Good day, and welcome to the Fiscal Year 2024 Laureate Education, Inc. Earnings Conference Call. At this time, all participants will be in a listen-only mode. After the speaker presentation, there will be question-and-answer session. [Operator Instructions] Please be advised that, today's conference is being recorded.

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

Good morning, and thank you for joining us on today's call to discuss Laureate Education's Fourth Quarter and Year-end 2024 results. Joining me on the call today are Eilif Serck-Hanssen, President and Chief Executive Officer; and Rick Buskirk, Chief Financial Officer.

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

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

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 US Securities and Exchange Commission earlier this morning, as well as other filings made with the SEC.

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

Additionally, non-GAAP measures that we discuss, including and among others, adjusted EBITDA and its related margin, adjusted net income and adjusted earnings per share, 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 Eilif..

in Peru, for the fourth consecutive year, UPC was ranked the number one education brand in the country by Merco. And even more impressively, it was ranked number 11 among all foreign and domestic consumer goods brands in the country, and we ranked ahead of companies such as Toyota and Microsoft and just behind Google and Nestle.

In Mexico, UVM was ranked the number two best private university according to Reader's Digest's 2024 rankings, second only to Tech de Monterrey. Additionally, our value brands in both markets, UPN in Peru and UNITEC in Mexico are now ranked in the top 10 in their respective countries by the same ranking agencies.

I extend my deepest gratitude to our faculty and staff for their continued commitment to academic excellence, and I congratulate them on these outstanding recognitions.

Looking ahead to 2025, we see continued growth opportunities in our local markets, including building and outfitting four new campuses for our value brands, two of which we plan to open during 2025. This represents our first new campus launches since 2019. We are also expanding our reach through continued investment in digital education.

We remain confident that the demand for quality higher education in both Mexico and Peru will continue to increase. This demand is fueled by rising participation rates, strong wage premiums for graduates and the affordability of our programs.

Additionally, the private sector, which accounts for over 55% of the combined university seats in the two countries, plays a critical role in the market due to limited public resources.

Despite some geopolitical uncertainties in Mexico, particularly the recent tariff threats and the related trade complications for the United States, we remain cautiously optimistic. Mexico has strong historical ties to the United States that are important to both countries.

Mexico also favors a more dovish monetary policy, and it maintains a strong fiscal discipline in its 2025 national budget. All these factors provide what we believe to be a solid base for growth in the coming years. In Peru, the economy has recovered from the recent recession, which began in mid-2023.

GDP growth for 2025 is expected to reach approximately 3%. Peru should benefit from a favorable macro backdrop, including low interest rates, stable inflation and a currency that is highly correlated to US dollar-denominated commodity prices.

We closely monitor political and external developments in both markets, especially as the US and Mexico trade discussions evolve. We do expect continued volatility in the Mexican peso in the coming months. And based on current exchange rates, we anticipate significant foreign currency translation headwinds in our 2025 reported financial results.

As a reminder, we are not exposed to any material transaction risks from foreign currency as our revenues and operating expenses are matched in local markets. But as a U.S. dollar-denominated reporting company, we are subject to translation impacts.

Our guidance indicates that we will be flat to slightly down year-over-year in reported revenues for 2025. However, we still expect to deliver U.S.

dollar reported growth in both adjusted EBITDA and unlevered free cash flow due to the stability of the Peruvian Sol, robust momentum in local currency revenue growth, and our continued margin expansion efforts.

That concludes my prepared remarks, and I will now turn the call over to Rick Buskirk for a more comprehensive financial overview of the fourth quarter and the full year 2024 performance as well as further details on our 2025 outlook.

Rick?.

total enrollments to be in the range of 489,000 to 495,000 students, reflecting growth of 4% to 5% versus 2024.

revenues to be in the range of $1.545 billion to $1.570 billion, reflecting flat to down 1% performance on an as-reported basis, but growth of 6% to 7% on an organic constant currency basis versus 2024 or 7% to 8%, excluding the impact from campus consolidations in Mexico.

Adjusted EBITDA to be in the range of $467 million to $477 million, reflecting growth of 4% to 6% on an as-reported basis and 11% to 13% on an organic constant currency basis versus 2024. This would result in an increase in adjusted EBITDA margins of approximately 150 basis points at the midpoint of our guidance.

We anticipate further margin expansion to be driven by operating leverage from revenue growth, our campus consolidations in Mexico and lower corporate expenses.

Lastly, for 2025, we expect adjusted EBITDA to unlevered free cash flow conversion of approximately 50% on a reported basis, which would imply strong double-digit growth in US dollar reported cash flows. Now turning to our first quarter guidance.

As a reminder, Q1 is a seasonally low quarter as classes are largely out of session in January and much of February. In addition, our guidance reflects the intra-year seasonality change I discussed earlier.

For the first quarter of 2025, we expect revenue between $221 million and $226 million, adjusted EBITDA between negative $7 million to negative $4 million. That concludes my prepared remarks. Eilif, I'm handing it back to you for closing comments..

Thank you, Rick. As the largest private provider of higher education in both of our markets, we are well positioned to capitalize on growth opportunities with our leading brands, strong digital capabilities and focus on academic quality and student outcomes.

And as an established emerging market company with a developed market governance, we are looking forward to another strong year in which we continue to create value for all stakeholders. Our focus remains on transforming the lives of the students in our markets by providing greater access to affordable quality higher education.

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

Thank you. [Operator Instructions] And our first question will come from the line of Jeff Silber with BMO Capital Markets..

Thank you so much. I wanted to start with Mexico. Eilif, you just mentioned what's going on in the environment there. And I know like specifically with some of the noise about tariffs, it doesn't really have a direct impact on your business.

But has this made the economic environment a bit more uncertain? And could this impact enrollments going forward?.

Good morning, Jeff. You are right that we are a local business and not directly impacted by the geopolitical discussions around tariffs and trade. However, in good economic times when GDP are strong and robust, we do get some tailwind.

And so what we saw in the latter part of last year, we saw a little bit of a slowdown in foreign direct investment and CapEx spend by foreign companies as they were -- took a bit of a wait-and-see attitude towards the US trade discussions.

That slowed down GDP a little bit from being in the first half of the year at about 3% to about 1% in the second half. And of course, that impacts our business somewhat as consumer discretionary also slow down a little bit with the overall economy.

But as we have proven, we are doing extraordinarily well during strong economic times, and we're doing pretty good, pretty well in weaker economic times just because of the strong value proposition that we offer our customers. So hopefully, that provides some additional color for you..

Yes. If I could just drill down a little bit on there.

Are you assuming an acceleration in GDP growth in Mexico or just that the current environment exists for rest of the year?.

So we are -- our guidance is based on the current consensus on GDP of about 1% GDP growth for 2025. So pretty benign economic environment in 2025. We do expect that there will be volatility in 2025 as the trade discussions are being wrapped up, and we are more bullish for 2026 and beyond..

Okay. That's helpful. If I could just sneak in one more. You talked about returning excess capital to shareholders remaining a priority. Can we get a little bit more color on that? And maybe we could just step back.

What is your current capital allocation policy?.

So we have talked about for the last couple of years an objective of delivering 50% free cash flow conversion on our EBITDA on an unlevered basis. And there's been a little bit of noise in that number last year as we were wrapping up some liabilities related to -- largely to taxes on our legacy structure.

That is now behind us and we expect to deliver free cash flow conversion of 50%. And that is after supporting growth in the business of around 5% of revenues in CapEx to support our growth momentum of 5%, 6%, 7% volume growth.

And so therefore, you should take it that 50% of the unlevered free cash flow will be returned to shareholders -- sorry, 50% of our EBITDA or our available free cash flow will be returned to shareholders..

Okay. That’s really helpful. Thanks so much..

Thank you. [Operator Instructions] I'm showing no further questions in the queue at this time. Actually, we do have one from Lucas Nagano with Morgan Stanley. Your line is open..

Hi Eilif, Rick. Thanks for the space here. I have two questions. The first is related to the tax rate. It decreased substantially in 2024 to high-30s, even if we exclude the one-off impact from Q3. So do you see this level as the run rate for now? And the second question is related to the Peru intake.

The first half intake of this year has kind of a similar baseline of the second half of last year. And so given the positive performance last year, do you see the maintenance of this favorable environment with this primary intake? Thank you..

Great.

Rick, do you want to take the tax rate, and I can pick up on the Peru intake?.

Yes. Good morning. If you -- on a reported basis, our book effective tax rate was around 29%, you're right. You do need to adjust for the non-cash FX gain loss on the pre-tax number. So that was over $70 million. And then you need to adjust for the reversal of an accrual of a discrete tax item of around 38% on the tax side.

If you adjust for those two, you get to around 40%, which is what we said our run rate is below 40% effective tax rate..

Great. And Lucas, to your second question, we are a little more than two-thirds through our main intake in Peru, which means that the next four to six weeks are very important period for us as we are wrapping up our commercial campaigns. The market is improving as evidenced by robust GDP expectations of 3-plus percent for GDP growth in 2025 in Peru.

That said, we do see some lingering effects of the recession, particularly in the more price-sensitive value segment. Is that….

Very clear. Thank you. That’s very helpful. Thank you..

Great. Thank you..

Thank you. As I'm showing no further questions in the queue at this time, this concludes today's program. Thank you all for participating. You may now disconnect..