Laureate Education, Inc. · NASDAQ:LAUR
Laureate Education — Investor Day (January 2018)
70 slides from Laureate Education's investor day presentation, Jan 31, 2018
Slide 1: Laureate Education Investor Day
Laureate Education Investor Day January 31, 2018 1
Slide 2: 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 3: Agenda
Agenda 1 Executive Summary 2 2017 Accomplishments 3 Recent Developments 4 Positioned for Success 5 2018 - 2020 Priorities 6 2018 Guidance 7 Future Opportunities 8 Summary & Wrap-up 9 Q&A 10 Appendix © 2018 Laureate Education, Inc. 3
Slide 4: Executive Summary
Executive Summary We are the global leader in higher education in large and growing markets with a long runway for growth 2017 was a transformational year for Laureate and has positioned us for future success • Completion of IPO with significantly stronger balance sheet • Re-assessment and refinemen
Slide 5: 2017 Accomplishments
2017 ACCOMPLISHMENTS © 2018 Laureate Education, Inc. 5
Slide 6: 2017 Was A Year of Simplification & Execution
2017 Was A Year of Simplification & Execution Simplify Portfolio Streamline Innovate Operations Successful transition to new management team Team • Streamlined operations / significant cost rationalization Sharpening Laureate’s strategic focus Simplify • Exiting 6 markets; 6% of Revenue; $650M+ proc
Slide 7: Experienced Management Team with Proven Track Record
Experienced Management Team with Proven Track Record EILIF SERCK-HANSSEN CHIEF EXECUTIVE OFFICER • Laureate Experience: 10 years • International Experience: 29 years MANAGEMENT TEAM GLOBAL CORPORATE FUNCTIONS RICARDO BERCKEMEYER PRESIDENT AND CHIEF OPERATING OFFICER JEAN-JACQUES (JJ) CHARHON • Laure
Slide 8: Significant Cost Savings from Streamlining Operations
Significant Cost Savings from Streamlining Operations EiP1 Wave 2 on-track to deliver $75-$100M of annual expense savings; reduction of over 2,500 FTE COMPONENTS OF EiP WAVE 2 Organization Design / Spans & Layers $50M – $60M Brazil & Peru Operating Model $15M – $25M Real Estate $10M – $15M $75M - $1
Slide 9: Successfully Executing Divestiture Plan to Simplify Operating Model
Successfully Executing Divestiture Plan to Simplify Operating Model Asset sales executed as part of Accelerator Plan yield strong deleveraging results1 • Exit criteria: slower growth, low margin/scale, or challenging regulatory environment Currently marketing 2-3 additional small assets in niche mar
Slide 10: Capital Structure Significantly Improved
Capital Structure Significantly Improved Significant progress made to delever balance sheet over the past 2 years Asset sale proceeds drive net leverage to 3.1x at year-end 2017 (pro forma)1 Net Leverage Trends 6.0x 4.6x 3.1x 1 2015 2016 2017E PF 1 2017E Net leverage is shown pro forma for announced
Slide 11: Integration of Technology Stack
Integration of Technology Stack Common Operating Model for scale is enabled by unified technology systems Integrated model provides for margin expansion CRM opportunities in 2018 – 2020 Core Technology Platforms (service) • Operating Cost Savings: $60M SIS • Common Curriculum & $30M LMS Scale Innova
Slide 12: Enrollments
2017 Organic Growth Guidance In-line with Prior Expectations (FXN)1 Current expectation for 2017 in-line with previous guidance New Enrollments Total Enrollments (000’s) (000’s) Enrollments 2% 2% 515 1,068 2016PF 2017E 2016PF 2017E Revenue ($M) Adj. EBITDA ($M) Adj. EBITDA Margin2 Financial Results
Slide 13: Recent Developments
RECENT DEVELOPMENTS © 2018 Laureate Education, Inc. 13
Slide 14: Chilean Higher Education Law in Process of Being Implemented
Chilean Higher Education Law in Process of Being Implemented New Higher Education Law was passed by the Chilean Congress last week and, assuming that is passes review by the Constitutional Court, is expected to be signed into Law by the President of Chile as early as the first quarter of 2018 Key Fe
Slide 15: Strong Improvements in Walden Performance Since Q3 Results
Strong Improvements in Walden Performance Since Q3 Results Overview • Leader in Healthcare and Human Services graduate education Degree Mix Program Mix • More than 50,000 students College of Riley College Management of Education • ~90% graduate students; primarily Doctoral and Technology 17% 14% 34%
Slide 16: Walden is a Large and Stable Business
Walden is a Large and Stable Business Integrated Congressional Exceeding Market & Systems MySys Scrutiny of For-Profits Industry Trends in U.S. 29K 33K 31K 32K 31K 32K 33K 34K 32K 900000000 24K 25K 800000000 - 700000000 $604M $618M $618M $618M $581M 600000000 $538M (50K) $500M 500000000 $450M 400000
Slide 17: Laureate Is Uniquely Positioned for Success in an Attractive Market
LAUREATE IS UNIQUELY POSITIONED FOR SUCCESS IN AN ATTRACTIVE MARKET © 2018 Laureate Education, Inc. 17
Slide 18: Massive Market Opportunity with Attractive Secular Trends
Massive Market Opportunity with Attractive Secular Trends Outsized growth opportunities in Laureate’s target markets (emerging markets) Global Higher Education Students Massive market opportunity $1.5T +5% CAGR 212M 2015 99M 166M +7% CAGR 64M 3.2B Global middle class expected to almost double in siz
Slide 19: Strong Economic Incentives Driving Increased Participation
Strong Economic Incentives Driving Increased Participation Strong Economic Incentives Significantly Underpenetrated by Participation (average wage premium for those with a tertiary education (1)) (higher education participation rates (2)) 63% 149% 137% 35% 74% 23% 53% 20% EU United Chile Brazil Unit
Slide 20: Laureate is The Market Leader With A Strong Track Record of Growth
Laureate is The Market Leader With A Strong Track Record of Growth1 Track Record of Consecutive Enrollment Growth MORE THAN (students in 000’s) ONE MILLION 1,068 STUDENTS 60+ INSTITUTIONS 2001 2003 2005 2007 2009 2011 2013 2015 2017 250+ CAMPUSES Consistent Constant Currency Organic Growth Adj. EBIT
Slide 21: Leading Brands Across Key Markets
Leading Brands Across Key Markets Quality Rated Proprietary IP & know-how and Licenses & curriculum leveraged globally accreditation Infrastructure / Reputation & Leading brands real estate relationships Examples Founded: 1960 Founded: 1970 Founded: 1994 Founded: 1995 QS Stars: QS Stars: QS Stars: Q
Slide 22: Focused on Degrees that are in High Demand by Employers
Focused on Degrees that are in High Demand by Employers Strong collaboration with employers and industry to ensure Laureate students are job-ready upon graduation Business & Management Medicine & Health Sciences Engineering & IT • Business Administration and • Medicine • Energy, Oil and Gas and STEM
Slide 23: Superior Outcomes for Our Students
Superior Outcomes for Our Students JOINT Third Party Research (1) RESEARCH 12 of 14 Mexico Laureate institutions surveyed (% of Laureate Mexico students that advance their socioeconomic status) met or exceeded vs. Peer Universities local market 41% employment benchmarks 27% Employment Salary 10% 13%
Slide 24: Powerful Network Benefits
Powerful Network Benefits Cost Synergies - Back Office Scale $175M Network Differentiator (EiP Wave 1 & 2) Finance &Procurement Aspirational Accreditations IT & HR Powerful Product Differentiation Curriculum – Develop once; deploy often International Student Experience © 2018 Laureate Ed
Slide 25: 2018 - 2020 Priorities
2018 - 2020 PRIORITIES © 2018 Laureate Education, Inc. 25
Slide 26: Laureate's 2018 - 2020 Priorities
Laureate’s 2018 - 2020 Priorities OPERATIONAL EXCELLENCE 1 2 3 4 5 Simplification Margin Capital Quality & Growth & Risk Mgmt Expansion Efficiency Outcomes Disciplined Execute on EiP Leverage Execute on Leverage LEAF Approach To Wave 2 (inflight) Hybridity For Geographic & Framework For Portfolio Re
Slide 27: Laureate's 2018 - 2020 Priorities
Laureate’s 2018 - 2020 Priorities OPERATIONAL EXCELLENCE 1 2 3 4 5 Simplification Margin Capital Quality & Growth & Risk Mgmt Expansion Efficiency Outcomes Disciplined Execute on EiP Leverage Execute on Leverage LEAF Approach To Wave 2 (inflight) Hybridity For Geographic & Framework For Portfolio Re
Slide 28: Disciplined Approach to Portfolio Reviews
1 Disciplined Approach to Portfolio Reviews Ongoing strategic reviews of our portfolio to optimize value T H R E E C O R E P R I N C I P L E S F O R P O R T F O L I O O P T I M I Z AT I O N CORE TO MISSION • Strong growth prospects Expanding the • Favorable regulatory conditions Middle Classes SCALE
Slide 29: Proactive Approach to Mitigating Risk
1 Proactive Approach to Mitigating Risk Regulatory Variable Interest Entities • 75% private pay model • Reduced exposure to VIEs post China sale and expected restructuring of Chilean operations • Relentless focus on quality and outcomes Revenue Sources For Profit as % Total Revenue Public funding ~2
Slide 30: Laureate's 2018 - 2020 Priorities
Laureate’s 2018 - 2020 Priorities OPERATIONAL EXCELLENCE 1 2 3 4 5 Simplification Margin Capital Quality & Growth & Risk Mgmt Expansion Efficiency Outcomes Disciplined Execute on EiP Leverage Execute on Leverage LEAF Approach To Wave 2 (inflight) Hybridity For Geographic & Framework For Portfolio Re
Slide 31: Sources of Incremental Margin Expansion Opportunities
2 Sources of Incremental Margin Expansion Opportunities Initiatives Goals Optimize Common Operating Model 1.5 percentage points of margin Network-wide expansion (or $60M) by 2020 • Deployment in Brazil and Peru underway • $25M inflight in Brazil and fully • Upgrade across network to follow operation
Slide 32: Brazil Operating Model Implemented
2 Brazil Operating Model Implemented New operating model in Brazil anticipated to generate 300-500bps of margin expansion • Benchmarked Laureate Brazil operational performance • Identified most significant opportunities are in two main cost drivers: Benchmark – Teaching and Academic Cost – G&A • Des
Slide 33: Laureate's 2018 - 2020 Priorities
Laureate’s 2018 - 2020 Priorities OPERATIONAL EXCELLENCE 1 2 3 4 5 Simplification Margin Capital Quality & Growth & Risk Mgmt Expansion Efficiency Outcomes Disciplined Execute on EiP Leverage Execute on Leverage LEAF Approach To Wave 2 (inflight) Hybridity For Geographic & Framework For Portfolio Re
Slide 34: Hybridity & Digitalized Student Experience
3 Hybridity & Digitalized Student Experience Hybrid & Online Model Digital Student Experience Laureate has been successful in transitioning Superior student experience developed via its campuses from offline to a blended proprietary technology and content learning modality Digital Teaching & Learnin
Slide 35: OneCampus Demo
3 OneCampus Demo A global online campus for all students and institutions in the Laureate network New platform launched in Fall 2017 © 2018 Laureate Education, Inc. 35
Slide 36: Capital Light Campus ("SMART" Campus)
3 Capital Light Campus (“SMART” Campus) New SMART campus model piloted in Australia • Innovative and modern campus, technology focused Rollout in Mexico, Brazil, Peru and Chile • Expands the reach of our brands through access to cities that could not be served efficiently by a more traditional campu
Slide 37: Laureate's 2018 - 2020 Priorities
Laureate’s 2018 - 2020 Priorities OPERATIONAL EXCELLENCE 1 2 3 4 5 Simplification Margin Capital Quality & Growth & Risk Mgmt Expansion Efficiency Outcomes Disciplined Execute on EiP Leverage Execute on Leverage LEAF Approach To Wave 2 (inflight) Hybridity For Geographic & Framework For Portfolio Re
Slide 38: Operational Priorities: Geographic & Programmatic Expansion
4 Operational Priorities: Geographic & Programmatic Expansion United States • Expand Competency Based Learning platform (TEMPO) • Hub for health sciences & innovation Mexico Spain/Portugal • UNITEC to launch 3 SMART campuses outside of Mexico • Expand strong presence in city in the next two years he
Slide 39: Grow Strong Health Sciences Vertical
4 Grow Strong Health Sciences Vertical Global Leadership in Health Sciences Vertical Strong Growth Profile 13 Countries 35 Institutions 130+ Campuses (Health Sciences Total Enrollment) 238K 249K 223K 179K 150K 131K 108K 23 Medical Schools 17 Veterinary Schools 21 Dental Schools 2010 2011 2012 2013 2
Slide 40: Execute on Distance Learning & Fully Online Opportunities
4 Execute on Distance Learning (DL) & Fully Online Opportunities Distance Learning in Brazil Fully Online in Mexico & Rest of Network • Incremental investment towards marketing initiatives • Successful roll-out of fully online in Mexico leveraging and polos1 distribution to support demand our strong
Slide 41: Laureate's 2018 - 2020 Priorities
Laureate’s 2018 - 2020 Priorities OPERATIONAL EXCELLENCE 1 2 3 4 5 Simplification Margin Capital Quality & Growth & Risk Mgmt Expansion Efficiency Outcomes Disciplined Execute on EiP Leverage Execute on Leverage LEAF Approach To Wave 2 (inflight) Hybridity For Geographic & Framework For Portfolio Re
Slide 42: Culture of Quality: LEAF
5 Culture of Quality: LEAF (Laureate Education Assessment Framework) Rigorous Internal Assessment Latam and Europe LEAF Assessment Results • Robust internal assessment tool to continuously evaluate • Improvements in LEAF scores (2015 to 2016) the performance of new and existing institutions • Contin
Slide 43: LEAF Framework Ensures Focus on Strong Accreditation Results
5 LEAF Framework Ensures Focus on Strong Accreditation Results ~45% + 4 years + 7 years* + 6 years* + 6 years* + 5 years* 2017 (FIMPES) (MEC) (MEC) (HLC) Revenues successfully re-accredited during 2017 + 6 years + 6 years + 4 years* + 5 years* (SUNEDU) (SUNEDU) (CNA) (HLC) ~15% 2018 Revenues to unde
Slide 44: LEAF Framework Yields Recognitions For Our Quality & Outcomes
5 LEAF Framework Yields Recognitions For Our Quality & Outcomes #1 in nursing graduates in the U.S. #1 among 377 accredited U.S. institutions for awarding #2 Research among doctorates to African Americans peers (National Science Foundation) (Scimago SIR 2017) Largest private higher education institu
Slide 45: 2018 Guidance
2018 GUIDANCE © 2018 Laureate Education, Inc. 45
Slide 46: Growth Heat-Map 2018
Guidance Overview Growth Heat -Map 2018 Revenue Adj. EBITDA Margin % Market Growth Expansion Brazil ++ ++ Mexico =/+ =/+ Andean & Iberian + + CentAm & U.S. Campuses + + EMEAA ++ ++ Online & Partnerships = –/= Laureate (FXN) 4.5% – 5.5% +80 bps STRONG MARGIN EXPANSION & CONTINUED GROWTH IN CAMPUS OPE
Slide 47: Guidance – 2017 PF for Divestitures & New Higher Ed. Law in Chile
Guidance – 2017 PF for Divestitures & New Higher Ed. Law in Chile Guidance shown includes impact from divestitures & assumed passage of New Higher Education Law and related deconsolidation of Chilean VIEs • Timing of closing of divestitures and deconsolidation in 2018 still to be determined (USD mil
Slide 48: 2018 Outlook – Key Metrics
2018 Outlook – Key Metrics Strong performance in campus based operations; efficiencies in G&A • Online run-rate impacted by 3Q 2017 Online new enrollment softness (run-rate impact) (USD millions, except enrollments in Total Adj. EBITDA thousands) Revenues Adj. EBITDA Net Leverage Enrollments Margin
Slide 49: Adjusted EBITDA and FCF Margin to Benefit From Simplification & Focused Execution
Adjusted EBITDA and FCF Margin to Benefit From Simplification & Focused Execution Commitment to improving Adjusted EBITDA margin and Free Cash Flow margin • Tracking towards 2020 goals Adjusted EBITDA Margin Expansion FCF Margin Bridge (Unlevered)1 1 pt 11.0% Impact of divestitures 21.0% & deconsoli
Slide 50: U.S. Tax Legislation Update – No Material Impact on Cash Taxes
U.S. Tax Legislation Update – No Material Impact on Cash Taxes U.S. tax legislation passed in late December lowered U.S. Corporate Tax Rates Laureate historically hasn’t had U.S. cash tax exposure as we are in a loss position due to corporate overhead and debt service IMPACTS: Still evaluating but l
Slide 51: Future Opportunities
FUTURE OPPORTUNITIES © 2018 Laureate Education, Inc. 51
Slide 52: The World is Increasingly Connected Via Technology
The World is Increasingly Connected Via Technology, And Higher Education Is No Exception © 2018 Laureate Education, Inc. 52
Slide 53: Vision To Be The Technology Enabled Leader in Global Higher Education
Vision To Be The Technology Enabled Leader in Global Higher Education © 2018 Laureate Education, Inc. 53
Slide 54: What are We Solving?
What are We Solving – In Addition to Strengthening Laureate’s Financial & Operating Attributes? Education is Use technology to enhance There is a disconnect unaffordable for all elements of student between what employers large part of global experience, including expect for “job-ready” population re
Slide 55: Future State Of Laureate Network
Future State Of Laureate Network LEAF (Proprietary) QUALITY & OUTCOMES QS-Stars (Partnership) Outcome Research (Proprietary & Partnership) 1,000,000 Students 250+ Campuses LAUREATE PRODUCT 20+ Countries LAUREATE OWNED & MANAGED & INNOVATION 3RD PARTY OPERATED PORTFOLIO (IP) UNIVERSITIES UNIVERSITIES
Slide 56: Future State Of Laureate Network
Future State Of Laureate Network LEAF (Proprietary) QUALITY & OUTCOMES QS-Stars (Partnership) Outcome Research (Proprietary & Partnership) LAUREATE • Enabled by unified LAUREATE PRODUCT OWNED technology systems MANAGED & & INNOVATION 3RD PARTY OPERATED • Scale economics forUNIVERSITIES PORTFOLIO (IP
Slide 57: Future State Of Laureate Network
Future State Of Laureate Network LEAF (Proprietary) QUALITY & OUTCOMES QS-Stars (Partnership) Outcome Research (Proprietary & Partnership) • Quality assurance framework LAUREATE • Regular testing for compliance PRODUCT LAUREATE OWNED & MANAGED & • Covers every part of the RD value chain: INNOVATION
Slide 58: Future State Of Laureate Network
Future State Of Laureate Network LEAF (Proprietary) QUALITY & OUTCOMES QS-Stars (Partnership) Outcome Research (Proprietary & Partnership) LAUREATE • Superior product PRODUCT LAUREATE OWNED development & overall & MANAGED & student experience – INNOVATION 3RD PARTY OPERATED that benefits from scale
Slide 59: Future State Of Laureate Network
Future State Of Laureate Network LEAF (Proprietary) QUALITY & OUTCOMES QS-Stars (Partnership) Outcome Research (Proprietary & Partnership) • Modified business model to export our operating model LAUREATEand IP to 3rd parties: PRODUCT LAUREATE OWNED – Reduced regulatory risks in certain markets& MANA
Slide 60: Future State Of Laureate Network
Future State Of Laureate Network LEAF (Proprietary) QUALITY & OUTCOMES QS-Stars (Partnership) Outcome Research (Proprietary & Partnership) LAUREATE PRODUCT LAUREATE OWNED & MANAGED & INNOVATION 3RD PARTY OPERATED PORTFOLIO (IP) UNIVERSITIES UNIVERSITIES DIGITAL Partners COMMON OPERATING MODEL © 2018
Slide 61: FCF Conversion Innovation
Vision Roadmap Innovation Growth & Superior Financial Performance • Organic Growth • Innovation • Scale Economics • Margin Expansion Leadership • Selective M&A • Capital Efficiency Innovation & Digital IT Efficiency & Improved FCF Conversion Build Out Common Operating Model & Unified Technology Plat
Slide 62: Summary & Wrap Up
SUMMARY & WRAP UP © 2018 Laureate Education, Inc. 62
Slide 63: Summary & Wrap Up
Summary & Wrap Up We are the global leader in a large and growing market that will continue to grow given the strong economic incentives for higher education 2017 laid the foundation for the future direction of our organization Management is committed to simplifying our business model and directing
Slide 64: 2018 Action Plans
2018 Action Plans 1 Execute on 2018 Guidance • 4.5% - 5.5% organic FXN revenue growth • 80bps Adj. EBITDA margin expansion 2 Walden turnaround; return to new enrollment growth 3 Deliver Accelerator Plan and related cost savings 4 Drive operating efficiencies from Common Operating Model • 200 bps+ ma
Slide 65: Q&A Session
Q&A SESSION © 2018 Laureate Education, Inc. 65
Slide 66: Appendix
APPENDIX © 2018 Laureate Education, Inc. 66
Slide 67: Strong Execution on Asset Sales
Strong Execution on Asset Sales Asset sales executed as part of Accelerator Plan yield strong deleveraging results • Cumulative EBITDA multiple of over 14x on sales Gross proceeds of $650M+ to be used for deleveraging • Reduction of 0.6x in net leverage once transactions close and fund $ in USD mill
Slide 68: FY 2017 Updated Guidance (Reaffirmed)
FY 2017 Updated Guidance (Reaffirmed) Reaffirming guidance provided during third quarter 2017 earnings call Capex range expected at 6.0% - 7.0% organic constant currency revenue, due primarily to timing shift to 2018 ($ millions, rounded) Revenue Adjusted EBITDA Guidance Guidance 2016 Reported Resul
Slide 69: US GAAP Reconciliations
US GAAP Reconciliations Non-GAAP Reconciliation For the year ended December 31, IN MILLIONS 2016 2015 Change Net income (loss) $ 366.2 $ (315.8) $ 682.0 Plus: Equity in net income of affiliates, net of tax (0.1) (2.5) 2.4 Income tax expense (benefit) 65.0 117.7 (52.7) Income (loss) from continuing o
Slide 70: © 2018 Laureate Education, Inc.
© 2018 Laureate Education, Inc. 70