LRN - Earnings call transcript Q3 2022

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Operator

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

Third Quarter Fiscal 2022 Earnings Call. [Operator Instructions] Tim Casey, Head of Investor Relations, you may begin your conference.

Tim Casey

Thank you and good afternoon. Welcome to Stride's third quarter earnings call for fiscal year 2022. call Chief Rhyu, Financial today's and Executive on Medina, Tim Officer. me are Chief James Officer With

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

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

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

James Rhyu

good and Tim, Thanks, afternoon.

our to from see business can and our continues you As strong grow. remains results,

over than previous learning remains past business think as its pandemic applications see return world Now, only to to I period, along closings, for return multiple a even of ended, which more to in-year strong. is that, going see and core to XX% education the growing. acceptance ways for our not for to find into than the fronts. We two higher reopenings Demand years online And we normal, the new normal multiple alternative were this is year. with and mandates pre-pandemic that learning this in just there

XX% increased an Angeles programs. past and those continue The New to schooling published families around need began notably million to Press increasingly majority brick has Career degrees more mainstream recently more the resources. this districts the of home have returned online offer mortar learning their the the indicating career article the largest Home on of start families expand to pandemic online announced of since importantly, schools. York, school pandemic college that have the some over Los X in for and and year to Just gaining initiatives Associated - students us. career opportunities schooling as vast focus appeal. to not the skills is And opposed during country, that

Street No Workers Wall an to Make Necessary. Tech Blue-Collar Leap The week published Journal other article the the Jobs, Just College Degree

the reached get engage to earn school a courses, becoming the And for our in an be programs we offer where environment, our certificates high we we the we So focus a skills in jobs. in the platform students taking advantages, approach high competitive pilot we our increasingly exploration related point of markets, families to multiple are career career majority summer free is them single placed has to with training, we and the partnership serve. for we macro customers to school school, viable of serve. take to school I to more to discovery launching on district program will be provide valuable like kind The a middle take solution hold tipping ability segment make a holistic offerings believe, well-paying This workforce. career asset will the a will financially the large our and we vast the offer, where ensure of a and and

or at technology from school districts again school will no offered be and And their on of focus industries districts there. first for this the will free, and expand We charge families. to all to healthcare

families students education the to parent likely us, come survey satisfaction our of The demonstrates are success. general they when stay. Additionally, to result more

score is consumer a than use which have you districts schools every promoter Our dramatically products of net and XX may favorably ranks day. higher most with other school

surveys This curriculum satisfaction a supported year with programs curriculum XX%. has parents satisfaction to students. their investments satisfaction independently suggest paying a more feel That staff invested years. to five took see in loyalty ratings who through prior excess students We the new to school grade XXX satisfaction result, more last our experience and through five as and more K parent their customer satisfaction the learn by our this off. motivated Our K in and year in of more basis off than and and learning points work are we over led parents parent with This coaches new curriculum two K year. increased and pressure XXX improved five points. supervise through has basis in by A and three

delivering for drive and value customers for lifetime improving will and value Our on for them focus our greater customer experience us. our

growth. realize underway too new I this season also provide quarter. numbers. we are. still gauge some mentioned Now, But with last a on time, programs update grow year our the said and I most next of last at plan focused to achieve to are you just it's on see our early want the I the is enrollment you characteristics know that quick as demand as fall I to year of to we And where

are opened the their in And full in programs year. enrollments online We Both students. Virginia options states Georgia. school interested and West accepting offering continue both these see now time to fall officially we've more our for new for programs now of

to looking learning more we programs to to past, In our core broader offer and by and innovation leveraging services the our a some the services and assets of footprint best on of range built our customers. our digital expand products products focused we've around. also are full-time We

States. only by the students, small used the families teachers are these in However, a of percentage and United

this some is we're making that them of improving adapting able this approach accessible is to them mainstream. expenditures easily a the and process to sometimes What organic consumers, those cases go-to-market compelling innovative me in And existing without means to make revenue. investment make an to growth capital most now offering. We our the it's of increasing rethinking percentage this products as in more are to in more about

As to this outline, typical into and our allows year spend for with Tim to over much million our $XX guidance in will capex larger our of just this And markets. or line investment products capex million this us launch is revenue. $XX X% is

in Ocean applying they the the Just and game. introduce in have line get the environment gaming a this announced to popular educational fun students to their partnership learned while with skills morning, UN we for Ecosystem involved endorsed Solutions Global the Minecraft for

classes camp offer esports taught also Students We summer the some by an to industry have to participate and professionals of those games. play in all coding opportunity students. popular open esports

However, beginning esports ambitions. this is our of the just

we've With opportunity programs more and we position represents sports the the making of little is to B]. some to few full-time we products Over us. for teams rolling one more effort esports of seen of available in are our these discuss years, information. of we a options for and products to [XX financial next no there's looking will start families, before. our We'll now many to our and them stay launch pass in Tim? better ever and to Medina available. last the call build jobs anticipate so fastest-growing This an help Esports these over unique And believe broadly teams to formalize as in out I these communities the and want tomorrow. a results world's large making the offer than other few many Tim opportunity provider these Stride investments that around students be gaming want cost. prepare their these to months, now these or bring quarter. for learning and together teachers students, flexibility all and students schools tuned of will online We for for achieve leading to communities to By us education products, means the at goals

Tim Medina

good Thank you, James, and afternoon.

of First, period expenditures from results. quickly million, was an let last recap reported income adjusted same $XX.X the year, increase X.X% capital $XX.X and XX%, up $XXX.X Revenue and operating strong again was guidance were as our we the enrollment We me once provided able exceed profitability a result, last quarter. we're of another to performance. million, of had an and $X.X And revenue increase million, million. quarter operating

exceeded actually enrollment quarter enrollments driven in-year enrollment year's third third strong by retention. last Our quarter and

on increasing quarterly later. Education revenue As Returning Revenue we range specifics $XXX.X our guidance a I'll from our slightly to our guidance profitability and General which of to more result, was more our provide business down million. detail. end in results are bottom the

by now for last the the enrollment. per per Gen down large We Revenue enrollment quarter in strong XXX,XXX, COVID-driven this year see per were is to sustainable million, Gen enrollments full over about at somewhat $XXX ago, years million in but year. came due two fiscal been the after revenue XX% for in in XX%. business to XX%. believe business. year the of X%. year demand in increased increase $XXX.X more to exceeds mentioned, XXXX, X%. enrollments enrollment offset revenue enrollment, the in we've expected than by We close in expect somewhat strength this revenue the up an just Learning in due surge, Ed year's As in-year fiscal We In we've gap that Ed third decline the this demand. shows did down Career the revenue year to the started able last full

up in was are in school revenue This Career million, a $XX.X XX% in enrollment. the we increase last and quarter. per almost and by Learning a middle achieving from was from XX% XX% $XXX increase high year. Now enrollment driven million Revenue

programs our our high General middle with enrollment per solid. has and in Education been revenue school business, growth career As

it expect quarter Since was last quarter. than growth million, acquired third first is quarter are Adult Gross We the revenue $XX.X we show margins year. comparison MedCerts XX% higher from end basis up XXX organic Elevator in this in points year, last XX.X%, from last last over just business. year. Learning and the full XX% to we this achieving Tech second the year's could for quarter the were up quarter up

we to continue on costs, school staff inflationary environment, improvement teacher believe gross have gross learning our the including margins targets. see businesses are track and in put Regardless and is little long-term managed adult our We margin on pressures, of still to pressure It margins. a we noting inflationary gross worth from achieve our that operations.

were prior-year and year. full period. that We expect Third the $XX.X quarter last X% in million, selling, the will with for still be SG&A expense down line from general administrative expenses year

is marketing for Our begin we year. fourth when roll school next quarter to out

SG&A the million. point a seasonally quarter low spend. third in So, Stock-based our is was $X.X compensation

the exceeding range quarter. guidance we with million. the Adjusted will in year to income million. million $XX.X compensation expect stock-based $XX finish $XX.X we We was the million, last operating EBITDA issued of Adjusted was $XX

profitability we've $X.XX, of retention, year strength $X.XX share during return to the been normal growth our driven up as enrollment, expenses a continued earnings totaled Diluted a as calls continued learning. per outlined has previous in as well earnings Our by in enrollments, from ago. adult seasonality per revenue more

effective finished behind organic position growth million XX% up the Our and as million. million cash were million, $XX.X with long-term markets. mainstream year. last the we incremental was and quarter And cash and $XX.X as tax from equivalents flow $XXX.X we we expenditures for rate investing James capital outlined, ourselves of third growth $X.X quarter in Free was cash are

to do, in As expect see flow cash we strong we fourth the typically quarter.

forecasting full-year guidance $X.XXX revenue billion billion our and we from to and We now $X.XX in $X.XX the billion up raised $X.XXX to range are previously. also billion, of updated

turn We back million capital to $XXX Thank and forecasting million tax million expenditures up you and operating lastly, million, previously. rate session. $XXX we're XX% $XX adjusted between an call and XX%. today. income for your $XXX to operator question-and-answer I'll time million $XXX Operator? forecasting are $XX the the And million. now from for between between And effective the

Operator

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

line is open. Your

Jeff Silber

wanted strong one to congratulations just in of opening the said on the clarify things Thanks so James, results. I much your you remarks. and

year-over-year. higher fall? the XX% year over the being upcoming that current applications in-year for or for for Is applications about talked You school

James Rhyu

Jeff. question, good Yes, for period. in-year the Sorry. That's applications current

year - not begun. As Applications an now, enough and for the you the have in-year through There's enrolling give period. know indication. really really enroll we're next we that fall but not for enroll really volume was much just to we all

Jeff Silber

you Okay. can that. clarify I started. would in have terms etc. know, indicators fall. And for Any applications again, Good. any be I just us to guidance great interest, meetings, leading wanted just give next of

James Rhyu

our shows fall, think actually into I in-year again through will indicator, is fall. it. not but if programs is continued there think because in-year numbers that there enough good this that interest that indicator, period which for would think in we the an the this But - the be translate is I period, a in-year

Jeff Silber

for That's And next helpful. what environment how about Okay. year? the really you're expecting funding

James Rhyu

we the neutral funding we to So the and green. manage is just landscape map. the two environment, our landscape, the of what programs, maybe largely policy across a to political far see across be strong where landscape, or red, heat no yellow continues There

Jeff Silber

that's hear. Okay, in one great sneak to just more. I'll

You mentioned that aware the we West there new cap, any anything any Are in of? and Georgia. Virginia else be need schools to limitations,

James Rhyu

There Virginia, it's students. it's small small a cap, - actually year has cap XXX West is. a fairly Georgia a state. one,

But it meaningful it's number don't be regardless, to, I think, but meaningful programs. expand a I going So be number. our won't think good to it's a

Jeff Silber

that ongoing is first that? lifted the after cap, Georgia are the And caps or after there year Okay.

James Rhyu

rises each of ongoing an cap. It's year. It hundred a couple

Operator

comes from of Paris Alex the Research. question with next line Barrington Your

open. line Research, Paris Alex line is is your Your Barrington with open.

Alex Paris

going then you strong to mean, to us well sorry, on revenues Career some strong - Education well. speak. business think Is Hi. comments My how way questions Learning, just with continued to given or early congratulations and revenue growing. similar I model to tell comments. student down it I about - two had as regard positive, as taking but overview adult per if Jeff's year is you as can bit, ask, to student stands next for the logic, account - little a Thanks with to the give too reason I'm made, enrollment mute. about schools General just question into taking so it's know that the thought a that it? of questions. have like I any back I fall, follow-up I'd my for way

James Rhyu

going you Yes, comment logic specifics. specifically. of poor to certainly but have think any not the don't to I'm on not going I generically, comment

mentioned, year. we I think, plan. I our grow as That's next intend to

I play number there that. will into a is think variables of come that do to

got around, career we've business. certainly I momentum our think

I think well. our adult businesses performing are

the improve. online think learning for environment to I continues overall

And up think businesses to year put out strong. So growth projections long-term we for serve - the generally customers that ago. remains for I speaking, that us guidance our that think and we that long-term be continue I environment we our and out the for that a pace think that put I sets on long-term we

Alex Paris

should normal comments two, to big obviously back enrollment, X%? in enrollment given of And think sort from of per revenue per to regard about the heat year X% the then your how or we next a range about recovery follow-up revenue to a we prior think with map, the year. - sort year, How should of

James Rhyu

a I I think as normal plays in back assume part think you the should you range. to Mix know this. big

range generically it an year. we we elevated like could on something see, not of So a depending speaking, this But normal obviously back on the mix, average average to sort different. range, into saw

Alex Paris

Virginia you. up applications. Thank Georgia accepting new states West and you. And and are then Got

New you Hampshire, coming as think be be a well, Any there? state will know update for that I mentioned it new I a year. had the should state small

James Rhyu

Yes.

more about I might still or two think two our clients, we hit But partners, we feel summer. time. have we good at but the pretty additional this feel announce or I that do one potential one nothing think potentially to good before

Alex Paris

you, hiring, And teacher that then just fiscal I experienced question early in teacher an my we shortages last year. for guess update the on

your do to fall? coming I regard you good for on teachers got a with now. about think handle How you positioning those feel the

James Rhyu

shortage. be environment the - there meaning - remains overall I mean Yes. teachers teacher think the same, to macro continues that I

I school to think and be districts numbers. brick teachers in mortar record leaving continue

no we we that for compelling do And people Obviously for online, still think think, alternative. a those vaccine to I proposition mask want teaching that teachers offer offer make. things, commute, kinds mandate, think those influence decisions being mandate, to that continue of will no them. I compelling I continue just a no

little a offers this making I to trying earlier, are the earlier. we for to teachers operationally in addition for fall get the year, a think enrollment that bit little anticipating ahead

So are operationally ahead hopefully of getting it. also we

Operator

of with question Singlehurst comes Citi. from the Your next line Tom

Your line is open.

Tom Singlehurst

Citi. about margin per enrollment? Thanks. sort revenue of question just question. and how talked got you talk know gross pressures - Tom bit Thanks have any little on taking the enrollment. is per weren't inflationary rising revenue about the I sort gross I on raising from potential to through if mean, on for inflation feed pressures interested here okay. of first I'm inflation. I and That ready a to a alarm potential funding you you much from whether benefit that. But follow-up, too in to there environment was the that's then Can just

James Rhyu

it's I great a Yes, question. think

inverse, think the a the So, an significant equation, I revenue think pressure. the fall on don't yes, there side I of inflationary be this for impact of will

both I think salaries know. equation. delay, go there because longer time therefore and is is so funding the they all teacher in impact of part we They a inflationary equation what of meaning a that the the of sides it's though as biggest I think those often have There mechanisms, over will pressures of to by delay part revenue. Teacher tax-based driven period are is do inflationary salaries. towards a the that

enticing, make stay in so to And up, keep in we've teachers sure just that our to order got are we incenting to systems.

think of that that, to do going be have So this to but do we is I sort I lag. think a

Tom Singlehurst

Perfect.

pipeline for is topline pure interested mean run I'm build M&A I of you organic XX% rate. in rate, whether organic just or of looks term? sort in like, that the businesses, with deep learning question second adult the - is trying a you hell do short The just what hurry to given leave area run whether scale - in guys it further are a to on that that

James Rhyu

at look this I'd think it I way.

stellar record we good panned that well. in, I reason discipline didn't a we strategic We in I think is done. And well. M&A. they us have had of deals We've for done off planning I long out that that too the a pay think couple overpay. be a fair, future to deals anxious of and out recent and weren't we have really as logic deal track - And will had have think part We get term long-term good going to the in don't well that a panned we

So capital can we got dry have pocket. lot powder of a lot of We've we back that deploy. in a our

Our, - think I deploy is the are that I We've deals good we to earn our I return always do a But irresponsibly. want think soon capital gun Board, we to active. return for capital. stay looking disciplined assets to But at. that that to actively got it a also we and - and deploy supportive for continue we anytime But I we're think the are right jump shareholders. pipeline do to that will we don't I going important looking if stay is we think so of that that think

Tom Singlehurst

final suppose, footprint? accelerator you sort on there an there can don't national speaking any And I of but is have, the step then you by in know Is of, building maybe Elevator, one mean there's way out that's that sort Okay. online element I Tech with physical I necessarily on set, that. - very coverage. mean there the follow-up particularly technically

James Rhyu

entire - virtually plus million you have industry, small-scale in outcomes answer Not day businesses has outcomes it has special asset who see Tech can't that And the marketplace the best we And balance best is to is it do responsibly. it's because it one. it a growth think operator. does profitable industry. really of only since me and I the our we been pretty Elevator entire that find all the our we a in growth still the the in operators make short in ensuring want Yes, money. $XXX

what only returns we So and want that great don't are we not is upset outcomes, do getting we're getting to good balance.

that don't Tech aggressively Elevator want for are capital sure want balance. make think return. assets where do we we that so too can the And that it to like outcomes we upset we make But to deploying We we to our that think that and customers the to we strong we our profile want for get remain want is we retain responsible make our that sure financial sure served shareholders. well,

capital step think to means don't behind But that a going the that think Elevator there. Elevator got great for leader means much I accelerator that too more. I it will we we're that Tech So deploy do we've Tech on continue

know continue job think you a think behind I him. him. to I going bet we're and He's to wonderful done

Operator

from next Your of Stephen with line the Blair. question William comes Sheldon

Your line is open.

Unidentified Analyst

for This Stephen. on is [indiscernible] actually

here. Just a couple ones quick of

about a So had on we much little on students general the and has there you but enrollments an teacher retention shortage demand impact touched new talk side, of on this then how education the just versus from just bit can already, bit general a families? and

James Rhyu

Yes.

was for It states and state to shortage. So that teacher have number years this we past the have teacher think indicated California last we probably demand. Texas. surpassed year's definitely a shortage, had the acute number, hit two that - it have like couple I've could tremendous of states been before if could over past weren't fall pent-up XXX Those have of particularly I

of lot our early a had to we those states shortage been in enrollments because not those have that turn year. states We've see we to in last So of teacher demand fulfill. off able

have So dynamics towards acceptance dynamics in just for particularly. forms of those of two that they I education, different population, California, families education. a in terms state in I prompt increasing lot alternative think of large gross obviously forms states to really consider of alternative think states And the

can the service students we for or great teachers appropriately getting in-year really level up were backfill appropriate with sort trying serve. possible. to that we of semester. first - an as shortage to the either hiring teacher I populations our products throughout And the and as - ramp of of ensure to And just so dynamic that The we tremendous they're that types think states both was

levels an in, is a that's as always because with. different sometimes coming dealing you're retention, attrition much issues as science grade got it got of you've that you've So art

feel - year balancing I so from a this I pretty, pretty we're is gone through We've act. hiring that perspective worst I teacher optimistic the so And think, guess behind turbulent always us. past in year. this a

think I behind the us. worst is

year. we've this past from learned I think

we a any I that see this shortage. think in not retention teacher meaningful degradation we did to standpoint, from retention the year tie could

In fact, generally stayed the consistent elevated speaking, pretty that last has we retention year. with saw levels

Unidentified Analyst

That's color helpful. Understood. And a launch in it? little cadence talk programs then some my there. required the bit Thanks the the one, next and of you really new in for just investments can so just behind when states launching that about general, of generally

James Rhyu

I actually might mean somewhat you think of administration sort I Yes. right, like first, up infrastructure logical right. to the as set has expected, get - have

registration, administrative staff of hiring we're hiring We're So up do the registrar setting office. geographic We're location. the systems staff. to for type the that

Georgia And in have We like we that. acquisition things cap concurrent marketing, of like student teachers also then there is states activities, hiring we that. with well are PR, type where and start as doing a

start to a courses So precedes summer, of coming the that program that. of get exactly a schools the the predominantly over start work. behave school and students in teachers like like set-up would that into and really the things allocated they And behave as lot the is other actually they sense work

of center, that, then the to - sure whether or leveraging So that in now we're place, that lift other it's upfront to leveraging largely place. beyond in we tends through early lot heavy just Stride the making the infrastructure spring summer, the administrative the infrastructure the actually have things, real these broader a And be other infrastructure for we're in things. curriculum enrollment

Operator

for There today's Thank you Instructions] further no you disconnect. This joining call. and may conclude are [Operator does questions. conference now

Stride (LRN) 20 Apr 222022 Q3 Earnings call transcript