollment efforts on helping students and
families understand the unique demands and challenges of the online learning environment. We believe better
understanding by parents and students will better prepare students for the work and improve their chance at
academic success.

Improve Student Retention in Our School-as-a-Service Offerings. To ensure the best outcomes for students, we
have partnered with the school boards we serve to make a concerted effort to enroll and retain students who are truly
engaged and ready to learn. Research shows that students who remain in the same school setting longer generally perform
better academically, and retention is especially challenging with virtual and blended schools because families have the
option of enrolling their children in a brick and mortar school or another virtual or blended school. Once students are
enrolled, we offer programs to provide early intervention and focused engagement and retention strategies, which strive
to help students stay on track, improve engagement and, ultimately, give students a better chance at academic success.

Grow Career Learning Enrollments and Expand Career Training Market. To grow Stride’s Career Learning
business and enrollments we are expanding the Stride Career Prep brand, and pursuing industry partnerships. We believe
this approach will be more advanced than traditional vocational training and broader than enrollment in a series of career
technical education (“CTE”) courses. We seek to expand our addressable market by offering career readiness training
beyond our traditional K-12 market and into adult education and corporate training. .

Introduce New and Improved Products and Services. We intend to continue to expand our product line and
offerings, both internally and through licensing or strategic acquisitions of products that expand our current portfolio. This
includes pursuing development and licensing of curriculum and platforms that are accessible from tablet and mobile
devices and leveraging adaptive learning technologies and solutions. We will also invest in our current products and assets
to make them more accessible to larger markets by improving the user experience and content.

Increase Enrollments at Existing Virtual and Blended Public Schools. Some state regulations, school governing
authorities and/or districts limit or cap student enrollment or enrollment growth. At the direction of our school board and

school district customers, we seek to provide an opportunity for more students to attend these schools, and support their
efforts to work with legislators, state departments of education, educators and parents to increase or remove student
enrollment caps.

Expand Virtual and Blended Public School Presence into Additional States and Cities. As laws change and
opportunities arise, we work with states, school districts, regional education organizations, and charter schools to authorize
and establish new virtual and blended public schools and to contract with them to provide our curriculum, online learning
platform, support services, and other related offerings. Traditional school districts are becoming a greater percentage of
our customer base.

Grow Our Learning Solutions Sales Channel. Our broad Learning Solutions course catalog ranges from pre-K
to 12th grade, instructional services, supplemental solutions, and teacher development and is the key driver for Learning
Solutions growth. We work to continue the market adoption of these solutions and services as school districts partner with
us to address a variety of academic needs and to facilitate personalized learning in traditional, blended and online learning
environments.

Add Enrollments in Our Private Schools. We currently operate online private schools that we believe appeal to
a broad range of students and families. We look to drive increased enrollments in these schools by increasing awareness,
through targeted marketing programs, and by partnerships with traditional brick and mortar private schools.

Develop Additional Channels through which to Deliver Our Learning Systems. We plan to evaluate other delivery
channels on a routine basis and to pursue opportunities where we believe there is likely to be significant demand for our
offering, such as direct classroom instruction, blended classroom models, career technical education, supplemental
educational products, adult learning, and individual products packaged and sold directly to consumers. We have made
strategic investments in other companies to supplement our Learning Solutions go-to-market approach with a focus on
advising school districts on their digital classroom transformation efforts.

Pursue Strategic Partnerships and Acquisitions. We may pursue selective acquisitions that complement our
existing educational offerings and business capabilities, and that are natural extensions of our core competencies. We may
also pursue acquisitions that extend our offerings and business capabilities. We believe we can be a valued-added partner
or contribute our expertise in curriculum development and educational services to serve more students. In 2018, we
partnered with Southern New Hampshire University to invest in the development of degree-granting programs for online
teaching.

Products and Services

We continue to invest in curriculum and technology to educate students more effectively and efficiently. Much
of our investment has been in the development of improved functionality of our curriculum and systems. Areas of focus
include: (i) integration and user experience—making sure that all of our systems and solutions are easy for teachers,
administrators, students, and parents to use; (ii) mobile enabled products; (iii) portability—making sure that our platforms
integrate with and onto third-party platforms; (iv) features which personalize learning for all students we serve; (v) courses
that are flexible enough to provide assistance to struggling students; (vi) reading and oral fluency scoring; (vii) alignment
with state standards; (viii) built-in tutoring and support functionality; and (ix) a virtual learning platform which supports
the scheduling and delivery of instruction, tracking of attendance, recording of instructional sessions, and allows student
group work.

We provide various products and services to customers on an individual basis as well as customized solutions,
including our comprehensive school-as-a-service offering which supports our customers in operating full-time virtual or
blended schools. We continue to expand upon our personalized learning model, improve the user experience of our
products, and develop tools and partnerships to more effectively engage and serve students, teachers, administrators, and
adult learners.

Curriculum and Content

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. We have built core courses with
the guidance and recommendations of leading educational organizations at the national and state levels. State standards

continue to evolve, and we invest in our curriculum to meet these changing requirements. Additionally, through our
Galvanize, Tech Elevator and MedCerts brands, we have high-quality, engaging, online coursework and content in
information technology and health care

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 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. À la carte offerings can provide curriculum and content hosting on customers’
learning management systems, or integrate with customers’ student information systems.

Instructional Services

We offer a broad range of instructional services that include customer support for instructional teams, including
recruitment of state certified teachers, training in research-based online instruction methods and systems, oversight and
evaluation services, and ongoing professional development. Stride also provides training options to support teachers and
parents to meet students’ learning needs. Our range of training options are designed to enhance skills needed to teach using
an online learning platform, and include hands-on training, on-demand courses, and support materials.

Support Services

We offer a broad range of support services, including marketing and enrollment (e.g., 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., providing student computers, offline
learning kits, internet access and technology support services).

Academic Performance

Our fundamental goal for every child who enrolls in a school that has purchased our school-as-a-service offering,
is to improve their academic performance. With the implementation of the federal Every Student Succeeds Act (“ESSA”)
beginning with the 2017-18 school year, each of the states in which we support virtual and blended public schools has
been given the authority to develop a school accountability plan within the confines of a broad federal ESSA framework
based on their own conception of the best means to advance college and career readiness. The ESSA requires states to
utilize four academic-related indicators in their accountability plans to measure school and student performance: academic
achievement, student growth in reading and math, graduation rate, and progress in achieving English language proficiency.
The states were given discretion on the weight to give to each indicator and how to apply them. Most of the state ESSA
plans submitted in 2017 to the U.S. Department of Education use some form of summative rating method to describe
school performance, such as conferring an A-F grade or using a ranking system having a 1-10 scale. A significant new
element of this education law is a requirement for states to adopt at least one non-academic indicator in their state’s
accountability system to measure “school quality or student success,” often called the “fifth” indicator. Unlike No Child
Left Behind where the only measure of school performance was an Annual Yearly Progress report, there are a wide range
of non-academic options enumerated in the ESSA that the states can adopt to advance their own “school quality or student
success” accountability objectives. The states may include measures of student engagement, educator engagement, student
access to and completion of advanced coursework, post-secondary readiness, school climate and safety, and any other
indicator a state may choose for this purpose. For example, a post-secondary readiness accountability indicator can include
student participation in and completion of a CTE program of study, or access to dual credit programs. Similarly, a student
engagement indicator may focus on teacher observations or ratings that demonstrate improvements in this area.

We share the view taken by many states that assessing a student by his or her learning growth is a more accurate
indicator of school and student performance than attaining a static proficiency score. This approach is now reflected in the
ESSA as well. All of our school-as-a-service offerings administer nationally recognized, norm-referenced assessments to
measure student growth during the school year, to prepare students for state assessments and to guide instruction. To
ensure all schools are utilizing best practices learned from other successful school clients and from other high performing
schools across the country, we have developed an academic framework that addresses teacher preparation, delivery of
instruction, and student assessment. Effective instruction is informed by and evaluated based on student-level data. As part

of the academic framework, schools implement plans to collect student-level data throughout the year through the use of
norm-referenced growth measures at least three times per year, along with strategically placed formative interims,
benchmarks, and summative assessments.

In addition to the complexities involved in measuring academic performance of students, we believe that the
virtual and blended public schools we serve face unique challenges impacting academic success not necessarily
encountered to the same extent by traditional brick and mortar schools. These challenges include students who enter behind
grade level or under-credited, high student mobility, lack of control over the student learning environment and higher than
average percentages of students eligible for free or reduced-price lunch in many states. With rare exceptions, the data
shows that students identified as eligible for free lunch had lower percentages at or above proficiency levels than students
eligible for reduced-price lunch, and both groups usually underperformed students identified as not eligible for subsidized
meals. In addition, for decades, educational research has shown that persistence—remaining and proceeding at pace in the
same school setting—can benefit academic performance, while mobility—moving from one school setting to another—
can have a destabilizing influence, causing students to struggle and lapse in academic performance.

While measuring academic performance is necessary, taking meaningful steps to improve academic performance
and student outcomes is an integral part of our mission. Accordingly, we continually strive to achieve that objective by
undertaking new initiatives and improving existing programs that support students and families. To monitor student
learning progress during the school year, we use multiple equivalent assessments at the lesson, unit and semester level.
This is intended to ensure that our measurement is reliable and valid. We provide more synchronous sessions for at-risk
students based on data driven instruction that provides for targeted teacher intervention to assist students with lesson
challenges.

Competition

As a general matter, we face varying degrees of competition from a variety of education companies because the
scope of our offerings and the customers we serve encompass many separate and distinct segments of the education
business. We compete primarily with companies that provide online curriculum and school support services to K-12 virtual
and blended public schools and school districts, including those with a career orientation. These companies include
Pearson PLC (Connections Academy), Lincoln Learning Solutions, StrongMind, Pansophic Learning, Inspire Charter
Schools, and Charter Schools USA, and state-administered online programs, among others. We also face competition from
digital and print curriculum developers. The digital curriculum providers include Apex Learning Inc., Curriculum
Associates, Imagine Learning LLC, Edmentum Inc., Dreambox Learning, Inc., and traditional textbook publishers such as
Houghton Mifflin Harcourt and McGraw Hill. Other competing digital curriculum providers, including Khan Academy,
Duolingo, IXL Learning, Inc. and Nearpod Inc., offer a different pricing model which provides curriculum at a lower cost
(sometimes free) but may charge for additional products or services. We also compete with institutions such as The Laurel
Springs School (Nobel Learning Communities, Inc.) and Penn Foster Inc. for online private pay school students.
Additionally, our Adult Learning offerings compete with other in-person and remote immersive programs and self-paced
online training programs. These include General Assembly (a subsidiary of Adecco), Lambda School (Lambda Inc.),
Carrus, Inc., and Education to Go (a subsidiary of Cengage Learning), among others.

We believe that the primary factors on which we compete are:

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extensive experience in, and understanding of, virtual education delivery;
comprehensive suite of academic programs;
customer satisfaction;
quality of integrated curriculum and materials with an online delivery platform;
qualifications, experience and training teachers for online instruction;
comprehensiveness of school management and student support services;
integrated K-12 solutions, with components designed and built to work together;
ability to leverage our assets across our business; and
sophisticated government affairs knowledge and experience in virtual and blended school regulatory
environments.

Broadly speaking, we participate in the market for digital education and adult training. In states where we enter
into multi-year service and product agreements with virtual and blended public schools, we believe that we generally serve
less than 1% of the public school students in that state. The customers for Learning Solutions sales are schools and school
districts seeking individual courses to supplement their course catalogs or school districts seeking to offer an online
education program to serve the needs of a small subset of their overall student population. Defining a more precise relevant
market upon which to base a share estimate would not be meaningful due to significant limitations on the comparability
of data among jurisdictions. For example, some providers to K-12 virtual public schools serve only high school students;
others serve elementary and middle school students, and some serve both. There are also providers of online virtual K-12
education that operate solely within individual states or geographic regions rather than globally as we do. Furthermore,
some school districts offer their own virtual programs with which we compete. Parents in search of an alternative to their
local public school have a number of alternatives beyond virtual and blended public schools, including private schools,
public charter schools and home schooling. In our private schools, we compete for students seeking an English-based K-12
education worldwide. In addition, our integrated learning systems consist of components that face competition from many
different types of education companies, such as traditional textbook publishers, test and assessment firms and private
education management companies. These learning systems are designed to operate domestically and internationally, and
thus, the geographic market for many of our products and services is global and indeterminate in size. Finally, our Adult
Learning brands compete with post-secondary providers, both public and private, as well as other certificate and credential
providers. They also compete with upskilling and reskilling training programs developed in-house by employers.

Key Functional Areas

Public Affairs, School Development, Student Recruitment and Marketing

We seek to increase public awareness of the educational and fiscal benefits of our online learning options through
full-time virtual and blended instructional models, as well as supplementary course options. We receive numerous inquiries
from school districts, legislators, public charter school boards, community leaders, state departments of education,
educators and parents who express the desire to have a choice in public school options. Our public affairs and school
development teams work together with these interested parties to identify and pursue opportunities to expand the use of
our products and services in new and existing jurisdictions.

Our student recruitment and marketing team is focused on promoting the K-12 online education category and
generating enrollments for the Company’s virtual and blended school customers within that category. This is achieved by
creating awareness among families with K-12 students through integrated marketing campaigns that include offline and
digital media, as well as web assets. These campaigns are continuously optimized using data analytics and market research.
The marketing team also assists in enhancing the onboarding experience of new students to online schooling. Additionally,
our marketing team is working to ensure awareness of our adult learning options, delivered through our Galvanize, Tech
Elevator, and MedCerts brands.

Operations

Over our 20 years of operation, we believe that we have gained significant experience in the sourcing, assembly
and delivery of school supplies and materials. We have developed strong relationships with partners allowing us to source
goods at favorable price, quality and service levels. Our fulfillment partner stores our inventory, assembles our learning
kits and ships the kits to students. We have invested in systems, including our Order Management System, to automatically
translate the curriculum selected by each enrolled student into a personalized order to fulfill the corresponding learning
kits to ship to each student. As a result, we believe we have an end-to-end warehousing and fulfillment operation that will
cost-effectively scale as the business grows in scope and complexity.

For many of our virtual and blended public school customers, we attempt to reclaim any materials that could be
cost-effectively re-utilized in the next school year. These items, once returned to our fulfillment centers, are refurbished
and included in future learning kits. This reclamation process allows us to maintain lower materials costs. Our fulfillment
activities are highly seasonal, and are centered on the start of school in August or September. To ensure that students in
virtual and blended public schools have access to our systems, we often provide students with a computer, where applicable
or required and all necessary support. We source computers and ship them to students when they enroll and reclaim the
computers upon termination of their enrollment or withdrawal from the school in which they are enrolled.

Technology

Stride’s online learning systems, along with our back-office support systems, run on cloud infrastructure from

Amazon Web Services (AWS) and Microsoft Azure.

Architecture. Stride’s key systems leverage a technology architecture that allows us to develop iterative solutions

to meet both present and future market needs.

Availability and Redundancy. Stride’s systems run on world-class cloud infrastructure from AWS and Azure that

operate in multiple availability zones.

Cybersecurity. A business-centric information security program has also been adopted that is tailored to adjust
to an ever-changing IT compliance and information security threat landscape. Our cybersecurity measures and policies are
aligned with cybersecurity guidance from the National Institute of Standards & Technologies (NIST) across our cloud
ecosystems.

Physical Infrastructure. Stride has completed the migration of our entire application portfolio to Amazon Web
Services (AWS) and Microsoft Azure. We leverage various technologies to monitor our application and infrastructure
ecosystem on a 7 X 24 X 365 basis.

Other Information

Intellectual Property

We continue to invest in our intellectual property through internal development and by acquisitions as we aim to
offer more courses for new grades and expand into adjacent education markets, both in the United States and overseas.
Through acquisitions, we have also obtained curriculum, patents and trademarks that expand our portfolio of educational
products and services. We continue to add features and tools to our proprietary learning platform and support systems to
assist teachers and students and improve educational outcomes, such as adaptive learning technologies. These intellectual
property assets are critical to our success and we avail ourselves of the full protections provided under the patent, copyright,
trademark and trade secrets laws. We also routinely utilize confidentiality and licensing agreements with our employees,
the virtual and blended public schools, traditional schools, school districts and private schools that we serve, individual
consumers, contractors and other businesses and persons with which we have commercial relationships.

Our patent portfolio includes five U.S.-issued patents and one foreign-issued patents directed towards various
aspects of our educational products and offerings. Three of the U.S.-issued patents encompass our system and methods of
virtual schooling and online foreign language instruction. The other two U.S.-issued patents and the foreign-issued patent
encompass our system and method for producing, delivering and managing educational material.

We own copyrights related to the lessons contained in the courses that comprise our proprietary curriculum. We
also have obtained federal, state and foreign registrations for numerous trademarks that are related to our offerings and we
have applied to the U.S. Patent and Trademark Office to register certain new trademarks.

We grant licenses to individuals to use our software and access our online learning systems. Similarly, schools
are granted licenses to utilize our online learning systems and other systems. These licenses are intended to protect our
ownership and the confidentiality of the embedded information and technology contained in our software and systems.
We also own many of the trademarks and service marks that we use as part of the student recruitment and branding services
we provide to schools. Those marks are licensed to the schools for use during the term of the products and services
agreements.

Our employees, contractors and other parties with access to our confidential information sign agreements that

prohibit the unauthorized use or disclosure of our proprietary rights, information and technology.

Human Capital Resources

As of June 30, 2022, we had approximately 7,500 employees, including approximately 4,200 teachers.
Substantially all of these employees are located in the United States. In addition, there are approximately 3,800 teachers

who are employed by virtual or blended public schools that we manage under contracts with those schools but are not
direct employees of Stride. None of our employees are represented by a labor union or covered by a collective bargaining
agreement; however, certain schools we serve employ unionized teachers. We believe that our employee relations are
good.

We select and hire based upon our values of making an impact on the lives of our students. In addition to annual
goals, and individual job duties, we consider demonstration of our core values—passion, accountability, courage, trust,
and inclusiveness—an important factor in performance appraisals.

We support professional development opportunities that reflect our desire to ‘hire from within’ and to enhance
employees’ skillsets in ways that improve their effectiveness and sense of fulfillment. We offer our employees many
different professional development opportunities through job related training and a number of benefit programs, including
a Tuition Assistance Benefit, discount tuition options with several participating colleges and universities, and discounted
options to access K-12 curriculum.

At our Company, we uphold a workplace culture that celebrates diversity and embraces inclusion. We are proud

of our diverse workforce and recognize the value diversity brings to our team.

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44% of our Board is comprised of minorities and 33% are women.

73% of our executive leadership team is comprised of minorities and women.

82% of our full-time employees are women.

For direct education-related roles, largely the K-12 teacher population, employee demographics mirror national
averages for these positions.

We continue to recognize opportunities to improve our gender equity and minority representation. Various efforts
are underway to create a more diverse workforce that supports our learner community, including robust professional,
managerial, and leadership development programs. In addition, we offer customized training for teams, as well as training
that focuses on diversity and inclusion topics, including mandatory unconscious bias training for all employees.

Corporate Information

Our website address is www.stridelearning.com.

Available Information

We make available, free of charge through the Investors section of our website (www.stridelearning.com), our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
promptly after they are electronically filed with the Securities and Exchange Commission (the “SEC”). Our earnings
conference calls are web cast live via the Investors section of our website. Information contained on our website is
expressly not incorporated by reference into this Annual Report.

Regulation

We and the virtual and blended public schools that we serve are subject to regulation by and laws of each of the
states in which we operate. The state laws and regulations that impact our business are primarily those that authorize or
restrict our ability to operate these schools, the applicable funding mechanisms for the schools and the increasing number
of states with their own, unique privacy laws. To the extent these schools receive federal funds, such as through a grant

program or financial support dedicated for the education of low-income families, these schools also become subject to
additional federal regulation.

State Laws Authorizing or Restricting Virtual and Blended Public Schools. The authority to operate a virtual or
blended public school is dependent on the laws and regulations of each state. Laws and regulations vary significantly from
one state to the next and are constantly evolving. In states that have implemented specific legislation to support virtual and
blended public schools, the schools are able to operate under these statutes. Other states provide for virtual and blended
public schools under existing public charter school legislation or provide that school districts and/or state education
agencies may authorize them. Some states do not currently have legislation that provides for virtual and blended public
schools or have requirements that effectively prohibit such schools and, as a result, may require new legislation before
virtual and blended public schools can open in the state.

Obtaining new legislation in the remaining states where we do not have virtual and blended public schools can
be a protracted and uncertain process. When determining whether to pursue expansion into new states in which the laws
are ambiguous, we research the relevant legislation and policy climate and then make an assessment of the perceived
likelihood of success before deciding to commit resources.

State Laws and Regulations Applicable to Virtual and Blended Public Schools. A virtual or blended public school
that fails to comply with the state laws and regulations applicable to it may be required to repay these funds and could
become ineligible for receipt of future state funds. To be eligible for state funding, some states require that virtual and
blended public schools be organized as not-for-profit charters exempt from taxation under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended. The schools must then be organized exclusively for charitable educational purposes,
and not for the benefit of private, for-profit management companies. The board or governing authority of the not-for-profit
virtual or blended public school must retain ultimate accountability and control for the school’s operations to retain its
tax-exempt status. It may not delegate its responsibility and accountability for the school’s operations. Our service
agreements with these virtual and blended public schools are, therefore, structured to ensure the full independence of the
not-for-profit board and preserve its arms-length ability to exercise its fiduciary obligations to operate a virtual or blended
public school.

Laws and regulations affect many aspects of operating a virtual or blended public school. They can dictate the
content and sequence of the curriculum, the methods for counting student enrollments for funding purposes, graduation
requirements, use of approved textbooks, the length of the school year and the school day, the accessibility of curriculum
and technology to students with disabilities, teacher to student ratios, specific credentialing of teachers and administrators,
the assessment of student performance and any accountability requirements. In addition, a virtual or blended public school
may be obligated to comply with states’ requirements to offer programs for specific populations, such as students at risk
of dropping out of school, advanced and talented students, non-English speaking students, pre-kindergarten students and
students with disabilities. Tutoring services and the use of technology may also be regulated. Other state laws and
regulations may affect the school’s compulsory attendance requirements, treatment of absences and make-up work, and
access by parents to student records and teaching and testing materials.

In addition to federal laws protecting the privacy of student education records, a growing number of states are
enacting laws to protect the privacy of student data and to guard against its misuse. As a general matter, these laws are
designed to prevent third-party vendors to schools from using student data for non-educational purposes and ensuring the
security of personally identifiable information. In addition, virtual or blended public schools may have to comply with
state requirements that school campuses report various types of data as performance indicators of the success of the
program.

States have laws and regulations concerning the certification, training, experience and continued professional
development of teachers and staff with which a virtual or blended public school may be required to comply. There are also
numerous laws pertaining to employee salaries and benefits, statewide teacher retirement systems, workers’ compensation,
unemployment benefits and matters related to employment agreements and procedures for termination of school
employees. State labor laws applicable to public-sector employees and their rights to organize may also apply to virtual
charter schools, such as teachers they employ. A virtual or blended public school must also comply with requirements for
performing criminal background checks on school staff, reporting criminal activity by school staff and reporting suspected
child abuse. States such as California, Nevada and Virginia are also enacting more general laws about personal information
that apply regardless of whether the individual is a student.

As with any public school, virtual and blended public schools must comply with state laws and regulations
applicable to governmental entities, such as open meetings or sunshine laws, which may require the board of trustees of a
virtual or blended public school to provide advance public notice of and hold its meetings open to the public unless an
exception in the law allows an executive session. Failure to comply with these requirements may lead to personal civil
and/or criminal penalties for board members or officers or the invalidation of actions taken during meetings that were not
properly noticed and open to the public. Virtual and blended public schools must also comply with public information or
open records laws, which require them to make school records available for public inspection, review and copying unless
a specific exemption in the law applies. Additionally, laws pertaining to records privacy and retention and to standards for
maintenance of records apply to virtual and blended public schools.

Other types of regulation applicable to virtual and blended public schools include restrictions on the use of public

funds, the types of investments made with public funds, accounting and financial management, and marketing practices.

There remains uncertainty about the extent to which virtual and blended public schools we serve may be required
to comply with state laws and regulations applicable to traditional public schools because the concept of virtual and blended
public schools is still evolving, especially as technology advances. Although we receive state funds indirectly, according
to the terms of each service agreement with the local public school entity, our receipt of state funds subjects us to extensive
state regulation and scrutiny. States routinely conduct audits of these schools, to verify enrollment, attendance, information
technology security, fiscal accountability, special education services and other regulatory issues. While we may believe
that a virtual public school or blended school we serve is compliant with state law, an agency’s different interpretation of
law in a particular state, or the application of facts to such law, could result in findings of non-compliance, potentially
affecting future funding or repayment of past funding.

Regulations Restricting Virtual and Blended Public School Growth and Funding. As a public schooling
alternative, some state and regulatory authorities have elected to proceed cautiously with virtual and blended public
schools. Statutes or regulations that hinder our ability to serve certain jurisdictions include: restrictions on student
eligibility, such as mandating attendance at a traditional public school prior to enrolling in a virtual or blended public
school; caps on the total number of students in a virtual or blended public school; restrictions on grade levels served;
geographic limitations on enrollments; fixing the percentage of per pupil funding that must be paid to teachers;
state-specific curriculum requirements; limits on the number of charters that can be granted in a state; and requirements to
obtain approval from a student’s resident school district.

Funding regulations for virtual public schools and blended schools can take a variety of forms. These regulations
include: (i) attendance—some state daily attendance rules were designed for traditional classroom procedures, and
applying them to track daily attendance and truancy in an online setting can cause disputes to arise over interpretation and
funding; (ii) enrollment eligibility—some states place restrictions on the students seeking to enroll in virtual and blended
public schools, resulting in lower aggregate funding levels; (iii) teacher contact time—some states have regulations that
specify minimum levels of teacher-student face-to-face time; and (iv) completion of course work. These regulations can
create logistical challenges for statewide virtual and blended public schools, reduce funding and eliminate some of the
economic, academic and technological advantages of virtual learning.

Federal and State Grants. We have worked with some entities to secure public and grant funding that flows to
virtual and blended public schools that we serve. These grants are awarded to the local or state education agency or to the
not-for-profit entity that holds the charter of the virtual or blended public school on a competitive basis in some instances
and on an entitlement basis in other instances. Grants awarded to public schools and programs—whether by a federal or
state agency or nongovernmental organization—often include reporting requirements, procedures and obligations.

Federal Laws Applicable to Virtual Public Schools and Blended Schools

Five primary federal laws are directly applicable to the day-to-day provision of educational services we provide

to virtual and blended public schools:

Every Student Succeeds Act (“ESSA”). The ESSA, which took effect on August 2, 2016 and requires
reauthorization after the 2020-2021 school year, represents a major change in federal education law by shifting much of
education policy decision making back to the states and by providing most funding through block grants. Of particular
significance to the Company is that the states have the discretion to develop and design their own accountability systems
within a broad federal framework. In addition, states have been given the authority to adopt different types of annual

accountability plans for school performance, including proficiency and growth standards for all students and subgroups.
The ESSA makes clear that the U.S. Department of Education has a more limited role to impose federal mandates, direction
or control over the authority given to the states. Notwithstanding these federal limitations, states are still required under
ESSA to test students in reading or language arts and math annually in grades 3-8 and once in grades 10-12, and in science
once in each of the following grade spans: 3-5, 6-9 and 10-12. All states have plans approved by the U.S. Department of
Education to demonstrate compliance with ESSA.

Individuals with Disabilities Education Act (“IDEA”). The IDEA is implemented through regulations governing
every aspect of the special education of a child with one or more specific disabilities that fit within any of the disability
categories listed in the Act. The IDEA created a responsibility on the part of a school to identify students who may qualify
under the IDEA and to perform periodic assessments to determine the students’ needs for services. A student who qualifies
for services under the IDEA must have in place an individual education plan, which must be updated at least annually,
created by a team consisting of school personnel, the student, and the parent. This plan must be implemented in a setting
where the child with a disability is educated with non-disabled peers to the maximum extent appropriate. IDEA provides
the student and parents with numerous due process rights relating to the student’s program and education, including the
right to seek mediation of disputes and make complaints to the state education agency. The schools we manage are
responsible for ensuring the requirements of IDEA are met. The virtual public schools and blended schools are required
to comply with certain requirements in IDEA concerning teacher certification and training. We, the virtual public school
or the blended school could be required to provide additional staff, related services, supplemental aids and services or a
private school option at our own cost to comply with the requirement to provide a free appropriate public education to
each child covered under the IDEA. If we fail to meet this requirement, we, the virtual public school or blended school
could lose federal funding and could be liable for compensatory educational services, reimbursement to the parent for
educational service the parent provided and payment of the parent’s attorney’s fees.

The Rehabilitation Act of 1973 and the Americans with Disabilities Act. A virtual public school or blended school
receiving federal funds is subject to Section 504 of the Rehabilitation Act of 1973 (“Section 504”) insofar as the regulations
implementing the Act govern the education of students with disabilities as well as personnel and parents. Section 504
prohibits discrimination against a person on the basis of disability in any program receiving federal financial assistance if
the person is otherwise qualified to participate in or receive benefit from the program. Students with disabilities not
specifically listed in the IDEA may be entitled to specialized instruction or related services pursuant to Section 504 if their
disability substantially limits a major life activity. Beginning in 2011, the Office of Civil Rights of the United States
Department of Education interpreted both Section 504 and Title II of the Americans with Disabilities Act to apply to
elementary and secondary schools and to require that students with disabilities be afforded substantially equivalent ease
of use as students without disabilities. As applied to online public schools, such “web accessibility” requires technical
capabilities similar to those applied to procurements of information technology by the federal government under
Section 508 of the Rehabilitation Act of 1973 (“Section 508”) or standards adopted by the world-wide web consortium,
such as Web Content Accessibility Guidelines (“WCAG”) Level A and Level AA. If a school fails to comply with the
requirements and the procedural safeguards of Section 504, it may lose federal funds even though these funds flow
indirectly to the school through a local board. In the case of bad faith or intentional wrongdoing, some courts have awarded
monetary damages to prevailing parties in Section 504 lawsuits. Because there is no federal rule setting a uniform technical
standard for determining web accessibility under Section 508 and Title II of the ADA, online service providers have no
uniform standard of compliance. Some states have adopted the standards promulgated under Section 508 while others
require WCAG Level A and/or Level AA or their own unique standards.

Family Educational Rights and Privacy Act (“FERPA”). Virtual public schools and blended schools are also
subject to the FERPA which protects the privacy of a student’s educational records and generally prohibits a school from
disclosing a student’s records to a third party without the parent’s prior consent. The law also gives parents certain
procedural rights with respect to their minor children’s education records. A school’s failure to comply with this law may
result in termination of its eligibility to receive federal education funds. Schools that contract with vendors that violate
FERPA may be prohibited from contracting with the vendor for five years.

Communications Decency Act. The Communications Decency Act of 1996 (“CDA”) provides protection for
online service providers against legal action being taken against them because of certain actions of others. For example,
the CDA states that no provider or user of an interactive computer service shall be treated as the publisher or speaker of
any data given by another provider of information content. Further, Section 230 of the CDA grants interactive online
services of all types, broad immunity from tort liability so long as the information at issue is provided or posted by a third
party. As part of our technology services offering, we provide an online school platform on which teachers and students

may communicate. We also conduct live classroom sessions using Internet-based collaboration software and we may offer
certain online community platforms for students and parents. While the CDA affords us with some protection from liability
associated with the interactive online services we offer, there are exceptions to the CDA that could result in successful
actions against us that give rise to financial liability.

Other Federal Laws. Other federal laws also apply to virtual managed schools, in some cases depending on the
demographics associated with a school. For example, Title VI of the Civil Rights Act of 1964 has been deemed to apply
to ELL Students, as further defined in the joint guidance issued by the U.S. Departments of Justice and Education in
January 2015. Title IX of the Education Amendments of 1972 also applies, which prohibits discrimination on the basis of
gender in education programs, activities and employment, applies to all schools that receive federal funds. There are also
other federal laws and regulations that affect other aspects of our business such as the Children’s Online Privacy Protection
Act (“COPPA”), which imposes certain parental notice and other requirements on us that are directed to children under 13
years of age who access the web-based schools we manage. In addition, the Children’s Internet Protection Act requires
that school districts that receive certain types of federal funding must ensure that they have technology which blocks or
filters certain material from being accessed through the Internet. We have developed procedures by which computers that
we ship to students meet this requirement. Many other federal and state laws, such as deceptive trade practices laws, the
Lanham Act and others apply to us, just as they do to other businesses. If we fail to comply with these and other federal
laws, we could be determined ineligible to receive funds from federal programs or face penalties.

Laws and Regulations Applicable to Consumer Education Products offered by Galvanize, Tech Elevator and
MedCerts

State Laws Authorizing or Restricting Private Post-Secondary Schools. The authority to operate a private post-
secondary school is dependent on the laws and regulations of each state. Laws and regulations vary significantly from one
state to the next and are constantly evolving, with regulatory authority vesting under various state agencies. Galvanize,
Tech Elevator and MedCerts each currently operate in a multi-jurisdictional regulatory environment, maintaining licenses
in several states. In states that have implemented specific legislation to license and oversee private post-secondary schools,
Galvanize, Tech Elevator and MedCerts are able to operate under these statutes. State laws and regulations affect many
aspects of operating a private post-secondary school, including, but not limited to, requiring the content and sequence of
the curriculum, the methodology for counting student enrollments and reporting outcomes, graduation requirements, the
duration of the approved program, the accessibility of curriculum and technology to students with disabilities, specific
credentialing of teachers and administrators, the assessment of student performance, accountability requirements, and
compliance with student record collection and retention requirements.

Other types of state regulations applicable to private post-secondary schools include, but are not limited to,
restrictions on the use of scholarships and tuition discounts, student payment policies and the collection of and use of
student fees, accounting and financial management, and limitations on marketing and advertising practices. States also
have laws and regulations concerning the certification, training, experience and continued professional development of
teachers and staff with which private post-secondary schools may be required to comply. Additionally, state unfair
competition and consumer protection laws and regulations apply to Galvanize, Tech Elevator and MedCerts in their
dealings with the public, which include limitations on advertising and disclosures, and the structure of financing methods
for consumer customers. Lastly, additional regulations and student outcome reporting requirements may affect Galvanize,
Tech Elevator and MedCerts should they seek funding related to the Workforce Innovation and Opportunity Act in any
given state.

Federal Laws Applicable

Each of Galvanize, Tech Elevator and MedCerts does not qualify or receive Title IV funding under the Higher
Education Act but is eligible for federal funding through its veteran's education and workforce programs. As such, each
is required to comply with the anti-discrimination provisions of Title VI of the Civil Rights Act of 1964, Title IX of the
Education Amendments of 1972, as amended, Section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act
of 1975, and all Federal regulations adopted to carry out such laws. If we fail to comply with these federal laws, we could
be determined ineligible to receive funds from federal programs or face penalties.

ITEM 1A. RISK FACTORS

Risk Factors Summary

The following summary description sets forth an overview of the material risks we are exposed to in the normal
course of our business activities. The summary does not purport to be complete and is qualified in its entirety by reference
to the full risk factor discussion immediately following this summary description. Our business, results of operations and
financial conditions, as well as your investment in our common stock, could be materially and adversely affected by any
of the following material risks:

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The majority of our revenues come from our school-as-a-service offering and depends on per pupil funding
amounts and payment formulas remaining near levels existing at the time we execute service agreements with the
schools we serve;

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The inability to predict how the COVID-19 pandemic will continue to impact our business;

(cid:120) Opponents of public charter schools could prevail in challenging the establishment and expansion of such schools

through the judicial process;

(cid:120) Any failure to comply with applicable laws or regulations, the enactment of new laws or regulations, poor

academic performance or misconduct by us or operators of other virtual public schools;

(cid:120) Disputes over our inability to invoice and receive payments for our services due to ambiguous enabling legislation

and interpretive discrepancies by regulatory authorities;

(cid:120) Any failure to renew an authorizing charter for a virtual or blended public school;

(cid:120) Actual or alleged misconduct by current or former directors, officers, key employees or officials;

(cid:120) Changes in the objectives or priorities of the independent governing bodies of the schools we serve;

(cid:120) Any failure to renew a contract for a school-as-a-service offering, which is subject to periodic renewal;

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Schools we serve or the programs we offer may fail to enroll or re-enroll a significant number of students;

The enrollment data we present may not fully capture trends in our business performance;

(cid:120) Our marketing efforts may not be effective;

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The student demographics of the schools we serve can lead to higher costs;

The ability to meet state accountability testing standards and achieve parent and student satisfaction;

(cid:120) Compliance with curriculum standards and assessments for individual state determinations under the ESSA;

(cid:120) Risks due to mergers, acquisitions and joint ventures;

(cid:120) Our business could be negatively affected as a result of actions by activist stockholders;

(cid:120) Market demand for online options in public schooling may decrease or not continue, or additional states may not

authorize or adequately fund virtual or blended public schools;

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Increasing competition in the education industry sectors that we serve;

The continuous evolution of regulatory frameworks on the accessibility of technology and curriculum;

(cid:120) Differences between our quarterly estimates and the actual funds received and expenses incurred by the schools

we serve;

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Seasonal fluctuations in our business;

(cid:120) Our ability to create new products, expand distribution channels and pilot innovative educational programs;

(cid:120) Our ability to recruit, train and retain quality certified teachers;

(cid:120) Higher operating expenses and loss of management flexibility due to collective bargaining agreements;

(cid:120) Our reliance on third-party service providers to host some of our solutions;

(cid:120) Any problems with our Company-wide ERP system;

(cid:120) Our ability to maintain and enhance our product and service brands;

(cid:120) Our ability to protect our valuable intellectual property rights, or lawsuits against us alleging the infringement of

intellectual property rights of others;

(cid:120) Any legal liability from the actions of third parties;

(cid:120) Any failure to maintain and support customer facing services, systems, and platforms;

(cid:120) Any failure to prevent or mitigate a cybersecurity incident affecting our systems, or any significant interruption

in the operation of our data centers;

(cid:120) Our reliance on the Internet to enroll students and to deliver our products and services to children;

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Failure to comply with data privacy regulations;

(cid:120) Any failure by the single vendor we use to manage, receive, assemble and ship our learning kits and printed

educational materials;

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Scale and capacity limits on some of our technology, transaction processing systems and network hardware and
software;

(cid:120) Our ability to keep pace with changes in our industry and advancements in technology;

(cid:120) Our ability attract and retain key executives and skilled employees; and

(cid:120) Our ability to obtain additional capital in the future on acceptable terms.

Risks Related to Government Funding and Regulation of Public Education

The majority of our revenues come from our comprehensive school-as-a-service offering in both the General Education
and Career Learning markets and depends on per pupil funding amounts and payment formulas remaining near the
levels existing at the time we execute service agreements with the schools we serve. If those funding levels or formulas
are materially reduced or modified due to economic conditions or political opposition, or new restrictions are adopted
or payments delayed, our business, financial condition, results of operations and cash flows could be adversely affected.

The public schools we contract with are financed with government funding from federal, state and local taxpayers.
Our business is primarily dependent upon those funds with a majority of our revenue coming from our comprehensive

school-as-a-service offerings in both the General Education and Career Learning markets. Budget appropriations for
education at all levels of government are determined through a legislative process that may be affected by negative views
of for-profit education companies, recessionary conditions in the economy at large, or significant declines in public school
funding. The results of federal and state elections can also result in shifts in education policy and the amount of funding
available for various education programs.

The political process and potential variability in general economic conditions, including due to the ongoing COVID-
19 pandemic, rising inflation and geo-political instability, create a number of risks that could have an adverse effect on
our business including the following:

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Legislative proposals can and have resulted in budget or program cuts for public education, including the
virtual and blended public schools and school districts we serve, and therefore have reduced and could
potentially limit or eliminate the products and services those schools purchase from us, causing our revenues
to decline. From time to time, proposals are introduced in state legislatures that single out virtual and blended
public schools for disparate treatment.

Economic conditions, including current and future business disruptions and debt and equity market volatility
caused by the ongoing COVID-19 pandemic, rising inflation and geo-political instability, could reduce state
education funding for all public schools or cause a delay in the payment of government funding to schools
and school districts or a delay in payments to us for our products or services, the effects of which could be
disproportionate for the schools we serve. Our annual revenue growth is impacted by changes in federal,
state and district per pupil funding levels. For example, due to the budgetary problems arising from the 2008
recession, many states reduced per pupil funding for public education affecting many of the public schools
we serve, including even abrupt midyear cuts in certain states, which in some cases were retroactively applied
to the start of the school year as a result of formulaic adjustments. In addition, as we enter into service and
product agreements with multiple schools in a single state, the aggregate impact of funding reductions
applicable to those schools could be material. For example, we have agreements with 13 schools in California
and while each school is independent with its own governing authority and no single school in California
accounts for more than 10% of our revenue, regulatory actions that affect the level or timing of payments for
all similarly situated schools in that state could adversely affect our financial condition. The specific level of
federal, state and local funding for the coming years is not yet known for specific states and, when taken as
a whole, it is reasonable to believe that a number of the public schools we serve could experience lower per
pupil enrollment funding, while others may increase funding, as economic conditions or political conditions
change.

(cid:120) As a public company, we are required to file periodic financial and other disclosure reports with the SEC.
This information may be referenced in the legislative process, including budgetary considerations, related to
the funding of alternative public school options, including virtual public schools and blended schools. The
disclosure of this information by a for-profit education company, regardless of parent satisfaction and student
performance, may nonetheless be used by opponents of virtual and blended public schools to propose funding
reductions or restrictions.

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From time to time, government funding to schools and school districts is not provided when due, which
sometimes causes the affected schools to delay payments to us for our products and services. These payment
delays have occurred in the past and can deprive us of significant working capital until the matter is resolved,
which could hinder our ability to implement our growth strategies and conduct our business. For example,
in fiscal year 2016, the Commonwealth of Pennsylvania was unable to approve a budget, including funding
for public school education, and thus the Agora Cyber Charter School received no funds and could not make
timely contractual payments to the Company for our products and services, even though we continued to
incur the costs to keep the school operating.

We cannot predict with any certainty whether and to what degree the disruption caused by the ongoing COVID-19
pandemic and reactions thereto will continue and how our business and results of operations will be impacted in the
future.

While we initially observed increasing demand from prospective students in the earlier part of the COVID-19

pandemic, we cannot estimate the specific impact of the ongoing COVID-19 pandemic on future demand trends, and

there is no assurance that we will continue to experience current demand levels as the COVID-19 pandemic tapers. As a
result, we expect to face difficulties in accurately forecasting financial results.

Failure to comply with regulatory requirements, poor academic performance, or misconduct by us or operators of other
virtual public schools could tarnish the reputation of all the school operators in our industry, which could have a
negative impact on our business or lead to punitive legislation.

As a non-traditional form of public education, online public school operators will be subject to scrutiny, perhaps
even greater than that applied to traditional brick and mortar public schools or public charter schools. Not all virtual public
schools will have successful academic programs or operate efficiently, and new entrants may not perform well either. Such
underperformance could create the impression that virtual schooling is not an effective way to educate students, whether
or not our learning systems achieve satisfactory performance. Consistently poor academic performance, or the perception
of poor performance, could also lead to closure of an online public school or termination of an approved provider status
in some jurisdictions, or to passage of legislation empowering the state to restructure or close low-performing schools. For
example, a 2016 Nevada law expanded a charter authorizer’s ability to terminate a charter based upon academic
performance or to reconstitute a school’s governing board, and a 2013 Tennessee law included academic performance
criteria applicable only to virtual schools.

Beyond academic performance issues, some virtual school operators, including us, have been subject to
governmental investigations alleging, among other things, false attendance reporting, the misuse of public funds or failures
in regulatory compliance. These allegations have attracted significant adverse media coverage and have prompted
legislative hearings and regulatory responses. Investigations have focused on specific companies and individuals, or even
entire industries, such as the industry-wide investigation of for-profit virtual schools initiated by the Attorney General of
California in 2015. The precise impact of these governmental investigations on our current and future business is difficult
to discern, in part because of the number of states in which we operate and the range of purported malfeasance or
performance issues involved. If these situations, or any additional alleged misconduct, cause all virtual public schools to
be viewed by the public and/or policymakers unfavorably, we may find it difficult to expand into new states or renew our
contracts with our clients.

Opponents of public charter schools, including virtual and blended, have sought to challenge the establishment and
expansion of such schools through the judicial process. If these interests prevail, it could damage our ability to sustain
or grow our current business or expand in certain jurisdictions.

We have been, and will likely continue to be, subject to public policy lawsuits by those who do not share our
belief in the value of this form of public education or the involvement of for-profit education management companies.
Whether we are a named party to these lawsuits, legal claims have involved challenges to the constitutionality of
authorizing statutes, methods of instructional delivery, funding provisions and the respective roles of parents and teachers
that can potentially affect us. For example, the Louisiana Association of Educators, an affiliate of a national teachers union,
sought to terminate funding on state constitutional grounds to certain types of charter schools through the judicial process
(including to a public school we serve), and while the teachers union was initially successful, the Louisiana Supreme Court
reversed that decision in March 2018. See Iberville Parish School Board v. Louisiana State Board of Elementary and
Secondary Education.

Should we fail to comply with the laws and regulations applicable to our business, such failures could result in a loss
of public funding and an obligation to repay funds previously received, which could adversely affect our business,
financial condition and results of operations.

Once authorized by law, virtual and blended public schools are generally subject to extensive regulation, as are
the school districts we serve. These regulations cover specific program standards and financial requirements including,
but not limited to: (i) student eligibility standards; (ii) numeric and geographic limitations or caps on enrollments;
(iii) state-specific curriculum requirements and standards; (iv) restrictions on open-enrollment policies by and among
districts; (v) prescribed teacher-to-student ratios and teacher funding allocations from per pupil funding; (vi) teacher
certification and reporting requirements; and (vii) virtual school attendance reporting. State and federal funding authorities
conduct regular program and financial audits of the public schools we serve to ensure compliance with applicable
regulations. If a final determination of non-compliance is made, funds may be withheld, which could impair that school’s
ability to pay us for services in a timely manner, or the school could be required to repay funds received during the period

of non-compliance. Additionally, the indemnity provisions in our standard service agreements, with virtual and blended
public schools and school districts, may require us to return any contested funds on behalf of the school.

As an emerging form of public education with unique attributes, enabling legislation for online public schools is often
ambiguous and subject to discrepancies in interpretation by regulatory authorities, which may lead to disputes over our
ability to invoice and receive payments for services rendered.

Statutory language providing for virtual and blended public schools is sometimes interpreted by regulatory
authorities in ways that may vary from year to year making compliance subject to uncertainty. More issues normally arise
during our first few school years of doing business in a state because such state’s enabling legislation often does not
address specific issues, such as what constitutes proper documentation for enrollment eligibility or attendance reporting in
a virtual or blended school. From time to time there are changes to the regulators’ approaches to determining the eligibility
of students for funding purposes. Another issue may be differing interpretations on what constitutes a student’s substantial
completion of a semester in a public school or daily attendance requirements. These regulatory uncertainties may lead to
disputes over our ability to invoice and receive payments for services rendered, or to disputes with auditors of public
schools, which could adversely affect our business, financial condition and results of operations. For example, in October
2017, the California Department of Education commenced an audit covering, among other things, the average daily
attendance records and associated funding provided to the California Virtual Academies (“CAVAs”), dependent on the
proper method of counting the time-value and daily engagement of students enrolled in independent study programs
provided by non-classroom based charter schools and the regulations applicable to such programs and schools.

The operation of virtual and blended public charter schools depends on the maintenance of the authorizing charter
and compliance with applicable laws. If these charters are not renewed, our contracts with these schools would be
terminated.

In many cases, virtual and blended public schools operate under a charter that is granted by a state or local
authorizer to the charter holder, such as a community group or an established not-for-profit corporation, which typically
is required by state law to qualify for student funding. In fiscal year 2022, a majority of our revenue was derived from our
comprehensive school-as-a-service offerings in both the General Education and Career Learning markets, the majority of
which were virtual and blended public schools operating under a charter. The service and products agreements for these
schools are with the charter holder or the charter board. Non-profit public charter schools qualifying for exemption from
federal taxation under Internal Revenue Code Section 501(c)(3) as charitable organizations must also operate on an
arms-length basis in accordance with Internal Revenue Service rules and policies to maintain that status and their funding
eligibility. In addition, many state public charter school statutes require periodic reauthorization. If a virtual or blended
public school we support fails to maintain its tax-exempt status and funding eligibility, fails to renew its charter, or if its
charter is revoked for non-performance or other reasons that may be due to actions of the independent charter board
completely outside of our control, our contract with that school would be terminated. For example, in fiscal year 2018, the
Buckeye Community Hope Foundation terminated the charter of Insight School of Ohio.

Actual or alleged misconduct by current or former directors, officers, key employees or officials could make it more
difficult for us to enter into new contracts or renew existing contracts.

If we or any of our current or former directors, officers, key employees, or officials are accused or found to be
guilty of serious crimes or civil violations, including the mismanagement or improper accounting of public funds, or
violations of the federal securities laws, the schools we serve could be barred or discouraged from entering into or renewing
service agreements with us. As a result, our business and revenues would be adversely affected.

New laws or regulations not currently applicable to for-profit education companies in the K-12 sector could be enacted
and negatively impact our operations and financial results.

As the provision of online K-12 public education matures, policy or business practice issues may arise that could
lead to the enactment of new laws or regulations similar to, or in addition to, laws or regulations applicable to other
education industry sectors. For example, for-profit education companies that own and operate post-secondary colleges and
programs depend in significant part on student loans provided by the federal government to cover tuition expenses and
income sharing agreements, and federal laws prohibit incentive compensation for success in securing enrollments or
financial aid to any person engaged in student recruiting or admission activities. In contrast, while students in virtual or
blended public K-12 schools are entitled to a public education with no federal or state loans necessary for tuition, laws

could be enacted that make for-profit management companies serving such schools subject to similar recruitment or other
restrictions. In keeping with good business practices, 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. New laws that specifically
target for-profit education companies or education management organizations from operating public charter schools could
also adversely affect our business, financial condition and results of operation.

Risks Related to Our Business and Our Industry

The schools we contract with and serve are governed by independent governing bodies that may shift their priorities or
change objectives in ways that are adverse to us and to the students who attend the school programs we administer, or
they may react negatively to acquisitions or other transactions.

We contract with and provide a majority of our products and services to virtual and blended public schools
governed by independent boards or similar governing bodies. While we typically share a common objective at the outset
of our business relationship, over time our interests could diverge resulting in changes adverse to our business or the
students enrolled in those schools. The governing boards of the schools we serve in which we hire the Principal or Head
of School (“HoS”) may seek to employ their own HoS as a condition for contract renewal. This decision may potentially
reduce the value of the programs they purchase from us by structurally separating the HoS from regular involvement with
our virtual school management experts, employee-based professional development programs, and internal understanding
of the proprietary curriculum and innovations we develop to improve academic performance. As these independent boards
shift their priorities or change objectives, reduce or modify the scope of services and products we provide, or terminate
their relationships with us, our ability to generate revenues consistently over time or to improve academic outcomes would
be adversely affected.

Our contracts for a school-as-a-service offering are subject to periodic renewal, and each year, some of these
agreements are set to expire. If we are unable to renew several such contracts or if a single significant contract expires
during a given year, our business, financial condition, results of operations and cash flow could be adversely affected.

In fiscal year 2022, we had contracts for our school-as-a-service offerings for 80 schools in 30 states and the
District of Columbia. A portion of these contracts are scheduled to expire in any given year and may not be renewed or
may be renewed on terms much less favorable to us. Most of these contracts include auto renewal provisions having
significant advance notice deadlines. The advance notice provisions are intended to allow sufficient time to engage in
renewal negotiations before and during the final year of these contracts. A renewed contract could involve a restructuring
of our services and management arrangements that could lower our revenue or even change how revenue and expenses are
recognized. When the customer prefers the existing contract terms to be extended, it can elect to disregard the advance
notice provision and have the contract automatically renew. If we are unable to renew contracts or if contract renewals
have significantly less favorable terms or unbundle previously provided services, our business, financial condition, results
of operations and cash flow could be adversely affected.

If the schools we serve fail to enroll or re-enroll a sufficient number of students, or we fail to enroll a significant number
of students in the Career Learning programs for adult learners, our business, financial condition and results of
operations will be adversely affected.

A majority of our revenues are a direct function of how many students are enrolled in our school-as-a-service
offerings, the number of school districts and students who subscribe to such district programs, and the enrollments in our
three international and private schools.

Because families have alternative choices both within and outside the public school system for educating their
children, it is typical during each school year that some students withdraw from schools using our online education services
and switch to their traditional local public schools, other charter school alternatives or private schools. While many of our
school-as-a-service offerings also accept new student enrollment throughout the year where permitted, generally our
average student enrollment declines as the school year progresses such that we serve on average fewer students at the end
of any given school year than at the beginning of the year. If our school-as-a-service offerings experience higher
withdrawal rates during the year and/or enroll fewer new students as the year progresses than we have experienced in the
past, our revenues, results of operations and financial condition would be adversely affected.

Similarly, at the start of each new school year, students who had remained enrolled through the end of the previous
year may have graduated from the terminal grade in a school or have left our school-as-a-service offerings for any number
of reasons. To the extent our school-as-a-service offerings do not retain previously enrolled students from the prior year,
they must attract new students at the start of the year to sustain their average student enrollment year over year, as well as
to grow their enrollment each year, based upon enrollment objectives determined by the governing authority of those
schools. If the schools we serve in the aggregate are able only to sustain prior year enrollment levels, our revenues may
not grow from the prior year, absent improved revenue capture or the addition of new schools. More fundamentally, if
average student enrollment at the schools we serve declines from one year to the next, our revenues, results of operations
and financial condition will be adversely affected.

We also contract with virtual public schools and school districts to provide marketing and enrollment services,
and we provide similar services directly to our international and private schools. However, many of these customers are
responsible for their own marketing and enrollment activities. Efforts on our part to sustain or increase enrollments in the
face of higher student withdrawals or fewer returning students at the start of a school year may lead to higher costs for us,
and may adversely affect our operating margin. If we or the virtual public schools and school districts are unsuccessful in
marketing plans or enrollment processes for the schools, the average student enrollment at the schools may not grow or
could even decline, and adversely affect our revenues, results of operations and financial condition.

We also derive revenues from our Galvanize, Tech Elevator and MedCerts offerings to adult learners. The vast
majority of the enrollments in these programs are for shorter periods of time, and re-enrollments are not typical due to the
nature of these offerings. Thus, we must continually attract and enroll new adult learners in order to maintain our revenues
at current levels or grow our revenues. Efforts on our part to sustain or increase enrollments in the face of lower
enrollments compared to prior periods may lead to higher costs for us, and may adversely affect our operating margin. If
we are unsuccessful in marketing plans or enrollment processes for these programs for adult learners, the average
enrollment in our Galvanize, Tech Elevator or MedCerts offerings may not grow or could even decline, which could
adversely affect our revenues, results of operations and financial condition.

The enrollment data we present is subject to certain limitations and may not fully capture trends in the performance of
our business.

We periodically disclose enrollment data for students in our General Education and Career Learning lines of
revenue. However, this data may not fully capture trends in the performance of our business for a number of reasons,
including:

(cid:120)

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;

(cid:120)

This data includes enrollments for which Stride receives no public funding or revenue;

(cid:120) No enrollments are included in Career Learning for Galvanize, Tech Elevator or MedCerts; and

(cid:120) Over time a student may move from being counted as a General Education enrollment to being counted as a
Career Learning enrollment, or vice versa, depending on the educational choices made by each student, which
choices in certain cases may be impacted by counseling from Stride employees, and this may result in enrollment
growth in one line of revenue being offset by a corresponding decrease in enrollments for the other line of revenue.

Accordingly, changes in enrollment data may not entirely correspond with changes in the financial performance
of our business, and if the mix of enrollments changes, our revenues will be impacted to the extent the average revenues
per enrollments are significantly different.

Because the independent governing authorities of our customers may shift priorities or incur new obligations which
have financial consequences, we may be exposed to the risk of loss resulting from the nonpayment or nonperformance
by our customers and our financial condition, results of operations and cash flows could suffer.

If our customers were to cause or be subjected to situations that lead to a weakened financial condition, dispute
our invoices, withhold payments, or file for bankruptcy, we could experience difficulty and prolonged delays in collecting

receivables, if at all. Any nonpayment or nonperformance by our customers could adversely affect our business, financial
condition, results of operations and cash flows. For example, in fiscal year 2017, as the Agora Cyber Charter School
continued to operate as a self-managed charter school, it delayed its payments to us and our accounts receivable from the
school have grown significantly, resulting in a revised payment schedule agreement, which accompanied a contract
extension.

As we continue to refine our marketing efforts, and support the enrollment activities for our school-as-a-service
offerings and adult learning programs, changes in our marketing efforts and enrollment activities could lead to a
decline in overall enrollment at the schools we serve or at the adult learning programs we offer.

As parents evaluate school choices for their children, we are segmenting our marketing efforts to better attract
students who are most likely to benefit from and succeed in virtual education programs and who are likely to remain
enrolled with a virtual school over several years. Our research leads us to believe that students with parents who are active
and regularly engaged in their education are more likely to be successful in a virtual school. In some cases, the governing
authorities of these schools may request different enrollment policies or criteria. Our marketing efforts, therefore, may not
be wholly successful, and could lead to an overall decline in enrollment for our school-as-a-service, thus adversely
affecting our revenue, results of operations and financial condition.

Additionally, for our Galvanize, Tech Elevator and MedCerts offerings to adult learners, we are focusing our
marketing and enrollment efforts to identify and attract adult learners in the software engineering, healthcare and medical
fields, as well as providing staffing and talent development services to employers and government agencies. However, our
marketing efforts may not be successful. As a result, our overall enrollment in these adult learning programs may decline,
and our revenue, results of operations and financial condition may be adversely affected.

The student demographics of the schools we serve can lead to higher costs and affect our ability to sustain or grow our
operating income.

The schools we serve are publicly funded and are generally obligated to accept all students meeting state or
district criteria for enrollment. Because an online education environment may offer a better educational opportunity for
students falling behind grade level, our school-as-a-service offerings have experienced in recent years a higher
academically at-risk student population, requiring supplemental student and family support services and closer one-on-one
involvement by teachers and school personnel, leading to higher costs to us in providing full management and curriculum
services to the schools. We consider students academically at-risk if they were not proficient on the previous year’s state
assessment, are credit-deficient, have previously dropped out, have failed courses, or score lower than average on
diagnostic norm-referenced assessments. Some states have additional or different indicators to determine students who are
at risk. These factors are used by the state to identify at-risk students in several states and have been found through research
to impact future student performance. The schools we serve also enroll a significant percentage of special needs students
with learning and/or physical disabilities, which also adds to the total costs incurred by the schools.

Education of high school students is generally more costly than K-8 as more teachers with subject matter expertise
(e.g., chemistry, calculus) must be hired to support an expansive curriculum, electives, and counseling services. As the
relative percentage of high school students increases as part of the total average enrollment in our school-as-a-service
offerings, our costs are likely to increase.

As our cost structure evolves due to the demographics, educational profile and mix of the students enrolled in our
school-as-a-service offerings, our profit margins may decline, and we may have increasing difficulty in sustaining or
growing our operating income commensurate with our revenues.

If student performance falls, state accountability standards are not achieved, teachers or administrators tamper with
state test scoring or graduation standards, or parent and student satisfaction declines, a significant number of students
may not remain enrolled in a virtual or blended public school that we serve, charters may not be renewed or enrollment
caps could be put in place, or enrollment practices could be limited, and our business, financial condition and results
of operations will be adversely affected.

The success of our business depends in part on the choice of a family to have their child begin or continue his or
her education in a virtual or blended public school that we serve. This decision is based on many factors, including student
performance and parent and student satisfaction. Students may perform significantly below state averages or the virtual or

blended public school may fail to meet state accountability standards. Like many traditional brick and mortar public
schools, not all of the public schools we serve meet the requirements of their applicable accountability frameworks, as
large numbers of new enrollments from students underperforming in traditional schools can decrease overall results or the
underperformance of any one subgroup can lead to the entire school failing to meet accountability expectations and
potentially lead to the school’s closure. For example, in Tennessee, the Commissioner of Education has statutory authority
to close a virtual school if an accountability trigger is met. In addition, although serving academically at-risk students is
an important aspect of our obligation to educate any child regardless of circumstance, the performance of these students
can adversely affect a school’s standing under applicable accountability standards. We expect that, as our enrollments
increase and the portion of students that have not used our learning systems for multiple years increases, the average
performance of all students using our learning systems may decrease, even if the individual performance of other students
improves over time. This effect may also be exacerbated if students enrolled in schools that we provide services to or
acquire are predominately below state proficiency standards or experience low graduation rates. For example, at-risk
students who attended the Electronic Classroom of Tomorrow (ECOT) schools in Ohio, which were closed in mid-school
year 2017-18 by state regulators, and who then transferred to other public schools, including the Ohio Virtual Academy
supported by us, could negatively impact a receiving school’s overall academic performance ratings absent a different
accountability measure applicable to such students or waiver of such standards. Moreover, under ESSA, state authorities
may change their accountability frameworks in ways that negatively impact the schools we serve.

Students in the school-as-a-service offerings we serve are required to complete standardized state testing, and the
frequency and the results of this testing may have an impact on school enrollment. The significant increase of testing
undertaken at the state level has led some parents to opt out of state assessments, a parental right which is now codified in
the ESSA, thereby resulting in an incomplete and potentially inaccurate assessment of school and student performance.
To avoid the consequences of failing to meet applicable required proficiency, growth or accountability standards, teachers
or school administrators may engage in improperly altering student test scores or graduation standards, especially if teacher
performance and compensation are evaluated on these results. Finally, parent and student satisfaction may decline as not
all parents and students are able to devote the substantial time and effort necessary to complete our curriculum. A student’s
satisfaction may also suffer if his or her relationship with the virtual or blended public school teacher does not meet
expectations. If student performance or satisfaction declines, students may decide not to remain enrolled in a virtual or
blended public school that we serve and our business, financial condition and results of operations could be adversely
affected.

Compliance with curriculum standards and assessments for individual state determinations under the ESSA may create
ongoing challenges to ensure that our curriculum products align with state requirements, which could possibly cause
academic performance to decline and dissatisfaction by our school customers which could limit our growth and
profitability.

Under the ESSA, states will set their own curriculum standards in reading, math and science, and the federal
government is prohibited from mandating or incentivizing states to adopt any set of particular standards, such as Common
Core. States were also given the authority under the ESSA to craft their own assessment programs to measure the
proficiency of their students for college and career readiness, and may also choose to offer already available nationally
recognized assessments at the high school level, such as the SAT or ACT tests. As implementation proceeds at the state
level, and use of the assessments previously developed by the Partnership for Assessment of Readiness for College and
Careers and Smarter Balanced Assessment Consortium consortia continues to erode, a multitude of different standards and
assessments may emerge and result in temporary misalignments of our curriculum offerings with state standards, cause
academic performance to decline, create a need for additional teacher training and product investments, all of which could
adversely affect our relationship with public school contracting with us for a school-as-a-service offering and school
district customers, financial condition, contract renewals and reputation.

Mergers, acquisitions and joint ventures present many risks, and we may not realize the financial and strategic goals
that formed the basis for the transaction.

When strategic opportunities arise to expand our business, we may acquire or invest in other companies using
cash, stock, debt, asset contributions or any combination thereof, such as the acquisitions of Galvanize in January 2020,
Tech Elevator in November 2020 and MedCerts in November 2020. We may face risks in connection with these or other
future transactions, including the possibility that we may not realize the anticipated cost and revenue synergies on a timely
basis, or at all, or further the strategic purpose of any acquisition if our forecasts do not materialize. The pursuit of
acquisitions and their integrations may divert the resources that could otherwise be used to support and grow our existing

lines of business. The combination of two or more independent enterprises is a complex, costly and time-consuming
process. Acquisitions may create multiple and overlapping product lines that are offered, priced and supported differently,
which could cause customer confusion and delays in service. We may have difficulties coordinating sales and marketing
efforts to effectively position the combined company’s capabilities. Customers may decline to renew their contracts, or
the contracts of acquired businesses might not allow us to recognize revenues on the same basis. These transactions and
their integrations may also divert our management’s attention, and our ongoing business may be disrupted by acquisition,
transition or integration activities. In addition, we may have difficulty separating, transitioning and integrating an acquired
company’s systems, including but not limited to, financial accounting systems, information technology systems,
transaction processing systems, internal controls and standards, and procedures and policies, and the associated costs in
doing so may be higher than we anticipate.

There may also be other adverse effects on our business, operating results or financial condition associated with
the expansion of our business through acquisitions. We may fail to identify or assess the magnitude of certain liabilities,
shortcomings or other circumstances prior to acquiring a company or technology, which could result in unexpected
operating expenses, unexpected accounting treatment, unexpected increases in taxes due or a loss of anticipated tax
benefits. The acquired companies may not be able to achieve the levels of revenue, earnings or operating efficiency that
we expect. Our use of cash to pay for acquisitions may limit other potential uses of our cash, including investment in other
areas of our business, stock repurchases, dividend payments and retirement of outstanding indebtedness. If we issue a
significant amount of equity for future acquisitions, existing stockholders may be diluted and earnings per share may
decrease. We may pay more than the acquired company or assets are ultimately worth and we may have underestimated
our costs in continuing the support and development of an acquired company’s offerings. Our operating results may be
adversely impacted by liabilities resulting from a stock or asset acquisition, which may be costly, disruptive to our business,
or lead to litigation.

We may be unable to obtain required approvals from governmental authorities on a timely basis, if at all, which
could, among other things, delay or prevent us from completing a transaction, otherwise restrict our ability to realize the
expected financial or strategic goals of an acquisition or have other adverse effects on our current business and operations.
We may face contingencies related to intellectual property, financial disclosures, and accounting practices or internal
controls. Finally, we may not be able to retain key executives of an acquired company.

To execute our business plans, we depend upon the experience and industry knowledge of our officers and other
key employees, including those who joined us as part of the Galvanize, Tech Elevator, and MedCerts acquisitions. The
combined company’s success will depend, in part, upon our ability to retain key management personnel and other key
employees, some of which may experience uncertainty about their future roles with the combined company as a result of
the acquisition. This may have a material adverse effect on our ability to attract and retain key personnel.

The occurrence of any of these risks could have a material adverse effect on our business, results of operations,

financial condition or cash flows, particularly in the case of a larger acquisition or several concurrent acquisitions.

Our business could be negatively affected as a result of actions by activist stockholders, and such activism could impact
the trading value of our securities and harm our business, financial condition and results of operations.

Responding to actions by activist stockholders can be costly and time consuming, disrupting our operations and
diverting the attention of management and our employees. If activist stockholders were to emerge, their activities could
interfere with our ability to execute our strategic plan and divert resources from our business. In addition, a proxy contest
for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation
expenses and require significant time and attention of management and our Board of Directors. Any perceived uncertainties
as to our future direction also could affect the market price and volatility of our securities, cause key executives to leave
the Company, adversely affect the relationships we have with our school board customers, and harm existing and new
business prospects.

If market demand for online options in public schooling does not increase or continue or if additional states do not
authorize or adequately fund virtual or blended public schools, our business, financial condition and results of
operations could be adversely affected.

While historically we grew by opening new virtual public schools in new states, in recent years the pace of state
expansion has declined while opening more schools in existing states has increased. In fiscal year 2022, we served 80

virtual public schools and blended schools in 30 states and the District of Columbia. Without adding additional states, our
school-as-a-service revenues may become increasingly dependent on serving more virtual schools in existing states. We
may also not be able to fill available enrollment slots as forecasted. If the market demand for virtual and blended public
schools does not increase or declines, if the remaining states are hesitant to authorize virtual or blended public schools, if
enrollment caps are not removed or raised, or if the funding of such schools is inadequate, our opportunities for growth
and our ability to sustain our revenues, results of operations and financial condition would be adversely affected.

Increasing competition in the education industry sectors that we serve could lead to pricing pressures, reduced
operating margins, loss of market share, departure of key employees and increased capital expenditures.

As a general matter, we face varying degrees of competition from a variety of education providers because our
learning systems integrate all the elements of the education development and delivery process, including curriculum
development, textbook publishing, teacher training and support, lesson planning, testing and assessment, job placement
and industry-certified content, and school performance and compliance management. In both our General Education and
Career Learning markets, we compete with companies that provide online curriculum and support services. We also
compete with public school districts and state departments of education that offer K-12 online programs of their own or in
partnership with other online curriculum vendors. As we pursue our post-secondary Career Learning strategic initiatives
through our Galvanize, Tech Elevator and MedCerts subsidiaries, we will be competing with corporate training businesses
and some employers that offer education as an employee benefit. We anticipate intensifying competition both from existing
competitors and new entrants. Our competitors may adopt superior curriculum content, technology and learning platforms,
school support or marketing approaches, and may have different pricing and service packages that may have greater appeal
than our offerings. In addition, some of our school-as-a-service offerings could seek to transition to a self-managed school
by inviting competitive alternatives to portions of the products and services now provided entirely by us under our
integrated fully managed service agreements. If we are unable to successfully compete for new business, win and renew
contracts, including fully managed public school contracts, or students fail to realize sufficient gains in academic
performance, our revenues, opportunities for growth and operating margins may decline. Price competition from our
current and future competitors could also result in reduced revenues, reduced margins or the failure of our product and
service offerings to achieve or maintain more widespread market acceptance.

We may also face competition from publishers of traditional educational materials that are substantially larger
than we are and have significantly greater financial, technical and marketing resources, and may enter the field through
acquisitions and mergers. Many of these traditional publishers, or new market entrants, have developed their own online
curriculum products and teaching materials that compete directly with our post-secondary Career Learning products. As a
result, they may be able to devote more resources and move quickly to develop products and services that are superior to
our platform and technologies. We may not have the resources necessary to acquire or compete with technologies being
developed by our competitors, which may render our online delivery format less competitive or obsolete. These new and
well-funded entrants may also seek to attract our key executives as employees based on their acquired expertise in virtual
education where such specialized skills are not widely available.

Our future success will depend in large part on our ability to maintain a competitive position with our curriculum
and our technology, as well as our ability to increase capital expenditures to sustain the competitive position of our product
and retain our talent base. We cannot assure that we will have the financial resources, technical expertise, marketing,
distribution or support capabilities to compete effectively.

Regulatory frameworks on the accessibility of technology and curriculum are continually evolving due to legislative
and administrative developments and the rapid evolution of technology, which could result in increased product
development costs and compliance risks.

Our online curriculum is made available to students through websites, computers and other display devices
connected to the Internet. The website platforms and online curriculum include a combination of software applications
that include graphics, pictures, videos, animations, sounds and interactive content that may present challenges to
individuals with disabilities. A number of states and federal authorities have considered or are considering how web-based
information should be made accessible to persons with such disabilities. To the extent they enact or interpret laws and
regulations to require greater accessibility than we currently provide, we may have to modify our offerings to satisfy those
requirements. Because there is no federal rule setting a uniform technical standard for determining web accessibility under
Section 508 and Title II of the ADA, online service providers have no uniform standard of compliance. Some states have
adopted the standards promulgated under Section 508 while others require WCAG Level A and/or Level AA or their own

unique standards. In addition, Section 504 of the Rehabilitation Act of 1973 is designed to ensure that students with
disabilities have an equal opportunity to access each school’s website and online learning environment. To the extent that
we enter into federal government contracts, different standards of compliance could be imposed on us under Section 508
of the Rehabilitation Act, or by states who apply these federal standards under Section 508 or other standards to education
providers, which standards may be changed from time to time. Beyond the significant product development costs
associated with these evolving regulations, a failure to meet such requirements could also result in loss or termination of
material contracts, inability to secure new contracts, or in potential legal liability.

Our revenues from our school-as-a-service offerings are based in part on our estimate of the total funds each school
will receive in a particular school year and our estimate of the full year expenses to be incurred by each school. As a
result, differences between our quarterly estimates and the actual funds received and expenses incurred could have an
adverse impact on our results of operations and cash flows.

We recognize revenues ratably from certain of our fees charged to school-as-a-service offerings over the course
of our fiscal year. To determine the pro rata amount of revenues to recognize in a fiscal quarter, we estimate the total
expected funds each school will receive in a particular school year. Additionally, we take responsibility for any operating
deficits incurred at most of the school-as-a-service offerings we serve. Because this may impair our ability to collect the
full amount invoiced in a period and therefore collection cannot reasonably be assured, we reduce revenues by the
estimated pro rata amount of the school’s net operating loss. We review our estimates of total funds and operating expenses
periodically, and we revise as necessary, by adjusting our year-to-date earned revenues to be proportional to the expected
revenues to be earned during the fiscal year. Actual school funding received and school operating expenses incurred may
vary from our estimates or revisions and could adversely impact our revenues, results of operations and cash flows.

Our business is subject to seasonal fluctuations, which may cause our operating results to fluctuate from
quarter-to-quarter and adversely impact our working capital and liquidity throughout the year.

Our operating results normally fluctuate as a result of seasonal variations in our business, principally due to the
number of months in a fiscal quarter that our school customers are fully operational and serving students. In the typical
academic year, our first and fourth fiscal quarters have fewer than three full months of operations, whereas our second and
third fiscal quarters will have three complete months of operations. Instructional costs and services increase in the first
fiscal quarter, primarily due to the costs incurred to ship learning kits at the beginning of the school year. These
instructional costs may increase significantly quarter-to-quarter as school operating expenses increase. The majority of our
selling and marketing expenses are incurred in the first and fourth fiscal quarters, as our primary enrollment season is April
through September.

We expect quarterly fluctuations in our operating results to continue. These fluctuations could result in volatility
and adversely affect our cash flow. As our business grows, these seasonal fluctuations may become more pronounced. As
a result, we believe that sequential quarterly comparisons of our financial results may not provide an accurate assessment
of our financial position.

Risks Related to Our Operations

We plan to continue to create new products, expand distribution channels and pilot innovative educational programs
to enhance academic performance. If we are unable to effectively manage these initiatives or they fail to gain
acceptance, our business, financial condition, results of operations and cash flows would be adversely affected.

As we create and acquire new products, expand our existing customer base and pilot new educational programs,

we expect to face challenges distinct from those we currently encounter, including:

(cid:120)

our continual efforts to innovate and pilot new programs to enhance student learning and to foster college
and career opportunities, such as our Stride Career Prep schools which offer pathways for Career Learning,
may not receive sufficient market acceptance to be economically viable;

the ongoing transition of our curriculum from Flash to HTML, and our use of third-party educational
platforms that we do not control, could create issues with customer satisfaction, early withdrawals and
declines in re-registrations, and potentially harm our reputation;

(cid:120)

the acquisition or opening of additional school-as-a-service offering in states where we already have a
contract with other schools can potentially complicate the school selection process for prospective parents,
and present marketing differentiation challenges depending on the facts and circumstances in that state;

our development of public blended schools has raised different operational challenges than those we face
with full-time virtual schools. Blended schools require us to lease facilities for classrooms, staff classrooms
with teachers, sometimes provide meals and kitchen facilities, adhere to local safety and fire codes, purchase
additional insurance and fulfill many other responsibilities;

operating in international markets may require us to conduct our business differently than we do in the United
States or in existing countries. Additionally, we may have difficulty training and retaining qualified teachers
or generating sufficient demand for our products and services in international markets. International
opportunities will also present us with different legal, operational, tax and currency challenges;

the use of our curriculum in classrooms will produce challenges with respect to adapting our curriculum for
effective use in a traditional classroom setting;

our creation of curricula and instruction protocols for courses taught through our Galvanize, Tech Elevator
and MedCerts subsidiaries requires us to rely upon specialized instructors and curriculum developers;

our online private school business is dependent on a tuition-based financial model and may not be able to
enroll a sufficient number of students over time to achieve long-run profitability or deliver a high level of
customer satisfaction; and

our participation in summer foreign language instruction camps through MIL could generate new legal
liabilities and financial consequences associated with our responsibility for students housed on leased college
campuses on a 24-hour basis over the duration of the camp.

Our failure to manage these business expansion programs, or any new business expansion program or new
distribution channel we pursue, may have an adverse effect on our business, financial condition, results of operations and
cash flows.

High-quality teachers are critical to the success of our learning systems. If we are not able to continue to recruit, train
and retain quality certified teachers, our curriculum might not be effectively delivered to students, compromising their
academic performance and our reputation. As a result, our brand, business and operating results may be adversely
affected.

High-quality teachers are critical to maintaining the value of our learning systems and assisting students with
their daily lessons. In addition, teachers in the public schools we manage or who provide instruction in connection with
the online programs we offer to school districts, must be state certified (with limited exceptions or temporary waiver
provisions in various states), and we must implement effective internal controls in each jurisdiction to ensure valid teacher
certifications, as well as the proper matching of certifications with student grade levels and subjects to be taught. Teachers
must also possess strong interpersonal communications skills to be able to effectively instruct students in a virtual school
setting, and the technical skills to use our technology-based learning systems. There is a limited pool of teachers with these
specialized attributes and the public schools and school districts we serve must provide competitive benefits packages to
attract and retain such qualified teachers.

The teachers in many public schools we serve are not our employees and the ultimate authority relating to those
teachers resides with an independent not-for-profit governing body, which oversees the schools. However, under many of
our service and product agreements with virtual and blended public schools, we have responsibility to recruit, train and
manage these teachers. The teacher recruitment and student assignment procedures and processes for our school-as-a-
service offerings must also comply with individual state certification and reporting requirements. We must also provide
continuous training to virtual and blended public school teachers so they can stay abreast of changes in student needs,
academic standards and other key trends necessary to teach online effectively, including measures of effectiveness. We
may not be able to recruit, train and retain enough qualified teachers to keep pace with school demand while maintaining
consistent teaching quality in the various public schools we serve. Shortages of qualified teachers, failures to ensure proper

teacher certifications and course assignments in each state, or decreases in the quality of our instruction, whether actual or
perceived, could have an adverse effect on our business.

School teachers are subject to union organizing campaigns, and if the teachers employed by us or at the public schools
we serve join a union, collective bargaining agreements negotiated with union representatives could result in higher
operating expenses and the loss of management flexibility and innovation for which charter schools were created.

If the teachers at any one of the public schools we serve were to unionize, as is the case in California, the employer
would become subject to a collective bargaining agreement with union representatives. A collective bargaining agreement
could impact teacher salaries, benefits, work rules, teacher tenure and provide for restrictions on the teaching work-day
and the time devoted to online instruction delivery or communications with students, and place limitations on the flexibility
to reassign or remove teachers for inadequate performance. This could result in higher school-related expenses and could
impede the sustainability of, or growth in, enrollment at the school due to the loss of management flexibility and
innovation. The outcome could result in higher costs to us in providing educational support and curriculum services to the
school, which may adversely affect our operating margins, overall revenues and academic performance results.

We rely on third-party service providers to host some of our solutions and any interruptions or delays in services from
these third parties could impair the delivery of our products and harm our business.

We currently outsource some of our hosting services to third parties. We do not control the operation of any third-
party facilities. These facilities are vulnerable to damage or interruption from natural disasters, fires, power loss,
telecommunications failures and similar events. They are also subject to break-ins, computer viruses, sabotage, intentional
acts of vandalism and other misconduct. The occurrence of any of these disasters or other unanticipated problems could
result in lengthy interruptions in our service. Furthermore, the availability of our proprietary and third-party LMSs could
be interrupted by a number of additional factors, including our customers’ inability to access the Internet, the failure of
our network or software systems due to human or other error, security breaches or the ability of the infrastructure to handle
spikes in customer usage. Interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties,
cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new
customers. Our business will also be harmed if our customers and potential customers believe our service is unreliable.

We operate a complex Company-wide enterprise resource planning (“ERP”) system, and if it were to experience
significant operating problems, it could adversely affect our business and results of operations.

We operate a complex Company-wide, Oracle-hosted, integrated ERP system to handle various business,
operating and financial processes, which handles a variety of important functions, such as order entry, invoicing, accounts
receivable, accounts payable, financial consolidation and internal and external financial and management reporting
matters. If the ERP system experiences significant problems, it could result in operational issues including delayed billing
and accounting errors and other operational issues which could adversely affect our business and results of operations.
System delays or malfunctioning could also disrupt our ability to timely and accurately process and report results of our
operations, financial position and cash flows, which could impact our ability to timely complete important business
processes.

The continued development of our product and service brands is important to our business. If we are not able to
maintain and enhance these brands, our business and operating results may suffer.

Enhancing brand awareness is critical to attracting and retaining students, and for serving additional virtual and
blended public schools, school districts and online private schools, and we intend to spend significant resources to
accomplish that objective. These efforts include sales and marketing directed to targeted locations as well as the national
marketplace, discrete student populations, the educational community at large, key policy groups, image-makers and the
media. As we continue to seek to increase enrollments and extend our geographic reach and product and service offerings,
maintaining quality and consistency across all our services and products may become more difficult to achieve, and any
significant and well-publicized failure to maintain this quality and consistency will have a detrimental effect on our brands.
We cannot provide assurances that our new sales and marketing efforts will be successful in further promoting our brands
in a competitive and cost-effective manner. If we are unable to further enhance our brand recognition and increase
awareness of our products and services, or if we incur excessive sales and marketing expenses, our business and results of
operations could be adversely affected.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products,
services and brand.

Our patents, trademarks, trade secrets, copyrights, domain names and other intellectual property rights are
important assets. For example, we have been granted three U.S. patents related to our provision of virtual schooling,
including the system components for creating and administering assessment tests and our lesson progress tracker, and two
U.S. patents related to foreign language instruction. Additionally, we are the copyright owner of courses in our proprietary
curriculum.

Various events outside of our control pose a threat to our intellectual property rights. For instance, effective
intellectual property protection may not be available in every country in which our products and services are distributed
or made available through the Internet. Also, the efforts we have taken to protect our proprietary rights may not be
sufficient or effective. If we fail to protect adequately our intellectual property through patents, trademarks and copyrights,
license agreements, employment agreements, confidentiality agreements, nondisclosure agreements or similar agreements,
our intellectual property rights may be misappropriated by others, invalidated or challenged, and our competitors could
duplicate our technology or may otherwise limit any competitive technology advantage we may have. Any significant
impairment of our intellectual property rights could harm our business or our ability to compete. Also, protecting our
intellectual property rights is costly and time consuming. Any unauthorized use of our intellectual property could make it
more expensive to do business and harm our operating results.

It is possible that we may not be able to sufficiently protect our innovations. In addition, given the costs of
obtaining patent protection, we may choose not to protect certain innovations that later turn out to be important. Further,
there is always the possibility that the scope of the protection gained will be insufficient or that an issued patent be deemed
invalid or unenforceable.

We also seek to maintain certain intellectual property as trade secrets. This secrecy could be compromised by
outside parties, whether through breach of our network security or otherwise, or by our employees or former employees,
intentionally or accidentally, which would cause us to lose the competitive advantage resulting from these trade secrets.
Third parties may acquire domain names that are substantially similar to our domain names leading to a decrease in the
value of our domain names and trademarks and other proprietary rights.

Lawsuits against us alleging infringement of the intellectual property rights of others and such actions would be costly
to defend, could require us to pay damages or royalty payments and could limit our ability or increase our costs to use
certain technologies in the future.

Companies in the Internet, software, technology, education, curriculum and media industries own large numbers
of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement
or other violations of intellectual property rights. Regardless of the merits, intellectual property claims are time-consuming
and expensive to litigate or settle. For example, a non-practicing entity sued us alleging that our proprietary learning
systems infringed three of its patents although its lawsuit was ultimately dismissed on the merits in 2014. In addition, to
the extent claims against us are successful, we may have to pay substantial monetary damages or discontinue certain
products, services or practices that are found to be in violation of another party’s rights. We may also have to seek a license
and make royalty payments to continue offering our products and services or following such practices, which may
significantly increase our operating expenses.

We may be subject to legal liability resulting from the actions of third parties, including independent contractors,
business partners, or teachers, which could cause us to incur substantial costs and damage our reputation.

We may be subject, directly or indirectly, to legal claims associated with the actions of or filed by our independent
contractors, business partners, or teachers. In the event of accidents or injuries or other harm to students, we could face
claims alleging that we were negligent, provided inadequate supervision or were otherwise liable for their injuries and our
insurance may not cover the expenses of litigation or settlement amounts. Additionally, we could face claims alleging that
our independent curriculum contractors or teachers infringed the intellectual property rights of third parties. A liability
claim against us or any of our independent contractors, business partners, or teachers could adversely affect our reputation,
enrollment and revenues. Even if unsuccessful, such a claim could create unfavorable publicity, cause us to incur
substantial expenses and divert the time and attention of management.

We operate in markets that are dependent on Information Technology (IT) systems and technological change. Failure
to maintain and support customer facing services, systems, and platforms, including addressing quality issues and
execution on time of new products and enhancements, could negatively impact our revenues and reputation.

We use complex IT systems and products to support our business activities, including customer-facing systems,
back-office processing and infrastructure. We face several technological risks associated with online product service
delivery, information technology security (including virus and cyber-attacks, as well as software related bugs,
misconfigurations or other vulnerabilities), e-commerce and enterprise resource planning system implementation and
upgrades. From time to time we have experienced verifiable attacks on our system by unauthorized parties, and our plans
and procedures to reduce such risks may not be successful. Thus, our business could be adversely affected if our systems
and infrastructure experience a significant failure or interruption in the event of future attacks on our system by
unauthorized parties.

The failure to prevent a cybersecurity incident affecting our systems could result in the disruption of our services and
the disclosure or misappropriation of sensitive information, which could harm our reputation, decrease demand for
our services and products, expose us to liability, penalties, and remedial costs, or otherwise adversely affect our
financial performance.

In order to provide our services and solutions, we depend on various hardware, software, infrastructure, online
sites and connected networks (hereinafter, "IT Systems"), including those of third parties. In addition, as part of our
business, we collect, use, process, transmit, host and store information, including personal data related to employees,
customers, students, and parents, as well as proprietary business information (collectively, "Confidential Information").
Our IT Systems and Confidential Information are at risk of being compromised, whether through malicious activity or
human or technological error. Although we dedicate personnel and resources toward protecting against cybersecurity risks
and threats, our efforts may fail to prevent a security incident.

For example, on December 1, 2020, we announced a security incident involving a ransomware attack. The
incident resulted in the attacker accessing certain parts of our corporate back-office systems, including some student and
employee information on those systems. We do not believe the incident has had a material impact on our business,
operations or financial results. We worked with our cyber insurance provider to make a payment to the ransomware
attacker, as a proactive and preventive step to prevent the information obtained by the attacker from being released on the
Internet or otherwise disclosed, although there is always a risk that the threat actor will not adhere to negotiated terms.
Any remediation measures that we have taken or that we may undertake in the future in response to this security incident
may be insufficient to prevent future attacks.

Cyberattacks are expected to accelerate on a global basis in both frequency and magnitude, and threat actors are
increasingly sophisticated in using techniques that circumvent controls, evade detection, and remove forensic evidence,
which means that we and critical third parties may be unable to anticipate, contain or recover from future attacks or
incidents in a timely or effective manner. In addition, remote working arrangements that started during the COVID-19
pandemic may continue in the future, which presents additional opportunities for threat actors to engage in social
engineering (for example, phishing) and to exploit vulnerabilities present in many non-corporate networks.

Any security incident that results in Confidential Information being stolen, accessed or modified without
authorization, or that otherwise disrupts or negatively impacts our operations or IT Systems, could harm our reputation,
lead to customer attrition, and expose us to regulatory enforcement action or litigation, including class actions. We may
also be required to expend significant capital and other resources in response to a security incident, including notification
under data privacy laws and regulations, and incur expenses related to containing the incident, restoring lost or corrupted
data, and remediating our IT Systems. Monetary damages, regulatory fines or penalties and other costs or losses could be
significant and may exceed insurance policy limits or may not be covered by our insurance at all. In addition, a security

incident could require that we expend substantial additional resources related to the security of our IT Systems, diverting
resources from other projects and disrupting our businesses.

We rely on the Internet to enroll students and to deliver our products and services to children and to market ourselves
and schools that contract with us, all of which exposes us to a growing number of legal risks and increasing regulation.

We collect information regarding students during the online enrollment process and a significant amount of our
curriculum content is delivered over the Internet. As a result, specific federal, state and other jurisdictional laws that could
have an impact on our business include the following:

(cid:120)

the COPPA, as implemented by regulations of the Federal Trade Commission (revised July 2013), imposes
restrictions on the ability of online companies to collect and use personal information from children under
the age of 13;

the FERPA, which imposes parental or student consent requirements for specified disclosures of student
information to third parties, and emerging state student data privacy laws;

the CDA, which provides website operators immunity from most claims arising from the publication of
third-party content;

numerous state cyberbullying laws which require schools to adopt policies on harassment through the Internet
or other electronic communications;

rapidly emerging state student data privacy laws which require schools to adopt privacy policies and/or
require certain contractual commitments from education technology providers are applicable to virtual
schools and can significantly vary from one state to another;

federal and state laws that govern schools’ obligations to ELL students and students with disabilities; and

the European Union General Data Protection Regulation (“GDPR”) which may apply to certain aspects of
our private schools.

In addition, the laws applicable to the Internet are still developing. These laws impact pricing, advertising,
taxation, consumer protection, quality of products and services, and are in a state of change. New or amended laws may
also be enacted, which could increase the costs of regulatory compliance for us or force us to change our business practices.
As a result, we may be exposed to substantial liability, including significant expenses necessary to comply with such laws
and regulations and indemnification of schools we operate for liabilities resulting from a school’s failure to comply with
such laws and regulations.

Failure to comply with data privacy regulations could result in reputational damage to our brands and adversely affect
our business, financial condition and results of operations.

Any perceived or actual unauthorized disclosure of personally identifiable information, whether through breach
of our network or a vendor’s network by an unauthorized party, employee theft, misuse or error or otherwise, could harm
our reputation, impair our ability to attract and retain our customers, or subject us to claims or litigation arising from
damages suffered by individuals. Failure to adequately protect personally identifiable information could potentially lead
to penalties, significant remediation costs, reputational damage, the cancellation of existing contracts and difficulty in
competing for future business. In addition, we could incur significant costs in complying with relevant laws and regulations
regarding the unauthorized disclosure of personal information, which may be affected by any changes to data privacy
legislation at both the federal and state levels. Because we serve students residing in foreign countries, we may be subject
to privacy laws of other countries and regions, such as the GDPR. In addition to the possibility of penalties, remediation
costs and reputational damage, the cost of compliance with foreign laws may outweigh revenue from those countries to
such an extent that we may discontinue or restrict our offerings to certain countries.

We utilize a single logistics vendor for the management, receiving, assembly and shipping of all of our learning kits
and printed educational materials. In addition, we utilize the same vendor at a second location for the reclamation and
redeployment of our student computers. This partnership depends upon execution on the part of us and the vendor.
Any material failure to execute properly for any reason, including damage or disruption to any of the vendor’s facilities
would have an adverse effect on our business, financial condition and results of operations.

Substantially all of the inventory for our learning kits and printed materials is located in one warehouse facility,
which is operated by a third-party logistics vendor that handles receipt, assembly and shipping of all physical learning
materials. If this logistics vendor were to fail to meet its obligations to deliver learning materials to students in a timely
manner, or if a material number of such shipments are incomplete or contain assembly errors, our business and results of
operations could be adversely affected. In addition, we provide computers for a substantial number of our students.
Execution or merger integration failures which interfere with the reclamation or redeployment of computers may result in
additional costs. Furthermore, a natural disaster, fire, power interruption, work stoppage or other unanticipated catastrophic
event, especially during the period from April through June when we are awaiting receipt of most of the curriculum
materials for the school year and have not yet shipped such materials to students, could significantly disrupt our ability to
deliver our products and operate our business. If any of our material inventory items were to experience any significant
damage, we would be unable to meet our contractual obligations and our business would suffer.

Any significant interruption in the operation of AWS or Azure could cause a loss of data and disrupt our ability to
manage our technological infrastructure.

Stride has migrated the applications that form the basis of our products to Amazon Web Services (AWS) and
Microsoft Azure. Amazon and Microsoft are global leaders in the cloud services industry and provide world class data
centers and capabilities.

Additionally, we do not control the operation of these cloud facilities and must rely on AWS and Azure to provide
the physical security, facilities management and communications infrastructure services related to our cloud environment.
Our reliance on these vendors exposes us to risks outside of our control. If AWS or Azure encounter financial difficulty,
such as bankruptcy or other events beyond our control, that causes it to fail to secure adequately and maintain its hosting
facilities or provide the required data communications capacity, students of the schools we serve may experience
interruptions in our service or the loss or theft of important customer data.

Scale and capacity limits on some of our technology, transaction processing systems and network hardware and
software may be difficult to project and we may not be able to expand and upgrade our systems in a timely manner to
meet significant unexpected increased demand.

As the number of schools we serve increases and our student base grows, the traffic on our transaction processing
systems and network hardware and software will rise. In our capacity planning processes, we may be unable to accurately
project the rate of increase in the use of our transaction processing systems and network hardware and software. In addition,
we may not be able to expand and upgrade our systems and network hardware and software capabilities to accommodate
significant unexpected increased or peak use. If we are unable to appropriately upgrade our systems and network hardware
and software in a timely manner, our operations and processes may be temporarily disrupted.

Our efforts to expand capacity may not produce the operational and financial results for which those investments were
intended.

As we have grown to serve more schools, students and families in an increasing number of states and countries,
we have invested in infrastructure systems and technology to keep pace such as new communication systems, enterprise
hardware and software systems. In the absence of compatible business processes, adequate employee training, integration
with other dependent systems, and sufficient staffing, this expanded capacity alone may not result in improved
performance or outcomes.

We may be unable to keep pace with changes in our industry and advancements in technology as our business and
market strategy evolves.

As changes in our industry occur or macroeconomic conditions fluctuate we may need to adjust our business
strategies or find it necessary to restructure our operations or businesses, which could lead to changes in our cost structure,

the need to write down the value of assets, or impact our profitability. We also make investments in existing or new
businesses, including investments in technology and expansion of our business lines. These investments may have
short-term returns that are negative or less than expected and the ultimate business prospects of the business may be
uncertain.

As our business and market strategy evolves, we also will need to respond to technological advances and emerging
industry standards in a cost-effective and timely manner in order to remain competitive, such as the ubiquitous use of
tablets for public school applications, adaptive learning technologies, and web accessibility standards. The need to respond
to technological changes may require us to make substantial, unanticipated expenditures. There can be no assurance that
we will be able to respond successfully to technological change.

We may be unable to attract and retain key executives and skilled employees, and because our employees are located
throughout the United States, we may incur additional compliance and litigation costs that could adversely impact our
business, financial condition and our results of operations.

Our success depends in large part on continued employment of senior management and key personnel who can
effectively operate our business, which is necessary in the highly regulated public education sector involving a publicly
traded for-profit company. This complexity requires us to attract and retain experienced executive management and
employees with specialized skills and knowledge across many disciplines. If any of these employees leave us and we fail
to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced
professionals on acceptable terms, our business, financial condition and results of operations could be adversely affected.

Our success also depends on our having highly trained financial, technical, recruiting, sales and marketing
personnel. We will need to continue to hire additional personnel as our business grows. A shortage in the number of people
with these skills or our failure to attract them to our Company could impede our ability to increase revenues from our
existing products and services, ensure full compliance with federal and state regulations, launch new product offerings,
and would have an adverse effect on our business and financial results.

We are subject to the Fair Labor Standards Act and other state and federal employment laws. These laws govern
such matters as minimum wage, overtime, leave, and other working conditions that can increase our labor costs or subject
us to liabilities to our employees. In addition, many state and local jurisdictions are adopting their own laws, such as paid
sick leave, to address conditions of employment not covered by federal law and/or to provide additional rights and benefits
to employees. These developments and disparate laws could increase our costs of doing business, lead to litigation, or have
a material adverse effect on our business, financial condition and results of operations.

We may need additional capital in the future, but there is no assurance that funds will be available on acceptable terms.

We may need to raise additional funds in order to achieve growth or fund other business initiatives. This financing
may not be available in sufficient amounts or on terms acceptable to us and may be dilutive to existing stockholders.
Additionally, any securities issued to raise funds may have rights, preferences or privileges senior to those of existing
stockholders. If adequate funds are not available or are not available on acceptable terms, our ability to expand, develop
or enhance services or products, or respond to competitive pressures will be limited.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters is located in approximately 23,000 square feet of office space in Reston, Virginia. The facility
is under a lease that expires in July 2033. In addition, we lease approximately 552,000 square feet in multiple locations
throughout the United States under individual leases that expire between July 2022 and August 2030.

ITEM 3. LEGAL PROCEEDINGS

See Item 8 of Part II, “Financial Statements and Supplementary Data – Note 10 – Commitments and Contingencies -

Litigation.”

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND

ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock, par value $0.0001 per share, is traded on the New York Stock Exchange (the “NYSE”) under

the symbol “LRN.” As of July 29, 2022, there were 305 registered holders of our common stock.

Stock Performance Graph

The graph below compares the cumulative return of holders of Stride, Inc.’s common stock with the cumulative
returns of the S&P 500 index, the NASDAQ Composite Index, the Russell 2000 Index and our Peer Group Index, which
is composed of 2U, Inc., Adtalem Global Education Inc., American Public Education Inc., Perdoceo Education
Corporation, Chegg, Inc., Grand Canyon Education Inc., Udemy, Inc., Pearson PLC, Strategic Education Inc., and
Coursera, Inc. The graph assumes that the value of the investment in our common stock in each index (including
reinvestment of dividends) was $100 on June 30, 2017 and tracks it through June 30, 2022. All prices reflect closing prices
on the last day of trading at the end of each calendar quarter.

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(1)(2)

Among Stride, Inc., S&P 500 Index, NASDAQ Composite Index, Russell 2000 Index and Peer Group Index

(cid:100)(cid:381)(cid:410)(cid:258)(cid:367)(cid:3)(cid:90)(cid:286)(cid:410)(cid:437)(cid:396)(cid:374)(cid:3)(cid:58)(cid:437)(cid:374)(cid:286)(cid:3)(cid:1006)(cid:1004)(cid:1005)(cid:1011) (cid:882) (cid:58)(cid:437)(cid:374)(cid:286)(cid:3)(cid:1006)(cid:1004)(cid:1006)(cid:1006)

(cid:396)
(cid:258)

(cid:367)
(cid:367)

(cid:381)
(cid:24)

(cid:62)(cid:90)(cid:69)

(cid:87)(cid:286)(cid:286)(cid:396)(cid:3)(cid:39)(cid:396)(cid:381)(cid:437)(cid:393)(cid:3)(cid:47)(cid:374)(cid:282)(cid:286)(cid:454)

(cid:94)(cid:920)(cid:87)(cid:3)(cid:1009)(cid:1004)(cid:1004)

(cid:69)(cid:258)(cid:400)(cid:282)(cid:258)(cid:395)(cid:3)(cid:18)(cid:381)(cid:373)(cid:393)(cid:381)(cid:400)(cid:349)(cid:410)(cid:286)

(cid:90)(cid:437)(cid:400)(cid:400)(cid:286)(cid:367)(cid:367)(cid:3)(cid:1006)(cid:1004)(cid:1004)(cid:1004)

(cid:1006)(cid:1009)(cid:1004)(cid:856)(cid:1004)(cid:1004)

(cid:1006)(cid:1006)(cid:1004)(cid:856)(cid:1004)(cid:1004)

(cid:1005)(cid:1013)(cid:1004)(cid:856)(cid:1004)(cid:1004)

(cid:1005)(cid:1010)(cid:1004)(cid:856)(cid:1004)(cid:1004)

(cid:1005)(cid:1007)(cid:1004)(cid:856)(cid:1004)(cid:1004)

(cid:1005)(cid:1004)(cid:1004)(cid:856)(cid:1004)(cid:1004)

(cid:1011)(cid:1004)(cid:856)(cid:1004)(cid:1004)

(cid:1010)(cid:876)(cid:1007)(cid:1004)(cid:876)(cid:1006)(cid:1004)(cid:1005)(cid:1011)

(cid:1010)(cid:876)(cid:1007)(cid:1004)(cid:876)(cid:1006)(cid:1004)(cid:1005)(cid:1012)

(cid:1010)(cid:876)(cid:1007)(cid:1004)(cid:876)(cid:1006)(cid:1004)(cid:1005)(cid:1013)

(cid:1010)(cid:876)(cid:1007)(cid:1004)(cid:876)(cid:1006)(cid:1004)(cid:1006)(cid:1004)

(cid:1010)(cid:876)(cid:1007)(cid:1004)(cid:876)(cid:1006)(cid:1004)(cid:1006)(cid:1005)

(cid:1010)(cid:876)(cid:1007)(cid:1004)(cid:876)(cid:1006)(cid:1004)(cid:1006)(cid:1006)

LRN
Peer Group Index
S&P 500
Nasdaq Composite
Russell 2000

30-Jun-17
100
100
100
100
100

30-Jun-18
93
141
115
125
121

30-Jun-19
168
144
127
136
120

30-Jun-20
169
151
136
164
121

30-Jun-21 30-Jun-22
221
110
160
179
145

195
154
171
203
173

(1) The information presented above in the stock performance graph shall not be deemed “soliciting material” or to be
“filed” with the SEC or subject to Regulation 14A or 14C, except to the extent that we subsequently specifically

request that such information be treated as soliciting material or specifically incorporate it by reference into a filing
under the Securities Act of 1933, as amended (the “Securities Act”), or a filing under the Exchange Act.

(2) The stock price performance shown on the graph is not necessarily indicative of future price performance. Information
used in the graph was obtained from a source we believe to be reliable, but we do not assume responsibility for any
errors or omissions in such information.

Dividend Policy

We have never declared or paid any cash dividends on our common stock and we currently do not anticipate
paying any cash dividends for the foreseeable future. Instead, we anticipate that all of our earnings on our common stock
will be used to provide working capital, to support our operations, and to finance the growth and development of our
business, including potentially the acquisition of, or investment in, businesses, technologies or products that complement
our existing business. Any future determination relating to dividend policy will be made at the discretion of our Board of
Directors and will depend on a number of factors, including, but not limited to, our future earnings, capital requirements,
financial condition, future prospects, and applicable Delaware law, which provides that dividends are only payable out of
surplus or current net profits and other factors our Board of Directors might deem relevant.

ITEM 6. RESERVED

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
contains certain forward-looking statements within the meaning of Section 21E of the Exchange Act. 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 this Annual 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 consolidated financial statements and
related notes included elsewhere in this Annual Report. The following overview provides a summary of the sections
included in our MD&A:

(cid:120)

Executive Summary—a general description of our business and key highlights of the year ended
June 30, 2022.

(cid:120) Key Aspects and Trends of Our Operations—a discussion of items and trends that may impact our business

in the upcoming year.

(cid:120) Critical Accounting Estimates—a discussion of critical accounting estimates requiring judgments and the

application of critical accounting policies.

(cid:120)

Results of Operations—an analysis of our results of operations in our consolidated financial statements.

Liquidity and Capital Resources—an analysis of cash flows, sources and uses of cash, commitments and
contingencies, seasonality in the results of our operations, and quantitative and qualitative disclosures about
market risk.

Executive Summary

Our solutions address two growing markets: General Education and Career Learning.

General Education

Career Learning

(cid:120) School-as-a-service
(cid:120) Stride Private Schools

(cid:120) Stride Career Prep school-as-a-service
(cid:120) Learning Solutions Career Learning software and

(cid:120) Learning Solutions software and services sales

services sales
(cid:120) Adult Learning

Products and services for the General Education market are predominantly focused on core subjects, including
math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of
knowledge. Programs utilizing General Education products and services are for students that are not specializing in any
particular curriculum or course of study. These programs provide an alternative to traditional school options and address
a range of student needs including, safety concerns, increased academic support, scheduling flexibility, physical/health
restrictions or advanced learning. Products and services are sold as a comprehensive school-as-a-service offering or à la
carte.

Career Learning products and services are focused on developing skills to enter and succeed in careers in high-
growth, in-demand industries—including information technology, health care and general business. We provide middle
and high school students with Career Learning programs that complement their core general education coursework in
math, English, science and history. Stride offers multiple career pathways supported by a diverse catalog of Career
Learning courses. The middle school program exposes students to a variety of career options and introduces career skill
development. In high school, students may engage in industry content pathway courses, project-based learning in virtual
teams, and career development services. High school students also have the opportunity to progress toward certifications,
connect with industry professionals, earn college credits while in high school, and participate in job shadowing and/or
work-based learning experiences that are required to succeed in today’s digital, tech-enabled economy. A student enrolled
in a school that offers Stride’s General Education program may elect to take Career Learning courses, but that student and
the associated revenue is reported as a General Education enrollment and General Education revenue. A student and the
associated revenue is counted as a Career Learning enrollment or Career Learning revenue only if the student is enrolled
in a Career Learning program or school. Like General Education products and services, the products and services for the
Career Learning market are sold as a comprehensive school-as-a-service offering or à la carte. We also offer focused post-
secondary career learning programs to adult learners, through Galvanize, Inc. (“Galvanize”), Tech Elevator, Inc. (“Tech
Elevator”), and MedCerts, LLC (“MedCerts”). These include skills training in the software engineering, healthcare, and
medical fields, as well as providing staffing and talent development services to employers. These programs are offered
directly to consumers, as well as to employers and government agencies.

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.
During the year ended June 30, 2022, revenues increased to $1,686.7 million from $1,536.8 million in the prior year, an
increase of 9.8%. Over the same period, operating income increased to $156.6 million from $110.5 million in the prior
year, an increase of 41.7%. Increases in operating income are driven by revenue growth, increases in gross margin and
reductions in selling, general, and administrative expenses. 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 year ended
June 30, 2022 was 185.1 thousand, a decrease of 1.2 thousand, or 0.6%, over the prior year.

While the long-term impact of the global emergence of COVID-19 is not estimable or determinable, in late fiscal

year 2020, we experienced an increase in demand for our products and services.

Environmental, Social and Governance

As overseers of risk and stewards of long-term enterprise value, Stride’s Board of Directors plays a vital role in
assessing our organization’s environmental and social impacts. They are also responsible for understanding the potential
impact and related risks of environmental, social and governance (“ESG”) issues on the organization’s operating model.
Our Board and management are committed to identifying those ESG issues most likely to impact business operations and
growth. We craft policies that are appropriate for our industry and that are of concern to our employees, investors,
customers and other key stakeholders. Our Board ensures that the Company’s leaders have ample opportunity to leverage
ESG for the long-term good of the organization, its stakeholders, and society. Each Committee of the Board monitors ESG
efforts in their respective areas, with the Nominating and Governance Committee coordinating across all Committees.

Since our inception twenty years ago, we have removed barriers that impact academic equity. We provide high-
quality education for anyone—particularly those in underserved communities—as a means to foster economic
empowerment and address societal inequities from kindergarten all the way through college and career readiness. We
recently reinforced our commitment in this area by launching several initiatives including initially offering scholarships
to advance education and career opportunities for black students, expanding career pathways in socially responsible law
enforcement and increasing employment of black teachers at Stride-powered schools. We are also developing interactive,
modular courses focused on racial equity and social justice that are being made available for free to every public school.

Among the many ESG issues we support within the Company, we endeavor to promote diversity and inclusion
across every aspect of the organization. We sponsor employee resource groups to provide support for female, minority,
differently abled, LGBTQ+, and veteran employees and support employee volunteer efforts. Our commitment is evident
in the make-up of our leadership team. We have more minorities in executive management and more women in executive
management than the representative population. Importantly, our Board of Directors is also diverse with female, Hispanic,
and African American members.

Our commitment to ESG initiatives is an endeavor both the Board and management undertake for the general

betterment of those both inside and outside of our Company.

The nature of our business supports environmental sustainability. Most of our employees work from home and
most students at Stride-powered schools attend virtual classes, even prior to the COVID-19 crisis, reducing the carbon
output from commuting in cars or buses. Our online curriculum reduces the need for paper. Our meetings are most often
held virtually using digital first presentations rather than paper.

Key Aspects and Trends of Our Operations

Revenues—Overview

We generate a significant portion of our revenues from the sale of curriculum, administration support and
technology services to virtual and blended public schools. We anticipate that these revenues will continue to represent the
majority of our total revenues over the next several years. However, we also expect revenues in other aspects of our
business to continue to increase as we execute on our growth strategy. Our growth strategy includes increasing revenues
in other distribution channels, expanding our adult learning training programs, adding enrollments in our private schools,
and expanding our learning solutions sales channel. Combined revenues from these other sectors were significantly smaller
than those from the virtual and blended public schools we served in the year ended June 30, 2022. Our success in executing
our strategies will impact future growth. We have several sales channels from which we generate revenues that are
discussed in more detail below.

Factors affecting our revenues include:

(i)

(ii)

the number of enrollments;

the mix of enrollments across grades and states;

(iii)

administrative services and curriculum sales provided to the schools and school districts;

(iv)

state or district per student funding levels and attendance requirements;

(v)

prices for our products and services;

(vi)

growth in our adult learning programs; and

(vii)

revenues from new initiatives, mergers and acquisitions.

Virtual and Blended Schools

The virtual and blended schools we serve offer an integrated package of systems, services, products, and
professional expertise that we administer to support a virtual or blended public school. Customers of these programs can
obtain the administrative support, information technology, academic support services, online curriculum, learning system
platforms and instructional services under the terms of a negotiated service and product agreement. We provide our school-
as-a-service offerings to virtual and blended public charter schools and school districts.

We define an enrollment as any student enrolled in a full service virtual or blended public school where we
provide a combination of curriculum, technology, instructional and support services inclusive of administrative support.
Generally, students will take four to six courses, except for some kindergarten students who may participate in half-day
programs. We count each half-day kindergarten student as an enrollment. School sessions generally begin in August or
September and end in May or June. To ensure that all schools are reflected in our measure of enrollments, we consider the
number of students on September 30th to be our opening enrollment level, and the number of students enrolled on the last
day of May to be our ending enrollment level. For each period, average enrollments represent the average of the month-end
enrollment levels for each school month in the period. We continually evaluate our enrollment levels by state, by school
and by grade. We track new student enrollments and withdrawals throughout the year.

We believe that our revenue growth from enrollments depends upon the following:

(cid:120)

the number of states and school districts in which we operate;

the mix of students served;

the restrictive terms of local laws or regulations, including enrollment caps;

the appeal of our curriculum and instructional model to students and families;

the specific school or school district requirements including credit recovery or special needs;

the effectiveness of our program in delivering favorable academic outcomes;

the quality of the teachers working in the schools we serve;

the effectiveness of our marketing and recruiting programs to attract new enrollments; and

retention of students through successive grade levels.

We continually evaluate our trends in revenues by monitoring the number of student enrollments in total, by state,
by school and by grade, assessing the impact of changes in school funding levels, school mix (distribution of enrollments
by school), changes in state funding rates and higher utilization in federal and state restricted funding per student, and the
pricing of our curriculum and educational services.

Enrollments in virtual and blended schools on average generate substantially more revenues than enrollments

served through our other sales channels where we provide limited or no administrative services.

Learning Solutions

Our Learning Solutions sales channel distributes our software and services to schools and school districts across
the U.S. Over the past few years, public schools and school districts have been increasingly adopting online solutions to
augment teaching practices, launch new learning models, cost-effectively expand course offerings, provide schedule
flexibility, improve student engagement, increase graduation rates, replace textbooks, and retain students. State education

funds traditionally allocated for textbook and print materials have also been authorized for the purchase of digital content,
including online courses, and in some cases mandated access to online courses. With the impact of the COVID-19
pandemic on education, school districts are seeking more complete virtual learning solutions in addition to curriculum,
including virtual instructional delivery, scheduling, attendance monitoring for virtual instructional sessions, teacher
professional development, consulting support in effective virtual instruction, and special education accommodations.
Additionally, districts are seeking support for implementations that blend virtual and in-person instruction.

To address the growing need for digital solutions and the recently emerging need for comprehensive virtual
solutions, our Learning Solutions team provides curriculum and technology solutions, packaged in a portfolio of flexible
learning and delivery models mapped to specific student and/or district needs. This portfolio approach provides a
continuum of delivery models, from full-time programs to individual course sales and supplemental options that can be
used in traditional classrooms to differentiate instruction. Our Learning Solutions team strives to partner with public
schools and school districts, primarily in the U.S., to provide more options and better tools to empower teachers to improve
student achievement through personalized learning in traditional, blended and online learning environments and to provide
comprehensive support for teachers and administrators to deliver effective virtual and blended instructions.

Sales opportunities are driven by a number of factors in a diverse customer population, which determine the

deliverable and price. These factors include:

(cid:120)

Type of Customer—A customer can be a public school district, private school, charter school, early childhood
learning center or corporate partner.

(cid:120) Curriculum Needs—We sell our curriculum solutions based on the scope of the customer need, and a solution
is generally purchased as end-user access to a complete catalog, individual course or supplemental content
title.

(cid:120)

License Options—Depending on the scope of the solution, a license can be purchased for individual course
enrollments, annual seat, school or district-wide site licenses or a perpetual license (a prepaid lifetime
license). We may charge incrementally if we are hosting the solution.

(cid:120) Hosting—Customers may host curricula themselves or license our hosted solution. We are able to track all
students for customers who use our hosted solution. However, more often in large-scale, district-wide
implementations, a customer may choose to host the curriculum, and in that case, we have no visibility of
individual student usage for counting enrollments.

(cid:120)

Services Menu—Instructional services may be provided and priced per-enrollment or bundled in the overall
price of the solution. Additional services, including professional development, title maintenance and support
may also be provided and are priced based on the scope of services.

Private Schools

Private schools are schools where tuition is paid directly by the family of the student. We receive no public funds
for students in our private schools. We operate three accredited private online schools at differing price points and service
levels. We define an enrollment as any student enrolled in one of these schools where we provide a combination of
curriculum, technology, instructional and support services inclusive of administrative support. Our revenues are derived
from tuition receipts that are a function of course enrollments and program price. In some circumstances, a third-party
school may elect to enroll one of its students in a Stride private school course as a supplement to the student’s regular
on-campus instruction. In such cases, the third-party school may pay the Stride private school tuition. We have entered
into agreements that enable us to distribute our products and services to our international school partners who use our
courses to provide electives offerings and dual diploma programs.

We believe our revenue growth depends primarily on the recruitment of students into our programs through
effective marketing and word-of-mouth referral based on the quality of our service. In addition, through high service
quality, we seek to retain existing students and increase the total number of courses each student takes with us. In some
cases, students return each summer and take only one course. In other cases, students choose a Stride private school as
their principal form of education and may stay for many years. The flexibility of our programs, the quality of our
curriculum and teaching, and the student community features lead to customer satisfaction and therefore, retention.

Consumer Sales

We also sell individual K-8 online courses and supplemental educational products directly to families. These
purchasers desire to educate their children as homeschoolers, outside of the traditional school system or to supplement
their child’s existing public or private school education without the aid of an online teacher. Customers of our consumer
products have the option of purchasing a complete grade-level curriculum for grades K-8, individual courses, or a variety
of other supplemental products, covering various subjects depending on their child’s needs. Typical applications include
summer school course work, home-schooling and educational supplements.

Similar to our private schools, we believe our revenue growth depends primarily on the recruitment of students

into our programs through effective marketing and word-of-mouth referral based on the quality of our service.

Adult Learning

We offer adult learning training programs through Galvanize, Tech Elevator, and MedCerts, which provide
programs that address the skills gap facing companies in the information technology and health care sectors. Galvanize
and Tech Elevator offer in-person and remote immersive full-time programs designed for adult learners looking to advance
their technology careers by providing such learners with skills and real-world experiences. These programs are offered in
software engineering. MedCerts provides self-paced, fully online structured training programs that lead to certifications in
the health care field. In many cases, Galvanize, Tech Elevator, and MedCerts work directly with a company to create a
customized, tailored education plan to help the company reach its goals and train its employees according to such plan.

We believe that revenue growth in our adult learning brands depends on our ability to identify and attract
prospective learners through various marketing channels. Continued growth in these brands will also require that we
demonstrate success in placing these learners in jobs following their completion of the program.

Instructional Costs and Services Expenses

Instructional costs and services expenses include expenses directly attributable to the educational products and
services we provide. The public schools we administer are the primary drivers of these costs, including teacher and
administrator salaries and benefits and expenses of related support services. We also employ teachers and administrators
for instruction and oversight in Learning Solutions and Private Schools. Instructional costs also include fulfillment costs
of student textbooks and materials, depreciation and reclamation costs of computers provided for student use, the cost of
any third-party online courses and the amortization of capitalized curriculum and related systems. Our instructional costs
are variable and are based directly on our number of schools and enrollments.

Our high school offering requires increased instructional costs as a percentage of revenues compared to our
kindergarten to 8th grade offering. This is due to the following: (i) generally lower student-to-teacher ratios; (ii) higher
compensation costs for some teaching positions requiring subject-matter expertise; (iii) ancillary costs for required student
support services, including college placement, SAT preparation and guidance counseling; (iv) use of third-party courses
to augment our proprietary curriculum; and (v) use of a third-party learning management system to service high school
students. Over time, we may partially offset these factors by obtaining productivity gains in our high school instructional
model, replacing third-party high school courses with proprietary content, replacing our third-party learning management
system with another third-party system, leveraging our school infrastructure and obtaining purchasing economies of scale.

We have deployed and are continuing to develop new delivery models, including blended schools, where students
receive limited face-to-face instruction in a learning center to complement their online instruction, and other programs that
utilize brick and mortar facilities. The maintenance, management and operations of these facilities necessitate additional
costs, which are generally not required to operate typical virtual public schools. We are pursuing expansion into new states
for both virtual public and other specialized charter schools. If we are successful, we will incur start-up costs and other
expenses associated with the initial launch of a school, including the funding of building leases and leasehold
improvements.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses include the salaries and benefits of employees engaged in business
development, public affairs, sales and marketing, and administrative functions, and transaction and due diligence expenses
related to mergers and acquisitions.

Also included are product development expenses which include research and development costs and overhead
costs associated with the management of both our curriculum development and internal systems development teams. In
addition, product development expenses include the amortization of internal systems. We measure and track our product
development expenditures on a per course or project basis to measure and assess our development efficiency. In addition,
we monitor employee utilization rates to evaluate our workforce efficiency. We plan to continue to invest in additional
curriculum development and related software in the future. We capitalize selected costs incurred to develop our curriculum,
beginning with application development, through production and testing into capitalized curriculum development costs.
We capitalize certain costs incurred to develop internal systems into capitalized software development costs.

Critical Accounting Estimates

The discussion of our financial condition and results of operations is based upon our consolidated financial
statements, which have been prepared in accordance with U.S. GAAP. In the preparation of our consolidated financial
statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as the related disclosures of contingent assets and liabilities. We base our estimates on
historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The
results of our analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions, and the impact of such differences may be material to our consolidated financial statements. Our critical
accounting policies have been discussed with the Audit Committee of our Board of Directors. We believe that the following
critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated
financial statements:

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an
amount that reflects the consideration we expect to be entitled to in exchange for those goods or services using the
following steps:

(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)

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 we provide 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, business, and health services, for students in middle school through
high school and adult learners.

The majority of our contracts are with the following types of customers:

(cid:120)

(cid:120)
(cid:120)

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

We provide 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 our 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.

We generate 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 our 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

(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120) 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, we estimate 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. We review its estimates of funding periodically, and updates as 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 our results of operations.
Since the end of the school year coincides with the end of our fiscal year, annual revenues are generally based on actual
school funding and actual costs incurred (including costs for our services to the schools plus other costs the schools may
incur). Our schools’ 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 current and prior periods. For the years ended June 30, 2021, 2020 and
2019, the Company’s aggregate funding estimates differed from actual reimbursements impacting total reported revenue
by approximately 1.4%, (0.1)%, and 0.6%, respectively.

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 we provide products and services to schools, we are responsible for substantially all
of the expenses incurred by the school and have 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 our
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 we
collect from the school. A school net operating loss in one year does not necessarily mean we anticipate losing money on
the entire contract with the school. However, a school’s net operating loss may reduce our ability to collect its management
fees in full and recognized revenues are constrained to reflect the expected cash collections from such schools. We record
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.

Subscription-based Contracts

We provide 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, we contract with individual customers who have access for one 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. We recognize
these revenues pro rata over the maximum term of the customer contract based on the defined contract price.

Enterprise Contracts

We provide job training over a specified contract period to enterprises. Each of these contracts are considered to
be one performance obligation. We recognize these revenues based on the number of students trained during the term of
the contract based on the defined contract price.

Income Taxes

Accounting for income taxes prescribes the use of the asset and liability method to compute the differences
between the tax bases of assets and liabilities and the related financial amounts, using currently enacted tax laws. If
necessary, a valuation allowance is established, based on the weight of available evidence, to reduce deferred tax assets to
the amount that is more likely than not to be realized. Realization of the deferred tax assets, net of deferred tax liabilities,
is principally dependent upon achievement of sufficient future taxable income. We exercise significant judgment in
determining our provisions for income taxes, our deferred tax assets and liabilities and our future taxable income for
purposes of assessing our ability to utilize any future tax benefit from our deferred tax assets.

Although we believe that our tax estimates are reasonable, the ultimate tax determination involves significant
judgments that could become subject to examination by tax authorities in the ordinary course of business. We periodically
assess the likelihood of adverse outcomes resulting from these examinations to determine the impact on our deferred taxes
and income tax liabilities and the adequacy of our provision for income taxes. Changes in income tax legislation, statutory
income tax rates or future taxable income levels, among other things, could materially impact our valuation of income tax
assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods.

We have a valuation allowance on net deferred tax assets of $6.7 million and $5.0 million as of June 30, 2022

and 2021, respectively, for the amount that will likely not be realized.

Results of Operations

Impacts of COVID-19 on Stride’s Business

While the long-term impact of the global emergence of COVID-19 is not estimable or determinable, in late fiscal

year 2020, we experienced an increase in demand for our products and services.

We continue to conduct business as usual with some modifications to employee travel, employee work locations,
and cancellation of certain events. We will continue to actively monitor the situation and may take further actions that alter
our business operations as may be required by federal, state or local authorities or that we determine are in the best interests
of our employees, customers, partners, suppliers and stockholders. It is not clear what the potential effects any such
alterations or modifications may have on our business, including the effects on our customers and prospects, or on our
long-term financial results.

Lines of Revenue

We operate in one operating and reportable business segment as a technology-based education company
providing proprietary and third-party curriculum, software systems and educational services designed to facilitate
individualized learning. The Chief Operating Decision Maker evaluates profitability based on consolidated results. We

have two lines of revenue: (i) General Education and (ii) Career Learning.

Enrollment Data

The following table sets forth total enrollment data for students in our General Education and Career Learning
lines of revenue. Enrollments for General Education and Career Learning only include those students in full service public
or private programs where Stride provides a combination of curriculum, technology, instructional and support services
inclusive of administrative support. No enrollments are included in Career Learning for Galvanize, Tech Elevator or
MedCerts. This data includes enrollments for which Stride receives no public funding or revenue.

If the mix of enrollments changes, our revenues will be impacted to the extent the average revenue per enrollment
is significantly different. We do not award or permit incentive compensation to be paid to our public school program
enrollment staff or contractors based on the number of students enrolled.

The following represents our current enrollment for each of the periods indicated:

(cid:3)

2022

Year Ended June 30,
2021

(cid:3)

2022 / 2021

2021 / 2020

2020

(cid:3) Change
(cid:3)
(In thousands, except percentages)

(cid:3)Change % (cid:3) Change

(cid:3)Change %

General Education (1)
Career Learning (1) (2)
Total Enrollment

143.2
41.9
185.1

156.7
29.6
186.3

107.8
13.1
120.9

(13.5)
12.3
(1.2)

(8.6%)
41.6%
(0.6%)

48.9
16.5
65.4

45.4%
126.0%
54.1%

(1) Enrollments reported for the first quarter are equal to the official count date number, which was September 30, 2021

for the first quarter of fiscal year 2022 and October 1, 2020 for the first quarter of fiscal year 2021.

(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.

The following represents our current revenues for each of the periods indicated:

2022

Year Ended June 30,
2021
(cid:3)

(cid:3)

2020

(cid:3)
(In thousands, except percentages)

Change 2022 / 2021
(cid:3) %

Change 2021 / 2020
(cid:3) %

(cid:3)

General Education
Career Learning

Middle - High School
Adult

Total Career Learning
Total Revenues

$ 1,273,783

$ 1,280,199

$ 933,809

$ (6,416)

(0.5%) $ 346,390

37.1%

321,416
91,467
412,883
$ 1,686,666

200,774
55,787
256,561
$ 1,536,760

96,003
10,953
106,956
$ 1,040,765

120,642
35,680
156,322
$ 149,906

60.1%
64.0%
60.9%

104,771
44,834
149,605
9.8% $ 495,995

109.1%
409.3%
139.9%
47.7%

Products and Services

Stride has invested over $600 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. Through our subsidiaries Galvanize, Tech Elevator and MedCerts, we have added 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. A la carte offerings can provide curriculum
and content hosting on customers’ learning management systems, or integration with customers’ student information
systems.

Instructional Services – We offer a broad range of instructional services that includes customer support for
instructional teams, including recruitment of state certified teachers, training in research-based online instruction methods
and Stride systems, oversight and evaluation services, and ongoing professional development. Stride also provides training
options to support teachers and parents to meet students’ learning needs. Stride’s range of training options are designed to
enhance skills needed to teach using an online learning platform, and include hands-on training, on-demand courses, and
support materials.

Support Services – We offer a broad range of support services, including marketing and enrollment, supporting
prospective students through the admission process, assessment management, administrative support (e.g., budget
proposals, financial reporting, and student data reporting), and technology and materials support (e.g., provisioning of
student computers, offline learning kits, internet access and technology support services).

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:

Year Ended June 30,

Revenues

Instructional costs and services

Gross margin

Selling, general, and
administrative expenses
Income from operations

Interest income (expense), net
Other income (expense), net
Income before income taxes
and income (loss) from equity
method investments
Income tax expense
Income (loss) from equity
method investments

Net income attributable to
common stockholders

2022

2021
(In thousands, except percentages)
$ 1,686,666 100.0 %(cid:3)(cid:3)$ 1,536,760 100.0 % $ 1,040,765 100.0 %

2020

1,090,191
596,475

439,847
156,628
(8,277)
(1,277)

147,074
(40,088)

144

64.6
35.4

26.1
9.3
(0.5)
(0.1)

8.7
(2.4)

0.0

1,001,860
534,900

424,444
110,456
(17,979)
2,829

95,306
(24,539)

684

65.2
34.8

27.6
7.2
(1.2)
0.2

6.2
(1.6)

0.0

693,232
347,533

315,076
32,457
698
272

33,427
(8,541)

(380)

66.6
33.4

30.3
3.1
0.1
0.0

3.2
(0.8)

(0.0)

107,130

6.4 % $

71,451

4.6 % $

24,506

2.4 %

Comparison of the Years Ended June 30, 2022 and 2021

Revenues. Our revenues for the year ended June 30, 2022(cid:3) were $1,686.7 million, representing an increase of
$149.9 million, or 9.8%, from $1,536.8 million for the year ended June 30, 2021. General Education revenues decreased
$6.4 million, or 0.5%, year over year. The decrease in General Education revenues was primarily due to the 8.6% decrease
in enrollments, and changes to school mix (distribution of enrollments by school).(cid:3)Career Learning revenues increased
$156.3 million, or 60.9%, primarily due to a 41.6% increase in enrollments, school mix, as well as from the acquisition of
MedCerts and Tech Elevator.(cid:3)

Instructional costs and services expenses. Instructional costs and services expenses for the year ended
June 30, 2022 were $1,090.2 million, representing an increase of $88.3 million, or 8.8%, from $1,001.9 million for the
year ended June 30, 2021. This increase in expense was due to hiring of personnel in growth states and salary increases.
Instructional costs and services expenses were 64.6% of revenues during the year ended June 30, 2022, a decrease from
65.2% for the year ended June 30, 2021.

Selling, general, and administrative expenses. Selling, general and administrative expenses for the year ended
June 30, 2022 were $439.8 million, representing an increase of $15.4 million, or 3.6% from $424.4 million for the year
ended June 30, 2021. The increase was primarily due to an increase of $9.1 million in bad debt expense resulting primarily
from reserves related to our investment in Tallo, Inc., $8.7 million in licensing fees, and $8.0 million in professional
services and marketing expenses, partially offset by a $7.8 million decrease in personnel and related benefit costs,
including stock-based compensation. Selling, general, and administrative expenses were 26.1% of revenues during the
year ended June 30, 2022, a decrease from 27.6% for the year ended June 30, 2021.

Interest income (expense), net. Net interest expense for the year ended June 30, 2022 was $8.3 million as
compared to $18.0 million in the year ended June 30, 2021. The decrease in net interest expense was primarily due to
adoption of ASU 2020-06 in fiscal year 2022 which resulted in the elimination of interest expense related to the debt
discount of the Convertible Senior Notes.

Income tax expense. Income tax expense was $40.1 million for the year ended June 30, 2022, or 27.2% of income
before taxes, as compared to $24.5 million, or 25.6% of income before taxes for the year ended June 30, 2021. The increase
in the effective income tax rate for the year ended June 30, 2022, as compared to the effective tax rate for the year ended
June 30, 2021, was primarily due to the increase in the amount of non-deductible compensation, which was partially offset

by the increase in excess tax benefit of stock-based compensation.

Comparison of the Years Ended June 30, 2021 and 2020

Revenues. Our revenues for the year ended June 30, 2021 were $1,536.8 million, representing an increase of
$496.0 million, or 47.7%, from $1,040.8 million for the year ended June 30, 2020. General Education revenues increased
$346.4 million, or 37.1%, year over year. The increase in General Education revenues was primarily due to the 45.4%
increase in enrollments, and changes to school mix (distribution of enrollments by school). Career Learning revenues
increased $149.6 million, or 139.9%, primarily due to a 126.0% increase in enrollments, school mix, as well as from the
acquisitions of Galvanize, MedCerts and Tech Elevator.

Instructional costs and services expenses. Instructional costs and services expenses for the year ended
June 30, 2021 were $1,001.9 million, representing an increase of $308.7 million, or 44.5%, from $693.2 million for the
year ended June 30, 2020. This increase in expense was primarily associated with the incremental personnel and related
benefit costs associated with supporting higher enrollments, as well as costs associated with serving Galvanize’s
customers. Instructional costs and services expenses were 65.2% of revenues during the year ended June 30, 2021, a
decrease from 66.6% for the year ended June 30, 2020.

Selling, general, and administrative expenses. Selling, general, and administrative expenses for the year ended
June 30, 2021 were $424.4 million, representing an increase of $109.3 million, or 34.7%, from $315.1 million for the year
ended June 30, 2020. This increase was primarily due to an increase of $39.9 million in personnel and related benefit costs,
$26.4 million in professional services expenses, $18.8 million in licensing fees, and $15.7 million in stock-based
compensation. The increase in personnel and related benefit costs was partially related to the additional headcount of
MedCerts and Tech Elevator, as well as a full year of headcount related to Galvanize. Selling, general, and administrative
expenses were 27.6% of revenues during the year ended June 30, 2021, a decrease from 30.3% for the year ended
June 30, 2020.

Income tax expense. Income tax expense was $24.5 million for the year ended June 30, 2021, or 25.6% of income

before taxes, as compared to $8.5 million, or 25.8% of income before taxes for the year ended June 30, 2020.

Discussion of Seasonality of Financial Condition

Certain accounts in our balance sheet are subject to seasonal fluctuations. As our enrollments and revenues grow,
we expect these seasonal trends to be amplified. The bulk of our materials are shipped to students prior to the beginning
of the school year, usually in July or August. In order to prepare for the upcoming school year, we generally build up
inventories during the fourth quarter of our fiscal year. Therefore, inventories tend to be at the highest levels at the end of
our fiscal year. In the first quarter of our fiscal year, inventories tend to decline significantly as materials are shipped to
students. In our fourth quarter, inventory purchases and the extent to which we utilize early payment discounts will impact
the level of accounts payable.

Accounts receivable balances tend to be at the highest levels in the first quarter of our fiscal year as we begin
billing for all enrolled students and our billing arrangements include upfront fees for many of the elements of our offering.
These upfront fees result in seasonal fluctuations to our deferred revenue balances. We routinely monitor state legislative
activity and regulatory proceedings that might impact the funding received by the schools we serve and to the extent
possible, factor potential outcomes into our business planning decisions.

The deferred revenue related to our direct-to-consumer business results from advance payments for twelve month
subscriptions to our online school. These advance payments are amortized over the life of the subscription and tend to be
highest at the end of the fourth quarter and first quarter, when the majority of subscriptions are sold.

Liquidity and Capital Resources

As of June 30, 2022, we had net working capital, or current assets minus current liabilities, of $648.5 million.
Our working capital includes cash and cash equivalents of $389.4 million and accounts receivable of $418.6 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 June 30, 2022.

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
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 has a five-year
term and incorporates 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
is secured by our assets. The Credit Facility agreement allows for an amendment to establish a new benchmark interest
rate when LIBOR is discontinued during the five-year term. As of June 30, 2022, 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 and as of
June 30, 2022, we had no amounts outstanding on the Credit Facility. The Credit Facility also includes a $200.0 million
accordion feature.

We are a lessee under finance lease obligations for student computers and peripherals under loan agreements with
Banc of America Leasing & Capital, LLC (“BALC”). As of June 30, 2022 and 2021, the finance lease liability was $66.3
million and $68.9 million, respectively, with lease interest rates ranging from 1.52% to 3.95%.

We entered into an agreement with BALC in April 2020 for $25.0 million (increased to $41.0 million in July
2020) to provide financing for our leases through March 2021 at varying rates. We entered into additional agreements
during fiscal year 2021 to provide financing of $54.0 million for our student computers and peripherals leases through
October 2022 at varying rates. Individual leases with BALC include 36-month payment terms, fixed rates ranging from
1.52% to 3.95%, and a $1 purchase option at the end of each lease term. We pledged the assets financed to secure the
outstanding leases.

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, borrowing on our Credit Facility and net working capital on hand
will be adequate to finance our ongoing operations for the foreseeable future. In addition, we continue to explore
acquisitions, strategic investments and joint ventures related to our business that we may acquire using cash, stock, debt,
contribution of assets or a combination thereof.

Operating Activities

Net cash provided by operating activities for the year ended June 30, 2022 was $206.9 million compared to $134.2

million for the year ended June 30, 2021. The $72.7 million increase in cash provided by operations between periods was
primarily due to an increase in net income and a lower increase in accounts receivable, partially offset by a decrease in
accrued compensation and benefits and deferred revenue and other liabilities.

Net cash provided by operating activities for the year ended June 30, 2021 was $134.2 million compared to $80.4
million for the year ended June 30, 2020. The $53.8 million increase in cash provided by operations between periods was
primarily due to an increase in net income including non-cash adjustments partially offset by a decrease in working capital
of $56.8 million. The decrease in other assets and liabilities was primarily due to increases in accounts receivable, and
inventory, prepaid expenses and other assets; partially offset by an increase in accounts payable and accrued compensation
and benefits. The increase in accounts receivable was related to the increase in revenue with schools with payment terms
that extend beyond our fiscal year, while the increase in accrued compensation and benefits was related to an increase in
our corporate bonus and accrued salaries.

Net cash provided by operating activities for the year ended June 30, 2020 was $80.4 million compared to $141.6
million for the year ended June 30, 2019. The $61.2 million decrease in cash provided by operations between periods was
primarily due to a decrease in working capital of $63.3 million. The decrease in other assets and liabilities was primarily
due to decreases in accounts payable, as well as increases in accounts receivable, and inventory, prepaid expenses and
other assets.

Investing Activities

Net cash used in investing activities for the years ended June 30, 2022, 2021 and 2020 was $110.8 million,

$165.4 million and $217.4 million, respectively.

Net cash used in investing activities for the year ended June 30, 2022 decreased $54.6 million from the year ended
June 30, 2021. The decrease was primarily due to the acquisitions of MedCerts and Tech Elevator for $71.1 million in
fiscal year 2021, partially offset by an increase in capital expenditures year over year of $15.3 million.

Net cash used in investing activities for the year ended June 30, 2021 decreased $52.0 million from the year ended
June 30, 2020. The decrease was primarily due to the acquisition of Galvanize during the year ended June 30, 2020 being
more than the acquisitions of MedCerts and Tech Elevator during the year ended June 30, 2021 and purchases of
marketable securities of $40.5 million.

Net cash used in investing activities for the year ended June 30, 2020 increased $156.3 million from the year
ended June 30, 2019. The increase was primarily due to the acquisition of Galvanize of $165.0 million, plus working
capital, net of cash.

Financing Activities

Net cash used in financing activities for the year ended June 30, 2022 was $93.3 million. Net cash provided by

financing activities for the years ended June 30, 2021 and 2020 was $204.6 million and $65.6 million, respectively.

Net cash used in financing activities for the year ended June 30, 2022 compared to net cash provided by financing
activities for the year ended June 30, 2021, a decrease of $297.9 million. The decrease was primarily due to the net
proceeds from the issuance of our Notes of $408.6 million, partially offset by capped call purchases related to the Notes
of $60.4 million, the repayment on our Credit Facility of $100.0 million in fiscal year 2021; $22.9 million in deferred
purchase consideration payments related to MedCerts and Tech Elevator in fiscal year 2022; and an increase in the
repurchase of restricted stock for income tax withholding of $37.9 million.

Net cash provided by financing activities for the year ended June 30, 2021 increased $139.0 million from the year
ended June 30, 2020. The increase was primarily due to the net proceeds from the issuance of our Notes of $408.6 million,
partially offset by capped call purchases related to the Notes of $60.4 million and the repayment of our Credit Facility of
$100.0 million. The net increase was partially offset by the net proceeds from our Credit Facility during the year ended
June 30, 2020.

Net cash provided by financing activities for the year ended June 30, 2020 increased $94.6 million from net cash
used in financing activities for the year ended June 30, 2019. The increase from net cash used in financing activities was

primarily due to borrowings from the Credit Facility of $105.0 million partially offset by an increase in the repayment of
finance lease obligations incurred for the acquisition of student computers of $6.6 million.

Recent Accounting Pronouncements

For information regarding, “Recent Accounting Pronouncements,” please refer to Note 3, “Summary of
Significant Accounting Policies,” contained within our consolidated financial statements in Part II, Item 8, of this Annual
Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

At June 30, 2022 and 2021, we had cash and cash equivalents totaling $389.4 million and $386.1 million,
respectively. Our excess cash has been invested in money market funds, government securities, corporate debt securities
and similar investments. At June 30, 2022, a 1% gross increase in interest rates for our variable-interest instruments would
result in a $3.9 million annualized increase in interest income. Additionally, the fair value of our investment portfolio is
subject to changes in market interest rates.

Our short-term debt obligations under our Credit Facility are subject to interest rate exposure. At June 30, 2022,

we had no outstanding balance on our Credit Facility.

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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 243)
Consolidated Balance Sheets as of June 30, 2022 and 2021
Consolidated Statements of Operations for the years ended June 30, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended June 30, 2022, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended June 30, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Schedule II—Valuation and Qualifying Accounts

Page

59
61
62
63
64
65
66
104

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Stride, Inc.
Reston, Virginia

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Stride, Inc. (the “Company”) as of June 30,
2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash
flows for each of the three years in the period ended June 30, 2022, and the related notes and financial statement schedule
listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30,
2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended June 30,
2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the Company's internal control over financial reporting as of June 30, 2022, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) and our report dated August 9, 2022, expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of
accounting for debt as of July 1, 2021, due to the adoption of Accounting Standards Update (“ASU”) No. 2020-06, Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Equity’s Own Equity
(Subtopic 815-40).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenues from Funding-based Contracts

As described in Note 3 to the Company’s consolidated financial statements, for the year ended June 30, 2022,
revenues from funding-based contracts approximated $1.5 billion and contributed to both lines of revenue—General
Education and Career Learning. The computation of funding-based contract revenue from state sources is based upon the
amount of estimated funding expected to be provided by the state where the public school or school district is located.
Total estimated funding from all sources represents the maximum value of revenue to be recognized from funding-based
contracts and is adjusted as necessary for individual school financial deficits and surpluses.

We identified management’s judgments related to revenues from funding-based contracts as a critical audit
matter. The critical input used to calculate state estimated funding is enrollment, which is defined by the state governing
authorities, varies by school and by funding metric, and often requires management to perform complex calculations
subject to the use of significant estimates and assumptions. Assumptions and inputs used to determine enrollment figures
may include withdrawal rates, new registrations, average daily attendance, special needs enrollment, academic progress,
historical completion rate, and student location among others. Changes to these inputs and assumptions could have a
material impact on the amount of expected annual funding, and thus revenues recognized. Auditing enrollment figures
involved especially challenging auditor judgment due to the nature and extent of audit effort required to properly address
inputs within the enrollment figures related to funding-based contracts.

The primary procedures we performed to address this critical audit matter included:

(cid:120)

Testing the design and operating effectiveness of internal controls relating to the determination of enrollment
figures including the monthly review of projected student counts and review of schools’ funding calculations.
These controls include review of the reasonableness of assumptions used and the appropriateness of
methodologies used to determine enrollment figures pursuant to the Company’s interpretation of the states’
enrollment definitions.

Testing the completeness, existence, and accuracy of enrollment calculations by validating a sample of underlying
student data and assumptions used as inputs through the inspection of relevant source documents including
admission records, report cards, and third-party support.

Testing the Company’s computations of enrollment figures and state estimated funding for a sample of schools
through recalculating the mathematical accuracy of the calculations.

Performing a retrospective review of funding on a school by school basis and investigating variances outside of
predetermined thresholds through the inspection of relevant source documents.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2005.
Potomac, Maryland
August 9, 2022

STRIDE, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

Current assets

Cash and cash equivalents
Accounts receivable, net of allowance of $26,993 and $21,384
Inventories, net
Prepaid expenses
Other current assets

Total current assets

Operating lease right-of-use assets, net
Property and equipment, net
Capitalized software, net
Capitalized curriculum development costs, net
Intangible assets, net
Goodwill
Deposits and other assets

Total assets

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable
Accrued liabilities
Accrued compensation and benefits
Deferred revenue
Current portion of finance lease liability
Current portion of operating lease liability

Total current liabilities
Long-term finance lease liability
Long-term operating lease liability
Long-term debt
Deferred tax liability
Other long-term liabilities

Total liabilities

Commitments and contingencies
Stockholders’ equity

Preferred stock, par value $0.0001; 10,000,000 shares authorized; zero shares
issued or outstanding
Common stock, par value $0.0001; 100,000,000 shares authorized; 48,112,664
and 46,911,527 shares issued; and 42,777,921 and 41,576,784 shares
outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Treasury stock of 5,334,743 shares at cost

Total stockholders’ equity
Total liabilities and stockholders' equity

June 30,

2022

2021

(In thousands except share and
per share data)

389,398
418,558
36,003
25,974
80,601
950,534
85,457
61,537
71,800
50,580
88,669
241,022
93,946
1,643,545

61,997
63,200
73,027
53,630
37,389
12,830
302,073
28,888
75,127
411,438
3,205
10,233
830,964

386,080
369,303
39,690
19,453
43,004
857,530
94,671
72,069
57,308
50,376
99,480
240,353
105,510
1,577,297

62,144
77,642
80,363
38,110
27,336
20,649
306,244
41,568
77,458
299,271
31,853
16,255
772,649

—

4
687,454
143
227,462
(102,482)
812,581
1,643,545

4
795,449
(474)
112,151
(102,482)
804,648
1,577,297

See accompanying notes to consolidated financial statements.

STRIDE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Revenues

Instructional costs and services

Gross margin

Selling, general, and administrative expenses

Income from operations

Interest income (expense), net
Other income (expense), net

Income before income taxes and income (loss) from equity
method investments
Income tax expense
Income (loss) from equity method investments
Net income attributable to common stockholders
Net income attributable to common stockholders per share:

Basic
Diluted

Weighted average shares used in computing per share
amounts:
Basic
Diluted

(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)

2022

Year Ended June 30,
2020
2021
(In thousands except share and per share data)
$ 1,536,760
1,686,666
1,001,860
1,090,191
534,900
596,475
424,444
439,847
110,456
156,628
(17,979)
(8,277)
2,829
(1,277)

$ 1,040,765
693,232
347,533
315,076
32,457
698
272

147,074
(40,088)
144
107,130

2.58
2.52

$
$

95,306
(24,539)
684
71,451

1.78
1.71

$
$

33,427
(8,541)
(380)
24,506

0.62
0.60

41,451,101
42,441,524

40,211,016
41,868,580

39,478,928
40,663,224

See accompanying notes to consolidated financial statements.

STRIDE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment

2022

Year Ended June 30,
2021
(In thousands)

2020

$ 107,130 $ 71,451

$ 24,506

617

(567)

133

Comprehensive income attributable to common stockholders

$ 107,747 $ 70,884

$ 24,639

See accompanying notes to consolidated financial statements.

STRIDE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Stride, Inc. Stockholders' Equity

(In thousands except share data)

Balance, June 30, 2019
Net income
Foreign currency translation adjustment
Stock-based compensation expense
Exercise of stock options
Vesting of performance share units, net of tax
withholding
Issuance of restricted stock awards
Forfeiture of restricted stock awards
Repurchase of restricted stock for tax withholding
Balance, June 30, 2020

Adjustment related to the adoption of new
accounting guidance
Net income
Foreign currency translation adjustment
Stock-based compensation expense
Exercise of stock options
Withholding of stock options for tax withholding
Equity component of convertible senior notes, net of
issuance costs and taxes
Purchases of capped calls in connection with
convertible senior notes
Vesting of performance share units, net of tax
withholding
Issuance of restricted stock awards
Forfeiture of restricted stock awards
Repurchase of restricted stock for tax withholding
Balance, June 30, 2021

Adjustment related to the adoption of new
accounting guidance
Net income
Foreign currency translation adjustment
Stock-based compensation expense
Exercise of stock options
Vesting of performance share units, net of tax
withholding
Issuance of restricted stock awards
Forfeiture of restricted stock awards
Repurchase of restricted stock for tax withholding
Balance, June 30, 2022

Common Stock
Shares

Amount

45,575,236
—
—
—
4,000

—
1,126,227
(79,541)
(284,295)
46,341,627

—
—
—
—
990,067
(655,219)

—

—
578,070
(82,419)
(260,599)
46,911,527

—
—
—
—
29,100

1,017,380
582,273
(160,795)
(266,821)
48,112,664

4
—
—
—
—

—
—
—
—
4

—
—
—
—
—
—

—

—
—
—
—
4

—
—
—
—
—

—
—
—
—
4

Additional
Paid-in
Capital

$ 713,436
—
—
24,022
64

—
—
—
(6,761)
$ 730,761

—
—
—
38,927
748
(10,885)

105,502

(60,354)

—
—
—
(9,250)
$ 795,449

(89,460)
—
—
19,021
414

—
—
—
(37,970)
$ 687,454

Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings

Treasury Stock

Amount

Total

(40)
—
133
—
—

—
—
—
—
93

—
—
(567)
—
—
—

—

22,447
24,506
—
—
—

—
—
—
—
46,953

(6,253)
71,451
—
—
—
—

—

(5,334,743)
—
—
—
—

$ (102,482)
—
—
—
—

—
—
—
—
(5,334,743)

—
—
—
—
$ (102,482)

—
—
—
—
—
—

—

—
—
—
—
—
—

—

—
—
—
—
(474)

—
—
—
—
$ 112,151

—
—
—
—
(5,334,743)

—
—
—
—
$ (102,482)

—
—
617
—
—

—
—
—
—
143

8,181
107,130
—
—
—

—
—
—
—

—
—
—
—
$ 227,462

—
—
—
—
(5,334,743)

—
—
—
—
$ (102,482)

633,365
24,506
133
24,022
64

—
—
—
(6,761)
675,329

(6,253)
71,451
(567)
38,927
748
(10,885)

105,502

(60,354)

—
—
—
(9,250)
804,648

(81,279)
107,130
617
19,021
414

—
—
—
(37,970)
812,581

See accompanying notes to consolidated financial statements.

STRIDE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization expense
Stock-based compensation expense
Deferred income taxes
Provision for doubtful accounts
Amortization of discount and fees on debt
Noncash operating lease expense
Other
Changes in assets and liabilities:

Accounts receivable
Inventories, prepaid expenses, deposits and other current and long-term
assets
Accounts payable
Accrued liabilities
Accrued compensation and benefits
Operating lease liability
Deferred revenue and other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Capitalized software development costs
Capitalized curriculum development costs
Sale of long-lived assets
Sale of other investments
Acquisition of Galvanize, Inc., net of cash acquired
Acquisition of MedCerts, LLC, net of cash acquired
Acquisition of Tech Elevator, Inc., net of cash acquired
Other acquisitions, loans and investments, net of distributions
Proceeds from the maturity of marketable securities
Purchases of marketable securities
Net cash used in investing activities
Cash flows from financing activities

Repayments on finance lease obligations
Borrowings from credit facility
Repayments on credit facility
Issuance of convertible senior notes, net of issuance costs
Purchases of capped calls in connection with convertible senior notes
Payments of deferred purchase consideration
Proceeds from exercise of stock options
Withholding of stock options for tax withholding
Repurchase of restricted stock for income tax withholding

Net cash provided by (used in) financing activities
Net change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period

Reconciliation of cash, cash equivalents and restricted cash to balance
sheet as of June 30th:

Cash and cash equivalents
Other current assets (restricted cash)
Deposits and other assets (restricted cash)

Total cash, cash equivalents and restricted cash

2022

Year Ended June 30,

2021

(In(cid:3)thousands)

2020

107,130

71,451

24,506

97,914
18,570
1,190
15,673
1,573
19,810
9,949

(57,501)

4,798
11
7,598
(7,465)
(20,742)
8,376
206,884

(9,748)
(42,191)
(15,687)
—
5,261
—
—
—
(3,899)
40,163
(84,657)
(110,758)

(33,011)
—
—
—
—
(22,858)
414
—
(37,855)
(93,310)
2,816
386,582
389,398

389,398
—
—
389,398

90,077
39,333
2,549
6,561
12,620
19,567
9,766

(143,073)

(39,164)
18,930
15,899
32,437
(21,025)
18,222
134,150

(3,567)
(31,264)
(17,432)
223
—
—
(55,031)
(16,107)
(1,723)
—
(40,542)
(165,443)

(24,315)
—
(100,000)
408,610
(60,354)
—
748
(10,885)
(9,228)
204,576
173,283
213,299
386,582

386,080
502
—
386,582

72,091
23,609
(1,305)
2,882
—
11,827
7,751

(37,772)

(16,181)
(6,213)
7,424
3,103
(13,124)
1,817
80,415

(1,677)
(23,988)
(19,332)
—
—
(167,995)
—
—
(4,373)
—
—
(217,365)

(27,675)
105,000
(5,000)
—
—
—
64
—
(6,761)
65,628
(71,322)
284,621
213,299

212,299
500
500
213,299

See accompanying notes to consolidated financial statements.

STRIDE, INC.

Notes to Consolidated Financial Statements

1. Description of the Business

Stride, Inc., together with its subsidiaries (“Stride” or the “Company”) is an education services company
providing virtual and blended learning. On December 16, 2020, the Company changed its name from K12 Inc. to Stride,
Inc. The brand reflects the Company’s continued growth into lifelong learning, regardless of a student’s age or location.
The Company’s technology-based products and services enable its clients to attract, enroll, educate, track progress, and
support students. These products and services, spanning curriculum, systems, instruction, and support services are
designed to help learners of all ages reach their full potential through inspired teaching and personalized learning. The
Company’s clients are primarily public and private schools, school districts, and charter boards. Additionally, it offers
solutions to employers, government agencies and consumers. These products and services are provided through two lines
of revenue:

(cid:120)

Products and services for the General Education market are predominantly focused on core subjects, including
math, English, science and history, for kindergarten through twelfth grade students to help build a common
foundation of knowledge. Programs utilizing General Education products and services are for students that are
not specializing in any particular curriculum or course of study. These programs provide an alternative to
traditional school options and address a range of student needs including, safety concerns, increased academic
support, scheduling flexibility, physical/health restrictions or advanced learning. Products and services are sold
as a comprehensive school-as-a-service offering or à la carte.

(cid:120) Career Learning products and services are focused on developing skills to enter and succeed in careers in high-
growth, in-demand industries—including information technology, health care and general business. The
Company provides middle and high school students with Career Learning programs that complement their core
general education coursework in math, English, science and history. Stride offers multiple career pathways
supported by a diverse catalog of Career Learning courses. The middle school program exposes students to a
variety of career options and introduces career skill development. In high school, students may engage in industry
content pathway courses, project-based learning in virtual teams, and career development services. High school
students also have the opportunity to progress toward certifications, connect with industry professionals, earn
college credits while in high school, and participate in job shadowing and/or work-based learning experiences
that are required to succeed in today’s digital, tech-enabled economy. A student enrolled in a school that offers
Stride’s General Education program may elect to take Career Learning courses, but that student and the associated
revenue is reported as a General Education enrollment and General Education revenue. A student and the
associated revenue is counted as a Career Learning enrollment or Career Learning revenue only if the student is
enrolled in a Career Learning program or school. Like General Education products and services, the products and
services for the Career Learning market are sold as a comprehensive school-as-a-service offering or à la carte.
The Company also offers focused post-secondary career learning programs to adult learners, through Galvanize,
Inc. (“Galvanize”), Tech Elevator, Inc. (“Tech Elevator”), and MedCerts, LLC (“MedCerts”). These include
skills training in the software engineering, healthcare, and medical fields, as well as providing staffing and talent
development services to employers. These programs are offered directly to consumers, as well as to employers
and government agencies.

2. Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant

intercompany accounts and transactions have been eliminated.

The Company operates in one operating and reportable business segment as a technology-based education
company providing proprietary and third-party curriculum, software systems and educational services designed to facilitate
individualized learning for students and adults. The Chief Operating Decision Maker evaluates profitability based on
consolidated results.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

3. Summary of Significant Accounting Policies

Recent Accounting Pronouncements

Accounting Standards Adopted

On July 1, 2021, the Company early adopted Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with
Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity
(Subtopic 815-40) (“ASU 2020-06”) which, among other things, simplifies the accounting for convertible instruments by
eliminating the requirement to separate conversion features from the host contract. Consequently, a convertible debt
instrument is accounted for as a single liability measured at its amortized cost and interest expense will be recognized at
the coupon rate. The adoption resulted in the elimination of the debt discount (and related deferred tax liability) that had
been recorded within equity (see Note 7, “Debt”). The net impact of the adjustments was recorded to the opening balance
of retained earnings, as presented in the statement of stockholders’ equity. The impacts to the consolidated balance sheet
were the following: (1) increase of $110.6 million to long-term debt, (2) decrease of $89.5 million to additional paid-in
capital, (3) decrease of $29.3 million to deferred tax liability, and (4) increase to retained earnings of $8.2 million.

During the second quarter of fiscal year 2022, the Company early adopted ASU 2021-08, Business Combinations
(Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”)
which, among other things, simplifies the accounting for deferred revenue (a contract liability) that is measured and
recognized as part of a business combination. ASU 2021-08 requires that deferred revenue be measured as if the acquirer
had originated the contracts, which, for the most part, results in no change to the value of deferred revenue when measured
in purchase accounting. The Company was required to adopt ASU 2021-08 on a retrospective basis for any acquisitions
that occurred since July 1, 2021, and prospectively to future acquisitions. The adoption of this standard did not have a
material impact to the consolidated financial statements and there were no material acquisitions from July 1, 2021 to
adoption.

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 provides relief to companies that will be impacted by the cessation of
reference rate reform, e.g. LIBOR, that is tentatively planned for the end of calendar year 2022. The ASU permits an entity
to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement.
This ASU is applicable from March 12, 2020 through December 31, 2022 and adoption is permitted at any time during
the period on a prospective basis. The Company determined that the adoption of this standard will not have a material
impact to the consolidated financial statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America (“GAAP”) requires management to make estimates and assumptions affecting the reported
amounts of assets and liabilities and contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company
evaluates its estimates and assumptions, including those related to the allowance for doubtful accounts, inventory reserves,
amortization periods, the allocation of purchase price to the fair value of net assets and liabilities acquired in business
combinations, fair values used in asset impairment evaluations, valuation of long-lived assets, accrual for incurred but not
reported (“IBNR”) claims, contingencies, income taxes, fair value of contingent consideration and stock-based
compensation expense. The Company bases its estimates on historical experience and various assumptions that it believes
are reasonable under the circumstances. The results of the analysis form the basis for making assumptions about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from
those estimates.

STRIDE, INC.

Notes to 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:

(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)

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, business, and health services, 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:

(cid:120)

(cid:120)
(cid:120)

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

(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120) 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

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

an annual basis by the state or school district. The Company reviews its estimates of funding periodically, and updates as
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 schools’ 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
current and prior periods. For the years ended June 30, 2021, 2020 and 2019, the Company’s aggregate funding estimates
differed from actual reimbursements impacting total reported revenue by approximately 1.4%, (0.1%), and 0.6%,
respectively.

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 years ended June 30, 2022, 2021 and 2020, the Company’s revenues
included a reduction for net school operating losses at the schools of $36.3 million, $63.4 million, and $45.4 million,
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 consolidated statements of operations. Amounts
recorded as revenues and expenses for the years ended June 30, 2022, 2021 and 2020, were $460.5 million, $412.1 million
and $325.5 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 one 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.

STRIDE, INC.

Notes to 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 years ended June 30, 2022, 2021 and 2020, approximately 89%,
88%, and 88%, respectively, of the Company’s General Education revenues, and 99%, 98% and 99%, 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 business for years

ended June 30, 2022, 2021 and 2020:

General Education
Career Learning

Middle - High School
Adult

Total Career Learning
Total Revenues

Concentration of Customers

Year Ended June 30,

2022

2021

2020

1,273,783

1,280,199

933,809

321,416
91,467
412,883
1,686,666

200,774
55,787
256,561
1,536,760

96,003
10,953
106,956
1,040,765

During the years ended June 30, 2022, 2021 and 2020, the Company had no contracts that represented greater

than 10% of 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 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.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

The opening and closing balance of the Company’s accounts receivable, unbilled receivables and deferred

revenue are as follows:

June 30,

2022

2021

(In thousands)

Accounts receivable
Unbilled receivables (included in accounts receivable)
Deferred revenue
Deferred revenue, long-term (included in other long-term liabilities)

418,558
19,702
53,630
3,099

369,303
24,794
38,110
1,973

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. 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 years ended June 30, 2022,
2021 and 2020, that was included in the previous July 1st deferred revenue balance was $38.9 million, $25.5 million, and
$21.5 million, respectively. During the years ended June 30, 2022, 2021 and 2020, the Company recorded revenues of
$20.8 million, ($1.4) million and $5.9 million, respectively, 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 30 or net 45, 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 June 30, 2022 was $3.1 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
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

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

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 accompanying consolidated balance sheets. Revenues do not include sales tax as the
Company considers itself a pass-through conduit for collecting and remitting sales tax.

Shipping and Handling Costs

Shipping and handling costs are expensed when incurred and are classified as instructional costs and services in
the accompanying consolidated statements of operations. Shipping and handling charges invoiced to a customer are
included in revenues.

Research and Development Costs

All research and development costs, including patent application costs, are expensed as incurred. Research and
development costs totaled $7.5 million, $3.7 million and $9.7 million for the years ended June 30, 2022, 2021 and 2020,
respectively, and are included within selling, general and administrative expenses in the consolidated statements of
operations.

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents generally consist of cash on hand and cash held in money market and demand deposit
accounts. The Company considers all highly liquid investments with maturities of three months or less when purchased to
be cash equivalents. The Company periodically has cash balances which exceed federally insured limits.

Restricted cash consists of amounts held in escrow related to the Company’s settlement agreement with Agora
Cyber Charter School. The restricted cash which is short-term in nature is included in other current assets, while the portion
that is long-term is included in deposits and other assets on the consolidated balance sheets.

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 other current assets on the 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 consolidated balance sheets. Held-to-maturity securities
are recorded at their amortized cost. Interest income and dividends are recorded within the 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 ASC Topic 326, Financial Instruments – Credit Losses (“ASC 326”). Any decline in
fair value related to a credit loss is recognized in the consolidated statements of operations, with the amount of the loss
limited to the difference between fair value and amortized cost. As of June 30, 2022 and 2021, the allowance for credit
losses related to held-to-maturity debt securities was zero.

As of June 30, 2022, 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 $63.0 million and $21.7 million,
respectively. The maturities of the Company’s long-term marketable debt securities range from one to two years. The

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

following table summarizes the amortized cost, net carrying amount, and fair value disaggregated by class of instrument
(in thousands).

Corporate Bonds
U.S. Treasury Notes
Commercial Paper

Total

Amortized Cost
50,067
16,399
18,186
84,652

Allowance for
Credit Losses
-
-
-
-

Net Carrying
Amount

Gross Unrealized
Gains (Losses)

Fair Value

50,067
16,399
18,186
84,652

(691) $
(199)
-
(890) $

49,376
16,200
18,186
83,762

As of June 30, 2021, 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 $17.3 million and $23.2 million,
respectively. The maturities of the Company’s long-term marketable debt securities range from one to two years. The
following table summarizes the amortized cost, net carrying amount, and fair value disaggregated by class of instrument
(in thousands).

Corporate Bonds
U.S. Treasury Notes
Commercial Paper

Total

Amortized Cost
28,852
8,692
2,998
40,542

Allowance for
Credit Losses
-
-
-
-

Net Carrying
Amount

Gross Unrealized
Gains (Losses)

Fair Value

28,852
8,692
2,998
40,542

(24) $
-
-
(24) $

28,828
8,692
2,998
40,518

Allowance for Doubtful Accounts

The Company maintains an allowance for uncollectible accounts primarily for estimated losses resulting from the
inability or failure of individual customers to make required payments. The Company analyzes accounts receivable,
historical percentages of uncollectible accounts, and changes in payment history when evaluating the adequacy of the
allowance for uncollectible accounts. The Company maintains an allowance under ASC 326 based on historical losses,
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 doubtful accounts increased from $21.4 million as of June 30, 2021 to $27.0
million as of June 30, 2022. The increase of $5.6 million is comprised of an $8.6 million provision, less $3.0 million of
amounts recovered. The Company’s allowance for doubtful accounts increased from $6.8 million as of June 30, 2020 to
$21.4 million as of June 30, 2021. The increase of $14.6 million is comprised of a $6.6 million provision, $8.5 million
related to the initial adoption of ASC 326, less $0.5 million of amounts recovered.

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 June 30, 2022 and 2021, $11.2 million and $8.8
million, respectively, of inventory, net of reserves, was deemed long-term and included in deposits and other assets on the
consolidated balance sheets. The provision for excess and obsolete inventory is established based upon the evaluation of

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

the quantity on hand relative to demand. The excess and obsolete inventory reserve was $6.5 million and $5.6 million at
June 30, 2022 and 2021, respectively.

Other Current Assets

Other current assets consist primarily of 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. Additionally, other current assets include short-term marketable securities.

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:

Student and state testing computers
Computer hardware
Computer software
Web site development
Office equipment
Furniture and fixtures
Leasehold improvements

Useful Life

3 - 5 years
3 - 7 years
3 - 5 years
3 years
5 years
7 years
Shorter of useful life or term of the lease

The Company makes an estimate of unreturned student computers based on an analysis of recent trends of returns.
The Company recorded accelerated depreciation of $3.8 million, $3.2 million and $2.4 million for the years ended
June 30, 2022, 2021 and 2020, respectively, related to unreturned student computers.

The Company fully expenses computer peripheral equipment (e.g. keyboards, mouses) upon purchase as recovery
has been determined to be uneconomical. These expenses totaled $8.6 million, $6.3 million and $3.8 million for the years
ended June 30, 2022, 2021 and 2020, respectively, and are recorded as instructional costs and services.

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 $42.2 million, $31.3 million and $24.0 million for the years ended
June 30, 2022, 2021 and 2020, respectively. There were no material write-downs of capitalized software projects for the
years ended June 30, 2022, 2021 and 2020.

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.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

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 $15.7 million, $17.4 million and $19.3 million for the
years ended June 30, 2022, 2021 and 2020, respectively. These amounts are recorded on the accompanying consolidated
balance sheets, net of amortization charges. There were no material write-downs of capitalized curriculum development
costs for the years ended June 30, 2022, 2021 and 2020.

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:

(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)

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 1 to 3-year payment terms, at varying rates, with a $1 purchase
option at the end of each lease term. The Company pledges the assets financed to secure the outstanding leases.

Operating Leases

The Company enters into agreements for facilities that serve as offices for its headquarters, sales and enrollment
teams, and school operations. Initial lease terms vary between 1 and 17 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 Company’s finance leases, the stated rate is defined within the
lease terms; while for the Company’s operating leases, the rate is not implicit. For operating leases, the Company uses its
incremental borrowing rate as the discount rate; determined as the Company’s borrowing rate on a collateralized basis for
a similar term and amount to the term and amount of the lease. The Company’s current incremental borrowing rate of
3.50% is based upon its agreements used for its finance leases. The incremental borrowing rate is subsequently reassessed
upon modification of its leasing arrangements or with the execution of a new lease agreement.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

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.

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 years ended June 30, 2022, 2021 and 2020 was $13.0 million, $11.6 million and $6.1 million,
respectively, and is included within selling, general, and administrative expenses in the consolidated statements of
operations. Future amortization of intangible assets is expected to be $12.9 million, $11.9 million, $10.7 million,
$9.6 million and $7.9 million in the fiscal years ending June 30, 2023 through June 30, 2027, respectively and
$35.4 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
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 year ended June 30, 2022, there were no events or changes in circumstances that would indicate that

the carrying amount of the goodwill was impaired.

During the year ended June 30, 2021 , the Company qualitatively assessed its goodwill and intangible assets for
impairment. It identified Coronavirus disease 2019 (“COVID-19”) as a triggering event, however there were no indicators
that the fair value of the reporting unit may be less than its carrying amount, and as a result, the Company determined that
no impairment was required.

On November 30, 2020, the Company acquired 100% of MedCerts in exchange for $70.0 million and estimated
contingent consideration of $10.8 million; and 100% of Tech Elevator in exchange for $23.5 million, plus working capital
of $2.2 million. The Company’s acquisitions are discussed in more detail in Note 12, “Acquisitions and Investments.”

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

The following table represents goodwill additions/reductions resulting from the acquisitions mentioned above

during the years ended June 30, 2022, 2021 and 2020:

($ in millions)
Goodwill

Balance as of June 30, 2020
Acquisition of MedCerts, LLC
Acquisition of Tech Elevator, Inc.
Adjustments related to Galvanize, Inc.

Balance as of June 30, 2021

Acquisition of Modern Teacher LLC

Balance as of June 30, 2022

Amount

$ 174.9
51.1
17.9
(3.5)
$ 240.4
0.6
$ 241.0

The following table represents the balance of the Company’s intangible assets as of June 30, 2022 and 2021:

June 30, 2022

June 30, 2021

($(cid:3)in millions)
Trade names
Customer and distributor relationships
Developed technology
Other
Total

Impairment of Long-Lived Assets

Gross
Carrying
Amount
$ 85.1 $
38.9
21.7
1.4
$ 147.1

Accumulated
Amortization

Net
Carrying
Value
(23.1) $ 62.0
13.6
(25.3)
12.8
(8.9)
(1.1)
0.3
(58.4) $ 88.7

Gross
Carrying
Amount
$ 84.5
37.7
21.3
1.4
$ 144.9

Accumulated
Amortization
$

Net
Carrying
Value
(17.4) $ 67.1
16.5
(21.2)
15.6
(5.7)
0.3
(1.1)
(45.4) $ 99.5

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 fair value and the carrying value of the asset. During the year ended
June 30, 2022, there were no events or changes in circumstances that may indicate that the carrying amount of the long-
lived assets may not be recoverable. During the year ended June 30, 2021, the Company identified COVID-19 as a
triggering event, however based on its assessment, the Company determined that COVID-19 did not impact the
recoverability of its long-lived assets.

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.

Stock-Based Compensation

The Company estimates the fair value of share-based awards on the date of grant. The fair value of restricted
stock awards is based on the closing price of the Company’s common stock on the date of grant. Certain restricted stock
awards with a market-based performance component are valued using a Monte Carlo simulation model that considers a
variety of factors including, but not limited to, the Company’s common stock price, risk-free rate, and expected stock price

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

volatility over the expected life of awards. The Company recognizes forfeitures of share-based awards as they occur in the
period of forfeiture.

Advertising and Marketing Costs

Advertising and marketing costs consist primarily of internet advertising, online marketing, direct mail, print
media and television commercials and are expensed when incurred. Advertising costs totaled $86.5 million, $60.3 million
and $63.1 million for the years ended June 30, 2022, 2021 and 2020, respectively, and are included within selling, general,
and administrative expenses in the consolidated statements of operations. Advertising costs previously reported for the
years ended June 30, 2021 and 2020 totaled $23.0 million and $32.7 million, respectively, and excluded $37.3 million and
$30.4 million of advertising costs incurred during the respective fiscal years. These disclosure modifications have no
effect on the Company’s consolidated balance sheets, results of operations or cash flows and are considered immaterial to
the previously issued annual consolidated financial statements.

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.

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 accompanying consolidated balance sheets for cash and cash equivalents,
receivables, and short term debt approximate their fair values, as they are largely short-term in nature. The contingent
consideration and Tallo, Inc. convertible note are discussed in more detail in Note 12, “Acquisitions and Investments.” As
of June 30, 2022, the estimated fair value of the long-term debt was $415.3 million. The Company estimated the fair value
based on the quoted market prices in an inactive market on the last day of the reporting period (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 consolidated balance sheet, and is discussed in more detail in Note 7, “Debt.” As of June 30, 2022,
the estimated fair value of the Company’s marketable securities was $83.8 million. The Company estimated the fair value
based on the quoted market prices in an inactive market on the last day of the reporting period (Level 2). The marketable
securities are discussed in more detail in Note 3, “Summary of Significant Accounting Policies - Investments in Marketable
Securities.”

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

The following table summarizes certain fair value information at June 30, 2022 for assets or liabilities measured

at fair value on a recurring basis.

Description

(cid:3)

Fair Value

(cid:3)

Contingent consideration associated with acquisitions
Convertible note received in acquisition

11,290
889

Fair Value Measurements Using:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Input
(Level 2)

(cid:3)
(In thousands)
— $
—

Significant
Unobservable
Inputs
(Level 3)

(cid:3)

— $
—

11,290
889

The following table summarizes certain fair value information at June 30, 2021 for assets or liabilities measured

at fair value on a recurring basis.

Description

(cid:3)

Fair Value

(cid:3)

Contingent consideration associated with acquisitions
Convertible note received in acquisition

$
$

11,082
5,006

$
$

Fair Value Measurements Using:
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Input
(Level 2)

(cid:3)
(In thousands)
— $
— $

Significant
Unobservable
Inputs
(Level 3)

(cid:3)

— $
— $

11,082
5,006

The following table presents activity related to the Company’s fair value measurements categorized as Level 3

of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2022.

Description

Year Ended June 30, 2022

Fair Value
(cid:3) June 30, 2021

Purchases,
Issuances,
(cid:3) and Settlements

Unrealized
(cid:3) Gains (Losses)

Fair Value
(cid:3) June 30, 2022

Contingent consideration associated with acquisitions
Convertible note received in acquisition

11,082
5,006

(In thousands)
— $
—

208
(4,117)

11,290
889

The following table presents activity related to the Company’s fair value measurements categorized as Level 3

of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2021.

Description

Year Ended June 30, 2021

Fair Value
(cid:3) June 30, 2020

Purchases,
Issuances,
(cid:3) and Settlements

Unrealized
(cid:3) Gains (Losses)

Fair Value
(cid:3) June 30, 2021

(In thousands)

Contingent consideration associated with acquisitions
Convertible note received in acquisition

$
$

— $
$

5,006

10,833

$
— $

$
249
— $

11,082
5,006

The following table presents activity related to the Company’s fair value measurements categorized as Level 3

of the valuation hierarchy, valued on a recurring basis, for the year ended June 30, 2020.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Description

Year Ended June 30, 2020

Fair Value
(cid:3) June 30, 2019

Purchases,
Issuances,
(cid:3) and Settlements

Unrealized
(cid:3) Gains (Losses)

Fair Value
(cid:3) June 30, 2020

Convertible note received in acquisition

5,006

(In thousands)
— $

— $

5,006

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 antidilutive.
Common stock outstanding reflected in the Company’s 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:

Year Ended June 30,
2021
(In thousands except share and per share data)

2020

2022

Basic net income per share computation:

Net income attributable to common stockholders
Weighted average common shares — basic

Basic net income per share

Diluted net income per share computation:

107,130
41,451,101
2.58

71,451
40,211,016
1.78

24,506
39,478,928
0.62

Net income attributable to common stockholders

107,130

71,451

24,506

Share computation:

Weighted average common shares — basic
Effect of dilutive stock options and restricted stock awards

Weighted average common shares — diluted

Diluted net income per share

41,451,101
990,423
42,441,524
2.52

40,211,016
1,657,564
41,868,580
1.71

39,478,928
1,184,296
40,663,224
0.60

For the years ended June 30, 2022, 2021 and 2020, shares issuable in connection with stock options and restricted
stock of 4,939, 296,577 and 729,008, respectively, were excluded from the diluted income per common share calculation
because the effect would have been antidilutive.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

4. Property and Equipment and Capitalized Software and Curriculum

Property and equipment consists of the following at:

Student computers
Computer software
Computer hardware
Leasehold improvements
State testing computers
Furniture and fixtures
Office equipment

Less accumulated depreciation and amortization

June 30,

2022

2021

(In thousands)

$ 106,688
14,655
5,386
12,612
7,440
3,910
134
150,825
(89,288)
$ 61,537

$ 99,728
16,201
9,461
18,320
7,440
7,104
1,455
159,709
(87,640)
$ 72,069

The Company recorded depreciation expense related to property and equipment reflected in selling, general, and
administrative expenses of $5.1 million, $6.6 million and $4.3 million during the years ended June 30, 2022, 2021 and
2020, respectively. Depreciation expense of $36.4 million, $31.4 million and $17.9 million related to computers provided
to students is reflected in instructional costs and services during the years ended June 30, 2022, 2021 and 2020,
respectively.

The Company incurs maintenance and repair expenses, which are expensed as incurred, and are generally
recorded in selling, general, and administrative expenses. Maintenance and repair expenses totaled $6.1 million,
$7.9 million and $10.3 million for the years ended June 30, 2022, 2021 and 2020, respectively.

Capitalized software costs consist of the following at:

Capitalized software
Less accumulated depreciation and amortization

June 30,

2022

2021

(In thousands)

$ 274,401
(202,601)
71,800

$ 281,705
(224,397)
57,308

The Company recorded amortization expense of $22.9 million, $19.7 million and $20.8 million related to
capitalized software reflected in instructional costs and services and $5.4 million, $4.2 million and $5.5 million reflected
in selling, general, and administrative expenses during the years ended June 30, 2022, 2021 and 2020, respectively.

Capitalized curriculum development costs consist of the following at:

Capitalized curriculum development costs
Less accumulated depreciation and amortization

June 30,

2022

2021

(In thousands)

$ 189,246
(138,666)
50,580

$ 173,971
(123,595)
50,376

The Company recorded amortization expense of $15.1 million, $16.4 million and $17.5 million related to
capitalized curriculum development cost reflected in instructional costs and services during the years ended June 30, 2022,
2021 and 2020, respectively.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

5. Income Taxes

The provision for income taxes is based on earnings reported in the 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 year.

Deferred tax assets and liabilities result primarily from temporary differences in book versus tax basis accounting.

Deferred tax assets and liabilities consist of the following:

Deferred tax assets
Net operating loss carryforward
Reserves
Accrued expenses
Stock compensation expense
Other assets
Convertible debt
Deferred revenue
Lease liability

Total deferred tax assets

Deferred tax liabilities
Capitalized curriculum development
Capitalized software and website development costs
Property and equipment
Right-of-use assets
Returned materials
Purchased intangibles
Convertible debt

Total deferred tax liabilities

Net deferred tax asset (liability) before valuation allowance
Valuation allowance

Net deferred tax liability

Reported as:
Long-term deferred tax liabilities

June 30,

2022

2021

(In thousands)

$ 19,613
8,306
11,524
5,166
5,218
11,005
591
21,680
83,103

22,159
5,038
5,552
8,193
7,466
—
437
27,812
76,657

(9,269)
(17,789)
(10,547)
(21,062)
(3,503)
(17,461)
—
(79,631)
3,472
(6,677)

(9,307)
(14,026)
(11,613)
(26,889)
(4,520)
(22,031)
(15,077)
(103,463)
(26,806)
(5,047)
$ (3,205) $ (31,853)

$ (3,205) $ (31,853)

The Company maintained a valuation allowance on net noncurrent deferred tax assets of $6.7 million and $5.0
million as of June 30, 2022 and 2021, respectively, predominantly related to foreign income tax net operating losses
("NOL").

At June 30, 2022, the Company had approximately $55.1 million of available federal NOL carryforwards solely
related to the acquisition of Galvanize in January 2020. The available federal NOL carryforwards were generated after
2017 and have an indefinite carryforward period due to the Tax Cuts and Jobs Act (the “Tax Act”). Section 382 of the
Internal Revenue Code limits the utilization of NOL carryforwards following a change of control. The Company has
performed an analysis of the Section 382 ownership changes and have determined that it will be able to fully utilize its
available NOLs subject to the Section 382 limitation.

At June 30, 2022, the Company had tax effected state NOL carryforwards of $2.3 million, net of valuation

allowances, and will expire on various dates.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

The components of the income before income taxes for the years ended June 30, 2022, 2021 and 2020 were as

follows:

Domestic
Foreign
Total income before income taxes

2022

131,967
15,251
147,218

Year Ended June 30,

2021
(In thousands)
81,068
14,922
95,990

2020

27,672
5,375
33,047

The components of the income tax expense (benefit) for the years ended June 30, 2022, 2021 and 2020 were as

follows:

Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Total deferred
Total income tax expense (benefit)

Year Ended June 30,

2022

2021
(In thousands)

2020

$ 27,969
7,550
3,379
38,898

1,743
(553)
1,190
$ 40,088

$ 12,290
6,643
3,057
21,990

2,287
262
2,549
$ 24,539

$ 6,907
1,911
1,028
9,846

(1,687)
382
(1,305)
$ 8,541

The provision for (benefit from) income taxes can be reconciled to the income tax that would result from applying

the statutory rate to the net income before income taxes as follows:

U.S. federal tax at statutory rates
Permanent items
Lobbying
Non-deductible compensation
State taxes, net of federal benefit
Research and development tax credits
Change in valuation allowance
Effects of foreign operations
Reserve for unrecognized tax benefits
Other
Stock-based compensation
Provision for (benefit from) income taxes

Year Ended June 30,
2021

2022

2020

21.0 %
0.4
0.1
9.3
3.5
(0.8)
0.8
0.3
0.5
(1.2)
(6.7)
27.2 %

21.0 %
(0.4)
0.2
4.9
5.8
(0.9)
(0.1)
0.4
0.2
(0.5)
(5.0)
25.6 %

21.0 %
1.1
0.4
9.0
5.3
(1.8)
0.1
0.3
(2.4)
(0.8)
(6.4)
25.8 %

The increase in the effective income tax rate for the year ended June 30, 2022, as compared to the effective tax
rate for the year ended June 30, 2021, was primarily due to the increase in the amount of non-deductible compensation,
which was partially offset by the increase in excess tax benefit of stock-based compensation.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Tax Uncertainties

The Company follows the provisions of ASC 740, Income Taxes (“ASC 740”) which applies to all tax positions
related to income taxes. ASC 740 provides a comprehensive model for how a company should recognize, measure, present
and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax
return. ASC 740 clarifies accounting for income taxes by prescribing a minimum probability threshold that a tax position
must meet before a financial statement benefit is recognized. If the probability for sustaining a tax position is greater than
50%, then the tax position is warranted and recognition should be at the highest amount which would be expected to be
realized upon ultimate settlement related to unrecognized tax benefits.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
As of June 30, 2022, 2021 and 2020, the Company had $0.1 million, $0.1 million and $0.1 million in accrued interest and
penalties, respectively.

The unrecognized tax benefits for the years ended June 30, 2022, 2021 and 2020 were as follows:

Balance at beginning of the year
Additions for prior year tax positions
Additions for current year tax positions
Reductions for prior year tax positions
Balance at end of the year

Year Ended June 30,

2022

2021
(In thousands)

2020

$ 1,057
364
482
(173)
$ 1,729

850
196
261
(250)
$ 1,057

$ 1,545
161
179
(1,035)
850

If recognized, all of the $1.7 million balance of unrecognized tax benefits as of June 30, 2022 would affect the
effective tax rate. The Company does not anticipate a significant increase or decrease in unrecognized tax benefits in the
next twelve months.

The Company remains subject to audit by the Internal Revenue Service for federal tax purposes for tax years after
June 30, 2018. Certain state and foreign tax jurisdictions are also either currently under audit or remain open under the
statute of limitations for the tax years after June 30, 2016.

6. 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”). As of June 30, 2022 and 2021, the finance lease liability was $66.3 million
and $68.9 million, respectively, with lease interest rates ranging from 1.52% to 3.95%. As of June 30, 2022 and 2021, the
balance of the associated right-of-use assets was $42.7 million and $49.0 million, respectively. The right-of-use asset is
recorded within property and equipment, net on the consolidated balance sheets. Lease amortization expense associated
with the Company’s finance leases is recorded within instructional costs and services on the consolidated statements of
operations.

The Company entered into an agreement with BALC in April 2020 for $25.0 million (increased to $41.0 million
in July 2020) to provide financing for its leases through March 2021 at varying rates. The Company entered into additional
agreements during fiscal year 2021 to provide financing of $54.0 million for its student computers and peripherals leases
through October 2022 at varying rates. Individual leases with BALC 36-month payment terms, fixed rates ranging from

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

1.52% to 3.95%, and a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to
secure the outstanding leases.

The following is a summary, as of June 30, 2022 and June 30, 2021, respectively, of the present value of the net

minimum lease payments under the Company’s finance leases:

2022
2023
2024
2025
2026
Total minimum payments
Less: imputed interest
Finance lease liability
Less: current portion of finance lease liability
Long-term finance lease liability

Operating Leases

(cid:3)
(cid:3)

Year Ended June 30,

2022

2021

(in thousands)
$
—
38,600
24,816
4,468
22
67,906
(1,629)
66,277
(37,389)
28,888

28,715
28,105
14,303
—
—
71,123
(2,219)
68,904
(27,336)
41,568

The Company is a lessee under operating leases for various facilities to support the Company’s operations. As of
June 30, 2022 and 2021, the operating lease liability was $88.0 million and $98.1 million, respectively. As of June 30, 2022
and 2021 the balance of the associated right-of-use assets was $85.5 million and $94.7 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 consolidated statements of operations.

Individual operating leases range in terms of 1 to 11 years and expire on various dates through fiscal year 2034

and the minimum lease payments are discounted using the Company’s incremental borrowing rate.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

The following is a summary as of June 30, 2022 and June 30, 2021, respectively, of the present value of the

minimum lease payments under the Company’s operating leases:

2022
2023
2024
2025
2026
2027
Thereafter
Total minimum payments
Less: imputed interest
Operating lease liability
Less: current portion of operating lease liability
Long-term operating lease liability

(cid:3)
(cid:3)

Year Ended June 30,

2022

2021

(in thousands)

—
15,120
16,638
16,168
12,900
8,797
27,447
97,070
(9,113)
87,957
(12,830)
75,127

23,030
16,204
15,032
14,222
11,247
—
27,432
107,167
(9,060)
98,107
(20,649)
77,458

The Company is subleasing one of its facilities through July 2023, one through November 2024, and one 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 consolidated statements of operations. The following is
a summary as of June 30, 2022 and June 30, 2021, respectively, of the expected sublease income:

2022
2023
2024
2025
2026
Total sublease income

(cid:3)
(cid:3)

Year Ended June 30,

2022

2021

(in thousands)

—
1,396
665
412
140
2,613

1,496
797
66
—
—
2,359

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

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 leases for the years ended June 30, 2022,
2021 and 2020:

Lease cost

Finance lease cost:

Amortization of right-of-use assets
Interest on lease liabilities

Instructional costs and services:

Operating lease cost
Short-term lease cost
Sublease income

Selling, general, and administrative expenses:

Operating lease cost
Short-term lease cost
Sublease income
Total lease cost

Other information

Cash paid for amounts included in the measurement of lease
liabilities

Operating cash flows from operating leases
Financing cash flows from finance leases

Right-of-use assets obtained in exchange for new finance lease
liabilities
Right-of-use assets obtained in exchange for new operating lease
liabilities
Weighted-average remaining lease term - finance leases
Weighted-average remaining lease term - operating leases
Weighted-average discount rate - finance leases
Weighted-average discount rate - operating leases

7. Debt

2022

Year Ended June 30,

2021

(in thousands)

2020

34,719
1,769

$ 28,647
1,111

$ 16,740
820

15,718
67
(955)

6,360
125
(685)
57,118

15,877
181
(920)

6,902
222
(419)

6,681
970
(916)
$ 51,631

6,227
992
(760)
$ 30,724

(20,742)
(33,011)

$ (21,025)
(24,315)

$ (13,124)
(27,675)

23,232

10,589

1.85 yrs.
6.54 yrs.
2.47 %
2.75 %

66,861

17,160

1,643
2.52 yrs.
6.58 yrs.
2.45 %
2.75 %

6,311
0.79 yrs.
7.15 yrs.
2.86 %
2.76 %

The following is a summary, as of June 30, 2022 and June 30, 2021, respectively, of the components of the

Company’s outstanding long-term debt:

(cid:3)
(cid:3)

Year Ended June 30,

2022

2021

(in thousands)

Convertible Senior Notes due 2027
Less: unamortized discount
Less: unamortized debt issuance costs
Total debt
Less: current portion of debt
Long-term debt

420,000
—
(8,562)
411,438
—
411,438

420,000
(113,331)
(7,398)
299,271
—
299,271

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Convertible Senior Notes due 2027

In August and September 2020, the Company 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 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 $4.7 million and $3.9 million, respectively, during the years ended June 30, 2022 and
2021.

Prior to the adoption of ASU 2020-06, the Company separated the Notes into liability and equity components.
The initial carrying amount of the liability component was $294.6 million and was calculated using a discount rate of 6.5%.
The discount rate was based on the terms of a similar debt instrument as the Notes without the associated conversion
feature. The carrying amount of the equity component representing the conversion option was determined by deducting
the fair value of the liability component from the principal amount of the Notes, or $125.4 million. The amount recorded
in equity was not subject to remeasurement or amortization. The $125.4 million also represented the initial discount
recorded on the Notes. As discussed in Note 3, “Summary of Significant Accounting Policies - Recent Accounting
Pronouncements,” the discount recorded within debt and equity was eliminated upon the adoption of ASU 2020-06.

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 related to the amortization of the debt issuance costs of $1.6 million and
$0.6 million, respectively, during the years ended June 30, 2022 and 2021.

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 (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.

8. 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 has a
five-year term and incorporates 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 LIBOR 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 is secured by the Company’s assets. The Credit Facility agreement allows for an
amendment to establish a new benchmark interest rate when LIBOR is discontinued during the five-year term. As of

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

June 30, 2022, 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 and as of June 30, 2022, the Company had no amounts
outstanding on the Credit Facility. The Credit Facility also includes a $200.0 million accordion feature.

9. Equity Incentive Plan

On December 15, 2016 (the “Effective Date”), the Company’s stockholders approved the 2016 Incentive Award
Plan (the “Plan”). The 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 Plan may include
stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. Under the
Plan, the following types of shares go back into the pool of shares available for issuance:

(cid:120)

unissued shares related to forfeited or cancelled restricted stock and stock options from Plan awards and Prior
Plan awards (that were outstanding as of the Effective Date), and;

shares tendered to satisfy the tax withholding obligation related to the vesting of restricted stock (but not stock
options).

Unlike the Company’s 2007 Equity Incentive Award Plan (the “Prior Plan”), the Plan has no evergreen provision
to increase the shares available for issuance; any new shares would require stockholder approval. The Prior Plan expired
in October 2017, and the Company no longer awards equity from the Prior Plan. At June 30, 2022, the remaining aggregate
number of shares of the Company’s common stock authorized for future issuance under the Plan was 1,915,531. At
June 30, 2022, there were 1,557,236 shares of the Company’s common stock that remain outstanding or nonvested under
the 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
consolidated statements of operations.

Stock Options

Each stock option is exercisable pursuant to the vesting schedule set forth in the stock option agreement granting
such stock option, generally over four years. No stock option shall be exercisable after the expiration of its option term.
The Company has granted stock options under the Prior Plan and the Company has also granted stock options to executive
officers under stand-alone agreements outside the Prior Plan.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Stock option activity including stand-alone agreements during the years ended June 30, 2022, 2021 and 2020 was

as follows:

Outstanding, June 30, 2019
Granted
Exercised
Forfeited or canceled
Outstanding, June 30, 2020
Granted
Exercised
Forfeited or canceled
Outstanding, June 30, 2021
Granted
Exercised
Forfeited or canceled
Outstanding and exercisable,
June 30, 2022

Weighted
Average
Remaining
Contractual
Life (Years)
2.64

Aggregate
Intrinsic
Value
$ 11,312,871

1.65

$ 8,325,869

0.82

437,037

Weighted
Average
Exercise
Price
$ 19.82
—
16.07
30.92
$ 19.73
—
19.83
—
$ 16.58
—
16.14
31.73

Shares
1,036,017
—
(4,000)
(10,500)
1,021,517
—
(990,067)
—
31,450
—
(29,100)
(1,000)

1,350

$ 14.77

0.98

35,127

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between
the Company’s closing stock price on the last day of the period and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option holders had all option holders exercised their options
on June 30, 2022. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s
stock. The total intrinsic value of options exercised during the years ended June 30, 2022, 2021 and 2020 was $0.5
million, $24.6 million, and $0.0 million, respectively.

As of June 30, 2022, there was no unrecognized compensation expense related to nonvested stock options
granted. During the years ended June 30, 2022, 2021 and 2020, the Company recognized $0.0 million, $0.0 million and
$0.1 million, respectively, of stock-based compensation expense related to stock options.

Restricted Stock Awards

The Company has approved grants of restricted stock awards (“RSA”) pursuant to the Plan and Prior Plan. Under
the 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. Under the Plan and Prior Plan, there have
been no awards of restricted stock to independent contractors.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Restricted stock award activity during the years ended June 30, 2022, 2021 and 2020 was as follows:

Nonvested, June 30, 2019
Granted
Vested
Canceled
Nonvested, June 30, 2020
Granted
Vested
Canceled
Nonvested, June 30, 2021
Granted
Vested
Canceled
Nonvested, June 30, 2022

Weighted
Average
Grant-Date
Fair Value

17.08
26.84
16.93
21.48
23.73
37.87
21.78
27.94
30.26
35.27
28.62
34.33
33.27

Shares
1,322,552
1,126,227
(750,634)
(79,541)
1,618,604
578,070
(704,921)
(82,419)
1,409,334
582,273
(699,346)
(160,795)
1,131,466

Performance-Based Restricted Stock Awards (included above)

During the year ended June 30, 2022, 37,313 new performance-based restricted stock awards were granted and
in total, 374,360 remain nonvested at June 30, 2022. During the year ended June 30, 2022, 221,194 performance-based
restricted stock awards vested. Vesting of the performance-based restricted stock awards is contingent on the achievement
of certain financial performance goals and service vesting conditions.

During fiscal year 2021, the Company granted 30,364 performance-based restricted stock awards to the
Company’s CEO with a weighted average grant-date fair value of $24.70 per share. These awards were granted pursuant
to the Plan and were subject to the achievement of Adjusted EBITDA metrics for the calendar year 2021. In January 2022,
achievement was certified at 133% of target, which resulted in an additional 10,020 shares, and one-third of the award
vested; the remaining two-thirds will vest annually over two years.

During fiscal year 2021, the Company granted 82,710 performance-based restricted stock awards to the
Company’s named executive officers (“NEOs”) with a weighted average grant-date fair value of $45.33 per share. These
awards were granted pursuant to the Plan and were subject to the achievement of Adjusted EBITDA metrics in fiscal year
2021. In August 2021, achievement was certified at 133% of target, which resulted in an additional 27,293 shares, and
one-third of the award vested; the remaining two-thirds will vest annually over two years.

During fiscal year 2020, the Company granted 358,294 performance-based restricted stock awards to the
Company’s then CEO with a weighted average grant-date fair value of $27.91 per share. These awards were granted
pursuant to the Plan and are subject to the achievement of target free cash flow metrics in each of the fiscal years 2020
through 2022. The metrics are measured at the end of each fiscal year; however if either of the first two tranches are not
achieved, the awards may still vest if the free cash flow metric in aggregate is met over the three-year life of the award. In
August 2021, the second tranche was achieved at above target resulting in the vesting of 119,431 shares. The Company is
currently amortizing the third tranche over the vesting period because it believes that it is probable that the free cash flow
target will be met. The free cash flow metric was not met for fiscal year 2020, however, the Company believes that it will
be met in aggregate, and therefore is amortizing the first tranche over a three-year period.

Service-Based Restricted Stock Awards (included above)

During the year ended June 30, 2022, 544,960 new service-based restricted stock awards were granted and in
total, 757,107 remain nonvested at June 30, 2022. During the year ended June 30, 2022, 478,152 service-based restricted

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

stock awards vested.

Summary of All Restricted Stock Awards

As of June 30, 2022, there was $19.3 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 1.3 years. The fair value
of restricted stock awards granted for the years ended June 30, 2022 and 2021 was $20.5 million and $21.9 million,
respectively. The total fair value of shares vested for the years ended June 30, 2022 and 2021 was $23.5 million and
$24.5 million, respectively. During the years ended June 30, 2022, 2021 and 2020, the Company recognized $18.4 million,
$22.6 million and $17.1 million, respectively, of stock-based compensation expense related to restricted stock awards.

Performance Share Units (“PSU”)

The Company has approved grants of performance share units (“PSU”) pursuant to the 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.

Performance share unit activity (excluding liability-classified awards) during the years ended June 30, 2022, 2021

and 2020 was as follows:

(cid:3)
(cid:3)
(cid:3)
(cid:3)
Nonvested, June 30, 2019
Granted
Vested
Canceled
Nonvested, June 30, 2020
Granted
Vested
Canceled
Nonvested, June 30, 2021
Granted
Vested
Canceled
Nonvested, June 30, 2022

Fiscal Year 2022 LTIP

(cid:3)
(cid:3)
(cid:3)

(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)

(cid:3)
(cid:3)
(cid:3)

2,372,241 (cid:3)
100,964 (cid:3)
— (cid:3)
(8,352)(cid:3)
2,464,853 (cid:3)
477,700 (cid:3)
— (cid:3)
(64,509)(cid:3)
2,878,044 (cid:3)
346,880 (cid:3)
(1,810,752)(cid:3)
(1,058,870)(cid:3)
355,302 (cid:3)

Weighted

Average

Grant-Date

Fair Value

10.61
15.30
—
29.93
10.78
40.17
—
28.33
15.26
34.90
9.95
24.95
32.62

During the year ended June 30, 2022, the Company granted 250,250 PSUs at target under a Long Term Incentive

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Plan (“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. The Company determined the
likelihood of achievement of the performance condition for Tranche #1 is not able to be determined at this time.

Fiscal Year 2021 Tech Elevator MIP

During fiscal year 2021, the Company granted to the executive team of Tech Elevator a time-based award with a
value of $4.0 million and a performance-based award with a target value of $4.0 million under a Management Incentive
Plan (“MIP”). The time-based award vests equally over three years on the anniversary of the closing date of the acquisition
of Tech Elevator (see Note 12, “Acquisitions and Investments” for additional detail on the Company’s acquisition). During
the second quarter of fiscal year 2022, one-third vested and was settled with the issuance of 38,575 PSUs. The
performance-based award is tied to the achievement of certain revenue and EBITDA targets of Tech Elevator. Seventy
percent of the award is based on Tech Elevator’s revenues for the calendar year 2023 (“Tranche #1”) and thirty percent of
the earned award is based on Tech Elevator’s EBITDA for the calendar year 2023 (“Tranche #2”), both of which are
expected to vest after achievement is certified in January 2024. The level of performance will determine the number of
PSUs earned as measured against threshold and target achievement levels. In all cases, vesting is dependent upon
continuing service by the grantee as an employee of the Company. The MIP is a liability-classified award. The Company
determined the likelihood of achievement of the performance conditions is not able to be determined at this time.

Fiscal Year 2021 LTIP

During fiscal year 2021, the Company granted 111,450 PSUs at target under a LTIP which are tied to the
achievement of certain individualized financial and non-financial performance targets. These PSUs had a grant date fair
value of $2.7 million, or a weighted average grant-date fair value of $24.15 per share. Forty percent will vest after
achievement is certified during the first quarter of fiscal year 2023 and sixty percent will vest one year later. The level of
performance will determine the number of PSUs earned as measured against threshold, target and outperform achievement
levels. In all cases, vesting is dependent upon continuing service by the grantee as an employee of the Company. The fiscal
year 2021 LTIP is an equity-classified award. The Company is currently amortizing certain awards over their vesting
periods because it believes that it is probable that the specific metrics will be achieved. Three metrics are assumed to be
achieved at each of threshold, target and outperform, respectively. The aggregate target grant date fair value of these
metrics are $0.3 million. The remaining metrics are currently being assessed as not probable of achievement.

Fiscal Year 2021 Career Learning PSUs

During fiscal year 2021, the Company granted 366,250 PSUs at target which are tied to the achievement of Career
Learning revenue targets for fiscal years 2021 – 2023. These PSUs had a grant date fair value of $16.5 million, or a
weighted average grant-date fair value of $45.05 per share. The vesting is as follows:

(cid:120)

77,690 PSUs relate to fiscal year 2021 revenues and if achieved, one-third of the award will vest immediately,
and the remaining two-thirds will vest annually over two years;
122,080 PSUs relate to fiscal year 2022 revenues and if achieved, two-thirds of the award will vest
immediately, and the remaining one-third will vest the following year; and
166,480 PSUs relate to fiscal year 2023 revenues and if achieved, the award will vest immediately.

The level of performance will determine the number of PSUs earned as measured against threshold, target and

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

outperform achievement levels. In all cases, vesting is dependent upon continuing service by the grantee as an employee
of the Company. The fiscal year 2021 Career Learning PSUs are equity-classified awards. In August 2021, the Company
determined the performance condition of fiscal year 2021 revenues were not achieved resulting in a forfeiture of those
shares. Additionally, in October 2021, the two remaining tranches were forfeited as the grantee of the PSUs separated
from the Company.

Fiscal Year 2020 Galvanize TRIP

During fiscal year 2020, the Company granted to the executive team of Galvanize a target level of $12.3 million
under a Transaction Related Incentive Plan (“TRIP”) which is tied to the achievement of certain revenue and EBITDA
targets of Galvanize. Seventy percent of the earned award is based on the performance of Galvanize for the calendar year
2021 (“Tranche #1”) and thirty percent of the earned award is based on the performance of Galvanize for the calendar year
2022 (“Tranche #2”), both of which are expected to vest after achievement is certified in January following each of the
calendar year ends. The revenue and EBITDA targets are split sixty percent and forty percent, respectively, for both
tranches. In all cases, vesting is dependent upon continuing service by the grantee as an employee of the Company. The
level of performance will determine the number of PSUs earned as measured against threshold, target and outperform
achievement levels. In January 2022, the Company determined that the metrics for calendar year 2021 were not met and
Tranche #1 was forfeited. The TRIP is a liability-classified award. The Company determined the likelihood of achievement
of the performance conditions associated with Tranche #2 is not probable.

Fiscal Year 2019 LTIP

During fiscal year 2019, the Company granted 263,936 PSUs at target under a LTIP which are tied to certain
career learning revenue targets and enrollment levels, as well as students’ academic progress. These PSUs had a grant date
fair value of $7.9 million, or a weighted average grant-date fair value of $30.05 per share. During fiscal year 2020, the
Company granted an additional 34,030 PSUs at target with a grant date fair value of $0.8 million, or $23.51 per share.
Forty-five percent of the earned award is based on students’ academic progress (“Tranche #1”) and twenty-five percent of
the earned award is based on certain enrollment levels (“Tranche #2”). In October 2021, Tranche #2 achievement was
certified at approximately 193% of target resulting in the vesting of 115,223 shares, while Tranche #1 was not achieved
resulting in 107,397 forfeited shares. The remaining thirty percent of the earned award is based on certain revenue targets
(“Tranche #3”) and will vest after achievement is certified in August 2022. The level of performance will determine the
number of PSUs earned as measured against threshold, target and outperform achievement levels. In all cases, vesting is
dependent upon continuing service by the grantee as an employee of the Company. The Company determined the
achievement of the performance conditions associated with Tranche #3 was probable at the outperform level.

Fiscal Year 2019 SPP

During fiscal year 2019, the Company adopted a new long-term shareholder performance plan (“2019 SPP”) that
provides for incentive award opportunities to its key senior executives. The awards were granted in the form of PSUs and
will be earned based on the Company’s market capitalization growth over a completed three-year performance period.
The 2019 SPP was designed to provide the executives with a percentage of shareholder value growth. No amounts will be
earned if total stock price growth over the three-year period is below 25% (7.6% annualized). An amount of 6% of total
value growth will be earned based on achieving total stock price growth of 33% (10% annualized) and a maximum of
7.5% of total value growth will be earned if total stock price growth equals or exceeds 95% (25% annualized).

During fiscal year 2019, the Company granted 2,108,305 PSUs at a weighted average grant-date fair value of
$8.18 per share, based on the highest level of performance. During fiscal year 2020, the Company granted an additional
66,934 PSUs at a weighted average grant-date fair value of $12.56 per share, based on the highest level of performance.
The final amount of PSUs was determined (and vesting occurred) based on the 30-day average price of the Company’s
stock subsequent to seven days after the release of fiscal year 2021 results. The fair value was determined using a Monte
Carlo simulation model and is amortized on a straight-line basis over the vesting period. The SPP is a market-based award,
and therefore is not subject to any probability assessment by the Company.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

In October 2021, the Company certified achievement of the 2019 SPP based upon the 30-day average price of
the Company’s stock during the period of August 18, 2021 – September 17, 2021 of $34.13. The 112% market
capitalization growth over the three-year performance period resulted in the vesting 1,656,594 shares to the Company’s
six named executive officers.

Summary of All Performance Share Units

As of June 30, 2022, there was $5.1 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 1.6 years. During the years ended June 30, 2022, 2021 and 2020 the
Company recognized $0.1 million, $16.7 million and $6.3 million, respectively, of stock-based compensation expense
related to PSUs. Included in the stock-based compensation expense above, for the years ended June 30, 2022 and 2021 is
$1.3 million and $0.8 million, respectively, related to the Tech Elevator time-based portion of the MIP. This amount was
recorded in accrued liabilities on the consolidated balance sheets because it is a liability-classified award.

Deferred Stock Units (“DSU”)

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 years ended June 30, 2022, 2021 and 2020 was as follows:

(cid:3)
(cid:3)
(cid:3)

(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)

(cid:3)
(cid:3)
(cid:3)

18,258 (cid:3)
23,844 (cid:3)
— (cid:3)
— (cid:3)
42,102 (cid:3)
17,252 (cid:3)
— (cid:3)
— (cid:3)
59,354 (cid:3)
14,769 (cid:3)
(5,006)(cid:3)
— (cid:3)
69,117 (cid:3)

Weighted

Average

Grant-Date

Fair Value

25.41
20.13
—
—
22.42
21.01
—
—
22.01
33.24
23.97
—
24.27

Summary of All Deferred Stock Units

As of June 30, 2022, there was $0.1 million of total unrecognized compensation expense related to nonvested
DSUs. The cost is expected to be recognized over a weighted average period of 0.5 years. During the years ended
June 30, 2022, 2021 and 2020, the Company recognized $0.5 million, $0.4 million and $0.5 million, respectively, of stock-
based compensation expense related to DSUs.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

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.

Georgia Cyber Academy Arbitration

On May 10, 2019, K12 Virtual Schools LLC filed a demand for arbitration with the American Arbitration
Association (“AAA”), Case No. 01-19-001-4778, naming Georgia Cyber Academy, Inc. (“GCA”) as the respondent. The
demand asserted claims for GCA’s breach and anticipatory breach of the Educational Products and Services Agreement
between GCA and K12 Virtual Schools LLC, as amended on January 4, 2019, based on GCA’s engagement of other
educational products and service providers for the school year 2019-2020. On May 29, 2019, GCA filed counterclaims
against K12 Virtual Schools, LLC for breach of contract, fraud, breach of the duty of good faith and fair dealing, and
negligent misrepresentation. The AAA appointed an arbitrator on June 12, 2019, and the parties presented evidence in
support of their respective claims during merits hearings in March and June 2020. On July 8, 2020, the parties executed
an agreement, effective June 30, 2020, to resolve all of their claims. Under the terms of the settlement agreement, GCA
was scheduled to pay the Company $19 million over a period of two years, of which $10 million was paid in July 2020.
The Company and GCA agreed to settle the remaining $9 million for a payment of $8.64 million that was received by the
Company in August 2021.

Securities Litigation

On November 19 and December 11, 2020, respectively, two putative securities class action lawsuits captioned
Yun Chau Lee v. K12 Inc., et al, Case No. 1:20-cv-01419 (the “Lee Case”), and Jennifer Baig v. K12 Inc., et al, Case No.
1:20-cv-01528 (the “Baig Case”) were filed against the Company, one of its current officers, and one of its former officers
in the United States District Court for the Eastern District of Virginia, purportedly on behalf of a class of persons who
purchased or otherwise acquired the Company’s common stock between April 27, 2020 and September 18, 2020, inclusive.
On February 17, 2021, the District Court consolidated the Lee Case and the Baig Case under the caption In re K12 Inc.
Securities Litigation, Case No. 1:20-cv-01419 (the “Consolidated Securities Class Action”), and appointed a lead plaintiff.
The lead plaintiff filed a consolidated amended complaint on April 5, 2021, alleging violations by the Company and the
individual defendants of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated under the Exchange Act, and
violations by the individual defendants of Section 20(a) of the Exchange Act. The complaint alleged, among other things,
that the Company and the individual defendants made false or misleading statements and/or omitted to disclose material
facts concerning the Company’s technological capabilities and expertise to support increased demand for virtual and
blended education related to the global emergence of COVID-19, its cybersecurity protocols and protections, and its
administrative support and training to teachers, students, and parents. The complaint sought unspecified monetary
damages and other relief. The Company filed a motion to dismiss the complaint in its entirety on May 20, 2021,which the
District Court granted, without prejudice, on September 16, 2021. The plaintiffs did not file a second amended complaint,
but appealed the District Court’s dismissal decision to the United States Court of Appeals for the Fourth Circuit on
December 1, 2021. Briefing in that appeal concluded March 10, 2022, and a decision from the Court of Appeals remains
outstanding.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

On December 21, 2020 and April 30, 2021, respectively, related derivative lawsuits captioned Larry Shemen, et
al v. Aida M. Alvarez, et al, Case No. 1:20-cv-01731 (the “Shemen Case”), and Wajid Ahmed v. Aida M. Alvarez, et al,
Case No. 1:21-cv-00618 (the “Ahmed Case) were filed by three of the Company’s shareholders in the United States District
Court for the District of Delaware. The plaintiffs in the Shemen Case and the Ahmed Case allege substantially the same
facts alleged in the Consolidated Securities Class Action. By stipulation of the parties on May 14, 2021, the Court
consolidated the Shemen Case and the Ahmed Case under the caption In re Stride Inc. Derivative Litigation, Case No. 20-
01731 (the “Consolidated Derivative Action”), and designated as operative the complaint filed in the Ahmed Case. The
operative complaint purports to assert claims on the Company’s behalf against certain of its officers and directors for
breach of fiduciary duty, unjust enrichment, and waste of corporate assets, and for violation of Sections 14(a) and 20(a) of
the Exchange Act. The complaint seeks unspecified monetary damages, corporate governance reforms, and other relief.
The Consolidated Derivative Action is stayed pending resolution of the Consolidated Securities Class Action appeal.

We intend to continue defending vigorously against each and every allegation and asserted claim in these matters.

Employment Agreements

The Company has entered into employment agreements with certain executive officers that provide for severance
payments and, in some cases other benefits, upon certain terminations of employment. Except for the agreement with the
Company’s Executive Chairman with an amended extended term to September 30, 2022, all other agreements 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 agreement.

Off-Balance Sheet Arrangements

As of June 30, 2022, the Company provided guarantees of approximately $0.4 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.

Risks and Uncertainties

Impacts of COVID-19 on Stride’s Business

While the long-term impact of the global emergence of COVID-19 is not estimable or determinable, in late fiscal

year 2020, the Company experienced an increase in demand for its products and services.

The Company continues to conduct business as usual with some modifications to employee travel, employee
work locations, and cancellation of certain events. The Company will continue to actively monitor the situation and may
take further actions that alter its business operations as may be required by federal, state or local authorities or that it
determines is in the best interests of its employees, customers, partners, suppliers and stockholders. It is not clear what the
potential effects any such alterations or modifications may have on the Company’s business, including the effects on its
customers and prospects, or on its long-term financial results.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed
into law. The Company has evaluated the business provisions in the CARES Act and adopted the deferral of the employer
portion of the social security payroll tax (6.2%) outlined within. The deferral was effective from the enactment date

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

through December 31, 2020. The deferred amount of $14.1 million will be paid in two installments, $7.05 million of the
deferred amount was paid in December 2021 and the remaining $7.05 million will be paid by December 31, 2022. The
deferred payroll taxes due on December 31, 2022 are recorded within accrued compensation and benefits on the
consolidated balance sheets.

11. Severance

During the years ended June 30, 2022, 2021 and 2020, the Company reduced its workforce, resulting in severance
of $3.7 million, $2.4 million and $1.5 million, respectively. Included in severance expense for the years ended
June 30, 2022, 2021 and 2020 is $0.1 million, $0.5 million and $0.1 million, respectively, associated with accelerated
vesting of equity awards to former executives and other employees.

12. Acquisitions and Investments

Acquisition of MedCerts, LLC

On November 30, 2020, the Company acquired 100% of MedCerts in exchange for $70.0 million and estimated
contingent consideration of $10.8 million. The purchase price is payable in two tranches; $55.0 million was paid at closing,
and $15.0 million plus the final contingent consideration will be paid on the 18-month anniversary of the closing. In
addition, during the fourth quarter of fiscal year 2021, the Company paid an additional $0.3 million related to the
finalization of working capital. MedCerts students participate in online, hands-on career training courses in the healthcare
and medical fields as they prepare for more than a dozen national healthcare certifications. The acquisition of MedCerts
further expands the Company’s post-secondary skills training in the healthcare and medical fields. The Company also
plans to use MedCerts’ curriculum to create appropriate content to offer high school students.

The acquisition has been accounted for as a business combination under the acquisition method of accounting,
which results in acquired assets and assumed liabilities being measured at their fair values as of November 30, 2020, the
acquisition date. As of the acquisition date, goodwill was measured as the excess of consideration transferred over the fair
values of the assets acquired and liabilities assumed.

Based on management’s valuation of the fair value of tangible and intangible assets acquired and liabilities

assumed, the purchase price was allocated as follows (in thousands):

Allocation of Purchase Price

Cash
Current assets, excluding cash
Property and equipment, net
Intangible assets, net
Goodwill
Current liabilities
Deferred revenue
Deferred tax asset (liability)

Total consideration

205
5,074
1,896
26,607
51,033
(2,201)
(1,562)
16
81,068

The fair value of the identified intangible assets was determined primarily using an income-based approach of
either the multi-period excess earnings method or relief from royalty method, as appropriate. Intangible assets are
amortized on a straight-line basis over the amortization periods noted below.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Intangible Assets

Customer relationships
Developed technology
Trade names

Amount
(In thousands)

12,072
11,970
2,565
26,607

Estimated
Useful Life
(In years)
5.84
7.00
5.00

The contingent consideration represents the fair value of additional consideration payable to the seller, estimated
using a Monte Carlo simulation model. The amount of consideration to be distributed on the 18-month anniversary of the
closing is based on a multiplier calculated using the annualized earnings before interest, taxes, depreciation and
amortization (“EBITDA”) for the period December 2021 – May 2022. This multiplier is applied to the annualized trailing
EBITDA for the period March 2022 – May 2022 to calculate an enterprise value of MedCerts as of May 2022. The
payment, if any, will equal 49% of the enterprise value less 49% of the original purchase price of $70.0 million ($34.3
million). The Company and the MedCerts sellers have executed an agreement to extend the review period related to the
earnout to mid-August 2022.

Subsequent to the acquisition date, the Company is required to reassess its estimate of the fair value of contingent
consideration, and record any changes in earnings when the estimate is based on information not known as of the
acquisition date. During fiscal year 2021, the Company recorded an expense of $0.3 million related to the estimate of the
fair value of its contingent consideration. During the year ended June 30, 2022, the Company recorded an expense of $0.2
million, related to the estimate of the fair value of its contingent consideration. Those adjustments are recorded within
selling, general, and administrative expenses on the consolidated statements of operations. The fair value of the contingent
consideration as of June 30, 2022 was $11.3 million and is recorded within accrued liabilities on the consolidated balance
sheets.

Goodwill represents the excess of the purchase price of an acquired business over the fair value of the tangible
and intangible assets acquired and liabilities assumed. Goodwill will not be amortized but instead will be tested for
impairment at least annually (or more frequently if indicators of impairment arise). In the event that management
determines that the goodwill has become impaired, the Company will incur an accounting charge for the amount of the
impairment during the fiscal quarter in which the determination is made. Goodwill is deductible for tax purposes.

Included in the Company’s consolidated results of operations for the year ended June 30, 2021 are revenues and a

loss from operations of $14.6 million and $3.5 million, respectively, related to MedCerts.

Acquisition of Tech Elevator, Inc.

On November 30, 2020, the Company acquired 100% of Tech Elevator in exchange for $23.5 million, plus
working capital of $2.2 million. Like Galvanize, Tech Elevator provides talent development for individuals and enterprises
in information technology fields. The acquisition of Tech Elevator expands Galvanize’s student demographic profile,
geographic footprint, and hiring partner portfolio; as well as provides additional curriculum to create appropriate content
to offer high school students.

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

Based on management’s valuation of the fair value of tangible and intangible assets acquired and liabilities

assumed, the purchase price was allocated as follows (in thousands):

Allocation of Purchase Price

Cash
Current assets, excluding cash
Property and equipment, net
Operating lease right-of-use assets, net
Intangible assets, net
Goodwill
Other assets
Current liabilities
Deferred revenue
Deferred tax liability
Current operating lease liability
Long-term operating lease liability

Total consideration

1,736
518
513
724
7,105
17,897
377
(267)
(534)
(1,650)
(420)
(304)
25,695

The fair value of the identified intangible assets was determined primarily using an income-based approach of either
the multi-period excess earnings method or relief from royalty method, as appropriate. Intangible assets are amortized on
a straight-line basis over the amortization periods noted below.

Intangible Assets

Customer relationships
Developed technology
Trade names

Intangible Assets

Amount
(In thousands)

311
2,796
3,998
7,105

Estimated
Useful Life
(In years)
3.92
5.00
15.00

Included in the Company’s consolidated results of operations for the year ended June 30, 2021 are revenues and

income from operations of $7.2 million and $0.4 million, respectively, related to Tech Elevator.

Acquisition of Galvanize, Inc.

On January 27, 2020, the Company acquired 100% of Galvanize in exchange for $165.0 million, plus working
capital of $9.2 million. Galvanize provides talent development for individuals and enterprises in information technology
fields. The acquisition of Galvanize expands the Company’s offerings to include post-secondary skills training in software
engineering, technology staffing and developing talent and capabilities for companies. The Company also plans to use
Galvanize’s curriculum to create appropriate content to offer high school students.

100

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

The acquisition has been accounted for as a business combination under the acquisition method of accounting,
which results in acquired assets and assumed liabilities being measured at their fair values as of January 27, 2020, the
acquisition date. As of the acquisition date, goodwill was measured as the excess of consideration transferred over the fair
values of the assets acquired and liabilities assumed.

Based on management’s valuation of the fair value of tangible and intangible assets acquired and liabilities

assumed, the purchase price was allocated as follows (in thousands):

Allocation of Purchase Price

Cash
Current assets, excluding cash
Property and equipment, net
Operating lease right-of-use assets, net
Intangible assets, net
Goodwill
Other assets
Current liabilities
Deferred revenue
Deferred tax asset (liability)
Current operating lease liability
Long-term operating lease liability
Other long-term liabilities

Total consideration

9,232
8,888
11,270
100,232
68,483
81,225
1,802
(4,370)
(3,374)
2,372
(11,620)
(89,782)
(130)
174,228

The Company made several adjustments to its fiscal year 2020 allocation of the preliminary purchase price during

fiscal year 2021.

(cid:120)

The value of the operating lease right-of-use assets, net increased from $99.7 million to $100.2 million. Lease
expense in fiscal year 2021 was not significantly impacted by the updated balance as of the acquisition date.
The Company and the sellers finalized its working capital calculation resulting in an adjustment to the
purchase price of $3.0 million.

(cid:120) Goodwill decreased from $84.7 million to $81.2 million as a result of the adjustments above.

The fair value of the identified intangible assets was determined primarily using an income-based approach of
either the multi-period excess earnings method or relief from royalty method, as well as the replacement cost approach, as
appropriate. Intangible assets are amortized on a straight-line basis over the amortization periods noted below.

Intangible Assets

Customer relationships
Developed technology
Trade names

Amount
(In thousands)

4,785
3,357
60,341
68,483

Estimated
Useful Life
(In years)
4.22
4.00
15.00

101

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

impairment at least annually (or more frequently if indicators of impairment arise). In the event that management
determines that the goodwill has become impaired, the Company will incur an accounting charge for the amount of the
impairment during the fiscal quarter in which the determination is made. Goodwill is not deductible for tax purposes.

Pro Forma Combined Results of Operations

The following unaudited pro forma combined results of operations give effect to the acquisition of Galvanize as
if it had occurred on July 1, 2018, and MedCerts and Tech Elevator as if they had occurred on July 1, 2019. The unaudited
pro forma combined results of operations are provided for informational purposes only and do not purport to represent the
Company’s actual consolidated results of operations had the acquisitions occurred on the dates assumed, nor are these
financial statements necessarily indicative of the Company’s future consolidated results of operations. The unaudited pro
forma combined results of operations do not reflect the costs of any integration activities or any benefits that may result
from operating efficiencies or revenue synergies.

(In thousands)

Revenues
Income from operations
Net income

Investments in Limited Partnerships

2021

Year Ended June 30,

1,552,173
111,287
72,443

2020

1,091,429
2,647
(4,506)

During fiscal year 2019, the Company invested in two early stage funds focused on career education with a total
commitment of $13.0 million. The Company invested in Rethink Education III, LP (“Rethink”) and New Markets
Education Partners II, L.P. (“New Markets”) to support the development of new technologies that will advance online
learning, to find early opportunities to adopt those new technologies at Stride, and to simultaneously achieve a reasonable
return on investment. As of June 30, 2022, the Company has contributed an aggregate $8.5 million to these funds: $2.2
million is an investment in New Markets and is recorded at cost and will be adjusted, as necessary, for impairment; and
$6.3 million is an investment in Rethink and is recorded under the equity method of accounting. The Company’s
investments in these funds are included in deposits and other assets on the consolidated balance sheets.

Investment in Tallo, Inc.

In August 2018, the Company made an initial investment of $6.7 million for a 39.5% minority interest in Tallo,
Inc. (“Tallo”). In August 2020, the Company invested an additional $2.3 million which increased its minority interest to
46.1%. These investments in preferred stock, which contain additional rights over common stock and have no readily
determinable fair value, were recorded at cost and will be adjusted, as necessary, for impairment. In the event Tallo issues
equity at a materially different price than what the Company paid, the Company would also assess changing the carrying
value. In conjunction with the Company’s initial investment in August 2018, Tallo also issued a convertible note to the
Company for $5.0 million that is being accounted for as an available-for-sale debt security and adjusted to fair value
quarterly. The note bears interest at the mid-term Applicable Federal Rate plus 25 bps per annum with a maturity of 48
months. The note is convertible at the Company’s option into 3.67 million Series D Preferred Shares that, combined with
the shares resulting from the conversion of the accrued interest, would give the Company an effective ownership of 55%
if exercised. In October 2021, the Company agreed to loan Tallo up to $3.0 million. This promissory note bears interest at
5% and has a maturity date of five years. The promissory note does not contain any means of conversion into additional
ownership by the Company. During the second and third quarters of fiscal year 2022, the Company funded $3.0 million
under the promissory note.

During fiscal year 2022, the Company adjusted its investment in Tallo preferred stock to fair value and recorded
an impairment charge of $4.5 million to other income (expense), net on the consolidated statements of operations. Also,
during fiscal year 2022, the Company recorded a credit loss expense of $4.1 million to reduce the carrying amount of the
convertible note and $3.0 million to reduce the carrying amount of the promissory note. The credit loss expenses are
recorded within selling, general, and administrative expenses on the consolidated statements of operations. Additionally,

102

STRIDE, INC.

Notes to Consolidated Financial Statements (Continued)

the Company reversed an aggregate $0.4 million of accrued interest on both instruments and made an accounting policy
election to record this within interest income (expense), net on the consolidated statements of operations. The Company’s
investment in Tallo, the convertible note, and promissory note are included in deposits and other assets on the consolidated
balance sheets.

13. 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 as an executive officer of the Company serves on its Board of Directors. During the years ended
June 30, 2022, 2021 and 2020, contributions made by the Company to Future of School were $1.2 million, $1.3 million,
and $1.2 million, respectively. In fiscal year 2019 and 2021, the Company accrued $2.5 million and $3.5 million,
respectively, for contributions to be made in subsequent years. The amounts shown for the years ended June 30, 2022,
2021 and 2020 reduced those obligations and as of June 30, 2022, $2.3 million remains outstanding as related to the fiscal
year 2021 accrual.

14. Employee Benefits

The Company maintains a 401(k) salary deferral plan (the “401(k) Plan”) for its employees. Employees who have
been employed for at least 30 days may voluntarily contribute to the 401(k) Plan on a pretax basis, up to the maximum
allowed by the Internal Revenue Service. The 401(k) Plan provides for a matching Company contribution of 50%, up to
first 5% of each participant’s contribution. The Company expensed $6.1 million, $3.8 million and $1.8 million during the
years ended June 30, 2022, 2021 and 2020, respectively, under the 401(k) Plan.

15. Supplemental Disclosure of Cash Flow Information

2022

Year Ended June 30,
2021

2020

6,641
35,972

4,504
18,717

$
$

1,287
3,384

— $
—
23,232

— $

1,280
66,861

17,652
99,676
17,160

374

255

229

184
—

116
—

88
1,145

394
2,157
600
(58)
(1,030)

11,043
33,712
68,930
(4,826)
(2,096)

$ 130,868
68,483
84,741
(103,490)
(3,374)

Cash paid for interest
Cash paid for taxes

Supplemental disclosure of non-cash financing activities:

Right-of-use assets obtained as a result of the adoption of ASC 842
Right-of-use assets obtained from acquisitions
Right-of-use assets obtained in exchange for new finance lease liabilities

Supplemental disclosure of non-cash investing activities:

Stock-based compensation expense capitalized on software development
Stock-based compensation expense capitalized on curriculum
development
Non-cash purchase price related to business combinations

Business combinations:

Acquired assets
Intangible assets
Goodwill
Assumed liabilities
Deferred revenue

$
$

103

SCHEDULE II

STRIDE, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ending June 30, 2022, 2021 and 2020

1. ALLOWANCE FOR DOUBTFUL ACCOUNTS

June 30, 2022
June 30, 2021
June 30, 2020

2. INVENTORY RESERVES

June 30, 2022
June 30, 2021
June 30, 2020

3. COMPUTER RESERVE (1)

June 30, 2022
June 30, 2021
June 30, 2020

Balance at
Beginning
of Period
$ 21,383,543
$ 6,807,674
$ 11,765,869

Additions
Charged to
Cost and
Expenses
8,555,918
6,561,243
2,882,067

Deductions from
Balance at
(Net Increases to)
End of Period
Allowance
2,946,424
$ 26,993,037
(8,014,626) $ 21,383,543
$ 6,807,674
7,840,262

Balance at
Beginning
of Period
$ 5,647,283
$ 4,817,300
$ 4,131,386

Charged to
Cost and
Expenses

880,809
1,038,019
877,357

Deductions,
Shrinkage and
Obsolescence
71,046
208,036
191,443

Balance at
End of Period
$ 6,457,046
$ 5,647,283
$ 4,817,300

Balance at
Beginning
of Period
$ 2,273,372
811,682
$
788,230
$

Additions
Charged to
Cost and
Expenses
135,948
2,007,076
835,488

Deductions,
Shrinkage and
Obsolescence
$ 369,549
545,386
812,036

Balance at
End of Period
$ 2,039,771
$ 2,273,372
$ 811,682

(1) A reserve account is maintained against potential obsolescence of, and damage beyond economic repair to, computers
provided to the Company’s students. The reserve is calculated based upon several factors including historical
percentages, the net book value and the remaining useful life. During fiscal years 2022, 2021 and 2020, certain
computers were written off against the reserve.

4. INCOME TAX VALUATION ALLOWANCE

Additions to Deductions in
Net Deferred Net Deferred

Tax Asset
Allowance
1,630,274
123,249
441,868

Tax Asset
Allowance

Balance at
End of Period
— $ 6,677,352
$ 5,047,078
— $ 4,990,768

66,939

June 30, 2022
June 30, 2021
June 30, 2020

Balance at
Beginning
of Period
$ 5,047,078
$ 4,990,768
$ 4,548,900

104

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(d) under the Exchange Act management has evaluated, with the participation of our
Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report. Disclosure controls and procedures refer to controls and other procedures designed
to ensure that information required to be disclosed in the reports the Company files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities
and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in our reports that the Company files or submits under
the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding our 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 applies its judgment in evaluating and implementing possible controls and procedures. Based on the evaluation
of our disclosure controls and procedures as of June 30, 2022, our Chief Executive Officer and Chief Financial Officer
concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting refers to a process designed by, or under the supervision of, our Chief
Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, 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 and includes those policies and procedures
that:

(cid:120)

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of our assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and members of our
board of directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of our assets that could have a material effect on our financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting
objectives because of inherent limitations. Internal control over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal
control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations,
there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is
possible to design into the process safeguards to reduce, though not eliminate, this risk.

Management evaluated the effectiveness of our internal control over financial reporting as of June 30, 2022 using
the framework set forth in the report of the Treadway Commission’s Committee of Sponsoring Organizations (COSO),
“Internal Control—Integrated Framework (2013).” As a result of management’s evaluation of our internal control over
financial reporting, management concluded that as of June 30, 2022, our internal control over financial reporting was

105

effective. The effectiveness of our internal control over financial reporting as of June 30, 2022 has been audited by BDO
USA, LLP, an independent registered public accounting firm, as stated in its report which appears on the subsequent page
of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting:

There was no change in our internal control over financial reporting that occurred during the fourth fiscal quarter
ended June 30, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.

106

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Stride, Inc.
Reston, Virginia

Opinion on Internal Control over Financial Reporting

We have audited Stride, Inc.’s (the “Company’s”) internal control over financial reporting as of June 30, 2022,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of June 30, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), the consolidated balance sheets of the Company as of June 30, 2022 and 2021, the related
consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three
years in the period ended June 30, 2022, and the related notes and financial statement schedule listed in the accompanying
index and our report dated August 9, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A,
Management’s Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

/s/ BDO USA, LLP

107

Potomac, Maryland
August 9, 2022

ITEM 9B. OTHER INFORMATION

Fourth Amended and Restated Bylaws

On August 4, 2022, our Board of Directors amended and restated the Company’s bylaws (the “Fourth Amended
and Restated Bylaws”) to, among other things (i) reflect amendments to the General Corporation Law of the State of
Delaware and (ii) clarify certain corporate procedures. Included among the amendments are additions to the procedures
for stockholders to properly bring business before an annual or special meeting of stockholders (Article III, Sections 3 and
4) and modernized procedures regarding how stockholders may vote or authorize a proxy at a stockholder meeting (Article
III, Section 9) and examine the list of stockholders entitled to vote at a stockholder meeting (Article III, Section 10). The
amendment also removes the requirement for 75% of the members of the Board of Directors to approve an amendment to
Article IV, Section 1 of the Fourth Amended and Restated Bylaws, which determines the number of directors that shall
constitute the whole Board of Directors.

The foregoing description of the Fourth Amended and Restated Bylaws does not purport to be complete and is
qualified in its entirety by reference to the Fourth Amended and Restated Bylaws, a copy of which is attached as Exhibit
3.2 and incorporated into this Annual Report on Form 10-K by reference.

Medina Transition Agreement

On August 5, 2022, the Company and Timothy Medina, the Company’s former Chief Financial Officer and
current Special Advisor to the Chief Executive Officer, entered into a transition agreement (the “Transition Agreement”).
The Transition Agreement provides that Mr. Medina will continue as a non-executive employee of the Company in his
role as Special Advisor to the Chief Executive Officer until June 30, 2023 (the “Employment Period”). During the
Employment Period, Mr. Medina will receive a base salary at an annualized rate equal to $475,000 until September 30,
2022, reduced to $36,000 for the remainder of the Employment Period, and continue to vest in his outstanding equity
awards. Provided that Mr. Medina remains employed through January 1, 2023, the Company will pay Mr. Medina a one-
time lump sum cash payment in the amount of $237,500, on or before January 15, 2023. If Mr. Medina remains employed
with the Company through June 30, 2023, or, if prior to that date his employment with the Company is terminated for
reasons other than his voluntary resignation, then, subject to Mr. Medina executing and not revoking a release of claims,
he will receive a lump-sum payment equal to $237,500 (plus the amount in the preceding sentence if not previously paid).

The foregoing description of the Transition Agreement is qualified in its entirety by reference to the full text of
the Transition Agreement, a copy of which is attached as Exhibit 10.20 and incorporated into this Annual Report on Form
10-K by reference.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not Applicable.

108

PART III

We will file a definitive Proxy Statement for our 2022 Annual Meeting of Stockholders (the 2022 Proxy
Statement”) with the SEC, pursuant to Regulation 14A of the Exchange Act, not later than 120 days after the end of our
fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to
Form 10-K. Only those sections of the 2022 Proxy Statement that specifically address the items set forth herein are
incorporated by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is hereby incorporated by reference to our 2022 Proxy Statement under the
captions “Proposal 1: Election of Directors,” “Corporate Governance and Board Matters” and, if applicable, “Delinquent
Section 16(a) Reports.”

We have adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees.
The Code of Business Conduct and Ethics is available on our website at www.stridelearning.com under the Investor
Relations – Governance section. We intend to satisfy the disclosure requirements under the Exchange Act regarding any
amendment to, or waiver from a material provision of our Code of Business Conduct and Ethics involving our principal
executive, financial or accounting officer or controller by posting such information on our website.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is hereby incorporated by reference to our 2022 Proxy Statement under the
captions “Compensation Discussion and Analysis,” “Compensation Tables,” “Compensation Committee Report,”
“Compensation Committee Interlocks and Insider Participation” and “Director Compensation for Fiscal 2022.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND, MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by Item 12 is hereby incorporated by reference to our 2022 Proxy Statement under the

caption “Security Ownership of Certain Beneficial Owners and Management.”

Stock-based Incentive Plan Information

The following table provides certain information as of June 30, 2022, with respect to our equity compensation

plans under which common stock is authorized for issuance:

Equity Compensation Plan Information
As of June 30, 2022

Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options

Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding Securities
Outstanding Options Reflected in First Column)

Weighted-Average
Exercise Price of

Equity compensation plans approved by security holders

1,350 (1)$

14.77

1,915,531 (2)

(1) Includes shares under the 2016 Incentive Award Plan (“2016 Plan”) and the 2007 Equity Incentive Award

Plan (“2007 Plan”).

(2) The 2016 Plan, which became effective upon its approval by the stockholders on December 15, 2016,

authorizes the issuance of up to 9,768,550 shares as of the effective date.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is hereby incorporated by reference to our 2022 Proxy Statement under the

captions “Certain Relationships and Related-Party Transactions” and “Director Independence.”

109

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is hereby incorporated by reference to our 2022 Proxy Statement under the

caption “Fees Paid to Independent Registered Public Accounting Firm.”

110

ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements.

PART IV

The information required by this item is incorporated herein by reference to the financial statements and notes

thereto listed in Item 8 of Part II and included in this Annual Report.

(a)(2) Financial Statement Schedules.

Except for Schedule II, which was presented separately, all financial statement schedules are omitted because the
required information is included in the financial statements and notes thereto listed in Item 8 of Part II and included in this
Annual Report.

The following exhibits are incorporated by reference or filed herewith.

See Exhibit Index

ITEM 16. FORM 10-K SUMMARY

None.

111

Exhibit Index

Exhibit No.

2.1

3.1

3.2
4.1

4.2*

4.3*

4.4*

4.5*

4.6*

4.7

4.8

4.9

4.10

4.11

10.1*

10.2*

10.3*

10.4*

10.5*

Description of Exhibit
Agreement and Plan of Merger, dated January 21, 2020, by and among K12 Management Inc. and
KAcquisitionCo Inc., on the one hand, and Galvanize Inc. and Fortis Advisors LLC, as Securityholders’
Representative (solely with respect to Article XIII), on the other hand (incorporated by reference to
Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 27, 2020, File
No. 001-33883).
Fifth Restated Certificate of Incorporation of Stride, Inc. (incorporated by reference to Exhibit 3.2 to the
Registrant’s Current Report on Form 8-K, filed on December 16, 2020, File No. 001-33883).
Fourth Amended and Restated Bylaws of Stride, Inc.
Form of stock certificate of common stock (incorporated by reference to Exhibit 4.1 to the Registrant’s
Amendment No. 4 to Registration Statement on Form S-1, filed with the SEC on November 8, 2007, File
No. 333-144894).
Form of Stock Option Agreement under the 2016 Incentive Award Plan (incorporated by reference to
Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2017, filed with
the SEC on August 9, 2017, File No. 001-33883).
Form of Restricted Stock Award Agreement under the 2016 Incentive Award Plan (incorporated by
reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2017,
filed with the SEC on August 9, 2017, File No. 001-33883).
K12 Inc. 2016 Incentive Award Plan (incorporated by reference to Exhibit 4.2 to the Registrant’s Post-
Effective Amendment to Form S-8, filed on March 22, 2017, File No. 333-213033).
K12 Inc. 2007 Equity Incentive Award Plan, as amended (incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement on Schedule 14A, filed on October 28, 2015, File
No. 001-33883).
Form of Indemnification Agreement for Non-Management Directors and for Officers of K12 Inc.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008, filed with the SEC on November 14, 2008, File No. 001-33883).
Form of Director’s Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K filed with the SEC on October 22, 2008, File No. 001-33883).
Form of Second Amended and Restated Stockholders Agreement (incorporated by reference to
Exhibit 4.5 to the Registrant’s Registration Statement on Form S-1, filed with the SEC on July 27, 2007,
File No. 333-144894).
Description of Common Stock (incorporated by reference to Exhibit 4.9 to the Registrant’s Annual Report
on Form 10-K for the year ended June 30, 2019, filed with the SEC on August 7, 2019, File
No. 001-33883).
Indenture, 1.125% Convertible Senior Notes Due 2027, dated as of August 31, 2020, between K12 Inc.
and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K, filed with the SEC on September 1, 2020, File No. 001-
33883)
Form of Global Note representing the 1.125% Convertible Senior Notes due 2027 (incorporated by
reference to Exhibit A to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC
on September 1, 2020, File No. 001-33883).
Amendment to Amended and Restated Stock Option Agreement, dated December 23, 2010 (incorporated
by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2010, filed with the SEC on February 9, 2011, File No. 001-33883).
Second Amended and Restated Employment Agreement of Nathaniel A. Davis, dated January 27, 2016.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2015, filed with the SEC on January 28, 2016, File No. 001-33883).
Form of Performance Share Unit Agreement under the 2016 Incentive Award Plan (incorporated by
reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the year ended June 30,
2017, filed with the SEC on August 9, 2017, File No. 001-33883).
Form of Performance Share Unit Agreement under the 2007 Equity Incentive Award Plan, as amended
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2015, filed with the SEC on October 27, 2015, File No. 001-33883).
Form of Executive Change in Control Severance Agreement (incorporated by reference to Exhibit 10.1
to the Registrant’s Current Report on Form 8-K, filed with the SEC on June 11, 2020, File
No. 001-33883).

112

Exhibit No.

10.6

10.7

10.8

10.9*

10.10*

10.11*

10.12*

10.13

10.14*

10.15*

10.16

10.17

10.18*

10.19

10.20
21.1
23.1
24.1
31.1

31.2

32.1

Description of Exhibit
Deed of Lease by and between ACP/2300 Corporate Park Drive, LLC and K12 Inc., dated December 7,
2005 (incorporated by reference to Exhibit 10.13 to the Registrant’s Amendment No. 1 to Registration
Statement on Form S-1, filed with the SEC on September 26, 2007, File No. 333-144894).
First Amendment to Deed of Lease by and between ACP/2300 Corporate Park Owner, LLC and K12 Inc.,
dated November 30, 2006 (incorporated by reference to Exhibit 10.21 to the Registrant’s Annual Report
on Form 10-K for the year ended June 30, 2008, filed with the SEC on September 26, 2008, File
No. 001-33883).
Second Amendment to Deed of Lease by and between ACP/2300 Corporate Park Owner, LLC and
K12 Inc., dated March 26, 2007 (incorporated by reference to Exhibit 10.22 to the Registrant’s Annual
Report on Form 10-K for the year ended June 30, 2008, filed with the SEC on September 26, 2008, File
No. 001-33883).
Form of Stock Option Agreement under the 2007 Equity Incentive Award Plan, as amended (incorporated
by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended June 30,
2015, filed with the SEC on August 4, 2015, File No. 001-33883).
Form of Restricted Stock Award Agreement under the 2007 Equity Incentive Award Plan, as amended
(incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K for the year
ended June 30, 2015, filed with the SEC on August 4, 2015, File No. 001-33883).
First Amendment to the Second Amended and Restated Employment Agreement of Nathaniel A. Davis,
dated April 20, 2018. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2018, filed with the SEC on April 25, 2018, File
No. 001-33883).
Second Amendment to Second Amended and Restated Employment Agreement of Nathaniel A. Davis,
dated August 29, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K, filed with the SEC on September 3, 2019, File No. 001-33883).
Credit Agreement, dated January 27, 2020, by and among K12 Inc., the guarantors party thereto, the
lenders party thereto, PNC Bank, National Association, as administrative agent (incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 27, 2020,
File No. 001-33883).
Employment Agreement of Timothy J. Medina, dated April 6, 2020 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on April 8, 2020, File
No. 001-33883).
Third Amendment to Second Amended and Restated Employment Agreement of Nathaniel A. Davis,
dated June 10, 2020 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
8-K, filed with the SEC on June 11, 2020, File No. 001-33883).
Form of Capped Call Transaction Confirmation (incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 8-K, filed with the SEC on September 1, 2020, File No. 001-
33883).
First Amendment to Credit Agreement, dated August 25, 2020, by and among K12 Inc., the guarantors
party thereto, the lenders party thereto, and PNC Bank, National Association, as administrative agent
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with
the SEC on August 26, 2020, File No. 001-33883).
Fourth Amendment to Second Amended and Restated Employment Agreement of Nathaniel A. Davis,
dated January 22, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on
Form 8-K, filed with the SEC on January 26, 2021, File No. 001 33883).
Employment Agreement of James J. Rhyu, dated February 25, 2022 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on February 28, 2022,
File No. 001-33883).
Employment Transition Agreement between Stride, Inc. and Timothy Medina, dated August 5, 2022
Subsidiaries of K12 Inc.
Consent of BDO USA, LLP.
Power of Attorney (included in signature pages).
Certification of Principal Executive Officer Required Under Rule 13a-14(a) of the Securities Exchange
Act of 1934, as amended.
Certification of Principal Financial Officer Required Under Rule 13a-14(a) of the Securities Exchange
Act of 1934, as amended.
Certification of Principal Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange
Act of 1934, as amended, and 18 U.S.C. Section 1350.

113

Exhibit No.

32.2

99.1†

101.INS

101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
104

Description of Exhibit
Certification of Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange
Act of 1934, as amended, and 18 U.S.C. Section 1350.
Third Amended and Restated Educational Products and Administrative, and Technology Services
Agreement between the Ohio Virtual Academy and K12 Virtual Schools L.L.C., dated July 1, 2017
(incorporated by reference to Exhibit 99.1 to the Registrant’s Annual Report on Form 10-K for the year
ended June 30, 2017, filed with the SEC on August 9, 2017, File No. 001-33883).
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document
Inline XBRL Taxonomy Extension Schema
Inline XBRL Taxonomy Extension Calculation
Inline XBRL Taxonomy Extension Labels
Inline XBRL Taxonomy Extension Presentation
Inline XBRL Taxonomy Extension Definition
The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL (contained in Exhibit
101)

* Denotes management compensation plan or arrangement.
† Confidential treatment requested with the Securities and Exchange Commission as to certain portions. Confidential

materials omitted and filed separately with the Securities and Exchange Commission.

Pursuant to the requirements of Section 13 or 15(d) 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.

August 10, 2022

STRIDE, INC.

SIGNATURES

By:

/s/ JAMES J. RHYU
Name: James J. Rhyu
Title: Chief Executive Officer

POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature appears below constitutes and appoints
James J. Rhyu, Donna M. Blackman and Vincent W. Mathis, and each of them severally, his or her true and lawful
attorney-in-fact with power of substitution and resubstitution to sign in his or her name, place and stead, in any and all
capacities, to do any and all things and execute any and all instruments that such attorney may deem necessary or advisable
under the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the U.S. Securities
and Exchange Commission in connection with the Annual Report on Form 10-K and any and all amendments hereto, as
fully for all intents and purposes as he or she might or could do in person, and hereby ratifies and confirms all said

114

attorneys-in-fact and agents, each acting alone, and his or her substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the

following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

/s/ JAMES J. RHYU
James J. Rhyu

/s/ DONNA M. BLACKMAN
Donna M. Blackman

/s/ NATHANIEL A. DAVIS
Nathaniel A. Davis

/s/ AIDA M. ALVAREZ
Aida M. Alvarez

/s/ CRAIG R. BARRETT
Craig R. Barrett

/s/ ROBERT L. COHEN
Robert L. Cohen

/s/ STEVEN B. FINK
Steven B. Fink

/s/ VICTORIA D. HARKER
Victoria D. Harker

/s/ ROBERT E. KNOWLING, JR.

Robert E. Knowling, Jr.

/s/ LIZA McFADDEN
Liza McFadden

Joseph A.Verbrugge

Date

August 10, 2022

Title

Chief Executive Officer (Principal Executive Officer)

Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
Executive Chairman

Director

115

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, nor shall it be incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, 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)

(2)

the accompanying Annual Report of the Company on Form 10-K for the fiscal year ended June 30, 2022
(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

the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

Dated: August 10, 2022

/s/ DONNA M. BLACKMAN
Donna M. Blackman
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

116

ADJUSTED OPERATING INCOME, ADJUSTED EBITDA, AND FREE CASH FLOW

Adjusted Operating Income and Adjusted EBITDA for ﬁscal 2020–2022 are shown excluding these charges,
where applicable, to the calculation. A reconciliation of GAAP Net Income to the Adjusted Operating Income,
and Adjusted EBITDA presented on page XV inclusive of the aforementioned charges, is as follows:

($ million)

Net Income

Loss (income) from equity method investments

Tax expense / (beneﬁt)

Net interest expense / (income)

Other (income) / expense, net

Income from operations

Stock-based compensation expense

Amortization of intangible assets

Adjusted operating income

Depreciation and amortization

2020

24.5

0.4

8.5

(0.7)

(0.2)

32.5

23.6

6.0

62.1

66.1

2021

71.5

(0.7)

24.5

18.0

(2.8)

110.5

39.3

11.6

161.4

78.5

Adjusted EBITDA

128.2

239.9

2022

107.1

(0.1)

40.1

8.3

1.2

156.6

18.6

13.0

188.2

84.9

273.1

A reconciliation of GAAP Net Cash Provided by Operating Activities to Free Cash Flow presented on page XV
is as follows:

($ million)

Net Cash Provided by Operating Activities

Purchases of property and equipment

Capitalized software development costs

Capitalized curriculum development costs

Free Cash Flow

2020

80.4

(1.7)

(24.0)

(19.3)

35.4

2021

134.2

(3.6)

(31.3)

(17.4)

81.9

2022

206.9

(9.7)

(42.2)

(15.7)

139.3

117
117

LEADERSHIP

EXECUTIVE
MANAGEMENT

James J. Rhyu
Chief Executive Officer

Donna Blackman
Chief Financial Officer

Dr. Charles “Tony” Bennett
President of Schools

Les Ottolenghi
Executive Vice President,
Chief Information and
Technology Officer

Vincent W. Mathis
Executive Vice President,
General Counsel and Secretary

Valerie A. Maddy
Senior Vice President,
Chief Human Resources Officer

BOARD OF
DIRECTORS

Dr. Craig R. Barrett
Chairman of the Board,
Stride, Inc.
Retired Chairman and CEO,
Intel Corporation

Steven B. Fink
Co-Chairman,
Heron International

Victoria D. Harker
Executive Vice President
and Chief Financial Officer,
TEGNA Inc.

Honorable Aida M. Alvarez
Former Clinton Cabinet Member,
Small Business Administration

Robert E. Knowling, Jr.
Chairman,
Eagles Landing Partners

Robert L. Cohen
Founding Chief Financial Officer,
2U Inc.

Liza McFadden
President,
Liza & Partners, LLC

James Rhyu
Chief Executive Officer,
Stride, Inc.

Joseph A. Verbrugge
Chief Commercial Officer,
Sirius XM Holdings Inc.

COMPANY
DIRECTORY

TRANSFER AGENT

Computershare
P.O. Box 30170
College Station, TX 77842
800.368.5948
Corporate website:
us.computershare.com

INDEPENDENT AUDITOR

BDO USA, LLP
Bethesda, MD

INVESTOR INQUIRIES

Timothy Casey
Vice President,
Investor Relations
571.392.2606
tcasey@K12.com

ONLINE INFORMATION

For corporate reports and
company news, visit
stridelearning.com.

LEGAL COUNSEL

Latham & Watkins LLP
Washington, DC

STOCK EXCHANGE LISTING

Listed on the New York
Stock Exchange under the
symbol LRN

ANNUAL MEETING

The annual meeting of
Stride, Inc. stockholders
will be held on Dec. 9, 2022,
at 11 AM (ET) at the offices of Latham
& Watkins LLP located at 555 Eleventh
Street, NW, Washington, DC 20004

StrideLearning.com

866.968.7512

referenced herein are trademarks of Stride, Inc. and its subsidiaries, and other marks are owned by third parties.