Welcome to the Laureate Education First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. Now I will turn the call to your speaker, Adam Morse.

Hello, everyone, and thank you for joining us on today's call to discuss Laureate Education's first quarter 2020 results, and updates on our response to the COVID-19 pandemic and our previously announced strategic review process. Joining me on the call today are Eilif Serck-Hanssen, President and Chief Executive Officer; and JJ Charhon, Chief Financial Officer. Our earnings press release is available on the Investor Relations section of our website at laureate.net. 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'd like to remind you that some of the information we're 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 quarterly report on Form 10-Q filed with the U.S. Securities and Exchange Commission this morning. In addition, all forward-looking statements are based on current expectations as of the date of this conference call, and we undertake no obligation to update any forward-looking statements. Additionally, non-GAAP measures that we discuss, including adjusted EBITDA, adjusted EBITDA margin and free cash flow, are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentation. With that, let me turn the call over to Eilif.

Thank you, Adam, and good morning, everyone. On behalf of the entire organization, I'd like to share our deepest sympathies for all those who have been affected by this global pandemic. We sincerely thank those who have been working hard to keep all of us safe through the crisis, particularly those on the front lines in the health care community across all our markets. During these unprecedented times, Laureate's priority is the health and well-being of our students, faculty, and staff, while delivering on our promise of delivering high-quality educational offerings. We understand the importance of higher education to the more than 870,000 students we serve, and the power it has to transform their lives and prepare them to positively contribute to their communities. I want to thank our faculty and staff for their flexibility, commitment, and resilience as together, we do everything possible in these challenging times to continue to deliver on our promises. In order to prevent the spread of the virus in our student communities, we closed all our physical campuses and quickly activated our Business Continuity Plan. In a matter of a few short weeks, our students were transitioned to online learning modules, and our staff and faculty were all working remotely. Our transition to online learning and the related digital capabilities we have represent an important differentiator for our network of institutions. Historically, our business model has proven to be resilient, performing very well during the 2008 and 2009 financial crisis, as well as after the large-scale natural disasters in Peru and Mexico City in 2017. We recognize that what we are experiencing with COVID-19 is unprecedented, and thus, we have limited visibility into the remainder of this year. That said, the early indicators are encouraging, and we have high confidence in the sustainability of the business model, given our strong value proposition and the strong outcomes for our students. We just recently completed the main intake in the Southern Hemisphere. Though new enrollments were softer than anticipated due to the COVID-19 pandemic, we had strong re-enrollments, which resulted in a stable total enrollment base. Our next large intake cycle occurs in the fall, and we will be watching that closely. With the work we have done to simplify our business model and improve our capital structure, Laureate is now well-positioned to navigate these uncertain times. In addition to safeguarding the health and well-being of our students, faculty, and staff, we are focused on protecting the business, given the lack of forward visibility. Later in our prepared remarks, JJ will cover more details about our current cash position and the actions we have taken to preserve liquidity and reduce our expenses. As part of this important work, we recognize the importance of senior leadership to lead and participate in these efforts. As a result, the Board and the executive management team will forego part of their compensation for the next 90 days, at which point, we will reassess the situation. Further, no salary increases have been awarded for executive management in 2020. I'd now like to provide an update on our strategic review process. The rationale for embarking on the strategic review process has not changed. However, in view of the COVID-19 pandemic and its continuing effect on market conditions, the various divestiture processes and potential business combinations are progressing at a slower pace than previously anticipated. Now turning our attention to Slide number 9, and a deeper dive on our transition to online learning for our traditional face-to-face institutions. For the past five years, we have invested in building capacity to deliver high-quality digital learning experiences for our students. Today, Laureate is a leader in online teaching, and our students around the world are familiar with this mode of delivery. Our faculty understands the importance of harnessing the power of technology to create authentic, personal, and innovative learning experiences for our students. Our commitment to digital teaching and learning has been manifested through significant investments in core technologies, as well as in human resources, training, and development activities. These investments have been instrumental in establishing a deep level of expertise in online education, facilitating the design and delivery of high-quality, effective, and differentiated online courses. When the COVID-19 pandemic hit, these competencies allowed Laureate to quickly transition all our universities to fully online in a matter of weeks, resulting in minimal disruptions for our students. Our capabilities have enabled us to provide differentiated and highly competitive online offerings in the markets we operate. Our students are now taking classes in an innovative learning environment, enabled by a common learning management system that we operate across the vast majority of our universities. Our expertise in digital instruction, coupled with our ongoing commitment to quality online learning, allows us to complement synchronous real-time instruction with the benefits of high-quality, engaging student instruction delivered through asynchronous means. Prior to the COVID-19 crisis, 28% of the teaching hours, across our network of campus-based institutions, were already being taught online as we deliver our educational offerings through a hybrid delivery model. This provided us with a strong starting point when we had to pivot to fully online delivery in the middle of March. For any institution to be successful under these current conditions, faculty need to be appropriately trained in digital delivery, as well as online teaching methodologies. Given our digital expertise, much of our faculty had already been trained prior to the COVID-19 outbreak. We supplemented that training where needed during the months of March and April. In addition, all our institutions are undertaking regular and consistent communications with regulators, faculty, and staff to determine how to best continue to evolve and enhance the online learning environment. We are also monitoring key indicators to ensure high levels of student engagement and satisfaction, and the results to date are very encouraging. In instances where students were at risk of not being able to continue their learning online due to limited connectivity, we have stepped in and provided support. More than 6,000 students in Chile alone have received equipment and connectivity assistance, as well as thousands of other students across our Latin America network. It is difficult to predict the lasting effects of this pandemic, but it is safe to say that many industries will forever be changed. Within education, online teaching will become an essential competency for all educational institutions. In that environment, there will be those that thrive and those that are unable to adapt. Laureate is in a strong leadership position for online education in our markets, in large part thanks to the investments we have made over the past five years in our infrastructure, in our digital product solutions, in our faculty preparedness, and in our student support models. Thus, we are well-positioned for the new normal post-crisis. We are committed to serving our students with innovative and effective learning tools during the COVID-19 crisis, as well as maintaining our leadership position in hybrid digital higher education for years to come. I will now turn the call over to JJ for a more detailed financial overview of the first quarter and our revised outlook for 2020.

Thank you, Eilif. I will begin by providing you an overview of our financial performance for the first quarter starting on Page 14. As a reminder, campus-based higher education is a seasonal business. The first quarter represents the largest intake cycle for the Southern Hemisphere. But as classes are out of session for most of the period, it is a seasonally low quarter from a revenue and income standpoint. This year, that seasonality was even more pronounced for the Andean Region as the academic calendar pushed additional days of classes into the second quarter. Let's start with enrollment. The COVID-19 crisis hit during the final two weeks of the intake cycle, which impacted the volume of new enrollment in Brazil and in our largest schools of the Andean Region. New enrollment for the first quarter, timing adjusted, declined by 6% compared to the same period a year ago. Total enrollment for the same period was only down 2%, aided by solid re-enrollments across all segments. Revenue in the first quarter was $529 million, and adjusted EBITDA was a loss of $37 million. On a comparable basis and at constant currency, our revenue and adjusted EBITDA for Q1 declined by 4% and 35%, respectively. The year-over-year decline was fully attributed to the academic calendar timing, which shifted approximately $30 million of revenue and $20 million adjusted EBITDA between the first and second quarter. After neutralizing the impact of organic calendar changes, both revenue and adjusted EBITDA were slightly up versus the prior year on a comparable basis and at constant currency. And compared to guidance, our financial performance was affected by two primary drivers. First, unfavorable foreign exchange as the dollar strengthened by an average of 8% against the currency of the geographies where we operate. Second, an additional delay in the start of the academic year due to COVID-19 on our value-priced institution in Peru, UPN. Please refer to Slides 15 and 16 for a detailed bridge of our Q1 financial performance to the guidance we provided at the end of February, as well as an overview of all the shifts in the academic calendar for this year compared to 2019. In short, on a comparable basis and at constant currency, our financial performance in Q1 was solid and was not yet materially affected by COVID-19. Let me now provide you some additional color on our first quarter performance by segment, starting on Page 17. Please note that as I review the financial performance by segment, I will be discussing results on an organic and constant currency basis. Let's start with Brazil. Total enrollment declined by 1% versus the prior year, and new enrollment decreased by 9%. Our Distance Learning segment increased total enrollment by 14% year-over-year on the back of strong new enrollment trends in the second half of last year. Total enrollment for our face-to-face segment continues to be negatively affected by the unwinding of the FIES program. Revenue was down 1% versus the prior year; however, adjusted EBITDA showed improvement as the cost actions taken in the second half of 2019 continued to yield strong dividends. In our Andean segment, as we indicated earlier, new enrollments were impacted by the COVID-19 crisis, and as a result, were down 8%. The impact on total enrollment was more limited to minus 3%, aided by solid re-enrollment. Revenue and adjusted EBITDA performance were affected by the timing items discussed in my opening remarks. Adjusted for the delay of semester start dates, revenue was broadly in line with last year. Adjusted EBITDA was below the prior year due to increased bad debt expenses in Chile and Peru. In Mexico, adjusted EBITDA grew 10% in the first quarter, resulting from the strong intake at UNITEC in the fall of last year. Our Rest of the World segment, which is Australia and New Zealand, continues to scale quickly and is experiencing strong double-digit growth in enrollments and revenues. Finally, in our Online & Partnership segment, our core domestic market performed well. New enrollments grew 2%, and total enrollments were essentially flat. Overall, total enrollment was down 6% as we continue to deemphasize our international partnership business, which represented only 7% of our total portfolio in Q1. Adjusted EBITDA was below the prior year as a result of additional investments in marketing we announced in conjunction with our 2019 Q4 earnings call. Now moving to our liquidity position, as noted on Slide 19. Given the unprecedented economic impact and uncertainty associated with COVID-19, one of our top priorities from a financial standpoint is to maintain a strong liquidity position. Over the last two years, the execution of our portfolio simplification strategy has allowed us to bring our net leverage below 2 times, and in the process, also turn around our free cash flow performance dramatically. Consequently, we feel that Laureate is now facing the crisis from a much stronger position. At the end of March, our liquidity position stood at $547 million. In addition, we have proactively implemented a number of actions to preserve cash, including a reduction of more than $100 million in operating expenses and instituted a freeze on our non-essential capital expenditures until visibility improves. Finally, I'd like to add that our capital structure is flexible in terms of debt covenants, and would allow an increase in our debt leverage if needed. Let me now conclude my prepared remarks with our 2020 guidance, starting on Page 21. Given our higher level of visibility in our near-term outlook, let me start with Q2. For the second quarter, we are guiding as follows: revenue between $760 million and $800 million. Adjusted EBITDA is estimated to be between $210 million and $230 million. For the full year, we believe that our financial performance will be impacted by how quickly our schools will be allowed to resume their face-to-face operations. We envisage two primary scenarios. The first one contemplates that most campuses reopening occurs in the second half, as the virus is finally contained and no major setback occurs during the remainder of the year. The second scenario assumes a virus resurgence in the second half and a delay of the reopening of most of our campuses to 2021. Please note that for both scenarios, we are expecting continued foreign exchange headwinds in 2020, consistent with what we have seen since the beginning of March. With that context in mind, our revised guidance for 2020 is as follows: for scenario one, assuming most campuses reopen in the second half, total enrollment is estimated to be approximately 830,000 students; revenues estimated to be between $2.675 billion and $2.775 billion; adjusted EBITDA estimated to be between $545 million and $575 million; and free cash flow estimated to be between $160 million and $180 million, which would at the midpoint still be a slight increase versus 2019. For scenario two, assuming most campuses remain closed for the remainder of the year, total enrollment is estimated to be approximately 780,000 students; revenues estimated to be between $2.575 billion and $2.675 billion; adjusted EBITDA estimated to be between $485 million and $550 million; and finally, free cash flow estimated to be between $100 million and $120 million. Eilif, now back to you for the wrap-up.

Thank you, JJ. We know that all of you are dealing with disruptions in your professional and personal lives resulting from the COVID-19 pandemic. And I'd like to thank you for being on our call today, and wish you and your families good health. Let me also, once again, thank our tremendous faculty and staff for their commitment, flexibility, and resilience during these unprecedented times. I'd also like to recognize Paula Singer, who runs our online business. She has been instrumental in helping guide the online activation of our international campus-based institutions, and she's also overseeing the academic quality assurance efforts across the network. Paula is on the line today and will help answer some of your questions. Undoubtedly, there will be challenges ahead, but we are prepared to take them head-on, and we will continue to be proactive in serving our students and protecting our business as the situation evolves. Operator, that concludes our prepared remarks. We are now happy to take any questions.

We have our first question from Marcelo Santos with JPMorgan.

Hi, good morning. Eilif, JJ, Adam, hope you are all well. I have two questions. The first is regarding the longer-term potential impact that you mentioned in your presentation. Do you think this could really increase the acceptance of online learning in LatAm, both by students and by regulators? And in which countries do you think we could see the most opportunity after the crisis is over to evolve in that direction? That is the first question. The second question is, have you put forward programs to support students that cannot pay their tuition? What's the size of these programs? And what's the main format and the impact to Laureate, if you did so? Thank you.

Hey, Marcelo, this is Eilif. I'll take the first, and I'll ask JJ to comment on the student support program and financing programs. In terms of the impact on our business for online, in the near-term, near to medium-term, it will be challenging. But for the longer-term, I think it would be very positive. Online education will be generally accepted across Latin America. Regulators are already getting much more used to it. We're seeing a lot of flexibility around the regulatory framework. I can see where traditional 18 to 24-year-old students will do a couple of days, two or three days, of their learning online and only spend a couple of days on the campuses, which will, of course, significantly improve the utilization of our physical plant, while working adults will most likely migrate much more to a fully online model. So I do think that over the longer-term, this is going to be very positive. In the near and medium-term, we are dealing with some connectivity challenges, and also the fact that some students are just not comfortable yet doing 100% of their learning online. I'll pause there to see if there were any follow-up questions on that first part, otherwise, I'll hand it over to JJ for the second part.

No. Just a follow-up would be - is there any specific country where you think the advances could be more important? And is there any regional differences that could be interesting to highlight when it comes to the online learning?

In Brazil, the DL program is already very well-established, and it's probably the most advanced market when it comes to digital and online learning. Peru and Mexico and Chile are all further behind. We're seeing probably more traction in the mid-term in Mexico and then Peru and Chile lagging a little bit.

And Marcelo, this is JJ. Let me answer your questions on financing programs. As you know, historically, this is not something we have done. In select situations, we have offered payment plans for some students. All those actions are selective in nature, and really directed at students that have a strong track record from a payment standpoint and also, obviously, are keeping up with their classes. We all understand that this is an evolving situation, and that this could be a means of actually managing attrition and securing new enrollment volume. So clearly, those options are under evaluation, but no commitments have been made at this point in time. So we have not, at this point in time, changed our current practices.

Perfect. Thank you very much.

Thank you. Our next question is from Ryan Leonard with Barclays. Please go ahead.

Hey guys, thanks for taking my question. Just curious, I was wondering if you could provide some color on how you came up with the scenario, particularly the enrollment side. I guess, what are the sensitivity you kind of pressed to get to 50,000 additional enrollments, just given if it's a resurgence and a long-lasting recession? Just trying to understand how you arrived at that number.

JJ, do you want to take that?

Yes, I'll take that one. We believe that the lack of opening of our campuses would have really two impacts on our enrollment. First of all, we're seeing certain students that prefer a face-to-face experience. And while I think the transition to online was extremely successful, and have been praised by many students, in certain markets, there is still a strong preference to continue their education using a face-to-face experience. Should that preference not be temporary, meaning that campuses will not reopen, that would impact that segment of the population. The second part is really the economic situation and the fact that we're catering to socio-economic classes that are directly impacted by the lack of jobs during a lockdown. Therefore, new enrollment would be affected as a result of that. It's a combination of re-enrollment weakness, in this particular case in the second semester, as well as continued new enrollment weakness that we would see in the second and third intakes, which is going to happen in the second half.

Got it. And are you seeing any pushback at all on price? People who are kind of saying I paid for an in-person experience, and now that it's online, it shouldn't be the same kind of price point?

Well, it's always a discussion. I mean, I think the value proposition, ultimately for students, we believe is still very strong. We are continuing to provide probably other than the face-to-face labs and clinical rotations for our medical programs. What we believe is a comparable experience. But there's obviously a little bit more price pressure, particularly for students that cannot afford. This is where I think some of the programs around payment terms are really important to make sure that we respond to some of the specific situations that students are facing.

Got it, thank you.

Thank you. Our next question is from Shlomo Rosenbaum with Stifel. Please go ahead.

Hi, good morning, thank you for taking my questions. Eilif and JJ, I just wanted to get your thoughts on the enrollment and whether there is any kind of pent-up demand from people not making the enrollment cycles that would really want to, so that when things kind of open up, there's actually potential for more students to join at that point in time? Or do you view it as more of the economics - if macroeconomic conditions are poor, then that really won't happen? How are you thinking about that? I'm trying to figure out if there's - you think about it in terms of kind of a pause with the resurgence, or if it's just kind of we're at a low base, and then you kind of slowly build back up from there.

Hey, Shlomo, this is Eilif. Good morning. We view it more to be a matter of pent-up demand, but it's not certain when we will catch up with this demand. I'd just take a step back. The students that we didn't get in the first intake that we had expected to get, there were two reasons. One is financial ability, given they were under lockdown at home. Their parents may have been without a job or without income, and the student themselves wasn't able to work part-time to support their tuition. The other reason was students who didn't have the ability or willingness to do all of their learning online. There may also have been technical issues, connectivity and lack of equipment. As soon as we are back face-to-face, the technology issue will, of course, be resolved, and we should get those students back relatively quickly. And those who couldn't afford it, as soon as they have gotten their life back together, whether that is going to be a semester delay or a full-year delay, it's hard to say, but we do expect both pools of demand to come back over time.

Shlomo, let me maybe provide - Sorry. Shlomo, let me provide also clarification as to what we're expecting in the various scenarios associated with that pent-up demand. For scenarios one and two, we're not expecting any pent-up demand to occur in the second half that would apply to both scenarios. We're assuming conservatively that the trends we're seeing on total enrollment in the first half will continue in the second half and then, of course, would further degrade in the second half for scenario two.

Okay, great.

In Australia, there is - half of our students are domestic and half of them are foreign. Of the foreign students, some of them are coming directly from an overseas location, and some of them are coming from another university within Australia. Clearly, during the main intake, which was really locked and loaded just before the COVID-19 outbreak, enabled us to really have minimal impact in Australia. For the second intake, which is in June, there could be some pressure on new enrollments from overseas locations. Although that is a very small portion, because the majority of the overseas students are coming in a main intake in February and March. So it could be a small drag in the second intake, and then it depends on which scenario we are under for the main intake in February 2021.

Okay, great, thank you.

Thank you. And sir, I'm not showing any further questions in the queue.

Well, then, I just want to say thanks to everyone for participating. If there's any follow-up, don't hesitate to reach out to Adam Morse.

And ladies and gentlemen, this concludes today's conference. Thank you for participating. Please have a great day. You may now disconnect.