IDP Education Limited (IEL) Earnings Call Transcript & Summary

Good morning. Welcome to IDP Education's 2025 Annual General Meeting. My name is Tracey Horton, and I'm the Chair of your company. It's now 9:30 a.m. and as there is a quorum present, the meeting is now open. I would like to begin by acknowledging the traditional owners of the land on which we are meeting today, the Wurundjeri people of the Kulin Nation, and pay my respects to the elders, past and present. On behalf of the Board, I'd like to welcome all shareholders, guests, and other visitors attending in person and also via online platform. Shareholders participating in the AGM in person all through the online platform will have the opportunity to submit questions to the Board, management and also IDP's external auditors during the course of the AGM. Details on how shareholders can participate as set out in the notice of meeting. and in the online virtual AGM guide, which have been made available. Both documents are also available to view online and download at the bottom of your screen alongside the get a voting card and ask a question buttons. While we will endeavor to answer all your questions today, if there are similar questions, we'll answer 1 from each group. Also, if we do run out of time, additional questions will be followed up after the meeting. I now formally open the poll on resolutions. All polls will remain open until 5 minutes after the conclusion of today's meeting. As we move through the items of business, I will respond to questions from shareholders and proxy holders. I'll take questions from the room first, and then we'll move to the online platform. Joining me today, we have fellow directors, Board members, Professor Colin Sterling, Greg West; Ariane Barker; Chris Leptos; Michelle Tredenick, Andrew Barkla and Paul Rogan. We also have Tennealle O'Shannessy, our CEO and Managing Director; and Ashley Warmbrand, our Company Secretary and General Counsel present. You can find copies of the Chair's and the CEO's speeches on our website, they have been released to the ASX this morning. This is my first AGM as Chair since my appointment to the role earlier this year, which followed the planned retirement of Peter Polson. Peter served on the Board of IDP for some 18 years, during which time the company grew from an Australian-focused business to a global leader in international education. On behalf of everyone here at IDP, I thank Peter for his important contribution over many years. I'm looking forward to working with the rest of the Board and our leadership team to realize the opportunities in our business for you, our shareholders. I've enjoyed having the opportunity to meet with many of our large shareholders over the last couple of months and look forward to meeting many of you here in the room after today's meeting. Engaging with shareholders and understanding your perspectives is an important part of my role as Chair. 2025 has been a challenging year for our sector and for our company. As industry volumes declined significantly following the record highs that were reached in 2023 and 2024. This followed 2 decades of 6% percent compound annual growth running up to 2020 when the growth was temporarily disrupted by the global pandemic. Concurrent election cycles in our 4 key destination markets triggered restricted immigration and international student policy settings. Those caused a significant decline in volumes over the past couple of years. These dynamics have been more synchronized and indeed more persistent than in previous cycles, and they've had a direct impact on industry volumes and on IDP's financial performance in fiscal year '25. At IDP, we did enter the year anticipating challenging conditions, and we set the strategy accordingly. Our leadership team focused on what was in their control, quality, yield discipline, market performance and cost control, while maintaining the ability to be agile in response to an expected return to more normal conditions. However, policy uncertainty and volatility increased throughout the year. And due to the long-dated pipeline of our business, we now expect this disruption to long-term industry trends to persist in fiscal year '26. In fiscal year '25, we reported adjusted group EBIT of $119 million, down from $239 million in fiscal year '24. Adjusted group NPAT was $65 million, down from $154 million the previous year. These results fell well short of our expectations and of yours. We are taking decisive action to manage financial performance and to position the business for the future. At our full year results announcement in August, Tennealle outlined a multiyear transformation program. This will reshape IDP into a simpler, more agile, technology-enabled business with a more flexible cost base. This transformation program will deliver significant additional cost savings in fiscal year '26 and beyond. It will also focus investment on technology that improves the student experience and enables our teams to serve our students and engage with education partners more productively. These outcomes will strengthen our quality differentiation, reinforce our student-first approach and position us continued market outperformance. On capital allocation, during the year, the Board refreshed our capital management strategy. Our priority is to maintain a strong balance sheet, apply clear discipline in capital allocation and to return surplus capital to shareholders where appropriate. As part of this review, the Board approved a transition to a cash-based dividend policy, ensuring sustainability and alignment with peer companies. The Board declared a final dividend of $0.05 per share, bringing the full year declared dividends to $0.14 per share. Another important focus for us during the year was ongoing Board renewal. In addition to Peter's planned retirement from the Board in June this year, our long-standing director, Greg West; is stepping down from the Board at the end of today's meeting. On behalf of all of us at IDP, I'd also like to thank Greg for his important contribution to IDP over many years. We are continuing the process of Board renewal to ensure we've got the right mix of skills, experience, industry knowledge and also fresh perspectives. In line with this commitment, our newly appointed Director, Paul Rogan, will stand for election today. Paul has strong commercial acumen, coupled with extensive experience across audit, risk and strategy. His understanding of international markets and digital first growth will also be valuable as IDP progresses the transformation strategy. On remuneration, last year at our AGM, we received a first strike with 33% of votes cast against the remuneration report. Since that time, a new Chair of the Remuneration Committee, Michelle Tredenick and I have had the opportunity to meet with many of our shareholders and also the proxy advisers to discuss our remuneration settings and understand their perspectives. Cognizant of feedback, we've made some important changes to our remuneration settings and minimum shareholding requirements as well as enhancing our disclosure. The Board also exercised its discretion to significantly reduce the STI payment in light of the disappointing financial performance in fiscal year '25. We halved the outcome and we allocated the benefit as deferred equity instead of cash. Later in the meeting, we will discuss the remuneration report in more detail. During the year, we also made important progress on our sustainability agenda. I encourage you to review our sustainability report for further detail on our commitment and progress towards building an inclusive culture and delivering social impact, managing our operations responsibly and responding to climate change. Finally, I'd like to acknowledge our people, to Tennealle, our global leadership team and all of IDP's people around the world, thank you. Our teams have worked incredibly hard to support our students and partners while managing the business in a highly dynamic operating environment. They've moved quickly to drive the cost reduction and transformation program that's now underway. While we continue to navigate a challenging policy environment in the near term, we do remain confident in the long-term drivers that underpin our industry. Universities will continue to seek high-quality international student placements and students with global education and career aspirations continue to want to study overseas. Being trusted by those students, test takers, partners and stakeholders continues to differentiate our business globally. In time, we do anticipate that the governments in our destination markets will ease the policy settings for skilled migration and international students. As developed economies with aging populations return to a focus on growth. I'm confident in the underlying strength of our business, and I'm confident in the ability of our people to deliver the transformation program to position our business for the for the benefit of our customers, our partners and for you, our shareholders. I'd now like to invite Tennealle to share her report on the financial year.

Thank you, Tracey, and good morning to everyone who is joining us, both here in person and online. Today, we will reflect on our financial and operational performance for the financial year of 2025, a year in which we not only navigated challenging industry conditions, but also took decisive steps towards reshaping IDP for a stronger, more resilient future. Let's begin with our FY '25 key financial metrics. As we shared in August, our financial performance for the year fell well below our expectations and yours. This was driven by ongoing policy uncertainty across our 4 key destinations. Australia, Canada, the U.K. and the U.S., which continued to reduce the size of the global international student and test taker market. This had a direct impact on our volumes with student placement volumes down 29%, and IELTS test volumes down 18%. Revenue declined 14%, which was materially better than the drop in volumes. This reflects both strong yield growth and disciplined execution. Overall, our adjusted EBIT fell 48% year-on-year, demonstrating both the challenging operating environment and the inherent deleverage in our business model. Turning to costs. We made solid progress on cost management throughout the year. Direct costs were reduced by 6% and overheads by 5%, resulting in a $20 million reduction in our cost base. This was achieved by making difficult but necessary decisions about the shape of our teams, plus managing a disciplined approach to spending across all line items, including marketing, travel, technology and consultancies. These actions partially mitigated the volume-driven pressure on margins. As Tracey mentioned, we've carried this focus into financial year '26, where we see further opportunity to simplify operations to resize our cost base and to accelerate our shift towards a more technology-enabled organization. Importantly, we finished the year with a strong balance sheet, which provides us with the flexibility to invest in transformation, to navigate ongoing volatility and to deliver long-term shareholder value. This financial resilience has enabled us to continue to invest prudently directing investment into the highest return opportunities that support long-term growth. Central to our strategy has been the use of technology to deliver differentiated services for our customers and to drive productivity across our teams. Artificial intelligence has been a key focus area and 1 where we believe IDP holds a significant competitive advantage. Our AI tools, although in early stages, are underpinned by our comprehensive proprietary data assets built over many years of enrollment, eligibility and engagement insights. This foundation positions IDP to deliver AI-powered services that others simply can't match. Now let me share with you how we're bringing this to life. We believe AI is most powerful when it enhances human connection. That principle has guided the launch of our counselor recommendation engine, which is now used by over 80% of counselors to deliver a more personalized guidance and to reduce manual course matching. This year, we also piloted our AI-powered student adviser Navi in over 10 countries. Navi captures student profile information 8x faster and connects outside of business hours and now qualifies 25% of leads in India. Enabling us to scale data capture, to power our matching services like FastLane. Finally, FastLane proposed. This is the next phase of our FastLane proposition, and it uses AI to deliver personalized offers from institutions within days, unlocking scale for client courses and international data across the FastLane ecosystem. Moving now to language testing. This year, we launched our IELTS One account, making it easier for test takers to book their exams. And we've already seen a 6% uplift in conversion rates for computer-based tests. And while these innovations reflect our commitment to improving services for our customers, we also recognize there is more we need to do in order to position IDP to win in continuing dynamic conditions. As such, in August, we outlined our plans for a multiyear transformation program to reshape IDP for a fast-changing AI-enabled world. The first phase will focus on simplifying our operating model by reducing layers and duplication and optimizing our corporate functions. At the same time, we are refocusing on high-value operations to deliver more profitable growth and streamlining and driving efficiency in lower-profit operations. Supporting this is a goal to centralize and leverage global purchasing power to reduce vendor spend, to consolidate our disparate systems and platforms and to standardize our processes. In parallel, we're laying the groundwork for future phases by further leveraging digital and technology to drive growth, to drive productivity and to support revenue diversification. Although we're only 3 months into the year, we're already making strong progress, and we look forward to updating you on the future priorities of the transformation over the course of the next year. Changing people's lives by helping them reach their international education goals remains at the heart of what we do. And we are confident we can help more people more efficiently through our transformation program, providing more value for our customers and our business in the process. Now before handing back to Tracey, I want to finish by acknowledging the IDP teams around the world. As we've commenced our transformation, we have made challenging but necessary decisions that have impacted the size and shape of our team, many dedicated and talented colleagues have left the organization. However, our teams have demonstrated remarkable resilience, and I'm very thankful for their expertise and their dedication to our purpose. Change is not easy. However, together, we are building a more agile and more focused IDP, one that empowers our people to do what matters most to help people achieve their international goals. While acknowledging our teams, I'd also like to echo Tracey's comments and to congratulate Peter Polson for his tenure as Chair. Peter helped shape the culture of IDP and I'm also personally grateful for the guidance he provided me as I joined IDP. I'd also like to acknowledge Murray Walton and Warwick Freeland, our Chief Financial Officer and Chief Strategy Officer, who both stepped down this year after more than a decade each with IDP. Murray and Warrick were fundamental in shaping IDP's growth and culture. In acknowledging their service, I'd also like to welcome Kate Koch, our Chief Financial Officer, and Jen Fleming, our Chief Strategy Officer, to our global leadership team. Both step into IDP in a period of immense change, bringing valued skills, experience and perspectives to support the transformation and to lead IDP forward. To close, I'd like to reaffirm our expectations for the year ahead. Our focus for financial year '26 is on managing financial performance and delivering on our transformation priorities. We expect that FY '26 adjusted EBIT will be in the range of $115 million to $125 million, consistent with the guidance we shared at our financial year '25 results announcement in August. This outlook is underpinned by a planning assumption for international student volumes to decline 20% to 30% compared to financial year '25, reflecting the annualized impact of policy changes made over the last 12 months, and aligned with current visa -- market visa data. We continue to remain confident in revenue outperformance driven by a focus on profitable growth and average yield improvement. Student placement average prices are expected to grow high single to low double-digit percentages, and English language testing average prices are expected to grow at mid-single-digit percentages. Our adjusted EBIT will benefit from the transformation program, delivering a net $25 million reduction in our cost base in FY '26 with savings weighted to the second half. We also remain confident in the long-term growth trajectory of our global market. The international education market has a long track record of sustainable growth, with a 6% compound annual growth rate delivered over the past 2 decades. While the past 18 months have been challenging, and we do expect this to continue in the near term, when we look forward, the macro drivers underpinning international student mobility remain compelling, with the market forecast to grow to 10 million students by 2030. And it is this longer-term focus we take into financial year '26 and remain focused on as we reshape IDP to capture this opportunity. To you, our shareholders, thank you for your support of IDP throughout this period and for your belief in the life-changing services we offer. While we are operating in a disrupted environment, we have leading positions in large markets. We have deep customer trust and a clear plan to lead through the challenge, so we can continue to support the international students of today and those that will follow. Thanks, everyone.

Thanks, Tennealle. We'll now turn to the formal business of the meeting. The notice of meeting was sent to shareholders and a copy is available online on the ASX website. I'd like to summarize the proxy and voting procedures for the meeting. Shareholders and proxy holders have the opportunity to consider and submit their vote on each resolution up to the end of the meeting. Following discussion on each item, the proxy results will be displayed on the screen, where undirected proxies have been given in favor of the chair, I'll be voting those proxies in favor of all items except Item 6, which I will be voting undirected proxies against. Please note, only shareholders and proxy holders may ask questions. Online questions can be entered on the virtual meeting platform using the instructions on the platform or in the online meeting guide. All online questions will be moderated to ensure that they are appropriate to be put to the meeting, and we'll now move on to the items of business for the meeting as set out in the notice of meeting. The first item of business is to receive the financial report for the year ended 30th of June 2025. Our auditor for the 2025 financial year, Travis Simkin from Deloitte is available to take questions relevant to the conduct of the audit and the preparation and content of the independent audit report. Please direct any questions that you have of our auditor through me. Are there any questions in the room?

Yes, please, gentleman in the middle there.

Good morning. My name is [ Peter Kelliero ], and I'm a very new shareholder in IDP. Just to clarify a couple of things. The past couple of years, it's fair to say it has been a challenging time for IDP. I've noticed that earnings over the past couple of years have gone from 2 years ago to $227 million to $119 this year, and the debt's gone up from $42 million to $165 million. It was actually great to hear talk of debt reduction and making some efforts to reduce the debt. One of the comments I read in the annual report to be fair, I haven't actually read all of it yet. Is it -- you believe that over time, the number of students you will actually gain will actually increase. Why are you so confident that the level that we have now isn't the new normal?

Thanks, Peter, for your questions, and welcome to IDP as a new shareholder. I'm very glad to have you, and thanks for showing up today. Good questions and ones that both the Board and the management team have been exercising their minds with regard. Look, I think in terms of the long-term structural drivers of the industry, we do remain confident that we will return to those historical rates of around 6% a year growth. The reasons for that is that we've experienced many, many years of consistent growth in international students prior to the pandemic. We did have a disruption with the pandemic. There was then a rebound and because of the increased number of students, that's what's been a driver of government reactions towards that. We feel confident that students -- we know that students still want to study overseas. We speak to a lot of students. We know that for sure. We know that universities want to have those students in their campuses. We speak to universities. We know that for sure. And so really, it's about governments returning to more normal policy settings. Thank you for your questions.

So what makes you confident the government will return to more normal settings. There's a lot of pressure out there for some governments from the general public, to be frank, in anti-immigration push, I don't understand it because we -- the 4 countries that you mainly cover about to hit a major demographic bust, we baby boomers are retiring. And there's going to be a labor shortage, which is what the students, hopefully will help. So what makes you so confident that governments are going to act rationally.

Well, in some ways, you've answered part of your own question, I think, but because we agree with you, we think that over time, there will be pressure on governments to return to growth settings. International student demand has been caught up in the whole anti-immigration stance that governments around the world have taken. But we feel confident that within that sector that -- and we're already seeing in some jurisdictions here in Australia. There's been a little bit of an easing of caps. We feel confident that this is a segment of immigration that governments will welcome back.

Okay. One other question, the Canadian business. What's happened to the Canadian business? Why is it -- had such a bad year?

It's related to the political decisions that governments have made, totally related to that.

Okay. Even though Canada has a very competent economist as prime minister.

Well, we're hopeful that we might see a little bit of a change in stance of the Canadian government. But like you, we do not have a crystal ball. Thanks for your questions. Any other questions in the room?

Hi. Good morning. Good morning. If you were like, say, a fresh start-up and you had an untested business model, I would probably ask you for a 30-second elevator pitch for what your focus is and why you're irreplaceable. At the start of this meeting, we didn't really hear that so much we heard that your business is complicated and you're hoping to simplify. So I was thinking I might just put you on the spot and get that 30-second elevator pitch from you.

You mean why IDP is essential?

Basically, what your focus is, what you do, the function you perform and why you continue to be relevant?

Our business is that we place international students. We enable them to fulfill their dreams of international education by placing them in the universities that match those aspirations. We have done this for very many years. We've differentiated ourselves through really caring about the student, really caring about quality and making a good match between the student and the university of their choice. We've done this very successfully for many years. We're diversified. We've generally been able to withstand policy changes in various jurisdictions around the world. This particular circumstances where we've seen policy changes in all of our major jurisdictions. But because we are the quality player, we are the leading player, we're confident in our ability to sustain ourselves through this difficult challenging period.

That's a good pitch. Okay. Now you mentioned simplifying. So what has been complicated? And what is the main thing that's been complicated? And what is -- what are you hoping to eliminate from your business model?

Essentially, what we're doing is we're moving from a very people-focused business to one that is enabled by technology by a digital platform and by artificial intelligence. So we're using those tools. We're taking this opportunity while conditions are disrupted to make some significant investments to improve the experience for our students and to also improve the capability of our student counselors to do their jobs in helping those students. So I wouldn't say it's making -- going from complicated to simple. It's about giving people the tools that they need and making our cost base more flexible.

Okay. Thank you very much. I did put you on the spot here.

That's my job. Thank you for your questions and welcome as a new shareholder. Peter, again, yes.

What's your market share? I mean the last I saw is about 32%. Is that about right?

It's not a straightforward question, Peter, market share. It's something that we measure on a market-by-market basis. it's also different for different parts of our business. So we are the market leader in our student placement side of the business. The English language side of the business is a bit more competitive. But it is a very fragmented market. So we are the largest and the leader, but there are many, many other players in the market. Thank you. Other questions in the room? Are there questions online? Oh, sorry. We are on the financial statement still on...

Is that right? Can we be asking any question.

Not any questions on the financial statements.

So we will have the chance for ask...

We will have a chance to ask general questions at the end, thank you. Any questions from the online platform?

There are some questions. Could new Chair, Tracey Horton, please comment on the biggest changes in Board process, delegations, reporting loans or governance that she's implemented since taking over as Chair from Peter Polson in June this year. Could the CEO also comment as to whether Tracey is more or less hands on than Peter as Chair, question from [ Stephen Mayne ].

Do you think this is one on the financial statement? You want to do this one now. I think we should defer it to the end. I'd prefer to focus on the financial statements of this.

There's no questions on the statements.

Okay. All right. Thank you. Okay. So there's no vote on this item. And the next item of business relates to the election and reelection of directors. The first part of this resolution relates to my own reelection. So I'll ask Ariane to chair this part of the meeting.

Good morning. Thank you, Tracey. Agenda Item 2A is for the reelection of Tracey Horton as a Director. Tracey's skills, experience end qualifications are set out in the notice of meeting. Tracey will now say a few words.

Here I am again. Thanks, Ariane. I'm honored to be standing for reelection as a Director of IDP today. I joined the IDP Board in September of 2022, and I was appointed by my fellow directors as the Chair of IDP in June of this year. I'm an experienced company Director and Board Chair, and I bring to IDP broad experience from both my executive and Board career across corporate strategy, international operations, finance, governance and the education industry. In addition to my role at IDP, I'm currently a Director at the GPT Group, IMDEX and Bhagwan Marine, all ASX-listed companies. I hold a Bachelor of Economics with honors and an MBA, and I'm a life fellow of the Australian Institute of Company Directors. Since I joined the Board of IDP 3 years ago, I've chaired the Remuneration Committee and now the Board. Over that time, we've seen the benefit of a diverse Board, consisting of members of complementary skills, resulting in valuable perspectives and quality decision-making. I'm fully committed to fulfilling my responsibilities as Chair and Director of IDP with the highest integrity. And with your support, I look forward to contributing to IDP to deliver long-term value for shareholders over the next several years. Thank you. I'll hand back to Ariane to conduct the poll for the resolution.

Thank you, Tracey. Are there any questions in the room related to this particular resolution? Are there any questions online?

There are no questions on the line.

Thank you. As there are no further questions, the proxy position in relation to the resolution is now set out on the screen. And I will now hand the chair back to Tracey.

Thanks, Ariane. Agenda Item 2B relates to the reelection of Michelle Tredenick as a Director. Michelle's experience, skills and qualifications are outlined in the Notice of Meeting. And Michelle is now going to say a few words.

Thank you, Tracey, and thank you to all of our shareholders for giving me the opportunity to seek your support for my reelection to the IDP Board. I joined the IDP Board in September '22 and present myself for reelection at this AGM. I've been a full-time Nonexecutive Director for over 15 years and today, have the privilege of sitting on a number of company Boards, including both listed and private boards across a range of industries. In my executive career, I held a number of senior executive roles and my expertise lies in financial services, strategy and technology digital. I have been and continue to be closely involved with many of the major challenges facing companies like IDP today, including digital disruption, regulatory and policy changes, geopolitical and macroeconomic uncertainty as well as the rising tide of customer and community expectations of businesses. I've brought this experience and skills to IDP as a Board member. And from July of this year, I've also taken on the role of Chair of the Remuneration Committee. I ask for your support, and I thank you again for giving me this opportunity.

Thanks, Michelle. Are there any questions in the room? Any questions online?

No questions online.

Thanks, Ashley. As there are no questions, the proxy position is now set out on the screen. Michelle, agenda Item 2C relates to the election of Paul Rogan as a Director, and Paul's experience, skills and qualifications are also outlined in the notice of meeting and call will say few words.

Thank you, Tracey, and good morning to you all. Certainly a privilege for me to be having opportunity today to speak to you as I stand for election as a Director of your company. For those of you who have not yet had the opportunity and pleasure of meeting, I bring over 25 years experience as a senior executive and Board across major financial institutions and growth-oriented businesses. Most recently, I served as the Chair of ASX listed Hub24, and I'm a Nonexecutive Director of Raiz Invest, and I'm also the Chair of a private business household Capital. IDPs impressed me is a remarkable organization with a global footprint, a quality brand and a mission that really resonates with me in terms of empowering students through access to quality education. Notwithstanding that the company is navigating some cyclical market challenges, which you've heard already in the meeting. I see enormous opportunity to leverage our strengths, to embrace digital transformation and to continue to enhance the experience we offer to students, the partners and our shareholders alike. My commitment to you is to provide strong oversight, strategic clarity and a culture of transparency and accountability. I'm very much looking forward to deepening my knowledge of the company and the markets within it operates. And I'm certainly energized by the opportunity to work closely with my colleagues on the Board and the talented executive team at IDP to navigate its next chapter. Thank you for your continued support of IDP Education. If elected, I will serve with dedication, integrity and a clear focus on shareholder value creation. Thank you very much.

Thanks, Paul. Are there any questions in the room? Any online questions.