LAUR - Earnings call transcript Q4 2020 | Laureate Education, Inc.

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Operator

Ladies and gentlemen thank you standing by, and welcome to the Laureate Education's Fourth Quarter and Year-end Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Mr. Adam Morse, Senior Vice President of Finance. begin. may you Sir,

Adam Morse

and discuss for and Laureate results. everyone, today's year-end us call to Education's thank morning joining you on XXXX Good fourth quarter

me Officer. Serck-Hanssen, are Officer; Joining J.J. call Chief and Financial and Executive Eilif Chief Charhon, the on President today

release on the press our section Investor available laureate.net. at is earnings Relations of Our website

like after being be during you today's available call. providing have some financial a presentation call. the today, supplementary will forward-looking to We the a to the recording of of call including, referring guidance, our meaning statements operational to to, applicable is webcast, that remind laws. also information posted U.S. within the but website, and we're not complete which we'll and I'd securities The be constitutes limited

expectations our that could subject as other and at with results differ may this well differ Exchange Forward-looking to change as are Securities materially and our expected. uncertainties we SEC. morning, cause that the those and disclosed Commission risks Important U.S. actual may on from annual therefore, are Form factors actual materially filings filed results the time, any statements in to our earlier with from XX-K report made

forward-looking are undertake all conference call, forward-looking on no any as current and obligation expectations the addition, In statements statements. we date based of of this to update

including, others, or and over EBITDA that, adjusted release Eilif. discuss, among me With and flow and our that their to the reconciled detailed let we GAAP are presentation. call cash Additionally, also non-GAAP counterparts to measures supplementary turn press free in

Eilif Serck-Hanssen

once performance, and staff, organization. what operational and and well extremely thank student again and commitment want response these commitment these times. communities other, the promises like the impact pandemic an to education, which social extraordinary was XXXX for students, I our as our even financial hardship. faculty during ongoing Strong faculty deliver place delivery and we everyone. agility to in of successful our which and realize students of morning, of year as good operate. and to on times our Adam, staff We tested to serving proud achieved. solid resilience the the uninterrupted of you, quality our execution, during COVID-XX no adaptability we their I'm on entire Thank to a value

quickly hit, Our students approach. thus pandemic classes to emblematic ability online their was the to studies transition fully allowing when our all our continue of to students-at-the-center

current for been this now past a in exception operating online mode to XX continue have mode fully turn We for almost in the semester. and likely without months,

consistently in strategy monitoring We local including it's market to our quarter we are throughout the results we the implement model. and ready expectations. government headwinds are actively and demonstrate ahead caused when a conditions by XXXX, Despite the any against so. reporting do goals, of pandemic resiliency results our return-to-campus today The the fourth to were Mexico requirements of delivered appropriate and business Peru, are our

a and focus generation initiatives. we full-year, cash better-than-expected retention and tight cost due adjusted increases the levels, to drive on free EBITDA both were For to flow controls in able productivity

reported to headwinds Laureate complete pandemic COVID Looking numbers, structure. ahead, still sales we transformation this in first year this enrollment the of XXXX is expect the notably to transition the causing asset continue overhead The impact our will and most for and year. and be half corporate our of a as pricing markets, we pending in our

more J.J. the which our start to and he prepared half the covers the abate, details pandemic when XXXX anticipate head we However, impact outlook for of the on set Later as we guidance. that both us XXXX into up provide will XXXX. should believe recovery in will XXXX, remarks, in a we of for strong second

this after Shortly provide USD $XXX to now strategic approximately transactions and the operations expect in review. quarter results, close for reported sale during Brazil Zealand second we of our million. and to Honduras, University, of is first minute a take divestiture Australia pending year half year. transactions operations closed me USD during New half our update $X.XX our close net we in approximately third Pending Let which from Walden and anticipated are which on the we Total an to of include the this on these billion. proceeds

return focused innovation Laureate's We organization. strategy we to associated what committed we these spend select preclude homogeneous further required believe to That to engagement have pursue Laureate should been this this is that and markets G&A to decided continue model burden the have a optimize and within are to in assets and robust as Mexico to to focus Mexico these beyond. Mexico a in regional with not sprawling two The with XXXX fraction Peru a in investments potential For the historically operating Peru Peru, relatively businesses institutions said, operate support on best focused to of corporate only network. small very legacy and for shareholder does in these we decision value. buyers growth along with approach,

Slide to X. number moving Now

compared gained States, participation both underpenetrated and opportunities. and minutes spend Peru benefits with above been graduates Mexico higher education demographic Mexico developed in XX%. markets, a higher the industry which while markets institutions. by economic rates The markets still significantly rate and including and participation demand is Peruvian factors, few Peru me favorable are United class by economic growing increasing well have XX% discussing fueled of education in and several And attractive and dynamics of which personal growing, and is represent the in in has long-term middle as of to Mexico for like overall Let markets, large XX% the a and both investment higher significant education

students conditions XX% private of education imbalances This market. education higher the higher In role of sector In is created for constitute high higher Peru, private The meaningful participation the sector which plays Digital markets, and that level addition, in providers. these Mexico, lack market both of have bridging of supply demand public private and we regulatory total are at education a of both important role by the universities. supportive favorable In states operate. Mexico education education Peru sector quality important the in increasingly in of the total validates is in in private the the private both providers markets. are that we accelerated XX% we capacity a economic online Laureate as years. delivery next in demand leader education pent-up to markets in consequence released market a expect learning X will and hybrid growing are quality higher that this the via advantage rebound further clear be has the time pandemic, as Further, been take well pandemic of we the X positioned hybrid mode. of to years This the is in believe of this markets. period. expecting same access trend COVID during for education affordable, Accordingly, aftermath and delivery by direct our in during markets flexible dynamic a the both to

Slide to X. moving number Now

of Let bit brands. about the quality me a our talk more

and top among rated as institutions high-quality Our QS X in and the of among UPC countries. in Peru. In at strategy We are rated UPC UVM market is universities are at our ranked their and and the our the premium brands via university market X-star segmentation serve UPC two Both via identical market X the price-sensitive are Peru, number brands. the our more highly Mexico value and overall UVM university the most Both Stars traditional in level. Mexico UVM in by the number the countries. country. in premium ranked

only over enrollment health operate UVM of markets. total sciences in and The of enrollments schools is allowed verticals, UPC are addition, sciences to are in of has field to granted meet the us licenses growing school presence Medical XX% combined obtain strong that schools rapidly demand medical In to and rigorous a health X,XXX these to our with employer medical institutions school Currently, students. both professionals. care medical build out standards. a broader due which platform both for health difficult

Our Stars, environment. in largest are is a still Both largest and in Both of X-star QS is offering, second the market programs requires all are more ratings have UNITEC educational in that top-quality and the UPN from a UPN segment employability. serving of teaching UNITEC high-quality institutions value and campus university UPN scale. in no-frills the of Peru. X-star affordable and ratings university institutions the but delivering with Mexico institutional private private categories UNITEC at

pre-COVID leading Our and give and earlier, focused investments with in organic in X% confidence X% us to our EBITDA. the return growth revenue brands, ability we dynamics at combined for rates Mexico Peru of growth above favorable or discussed our to adjusted for growth in and macro

well with strong as let in of of strong consists Mexico free and flow remind following profiles, cash as the Peru margins assets. as you Laureate financial Finally, that today, attractive institutions the platform me and

proceeds, as First year-end, well was Brazil to $X our fees, of in United position operations sell with of approximately debt net in Honduras, as University nearly And Walden and million. secondly, combined $XXX at taxes net which the and billion. contracts foremost, and States

the a Our divestitures. of shareholders as J.J. excess will to the a financial J.J.? XXXX our well of performance, cash in more I tax-efficient and large intent overview to call XXXX detailed of during full-year the fourth is return over outlook. completion to guidance our amounts now manner for following pending the quarter turn as

J.J. Charhon

Thank you, Eilif.

million. online $XXX revenue XX. QX X%, with Revenue adjusted while cost comparable our a On million, was to currency, declined to our on basis due quarter at for reductions only lower primarily cover enrollments, adjusted overview $XX Page thanks me an fourth first when constant of to compared EBITDA Let by performance, was starting was the XXXX, and and down EBITDA associated delivery. service in XX%

year constant full-year overall and for was in our a the XXXX $XXX basis billion, expansion year. EBITDA reduction together to comparable revenue results. margin resulted and in by On a savings a XXXX decrease continued cost prior adjusted mostly million. now in Peru, at $X.XXX XX%, result in was our Revenue $XX Moving performance our adjusted currency, at X% G&A campus-related corporate. million versus as large showing with Conversely, up EBITDA of was

color Page Mexico comparisons an provide year are versus on the now on all Peru, XX. prior note with Please basis. some and performance me of constant organic that and Let currency additional starting

Let's past where main cycle our this intake start Mexico with was fall. completed

online New offerings. is the that and the our X% very helped the different. programs modality, enrollment no face-to-face fully traditional doubt were By There between shift mix declined pandemic dynamics accelerate overall.

down face-to-face. year as was average of our for and online while for with mix trend digits up a combined in face-to-face. shift revenue grew mix a online for single modality, Revenue enrollment of overall was and online down a between showed By per As Total year-over-year marginally XX%. and between programs student were shift enrollment online for terms result, the result similar low and down face-to-face XX%, X% enrollment, lower face-to-face.

than more of Finally, of base. adjusted nature XX% EBITDA was the XX% year-over-year, given our down cost fixed

On the other operations despite hand, the our a challenges top Peru lot experienced in showed resiliency Mexico. as more similar in performance of line

and by enrollment prior New enrollments performance in UPN higher XXXX the target by our impacted the that X%, line in than Total market year down we a performance whose premium Mexico, XX% students been fixed of dynamics reflects down to Peru result institutions top brand, as enrollment like mostly by X% of year was Revenue in challenging dynamics, up Peru, more versus in full-year full down been is different lean were continue the for institutions. Despite year quarter of and note were cost EBITDA were respectively, and lower pandemic. impressive UNITEC pandemic. Please prior disproportionately affected value-priced in the enrollments enrollments up their the our experience institution, and the income COVID as new The versus X% that levels. has declines. in made a fourth result both structure. attrition has X%, and adjusted impacted of given was which

our segment XX. to Page corporate now on Turning

level we as have our of simplified corporate saw G&A For the we have of trend. XXXX three years, that our last reduced portfolio. an acceleration disproportionately

only the X We maintaining with XX with with infrastructure a transformation the portfolio of months our consistent corporate months XX countries. expect stewardship operations to of objective next a to the complete in G&A over

corporate XX% can further versus XXXX. average our G&A We run-rate believe continue be to to by in XX% that reduced

Before moving our discuss guidance, to position me illustrated balance sheet on let Page briefly now XX.

in operations extent Australia and As leverage. to reduce a our to us Malaysia, significantly debt allowed has lesser sale our expected, Zealand, of New and in the

XXXX, million. As position down net our of $XXX year-end debt to was

an sale the operations in in Honduras our of Walden closing additional expected the and and net bring Additionally, in Brazil are billion of $X.XX to proceeds.

our reaffirm me excess let that continue in be tax-efficient shareholders to plans way most to liquidity Finally, return to possible. the

transition a will move two Page now guidance Laureate Let's reasons. on for be to XX. year starting for XXXX

be still to expected impacted segment, are by as enrollments the experienced similar XXXX. First, in by pandemic, we dynamics, in resulting

largely our by end the but throughout in-line adjusted historical more two of prior XX% half. the XXXX. growth of EBITDA abated, to pandemic will margin jump anticipate context performance G&A XX let be gives corporate that will and company that levels to with to be With guidance to XXXX, through, reduction G&A XXXX, the corporate We with going in a three-year our mostly the almost is occur transformation provide for by COVID of perspective second the at of the Page me now to mostly reduction completed, the the business in mind, Second, the will impact allowing XXXX. next years. expected return

is $X EBITDA billion note, the asset estimated estimated prior non-cash be million be approximately a are $X.XX charges $XX approximately associated continuing Revenues $XXX in of million. an between estimated indemnification and between million to $XXX are to billion, students. of to XXX,XXX total period For adjusted be and and related includes Please this with acquisition. XXXX, to write-off operation enrollments

Revenues For estimated XXXX, in continuing to $XX is XX. operation $XX on and and to are be improvement billion], XX% a as operation adjusted million be million. noted $XX XXX,XXX be year-over-year, the adjusted students. represents XX, are This estimated million illustrated Page in XX% total $XXX on estimated of EBITDA increase as million, the or as enrollments Page still to G&A corporate approximately mostly [$X.XX a reduction result a in EBITDA

participation strongly in remarks, his with opportunities believes the the for education and represent long-term As private Mexico that Peru and company opening higher market to favorable attractive rates alluded sector. dynamics low Eilif

pandemic profit illustrated as Page Our these very of COVID growing track record revenue in the strong and was on prior markets XX. to

about shift the towards More is We to grow to view expect is online; to revenue specifically, X%, over. our while reflecting XXXX, EBITDA, adjusted these about in dynamics grow should should current operating leverage, enrollments starting return continued grow X%; at pandemic XX%. least that thanks once should about the

margin performance We progression. our flow cash expect to follow and increase

that Laureate XXXX, impacts to we cash associated expect that free excluding pending levels. bright. my be with short, consistent remarks. with Eilif, feel For the items In transformation one-time timing concludes flow divestitures, post-COVID XXXX for and remains we from the future

back Now you wrap-up. a for to

Eilif Serck-Hanssen

in value our headwinds business that will well to will in anticipate We our has and portfolio Thank completion position proven us for committed transformation remarks, a happy return the any remain second We concludes you, of be beyond. from for J.J. look during and all COVID questions now the start abate the this XXXX. half we The are take stakeholders. that to growth to forward to XXXX of resilient. model prepared from to participants. that and creation to Operator, We the our year,

Operator

[Operator Instructions] We question from have Swope with a Matt Baird.

now is open. line Your

Matt Swope

and us of Department takeout which be you. point investigation on know that thinking on And there whether call Good I the were the bonds? the sale the you morning. then they would you and or about do close bond come how I that May secondly, down Any out the X. steps on your need a could Justice Is Could questions, sale with the Walden guess Walden Thank appreciated. the at you think, to first? color a update unwind please. I associated, sale? what's and of couple of happening might price

Eilif Serck-Hanssen

then the This bond question. is I'll Eilif. first, take ask take taker the and I'll J.J. to

a high rates XX%. inquiry, XX Laureate getting very offered to graduation Nursing an becoming September In in Walden program, Walden, The notice related the and of it Walden's DOJ received graduation and outcomes that Nursing rigor are Investigation, the Justice are leaders at note the that And well and of and proud also Walden quality example, over it Vis-à-vis, And Science in the at their with is Walden University on United largest want I rates. Walden. and is Masters students graduate of as good to including of our we program of States are Department first of producing terms very are in our program. strong, jobs the the Masters foremost, and degrees outcomes field. of

in any Laureate Sidley, the with Department Act. False which and the external complete Specifically, interested of Claims cooperating we of And asked has the support retained Justice was them in no the found to to a this inquiry. with conduct was DOJ review been matter. at was and we last of of being specifically, posture That this around year counsel, fully case, review thorough completed end misrepresentation. the allegations substantially evidence compliance

present with are there Justice Department or we with conjunction the pause see any to Justice was I'll findings, met on of and wanted you we follow-up the in Department investigation. if additional So there and of feedback. our awaiting color Sidley,

Matt Swope

color. that's Yes. ultimately And or a been see quarter this in that on the close. July I be committee helpful second resolved this? order let I timing in resolved? targeting know will is time? meeting asset – probably sale very believe Will in you half, sort close No, there decide in you've to that June second the that you to this June be for happen that this. Is expect on Do for of

Eilif Serck-Hanssen

committee late of has complete. on-track is to we process. is of June what that's the change the June submitted, think there July. to referencing And is meet in control in need the meeting hurdles HLC to been I in that you're everything or That and And approval regulatory one the early application requirement. meeting

to time a frame. advance Department application, inquiry needs course, in of of well well. then, resolution change process as that control And DOJ very progressing on also we're the forward the approve the addition, to Education and is that In of looking of

Matt Swope

I see.

before Education expect of meeting Department decision? be part HLC and would of their before that done has the DOJ you the to to make the So,

Eilif Serck-Hanssen

It's our we Department to conclusion hard in come investigation, we a the project time expect but concluded lines a parameters. and manner. specific make specific shared have the representation Justice, ongoing, said, to matter we the internal – will as is this I they can't of very time that around with But investigation in have as finding that and timely I

Matt Swope

could And away this the and transaction break worst the from on how depending certainly deal turns out? That's in the walk case, fair. actually Adtalem

Eilif Serck-Hanssen

[indiscernible] require you various the we are I that a that, transaction There transaction. nature, regulatory And that parties precedent move regulatory approvals achieve the The as have this does the just the conditions referenced. but deal then reps over and to unilaterally obligation go But cancel to know. of approvals, close. a contractual various cannot the have upon to

Matt Swope

helpful. That's very

that part question. Walden Do to leads my before the And can to so retire bonds? of need second close you the you deal the

J.J. Charhon

take transaction, the but that we one, Walden is, either need we The Matt. transactions need Brazil I'll the don't Walden close. the to or answer

– we in current bonds. So position close then haven't right to retire made we of but final be the first the a would should a in now, our the transaction half Brazil year, determination, this

Matt Swope

what best the can of the Brazil timing you guess us And remind that close? is just your

J.J. Charhon

first the what said half. That's We we've said externally.

Matt Swope

Got it.

you the thank Okay, all I really appreciate guys. color.

J.J. Charhon

Sure.

Eilif Serck-Hanssen

you. Thank

Operator

for no [Operator Ladies time. at this conference questions today. Thank you that Instructions] our gentlemen, does your conclude I'm for showing participation. further and

may disconnect. You all

Laureate Education (LAUR) 28 Feb 212020 Q4 Earnings call transcript