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 current growth strategy and other future plans, strategies or transactions that may be identified, explored or implemented and any litigation or dispute resulting from any completed transaction, (ii) any anticipated share repurchases or cash distributions, 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 current growth strategy and the impact of any completed 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 and risk factor 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), as updated in Part II, “Item 1A—Risk Factors” in this Form 10-Q. 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; • 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; • information technology system disruptions, unauthorized access, data security breaches, cyberattacks, ransomware attacks, other security threats or the costs associated with protection against and the remediation of the foregoing; • our ability to maintain proper and effective internal controls necessary to produce accurate financial statements on a timely basis; • our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance; and • the future trading prices of our Class A common stock and the impact of any securities analysts’ reports on these prices. We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this 31 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 390,200 students enrolled at five institutions in these two countries, which represent our Continuing Operations as of September 30, 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 Mexico and Peru 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 predominantly 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. 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, 32 which have now been completed, 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, the sale of our operations in Brazil was completed on May 28, 2021, and the sale of Walden University was completed on August 12, 2021. For Laureate’s institutions in Mexico and Peru, the board decided after a thorough evaluation of all strategic options, including a potential sale, to continue to operate these assets under Laureate management. Accordingly, Mexico and Peru represent our Continuing Operations. 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. Our Discontinued Operations are excluded from the segments information for all periods presented, as they no longer meet the criteria for a reportable segment under ASC 280, “Segment Reporting.” Unless indicated otherwise, the information in the MD&A relates to Continuing Operations. 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. 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. 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 inter-segment revenues and expenses. 33 The following information for our reportable segments in continuing operations is presented as of September 30, 2021: Institutions Enrollment 2021 YTD Revenues ($ in millions) (1) % Contribution to 2021 YTD Revenues Mexico 2 203,000 $ 390.9 49 % Peru 3 187,200 392.3 50 % Total (1) 5 390,200 $ 790.0 100 % (1) Amounts related to Corporate, partially offset by the elimination of inter-segment revenues, totaled $6.8 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,” and “Item 1—Business—Industry Regulation” in our 2020 Form 10-K, as well as “Item 1A—Risk Factors” in this Form 10-Q for a detailed discussion of our different regulatory environments. 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. 34 Principal Components of Income Statement Revenues The majority of our revenue is derived from tuition and educational services. The amount of tuition generated in a given period depends on the price per credit hour and the total credit hours or price per program taken by the enrolled student population. The price per credit hour varies by program, by market and by degree level. Additionally, varying levels of discounts and scholarships are offered depending on market-specific dynamics and individual achievements of our students. Revenues are recognized net of scholarships, other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. In addition to tuition revenues, we generate other revenues from student fees, dormitory/residency fees and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. The main drivers of changes in revenues between periods are student enrollment and price. We continually monitor market conditions and carefully adjust our tuition rates to meet local demand levels. We proactively seek the best price and content combinations to remain competitive in all the markets in which we operate. Direct Costs Our direct costs include labor and operating costs associated with the delivery of services to our students, including the cost of wages, payroll taxes and benefits, depreciation and amortization, rent, utilities, bad debt expenses, and marketing and promotional costs to grow future enrollments. In general, a significant portion of our direct costs tend to be variable in nature and trend with enrollment, and management continues to monitor and improve the efficiency of instructional delivery. Conversely, as campuses expand, direct costs may grow faster than enrollment growth as infrastructure investments are made in anticipation of future enrollment growth. General and Administrative Expenses Our general and administrative expenses primarily consist of costs associated with corporate departments, including executive management, finance, legal, business development and other departments that do not provide direct operational services. Factors Affecting Comparability Acquisitions Our past experiences provide us with the expertise to further our mission of providing high-quality, accessible and affordable higher education to students by expanding into new markets if opportunities arise, primarily through acquisitions. Acquisitions have historically affected the comparability of our financial statements from period to period. Acquisitions completed during one period impact comparability to a prior period in which we did not own the acquired entity. Therefore, changes related to such entities are considered “incremental impact of acquisitions” for the first 12 months of our ownership. We have not made any acquisitions thus far in 2021, and we did not make any acquisitions in 2020. 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 35 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 Our institutions 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 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. Results from the Discontinued Operations The results of operations of our Discontinued Operations for the three and nine months ended September 30, 2021 and 2020 were as follows: For the three months ended For the nine months ended September 30, September 30, (in millions) 2021 2020 2021 2020 Revenues $ 70.8 $ 459.4 $ 542.7 $ 1,342.3 Depreciation and amortization expense — (13.7) — (60.2) Share-based compensation expense (0.4) (1.0) (1.2) (2.4) Other direct costs (58.1) (340.7) (430.8) (1,070.4) Loss on impairment of assets — (10.3) (1.3) (431.6) Other non-operating expense (4.9) (14.7) (20.5) (79.8) Gain (loss) on sale of discontinued operations before taxes, net 612.0 (488.7) 625.3 (523.7) Pretax income (loss) of discontinued operations 619.4 (409.6) 714.2 (825.7) Income tax expense (248.8) (103.8) (257.4) (95.6) Income (loss) from discontinued operations, net of tax $ 370.5 $ (513.4) $ 456.8 $ (921.2) Nine Months Ended September 30, 2021 On March 8, 2021, we sold our operations in Honduras, which resulted in an after-tax loss of $1.7 million, including a working capital adjustment during the second quarter of 2021. 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 36 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 Gain (loss) on sale of discontinued operations before taxes, net. On May 28, 2021, we completed the sale of our operations in Brazil, which resulted in a pre-tax gain of $26.1 million, including a working capital adjustment during the third quarter of 2021. On August 12, 2021, we completed the sale of Walden University, which resulted in a pre-tax gain of $615.2 million, as well as estimated tax expense of approximately $278.0 million. Nine Months Ended September 30, 2020 On January 10, 2020, we sold our operations in Costa Rica, which resulted in a pre-tax loss of approximately $18.6 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 $418.0 million related to our Chilean operations, in order to write down the carrying value of their assets to their estimated fair value, and $3.3 million related to the Brazil enrollment to graduation (E2G) software assets. We also recorded a loss of $10.0 million on the held-for-sale Honduras disposal group, in order to write down the carrying value of the group to its estimated fair value, which is included in Gain (loss) on sale of discontinued operations before taxes, net. During the third quarter of 2020, we recorded a loss of approximately $190.0 million related to our Brazil operations in order to write down the carrying value of Brazil’s disposal group to its estimated fair value. We also recorded an additional loss of $10.0 million related to our held-for-sale Honduras group, in order to write down its carrying value to the estimated fair value based on the sale agreement that was signed in October 2020. These losses are included in Gain (loss) on sale of discontinued operations before taxes, net. On September 10, 2020, we completed the divestiture of our operations in Chile, resulting in a pre-tax loss of approximately $344.5 million that related 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 will be recognized when collected. 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. 37 Summary Comparison of Consolidated Results Discussion of Significant Items Affecting the Consolidated Results for the Nine Months Ended September 30, 2021 and 2020 Nine Months Ended September 30, 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 Laureate 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. During the second quarter of 2021, the Company fully repaid the remaining balance outstanding under our Senior Notes due 2025 using a portion of the proceeds received from the sales of its operations in Australia and New Zealand and Brazil. In connection with the debt repayment, the Company recorded a loss on debt extinguishment of $77.9 million, related to the redemption premium paid and the write off of the unamortized deferred financing costs associated with the repaid debt balances. This loss is included in other non-operating expense in the year-to-date table below. In November 2020, in connection with the signing of the sale agreement for our Brazil operations, the Company entered into six BRL-to-USD swap agreements to mitigate the risk of foreign currency exposure on the expected proceeds from the sale. The sale of our Brazil operations closed on May 28, 2021. On June 2, 2021, the Company settled the swap agreements, which resulted in a realized loss on derivatives of $24.5 million. This loss is included in other non-operating expense in the tables below. Nine Months Ended September 30, 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. During the third quarter of 2020, the Company recognized an impairment charge of $320.0 million on the Laureate tradename, an intangible asset. 38 Comparison of Consolidated Results for the Three Months Ended September 30, 2021 and 2020 % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Revenues $ 267.7 $ 243.5 10 % Direct costs 182.0 185.8 2 % General and administrative expenses 47.3 52.6 10 % Loss on impairment of assets 3.3 323.4 99 % Operating income (loss) 35.1 (318.2) 111 % Interest expense, net of interest income (2.4) (24.0) 90 % Other non-operating income (expense) 5.2 (1.0) nm Income (loss) from continuing operations before income taxes 37.7 (343.2) 111 % Income tax (expense) benefit (48.1) 72.2 (167) % Loss from continuing operations (10.4) (271.0) 96 % Income (loss) from discontinued operations, net of tax 370.5 (513.4) 172 % Net income (loss) 360.1 (784.4) 146 % Net loss attributable to noncontrolling interests 0.3 — nm Net income (loss) attributable to Laureate Education, Inc. $ 360.4 $ (784.4) 146 % 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, 2021 to the Three Months Ended September 30, 2020 Revenues increased by $24.2 million to $267.7 million for the three months ended September 30, 2021 (the 2021 fiscal quarter) from $243.5 million for the three months ended September 30, 2020 (the 2020 fiscal quarter). Average total organic enrollment at a majority of our institutions increased during the 2021 fiscal quarter, mainly in the Peru segment, increasing revenues by $36.6 million compared to the 2020 fiscal quarter. Other Corporate and Eliminations changes accounted for an increase in revenues of $3.0 million. These increases in revenues were partially offset by the effect of a net change in foreign currency exchange rates, which decreased revenues by $7.4 million, driven by the weakening of the Peruvian Nuevo Sol against the USD. Additionally, the effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing decreased revenues by $8.0 million compared to the 2020 fiscal quarter. Direct costs and general and administrative expenses combined decreased by $9.1 million to $229.3 million for the 2021 fiscal quarter from $238.4 million for the 2020 fiscal quarter. The effect of operational changes decreased costs by $13.8 million, mainly driven by cost-saving initiatives, partially offset by higher amortization expense at Corporate, mostly related to the amortization of the finite-lived tradename. 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 $0.1 million. These increases in direct costs were partially offset by the effect of a net change in foreign currency exchange rates, which increased costs by $1.4 million. Corporate and Eliminations expenses also accounted for an increase in costs of $3.4 million. Operating income (loss) changed by $353.3 million to income of $35.1 million for the 2021 fiscal quarter from a loss of $(318.2) million for the 2020 fiscal quarter. This increase in operating income was primarily driven by the impairment charges recorded during the 2020 fiscal quarter, related to the Laureate tradename impairment that was recognized during the 2020 fiscal quarter, combined with higher operating income at our Peru segment and our Mexico segment for the 2021 fiscal quarter. Interest expense, net of interest income decreased by $21.6 million to $2.4 million for the 2021 fiscal quarter from $24.0 million for the 2020 fiscal quarter. The decrease in interest expense was primarily attributable to lower average debt balances as a result of debt repayments. 39 Other non-operating income (expense) changed by $6.2 million to income of $5.2 million for the 2021 fiscal quarter from an expense of $(1.0) million for the 2020 fiscal quarter. This change was primarily attributable to gain on foreign currency exchange during the 2021 fiscal quarter compared to a loss during the 2020 fiscal quarter, for a change of $9.0 million. This increase in other non-operating income was partially offset by loss on disposal of subsidiaries during the 2021 fiscal quarter, compared to a gain during the 2020 fiscal quarter for a change of $1.5 million, and other non-operating income of $1.3 million during the 2020 fiscal quarter. Income tax (expense) benefit changed by $120.3 million to an expense of $(48.1) million for the 2021 fiscal quarter from an income tax benefit of $72.2 million for the 2020 fiscal quarter. This change in income tax was primarily due to changes in the mix of pre-tax book income attributable to taxable and non-taxable entities in various taxing jurisdictions, as well as additional tax expense in the 2021 fiscal quarter for changes in estimate associated with provision-to-return adjustments related to the GILTI high-tax exception regulations. Income (loss) from discontinued operations, net of tax changed by $883.9 million to income of $370.5 million for the 2021 fiscal quarter from a loss of $(513.4) million for the 2020 fiscal quarter. This change was primarily driven by the gain on sale of Walden University during the 2021 fiscal quarter, combined with charges recorded during the 2020 fiscal quarter to write down certain held-for-sale disposal groups to fair value. See Overview for further detail on results of the Discontinued Operations. Comparison of Consolidated Results for the Nine Months Ended September 30, 2021 and 2020 % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Revenues $ 790.0 $ 739.7 7 % Direct costs 577.1 614.1 6 % General and administrative expenses 139.3 140.8 1 % Loss on impairment of assets 67.2 350.9 81 % Operating income (loss) 6.4 (366.2) 102 % Interest expense, net of interest income (38.3) (74.1) 48 % Other non-operating (expense) income (84.7) 70.1 nm Loss from continuing operations before income taxes and equity in net income of affiliates (116.6) (370.2) 69 % Income tax (expense) benefit (174.2) 293.5 (159) % Equity in net income of affiliates, net of tax — 0.2 (100) % Loss from continuing operations (290.8) (76.5) nm Income (loss) from discontinued operations, net of tax 456.8 (921.2) 150 % Net income (loss) 166.0 (997.7) 117 % Net loss attributable to noncontrolling interests 0.5 5.1 90 % Net income (loss) attributable to Laureate Education, Inc. $ 166.5 $ (992.7) 117 % 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 Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020 Revenues increased by $50.3 million to $790.0 million for the nine months ended September 30, 2021 (the 2021 fiscal period) from $739.7 million for the nine months ended September 30, 2020 (the 2020 fiscal period). The effect of product mix, pricing and timing increased revenues by $29.4 million for the 2021 fiscal period. Average total organic enrollment was higher at our institutions in Peru, partially offset by lower average enrollment in Mexico, increasing revenues by $35.3 million compared to the 2020 fiscal period. Other Corporate and Eliminations changes accounted for an increase in revenues of $3.5 million. These increases in revenues were partially offset by the effect of a net change in foreign currency exchange rates, which decreased revenues by $17.9 million, as a result of the weakening of the Peruvian Nuevo Sol against the USD. 40 Direct costs and general and administrative expenses combined decreased by $38.5 million to $716.4 million for the 2021 fiscal period from $754.9 million for the 2020 fiscal period. The effect of operational changes decreased direct costs by $41.6 million, mainly driven by cost-saving initiatives, partially offset by higher amortization expense at Corporate, mostly related to the amortization of the finite-lived tradename. The effect of a net change in foreign currency exchange rates decreased costs by $0.2 million. Other Corporate and Eliminations expenses accounted for a decrease in costs of $4.0 million in the 2021 fiscal period, 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 $7.3 million. Operating income (loss) changed by $372.6 million to an income of $6.4 million for the 2021 fiscal period from a loss of $(366.2) million for the 2020 fiscal period. This change was primarily a result of lower impairment loss during the 2021 fiscal period of $283.7 million, related to the Laureate tradename impairment recognized during the 2020 fiscal period, combined with higher operating income at our Peru segment and lower operating loss at our Mexico segment. Interest expense, net of interest income decreased by $35.8 million to $38.3 million for the 2021 fiscal period from $74.1 million for the 2020 fiscal period. The decrease in interest expense was primarily attributable to lower average debt balances as a result of debt repayments. Other non-operating (expense) income changed by $154.8 million to an expense of $(84.7) million for the 2021 fiscal period from an income of $70.1 million for the 2020 fiscal period. This change was attributable to: (1) a loss on debt extinguishment of $77.9 million during the 2021 fiscal period in connection with the repayment of the Senior Notes due 2025; (2) an increase in loss on derivative instruments of $23.9 million, driven by settlement of foreign currency swap agreements in connection with the sale of Brazil operations during the 2021 fiscal period; (3) less gain on foreign currency exchange of $52.3 million; and (4) the year-over-year effect of other non-operating expense of $1.0 million during the 2020 fiscal period. These increases in other non-operating expense were partially offset by a lower loss on disposal of subsidiaries of $0.3 million during the 2021 fiscal period. Income tax (expense) benefit changed by $467.7 million to an expense of $(174.2) million for the 2021 fiscal period from a benefit of $293.5 million for the 2020 fiscal period. This change was primarily attributable to a nonrecurring discrete tax benefit of approximately $222 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, in addition to tax expense recorded during the 2021 fiscal period of approximately $46.5 million for increases to income tax reserves, and tax expense of approximately $35.7 million for changes in estimate associated with provision-to-return adjustments related to the GILTI high-tax exception regulations. The majority of the remaining difference is attributable to the change in pretax earnings. Income (loss) from discontinued operations, net of tax changed by $1,378.0 million to income of $456.8 million for the 2021 fiscal period from a loss of $(921.2) million for the 2020 fiscal period. This change was primarily driven by the gain on sale of Walden University during the 2021 fiscal period, combined with impairment charges recorded during the 2020 fiscal period and charges recorded during the 2020 fiscal period to write down certain held-for-sale disposal groups to fair value. See Overview for further detail on results of the Discontinued Operations. Net loss attributable to noncontrolling interests decreased by $4.6 million to $0.5 million for the 2021 fiscal period from $5.1 million for the 2020 fiscal period, which was primarily related to our previous joint venture in Saudi Arabia. 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- 41 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. The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the three months ended September 30, 2021 and 2020: % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Loss from continuing operations $ (10.4) $ (271.0) 96 % Plus: Income tax expense (benefit) 48.1 (72.2) (167) % Income (loss) from continuing operations before income taxes 37.7 (343.2) 111 % Plus: Loss (gain) on disposal of subsidiaries, net 0.9 (0.6) nm Foreign currency exchange (gain) loss, net (6.1) 2.9 nm Other income, net — (1.3) (100) % Interest expense 3.7 24.7 85 % Interest income (1.3) (0.7) 86 % Operating income (loss) 35.1 (318.2) 111 % Plus: Depreciation and amortization 25.9 18.2 (42) % EBITDA 61.0 (300.0) 120 % Plus: Share-based compensation expense (a) 2.0 2.6 23 % Loss on impairment of assets (b) 3.3 323.4 99 % EiP implementation expenses (c) 9.6 24.4 61 % Adjusted EBITDA $ 75.9 $ 50.4 51 % 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, 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), 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 completed dispositions. Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Three Months Ended September 30, 2021 and 2020 Depreciation and amortization increased by $7.7 million to $25.9 million for the 2021 fiscal quarter from $18.2 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 $7.8 million. This increase was partially offset by the effects of foreign currency exchange, which decreased depreciation and amortization expense by $0.1 million for the 2021 fiscal quarter. 42 Share-based compensation expense decreased by $0.6 million to $2.0 million for the 2021 fiscal quarter from $2.6 million for the 2020 fiscal quarter. EiP implementation expenses decreased by $14.8 million to $9.6 million for the 2021 fiscal quarter from $24.4 million for the 2020 fiscal quarter. This decrease was primarily attributable to lower costs during the 2021 fiscal quarter associated with an enterprise-wide program aimed at revenue growth, combined with lower legal and consulting fees related to our divestiture activity. The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the nine months ended September 30, 2021 and 2020: % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Loss from continuing operations $ (290.8) $ (76.5) nm Plus: Equity in net income of affiliates, net of tax — (0.2) (100) % Income tax expense (benefit) 174.2 (293.5) (159) % Loss from continuing operations before income taxes and equity in net income of affiliates (116.6) (370.2) 69 % Plus: Loss on disposal of subsidiaries, net 0.9 1.2 25 % Foreign currency exchange gain, net (18.7) (71.1) (74) % Other expense (income), net 0.1 (0.8) (113) % Loss on derivatives 24.5 0.6 nm Loss on debt extinguishment 77.9 — nm Interest expense 40.8 75.7 46 % Interest income (2.5) (1.6) 56 % Operating income (loss) 6.4 (366.2) 102 % Plus: Depreciation and amortization 75.6 55.9 (35) % EBITDA 82.0 (310.3) 126 % Plus: Share-based compensation expense (a) 6.0 7.9 24 % Loss on impairment of assets (b) 67.2 350.9 81 % EiP implementation expenses (c) 37.5 66.5 44 % Adjusted EBITDA $ 192.7 $ 115.1 67 % 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, 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), 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 and completed dispositions. 43 Comparison of Depreciation and Amortization, Share-based Compensation and EiP Implementation Expenses for the Nine Months Ended September 30, 2021 and 2020 Depreciation and amortization increased by $19.7 million to $75.6 million for the 2021 fiscal period from $55.9 million for the 2020 fiscal period. 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 $20.1 million. Partially offsetting this increase was the effect of foreign currency exchange, which decreased depreciation and amortization expense by $0.4 million for the 2021 fiscal period. Share-based compensation expense decreased by $1.9 million to $6.0 million for the 2021 fiscal period from $7.9 million for the 2020 fiscal period. EiP implementation expenses decreased by $29.0 million to $37.5 million for the 2021 fiscal period from $66.5 million for the 2020 fiscal period. This decrease was primarily attributable to lower costs during the 2021 fiscal period associated with an enterprise-wide program aimed at revenue growth, combined with lower severance costs and lower legal and consulting fees related to our divestiture activity. 44 Segment Results We have two reportable segments: Mexico and Peru, 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 September 30, 2021 2020 2021 vs. 2020 Revenues: Mexico $ 131.3 $ 115.9 13 % Peru 133.1 127.3 5 % Corporate 3.3 0.3 nm Consolidated Total Revenues $ 267.7 $ 243.5 10 % Adjusted EBITDA: Mexico $ 27.0 $ 15.5 74 % Peru 70.8 56.5 25 % Corporate (22.0) (21.6) (2) % Consolidated Total Adjusted EBITDA $ 75.9 $ 50.4 51 % nm - percentage changes not meaningful (in millions) % Change Better/(Worse) For the nine months ended September 30, 2021 2020 2021 vs. 2020 Revenues: Mexico $ 390.9 $ 385.0 2 % Peru 392.3 351.4 12 % Corporate 6.8 3.3 106 % Consolidated Total Revenues $ 790.0 $ 739.7 7 % Adjusted EBITDA: Mexico $ 61.5 $ 58.5 5 % Peru 196.0 129.0 52 % Corporate (64.9) (72.4) 10 % Consolidated Total Adjusted EBITDA $ 192.7 $ 115.1 67 % 45 Mexico Financial Overview Comparison of Mexico Results for the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020 (in millions) Revenues Direct Costs Adjusted EBITDA September 30, 2020 $ 115.9 $ 100.4 $ 15.5 Organic enrollment (1) 4.3 Product mix, pricing and timing (1) (0.8) Organic constant currency 3.5 (5.9) 9.4 Foreign exchange 11.9 9.9 2.0 Dispositions — — — Other (2) — (0.1) 0.1 September 30, 2021 $ 131.3 $ 104.3 $ 27.0 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues increased by $15.4 million, a 13% increase from the 2020 fiscal quarter. • Organic enrollment increased during the fiscal quarter by 4%, increasing revenues by $4.3 million. • Revenues represented 50% of our consolidated total revenues for the 2021 fiscal quarter compared to 48% for the 2020 fiscal quarter. Adjusted EBITDA increased by $11.5 million, a 74% increase from the 2020 fiscal quarter. 46 Comparison of Mexico Results for the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020 (in millions) Revenues Direct Costs Adjusted EBITDA September 30, 2020 $ 385.0 $ 326.5 $ 58.5 Organic enrollment (1) (5.6) Product mix, pricing and timing (1) (15.3) Organic constant currency (20.9) (25.6) 4.7 Foreign exchange 26.8 21.2 5.6 Dispositions — — — Other (2) — 7.3 (7.3) September 30, 2021 $ 390.9 $ 329.4 $ 61.5 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. (2) Other is composed of acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in recorded indemnification assets. Revenues increased by $5.9 million, a 2% increase from the 2020 fiscal period. • Organic enrollment decreased during the 2021 fiscal period by 1%, decreasing revenues by $5.6 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. • The Mexican peso strengthened against the USD during the 2021 fiscal period compared to the 2020 fiscal period, increasing revenue by $26.8 million . • Revenues represented 49% of our consolidated total revenues for the 2021 fiscal period, compared to 52% for the 2020 fiscal period. Adjusted EBITDA increased by $3.0 million, a 5% increase from the 2020 fiscal period. 47 Peru Financial Overview Comparison of Peru Results for the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020 (in millions) Revenues Direct Costs Adjusted EBITDA September 30, 2020 $ 127.3 $ 70.8 $ 56.5 Organic enrollment (1) 32.3 Product mix, pricing and timing (1) (7.2) Organic constant currency 25.1 (0.1) 25.2 Foreign exchange (19.3) (8.4) (10.9) Dispositions — — — Other — — — September 30, 2021 $ 133.1 $ 62.3 $ 70.8 (1) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA. Revenues increased by $5.8 million, a 5% increase from the 2020 fiscal quarter. • Organic enrollment increased during the 2021 fiscal quarter by 27%, increasing revenues by $32.3 million. • Revenue represented 50% of our consolidated total revenues for the 2021 fiscal quarter compared to 52% for the 2020 fiscal quarter. Adjusted EBITDA increased by $14.3 million, a 25% increase from the 2020 fiscal quarter. Comparison of Peru Results for the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020 (in millions) Revenues Direct Costs Adjusted EBITDA September 30, 2020 $ 351.4 $ 222.4 $ 129.0 Organic enrollment (1) 40.9 Product mix, pricing and timing (1) 44.7 Organic constant currency 85.6 (5.1) 90.7 Foreign exchange (44.7) (21.0) (23.7) Dispositions — — — Other — — — September 30, 2021 $ 392.3 $ 196.3 $ 196.0 (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. 48 Revenues increased by $40.9 million, a 12% increase from the 2020 fiscal period. • Organic enrollment increased during the 2021 fiscal period by 12%, increasing revenues by $40.9 million. • The increase in revenues from product mix, pricing and timing was driven by a combination of pricing increases and more weeks of revenue recognition during the 2021 fiscal period compared to the 2020 fiscal period due to the academic calendar timing. • Revenue represented 50% of our consolidated total revenues for the 2021 fiscal period compared to 48% for the 2020 fiscal period. Adjusted EBITDA increased by $67.0 million, a 52% increase from the 2020 fiscal period. 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 inter-segment revenues. Comparison of Corporate Results for the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020 % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Revenues $ 3.3 $ 0.3 nm Expenses 25.3 21.9 (16) % Adjusted EBITDA $ (22.0) $ (21.6) (2) % Adjusted EBITDA decreased by $0.4 million, a 2% decrease from the 2020 fiscal quarter. Comparison of Corporate Results for the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020 % Change Better/(Worse) (in millions) 2021 2020 2021 vs. 2020 Revenues $ 6.8 $ 3.3 106 % Expenses 71.7 75.7 5 % Adjusted EBITDA $ (64.9) $ (72.4) 10 % Adjusted EBITDA increased by $7.5 million, a 10% increase from the 2020 fiscal period. • Cost-reduction efforts led to reduced labor costs and other professional fees, decreasing expenses by $12.1 million compared to the 2020 fiscal period. • Other items accounted for a decrease in Adjusted EBITDA of $4.6 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 49 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 September 30, 2021, our secondary source of liquidity was cash and cash equivalents of $1,856.9 million. Our cash accounts are maintained with high-quality financial institutions with no significant concentration in any one institution. As discussed further below, on October 29, 2021, the Company paid a special cash distribution to shareholders of approximately $1,271.8 million. 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. Completed Sale Transactions On March 8, 2021, we completed the divestiture of our operations in Honduras and received proceeds of approximately $24.0 million, net of cash sold and closing costs. In 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, which was approximately $21.7 million at the date of receipt. On May 28, 2021, we completed the sale of our operations in Brazil and received proceeds of approximately $625.5 million, net of cash sold, transaction fees and settlement of foreign currency swaps. The Company used a portion of the proceeds to repay the remaining balance outstanding under its Senior Notes due 2025. On August 12, 2021, we completed the sale of Walden University and received proceeds of approximately $1,397.2 million, net of cash sold, transaction fees, and certain closing adjustments. At closing, the Company also recorded a receivable of $74.0 million, representing a portion of the transaction value that was paid into an escrow account, to be released to the Company one year following the closing of the transaction pursuant to the terms and conditions of the escrow agreement. In addition, approximately $83.6 million of restricted cash on the Company's balance sheet related to collateralized regulatory obligations is expected to be released within the next twelve months. As described in Note 12, Stockholders’ Equity, in our consolidated financial statements included elsewhere in this Form 10-Q, on October 29, 2021, the Company paid a special cash distribution to shareholders of approximately $1,271.8 million. In addition, the Company anticipates that it will pay approximately $170 million in estimated taxes and fees due on prior sales (including Walden University). We expect that the majority of the taxes and fees will be paid during the fourth quarter of 2021. On September 10, 2020, we completed the divestiture of our operations in Chile. Under the terms of the agreement, the purchase price included a note receivable of $21.5 million that was payable one year from the date of divestiture. We collected this receivable in September 2021. Liquidity Restrictions Our liquidity is affected by restricted cash balances, which totaled $105.0 million and $117.2 million as of September 30, 2021 and December 31, 2020, respectively. 50 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 September 30, 2021, $295.5 million of our total $1,856.9 million of cash and cash equivalents were 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 of income taxes; deferred compensation; working capital; operating expenses; capital expenditures; repurchase of the Company’s common stock; and business development activities. Long-term liquidity requirements include: payments on long-term debt (including finance leases); operating lease obligations; payments of deferred compensation; and payments of other third-party obligations. Debt As of September 30, 2021, our debt obligations included lines of credit and short-term borrowing arrangements of subsidiaries, mortgages payable and notes payable, which totaled $119.2 million. In addition, our finance lease obligations and sale-leaseback financings were $46.5 million. Senior Secured Credit Facility Our Senior Secured Credit Facility consists of the revolving credit facility, which provides for borrowings of $410.0 million. As of both September 30, 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 September 30, 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 September 30, 2021. Senior Notes During the second quarter of 2021, the Company fully repaid the remaining balance outstanding under our Senior Notes due 2025 using a portion of the proceeds received from the sales of its operations in Australia and New Zealand and Brazil. 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 September 30, 2021 and December 31, 2020, the present value of operating lease liabilities was $459.5 million and $519.1 million, respectively. These amounts exclude operating lease liabilities for our Discontinued Operations of $12.0 million and $151.4 million as of September 30, 2021 and December 31, 2020, respectively. 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 51 spending, which we can adjust in response to economic and other changes in our business environment, to grow our business 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 $32.9 million and $74.3 million during the nine months ended September 30, 2021 and 2020, respectively. The 56% decrease in capital expenditures was primarily due to the completed divestitures, as well as a targeted reduction and deferral across all business lines to preserve cash as a result of the COVID-19 pandemic. 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 September 30, 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 stock repurchase program to acquire up to $300 million of the Company’s Class A common stock. On April 30, 2021, the Laureate’s board of directors approved an increase of the above authorization by $200 million, for a total repurchase authorization (including the above authorized repurchases) of up to $500 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. As of September 30, 2021, the approximate dollar value of shares yet to be purchased under this stock repurchase program was $71.0 million. The Company expects to finance the remaining repurchases with free cash flow, from excess cash and liquidity 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. The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020: (in millions) 2021 2020 Cash provided by (used in): Operating activities $ 54.0 $ 221.8 Investing activities 2,054.4 (34.2) Financing activities (1,284.5) 257.4 Effects of exchange rates changes on cash (14.4) (13.4) Change in cash included in current assets held for sale 285.0 218.3 Net change in cash and cash equivalents and restricted cash $ 1,094.6 $ 649.8 52 Comparison of Cash Flows for the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020 Operating Activities Cash provided by operating activities decreased by $167.8 million to $54.0 million for the 2021 fiscal period, from $221.8 million for the 2020 fiscal period. This decrease in operating cash was primarily attributable to the net effect of changes in working capital and the divestiture of subsidiaries that contributed positive operating cash flows during the 2020 fiscal period, which accounted for $149.8 million of the decrease. Additionally, cash paid for taxes increased by $33.0 million, from $62.0 million for the 2020 fiscal period to $95.0 million for the 2021 fiscal period, primarily related to the payment of withholding taxes for intercompany loans that were capitalized during the 2021 fiscal period. These decreases in operating cash flow were partially offset by a decrease in cash paid for interest of $15.0 million, from $75.3 million for the 2020 fiscal period to $60.3 million for the 2021 fiscal period, attributable to lower average debt balances. Investing Activities Cash flows from investing activities increased by $2,088.6 million to investing cash inflow of $2,054.4 million for the 2021 fiscal period from investing cash outflow of $(34.2) million for the 2020 fiscal period. This increase in investing cash was attributable to higher cash receipts from the sales of Discontinued Operations of $2,097.6 million, from $40.1 million during the 2020 fiscal period (for the net effect of the sales of NSAD and our operations in Costa Rica, Chile and Malaysia, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations) to $2,137.7 million, net, during the 2021 fiscal period (primarily for the sale Walden University, our operations in Honduras and Brazil, the receipt of the note receivable related to the 2020 divestiture of our Chilean operations, and the receipt of portions of the purchase prices that were withheld in connection to the 2018 sale of our China operations and the 2020 sale of our Malaysia operations). In addition, cash used for capital expenditures decreased $41.4 million compared to the 2020 fiscal period. These increases in investing cash were partially offset by payments of $50.3 million for derivative instruments related to foreign exchange swap agreements associated with the sale of our Brazil operations. Other items accounted for the remaining difference of $0.1 million. Financing Activities Cash flows from financing activities decreased by $1,541.9 million to a financing cash outflow of $(1,284.5) million for the 2021 fiscal period from a financing cash inflow of $257.4 million for the 2020 fiscal period. This decrease in financing cash was attributable to: (1) net payments of long-term debt during the 2021 fiscal period, mainly the repayment in full of the balance outstanding under the Senior Notes due 2025, compared to net proceeds of long-term debt during the 2020 fiscal period, related to the full draw down on our $410.0 million revolving credit facility in the 2020 fiscal period in order to increase our cash position and preserve financial flexibility in response to the COVID-19 pandemic, for a change of $1,154.8 million; (2) higher payments during the 2021 fiscal period of $335.1 million to repurchase shares of our Class A common stock under our stock repurchase program; (3) payments of call premiums of $32.3 million associated with the redemption of the Senior Notes due 2025 during the 2021 fiscal period; and (4) the year-over-year effect of proceeds from the exercise of common stock options of $25.5 million during the 2020 fiscal period. These decreases in financing cash were partially offset by payments of deferred purchase price for acquisitions during the 2020 fiscal period of $5.7 million. Other items accounted for the remaining difference of $0.1 million. 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 nine months ended September 30, 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. 53 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.