LRN - Earnings call transcript Q2 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Stride, Inc.

Second Quarter Fiscal 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. of you President conference. begin Vice Casey, Investor may Relations, your Tim

Tim Casey

today’s Rhyu, you to Medina, year for on Welcome good Chief XXXX. are second me Thank afternoon. call Financial Stride’s Officer. and and Executive Chief Officer quarter earnings With call Tim James fiscal

As reconciliation today’s today's results website. Relations' Please A and and of advised measures may found include that conference measures. certain webcast a financial release accompanied our by Investor a afternoon financial that the can in Stride provided this of on of earnings reminder, can these discussion the section non-GAAP our presentation is be call are be found website. on the be issued Investors also

business also results due in future company’s made involve assumes the forward-looking to In These to made call. and views as important SEC addition statements. company any filings. could and forward-looking statements no our materially may on actual from the we this to any them several company’s latest time statements described forward-looking factors historical information, events the of statements update are call basis make differ assumptions The performance this during obligation and regarding at

have. we any will our over Following remarks, prepared now questions I you turn James. answer may James? will to call the

James Rhyu

afternoon Thank you. everyone. Good

The back November quitting much quitting and disruptions getting some issues with widely normal high provide million than uncertainty acute public more districts significant to continues the are shortage in-school sector vaccines be have As alone. to to and here as to more into are insight in some their there for at available. across to I jobs enter this record difficult. K-XX national continues my levels, and future. American wreak And continues second I Environmentally, year as what the with made CEO, even on past Unfortunately, learning. X.X country I wanted workers year XXXX become COVID be havoc, our to teacher workers see observations. reflect pandemic that

politicize have all meet education be should thrive the and continue of workers People to This more areas. trend, I continue interest ages we of is disruption in into are solutions Stride providing expect. believe that pandemic and very than And we now issues ensure rates longer supply is has nation, has what and training that continues to by continue cause or believe be company to sustainable the a area that achieving grow that structural been. showing well-trained Stride settling options of outcomes the We that many end for helps recently prepare out I Last sent in would survey on are sectors term uncertainty the it Regardless students continue we us is said pandemic almost I the our ever and for belief our estimates outcomes. to our our stronger discipline, And through and careers. well-positioned demands XX a focus need One that political the my flexibility work-from-home culture choice us. workers created them and opportunity aspect a not our the that on the to experience, they of and that continued from employees believe they an that path on are incredibly of chain. a towards school employers to And environment times. As with we academically what are career. their already experience their our million doing inflation are believe educational one-third searching school one this U.S. getting what believe to of alumni XXXX. remote online environment nearly that XX% job they're surveyed were their to and openings impact to I just was to Meanwhile, think. feel all lives. April, they of looking desired believe we employers are those for see The the fill at in to started. benefited of seeking economically of online their hear economy. XX% success, are We will rising results XX% and across I those demonstrated unfortunately, that positive can

Stride the I've students to education area is than first companies innovation. was online. been Another ago, of technology learn More to XX focused enable on years one

To to education Now, learners. technology. our outcomes and ensure students continue new opportunity drive the continuing that market millions that of later, we we're of at products and expand to we develop innovate reach to forefront end, remain more must will

are additional exciting news investing on among curriculum, development initiatives. programs and first career like professional enrichment progressing. our some we our platform, our other fall, We digital eSports, behind we should This platform have are how

XX% updates well-positioned we at over be yearly approach; just in ensure publishing the we and have making. areas to leveraging leadership, Tech encourage the for education progress great to is also our looking our Stride's XXXX, we remains learning training. and respective in very environment grow. demand we structurally outlined professional targets, great continue as has and software to our focus. on pace technology our and that which high more enabling are remain I We to a we've pilot, Allied And we It's the to continued development, done and governance the Healthcare a case anticipate in these and all the racial innovative and We've fostering we acquired published I of school able and on November ESG amazing This these both want options, we contributing goals. and inclusion, has financial supporting been expanding these experience overall success for work take our sustainable by And much we and to an been offerings. businesses are students going These Strategically, strong We certificate and continue on In supplemental to COVID Elevator. continues to year and leverage bigger, mainstream exceeding grow programs. in a positive demand of to socio November. for will hit since continue to are MedCerts, assumptions believe transparent our the outlining already Tech a businesses leaders MedCerts' report cornerstones opportunities. some incredible an June, report belief our career to world. assumptions. Underlying read MedCerts revenue to XX% four investors well markets in introduced and growing their be grown financial achieve. to we with far update year, strategic over lifelong Similarly, pandemic its forward Elevator all more economic equity that are team pace development changed to over is initiatives. and published for amount first business year run macro five our

positive our We continue across demand see to offerings. characteristics

the demand year-over-year the after down since for Over trended our applications X%. we demand higher manage to last predicted be Many our past since levels inception up today, starting at have several almost count the programs manage sit ago that the that increased our pandemic strong, our programs years And that true enrollment and months, from year educational and the programs year. pandemic across have would temporary. districts of conversations U.S. XX% And Well, two remaining years not two more families. even be continue demand open opposite for with to needs demonstrated convinced would also will isn't I'm options school now possible. the having that swell. almost after have to been The to the we're states not and

So, fiscal themes our we we've A $X.X were Education put XXXX XX growth. of system, targets. $X.XX to In billion. this families more General billion demand business, of us both we our a believe a fiscal to increased drive on receptive achieve trajectory from will targeting few and year educational revenue which

foremost, characteristics overall I that just demand mentioned. and First

While may up we for begin have the to to around of believe curve there's point the upwards used growing climb of an to X% population, XX% inflection out that to the programs evidence S-curve hit to student X% XX%. we and penetration our flattened penetration

our the increasing states Stride-powered of and Second, that offer solutions. number programs

pandemic programs and the to for to been led schools states full-time our Career has While demand many recent educational virtual states, growing open options more Learning focus on be has resulting and programs. in

In wind ability Career in at our least for in at they're fact, has long-term characteristics learning a us the we produced One business. new work-from-home will landscape their in significant virtual million In This know revenue $XXX is of the three families for fiscal is today for Learning that need opening still a our stages significant for is we because is there manage will And our we upside this macro programs. the at logistically believe its business, to putting program to in allow backs to early there million home -- work will and trend third, by the same for we the market fall. and states The creates be political pandemic the growth economic many trend. XXXX. recognizes -- children know easy ahead. $XXX that our the achieve is

messaging understand we so the our increment tap and continue proposition can for Career the We of ensure students that parents Learning. programs, hone our audience to career to into value

train in drive revenue training plus goals. ability fiscal to not there's million income to Adult to businesses XXXX. four businesses years. product least in businesses, the million get by million close and that their two our Learning well-positioned that These to within revenue they achieve $XXX billion our which to today workers upside new $X to we believe $XXX These will while we tomorrow, And to workforce need to next the is the these should in of a and helping with have potential adjusted also achieve goals. $XXX in anticipate are We reach million at $XXX revenue current career operating

and As an we I I make inroads. can mentioned some earlier, area think serious innovate this where is

we introducing an that conference inaugural an audience administrators, to career year, is for core and and readiness our be families. virtually professional from incredible counselors, launch Stride assets free Promising which have this we all teachers, for broader the innovative be be development of will held One March and open easy will to We everyone. theme will education. The products. can in will mainstream Practices example, of It Conference through be a

safe and we remains student programs. country. grateful of special for of midst teacher the best demonstration will what and will teachers many experts also that hall thank the calendar can effectiveness, of development content. help education I'm practices this who partners the socialization, across share professional for today. And the that finally, and exhibitor feature for We'll employees our and leadership, have Stride's Thank education students we will improve hope distractions. platform you to hope XXXX, share and an a conference We the Our all in on dedicated remain do. I students time as everyone you the turn focused you and

the over pass I'll to Tim. Tim? Now, call

Tim Medina

afternoon everyone. you, and Thank James good

First, up was or $XX.X increase recap million reported profitability quarter. guidance me we $XX.X same the second Revenue let of operating last period an was XX% of from Adjusted year last over income our capital an the $XXX.X And year. year. We provided the X% expenditures million last from million, million, were results. quarter and quarter. $X.X for million, exceeded $XX.X last increase revenue

to results revenue later, from as enrollment. Ed increased primarily of is see more due per We Learning $XXX.X revenue Education our quarter enrollments enrollments XXX,XXX XXX,XXX, decline than other of Ed our demonstrates even last Revenue I from from and more options enrollments. programs this down in in enrollment just this And Career are by COVID our General because expected demand year's per million. to guidance General Returning in outline quarter believe results Education are General available. to was increase XX% slightly in offset impacted business last the the year. families detail. continue down that were General us demand. Revenue an the This second profitability and We value for and will when our second strong increasing choosing our to strong are virtual we for programs.

$XX.X We in year. school acquired business, and year. we significantly than Education our year. was our full This see of high a revenue was per over to expect revenue Learning growth XX% year, $XX the by XX% give last and year. to for see so per a increase enrollment our to million, up XX% the quarter quarter continue is Stride We growth our enrollments Learning were by revenue to XXX substantially for fiscal last the million. points revenue our basis per from Tech comparison improve favorable up enrollments Middle better year, results. last our XXXX enrollment that Career MedCerts in revenue million, General an Adult for second higher Stride funding in and and career prep X% was we is This career business. next Learning enrollment. $XX.X driven quarter in revenue increase Career Elevator driven programs was Adult from results last margins of in year-over-year increase growth. compared quarter and expect Gross mid-second organic Like should prep XX%, Learning last

As returned we revenue. from expenses said Selling, period. to administrative last and the were our prior seasonal of million, year $XX.X pattern quarter, essentially we've more a general, cost for flat

will expect for range $XX the million, EBITDA with stock-based was business. million in finish with quarter. for the quarter. year for from that as in we the expect last $XX.X to our we've our was quarter income compensation of last was expectations We Adjusted above end our million year well $X.X operating be to automation Adjusted of that guidance will in on SG&A This expense million. and compensation line continued now $XX.X was the focus $XX below the and Stock-based efficiencies the we million. year top

in As had of last pattern year's line see expected, beginning than profitability, seasonal increases expenses we're trends. to we more a a to in our return in normal quarterly with fiscal

million, range. that Our tax $X.X rate from year quarter quarter now to the We effective the was the will the Capital year. XX%. a expenditures totaled in million tax last $XX.X finish up the for XX% quarter in second think XX% rate with we

revenue products, flow year. margins. is was addressable market, a higher from last which become continue believe increase million, of to new us allow $XX.X mainstream Free receipts. timing This the consumer $XXX.X invest expand to and we in and We will our million to up tied more generate cash our growth focused-company,

equivalents see rest with cash million. quarter positive flow the and for of cash expect We fiscal year. the cash to the finished of We $XXX

range our to to and million fiscal quarter turning and adjusted guiding $XX $XX income million, third $XX are guidance, $XXX capital $XX to between expenditures of million million. million of for between the XXXX, in the Now, we million, and year $XXX operating revenue

and For profitability the year, full we revenue are guidance. raising

and XXX income up We expect range in $XXX billion $X.XX $X.XX million between billion, up to $XXX to the $XXX from Adjusted from revenue $X.XX to of $X.XX billion previously. and operating billion million, million million million turn previously. Capital your expenditures rate tax Operator? Thank time and today. operator. between $XX the million XX%. an you for the effective and XX% between $XX I'll call back to

Operator

question BMO comes And first Instructions] Markets. with [Operator from Jeff Capital your Silber

Your line open. is

Jeff Silber

Thank you so much.

thinking focus opened us next environment that. probably enrollment for what next it's Ed, color you're give if potential more any an year? three wondering about then can the for when those states, of also, a let new three bit I'm me Thanks. us little give enrollment new but kind willing indicators, year indicators, You on for be the great. he And you to that'll just Gen you're early talked up talking funding on know too so states if for I about

James Rhyu

the Yes. Jeff. Thanks question, for

also, new I got in least public I -- the got we've sure. domain and of also also think think, which domain, the for is West think fall. for public -- I so we've states three public already; is up the at in Virginia, New think which I the sort set Hampshire, domain; Georgia, in three

know arrangement, we sure, the will for demand. a under incredible -- In enrollment the be think I cap. has short-term, Georgia there long-term, enrollment our

a us. I demand in meet to be opportunity we state. So, it will But think long-term, all that presents able for tremendous not the

to in to states increase years, I also worked previously and have pass good. us into an are but states they're really little important that that I obviously good the been not conversations really the a think we've represent look think have I us. and openness are that they past may of hard roadmap also open bit meaningful for to were that the states think other The And get smaller, states, just

continue the new looks open numbers, without that think to and I looks ability just good. I in specific So, states us think pretty pretty for the to giving the years but coming strong trajectory

Jeff Silber

address environment And That's the did funding next you great. sorry year? for general I'm

James Rhyu

funding No, level, the be We requirements, to at it's see lot I'm sorry, I state a Jeff. The of headwinds. think, continued don't general strong.

funding. think I see -- around see to you'll tailwinds you'll continue

some a thing maybe, where I sort really going year districts I a money strong. think washed of But grades gone [ph] in remains federal That it's very the that not would K-XX, us not funding, that's the to from pipe a think education, sort that -- even of down lift the there's in there's caution, tailwinds. I money our to is sector government see of think you'll that's general flowing flood in next I of and are education but the peers. huge environment give pockets

Jeff Silber

Okay, you terms just in quarter on issues some into great. next? you And last see an going that's what and update teachers. wondering how that, we going can I think get year next if talked of finding I'm Thanks. about

James Rhyu

Yes, so in January. It's that think, -- country. we're just here, landscape -- is now year, us, we the It equilibrium across so we I across this now shortage remains the say in this the see found of teacher a the an I U.S. national issue not entire

we all think round get year I hard work to teachers.

than now next we fall process approach going good we of so this -- year. did to accelerate ahead hiring a get actually more got hopefully, we've that think will past I or now into it

us that year, the won't we the upon experience restriction next think year. type of I So, shortage this imposed

of certainly but leaving surrounding ours, of environment lot actually alleviated that but within do see will -- we because next think so into actually programs, teachers shortage the we I our there's continue professional together, like the profession we be said It's teachers will less think that I across that less altogether. teacher the I I programs a in think the leaving the So, somewhat, are sort nation think see year. controversy

think in I are tune more aligned I that works with our teachers favor, into are in the now works favor. being being and long-term more -- online of profession towards and think in the trend with our macro educators going skewing -- digital because natives the over landscape more digital they're education

opportunity. school think that as increasingly districts become teachers districts, districts us also in -- I think their brick-and-mortar I gives disenchanted with school school

remains satisfaction high. teacher Our very

works the So, it I think way don't other around.

I remains think the a our going teacher us trend here for I trends think will year. nation intact, for next general shortage but into So, as the specifically improve

Jeff Silber

Okay, that's Thanks great the so to queue. to hear. I'll jump back much.

Operator

next comes Stephen from William question Your Sheldon Blair. with

Your line is open.

Stephen Sheldon

thanks Hey, questions. for my taking

from enrollment last numbers here love in really, saw few the what first of of the the saw, and would for terms time the students rates so more to start I especially looks notable maybe some really retention benefit get in color the up for just this new new whether semester. on solid, On signing you any you semester weeks

on second year? So, of new just rates half for retention maybe fiscal high enrollment this the level commentary and trends

James Rhyu

go seen Yes, were us, year. brick-and-mortar actually year that to that last our back remain retention of and rates, get schools levels, similar schools so this to think than better worse year we've kids would rates retention programs improved once go there a our think was -- reopen retention that rates year, to And would there. pre-pandemic saw against lot And an leave I last assumption retention last we unexpectedly prior I years.

change step year, not improvement from a last there's pre-pandemic function but levels. So, to remain they're improved they not --

strong into retention and year for be news to continues story us. a is for this I good think story us So, a

they announced for up a XX%, it's -- our up are of the alternative my since it's as actually, is of it enrollment back -- in morning comments, last very -- here And we -- for a in strong. remains And our we're customers now in I actually trend continue for looking -- to think north just we're programs we have alternatives. this in little XXth, see our up a January really new applications enrollment little bit but And north a looking We I October, that that year. side count many see this the see think actually demand date we demand of was see XX%. enrollments enrollments, it's cases. today, viable for surpassed seeing very and we I stand the mentioned on little equation, strength year-over-year,

demand from So, the we again, of to equation just the improve. fronts, see all continuing side

reported numbers started you see down quarter Now, year, obviously the across out and we they're the the blended X%. last are and from quarter

numbers today, So, stand as have year's look last here surpassed But number. the year-over-year, reported different. we we

and retention trends I far least strong; no see equation that we see services. new of the data as continue at products of trends and the from the we remain can think the to that, So, remain abating robust; to demand the enrollment for we our continues side see as

Stephen Sheldon

Got growth know seeing it. then really business, share that you small you about How guess next That's was it expectations? the about to been hear think helpful. how a we there what thinking potential institutional in performing it's to years? And And I and about few the the a we great business? can I is as follow-up, relative what you're your as but are

James Rhyu

business had teams with lot fits around that and that. the things is So, upside. over struggle We and on business, had to sales like I going issues surprise institutional the a we've our starts, of the next people really few think we've years

company think, we see built. I and ever pipeline we I in we've have history team, of the we've the we much the this smallest think see magnitude, order now, -- sales pretty with of had largest

put some of long-term. into over market going on education think digital fall couple make see to inroads in -- winner some next So, we're I the be in for think stronger, this think going strong it's a to our business, years, going our I And trends K-XX. that really in us side to to be institutional that's offerings think the new capture to some really I in is equation going are we're the market the products get the just going and you're going I demand to

Stephen Sheldon

hear. for my taking to questions. Great Thanks

Operator

Tom [Operator Citi. Singlehurst from question your ahead. comes next Instructions] go with Please And

Tom Singlehurst

Thanks the question congrats I Tom good results. Yes, Citi. taking moral and evening. A questions. suppose, couple It's from of, the here for on

one, my seasonality First can like full it's per figures of just part, a just sort those is understand you I commentary. in and go what to the sort the but enrollment, to lack this knowledge over are of missed understand your year. training, there's revenue for just wanted of I and on that again expectations Tim's whether

I'm this And So that first will the a again, be is the interested, once second question. one, point on disclosure.

I a there's pure Learning, bit the still think an the a M&A impact start question I on growth? of mentioned for to you mentioned rates a impact if okay. us pure of just anniversary we on? can sort That'd give can proper to a Adult just of growth the the underlying know off underlying you there's great revenue whether focus M&A, that's but be that number the you

Tim Medina

Adult QX would giving a comp, QX, prior Well, was organic strong I business would to year-over-year. still so Great. that and This our say for repeat that call that still we take Tim expect would rather that to that very have Learning said suggest year-over-year What second Medina. going say overall into you start than that here I to that's account in Sure $XXX year. Tom. that is the million you if the We I'll just growth question. with the we approach completely that

to in back what not than XXXX, per year FY but enrollment, in XXXX, Tom. to higher enrollment revenue this said per all to levels the also On actually so way go expect FY just be and XXXX, have on XXXX, is the the fact, the surpass FY first we that that revenue we question, level, excuse -- the me FY surpass we saw pre-pandemic

say there continue So, the is above numbers we some cause estimates, -- and way really, FY our adjustments even anomalies, from really would I expect that'll is to that that we have full a we sometimes quarter-to-quarter for have do general enrollment. no may to to in there both year-to-date particular particular when seasonality back come No this seasonality Career rebound but sort highlight of we effect, in, our will at Tom, the Learning any time. that XXXX

James Rhyu

MedCerts. is add would recent I and thing Elevator One Tech our acquisitions, most

I they of both think They're acquisition Tim mentioned, north XX% as growing year-over-year. very against organically well to plan. continue our perform

it's very businesses, We've to strong strategic Stride. about So, those grow been continuing I tremendous fantastic and mean, across growth. opportunities finding assets doing they've they're as great expand, to those in got a leaders job leaders businesses

continue very, to going our shareholders just they're on off states. pay be for and we bullish So, acquisitions very those to think we and

Tom Singlehurst

done sort to Perfect. cash of in I'll on And is year, is, on of pipeline's relatively second with forward. transactions that given of on that you mentioned to delay and in delayed and bolt-on a -- a going it well, flow, I'm with next question, surprised way last which a of -- that reason? the mean haven't is you be questions actually nature. that, I -- start which two leads I'm but interested Is is the sort the more is the guys for part just whether M&A conscious the that that's just that the

Tim Medina

Yes, so think-- I

Tom Singlehurst

Tim. sorry, Yes,

Tim Medina

no. No,

delay. I no think there's think I

pipeline active very look that a of at. have we We deals

our think markets, trended valuations a the to private to I we think that recently I deployers they responsible our valuations sector, business I we really capital of piece do of deal of feel space market markets, where the we evaluations the was think want it announced private a a tell I capital. that we I be down -- recent deployment some education that think be of of do, within mean indicative to think of we there's lot public they've that fact, that and as trended their like at. in of of we in that sort warrant want sell think And public sort deal the I want in down I a they've you'll them company in would don't deals and to much, when see. look

that I think valuation strategically And particularly the now, while us equation Elevator, side we that They it. sense. to do there space find equation. the a of that lot might about, MedCerts will are just I deals value them. we found more got well. career interesting like our assets for we'll it that, so We of strategic haven't in pursue And right makes out continue right in if when perform can only Tech we and of it. to continue made on shareholders. equation think And the think great some got leadership we out otherwise We

Tom Singlehurst

I think working one outflows, the final balance across I for the working very we year? it's one And big capital. capital fairly Tim, mean, relatively on inflow the capital a of normal. big expect quarter working Okay. Should obviously, first

Tim Medina

that is correct. Yes,

We flow capital. inflows have by free good QX, expect driven in QX to working strong and cash of

Tom Singlehurst

Thanks magic. much. That’s very

Operator

further are Instructions] time. you concludes this your thank for [Operator at today's and participation. call There This no conference questions

may now disconnect. You

Stride (LRN) 26 Jan 222022 Q2 Earnings call transcript