What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 103 added, 96 removed, 430 unchanged (32% of the section changed)

54 unchanged sentences

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.

As such, these subsidiaries are classified as assets held for sale as of September 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.

22 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 June 30, 2023:

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

Institutions Enrollment 2023 YTD Revenues

85 unchanged sentences

• Segment Results.

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

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

Better/(Worse)

3 unchanged sentences

General and administrative expenses 11.8 15.3 23 %

Loss on impairment of assets 1.6 — nm

Operating income 58.7 56.3 4 %

Interest expense, net of interest income (2.4) (1.7) (41) %

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

Other non-operating income 13.2 16.5 (20) %

Income from continuing operations before income taxes 69.5 71.1 (2) %

1 unchanged sentence

Income from continuing operations 35.7 31.9 12 %

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

Income (loss) from discontinued operations, net of tax

0.2 (0.8) 125 %

Net income 36.0 31.0 16 %

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

Net loss attributable to noncontrolling interests 0.2 0.1 (100) %

Net income attributable to Laureate Education, Inc.

$ 36.2 $ 31.1 16 %

nm - percentage changes not meaningful

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).

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

Revenues increased by $60.5 million to $361.5 million for the three months ended September 30, 2023 (the 2023 fiscal quarter) from $301.0 million for the three months ended September 30, 2022 (the 2022 fiscal quarter).

This increase in revenues was attributable to:

(1) the effect of a net change in foreign currency exchange rates, which increased revenues by $37.8 million, mainly due to the strengthening of the Mexican peso against the USD compared to the 2022 fiscal quarter;

(2) higher average total organic enrollment at our institutions during the 2023 fiscal quarter, which increased revenues by $16.0 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.

and (3) the effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing, which increased revenues by $7.4 million compared to the 2022 fiscal quarter.

These increases in revenues were partially offset by other Corporate changes, which accounted for a decrease in revenues of $0.7 million.

Direct costs and general and administrative expenses combined increased by $58.2 million to $302.9 million for the 2023 fiscal quarter from $244.7 million for the 2022 fiscal quarter.

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.

The increase in direct costs was primarily driven by the effect of a net change in foreign currency exchange rates, which increased costs by $33.0 million, mainly due to the strengthening of the Mexican peso against the USD compared to the 2022 fiscal quarter.

In addition, the effect of operational changes increased costs by $27.9 million, primarily due to the result of higher enrollment at our institutions.

These increases in direct costs were partially offset by a decrease of $2.7 million in Corporate expenses.

Operating income increased by $2.4 million to $58.7 million for the 2023 fiscal quarter from $56.3 million for the 2022 fiscal quarter.

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.

The increase in operating income was mainly driven by higher operating income at our Peru segment, combined with lower operating costs at Corporate, partially offset by lower operating income at our Mexico segment that was partly due to lease exit costs.

Interest expense, net of interest income increased by $0.7 million to $2.4 million for the 2023 fiscal quarter from $1.7 million for the 2022 fiscal quarter.

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

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:

(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.

Other non-operating income decreased by $3.3 million to $13.2 million for the 2023 fiscal quarter from $16.5 million for the 2022 fiscal quarter.

This decrease was primarily attributable to a lower gain on foreign currency exchange of $5.3 million compared to the 2022 fiscal quarter, mainly related to intercompany loan arrangements.

In addition, other income was lower by $1.3 million compared to the 2022 fiscal quarter.

These decreases in other non-operating income were partially offset by a gain on disposal of subsidiaries of $3.3 million during the 2023 fiscal quarter, which was primarily attributable to the release of accumulated foreign currency translation gain upon the liquidation of a subsidiary.

Income tax expense decreased by $5.6 million to $33.7 million for the 2023 fiscal quarter from $39.3 million for the 2022 fiscal quarter.

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.

This decrease was primarily attributable to changes in the jurisdictional mix of earnings.

Summary Comparison of Consolidated Results

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

Comparison of Consolidated Results for the Nine Months Ended September 30, 2023 and 2022

Better/(Worse)

10 unchanged sentences

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

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

Income from continuing operations 69.3 25.9 168 %

(Loss) income from discontinued operations, net of tax (3.8) 4.1 (193) %

Net income (loss) 29.6 (1.1) nm

Net income 65.5 29.9 119 %

Net loss attributable to noncontrolling interests 0.2 0.4 50 %

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

$ 29.6 $ (0.8) nm

Net income attributable to Laureate Education, Inc.

$ 65.7 $ 30.3 117 %

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).

Comparison of Consolidated Results for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

Revenues increased by $179.0 million to $1,074.9 million for the nine months ended September 30, 2023 (the 2023 fiscal period) from $895.9 million for the nine months ended September 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;

(1) the effect of a net change in foreign currency exchange rates, which increased revenues by $79.3 million, mostly driven by the strengthening of the Mexican peso against the USD compared to the 2022 fiscal period;

(2) higher average total organic enrollment at our institutions, which increased revenues by $62.8 million compared to the 2022 fiscal period;

and (3) the effect of product mix, pricing and timing, which increased revenues by $40.7 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.

These increases in revenues were partially offset by other Corporate changes, which accounted for a decrease in revenues of $3.8 million.

Direct costs and general and administrative expenses combined increased by $140.5 million to $844.4 million for the 2023 fiscal period from $703.9 million for the 2022 fiscal period.

1 unchanged sentence

Additionally, the effect of a net change in foreign currency exchange rates increased costs by $64.9 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.

These increases in direct costs were partially offset by other Corporate expenses, which accounted for a decrease in costs of $12.2 million in the 2023 fiscal period.

Operating income increased by $36.8 million to $228.8 million for the 2023 fiscal period from $192.0 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.

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

Interest expense, net of interest income increased by $4.3 million to $10.3 million for the 2023 fiscal period from $6.0 million for the 2022 fiscal period.

2 unchanged sentences

This increase was attributable to a higher loss on foreign currency exchange of $48.7 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.

Additionally, other income was lower by $0.2 million compared to the 2022 fiscal period.

These increases in other non-operating expense were partially offset by higher gain on disposal of subsidiaries of $2.1 million, primarily attributable to the release of accumulated foreign currency translation gains upon the liquidation of certain subsidiaries.

Income tax expense decreased by $57.8 million to $101.4 million for the 2023 fiscal period from $159.2 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.

This decrease was primarily attributable to a discrete tax expense recorded during the 2022 fiscal period of approximately $32.5 million for 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 the jurisdictional mix of earnings.

(Loss) income from discontinued operations, net of tax changed by $7.9 million to a loss of $(3.8) million for the 2023 fiscal period from income of $4.1 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.

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

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 disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to our Excellence-in-Process (EiP) initiative.

We define Adjusted EBITDA as net income (loss), before (income) loss from discontinued operations, net of tax, equity in net (income) loss of affiliates, net of tax, income tax expense (benefit), (gain) loss on disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other (income) expense, net, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to our Excellence-in-Process (EiP) initiative.

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.

3 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 income from continuing operations to Adjusted EBITDA for the three months ended June 30, 2023 and 2022:

The following table presents Adjusted EBITDA and reconciles Net income to Adjusted EBITDA for the three months ended September 30, 2023 and 2022:

Better/(Worse)

(in millions) 2023 2022 2023 vs.

Net income $ 36.0 $ 31.0 16 %

(Income) loss from discontinued operations, net of tax (0.2) 0.8 125 %

Income from continuing operations 35.7 31.9 12 %

1 unchanged sentence

Income from continuing operations before income taxes 69.5 71.1 (2) %

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) %

Gain on disposal of subsidiaries, net (3.3) — nm

Foreign currency exchange gain, net (9.8) (15.1) (35) %

Other income, net (0.1) (1.4) (93) %

Interest expense 5.2 3.7 (41) %

4 unchanged sentences

Share-based compensation expense (a)

Loss on impairment of assets (b)

EiP implementation expenses (c)

EiP implementation expenses (b)

Adjusted EBITDA $ 78.4 $ 72.8 8 %

1 unchanged sentence

(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.

(b) 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.

1 unchanged sentence

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

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

Depreciation and amortization increased by $3.4 million to $17.9 million for the 2023 fiscal quarter from $14.5 million for the 2022 fiscal quarter.

1 unchanged sentence

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:

The following table presents Adjusted EBITDA and reconciles Net income to Adjusted EBITDA for the nine months ended September 30, 2023 and 2022:

Better/(Worse)

(in millions) 2023 2022 2023 vs.

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

Net income $ 65.5 $ 29.9 119 %

Loss (income) from discontinued operations, net of tax 3.8 (4.1) (193) %

Income from continuing operations 69.3 25.9 168 %

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

3 unchanged sentences

Foreign currency exchange loss, net 51.6 2.9 nm

Other (income) expense, net (0.1) 1.0 110 %

Other income, net (0.2) (0.4) (50) %

Interest expense 17.3 11.6 (49) %

14 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

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

Depreciation and amortization increased by $8.4 million to $52.0 million for the 2023 fiscal period from $43.6 million for the 2022 fiscal period.

12 unchanged sentences

Better/(Worse)

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

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

Mexico $ 185.4 $ 147.8 25 %

9 unchanged sentences

Better/(Worse)

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

For the nine months ended September 30, 2023 2022 2023 vs.

Mexico $ 559.5 $ 435.0 29 %

8 unchanged sentences

Financial Overview

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

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

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2022 $ 144.7 $ 125.2 $ 19.5

September 30, 2022 $ 147.8 $ 124.4 $ 23.4

Organic enrollment (1)

2 unchanged sentences

Foreign exchange 28.8 25.2 3.6

June 30, 2023 $ 192.1 $ 153.9 $ 38.2

September 30, 2023 $ 185.4 $ 163.5 $ 21.9

(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 $37.6 million, a 25% increase from the 2022 fiscal quarter.

1 unchanged sentence

• Revenues from our Mexico segment represented 51% of our consolidated total revenues for the 2023 fiscal quarter, compared to 49% for 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

Adjusted EBITDA decreased by $1.5 million, a 6% decrease from the 2022 fiscal quarter, partly due to lease exit costs.

Comparison of Mexico Results for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2022 $ 287.2 $ 230.8 $ 56.4

September 30, 2022 $ 435.0 $ 355.2 $ 79.8

Organic enrollment (1)

2 unchanged sentences

Foreign exchange 68.0 54.2 13.8

June 30, 2023 $ 374.1 $ 287.0 $ 87.1

September 30, 2023 $ 559.5 $ 450.4 $ 109.1

3 unchanged sentences

• 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.

Adjusted EBITDA increased by $29.3 million, a 37% increase from the 2022 fiscal period, mainly driven by higher revenues, partially offset by higher costs associated with return-to-campus expenses.

Financial Overview

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

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

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2022 $ 239.2 $ 102.9 $ 136.3

September 30, 2022 $ 152.5 $ 91.3 $ 61.2

Organic enrollment (1)

2 unchanged sentences

Foreign exchange 9.0 5.7 3.3

June 30, 2023 $ 270.0 $ 122.8 $ 147.2

September 30, 2023 $ 176.2 $ 109.9 $ 66.3

2 unchanged sentences

• Revenues from our Peru segment represented 49% of our consolidated total revenues for the 2023 fiscal quarter, compared to 51% for the 2022 fiscal quarter.

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

Adjusted EBITDA increased by $5.1 million, an 8% increase from the 2022 fiscal quarter.

Comparison of Peru Results for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2022 $ 304.6 $ 164.5 $ 140.1

September 30, 2022 $ 457.1 $ 255.7 $ 201.4

Organic enrollment (1)

2 unchanged sentences

Foreign exchange 11.3 6.7 4.6

June 30, 2023 $ 339.2 $ 198.5 $ 140.7

September 30, 2023 $ 515.4 $ 308.3 $ 207.1

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

Revenues increased by $58.3 million, a 13% increase from the 2022 fiscal period.

• Organic enrollment increased during the 2023 fiscal period by 6%, increasing revenues by $22.8 million.

3 unchanged sentences

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

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

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

Better/(Worse)

3 unchanged sentences

Adjusted EBITDA $ (9.9) $ (11.9) 17 %

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

Comparison of Corporate Results for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

Better/(Worse)

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

As of September 30, 2023, our secondary source of liquidity was cash and cash equivalents of $130.9 million.

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

The Company also maintains a revolving credit facility (the Senior Secured Credit Facility) with a syndicate of financial institutions as a source of liquidity.

The Senior Secured Credit Facility provides for borrowings of $410.0 million and has a maturity date of October 7, 2024.

The Senior Secured Credit Facility, pursuant to the Third Amended and Restated Credit Agreement, dated as of October 7, 2019 (the “Credit Agreement”, as amended by the First Amendment, dated as of July 20, 2020, the Second Amendment, dated as of December 23, 2022, and, as further amended by the Third Amendment, dated as of September 18, 2023, the “Amended Credit Agreement”), provides for borrowings of $145.0 million of revolving credit loans maturing October 2024 (the Series 2024 Tranche) and $155.0 million of revolving credit loans maturing in September 18, 2028 (the Series 2028 Tranche) for a $300.0 million aggregate revolving credit facility (the revolving credit facility) .

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 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.

As of September 30, 2023, the Company had borrowed $28.0 million of the $300.0 million of available capacity.

If certain conditions are satisfied, the Amended 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) $172.5 million and (b) 50% 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 Amended Credit Agreement, on a pro forma basis, does not exceed 2.25x, 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 $8.9 million as of June 30, 2023 and $8.6 million as of December 31, 2022.

Our liquidity is affected by restricted cash balances, which totaled $7.6 million as of September 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 June 30, 2023, $103.9 million of our total $111.7 million of cash and cash equivalents were held by foreign subsidiaries.

As of September 30, 2023, $121.3 million of our total $130.9 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.

8 unchanged sentences

capital expenditures;

payment of a special dividend;

and business development activities.

4 unchanged sentences

and payments of other third-party obligations.

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.

As of September 30, 2023, our debt obligations consisted of $28.0 million of borrowings under the Senior Secured Credit Facility and $49.1 million of other debt.

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

In addition, our finance lease obligations and sale-leaseback financings were $57.6 million.

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

Under the Amended 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 Amended Credit Agreement, unless certain conditions are satisfied.

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

The maximum ratio, as defined, is 3.00x 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 June 30, 2023.

We were in compliance with those covenants as of September 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 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.

As of September 30, 2023 and December 31, 2022, the present value of operating lease liabilities was $393.2 million and $415.9 million, respectively.

Capital Expenditures

9 unchanged sentences

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 $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.

Our total capital expenditures, excluding receipts from the sale of subsidiaries and property equipment, were $26.7 million and $17.1 million during the nine months ended September 30, 2023 and 2022, respectively.

The 56% increase in capital expenditures was primarily due to investment in equipment for health science programs in Peru as well as campus expansion and digital innovation in Mexico.

Special Cash Dividend

On October 30, 2023, the Board of Directors of the Company approved the payment of a special cash dividend (the 2023 Special Dividend) equal to $0.70 per each share of the Company’s common stock, par value $0.004 per share, to each holder of record on November 15, 2023.

The 2023 Special Dividend is scheduled to be paid on November 30, 2023.

Based on the current number of shares outstanding, the aggregate amount of the 2023 Special Dividend is expected to be approximately $110.0 million.

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

1 unchanged sentence

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 six months ended June 30, 2023 and 2022:

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

(in millions) 2023 2022

6 unchanged sentences

Net change in cash and cash equivalents and restricted cash $ 44.7 $ (9.1)

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

Comparison of Cash Flows for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

Operating Activities

5 unchanged sentences

Cash flows from investing activities decreased by $92.5 million to a cash outflow of $(26.2) million for the 2023 fiscal period from a cash inflow of $66.3 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.

This decrease in investing cash flows was attributable to lower cash receipts from the sales of Discontinued Operations and property and equipment of $82.9 million, from $83.4 million, net, during the 2022 fiscal period (primarily related to the receipt of the escrow receivable in connection with the 2021 sale of Walden University and the collection of certain receivables from the 2021 sale of our Brazilian operations) to $0.5 million during the 2023 fiscal period.

Additionally, cash used for capital expenditures increased by $9.6 million during the 2023 fiscal period, as compared to the 2022 fiscal period, mainly driven by investment in equipment for health science programs in Peru as well as campus expansion and digital innovation in Mexico.

Financing Activities

1 unchanged sentence

This decrease in financing cash outflows was attributable to the period-over-period effect of $207.2 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.

In addition, payments of dividend equivalent rights for vested share-based awards were lower by $2.3 million for the 2023 fiscal period compared to

2022 fiscal period.

These decreases in financing cash outflows were partially offset by:

(1) higher net payments of long-term debt during the 2023 fiscal period of $83.8 million;

(2) lower proceeds from the exercise of stock options of $8.7 million compared to the 2022 fiscal period;

and (3) payments of $1.3 million during the 2023 fiscal period in connection with the amendment of our Senior Secured Credit Facility.

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

6 unchanged sentences

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

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

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

Recently Adopted Accounting Standards

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis