Stride (NYSE:LRN) reported fiscal first-quarter revenue growth of 3% but said enrollment fell year over year as technology-platform issues affected applications and retention among new students.
Revenue for the quarter totaled $639.4 million, compared with $620.9 million a year earlier. Adjusted operating income declined to $78.6 million from $81.1 million, while adjusted EBITDA increased to $111.8 million from $108.4 million. Adjusted earnings per share were $1.37, down from $1.52 in the prior-year quarter.
Total enrollment as of Sept. 30 was 241,400, compared with 247,700 a year earlier. Chief Executive Officer Bob Knowling, who became CEO at the end of July, said the company’s enrollment performance was below expectations and had his “full attention.”
Technology Experience Affected Enrollment
Knowling said parents, students and teachers encountered challenges with Stride’s technology platforms, contributing to lower application activity and lower retention of new students. Retention among returning students was stable and conversion metrics remained strong, he said, but those factors did not offset the decline in net new enrollment.
“When introducing our new platform changes last year, we added friction to the user experience instead of making it more seamless,” Knowling said. “We did not sufficiently anticipate the end-to-end experience for families or move quickly enough to address the friction they encountered.”
The company said it did not experience a repeat of the broad technical disruptions reported during the prior fall school launch. However, enhancements to its Launchpad platform ahead of the current enrollment season created a poor user experience during the school-year launch, according to Knowling.
Launchpad serves as an overlay in front of the learning-management system, organizing information and guiding students through their daily work. Knowling said families should not have difficulty navigating schedules, retrieving assignments or accessing classes. While the company cannot isolate the platform’s precise enrollment effect, he said the friction influenced some families’ decisions during the enrollment period.
Stride has hired Darlene Williams as chief information officer. Williams previously served as CIO at Rocket Software, and Knowling said all IT development and operational functions will report under her leadership. Her priorities will include improving the experience for students and families and aligning technology investments with student outcomes.
Enrollment Trends and Program Changes
Chief Financial Officer Donna Blackman said lower application volumes, partially offset by higher conversion rates, continued through the fall enrollment season. Applications were lower year over year but approximately 2% above the level from two years ago, she said. Blackman cited a difficult comparison with strong early applications in the prior year, technology issues and broader changes affecting Google Search as factors influencing results.
The company said it has resumed marketing spending after reducing such spending last year. Blackman said Stride believes demand remains available but that it needs to improve the customer experience and execution to capture it.
Career Learning enrollment continued to outpace general education enrollment, aided by a higher number of high school students. Blackman said the company had previously expanded Career Learning offerings wherever it had general education programs. She added that Stride sees an opportunity to accelerate Career Learning growth by establishing a separate enrollment funnel for those programs, though it has not yet done so.
General education enrollment was affected by the loss of Lone Star, which resulted in a net reduction of approximately 3,000 students compared with last year, including 2,000 students in Stride’s private school. Capacity limitations in alternative education programs also constrained potential growth in Texas, Blackman said.
Stride lost another small program but added a net five programs during the year. Blackman said the additions are more meaningful for the company’s longer-term growth prospects than for the current fiscal year.
Margins, Cash and Outlook
First-quarter revenue per enrollment rose 7% to $2,556. Stride expects revenue per enrollment for the full fiscal year to increase 1.5% to 2.5% from fiscal 2026.
Gross margin fell to 37.7% from 39% a year earlier, reflecting higher costs associated with launching the school year, including instruction costs and operational work to improve student and family experiences. The company expects full-year gross margin to decline by 100 to 200 basis points from fiscal 2026.
Selling, general and administrative expenses declined to $156.8 million from $173.1 million, primarily due to lower stock-based compensation. First-quarter stock-based compensation included a $7.4 million benefit related to forfeited awards. Stride expects full-year SG&A expenses to decline 10% to 15% year over year and anticipates stock-based compensation of $15 million to $19 million.
Capital expenditures were $24.5 million, while free cash flow was negative $149.3 million, compared with negative $217.5 million a year ago. Blackman said first-quarter cash flow reflects the business’s normal seasonal pattern and that the company expects positive cash flow during the remainder of the year.
Stride ended the quarter with $884.2 million in cash equivalents and marketable securities. Its $420 million convertible note matures in September 2027 and is now classified as a current liability. The company has $311 million remaining under its share-repurchase authorization, which runs through October 2027.
- Second-quarter revenue guidance: $625 million to $645 million
- Second-quarter adjusted operating income guidance: $135 million to $145 million
- Full-year revenue guidance: $2.53 billion to $2.61 billion
- Full-year adjusted operating income guidance: $500 million to $530 million
- Full-year capital expenditure guidance: $70 million to $80 million
Blackman said Stride has seen positive in-year enrollment activity since the September count date. The midpoint of its full-year outlook assumes enrollment growth in the second and third quarters, followed by the company’s typical decline from the third to fourth quarter, resulting in year-end enrollment roughly in line with the September count date.
Knowling said the company has begun a broader strategic reassessment focused on student outcomes, parent experience and more integrated use of its portfolio of tutoring, career exploration and Tallo offerings. Stride is also halting work on initiatives where it does not see a clear path to improving outcomes or creating meaningful value, he said. The company remains committed to its previously communicated fiscal 2028 targets.
About Stride (NYSE:LRN)
Stride, Inc is an education technology company that provides online and blended learning programs for K-12 students. The company partners with public school districts, charter schools and other education organizations to deliver digital curricula, instructional software, teaching support and student services. Its offerings are designed to support full-time virtual schools, supplemental courses and traditional schools incorporating online learning.
Stride also provides career-focused education through programs that combine academic instruction with career exploration, technical training and industry-aligned learning opportunities.
