While much of the discussion surrounding Laureate Education Inc. focuses on the differing market conditions in Mexico and Peru, with Mexico showing robust growth and Peru experiencing a slowdown, a deeper dive into the Q1 2024 earnings call transcript reveals a potential hidden gem – a possible quicker-than-expected turnaround in Peru.

Yes, Peru is navigating its first recession in over two decades. Yes, the political and weather-related challenges have put pressure on the Peruvian consumer, impacting Laureate's secondary intake in September. Yes, economists are projecting a recovery in the second half of 2024. But what if the signs of that recovery are already manifesting, hidden in plain sight within the data points of Laureate's performance?

Eilif Serck-Hanssen, Laureate's CEO, stated that the C1 intake, the main intake period in Peru, was expected to be "a little softer" due to economic conditions. However, he also noted that he expects the secondary intake in September to reflect a "more normalized economic environment." This phrasing suggests a belief that the recovery's impact will be felt *before* the second half of the year.

Adding weight to this hypothesis is the subtle but significant shift in language used to describe Peru's economic indicators. Serck-Hanssen mentioned "bottoming out" or "slight improvement" in key disposable income categories. This cautious optimism contrasts sharply with the pronouncements of a "recession" and "economic slowdown" used in previous discussions of Peru's economic situation.

Furthermore, Rick Buskirk, Laureate's CFO, attributed a portion of Peru's Q1 EBITDA decline to higher bad debt, a "lag effect" from the previous intake cycle. Importantly, he stated that this was "expected" and "reflected in the guidance." This suggests that Laureate anticipated a temporary bad debt spike, implying that the company believes the worst is already behind them.

Let's delve into the potential financial implications of this possible early Peruvian turnaround. Laureate's guidance for consolidated revenue growth in 2024 is 5% to 6% on a constant currency basis. This guidance acknowledges the current subdued performance in Peru. However, if Peru experiences a quicker rebound than anticipated, with a noticeable upswing in new enrollments during the secondary intake in September, this 5% to 6% growth could prove to be conservative.

Hypothetical Impact of Peru Enrollment Rebound

The following chart illustrates a potential scenario where a 10% rebound in new enrollments for the September intake in Peru leads to an additional $10-15 million in Q4 2024 revenue. This could push Laureate's consolidated revenue growth toward the high end of their guidance, or even beyond.

This scenario highlights the potential for a hidden upside in Laureate's outlook. While a quick recovery in Peru is not guaranteed, the subtle but significant shifts in language and the CFO's confident assertion that higher bad debt was "expected" suggest that Laureate sees a brighter picture for Peru than most analysts are currently acknowledging. This potential Peruvian renaissance, if it materializes, could have a significant impact on Laureate's financial performance in 2024, adding a layer of intrigue to an already compelling growth story.

"**Fun Fact:** Laureate Education was originally known as Sylvan Learning Systems, a company focused on tutoring and test preparation. It wasn't until 2004 that the company rebranded as Laureate Education, shifting its focus to higher education. This transformation highlights the company's dynamic and adaptable nature."