Good day, and thank you for standing by. Welcome to the Laureate Education Second 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.

Good morning, and thank you for joining us on today's call to discuss Laureate Education's second quarter and year-to-date 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 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 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 and adjusted earnings per share total cash and equivalents net of total debt and free cash flow are also detailed and reconciled to our 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. I am pleased to report strong execution across the board for the second quarter and the first half of the year. Through year-to-date June, new and total enrollments were up 7% and 6%, respectively, versus the comparable period in the prior year, driving 9% growth in revenue on a timing adjusted and constant currency basis. We are also advancing our operating efficiency efforts and remain on track to expand adjusted EBITDA margins by approximately 150 basis points this year. In addition to solid operating results, we are also benefiting from favorable currency trends in the past few months. As a result, we are raising full year 2025 outlook at the midpoint by $55 million for revenue and $16 million for adjusted EBITDA. I'm also pleased to report that our two new campus openings scheduled for September are on track, and we will be welcoming new students in both locations this upcoming intake cycle. These new campuses in Monterrey, Mexico and Lima's Ate District are key components of our growth strategy and underscore our long-term commitment to expanding access to quality higher education where demand continues to rise. We have two additional new campus projects underway, one in each market and expect those to open late next year or early 2027. Beyond that, we have identified numerous other cities and site locations in both Mexico and Peru that are ripe for development over the next 5-year period. From a geopolitical perspective, we continue to closely monitor the macro development in both markets. While the global operating environment remains complex, Mexico continues to demonstrate resilience, supported by solid financial systems, prudent fiscal management and continued interest rate cuts by the Central Bank. Inflation is largely contained, and we believe that the country is well positioned…

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. While the second and fourth quarters are not major enrollment intake periods, they are the strongest in terms of revenue and adjusted EBITDA as students are in session and academic activity is at its peak. 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, I will provide additional color on these timing-related impacts. Let's start with Pages 10 and 11, which highlight our operating and financial performance for the second quarter and year-to-date. Total enrollments increased by 6% when compared to the prior year quarter, driven by year-to-date new enrollment growth of 7%. Revenue in the seasonally strong second quarter was $524 million, and adjusted EBITDA was $214 million. Both metrics were ahead of the guidance provided three months ago, aided by favorable currency rates and timing of expenses. On an organic constant currency basis and adjusted for the academic calendar shift discussed earlier, revenue for the second quarter was up 8% year-over-year and adjusted EBITDA increased by 13%. Second quarter net income was $97 million, resulting in earnings per share of $0.65 per share on a reported basis. Second quarter…

Thank you, Rick. As we enter the second half of 2025 and approach our next major intake cycle, I remain confident in the strong momentum we have built. Our growth agenda continues to advance across both of our core markets. We are broadening our academic portfolio, scaling our digital offering to better serve working adults and strategically expanding our footprint through targeted campus openings in high-growth areas. At the same time, we are making solid progress on our efficiency initiatives, which are driving improved margins and stronger free cash flow generation. We hold a privileged position as the leading private higher education provider in Mexico and Peru, two of the most attractive private education markets in Latin America. The continued expansion of the middle class, increasing participation rates in higher education and a constructive regulatory environment all reinforce the long-term attractiveness of these markets. We believe we are well positioned to deliver sustainable value to our students, our partners and our shareholders for years to come. Operator, that concludes our prepared remarks. We are now happy to take any questions from the participants.

[Operator Instructions] Our first question comes from Jeff Silber of BMO Capital Markets.

This is Ryan on for Jeff. I know it's early, but any indications on the student application pipeline for Mexico's primary intake period this fall? I think you said you were encouraged by the trend. But just wondering if you could break that apart a little bit more and what you're hearing from students.

Ryan, this is Eilif. We are about halfway through the main intake. And as Rick noted, we are encouraged by where we are. We just completed the -- what we call the C2 intake, which is really a working adult intake in June, July, and we were growing that high single digits. And so very, very encouraged by the strength of the working adult students. And as I said, well underway now with the main intake, which is primarily young students, the traditional undergraduate students and more to come on that, but so far so good.

Got it. And then I just had one follow-up. I was hoping you might be able to help me on some of the revenue upside for the quarter. Even after adjusting for the $18 million, it was still a bit above the guidance. I was wondering if that was FX or anything else to kind of call out there?

Rick, do you want to take that?

Yes, sure. Ryan, this is Rick. Exactly. The $20 million of outperformance versus the high end of the range was primarily associated with FX. So $18 million of it was FX related. And as you've seen, the Mexican peso appreciated significantly. And so that around 9%. And then we did have $2 million of operational outperformance that was a bit of a carryforward from a strong enrollment intake in C1 and re-enrollments that continued through working adult in C2, as Eilif noted.

[Operator Instructions] Our next question comes from Lucas Nagano of Morgan Stanley.

We have two questions. So the first is related to online learning in Peru. It appears that you're increasing your focus on online there. How is this trend developing? How does the product and the acceptance compared to Mexico? And the second question is related to the new campuses. If I'm correct, you're opening two in the second half and then there are two more on the way. So can you provide some color about the regions and the brands of those campuses? And how is your sense of demand for the next intake cycle there?

Absolutely. Starting off with Peru. As you will recall, the regulatory environment in Peru was revised post-COVID. There was limited fully online activity in Peru until 2023. So we have really ramped the business very nicely. It is growing double digits, and we have launched all of the programs that we wanted in the initial wave and are seeing very strong interest by the working adult students for that fully online product in Peru, just as we saw a couple of years ago in Mexico. So very confident that the fully online working adult product in Peru can mirror the fully online development that we have seen over the last four or five years in Mexico. So that's very encouraging. Going on to the face-to-face young student growth plan, which involves a new campus development. We are opening in September a new campus in Monterrey for the value brand UNITEC in Mexico. And we are opening a campus in East Lima in an area called Ate, for UPN, which is the value brand in Peru. Both campuses will open in September, robust interest and demand for those two locations. And we expect over a 5- to 6-year period, these campuses to get to maturity and these campuses have a very attractive IRR. And we have two more campuses under development, one in Mexico and one in Peru that we expect to open in late '26, early '27. And as I mentioned in my prepared remarks, we are very fortunate to have a long list of very attractive sites that are ripe for development in both Mexico and Peru over the next five years. So more to come on that when we are ready to announce further campus developments.

Then how does that change the level of CapEx compared to previous years when you weren't opening campuses?

So in the last couple of years, we had a little bit of a CapEx holiday because we coming out of COVID, we were able to grow very robustly by creating capacity for young students through higher hybridity percentage. So which means that the traditional young undergraduate students pre-COVID was 90-plus percent face-to-face and a very small percentage of digital. Now it is more 60% face-to-face and 40% digital, which meant that we could grow robustly through very capital-efficient means. So if you look at 2019 to 2023, CapEx as a percentage of revenues was really 2% of maintenance CapEx and maybe 1% of lab investments and refurbishments and expansion of existing campus footprint. What we have said is that the growth algorithm, if you're thinking about a momentum where we are growing revenue -- enrollments at 6% plus/minus, which results in revenues at 8% to 10% annually, then that is going to take about 5% of revenues to be invested in CapEx to support that. And then, of course, if you -- and that would basically mean that you'll have one to two new campus launches per year. And if you add another campus to that, CapEx may go 6% to 7%, but then also growth will be lifted as well. So that's basically the growth algorithm.

This concludes our question-and-answer session and today's conference call. Thank you for participating, and you may now disconnect.

Thanks, everyone.