Laureate Education(LAUR) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, revenue was $423 million, and adjusted EBITDA was$141 million, representing a 10% year-over-year increase in revenue on an organic constant currency basis, driven by a 5% increase in total enrollment volume [21][22] - For the full year 2024, revenue was $1.567 billion, with adjusted EBITDA of$450 million, resulting in an adjusted EBITDA margin of 28.7%, a historic high for the company [23][24] - Full year net income was $296 million, leading to earnings per share of$1.92 [24] Business Line Data and Key Metrics Changes - In Mexico, new enrollments increased by 4% for the year, with revenue growth of 10% driven by an 8% increase in average total enrollments [29] - In Peru, new enrollments increased by 6% for the year, with revenue growth of 4% driven by a 2% increase in average total enrollments [32] Market Data and Key Metrics Changes - The company remains the largest higher education provider in Mexico and Peru, with strong demand for quality higher education driven by rising participation rates and strong wage premiums for graduates [9][14] - Peru's GDP growth for 2025 is expected to reach approximately 3%, indicating a recovery from the recent recession [16] Company Strategy and Development Direction - The company plans to open four new campuses for its value brands, with two expected to launch in 2025, marking the first new campus launches since 2019 [13] - The focus remains on enhancing academic offerings and expanding digital education capabilities [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the economic environment in Mexico, despite geopolitical uncertainties, and expects GDP growth of about 1% for 2025 [15][53] - The company anticipates flat to slightly down reported revenues for 2025, but expects growth in adjusted EBITDA and unlevered free cash flow due to local currency revenue growth and margin expansion efforts [19][41] Other Important Information - The company returned over $100 million to shareholders in 2024 and has returned nearly$3 billion since 2019 through share repurchases and cash distributions [8][33] - The company introduced new non-GAAP metrics for adjusted net income and adjusted earnings per share to provide a clearer picture of underlying profitability [25][26] Q&A Session Summary Question: Impact of tariffs and economic environment in Mexico - Management acknowledged that while tariffs do not directly impact the business, a slowdown in foreign direct investment and CapEx spending has affected GDP growth, which in turn impacts enrollments [48][49] Question: Current capital allocation policy - The company aims for a 50% free cash flow conversion on EBITDA, with plans to return 50% of available free cash flow to shareholders after supporting growth [55][56] Question: Tax rate and Peru intake - The effective tax rate is expected to be below 40%, and management is optimistic about the Peru intake due to improving market conditions and GDP growth expectations [62][64]