Stride, Inc.

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Stride, Inc. Third Quarter 2023 Earnings Conference 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, Again, press the star one. Thank you. Tim Casey, VP of Investor Relations. You may begin your conference.

Thank you, and good afternoon. Welcome to Stride's third quarter earnings call for fiscal year 2023. With me on today's call are James Rue, 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. 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 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 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 made during this call. Following our prepared remarks, we will answer any questions you may have. I will now turn the call over to James. James?

Thank you, and good afternoon. The underlying systems and institutions in the U.S. and across the world can be fragile. We have seen this repeatedly over many decades. Headlines in the banking and technology sector are just recent examples. But each time we see these cracks in the economy, the U.S. has been resilient. And more often than not, we surge forward through innovation. These cycles have enabled the U.S. to progress in amazing ways. The ways in which we travel, bank, shop, and even eat have changed dramatically. It wasn't that long ago that we did most of our banking, shopping, and transacting in person. However, it has not permeated all sectors equally. One of the sectors that has not evolved as dramatically is the education sector, and most notably, the K-12 education sector. With our recent experience going through a pandemic, I would have hoped we would have emerged with more fundamental change in the system, particularly given the customer feedback we have heard. But I see kids being schooled largely the same way as they have for decades. Sure, there are some minor tweaks that technology has enabled, but no real substantive change. That both disheartens me, but also gives me hope that stride can begin to move the needle on the system that will power the future of this nation. From how we think about the trade-offs of skills versus knowledge, trades versus professions, college versus jobs, practical versus theoretical, should kids still be on a traditional bell schedule or should they have flexibility? Should all students really be spending the exact same amount of time on each lesson? Should we enable our students to use their time efficiently in a manner that meets them at their point of need? And should we empower parents to have a say in how their children's time is being spent? At Stride, we are investing behind these themes. Our core full-time virtual business, both the career and general education aspects, is at the forefront of that investment. to enable parents and families to really see how the next generation of schooling can break away from the traditional paradigm of the education system. And I'd love to invite the leaders of the traditional establishment to participate with us for the sake of our children. But I also fear that politics and fights for power often get in the way. I think the macro data and the trends in our business continue to support my thesis. While we began this year down 8% in enrollments, We saw in-year demand continue to outpace the prior year. We were down four percent at the end of the second quarter and we're down just over one percent at the end of the third quarter. The strength of our third quarter was even more impressive in that we bucked a trend. Last year we lost about five thousand students from the beginning to the end of the quarter which is consistent with what we've typically seen. And this year we're basically flat from the beginning to the end of the quarter. as we continue to see strong demand for our products and services. We're always asked at this time of year how things are shaping up for next year. And we always say it's far too early to tell. What I can say is that through today, the positive demand trends have continued in terms of application volumes. As I previously stated, these metrics are the best indicator of demand, so I'm optimistic that we will return to enrollment growth for this fall. And if you followed us, since I took over as CEO just over two years ago, you'll know that I pushed us to continue to innovate. I believe that schools and districts in the U.S. are too complacent. So I believe it's going to be up to companies like Stride to drive innovation that is focused on the customers, the students. For example, I've spoken previously about our career platform. students and parents continue to want more exposure to career skills and opportunities, and yet traditional schools still fall short in delivering these options. For example, in a recent survey, the top priority for respondents was for students to develop practical life skills, and yet only 26% rated their local schools as satisfactory in providing these skills. Similarly, only 30% said their local schools have satisfactorily prepared students for careers. In a separate survey of Gen Z students, 44% said that school only taught them very basic computing skills, while 37% said that school education did not prepare them with the technology skills they needed for their planned careers. And at the same time, the number of organizations with a skills gap has increased from 55% in 2021 to almost 70% in 2022. Users of our TALA career platform, including the 1.7 million current users, will have access to exclusive employment and educational options. And employers, workforce organizations, and colleges and universities will be able to engage with a unique pool of talent seekers. The platform includes educational content, badges, credentials, and certifications in the top career interest areas, including healthcare, STEM, business, and education and training. As I've mentioned before, TALO is available to anyone over 13 at no cost. Students in high school and college can join to showcase their skills and talent and connect with employment opportunities. They can take courses and prepare for in-demand certifications while developing durable skills to help them in any industry. On top of the opportunity to get connected to companies looking for their chosen skills, users can match with over $20 billion in scholarships. On the other side of that platform, companies and postsecondary organizations can use the platform to recruit specific talent based on interest, credentials, community involvement, and test scores. We can also track talent over time to provide predictive information on employee retention. I also want to talk about another product that I think can revolutionize the way parents, students, and teachers collaborate on education. We call this product our Learning Hub. And for too long, a student's education has separated interactions between parents and teachers. Students feel like they need more help at home and parents want to help, but may not know how. Meanwhile, teachers want parental support, but find it challenging to manage so many relationships. Our Learning Hub solves this. by being a single platform for personalized content to enhance learning. The platform offers a comprehensive library of curated lessons and resources aligned to state standards. It uses best practices to suggest content for each individual student based on their past use and success. And since students, parents, and teachers all have access to the platform, support is seamless and comprehensive. We just launched Learning Hub this last month. but we've already received positive feedback from teachers and administrators. The great thing about both these products is that we have a built-in user base that we can reach out to to learn and use to evolve the product. At the same time, these products have the ability to address significant market opportunities outside of our core full-time offering. They allow Stride to diversify our revenue streams and reach more users. And they do so by leveraging the expertise we've developed over the past 20 plus years. Now, before I wrap up, I'm excited to announce that we're planning an analyst day sometime later this calendar year, likely in the late fall. By fall, it will have been three years since we provided our fiscal 25 targets, and while we remain committed to those targets, both Diana and I look forward to offering a deeper dive into our financial goals and strategic priorities, looking out further and including some of the exciting things we've been working on. While we are exceeding expectations for this fiscal year, I'm even more bullish on our ability to help transform our educational system in the years to come. Now I'll pass the call over to Donna to give some commentary on our third quarter results and discuss our updated guidance. Donna?