• Revenue: USD587.2 million, up 16% from Q2 FY24.
• Total Average Enrollment: 230,600, up 19.4%.
• Adjusted Operating Income: USD135.6 million, up 43% from last year.
• Earnings Per Share (EPS): USD2.03, up 32% from last year.
• Capital Expenditures: USD14.8 million, up from USD12.7 million last year.
• Career Learning Revenue: USD213.1 million, up 29%.
• General Education Revenue: USD354.3 million, up 13%.
• Gross Margin: 40.8%, up 100 basis points from last year.
• Adjusted EBITDA: USD160.4 million, up 36%.
• Interest Expense: USD2.7 million.
• Effective Tax Rate: 25.7%.
• Free Cash Flow: USD208.6 million, up USD48 million from the prior year period.
• Cash and Cash Equivalents: USD515.1 million.

• Warning! GuruFocus has detected 5 Warning Sign with LRN.

Release Date: January 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Stride Inc (NYSE:LRN) reported record enrollments, helping 230,000 students, indicating strong demand for their programs.
• The company posted a 16% increase in revenue to USD587.2 million compared to the previous year.
• Adjusted operating income rose by 43% to USD135.6 million, showcasing improved profitability.
• Career learning programs saw a significant enrollment growth of 30.9%, driving a 29% increase in revenue to USD213.1 million.
• Stride Inc (NYSE:LRN) raised its full-year revenue and profitability guidance, reflecting confidence in continued growth.

Negative Points

• Revenue per enrollment is expected to decline by 1% to 2% due to state mix impacts.
• The adult learning business experienced a revenue decline of USD6.1 million, indicating challenges in this segment.
• Despite strong enrollment growth, the incremental career funnel has not materialized as strongly as expected.
• Selling, general, and administrative expenses are expected to increase slightly in the second half of the year.
• The company faces ongoing challenges in improving and executing across all business areas, requiring vigilance to ensure long-term success.

Q & A Highlights

Q: Can you unpack the enrollment momentum, particularly the differences in the funnels for career learning and general education? A: James Rhyu, CEO: We continue to see strong enrollment across the board, with year-over-year growth. While the career funnel hasn't materialized as strongly as expected, we see long-term opportunities in this area.

Q: Can you share early learnings from the nationwide rollout of K-12 tutoring and its potential impact on the business? A: James Rhyu, CEO: The tutoring business is strategically important, though financially immaterial in the short term. It leverages our educator network and offers teachers additional earning opportunities. We are investing in this product and exploring innovations like AI summary features.

Q: What is driving Stride's outperformance compared to the industry? A: James Rhyu, CEO: Our team has honed their execution, addressing past issues that hampered growth. This improved execution allows us to take market share from competitors, although we still see opportunities for further improvement.

Q: How does the current funding environment, particularly federal funding, impact Stride? A: James Rhyu, CEO: Our exposure to federal funding is very limited, well less than 5%. We believe the administration's intent is to help students, and we will manage any impacts, positive or negative, accordingly.

Q: How is retention faring, and what are the structural improvements being made? A: James Rhyu, CEO: Retention remains stable year-over-year, with structural improvements post-pandemic. We are investing in platforms like the K12 Zone to enhance socialization and address feedback, aiming for long-term retention benefits.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.