Laureate Education (LAUR) 3 Aug 232023 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Second Quarter 2023 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. [Operator Instructions]. today's being that advised be conference recorded. is Please

hand over Senior to would President, now speaker conference to like ahead. go Morse, I your the today, Finance. Please Corporate Vice Adam

Education's joining and morning, today's discuss XXXX thank for second Good us of quarter you call on to results. Laureate

President Financial me Officer. Serck-Hanssen, are on Officer, Executive today call Chief Joining Rick the Eilif and Buskirk, Chief

presentation of to available is our release complete website, call. Our is on posted after the available a Relations today's also earnings call. will recording be supplementary at website being we'll section the www.laureate.net. which a during referring We've press Investor be the webcast, to and call The

limited remind I'd Laws. operational information some and are within to, guidance you constitutes the forward-looking not meaning of Securities our that U.S. like of applicable statements financial providing to we the but today, including

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

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

GAAP and our margin, detailed cash discussed, release also we counterparts debt, flow that measures others, their cash supplementary EBITDA presentation. press reconciled its non-GAAP among free to in and or total Additionally, adjusted and net of including related are

to me turn Let Eilif. the over now call

operating to June and performance everyone. our well, report to strong continue increasing Adam, new XX% enrollments to and of with pleased Today trend respectively last you, X% compared I'm ahead morning Year-to-date expectations. of by and second-floor total good results Thank year.

of the completed enrollment line in year off volume with half the pricing has ahead for utilization. to in favorable first to addition cost our slightly been growth, cycles In realized our

to deliver EBITDA and continue for XXX operating to also efficiencies, adjusted the in basis-point year. on are track margins drive than We more improvement

addition we have XX% the Peso X% benefited trends. Sol we first the Mexico have guidance currency is and during million for The year revenue, and This and full In flow by cash the the expected in operating U.S. for of generation. than $XX positive Peruvian respectively resulting higher these operating midpoint free trends, Based EBITDA. strong revenue adjusted from at appreciated six and dollar are adjusted million $XX the XXXX EBITDA and foreign to performance, favorable year. versus by on the raising months currency

focus Laureate’s of results, Mexico impressive the key on strategic factors. is three growth deliver Peru by continues supported and market and high to

amount countries, driving higher get and education for participation to robust steady by for attractive First, premiums wage rates underpinned degrees education them. the cost in both in the the increase higher individuals with affordable

Peru. and the the over Mexico with vital advancing third, to the sector now the the providing higher resources, demand labor due role up-skilling government limited substantial for of Universities And combined in education private force. of XX% Second, private of institutions in

the for expect opportunity like higher compelling education further reassuring providing Mexico, intensify a Laureate. We this demand trends in ongoing institutions to

hybrid our to a affordable, and in distribute are profile quality, committed face-to-face, pursuing remain modes. Laureate’s we And through in three next five products years institutions delivery recognized leaders as within Mexico financial the and education both Peru. follows: We to higher online

of to at least momentum a our basis. maintaining X% organic XX% revenue constant-currency on First, growth

adjusted online a in adjusted finally, Second, hours X%. growth revenue of pursuing capital EBITDA EBITDA And and resulting expansion delivering to over capital taught a as more. unlevered conversion XX% drive constant-currency a expenditures below to on XX% delivered strategy, basis XX% Laureate in where adjusted a our teens of consolidated on the flow low margins of will cash light XX% for EBITDA This to percentage free help to be are thus basis. or turn and in

is unwavering our reflected an commitment the leading agenda excellence tomorrow. and portfolio and requirements to innovation, by academic supported growth to program designed job of brands in Our meet a

just Laureate, we dedication academia positive a At society. our goes aim make on beyond to and and impact meaningful

Goals, has few recent two working touch in to Just Nations Peru, universities of Sustainable recognized the as the on impact Higher the Education. latest ranking a by been Development highlights. top United according UPC to towards Times one

the validation recently as Peruvian of platform, La reported Ministry by careers the from best is Labor has market. Republica which well Furthermore, as Ponte UPC in that with Education. Employment, of the Carrera promoted This the of comes labor paid and the graduates number Ministry highest the en

the In making at level Responsibility that university. position we at with Award introduce are at our Diamond Mexico, received to UNITEC, new Institutional delighted of hold the Atizapán our a history in Institution These Rector category. demonstrate Certificate to in Balance Campus woman receive Environmental outstanding first the this Mexico the prestigious we communities commitment UNITEC, at our Also university of UNITEC accomplishment our delivering for to outcomes impact the positive educational This makes serve. level award. furthering first to in accomplishments Academic this and

now as more year-to-date will my the details second on a performance, further remarks our as Rick? XXXX completes Buskirk financial well That the prepare of Rick detailed and improved full-year call turn for to overview outlook. and quarter I over

Thank you, Eilif.

business. As a a seasonal campus-based is reminder, education higher

for quarter a it classes in as represents large of earnings Although a the intake quarter are period, session not for much strong the second the company is period.

enrollment performance favorable year-to-date. operating enrollment to the and when X% was compared XX, and quarter new increased with Total included This prior which across year quarter. driven growth by for year-to-date start brands. our Let's Pages financial all highlight XX%, which five and second the of XX results

our ahead to outlook. strong up-site on pricing realized to to our allowing and growth, providing of expectations, In cost has performance our slightly value us structure cover addition been of some inflation expense

and the and guidance realized three intake. metrics versus during the expectations of result of ahead pricing outperformance provided volume quarter the during secondary we and ago. million. better seasonally Revenue that strong adjusted million in Both was months quarter Revenue favorable rates was a Mexico's were FX $XXX $XXX was second EBITDA

performance and EBITDA of respectively. additionally second on adjusted of $XX first organic, quarter, the aided and with and second the was followed trend year. year-over-year were constant the than an XXXX the our XX% XX% that up the half growth half was resulted for first adjusted combined by in EBITDA XX% shifted XX%. revenue currency the increased more When constant to of overall of basis, revenue million still EBITDA Adjusted for On outperformance and revenue basis, expenses an currency organic, quarter

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

profitability. Let's and our top start of improved to where levels contributing line working with is well. portfolio Both Mexico are growth brand premium our value and

during For and the impacts. effect. second timing benefit mix for positive Mexico's XX% the basis, the slightly effect fall, growth a by was result intake revenue XX% last XX% The growth rates mix. of inflation prior year-to-date increase of was undergraduate that cost from adjusted adjusted annualization our driven of ahead quarter, during price which the by was and versus well created mix favorable XX% revenue enrollments year of our timing total period X% increased in higher a On price when as programs grew secondary pricing intake, added as primary EBITDA the in a

margins returned offset Adjusted the and by Mexico to next productivity in through, EBITDA timing increased versus our by partially XX% expand gains three was year-to-date XX% driven above is benefits We well period. that expenses. in five This to years year prior believe revenue underway. to to flow strategy the campus

Peru on Let's transition XX. now to Slide

primary this brands intake contributed past March completed was double for reminder, enrollment to growth three and in Peru new a As the digit enrollments. all

reflecting was second EBITDA quarter, XX%. campus expected of the up to return X% growth expenses. Peru's the impact For Adjusted revenue increased

On completed we of a inflation intake basis, primary X% growth cost enrollment mix year-to-date able March. total price realized as a hold increase the pricing a were during by of to increase XX% was in driven a revenue of and X% at in

was face-to-face our with expenses year-to-date flat margin the incremental decline through at revenue expected, flow with campuses. EBITDA to Adjusted associated in was as by offset versus return classes prior as partially

Let $XX million. of Laureate and with in June ended million million in our debt $XXX net discuss briefly $XXX cash position. position now a balance sheet gross me debt for

Our sheet less half position a strong balance to turn equates than of leverage. net

XXXX Moving on for our outlook starting to on improved Page XX.

year current and rates, revenue in guidance XXXX expect are follows: revenue the million midpoint. adjusted outlook Based at guidance range million more to full a trends. adjusted $XX EBITDA a We operating currency the favorable improved The results EBITDA on be we now FX midpoint $XX in results overall and increase to the increase spot for in as reflect at and increasing

an versus of to be be Total to $X.XXX basis Revenue XX% versus the currency $XXX an as of and million range on basis basis to reflecting of and XXX,XXX XXX,XXX to of to of in range basis to students, enrollment constant to XX% of organic constant an X% range XX% XX% XXXX. reported growth to XX% growth billion, be currency in to on XXXX. EBITDA to the $X.XXX billion organic continue on on Adjusted XXXX. XX% an to reflecting as now XX% $XXX reported million, the in now growth versus reflecting X%

our improvement better to guidance. points by from at XX XXX flow the basis in our expectations resulting point through, midpoint increasing margin Mexico. for We revenue margin The guidance secondary praising are in versus recent the of intake adjusted increase basis is driven prior EBITDA slightly

to for low our in Additionally, capital-light EBITDA XX% flow unlevered conversion to model. mid to expect improvement cash by be aided range, and growth continued we adjusted free margin XXXX continue to the

once guidance. few prior discussed year a our to call, full as wanted to Finally, in our highlight XXXX seasonality I on items related again

anticipate is Mexico than enrollment XXXX somewhat revenue we strong half second growth by from Peru, second half First COVID other driven of students last for as at second graduation for year's of as revenue, aided XXXX be the by year-over-year first fees. growth intake returning was first however, new that timing In well very growth including lower half. and the step-outs, first we rates. the partially expectations. This revenue for is half regarding similar versus half to In revenue half anticipate the primary

in XXXX. pattern Mexico and expect to first half see We more growth a half normal for second

more the our XXXX be tax is we working the quarter capital. cash and to of due the year. the Lastly, half flow second first in weighted towards payments of of the timing expect seasonality This to heavily in

Now, moving to the third quarter guidance.

third the of quarter $XX XXXX, $XXX million. EBITDA be range million million expect range we the million. to be revenue of to Adjusted of the in $XXX $XX in to For to

handing remarks. you closing back I'm it That prepare Eilif, to for concludes my comments.

our by ahead capabilities Thank you, by quality us. brands, strong growth on encouraged continued strong outcomes. positioned of to focus our we in driven digital both I'm student the of academic growth capitalize well Mexico and We Peru, leading momentum opportunities believe Rick. are and on and

we Operator, our now that to prepared participants. questions and concludes from are take remarks, happy any

Thank you. [Operator Instructions].

comes Our a with from BMO Capital question of first Jeff Markets. line Silber

is open. line Your

so quarter. much, solid congratulations on another Thanks and

of quarter. means? couple Can questions regarding you looking this the it presentation, you timing closes. impact intake Mexico, year, year? for? What a what the that of last enrollment Just just you're on about talk your Was In it of was specifically the us remind

intake, is and The Eilif. in during [inaudible] of year smaller the the Hey Jeff, loved the we intake quarter QX. CX, this last

just of July. the calendar, went into the first While week due this to year,

saying are look So are at the referencing that when what we CX when adjusted. we you intake, is timing full

Just the calendar. cut-over of the

Okay, students about? talking and we how many roughly are

you It's a that handy? have Rick. Do cycle small relatively

Yes, it's around?

$X,XXX. or $X,XXX

or $X,XXX Yes, $X,XXX.

great. helpful. [Cross Talk] sorry, I'm go Okay, That's ahead.

$X,XXX. Sorry, it's $X,XXX around to

Okay, I that. appreciate

remarks you the prepare your first to think in shifting was talked the I was from about million Rick, expenses that? done? $XX Why second of half. half that Where about

expense, for Yes, due thank And was the projects part occurring that Jeff services. simply shift a QX. the Mexico. majority little IT of bit The that just and shift of into professional later and from seasonality the you QX in into shifted was shift question. to QX

those and implementing we're look in we timing projects Mexico. at the As that

intake curious was in that's the great, terms and overall Mexico? what so expect I far the what in the in first specifically half, of us, Okay, large can second in seen pricing price remind if half, increases should you've we the And period helpful. environment,

you to take want Rick, that?

an what talked year the with inflation Jeff, with year, about of Consistent the this the said like X%. Sure. we around we beginning of entering environment at

on X% Our between inflation than of cost was the average higher at Peru, lower between much pricing. that implied slightly on Mexico structure cost around and

in Our could Mexico real we and own estate inflation in release on in real Peru. Mexico inflation and in we be Peru, the own – lower estate the where

an of in do on in focused really saw favorability were we of end environment half that reason first we're to and were with that the simply is of full expense our able year we heavy around advantage inflation on cost year the slight guidance, So which the on the intake, in pressure we FX consumer structure, X% inflation pass that the the in with and secondary pricing that some in for smaller passing a Mexico the on basis. an through to

in the intake will and continue with that third, the And big period?

in in that of we're our expectations to CX, Peru. any into guidance on in half second are have the expectations guidance. and the secondary Obviously and don't differs in early factored that from main which significantly intake our the what intake But your intake is we fully Mexico

Okay, so much. fantastic. Thanks

Thank you. [Operator Instructions].

Morgan Dai Nagano Lucas question next Our of from comes with line Stanley.

open. is line Your

Hey, questions. good taking Thanks our morning. for

margins. was Mexico expansion to related The we is question than first expected. harder The

part but XXX and just wanted how much to due in that was how understand, mentioned this much this to of structural points of expansion particular I of this effect was quarter. the shift due You to expenses, was timing based this

this is Rick. Yes,

be Mexico. three expansion to occurring We notable to opportunity our get in our expansion Mexican years. in in talked We margin we to next I'm very continue XX% year encouraged about, at five as opening plus do about the margin noted this remarks. margins see as we to

to going XX% our around We're that expectation is plus. see

very that half. progression margin simply first expenses we're shifted little saw bit with occur in timing because bit the our into in You a second the Mexico. pleased heavier overall, expansion a little the of But than half

We will know this year, that's see notable. upside you

there Thanks. And that you mentioned Could favorable also Mexico, the pricing mix. again how on a impact effect mix was you growth? for explain benefited

Sure.

is from about is right. One So dimensions, than we have price also are that similarly brands. it. better have face-to-face driving versus dimension, and our brands lower a value discount portfolio it then then dimension And premium XX% what's is XX% actually there's third which third you think And about in which there’s have Mexico, we a two online, and one. – we really

pricing, pricing. undergraduate traditional pricing, undergraduate versus have We online

the Mexico intake that both what And And brand, and we premium high brand brand a our our intake in you CX, we essentially very a year you stronger Mexico for we relative benefit undergraduate, premium where intake when growth year-to-day see or really our primary of in in particularly terms significant mix had as weighting in essentially premium of creates happened last brand, our enrollment in spaces. including our of teens in price UVM. had and benefit significant recall, successful in value the growth of have year. quarter in that you that, last happened, the in undergraduates, mix the the get a higher effect When the

That's very clear. Rick. you, Thank

does Thank That Instructions]. in [Operator our you question-and-answer you. program. participation for session. conference. Thank today's This concludes your the conclude

may disconnect. now You