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Operator: Good day, everyone, and thank you for standing by. Welcome to the Laureate Education First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Morse, Senior Vice President of Finance. Please go ahead.

Adam Morse: Good morning, and thank you for joining us on today’s call to discuss Laureate Education’s First Quarter 2025 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’ve 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, 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 and adjusted earnings per share, total debt net of cash 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.

Eilif Serck-Hanssen: Thank you, Adam, and good morning, everyone. 2025 is off to a good start, and we are encouraged by the solid results from our recently completed 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 8% for Mexico and 6% in Peru through the completion of the intake cycles by middle of April. With the intake now finalized, we have good visibility into the remainder of the year, and we are tightening the range of our full year guidance, effectively raising the midpoint for total enrollments, revenue and adjusted EBITDA. The result from this intake cycle further validates the resiliency of our business model.

Our historical performance demonstrates that our business model is loosely correlated with economic cycles. During more robust economic times and periods of GDP growth, we benefit from both strong volume growth and pricing power. In slower and more uncertain economic times, as we are currently experiencing, our business model has consistently proven to be resilient as families tend to prioritize education over other forms of discretionary spending. This is due to the strong wage premium from having a higher education degree, the affordability of our programs and the strong return on the educational investment we deliver to our students. This resiliency was also demonstrated during the global financial crisis in 2008 to 2010, the COVID-19 pandemic and even more recently during the 2023 recession in Peru.

For that reason, we remain confident in the growing demand for quality higher education in both Mexico and Peru. With our leading brands and strong digital capabilities, we feel very well positioned to capitalize on the secular growth trends in our markets. In the near term, from a macro perspective, we continue to closely monitor political and external developments in both markets, particularly as U.S.-Mexico trade discussions evolve. Although GDP growth and foreign direct investment have recently slowed, we remain cautiously optimistic given Mexico’s strategic position as the U.S. seeks to reduce its reliance on China. While recent trade tensions have introduced some uncertainty, Mexico’s strong economic ties to the U.S., its sound fiscal discipline and more dovish monetary policy set the stage for solid foundation for growth in the coming years.

In Peru, the recovery from the mid-2023 recession continues to gain traction with GDP growth projected at approximately 3% for 2025. Peru is less affected by U.S. tariff policies. And it has a favorable macro backdrop due to low interest rates, stable inflation and a currency that is correlated with U.S. dollar-denominated commodity prices, such as copper, gold and agricultural products. While the current macroeconomic backdrop in both Mexico and Peru remains largely stable, we do anticipate continued volatility in the coming months and recognize that evolving global trade dynamics may introduce near-term pressures on GDP growth and foreign exchange rates across both markets. As a reminder, our businesses are local businesses with revenues and expenses naturally matched within each market.

While this insulates us from any material foreign currency transaction risks, we do face translation impacts as a U.S. dollar reporting company. At Laureate, our mission is to deliver affordable, high-quality education to prepare students for successful careers and lifelong achievements while building pride, trust and respect in our communities. For more than 25 years, we have honored that mission and positively influenced millions of lives by broadened access to quality higher education. My sincere gratitude goes out to all faculty and staff who have played a significant role in our success. The impact we have had on society is profound, and we measure that in many ways, including access to education, student outcomes and affordability and quality of our offerings.

We also take tremendous pride in tracking the magnitude of our institutions’ support to our local communities through free or low-cost health services and volunteering hours. In early April, we published our 2024 impact report, and I encourage you to visit our website and download a copy to learn more about the impact and the outstanding work of our students, faculty and institutions throughout the communities in Mexico and Peru. Just to touch on a few highlights. Our 4 institutions are all 5-star rated by QS Stars, the highest rating attainable in the categories of employability, inclusiveness, online learning and social impact. 47% of our students are first-generation university goers. By expanding access to higher education, we turn ambition into opportunity, enabling these students to surpass their parents’ economic status and create lasting change for their families and communities.

And 9 out of 10 of our job-seeking graduates are employed within 12 months of graduation. Our academic programs emphasize health sciences, STEM and business disciplines, careers where there are large and growing demand by employers. I’m very honored to be part of an organization which cares so deeply about expanding the middle classes in Mexico and Peru by providing quality higher education at affordable prices. 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 2025 full year outlook. Rick?

Rick Buskirk: 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 2 largest intake periods. The 2 intake periods 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, 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 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. As a result, approximately $26 million of revenue and $23 million in adjusted EBITDA will shift from the first quarter to the second half of the year. As I review our operating results for the first quarter, I will provide additional color on these timing-related impacts and discuss enrollments in context of the cycle’s completion through mid-April. Let me now move to the operating and financial performance for the first quarter, starting on Page 11. Enrollment results and associated pricing for the cycle were in line with our expectations in both markets.

Adjusted for timing of semester starts, new and total enrollment volumes increased 7% and 6%, respectively. These growth rates represent completion of the intake cycles as compared to the corresponding intake period in the prior year. Revenue in the seasonally low first quarter was $236 million and adjusted EBITDA was $5 million. Both metrics were ahead of the guidance provided 3 months ago. On an organic constant currency basis and adjusted for the academic calendar shift discussed earlier, revenue for the first quarter was up 10% year-over-year, and adjusted EBITDA increased by 132%, albeit from a small base. First quarter net loss was $20 million, resulting in a loss per share of $0.13. First quarter adjusted net loss was $17 million and adjusted loss per share was $0.11.

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 an organic and constant currency basis. Let’s start with Mexico. The first quarter represents a smaller secondary intake, their large intake occurs each September and follows the Northern Hemisphere calendar. Mexico’s new enrollments increased 8% versus the comparable intake cycle period in prior year, led by strong growth in working adult-focused fully online programs. Total enrollments were up 7% for the cycle. Pricing for the intake was in line with our cost of inflation for traditional face-to-face offerings. In our fully online product, we prioritized higher volume growth and kept pricing relatively flat.

Adjusted for timing of the academic calendar, Mexico’s revenue for the first quarter increased by 11% compared to the prior year period due to volume growth and adjusted EBITDA was up 22%, led by productivity gains and revenue flow-through. 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. For the first quarter, new and total enrollments came in line with our expectations, underscoring a more favorable operating environment as Peru moves beyond last year’s recession. Peru’s new enrollments increased 6% versus last year’s comparable intake, led by strong growth in young students in our premium brand and working adult-focused fully online programs.

Total enrollments were up 5% for the cycle. Pricing for our traditional face-to-face product during the intake was in line with inflation. We do expect a mix effect as we grew fully online programs faster than our face-to-face offerings. Adjusted for timing of the academic calendar, Peru’s revenue for the seasonally low first quarter increased by 5% versus the prior year period. Adjusted EBITDA for the quarter, adjusted for timing of the academic calendar was down $2 million compared to the prior year period due to seasonality. The first quarter in Peru is a largely out-of-session summer period with limited revenue recognition while we still incur fixed expenses as well as investments for growth. Let me now briefly discuss our balance sheet position.

Laureate ended March with $110 million in cash and $115 million in gross debt for a net debt position of $5 million. Our balance sheet remains strong. During the quarter, we repurchased $42 million of stock and at quarter end, had $56 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 2025, starting on Page 18. As referenced earlier by Eilif, with the first intake now finalized and increased visibility into the year, we are tightening our full year 2025 guidance range by increasing the low end of the operational range and flowing through the FX benefit realized in the first quarter.

The resulting impact to our 2025 guidance midpoint expectations are a 1,000 student increase in total enrollments, $10 million increase in revenues and approximately $5 million increase in adjusted EBITDA. I also want to remind you that in addition to the approximately $26 million shift in revenue and related profitability from Q1 to the second half of the year due to academic calendar timing, there are 2 additional factors to be aware of in our 2025 outlook. First, our campus consolidations in Mexico are progressing well. As a result of those activities, we do expect a onetime revenue loss in 2025 of approximately $8 million. However, our more streamlined campus footprint will continue to allow us to be more efficient. We have continued to raise margins in Mexico, and you will see that reflected in our strong consolidated margin growth expectations for 2025.

Second, with the significance of the movement in the Mexican peso, we do expect our reported revenues in 2025 to be flat to slightly up versus 2024. However, given local currency revenue growth, margin momentum in the business and a stable Peruvian sol, we still expect to deliver growth in both U.S. dollar reported adjusted EBITDA and cash flow based on guided exchange rates. While we do note that we have seen a very recent improvement in the strength of the Mexican peso, we are maintaining a MXN 20.50 to dollar rate in our guidance as was used in our February guidance for the remainder of the year given overall volatility. As a reminder, as a local business, our revenues and expenses are naturally hedged within each market. While we anticipate continued FX volatility, the main impact to our business will be limited to U.S. dollar translation.

We now expect our full year 2025 results to be as follows: total enrollments to be in the range of 491,000 to 495,000 students, reflecting growth of 4% to 5% versus 2024. Revenue to be in the range of $1.560 billion to $1.575 billion, reflecting flat performance to growth of 1% on an as-reported basis and growth of 6% to 7% on an organic constant currency basis versus 2024 or 7% to 8%, excluding the impact from campus consolidations in Mexico. Adjusted EBITDA to be in the range of $473 million to $480 million, reflecting growth of 5% to 7% on an as-reported basis and 11% to 13% on an organic constant currency basis versus 2024. This would result in an increase in adjusted EBITDA margins of approximately 150 basis points at the midpoint of our guidance.

We anticipate further margin expansion to be driven by operating leverage from revenue growth, our campus consolidations in Mexico and lower corporate expenses. Lastly, for 2025, we expect adjusted EBITDA to unlevered free cash flow conversion of approximately 50% on a reported basis. This implies strong double-digit year-over-year growth in U.S. dollar reported cash flows. Now turning to our second quarter guidance. For the second quarter of 2025, we expect revenue between $499 million and $504 million, adjusted EBITDA between $191 million to $194 million. That concludes my prepared remarks. Eilif, I’m handing it back to you for closing comments.

Eilif Serck-Hanssen: Thank you, Rick. Let me close by saying that market dynamics remain favorable in Mexico and Peru, even with the backdrop of macroeconomic uncertainty. Both markets are attractive with significant growth opportunities. Participation rates in higher education are growing and still well below developed markets. And the private sector plays a critical role by providing over half of the total seat capacity in both markets on a combined basis. With our strong balance sheet, best-in-class universities and resilient business model, we are confident in our continued ability to grow faster than the overall market and deliver great value to our shareholders. Operator, that concludes our prepared remarks, and we’re now happy to take any questions from the participants.

Operator: [Operator Instructions] And our first question comes from Jeff Silber of BMO Capital Markets.

Jeffrey Silber: I look in your prepared remarks, you talked about the uncertain environment and the backdrop of the fact that your business tends to be resilient. But I’m just curious, are you seeing any hesitancy from potential students given what’s going on? And I’m specifically interested in Mexico in terms of the upcoming fall intake period.

Eilif Serck-Hanssen: Thanks, Jeff. We’ve just completed our secondary intake, which is largely a working adult student profile. And that student, by definition, is less dependent on household income because it is funded by being a working professional. So we saw very robust demand during this intake. We do expect the primary intake in the third quarter to mirror more the intake of last year in the same time, which was 4% to 5%. So we will see how it goes. It’s way too early to give any specific guidance, but we are assuming this similar economic environment for this intake as we saw at the end of last year when the slowdown in the economy had already started in Mexico.

Operator: And our next question comes from Mauricio Cepeda of Morgan Stanley.

Mauricio Cepeda: I have 2 questions. The first one about the intake, again, sorry for insisting on that. So I understand there was kind of a time shift between ’24 and ’25 in terms of which was the intake cycle. But judging from the numbers in the release, it seems that there was a lot of intake that happened in April for that growth to happen. So is this the right interpretation? Or is any other kind of normalization you made with the numbers to try to compare apple-to-apples in respect to the intake cycle? And the second question is a little bit about FX. So I understand that you were using the effects from Q1 in this guidance, let’s say, republishing, but it would give naturally a room in terms of FX because the FX is more favorable to you now. Why the decision to use the past effects rather than the guidance publication date effects?

Rick Buskirk: Mauricio, I’m happy to take the first on that — both those questions. Let’s start first with the enrollment intake. So normalized for the academic calendar change, we are up 7% new enrollments, 8% in Mexico and 6% in Peru. We — that 8% in — if we deconstruct that by market, we actually closed our intake cycle in Mexico in Q1. So you will see not only on a reported basis, but also on a normalized basis is the same of 8% intake for the quarter. The shift happened in Peru, where the academic calendar started 2 weeks later, and that’s where the normalization occurs. And it’s simply that, just the delay of 2 weeks of our academic calendar enrollment start in Peru, which takes Peru from a reported basis that you will see in the guided presentation of negative 9% to an adjustment for those 2 weeks of 6%.

There’s no other normalizations other than the 2 weeks of deferral on the enrollment intake for the quarter. I’ll pause there and see if that answers your question.

Mauricio Cepeda: Yes. Yes. So if I understood, the point is that the beginning of the cycle was later, right? It’s not that you are adding up the April intake to compose the begin to end intake for each year, right? You’re judging…

Eilif Serck-Hanssen: Think about it this way, instead of having the main — the first semester start in late March, it now started in the second week of April. And that more aligns to market needs or market norms in the market.

Rick Buskirk: And your second question on — sorry, your second question on FX, to your point, we guided at a 20.50 rate of the peso to the dollar in February. We do acknowledge that the peso has been volatile and has come down in the most recent 10 days trading days to as low as around 19.50, 19.60. But given the fact that there’s a tremendous amount of volatility in FX in that market, we saw it prudent to maintain that 20.50 as again, as recent as about 10 trading days ago, it was at 20.50. So that was our approach, which is not what we typically do, to your point, we usually guide as spot at the moment, but we are not in typical environment in terms of FX volatility.

Operator: [Operator Instructions] And our next question comes from Yan Cesquim of BTG Pactual.

Yan Banco: I have 2 quick questions here. The first one is regarding the advance of fully digital courses. Could you please give us more color on the breakdown and development of fully digital courses in this first intake cycle? That’s the first one. And the second is regarding capital allocation that you repurchased, $42 million in this first quarter, still holding some room until the end of the existing buyback program. So should we expect similar capital allocation in the following quarters? Is that space for even bolder annualized payout going forward this year? That’s the 2 questions here.

Eilif Serck-Hanssen: Great. Well, the digital or fully online courses are growing at a very robust rate, double digit in both markets. It’s growing faster than our on-campus face-to-face hybrid delivery. And for us, digital education or fully online education is really the way that we are penetrating the working adult market. So we’re the absolute leader in both Mexico and Peru when it comes to quality digital education, and we are market leaders when it comes to innovating and launching new programs. So we are growing very robustly. We have about 100,000 students, or about 20% of our student population enrolled in fully online digital learning. And I said we’re growing at a much faster clip than face-to-face, about 3 to 4x the momentum.

The other thing I can share with you on digital learning is that we are further along in Mexico than we are in Peru, but we are very encouraged with the momentum in both markets. I’ll pause there before going to capital allocation. Did that address your question, Yan?

Yan Banco: Yes, that’s the question.

Eilif Serck-Hanssen: Perfect. And vis-a-vis capital allocation, we are committed to return all excess cash to our shareholders after what we have allocated and guided vis-a-vis CapEx to support growth in the business. And that means that 50% of our EBITDA would convert into free cash flow, and that is the amount that we are planning to return to shareholders, and we have a $100 million program that we are — at the end of the first quarter, we were essentially halfway through. And so we will continue that program and discuss with our Board appropriate actions when that program has been exhausted.

Operator: Thank you. This concludes the question-and-answer session and today’s conference. Thank you for your participation, and you may now disconnect.

Eilif Serck-Hanssen: Thank you all.