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Stride (LRN +31%) is surging higher today after reporting huge upside with its Q1 (Sep) report last night. EPS jumped to $0.94 from $0.11 in the year ago period, while revenue rose a healthy 14.8% yr/yr to $551.1 mln. Both results blew away analyst expectations. Stride also guided Q2 (Dec) revenue at $560-580 mln, which also was well above expectations.

• Stride provides a wide range of services including K-12 education, career learning, professional skills training etc. LRN said that there is high parent dissatisfaction with their current schools and LRN continues to see students reconsidering the traditional college pathway in favor of a more skills-based education. Stride says it's filling a need in the market for virtual options.
• Demand in its core business remains robust which was evident in the acceleration it is seeing in application volumes. Stride notes that the issues that it can address for families span a wide range from school safety to academics to mental health to mobility to flexibility and everything in between.
• Enrollments are a key metric for Stride, and there was healthy +18.5% growth in SepQ to a record 222.6K, almost 100K more than LRN had prior to the pandemic in FY20. Of the total enrollments, 91.7K were Career Learning enrollments, up 30.4% yr/yr. Families continue to seek out educational opportunities. Also, Stride cited its execution around marketing and operations as helping as well.
• It is not all good news. Stride will be dealing with the expiration of ESSER (Elementary and Secondary School Emergency Relief) grants. They have provided federal pandemic relief funding to enable schools to operate safely during the pandemic, but that funding is ending. Stride sees the loss of ESSER funding as a headwind to revenue and enrollment in FY25. As such, Stride expects revenue per enrollment to finish the year flattish to down slightly.

Overall, this was a great quarter for Stride with big upside results and robust guidance for DecQ. Enrollment growth continues to be robust as parents seek education alternatives. Also, what's nice about Stride is that it also caters to adults with career learning and professional skills training. The ESSER headwind will be something to watch in FY25 and may impact different states at different times, but Stride's results/guidance looks great right now.