Q2 2021 Laureate Education Inc Earnings Call
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Ladies and gentlemen, thank you for standing by the walk through the Q2.2021 Laureate education earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a <unk>.
During the session will be depressed star 1 on your telephone if you require any further assistance. Please press star zero I would now like to turn the call over to your host Adam Morse.
Good morning, and thank you for joining us on today's call to discuss Larry Education second quarter 2021 results.
Joining me on the call day, our ILEC Circ, Hanson, President and Chief Executive Officer, and Rick <unk>, Chief Financial Officer.
Our earnings press release is available on the Investor Relations section of our website at laureate Dot net.
We have also posted a supplementary presentation to the website, which we'll be referring to during today's call.
Call is being webcast and a complete recording will be available after the call.
I would like to remind you that some of the information, we're providing today, including but not limited to our financial and operational guidance.
Constitutes forward looking statements within the meaning of applicable us securities laws.
This pandemic.
And we have no returned to growth.
Our operating performance to the first 6 months of the year was robust and I had the of expectations and on the strength of that performance.
The increasing our of guidance for the full year 2021.
Second following the successful closing of the sale of operations in Brazil.
Repaid are outstanding senior notes.
I don't know it of nuts cash position of $354 million ourselves end of June.
Of the closing the pending sales of all of the University, which we anticipate to occur shortly or perform of June catch the buttons would equates to approximately $1.65 billion.
Which is more than $8 per share and cash value.
As discussed previously.
Plan to return access capital to share holders in the coming months and are evaluating the most text efficient ways of doing so.
In addition to having a strong balance sheets are operating modules in Mexico, and Peru Ah cash accretive.
We are operating and attractive markets with favorable growth dynamics and expect to be able to deploy capital efficiently to generate strong returns for our shareholders.
That's the reminder.
The demand for higher education in both Mexico, and true is large and growing fueled by rising participation rates.
We have a top ranked brands in both markets serving the traditional segment by our premium brands and the more price sensitive segment of via are of high quality value brands.
We have over 50 campuses throughout Mexico, and true that anchor or a strong brands.
And of leveraging the brand power to become the market leader and on line education.
Digital delivery is increasingly important in both markets of students expect to be able to access affordable quality education why of flexible hybrid delivery of mode.
This trend has been filled the accelerated by the COVID-19 pandemic.
We believe that we of well positioned to take advantage of this growing market dynamic during the next 3 to 5 years.
Oh, no turn the call over to Rick Tusker for a more detailed the financial overview of the second quarter in here to day performance as well as Hell of guidance outlook Rick.
Rick.
Thank you very much islay.
As a reminder, the second quarter is an important earnings period for the company. It typically represents nearly half of our adjusted EBITDA for the full year as classes are in session for much of a quarter let.
Let me know provide us summary of our financial performance for the quarter, which we are very pleased with starting on page 10.
Revenue in the second quarter was $328 million and adjusted EBITDA was $170 million revenue and adjusted EBITDA for both ahead of the guidance that we provided 3 months ago.
On a comparable basis and a constant currency revenue and adjusted EBITDA for the second quarter were up 9 and 25% respectively.
The strong revenue performance in the quarter was led by Peru, which experience 19% year of of your growth the.
The favorable results in Peru were driven by a strong cycle, 1 intake and significantly improved for attention driving total enrollment growth of 18% year over year.
Moving now tour of year to date June results will.
When combined with the first quarter still on of comparable basis, and a constant currency. Our overall performance for the first half resulted in revenue growth of 7 per cent and more than a doubling of our adjusted EBITDA, which increased 107 per cent.
As you may recall from of discussion last quarter.
Last year, David the COVID-19 pandemic the start of certain classes in Peru were pushed to the second quarter of 2020.
This timing different skews year over year compatibility for our performance and resulted in approximately 18 million more of revenue and related earnings recognized in the first half of 2021 versus prior year.
Adjusted for the timing of impacts still on of comparable basis and of constant currency revenue for the 6 months of 2021 without the 4% versus prior year and adjusted EBITDA increased 83% driven by Peru, and corporate G&A efficiencies.
Let me now provide some additional color on the performance of Mexico, and Peru, starting with page 13.
Please note that all comparisons versus prior year are on it of Ganic in constant currency basis.
Let's start with Mexico.
Through the first 6 months of the year, Mexico has completed its smaller cycle, 1 and 2 in case, which typically represents around 40% of the total intake for the year the cycle to intake in particular with solid driving new enrollment of 11% versus prior of.
Your third June.
We continue to see a mix shift.
Between traditional face to face programs and are fully online programs that has been accelerated by the pandemic.
Total enrollments are up 1% versus the prior period reversing the negative trend that we had been experiencing since the start of the pandemic.
We are encouraged by these recent trends and we believe that we are coming out of the low trough point in Mexico.
We will be able to validate that more fully once the large intake is completed in September but early signs of encouraging.
Revenue for the quarter was down 7% as a result of increased levels of discounts and scholarships required during the pandemic combined with the mixture between face to face and fully online.
Finally, adjusted EBITDA was down 21 per cent year over year on of comparable basis, resulting from revenue declines in the high flow through impact from increased discounts.
Let us know transitions of Peru on slide 14.
Through the first 6 months of the year, new enrollments in Peru were up 14%.
Total enrollment increase the robust 18% versus prior year, driven by the strong intake plus a double digit improvement of retention rates as we have seen many students who dropped out last year. When the pandemic again are now returning for their studies.
Revenue for the quarter was up 19% on of constant currency basis revenue growth was driven by the enrollment increase.
Adjusted EBITDA of $114 million for the quarter was up 27% as compared to the second quarter of 2020.
The increase year over year of resulted from the strong enrollment intake and improve for attention.
Please note that year to day June revenue and adjusted EBITDA were favorably impacted but the academic calendar timing discussed earlier year to date resolved adjusted for timing where of 19% and 69% respectively.
Let me now briefly discuss our balance sheet position illustrated on page 15.
As of June 30th we weren't of net cash position of $354 million in total shares outstanding where approximately 188 million shares. This compares to of net debt position of 286 million as of March 31st.
During the second quarter, we completed the sale of our operations in Brazil and use the proceeds to repay are outstanding 8 and a quarter of senior notes.
Over the past few years, we have turned laureate from a highly leveraged company to now being in the net cash position of truly key milestone for our organization.
Additionally, we anticipate net proceeds from the sale of Walden University and select smaller Hell payments from previously completed divestitures to generate approximately 1.3 billion after taxes and fees on of pro forma basis. This puts laureate net cash.
Position at 1.65 billion as of June 30th.
As the Eyelift alluded to in his opening remarks that equates to more than $8 per share and cash value.
Now, let's move the guidance starting on page 17.
On the strength of our first half results and the positive momentum that we're seeing in the business laureate is increasing its full year of 2021 guidance as follows.
For continuing operations in 2021 total enrollments are estimated to be approximately 350000 students.
Revenues are estimated to be between $1 billion and $25 million and $1.065 billion.
Adjusted EBITDA is estimated to be between 205 and $215 million per.
<unk> note that this includes approximately 13 million of non-cash charges related to the right off of an indemnification asset associated with the prior period acquisition.
I was that concludes my remarks.
Handing it back to you for closing comments.
Thank you Rick we continue to be charged by the momentum and the business under our new operating more of a regional operator of higher education institutions in Mexico and Peru.
We look forward to closing of the pending sales of what is the university of during the third quarter and competing of of transformation into of higher education companies focused solely on Latin America.
Operator that concludes our prepared remarks I'd be happy to take any questions from the participants.
Certainly.
As a reminder to ask the question you will need to press star 1 of your telephone.
To withdraw your question for.
The parakeet.
Once again, if you have a question please press star 1.
We have a question from the line of.
Slo-mo Rosenbalm with sniffles.
Hey, How're you doing this is that a month for some of them. Just curious if you could kind of quantifier kind of.
For the lemonade on the discounting that was affecting the results of those period and kind of why there was more of an Mexico versus true.
The this is either of the <unk>.
[noise] counting.
Mexico.
Was what we did in order to help for the students of Julie of very difficult time during the pandemic.
And those discount levels were slightly higher in Mexico, the improve the day off.
When the the short term of nature.
So what is would be experienced in Mexico wish for.
The experience too much less of degree improve for the.
The students would flip over to online delivered during the turned on the for the with the.
Past the migration to fully on line those 2 effects combine the driving a would review to be a temporary reduction in the average price of new Mexico.
[laughter].
And if you could quantify the how much of that in fact of the revenue.
Rick do you want us to come into the on us.
[laughter] yeah.
Yeah, you can see in our financial US that we published in the segment of reporting that increased discounts of scholarships on of your over your basis, where approximately around $30 million.
Okay.
And then the role of all of those things better for the year, because you figure out of the improvement kind of.
Between Mexico and Peru.
[noise] pilots did you want to take that question or.
Sorry, I was I was the news with us.
It was the the.
Is it coming through the the.
The the growth in total enrollment of Adam.
For the improved outlook for the year of kind of you know how much it was coming from Mexico versus Peru.
The factored into the air you up with them at the moment.
We don't we don't keep guidance advice by segment of clearly we're very very encouraged by the trends go see the in Peru, and we expect them to continue.
Just as soon as the.
The as a reminder of Peru's made the intake.
In the political cycle of 1 which was February March.
And in Mexico. The main intake in September and the would be sent through for me was that it seems so sofas in the.
The smaller intake, but in the main intake as students for more determined to come back.
And the with seeing some similar trends in Mexico, but it is too early to to go through can provide for specifics of their own the.
What are your modem for from Mexico during let's go for reported.
Okay.
And for the adjusted EBITDA guys of improvement how much of that is coming from just kind of core operational improvement versus taking upgraded of corporate expensive here for the acquisition.
So.
You would take the.
[noise] Yeah, it's a combination of both I, where you can see us.
To answer your question directly first on the corporate G&A side, you'll see our first half we took that down around $8 million, you'll see that in the financials related to take care of according.
So a reduction in G&A as the step down to right size of the organization after the disposition and.
And the rest of the the outperformance was related to the over achievement, mainly driven by Peru.
Is the answer.
Okay.
And for will share buybacks can pick the continue to be the preferred method church on a couple of shareholders of any change in thinking of it.
[laughter].
We are still very committed to return the excess capital of.
Oh of shareholders, we have the.
The the strong cash position no in the movies, even in the stronger position at the.
Of the close of the.
The world of the transaction and we are working on ways to return the tactical in a the most techs efficient manner of for our shareholders and we will provide more details from the.
After the closing of the holes the transaction.
Okay.
And I guess the last question would be for the let me just mention that 30 million charged for the intensification of here well kind of car.
For my own more color on that.
Yeah, we had a historical acquisition.
In Mexico for 1 of our our campuses and when you have an acquisition you essentially have an indemnification asset that's on your books and then after the statue of limitations expires of the way. It works from an accounting perspective is that gets reversed and essentially.
Expense that asset if it doesn't get you the life. So we create the non cash charge on our on our income statement.
Since the geography matter of its a dry EBITDA when is the <unk> on the the income tax line to the neutral on the nothing's wrong.
Got it.
Okay. Thank you very much.
Thanks.
Thank you.
As a reminder, if you have a question please price star 1 on your telephone.
The next question comes from the line of Bill Goldman with the C D 's capital.
Hey, guys congratulations on the corner just wanted to.
Just get a sense of on the timing for the the Walden deal when when do you guys see that crime.
Of those just from 1 of attacks character of this minor administrative matters of extending to satisfy the C. P for closing in both of the Lemon laureate of working collaboratively.
Expeditiously towards us access for closing in the near future.
More specific from us.
Certainly we of high programs of the of this is the third quarter items.
The fourth quarter of you Sir.
Okay got it okay. That's helpful. Thank you.
Thank you for.
Again, if you have a question please press star World when your telephone.
And this concludes today's conference call.
You for participating and you may now disconnect.
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