LRN Q1 Earnings Call: Enrollment Growth and Career Learning Fuel Guidance Upside

Online education Stride (NYSE: LRN) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 17.8% year on year to $613.4 million. The company’s full-year revenue guidance of $2.38 billion at the midpoint came in 1.6% above analysts’ estimates. Its non-GAAP profit of $2.15 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Stride’s first quarter results were driven by robust demand for online education, particularly in its career learning programs. Management attributed the performance to macro trends favoring alternative education options, with CEO James Rhyu highlighting survey data showing increased parental interest in full-time online education and dissatisfaction with traditional public schools. The company also pointed to the success of new socialization initiatives and ongoing investments in technology and student support as contributors to its enrollment growth.

Looking ahead, Stride’s forward guidance reflects confidence in continued enrollment momentum and a generally favorable funding environment at the state level. CFO Donna Blackman noted that higher enrollments and improved retention rates set a strong base for the upcoming school year. While management acknowledged ongoing uncertainties in state and federal education policy, they reiterated that less than 5% of revenue depends on federal funding, limiting exposure to potential shifts. The company expects to maintain margin discipline while investing in core programs and student experience.

Key Insights from Management’s Remarks

Stride’s management focused on several operational and market factors shaping Q1 performance and offered insight into near-term strategic priorities.

• Career Learning Enrollment Surge: The career learning middle and high school segment saw enrollment growth of 34%, reflecting rising demand for alternatives to traditional college pathways and skills-based education among families.
• Enrollment Constraints Identified: While application volumes have reached record levels, some schools closed enrollment windows earlier in the year, temporarily limiting the company’s ability to capture all available demand.
• Technology and Socialization Investments: The company rolled out its K-12 Zone virtual campus and began organizing geographic in-person meetups, aiming to address socialization needs for online students and enhance program appeal.
• Efficiency and Operating Leverage: Management cited ongoing efficiency initiatives, such as optimizing marketing spend and streamlining administrative tasks for teachers, as key drivers of margin expansion. Gross margins improved by nearly 200 basis points year over year.
• State-Driven Opportunity: Management emphasized that most funding and regulatory changes affecting Stride occur at the state level, with a favorable outlook for state education budgets and policy support for school choice in coming quarters.

Drivers of Future Performance

Management’s outlook centers on sustained enrollment growth, continued execution in career learning, and prudent reinvestment in student support and technology.

• Career Learning Expansion: The company sees further opportunity to grow its career learning programs, especially by targeting lower grade levels and expanding skills-based offerings, though management noted ongoing challenges in optimizing recruitment channels.
• Retention and Re-Enrollment: Higher year-end enrollment levels are expected to boost student retention and re-registration rates, creating a stronger starting point for the next academic year.
• Funding and Policy Environment: Management believes the generally favorable state funding landscape and continued bipartisan support for school choice initiatives will support revenue and margin stability, though they remain watchful for changes in state-level budget allocations.

Top Analyst Questions

• Jason Tilchen (Canaccord Genuity): Asked about progress in creating a dedicated application funnel for career learning. Management admitted incremental progress, but said they have not yet “cracked the code” and continue to run tests.
• Greg Parrish (Morgan Stanley): Inquired about the marketing strategy and spending plans for the summer. Management responded that marketing spend will remain stable, focusing on efficiency and increased testing of new approaches.
• Jeffrey Silber (BMO Capital Markets): Sought details on drivers of middle and high school career learning growth. Management pointed to high parent demand and program alignment but noted underperformance in lower grades, which they aim to address with new tutoring investments.
• Pat McIlwee (William Blair): Asked if broader macro or geopolitical uncertainty is fueling demand. Management said local school-level volatility and safety concerns drive interest, but larger macro events like tariffs are not a direct factor.
• Alexander Paris (Barrington Research): Requested clarification on year-end enrollment trends and revenue per enrollment. Management confirmed the trend of ending the year with higher enrollments and expects revenue per enrollment to decline less than 1%, mainly due to state mix.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be tracking (1) the impact of new socialization and tutoring initiatives on lower-grade enrollment growth, (2) ongoing enrollment and application trends as state funding and policy settings evolve, and (3) the effectiveness of marketing and operational efficiency measures in supporting margin improvement. We will also monitor any developments in state or federal education policy that could alter the funding landscape for online schools.

Stride currently trades at a forward P/E ratio of 20×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.

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