LAUREATE EDUCATION, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report on Form 10-Q (this Form 10-Q) contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or similar expressions that concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results, and all statements we make relating to (i) our exploration of strategic alternatives and potential future plans, strategies or transactions that may be identified, explored or implemented as a result of such review process, (ii) our planned divestitures, the expected proceeds generated therefrom, the expected reduction in revenue resulting therefrom and any resulting litigation or dispute therewith, (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. All of these forward‑looking statements are subject to risks and uncertainties that may change at any time, including, with respect to our exploration of strategic alternatives, risks and uncertainties as to the terms, timing, structure, benefits and costs of any divestiture or separation transaction and whether one will be consummated at all, and the impact of any divestiture or separation transaction on our remaining businesses. Accordingly, our actual results may differ materially from those we expected. We derive most of our forward‑looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-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, 2020 (the 2020 Form 10-K). Some of the factors that we believe could affect our results include: • the risks associated with operating our portfolio of degree-granting higher education institutions in Mexico and Peru, including complex business, foreign currency, political, legal, regulatory, tax and economic risks; • our ability to maintain and, subsequently, increase tuition rates and student enrollments in our institutions; • our ability to successfully complete previously announced divestitures; • the risks associated with our exploration of strategic alternatives, including possible disruption to our ongoing businesses and increased transaction-related expenses; • the risks and uncertainties related to the long-term effect to the Company of the COVID-19 pandemic and its resurgence, including, but not limited to, its effect on student enrollment, tuition pricing, and collections in future periods; • our ability to effectively manage the growth of our business and increase our operating leverage; • the effect of existing international and U.S. laws and regulations governing our business or changes to those laws and regulations or in their application to our business; • changes in the political, economic and business climate in the markets in which we operate; • risks of downturns in general economic conditions and in the educational services and education technology industries that could, among other things, impair our goodwill and intangible assets; • possible increased competition from other educational service providers; • market acceptance of new service offerings by us or our competitors and our ability to predict and respond to changes in the markets for our educational services; • the effect on our business and results of operations from fluctuations in the value of foreign currencies; • our ability to attract and retain key personnel; • the fluctuations in revenues due to seasonality; • our ability to maintain proper and effective internal controls necessary to produce accurate financial statements on a timely basis; • our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance; and 28 • the future trading prices of our Class A common stock and the impact of any securities analysts’ reports on these prices. We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Form 10-Q may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Introduction This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the MD&A) is provided to assist readers of the financial statements in understanding the results of operations, financial condition and cash flows of Laureate Education, Inc. This MD&A should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-Q. The consolidated financial statements included elsewhere in this Form 10-Q are presented in U.S. dollars (USD) rounded to the nearest thousand, with the amounts in MD&A rounded to the nearest tenth of a million. Therefore, discrepancies in the tables between totals and the sums of the amounts listed may occur due to such rounding. Our MD&A is presented in the following sections: • Overview; • Results of Operations; • Liquidity and Capital Resources; • Critical Accounting Policies and Estimates; and • Recently Adopted Accounting Standards. Overview Our Business 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: 1) Mexico; and 2) Peru (formerly Andean) for reporting purposes. COVID-19 In response to the COVID-19 pandemic, we h ave temporarily tran sitioned the educational delivery method at all of our campus-based institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting. The outbreak of COVID-19 has caused domestic and global disruption in operations for institutions of higher education. The long-term effect to the Company of the COVID-19 pandemic depends on numerous factors, including, but not limited to, the effect on student enrollment, tuition pricing, and collections in future periods, which cannot be fully quantified at this time. In addition, regulatory activity in response to COVID-19 could have an adverse effect on our business if, for example, legislation was passed to suspend or reduce student tuition payments in any of the markets in which we operate. As a result, the full impact of COVID-19 and the scope of any adverse effect on the Company’s operations, including any potential impairments, which could be material, cannot be fully determined at this time. See also “Item 1A—Risk Factors—An epidemic, pandemic or other public health emergency, such as the recent outbreak of a novel strain of coronavirus (COVID-19), could have a material adverse effect on our business, financial condition, cash flows and results of operations” in our 2020 Form 10-K. 29 Discontinued Operations In 2017 and 2018, the Company announced the divestiture of certain subsidiaries located in Europe, Asia and Central America, which were included in the following segments: Peru (formerly Andean), Central America (formerly Central America & U.S. Campuses), and Rest of World. The goal of the divestitures was to create a more focused and simplified business model and generate proceeds to be used for further repayment of long-term debt. This represented a strategic shift that had a major effect on the Company’s operations and financial results. Accordingly, all of the divestitures that were part of this strategic shift, as well as the Company's operations in the Kingdom of Saudi Arabia that were managed under a contract that expired on August 31, 2019 and was not renewed, were accounted for as Discontinued Operations for all periods presented in accordance with Accounting Standards Codification (ASC) 205-20, “Discontinued Operations” (ASC 205). On January 27, 2020, we announced that our board of directors had authorized the Company to explore strategic alternatives for each of its businesses to unlock shareholder value. As a result of these efforts to explore strategic alternatives, 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. 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 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 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. dollar has strengthened against many international currencies, including the Brazilian real and the Mexican peso. As a result, the Company has significant FX losses recorded within stockholders’ equity, as a component of accumulated other comprehensive income. As of 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. 30 Presented in the table below are the Company’s businesses, by asset group/reporting unit, that carry the most significant FX losses: Asset Group/ Reporting Unit Foreign Currency Translation Losses as of (in millions) March 31, 2021 December 31, 2020 Brazil $ 494 $ 479 Mexico 551 509 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. 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 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. 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. Each institution in Mexico has a national license. Students in our Mexican institutions typically finance their own education. • In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute 72% of the total higher-education market. Laureate owns three institutions in Peru. Corporate is a non-operating business unit whose purpose is to support operations. Its departments are responsible for establishing operational policies and internal control standards, implementing strategic initiatives, and monitoring compliance with policies and controls throughout our operations. Our Corporate segment is an internal source of capital and provides financial, human resource, information technology, insurance, legal, and tax compliance services. The Corporate segment also contains the eliminations of intersegment revenues and expenses. 31 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 Mexico 2 183,700 $ 135.4 70 % Peru 3 182,300 57.5 30 % Total (1) 5 366,000 $ 194.7 100 % (1) Amounts related to Corporate, partially offset by the elimination of intersegment revenues, totaled $1.8 million and are not separately presented. Challenges Our operations are subject to complex business, economic, legal, regulatory, political, tax and foreign currency risks, which may be difficult to adequately address. The majority of our operations are outside the United States. As a result, we face risks that are inherent in international operations, including: fluctuations in exchange rates, possible currency devaluations, inflation and hyper-inflation; price controls and foreign currency exchange restrictions; potential economic and political instability in the countries in which we operate; expropriation of assets by local governments; key political elections and changes in government policies; multiple and possibly overlapping and conflicting tax laws; and compliance with a wide variety of foreign laws. See “Item 1A—Risk Factors—Risks Relating to Our Business—We operate a portfolio of degree-granting higher education institutions in Mexico and Peru and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address,” 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 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: 1) adding new programs and course offerings; 2) expanding target student demographics; and 3) increasing capacity at existing and new campus locations. Our success in growing our business will depend on the ability to anticipate and effectively manage these and other risks related to operating in various countries. Regulatory Environment and Other Matters Our business is subject to varying laws and regulations based on the requirements of local jurisdictions. These laws and regulations are subject to updates and changes. We cannot predict the form of the rules that ultimately may be adopted in the future or what effects they might have on our business, financial condition, results of operations and cash flows. We will continue to develop and implement necessary changes that enable us to comply with such laws and regulations. See 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. 32 Key Business Metric Enrollment Enrollment is our lead revenue indicator and represents our most important non-financial metric. We define “enrollment” as the number of students registered in a course on the last day of the enrollment reporting period. New enrollments provide an indication of future revenue trends. Total enrollment is a function of continuing student enrollments, new student enrollments and enrollments from acquisitions, offset by graduations, attrition and enrollment decreases due to dispositions. Attrition is defined as a student leaving the institution before completion of the program. To minimize attrition, we have implemented programs that involve assisting students in remedial education, mentoring, counseling and student financing. Each of our institutions has an enrollment cycle that varies by geographic region and academic program. Each institution has a “Primary Intake” period during each academic year in which the majority of the enrollment occurs. Most institutions also have one or more smaller “Secondary Intake” periods. Our Peruvian institutions have their Primary Intake during the first calendar quarter and a Secondary Intake during the third calendar quarter. Institutions in our Mexico segment have their Primary Intake during the third calendar quarter and a Secondary Intake during the first calendar quarter. Our institutions in Peru are generally out of session in January, February and July, while institutions in Mexico are generally out of session in May through July. Revenues are recognized when classes are in session. Principal Components of Income Statement Revenues The majority of our revenue is derived from tuition and educational services. The amount of tuition generated in a given period depends on the price per credit hour and the total credit hours or price per program taken by the enrolled student population. The price per credit hour varies by program, by market and by degree level. Additionally, varying levels of discounts and scholarships are offered depending on market-specific dynamics and individual achievements of our students. Revenues are recognized net of scholarships, other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. In addition to tuition revenues, we generate other revenues from student fees, dormitory/residency fees and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. The main drivers of changes in revenues between periods are student enrollment and price. We continually monitor market conditions and carefully adjust our tuition rates to meet local demand levels. We proactively seek the best price and content combinations to remain competitive in all the markets in which we operate. Direct Costs Our direct costs include labor and operating costs associated with the delivery of services to our students, including the cost of wages, payroll taxes and benefits, depreciation and amortization, rent, utilities, bad debt expenses, and marketing and promotional costs to grow future enrollments. In general, a significant portion of our direct costs tend to be variable in nature and trend with enrollment, and management continues to monitor and improve the efficiency of instructional delivery. Conversely, as campuses expand, direct costs may grow faster than enrollment growth as infrastructure investments are made in anticipation of future enrollment growth. General and Administrative Expenses Our general and administrative expenses primarily consist of costs associated with corporate departments, including executive management, finance, legal, business development and other departments that do not provide direct operational services. Factors Affecting Comparability Acquisitions Our past experiences provide us with the expertise to further our mission of providing high-quality, accessible and affordable higher education to students by expanding into new markets if opportunities arise, primarily through acquisitions. Acquisitions have historically affected the comparability of our financial statements from period to period. Acquisitions completed during one period impact comparability to a prior period in which we did not own the acquired entity. Therefore, changes related to 33 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. Dispositions Any dispositions of our Continuing Operations affect the comparability of our financial statements from period to period. Dispositions completed during one period impact comparability to a prior period in which we owned the divested entity. Therefore, changes related to such entities are considered “incremental impact of dispositions” for the first 12 months subsequent to the disposition. As discussed above, all of the divestitures that are part of the strategic shifts are included in Discontinued Operations for all periods presented. Foreign Exchange Institutions in our Continuing Operations are located outside the United States. These institutions enter into transactions in currencies other than USD and keep their local financial records in a functional currency other than the USD. We monitor the impact of foreign currency movements and the correlation between the local currency and the USD. Our revenues and expenses are generally denominated in local currency. The USD is our reporting currency and our subsidiaries operate in other functional currencies, namely the Mexican peso and Peruvian nuevo sol. The principal foreign exchange exposure is the risk related to the translation of revenues and expenses incurred in each country from the local currency into USD. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our reported revenues and earnings may be negatively affected by the strengthening of the U.S. dollar and currency exchange rates” in our 2020 Form 10-K. In order to provide a framework for assessing how our business performed excluding the effects of foreign currency fluctuations, we present organic constant currency in our segment results, which is calculated using the change from prior-year average foreign exchange rates to current-year average foreign exchange rates, as applied to local-currency operating results for the current year, and then excludes the impact of acquisitions, divestitures and other items, as described in the segments results. Seasonality Institutions in our network have a summer break during which classes are generally not in session and minimal revenues are recognized. In addition to the timing of summer breaks, holidays such as Easter also have an impact on our academic calendar. Operating expenses, however, do not fully correlate to the enrollment and revenue cycles, as the institutions continue to incur expenses during summer breaks. Given the geographic diversity of our institutions and differences in timing of summer breaks, our second and fourth quarters are stronger revenue quarters as the majority of our institutions are in session for most of these respective quarters. Our first and third fiscal quarters are weaker revenue quarters because our institutions have summer breaks for some portion of one of these two quarters. However, our primary enrollment intakes occur during the first and third quarters. Due to this seasonality, revenues and profits in any one quarter are not necessarily indicative of results in subsequent quarters and may not be correlated to new enrollment in any one quarter. Additionally, seasonality may be affected due to other events, such as the COVID-19 pandemic, which changed the academic calendar at many of our institutions. See “Item 1A—Risk Factors—Risks Relating to Our Business—We experience seasonal fluctuations in our results of operations” in our 2020 Form 10-K. Income Tax Expense Our consolidated income tax provision is derived based on the combined impact of federal, state and foreign income taxes. Also, discrete items can arise in the course of our operations that can further impact the Company’s effective tax rate for the period. Our tax rate fluctuates from period to period due to changes in the mix of earnings between our tax-paying entities, our tax-exempt entities and our loss-making entities for which it is not 'more likely than not' that a tax benefit will be realized on the loss. See “Item 1A—Risk Factors—Risks Relating to Our Business—We may have exposure to greater-than-anticipated tax liabilities” in our 2020 Form 10-K. 34 Results from the Discontinued Operations 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 Depreciation and amortization expense — (24.5) Share-based compensation expense (0.2) (0.4) Other direct costs (201.2) (378.9) Loss on impairment of assets (1.1) — Other non-operating expense (11.2) (55.1) 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. Results of Operations The following discussion of the results of our operations is organized as follows: • Summary Comparison of Consolidated Results; • Non-GAAP Financial Measure; and • Segment Results. 35 Summary Comparison of Consolidated Results 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. Comparison of Consolidated Results for the Three Months Ended March 31, 2021 and 2020 % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Revenues $ 194.7 $ 192.3 1 % Direct costs 181.8 220.6 18 % General and administrative expenses 42.6 45.1 6 % Loss on impairment of assets 56.7 3.8 nm Operating loss (86.4) (77.1) (12) % Interest expense, net of interest income (22.8) (24.7) 8 % 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) 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 — 1.3 100 % Net (loss) income attributable to Laureate Education, Inc. $ (164.9) $ 99.6 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 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. 36 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. 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 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 We define Adjusted EBITDA as income (loss) from continuing operations, before equity in net (income) loss of affiliates, net of tax, income tax expense (benefit), (gain) loss on sale or disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, loss (gain) on derivatives, loss on debt extinguishment, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to implementation of our Excellence-in-Process (EiP) initiative. When we review Adjusted EBITDA on a segment basis, we exclude inter-segment revenues and expenses that eliminate in consolidation. Adjusted EBITDA is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, Adjusted EBITDA is a key financial measure used by the compensation committee of our board of directors and our Chief Executive Officer in connection with the payment of incentive compensation to our executive officers and other members of our management team. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. 37 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: % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 (Loss) income from continuing operations $ (164.5) $ 206.1 (180) % Plus: Equity in net income of affiliates, net of tax — (0.2) (100) % 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) % Plus: Loss on disposal of subsidiaries, net — 1.8 100 % 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 (86.4) (77.1) (12) % Plus: Depreciation and amortization 22.8 19.7 (16) % EBITDA (63.6) (57.4) (11) % Plus: Share-based compensation expense (a) 1.3 1.5 13 % Loss on impairment of assets (b) 56.7 3.8 nm EiP implementation expenses (c) 15.3 22.8 33 % Adjusted EBITDA $ 9.7 $ (29.4) 133 % 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 Three Months Ended March 31, 2021.” (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, 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. 38 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. 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 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 three months ended March 31, 2021 2020 2021 vs. 2020 Revenues: Mexico $ 135.4 $ 154.2 (12) % Peru 57.5 36.5 58 % Corporate 1.8 1.6 13 % Consolidated Total Revenues $ 194.7 $ 192.3 1 % Adjusted EBITDA: Mexico $ 17.3 $ 23.3 (26) % Peru 11.6 (26.7) 143 % Corporate (19.2) (26.0) 26 % Consolidated Total Adjusted EBITDA $ 9.7 $ (29.4) 133 % 39 Mexico Financial Overview 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 March 31, 2020 $ 154.2 $ 130.9 $ 23.3 Organic enrollment (1) (9.1) Product mix, pricing and timing (1) (7.1) Organic constant currency (16.2) (15.9) (0.3) Foreign exchange (2.6) (3.7) 1.1 Dispositions — — — Other (2) — 6.8 (6.8) 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. (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 $18.8 million, a 12% decrease from the 2020 fiscal quarter. • Organic enrollment decreased during the 2021 fiscal quarter by 7%, decreasing revenues by $9.1 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. • Revenues represented 70% of our consolidated total revenues for the 2021 fiscal quarter, compared to 80% for the 2020 fiscal quarter. Adjusted EBITDA decreased by $6.0 million, a 26% decrease from the 2020 fiscal quarter. 40 Peru Financial Overview 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 March 31, 2020 $ 36.5 $ 63.2 $ (26.7) Organic enrollment (1) (1.3) Product mix, pricing and timing (1) 26.3 Organic constant currency 25.0 (14.0) 39.0 Foreign exchange (4.0) (3.3) (0.7) Dispositions — — — Other — — — March 31, 2021 $ 57.5 $ 45.9 $ 11.6 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues increased by $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. • 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. 41 Corporate 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 % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Revenues $ 1.8 $ 1.6 13 % Expenses 21.0 27.6 24 % Adjusted EBITDA $ (19.2) $ (26.0) 26 % 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 Liquidity Sources We anticipate that cash flow from operations and available cash will be sufficient to meet our current operating requirements and manage our liquidity needs, including any effects on the Company’s business operations that arise from the COVID-19 pandemic, for at least the next 12 months from the date of issuance of this report. 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. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions, such as obtaining additional financing. The Company will continue to evaluate its financial position in light of future developments, particularly those relating to the COVID-19 pandemic. Our primary source of cash is revenue from tuition charged to students in connection with our various education program offerings. Essentially all of our revenues are generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru. We anticipate generating sufficient cash flow from operations in the 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 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. The Company also maintains a revolving credit facility with a syndicate of financial institutions as a source of liquidity. The revolving credit facility provides for borrowings of $410.0 million and a maturity date of October 7, 2024. From time to time, we draw down on the revolver and, in accordance with the terms of the credit agreement, any proceeds drawn on the revolving credit facility may be used for general corporate purposes. 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. 42 Completed Sale Transactions 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 On September 11, 2020, the Company entered into a sale agreement to sell its operation of Walden University, LLC, (Walden University) for a purchase price of $1,480.0 million in cash, subject to certain adjustments set forth in the sale agreement. The closing of this transaction is expected to occur toward the end of 2021 and is subject to customary closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals. Under certain specified circumstances, the purchaser may be required to pay the Company a termination fee of $88.0 million, including if the purchaser terminates the sale agreement as a result of the imposition by the U.S. Department of Education of certain specified restrictions, or if Laureate terminates the sale agreement as a result of the purchaser’s failure to consummate the transaction upon satisfaction of the closing conditions. Upon completion of the sale, the restricted cash that is held to collateralize the letters of credit in favor of the DOE will be released and reclassified to cash and cash equivalents. 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 (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 $106.6 million and $117.2 million as of March 31, 2021 and December 31, 2020, respectively. Indefinite Reinvestment of Foreign Earnings We earn a significant portion of our income from subsidiaries located in countries outside the United States. As part of our business strategies, we have determined that, except for one of our institutions in Peru, all earnings from our foreign continuing operations will be deemed indefinitely reinvested outside of the United States. As of 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. These amounts above do not include $270.2 million of cash recorded at subsidiaries that were classified as held for sale at December 31, 2020, of which $66.4 million was held by foreign subsidiaries. Liquidity Requirements Our short-term liquidity requirements include: funding for debt service (including finance leases); operating lease obligations; payments due to shareholders of acquired companies (seller notes); payments of deferred compensation; working capital; operating expenses; capital expenditures; and business development activities. Long-term liquidity requirements include: payments on long-term debt (including finance leases); operating lease obligations; payments of deferred compensation; and payments of other third-party obligations. 43 Debt 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 $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 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. Covenants Under the Third A&R Credit Agreement, we are subject to a Consolidated Senior Secured Debt to Consolidated EBITDA financial maintenance covenant (a leverage ratio covenant), as defined in the Third A&R Credit Agreement, unless certain conditions are satisfied. As of 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. Senior Notes 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. Leases We conduct a significant portion of our operations from leased facilities. These facilities include our corporate headquarters, other office locations, and many of our higher education facilities. As discussed in Note 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. 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. 44 Capital Expenditures Capital expenditures consist of purchases of property and equipment and expenditures for deferred costs. Our capital expenditure program is a component of our liquidity and capital management strategy. This program includes discretionary spending, which we can adjust in response to economic and other changes in our business environment, to grow our network through the following: (1) capacity expansion at institutions to support enrollment growth; (2) new campuses for institutions in our existing markets; (3) information technology to increase efficiency and controls; and (4) online content development. Our non-discretionary spending includes the maintenance of existing facilities. We typically fund our capital expenditures through cash flow from operations and external financing. In the event that we are unable to obtain the necessary funding for capital expenditures, our long-term growth strategy could be significantly affected. We believe that our internal sources of cash and our ability to obtain additional third-party financing, subject to market conditions, will be sufficient to fund our investing activities. Our total capital expenditures for our Continuing and Discontinued Operations, excluding receipts from the sale of subsidiaries and property 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 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 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. Cash Flows In the consolidated statements of cash flows, the changes in operating assets and liabilities are presented excluding the effects of exchange rate changes, acquisitions, and reclassifications, as these effects do not represent operating cash flows. Accordingly, the amounts in the consolidated statements of cash flows do not agree with the changes of the operating assets and liabilities as presented in the consolidated balance sheets. The effects of exchange rate changes on cash are presented separately in the consolidated statements of cash flows. 45 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 Cash provided by (used in): Operating activities $ 11.3 $ (3.5) Investing activities (1.1) (24.0) Financing activities (199.2) 267.9 Effects of exchange rates changes on cash (6.9) (7.7) Change in cash included in current assets held for sale (3.5) 10.1 Net change in cash and cash equivalents and restricted cash $ (199.3) $ 242.8 Comparison of Cash Flows for the Three Months Ended March 31, 2021 to the Three Months Ended March 31, 2020 Operating Activities 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 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 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. 46 Critical Accounting Policies and Estimates The preparation of the consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Our significant accounting policies are discussed in Note 2, Significant Accounting Policies, of the audited consolidated financial statements included in our 2020 Form 10-K. Our critical accounting policies require the most significant judgments and estimates about the effect of matters that are inherently uncertain. As a result, these accounting policies and estimates could materially affect our financial statements and are critical to the understanding of our results of operations and financial condition. 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 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. Recently Adopted Accounting Standards Refer to Note 2, Significant Accounting Policies, in our consolidated financial statements included elsewhere in this Form 10-Q for recently adopted accounting standards. Item 3. Quantitative and Qualitative Disclosures About Market Risk For information regarding our exposure to certain market risks, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our 2020 Form 10-K. There have been no significant changes in our market risk exposures since our December 31, 2020 fiscal year end.