What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-05 · 235 added, 453 removed, 341 unchanged (67% of the section changed)

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You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or similar expressions that concern our strategy, plans or intentions.

All statements we make relating to estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results, and all statements we make relating to (i) our exploration of strategic alternatives and potential future plans, strategies or transactions that may be identified, explored or implemented as a result of such review process, (ii) our planned divestitures, the expected proceeds generated therefrom, the expected reduction in revenue resulting therefrom and any resulting litigation or dispute therewith, and (iii) the potential impact of the COVID-19 pandemic on our business or the global economy as a whole, are forward-looking statements.

All statements we make relating to estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results, and all statements we make relating to (i) our exploration of strategic alternatives and potential future plans, strategies or transactions that may be identified, explored or implemented as a result of such review process, (ii) our planned divestitures, the expected proceeds generated therefrom, the expected reduction in revenue resulting therefrom and any resulting litigation or dispute therewith, (iii) anticipated share repurchases, and (iv) the potential impact of the COVID-19 pandemic on our business or the global economy as a whole, are forward‑looking statements.

In addition, we, through our senior management, from time to time make forward‑looking public statements concerning our expected future operations and performance and other developments.

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While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results.

Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-Q, are disclosed in “Item 1—Business,” and “Item 1A—Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the 2019 Form 10-K), as updated by Part II, “Item 1A—Risk Factors” of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020.

Some of the factors that we believe could affect our results include:

• the risks and uncertainties related to the long-term effect to the Company of the COVID-19 pandemic and its resurgence, including, but not limited to, its effect on student enrollment, tuition pricing, and collections in future periods;

• the risks associated with conducting our global operations, including complex business, foreign currency, political, legal, regulatory, tax and economic risks;

• the risks associated with our exploration of strategic alternatives, including possible disruption to our ongoing businesses and increased transaction-related expenses;

• our ability to effectively manage the growth of our business, implement common operating models within our country networks and increase our operating leverage;

• the development and expansion of our operations and the effect of new technology applications in the educational services industry;

• the risks associated with operating our portfolio of degree-granting higher education institutions in Mexico and Peru, including complex business, foreign currency, political, legal, regulatory, tax and economic risks;

• our ability to maintain and, subsequently, increase tuition rates and student enrollments in our institutions;

• our ability to successfully complete previously announced divestitures;

• the risks associated with our exploration of strategic alternatives, including possible disruption to our ongoing businesses and increased transaction-related expenses;

• our ability to effectively manage the growth of our business and increase our operating leverage;

• the effect of existing international and U.S.

laws and regulations governing our business or changes to those laws and regulations or in their application to our business;

• changes in the political, economic and business climate in the international or the U.S.

markets where we operate;

• changes in the political, economic and business climate in the markets in which we operate;

• risks of downturns in general economic conditions and in the educational services and education technology industries that could, among other things, impair our goodwill and intangible assets;

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• the future trading prices of our Class A common stock and the impact of any securities analysts’ reports on these prices.

• our ability to maintain and, subsequently, increase tuition rates and student enrollments in our institutions.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you.

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This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the MD&A) is provided to assist readers of the financial statements in understanding the results of operations, financial condition and cash flows of Laureate Education, Inc.

This MD&A should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (Form 10-Q).

This MD&A should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-Q.

The consolidated financial statements included elsewhere in this Form 10-Q are presented in U.S.

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• Recently Adopted Accounting Standards.

We have built a portfolio of degree-granting higher education institutions, primarily focused in Latin America, with 335,600 students enrolled at our five institutions in two countries (Mexico and Peru) included in our continuing operations as of September 30, 2020.

We believe the global higher education market presents an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for quality higher education around the world.

Advanced education opportunities drive higher earnings potential, and we believe the projected growth in the middle-class population worldwide and limited government resources dedicated to higher education create substantial opportunities for high-quality private institutions to meet this growing and unmet demand.

Our outcomes-driven strategy is focused on enabling students to prosper and thrive in the dynamic and evolving knowledge economy.

We have six operating segments as described below.

We operate a portfolio of degree-granting higher education institutions in Mexico and Peru.

Collectively, we have approximately 366,000 students enrolled at five institutions in these two countries, which represent our Continuing Operations as of March 31, 2021.

We believe that the higher education markets in Mexico and Peru present an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for affordable, quality higher education in those markets.

We believe that the combination of the projected growth in the middle class, limited government resources dedicated to higher education, and a clear value proposition demonstrated by the higher earnings potential afforded by higher education, creates substantial opportunities for high-quality private institutions to meet this growing and unmet demand.

By offering high-quality, outcome-focused education, we believe that we enable students to prosper and thrive in the dynamic and evolving knowledge economy.

We have two reportable segments as described below.

We group our institutions by geography in:

3) Peru (formerly Andean);

4) Central America ( formerly Central America & U.S.

and 5) Rest of World for reporting purposes.

Our sixth segment, Online & Partnerships, includes fully online institutions that operate globally.

As described further below, our Mexico and Peru operating segments are classified as Continuing Operations and the remaining operating segments are classified as Discontinued Operations.

and 2) Peru (formerly Andean) for reporting purposes.

In response to the COVID-19 pandemic, we h ave temporarily tran sitioned the educational delivery method at all of our campus-based institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting.

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The long-term effect to the Company of the COVID-19 pandemic depends on numerous factors, including, but not limited to, the effect on student enrollment, tuition pricing, and collections in future periods, which cannot be fully quantified at this time.

In addition, regulatory activity that occurs in response to COVID-19 could have an adverse effect on our business if, for example,

legislation was passed to suspend or reduce student tuition payments in any of the markets in which we operate.

In addition, regulatory activity in response to COVID-19 could have an adverse effect on our business if, for example, legislation was passed to suspend or reduce student tuition payments in any of the markets in which we operate.

As a result, the full impact of COVID-19 and the scope of any adverse effect on the Company’s operations, including any potential impairments, which could be material, cannot be fully determined at this time.

See also “Part II, Item 1A–Risk Factors–An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

The COVID-19 pandemic has affected the academic calendars at a number of our institutions, resulting in the deferral of revenue to the fourth quarter of 2020 that would otherwise have been recognized by September 30, 2020, if the academic calendars had not been changed.

For the nine months ended September 30, 2020, revenue of approximately $15 million related to our Mexico operations was deferred to the fourth quarter of 2020, due to changes in the academic calendar, primarily as a result of the COVID-19 pandemic.

During the third quarter of 2020, our Peru operations held rescheduled classes and recognized revenue that had previously been deferred as of June 30, 2020, due to academic calendar changes during the first half of 2020 that resulted from the COVID-19 pandemic.

See also “Item 1A—Risk Factors—An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations” in our 2020 Form 10-K.

Discontinued Operations

In 2017 and 2018, the Company announced the divestiture of certain subsidiaries located in Europe, Asia and Central America, which were included in the Rest of World, Peru (formerly Andean), and Central America (formerly Central America & U.S.

Campuses) segments.

In 2017 and 2018, the Company announced the divestiture of certain subsidiaries located in Europe, Asia and Central America, which were included in the following segments:

Peru (formerly Andean), Central America (formerly Central America & U.S.

Campuses), and Rest of World.

The goal of the divestitures was to create a more focused and simplified business model and generate proceeds to be used for further repayment of long-term debt.

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Accordingly, all of the divestitures that were part of this strategic shift, as well as the Company's operations in the Kingdom of Saudi Arabia that were managed under a contract that expired on August 31, 2019 and was not renewed, were accounted for as Discontinued Operations for all periods presented in accordance with Accounting Standards Codification (ASC) 205-20, “Discontinued Operations” (ASC 205).

On January 27, 2020, Laureate announced that its Board of Directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value.

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

There can be no assurance as to the outcome of this process, including whether it will result in the completion of any transaction, as to the values that may be realized from any potential transaction or as to how long the review process will take.

As a result of these efforts to explore strategic alternatives, d uring the third quarter of 2020, the Company announced that it had completed a sale of its operations in Chile and had signed agreements to sell its operations in Brazil, Australia and New Zealand, as well as Walden University, its fully online higher education institution in the United States.

The sale of Australia and New Zealand was subsequently completed on November 3, 2020.

After completing these announced divestitures, the Company’s remaining principal markets will be Mexico and Peru.

On January 27, 2020, we announced that our board of directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value.

As a result of these efforts to explore strategic alternatives, during the third quarter of 2020, the Company announced that it had completed a sale of its operations in Chile and had signed agreements to sell its operations in Brazil, Australia and New Zealand, as well as Walden University, its fully online higher education institution in the United States.

This also represented a strategic shift that had a major effect on the Company’s operations and financial results.

Accordingly, Chile, Brazil, Australia and New Zealand, and Walden also have been accounted for as discontinued operations for all periods presented in accordance with ASC 205.

Because our entire Brazil, Central America, Rest of World and Online & Partnerships operating segments are included in Discontinued Operations, they no longer meet the criteria for a reportable segment under ASC 280, “Segment Reporting,” and, therefore, are excluded from the segments information for all periods presented.

In addition, the portions of the former Andean reportable segment (now called the Peru segment) that are included in Discontinued Operations, such as Chile, Spain and Portugal, have also been excluded from the segment information for all periods presented.

As such, Chile, Brazil, Australia and New Zealand, and Walden also have been accounted for as Discontinued Operations for all periods presented in accordance with ASC 205.

The sale of our operations in Australia and New Zealand was completed on November 3, 2020.

For Laureate’s institutions in Mexico and Peru, the board decided after a thorough evaluation of all strategic options, including a potential sale, to continue to operate these assets under Laureate management.

Accordingly, Mexico and Peru represent our Continuing Operations.

The decision to focus on a regional operating model in Mexico and Peru at this time does not preclude further engagement with potential buyers for those businesses.

See Note 4, Discontinued Operations and Assets Held for Sale, and Note 5, Dispositions, for more information.

Unless indicated otherwise, the information in the footnotes to the Consolidated Financial Statements relates to Continuing Operations.

Because a number of our subsidiaries are included in Discontinued Operations, they no longer meet the criteria for a reportable segment under ASC 280, “Segment Reporting,” and, therefore, are excluded from the segments information for all periods presented.

Unless indicated otherwise, the information in the MD&A relates to Continuing Operations.

The Company began closing sale transactions in the first quarter of 2018.

We have not yet completed the divestitures of Walden University or our subsidiaries in Honduras and Brazil.

As noted above, during the third quarter of 2020, we signed agreements to sell Walden University and divest our operations in Brazil, Chile, and Australia and New Zealand.

The divestitures of Chile and Australia and New Zealand were completed on September 11, 2020 and November 3, 2020, respectively.

On October 13, 2020, we entered into an agreement to sell our operations in Honduras.

See also Note 4, Discontinued Operations and Assets Held for Sale, Note 5, Dispositions, and Note 19, Subsequent Events, in our consolidated financial statements included elsewhere in this Form 10-Q.

If the Company determines that the estimated fair value of any business is less than its carrying value, the Company will be required to record an impairment charge that could be material.

See Note 4, Discontinued Operations and Assets Held for Sale, in our consolidated financial statements included elsewhere in this Form 10-Q for discussion of the impairment charges that the Company recorded during 2020 for Chile, Honduras and Brazil.

While the Company explores these strategic alternatives for its remaining Continuing Operations, and until the held-for-sale criteria are met, the long-lived assets in these businesses continue to be classified as held and used and are evaluated for impairment under that model, based on the cash flows expected to be generated by the use of those asset groups in operations.

We have not yet completed the divestitures of Brazil and Walden University, both of which have signed sale agreements pending closure.

See also Note 4, Discontinued Operations and Assets Held for Sale, and Note 5, Dispositions, in our consolidated financial statements included elsewhere in this Form 10-Q.

If the Company determines that the estimated fair value of any business is less than its carrying value, the Company will be required to record a charge to write down the carrying value to fair value and the amount of that charge could be material.

See Note 4, Discontinued Operations and Assets Held for Sale, in our consolidated financial statements included elsewhere in this Form 10-Q for disclosure of the valuation allowance that the Company recorded on the Brazil disposal group in order to write down its carrying value to fair value.

The Company’s Continuing Operations continue to be classified as held and used and are evaluated for impairment under that model, based on the cash flows expected to be generated by the use of those asset groups in operations.

Should the held-for-sale criteria be met, the long-lived assets will be recorded at the lower of their carrying value or fair value, less cost to sell.

Because completing a sale, spin-off, or other transaction may be challenging due to the regulatory environment, market conditions and other factors, the values that may be realized from any potential transactions could be less than if these businesses remained held and used.

If the Company decides to sell any of its remaining businesses, the carrying value used to evaluate the business for potential impairment and to determine the gain or loss on sale will include any accumulated foreign currency translation (FX) losses associated with that business.

If the held-for-sale criteria are met, the carrying value used to evaluate a business for potential write down and to determine the gain or loss on sale will include any accumulated foreign currency translation (FX) losses associated with that business.

In recent years, the U.S.

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As a result, the Company has significant FX losses recorded within stockholders’ equity, as a component of accumulated other comprehensive income.

As of both September 30, 2020, and December 31, 2019, the Company’s consolidated FX loss totaled approximately $1.1 billion.

As of both March 31, 2021 and December 31, 2020, the Company’s consolidated FX loss totaled approximately $1.0 billion.

Upon the sale of a business, any FX loss related to that business would be recognized as part of the gain or loss on sale.

In addition, upon classification of a business as held-for-sale, the cumulative translation losses would be included as part of the carrying value of that business when evaluating it for potential impairment.

Presented in the table below are the Company’s businesses, by asset group/reporting unit, that carry the most significant FX losses:

Asset Group/ Reporting Unit Foreign Currency Translation Losses

(in millions) September 30, 2020 December 31, 2019

Asset Group/ Reporting Unit Foreign Currency Translation Losses as of

(in millions) March 31, 2021 December 31, 2020

Brazil $ 494 $ 479

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Total Brazil and Mexico $ 1,045 $ 988

As discussed in Note 4, Discontinued Operations and Assets Held for Sale, in our consolidated financial statements included elsewhere in this Form 10-Q, the Company decided to sell its Brazil operations during the third quarter of 2020 and recorded an impairment charge to write down the carrying value of its Brazil operations to its estimated fair value as of September 30, 2020.

While the Company has not agreed to divest our Mexico operations, the substantial amounts of FX losses attributable to this business would have a material effect on the amount of gain or loss that would result from its sale.

Moreover, such FX losses could result in a material impairment charge (or increase it) if the held-for-sale criteria are met and the carrying value of a held-for-sale business exceeds its fair value, less cost to sell.

To date, the Company has not identified impairment indicators related to its Mexico asset group/reporting unit based on the Company’s estimates of future cash flows assuming that the business is held and used.

As a result of the considerations highlighted above and the significant FX losses, the Mexico asset group/reporting unit may be at risk of impairment if the Company commits to a plan to sell its interests in this business.

Furthermore, additional impairments of the Brazil asset group/reporting unit could be required in future periods depending on changes in Brazil’s carrying value or estimated fair value.

The Company will continue to monitor for impairment indicators as additional information becomes known.

Our campus-based segments generate revenues by providing an education that emphasizes profession-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines.

The Company recorded losses in both the third and fourth quarters of 2020 to write down the carrying value of the Brazil disposal group to its estimated fair value less costs to sell.

During the first quarter of 2021, the Company recorded an additional loss of approximately $32.4 million in order to write down the carrying value of the Brazil disposal group to its estimated fair value less costs to sell as of March 31, 2021.

The sale of Brazil operations is targeted to close during the second quarter of 2021.

While the Company plans to continue operating its institutions in Mexico, the substantial amounts of FX losses attributable to the Mexico business would have a material effect on the amount of gain or loss that would result from a sale.

Our segments generate revenues by providing an education that emphasizes profession-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines.

Our educational offerings are increasingly utilizing online and hybrid (a combination of online and in-classroom) courses and programs to deliver their curriculum.

As noted above, in response to the COVID-19 pandemic we have temporarily transitioned the educational delivery method at our campus-based institutions to be online.

Many of our largest campus-based operations are in developing markets which, in recent years, have experienced a growing demand for higher education based on favorable demographics and increasing secondary completion rates, driving increases in participation rates.

Traditional higher education students (defined as 18-24 year olds) have historically been served by public universities, which have limited capacity and are often underfunded, resulting in an inability to meet the growing student demand and employer requirements.

This supply and demand imbalance has created a market opportunity for private sector participants.

Most students finance their own education.

However, there are some government-sponsored student financing programs which are discussed below.

These campus-based segments include Brazil, Mexico, Peru, Central America, and Rest of World.

Specifics related to each of these campus-based segments and our Online & Partnerships segment are discussed below:

• In Brazil, approximately 73% of post-secondary students are enrolled in private higher education institutions.

While the federal government defines the national curricular guidelines, institutions are licensed to operate by city.

Laureate owns 11 institutions in seven states throughout Brazil, with a particularly strong presence in the competitive São Paulo market.

Most students finance their own education, while others rely on the government-sponsored programs such as Prouni and Fundo de Financiamento Estudantil (FIES).

The entire Brazil segment is included in Discontinued Operations.

• Public universities in Mexico enroll approximately two-thirds of students attending post-secondary education.

However, many public institutions are faced with capacity constraints or the quality of the education is considered low.

In response to the COVID-19 pandemic, we have temporarily transitioned the educational delivery method at all of our institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting.

The Mexico and Peru markets are characterized by what we believe is a significant imbalance between supply and demand.

The demand for higher education is large and growing and is fueled by several demographic and economic factors, including a growing middle class, global growth in services and technology-related industries and recognition of the significant personal and economic benefits gained by graduates of higher education institutions.

The target demographics are primarily 18- to 24-year-olds in the countries in which we compete.

We compete with other private higher education institutions on the basis of price, educational quality, reputation and location.

We believe that we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by our network.

There are a number of private and public institutions in both of the countries in which we operate, and it is difficult to predict how the markets will evolve and how many competitors there will be in the future.

We expect competition to increase as the Mexican and Peruvian markets mature.

Essentially all of our revenues were generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru.

Specifics related to both of our reportable segments are discussed below:

• Private education providers in Mexico constitute 35% of the total higher-education market.

The private sector plays a meaningful role in higher education, bridging supply and demand imbalances created by a lack of capacity at public universities.

Laureate owns two institutions and is present throughout the country with a footprint of over 35 campuses.

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Students in our Mexican institutions typically finance their own education.

• The Peru segment includes three institutions, where the public sector plays a significant role, but private universities are increasingly providing the capacity to meet growing demand.

• The Central America segment includes an institution in Honduras, which is included in Discontinued Operations.

Students in Central America typically finance their own education.

• The Rest of World segment includes campus-based institutions in Asia Pacific with operations in Australia and New Zealand.

Additionally, the Rest of World segment manages one institution in China through a joint venture arrangement.

The entire Rest of World segment is included in Discontinued Operations.

• The Online & Partnerships segment includes fully online institutions that offer profession-oriented degree programs in the United States through Walden University (Walden), a U.S.-based accredited institution, and through the University of Liverpool and the University of Roehampton in the United Kingdom.

These online institutions primarily serve working adults with undergraduate and graduate degree program offerings.

Students in the United States finance their education in a variety of ways, including Title IV programs.

We no longer accept new enrollments at the University of Liverpool and the University of Roehampton, which are in a teach-out process.

The entire Online & Partnerships segment is included in Discontinued Operations.

• In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute 72% of the total higher-education market.

Laureate owns three institutions in Peru.

Corporate is a non-operating business unit whose purpose is to support operations.

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The Corporate segment also contains the eliminations of intersegment revenues and expenses.

The following information for our reportable segments in continuing operations is presented as of September 30, 2020:

Countries Institutions Enrollment 2020 YTD Revenues ($ in millions) (1)

The following information for our reportable segments in continuing operations is presented as of March 31, 2021:

Institutions Enrollment 2021 YTD Revenues ($ in millions) (1)

% Contribution to 2021 YTD Revenues

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and compliance with a wide variety of foreign laws.

See “Item 1A—Risk Factors—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 our 2019 Form 10-K.

See “Item 1A—Risk Factors—Risks Relating to Our Business—We operate a portfolio of degree-granting higher education institutions in Mexico and Peru and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address,” in our 2020 Form 10-K.

There are also risks associated with our decision to divest certain operations.

See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—Our exploration of strategic alternatives and our activities related to previously announced divestitures may disrupt our ongoing businesses, result in increased expenses and present certain risks to the Company,” in our 2019 Form 10-K.

See “Item 1A—Risk Factors—Risks Relating to Our Business—Our exploration of strategic alternatives and our activities related to previously announced divestitures may disrupt our ongoing businesses, result in increased expenses and present certain risks to the Company” in our 2020 Form 10-K.

We plan to grow our continuing operations organically by:

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We will continue to develop and implement necessary changes that enable us to comply with such laws and regulations.

See Part II, “Item 1A—Risk Factors—An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

See also “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations,” “Risk Factors—Risks Relating to Our Highly Regulated Industry in the United States,” and “Item 1—Business—Industry Regulation,” in our 2019 Form 10-K for a detailed discussion of our different regulatory environments.

Department of Justice Voluntary Information Request for Walden University

On September 14, 2020, Walden University (Walden) received a letter from the Civil Division of the United States Department of Justice (DOJ) indicating that the DOJ is examining whether Walden, in the operation of its Masters of Science in Nursing program (Nursing Program), may have violated the Federal False Claims Act by misrepresenting compliance with its program participation agreement with the U.S.

Department of Education, 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 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.

While the Company is cooperating with the DOJ’s request to voluntarily provide information, it cannot predict the timing or outcome of this matter.

Further, on October 12, 2020, Walden received notice from the Higher Learning Commission (HLC) of its intent to assign a public “Governmental Investigation” designation to Walden due to the DOJ inquiry.

While the HLC has complete discretion in whether to issue such a public designation, Walden has requested that such a designation not be imposed, as there has been no governmental allegation of any misconduct or illegal acts.

The Company accrues for a liability when it is both probable that a liability has been incurred and the

amount of the liability can be reasonably estimated.

Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable.

The disclosures, accruals or estimates, if any, resulting from the foregoing analysis are reviewed and adjusted to reflect the effect of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter.

At this time, the Company does not believe that this matter will have a material effect on the Company’s financial position, results of operations, or cash flows.

See also “Item 1A—Risk Factors—Risks Relating to Our Business—Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations,” “Risk Factors—Risks Relating to Walden University, which is included in our Discontinued Operations, and the Highly Regulated Higher Education Industry in the United States,” and “Item 1—Business—Industry Regulation” in our 2020 Form 10-K for a detailed discussion of our different regulatory environments.

Department of Justice Notice of Election to Decline Intervention

On April 28, 2021, the Company was notified that the Civil Division of the United States Department of Justice (the “DOJ”), on behalf of the United States, had filed a Notice of Election to Decline Intervention (the “Notice”) with respect to a civil qui tam action filed by third-party relators (the “Relators”) against Walden University and the Company.

It was this action that prompted the DOJ’s examination of Walden University’s Masters of Science in Nursing program.

The DOJ’s investigation into this matter has now concluded.

Further, as previously disclosed by the Company, the Higher Learning Commission (“HLC”) had informed Walden University that a public “Governmental Investigation” designation would be assigned to Walden University due to the DOJ inquiry;

such designation became effective on November 9, 2020.

Effective as of May 3, 2021, the HLC removed such designation.

Per the court order related to the Notice, the Relators may elect to continue to pursue the action.

The Company cannot predict how long it may take to resolve this matter.

The Company believes that the Relators’ claims are without merit and intends to defend vigorously against them.

Key Business Metric

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Our past experiences provide us with the expertise to further our mission of providing high-quality, accessible and affordable higher education to students by expanding into new markets if opportunities arise, primarily through acquisitions.

Acquisitions affect the comparability of our financial statements from period to period.

Acquisitions have historically affected the comparability of our financial statements from period to period.

Acquisitions completed during one period impact comparability to a prior period in which we did not own the acquired entity.

Therefore, changes related to such entities are considered “incremental impact of acquisitions” for the first 12 months of our ownership.

Therefore, changes related to

such entities are considered “incremental impact of acquisitions” for the first 12 months of our ownership.

We have not made any acquisitions thus far in 2021, and we did not make any acquisitions in 2020 related to our Continuing Operations.

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Our revenues and expenses are generally denominated in local currency.

The USD is our reporting currency and our subsidiaries operate in other functional currencies, including:

the Mexican Peso and Peruvian Nuevo Sol.

The USD is our reporting currency and our subsidiaries operate in other functional currencies, namely the Mexican peso and Peruvian nuevo sol.

The principal foreign exchange exposure is the risk related to the translation of revenues and expenses incurred in each country from the local currency into USD.

See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—Our reported revenues and earnings may be negatively affected by the strengthening of the U.S.

See “Item 1A—Risk Factors—Risks Relating to Our Business—Our reported revenues and earnings may be negatively affected by the strengthening of the U.S.

dollar and currency exchange rates” in our 2020 Form 10-K.

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Additionally, seasonality may be affected due to other events, such as the COVID-19 pandemic, which changed the academic calendar at many of our institutions.

See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—We experience seasonal fluctuations in our results of operations” in our 2019 Form 10-K.

See “Item 1A—Risk Factors—Risks Relating to Our Business—We experience seasonal fluctuations in our results of operations” in our 2020 Form 10-K.

Income Tax Expense

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Our tax rate fluctuates from period to period due to changes in the mix of earnings between our tax-paying entities, our tax-exempt entities and our loss-making entities for which it is not 'more likely than not' that a tax benefit will be realized on the loss.

See “Item 1A—Risk Factors—Risks Relating to Our Continuing Business—We may have exposure to greater-than-anticipated tax liabilities” in our 2019 Form 10-K.

See “Item 1A—Risk Factors—Risks Relating to Our Business—We may have exposure to greater-than-anticipated tax liabilities” in our 2020 Form 10-K.

Results from the Discontinued Operations

The results of operations of our Discontinued Operations for the three and nine months ended September 30, 2020 and 2019 were as follows:

For the three months ended For the nine months ended

September 30, September 30,

The results of operations of our Discontinued Operations for the three months ended March 31, 2021 and 2020 were as follows:

(in millions) 2021 2020

Revenues $ 239.8 $ 369.5

Costs and expenses:

Depreciation and amortization 13.7 28.5 60.2 84.7

Depreciation and amortization expense — (24.5)

Share-based compensation expense (0.2) (0.4)

1 unchanged sentence

Loss on impairment of assets (1.1) —

Operating (loss) income (104.0) 39.3 (429.9) 268.3

Other non-operating expense (11.2) (55.1)

Pretax (loss) income of discontinued operations (118.7) 6.9 (509.7) 223.0

Income tax benefit (51.1) 24.1 (48.2) 17.4

(Loss) income from discontinued operations, net of tax (169.8) 31.0 (558.0) 240.4

(Loss) gain on sales of discontinued operations, net of tax (343.6) (41.1) (363.3) 848.4

Net (loss) income from discontinued operations $ (513.4) $ (10.1) $ (921.2) $ 1,088.8

Enrollments at our discontinued operations as of September 30, 2020 and September 30, 2019 were 393,900 and 606,700, respectively.

Nine Months Ended September 30, 2020

Loss on sale of discontinued operations before taxes, net (16.8) (23.6)

Pretax income (loss) of discontinued operations 9.2 (113.0)

Income tax (expense) benefit (9.7) 5.2

Loss from discontinued operations, net of tax $ (0.4) $ (107.8)

Enrollments at our Discontinued Operations as of March 31, 2021 and March 31, 2020 were 365,800 and 559,900, respectively.

Three Months Ended March 31, 2021

On March 8, 2021, we sold our operations in Honduras, which resulted in an after-tax gain of $0.5 million.

On January 25, 2018, we completed the sale of LEI Lie Ying Limited in China.

At the closing of the sale, a portion of the total transaction value was paid into an escrow account, to be distributed to the Company pursuant to the terms and conditions of the escrow agreement.

During the first quarter of 2021, the Company adjusted the final receivable balance from the escrow account of 168.3 million Hong Kong Dollars (approximately $21.7 million at the date of receipt in April 2021), which resulted in a pre-tax gain of approximately $13.6 million.

During the first quarter of 2021, we recorded a loss of approximately $32.4 million in order to adjust the carrying value of our Brazil disposal group to its estimated fair value less costs to sell as of March 31, 2021.

This loss is included in Loss on sale of discontinued operations before taxes, net.

Three Months Ended March 31, 2020

On January 10, 2020, we sold our operations in Costa Rica, which resulted in a pre-tax loss of approximately $17.2 million.

On March 6, 2020, we sold the operations of NewSchool of Architecture and Design, LLC (NSAD), which resulted in a pre-tax loss of approximately $5.7 million.

During the second quarter of 2020, we recorded impairment charges of $10.0 million related to our Honduras institution and $418.0 million related to our Chilean operations in order to write down the carrying value of assets in those regions to their estimated fair value, and $3.3 million related to the Brazil enrollment to graduation (E2G) software assets.

During the third quarter of 2020, we recorded an impairment charge of approximately $190.0 million related to our Brazil operations in order to write down the carrying value of Brazil’s assets to their estimated fair value.

We also recorded an additional impairment charge of $10.0 million related to our Honduras operation in order to write down the carrying value of its assets to their estimated fair value based on the sale agreement that was signed in October 2020.

On September 10, 2020, we completed the divestiture of our operations in Chile, resulting in a pre-tax loss of approximately $344.5 million that relates primarily to the accumulated foreign currency translation losses associated with the Chilean operations.

On September 29, 2020, we completed the sale of our operations in Malaysia, which resulted in a pre-tax gain of approximately $45.2 million.

In early October 2020, we received a payment for $8.4 million, representing a portion of the $15.0 million deferred purchase price related to the sale of our operations in Turkey in August 2019.

At the time of the sale, the Company determined that this deferred purchase price would be recognized if collected.

Accordingly, as of September 30, 2020, the Company recorded a receivable of $8.4 million through a reduction of the loss on sale for Turkey.

The remaining deferred purchase price is due in January 2021 and will be recognized when collected.

Nine Months Ended September 30, 2019

On February 1, 2019, we sold the operations of St.

Augustine, which resulted in a gain of approximately $223.0 million.

On February 12, 2019, we sold our operations in Thailand, which resulted in a gain of approximately $10.8 million.

On January 25, 2018, we completed the sale of LEI Lie Ying Limited (LEILY).

During the first quarter of 2019, a legal matter, for which the Company had indemnified the buyer and recorded a contingent liability, was settled with no cost to the Company.

Accordingly, the Company reversed the liability and recognized additional gain on the sale of LEILY of approximately $13.7 million.

On April 8, 2019, we sold Monash South Africa as well as the real estate associated with that institution, which resulted in a gain of approximately $2.3 million.

On May 9, 2019, we sold our operations in India, which resulted in a gain of approximately $19.5 million.

On May 31, 2019, we sold our institutions in Spain and Portugal, which resulted in a gain of approximately $615.0 million.

On August 27, 2019, we sold our operations in Turkey, which resulted in a loss of approximately $37.0 million.

During the third quarter of 2019, we recorded an impairment charge of approximately $25.0 million related to long-lived assets of our institutions in Costa Rica in order to write down the carrying value of those assets to their estimated fair value.

The sale of the Costa Rica institutions was completed on January 10, 2020.

Results of Operations

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Summary Comparison of Consolidated Results

Discussion of Significant Items Affecting the Consolidated Results for the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended September 30, 2020

Discussion of Significant Items Affecting the Consolidated Results for the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31, 2021

In March 2021, the Company decided that, during 2021, it would wind down certain support functions related to the Laureate network and would no longer invest in and support the tradename beyond 2021.

As a result, the Company tested the asset for impairment and estimated the fair value of the tradename asset using the relief-from-royalty method, based on the projected revenues for each business over the estimated remaining useful life of the asset .

As a result of the impairment test, the Company concluded that the estimated fair value of the Laureate tradename was less than its carrying value by approximately $51.4 million and recorded an impairment charge for that amount.

Three Months Ended March 31, 2020

During the first quarter of 2020, the Company recorded an impairment charge of $3.8 million primarily related to the write-off of capitalized curriculum development costs for a program that the Company decided to stop developing.

During the second quarter of 2020, the Company recorded an impairment charge of approximately $23.8 million related to the Brazil E2G software assets that were recorded on the Corporate segment, as described in Note 7, Goodwill and Loss on Impairment of Assets, in our consolidated financial statements included elsewhere in this Form 10-Q.

During the third quarter of 2020, the Company recognized an impairment charge of $320.0 million on the Laureate tradename, an intangible asset, as described in Note 7, Goodwill and Loss on Impairment of Assets, in our consolidated financial statements included elsewhere in this Form 10-Q.

Nine Months Ended September 30, 2019

During the first quarter of 2019, we used approximately $340.0 million of the net proceeds from the sale of St.

Augustine to repay a portion of our term loan that had a maturity date of April 2024 (the 2024 Term Loan).

In addition, the Company elected to repay approximately $35.0 million of the approximately $51.7 million principal balance outstanding for certain notes payable at a real estate subsidiary in Chile.

In connection with these debt repayments, the Company recorded a loss on debt extinguishment of $10.6 million, primarily related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances.

This loss is included in other non-operating income in the year-to-date table below.

During the second quarter of 2019, we fully repaid the remaining balance outstanding under the 2024 Term Loan, using proceeds received from the sale of our operations in India, Spain and Portugal.

The remaining proceeds were used to repay borrowings outstanding under the senior secured revolving credit facility.

In connection with these debt repayments, the Company recorded a loss on debt extinguishment of $15.6 million related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances, as well as the debt discount associated with the 2024 Term Loan.

This loss is included in other non-operating income in the year-to-date table below.

Comparison of Consolidated Results for the Three Months Ended September 30, 2020 and 2019

Better/(Worse)

(in millions) 2020 2019 2020 vs.

Revenues $ 243.5 $ 277.3 (12) %

Direct costs 185.8 229.7 19 %

General and administrative expenses 52.6 65.9 20 %

Loss on impairment of assets 323.4 — nm

Operating loss (318.2) (18.4) nm

Interest expense, net of interest income (24.0) (27.4) 12 %

Other non-operating (expense) income (1.0) 7.3 (114) %

Loss from continuing operations before income taxes (343.2) (38.6) nm

Income tax benefit (expense) 72.2 (48.1) nm

Loss from continuing operations (271.0) (86.6) nm

(Loss) income from discontinued operations, net of tax (169.8) 31.0 nm

Loss on sales of discontinued operations, net of tax (343.6) (41.1) nm

Net loss (784.4) (96.8) nm

Net loss attributable to noncontrolling interests — 1.6 100 %

Net loss attributable to Laureate Education, Inc.

$ (784.4) $ (95.2) nm

nm - percentage changes not meaningful

For further details on certain discrete items discussed below, see “Discussion of Significant Items Affecting the Consolidated Results.”

Comparison of Consolidated Results for the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

Revenues decreased by $33.8 million to $243.5 million for the three months ended September 30, 2020 (the 2020 fiscal quarter) from $277.3 million for the three months ended September 30, 2019 (the 2019 fiscal quarter).

The effect of a net change in foreign currency exchange rates decreased revenues by $22.9 million, driven by the weakening of the Mexican Peso and the Peruvian Nuevo Sol against the USD.

Additionally, average total organic enrollment at a majority of our institutions decreased during the 2020 fiscal quarter, decreasing revenues by $22.9 million compared to the 2019 fiscal quarter.

These decreases in revenues were partially offset by the effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing, which increased revenues by $12.4 million compared to the 2019 fiscal quarter, mainly in our Peru segment where it was mostly attributable to changes in the academic calendar resulting from the COVID-19 pandemic.

Other Corporate and Eliminations changes accounted for a decrease in revenues of $0.4 million.

Direct costs and general and administrative expenses combined decreased by $57.2 million to $238.4 million for the 2020 fiscal quarter from $295.6 million for the 2019 fiscal quarter.

The effect of a net change in foreign currency exchange rates decreased costs by $19.4 million.

The effect of operational changes decreased costs by $21.0 million, mainly driven by cost-saving initiatives to preserve liquidity in the wake of the COVID-19 pandemic.

Additionally, changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets resulted in a year-over-year decrease in direct costs of $0.2 million.

Other Corporate and Eliminations expenses accounted for a decrease in costs of $16.6 million, related to cost-reduction efforts.

Operating loss increased by $299.8 million to $318.2 million for the 2020 fiscal quarter from $18.4 million for the 2019 fiscal quarter, driven by the impairment charges of $323.4 million during the 2020 fiscal quarter.

As compared to the 2019 fiscal quarter, our Mexico segment had a higher operating loss, which was essentially fully offset by higher operating income at our Peru segment.

The overall increase in operating loss was partially offset by lower operating costs at Corporate.

Interest expense, net of interest income decreased by $3.4 million to $24.0 million for the 2020 fiscal quarter from $27.4 million for the 2019 fiscal quarter.

The decrease in interest expense was primarily attributable to lower average debt balances.

Other non-operating (expense) income changed by $8.3 million to expense of $(1.0) million for the 2020 fiscal quarter from income of $7.3 million for the 2019 fiscal quarter.

This change was primarily attributable to a loss on foreign currency exchange for the 2020 fiscal quarter compared to a gain for the 2019 fiscal quarter, for a change of $10.6 million, and a gain on derivative instruments for the 2019 fiscal quarter of $0.3 million.

These decreases in other non-operating income were partially offset by:

(1) a gain on disposal of subsidiaries for the 2020 fiscal quarter compared to a loss for the 2019 fiscal quarter, for a change of $2.1 million;

(2) an increase in other non-operating income of $0.3 million;

and (3) a loss on debt extinguishment of $0.2 million during the 2019 fiscal quarter.

Income tax benefit (expense) changed by $120.3 million to a benefit of $72.2 million for the 2020 fiscal quarter from an expense of $(48.1) million for the 2019 fiscal quarter.

This change was attributable to (1) a discrete tax benefit of approximately $71 million related to the Company’s election to exclude certain foreign income of foreign corporations from global intangible low-taxed income (GILTI), (2) a tax benefit of approximately $31 million related to changes in valuation allowance against the U.S.

and Australia deferred tax assets, (3) a tax benefit related to changes in reserves on uncertain tax positions audit settlement, and (4) changes in the mix of pre-tax book income attributable to taxable and non-taxable entities in various taxing jurisdictions.

These tax benefits were partially offset by a tax expense of approximately $81 million related to the remeasurement of the tax-basis step up of certain intellectual property that became subject to Dutch taxation in the Netherlands following the reclassification of certain entities as held for sale during the third quarter of 2020.

(Loss) income from discontinued operations, net of tax changed by $200.8 million to a loss of $(169.8) million for the 2020 fiscal quarter from income of $31.0 million for the 2019 fiscal quarter.

This change was primarily driven by higher impairment charges of $183.0 million during the 2020 fiscal quarter related to assets that were held for sale, partially offset by higher income in Chile.

Loss on sales of discontinued operations, net of tax increased by $302.5 million to $343.6 million for the 2020 fiscal quarter, primarily related to the net effect of the sales of our operations in Chile and Malaysia, combined with an adjustment to the loss on sale of our Turkey operations, compared to $41.1 million for the 2019 fiscal quarter, which was primarily related to the sale of our Turkey operations.

Comparison of Consolidated Results for the Nine Months Ended September 30, 2020 and 2019

Comparison of Consolidated Results for the Three Months Ended March 31, 2021 and 2020

Better/(Worse)

4 unchanged sentences

Loss on impairment of assets 56.7 3.8 nm

Operating loss (366.2) (21.3) nm

Operating loss (86.4) (77.1) (12) %

Interest expense, net of interest income (22.8) (24.7) 8 %

Other non-operating income 70.1 2.3 nm

Loss from continuing operations before income taxes and equity in net income of affiliates (370.2) (117.9) nm

Income tax benefit (expense) 293.5 (94.0) nm

Other non-operating income 57.5 77.6 (26) %

Loss from continuing operations before income taxes and equity in net income of affiliates (51.7) (24.1) (115) %

Income tax (expense) benefit (112.9) 230.0 (149) %

Equity in net income of affiliates, net of tax — 0.2 (100) %

Loss from continuing operations (76.5) (211.7) 64 %

(Loss) income from discontinued operations, net of tax (558.0) 240.4 nm

(Loss) gain on sales of discontinued operations, net of tax (363.3) 848.4 (143) %

(Loss) income from continuing operations (164.5) 206.1 (180) %

Loss from discontinued operations, net of tax (0.4) (107.8) 100 %

Net (loss) income (164.9) 98.3 nm

Net loss attributable to noncontrolling interests 5.1 0.5 nm

Net loss attributable to noncontrolling interests — 1.3 100 %

Net (loss) income attributable to Laureate Education, Inc.

2 unchanged sentences

For further details on certain discrete items discussed below, see “Discussion of Significant Items Affecting the Consolidated Results.”

Comparison of Consolidated Results for the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

Revenues decreased by $120.5 million to $739.7 million for the nine months ended September 30, 2020 (the 2020 fiscal period) from $860.2 million for the nine months ended September 30, 2019 (the 2019 fiscal period).

The effect of a net change in foreign currency exchange rates decreased revenues by $61.5 million, driven by the weakening of the Mexican Peso and the Peruvian Nuevo Sol against the USD.

Average total organic enrollment at a majority of our institutions decreased during the 2020 fiscal period, decreasing revenues by $36.7 million compared to the 2019 fiscal period.

The effect of product mix, pricing and timing decreased revenues by $21.1 million for the 2020 fiscal period, mainly due to the effect of the COVID-19 pandemic on the academic calendar timing.

Other Corporate and Eliminations changes accounted for a decrease in revenues of $1.2 million.

Direct costs and general and administrative expenses combined decreased by $126.4 million to $754.9 million for the 2020 fiscal period from $881.3 million for the 2019 fiscal period.

Comparison of Consolidated Results for the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020

Revenues increased by $2.4 million to $194.7 million for the three months ended March 31, 2021 (the 2021 fiscal quarter) from $192.3 million for the three months ended March 31, 2020 (the 2020 fiscal quarter).

The effect of changes in tuition rates and enrollments in programs at varying price points (“product mix”), pricing and timing increased revenues by $19.2 million for the 2021 fiscal quarter, attributable primarily to the academic calendar and the delay of semester start dates in the Peru segment in 2020 as a result of the COVID-19 pandemic.

Other Corporate and Eliminations changes accounted for an increase in revenues of $0.2 million.

These increases in revenues were partially offset by lower average total organic enrollment at a majority of our institutions during the 2021 fiscal quarter, which decreased revenues by $10.4 million compared to the 2020 fiscal quarter.

Additionally, the effect of a net change in foreign currency exchange rates decreased revenues by $6.6 million, driven by the weakening of the Mexican Peso and the Peruvian Nuevo Sol against the USD.

Direct costs and general and administrative expenses combined decreased by $41.3 million to $224.4 million for the 2021 fiscal quarter from $265.7 million for the 2020 fiscal quarter.

The effect of operational changes decreased direct costs by $33.7 million, mainly driven by cost-saving initiatives to preserve liquidity.

The effect of a net change in foreign currency exchange rates decreased costs by $7.8 million.

The effect of operational changes decreased direct costs by $50.1 million, mainly driven by cost-saving initiatives to preserve liquidity in the wake of the COVID-19 pandemic.

Other Corporate and Eliminations expenses accounted for a decrease in costs of $38.8 million in the 2020 fiscal period, related to cost-reduction efforts.

Partially offsetting these decreases in direct costs was Excellence-in-Process (EiP) implementation expense, which increased costs by $10.4 million for the 2020 fiscal period compared to the 2019 fiscal period, in addition to changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets, which resulted in a year-over-year increase in direct costs of $0.8 million.

Operating loss increased by $344.9 million to $366.2 million for the 2020 fiscal period from $21.3 million for the 2019 fiscal period.

This increase was primarily a result of the impairment charges of $350.9 million during the 2020 fiscal period, partially offset by lower operating costs at Corporate.

Interest expense, net of interest income decreased by $24.9 million to $74.1 million for the 2020 fiscal period from $99.0 million for the 2019 fiscal period.

Other Corporate and Eliminations expenses accounted for a decrease in costs of $6.6 million in the 2021 fiscal quarter, related to cost-reduction efforts.

Partially offsetting these decreases in direct costs were changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets, which resulted in a year-over-year increase in direct costs of $6.8 million.

Operating loss increased by $9.3 million to $86.4 million for the 2021 fiscal quarter from $77.1 million for the 2020 fiscal quarter.

This increase was primarily a result of the impairment charges of $56.7 million recorded during the 2021 fiscal quarter, partially offset by a lower operating loss at our Peru segment.

Interest expense, net of interest income decreased by $1.9 million to $22.8 million for the 2021 fiscal quarter from $24.7 million for the 2020 fiscal quarter.

The decrease in interest expense was primarily attributable to lower average debt balances.

Other non-operating income increased by $67.8 million to $70.1 million for the 2020 fiscal period from $2.3 million for the 2019 fiscal period.

This change was primarily attributable to:

(1) an increase in gain on foreign currency exchange of $63.5 million;

(2) a decrease in loss on debt extinguishment of $22.1 million, related to the repayment of the 2024 Term Loan during the 2019 fiscal period;

and (3) a decrease in loss on disposal of subsidiaries of $0.3 million.

These increases in non-operating income were partially offset by a loss on derivative instruments for the 2020 fiscal period compared to a gain for the 2019 fiscal period, for a change of $9.8 million, and a decrease in other non-operating income of $8.3 million, primarily attributable to non-operating income recorded during the 2019 fiscal period related to the sale of an equity security held at Corporate.

Income tax benefit (expense) changed by $387.5 million to a benefit of $293.5 million for the 2020 fiscal period from an expense of $(94.0) million for the 2019 fiscal period.

This change was attributable to a net discrete tax benefit of approximately $141 million that was recognized during the 2020 fiscal period related to the tax-basis step up of certain intellectual property that became subject to Dutch taxation in the Netherlands, a discrete tax benefit of approximately $71 million related to the Company’s election to exclude certain foreign income of foreign corporations from GILTI, and a tax benefit of approximately $31 million related to changes in valuation allowance against U.S.

and Australia deferred tax assets.

(Loss) income from discontinued operations, net of tax changed by $798.4 million to a loss of $(558.0) million for the 2020 fiscal period from income of $240.4 million for the 2019 fiscal period.

This change was primarily the result of higher year-over-year impairment charges of $614.1 million during the 2020 fiscal period related to assets that were held for sale, combined with the sales of discontinued operations that generated income during the 2019 fiscal period.

(Loss) gain on sales of discontinued operations, net of tax changed by $1,211.7 million to a loss of $(363.3) million for the 2020 fiscal period, related to the net effect of the sales of NSAD and our operations in Costa Rica, Chile and Malaysia, combined with an adjustment to the loss on sale of our Turkey operations, compared to a gain of $848.4 million for the 2019 fiscal period related to the sales of St.

Augustine and our operations in Thailand, South Africa, India, Spain, Portugal and Turkey, along with an adjustment to the gain on the sale of our China operation.

Net loss attributable to noncontrolling interests increased by $4.6 million to $5.1 million for the 2020 fiscal period from $0.5 million for the 2019 fiscal period.

This change was primarily related to our previous joint venture in Saudi Arabia.

Other non-operating income decreased by $20.1 million to $57.5 million for the 2021 fiscal quarter from $77.6 million for the 2020 fiscal quarter.

This decrease was attributable to less gain on foreign currency exchange of $50.5 million, partially offset by:

(1) an increase in gain on derivative instruments of $28.5 million;

(2) a loss on disposal of subsidiaries of $1.8 million during the 2020 fiscal quarter;

and (3) other non-operating expense of $0.1 million during the 2020 fiscal quarter.

Income tax (expense) benefit changed by $342.9 million to an expense of $(112.9) million for the 2021 fiscal quarter from a benefit of $230.0 million for the 2020 fiscal quarter.

This change was primarily attributable to a nonrecurring discrete tax benefit of approximately $222 million that was recognized during the 2020 fiscal quarter related to the tax-basis step up of certain intellectual property that became subject to Dutch taxation in the Netherlands as well as additional tax expense of approximately $46.5 million related to increases to income tax reserves in the 2021 fiscal quarter, with the majority of the remaining difference attributable to the change in pretax earnings.

Loss from discontinued operations, net of tax decreased by $107.4 million to $0.4 million for the 2021 fiscal quarter from $107.8 million for the 2020 fiscal quarter.

This change was a result of the sales during 2020 of certain Discontinued Operations that generated losses during the 2020 fiscal quarter.

See Overview for further detail on results of the Discontinued Operations.

Non-GAAP Financial Measure

6 unchanged sentences

Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the three months ended September 30, 2020 and 2019:

Better/(Worse)

(in millions) 2020 2019 2020 vs.

Loss from continuing operations $ (271.0) $ (86.6) nm

Income tax (benefit) expense (72.2) 48.1 nm

Loss from continuing operations before income taxes (343.2) (38.6) nm

(Gain) loss on disposal of subsidiaries, net (0.6) 1.5 140 %

Foreign currency exchange loss (gain), net 2.9 (7.7) (138) %

Other income, net (1.3) (1.0) 30 %

Gain on derivatives — (0.3) (100) %

Loss on debt extinguishment — 0.2 100 %

Interest expense 24.7 28.3 13 %

Interest income (0.7) (0.9) (22) %

Operating loss (318.2) (18.4) nm

Depreciation and amortization 18.2 20.4 11 %

EBITDA (300.0) 2.0 nm

Share-based compensation expense (a)

2.6 1.2 (117) %

Loss on impairment of assets (b)

EiP implementation expenses (c)

24.4 27.3 11 %

Adjusted EBITDA $ 50.4 $ 30.5 65 %

nm - percentage changes not meaningful

(a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718, “Stock Compensation.”

(b) Represents non-cash charges related to impairments of long-lived assets.

For further details, see “Discussion of Significant Items Affecting the Consolidated Results for the Nine Months Ended September 30, 2020.”

(c) EiP implementation expenses are related to our enterprise-wide initiative to optimize and standardize Laureate’s processes, creating vertical integration of procurement, information technology, finance, accounting and human resources.

It included the establishment of regional shared services organizations (SSOs) around the world, as well as improvements to the Company's system of internal controls over financial reporting.

The EiP initiative also includes other back- and mid-office areas, as well as certain student-facing activities, expenses associated with streamlining the organizational structure and certain non-recurring costs incurred in connection with the planned and completed dispositions.

EiP also includes expenses associated with an enterprise-wide program aimed at revenue growth.

Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Three Months Ended September 30, 2020 and 2019

Depreciation and amortization decreased by $2.2 million to $18.2 million for the 2020 fiscal quarter from $20.4 million for the 2019 fiscal quarter.

The effects of foreign currency exchange decreased depreciation and amortization expense by $1.4 million for the 2020 fiscal quarter.

Other items decreased depreciation and amortization by $0.8 million.

Share-based compensation expense increased by $1.4 million to $2.6 million for the 2020 fiscal quarter from $1.2 million for the 2019 fiscal quarter.

EiP implementation expenses decreased by $2.9 million to $24.4 million for the 2020 fiscal quarter from $27.3 million for the 2019 fiscal quarter.

The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the nine months ended September 30, 2020 and 2019:

The following table presents Adjusted EBITDA and reconciles (loss) income from continuing operations to Adjusted EBITDA for the three months ended March 31, 2021 and 2020:

Better/(Worse)

(in millions) 2021 2020 2021 vs.

Loss from continuing operations $ (76.5) $ (211.7) 64 %

(Loss) income from continuing operations $ (164.5) $ 206.1 (180) %

Equity in net income of affiliates, net of tax — (0.2) (100) %

Income tax (benefit) expense (293.5) 94.0 nm

Loss from continuing operations before income taxes and equity in net income of affiliates (370.2) (117.9) nm

Income tax expense (benefit) 112.9 (230.0) (149) %

Loss from continuing operations before income taxes and equity in net income of affiliates (51.7) (24.1) (115) %

Loss on disposal of subsidiaries, net — 1.8 100 %

Foreign currency exchange gain, net (71.1) (7.6) nm

Other income, net (0.8) (9.1) (91) %

Loss (gain) on derivatives 0.6 (9.2) (107) %

Loss on debt extinguishment — 22.1 100 %

Foreign currency exchange gain, net (28.2) (78.7) (64) %

Other expense, net — 0.1 100 %

Gain on derivatives (29.3) (0.8) nm

Interest expense 23.5 25.3 7 %

Interest income (0.7) (0.6) 17 %

Operating loss (366.2) (21.3) nm

Operating loss (86.4) (77.1) (12) %

Depreciation and amortization 22.8 19.7 (16) %

EBITDA (310.3) 40.3 nm

EBITDA (63.6) (57.4) (11) %

Share-based compensation expense (a)

7.9 7.5 (5) %

Loss on impairment of assets (b)

5 unchanged sentences

(b) Represents non-cash charges related to impairments of long-lived assets.

For further details, see “Discussion of Significant Items Affecting the Consolidated Results for the Nine Months Ended September 30, 2020.”

For further details, see “Discussion of Significant Items Affecting the Consolidated Results for the Three Months Ended March 31, 2021.”

It included the establishment of regional shared services organizations (SSOs) around the world, as well as improvements to the Company's system of internal controls over financial reporting.

Beginning in the third quarter of 2019, EiP also includes expenses associated with an enterprise-wide program aimed at revenue growth.

Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Nine Months Ended September 30, 2020 and 2019

Depreciation and amortization decreased by $5.7 million to $55.9 million for the 2020 fiscal period from $61.6 million for the 2019 fiscal period.

The effects of foreign currency exchange decreased depreciation and amortization expense by $3.4 million for the 2020 fiscal period.

Other items decreased depreciation and amortization by $2.3 million.

Share-based compensation expense increased by $0.4 million to $7.9 million for the 2020 fiscal period from $7.5 million for the 2019 fiscal period.

EiP implementation expenses increased by $10.4 million to $66.5 million for the 2020 fiscal period from $56.1 million for the 2019 fiscal period.

This increase was primarily attributable to higher legal and consulting fees related to our divestiture activity and the inclusion in EiP of expenses associated with an enterprise-wide program aimed at revenue growth.

The EiP initiative also includes other back- and mid-office areas, as well as certain student-facing activities, expenses associated with streamlining the organizational structure, an enterprise-wide program aimed at revenue growth, and certain non-recurring costs incurred in connection with the planned and completed dispositions.

Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Three Months Ended March 31, 2021 and 2020

Depreciation and amortization increased by $3.1 million to $22.8 million for the 2021 fiscal quarter from $19.7 million for the 2020 fiscal quarter.

This increase was primarily attributable to amortization of Laureate’s tradename which, during the third quarter of 2020, changed from being an indefinite-lived intangible asset to being a finite-lived intangible asset.

When combined with other items, this change increased depreciation and amortization by $3.9 million.

Partially offsetting this increase was the effect of foreign currency exchange, which decreased depreciation and amortization expense by $0.8 million for the 2021 fiscal quarter.

Share-based compensation expense decreased by $0.2 million to $1.3 million for the 2021 fiscal quarter from $1.5 million for the 2020 fiscal quarter.

EiP implementation expenses decreased by $7.5 million to $15.3 million for the 2021 fiscal quarter from $22.8 million for the 2020 fiscal quarter.

This decrease was primarily attributable to lower severance costs and lower legal and consulting fees related to our divestiture activity.

Segment Results

We have two reportable segments:

Mexico and Peru (formerly Andean).

As discussed in “Overview,” the entire Brazil, Central America, Rest of World and Online & Partnerships operating segments are included in Discontinued Operations and therefore are excluded from segment results.

For purposes of the following comparison of results discussion, “ segment direct costs ” represent direct costs by segment as they are included in Adjusted EBITDA, such that depreciation and amortization expense, loss on impairment of assets, share-based compensation expense and our EiP implementation expenses have been excluded.

Mexico and Peru (formerly Andean), as discussed in Overview.

For purposes of the following comparison of results discussion, “ segment direct costs ” represent direct costs incurred by the segment as they are included in Adjusted EBITDA, such that depreciation and amortization expense, loss on impairment of assets, share-based compensation expense and our EiP implementation expenses have been excluded.

Organic enrollment is based on average total enrollment for the period.

For a further description of our segments, see Overview.

The following tables, derived from our consolidated financial statements included elsewhere in this Form 10-Q, presents selected financial information of our segments:

(in millions) % Change

Better/(Worse)

For the three months ended September 30, 2020 2019 2020 vs.

Mexico $ 115.9 $ 145.8 (21) %

Peru 127.3 130.8 (3) %

Corporate 0.3 0.7 (57) %

Consolidated Total Revenues $ 243.5 $ 277.3 (12) %

Adjusted EBITDA:

Mexico $ 15.5 $ 23.1 (33) %

Peru 56.5 45.2 25 %

Corporate (21.6) (37.8) 43 %

Consolidated Total Adjusted EBITDA $ 50.4 $ 30.5 65 %

The following table, derived from our consolidated financial statements included elsewhere in this Form 10-Q, presents selected financial information of our segments:

(in millions) % Change

Better/(Worse)

For the nine months ended September 30, 2020 2019 2020 vs.

For the three months ended March 31, 2021 2020 2021 vs.

Mexico $ 135.4 $ 154.2 (12) %

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Financial Overview

Comparison of Mexico Results for the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

Comparison of Mexico Results for the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020

(in millions) Revenues Direct Costs Adjusted EBITDA

September 30, 2019 $ 145.8 $ 122.7 $ 23.1

March 31, 2020 $ 154.2 $ 130.9 $ 23.3

Organic enrollment (1)

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Dispositions — — —

September 30, 2020 $ 115.9 $ 100.4 $ 15.5

March 31, 2021 $ 135.4 $ 118.1 $ 17.3

(1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA.

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Adjusted EBITDA decreased by $6.0 million, a 26% decrease from the 2020 fiscal quarter.

Comparison of Mexico Results for the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

(in millions) Revenues Direct Costs Adjusted EBITDA

September 30, 2019 $ 464.7 $ 384.2 $ 80.5

Organic enrollment (1)

Product mix, pricing and timing (1)

Organic constant currency (32.4) (21.5) (10.9)

Foreign exchange (47.3) (37.0) (10.3)

Dispositions — — —

September 30, 2020 $ 385.0 $ 326.5 $ 58.5

(2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets.

Revenues decreased by $79.7 million, a 17% decrease from the 2019 fiscal period.

• Organic enrollment decreased during the 2020 fiscal period by 4%, decreasing revenues by $19.6 million.

• The decrease in revenues from product mix, pricing and timing was mainly due to the effect of the COVID-19 pandemic on the academic calendar timing, as well as an increase in discounts and scholarships as a percentage of revenues.

• Revenues represented 52% of our consolidated total revenues for the 2020 fiscal period, compared to 54% for the 2019 fiscal period.

Adjusted EBITDA decreased by $22.0 million, a 27% decrease from the 2019 fiscal period.

Financial Overview

Comparison of Peru Results for the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

Comparison of Peru Results for the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020

(in millions) Revenues Direct Costs Adjusted EBITDA

September 30, 2019 $ 130.8 $ 85.6 $ 45.2

March 31, 2020 $ 36.5 $ 63.2 $ (26.7)

Organic enrollment (1)

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Dispositions — — —

September 30, 2020 $ 127.3 $ 70.8 $ 56.5

March 31, 2021 $ 57.5 $ 45.9 $ 11.6

Revenues decreased by $3.5 million, a 3% decrease from the 2019 fiscal quarter.

Revenues increased by $21.0 million, a 58% increase from the 2020 fiscal quarter.

• The increase in revenues from product mix, pricing and timing was mainly due to the effect of the COVID-19 pandemic on the academic calendar timing, which decreased revenues for the 2020 fiscal quarter.

• Organic enrollment decreased during the 2021 fiscal quarter by 4%, decreasing revenues by $1.3 million.

• The increase in revenues from product mix, pricing and timing was mainly due to the effect of the COVID-19 pandemic on the academic calendar timing, as revenue that had previously been deferred was recognized during the 2020 fiscal quarter when rescheduled classes took place.

This increase was partially offset by an increase in discounts and scholarships as a percentage of revenues.

• Revenue represented 30% of our consolidated total revenues for the 2021 fiscal quarter compared to 20% for the 2020 fiscal quarter.

Adjusted EBITDA increased by $38.3 million, a 143% increase from the 2020 fiscal quarter.

Comparison of Peru Results for the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

(in millions) Revenues Direct Costs Adjusted EBITDA

September 30, 2019 $ 391.1 $ 257.3 $ 133.8

Organic enrollment (1)

Product mix, pricing and timing (1)

Organic constant currency (25.5) (26.6) 1.1

Foreign exchange (14.2) (8.3) (5.9)

Dispositions — — —

September 30, 2020 $ 351.4 $ 222.4 $ 129.0

Revenues decreased by $39.7 million, a 10% decrease from the 2019 fiscal period.

• Organic enrollment decreased during the 2020 fiscal period by 5%, decreasing revenues by $17.1 million.

• The decrease in revenues from product mix, pricing and timing was mainly due to an increase in discounts and scholarships as a percentage of revenues.

• Revenue represented 48% of our consolidated total revenues for the 2020 fiscal period compared to 46% for the 2019 fiscal period.

Adjusted EBITDA decreased by $4.8 million, a 4% decrease from the 2019 fiscal period, primarily driven by the weakening of the Peruvian Nuevo Sol relative to the USD.

Corporate revenues represent amounts from our consolidated joint venture with the University of Liverpool, as well as centralized IT costs charged to various segments, offset by the elimination of intersegment revenues.

Comparison of Corporate Results for the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

Better/(Worse)

(in millions) 2020 2019 2020 vs.

Revenues $ 0.3 $ 0.7 (57) %

Expenses 21.9 38.5 43 %

Adjusted EBITDA $ (21.6) $ (37.8) 43 %

Adjusted EBITDA increased by $16.2 million, a 43% increase from the 2019 fiscal quarter, primarily due to a decrease in labor costs and other professional fees, related to cost-reduction efforts.

Comparison of Corporate Results for the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

Corporate revenues primarily include our transition services agreements related to divestitures and centralized IT costs charged to other business units, partially offset by the elimination of intersegment revenues.

Comparison of Corporate Results for the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020

Better/(Worse)

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Adjusted EBITDA $ (19.2) $ (26.0) 26 %

Adjusted EBITDA increased by $37.6 million, a 34% increase from the 2019 fiscal period, primarily due to a decrease in labor costs and other professional fees, related to cost-reduction efforts.

Adjusted EBITDA increased by $6.8 million, a 26% increase from the 2020 fiscal quarter.

• Cost-reduction efforts led to reduced labor costs and other professional fees, decreasing expenses by $8.6 million compared to the 2020 fiscal quarter.

• Other items accounted for a decrease in Adjusted EBITDA of $1.8 million.

Liquidity and Capital Resources

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We anticipate that cash flow from operations and available cash will be sufficient to meet our current operating requirements and manage our liquidity needs, including any effects on the Company’s business operations that arise from the COVID-19 pandemic, for at least the next 12 months from the date of issuance of this report.

However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.

We continue to assess our liquidity needs as a result of the COVID-19 pandemic.

A continued worldwide disruption could materially affect our future access to liquidity sources, particularly our cash flows from operations, as well as our financial condition and capitalization.

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Our primary source of cash is revenue from tuition charged to students in connection with our various education program offerings.

The majority of our students finance the cost of their own education and/or seek third-party financing programs.

We anticipate generating sufficient cash flow from operations in the majority of countries where we operate to satisfy the working capital and financing needs of our organic growth plans for each country.

Essentially all of our revenues are generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru.

We anticipate generating sufficient cash flow from operations in the countries in which we operate to satisfy the working capital and financing needs of our organic growth plans for each country.

If our educational institutions within one country were unable to maintain sufficient liquidity, we would consider using internal cash resources or reasonable short-term working capital facilities to accommodate any short- to medium-term shortfalls.

As of September 30, 2020, our secondary source of liquidity was cash and cash equivalents of $716.8 million, which does not include $113.0 million of cash recorded at subsidiaries that are classified as held for sale at September 30, 2020.

As of March 31, 2021, our secondary source of liquidity was cash and cash equivalents of $561.3 million, which does not include $272.1 million of cash recorded at subsidiaries that are classified as held for sale at March 31, 2021.

Our cash accounts are maintained with high-quality financial institutions with no significant concentration in any one institution.

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From time to time, we draw down on the revolver and, in accordance with the terms of the credit agreement, any proceeds drawn on the revolving credit facility may be used for general corporate purposes.

In March 2020, we fully drew down our $410.0 million revolving credit facility in order to increase our cash position and preserve financial flexibility in light of the COVID-19 pandemic.

If certain conditions are satisfied, the Third Amended and Restated Credit Agreement (the Third A&R Credit Agreement) also provides for an incremental revolving and term loan facilities not to exceed $565.0 million plus additional amounts so long as both immediately before and after giving effect to such incremental facilities the Company’s Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Third A&R Credit Agreement, on a pro forma basis, does not exceed 2.75x.

Completed Sale Transactions

On January 10, 2020, we completed the sale of our Costa Rica operations and received net proceeds of approximately $15.0 million.

The proceeds received net of cash sold, transaction fees and the working capital adjustment completed during the second quarter of 2020, were approximately $1.8 million.

The Company will also receive up to $5.0 million within two years after the sale if Laureate Costa Rica meets certain performance metrics.

On March 6, 2020, we completed the sale of NSAD, a higher education institution located in California.

At closing, the Company paid subsidies to the buyers of approximately $4.5 million.

Under the terms of the sale agreement, the Company will pay additional subsidies to the buyers of approximately $2.8 million ratably on a quarterly basis over the next four years, beginning on March 31, 2020.

In June 2020, we received 141.6 million Hong Kong Dollars (approximately $18.3 million at the date of receipt), related to the portion of the transaction value from the January 2018 sale of our China operations that was paid into escrow by the buyer.

As of December 31, 2019, the Company had recorded a receivable of approximately $25.9 million for the portion of the escrowed amount that we expected to receive.

Under the terms of the sale agreement, we expect to receive the remaining escrow receivable amount in January 2021.

On September 11, 2020, we completed the divestiture of our operations in Chile through the transfer of control of our not-for-profit institutions and the sale of our for-profit operations.

The cash proceeds received at closing, prior to transaction fees, were approximately $195.3 million.

In addition, the purchase price included a note receivable of approximately $21.5 million that is payable one year from the date of divestiture.

At the closing date, the Chilean operations had a cash balance (cash sold) of approximately $288.0 million that was transferred to the buyer as part of the transaction.

On September 29, 2020, we completed the sale of our operations in Malaysia and received proceeds of $116.3 million, net of cash sold, but prior to transaction fees.

The cash proceeds included a deposit of $5.0 million that we received from the buyer in February 2020.

In connection with the sale, on October 1, 2020, we made a payment of $13.7 million to the minority owner of Inti Holdings for their 10.10% interest.

On November 3, 2020, we completed the sale of our operations in Australia and New Zealand.

The purchase price was $642.7 million and was subject to certain closing adjustments based on the aggregate working capital and indebtedness of the Australia and New Zealand entities and their forecasted performance.

At closing, we received proceeds of approximately $650 million, net of transaction costs.

On March 8, 2021, we completed the divestiture of our operations in Honduras and received proceeds of approximately $26.0 million, net of cash sold and closing costs.

On January 25, 2018, we Completed the sale of LEI Lie Ying Limited in China.

At the closing of the sale, a portion of the total transaction value was paid into an escrow account, to be distributed to the Company pursuant to the terms and conditions of the escrow agreement.

In April 2021, the Company received the final balance from the escrow account of $168.3 million Hong Kong Dollars (approximately $21.7 million at the date of receipt).

Pending Sale Transactions

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Upon completion of the sale, the restricted cash that is held to collateralize the letters of credit in favor of the DOE will be released and reclassified to cash and cash equivalents.

On October 13, 2020, the Company entered into a definitive agreement with Fundación Nasser, a not-for-profit foundation in Honduras, to transfer control of its operations in Honduras for total cash consideration of approximately $29.8 million, prior to closing costs.

The buyer will also assume indebtedness which, as of September 30, 2020, was approximately $30 million.

The transaction is subject to certain closing conditions, including regulatory approval, and is expected to be completed in the first half of 2021.

On November 2, 2020, the Company entered into a definitive agreement with Ânima Holding S.A., one of the largest private higher education organizations in Brazil, for the sale of its Brazilian operations.

The transaction value is approximately 4,400.0 million Brazilian Reals (or approximately $765.0 million at the time of signing), including 3,800.0 million Brazilian Reals (or approximately $660.7 million at the time of signing) in cash consideration, which is subject to certain adjustments, and assumption of net indebtedness.

Pursuant to the agreement, the Company will be entitled to receive up to 203.0 million Brazilian Reals (or approximately $35.3 million at the time of signing) in additional cash consideration if certain metrics are achieved following the closing .

The closing of this transaction is targeted to occur toward the end of the second quarter of 2021 and is subject to certain specified closing conditions.

The transaction value is approximately 4,400.0 million Brazilian Reals (approximately $765.0 million at the time of signing), including 3,800.0 million Brazilian Reals (approximately $660.7 million at the time of signing) in cash consideration, which is subject to certain adjustments, and assumption of net indebtedness.

Pursuant to the agreement, the Company will be entitled to receive up to 203.0 million Brazilian Reals (approximately $35.3 million at the time of signing) in additional cash consideration if certain metrics are achieved following the closing.

The transaction is targeted to close during the second quarter of 2021, subject to regulatory approval.

Liquidity Restrictions

Our liquidity is affected by restricted cash balances, which totaled $30.9 million and $36.2 million as of September 30, 2020 and December 31, 2019, respectively.

Our liquidity is affected by restricted cash balances, which totaled $106.6 million and $117.2 million as of March 31, 2021 and December 31, 2020, respectively.

Indefinite Reinvestment of Foreign Earnings

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As part of our business strategies, we have determined that, except for one of our institutions in Peru, all earnings from our foreign continuing operations will be deemed indefinitely reinvested outside of the United States.

As of September 30, 2020, $321.3 million of our total $716.8 million of cash and cash equivalents were held by foreign subsidiaries.

These amounts above do not include $113.0 million of cash recorded at subsidiaries that are classified as held for sale at September 30, 2020, of which $108.7 million was held by foreign subsidiaries.

As of March 31, 2021, $142.9 million of our total $561.3 million of cash and cash equivalents were held by foreign subsidiaries.

These amounts above do not include $272.1 million of cash recorded at subsidiaries that are classified as held for sale at March 31, 2021, of which $39.5 million was held by foreign subsidiaries.

As of December 31, 2020, $127.7 million of our total $750.1 million of cash and cash equivalents were held by foreign subsidiaries.

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and payments of other third-party obligations.

As of September 30, 2020, senior long-term borrowings totaled $1,209.1 million and consisted of $409.1 million of borrowings under our revolving credit facility and $800.0 million in Senior Notes due 2025 that mature in May 2025.

As discussed above, in March 2020, we fully drew down our $410.0 million revolving credit facility in order to increase our cash position and preserve financial flexibility in light of the COVID-19 pandemic.

As of September 30, 2020, other debt balances totaled $212.0 million and our finance lease obligations and sale-leaseback financings were $31.9 million.

As of March 31, 2021, senior long-term borrowings totaled $798.7 million, which consisted entirely of the balance outstanding under our Senior Notes due 2025 that mature in May 2025.

As of March 31, 2021, other debt balances totaled $152.5 million and our finance lease obligations and sale-leaseback financings were $50.4 million.

Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries, mortgages payable and notes payable.

Approximately $172.2 million of long-term debt and fi nance leases, including the current portion, is included in the held-for-sale liabilities recorded on the consolidated balance sheet as of September 30, 2020.

Approximately $116.6 million of long-term debt, seller notes and fi nance leases, including the current portion, is included in the held-for-sale liabilities recorded on the consolidated balance sheet as of March 31, 2021.

For further description of the held-for-sale amounts see Note 4, Discontinued Operations and Assets Held for Sale, in our consolidated financial statements included elsewhere in this Form 10-Q.

Senior Secured Credit Facility

As of September 30, 2020 and December 31, 2019, the outstanding balance under our Senior Secured Credit Facility was $409.1 million and $202.4 million, respectively, which consisted entirely of balances outstanding under our $410.0 million revolving credit facility.

Under the Third A&R Credit Agreement, we are subject to a Consolidated Senior Secured Debt to Consolidated EBITDA financial maintenance covenant, as defined in the Third A&R Credit Agreement, unless certain conditions are satisfied.

As of September 30, 2020, we were in compliance with the leverage ratio covenant.

The maximum ratio, as defined, is 3.50x as of September 30, 2020 and thereafter.

In addition, notes payable at some of our locations contain financial maintenance covenants and we were in compliance with those covenants.

As of both September 30, 2020 and December 31, 2019, the outstanding balance under our Senior Notes due 2025 was $800.0 million.

Our Senior Secured Credit Facility consist of the revolving credit facility, which provides for borrowings of $410.0 million.

As of both March 31, 2021 and December 31, 2020, there was no balance outstanding under our Senior Secured Credit Facility.

Under the Third A&R Credit Agreement, we are subject to a Consolidated Senior Secured Debt to Consolidated EBITDA financial maintenance covenant (a leverage ratio covenant), as defined in the Third A&R Credit Agreement, unless certain conditions are satisfied.

As of March 31, 2021, those conditions were satisfied and, therefore, we were not subject to the leverage ratio.

The maximum ratio, as defined, is 3.50x as of the last day of each quarter commencing with the quarter ending December 31, 2019 and thereafter.

In addition, indebtedness at some of our locations contain financial maintenance covenants and we were in compliance with those covenants as March 31, 2021.

As of both March 31, 2021 and December 31, 2020, the outstanding balance under our Senior Notes due 2025 was $798.7 million.

As described in Note 19, Subsequent Events, in our consolidated financial statements included elsewhere in this Form 10-Q, on May 4, 2021 , we redeemed $500.0 million aggregate principal amount of our Senior Notes due 2025 at a redemption price of 104.125% of the principal amount thereof plus accrued and unpaid interest thereon to, but excluding the redemption date.

The total payment made was $521.0 million.

The source of the funds was cash on hand from the proceeds of the sale of our operations in Australia and New Zealand.

Additionally, we notified holders of our Senior Notes due 2025 of our election to redeem the remaining $298.7 million aggregate principal amount at a price of 104.125% of the principal amount thereof plus accrued and unpaid interest thereon to, but excluding the redemption date.

The redemption is contingent on completion of the sale of our Brazil operations, which is targeted to close by the end of the second quarter of 2021.

Following completion of the above redempti ons, we will have repaid the entire outstanding principal amount of the Senior Notes due 2025.

As of March 31, 2021, the amount of unamortized deferred financing costs associated with the Senior Notes was approximately $45.7 million.

This amount will be charged to loss on debt extinguishment upon the repayment of the Senior Notes due 2025, which is expected to occur during the second quarter of 2021.

We conduct a significant portion of our operations from leased facilities.

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As discussed in Note 9, Leases, in our consolidated financial statements included elsewhere in this Form 10-Q, we have significant liabilities recorded related to our leased facilities, which will require future cash payments.

Due to Shareholders of Acquired Companies (Seller Notes)

In the past, one method of payment for acquisitions was the use of promissory notes payable to the sellers of acquired companies.

As of September 30, 2020 and December 31, 2019, we recorded $7.9 million and $22.3 million, respectively, for these liabilities, which relate entirely to Discontinued Operations and therefore are classified as liabilities held for sale in our consolidated balance sheets.

As of March 31, 2021 and December 31, 2020, the present value of operating lease liabilities was $476.0 million and $519.1 million, respectively.

These amounts exclude operating lease liabilities for our Discontinued Operations of $114.6 million and $151.4 million as of March 31, 2021 and December 31, 2020, respectively.

Capital Expenditures

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We believe that our internal sources of cash and our ability to obtain additional third-party financing, subject to market conditions, will be sufficient to fund our investing activities.

Our total capital expenditures for our continuing and discontinued operations, excluding receipts from the sale of subsidiaries and property equipment, were $74.3 million and $114.2 million during the nine months ended September 30, 2020 and 2019, respectively.

The 35% decrease in capital expenditures for the 2020 fiscal period compared to the 2019 fiscal period was primarily due to a targeted reduction and deferral across all business lines to preserve cash amid the COVID-19 pandemic, as well as a result of the executed divestitures.

In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes.

We mitigate a portion of these risks through a risk-management program that includes the use of derivatives.

For further information on our derivatives, see Note 13, Derivative Instruments, in our consolidated financial statements included elsewhere in this Form 10-Q.

Asset Sale Offer to Purchase Up to $300 Million of Senior Notes

On October 13, 2020, the Company announced the commencement of a cash tender offer to purchase up to $300 million aggregate principal amount of its 8.250% Senior Notes due 2025, at a purchase price of 100% of the principal amount thereof plus accrued and unpaid interest to, but not including, the purchase date.

The Company intends to use cash proceeds from the sale of its operations in Chile and Malaysia to purchase the Senior Notes.

The offer will expire on November 10, 2020, unless extended by the Company, in its sole discretion.

Our total capital expenditures for our Continuing and Discontinued Operations, excluding receipts from the sale of subsidiaries and property equipment, were $13.6 million and $28.1 million during the three months ended March 31, 2021 and 2020, respectively.

The 52% decrease in capital expenditures was primarily due to a targeted reduction and deferral across all business lines to preserve cash amid the COVID-19 pandemic, as well as a result of the executed divestitures.

Laureate Education, Inc.

Deferred Compensation Plan

During the first quarter of 2021, the Company’s board of directors approved the termination of a deferred compensation plan for certain executive employees and members of our board of directors, with such termination effective April 1, 2021.

The Company expects that the participants will receive a distribution payout of their account balances under the terms of the plan in April 2022.

As of March 31, 2021, the total plan assets were $1.9 million and the total plan liabilities were $5.1 million.

The Company plans to fund the difference between the assets and the liabilities with operating cash flows.

Stock Repurchase Program

Laureate’s board of directors has approved a new stock repurchase program to acquire up to $300 million of the Company’s Class A common stock.

The Company’s proposed repurchases may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act).

On November 5, 2020, Laureate’s board of directors approved a new stock repurchase program to acquire up to $300 million of the Company’s Class A common stock.

The Company’s repurchases may be made on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act).

Repurchases may be effected pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act.

The Company’s board of directors will review the share repurchase program periodically and may authorize adjustment of its terms and size or suspend or discontinue the program.

The Company intends to finance the repurchases with free cash flow and excess cash and liquidity on-hand.

The Company expects to finance the repurchases with free cash flow and excess cash and liquidity on-hand.

As of March 31, 2021, the approximate dollar value of shares yet to be purchased under this stock repurchase program was $89.5 million.

On April 30, 2021, the Laureate’s board of directors approved an increase of the above authorization to repurchase shares of the Company’s Class A common stock by $200.0 million, for a total authorization (including the above authorized repurchases) of up to $500.0 million of the Company’s Class A common stock.

The Company expects to finance the additional $200.0 million of repurchases with proceeds received from the sale of the Company’s Brazil operations, from cash on-hand or from its revolving credit facility, or a combination thereof.

In the consolidated statements of cash flows, the changes in operating assets and liabilities are presented excluding the effects of exchange rate changes, acquisitions, and reclassifications, as these effects do not represent operating cash flows.

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The effects of exchange rate changes on cash are presented separately in the consolidated statements of cash flows.

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2020 and 2019:

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2021 and 2020:

(in millions) 2021 2020

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Net change in cash and cash equivalents and restricted cash $ (199.3) $ 242.8

Comparison of Cash Flows for the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

Comparison of Cash Flows for the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020

Operating Activities

Cash provided by operating activities decreased by $90.5 million to $221.8 million for the 2020 fiscal period from $312.3 million for the 2019 fiscal period.

This decrease in operating cash was primarily attributable to changes in working capital, as well as the year-over-year effect of the divestitures that occurred in 2019, as certain of the divested institutions contributed positive operating cash flows during 2019 prior to divestiture.

These factors accounted for a decrease in operating cash flows of approximately $178.5 million.

This decrease was partially offset by:

(1) a decrease in cash paid for interest of $62.4 million, from $137.7 million for the 2019 fiscal period to $75.3 million for the 2020 fiscal period, attributable to lower average debt balances;

(2) a decrease in cash paid for taxes of $18.0 million, from $80.0 million for the 2019 fiscal period to $62.0 million for the 2020 fiscal period;

and (3) a positive year-over-year effect to operating cash of $7.6 million primarily related to a cash payment during the 2019 fiscal period to settle cross currency and interest rate swaps in Chile.

Cash flows from operating activities increased by $14.8 million to operating cash inflow of $11.3 million for the 2021 fiscal quarter from operating cash outflow of $(3.5) million for the 2020 fiscal quarter.

This increase in operating cash was primarily attributable to changes in working capital, which accounted for an increase in operating cash flows of approximately $47.9 million, primarily driven by collections.

In addition, cash paid for interest decreased by $3.0 million, from $14.6 million for the 2020 fiscal quarter to $11.6 million for the 2021 fiscal quarter, attributable to lower average debt balances.

These increases in operating cash were partially offset by an increase in cash paid for taxes of $36.1 million, from $16.3 million for the 2020 fiscal quarter to $52.4 million for the 2021 fiscal quarter, primarily related to the payment of withholding taxes for intercompany loans that were capitalized during the 2021 fiscal quarter.

Investing Activities

Cash flows from investing activities decreased by $1,084.9 million to an investing cash outflow of $(34.2) million for the 2020 fiscal period from an investing cash inflow of $1,050.7 million for the 2019 fiscal period.

This decrease was primarily attributable to lower cash receipts from the sales of discontinued operations of $1,101.6 million, from $1,141.7 million during the 2019 fiscal period (for the sales of St.

Augustine and our operations in Thailand, South Africa, India, Spain, Portugal and Turkey) to $40.1 million, net, during the 2020 fiscal period (for the net effect of the sales of NSAD and our operations in Costa Rica, Chile and Malaysia, net of cash sold, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations).

In addition, during the 2019 fiscal period, we received $12.9 million from derivative settlements related to foreign exchange swap agreements associated with the sale of the Spain and Portugal institutions, as well as $11.5 million from the sale of shares of a preferred stock investment in a private education company.

These decreases in investing cash were partially offset by a decrease in capital expenditures of $39.9 million, and the year-over-year effect of a payment of $1.2 million during the 2019 fiscal period for a small acquisition in Brazil.

Cash used in investing activities decreased by $22.9 million to $1.1 million for the 2021 fiscal quarter from $24.0 million for the 2020 fiscal quarter.

This decrease was primarily attributable to higher cash receipts from the sales of Discontinued Operations of $26.8 million, from $4.0 million during the 2020 fiscal quarter (for the net effect of the sales of NSAD and our operations in Costa Rica) to $30.8 million, net, during the 2021 fiscal quarter (primarily for the sale our operations in Honduras and the receipt of a portion of the purchase price that was withheld in connection to the 2020 sale of our Malaysia operations).

In addition, cash used for capital expenditures decreased $14.4 million compared to the 2020 fiscal quarter.

These increases in investing cash were partially offset by payments of $18.3 million for derivative instruments related to foreign exchange swap agreements associated with the planned sale of our Brazil operations.

Financing Activities

Cash flows from financing activities increased by $1,845.0 million to a financing cash inflow of $257.4 million for the 2020 fiscal period from a financing cash outflow of $(1,587.6) million for the 2019 fiscal period.

This increase in financing cash inflows was primarily attributable to:

(1) net proceeds from long-term debt during the 2020 fiscal period, related to the full draw down on our $410.0 million revolving credit facility in order to increase our cash position and preserve financial flexibility in response to the COVID-19 pandemic, compared to net payments of long-term debt during the 2019 fiscal period, for a change of $1,733.8 million;

(2) increased proceeds from the exercise of common stock options of $25.0 million during the 2020 fiscal period;

(3) lower payments of deferred price for acquisitions during the 2020 fiscal period by $14.1 million, primarily due to the full repayment of the St.

Augustine seller note during the 2019 fiscal period;

(4) a payment for a debt redemption in Chile during the 2019 fiscal period of $5.9 million;

(5) a payment of $5.8 million during the 2019 fiscal period to acquire the remaining 10% noncontrolling interest of one of our operations in India, immediately prior to the sale of those operations;

and (6) higher payments during the 2019 fiscal period of $58.7 million to repurchase shares of our Class A common stock under our stock repurchase program.

Cash flows from financing activities decreased by $467.1 million to a financing cash outflow of $(199.2) million for the 2021 fiscal quarter from a financing cash inflow of $267.9 million for the 2020 fiscal quarter.

This decrease in financing cash was primarily attributable to:

(1) net payments of long-term debt during the 2021 fiscal quarter, compared to net proceeds of long-term debt during the 2020 fiscal quarter, related to the full draw down on our $410.0 million revolving credit facility in the first quarter of 2020 in order to increase our cash position and preserve financial flexibility in response to the COVID-19 pandemic, for a change of $325.6 million;

(2) higher payments during the 2021 fiscal quarter of $116.0 million to repurchase shares of our Class A common stock under our stock repurchase program;

and (3) a year-over-year decrease in proceeds from the exercise of common stock options of $26.8 million.

These decreases in financing cash were partially offset by payments of deferred purchase price for acquisitions during the 2020 fiscal quarter of $1.5 million.

Other items accounted for the remaining difference of $0.2 million.

6 unchanged sentences

For a complete discussion of our critical accounting policies, see the “Critical Accounting Policies and Estimates” section of the MD&A in our 2020 Form 10-K.

During the nine months ended September 30, 2020, there were no significant changes to our critical accounting policies.

During the three months ended March 31, 2021, there were no significant changes to our critical accounting policies.

We will continue to monitor the effect to the Company of the COVID-19 pandemic and assess whether any changes to our accounting estimates are warranted as additional information becomes available.

5 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis