Stride, Inc. Q3 FY2025 earnings call

Key Messages - James Rhyu: - Strong demand continues to outpace last year, with over 60% of parents considering sending at least one child to a different school and 27% considering a full-time online program. - February Gallup poll showed low satisfaction with public education (lowest since 2001), and nearly 90% of parents are interested in non-college degree pathways. - Expect to finish the year with more enrollments than started, and confident in growth for fiscal year '26. - ### Donna Blackman: - Q3 enrollment up over 21% from last year, raising FY '25 revenue and adjusted operating income guidance. - Total revenue for FY '25 expected to be $2.370 billion to $2.385 billion, adjusted operating income $455 million to $465 million. - Gross margin 40.6% in Q3, up 190 basis points, expected to improve ~200 basis points for full year. - Selling, general and administrative expenses up 5% to $118.5 million. - Adjusted operating income up 47% to $141.7 million, adjusted EBITDA up 40% to $168.3 million. - Diluted EPS for the quarter was $2.02.

Total revenue for the third quarter was $630.4 million, up 17.8%. Revenue from career learning middle and high school programs grew to $223.9 million, a 33% increase, driven by enrollment growth of 34% to 98,700 enrollments. General Education revenue was $370.8 million, up 13% from the previous year, with average enrollments up 14% to 141,500. Total revenue per enrollment across both lines was $2,415, down slightly from last year but expected to be down less than 1% for the full year. Career learning programs contributed 35.5% of total revenue ($223.9 million / $630.4 million), while General Education contributed 58.8% ($370.8 million / $630.4%).

• Raised FY '25 revenue guidance to $2.370 billion to $2.385 billion, up from prior range. - Adjusted operating income guidance raised to $455 million to $465 million. - Capital expenditures guidance remains $60 million to $65 million. - Effective tax rate guidance 24% to 26%.

• General macro environment uncertainties. - Federal funding impact: less than 5% of revenue comes from federal resources. - Execution risks related to cracking the code on standalone career learning funnels and socialization for online students.

Q: Jason Tilchen asked about progress on standalone career learning funnels and socialization for full-time online students.

A: James Rhyu stated they're running tests on career learning but haven't cracked it yet, and are using platforms like K-12 zone and geographic pods for socialization.

Q: Greg Parrish asked about marketing strategy and federal DOE impacts.

A: James Rhyu said marketing approach will continue testing and optimizing, and Donna Blackman noted marketing spend will focus on efficiency. On federal DOE, James Rhyu said the administration is pro-choice and empowers states, which is beneficial.

Q: Jeff Silber asked about drivers of career learning growth and enrollment constraints.

A: James Rhyu said lower grades need improvement in communication, and enrollment constraints are due to demand spiking while enrollment windows close.

Q: Pat McIlwee asked about uncertainty and flywheel effect.

A: James Rhyu said uncertainty at district and school level benefits demand, and there's a flywheel from scale and word-of-mouth.

Q: Alex Paris asked about enrollment recap, revenue per enrollment, and share count.

A: James Rhyu recapped finishing the year with more enrollment than started, Donna Blackman explained revenue per enrollment expected to be down less than 1%, and discussed share count calculation related to convertible notes.