Slide 1: Investor Day 2023
INVESTOR DAY 2023 November 14, 2023
Slide 2: Forward-looking statements
This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve substantial risks and uncertainties. All statements in this presentation, except for historical facts, are considered forward-looking statements. We
Slide 3: Agenda
AGENDA Themes Speaker Company Overview & Market Opportunity James Rhyu, CEO Schools James Rhyu, CEO Break New Products & Innovation James Rhyu, CEO Financial Overview & Outlook Donna Blackman, CFO Closing Remarks James Rhyu, CEO Break Q&A Panel James Rhyu, CEO Donna Blackman, CFO Tony Bennett, Presi
Slide 4: Opportunity & Introduction
Opportunity & Introduction James Rhyu CEO & Member of the Board of Directors
Slide 5: Massive Market Opportunity in US
MASSIVE MARKET OPPORTUNITY IN US Total education spending in the US exceedsone trillion dollars, growing at 3% Spending on K-12 schools approaching $700 billion annually, growing at 3% 3% CAGR Direct Government Expenditure on Education, US Expenditures for Elementary & Secondary Education, US 3% CAG
Slide 6: 2021 Global Learning Landscape
globallearninglandscape.org 2021 Global Learning Landscape Holon An open source taxonomy for the future of education. Mapping the learning and talent innovation landscape. Traditional Models Knowledge & Content e Cu | 70) Lt i || # By 8 mac 2c 2c eae 7 Assessment & Verification Ecosystem . a ca =e 0
Slide 7: Stride Offerings and Opportunities
Stride currently only operates in a few of the educational verticals STRIDE OFFERINGS AND OPPORTUNITIES Immediate Opportunity for Expansion
Slide 8: Virtual Education Programs
VIRTUAL EDUCATION PROGRAMS Full Time Online Programs Online programs for K - 12th grade in General Education and middle and high school in Career Learning K-12 programs designed to meet students at their point of need General Education and Career Learning Programs General Education Career Prep
Slide 9: Innovative Educational Offerings
INNOVATIVE EDUCATIONAL OFFERINGS Ability to leverage existing capabilities to expand into new products and markets New Products and Markets New Products and Markets Leveraging current educational assets to expand into large and growing addressable markets
Slide 10: Strong Execution Track Record: Revenue and Enrollment
STRONG EXECUTION TRACK RECORD Consistent revenue growth and return to enrollment growth following the pandemic surge Total Revenue ($M) FYE 6/30 Total Enrollment1 (K) QE 9/30 18% CAGR2 Depicts high-low range for guidance 1,960 – 2,030 1. Number based on the number of students enrolled at the end of
Slide 11: Strong Execution Track Record: Profitability
STRONG EXECUTION TRACK RECORD Profitability growth with solid free cash flow Adj. Operating Income1 ($M) FYE 6/30 Free Cash Flow1 ($M) FYE 6/30 43% CAGR2 1. Adjusted operating income and free case flow are non-GAAP measures. 2. CAGR based on mid-point of guidance or target 150 – 175 35 82 139 137 47
Slide 12: Driving Stockholder Value
Consistent revenue and profitability growth have resulted in outperformance in the public markets with low price-to-earnings ratios DRIVING STOCKHOLDER VALUE Nasdaq +16% DJI +13% Russell -19% S&P +16% +125% Stride financials as of Sept. 30, 2023; indices financials as of Q2 2023; stock price data fr
Slide 13: Share Price Outperforming EdTech Peers
Share price outperforming EdTech and EdServices Peers – without multiple expansion DRIVING STOCKHOLDER VALUE +125% Relative Stock Performance Over Time Financials 3-Yr Rev CAGR Consensus EPS EV/Rev Multiple EV/EBITDA Multiple Fwd PE Estimate 9% $3.91 1.4X 7.7X 14.49 Powerschool 17% (0.14) 6.5X 30.1X
Slide 14: Compelling Long-Term Investment Thesis
COMPELLING LONG-TERM INVESTMENT THESIS Disruptor in Education Innovator with the scale, expertise & long-term customer relationships to change education Sustainable & Growing Virtual School Business Accelerating secular shift toward virtual education and school choice New Products & Technologies Lev
Slide 15: Market
Market
Slide 16: Macro Trends Support the Need for Disruption in Education
MACRO TRENDS SUPPORT THE NEED FOR DISRUPTION IN EDUCATION Volatility Uncertainty Chaos
Slide 17: Economic Uncertainty
Labor Participation Rate 21% Millennials in the workforce who have changed jobs within one year Millennials who have 2 or more jobs 26% Share of global household wealth owned by top 10% 76% Labor Participation has been declining since the late 1990s/early 2000s Total Student Loan Debt in the US in 2
Slide 18: Increasing Volatility
INCREASING VOLATILITY More active Global Debt Is Returning to its shooter drills. Rising Trend Safe rooms. | M F Bulletproof As Natural Disasters Get Worse, backpacks. . So Do Home Insurance The American classroom is Premiums changing. What's driving America’s partisan divide and what might be done
Slide 19: Significant Shifts in Labor Market
SIGNIFICANT SHIFTS IN LABOR MARKET Innovations have driven a significant shift in the labor force over the past 50 years, moving toward services-based careers Workforce by Industry (2023) Change from 1973 Job Growth Job Loss
Slide 20: New Market Entrants Have Disrupted All Major Markets
NEW MARKET ENTRANTS HAVE DISRUPTED ALL MAJOR MARKETS IN THE PAST 20+ YEARS Technology and innovation have driven out incumbents at a pace not seen before in history Transportation Media Shopping Finance Transportation Advertising Advertising Transportation Lodging Video Conferencing Employees: 33K E
Slide 21: U.S. Education Lagging Despite Investment
Despite the U.S.’ significant investment in education, nearly half of all U.S. public-school students are lagging in educational benchmarks U.S. EDUCATION LAGGING DESPITE INVESTMENT Highest Expenditure Lowest Expenditure Government and Private Expenditures as aPercent of GDP (2019) Americans’ Belief
Slide 22: Historical Levels of Dissatisfaction with U.S. Education
HISTORICAL LEVELS OF DISSATISFACTION WITH U.S. EDUCATION Parental concern about learning and academic progress 38% Somewhat or Slightly Concerned 48% Extremely orModerately Concerned 14% Not atall Concerned Americans’ Satisfaction with U.S. Public Education The Nation’s Report Card projects that if
Slide 23: Teachers Are Leaving for Other Opportunities
TEACHERS ARE LEAVING FOR OTHER OPPORTUNITIES Performance ofChildren’s Teachers K-12 Parents 7% 20% 37% 36% Only 55% Staffing shortages persist post-pandemic, even as parents express satisfaction with their students’ teachers 36K 2022 Estimated teacher vacancies up over 50% since last year 55K 2023 O
Slide 24: Current Response Is Fragmented and Not Meeting Family Needs
THE CURRENT RESPONSE IS FRAGMENTED AND NOT MEETING FAMILY'S NEEDS Of parents considered or searched for a new or different school for their student within the past year (Jan 2023) 54% Of parents favor school choice 66% Although parents are in favor of school choice and looking for options, their pre
Slide 25: Shifting Attitudes Regarding Four-Year Degrees
What do you need to be successful (High School Students)? 21% 2019 Percent of jobs on LinkedIn that don’t require a professional degree 29% 2023 Recruiters onLinkedIn are5 times more likelyto search by skillsthan degrees Of college graduates are in jobs that don’t require a degree Of jobs require sp
Slide 26: U.S. Employers' Skills Gap Continues to Grow
U.S. EMPLOYERS’ SKILLS GAP CONTINUES TO GROW 4.4M Demand for workers exceeded supply of trained workers in top 10 career paths 87% Of companies are experiencing or expect to experience a significant skills gap within 3 years Yes Unsure No Do You Believe There is a Gap in the Skills Your Organization
Slide 27: Change Your Future
27 CHANGE YOUR FUTURE Stride is positioned to change the future of education using technology to enhance student outcomes and prepare the workforce of tomorrow EDUCATION HAS NOT REALLY CHANGED IN 100+ YEARS
Slide 28: Schools
Schools
Slide 29: Virtual Schools Can Personalize Learning
VIRTUAL SCHOOLS CAN PERSONALIZE LEARNING TO SERVE DIVERSE STUDENT NEEDS Additional students who should be labeled Gifted & Talented but are being overlooked 3.6M During the 2020-21 school year, 40% of public schools had a special education teaching vacancy The traditional U.S. public school system w
Slide 30: Increasing Demand for Virtual Education
INCREASING DEMAND FOR VIRTUAL EDUCATION Secular Trends Driving Demand Growing acceptance and awareness of virtual and online learning Dissatisfaction with current public school systems Concerns about school safety Desire for more control over what your child is learning Digital-native parents used t
Slide 31: Focus on Customer Satisfaction
Continued commitment to academic outcomes and improving student experience to drive higher satisfaction FOCUS ON CUSTOMER SATISFACTION Stride Satisfaction Metrics Satisfied Net Promoter Score Net Promoter Score 68 61 83% 81% School Curriculum Satisfied
Slide 32: Strong School and Partner Relationships
STRONG SCHOOL AND PARTNER RELATIONSHIPS Long-standing customer relationships supported by unique combinationof offerings and expertise Meet Students’Unique Needs ProvideHow-To Expertise DeliverComprehensive Support DriveContinuous Innovation Help students reach their full potential through inspired
Slide 33: K-12 Full-Time Programs
K-12 FULL-TIME PROGRAMS Nationwide Reach GenEd States Career Learning States GenEd & Career States Students enrolled in full-time programs ~188K FY24 Career learning programs in 27 states and DC 55+ General education programs in 31 states and DC 90+ Student population covered by existing full-time o
Slide 34: Expansion into New States and Models
EXPANSION INTO NEW STATES AND MODELS Utilize multiple models to expand capacity in existing states andadd new states and geographies New States New or Expanded Programs Maryland Massachusetts Nebraska Connecticut New Hampshire California Georgia Nevada Kentucky Florida Louisiana North Carolina Other
Slide 35: Driving Academic Excellence
Preparing students for the Three E’s: Education, Employment or Enlistment DRIVING ACADEMIC EXCELLENCE Education Prepare students for postsecondary opportunities with dual-credit options and AP courses Enlistment Prepare students with the skills they need to serve in our nation’s military Employment
Slide 36: Deep Political, Regulatory and Policy Expertise
Successfully operating in a complex industry with vast knowledge and understanding of legislative, political, policy, and advocacy operations DEEP POLITICAL, REGULATORY AND POLICY EXPERTISE Key Issues Open enrollment policies to allow families to attend the school of their choice Reimagine accountab
Slide 37: Break
Break
Slide 38: New Offerings
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Slide 39: Proven Success Entering Adjacent Markets
PROVEN SUCCESS ENTERING ADJACENT MARKETS Career Learning Middle and High School programs launched just 7 years ago and now account for over 30% of revenue and enrollments 1. Number based on the number of students enrolled at the end of Q1 (September 30th) of each fiscal year Career Learning MS/HS En
Slide 40: Entering New Markets to Make Stride Products Available
ENTERING NEW MARKETS TO MAKE STRIDE PRODUCTS AVAILABLE TO MORE STUDENTS Leveraging existing assets to expand into large, fast-growing markets with a “fail-fast” mentality while incorporating innovative technologies into our core programs to enhance outcomes New Products Tallo Learning Hub Adult Lear
Slide 41: Allied Healthcare Training
ALLIED HEALTHCARE TRAINING Significant adjacent market opportunity in training and education Increase lifetime value of students (post-graduation) Additional job pathway and placement opportunities Leading assets with high growth and profitability MedCerts revenue grew almost 30% last year, in a lar
Slide 42: Tutoring Market and Alignment
TUTORING MARKET AND ALIGNMENT Extensive learning loss in public schools: 89% of public schools reported that teachers have expressed concerns about getting students to meet academic standards Tutoring remans in high demand for districts: 87% of districts offer some form of tutoring to students 17% o
Slide 43: Stride Tutoring
STRIDE TUTORING Leverages state-certified teachers to open a new market opportunity with a differentiated offering Staffed exclusively by state-certified teachers Leverages Stride’s teachers & recruitment Leverages Stride curriculum and online instruction capabilities Full integration across all K
Slide 44: Digital Content Market
DIGITAL CONTENT MARKET $10B+ $8B+ $2.6B+ 75% Addressable Market for Digital Textbooks District spending on supplemental curriculum solutions Annual total spent by teachers on supplies, an average of $750 each Of parents would like a link to video info about their child's homework Of districts indica
Slide 45: Stride Learning Hub
STRIDE LEARNING HUB Leverages Stride content to deliver short, 5-10-minute lessons to improve outcomes and support parents, teachers and students Expansion of existing assets into larger market opportunity Single platform addressing needs of learners, teachers and parents Cost-efficient approach for
Slide 46: Career and Skills Training Market
CAREER AND SKILLS TRAINING MARKET 16M 1M+ 10.2M High school students - 4M graduates each year Students choose to not attend college following graduation Young adults without a bachelor's degree 33% Of all young adults aged 18-24 are employed and not in college Of students enrolled in 4-year colleges
Slide 47: Tallo Career Platform
TALLO CAREER PLATFORM Significant market opportunity utilizing existing capabilities Whitespace in early/Gen-Z talent offerings One-stop shop offering addressing needs of learners, schools and enterprises Favorable political and regulatory environment Leverage adult learning companies and partners t
Slide 48: Esports Market
ESPORTS MARKET 70% 56% Of U.S. parents believe video games positively influence their child Of parents play video games with their children at least once per week 25% 21% esports industry projected CAGR (2019 to 2025P) esports tournaments CAGR (2019 to 2030P) 3.1B+ video gamers 530M+ spectators wor
Slide 49: Stride Esports
STRIDE ESPORTS Fast-growingadjacent market Significant whitespace in educational esports market First mover advantage Additional marketing exposure via esports leagues, etc. Stride esports leverages our existing relationships in the education market to expand into a massive, fast-growing market Mine
Slide 50: Innovation & AI
Innovation & AI
Slide 51: Technology Advancements Are Rapidly Changing Education
22% Of students reported using ChatGPT on a weekly basis or more 65% Of students agree that ChatGPT will be an essential tool for students' success in college and the workplace 91% Of teachers believe technology is important to get students back on track from academic losses 73% Of teachers agree th
Slide 52: Foundational Approach to Innovation & Artificial Intelligence
FOUNDATIONAL APPROACH TO INNOVATION & ARTIFICIAL INTELLIGENCE Use technology to improve efficiencies and outcomes across multiple vectors Front Office School Operations Curriculum Teaching Enrollment/Marketing Back Office HR Legal Finance InternalEfficiencies Student Progress Grading Tutoring Assess
Slide 53: Embracing Technology to Improve Student Outcomes
EMBRACING TECHNOLOGY TO IMPROVE STUDENT OUTCOMES Stride has always been at the forefront of implementing new technologies to improve student outcomes and will continue to embrace innovation Only 1 in 5 Socialization ~50% Amount of time teachers spend on administrative tasks, grading, lesson prep, an
Slide 54: K12 Zone Addresses Socialization
K12 ZONE ADDRESSES SOCIALIZATION Create your own avatar to engage with friends and other students Check out classes, games, the cafeteria, and explore your school Attend school assemblies andart competitions “I really like being able to talk to my friends, see my teachers, and meet other teachers I
Slide 55: AI-Powered Chat Functionality to Address Learning Loss
AI-POWERED CHAT FUNCTIONALITY TO ADDRESS LEARNING LOSS AT SCALE Offers step-by-step guidance Explains academic concepts clearly, aligning to state standards Curates curriculum recommendations for all developmental levels Upholds high academic integrity Provides an engaging user experience Connects l
Slide 56: AI-Powered Teacher Grading
AI-POWERED TEACHER GRADING ADDRESSES ADMINISTRATIVE TIME CONSTRAINTS LessonPlanning/Prep Student & Family Communications 15% 12% Grading Assignments Administrative Tasks 10% 10% Teacher Administrative Time Spent Teachers spend too much time on administrative tasks; technology can allow them to focus
Slide 57: T.I. by K12
T.I. BY K12 Develop AI-powered interface that students and teachers want to interact with Synthesize and utilize data with AI without losing the human touch Ensure AI adapts to evolving interests and needs of students without stifling individuality Developing intuitive AI-powered experience that bui
Slide 58: Financial Overview & Outlook
Financial Overview & Outlook Donna Blackman Chief Financial Officer
Slide 59: Non-GAAP definitions
Adjusted operating income, adjusted EBITDA margin and free cash flow numbers are non-GAAP measures, a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the Appendix to this presentation. 1. Gross margin calculated as revenue le
Slide 60: Education Spending Supports Consistent Revenue Growth
Consistent growth in education fundingover time Narrowing funding gap to brick andmortar schools Improving yield EDUCATION SPENDING SUPPORTS CONSISTENTREVENUE GROWTH Current expenditures per pupil in public elementary and secondary schools, inflation adjusted: Selected years, through 2019-20, NCES 2
Slide 61: Demand and Funding Increases Drive Consistent Revenue Growth
DEMAND AND FUNDING INCREASES DRIVE CONSISTENT REVENUE GROWTH 48% 10% 9% 7%–10% YoY Growth (%) 1,960 – 2,030 Depicts low-high range for guidance Total Revenue ($M) FYE 6/30 Significant addressable market Increased acceptance and awareness of online learning Strength of Career Learning programs High b
Slide 62: Increasing Efficiencies and Improving Margins
INCREASING EFFICIENCIES AND IMPROVING MARGINS 400 bps improvement SG&A as a Percent of Revenue Marketing Automation Lower customer acquisition costs by optimizing spending Implement robotic process automation across customer lifecycle, decrease administrative tasks including scheduling and grading O
Slide 63: Improving Gross Margins
IMPROVING GROSS MARGINS Investments in automation and process improvements Machine learning Robotic process automation Conversational AI chat bots Lower material costs from increased digital access Increased mix of higher-margin and Adult Learning revenue +200–250BPS Depicts low-high range for guida
Slide 64: Profitability Growth Outpacing Revenue
PROFITABILITY GROWTH OUTPACING REVENUE Adjusted operating income and adjusted EBITDA are non-GAAP measures a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is provided in the Appendix to this presentation. Leverage in business model leadin
Slide 65: Strong Balance Sheet with Low Debt
STRONG BALANCE SHEET WITH LOW DEBT Cash, Cash Equivalents & Marketable Securities 545.5 Accounts Receivable, Net 463.7 Accounts Payable 48.9 Total Debt Obligations 469.9 1. Leverage ratio is a non-GAAP measure defined as Net Debt (total debt obligations of $469.9M less cash and cash equivalents of $
Slide 66: Disciplined Capital Allocation
Prioritizing organic growth, new product and technology development and synergistic M&A DISCIPLINED CAPITAL ALLOCATION Organic Growth Strategic Acquisitions Capital Return Invest in academic quality and student/customer experience to support outcomes and retention Technology advancements to improve
Slide 67: Strategic Approach to M&A
STRATEGIC APPROACH TO M&A Focus on alignment to strategy of innovation in education to drive long-term value and outcomes Operates in large or fast-growing nascent addressable market Combined company can accelerate revenue and profitability growth of both businesses Cultural fit and experienced mana
Slide 68: Reaffirming 2024 Financial Guidance
REAFFIRMING 2024 FINANCIAL GUIDANCE Guidance reaffirmed as of November 14, 2023 Current FY24 Guidance exceeds low end of FY25 targets from November 2020 Investor Day $65M – $75M CapitalExpenditures 25% – 27% Tax Rate $1.96B – $2.03B TotalRevenue + 7 – 10% Y/Y $250M – $275M Adj. OperatingIncome + 24
Slide 69: Introducing New Long-Term Financial Targets
Long-term financial targets supported by macro trends, new product investments and improving margins INTRODUCING NEW LONG-TERM FINANCIAL TARGETS Total Revenue ($B) 10% CAGR to mid-point 20% CAGR to mid-point Adj. Operating Income ($M) EPS ($) 20% CAGR to mid-point Depicts low-high range for target A
Slide 70: Closing Remarks
Closing Remarks James Rhyu CEO & Member of the Board of Directors
Slide 71: Break
Break
Slide 72: Q&A Panel
Q&A Panel
Slide 73: Q&A Panel
Q&A PANEL Donna Blackman Chief Financial Officer James Rhyu CEO and Member of the Board of Directors Dr. Tony Bennett President,Schools Les Ottolenghi Chief Information and Technology Officer Todd Goldthwaite GM, Portfolio Companies Deb Hannah Chief Marketing Officer Vince Mathis General Counsel Val
Slide 74: Upcoming Investor Events
UPCOMING INVESTOR EVENTS EVENT DATE HOST STRIDE ATTENDEES Non-Deal Roadshow Virtual November 29, 2023 Barrington Donna Blackman, CFO 1:1s BMO 2023 Growth & ESG Conference Virtual December 4, 2023 BMO Donna Blackman, CFO 1:1s 26th Annual Needham Growth Conference NYC January 17, 2024 Needham Donna Bl
Slide 75: Thank You
Thank You
Slide 76: Appendix
Appendix Appendix
Slide 77: Reconciliation of Income from Operations to Adjusted Operating Income
RECONCILIATION OF INCOME FROM OPERATIONS TO ADJUSTED OPERATING INCOME 77 77 Year Ended June 30, ($, M) 2020 2021 2022 2023 2024 Guidance Low High Income from operations 32.5 110.5 156.6 165.5 210.5 228.5 Stock-based compensation expense 23.6 39.3 18.6 20.3 28.0 33.0 Amortization of intangible assets
Slide 78: Reconciliation of Net Cash from Operating Activities to Free Cash Flow
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW 78 78 Year EndedJune 30, ($, M) 2020 2021 2022 2023 2024 Target Low High Net cash provided by operating activities 80.4 134.2 206.9 203.1 Purchases of property and equipment (1.7) (3.6) (9.7) (4.3) Capitalized software dev
Slide 79: Reconciliation of Net Income to EBITDA and Adjusted EBITDA
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA 79 79 Year EndedJune 30, ($, M) 2020 2021 2022 2023 2024 Target Low High Net income (loss) 24.5 71.5 107.1 126.9 Interest (income) expense, net (0.7) 18.0 8.3 8.4 Other (income) expense, net (0.2) (2.8) 1.2 (15.4) Income tax expense 8.5 24.5