Laureate Education, Inc. Common Stock 2026 Q3 Earnings Call

You may begin. Good morning, and thank you for joining us on today's call to discuss Laureate Education's third quarter 2026 results.

Joining me on the call today are Alex Sarkisian, President and Chief Executive Officer, and Rick Buskirk, Chief Financial Officer. Our 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'd 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. Forward-looking statements are subject to risks and uncertainties that may change at any time, 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. In addition, all forward-looking statements are based on current expectations as of the date of this conference call, we undertake no obligation to update any forward-looking statements. 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 debt net of cash and 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 Alex.

Thank you, Adam, and good morning, everyone. Today, we are pleased to report strong financial performance for the third quarter, along with the results of our current intake cycle. Third quarter revenue was $485 million and Adjusted EBITDA was $147 million. Both metrics were ahead of the guidance we provided three months ago, aided by favorable foreign exchange rates. In Mexico, the primary intake is largely completed with new enrollment growth of 8% versus comparable intake period last year, driven by a very successful launch of our new campus in Puebla, as well as continued growth in existing campuses and online. In Peru, we are seeing a 9% increase year over year in new enrollments during the secondary intake, which will be fully completed in November. Our Peru intake benefited from our leading fully online capabilities, which generated strong demand from working adult students.

The strong results from our combined intake cycles confirm the three main growth levers in our business and that they are all working well. These three growth drivers are, number one, same-store growth enabled by rising participation rates and market share gains. Secondly, new campus expansions in new zip codes and new cities in Mexico and Peru. Thirdly, our rapidly scaling fully online portfolio for working adult learners. Since the start of 2025, we have opened three new campuses, and we expect two additional campuses opening in 2027. Our Southern Lima campus remains on track to open in the first quarter, followed by our new Mexican campus in Merida, which is expected to open prior to the September 2027 main intake.

Beyond these projects, we have a strong multi-year pipeline of attractive campus expansion opportunities across Mexico and Peru, and we have already secured multiple sites to support future growth and expect to accelerate our new campus openings in 2028. During our next earnings call, we will provide some additional details on the pipeline and its deployment cadence going forward. Upon completion of this intake cycle, we have good visibility into the remainder of the year as well as the jump-off point for 2027. That gives us the confidence to reaffirm the full-year guidance expectations and announce an additional $150 million increase to our stock repurchase program, reinforcing our disciplined capital allocation strategy and commitment to long-term shareholder value creation. Let me now provide some color on the geopolitical and macro conditions in our markets. Mexico's economy continues to show signs of improvement during 2026.

Second quarter GDP grew by 2.1% year-over-year, the strongest gain since 2024, supported by broad-based growth across industrial production, services, and agriculture. Importantly, foreign direct investment hit a record level for the first half of this year, highlighting the renewed confidence in Mexico's role as the preferred supply chain partner to the U.S. While conditions are improving and in line with our expectations for the second half of 2026, overall economic growth in Mexico continues to be below its full potential. In the medium to long term, we remain confident that Mexico's deep integration with the U.S. economy will provide attractive structural growth opportunities for the Mexican economy. In Peru, President Keiko Fujimori's election win provides greater clarity on economic policy, which now focuses on reducing red tape, increasing investments in core industries, and lifting the growth rate for the economy.

Strong domestic demand, large investment into the mining sector, and elevated commodity prices further support Peru's momentum of GDP growth above 3%. As for Peru's El Niño preparedness, the country has drawn lessons from previous events and is today better prepared than during past extreme weather occurrences. The government has improved their forecast capabilities and increased investments in storm and flood mitigation activities, including river dredging and drainage systems. Further, Laureate's ability to deliver high-quality hybrid and online learning should help to partly mitigate the potential disruption to our operations during the peak of the El Niño event, forecasted to take place between November 2026 and February 2027. In summary, Peru's solid fundamentals continue to support our bullish medium and long-term growth outlook for the country.

That concludes my prepared remarks, and I am now handing the call over to Rick for the financial overview for the quarter, as well as more details on our outlook.

Rick? Thank you, Eilif. 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. Although the third quarter is a large intake period, from a P&L perspective, it is seasonally low, as classes are out of session for much of the quarter. 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. This, in turn, affects the timing of enrollments and revenue recognition and quarter-over-quarter comparability. In terms of seasonality for 2026, we have some intra-year calendar timing impacts, as outlined on slide 21 in our presentation. As I review our operating results, I will provide additional color on these timing-related impacts.

Let us start with pages 10 and 11 of the supplementary presentation, which highlight our third quarter and year-to-date operating and financial performance. New and total enrollment volumes increased 8% and 6% respectively for the current intake cycle versus the comparable intake period in the prior year. Growth from new campuses contributed approximately 2% to our overall new enrollment growth and 1% to our total enrollment growth. Third quarter revenue was $485 million, and Adjusted EBITDA was $147 million. Strong new enrollment intakes in both markets drove favorable results for the quarter. We also benefited from $29 million of foreign currency impact on revenue, reflecting a stronger Mexican peso and Peruvian sol during the period. On a 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 14%.

Third quarter net income was $101 million, resulting in earnings per share of $0.73 per share on a reported basis. Third quarter adjusted net income was $72 million, and adjusted earnings per share was $0.52 per share, an increase of 100% as compared to Q3 of the previous year. Growth was aided by earnings momentum and favorable intra-year academic calendar timing. Turning to year-to-date performance. On a constant currency basis and adjusted for academic calendar timing, results for the first nine months of 2026 were strong, with revenue and Adjusted EBITDA growth of 7% and 9% respectively 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 us start with Mexico.