What changed in this filing

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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-24 · 40 added, 52 removed, 308 unchanged (23% of the section changed)

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The risks identified below are not all encompassing but should be considered in establishing an opinion of our future operations.

Furthermore, the impact of COVID-19 also may exacerbate the risks identified below, any one of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The situation continues to evolve, and additional impacts may arise of which we are not currently aware.

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In addition, student enrollment may be negatively affected by our reputation and any negative publicity related to us.

An epidemic, pandemic or other public health emergency, such as the current global coronavirus (COVID-19) outbreak and the efficacy and distribution of COVID-19 vaccines in the locations in which we operate could have a material adverse effect on our business, financial condition, cash flows and results of operations.

The Company cannot predict the duration of the COVID-19 pandemic, the efficacy and distribution of COVID-19 vaccines, the severity of the illness or the scope, breadth or depth of the actions that may be taken by governmental authorities and/or other third parties in response to the outbreak.

We believe that the continued spread of COVID-19 and any resulting preventative or protective actions has adversely affected, and could continue to adversely affect, our operations.

Our ability to retain students, enroll new students and maintain tuition levels, as well as the ability of our students to pay tuition and other fees, may be materially adversely affected by, among other things, (i) the health of our students, our faculty and their families;

(ii) decreases in our students’ and/or their families’ level of disposable income;

(iii) the performance and reliability of our online program infrastructure;

(iv) our ability to safely return to campus, when appropriate to do so, (v) the efficacy and distribution of COVID-19 vaccines;

(vi) the ability of our recruiters to conduct outreach with prospective students during the student recruitment season;

and (vii) adverse legislative and regulatory actions.

If we are unable to retain students, enroll new students, maintain tuition levels and collect student accounts receivables, we may be required to record impairments and our business, financial condition, cash flows and results of operations may be materially adversely affected.

In addition, an epidemic, pandemic or other public health emergency could adversely affect, and, in the case of COVID-19, has adversely affected, global economies and financial markets.

The depth and duration of the global economic and market turmoil resulting from COVID-19 remain highly uncertain, particularly given the lack of appropriate historical benchmarks.

Reduced economic activity, increased unemployment and, in some countries, economic recession, may reduce the demand for our programs among students, which could materially adversely affect our business, financial condition, cash flows and results of operations.

These adverse economic developments also may result in a reduction in the number of jobs available to our graduates and lower salaries being offered in connection with available employment, which, in turn, may result in declines in our placement and retention rates.

As a result, any general economic slowdown or recession that disproportionately impacts the countries in which our institutions operate could have a material adverse effect on our business, financial condition, cash flows and results of operations.

In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

Additionally, the COVID-19 pandemic has resulted in severe disruption and volatility in the U.S.

financial markets.

The trading price of our stock declined dramatically at the start of the pandemic in 2020 and may continue to experience volatility and declines.

Our success depends substantially on the value of the local brands of each of our institutions, each of which may be materially adversely affected by changes in current and prospective students’ perception of our reputation and the use of social media.

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

There has been a marked increase in use of social media platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications that allow individuals access to a broad audience of interested persons.

There has been a marked increase in use of social media platforms and other forms of Internet-based communications that allow individuals access to a broad audience of interested persons.

We believe that students and prospective employers value readily available information about our institutions and often act on such information without further investigation or authentication, and without regard to its accuracy.

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Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on the accuracy of the content posted.

Information concerning our company

and our institutions may be posted on such platforms and devices at any time.

Information concerning our company and our institutions may be posted on such platforms and devices at any time.

Information posted may be materially adverse to our interests, it may be inaccurate, and it may harm our performance, prospects and business.

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Growing our online academic programs could be difficult for us.

Despite our success in effectively transitioning all of our students to an online learning environment shortly after COVID-19 was declared a global pandemic by the World Health Organization in March 2020, the expansion of our existing online programs and the creation of new online academic programs may not be accepted by students or employers, or by government regulators or accreditation agencies, once we reach an epidemiological end to the pandemic.

Despite our success in effectively transitioning all of our students to an online learning environment shortly after COVID-19 was declared a global pandemic in March 2020, the expansion of our existing online programs and the creation of new online academic programs may not be accepted by students or employers, or by government regulators or accreditation agencies.

In addition, our efforts may be materially adversely affected by increased competition in the online education market or because of problems with the performance or reliability of our online program infrastructure.

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If we cannot respond effectively to market changes, our business may be materially adversely affected.

Even if we are able to develop acceptable new programs, we may not be able to introduce these new programs as quickly as students or employers require or as quickly as our competitors are able to introduce competing programs.

Even if we are able to develop acceptable new programs, we may not be able to introduce these new programs as quickly as students or employers require or as quickly as our competitors are

able to introduce competing programs.

Our efforts to introduce a new academic program may be conditioned or delayed by requirements to obtain foreign, federal, state and accrediting agency approvals.

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The expansion of existing academic programs and the development of new programs may not be accepted by current or prospective students or by the employers of our graduates.

Students and faculty increasingly rely on personal communication devices and expect that we will be able to adapt our information technology

platforms and our educational delivery methods to support these devices and any new technologies that may develop.

Students and faculty increasingly rely on personal communication devices and expect that we will be able to adapt our information technology platforms and our educational delivery methods to support these devices and any new technologies that may develop.

Even if our institutions are able to develop acceptable new programs and adapt to new technologies, our institutions may not be able to begin offering those new programs and technologies as quickly as required by prospective students and employers or as quickly as our competitors begin offering similar programs.

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As a multinational corporation, we are subject to income taxes as well as non-income based taxes in the United States and various foreign jurisdictions.

Our future income taxes could be materially adversely affected by earnings being lower than anticipated in jurisdictions in which we have lower statutory tax rates and higher than anticipated in jurisdictions in which we have higher statutory tax rates.

The determination of our provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain.

In addition, changes in the valuation of our deferred tax assets and liabilities, or changes in tax laws, regulations and accounting principles, could have a material adverse effect on our future income taxes.

The determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain.

We have not recorded deferred tax liabilities for undistributed foreign earnings because our strategy is to reinvest these earnings outside the United States.

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Any adverse outcome of such a review or audit could have a negative effect on our operating results and financial condition.

We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions.

We are also subject to non-income based taxes, such as payroll, sales, use, value-a dded, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions.

We are under regular audit by tax authorities with respect to these non-income based taxes and may have exposure to additional non-income based tax liabilities.

We have identified certain tax-related contingencies that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on our results of operations if the outcomes are unfavorable.

In most cases, we have received indemnifications from the former owners of the acquired businesses for contingencies.

In cases where we are not indemnified, the unrecorded contingencies are not material.

For information related to outstanding tax audits initiated by the Spanish Taxing Authorities, see “Item 3—Legal Proceedings.”

We have also identified certain tax-related contingencies that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on our results of operations if the outcomes are unfavorable.

Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially adversely affect our financial results in the period or periods for which such determination is made.

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This translation is based on average exchange rates during a reporting period.

In recent years, the U.S.

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

While the Mexican peso and the Peruvian nuevo sol strengthened against the U.S.

dollar in 2022, in recent years, the U.S.

dollar has strengthened against many international currencies, including the Mexican peso and Peruvian nuevo sol.

As the exchange rate of the U.S.

dollar strengthens, our reported international revenues and earnings are reduced because foreign currencies translate into fewer U.S.

For the year ended December 31, 2021, a hypothetical 10% adverse change in average annual foreign currency exchange rates would have increased our operating loss and decreased our Adjusted EBITDA by approximately $21.9 million and $36.6 million, respectively.

For the year ended December 31, 2022, a hypothetical 10% adverse change in average annual foreign currency exchange rates would have decreased our operating income and our Adjusted EBITDA by approximately $35.6 million and $41.3 million, respectively.

For more information, see “Item 7A—Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Exchange Risk.”

To the extent that foreign revenues and expense transactions are not denominated in the local currency and/or to the extent foreign earnings are reinvested in a currency other than their functional currency, we are also subject to the risk of transaction losses.

We occasionally enter into foreign exchange forward contracts or other hedging arrangements to reduce the earnings

impact of non-functional currency denominated non-trade receivables and debt and to protect the U.S.

We occasionally enter into foreign exchange forward contracts or other hedging arrangements to reduce the earnings impact of non-functional currency denominated non-trade receivables and debt and to protect the U.S.

dollar value of our assets and future cash flows with respect to exchange rate fluctuations.

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As a result, we may be required to expend significant resources to protect against the threat of these security breaches or to alleviate problems caused by these incidents.

Further, the disaster recovery plans and backup systems that we have in place may not be effective in addressing a natural disaster or catastrophic event that results in the destruction or disruption of any of our critical business or

information technology and infrastructure systems.

As a result of any of these events, we may not be able to conduct normal business operations and may be required to incur significant expenses in order to resume normal business operations.

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A breach, theft or loss of personal information regarding our students and their families, our employees, or other persons that is held by us or our vendors, or a violation of the laws and regulations governing privacy in one or more of the countries in which we operate, could result in significant penalties or legal liability, reputational damage, and/or remediation and compliance costs, which could be substantial and materially adversely affect our business, financial condition and results of operations.

Student protests and strikes may disrupt our ability to hold classes as well as our ability to attract and retain students, which could materially adversely affect our operations.

An epidemic, pandemic or other public health emergency, such as the global coronavirus (COVID-19) pandemic and the efficacy and distribution of COVID-19 vaccines, could have a material adverse effect on our business, financial condition, cash flows and results of operations.

An epidemic, pandemic or other public health emergency, such as the current COVID-19 pandemic and the efficacy and distribution of COVID-19 vaccines, in the locations in which our students, faculty, and staff live, work and attend classes could have an adverse effect on our business, financial condition, cash flows and results of operations.

An epidemic, pandemic or other public health emergency could adversely affect, and, in the case of the COVID-19 pandemic, has adversely affected, global economies, market conditions and business operations across industries worldwide, including our industry.

Therefore, we remain cautious about how the economy might behave for the next few years and continue to monitor the potential impact of COVID-19 on our operations.

Any general economic slowdown or recession that disproportionately impacts the countries in which our institutions operate could have a material adverse effect on our business, financial condition, cash flows and results of operations.

In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

Protests and strikes may disrupt our ability to hold classes as well as our ability to attract and retain students, which could materially adversely affect our operations.

Political, social and economic developments in the countries in which we operate may cause protests and disturbances against conditions in those countries, including policies relating to the operation and funding of higher education institutions.

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

These disturbances may involve protests in areas where our campuses are located or on our university campuses, including the occupation of university buildings and the disruption of classes.

We are unable to predict whether students at our institutions will engage in various forms of protest in the future.

Should we sustain student strikes, protests or occupations in the future, it could have a material adverse effect on our results of operations and on our overall financial condition.

Further, we may need to make additional investments in security infrastructure and personnel on our campuses in order to prevent future student protests from disrupting the ability of our institutions to hold classes.

Further, we may need to make additional investments in security infrastructure and personnel on our campuses in order to prevent future protests from disrupting the ability of our institutions to hold classes.

If we are required to make substantial additional investments in security, or if we are unable to identify security enhancements that would prevent future disruptions of classes, that could cause an adverse effect on our results of operations and financial condition.

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

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

We face competition in attracting and

retaining faculty members who possess the necessary experience and accreditation to teach at our institutions.

It may be difficult to maintain consistency in the quality of our faculty and administrative staff.

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Unplanned or repeated turnover within the senior management ranks in the corporate team or in the regions in which we operate can lead to instability or weakness in oversight that creates the conditions for gaps in performance and non-compliance with our control environment or public company reporting requirements.

Any one of these occurrences could adversely affect our stock price, results of operations, ability to timely report financial results, or business relationships and can make recruiting for future management positions

more difficult.

Competition for senior leadership may increase our overall compensation expenses, whether resulting from new hires or retention, which may negatively affect our profitability.

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• designate our subsidiaries as unrestricted subsidiaries.

While the Credit Agreement provides for quarterly compliance with the Consolidated Senior Secured Debt to Consolidated EBITDA Ratio, as defined in the Credit Agreement, as of December 31, 2021, we were not required to comply with this covenant.

While the Credit Agreement provide s for quarterly compliance with the Consolidated Senior Secured Debt to Consolidated EBITDA Ratio, as defined in the Credit Agreement, as of December 31, 2022, we were not required to comply with this covenant.

We rely on funds from our operating subsidiaries to meet our debt service and other obligations.

We conduct all of our operations through certain of our subsidiaries, and we have no significant assets other than cash of approximately $10 million as of December 31, 2022 held at corporate entities and the capital stock or other control rights of our subsidiaries.

As a result, we rely on our operating subsidiaries to pay dividends or to make distributions or other payments to their parent companies.

Also as of December 31, 2022, we had $100 million of U.S.

dollar denominated debt obligations outstanding under our Senior Secured Credit Facility, As a result, we rely on our operating subsidiaries to pay dividends or to make distributions or other payments to their parent companies.

In addition, we rely on intercompany loan repayments and other payments from our operating subsidiaries to meet any existing or future debt service and other obligations, a substantial portion of which are denominated in U.S.

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

dollar denominated currencies, our ability to

service our U.S.

dollar denominated currencies, our ability to service our U.S.

dollar denominated debt obligations may be affected by any strengthening of the U.S.

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If these market disruptions occur in the future, we may not be able to access the capital markets to obtain funding needed to refinance our existing indebtedness or conduct our business.

In addition, changes in the capital or other legal requirements applicable to commercial lenders may affect the availability or increase the cost of borrowing under our Revolving Credit Facility.

In addition, changes in the capital or other legal requirements applicable to commercial lenders may affect the availability or increase the cost of borrowing under our Senior Secured Credit Facility.

If we are unable to obtain needed capital on terms acceptable to us, we may need to limit our growth initiatives or take other actions that materially adversely affect our business, financial condition, results of operations and cash flows.

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We may be unable to maintain adequate research coverage, and if one or more analysts cease coverage of us, we could lose visibility in the market for our common stock, which in turn could cause our stock price to decline.

The provision of our amended and restated certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

Our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended

and restated bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware unless we otherwise consent in writing to an alternative form.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above.

We believe that this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies.

This choice of forum provision, however, may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims.

Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, results of operations and cash flows.

The choice of forum provision in the Company’s amended and restated certificate of incorporation will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws, including the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or the respective rules and regulations promulgated thereunder.

Risks Relating to Peruvian Nonresident Capital Gains Tax

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

What changed 10-K

Item 1A. Risk Factors