Q3 2025 Laureate Education Inc Earnings Call
Speaker #2: Good day and thank you for standing by . Welcome to the Laureate . Third quarter 2020 Earnings Conference Call . At this time , all participants are in a listen only mode .
Speaker #2: After the speakers presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .
Speaker #3: morning , and thank you for joining us on today's call to discuss LAUREATE EDUCATION, INC. third quarter and year to date 2020 results .
Speaker #3: Joining me on the call today are Eiliv Hansen , President and Chief Executive Officer . And Richard Buskirk Chief Financial Officer . Our earnings press release is available on the Investor Relations section of our website at Laureate Net .
Speaker #3: We have also posted a supplementary presentation to the website, which we will be referring to during today's call. The call is being webcast and a recording will be available after the call.
Speaker #3: I would like to remind you that some of the information we are providing today , including , but not limited to , our financial and operational guidance , constitutes forward looking statements within the meaning of applicable US securities laws .
Speaker #3: For looking , statements are subject to risks and uncertainties that may change at any time and therefore our actual results may differ materially from those we expected .
Speaker #3: Important factors that could cause actual results to differ materially from our expectations . Are disclosed in our annual report on Form 10-K filed with the US Securities and Exchange Commission .
Speaker #3: Our 10-q filed earlier this morning , as well as other filings made with the SEC . In addition , all for looking statements are based on current expectations as of the date of this conference call , and we undertake no obligation to update any forward looking statements .
Speaker #3: Additionally , non-GAAP measures that we discuss including and among others , adjusted EBITDA and its related margin , adjusted net income and adjusted earnings per share , total cash and equivalents , net of total debt and free cash flow , are also detailed and reconciled to their GAAP counterparts .
Speaker #3: And our press release or supplementary presentation . Let me now turn the call over to Ilef .
Speaker #4: Thank you , Adam , and good morning , everyone . Today we are pleased to report strong operating and financial performance for the third quarter , along with the results of our recently completed intake cycles .
Speaker #4: Third quarter revenue was $400 million and adjusted EBITDA was $95 million . Both metrics were ahead of the guidance we provided in July .
Speaker #4: Favorable results for the quarter were driven by improved foreign currency rates and double digit growth in Peru's secondary intake , led by fully online working adult programs .
Speaker #4: As we continue to scale in that segment , albeit from a smaller base . The primary intake in Mexico was up 4% , excluding campus closures and in line with our expectations .
Speaker #4: The solid results during the intake were against the of a softer macroeconomic environment , reinforcing the resiliency of our business model during the intake cycle .
Speaker #4: We also opened two new campuses for our value brand institutions, one in Monterrey, Mexico, and one in the Lima Eight district in Peru.
Speaker #4: Both campuses opened on time on budget and performed as expected . These campus openings were our first new campus launches since 2019 . We also have two additional new campus projects underway , one in each market and expect these to open late next year or early in 2027 .
Speaker #4: Beyond that , we have identified numerous other cities and site locations in both Mexico and Peru that are ripe for development over the next several years .
Speaker #4: The completion of the intake cycle provides us with strong visibility for the remainder of the year , and we are announcing an backdrop increase to our full year 2025 outlook , which Rick will cover in more detail later in his prepared remarks .
Speaker #4: Our balance sheet remains exceptionally strong , and today we are also pleased to announce that our board has authorized $150 million increase to our stock repurchase program , underscoring our disciplined approach to capital allocation and focus on long term value creation for our shareholders .
Speaker #4: From a macro perspective , Peru's economy continues to perform well , driven by robust domestic demand , new mining projects , strong commodity prices , rising wages and low inflation .
Speaker #4: GDP growth for this year is projected at approximately 3% , with a similar pace expected to continue through 2026 , reinforcing the country's path towards sustainable growth in Mexico .
Speaker #4: President Sheinbaum administration marks its first year in office with a public approval rating above 70% . The government has maintained fiscal discipline , advanced industrial modernization and promoted infrastructure investments through stronger public , private collaboration .
Speaker #4: US trade policy uncertainties have caused the current macroeconomic environment to be a bit sluggish . However , Shinbones pragmatic approach to managing the US-Mexico relationship has helped maintain the constructive tone ahead of the upcoming Usmca review .
Speaker #4: Most economists anticipate an increase in economic activity in the second half of 2020 and into 2027 , following completion of these training . That concludes my prepared remarks .
Speaker #4: And I'm now handing the call over to Rick for the financial overview of the third quarter , as well as guidance for the fourth quarter and the full year 2025 .
Speaker #4: Rick .
Speaker #3: Thank you . Alice .
Speaker #5: Before I discuss our financial performance for the quarter , let me provide a few important reminders on seasonality . Campus based , higher education is a seasonal business .
Speaker #5: Although the third quarter is a large intake period from a PNL perspective , it is seasonally low as classes are out of session for much of the quarter .
Speaker #5: In addition , the timing of the start of our classes can shift year over year , depending on various factors , such as when public universities begin classes or when holidays occur .
Speaker #5: This in turn affects the timing of enrollments in revenue recognition and quarter over quarter comparability . In 2025 , the beginning of classes , particularly in Peru , started later versus 2024 , extending the enrollment cycle into mid-April and beyond the first quarter cutoff .
Speaker #5: As a result , we expect approximately $26 million of revenue and $23 million in adjusted EBITDA will shift from the first quarter to the second half of the year , primarily to the fourth quarter .
Speaker #5: As we review our operating results , I will provide additional color on these timing related impacts . Let's start with page ten and 11 of the supplementary presentation , which highlight our operating and financial performance for the third quarter and year to date .
Speaker #5: For the quarter . New and total enrollment volumes increased 7% and 6% , respectively , versus the third quarter of the prior year .
Speaker #5: Third quarter revenue $400 million , and adjusted EBITDA was $95 million . Both metrics were ahead of the guidance we provided three months ago , aided by the favorable secondary intake in Peru , favorable price mix and improved currency rates .
Speaker #5: On an organic constant currency basis and adjusted for the academic calendar shift discussed earlier , revenue for the seasonally low third quarter was up 6% year over year and adjusted EBITDA increased by 3% .
Speaker #5: Third quarter net income was $34 million , resulting in earnings per share of $0.23 per share on a reported basis . Third quarter adjusted net income was $37 million and adjusted earnings per share was $0.25 per share , an increase was compared to Q3 of the prior year .
Speaker #5: Now , turning to year to date performance on an organic , constant currency basis and adjusted for academic calendar timing . Results for the nine months of 2025 were strong , with revenue and adjusted EBITDA growth of 8% and 13% , respectively , versus the prior year period .
Speaker #5: Let me now provide some additional color on the performance of Mexico and Peru . Starting with page 13 , please note that all comparisons versus prior year are on an organic and constant currency basis .
Speaker #5: Beginning with Mexico , Mexico's new enrollment for the third quarter increased 2% versus the prior year period . On a reported basis , or 4% excluding campus closures during their primary intake .
Speaker #5: Total enrollment volume for the third quarter increased 4% compared to the prior year period on a reported basis , or 5% when adjusted for the impact of campus closures .
Speaker #5: As Ayliffe noted earlier , the macroeconomic environment in Mexico is currently a bit sluggish . The growth we delivered during this intake cycle demonstrates the resiliency of our business model and the value proposition , our institutions offer to parents and students .
Speaker #5: Mexico's revenue for the third quarter increased 5% compared to the prior year period , and adjusted EBITDA was up 25% . Overall pricing for the intake was in line with inflation for a traditional face to face students on a year to date basis , Mexico's revenue grew 8% and adjusted EBITDA increased 21% versus the prior year period .
Speaker #5: The resulting margin increase of 240 basis points was led by productivity gains and revenue flow through . Let's now transition to Peru on slide 14 .
Speaker #5: New enrollments in Peru increased by 21% for the third quarter compared to the previous year . Results were driven by strong growth in our fully online programs that serve working adults .
Speaker #5: As we continue to scale in that segment . Total enrollments were up 8% versus the third quarter of the prior year . Supported by a strengthening macroeconomic backdrop and the expansion of our fully online programs .
Speaker #5: Adjusted for the timing of the academic calendar, Peru's revenue for the third quarter increased 8% year over year, driven by higher enrollment volumes.
Speaker #5: Overall pricing for the secondary intake was in line with inflation . For our traditional face to face students . Going forward , we do expect a price mix impact on average revenue per student due to the higher growth rate of our fully online programs , adjusted for timing of the academic calendar , adjusted EBITDA declined 2% versus the comparable period in the prior year .
Speaker #5: This was due to timing of expenses , which we expect to be offset in the fourth quarter . On a year to date basis and adjusted for timing of the academic calendar .
Speaker #5: Peru's revenue increased 7% versus the prior year period . Adjusted EBITDA increased 5% and was impacted by the timing of certain expenses , which we are expected to normalize in the fourth quarter .
Speaker #5: Let me now transition to our balance sheet position . Laureate ended September with $241 million in cash and $102 million in gross debt for a net cash position of $139 million through September of this year , we repurchased $71 million of common stock under our previously announced $100 million repurchase program .
Speaker #5: Our strong balance sheet , cash accretive model , and disciplined capital allocation supported our board's decision to authorize a $150 million increase in our stock repurchase program .
Speaker #5: In total , $177 million remains available under our current upsized authorization . Upon completion of this authorization , we will have returned more than $3 billion of capital to shareholders since 2019 through a combination of share repurchases , cash distributions , and cash dividends .
Speaker #5: Moving on to our outlook , starting on page 18 . Today , we are announcing an increase in our full year 2025 guidance at the midpoint by $61 million for revenue and $17 million for adjusted EBITDA .
Speaker #5: Our improved outlook for 2025 is resulting from the favorable secondary intake in Peru , and better price mix and favorable currency movements in the Mexican peso and Peruvian soul .
Speaker #5: Based on our assumed spot , FX rates , we now expect full year 2025 results to be as follows . Total enrollments to be approximately 494,000 students , reflecting growth of approximately 5% versus 2024 revenues to be in the range of 1.681 billion to $1.686 billion , reflecting growth of 7 to 8% on an as reported basis and approximately 8% on an organic constant currency basis , versus 2024 adjusted EBITDA to now be in the range of 508 million to $512 million , reflecting growth of 13 to 14% on an as reported basis and 12 to 13% on an organic constant currency basis versus 2024 adjusted EBITDA margin .
Speaker #5: Expansion of approximately 150 basis points , primarily driven by Mexico's continued margin optimization and operating leverage . Adjusted EBITDA to Unlevered free cash flow conversion of approximately 50% , reflecting our strong cash accretive business model and disciplined capital approach .
Speaker #5: Now , moving to the fourth quarter , guidance for the fourth quarter of 2025 , we expect revenue to be in the range of 521 million to $526 million , adjusted EBITDA , to be in the range of 194 million to $198 million .
Speaker #5: Our fourth quarter outlook reflects the catch up benefit from the intra year academic calendar changes in Peru . That concludes my prepared remarks .
Speaker #5: I'll if I'm handing it back to you for closing comments .
Speaker #4: Thank you . Rick . Our operations in both Mexico and Peru continue to perform very well , resulting in strong performance on a year to date basis and causing us to guide to an improved outlook for the remainder of the year .
Speaker #4: With leading brands , strong digital capabilities , disciplined capital allocation and a strong balance sheet . We are very well positioned to execute on our growth agenda and advance our mission of transforming lives across Mexico and Peru through high quality , affordable education .
Speaker #4: Operator that concludes our prepared remarks . And we are now happy to take any questions from the participants .
Speaker #2: Thank you . As a reminder to ask a question , please press star one on your telephone and wait for your name to be announced .
Speaker #2: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . And our first question comes from Jeff Silber of BMO Capital Markets .
Speaker #2: Your line is open .
Speaker #6: Hey , thank you so much . This is Ryan on for Jeff on Peru . Revenue for the quarter was really strong , especially in the context of the 7 million of revenue falling out from the calendar timing .
Speaker #6: I was just trying to understand some of the moving pieces with FX enrollment and pricing versus your initial forecasts. Thank you.
Speaker #4: Well , we are benefiting in Peru . Of course , having the recession behind us , which means that we are seeing a little bit of a catch up on on on delayed demand or deferred demand from , from last year .
Speaker #4: But we also just seeing , you know , as you know , strong consumer sentiment . We have a very strong value proposition which works well in the premium segment .
Speaker #4: And the value segment as well as a very rapid . Increase in demand for fully online working adult products . In terms of pricing for face to face , we have been pricing in line with inflation with the working adult product that's fully online .
Speaker #4: We have adjusted price to pricing to optimize our revenue , production , but it is been from a relatively small base , so shouldn't have a material impact on on the overall price dynamics in the market , but net net on the fully online product , we have taken a slight reduction in in headline pricing .
Speaker #6: Appreciate that . And just for the follow up on the Mexican new enrollment growth for the quarter , I was hoping you could parse apart the plus two or the plus four .
Speaker #6: I guess on an organic basis . I think . Last quarter you had highlighted some working adult strength , so it was just wondering how that evolved .
Speaker #6: And then if you could give us anything on how the face to face new enrollment evolved in Mexico as well for the intake cycle .
Speaker #6: Thank you very much .
Speaker #4: Yeah, so the third quarter is really the main enrollment period. The focus is primarily on young students, while what we would call Cycle 1 and Cycle 2 in the first and second quarters are primarily targeting working adult markets.
Speaker #4: So you know the vast majority of , you know , of the volume momentum is driven by traditional 18 to 24 year old undergraduate students in Mexico for third quarter .
Speaker #2: Thank you . And as a reminder , if you have a question , please press star one one and our next question comes from Lucas Nagano of Morgan Stanley .
Speaker #2: Your line is open .
Speaker #7: Good morning, everyone. Thank you for the space here. We have a question about the intake in Mexico. If you could quantify the contribution percentage points from the new campus launched this quarter.
Speaker #7: In other words , how much did it grow without the new campus ?
Speaker #4: So we had 4% growth when excluding campus closures and one point of that came from new campus launches . So 3% same store .
Speaker #7: Perfect . And also , you mentioned that going forward , you expect a pricing in Peru in line with inflation . How much should the average revenue per student be impacted due to the mix of following online ?
Speaker #4: Rick , do you want to take the mix impact .
Speaker #5: I mean , overall inflation in Peru is trending very well . It's a headline around 2% . So that's as a starting point of what our target would be to match that in the market .
Speaker #5: And then mix impact could be upwards of 2% as we continue to aggressively go after the fully online working adult segment . And as a reminder , we're just getting started .
Speaker #5: In Peru . We have over 100,000 students approximately in Mexico . We have a fraction of that in Peru , and we're starting to really see solid growth in that segment .
Speaker #5: As we've seen posted in Q3 of this year .
Speaker #7: Very clear . Thank you .
Speaker #2: Thank you . This concludes our question and answer session . And also today's conference call . Thank you for participating . And you may now disconnect .