Laureate Education, Inc.

Good day and welcome to Laureate Education's fourth quarter and year-end 2023 results 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. To ask a question, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Morse, Senior Vice President, Corporate Finance. Please go ahead.

Good morning, and thank you for joining us on today's call to discuss Lard Education's fourth quarter and year-end 2023 results. Joining me on the call today are Alex Sarkanson, President and Chief Executive Officer, and Rick Buskirk, Chief Financial Officer. Earnings Press Release is available on the Investor Relations section of our website, 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 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 day 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, total debt, net of cash, and free cash flow are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentations. Let me now turn the call over to Ailis.

Thank you, Adam, and good morning, everyone. I'm pleased to report another strong year for L'Oreal in 2023. We delivered on our commitment to all stakeholders. Our financial performance for the year was robust with double-digit growth in revenue and a margin profile which is at a historic high for our company. In addition to favorable financial results, our cash-accreted business model and strong balance sheet enabled us to return $110 million of capital to shareholders through a special cash dividend in the fourth quarter of last year. And today, I am pleased to announce a new $100 million stock buyback authorization underscoring our ongoing commitment to shareholder value creation. During 2023, we also strengthened our academic offerings through further investments in our leading digital capabilities. And we also expanded our health sciences portfolio, including opening a new medical school in Peru and securing seven new medical school licenses in Mexico. We are the largest private provider of higher education in Mexico and Peru, and our institutions continue to be recognized among the best universities in their respective countries and consistently lead the way in academic excellence. Today, I'm very proud to announce our latest ratings from QS Stars, a leading independent university ranking and rating organization. All our universities in Mexico and Peru are now five-star rated, the highest rating attainable in the categories of employability, online learning, inclusiveness, and social responsibility. I would like to thank our faculty and staff for this tremendous achievement. In addition to QS star ratings, each of our institutions continue to be recognized in the local markets for their academic achievements. A few examples of this past year include in Peru, for the third consecutive year, UPC was ranked the number one education brand in the country by Merco. And even more impressively, it was ranked number nine among all foreign and domestic consumer good brands. in the country. And we ranked ahead of companies such as Scotiabank, Toyota, and Microsoft, and just behind Google and Nestle. And in Mexico, UVM was ranked the second best private university according to the Reader's Digest 2023 rankings, second only to Tech de Monterey. We remain confident in our future growth outlook. and believe that demand for quality higher education in Mexico and Peru will continue to grow in the years to come, supported by three key factors. First, the steady increase in participation rates, driving robust demand for higher education in both countries underpinned by the attractive wage premiums for individuals with higher education degrees and the affordable cost to get them. Second, the vital role of the private sector in advancing higher education due to limited government resources, with private institutions now providing over 50% of the combined university seats in Mexico and Peru. And third, substantial demand for upskilling of the labor force. We expect the ongoing nearshoring trends to further accelerate this demand in Mexico, providing a compelling opportunity for higher education institutions like L'Oréal. During our year-end 2022 earnings call, we know that we will strive for continued organic growth momentum and for L'Oréal to deliver a financial profile over the next three to five years in which we pursue three key objectives. First, a target 8% to 10% compound annual growth rate in revenue on a constant currency basis. Secondly, we pursue a capital light expansion strategy with the objective of delivering 40% to 60% of teaching hours online, resulting in capex spending being below 5% of revenues. And finally, we target adjusted EBITDA margin of 30% and adjusted EBITDA to unlevered free cash flow conversion of more than 50%. In 2023, we outperformed our growth objectives. We achieved our online hybridity goals and delivered on our 50% free cash flow conversion when excluding certain cleanup items related to unwinding legacy laureate. Despite the near-term impact of an economic slowdown in Peru, we maintain our three to five year growth profile on a CAGR basis, given the strength of our brands and strong positioning in Mexico and Peru. And we target to deliver 30% adjusted EBITDA margin and 50% or greater free cash flow conversion by end of 2025. As for our 2024 outlook, we continue to see strong opportunities for growth fueled by favorable secular trends. However, we are experiencing different market conditions in Mexico versus Peru, which we believe will cause 2024 top-line growth to be slightly below our mid-term expectations. The macroeconomic backdrop in Mexico is favorable, with robust manufacturing and construction activities, growth in real wages, and increased private consumption. The nearshoring impact is starting to be felt across the economy. For L'Oréal, we expect to see increased participation rates in higher education, as well as higher demand for reskilling and upskilling of the labor force. The market dynamics in Peru are currently more challenged. Peru has been a strong growth market for L'Oréal for many years. In the second half of 2023, Peru encountered an economic downturn as a result of political and weather-related events. These conditions are expected to persist through the first half of this year. However, most economists are forecasting an economic recovery in the second half of 2024, which is aligned with our outlook. As a result of these differing market dynamics, we expect higher growth rates in Mexico versus Peru this year. Our guidance calls for L'Oreal's consolidated revenue to grow 5% to 6% on a constant currency basis for 2024. However, as we enter 2025, we do expect to be at a higher growth rate, which is more aligned to our steady state targeted growth profile. That concludes my prepared remarks, and I will now turn the call over to Rick Bosker for a more comprehensive financial overview of the fourth quarter and the full year 2023 performance, as well as further details on our 2024 outlook. Rick? Thank you, Ilas.