BALTIMORE, Feb. 28, 2019 (GLOBE NEWSWIRE) -- Laureate Education, Inc. (NASDAQ:LAUR) today announced financial results for the fourth quarter and the year ended December 31, 2018, and provided an update on the strong progress made on its strategic priorities.

Fourth Quarter 2018 Highlights (compared to fourth quarter 2017):

• Revenue of $913.7 million was up 2% on an organic constant currency basis¹. On a reported basis, revenue decreased 4% due to weakening of foreign currencies against the US Dollar.
• Operating income decreased by $0.3 million to $139.8 million.
• Net income (including discontinued operations) for the quarter was $72.1 million, as compared to $200.5 million in the fourth quarter of 2017, primarily attributable to one-time income tax benefits of $136 million resulting from the U.S. tax reform law that were recorded in 2017.
• Adjusted EBITDA was $228.7 million; up 6% on an organic constant currency basis.
• Adjusted for timing impact related to the Mexican earthquake in prior year, Revenue and Adjusted EBITDA were up 4% and 11%, respectively, on an organic constant currency basis.

Year Ended December 31, 2018 Highlights (compared to year ended December 31, 2017):

• New enrollments increased 6%.
• Total enrollments increased 1%.
• Revenue of $3,350.2 million was up 2% on an organic constant currency basis. On a reported basis, revenue decreased 1% due to weakening of foreign currencies against the US Dollar.
• Operating income increased by $49.0 million to $291.0 million.
• Net income (including discontinued operations) for the year was $370.9 million, as compared to $93.8 million in the year ended December 31, 2017, largely attributable to the gains from asset sales.
• Adjusted EBITDA was $623.1 million; up 7% on an organic constant currency basis.
• Free Cash Flow (or FCF), defined as operating cash flow less capital expenditures, was $139 million for 2018, which represents a $241 million increase versus prior year, driven by reduced interest expense, improved capital efficiency and higher operating margins.

“We are pleased to report strong performance for the fourth quarter and fiscal year 2018,” said Eilif Serck-Hanssen, Chief Executive Officer. “In 2018, we made significant progress against our strategic priorities, including the simplification of our portfolio to a core set of markets, where we have scale and a strong competitive position. These actions have also allowed us to significantly decrease our corporate debt and improve our margins,” Mr. Serck-Hanssen added. “These bold actions have been taken while maintaining a firm commitment to delivering high quality education for our students and strong outcomes for all of our stakeholders. We are well positioned heading into 2019.”

Strong Progress on Strategic Priorities

During the Company’s Investor Day in early 2018, management outlined five pillars for its strategic priorities in the coming years. Throughout 2018, progress was made on all fronts:

Laureate Education - great progress across all strategic priorities

Basis of Presentation

We have classified all of our currently planned divestitures in Europe, Africa, Asia and Central America in discontinued operations. Unless indicated otherwise, the results presented below relate to continuing operations.

Fourth Quarter 2018 Results

Revenue in the fourth quarter of 2018 was $913.7 million, up 2% on an organic constant currency basis. On a reported basis, revenue decreased 4% compared to the fourth quarter of 2017, affected by the weakening of foreign currencies against the US Dollar. Operating income decreased by $0.3 million to $139.8 million from $140.1 million in the fourth quarter of 2017. Net income (including discontinued operations) was $72.1 million for the fourth quarter, compared to $200.5 million in the fourth quarter of 2017; the decrease in net income was primarily attributable to income tax benefits resulting from the U.S. tax reform law that were recorded in 2017. Basic and diluted earnings per share were $0.31 for the fourth quarter of 2018.

Adjusted EBITDA was $228.7 million in the fourth quarter of 2018, up 6% on an organic constant currency basis. On a reported basis, Adjusted EBITDA decreased 13% compared to the fourth quarter of 2017. Adjusted for the timing impact related to the Mexican earthquake in 2017, revenue and Adjusted EBITDA for the fourth quarter were up 4% and 11% versus prior year, respectively, on a constant currency basis.

Year Ended December 31, 2018 Results

New enrollments for full year 2018 increased 6% compared to our new enrollment activity for full year 2017. New enrollment growth reflects strong growth in Brazil, which is up 14%, led by 75% growth in new enrollments in Distance Learning in that segment. Both Mexico and Andean grew new enrollments by 2%, while Rest of World grew new enrollments by 8%. Online & Partnerships new enrollments remain solid in our core domestic market, which increased 3%, offset by our planned transition away from lower revenue and margin producing students from international students in that segment. Total enrollments at December 31, 2018 grew 1% compared to December 31, 2017.

For the year ended December 31, 2018, revenue was $3,350.2 million, up 2% on an organic constant currency basis. On a reported basis, revenue decreased $35.7 million compared to 2017, affected by the weakening of foreign currencies against the US Dollar. Operating income increased $49.0 million compared to 2017, due primarily to decreased stock compensation expenses. Net income (including discontinued operations) for 2018 was $370.9 million, which included a $296.6 million net gain related to the completion of the previously announced sales of our Cyprus, Italy, China, Germany, Morocco and Kendall institutions and a $88.3 million derivative gain, primarily related to conversion of the preferred equity into common shares in April 2018, compared to net income of $93.8 million for 2017. Basic and diluted earnings per share for 2018 were $1.79 and $1.73, respectively.

Adjusted EBITDA was $623.1 million in 2018, up 7% on an organic constant currency basis. On a reported basis, Adjusted EBITDA increased 1% compared to 2017.

¹ Organic constant currency results exclude the period-over-period impact from currency fluctuations, acquisitions and divestitures, and other items.

Balance Sheet, Cash Flow and Capital Structure

Laureate ended 2018 with $388.5 million of cash on hand and $680.0 million in total liquidity, including our undrawn revolver capacity. These amounts do not include $216.4 million of cash recorded at subsidiaries that are classified as held for sale at December 31, 2018.

Free Cash Flow, defined as operating cash flow less capital expenditures, was $139 million for 2018, which represents a $241 million increase versus prior year, driven by reduced interest expense, improved capital efficiency and higher operating margins.

Outlook for Fiscal 2019

The guidance for full-year 2019 includes the impact from the implementation of Accounting Standards Codification (ASC) 842, ‘‘Leases’’, which became effective January 1, 2019. Under this new standard, the balance sheet will be grossed up to show a right-of-use asset and correlated right-of-use liability for operating leases. The impact to our income statement is expected to be approximately $13 million of additional rent expense in 2019, related to certain build-to-suit arrangements that are currently treated as capital leases on our books but will be classified as operating leases upon implementation of ASC 842. Conversely, the approximately $75 million of debt recorded for those leases will be eliminated.

Based on the current foreign exchange spot rates², Laureate currently expects its pro-forma performance for full-year 2019 to be as follows:

Continuing Operations

• Total enrollments to be approximately 890,000, growth of roughly 2%;
• Revenues to be in the range of $3,350 to $3,385 million, growth of 2% - 3% on an organic constant currency basis;
• Adjusted EBITDA to be in the range of $645 to $655 million, growth of 7% - 8% on an organic constant currency basis and prior to the impact from implementation of ASC 842, which will cause a 2% year-over-year unfavorable impact on growth; and
• Throughout 2019, as our announced asset sales are completed, we expect that we will continue to reduce G&A costs. We expect those cost reductions to be completed by the end of 2019. Thus, we anticipate Adjusted EBITDA for year-end 2019 to be between $670 - $680 million on a run-rate basis.

Consolidated Operations

• Capital expenditures at approximately 6% of revenue;
• Free Cash Flow, defined as operating cash flow less capital expenditures, expected to be approximately $145 million for 2019, and with the expected G&A cost reduction we expect Free Cash Flow to be approximately $170 million for 2019 on a run-rate basis; and
• We expect to end 2019 with approximately $800 million in net debt, factoring in $1.5 billion net proceeds anticipated from asset sales in 2019.

² Based on actual FX rates for January-February 2019, and current spot FX rates (local currency per US dollar) of MXN 19.39, BRL 3.76, CLP 666.00, PEN 3.34 for March - December 2019. FX impact may change based on fluctuations in currency rates in future periods.

An outlook for 2019 net income and a reconciliation of the forward-looking 2019 Adjusted EBITDA outlook to net income and a reconciliation of the forward-looking 2019 Free Cash Flow to operating cash flow are not being provided, as Laureate does not currently have sufficient data to accurately estimate the variables and individual adjustments for such outlook and reconciliation.

Please see the “Forward-Looking Statements” section in this release for a discussion of certain risks related to this outlook.

About Laureate Education, Inc.

Laureate Education, Inc. is the largest international network of degree-granting higher education institutions, primarily focused in Latin America, with approximately 875,000 students enrolled at over 25 institutions with more than 150 campuses, which we collectively refer to as the Laureate International Universities network. Laureate offers high-quality, undergraduate, graduate and specialized degree programs in a wide range of academic disciplines that provide attractive employment prospects. Laureate believes that when our students succeed, countries prosper and societies benefit. This belief is expressed through the company’s philosophy of being ‘Here for Good’ and is represented by its status as a certified B Corporation® and conversion in 2015 to a Delaware public benefit corporation, a new class of corporation committed to creating a positive impact on society.