Stride Q3 2025 Earnings Call Transcript

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Provided by Quartr
April 29, 2025
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Operator

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stride Incorporated Third Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Tim Casey, Vice President of Investor Relations. You may begin.

Timothy Casey
Timothy Casey
VP Investor Relations at Stride

Thank you, and good afternoon. Welcome to Stride's third quarter earnings call for fiscal year twenty twenty five. With me on today's call are James Root, Chief Executive Officer and Donald Blackman, Chief Financial Officer. As a reminder, today's conference call and webcast are accompanied by a presentation that can be found on the Stride Investor Relations website. Please be advised that today's discussion of our financial results may include certain non GAAP financial measures.

Timothy Casey
Timothy Casey
VP Investor Relations at Stride

A reconciliation of these measures is provided in the earnings release issued this afternoon and can also be found on our Investor Relations website. In addition to historical information, this call will also involve forward looking statements. The company's actual results could differ materially from any forward looking statements due to several important factors as described in the company's earnings release and latest SEC filings. These statements are made on the basis of our views and assumptions regarding future events and business performance at the time we make them, and the company assumes no obligation to update any forward looking statements. Following our prepared remarks, we will answer any questions you may have.

Timothy Casey
Timothy Casey
VP Investor Relations at Stride

Now I'll turn the call over to James.

Timothy Casey
Timothy Casey
VP Investor Relations at Stride

James?

James Rhyu
James Rhyu
CEO at Stride

Thanks, Tim, and good afternoon, everyone. Well, another solid quarter as demand continues to outpace last year. I mentioned last quarter that the macro environment remains favorable, and some recent polling supports our thesis. A survey of parents compiled by the National School Choice Awareness Foundation earlier this year found that more than 60% of parents considered sending at least one of their children to a different school last year.

James Rhyu
James Rhyu
CEO at Stride

And those, 27% consider sending their child to a full time online program, meaning over 15% of all families are considering a full time online program. Now that is a much higher level than we saw just a few years ago. Also, a February Gallup poll indicated that less than a quarter of Americans are satisfied with public education. Now that's the lowest level since the survey began in 02/2001. And nearly 90% of parents are interested in non college degree pathways, meaning a focus on career education.

James Rhyu
James Rhyu
CEO at Stride

All of this bodes well for our future prospects. Now this is the time of year we are trying to both finish the year strong and gear up for the fall. If we continue to execute and given the macro trends we're seeing, that should position us for continued strong growth heading into next fall. We also need to look past this fall. While we celebrate our twenty fifth anniversary this year, we need to ensure we build an enduring business for the next twenty five years.

James Rhyu
James Rhyu
CEO at Stride

I believe we can continue to change the future of education by leveraging our core capabilities to deliver innovative, outcomes driven solutions for the 50,000,000 plus students across the country. Parents remain dissatisfied with the current state of education, and we are in a position to give schools, administrators, teachers and students the tools to redefine the system and set ourselves up as leaders for the next twenty five years. In the near term, the trends we see in market demand, in year enrollment and retention set us up for another strong start to the fall season. For context, since January 1, demand, as measured by in year application volumes, has grown in each of the past four years. This year, application volumes are almost twice what they were two years ago and four times what they were four years ago.

James Rhyu
James Rhyu
CEO at Stride

This is during a time when we have some constraints to the number of new enrollments we can add as some schools have closed enrollment for the school year. I've been pleasantly surprised by this ongoing trend, and it supports our thesis that demand for our products and services continues to strengthen. So once again, we expect to finish the year with more enrollments than we started. We still have a lot of work to do before the next school year begins, but we feel confident in our ability to continue to grow enrollments in fiscal year 'twenty six. Thank you.

James Rhyu
James Rhyu
CEO at Stride

And now I'll turn the call over to Donna. Donna?

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Thanks, James, and good afternoon. As James mentioned, we continue to see strong end year demand in Q3. We finished the quarter with enrollment up over 21% from last year, and we believe this has set us up to once again finish the fiscal year with more enrollments than we started for the third year in a row. The market conditions, including demand for full time online programs, coupled with our continued strong execution, give us confidence to again raise our FY '25 revenue and adjusted operating income guidance. For the full year, the implied growth rates, revenue and profitability, exceed the 2028 CAGR targets we outlined during our Investor Day in November 2023.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Our AOI guidance for this year suggests we will be well ahead of the low end of our FY twenty eight AOI targets three years early. For our Q3 results, total revenue was $613,400,000 up 17.8%. Revenue from our career learning, middle and high school programs grew to $223,900,000 up 33%. This strength was driven by enrollment growth of 34% to 98,700 enrollments. General education revenue was $370,800,000 up 13% from last year, which was also driven by continued enrollment growth in the quarter.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Average enrollments were up 14% from last year to 141,500. Total revenue per enrollment across both lines of revenue was $2,415 compared to 2,420 last year. And as we discussed over the last two quarters, the cause of a slight decline is the impact of state mix from eight year enrollments as we otherwise continue to see a largely positive funding environment. Given the results this quarter, we now expect to finish the year down less than 1% in revenue per enrollment. While I know this is a quarter we received lots of questions about next year, and we remind you that it's very early in the season, I do wanna give a little insight into what we are seeing for the funding environment for f y twenty six.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Recognizing it's still very early in the process of states setting their budgets, we are seeing a generally favorable funding environment going into next year. And as states finalize their budgets over the next few months, I'll be able to give more color during our fourth quarter earnings call. Additionally, I know there's lots of discussion about federal funding and the impact that could have on STRIDE. I want to reiterate what we've said last quarter. Well less than 5% of our overall revenues come from federal sources.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Now to wrap up the remaining highlights for the third quarter. Gross margins were 40.6%, up 190 basis points from last year. Given the strength through the first three quarters, we expect to see gross margin improve around 200 basis points for the full year. Selling, general and administrative expenses increased 5% to $118,500,000 And as I've mentioned previously, we expected some increase in the back half of the year. We still expect to finish the year up slightly compared to FY 2024.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Stock based compensation was $8,500,000 and we expect to finish the year with stock based compensation in the range of 34,000,000 to $37,000,000 Adjusted operating income was $141,700,000 up 47%. Adjusted EBITDA was $168,300,000 up 40%. Both metrics are quarterly records for the company. Diluted earnings per share for the quarter were $2.2 Our EPS calculation now includes incremental shares related to our convertible notes on as if converted basis for GAAP reporting purposes. Our quarterly investor presentation includes a slide that shows the potential dilution from our convertible note at various share prices as well as the offset from the capped call transaction we completed at the time of the note issuance.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

And starting next quarter, in addition to the investor presentation, we plan to introduce an adjusted earnings per share calculation in our earnings material to give investors a picture of the underlying EPS growth in the business. Capital expenditures for the quarter were $15,800,000 down slightly from $16,300,000 Free cash flow defined as cash from operations less CapEx was $37,300,000 down from $52,200,000 due to the timing of cash receipts. As of last year, we expect fourth quarter free cash flow to be up significantly. Given the continued strength of in year enrollments and the margin improvements, we are raising our full year revenue and AOI guidance, and we now expect revenue in the range of 2.37 to $2,385,000,000 up from 2.32 to 2,355,000,000.000 last quarter. Adjusted operating income between 455 and $465,000,000, up from 430 and 450,000,000 last quarter.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Capital expenditures between 60 and $65,000,000 unchanged from last quarter, and an effective tax rate between 2426%, also unchanged from last quarter. Thank you so much for your time this afternoon. And now I will turn it over to the operator for Q and A. Operator?

Operator

Thank you. And we will now begin the question and answer session. If you would like to withdraw your question, press star one a second time. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And our first question comes from the line of Jason Tilton with Canaccord Genuity.

Operator

Your line is open.

Jason Tilchen
Director & Senior Equity research Analyst at Canaccord Genuity Inc

Great. Good afternoon. Thanks for taking my question. I guess the first thing I'm curious about, you continue to see really strong enrollment growth in the Career Learning program. I think you talked about last quarter that's largely coming from the same application funnel as general education, but that over time, you're gonna work towards opening up that sort of second funnel with sort of directly, know, related to career learning.

Jason Tilchen
Director & Senior Equity research Analyst at Canaccord Genuity Inc

I'm wondering if you could talk a bit more about some of the steps you're taking in that area, some of the progress, that's being made, and and sort of what the timeline we could realistically expect to start to see that stand alone funnel really start to contribute to overall enrollment growth?

James Rhyu
James Rhyu
CEO at Stride

Yeah. So I I think, Jason, the the unfortunate truth of it is is that and I think this I've been saying this now for a number of years, not quarters, is that, we just we haven't cracked the code on it yet. We keep running a bunch of tests around it. I think this year, we run a number of tests set where we saw maybe a little bit more promise. But everything everything outside of the tests we're running point to this being an attractive market for us and a good opportunity for us.

James Rhyu
James Rhyu
CEO at Stride

And if you look more broadly at the market and see the activity that whether it's, you know, corporate enterprises are having around direct, you know, hiring out of high school, focus on skills as opposed to degrees and things like that. We know that this is sort of an evolving market in the direction of career education for high school. So I'm probably a long way to saying that I don't I don't think that we get crack the code. I don't know if there's a a timing yet. I think we're making incremental progress.

James Rhyu
James Rhyu
CEO at Stride

It's not as good as I would have hoped, and, and that's on us.

Jason Tilchen
Director & Senior Equity research Analyst at Canaccord Genuity Inc

Okay. Great. Really helpful overview there. And then one other question. I'm I'm curious about, some of the efforts you guys are making to improve socialization opportunities for students that are in sort of full time online programs.

Jason Tilchen
Director & Senior Equity research Analyst at Canaccord Genuity Inc

Anything you can share there about some of the some of the steps you've taken there to to help sort of create a a more similar experience to the sort of traditional in person, socialization opportunities?

James Rhyu
James Rhyu
CEO at Stride

Yeah. I mean, I think, you know, we all, I think, recognize that socialization is, you know, one very significant aspect of school experience. We also, I think, recognize whether you like it or not that kids school aged kids these days socialize predominantly online. Again, not a commentary on whether that's good or bad. Just, I think, the factual statement.

James Rhyu
James Rhyu
CEO at Stride

And so, we are leaning into a number of platforms that, enable, that type of socialization. One of them is, we call our k 12 zone. It's a virtual, school, basically, structure, if you will, as a playground or a library and things like that. We've gotten record this year, usage. We rolled it out, I guess, formally a year ago, but we had it in test even before that.

James Rhyu
James Rhyu
CEO at Stride

And we're just seeing record numbers out of that, and and so we think that that's one very, very powerful element. The other thing that we're doing, and we just started testing it this calendar year, which is actually counter to the online engagement model, is we're rolling out what's essentially geographic pods. Meaning, we are rolling out the ability for families that live geographically close to each other that have similar school age kids in the program to, you know, to do meetups and things like that with the kids. And it just so happens that I, you know, spoke to a family that just was unbelievably grateful that they were gonna get the opportunity to do both of those activities, both the online and the in person. I think the families recognize that there's a reality about sort of just online socialization that's important, but also just the opportunity to being from an online school to have a chance to meet up with with kids in person.

James Rhyu
James Rhyu
CEO at Stride

We were just this past weekend at an event for one of our one of our amazing kids in Florida. His name is Carter Bonas, and he's an incredible golfer. He had a golf tournament, and they did a meet up party a meet up pizza party with mini golf the night before. And some of the families there had said that it was, you know, one of the most exciting things that their kids do is to do these, in person meetups. So, we're just you know, there's a lot of different angles that we can approach to improve, our ability to to enable socialization, and we're going to continue investing behind that.

James Rhyu
James Rhyu
CEO at Stride

We think it's really important for the families and for the kids.

Jason Tilchen
Director & Senior Equity research Analyst at Canaccord Genuity Inc

Great. Thanks a lot for taking my questions.

James Rhyu
James Rhyu
CEO at Stride

Sure.

Operator

And your next question comes from the line of Greg Parrish with Morgan Stanley. Your line is open.

Greg Parrish
Greg Parrish
Analyst at Morgan Stanley

Hey, thanks. Good evening. Congrats on the quarter. Strong result. On your marketing strategy, thinking maybe ahead for the summer, I imagine the strategy maybe limited changes.

Greg Parrish
Greg Parrish
Analyst at Morgan Stanley

I don't know if there's anything to talk through. And on the marketing spend, it's been pretty consistent over the last couple years. Do you anticipate that number changing at all, or maybe the similar spot is the right way to think about it? Thanks.

James Rhyu
James Rhyu
CEO at Stride

Yeah. I think the, the approach from marketing perspective, it's it is, I think, gonna be pretty similar. Of course, we're always evolving. I think, one of the things that from a sort of approach perspective, that I think that we've been doing a good job of in the past year or two is is testing a lot of different things. I think our sort of testing velocity has increased, and so I think, you know, we're gonna continue to lean into that, the ability to test a lot of different approaches, methodologies, creatives.

James Rhyu
James Rhyu
CEO at Stride

And, you know, and I think that will continue to improve. And so I think that there's there's actually, I think, a lot of different angles of our marketing approach that we can that we can continue to pursue that you know, it goes back to the previous question around career as well, around creative and approach and social media and things like that that, you know, local social media. I think, know, there's still a lot of different things that we have been testing and and we're gonna continue to test in. I think we continue to see opportunities to make improvements. So I think that's gonna be consistent, and that'll, you know we'll be keep double down downing on that through the summer.

James Rhyu
James Rhyu
CEO at Stride

And, sorry, the other question was

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Yeah. The dollar.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

With respect to with respect to spend, I mean, as as you know, we we grew enrollment significantly this year without increasing our marketing spend. Our our priority is really around certainly doing some more testing, optimizing our media placement, SEO, testing our messaging, and improving our messaging. So we'll focus on that. And so the plan is not to spend significantly more on marketing, but to be smart about our marketing and to look for ways to be more efficient in our, marketing spend.

Greg Parrish
Greg Parrish
Analyst at Morgan Stanley

Okay. That's all. Very helpful. And then I know I was talking a little bit about the changes going on at the federal level and the shakeup at the DOE, and not the funding side. I think that's been well covered over the last year or so.

Greg Parrish
Greg Parrish
Analyst at Morgan Stanley

But, know, they have a very pro choice stance. Right? So, I mean, what are the impacts of those kinda as they sort of filter down to the states, through this administration? And and maybe any other impacts really, from the DOE and some of their, some of their stances? Thanks.

James Rhyu
James Rhyu
CEO at Stride

Yeah. I mean, I think I think we have observed that, you know, I think we said we said before that we have a lot of confidence that the this administration and the Department of Education is gonna keep kids and families in focus, and we continue to believe that that's the case. Some of the more tactical things that they're doing, I think, have maybe a little bit more sort of sound bite and an impact at the postsecondary level right now. But but, you know, I think, just generally speaking, this their general overall stance of empowering the states, which, you know, we've you know, we're a state level business, really, reducing sort of overhead administration, if you will. We think that tends to be good.

James Rhyu
James Rhyu
CEO at Stride

It tends to it does tend to send a message of more choice that I think this administration really believes in the power of choice and customers for the customers. So I think that's really an important message. But, you know, I I think outside of just, you know, continuing to monitor the things that they're they're advocating for and continuing to be aligned with what the administration is advocating, which I think we are, you know, we're just very optimistic that both the federal government and the state governments are gonna keep the focus on the kids and the students and the families.

Greg Parrish
Greg Parrish
Analyst at Morgan Stanley

Great. I'll pass it off. Thank you.

Operator

And your next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is open.

Jeff Silber
Jeff Silber
Senior Analyst at BMO Capital Markets

Thank you so much. Wanted to go back to Career Learning, specifically the middle high school area. It's just a really another strong quarter with growth accelerating. Can we get a little bit more color what's driving this strong growth?

James Rhyu
James Rhyu
CEO at Stride

Yeah. I mean, I think I might actually say it the opposite way, Jeff. And I know this is gonna sound, I don't know. It may sound odd, but, I actually think that, I look at it as instead of the fact that our growth is higher in middle and high school, I actually think we're missing some opportunities in the lower grades. I think the robust strength in middle and high school, it's we've seen that there for a while.

James Rhyu
James Rhyu
CEO at Stride

I think that our pro types of programs directly address a lot of the needs that we're seeing in those grade levels. You know, we see a lot of the parent satisfaction surveys and things like that in those grade levels, you know, where, you know, there for a lot of different reasons, that's the the local, either districts or the states or the state the way the state programs run or, you know, whether it's, you know, the lack of certain academic elements or restrictions around certain academic elements or things like that. Just it just opens up for those grade levels a lot of parental desire to look at alternatives. But I think it similarly applies in the lower grade levels, and and we haven't been as effective in communicating that message, you know, in the lower grade levels because you know, I'll tell you, you know, one thing that we know across the country is reading scores, specifically third grade reading scores, are really subpar. And one of the message that we're really gonna promote here to sort of have the lower grades, quote unquote, catch up to the upper grades in terms of the awareness and growth is we're gonna really lean into some sort of high dosage tutoring in the lowest grades specifically around reading because we think it's that important.

James Rhyu
James Rhyu
CEO at Stride

And we're gonna make some pretty significant investments in that in that arena. You know, we've launched our tutoring platform a couple years ago. It's running really well, and we think we can apply some of that into the lowest grades for a lot of programs and really accelerate learning in the lowest grades. And I think that may be a message that's gonna resonate as well with some families. So I think to me, it's more of a challenge of improving the lower grades as opposed to why the upper grades, you know, outperforming lower grades.

Jeff Silber
Jeff Silber
Senior Analyst at BMO Capital Markets

Okay. Fair enough. Shifting gears a bit. I I think in your prepared remarks, you talked about some constraints. I don't if it was some schools that have closed enrollment or some states that have closed enrollment.

Jeff Silber
Jeff Silber
Senior Analyst at BMO Capital Markets

Is that in in both justification and career learning? And any specific color would be great. Thank you.

James Rhyu
James Rhyu
CEO at Stride

Yeah. Yeah. It's a good great question. And and, yes, it is in both. We I think as I mentioned in my remarks, like, the the demand side of this equation has just really continued to grow in in in ways that I think are unexpected, at least to me, you know, in a in a time of year that usually isn't the strongest part of the year.

James Rhyu
James Rhyu
CEO at Stride

And and we've just just by the nature of either, you know, the policy or the school or the partner or whatever. Sometimes we close-up the enrollment windows. And this is, by the way, it's not new, but just those enrollment windows close-up often during this quarter. And so as demand continues to spike, the ability to meet that man actually can stays somewhat contained. And so so that's just really a phenomenon that's always happened.

James Rhyu
James Rhyu
CEO at Stride

We just haven't really had to deal with it as much in previous years because we haven't seen, such a spike in demand. So it hasn't been as, sort of acute as it is has been this year. So it's really been a really a a a a demand side issue more than any change in, like, enrollment windows or caps or anything like that. That's really always been there.

Jeff Silber
Jeff Silber
Senior Analyst at BMO Capital Markets

K. Thanks so much.

Operator

And your next question comes from the line of Stephen Sheldon with William Blair. Your line is open.

Patrick Mcilwee
Equity Research Associate at William Blair

Hi, team. You have Pat McAuley on today. So James, you've talked about this bit, but in the past, you've said that uncertainty and chaos have historically benefited Stride. Understand that K-twelve isn't necessarily within the crosshairs of recent trade policies or geopolitical tensions, but do you get the sense any of the traction you've been seeing has been supported by these uncertain times? Or do you think this demand is more so, a factor of you reaching scale and, you know, word-of-mouth referral kind of beginning to flywheel?

James Rhyu
James Rhyu
CEO at Stride

Yeah. It's a great question.

James Rhyu
James Rhyu
CEO at Stride

I think it's actually both. I do think that, you know, uncertainty I I think broad macro uncertainty is probably less the the issue. And, you know, we've just seen just uncertainty and volatility, whether it's, you know, gun violence certainly has precipitated, I think, a lot of interest in our programs. Uncertainty at the district level and volatility in

James Rhyu
James Rhyu
CEO at Stride

sort of

James Rhyu
James Rhyu
CEO at Stride

how certain districts may be administering programs or whatever, you know, has benefited our programs, I think. Some of the larger sort of geopolitical, you know, things like tariffs and things like that, I don't think we see that as having as direct a correlation with demand. In fact, I I could say, like, the in the data that I've seen there, we have not seen a direct correlation between, you know, the past few weeks spikes in, you know, policies of tariffs or things like that, you know, spiking demand. So I don't think it's that type of uncertainty. But, certainly, the uncertainty that happens at the district level, uncertainty that happens around school safety, uncertainty that happens around school policy.

James Rhyu
James Rhyu
CEO at Stride

Those types of things, I think, do have a positive impact. And I think your last comment there around the flywheel, we do see that I think that the you know, the more scale that we get and the high customer satisfaction scores that we've received does create a lot of, referral business. And so, you know, we see that, you know, sort of just directionally, you know, the referral numbers, are are strong, cost of acquisition is good, you know, things that sort of indicate towards referral also, those things tend to look good as well.

Patrick Mcilwee
Equity Research Associate at William Blair

Right. Okay. All very helpful. Thank you. And and, Donna, on the gross margins, once again, 40% this quarter, you know, you're you're already pacing ahead of your margin targets for the year.

Patrick Mcilwee
Equity Research Associate at William Blair

So my question really is just how much more room for expansion do you think you have in that line over time? And what are the the primary levers as you think about driving that expansion over the next few years?

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Look. I I I think we will we're we're continuing to see good flow through in the business. I think the efficiency efforts that I started to talk about two years ago, maintaining those efficiency efforts, that's bearing out well for us, we'll continue to do that. I think we'll continue that into we'll continue that into the future. I wouldn't expect to have gross margins be significantly higher than they are now.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

We're not coming up even though we were are at the high end of our targets for 2028. I'm not changing our overall targets for our for our gross margins. We will continue, though, however, to see strong flow through as the business grows and expands, and we are continuing to maintain those efficiency efforts that, we put into place over the past couple of years.

James Rhyu
James Rhyu
CEO at Stride

I I also wanna say that, as much as those efforts are ongoing, we continue to look at ways to reinvest for the programs. So, I mean, I mentioned earlier the investment we'll make in tutoring. So there is a balance that we try to strike. You know, not always are those investments, you know, gross margin impacting, but, you know, sort of in in aggregate dollars, we're investing more today, in the business, in, new tools, investing in our teachers, than we've ever done before. So, you know, so I think there's a balance there that, you know, we need to keep investing for the longevity of the business.

James Rhyu
James Rhyu
CEO at Stride

As the sort of the market dynamics evolve, technologies evolve, we wanna keep investing in new technologies. So there is a big investment piece of this that sort of gets maybe a little bit masked by how sort of other parts of the business we run efficiently. But, there is there are a lot of investments that go into, into improving our product, you know, the socialization stuff I mentioned earlier. Those are all very significant investments that will grow over time as we see them working.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

And some of those investments are some of the what I talked about, you know, as you may recall during our investor day, to help the teachers out, to make their lives a lot easier, right, and take some of that administrative burden from them so they can do the things that they love to do, which is, teach kids.

Patrick Mcilwee
Equity Research Associate at William Blair

Right. Understood. Thank you both for the thoughts.

Operator

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

Alex Paris
President & Senior MD at Barrington Research Associates

Hi, guys. Thanks for taking my questions. I essentially have two. First one for James. James, would you mind repeating your comments about finishing the year with more enrollment than you started?

Alex Paris
President & Senior MD at Barrington Research Associates

And while early, your comments for next year, I think you said that you would expect growth here. You're just kinda going fast for my pencil. So, can we get that recapped?

James Rhyu
James Rhyu
CEO at Stride

Yeah. I mean, so and this has been now a multiyear trend where, we, we're on a trajectory. We feel pretty confident that we'll end the year with a higher enrollment level than we began the year. And, you know, you should you can sort of see that we reported. We just reported numbers that were pretty significantly higher than we started the year already.

James Rhyu
James Rhyu
CEO at Stride

So, you know, ending the year at a higher level, what it does is it gives us a higher jumping off point for the fall enrollment because, obviously, many of those students, you know, will come back. And in fact, as we get, almost counterintuitively, as we get toward the end of the year, many of the students who join right at the end of the year have actually a high propensity to return in the fall. And so so ending the year strong just really does set us up for strength going into the fall. And so there is some early indicator that, you know, we are gonna end the year strong, and and that will bode well for the reregistration cohort for the fall. And so those that early indication along with the very strong demand we saw in q three, you know, January through March, if that continues, you know, it just it really sets us up for a very strong demand season for the fall, you know, which I think sets us up for growth.

James Rhyu
James Rhyu
CEO at Stride

So, you know, I think the characteristics are there, all there for us to continue, you know, our enrollment trajectory.

Alex Paris
President & Senior MD at Barrington Research Associates

And then along those lines, is it too early to talk about, applications for the fall? When do those start, rolling in?

James Rhyu
James Rhyu
CEO at Stride

Yeah. The fall application season is, like, literally you know, the windows are just opening up here. So it's it is that is way too early to to really have any good indicator, of how that's shaping up. You know? So I think that that, we'll have a little bit more information on that, you know, in the next call.

James Rhyu
James Rhyu
CEO at Stride

But but, you know, like, it it's just it it's the the at least the the past couple of years that we've seen, the the back half of the year, has, you know, bode well. The the strength in the back half of the year has bode well for the fall, you know, fall applications. So we don't yet see that, but but, you know, if the prior years are any any indicator, the strength that we've seen this past quarter in application volume is a is a pretty good indicator for the fall.

Alex Paris
President & Senior MD at Barrington Research Associates

That's great. And then, Donna, I think you said in terms of revenue per enrollment, for the full year, you're saying down less than 1%. I think you said down one to 2% as recently as the Q2 report. Do I have that right?

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

That is correct. And now that we're sort of three quarters in, feel comfortable saying that we'll be down less than 1%.

Alex Paris
President & Senior MD at Barrington Research Associates

Great. That's helpful. And then the last one is on the slide, on Page 17. It's the just to understand how to use it a little bit better because I was off. I was using 47,600,000.0 shares and on a diluted basis it came in at 49.2.

Alex Paris
President & Senior MD at Barrington Research Associates

You talk about the illustrative average quarterly stock price. I'm just looking at Q3 and you started the year at about 104 or the quarter and then you finished the quarter at 126. Is this just a simple average or is it a VWAP? How do how do we calculate that?

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

So just the it's the it's the average stock price for the quarter. So if you look on page 17, so the average stock price for the quarter was around 1 roughly $1.27. So use the $1.25 as the example, and so you would have added roughly 4,600,000.0 shares to otherwise have been, without convert for the purpose of translating

Alex Paris
President & Senior MD at Barrington Research Associates

and what am I adding that to? The basic shares? My assumption for basic shares? Basic shares plus, whatever stock option underlying stuff is there plus the 4,600,000.0 shares.

Alex Paris
President & Senior MD at Barrington Research Associates

Is

Alex Paris
President & Senior MD at Barrington Research Associates

that how you do it? Gotcha. Okay. Wanted to have a more accurate share count.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Yes. And we can certainly walk you through it offline if you like.

Alex Paris
President & Senior MD at Barrington Research Associates

Okay. For sure. And and, you know, to me, your numbers were spot on mine, but you were slightly below the consensus EPS estimate. And I suspect it's just because of the share count that that the consensus of analysts were using. Thank you very much.

Alex Paris
President & Senior MD at Barrington Research Associates

That that does it for me.

Donna Blackman
Donna Blackman
Chief Financial Officer at Stride

Thanks.

Operator

And ladies and gentlemen, that concludes our question and answer session and today's conference call. We thank you for your participation and you may now disconnect.

Executives
    • Timothy Casey
      Timothy Casey
      VP Investor Relations
    • James Rhyu
      James Rhyu
      CEO
    • Donna Blackman
      Donna Blackman
      Chief Financial Officer
Analysts
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Earnings Conference Call
Stride Q3 2025
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