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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you standing by, and welcome to the Laureate Education's Fourth Quarter and Year-end Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded.
I would now like to turn the conference over to your host, Mr. Adam Morse, Senior Vice President of Finance. Sir, you may begin.
Good morning, everyone, and thank you for joining us on today's call to discuss Laureate Education's fourth quarter and year-end 2020 results. 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 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 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 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. 2020 was a year like no other, which tested the resilience and adaptability of our students, faculty and staff as well as our entire organization. I'm extremely proud of what we achieved. Strong execution, solid financial performance, successful operational response to the COVID-19 pandemic and an ongoing commitment to social impact and serving the communities in which we operate. I want to thank our faculty and staff once again for their agility and commitment to deliver on our promises to our students during these extraordinary times.
We realize the value student place on uninterrupted delivery of quality education, even during these times of hardship. Our ability to quickly transition all classes to fully online when the pandemic hit, thus allowing our students to continue their studies with emblematic of our students-at-the-center approach. We have now been operating almost without exception in the fully online mode for the past 11 months, and likely to continue in this node for the turn semester. We are actively monitoring the local market conditions in Mexico and Peru, including any government requirements and are ready to implement a return-to-campus strategy when it's appropriate to do so.
The fourth quarter results we are reporting today were ahead of expectations. Despite the headwinds caused by the pandemic throughout 2020, we consistently delivered against our goals, and our results demonstrate the resiliency of our business model. For the full year, we were able to drive increases in both adjusted EBITDA and free cash flow generation due to better-than-expected retention levels, tight cost controls and a focus on productivity initiatives.
Looking ahead, 2021 will be a transition year for Laureate as we complete the pending asset sales and the transformation of our corporate overhead structure. The COVID pandemic is still causing enrollment and pricing headwinds in our markets, and we expect this to continue to impact our reported numbers, most notably in the first half of this year. However, as we head into the second half of 2021, we anticipate that the impact of the pandemic will start to abate, which we believe should set us up for a strong recovery in 2022. Later in our prepared remarks, JJ will provide more details on the outlook for both 2021 and 2022 when he covers guidance.
Let me take a minute now to provide an update on our strategic review. Shortly after we reported third quarter results, we closed on the sale of our operations in Australia and New Zealand for approximately USD 650 million. Pending divestiture transactions include our operations in Brazil and Honduras, which are anticipated to close during the first half of this year and Walden University, which we expect to close during the second half of this year.
Total net proceeds from these pending transactions is approximately USD 1.95 billion. For Laureate's institutions in Mexico and Peru, we have decided to continue to operate these assets within a very focused organization. The corporate G&A burden associated with these 2 relatively homogeneous markets is only a small fraction of what we have historically been required to spend to support this brawling legacy network. We believe that this focused approach, along with select innovation investments in Mexico and Peru should return Laureate to robust growth in 2022 and beyond. That said, the decision to focus on a regional operating model in Mexico and Peru does not preclude further engagement with potential buyers for these businesses as we are committed to pursue the best strategy to optimize shareholder value.
Now moving to Slide #7. Let me spend a few minutes discussing the Mexico and Peruvian higher education markets, both of which are favorable industry dynamics and represents attractive long-term investment opportunities. The demand for higher education in Mexico and Peru is large and growing, fueled by several demographic and economic factors, including a growing middle class and significant personal and economic benefits gained by graduates of higher education institutions. And while participation rate has been increasing in both markets, the overall markets are still significantly underpenetrated with participation rates of 30% in Mexico and 47% in Peru as compared to developed markets like the United States, which is well above 60%.
In addition, both Mexico and Peru has favorable regulatory conditions that are supportive of quality private higher education providers. The private sector plays a meaningful role in higher education in both markets, bridging supply and demand imbalances created by the lack of capacity at public universities. In Mexico, private education providers constitute 44% of the total higher education market for the state in which we operate. In Peru, the private sector is 72% of the total market. This high level of participation validates the important role of the private sector in these markets.
Digital education is increasingly important in both markets as students are expecting access to affordable, quality education via a flexible hybrid delivery mode. This trend has been further accelerated by the COVID pandemic, and Laureate is a clear leader in online learning and hybrid delivery in our markets. Accordingly, we believe that we are well positioned to take advantage of this growing market dynamic during the next 3 to 5 years. Further, we expect that pent-up demand for higher education in both markets will be released as a direct consequence of the economic rebound in the aftermath of the pandemic during this same time period.
Now moving to Slide #8. Let me talk a bit more about the quality of our brands. Our market segmentation strategy is identical in the 2 countries. We serve the traditional market via our premium brands and the more price-sensitive market via our high-quality value brands. In Mexico and Peru, our premium institutions of UVM and UPC are among the most highly rated in the country. Both UVM and UPC are 4-star rated by QS Stars at the overall university level. Both are ranked among the top universities in their countries. UVM at #7 in Mexico and UPC as the #3 ranked university in Peru.
In addition, both UVM and UPC operate medical schools with combined enrollment of over 7,000 medical school students. Medical school licenses are difficult to obtain and only granted to institutions that meet rigorous standards. The presence of these medical schools has allowed us to build out a broader health sciences platform in both markets. Currently, 17% of our total enrollments are in health sciences verticals, a field which is growing rapidly due to the strong employer demand for health care professionals.
Our high-quality value institutions of UNITEC and UPN are serving the market segments that require a more affordable offering with still delivering top-quality educational programs in a no-frills campus environment. Both UNITEC and UPN have 3-star institutional ratings from QS Stars, with high star ratings in the categories of teaching and employability. Both institutions are at scale. UNITEC is the largest private university in Mexico and UPN is the second largest private university in all of Peru. Our leading brands, combined with focused investments in growth and the favorable macro dynamics we discussed earlier, give us confidence in our ability to return to growth at or above our pre-COVID organic growth rates in Mexico and Peru of 6% for revenue and 9% for adjusted EBITDA.
Finally, let me remind you that as of today, Laureate consists of the attractive cut from institutions in Mexico and Peru with strong margins and strong free cash flow profiles as well as the following financial assets. First and foremost, contracts to sell our operations in Brazil and Honduras as well as Walden University in the United States with combined proceeds, net of taxes and fees, of nearly $2 billion. And secondly, net debt position at year-end, which was approximately $200 million. Our intent is to return large amounts of excess cash to our shareholders in a tax-efficient manner during 2021 following the completion of the pending divestitures.
I will now turn the call over to JJ for a more detailed financial overview of the fourth quarter and full year 2020 performance as well as our guidance outlook. JJ?
Thank you, Eilif. Let me cover first an overview of our performance, starting on Page 10. Revenue in the fourth quarter was $285 million, and adjusted EBITDA was $91 million. On a comparable basis and at constant currency, revenue for Q4 declined by 13% when compared to 2019 due primarily to lower enrollments, while adjusted EBITDA was only down 2%, thanks to cost reductions associated with our online service delivery. Moving now to full year 2020 results. Revenue for the year was $1.25 billion, and adjusted EBITDA was $206 million. On a comparable basis and at constant currency, our overall performance in 2020 resulted in a decrease in revenue by 9% versus prior year. Conversely, adjusted EBITDA was up 13%, showing continued margin expansion as a result of our large campus-related cost savings mostly in Peru, together with our $45 million G&A reduction at corporate.
Let me now provide some additional color on the performance of Mexico and Peru, starting with Page 13. Please note that all comparisons versus prior year are on an organic and constant currency basis. Let's start with Mexico where our main intake cycle was completed this past fall. New enrollment declined 5% overall. By modality, the dynamics were very different. There is no doubt that the pandemic helped accelerate the mix shift between traditional face-to-face program and our fully online offerings. As a result, online grew year-over-year 28%, while enrollment for our face-to-face program were down 17%. Total enrollment showed a similar trend overall and in terms of mix shift between online and face-to-face.
Revenue for the year was down 9% as a result of lower enrollment, combined with mix shift between online and face-to-face. By modality, average revenue per student was marginally up for online and down low single digits for face-to-face.
Finally, adjusted EBITDA was down 14% year-over-year, given the fixed nature of more than 40% of our cost base. On the other hand, the performance of our operations in Peru shows a lot more resiliency despite similar top line challenges as experienced in Mexico. New enrollment in Peru were down 9% versus prior year and impacted by the COVID pandemic. Total enrollment were down 12% as a result of lower new enrollments and higher attrition versus prior year levels.
Please note that we continue to experience different dynamics and performance by institutions. The enrollment of our value-priced institution, UPN in Peru, like UNITEC in Mexico, has been more affected than our premium brand, given that their target market is made up of students whose income has been disproportionately impacted by the pandemic.
Revenue for the full year in 2020 was down 7%, mostly as a result of the enrollment declines. Despite challenging top line dynamics, adjusted EBITDA in the fourth quarter and the full year were up 2% and 1%, respectively, which was impressive performance and reflect both institutions lean fixed cost structure.
Turning now to our corporate segment on Page 15. For the last 3 years, we have disproportionately reduced our level of corporate G&A as we have simplified our portfolio. 2020 saw an acceleration of that trend. We expect to complete the transformation of our corporate G&A over the next 12 to 15 months with the objective of maintaining a stewardship infrastructure consistent with the portfolio with operations in only 2 countries. We continue to believe that corporate G&A can be reduced further by 70% to 80% versus our average rate in 2020.
Before moving to guidance, let me now briefly discuss our balance sheet position illustrated on Page 16. As expected, the sale of our operations in Australia and New Zealand and to a lesser extent in Malaysia has allowed us to significantly reduce our debt leverage. As of year-end 2020, our net debt position was down $202 million. Additionally, the closing of the sale of Walden and our operation in Brazil and Honduras are expected to bring in an additional $1.95 billion in net proceeds. Finally, let me reaffirm that our plans continue to be to return excess liquidity to shareholders in the most tax-efficient way possible.
Let's now move to guidance starting on Page 18. 2021 will be a transition year for Laureate for 2 reasons. First, enrollments are expected to still be impacted by the pandemic, resulting in similar dynamics-wise segments as we experienced in 2020. Second, the reduction of our corporate G&A will occur throughout 2021, but mostly in the second half. We anticipate that by the end of 2021, the corporate G&A reduction will be largely completed, and the impact of the COVID pandemic will be mostly abated, allowing the company to return to growth at levels more in line with historical performance prior to 2020.
Page 20 gives a 3-year perspective of the transformation our business is going through, with adjusted EBITDA margin expected to jump to almost 26% by 2022. With that context in mind, let me now provide guidance for the next 2 years. For continuing operation in 2021, total enrollments are estimated to be approximately 337,000 students. Revenues are estimated to be between $1 billion and $1.04 billion, and adjusted EBITDA is estimated to be between $180 million and $190 million. Please note, this includes approximately $13 million of noncash charges related to the write-off of an immunifaction asset associated with the prior period acquisition.
For continuing operation in 2022, as noted still on Page 20, total enrollments are estimated to be approximately 350,000 students. Revenues are estimated to be $1.08 billion, and adjusted EBITDA is estimated to be $280 million. This represents a $95 million, a 51% increase in adjusted EBITDA year-over-year, mostly as a result of the $50 million corporate G&A reduction and the $32 million or 11% improvement in operation as illustrated on Page 21.
As Eilif alluded to on his opening remarks, the company strongly believes that Mexico and PRU represent attractive market opportunities long-term with low higher education participation rates and favorable dynamics for the private sector. Our track record of growing revenue and profit in these markets prior to the COVID pandemic was very strong as illustrated on Page 22. We expect to return to at least these dynamics when the pandemic is over.
More specifically, our current view is that starting in 2022, enrollments should grow about 5%; revenue should grow about 6%, reflecting the continued shift towards online; while adjusted EBITDA, thanks to operating leverage, should grow about 10%. We expect cash flow performance to increase and follow our margin progression. For 2021, excluding onetime items associated with the transformation and timing impacts from pending divestitures, we expect free cash flow to be consistent with 2020 levels. In short, we feel that the post-COVID future for Laureate remains bright.
Eilif, that concludes my remarks. Now back to you for the wrap-up.
Thank you, JJ. We look forward to the completion of our portfolio transformation during 2021. The business more or less proven to be resilient. We anticipate that the headwind from COVID will start to abate in the second half of this year, and that will position us well for the return to growth in 2022 and beyond. We remain committed to value creation for all our stakeholders.
Operator, that concludes our prepared remarks, and we are now happy to take any questions from the participants.
[Operator Instructions] We have a question from Matt Swope with Baird.
Could you -- I guess a couple of questions, please. Could you update us on what's happening with the Walden sale and the Department of Justice investigation there and whether that might unwind the sale? And then secondly, and associated, I think, how you were thinking about the takeout of your bonds? I know the call price on the bond steps down on May 1. Is that a point at which they could come out? Or do you need the Walden sale to close first? Any color would be appreciated.
This is Eilif. I'll take the first, and then I'll ask JJ to take the bond taker question. In terms of Walden, first and foremost, we are very proud of Walden University and the quality and rigor of the degrees offered at Walden. The outcomes at Walden are very strong, including our graduation rates. And as an example, a masters of science, of nursing program, it is the largest graduate program in the United States and our graduation rates are well over 80%. And also -- I also want to note that Walden is producing students with high outcomes that are getting good jobs and becoming leaders in their field. Vis-à-vis, the Department of Justice Investigation, Laureate received a notice on September 14 of the DOJ inquiry, and it related to Walden's master and nursing program.
Specifically, DOJ was interested in the compliance posture around the False Claims Act. Laureate has been fully cooperating with this Department of Justice inquiry. And specifically, we retained external counsel, which was Sidley, in this case, and we asked them to conduct a complete thorough review of the matter. That review was substantially completed at the end of last year with no evidence being found to support any allegations of misrepresentation.
So in conjunction with Sidley, we met with the Department of Justice to present our findings, and we are awaiting feedback. I'll pause there and see if there was any additional color or follow-up you wanted on the Department of Justice investigation.
Yes. No, that's very helpful color. And I believe there is a committee meeting in June that will sort of decide ultimately on this. Is that the timing that you see for this? Will this be resolved? I know you've been targeting second quarter -- or second half, probably in July for the asset sale close. Do you expect this to be resolved in June in order to let that close happen on time?
I think what you're referencing to the committee meeting in June is the HLC change of control approval process. That meeting is in late June or early July. And that's one of the regulatory hurdles we need to complete. And the application there has been submitted, and everything is on track to meet that requirement. In addition, the Department of Education needs to approve the change of control application, and that process is also progressing very well. And then, of course, we're looking forward to a resolution on the DOJ inquiry as well in advance of that time frame.
I see. So you would expect the DOJ part of that to be done before the HLC meeting and before the Department of Education has to make their decision?
It's very hard to project specific time lines as the investigation is ongoing. But we have -- as I said, we have concluded our internal investigation, and we shared that finding with the Department of Justice, and expect that they will come to a conclusion in this matter in a timely manner. But I don't want to be -- I can't make the representation around specific time parameters.
That's certainly fair. And in the worst case, could Adtalem actually break the deal and walk away from the transaction depending on how this turns out?
There are various conditions, presidents and reps to go over a transaction of this nature, as you know. But the [Audio Gap] cannot do laterally cancel the transaction. The deal does require the regulatory approvals that I just referenced. And upon the various regulatory approvals, but we have to achieve that, then the parties have a contractual obligation to move to close.
That's very helpful. And so that leads to my second part of the question. Do you need the Walden deal to close before you can retire the bonds?
I'll take that one, Matt. The answer is we don't need the Walden transactions, but we need either the Walden or the Brazil transactions to close. So right now, our current -- we haven't made a final determination, but should the Brazil transaction close in the first half of this year, then we would be in a position to retire the bonds.
And can you just remind us what your best guess is that the timing of the Brazil close?
We set the first half. That's what we've said externally.
[Operator Instructions] I'm showing no further questions at this time. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all disconnect.