Shares of online educational software company Stride (NYSE: LRN), formerly known as K12, surged 16% through 10:05 a.m. ET after delivering a surprise earnings beat Wednesday morning.
Heading into the company's fiscal Q1 2024, analysts had forecast Stride would lose $0.35 per share on sales of $451.2 million. Instead, Stride earned an $0.11-per-share profit, beating sales estimates as well with $480.2 million in quarterly revenue.
Stride stock sales and earnings
Quarterly sales climbed 13% year over year (YOY) to set a new quarterly record for Stride. But even better than that was the earnings news: Instead of the loss that Wall Street had predicted, Stride reported operating and net profits, flipping from a $0.54-per-share loss last year to an $0.11-per-share profit this time around.
So how did it do that?
Not in the way you might think. Enrollment in Stride's general education courses actually grew only 5% YOY. "Career learning" enrollment, on the other hand, surged 14% YOY, adding revenue streams as Stride signed up large numbers of middle and high school students for its courses.
Within career learning, adult learning revenues grew a respectable 7%, but middle and high school revenues grew three times as much -- 20% -- suggesting that not only is Stride recruiting more students, but it is also charging them higher rates. General education revenues, meanwhile, grew 10% -- twice as much as enrollment growth.
What comes next for Stride
With a great start to the year and strong Q1 numbers to build on, Stride is now forecasting it might see $500 million or so in revenue next quarter, and total revenue of $2 billion this year, comfortably ahead of Wall Street's forecast of $1.9 billion.
Management did not give a GAAP forecast for earnings, but it did say that "adjusted operating income," a non-GAAP (adjusted) figure, could be $80 million to $90 million in Q2, and $250 million to $275 million for the year. Spread across a share count of 43 million shares outstanding, that seems to imply earnings as high as $6.40 per share -- twice Wall Street's $3.21 forecast.
Before you get too excited about that, though, recall first that Stride's forecast discusses only operating earnings, not net earnings, and second that "adjusted operating income" in Q1 was three times as high as actual GAAP profits. While that doesn't necessarily mean that full-year income will be only one-third of $6.40, it does suggest that when all's said and done, Stride's full-year profit this year will probably be a whole lot less than $6.40.
Caveat investor.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
