Laureate Education (LAUR) Q2 FY26 earnings call: guidance and Q&A

How is the main September intake in Mexico tracking, given it's the largest intake period?

The main September intake in Mexico, which accounts for about 60% of annual intake, is about 50% complete and is tracking along with management's expectations.

“When it comes to the main intake in Mexico, which I think your question was about, that's about 60% of the annual intake. That's happening in September. We are about halfway through that. We have about 50% completion of that intake. And it is tracking along with my expectations, and that's as much as I'm going to comment on that intake.”

asked by Jeffrey Silber · answered by Eilif Serck-Hanssen

Are you seeing changes in student search behavior towards AI in Mexico and Peru, similar to the US, and how is your marketing strategy adapting?

Laureate is at the forefront of AI and digital marketing, partnering with Google and others. This has provided a strong competitive advantage, leading to explosive lead generation, improved conversion, lower acquisition costs, and consistent market share gains in Mexico. The same expertise is being deployed in Peru.

“we've been recognized now for 2 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 embracing AI in our recruiting and onboarding effort. And it has given us a very strong competitive advantage, where we have seen an explosive growth in our lead generation capability and significant improvement in conversion, which has taken down our cost of acquisition and also enabled us to consistently take market share in Mexico.”

asked by Jeffrey Silber · answered by Eilif Serck-Hanssen

What are the long-term strategic drivers for sustainable growth given campus openings and distance learning initiatives?

Long-term growth is driven by three factors: rising participation rates in Mexico and Peru, the penetration of fully online programs for working adults, and new campus expansions in underserved areas and secondary cities.

“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 the significant opportunity for that participation rate to increase... The second big growth driver is the fully online working adult product... And then third, new campuses.”

asked by Marcelo Santos · answered by Eilif Serck-Hanssen

What actions led to the improved retention rates observed in Mexico in Q2?

Improved retention rates in Mexico, particularly in the online segment, resulted from dissecting the enrollment-to-graduation process, deconstructing the digital journey, reducing friction, and experimenting with AI tutors. This is expected to lead to overall attrition improvement for the full year.

“We spent several years focused 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.”

asked by Marcelo Santos · answered by Richard Buskirk

How are online programs priced relative to campus-based programs, and what is their contribution to operating income?

Online programs are priced about 40% below face-to-face programs but yield a similar mid-50s contribution margin. They offer a superior return on invested capital (ROIC) due to no CapEx and leverage strong brand portfolios.

“The price point of an online offering versus the face-to-face counterpart is about 40% below face-to-face. And that gives us a contribution margin in the mid-50s, which is similar to a campus performance. So similar margin contribution, 40% lower price. And of course, an ROIC that is very, very superior because there is no CapEx in online, and it's benefiting from the strong brand portfolio that we have in both Mexico and Peru.”

asked by Alexander Paris · answered by Eilif Serck-Hanssen

As past benefits from campus consolidation mature, what are the main sources for the next wave of margin expansion in Mexico and over what timeframe?

Future margin expansion in Mexico will come from healthy operating leverage, flow-through of incremental revenue, and targeted efficiencies to streamline operations. Management aims to close a substantial part of the 6% margin gap with Peru within the next 3 to 5 years, contributing to a consolidated margin expansion target of 30+ basis points per year.

“So we see notable opportunities to continue on a healthy operating leverage and flow-through margin of incremental revenue as well as we do still have some targeted efficiencies that we're working on to streamline operations across the different lines. So we do expect to continue to expand margins when you adjust for rent because we lease our properties in Mexico, and we own them in Peru. It's about a 6% plus delta. So as we've said historically, we are working on closing that gap and management believes we can close a substantial part of that gap in the next 3 to 5 years.”

asked by Mauricio Cepeda · answered by Richard Buskirk

At what point will increasing online penetration offset enrollment and margin benefits, and how is Laureate monitoring for cannibalization or competitive pressure?

Laureate believes online penetration is still early, with significant growth potential in Mexico (14%) and Peru (<5%) compared to the US (25%), especially for working adults. They actively monitor for cannibalization by targeting online programs specifically to 25-50 year olds, ensuring young students primarily engage in campus-based or hybrid settings, thus maintaining distinct market segments.

“In the United States, 25% of all students are working adult fully online students. So it is a segment that makes a tremendous amount of sense for that working adult students, and it is at scale. In Mexico, it is at 14%, and in Peru, it's less than 5%. And so you would expect online penetration in Mexico and Peru at least to get to the U.S. It really should become significantly larger than in the U.S. because the mix of 25- to 50-year olds in Mexico and Peru that doesn't have a degree is much bigger than the mix of 25- to 50-year olds in the U.S. that doesn't have an undergraduate degree.”

asked by Mauricio Cepeda · answered by Eilif Serck-Hanssen