Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IDP Education Ltd (ASX:IEL, Financial) achieved a record financial performance, surpassing $1 billion in revenue for the first time, reflecting a 6% increase from the prior year.
- The student placement business line saw exceptional performance with placement volumes up 17%, indicating strong market share gains.
- English language teaching continued its solid growth trajectory, with courses up 13%, surpassing 100,000 courses for the first time.
- Revenue from other student placement services grew by 21%, driven by the inclusion of peer-to-peer services from the TAP acquisition.
- The company maintained a disciplined approach to cost management, keeping total direct costs flat and achieving an 8% growth in gross profit.
Negative Points
- Adjusted net profit was down slightly at $154 million due to higher interest charges and a higher effective tax rate.
- IELTS volumes were down 18%, primarily due to weakness in the Indian market, which was only partially offset by growth in other regions.
- Revenue from English language testing decreased by 11%, reflecting lower IELTS volumes despite higher prices across the network.
- The company expects a decline in international student volumes by 20% to 25% in FY25 due to policy changes and regulatory uncertainties in key markets.
- The impact of recent policy changes and visa processing adjustments will take time to quantify, adding uncertainty to the short-term outlook.
Q & A Highlights
Q: Could you give a little bit more color around expectations by region and opportunities for market share gains?
A: We expect each of Australia, the UK, and Canada to be down around 20% to 30% at a market level. Our smaller markets of the US, New Zealand, and Ireland will in aggregate show growth. Our confidence in continued outperformance is driven by our high-quality client portfolio, focus on quality in source markets, and product innovation.
Q: Can you provide more detail on the Australian 270,000 student cap and its impact?
A: The cap announcement is another lever the government is using to manage net overseas migration. It will take time to understand the impact on student sentiment and demand. Our internal modeling considers the cap announcement as part of broader visa processing and acceptance rate management.
Q: What are your expectations for IELTS volumes in FY25 given recent declines in the Indian market?
A: We expect India to underperform the aggregate system growth for IELTS in FY25, reflecting weaker market conditions. However, IELTS benefits from diversified exposure, including onshore purposes and regional use cases, which should provide some offset.
Q: Can you elaborate on the strategic review of the Mainland China market for IELTS?
A: We are exploring a direct testing model in China, partnering with a local provider to establish the necessary foundations and scale the testing network. This strategic move aims to expand our geographic presence and accelerate growth in student placement operations in China.
Q: What are your plans for the student essentials marketplace model?
A: We are partnering with local and global providers for accommodation, health insurance, banking, and money transfer services. The opportunity lies in modernizing and digitizing this into a marketplace model to scale it across various markets while retaining the same engagement model.
Q: How do you see the impact of the scrappage of ministerial direction 107 on visa processing?
A: A return to normal visa processing times and lower rejection rates would be welcome by students. This change is one of the factors we are monitoring to assess its impact on student sentiment and demand for Australia.
Q: Can you provide more context on the overheads run rate for FY25?
A: Overhead costs in FY25 are expected to be broadly in line with the second half of FY24 run rate on an adjusted basis. We have flexibility to adjust costs as needed based on market conditions.
Q: What are your expectations for EBIT margins in the IELTS business over the next three to five years?
A: While we won't provide specific long-term margin guidance, we expect overall EBIT margins to continue to expand over a three to five-year period, driven by opportunities in student placement and a return to long-term growth trends for IELTS.
Q: How are you managing the impact of policy changes on student placement volumes?
A: We are leveraging our deep relationships with high-quality providers and our multi-destination strategy to match demand with supply. Our focus remains on supporting clients and students to navigate the current environment and drive market share gains.
Q: What are your plans for technology investments, particularly in digital delivery for IELTS?
A: We have an extensive product roadmap that includes both enhancements to existing IELTS offerings and more transformative changes in digital delivery. Investments are being made in conjunction with our partners to improve the test-taker experience and expand our digital capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
