Good morning, ladies and gentlemen. Thank you for standing by and welcome to Laureate Education Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference may be recorded. I would now like to turn the conference over to your speaker host, Adam Morse. Please go ahead.

Good morning and thank you for joining us on today's call to discuss Laureate Education's second quarter 2022 results. Joining me on the call today are Eilif Serck-Hanssen, President and Chief Executive Officer; and Rick Buskirk Chief Financial Officer. Our earnings press release is available on the Investor Relations section of our website at laureate.net. We've 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 would like to remind you that some of the information we are providing today, including but not limited to our financial and operational guidance constitutes forward-looking statements within the meaning of applicable US 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 US Securities and Exchange Commission, 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 and among others adjusted EBITDA and its related margin, total cash net of debt and free cash flow are also detailed and reconciled to their GAAP counterparts in our press release or supplementary presentation. Let me now turn the call over to Eilif.

Thank you Adam and good morning everyone. Today I'm pleased to report strong second quarter performance with operating and financial results ahead of our expectations. We are again raising our full year 2022 outlook, which Rick will cover in more detail later in our prepared remarks. Enrollments continue to trend well with June year-to-date new and total enrollments both increasing 11% versus prior year. During the recent semester, we returned to face-to-face operations across all of our campuses and we are effectively deploying our hybrid operating model, allowing students to study both in-person and through online. We have more than 50 campuses in Mexico and Peru that reinforce our strong brands and we are leveraging that brand power to become the market leader in online education. Digital delivery is increasingly important in both markets as students expect to be able to access affordable quality education through flexible online and hybrid delivery modes. And the growth of online education is accelerating in this post-COVID era as its acceptance by employers and regulators continue to increase. Going forward, we expect to provide between 40% and 60% of our taught hours online across our five institutions. This in turn will allow us to continue to grow in a more capital light manner as a greater number of students can be accommodated in our existing physical campus space. At the core of our growth agenda is our mission, which is to deliver affordable high-quality education to prepare students for a successful career and lifelong achievements while building pride, trust and respect in our communities. Our 2021, Impact Report, which now is available on our website reflects our commitment to our mission. I encourage you to download the report and read more about what is happening across our institutions and the respective communities. During the…

Thank you, Eilif. As a reminder campus-based higher education is a seasonal business. Although the second quarter is not a large intake period, it represents a strong earnings quarter for the company as classes are in session for much of the period. Let's start with page 12, which highlights our strong financial performance for the second quarter. Revenue in the seasonally strong quarter was $385 million and adjusted EBITDA was $144 million. Both metrics were ahead of the guidance that we provided three months ago. Half of the revenue outperformance versus expectations was led by a more favorable cycle two enrollment intake, positive mix from our traditional undergraduate segment and better-than-expected attrition rates. The remaining portion of revenue outperformance was the result of more favorable FX rates realized during the quarter. Adjusted EBITDA outperformance followed the revenue trends and was additionally aided by some timing of expenses, which have been shifted to the second half of the year. On an organic constant currency basis, revenue and adjusted EBITDA for the second quarter were up 17% and 33% respectively, which includes a $5 million favorable impact year-over-year related to academic calendar timing in Mexico. When combined with the first quarter, still on an organic constant currency basis our overall performance for the first half resulted in revenue and adjusted EBITDA growth of 14% and 33%, respectively. Let me now provide some additional color on the performance of Mexico and Peru, starting with page 15. Please note that all comparisons versus prior year are on an organic and constant currency basis. Let's start with Mexico. Mexico's revenue growth for the second quarter was up 16% or an increase of 12% adjusted for academic calendar timing. Revenue growth was the result of an 8% increase in total enrollment as well as a favorable…

Thank you, Rick. I remain encouraged as we enter the second half of 2022 and our next major enrollment intake cycle. Mexico and Peru are attractive markets with favorable growth dynamics and we're operating leading brands in both countries. We continue to see positive signs from a market perspective, and are well-positioned to continue to deliver on our growth agenda given our differentiated product offerings, and we have a strong balance sheet and a cash accretive business model. We expect to continue to generate strong returns for our shareholders. Operator that concludes our prepared remarks and we are now happy to take any questions from the participants.

Thank you. We have a question from Jeff Silber from BMO. Your line is open.

Thank you so much. With all the talk about an economic slowdown worldwide -- I'm not an expert on what's going on in Mexico and Peru, but maybe you can talk a little about what's going on there? And what would be the theoretical recessionary impact on your businesses in those two countries specifically the different brands and segments you have there? Thanks.

Hi, Jeff, this is Eilif. I'll kick it off and Rick will join in. Laureate and our brands have fared pretty well through the cycles in the past. We are a very resilient business. And when you look back to the 2008 to 2010 financial crisis as well as the challenges in 2020 and 2021 during the pandemic I think you can conclude that we are loosely correlated to the overall economic environment. So in good economic times, we are doing extraordinarily well both in terms of volume growth and price/mix and in weaker economic times we are still performing solid. A little lighter on the volume growth, but still delivered growth during the financial crisis of 2008 to 2010. And we also see a little bit of a mix shift where the value brand is performing greater than the premium brands but as a portfolio the business is performing really well. So that's how we expect the business to continue to perform through the cycle, but clearly we are very focused on being prepared for an environment with much higher price inflation and we are building in a lot of productivity initiatives into our operating models and we can continue to provide an affordable education solution to our customer.

Okay. Great. My follow-up question is regarding tuition levels. I know last year you had some discounting and scholarships. Can you just talk about where we stand on that this year in terms of pricing and what we should expect going forward? Thanks.

Rick, do you want to take that?

Yes, sure. Thanks for the question. I would say overall we're very pleased with our pricing. As you recall and we've said this before we generally looked to price at our implied inflation each year. Note, our implied internal inflation is really lower than headline inflation that you see in the market, because that's heavily impacted by energy and food as an example. Additionally, remember, that the majority of our costs in 2022 were locked at the beginning of the year in last year. And a big focus of our pricing this year was, I think what you're alluding to which is on Mexico, particularly on our premium brand at UVM, where we had a higher amount of discounting in scholarship during the pandemic. And to this point, our pricing has been in line or slightly above our expectations in Mexico. So overall, we're pleased with our pricing that we're seeing in the market this year.

And going forward, is there a range we should use in terms of calculating revenue per student?

On average, we have around $3,000 average revenue per student, that obviously differs between our -- it's a weight between our value brands and our premium brands in each of the markets, but that's on average what we are looking at.

And changes in that going forward again, you said with in line with implied inflation internally. I'm just curious what that is roughly.

This year, our inflation that we had was a bit less than 4% on our model. So, obviously we're looking at what potential inflation will be next year in Mexico and Peru much as everybody is. And we'll analyze that inflation and understand what we can pass through to the consumer and keep that affordable and drive the right volume amounts. We don't have a final point of view on that, because I think everybody is looking at inflation and what it's going to end up landing at in 2023. But I think Eilif's point is the most relevant point, which is we believe, we'll pass through some inflationary effects on pricing. We hope, we put through implied inflation, but if we aren't able to put through implied inflation, we have plenty of productivity initiatives that we think, that we can put in place to continue profitability particularly in our Mexico business.

Okay. Great. That’s really helpful. Thanks so much.

Thank you. And our next question, coming from the line of Javier Martinez de Olcoz from Morgan Stanley. Your line is open.

Hi. Thank you. So obviously, you did a pretty good job resizing G&A. You did it fast and efficiently. I was wondering, where are we in the process? Is the process over? And also, I was wondering, if this reduction in corporate cost has maybe generated any initial operational issue, control issue that we can be aware of?

Rick, you want to take that?

Yes, I'll take that. Thanks for the question Javier. It's been -- we went through quite a transformation of rightsizing the Laureate corporate headquarters last year as you've mentioned. We have not seen and we are -- we were at $90 million of approximate G&A. We're targeting around a $50 million reduction. That is going very well. We do have a little bit higher costs that are onetime this year in winding down the Laureate network, but we feel very comfortable about getting to the right size run rate effect of the downsizing of the G&A structure. And to your point, we have not seen any friction in the business. We continue to perform very well. Obviously, we are very focused on maintaining our control environment and the cadence of our operations and it's gone very, very well.

Fantastic. Thank you, very much.

I am showing no further questions at this time. And ladies and gentlemen, that does conclude our conference for today. We thank you for your participation. You may now disconnect. Good day.