Laureate Education, Inc. · NASDAQ:LAUR

Laureate Education — Q3 2019 Earnings Presentation

39 slides from Laureate Education's earnings presentation, Nov 6, 2019

  1. Slide 1: Third Quarter 2019 Earnings Presentation

    Third Quarter 2019 Earnings Presentation November 6, 2019 © 2019 Laureate Education, Inc. 1

  2. 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

  3. Slide 3: Presentation of Non-GAAP Measures

    Presentation of Non-GAAP Measures In addition to the results provided in accordance with U.S. generally accepted accounting principles (GAAP) throughout this presentation, Laureate provides the non- GAAP measurements of Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow. We have included the

  4. Slide 4: Summary Overview

    SUMMARY OVERVIEW Note: Throughout this presentation amounts may not sum to totals due to rounding Amounts presented for enrollments, Revenue and Adjusted EBITDA are for continuing operations only © 2019 Laureate Education, Inc. 4

  5. Slide 5: Summary - Highlights

    Summary - Highlights  Q3 Adjusted EBITDA significantly ahead of guidance driven by cost actions  Reaffirming FY Adjusted EBITDA and FCF(1) guidance despite FX headwinds  Run-Rate 2019 Adj. EBITDA margin expected at 20.8%  Raising 2020 Adj. EBITDA margin by 1-point to 22%  $150 million of share

  6. Slide 6: Commitment to Quality and Student Outcomes

    Commitment to Quality and Student Outcomes Universities with highest Strategic Brand Value in Peru 2019 results: 2nd place among all 4th place among all 1st place among Tec- universities in Peru universities in Peru Voc institutions in Peru La u r e a t e Br a z il Obtained Conceito Institucional sc

  7. Slide 7: Q3 2019 Performance Results

    Q3 2019 PERFORMANCE RESULTS © 2019 Laureate Education, Inc. 7

  8. Slide 8: 2019 Third Quarter – Financial Summary

    2019 Third Quarter – Financial Summary Q3 ’19 Variance Notes ($ in millions) (Enrollments in thousands) Results Vs. Q3 ‘18 New Enrollment 159K 4% • Driven by Mexico & Andean New Enrollment – Organic(1) 4% Total Enrollment 895K 2% Total Enrollment – Organic(1) 2% Revenue 774 (1%) • ($4M) FX headwind

  9. Slide 9: 2019 Q3 YTD – Financial Summary

    2019 Q3 YTD – Financial Summary Q3 YTD ’19 Variance Notes ($ in millions) (Enrollments in thousands) Results Vs. Q3 YTD ‘18 • Driven by Andean & Brazil DL New Enrollment 454K 8% • 3% Excluding Brazil DL New Enrollment – Organic(1) 8% Total Enrollment 895K 2% Total Enrollment – Organic(1) 2% Revenue

  10. Slide 10: 2019 Third Quarter – Enrollment Dynamics by Segment

    2019 Third Quarter – Enrollment Dynamics by Segment New Enrollment Total Enrollment (NE) (TE) Notes Organic Organic Q3 ’19 Q3 ‘19 Vs. Q3 ’18 Vs. Q3 ’18 (Enrollments in thousands) • Impacted by timing of intake (Sept/Oct); Brazil 52 (4%) 283 4% expect 70%+ growth in NE for DL in 2H Mexico 68 6% 206 (

  11. Slide 11: 2019 Q3 YTD – Enrollment Dynamics by Segment

    2019 Q3 YTD – Enrollment Dynamics by Segment New Enrollment (NE) Total Enrollment (TE) Notes Q3 YTD Organic Q3 YTD Organic ’19 Vs. Q3 YTD ’18 ’19 Vs. Q3 YTD ’18 (Enrollments in thousands) • Strong growth in Distance Learning Brazil 177 13% 283 4% • NE Growth DL: 71%, F2F: (2%) • TE Growth DL: 55%, F

  12. Slide 12: 2019 Third Quarter – Revenue, EBITDA Dynamics by Segment

    2019 Third Quarter – Revenue, EBITDA Dynamics by Segment Revenue Adj. EBITDA Notes Organic/CC Organic/CC Q3 ‘19 Q3 ‘19 ($ millions) Vs. Q3 ’18 (1) Vs. Q3 ’18 (1) • Flat net pricing year-over-year; cost Brazil 114 (5%) 3 n.m. actions expected to benefit Q4 Mexico 146 1% 23 2% • Driven by strong enrol

  13. Slide 13: 2019 Q3 YTD – Revenue, EBITDA Dynamics by Segment

    2019 Q3 YTD – Revenue, EBITDA Dynamics by Segment Revenue Adj. EBITDA Notes Q3 YTD Organic/CC Q3 YTD Organic/CC ($ millions) ‘19 Vs. Q3 YTD ’18 (1) ‘19 Vs. Q3 YTD ’18 (1) • Flat net pricing year-over-year; cost Brazil 421 (2%) 31 (32%) actions expected to disproportionately benefit Q4 Mexico 465 2%

  14. Slide 14: Transformation Update (2018-2020E)

    TRANSFORMATION UPDATE (2018-2020E) © 2019 Laureate Education, Inc. 14

  15. Slide 15: Improved Margin Outlook for 2019

    Improved Margin Outlook for 2019 ($ in millions) Adj. EBITDA Margin 18.5% 19.8% 20.8% Evolution $176 20.2% at Q2 Outlook $155 $125 2018 Corporate G&A 2019 G&A Estimate 2019 Year-end G&A Run-Rate Estimate Reductions in G&A Enabling Rapid Margin Expansion +60bps Improvement vs Q2 Outlook © 2019 Laurea

  16. Slide 16: Accelerating Adjusted EBITDA Margin Improvement

    Accelerating Adjusted EBITDA Margin Improvement Investments in Additional “self-funded” investments business optimization expected to further accelerate margin activities progression in 2020 +3.5% 22.0% 20.8% 21.0% 18.5% 18.2% 17.6% 2016 2017 2018 2019 2020E 2020E Run-Rate Prior Revised Guidance Gui

  17. Slide 17: 2018-2020E Margin Accretion

    2018-2020E Margin Accretion G&A Educational Revenue Procurement Lever Reduction Productivity Optimization & Real Estate Margin Impact +++ ++ + + Initiatives Corporate & Class Scheduling Increased Student Information Regional G&A Retention Technology Teacher/student IT Infrastructure Ratio Optimizati

  18. Slide 18: Significant Increase in Free Cash Flow Expected in 2020

    Significant Increase in Free Cash Flow Expected in 2020 12.0% 11.0% 1.0% 1.2% 2.0% 7.8% Unlevered FCF as Reduction in Growth in Unlevered FCF 2020 One-Time Unlevered FCF % Revenue 2019E 1 Transformation Operational FCF as % Revenue Investments as % Revenue Investments 2020E Reported 2020E Run-Rate 2

  19. Slide 19: 2019 Outlook

    2019 OUTLOOK © 2019 Laureate Education, Inc. 19

  20. Slide 20: 2019 Full Year Guidance

    2019 Full Year Guidance ($ and shares in millions) FY 2019 Guidance Total Enrollments 865K Revenue $3,233 - $3,268 Adjusted EBITDA $640 - $650 Free Cash Flow $145 Net Debt (1) $1,000 - $1,200 Upper End of Range Reflects Increased $150M Share Repurchase Program Shares Outstanding (1) 215 - 206 (total

  21. Slide 21: 2019 Full Year Guidance Walk

    2019 Full Year Guidance Walk Moved to Asset Prior FX Disc Ops. Sale Revised ($ in millions) (Enrollments in thousands) Guidance (1) Translation Saudi Timing Operations Guidance Total Enrollments 865K - - - 865K Revenue $3,330 - $3,365 ($66) ($31) - $3,233 - $3,268 Adjusted EBITDA $640 - $650 ($20) (

  22. Slide 22: Appendix

    APPENDIX © 2019 Laureate Education, Inc. 22

  23. Slide 23: 2019 Third Quarter – Net Income Reconciliation

    2019 Third Quarter – Net Income Reconciliation Q3 ’19 B / (W) Vs. Q3 ’18 Notes ($ in millions) Reported $ % Adjusted EBITDA 134 11 9% • ($6M) impact from FX Depreciation & Amort. (49) 4 8% • Significant reduction in debt following Interest Expense, net (37) 18 32% completion of asset sales Other (55

  24. Slide 24: 2019 Q3 YTD – Net Income Reconciliation

    2019 Q3 YTD – Net Income Reconciliation Q3 YTD ’19 B / (W) Vs. Q3 YTD ’18 Notes ($ in millions) Reported $ % Adjusted EBITDA 403 13 3% • ($17M) impact from FX Depreciation & Amort. (145) 16 10% • Significant reduction in debt following Interest Expense, net (127) 46 26% completion of asset sales • $

  25. Slide 25: 2019 Full Year Guidance - Details

    2019 Full Year Guidance - Details Guidance (USD millions) Revenue Adj. EBITDA FY 2018 Reported Results (excl. Saudi) $3,290 $610 Excl. UniNorte ($47) ($6) FY 2018 excl UniNorte $3,243 $604 Organic Growth $89 - $124 $73 - $83 Growth % 3% - 4% 12% - 14% FY 2019 Pro Forma (CC) excl. Lease Impact $3,332

  26. Slide 26: Q4 2019 Guidance

    Q4 2019 Guidance ($ in millions) Q4 2019 Guidance Total Enrollments 865K Revenue (1) $866 - $901 Adjusted EBITDA (1) $237 - $247 (1) Based on current spot FX rates (local currency per US dollar) of MXN 19.34, BRL 3.89, CLP 711.00, PEN 3.34 and AUD 1.47 for November – December 2019. FX impact may cha

  27. Slide 27: Seasonality: Main Enrollment Intakes

    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 & Rest of World) – Q3 represe

  28. 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 Seasonali

  29. Slide 29: Saudi Arabia Operational Metrics

    Saudi Arabia Operational Metrics The following tables present selected results for our operations in Saudi Arabia for the four fiscal quarters in 2018 and the first three fiscal quarters in 2019: (in Millions Except for Enrollments) 2018 Results Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Total enrollme

  30. Slide 30: Financial Results & Tables

    Financial Results & Tables © 2019 Laureate Education, Inc. 30

  31. Slide 31: Financial Tables – Statements of Operations

    Financial Tables Consolidated Statements of Operations For the three months ended For the nine months ended September 30, September 30, IN MILLIONS 2019 2018 Change 2019 2018 Change Revenues $ 773.7 $ 778.3 $ (4.6) $ 2,367.2 $ 2,397.8 $ (30.6) Costs and expenses: Direct costs 655.6 665.5 (9.9) 2,002

  32. Slide 32: Financial Tables – Revenue and Adjusted EBITDA by Segment (Q3)

    Financial Tables Revenue and Adjusted EBITDA by segment IN MILLIONS % Change $ Variance Components Organic Organic For the three months ended Constant Constant September 30, 2019 2018 Reported Currency(1) Total Currency Other Acq/Div. FX Revenues Brazil $ 114.1 $ 121.1 (6)% (5)% $ (7.0) $ (6.1) $ —

  33. Slide 33: Financial Tables – Revenue and Adjusted EBITDA by Segment (9M)

    Financial Tables Revenue and Adjusted EBITDA by segment IN MILLIONS % Change $ Variance Components Organic Organic For the nine months ended Constant Constant September 30, 2019 2018 Reported Currency(2) Total Currency Other Acq/Div. FX Revenues Brazil $ 421.1 $ 469.5 (10)% (2)% $ (48.4) $ (10.3) $

  34. Slide 34: Financial Tables – Consolidated Balance Sheets

    Financial Tables Consolidated Balance Sheets IN MILLIONS September 30, 2019 December 31, 2018 Change Assets Cash and cash equivalents $ 323.9 $ 387.8 $ (63.9) Receivables (current), net 371.4 225.3 146.1 Other current assets 297.3 266.4 30.9 Current assets held for sale 131.6 337.7 (206.1) Property

  35. Slide 35: Financial Tables – Statements of Cash Flows

    Financial Tables Consolidated Statements of Cash Flows For the nine months ended September 30, IN MILLIONS 2019 2018 Change Cash flows from operating activities Net income $ 877.1 $ 298.8 $ 578.3 Depreciation and amortization 146.3 190.0 (43.7) Loss on impairment of assets 25.5 10.0 15.5 Amortizatio

  36. Slide 36: Non-GAAP Reconciliation (1 of 3)

    Financial Tables Non-GAAP Reconciliation (1 of 3) The following table reconciles loss from continuing operations to Adjusted EBITDA and Adjusted EBITDA margin: (3) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC Topic 718. (4) Represents non-cash charges relat

  37. Slide 37: Non-GAAP Reconciliation (2 of 3)

    Financial Tables Non-GAAP Reconciliation (2 of 3) The following table reconciles (loss) from continuing operations to Adjusted EBITDA and Adjusted EBITDA margin: (6) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC Topic 718. (7) Represents non-cash charges rel

  38. Slide 38: Non-GAAP Reconciliation (3 of 3)

    Financial Tables Non-GAAP Reconciliation (3 of 3) The following table reconciles operating cash flow to Free Cash Flow for the nine months ended September 30, 2019 and 2018: IN MILLIONS 2019 2018 Change Net cash provided by operating activities $ 312.3 $ 356.4 $ (44.1) Capital expenditures: Purchase

  39. Slide 39: © 2019 Laureate Education, Inc.

    © 2019 Laureate Education, Inc. 39

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