LRN - Earnings call transcript Q3 2024

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Operator

Good day, everyone, and welcome to the Stride Third Quarter Fiscal 2024 Earnings Call. Today's call is being recorded. I would now like to turn the conference over to Timothy Casey, Vice President of Investor Relations. Please go ahead.

Timothy Casey

Thank you, and good afternoon. Quarter for Third year Stride's to Earnings fiscal Call XXXX. Welcome James on Financial Executive today's me Rhyu, Officer. call Chief With Blackman, are Chief Don Officer; and

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

to in results may also could the filings. company's addition important statements involve actual from information, materially several company's forward-looking latest any SEC The In this differ due historical described forward-looking as call to statements. factors

the no during statements are time at performance basis our and views future and to the assumes forward-looking obligation statements update regarding made made the of and events this assumptions These call. company business them, we make on any

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

James Rhyu

Thanks, Tim, afternoon. and good

college new that seen The is those and school customers is X/X indicated looked state the over almost that a least new just United last view more this. importantly, recent school National and between over value that licensure Every survey in cracks. States were evolving. survey, to skills or a in year a child professional were a consider child for leading their Almost training want school that this School That as show training have survey beginning half the year way of Of Choice high the over swinging supports their skills on X/X certifications from training. real default than A over of paradigm sell for and Foundation confirms Awareness likely students, more at considered to courses half on-the-job a equation the leading research a better for for and they up college courses, strongly year. is of option to degrees. and choice. students they'd X- year students to coming I college and students past evolve, survey favor is the different value parents to the and continues education X-year but education In school said that recent by

a skilled The the AI of path college when comes article AI. changed behind of given to better growing saying saw use that growth this to it They the The Wall college that XX% students trades, trend of Street Gen make in Z jobs. on recently college pursue has survey cited traditional They blue-collar are they on the the entering of generative rise skills skilled they trend. jobs published white jobs, don't or showed collar the their jobs of leaving the growing with number Journal reported articles security also than majority that high-paying reported credentials. respondents the offered of of graduates also equation the

as at and the dominate Stride, tomorrow's Artificial right industries. cycle as to graduates One a level, major, job. was high are new getting of of for first internships today. well intelligence factors continues findings things the choice We, the the most Stride the education the also school offer college are education defining other compelling critical delivering at most can that that success in

to customer teachers developing support We are improve encouraging. AI testing very building a feedback is we the ways for foundation and and our students experience and the serve. efforts to are Initial

work do our hands programs, into other so and their of to AI we the but and empower incorporating putting the students We all teachers right supplement remain committed by into parties. will to technologies tools and

quarterly record higher reported of We new quarter. incredible the than year than another quarter high our fiscal higher XXX,XXX pandemic revenue finished enrollment sequentially last hit all-time 'XX. and students, a and just levels of we Now

Our choice is and sentiment. season, fall indicator delivering and enrollment the fluid years that of the the in-year focused strong. growth Many upcoming are wondering expanding now customers this of one of the are education for is just more our that ending we running and about already of for X indicates year customer while you fall landscape on year

a we strong as If are positive. proxy continue during trend this to Application we've volumes up ourselves year in seeing enrollment the a fall for and rate are trends demand continue, set indicators season. strongly conversion for

of be done largest feel we There's year, of of history. but school enrollment. grow next still As cohort positioned the we to a today, well continue lot are before reregistering Stride's in students to to have work we

landscape that education by today, one the I Given on believe flexible, of on education accessible education the today is represents emerging trends of tomorrow's the career-focused and many of proven. Stride delivering future technology-driven,

With call that, Donna? Donna. the pass I'll to

Donna Blackman

everyone. evening, good and James, Thanks,

November. revenue between income outlined These and our in XX% about, rates see both profitability third for quarter. XX% rates with now growth XX%. turns anticipate in-year and numbers, increasing between We and to strong retention the growth comfortable the strong feel in XX% growth talked the we James revenue full we we continue achieved growth year. operating XXXX enrollment As target and guidance our our Coupled annual adjusted in

middle XX% third last million, revenue share to from our up up XX% of We $XXX.X enrollment Turning year. and $XXX.X $X.XX by same per income year $X.XX, school year. million, revenue operating enrollment per period last year of an of $XX.X This from the an results. of fiscal of from Adjusted X%. Learning, driven million. of growth XX% quarter the increase Earnings million of of million, reported capital increase quarterly last growth to and XXXX. performance expenditures high $XX.X grew revenue was of $X.X XX% year-over-year and from Career

and X the the quarters see X,XXX in is seen continue third quarter in-year over the the we've quarter, quarter. from second This last of We a to trends up second enrollment growth over continuation enrollment in years.

year. X,XXX from the million, last also last by $XXX.X from the last business, X.X% quarter enrollment was driven up quarter. almost General up year. Revenue with finishing revenue This in enrollment our enrollment In quarter from per in continued average quarter growth strength the Education up was XX% was

think it's quarter, the the as third quarter we in to of enrollment year, programs school There fourth is sequential but enrollment the important the we quarter. new the we QX. for from high leads a remember, no to most about for expect during these our upcoming anticipate still decline declines opportunity convert As accept enrollments and always us to longer

year the year comp for timing. Per pupil to up we particularly And Career against from are we when revenue finished XX%. last be by going impacted Learning, a continued strong

good across see Career. to continue General We funding increases and

However, from of in a we've be any year yield mix, given timing impacts impacted can discussed. number previously quarter, that catch-up and prior including these by things,

past the are it's we've positive very across see few at of school years. loss While funding schools. we the environment [indiscernible] now, fiscal as so an process level early the year grappling extra in funds impact of decide still coming all in year's the the overall strong not XXXX, with seen right to year, for funding also of next as state funding, how as could allocate over they which

programs. quarter continues business quoting learning Revenue Our million. $X.X the from million our for declined slowdown to see the in $XX adult to impact

as with growth, hold not XX%. but bootcamps. year our quarter put offset efficiencies growth points the Next, not but declines MedCerts enough some back efforts to our in fully place took half efficiency Allied of up see for from last year. was margin we've benefits the Health still in last in finish to seeing strong more basis programming the year-over-year a XX.X%, Gross the of We're strong these year. revenue year, basis should last continues than as from the on XXX of

content efforts, in and outcomes. while drive to with supporting not we're strong those Importantly, continue we margin academic gross improvement

million. by still For compensation gross to general the to basis administrative the expect $XXX Stock-based was XX% quarter Selling, year. up the points. improve from for quarter were year, last and full range for expenses the quarter XXX XXX see we operating finish million, million, margins was million $X.X comp from with Adjusted now to the for income million. year We up in $XX strongest our quarter year, expect to of the last $XX ever. XX% stock-based $XX.X

million. $XXX.X was EBITDA Adjusted

the expect the quarter quarter ramp As of marketing quarter spend with and every million. expense in fourth other less $X.X year, as for to up anticipation third begin profitability Interest we than be was to year. the we school upcoming

our Our quarter quarter spend quarter effective in above the the year. last was million, share tax rate for XX.X%. earnings for expenditures Diluted was million were $X.X $XX.X Capital per the $X.XX.

the defined as cash mostly down million, cash less Free due of timing from prior year cash from $XX.X CapEx, was to flow, period, receipts. operations

equivalents year million full and guidance billion result. and a last $XXX $XX of ] and Based our the raising expect Capital of We guidance. XX%. profit to bringing billion, [ We cash across flow to free marketable revenue up revenue continued $XXX quarter and and cash as and adjusted and million between with trends, up the million between $X.XX $X.XXX cash income of an retention in fourth XX% third million. range expect $XXX.X year in-year the now are between rate quarter operating expenditures and $XX we a finished significantly effective million We tax enrollment $XXX.X million. on low securities from be

your Thank you for time.

to I'll our Q&A. it Operator? operator over Now for turn

Operator

Instructions] [Operator

Barrington Alex Research. our We with take first Paris question from

Alexander Paris

of Congrats have on questions couple the beat just and raise. I a here.

than faster the Education. think Career Learning you've Is Learning Education how General regarding now rolled And should rates we has well, the comparable forward, growing now going that General kind enrollment respective growth rates growth the still significantly? out that off, segments Career accelerated. rates growth are so of comparable. First is about

James Rhyu

that can sorry, on grow, But continue Yes. meaning the as obviously, directionally, they new strength of make we there distinction continue dynamics that lower-grade to strong extent programs And levels. One to I that's think would schools want. to are of sort maybe think really opening, do So predominantly career dynamics even school-oriented, there's going I try those that obviously, market maybe some that are mean, be will in yes, right, of right? sort they're us. have that We've going recently, but necessarily we but and seen as great see is the then in to mix, for some programs open career our the both to Jeff-- think high with of shift. is, really make I not probably we that programs have only opening, we I could programs, that really to X So right? Alex, shifts. mix our sure

Alexander Paris

number talk Speaking a General new programs of plan and core of Ed new states it, could in about versus or new new the XXXX, fiscal a number either opening you programs. if learning for schools, of terms what's of programs

Donna Blackman

number are. a of focused So one that of to not today. the our programs of try as the expand to we currently things in we Day are states continuing out states is I at to to we to part we're in currently announce anything laid looking in on continue have back where don't Investor on in grow states November

talked add we'll predicated with states on not As but and we QX you certainly in might any guidance, deal And before we to that programs. want the new fact new are would that in that more recall have XXXX ahead don't conversations about signed. to add of we QX, ourselves get to have was we states, about when having we guidance great our that talk

James Rhyu

not benefit I obvious in have is better sometimes the pretty to new programs size also states, example, add programs us ability -- equation things states that. is grow like it's for one are in meaning terms our versus that we some and the for new where And of sort restricted where is. the thing -- of I'd

lot program a us states a some have in better a actually state. for in those that then of characteristics, new open open And of new so state, that it's demand to up

but It's one is things other. may we growth for and that, us. actually off think aggressively that strong be not But new gain here. us, a a that characteristics that zero present not it's the trade for a had itself pursue there demand opportunity often more just not state, So necessarily opportunities better for like we the where

Donna Blackman

on to either thing the there one we up I'll opportunities for some states If expanded. add caps, caps us couple a eliminated have growth caps capsule our or have that. -- is And pushing to the the have that of where have of one we last are we're

Alexander Paris

after other pretty and is helpful. a I'll get is in the and color last that rapid both income It quarter is Well, question, that into increasing -- like Good. rate, that income? other year-to-date. back queue. other beneath item operating income, What One line, in line seems income the at

Donna Blackman

that question. asked you I'm glad

As we a in know, you generate lot business. the cash of

taking cash in securities. And so that we're investing it and marketable

sitting that's in item. increase. That's that what's what's primarily other the And line driving income so

it look may If cash number, expect lower than we're at you our because cash. investing you be that actually would

our some that see well. assets you'll as marketable in our so of short-term longer-term well And assets our securities with as as and

Operator

next take We'll question Markets. our Jeff from Capital with BMO Silber

Ryan Griffin

Jeff. for on Ryan is This

Just ahead some could for are had September. saw was wondering of question data more We in a get on give any that funding I tech cut if beginning back funding the confidence on your environment. to to spend the cliff you just on the environment color year. on next districts

James Rhyu

Yes.

whereas aren't state-based actually baseline the X and the at the other things. the referenced and cliff is separate cliff really One [ funding program, environment, is there's the issues Because Esser again, overall ] here. federal X right? I that those, largely play separate think funding is is Esser government-funded you a just funding

that bit of of going away. sort under funding you of always the federal that is costs. a to I that a not because go and lot -- temporary feeling to pressure be think structural does ongoing funding are that little of was mentioned the districts I was that for think intent cliff That sure, for that's

think we the and for costs best every I decisions has them, of district think sort district. kind not they're had that their think haven't funding. finding having pressure probably for structural are because increase their do it's back. sort to from that same made lot I their But the scale we ways out of not the what at own we thought have they I of a now of far that -- don't for time under themselves benefited that best to

indirectly some benefited sort have it. from of of We

going haven't sort funding we same be of Ester that taken that's have to to need rightsized we of to cost But structure going a it, be don't approach maybe think I because the away. and

I still expectations, that is cost that, altogether. said think, we positive. having The our thing trend we but run year environment continuing in that's means mentioned environment to business efficient be to see meaning in into Donna will continue funding Now think positive, I level, pursue remarks, distinct We here, her -- state it's and And are an that stable, funding positive with the to continues think it's going those fund efficiency. line increases. we the at a next

our and off that, translates mix like flow-through we Now business and to how yet. based don't that things actually next know year of

it the I us, to business impacts in it's sort think going of to be funding whatever mix X-year going say, we're I'd that refer and But see year temporary, a a that. us, be, robust be strength of how it our after of pattern the think, to will remains if sort will thing, going into it I seen. meaning be, to normalized somewhat next then we'll impacts year. of and

us. although and it, about impact like as concerned districts that, to it's things you a I might from like But too on things not onetime I'm and some there's think mix hearing that. severe be for potential So based don't

Ryan Griffin

a the I makes mentioned app it's cohort. any think color success? early. lot what's just for you And for volumes rates driving still good give Can of more were your you that follow-up, conversion That I kind of fall looking it. the then Got and know on sense. the

James Rhyu

Yes.

But continue volumes year very strong. This cohort into really to mean fall that. season I has we So barely a strong. of seen yet trends -- focused that is really year, in-year we've because are the be the data there's next is if I the continue this been not lot comment think underway. on my application year. for season

be Our conversion to strong. continue rates

we and season. good translate last a And so do fall that this saw saw into we year, -- we think

past us of is early So as the a we well indicator not it. again as A operational we and of improve those hard years translating funnel you ago, continue give those think a it worked really of application say, who both improve rates. in I we've had, couple fall those operational good think conversion season. actually great fall improvements to season. operational And I would of -- remember, it into an a volumes good And years to over we couple that things for

I a is the it, made. And overall that also, we've lot a think as of operational I side I are little bit think, particularly it think, attributed improvements strong. say, of And to, in-year so in which our I market dynamics, I about talked the well,

Operator

Greg from our Stanley. take with Parrish next We question Morgan

Gregory Parrish

quarter the on results. strong and Congrats

fall you about slightly digits single-digit of digit upper single of ask long-term just mid-single kind targets. of there at to I'll growth high guess the just level, XXXX bound enrollment financial of higher a different I sort imply kind out targets way. zooming enrollments have So high out Maybe your

the kind So that's have framework of there. you out

headwinds you growth year, the sort that of framework If do expect you in you now? framework? what sort Or long-term know about think are any there next of knowing of to kind the

James Rhyu

Yes.

on think headwind we against that I don't a based see framework. we see, what

to it's think really about fall. concerned are you're question, the about we build long-term good a know framing think I the way it business to and a growth is really trying think, is the because here. smart everybody I I way

long-term And we're for building the here so engine growth.

think from see you if we we're right operating everything will, of indicates all that. going a framework. things that to against being continue own sort execute well think we're that and we dynamic that within cadence, equal, expect our And market I to that perspective I

Gregory Parrish

the if in? ramping up leverage seeing very do moment? pipeline. lever kind sort that then you position like Could I the Board's and of and mean, us target ramp Great. presents willingness see activity kind of And full up you is secondly you of then sort that related, things And you up? you're M&A can broadly? sort M&A right acquisition maybe talk at update Or low management about maybe the of the to you itself? of on potentially Are

James Rhyu

Yes.

terms listen bit on been M&A I there. out a continue always more little we've valuation of I've bearish in pipeline. active to So been our valuation be a and bearish little very on

us. don't on there's think near for anything I horizon So the

don't we deploy I return capital, high I I right good make now. I if that for probability. to that think a sure at just a think And want deploy we see

to it going the includes right along. I think that of our that be Board if strategic they're think they're supportive if strategic that are good the comes decisions that focused to more of make probably think think right interest the be on leverage, long-term right in going term deal our I ensuring right we supportive deal, shareholders. strategic I And I long -- is structuring of

that think we'll they have put while like find belief I to against personally try deal probably. a any right amount and I in leverage, do usually, need right we that's I'm options many I that you of turns to have probably of capital have around pursue to the structure we I certain and a textbook tell not we'll -- that mix you loading that that don't that, think do options pursuing I mechanism up that to. instances, ourselves around the the with And And will tells debt. deal. know whatever. I think we to it's don't or

believer And in much big in as I'm just possible leverage probably a not books. having the as as

of that really few next of $XXX-plus the be million in here where cash few books. want maturity And hundred I sit on several the pay to dollars. going pretty like we're to a a dollars think going have got with to We've end today I comfortable. to the net that be good. we position years I to in. hundred, million year is We're off

to credit day. If the up couple you know past had you've markets, in those. a lived seize they the years list to I've of that over literally a can XX

to in position we're to want where capital I make not And sure like a we're beholden markets that that.

Gregory Parrish

this for ramping But And versus don't talk Awesome. improvement lot talked if year. your then to about prior marketing color. saw Yes. campaign up doing sort question, one. the prior. know last on year for a I strategy, me, That's you anything this my year great maybe an about want odd you're excuse last And differently. your of you're question, you of a I

any this is I same game changes? So last of kind season, guess, you running year success it the that plan material or gave

James Rhyu

Yes.

we of things. I we'll a over improvement bit year So both, the an little and the continue think program last meaning was those ran year, to prior that do

time, sort out, have also it are think I execution. we move good a of them needle road we multiyear As improvements can't We at we all going think, the require and once. us. investment for -- have do map turns to of They

way continue and see to the our draw improve And funnel the the improve in think funnel. we convert opportunities improve so we way I we to the execution,

there's think more actually I improve. headroom to So

team the a of good has that think map laid really road road I against out map. executing

here. I we're actually so And done think that not

got to a the go across I can we think that funnel to metrics. we've ways improve --

Operator

take Tom Citi. next with question our from We'll Singlehurst

Thomas Singlehurst

actually. Yes. Tom A questions, from here Citi. couple of

The my betraying announced has sort to probably I ignorance, -- a of saw first slightly them couple of competitor a contract one, wins. but call Pearson they as want

sort of already as be So operations. school of question. a running they of sort to just there whether enrollment I'm of growth virtual for take whether are taking can over that sort wondering the sort opportunities of they've of of similar Stride the on schools forgive of sort and well sort opportunities are they're source well, as sort of discrete time sort existing sort whether obviously as up additional and that basic over of

stick obviously, suppose the on with that And technology there bootcamps then of seeing the you're what, thoughts are to seen second is through? for I'm of and mean, to of would appreciated. to very is turns if just going where there the mean it when I industry. just the just being stimulate Or demand. anything, on across you're it remedial is what's that interested to some much it things you and Any it? representative action about I around piece. I sort one work those wait need do be try trends one

James Rhyu

Yes.

take sort first. of Pearson that me question So let

thing -- saying don't first I that for get this criticized would want Pearson the to I know, I is maybe I that, actually. say succeed maybe think like, I

good think market. everybody. competitive I having healthy good robust it's for a It's really

this that. think country needs education in I

I'm maybe not for And a fan. sort continue of not of over everybody hope taking Pearson. with where wants. personally success there's their So what personally again, rooting is it's fan this other I'm people's have a not programs. personally clients necessary. a I to they I'm unless situation probably

think I all if pie, grow then we're in we to pie off split better up pieces. the more the try

growing think system our pie. focuses approach -- I is largely the on And again, needs I education think our that.

So we're I best breadcrumbs what's doing think to think and the trying fight all if then other. over for each here, for we're doing what's marketplace, not we're I best the not

is to Having sort back. we're But the Pearson's going the everybody play is of said And and course, of to that grow we're ways know I to get to going play, that of they to got play preference to growth find if and that some that, pie. then to going that's game win. game, contracts. to run, need lost that a course, they've business my

so think growing. respect to now way necessary us path see they But And that. grow to do don't that the right we've as I to they for need do, for continue whatever a to been I

competitors states. Donna contracts mentioned plans earlier, as contingent contingent from also new are They're think winning I or others. not on not on our

good pretty feel we without those to think I hit our plan to tactics. having our about targets resort long-range So to

happening the yes, what experiencing market. is think overall As the market, what's far overall as we're of bootcamps I tech in go, indicative the

is the sense people about things pretty going are that in changing it's here. pretty quickly think how to quickly I impact learning AI

I model expensive, pretty think expensive. can people way, building I hey, the could how be realizing, large are be language by a

investing foundational right for to for for to mean, for I I a not are don't I investing approach does customers. return, investing think take that's us. our investing strategy It we AI. think announcements appropriately, around very splashy outcome, having the but trying think,

industry. I hurt space able little might think because have splashy tech AI it might how and what a of bit hurt to those the of promise the that announcements do bootcamp be

skills bootcamp finding time that is we're be I And the think in what approach goes that of a broadly, that technology tech on training space. will has long for training the skills the place, training is as place a there think space. in specifically skills in I place there term for type

we're the seeing now of space, opportunities. BXB some side I the corporate interesting think the side,

on people are development landscape turn to a dime. of the that realizing think I not technology terms is going probably in

competitive think biggest very companies significant I there. technology advantage have the

think be the a rest going migration world the slower I bit path. to of is a of little lower

The war continues very I be for talent, very, to think, tech challenging.

I AI technology think the migration talent to is creating opportunities. some to

take So growth in know I think a is se, going that see would to there a for think can advantage I say that short, I next guess, here. year long-term I I don't strategy I turnaround per we predict here that of. that that happen could there's that it's we but and we think

Operator

[Operator Instructions]

William Blair. next Sheldon from question Stephen with our take We'll

Matthew Filek

and more Sheldon. share provide nice quarter. on start, material you Filek for can Stephen update become an thoughts on To might Congrats have tutoring some to on when story? and Matt Donna, you James the the tutoring

James Rhyu

Yes.

significant states which it's think so actually, or is is the traditional those somewhat teachers think twofold but the types think is a I -- next -- the contributor don't sense us our getting distinguished clients I to online marketplace now solution, revenue year going number of behind has for sort I in of a billion-plus solution, our putting in some traction a more of number become uses see say, be it and decent it's I'll the We've I think tutoring are, that are programs. there. of material still I solution we there. $X state-certified the to to that line, we going to won so, money new it's time. potential that traditional -- over And our to tutoring in think, it's approach tutoring an

bit growth And new on saw year. we've with customer the in year. really think it. also seen up landscape this some getting little in coming it I some -- is feedback the We contracts for good good coming players AI evolving see competitive products. see good next that you some we're we a then sense for And

the us. to if I hit the pillar think an for other in we AI yet mark, see the have will really that's you product tutoring space,

are augment proprietary how model We AI language we our using some an tool our at looking a we that also think content can can tutoring offering of deploy with. that's small we in

are we of that -- for with out foreign that clients we're have what I think go some marketplace is of ownership companies some and of whether of our whatever, There some the quality that. are districts in seeing are products think or saying see that forcing some think, the the bid. some I concerns, the to it's I

think that there I well. we're seeing opportunity So as

So a both tutoring innovative continue good new in invest to way, and think in and opportunity a of sense technology, us, will it. and pursue for I long-term is sort traditional we the

Matthew Filek

the Got hear That's initial traction helpful. it. Great to been has strong.

that, you those Stride that. management Just Stride services something on through to Or non tutoring or us system students? as plans for? integrating Is something to with possibly services tutoring your Can directly could though. come learning be delivering follow-up to remind the delivered a quick students that like would that

James Rhyu

question. it's great Yes, a

what's and we got system consumers again, back-office it. of that service districts. type directly prospects type to bit -- compelling We've also but now AI the The to proposition. in learning something definitely management through with around more definitely is, we think news think is right it's to something that think around like or I it's But it's I the our think little integration So system delivered to some pursue. is focus now, would I announce a the nothing a right tends

be to And I think we word. careful the got -- is not just

out there's things and there's hallucinations, got get -- work. I student those about interactions model that actually to deliberate concerns the be from algorithm think rolled I around language There's concerns privacy. just around There's around to the think, that how happening. learn concerns, can right are we've the provide

just And I got cautiously. proceed to so think we

Operator

may that today, everyone disconnect. Thank today's that, for your And with participation now presentation. and you concludes

Stride (LRN) 23 Apr 242024 Q3 Earnings call transcript