Ladies and gentlemen, thank you for standing by, and welcome to the Laureate Education's Fourth Quarter and Year-end Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Mr. Adam Morse, Senior Vice President of Finance. Sir, you may begin.

Good morning everyone, and thank you for joining us on today's call to discuss Laureate Education's fourth quarter and year-end 2020 results. Joining me on the call today are Eilif Serck-Hanssen, President and Chief Executive Officer; and J.J. Charhon, Chief Financial Officer. Our earnings press release is available on the Investor Relations section of our website at laureate.net.

Thank you, Adam, and good morning, everyone. 2020 was a year like no other, which tested the resilience and adaptability of our students, faculty, and staff, as well as our entire organization. I'm extremely proud of what we achieved: strong execution, solid financial performance, a successful operational response to the COVID-19 pandemic, and an ongoing commitment to social impact and serving the communities in which we operate. I want to thank our faculty and staff once again for their agility and commitment to deliver on our promises to our students during these extraordinary times. We realize the value students place on uninterrupted delivery of quality education, even during these times of hardship. Our ability to quickly transition all classes to fully online when the pandemic hit, thus allowing our students to continue their studies, was emblematic of our students-at-the-center approach. We have now been operating almost without exception in a fully online mode for the past 11 months and are likely to continue in this mode for the current term semester. We are actively monitoring the local market conditions in Mexico and Peru, including any government requirements, and are ready to implement a return-to-campus strategy when it's appropriate to do so.

Thank you, Eilif. Let me cover first an overview of our performance, starting on Page 10. Revenue in the fourth quarter was $285 million, and adjusted EBITDA was $91 million. On a comparable basis and at constant currency, revenue for Q4 declined by 13% compared to 2019, due primarily to lower enrollments, while adjusted EBITDA was only down 2%, thanks to cost reductions associated with our online service delivery. Moving now to full-year 2020 results: Revenue for the year was $1.025 billion, and adjusted EBITDA was $206 million. On a comparable basis and at constant currency, our overall performance in 2020 resulted in a decrease in revenue of 9% versus the prior year. Conversely, adjusted EBITDA was up 13%, showing continued margin expansion as a result of our large campus-related cost savings, mostly in Peru, together with our $45 million G&A reduction at corporate.

Thank you, J.J. We look forward to the completion of our portfolio transformation during 2021. The business model has proven to be resilient. We anticipate that the headwinds from COVID will start to abate in the second half of this year, and that will position us well for a return to growth in 2022 and beyond. We remain committed to value creation for all our stakeholders. Operator, that concludes our prepared remarks, and we are now happy to take any questions from the participants.

We have a question from Matt Swope with Baird. Your line is now open.

Good morning. I have a couple of questions, please. Could you update us on what's happening with the Walden sale and the Department of Justice investigation there and whether that might unwind the sale? And then secondly, and associated, how you were thinking about the takeout of your bonds? I know the call price on the bond steps down on May 1. Is that a point at which they could come out or do you need the Walden sale to close first? Any color would be appreciated. Thank you.

This is Eilif. I'll take the first, and then I'll ask J.J. to take the bond taker question. In terms of Walden, first and foremost, we are very proud of Walden University and the quality and rigor of the degrees offered at Walden. The outcomes at Walden are very strong, including our graduation rates. As an example, the Master's of Science in Nursing program is the largest graduate program in the United States, and our graduation rates are well over 80%. I also want to note that Walden is producing students with high outcomes who are getting good jobs and becoming leaders in their field. Regarding the Department of Justice investigation, Laureate received a notice on September 14 regarding the DOJ inquiry, and it related to Walden's Master's in Nursing program. Specifically, the DOJ was interested in the compliance posture around the False Claims Act. Laureate has been fully cooperating with this Department of Justice inquiry. We retained external counsel, which was Sidley, in this case, and we asked them to conduct a complete and thorough review of the matter. That review was substantially completed at the end of last year with no evidence being found to support any allegations of misrepresentation. So in conjunction with Sidley, we met with the Department of Justice to present our findings and we are awaiting feedback. I'll pause there and see if there was any additional color or follow-up you wanted on the Department of Justice investigation.

Yes. No, that's very helpful color. I believe there is a committee meeting in June that will sort of decide ultimately on this. Is that the timing that you see for this? Will this be resolved? I know you've been targeting the second half, probably in July for the asset sale close. Do you expect this to be resolved in June in order to let that close happen on time?

I think what you're referencing to in the committee meeting in June is the HLC change of control approval process. That meeting is in late June or early July, and that's one of the regulatory hurdles we need to complete. The application there has been submitted, and everything is on track to meet that requirement. In addition, the Department of Education needs to approve the change of control application, and that process is also progressing very well. We're also looking forward to a resolution on the DOJ inquiry as well in advance of that timeframe.

I see. So, you would expect the DOJ part of that to be done before the HLC meeting and before the Department of Education has to make their decision?

It's very hard to project specific timelines as the investigation is ongoing. However, we have concluded our internal investigation, and we have shared that finding with the Department of Justice, and expect that they will come to a conclusion in this matter in a timely manner. But I can't make any representations around specific time parameters.

That's certainly fair. In the worst case, could Adtalem actually break the deal and walk away from the transaction depending on how this turns out?

There are various conditions precedent and representations that go over a transaction of this nature, as you know. But they cannot unilaterally cancel the transaction. The deal does require the regulatory approvals that I just referenced. Upon the various regulatory approvals, we have to achieve that, and then the parties have a contractual obligation to move to close.

That's very helpful. So that leads to my second part of the question. Do you need the Walden deal to close before you can retire the bonds?

I'll take that one, Matt. The answer is, we don't need the Walden transaction, but we need either the Walden or the Brazil transactions to close. So right now, we haven't made a final determination, but should the Brazil transaction close in the first half of this year, then we would be in a position to retire the bonds.

Can you just remind us what your best guess is for the timing of the Brazil close?

We said the first half. That's what we've stated externally.

Got it. Okay, thank you guys. I really appreciate all the color.

Sure.

Thank you.

I'm showing no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all disconnect.