Adam Morse - SVP Corporate Finance & Treasurer Eilif Serck-Hanssen - Chief Executive Officer Jean-Jacques Charhon - EVP & CFO Ricardo Berckemeyer - President & COO

Jeffrey Silber - BMO Capital Markets Kevin Estok - Piper Jaffray Companies Shlomo Rosenbaum - Stifel, Nicolaus & Company Jeffrey Meuler - Robert W. Baird & Co. Christopher Howe - Barrington Research Associates Ryan Leonard - Barclays Bank Hamzah Mazari - Macquarie Research

Welcome to the First Quarter 2018 Laureate Education Incorporated Earnings Conference Call. My name is Sylvia, and I'll be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I would now turn the call over to Adam Morse, Senior Vice President. Mr. Morse, you may begin.

Thank you, Operator. Hello, everyone, and thank you for joining us on today's call to discuss Laureate Education's first quarter 2018 results. Joining me on the call today are Eilif Serck-Hanssen, Chief Executive Officer; Ricardo Berckemeyer, Chief Operating Officer and President; JJ Charhon, Chief Financial Officer; and Victoria Silbey, Chief Legal 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 on 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 meanings 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, our Form 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 adjusted EBITDA, are also detailed and reconciled to their GAAP counterparts in our press release and included in our Form 10-Q filed with the SEC. With that, let me turn the call over to Eilif for opening remarks. Eilif Serck-Hanssen: Thank you, Adam, and thanks to everyone on the line for joining us on today's earnings call. Having just completed our large enrollment intake and closed the first quarter, I am very pleased to report that 2018 is off to a strong start. Our first quarter results were ahead of our guidance, and we are delivering on our commitments to our investors and our internal plans. This enrollment cycle, which run through April and accounts for approximately 45% of the total year's intake activity, was robust, with new enrollments increasing 5%, with strong growth in Brazil, continued progress at Walden, which is now back to positive new enrollment growth, and solid results in most of our other key markets. I am very enthusiastic about the progress we are making on our accelerated plan and initiatives designed to simplify our business, mitigate risks, improve margins, strengthen our balance sheet and improve free cash flow generation. During the quarter and through the month of April, we closed the previously announced asset sales for institutions in Italy, Cyprus, China, Morocco and Germany, and we expect Malaysia to close shortly. These transactions, combined with a strong operating performance, are expected to cause our net debt leverage ratio to reach 2.7x by the end of 2018. More recently, we announced the additional asset sale of University of St. Augustine, the doctorate level, physical therapy school in United States for $400 million with an implied valuation of approximately 12x EBITDA. Once closed, this transaction will further simplify our operations and allow for potential further debt reductions. Our EiP and margin expansion initiatives continue to track according to plan with the implementation of our common operating model in Brazil and Peru going very well, and already starting to deliver margin gains and improved product experiences for our students in those markets. This is a key initiative for the company in terms of increasing our free cash flow generation, while maintaining our innovation leadership. I'm delighted by the growth prospects throughout the network. Health Sciences is a key center of expertise for Laureate. And we have some exciting developments on that front, including the opening of two new medical schools in the interior of São Paulo, Brazil, both of which are expected to start enrolling students during the second half of this year. We also recently received approval to open a new veterinary school in Monterrey, Mexico. And in Honduras, we welcomed the first cohort of students into our technical vocational nursing program, the first of its kind in the country. There's a lot of good progress on expansion activities around the Laureate network. Quality and student outcomes are the center of everything we do. I want to take a moment to recognize our UVM Institution in Mexico, which recently received the prestigious recognition as the institution with the most academic programs rated as excellent in that country. 189 programs in all, surpassing Tec de Monterrey, the highly regarded elite institution, which frequently held the top slot in prior years. This is a powerful testament that the Laureate network enables excellence and scale to go hand in hand. I also want to provide an important update on recent developments in Chile. The constitutional court has determined that for-profit institutions, like Laureate, will continue to be permitted to control universities in Chile. With this clarity provided by the constitutional court, Laureate will continue our commitment to the success of our students that we serve in this important market. Moreover, we will maintain accounting consolidation of our network institutions in Chile, and thus, are updating our full year 2018 guidance to reflect this favorable event. Our strong brands and unparalleled product innovation in Chile have resulted in strong student outcomes, and we look forward to moving ahead with a much clearer regulatory framework in this country. The first quarter was a strong start to the year with solid operating results throughout the network, significantly improved regulatory conditions, a return to new enrollment growth at Walden during this quarter, and continued progress on many key initiatives. We are well positioned to deliver on our commitments during 2018. Now let me turn it over to JJ for the financial overview for the quarter. Jean-Jacques Charhon: Thank you, Eilif. Before running through the financial results, I want to remind everyone of the seasonality in our business, which for reference, is illustrated on a couple of slides in the Appendix of the slide deck. As most of you know, the first and third quarters represents our two largest intake periods, which account for approximately 80% of total new enrollment activity for the year that are seasonally low from a P&L perspective as classes are out of session for most of those months. Conversely, the second and fourth quarters generate the majority of the revenue and adjusted EBITDA for the year, but are not large enrollment-intake periods. The first quarter we are reporting today covers a large intake period that typically represents about 45% of our new enrollment activity for the year. With that context, let me run you through the highlights starting on Page 6. Revenue in the first quarter of 2018 was $885 million, a 3% increase compared to the first quarter of 2017. On a reported basis, adjusted EBITDA was $47 million, so essentially flat versus the same period a year ago. However, when adjusting for the sale of our institutions in Italy, China and Cyprus, which all closed during the first quarter, our adjusted EBITDA on a constant currency basis was up 16% year-over-year. This is about $10 million better than the guidance we provided during our 2017 fourth quarter earnings call in early March and is due mostly to the rephasing of expenses originally anticipated to occur in Q1. In short, a very good start to the year. Now let me spend a few minutes discussing in more detail our key operating metrics for the first quarter starting on Page 7. As a reminder, the new enrollment activity in the first quarter represents the largest intake for institution in our southern hemisphere geographies, namely Brazil, Peru, Chile and Australia. On the other hand, all northern hemisphere markets have smaller intakes during the first quarter. For them, their largest intake will occur in the fall. Lastly, for Online & Partnerships segments, their intake is more evenly distributed across the year. This year, our first intake cycle ran through the month of April, so I'm going to focus on the April year-to-date enrollment performance, which is outlined on Page 8. For the total company, we grew new enrollment 5% for the period as compared to prior year, which was in line with our expectations. Now our few highlights. Brazil continues to perform very well for us. Our Distance Learning business grew new enrollments by 80% versus the same period a year ago. New enrollment for our face-to-face business was approximately up 2%, with strong growth of 10% in payers, partially offset by further reduction in FIES-related enrollments, which now accounts for only about 1% of our intake activity. In Mexico, our performance was mixed, during a more challenging economic environment associated with eroding consumer confidence ahead of the presidential election. We did, however, experience strong new enrollment growth in our UNITEC brands, which was largely offset by weaker performance of our premier institution, UVM. These opposing dynamics reflects, in our view, the benefits of our portfolio approach in markets like Mexico, making our top line more resilient to downturns of economic cycles. The Andean & Iberian segment continues to deliver strong performance, mostly led by continued growth in Peru. In the EMEAA, our business in Australia is doing very well with 15% growth in new enrollments. Finally, Online & Partnerships new enrollments were slightly down for the intake period because of our planned declines in our partnership business as we transition away from lower revenue and margin-producing students in that segment. We continue to be encouraged by our progress at Walden where new enrollment growth was positive for the first time since Q2 of last year. Although, we still have work to further strengthen this business, I would like to congratulate Paula Singer and her leadership team for returning Walden back to growth this quarter. Now let's move to our revenue and adjusted EBITDA results, which you will find on Page 10. On a comparable basis, our first quarter revenue was up 3% versus the same period a year ago. Our campus-based operation delivered mid-single digit growth, thanks to positive dynamics in most of our key markets. As indicated already, adjusted EBITDA was up 16% on a comparable basis, reflecting margin improvement across most of our segments as well as the benefit associated with changes in our academic calendar. Of specific note, our operating model implementation in Brazil is exceeding expectations. This is great news and helpful, given the challenging pricing dynamic in that market following the continued reduction of the FIES program. As you can see, our adjusted EBITDA for our Online & Partnership segment is down 17% year-over-year because of 2 factors. First, the weak-intake period from last September, which caused a lower-student base in the first quarter as compared to 2017. Second, increased marketing expenses for supporting the increase of new enrollments. Now let me briefly discuss the net income and cash flow results for the quarter starting on Page 11. Net income for the quarter was up almost $300 million versus a year ago, thanks to the gain on the sale of our businesses in Italy, Cyprus and China. Please also note our 35% reduction in interest expense, which is the result of our lower debt levels and reduced cost of debt. Moving now to cash flow for the quarter, which you will find on Page 12. Free cash flow for the quarter was up $22 million from prior year, thanks to a $78 million reduction in interest paid during the quarter. Also worth noting is the difference in our working capital change for the period versus 2017. This was mostly the result of the change in timing of our FIES receipt in Brazil. Adjusted to timing, working capital continues to be a low percentage of our net operating assets. In regard to our capital structure, let me remind you that on April 23, the company filed a Shelf Registration Statement to convert all of our outstanding Series A preferred equity into 36.1 million Class A common shares, and in the process, significantly simplified our capital structure as well as eliminated the preferred dividend obligation going forward. As a result, the company now has approximately 224 million total shares outstanding. Before moving to guidance, let me provide you with a little bit more detail on Chile as noted on Page 14. As most of you know from our 8-K filing issued on March 27, the Chilean Constitutional Court declared unconstitutional, the provision of the new law, often referred to as Article 63, which would have prohibited for-profit organizations like Laureate from controlling universities. The Constitutional Court affirmed that decision on April 26 as part of its review of all articles of the new law. This means, among other things, that all conditions required for the financial consolidation of our universities in Chile continued to be met. With that in mind, let me now walk you through our full year and second quarter guidance, which you will find on Page 16. Given the new development in Chile, the full year guidance for revenue and adjusted EBITDA have been increased by approximately $400 million and $50 million, respectively. Please note that the increase in adjusted EBITDA also includes a $15 million unfavorable impact associated with the recent strengthening of the U.S. dollar against most of our functional currencies outside of the U.S. It also includes, for clarity, the financial impact associated with the stub period of our announced divestitures. On a comparable basis, the organic growth rates for all 3 operating metrics remain unchanged when compared to our prior guidance, but the absolute amounts are, as expected, materially higher. Total enrollments for 2018 are now expected to end the year between 1,025,000 and 1,030,000 students. Revenue for 2018, based on current spot FX rates, is expected to be between $4,260,000,000 and $4,300,000,000. Adjusted EBITDA for 2018, based on the same set of current spot FX rates is expect to be now between $810 million and $820 million. The guidance previously provided for CapEx, interest, tax rate and cash flow remain also unchanged. Now let's move to the second quarter. A couple of context setting comments. This year, the phasing of our marketing expenses in Mexico and Walden have been more heavily weighted towards the first half, and will continue to affect adjusted EBITDA in the second quarter. Also included in our full year guidance is the expected improvement of our revenue performance in the second half for these two markets. These dynamics will translate into having most of our earnings growth in the second half of the year. With that in mind, our guidance for the second quarter is as follows, revenue is expected to be between $1,230,000,000 and $1,270,000,000; adjusted EBITDA is expected to be between $335 million and $355 million. Let me now turn it over to Eilif for the wrap-up. Eilif Serck-Hanssen: Thank you, JJ. I am extremely proud of what the Laureate management team has accomplished since our IPO only 15 months ago. We have strengthened management with a new CFO, a new General Counsel a new Chief Information Officer and most recently, a new Chief Human Resource Officer. We welcome these individuals into the Laureate leadership team. Further, company veterans, such as Ricardo Berckemeyer and Paula Singer, have also assumed important new roles. Our debt levels have been reduced dramatically, and we have simplified the company and cut expenses. Regulatory overhang has been significantly reduced, and I'm delighted with the robust student intake during the first quarter, which has set us up for a solid 2018 on an organic basis. We head into the second quarter with our priorities well-defined. We are focusing on a further simplified operating model, strong execution and operational excellence, all of which we believe will create a more scalable organization with significantly improved free cash flow conversion. We are executing on our plans and delivering on our commitments to investors. I am very confident and excited about the future of what this great company can and will accomplish. Operator, that concludes our prepared remarks, and we are now happy to take questions.

[Operator Instructions]. And our first question comes from Jeff Silber from BMO Capital Markets.

Just wanted to first start with Chile. Is this the end of this issue? Are there going to be appeals? Or what you are telling us now is basically what's going to last? Eilif Serck-Hanssen: Jeff, this is Eilif. The Constitutional Court ruling as we shared with you have provided some significant clarity, specifically, private for-profit organizations like Laureate are now permitted to control universities, which then supports our consolidation. The Constitutional Court ruling is final and any changes to that will require a change in the Constitution.

Okay, great. That's helpful. And then on Brazil, I know this is probably a relatively minor issue, but one of the other companies in the space talked about financial processing delays, and this is small percentage of what you do. Did you see any of that? Is that something that's going to be impacting you going forward?

This is Ricardo Berckemeyer. We saw a delay in the processing of FIES throughout the cycle. It was extremely, extremely delayed. When the government released the actual contracts of FIES that had been approved, there was really no time to enroll those students. Our exposure to FIES is really minimal now and there is a potential that the situation could be reversed for the second cycle, but we are not counting on it.

Okay, great. And then JJ, I think you had used the words about a phasing in of expenses, I guess, in the first quarter, maybe the first half. Can you give us a little bit more color what type of expenses are you talking about? And are there specific segments that are impacted more than others? Jean-Jacques Charhon: Sure. Well, it's across the board in terms of discretionary expenses. I think based on priorities and the focus on really supporting the enrollment intake, I think decisions were made to really, the first, to start up some of these initiatives towards the second part of the year. And it impacts, I think, equally most of the segments this was a company-wide effort.

Okay. And then just 1 quick question on the updated guidance. I just want to double check. This does include the potential divestitures of both Malaysia and St. Augustine, is that correct?? And number 2, roughly when are those expected to occur? Jean-Jacques Charhon: Yes, it does. So I think we updated the guidance to reflect really three elements. First of all, the impact of Chile. The stub here that associates with really the announced divestitures, either the ones that are not closed or the ones that have been signed as well as some revised outlook on FX rates. We expect it to be around May. And then for U.S.A, University of St. Augustine, we expect to hold on to the assets for most of the year. Right now, the expected timing for closing is November.

Our following question comes from Peter Appert from Piper Jaffray.

This is Kevin Estok on for Peter Appert. Congratulations on the great quarter. My first question has to do with margins. So you gave some color for 2018, I think, but I guess I'm wondering how we should look at margins beyond 2018 and what's your comfort in delivering that margin growth? Jean-Jacques Charhon: Yes, thanks for the question. This is JJ speaking. Really, our outlook for 2018 and the remaining two years are really no different than what we presented at Investor Day, which basically would translate into roughly about 70 basis points increase per year for the next three years. So another, two points or 200 basis points versus where we closed 2017. And then we also provided similar guidance around unlevered cash flow for those 3 years, but didn't provide any phasing.

The second question I had has to do without growth opportunities. And I guess I'm wondering what markets you guys are most like to be in that you are not currently in? And I guess where you see some of biggest growth opportunities? Eilif Serck-Hanssen: Kevin, this is Eilif. In terms of growth, we are seeing a robust organic growth across the network. Near-term growth is going to be focused on organic and for us to get really to scale in markets where we already have a strong footprint. So we are excited about the prospect of our brand, UNITEC in Mexico, for example, which is now largely a Mexico City operation with opportunities to rapidly grow outside Mexico City. Similarly, in Peru, all of our 3 brands are largely a Lima operation- opportunities outside. Lots of white space still for us in Brazil. The interior, I shared with you, we are opening 2 new medical schools, and with that, a full traditional university operation would be coming behind those 2 institutions. So strong organic growth really in some of our core markets. As you know, we typically enter new markets through M&A. And for the next 12 to 18 months, our focus will be, continue to strengthen our balance sheet, continue to get scale in the markets where we have a strong presence already. So minimal M&A activity in the near to medium term.

Following question comes from Shlomo Rosenbaum from Stifel.

Elif, can you give us a little update on Turkey. There seem to have been in the 10-Q, some approval of some payments to subsidiary, but then a disallowance and the company had to reimburse BILGI for some payments. What's going on over there? And what's the -- is there a line of sight to some resolution? Or is just going to hang out there for a while? Eilif Serck-Hanssen: Great. Thank you, Shlomo, for that questions. As you may recall, we are presuming two paths to resolve our regulatory situation in Turkey. First and foremost, we are pursuing all rights through the administrative court system. But as you can imagine, that's a relatively lengthy process. So in parallel, we are having bilateral conversations with the regulator, and I am very encouraged by the progress that we are making with -- in these discussions. It has enabled us, as we indicated, in the filing to now be in good standing with the regulator. We still have the ability to continue to discuss and challenge some of the limitations on our contract arrangements. But as of today, we are in a good standing. And when we get the full clarity on which contracts are permitted and which contracts -- which contractual arrangement needs to be restructured or repurposed, we will share that information with you. But we are very focused on working on these in a productive manner with the regulator.

Okay. And then, JJ, would guidance have been raised if Chile was still to be deconsolidated? In other words, is it really strictly because of Chile coming back in? Jean-Jacques Charhon: So the short answer is we would have included the stuff here just for facility purposes. It would have been a minor adjustment to the guidance, but the majority of the guidance is strictly associated with Chile.

Okay. And then if you're increasing the EBITDA and -- why is the free cash flow guidance remain the same? I mean, is it not translating to cash over there? Jean-Jacques Charhon: So as you may have noticed, there were really two elements that we factored into our revised guidance. The first one was FX. The second one is that we basically, for really cash management purposes, decided to pay down upfront an assessment -- tax assessment that we have in Europe. This tax assessment was actually secured through a collateral as LC of roughly $39 million, and we thought it would be better to really pay down $35 million, which is actually a lower number and avoid the penalty and the interests that were still accruing. So that is the second element that really impacted there. Obviously, a number of moving pieces associated with cash flow, but I think we're still looking at a major turnaround of our cash flow performance between '17 and '18 as reflected by guidance. Eilif Serck-Hanssen: Let me just add to that. So this is more of a geography issue within the cash flow statement. So we paid a deposit on the disputed tax amount of $35 million and then we got $39 million of cash collateralized funds in return. So from a liquidity perspective, this was net $4 million better for us. But in the free cash flow calculation, the tax payment gets netted in there, while the receipt of the $39 million from the cash collateralized LC is not. So it is purely geography issue.

So really, it would have gone up by, say, the $35 million or so, but it's just the mechanics of how it's working to the system? Jean-Jacques Charhon: Yes, more or less. There's obviously puts and takes versus one we've provided the guidance, but that's the right way to think about it.

Okay. And then would net leverage after St. Augustine go down materially, it seemed like, from the slide that the 2.7x is not factoring in the divestiture and repurposing the proceeds for debt reduction? Jean-Jacques Charhon: So at this point in time, we haven't finalized the way we're going to be using the proceeds associated with the sale of U.S.A. University of St. Augustine Our priorities remains the same, which is to first support the business; second, really deleverage the business and de-risk the balance sheet and then eventually do some additional investments. So there is potential, of course, to bring that leverage ratio further down by above 40 basis points, which... Eilif Serck-Hanssen: 0.4x of a turn. Jean-Jacques Charhon: 0.4x of a turn, so that we could go as low as 2.3x point rate, but at this point in time, we're not committing to it. Eilif Serck-Hanssen: That transaction is not closing into November. So between now and November, we will analyze the use of proceeds and then we'll get back to you with more specific guidance. But clearly, even strengthening our balance sheet and reducing debt is one of our key pillars in our transformation plan.

Great. And then just final question, is there a chart or somewhere where we could use for pro forma numbers for '18 in order to model '19 with all the various divestitures and the impacts? Jean-Jacques Charhon: Yes, there is a schedule that we've now provided in 10-Q that looks at basically the trailing 5 quarters associated with all these divestitures and the impact on the operating metrics. We can obviously continue to update them with future filings, so we had committed to provide that in the last earnings call and now you should find that in the 10-Q. On Page 62, to be precise.

And following question comes from Jeff Meuler from RW Baird.

Yes, it's maybe on Page 62, but what is the assumed contribution to 2018 guidance, both revenue and EBITDA, from the stub period from all of the divestitures, including St. Augustine? Just trying to re-baseline for -- as we think about 2019. Jean-Jacques Charhon: Sure. So let me, first of all, give you kind of the part that is really materially changing the guidance versus when we provided it at Investor Day, and the impact on revenue is about $70 million and the impact on adjusted EBITDA is about $10 million. And then for U.S.A. University of St. Augustine, as you know, we could be missing only 1 month. So it's really not a major driver in the change of the guidance.

Right. I'm just trying to think about what the 2018 like-for-like baseline revenue and EBITDA is that you are going to grow off of this as we think about modeling 2019? Jean-Jacques Charhon: Yes, absolutely. We've provided really all the additional details on Page 19 of the earnings package. So you'll find there the breakdown between the pending divestitures and the completed divestitures. But for the pending divestitures, it's about $118 million of revenue and $33 million of adjusted EBITDA.

Okay. And then in Brazil, just obviously a big shift between face-to-face and Distance Learning. I'm guessing some of that is expanding the market, some of that is just student preference. But I guess any comments on that in terms of how much face-to-face is being impacted by the student preference for Distance Learning? And then at scale, what's the margin differential? I know you have big ambitions for Brazil margins, but how do you think about Distance Learning margins at scale? Eilif Serck-Hanssen: So this is Eilif. In face-to-face, we grew 10% -- sorry, face-to-face grew 10% on payers, 2% on a combined. And on Distance Learning, we grew 80-plus percent, 88% I believe, but from a much smaller base. So we are very encouraged by the momentum that we're getting on in our Distance Learning business, but it is a much smaller part of our business. What we are excited about is the new regulatory environment on the -- for Distance Learning, which enables us with very strong brands to go nationwide in the DL segment. That's a very, very exciting business for us. Given the structure of Distance Learning, it is asset-light model. The margin profile is relatively strong, and we believe that we are going to get a margin profile on that business above our average in that market. And then Brazil, in the face-to-face market, we are implementing, what we call the common operating model as we speak, which is going to take our margin profile in Brazil from the teens to the mid-20s over the next couple of years on the face-to-face business. So that's how we are thinking about the growth and the margin profile of those 2 businesses.

Okay. And I know FIES, exposure FIES are relatively small, but do you have an estimate of what the new enrollment impact was this quarter due to the FIES delays?

Yes. Last year in the first quarter, we had 3,500 FIES contracts. This year, we had 900.

And following question comes from Alex Paris from Barrington Research.

This is Chris Howe sitting in for Alex Paris. My first question was just in regards to the Accelerator Plan. Just curious if there are other niche markets that are currently being considered and what the outlook is for that and the current state beyond what you currently shared. And my second question was in regard to the health sciences. Perhaps you can comment on the health sciences outlook moving forward. These specific 2 new medical schools, what kind of a contributor to enrollments could they be and the positive outlook there is within the health sciences as part of the mix. Eilif Serck-Hanssen: Sure. Starting with the Accelerator Plan, the heavy lifting has been now done and essentially completed for the Accelerator Plan. We have 1 other market that we are negotiating for sale. It's a small market for us and that then will conclude the original Accelerator Plan divestiture. However, as you will recall from our January 31 Investor Presentation, we are committing to undertake regular portfolio reviews, and we laid out presentation on January 31 as a framework from which we will be using on an ongoing basis to assess the composition of our portfolio. So I'll pause there for a second, and see does that address your Accelerator Plan question?

Yes, that does. Eilif Serck-Hanssen: Great. Then I'm going to ask Ricardo to address your health sciences strategy and outlook.

Health sciences continues to be a very strong vertical for us. It's the largest vertical, very profitable one, very high tuition and high-quality as well with great outcomes, low attrition and great persistence, employability, et cetera. In the case of the medical schools in Brazil, we want these 2 licenses in interior of São Paolo. Initially, we will only launch in the C2 this year the medical degree, Human Medicine only. So around 200 to 250 enrollments. But soon after that, the license allows us to go with full-fledged portfolio and scope. So on maturity, those campuses should be around 4,000 to 6,000 students each.

Our following question comes from Manav Patnaik from Barclays.

This is Ryan filling in for Manav. Just going back to the Chile, I understand that the court ruled on it, and I guess, just to make sure we don't go down the similar path. I mean, is there a chance that there's a slight tweak in the language of the underlying law that could then be put back in front of Congress or anything like that? Just want to make sure it's not something that can come back on the table at some point. Eilif Serck-Hanssen: The legislators can, of course, at any time propose new changes to the laws, but then you will go through a new legislative process. Right now, we have a Higher Education Law that is in place, which is the old law. Then there was a new law that has been developed and drafted by both of the Houses and signed up by both Houses of the parliament. Then the Constitutional Court has renewed Article 63, so now it's up to the President to either sign new law as amended by the Constitutional Court or send something back to Congress for new process, which I haven't heard, it's on the agenda, but of course, it's his prerogative. Or the old law as that is currently in effect, will remain in effect. So those are the 3 options that are on the table.

Got it. Okay, so there'll be a long runway of time before another legislative event would have an impact on Chile on operation? Eilif Serck-Hanssen: We don't know. I haven't even heard about any suggestions of a new process, so I can't comment on that.

Okay, fair enough. And then on Brazil, in the Distance Learning, obviously, regulatory changes. There has been a lot of growth in that. Is that, what are the competitive advantages there? Does your brand name help you versus some of the other big players in the market? Or is it more geography based? Can you help us understand the opportunity there?

Yes. In the first two years, we've increased tremendously our distribution network in the DL side of the business. We have now over 400 polos. We are in the process of concentrating solely on scaling the business. The success we're having and that 85% growth rate is due to our management's ability to execute, but backed by very, very strong brands in very important markets, okay. I believe that in Brazil, Laureate has one of the best portfolios of universities in the country, and those brands are very appealing to the students to the future prospects. Eilif Serck-Hanssen: I would also add to that, that the institutions in Brazil, as part of the Laureate network, are positioned higher up in the social economic pyramid. High focus on health sciences. These are full-fledged universities as opposed to faculdades. And I think that positioning is serving us well, particularly when we are relying on, predominantly private pay.

Got it. And just on the -- some of the divestitures, was St. Augustine one that was identified early on? Or was it more opportunistic? And I guess, yes, as you look at the portfolio today, do you feel pretty good that we're -- all of the identified schools in most of the targets for divestiture completed? Or is this something that could be ongoing? Eilif Serck-Hanssen: So St. Augustine was not part of the initial Accelerator Plan. St. Augustine is a great asset. It's a very U.S.-centric asset and it has very specific state licensing associated with it, which makes it very hard to incorporate that institution into our global network. So again, going back to, I think, Page 28 on our January 31 Investor Day presentation where we laid out the core principles for our portfolio review, we found that University of St. Augustine doesn't really integrate with the rest of the network in the way that our other traditional member universities engage with each other in terms of faculty exchange, student exchange, common curriculum, dual degrees. All of those differentiators, we find didn't really lend itself to St. Augustine. And, hence, we decided to start the process and signed a definite SPA a couple of weeks ago for that asset.

And then going forward, I mean, similarly, you're just going to be doing this type of analysis ongoing and well, obviously, see if anything comes out of it? Eilif Serck-Hanssen: We would always, as part of our annual planning process, we will make sure that we have the right assets in the right markets with the right products. But clearly, the heavy lifting of the Accelerator Plan is behind us, but we will continue, like most organizations do on a regular basis, to re-underwrite our portfolio on a timely basis.

Our following question comes from Hamzah Mazari from Macquarie Capital.

The first question is just, and you may have touched on this, is just on the partnership side. I know you referenced sort of Walden returning to growth. But on the partnership side, could you just maybe frame for us how long is the process to get higher-margin volume? And then maybe just touch on sort of the de-emphasis of International partnerships, what does that mean? Is partnerships just less of a focus in the portfolio going forward? Eilif Serck-Hanssen: So we found, again, similar to the portfolio review that we have partnerships that didn't yield the results that we had hoped for. So we're now refocusing around some very core partnerships. So Liverpool University, very important partner for us and it's going to be core. It remains in an important segment of our business. But some of the other brands that we had relationship with, we are either exiting or de-emphasizing or focusing more on a specific area. And similarly, Walden, which is a great U.S. brand, we are focusing more of those efforts as well domestically, where it has a great brand, great reputation and a much better infrastructure to win in that market versus internationally. So we're just refocusing all of our online brands in the markets where we think that they have a right to win.

Great. And just a follow-up question. You touched on Chile. We touched on Brazil, specifically the FIES funding. Is there anything else, as you look longer term, I know there is low visibility, but anything else from a regulatory perspective in any of your markets that you are sort of paying attention to or that investors should pay attention to, either positive or negative impact? Or is it sort of nothing on the horizon? Eilif Serck-Hanssen: Shlomo mentioned earlier -- or asked earlier about Turkey, and that is a very core market for us where we are focusing on addressing the regulatory environment. But that's that. I think we have a well-diversified portfolio and very constructive regulatory environment.

We have no further questions. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. Eilif Serck-Hanssen: Thanks.