Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Sep. 30, 2022 | Oct. 21, 2022 | |
Cover | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2022 | |
Entity File Number | 001-33883 | |
Entity Registrant Name | Stride, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 95-4774688 | |
Entity Address, Address Line One | 11720 Plaza America 9th Floor | |
Entity Address, City or Town | Reston | |
Entity Address, State or Province | VA | |
Entity Address, Postal Zip Code | 20190 | |
City Area Code | 703 | |
Local Phone Number | 483-7000 | |
Title of 12(b) Security | Common Stock, $0.0001 par value | |
Trading Symbol | LRN | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 43,031,568 | |
Current Fiscal Year End Date | --06-30 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001157408 | |
Amendment Flag | false |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
Current assets | ||
Cash and cash equivalents | $ 194,524 | $ 389,398 |
Accounts receivable, net of allowance of $28,623 and $26,993 | 543,705 | 418,558 |
Inventories, net | 27,919 | 36,003 |
Prepaid expenses | 71,149 | 25,974 |
Other current assets | 93,840 | 80,601 |
Total current assets | 931,137 | 950,534 |
Operating lease right-of-use assets, net | 79,327 | 85,457 |
Property and equipment, net | 72,307 | 61,537 |
Capitalized software, net | 74,748 | 71,800 |
Capitalized curriculum development costs, net | 51,430 | 50,580 |
Intangible assets, net | 86,690 | 88,669 |
Goodwill | 246,238 | 241,022 |
Deposits and other assets | 80,221 | 93,946 |
Total assets | 1,622,098 | 1,643,545 |
Current liabilities | ||
Accounts payable | 68,956 | 61,997 |
Accrued liabilities | 42,540 | 63,200 |
Accrued compensation and benefits | 40,084 | 73,027 |
Deferred revenue | 80,682 | 53,630 |
Current portion of finance lease liability | 43,627 | 37,389 |
Current portion of operating lease liability | 13,356 | 12,830 |
Total current liabilities | 289,245 | 302,073 |
Long-term finance lease liability | 34,401 | 28,888 |
Long-term operating lease liability | 69,113 | 75,127 |
Long-term debt | 411,848 | 411,438 |
Deferred tax liability | 20,182 | 3,205 |
Other long-term liabilities | 10,486 | 10,233 |
Total liabilities | 835,275 | 830,964 |
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; 48,386,472 and 48,112,664 shares issued; and 43,051,729 and 42,777,921 shares outstanding, respectively | 4 | 4 |
Additional paid-in capital | 683,993 | 687,454 |
Accumulated other comprehensive income (loss) | 518 | 143 |
Retained earnings | 204,790 | 227,462 |
Treasury stock of 5,334,743 shares at cost | (102,482) | (102,482) |
Total stockholders' equity | 786,823 | 812,581 |
Total liabilities and stockholders' equity | $ 1,622,098 | $ 1,643,545 |
UNAUDITED CONDENSED CONSOLIDA_2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance (in dollars) | $ 28,623 | $ 26,993 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 48,386,472 | 48,112,664 |
Common stock, shares outstanding | 43,051,729 | 42,777,921 |
Treasury stock, shares | 5,334,743 | 5,334,743 |
UNAUDITED CONDENSED CONSOLIDA_3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Revenues | $ 425,150 | $ 400,226 |
Instructional costs and services | 295,501 | 273,824 |
Gross margin | 129,649 | 126,402 |
Selling, general, and administrative expenses | 158,368 | 133,379 |
Loss from operations | (28,719) | (6,977) |
Interest expense, net | (2,046) | (1,993) |
Other income (expense), net | 1,037 | (89) |
Loss before income taxes and income (loss) from equity method investments | (29,728) | (9,059) |
Income tax benefit | 7,507 | 2,893 |
Income (loss) from equity method investments | (451) | 283 |
Net loss attributable to common stockholders | $ (22,672) | $ (5,883) |
Net loss attributable to common stockholders per share: | ||
Basic (in dollars per share) | $ (0.54) | $ (0.15) |
Diluted (in dollars per share) | $ (0.54) | $ (0.15) |
Weighted average shares used in computing per share amounts: | ||
Basic (in shares) | 42,076,628 | 40,559,066 |
Diluted (in shares) | 42,076,628 | 40,559,066 |
UNAUDITED CONDENSED CONSOLIDA_4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||
Net loss | $ (22,672) | $ (5,883) |
Other comprehensive income (loss), net of tax: | ||
Foreign currency translation adjustment | 375 | 144 |
Comprehensive loss attributable to common stockholders | $ (22,297) | $ (5,739) |
UNAUDITED CONDENSED CONSOLIDA_5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjustment | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings | Treasury Stock | Cumulative Effect, Period of Adoption, Adjustment | Total |
Balance at Jun. 30, 2021 | $ 4 | $ 795,449 | $ (474) | $ 112,151 | $ (102,482) | $ 804,648 | |||
Balance (in shares) at Jun. 30, 2021 | 46,911,527 | (5,334,743) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Adjustment related to new convertible debt guidance | $ (89,460) | $ 8,181 | $ (81,279) | ||||||
Net loss | (5,883) | (5,883) | |||||||
Foreign currency translation adjustment | 144 | 144 | |||||||
Stock-based compensation expense | 8,050 | 8,050 | |||||||
Exercise of stock options | 246 | 246 | |||||||
Exercise of stock options (in shares) | 15,025 | ||||||||
Issuance of restricted stock awards (in shares) | 398,943 | ||||||||
Forfeiture of restricted stock awards (in shares) | (34,740) | ||||||||
Repurchase of restricted stock for tax withholding | (6,020) | (6,020) | |||||||
Repurchase of restricted stock for tax withholding (in shares) | (179,151) | ||||||||
Balance at Sep. 30, 2021 | $ 4 | 708,265 | (330) | 114,449 | $ (102,482) | 719,906 | |||
Balance (in shares) at Sep. 30, 2021 | 47,111,604 | (5,334,743) | |||||||
Balance at Jun. 30, 2022 | $ 4 | 687,454 | 143 | 227,462 | $ (102,482) | 812,581 | |||
Balance (in shares) at Jun. 30, 2022 | 48,112,664 | (5,334,743) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net loss | (22,672) | (22,672) | |||||||
Foreign currency translation adjustment | 375 | 375 | |||||||
Stock-based compensation expense | 5,295 | 5,295 | |||||||
Exercise of stock options | 10 | $ 10 | |||||||
Exercise of stock options (in shares) | 675 | 675 | |||||||
Vesting of performance share units, net of tax withholding | 48,916 | ||||||||
Issuance of restricted stock awards (in shares) | 460,411 | ||||||||
Forfeiture of restricted stock awards (in shares) | (27,184) | ||||||||
Repurchase of restricted stock for tax withholding | (8,766) | $ (8,766) | |||||||
Repurchase of restricted stock for tax withholding (in shares) | (209,010) | ||||||||
Balance at Sep. 30, 2022 | $ 4 | $ 683,993 | $ 518 | $ 204,790 | $ (102,482) | $ 786,823 | |||
Balance (in shares) at Sep. 30, 2022 | 48,386,472 | (5,334,743) |
UNAUDITED CONDENSED CONSOLIDA_6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities | ||
Net income | $ (22,672) | $ (5,883) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization expense | 26,251 | 24,147 |
Stock-based compensation expense | 5,510 | 8,286 |
Deferred income taxes | 17,223 | 5,484 |
Provision for doubtful accounts | 1,503 | 152 |
Amortization of fees on debt | 410 | 404 |
Noncash operating lease expense | 3,866 | 5,005 |
Other | (3,918) | 4,325 |
Changes in assets and liabilities: | ||
Accounts receivable | (126,521) | (150,263) |
Inventories, prepaid expenses, deposits and other current and long-term assets | (34,695) | 1,260 |
Accounts payable | 8,425 | (1,256) |
Accrued liabilities | (9,971) | (2,464) |
Accrued compensation and benefits | (32,805) | (44,395) |
Operating lease liability | (2,605) | (5,321) |
Deferred revenue and other liabilities | 26,853 | 29,009 |
Net cash used in operating activities | (143,146) | (131,510) |
Cash flows from investing activities | ||
Purchase of property and equipment | (913) | (1,278) |
Capitalized software development costs | (9,793) | (9,690) |
Capitalized curriculum development costs | (6,145) | (4,376) |
Sale of other investments | 60 | |
Acquisition of assets | (1,409) | |
Other acquisitions, loans and investments, net of distributions | (213) | (192) |
Proceeds from the maturity of marketable securities | 12,044 | 1,501 |
Purchases of marketable securities | (20,126) | (9,196) |
Net cash used in investing activities | (26,495) | (23,231) |
Cash flows from financing activities | ||
Repayments on finance lease obligations | (9,314) | (7,020) |
Payments of contingent consideration | (7,024) | |
Proceeds from exercise of stock options | 10 | 246 |
Repurchase of restricted stock for income tax withholding | (8,905) | (6,043) |
Net cash used in financing activities | (25,233) | (12,817) |
Net change in cash, cash equivalents and restricted cash | (194,874) | (167,558) |
Cash, cash equivalents and restricted cash, beginning of period | 389,398 | 386,582 |
Cash, cash equivalents and restricted cash, end of period | $ 194,524 | $ 219,024 |
UNAUDITED CONDENSED CONSOLIDA_7
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) $ in Thousands | Sep. 30, 2021 USD ($) |
Reconciliation of cash, cash equivalents and restricted cash to balance sheet as of September 30th: | |
Cash and cash equivalents | $ 218,519 |
Restricted cash | 505 |
Total cash, cash equivalents and restricted cash | $ 219,024 |
Description of the Business
Description of the Business | 3 Months Ended |
Sep. 30, 2022 | |
Description of the Business | |
Description of the Business | 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. 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: ● Products and services for the General Education market are predominantly focused on core subjects, including math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of knowledge. These programs provide an alternative to traditional school options and address a range of student needs 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. The Company pr ovides 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 facilitate success 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. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Sep. 30, 2022 | |
Basis of Presentation | |
Basis of Presentation | 2. Basis of Presentation The accompanying condensed consolidated balance sheet as of September 30, 2022, the condensed consolidated statements of operations and comprehensive income for the three months ended September 30, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended September 30, 2022 and 2021, and the condensed consolidated statements of stockholders’ equity for the three months ended September 30, 2022 and 2021 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations for the periods presented. The results for the three months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending June 30, 2023, for any other interim period or for any other future fiscal year. The condensed consolidated balance sheet as of June 30, 2022 has been derived from the audited consolidated financial statements at that date. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, the Company does not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these statements include all adjustments (consisting of normal recurring adjustments) considered necessary to present a fair statement of the Company’s condensed consolidated results of operations, financial position and cash flows. Preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and footnotes. Actual results could differ from those estimates. This quarterly report on Form 10-Q should be read in conjunction with the financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on August 10, 2022, which contains the Company’s audited financial statements for the fiscal year ended June 30, 2022. The Company operates in one operating and reportable |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Sep. 30, 2022 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Recent Accounting Pronouncements Accounting Standards Not Yet Adopted In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services using the following steps: ● identify the contract, or contracts, with a customer; ● identify the performance obligations in the contract; ● determine the transaction price; ● allocate the transaction price to the performance obligations in the contract; and ● recognize revenue when, or as, the Company satisfies a performance obligation. Revenues related to the products and services that the Company provides to students in kindergarten through twelfth grade or adult learners are considered to be General Education or Career Learning based on the school or adult program in which the student is enrolled. General Education products and services are focused on core subjects, including math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of knowledge. Career Learning products and services are focused on developing skills to enter and succeed in careers in high-growth, in-demand industries—including information technology, 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: ● a virtual or blended school whereby the amount of revenue is primarily determined by funding the school receives; ● a school or individual who licenses certain curriculum on a subscription or course-by-course basis; or ● an enterprise who contracts with the Company to provide job training. Funding-based Contracts The Company provides an integrated package of systems, services, products, and professional expertise that is administered together to support a virtual or blended public school. Contractual agreements generally span multiple years with performance obligations being isolated to annual periods which generally coincide with the Company’s fiscal year. Customers of these programs can obtain administrative support, information technology, academic support services, online curriculum, learning systems platforms and instructional services under the terms of a negotiated service agreement. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenue. The Company generates revenues under contracts with virtual and blended public schools and include the following components, where required: ● providing each of a school’s students with access to the Company’s online school and lessons; ● offline learning kits, which include books and materials to supplement the online lessons; ● the use of a personal computer and associated reclamation services; ● internet access and technology support services; ● instruction by a state-certified teacher; and ● management and technology services necessary to support a virtual or blended school. In certain contracts, revenues are determined directly by per enrollment funding. To determine the pro rata amount of revenue to recognize in a fiscal quarter, the Company estimates the total expected funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels, which are generally published on an annual basis by the state or school district. The Company reviews its estimates of funding periodically, and updates as 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 three months ended September 30, 2022 and 2021. Each state and/or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company estimates funding for each school, it takes into account the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, new registrations, average daily attendance, special needs enrollment, academic progress, historical completion, student location, funding caps and other state specified categorical program funding. Under the contracts where the Company provides products and services to schools, the Company is responsible for substantially all of the expenses incurred by the school and has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school (the school’s expected funding), as reflected in its respective financial statements, including Company charges to the schools. To the extent a school does not receive sufficient funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenues and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school’s net operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are constrained to reflect the expected cash collections from such schools. The Company records the school’s estimated net operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. Actual school net operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. For the three months ended September 30, 2022 and 2021, the Company’s revenues included a reduction for net school operating losses at the schools of $10.1 million and $12.9 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 condensed consolidated statements of operations. Amounts recorded as revenues and expenses for the three months ended September 30, 2022 and 2021 were $125.3 million and $113.9 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 Enterprise Contracts The Company provides job training over a specified contract period to enterprises. Each of these contracts are considered to be one performance obligation. The Company recognizes these revenues based on the number of students trained during the term of the contract based on the defined contract price. Disaggregated Revenues The revenue recognition related to the types of contracts discussed above can span both of the Company’s lines of revenue as shown below. For example, a funding-based contract may include both General Education and Career Learning students. In total, there is one performance obligation and revenue is recognized over the Company’s fiscal year. The revenue is then disaggregated between General Education and Career Learning based on the Company’s estimated full-year enrollment totals of each category. During the three months ended September 30, 2022 and 2021, approximately 90% and 90%, respectively, of the Company’s General Education revenues, and 99% 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 revenue for the three months ended September 30, 2022 and 2021: Three Months Ended September 30, 2022 2021 (In thousands) General Education $ 271,658 $ 306,341 Career Learning Middle - High School 125,535 71,411 Adult 27,957 22,474 Total Career Learning 153,492 93,885 Total Revenues $ 425,150 $ 400,226 Concentration of Customers During the three months ended September 30, 2022 and 2021, the Company had no contracts that represented greater than 10% of total revenues. Contract Balances The opening and closing balance of the Company’s accounts receivable, unbilled receivables and deferred revenue are as follows: September 30, June 30, 2022 2022 (In thousands) Accounts receivable $ 543,705 $ 418,558 Unbilled receivables (included in accounts receivable) 23,729 19,702 Deferred revenue 80,682 53,630 Deferred revenue, long-term (included in other long-term liabilities) 2,911 3,099 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 three months ended September 30, 2022 and 2021 that was included in the previous July 1 st Performance Obligations 30 45 one Significant Judgments 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. Sales Taxes Consolidation The condensed consolidated financial statements include the accounts of the Company, the wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Investments in Marketable Securities The Company’s marketable securities generally consist of bonds and other securities which are classified as held-to-maturity. The securities with maturities between three months and one year are classified as short-term and are included in other current assets on the condensed consolidated balance sheets. The securities with maturities greater than one year are classified as long-term and are included in deposits and other assets on the condensed consolidated balance sheets. Held-to-maturity securities are recorded at their amortized cost. Interest income and dividends are recorded within the condensed consolidated statements of operations. The Company reviews the held-to-maturity debt securities for declines in fair value below the amortized cost basis under the credit loss model of Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses As of September 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 $75.1 million and $17.6 million, respectively. The maturities of the Company’s long-term marketable debt securities range from one two Allowance for Net Carrying Gross Unrealized Amortized Cost Credit Losses Amount Gains (Losses) Fair Value Corporate Bonds $ 49,242 $ - $ 49,242 $ (898) $ 48,344 U.S. Treasury Notes 16,374 - 16,374 (224) 16,150 Commercial Paper 27,073 - 27,073 - 27,073 Total $ 92,689 $ - $ 92,689 $ (1,122) $ 91,567 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 following table summarizes the amortized cost, net carrying amount, and fair value disaggregated by class of instrument (in thousands). Allowance for Net Carrying Gross Unrealized Amortized Cost Credit Losses Amount Gains (Losses) Fair Value Corporate Bonds $ 50,067 $ - $ 50,067 $ (691) $ 49,376 U.S. Treasury Notes 16,399 - 16,399 (199) 16,200 Commercial Paper 18,186 - 18,186 - 18,186 Total $ 84,652 $ - $ 84,652 $ (890) $ 83,762 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 maintains an allowance under ASC 326 based on historical losses, changes in payment history, customer-specific information, current economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are incurred or information becomes available related to the customer or economic conditions. 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 September 30, 2022 and June 30, 2022, $9.1 million and $11.2 million, respectively, of inventory, net of reserves, was deemed long-term and included in deposits and other assets on the condensed consolidated balance sheets. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. The excess and obsolete inventory reserve was $6.5 million and $6.5 million at September 30, 2022 and June 30, 2022, 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: Useful Life Student and state testing computers and printers 3 - 5 years Computer hardware 3 - 7 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements Shorter of useful life or term of the lease The Company makes an estimate of unreturned student computers and printers based on an analysis of recent trends of returns. The Company recorded accelerated depreciation of $1.6 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively, related to unreturned student computers. Depreciation expense, including accelerated depreciation, related to computers and printers provided to students reflected in instructional costs and services for the three months ended September 30, 2022 and 2021 was $10.3 million and $8.1 million, respectively. Depreciation expense related to property and equipment reflected in selling, general, and administrative expenses for the three months ended September 30, 2022 and 2021 was $1.6 million and $1.2 million, respectively. The Company fully expenses computer peripheral equipment (e.g., keyboards, mouses) upon purchase as recovery has been determined to be uneconomical. These expenses totaled $1.2 million and $4.7 million for the three months ended September 30, 2022 and 2021, 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 $9.8 million and $9.7 million for the three months ended September 30, 2022 and 2021, respectively. The Company recorded amortization expense related to capitalized software of $5.7 million and $6.2 million during the three months ended September 30, 2022 and 2021, respectively, within instructional costs and services. Amortization expense related to capitalized software reflected in selling, general, and administrative expenses during the three months ended September 30, 2022 and 2021 was $1.3 million and $1.3 million, respectively. Capitalized Curriculum Development Costs The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. The Company capitalizes curriculum development costs incurred during the application development stage, as well as the design and deployment phases of the project. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs are amortized is generally five years. Total capitalized curriculum development additions were $6.1 million and $4.4 million for the three months ended September 30, 2022 and 2021, respectively. These amounts are recorded on the condensed consolidated balance sheets net of amortization charges. Amortization expense for the three months ended September 30, 2022 and 2021 was $4.0 million and $4.2 million, respectively, and is recorded in instructional costs and services. Leases The Company’s principal leasing activities include student computers and peripherals, classified as finance leases, and facilities, classified as operating leases. Leases are classified as operating leases unless they meet any of the criteria below to be classified as a finance lease: ● the lease transfers ownership of the asset at the end of the lease; ● the lease grants an option to purchase the asset which the lessee is expected to exercise; ● the lease term reflects a major part of the asset’s economic life; ● the present value of the lease payments equals or exceeds the fair value of the asset; or ● the asset is specialized with no alternative use to the lessor at the end of the term. Finance Leases The Company enters into agreements to finance the purchase of student computers and peripherals provided to students of its schools. Individual leases typically include 3-year payment terms, at varying rates. 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 and school operations. Lease terms vary between 1 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 4.42% 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. Policy Elections Short-term Leases The Company has elected as an on-going accounting policy election not to record a right-of-use asset or lease liability on its short-term facility leases of 12 months or less, and will expense its lease payments on a straight-line basis over the lease term. The accounting policy election is made by class of underlying asset to which the right of use relates. The Company has elected to apply the accounting policy election only to operating leases. Income Taxes Deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. The net deferred tax asset is reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Goodwill and Intangible Assets The Company records as goodwill the excess of the purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and distributors, developed technology and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended September 30, 2022 and 2021 was $3.3 million and $3.2 million, respectively, and is included within selling, general, and administrative expenses in the condensed consolidated statements of operations. Future amortization of intangible assets is expected to be $9.8 million, $12.1 million, $10.9 million, $9.7 million, and $8.1 million in the fiscal years ending June 30, 2023 through June 30, 2027, respectively, and $35.9 million thereafter. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. The Company has one reporting unit. The process for testing goodwill and intangible assets with indefinite lives for impairment is performed annually, as well as when an event triggering impairment may have occurred. Companies are also allowed to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo the quantitative impairment test as part of their annual goodwill impairment process. The Company performs its annual assessment on May 31 st th During the three months ended September 30, 2022, there were no events or changes in circumstances that would indicate that the carrying amount of the goodwill was impaired. During the three months ended September 30, 2021 the Company qualitatively assessed its goodwill and intangible assets for impairment. It identified Coronavirus disease 2019 (“COVID-19”) as a triggering event, however there were no indicators that the fair value of the reporting unit may be less than its carrying amount, and as a result, the Company determined that no impairment was required. The following table represents the balance of the Company’s intangible assets as of September 30, 2022 and June 30, 2022: September 30, 2022 June 30, 2022 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ 85.1 $ (24.5) $ 60.6 $ 85.1 $ (23.1) $ 62.0 Customer and distributor relationships 39.8 (26.3) 13.5 38.9 (25.3) 13.6 Developed technology 22.0 (9.7) 12.3 21.7 (8.9) 12.8 Other 1.4 (1.1) 0.3 1.4 (1.1) 0.3 Total $ 148.3 $ (61.6) $ 86.7 $ 147.1 $ (58.4) $ 88.7 Impairment of Long-Lived Assets Long-lived assets include property, equipment, right-of-use assets, capitalized curriculum and software developed or obtained for internal use. Management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. During the three months ended September 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 three months ended September 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. 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 condensed 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 Tallo, Inc. convertible note is discussed in more detail in Note 11, “Acquisitions and Investments.” As of September 30, 2022, the estimated fair value of the long-term debt was $415.8 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 long-term debt, comprised of the Company’s convertible senior notes due 2027, is recorded at face value less the unamortized debt issuance costs on its condensed consolidated balance sheet, and is discussed in more detail in Note 6, “Debt.” As of September 30, 2022, the estimated fair value of the Company’s marketable securities was $91.6 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.” On November 30, 2020, the Company acquired 100% of MedCerts in exchange for $70.0 million and estimated contingent consideration of $10.8 million. During fiscal year 2021 and 2022, the Company recorded an aggregate expense of $0.5 million to adjust its estimate of the fair value of the contingent consideration to $11.3 million. During the three months ended September 30, 2022, the Company paid $7.0 million to settle the contingent consideration and recorded a gain of $4.3 million. The gain is recorded within selling, general, and administrative expenses on the condensed consolidated statements of operations. There were no assets The following table summarizes certain fair value information at June 30, 2022 for assets or liabilities measured at fair value on a recurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Contingent consideration associated with acquisitions $ 11,290 $ — $ — $ 11,290 Convertible note received in acquisition $ 889 $ — $ — $ 889 The following table presents activity related to the Company’s fair value measurements categorized as Level 3 in the valuation hierarchy, valued on a recurring basis, for the three months ended September 30, 2022 and 2021: Three Months Ended September 30, 2022 Purchases, Fair Value Issuances, Realized Fair Value Description June 30, 2022 and Settlements Gains/(Losses) September 30, 2022 (In thousands) Contingent consideration associated w |
Income Taxes
Income Taxes | 3 Months Ended |
Sep. 30, 2022 | |
Income Taxes | |
Income Taxes | 4. Income Taxes The provision for income taxes is based on earnings reported in the condensed consolidated financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense or benefit is measured by the change in the deferred income tax asset or liability during the period. For the three months ended September 30, 2022 and 2021, the Company’s effective income tax rate was 24.9% and 33.0%, respectively. 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 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 condensed consolidated balance sheets |
Finance and Operating Leases
Finance and Operating Leases | 3 Months Ended |
Sep. 30, 2022 | |
Finance and Operating Leases | |
Finance and Operating Leases | 5. Finance and Operating Leases Finance Leases The Company is a lessee under finance leases for student computers and peripherals under agreements with Banc of America Leasing & Capital, LLC (“BALC”) and CSI Leasing, Inc. (“CSI Leasing”). As of September 30, 2022 and June 30, 2022, the finance lease liability was $78.0 million and $66.3 million, respectively, with lease interest rates ranging from 1.52% to 4.42%. As of September 30, 2022 and June 30, 2022, the balance of the associated right-of-use assets was $55.5 million and $42.7 million, respectively. The right-of-use asset is recorded within property and equipment, net on the condensed consolidated balance sheets. Lease amortization expense associated with the Company’s finance leases is recorded within instructional costs and services on the condensed consolidated statements of operations. The Company entered into 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 include 36 month payment terms, fixed rates ranging from 1.52% to 4.42%, 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 Company entered into an agreement with CSI Leasing in August 2022 to provide financing for its leases. Individual leases under the agreement with CSI Leasing include 36-month payments terms, at varying rates. The Company did not enter into any individual leases under the agreement through September 30, 2022. The following is a summary, as of September 30, 2022 and June 30, 2022, respectively, of the present value of the net minimum lease payments under the Company’s finance leases: September 30, 2022 June 30, 2022 (in thousands) 2023 $ 34,326 $ 38,600 2024 32,333 24,816 2025 11,984 4,468 2026 2,047 22 Total minimum payments 80,690 67,906 Less: imputed interest (2,662) (1,629) Finance lease liability 78,028 66,277 Less: current portion of finance lease liability (43,627) (37,389) Long-term finance lease liability $ 34,401 $ 28,888 Operating Leases The Company is a lessee under operating leases for various facilities to support the Company’s operations. As of September 30, 2022 and June 30, 2022, the operating lease liability was $82.5 million and $88.0 million, respectively. As of September 30, 2022 and June 30, 2022, the balance of the associated right-of-use assets was $79.3 million and $85.5 million, respectively. Lease expense associated with the Company’s operating leases is recorded within both instructional costs and services and selling, general, and administrative expenses on the condensed consolidated statements of operations. Individual operating leases range in terms of 1 The following is a summary as of September 30, 2022 and June 30, 2022, respectively, of the present value of the minimum lease payments under the Company’s operating leases: September 30, 2022 June 30, 2022 (in thousands) 2023 $ 11,443 $ 15,120 2024 16,039 16,638 2025 15,332 16,168 2026 12,025 12,900 2027 8,518 8,797 Thereafter 27,455 27,447 Total minimum payments 90,812 97,070 Less: imputed interest (8,343) (9,113) Operating lease liability 82,469 87,957 Less: current portion of operating lease liability (13,356) (12,830) Long-term operating lease liability $ 69,113 $ 75,127 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 condensed consolidated statements of operations. The following is a summary as of September 30, 2022 and June 30, 2022, respectively, of the expected sublease income: September 30, 2022 June 30, 2022 (in thousands) 2023 $ 1,047 $ 1,396 2024 665 665 2025 412 412 2026 140 140 Total sublease income $ 2,264 $ 2,613 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 three months ended September 30, 2022 and 2021: Three Months Ended September 30, 2022 2021 (in thousands) Lease cost Finance lease cost: Amortization of right-of-use assets $ 9,934 $ 7,620 Interest on lease liabilities 388 417 Instructional costs and services: Operating lease cost 3,715 3,935 Short-term lease cost 24 18 Sublease income (282) (332) Selling, general, and administrative expenses: Operating lease cost 586 1,667 Short-term lease cost 94 4 Sublease income (80) (129) Total lease cost $ 14,379 $ 13,200 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ (2,605) $ (5,321) Financing cash flows from finance leases (9,314) (7,020) Right-of-use assets obtained in exchange for new finance lease liabilities 19,907 13,983 Right-of-use assets obtained in exchange for new operating lease liabilities 576 6,805 Weighted-average remaining lease term - finance leases 1.82 yrs. 2.31 yrs. Weighted-average remaining lease term - operating leases 6.51 yrs. 6.80 yrs. Weighted-average discount rate - finance leases 3.00 % 2.37 % Weighted-average discount rate - operating leases 2.77 % 2.79 % |
Debt
Debt | 3 Months Ended |
Sep. 30, 2022 | |
Debt | |
Debt | 6. Debt The following is a summary, as of September 30, 2022 and June 30, 2022, respectively, of the components of the Company’s outstanding long-term debt: September 30, 2022 June 30, 2022 (in thousands) Convertible Senior Notes due 2027 $ 420,000 $ 420,000 Less: unamortized debt issuance costs (8,152) (8,562) Total debt 411,848 411,438 Less: current portion of debt — — Long-term debt $ 411,848 $ 411,438 Convertible Senior Notes due 2027 The Notes bear interest at a rate of 1.125% per annum, payable semi-annually in arrears on March 1 st st The Company incurred debt issuance costs of $11.4 million which are amortized over the contractual term of the Notes. During the three months ended September 30, 2022 and 2021, the Company recorded interest expense related to the amortization of the debt issuance costs of $0.4 million and $0.4 million, respectively. 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. |
Credit Facility
Credit Facility | 3 Months Ended |
Sep. 30, 2022 | |
Credit Facility | |
Credit Facility | 7. Credit Facility On January 27, 2020, the Company entered into a $100.0 million senior secured revolving credit facility (“Credit Facility”) to be used for general corporate operating purposes with PNC Capital Markets LLC. The Credit Facility 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 September 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 September 30, 2022, the Company had no amounts outstanding on the Credit Facility. The Credit Facility also includes a $200.0 million accordion feature. |
Equity Incentive Plan
Equity Incentive Plan | 3 Months Ended |
Sep. 30, 2022 | |
Equity Incentive Plan | |
Equity Incentive Plan | 8. 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: ● 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. As of September 30, 2022, the remaining aggregate number of shares of the Company’s common stock authorized for future issuance under the Plan was 1,413,499. As of September 30, 2022, there were 1,735,079 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. Stock option activity including stand-alone agreements during the three months ended September 30, 2022 was as follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Life (Years) Value Outstanding, June 30, 2022 1,350 $ 14.77 0.98 $ 35,127 Granted — — Exercised (675) 14.77 Forfeited or canceled — — Outstanding and exercisable, September 30, 2022 675 $ 14.77 0.73 $ 18,401 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 September 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 three months ended September 30, 2022 and 2021 was $0.0 million and $0.2 million, respectively. 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. Restricted stock award activity during the three months ended September 30, 2022 Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2022 1,131,466 $ 33.27 Granted 460,411 38.35 Vested (483,608) 31.47 Canceled (27,184) 35.70 Nonvested, September 30, 2022 1,081,085 $ 36.18 Performance-Based Restricted Stock Awards (included above) During the three months ended September 30, 2022, zero new performance-based restricted stock awards were granted and in total, 58,662 remain nonvested at September 30, 2022. During the three months ended September 30, 2022, 315,702 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. Service-Based Restricted Stock Awards (included above) During the three months ended September 30, 2022, 460,411 new service-based restricted stock awards were granted and in total, 1,022,424 remain nonvested at September 30, 2022. During the three months ended September 30, 2022, 167,906 service-based restricted stock awards vested. Summary of All Restricted Stock Awards As of September 30, 2022, there was $30.2 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 2.1 years. The fair value of restricted stock awards granted for the three months ended September 30, 2022 and 2021 was $17.7 million and $14.4 million, respectively. The total fair value of shares vested for the three months ended September 30, 2022 and 2021 was $17.9 million and $14.4 million, respectively. During the three months ended September 30, 2022 and 2021, the Company recognized $4.6 million and $5.3 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 three months ended September 30, 2022 was as follows: Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2022 355,302 $ 32.62 Granted 328,164 36.50 Vested (77,048) 28.42 Canceled (23,318) 28.50 Nonvested, September 30, 2022 583,100 $ 35.53 Fiscal Year 2023 LTIP During the three months ended September 30, 2022, the Company granted 289,640 PSUs at target under a Long Term Incentive Plan (“LTIP”) which are tied to gross margin targets and stock price performance. These PSUs had a grant date fair value of $10.9 million, or a weighted average grant-date fair value of $37.58 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 2026. 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 2022 LTIP 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 which was November 30, 2020. During the second quarter of fiscal year 2022, one 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 second 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 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”). In August 2022, Tranche #3 achievement was certified at 200% of target resulting in the vesting of 77,048 shares. Summary of All Performance Share Units As of September 30, 2022, there was $9.4 million of total unrecognized compensation expense related to nonvested PSUs that are expected to vest based on the Company’s probability assumptions discussed above. The cost is expected to be recognized over a weighted average period of 2.3 years. During the three months ended September 30, 2022 and 2021, the Company recognized $0.9 million and $3.0 million, respectively, of stock-based compensation expense related to PSUs. Included in the stock-based compensation expense above, for the three months ended September 30, 2022 and 2021 is $0.3 million and $0.3 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”) Deferred stock unit activity during the three months ended September 30, 2022 was as follows: Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2022 69,117 $ 24.27 Granted 1,101 43.46 Vested — — Canceled — — Nonvested, September 30, 2022 70,218 $ 24.57 Summary of All Deferred Stock Units As of September 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 0.3 years. During the three months ended September 30, 2022 and 2021, the Company recognized $0.1 million and $0.1 million, respectively, of stock-based compensation expense related to DSUs. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions | |
Related Party Transactions | 9. Related Party Transactions |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies | |
Commitments and Contingencies | 10. Commitments and Contingencies Litigation Securities Litigation 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. All 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 September 30, 2022, the Company provided guarantees of approximately $0.3 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 through fiscal year 2022, we experienced an increase in demand for our products and services. The effects of the pandemic or the ending of the pandemic on our business, are not estimable. 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. |
Acquisitions and Investments
Acquisitions and Investments | 3 Months Ended |
Sep. 30, 2022 | |
Acquisitions and Investments. | |
Acquisitions and Investments | 11. Acquisitions and Investments Investments in Limited Partnerships Investment in Tallo, Inc. and Acquisition of Assets On July 8, 2022, the Company purchased the assets of Tallo in exchange for $1.0 million, plus $0.4 million in working capital. As part of the closing of the transaction, the promissory note was cancelled and the convertible note was converted into additional equity. That additional equity and previously held equity interests were cancelled, and combined with the cash, resulted in a preliminary purchase price of $6.8 million. The acquisition of Tallo further expands the Company’s ability to match students to internships, jobs, and scholarships with colleges and companies looking for talent. 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 July 8, 2022, the acquisition date. The allocation of the preliminary purchase price resulted in goodwill of $5.2 million and intangible assets of $1.3 million, both of which are deductible for income tax purposes. The recognized goodwill is primarily associated with future customer relationships and an acquired assembled work force. The intangible assets primarily consist of customer relationships which will be amortized over 10 years. The estimated fair value for the intangible assets is considered preliminary and are subject to change based on final purchase price valuation amounts. |
Supplemental Disclosure of Cash
Supplemental Disclosure of Cash Flow Information | 3 Months Ended |
Sep. 30, 2022 | |
Supplemental Disclosure of Cash Flow Information | |
Supplemental Disclosure of Cash Flow Information | 12. Supplemental Disclosure of Cash Flow Information Three Months Ended September 30, 2022 2021 (In thousands) Cash paid for interest $ 2,796 $ 2,811 Cash paid for taxes $ 21,296 $ 12,593 Supplemental disclosure of non-cash financing activities: Right-of-use assets obtained from acquisitions 385 — Right-of-use assets obtained in exchange for new finance lease liabilities 19,907 13,983 Supplemental disclosure of non-cash investing activities: Stock-based compensation expense capitalized on software development $ 101 $ 68 Stock-based compensation expense capitalized on curriculum development 19 29 Non-cash purchase price related to business combinations 5,423 — Business combinations: Acquired assets $ 1,132 $ — Intangible assets 1,309 — Goodwill 5,217 — Assumed liabilities (385) — Deferred revenue (441) — |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Sep. 30, 2022 | |
Summary of Significant Accounting Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounting Standards Not Yet Adopted In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform |
Revenue Recognition | Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services using the following steps: ● identify the contract, or contracts, with a customer; ● identify the performance obligations in the contract; ● determine the transaction price; ● allocate the transaction price to the performance obligations in the contract; and ● recognize revenue when, or as, the Company satisfies a performance obligation. Revenues related to the products and services that the Company provides to students in kindergarten through twelfth grade or adult learners are considered to be General Education or Career Learning based on the school or adult program in which the student is enrolled. General Education products and services are focused on core subjects, including math, English, science and history, for kindergarten through twelfth grade students to help build a common foundation of knowledge. Career Learning products and services are focused on developing skills to enter and succeed in careers in high-growth, in-demand industries—including information technology, 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: ● a virtual or blended school whereby the amount of revenue is primarily determined by funding the school receives; ● a school or individual who licenses certain curriculum on a subscription or course-by-course basis; or ● an enterprise who contracts with the Company to provide job training. Funding-based Contracts The Company provides an integrated package of systems, services, products, and professional expertise that is administered together to support a virtual or blended public school. Contractual agreements generally span multiple years with performance obligations being isolated to annual periods which generally coincide with the Company’s fiscal year. Customers of these programs can obtain administrative support, information technology, academic support services, online curriculum, learning systems platforms and instructional services under the terms of a negotiated service agreement. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenue. The Company generates revenues under contracts with virtual and blended public schools and include the following components, where required: ● providing each of a school’s students with access to the Company’s online school and lessons; ● offline learning kits, which include books and materials to supplement the online lessons; ● the use of a personal computer and associated reclamation services; ● internet access and technology support services; ● instruction by a state-certified teacher; and ● management and technology services necessary to support a virtual or blended school. In certain contracts, revenues are determined directly by per enrollment funding. To determine the pro rata amount of revenue to recognize in a fiscal quarter, the Company estimates the total expected funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels, which are generally published on an annual basis by the state or school district. The Company reviews its estimates of funding periodically, and updates as 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 three months ended September 30, 2022 and 2021. Each state and/or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company estimates funding for each school, it takes into account the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, new registrations, average daily attendance, special needs enrollment, academic progress, historical completion, student location, funding caps and other state specified categorical program funding. Under the contracts where the Company provides products and services to schools, the Company is responsible for substantially all of the expenses incurred by the school and has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school (the school’s expected funding), as reflected in its respective financial statements, including Company charges to the schools. To the extent a school does not receive sufficient funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenues and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school’s net operating loss may reduce the Company’s ability to collect its management fees in full and recognized revenues are constrained to reflect the expected cash collections from such schools. The Company records the school’s estimated net operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. Actual school net operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. For the three months ended September 30, 2022 and 2021, the Company’s revenues included a reduction for net school operating losses at the schools of $10.1 million and $12.9 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 condensed consolidated statements of operations. Amounts recorded as revenues and expenses for the three months ended September 30, 2022 and 2021 were $125.3 million and $113.9 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 Enterprise Contracts The Company provides job training over a specified contract period to enterprises. Each of these contracts are considered to be one performance obligation. The Company recognizes these revenues based on the number of students trained during the term of the contract based on the defined contract price. Disaggregated Revenues The revenue recognition related to the types of contracts discussed above can span both of the Company’s lines of revenue as shown below. For example, a funding-based contract may include both General Education and Career Learning students. In total, there is one performance obligation and revenue is recognized over the Company’s fiscal year. The revenue is then disaggregated between General Education and Career Learning based on the Company’s estimated full-year enrollment totals of each category. During the three months ended September 30, 2022 and 2021, approximately 90% and 90%, respectively, of the Company’s General Education revenues, and 99% 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 revenue for the three months ended September 30, 2022 and 2021: Three Months Ended September 30, 2022 2021 (In thousands) General Education $ 271,658 $ 306,341 Career Learning Middle - High School 125,535 71,411 Adult 27,957 22,474 Total Career Learning 153,492 93,885 Total Revenues $ 425,150 $ 400,226 Concentration of Customers During the three months ended September 30, 2022 and 2021, the Company had no contracts that represented greater than 10% of total revenues. Contract Balances The opening and closing balance of the Company’s accounts receivable, unbilled receivables and deferred revenue are as follows: September 30, June 30, 2022 2022 (In thousands) Accounts receivable $ 543,705 $ 418,558 Unbilled receivables (included in accounts receivable) 23,729 19,702 Deferred revenue 80,682 53,630 Deferred revenue, long-term (included in other long-term liabilities) 2,911 3,099 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 three months ended September 30, 2022 and 2021 that was included in the previous July 1 st Performance Obligations 30 45 one Significant Judgments 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. Sales Taxes |
Consolidation | Consolidation The condensed consolidated financial statements include the accounts of the Company, the wholly-owned and affiliated companies that the Company owns, directly or indirectly, and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. |
Investments in Marketable Securities | 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 condensed consolidated balance sheets. The securities with maturities greater than one year are classified as long-term and are included in deposits and other assets on the condensed consolidated balance sheets. Held-to-maturity securities are recorded at their amortized cost. Interest income and dividends are recorded within the condensed consolidated statements of operations. The Company reviews the held-to-maturity debt securities for declines in fair value below the amortized cost basis under the credit loss model of Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses As of September 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 $75.1 million and $17.6 million, respectively. The maturities of the Company’s long-term marketable debt securities range from one two Allowance for Net Carrying Gross Unrealized Amortized Cost Credit Losses Amount Gains (Losses) Fair Value Corporate Bonds $ 49,242 $ - $ 49,242 $ (898) $ 48,344 U.S. Treasury Notes 16,374 - 16,374 (224) 16,150 Commercial Paper 27,073 - 27,073 - 27,073 Total $ 92,689 $ - $ 92,689 $ (1,122) $ 91,567 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 following table summarizes the amortized cost, net carrying amount, and fair value disaggregated by class of instrument (in thousands). Allowance for Net Carrying Gross Unrealized Amortized Cost Credit Losses Amount Gains (Losses) Fair Value Corporate Bonds $ 50,067 $ - $ 50,067 $ (691) $ 49,376 U.S. Treasury Notes 16,399 - 16,399 (199) 16,200 Commercial Paper 18,186 - 18,186 - 18,186 Total $ 84,652 $ - $ 84,652 $ (890) $ 83,762 |
Allowance for Doubtful Accounts | 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 maintains an allowance under ASC 326 based on historical losses, changes in payment history, customer-specific information, current economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are incurred or information becomes available related to the customer or economic conditions. |
Inventories | 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 September 30, 2022 and June 30, 2022, $9.1 million and $11.2 million, respectively, of inventory, net of reserves, was deemed long-term and included in deposits and other assets on the condensed consolidated balance sheets. The provision for excess and obsolete inventory is established based upon the evaluation of the quantity on hand relative to demand. The excess and obsolete inventory reserve was $6.5 million and $6.5 million at September 30, 2022 and June 30, 2022, respectively. |
Other Current Assets | 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 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: Useful Life Student and state testing computers and printers 3 - 5 years Computer hardware 3 - 7 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements Shorter of useful life or term of the lease The Company makes an estimate of unreturned student computers and printers based on an analysis of recent trends of returns. The Company recorded accelerated depreciation of $1.6 million and $0.6 million for the three months ended September 30, 2022 and 2021, respectively, related to unreturned student computers. Depreciation expense, including accelerated depreciation, related to computers and printers provided to students reflected in instructional costs and services for the three months ended September 30, 2022 and 2021 was $10.3 million and $8.1 million, respectively. Depreciation expense related to property and equipment reflected in selling, general, and administrative expenses for the three months ended September 30, 2022 and 2021 was $1.6 million and $1.2 million, respectively. The Company fully expenses computer peripheral equipment (e.g., keyboards, mouses) upon purchase as recovery has been determined to be uneconomical. These expenses totaled $1.2 million and $4.7 million for the three months ended September 30, 2022 and 2021, respectively, and are recorded as instructional costs and services. |
Capitalized Software Costs | 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 $9.8 million and $9.7 million for the three months ended September 30, 2022 and 2021, respectively. The Company recorded amortization expense related to capitalized software of $5.7 million and $6.2 million during the three months ended September 30, 2022 and 2021, respectively, within instructional costs and services. Amortization expense related to capitalized software reflected in selling, general, and administrative expenses during the three months ended September 30, 2022 and 2021 was $1.3 million and $1.3 million, respectively. |
Capitalized Curriculum Development Costs | Capitalized Curriculum Development Costs The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. The Company capitalizes curriculum development costs incurred during the application development stage, as well as the design and deployment phases of the project. As a result, a significant portion of the Company’s courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs are amortized is generally five years. Total capitalized curriculum development additions were $6.1 million and $4.4 million for the three months ended September 30, 2022 and 2021, respectively. These amounts are recorded on the condensed consolidated balance sheets net of amortization charges. Amortization expense for the three months ended September 30, 2022 and 2021 was $4.0 million and $4.2 million, respectively, and is recorded in instructional costs and services. |
Leases | Leases The Company’s principal leasing activities include student computers and peripherals, classified as finance leases, and facilities, classified as operating leases. Leases are classified as operating leases unless they meet any of the criteria below to be classified as a finance lease: ● the lease transfers ownership of the asset at the end of the lease; ● the lease grants an option to purchase the asset which the lessee is expected to exercise; ● the lease term reflects a major part of the asset’s economic life; ● the present value of the lease payments equals or exceeds the fair value of the asset; or ● the asset is specialized with no alternative use to the lessor at the end of the term. Finance Leases The Company enters into agreements to finance the purchase of student computers and peripherals provided to students of its schools. Individual leases typically include 3-year payment terms, at varying rates. 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 and school operations. Lease terms vary between 1 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 4.42% 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. Policy Elections Short-term Leases The Company has elected as an on-going accounting policy election not to record a right-of-use asset or lease liability on its short-term facility leases of 12 months or less, and will expense its lease payments on a straight-line basis over the lease term. The accounting policy election is made by class of underlying asset to which the right of use relates. The Company has elected to apply the accounting policy election only to operating leases. |
Income Taxes | Income Taxes Deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. The net deferred tax asset is reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company records as goodwill the excess of the purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and distributors, developed technology and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense for the three months ended September 30, 2022 and 2021 was $3.3 million and $3.2 million, respectively, and is included within selling, general, and administrative expenses in the condensed consolidated statements of operations. Future amortization of intangible assets is expected to be $9.8 million, $12.1 million, $10.9 million, $9.7 million, and $8.1 million in the fiscal years ending June 30, 2023 through June 30, 2027, respectively, and $35.9 million thereafter. The Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. The Company has one reporting unit. The process for testing goodwill and intangible assets with indefinite lives for impairment is performed annually, as well as when an event triggering impairment may have occurred. Companies are also allowed to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo the quantitative impairment test as part of their annual goodwill impairment process. The Company performs its annual assessment on May 31 st th During the three months ended September 30, 2022, there were no events or changes in circumstances that would indicate that the carrying amount of the goodwill was impaired. During the three months ended September 30, 2021 the Company qualitatively assessed its goodwill and intangible assets for impairment. It identified Coronavirus disease 2019 (“COVID-19”) as a triggering event, however there were no indicators that the fair value of the reporting unit may be less than its carrying amount, and as a result, the Company determined that no impairment was required. The following table represents the balance of the Company’s intangible assets as of September 30, 2022 and June 30, 2022: September 30, 2022 June 30, 2022 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ 85.1 $ (24.5) $ 60.6 $ 85.1 $ (23.1) $ 62.0 Customer and distributor relationships 39.8 (26.3) 13.5 38.9 (25.3) 13.6 Developed technology 22.0 (9.7) 12.3 21.7 (8.9) 12.8 Other 1.4 (1.1) 0.3 1.4 (1.1) 0.3 Total $ 148.3 $ (61.6) $ 86.7 $ 147.1 $ (58.4) $ 88.7 |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets include property, equipment, right-of-use assets, capitalized curriculum and software developed or obtained for internal use. Management reviews the Company’s recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. During the three months ended September 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 three months ended September 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. |
Fair Value Measurements | 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 condensed 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 Tallo, Inc. convertible note is discussed in more detail in Note 11, “Acquisitions and Investments.” As of September 30, 2022, the estimated fair value of the long-term debt was $415.8 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 long-term debt, comprised of the Company’s convertible senior notes due 2027, is recorded at face value less the unamortized debt issuance costs on its condensed consolidated balance sheet, and is discussed in more detail in Note 6, “Debt.” As of September 30, 2022, the estimated fair value of the Company’s marketable securities was $91.6 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.” On November 30, 2020, the Company acquired 100% of MedCerts in exchange for $70.0 million and estimated contingent consideration of $10.8 million. During fiscal year 2021 and 2022, the Company recorded an aggregate expense of $0.5 million to adjust its estimate of the fair value of the contingent consideration to $11.3 million. During the three months ended September 30, 2022, the Company paid $7.0 million to settle the contingent consideration and recorded a gain of $4.3 million. The gain is recorded within selling, general, and administrative expenses on the condensed consolidated statements of operations. There were no assets The following table summarizes certain fair value information at June 30, 2022 for assets or liabilities measured at fair value on a recurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Contingent consideration associated with acquisitions $ 11,290 $ — $ — $ 11,290 Convertible note received in acquisition $ 889 $ — $ — $ 889 The following table presents activity related to the Company’s fair value measurements categorized as Level 3 in the valuation hierarchy, valued on a recurring basis, for the three months ended September 30, 2022 and 2021: Three Months Ended September 30, 2022 Purchases, Fair Value Issuances, Realized Fair Value Description June 30, 2022 and Settlements Gains/(Losses) September 30, 2022 (In thousands) Contingent consideration associated with acquisitions $ 11,290 $ (7,024) $ (4,266) $ — Convertible note received in acquisition $ 889 $ (889) $ — $ — Three Months Ended September 30, 2021 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2021 and Settlements Gains/(Losses) September 30, 2021 (In thousands) Contingent consideration associated with acquisitions $ 11,082 $ — $ 123 $ 11,205 Convertible note received in acquisition $ 5,006 $ — $ — $ 5,006 |
Net Income (Loss) Per Common Share | 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 condensed consolidated balance sheets includes restricted stock awards outstanding. The dilutive effect of the Company’s convertible debt is determined using the if-converted method when the Company’s stock is trading above the conversion price. However, based on the structure of the instrument and how it is settled upon conversion, it would produce a similar result as the previously applied treasury stock method. The following schedule presents the calculation of basic and diluted net loss per share: Three Months Ended September 30, 2022 2021 (In thousands except share and per share data) Basic net loss per share computation: Net loss attributable to common stockholders $ (22,672) $ (5,883) Weighted average common shares — basic 42,076,628 40,559,066 Basic net loss per share $ (0.54) $ (0.15) Diluted net loss per share computation: Net loss attributable to common stockholders $ (22,672) $ (5,883) Share computation: Weighted average common shares — basic 42,076,628 40,559,066 Effect of dilutive stock options and restricted stock awards — — Weighted average common shares — diluted 42,076,628 40,559,066 Diluted net loss per share $ (0.54) $ (0.15) For the three months ended September 30, 2022 and 2021, 534,280 and 2,700,193 shares issuable in connection with stock options and restricted stock were excluded from the diluted income per common share calculation because the effect would have been antidilutive. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Summary of Significant Accounting Policies | |
Schedule of disaggregation of revenue | Three Months Ended September 30, 2022 2021 (In thousands) General Education $ 271,658 $ 306,341 Career Learning Middle - High School 125,535 71,411 Adult 27,957 22,474 Total Career Learning 153,492 93,885 Total Revenues $ 425,150 $ 400,226 |
Schedule of accounts receivables, unbilled receivables and deferred revenue | September 30, June 30, 2022 2022 (In thousands) Accounts receivable $ 543,705 $ 418,558 Unbilled receivables (included in accounts receivable) 23,729 19,702 Deferred revenue 80,682 53,630 Deferred revenue, long-term (included in other long-term liabilities) 2,911 3,099 |
Schedule of investments in marketable securities | The following table summarizes the amortized cost, net carrying amount, and fair value disaggregated by class of instrument (in thousands). Allowance for Net Carrying Gross Unrealized Amortized Cost Credit Losses Amount Gains (Losses) Fair Value Corporate Bonds $ 49,242 $ - $ 49,242 $ (898) $ 48,344 U.S. Treasury Notes 16,374 - 16,374 (224) 16,150 Commercial Paper 27,073 - 27,073 - 27,073 Total $ 92,689 $ - $ 92,689 $ (1,122) $ 91,567 Allowance for Net Carrying Gross Unrealized Amortized Cost Credit Losses Amount Gains (Losses) Fair Value Corporate Bonds $ 50,067 $ - $ 50,067 $ (691) $ 49,376 U.S. Treasury Notes 16,399 - 16,399 (199) 16,200 Commercial Paper 18,186 - 18,186 - 18,186 Total $ 84,652 $ - $ 84,652 $ (890) $ 83,762 |
Schedule of useful lives of property and equipment | Useful Life Student and state testing computers and printers 3 - 5 years Computer hardware 3 - 7 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements Shorter of useful life or term of the lease |
Schedule of intangible assets | September 30, 2022 June 30, 2022 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ 85.1 $ (24.5) $ 60.6 $ 85.1 $ (23.1) $ 62.0 Customer and distributor relationships 39.8 (26.3) 13.5 38.9 (25.3) 13.6 Developed technology 22.0 (9.7) 12.3 21.7 (8.9) 12.8 Other 1.4 (1.1) 0.3 1.4 (1.1) 0.3 Total $ 148.3 $ (61.6) $ 86.7 $ 147.1 $ (58.4) $ 88.7 |
Schedule of assets and liabilities measured at fair value on a recurring basis | The following table summarizes certain fair value information at June 30, 2022 for assets or liabilities measured at fair value on a recurring basis: Fair Value Measurements Using: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Input Inputs Description Fair Value (Level 1) (Level 2) (Level 3) (In thousands) Contingent consideration associated with acquisitions $ 11,290 $ — $ — $ 11,290 Convertible note received in acquisition $ 889 $ — $ — $ 889 |
Schedule of activity related to fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | Three Months Ended September 30, 2022 Purchases, Fair Value Issuances, Realized Fair Value Description June 30, 2022 and Settlements Gains/(Losses) September 30, 2022 (In thousands) Contingent consideration associated with acquisitions $ 11,290 $ (7,024) $ (4,266) $ — Convertible note received in acquisition $ 889 $ (889) $ — $ — Three Months Ended September 30, 2021 Purchases, Fair Value Issuances, Unrealized Fair Value Description June 30, 2021 and Settlements Gains/(Losses) September 30, 2021 (In thousands) Contingent consideration associated with acquisitions $ 11,082 $ — $ 123 $ 11,205 Convertible note received in acquisition $ 5,006 $ — $ — $ 5,006 |
Schedule of calculation of basic and diluted net income (loss) per share | Three Months Ended September 30, 2022 2021 (In thousands except share and per share data) Basic net loss per share computation: Net loss attributable to common stockholders $ (22,672) $ (5,883) Weighted average common shares — basic 42,076,628 40,559,066 Basic net loss per share $ (0.54) $ (0.15) Diluted net loss per share computation: Net loss attributable to common stockholders $ (22,672) $ (5,883) Share computation: Weighted average common shares — basic 42,076,628 40,559,066 Effect of dilutive stock options and restricted stock awards — — Weighted average common shares — diluted 42,076,628 40,559,066 Diluted net loss per share $ (0.54) $ (0.15) |
Finance and Operating Leases (T
Finance and Operating Leases (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Finance and Operating Leases | |
Schedule of present value of the minimum lease payments on finance leases | September 30, 2022 June 30, 2022 (in thousands) 2023 $ 34,326 $ 38,600 2024 32,333 24,816 2025 11,984 4,468 2026 2,047 22 Total minimum payments 80,690 67,906 Less: imputed interest (2,662) (1,629) Finance lease liability 78,028 66,277 Less: current portion of finance lease liability (43,627) (37,389) Long-term finance lease liability $ 34,401 $ 28,888 |
Schedule of future minimum lease payments under non-cancelable operating leases | September 30, 2022 June 30, 2022 (in thousands) 2023 $ 11,443 $ 15,120 2024 16,039 16,638 2025 15,332 16,168 2026 12,025 12,900 2027 8,518 8,797 Thereafter 27,455 27,447 Total minimum payments 90,812 97,070 Less: imputed interest (8,343) (9,113) Operating lease liability 82,469 87,957 Less: current portion of operating lease liability (13,356) (12,830) Long-term operating lease liability $ 69,113 $ 75,127 |
Schedule of expected sublease income | September 30, 2022 June 30, 2022 (in thousands) 2023 $ 1,047 $ 1,396 2024 665 665 2025 412 412 2026 140 140 Total sublease income $ 2,264 $ 2,613 |
Schedule of lease cost, weighted-average remaining lease term, weighted-average discount rate | Three Months Ended September 30, 2022 2021 (in thousands) Lease cost Finance lease cost: Amortization of right-of-use assets $ 9,934 $ 7,620 Interest on lease liabilities 388 417 Instructional costs and services: Operating lease cost 3,715 3,935 Short-term lease cost 24 18 Sublease income (282) (332) Selling, general, and administrative expenses: Operating lease cost 586 1,667 Short-term lease cost 94 4 Sublease income (80) (129) Total lease cost $ 14,379 $ 13,200 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ (2,605) $ (5,321) Financing cash flows from finance leases (9,314) (7,020) Right-of-use assets obtained in exchange for new finance lease liabilities 19,907 13,983 Right-of-use assets obtained in exchange for new operating lease liabilities 576 6,805 Weighted-average remaining lease term - finance leases 1.82 yrs. 2.31 yrs. Weighted-average remaining lease term - operating leases 6.51 yrs. 6.80 yrs. Weighted-average discount rate - finance leases 3.00 % 2.37 % Weighted-average discount rate - operating leases 2.77 % 2.79 % |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Debt | |
Schedule of components of debt | September 30, 2022 June 30, 2022 (in thousands) Convertible Senior Notes due 2027 $ 420,000 $ 420,000 Less: unamortized debt issuance costs (8,152) (8,562) Total debt 411,848 411,438 Less: current portion of debt — — Long-term debt $ 411,848 $ 411,438 |
Equity Incentive Plan (Tables)
Equity Incentive Plan (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Schedule of stock option activity | Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Shares Price Life (Years) Value Outstanding, June 30, 2022 1,350 $ 14.77 0.98 $ 35,127 Granted — — Exercised (675) 14.77 Forfeited or canceled — — Outstanding and exercisable, September 30, 2022 675 $ 14.77 0.73 $ 18,401 |
Schedule of restricted stock award activity | Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2022 1,131,466 $ 33.27 Granted 460,411 38.35 Vested (483,608) 31.47 Canceled (27,184) 35.70 Nonvested, September 30, 2022 1,081,085 $ 36.18 |
Schedule of performance share units award activity | Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2022 355,302 $ 32.62 Granted 328,164 36.50 Vested (77,048) 28.42 Canceled (23,318) 28.50 Nonvested, September 30, 2022 583,100 $ 35.53 |
Deferred Stock Units | |
Schedule of performance share units award activity | Weighted Average Grant-Date Shares Fair Value Nonvested, June 30, 2022 69,117 $ 24.27 Granted 1,101 43.46 Vested — — Canceled — — Nonvested, September 30, 2022 70,218 $ 24.57 |
Acquisitions and Investments (T
Acquisitions and Investments (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Acquisitions and Investments | |
Schedule of intangible assets | September 30, 2022 June 30, 2022 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ 85.1 $ (24.5) $ 60.6 $ 85.1 $ (23.1) $ 62.0 Customer and distributor relationships 39.8 (26.3) 13.5 38.9 (25.3) 13.6 Developed technology 22.0 (9.7) 12.3 21.7 (8.9) 12.8 Other 1.4 (1.1) 0.3 1.4 (1.1) 0.3 Total $ 148.3 $ (61.6) $ 86.7 $ 147.1 $ (58.4) $ 88.7 |
Supplemental Disclosure of Ca_2
Supplemental Disclosure of Cash Flow Information (Tables) | 3 Months Ended |
Sep. 30, 2022 | |
Supplemental Disclosure of Cash Flow Information | |
Schedule of supplemental disclosure of cash flow information | Three Months Ended September 30, 2022 2021 (In thousands) Cash paid for interest $ 2,796 $ 2,811 Cash paid for taxes $ 21,296 $ 12,593 Supplemental disclosure of non-cash financing activities: Right-of-use assets obtained from acquisitions 385 — Right-of-use assets obtained in exchange for new finance lease liabilities 19,907 13,983 Supplemental disclosure of non-cash investing activities: Stock-based compensation expense capitalized on software development $ 101 $ 68 Stock-based compensation expense capitalized on curriculum development 19 29 Non-cash purchase price related to business combinations 5,423 — Business combinations: Acquired assets $ 1,132 $ — Intangible assets 1,309 — Goodwill 5,217 — Assumed liabilities (385) — Deferred revenue (441) — |
Description of the Business (De
Description of the Business (Details) | Sep. 30, 2022 item |
Description of the Business | |
Number of lines of revenue | 2 |
Basis of Presentation (Details)
Basis of Presentation (Details) | 3 Months Ended |
Sep. 30, 2022 segment | |
Basis of Presentation | |
Number of operating segments | 1 |
Number of reportable business segments | 1 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Summary of Significant Accounting Policies | ||
Revenues | $ 425,150 | $ 400,226 |
School operating losses included in the entity's revenue | $ 10,100 | 12,900 |
Minimum | ||
Summary of Significant Accounting Policies | ||
Duration of contracts providing access to curriculum via the entity's Web site | 1 year | |
Maximum | ||
Summary of Significant Accounting Policies | ||
Duration of contracts providing access to curriculum via the entity's Web site | 2 years | |
Primary Obligor | ||
Summary of Significant Accounting Policies | ||
Revenues | $ 125,300 | $ 113,900 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Disaggregation of revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Summary of Significant Accounting Policies | ||
Total Revenues | $ 425,150 | $ 400,226 |
General Education | ||
Summary of Significant Accounting Policies | ||
Percentage of revenues from funding-based contracts | 90% | 90% |
Total Revenues | $ 271,658 | $ 306,341 |
Career Learning | ||
Summary of Significant Accounting Policies | ||
Total Revenues | $ 153,492 | $ 93,885 |
Middle - High School | ||
Summary of Significant Accounting Policies | ||
Percentage of revenues from funding-based contracts | 99% | 99% |
Total Revenues | $ 125,535 | $ 71,411 |
Adult | ||
Summary of Significant Accounting Policies | ||
Total Revenues | $ 27,957 | $ 22,474 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Concentration of Customers (Details) - contract | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue | Customer Concentration Risk | ||
Concentration of revenues | ||
Number of customers with concentration | 0 | 0 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Contract Balances (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2022 | |
Accounts receivables, contract assets and deferred revenue | |||
Accounts receivable | $ 543,705 | $ 418,558 | |
Unbilled receivables (included in accounts receivable) | 23,729 | 19,702 | |
Deferred revenue | 80,682 | 53,630 | |
Deferred revenue, long-term (included in other long-term liabilities) | 2,911 | $ 3,099 | |
Revenue recognized that was included in opening deferred revenue balance | 27,800 | $ 25,200 | |
Revenue recognized from performance obligation satisfied in prior periods | $ (600) | $ 2,300 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Performance Obligations (Details) $ in Millions | 3 Months Ended |
Sep. 30, 2022 USD ($) | |
Summary of Significant Accounting Policies | |
Minimum payment term | 30 days |
Maximum payment term | 45 days |
Practical expedient | |
Unsatisfied performance obligations | true |
Unsatisfied performance obligations amount | $ 2.9 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Marketable Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
Marketable securities | ||
Marketable securities, short-term portion | $ 75,100 | $ 63,000 |
Marketable securities, long-term portion | $ 17,600 | 21,700 |
Marketable Securities, Maturity Date, Start | 1 year | |
Marketable Securities, Maturity Date, End | 2 years | |
Amortized Cost | $ 92,689 | 84,652 |
Allowance for Credit Losses | 0 | 0 |
Net Carrying Amount | 92,689 | 84,652 |
Gross Unrealize (Losses) | (1,122) | (890) |
Fair Value | 91,567 | 83,762 |
Corporate Bonds | ||
Marketable securities | ||
Amortized Cost | 49,242 | 50,067 |
Net Carrying Amount | 49,242 | 50,067 |
Gross Unrealize (Losses) | (898) | (691) |
Fair Value | 48,344 | 49,376 |
U.S. Treasury Notes | ||
Marketable securities | ||
Amortized Cost | 16,374 | 16,399 |
Net Carrying Amount | 16,374 | 16,399 |
Gross Unrealize (Losses) | (224) | (199) |
Fair Value | 16,150 | 16,200 |
Commercial Paper | ||
Marketable securities | ||
Amortized Cost | 27,073 | 18,186 |
Net Carrying Amount | 27,073 | 18,186 |
Fair Value | $ 27,073 | $ 18,186 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Millions | Sep. 30, 2022 | Jun. 30, 2022 |
Summary of Significant Accounting Policies | ||
Inventory deemed long-term and included in deposits and other assets | $ 9.1 | $ 11.2 |
Excess and obsolete inventory reserve | $ 6.5 | $ 6.5 |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Property and Equipment and Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Property and equipment | ||
Equipment expense | $ 1,200 | $ 4,700 |
Capitalized software development costs | $ 9,793 | 9,690 |
Capitalized Curriculum Development Costs | ||
Amortization period of capitalized development costs | 5 years | |
Capitalized curriculum development additions | $ 6,145 | 4,376 |
Operating Leases | ||
Incremental borrowing rate used as discount rate | 4.42% | |
Minimum | ||
Operating Leases | ||
Operating leases initial term | 1 year | |
Maximum | ||
Finance Leases | ||
Finance lease term | 3 years | |
Operating Leases | ||
Operating leases initial term | 11 years | |
Instructional costs and services | ||
Property and equipment | ||
Depreciation expense | $ 10,300 | 8,100 |
Amortization expense | 5,700 | 6,200 |
Capitalized Curriculum Development Costs | ||
Amortization expense | 4,000 | 4,200 |
Selling, general and administrative expenses | ||
Property and equipment | ||
Depreciation expense | 1,600 | 1,200 |
Amortization expense | 1,300 | 1,300 |
Student and state testing computers and printers | ||
Property and equipment | ||
Accelerated depreciation | $ 1,600 | $ 600 |
Student and state testing computers and printers | Minimum | ||
Property and equipment | ||
Useful Life | 3 years | |
Student and state testing computers and printers | Maximum | ||
Property and equipment | ||
Useful Life | 5 years | |
Computer hardware | Minimum | ||
Property and equipment | ||
Useful Life | 3 years | |
Computer hardware | Maximum | ||
Property and equipment | ||
Useful Life | 7 years | |
Computer software | Minimum | ||
Property and equipment | ||
Useful Life | 3 years | |
Computer software | Maximum | ||
Property and equipment | ||
Useful Life | 5 years | |
Web site development | ||
Property and equipment | ||
Useful Life | 3 years | |
Office equipment | ||
Property and equipment | ||
Useful Life | 5 years | |
Furniture and fixtures | ||
Property and equipment | ||
Useful Life | 7 years | |
Capitalized software | ||
Property and equipment | ||
Useful Life | 3 years | |
Buildings | Minimum | ||
Operating Leases | ||
Operating leases initial term | 1 year | |
Buildings | Maximum | ||
Operating Leases | ||
Operating leases initial term | 11 years |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Goodwill and Intangible Assets (Details) $ in Millions | 3 Months Ended | ||
Sep. 30, 2022 USD ($) segment | Sep. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) | |
Intangible Assets: | |||
Amortization expense | $ 3.3 | $ 3.2 | |
Gross Carrying Amount | 148.3 | $ 147.1 | |
Accumulated Amortization | (61.6) | (58.4) | |
Net Carrying Value | $ 86.7 | 88.7 | |
Number of reporting units | segment | 1 | ||
Future amortization of intangible assets | |||
Fiscal 2022 - remainder | $ 9.8 | ||
Fiscal 2023 | 12.1 | ||
Fiscal 2024 | 10.9 | ||
Fiscal 2025 | 9.7 | ||
Fiscal 2026 | 8.1 | ||
Thereafter | 35.9 | ||
Trade names | |||
Intangible Assets: | |||
Gross Carrying Amount | 85.1 | 85.1 | |
Accumulated Amortization | (24.5) | (23.1) | |
Net Carrying Value | 60.6 | 62 | |
Customer relationships | |||
Intangible Assets: | |||
Gross Carrying Amount | 39.8 | 38.9 | |
Accumulated Amortization | (26.3) | (25.3) | |
Net Carrying Value | 13.5 | 13.6 | |
Developed technology | |||
Intangible Assets: | |||
Gross Carrying Amount | 22 | 21.7 | |
Accumulated Amortization | (9.7) | (8.9) | |
Net Carrying Value | 12.3 | 12.8 | |
Other | |||
Intangible Assets: | |||
Gross Carrying Amount | 1.4 | 1.4 | |
Accumulated Amortization | (1.1) | (1.1) | |
Net Carrying Value | $ 0.3 | $ 0.3 |
Summary of Significant Accou_13
Summary of Significant Accounting Policies - Fair Value Measurement (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Nov. 30, 2020 | Sep. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Assets and liabilities measured at fair value | |||||
Estimated fair value of long-term debt | $ 415,800 | ||||
Estimated fair value of marketable securities | 91,600 | ||||
Expense on estimate of fair value of contingent consideration | $ 500 | $ 500 | |||
Fair value of the contingent consideration | 11,300 | 11,300 | |||
Payments of contingent consideration | 7,024 | ||||
MedCerts | |||||
Assets and liabilities measured at fair value | |||||
Ownership percentage acquired (as a percent) | 100% | ||||
Total consideration | $ 70,000 | ||||
Contingent consideration | $ 10,800 | ||||
Payments of contingent consideration | 7,000 | ||||
MedCerts | Selling, General, and Administrative Expenses | |||||
Assets and liabilities measured at fair value | |||||
Gain on contingent consideration | 4,300 | ||||
Measured on a recurring basis | |||||
Assets and liabilities measured at fair value | |||||
Assets, Fair Value Disclosure | 0 | ||||
Liabilities, Fair Value Disclosure | 0 | ||||
Measured on a recurring basis | Contingent Consideration | Acquisitions | |||||
Assets and liabilities measured at fair value | |||||
Fair Value Liability, beginning of period | 11,290 | ||||
Fair Value Liability, ending of period | 11,290 | ||||
Measured on a recurring basis | Convertible Note | Acquisitions | |||||
Assets and liabilities measured at fair value | |||||
Fair Value Asset, beginning of period | 889 | ||||
Fair Value Asset, ending of period | 889 | ||||
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Contingent Consideration | Acquisitions | |||||
Assets and liabilities measured at fair value | |||||
Fair Value Liability, beginning of period | 11,290 | $ 11,082 | 11,082 | ||
Purchases, Issuances and Settlements | (7,024) | ||||
Realized Liability Gains/(Losses) | (4,266) | 123 | |||
Fair Value Liability, ending of period | 11,205 | 11,290 | 11,082 | ||
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Convertible Note | Acquisitions | |||||
Assets and liabilities measured at fair value | |||||
Fair Value Asset, beginning of period | 889 | 5,006 | 5,006 | ||
Purchases, Issuances and Settlements | $ (889) | ||||
Fair Value Asset, ending of period | $ 5,006 | $ 889 | $ 5,006 |
Summary of Significant Accou_14
Summary of Significant Accounting Policies - Net Income (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Basic and diluted net income (loss) per share computation: | ||
Net income (loss) attributable to common stockholders | $ (22,672) | $ (5,883) |
Weighted average common shares-basic | 42,076,628 | 40,559,066 |
Basic net income (loss) per share (in dollars per share) | $ (0.54) | $ (0.15) |
Weighted average common shares-diluted | 42,076,628 | 40,559,066 |
Diluted net income (loss) per share (in dollars per share) | $ (0.54) | $ (0.15) |
Stock options and restricted stock | ||
Basic and diluted net income (loss) per share computation: | ||
Anti-dilutive shares | 534,280 | 2,700,193 |
Income Taxes (Details)
Income Taxes (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | ||||
Dec. 31, 2021 USD ($) | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2022 USD ($) | Dec. 31, 2020 USD ($) installment | Mar. 27, 2020 | |
Reconciliation to income tax at the statutory rate: | ||||||
Effective income tax rate (as a percent) | 24.90% | 33% | ||||
Employer portion of social security payroll tax percentage | 6.20% | |||||
Deferred amount of employer portion of social security payroll tax | $ 14,100 | |||||
Number of installments that deferred employer social security payroll taxes will be repaid | installment | 2 | |||||
Deferred amount paid | $ 7,050 | |||||
Forecast | ||||||
Reconciliation to income tax at the statutory rate: | ||||||
Deferred amount payable | $ 7,050 |
Finance and Operating Leases (D
Finance and Operating Leases (Details) - USD ($) | Sep. 30, 2022 | Aug. 31, 2022 | Jun. 30, 2022 | Jul. 31, 2020 | Apr. 30, 2020 |
Finance and Operating Leases | |||||
Finance lease liability | $ 78,028,000 | $ 66,277,000 | |||
Maximum | |||||
Finance and Operating Leases | |||||
Finance lease term | 3 years | ||||
BALC | |||||
Finance and Operating Leases | |||||
Finance lease liability | $ 78,000,000 | 66,300,000 | |||
Available line of credit | $ 41,000,000 | $ 25,000,000 | |||
Finance lease right-of-use assets | $ 55,500,000 | 42,700,000 | |||
Finance lease term | 36 months | ||||
Purchase option | $ 1 | ||||
Additional amount of borrowings as at the and of the reporting period | $ 54,000,000 | ||||
BALC | Minimum | |||||
Finance and Operating Leases | |||||
Interest rate on finance lease (as a percent) | 1.52% | ||||
Fixed interest rate (as a percent) | 1.52% | ||||
BALC | Maximum | |||||
Finance and Operating Leases | |||||
Interest rate on finance lease (as a percent) | 4.42% | ||||
Fixed interest rate (as a percent) | 4.42% | ||||
CSI Leasing | |||||
Finance and Operating Leases | |||||
Finance lease term | 36 months |
Finance and Operating Leases -
Finance and Operating Leases - Finance leases (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
Finance leases | ||
Remainder of fiscal year | $ 34,326 | |
Year 1 | 32,333 | $ 38,600 |
Year 2 | 11,984 | 24,816 |
Year 3 | 2,047 | 4,468 |
Year 4 | 22 | |
Total minimum payments | 80,690 | 67,906 |
Less: imputed interest | (2,662) | (1,629) |
Finance lease liability | 78,028 | 66,277 |
Less: current portion of finance lease liability | (43,627) | (37,389) |
Long-term finance lease liability | $ 34,401 | $ 28,888 |
Finance and Operating Leases _2
Finance and Operating Leases - Operating Leases (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
Operating Leases | ||
Remainder of fiscal year | $ 11,443 | |
Year 1 | 16,039 | $ 15,120 |
Year 2 | 15,332 | 16,638 |
Year 3 | 12,025 | 16,168 |
Year 4 | 8,518 | 12,900 |
Year 5 | 8,797 | |
Thereafter | 27,455 | |
Thereafter | 27,447 | |
Total minimum payments | 90,812 | 97,070 |
Less: imputed interest | (8,343) | (9,113) |
Operating lease liability | 82,469 | 87,957 |
Less: current portion of operating lease liability | (13,356) | (12,830) |
Long-term operating lease liability | 69,113 | 75,127 |
Operating lease right-of-use assets, net | $ 79,327 | $ 85,457 |
Minimum | ||
Operating Leases | ||
Operating leases initial term | 1 year | |
Maximum | ||
Operating Leases | ||
Operating leases initial term | 11 years |
Finance and Operating Leases _3
Finance and Operating Leases - Sub Leases (Details) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 USD ($) facility | Jun. 30, 2022 USD ($) | |
Finance and Operating Leases | ||
Remainder of current fiscal year | $ 1,047 | |
Year 1 | 665 | $ 1,396 |
Year 2 | 412 | 665 |
Year 3 | 140 | 412 |
Year 4 | 140 | |
Total sublease income | $ 2,264 | $ 2,613 |
Number of entity's facilities that are being subleased through July 2023 | facility | 1 | |
Number of entity's facilities that are being subleased through November 2024 | facility | 1 | |
Number Of Facilities Being Subleased Through December 2025 | facility | 1 |
Finance and Operating Leases _4
Finance and Operating Leases - Lease cost and other information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Finance lease cost: | ||
Amortization of right-of-use assets | $ 9,934 | $ 7,620 |
Interest on lease liabilities | 388 | 417 |
Total lease cost | 14,379 | 13,200 |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash flows from operating leases | (2,605) | (5,321) |
Financing cash flows from finance leases | (9,314) | (7,020) |
Right-of-use assets obtained in exchange for new finance lease liabilities | 19,907 | 13,983 |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 576 | $ 6,805 |
Weighted-average remaining lease term - finance leases | 1 year 9 months 25 days | 2 years 3 months 21 days |
Weighted-average remaining lease term - operating leases | 6 years 6 months 3 days | 6 years 9 months 18 days |
Weighted-average discount rate - finance leases | 3% | 2.37% |
Weighted-average discount rate - operating leases | 2.77% | 2.79% |
Instructional Costs and Services | ||
Finance lease cost: | ||
Operating lease cost | $ 3,715 | $ 3,935 |
Short-term lease cost | 24 | 18 |
Sublease income | (282) | (332) |
Selling, general and administrative expenses | ||
Finance lease cost: | ||
Operating lease cost | 586 | 1,667 |
Short-term lease cost | 94 | 4 |
Sublease income | $ (80) | $ (129) |
Debt (Details)
Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
Debt | ||
Less: unamortized debt issuance costs | $ (8,152) | $ (8,562) |
Total debt | 411,848 | 411,438 |
Long-term debt | 411,848 | 411,438 |
Convertible Senior Notes Due 2027 | ||
Debt | ||
Total debt | $ 420,000 | $ 420,000 |
Debt - Additional Information (
Debt - Additional Information (Details) $ / shares in Units, $ in Thousands | 2 Months Ended | 3 Months Ended | |
Sep. 30, 2020 USD ($) $ / shares | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | |
Debt | |||
Amortization of fees on debt | $ 410 | $ 404 | |
Convertible Senior Notes Due 2027 | |||
Debt | |||
Face amount | $ 420,000 | ||
Interest rate (as percent) | 1.125% | ||
Net proceeds | $ 408,600 | ||
Interest expense | 1,200 | 1,200 | |
Debt issuance costs | $ 11,400 | ||
Amortization of fees on debt | $ 400 | $ 400 | |
Period prior to maturity date where noteholders may convert their notes at their election prior to the maturity date | 2 days | ||
Conversion rate | 18.9109 | ||
Conversion price (in dollars per share) | $ / shares | $ 52.88 | ||
Upper strike price (in dollars per share) | $ / shares | $ 86.174 | ||
Capped call transaction | $ 60,400 |
Credit Facility (Details)
Credit Facility (Details) - Credit Facility. - USD ($) $ in Millions | 2 Months Ended | ||
Jan. 27, 2020 | Sep. 30, 2020 | Sep. 30, 2022 | |
Credit Facility | |||
Face amount | $ 100 | ||
Term of debt | 5 years | ||
Repayments on credit facility | $ 100 | ||
Amount outstanding | $ 0 | ||
Amount of accordion feature under the credit facility | $ 200 | ||
LIBOR | Minimum | |||
Credit Facility | |||
Interest rate spread added to base rate (as a percent) | 0.875% | ||
LIBOR | Maximum | |||
Credit Facility | |||
Interest rate spread added to base rate (as a percent) | 1.50% |
Equity Incentive Plan (Details)
Equity Incentive Plan (Details) - shares | 3 Months Ended | |
Sep. 30, 2022 | Jun. 30, 2022 | |
Equity Transactions | ||
Options outstanding (in shares) | 675 | 1,350 |
Exercisable after expiration of option term (in shares) | 0 | |
Employee and Non Employees Stock Option [Member] | ||
Equity Transactions | ||
Vesting period | 4 years | |
Plan | ||
Equity Transactions | ||
Shares reserved for issuance | 1,413,499 | |
Plan and prior plan | ||
Equity Transactions | ||
Options outstanding (in shares) | 1,735,079 |
Equity Incentive Plan - Activit
Equity Incentive Plan - Activity (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Jun. 30, 2022 | |
Shares | ||
Outstanding at the beginning of the period (in shares) | 1,350 | |
Exercised (in shares) | (675) | |
Outstanding at the end of the period (in shares) | 675 | 1,350 |
Weighted-Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 14.77 | |
Exercised (in dollars per share) | 14.77 | |
Outstanding at the end of the period (in dollars per share) | $ 14.77 | $ 14.77 |
Additional information | ||
Weighted Average Remaining Contractual Life | 8 months 23 days | 11 months 23 days |
Aggregate Intrinsic Value | $ 18,401 | $ 35,127 |
Equity Incentive Plan - Relatio
Equity Incentive Plan - Relationship (Details) - USD ($) $ in Millions | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Employee and Non Employees Stock Option [Member] | ||
Equity Transactions | ||
Intrinsic value of options exercised | $ 0 | $ 0.2 |
Unrecognized compensation | 0 | |
Stock based compensation expense | 0 | 0 |
Performance Share Units | ||
Equity Transactions | ||
Unrecognized compensation | $ 9.4 | |
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 years 3 months 18 days | |
Stock based compensation expense | $ 0.9 | $ 3 |
Equity Incentive Plan - Other (
Equity Incentive Plan - Other (Details) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||||
Aug. 31, 2022 shares | Oct. 31, 2021 shares | Aug. 31, 2021 shares | Sep. 30, 2022 USD ($) item $ / shares shares | Dec. 31, 2021 shares | Sep. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) $ / shares shares | Jun. 30, 2021 USD ($) $ / shares shares | Jun. 30, 2020 USD ($) $ / shares shares | Jun. 30, 2019 USD ($) $ / shares shares | |
Equity Transactions | ||||||||||
Vested (in shares) | 238,863 | |||||||||
Fiscal Year 2021 LTIP | ||||||||||
Equity Transactions | ||||||||||
Fair value | $ | $ 0.3 | |||||||||
Number of Metrics, Assumed to be Achieved | item | 3 | |||||||||
Vest the following year | ||||||||||
Equity Transactions | ||||||||||
Vested (in shares) | 77,048 | |||||||||
Certified achievement percentage | 200% | |||||||||
Restricted Stock | ||||||||||
Equity Transactions | ||||||||||
Nonvested at the beginning of the period (in shares) | 1,131,466 | |||||||||
Granted (in shares) | 460,411 | |||||||||
Granted (in dollars per share) | $ / shares | $ 38.35 | |||||||||
Nonvested at the end of the period (in shares) | 1,081,085 | 1,131,466 | ||||||||
Vested (in shares) | 483,608 | |||||||||
Forfeited or canceled (in shares) | 27,184 | |||||||||
Vesting period | 3 years | |||||||||
Unrecognized compensation | $ | $ 30.2 | |||||||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 years 1 month 6 days | |||||||||
Fair value of share-based compensation awards granted in period | $ | $ 17.7 | $ 14.4 | ||||||||
Fair value of share-based compensation awards vested in period | $ | 17.9 | 14.4 | ||||||||
Stock based compensation expense | $ | $ 4.6 | 5.3 | ||||||||
Restricted Stock | Vesting Based on Performance | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 0 | |||||||||
Restricted Stock | Service based awards | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 460,411 | |||||||||
Nonvested at the end of the period (in shares) | 1,022,424 | |||||||||
Vested (in shares) | 167,906 | |||||||||
Restricted Stock | Vesting Based On Performance And Service | ||||||||||
Equity Transactions | ||||||||||
Nonvested at the end of the period (in shares) | 58,662 | |||||||||
Vested (in shares) | 315,702 | |||||||||
Performance Share Units | ||||||||||
Equity Transactions | ||||||||||
Number of shares of common stock each unit has the right to receive | 1 | |||||||||
Nonvested at the beginning of the period (in shares) | 355,302 | |||||||||
Granted (in shares) | 328,164 | |||||||||
Granted (in dollars per share) | $ / shares | $ 36.50 | |||||||||
Nonvested at the end of the period (in shares) | 583,100 | 355,302 | ||||||||
Vested (in shares) | 77,048 | |||||||||
Forfeited or canceled (in shares) | 23,318 | |||||||||
Unrecognized compensation | $ | $ 9.4 | |||||||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 years 3 months 18 days | |||||||||
Stock based compensation expense | $ | $ 0.9 | 3 | ||||||||
Performance Share Units | Fiscal Year 2019 LTIP | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 34,030 | 263,936 | ||||||||
Granted (in dollars per share) | $ / shares | $ 23.51 | $ 30.05 | ||||||||
Vested (in shares) | 115,223 | |||||||||
Forfeited or canceled (in shares) | 107,397 | |||||||||
Fair value | $ | $ 0.8 | $ 7.9 | ||||||||
Performance Share Units | Fiscal Year 2020 TRIP | ||||||||||
Equity Transactions | ||||||||||
Fair value | $ | $ 12.3 | |||||||||
Performance Share Units | Fiscal Year 2021 MIP | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 38,575 | |||||||||
Earned award vesting percentage | 33.33% | |||||||||
Performance Share Units | Fiscal Year 2021 LTIP | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 111,450 | |||||||||
Granted (in dollars per share) | $ / shares | $ 24.15 | |||||||||
Fair value | $ | $ 2.7 | |||||||||
Performance Share Units | Fiscal Year 2022 LTIP | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 250,250 | |||||||||
Granted (in dollars per share) | $ / shares | $ 36.30 | |||||||||
Vesting period | 3 years | |||||||||
Fair value | $ | $ 9.1 | |||||||||
Performance Share Units | Fiscal Year 2023 LTIP | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 289,640 | |||||||||
Granted (in dollars per share) | $ / shares | $ 37.58 | |||||||||
Vesting period | 3 years | |||||||||
Fair value | $ | $ 10.9 | |||||||||
Performance Share Units | Tech Elevator | ||||||||||
Equity Transactions | ||||||||||
Stock based compensation expense | $ | $ 0.3 | 0.3 | ||||||||
Performance Share Units | Tech Elevator | Fiscal Year 2021 MIP | ||||||||||
Equity Transactions | ||||||||||
Intrinsic value of awards | $ | $ 4 | |||||||||
Performance Share Units | Revenue | Fiscal Year 2020 TRIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 60% | |||||||||
Performance Share Units | EBITDA | Fiscal Year 2020 TRIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 40% | |||||||||
Performance Share Units | Vest immediately | Fiscal Year 2021 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 40% | |||||||||
Performance Share Units | Vest annually over two years. | Fiscal Year 2021 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 60% | |||||||||
Performance Shares Tranche #1 | Fiscal Year 2019 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 45% | |||||||||
Performance Shares Tranche #1 | Calendar Year 2021 | Fiscal Year 2020 TRIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 70% | |||||||||
Performance Shares Tranche #1 | Vest immediately | Fiscal Year 2022 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 50% | |||||||||
Performance Shares Tranche #1 | Vest immediately | Fiscal Year 2023 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 50% | |||||||||
Performance Shares Tranche #1 | Vest annually over two years. | Fiscal Year 2022 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 50% | |||||||||
Performance Shares Tranche #1 | Vest annually over two years. | Fiscal Year 2023 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 50% | |||||||||
Performance Shares Tranche #2 | Fiscal Year 2019 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 25% | |||||||||
Certified achievement percentage | 193% | |||||||||
Performance Shares Tranche #2 | Calendar Year 2022 | Fiscal Year 2020 TRIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 30% | |||||||||
Performance Shares Tranche #3 | Fiscal Year 2019 LTIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 30% | |||||||||
Time Based Award | Tech Elevator | Fiscal Year 2021 MIP | ||||||||||
Equity Transactions | ||||||||||
Vesting period | 3 years | |||||||||
Intrinsic value of awards | $ | $ 4 | |||||||||
Time Based Award | Vest immediately | Tech Elevator | Fiscal Year 2021 MIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 70% | |||||||||
Time Based Award | Vest annually over two years. | Tech Elevator | Fiscal Year 2021 MIP | ||||||||||
Equity Transactions | ||||||||||
Earned award vesting percentage | 30% | |||||||||
Deferred Stock Units | ||||||||||
Equity Transactions | ||||||||||
Nonvested at the beginning of the period (in shares) | 69,117 | |||||||||
Granted (in shares) | 1,101 | |||||||||
Granted (in dollars per share) | $ / shares | $ 43.46 | |||||||||
Nonvested at the end of the period (in shares) | 70,218 | 69,117 | ||||||||
Unrecognized compensation | $ | $ 0.1 | |||||||||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 3 months 18 days | |||||||||
Stock based compensation expense | $ | $ 0.1 | $ 0.1 | ||||||||
Chief Executive Officer And Executive Chairman | Performance Share Units | ||||||||||
Equity Transactions | ||||||||||
Granted (in dollars per share) | $ / shares | $ 27.91 | |||||||||
Chief Executive Officer And Executive Chairman | Performance Share Units | Vesting Based on Performance | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 358,294 | |||||||||
Chief Executive Officer And Executive Chairman | Performance Shares Tranche #2 | ||||||||||
Equity Transactions | ||||||||||
Granted (in shares) | 119,431 | |||||||||
Senior Executives | Performance Share Units | 2019 SPP | ||||||||||
Equity Transactions | ||||||||||
Market capitalization growth performance period | 3 years |
Equity Incentive Plan - Vesting
Equity Incentive Plan - Vesting (Details) - $ / shares | 1 Months Ended | 3 Months Ended |
Aug. 31, 2022 | Sep. 30, 2022 | |
Shares | ||
Vested (in shares) | (238,863) | |
Restricted Stock | ||
Shares | ||
Nonvested at the beginning of the period (in shares) | 1,131,466 | |
Granted (in shares) | 460,411 | |
Vested (in shares) | (483,608) | |
Forfeited or canceled (in shares) | (27,184) | |
Nonvested at the end of the period (in shares) | 1,081,085 | |
Weighted-Average Grant Date Fair Value | ||
Nonvested at the beginning of the period (in dollars per share) | $ 33.27 | |
Granted (in dollars per share) | 38.35 | |
Vested (in dollars per share) | 31.47 | |
Forfeited or canceled (in dollars per share) | 35.70 | |
Nonvested at the end of the period (in dollars per share) | $ 36.18 | |
Period over which shares vest in semi-annual intervals | 3 years | |
Restricted Stock | Independent Contractors [Member] | ||
Shares | ||
Granted (in shares) | 0 | |
Restricted Stock | Vesting Based on Performance [Member] | ||
Shares | ||
Granted (in shares) | 0 | |
Restricted Stock | Vesting Based On Performance And Service | ||
Shares | ||
Vested (in shares) | (315,702) | |
Nonvested at the end of the period (in shares) | 58,662 | |
Performance Share Units | ||
Shares | ||
Nonvested at the beginning of the period (in shares) | 355,302 | |
Granted (in shares) | 328,164 | |
Vested (in shares) | (77,048) | |
Forfeited or canceled (in shares) | (23,318) | |
Nonvested at the end of the period (in shares) | 583,100 | |
Weighted-Average Grant Date Fair Value | ||
Nonvested at the beginning of the period (in dollars per share) | $ 32.62 | |
Granted (in dollars per share) | 36.50 | |
Vested (in dollars per share) | 28.42 | |
Forfeited or canceled (in dollars per share) | 28.50 | |
Nonvested at the end of the period (in dollars per share) | $ 35.53 | |
Deferred Stock Units | ||
Shares | ||
Nonvested at the beginning of the period (in shares) | 69,117 | |
Granted (in shares) | 1,101 | |
Nonvested at the end of the period (in shares) | 70,218 | |
Weighted-Average Grant Date Fair Value | ||
Nonvested at the beginning of the period (in dollars per share) | $ 24.27 | |
Granted (in dollars per share) | 43.46 | |
Nonvested at the end of the period (in dollars per share) | $ 24.57 |
Related Party Transactions (Det
Related Party Transactions (Details) - Future of School - USD ($) $ in Millions | 3 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Jun. 30, 2019 | |
Related Party Transactions | ||||
Contributions made to related party | $ 0 | $ 0.6 | ||
Accrued contributions to related party | $ 2.5 | $ 3.5 | $ 2.5 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | 1 Months Ended | 4 Months Ended | |
Dec. 11, 2020 lawsuit | Apr. 30, 2021 stockholder | Sep. 30, 2022 USD ($) | |
Buildings | |||
Commitments and contingencies | |||
Guarantees related to lease commitments | $ | $ 0.3 | ||
Securities Litigation | Pending Litigation | |||
Commitments and contingencies | |||
Number of lawsuits | lawsuit | 2 | ||
Shemen Case And Ahmed Case | Pending Litigation | |||
Commitments and contingencies | |||
Number of shareholders who filed suit | stockholder | 3 |
Acquisitions and Investments (D
Acquisitions and Investments (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||
Jul. 08, 2022 USD ($) | Oct. 31, 2021 USD ($) | Aug. 31, 2018 USD ($) | Sep. 30, 2022 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2019 USD ($) fund | Mar. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) | Aug. 31, 2020 USD ($) | |
Acquisition and Investments | |||||||||
Goodwill | $ 246,238 | $ 241,022 | |||||||
Intangible assets | 86,690 | 88,669 | |||||||
Three Early Stage Funds | |||||||||
Acquisition and Investments | |||||||||
Number of limited partnerships invested in | fund | 3 | ||||||||
Investment commitment | $ 15,000 | ||||||||
Investments in limited partnerships | 8,700 | ||||||||
New Markets | |||||||||
Acquisition and Investments | |||||||||
Investment recorded at cost | 2,200 | ||||||||
Rethink | |||||||||
Acquisition and Investments | |||||||||
Equity method investment | $ 6,500 | ||||||||
Tallo | |||||||||
Acquisition and Investments | |||||||||
Investment | $ 6,700 | $ 2,300 | |||||||
Ownership percentage | 39.50% | 46.10% | |||||||
Convertible note | $ 5,000 | ||||||||
Ownership percentage on an if-converted basis | 55% | ||||||||
Term of debt | 48 months | ||||||||
Impairment loss | 4,500 | ||||||||
Loans receivable | $ 3,000 | ||||||||
Loans receivable interest rate | 5% | ||||||||
Maturity term of loans receivable | 5 years | ||||||||
Loans receivable funded amount | $ 3,000 | $ 3,000 | |||||||
Credit loss expense on convertible note | 4,100 | ||||||||
Credit loss expense on promissory note | 3,000 | ||||||||
Reversal of accrued interest on convertible note and promissory note | $ 400 | ||||||||
Tallo | Series D Preferred shares | |||||||||
Acquisition and Investments | |||||||||
Convertible into Series D Preferred shares | 3,670 | ||||||||
Tallo | Base Rate | |||||||||
Acquisition and Investments | |||||||||
Interest rate spread added to base rate (as a percent) | 25% | ||||||||
Acquisition of Tallo Assets | |||||||||
Acquisition and Investments | |||||||||
Cash purchase price | $ 1,000 | ||||||||
Working capital | 400 | ||||||||
Cash and contingent consideration paid | 6,800 | ||||||||
Goodwill | 5,200 | ||||||||
Intangible assets | $ 1,300 | ||||||||
Acquisition of Tallo Assets | Customer relationships | |||||||||
Acquisition and Investments | |||||||||
Amortization period | 10 years |
Supplemental Disclosure of Ca_3
Supplemental Disclosure of Cash Flow Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid for interest | $ 2,796 | $ 2,811 |
Cash paid for taxes | 21,296 | 12,593 |
Supplemental disclosure of non-cash financing activities: | ||
Right-of-use assets obtained from acquisitions | 385 | |
Right-of-use assets obtained in exchange for new finance lease liabilities | 19,907 | 13,983 |
Supplemental disclosure of non-cash investing activities: | ||
Stock-based compensation expense capitalized on software development | 101 | 68 |
Stock-based compensation expense capitalized on curriculum development | 19 | $ 29 |
Non-cash purchase price related to business combinations | 5,423 | |
Business Combinations: | ||
Acquired assets | 1,132 | |
Intangible assets, net | 1,309 | |
Goodwill | 5,217 | |
Assumed liabilities | (385) | |
Deferred revenue | $ (441) |
Summary of Significant Accou_15
Summary of Significant Accounting Policies - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
Summary of Significant Accounting Policies | ||
Allowance for doubtful accounts | $ 28,623 | $ 26,993 |
Acquisitions and Investments -
Acquisitions and Investments - Asset Acquisition (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Jun. 30, 2022 |
Asset Acquisition [Line Items] | ||
Goodwill | $ 246,238 | $ 241,022 |
Intangible assets | $ 86,690 | $ 88,669 |