Good day, and thank you for standing by, and welcome to the Full Year 2022 Laureate Education, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Morse, Senior Vice President, Corporate Finance. Please go ahead.

Good morning, and thank you for joining us on today's call to discuss Laureate Education's fourth quarter and year-end 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 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 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 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 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 debt, net of cash 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. Our performance in 2022 demonstrated the resiliency of Laureate's operating model. Despite global macro headwinds, we delivered outstanding results. Specifically for the year, new and total enrollments grew 13% and 9%, respectively, versus prior year. Revenues grew by 14% and adjusted EBITDA increased by 34% and adjusted EBITDA margins were at 27% a historic high for Laureate due to the scale benefits from a robust growth and continued focus on operational efficiencies. In addition to favorable operating performance, our cash accretive business model and strong balance sheet allowed us to return over $500 million of capital to shareholders during 2022 through a combination of cash distributions and share repurchases. The management team will continue to focus on delivering strong free cash flow performance going forward. Our decision is to focus exclusively on the high-growth potential markets of Mexico and Peru, expand our digital portfolio and pursue further efficiency initiatives across the company have proven to be an effective strategy for Laureate as evidenced in our 2022 results. We expect this positive momentum to continue into 2023 and beyond. The accelerated growth that we sustained in recent years is also driven by our leading brand positions in both markets. In Mexico and Peru, our institutions are among the largest and most respected in the region. I would like to thank the faculty and staff of each of our institutions for their unwavering commitment to academic quality and innovation and for working hard to make education more accessible. Let me highlight just a few of the many academic accomplishments we achieved in 2022. For the second consecutive year, UPC in Peru was ranked the number one education brand in the country. UPN in Peru was upgraded to a four-star university rating by QS Stars, the…

Thank you, Eilif. As a reminder, campus-based higher education is a seasonal business. The first and third quarters represent our two largest intake periods, which account for more than 80% of our total new enrollment activity for the year. From a P&L perspective, both are seasonally low periods as classes are out of session for most of those months. In contrast, the second and fourth quarters are not large enrollment intake periods, but generate higher revenue and adjusted EBITDA for the year. Let's start with Page 14, which highlights our strong operating and financial performance for the fourth quarter. Total enrollments increased 9% when compared to the prior year with strong growth in both markets. Revenue in the fourth quarter was $346 million and adjusted EBITDA was $95 million both metrics were ahead of the guidance we provided three months ago. Revenue outperformance was driven by enrollment volume and better price mix, adjusted EBITDA outperformance follow the revenue trend. On an organic constant currency basis, revenue for the fourth quarter was up 13% year-over-year, driven by the growth in total enrollment volume. Adjusted EBITDA for the fourth quarter was up 51% year-over-year, aided by timing of expenses and revenue growth. Now moving to full year results on Page 15. New enrollments increased 13% versus prior year, and total enrollments were up 9%. Full year 2022 revenue was $1.242 billion and adjusted EBITDA was $339 million. This resulted in an adjusted EBITDA margin of 27.3%, which was a historic high for Laureate. On an organic constant currency basis, revenue for the year increased by 13% and adjusted EBITDA was up 25%. Our year-over-year adjusted EBITDA margin was aided by approximately 260 basis points of improvement driven by our focus on growth and operating efficiencies. Let me now provide some additional color…

Thank you, Rick. Our full year 2022 results and strong 2023 outlook demonstrate that we are on track to deliver on our strategic priorities. We have the right management team, the best brands and a powerful omnichannel distribution network that we believe will allow us to drive revenue growth and support our vision of transforming the lives of students and communities in Mexico and Peru by providing greater access to affordable quality education. Operator, that concludes our prepared remarks, and we are now happy to take any questions from the participants.

Thank you. [Operator Instructions] And our first question comes from Jeffrey Silber from BMO Capital Markets. Your line is now open.

Thanks, good morning. Thanks taking my question. My first question is just regarding some of the political upheaval that we've been seeing and hearing about in Peru. Are you seeing any issues either in terms of impacting your enrollment trends and/or potential regulatory changes that might be on the horizon?

Good morning, Jeff. This is Eilif. We are seeing no material impact to our operations. These demonstrations have been relatively small, 3,000 to 4,000 demonstrators, and they have been largely in the South. Of course, there's been some unfortunate loss of life associated with these demonstrations. So it has gained a significant amount of press coverage but our operation has been essentially unimpacted. In terms of regulatory applications, we see no changes in regulatory conditions for higher education that has not really been on the agenda or point of contention.

Okay. That's good to hear. Can we shift gears to the pricing environment in both countries? Can we just talk about what type of tuition increases are embedded in your guidance for this year and what you think will be sustainable going forward? Thank you.

Rick, do you want to take that?

Yes. Jeff. So in general, in a normal inflationary environment, our target is typically to price in line with our transition -- our translated inflation that is on our expense structure by product and by brand. This year, we expect the translation of a high inflationary market on our cost structure to be around 5%. It will be a bit higher than that in Mexico. It will be a bit lower than that in Peru. The main difference between that is mainly driven by the fact that we lease most of our real estate in Mexico. In terms of pricing, given the pressure on the consumer we may be slightly below this on average, but we expect to be able to cover any gap with efficiency initiatives to maintain upward trends on our margins and that's how we built the 2023 guidance.

Okay. That's really helpful. I appreciate it. And I'll just throw one more if okay. Obviously, you've got a strong balance sheet. The company continues to generate cash. Can you talk about your capital allocation priorities going forward?

Happy to do so. We are focused on generating strong free cash flow conversion. We have a very disciplined approach in terms of investing in the business and growing and most of the investments in the business will be on capital-light initiatives in terms of expanding our digital and hybrid education. That means that we would have excess cash flow generated in the business so that the management team and the Board will discuss how to deploy, whether or not that would be reducing our debt or returning capital to shareholders either via through a dividend or stock buyback. But no further guidance on which means we will be deploying until we have made such decisions later in the year.

I appreciate the color. Thanks so much.

Thank you. [Operator Instructions] And I am showing no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.