Stride (LRN) 15 Aug 232023 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Stride, Inc. Fourth Quarter Fiscal 2023 Earnings Call. [Operator Instructions]

Tim Casey, Vice President of Investor Relations, you may begin your conference.

Thank you, and good afternoon. quarter for fourth year Stride's to earnings fiscal call XXXX. Welcome James on Financial Executive today's me Rhyu, Officer. call Chief With Blackman, are Chief Donna Officer; and

As Stride Investor are website. and that a be Relations conference a can the by presentation webcast on found reminder, today's accompanied call

our certain measures this advised be on is be the release issued include provided and discussion measures. can A found financial results of in Relations Please financial our reconciliation afternoon also today's may that website. non-GAAP Investor of these earnings

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

our you may answer have. any prepared questions will remarks, Following we

I call James. over will the James? to turn now

afternoon, doubt and as challenges live, learn, everyone. education primary work, to and society. other present key and our past is have brought few good however, change how and entertain Tim, Thanks, among There themselves, core things. people to years me, disruption no to The opportunities these will remain

of organizations be have I But lives is believe seems that AI how change a our embrace best we and to impact change recognize disruption generative facets will economy, iteration also believe on that and all a industry. and massive our The of change. I this including aspect must latest of the change it will constant the every education.

to away soon. I as foremost, that it going today First think education need will anytime and be not K-XX we we know appreciate

have ways In personalize previously. very the not really students learning accelerate in dreamed way achieved K-XX think a and to AI ability their enable positive in I will about has we but transform education to that our fact,

a that individual in computer teaching those for was it has programming, AI terms ability years training For output forefront has we them. not provide personalize navigating the AI of and functional when be maybe example, And skills code terms over students. well, consider level of school of the to will engineer, required in become in but before. the nothing XX high Stride of at learning founded computer assessments like Since at student been of we to the for ago, instead but content should feedback, personalized and education some the the

content students and And believe be connection. AI student human allow for that teachers. outcomes, build I giving tasks. and style incredible The students to them AI-powered Ultimately, are up students provide can free time on learning beneficial important giving time those less learning based and allow toolkit teachers both to time more teachers a on flourish. relationships incredibly an for more with provide teachers with to will customized will AI-powered actually teachers will to to individual that with time students teach lessons spend their and spend students and administrative

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Day. will AI a upcoming more We in-depth approaching on view at an how provide we are Investor

in approach. a recognize to our need do things We of couple

generative teachers establishment already stance this. the is. Recent and that will is be confirm regardless surveys what students AI adopting First of

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to we've we applying can the talked of We've teachers ongoing many AI We supplement automate increase employees. believe efforts the administrative before. efficiency tasks internally about of continue and corporate productivity routine and for already both been many to

practice will us chatbots enrollment full much also courses user materials friction the faster than to also assessments admission We previously. AI-powered generate should removing our and continue content with allow It to experience improve funnel. while from in to to

begin when progress additional use track AI-powered learning personalized student core to can to greater and stronger intervene scale student We struggling. Teachers to will to real out allow time, will roll offerings. at is student provide resulting We remain us earlier our will a and outcomes. to personalized programs in tools outcomes. further This strengthen learning

problems, mentorship good provide AI need critical new tasks, develop AI use cannot. students models create creativity and Teachers While thinking encourage is to at foster and solve in instructions to explore completing and following data, you teachers can ways ideas, skills.

I in the had. a that execution million for with than we've with We Now the us $XXX number ever fronts. history. We revenue, before, started of It want We about adjusted our than EBITDA. retention more adult first adjusted We topped demonstrate success year results Learning in had $XXX to a we and business, the more our enrollments Career saw improved was for also records. and XX-year more and ever. our in-year on over the operating learning this demand in time income operations than had talk in-year our year revenue, record from finishing best record including both million year

Our per at earnings share. almost record also share $X a was per

at we teens. trade the While talk EPS, P/E low about a ratio we really in

when to that and with. indicate they at what a these multiple It led we families retention, fairly a our impressed to families And us, I've it achieved they view our are one school's Score of our company remain have to years, Net recognize and families us Net its delivering our delivering near has and profile value. as improving all Score achievements, us. all most low we Net choosing ever. comes digits in-year And come they a a for shows we which are is education a translating and XX Promoter like for I'm satisfied of double These And growing increasingly, reinforce represents attractive that Promoter schools. that they Promoter Of efforts is great our growth a more their customers, our satisfied. child's multiple might level choice believe for the our mentioned feel they future metrics very belief is year, need. to not this highest now an customer. option results of For when And incredibly a that TAM, that be Score have when previously. current their they are

also programs won schools. We goes We We EdTech gold continue our the the Solutions for some the all Education by a receive, Stevie this Online a Tech Minecraft won our Business incredible and education accolades Business of Awards captured MedCerts' from were of the for We we Year. And course. Awards. Breakthrough Global year. also the we product innovative Worlds! and for for American On across Award list top on. Provider Company human Award to for bronze launch partnerships Year the anatomy shortlisted awards business and EdTech our content of Stevie

new will care program career Colorado to to from relationship programs. home Coursera our a global students. to get deepened We in-demand initiative launched few. This with a and in a access to Hampshire bring and at program cost reduced partnership a to University lower Southern are MedCerts free name courses Coursera's to of we learners. announced these on These the health for meals And to still Stride-powered nutritious tuition to allow graduates New lunch our of students all Stride. while eligible offer just learning eligible

in team to and work offer incredible continue paying our partnerships the improve to the engaging of innovative that curriculum All off. put is has

Now early, early website, that I couple some our that on data season. up. generative for site. initial season fall and even enrollments, as shaping is launched more I incorporated caveat test hear We've mentioned We've seeing we with kXX.com it's we've enable from made seen trends messaging of and improved deploy messaging. also even some our conversion enrollment AI everybody how indications. is to wanting are some is a positive consumer us different this examples. good though and it also enrollment is We some site earlier, positive our comes a And progress, and new initial A to still very which our realize to about rapidly

good the and 'XX in Additionally, fiscal in upcoming our to year finished strong retention year. we position means the that enrollment a students for retain in-year school year

since believe the I are on #X And to grow do are we to to ensure enrollment for I growth the time is data, we became this said return to well Given year, first track so. every when positioned my and I goal we currently CEO, pandemic.

conclude, I I to reiterate a want Before have. position singular I

innovation. to I'll call and and status We to change time turn are embrace over here your Stride future. Thank We much you want so the Donna. the quo. to change can today, disrupt for Donna? the

were we our to of $XX.X was our profitability. $X.XXX and were from the $XXX incredibly up decrease to the in reported full I'll operating able the of expenditures provided proud last expectations and million, fiscal results year. Thank with even Revenue over We good growth profitability prior inflationary year again, capital a the I'm of beat for revenue income recap were Once for able billion, year. increase guidance deliver headwinds. million, a James, fiscal start and our afternoon, quarter facing while we revenue Adjusted and slight year. you, everyone. last for X% an was results. X%,

for deliver serve. More we continuing while did the importantly, this academic strong results to students we

Let million, business, last finished last Revenue strong year in me enrollment Adult XXX,XXX. $XXX $X.XXX XX% year year to for the finished to year. down this million. with from from us, XX% billion, the high million Education from $XXX.X were driver totaled year up enrollment up XX.X% $X,XXX, per Learning were the the provide revenue on XX,XXX. XX% a from Ed of for last for General growth increased Revenue the $X,XXX. at for middle XX.X% revenues year. Enrollments and year. enrollments on our revenues revenue up year. Career over up year. of increasing Gen remains learning XX% In more results came last $XXX.X enrollments to per year school our than more detail

with able pressures of down were the are XX.X%, finished still for margin just and believe margins from there opportunities last additional year. gross year. inflationary We slightly coming We to mitigate year significantly the year improvements in this

confident XX% of gross our still can are long-term XXXX. to we margin by target We achieve XX%

learning adult expenses in as well general up This largely from $XXX.X million. administrative costs. were million. by totaled compensation marketing For growth selling, and was million, Interest year. additional expense X.X% increase and the Stock-based in investments driven products as expense $XX.X year, new $X.X our last was

tax year year income $XX.X Adjusted EBITDA last up up full was rate for year million, $XXX.X million, operating the for $XXX year. Our was million. the million $XX.X Adjusted XX.X%. from was

defined and cash operations and enrollment, with $XXX.X cash $XX.X There's the CapEx, million. Capital slight to increases per revenue driven million. timing. up cash adult by flow, share the fiscal cash $X.XX, per mostly from in expenditures million. less a efficiency Free year, for Diluted as were the last totaled of Profitability XXXX. We earnings decrease totaled increases efforts in from totaled ended attributable learning. equivalents from $XXX.X year $X.XX growth year

of both for grow year first to strong Overall, in began to the we enrollment fiscal strong years year the revenue and and a we Stride. inflationary finishing of XXXX, outcomes with able continuing face all XXXX headwinds pandemic-driven challenging with, strong company's In comparison and deliver history. still were while to year XXXX the and the more a a profitability, enrollments than student was

current As Stride to this James current the always too school are some enrollment September our get to year year. and incredibly that early for year. at looking busiest incredibly predict we are and upcoming we you overall some This time, enrollment understand say early at, it's there provided about know, asked the each for August an we trends, it's remains time means historically, around enrollment and it's for uncertainties our busy important months. think I that indicators but

lead done. to of trends will we current enrollments overall last be lot the believe year, there's a while increase to from still work So us

formal With October. provide as do, we our will we quarter when guidance that results report mind, first to in typically in wait we

thoughts. initial However, I do want some provide to

think favorable, well will With profitability the be current trend early enrollment profit enrollment of to in of Revenue are and the both excluding we seasonality We should and trends, trends, per enrollment revenue to and year. XXXX last with line pandemic it rate positioned per will continue the X% the for at historical we saw be full revenue year. to though XXXX. not we with grow historical be line more continue X%. the in and between Revenue and believe years

margins driven in SG&A that think expenses by invest growth will we the next increase annualization should in the continue we put We of efficiencies of this gross slightly spend improve year. as and drivers. year, to CapEx some place

tax Our be should stock-based interest 'XX. similar and fiscal rate compensation expense, to year

anticipate all we further Thank together, of keeping achieve I your additional our during Taken long-term our to today. providing you another profitability, year look Investor on Day. XXXX on information track our improving fiscal trajectory us year time fall forward target. for to

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

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

want I something. to just clarify

again, you'll was early Learning. I overall fiscal growth 'XX. the pie. comment a to talking necessarily We're not Is it's that returning just segments, enrollment Career I Gen different Ed know think think -- that be you said about by the correct? That that versus but in you total

Yes, that's correct.

tracking Thank you've more talked not specific give you in there's giving enrollment know Okay, numbers, And but of about indicators more that. little bit calls can et prior for years? know August, like -- done again some any you I on think a you've I the color I if cetera. inquiries, prior clarifying in early you're know terms in I of don't great.

Yes.

really through we enrollment volumes. our believe stronger indicator to So grow. that season, X I than last application consider think this of application our far as are function that so are speaking, Year-over-year That's year. enrollments volumes makes demand generally us a going our

actually was, referring year. August If fiscal a year, this last were bit pretty you bit, is fiscal I I year. refer actually last little I little so enrollment parsed going think am I didn't fiscal saying year. this different I we careful growth a the grow growth enrollment this to from to about I than think, commentary that to thought for for

we about we there. strong that continue We demand, demand say, the think that conversion, higher as continue yes, feel within we're we're to in feeling generate we I today, and to fall. to continue able think demand I pretty growth see overall, so is, quality to for -- improvements we here And case I'd enrollment -- see which good see sit the

still mentioned, year early about, thing in I'd add, year. One very enrollment we're I've been and the this -- process that still in-year James thing enrollment Jeff, all about like to But we're the as we had that, season. X strong is talked that talking growth I

And starting into so strong Again retention still us bit that's enrollment something place. insight a with so of a enrollment, next grow little year in-year the think but we're that stronger else early ended from why we'll and we year. we gives very

generative of whether the can just you All right. James, terms I be impact next initial that sneak I really about if out your of discussion seeing business. And in. too might early, us insight again, some can know one appreciate internally or way think really on that year the AI things it's it's If give I helpful. That's more externally, or over helpful. will but rolled be we being I two, the in

Yes.

efficiency generative company cover business, think you standpoint an there's external listen, AI internal from standpoint. that isn't a thinking either how from I -- I So out their impact about product there that doubt or can an

sort stuff. it's positively I well of efficiency think external both meaning on we as to impact believe that going product-facing fronts, internal us as

K-XX a on of next sort couple And of that impact necessarily it. two we're how aren't online think we're can how or products we're examples positive to these school I experience. thinking that out you year about believers thinking AI generative big we're give be I of the going could in have the but rolling

I any Our get good teaching teachers, at in AI. I to the And are by believe, near going think term, to which think product. displaced continue I our is, -- going generative to of core be don't

AI i.e., don't to point able the able direct will that more teachers and see lot of the What can see AI grading a experience, a administrative students. directly build them where time customer efficiency is that's certainly generative Whether taking being that I do out generative to teachers replace. whether students, with can connections and the the administrative The I replace teachers at tasks will students. attendance spend think being things with process, I therefore that's of like to but allow that our work there's papers, lot around we're that we do that for impact a roll

But focusing as we're experience I we're a think we're our commitment so in think I teacher-focused And those. a -- on very think also delivering clear of lot I well. to

believe I So teacher-led for we make the think committed and think we're experience is experience students teachers. the teachers stand We important. easier the can I better. today, to our where for And the therefore, job we that

creation ways think benefits to in enrolled, We're to journey nice On getting content won't think general. starting curriculum already experience. to in benefits end, in start marketing whole that's creation, some that customer I that content efficiencies, think. most mean, of see content whether huge the but huge The we're see already starting I see, creation, I creation people we in see, back I content

involved we -- I approach internal call -- I in. just we. I have which this, have modern-day hack, sort everybody it, And so we've to an well, say of gets

company. with for employee to gives solutions to generative you're in the problems hack They us can technology ability every sort the us we like AI. through for participate on space, have If hack basically AI familiar of in that the

we've a hack sort concept. introduced so And modern-day of

problems find AI. own our ability an within to crowd-sourcing using ways generative we're solve really company to So

And today announcements beginning to going do that big are I the about ways very like we're for it help don't said, business any can only in we're at have to of excited I So grow. the I think make, but stages. what prospect very positive our us

the question next of from Your Greg line Parrish Morgan comes Stanley. with

you covered marketing talk about I I this it I'll to enrollment we think years. spare versus well. question, just want the prior year

calls I highlighted past, in in last more And think AI. bit remarks utilizing few aggressive also have you prepared some talked maybe than on the a being you your summer. about a missteps a few you little

early and If you bit, what you're could seeing. this unpack summer different be the that little about a you talk of might some doing successes

I operational missteps think year, on I marketing our that's -- some in I And we Yes. think so had me. last mean, program. listen,

of marketing I and think actually discipline we our invest some we disciplined where we missteps invest, invest, in. which being were around about channels how

softening, sort I the think and on of to in volumes pull having get discipline higher we spray as course volumes. good just the to investments hopes when trying we to see opposed making pray

that year, think lot I I give this credit. a Donna of

discipline. think this an I in really incredible instilled she's of amount company

seeing we're more get we disciplined we returns that operationally. spend better And we're around when how

year. a think made And so we I improvement that's big over last

go to As Donna I disciplined. to think saying, to us All the we a investments still return. their keeps for we is way and and focused season, actually marketing in to investments long stay have continue and have our

messages. right send we're the get the And right to customers. to so trying trying We're

for able side messaging. some it, I to think we've generative the our creative of of creative been AI use

us. been great It think, I a also, proved think for have productive happens for experience been to learning that's us. I

think at to it. get we'll better I So continue

I we have an this I taken year, also a we way get have marketing to programs. think can definitely, we long think to better. I go our forward so step But incremental think continue operationally in

investing a I more got -- creatives we've I definitely We've there. for better we But return. some, got better think, are We're discipline. think out

platform for fundamental better. our A/B has think testing gotten I

discipline incremental sort it's So translate, of better improvements going think couple as a the over like lot to over of of we're greater I next of incrementally seeing, that time, years and sort well.

given a I of all, market in differentiation Career of had And of you wanted if launched I business. I to at flattery, form helpful. dynamic? you you've to competitive that that that's the the know tough to that how success think it's the Connections do how but a districts competitor Pathways, then in ask, does that maintain Great, is which answer change, And serve? But sort yours,

Yes.

at hope listen, not marketplace. think, don't I've that player strong secret. as long any think, I a very, think I has for any with least as in Connections it's I the it's company, been been I the secret

a I follower. fast be they think tend to sort of

pioneer. They've has marketplace. marketplace that them. actually doing I I that really respect for able tremendous as think opportunity a they're the some of us. for for avoid in what little of the strategy I And to think of mistakes we a more bit well played maybe has the make both amount this have been of

I think it's a growing marketplace.

really that But being the helps them But there's well, think has I the for think other other as well I us just be grown a us I competitors with is so all there's besides and marketplace evolved. a lot Connections marketplace think the and as of Connections better. I them. and good in out blossomed and market the there, lot players as of think

fact for that And rich excited in enough Connections us. for many work what enough is our I validates so doing, big we're doing of aspects, lead in market for all following and is us -- taking think, it And think I the is and we're aspects. following the Connections what site many is

us to And if can last do in. heading more staffing one you some slip just then of the I'll update too And into on sort that there. give early And it's capacity wages you year, maybe color gave an don't us if as Great. on well. know year. I

Yes. industry No, think, a in struggle. has been, think staffing I I the

about I staffing are shortages, think hear you teacher shortages, struggling. continue school still districts to

bit I that, we're think a I think positioned. little better with

of We to sort in for the that alternative positioned. dynamics maybe the are years, be want I with but an frustrated little we now bit couple tend profession little find think stay increasingly who teachers we to over the may have, a past of they a of continued better where to are.

lot pretty we think, innovation. competitive to a of is have a us. offer They to They degree long-term I think teachers, advantage participate in I can opportunity, get compelling. that think it a what be for of get So things. I And

We have also teachers trajectories us. career have with that incredible

focus are that things and that not distracted teachers us. to other with on get to issues with have the them We allowed are meaningful

So going we a it's to able real advantage marketplace. that a I be I competitive sustained think advantage to teacher in And think offer the we're have.

generative will think embracing As we tools continue that see the for AI. how it AI we in I will plays -- districts teachers, a of And it we to variability tools, advantage think generative our embrace more lot around variability because introduce are I market for our teachers.

bullish us So marketplace teachers. the about we sit I'm pretty teacher for and with where

we put certainly in that We to of think extent deploy still those did wages the efficiency And were impact last about as not your year. this we'll wages, year big by and And mitigate know, which to some efforts increases. saw in largely see you to with we'll year, we question some a able to inflation, line continue that to mitigate wages answer increase forth. we the we efficiency increases the our so in last efforts

of [Operator Stephen with Instructions] Blair. line Your next William question from Sheldon comes the

those work more Nice to have seen of demand end curious are that year heading I about Learning fall, commentary. very or if last you've specifically guess students programs? I appreciate the year, and within enrollment I'd you into pursuing the enrollment qualitatively, And notable over early also verticals what the anything seen in helpful. terms for Career It's the the programs. be so

what seeing health frequently than pursued way or IT more care curious some there. being Just example, are paths you're For others? like

Yes.

of great we demand for our see career think continue a qualitatively, to programs. interest. I So lot There's

of high-paying lot of required. I jobs, think a that we was lot that I what think what's that for more -- corporates of I white degrees the lot required thought theme a Skills a think are is, now jobs. a of not being college of necessarily formally, lot white-collar by jobs, -- are it

theme think increasingly. I and is resonating that

a I of health do see in think do within particularly businesses. our field, some technology softening. care are lot strength the seeing that the adult fields continue We to

stuff Google like at see some you statistics technology-related things Analytics to and and I sort think you're of sort if around traffic of look of terms, search fields. the softening that starting in

industry-wide. that's think I

that think are up in probably think I than the better but holding many some space, we I we softening. are seeing

small I really probably to a to it two long little whole a think overall the seeing say much don't we've perform think bullish and don't side the their us on We're and impact tech But continue bit perform the think bullish there. softness. will But particularly overall that so really we the ability outperform They of the our on certainly of market. got I'd I adult that -- term. business assets -- premier to industry as certification is well. still to I bootcamp about

Got it. And potentially states K-XX. That's choice opening you've and more been optimistic allow think alternatives about very helpful. in then I to James, up virtual

next few open out. as an if get Stride's over up to there years solutions great on front. that states be we look it'd that the update So And you think still more to could be

enter multidimensional in be now over the at Yes, the sort materializing thinking I different bear us a is to that X-dimensional. years evolved some a our state on or next for And way going think Definitely, is state the for ways, a demand states That of some our for look somewhat That very before. we positive more us, partnership in of could demand. to lot meaning fruit. haven't couple that unique deployed state to way though. we more be think see district in used was that X is it to And that state a the question, sure. has think, ability I I ability

And to take think that. to we're going advantage so be I of able

more I bullish open So am that up over states. in the years, few will we next

I XXXX Donna, comments. fiscal question Great. ask to just wanted the And then, initial one on

increase you said expect you slightly. CapEx think I SG&A and to

just increasing comment. those more that Is slightly absolute I that revenue? as percentage about want a on of or So more to looking at about clarify dollars

dollars. Absolute

no you This very much Thank today's further joining. for are does There call. conference questions. Instructions] [Operator conclude

You disconnect. may now