Q3 2023 Laureate Education Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the third quarter 'twenty twenty-three Laureate Education, Inc Earnings Conference call.
Speaker 1: Good day and thank you for standing by. Welcome to the third quarter, 2023, Lariat Education Inc. earnings conference 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 question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
At this time all participants are in a listen only mode.
After the Speakers' presentation, there will be a question and answer session.
To ask a question. During this session you will need to press star one one on your telephone you will then here in the automated message advising your hand is raised.
Speaker 1: To withdraw your question, please press star 1-1 again.
To withdraw your question. Please press star one one again.
Speaker 1: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Morse, Senior Vice President, Finance. Please go ahead.
Please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your Speaker today, Adam Morse Senior Vice President Finance. Please go ahead.
Okay.
Good morning, and thank you for joining us on today's call to discuss laureate Education's third quarter 2023 results.
Speaker 2: Good morning and thank you for joining us on today's call to discuss Laureate Education's third quarter, 2023 results.
Speaker 2: Joining me on the call today are Alex Sircanson, President and Chief Executive Officer and Rick Buzz Kirk, Chief Financial Officer.
Joining me on the call today are Alex or Hanson, President and Chief Executive Officer.
Rick bus Kirk Chief Financial Officer.
Speaker 2: Our rings press release is available on the Invest Relations section of our website at laureate.net.
Our earnings press release is available on the Investor Relations section of our website at laureate Dot net.
Speaker 2: We have also posted a supplementary presentation to the website, which we will be referring to during today's call.
Also posted a supplementary presentation to the website.
Which we'll be referring to during today's call.
Speaker 2: the calls being webcast and a complete recording will be available after the call.
It is being webcast and a complete recording will be available after the call.
Speaker 2: I'd like to remind you that some of the information we are providing today, including, but not limited to, are financial and operational guidance.
I'd like to remind you that some of the information, we're providing today, including but not limited to our financial and operational guidance.
Speaker 2: Constituts for looking statements within the meeting will applicable US securities law
Constitutes forward looking statements within the meaning of applicable U S Securities laws.
Speaker 2: For looking statements are subject to risk and uncertainties that may change at any time. And therefore, our actual results may differ materially from those we expect.
Forward looking statements are subject to risks and uncertainties that may change at any time and therefore, our actual results may differ materially from those we expected.
Important factors that could cause actual results to differ materially from our expectations are disclosed in our annual report on Form 10-K filed with the U S Securities and Exchange Commission, our 10-Q filed earlier this morning.
Speaker 2: important factors that could cause extra results to different materially from our expectations are disclosed in our annual report on Form 10K, filed with the U.S. Securities and Exchange Commission, are 10Q, filed earlier this morning, as well as other filing.
As well as other filings made with the SEC.
In addition, all forward looking statements are based on current expectations as of the day of this conference call.
Speaker 2: In addition, all for-looking statements are based on current expectations as of the day of this conference call. And when they take no obligations update any for-looking-
We undertake no obligation to update any forward looking statements.
Additionally, non-GAAP measures that we discuss including among others adjusted EBITDA and related margin total debt net of cash and free cash flow are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentation.
Speaker 2: Additionally, non-get measures that we discuss, including among others.
Speaker 2: Adjust the EBITDA and a related margin, total debt, net of cash and free cash flow are also detailed and reconciled to their gap counter parts in our press release or supplementary presentation. Let me now turn the call over to ILEC. ILEC.
Let me now turn the call over to Ireland.
Thank you Adam and good morning, everyone.
Speaker 3: Today we are pleased to report strong financial performance for the third quarter. Along with the results from the recently completed primary enrollment intake for Mexico and the smaller secondary intake for Peru.
Today, we are pleased to report strong financial performance for the third quarter, along with the results from the recently completed primary enrollment intake for Mexico, and the smaller secondary intake for Peru.
Third quarter revenue was $362 million and adjusted EBITDA was $78 million.
Speaker 3: Third quarter revenue was $362 million, and adjusted EBITDA was $78 million. Both metrics were in line with a guidance range we provided during the second quarter earnings call. For Mexico's
Both metrics were in line with the guidance range, we provided during the second quarter earnings call.
For Mexico, primarily enrollment intake.
Speaker 3: new enrollment grew 4%. And that's on top of the 17% increase we achieved during the prior intake, which benefited somewhat from the COVID recovery volume.
New enrollments grew 4% and that's on top of the 17% increase we achieved during the prior year intake, which benefited somewhat from the COVID-19 recovery volumes.
Speaker 3: We are very pleased with the enrollment performance in Mexico and the momentum we are experiencing in that market.
We are very pleased with the enrollment performance in Mexico, and the momentum we're experiencing in that market.
We are seeing strong performance across both brands as well as our face to face and fully online delivery mode.
Speaker 3: We are seeing strong performance across both brands, as well as our taste of faith and fully online delivery mode.
Speaker 3: over the past two years, new enrollment in Mexico has increased over 20% during the primary intake. For...
Over the past two years, new enrollments in Mexico has increased over 20% during the primary intake.
So peruse smaller secondary intake.
Speaker 3: new enrollment increase 2% as compared to prior year. As a reminder, Prus' primary intake occurred earlier this year in March, and their next large enrollment cycle will take place during the first quarter of 2024.
New enrollment increased 2%.
Compared to prior year.
As a reminder, proof primary intake occurred earlier this year in March.
Next large enrollment cycle will take place during the first quarter of 2024.
Speaker 3: In Mexico, we are experiencing favorable macroeconomic trends.
In Mexico, we are experiencing favorable macroeconomic trends this.
Speaker 3: This year's GDP growth has been upward revised by the IMF to 3.2% and notable improvement from the initial expectations at the beginning of the year. And this increased growth has been driven really by two factors. First and foremost, increased private consumption and secondly, from early investments relating to the near-shore.
This year's GDP growth has been upward revised by the IMF to three 2% a notable improvement from the initial expectations at the beginning of the year.
Increased growth has been driven really by two factors first and foremost increased private consumption.
Secondly from early investments relating to the near shoring trends.
Speaker 3: The nearshoring opportunity has contributed to over 40 percent year-to-date growth in direct foreign investment into Mexico. And Mexico has no overtake in China as the largest trading partner of the United States.
The near shoring opportunities has contributed to over 40% year to date growth in direct foreign investment into Mexico.
Mexico has no overtaken China.
Largest trading partner of the United States.
Speaker 3: We believe that higher education will be a sector that benefits from near-shoring, as employers in Mexico will require re-skilling and upskilling of their labels.
We believe that higher education will be sector benefit from near shoring.
Lawyers in Mexico will require reskilling and upskilling of their labor force.
Speaker 3: And we believe that lawyer is well positioned to capitalize on it.
And we believe that laureate is well positioned to capitalize on this opportunity specifically.
Speaker 3: Specifically, we are the largest private operator of higher education in Mexico.
Specifically, we are the largest private operator of higher education in Mexico.
Speaker 3: with an extensive suite of STEM and business degree program offerings as well as a large portfolio of short course.
With an extensive suite of stem and business degree program offerings as well as a large portfolio of short courses.
Further inflationary pressures have subsided in Mexico.
Speaker 3: Further, inflationary pressures have subsided in Mexico.
The inflation rate is no nearly half of what it was last year dropping from a high of eight 7% in September of 2022 to the current rate of approximately four 5%.
Speaker 3: The inflation rate is nearly half of what it was last year, dropping from a high of 8.7% in September of 2022 to the current rate of approximately 4.5%.
Speaker 3: Marching eight consecutive months of declining inflation.
Marking eight consecutive months of declining inflation.
Speaker 3: Overall, we're very positive on the operating environment in Mexico and our business is performing very well.
Overall, we're very positive on the operating environment in Mexico, and our business is performing very well.
Peru's economic landscape currently reflects the more subdued environment compared to Mexico.
Speaker 3: Peruse economic landscape currently reflects a more subdued environment compared to Mexico.
Speaker 3: It is not anticipated that Peru's GDP for 2023 will experience a slight contraction impacted by a series of events including political disruption and severe weather.
It is not anticipated that proves GDP for 2023 will experience a slight contraction impacted by a series of events, including political disruptions and severe weather.
Speaker 3: This has led to some pressure on the consumer, with families and students taking a cautious approach to spending.
This has led to some pressure on the consumer with families and students taking a cautious approach to spending.
During the recent secondary intake we did observe an increase in students posting their studies.
Speaker 3: During the recent secondary intake, we did observe an increase in students posting their studies.
Speaker 3: But overall, families and students continue to prioritize educational spending due to the strong economic incentives from having a university degree.
But overall families and students continue to prioritize education spending due to the strong economic incentives from having a university degree.
Speaker 3: In Peru, like Mexico, inflation has improved, falling for eight consecutive months to 5% in September .
In Peru, like Mexico inflation has improved falling for eight consecutive months two 5% in September.
Speaker 3: While this is a positive trend, the inflation rate remains above the 3% stated target level.
While this is a positive trend the inflation rates remains above the 3% stated target level.
Speaker 3: Most economists are predicting a return to positive GDP growth in 2024.
Most economists are predicting a return to positive GDP growth in 2024.
Speaker 3: Despite the challenges in the Peruvian market throughout 2023, our business model has performed well with continued growth and enrollment.
Despite the challenges in the Peruvian market throughout 2023, our business model has performed well.
With continued growth in enrollments and revenue.
This resiliency.
Speaker 3: This resiliency underscores the strength of our brands and product offerings in Peru.
Underscore the strength of our brands and product offerings in Peru.
The completion of the third quarter intake in Mexico, and Peru give us high visibility for the balance of the year.
Speaker 3: The completion of the third quarter intakes in Mexico and Peru give us high visibility for the balance of the year.
Speaker 3: We are pleased to reaffirm our constant currency revenue and adjusted EBITDA outlooks for the full year 2023 within the previously guided range.
We are pleased to reaffirm our constant currency revenue and adjusted EBITDA outlook for the full year 2023 within the previously guided range.
Speaker 3: Later in our prepared remarks, Rick will provide more details on the updated guidance, including the impact from foreign currency rates, which have weakened a bit in the past few months.
Later in our prepared remarks, Rick will provide more details on the updated guidance, including the impact from foreign currency rates, which have weakened a bit in the past few months.
We are also pleased to announce today, especially cash dividend of <unk> 17 per share or approximately $110 million to be paid on November 30.
Speaker 3: We are also pleased to announce today a special cash dividend of 70 cents per share, or approximately $110 million, to be paid on November 30th.
Having just completed the enrollment intake onerous seasonally high cash growth third quarter, we are well positioned to continue our track record of returning capital to our shareholders.
Speaker 3: Having just completed the enrollment intake, and our seasonally high cash flow third quarter, we are well positioned to continue our track record of returning capital to our shareholders.
A priority for our organization.
That concludes my prepared remarks over to you Rick for the financial overview of the quarter and full year 2023 outlook.
Speaker 3: That concludes my prepared remarks. Over to you, Rick, for the financial overview of the quarter and full year 2023 out.
Speaker 4: Thank you, Islas. As a reminder, campus-based tire education is a seasonal...
Thank you Alice as a reminder, campus based higher education is a seasonal business, although the third quarter as a large intake period from a P&L perspective. It is seasonally low as classes are out of session for much of the quarter.
Speaker 4: Although the third quarter is a large intake period, from a P&L perspective, it is seasonally low as classes are out of session for much of the quarter.
Speaker 4: Let's start with pages 10 and 11, which highlight our operating and financial performance for the third quarter in year to date.
Let's start with pages, 10, and 11, which highlight our operating and financial performance for the third quarter and year to date.
Speaker 4: New enrollments and total enrollments were both up 6% for the quarter when compared to the prior year period.
New enrollments and total enrollments were both up 6% for the quarter when compared to the prior year period pray.
Speaker 4: Pracing at a brand-indegree level would inline with expectations and when combined with year-to-date volume performance is covering or applied cost of inflation as anticipated.
Pricing at our brand and the Green level was in line with expectations and when combined with year to date volume performance is covering our implied cost of inflation as anticipated.
Speaker 4: During the recent intake, we did experience a positive mixed impact on average revenue per student versus expectations, primarily driven by Mexico.
During the recent intake we did experience a positive mix impact on average revenue per student versus expectation, primarily driven by Mexico.
Speaker 4: Revenue in the third quarter was $362 million, and adjusted EBITDA was $78 million.
Revenue in the third quarter with $362 million and adjusted EBITDA was $78 million on an organic constant currency basis revenue for the third quarter increased 8% year over year.
Speaker 4: on an organic constant currency basis, revenue for the third quarter increased 8% year-to-year.
Speaker 4: adjusted even a decline lately year over year and was in line with the guidance range we provided for the quarters performance.
Adjusted EBITDA declined slightly year over year and was in line with the guidance range, we provided for the quarters performance.
Speaker 4: The decrease was attributable to the shifting of expenses from the first half of the year as discussed on a prior call. An additional cost related to lease access as we continue to focus on optimization of a real estate footprint in Mexico.
The decrease was attributable to the shifting of expenses from the first half of the year as discussed on our prior call and additional costs related to lease exits as we continue to focus on optimization of our real estate footprint in Mexico.
When combined with the first half and still on an organic constant currency basis. Our overall performance for the nine months ended in 2023 resulted in revenue growth of 11% and adjusted EBITDA increase of 10%.
Speaker 4: When combined with the first half and still on an organic constant currency basis, our overall performance for the nine months ended in 2023 resulted in revenue growth of 11% and adjusted EBITDA increase of 10%.
Let me now provide some additional color on the performance of Mexico, Peru, starting with page 13.
Speaker 4: Let me now provide some additional color on the performance of Mexico of Peru, starting with page 13.
Speaker 4: Please note that all comparisons versus prior year are on an organic and constant currency basis. Let's start with Mexico.
Please note that all comparisons versus prior year are on an organic and constant currency basis.
Let's start with Mexico.
Speaker 4: We are very pleased with Mexico's primary intake performance. As a reminder, Mexico grew new enrollment 17% in last year's primary intake. We signaled in our previous calls that this would create a hard comparison in the second half of this year, but that we still expected to deliver year over year growth during the intake. That growth came in as new enrollment's increased 4% timing adjusted.
We are very pleased with Mexico's primary intake performance as a reminder, Mexico grew new enrollments, 17% in last year's primary intake we.
We signaled in our previous call that this would create a hard comparison in the second half of this year, but that we still expected to deliver year over year growth during the intake that growth came in as new enrollment increased 4% timing adjusted.
Speaker 4: As Ilas noted, over the past two years, new enrollment have increased 21% in Mexico during its primary intake driven by double-digit growth in both our premium and value brands, and across both our face-to-face and fully online offers.
As <unk> noted over the past two years, new enrollments have increased 21% and Mexico. During its primary intake driven by double digit growth in both our premium and value brands and across both our face to face and fully online offering.
For the third quarter, Mexico's revenue grew 6% versus the prior year adjusted EBITDA declined $5 million as expected due to shifting of expenses referred to earlier and lease exit costs.
Speaker 4: For the third quarter, Mexico's revenue grew 6% versus the prior year. Adjusted EBITDA declined $5 million as expected due to shifting of expenses referred to earlier and least exit costs.
Speaker 4: On a year-to-date basis, revenue growth of 13% was driven by a 10% increase in average total enrollment and 3% of price mix.
On a year to date basis revenue growth of 13% was driven by a 10% increase in average total enrollments and 3% of price mix.
Speaker 4: Adjusted EVA increased 19% year to date versus the prior year period driven by revenue flow through a productivity gains partially offset by return to campus expenses. We believe that our strategy to expand margins in Mexico to about 25% in the next couple of years is well underway. Let's now transition to
Adjusted EBITDA increased 19% year to date versus the prior year period, driven by revenue flow through of productivity gains, partially offset by return to campus expenses.
We believe that our strategy to expand margins in Mexico to above 25% in the next couple of years is well underway.
Let's now transition to Peru on slide 14.
Speaker 4: During the smaller intake cycle just completed, new enrollments in Peru increased 2% versus the prior year period, and total enrollments grew 4%.
During the smaller intake cycle, just completed new enrollments in Peru increased 2% versus the prior year period, and total enrollment grew 4%.
Speaker 4: As I let noted in his opening remarks, Peru is currently experiencing some pressure on the consumer.
As <unk> noted in his opening remarks, Peru is currently experiencing some pressure on the consumer.
Speaker 4: Accordingly, we did experience higher attrition during the recently completed secondary intake. The impact was felt across the entire sex.
Accordingly, we did experience higher attrition during the recently completed secondary intake the impact was felt across the entire sector.
Despite the macroeconomic conditions, we are still delivering strong topline growth due at a solid primary intake earlier in the year and disciplined pricing approach.
Speaker 4: Despite the macroeconomic conditions, we are still delivering strong top line growth due to a solid primary intake earlier in the year and disciplined pricing approach.
Speaker 4: For the third quarter, Peru's revenue growth was up 10%, adjusted EBITDA increased 3% reflecting the expected impact of return to campus expenses, and additional investments in our health science and digital office.
For the third quarter Peruse revenue growth was up 10% adjusted EBITDA increased 3%, reflecting the expected impact of return to campus expenses and additional investments in our health science and digital offerings.
Speaker 4: On a year-to-date basis, revenue growth of 10% was triggered by a 6% increase in average total enrollment and a 4% increase of price mix.
On a year to date basis revenue growth of 10% was driven by a 6% increase in average total enrollments and a 4% increase of price mix.
Adjusted EBITDA was up 1% versus the prior year to date with the decline in margins as expected as incremental revenue flow through was partially offset by expenses associated with return to face to face classes at our campuses.
Speaker 4: Adjusted evita was up 1% versus the prior year to date with the decline in margins as expected as incremental revenue flow through was partially upset by expenses associated with return to face-to-face classes at our
Let me now briefly discuss our balance sheet position laureate ended September with $131 million in cash and $135 million and gross debt for a net debt position of only $4 million.
Speaker 4: Let me now briefly discuss our balance sheet position. Laureate ended September with $131 million in cash and $135 million in cross debt for a net debt position of only $4 million.
During the quarter, we refinanced our corporate revolver extending its maturity to September 2028, while reducing the size of the commitment to be more appropriate for what is needed for our organization post transformation.
Speaker 4: During the quarter, we refinanced our corporate revolver, extending its maturity through September , 2028, while reducing the size of the commitment to be more appropriate for what is needed for our organization post-transformation.
Speaker 4: Key turns under the revolver, including pracing, were largely unchanged.
Key terms under the revolver, including pricing were largely unchanged.
Our strong balance sheet and extended revolver maturity supported our board's decision to declare the special cash dividend of <unk> 70 per share today.
Speaker 4: Our strong balance sheet and extended revolver maturity supported our broads decision to declare the special cash dividend of 70 cents per share today.
Moving on to our updated outlook for 2023, starting on page 15.
Speaker 4: Moving on to our updated outlook for 2023 starting on page 5.
Speaker 4: We are maintaining revenue and adjusted EBITDA expectations for the full year on a constant currency basis within the previously guided range.
We are maintaining revenue and adjusted EBITDA expectations for the full year on a constant currency basis within the previously guided range. However, we have narrowed the range given only the fourth quarter remains in the year.
Speaker 4: However, we have narrowed the range, given only the fourth quarter remains in the year.
On the foreign currency component.
Speaker 4: Though still very favorable for the year, FX rates have declined since the time of our second quarter earnings call. As a result, we are reducing the full year FX benefits to reflect current spot rates.
There is still very favorable for the year FX rates have declined since the time of our second quarter earnings call. As a result, we are reducing our full year FX benefit to reflect current spot rate.
As a reminder, we consistently provide guidance on a spot FX rate basis.
Speaker 4: As a reminder, we consistently provide guidance on a spot FX rate B.
Speaker 4: During the recent intake, we did experience a positive price and mixed impact, but that was offset by a higher-trition rate in Peru related to the macroeconomic softness in that market.
During the recent intake we did experience a positive price and mix impact, but that was offset by a higher attrition rates in Peru related to the macroeconomic softness in that market. As a result, we now expect total enrollment volume closer to the low end of our previous range.
Speaker 4: As a result, we now expect total enrollment volume closer to the low end of our previous range.
Based on current spot FX rates, we now expect full year 2023 results to be as follows.
Speaker 4: Based on current spot FX rates, we now expect full year 2023 results to be as follow.
Speaker 4: Total enrollments to be approximately 447,000 students reflecting growth of approximately 6% versus 2022.
Total enrollment to be approximately 447000 students reflecting growth of approximately 6% versus 2022.
Speaker 4: Revenue to now be in the range of 1.457 billion.
Revenue to now be in the range of $145 7 billion to.
Speaker 4: to 1.465 billion dollars, reflecting growth of 17 to 18% on an as reported basis and 10% on an organic, constant currency basis versus 2022.
214, $65 billion, reflecting growth of 17% to 18% on an as reported basis and 10% on an organic constant currency basis versus 2022.
Speaker 4: adjusted EBITDA to now be in the range of $410 million to $416 million, reflecting growth of 21% to 23% on an as-reported basis and 14% to 16% on an organic constant currency basis versus 2022.
Adjusted EBITDA to now be in the range of $410 million to $416 million, reflecting growth of 21% to 23% on an as reported basis and 14% to 16% on an organic constant currency basis versus 2022.
Now moving to the fourth quarter guidance for the fourth quarter of 2023, we expect revenue to be in the range of 382 million to $390 million.
Speaker 4: Now moving to the fourth quarter guidance. For the fourth quarter of 2023, we expect revenue to be in the range of $382 million to $390 million. Adjusted EBITDA to be in the range of $123 million to $129 million, with strong margin expansion expected during the fourth quarter.
Adjusted EBITDA to be in the range of $123 million to $129 million with strong margin expansion expected during the fourth quarter.
That concludes my prepared remarks, I'll, let them handing it back to you for closing comments.
Speaker 4: That concludes my prepared remarks. Iliff, I'm handing it back to you for closing comments.
Thank you Rick.
Speaker 3: Thank you, Rick. We on track to deliver on our commitments for 2023 with strong top-line growth, continued margin expansion, and improved free cash flow.
We're on track to deliver on our commitment for 2023 with strong top line growth continued margin expansion and improved free cash flows.
Speaker 3: The financial results we have reported for the first nine months of this year demonstrate the resiliency of Loria's business model and the strengths of our local branch.
The financial results, we have reported for the first nine months of this year demonstrate the resiliency of laureate business model and the strength of our local brands.
Speaker 3: operator that concludes our prepared remarks and we are happy to know take any questions from the participant.
Operator that concludes our prepared prepared remarks, and we are happy to know take any questions from the participants.
Thank you.
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<unk> to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
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Two questions.
Speaker 1: I'm showing no questions at this time. This concludes today's conference call. Thank you for participating and you may now disconnect.
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Speaker 1: Good day and thank you for standing by. Welcome to the third quarter, 2023, Lariat Education Inc. earnings conference 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 question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
Good day, and thank you for standing by.
Welcome to the third quarter 2023 Laureate Education, Inc Earnings Conference call.
At this time all participants are in a listen only mode.
After the Speakers' presentation, there will be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you Wilson herein the automated message advising your hand is raised.
Speaker 1: To withdraw your question, please press star 1-1 again.
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Speaker 1: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Morse, Senior Vice President, Finance. Please go ahead.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker today, Adam Moore Senior Vice President Finance. Please go ahead.
Speaker 2: Good morning and thank you for joining us on today's call to discuss Laurier Education's third quarter, 2020-23 results.
Good morning, and thank you for joining us on today's call to discuss laureate Education's third quarter 2023 results.
Speaker 2: Joining me on the call today are Alex Sarkantan, President and Chief Executive Officer, and Rick Buskirk, Chief Financial Officer.
Joining me on the call today are Alistair Hanson, President and Chief Executive Officer, and Rick Bus Kirk Chief Financial Officer.
Speaker 2: Earnings Press Release is available on the Investor Relations section of our website at laureate.net.
Our earnings press release is available on the Investor Relations section of our website at laureate Dot net.
Speaker 2: We have also posted a supplementary presentation to the website, which we will be referring to during today's call.
<unk> also posted a supplementary presentation to the website.
Which we'll be referring to during today's call.
Speaker 2: The call is being webcast and a complete recording will be available after the call.
Call is being webcast and a complete recording will be available after the call.
Speaker 2: I'd like to remind you that some of the information we are providing today. Including, but not limited to our financial and operational guidance.
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.
Speaker 2: Constituce forward-looking statements within the meeting will applicable US securities law
Constitutes forward looking statements within the meaning of applicable U S Securities laws.
Speaker 2: For looking statements are subject to risks and uncertainties that may change at any time. And therefore, our actual results may differ materially from those we expect.
Forward looking statements are subject to risks and uncertainties that may change at any time and therefore, our actual results may differ materially from those we expected.
Speaker 2: important factors that could cause the actual result to differ materially from our expectations, are disclosed in our annual report on Form 10K, filed with the US Securities and Exchange Commission, are 10Q, filed earlier this morning, as well as other filing.
Important factors that could cause actual results to differ materially from our expectations are disclosed in our annual report on Form 10-K filed with the U S Securities and Exchange Commission, our 10-Q filed earlier this morning.
As well as other filings made with the SEC.
Speaker 2: In addition, all forward-looking statements are based on current expectations as of the day of this conference call, and we undertake no obligation to update any of them.
In addition, all forward looking statements are based on current expectations as of the day of this conference call.
And we undertake no obligation to update any forward looking statements.
Speaker 2: Additionally, non-get measures that we discuss, including among others.
Additionally, non-GAAP measures that we discuss including among others adjusted EBITDA and related margin total debt net of cash and free cash flow are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentation let.
Speaker 2: Adjusted EBITDA and its related margin, total debt, net of cash, and free cash flow are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentation. Let me now turn the call over to Isla.
Let me now turn the call over to Ireland.
Thank you Adam and good morning, everyone.
Speaker 3: Today we are pleased to report strong financial performance for the third quarter. Along with the results from the recently completed primary enrollment intake for Mexico and the smaller secondary intake for Peru.
Today, we are pleased to report strong financial performance for the third quarter, along with the results from the recently completed primary enrollment intake for Mexico, and the smaller secondary intake for Peru.
Speaker 3: Third quarter revenue was $362 million and adjusted EBITDA was $78 million. Both mass tricks were in line with a guidance range we provided during the second quarter earnings call. In the banking class looking back on both represents Yidade Wol this huiedz
Third quarter revenue was $362 million and adjusted EBITDA was $78 million both.
Both metrics were in line with the guidance range, we provided during the second quarter earnings call.
For Mexico as primary enrollment intake.
Speaker 3: new enrollments grew 4% and that's on top of the 17% increase we achieved during the prior year intake, which benefited somewhat from the COVID recovery volume.
Enrollments grew 4% and that's on top of the 17% increase we achieved during the prior year intake, which benefited somewhat from the COVID-19 recovery volumes.
Speaker 3: We are very pleased with the enrollment performance in Mexico and the momentum we are experiencing in that market.
We are very pleased with the enrollment performance in Mexico, and the momentum we are experiencing in that market.
Speaker 3: We are seeing strong performance across both brands, as well as our taste to face and fully online delivery mode.
We are seeing strong performance across both brands as well as our face to face and fully online delivery mode.
Over the past two years, new enrollment in Mexico has increased over 20% during the primary intake.
Speaker 3: Over the past two years, new enrollment in Mexico has increased over 20% during the primary intake.
So peruse smaller secondary intake.
Speaker 3: new enrollment increase 2% as compared to prior year. As a reminder, proves primary intake occurred earlier this year in March and their next large enrollment cycle will take place during the first quarter of 2024.
New enrollment increased 2% as compared to prior year.
As a reminder proved primary intake occurred earlier this year in March.
And the next large enrollment cycle will take place during the first quarter of 2024.
In Mexico, we are experiencing favorable macroeconomic trends.
Speaker 3: In Mexico, we're experiencing favorable macroeconomic trends.
Speaker 3: This year's GDP growth has been upward revised by the IMF to 3.2% and notable improvement from the initial expectations at the beginning of the year. And this increased growth has been driven really by two factors. First and foremost, increased private consumption and secondly, from early investments relating to the near-shore.
GDP growth has been upward revised by the IMF to three 2% a notable improvement from the initial expectations at the beginning of the year.
This increased growth has been driven really by two factors first and foremost increased private consumption.
Secondly from early investments relating to the near shoring trends.
Speaker 3: The near-suring opportunity has contributed to over 40% year-to-date growth in direct foreign investment into Mexico. And Mexico has no overtaken China as the largest trading partner of the United States.
The nearshoring opportunities has contributed to over 40% year to date growth in direct foreign investment into Mexico, and Mexico has now overtaken China as the largest trading partner of the United States.
We believe that higher education will be sector benefit from near shoring as employers in Mexico will require reskilling and upskilling of the Labor Force.
Speaker 3: We believe that higher education will be a sector that benefits from near-shoring as employers in Mexico will require reskilling and upskilling of their labor.
And we believe that laureate is well positioned to capitalize on this opportunity spin.
Speaker 3: And we believe that lawyer is well positioned to capitalize on it.
Speaker 3: Specifically, we are the largest private operator of higher education in Mexico.
Specifically, we are the largest private operator of higher education in Mexico.
Speaker 3: with an extensive suite of STEM and business degree program offerings, as well as a large portfolio of short course.
Within the dental suite of stem and business degree program offerings as well as a large portfolio of short courses.
Speaker 3: Further, inflationary pressures have subsided in Mexico.
Further inflationary pressures have subsided in Mexico.
Speaker 3: The inflation rate is no nearly half of what it was last year, dropping from a high of 8.7% in September of 2022 to the current rate of approximately 4.5%.
The inflation rate is no nearly half of what it was last year dropping from a high of eight 7% in September of 2022 to the current rate of approximately four 5%.
Speaker 3: marking eight consecutive months of declining inflation.
Marking eight consecutive months of declining inflation.
Speaker 3: Overall, we're very positive on the operating environment in Mexico and our business is performing very well.
Overall, we're very positive on the operating environment in Mexico, and our business is performing very well.
Speaker 3: Peru's economic landscape currently reflects a more subdued environment compared to Mexico.
Peru's economic landscape currently reflects a more subdued environment compared to Mexico.
Speaker 3: It is not anticipated that Peru's GDP for 2023 will experience a slight contraction infected by a series of events including political disruption and severe weather.
It is not anticipated that prove GDP for 2023 will experience a slight contraction impacted by a series of events, including political disruption and severe weather.
Speaker 3: This has led to some pressure on the consumer with families and students taking a cautious approach to Spanish.
This has led to some pressure on the consumer with families and students taking a cautious approach to spending.
Speaker 3: During the recent secondary intake, we did observe an increase in students passing their studies.
During the recent secondary intake we did observe an increase in students posting their studies.
Speaker 3: But overall, families and students continue to prioritize educational spending due to the strong economic incentives from having a university degree.
But overall.
Students continue to prioritize education spending due to the strong economic incentives from having a university degree.
Speaker 3: improved like Mexico, inflation has improved, falling for eight consecutive months to five percent
In Peru, like Mexico inflation has improved falling for eight consecutive months two 5% in September.
Speaker 3: While this is a positive trend, the inflation rate remains above the 3% stated target level.
While this is a positive trend the inflation rates remains above the 3% stated target level.
Speaker 3: Most economists are predicting and return to positive GDP growth in 2024.
Most economists are predicting a return to positive GDP growth in 2024.
Speaker 3: Despite the challenges in the Peruvian market throughout 2023, our business model has performed well with continued growth in the role.
Despite the challenges in the Peruvian market throughout 2023, our business model has performed well.
With continued growth in enrollment and revenues.
Speaker 3: This resilience is underscore the strength of our brands and product offerings in Peru.
This resiliency.
Underscore the strength of our brands and product offerings in Peru.
Speaker 3: The completion of the third quarter intakes in Mexico and Peru give us high visibility for the balance of the year.
The completion of the third quarter intake in Mexico and Peru.
Give us high visibility for the balance of the year.
Speaker 3: We are pleased to reaffirm our constant currency revenue and adjusted EBITDA outlooks for the full year 2023 within the previously guided range.
We are pleased to reaffirm our constant currency revenue and adjusted EBITDA outlook for the full year 2023 within the previously guided range.
Later in our prepared remarks, Rick will provide more details on the updated guidance, including the impact from foreign currency rates, which have weakened a bit in the past few months.
Speaker 3: Later in our prepared remarks, Rick will provide more details on the updated guidance, including the impact from foreign currency rates, which have weakened a bit in the past few months.
Speaker 3: We are also pleased to be known today a special cash dividend of 70 cents per share or approximately 110 million dollars to be paid on November 30.
We are also pleased to announce today, especially cash dividend of <unk> 17 per share or approximately $110 million to be paid on November 30.
Speaker 3: Having just completed the enrollment intake and our seasonally high cashflow third quarter, we are well positioned to continue our track record of returning capital to our shareholders.
Having just completed the enrollment intake onerous seasonally high cash growth third quarter, we are well positioned to continue our track record of returning capital to our shareholders.
A priority for our organization.
Speaker 3: That concludes my prepared remarks. Over to you, Rick, for the financial overview of the quarter and full year 2023 out.
That concludes my prepared remarks over to you Rick for the financial overview of the quarter and full year 2023 outlook.
Speaker 4: Thank you, Islas. As a reminder, campus-based tire education is a seasonal...
Thank you Atlas as a reminder, campus based higher education is a seasonal business, although the third quarter as a large intake period from a P&L perspective. It is seasonally low as classes are out of session for much of the quarter.
Speaker 4: Although the third quarter is a large intake period, from a P&L perspective, it is seasonally low as classes are out of session for much of the quarter.
Speaker 4: Let's start with pages 10 and 11, which highlight our operating and financial performance for the third quarter and year to date.
Let's start with pages, 10, and 11, which highlight our operating and financial performance for the third quarter and year to date.
Speaker 4: New enrollments and total enrollments were both up 6% for the quarter when compared to the prior year period.
New enrollments and total enrollments were both up 6% for the quarter when compared to the prior year period.
Speaker 4: Pricing at a brand and degree level was in line with expectations and when combined with year-to-date volume performance is covering our implied cost of inflation as anticipated.
Pricing at a brand into green level was in line with expectations and when combined with year to date volume performance is covering our implied cost of inflation as anticipated.
Speaker 4: During the recent intake, we did experience a positive mixed impact on average revenue per student versus expectation, primarily driven by Mexico.
During the recent intake we did experience a positive mix impact on average revenue per student versus expectation, primarily driven by Mexico.
Speaker 4: Revenue in the third quarter was $362 million, and adjusted EBITDA was $78 million.
Revenue in the third quarter with $362 million and adjusted EBITDA was $78 million on an organic constant currency basis revenue for the third quarter increased 8% year over year.
Speaker 4: On an organic constant currency basis, revenue for the third quarter increased 8% year-over-year.
Speaker 4: adjusted EBITDA decline slightly year over year and was in line with the guidance range we provided for the quarter's performance.
Adjusted EBITDA declined slightly year over year and was in line with the guidance range, we provided for the quarters performance.
Speaker 4: The decrease was attributable to the shifting of expenses from the first half of the year as discussed on our prior call and additional costs related to lease exits as we continue to focus on optimization of a real estate footprint in Mexico.
The decrease was attributable to the shifting of expenses from the first half of the year as discussed on our prior call and additional costs related to lease exits as we continue to focus on optimization of our real estate footprint in Mexico.
Speaker 4: When combined with the first half and still on an organic constant currency basis, our overall performance for the nine months ended in 2023 resulted in revenue growth of 11% and adjusted EBITDA increase of 10%.
When combined with the first half and still on an organic constant currency basis. Our overall performance for the nine months ended in 2023 resulted in revenue growth of 11% and adjusted EBITDA increase of 10%.
Speaker 4: Let me now provide some additional color on the performance of Mexico of Peru, starting with page 13.
Let me now provide some additional color on the performance of Mexico, Peru, starting with page 13.
Speaker 4: Please note that all comparisons versus prior year are on an organic and constant currency basis. Let's start with Mexico.
Please note that all comparisons versus prior year are on an organic and constant currency basis.
Let's start with Mexico.
Speaker 4: We are very pleased with Mexico's primary intake performance. As a reminder, Mexico grew new enrollment 17% in last year's primary intake. We signaled in our previous calls that this would create a hard comparison in the second half of this year, but that we still expected to deliver year-over-year growth during the intake. That growth came in as new enrollments increased 4% timing adjusted.
We are very pleased with Mexico's primary intake performance as a reminder, Mexico grew new enrollments, 17% in last year's primary intake we.
We signaled in our previous call that this would create a hard comparison in the second half of this year, but that we still expected to deliver year over year growth during the intake that growth came in as new enrollment increased 4% timing adjusted.
Speaker 4: As Iless noted, over the past two years, new enrollment have increased 21% in Mexico during its primary intake driven by double-digit growth in both our premium and value brands and across both our face-to-face and fully online offers.
As <unk> noted over the past two years, new enrollments have increased 21% and Mexico. During its primary intake driven by double digit growth in both our premium and value brands and across both our face to face and fully online offerings.
Speaker 4: For the third quarter, Mexico's revenue grew 6% versus the prior year. Adjusted EBITDA declined $5 million as expected due to shifting of expenses referred to earlier and leased exit costs.
For the third quarter, Mexico's revenue grew 6% versus the prior year adjusted EBITDA declined $5 million as expected due to shifting of expenses referred to earlier and lease exit costs.
Speaker 4: On a year-to-date basis, revenue growth of 13% was driven by a 10% increase in average total enrollment and 3% of price mix.
On a year to date basis revenue growth of 13% was driven by a 10% increase in average total enrollments and 3% of price mix.
Speaker 4: Adjusted EVA increased 19% year to date versus the prior year period driven by revenue flow through a productivity gains, partially offset by return to campus expenses. We believe that our strategy to expand margins in Mexico to above 25% in the next couple of years is well underway. Starting now.
Adjusted EBITDA increased 19% year to date versus the prior year period, driven by revenue flow through of productivity gains, partially offset by return to campus expenses.
We believe that our strategy to expand margins in Mexico to above 25% in the next couple of years is well underway.
Let's now transition to Peru on slide 14.
Speaker 4: During the smaller intake cycle just completed, new enrollments in Peru increased 2% versus the prior year period, and total enrollments grew 4%.
During the smaller intake cycle, just completed new enrollment in Peru increased 2% versus the prior year period and total enrollment grew 4%.
Speaker 4: As Ilis noted in his opening remarks, Peru is currently experiencing some pressure on the consumer.
As <unk> noted in his opening remarks, Peru is currently experiencing some pressure on the consumer.
Speaker 4: Accordingly, we did experience higher attrition during the recently completed secondary intake. The impact was felt across the entire sector.
Accordingly, we did experience higher attrition during the recently completed secondary intake the impact was felt across the entire sector.
Speaker 4: Despite the macroeconomic conditions, we are still delivering strong top-line growth due to a solid primary intake earlier in the year and disciplined pricing approach.
Despite the macroeconomic conditions, we are still delivering strong topline growth due at a solid primary intake earlier in the year and disciplined pricing approach.
Speaker 4: For the third quarter, Peru's revenue growth was up 10%, adjusted EBITDA increased 3% reflecting the expected impact of return to campus expenses and additional investment in our health science and digital offerings.
For the third quarter periods revenue growth was up 10% adjusted EBITDA increased 3%, reflecting the expected impact of return to campus expenses and additional investments in our health science and digital offerings.
Speaker 4: On a year-to-date basis, revenue growth of 10% was driven by a 6% increase in average total enrollments and a 4% increase of price mix.
On a year to date basis revenue growth of 10% was driven by a 6% increase in average total enrollments and a 4% increase of price mix.
Speaker 4: Adjusted evita was up 1% versus the prior year to date with the decline in margins as expected as incremental revenue flow through was partially upset by expenses associated with return to face-to-face classes at our
Adjusted EBITDA was up 1% versus the prior year to date with the decline in margins as expected as incremental revenue flow through was partially offset by expenses associated with the return to face to face classes at our campuses.
Speaker 4: Let me now briefly discuss our balance sheet position. Laurier ended September with $131 million in cash and $135 million in gross debt for a net debt position of only $4 million.
Let me now briefly discuss our balance sheet position laureate ended September with $131 million in cash and $135 million and gross debt for a net debt position of only $4 million.
Speaker 4: During the quarter, we refinance our corporate revolver, extending its maturity through September 2028 while reducing the size of the commitment to be more appropriate for what is needed for our organization post-transformation.
During the quarter, we refinanced our corporate revolver extending its maturity through September 2028, while reducing the size of the commitment to be more appropriate for what is needed for our organization post transformation.
Speaker 4: Key terms under the revolver, including pricing, were largely unchanged.
Key terms under the revolver, including pricing were largely unchanged.
Speaker 4: Our strong balance sheet and extended revolver maturity supported our board's decision to declare the special cash dividend of $0.70 per share today.
Our strong balance sheet and extended revolver maturity supported our board's decision to declare the special cash dividend of <unk> 70 per share today.
Okay.
Speaker 4: Moving on to our updated outlook for 2023, starting on page 15.
Moving on to our updated outlook for 2023, starting on page 15.
Speaker 4: We are maintaining revenue and adjusted EBITDA expectations for the full year on a constant currency basis within the previously guided range.
We are maintaining revenue and adjusted EBITDA expectations for the full year on a constant currency basis within the previously guided range. However, we have narrowed the range given only the fourth quarter remains in the year.
Speaker 4: However, we have narrowed the range, given only the fourth quarter remains in the year.
On the foreign currency component.
Speaker 4: Those still very favorable for the year, FX rates have declined since the time of our second quarter earnings call. As a result, we are reducing the full year FX benefits to reflect current spot rates.
There is still very favorable for the year FX rates have declined since the time of our second quarter earnings call.
As a result, we are reducing our full year FX benefit to reflect current spot rate.
Speaker 4: As a reminder, we consistently provide guidance on a spot FX-rate B.
As a reminder, we consistently provide guidance on a spot FX rate basis.
During the recent intake we did experience a positive price and mix impact, but that was offset by a higher attrition rates in Peru related to the macroeconomic softness in that market. As a result, we now expect total enrollment volume closer to the low end of our previous range.
Speaker 4: During the recent intake, we did experience a positive price and mixed impact, but that was offset by a higher-trition rate in Peru related to the macroeconomic softness in that market.
Speaker 4: As a result, we now expect total enrollment volume closer to the low end of our previous range.
Speaker 4: Based on current spot FX rates, we now expect full year 2023 results to be as follows.
Based on current spot FX rates, we now expect full year 2023 results to be as follows.
Speaker 4: total enrollments to be approximately 447,000 students reflecting growth of approximately 6% versus 2022.
Total enrollment to be approximately 447000 student reflecting growth of approximately 6% versus 2022.
Speaker 4: revenue to now be in the range of $1.457 billion.
Revenue to now be in the range of one for $5 7 billion.
Speaker 4: to 1.465 billion dollars, reflecting growth of 17 to 18% on an as reported basis and 10% on an organic, constant currency basis versus 2022.
2146, $5 billion, reflecting growth of 17% to 18% on an as reported basis and 10% on an organic constant currency basis versus 2022.
Speaker 4: Adjusted EBITDA to now be in the range of 410 million to 416 million dollars for selecting growth of 21 to 23% on an as reported basis and 14 to 16% on an organic constant currency basis versus 2022.
Adjusted EBITDA to now be in the range of $410 million to $416 million, reflecting growth of 21% to 23% on an as reported basis and 14% to 16% on an organic constant currency basis versus 2022.
Speaker 4: Now moving to the fourth quarter guidance. For the fourth quarter of 2023, we expect revenue to be in the range of $382 million to $390 million. Adjusted EBITDA to be in the range of $123 million to $129 million. With strong margin expansion expected during the fourth quarter.
Now moving to the fourth quarter guidance for the fourth quarter of 2023, we expect revenue to be in the range of 382 million to $390 million.
Adjusted EBITDA to be in the range of $123 million to $129 million with.
With strong margin expansion expected during the fourth quarter.
Speaker 4: That concludes my prepared remarks. Iliff, I'm handing it back to you for closing comments.
That concludes my prepared remarks, I lytham handing it back to you for closing comments.
Speaker 3: Thank you, Rick. We on track to deliver on our commitments for 2023 with strong top-line growth, continued margin expansion, and improved free cash flow.
Thank you Rick we are on track to deliver on our commitments for 2023 with strong top line growth continued margin expansion and improved free cash flows.
Speaker 3: The financial results we have reported for the first nine months of this year demonstrate the resiliency of Loria's business model and the strengths of our local branch.
The financial results, we have reported for the first nine months of this year demonstrate the resiliency of Lora business model and the strength of our local brands.
Speaker 3: operator that concludes our prepared remarks and we are happy to know take any questions from the participant.
Operator that concludes our prepared prepared remarks, and we are happy to know take any questions from the participants.
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