Laureate Education, Inc. · NASDAQ:LAUR
Laureate Education — Q2 2018 Earnings Presentation
36 slides from Laureate Education's earnings presentation, Aug 9, 2018
Slide 1: Forward Looking Statements
Forward Looking Statements This presentation includes statements that express Laureate's opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, "forward-looking statements" within the meaning
Slide 2: Summary Overview
SUMMARY OVERVIEW Note: Throughout this presentation amounts may not sum to totals due to rounding
Slide 3: Summary Highlights
Summary Highlights New Enrollments up 4% Q2 YTD Continued margin improvements; up 86bps through Q2 YTD 2Q Adjusted EBITDA ahead of Guidance; up 6% Vs. 2Q 2017 (1) Strong 1H performance; reaffirming full year guidance Outstanding 3rd party rankings and recognitions in Spain, Chile and Peru 2017 Accel
Slide 4: Summary Highlights
Summary Highlights v v v New Enrollments up 4% Q2 YTD Continued margin improvements; up 86bps through Q2 YTD 2Q Adjusted EBITDA ahead of Guidance; up 6% Vs. 2Q 2017 (") Strong 1H performance; reaffirming full year guidance Outstanding 3" party rankings and recognitions in Spain, Chile and Peru 2017
Slide 5: 2017 Accelerator Plan has Been Successful
2017 Accelerator Plan has Been Successful Exit 7 Markets Approx. $1bn in proceeds expected at 13x EV/EBITDA 1,2 Net leverage expected to be 2.7x by year-end 2018 Deploy Common Operating Model $75M+ in annual cost savings Simplify Portfolio Streamline Operations Innovate Enhanced Student Digital Expe
Slide 6: Accelerator Plan Wave 2 Underway
Accelerator Plan Wave 2 Underway of Proceeds Expected of Revenue ~$700M Assets to be Divested $1bn+ Europe Asia Central Further reducing complexity and focusing on LATAM Big 4 and Online/Hybrid opportunities Remaining Portfolio LATAM Big 4 Brazil, Mexico, Peru & Chile Online/Hybrid U.S. & Australia/
Slide 7: Focused Portfolio at Scale
Focused Portfolio at Scale Number of Countries Net Leverage At IPO 2017 Accelerator Plan Accelerator Plan Wave 2 25 18 LATAM Big 4 & Online/Hybrid 4.0x 2.7x ~1x LATAM Big 4 as % Revenue 53% 62% 76% Revenues ($ billions) $4.2B $4.1B $3.4B 1 2018 pro forma for sale of assets from 2017 Accelerator Plan
Slide 8: Q2 & 1H 2018 Performance Results
Q2 & 1H 2018 PERFORMANCE RESULTS
Slide 9: Q2 '18 Variance
Q2 ’18 Variance Notes ($ in millions) (Enrollments in thousands) Results Vs. Q2 ‘17 New Enrollment 62K (10%) Light enrollment period (not a major intake) New Enrollment – Organic(1) (9%) +9% Adjusted for intake timing due to Peru floods in 2017 Total Enrollment 1,041K (3%) Total Enrollment – Organic
Slide 10: H1 '18 Variance
H1 ’18 Variance Notes ($ in millions) (Enrollments in thousands) Results Vs. H1 ‘17 New Enrollment 308K 4% New Enrollment – Organic(1) 4% Brazil up 9% with strong growth in DL Total Enrollment 1,041K (3%) Total Enrollment – Organic(1) 1% Revenue $2,133 0% Revenue – Organic/CC(2) 3% Adj. EBITDA $409
Slide 11: 2018 Second Quarter – Enrollment Dynamics by Segment
2018 Second Quarter – Enrollment Dynamics by Segment Small Intake Cycle in Q2; New Enrollment Growth +9% Normalized for 2017 Peru Floods Timing Q2 ’18 New Enrollment (NE) Q2 ’18 Total Enrollment (TE) Notes (Enrollments in thousands) Q2 ’18 Organic Vs. Q2 ’17 Q2 ‘18 Organic Vs. Q2 ’17 Brazil 16 45% 2
Slide 12: 2018 H1 – Enrollment Dynamics by Segment
2018 H1 – Enrollment Dynamics by Segment Enrollment Trends in line With Expectations H1 ’18 New Enrollment (NE) H1 ’18 Total Enrollment (TE) Notes (Enrollments in thousands) H1 ’18 Organic Vs. H1 ’17 H1 ’18 Organic Vs. H1 ’17 Brazil 103 9% 294 4% +90% Distance Learning NE Growth Mexico 44 2% 188 (2%
Slide 13: Q2 Revenue and Adj. EBITDA by Segment
Revenue Adj. EBITDA Notes ($ millions) Q2 ‘18 Organic/CC Vs. Q2 ’17 (1) Q2 ‘18 Organic/CC Vs. Q2 ’17 (1) Brazil 226 (4%) 78 (7%) Impacted by Academic Calendar shift; 1H: Revenue +1% / Adj. EBITDA +11% Mexico 160 3% 28 (17%) Accelerated marketing investments Andean & Iberian 487 7% 209 9% Central Am.
Slide 14: 2018 H1 – Revenue, EBITDA Dynamics by Segment
Revenue Adj. EBITDA Notes ($ millions) H1 ‘18 Organic/CC Vs. H1 ’17 (1) H1 ‘18 Organic/CC Vs. H1 ’17 (1) Brazil 348 1% 52 11% Margin lift due to new operating model Mexico 316 0% 58 (20%) Increased & front-loading of marketing investments Andean & Iberian 703 8% 202 16% Central Am. & U.S. Campuses 1
Slide 15: 2018 Second Quarter – Net Income Reconciliation
2018 Second Quarter – Net Income Reconciliation Net Income Improvements Driven by Lower Interest Expense & One-Time Gain upon Conversion of Preferred Equity Q2 ’18 B / (W) Vs. Q2 ’17 Notes ($ in millions) Reported $ % Adjusted EBITDA 361 19 6% $19M reduction in Q2 due to asset sales Depreciation & A
Slide 16: 2018 H1 – Net Income Reconciliation
2018 H1 – Net Income Reconciliation H1 Results include ~$300M Gain related to Asset Sales H1 ’18 B / (W) Vs. H1 ’17 Notes ($ in millions) Reported $ % Adjusted EBITDA 409 18 5% $29M reduction in H1 due to asset sales Depreciation & Amort. (130) 1 1% Interest Expense, net (124) 69 36% 25% reduction i
Slide 17: 2018 Second Quarter – Free Cash Flow
2018 Second Quarter – Free Cash Flow Q2 FCF up $114M Y-o-Y Driven by Lower Interest Expense and Timing of Working Capital Change B / (W) Vs. ($ millions) Q2 ‘18 Q2 ’17 Notes Adj. EBITDA (excl. Debt Refi) 361 (3) $19M reduction in Q2 due to asset sales Working Capital/Other (203) 70 Timing impact fro
Slide 18: 2018 H1 – Free Cash Flow
2018 H1 – Free Cash Flow H1 FCF up $136M mostly due to Interest Expense Reductions B / (W) Vs. ($ millions) H1 ‘18 H1 ’17 Notes Adj. EBITDA (excl. Debt Refi) 409 (4) $29M reduction in 1H due to asset sales Working Capital/Other (163) 25 Timing impact from payments and asset divestitures Cash Taxes (
Slide 19: 2018 H1 — Free Cash Flow
2018 H1 — Free Cash Flow H1 18 Adj. EBITDA (excl. Debt Refi) 409 A Working Capital/Other (163) Cash Taxes (83) Capital Expenditures (1) (97) EIP Initiatives (40) Unlevered Free Cash Flow 26 Debt Refinancing Cost - Cash Interest (126) Reported FCF B/(W)V: H1 17 (4) 25 23 113 Notes + $29M reduction in
Slide 20: Impact of Currency Movements on Translated Results
Impact of Currency Movements on Translated Results Foreign Currency Exposure: ~80% of Revenue is non-USD) Foreign Currency Exposure: ~90% of Adj EBITDA is non-USD as all corporate expenses are USD ~55% of Interest is in USD ----- Impact From +1% Appreciation of USD ----- ($35M) (0.8% of FY Revenue)
Slide 21: Impact of Currency Movements on Translated Results
Impact of Currency Movements on Translated Results The company is well hedged from a transactional standpoint as revenue and expense are matched in our local markets — main exposure is currency translation Impact From +1% Appreciation of USD ($35M) ($7M) ($4M) (0.8% of FY Revenue) (0.9% of FY Adj. E
Slide 22: 2018 Guidance
FY (1) Q3 (1) ($ in millions) (Enrollments in thousands) 2018 2018 Total Enrollments 1,025K – 1,030K Revenue $4,260 - $4,300 $920 - $940 Adjusted EBITDA $810 - $820 $95 - $105 Net Leverage 2.7x Capex as % Revenue ~ 7% Cash Taxes 22% of EBIT (excluding gain on asset sales) Cash Interest ~ $250 Free C
Slide 23: 2018 Guidance
2018 Guidance FY () a3) {Eectment a ovsands 201 2018 Total Enrollments 1,025K - 1,030K Revenue $4,260 - $4,300 $920 - $940 Adjusted EBITDA $810 - $820 $95 - $105 Net Leverage 21K Capex as % Revenue ~T% Cash Taxes 22% of EBIT (excluding gain on asset sales) Cash Interest ~ $250 Free Cash Flow ~ $100
Slide 24: FY 2018 Guidance
FY 2018 Guidance (USD millions, except enrollments in thousands) Total Enrollment Revenues Adj. EBITDA 2017 Results 1,068 $4,378 $832 2017 Normalized Adjustments (1) ($13) Completed Divestitures (by Q2 2018) (2) (44) ($186) ($43) Pending Divestitures (3) (21) ($182) ($42) 2017 Proforma 1,004 $4,010
Slide 25: Q3 2018 Guidance
Q3 2018 Guidance (USD millions) Revenues Adj. EBITDA 3Q 2017 Reported Results $983 $87 Closed Divestitures (1) ($43) $12 Debt Refinancing 3Q 2017 Reported Results Pro Forma $941 $99 Organic Growth $17 - $37 $2 - $12 Growth % 2% - 4% 2% – 12% 3Q 2018 Guidance (CC) $958 - $978 $101 - $111 Add Back Clo
Slide 26: Q3 2018 Guidance
Q3 2018 Guidance 3Q 2017 Reported Results $983 $87 Closed Divestitures (843) $12 Debt Refinancing 3Q 2017 Reported Results Pro Forma $941 $99 Organic Growth $17 - $37 $2-$12 Growth % 2% -4% 2%- 12% 3Q 2018 Guidance (CC) $958 - $978 $101 - $111 Add Back Closed Divestitures (") $23 $1 FX Impact (spot
Slide 27: Seasonality: Main Enrollment Intakes
Q1 and Q3 are peak intake quarters, but seasonally weak earnings quarters as institutions are largely out of session during the summer season Q1 represents the large intake for our Southern Hemisphere institutions (Brazil, Andean & Iberian) Q3 represents the large intake for our Northern Hemisphere
Slide 28: Intra-Year Seasonality Trends
Intra-Year Seasonality Trends Large intake cycles at end of Q1 (Southern Hemisphere) and end of Q3 (Northern Hemisphere) drive seasonality of earnings (Q2 and Q4 are our strongest earnings quarters) Revenue Seasonality Adj. EBITDA Seasonality New Enrollments Seasonality Factors Affecting Seasonality
Slide 29: Intra-Year Seasonality Trends
Intra-Year Seasonality Trends + Large intake cycles at end of Q1 (Southern Hemisphere) and end of Q3 (Northern Hemisphere) drive seasonality of earnings (Q2 and Q4 are our strongest earnings quarters) a aan 20% 20% 20% 28 a 20% 21% 2% a9y, 22% 20% 205,225 at 7 as as 2014 ©2015 #2016 #2017 2014 = 201
Slide 30: Financial Tables: Consolidated Statements of Operations
Financial Tables Consolidated Statements of Operations Note: Dollars in millions, except per share amounts, and may not sum to total due to rounding For the three months ended June 30, For the three months ended June 30, For the six months ended June 30, For the six months ended June 30, IN MILLIONS
Slide 31: Financial Tables: Revenue and Adjusted EBITDA by Segment
Financial Tables Note: Dollars in millions, except per share amounts, and may not sum to total due to rounding Revenue and Adjusted EBITDA by segment IN MILLIONS % Change $ Variance Components $ Variance Components For the six months ended June 30, 2018 2018 2017 2017 Reported Organic Constant Curre
Slide 32: Financial Tables: Consolidated Balance Sheets
Financial Tables Note: Dollars in millions, except per share amounts, and may not sum to total due to rounding Consolidated Balance Sheets IN MILLIONS June 30, 2018 June 30, 2018 December 31, 2017 December 31, 2017 Change Change Assets Cash and cash equivalents $ 402.4 $ 468.7 $ (66.3 ) Receivables
Slide 33: Financial Tables: Consolidated Statements of Cash Flows
Financial Tables Note: Dollars in millions, except per share amounts, and may not sum to total due to rounding Consolidated Statements of Cash Flows For the six months ended June 30, For the six months ended June 30, IN MILLIONS 2018 2018 2017 2017 Change Change Cash flows from operating activities
Slide 34: Financial Tables: Non-GAAP Reconciliation
Financial Tables Note: Dollars in millions, except per share amounts, and may not sum to total due to rounding Non-GAAP Reconciliation For the three months ended June 30, For the three months ended June 30, For the six months ended June 30, For the six months ended June 30, IN MILLIONS 2018 2018 201
Slide 35: Financial Tables: Non-GAAP Reconciliation
Financial Tables Non-GAAP Reconcil For the three months ended June 30, For the six months ended June 30, TN MILLIONS 2018 2017____Change 2018 2017 Change Net income (105) 3 240 SUT S 1069S 3955 8 G3) S 3988 Plus: Income tax expense 889) 20 46.9 914 149. 165 ‘income from continuing operations before
Slide 36: Laureate Education Inc
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