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Stride Sows Doubt About Its Revenue Recognition Accuracy

Online education provider acknowledges it may not have accurately accounted for sales and expenses.

September 14, 2023

Stride Inc. (LRN), an online online curriculum provider, acknowledges investors may not be able to trust its financial statements for the fiscal year ended June 30, 2023. In its latest annual report, Stride revealed its information technology general controls were not effective.

Specifically, Stride says user access to certain IT systems was granted to personnel resulting in segregation of duties conflicts and that management did not maintain adequate documentation of review and approvals for configuration changes to certain IT systems.

The financial statements, in large part, are dependent upon the compromised IT systems. However, Stride cited the following specific areas of concern:

“...primarily revenue, expenses, and related accounts…”

In August 2022, DuDil flagged Stride’s accounting after discovering a discrepancy in year-over-year ad costs.

In its FY22 annual report Stride included Advertising and Marketing Costs for 2021 and 2020 that do not match previous filings. Stride increased its Advertising and Marketing costs for the two prior years by $67.7 million, approximately doubling the annual expense. In a footnote, the company said it had previously excluded $37.3 million and $30.4 million of advertising costs incurred during 2021 and 2020 respectively.

The company called the change a disclosure modification.

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