LAUR

Good day. Thank you for standing by. Welcome to the Q1 2026 Laureate Education Inc earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll 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's first quarter 2026 results. Joining me on the call today are Eilif Serck-Hanssen, 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'll 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.

Forward-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. 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, non-GAAP measures that we discuss, including and among others, Adjusted EBITDA and its related margin, Adjusted net income, 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. 2026 is off to a good start, and we are encouraged by the results from our recently completed enrollment intake cycles, which included Peru's primary intake and a smaller secondary intake for Mexico. Enrollment results came in line with our expectations for both markets with year-over-year new enrollment growth of 13% in Peru and 4% in Mexico through completion of the intake cycles by the middle of April. With the intakes now finalized, we have good visibility into the remainder of the year, and we are reaffirming our full-year guidance for enrollments, revenue, and Adjusted EBITDA. We are increasing our guidance for Adjusted Earnings Per Share to reflect the $105 million in share buybacks completed during the first quarter.

We anticipate further share buybacks through the remainder of 2026 as return of excess capital remains a priority for the company. The enrollment intake results for the first cycle were in line with the macroeconomic trends we discussed during our last call for both Mexico and Peru. In addition, Peru is benefiting from continued strong penetration for our online offerings for working adult students. As a reminder, our business model is loosely correlated with economic cycles. In periods of robust GDP growth, such as the current environment in Peru, we have historically benefited from strong enrollment momentum. During a softer macroeconomic backdrop, as we are currently experiencing in Mexico, our growth tends to moderate a bit, but we are still doing well as families continue to prioritize spending on higher education due to the strong value proposition.

In Mexico, GDP growth for 2026 is expected to remain relatively modest, albeit slightly better than 2025. President Sheinbaum's pragmatic leadership has helped preserve stability in the U.S.-Mexico relationship, providing for a constructive backdrop for the upcoming USMCA trade negotiations. Many economists are projecting an increase in economic activity for Mexico starting in the second half of 2026, setting the stage for more robust GDP growth in 2027. In Peru, the economy continues to perform solidly, bolstered by robust domestic demand, new mining projects, and strong commodity prices. The Peruvians just elected a new Congress, which reaffirmed a business-friendly center-right majority, and their presidential runoff election is set for June.

Regardless of the outcome of the presidential election, Peru has historically demonstrated economic strength and stability underpinned by strong underlying governmental institutions, a representative Congress, an independent central bank, and a history of strong fiscal discipline. The foundation of our strong track record of performance is our mission. A mission to deliver affordable, high quality education to prepare students for successful career and lifelong achievement while building pride, trust and respect within the communities we serve. We remain committed to transparency and accountability, measuring the outcomes that matter most, and continuously improving how we track and report these results to all of our stakeholders. Earlier this month, we published our 2025 Impact Report. I encourage you to visit our website and download a copy to learn more about the impact of the outstanding work of our students, faculty, and institutions are currently doing in their communities throughout Mexico and Peru.

Let me briefly highlight some of the most important measurable outcomes we delivered. Half of our newly enrolled students are first-generation university attendees for whom a degree leads to their first professional role and a long-term economic upward mobility for their families. Nine out of 10 of our job-seeking graduates secure employment within 12 months of graduation, underscoring the relevance of our programs, strong alignment with industry needs, and the expertise and commitment of our faculty and staff to prepare students for successful careers. Graduates of Laureate universities in on-campus programs recover the nominal cost of their education in approximately three years through increased earnings compared to high school graduates of the same age, and the payback period is even shorter for working adults in our fully online programs. These measurable outcomes aligns perfectly with our mission, which is focused on quality, affordability, and lifelong achievement.

This concludes my prepared remarks, and I will now turn the call over to Rick Buskirk for a more detailed financial overview of our first quarter performance, as well as further details on our 2026 full year outlook. Rick?

Thank you, Eilif. Before I discuss our financial performance for the quarter, let me provide a few important reminders on seasonality. First, campus-based higher education is a seasonal business. The first and third quarters represent our two largest intake periods, which traditionally account for approximately 80% of our total new enrollment activity for the year. From a P&L perspective, both are seasonally low periods as classes are out of session for most of those months. In contrast, the second and fourth quarters are not large enrollment intake periods, but generate higher revenue and Adjusted EBITDA for the year. In addition, in terms of seasonality for 2026, we will have some intra-year calendar timing as outlined on slide 22 in our presentation.

For the first quarter specifically, approximately $9 million of revenue and related profitability is expected to shift out of the first quarter to the second half of the year. As I review our operating results for the first quarter, I will provide some additional color on these and other timing related impacts and discuss enrollments in context of the cycle completion through mid-April. Let me now move to the operating and financial performance for the first quarter starting on page 11. Enrollment results for the cycle were in line with our expectations in both markets. New and total enrollment volumes increased 9% and 6% respectively through completion of the intake cycle in April as compared to the corresponding intake period in the prior year. Revenue in the seasonally low first quarter was $273 million with Adjusted EBITDA of $-2 million.

Both metrics were ahead of the guidance provided three months ago due to favorable FX rates as well as some timing of expenses which benefited Adjusted EBITDA. On a constant currency basis and adjusted for the academic calendar shift discussed earlier, revenue for the first quarter was up 5% year-over-year and Adjusted EBITDA was essentially flat, with a slight $2 million decrease from prior year due to timing of expenses and investments for new campuses in a low seasonal quarter. First quarter net loss was $22 million, resulting in a loss per share of $0.15. First quarter Adjusted net loss was $24 million, and Adjusted Loss Per Share was $0.17.

Given some timing items affecting both revenue and Adjusted EBITDA for the quarter, we are providing an outlook for both the first half and second half of 2026 to help investors better understand the trend line in the business. I'll discuss that a bit further when we review guidance in a few minutes. Let me now provide some additional color on the performance of Mexico and Peru, starting with page 13. Please note that all comparisons versus the prior year quarter are on a constant currency basis. Let's start with Mexico. The first quarter reflects a smaller secondary intake as Mexico's primary enrollment cycle occurs in September, aligned with the Northern Hemisphere calendar. Mexico's new and total enrollments increased 4% versus the comparable intake cycle period through April in the prior year.

These results are a continuation of the performance we saw during the primary intake last September and are aligned with the softer macroeconomic conditions we are currently experiencing in that market. Overall, pricing for the intake was in line with inflation for our traditional face-to-face programs. We were a little less aggressive with pricing for Online. Still with an increase year-over-year as we continue to focus on driving strong volume growth in those programs. Adjusted for academic calendar timing, Mexico's first quarter revenue increased 2% versus the prior year period, with volume growth offset by timing of other revenue items. Revenue growth in Mexico for the first half of the year is expected to be fairly consistent with guided total company growth rate expectations for the year as those timing items will wash out in the second quarter.

Adjusted EBITDA was down 16% year-over-year in the first quarter, largely reflecting the out-of-session period, investments in new campuses, and other timing items. Let's now transition to Peru on slide 14. The first quarter represents the primary intake for Peru as they are a Southern Hemisphere institution. Peru's new enrollments increased 13% versus last year's comparable intake, led by strong growth in working adult-focused fully online programs. Total enrollments were up 8% for the cycle. The rapid scaling of fully online offerings will drive the majority of our enrollment growth in Peru this year as our series of planned new campus launches for face-to-face students won't start to ramp until 2027 and beyond.

As discussed in our prior call, this will create a price mix impact on average revenue per student in 2026, resulting in similar revenue and volume growth rates this year in that market. Pricing during the intake was largely in line with inflation for traditional face-to-face programs. For online programs, given that we are still in an early stage market, we are keeping prices relatively flat for the time being as we continue to focus on scaling that business and further enhancing our market-leading position. Adjusted for timing of the academic calendar, Peru's revenue for the seasonally low first quarter increased by 13% versus the prior year period and was aided by timing of other revenue during a seasonally low quarter.

Adjusted EBITDA for the quarter was $-35 million as Peru is out of session for most of the quarter as it is in their summer period. Adjusted for timing of the academic calendar, this represents $5 million improvement versus the prior year period. Let me now briefly discuss our balance sheet position. Laureate ended March with $217 million in gross debt and $157 million in cash, for a net debt position of $60 million. Our balance sheet remains strong. During the first quarter, we repurchased $105 million of stock and at quarter end had $76 million remaining under our stock repurchase authorization. Supported by a strong balance sheet and our cash accretive business model, we remain committed to continuing to return excess capital to shareholders.

Moving on to our outlook for 2026, starting on page 18. We remain excited about the growth opportunities in Mexico and Peru and expect continued operating momentum in both markets during 2026. Following the results from our recently completed intake, today we are reaffirming our guidance for total enrollments, revenue, and Adjusted EBITDA, and are increasing our Adjusted Earnings Per Share guidance by $0.05 per share to reflect the impact of share repurchases during the first quarter. We did recognize a slight foreign currency translation benefit versus expectations in the first quarter. Are maintaining our existing FX rate assumptions for the year given some of the recent volatility in currency rates caused by global events. With that context, let me now move to our guidance ranges.

Based on our assumed FX rates, we expect full year 2026 results to be as follows: Total enrollments to still be in the range of what 516,000-521,000 students, reflecting growth of 4%-5% versus 2025. Revenues to be in the range of $1.890 billion-$1.905 billion, reflecting growth of 11%-12% on an as-reported basis, and 6%-7% on a constant currency basis versus 2025. Adjusted EBITDA to be in the range of $583 million-$593 million, reflecting growth of 12%-14% on an as-reported basis, and 7%-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. For 2026, we 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. Adjusted Earnings Per Share guidance for 2026 is now expected at $2.00-$2.08 per share, reflecting growth of 16%-21% versus 2025 on a reported basis. This guidance reflects a diluted weighted average share count of approximately 141 million shares, incorporating the impact of share repurchases completed during the first quarter. Now moving to guidance for the second quarter, implied first and second half of the year.

For the second quarter of 2026, we expect revenue between $597 million and $601 million dollars. Adjusted EBITDA between $239 million to $243 million dollars. This would result in first and second half of 2026 trends as shown on slide number 26. Let me just highlight a few points. Constant currency revenue growth rate expectations for the first and second half of the year are pretty similar, with a slight uptick in the second half as we expect to start to see some macro recovery in Mexico. From an EBITDA perspective, you will note that our margin accretion is weighted towards the second half of the year. That is resulting from timing of investments as well as the new campus for Mexico that will open starting in September. That concludes my remarks.

Eilif, I'm handing it back to you for closing comments.

Thank you, Rick. The key points of promotable differentiation for Laureate are our leading brands, strong culture of innovation and student centricity, and track record of delivering quality education at scale. These assets drive our long-term value creation for all our stakeholders. I am honored to be part of an organization so deeply committed to expanding the middle class in Mexico and Peru through high quality, affordable higher education. I extend my sincere gratitude to the faculty and staff, past and present, whose dedication has been essential to our success. Operator, that concludes our prepared remarks, and we are now happy to take any questions from the participants.

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to 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 Jeff Silber of BMO Capital Markets. Your line is now open.

Hey, good morning. This is Ryan on for Jeff. The new enrollment in Peru is really solid this quarter. I understand it was within your expectation, but certainly a lot better than ours. Wondering if it gives you a little bit more tension towards the upper end of the enrollment range. Thank you.

Good morning, Ryan. Thank you. This is Eilif. Yeah, we are very pleased with the performance in Peru. It's driven by our focused effort to penetrate the fully online working adult market, you know, as well as, you know, benefiting from, you know, robust, you know, macro conditions in Peru. We've really over the last 18 months, 18-24 months, we have launched a broad suite of fully online products. We have done a great job in executing operationally to deliver quality experience for our students. Our commercial efforts has also really resonated with the consumers given the convenient product and the strong value proposition.

I appreciate it. Just for the follow-up, has your view on the macro changed at all since last quarter? Has the recent geopolitical volatility in the U.S. dampened the consumer in Mexico or Peru at all? Thank you.

No, not really. I mean, the Peruvian economy is really driven by natural resources, mining, farming, fishing, tourism, and, you know, a very broad set of trading partners, both the Americas, Asia, China and Europe. That has benefited from, you know, really stable, you know, macro conditions. Mexico is, you know, more closely tied to the U.S. The U.S. has also been fairly resilient given some of the geopolitical challenges. We're seeing, you know, improvements in GDP, we're seeing improvements in consumer confidence, and we are seeing improvement in employment. You know, albeit all at relatively, you know, small, marginal magnitudes. The trend lines are encouraging.

Great. Thank you. Our next question comes from the line of Marcelo Santos of JPMorgan. Your line is now open.

Good morning. Thanks for taking my questions. I have 2. The 1st is, in the expansion of online education in Peru, how is that going through the market? I mean, is a new, recently new development. How is market discipline around it? Like, where are your senior competitors? You competed what you're doing, but I just want to know how the market is behaving. The second question is like, your student enrollment outlook is below what you posted in the first quarter, right? Than what you were promising. Is that because you expect kind of a slowdown in Mexico? Those would be my questions.

Good morning, Marcelo. I'll start with the Peru online market, then Rick will take the guidance in enrollment outlook. In terms of the online performance in Peru, very consistent with what I shared with Ryan in the prior question. The market is responding very favorable to our product offering. We of course, we're seeing competitors launching similar similar products, you know, following our lead. The market is very disciplined. This fully online offering is really dedicated for the working adult, the 25 to 50-year-old students. It's largely driven by degree completion.

There is no meaningful cannibalization between the working adult students that want a fully online experience versus, you know, young students who wants and needs a campus experience where they're supervised by faculty and staff and collaborating and getting durable life skills in addition to the academic experience, you know, on the ground. I view the fishing pond, so to speak, between the young students in the campus setting very distinct and separate from the fully online offering, which are providing enormous convenience and flexibility for the working adult students.

Yeah. Marcelo. Hi, this is Rick. Just to comment on, we still feel on the enrollment expectations for the year, on the full year, we still feel comfortable with the guidance on the full year of 4%-5% revenue growth. Yes, on a weighted basis, we were higher in the first intake this year, that is driven by Peru. We still haven't had the secondary impact, or the impact from the primary intake of Mexico in the second half. When you weigh those together, we're still looking at the enrollment volume growth of 4%-5%. The only other data point that I would add to you is the growth, we're very pleased, as Eilif said, with the trend rate of expanding in fully online.

Fully online does come with a higher attrition rate as expected, and will create a bit of a difference between our new enrollment and our total enrollment growth for the full year, relative to some of our historical trends. Overall, very positive and, we feel very comfortable about our enrollment outlook for the year.

All right. Thank you very much.

Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. We'll stand by a moment for additional questions. Okay. Our next question comes from Lucas Nagano of Morgan Stanley. Your line is now open.

Morning. First question is about the intake in Mexico. If it's, if it's fully comparable in terms of campuses, of how much of the 2% intake growth was due to the new UNITEC campus launch, and how much was dragged by the closure of UPN campuses? Thank you.

Good morning, Lucas. C1 in Mexico, the intake, the first quarter intake in Mexico is a secondary intake, it is primarily non-traditional students, largely working adults. A big portion of it is online. The growth really is, you can view it essentially all as organic.

Got it. About the 50 basis point increase in margin outlook, is it more concentrated in Mexico, Peru, or both? Mexico may have some more opportunity to raise margins as the new campus matures, but Peru may, we think it may experience some benefits from online.

Thanks, Lucas. This is Rick. We expect, in short, we expect margin expansion in both markets. We expect margin expansion in Peru. Peru, ended the year last year right at about 40%, you will see some margin accretion happen in that market. As well as, Mexico, we do expect to continue to expand our operating leverage as we've talked about in the past and see margin expansion in Mexico. That's despite the fact that, you know, we are investing in new campuses that do have a drag, a drag of 50 basis points in Mexico. We're still able to beat that drag and expand margin. We feel very good that we'll get expansion in both markets.

What you will see, as we called out in the script, is you will see on top of what I just mentioned on a segment level, that margin expansion will largely come in the second half as we are making investments in some of these new campuses, including Puebla, that will launch in the second half, and we're not generating revenue off. You'll see more revenue expansion come in the second half of the year versus the first half.

I would just supplement that by saying, had it not been for the new campus investments, largely in Mexico, that we are launching this year, the campus EBITDA margin expansion, instead of being 50 basis points, would have been 75 basis points. You know, that delta of 25 basis points is, you know, is largely attributable to Mexico. We're seeing, you know, continued margin expansion opportunity in Peru from scale, and we are seeing significant margin opportunity in Mexico, both from scale and continued operational efficiencies.

Very clear. Thank you.

Thank you. I'm showing no further questions at this time. I'd like to thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.