Earnings call transcript: IDP Education shares sink after FY 2026 outlook

IDP Education disclosed in its FY 2026 earnings call that revenue fell by 9%, driven by weakened international student recruitment and testing volumes. Despite this, the company maintained a 60% gross margin and experienced a 7% decline in adjusted EBIT. Investors responded sharply, driving the stock down 25.12% to $1.63 from $2.17, near its 52-week low.

The company outlined that FY 2027 volumes are projected to be 20% to 30% below FY 2026, indicating continued pressure. IDP highlighted that cost cuts, price increases, and tighter working capital control helped protect profitability. The company's core markets faced challenges such as policy changes, slower visa processing, and weakened student demand, particularly in Australia, the U.K., and Canada.

While student placement revenue fell by 16% as volumes dropped 27%, testing revenue declined by only 1% despite a 8% decrease in volumes. Management reported an improvement in yields, with student placement up 11% and testing up 7%. Net leverage improved to 1.0 times from 1.4 times previously, and the company ended the year with AUD 135 million in cash. Despite the weak outlook, the stock may be undervalued according to InvestingPro analysis.