LAUREATE EDUCATION, INC. AND SUBSIDIARIES Quarterly Report (Form 10-Q)

Laureate Education’s Financial Performance: Navigating Challenges and Opportunities

Laureate Education, a leading provider of higher education in Mexico and Peru, has recently released its financial report for the three months ended March 31, 2025. This article will provide an overview of the company’s financial performance, discuss revenue and profit trends, analyze its strengths and weaknesses, and explore the outlook for the future.

Overview of Financial Performance

Laureate Education’s consolidated revenues for the three months ended March 31, 2025 (the 2025 fiscal quarter) decreased by 14% to $236.2 million, compared to $275.4 million in the same period of the previous year (the 2024 fiscal quarter). This decrease was primarily attributable to the weakening of the Mexican peso against the US dollar, which reduced revenues by $37.6 million. Additionally, changes in tuition rates, enrollment, and academic calendar timing decreased revenues by $19.2 million.

Direct costs and general and administrative expenses combined decreased by $14.9 million to $249.4 million for the 2025 fiscal quarter, compared to $264.3 million in the 2024 fiscal quarter. This decrease was driven by the effect of the weakening Mexican peso, which reduced direct costs by $27.9 million, partially offset by higher enrollment-related expenses.

As a result of these factors, Laureate Education reported an operating loss of $13.2 million for the 2025 fiscal quarter, compared to an operating income of $11.1 million in the 2024 fiscal quarter. The company also reported a net loss of $19.6 million for the 2025 fiscal quarter, compared to a net loss of $10.8 million in the 2024 fiscal quarter.

Revenue and Profit Trends

Laureate Education’s revenues are primarily driven by tuition and educational services, with the majority of its revenue coming from private pay sources, as there are no material government-sponsored loan programs in Mexico or Peru.

The company’s revenues are subject to seasonal fluctuations due to the academic calendar of its institutions. The second and fourth quarters are typically stronger revenue quarters, as the majority of the institutions are in session for most of these respective quarters. The first and third fiscal quarters are weaker revenue quarters, as the institutions have summer breaks for some portion of one of these two quarters.

Laureate Education’s profitability is also affected by the seasonality of its operations, as well as the impact of foreign currency exchange rates. The weakening of the Mexican peso against the US dollar during the 2025 fiscal quarter had a significant negative impact on the company’s revenues and direct costs.

Strengths and Weaknesses

Strengths:

• Established presence in the growing higher education markets of Mexico and Peru, with a portfolio of five degree-granting institutions.
• Focus on profession-oriented fields of study, which are in high demand in the dynamic and evolving knowledge economy.
• Ability to leverage its in-country networks and competitive advantages to attract students.
• Diversified revenue streams, with no material reliance on government-sponsored loan programs.

Weaknesses:

• Exposure to complex business, economic, legal, political, tax, and foreign currency risks in Mexico and Peru, which can be difficult to manage.
• Susceptibility to seasonal fluctuations in revenues and profits due to the academic calendar of its institutions.
• Dependence on the strength of the Mexican peso and Peruvian nuevo sol against the US dollar, as the company’s reporting currency is the US dollar.
• Potential for increased competition from other educational service providers as the Mexican and Peruvian markets mature.

Outlook and Future Prospects

Laureate Education’s future prospects are closely tied to the growth and development of the higher education markets in Mexico and Peru. The company believes that these markets present a significant long-term opportunity, driven by the large and growing imbalance between the supply and demand for affordable, quality higher education.

To capitalize on this opportunity, Laureate Education plans to grow its operations organically by adding new programs and course offerings, expanding its target student demographics, and increasing capacity at existing and new campus locations. The company’s success in executing this strategy will depend on its ability to effectively manage the risks associated with operating in various countries, including fluctuations in exchange rates, political and economic instability, and changes in laws and regulations.

Additionally, Laureate Education will need to continue to invest in maintaining the value of its brands and reputation, as well as adapting to technological advancements, such as the incorporation of artificial intelligence into its programs and processes.

Overall, Laureate Education’s financial performance in the 2025 fiscal quarter was impacted by the weakening of the Mexican peso and the timing of the academic calendar. However, the company’s long-term growth prospects remain promising, provided it can navigate the complex challenges of operating in international markets and adapt to the evolving needs of the higher education industry.

Key Financial Highlights

The following table summarizes Laureate Education’s key financial performance for the three months ended March 31, 2025 and 2024:

The company’s Adjusted EBITDA, a non-GAAP financial measure, decreased by 82% to $5.4 million in the 2025 fiscal quarter, compared to $30.6 million in the 2024 fiscal quarter. This decrease was primarily driven by the unfavorable impact of the weakening Mexican peso and the timing of the academic calendar.

Segment Performance

Laureate Education has two reportable segments: Mexico and Peru.

Mexico Segment:

• Revenues decreased by 12% to $189.3 million, primarily due to the weakening of the Mexican peso and the timing of the academic calendar.
• Adjusted EBITDA decreased by 12% to $53.0 million, also due to the impact of the weaker Mexican peso and academic calendar timing.

Peru Segment:

• Revenues decreased by 23% to $46.9 million, mainly due to the unfavorable effect of the academic calendar timing.
• Adjusted EBITDA decreased by 87% to $(38.8) million, primarily driven by the unfavorable impact of the academic calendar timing.

The Corporate segment, which provides support services to the operating segments, reported a decrease in Adjusted EBITDA of 2% to $(8.8) million.

Liquidity and Capital Resources

Laureate Education anticipates that cash flow from operations and available cash will be sufficient to meet its current operating requirements and manage its liquidity needs for at least the next 12 months.

As of March 31, 2025, the company had $109.8 million in cash and cash equivalents, and a revolving credit facility with $155.0 million in available borrowing capacity. Laureate Education also has $321.3 million in operating lease liabilities and $50.9 million in finance lease obligations and sale-leaseback financings.

The company’s capital expenditure program, which includes discretionary spending for capacity expansion, new programs and campuses, and information technology, is a key component of its liquidity and capital management strategy. Laureate Education’s total capital expenditures, excluding receipts from the sale of subsidiaries and property and equipment, were $4.6 million and $15.9 million during the three months ended March 31, 2025 and 2024, respectively.

Conclusion

Laureate Education’s financial performance in the 2025 fiscal quarter was impacted by the weakening of the Mexican peso against the US dollar and the timing of the academic calendar at its institutions. While the company’s revenues and profitability declined compared to the previous year, Laureate Education remains focused on capitalizing on the long-term growth opportunities in the higher education markets of Mexico and Peru.

To navigate the challenges of operating in these international markets, the company will need to continue to effectively manage its risks, invest in maintaining its brand and reputation, and adapt to technological advancements. If Laureate Education can successfully execute its growth strategy and mitigate the risks inherent in its business, it may be well-positioned to deliver value for its shareholders in the years to come.