LAUREATE EDUCATION, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Performance: Third quarter revenue was $369 million and adjusted EBITDA was $91 million, both ahead of early August guidance. Peru saw new enrollments up 12% year-over-year, and Mexico saw new enrollments up 4% year-over-year.
• Macroeconomic Conditions: Peru's macro conditions improved with GDP forecasted at 3% for 2024. Mexico's election year had stimulus aiding intake in early 2024, but post-election had a pullback in economic activity.
• Outlook Adjustment: Increased constant currency outlook for 2024 midpoint by $50 million for revenues and $6 million for adjusted EBITDA. Balance sheet remained strong, with a new $100 million stock repurchase program announced.

Segment Performance

• Mexico: Third quarter revenue increased 9% compared to prior year, adjusted EBITDA increased 2%. Year-to-date, revenue grew 9% (10% adjusted for academic calendar timing), adjusted EBITDA grew 13% (18% adjusted for timing). Adjusted EBITDA margins in Mexico were up 130 basis points year-to-date and expected to accrete further in Q4. New enrollments in Q3 increased 4% year-over-year, with total enrollments up 7% versus September prior year.
• Peru: Third quarter new enrollments increased 12% year-over-year, expected to rise to 16% through completion of the secondary intake cycle. Third quarter revenue grew 8%, adjusted EBITDA increased 23%. Year-to-date, revenue grew 3% (4% adjusted for timing), adjusted EBITDA up 3%. Adjusted EBITDA margins in Peru were 39.7% year-to-date September, expected to be slightly down in Q4 due to expense timing.

Guidance

• Full Year 2024: Revenue expected in the range of $1.551 billion to $1.556 billion (5% as-reported growth, 7% organic constant currency), adjusted EBITDA expected in the range of $447 million to $451 million (7%-8% as-reported growth, 9%-10% organic constant currency).
• Q4 2024: Revenue expected in the range of $408 million to $413 million, adjusted EBITDA expected in the range of $138 million to $142 million. This reflects third quarter cost deferrals and timing of other revenue.

Risks

• Macroeconomic Uncertainties: Uncertainties in Mexico due to post-election economic changes and consumer spending shifts, and in Peru related to overall macroeconomic conditions.
• Currency Headwinds: Weaker Mexican peso causing currency headwinds that offset some operating performance improvements.
• Timing Shifts: Shifting of costs and revenue between quarters, with $13 million of revenue and $11 million of adjusted EBITDA shifted from first half to second half.

Question and Answer

Q: Quantify the timing impact that you mentioned in terms of revenues and adjusted EBITDA between 3Q and 4Q?

A: Yes. From a full year basis, $13 million of revenue and $11 million of adjusted EBITDA was shifted from the first half to the second half. $4 million of that revenue was recovered in Q3, with the remainder coming through in Q4.

Q: Can we get more color on the macro perspective regarding new enrollment softening in Mexico after the election?

A: In an election year, there is additional government spending and stimulus boosting the economy, which helped intake in early 2024. Post-election, consumer spend and business sentiment softened due to judicial reforms and related concerns, impacting new enrollments.

Q: Provide color on operational upside in guidance and capital allocation priorities?

A: Guidance was increased due to Q3 revenue outperformance and expense timing. Focus on returning capital to shareholders, with $2.8 billion returned to-date, and a new $100 million stock repurchase program approved by the Board.