Laureate Education, Inc. Common Stock Q2 2026 Earnings Call

Good day and thank you for standing by. Welcome to Laureate Education s second quarter 2026 Earnings Conference call. At this time, all participants are in a listen only mode. 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. You will then hear an automated message advising. Your hand is raised to withdraw your question. Please press star one. One again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today. Adam Morse, Senior Vice President of Finance. Please go ahead.

Good morning, and thank you for joining us on today's call to discuss Laureate Education Inc second quarter 2026 results. Joining me on the call today are Eilif Serck-Hanssen President and Chief Executive Officer. And Rick Buskirk, Chief Financial Officer Earnings press release is available on the Investor Relations section of our website at laureate.net. 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 complete recording will be available after the call. 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 U.S. securities laws 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 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 U.S. Securities and Exchange Commission. Our 10-q filed earlier this morning, as well as other filings made with the SEC. And. In addition, all forward 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.

Additionally, the non-GAAP measures that we discussed, including and among others, adjusted EBITDA and its related margin, adjusted net income and adjusted earnings per share. Total debt, net of cash and cash equivalents and free cash flow, are also detailed and reconciled to their GAAP counterparts. In our press release or supplementary presentation. Let me now turn the call over to Eilif.

Thank you. Adam. And good morning, everyone. I am pleased to report strong execution across the board for the second quarter and first half of 2026. Through year to date, June new and total enrollments were up 10% and 6%, respectively, versus the comparable period in prior year, driving 7% growth in revenue. On a timing adjusted and constant currency basis in. Addition to favorable operating results. We have also benefited from improved currency over the past few months. As a result, we are raising our full year 2026 outlook at the midpoint by $28 million for revenue, $8 million for adjusted EBITDA, and $0.03 per share for adjusted earnings per share. The. Operating momentum of our business, as well as the strong balance sheet and free cash flow generation, continue to support our commitment to. Return excess capital to shareholders through the first half of the year, we repurchased $181 million worth of our shares, and today we are announcing an additional $150 million increase to our stock repurchase program. Throughout the first half of the year, we continued to advance on key priorities, which include the the opening of new campuses and investment in digital leadership. The. Two new campuses we opened last year in Monterrey, Mexico, and Lima, Peru.

At a district. Continue to perform in line with our expectations. Our. New campus openings for this year in Puebla, Mexico is off to a strong start with enrollments already well underway for our primary intake in September. Looking. Around these projects, we have a clear multi-year roadmap of attractive new campus expansion opportunities across both Mexico and Peru and have already secured multiple sites to support that growth pipeline in the years to come. We do expect two new campus projects to be operational next year, one in southern Lima, which is on track to open during the first quarter of 2027, and one in Mérida, Mexico, which we anticipate being open in time for our primary intake in September of 2027. Further momentum. For new campus openings are planned for 2028 and beyond. On the digital front, AI is becoming a core capability across our organization and an increasingly important driver of our long term strategy. We are. Not only how and what we teach, but also how we operate. Translating technology enabled efficiencies into greater affordability, broader access to high quality education, and further progress towards laureates. Mission. By enabling AI throughout the student journey, we aim to deliver more personalized learning experiences, strengthen student support and improve academic outcomes.

At the same time, we are equipping our faculty and staff with AI enabled tools that allow them to focus on activities that create the greatest value for our students. To support. This transformation, we are investing in our data and IT infrastructure and collaborating with leading technology companies. By leveraging their expertise and capabilities, we are orchestrating and building an integrated ecosystem of AI powered learning, cloud and education solutions for our more than 500,000 students, faculty and staff across Mexico and Peru. From a geopolitical and macroeconomic perspective, the backdrop in Mexico and Peru remains stable, and we are confident in the long term fundamentals of both markets. In. The existing Usmca trade agreement remains in place through 2036 and continues to provide. Mexico with reliable and preferential access to the US and Canadian markets, supporting investments in economic, cross-border opportunities across North America. Although the Usmca agreement wasn't extended during the first mandatory joint review in July of this year, the absence of consensus simply activates the annual review. Mechanism Beginning in 2027. Mexico. Continues to play a central role in the regional economy as the United States largest trading partner and the record export level for Mexico into the United States during May, shows that trade and supply chain integration between the two countries remain very strong.

Future bilateral discussions will focus on improving market access, strengthening regional and production, and addressing select tariffs. In Peru, the political outlook has become more stable following the recent national elections. President Keiko Fujimori is expected to pursue a more market oriented agenda, which could strengthen business confidence, encourage private investment and support further economic growth, reinforcing Peru's long standing position as one of Latin America's more established and resilient market economies. That concludes my prepared remarks, and I will now turn the call over to Rick Buskirk for a more detailed financial overview of our second quarter and year to date performance, as well as further details on our 2026 full year outlook. Rick.

Eyelid. 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. While the second and fourth quarters are not major, enrollment intake periods, they are the strongest in terms of revenue and adjusted EBITDA. As students are in session and academic activity is at its peak, the time. 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. This in turn affects the timing of enrollment and revenue recognition and quarter over quarter comparability in terms of seasonality for 2026, we will have some intra year calendar timing impacts as outlined on slide 22. In our presentation. As. I review our operating results. I will provide some additional color on these timing related impacts. Let's start with page ten and 11, which highlight our operating and financial performance for the second quarter in year to date. June total enrollment increased by 6% when compared to the prior year quarter, driven by year to date new enrollment growth of 10%. Revenue in the seasonally strong second quarter was $616 million.

And adjusted EBITDA was $251 million. Both metrics were ahead of the guidance provided. Three months ago, driven by favorable currency translation and operational outperformance on a constant currency basis. Both revenue and adjusted EBITDA for the second quarter increased by 8% year over year. Second. Quarter net income was $137 million. Resulting in earnings per share of $0.98 per share. On a reported basis. Second quarter adjusted net income was $140 million, and adjusted earnings per share was $1 per share. When combined with the first quarter on a constant currency basis and adjusted for academic calendar timing, our overall performance for the first half of 2026 was strong and resulted in revenue and adjusted EBITDA growth of 7% versus the prior year period. 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 a constant currency basis. Let's start with Mexico. Mexico's new enrollments increased by 7% on a year to date basis versus the prior year period, led by strong growth in working adult focused, fully online programs. Total enrollments increased 5%. Mexico's revenue for the second quarter increased by 10% compared to the prior year period, and adjusted EBITDA was up 9%, which included costs associated with launching our new campus in Puebla on a.

Year to date basis, and adjusted for timing of the academic calendar, Mexico's revenue grew 6%. Resulting from a 5% increase in average total enrollments and 1% price mix. Overall pricing was in line to slightly above inflation for traditional face to face students, partially offset from a mixed perspective by higher growth in working adult, fully online programs. We were a little less aggressive with our pricing for our fully online programs, but still had an increase year over year as we continue to focus on driving strong volume growth in those programs. On a year to date basis and adjusted for timing of the academic calendar, adjusted EBITDA decreased by 2% versus the prior year period. Reflecting the timing of investments and the ramp up of our new Puebla campus. As discussed on our prior call, we expect margin accretion this year to be weighted towards the second half of 2026 in that market. Let's now transition to Peru on slide 14. Peru's primary enrollment cycle concluded in mid-April, with total enrollment growth of 8% year to date, supported by strong demand from our fully online programs serving working adults. In the second quarter, Peru's revenue increased 6% and adjusted EBITDA was up 7% versus prior year.

On a year to date basis and adjusted for timing of the academic calendar, Peru's revenue increased 7% versus the prior year period, and adjusted EBITDA increased by 13%. You will note that through year to date, June, our growth in total enrollments and revenue are at similar rates due to the rapid scaling of fully online offerings. As discussed on our prior calls, our series of planned new campus launches for face to face students will start to ramp in 2027 pricing. During the primary, intake was largely in line with inflation for our traditional face to face programs, but that was offset by the price mix impact from fully online. Let me now briefly discuss our balance sheet position. Our balance sheet remains strong. Laureate ended June with $223 million in gross debt and $162 million in cash for a net debt position of $61 million through. June of this year, we repurchased $181 million of common stock under our previously announced share repurchase program. Today. We announced that our board is authorized a $150 million increase to our share repurchase program. This authorization is supported by our strong balance sheet. Cash accretive business model and disciplined capital allocation. Moving on to our outlook for 2026, starting on page 17.

Today, we are increasing our full year guidance at the midpoint by $28 million for revenue, $8 million for adjusted EBITDA and $0.03 per share for adjusted earnings per share. Our update. 2026 outlook reflects an improved operational outlook, as well as more favorable foreign currency exchange rates based. On our assumed FX rates, we now expect our full year 2026 results to be as follows. Total enrollments to be in the range of 518,000 to 523,000 students, reflecting growth of 4 to 5% versus 2025. Revenues to be in the range of 1.920 billion to $1.930 billion, reflecting growth of 13% on an. As reported basis and growth of 6 to 7% on a constant currency basis, versus 2025. Adjusted EBITDA to be in the range of 593 million to $599 million, reflecting growth of 14 to 15% on an as reported basis and 8 to 9% on a constant currency basis, versus 2025. This would result in an increase in adjusted EBITDA margins of approximately 50 basis points at the midpoint of guidance. On a reported basis. The margin expansion expected for the second half of the year will be driven by timing of investments and the opening and scaling of new campuses. For 2026. We still expect adjusted EBITDA to unlevered free cash flow conversion of approximately 50% on a reported basis.

Supporting our continued emphasis on return of capital to shareholders. Lastly, adjusted earnings per share guidance for 2026 is now expected to be in the range of $2.04 to $2.10 per share, reflecting growth of 19% to 22% versus 2025. On a reported basis. This outlook assumes a weighted average share count of approximately 139 million shares. Only reflecting the impact of share repurchases through June. Now, moving to the third quarter, guidance, which includes an expected $29 million of favorable intra year academic calendar timing impact as illustrated on page 22 of our presentation for the third quarter of 2026, we expect revenue to be in the range of 471 million to $476 million, and adjusted EBITDA of approximately 134 million to $137 million. Eilif. I'm now handing it back to you for your closing comments.

Thank you. Rick. As we enter the second half of 2026 and prepare for our next major intake cycle, I remain confident in the momentum that we have built and our ability to continue to execute on our growth agenda. We are. Investing where we see the greatest opportunities to create long term value, including expanding our academic portfolio, building strategic AI partnerships, scaling our digital offerings, and selectively growing our campus network in attractive, high growth markets. At the same time, our disciplined operating model continues to drive margin expansion. Strong cash flow generation and the financial flexibility to invest in future growth while returning excess capital to shareholders. Operator. That concludes our prepared remarks, and we're now happy to take any questions from the participants Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one. One. Again. Please stand by while we compile the Q&A roster. Our first. Question comes from the line of Jess Seidler of BMO markets. Your line is open.

That's close enough. My first question is regarding Mexico. You've got a primary intake period coming up in a few months, probably enrolling students already. Can you give us any color in terms of how that's going?

Good morning Geoff. This is Eilif. I'll just do a quick reminder. We did our our March intake, which is a secondary intake in Mexico, which was consistent with last year's trend at about 4%. Then we had a and that was about 25% of the intake for the for the year., we did expect, some. Movement and we saw that in the June intake. That's largely a working adult intake., represents about 15% of the, the annual intake. And we were growing,, 12% in that intake, which was consistent with our expectations of an improving operating environment in Mexico., when it comes to the main intake in Mexico, which is which I think your question was about,, that's about 60% of the annual intake., that's,, happening in September. We have about halfway through that. We're about 50% completion of that intake. And,. You know. I'm, it is tracking along with my expectations. And that's as much as I'm going to comment on that intake.

Okay. I appreciate that., and then maybe a bigger picture question ., a number of the US schools have been talking about changes in the way that students are looking for schools switching away from traditional search engines, going towards AI. I'm wondering if you're seeing that in Mexico and Peru, and if so, if there's any change in your marketing strategy, there Yeah, we ,, I would say that we were the cutting edge of driving that change in the market. We have, you know, partnered with,, with Google over the years and several other,, you know, key strategic digital and AI partners and,, we've been recognized now for, for, for, two years in a row by BCG and Google as being in the top decile when it comes to AI and digital, marketing capabilities in the way that we are, you know, embracing,, you know, AI in our recruiting and onboarding effort. And it has,, given us a very. Very strong competitive advantage where we have seen, you know, an explosive growth in our lead generation capability and significant improvement in, conversion, which has taken down our cost of acquisition and also, you know, enabled us to, to consistently take market share in Mexico.

So very, very pleased with those, those capabilities. And in Peru, we are deploying ,,, you know, that same center of expertise that was developed in Mexico ,, to, you know, to, to roll out those capabilities there as well.

Okay. Thanks.

Thank you. Our next question comes from Marcelo Santos of JP Morgan. Your line is now open.

Good morning. Thanks for taking my questions. I have two. The first is a bit more long term strategic., you have a lot of plans to open campuses. You're deploying ,, distance learning. So how do you see the sustainability of growth in the coming years? Given these initiatives, could you give us some some broad views on how do you expect to grow for a specific guidance? But I'm just asking for a broad outlook. And the second question is,, I think you had higher better retention rates in Mexico in the second quarter., what were the actions that led to this improvement in retention rates? Thank you very much.

Great. Well, I'll start kicking off on the growth algorithm and, and we we have a really deep and robust,, pipeline of growth opportunities in our core markets in Mexico and Peru and really, there are three drivers of, of our growth in both markets., one is the rising participation rates, the rising participation rates., there's a lot of headroom there in Mexico., the participation rates are about 36% versus,, Peru high 40s. And the United States. Mid 60s. So it shows you there's a significant,, opportunity for, for that participation rate to increase, which over the last,, you know, ten years. Has consistently given us, you know, you know, very predictable and consistent growth. And I expect that to continue the second,, big growth driver is the fully online working adult product where we are marketing ,, fully online to students aged 25 to 50. And those are largely degree completion, but also increasingly becoming, you know, postgraduate degrees and,., you know, we really following,, the, the US model there,, of high quality, personalized ,. Fully online experience., but targeting, you know, only that working adult consumer where online is, is,, is, is a very good product., and. And, in Mexico, we have about 9000,, fully online working adult students and growing in high single digits,, in Peru, we have about 20,000, 35,000,, students..

And,, it is growing. You know, at a much higher rate, but from, from that smaller base and are important,, you know, long term growth driver for both countries., and I can see if taking a, you know, if you're looking at, you know, five plus years, I can see,, the,, the penetration of the fully online in Peru to kind of catch up with, with, with Mexico. So very excited about the,, the depth of that,. You know? Growth lever and,, and then third,, new., campuses in Lima. We are largely in Peru. We are largely in Lima. Operator. So there are some interesting,, secondary cities and also still several zip codes in Lima where we don't have our full portfolio of products. So there's more growth with campuses in Lima and in large secondary cities like Arequipa., in, in Mexico, which is a much larger country in Mexico, we have 135 million people in Peru, we have 35 million people., you have, you know, 20 cities in Mexico with,, you know, multi-million population centers over, over over a million,, population centers, which is ideal for our product portfolio. And so we have,, a very, very robust pipeline, of,, you know, campus.

Opportunities. Last year we opened Unitec in Monterrey. Here. We opened Unitec in Puebla. And, we have announced Merida is going to be our new,. Campus expansion opportunity for Unitec. And ,, you know, we are seeing ,, you know, double digit,, campus expansion opportunities,, in, in Mexico alone in order to, to get the coverage that,, that makes sense given our very strong brand portfolio in,, in, in Mexico. So those are the three, you know, in our core business, it is ,, participation rate. It is online penetration. And it is a new campuses and new zip codes and new cities. And, and so I would say those are the core,. Growth drivers,, to support our guidance.

Perfect.

Thank you.

And, and,. Let me just before, before covering your retention question.. Rick, why don't you add anything on the growth algorithm that.

I think that was well said. I don't have anything else to call on the growth algorithm.

Very good. Do you want to take the retention question then?

Sure. Great., on the retention, you're exactly right. We are seeing some improved retention rates in Mexico., we're very pleased with that. We spent several years ,, focus in dissecting the entire enrollment to graduation process that our students go through,, particularly on our growing online segment and have started deconstructing that digital journey that they follow. And really putting in different elements to reduce friction and support their learning, including,, experimenting with an AI tutor. And as a result of that, we are seeing,, improved attrition and we expect attrition., despite,, online growing faster to face to face, which generally has a higher attrition rate as a total consolidated Mexico, we expect attrition improvement on a full year basis. So we're very pleased with the results. And it's been an effort that we've been very focused on. And we're seeing good results, particularly in our fully online product.

Perfect. Very clear. Thank you very much.

Thank you. Marcelo did that cover your questions?

Yes, of course. Thanks a lot. Very comprehensive.

I think. So I think we can move on to the next question.

Thank you. Our next question comes from Alex Paris of Barrington Research. Your line is open.

Can you hear us?

Hi, guys. Thanks for taking my question. I'm glad to be on the call today after having recently initiated a still learning., and I appreciate your responses to the prior questions., some of which I was going to ask myself., but I thought,,, and by. The way, I don't know if it's just my line or, or in general, but,, it sounds like,, your line is cutting out from time to time., and I'm having a little trouble following it,