Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2020 Laureate Education Inc Earnings Conference Call. At this time all participants lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Adam Morse. Thank you and please go ahead sir.

Good morning, everyone, and thank you for joining us on today's call to discuss Laureate Education's third quarter 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. We have also posted a supplementary presentation to the website, which we'll 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 annual report on Form 10-K filed with the U.S. Securities and Exchange Commission; our 10-Qs filed earlier this year; our 10-Q filed earlier this morning as well as other filings made with the SEC. 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 and free cash flow, are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentation. Before turning the call over to Eilif, I'd like to note that following the closing of certain additional asset divestitures as part of our previously announced strategic review and the signing of others, we are required to move those operations to Discontinued Operations. Therefore, our results being reported today for Continuing Operations include only our remaining Mexico, Peru and corporate segments. In the appendix to the slide presentation, we have included a table with historical data for our revised presentation of Continuing Operations. We hope that you will find that information helpful as you update your models. With that let me turn the call over to Eilif.

Thank you, Adam, and good morning, everyone. I am pleased to report third quarter results, which were in line with expectations. Our business model continues to exhibit resiliency through the COVID-19 pandemic, and our liquidity position remains strong. The management team is focused on tight cost controls and the acceleration of certain productivity initiatives. These actions have kept us on track for the year, and we are reaffirming our guidance expectations for 2020 for the business units that remain within Continuing Operations. I want to thank our faculty and staff, once again, for their agility and commitment to deliver on our promise to our students. These past eight months have been challenging for everyone, and I greatly appreciate all the team members' efforts. Laureate's top priority continues to be the health and well-being of our students, faculty and staff, while delivering high-quality educational offerings in a safe and responsible manner. During the quarter, we made significant progress on our strategic review, having signed definitive agreements to sell our operations in Brazil as well as Walden University, which is our online institution here in the United States. In addition, we have closed on the sale of our operations in Chile and Malaysia during the third quarter. Given the significant size of the operations now sitting in Discontinued Operations, we have included in the appendix a summary of key operating metrics for those operations. As of September 30th, we had approximately $2.6 billion of additional net asset – proceeds expected from pending divestiture transactions. Of that, we collected nearly $650 million from the completion of the sale of our Australia and New Zealand operations earlier this week. Given our strong liquidity position, combined with expectations for continued positive free cash flow generation from our operations and the large cash proceeds from pending…

Thank you, Eilif. Before we go through our results for the quarter, I would like to highlight that even though our financials have been recast for Discontinued Operations, the seasonality of the business remains largely unchanged. The first and third quarter represent the main intake cycles, and the second and fourth quarters are seasonally strong from a P&L perspective as classes are in session during those periods. Additionally, as discussed during last quarter's earnings call, the phasing of our quarterly revenue has been further impacted by the COVID-19 pandemic. This resulted in moving a number of classes from earlier in the year to the third quarter. In light of that, we believe that our year-to-date results may be more representative of our current operating performance. With that context in mind, let me now cover the financial results starting on Page 8. Revenue in the third quarter was $244 million and adjusted EBITDA was $50 million. Results for the third quarter included approximately $20 million of revenue associated with classes that were deferred from earlier in the year. On a comparable basis and at constant currency, revenue for Q3 declined by 4% while adjusted EBITDA was up by double digits. Moving now to year-to-date September results. When combined with the first half results, still on a comparable basis and at constant currency, our overall performance year-to-date resulted in a decrease in revenue by 7%. However, adjusted EBITDA was up 27%, showing continued margin expansion following cost and efficiency actions that we have undertaken this year across all operating segments and at corporate. Let me now provide some additional color on the performance of our two remaining operating segments, Mexico and Peru, starting with Page 11. Please note that all indicators we will discuss are on an organic and constant currency basis.…

Thank you, J. J. We are very pleased with the resiliency that our business model continues to demonstrate despite the impact of the pandemic. We will continue to be proactive in managing the business in a prudent manner during the pandemic, while at the same time, pursuing strategic transactions for our remaining markets to generate incremental value opportunities for our shareholders. Operator, that concludes our prepared remarks, and we are happy to take any questions from the participants.

Thank you. [Operator Instructions] And our first question will come from the line of Shlomo Rosenbaum from Stifel. You may begin.

Hi, how are you doing? This is Adam on for Shlomo. Could you talk a little bit more about the kind of – your plan to return capital to shareholders in the most kind of tax-efficiently possible when all the assets are sold? And I see today that you announced the $300 million buyback program. But ultimately, there is going to be a pile of cash after all these sales. How will shareholders realize this, the value of the cash in kind of the most tax-efficient manner?

J. J., do you want to take that one?

Yes, I will take that one. Thank you, Eilif. Hi, Adam. The most tax-efficient manner to return capital to shareholders is in the form of open market purchases, so a share buyback like the program we've just announced, as well as other means such as a tender offer. So at this point in time, we are not thinking of distributing cash or excess cash to shareholders in the form of dividends. Obviously, that may change. But our priority is really to do it in the most tax-efficient manner.

Okay. And then the other question was the free cash flow range was tweaked to $150 million to $170 million, kind of the top end came down $10 million from last quarter's guidance. Is this due to operational changes or divestiture changes or something else like FX? And…

Yes, it's divestiture changes. It’s basically the fact that we're missing four months associated with Chile. If you really adjust for that, we basically lost, between Malaysia and Chile, about $30 million of cash flow. And despite that, we only came down about $10 million, so there was clearly some improved outlook baked into the revised guidance.

Okay. And the comment about kind of revenue and adjusted EBITDA guidance being broadly unchanged on Slide 5 or 4, is there anything behind that? Or is it just kind of what you just mentioned?

Yes, just what we mentioned. If you look at the assumptions that we had baked into the guidance that we released in conjunction with Q2 earnings, and look at the segments that are remaining in our continuing operations, basically, then again it is broadly unchanged for EBITDA.

Okay, thank you.

Thank you. [Operator Instructions] Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may now disconnect.