What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 208 added, 77 removed, 318 unchanged (47% of the section changed)

52 unchanged sentences

We group our institutions by geography in Mexico and Peru for reporting purposes.

Assets Held for Sale

As discussed in Note 3, Assets Held for Sale, of our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, the Company has undertaken a process to sell two of our subsidiaries in Mexico that operate K-12 educational programs.

As such, these subsidiaries are classified as assets held for sale as of June 30, 2023.

The planned sale does not represent a strategic shift and therefore does not qualify for presentation as a discontinued operation in the consolidated financial statements.

The completion of the sale is not expected to have a material effect on our financial results.

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.

5 unchanged sentences

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

There are a number of private and public institutions in both 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.

There are a number of private and

public institutions in both 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.

6 unchanged sentences

• In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute approximately 73% of the total higher-education market.

Laureate owns three institutions in Peru.

Laureate owns three institutions in Peru, with a footprint of 19 campuses.

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

2 unchanged sentences

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

The following information for our reportable segments is presented as of March 31, 2023:

The following information for our reportable segments is presented as of June 30, 2023:

Institutions Enrollment 2023 YTD Revenues

($ in millions) (1)

% Contribution to 2023 YTD Revenues

($ in millions) % Contribution to 2023 YTD Revenues

Mexico 2 205,100 $ 374.1 52 %

Peru 3 219,300 339.2 48 %

5 437,900 $ 251.3 100 %

(1) Amounts related to Corporate totaled $0.1 million and are not separately presented.

Total 5 424,400 $ 713.3 100 %

Our operations are outside of the United States and are subject to complex business, economic, legal, regulatory, political, tax and foreign currency risks, which may be difficult to adequately address.

24 unchanged sentences

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.

defined as a student leaving the institution before completion of the program.

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.

29 unchanged sentences

dollar and currency exchange rates” in our 2022 Form 10-K.

In order to provide a framework for assessing how our business performed excluding the effects of foreign currency fluctuations, we present organic constant currency in our segment results, which is calculated using the change from prior-year average foreign exchange rates to current-year average foreign exchange rates, as applied to local-currency operating results for the current year, and then excludes the impact of other items, as described in the segments results.

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 other items, as described in the segments’ results.

Our institutions have a summer break during which classes are generally not in session and minimal revenues are recognized.

20 unchanged sentences

• Segment Results.

Summary Comparison of Consolidated Results

Comparison of Consolidated Results for the Three Months Ended March 31, 2023 and 2022

Comparison of Consolidated Results for the Three Months Ended June 30, 2023 and 2022

Better/(Worse)

3 unchanged sentences

General and administrative expenses 12.0 15.9 25 %

Loss on impairment of assets — 0.1 100 %

Loss on impairment of assets 1.6 — nm

Operating income 154.5 126.6 22 %

Interest expense, net of interest income (4.1) (2.5) (64) %

Other non-operating expense (28.4) (4.8) nm

(Loss) income from continuing operations before income taxes and equity in net income of affiliates (16.6) 2.4 nm

Other non-operating expense (32.5) (12.8) (154) %

Income from continuing operations before income taxes 117.8 111.4 6 %

Income tax expense (57.5) (72.0) 20 %

Equity in net income of affiliates, net of tax — 0.1 (100) %

Loss from continuing operations (26.7) (45.4) 41 %

Income from discontinued operations, net of tax — 0.7 (100) %

Net loss (26.8) (44.7) 40 %

Net loss attributable to noncontrolling interests 0.2 0.5 60 %

Net loss attributable to Laureate Education, Inc.

Income from continuing operations 60.4 39.4 53 %

(Loss) income from discontinued operations, net of tax (4.0) 4.1 (198) %

Net income 56.3 43.6 29 %

Net income attributable to noncontrolling interests (0.1) (0.1) — %

Net income attributable to Laureate Education, Inc.

$ 56.2 $ 43.4 29 %

nm - percentage changes not meaningful

Comparison of Consolidated Results for the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Revenues increased by $41.7 million to $251.3 million for the three months ended March 31, 2023 (the 2023 fiscal quarter) from $209.6 million for the three months ended March 31, 2022 (the 2022 fiscal quarter).

Average total organic enrollment was higher at our institutions, increasing revenues by $18.1 million compared to the 2022 fiscal quarter.

The effect of a net change in foreign currency exchange rates increased revenues by $16.9 million, mostly driven by the strengthening of the Mexican peso against the USD compared to the 2022 fiscal quarter.

In addition, the effect of product mix, pricing and timing increased revenues by $8.2 million for the 2023 fiscal quarter.

Comparison of Consolidated Results for the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022

Revenues increased by $76.7 million to $462.1 million for the three months ended June 30, 2023 (the 2023 fiscal quarter) from $385.4 million for the three months ended June 30, 2022 (the 2022 fiscal quarter).

This increase in revenues was attributable to:

(1) higher average total organic enrollment at our institutions during the 2023 fiscal quarter, which increased revenues by $28.2 million compared to the 2022 fiscal quarter;

(2) the effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing, which increased revenues by $25.7 million compared to the 2022 fiscal quarter;

and (3) the effect of a net change in foreign currency exchange rates, which increased revenues by $24.5 million, mainly due to the strengthening of the Mexican peso against the USD compared to the 2022 fiscal quarter.

These increases in revenues were partially offset by other Corporate and Eliminations changes, which accounted for a decrease in revenues of $1.7 million.

Direct costs and general and administrative expenses combined increased by $47.3 million to $306.0 million for the 2023 fiscal quarter from $258.7 million for the 2022 fiscal quarter.

The effect of operational changes increased direct costs by $29.1 million, mostly attributable to the effect of higher enrollments at our institutions as well as return-to-campus expenses, compared to the 2022 fiscal quarter.

Additionally, the effect of a net change in foreign currency exchange rates increased costs by $12.3 million compared to the 2022 fiscal quarter.

These increases in direct costs were partially offset by other Corporate and Eliminations expenses, which accounted for a decrease in costs of $6.1 million in the 2023 fiscal quarter, as well as a period-over-period decrease in direct costs of $0.1 million from changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in indemnification assets.

The increase in direct costs was primarily driven by the effect of operational changes, which increased costs by $31.0 million, primarily due to the result of higher enrollment at our institutions, as well as return-to-campus expenses.

In addition, the effect of a net change in foreign currency exchange rates increased costs by $19.7 million, mainly due to the strengthening of the Mexican peso against the USD compared to the 2022 fiscal quarter.

These increases in direct costs were partially offset by a decrease of $3.4 million in Corporate and Eliminations expenses.

Operating income increased by $27.9 million to $154.5 million for the 2023 fiscal quarter from $126.6 million for the 2022 fiscal quarter.

This increase was primarily a result of higher operating income at our Mexico segment, combined with lower operating costs at Corporate, as compared to the 2022 fiscal quarter.

These increases in operating income were partially offset by a higher operating loss at our Peru segment compared to the 2022 fiscal quarter, primarily due to return-to-campus expenses.

The increase in operating income was mainly driven by higher operating income at both our Peru and Mexico segments, which was primarily attributable to higher revenues compared to the 2022 fiscal quarter.

Interest expense, net of interest income increased by $1.6 million to $4.1 million for the 2023 fiscal quarter from $2.5 million for the 2022 fiscal quarter.

1 unchanged sentence

Other non-operating expense increased by $19.7 million to $32.5 million for the 2023 fiscal quarter from $12.8 million for the 2022 fiscal quarter.

This increase was attributable to a higher loss on foreign currency exchange of $25.4 million compared to the 2022 fiscal quarter, mainly related to intercompany loan obligations.

This loss was partially offset by the period-over-period change in other non-operating income of $1.5 million during the 2023 fiscal quarter, combined with a gain on disposal of subsidiaries of $0.3 million during the 2023 fiscal quarter from the release of accumulated foreign currency translation gains upon liquidation of two subsidiaries.

This increase was attributable to:

(1) a higher loss on foreign currency exchange of $17.9 million during the 2022 fiscal quarter, mainly related to intercompany loan arrangements;

(2) the year-over-year effect of a gain on disposal of subsidiaries of $1.5 million during the 2022 fiscal quarter, which was primarily attributable to the release of accumulated foreign currency translation gains upon liquidation of certain subsidiaries;

and (3) the year-over-year change in other non-operating expense of $0.3 million.

Income tax expense decreased by $14.5 million to $57.5 million for the 2023 fiscal quarter from $72.0 million for the 2022 fiscal quarter.

This decrease was primarily attributable to a discrete tax expense recorded during the 2022 fiscal quarter of approximately $32.5 million for additions to income tax reserves related to the application of the high-tax exception to global intangible low-taxed income.

This decrease was primarily attributable to a change in the mix of pre-tax earnings among jurisdictions.

(Loss) income from discontinued operations, net of tax changed by $8.1 million to a loss of $(4.0) million for the 2023 fiscal quarter from income of $4.1 million for the 2022 fiscal quarter.

This change was primarily attributable to changes in estimates during the 2023 fiscal quarter regarding the realizability of certain receivables from previous divestitures, combined with the year-over-year impact of a gain recognized during the 2022 fiscal quarter upon completion of the transfer of certain leases related to our former operations in Chile.

Summary Comparison of Consolidated Results

Comparison of Consolidated Results for the Six Months Ended June 30, 2023 and 2022

Better/(Worse)

(in millions) 2023 2022 2023 vs.

Revenues $ 713.3 $ 594.9 20 %

Direct costs 519.3 425.7 (22) %

General and administrative expenses 22.3 33.4 33 %

Loss on impairment of assets 1.6 0.1 nm

Operating income 170.1 135.7 25 %

Interest expense, net of interest income (8.0) (4.2) (90) %

Other non-operating expense (60.9) (17.6) nm

Income from continuing operations before income taxes and equity in net income of affiliates 101.3 113.9 (11) %

Income tax expense (67.7) (119.9) 44 %

Equity in net income of affiliates, net of tax — 0.1 (100) %

Income (loss) from continuing operations 33.6 (6.0) nm

(Loss) income from discontinued operations, net of tax (4.1) 4.9 (184) %

Net income (loss) 29.6 (1.1) nm

Net loss attributable to noncontrolling interests — 0.3 100 %

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

$ 29.6 $ (0.8) nm

nm - percentage changes not meaningful

Comparison of Consolidated Results for the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

Revenues increased by $118.4 million to $713.3 million for the six months ended June 30, 2023 (the 2023 fiscal period) from $594.9 million for the six months ended June 30, 2022 (the 2022 fiscal period).

This increase was attributable to:

(1) higher average total organic enrollment at our institutions, which increased revenues by $47.3 million compared to the 2022 fiscal period;

(2) the effect of a net change in foreign currency exchange rates, which increased revenues by $41.4 million, mostly driven by the strengthening of the Mexican peso against the USD compared to the 2022 fiscal period;

and (3) the effect of product mix, pricing and timing, which increased revenues by $32.9 million for the 2023 fiscal period.

These increases in revenues were partially offset by other Corporate and Eliminations changes, which accounted for a decrease in revenues of $3.2 million.

Direct costs and general and administrative expenses combined increased by $82.5 million to $541.6 million for the 2023 fiscal period from $459.1 million for the 2022 fiscal period.

The effect of operational changes mostly attributable to the effect of higher enrollments at our institutions as well as return-to-campus expenses, increased direct costs by $60.0 million compared to the 2022 fiscal period.

Additionally, the effect of a net change in foreign currency exchange rates increased costs by $32.0 million compared to the 2022 fiscal period.

These increases in direct costs were partially offset by other Corporate and Eliminations expenses, which accounted for a decrease in costs of $9.5 million in the 2023 fiscal period.

Operating income increased by $34.4 million to $170.1 million for the 2023 fiscal period from $135.7 million for the 2022 fiscal period.

This increase was primarily a result of higher operating income at our Mexico segment, combined with lower operating costs at Corporate, as compared to the 2022 fiscal period.

Interest expense, net of interest income increased by $3.8 million to $8.0 million for the 2023 fiscal period from $4.2 million for the 2022 fiscal period.

The increase in interest expense was primarily attributable to higher average debt balances compared to the 2022 fiscal period.

Other non-operating expense increased by $43.3 million to $60.9 million for the 2023 fiscal period from $17.6 million for the 2022 fiscal period.

This increase was attributable to a higher loss on foreign currency exchange of $43.2 million compared to the 2022 fiscal period, mainly related to intercompany loan arrangements.

Additionally, gain on disposal of subsidiaries, which was primarily attributable to the release of accumulated foreign currency translation gains upon liquidation of certain subsidiaries, was lower by $1.2 million during the 2023 fiscal period.

These increases in expense were partially offset by the period-over-period change in other non-operating income of $1.1 million during the 2023 fiscal period.

Income tax expense decreased by $52.2 million to $67.7 million for the 2023 fiscal period from $119.9 million for the 2022 fiscal period.

This decrease was primarily attributable to a discrete tax expense recorded during the 2022 fiscal period of approximately $32.5 million for additions to income tax reserves related to the application of the high-tax exception to global intangible low-taxed income.

The remaining difference was primarily attributable to the change in pretax earnings.

(Loss) income from discontinued operations, net of tax changed by $9.0 million to a loss of $(4.1) million for the 2023 fiscal period from income of $4.9 million for the 2022 fiscal period.

This change was attributable to changes in estimates during the 2023 fiscal quarter regarding the realizability of certain receivables from previous divestitures, combined with the year-over-year impact of a gain recognized during the 2022 fiscal quarter upon completion of the transfer of certain leases related to our former operations in Chile.

Non-GAAP Financial Measure

5 unchanged sentences

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

The following table presents Adjusted EBITDA and reconciles loss from continuing operations to Adjusted EBITDA for the three months ended March 31, 2023 and 2022:

The following table presents Adjusted EBITDA and reconciles income from continuing operations to Adjusted EBITDA for the three months ended June 30, 2023 and 2022:

Better/(Worse)

(in millions) 2023 2022 2023 vs.

Loss from continuing operations $ (26.7) $ (45.4) 41 %

Income from continuing operations $ 60.4 $ 39.4 53 %

Income tax expense 57.5 72.0 20 %

Income from continuing operations before income taxes 117.8 111.4 6 %

Income on disposal of subsidiaries, net — (1.5) (100) %

Foreign currency exchange loss, net 32.4 14.5 (123) %

Other loss (income), net 0.1 (0.2) (150) %

Interest expense 6.1 4.2 (45) %

Interest income (2.0) (1.7) 18 %

Operating income 154.5 126.6 22 %

Depreciation and amortization 17.3 14.8 (17) %

EBITDA 171.8 141.4 21 %

Share-based compensation expense (a)

Loss on impairment of assets (b)

EiP implementation expenses (c)

Adjusted EBITDA $ 175.4 $ 144.1 22 %

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.

(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 included 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 that were incurred in connection with previous dispositions.

The EiP initiative was completed as of December 31, 2021, except for certain EiP expenses related to the run out of programs that began in prior periods.

Comparison of Depreciation and Amortization for the Three Months Ended June 30, 2023 and 2022

Depreciation and amortization increased by $2.5 million to $17.3 million for the 2023 fiscal quarter from $14.8 million for the 2022 fiscal quarter.

The effects of foreign currency exchange increased depreciation and amortization expense by $1.2 million for the 2023 fiscal quarter.

Other items increased depreciation and amortization by $1.3 million.

The following table presents Adjusted EBITDA and reconciles income (loss) from continuing operations to Adjusted EBITDA for the six months ended June 30, 2023 and 2022:

Better/(Worse)

(in millions) 2023 2022 2023 vs.

Income (loss) from continuing operations $ 33.6 $ (6.0) nm

Equity in net income of affiliates, net of tax — (0.1) (100) %

Income tax expense 67.7 119.9 44 %

(Loss) income from continuing operations before income taxes and equity in net income of affiliates (16.6) 2.4 nm

Gain on disposal of subsidiaries, net (0.3) — nm

Income from continuing operations before income taxes and equity in net income of affiliates 101.3 113.9 (11) %

Gain on disposal of subsidiaries, net (0.3) (1.5) (80) %

Foreign currency exchange loss, net 61.3 18.1 nm

16 unchanged sentences

The EiP initiative was completed as of December 31, 2021, except for certain EiP expenses related to the run out of programs that began in prior periods.

Comparison of Depreciation and Amortization, and Share-based Compensation Expense for the Six Months Ended June 30, 2023 and 2022

Depreciation and amortization increased by $4.8 million to $34.0 million for the 2023 fiscal period from $29.2 million for the 2022 fiscal period.

The effects of foreign currency exchange increased depreciation and amortization expense by $2.0 million for the 2023 fiscal period.

Other items increased depreciation and amortization by $2.8 million.

Share-based compensation expense decreased by $2.0 million to $3.1 million for the 2023 fiscal period from $5.1 million for the 2022 fiscal period.

The decrease is primarily related to accelerated vesting of unvested equity awards that occurred during the 2022 fiscal period for employees terminated in connection with the now-completed strategic review process.

Segment Results

4 unchanged sentences

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:

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

(in millions) % Change

Better/(Worse)

For the three months ended March 31, 2023 2022 2023 vs.

For the three months ended June 30, 2023 2022 2023 vs.

Mexico $ 192.1 $ 144.7 33 %

4 unchanged sentences

Mexico $ 38.2 $ 19.5 96 %

Peru (6.5) 3.8 nm

Peru 147.2 136.3 8 %

Corporate (10.0) (11.7) 15 %

Consolidated Total Adjusted EBITDA $ 175.4 $ 144.1 22 %

nm - percentage changes not meaningful

(in millions) % Change

Better/(Worse)

For the six months ended June 30, 2023 2022 2023 vs.

Mexico $ 374.1 $ 287.2 30 %

Peru 339.2 304.6 11 %

Corporate — 3.2 (100) %

Consolidated Total Revenues $ 713.3 $ 594.9 20 %

Adjusted EBITDA:

Mexico $ 87.1 $ 56.4 54 %

Peru 140.7 140.1 — %

Corporate (19.0) (25.3) 25 %

Consolidated Total Adjusted EBITDA $ 208.9 $ 171.3 22 %

Financial Overview

Comparison of Mexico Results for the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Comparison of Mexico Results for the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022

(in millions) Revenues Direct Costs Adjusted EBITDA

March 31, 2022 $ 142.5 $ 105.5 $ 37.0

June 30, 2022 $ 144.7 $ 125.2 $ 19.5

Organic enrollment (1)

2 unchanged sentences

Foreign exchange 21.8 17.3 4.5

March 31, 2023 $ 182.0 $ 133.1 $ 48.9

June 30, 2023 $ 192.1 $ 153.9 $ 38.2

(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 $47.4 million, a 33% increase from the 2022 fiscal quarter.

1 unchanged sentence

• Revenues from our Mexico segment represented 42% of our consolidated total revenues for the 2023 fiscal quarter, compared to 38% for the 2022 fiscal quarter.

Adjusted EBITDA increased by $11.9 million, a 32% increase from the 2022 fiscal quarter.

Adjusted EBITDA increased by $18.7 million, a 96% increase from the 2022 fiscal quarter, mainly attributable to higher revenues and favorable timing impacts, partially offset by higher costs associated with return-to-campus expenses.

Comparison of Mexico Results for the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2022 $ 287.2 $ 230.8 $ 56.4

Organic enrollment (1)

Product mix, pricing and timing (1)

Organic constant currency 47.8 27.3 20.5

Foreign exchange 39.1 29.0 10.1

June 30, 2023 $ 374.1 $ 287.0 $ 87.1

(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 $86.9 million, a 30% increase from the 2022 fiscal period.

• Organic enrollment increased during the 2023 fiscal period by 11%, increasing revenues by $29.4 million.

• Revenues from our Mexico segment represented 52% of our consolidated total revenues for the 2023 fiscal period, compared to 49% for the 2022 fiscal period.

Adjusted EBITDA increased by $30.7 million, a 54% increase from the 2022 fiscal period, mainly driven by higher revenues and favorable timing impacts, partially offset by higher costs associated with return-to-campus expenses.

Financial Overview

Comparison of Peru Results for the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Comparison of Peru Results for the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022

(in millions) Revenues Direct Costs Adjusted EBITDA

March 31, 2022 $ 65.4 $ 61.6 $ 3.8

June 30, 2022 $ 239.2 $ 102.9 $ 136.3

Organic enrollment (1)

2 unchanged sentences

Foreign exchange 2.7 1.2 1.5

March 31, 2023 $ 69.2 $ 75.7 $ (6.5)

June 30, 2023 $ 270.0 $ 122.8 $ 147.2

2 unchanged sentences

• Revenues from our Peru segment represented 58% of our consolidated total revenues for the 2023 fiscal quarter, compared to 62% for the 2022 fiscal quarter.

Adjusted EBITDA decreased by $10.3 million from the 2022 fiscal quarter due primarily to return-to-campus expenses and higher fixed costs during a largely out-of-session quarter.

Corporate revenues primarily represent services revenues.

Adjusted EBITDA increased by $10.9 million, an 8% increase from the 2022 fiscal quarter, which was net of higher costs associated with return-to-campus expenses.

Comparison of Peru Results for the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2022 $ 304.6 $ 164.5 $ 140.1

Organic enrollment (1)

Product mix, pricing and timing (1)

Organic constant currency 32.3 33.0 (0.7)

Foreign exchange 2.3 1.0 1.3

June 30, 2023 $ 339.2 $ 198.5 $ 140.7

Revenues increased by $34.6 million, an 11% increase from the 2022 fiscal period.

• Organic enrollment increased during the 2023 fiscal period by 7%, increasing revenues by $17.9 million.

• Revenues from our Peru segment represented 48% of our consolidated total revenues for the 2023 fiscal period compared to 51% for the 2022 fiscal period.

Adjusted EBITDA increased by $0.6 million from the 2022 fiscal period, which was net of higher costs associated with return-to-campus expenses.

Corporate revenues primarily represent miscellaneous other revenues, net of the elimination of intersegment revenues.

In 2022, corporate revenues also included transition services agreements related to previous divestitures.

Comparison of Corporate Results for the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Comparison of Corporate Results for the Three Months Ended June 30, 2023 to the Three Months Ended June 30, 2022

Better/(Worse)

3 unchanged sentences

Adjusted EBITDA $ (10.0) $ (11.7) 15 %

Adjusted EBITDA increased by $4.6 million, a 34% increase from the 2022 fiscal quarter, mainly driven by a decrease in contract labor expenses and other professional fees, as well as a reduction in IT-related costs.

Adjusted EBITDA increased by $1.7 million, a 15% increase from the 2022 fiscal quarter.

Comparison of Corporate Results for the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

Better/(Worse)

(in millions) 2023 2022 2023 vs.

Revenues $ — $ 3.2 (100) %

Expenses 19.0 28.5 33 %

Adjusted EBITDA $ (19.0) $ (25.3) 25 %

Adjusted EBITDA increased by $6.3 million, a 25% increase from the 2022 fiscal period, mainly driven by a decrease in contract labor expenses and other professional fees, as well as a reduction in IT-related costs.

Liquidity and Capital Resources

5 unchanged sentences

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

As of March 31, 2023, our secondary source of liquidity was cash and cash equivalents of $130.6 million.

As of June 30, 2023, our secondary source of liquidity was cash and cash equivalents of $111.7 million.

Our cash accounts are maintained with high-quality financial institutions.

2 unchanged sentences

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.

As of March 31, 2023, the Company had borrowed $138.0 million of the $410.0 million of available capacity.

As of June 30, 2023, the Company had borrowed $88.0 million of the $410.0 million of available capacity.

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, at the request of the Company, not to exceed (i) the greater of (a) $565.0 million and (b) 100% of the consolidated EBITDA of the Company, plus (ii) 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, plus, (iii) the aggregate amounts of any voluntary repayments of term loans, if any, and aggregate amount of voluntary repayments of revolving credit facilities that are accompanied by a corresponding termination or reduction of revolving credit commitments.

Liquidity Restrictions

Our liquidity is affected by restricted cash balances, which totaled $8.6 million as of both March 31, 2023 and December 31, 2022.

Our liquidity is affected by restricted cash balances, which totaled $8.9 million as of June 30, 2023 and $8.6 million as of December 31, 2022.

Restricted cash consisted of cash equivalents held as assets for a supplemental employment retention agreement for a former executive.

1 unchanged sentence

We earn a significant portion of our income from subsidiaries located in countries outside the United States.

As of March 31, 2023, $119.2 million of our total $130.6 million of cash and cash equivalents were held by foreign subsidiaries.

As of June 30, 2023, $103.9 million of our total $111.7 million of cash and cash equivalents were held by foreign subsidiaries.

As of December 31, 2022, $77.3 million of our total $85.2 million of cash and cash equivalents were held by foreign subsidiaries.

14 unchanged sentences

and payments of other third-party obligations.

As of March 31, 2023, our debt obligations consisted of $138.0 million of borrowings under the Senior Secured Credit Facility and $75.4 million of other debt.

As of June 30, 2023, our debt obligations consisted of $88.0 million of borrowings under the Senior Secured Credit Facility and $63.9 million of other debt.

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

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

As of March 31, 2023, we were in compliance with the leverage ratio covenant.

As of June 30, 2023, those conditions were satisfied and, therefore, we were not subject to the leverage ratio covenant.

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.

We were in compliance with those covenants as of March 31, 2023.

We were in compliance with those covenants as of June 30, 2023.

We conduct a significant portion of our operations from leased facilities, including many of our higher education facilities and other office locations.

As discussed in Note 6, Leases, in our consolidated financial statements included elsewhere in this Form 10-Q, we have significant operating lease liabilities.

As of March 31, 2023 and December 31, 2022, the present value of operating lease liabilities was $427.9 million and $415.9 million, respectively.

As discussed in Note 7, Leases, of our consolidated financial statements included elsewhere in this Form 10-Q, we have significant operating lease liabilities.

As of June 30, 2023 and December 31, 2022, the present value of operating lease liabilities was $411.0 million and $415.9 million, respectively.

Capital Expenditures

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

Our total capital expenditures, excluding receipts from the sale of subsidiaries and property equipment, were $5.8 million and $1.3 million during the three months ended March 31, 2023 and 2022, respectively.

Our total capital expenditures, excluding receipts from the sale of subsidiaries and property equipment, were $14.9 million and $8.2 million during the six months ended June 30, 2023 and 2022, respectively.

The increase in capital expenditures was primarily due to higher spending related to return-to-campus activities as well as investment in equipment for health science programs in Mexico and Peru.

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

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022:

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022:

(in millions) 2023 2022

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Effects of exchange rates changes on cash 8.7 10.0

Change in cash included in current assets held for sale (0.6) —

Net change in cash and cash equivalents and restricted cash $ 26.7 $ (168.5)

Comparison of Cash Flows for the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Comparison of Cash Flows for the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022

Operating Activities

Cash provided by operating activities decreased by $27.4 million to $26.5 million for the 2023 fiscal quarter from $53.9 million for the 2022 fiscal quarter.

This decrease in operating cash was attributable to an increase in cash paid for taxes of $35.0 million, from $8.4 million for the 2022 fiscal quarter to $43.4 million for the 2023 fiscal quarter, due primarily to the utilization of tax attributes that reduced cash tax payments for the 2022 fiscal quarter.

This decrease in operating cash was partially offset by increased operating income, combined with the net effect of changes in operating assets and liabilities, which increased operating cash by $7.5 million compared to the 2022 fiscal quarter.

Additionally, cash paid for interest decreased by $0.1 million, from $5.4 million for the 2022 fiscal quarter to $5.3 million for the 2023 fiscal quarter.

Cash provided by operating activities increased by $33.2 million to $78.8 million for the 2023 fiscal period from $45.6 million for the 2022 fiscal period.

This increase in operating cash was attributable to higher operating income, combined with the net effect of changes in operating assets and liabilities, which increased operating cash by $66.4 million compared to the 2022 fiscal period.

This increase in operating cash was partially offset by an increase in cash paid for taxes of $30.3 million, from $48.5 million for the 2022 fiscal period to $78.8 million for the 2023 fiscal period, which was a result of higher tax prepayments during the 2023 fiscal period in Mexico and Peru, partially offset by tax refunds in the United States.

Additionally, cash paid for interest increased by $2.9 million, from $8.5 million for the 2022 fiscal period to $11.4 million for the 2023 fiscal period, primarily due to higher average debt balances.

Investing Activities

Cash flows from investing activities decreased by $13.5 million to a cash outflow of $(5.6) million for the 2023 fiscal quarter from a cash inflow of $7.9 million for the 2022 fiscal quarter.

This decrease in investing cash flows was attributable to lower cash receipts from the sales of Discontinued Operations of $8.9 million, from $9.2 million, net, during the 2022 fiscal quarter (primarily related to the collection of certain receivables from the 2021 sale of our Brazilian operations) to $0.3 million, during the 2023 fiscal quarter.

Additionally, cash used for capital expenditures increased by $4.6 million during the 2023 fiscal quarter, as compared to the 2022 fiscal quarter.

Cash flows from investing activities decreased by $16.5 million to a cash outflow of $(14.5) million for the 2023 fiscal period from a cash inflow of $2.0 million for the 2022 fiscal period.

This decrease in investing cash flows was attributable to lower cash receipts from the sales of Discontinued Operations and property and equipment of $9.9 million, from $10.3 million, net, during the 2022 fiscal period (primarily related to the collection of certain receivables from the 2021 sale of our Brazilian operations) to $0.4 million during the 2023 fiscal period.

Additionally, cash used for capital expenditures increased by $6.6 million during the 2023 fiscal period, as compared to the 2022 fiscal period, mainly driven by higher spending related to return-to-campus activities as well as investment in equipment for health science programs in Mexico and Peru.

Financing Activities

Cash flows from financing activities increased by $125.2 million to a cash inflow of $21.1 million for the 2023 fiscal quarter from a cash outflow of $(104.1) million for the 2022 fiscal quarter.

This increase in financing cash flows was attributable to the period-over-period effect of $102.2 million of payments made during the 2022 fiscal quarter for common stock repurchases.

In addition, we had net proceeds from issuance of long-term debt during the 2023 fiscal quarter as compared to net payments of long-term debt during the 2022 fiscal quarter, for a change of $32.0 million.

These increases in financing cash flows were partially offset by lower proceeds from the exercise of common stock options of $10.1 million compared to the 2022 fiscal quarter.

Cash used in financing activities decreased by $180.5 million to $(45.7) million for the 2023 fiscal period from $(226.2) million for the 2022 fiscal period.

This decrease in financing cash outflows was attributable to the period-over-period effect of $206.3 million of payments made during the 2022 fiscal period for common stock repurchases.

In addition, payments of dividend equivalent rights for vested share-based awards were lower by $2.1 million for the 2023 fiscal period compared to 2022 fiscal period.

These decreases in financing cash outflows were partially offset by higher net payments of long-term debt during the 2023 fiscal period of $18.4 million, combined with lower proceeds from the exercise of stock options of $10.1 million compared to the 2022 fiscal period.

Other items accounted for the remaining difference of $0.6 million.

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For a complete discussion of our critical accounting policies, see the “Critical Accounting Policies and Estimates” section of the MD&A in our 2022 Form 10-K.

During the three months ended March 31, 2023, there were no significant changes to our critical accounting policies.

During the six months ended June 30, 2023, there were no significant changes to our critical accounting policies.

Recently Adopted Accounting Standards

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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-Q

Item 2. Management’s Discussion and Analysis