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Item 1A. Risk Factors

2021-02-25 compared with 2020-02-27 · 207 added, 433 removed, 489 unchanged (57% of the section changed)

The following are certain risks that could affect our business and our results of operations.

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.

Risks Relating to Our Continuing Business

We are a multinational business with continuing operations in nine countries around the world, predominantly in Latin America, and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address.

In each of 2019, 2018 and 2017, over 80% of our revenues from continuing operations were generated from operations outside of the United States.

Our continuing operations in four Latin American countries provided 74% of our revenues in 2019.

Our portfolio of international universities, which is comprised of over 25 institutions that we own or control and one other licensed institution that we manage through a joint venture arrangement, operates in nine countries, each of which is subject to complex business, economic, legal, political, tax and foreign currency risks.

We may have difficulty managing and administering an internationally dispersed business, 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 a significant number of international markets, which may materially adversely affect our business, financial condition and results of 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:

the size of our portfolio and diverse range of institutions present numerous challenges, including difficulty in staffing and managing foreign operations as a result of distance, language, legal and other differences;

our concentration in Latin America presents risks relating to regional economic pressures;

• 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;

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• limitations on the repatriation and investment of funds and foreign currency exchange restrictions;

limitations on our ability to realize economic benefits from certain institutions that are organized as not-for-profit or non-stock entities and that we account for as variable interest entities;

• acts of terrorism, public health risks, crime and natural disasters, particularly in areas in which we have significant operations.

Our success in growing our business will depend, in part, on the ability to anticipate and effectively manage these and other risks related to operating in various countries.

Any failure by us to effectively manage the challenges associated with the international expansion of our operations could materially adversely affect our business, financial condition and results of operations.

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.

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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.

As part of this process, the Company will evaluate all potential options for its businesses, including sales, spin-offs or business combinations.

As announced on January 27, 2020, the Company has already initiated separate processes to explore the sale of its Peru, Mexico and Australia/New Zealand businesses.

Additionally, we are continuing to pursue previously announced divestitures.

While the Company has had success with previous divestitures, there can be no assurance that our exploration of strategic alternatives will result in us being able to consummate sales, spin-offs or business combinations of any of our businesses or as to the terms, timing, structure, benefits and costs of any such transaction.

Speculation and uncertainty regarding our exploration of strategic alternatives and previously announced divestitures may cause or result in:

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;

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• 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 the estimated fair value of any of its remaining businesses is less than its carrying value;

• 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;

• 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 any divestiture, the resulting disruption of our businesses may have a material adverse impact on our revenue, operating results and financial condition.

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.

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Brand value may be severely damaged, even by isolated incidents, particularly if the incidents receive considerable negative publicity.

There has been a marked 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.

There has been a marked

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, many of our institutions use the Laureate name in promoting their institutions and our success is dependent in large part upon our ability to maintain and enhance the value of the Laureate and Laureate International Universities brands.

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.

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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, such as Chile.

These investigations and lawsuits have alleged, among other things, deceptive trade practices, false claims against the United States and noncompliance with state and DOE regulations, and breach of the requirement that universities in Chile be operated as not-for-profit institutions.

These allegations 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.

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.

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Growing our online academic programs could be difficult for us.

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.

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.

There is also increasing development of online programs by traditional universities, both in the public and private sectors, which may have more consumer acceptance than programs we develop because of lower pricing or perception of greater value of their degrees in the marketplace, which may materially adversely affect our business, financial condition and results of operations.

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

The complexity of these marketing efforts contributes to their cost.

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Our representatives also make presentations at upper secondary schools.

Additionally, we rely on the general reputation of our institutions and referrals from current students, alumni and employers as a source of new enrollment.

As part of our marketing and advertising, we also subscribe to lead-generating databases in certain markets, the cost of which may increase.

Among the factors that could prevent us from marketing and advertising our institutions and programs successfully are the failure of our marketing tools and strategies to appeal to prospective students, regulatory constraints on marketing, current student and/or employer dissatisfaction with our program offerings or results and diminished access to upper secondary campuses.

In some of the countries in which we operate, enrollment growth in degree-granting, higher education institutions is slowing or is expected to slow.

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.

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If we do not effectively manage our growth and business, our results of operations may be materially adversely affected.

We have expanded our business through the expansion of existing institutions and the acquisition of higher education institutions, and we may do so in the future.

Planned growth may require us to add management personnel and upgrade our financial and management systems and controls and information technology infrastructure.

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.

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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 operations.

In some countries in which we operate, there is a trend toward making continued licensure or accreditation based on successful student outcomes, such as employment, which may be affected by many factors outside of our control.

Once licensed, approved, authorized or accredited, some of our institutions may need approvals for new campuses or to add new degree programs.

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Moreover, regulatory agencies may scrutinize our institutions because they are owned or controlled by a U.S.-based for-profit corporation.

Outside the United States, we may be particularly susceptible to such treatment because, in several of the countries in which we operate, our institutions are among the largest private institutions.

Changes in applicable regulations may cause a material adverse effect on our business, financial condition and results of operations.

For a full description of the material laws and regulations affecting our higher education institutions in the United States, and the impact of these laws and regulations on the operations of those institutions, including the ability of those institutions to continue to access U.S.

federal student aid funding sources, see “-Risks Relating to our Highly Regulated Industry in the United States” and “Item 1-Business-Industry Regulation-U.S.

Changes in laws governing student financing could affect the availability of government-sponsored financing programs for our non-U.S.

students, such as the Crédito con Aval del Estado (the “CAE Program”), a government-sponsored student loan program in Chile, the Fundo de Financiamento Estudantil (“FIES”), a government-sponsored loan program in Brazil, and the Programa Universidade Para Todos (“PROUNI”) in Brazil, all of which are offered by governments as a means of increasing student access to post-secondary education programs.

If those programs are changed, or if our institutions or our students are no longer permitted to participate in those programs, or, in certain countries, if students who avail themselves of such programs do not graduate or subsequently default on their loans and we as a result become responsible for paying a significant portion of those loans, it could cause a material adverse effect on our business, financial condition and results of operations.

For more information on the CAE Program, FIES and PROUNI, see “Item 1-Business-Industry Regulation-Brazilian Regulation” and “Item 1-Business-Industry Regulation-Chilean Regulation.”

The laws of the countries where we own or control institutions or may acquire ownership or control of institutions in the future must permit both private higher education institutions and foreign ownership or control of them.

For political, economic or other reasons, a country could decide to change its laws or regulations to prohibit or limit private higher education institutions or foreign

ownership or control or prohibit or limit our ability to enter into contracts or agreements with these institutions.

If this change occurred, it could have a material adverse effect on our business, financial condition and results of operations and we could be forced to sell an institution at a price that could be lower than its fair market value or relinquish control of an institution.

A forced sale or relinquishment of control could materially adversely affect our business, financial condition and results of operations.

Political and regulatory developments in Chile may materially adversely affect us.

On May 29, 2018, a new Higher Education Law (the “New Law”) was enacted.

Among other things, the New Law prohibits conflicts of interests and related party transactions involving universities and their controlling parties, with certain exceptions, including the provision of services that are educational in nature or essential for the university’s purposes.

While we have modified some of our relationships with the Chilean universities in our network, and may need to make further modifications, we do not believe that the New Law will change our relationship with our two technical-vocational institutes in Chile that are for-profit entities.

However, it is possible that the Chilean government will adopt additional laws that affect for-profit technical-vocational institutes and their relationships with their owners.

The New Law established a Superintendency of Higher Education, with authority to regulate institutions of higher education and promulgate regulations and procedures implementing the New Law.

As of May 29, 2019, the New Law’s provisions regarding related party transactions came into force, and the Superintendent has since issued further interpretive guidance and regulations.

Immediately prior to these provisions coming into force, each of the Chilean non-profit universities and the relevant Laureate services provider reached an agreement to terminate the prior network services agreement in favor of an open bidding process, wherein unrelated third parties and Laureate-related providers were invited to compete in the provision of the range of services that are essential to the fulfillment of each of their academic missions.

Each of the Chilean non-profit universities has completed all of the bidding and contractual processes subsequent to the May 2019 contract terminations.

The Company participated in these open bid processes, conducted by a third party, and was judged to have submitted the superior bid in many of them.

Awarded contracts entered into force once the applicable university’s board approved them or in January 2020, in the case of some of the educational services, due to the academic calendar.

Within the ordinary regulatory course of supervision, the Company and its Chilean non-profit universities will continue to interact with the Superintendent to maintain compliance with the New Law.

Additionally, we will continue to evaluate our accounting treatment of the Chilean non-profit universities to determine whether we can continue to consolidate them.

Our continuing evaluation of the impact of the New Law may result in changes to our expectations due to changes in our interpretations of the law, assumptions used, and additional guidance that may be issued.

There is no assurance that the New Law will not have additional material adverse effects on our financial condition or results of operations.

In April 2020, Chileans will vote on whether Chile should create a new constitution and, if so, whether it should be drafted by a popularly elected assembly or one mixed with current lawmakers.

Although it is too early to know whether a new constitution could include provisions that have a material adverse effect on our financial condition or results of operations, we will continue to monitor the developments.

While we believe that all of our institutions in Chile are operating in full compliance with Chilean law, we cannot predict the extent or outcome of any additional educational or constitutional reforms that may be implemented in Chile.

Depending upon how these reforms are defined and implemented, there could be a material adverse effect on our financial condition and results of operations.

Any additional significant disruption to our operations in Chile would have a material adverse effect on our financial condition and results of operations.

Similar reforms in other countries in which we operate could also have a material adverse effect on our financial condition and results of operations.

Regulatory changes in Chile may reduce access to student financing for some of our students in Chile, which could reduce enrollments at our Chilean institutions.

The Chilean government and Congress, as well as participants in the Chilean higher education sector, are engaged in a policy debate about how to reform the student financing system including, but not limited to, discussion of reform to the CAE system, modifications to the availability of means-tested free tuition for various classes of students and other initiatives.

This policy debate may or may not result in actual legislative action.

We cannot predict the extent or outcome of any reforms or changes to the student financing system in Chile.

Depending on how these reforms, if any, are defined and implemented, there could be an adverse effect on the ability of students in Chile to access government-sponsored higher education funding and on the ability of our institutions in Chile to attract and retain students, which could result in a material adverse effect on our financial condition and results of operations.

We have been subject in the recent past to investigations by Chilean regulators and could become subject to other investigations in the future.

In recent years, the not-for-profit universities in our network in Chile have been the subject of multiple investigations by various parts of the Chilean government, including the Chilean Congress, the Ministry of Education, the tax authorities and the public prosecutor, alleging various violations of Chilean law governing the non-profit status of universities.

None of those investigations is currently active or has resulted in any material penalty to our institutions.

While we believe that all of our institutions in Chile are operating in full compliance with Chilean law, we cannot predict what outcome may result from any future administrative processes or other investigations undertaken by the Chilean government, including by the newly appointed Superintendent of Higher Education under the New Law.

Depending upon the outcome of any such processes or investigations, if any are instituted, there could be a material adverse effect on our financial condition and results of operations.

Any disruption to our operations in Chile would have a material adverse effect on our financial condition and results of operations.

Our right to receive economic benefits from certain of the institutions that are organized as not-for-profit or non-stock entities, and that we account for as variable interest entities, may be limited.

We have obtained board and operating control and controlling financial interests in entities outside the United States that are educational institutions similar to U.S.

not-for-profit, non-stock universities.

Under applicable law, these institutions do not have recognized “owners” or shareholders, and generally cannot declare dividends or distribute their net assets to us.

For accounting purposes, we have determined that these institutions are variable interest entities under GAAP and that we are the primary beneficiary of these variable interest entities.

Maintenance of our interest in the variable interest entity institutions, and our ability to receive economic benefits from these entities, is based on a combination of (1) service agreements that other Laureate entities have with the VIE institutions, allowing the institutions to access the benefits of the Laureate International Universities network and allowing us to recognize economies of scale throughout the network, and (2) our ability to transfer our rights to govern the VIE institutions, or the entities that possess those rights, to other parties, which would yield a return if and when these rights are transferred.

In limited circumstances, we may have rights to the residual assets in liquidation.

Under the mutually agreed service agreements, we are paid at market rates for providing services to institutions that are essential to the fulfillment of each of their academic missions.

While we believe that these arrangements conform to applicable law, the VIE institutions are subject to regulation by various agencies based on the requirements of local jurisdictions.

These agencies, as well as local legislative bodies, review and update laws and regulations as they deem necessary or appropriate.

We cannot predict the form of any laws that may be enacted, or regulations that ultimately may be adopted in the future, or whether they may have a material adverse effect on our results of operations or financial condition.

If local laws or regulations were to change, the VIE institutions were found to be in violation of existing local laws or regulations, or regulators were to question the financial sustainability of the VIE institutions and/or whether the contractual arrangements were at fair value, local government agencies could, among other actions:

revoke the business licenses and/or accreditations of the VIE institutions;

void or restrict related party transactions, such as the contractual arrangements between us and the VIE institutions;

impose fines that significantly impact business performance or other requirements with which the VIE institutions may not be able to comply;

require us to change the governance structures of the VIE institutions, such that we would no longer maintain control of the VIE institutions;

disallow a transfer of our rights to govern the VIE institutions, or the entities that possess those rights, to a third party for consideration.

If we are unable to receive economic benefits from these institutions, it could have a material adverse effect on our results of operations and financial condition.

In addition, if we are unable or limited in our ability to receive economic benefits from these institutions, we may be unable to consolidate the VIE institutions into our consolidated financial statements, which could have a material adverse effect on our business, financial condition and results of operations, including possible write-offs of all or a portion of our investment in the affected VIEs and a reduction in operating income, or we may be limited in our ability to recognize all of the institutions’ earnings in our consolidated statements of operations.

See “-Political and regulatory developments in Chile may materially adversely affect us.”

The higher education market is very competitive, and we may not be able to compete effectively.

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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 where 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.

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.

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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.

Any of these large, well-capitalized competitors may make it more difficult for us to acquire institutions as part of our strategy.

They may also be able to charge lower tuitions or attract more students, which would adversely affect our growth and the profitability of our competing institutions.

There is also an increased ability of traditional universities to offer online programs and we expect competition to increase as the online market matures.

This may create greater pricing or operating pressure on us, which could have a material adverse effect on our institutions’ enrollments, revenues and profit margins.

We may not be able to compete successfully against current or future competitors and may face competitive pressures that could have a material adverse effect on our business, financial condition and results of operations.

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.

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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.

See “-Risks Relating to Our Highly Regulated Industry in the United States-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.”

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.

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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, including the U.S.

Department of Education (“DOE”), state licensing agencies and the relevant accrediting bodies.

The imposition of restrictions on the initiation of new educational programs by regulatory agencies may delay such expansion plans.

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We may have limited experience with the subject matter of new programs and may need to modify our systems and strategy.

unable to increase the number of students, offer new programs in a cost-effective manner or otherwise manage effectively the operations of newly established academic programs, our business, financial condition and results of operations could be materially adversely affected.

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.

Failure to keep pace with changing market needs and technology could harm our ability to attract students.

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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 where we have lower statutory tax rates and higher than anticipated in jurisdictions where we have higher statutory tax rates.

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.

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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.

This includes certain of our higher education institutions that are organized as VIEs, similar to not-for-profit institutions in the United States.

If we were to lose this favorable tax treatment, either because a VIE institution is converted into a for-profit shareholder-owned entity, or because of a change in local tax laws, our tax liabilities could increase materially.

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.

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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.

Our acquisition activities have increased the volume and complexity of laws and regulations that we are subject to and with which we must comply.

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.

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If we are not able to recover amounts that are subject to indemnification, the loss for these contingencies could be greater.

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 Iniciativas Culturales de España, S.L.

(“ICE”), our Spanish holding company, for approximately EUR 11.1 million ( $12.3 million at December 31, 2019), 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 ( $19.1 million at December 31, 2019), 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 $32.8 million at December 31, 2019) 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 a final assessment to our Spanish holding company for the 2011 through 2013 period of approximately EUR 4.1 million ( $4.5 million at December 31, 2019).

As of December 31, 2019, the Company has posted a cash-collateralized letter of credit of approximately $5.6 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 ( $4.8 million at December 31, 2019).

In this regard, ICE is going to appeal the referred assessment before the Administrative Central Court but, in order to be able to submit the appeal, ICE has to issue a guarantee to cover the referred assessment.

Finally, the referred tax audit was extended in June 2019 to the non resident income tax for the second semester of fiscal year 2015.

This audit is still in progress and the entity has not yet received any estimative assessment.

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.

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dollar and the local currency in the countries where we operate institutions are likely to fluctuate from period to period.

In 2019, approximately 81% of our revenues originated outside the United States.

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.

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In recent years, the U.S.

dollar has strengthened against many international currencies, including the Brazilian real, Chilean peso and Mexican peso.

dollar has strengthened against many international currencies, including the Mexican peso.

As the exchange rate of the U.S.

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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.

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.

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We experience seasonal fluctuations in our results of operations.

Most of the institutions in our portfolio have a summer break, during which classes are generally not in session and minimal revenues are recognized.

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.

Given the geographic diversity of our institutions and differences in timing of summer breaks, our second and fourth quarters are stronger revenue quarters as the majority of our institutions are in session for most of these respective quarters.

Our first and third fiscal quarters are weaker revenue quarters because the majority of our institutions have summer breaks for some portion of one of these two quarters.

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.

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As a result, our revenues and results of operations may be materially adversely affected.

We rely on computer systems for financial reporting and other operations and any disruptions in our systems would materially adversely affect us.

We rely on computer systems to support our financial reporting capabilities, including our regional shared services organizations (“SSOs”), and other operations.

As with any computer systems, unforeseen issues may arise that could affect our ability to receive adequate, accurate and timely financial information, which in turn could inhibit effective and timely decisions.

Furthermore, it is

possible that our information systems could experience a complete or partial shutdown.

If such a shutdown occurred, it could materially adversely affect our ability to report our financial results in a timely manner or to otherwise operate our business.

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.

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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 Latin America, 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.

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.

We may lose the right to license certain intellectual property which is integral to our online course offerings.

With our mandate that all of our institutions offer a certain percentage of online course offerings, we rely heavily upon the licensing of third-party materials, including e-textbooks and graphic, video and audio media, which are incorporated into our globally offered course content.

Our institutions contract with large vendors which offer volumes of such course content.

We could lose the right to license some percentage or all of those third-party materials for several reasons, including our licensors’ infringement of third-party materials, going out of business, or terminating our content licenses for one or more business reasons.

We rely on the negotiation of extensive licensing rights to mitigate this eventuality and contract with known, reliable vendors.

If we lose the right to a significant percentage of such content, our course offerings and programs could be negatively affected because those materials must be removed from our course offerings, resulting in significant cost to us to revise the affected courses and a poor educational experience for our students, which could negatively affect our reputation, and our financial condition and results of operations may be materially adversely affected.

We may infringe the intellectual property rights of one or more of our third-party licensors.

All of our institutions offer a certain percentage of online course offerings.

The educational content contained in such online course offerings is inherently more susceptible to infringement than campus-based learning materials because it is easier to make many digital copies of an online text, picture, video or audio file than it is to reproduce hard-copy materials.

Also, intellectual property laws can vary from country to country, resulting in additional risk of infringement when licensing the same materials in multiple countries.

Our institutions take reasonable precautions to ensure that all course content offerings used by them are properly licensed

and distributed;

however, there is no guarantee that all of our course content offerings are properly licensed.

Additionally, we create universally applicable course and program offerings that are licensed throughout our institutions, meaning that a single act of infringement could adversely affect multiple institutions around the world.

Intellectual property infringement by us and our institutions can result in damaged vendor relationships, legal proceedings, loss of course content, and reputational loss, which could negatively affect our reputation, and our financial condition and results of operations may be materially adversely affected.

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 disturbances may involve protests on university campuses, including the occupation of university buildings and the disruption of classes.

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.

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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 are located in areas such as Mexico and Peru that are prone to damage from major weather events, which may be substantial.

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.

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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.

A number of our institutions are also located in areas, such as Chile, Mexico and Peru, that are prone to earthquake damage.

Also 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.

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 which does substantial damage to the area in which an institution is located.

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.

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Our faculty members in particular are key to the success of our institutions.

Our rapid global expansion has presented challenges for recruiting talented people with the right experience and skills for our needs.

We face competition in attracting and retaining faculty members who possess the necessary experience and accreditation to teach at our institutions.

As we expand and add personnel, it may be difficult to maintain consistency in the quality of our faculty and administrative staff.

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.

High crime levels in certain countries and regions in which we operate institutions may have an impact on our ability to attract and retain students and may increase our operating expenses.

Many of our institutions are located in countries and regions that have high rates of violent crime, drug trafficking and vandalism.

If we are unable to maintain adequate security levels on our campuses, and to work with local authorities to maintain adequate security in the areas adjacent to our campuses, we may not be able to continue to attract and retain students, or we may have to close a campus either temporarily or permanently.

For example, in 2014 we closed a small campus of one of our universities in Mexico because of threats from a local drug cartel.

In addition, high crime rates may require us to make additional investments in security infrastructure and personnel, which may cause us to increase our tuition rates in order to maintain operating margins.

Certain security measures may materially adversely affect the campus experience by making access by students more cumbersome, which may be viewed negatively by some of our existing or prospective students.

If we are not able to attract and retain students because of our inability to provide them with a safe environment, or if we are required to make substantial additional investments in security, that could cause a material adverse effect on our business, financial condition and results of operations.

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.

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The marketplace for senior executive management candidates is very competitive.

Our growth may be adversely affected if we are unable to attract and retain such key employees.

Turnover of senior management can adversely affect our stock price, our results of operations and our client relationships, and can make recruiting for future management positions more difficult.

Competition for senior leadership may increase our compensation expenses, which may negatively affect our profitability.

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 where local parties may have certain advantages over foreign parties.

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.

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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.

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.

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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.

Our continued international expansion, and any development of new partnerships and joint venture relationships worldwide, increase the risk of FCPA violations in the future.

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.

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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 could also 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 Our Highly Regulated Industry in the United States

Failure of each of our U.S.

Institutions 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.

Our postsecondary educational institutions in the United States (our “U.S.

Institutions”) are subject to extensive regulatory requirements, including at the federal, state, and accrediting agency levels.

Many students at our U.S.

Institutions rely on the availability of federal student financial aid programs, known as Title IV programs, which are administered by the U.S.

Department of Education (“DOE”), to finance their cost of attending our institutions.

For the fiscal year ended December 31, 2019, Walden University and NewSchool of Architecture and Design derived approximately 76% and 36% of their revenues (calculated on a cash basis) from Title IV program funds.

To participate in Title IV programs, our U.S.

Institutions must be authorized by the appropriate state education agency or agencies, be accredited by an accrediting agency recognized by the DOE, and be certified as an eligible institution by the DOE.

As a result, our U.S.

Institutions are 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.

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.

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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, our U.S.

Institutions could suffer financial penalties, limitations on their operations, loss of accreditation, termination of or limitations on their ability to grant degrees and certificates, or limitations on or termination of their eligibility to participate in Title IV programs, each of which could materially adversely affect our business, financial condition and results of operations.

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.

If either of our U.S.

Institutions 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, the affected U.S.

Institution 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 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 one of our U.S.

Institutions 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.

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.

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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 our U.S.

Institutions’ 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 our U.S.

Institutions are 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.

Our failure to obtain any required approval of any transactions from the DOE, the institutional accrediting agencies or the pertinent state educational agencies could result in one or more of our U.S.

Institutions 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.

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.

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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 Higher Education Act, which governs federal financial assistance for higher education, approximately every five to eight years.

However, the HEA was most recently reauthorized in August 2008.

Congress is considering the reauthorization of HEA and an HEA reauthorization bill called the College Affordability Act was introduced in the U.S.

House of Representatives on October 15, 2019.

Among other provisions, the College Affordability Act would revise 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.

It is possible that there will be other bills introduced in this Congress to amend the HEA, including a U.S.

Senate HEA reauthorization bill.

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.

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.

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 our U.S.

Institutions is and is expected to be derived from Title IV programs, any action by the U.S.

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 the enrollments, business, financial condition and results of operations of our U.S.

Institutions.

In recent years, DOE has proposed or promulgated a substantial number of new regulations that impact our U.S.

Institutions, including, but not limited to, borrower defenses to repayment, state authorization, and financial responsibility.

For additional information regarding these regulations, see:

“-The DOE may adopt 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 any of our U.S.

and “-If any of our U.S.

Institutions do not meet specific financial responsibility standards established by the DOE, that institution may be required to post a letter of credit or accept other limitations to continue participating in Title IV programs, or that institution could lose its eligibility to participate in Title IV programs”.

Any of these new or proposed regulations could have a material adverse effect on enrollments, business, financial condition, and results of operations of our U.S.

Institutions.

On November 1, 2019, the DOE published final regulations regarding state authorization for programs offered through distance education and accreditation requirements.

The general effective date of the final regulations is July 1, 2020.

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

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 of our U.S.

Institutions 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, that institution 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.

The rulemaking is currently pending with the Office of Management and Budget.

Once the review by the Office of Management and Budget is complete, the DOE will issue a Notice of Proposed Rulemaking for notice and comment.

“—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.

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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”), while it engaged in a new rulemaking to further revise the 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.

They also prohibited schools from using any pre-dispute arbitration agreements, prohibited schools from prohibiting relief in the form of class actions by student borrowers, and invalidated clauses imposing requirements that students pursue an internal dispute resolution process before contacting authorities regarding concerns about an institution.

For proprietary institutions, the 2016 DTR regulations described the threshold for loan repayment rates that would require specific disclosures to current and prospective students and the applicable loan repayment rate methodology.

The 2016 DTR regulations also established new financial responsibility and administrative capacity requirements for both not-for-profit and for-profit institutions participating in the Title IV programs.

Under the 2016 DTR regulations, certain events would automatically trigger a letter of credit, and the DOE retained discretion to impose a letter of credit upon the occurrence of other events.

The 2016 DTR regulations were to take effect on July 1, 2017.

On June 15, 2017, the DOE announced an indefinite delay to its implementation of the 2016 DTR regulations.

On July 6, 2017, the attorneys general of 18 states and the District of Columbia filed suit against the DOE, claiming that its delay of the 2016 DTR regulations violated applicable law, including the Administrative Procedure Act.

Through a series of orders dated September 12 and 17, and October 12, 2018, the U.S.

District Court for the District

of Columbia held that procedural delays by the DOE in implementing the 2016 DTR regulations were improper and required that the 2016 DTR regulations be reinstated as of October 16, 2018.

On September 23, 2019, the DOE published final regulations further revising DTR and addressing certain financial responsibility and other matters (the “2019 DTR regulations”).

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.

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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 take 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.

On January 16, 2020, the U.S.

House of Representatives voted to pass a resolution blocking the implementation of the 2019 DTR regulations.

The resolution would need to be passed by the U.S.

Senate and signed by the president in order to become effective.

If the resolution were enacted into Law, the 2016 DTR rules would remain in effect past July 1, 2020.

We cannot predict the outcome of this resolution or any other attempts to block or revise the 2019 DTR regulations.

We cannot state with any certainty the impact that complying with the 2016 DTR regulations might have on our business.

If we are required to repay the DOE for any successful DTR claims by students who attended our U.S.

Institutions, 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.

Institutions must periodically seek recertification to participate in Title IV programs and, if the DOE does not recertify the institutions to continue participating in Title IV programs, our students would lose their access to Title IV program funds, or the institutions could be recertified but required to accept significant limitations as a condition of continued participation in Title IV programs.

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.

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.

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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-U.S.

Regulation,” both of our U.S.

Institutions currently participate in the Title IV programs pursuant to the DOE’s provisional form of certification.

If the DOE does not renew or withdraws either of our U.S.

Institutions’ certifications to participate in Title IV programs at any time, students in the affected institution(s) would no longer be able to receive Title IV program funds.

Similarly, the DOE could renew our U.S.

Institutions’ 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 any of our U.S.

Institutions’ certifications without advance notice if it receives reliable information that an 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 our U.S.

Institutions’ enrollments and our business, financial condition and results of operations.

Institutions would lose their ability to participate in Title IV programs if they fail to maintain their institutional accreditation, and our student enrollments could decline if we fail to maintain any of our accreditations or approvals.

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.

Each of our U.S.

Institutions is so accredited, and such accreditation is subject to renewal or review periodically or when necessary.

either of our U.S.

Institutions fails to satisfy any of its respective accrediting commission’s standards, that institution could lose its accreditation by its respective accrediting commission, which would cause the institution to lose eligibility to participate in Title IV programs and experience a significant decline in total student enrollments.

In addition, our U.S.

Institutions’ individual educational programs are accredited by specialized accrediting commissions or approved by specialized state agencies.

If either of our U.S.

Institutions fails to satisfy the standards of any of those specialized accrediting commissions or state agencies, the institution 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 an accrediting body of our U.S.

Institutions loses recognition by the DOE, that institution could lose its ability to participate in Title IV programs.

If either of our U.S.

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.

Our campus-based U.S.

Institutions are authorized by applicable state educational licensing agencies to operate and to grant degrees or diplomas, which authorizations are required for students at these institutions to be eligible to receive funding under Title IV programs.

If either of our U.S.

Institutions fails to continuously satisfy applicable standards for maintaining its state authorization in a state in which that institution is physically located, that institution 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 that institution’s 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.

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.

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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.

For more information on these lawsuits, see “Item 3-Legal Proceedings.”

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.

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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 our U.S.

Institutions and the constantly changing regulatory environment require us to continually evaluate our state regulatory compliance activities.

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.

Therefore, in addition to the states in which we maintain physical facilities, we have obtained, or are in the process of obtaining or renewing, approvals or exemptions that we believe are necessary in connection with our activities that may constitute a presence in such other states requiring licensure or authorization by the state educational agency based on the laws, rules or regulations of that 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.

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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).

Neither of our U.S.

Institutions participates in NC-SARA because Laureate has a composite score of below 1.0.

Accordingly, our U.S.

Institutions must apply for and comply with each state’s applicable authorization requirements related to their distance education activities.

Many states have established or are proposing legislation to create new or different criteria for authorization of “non-SARA” institutions, including requiring

them to post bonds and/or meet composite score requirements.

Institutions do not meet these requirements, they may not enroll students in that state, which could have a material impact on our business.

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.

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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.

These regulations are effective July 1, 2020, but the DOE allows institutions to opt for early implementation of the provisions related to state authorization and institutional disclosures.

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 any of our U.S.

Institutions 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.

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.

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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 material adverse effect on our business, financial condition, results of operations and cash flows.

material adverse effect on our business, financial condition, results of operations and cash flows.

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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 our U.S.

Institutions, the cost of responding to these inquiries and investigations could increase significantly, and the potential impact on our business would be substantially greater.

If either of our U.S.

Institutions do 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.

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.

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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 funds, which in some cases may result in a significant delay in the institution’s receipt of those funds;

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

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 any of our U.S.

Institutions 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.

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 any of our U.S.

To participate in Title IV programs, our U.S.

Institutions 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.

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.

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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—U.S.

Regulation” in this Form 10‑K, the DOE annually assesses our U.S.

Institutions’ 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, 2018, the DOE determined that it, and consequently, Walden University and NewSchool of Architecture and Design, failed to meet the standards of financial responsibility.

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, 2016, as part of its defense to repayment rulemaking, the DOE issued a rule to revise 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.

Due to litigation, the 2016 DTR regulations were reinstated as of October 16, 2018.

For additional information regarding this rule and current rulemaking, see “—Risks Relating to Our Highly Regulated Industry in the United States—The DOE has adopt 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 our U.S.

Institutions, 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.

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 either of our U.S.

Institutions does not properly calculate and timely return the unearned funds for a sufficient percentage of students, that institution 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 any of our U.S.

Institutions does not correctly calculate and timely return unearned Title IV program funds, that institution 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 that institution’s participation in Title IV programs.

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.

The DOE may change our U.S.

Institutions’ 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 one or more of our U.S.

Institutions 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 our U.S.

Institutions’ 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.

Institutions may lose eligibility to participate in Title IV programs if the percentage of our U.S.

Institutions revenues derived from Title IV programs is too high.

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 any of our U.S.

Institutions were to violate the 90/10 Rule, that institution 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 the institution exceeded the 90% threshold and would be unable to regain eligibility for two fiscal years thereafter.

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 and NSAD derived approximately 76% and 36% of their revenues (calculated on a cash basis), respectively, from Title IV program funds for the fiscal year ended December 31, 2019.

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.

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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.

The College Affordability Act, which was introduced in the U.S.

House of Representatives on October 15, 2019, would revise 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 could be 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 our U.S.

Institutions’ percentages of revenues derived from Title IV program funds.

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.

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.

Either of our U.S.

Institutions may lose eligibility to participate in Title IV programs if their respective student loan default rates are too high.

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.

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The DOE generally publishes official cohort default rates annually in September for the repayment period that ended the prior September 30.

NewSchool of Architecture and Design’s official cohort default rates for the 2016, 2015 and 2014 federal fiscal years were 8%, 7.4% and 5.2%, respectively.

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 believe that neither of our institutions 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.

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.

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 our U.S.

Institutions in danger of losing their 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 either of our U.S.

Institutions 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.

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.

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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 any of our U.S.

Institutions 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 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.

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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 our U.S.

Institutions offering various educational programs via distance education.

Any significant failure by one of our U.S.

Institutions to adequately detect fraudulent activity related to student enrollment and financial aid could result in loss of accreditation at the discretion of the institutions’ accrediting agency, which would result in the institution losing eligibility for Title IV programs, or in direct action by the DOE to limit or terminate the institution’s Title IV program participation.

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.

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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 noncompliance.

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.

If the results of any federal proceeding is 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 our U.S.

Institutions, injunctions or other penalties.

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.

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• incur additional indebtedness, issue disqualified stock or issue certain preferred shares;

• sell assets;

• enter into transactions with affiliates;

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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.

For example, our VIE institutions generally are not permitted to pay dividends.

Further, because most of our income is generated by our operating subsidiaries in non-U.S.

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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 expand our business and may affect the availability or cost of borrowing under our existing credit facility.

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 expand our business.

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.

Our variable rate debt exposes us to interest rate risk which could materially adversely affect our cash flow.

Borrowings under our Revolving Credit Facility and certain local credit facilities bear interest at variable rates and other debt we incur also could be variable-rate debt.

If market interest rates increase, variable-rate debt will create higher debt service requirements, which could materially adversely affect our cash flow.

If these rates were to increase significantly, the risks related to our substantial debt would intensify.

While we have and may in the future enter into agreements limiting our exposure to higher interest rates, any such agreements may not offer complete protection from this risk.

Based on our outstanding variable-rate debt as of December 31, 2019, an increase of 1% in interest rates would result in an increase in interest expense of approximately $4.4 million on an annual basis.

In addition, borrowings under our Revolving Credit Facility carry an interest rate based on LIBOR.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, is considering replacing U.S.

dollar LIBOR with a newly-created index, calculated by reference to short-term repurchase agreements backed by U.S.

Treasury securities, called the Secured Overnight Financing Rate (“SOFR”).

The first publication of SOFR was released by the Federal Reserve Bank of New York in April 2018.

Whether SOFR will become a widely-accepted benchmark in place of LIBOR, however, remains in question.

As such, the future of LIBOR and potential alternatives thereto are uncertain at this time.

The potential effects of the foregoing on our cost of capital cannot yet be determined.

Risks Relating to Investing in Our Class A Common Stock

Our status as a public benefit corporation and a Certified B Corporation may not result in the benefits that we anticipate.

We are a public benefit corporation under Delaware law.

As a public benefit corporation, we are required to balance the financial interests of our stockholders with the best interests of those stakeholders materially affected by our conduct, including particularly those affected by the specific benefit purpose relating to education set forth in our certificate of incorporation.

In addition, there is no assurance that the expected positive impact from being a public benefit corporation will be realized.

Accordingly, being a public benefit corporation and complying with our related obligations could negatively impact our ability to provide the highest possible return to our stockholders.

As a public benefit corporation, we are required to publicly disclose a report at least biennially on our overall public benefit performance and on our assessment of our success in achieving our specific public benefit purpose.

If we are not timely or are unable to provide this report, or if the report is not viewed favorably by parties doing business with us or regulators or others reviewing our credentials, our reputation and status as a public benefit corporation may be harmed.

While not required by Delaware law or the terms of our certificate of incorporation, we have elected to have our social and environmental performance, accountability and transparency assessed against the proprietary criteria established by an independent non-profit organization.

As a result of this assessment, we have been designated as a “Certified B Corporation TM ,” which refers to companies that are certified as meeting certain levels of social and environmental performance, accountability and transparency.

The standards for Certified B Corporation certification are set by an independent organization and may change over time.

See “Item 1-Business-Certified B Corporation.” Our reputation could be harmed if we lose our status as a Certified B Corporation, whether by our choice or by our failure to continue to meet the certification requirements, if that failure or change were to create a perception that we are more focused on financial performance and are no longer as committed to the values shared by Certified B Corporations.

Likewise, our reputation could be harmed if our publicly reported Certified B Corporation score declines.

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.

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• 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;

in responding to a possible proposal to acquire the Company, 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.

• 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.

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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 $10.46 on November 15, 2017 to a high of $21.62 on January 30, 2020.

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.

Factors that could cause fluctuations in the trading price of our Class A common stock include the following:

quarterly variations in our results of operations;

results of operations that vary from the expectations of securities analysts and investors;

results of operations that vary from those of our competitors;

changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

our or our competitors’ introduction of new institutions, new programs, concepts or pricing policies;

announcements by us, our competitors or our vendors of significant acquisitions, joint marketing relationships, joint ventures or capital commitments;

changes in laws or conditions in the education industry, the financial markets or the economy as a whole;

failure of any of our institutions to secure or maintain accreditation or licensure;

announcements of regulatory or other investigations, adverse regulatory action by any regulatory body including those overseas or the DOE, state agencies or accrediting agencies, regulatory scrutiny of our operations or operations of our competitors or lawsuits filed against us or our competitors;

announcements by third parties of significant claims or proceedings against us;

the size of our public float;

changes in senior management or key personnel;

changes in our dividend policy;

adverse resolution of new or pending litigation against us;

the occurrence of any event described in “Item 1A-Risk Factors”;

issuances, exchanges, repurchases or sales, or expected issuances, exchanges, repurchases or sales of our capital stock;

general domestic and international economic conditions.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation.

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As of December 31, 2020, 90,791,807 shares of our Class B common stock were outstanding.

Such amount excludes 701,125 shares of Class B common stock issuable upon the exercise of outstanding vested stock options under the 2007 Stock Incentive Plan (the “2007 Plan”), 2,719,552 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”), 517 shares of Class B common stock subject to outstanding unvested stock options under the 2013 Plan, 1,250,827 shares of Class A common stock and/or Class B 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.

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”).

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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.

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 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.

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.

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• the requirement for an annual performance evaluation of the nominating/corporate governance and compensation committees.

We currently utilize these exemptions and intend to continue to do so.

As a result, we do not have a majority of independent directors, 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.

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 certificate of incorporation and 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 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.

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• prohibiting the use of cumulative voting for the election of directors;

as a public benefit corporation, requiring a two-thirds majority vote of the outstanding stock to effect a non-cash merger with an entity that is not a public benefit corporation with an identical public benefit;

• 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 all stockholder actions to be taken at a meeting of our stockholders;

• 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;

• 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 could also 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.

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.

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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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors