LAUREATE EDUCATION, INC. 10-Q

Item 1. Financial Statements (Unaudited) LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations IN THOUSANDS, except per share amounts For the three months ended September 30, 2023 2022 (Unaudited) (Unaudited) Revenues $ 361,533 $ 300,999 Costs and expenses: Direct costs 291,052 229,361 General and administrative expenses 11,772 15,321 Operating income 58,709 56,317 Interest income 2,830 1,970 Interest expense ( 5,169 ) ( 3,694 ) Other income, net 66 1,393 Foreign currency exchange gain, net 9,755 15,146 Gain on disposal of subsidiaries, net 3,260 — Income from continuing operations before income taxes 69,451 71,132 Income tax expense ( 33,716 ) ( 39,280 ) Income from continuing operations 35,735 31,852 Income (loss) from discontinued operations, net of tax of $ 0 for both periods 246 ( 816 ) Net income 35,981 31,036 Net loss attributable to noncontrolling interests 177 81 Net income attributable to Laureate Education, Inc. $ 36,158 $ 31,117 Basic and diluted earnings per share: Income from continuing operations $ 0.23 $ 0.19 Income (loss) from discontinued operations — — Basic and diluted earnings per share $ 0.23 $ 0.19 The accompanying notes are an integral part of these consolidated financial statements. 2 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations IN THOUSANDS, except per share amounts For the nine months ended September 30, 2023 2022 (Unaudited) (Unaudited) Revenues $ 1,074,855 $ 895,943 Costs and expenses: Direct costs 810,362 655,055 General and administrative expenses 34,046 48,752 Loss on impairment of assets 1,620 144 Operating income 228,827 191,992 Interest income 6,939 5,623 Interest expense ( 17,258 ) ( 11,589 ) Other income, net 198 413 Foreign currency exchange loss, net ( 51,554 ) ( 2,906 ) Gain on disposal of subsidiaries, net 3,567 1,461 Income from continuing operations before income taxes and equity in net (loss) income of affiliates 170,719 184,994 Income tax expense ( 101,379 ) ( 159,213 ) Equity in net (loss) income of affiliates, net of tax ( 3 ) 70 Income from continuing operations 69,337 25,851 (Loss) income from discontinued operations, net of tax of $ 0 for both periods ( 3,805 ) 4,064 Net income 65,532 29,915 Net loss attributable to noncontrolling interests 196 414 Net income attributable to Laureate Education, Inc. $ 65,728 $ 30,329 Basic and diluted earnings per share: Income from continuing operations $ 0.44 $ 0.15 (Loss) income from discontinued operations ( 0.02 ) 0.02 Basic and diluted earnings per share $ 0.42 $ 0.17 The accompanying notes are an integral part of these consolidated financial statements. 3 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income IN THOUSANDS For the three months ended September 30, 2023 2022 (Unaudited) (Unaudited) Net income $ 35,981 $ 31,036 Other comprehensive income: Foreign currency translation adjustment, net of tax of $ 0 for both periods ( 46,371 ) ( 42,161 ) Minimum pension liability adjustment, net of tax of $ 0 for both periods — 983 Total other comprehensive loss ( 46,371 ) ( 41,178 ) Comprehensive loss ( 10,390 ) ( 10,142 ) Net comprehensive loss attributable to noncontrolling interests 175 82 Comprehensive loss attributable to Laureate Education, Inc. $ ( 10,215 ) $ ( 10,060 ) The accompanying notes are an integral part of these consolidated financial statements. 4 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income IN THOUSANDS For the nine months ended September 30, 2023 2022 (Unaudited) (Unaudited) Net income $ 65,532 $ 29,915 Other comprehensive income: Foreign currency translation adjustment, net of tax of $ 0 for both periods 118,341 25,386 Minimum pension liability adjustment, net of tax of $ 0 for both periods — 997 Total other comprehensive income 118,341 26,383 Comprehensive income 183,873 56,298 Net comprehensive loss attributable to noncontrolling interests 280 410 Comprehensive income attributable to Laureate Education, Inc. $ 184,153 $ 56,708 The accompanying notes are an integral part of these consolidated financial statements. 5 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets IN THOUSANDS, except per share amounts September 30, 2023 December 31, 2022 Assets (Unaudited) Current assets: Cash and cash equivalents $ 130,862 $ 85,167 Restricted cash 7,587 8,617 Receivables: Accounts and notes receivable 159,730 133,105 Other receivables 10,658 9,486 Allowance for doubtful accounts ( 74,639 ) ( 61,882 ) Receivables, net 95,749 80,709 Income tax receivable 18,604 32,261 Prepaid expenses and other current assets 26,493 19,445 Current assets held for sale 738 — Total current assets 280,033 226,199 Property and equipment: Land 131,420 127,154 Buildings 370,220 348,931 Furniture, equipment and software 548,310 494,004 Leasehold improvements 129,698 117,820 Construction in-progress 16,016 11,871 Accumulated depreciation and amortization ( 652,058 ) ( 576,373 ) Property and equipment, net 543,606 523,407 Operating lease right-of-use assets, net 356,351 389,565 Goodwill 640,358 583,493 Tradenames, net 164,055 151,645 Deferred costs, net 5,032 5,310 Deferred income taxes 58,054 51,941 Other assets 39,264 40,677 Long-term assets held for sale 10,521 — Total assets $ 2,097,274 $ 1,972,237 The accompanying notes are an integral part of these consolidated financial statements. 6 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (continued) IN THOUSANDS, except per share amounts September 30, 2023 December 31, 2022 Liabilities and stockholders' equity (Unaudited) Current liabilities: Accounts payable $ 33,325 $ 42,842 Accrued expenses 73,178 50,563 Accrued compensation and benefits 89,624 85,215 Deferred revenue and student deposits 81,039 51,264 Current portion of operating leases 56,265 38,994 Current portion of long-term debt and finance leases 49,053 56,184 Income taxes payable 16,427 38,738 Other current liabilities 31,201 17,587 Current liabilities held for sale 1,436 — Total current liabilities 431,548 381,387 Long-term operating leases, less current portion 336,905 376,898 Long-term debt and finance leases, less current portion 83,059 175,929 Deferred compensation 9,313 10,379 Income taxes payable 136,709 131,301 Deferred income taxes 89,268 89,765 Other long-term liabilities 35,385 30,823 Long-term liabilities held for sale 10,047 — Total liabilities 1,132,234 1,196,482 Redeemable equity 1,398 1,398 Stockholders' equity: Preferred stock, par value $ 0.001 per share – 50,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022 — — Common stock, par value $ 0.004 per share – 700,000 shares authorized, 157,367 shares issued and outstanding as of September 30, 2023 and 230,779 shares issued and 157,013 shares outstanding as of December 31, 2022 629 923 Additional paid-in capital 1,184,329 2,204,755 Retained earnings 104,972 39,244 Accumulated other comprehensive loss ( 323,999 ) ( 442,424 ) Treasury stock at cost ( 73,766 shares held at December 31, 2022) — ( 1,026,272 ) Total Laureate Education, Inc. stockholders' equity 965,931 776,226 Noncontrolling interests ( 2,289 ) ( 1,869 ) Total stockholders' equity 963,642 774,357 Total liabilities and stockholders' equity $ 2,097,274 $ 1,972,237 The accompanying notes are an integral part of these consolidated financial statements. 7 LAUREATE EDUCATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows IN THOUSANDS For the nine months ended September 30, 2023 2022 Cash flows from operating activities (Unaudited) (Unaudited) Net income $ 65,532 $ 29,915 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 51,956 43,628 Amortization of operating lease right-of-use assets 24,117 22,200 Loss on impairment of assets 1,620 144 Loss (gain) on sales and disposal of subsidiaries and property and equipment, net 5,279 ( 5,797 ) Non-cash interest expense 1,149 1,127 Non-cash share-based compensation expense 4,894 6,971 Bad debt expense 29,535 14,194 Deferred income taxes ( 9,537 ) 8,152 Unrealized foreign currency exchange loss (gain) 51,100 ( 2,169 ) Non-cash loss from non-income tax contingencies — 419 Other, net ( 5,751 ) 120 Changes in operating assets and liabilities: Receivables ( 41,021 ) ( 22,011 ) Prepaid expenses and other assets ( 5,651 ) ( 11 ) Accounts payable and accrued expenses 1,040 ( 16,866 ) Income tax receivable/payable, net ( 6,708 ) 53,588 Deferred revenue and other liabilities 19,865 21,077 Net cash provided by operating activities 187,419 154,681 Cash flows from investing activities Purchase of property and equipment ( 26,740 ) ( 16,754 ) Expenditures for deferred costs — ( 363 ) Receipts from sales of discontinued operations and property and equipment 503 83,405 Net cash (used in) provided by investing activities ( 26,237 ) 66,288 Cash flows from financing activities Proceeds from issuance of long-term debt, net of original issue discount 48,122 235,181 Payments on long-term debt ( 167,189 ) ( 270,413 ) Payment of dividend equivalent rights for vested share-based awards ( 2,318 ) ( 4,572 ) Payments to purchase noncontrolling interests ( 123 ) — Proceeds from exercise of stock options 3,196 11,888 Withholding of shares to satisfy tax withholding for vested stock awards and exercised stock options ( 616 ) ( 1,438 ) Payments to repurchase common stock — ( 207,151 ) Payments of debt issuance costs ( 1,285 ) — Net cash used in financing activities ( 120,213 ) ( 236,505 ) Effects of exchange rate changes on Cash and cash equivalents and Restricted cash 4,005 6,448 Change in cash included in current assets held for sale ( 309 ) — Net change in Cash and cash equivalents and Restricted cash 44,665 ( 9,088 ) Cash and cash equivalents and Restricted cash at beginning of period 93,784 345,575 Cash and cash equivalents and Restricted cash at end of period $ 138,449 $ 336,487 The accompanying notes are an integral part of these consolidated financial statements. 8 Laureate Education, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Dollars and shares in thousands) Note 1. Description of Business Laureate Education, Inc. and subsidiaries (hereinafter Laureate, we, us, our, or the Company) provide higher education programs and services to students through licensed universities and higher education institutions (institutions). Laureate's programs are provided through institutions that are campus-based and through electronically distributed educational programs (online). We are domiciled in Delaware as a public benefit corporation, a demonstration of our long-term commitment to our mission to benefit our students and society. The Company completed its initial public offering (IPO) on February 6, 2017, and its shares are listed on the Nasdaq Global Select Market under the symbol “LAUR.” The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, these financial statements include all adjustments considered necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with Laureate's audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the 2022 Form 10-K). Note 2. Revenue Revenue Recognition Laureate's revenues primarily consist of tuition and educational service revenues. We also generate other revenues from student fees and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. These revenues are recognized net of scholarships and other discounts, refunds and waivers. Laureate's institutions have various billing and academic cycles. We determine revenue recognition through the five-step model prescribed by ASC Topic 606, Revenue from Contracts with Customers , as follows: • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when, or as, we satisfy a performance obligation. We assess collectability on a portfolio basis prior to recording revenue. Generally, students cannot re-enroll for the next academic session without satisfactory resolution of any past-due amounts. If a student withdraws from an institution, Laureate's obligation to issue a refund depends on the refund policy at that institution and the timing of the student's withdrawal. Generally, our refund obligations are reduced over the course of the academic term. We record refunds as a reduction of deferred revenue as applicable. 9 The following table shows the components of Revenues by reportable segment and as a percentage of total revenue for the three months ended September 30, 2023 and 2022: Mexico Peru Corporate (1) Total 2023 Tuition and educational services $ 240,329 $ 170,337 $ — $ 410,666 114 % Other 36,972 20,293 ( 32 ) 57,233 15 % Gross revenue 277,301 190,630 ( 32 ) 467,899 129 % Less: Discounts / waivers / scholarships ( 91,913 ) ( 14,453 ) — ( 106,366 ) ( 29 ) % Total $ 185,388 $ 176,177 $ ( 32 ) $ 361,533 100 % 2022 Tuition and educational services $ 178,733 $ 147,982 $ — $ 326,715 109 % Other 32,750 15,493 670 48,913 16 % Gross revenue 211,483 163,475 670 375,628 125 % Less: Discounts / waivers / scholarships ( 63,701 ) ( 10,928 ) — ( 74,629 ) ( 25 ) % Total $ 147,782 $ 152,547 $ 670 $ 300,999 100 % (1) Includes the elimination of inter-segment revenues. The following table shows the components of Revenues by reportable segment and as a percentage of total revenue for the nine months ended September 30, 2023 and 2022: Mexico Peru Corporate (1) Total 2023 Tuition and educational services $ 716,575 $ 509,940 $ — $ 1,226,515 114 % Other 99,355 47,679 ( 38 ) 146,996 14 % Gross revenue 815,930 557,619 ( 38 ) 1,373,511 128 % Less: Discounts / waivers / scholarships ( 256,443 ) ( 42,213 ) — ( 298,656 ) ( 28 ) % Total $ 559,487 $ 515,406 $ ( 38 ) $ 1,074,855 100 % 2022 Tuition and educational services $ 541,744 $ 451,570 $ — $ 993,314 111 % Other 80,869 41,841 3,848 126,558 14 % Gross revenue 622,613 493,411 3,848 1,119,872 125 % Less: Discounts / waivers / scholarships ( 187,622 ) ( 36,307 ) — ( 223,929 ) ( 25 ) % Total $ 434,991 $ 457,104 $ 3,848 $ 895,943 100 % (1) Includes the elimination of inter-segment revenues. Contract Balances The timing of billings, cash collections and revenue recognition results in accounts receivable (contract assets) and Deferred revenue and student deposits (contract liabilities) on the Consolidated Balance Sheets. We have various billing and academic cycles and recognize student receivables when an academic session begins, although students generally enroll in courses prior to the start of the academic session. Receivables are recognized only to the extent that it is probable that we will collect substantially all of the consideration to which we are entitled in exchange for the goods and services that will be transferred to the student. We receive advance payments or deposits from our students before revenue is recognized, which are recorded as contract liabilities in deferred revenue and student deposits. Payment terms vary by university with some universities requiring payment in advance of the academic session and other universities allowing students to pay in installments over the term of the academic session. All of our contract assets are considered accounts receivable and are included within the Accounts and notes receivable balance in the accompanying Consolidated Balance Sheets. Total accounts receivable from our contracts with students were $ 159,730 and $ 133,105 as of September 30, 2023 and December 31, 2022, respectively. The increase in the contract assets balance at September 30, 2023 compared to December 31, 2022 was primarily driven by enrollment cycles. The first and third calendar 10 quarters generally coincide with the primary and secondary intakes for our larger institutions. All contract asset amounts are classified as current. Contract liabilities in the amount of $ 81,039 and $ 51,264 were included within the Deferred revenue and student deposits balance in the current liabilities section of the accompanying Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022, respectively. The increase in the contract liability balance during the period ended September 30, 2023 was the result of semester billings and cash payments received in advance of satisfying performance obligations, partially offset by revenue recognized during that period. Substantially all of the contract liability balance at the beginning of the year was recognized as revenue during the nine months ended September 30, 2023. Note 3. Assets Held for Sale During the second quarter of 2023, two of the Company’s subsidiaries that operate K-12 educational programs in Mexico met the criteria for classification as held for sale under ASC 360-10-45-9, “Long-Lived Assets Classified as Held for Sale.” The sale of the K-12 campuses is intended to allow the Mexico segment to focus on its core business. The planned sale of this disposal group does not represent a strategic shift and therefore does not qualify for presentation as a discontinued operation in the Consolidated Financial Statements. In addition, during the third quarter of 2023, a parcel of land at one of our campuses in Mexico met the criteria for classification as held for sale under ASC 360-10-45-9. The assets and liabilities are recorded at the lower of their carrying values or their estimated fair values less costs to sell. The carrying amounts of the major classes of assets and liabilities that were classified as held for sale are presented in the following table: September 30, 2023 December 31, 2022 Assets Held for Sale Cash and cash equivalents $ 314 $ — Receivables, net 408 — Property and equipment, net 1,683 — Operating lease right-of-use assets, net 8,839 — Other assets 15 — Total assets held for sale $ 11,259 $ — Liabilities Held for Sale Deferred revenue and student deposits $ 906 $ — Operating leases, including current portion 8,956 — Long-term debt, including current portion 840 — Other liabilities 781 — Total liabilities held for sale $ 11,483 $ — The long-term debt balance represents a finance lease for property. Note 4. Business and Geographic Segment Information Laureate’s educational services are offered through two reportable segments: Mexico and Peru. Laureate determines its segments based on information utilized by the chief operating decision maker to allocate resources and assess performance. Our segments generate revenues by providing an education that emphasizes profession-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines. Our educational offerings utilize campus-based, online and hybrid (a combination of online and in-classroom) courses and programs to deliver their curriculum. The Mexico and Peru markets are characterized by what we believe is a significant imbalance between supply and demand. The demand for higher education is large and growing and is fueled by several demographic and economic factors, including a growing middle class, global growth in services and technology-related industries and recognition of the significant personal and economic benefits gained by graduates of higher education institutions. The target demographics are primarily 18- to 24-year-olds in both countries in which we compete. We compete with other private higher education institutions on the basis of price, educational quality, reputation and location. We believe that we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by our network. There are a number of private and 11 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. Essentially all of our revenues were generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru. Specifics related to both of our reportable segments are discussed below. In Mexico, the private sector plays a meaningful role in higher education, bridging supply and demand imbalances created by a lack of capacity at public universities. Laureate owns two nationally licensed institutions and is present throughout the country with a footprint of over 35 campuses. Students in our Mexican institutions typically finance their own education. In Peru, private universities are increasingly providing the capacity to meet growing demand in the higher-education market. Laureate owns three institutions in Peru, with a footprint of 19 campuses. Inter-segment transactions are accounted for in a similar manner as third-party transactions and are eliminated in consolidation. The Corporate amounts presented in the following tables include corporate charges that were not allocated to our reportable segments and adjustments to eliminate inter-segment items. We evaluate segment performance based on Adjusted EBITDA, which is a non-GAAP performance measure defined as Income from continuing operations before income taxes and equity in net income of affiliates, adding back the following items: Gain on disposal of subsidiaries, net, Foreign currency exchange loss, net, Other income, net, Interest expense, Interest income, Depreciation and amortization expense, Loss on impairment of assets, Share-based compensation expense and expenses related to our Excellence-in-Process (EiP) initiative. Our EiP initiative was completed as of December 31, 2021, except for certain EiP expenses related to the completion of programs that began in prior periods. EiP was an 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. Adjusted EBITDA is a key measure used by our management and Board of Directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, Adjusted EBITDA is a key financial measure used by the compensation committee of our Board of Directors and our Chief Executive Officer in connection with the payment of incentive compensation to our executive officers and other members of our management team. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors. We use total assets as the measure of assets for reportable segments. 12 The following tables provide financial information for our reportable segments, including a reconciliation of Adjusted EBITDA to Income from continuing operations before income taxes and equity in net income of affiliates, as reported in the Consolidated Statements of Operations: For the three months ended For the nine months ended September 30, September 30, 2023 2022 2023 2022 Revenues Mexico $ 185,388 $ 147,782 $ 559,487 $ 434,991 Peru 176,177 152,547 515,406 457,104 Corporate ( 32 ) 670 ( 38 ) 3,848 Total Revenues $ 361,533 $ 300,999 $ 1,074,855 $ 895,943 Adjusted EBITDA of reportable segments Mexico $ 21,925 $ 23,442 $ 109,068 $ 79,848 Peru 66,349 61,223 207,062 201,363 Total Adjusted EBITDA of reportable segments 88,274 84,665 316,130 281,211 Reconciling items: Corporate ( 9,853 ) ( 11,861 ) ( 28,833 ) ( 37,155 ) Depreciation and amortization expense ( 17,918 ) ( 14,470 ) ( 51,956 ) ( 43,628 ) Loss on impairment of assets — — ( 1,620 ) ( 144 ) Share-based compensation expense ( 1,794 ) ( 1,849 ) ( 4,894 ) ( 6,971 ) EiP expenses — ( 168 ) — ( 1,321 ) Operating income 58,709 56,317 228,827 191,992 Interest income 2,830 1,970 6,939 5,623 Interest expense ( 5,169 ) ( 3,694 ) ( 17,258 ) ( 11,589 ) Other income, net 66 1,393 198 413 Foreign currency gain (loss), net 9,755 15,146 ( 51,554 ) ( 2,906 ) Gain on disposal of subsidiaries, net 3,260 — 3,567 1,461 Income from continuing operations before income taxes and equity in net income of affiliates $ 69,451 $ 71,132 $ 170,719 $ 184,994 September 30, 2023 December 31, 2022 Assets Mexico $ 1,333,563 $ 1,220,630 Peru 581,619 536,141 Corporate 182,092 215,466 Total assets $ 2,097,274 $ 1,972,237 Note 5. Goodwill The change in the net carrying amount of Goodwill from December 31, 2022 through September 30, 2023 was composed of the following items: Mexico Peru Total Balance at December 31, 2022 $ 512,990 $ 70,503 $ 583,493 Currency translation adjustments 56,207 658 56,865 Balance at September 30, 2023 $ 569,197 $ 71,161 $ 640,358 13 Note 6. Debt Outstanding long-term debt was as follows: September 30, 2023 December 31, 2022 Senior long-term debt: Senior Secured Credit Facility (stated maturity date of September 18, 2028 as of September 30, 2023; stated maturity date of October 7, 2024 as of December 31, 2022) $ 28,000 $ 100,000 Other debt: Lines of credit — 13,778 Notes payable and other debt 49,078 72,209 Total senior and other debt 77,078 185,987 Finance lease obligations and sale-leaseback financings 57,583 48,186 Total long-term debt and finance leases 134,661 234,173 Less: total unamortized deferred financing costs 2,549 2,060 Less: current portion of long-term debt and finance leases 49,053 56,184 Long-term debt and finance leases, less current portion $ 83,059 $ 175,929 Senior Secured Credit Facility On September 18, 2023, the Company entered into an amendment of its Senior Secured Credit Facility (as defined below) (the “Third Amendment”) 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, the “Amended Credit Agreement”). Among other things, the Company incurred a new tranche of revolving credit loans maturing September 2028 (the “Series 2028 Tranche”). The credit available to be borrowed under the Amended Credit Agreement, whether as revolving loans or term loans, if any, are referred to herein collectively as the “Senior Secured Credit Facility.” The Amended Credit Agreement, among other things, provides for $ 145,000 of revolving credit loans maturing October 2024 (the “Series 2024 Tranche”) and $ 155,000 of revolving credit loans under the Series 2028 Tranche for a $ 300,000 aggregate revolving credit facility (the “Revolving Credit Facility”). As a subfacility under the Revolving Credit Facility, the Amended Credit Agreement provides for letter of credit commitments in the aggregate amount of $ 10,000 . The Amended Credit Agreement also provides, subject to the satisfaction of certain conditions, for incremental revolving and term loan facilities, at the request of the Company, not to exceed (i) the greater of (a) $ 172,500 and (b) 50 % of the Company’s Consolidated EBITDA, 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 agreement, on a pro forma basis, does not exceed 2.25 to 1.00, 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. The maturity date for the Amended Credit Agreement is September 18, 2028. The Revolving Credit Facility bears interest at a per annum interest rate, at the option of the Company, at either the EURIBOR rate, the Term SOFR rate or the ABR rate plus an applicable margin of 2.50 % per annum, 2.25 % per annum, 2.00 % per annum or 1.75 % per annum for EURIBOR loans or Term SOFR loans, and 1.50 % per annum, 1.25 % per annum, 1.00 % per annum or 0.75 % per annum for ABR loans, in each case, based on the Company’s Consolidated Total Debt to Consolidated EBITDA ratio as defined in the agreement. As of September 30, 2023 and December 31, 2022, the Senior Secured Credit Facility had a total outstanding balance of $ 28,000 and $ 100,000 , respectively. 14 Estimated Fair Value of Debt As of September 30, 2023 and December 31, 2022, the estimated fair value of our debt approximated its carrying value. Certain Covenants As of September 30, 2023, our Amended Credit Agreement contained certain negative covenants including, among others: (1) limitations on additional indebtedness; (2) limitations on dividends; (3) limitations on asset sales, including the sale of ownership interests in subsidiaries and sale-leaseback transactions; and (4) limitations on liens, guarantees, loans or investments. The Amended Credit Agreement also provides, solely with respect to the revolving credit facility, that the Company shall not permit its Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Amended Credit Agreement, to exceed 3.00 x as of the last day of each quarter commencing with the quarter ending December 31, 2019 and thereafter. The agreement also provides that if (i) the Company’s Consolidated Total Debt to Consolidated EBITDA ratio, as defined in the Amended Credit Agreement, is not greater than 3.00 x as of such date and (ii) less than 25 % of the revolving credit facility is utilized as of that date, then such financial covenant shall not apply. As of September 30, 2023, these conditions were satisfied and, therefore, we were not subject to the leverage ratio covenant. In addition, indebtedness at some of our locations contain financial maintenance covenants. We were in compliance with these covenants as of September 30, 2023. Note 7. Leases Laureate conducts a significant portion of its operations at leased facilities, including many of Laureate's higher education facilities and other office locations. In accordance with ASC Topic 842, “Leases,” Laureate analyzes each lease agreement to determine whether it should be classified as a finance lease or an operating lease. Finance Leases Our finance lease agreements are for property and equipment. The lease assets are included within buildings as well as furniture, equipment and software, and the related lease liability is included within debt and finance leases on the Consolidated Balance Sheets. Operating Leases Our operating lease agreements are primarily for real estate space and are included within operating lease right-of-use (ROU) assets and operating lease liabilities on the Consolidated Balance Sheets. The terms of our operating leases vary and generally contain renewal options. Certain of these operating leases provide for increasing rent over the term of the lease. Laureate also leases certain equipment under noncancellable operating leases, which are typically for terms of 60 months or less. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Our variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Many of our lease agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. On occasion, Laureate has entered into sublease agreements for certain leased office space; however, the sublease income from these agreements is immaterial. Note 8. Commitments and Contingencies Loss Contingencies Laureate is subject to legal actions arising in the ordinary course of its business. In management's opinion, we have adequate legal defenses, insurance coverage and/or accrued liabilities with respect to the eventuality of such actions. We do not believe that any settlement would have a material impact on our Consolidated Financial Statements. 15 Income Tax Contingencies As of September 30, 2023 and December 31, 2022, Laureate had recorded cumulative liabilities for income tax contingencies of $ 135,805 and $ 130,323 , respectively. Non-Income Tax Loss Contingencies Laureate has accrued liabilities for certain civil actions against our institutions, a portion of which existed prior to our acquisition of these entities. Laureate intends to vigorously defend against these matters. As of September 30, 2023 and December 31, 2022, approximately $ 15,800 and $ 11,400 , respectively, of loss contingencies were included in Other long-term liabilities and Other current liabilities on the Consolidated Balance Sheets. We have also identified certain loss contingencies that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on the Company’s results of operations if the outcomes are unfavorable. In the aggregate, we estimate that the reasonably possible loss for these unrecorded contingencies could be up to approximately $ 17,800 if the outcomes were unfavorable. Guarantees In connection with a loan agreement entered into by a Laureate subsidiary in Peru, all of the shares of Universidad Privada del Norte, one of our universities, were pledged to the third-party lender as a guarantee of the payment obligations under the loan. During the first quarter of 2021, one of our Peruvian institutions issued a bank guarantee in order to appeal a preliminary tax assessment received related to tax audits of 2014 and 2015. As of September 30, 2023 and December 31, 2022, the amount of the guarantee was $ 7,141 and $ 7,076 , respectively. 16 Note 9. Stockholders’ Equity The components of net changes in stockholders’ equity for the fiscal quarters of 2023 are as follows: Laureate Education, Inc. Stockholders Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock at cost Non-controlling interests Total stockholders’ equity Shares Amount Balance at December 31, 2022 157,013 $ 923 $ 2,204,755 $ 39,244 $ ( 442,424 ) $ ( 1,026,272 ) $ ( 1,869 ) $ 774,357 Non-cash share-based compensation — — 1,124 — — — — 1,124 Exercise of stock options and vesting of restricted stock units, net of shares withheld to satisfy tax withholding 161 1 ( 448 ) — — — — ( 447 ) Equitable adjustments to stock-based awards — — ( 13 ) — — — — ( 13 ) Change in noncontrolling interests — — 16 — — — ( 140 ) ( 124 ) Net loss — — — ( 26,607 ) — — ( 155 ) ( 26,762 ) Foreign currency translation adjustment, net of tax of $ 0 — — — — 72,791 — 6 72,797 Balance at March 31, 2023 157,174 $ 924 $ 2,205,434 $ 12,637 $ ( 369,633 ) $ ( 1,026,272 ) $ ( 2,158 ) $ 820,932 Non-cash share-based compensation — — 1,976 — — — — 1,976 Retirement of treasury stock — ( 295 ) ( 1,025,977 ) — — 1,026,272 — — Exercise of stock options and vesting of restricted stock units, net of shares withheld to satisfy tax withholding 46 — 44 — — — — 44 Equitable adjustments to stock-based awards — — 24 — — — — 24 Net income — — — 56,177 — — 136 56,313 Foreign currency translation adjustment, net of tax of $ 0 — — — — 92,007 — ( 92 ) 91,915 Balance at June 30, 2023 157,220 $ 629 $ 1,181,501 $ 68,814 $ ( 277,626 ) $ — $ ( 2,114 ) $ 971,204 Non-cash share-based compensation — — 1,794 — — — — 1,794 Exercise of stock options and vesting of restricted stock units, net of shares withheld to satisfy tax withholding 147 — 1,032 — — — — 1,032 Equitable adjustments to stock-based awards — — 2 — — — — 2 Net income — — — 36,158 — — ( 177 ) 35,981 Foreign currency translation adjustment, net of tax of $ 0 — — — — ( 46,373 ) — 2 ( 46,371 ) Balance at September 30, 2023 157,367 $ 629 $ 1,184,329 $ 104,972 $ ( 323,999 ) $ — $ ( 2,289 ) $ 963,642 Retirement of Treasury Stock On May 24, 2023, the Company’s Board of Directors approved the retirement of all outstanding shares of treasury stock, which totaled 73,766 shares. The Company recorded the purchases of treasury stock at cost as a separate component within stockholders’ equity in the Consolidated Balance Sheets. Upon retirement of treasury stock, the Company allocates the excess of the purchase price over par value to additional paid-in capital, subject to certain limitations. 17 The components of net changes in stockholders’ equity for the fiscal quarters of 2022 are as follows: Laureate Education, Inc. Stockholders Common stock Additional paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive loss Treasury stock at cost Non-controlling interests Total stockholders’ equity Shares Amount Balance at December 31, 2021 180,611 $ 915 $ 2,388,783 $ 15,523 $ ( 520,204 ) $ ( 744,174 ) $ ( 1,285 ) $ 1,139,558 Non-cash share-based compensation — — 2,762 — — — — 2,762 Purchase of treasury stock at cost ( 9,485 ) — — — — ( 112,874 ) — ( 112,874 ) Exercise of stock options and vesting of restricted stock units, net of shares withheld to satisfy tax withholding 1,379 6 10,716 — — — — 10,722 Equitable adjustments to stock-based awards — — ( 189 ) — — — — ( 189 ) Net loss — — — ( 44,211 ) — — ( 469 ) ( 44,680 ) Foreign currency translation adjustment, net of tax of $ 0 — — — — 49,573 — 2 49,575 Minimum pension liability adjustment, net of tax of $ 0 — — — — 14 — — 14 Balance at March 31, 2022 172,505 $ 921 $ 2,402,072 $ ( 28,688 ) $ ( 470,617 ) $ ( 857,048 ) $ ( 1,752 ) $ 1,044,888 Non-cash share-based compensation — — 2,360 — — — — 2,360 Purchase of treasury stock at cost ( 8,013 ) — — — — ( 93,362 ) — ( 93,362 ) Exercise of stock options and vesting of restricted stock units, net of shares withheld to satisfy tax withholding 171 1 ( 472 ) — — — — ( 471 ) Equitable adjustments to stock-based awards — — ( 35 ) — — — — ( 35 ) Change in noncontrolling interests — — 2 — — — ( 2 ) — Reclassification of redeemable equity to non-redeemable equity — — 316 — — — — 316 Net income — — — 43,423 — — 136 43,559 Foreign currency translation adjustment, net of tax of $ 0 — — — — 17,969 — 3 17,972 Balance at June 30, 2022 164,663 $ 922 $ 2,404,243 $ 14,735 $ ( 452,648 ) $ ( 950,410 ) $ ( 1,615 ) $ 1,015,227 Non-cash share-based compensation — — 1,849 — — — — 1,849 Purchase of treasury stock at cost ( 77 ) — — — — ( 862 ) — ( 862 ) Exercise of stock options and vesting of restricted stock units, net of shares withheld to satisfy tax withholding 63 — 199 — — — — 199 Special cash distribution accrued on outstanding common stock — — ( 136,642 ) — — — — ( 136,642 ) Equitable adjustments to stock-based awards — — ( 770 ) — — — — ( 770 ) Net income — — — 31,117 — — ( 81 ) 31,036 Foreign currency translation adjustment, net of tax of $ 0 — — — — ( 42,160 ) — ( 1 ) ( 42,161 ) Minimum pension liability adjustment, net of tax of $ 0 — — — — 983 — — 983 Balance at September 30, 2022 164,649 $ 922 $ 2,268,879 $ 45,852 $ ( 493,825 ) $ ( 951,272 ) $ ( 1,697 ) $ 868,859 2022 Special Cash Distribution As previously disclosed in the 2022 Form 10-K, on September 14, 2022, the Company announced that its Board approved, pursuant to the previously announced adoption of a Partial Liquidation Plan related to the distribution of net proceeds from the Company’s sale of Walden e-Learning LLC (the Walden Sale), the payment of a special cash distribution (the October 2022 Distribution) equal to $ 0.83 per each share of the Company’s common stock, par value $ 0.004 per share, to each holder of record on September 28, 2022. The proceeds that were distributed were attributable to the release during the third quarter of 2022 of $ 71,700 of escrowed funds from the Walden Sale, plus remaining net proceeds that had yet to be distributed. On October 12, 2022, the Company paid approximately $ 136,600 related to the October 2022 Distribution, which was the final distribution pursuant to the Partial Liquidation Plan. 18 Share-based Compensation Expense During the three and nine months ended September 30, 2023 and 2022, the Company recorded share-based compensation expense for restricted stock unit awards of $ 1,794 and $ 1,849 , respectively, and $ 4,894 and $ 6,971 , respectively. Accumulated Other Comprehen sive Income (Loss) Accumulated other comprehensive income (loss) (AOCI) in our Consolidated Balance Sheets includes the accumulated translation adjustments arising from translation of foreign subsidiaries’ financial statements, the unrealized gain on a derivative designated as an effective net investment hedge, and the accumulated net gains or losses that are not recognized as components of net periodic benefit cost for our minimum pension liability. The AOCI related to the net investment hedge will be deferred from earnings until the sale or liquidation of the hedged investee. The components of these balances were as follows: September 30, 2023 December 31, 2022 Laureate Education, Inc. Noncontrolling Interests Total Laureate Education, Inc. Noncontrolling Interests Total Foreign currency translation adjustment $ ( 333,827 ) $ 875 $ ( 332,952 ) $ ( 452,252 ) $ 959 $ ( 451,293 ) Unrealized gain on derivatives 10,416 — 10,416 10,416 — 10,416 Minimum pension liability adjustment ( 588 ) — ( 588 ) ( 588 ) — ( 588 ) Accumulated other comprehensive loss $ ( 323,999 ) $ 875 $ ( 323,124 ) $ ( 442,424 ) $ 959 $ ( 441,465 ) Note 10. Income Taxes Laureate's income tax provisions for all periods consist of federal, state and foreign income taxes. The tax provisions for the nine months ended September 30, 2023 and 2022 are based on estimated full-year effective tax rates, adjusted for discrete income tax items related specifically to the interim periods. Laureate has operations in multiple countries at various statutory tax rates and other operations that are loss-making entities for which it is not more likely than not that a tax benefit will be realized on the loss. For the nine months ended September 30, 2023, the Company recognized income t ax expense of $ 101,379 , as compared to $ 159,213 in the prior year period. Income tax expense for the nine months ended September 30, 2023 was attributable to pretax income, the jurisdictional mix of earnings, and pretax losses for which the Company cannot recognize a tax benefit. Income tax expense for the nine months ended September 30, 2022 was attributable to pretax income, the jurisdictional mix of earnings, pretax losses for which the Company cannot recognize a tax benefit, and a discrete tax expense of approximately $ 32,500 that was recorded for income tax reserves related to the application of the high-tax exception to global intangible low-taxed income. 19 Note 11. Earnings (Loss) Per Share Laureate computes basic earnings per share (EPS) by dividing income available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted EPS reflects the potential dilution that would occur if share-based compensation awards were exercised or converted into common stock. To calculate the diluted EPS, the basic weighted average number of shares is increased by the dilutive effect of stock options, restricted stock units, and any other share-based compensation arrangements determined using the treasury stock method. The following tables summarize the computations of basic and diluted earnings (loss) per share: For the three months ended September 30, 2023 2022 Numerator used in basic and diluted earnings (loss) per common share for continuing operations: Income from continuing operations $ 35,735 $ 31,852 Loss attributable to noncontrolling interests 177 81 Net income from continuing operations for basic and diluted earnings per share $ 35,912 $ 31,933 Numerator used in basic and diluted earnings (loss) per common share for discontinued operations: Net income (loss) from discontinued operations for basic and diluted earnings per share $ 246 $ ( 816 ) Denominator used in basic and diluted earnings per common share: Basic weighted average shares outstanding 157,268 164,645 Dilutive effect of stock options 226 221 Dilutive effect of restricted stock units 310 149 Diluted weighted average shares outstanding 157,804 165,015 Basic and diluted earnings per share: Income from continuing operations $ 0.23 $ 0.19 Income (loss) from discontinued operations — — Basic and diluted earnings per share $ 0.23 $ 0.19 20 For the nine months ended September 30, 2023 2022 Numerator used in basic and diluted earnings (loss) per common share for continuing operations: Income from continuing operations $ 69,337 $ 25,851 Loss attributable to noncontrolling interests 196 414 Net income from continuing operations for basic and diluted earnings per share $ 69,533 $ 26,265 Numerator used in basic and diluted earnings (loss) per common share for discontinued operations: Net (loss) income from discontinued operations for basic and diluted earnings per share $ ( 3,805 ) $ 4,064 Denominator used in basic and diluted earnings (loss) per common share: Basic weighted average shares outstanding 157,217 169,885 Dilutive effect of stock options 219 302 Dilutive effect of restricted stock units 234 173 Diluted weighted average shares outstanding 157,670 170,360 Basic and diluted earnings per share: Income from continuing operations $ 0.44 $ 0.15 (Loss) income from discontinued operations ( 0.02 ) 0.02 Basic and diluted earnings per share $ 0.42 $ 0.17 The following table summarizes the number of stock options and restricted stock units that were excluded from the diluted EPS calculations because the effect would have been antidilutive: For the three months ended September 30, For the nine months ended September 30, 2023 2022 2023 2022 Stock options — 14 — 54 Restricted stock units — 284 12 239 Note 12. Legal and Regulatory Matters Laureate is subject to legal proceedings arising in the ordinary course of business. In management’s opinion, we have adequate legal defenses, insurance coverage, and/or accrued liabilities with respect to the eventuality of these actions. Management believes that any settlement would not have a material impact on Laureate’s financial position, results of operations, or cash flows. Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and results of operations. Except as set forth below, there have been no material changes to the laws and regulations affecting our higher education institutions that are described in our 2022 Form 10-K. Peru Regulation Superintendencia Nacional de Educación Superior Universitaria (“SUNEDU”), the regulatory agency that supervises university standards and quality in Peru, is currently reviewing all regulations applicable to universities, with new regulations expected to be announced at a future time. This follows the appointment of new members to the board of SUNEDU in the first quarter of 2023 in connection with the implementation of the July 2022 law that modified SUNEDU’s board representation and authority. On March 30, 2023, Cibertec, the Company’s technical-vocational institute, was granted a higher education colleges license for a six-year period. This license will now allow Cibertec to offer four-year programs for professional bachelor degrees. 21 Note 13. Supplemental Cash Flow Information Reconciliation of Cash and cash equivalents and Restricted cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets, as well as the September 30, 2022 balance. The September 30, 2023 and September 30, 2022 balances sum to the amounts shown in the Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022: September 30, 2023 September 30, 2022 December 31, 2022 Cash and cash equivalents $ 130,862 $ 319,039 $ 85,167 Restricted cash 7,587 17,448 8,617 Total Cash and cash equivalents and Restricted cash shown in the Consolidated Statements of Cash Flows $ 138,449 $ 336,487 $ 93,784 Restricted cash represents cash that is not immediately available for use in current operations. Note 14. Subsequent Events 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 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 $ 110,000 . In connection with the 2023 Special Dividend, the Board of Directors approved certain required adjustments under the Company’s equity award compensation plans. Subject to the payment of the 2023 Special Dividend, the exercise price of the Company’s options will be reduced by $ 0.70 per share, and holders of restricted and performance stock units will receive an amount in cash equal to $ 0.70 per unvested stock unit held payable when such unit vests. If all outstanding stock units vest, the aggregate amount to be paid in respect of the units will be approximately $ 700 . 22