LAUREATE EDUCATION, INC. 10-K

laur-20201231 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31 , 2020 OR ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________. Commission File Number: 001-38002 Laureate Education, Inc. (Exact name of registrant as specified in its charter) Delaware 52-1492296 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 650 S. Exeter Street, Baltimore, Maryland 21202 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (410) 843-6100 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Trading Symbol(s) Name of each exchange on which registered Class A common stock, par value $0.004 per share LAUR The NASDAQ Stock Market LLC Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of June 30, 2020, (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the Class A common stock held by non-affiliates of the registrant was $ 1.119 billion (based on the closing price of the registrant's Class A common stock on that date as reported on the Nasdaq Global Select Market). Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at February 12, 2021 Class A common stock, par value $0.004 per share 108,169,831 shares Class B common stock, par value $0.004 per share 90,790,449 shares Documents Incorporated by Reference The registrant incorporates by reference its definitive proxy statement with respect to its 2021 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of its fiscal year, into Part III of this Annual Report on Form 10‑K. Index Page No. Part I 6 Item 1. Business 6 Item 1A. Risk Factors 31 Item 1B. Unresolved Staff Comments 55 Item 2. Properties 56 Item 3. Legal Proceedings 56 Item 4. Mine Safety Disclosures 57 Part II 58 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 58 Item 6. Selected Financial Data 59 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 60 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 91 Item 8. Financial Statements 92 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 163 Item 9A. Controls and Procedures 163 Item 9B. Other Information 163 Part III 164 Item 10. Directors, Executive Officers and Corporate Governance 164 Item 11. Executive Compensation 166 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 166 Item 13. Certain Relationships and Related Transactions, and Director Independence 166 Item 14. Principal Accountant Fees and Services 166 Part IV 167 Item 15. Exhibits and Financial Statement Schedules 167 Item 16. Form 10-K Summary 171 Signatures 172 As used in this Annual Report on Form 10‑K (this “Form 10‑K”), unless otherwise stated or the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “Laureate” and similar references refer collectively to Laureate Education, Inc. and its subsidiaries. 1 Trademarks and Tradenames LAUREATE, LAUREATE INTERNATIONAL UNIVERSITIES and the leaf symbol are trademarks of Laureate Education, Inc. in the United States and other countries. This Form 10‑K also includes other trademarks of Laureate and trademarks of other persons, which are properties of their respective owners. Industry and Market Data We obtained the industry, market and competitive position data used throughout this Form 10‑K from our own internal estimates and research, as well as from industry publications and research, surveys and studies conducted by third‑party sources. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified industry, market and competitive position data from third‑party sources. While we believe that our internal business estimates and research are reliable and the market definitions are appropriate, neither such estimates or research nor these definitions have been verified by any independent source. Forward‑Looking Statements This Form 10‑K contains “forward‑looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. You can identify forward‑looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or similar expressions that concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results, and all statements we make relating to (i) our exploration of strategic alternatives and potential future plans, strategies or transactions that may be identified, explored or implemented as a result of such review process, (ii) our planned divestitures, the expected proceeds generated therefrom, the expected reduction in revenue resulting therefrom and any resulting litigation or dispute therewith, and (iii) the potential impact of the COVID-19 pandemic on our business or the global economy as a whole, are forward‑looking statements. In addition, we, through our senior management, from time to time make forward‑looking public statements concerning our expected future operations and performance and other developments. All of these forward‑looking statements are subject to risks and uncertainties that may change at any time, including, with respect to our exploration of strategic alternatives, risks and uncertainties as to the terms, timing, structure, benefits and costs of any divestiture or separation transaction and whether one will be consummated at all, and the impact of any divestiture or separation transaction on our remaining businesses. Accordingly, our actual results may differ materially from those we expected. We derive most of our forward‑looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward‑looking statements included in this Form 10‑K, are disclosed under various sections throughout this Form 10‑K, including, but not limited to, Item 1—Business, Item 1A—Risk Factors, and Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations. All subsequent written and oral forward‑looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the factors discussed in this Form 10‑K. Some of the factors that we believe could affect our results include: • the risks associated with operating our portfolio of degree-granting higher education institutions in Mexico and Peru, including complex business, foreign currency, political, legal, regulatory, tax and economic risks; • our ability to maintain and, subsequently, increase tuition rates and student enrollments in our institutions; • our ability to successfully complete previously announced divestitures; • the risks associated with our exploration of strategic alternatives, including possible disruption to our ongoing businesses and increased transaction-related expenses; • the risks and uncertainties related to the long-term effect to the Company of the COVID-19 pandemic and its resurgence, including, but not limited to, its effect on student enrollment, tuition pricing, and collections in future periods; • our ability to effectively manage the growth of our business and increase our operating leverage; 2 • the effect of existing international and U.S. laws and regulations governing our business or changes to those laws and regulations or in their application to our business; • changes in the political, economic and business climate in the markets in which we operate; • risks of downturns in general economic conditions and in the educational services and education technology industries that could, among other things, impair our goodwill and intangible assets; • possible increased competition from other educational service providers; • market acceptance of new service offerings by us or our competitors and our ability to predict and respond to changes in the markets for our educational services; • the effect on our business and results of operations from fluctuations in the value of foreign currencies; • our ability to attract and retain key personnel; • the fluctuations in revenues due to seasonality; • our ability to maintain proper and effective internal controls necessary to produce accurate financial statements on a timely basis; • our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance; and • the future trading prices of our Class A common stock and the impact of any securities analysts’ reports on these prices We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward‑looking statements contained in this Form 10‑K may not in fact occur. We undertake no obligation to publicly update or revise any forward‑looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Summary of Risk Factors The following is only a summary of the principal risks that may materially adversely affect our business, financial condition, results of operations and cash flows. The following should be read in conjunction with the more complete discussion of the risk factors that we face, which are set forth in this “Item 1A. Risk Factors” under the caption “Risk Factors.” Material risks that may adversely affect our business, financial condition, results of operations and cash flows include, but are not limited to, the following: Risks Relating to Our Business • We operate a portfolio of degree-granting higher education institutions in Mexico and Peru and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address. • If we cannot maintain student enrollments in our institutions and maintain tuition levels, our results of operations may be materially adversely affected. • Our exploration of strategic alternatives and our activities related to previously announced divestitures may disrupt our ongoing businesses, result in increased expenses and present certain risks to the Company. • An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations. • Our success depends substantially on the value of the local brands of each of our institutions and the Laureate International Universities network brand, each of which may be materially adversely affected by changes in current and prospective students’ perception of our reputation and the use of social media. • Our reputation may be negatively influenced by the actions of other for-profit and private institutions. • Growing our online academic programs could be difficult for us. 3 • Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students. • If we do not effectively manage our growth and business, our results of operations may be materially adversely affected. • Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations. • The higher education market is very competitive, and we may not be able to compete effectively. Risks Relating to Walden University, which is included in our Discontinued Operations, and the Highly Regulated Higher Education Industry in the United States • Failure of Walden University to comply with extensive regulatory requirements could result in significant monetary liabilities, fines and penalties, restrictions on our operations, limitations on our growth, or loss of access to federal student loans and grants for our students, on which we are substantially dependent. • If any of the U.S. education regulatory agencies or commissions that regulate us do not approve or delay any required approvals of transactions involving a change of control, our ability to operate or participate in Title IV programs may be impaired. • Congress may revise the laws governing Title IV programs or reduce funding for those and other student financial assistance programs, and the U.S. Department of Education (“DOE”) may revise its regulations administering Title IV programs, any of which could reduce our enrollment and revenues and increase costs of operations. • The DOE has adopted regulations governing federal student loan debt forgiveness that could result in liability for amounts based on borrower defenses or affect the DOE’s assessment of our institutional capability. • Walden University must periodically seek recertification to participate in Title IV programs, and, if the DOE does not recertify the institution to continue participating in Title IV programs, our students would lose their access to Title IV program funds, or the institution could be recertified but required to accept significant limitations as a condition of continued participation in Title IV programs. • Walden University would lose its ability to participate in Title IV programs if it fails to maintain its institutional accreditation, and our student enrollments could decline if we fail to maintain any of our accreditations or approvals. • If Walden University fails to obtain or maintain any of its state authorizations in states in which such authorization is required or fails to comply with the laws and regulations of such states, it may not be able to operate or enroll students in that state, and may not be able to award Title IV program funds to students. Risks Relating to Our Indebtedness • The fact that we have substantial debt could materially adversely affect our ability to raise additional capital to fund our operations and limit our ability to pursue our strategy or to react to changes in the economy or our industry. • Our debt agreements contain, and future debt agreements may contain, restrictions that may limit our flexibility in operating our business. Risks Relating to Investing in Our Class A Common Stock • As a public benefit corporation, our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance. • The price of our Class A common stock has been and may continue to be volatile, and you could lose all or part of your investment as a result. • If we or our existing investors sell or announce an intention to sell additional shares of our Class A common stock, the market price of our Class A common stock could decline. • Because we have no current plans to pay ordinary cash dividends on our common stock for the foreseeable future, and our debt arrangements place certain restrictions on our ability to do so, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it. • The dual class structure of our common stock as contained in our amended and restated certificate of incorporation has the effect of concentrating voting control with those stockholders who held our stock prior to our initial public offering, including Wengen Alberta, Limited Partnership (“Wengen”), our controlling stockholder, and our executive officers, employees and directors and their affiliates, and limiting your ability to influence corporate matters. • We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. Holders of our securities do not have the same protections afforded to stockholders of companies that are subject to such requirements. 4 • Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and the Delaware General Corporation Law could make it more difficult for a third party to acquire us and could discourage a takeover and adversely affect the holders of our Class A common stock. 5 Part I Item 1. Business Our Continuing Operations include Mexico and Peru. Unless otherwise indicated, the information in or incorporated by reference into this Form 10-K, including our segment information, relates only to our Continuing Operations. Strategic Developments On January 27, 2020, we announced that our board of directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value. During 2020, we made significant progress on this initiative. Laureate completed the sales of its operations in Chile, Malaysia, and Australia & New Zealand and signed definitive agreements to sell Walden University, its higher education institution in the U.S., as well as its operations in Brazil and Honduras. The Company expects to close the Brazil and Honduras transactions during the first half of the year. The closing for the Walden transaction is anticipated to occur in the second half of 2021. For Laureate’s institutions in Mexico and Peru, the board decided after a thorough evaluation of all strategic options, including a potential sale, to continue to operate these assets under Laureate management. The decision to focus on a regional operating model in Mexico and Peru at this time does not preclude further engagement with potential buyers for those businesses. Laureate does not intend to provide further interim updates unless and until it believes disclosure is appropriate. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our exploration of strategic alternatives and our activities related to previously announced divestitures may disrupt our ongoing businesses, result in increased expenses and present certain risks to the Company.” COVID-19 Update On March 11, 2020, the novel coronavirus (“COVID-19” or the “virus”) outbreak was declared a pandemic by the World Health Organization. In order to prevent the spread of the virus in our student communities, we closed all of our physical campuses in March 2020 and quickly activated our business continuity plans. In a matter of a few short weeks, all of our students were effectively transitioned to an online learning environment, at scale, and our staff and faculty were effectively moved to a fully remote environment. We believe that our institutions have a competitive advantage in online and distance learning given the investments that we have made in digital learning platforms over the past three-to-five years and believe that we are well-positioned to continue to serve our students through the pandemic. While our universities continue to deliver learning online, they also are focused on planning for a safe return to campus, when appropriate to do so. Most of our universities are expecting to adopt a phased approach, prioritizing classes that require the use of labs and other physical resources. Consistent with local regulations and health authority recommendations, we will implement a range of precautions to protect the health and safety of our students, faculty and staff, to ensure the safe return of activity on our campuses. We will continue to monitor the situation and adjust based on what is most appropriate for each market. General We operate a portfolio of degree-granting higher education institutions in Mexico and Peru. These institutions, which we collectively refer to as the Laureate International Universities network, are leading brands in their respective markets and offer a broad range of undergraduate and graduate degrees through campus-based, online and hybrid programs. Collectively, we have approximately 336,500 students enrolled at five institutions with over 50 campuses included in our Continuing Operations as of December 31, 2020. Our institutions in Mexico and Peru operate within scaled country networks, which provide advantages in terms of shared infrastructure, technology, curricula and operational best practices. More than 75% of our students are enrolled in programs of four or more years in duration. As of December 31, 2020, the vast majority of our students were enrolled at traditional, campus-based institutions offering multi-year degrees, similar to leading private and public higher education institutions in developed markets such as the United States and Europe. Due to the COVID-19 pandemic, all of our students were effectively transitioned to an online learning environment in early 2020 and remained online throughout the remainder of the year. Our institutions are focused on planning for a safe return to campus, when appropriate to do so. See “—COVID-19 Update.” Our programs are designed with a distinct emphasis on applied, professional-oriented content for growing career fields and are focused on academic disciplines that we believe offer strong employment opportunities and high earnings potential for our students. We continually and proactively adapt our curriculum to the needs of the market. In particular, we emphasize science, 6 technology, engineering and math (STEM) and business disciplines, areas in which we believe that there is large and growing demand, especially in developing countries. Students pursuing degrees in Medicine & Health Sciences, Engineering & Information Technology and Business & Management, our three largest disciplines, constitute over 70% of our total post-secondary enrollments. We believe that the work of our graduates in these disciplines creates a positive impact on the communities we serve and strengthens our institutions’ reputations within their respective markets. Our focus on private-pay and our track record for delivering high-quality outcomes to our students, while stressing affordability and accessibility, has been a key reason for our long record of success. We believe that the higher education markets in Mexico and Peru present an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for affordable, quality higher education in those markets. We believe that the combination of the projected growth in the middle class, limited government resources dedicated to higher education, and a clear value proposition demonstrated by the higher earnings potential afforded by higher education creates substantial opportunities for high-quality private institutions to meet this growing and unmet demand. By offering high-quality, outcome-focused education, we believe that we enable students to prosper and thrive in the dynamic and evolving knowledge economy. In many developing markets, traditional higher education students (defined as 18-24 year olds) have historically been served by public universities, which have limited capacity and are often underfunded, resulting in an inability to meet growing student demands and employer requirements. In addition, in many of these same markets, non-traditional students, such as working adults and distance learners, have limited options for pursuing higher education. With strong brands and highly reputed institutions in Mexico and Peru, we believe that we are uniquely positioned to address these market opportunities. Country Institution Enrollment at December 31, 2020 Market Segment QS Stars™ Overall University Rating Ratings/Rankings Mexico Universidad del Valle de México (UVM) 95,000 Premium/ Traditional «««« • Ranked #7 university in Mexico • One of only three 4-Star rated universities in Mexico by QS Stars™ Mexico Universidad Tecnológica de México (UNITEC) 99,000 Value/Teaching ««« • Largest private university in Mexico • 5-Stars rated by QS Stars™ in categories of Teaching & Employability Peru Universidad Peruana de Ciencias Aplicadas (UPC) 55,000 Premium/Traditional «««« • Ranked #3 university in Peru • Only 4-Star rated university in Peru by QS Stars™ Peru Universidad Privada del Norte (UPN) 73,700 Value/Teaching ««« • 2 nd largest private university in Peru • 5-Stars rated by QS Stars™ in categories of Teaching & Employability Peru CIBERTEC 13,800 Tech/Voc N/A • 2 nd largest private tech/voc institute in Peru Sources: QS Stars™, Guía Universitaria (UVM), Scimago Institutions Rankings (UPC) 7 Our institutions in Mexico and Peru offer traditional higher education students a private education alternative, with multiple brands and price points in each market and innovative programs and strong career-driven outcomes. Additionally, through targeted programs and multiple teaching modalities, we are able to serve the differentiated needs of non-traditional students in these markets. Our program and level of study mix for 2020 was as follows: Based on 12/31/2020 total enrollments Based on 12/31/2020 total enrollments All high school students are in Mexico Our Segments We have two reportable segments, which are summarized in the charts below. The following information for our segments is presented as of December 31, 2020. Our Industry We operate higher education institutions in Mexico and Peru. These markets are characterized by what we believe is a significant imbalance between supply and demand. The demand for higher education is large and growing and is fueled by several demographic and economic factors, including a growing middle class, global growth in services and technology-related industries and recognition of the significant personal and economic benefits gained by graduates of higher education institutions. At the same time, the respective Mexican and Peruvian governments often have limited resources to devote to higher education, resulting in a diminished ability by the public sector to meet growing demand, and creating opportunities for 8 private education providers to enter these markets and deliver high-quality education. As a result, the private sector plays a large and growing role in higher education. Favorable industry dynamics in Mexico and Peru driving growth in the higher education sector include the following: Large, Growing and Underpenetrated Population of Qualified Higher Education Students. In many countries, including throughout Latin America and other developing regions, there is growing demand for higher education based on favorable demographics, increasing secondary completion rates and increasing higher education participation rates, resulting in continued growth in higher education enrollments. While global participation rates have increased for traditional higher education students (defined as 18-24 year olds), the market for higher education in Mexico and Peru is still significantly underpenetrated, at approximately 30% and 47%, respectively, as compared to approximately 62% in the United States. Strong Economic Incentives for Higher Education. According to data from the Organization for Economic Co-operation and Development (“OECD”), in countries that are members of the OECD, the earnings from employment for an adult completing higher education were approximately 54% higher than those of an adult with only an upper secondary education. We believe that the cumulative impact of favorable demographic and socio-economic trends, coupled with the superior earnings potential of higher education graduates, will continue to expand the market for private higher education. Increasing Role of the Private Sector in Higher Education. In both Mexico and Peru, the private sector plays a meaningful role in higher education, bridging supply and demand imbalances created by a lack of capacity at public universities. In Mexico, private education providers constitute 35% of the total higher-education market (44% in states in which we have operations). In Peru, private education providers constitute 72% of the total higher-education market. In addition to capacity limitations, we believe that limited public resources, and the corresponding policy reforms to make higher education systems less dependent on the financial and operational support of local governments, have resulted in increased enrollments in private institutions relative to public institutions. Increasing Demand for Online Offerings. We believe that increasing student demand, new instruction methodologies designed for the online medium, and growing employer and regulatory acceptance of degrees obtained through online and hybrid modalities will continue to drive online learning in Mexico and Peru. Moreover, increasing the percentage of courses taught online in a hybrid educational model has significant cost and capital efficiency benefits, as a greater number of students can be accommodated in existing physical campus space. Our Strengths and Competitive Advantages We believe that our key competitive strengths that will enable us to execute our strategy include the following: Scaled Platform Institutions Across Country Networks. Our scale within the countries in which we operate facilitates distinct advantages for our students and allows us to leverage our operating model across multiple brands in Mexico and Peru. Our in-country networks facilitate competitive advantages related to: • Curricula and Programs. We are able to leverage our curricula and resources, allowing for the rapid deployment of new programs. Increasing amounts of our curricula are being standardized, allowing us to lower the cost of program development by reusing and sharing content, while improving the quality of our programs. • Best Practices. Through collaboration across our in-country networks, best practices for key operational processes, such as campus design, faculty training, student services and recruitment, are identified and then rolled out to the institutions within each country. • Unified Systems. Our scale also permits increased investment in unified technology systems and an opportunity to leverage standardization of processes, centralization of common services (such as information technology, finance and procurement) and intellectual property, and implementing a common operating model and platform for content development, digital campus experiences, student services, recruitment and administrative services within each country. Leading Intellectual Property and Technology. We have developed an extensive collection of intellectual property. We believe that this collection of intellectual property, including online capabilities, campus management, faculty training, curriculum design and quality assurance, among other proprietary solutions, provides our students a truly differentiated learning experience and creates a significant competitive advantage for our institutions over competitors. We have made significant investments to 9 create unified technology systems across our in-country networks. These systems will provide data and insights on a scale that we believe will allow us to improve student experience, retention rates and outcomes, while also enabling a more efficient and lower cost educational delivery model. Leading Online Technology . Our commitment to digital teaching and learning has been manifested through significant investments in core technologies, as well as in human resources, training and development activities. These investments have been instrumental in establishing a deep level of expertise in online education, facilitating the design and delivery of high quality, effective and differentiated online courses in the markets in which we operate. Long-Standing and Respected University Brands. We believe that we have established a reputation for providing high-quality higher education, and our institutions are among the most respected higher education brands in their local markets. Our institutions have long-established histories and are ranked among the best in their respective countries. In addition, many of our institutions and programs have earned the highest accreditation available, which provides us with a strong competitive advantage in local markets. For example, medical school licenses are often the most difficult to obtain and are only granted to institutions that meet rigorous standards. Throughout Mexico and Peru we operate 12 medical schools and seven dental schools. We believe that the establishment of our medical and dental schools further validates the quality of our institutions and programs and increases brand awareness. Commitment to Academic Quality. We offer high-quality undergraduate, graduate and specialized programs in a wide range of disciplines that generate strong interest from students and provide attractive employment prospects. We focus on programs that prepare our students to become employed in high demand professions. Our curriculum development process includes employer surveys and ongoing research into business trends to determine the skills and knowledge base that will be required by those employers in the future. This information results in timely curriculum upgrades, which helps ensure that our graduates acquire the skills that will make them marketable to employers. We also are committed to continually evaluating our institutions to ensure we are providing the highest quality education to our students. External assessment methodologies, such as QS Stars™, allows us to identify key areas for improvement in order to drive a culture of quality and continual innovation at our institutions. Attractive Financial Model. • Private Pay Model. Essentially all of our revenues for 2020 were generated from private pay sources, as there are no material government-sponsored student loan programs in Mexico or Peru. We believe that students’ and families’ willingness to allocate personal resources to fund higher education at our institutions validates our strong value proposition. • Revenue Visibility Enhanced by Program Length and Strong Retention. The length of our programs provides us with a high degree of revenue visibility. The majority of the academic programs offered by our institutions last between four and five years, and more than 75% of our students were enrolled in programs of at least four years or more in duration as of December 31, 2020. Additionally, we actively monitor and manage student retention because of the impact it has on student outcomes and our financial results. Our historical annual student retention rate, which we define as the proportion of prior year students returning in the current year (excluding graduating students), was 79% on average over the last five years. Given our high degree of revenue visibility, we are able to make attractive capital investments and execute other strategic initiatives to help drive sustainable growth in our business. • Attractive Margin Profile with Significant Operating Leverage. Our scale within each country provides significant advantages, enabling us to operate efficiently with attractive margin levels. We focus on optimizing our operations at the country level through our in-county networks. Our Strategy While the countries in which we operate currently are affected by the COVID-19 pandemic, we do not presently believe that the pandemic will materially impact our long-term strategy and initiatives. See “—COVID-19 Update” and “—Employees and Human Capital Management—Health and Safety” for information related to the impact of the COVID-19 pandemic on our students, faculty and staff. That said, see “Item 1A—Risk Factors—Risks Relating to Our Business—An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations.” 10 The execution of our strategy will be enabled by the following initiatives: Integration of Campus-Based Operations in Mexico and Peru. Our institutions in Mexico and Peru serve approximately 336,500 students in a relatively homogenous operating environment, creating a unique opportunity to harvest the benefits of scale. We believe that by implementing best practices within each country we will enable closer collaboration and facilitate innovation and improved student experiences. We believe that this unification will enable us to be more nimble in our day-to-day operations and will allow us to extract valuable insights from more data across our network. Further, we believe that integration will enable further innovation and efficiency in our academic model and operations, and allow us to expand our market share. Leverage and Expand Existing Portfolio. We will continue to focus on opportunities to expand our programs and the type of students that we serve, as well as our capacity in our markets to meet local demand, leveraging our existing platform to execute on attractive organic growth opportunities. In particular, we intend to add new programs and course offerings, expand target student demographics and, where appropriate, increase capacity at existing campuses and through hybrid online opportunities, open new campuses and enter new cities in existing markets. We believe that these initiatives will drive growth and provide an attractive return on capital. • Add New Programs and Course Offerings. We will continue to develop new programs and course offerings to address the changing needs in the markets. New programs and course offerings enable us to provide a high-quality education that we believe is desired by students and prospective employers. • Expand Target Student Demographics. We use sophisticated analytical techniques to identify opportunities to provide quality education to new or underserved student populations where market demand is not being met, such as non-traditional students (e.g., working adults) who may value flexible scheduling options, as well as traditional students. Our ability to provide quality education to these underserved markets has provided additional growth opportunities to our network and we intend to leverage our management capabilities and local knowledge to further capitalize on these opportunities in new and existing markets. • Increase Capacity at Existing and New Campus Locations. We will continue to make demand-driven investments in additional capacity throughout our network by expanding existing campuses and opening new campuses, including in new cities. We employ a highly analytical process based on economic and demographic trends, and demand data for the local market to determine when and where to expand capacity. When opening a new campus or expanding existing facilities, we use best practices that we have developed over more than the past decade to cost-effectively expedite the opening and development of that location. Expand Online and Hybrid Education Programs. We intend to increase the number of our students that receive their education through fully online or hybrid programs to meet the growing demands of students. Our online initiative is designed to not only provide students with access to innovative programs and modern digital experiences, but also to diversify our offerings, increase our enrollments and expand our digital solutions in a capital efficient manner, leveraging current infrastructure and improving classroom utilization. The percentage of student credit hours taken online in our campus-based institutions was approximately 28% at the end of 2019. During 2020, due to the COVID-19 pandemic, all of our students were effectively transitioned to an online learning environment, at scale. Once our students, faculty and staff are able to safely return to campus, we expect that our students will transition back to a more traditional campus-based environment, with blended learning modalities. With a common learning management system implemented across our universities, we believe that we have the expertise to continue to expand online and hybrid offerings to meet the growing demand for this market opportunity, allowing us to differentiate ourselves further from our competitors. We continue to accelerate the advancement of online education programs and technology-enabled solutions that deliver high-quality differentiated student experiences for our institutions at scale. Our strategy for the online opportunity includes the following components: • Hybrid Online Programs. Traditional 18-24 year old students attending campus-based institutions are increasingly seeking digital learning experiences that are blended with in-person learning. We provide those students with a hybrid learning experience, mixing face-to-face classroom experience with technology through our online platform, which we believe improves the student experience by providing them with a wide range of online 11 courses, interactive discussions, virtual experiences, digital resources, and simulations that enhance their learning experiences both within and outside the classroom. • Fully Online Programs. Many students require flexible learning modules to accommodate work and personal responsibilities. Often, these students are working adults who are looking to either complete an undergraduate or post-graduate degree, or who want to gain a credential to accelerate or change careers. Our fully online programs provide students with a high-quality curriculum experience to achieve their goals. Our Segments and Institutions Effective September 30, 2020 (giving effect to discontinued operations and the renaming of our segments), Laureate offers its educational services through two reportable segments: Mexico and Peru. We determine our segments based on information utilized by our chief operating decision maker to allocate resources and assess performance. See Note 7, Business and Geographic Segment Information, in our consolidated financial statements for financial information regarding our operating segments and financial information about geographic areas; see also “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Segment Results” and “—Overview—Factors Affecting Comparability—Seasonality” in this Form 10-K. The following table presents information about the institutions as of December 31, 2020 and excludes institutions that are part of discontinued operations as of that date. Reportable Segment (Enrollment) Higher Education Institution Year Joined Laureate Network Year Founded Mexico Universidad del Valle de México (UVM) 2000 1960 (194,000) Universidad Tecnológica de México (UNITEC) 2008 1966 Peru Universidad Peruana de Ciencias Aplicadas (UPC) 2004 1994 (142,500) CIBERTEC 2004 1983 Universidad Privada del Norte (UPN) 2007 1994 Competition We face competition in both of our reportable segments. We believe that competition focuses on price, educational quality, reputation, brand positioning, location and facilities. The market for higher education in Mexico and Peru is highly fragmented and marked by large numbers of local competitors. The target demographics are primarily 18- to 24-year-olds in the countries in which we compete. Public institutions tend to be less expensive, if not free, but limited in capacity. The top public universities in these market are selective, and many of the other public universities are less focused on practical programs aligned around career opportunities. This creates market demand for private educational providers. We compete with other private higher education institutions on the basis of price, educational quality, reputation and location. We believe that we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by our network. There are a number of private and public institutions in both of the countries in which we operate, and it is difficult to predict how the markets will evolve and how many competitors there will be in the future. We expect competition to increase as the Mexican and Peruvian markets continue to develop. See “Item 1A—Risk Factors—Risks Relating to Our Business—The higher education market is very competitive, and we may not be able to compete effectively.” Intellectual Property We currently own, or have filed applications for, trademark registrations for the word “Laureate,” for “Laureate International Universities” and for the Laureate leaf logo in the trademark offices of all jurisdictions in which we operate institutions of higher learning. We have also registered or filed applications in the applicable jurisdictions in which we operate for the marks “Laureate Online International” and “Laureate Online Education.” In addition, we have the rights to trade names, logos and other intellectual property specific to most of our higher education institutions, in the countries in which those institutions operate. 12 Employees and Human Capital Management As of December 31, 2020, including Discontinued Operations, we had approximately 37,000 employees, of which approximately 3,000 were full-time academic teaching staff and 14,000 were part-time academic teaching staff. As of December 31, 2020, for Continuing Operations only, we had approximately 22,000 employees, of which approximately 2,000 were full-time academic teaching staff and 9,000 were part-time academic teaching staff. Our employees at our institutions outside the United States are represented by labor unions under collective bargaining agreements, as is customary or required under local law in those jurisdictions. At various points throughout the year, we negotiate to renew collective bargaining agreements that have expired or that will expire in the near term. We consider ourselves to be in good standing with all of the labor unions of which our employees are members and believe that we have good relations with all of our employees. Commitment to Ethics and Values Acting ethically and in accordance with the law is at the very core of who we are. Maintaining our integrity is more important than any financial gain. We have incorporated as a benefit corporation and believe that long-term success is linked to the delivery of strong outcomes for all out stakeholders. The Laureate Code of Conduct and Ethics (the “Code”) is central to that effort. Our Code sets out principles of integrity and ethical behavior, and our responsibilities to each other, our students, suppliers, stockholders and the public. The Code covers such topics as accurate records, proper use of assets and information, conflicts of interest, and bribery and corruption. The Code sets a baseline: it does not cover every issue that may arise, but it provides basic principles and a methodology to help guide us in the attainment of this common goal. The Code establishes common standards for Laureate Education, Inc. and all of our institutions. We maintain an Ethics Hotline, which is a secure, confidential resource for Laureate employees, faculty members, students and others to ask a question or raise a concern related to the Code or other ethics or compliance issues. Further, as a Company, we will continue to use our platform to actively be non-discriminatory in all we do, we will promote diversity, inclusion and equality across our workplace, and we will inspire a generation of graduates to continue advancing these principles in their work and throughout their communities. Health and Safety The health and well-being of our students, faculty and staff has been, and remains, a high priority. The COVID-19 pandemic has affected nearly every sector and every business around the world, with higher education experiencing a significant impact. Shortly after the World Health Organization declared the global pandemic, millions of students needed to move away from their campus-based, face-to-face classes and abruptly switch to online learning. For many years, we have had the capacity to deliver high-quality, digital learning experiences, and we acted quickly to leverage our existing technologies and learning platforms to serve students outside of the traditional classroom setting. In addition to transitioning to fully online delivery, we also effectively moved other essential functions, including student support services and marketing and enrollment, to a fully remote environment. We have communicated with our students, faculty and staff regularly throughout the pandemic to ensure that they remain informed of our response. While Laureate universities continue to deliver learning online, they also are focused on planning for a safe return to campus, when appropriate to do so. Most of our universities are expected to adopt a phased approach, prioritizing classes that require the use of labs and other physical resources. Consistent with local regulations and health authority recommendations, we will implement a range of precautions to protect the health and safety of our students, faculty and staff, to ensure the safe return of activity on our campuses. We also moved quickly to support our corporate workforce transitioning to an entirely remote, online environment. We launched “Excelling Remotely,” an initiative to share resources, best practice and inspiration for employees to ensure a successful transition to remote work. In addition, we established a COVID-19 Employee Relief Fund to provide financial assistance to those experiencing financial hardship as a direct result of the pandemic. Our History Since making our first investment in global higher education in 1999, we have focused on expanding access to differentiated higher education and learning opportunities to traditionally underserved areas of the world. In August 2007, we were acquired in a leveraged buyout by a consortium of investment funds and other investors. On February 6, 2017, we consummated our initial public offering and shares of our Class A Common Stock began trading on the Nasdaq under the symbol “LAUR”. 13 Public Benefit Corporation Status In October 2015, we redomiciled in Delaware as a public benefit corporation as a demonstration of our long-term commitment to our mission to benefit our students and society. Public benefit corporations are a relatively new class of corporations that are intended to produce a public benefit and to operate in a responsible and sustainable manner. Under Delaware law, public benefit corporations are required to identify in their certificate of incorporation the public benefit or benefits they will promote and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in the public benefit corporation’s certificate of incorporation. Public benefit corporations organized in Delaware also are required to assess their benefit performance internally and to disclose publicly at least biennially a report detailing their success in meeting their benefit objectives. Our public benefit, as provided in our amended and restated certificate of incorporation, is to produce a positive effect (or a reduction of negative effects) for society and persons by offering diverse education programs delivered online and on premises operated in the communities that we serve. By doing so, we believe that we provide greater access to cost-effective, high-quality higher education that enables more students to achieve their academic and career aspirations. Our Continuing Operations are outside the United States, where there is a large and growing imbalance between the supply and demand for quality higher education. Our stated public benefit is firmly rooted in our company mission and our belief that when our students succeed, countries prosper and societies benefit. Becoming a public benefit corporation underscores our commitment to our purpose and our stakeholders, including students, regulators, employers, local communities and stockholders. Available Information Our principal executive offices are located at 650 S. Exeter Street, Baltimore, Maryland 21202, telephone (410) 843-6100. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge to stockholders and other interested parties through the “Financials” portion of our investor relations website at http://investors.laureate.net as soon as reasonably practical after they are filed with the SEC. Various corporate governance documents, including our Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, Corporate Governance Guidelines and Code of Conduct and Ethics are available without charge through the “Leadership and Governance” portion of our investor relations website, listed above. Industry Regulation Continuing Operations Mexican Regulation Mexican law provides that private entities are entitled to render education services in accordance with applicable legal provisions. These provisions regulate the education services rendered by the federal government, the states and private entities and contain guidelines for the allocation of the higher education role among the federal government, the states and the municipalities, including their respective economic contributions, in order to jointly participate in the development and coordination of higher education. There are three levels of regulation in Mexico: federal, state and municipal. The federal authority is the Federal Ministry of Public Education ( Secretaría de Educación Pública ). Each of the 31 states and Mexico City has the right to establish a local Ministry of Education, and each municipality of each state may establish a municipal education authority that only has authority to advertise and promote educational services and/or activities. Some functions are exclusive to the Federal Ministry of Education, such as the establishment of study plans and programs for Basic and Mid-Superior education services. There are also concurrent functions, such as the granting and withdrawal of governmental recognition of validity of studies ( Reconocimiento de Validez Oficial de Estudios ) (“REVOEs,” for its acronym in Spanish). The General Law on Education ( Ley General de Educación ) in Mexico classifies studies in the following three categories: (i) Basic Education, which includes pre-school (kindergarten), elementary school and junior high school ( secundaria ); (ii) Mid-Superior Education, which includes high school ( preparatoria ) and equivalent studies, as well as professional education that does not consider preparatoria as a prerequisite; and (iii) Superior Education, which includes the studies taught after preparatoria, including undergraduate school ( licenciatura ), specialties ( especialidades ), master’s studies, doctorate studies and studies for teachers ( educación normal ). 14 The REVOEs are issued either by the Federal Ministry of Education under the General Law on Education or by any of the state Ministries of Education under the applicable state law. REVOEs are granted for each program taught at each campus. If there is a change in the program or in the campus at which it is taught, the entity will need to get a new REVOE. The Federal Ministry of Education has issued a set of general resolutions ( Acuerdos ) that regulate the general requirements for obtaining REVOEs. The main Acuerdos are (i) Acuerdo 243, issued on May 27, 1998, which sets the general guidelines for obtaining an Authorization or REVOE; (ii) Acuerdo 17/11/17, issued on November 10, 2017, which sets the procedures related to REVOEs for Superior Education studies; and (iii) Acuerdo 18/11/18, issued on November 27, 2018, which defines the different levels, models and educational options at Superior Education. The Federal Ministry of Education recommends to the local Ministries of Education the adoption and inclusion of the provisions contained in Acuerdo 243 and Acuerdo 17/11/17 in the local Law on Education and other applicable local laws and regulations. Depending on each state, other requirements may apply; for example, in certain states, private institutions that provide educational services with REVOEs need to be registered with the corresponding local authorities. Acuerdo 17/11/17 regulates in detail the provisions contained under the General Law on Education to grant REVOEs for Superior Education studies, regarding faculty, plans and programs of studies, inspection visits, procedures, etc. Acuerdo 17/11/17 also provides that private institutions that provide Superior Education services in accordance with presidential decrees or secretarial resolutions ( acuerdos secretariales ) issued specifically to them may maintain the obligations provided to them thereunder and may function under the simplified provisions of Acuerdo 17/11/17. Currently, Universidad Tecnológica de México, S.C. and Universidad del Valle de México, S.C. have secretarial resolutions that were issued in their favor before the issuance of Acuerdo 17/11/17. The obligations contained in these secretarial resolutions generally conform to the obligations provided under Acuerdo 17/11/17. The regulatory authorities are entitled to conduct inspection visits to the facilities of educational institutions to verify compliance with applicable legal provisions. Failure to comply with applicable legal provisions may result in the imposition of fines, the cancellation of the applicable REVOE and the closure of the education facilities. Private institutions with REVOEs are required to grant a minimum percentage of scholarships to students. Acuerdo 17/11/17 requires private institutions to grant scholarships to at least five percent of the total students registered during each academic term. Scholarships consist, in whole or in part, of payment of the registration and tuition fees established by the educational institution. Private entities may also obtain the recognition of validity of their programs from the National Autonomous University of Mexico ( Universidad Nacional Autónoma de México or “UNAM”). The General Regulations of Incorporation and Validation of Studies issued by UNAM provide that programs followed in private entities may be “incorporated” to UNAM in order for UNAM to recognize their validity. The UNAM regulations also require private entities incorporated to UNAM to grant scholarships to at least five percent of the total students registered at such entity. The students entitled to have this benefit will be selected by UNAM. Some of our high school programs and one of our medical programs are incorporated to UNAM. A new higher education bill was approved by the senate on December 9, 2020, and we currently anticipate that the house of representatives will consider the legislation in the spring of 2021. Should the bill be enacted, no foreseeable material changes are expected to impact the business. Peruvian Regulation We operate three post-secondary education institutions in Peru, two of which are universities and one of which is a technical-vocational institute. Peruvian law provides that universities and technical-vocational institutes can be operated as public or private entities, and that the private entities may be organized for profit. The Ministry of Education has overall responsibility for the national education system. In 2014, the Peruvian Congress enacted a new University Law to regulate the establishment, operation, monitoring and closure of universities. The law also promotes continuous improvement of quality at Peruvian universities. The law created a new agency, the Superintendencia de Educación Superior Universitaria (“SUNEDU”), which is responsible for carrying out the governmental role in university regulation, including ensuring quality. While institutional autonomy is still recognized, and universities are permitted to create their own internal governance rules and determine their own academic, management and 15 economic systems, including curriculum design and entrance and graduation requirements, all of these matters are now subject to review and evaluation by SUNEDU through its periodic review of universities as part of a license renewal process. Under the new law, university licenses are temporary but renewable, and are granted by SUNEDU for a maximum of eight years. On November 24, 2015, the Board of SUNEDU promulgated regulations for the university licensing process. For licenses to be renewed, universities have to demonstrate to SUNEDU that they comply with, at a minimum, certain Basic Quality Conditions (“BQCs”) (i.e., that they have specified academic goals and that the degrees granted and plans of study are aligned with those goals; that their academic offerings are compatible with their planning goals (e.g., there is sufficient labor demand for careers offered); that there are only two regular semesters of studies per year; that they have appropriate infrastructure and equipment; that they engage in research; that they have a sufficient supply of qualified teachers, at least 25% of whom will need to be full-time; that they supply adequate basic complementary educational services (e.g., medical and psychological services and sports activities); that they provide appropriate placement office services; and that they have transparency of institutional information). Both UPC and UPN had their licenses renewed in 2017, in each case for a period of six years. Technical-vocational institutes are regulated by the Ministry of Education, which grants operating licenses for not less than three nor more than six years, after which the Ministry conducts a revalidation process. The approval of new institute licenses is based on the evaluation by the Ministry of the institute’s institutional goals, the curricula of its education programs and their link with careers needed in the Peruvian economy, the availability of adequate qualified teachers, the institute’s infrastructure, the institute’s financial resources, and the favorable opinion of the National System of Assessment, Accreditation and Certification of Education Quality (“SINEACES”) regarding the appropriateness of the programs that the institute is offering. SINEACES is also responsible for the accreditation of programs and careers at all higher education institutions. On November 2, 2016, a new law regarding technical-vocational institutes (the “Institutes Law”) was enacted. Under the Institutes Law, technical-vocational institutes are regulated by the Ministry of Education, which grants operating licenses. The Institutes Law created two types of institutes: Higher Education Institutes (“Institutes”) and Higher Education Colleges (“Colleges”). Institutes are dedicated to technical careers and Colleges are devoted to technical careers related to education, as well as science and information Technology. Colleges grant Technical Bachelor Degrees and Professional Technical Degrees. Institutes and Colleges are subject to a mandatory license granted by the Ministry of Education, based on an evaluation to determine compliance with BQCs. BQCs include: an appropriate institutional management guaranteeing a proper relation with the educational model of the institution; appropriate academic management and proper program studies aligned with the Ministry of Education norms; appropriate infrastructure and equipment to develop educational activities; adequate teachers and staff which, at a minimum, should consist of 20% full-time staff; and appropriate financial and economic provisions. The Institutes Law provides that the process will last no more than 90 days and will grant a license for a five-year period to be renewed once expired. Unlike licenses, quality accreditation is voluntary, except for certain careers for which it might be mandatory as determined by law. Such accreditation will be taken into consideration for access to public grants for scholarships and research, among other things. Private Institutes and Colleges may be organized as for-profit or not-for-profit entities under Peruvian law. Not-for-profit Colleges’ and Institutes’ income is exempt from taxes on their educational activities. For-profit Colleges and Institutes are subject to income taxes but may qualify for a tax credit on 30% of their reinvested income, subject to a reinvestment program to be filed with the Ministry of Education for a maximum term of five years. The specific requirements of such programs were determined by regulations in August 2017. According to the schedule determined by the regulations, in May 2018, Cibertec was granted a license by the Ministry of Education for a five-year period. In November 2018, Laureate Education Peru SRL acquired Instituto de Educación Superior Tecnológico Privado Red Avansys S.A.C. (“Avansys”). Avansys is an Institute that offers 25 degrees to approximately 3,000 students in a single campus located in downtown Lima in an educational cluster for Institutes. Avansys obtained its license from the Ministry of Education in April 2018, for a five-year period. Cibertec and Avansys merged from a corporate and tax perspective as of February 1, 2019 and changed its corporate name to Instituto de Educación Superior Cibertec SAC. (“IES Cibertec”). During November 2019, the Ministry of Education issued a license for both entities (like separate entities for regulatory purposes) to permit cross selling of degrees in campuses of both the former Avansys and/or Cibertec. A merged license for IES Cibertec will be required. Discontinued Operations Brazilian Regulation The Brazilian educational system is organized according to a system of cooperation among federal, state and local governments. Higher education (i.e., undergraduate and graduate level education provided by public and private higher education institutions (“HEI”)) is regulated primarily at the federal level, particularly in terms of public policy goals, accreditation and academic 16 oversight. The legislative influence of state and municipal governments is generally restricted to taxation, real estate and operational permitting issues. With respect to the federal role, the National Educational Basis and Guidelines Law (“LDB”), provides the general framework for the provision of educational services in Brazil and establishes the duty of the federal government to: • coordinate the national education policy; • ensure national process of evaluation of higher education institutions, with the cooperation of evaluation agencies that have responsibility for this level of education; and to create an evaluation process for the academic performance of elementary, secondary and higher education in collaboration with educational institutions in order to improve the quality of education; and • issue rules and regulations regarding higher education. The responsibility of the federal government in regulating, monitoring and evaluating higher education institutions and undergraduate programs is exercised by the Ministry of Education (“MEC”), along with a number of other federal agencies and related offices. MEC MEC is the highest authority of the higher education system in Brazil and has the power to issue implementing rules (regulations, notices, and technical advisories governing the conduct of higher education), as well as to regulate and monitor the higher education segment. By exercising its duties, MEC has the power to confirm decisions from the National Board of Education (“CNE”) regarding the accreditation and reaccreditation of institutions of higher education, as well as legal opinions and regulatory proposals coming from the Board. MEC is also responsible for validating the criteria and methodology employed by the National Institute of Educational Studies Anísio Teixeira (“INEP”). CNE-National Board of Education CNE is a consultative advisory and deliberative body of MEC. It consists of the Board of Basic Education and the Board of Higher Education, each composed of 12 members appointed by the President of Brazil. The Board of Higher Education has the power to (i) analyze and issue opinions on the results of higher education quality assessment; (ii) deliberate on the reports submitted by MEC on programmatic accreditation and qualifications offered by higher education institutions, as well as on prior authorization from those offered by non-university institutions; and (iii) approve the accreditation and periodic reaccreditation of higher education institutions, based on official reports and quality assessments. CNE is also responsible for matters relating to the implementation of higher education norms and advising MEC on related matters. INEP-National Institute of Educational Studies Anísio Teixeira INEP is a federal agency linked to MEC that is the primary statistical and information-gathering body for the entire Brazilian education system. The performance data that it collects and publishes is used by MEC, the legislature and the rest of the executive branch, as well as the public, to debate and make policy and programmatic decisions about education. INEP is responsible for the National Higher Education Evaluation System (“SINAES”) and will coordinate and execute on-site visits to Higher Education institutions in the process of accreditation/reaccreditation of institutions and undergraduate programs. CONAES-National Commission on Higher Education Evaluation CONAES is a committee under MEC supervision composed of 13 members, created to coordinate and monitor SINAES. To fulfill that duty, CONAES can establish guidelines to be followed by INEP in the development of evaluation tools, as well as submit the list of programs to be evaluated by the National Examination of Student Performance (“ENADE”). SERES-Higher Education Regulation and Supervision Secretariat In 2011, SERES - which operates as a MEC branch - became the specific agency directly responsible for regulation and supervision of public and private HEIs, as well as undergraduate courses and lato sensu graduate programs, for both face-to-face and distance learning modalities. Its mission is to elevate the quality level of all higher education through the establishment 17 of guidelines for the expansion of HEIs and their courses, in accordance with national curriculum guidelines and proprietary quality parameters. SERES plans and coordinates the policy-making process for higher education and has been granted the power to (i) accredit HEIs and their undergraduate courses; (ii) oversee HEIs and courses, in order to fulfill the educational legislation and to induce improvements in quality standards; and (iii) design actions and update curriculum guidelines for undergraduate programs, as well as benchmarks for quality distance education, considering curricular guidelines and various forms of technology. SERES can also establish guidelines for the preparation of assessment instruments for higher education courses and ultimately manages the public system of registration and database of HEIs and higher education programs. Finally, SERES can apply the penalties provided for in regulation, following due process. According to the LDB, higher education can be offered by public or private higher education institutions. A private institution of higher education shall be controlled, managed and maintained by an individual person(s) or legal entity, in either case referred to as the “ mantenedora .” The mantenedora is responsible for obtaining resources to meet the needs of the duly authorized HEI, which in regulatory terms is referred to as the “ mantida .” A mantenedora may be authorized to operate more than one mantida. In any case, the mantenedora is legally and financially responsible for all of its mantidas. Each of our HEIs in Brazil is maintained by a Laureate-controlled mantenedora. Regarding their organizational and academic prerogatives, institutions of undergraduate learning can be: • Colleges ( faculdades) : Colleges are institutions of public or private education offering degree programs in more than one area of knowledge that are supported by a single supporting entity and have specific administration and management. Colleges may offer programs at the following levels: traditional undergraduate programs, technological undergraduate programs, specialization and graduate programs (master’s and Ph.D. degrees). Colleges do not have minimum requirements for the qualifications of professors and their labor practices and cannot establish new campuses or create programs and new locations without the prior permission of MEC. • University Centers ( centro universitários ): University centers are public or private educational institutions that offer a variety of programs in higher education, including undergraduate programs, extension courses and lato sensu graduate programs-master’s and Ph.D. degrees; they must also provide learning opportunities and career development for their professors. At least one third of the faculty of a university center must be composed of persons with master’s or doctorate degrees. In addition, at least one fifth of its professors must be composed of professors who work full time. University centers have the autonomy to create, organize and extinguish individual courses and degree programs, as well as relocate or expand locations in their existing programs in the municipality in which the university center’s headquarters is located, without the prior permission of MEC. Under certain circumstances, university centers are allowed to open campuses outside the municipality in which its seat is located; however, such campuses will not enjoy the same autonomy prerogatives. • Universities ( universidades ): Universities are public or private institutions of higher education that offer several degree programs, extension activities and development of institutional research. Like the university centers, at least one third of the faculty of a university must be composed of persons with master’s or doctorate degrees. In addition, at least one third of a university’s faculty must be composed of professors who work full time. Similar to university centers, universities have autonomy to create, organize and extinguish individual courses and degree programs, as well as to relocate or expand locations in their existing programs in the municipality in which the university’s headquarters is located, without prior permission of MEC. Additionally, universities have the ability, upon prior authorization by MEC, to apply for accreditation of new campuses and courses outside the municipality in which the university’s seat is located, provided that they are within the same state as the seat, and, under certain circumstances, autonomy might be extended to them as well. Among the HEIs in the Laureate International Universities network are one faculdade (Faculdade Internacional da Paraíba, located in João Pessoa, PB), six university centers (Centro Universitário FADERGS, located in Porto Alegre, RS; Centro Universitário dos Guararapes, located in Jaboatão dos Guararapes, PE; FMU Education Group (formed by Centro Universitario das Faculdades Metropolitanas Unidas – FMU and Centro Universitario FIAM-FAAM), located in São Paulo, SP; Centro Universitário Ritter dos Reis, located in Porto Alegre, RS; and Centro Universitario IBMR, located in Rio de Janeiro, RJ), and three universities (Universidade Potiguar, located in Natal, RN; UNIFACS-Universidade Salvador, located in Salvador, BA; and Universidade Anhembi Morumbi, located in São Paulo, SP). Originally standalone HEIs, Faculdades Porto-Alegrense and Faculdade dos Guararapes de Recife have been integrated, respectively, to Centro Universitário Ritter dos Reis and Centro Universitário dos Guararapes. Also included are Business School São Paulo, a professional degree-granting premium branch owned and operated by Universidade Anhembi Morumbi, and CEDEPE Business School, a professional degree-granting 18 premium branch owned and operated by Guararapes. As noted below, each form of HEI is entitled to a different level of autonomy within the regulatory framework. In turn, we factor the respective levels of autonomy into the operational strategy for each HEI, as the requirement of prior or post-facto MEC approval can delay or nullify specific new campus expansion projects, new course offerings, and increases in the number of authorized seats per course. Legislation provides for specific levels of didactic, scientific and administrative autonomy to universities, university centers and colleges in differing degrees with the aim of limiting outside influence by other institutions or persons outside of the HEI’s internal governance structure. The LDB provides that the following powers are guaranteed to universities and university centers in the exercise of their autonomy: (i) to create, organize and terminate undergraduate programs in their facilities, subject to applicable regulations; (ii) to establish the curriculum, subject to applicable general guidelines; (iii) to plan and execute scientific research, artistic production and extracurricular activities; (iv) to quantify the available seats for each program, except in specific undergraduate programs where the total number of available seats in the entire system is controlled by MEC in conjunction with the input of the relevant professional associations; (v) to prepare and amend their bylaws in accordance with the general applicable standards; and (vi) to grant degrees, diplomas and other qualifications. Although colleges have administrative autonomy, they do not enjoy academic autonomy and, therefore, are subject to MEC’s prior authorization to create new programs and degree programs. Distance education. Distance Education, or Educação a Distância (“EaD”), in Brazil is primarily regulated by the LDB. The law defines EaD as an educational modality in which the didactic and pedagogical measurement in teaching and learning processes occur with the use of media, information and communication technologies, with students and teachers developing educational activities at a different place and/or time. EaD programs can be offered at different levels and types of higher education, covering continuing education programs, undergraduate, specialization, master’s and Ph.D., as well as professional education (including technical, medium and technological level of higher education). Universities and university centers accredited to offer EaD programs may create, organize and terminate programs, upon notice to MEC. Colleges (‘ faculdades ’) must seek prior MEC authorization. The new regulatory framework for distance education (Decree # 9.057/2017) significantly reduced the regulatory and operational hindrances to the expansion of undergraduate and postgraduate, allowing a specific accreditation to offer EaD programs exclusively, without the need of a prior face-to-face HEI accreditation, making it possible to create a HEI dedicated to EaD programs, with lower operational costs and reduced regulatory complexity. Further, another characteristic of EaD programs in Brazil-the mandatory presence of brick-and-mortar support facilities, or ‘ polos ’, for in-person activities such as professional practice labs and exams-has been relaxed, thus making full online programs possible. Under the new regulation, the need for classroom activities to be developed at the polos will be determined by the pedagogical projects of the respective programs, according to an HEI’s own discretion. However, curriculum guidelines published by the National Board of Education may require activities to be developed in laboratory or professional settings, which may compromise some of this prerogative. The decree also eliminated the need for prior polo accreditation, which becomes another prerogative of the accredited HEIs. However, a maximum number of new polos to be created annually by HEIs was stipulated, based on their institutional evaluation, or CI score (resulting from official onsite evaluations). HEIs with a CI score equal to 3 can create up to 50 new polos per year, whereas those with CI score of 4 can create 150 new polos . HEIs with a maximum CI score equal to 5 can create up to 250 new polos per year. HEIs offering EaD programs, including their polos , are subject to inspection by MEC at any time, as to determine compliance with legal and regulatory requirements. EaD certificates or diplomas issued by accredited HEIs have national validity, with the same force and effect as those issued for face-to-face programs. As a means of coping with the COVID-19 pandemic, MEC issued a series of regulations allowing activities developed in the face-to-face programs to be provided online, though preserving certain peculiarities, such as their synchronous character. All planning to resume face-to-face classes is subject to the sanitary conditions assessed by the States and will follow the respective protocols. Accreditation. The first accreditation of an institution of higher education is necessarily as a college. The accreditation as a university or university center is only granted after the institution has operated as a college for at least six years and has demonstrated that it has met satisfactory quality standards, including positive evaluation by the SINAES, as well as met legal 19 requirements applicable to each type of institution of undergraduate learning, including minimum degree attainment and terms of faculty employment. Following accreditation, colleges must obtain MEC permission to offer new undergraduate degree programs. As consequence of their autonomy, universities and university centers do not require MEC authorization to create programs in the city in which the university’s or university center’s headquarters are located. They need only inform MEC about the programs they offer for registration, evaluation and subsequent recognition. However, the creation of graduate programs in law, medicine, dentistry, nursing and psychology, whether by colleges, universities or university centers, are subject to the opinion of the proper professional associations. Once a non-autonomous institution gets authorization to offer a particular program, it has to seek accreditation in the period between 50% and 75% of the program’s completion. Institutional and programmatic accreditation has to be renewed periodically in accordance with the regularly applicable MEC evaluation process. Decree n. 9.235, published in December 2017, condensed various directives present in several normative instruments and set procedural standards and decision models for accreditation. The new regulation eliminated the need for a previous mandatory decision of MEC, which effectively granted wider autonomy to HEIs. Such autonomy, however, is tied to a performance score beyond the merely satisfactory grade in the official evaluation integrated with the accreditation process. This increased autonomy primarily benefits university-like structures (i.e., universidades and centros universitarios ). As already mentioned, Universidades are now allowed to have the same autonomy prerogatives at their satellite campuses as they already enjoy at their headquarters, such as program creation, seat openings, etc. They must, however, sustain above average performance scores and the same minimum proportion of faculty (one-third) working full time and/or with a master’s/Ph.D. at each campus receiving autonomy. Centros universitarios , once geographically limited to the headquarters municipality, are now allowed to expand statewide, although there will be no autonomy prerogatives for such units; their new programs and seat expansion initiatives will have to be authorized by MEC. Evaluation. SINAES was established to evaluate HEI as institutions of higher education, traditional degree and technology degree programs and student academic performance, so as to improve the quality of higher education in Brazil. In practice, the CONAES conducts the monitoring and coordination efforts of SINAES. The results of the institutional and course evaluations are represented on a scale of five levels, and when facing unsatisfactory results, the HEI will be required to enter into an agreement with MEC to establish a remediation initiative. Failure to comply, in whole or in part, with the conditions provided in the term of commitment may result in one or more penalties imposed by MEC, including temporary suspension of the opening of the selective process for undergraduate programs and cancellation of accreditation or reaccreditation of the institution and the authorization for operation of its programs. External evaluations of institutions of higher education are carried out by INEP in two instances, first, when an institution applies for its first accreditation, and second, by the end of each of SINAES’s evaluation, primarily based on the following criteria: (i) institutional development plan; (ii) social and institutional responsibility; (iii) infrastructure and financial condition; and (iv) pedagogical monitoring of student academic performance. The evaluation of graduate programs is made by the Coordination of Superior Level Staff Improvement, which is responsible for establishing the quality standard required of master’s and doctoral programs, along with the identification and evaluation of the courses that meet this standard. The evaluation of student academic performance is conducted by INEP, which requires each student to sit for the ENADE in order to verify the knowledge and technical skill of the student body. Each ENADE test is developed in accordance with the content and specific curriculum of each educational program. Students enrolled in undergraduate programs take the ENADE every three years. In this system, students are evaluated at the end of the last year of each program. Transfer of control. Although changes of control exercised by Laureate do not ordinarily need MEC prior approval or review, due to the level of Laureate’s consolidated gross revenues throughout Brazil, current Brazilian law requires that every control transaction, with limited exceptions, that Laureate enters into must be submitted to the Brazilian anti-trust authority, the Conselho Administrativo de Defesa Economico (the “CADE”), for approval. Such request for approval must be granted prior to the definitive closing of such transaction. CADE has the power to reject and/or alter any transaction or any part of a transaction that it deems to unduly restrict competition. Incentive programs. Programa Universidade Para Todos (“PROUNI”) is a federal program of tax benefits designed to increase higher education participation rates by making college more affordable. PROUNI provides private HEIs with an exemption 20 from certain federal taxes in exchange for granting partial and full scholarships to low-income students enrolled in traditional and technology undergraduate programs. All of our HEIs adhere to PROUNI. HEIs may join PROUNI by signing a term of membership valid for ten years and renewable for the same period. This term of membership shall include the number of scholarships to be offered in each program, unit and class, and a percentage of scholarships for degree programs to be given to indigenous and Afro-Brazilians. To join PROUNI, an educational institution must maintain a certain relationship between the number of scholarships granted and the number of regular paying students. The relationship between the number of scholarships and regular paying students is tested annually. If this relationship is not observed during a given academic year due to the departure of students, the institution must adjust the number of scholarships in a proportional manner the following academic year. An HEI that has joined PROUNI and remains in good standing is exempt, in whole or in part, from the following taxes during the period in which the term of membership is in effect: • IRPJ (income tax) and CSLL (social contribution), with respect to the portion of net income in proportion to revenues from traditional and technology undergraduate programs; and • Cofins (Contribution for the Financing of Social Security) and PIS (Program of Social Integration), concerning revenues from traditional and technology undergraduate programs. A number of municipal and state governments have sought to replicate PROUNI by creating their own programs that, for example, offer tax incentives through a reduction in, or credits against, the ISS (Municipal Services Tax) in exchange for scholarships to targeted social groups or professions. Laureate owns and operates HEIs in several jurisdictions in which such local incentive programs are in force. Student financing program. Fundo de Financiamento Estudantil (“FIES”) is a federal program established to provide financing to students enrolled in courses in private institutions of higher education that have achieved a minimum satisfactory evaluation according to SINAES and receive a grade of 3 or higher out of 5 on the ENADE. Under this basic structure, FIES targets both of the government’s education policy goals: increased access and improved academic quality outcomes. The HEI receives the benefit of the FIES program through its participation in the intermediation of CFT-E (Certificado Financeiro do Tesouro) bonds, which are public bonds issued to the HEI by the federal government that the HEI may use to pay the national social security tax imposed by the INSS (National Social Security Institute) and certain other federal tax obligations. If the HEI is current with its taxes (i.e., it possesses a tax clearance certificate and is not otherwise involved in any tax-related disputes with the federal government that are not being defended in compliance with applicable security/bond requirements), then the HEI also has the option to sell the bonds for cash in a public auction conducted by one of the government-sponsored banks. Following changes initiated in 2014, a new FIES reform was implemented by Law n. 13.530/2017, which amended the original FIES legal statute (Law n. 10.260/2001). The current FIES offer conditions were first consolidated for the 2018.1 candidate selection. The traditional FIES financing program continues to be offered to candidates with a family income of up to three times the minimum wage, and while the previous 18-month grace period was eliminated, financing will have a zero interest rate. The risk is borne by a new guarantee fund-called FG-FIES -which may have initial public contributions of up to R$ 3 billion, and contributions from HEIs ranging from 13% for the first year, between 10% and 25% for the second to fifth year (according to delinquency-related variances), and at least 10% from the sixth year on. The second financing offer-called P-FIES -originally had two variables, according to the funding sources (either the Constitutional/Regional Development Funds or the BNDES). The distribution of vacancies for this modality favors programs offered in corresponding regional limits and is operated strictly by financial agents, who bear the risks of the operation, but are entitled to charge for interest. Further reforms were implemented in December 2019, following government claims that program sustainability should be a primary concern to the traditional FIES program, as well as to promote meritocracy as part of eligibility criteria. Therefore, better academic performance will be required from applicants. On the other hand, there was considerable flexibilization for P-FIES, the most significant being to disregard the applicant’s family income as a condition to financing access. P-FIES will also free candidates from the usual selection via ENEM ( Exame 21 Nacional do Ensino Medio -the official, non-mandatory high school national examination promoted by MEC), as well as allow students to apply for financing at any time, and for private banks to offer credit lines, effectively untying P-FIES from the traditional FIES annual chronogram and original modelling. Due to the effects of the COVID-19 pandemic, several measures to assist beneficiaries were implemented, such as temporary payment suspension and deadline extension for renewing contracts. As of December 31, 2020, approximately 4.3% of our students in Brazil participated in FIES, representing approximately 8.5% of our Brazil 2020 net revenues. U.S. Regulation U.S. institutions of higher education that are eligible to receive Title IV federal student aid funds must obtain and maintain approvals from the U.S. Department of Education (the “DOE”), the state(s) in which they are located and an accrediting agency recognized by the DOE, i.e., the U.S. regulatory triad. Walden University, our postsecondary educational institution in the United States, is subject to extensive regulation by the DOE, accrediting agencies and state educational agencies. The regulations, standards and policies of these agencies cover substantially all of the operations of Walden University, including its educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, finances, results of operations and financial condition. As an institution of higher education that grants degrees and diplomas, Walden University is required to be authorized by appropriate state educational agencies. In addition, the DOE regulates Walden University due to its participation in federal student financial aid programs under Title IV of the U.S. Higher Education Act (the “HEA”), or Title IV programs. Title IV programs currently include grants and educational loans provided directly by the federal government, including loans to students and parents through the William D. Ford Federal Direct Loan Program (the “Direct Loan Program”). The Direct Loan Program offers Federal Stafford Loans, Federal Parent PLUS Loans, Federal Grad PLUS Loans and Federal Consolidation Loans. A significant percentage of students at Walden University rely on the availability of Title IV programs to finance their cost of attendance. In addition to complying with specific requirements contained in the HEA and regulations issued thereunder by the DOE, in order to participate in Title IV programs, Walden University also is required to maintain authorization by an appropriate state educational agency or agencies and be accredited by an accrediting agency recognized by the DOE. We plan and implement our business activities to comply with the standards of these regulatory agencies. Historically, Walden University has maintained eligibility to access Title IV funding. State Education Authorization and Regulation Walden University is required by the HEA to be authorized by applicable state educational agencies in the states in which it is located to participate in Title IV programs. To maintain requisite state authorizations, Walden University is required to continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs and various operational and administrative procedures. These standards can be different from and conflict with the requirements of the DOE and other applicable regulatory bodies. State laws and regulations are subject to change and may limit our ability to offer educational programs and offer certain degrees. Some states may also prescribe financial regulations that are different from those of the DOE and may require the posting of surety bonds. Failure to comply with the requirements of applicable state educational agencies could result in us losing our authorization to offer educational programs in those states and in applicable state educational agencies forcing us to cease enrolling students in their state. Alternatively, the state educational licensing agencies could restrict the institution’s ability to offer certain degree or diploma programs. The loss of an authorization by the state in which the institution is based could also impact the ability of such institution to participate in Title IV programs. Walden University is authorized by the Minnesota Office of Higher Education, the applicable state educational licensing agency of its home state, to operate and to grant degrees or diplomas, which authorizations are required for students at the institution to be eligible to receive funding under Title IV programs. Additionally, we review the licensure or authorization requirements of other states to determine whether our activities in those states may constitute a presence or otherwise may require licensure or authorization by the respective state education agencies. Several states have asserted jurisdiction over educational institutions offering online degree programs that have no physical location or other presence in the state, but that have some activity in the 22 state, such as enrolling or offering educational services to students who reside in the state, conducting practica or sponsoring internships in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state. In recent years, regional state compacts have created the National Council for State Authorization Reciprocity Agreements (“NC-SARA”), which is a voluntary agreement among member states and U.S. territories that establishes comparable national standards for interstate offering of postsecondary distance-education courses and programs. As of the date of this filing, all states except California participate in NC-SARA. NC-SARA requires each participating institution to have a federal composite score as measured by the DOE at the parent level of a 1.5 (or a 1.0 with justification acceptable to the state). Walden University does not participate in NC-SARA because the most recent federal composite score for Laureate as measured by the DOE is below 1.0. Accordingly, Walden University must apply for and comply with each state’s authorization requirements. Many states have established or are proposing legislation or regulations to create new or different criteria for authorization of “non-SARA” institutions, including requiring them to post bonds and/or meet composite score requirements. If Walden University does not meet these requirements, it may not enroll students in that state. Additionally, the DOE recently revised its state authorization requirements pertaining to distance education. On November 1, 2019, the DOE published final regulations regarding state authorization for programs offered through distance education. Among other provisions, these final regulations require that an institution participating in the Title IV federal student aid programs and offering post-secondary education through distance education be authorized by each state in which the institution enrolls students, if such authorization is required by the state. The final regulations also eliminated or revised certain disclosure requirements applicable to institutions participating in the Title IV federal student aid programs. The DOE will also recognize, but not require, authorization through participation in a state authorization reciprocity agreement, if the agreement does not prevent a state from enforcing its own general-purpose laws or regulations outside of the state authorization of distance education. These regulations became effective on July 1, 2020. In recent years, the proprietary education industry has experienced broad-based, intensifying scrutiny in the form of increased investigations and enforcement actions. State attorneys general and educational authorizing agencies in several states, as well as the U.S. Federal Trade Commission (the “FTC”) and Consumer Financial Protection Bureau, have become more active in enforcing consumer protection laws, especially related to recruiting practices and the financing of education at proprietary educational institutions. State Professional Licensure Many states have specific licensure requirements that an individual must satisfy to be licensed as a professional in specified fields, including fields such as education and healthcare. These requirements vary by state and by field. A student’s success in obtaining licensure following graduation typically depends on several factors, which may include, but are not limited to: the background and qualifications of the individual graduate; whether the institution or the program was approved by the applicable state agencies in the state in which the graduate seeks licensure; whether the program from which the student graduated meets all requirements for professional licensure in that state; whether the institution or the program is accredited and, if so, by what accrediting agencies; and whether the institution’s degrees are recognized by other states in which a student may seek to work. Several states also require that graduates pass a state test or examination as a prerequisite to becoming certified in certain fields, such as teaching and nursing. In several states, an educational program must be accredited by an accrediting agency affiliated with a professional association in order for graduates to be licensed in that professional field. In the field of psychology, an increasing number of states require approval by either the American Psychological Association (“APA”) or the Association of State and Provincial Psychology Boards (“ASPPB”). To date, Walden University has been unable to obtain approval of its Ph.D. program in Counseling Psychology from the ASPPB or APA. Accreditation Accreditation is a private, non-governmental process for evaluating the quality of educational institutions and their programs in areas, including student performance, governance, integrity, educational quality, faculty, physical resources, administrative capability and resources and financial stability. To be recognized by the DOE, accrediting agencies must comply with DOE regulations, which require, among other things, that accrediting agencies adopt specific standards for their review of educational institutions, conduct peer review evaluations of institutions and publicly designate those institutions that meet their criteria. An accredited institution is subject to periodic review or review when necessary by its accrediting agencies to determine whether it continues to meet the performance, integrity and quality required for accreditation. Walden University is institutionally accredited by the Higher Learning Commission, a regional accrediting agency recognized by the DOE. Accreditation by the Higher Learning Commission is important to us for several reasons, one being that it enables eligible students at Walden University to receive Title IV financial aid. In addition, other colleges and universities depend, in part, on an institution’s accreditation in evaluating transfers of credit and applications to graduate schools. Employers also rely on the accredited status 23 of institutions when evaluating candidates’ credentials, and students and corporate and government sponsors under tuition reimbursement programs consider accreditation as assurance that an institution maintains quality educational standards. In addition to institution-wide accreditation, there are numerous specialized accrediting agencies that accredit specific programs or schools within their jurisdiction, many of which are in healthcare and professional fields. Accreditation of specific programs by one of these specialized accrediting agencies signifies that those programs have met the additional standards of those agencies. In addition to being accredited by regional and/or national accrediting agencies, Walden University also has the following specialized accreditations: • the Council for Accreditation of Counseling and Related Educational Programs accredits the M.S. in Clinical Mental Health Counseling, M.S. in Marriage, Couple and Family Counseling, M.S. in Addictions Counseling, M.S. in School Counseling and Ph.D. in Counselor Education and Supervision programs; • the Commission on Collegiate Nursing Education accredits the Bachelor of Science in Nursing, Master of Science in Nursing and Doctor of Nursing Practice programs; • the Accreditation Council for Business Schools and Programs accredits the B.S. in Business Administration, Master of Business Administration, Doctor of Business Administration and Ph.D. in Management programs and granted Specialized Accounting Accreditation to the B.S. in Accounting and M.S. in Accounting programs; • the Council for the Accreditation of Educator Preparation (formerly the National Council for Accreditation of Teacher Education) accredits the initial teacher preparation programs in the Richard W. Riley College of Education and Leadership; • the Project Management Institute Global Accreditation Center for Project Management Education Program accredits the M.S. in Project Management program; • the ABET accredits the B.S. in Information Technology program; • the Council on Social Work Education accredits the master’s in social work program and the bachelor’s in social work program; • the Council on Education for Public Health accredits the master’s in public health program; and • the American Nurses Credentialing Center accredits continuing education certificates in nursing education, nursing informatics and nursing leadership and management. Congressional Activity The U.S. Congress must authorize and appropriate funding for Title IV programs under the HEA and can change the laws governing Title IV programs at any time. Congress reauthorizes the HEA, which governs federal financial assistance for higher education, generally every five to ten years. The HEA was most recently reauthorized in August 2008. In addition to comprehensive reauthorizations of the HEA, Congress may periodically revise the law and other statutory requirements governing Title IV programs. The Consolidated Appropriations Act for federal fiscal year 2021 included a number of significant changes to federal student aid policy, including changes to the needs analysis applicable to certain Title IV programs, expanded eligibility for Pell Grants and a repeal of the limitation on lifetime subsidized loan eligibility for undergraduate students. It is likely that there will be bills introduced in the current 117 th Congress to reauthorize and further amend the HEA. In addition to Title IV programs, eligible veterans and military personnel may receive educational benefits under other federal programs. Congress has the authority to determine the funding levels for programs benefiting eligible veterans and military personnel. We cannot predict the timing and terms of any eventual HEA reauthorization, including any potential changes to institutional participation or student eligibility requirements or funding levels for particular Title IV programs, or for programs providing educational benefits to veterans and military personnel, or the nature of any future revisions to the law or regulations related to these programs. Regulation of Federal Student Financial Aid Programs To be eligible to participate in Title IV programs, an institution must comply with specific requirements contained in the HEA and the regulations issued thereunder by the DOE. An institution must, among other things, be licensed or authorized to offer its educational programs by the state or states in which it is located and maintain institutional accreditation by an accrediting 24 agency recognized by the DOE. The substantial amount of federal funds disbursed to schools through Title IV programs, the large number of students and institutions participating in these programs and allegations of fraud and abuse by certain for-profit educational institutions have caused Congress to require the DOE to exercise considerable regulatory oversight over for-profit educational institutions. As a result, for-profit educational institutions, including ours, are subject to extensive oversight and review. Because the DOE periodically revises its regulations and changes its interpretations of existing laws and regulations, we cannot predict with certainty how the Title IV program requirements will be applied in all circumstances. Significant aspects of Title IV programs include the following: Eligibility and certification procedures. Walden University must apply periodically to the DOE for continued certification to participate in Title IV programs. Such recertification generally is required every six years, but may be required earlier, including when an institution undergoes a change in control or expands its activities in certain ways, such as opening an additional location, adding a new educational program or modifying the academic credentials it offers. The DOE may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards and in certain other circumstances, such as when an institution is certified for the first time or undergoes a change in control. During the period of provisional certification, the institution must comply with any additional conditions included in the institution’s program participation agreement with the DOE. In addition, the DOE may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another institution or make any other significant change. If the DOE determines that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may seek to revoke the institution’s certification to participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. Students attending provisionally certified institutions remain eligible to receive Title IV program funds. Walden University currently is provisionally certified to participate in Title IV programs on a month-to-month basis. The provisional certification is due to both Laureate’s failing composite score under the DOE’s financial responsibility standards (see below) and the DOE’s approval of Laureate’s initial public offering in February 2017, which it viewed as a change in control. In addition, the certification is month-to-month because Walden University’s most recent certification period expired, but remains in effect on a month-to-month basis while the DOE reviews the pending pre-acquisition review application relating to the acquisition of Walden University by Adtalem Global Education Inc. (“Adtalem”). Walden University also is subject to a letter of credit and is subject to additional cash management requirements with respect to its disbursements of Title IV funds, as well as certain additional reporting and disclosure requirements. Administrative capability. DOE regulations specify extensive criteria by which an institution must establish that it has the requisite “administrative capability” to participate in Title IV programs. To meet the administrative capability standards, an institution must, among other things: comply with all applicable Title IV program requirements; have an adequate number of qualified personnel to administer Title IV programs; have acceptable standards for measuring the satisfactory academic progress of its students; not have student loan cohort default rates above specified levels; have various procedures in place for awarding, disbursing and safeguarding Title IV program funds and for maintaining required records; administer Title IV programs with adequate checks and balances in its system of internal controls; not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension; provide financial aid counseling to its students; refer to the DOE’s Office of Inspector General any credible information indicating that any student, parent, employee, third-party servicer or other agent of the institution has engaged in any fraud or other illegal conduct involving Title IV programs; submit all required reports and financial statements in a timely manner; and not otherwise appear to lack administrative capability. If an institution fails to satisfy any of these criteria, the DOE may require the institution to repay Title IV funds its students previously received, change the institution’s method of receiving Title IV program funds, which in some cases may result in a significant delay in the institution’s receipt of those funds, place the institution on provisional certification status or commence a proceeding to impose a fine or to limit, suspend or terminate the institution’s participation in Title IV programs. Financial responsibility. The HEA and DOE regulations establish extensive standards of financial responsibility that institutions such as Walden University must satisfy to participate in Title IV programs. The DOE evaluates institutions for compliance with these standards on an annual basis based on the institution’s annual audited financial statements, as well as when the institution applies to the DOE to have its eligibility to participate in Title IV programs recertified. The most significant financial responsibility standard is the institution’s composite score, which is derived from a formula established by the DOE based on three financial ratios: (1) equity ratio, which measures the institution’s capital resources, financial viability and ability to borrow; (2) primary reserve ratio, which measures the institution’s ability to support current operations from expendable resources; and (3) net income ratio, which measures the institution’s ability to operate at a profit or within its means. The DOE assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0 reflecting financial weakness and positive 3.0 reflecting financial strength. The DOE then assigns a weighting percentage to each ratio and adds the weighted scores for the three ratios together to produce a composite score for the 25 institution. The composite score must be at least 1.5 for the institution to be deemed financially responsible without the need for further DOE oversight. In addition to having an acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations including required refunds to students and any Title IV liabilities and debts, be current in its debt payments and not receive an adverse, qualified or disclaimed opinion by its accountants in its audited financial statements. If the DOE determines that an institution does not meet the financial responsibility standards due to a failure to meet the composite score or other factors, the institution is able to establish financial responsibility on an alternative basis permitted by the DOE. This alternative basis could include, in the Department’s discretion, posting a letter of credit, accepting provisional certification, complying with additional DOE monitoring requirements, agreeing to receive Title IV program funds under an arrangement other than the DOE’s standard advance funding arrangement, such as the reimbursement method of payment or heightened cash monitoring, or complying with or accepting other limitations on the institution’s ability to increase the number of programs it offers or the number of students it enrolls. The DOE measures the financial responsibility of Walden University on the basis of the Laureate consolidated audited financial statements and not at the individual institution level. Based on Laureate’s composite score for its fiscal year ended December 31, 2019, the DOE determined that it and, consequently, Walden University, failed to meet the standards of financial responsibility. As a result, in a letter sent to Laureate on September 11, 2020, the DOE required Laureate to decrease its existing letter of credit to $83.6 million (10% of the Title IV program funds that the schools received during the most recently completed fiscal year), continued the institutions on Heightened Cash Monitoring 1 and required Laureate to continue to comply with additional notification and reporting requirements, including submitting bi-weekly cash flow statements for Laureate and monthly student rosters of the institutions, which has been a requirement since April 2018. Although the DOE does not measure the financial responsibility of Walden University at the individual institutional level, the DOE has calculated an unofficial composite score for Walden University for state authorization purposes, and the score is 2.9 out of a possible 3.0. Any requirement to provide, maintain or increase a letter of credit or other sanctions that may be imposed by the DOE could increase our cost of regulatory compliance and could affect our cash flows. The DOE has the discretion to increase our letter of credit requirements at any time. If Walden University is unable to meet the minimum composite score requirement or comply with the other standards of financial responsibility, and could not post a required letter of credit or comply with the alternative bases for establishing financial responsibility, then students at Walden University could lose their access to Title IV program funding. On September 23, 2019, the DOE published final regulations regarding, among other things, events that the DOE considers early warning signs of financial difficulty, the occurrence of which may require an institution to provide the DOE with a letter of credit or other surety. These regulations became effective on July 1, 2020. The regulations also include provisions regarding the treatment of operating leases in the financial responsibility composite score methodology, more specifically define and require disclosures concerning the composite score’s inclusion of debt obtained for long-term purposes, and revise limited aspects of the composite score formula to account for changes in accounting terminology. For additional information regarding this rule and new regulations, see “—Borrower Defense-to-Repayment.” When a student who has received Title IV funds withdraws from school, the institution must determine the amount of Title IV program funds the student has “earned.” The institution must return any unearned Title IV program funds to the appropriate lender or the DOE in a timely manner, which is generally no later than 45 days after the date the institution determined that the student withdrew. If such payments are not timely made, the institution will be required to submit a letter of credit to the DOE equal to 25% of the Title IV funds that the institution should have returned for withdrawn students in its most recently completed fiscal year. Under DOE regulations, late returns of Title IV program funds for 5% or more of the withdrawn students in the audit sample in the institution’s annual Title IV compliance audit for either of the institution’s two most recent fiscal years or in a DOE program review triggers this letter of credit requirement. The “90/10 Rule.” A requirement of the HEA commonly referred to as the “90/10 Rule” provides that an institution loses its eligibility to participate in Title IV programs if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenue, the institution derives more than 90% of its revenues for any fiscal year from Title IV program funds. This rule applies only to proprietary post-secondary educational institutions, including Walden University. An institution is subject to loss of eligibility to participate in Title IV programs if it exceeds the 90% threshold for two consecutive fiscal years, and an institution whose rate exceeds 90% for any single fiscal year will be placed on provisional certification and may be subject to addition conditions or sanctions imposed by the DOE. Using the DOE’s formula under the “90/10 Rule,” Walden University derived approximately 76% of its revenues (calculated on a cash basis) from Title IV program funds in each of fiscal years 2020, 2019 and 2018, respectively. 26 The ability of Walden University to maintain 90/10 rates below 90% will depend on our enrollments, any increases in students Title IV funding eligibility in the future, and other factors outside of our control, including any reduction in government assistance for military personnel, including veterans, or changes in the treatment of such funding for the purposes of the 90/10 calculation. In recent years, several members of Congress have introduced proposals and legislation that would modify the 90/10 Rule. One such proposal would revise the 90/10 Rule to an 85/15 rule and would count DoD tuition assistance and GI Bill education benefits toward that limit. We cannot predict whether, or the extent to which, these actions could result in legislation or further rulemaking affecting the 90/10 Rule. Student loan defaults. Under the HEA, an educational institution may lose its eligibility to participate in some or all Title IV programs if defaults by its students on the repayment of federal student loans received under Title IV programs exceed certain levels. For each federal fiscal year, the DOE calculates a rate of student defaults on such loans for each institution, known as a “cohort default rate.” Under current regulations, an institution will lose its eligibility to participate in Title IV programs if its three-year cohort default rate equals or exceeds 30% for three consecutive cohort years or 40% for any given year. Walden University’s official cohort default rates for the 2017, 2016 and 2015 federal fiscal years were 6.8%, 6.9% and 7.3%, respectively. The average national student loan default rates published by the DOE for all institutions that participated in the federal student aid programs for 2017, 2016 and 2015 were 9.7%, 10.1% and 10.8%, respectively, and for all proprietary institutions that participated in the federal student aid programs for 2017, 2016 and 2015 were 14.7%, 15.2% and 15.6%, respectively. Incentive compensation rule. Under the HEA, an institution participating in Title IV programs may not pay any commission, bonus or other incentive payments to any person involved in student recruitment or admissions or awarding of Title IV program funds if such payments are based in any part, directly or indirectly, on success in enrolling students or obtaining student financial aid. Failure to comply could result in monetary penalties and/or sanctions imposed by the DOE, which could result in lower enrollments, revenue, and net operating income. The law and regulations governing this requirement do not establish clear criteria for compliance in all circumstances, creating uncertainty about what constitutes incentive compensation and which employees are covered by the regulation, rendering development of effective and compliant performance metrics more difficult to establish. In addition, in recent years, other post-secondary educational institutions have been named as defendants to whistleblower lawsuits, known as “ qui tam ” cases, brought by current or former employees pursuant to the Federal False Claims Act, alleging that their institutions’ compensation practices did not comply with the incentive compensation rule. A qui tam case is a civil lawsuit brought by one or more individuals (a “relator”) on behalf of the federal government for an alleged submission to the government of a false claim for payment. The relator, often a current or former employee, is entitled to a share of the government’s recovery in the case, including the possibility of treble damages. Substantial misrepresentation. The DOE has specific rules prohibiting substantial misrepresentations to students, members of the public, accrediting agencies and state licensing agencies, as well as the DOE. In the event that the DOE determines that an institution engaged in a substantial misrepresentation, it can revoke the institution’s program participation agreement, impose limitations on the institution’s participation in Title IV programs, deny participation applications on behalf of the institution, or seek to fine, suspend or terminate the institution’s participation in Title IV programs. These regulations provide grounds for private litigants to seek to enforce the expanded regulations through False Claims Act litigation. Compliance reviews. Walden University is subject to announced and unannounced compliance reviews and audits by various external agencies, including the DOE, its Office of Inspector General, state licensing agencies, various state approving agencies for financial assistance to veterans and accrediting agencies. In general, after the DOE conducts a site visit and reviews data supplied by an institution, the DOE sends the institution a program review report and affords the institution with an opportunity to respond to any findings. The DOE then issues a final program review determination letter, which identifies any liabilities. Our institutions are subject to regulatory oversight and from time to time must respond to inquiries about their compliance with the various statutory requirements under which they operate. On September 14, 2020, Walden University received a letter from the Civil Division of the United States Department of Justice (referred to herein as “DOJ”) indicating that the DOJ is examining whether Walden University, in the operation of its Masters of Science in Nursing program (referred to herein as the “Nursing Program”), may have violated the Federal False Claims Act by misrepresenting compliance with its program participation agreement with the DOE, which agreement covers Walden University’s participation in federal student financial aid programs under Title IV of the U.S. Higher Education Act. The letter invites Walden University to provide information regarding a number of specific areas primarily related to the practicum component of its Nursing Program, but it makes no allegations of any misconduct or wrongdoing by Walden University. Further, on November 9, 2020, Walden University received notice from 27 the Higher Learning Commission (“HLC”) that a public “Governmental Investigation” designation would be assigned to Walden University due to the DOJ inquiry and such designation became effective on November 9, 2020. On November 24, 2020, representatives of Walden University met with individuals from the DOJ to present the information requested. While Laureate is cooperating with the DOJ’s request to voluntarily provide information, it cannot predict the timing or outcome of this matter. At this time, Laureate does not believe that this matter will have a material effect on its financial position, results of operations, or cash flows. Further, consistent with the HLC’s policies and procedures, a Governmental Investigation designation by the HLC could delay or prevent the HLC’s approval of a substantive change application to approve the pending sale of Walden University. We continue to evaluate these regulatory developments and the potential impact, if any, on the pending sale of Walden University. On September 8, 2016, the Minnesota Office of Higher Education (“MOHE”) sent to Walden University an information request regarding its doctoral programs and complaints filed by doctoral students as part of a program review that MOHE was conducting. On October 23, 2019, MOHE completed its program review and issued a final report that indicated no findings of noncompliance. As part of its report, MOHE made recommendations for Walden University to develop certain goals and benchmarks with respect to its doctoral programs. As part of the DOE’s ongoing monitoring of institutions’ administration of Title IV programs, the HEA also requires institutions to annually submit to the DOE a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and DOE audit standards. In addition, to enable the DOE to make a determination of an institution’s financial responsibility, each institution must annually submit audited financial statements prepared in accordance with DOE regulations. Borrower Defense-to-Repayment. On November 1, 2016, the DOE published a rule that, among other provisions, established new standards and processes for determining whether a William D. Ford Federal Direct Loan Program (“Direct Loan Program”) borrower has a defense to repayment (“DTR”) on a loan due to acts or omissions by the institution at which the loan was used by the borrower for educational expenses (the “2016 DTR regulations”). Among other topics, the 2016 DTR regulations established permissible borrower defense claims for discharge, procedural rules under which claims would be adjudicated, time limits for borrowers’ claims, and guidelines for recoupment by the DOE of discharged loan amounts from institutions of higher education. These aspects of the 2016 DTR regulations are applicable to loans disbursed under the Direct Loan Program on or after July 1, 2017 and before July 1, 2020. On September 23, 2019, the DOE published final regulations regarding DTR, financial responsibility and certain other matters (the “2019 DTR regulations”). The 2019 DTR regulations became effective on July 1, 2020. Among other things, the 2019 DTR regulations modify the process and standards by which borrowers can assert a defense to the borrowers’ obligation to repay certain Title IV loans first disbursed on or after July 1, 2020. A borrower may assert a defense to repayment if he or she can establish, by a preponderance of the evidence, that the participating institution misrepresented a material fact on which the borrower reasonably relied when deciding to undertake the loan, so long as the misrepresentation “clearly and directly” relates to initial or continued enrollment at the institution, concerns the institution’s provision of educational services, and also results in financial harm to the borrower. The 2019 DTR regulations establish revised definitions for misrepresentation and financial harm and generally require a borrower to assert his or her defense to repayment within three (3) years from the date on which the student ceased to be enrolled at the institution. The 2019 DTR regulations also give the DOE five (5) years in which to seek recovery of the discharged amount from the institution, after a final written decision that a borrower is entitled to a defense to repayment. The 2019 DTR regulations also modify the “triggers” that the DOE considers early warning signs of financial difficulty, the occurrence of which may require an institution to provide the DOE with a letter of credit or other surety. The 2019 DTR regulations also include provisions regarding the treatment of operating leases in the financial responsibility composite score methodology, more specifically define and require disclosures concerning the composite score’s inclusion of debt obtained for long-term purposes, and revise limited aspects of the composite score formula to account for changes in accounting terminology. DOE Distance Education Rulemaking Activities. On November 1, 2019, the DOE published final regulations regarding state authorization for programs offered through distance education and accreditation requirements, and those regulations became effective on July 1, 2020. For additional information regarding this new regulation, see” –State Education Authorization and Regulation.” On August 24, 2020, the DOE issued final regulations making changes to regulations that impact distance education programs in particular. The final regulations provide new definitions for, among other terms, correspondence courses, distance education, and academic engagement. Walden University offers both course-based distance education programs and direct assessment distance education programs through its Tempo Learning offerings. Under these new regulations, it is possible that students eligible for Title IV federal student aid funds who are enrolled in Walden University’s Tempo Learning 28 programs will receive their funds on a more regular disbursement pattern that is better aligned with their individualized progression. The final regulations have an effective date of July 1, 2021, but the DOE will allow institutions to opt for early implementation of portions of these regulations. Privacy of student records. The Family Educational Rights and Privacy Act of 1974 (“FERPA”) and the DOE’s FERPA regulations require educational institutions to, among other things, protect the privacy of students’ educational records by limiting an institution’s disclosure of a student’s personally identifiable information without the student’s prior written consent. If an institution fails to comply with FERPA, the DOE may require corrective actions by the institution or may terminate an institution’s receipt of further federal funds. In addition, Walden University is obligated to safeguard student information pursuant to the Gramm-Leach-Bliley Act (the “GLBA”), a federal law designed to protect consumers’ personal financial information held by financial institutions and other entities that provide financial services to consumers. Compliance with GLBA requirements also is a condition of Walden University’s continued Title IV Program participation. The GLBA and the applicable GLBA regulations require an institution to, among other things, develop and maintain a comprehensive, written information security program designed to protect against the unauthorized disclosure of personally identifiable financial information of students, parents or other individuals with whom such institution has a customer relationship. If an institution fails to comply with the applicable GLBA requirements, it may be required to take corrective actions, be subject to monitoring and oversight by the FTC, and be subject to fines or penalties imposed by the FTC. For-profit educational institutions are also subject to the general deceptive practices jurisdiction of the FTC with respect to their collection, use and disclosure of student information. The institution must also comply with the FTC Red Flags Rule, a section of the federal Fair Credit Reporting Act, that requires the establishment of guidelines and policies regarding identity theft related to student credit accounts. Potential effect of regulatory violations. If Walden University fails to comply with the regulatory standards governing Title IV programs, the DOE could impose one or more sanctions, including requiring us to repay Title IV program funds, requiring us to post a letter of credit in favor of the DOE as a condition for continued Title IV certification, taking emergency action against us, initiating proceedings to impose a fine or to limit, suspend or terminate our participation in Title IV programs or referring the matter for civil or criminal prosecution. Because Walden University is provisionally certified to participate in Title IV programs, the DOE may revoke its certification without advance notice or advance opportunity for us to challenge that action. In addition to the actions that may be brought against us as a result of our participation in Title IV programs, we are also subject to complaints and lawsuits relating to regulatory compliance brought not only by regulatory agencies, but also by other government agencies and third parties, such as current or former students or employees and other members of the public. Regulatory Standards that May Restrict Institutional Expansion or Other Changes in the United States Many actions that we may wish to take in connection with our operations or other changes in the United States are subject to review or approval by the applicable regulatory agencies. Implementing new educational programs and increasing enrollment. The requirements and standards of state education agencies, accrediting agencies and the DOE limit our ability in certain instances to implement new educational programs or increase enrollment in certain programs. Many states require review and approval before institutions can add new programs. Walden University’s state educational agencies and institutional and specialized accrediting agencies that authorize or accredit Walden University and its programs generally require institutions to notify them in advance of implementing new programs, and upon notification may undertake a review of the quality of the facility or the program and the financial, academic and other qualifications of the institution. With respect to the DOE, if an institution participating in Title IV programs plans to add a new educational program, the institution must generally apply to the DOE to have the additional educational program designated as within the scope of the institution’s Title IV eligibility. As a condition for an institution to participate in Title IV programs on a provisional basis, as in our case, the DOE can require prior approval of such programs or otherwise restrict the number of programs an institution may add or the extent to which an institution can modify existing educational programs. If an institution that is required to obtain the DOE’s advance approval for the addition of a new program fails to do so, the institution may be liable for repayment of the Title IV program funds received by the institution or students in connection with that program. Change in ownership resulting in a change in control. The DOE and many states and accrediting agencies require institutions of higher education to report or obtain approval of certain changes in control and changes in other aspects of institutional organization or control. Under the DOE’s regulations, an institution that undergoes a change in control loses its eligibility to participate in Title IV programs and must apply to the DOE to reestablish such eligibility. If an institution files the required application and follows other procedures, the DOE may temporarily certify the institution on a provisional basis following the change in control, so that the institution’s students retain continued access to Title IV program funds. In addition, the DOE may 29 extend such temporary provisional certification if the institution timely files certain required materials, including the approval of the change in control by its state authorizing agency and accrediting agency and certain financial information pertaining to the financial condition of the institution or its parent corporation. The types of and thresholds for such reporting and approval vary among the states and accrediting agencies. Certain accrediting agencies may require that an institution must obtain its approval in advance of a change in control, structure or organization for the institution to retain its accredited status. In addition, in the event of a change in control, structure or organization, certain accrediting agencies may require a post-transaction focused visit or other evaluation to review the appropriateness of its approval of the change and whether the institution has met the commitment it made to the accrediting agency prior to the approval. Other specialized accrediting agencies also require an institution to obtain similar approval before or after the event that constitutes a change in control under their standards. Many states include the transfer of a controlling interest of common stock in the definition of a change in control requiring approval. Some state educational agencies that regulate us may require us to obtain approval of the change in control to maintain authorization to operate in that state, and, in some cases, such states could require us to obtain advance approval of a change in control. Walden University has filed a pre-acquisition review application with the DOE in connection with the contemplated acquisition of Walden University by Adtalem. Walden has also filed applications for approval of the change of ownership with its primary accreditor, the Higher Learning Commission, and with various state educational agencies and programmatic accrediting agencies that require that such changes be approved prior to their occurrence. 30 Item 1A. Risk Factors Risk Factors In addition to the information set forth in this Form 10-K and our other filings with the SEC, you should carefully consider the following risks and uncertainties, which could materially adversely affect our business, financial condition, results of operations and cash flows. The risks identified below are not all encompassing but should be considered in establishing an opinion of our future operations. Furthermore, the impact of COVID-19 also may exacerbate the risks identified below, any one of which could have a material adverse effect on our business, financial condition, results of operations and cash flows. The situation is changing rapidly, and additional impacts may arise of which we are not currently aware. Finally, the risks identified below may affect both our Continuing and Discontinued Operations. Risks Relating to Our Business We operate a portfolio of degree-granting higher education institutions in Mexico and Peru and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address. Our portfolio, which is composed of five institutions, operates in Mexico and Peru, each of which is subject to complex business, economic, legal, political, tax and foreign currency risks. We may have difficulty managing and administering our operations in multiple countries, and we may need to expend additional funds to, among other things, staff key management positions, obtain additional information technology infrastructure and successfully implement relevant course and program offerings for each market, which may materially adversely affect our business, financial condition and results of operations. Additional challenges associated with the conduct of our business overseas that may materially adversely affect our operating results include: • difficulty in staffing and managing foreign operations as a result of distance, language, legal and other differences; • our presence solely in Latin America presents risks relating to regional economic pressures; • each of our institutions is subject to unique business risks and challenges, including competitive pressures and diverse pricing environments at the local level; • difficulty maintaining quality standards consistent with our brands and with local accreditation requirements; • potential economic and political instability in the countries in which we operate, including student unrest; • fluctuations in exchange rates, possible currency devaluations, inflation and hyperinflation; • difficulty selecting, monitoring and controlling partners outside of the United States; • compliance with a wide variety of domestic and foreign laws and regulations; • expropriation of assets by governments; • political elections and changes in government policies; • difficulty protecting our intellectual property rights overseas due to, among other reasons, the uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property rights; • lower levels of availability or use of the Internet, through which our online programs are delivered; • limitations on the repatriation and investment of funds and foreign currency exchange restrictions; and • acts of terrorism, public health risks, crime and natural disasters, particularly in areas in which we have significant operations. 31 Our success in operating our business will depend, in part, on our ability to anticipate and effectively manage these and other risks related to operating in multiple countries. Any failure by us to effectively manage the challenges associated with our operations could materially adversely affect our business, financial condition and results of operations. If we cannot maintain student enrollments in our institutions and maintain tuition levels, our results of operations may be materially adversely affected. Our strategy for growth and profitability depends, in part, upon maintaining and, subsequently, increasing student enrollments in our institutions and maintaining tuition levels. Attrition rates are often due to factors outside our control. Students sometimes face financial, personal or family constraints that require them to drop out of school. They also are affected by economic and social factors prevalent in their countries. In some markets in which we operate, transfers between universities are not common and, as a result, we are less likely to fill spaces of students who drop out. In addition, our ability to attract and retain students may require us to discount tuition from published levels and may prevent us from increasing tuition levels at a rate consistent with inflation and increases in our costs. If we are unable to control the rate of student attrition, our overall enrollment levels are likely to decline, which could materially adversely affect our business, financial condition and results of operations. If we are unable to charge tuition rates that are both competitive and cover our rising expenses, our business, financial condition, cash flows and results of operations may be materially adversely affected. In addition, student enrollment may be negatively affected by our reputation and any negative publicity related to us. Our exploration of strategic alternatives and our activities related to previously announced divestitures may disrupt our ongoing businesses, result in increased expenses and present certain risks to the Company . On January 27, 2020, we announced that our board of directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value. During 2020, we completed the sales of our operations in Chile, Malaysia, and Australia & New Zealand and signed definitive agreements to sell Walden University, our higher education institution in the U.S., as well as our operations in Brazil and Honduras. We expect to close the Brazil and Honduras transactions during the first half of the year. The closing for the Walden transaction is anticipated to occur in the second half of 2021. For our institutions in Mexico and Peru, our board of directors decided after a thorough evaluation of all strategic options, including a potential sale, to continue to operate these assets under Laureate management. The decision to focus on a regional operating model in Mexico and Peru at this time does not preclude further engagement with potential buyers for those businesses. Speculation and uncertainty regarding our exploration of strategic alternatives and pending divestitures may cause or result in: • disruption of our businesses; • distraction of our management and employees; • difficulty in recruiting, hiring, motivating and retaining talented and skilled personnel; • reduced enrollment or increased competition for enrollment at our universities; • increased scrutiny from our regulators; • difficulty in maintaining or negotiating and consummating new business or strategic relationships or transactions; • increased stock price volatility; and • increased costs, including taxes on the proceeds from any divestiture, and advisory fees and other transaction costs. In addition, there are risks associated with our proposed divestiture activities, including that: • we may not be able to find buyers for our businesses or complete transactions on favorable terms; • we may be required to indemnify buyers against certain liabilities and obligations, resulting in significant post-closing exposure to the Company in respect of liabilities of the divested businesses; 32 • we may have challenges in identifying and separating the intellectual property and data to be divested from the intellectual property and data that we wish to retain; • although our previous divestitures were generally implemented on tax efficient terms, we may incur significant tax costs in implementing additional divestitures; • we may not be able to eliminate or reduce overhead and fixed costs associated with the divested assets or businesses, which will impede our ability to operate the retained businesses on a cost effective and efficient basis; • we may be required to record impairment charges if the Company determines that (i) the estimated fair value of any of its remaining businesses is less than its carrying value or (ii) the signing of additional sale agreements requires the Company to perform additional impairment tests; and • as we explore these additional divestitures, we may have difficulty effectively forecasting future operating results. If we are unable to mitigate these or other potential risks related to our exploration of strategic alternatives and the execution of our pending divestitures, the resulting disruption of our businesses may have a material adverse impact on our revenue, operating results and financial condition. An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations. The extent to which COVID-19, like any other rapidly spreading contagious illness, may impact our operations will depend upon the evolution of the outbreak, which continues to be highly speculative at this time and cannot be predicted with any level of confidence. The Company cannot predict the duration of the outbreak, the severity of the illness or the scope, breadth or depth of the actions that may be taken by governmental authorities and/or other third parties in response to the outbreak. We believe that the continued spread of COVID-19 and any resulting preventative or protective actions has, and could continue to, adversely impact our operations. While we acted quickly to leverage our existing technologies and learning platforms to serve students outside of the traditional classroom setting,—and all of our students were effectively transitioned to an online learning environment shortly after the declaration of the pandemic—our ability to retain students, enroll new students and maintain tuition levels, as well as the ability of our students to pay tuition and other fees, may be materially adversely affected by, among other things, (i) the health of our students, our faculty and their families; (ii) decreases in our students’ and/or their families’ level of disposable income; (iii) the performance and reliability of our online program infrastructure; (iv) our ability to safely return to campus, when appropriate to do so, (v) the ability of our recruiters to conduct outreach with prospective students during the student recruitment season; and (vi) adverse legislative and regulatory actions. If we are unable to retain students, enroll new students, maintain tuition levels and collect student accounts receivables, we may be required to record impairments and our business, financial condition, cash flows and results of operations may be materially adversely affected. In addition, an epidemic, pandemic or other public health emergency could adversely affect, and, in the case of COVID-19, has adversely affected, global economies and financial markets. The depth and duration of the global economic and market turmoil resulting from COVID-19 remain highly uncertain, particularly given the lack of appropriate historical benchmarks. Reduced economic activity, increased unemployment and, in some countries, economic recession, may reduce the demand for our programs among students, which could materially adversely affect our business, financial condition, cash flows and results of operations. These adverse economic developments also may result in a reduction in the number of jobs available to our graduates and lower salaries being offered in connection with available employment, which, in turn, may result in declines in our placement and retention rates. As a result, any general economic slowdown or recession that disproportionately impacts the countries in which our institutions operate could have a material adverse effect on our business, financial condition, cash flows and results of operations. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions. Additionally, the COVID-19 pandemic has resulted in severe disruption and volatility in the U.S. financial markets. The trading price of our Class A common stock has declined dramatically since the beginning of March 2020 and may continue to experience volatility and declines. Our success depends substantially on the value of the local brands of each of our institutions and the Laureate International Universities network brand, each of which may be materially adversely affected by changes in current and prospective students’ perception of our reputation and the use of social media. Each of our institutions has worked hard to establish the value of its individual brand. Brand value may be severely damaged, even by isolated incidents, particularly if the incidents receive considerable negative publicity. There has been a marked 33 increase in use of social media platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications that allow individuals access to a broad audience of interested persons. We believe that students and prospective employers value readily available information about our institutions and often act on such information without further investigation or authentication, and without regard to its accuracy. In addition, some of our institutions use the Laureate name in promoting their institutions. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on the accuracy of the content posted. Information concerning our company and our institutions may be posted on such platforms and devices at any time. Information posted may be materially adverse to our interests, it may be inaccurate, and it may harm our performance, prospects and business. Our reputation may be negatively influenced by the actions of other for-profit and private institutions. In recent years, there have been a number of regulatory investigations and civil litigation matters targeting post-secondary for-profit education institutions in the United States and private higher education institutions in other countries. These investigations and lawsuits have attracted adverse media coverage and have been the subject of federal and state legislative hearings and investigations in the United States and in other countries. Allegations against the post-secondary for-profit and private education sectors may affect general public perceptions of for-profit and private educational institutions, including institutions in the Laureate International Universities network and us, in a negative manner. Adverse media coverage regarding other for-profit or private educational institutions or regarding us directly or indirectly could damage our reputation, reduce student demand for our programs, materially adversely affect our revenues and operating profit or result in increased regulatory scrutiny. Growing our online academic programs could be difficult for us. Despite our success in effectively transitioning all of our students to an online learning environment shortly after COVID-19 was declared a global pandemic by the World Health Organization in March 2020, the expansion of our existing online programs and the creation of new online academic programs may not be accepted by students or employers, or by government regulators or accreditation agencies, once we reach an epidemiological end to the pandemic. In addition, our efforts may be materially adversely affected by increased competition in the online education market or because of problems with the performance or reliability of our online program infrastructure. Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students. In order to maintain and increase our revenues and margins, we must continue to develop our admissions programs and attract new students in a cost-effective manner. The level of marketing and advertising and types of strategies used are affected by the specific geographic markets, regulatory compliance requirements and the specific individual nature of each institution and its students. The complexity of these marketing efforts contributes to their cost. If we are unable to advertise and market our institutions and programs successfully, our ability to attract and enroll new students could be materially adversely affected and, consequently, our financial performance could suffer. We use marketing tools such as the Internet, radio, television and print media advertising to promote our institutions and programs. Our representatives also make presentations at upper secondary schools. In order to maintain our growth, we will need to attract a larger percentage of students in existing markets and increase our addressable market by adding locations in new markets and rolling out new academic programs. Any failure to accomplish this may have a material adverse effect on our future growth. If we do not effectively manage our growth and business, our results of operations may be materially adversely affected. There is no assurance that we will be able to maintain or accelerate the current growth rate, effectively manage expanding operations, build expansion capacity, integrate new institutions or achieve planned growth on a timely or profitable basis. If our revenue growth is less than projected, the costs incurred for these additions and upgrades could have a material adverse effect on our business, financial condition and results of operations. Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations. Higher education is regulated to varying degrees and in different ways in each of the countries in which we operate an institution. In general, our institutions must have licenses, approvals, authorizations, or accreditations from various governmental authorities and accrediting bodies. These licenses, approvals, authorizations, and accreditations must be renewed periodically, usually after an evaluation of the institution by the relevant governmental authorities or accrediting bodies. These periodic evaluations could result in limitations, restrictions, conditions, or withdrawal of such licenses, approvals, authorizations or accreditations, which could have a material adverse effect on our business, financial condition and results of 34 operations. Once licensed, approved, authorized or accredited, some of our institutions may need approvals for new campuses or to add new degree programs. All of these regulations and their applicable interpretations are subject to change. Moreover, regulatory agencies may scrutinize our institutions because they are owned or controlled by a U.S.-based for-profit corporation. Changes in applicable regulations may cause a material adverse effect on our business, financial condition and results of operations. The higher education market is very competitive, and we may not be able to compete effectively. Higher education markets around the world are highly fragmented and are very competitive and dynamic. Our institutions compete with traditional public and private colleges and universities and other proprietary institutions, including those that offer online professional-oriented programs. In each of the countries in which we operate a private institution, our primary competitors are public and other private universities, some of which are larger, more widely known and have more established reputations than our institutions. Some of our competitors in both the public and private sectors may have greater financial and other resources than we have and have operated in their markets for many years. We also face potential competition from alternative education providers that prioritize open access education to students. A number of these providers have been formed recently to provide online curriculum from leading academics at little or no cost to the student. If this new modality is successful, it could disrupt the economics of the current education model (both for-profit and not-for-profit institutions). Other competitors may include large, well-capitalized companies that may pursue a strategy similar to ours of acquiring or establishing for-profit institutions. Public institutions receive substantial government subsidies, and public and private not-for-profit institutions have access to government and foundation grants, tax-deductible contributions and other financial resources generally not available to for-profit institutions. Accordingly, public and private not-for-profit institutions may have instructional and support resources superior to those in the for-profit sector, and public institutions can offer substantially lower tuition prices or other advantages that we cannot match. If our graduates are unable to obtain professional licenses or certifications required for employment in their chosen fields of study, our reputation may suffer and we may face declining enrollments and revenues or be subject to student litigation. Certain of our students require or desire professional licenses or certifications after graduation to obtain employment in their chosen fields. Their success in obtaining such licensure depends on several factors, including the individual merits of the student, whether the institution and the program were approved by the relevant government or by a professional association, whether the program from which the student graduated meets all governmental requirements and whether the institution is accredited. If one or more governmental authorities refuses to recognize our graduates for professional licensure in the future based on factors relating to us or our programs, the potential growth of our programs would be negatively affected, which could have a material adverse effect on our business, financial condition and results of operations. In addition, we could be exposed to litigation that would force us to incur legal and other expenses that could have a material adverse effect on our business, financial condition and results of operations. Our business may be materially adversely affected if we are not able to maintain or improve the content of our existing academic programs or to develop new programs on a timely basis and in a cost-effective manner. We continually seek to maintain and improve the content of our existing academic programs and develop new programs in order to meet changing market needs. Revisions to our existing academic programs and the development of new programs may not be accepted by existing or prospective students or employers in all instances. If we cannot respond effectively to market changes, our business may be materially adversely affected. Even if we are able to develop acceptable new programs, we may not be able to introduce these new programs as quickly as students or employers require or as quickly as our competitors are able to introduce competing programs. Our efforts to introduce a new academic program may be conditioned or delayed by requirements to obtain foreign, federal, state and accrediting agency approvals. The development of new programs and courses, both conventional and online, is subject to requirements and limitations imposed by the governmental regulatory bodies of the various countries in which our institutions are located. The imposition of restrictions on the initiation of new educational programs by regulatory agencies may delay such expansion plans. If we do not respond adequately to changes in market requirements, our ability to attract and retain students could be impaired and our financial results could suffer. Establishing new academic programs or modifying existing academic programs also may require us to make investments in specialized personnel and capital expenditures, increase marketing efforts and reallocate resources away from other uses. We may have limited experience with the subject matter of new programs and may need to modify our systems and strategy. If we are unable to increase the number of students, offer new programs in a cost-effective manner or otherwise effectively manage the operations of newly established academic programs, our business, financial condition and results of operations could be materially adversely affected. 35 Failure to keep pace with changing market needs and technology could harm our ability to attract students. The success of our institutions depends to a significant extent on the willingness of prospective employers to hire our students upon graduation. Increasingly, employers demand that their employees possess appropriate technological skills and also appropriate “soft” skills, such as communication, critical thinking and teamwork skills. These skills can evolve rapidly in a changing economic and technological environment. Accordingly, it is important that our educational programs evolve in response to those economic and technological changes. The expansion of existing academic programs and the development of new programs may not be accepted by current or prospective students or by the employers of our graduates. Students and faculty increasingly rely on personal communication devices and expect that we will be able to adapt our information technology platforms and our educational delivery methods to support these devices and any new technologies that may develop. Even if our institutions are able to develop acceptable new programs and adapt to new technologies, our institutions may not be able to begin offering those new programs and technologies as quickly as required by prospective students and employers or as quickly as our competitors begin offering similar programs. If we are unable to adequately respond to changes in market requirements due to regulatory or financial constraints, unusually rapid technological changes or other factors, our ability to attract and retain students could be impaired, the rates at which our graduates obtain jobs involving their fields of study could suffer and our results of operations and cash flows could be materially adversely affected. We may have exposure to greater-than-anticipated tax liabilities. As a multinational corporation, we are subject to income taxes as well as non-income based taxes in the United States and various foreign jurisdictions. Our future income taxes could be materially adversely affected by earnings being lower than anticipated in jurisdictions in which we have lower statutory tax rates and higher than anticipated in jurisdictions in which we have higher statutory tax rates. In addition, changes in the valuation of our deferred tax assets and liabilities, or changes in tax laws, regulations and accounting principles, could have a material adverse effect on our future income taxes. The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain. We have not recorded any deferred tax liabilities for undistributed foreign earnings either because of legal restrictions on distributions or because our historical strategy was to reinvest these earnings outside the United States. As circumstances change and if some or all of these undistributed foreign earnings are remitted to the United States, we may be required to recognize deferred tax liabilities on those amounts. Additionally, in certain countries in which we operate, higher education institutions are either exempt from paying certain taxes, including income taxes, or pay taxes at significantly reduced rates. If we were to lose this favorable tax treatment because of a change in local tax laws, our tax liabilities could increase materially. We are subject to regular review and audit by both domestic and foreign tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition. We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions. We are under regular audit by tax authorities with respect to these non-income based taxes and may have exposure to additional non-income based tax liabilities. We have identified certain contingencies, primarily tax-related, that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on our results of operations if the outcomes are unfavorable. In most cases, we have received indemnifications from the former owners and/or noncontrolling interest holders of the acquired businesses for contingencies. In cases where we are not indemnified, the unrecorded contingencies are primarily in Brazil and, in the aggregate, we estimate that the reasonably possible loss for these unrecorded contingencies in Brazil could be up to approximately $49 million if the outcomes were unfavorable in all cases. If we are not able to recover amounts that are subject to indemnification, the loss for these contingencies could be greater. For information related to outstanding tax audits initiated by the Spanish Taxing Authorities, see “Item 3—Legal Proceedings.” Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially adversely affect our financial results in the period or periods for which such determination is made. 36 Our reported revenues and earnings may be negatively affected by the strengthening of the U.S. dollar and currency exchange rates. We report revenues, costs and earnings in U.S. dollars, while our institutions generally collect tuition in the local currency. Exchange rates between the U.S. dollar and the local currency in the countries where we operate institutions are likely to fluctuate from period to period. In 2020, essentially all of our revenues originated outside the United States. We translate revenues and other results denominated in foreign currencies into U.S. dollars for our consolidated financial statements. This translation is based on average exchange rates during a reporting period. In recent years, the U.S. dollar has strengthened against many international currencies, including the Mexican peso. As the exchange rate of the U.S. dollar strengthens, our reported international revenues and earnings are reduced because foreign currencies translate into fewer U.S. dollars. For the year ended December 31, 2020, a hypothetical 10% adverse change in average annual foreign currency exchange rates, excluding the impacts of our derivatives, would have decreased our operating income and our Adjusted EBITDA by $8.6 million and $31.8 million, respectively. For more information, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk.” To the extent that foreign revenues and expense transactions are not denominated in the local currency and/or to the extent foreign earnings are reinvested in a currency other than their functional currency, we are also subject to the risk of transaction losses. We occasionally enter into foreign exchange forward contracts or other hedging arrangements to reduce the earnings impact of non-functional currency denominated non-trade receivables and debt and to protect the U.S. dollar value of our assets and future cash flows with respect to exchange rate fluctuations. Given the volatility of exchange rates, there is no assurance that we will be able to effectively manage currency transaction and/or translation risks. Therefore, volatility in currency exchange rates may have a material adverse effect on our business, financial condition, results of operations and cash flows. Currency exchange rates and our reported revenues and earnings may also be negatively affected by inflation or hyperinflation. If a country in which we operate is designated as a highly inflationary economy in the future under GAAP, the U.S. dollar would become the functional currency for our operations in that country. As a result, all gains and losses resulting from the remeasurement of the financial results of operations in such country and other transactional foreign exchange gains and losses would be reflected in our earnings, which could result in volatility within our earnings, rather than as a component of our comprehensive income within stockholders’ equity. Hyperinflation in any of the countries in which we operate may have a material adverse effect on our business, financial condition, results of operations and cash flows. Goodwill and indefinite-lived intangibles make up a significant portion of our total assets, and if we determine that goodwill or indefinite-lived intangibles become impaired in the future, net income and operating income in such years may be materially and adversely affected. As of December 31, 2020, the net carrying value of our goodwill and other intangible assets totaled approximately $800.4 million. Goodwill represents the excess of cost over the fair market value of net assets acquired in business combinations. Due to the revaluation of our assets at the time of the LBO and acquisitions we have completed historically, goodwill makes up a significant portion of our total assets. In accordance with generally accepted accounting principles, we periodically review goodwill and indefinite-lived intangibles for impairment and any excess in carrying value over the estimated fair value is charged to the results of operations. Future reviews of goodwill and indefinite-lived intangibles could result in reductions. Any reduction in net income and operating income resulting from the write down or impairment of goodwill and indefinite-lived intangibles could adversely affect our financial results. If economic or industry conditions deteriorate or if market valuations decline, including with respect to our Class A common stock, we may be required to impair goodwill and indefinite-lived intangibles in future periods. We experience seasonal fluctuations in our results of operations. The institutions in our portfolio have a summer break, during which classes are generally not in session and minimal revenues are recognized. In addition to the timing of summer breaks, holidays such as Easter also have an impact on our academic calendar. Operating expenses, however, do not fully correlate to the enrollment and revenue cycles, as the institutions continue to incur expenses during summer breaks. Accordingly, our second and fourth quarters are stronger revenue quarters, as our institutions are in session for most of these respective quarters. Our first and third fiscal quarters are weaker revenue quarters because our institutions have summer breaks for some portion of one of these two quarters. Because a significant portion of our expenses do not vary proportionately with the fluctuations in our revenues, our results in a particular fiscal quarter may not indicate accurately the results we will achieve in a subsequent quarter or for the full fiscal year. 37 Connectivity constraints or technology system disruptions to our computer networks could have a material adverse effect on our ability to attract and retain students. We run the online operations of our institutions on different platforms, which are in various stages of development. The performance and reliability of these online operations are critical to the reputation of our institutions and our ability to attract and retain students. Any computer system error or failure, or a sudden and significant increase in traffic on our institutions’ computer networks may result in the unavailability of these computer networks. In addition, any significant failure of our computer networks could disrupt our on-campus operations. Individual, sustained or repeated occurrences could significantly damage the reputation of our institutions’ operations and result in a loss of potential or existing students. Additionally, the computer systems and operations of our institutions are vulnerable to interruption or malfunction due to events beyond our control, including natural disasters and other catastrophic events and network and telecommunications failures. The disaster recovery plans and backup systems that we have in place may not be effective in addressing a natural disaster or catastrophic event that results in the destruction or disruption of any of our critical business or information technology and infrastructure systems. As a result of any of these events, we may not be able to conduct normal business operations and may be required to incur significant expenses in order to resume normal business operations. As a result, our revenues and results of operations may be materially adversely affected. We are subject to privacy and information security laws and regulations due to our collection and use of personal information, and any violations of those laws or regulations, or any breach, theft or loss of that information, could materially adversely affect our reputation and operations. Possession and use of personal information in our operations subjects us to risks and costs that could harm our business. Our institutions collect, use and retain large amounts of personal information regarding our students and their families, including social security numbers, tax return information, personal and family financial data and credit card numbers. We also collect and maintain personal information of our employees in the ordinary course of our business. In addition, we collect and maintain other types of information, such as leads, that may include personal information of our business contacts in the ordinary course of our business. Our computer networks and the networks of certain of our vendors that hold and manage confidential information on our behalf may be vulnerable to unauthorized access, computer hackers, computer viruses, cyber-attacks and other security threats. Confidential information also may become available to third parties inadvertently when we integrate or convert computer networks into our network following an acquisition of an institution or in connection with upgrades from time to time. Due to the sensitive nature of the information contained on our networks, such as students’ grades, our networks may be targeted by hackers. A user who circumvents security measures could misappropriate proprietary information or cause interruptions or malfunctions in our operations. Although we use security and business controls to limit access and use of personal information, a third party may be able to circumvent those security and business controls, which could result in a breach of student or employee privacy. In addition, errors in the storage, use or transmission of personal information could result in a breach of student or employee privacy. As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these breaches. Furthermore, we are subject to a variety of laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data. For example, the European Union’s privacy and data security regulation, the General Data Protection Regulation (the “GDPR”), which went into effect in May 2018, imposes more stringent requirements in how we collect and process personal data and provides for significantly greater penalties for noncompliance (including possible fines of up to 4% of total company revenue). Countries in other regions, including Mexico and Peru, have passed or are considering similar privacy regulations, resulting in additional compliance burdens and uncertainty as to how some of these laws will be interpreted. We have invested, and expect to continue to invest, significant resources to comply with the GDPR and other privacy laws and regulations. A breach, theft or loss of personal information regarding our students and their families, our employees, or other persons that is held by us or our vendors, or a violation of the laws and regulations governing privacy in one or more of the countries in which we operate, could result in significant penalties or legal liability, reputational damage, and/or remediation and compliance costs, which could be substantial and materially adversely affect our business, financial condition and results of operations. Student protests and strikes may disrupt our ability to hold classes as well as our ability to attract and retain students, which could materially adversely affect our operations. Political, social and economic developments in the countries in which we operate may cause protests and disturbances against conditions in those countries, including policies relating to the operation and funding of higher education institutions. These 38 disturbances may involve protests on university campuses, including the occupation of university buildings and the disruption of classes. We are unable to predict whether students at institutions in the Laureate International Universities network will engage in various forms of protest in the future. Should we sustain student strikes, protests or occupations in the future, it could have a material adverse effect on our results of operations and on our overall financial condition. Further, we may need to make additional investments in security infrastructure and personnel on our campuses in order to prevent future student protests from disrupting the ability of our institutions to hold classes. If we are required to make substantial additional investments in security, or if we are unable to identify security enhancements that would prevent future disruptions of classes, that could cause an adverse effect on our results of operations and financial condition. In addition, we may need to pay overtime compensation to certain of our faculty and staff, which may increase our overall costs. We may be unable to operate one or more of our institutions or suffer liability or loss due to a natural or other disaster. Our institutions are vulnerable to natural or other disasters, including fires, floods, earthquakes, hurricanes and other events beyond our control. A number of our institutions in Mexico and Peru are located in areas that are prone to damage from major weather events, which may be substantial. For example, in 2017, Peru’s normally arid regions experienced historic, torrential rainfall and subsequent flooding. At least one of our campuses located there suffered flood-related damage. There, as elsewhere in the country, flood-related damage caused a range of disruptions, including in our case a delay in the regularly scheduled start of classes for the semester, which caused revenue disruptions. In addition, a number of our institutions in Mexico and Peru are located in areas that are prone to earthquake damage. For example, in 2017, a magnitude 7.1 earthquake struck Mexico, causing a temporary suspension of activities at several UVM and UNITEC campuses located in the affected states of Mexico City, Puebla, Veracruz, Morelos, Chiapas and Estado de México. UVM and UNITEC temporarily suspended all activities on 21 campuses at the request of the Ministry of Education. The temporary suspension lasted 12 days on average and we incurred significant direct costs for repairs due to the earthquake. It is possible that one or more of our institutions would be unable to operate for an extended period of time in the event of a hurricane, earthquake or other disaster that causes substantial damage to the area in which an institution is located. The failure of one or more of our institutions to operate for a substantial period of time could have a material adverse effect on our results of operations. In the event of a major natural or other disaster, we could also experience loss of life of students, faculty members and administrative staff, or liability for damages or injuries. We may be unable to recruit, train and retain qualified and experienced faculty and administrative staff at our institutions. Our success and ability to grow depend on the ability to hire and retain large numbers of talented people. The process of hiring employees with the combination of skills and attributes required to implement our business strategy can be difficult and time-consuming. Our faculty members in particular are key to the success of our institutions. We face competition in attracting and retaining faculty members who possess the necessary experience and accreditation to teach at our institutions. It may be difficult to maintain consistency in the quality of our faculty and administrative staff. If we are unable to, or are perceived to be unable to, attract and retain experienced and qualified faculty, our business, financial condition and results of operations may be materially adversely affected. If we are unable to upgrade our campuses, they may become less attractive to parents and students and we may fail to grow our business. All of our institutions require periodic upgrades to remain attractive to parents and students. Upgrading the facilities at our institutions could be difficult for a number of reasons, including the following: • our properties may not have the capacity or configuration to accommodate proposed renovations; • construction and other costs may be prohibitive; • we may fail to obtain regulatory approvals; • it may be difficult and expensive to comply with local building and fire codes, especially as to properties that we acquired as part of past acquisitions; • we may be unable to finance construction and other costs; and • we may not be able to negotiate reasonable terms with our landlords or developers or complete the work within acceptable timeframes. 39 Our failure to upgrade the facilities of our institutions could lead to lower enrollment and could cause a material adverse effect on our business, financial condition and results of operations. If we fail to attract and retain the key talent needed for us to timely achieve our business objectives, our business and results of operations could be harmed. The marketplace for senior executive management candidates is very competitive. As we continue to implement changes to our corporate structure, we may experience higher unplanned turnover than in prior periods. Unplanned or repeated turnover within the senior management ranks in the corporate headquarters or in the regions in which we operate can lead to instability or weakness in oversight that creates the conditions for gaps in performance and non-compliance with our control environment or public company reporting requirements. Any one of these occurrences could adversely affect our stock price, results of operations, ability to timely report financial results, or business relationships and can make recruiting for future management positions more difficult. Competition for senior leadership may increase our overall compensation expenses, whether resulting from new hires or retention, which may negatively affect our profitability. Litigation may materially adversely affect our business, financial condition and results of operations. Our business is subject to the risk of litigation by employees, students, suppliers, competitors, minority partners, counterparties in transactions in which we purchase or sell assets, stockholders, government agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation, some of which may take place in jurisdictions in which local parties may have certain advantages over foreign parties. The outcome of litigation, particularly class action lawsuits, regulatory actions and intellectual property claims, is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, or may assert criminal charges, and the magnitude of the potential loss relating to these lawsuits may remain unknown for substantial periods of time. In addition, certain of these lawsuits, if decided adversely to us or settled by us, may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operation are required. The cost to defend future litigation may be significant. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may materially adversely affect our business, financial condition and results of operations. See “Item 3—Legal Proceedings.” We are subject to anti-corruption laws in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (the “FCPA”), as well as trade compliance and economic sanctions laws and regulations. Our failure to comply with these laws and regulations could subject us to civil and criminal penalties, harm our reputation and materially adversely affect our business, financial condition and results of operations. Doing business on a worldwide basis requires us to comply with the laws and regulations of numerous jurisdictions. These laws and regulations place restrictions on our operations and business practices. In particular, we are subject to the FCPA, which generally prohibits companies and their intermediaries from providing anything of value to foreign officials for the purpose of obtaining or retaining business or securing any improper business advantage, along with various other anti-corruption laws. As a result of doing business in foreign countries and with foreign partners, we are exposed to a heightened risk of violating anti-corruption laws. Although we have implemented policies and procedures designed to ensure that we, our employees and other intermediaries comply with the FCPA and other anti-corruption laws to which we are subject, there is no assurance that such policies or procedures will work effectively all of the time or protect us against liability under the FCPA or other laws for actions taken by our employees and other intermediaries with respect to our business or any businesses that we may acquire. We cannot assure you that all of our local partners will comply with these laws, in which case we could be held liable for actions taken inside or outside of the United States, even though our partners may not be subject to these laws. Any development of new partnerships and joint venture relationships worldwide would increase the risk of FCPA violations in the future. Violations of anti-corruption laws, export control laws and regulations, and economic sanctions laws and regulations are punishable by civil penalties, including fines, as well as criminal fines and imprisonment. If we fail to comply with the FCPA or other laws governing the conduct of international operations, we may be subject to criminal and civil penalties and other remedial measures, which could materially adversely affect our business, financial condition, results of operations and liquidity. Any investigation of any potential violations of the FCPA or other anti-corruption laws, export control laws and regulations, and economic sanctions laws and regulations by the United States or foreign authorities could also materially adversely affect our business, financial condition, results of operations and liquidity, regardless of the outcome of the investigation. 40 We have in the past had material weaknesses in our internal control over financial reporting. In 2018, we remediated each of the four material weaknesses that were previously identified and were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. See “Item 9A. Controls and Procedures—Remediation of Material Weaknesses” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. However, we may in the future discover areas of our internal financial and accounting controls and procedures that need improvement. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, regardless of how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements, and we or our independent registered public accounting firm may conclude that our internal controls over financial reporting are not effective or our independent registered public accounting firm may not be able to provide us with an unqualified opinion as required by Section 404 of the Sarbanes-Oxley Act. If that were to happen, investors could lose confidence in our reported financial information, which could lead to a decline in the market price of our Class A common stock and we could be subject to sanctions or investigations by the stock exchange on which our Class A common stock is listed, the SEC or other regulatory authorities. Additionally, the existence of any material weakness could require management to devote significant time and incur significant expense to remediate any such material weakness and management may not be able to remediate any such material weakness in a timely manner. The existence of any material weakness in our internal control over financial reporting also could result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause the holders of our Class A common stock to lose confidence in our reported financial information, all of which could materially adversely affect our business and share price. Risks Relating to Walden University, which is included in our Discontinued Operations, and the Highly Regulated Higher Education Industry in the United States Failure of Walden University to comply with extensive regulatory requirements could result in significant monetary liabilities, fines and penalties, restrictions on our operations, limitations on our growth, or loss of access to federal student loans and grants for our students, on which we are substantially dependent. Walden University, our postsecondary educational institution in the United States, is subject to extensive regulatory requirements, including at the federal, state, and accrediting agency levels. Many students at Walden University rely on the availability of federal student financial aid programs, known as Title IV programs, which are administered by the DOE, to finance their cost of attending our institution. For the fiscal year ended December 31, 2020, Walden University derived approximately 76% of its revenues (calculated on a cash basis) from Title IV program funds. To participate in Title IV programs, Walden University must be authorized by the appropriate state education agency or agencies, accredited by an accrediting agency recognized by the DOE, and certified as an eligible institution by the DOE. As a result, Walden University is subject to extensive regulation and review by these agencies and commissions, including our educational programs, instructional and administrative staff, administrative procedures, marketing, student recruiting and admissions, and financial operations. These regulations also affect our ability to acquire or open additional institutions, add new educational programs, substantially change existing programs or change our corporate or ownership structure. The agencies and commissions that regulate our operations periodically revise their requirements and modify their interpretations of existing requirements. Regulatory requirements are not always precise and clear, and regulatory agencies may sometimes disagree with the way we interpret or apply these requirements. If we misinterpret or are found to have not complied with any of these regulatory requirements, Walden University could suffer financial penalties, limitations on its operations, loss of accreditation, termination of or limitations on its ability to grant degrees and certificates, or limitations on or termination of its eligibility to participate in Title IV programs, each of which could materially adversely affect our business, financial condition and results of operations. In addition, if we are charged with regulatory violations, our reputation could be damaged, which could have a negative impact on our enrollments and materially adversely affect our business, financial condition and results of operations. We cannot predict with certainty how all of these regulatory requirements will be applied, or whether we will be able to comply with all of the applicable requirements in the future. 41 If Walden University were to lose its eligibility to participate in Title IV programs, we would experience a material and adverse decline in revenues, financial condition, results of operations, and future growth prospects. Furthermore, Walden University would be unable to continue its business as it is currently conducted, which could have a material adverse effect on the institution’s ability to continue as a going concern. If any of the U.S. education regulatory agencies or commissions that regulate us do not approve or delay any required approvals of transactions involving a change of control, our ability to operate or participate in Title IV programs may be impaired. If we or Walden University experiences a change of ownership or control under the standards of the DOE, any applicable accrediting agency, any applicable state educational licensing agency or any specialized accrediting agency, we must notify or seek approval of each such agency or commission. These agencies do not have uniform criteria for what constitutes a change of ownership or control. Transactions or events that typically constitute a change of ownership or control include significant acquisitions or dispositions of shares of the voting stock of an institution or its parent company, and significant changes in the composition of the board of directors of an institution or its parent company. The occurrence of some of these transactions or events may be beyond our control. Our failure to obtain, or a delay in receiving, approval of any change of control from the DOE or any applicable accrediting agency or state educational licensing agency could impair Walden University’s ability to operate or participate in Title IV programs, which could have a material adverse effect on our business, financial condition and results of operations. Failure to obtain, or a delay in receiving, approval of any change of control from any state in which Walden University is currently licensed or authorized, or from any applicable accrediting agency, could require us to suspend our activities in that state or suspend offering applicable programs until we receive the required approval, or could otherwise impair our operations. In connection with the contemplated acquisition of Walden University by Adtalem Global Education Inc. (“Adtalem”), Walden has filed a pre-acquisition review application with the DOE and also has filed an application for approval of the change of ownership with its primary accreditor, the Higher Learning Commission, as well as with various state educational agencies and programmatic accrediting agencies that require that such changes be approved prior to their occurrence. Our failure to obtain any required approval of any transactions from the DOE, the institutional accrediting agencies or the pertinent state educational agencies, including in connection with the contemplated acquisition of Walden University by Adtalem, could result in Walden University losing continued eligibility to participate in the Title IV programs, accreditation or state licensure, which could have a material adverse effect on our U.S. business, financial condition and results of operations. Congress may revise the laws governing Title IV programs or reduce funding for those and other student financial assistance programs, and the DOE may revise its regulations administering Title IV programs, any of which could reduce our enrollment and revenues and increase costs of operations. The U.S. Higher Education Act (the “HEA”) is a federal law that governs Title IV programs. The U.S. Congress must authorize and appropriate funding for Title IV programs under the HEA and can change the laws governing Title IV programs at any time. Congress reauthorizes the HEA, which governs federal financial assistance for higher education, generally every five to ten years. The HEA was most recently reauthorized in August 2008; however, the Consolidated Appropriations Act for federal fiscal year 2021 included a number of significant changes to federal student aid policy, including changes to the needs analysis applicable to certain Title IV programs, expanded eligibility for Pell Grants and a repeal of the limitation on lifetime subsidized loan eligibility for undergraduate students. It is likely that there will be bills introduced in the current 117 th Congress to reauthorize and further amend the HEA. We cannot predict the timing and terms of any eventual HEA reauthorization, including any potential changes to institutional participation, student eligibility requirements or funding levels for particular Title IV programs, which terms may materially adversely affect our business, financial condition and results of operations. Apart from Title IV programs, eligible veterans and military personnel may receive educational benefits for the pursuit of higher education. We cannot predict with certainty the future funding levels for Title IV programs, or for programs providing educational benefits to veterans and military personnel, or the nature of any future revisions to the law or regulations related to these programs. Because a significant percentage of the revenues of Walden University is and is expected to be derived from Title IV programs, any action by the U.S. Congress that significantly reduces Title IV program funding or the ability of our U.S. students to participate in Title IV programs could have a material adverse effect on Walden University’s enrollments, business, financial condition and results of operations. In recent years, the DOE has proposed or promulgated a substantial number of new regulations that impact Walden University, including, but not limited to, borrower defenses to repayment, state authorization, and financial responsibility. For additional 42 information regarding these regulations, see: “—The DOE has adopted regulations governing federal student loan debt forgiveness that could result in liability for amounts based on borrower defenses or affect the DOE’s assessment of our institutional capability”; “—If Walden University fails to obtain or maintain any of its state authorizations in states in which such authorization is required or fail to comply with the laws and regulations of such states, it may not be able to operate or enroll students in that state, and may not be able to award Title IV program funds to students”; and “—If Walden University does not meet specific financial responsibility standards established by the DOE, it may be required to post a letter of credit or accept other limitations to continue participating in Title IV programs, or it could lose its eligibility to participate in Title IV programs”. Any of these new or proposed regulations could have a material adverse effect on Walden University’s enrollments, business, financial condition, and results of operations. On November 1, 2019, the DOE published final regulations regarding state authorization for programs offered through distance education and accreditation requirements, and those regulations became effective on July 1, 2020. For additional information regarding these regulations, see: “—If any Walden University fails to obtain or maintain any of its state authorizations in states in which such authorization is required or fail to comply with the laws and regulations of such states, it may not be able to operate or enroll students in that state, and may not be able to award Title IV program funds to students.” As part of a 2019 negotiating rulemaking, the DOE considered changes to current regulations pertaining to the definition of distance education and to the disbursement of Title IV funds for competency-based education programs resulting in the issuance of a final rule in August 2020 and final rules on the topic that will become effective on July 1, 2021. We cannot predict with certainty when these or other DOE regulations would be finalized or effective or the impact that such new regulations could have on our business, financial conditions or results of operations. The DOE has adopted regulations governing federal student loan debt forgiveness that could result in liability for amounts based on borrower defenses or affect the DOE’s assessment of our institutional capability. On November 1, 2016, the DOE published a rule that, among other provisions, established new standards and processes for determining whether a William D. Ford Federal Direct Loan Program (“Direct Loan Program”) borrower has a defense to repayment (“DTR”) on a loan due to acts or omissions by the institution at which the loan was used by the borrower for educational expenses (the “2016 DTR regulations”). Among other topics, the 2016 DTR regulations established permissible borrower defense claims for discharge, procedural rules under which claims would be adjudicated, time limits for borrowers’ claims, and guidelines for recoupment by the DOE of discharged loan amounts from institutions of higher education. These aspects of the 2016 DTR regulations are applicable to loans disbursed under the Direct Loan Program on or after July 1, 2017 and before July 1, 2020. On September 23, 2019, the DOE published final regulations revising the 2016 DTR regulations and addressing certain financial responsibility and other matters (the “2019 DTR regulations”). The 2019 DTR regulations became effective on July 1, 2020. Among other things, the 2019 DTR Regulations modify the process and standards by which borrowers can assert a defense to the borrowers’ obligation to repay certain Title IV loans first disbursed on or after July 1, 2020. A borrower may assert a defense to repayment if he or she can establish, by a preponderance of the evidence, that the participating institution misrepresented a material fact on which the borrower reasonably relied when deciding to undertake the loan, so long as the misrepresentation “clearly and directly” relates to initial or continued enrollment at the institution, concerns the institution’s provision of educational services, and also results in financial harm to the borrower. The 2019 DTR regulations establish revised definitions for misrepresentation and financial harm and generally require a borrower to assert his or her defense to repayment within three (3) years from the date on which the student ceased to be enrolled at the institution. The 2019 DTR regulations also give the DOE five (5) years in which to seek recovery of the discharged amount from the institution, after a final written decision that a borrower is entitled to a defense to repayment. The 2019 DTR regulations also modify the “triggers” that the DOE considers early warning signs of financial difficulty, the occurrence of which may require an institution to provide the DOE with a letter of credit or other surety. The 2019 DTR regulations also include provisions regarding the treatment of operating leases in the financial responsibility composite score methodology, more specifically define and require disclosures concerning the composite score’s inclusion of debt obtained for long-term purposes, and revise limited aspects of the composite score formula to account for changes in accounting terminology. The 2019 DTR regulations took effect on July 1, 2020, except for certain financial responsibility provisions that the DOE has designated for early implementation if an institution wishes to do so. We cannot state with any certainty the impact that complying with the 2016 DTR regulations and the 2019 DTR regulations might have on our business. If we are required to repay the DOE for any successful DTR claims by students who attended Walden University, or if we are required to obtain additional letters of credit or increase our current letter of credit, it could materially affect our business, financial conditions and results of operations. 43 Walden University must periodically seek recertification to participate in Title IV programs and, if the DOE does not recertify the institution to continue participating in Title IV programs, our students would lose their access to Title IV program funds, or the institution could be recertified but required to accept significant limitations as a condition of continued participation in Title IV programs. DOE certification to participate in Title IV programs lasts a maximum of six years, and institutions are required to seek recertification from the DOE on a regular basis to continue their participation in Title IV programs. An institution must also apply for recertification by the DOE if it undergoes a change in control, as defined by DOE regulations, and may be subject to similar review if it expands its operations or educational programs in certain ways. Generally, the recertification process includes a review by the DOE of the institution’s educational programs and locations, administrative capability, financial responsibility and other oversight categories. The DOE could limit, suspend or terminate an institution’s participation in Title IV programs for violations of the HEA or Title IV regulations. As discussed in more detail under “Item 1—Business—Industry Regulation—Discontinued Operations—U.S. Regulation,” Walden University currently participates in the Title IV programs pursuant to the DOE’s provisional form of certification on a month-to-month basis. If the DOE does not renew or withdraws Walden University’s certifications to participate in Title IV programs at any time, students would no longer be able to receive Title IV program funds. Similarly, the DOE could renew Walden University’s certifications, but restrict or delay Title IV funding, limit the number of students to whom it could disburse such funds or impose other restrictions. In addition, the DOE may take emergency action to suspend Walden University’s certifications without advance notice if it receives reliable information that the institution is violating Title IV requirements and it determines that immediate action is necessary to prevent misuse of Title IV funds. Any of these outcomes could have a material adverse effect on Walden University’s enrollments and our business, financial condition and results of operations. Walden University would lose its ability to participate in Title IV programs if it fails to maintain its institutional accreditation, and our student enrollments could decline if we fail to maintain any of our accreditations or approvals. An institution must be accredited by an accrediting agency recognized by the DOE to participate in Title IV programs. Walden University is so accredited, and such accreditation is subject to renewal or review periodically or when necessary. If Walden University fails to satisfy any of its accrediting commission’s standards, it could lose its accreditation by its respective accrediting commission, which would cause it to lose eligibility to participate in Title IV programs and experience a significant decline in total student enrollments. In addition, Walden University’s individual educational programs are accredited by specialized accrediting commissions or approved by specialized state agencies. If Walden University fails to satisfy the standards of any of those specialized accrediting commissions or state agencies, it could lose the specialized accreditation or approval for the affected programs, which could result in materially reduced student enrollments in those programs and have a material adverse effect on our business, financial condition and results of operations. In addition, if one of Walden University’s accrediting bodies loses recognition by the DOE, the institution could lose its ability to participate in Title IV programs. If Walden University fails to obtain or maintain any of its state authorizations in states in which such authorization is required or fails to comply with the laws and regulations of such states, it may not be able to operate or enroll students in that state, and may not be able to award Title IV program funds to students. The DOE requires that an educational institution be authorized in each state in which it physically operates in order to participate in Title IV programs. The level of regulatory oversight varies substantially from state to state. Walden University is authorized by the Minnesota Office of Higher Education, the applicable state educational licensing agency of its home state, to operate and to grant degrees or diplomas, which authorizations are required for students at the institution to be eligible to receive funding under Title IV programs. If Walden University fails to continuously satisfy applicable standards for maintaining its state authorization in a state in which it is physically located, it could lose its authorization from the applicable state educational agency to offer educational programs and could be forced to cease operations in that state. Such a loss of authorization would also cause its location in the state to lose eligibility to participate in Title IV programs, which could have a material adverse effect on our business, financial condition and results of operations. We are subject to extensive laws and regulations by the states in which we are authorized or licensed to operate. State laws typically establish standards for instruction, qualifications of faculty, administrative procedures, marketing, recruiting, financial operations and other operational matters. State laws and regulations are subject to change and may limit our ability to offer educational programs and to award degrees and may limit the ability of our students to sit for certification exams in their chosen fields of study. In addition, as mentioned above, attorneys general in several states have become more active in enforcing state consumer protection laws. In addition, we may be subject to litigation by private parties alleging that we violated state laws regarding the educational programs we provide and their operations. 44 Many states also have sought to assert jurisdiction, whether through adoption of new laws and regulations or new interpretations of existing laws and regulations, over out-of-state educational institutions offering online degree programs that have no physical location or other presence in the state, but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state. State regulatory requirements for online education are inconsistent between states and not well developed in many jurisdictions. As such, these requirements change frequently and, in some instances, are not clear or are left to the discretion of state employees or agents. State regulatory agencies may sometimes disagree with the way we have interpreted or applied these requirements. Any misinterpretation by us of these regulatory requirements or adverse changes in regulations or interpretations of these regulations by state licensing agencies could have a material adverse effect on our business, financial condition and results of operations. Our online educational programs offered by Walden University and the constantly changing regulatory environment require us to continually evaluate our state regulatory compliance activities. We review the licensure or authorization requirements of other states to determine whether our activities in those states constitute a presence or otherwise require licensure or authorization by the respective state education agencies. In recent years, regional state compacts have created the National Council for State Authorization Reciprocity Agreements (“NC-SARA”), which is a voluntary agreement among member states and U.S. territories that establishes comparable national standards for interstate offering of postsecondary distance-education courses and programs. As of the date of this filing, all states except California participate in NC-SARA. NC-SARA requires each participating institution to have a federal composite score as measured by the DOE at the parent level of a 1.5 (or a 1.0 with justification acceptable to the state). Walden University does not participate in NC-SARA because the most recent federal composite score for Laureate as measured by the DOE is below 1.0. Accordingly, Walden University must apply for and comply with each state’s applicable authorization requirements related to its distance education activities. Many states have established or are proposing legislation or regulations to create new or different criteria for authorization of “non-SARA” institutions, including requiring them to post bonds and/or meet composite score requirements. If Walden University does not meet these requirements, it may not enroll students in that state, which could have a material impact on our business. Additionally, the DOE recently revised its state authorization requirements pertaining to distance education. On November 1, 2019, the DOE published final regulations revising its requirements relating to state authorization for programs offered through distance education. These regulations became effective on July 1, 2020. Among other provisions, these final regulations require that an institution participating in the Title IV federal student aid programs and offering post-secondary education through distance education be authorized by each state in which the institution enrolls students, if such authorization is required by the state. The final regulations also eliminated or revised certain disclosure requirements applicable to institutions participating in the Title IV federal student aid programs. The DOE stated that it would accept, although it does not require, authorization through participation in a state authorization reciprocity agreement; provided that the agreement does not prevent a state from enforcing its own general-purpose laws or regulations outside of the state authorization of distance education. Any failure to comply with state requirements for our campuses or our distance education programs, or any new or modified regulations at the federal or state level, could result in our inability to enroll students or receive Title IV funds for students in those states and could result in restrictions on our growth and enrollments. If Walden University fails to comply with state licensure or authorization requirements, we could be subject to various sanctions, including restrictions on recruiting students, providing educational programs and other activities in that state, and fines and penalties. Additionally, new laws, regulations or interpretations related to providing online educational programs and services could increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, negatively affect enrollments and revenues and otherwise have a material adverse effect on our business, financial condition and results of operations. The inability of our graduates to obtain licensure or other specialized outcomes in their chosen professional fields of study could reduce our enrollments and revenues, and potentially lead to litigation that could be costly to us. Certain of our graduates seek professional licensure or other specialized outcomes in their chosen fields following graduation. Their success in obtaining these outcomes depends on several factors, including the individual merits of the learner, but also may depend on whether the institution or its programs were approved by the state or by a professional association, whether the program from which the learner graduated meets all state requirements and whether the institution is accredited. In addition, professional associations may refuse to certify specialized outcomes for our learners. The state requirements for licensure are subject to change, as are the professional certification standards, and we may not immediately become aware of changes that may impact our learners in certain instances. In the event that one or more states refuses to recognize our learners for professional licensure, and/or professional associations refuse to certify specialized outcomes for our learners, based on factors relating to our institution or programs, the potential growth of our programs would be negatively affected, which could have a 45 material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we could be exposed to litigation that would force us to incur legal and other expenses that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Increased regulatory and enforcement effort of consumer protection laws could be a catalyst for legislative or regulatory restrictions, investigations, enforcement actions and claims that could, individually or in the aggregate, materially adversely affect our business, financial condition, results of operations and cash flows. In recent years, the proprietary education industry has experienced broad-based, intensifying scrutiny in the form of increased investigations and enforcement actions. Attorneys general and educational authorizing agencies in several states, as well as the FTC and Consumer Financial Protection Bureau have become more active in enforcing consumer protection laws, especially related to recruiting practices and the financing of education at proprietary educational institutions. In addition, the DOE has specific rules prohibiting substantial misrepresentations to students, members of the public, accrediting agencies and state licensing agencies, as well as the DOE. In the event that the DOE determines that an institution engaged in a substantial misrepresentation, it can revoke the institution’s program participation agreement, impose limitations on the institution’s participation in Title IV programs, deny participation applications on behalf of the institution, or seek to fine, suspend or terminate the institution’s participation in Title IV programs. These regulations provide grounds for private litigants to seek to enforce the expanded regulations through False Claims Act litigation. On September 14, 2020, Walden University received a letter from the Civil Division of the United States Department of Justice (referred to herein as “DOJ”) indicating that the DOJ is examining whether Walden University, in the operation of its Masters of Science in Nursing program (referred to herein as the “Nursing Program”), may have violated the Federal False Claims Act by misrepresenting compliance with its program participation agreement with the DOE, which agreement covers Walden University’s participation in federal student financial aid programs under Title IV of the U.S. Higher Education Act. The letter invites Walden University to provide information regarding a number of specific areas primarily related to the practicum component of its Nursing Program, but it makes no allegations of any misconduct or wrongdoing by Walden University. Further, on November 9, 2020, Walden University received notice from the Higher Learning Commission (“HLC”) that a public “Governmental Investigation” designation would be assigned to Walden University due to the DOJ inquiry and such designation became effective on November 9, 2020. On November 24, 2020, representatives of Walden University met with individuals from the DOJ to present the information requested. While Laureate is cooperating with the DOJ’s request to voluntarily provide information, it cannot predict the timing or outcome of this matter. At this time, Laureate does not believe that this matter will have a material effect on its financial position, results of operations, or cash flows. Further, consistent with the HLC’s policies and procedures, a Governmental Investigation designation by the HLC could delay or prevent the HLC’s approval of a substantive change application to approve the pending sale of Walden University. We continue to evaluate these regulatory developments and the potential impact, if any, on the pending sale of Walden University. In the event that any of our past or current business practices are found to violate applicable consumer protection laws, or if we are found to have made misrepresentations to our current or prospective students about our educational programs, we could be subject to monetary fines or penalties and possible limitations on the manner in which we conduct our business, which could materially adversely affect our business, financial condition, results of operations and cash flows. To the extent that more states or government agencies commence investigations, act in concert, or direct their focus on Walden University, the cost of responding to these inquiries and investigations could increase significantly, and the potential impact on our business would be substantially greater. If Walden University does not comply with the DOE’s “administrative capability” standards, we could suffer financial penalties, be required to accept other limitations to continue participating in Title IV programs or lose our eligibility to participate in Title IV programs. DOE regulations specify extensive criteria an institution must satisfy to establish that it has the requisite “administrative capability” to participate in Title IV programs. These criteria require, among other things, that we comply with all applicable Title IV program regulations; have capable and sufficient personnel to administer the federal student financial aid programs; not have student loan cohort default rates in excess of specified levels; have acceptable methods of defining and measuring the satisfactory academic progress of our students; have various procedures in place for safeguarding federal funds; not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that is cause for debarment or suspension; provide financial aid counseling to our students; refer to the DOE’s Office of Inspector General any credible information indicating that any applicant, student, employee or agent of the institution has been engaged in any fraud or other illegal conduct involving Title IV programs; submit in a timely manner all reports and financial statements required by Title IV regulations; and not otherwise appear to lack administrative capability. If an institution fails to satisfy any of these criteria or comply with any other DOE regulations, the DOE may change the institution’s method of receiving Title IV program 46 funds, which in some cases may result in a significant delay in the institution’s receipt of those funds; place the institution on provisional certification status; or commence a proceeding to impose a fine or to limit, suspend or terminate the participation of the institution in Title IV programs. Thus, if Walden University were found not to have satisfied the DOE’s “administrative capability” requirements, we could be limited in our access to, or lose, Title IV program funding, which could significantly reduce our enrollments and have a material adverse effect on our business, financial condition and results of operations. We could also be subject to fines or penalties related to findings cited in our regulatory compliance reviews. For more information, see “—Government, regulatory agencies, accrediting bodies and third parties may conduct compliance reviews, bring claims or initiate litigation against us.” If Walden University does not meet specific financial responsibility standards established by the DOE, it may be required to post a letter of credit or accept other limitations to continue participating in Title IV programs, or it could lose its eligibility to participate in Title IV programs. To participate in Title IV programs, Walden University must satisfy specific measures of financial responsibility prescribed by the DOE, or post a letter of credit in favor of the DOE and possibly accept other conditions on its participation in Title IV programs. These financial responsibility tests are applied on an annual basis based on an institution’s audited financial statements, and may be applied at other times, such as if an institution undergoes a change in control. The DOE may also apply such measures of financial responsibility to an eligible institution’s operating company and ownership entities and, if such measures are not satisfied by the operating company or ownership entities, require the institution to post a letter of credit in favor of the DOE and possibly accept other conditions on its participation in Title IV programs. The operating restrictions that may be placed on an institution that does not meet the quantitative standards of financial responsibility include changes to the method of receiving Title IV program funds, which in some cases may result in a significant delay in the institution’s receipt of those funds. Limitations on, or termination of, our participation in Title IV programs as a result of our failure to demonstrate financial responsibility would limit our students’ access to Title IV program funds, which could significantly reduce enrollments and have a material adverse effect on our business, financial condition and results of operations. As described in more detail under “Item 1—Business—Industry Regulation—Discontinued Operations—U.S. Regulation” in this Form 10-K, the DOE annually assesses Walden University’s financial responsibility through a composite score determination based on the Laureate consolidated audited financial statements and not at the individual institutional level. Based on Laureate’s composite score for its fiscal year ended December 31, 2019, the DOE determined that it and, consequently, Walden University, failed to meet the standards of financial responsibility. As a result, in a letter sent to Laureate on September 11, 2020, the Department required Laureate to decrease its existing letter of credit to $83.6 million (10% of the Title IV program funds that Walden University and the other institutions that Laureate owned in the U.S. at that time received during the most recently completed fiscal year), continued the institutions on Heightened Cash Monitoring 1 and required Laureate to continue to comply with additional notification and reporting requirements, including submitting bi‑weekly cash flow statements for Laureate and monthly student rosters of the institutions, which has been a requirement since April 2018. On November 1, 2019, as part of the 2019 DTR regulations, the DOE updated its general standards of financial responsibility to include various actions and events that would require institutions to provide the DOE with irrevocable letters of credit upon the occurrence of certain triggering events. For additional information regarding this rule and current rulemaking, see “—The DOE has adopted regulations governing federal student loan debt forgiveness that could result in liability for amounts based on borrower defenses or affect the DOE’s assessment of our institutional capability.” If we are required to repay the DOE for any successful DTR claims by students who attended Walden University, or we are required to obtain additional letters of credit or increase our current letter of credit, it could materially affect our business, financial conditions and results of operations. In addition, an institution participating in Title IV programs must calculate the amount of unearned Title IV program funds that it has disbursed to students who withdraw from their educational programs before completing such programs and must return those unearned funds to the appropriate lender or the DOE in a timely manner, generally within 45 days of the date the institution determines that the student has withdrawn. If Walden University does not properly calculate and timely return the unearned funds for a sufficient percentage of students, it may have to post a letter of credit in favor of the DOE equal to 25% of Title IV program funds that should have been returned for such students in the prior fiscal year. Additionally, if Walden University does not correctly calculate and timely return unearned Title IV program funds, it may be liable for repayment of Title IV funds and related interest and may be fined, sanctioned, or otherwise subject to adverse actions by the DOE, including termination of its participation in Title IV programs. Any of these adverse actions could increase our cost of regulatory compliance and have a material adverse effect on our business, financial condition and results of operations. 47 The DOE may change Walden University’s method of receiving Title IV program funds, which could materially adversely affect our liquidity. The DOE can impose sanctions for violating the statutory and regulatory requirements of Title IV programs, including transferring Walden University from the advance method or the heightened cash monitoring level one method of Title IV payment, each of which permits an institution to receive Title IV funds before or concurrently with disbursing them to students, to the heightened cash monitoring level two method of payment or to the reimbursement method of payment, each of which may significantly delay an institution’s receipt of Title IV funds until student eligibility has been verified by the DOE. Any such delay in Walden University’s receipt of Title IV program funds may materially adversely affect our cash flows and we may require additional working capital or third-party funding to finance our operations. Walden University may lose eligibility to participate in Title IV programs if the percentage of its revenues derived from Title IV programs is too high. A provision of the HEA commonly referred to as the “90/10 Rule” provides that a for-profit educational institution loses its eligibility to participate in Title IV programs if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenues, the institution derives more than 90% of its revenues from Title IV program funds for any two consecutive fiscal years. If Walden University were to violate the 90/10 Rule, it would become ineligible to participate in Title IV programs as of the first day of the fiscal year following the second consecutive fiscal year in which it exceeded the 90% threshold and would be unable to regain eligibility for two fiscal years thereafter. In addition, an institution that derives more than 90% of its revenue (on a cash basis) from Title IV programs for any single fiscal year will be placed on provisional certification for at least two fiscal years and may be subject to additional conditions or sanctions imposed by the DOE. Using the DOE’s formula under the “90/10 Rule,” Walden University derived approximately 76% of its revenues (calculated on a cash basis) from Title IV program funds for the fiscal year ended December 31, 2020. Walden University’s ratio could increase in the future. Congressional increases in students’ Title IV grant and loan limits may result in an increase in the revenues we receive from Title IV programs. In recent years, legislation has been introduced in Congress that would revise the 90/10 Rule to consider educational benefits for veterans and military personnel from the Department of Veteran Affairs and Department of Defense, respectively, in the same manner as Title IV funds for purposes of the rule, to prohibit institutions from participating in Title IV programs for one year if they derive more than 90% of their total revenues (calculated on a cash basis) from the Title IV programs and these other federal programs in a single fiscal year rather than the current rule of two consecutive fiscal years. During the 116 th Congress, the U.S. House of Representatives considered legislation that would have revised the 90/10 Rule to an 85/15 rule and consider educational benefits for veterans and military personnel from the Department of Veteran Affairs and Department of Defense, respectively, in the same manner as Title IV funds for purposes of the rule. We cannot predict whether, or the extent to which, any of these proposed revisions may be considered in the current 117 th Congress or enacted into law. In addition, reductions in state appropriations in a number of areas, including with respect to the amount of financial assistance provided to post-secondary students, could further increase Walden University’s percentages of revenues derived from Title IV program funds. The employment circumstances of our students or their parents could also increase reliance on Title IV program funds. If Walden University becomes ineligible to participate in Title IV programs as a result of noncompliance with the 90/10 Rule, it could have a material adverse effect on our business, financial condition and results of operations. Walden University may lose eligibility to participate in Title IV programs if its student loan default rates are too high. An educational institution may lose eligibility to participate in Title IV programs if, for three consecutive years, 30% or more of its students who were required to begin repayment on their federal student loans in the relevant fiscal year default on their payment by the end of the next federal fiscal year. In addition, an institution may lose its eligibility to participate in Title IV programs if the default rate as determined by the DOE of its students exceeds 40% for any single year. The DOE generally publishes official cohort default rates annually in September for the repayment period that ended the prior September 30. Walden University’s official cohort default rates for the 2017, 2016, and 2015 federal fiscal years were 6.8%, 6.9%, and 7.3%, respectively. The average national student loan default rates published by the DOE for all institutions that participated in the federal student aid programs for 2017, 2016, and 2015 were 9.7%, 10.1%, and 10.8%, respectively, and for all proprietary institutions that participated in the federal student aid programs for 2017, 2016, and 2015 were 14.7%, 15.2%, and 15.6%, respectively. While we do not believe that Walden University is in danger of exceeding the regulatory default rate thresholds for other Title IV programs, we cannot provide any assurance that this will continue to be the case. Any increase in interest rates on federal loans, as well as declines in income or job losses for our students, could contribute to higher default rates on student loans. 48 Exceeding the student loan default rate thresholds and losing eligibility to participate in Title IV programs would have a material adverse effect on our business, financial condition and results of operations. Any future changes in the formula for calculating student loan default rates, economic conditions or other factors that cause our default rates to increase, could place Walden University in danger of losing its eligibility to participate in Title IV programs, which would have a material adverse effect on our business, financial condition and results of operations. We could be subject to sanctions or other adverse legal actions if Walden University were to pay impermissible commissions, bonuses or other incentive payments to individuals involved in or with responsibility for certain recruiting, admission or financial aid activities. Under the HEA, an institution participating in Title IV programs may not pay any commission, bonus or other incentive payments to any person involved in student recruitment or admissions or awarding of Title IV program funds, if such payments are based in any part, directly or indirectly, on success in enrolling students or obtaining student financial aid. Failure to comply could result in monetary penalties and/or sanctions imposed by the DOE, which could result in lower enrollments, revenue, and net operating income. The law and regulations governing this requirement do not establish clear criteria for compliance in all circumstances, creating uncertainty about what constitutes incentive compensation and which employees are covered by the regulation, rendering development of effective and compliant performance metrics more difficult to establish. In addition, in recent years, several for-profit education companies have been faced with whistleblower lawsuits under the Federal False Claims Act, known as “qui tam” cases, by current or former employees alleging violations of the prohibition against incentive compensation. If the DOE were to determine that we or Walden University violated the prohibition regarding impermissible commissions, or if we were to be found liable in a False Claims action alleging a violation of this law, or if any third parties we have engaged were to violate this law, we could be fined or sanctioned by the DOE, or subjected to other monetary liability or penalties that could be substantial, including the possibility of treble damages under a False Claims action, any of which could harm our reputation, impose significant costs and have a material adverse effect on our business, financial condition and results of operations. If we fail to maintain adequate systems and processes to detect and prevent fraudulent activity in student enrollment and financial aid, our business could be materially adversely affected. Higher educational institutions are susceptible to an increased risk of fraudulent activity by outside parties with respect to student enrollment and student financial aid programs. The DOE’s regulations require institutions that participate in Title IV programs to refer to the Office of Inspector General credible information indicating that any applicant, employee, third-party servicer or agent of the institution that acts in a capacity that involves administration of the Title IV programs has been engaged in any fraud or other illegal conduct involving Title IV programs. We cannot be certain that our systems and processes will always be adequate in the face of increasingly sophisticated and ever-changing fraud schemes. The potential for outside parties to perpetrate fraud in connection with the award and disbursement of Title IV program funds, including as a result of identity theft, may be heightened due to Walden University offering various educational programs via distance education. Any significant failure by Walden University to adequately detect fraudulent activity related to student enrollment and financial aid could result in loss of accreditation at the discretion of its accrediting agency, which would result in it losing eligibility for Title IV programs, or in direct action by the DOE to limit or terminate its Title IV program participation. Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations. Government, regulatory agencies, accrediting bodies and third parties may conduct compliance reviews, bring claims or initiate litigation against us. Because we operate in a highly regulated industry, we may be subject to compliance reviews and claims of noncompliance and lawsuits by government agencies, regulatory agencies and third parties, including claims brought by third parties on behalf of the federal government. For example, o n September 14, 2020, Walden University received a letter from the DOJ indicating that the DOJ is examining whether Walden University, in the operation of its Masters of Science in Nursing program, may have violated the Federal False Claims Act by misrepresenting compliance with its program participation agreement with the DOE, which agreement covers Walden University’s participation in federal student financial aid programs under Title IV of the U.S. Higher Education Act. For further detail, see “— Increased regulatory and enforcement effort of consumer protection laws could be a catalyst for legislative or regulatory restrictions, investigations, enforcement actions and claims that could, individually or in the aggregate, materially adversely affect our business, financial condition, results of operations and cash flows. ” On September 8, 2016, the Minnesota Office of Higher Education (“MOHE”) sent to Walden University an information request regarding its doctoral programs and complaints filed by doctoral students as part of a program review that MOHE was conducting. On October 23, 2019, MOHE completed its program review and issued a final report that indicated no findings of 49 noncompliance. As part of its report, MOHE made recommendations for Walden University to develop certain goals and benchmarks with respect to its doctoral programs. If the results of any federal proceeding are unfavorable to us, or if we are unable to defend successfully against lawsuits or claims, we may be required to pay money damages or be subject to fines, limitations, loss of eligibility for Title IV program funding at Walden University, injunctions or other penalties. We may also lose or have limitations imposed on our accreditations, licensing or Title IV program participation, be required to pay monetary damages or be limited in our ability to open new institutions or add new program offerings. Even if we adequately address issues raised by an agency review or successfully defend a lawsuit or claim, we may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those reviews or to defend against those lawsuits or claims. Additionally, we may experience adverse collateral consequences, including declines in the number of students enrolling at our institutions and the willingness of third parties to deal with us or our institutions, as a result of any negative publicity associated with such reviews, claims or litigation. Claims and lawsuits brought against us may damage our reputation or cause us to incur expenses, even if such claims and lawsuits are without merit, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Risks Relating to Our Indebtedness The fact that we have substantial debt could materially adversely affect our ability to raise additional capital to fund our operations and limit our ability to pursue our strategy or to react to changes in the economy or our industry. We have substantial debt. As of December 31, 2020, we had outstanding: (a) a multi-currency revolving credit facility (the “Revolving Credit Facility”) scheduled to mature in October 2024; (b) senior notes consisting of Senior Notes due 2025; and (c) other long term indebtedness, consisting of capital lease obligations, notes payable, seller notes and borrowings against certain lines of credit. Our debt could have important negative consequences to our business, including: • increasing the difficulty of our ability to make payments on our outstanding debt; • increasing our vulnerability to general economic and industry conditions because our debt payment obligations may limit our ability to use our cash to respond to or defend against changes in the industry or the economy; • requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities or to pay dividends; • limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; • limiting our ability to pursue our strategy; • limiting our ability to adjust to changing market conditions; and • placing us at a competitive disadvantage compared to our competitors who are less highly leveraged. We and our subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in the senior secured credit agreement governing our Revolving Credit Facility and the indenture governing our outstanding Senior Notes due 2025. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify. Our debt agreements contain, and future debt agreements may contain, restrictions that may limit our flexibility in operating our business. The senior secured credit agreement governing our Revolving Credit Facility and the indenture governing our outstanding Senior Notes due 2025 contain various covenants that may limit our ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries’ ability to, among other things: • pay dividends and make certain distributions, investments and other restricted payments; • incur additional indebtedness, issue disqualified stock or issue certain preferred shares; 50 • sell assets; • enter into transactions with affiliates; • create certain liens or encumbrances; • preserve our corporate existence; • merge, consolidate, sell or otherwise dispose of all or substantially all of our assets; and • designate our subsidiaries as unrestricted subsidiaries. In addition, the senior secured credit agreement governing our Revolving Credit Facility provides for compliance with the Consolidated Senior Secured Debt to Consolidated EBITDA Ratio, as defined in the senior secured credit agreement, which is tested quarterly. The maximum ratio, as defined, was 3.5x at December 31, 2020. As of December 31, 2020, we were in compliance with this covenant. The senior secured credit agreement governing our Revolving Credit Facility and the indenture governing our outstanding Senior Notes due 2025 also include cross-default provisions applicable to other agreements. A breach of any of these covenants could result in a default under the agreement governing such indebtedness, including as a result of cross-default provisions. In addition, failure to make payments or observe certain covenants on the indebtedness of our subsidiaries may cause a cross default on our Revolving Credit Facility and our outstanding Senior Notes due 2025. Upon our failure to maintain compliance with these covenants, the lenders could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If the lenders under such indebtedness accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay those borrowings, as well as our other indebtedness. We have pledged a significant portion of our assets as collateral under our Revolving Credit Facility. If we were unable to repay those amounts, the lenders under our Revolving Credit Facility could proceed against the collateral granted to them to secure that indebtedness. We rely on contractual arrangements and other payments, advances and transfers of funds from our operating subsidiaries to meet our debt service and other obligations. We conduct all of our operations through certain of our subsidiaries, and we have no significant assets other than cash of $632.5 million as of December 31, 2020 held at corporate entities and the capital stock or other control rights of our subsidiaries. As a result, we rely on payments from contractual arrangements, such as intellectual property royalty, network fee and management services agreements. In addition, we also rely upon intercompany loan repayments and other payments from our operating subsidiaries to meet any existing or future debt service and other obligations, a substantial portion of which are denominated in U.S. dollars. The ability of our operating subsidiaries to pay dividends or to make distributions or other payments to their parent companies or directly to us will depend on their respective operating results and may be restricted by, among other things, the laws of their respective jurisdictions of organization, regulatory requirements, agreements entered into by those operating subsidiaries and the covenants of any existing or future outstanding indebtedness that we or our subsidiaries may incur. Further, because most of our income is generated by our operating subsidiaries in non-U.S. dollar denominated currencies, our ability to service our U.S. dollar denominated debt obligations may be affected by any strengthening of the U.S. dollar compared to the functional currencies of our operating subsidiaries. Disruptions of the credit and equity markets worldwide may impede or prevent our access to the capital markets for additional funding to conduct our business and may affect the availability or cost of borrowing under our existing credit facility. The credit and equity markets of both mature and developing economies have historically experienced extraordinary volatility, asset erosion and uncertainty, leading to governmental intervention in the banking sector in the United States and abroad. If these market disruptions occur in the future, we may not be able to access the capital markets to obtain funding needed to refinance our existing indebtedness or conduct our business. In addition, changes in the capital or other legal requirements applicable to commercial lenders may affect the availability or increase the cost of borrowing under our Revolving Credit Facility. If we are unable to obtain needed capital on terms acceptable to us, we may need to limit our growth initiatives or take other actions that materially adversely affect our business, financial condition, results of operations and cash flows. 51 Risks Relating to Investing in Our Class A Common Stock As a public benefit corporation, our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance. As a public benefit corporation, we may take actions that we believe will benefit our students and the surrounding communities, even if those actions do not maximize our short- or medium-term financial results. While we believe that this designation and obligation will benefit the Company given the importance to our long-term success of our commitment to education, it could cause our board of directors to make decisions and take actions not in keeping with the short-term or more narrow interests of our stockholders. Any longer-term benefits may not materialize within the timeframe we expect or at all and may have an immediate negative effect. For example: • we may choose to revise our policies in ways that we believe will be beneficial to our students and their communities in the long term, even though the changes may be costly in the short- or medium-term; • we may take actions, such as modernizing campuses to provide students with the latest technology, even though these actions may be more costly than other alternatives; • in exiting a market that is not meeting our goals, we may choose to “teach out” the existing student body over several years rather than lose an institution; even though this could be substantially more expensive; • we may be influenced to pursue programs and services to demonstrate our commitment to our students and communities even though there is no immediate return to our stockholders; or • in responding to a possible proposal to acquire the Company and/or any business unit, our board of directors may be influenced by the interests of our employees, students, teachers and others whose interests may be different from the interests of our stockholders. We may be unable or slow to realize the long-term benefits we expect from actions taken to benefit our students and communities in which we operate, which could materially adversely affect our business, financial condition and results of operations, which in turn could cause our stock price to decline. The price of our Class A common stock has been and may continue to be volatile, and you could lose all or part of your investment as a result. We completed our initial public offering (“IPO”) in February 2017. Since our IPO, the price of our Class A common stock, as reported by the Nasdaq Global Select Market, has ranged from a low of $7.67 on May 13, 2020 to a high of $21.62 on January 30, 2020. The trading price of our Class A common stock may continue to fluctuate and is dependent upon a number of factors, including those described in this “Item 1A—Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our Class A common stock, as you may be unable to sell your shares at or above the price you paid, or at all. In the past, following periods of market volatility, stockholders have instituted securities class action litigation. We may be the target of this type of litigation in the future. If we were to become involved in securities litigation, it could have a substantial cost and divert resources and the attention of our management team from our business regardless of the outcome of such litigation. In addition, price volatility may be greater if the public float and trading volume of our Class A common stock is low. As a result, you may suffer a loss on your investment. If we or our existing investors sell or announce an intention to sell additional shares of our Class A common stock, the market price of our Class A common stock could decline. The market price of our Class A common stock could decline as a result of sales of a large number of shares of Class A common stock in the market, or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to raise capital through future sales of equity securities at a time and at a price that we deem appropriate, or at all. 52 As of December 31, 2020, 90,791,807 shares of our Class B common stock were outstanding. Such amount excludes 287,125 shares of Class B common stock issuable upon the exercise of outstanding vested stock options under the 2007 Stock Incentive Plan (the “2007 Plan”), 2,073,863 shares of Class B common stock issuable upon the exercise of outstanding vested stock options under the 2013 Long-Term Incentive Plan (the “2013 Plan”), 998,814 shares of Class A common stock reserved for future issuance under the 2013 Plan, and 7,430 shares of Class B common stock reserved for future issuance under the Laureate Education, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”). All of our outstanding shares of Class B common stock became eligible for sale on August 5, 2017. Sales of a substantial number of shares of our Class B common stock, which will automatically convert into Class A common stock upon sale, could cause the market price of our Class A common stock to decline. Because we have no current plans to pay ordinary cash dividends on our common stock for the foreseeable future, and our debt arrangements place certain restrictions on our ability to do so, you may not receive any return on investment unless you sell your Class A common stock for a price greater than that which you paid for it. We may retain future earnings, if any, for future operation, expansion and debt repayment and have no current plans to pay any ordinary cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our Revolving Credit Facility and the indenture governing our outstanding notes. In addition, we are permitted under the terms of our debt instruments to incur additional indebtedness, which may restrict or prevent us from paying dividends on our common stock. Furthermore, our ability to declare and pay dividends may be limited by instruments governing future outstanding indebtedness we may incur. As a result, you may not receive any return on an investment in our Class A common stock unless you sell your Class A common stock for a price greater than that which you paid for it. The dual class structure of our common stock as contained in our amended and restated certificate of incorporation has the effect of concentrating voting control with those stockholders who held our stock prior to our initial public offering, including Wengen and our executive officers, employees and directors and their affiliates, and limiting your ability to influence corporate matters. Each share of our Class B common stock has ten votes per share, and each share of our Class A common stock has one vote per share. As of February 12, 2021, stockholders who hold shares of Class B common stock, including Wengen, and our executive officers, employees and directors and their affiliates, together hold approximately 89% of the voting power of our outstanding capital stock, and therefore have significant influence over the management affairs of the Company and control over all matters requiring stockholder approval, including election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future. Because of the 10-to-1 voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock even when the shares of Class B common stock represent less than a majority of the outstanding shares of our Class A and Class B common stock. The Wengen investors have control over our decisions to enter into any corporate transaction and the ability to prevent any transaction that requires stockholder approval regardless of whether others believe that the transaction is in our best interests. So long as the Wengen investors continue to have an indirect interest in a majority of our outstanding Class B common stock, they have the ability to control the vote in any election of directors. This concentrated control limits your ability to influence corporate matters. The interests of the Wengen investors and other holders of Class B common stock may not coincide with the interests of holders of the Class A common stock. In addition, in connection with the completion of our IPO, we entered into a new Wengen Securityholders’ Agreement dated as of February 6, 2017, by and among Wengen, Laureate and the other parties thereto, pursuant to which certain of the Wengen investors have certain rights to appoint directors to our board of directors and its committees. In addition, the Wengen investors are in the business of making or advising on investments in companies and may hold, and may from time to time in the future acquire, interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. 53 We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. Holders of our securities do not have the same protections afforded to stockholders of companies that are subject to such requirements. Wengen controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the Nasdaq corporate governance standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including: • the requirement that a majority of the board of directors consist of independent directors; • the requirement that we have a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; • the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees. We currently utilize some of these exemptions and intend to continue to do so. As a result, our nominating and corporate governance committee and our compensation committee do not consist entirely of independent directors and such committees are not subject to annual performance evaluations. Accordingly, for so long as we are a “controlled company,” you will not have the same protections afforded to holders of securities of companies that are subject to all of the corporate governance requirements of Nasdaq. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and the Delaware General Corporation Law could make it more difficult for a third party to acquire us and could discourage a takeover and adversely affect the holders of our Class A common stock. Provisions of our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law could discourage, delay or prevent a merger, acquisition or other change in control of the Company, even if such change in control would be beneficial to the holders of our Class A common stock. These provisions include: • the dual class structure of our common stock; • authorizing the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt; • prohibiting the use of cumulative voting for the election of directors; • limiting the ability of stockholders to call special meetings or amend our bylaws; • following the conversion of all of our Class B common stock into Class A common stock, requiring that all stockholder actions to be taken at a meeting of our stockholders; and • establishing advance notice and duration of ownership requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. These provisions also could discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions you desire. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. 54 We may issue additional shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock. Our amended and restated certificate of incorporation authorizes us to issue one or more additional series of preferred stock. Our board of directors has the authority to determine the preferences, limitations and relative rights of any additional shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Additional series of preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our Class A common stock. The potential issuance of an additional series of preferred stock may delay or prevent a change in control of us, discourage bids for our Class A common stock at a premium to the market price, and materially adversely affect the market price and the voting and other rights of the holders of our Class A common stock. The provision of our amended and restated certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers. Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware unless we otherwise consent in writing to an alternative form. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above. We believe that this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies. This choice of forum provision, however, may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, results of operations and cash flows. The choice of forum provision in the Company’s amended and restated certificate of incorporation will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws, including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder. If we do not maintain adequate coverage of our Class A common stock by securities analysts or if they publish unfavorable commentary about us or our industry or downgrade our Class A common stock, the trading price of our Class A common stock could decline. The trading price for our Class A common stock could be affected by any research or reports that securities analysts publish about us or our business. If one or more of the analysts who cover us or our business downgrade their evaluations of our Class A common stock, the price of our Class A common stock could decline. We may be unable to maintain adequate research coverage, and if one or more analysts cease coverage of our company, we could lose visibility in the market for our Class A common stock, which in turn could cause our stock price to decline. Item 1B. Unresolved Staff Comments None. 55 Item 2. Properties Laureate is headquartered in Baltimore, Maryland. The following table summarizes the properties included in Continuing Operations by segment and in Discontinued Operations, each as of December 31, 2020: Segment Square feet leased space Square feet owned space Total square feet Mexico 28,064,481 8,529,832 36,594,313 Peru (formerly Andean) 884,163 5,521,627 6,405,790 Corporate (including headquarters) 110,575 — 110,575 Discontinued Operations 12,180,817 5,086,083 17,266,900 Total 41,240,036 19,137,542 60,377,578 Our Mexico and Peru segments lease or own various sites that may include a local headquarters and all or some of the facilities of a campus or location. Our facilities are often subject to mortgages. Our Corporate headquarters consists principally of leased facilities in Baltimore, Maryland, which are used primarily for office space. We monitor the capacity of our higher education institutions on a regular basis and make decisions to expand capacity based on expected enrollment and other factors. Our leased facilities are occupied under leases whose remaining terms range from one month to 17 years. A majority of these leases contain provisions giving us the right to renew the lease for additional periods at various rental rates, although generally at rates higher than we are currently paying. Item 3. Legal Proceedings We are party to various claims and legal proceedings from time to time. Except as described below, we are not aware of any legal proceedings that we believe could have, individually or in the aggregate, a material adverse effect on our business, results of operations or financial condition. On November 25, 2020, the Company and Michael S. Ryan, the former chief accounting officer of the Company, settled all outstanding claims with respect to Mr. Ryan’s objections to the dismissal of his 2016 complaint to the Occupational Safety and Health Administration of the U.S. Department of Labor alleging a lack of compliance with U.S. GAAP and certain SEC rules and regulations by the Company. Such settlement did not involve a material amount nor any admission of wrongdoing by either party. During 2010, we were notified by the Spanish Taxing Authorities (“STA”) (in this case, by the Regional Inspection Office of the Special Madrid Tax Unit) that an audit of some of our Spanish subsidiaries was being initiated for 2006 and 2007. On June 29, 2012, the STA issued a final assessment to Laureate Netherlands Holding B.V. (f/k/a Iniciativas Culturales de España, S.L.) (“ICE”), our Spanish holding company, for approximately EUR 11.1 million ($13.5 million at December 31, 2020), including interest, for those two years based on its rejection of the tax deductibility of financial expenses related to certain intercompany acquisitions and the application of the Spanish ETVE regime. On July 25, 2012, we filed a claim with the Regional Economic-Administrative Court challenging this assessment, and, in the same month, we issued a cash-collateralized letter of credit for the assessment amount, in order to suspend the payment of the tax due. Further, in July 2013, we were notified by the STA (in this case, by the Central Inspection Office for Large Taxpayers) that an audit of ICE was also being initiated for 2008 through 2010. On October 19, 2015, the STA issued a final assessment to ICE for approximately EUR 17.2 million ($21.0 million at December 31, 2020), including interest, for those three years. We have appealed this assessment, and, in order to suspend the payment of the tax assessment until the court decision, we issued a cash-collateralized letter of credit for the assessment amount plus interest and surcharges. We believe that the assessments in this case are without merit and intend to defend vigorously against them. During the second quarter of 2016, we were notified by the STA that tax audits of the Spanish subsidiaries were also being initiated for 2011 and 2012. Also during the second quarter of 2016, the Regional Administrative Court issued a decision against the Company on its appeal. The Company has further appealed at the Highest Administrative Court level, which appeal has been rejected. The Company has appealed both decisions to the National Court. In July 2017, we were notified by the STA that tax audits of the Spanish subsidiaries for 2011 and 2012 were being extended to include 2013. In the first quarter of 2018, we made payments to the STA totaling EUR 29.6 million (approximately $36.1 million at December 31, 2020) in order to reduce the amount of future interest that could be incurred as the appeals process continues. The payments were made using cash that collateralized the letters of credit discussed above. In October of 2018, the STA issued 56 a final assessment to our Spanish holding company for the 2011 through 2013 period of approximately EUR 4.1 million ($5.0 million at December 31, 2020). As of December 31, 2020, the Company has posted a cash-collateralized letter of credit of approximately $5.5 million for the assessment, plus a surcharge. The Company has appealed this assessment to the Highest Administrative Court. In May 2019, a new tax audit was opened for fiscal years 2014-2015 for corporate income tax based on the STA’s rejection of the tax deductibility of financial expenses related to the same intercompany acquisitions as the previous tax audits. ICE received the final assessment on January 27, 2020, in which the STA rejected the allegation writ submitted by ICE and confirmed the assessment issued by the tax audit, amounting to approximately EUR 4.3 million ($5.3 million at December 31, 2020). ICE intends to appeal the referred assessment before the Administrative Central Court, and, in order to do so, ICE has posted a cash-collateralized letter of credit of approximately EUR 4.3 million ($5.3 million at December 31, 2020). Finally, the referred tax audit was extended in June 2019 to the non-resident income tax for the second semester of fiscal year 2015. On March 11, 2020, ICE received a preliminary assessment of approximately EUR 21.6 million ($26.4 million at December 31, 2020). This assessment is not final, and we intend to challenge the referred assessment before the STA. Item 4. Mine Safety Disclosures Not applicable. 57 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock is traded on the Nasdaq under the symbol “LAUR.” There is currently no established public trading market for our Class B common stock. Holders of Record There were 28 holders of record of our Class A common stock and 185 holders of record of our Class B common stock as of February 12, 2021. The number of beneficial owners of our Class A common stock is substantially greater than the number of record holders because substantially all of our Class A common stock is held in “street name” by banks and brokers. Dividend Policy We currently do not anticipate paying any ordinary cash dividends on our Class A common stock or Class B common stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation of our business. The terms of our senior secured credit agreement governing our Revolving Credit Facility and the indenture governing our outstanding Senior Notes due 2025 limit our ability to pay cash dividends in certain circumstances. Furthermore, if we are in default under the senior secured credit agreement governing our Revolving Credit Facility or the indenture governing our outstanding Senior Notes due 2025, our ability to pay cash dividends will be limited in the absence of a waiver of that default or an amendment to such agreement or such indenture. In addition, our ability to pay cash dividends on shares of our Class A common stock may be limited by restrictions on our ability to obtain sufficient funds through dividends from our subsidiaries. For more information on our senior secured credit agreement governing our Revolving Credit Facility and the indenture governing our outstanding Senior Notes due 2025, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 9, Debt, in our consolidated financial statements. Subject to the foregoing, the payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant by our board of directors. Stock Performance Graph The following graph compares the cumulative total return of our Class A common stock, an industry peer group index, and the Nasdaq Composite Index from February 1, 2017 (the first day on which our Class A common stock traded on the Nasdaq Global Select Market) through December 31, 2020. We believe that our industry peer group represents the majority of the market value of publicly traded companies whose primary business is post-secondary education. The returns set forth on the following graph are based on historical results and are not intended to suggest future performance. The performance graph assumes $100 investment on February 1, 2017 in either our Class A common stock, the companies in our industry peer group, or the Nasdaq Composite Index. Data for the Nasdaq Composite Index and our peer group assume reinvestment of dividends. 58 The peer group included in the performance graph above consists of Strategic Education, Inc. (STRA), Adtalem Global Education, Inc. (ATGE), Grand Canyon Education, Inc. (LOPE), Cogna Educação S.A. (COGN3) and YDUQS (YDUQ3). The information contained in the performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be deemed incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into such filing. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities (in thousands, except per share amounts) The following table provides a summary of the Company’s purchases of its Class A common stock during the fourth quarter of the fiscal year ended December 31, 2020 pursuant to the Company’s authorized stock repurchase program: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares yet to be purchased under the plans or programs (1) 10/1/20 - 10/31/20 — $ — — $ 300,000 11/1/20 - 11/30/20 1,703 $ 14.16 1,703 $ 275,885 12/1/20 - 12/31/20 2,713 $ 15.04 2,713 $ 235,080 Total 4,416 $ 14.70 4,416 $ 235,080 (1) On November 5, 2020, the Company announced that its board of directors had authorized a stock repurchase program to acquire up to $300,000 of the Company’s Class A common stock. See further description of the stock repurchase program in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Item 6. Selected Financial Data The selected financial data previously required by Item 301 of Regulation S-K has been omitted in reliance on SEC Release No. 33-10890, Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion of our results of operations and financial condition with the audited historical consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K (or, Form 10-K). This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Item 1A. Risk Factors” section of this Form 10-K. Actual results may differ materially from those contained in any forward-looking statements. See “Forward-Looking Statements.” Introduction This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the ‘‘MD&A’’) is provided to assist readers of the financial statements in understanding the results of operations, financial condition and cash flows of Laureate Education, Inc. This MD&A should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-K. The consolidated financial statements included elsewhere in this Form 10-K are presented in U.S. dollars (USD) rounded to the nearest thousand, with the amounts in MD&A rounded to the nearest tenth of a million. Therefore, discrepancies in the tables between totals and the sums of the amounts listed may occur due to such rounding. Our MD&A is presented in the following sections: • Overview; • Results of Operations; • Liquidity and Capital Resources; • Critical Accounting Policies and Estimates; and • Recently Issued Accounting Standards. Overview Our Business We operate a portfolio of degree-granting higher education institutions in Mexico and Peru. Collectively, we have approximately 336,500 students enrolled at five institutions in these two countries, which represent our Continuing Operations as of December 31, 2020. We believe that the higher education markets in Mexico and Peru present an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for affordable, quality higher education in those markets. We believe that the combination of the projected growth in the middle class, limited government resources dedicated to higher education, and a clear value proposition demonstrated by the higher earnings potential afforded by higher education, creates substantial opportunities for high-quality private institutions to meet this growing and unmet demand. By offering high-quality, outcome-focused education, we believe that we enable students to prosper and thrive in the dynamic and evolving knowledge economy. We have two reportable segments as described below. We group our institutions by geography in: 1 ) Mexico; and 2) Peru (formerly Andean) for reporting purposes. COVID-19 In response to the COVID-19 pandemic, we h ave temporarily tran sitioned the educational delivery method at all of our campus-based institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting. The outbreak of COVID-19 has caused domestic and global disruption in operations for institutions of higher education. The long-term effect to the Company of the COVID-19 pandemic depends on numerous factors, including, but not limited to, the effect on student enrollment, tuition pricing, and collections in future periods, which cannot be fully quantified at this time. In addition, regulatory activity in response to COVID-19 could have an adverse effect on our business if, for example, legislation was passed to suspend or reduce student tuition payments in any of the markets in which we operate. As a result, the full impact of COVID-19 and the scope of any adverse effect on the Company’s operations, including any potential impairments, which could be material, cannot be fully determined at this time. See also “Item 1A—Risk Factors—An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations.” 60 Discontinued Operations In 2017 and 2018, the Company announced the divestiture of certain subsidiaries located in Europe, Asia and Central America, which were included in the following segments: Peru (formerly Andean), Central America (formerly Central America & U.S. Campuses), and Rest of World. The goal of the divestitures was to create a more focused and simplified business model and generate proceeds to be used for further repayment of long-term debt. This represented a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, all of the divestitures that were part of this strategic shift, as well as the Company's operations in the Kingdom of Saudi Arabia that were managed under a contract that expired on August 31, 2019 and was not renewed, were accounted for as discontinued operations for all periods presented in accordance with Accounting Standards Codification (ASC) 205-20, “Discontinued Operations” (ASC 205). On January 27, 2020, we announced that our board of directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value. As a result of these efforts to explore strategic alternatives, d uring the third quarter of 2020, the Company announced that it had completed a sale of its operations in Chile and had signed agreements to sell its operations in Brazil, Australia and New Zealand, as well as Walden University, its fully online higher education institution in the United States. This also represented a strategic shift that had a major effect on the Company’s operations and financial results. As such, Chile, Brazil, Australia and New Zealand, and Walden also have been accounted for as discontinued operations for all periods presented in accordance with ASC 205. For Laureate’s institutions in Mexico and Peru, the board decided after a thorough evaluation of all strategic options, including a potential sale, to continue to operate these assets under Laureate management. Accordingly, Mexico and Peru represent our Continuing Operations. The decision to focus on a regional operating model in Mexico and Peru at this time does not preclude further engagement with potential buyers for those businesses. Because a number of our subsidiaries are included in Discontinued Operations, they no longer meet the criteria for a reportable segment under ASC 280, “Segment Reporting,” and, therefore, are excluded from the segments information for all periods presented. Unless indicated otherwise, the information in the MD&A relates to Continuing Operations. The Company began closing sale transactions in the first quarter of 2018. As noted above, during the third quarter of 2020, we signed agreements to sell Walden University and divest our operations in Australia and New Zealand, and Brazil. In October 2020, we entered into an agreement to sell our operations in Honduras. The sale of Australia and New Zealand was completed on November 3, 2020 . We have not yet completed the divestitures of Walden University or our subsidiaries in Honduras and Brazil. See also Note 4, Discontinued Operations and Assets Held for Sale, and Note 6, Dispositions, in our consolidated financial statements included elsewhere in this Form 10-K. If the Company determines that the estimated fair value of any business is less than its carrying value, the Company will be required to record a charge to write down the carrying value to fair value and the amount of that charge could be material. During 2020, the Company recorded impairment charges for certain subsidiaries while they were still classified as held and used, and also recorded charges on disposal groups classified as held-for-sale. See Note 4, Discontinued Operations and Assets Held for Sale, in our consolidated financial statements included elsewhere in this Form 10-K for discussion of the charges recorded during 2020 for our operations in Chile, Honduras and Brazil. While the Company explores strategic alternatives for its remaining Continuing Operations, and until the held-for-sale criteria are met, the long-lived assets in these businesses continue to be classified as held and used and are evaluated for impairment under that model, based on the cash flows expected to be generated by the use of those asset groups in operations. Should the held-for-sale criteria be met, the long-lived assets will be recorded at the lower of their carrying value or fair value, less cost to sell. Because completing a sale, spin-off, or other transaction may be challenging due to the regulatory environment, market conditions and other factors, the values that may be realized from any potential transactions could be less than if these businesses remained held and used. If the Company decides to sell any of its remaining businesses, the carrying value used to evaluate the business for potential write down and to determine the gain or loss on sale will include any accumulated foreign currency translation (FX) losses associated with that business. In recent years, the U.S. dollar has strengthened against many international currencies, including the Brazilian real and the Mexican peso. As a result, the Company has significant FX losses recorded within stockholders’ equity, as a component of accumulated other comprehensive income. As of December 31, 2020 and 2019, the Company’s consolidated FX loss totaled approximately $1.0 billion and $1.1 billion, respectively. Upon the sale of a business, any FX loss related to that business would be recognized as part of the gain or loss on sale. In addition, upon classification of a business as held-for-sale, the cumulative translation losses would be included as part of the carrying value of that business when evaluating it for potential write down. 61 Presented in the table below are the Company’s businesses, by asset group/reporting unit, that carry the most significant FX losses: Asset Group/ Reporting Unit Foreign Currency Translation Losses As of (in millions) December 31, 2020 December 31, 2019 Brazil $ 479 $ 407 Mexico 509 461 Total Brazil and Mexico $ 988 $ 868 As discussed in Note 4, Discontinued Operations and Assets Held for Sale, in our consolidated financial statements included elsewhere in this Form 10-K, the Company decided to sell its Brazil operations during the third quarter of 2020 and recorded a loss of approximately $190 million to write down the carrying value of the Brazil disposal group to its estimated fair value less costs to sell. During the fourth quarter of 2020, the Company recorded an additional loss of approximately $15 million in order to write down the carrying value of the Brazil disposal group to its estimated fair value less costs to sell as of December 31, 2020. While the Company has not agreed to divest our Mexico operations, the substantial amounts of FX losses attributable to this business would have a material effect on the amount of gain or loss that would result from its sale. Moreover, such FX losses could result in a material loss if the held-for-sale criteria are met and the carrying value of a held-for-sale business exceeds its fair value, less cost to sell. To date, the Company has not identified impairment indicators related to its Mexico asset group/reporting unit based on the Company’s estimates of future cash flows assuming that the business is held and used. As a result of the considerations highlighted above and the significant FX losses, the Mexico asset group may be at risk of a material loss if the Company commits to a plan to sell its interests in this business. Furthermore, additional loss on the Brazil disposal group could be required in future periods depending on changes in Brazil’s carrying value or estimated fair value. The Company will continue to monitor for impairment indicators as additional information becomes known. Our Segments Our segments generate revenues by providing an education that emphasizes profession-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines. Our educational offerings are increasingly utilizing online and hybrid (a combination of onli ne and in-classroom) courses and programs to deliver their curriculum. In response to the COVID-19 pandemic, we h ave temporarily tran sitioned the educational delivery method at all of our institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting. The Mexico and Peru markets are characterized by what we believe is a significant imbalance between supply and demand. The demand for higher education is large and growing and is fueled by several demographic and economic factors, including a growing middle class, global growth in services and technology-related industries and recognition of the significant personal and economic benefits gained by graduates of higher education institutions. The target demographics are primarily 18- to 24-year-olds in the countries in which we compete. We compete with other private higher education institutions on the basis of price, educational quality, reputation and location. We believe that we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by our network. There are a number of private and public institutions in both of the countries in which we operate, and it is difficult to predict how the markets will evolve and how many competitors there will be in the future. We expect competition to increase as the Mexican and Peruvian markets mature. Essentially all of our revenues were generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru. Specifics related to both of our reportable segments are discussed below: • Private education providers in Mexico constitute 35% of the total higher-education market. The private sector plays a meaningful role in higher education, bridging supply and demand imbalances created by a lack of capacity at public universities. Laureate owns two institutions and is present throughout the country with a footprint of over 35 campuses. Each institution in Mexico has a national license. Students in our Mexican institutions typically finance their own education. • In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute 72% of the total higher-education market. Laureate owns three institutions in Peru. Corporate is a non-operating business unit whose purpose is to support operations. Its departments are responsible for establishing operational policies and internal control standards; implementing strategic initiatives; and monitoring compliance with policies and controls throughout our operations. Our Corporate segment is an internal source of capital and provides financial, human resource, information technology, insurance, legal and tax compliance services. The Corporate segment also contains the eliminations of intersegment revenues and expenses. 62 The following information for our reportable segments is presented as of December 31, 2020: Institutions Enrollment 2020 Revenues (in millions) (1) % Contribution to 2020 YTD Revenues Mexico 2 194,000 $ 534.6 53 % Peru 3 142,500 482.9 47 % Total (1) 5 336,500 $ 1,024.9 100 % (1) Amounts related to Corporate, partially offset by the elimination of intersegment revenues, totaled $7.4 million and are not separately presented. Challenges Our operations are subject to complex business, economic, legal, regulatory, political, tax and foreign currency risks, which may be difficult to adequately address. The majority of our operations are outside the United States. As a result, we face risks that are inherent in international operations, including: fluctuations in exchange rates, possible currency devaluations, inflation and hyper-inflation; price controls and foreign currency exchange restrictions; potential economic and political instability in the countries in which we operate; expropriation of assets by local governments; key political elections and changes in government policies; multiple and possibly overlapping and conflicting tax laws; and compliance with a wide variety of foreign laws. See “Item 1A—Risk Factors—Risks Relating to Our Business—We operate a portfolio of degree-granting higher education institutions in Mexico and Peru and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address.” There are also risks associated with our decision to divest certain operations. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our exploration of strategic alternatives and our activities related to previously announced divestitures may disrupt our ongoing businesses, result in increased expenses and present certain risks to the Company.” We plan to grow our Continuing Operations organically by: 1) adding new programs and course offerings; 2) expanding target student demographics; and 3) increasing capacity at existing and new campus locations. Our success in growing our business will depend on the ability to anticipate and effectively manage these and other risks related to operating in various countries. Regulatory Environment and Other Matters Our business is subject to varying laws and regulations based on the requirements of local jurisdictions. These laws and regulations are subject to updates and changes. We cannot predict the form of the rules that ultimately may be adopted in the future or what effects they might have on our business, financial condition, results of operations and cash flows. We will continue to develop and implement necessary changes that enable us to comply with such laws and regulations. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations,” “Risk Factors—Risks Relating to Walden University, which is included in our Discontinued Operations, and the Highly Regulated Higher Education Industry in the United States,” and “Item 1—Business—Industry Regulation,” for a detailed discussion of our different regulatory environments and Note 18, Legal and Regulatory Matters, in our consolidated financial statements included elsewhere in this Form 10-K. Key Business Metric Enrollment Enrollment is our lead revenue indicator and represents our most important non-financial metric. We define “enrollment” as the number of students registered in a course on the last day of the enrollment reporting period. New enrollments provide an indication of future revenue trends. Total enrollment is a function of continuing student enrollments, new student enrollments and enrollments from acquisitions, offset by graduations, attrition and enrollment decreases due to dispositions. Attrition is defined as a student leaving the institution before completion of the program. To minimize attrition, we have implemented programs that involve assisting students in remedial education, mentoring, counseling and student financing. Each of our institutions has an enrollment cycle that varies by geographic region and academic program. Each institution has a “Primary Intake” period during each academic year in which the majority of the enrollment occurs. Most institutions also have one or more smaller “Secondary Intake” periods. Our Peruvian institutions have their Primary Intake during the first calendar quarter and a Secondary Intake during the third calendar quarter. Institutions in our Mexico segment have their Primary Intake during the third calendar quarter and a Secondary Intake during the first calendar quarter. Our institutions in Peru are generally 63 out of session in January, February and July, while institutions in Mexico are generally out of session in May through July. Revenues are recognized when classes are in session. Principal Components of Income Statement Revenues The majority of our revenue is derived from tuition and educational services. The amount of tuition generated in a given period depends on the price per credit hour and the total credit hours or price per program taken by the enrolled student population. The price per credit hour varies by program, by market and by degree level. Additionally, varying levels of discounts and scholarships are offered depending on market-specific dynamics and individual achievements of our students. Revenues are recognized net of scholarships, other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. In addition to tuition revenues, we generate other revenues from student fees, dormitory/residency fees and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. The main drivers of changes in revenues between periods are student enrollment and price. We continually monitor market conditions and carefully adjust our tuition rates to meet local demand levels. We proactively seek the best price and content combinations to remain competitive in all the markets in which we operate. Direct Costs Our direct costs include labor and operating costs associated with the delivery of services to our students, including the cost of wages, payroll taxes and benefits, depreciation and amortization, rent, utilities, bad debt expenses, and marketing and promotional costs to grow future enrollments. In general, a significant portion of our direct costs tend to be variable in nature and trend with enrollment, and management continues to monitor and improve the efficiency of instructional delivery. Conversely, as campuses expand, direct costs may grow faster than enrollment growth as infrastructure investments are made in anticipation of future enrollment growth. General and Administrative Expenses Our general and administrative expenses primarily consist of costs associated with corporate departments, including executive management, finance, legal, business development and other departments that do not provide direct operational services. Factors Affecting Comparability Acquisitions Our past experiences provide us with the expertise to further our mission of providing high-quality, accessible and affordable higher education to students by expanding into new markets if opportunities arise, primarily through acquisitions. Acquisitions have historically affected the comparability of our financial statements from period to period. Acquisitions completed during one period impact comparability to a prior period in which we did not own the acquired entity. Therefore, changes related to such entities are considered “incremental impact of acquisitions” for the first 12 months of our ownership. We made no acquisitions in 2020 and 2019, and made only a small acquisition in 2018 that had essentially no impact on the comparability of the periods presented for our continued operations. Dispositions Any dispositions of our Continuing Operations affect the comparability of our financial statements from period to period. Dispositions completed during one period impact comparability to a prior period in which we owned the divested entity. Therefore, changes related to such entities are considered “incremental impact of dispositions” for the first 12 months subsequent to the disposition. As discussed above, all of the divestitures that are part of the strategic shifts are included in Discontinued Operations for all periods presented. Foreign Exchange Institutions in our Continuing Operations are located outside the United States. These institutions enter into transactions in currencies other than USD and keep their local financial records in a functional currency other than the USD. We monitor the impact of foreign currency movements and the correlation between the local currency and the USD. Our revenues and expenses are generally denominated in local currency. The USD is our reporting currency and our subsidiaries operate in other functional currencies, namely the Mexican peso and Peruvian nuevo sol. The principal foreign exchange exposure is the risk related to the 64 translation of revenues and expenses incurred in each country from the local currency into USD. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our reported revenues and earnings may be negatively affected by the strengthening of the U.S. dollar and currency exchange rates.” In order to provide a framework for assessing how our business performed excluding the effects of foreign currency fluctuations, we present organic constant currency in our segment results, which is calculated using the change from prior-year average foreign exchange rates to current-year average foreign exchange rates, as applied to local-currency operating results for the current year, and then excludes the impact of acquisitions, divestitures and other items, as described in the segments results. Seasonality The institutions in our portfolio have a summer break, during which classes are generally not in session and minimal revenues are recognized. In addition to the timing of summer breaks, holidays such as Easter also have an impact on our academic calendar. Operating expenses, however, do not fully correlate to the enrollment and revenue cycles, as the institutions continue to incur expenses during summer breaks. Accordingly, our second and fourth quarters are stronger revenue quarters, as our institutions are in session for most of these respective quarters. Our first and third fiscal quarters are weaker revenue quarters because our institutions have summer breaks for some portion of one of these two quarters. However, our primary enrollment intakes occur during the first and third quarters. Due to this seasonality, revenues and profits in any one quarter are not necessarily indicative of results in subsequent quarters and may not be correlated to new enrollment in any one quarter. Additionally, seasonality may be affected due to other events, such as the COVID-19 pandemic, which changed the academic calendar at many of our institutions. See “Item 1A—Risk Factors—Risks Relating to Our Business—We experience seasonal fluctuations in our results of operations.” Income Tax Expense Our consolidated income tax provision is derived based on the combined impact of federal, state and foreign income taxes. Also, discrete items can arise in the course of our operations that can further impact the Company’s effective tax rate for the period. Our tax rate fluctuates from period to period due to changes in the mix of earnings between our tax-paying entities, our tax-exempt entities and our loss-making entities for which it is not 'more likely than not' that a tax benefit will be realized on the loss. See “Item 1A—Risk Factors—Risks Relating to Our Business—We may have exposure to greater-than-anticipated tax liabilities.” Results of the Discontinued Operations The results of operations of the Discontinued Operations for the years ended December 31, 2020, 2019, and 2018 were as follows: For the year ended December 31, 2020 2019 2018 Revenues $ 1,674.6 $ 2,540.0 $ 3,075.3 Depreciation and amortization expense (60.4) (111.4) (155.4) Share-based compensation expense (3.1) (2.7) (4.2) Other direct costs (1,313.3) (2,026.2) (2,436.4) Loss on impairment of assets (438.3) (0.7) (13.1) Other non-operating expense (68.6) (70.7) (91.1) Gain on sale of discontinued operations before taxes, net 25.0 793.5 293.1 Pretax (loss) income of discontinued operations (183.8) 1,121.8 668.1 Income tax expense (114.3) (33.7) (105.9) (Loss) income from discontinued operations, net of tax $ (298.1) $ 1,088.1 $ 562.2 Enrollments at our Discontinued Operations as of December 31, 2020, 2019 and 2018 were 335,500, 575,300 and 680,300, respectively. Year Ended December 31, 2020 On January 10, 2020, we sold our operations in Costa Rica, which resulted in an additional pre-tax loss of approximately $18.6 million. Together with the 2019 loss described below, the total loss on the sale of Costa Rica was approximately $43.6 million. 65 On March 6, 2020, we sold the operations of NewSchool of Architecture and Design, LLC (NSAD), which resulted in a pre-tax loss of approximately $5.9 million. During the second quarter of 2020, we recorded impairment charges of $418.0 million related to our Chilean operations, in order to write down the carrying value of their assets to their estimated fair value, and $3.3 million related to the Brazil enrollment to graduation (E2G) software assets. We also recorded a loss of $10.0 million on the held-for-sale Honduras disposal group, in order to write down the carrying value of the group to its estimated fair value, which is included in Gain on sale of discontinued operations before taxes, net. During the third quarter of 2020, we recorded a loss of approximately $190.0 million related to our Brazil operations in order to write down the carrying value of Brazil’s disposal group to its estimated fair value. We also recorded an additional loss of $10.0 million related to our held-for-sale Honduras group, in order to write down its carrying value to the estimated fair value based on the sale agreement that was signed in October 2020. These losses are included in Gain on sale of discontinued operations before taxes, net. On September 10, 2020, we completed the divestiture of our operations in Chile, resulting in a pre-tax loss of approximately $338.2 million that relates primarily to the accumulated foreign currency translation losses associated with the Chilean operations. On September 29, 2020, we completed the sale of our operations in Malaysia, which resulted in a pre-tax gain of approximately $47.9 million. In early October 2020, we received a payment for $8.4 million, representing a portion of the $15.0 million deferred purchase price related to the sale of our operations in Turkey in August 2019. At the time of the sale, the Company determined that this deferred purchase price would be recognized if collected. Accordingly, the Company recorded the receipt of $8.4 million through a reduction of the loss on sale for Turkey. The remaining deferred purchase price was due in January 2021 and will be recognized when collected. On November 3, 2020, we completed the sale of our Australia and New Zealand operations, which resulted in a pre-tax gain of approximately $555.8 million. During the fourth quarter of 2020, we recorded an additional loss of approximately $15.0 million in order to adjust the carrying value of our Brazil’s disposal group to its estimated fair value less costs to sell as of December 31, 2020. This loss is included in Gain on sale of discontinued operations before taxes, net. Year Ended December 31, 2019 On February 1, 2019, we sold the operations of St. Augustine, which resulted in a gain of approximately $223.0 million. On February 12, 2019, we sold our operations in Thailand, which resulted in a gain of approximately $10.8 million. On January 25, 2018, we completed the sale of LEI Lie Ying Limited (LEILY). During the first quarter of 2019, a legal matter, for which the Company had indemnified the buyer and recorded a contingent liability, was settled with no cost to the Company. Accordingly, the Company reversed the liability and recognized additional gain on the sale of LEILY of approximately $13.7 million. On April 8, 2019, we sold Monash South Africa as well as the real estate associated with that institution, which resulted in a gain of approximately $2.3 million. On May 9, 2019, we sold our operations in India, which resulted in a gain of approximately $19.5 million. On May 31, 2019, we sold our institutions in Spain and Portugal, which resulted in a gain of approximately $615.0 million. On August 27, 2019, we sold our operations in Turkey, which resulted in a loss of approximately $37.7 million. During the third quarter of 2019, we recorded a loss of approximately $25.0 million on the held-for-sale Costa Rica disposal group, in order to write down its carrying value to the estimated fair value. This loss is included in Gain on sale of discontinued operations before taxes, net. The sale of the Costa Rica institutions was completed on January 10, 2020. 66 In early October 2019, we sold Universidad Interamericana de Panamá (UIP), in addition to real estate which served as the campus of UIP, and recognized a gain of approximately $21.0 million. On November 1, 2019, we sold UniNorte, a traditional higher education institution in Manaus, Brazil, which resulted in a loss on sale of approximately $0.3 million. During the fourth quarter of 2019, we recorded a loss of approximately $17.8 million related to the held-for-sale Honduras disposal group, in order to write down its carrying value to the estimated fair value. This loss is included in Gain on sale of discontinued operations before taxes, net. Year Ended December 31, 2018 On January 11, 2018, we sold the operations of European University-Cyprus Ltd (EUC) and Laureate Italy S.r.L. (Laureate Italy), which resulted in a gain on sale of approximately $218.0 million. On January 25, 2018, we sold the operations of LEILY, which resulted in a gain on sale of approximately $84.0 million. On April 12, 2018, we sold the operations of Laureate Germany, which resulted in a loss on sale of approximately $5.5 million. On April 13, 2018, we sold the operations of Laureate Somed, the operator of Université Internationale de Casablanca, a comprehensive campus-based university in Casablanca, Morocco, and recognized a gain on the sale of approximately $17.4 million. On August 6, 2018, we sold the operations of Kendall, which resulted in a loss on sale of approximately $17.2 million. In connection with our goodwill impairment testing in the fourth quarter of 2018, we wrote off the remaining goodwill balance of $3.1 million associated with our operations in the Kingdom of Saudi Arabia, which are now included in Discontinued Operations. Effective September 30, 2018, the University of Liverpool (Liverpool), an institution in our Online & Partnerships segment, began a teach-out process. As a result, during the third quarter of 2018, we recorded an impairment charge of $10.0 million related to the fixed assets of this entity that were no longer recoverable based on expected future cash flows. As noted, the entire Online & Partnerships segment is now classified in discontinued operations. Results of Operations The following discussion of the results of our operations is organized as follows: • Summary Comparison of Consolidated Results; • Non-GAAP Financial Measure; and • Segment Results. Summary Comparison of Consolidated Results Discussion of Significant Items Affecting the Consolidated Results for the Years Ended December 31, 2020, 2019 and 2018 Year Ended December 31, 2020 During the first quarter of 2020, the Company recorded an impairment charge of $3.8 million primarily related to the write-off of capitalized curriculum development costs for a program that the Company decided to stop developing. During the second quarter of 2020, the Company recorded an impairment charge of approximately $23.8 million related to the Brazil E2G software assets that were recorded on the Corporate segment, as described in Note 8, Goodwill and Other Intangible Assets, in our consolidated financial statements included elsewhere in this Form 10-K. 67 During the third quarter of 2020, the Company recognized an impairment charge of $320.0 million on the Laureate tradename, an intangible asset, as described in Note 8, Goodwill and Other Intangible Assets, in our consolidated financial statements included elsewhere in this Form 10-K. In November 2020, Universidad del Valle de Mexico, SC, a wholly owned subsidiary of the Company, signed an agreement to sell the land and buildings of Campus Guadalajara Norte, after a decision was made to relocate all students of Campus Guadalajara Norte to the nearby Campus Zapopan in Jalisco, Mexico. The total purchase price was approximately $13.9 million, prior to transaction fees. The Company recognized a pre-tax operating gain on the sale of this property and equipment of approximately $5.8 million, which is included in Direct costs in the table below. During the fourth quarter of 2020, the Company dissolved a dormant subsidiary, resulting in the release of accumulated foreign currency translation loss of approximately $6.1 million. This loss is included in Other non-operating (expense) income in the table below and is part of Continuing Operations as this entity was not part of the strategic shifts described above in Overview. Year Ended December 31, 2019 During the first quarter of 2019, we used approximately $340.0 million of the net proceeds from the sale of St. Augustine to repay a portion of our term loan that had a maturity date of April 2024 (the 2024 Term Loan). In connection with this debt repayment, the Company recorded a loss on debt extinguishment of $6.3 million, primarily related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances. This loss is included in Other non-operating (expense) income in the table below. During the second quarter of 2019, we fully repaid the remaining balance outstanding under our 2024 Term Loan, using the proceeds received from the sales of our operations in India, Spain and Portugal. The remaining proceeds were used to repay borrowings outstanding under the senior secured revolving credit facility. In connection with these debt repayments, the Company recorded a loss on debt extinguishment of $15.6 million related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances, as well as the debt discount associated with the 2024 Term Loan. This loss is included in Other non-operating (expense) income in the table below. During the third and fourth quarters of 2019, we dissolved several dormant subsidiaries, resulting in the release of accumulated foreign currency translation loss of approximately $37.5 million. This loss is included in Other non-operating (expense) income in the table below and is part of Continuing Operations as these entities were not part of the strategic shifts described above in Overview. Year Ended December 31, 2018 On February 1, 2018, we amended our Senior Secured Credit Facility to reduce the interest rate on our 2024 Term Loan. In connection with this transaction, we also repaid $350.0 million of the principal balance of the 2024 Term Loan. As a result of this transaction, the Company recorded a $7.5 million loss on debt extinguishment related to the pro-rata write-off of the term loan's remaining deferred financing costs. This loss is included in Other non-operating (expense) income in the table below. 68 Comparison of Consolidated Results for the Years Ended December 31, 2020, 2019 and 2018 % Change Better/(Worse) (in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Revenues $ 1,024.9 $ 1,212.1 $ 1,144.6 (15) % 6 % Direct costs 802.5 949.5 904.0 15 % (5) % General and administrative expenses 199.8 226.3 267.4 12 % 15 % Loss on impairment of assets 352.0 0.2 — nm nm Operating (loss) income (329.3) 36.0 (26.8) nm nm Interest expense, net of interest income (98.7) (121.7) (185.6) 19 % 34 % Other non-operating (expense) income (22.8) (33.9) 92.3 33 % (137) % Loss from continuing operations before income taxes and equity in net income of affiliates (450.8) (119.7) (120.1) nm — % Income tax benefit (expense) 130.1 (31.0) (71.2) nm 56 % Equity in net income of affiliates, net of tax 0.2 0.2 — — % nm Loss from continuing operations (320.6) (150.5) (191.3) (113) % 21 % (Loss) income from discontinued operations, net of tax (298.1) 1,088.1 562.2 (127) % 94 % Net (loss) income (618.7) 937.7 370.9 (166) % 153 % Net loss (income) attributable to noncontrolling interests 5.4 0.8 (0.9) nm (189) % Net (loss) income attributable to Laureate Education, Inc. $ (613.3) $ 938.5 $ 370.1 (165) % 154 % nm - percentage changes not meaningful For further details on certain discrete items discussed below, see “Discussion of Significant Items Affecting the Consolidated Results.” Comparison of Consolidated Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019 Revenues decreased by $187.2 million to $1,024.9 million for 2020 from $1,212.1 million for 2019. The effect of a net change in foreign currency exchange rates decreased revenues by $81.8 million, due to weakening of the Mexican peso and the Peruvian nuevo sol against the USD. Average total enrollment at a majority of our institutions decreased during 2020, reducing revenues by $62.3 million compared to 2019. The effect of changes in tuition rates and enrollments in programs at varying price points (“product mix”), pricing and timing decreased revenues by $38.0 million, mainly driven by an increase in discounts and scholarships as a percentage of revenues in 2020 compared to 2019. Other Corporate and Eliminations changes accounted for a decrease in revenues of $5.1 million. Direct costs and general and administrative expenses combined decreased by $173.5 million to $1,002.3 million for 2020 from $1,175.8 million for 2019. The effect of a net change in foreign currency exchange rates decreased costs by $61.1 million. The effect of operational changes decreased direct costs by $75.8 million compared to 2019. Other Corporate and Eliminations expenses accounted for a decrease in costs of $50.4 million in 2020, related to cost-reduction efforts. Changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in indemnification assets resulted in a year-over-year decrease in costs of $0.8 million. These decreases in direct costs were partially offset by Excellence-in-Process (EiP) implementation expense, which increased direct costs by $14.6 million. Operating (loss) income changed by $365.3 million to loss of $(329.3) million for 2020 from income of $36.0 million for 2019. This change was primarily a result of the impairment charges of $352.0 million during 2020 and operating loss at our Mexico segment for 2020 compared to operating income for 2019, partially offset by lower 2020 operating expenses at Corporate. Interest expense, net of interest income decreased by $23.0 million to $98.7 million for 2020 from $121.7 million for 2019. The decrease in interest expense was primarily attributable to lower average debt balances. 69 Other non-operating expense decreased by $11.1 million to $22.8 million for 2020, compared to $33.9 million for 2019. This decrease was attributable to: (1) a decrease in loss on debt extinguishment of $22.0 million, primarily related to the repayment of the 2024 Term Loan during 2019; (2) a foreign currency exchange gain for 2020 compared to a loss for 2019, for a change of $21.6 million; and (3) a decrease in loss on disposal of subsidiaries of $13.2 million. These decreases in other non-operating expense were partially offset by a loss on derivative instruments for 2020 compared to a gain for 2019, for a change of $34.3 million, and other non-operating expense for 2020 compared to income for 2019, for a change of $11.4 million, primarily attributable to non-operating income recorded during 2019 related to the sale of an equity security held at Corporate. Income tax benefit (expense) changed by $161.1 million to a benefit of $130.1 million for 2020 from an expense of $(31.0) million for 2019. This change was primarily attributable to a $75.1 million benefit due to the increase in pretax loss, a tax benefit of approximately $70.9 million related to the Company's election to exclude certain foreign income of foreign corporations from GILTI, and a tax benefit for release of valuation allowances for state deferred tax assets of $32.3 million, partially offset by a tax expense of approximately $32.4 million that was recognized during 2020 related to the tax-basis step up of certain intellectual property that became subject to taxation in the Netherlands. (Loss) income on sales of discontinued operations, net of tax decreased by $1,386.2 million to a loss of $(298.1) million for 2020 from income of $1,088.1 million for 2019, primarily driven by lower gains upon the completion of divestitures in 2020 as compared to 2019, combined with higher losses recorded during 2020 for discontinued operations due to impairments and charges to write held-for-sale disposal groups down to fair value. See Overview for further detail on results of the Discontinued Operations. Net loss attributable to noncontrolling interests increased by $4.6 million to $5.4 million for 2020 from $0.8 million for 2019. This change was primarily related to our previous joint venture in Saudi Arabia. Comparison of Consolidated Results for the Year Ended December 31, 2019 to the Year Ended December 31, 2018 Revenues increased by $67.5 million to $1,212.1 million for 2019 from $1,144.6 million for 2018. This revenue increase was driven by higher average total enrollment at a majority of our institutions, which increased revenues by $34.7 million; the effect of product mix, pricing and timing, which increased revenues by $33.4 million; and other Corporate and Eliminations changes, which accounted for an increase in revenues of $10.4 million. These increases in revenues were partially offset by the effect of a net change in foreign currency exchange rates, which decreased revenues by $11.0 million compared to 2018. Direct costs and general and administrative expenses combined increased by $4.4 million to $1,175.8 million for 2019 from $1,171.4 million for 2018. The direct costs increase was due to the overall higher enrollments and costs related to expanding our Continuing Operations, which increased costs by $30.3 million compared to 2018, and changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets, which increased direct costs by $2.2 million. Partially offsetting these direct costs increases were the effect of a net change in foreign currency exchange rates, which decreased costs by $7.6 million, and other Corporate and Eliminations expenses, which accounted for a decrease in costs of $20.5 million in 2019. Operating income (loss) changed by $62.8 million to income of $36.0 million for 2019 from loss of $(26.8) million for 2018. This change to operating income was primarily the result of increased operating income at our Peru segment combined with lower 2019 operating expenses at Corporate. Interest expense, net of interest income decreased by $63.9 million to $121.7 million for 2019 from $185.6 million for 2018. The decrease in interest expense was primarily attributable to lower average debt balances as a result of the debt repayments. Other non-operating (expense) income changed by $126.2 million to expense of $(33.9) million for 2019 from income of $92.3 million for 2018. This change was attributable to: (1) a decrease in gain on derivative instruments of $80.2 million, primarily related to a gain recorded in 2018 upon the conversion of the Series A Preferred Stock; (2) a loss on disposal of subsidiaries of $20.4 million in 2019, primarily related to the release of accumulated foreign currency translation upon the dissolution of several dormant subsidiaries; (3) an increase in loss on debt extinguishment of $15.1 million, related to increased debt repayments in 2019; (4) a loss on foreign currency exchange in 2019 compared to a gain in 2018, for a change of $8.8 million; and (5) a decrease in other non-operating income of $1.7 million. Income tax expense decre ased by $40.2 million to $31.0 million for 2019 from $71.2 million for 2018. This decrease was primarily due to a year-over-year reduction in withholding tax expense as a result of the redesignation of certain intercompany loans from permanent to temporary during 2018, which increased withholding tax expense in 2018, in addition to a reduction in 2019 withholding tax expense resulting from changes to tax treaties between U.S. and non-U.S. jurisdictions. 70 Income from discontinued operations, net of tax increased by $525.9 million to $1,088.1 million for 2019, from $562.2 million for 2018, primarily related to higher gains upon the completion of divestitures during 2019 as compared to 2018. See Overview for further detail on results of the Discontinued Operations. Non-GAAP Financial Measure We define Adjusted EBITDA as income (loss) from continuing operations, before equity in net (income) loss of affiliates, net of tax, income tax expense (benefit), (gain) loss on sale or disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, loss (gain) on derivatives, loss on debt extinguishment, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to implementation of our Excellence-in-Process (EiP) initiative. When we review Adjusted EBITDA on a segment basis, we exclude inter-segment revenues and expenses that eliminate in consolidation. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, Adjusted EBITDA is a key financial measure used by the compensation committee of our board of directors and our Chief Executive Officer in connection with the payment of incentive compensation to our executive officers and other members of our management team. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. 71 The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the years ended December 31, 2020 , 2019 and 2018: % Change Better/(Worse) (in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Loss from continuing operations $ (320.6) $ (150.5) $ (191.3) (113) % 21 % Plus: Equity in net income of affiliates, net of tax (0.2) (0.2) — — % nm Income tax (benefit) expense (130.1) 31.0 71.2 nm 56 % Loss from continuing operations before income taxes and equity in net income of affiliates (450.8) (119.7) (120.1) nm — % Plus: Loss on disposal of subsidiaries, net 7.3 20.4 — 64 % nm Foreign currency exchange (gain) loss, net (13.5) 8.1 (0.7) nm nm Other expense (income), net 2.4 (8.9) (10.6) (127) % (16) % Loss (gain) on derivatives 26.0 (8.3) (88.5) nm (91) % Loss on debt extinguishment 0.6 22.6 7.5 97 % nm Interest expense 100.9 125.0 188.4 19 % 34 % Interest income (2.2) (3.3) (2.8) (33) % 18 % Operating (loss) income (329.3) 36.0 (26.8) nm nm Plus: Depreciation and amortization 83.1 82.0 84.6 (1) % 3 % EBITDA (246.2) 118.0 57.8 nm 104 % Plus: Share-based compensation expense (a) 10.2 10.3 6.6 1 % (56) % Loss on impairment of assets (b) 352.0 0.2 — nm nm EiP implementation expenses (c) 89.6 75.0 75.2 (19) % — % Adjusted EBITDA $ 205.7 $ 203.6 $ 139.6 1 % 46 % nm - percentage changes not meaningful (a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718, “Stock Compensation.” (b) Represents non-cash charges related to impairments of long-lived assets. For further details on certain impairment items see “Discussion of Significant Items Affecting the Consolidated Results for the Years Ended December 31, 2020, 2019 and 2018.” (c) EiP implementation expenses are related to our enterprise-wide initiative to optimize and standardize Laureate’s processes, creating vertical integration of procurement, information technology, finance, accounting and human resources. It included the establishment of regional shared services organizations (SSOs) around the world, as well as improvements to the Company's system of internal controls over financial reporting. The EiP initiative also includes other back- and mid-office areas, as well as certain student-facing activities, expenses associated with streamlining the organizational structure and certain non-recurring costs incurred in connection with the planned and completed dispositions. Beginning in 2019, EiP also includes expenses associated with an enterprise-wide program aimed at revenue growth. Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Years Ended December 31, 2020 and 2019 Depreciation and amortization increased by $1.1 million to $83.1 million for 2020 from $82.0 million for 2019. This increase was primarily attributable to amortization of Laureate's tradename which, during 2020, changed from being an indefinite-lived intangible asset to being a finite-lived intangible asset. When combined with other items, this increased depreciation and amortization expense by $5.5 million. Partially offsetting this increase was the effect of foreign currency exchange, which decreased depreciation and amortization expense by $4.4 million for 2020, as compared to 2019. Share-based compensation expense decreased by $0.1 million to $10.2 million for 2020 from $10.3 million for 2019. 72 EiP implementation expenses increased by $14.6 million to $89.6 million for 2020 from $75.0 million for 2019. This increase was primarily attributable to higher legal and consulting fees related to our divestiture activity and the inclusion in EiP of expenses associated with an enterprise-wide program aimed at revenue growth. Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Years Ended December 31, 2019 and 2018 Depreciation and amortization decreased by $2.6 million to $82.0 million for 2019 from $84.6 million for 2018. Share-based compensation expense increased by $3.7 million to $10.3 million for 2019 from $6.6 million for 2018. This increase was mostly attributable to the effect of a correction of an immaterial error in the first quarter of 2018, which reduced share-based compensation expense for 2018. EiP implementation expenses decreased by $0.2 million to $75.0 million for 2019 from $75.2 million for 2018. Segment Results We have two reportable segments: Mexico and Peru (formerly Andean), as discussed in Overview. For purposes of the following comparison of results discussion, “ segment direct costs ” represent direct costs by segment as they are included in Adjusted EBITDA, such that depreciation and amortization expense, loss on impairment of assets, share-based compensation expense and our EiP implementation expenses have been excluded. Organic enrollment is based on average total enrollment for the period. For a further description of our segments, see Overview. The following tables, derived from our consolidated financial statements included elsewhere in this Form 10-K, presents selected financial information of our reportable segments included in Continuing Operations: (in millions) % Change Better/(Worse) For the year ended December 31, 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Revenues: Mexico $ 534.6 $ 652.8 $ 646.1 (18) % 1 % Peru 482.9 546.8 496.4 (12) % 10 % Corporate 7.4 12.5 2.1 (41) % nm Consolidated Total Revenues $ 1,024.9 $ 1,212.1 $ 1,144.6 (15) % 6 % Adjusted EBITDA: Mexico $ 112.9 $ 147.8 $ 143.2 (24) % 3 % Peru 189.5 197.8 169.2 (4) % 17 % Corporate (96.7) (142.0) (172.9) 32 % 18 % Consolidated Total Adjusted EBITDA $ 205.7 $ 203.6 $ 139.6 1 % 46 % nm - percentage change not meaningful 73 Mexico Financial Overview Comparison of Mexico Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA December 31, 2019 $ 652.8 $ 505.0 $ 147.8 Organic enrollment (1) (28.8) Product mix, pricing and timing (1) (31.0) Organic constant currency (59.8) (38.8) (21.0) Foreign exchange (58.4) (43.7) (14.7) Dispositions — — — Other (2) — (0.8) 0.8 December 31, 2020 $ 534.6 $ 421.7 $ 112.9 (1) Organic enrollment and Product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues decreased by $118.2 million, an 18% decrease from 2019. • Organic enrollment decreased during 2020 by 4%, which decreased revenues by $28.8 million, mainly due to impacts from the COVID-19 pandemic. • The decrease in revenues from product mix, pricing and timing was mainly due to an increase in discounts and scholarships as a percentage of revenues. • Revenues represented 53% of our consolidated total revenues for 2020, compared to 54% for 2019. Adjusted EBITDA decreased by $34.9 million, a 24% decrease from 2019. • The overall decrease in Adjusted EBITDA was partially offset by a gain of $5.8 million from the sale of land and buildings at one of our campuses in 2020. This gain is included in Organic constant currency. 74 Comparison of Mexico Results for the Year Ended December 31, 2019 to the Year Ended December 31, 2018 (in millions) Revenues Direct Costs Adjusted EBITDA December 31, 2018 $ 646.1 $ 502.9 $ 143.2 Organic enrollment (1) (16.0) Product mix, pricing and timing (1) 26.0 Organic constant currency 10.0 1.8 8.2 Foreign exchange (3.3) (1.9) (1.4) Dispositions — — — Other (2) — 2.2 (2.2) December 31, 2019 $ 652.8 $ 505.0 $ 147.8 (1) Organic enrollment and Product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues increased by $6.7 million, a 1% increase from 2018. • The increase in revenues from product mix, pricing and timing was partially offset by a decrease in organic enrollment of 2%, which decreased revenues by $16.0 million. • Revenues represented 54% of our consolidated total revenues for 2019 compared to 57% for 2018. Adjusted EBITDA increased by $4.6 million, a 3% increase from 2018. Peru Financial Overview 75 Comparison of Peru Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019 (in millions) Revenues Direct Costs Adjusted EBITDA December 31, 2019 $ 546.8 $ 349.0 $ 197.8 Organic enrollment (1) (33.5) Product mix, pricing and timing (1) (7.0) Organic constant currency (40.5) (42.6) 2.1 Foreign exchange (23.4) (13.0) (10.4) Dispositions — — — Other — — — December 31, 2020 $ 482.9 $ 293.4 $ 189.5 (1) Organic enrollment and Product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues decreased by $63.9 million, a 12% decrease from 2019. • Organic enrollment decreased during 2020 by 7%, decreasing revenues by $33.5 million, mainly due to impacts from the COVID-19 pandemic. • The decrease in revenues from product mix, pricing and timing was mainly due to an increase in discounts and scholarships as a percentage of revenues. • Revenue represented 47% of our consolidated total revenues for 2020 compared to 46% for 2019. Adjusted EBITDA decreased by $8.3 million, a 4% decrease from 2019. Comparison of Peru Results for the Year Ended December 31, 2019 to the Year Ended December 31, 2018 (in millions) Revenues Direct Costs Adjusted EBITDA December 31, 2018 $ 496.4 $ 327.2 $ 169.2 Organic enrollment (1) 50.7 Product mix, pricing and timing (1) 7.4 Organic constant currency 58.1 27.0 31.1 Foreign exchange (7.7) (5.2) (2.5) Dispositions — — — Other — — — December 31, 2019 $ 546.8 $ 349.0 $ 197.8 (1) Organic enrollment and Product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues increased by $50.4 million, a 10% increase from 2018. • Organic enrollment increased during 2019 by 11%, increasing revenues by $50.7 million. • Revenues represented 46% of our consolidated total revenues for 2019 compared to 43% for 2018. Adjusted EBITDA increased by $28.6 million, a 17% increase from 2018. 76 Corporate Corporate revenues represent amounts from our consolidated joint venture with the University of Liverpool and revenues from transition services agreements related to divestitures, as well as centralized IT costs charged to other business units, partially offset by the elimination of intersegment revenues. Operating results for Corporate for the years ended December 31, 2020, 2019 and 2018 were as follows: % Change Better/(Worse) (in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Revenues $ 7.4 $ 12.5 $ 2.1 (41) % nm Expenses 104.1 154.5 175.0 33 % 12 % Adjusted EBITDA $ (96.7) $ (142.0) $ (172.9) 32 % 18 % nm - percentage change not meaningful Comparison of Corporate Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019 Adjusted EBITDA increased by $45.3 million, a 32% increase from 2019. • Labor costs and other professional fees decreased expenses by $55.5 million for 2020 compared to 2019, related to cost-reduction efforts. • Other items accounted for a decrease in Adjusted EBITDA of $10.2 million, primarily related to a reduction in revenues from the joint venture with the University of Liverpool. Comparison of Corporate Results for the Year Ended December 31, 2019 to the Year Ended December 31, 2018 Adjusted EBITDA increased by $30.9 million, an 18% increase from 2018. • Labor costs and other professional fees decreased expenses by $42.4 million for 2019 compared to 2018, related to cost-reduction efforts. • Other items accounted for a decrease in Adjusted EBITDA of $11.5 million, primarily attributable to the year-over-year impact of the resolution of an earnout liability during 2018 that was related to the 2014 acquisition of Monash South Africa; the reversal of the earnout liability increased Adjusted EBITDA for 2018. Liquidity and Capital Resources Liquidity Sources We anticipate that cash flow from operations and available cash will be sufficient to meet our current operating requirements and manage our liquidity needs, including any effects on the Company’s business operations that arise from the COVID-19 pandemic, for at least the next 12 months from the date of issuance of this report. As the impact of the COVID-19 pandemic on the economy and our operations continues to evolve, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to liquidity sources, particularly our cash flows from operations, as well as our financial condition and capitalization. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions, such as obtaining additional financing. The Company will continue to evaluate its financial position in light of future developments, particularly those relating to the COVID-19 pandemic. Our primary source of cash is revenue from tuition charged to students in connection with our various education program offerings. Essentially all of our revenues are generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru. We anticipate generating sufficient cash flow from operations in the majority of countries where we operate to satisfy the working capital and financing needs of our organic growth plans for each country. If our educational institutions within one country were unable to maintain sufficient liquidity, we would consider using internal cash resources or reasonable short-term working capital facilities to accommodate any short- to medium-term shortfalls. 77 As of December 31, 2020, our secondary source of liquidity was cash and cash equivalents of $750.1 million, which does not include $270.2 million of cash recorded at subsidiaries that are classified as held for sale at December 31, 2020. Our cash accounts are maintained with high-quality financial institutions with no significant concentration in any one institution. The Company also maintains a revolving credit facility with a syndicate of financial institutions as a source of liquidity. The revolving credit facility provides for borrowings of $410.0 million and has a maturity date of October 7, 2024. From time to time, we draw down on the revolver, and, in accordance with the terms of the credit agreement, any proceeds drawn on the revolving credit facility may be used for general corporate purposes. In March 2020, we fully drew down our $410.0 million revolving credit facility in order to increase our cash position and preserve financial flexibility in light of the COVID-19 pandemic. During the fourth quarter of 2020, following the sale of our operations in Australia and New Zealand, the company fully repaid the outstanding balance of the revolving credit facility. If certain conditions are satisfied, the Third Amended and Restated Credit Agreement (the Third A&R Credit Agreement) also provides for an incremental revolving and term loan facilities not to exceed $565.0 million plus additional amounts so long as both immediately before and after giving effect to such incremental facilities the Company’s Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Third A&R Credit Agreement, on a pro forma basis, does not exceed 2.75x. Completed Sale Transactions On January 10, 2020, we completed the sale of our Costa Rica operations and received net proceeds of approximately $15.0 million. The proceeds received net of cash sold, transaction fees and the working capital adjustment completed during the second quarter of 2020, were approximately $1.8 million. The Company will also receive up to $5.0 million within two years after the sale if Laureate Costa Rica meets certain performance metrics. On March 6, 2020, we completed the sale of NSAD, a higher education institution located in California. At closing, the Company paid subsidies to the buyers of approximately $4.5 million. Under the terms of the sale agreement, the Company will pay additional subsidies to the buyers of approximately $2.8 million ratably on a quarterly basis over the next four years, beginning on March 31, 2020. On January 25, 2018, the Company completed the sale of its operations in China, and, at the closing of the sale, a portion of the total transaction value was paid into an escrow account. As of December 31, 2019, the Company had recorded a receivable of approximately $25.9 million for the portion of the escrowed amount that we expected to receive. In June 2020, we received 141.6 million Hong Kong Dollars (approximately $18.3 million at the date of receipt) from the escrow, which was offset against the receivable recorded. Under the terms of the agreement, the remaining escrow receivable amount was due in late January 2021. The Company is pursuing collection and considers the net receivable remaining to be fully collectable. On September 11, 2020, we completed the divestiture of our operations in Chile through the transfer of control of our not-for-profit institutions and the sale of our for-profit operations. The cash proceeds received at closing, prior to transaction fees, were approximately $195.3 million. In addition, the purchase price included a note receivable of approximately $21.5 million that is payable one year from the date of divestiture. At the closing date, the Chilean operations had a cash balance (cash sold) of approximately $288.0 million that was transferred to the buyer as part of the transaction. On September 29, 2020, we completed the sale of our operations in Malaysia and received proceeds of $116.3 million, net of cash sold, but prior to transaction fees. The cash proceeds included a deposit of $5.0 million that we received from the buyer in February 2020. In connection with the sale, on October 1, 2020, we made a payment of $13.7 million to the minority owner of Inti Holdings for their 10.10% interest. On November 3, 2020, we completed the sale of our operations in Australia and New Zealand and received proceeds of approximately $624.2 million, net of cash sold and transaction costs. In November 2020, one of the Company's subsidiaries in Mexico sold land and buildings for a total purchase price of approximately $13.9 million, prior to transaction fees. As of December 31, 2020, the Company received approximately $7.0 million of the total purchase price, with the outstanding amount of approximately $6.9 million to be paid before the one-year anniversary of the signing of the agreement. 78 Pending Sale Transactions On September 11, 2020, the Company entered into a sale agreement to sell its operation of Walden University, LLC, (Walden University) for a purchase price of $1,480.0 million in cash, subject to certain adjustments set forth in the sale agreement. The closing of this transaction is expected to occur toward the end of 2021 and is subject to customary closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals. Under certain specified circumstances, the purchaser may be required to pay the Company a termination fee of $88.0 million, including if the purchaser terminates the sale agreement as a result of the imposition by the U.S. Department of Education of certain specified restrictions, or if Laureate terminates the sale agreement as a result of the purchaser’s failure to consummate the transaction upon satisfaction of the closing conditions. Upon completion of the sale, the restricted cash that is held at a corporate entity to collateralize the letters of credit in favor of the DOE will be released and reclassified to cash and cash equivalents. See also Overview—Regulatory Environment and Other Matters— Department of Justice Voluntary Information Request for Walden University. On October 13, 2020, the Company entered into a definitive agreement with Fundación Nasser, a not-for-profit foundation in Honduras, to transfer control of its operations in Honduras for total cash consideration of approximately $29.8 million, prior to closing costs. The buyer will also assume indebtedness which, as of December 31, 2020, was approximately $29.5 million. The transaction is subject to certain closing conditions, including regulatory approval, and is expected to be completed in the first half of 2021. On November 2, 2020, the Company entered into a definitive agreement with Ânima Holding S.A., one of the largest private higher education organizations in Brazil, for the sale of its Brazilian operations. The transaction value is approximately 4,400.0 million Brazilian Reals (or approximately $765.0 million at the time of signing), including 3,800.0 million Brazilian Reals (or approximately $660.7 million at the time of signing) in cash consideration, which is subject to certain adjustments, and assumption of net indebtedness. Pursuant to the agreement, the Company will be entitled to receive up to 203.0 million Brazilian Reals (or approximately $35.3 million at the time of signing) in additional cash consideration if certain metrics are achieved following the closing . The transaction is targeted to close by the end of the second quarter of 2021 and is subject to certain specified closing conditions. Liquidity Restrictions Our liquidity is affected by restricted cash balances, which totaled $117.2 million and $36.2 million as of December 31, 2020 and 2019, respectively. Restricted cash consists of cash equivalents held to collateralize a standby letter of credit in favor of the DOE. This letter of credit was required by the DOE in order to allow Walden and, in 2019, NSAD, to participate in the Title IV program. As of December 31, 2020 and 2019, we had approximately $83.6 million and $127.3 million, respectively, posted as a letter of credit in favor of the DOE. As of December 31, 2020, the restricted cash used to collateralize this letter of credit was held by a corporate entity. As of December 31, 2019, the restricted cash used to collateralize the letter of credit was primarily held by Walden. Because Walden is classified as a discontinued operation, its restricted cash balances were included in Current assets held for sale on the Consolidated Balance Sheets. As of December 31, 2020 and 2019, we had EUR 9.4 million (approximately $11.5 million at December 31, 2020) and EUR 5.0 million (approximately $5.5 million at December 31, 2019), respectively, posted as cash-collateral for LOCs related to the Spain Tax Audits. As part of our normal operations, our insurers issue surety bonds on our behalf, as required by various state education authorities in the United States. We are obligated to reimburse our insurers for any payments made by the insurers under the surety bonds. As of December 31, 2020 and 2019, the total face amount of these surety bonds was $17.1 million and $25.6 million, respectively. As of December 31, 2019, approximately $17 million of these surety bonds were held at a corporate entity; however, during 2020, all of the surety bonds were transferred to Walden and were held at Walden at December 31, 2020. Indefinite Reinvestment of Foreign Earnings We earn a significant portion of our income from subsidiaries located in countries outside the United States. As part of our business strategies, we have determined that, except for one of our institutions in Peru, all earnings from our foreign continuing operations will be deemed indefinitely reinvested outside of the United States. As of December 31, 2020, $127.7 million of our total $750.1 million of cash and cash equivalents were held by foreign subsidiaries. These amounts above do not include $270.2 79 million of cash recorded at subsidiaries that are classified as held for sale at December 31, 2020, of which $66.4 million was held by foreign subsidiaries. As of December 31, 2019, $55.8 million of our total $61.6 million of cash and cash equivalents were held by foreign subsidiaries. These amounts above do not include $333.5 million of cash recorded at subsidiaries that are classified as held for sale at December 31, 2019, of which $269.3 million was held by foreign subsidiaries. Our plans to indefinitely reinvest certain earnings are supported by projected working capital and long-term capital requirements in each foreign subsidiary location in which the earnings are generated. We have analyzed our domestic operation's cash repatriation strategies, projected cash flows, projected working capital and liquidity, and the expected availability within the debt or equity markets to provide funds for our domestic needs. As a result, we rely on payments from contractual arrangements, such as intellectual property royalty, network fee and management services agreements, as well as repayments of intercompany loans to meet any of our existing or future debt service and other obligations, a substantial portion of which are denominated in USD. Based on our analysis, we believe we have the ability to indefinitely reinvest these foreign earnings. If our expectations change based on future developments, including as a result of the announcement on January 27, 2020 to explore strategic alternatives, such that some or all of the undistributed earnings of our foreign subsidiaries may be remitted to the United States in the foreseeable future, we will be required to recognize deferred tax expense and liabilities on those amounts and pay additional taxes. For Peru, we have recognized deferred tax liabilities of approximately $0.1 million for the portion of the undistributed foreign earnings that are not expected to be indefinitely reinvested outside the United States. Liquidity Requirements Our short-term liquidity requirements include: funding for debt service (including finance leases); operating lease obligations; payments due to shareholders of acquired companies (seller notes); payments of deferred compensation; working capital; operating expenses; capital expenditures; and business development activities. Long-term liquidity requirements include: payments on long-term debt (including finance leases); operating lease obligations; payments of deferred compensation; and payments of other third-party obligations. Debt On April 26, 2017, we completed an offering of $800.0 million aggregate principal amount of 8.250% Senior Notes due 2025 (the Senior Notes due 2025).The Senior Notes due 2025 were issued at par and will mature on May 1, 2025. Interest on the Senior Notes due 2025 is payable semi-annually on May 1 and November 1, and the first interest payment date was November 1, 2017. During the fourth quarter of 2020, following the expiration of two cash tender offers, the Company purchased a total of $1.3 million aggregate principal amount of the Senior Notes due 2025, at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest to, but not including, the purchase dates. Substantially concurrently with the issuance of the Senior Notes due 2025, we consummated a refinancing of our Senior Secured Credit Facility by means of an amendment and restatement of the existing amended and restated credit agreement (the Second Amended and Restated Credit Agreement) to provide a new revolving credit facility that had an original borrowing capacity of $385.0 million and originally matured in April 2022 (the Revolving Credit Facility), as well as a syndicated term loan of $1,600.0 million that had a maturity date of April 26, 2024 (the 2024 Term Loan). As previously noted, the 2024 Term Loan was fully repaid in 2019. The Company entered into the Third A&R Credit Agreement on October 7, 2019. Among other things, the Third A&R Credit Agreement increased the borrowing capacity of our revolving credit facility from $385.0 million to $410.0 million and extended the maturity date from April 26, 2022 to October 7, 2024. As of December 31, 2020, senior long-term borrowings totaled $798.7 million, which consisted entirely of the balance outstanding under our Senior Notes due 2025. As of December 31, 2020, other debt balances totaled $197.6 million and our finance lease obligations and sale-leaseback financings were $52.6 million. Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries, mortgages payable, and notes payable. Approximately $171.5 million of long-term debt and seller notes, including the current portion, is included in the held-for-sale liabilities recorded on the consolidated balance sheet as of December 31, 2020. For further description of the held-for-sale amounts see Note 4, Discontinued Operations and Assets Held for Sale in our consolidated financial statements included elsewhere in this Form 10-K. 80 Senior Secured Credit Facility As described above, during the fourth quarter of 2020, the Company fully repaid the outstanding balance of our $410.0 million revolving credit facility, following the sale of our Australia and New Zealand operations. The revolving credit facility provides for borrowings of $410.0 million and has a maturity date of October 7, 2024. As of December 31, 2019, the outstanding balance under our senior credit facility was $202.4 million, which consisted entirely of balances outstanding under our $410.0 million revolving credit facility. Senior Notes As of December 31, 2020 and 2019, the outstanding balance under our Senior Notes due 2025 was $798.7 million and $800.0 million, respectively. Covenants Under the Third A&R Credit Agreement, we are subject to a Consolidated Senior Secured Debt to Consolidated EBITDA financial maintenance covenant (a leverage ratio covenant), as defined in the Third A&R Credit Agreement, unless certain conditions are satisfied. As of December 31, 2020, these conditions were satisfied and, therefore, we were not subject to the leverage ratio. The maximum ratio, as defined, is 3.50x as of the last day of each quarter commencing with the quarter ending December 31, 2019 and thereafter. In addition, indebtedness at some of our locations contain financial maintenance covenants. We were in compliance with these covenants as of December 31, 2020. Other Debt Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries, mortgages payable, and notes payable. As of December 31, 2020 and 2019, the aggregate outstanding balances on our lines of credit were $59.0 million and $14.5 million, respectively. In December 2017, UVM Mexico entered into an agreement with a bank for a loan of MXN 1,700.0 million (approximately $89.0 million at the time of the loan). The loan matures in June 2024 and carries a variable interest rate based on TIIE, plus an applicable margin, which is established based on the ratio of debt to EBITDA, as defined in the agreement (5.98% as of December 31, 2020). Payments on the loan were deferred until December 2018, at which time quarterly principal payments were due, beginning at MXN 42.5 million ($2.1 million at December 31, 2020) and increasing to MXN 76.5 million ($3.9 million at December 31, 2020), with a balloon payment of MXN 425.0 million ($21.4 million at December 31, 2020) due at maturity. In 2019, this loan was reassigned to another wholly owned subsidiary of the Company in Mexico. As of December 31, 2020 and 2019, the outstanding balance of this loan was $68.0 million and $77.6 million, respectively. The Company obtained financing to fund the construction of two new campuses at one of our institutions in Peru, Universidad Peruana de Ciencias Aplicadas. In 2019, the Company repaid the loans except for one, which carries an interest rate of 7.93% and is scheduled to mature in October 2023. Principal payments, plus accrued and unpaid interest, are made semi-annually in April and October. As of December 31, 2020 and 2019, the outstanding balance on the loan was $13.4 million and $14.5 million, respectively. We have outstanding notes payable at Universidad Privada del Norte (UPN), one of our institutions in Peru. These loans have varying maturity dates through January 2022 and have interest rates ranging from 2.10% to 7.85%. As of December 31, 2020 and 2019, these loans had an aggregate balance of $12.7 million and $23.5 million, respectively. In December 2017, one of our subsidiaries in Peru entered into an agreement to borrow PEN 247.5 million (approximately $76.0 million at the agreement date). The loan matures in December 2023. Quarterly payments in the amount of PEN 9.3 million ($2.6 million at December 31, 2020) were due from March 2018 through December 2019. The quarterly payments increased to PEN 14.4 million ($4.0 million at December 31, 2020) in March 2020 through the loan's maturity in December 2023. In June 2020, during the COVID-19 pandemic, the quarterly principal payments were suspended until June 2021. As of December 31, 2020 and 2019, this loan had a balance of $44.0 million and $52.3 million, respectively. On December 20, 2017, one of our subsidiaries in Brazil entered into an agreement to borrow BRL 360.0 million (approximately $110.0 million at the time of the loan). The loan was scheduled to mature on December 25, 2022. In 2020, during the COVID-19 pandemic, quarterly payments were deferred from June to December 2020 and the loan maturity was 81 extended to July 25, 2023. Following the deferral of the quarterly payments in 2020, the loan requires total principal payments of BRL 99.0 million ($19.1 million at December 31, 2020) in 2021, BRL 108.0 million ($20.9 million at December 31, 2020) in 2022, and BRL 76.5 million ($14.8 million at December 31, 2020) in 2023. As of December 31, 2020 and 2019, the loan had a balance of $54.7 million and $75.0 million, respectively. In addition to this loan, the same Laureate subsidiary in Brazil entered into two additional loans during the year ended December 31, 2019 totaling BRL 190.0 million (approximately $47.5 million at the time of loan). These loans have maturity dates of April 2021 and November 2021. As of December 31, 2020 and 2019, the outstanding balance on these loans was $33.8 million and $46.6 million, respectively. Leases We conduct a significant portion of our operations from leased facilities. These facilities include our corporate headquarters, other office locations, and many of our higher education facilities. As discussed in Note 10, Leases, in our consolidated financial statements included elsewhere in this Form 10-K, we have significant operating lease liabilities recorded related to our leased facilities, which will require future cash payments. As of December 31, 2020 and 2019, the present value of operating lease liabilities was $519.1 million and $559.0 million, respectively. These amounts exclude operating lease liabilities for our discontinued operations of $151.4 million and $388.2 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020, the minimum lease payments required during 2021 for our Continuing Operations is $91.5 million. Due to Shareholders of Acquired Companies One method of payment for past acquisitions was the use of promissory notes payable to the sellers of the acquired companies. As of December 31, 2020 and 2019, we recorded $8.6 million and $22.3 million, respectively, for these liabilities, which relate to Discontinued Operations. Capital Expenditures Capital expenditures consist of purchases of property and equipment and expenditures for deferred costs. Our capital expenditure program is a component of our liquidity and capital management strategy. This program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment, to grow our network through the following: (1) capacity expansion at institutions to support enrollment growth; (2) new campuses for institutions in our existing markets; (3) information technology to increase efficiency and controls; and (4) online content development. Our non-discretionary spending includes the maintenance of existing facilities. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital expenditures, our long-term growth strategy could be significantly affected. We believe that our internal sources of cash and our ability to obtain additional third-party financing, subject to market conditions, will be sufficient to fund our investing activities. Our total capital expenditures for our continuing and discontinued operations, excluding receipts from the sale of subsidiaries and property and equipment, were $89.2 million, $173.3 million and $257.9 million during 2020, 2019 and 2018, respectively. The 49% decrease in capital expenditures for 2020 compared to 2019 was primarily due to a targeted reduction and deferral across all business lines to preserve cash amid the COVID-19 pandemic, as well as a result of the executed divestitures. The 33% decrease in capital expenditures for 2019 compared to 2018 was driven mainly by reduced capital expenditures as a result of divestitures, as well as lower spending in Costa Rica, Peru and Brazil due to significant capital expenditures made in prior periods to launch several new campuses in these geographies, and reduced accreditation/regulatory expenditures in Brazil. Laureate Education, Inc. Deferred Compensation Plan Laureate maintains a deferred compensation plan to provide certain executive employees and members of our Board of Directors with the opportunity to defer their salaries, bonuses, and Board of Directors' retainers and fees in order to accumulate funds for retirement on a pre-tax basis. Participants are 100% vested in their respective deferrals and the earnings thereon. Laureate does not make contributions to the plan or guarantee returns on the investments. Although plan investments and participant deferrals are kept in a separate trust account, the assets remain Laureate’s property and are subject to claims of general creditors. As of December 31, 2020 and 2019, plan assets included in Other assets in our Consolidated Balance Sheets were $3.1 million and $4.5 million, respectively. As of December 31, 2020 and 2019, the plan liabilities reported in our Consolidated Balance Sheets were $6.2 million and $6.8 million, respectively. As of December 31, 2020 and 2019, $1.2 million and $1.8 million, 82 respectively, of the total plan liability was classified as a current liability; the remainder was noncurrent and recorded in Other long-term liabilities. Stock Repurchase Program On November 5, 2020, Laureate’s board of directors approved a new stock repurchase program to acquire up to $300 million of the Company’s Class A common stock. The Company’s proposed repurchases may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Repurchases may be effected pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act. The Company’s board of directors will review the share repurchase program periodically and may authorize adjustment of its terms and size or suspend or discontinue the program. The Company intends to finance the repurchases with free cash flow and excess cash and liquidity on-hand. As of December 31, 2020, the approximate dollar value of shares yet to be purchased under this stock repurchase program is $235.1 million. Cash Flows In the consolidated statements of cash flows, the changes in operating assets and liabilities are presented excluding the effects of exchange rate changes, acquisitions, and reclassifications, as these effects do not represent operating cash flows. Accordingly, the amounts in the consolidated statements of cash flows do not agree with the changes of the operating assets and liabilities as presented in the consolidated balance sheets. The effects of exchange rate changes on cash are presented separately in the consolidated statements of cash flows. The following table summarizes our cash flows from operating, investing, and financing activities for each of the past three fiscal years: (in millions) 2020 2019 2018 Cash provided by (used in): Operating activities $ 259.6 $ 339.8 $ 396.9 Investing activities 587.4 1,116.8 115.5 Financing activities (272.7) (1,674.0) (410.1) Effects of exchange rates changes on cash (0.5) 5.1 9.0 Change in cash included in current assets held for sale 195.8 184.6 (109.5) Net change in cash and cash equivalents and restricted cash $ 769.5 $ (27.8) $ 1.7 Comparison of Cash Flows for the Year Ended December 31, 2020 to the Year Ended December 31, 2019 Operating activities Cash provided by operating activities decreased by $80.2 million to $259.6 million for 2020, compared to $339.8 million for 2019. This decrease in operating cash was primarily attributable to changes in working capital, as well as the year-over-year effect of the divestitures that occurred, as certain of the divested institutions contributed positive operating cash flows during 2019 prior to divestiture. These factors accounted for a decrease in operating cash flows of approximately $184.7 million. This decrease was partially offset by: (1) a decrease in cash paid for interest of $68.1 million, prior to interest income, that is attributable to the lower average debt balances, from $188.7 million of cash paid for interest in 2019 to $120.6 million in 2020; (2) a decrease in cash paid for taxes of $28.3 million, from $119.7 million in 2019 to $91.4 million in 2020; and (3) a positive year-over-year effect to operating cash of $8.1 million primarily related to a cash payment in 2019 to settle cross currency and interest rate swaps in Chile. Investing activities Cash provided by investing activities decreased by $529.4 million, to $587.4 million for 2020 from $1,116.8 million in 2019. This decrease was primarily attributable to: (1) lower cash receipts from the sales of discontinued operations of $589.4 million, from $1,266.0 million in 2019 (for the sales of St. Augustine and our Thailand, South Africa, India, Spain, Portugal, Turkey, Panama, and UniNorte operations) to $676.6 million, net, in 2020 (for the net effect of the sales of NSAD and our operations in Costa Rica, Chile, Malaysia, Australia and New Zealand, net of cash sold, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations); (2) the year-over-year negative effect of cash receipt from derivative 83 settlements of $12.9 million, related to the foreign exchange swap agreements associated with the sale of the Spain and Portugal institutions in 2019; and (3) the year-over-year effect of proceeds of $11.5 million in 2019 from the sale of shares of a preferred stock investment in a private education company. These decreases in investing cash were partially offset by a decrease in capital expenditures of $84.2 million, and the year-over-year effect of a payment of $1.2 million in 2019 for a small acquisition in Brazil. Other items accounted for the remaining change of $1.0 million. Financing activities Cash used in financing activities decreased by $1,401.3 million to $272.7 million for 2020 from $1,674.0 million for 2019. This decrease in financing cash outflows was primarily attributable to: (1) higher net payments of long-term debt in 2019 as compared to 2020 of $1,207.6 million, primarily related to the use of divestiture proceeds for debt repayment; (2) lower payments in 2020 of $164.6 million to repurchase shares of our Class A common stock under our stock repurchase program; (3) lower payments of deferred purchase price for acquisitions of $14.5 million, due primarily to the full repayment of the St. Augustine seller note in 2019; (4) higher proceeds from stock option exercises of $11.7 million during 2020, as compared to 2019; and (5) lower payments for debt issuance costs and redemption and call premiums of $8.3 million, mostly related to a debt repayment in Chile in 2019. These decreases in financing cash outflows were partially offset by higher year-over-year payments to purchase noncontrolling interests of $7.9 million, from a $5.8 million payment in 2019 to acquire the remaining noncontrolling interest of one of our operations in India, immediately prior to the sale of those operations, to a $13.7 million payment in 2020 to the minority owner of our Malaysia operations in connection with the sale of those operations. Other items accounted for the remaining difference of $2.5 million. Comparison of Cash Flows for the Year Ended December 31, 2019 to the Year Ended December 31, 2018 Operating activities Cash provided by operating activities decreased by $57.1 million to $339.8 million for 2019, compared to $396.9 million for 2018. This decrease in operating cash flows during 2019 was primarily due to the following: (1) changes in operating assets and liabilities and other working capital, which decreased operating cash by $102.9 million, due largely to the year-over-year effect of cash received during the fall intake cycle of 2018 for entities that were subsequently divested in 2019; and (2) proceeds from the settlement of derivative contracts were $22.9 million higher in 2018 than in 2019 due to the fact that, in 2018, we received $14.1 million in cash from the settlement of interest rate swaps whereas, in 2019, we made a cash payment of $8.8 million in order to settle certain cross currency and interest swaps, primarily in Chile. Partially offsetting these operating cash decreases were increases in operating cash flows resulting from: (1) a $45.4 million decrease in cash paid for interest, prior to interest income, that is attributable to the lower average debt balances as a result of the debt repayments, from $234.1 million of cash paid for interest in 2018 to $188.7 million in 2019; and (2) a decrease in cash paid for taxes of $23.3 million, from $143.0 million in 2018, which included approximately $34.5 million of payments to the Spanish Tax Authorities, to $119.7 million in 2019. Investing activities Cash flows from investing activities increased by $1,001.3 million to $1,116.8 million for 2019 from $115.5 million in 2018. This increase is primarily attributable to: (1) higher cash receipts from the sales of discontinued operations of $890.2 million, from $375.8 million in 2018 (for the sales of Kendall and our operations in Cyprus, Italy, China, Germany, and Morocco) to $1,266.0 million in 2019 (for the sales of St. Augustine and our Thailand, South Africa, India, Spain, Portugal, Turkey, Panama, and UniNorte operations); (2) a decrease in capital expenditures of $84.6 million; (3) a year-over-year increase in cash from derivative settlements of $22.9 million, related to the foreign exchange swap agreements associated with the sale of the Cyprus and Italy institutions in 2018 and the Spain and Portugal institutions in 2019, as well as the settlement of the net investment hedges in 2019; (4) a year-over-year decrease in cash paid for acquisitions of $15.8 million; and (5) proceeds of $11.5 million in the 2019 fiscal period from the sale of shares of a preferred stock investment in a private education company. Partially offsetting these increases in investing cash flows was the effect of proceeds received from corporate-owned life insurance policies in 2018, resulting in a year-over-year decrease of $26.6 million. Other items accounted for the remaining change of $2.9 million. 84 Financing activities Cash used in financing activities increased by $1,263.9 million to $1,674.0 million for 2019 from $410.1 million for 2018. The increased financing cash outflows were primarily attributable to: (1) higher net payments of long-term debt in 2019 as compared to 2018 of $1,002.2 million, related to the use of divestiture proceeds for debt repayment; (2) payments of $264.1 million made during the third and fourth quarters of 2019 to repurchase shares of our Class A common stock under our stock repurchase program; (3) higher payments for debt issuance costs and redemption and call premiums during 2019 of $8.5 million, which was mostly related to a debt repayment in Chile; (4) higher payments to purchase noncontrolling interests of $5.6 million, primarily attributable to the payment made during 2019 to acquire the remaining 10% noncontrolling interest of one of our operations in India, immediately prior to the sale of those operations; and (5) higher payments of deferred purchase price for acquisitions of $6.5 million, due primarily to the full repayment of the St. Augustine seller note in 2019. These increases in financing cash outflows were partially offset by: (1) an $11.1 million reduction in dividend payments for the Series A Preferred Stock (no further dividend payments were required following the April 2018 conversion of the Series A Preferred Stock into Class A common stock); and (2) proceeds from stock option exercises during 2019 of $14.0 million. Other items accounted for the remaining difference of $2.1 million. 85 Critical Accounting Policies and Estimates The preparation of the consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Our significant accounting policies are discussed in Note 2, Significant Accounting Policies, in our consolidated financial statements included elsewhere in this Form 10-K. Our critical accounting policies require the most significant judgments and estimates about the effect of matters that are inherently uncertain. As a result, these accounting policies and estimates could materially affect our financial statements and are critical to the understanding of our results of operations and financial condition. Management has discussed the selection of these critical accounting policies and estimates with the audit committee of the board of directors. Business Combinations We apply the purchase accounting standards under ASC 805, “Business Combinations,” to acquisitions. The purchase price of an acquisition is allocated, for accounting purposes, to individual tangible and identifiable intangible assets acquired, liabilities assumed, and noncontrolling interests based on their estimated fair values on the acquisition date. Any excess purchase price over the assigned values of net assets acquired is recorded as goodwill. The acquisition date is the date on which control is obtained by the acquiring company. Any non-monetary consideration transferred and any previously held noncontrolling interests that are part of the purchase consideration are remeasured at fair value on the acquisition date, with any resulting gain or loss recognized in earnings. The preliminary allocations of the purchase price are subject to revision in subsequent periods based on the final determination of fair values, which must be finalized no later than the first anniversary of the date of the acquisition. Transaction costs are expensed as incurred. See Note 5, Acquisitions, in our consolidated financial statements included elsewhere in this Form 10-K for details of our business combinations. Goodwill and Indefinite-lived Intangible Assets We perform annual impairment tests of indefinite-lived intangible assets, including goodwill and tradenames, as of October 1st each year. We also evaluate these assets on an interim basis if events or changes in circumstances between annual tests indicate that the assets may be impaired. For example, during the second quarter of 2020, we recorded an impairment of the indefinite-lived intangible assets that were part of the Chile reporting unit. We have not made material changes to the methodology used to assess impairment loss on indefinite-lived tradenames during the past three fiscal years. If the estimates and related assumptions used in assessing the recoverability of our goodwill and indefinite-lived tradenames decline, we may be required to record impairment charges for those assets. We base our fair value estimates on assumptions that we believe to be reasonable but that are unpredictable and inherently uncertain. Actual results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. Goodwill On January 1, 2020, the Company adopted Accounting Standards Update (ASU) No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. This ASU requires entities to calculate goodwill impairment as the amount by which a reporting unit’s carrying value exceeds its fair