Stride, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to Stride, Inc.' 's second quarter fiscal 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. Tim Casey, Vice President of Investor Relations, you may begin your conference.

Thank you and good afternoon. Welcome to Stride's second quarter earnings call for fiscal year 2022. With me on today's call are James Rue, Chief Executive Officer, and Tim Medina, 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. A reconciliation of these measures is provided in the earnings release issued this afternoon and can also be found on the investors section of our websites. In addition to historical information, this call may 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 latest SEC filing. 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 made during this call. Following our prepared remarks, we'll answer any questions you may have. I will now turn the call over to James. James?

Thank you, and good afternoon, everyone. As I enter my second year as CEO, I wanted to reflect on this past year and provide some insight into what I see for our future. Environmentally, here are some observations. Unfortunately, the COVID pandemic continues to wreak havoc even as vaccines have become widely available, and there continues to be significant disruptions and uncertainty to K-12 learning. American workers are quitting their jobs at record high levels, with more than 4.3 million public sector workers quitting in November 2021 alone. The national teacher shortage continues to be acute, and issues within school districts across the country make getting back to normal that much more difficult. As a nation, we continue to politicize issues that should not be political, and education, unfortunately, continues to be one of those areas. and employers and employees are settling into the work-from-home trend, with estimates showing that almost one-third of all workers were remote at the end of 2021. This environment will continue to cause uncertainty across many sectors of our economy. We already see rising inflation and interest rates and continued disruption in the supply chain. I believe Stride is well-positioned in this environment to continue to thrive by providing solutions that meet the varied demands of our times. People of all ages are searching out more educational choice and flexibility, and they are seeking training options to prepare them for economically sustainable careers. Meanwhile, employers are looking for well-trained workers to fill the nearly 11 million job openings in the U.S. Now, last April, I said that I believed Stride would grow through the pandemic. and that I believe the pandemic has created a longer term structural opportunity for us. And my belief is stronger now than it has ever been. One aspect of our culture that helps us is our continued focus on outcomes. Regardless of what area or discipline, we need to ensure that our students and company are achieving the outcomes we expect. We recently sent out a survey to our alumni to hear what they think. The results demonstrated that what we are doing can have an incredibly positive impact on their lives. 94% of those surveyed believe their online school experience was a success. 92% believe that they benefited academically from their online school experience. And 82% feel that they are on the path towards their desired career. And I believe we are just getting started. Another area I've been focused on is innovation. More than 20 years ago, Stride was one of the first education technology companies to enable students to learn online. Now, millions of students later, we must continue to innovate to drive outcomes and reach more learners. To that end, we're continuing to develop new products that will expand our market opportunity and ensure we remain at the forefront of education technology. We are investing behind our digital first curriculum, our career platform, enrichment programs like eSports, and our professional development platform, among other initiatives. This fall, we should have some additional exciting news on how we are progressing. We have an amazing team with an incredible amount of experience in education and technology, and I want to ensure we are leveraging that for bigger, more mainstream opportunities. We published our first ESG report in June. outlining the four cornerstones of our approach. Expanding lifelong learning options, supporting racial and socioeconomic equity and inclusion, fostering transparent leadership governance and professional development, and contributing to a more sustainable world. We've done some great work already in these areas and are going to continue our focus. I encourage all our investors to read the report and a supplemental update we published in November. And looking forward, we anticipate publishing yearly updates on the great progress we will be making. It's also been just over a year since we acquired MedCerts and TechElevator. TechElevator is growing at over 30% and continues to be on pace to hit both its financial and strategic goals. Similarly, MedCert's revenue has grown over 50% and is far exceeding our business case assumptions. Strategically, we've been able to leverage these businesses to grow our overall career initiatives. This year, we introduced to much success a pilot enabling high school students to take MedCert's certificate programs. These businesses are run by innovative leaders and remain well positioned in their respective markets to continue to grow. And the macro environment remains very positive for continued demand for software development and allied healthcare training. In November 2020, we outlined our five-year financial targets, which we continue to believe we are well on pace to achieve. Underlying all these assumptions is our strong belief that the COVID pandemic has structurally changed the demand for Strive's offerings. We continue to see positive demand characteristics across our offerings. Over the past several months since our county, applications to our managed programs have trended up almost 30% from last year. And today, we sit at enrollment levels higher year over year across our managed programs after starting the year down 3%. Many have predicted since the inception of the pandemic that the increased demand for our programs would be temporary. Well, after almost two years, and demand remaining strong, I'm not convinced the opposite isn't true and that demand will continue to swell. The pandemic also demonstrated that the US needs to be more open to educational options for families. And we're now having conversations with states and school districts that even two years ago would not have been possible. So we've increased demand from families and a more receptive educational system both of which we believe put us on a trajectory to achieve our fiscal 25 targets. In our general education business, we were targeting fiscal year 25 revenue of $1.25 to $1.4 billion. A few themes will drive this growth. First and foremost, overall demand characteristics that I just mentioned. While we used to believe the penetration curve for our programs flattened out around 2% to 3% of the student population, there's growing evidence that we have hit an inflection point up the S curve and penetration may begin to climb to upwards of 10 to 15%. Second, increasing the number of programs and states that offer our stride-powered solutions. While our recent focus has been on growing career learning programs in states, the pandemic and resulting demand for educational options has led many schools and states to be more open to full-time virtual programs. In fact, We know today that we will be opening a program in at least three new states this fall. And third, the economic and political landscape for the pandemic has produced recognizes the need for our programs. One easy macro trend we know is putting the wind at our backs is the work-from-home trend. The ability for families to logistically manage virtual learning for their children because they're at home creates significant long-term upside for our business. In our career learning business, many of these same characteristics will allow us to achieve 650 to 800 million in revenue by fiscal 25. This is a market that is still in its early stages and we believe there is significant growth ahead. We continue to hone our messaging to ensure that parents and students understand the value proposition of our career programs so we can tap into the incremental audience for career learning. We also have our adult learning businesses, which we anticipate will reach at least 140 to 150 million in revenue by fiscal 2025. These businesses are well positioned to train the workforce of today and tomorrow while helping current workers get the training they need to achieve their career goals. These two businesses should drive our ability to achieve close to 2 billion plus in revenue and to 250 to 350 million in adjusted operating income within the next four years. And we believe there's potential upside to that with a new product revenue that is not in these goals. As I mentioned earlier, this is an area where I think we can innovate and make some serious inroads. We have an incredible core of assets from which we can launch innovative and mainstream products. One easy example, in March of this year, we will be introducing our professional development to a broader audience through an inaugural Stride Promising Practices Conference that will be open to everyone. The theme for the conference is Career Readiness Education. It will be held virtually and will be free for all teachers, administrators, counselors, and families. Our professional development experts will share best practices in teacher effectiveness, student socialization, leadership, and special programs. We'll also have an exhibitor hall that will feature our education partners, and we will share a demonstration of STRIDES platform and content. We hope that this conference can help improve the education of students across the country. And finally, as we turn the calendar to 2022, I'm grateful for the dedicated teachers and employees who remain focused on students in the midst of many distractions. Thank you all for what you do. I hope everyone remains safe, and thank you for the time today. Now I'll pass the call over to Tim. Tim?