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. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions].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 Web site 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,…

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 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 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% as 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 by 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 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 FX 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…

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. And we are now happy to take any questions.

[Operator Instructions] 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, by regulators? And in which countries do you think we could see most opportunity after the crisis is over to evolve in the 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 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.And 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 spending a couple of days at 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. And then, 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 to do 100% of their learning online.I'll pause there to see if there was 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. And 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 records from a payment standpoint and also, obviously, are keeping up with the 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 revaluations, but no commitment have been made at this point in time. And so we have not, at this point 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 to, 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 with many students. In certain markets, there is still a strong preference to continue their education using a face-to-face experience. And so should that not be temporary in nature, meaning that campuses will not reopen, that would impact that segment of the population.And then the second part is really the economic situation and the fact that we're catering to socioeconomical classes that are directly impacted by the lack of jobs, when there's a lockdown. And so therefore, new enrollment would be affected as a result of that. So 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 the third intake, 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 student we believe, is still very, very strong. And we are continuing to provide probably other than the face-to-face labs and clinical rotations for our medical programs. I think, what we believe is a comparable experience.But there's, obviously a little bit more price pressure, particularly for students that cannot afford. And this is where I think some of the programs around payment terms is really important to make sure that we respond to some of the specific situation that students are facing.

Got it, thank you.

Thank you [Operator Instructions] 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 is there any kind of pent-up demand from people not making the enrollment cycles, but 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 - 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 get - 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 the financial ability, given they were under lockup at home. Their parents may have been without a job or without an income and the student themselves wasn't able to work part-time to support their tuition. And the other reason was students who didn't that have the ability or willingness as to do all of the learning online. There may also have been technical issues, connectivity and lack of equipment.So the - 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 full year delay, it's hard to see, but do expect both pools of demand to come back over time.

Okay, great.

Shlomo, let me maybe provide - Sorry. Shlomo, let me provide also clarification as to what we're expecting in the various scenario, associated with that pent-up demand. For scenario 1 and 2, we're not expecting any pent-up demand to occur in the second half that could applied 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 2.

Okay, great. Thanks for sharing that. And then how should we think about areas like Australia, which is there's really a large segment of the students that are foreign nationals and kind of with the lockdowns. Is there going to be - are you anticipating a huge adverse impact in terms of ability to travel and things like that over there?

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, 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.