Q3 2024 Laureate Education Inc Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the Q3 2020 for a Laureate 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. You will need to press star one one on your telephone to enter the queue. You will then hear an automated message advice and that your hand is raised. To withdraw your question, please press star one again. Please be advised that today's conference is being recorded. I would now like to hand the call number to Adam Morse. Send your vice president from corporate finance. Please go ahead.
Speaker Change: Good morning and thank you for joining us on today's call to discuss Lardage Cations 3rd quarter, 2024 results.
Adam Morse: Joining me on the call today, or I love Circanson, President and Chief Executive Officer, and Rick Buskirk Chief Financial Officer.
Adam Morse: Our name is Pres release is available on the Investor Relations section or website at laria.net
Adam Morse: We have also posted a supplementary presentation to the website which will be referring to during today's call. The call is being webcast and a complete recording will be available after the call.
Adam Morse: 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, constitutes forward-looking statements within the mean of applicable U.S. security's laws.
Adam Morse: For looking statements or subject to risks and uncertainties that may change at any time, and therefore, our actual results may differ materially from those we expected.
Adam Morse: Important factors that could cause extra results of different materialy from our expectations, are disclosed in our annual report on Form 10K, followed with the U.S. Securities and Exchange Commission, are 10Q, followed earlier this morning, as well as other findings made with the SEC.
Adam Morse: In addition, all four looking statements are based on current expectations as of the date of this conference call and when they're taking no obligations update any forward looking statements.
Adam Morse: Additionally, non-get measures that we discuss, including, and among others.
Adam Morse: and Joseph Ibadah and a 3-Lated Margin, Total Dead, Native Cash and Free Cash Flow are also detailed and reconciled to their Gap Counter Parts and our Press Release or Supplementary Presentation.
Speaker Change: Let me now turn the call over to Eilif.
Eilif: Thank you Adam and good morning everyone. Today we are pleased to report strong financial performance for the third quarter along with the results of our recently completed intake cycles.
Eilif: Serckwater revenue was $369 million and it just at Ebeton was $91 million. Both metrics were ahead of the guidance we provided in early August.
Eilif: Taver will results for driven by Peru, in which new enrollment increase by 12% year over year for the third quarter.
Eilif: We expect that this growth rate will increase to an impressive 16% year or year upon completion of the intake cycle.
Eilif: The macro-conditions in Peru continue to improve.
Eilif: Consum is standing as increased, supported by stable inflation, lower interest rates and rising wages.
Eilif: Economists are now forecasting GDP growth of approximately 3% for 2024, a significant turnaround since the 2023 recession.
Eilif: In Mexico, the presidential election took place this past June.
Eilif: in the run up to the election.
Eilif: Inchry's government spending and stimulus has bolster demand for our first quarter new enrollment in take cycle, which was up 7%.
Eilif: Following the election, there was a pullback in economic activity that occurred during the third quarter of the take.
Eilif: Despite these conditions, we still deliver solid results with new enrollments growth of 4% year a year for the third quarter.
Eilif: As the shine-borne administration settles in, we are closely observing its early handling of the Constitutional reforms as well as key pillars of President Shindrom's policy agenda.
Eilif: We are cautiously encouraged by the early indications of Shijnbom's policy priorities, which include enhanced fiscal discipline, modernization of industrial policies.
Eilif: Investments in Infrastructure Development and Public Private Collaboration. All of which we believe are important elements to create sustainable growth for the Mexican economy.
Speaker Change: The completion of our September and October intake cycle provides us with strong visible dim for the remainder of the year.
Speaker Change: Today we are pleased to announce an increase in our constant currency outlook for 2024 at the midpoint by 15 million dollars for revenues and 6 million dollars for adjusted e-biddahl.
Speaker Change: The improved operating performance is expected to be largely offset by currency headwinds from a weaker Mexican peso, allowing us to essentially maintain our full year outlook on an as-supported US dollar basis.
Speaker Change: The End
Speaker Change: Or Balonchey remains exceptionally strong and we have well-positioned to continue delivering on our commitment to return access capital to shareholders.
Speaker Change: For the completion of the $100 billion stock repair purchase program and known in February of this year, we introduced a new $100 million authorization program in September.
Speaker Change: A assuming completion of this program, we will have returned nearly $3 billion of capital to shareholder since 2019 through the combination of share repurchases, cash distributions, and cash dividend.
Speaker Change: That concludes my prepared remarks and I am no handing the call over to Rick for the financial overview of the quarter as well as 2024 outlook.
Rick Buskirk: Thank you, Eilif, as a reminder, Campus State Higher Education is a seasonal business. 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 court further.
Rick Buskirk: Let's start with pages 10 and 11 of the supplementary presentation which highlight our operating and financial performance for the third quarter in year to date.
Rick Buskirk: 3rd quarter revenue was $369 million, but it just had even a was $91 million. Both metrics were ahead of the guidance we provided in early August.
Rick Buskirk: Revenue out performance resulted from the stronger than expected new enrollment intake in Peru. Adjusted EBITDA upside, followed the revenue trend and was further aided by the deferral of certain costs to the fourth order as we opted to wait for the final intake results before committing this fun.
Rick Buskirk: On an organic, constant, currency basis, revenue for the third quarter was out 9% year every year and has just even at increased by 22%.
Rick Buskirk: Both benefiting slightly from academic calendar timing. Adjusting for timing of the academic calendar, the comparable road for revenue and a 7% and 15% respectively.
Rick Buskirk: For the quarter, new and total enrollment involves increased 6% and 5% respectively, versus the third quarter of the prior year.
Rick Buskirk: Now moving to Year-to-Day performance.
Rick Buskirk: For the first nine months of 2024, we achieved a 6% increase in revenue and 7% growth and adjusted even at an organic, constant currency basis versus the prior year period.
Rick Buskirk: A justing for timing of the academic calendar that comparable growth for revenue and a just the EVIDO with 7% and 9% respectively.
Rick Buskirk: Let me now provide some additional color on the performance of Mexico and Peru starting with page 13.
Rick Buskirk: Please note that all comparisons versus prior year are on an organic and constant currency business.
Rick Buskirk: Let's start with Mexico, for both our premiums and value brand are contributing to revenue growth and improve levels of profitability.
Rick Buskirk: Mexico's new enrollments for the third quarter increased 4% year, led by growth and fully online programs focused on work, working adults.
Rick Buskirk: Upon completion of the intake cycle, we anticipate new and wrongly growth of approximately 3% year or 4% when adjusted for the impact of campus closures.
Rick Buskirk: pricing for the intake, slightly above our cost of inflation for both traditional, face-to-face and fully online products.
Rick Buskirk: Total Romans were up 7% versus September of the prior year due to the favorable primary intake last fall in growth in new enrollments.
Rick Buskirk: For the third quarter, Mexico's revenue increased by 9% compared to the prior year due to strong volume growth and adjusted even at increased by 2%. Both metrics were slightly aided by the timing of the academic calendar.
Rick Buskirk: On a year-to-date basis, revenue grew 9% or 10% when adjusted for timing of the academic calendar. This growth was driven by a 9% increase in average total enrollment and 1% of price makes effect.
Rick Buskirk: Inflation based pricing and are based at based offerings was offset by faster growth rates and are fully online products.
Rick Buskirk: Adjusted EBITITIT, increased 13% year-to-date versus the prior year period, or 18% when adjusted for timing the academic calendar resulting from revenue growth and productivity gains.
Rick Buskirk: A just the even of Margin's Mexico were up 130 basis points versus year-to-date prior year when adjusted for timing. We do anticipate additional margin accretion during the fourth quarter and are pleased with our progress to expand Margin's in Mexico to about 25% within our targeted mid-range guidance period.
Rick Buskirk: Let's now transition to Peru on flight 14.
Rick Buskirk: New Enrollments in Peru increased by 12% for the third quarter compared to the previous year and we expect that growth rate to increase to 16% through completion of the secondary intake cycle.
Rick Buskirk: The strong intake performance was driven by tens of demands from students who deferred during the previous intake cycle, as well as strong growth and fully online as we continue to scale up that model.
Rick Buskirk: As a reminder during the primary intake in March, we provided enhanced discounts and scholarships to support our students during a period of macroeconomic challenges.
Rick Buskirk: For the secondary intake, we were able to scale back those discounts given the macroeconomic recovery. As a result, pricing for our traditional face-to-face product was roughly in line with a place but we do expect a mix effect as we grew fully online programs faster than our face-to-face offerings.
Rick Buskirk: Total enrollments were up to 3% versus September of the prior year, reflecting softer macroeconomic conditions experienced during the first half of 2024.
Rick Buskirk: For the third quarter of the macroeconomic recovery drove revenue growth of the 8% and a 23% increase in adjusted evita. Both metrics benefit it's slightly from academic calendar timing.
Rick Buskirk: On a year to date basis, revenue grew 3% or 4% when adjusted for timing of the academic calendar driven by a 2% increase in average total enrollment and 2% of price mix.
Rick Buskirk: adjusted EVIDo was up 3% versus the prior year to date period. Slow through margin on revenue growth was offset by enhanced discounts and scholarships from the first quarter intake, as well as higher levels of bad debt provisioning, resulting from the softer macroeconomic conditions in the first half of the year.
Rick Buskirk: adjusted even at margins of Peru were at 39.7% for years-a-day September. We expect margins in the fourth quarter to be down slightly from that level due to the shifting of expense from the third quarter as discussed earlier.
Rick Buskirk: Let me now transition to discuss our balance sheet position.
Rick Buskirk: Laureate ended September with $134 million in cash and $155 million in gross debt for a net bet position of $20 million.
Rick Buskirk: Our strong balance sheet and cathode generation supported our board's decision to announce a new $100 million stock or purchase program last month.
Rick Buskirk: Moving on to our updated outlook for the year starting on page 18.
Rick Buskirk: Following the strong intake results, notably the double digit new enrollment growth in Peru. We are raising our constant currency guidance for 4 year 2024 at the mid-20 by 15 million for revenue and 6 million for adjusted ebode.
Speaker Change: As Eilif noted, this increased operating performance is expected to largely cover the currency headwind, allowing us to essentially maintain our as-reported U.S. dollar full year outlook within a narrow range.
Speaker Change: The Mexican peso considered declined during the third quarter, and current spot FX rates are now approximately 11% weaker as compared to year-to-date average rates.
Speaker Change: Based on current spot rates, we now expect full year 2024 results to be as follows.
Speaker Change: Total enrollment to be approximately 470,000 students reflecting growth of approximately 5% versus 2023.
Speaker Change: Revenue is to now be in the range of $1.551 billion to $1.556 billion. Refucking growth of 5% on an as reported basis and 7% on an organic, constant currency basis versus 2023.
Speaker Change: A just to the EBITDA to now be in the range of $447 million to $451 million. Reflecting growth of 7 to 8% on an AS report of bases and 9 to 10% on an organic consequences currency basis versus 2023.
Speaker Change: Now moving to fourth quarter guidance.
Speaker Change: For the fourth quarter of 2024, we expect revenue to be in the range of 480 million to 413 million dollars.
Speaker Change: Adjusted, Eivided to be in the range of 138 million to 142 million dollars.
Speaker Change: A fourth quarter outlook reflects the impact from third quarter cost of furl, as well as timing of other revenue. That concludes my prepared remarks. I live on handing it back to you for closing comments.
Speaker Change: Thank you, Rick. We believe that we are well-positioned to meet our commitments to our stakeholders for 2024, with strong top line growth and continued margin expansion.
Speaker Change: The strong rebound we experience in Peru and solid performance in Mexico during the intake cycles. Under score the strength of our local brands and the resiliency of our business model.
Speaker Change: Operator, that concludes our prepared remarks and we know happy to take any questions from the participants.
Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone of wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by when we compile the Q&A roster.
Speaker Change: and one moment for our first question. Our first question will come from Jeff Filmer of BMO Capital markets. Your line is open.
Jeff Filmer: Thanks so much. Can we just go back and just quantify the timing impact that you mentioned in terms of revenues and adjusted EBITDA between three Q and 4 Q?
Jeff Filmer: Yeah, just to take us that back Jeff, this is Rick.
Jeff Filmer: from a full year basis.
Rick Buskirk: We shifted effectively $13 million of revenue and 11 million dollars of even from the first half to the second half.
Rick Buskirk: We essentially in Q3 recovered $4 million of that and rounded up around $4 million a little less than that.
Rick Buskirk: in the 4th and the 3rd quarter and the remainder of that, which is the remainder that will come through in Q4.
Speaker Change: I'm sorry I was a little bit confused so there's not necessarily a timing issue between three Q and 4 Q. You're just revisiting the one half versus the second half timing is that correct?
Speaker Change: Well, 13 million of revenue in 11 million of the job that even it was shifted from 1st half to 2nd half and will recover that 13 million of revenue that shifted out of the 1st half and the 2nd half, 4 million of that revenue got recovered in Q3
Speaker Change: [inaudible]
Speaker Change: and got it down. So, okay. Maybe we can move on to a macro perspective. You mentioned the new elections in Mexico, and then I think you mentioned softening new enrollment after the election. Can we get a little bit more color terms of what's going on and why that was impacted so quickly?
Jeff Filmer: This is Iif Jeff, in an election year, typically in Latin America, there will be additional government spending and stimulus.
Speaker Change: to drive up the economy in the election year and have more discretionary, spend available for the consumers and the voters.
Speaker Change: and so we saw that in...
Jeff Filmer: 2.5 of 23 and under the 24 that really helped us. We had really strong intake cycles with a point to two ahead of.
Jeff Filmer: What we were expecting, what we normally have.
Jeff Filmer: I think we got a little bit of had went from that. So that shifted some demand from otherwise, for typically have seen in the main intake for September 2024 into earlier period. And also there is a sensible consumers.
Jeff Filmer: that they are available in the second half of 2024, was a little lighter than what it had been in the prior 6 to 12 months.
Jeff Filmer: So that that that that integrated us a little bit.
Jeff Filmer: Also, I would say some of the concerns related to the election and the judicial reforms that were...
Jeff Filmer: We implemented a post-election course, a business sentiment to turn a little softer for an investment and overall cap expand.
Jeff Filmer: and the industry came down which also made the consumer a little bit more concerned about making large commitments on big ticket items such as education.
Speaker Change: Okay, got it. I could just sneak one more in and just keeping with the same scene.
Speaker Change: We saw an article that last week.
Speaker Change: Ms. Shunbaum had proposed to create, I think, with 330,000, new university places in Mexico over the course of her presidency. I was the specific school that she was talking about, we're not on profit schools.
Speaker Change: Can we get a little bit more color I don't know? Is it just a proposal? Is it something that will happen? What if it does? What do you think the impact will be on your school? Thanks.
Speaker Change: This is a proposal and we are waiting to see what will be incorporated of that proposal into the fiscal budget for 25.
Speaker Change: and we will have a disability that in late November, early December.
Speaker Change: But basically the proposal for the Chamber ofain Administration to expand.
Speaker Change: Access to public capacity, correct the 330 social seats over 60 year period.
Speaker Change: that represents a 10% increase in public capacity, or less than 2% cager over the period.
Speaker Change: Public capacity has not really expanded, so most of the growth in the market has been absorbed by the private sector, and and Ocean 10 to add to capacity, all be it at slightly slow pace than over market.
Speaker Change: She is saying in her remarks her administration is saying that they would focus on underserved communities and rural areas.
Speaker Change: which of course also with somewhat limit the overlap to the Loryat network as we are focused on the larger cities. To illustrate that.
Speaker Change: and New Campuses.
Speaker Change: and that they have announced for University of Donald's view now.
Speaker Change: and Rosaria Castellinius accounts for about 50 to 60% of the incremental capacity and those campuses will be in areas where we don't have any presence.
Speaker Change: I really appreciate the details on this. Thanks so much.
Jeff Filmer: Of course Jeff.
Speaker Change: and as a reminder to ask a question, please press star 1-1 for your telephone and wait for your name to be announced.
Speaker Change: Our next question will be coming from Lucas, Nagano, of Morgan Stanley, your line is open.
Lucas, Nagano: Hey, good morning, I live at Adam. Thanks for the opportunity here. Two questions. This first one is related to the new guidance. If you could provide more color on where the operational upside comes from.
Lucas, Nagano: And also a second question is related to a capital allocation. If you could give some call around the priorities in terms of capital allocation regarding the remaining free cash flow for this year, excluding the new buyback program.
Speaker Change: Yes, I look at this morning so
Speaker Change: This is Rick, a related to guidance.
Rick Buskirk: We adjusted as you saw the range, we shortened the range for both revenue and adjusted EBITDA.
Rick Buskirk: and we ended up taking up the midpoint of revenues.
Rick Buskirk: by $15 million and $6 million of adjusted EBITDA. What was happening in that was effectively we flew through.
Rick Buskirk: The upside of revenue that we had in the Q3, we outperformed the high of $6 million and we're just
Rick Buskirk: on adjusted Eilif that up.
Rick Buskirk: We took it out as I noted and then there were two things that happened one primarily it was the flow through associated with that incremental revenue
Rick Buskirk: Otherwise, we had around a $10 million of expense timing that shifted from 23 to Q4 that happened. So that's the explanation behind the guidance.
Rick Buskirk: and Adam Morse.
Speaker Change: Wookie, get that
Adam Morse: and you're asking on return of capital, we continue to focus on returning capital to shareholders, we have returned.
Adam Morse: $2.8 million today. The 100 million dollar program that the board approved.
Adam Morse: and Fistok reproches in February, was completed in September, in September the board approved another $100 million which...
Adam Morse: We will be executing over the coming quarters.
Adam Morse: So that's the current state is for that.
Adam Morse: 100 million dollars have been executed we will.
Adam Morse: I have returned nearly $3 billion.
Speaker Change: Be very clear, Eilif Serck, thank you.
Speaker Change: Thank you so much Lucas
Speaker Change: and I am showing no further questions at this time and this concludes today's conference call. Thank you for participating. You may now disconnect.