Stride, Inc. Q1 FY2026 earnings call

• Demand for products and services remains strong, but short-term growth was tempered by strategic decisions. - Invested in upgrading learning and technology platforms, but implementations didn't go smoothly, leading to poor customer experience, higher withdrawal rates, and lower conversion rates. - Focused on running high-quality programs by limiting enrollment growth to improve execution. - Total enrollments up 11.3% from last year. - Career Learning revenue up over 21% with enrollments up 20%; General Education revenue up over 10% with enrollments up 5.2%. - Gross margin 39%, down 20 basis points from last year due to investments and platform challenges. - Selling, general and administrative expenses up 3%, but still expect SG&A as percent of revenue to decrease. - Stock-based compensation expected to increase to $41M-$44M full year.

Revenue for the quarter was $620.9 million, up 13% from the first quarter of last year. Career Learning and middle and high school revenue for the quarter was $241.5 million, up more than 21% from last year, with career learning enrollments growing 20% to 110,000. General Education revenue grew over 10% to $363.1 million on enrollment growth of 5.2% to 137,700 students. Career Learning and middle/high school contributed approximately 39% of total revenue ($241.5M out of $620.9M), while General Education contributed approximately 58.5% ($363.1M out of $620.9M). Total enrollments for the quarter were up 11.3% from last year. Total revenue per enrollment across both lines was $2,388, up 3.7% from last year.

• Second quarter 2026: Revenue range $620 million to $640 million; adjusted operating income $135 million to $145 million; capital expenditures $15 million to $18 million. - Full year 2026: Revenue range $2.480 billion to $2.555 billion; adjusted operating income $475 million to $500 million; capital expenditures $70 million to $80 million; effective tax rate 24% to 25%. - Expect in-year enrollment growth to be muted compared to past years, but longer-term outlook remains bullish.

• Platform implementation issues causing poor customer experience, leading to higher withdrawal rates and lower conversion rates. - These issues limited enrollment growth by approximately 10,000 to 15,000 and are expected to restrict in-year enrollment growth.

Q: Did you give enrollment guidance for the year?

A: We did not give guidance for the full year. We came in at 11.3% growth from October to October but don't anticipate the same in-year enrollment growth as past 3 years.

Q: Can we parse out what each item (system implementation and limiting enrollment) had on the 10,000 to 15,000 weaker enrollments?

A: Majority was due to system implementation issues impacting customer experience and causing higher withdrawals; limiting enrollment growth is to focus on quality programs and stabilize platforms.

Q: Rationale and timing for tech implementation?

A: Rationale is to scale with robust platforms as company has doubled in 5 years; timing is summer between school years, but execution didn't go as planned.

Q: Impact of tech issues on programs? Any difference between Gen Ed and Career Learning?

A: Not a material impact on one program vs the other; platform issues took longer than expected, impacted customer logon, resiliency, etc., continuing into the year.

Q: Rationale for limiting in-year enrollment growth? Temporary or permanent?

A: It's a mix of limiting exposure to platform issues and ensuring quality programs; if issues fixed this year, next year could return to prior growth.

Q: Competitive landscape?

A: Welcome healthy competition; our growth year-over-year outpaced largest competitor's raw growth numbers despite competition.

Q: Platform issues related to classroom/learning and administrative? Timing of issues?

A: Platform issues are both front office (classroom/learning) and back office administrative; issues became apparent well into August, after last earnings call.

Q: Inning of rectifying platform issues? Timing of fixing?

A: Distinct platforms; issues started well into August; expect biggest fixes in next few months, but improvements will persist throughout the year.

Q: Enrollment growth after count date, revenue per enrollment outlook?

A: Mathematically, comps are affected by prior year's rising enrollment; revenue per enrollment expected to be flat compared to FY '25 due to mix and timing impacts.