Laureate Education, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Laureate Education's fourth quarter and year-end earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there will be a question-and-answer session. To ask a question at that time, please press star then 1 on your touch-tone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Mr. Adam Morris, Senior Vice President of Finance, so you may begin.

Good morning, everyone, and thank you for joining us on today's call to discuss Laurier Education's fourth quarter and year-end 2020 results. Joining me on the call today are Iliff Sarkanson, President and Chief Executive Officer, and JJ Cherone, Chief Financial Officer. Our earnings press release is available on the investor relations section of our website at laurier.net. We have also posted a supplementary presentation to the website, which you'll be referring to during today's call. The call is being webcast and a complete recording will be available after the call. 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, 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 U.S. 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 free cash flow, are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentation. With that, let me turn the call over to Ilif.

Thank you, Adam, and good morning, everyone. 2020 was a year like no other, which tested the resilience and adaptability of our students, faculty, and staff, as well as our entire organization. I'm extremely proud of what we achieved. Strong execution, solid financial performance, successful operational response to the COVID-19 pandemic, and an ongoing commitment to social impact and serving the communities in which we operate. I want to thank our faculty and staff once again for their agility and commitment to deliver on our promises to our students during these extraordinary times. We realize the value students place on uninterrupted delivery of quality education, even during these times of hardship. Our ability to quickly transition all classes to fully online when the pandemic hit, thus allowing our students to continue their studies was emblematic of our students at the center approach. We have now been operating almost without exception in a fully online mode for the past 11 months. and likely to continue in this mode for the current semester. We are actively monitoring the local market conditions in Mexico and Peru, including any government requirements, and are ready to implement a return to campus strategy when it's appropriate to do so. The fourth quarter results we are reporting today were ahead of expectations. Despite the headwinds caused by the pandemic, throughout 2020, we consistently delivered against our goals and our results demonstrate the resiliency of our business model. For the full year, we were able to drive increases in both adjusted EBITDA and free cash flow generation due to better than expected retention levels, tight cost controls, and a focus on productivity initiatives. Looking ahead, 2021 will be a transition year for L'Oréal as we complete the pending asset sales and the transformation of our corporate overhead structure. The COVID pandemic is still causing enrollment and pricing headwinds in our markets, and we expect this to continue to impact our reported numbers, most notably in the first half of this year. However, as we head into the second half of 2021, we anticipate that the impact of the pandemic will start to abate, which we believe should set us up for a strong recovery in 2022. Later in our prepared remarks, J.J. will provide more details on the outlook for both 2021 and 2022 when he covers guidance. Let me take a minute now to provide an update on our strategic review. Shortly after we reported third quarter results, we closed on the sale of our operations in Australia and New Zealand for approximately 650 million U.S. dollars. Pending transactions include our operations in Brazil and Honduras, which are anticipated to close during the first half of this year, and Walden University, which we expect to close during the second half of this year. Total net proceeds from these pending transactions is approximately 1.95 billion US dollars. For lower institutions in Mexico and Peru, we have decided to continue to operate these assets within a very focused organization. The corporate GNA burden associated with these two relatively homogeneous markets is only a small fraction of what we have historically been required to spend to support this sprawling legacy network. We believe that this focused approach, along with select innovation investments in Mexico and Peru, should return L'Oréal to robust growth in 2022 and beyond. That said, the decision to focus on a regional operating model in Mexico and Peru does not preclude further engagement with potential buyers for these businesses, as we are committed to pursue the best strategy to optimize shareholder value. Now moving to slide number seven. Let me spend a few minutes discussing the Mexico and Peruvian higher education market, both of which are favorable industry dynamics and represent attractive long-term investment opportunities. The demand for higher education in Mexico and Peru is large and growing, fueled by several demographic and economic factors, including a growing middle class and significant personal and economic benefits gained by graduates of higher education institutions. And while participation rate has been increasing in both markets, the overall markets are still significantly under-penetrated with participation rates of 30% in Mexico and 47% in Peru, as compared to developed markets like the United States, which is well above 60%. In addition, both Mexico and Peru have favorable regulatory conditions that are supportive of quality private higher education providers. The private sector plays a meaningful role in higher education in both markets, bridging supply and demand imbalances created by the lack of capacity at public universities. In Mexico, private education providers constitute 44% of the total higher education market for the state in which we operate. In Peru, the private sector is 72% of the total market. This high level of participation validates the important role of the private sector in these markets. Digital education is increasingly important in both markets, as students are expecting access to affordable, quality education via flexible hybrid delivery mode. This trend has been further accelerated by the COVID pandemic, and L'Oréal is a clear leader in online learning and hybrid delivery in our market. Accordingly, We believe that we are well positioned to take advantage of this growing market dynamic during the next three to five years. Further, we expect that pent-up demand for higher education in both markets will be released as a direct consequence of the economic rebound in the aftermath of the pandemic during this same time period. Now moving to slide number eight, let me talk a bit more about the quality of our brands. Our market segmentation strategy is identical in the two countries. We serve the traditional market by our premium brands and the more price sensitive market by our high quality value brands. In Mexico and Peru, our premium institutions of UVM and UPC are among the most highly rated in the country. Both UVM and UPC are four star rated by QS stars at the overall university level. Both are ranked among the top universities in their countries. UVM at number seven in Mexico and UPC as the number three ranked university in Peru. In addition, Both UVM and UPC operate medical schools with combined enrollments of over 7,000 medical school students. Medical school licenses are difficult to obtain and only granted to institutions that meet rigorous standards. The presence of these medical schools has allowed us to build out broader health sciences platforms in both markets. Currently, 17% of our total enrollments are in health sciences verticals, a field which is growing rapidly due to the strong employer demand for healthcare professionals. Our high-quality value institutions of Unitec and UPN are serving the market segments that require a more affordable offering, but still delivering top-quality educational programs in a no-frills campus environment. Both Unitec and UPN have three-star institutional ratings from QS stars, with five-star ratings in the categories of teaching and employability. Both institutions are at scale. Unitec is the largest private university in Mexico, and UPN is the second largest private university in all of Peru. Our leading brands, combined with focused investment in growth and the favorable macro dynamics we discussed earlier, give us confidence in our ability to return to growth at or above our pre-COVID organic growth rates in Mexico and Peru of 6% for revenue and 9% for adjusted EBITDA. Finally, let me remind you that as of today, LORET consists of the attractive platform institutions in Mexico and Peru, with strong margins and strong free cash flow profiles, as well as the following financial assets. First and foremost, contracts to sell our operations in Brazil and Honduras, as well as Walden University in the United States, with combined proceeds, net of taxes and fees of nearly $2 billion. And secondly, net debt position at year end, which was approximately $200 million. Our intent is to return large amounts of excess cash to our shareholders in a tax-efficient manner during 2021, following the completion of the pending divestitures. I will now turn the call over to JJ for a more detailed financial overview of the fourth quarter and full year 2020 performance, as well as our guidance outlook. JJ?