Stride Q2 Earnings Call Highlights

Stride (NYSE:LRN) executives said the company stabilized technology platforms that created customer experience challenges earlier in the school year, while reporting second-quarter fiscal 2026 results that reflected continued demand for its online education offerings and improved profitability.

Platform stabilization and focus on customer experience

Chief Executive Officer James Rhyu opened the call by revisiting the platform issues discussed in the prior quarter, saying Stride “executed on our plan” and that the “core issues are behind us.” He said the company’s focus is now on ongoing improvements to enhance the customer experience and, where possible, finding proprietary solutions to maintain greater control over the user experience. Rhyu added he is confident the issues will not recur in the upcoming season.

Rhyu pointed to lower customer support volumes and less negative commentary as evidence of progress. After addressing a significant login issue “a couple of months ago,” he said call volumes dropped more than 90% week over week. He also noted a “significant decline” in social media commentary about platform challenges.

While acknowledging that no platform is perfect, Rhyu said Stride now has a stronger foundation and has learned from the experience. He said the company is working on better redundancy and continues to rely on third-party partners, while seeking an architecture that gives Stride “a degree of influence and control over our own destiny.”

Enrollment and demand trends: stability prioritized over growth

Rhyu said demand remained strong and existing enrollments proved resilient. He said Stride was able to “backfill much of our attrition during the quarter” and ended the quarter essentially flat with the prior quarter, emphasizing that the company’s goal for the year is stability, not growth.

On withdrawals, Rhyu said that as the second semester began—an area of uncertainty entering the quarter—withdrawal rates were within historical norms so far. In response to analyst questions, he clarified that the company was only a few weeks into the period, but that January month-to-date withdrawal rates had returned to normal levels, which he characterized as “very good news.”

Rhyu said the company measures demand through application volumes and described demand as strong, with volumes similar to last year’s “record-breaking” levels. He added that the company is seeing strong demand even while being “not as aggressively in market” to acquire enrollments, which he said highlights organic demand for Stride’s programs.

Asked why the company would not pursue more in-year enrollment growth given the improving environment, Rhyu said Stride is taking a prudent approach after a difficult period and does not want to “put your foot back on the gas” too quickly. He said the decision is not about demand or withdrawals, but about setting the company up for long-term success and sending the right signals to partners and employees.

Rhyu also said capacity constraints and enrollment window closures are not unusual for Stride, noting that schools often close enrollment in the third quarter and that the company frequently must turn away applicants after those windows close, place families on waitlists, or encourage them to apply for the fall.

Quarterly financial results and segment performance

Chief Financial Officer Donna Blackman reported second-quarter revenue of $631.3 million, up nearly 8% from the second quarter of fiscal 2025. Adjusted operating income was $159.0 million, up $23.4 million, or 17% year over year. Adjusted EPS was $2.50, up 13%, and adjusted EBITDA was $188.1 million, up 17%. Capital expenditures were $16.0 million, up from $14.8 million a year earlier.

Total enrollments in the second quarter were 248.5 thousand, up 7.8% from last year and “up slightly” from the first quarter, which Blackman attributed to continued demand and stabilization in withdrawals.

• Career Learning revenue grew 29% to $275.6 million, driven by enrollment growth of 17.6% year over year.
• General Education revenue declined 3.6% to $341.4 million. Average enrollments rose slightly to 137,000, but revenue per enrollment fell 3.6%, which Blackman said was largely due to mix.

Total revenue per enrollment across both lines was $2,437, up 1.8% from last year. Blackman cautioned that revenue per enrollment by segment can be “wonky” because mix can shift between General Education and Career Learning relative to forecasts, and she suggested focusing on the combined figure. She reiterated expectations that revenue per enrollment for the year should be “flattish” versus last year due to state and program mix and timing.

Margins, cash flow, and capital allocation

Gross margin was 41.1%, up 30 basis points year over year. Blackman said the quarter benefited from recognizing a gain related to a non-core business, following an agreement to exit a long-term commitment associated with a leased-space “community” business acquired with Stride’s bootcamp purchase. In the Q&A, she said the gross margin impact in Q2 was about 200 basis points, and she noted the company will no longer have that lease expense through 2030.

Blackman also said Stride expects additional expenses related to platform implementation through the rest of the year and now expects full-year gross margins to be similar to fiscal 2024.

Selling, general and administrative expenses were $112.8 million, down nearly 2% from last year. Management attributed the decrease to benefits from right-sizing the adult learning business and pulling back marketing spend during the quarter. Stock-based compensation was $10.3 million, up $2.4 million year over year, and Blackman said the company expects $41 million to $43 million of stock-based compensation for the full year.

Free cash flow (cash from operations less capex) was $75.9 million, compared to $208.6 million last year. Blackman said the decline was driven by payment timing, including a large receivable that typically arrives in Q2 but shifted to Q3. She said Stride does not believe there is risk to the payment and characterized it as a timing issue between quarters. The company ended the quarter with $676 million in cash, cash equivalents, and marketable securities.

Blackman also highlighted a $500 million share repurchase authorization approved in November that runs through Oct. 31, 2026. Stride repurchased $88.6 million in shares during the second quarter. She said the company’s capital allocation priorities remain unchanged, balancing organic investment and potential M&A with share repurchases.

Guidance raised for operating income; revenue reaffirmed

Stride reaffirmed full-year revenue guidance of $2.480 billion to $2.555 billion and raised adjusted operating income guidance to $485 million to $505 million, from $475 million to $500 million previously. The company maintained capital expenditure guidance of $70 million to $80 million and an effective tax rate of 24% to 25%.

For the third quarter of fiscal 2026, Stride guided to revenue of $615 million to $645 million, adjusted operating income of $130 million to $140 million, and capital expenditures of $16 million to $21 million.

Blackman also discussed seasonality, saying that while recent years have seen second-half revenue weighted toward the fourth quarter, this year’s enrollment trends suggest third- and fourth-quarter revenues will be “more evenly split.” She noted that many schools begin closing enrollment in the third quarter and that the company expects third-quarter average enrollment to be similar to the first and second quarters, with a seasonal decline in enrollments in the fourth quarter comparable to historical trends.

Rhyu said the company has not seen evidence that negative word-of-mouth from the platform issues has harmed demand, noting continued strength in application volumes. He also said he has not experienced an “overhang” in discussions with prospective partners, including a recent in-person visit with a potential partner where the issues were addressed directly.

About Stride (NYSE:LRN)

Stride, Inc (NYSE:LRN) is a technology-driven education company that designs and delivers online learning solutions for students and adult learners. Through long-term partnerships with state-authorized public school districts, Stride operates virtual academies that serve K-12 students across the United States. The company’s blended-learning model combines digital curriculum, live teaching support and data analytics to personalize instruction and monitor student progress.

In addition to its K-12 offerings, Stride provides a portfolio of career and workforce readiness programs under its Stride Career Prep division.