Q1 2021 Laureate Education Inc Earnings Call

[music].

Good day, and thank you for standing by welcome.

Welcome to the first quarter 2021 Laureate Education earnings Conference call.

At this time, all participants are in listen only mode.

After the speaker's presentation, there will be a question and answer session.

Ask the question during the session you will need to press Star then one on your telephone keypad.

Please be advised of today's conference maybe recorded.

If you require any further assistance. Please press star then zero to reach and operator.

I'd now like to hand, the conference over to your host today is there out of more senior Vice President of finance.

And therefore are actual results may differ materially from those we expected.

Important factors that could cause actual results to differ materially from our expectations are disclosed and our annual report on form 10-K filed with the U S Securities and Exchange Commission.

Or 10-Q filed earlier this morning as.

As well as other filings made with the SEC.

And in addition on.

I'll forward looking statements are based on current expectations as of the date of this conference call and.

And we undertake no obligation to update any forward looking statements.

Additionally, non-GAAP measures that we discuss including among others and.

Justin EBITDA and it's related margin.

Total debt net of cash and free cash flow are and also detailed and reconciled to their GAAP counterparts, and our press release or supplementary presentation.

And with that let me turn the call over to Ireland.

And thank you Adam and good morning, everyone, having just completed our primary enrollment and taken Peru and police report, that's 2021 and there's no food good start.

Re experience to return to growth and Peru, with new enrollments, increasing 11% year over year on a comparable basis and that market.

And with 5% new enrollment growth overall for continuing operations.

Or first quarter results were ahead of expectations and very encouraging.

Re optimistic.

On the <unk> for the year, although we acknowledge continued uncertainties from the pandemic and recent weakness and FX rates.

And both Mexico, and Peru, vaccinations, unlike and well behind the United States with less than 5% of the population, having having been fully vaccinated.

And the general macro conditions have looked yet experienced the pace of recovery that we've seen and the us.

And Mexico or lodge, new enrollment intake cycle will occur and September it is too early us of today to other firm read on that and take could we will have a better indication by the time, we report second quarter results.

Therefore, we are maintaining or previously issued full year of 2021 guidance and 2022 outlook and plan to revisit or guidance.

September intake progressive.

And <unk> be close by the end of May.

The World and University transaction is anticipated to close during the second half of this year.

Last week the department of Justice inquiry with resolved when we received notice that the department of Justice Formula decided not to intervene and of civil third part of a complaint against the wall.

We have and Lance price involvement it's program quality and of student outcomes and we are pleased to know behavior and moving forward.

Consistent with our prior discussions on use of proceeds we continue to repay debt and returned capital to shareholders as transactions are completed.

Earlier this week following the stepped on of the court premium.

We redeemed 500 million of our 8.25% senior notes.

We plan to retire the remaining balance of the notes wants to Brazil sales transaction closes.

And addition, Imp's report that our board has approved and expansion of our stock repurchase plan by an additional $200 million.

Bringing the total authorization to $500 million.

Since the beginning of the plan and November.

We have repurchase approximately $250 million worth of stock.

We continue to believe that return and capital to shareholders through stock buyback is very creative use of capital for our investors given the significant discount of our stock price versus the intrinsic value of the individual institutions and our portfolio.

That concludes the opening remarks.

But before discussing our detailed financial overview of the first quarter I would like to welcome break posture or newly appointed Chief financial officer to the call.

Rick previously served as our senior Vice President of corporate development and played an integral role and managing our portfolio optimization strategies.

Rick has been with laureate for over five years and prior to joining the company he of senior positions and the telecom industry investment banking and and one of the big four accounting firms.

Welcome Rick and over to you for the financial overview and guidance outlook.

Thank you very much island as.

As a reminder, higher education as of seasonal business.

The first quarter of represents the primary intake cycle for Peru, a southern hemisphere market and of smaller intake cycle from Mexico, which is of northern hemisphere market. However, as classes are out of session and for most of the period. It is of seasonally low quarter from a revenue and income.

Standpoint.

As you may recall last year due to the COVID-19 pandemic.

Start of certain classes, and Peru were pushed to the second quarter of 2020.

This year yeah.

Academic calendar is back on and normal cycle and the intake completed and classes started during the first quarter and.

As illustrated on the chart noted on page 10.

The timing different skews year over year comparability for our results as I run through the highlights for the quarter I will note those timing adjustments.

Now starting on page 11, with the financial performance.

Avenue and the seasonally low first quarter was $195 million and adjusted EBITDA was $10 million on.

On a comparable basis and.

And at constant currency revenue for the first quarter increased by 5% when compared to 2020 due to the favorable Peru intake and shift of the academic calendar, which benefited revenue by $18 million.

Adjusting for the timing of that calendar shift revenue was down and 5% on of comparable basis, despite being up 2% and enrollment volume.

The reason for this is due to the waiting of Mexico, and peruse results for the quarter, Peru drove the volume upside and the first quarter, but it's mainly out of session for Q1 and as of resolve represents only around 30% of revenue generator for the quarter.

As a result of lower enrollments combined with the mix shift between face to face and fully online as the average revenue per online program is roughly 40% below of face to face offering.

Finally, adjusted EBITDA was essentially flat year over year on a comparable basis.

Benefiting from cost and efficiency actions.

Let's now I'll transition to Peru on slide 14.

Peru on the other hand completed its primary intake and Q1 and saw robust performance.

New enrollments and Peru were up 11% versus prior year when adjusted for timing of the intake.

Total enrollments increased 10% versus prior year adjusted for timing.

Revenue for the quarter was up 68% on a constant currency basis, which equates to 19% growth when adjusted.

For $18 million of academic calendar timing.

Revenue growth was driven by the enrollment increase.

A positive mix between our premium and value brands and increase student credit loads during their summer session.

Finally adjusted.

Adjusted EBITDA of $12 million for the quarter compares to an adjusted EBITDA loss of $27 million and the first quarter of 2020.

The increase year over year resulted from the strong enrollment intake and timing items, including the shift and class start dates which favorably impacted results by approximately $15 million.

Let me now briefly discuss our balance sheet position illustrated on page 15.

As of March 31, and our net debt position was $286 million and total shares outstanding were approximately 196 million shares.

Additionally.

The pending sales of Walden University, and our operations and Brazil are expected to generate an additional $1 95 billion and net proceeds.

Let's now move to guide and starting on page 17, as I lift noted in his opening remarks, we are reaffirming our 2021 guidance and outlook for 2022.

For continuing operations and 2021 total enrollments are estimated to be approximately 337000 students.

Revenues are estimated to be between 1 billion and.

And $1 billion and $40 million.

And adjusted EBITDA is estimated to be between 180.

And $190 million.

Please note. This includes approximately $13 million of noncash charges related to the write off of and indemnification asset associated with of prior period acquisition.

Moving now to continuing operations and 2022.

Total enrollments are estimated to be approximately 350000 students.

Revenues are estimated to be $1 billion and $80 million and adjusted EBITDA is estimated to be $280 million.

This represents a $95 million or 51% increase and adjusted EBIT of year over year.

This increase is mostly driven by approximately $50 million of corporate G&A reduction and of $32 million improvement in operations as of.

Illustrated on page 18.

I left that concludes my remarks and.

And now back to you for closing comments.

Thank you rich.

We are encouraged by the momentum and the business under our new model of regional operator in Mexico and Peru.

The student value proposition for higher education is very strong in both Mexico, and Peru and on.

Quality and brand positioning are unparalleled.

Our business model has proven to be very resilient.

Tire pandemic, and we are known and starting to see signs of enrollments and revenues returning to growth.