Stride, Inc. (NYSE:LRN) Q2 2023 Earnings Call Transcript

It makes the Q4 comp harder. So even if we continue to have that sequential strength through Q4 of this fiscal year, the year-over-year comp in percentage terms is probably going to be hard to be very high in terms of percentage terms. So I think that’s where you sort of get the full year percentage since there’s going to be some dilution, if you will, in Q4 probably in the full year comp in percentage terms.

Greg Parrish: Okay. It’s all very helpful and congrats again on the quarter and thank you.

Operator: Thank you. We will go next now to Tom Singlehurst at Citi.

Tom Singlehurst: Yes. Good evening. It’s Tom here from Citi. Thanks for taking the question and congratulations on the results. First question I wanted to ask about was on market share. I mean, maybe I got sort of the wrong way almost. I noticed last week indicated that revenue was down for them. And I think overall enrollment fell in the same sort of quarterly period. I’m interested on market share. I know geographically you don’t necessarily map on to exactly the same areas. But within the trends you saw, would you say that there is a share gain and what you’ve done?

James Rhyu: You had a totally fair question. I’m going to answer slightly maybe from a different angle than what the way you’re presenting it. I think that the short answer is, yes. We, I think, almost by default gained market share, almost irrespective of our growth relative to connections by the way. And that’s for the very simple reason that we’re seeing across the landscape of the U.S. virtual programs are getting shut down in brick and mortar schools. So therefore, the whole pie is starting to shrink a little bit right now and therefore as we sustain or grow as we’ve done, our market share sort of mathematically by default will grow. So I really won’t speak to some of the other specific competitors and what they’re doing and what they’re seeing.

But we are certainly seeing strength in our funnel, in our demand and we see that continuing through the year. We see that the overall macro trends around these programs continuing to be strong. And I think that it will work in our favor as brick and mortars continue to sort of either shrink or shut down their programs. But we certainly, I think, we consider that we have gained market share just because of, again, the shrinking overall programs across brick and mortar districts.

Tom Singlehurst: That’s great. And then the second question, I mean, obviously, fantastic news that you’re looking for revenue per enrollment up 10%. I think previously it was 7% to 10% and then potentially gross margins flattish relative to upwards of 200 basis points conversion. I was wondering whether you could just unpack the drivers of those changes again. And specifically comment on whether some of that is also a function of just that spectacular sort of enrollment performance across the second quarter that you had actually hopefully growing the base that having more students in the mix automatically help both of those metrics. Thank you.

Donna Blackman: So there are a couple of things that are happening. So we’ve got strong funding increase. You probably heard us talk previously about capture. So we’re capturing more of the rate increase in attendance. There’s a mix involved. We also did some pass through revenue where we actually have to spend the revenue that we received. So there are a number of factors that are actually impact our rate. But as James said earlier today, we’re in a strong funding environment and the fact that we’re actually growing in states that pay a high rate and shrinking in states that pay a lower rate, that certainly has an impact on that.