What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-23 · 142 added, 187 removed, 518 unchanged (39% of the section changed)

49 unchanged sentences

• In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute approximately 74% 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.

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5 448,900 $ 1,484.3 100 %

(1) Amounts related to Corporate totaled $4.1 million and are not separately presented.

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.

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See “Item 1A—Risk Factors—Risks Relating to Our Business—Our reported revenues and earnings may be negatively affected by the strengthening of the U.S.

dollar and currency exchange rates.” In 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 any acquisitions, divestitures and 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.

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See “Item 1A—Risk Factors—Risks Relating to Our Business—We may have exposure to greater-than-anticipated tax liabilities.”

The Organization for Economic Co-operation and Development (OECD) has proposed changes to numerous long-standing tax principles.

These proposals, if finalized and adopted by the associated countries, will likely increase tax uncertainty, and may adversely affect our provision for income taxes.

The Company will continue to monitor regulatory developments to assess potential impacts to the Company.

Many countries have enacted legislation and adopted policies to implement the global minimum tax resulting from the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting project.

Significant details and guidance around the global minimum tax provisions are still pending.

For countries that have enacted the global minimum tax, they are generally effective for the Company beginning in 2024.

Income tax expense could be adversely affected as the legislation becomes effective in countries in which we do business.

We will continue to monitor pending legislation and implementation by individual countries in which we operate.

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act of 2022, which implemented a 15% minimum tax on book income of certain large corporations, a 1% excise tax on stock repurchases and tax incentives to promote clean energy, among other provisions.

This legislation has not had a material impact on the financial statements and the Company will continue to monitor regulatory developments to assess potential impacts.

Results of the Discontinued Operations

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Other non-operating expense — — (22.3)

Gain on sale of discontinued operations before taxes, net 7.8 636.2 25.0

Pretax income (loss) of discontinued operations 7.8 721.2 (183.8)

(Loss) gain on sale of discontinued operations before taxes, net (9.8) 7.8 636.2

Pretax (loss) income of discontinued operations (9.8) 7.8 721.2

Income tax benefit (expense) — 0.5 (234.3)

Income (loss) from discontinued operations, net of tax $ 8.3 $ 486.9 $ (298.1)

(Loss) income from discontinued operations, net of tax $ (9.8) $ 8.3 $ 486.9

Year Ended December 31, 2023

The $9.8 million loss in the table above primarily resulted from an adjustment to the sale price of Walden University pursuant to an indemnification claim received from the buyer, as described in Note 5, Dispositions, in our consolidated financial statements included elsewhere in this Form 10-K.

The remainder of the loss was mostly attributable to changes in estimates regarding the realizability of certain receivables from previous divestitures.

Year Ended December 31, 2022

The $7.8 million gain in the table above primarily resulted from the transfer of the remaining assets and liabilities that were classified as held for sale as of December 31, 2021, which related to the divestiture of our operations in Chile.

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In addition, the Company recognized estimated tax expense of approximately $278.0 million.

Year Ended December 31, 2020

On January 10, 2020, we sold our operations in Costa Rica, which resulted in a pre-tax loss of approximately $18.6 million.

This loss was in addition to a previously recorded loss of approximately $25.0 million that we recognized in 2019 to write down the carrying value of the held-for-sale Costa Rica disposal group to its estimated fair value.

On March 6, 2020, we sold the operations of NewSchool of Architecture and Design, LLC (NSAD), which resulted in a pre-tax loss of approximately $5.9 million.

During the second quarter of 2020, we recorded impairment charges of $418.0 million related to our Chilean operations, in order to write down the carrying value of their assets to their estimated fair value, and $3.3 million related to the Brazil enrollment to graduation (E2G) software assets.

We also recorded a loss of $10.0 million on the held-for-sale Honduras disposal group, in order to write down the carrying value of the group to its estimated fair value, which is included in Gain on sale of discontinued operations before taxes, net.

During the third quarter of 2020, we recorded a loss of approximately $190.0 million related to our Brazil operations in order to write down the carrying value of Brazil’s disposal group to its estimated fair value.

We also recorded an additional loss of $10.0 million related to our held-for-sale Honduras group, in order to write down its carrying value to the estimated fair value based on the sale agreement that was signed in October 2020.

These losses are included in Gain on sale of discontinued operations before taxes, net.

On September 10, 2020, we completed the divestiture of our operations in Chile, resulting in a pre-tax loss of approximately $338.2 million that relates primarily to the accumulated foreign currency translation losses associated with the Chilean operations.

On September 29, 2020, we completed the sale of our operations in Malaysia, which resulted in a pre-tax gain of approximately $47.9 million.

In early October 2020, we received a payment for $8.4 million, representing a portion of the $15.0 million deferred purchase price related to the sale of our operations in Turkey in August 2019.

At the time of the sale, the Company determined that this deferred purchase price would be recognized if collected.

On November 3, 2020, we completed the sale of our Australia and New Zealand operations, which resulted in a pre-tax gain of approximately $555.8 million.

During the fourth quarter of 2020, we recorded an additional loss of approximately $15.0 million in order to adjust the carrying value of our Brazil’s disposal group to its estimated fair value less costs to sell as of December 31, 2020.

This loss is included in Gain on sale of discontinued operations before taxes, net.

Results of Operations

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Summary Comparison of Consolidated Results

Discussion of Significant Items Affecting the Consolidated Results for the Years Ended December 31, 2021 and 2020

Year Ended December 31, 2021

Discussion of Significant Items Affecting the Consolidated Results for the Year Ended December 31, 2021

In March 2021, the Company decided that, during 2021, it would wind down certain support functions related to the Laureate network and would no longer invest in and support the Laureate tradename beyond 2021.

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In connection with the lease termination agreement, we recorded a loss of approximately $25.8 million, which is included in Excellence-in-Process (EiP) expenses within Operating (loss) income in the table below.

Year Ended December 31, 2020

During the first quarter of 2020, the Company recorded an impairment charge of $3.8 million primarily related to the write-off of capitalized curriculum development costs for a program that the Company decided to stop developing.

During the second quarter of 2020, the Company recorded an impairment charge of approximately $23.8 million related to the Brazil enrollment to graduation cycle ( E2G) software assets that were recorded on the Corporate segment, as described in Note 7, Goodwill and Other Intangible Assets, in our consolidated financial statements included elsewhere in this Form 10-K.

During the third quarter of 2020, the Company recognized an impairment charge of $320.0 million on the Laureate tradename, an intangible asset, as described in Note 7, Goodwill and Other Intangible Assets, in our consolidated financial statements included elsewhere in this Form 10-K.

In November 2020, Universidad del Valle de Mexico, SC, a wholly owned subsidiary of the Company, signed an agreement to sell the land and buildings of Campus Guadalajara Norte, after a decision was made to relocate all students of Campus Guadalajara Norte to the nearby Campus Zapopan in Jalisco, Mexico.

The total purchase price was approximately $13.9 million, prior to transaction fees.

The Company recognized a pre-tax operating gain on the sale of this property and equipment of approximately $5.8 million, which is included in Direct costs in the table below.

During the fourth quarter of 2020, the Company dissolved a dormant subsidiary, resulting in the release of accumulated foreign currency translation loss of approximately $6.1 million.

This loss is included in Other non-operating expense in the table below and is part of continuing operations as this entity was not part of the strategic shifts described above in Overview.

Comparison of Consolidated Results for the Years Ended December 31, 2023, 2022 and 2021

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General and administrative expenses 52.6 64.8 204.4 19 % 68 %

Loss on impairment of assets 0.1 72.5 352.0 100 % 79 %

Loss on impairment of assets 3.1 0.1 72.5 nm 100 %

Operating income (loss) 338.8 270.0 (4.6) 25 % nm

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Income (loss) from continuing operations before income taxes and equity in net income of affiliates 254.5 245.9 (137.5) 3 % nm

Income tax (expense) benefit (185.4) (145.6) 130.1 (27) % nm

Income tax expense

(137.6) (185.4) (145.6) 26 % (27) %

Equity in net income of affiliates, net of tax 0.2 0.3 — (33) % nm

Income (loss) from continuing operations 117.0 60.7 (283.1) 93 % 121 %

Income (loss) from discontinued operations, net of tax 8.3 486.9 (298.1) (98) % nm

Net income (loss) 69.0 203.8 (618.7) (66) % 133 %

Net loss (income) attributable to noncontrolling interests 0.6 (11.3) 5.4 (105) % nm

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

(Loss) income from discontinued operations, net of tax

(9.8) 8.3 486.9 nm (98) %

107.3 69.0 203.8 56 % (66) %

Net loss (income) attributable to noncontrolling interests 0.3 0.6 (11.3) 50 % (105) %

Net income attributable to Laureate Education, Inc.

$ 107.6 $ 69.6 $ 192.4 55 % (64) %

nm - percentage changes not meaningful

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Revenues increased by $242.0 million to $1,484.3 million for 2023 from $1,242.3 million for 2022.

The increase was attributable to:

(1) the effect of a net change in foreign currency exchange rates, which increased revenues by $108.9 million, mainly driven by the strengthening of the Mexican peso against the USD compared to 2022;

(2) higher average total organic enrollment at our institutions, which increased revenues by $79.3 million compared to 2022;

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 $57.9 million compared to 2022.

These increases in revenues were partially offset by other Corporate and Eliminations changes, which accounted for a decrease in revenues of $4.1 million.

Direct costs and general and administrative expenses combined increased by $170.2 million to $1,142.4 million for 2023 from $972.2 million for 2022.

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 $94.0 million compared to 2022.

Additionally, the effect of a net change in foreign currency exchange rates increased costs by $86.3 million.

These increases in direct costs were partially offset by a decrease in costs of $10.1 million in 2023 related to other Corporate expenses.

Operating income (loss) increased by $68.8 million to $338.8 million for 2023 from $270.0 million for 2022.

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

Interest expense, net of interest income increased by $3.0 million to $11.9 million for 2023 from $8.9 million for 2022.

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

Other non-operating expense increased by $57.2 million to $72.5 million for 2023 from $15.3 million for 2022.

This increase was attributable to a higher loss on foreign currency exchange of $58.3 million compared to 2022, mainly related to intercompany loan arrangements.

Additionally, other income was lower by $1.1 million compared to 2022.

These increases in non-operating expense were partially offset by a higher gain on disposal of subsidiaries of $2.2 million, primarily attributable to the release of accumulated foreign currency translation gains upon the liquidation of certain subsidiaries.

Income tax expense dec reased by $47.8 million to $137.6 million for 2023 from $185.4 million for 2022.

This decrease was primarily attributable to a discrete tax expense recorded in 2022 of approximately $32.5 million for an income tax reserve related to the application of the high-tax exception to global intangible low-taxed income, with the remaining difference mostly related to a benefit recorded in 2023 of approximately $11.5 million for the release of valuation allowances in Mexico.

(Loss) income from discontinued operations, net of tax changed by $18.1 million to a loss of $(9.8) million for 2023 compared to income of $8.3 million for 2022.

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

See Overview for further detail on results of the Discontinued Operations.

Comparison of Consolidated Results for the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Revenues increased by $155.6 million to $1,242.3 million for 2022 from $1,086.7 million for 2021.

Average total organic enrollment was higher at our institutions, increasing revenues by $111.9 million compared to 2021.

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Additionally, the effect of a net change in foreign currency exchange rates increased costs by $10.0 million compared to 2021.

Operating income (loss) changed by $274.6 million to income of $270.0 million for 2022 from loss of $(4.6) million for 2021.

Operating income (loss) changed by $274.6 million to income of $270.0 million for 2022 from a loss of $(4.6) million for 2021.

This increase in operating income was primarily a result of the impairment loss related to the Laureate tradename impairment that was recognized during 2021, combined with higher operating income at our Mexico and Peru segments during 2022.

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These decreases in other non-operating expense were partially offset by foreign currency exchange loss in 2022, compared to a gain in 2021, for a change of $31.2 million.

Income tax expense inc reased by $39.8 million to $185.4 million for 2022 from $145.6 million for 2021.

Income tax expense increased by $39.8 million to $185.4 million for 2022 from $145.6 million for 2021.

This increase was primarily driven by the tax effect of the increase in pretax income in 2022 compared to 2021.

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See Overview for further detail on results of the Discontinued Operations.

Net loss (income) attributable to noncontrolling interests changed by $11.9 million to a loss of $0.6 million for 2022 from an income of $(11.3) million for 2021.

This change was primarily related to our previous joint venture in Saudi Arabia and the income effect to noncontrolling interests that resulted in 2021 from the settlement of certain intercompany transactions.

Comparison of Consolidated Results for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Revenues increased by $61.8 million to $1,086.7 million for 2021 from $1,024.9 million for 2020.

Average total enrollment at a majority of our institutions, mainly in our Peru segment, increased during 2021, increasing revenues by $75.2 million compared to 2020.

The increase in average total enrollment in Peru was attributable to a robust primary intake cycle during 2021 and increased retention rates.

Additionally, the effect of product mix, pricing and timing increased revenues by $19.6 million compared to 2020.

These increases in revenues were partially offset by the effect of a net change in foreign currency exchange rates, which decreased revenues by $34.8 million, due to weakening of the Peruvian nuevo sol against the USD.

Other Corporate and Eliminations changes accounted for an increase in revenues of $1.8 million.

Direct costs and general and administrative expenses combined increased by $16.6 million to $1,018.9 million for 2021 from $1,002.3 million for 2020.

The effect of operational changes increased direct costs by $42.0 million compared to 2020, mainly driven by higher amortization expense at Corporate, mostly related to the amortization of the finite-lived tradename.

Changes in acquisition-related contingent liabilities for taxes other-than-income tax, net of changes in indemnification assets resulted in a year-over-year increase in costs of $7.8 million.

These increases in direct costs were partially offset by a decrease in EiP implementation expense, which decreased direct costs by $14.2 million, driven by cost-saving initiatives.

Additionally, the effect of a net change in foreign currency exchange rates decreased costs by $12.2 million compared to 2020.

Other Corporate and Eliminations expenses accounted for a decrease in costs of $6.8 million in 2021, related to cost-reduction efforts.

Operating loss decreased by $324.7 million to $4.6 million for 2021 from $329.3 million for 2020.

This change was primarily a result of lower impairment charges of $279.5 million, mainly related to the Laureate tradename impairment recognized during 2020.

Additionally, operating income at our Peru and Mexico segments increased during 2021 compared to 2020.

Interest expense, net of interest income decreased by $56.8 million to $41.9 million for 2021 from $98.7 million for 2020.

The decrease in interest expense was primarily attributable to lower average debt balances as a result of debt repayments.

Other non-operating expense increased by $68.2 million to $91.0 million for 2021 from $22.8 million for 2020.

This increase was attributable to a higher loss on debt extinguishment of $77.3 million, primarily related to the repayment of the Senior Notes due 2025 during 2021.

This increase in other non-operating expense was partially offset by:

(1) a lower loss on disposal of subsidiaries of $6.7 million;

(2) a lower loss on derivative instruments during 2021 of $1.5 million;

(3) a decrease in foreign currency exchange gain of $0.3 million;

and (4) a decrease in other non-operating expense of $0.6 million.

Income tax (expense) benefit changed by $275.7 million to an expense of $(145.6) million for 2021 from a benefit of $130.1 million for 2020.

This change was attributable to tax expense recorded in 2021 of approximately $35.7 million related to amended returns filed for the Company's election to exclude certain foreign income of foreign corporations from global intangible low-taxed income (GILTI).

In the prior year the company recorded a $70.9 million tax benefit for this item, resulting in a year-over-year change of approximately $106.6 million.

In addition, the decrease in pre-tax loss in the current year resulted in $76.9 million of less tax benefit compared to 2020.

Additionally, there was a year-over-year increase in state tax expense of $41.3 million and a year-over-year increase in withholding taxes of $30.0 million.

Income (loss) from discontinued operations, net of tax changed by $785.0 million to income of $486.9 million for 2021 from a loss of $(298.1) million for 2020.

This change was primarily driven by the gain on sale of Walden University during 2021, combined with impairment charges recorded during 2020 and charges recorded during 2020 to write down certain held-for-sale disposal groups to fair value.

See Overview for further detail on results of the Discontinued Operations.

Net (income) loss attributable to noncontrolling interests changed by $16.7 million to income of $(11.3) million for 2021 from a loss of $5.4 million for 2020.

Net loss (income) attributable to noncontrolling interests changed by $11.9 million to a loss of $0.6 million for 2022 from income of $(11.3) million for 2021.

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, loss (gain) on derivatives, loss on debt extinguishment, interest expense and interest income, plus depreciation and amortization, share-based compensation expense, loss on impairment of assets and expenses related to our Excellence-in-Process (EiP) initiative.

We define Adjusted EBITDA as net income, before loss (income) from discontinued operations, net of tax, equity in net (income) loss of affiliates, net of tax, and income tax expense (benefit) adjusted for (gain) loss on disposal of subsidiaries, net, foreign currency exchange (gain) loss, net, other expense (income), net, interest expense, interest income, loss on derivatives and loss on debt extinguishment, 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.

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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 (loss) from continuing operations to Adjusted EBITDA for the years ended December 31, 2022 , 2021 and 2020:

The following table presents Adjusted EBITDA and reconciles Net income to Adjusted EBITDA for the years ended December 31, 2023 , 2022 and 2021:

Better/(Worse)

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2022 2022 vs.

Net income $ 107.3 $ 69.0 $ 203.8 56 % (66) %

Loss (income) from discontinued operations, net of tax 9.8 (8.3) (486.9) nm (98) %

Income (loss) from continuing operations 117.0 60.7 (283.1) 93 % 121 %

Equity in net income of affiliates, net of tax (0.2) (0.3) — (33) % nm

Income tax expense (benefit) 185.4 145.6 (130.1) (27) % nm

Income tax expense

137.6 185.4 145.6 26 % (27) %

Income (loss) from continuing operations before income taxes and equity in net income of affiliates 254.5 245.9 (137.5) 3 % nm

(Gain) loss on disposal of subsidiaries, net (3.6) (1.4) 0.6 157 % nm

Foreign currency exchange loss (gain), net 17.4 (13.8) (13.5) nm 2 %

Other (income) expense, net (0.8) 1.7 2.4 147 % 29 %

Loss on derivatives — 24.5 26.0 100 % 6 %

Loss on debt extinguishment — 77.9 0.6 100 % nm

Foreign currency exchange loss (gain), net 75.7 17.4 (13.8) nm nm

Other expense (income), net

0.3 (0.8) 1.7 (138) % 147 %

Interest expense 21.0 16.4 46.3 (28) % 65 %

Interest income (9.1) (7.6) (4.4) 20 % 73 %

Loss on derivatives — — 24.5 nm 100 %

Loss on debt extinguishment — — 77.9 nm 100 %

Operating income (loss) 338.8 270.0 (4.6) 25 % nm

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Loss on impairment of assets (b)

0.1 72.5 352.0 100 % 79 %

3.1 0.1 72.5 nm 100 %

EiP implementation expenses (c)

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(b) Represents non-cash charges related to impairments of long-lived assets.

For further details on certain impairment items see “Discussion of Significant Items Affecting the Consolidated Results for the Years Ended December 31, 2021 and 2020.”

For further details on certain impairment items see “Discussion of Significant Items Affecting the Consolidated Results for the Year Ended December 31, 2021.”

(c) EiP implementation expenses are related to our enterprise-wide initiative to optimize and standardize Laureate’s processes, creating vertical integration of procurement, information technology, finance, accounting and human resources.

It included the establishment of regional shared services organizations (SSOs), as well as improvements to the Company's system of internal controls over financial reporting.

The EiP initiative also 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 incurred in connection with the 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 Years Ended December 31, 2023 and 2022

Depreciation and amortization increased by $10.5 million to $69.6 million for 2023 from $59.1 million for 2022.

The effects of foreign currency exchange rates increased depreciation and amortization expense by $5.3 million.

The remaining increase in depreciation and amortization expense of $5.2 million was primarily attributed to a higher depreciable asset base in Mexico and Peru.

Comparison of Depreciation and Amortization and EiP Implementation Expenses for the Years Ended December 31, 2022 and 2021

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This decrease resulted from the completion of our EiP program in 2021, with the exception of certain EiP expenses related to the run out of programs that began in prior periods.

Comparison of Depreciation and Amortization and EiP Implementation Expenses for the Years Ended December 31, 2021 and 2020

Depreciation and amortization increased by $18.1 million to $101.2 million for 2021 from $83.1 million for 2020.

This increase was primarily attributable to amortization of Laureate's tradename which, during 2020, changed from being an indefinite-lived intangible asset to being a finite-lived intangible asset.

When combined with other items, this increased depreciation and amortization expense by $19.3 million.

Partially offsetting this increase was the effect of foreign currency exchange, which decreased depreciation and amortization expense by $1.2 million for 2021, as compared to 2020.

EiP implementation expenses decreased by $14.2 million to $75.4 million for 2021 from $89.6 million for 2020.

This decrease was primarily attributable to lower costs during 2021 associated with an enterprise-wide program aimed at revenue growth, combined with lower severance costs and lower legal and consulting fees related to our divestiture activity.

The decreases in EiP costs were partially offset by the cost associated with the lease buyout for our Kendall property in Chicago, Illinois, and lease termination for our previous Corporate headquarters in 2021.

Segment Results

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Foreign exchange 91.6 71.0 20.6

— (13.1) 13.1

December 31, 2023 $ 782.6 $ 605.6 $ 177.0

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• Organic enrollment increased during 2023 by 10%, increasing revenues by $52.2 million.

• Revenues from our Mexico segment represented 50% of our consolidated total revenues for both 2022 and 2021.

Adjusted EBITDA increased by $27.6 million, a 29% increase from 2021.

• The increase in Adjusted EBITDA included a year-over-year benefit from the $13.1 million charge recorded during 2021 related to acquisition-related contingencies.

• Revenues from our Mexico segment represented 53% of our consolidated total revenues for 2023 compared to 50% for 2022.

Adjusted EBITDA increased by $53.6 million, a 43% increase from 2022, mainly driven by higher revenues, partially offset by higher costs associated with return-to-campus expenses.

Comparison of Mexico Results for the Year Ended December 31, 2022 to the Year Ended December 31, 2021

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Foreign exchange 6.3 4.2 2.1

— (13.1) 13.1

December 31, 2022 $ 613.9 $ 490.5 $ 123.4

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Revenues increased by $73.5 million, a 14% increase from 2021.

• The Mexican peso strengthened against the USD during 2021 compared to 2020, increasing revenue by $27.0 million.

• Organic enrollment during 2021 remained relatively flat compared to 2020.

• The decrease in revenues from product mix, pricing and timing was mainly due to an increase in discounts and scholarships as a percentage of revenues.

• Revenues from our Mexico segment represented 50% of our consolidated total revenues for 2021 compared to 53% for 2020.

Adjusted EBITDA decreased by $17.1 million, a 15% decrease from 2020.

• The decrease in Adjusted EBITDA included a year-over-year effect of a gain of $5.8 million from the sale of land and buildings at one of our campuses in 2020, which is included in Organic constant currency.

• Organic enrollment increased during 2022 by 9%, increasing revenues by $41.8 million.

• Revenues from our Mexico segment represented 50% of our consolidated total revenues for 2022 and 2021.

Adjusted EBITDA increased by $27.6 million, a 29% increase from 2021.

• The increase in Adjusted EBITDA included a year-over-year benefit from the $13.1 million charge recorded during 2021 related to acquisition-related contingencies.

Financial Overview

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• Organic enrollment increased during 2023 by 6%, increasing revenues by $27.1 million.

• Revenues from our Peru segment represented 50% of our consolidated total revenues for both 2022 and 2021.

Adjusted EBITDA increased by $21.0 million, a 9% increase from 2021.

• Revenues from our Peru segment represented 47% of our consolidated total revenues for 2023 compared to 50% for 2022.

Adjusted EBITDA increased by $20.2 million, an 8% increase from 2022, mainly driven by higher revenues, partially offset by higher costs associated with return-to-campus expenses.

Comparison of Peru Results for the Year Ended December 31, 2022 to the Year Ended December 31, 2021

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(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 $87.1 million, an 16% increase from 2021.

• Organic enrollment increased during 2021 by 16%, increasing revenues by $75.2 million, mainly driven by a robust primary intake cycle during 2021 and increased retention rates.

• Revenues from our Peru segment represented 50% of our consolidated total revenues for 2021 compared to 47% for 2020.

Adjusted EBITDA increased by $56.2 million, a 30% increase from 2020, primarily driven by higher enrollments.

Corporate revenues primarily include our transition services agreements related to divestitures, which were mostly completed in 2022.

• Organic enrollment increased during 2022 by 14%, increasing revenues by $70.1 million.

• Revenues from our Peru segment represented 50% of our consolidated total revenues for both 2022 and 2021.

Adjusted EBITDA increased by $21.0 million, a 9% increase from 2021.

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.

Operating results for Corporate for the years ended December 31, 2023, 2022 and 2021 were as follows:

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Comparison of Corporate Results for the Year Ended December 31, 2023 to the Year Ended December 31, 2022

Adjusted EBITDA increased by $36.9 million, a 42% increase from 2021, mainly driven by a decrease in labor costs and other professional fees, related to cost-reduction efforts.

Adjusted EBITDA increased by $6.0 million, a 12% increase from 2022, mainly driven by a decrease in labor expenses and other professional fees, as well as a reduction in IT-related costs.

Comparison of Corporate Results for the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Adjusted EBITDA increased by $8.6 million, a 9% increase from 2020.

• Labor costs and other professional fees decreased expenses by $23.3 million for 2021 compared to 2020, related to cost-reduction efforts.

This increase in Adjusted EBITDA was partially offset by other items, which accounted for a decrease in adjusted EBITDA of $14.7 million.

Adjusted EBITDA increased by $36.9 million, a 42% increase from 2021, mainly driven by a decrease in labor costs and other professional fees, related to cost-reduction efforts.

Liquidity and Capital Resources

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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 revolving credit facility provides for borrowings of $410.0 million and has a maturity date of October 7, 2024.

From time to time, we draw down on the revolver, and, in accordance with the terms of the credit agreement, any proceeds drawn on the revolving credit facility may be used for general corporate purposes.

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 2028 (the "Series 2028 Tranche") for a $300.0 million 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 $10.0 million.

From time to time, we draw down on the Revolving Credit Facility , 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 December 31, 2023, the Company had borrowed $59.0 million of the $300.0 million of available capacity.

In addition to the Senior Secured Credit Facility, our subsidiaries had approximately $63.7 million of available borrowing capacity under lines of credit and short-term borrowing arrangements as of December 31, 2022.

If certain conditions are satisfied, the Third Amended and Restated Credit Agreement (the Third A&R Credit Agreement) also provides for 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.

In addition to the Revolving Credit Facility, our subsidiaries had approximately $68.8 million of available borrowing capacity under lines of credit and short-term borrowing arrangements as of December 31, 2023.

If certain conditions are satisfied, the Amended Credit Agreement also provides for 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 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 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 $7.5 million and $8.6 million as of December 31, 2023 and 2022, respectively.

As of December 31, 2022, restricted cash consisted of cash equivalents held as assets for a supplemental employment retention agreement for a former executive.

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

Indefinite Reinvestment of Foreign Earnings

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We have analyzed our domestic operation's cash repatriation strategies, projected cash flows, projected working capital and liquidity, and the expected availability within the debt or equity markets to provide funds for our domestic needs.

Based on our analysis, we believe we have the ability to indefinitely reinvest our historical foreign earnings.

Based on our analysis, we believe we have the ability to indefinitely reinvest our historical foreign earnings that would be subject to tax.

If our expectations change based on future developments such that some or all of the undistributed earnings of our foreign subsidiaries may be remitted to the United States in the foreseeable future, we will be required to recognize deferred tax expense and liabilities and pay additional taxes on any amounts that we are unable to repatriate in a tax-free manner.

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capital expenditures;

stock repurchases;

an indemnification claim;

and business development activities.

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payments of deferred compensation;

stock repurchases;

and payments of other third-party obligations.

Our debt obligations consisted of $100.0 million of borrowings under the Senior Secured Credit Facility and $86.0 million of other debt as of December 31, 2022.

In addition, our finance lease obligations and sale-leaseback financings were $48.2 million.

As of December 31, 2023, our debt obligations consisted of borrowings under the Senior Secured Credit Facility and other debt instruments at our operations, as well as finance lease obligations and sale-leaseback financings.

Senior Secured Credit Facility

As of December 31, 2022 and 2021, there was $100.0 million and no balance outstanding under our Senior Secured Credit Facility, respectively.

During the fourth quarter of 2022, the Company borrowed on our Senior Secured Credit Facility primarily to fund the repurchase of shares in connection with the secondary offering that the Company completed in November 2022.

For more detail on the secondary offering, see Note 11, Share-based Compensation and Equity, in our consolidated financial statements included elsewhere in this Form 10-K.

As of December 31, 2023 and 2022, there was a $59.0 million and $100.0 million balance outstanding under our Senior Secured Credit Facility, respectively.

Other debt includes lines of credit and short-term borrowing arrangements of subsidiaries and notes payable, the significant components of which are described below.

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The loan matures in June 2024 and carries a variable interest rate, plus an applicable margin, which is established based on the ratio of debt to EBITDA, as defined in the agreement (13.00% as of December 31, 2023).

The current quarterly payments on the loan total MXN 72.3 million ($3.7 million at December 31, 2022)

and increase over the remaining term of the loan to MXN 76.5 million ($3.9 million at December 31, 2022), with a balloon payment of MXN 425.0 million ($21.9 million at December 31, 2022) due at maturity.

The current quarterly payments on the loan total MXN 76.5 million ($4.5 million at December 31, 2023), with a balloon payment of MXN 425.0 million ($25.0 million at December 31, 2023) due at maturity.

As of December 31, 2023 and 2022, the outstanding balance of this loan was $29.5 million and $41.4 million, respectively.

In December 2017, one of our subsidiaries in Peru entered into an agreement to borrow PEN 247.5 million (approximately $76.0 million at the agreement date).

The loan bears interest at a fixed rate of 6.62% per annum and matures in December 2023.

Over the remaining term of the loan, quarterly payments of PEN 14.4 million ($3.8 million at December 31, 2022) are due.

As of December 31, 2022 and 2021, this loan had a balance of $15.1 million and $29.0 million, respectively.

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.

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 December 31, 2023, these conditions were satisfied and, therefore, we were not subject to the leverage ratio.

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As of December 31, 2023 and 2022, the present value of operating lease liabilities was $417.6 million and $415.9 million, respectively.

Based on the leases outstanding at December 31, 2022, $83.6 million of minimum lease payments will be required during 2023.

Based on the operating leases outstanding at December 31, 2023, $95.0 million of minimum lease payments will be required during 2024.

In addition, we had finance lease obligations and sale-leaseback financings of $57.6 million and $48.2 million as of December 31, 2023 and 2022, respectively.

Capital Expenditures

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Our total capital expenditures for our continuing and discontinued operations, excluding receipts from the sale of subsidiaries and property and equipment, were $56.5 million, $53.1 million and $56.3 million during 2023, 2022 and 2021, respectively.

The 6% increase in capital expenditures for 2023 compared to 2022 was primarily due to investment in equipment for health science programs in Peru as well as campus expansion and digital innovation in Mexico.

The 6% decrease in capital expenditures for 2022 compared to 2021 was primarily due to the year-over-year effect of divestitures completed in 2021 combined with lower spending in Peru and Corporate, partially offset by higher spending in health science programs in Mexico.

The 37% decrease in capital expenditures for 2021 compared to 2020 was primarily due to the completed divestitures.

St ock Repurchase Program

On February 15, 2024, Laureate’s Board of Directors approved a new stock repurchase program to acquire up to $100 million of the Company’s common stock.

The Company intends to finance the repurchases with free cash flow, excess cash and liquidity on-hand, including available capacity under its Revolving Credit Facility.

The Company’s proposed repurchases may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Repurchases may be effected pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act.

The Company’s board will review the share repurchase program periodically and may authorize adjustment of its terms and size or suspend or discontinue the program.

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.

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Operating activities

Cash flows from operating activities changed by $334.3 million to a cash inflow of $178.2 million for 2022, compared to a cash outflow of $(156.1) million for 2021.

Cash provided by operating activities increased by $72.6 million to $250.8 million for 2023, compared to $178.2 million for 2022.

This increase in operating cash flows was attributable to higher operating income, combined with the net effect of changes in operating assets and liabilities, which increased operating cash by $93.6 million compared to 2022.

This increase in cash inflows was offset in part by an increase in cash paid for taxes of $17.5 million, from $153.8 million in 2022 to $171.3 million in 2023, which was a result of higher tax prepayments during the 2023 period in Mexico and Peru, partially offset by tax refunds in the United States.

Additionally, cash paid for interest increased by $3.5 million, from $16.8 million in 2022 to $20.3 million in 2023, attributable to higher average debt balances in 2023.

Investing activities

Cash from investing activities decreased by $82.2 million to a cash outflow of $(51.9) million for 2023 from a cash inflow of $30.3 million for 2022.

This decrease in investing cash flows was attributable to lower cash receipts from the sales of Discontinued Operations and property and equipment of $78.9 million, from $83.4 million, net, during 2022 (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 $4.5 million, net, in 2023 (primarily related to the receipt of an earnout receivable from the sale of our Brazilian operations).

Additionally, cash used for capital expenditures increased by $3.4 million compared to 2022, mainly driven by investment in equipment for health science programs in Peru as well as campus expansion and digital innovation in Mexico.

Other items accounted for the remaining difference of $0.1 million.

Financing activities

Cash used in financing activities decreased by $259.7 million to $(201.9) million for 2023 from $(461.6) million for 2022.

This decrease in financing cash outflows was attributable to the year-over-year effect of $282.2 million of payments made during 2022 for common stock repurchases.

In addition, payments of special dividends and distributions were lower by $140.7 million, from $253.2 million in 2022 to $112.5 million in 2023.

These decreases in financing cash outflows were partially offset by:

(1) higher net payments of long-term debt during 2023 as compared to 2022, for a change of $152.2 million;

(2) lower proceeds from the exercise of common stock options of $10.9 million;

and (3) payment of debt issuance costs of $1.3 million during 2023 in connection with the amendment of our Senior Secured Credit Facility.

Other items accounted for the remaining difference of $1.2 million.

Comparison of Cash Flows for the Year Ended December 31, 2022 to the Year Ended December 31, 2021

Operating activities

Cash flows from operating activities changed by $334.3 million to cash inflow of $178.2 million for 2022, compared to a cash outflow of $(156.1) million for 2021.

This increase in operating cash flows was attributable to:

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(2) lower cash paid for taxes of $97.3 million, from $251.1 million in 2021 to $153.8 million in 2022, a decrease primarily driven by the payment of estimated taxes related to the sale of Walden University in 2021 and payment of withholding taxes for intercompany loans that were capitalized during 2021;

(3) the year-over-year effect of $46.8 million of payments for lease termination agreements in 2021;

(3) the year-over-year effect of $46.8 million of

payments for lease termination agreements in 2021;

and (4) a decrease in cash paid for interest of $46.4 million, from $63.2 million in 2021 to $16.8 million in 2022, attributable to lower average debt balances.

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Cash provided by investing activities decreased by $2,013.9 million to $30.3 million for 2022 from $2,044.2 million in 2021.

This decrease was primarily attributable to lower cash receipts from the sales of discontinued operations of $2,067.4 million, from $2,150.8 million, net, in 2021 (primarily for the sale of Walden University, our operations in Honduras and Brazil, the receipt of the note receivable related to the 2020 divestiture of our Chilean operations, and the receipt of a portion of the purchase prices that were withheld in connection to the 2018 sale of our China operations and the 2020 sale of our Malaysia operations) to $83.4 million, net, in 2022 (primarily related to the receipt of the escrow receivable related the 2021 sale of Walden University, and the collection of certain receivables from the sale of our Brazilian operations).

This decrease was primarily attributable to lower cash receipts from the sales of discontinued operations of $2,067.4 million, from $2,150.8 million, net, in 2021 (primarily for the sale of Walden University, our operations in Honduras and Brazil, the receipt of the note receivable related to the 2020 divestiture of our Chilean operations, and the receipt of a portion of the purchase prices that were withheld in connection to the 2018 sale of our China operations and the 2020 sale of our Malaysia operations) to $83.4 million, net, in 2022 (primarily related to the receipt of the escrow receivable related to the 2021 sale of Walden University, and the collection of certain receivables from the sale of our Brazilian operations).

This decrease in investing cash flows was partially offset by the year-over-year effect of $50.3 million of payments made in 2021 for derivative instruments related to foreign exchange swap agreements associated with the sale of our Brazil operations.

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Other items accounted for the remaining difference of $0.7 million .

Comparison of Cash Flows for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Operating activities

Cash flows from operating activities changed by $415.7 million to cash outflow of $(156.1) million for 2021, compared to a cash inflow $259.6 million for 2020.

This decrease in operating cash was primarily attributable to:

(1) changes in working capital and divestitures of subsidiaries that contributed positive operating cash flows during 2020, which accounted for $266.6

million of the decrease;

(2) higher cash paid for taxes of $159.7 million, from $91.4 million in 2020 to $251.1 million in 2021, primarily due to the payment of estimated taxes related to the sale of Walden University in 2021 and payment of withholding taxes for intercompany loans that were capitalized during 2021;

and (3) payments of $46.8 million for lease termination agreements in 2021.

These decreases in operating cash flow were partially offset by a decrease in cash paid for interest of $57.4 million, prior to interest income, from $120.6 million in 2020 to $63.2 million in 2021, attributable to lower average debt balances.

Investing activities

Cash provided by investing activities increased by $1,456.8 million to $2,044.2 million for 2021 from $587.4 million in 2020.

This increase was primarily attributable to higher cash receipts from the sales of discontinued operations of $1,474.2 million, from $676.6 million in 2020 (for the net effect of the sales of NSAD and our operations in Costa Rica, Chile, Malaysia, Australia and New Zealand, net of cash sold, and the receipt of a portion of the escrow receivable balance related to the 2018 sale of our China operations) to $2,150.8 million, net, in 2021 (primarily for the sale of Walden University, our operations in Honduras and Brazil, the receipt of the note receivable related to the 2020 divestiture of our Chilean operations, and the receipt of a portion of the purchase prices that were withheld in connection to the 2018 sale of our China operations and the 2020 sale of our Malaysia operations).

In addition, cash used for capital expenditures decreased by $32.9 million compared to 2020.

These increases in investing cash were partially offset by payments of $50.3 million for derivative instruments related to foreign exchange swap agreements associated with the sale of our Brazil operations.

Financing activities

Cash used in financing activities increased by $2,410.5 million to $2,683.2 million for 2021 from $272.7 million for 2020.

This increase in financing cash outflows was primarily attributable to:

(1) payments of special cash distributions to shareholders in 2021 of $1,374.9 million following the sale of Walden University;

(2) higher net payments of long-term debt in 2021 as compared to 2020 of $718.6 million, primarily related to the 2021 repayment in full of the balance outstanding under the Senior Notes due 2025;

(3) higher payments in 2021 of $281.0 million to repurchase shares of our common stock under our stock repurchase program;

(4) higher payments of call premiums and debt issuance costs of $32.2 million, mainly the call premiums associated with the redemption of the Senior Notes due 2025 during 2021;

and (5) lower proceeds from stock option exercises of $22.3 million during 2021, as compared to 2020.

These increases in financing cash outflows were partially offset by the year-over-year effect of a $13.7 million payment in 2020 to the minority owner of our Malaysia operations in connection with the sale of those operations and $5.7 million of deferred purchase price payments in 2020 related to acquisitions.

Other items accounted for the remaining difference of $0.9 million.

Critical Accounting Policies and Estimates

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We also evaluate these assets on an interim basis if events or changes in circumstances between annual tests indicate that the assets may be impaired.

For example, during the second quarter of 2020, we recorded an impairment of the indefinite-lived intangible assets that were part of the Chile reporting unit.

We have not made material changes to the methodology used to assess impairment loss on indefinite-lived tradenames during the past three fiscal years.

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This ASU requires entities to calculate goodwill impairment as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

Under the updated guidance, the Company continues to have the option of first performing a qualitative goodwill impairment assessment (i.e., step zero) in order to determine if the quantitative impairment test is necessary.

The requirement to perform a qualitative assessment for a reporting unit with a zero or negative carrying amount is eliminated.

A reporting unit is defined as a component of an operating segment for which discrete financial information is available and regularly reviewed by management of the segment.

A reporting unit is defined as a

component of an operating segment for which discrete financial information is available and regularly reviewed by management of the segment.

Based on the qualitative assessment, if we determine that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the quantitative impairment test is not required.

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Indefinite-lived Intangible Assets

The impairment test for indefinite-lived intangible assets, such as indefinite-lived tradenames, generally requires a new determination of the fair value of the intangible asset using the relief-from-royalty method.

Indefinite-lived intangible assets include acquired indefinite-lived tradenames.

Indefinite-lived tradenames are evaluated annually as of October 1st each year for impairment as well as on an interim basis if events or changes in circumstances between annual tests indicate that the asset may be impaired.

The Company has the option of first performing a qualitative impairment test to determine if a quantitative impairment test is necessary.

Based on the qualitative assessment, if we determine that it is more likely than not that the fair value of the indefinite-lived intangible is greater than its carrying amount, the quantitative impairment test is not required.

If required, the quantitative impairment test for indefinite-lived tradenames generally requires a new determination of the fair value of the intangible asset using the relief-from-royalty method.

This method estimates the amount of royalty expense that we would expect to incur if the assets were licensed from a third party.

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and (3) the estimated royalty rates.

In 2020, following the reclassification of several of our subsidiaries as held-for-sale, the Company tested the Laureate tradename for impairment and concluded that the estimated fair value of the Laureate tradename was less than its carrying value.

As a result, the Company recognized an impairment charge of $320.0 million, in accordance with ASC 350-30-35-17.

Additionally, the Company determined that the remaining Laureate tradename asset no longer had an indefinite life.

During the first quarter of 2021, the Company decided that, during 2021, it would wind down certain support functions related to the Laureate network and would no longer invest in and support the Laureate tradename, a finite-lived intangible asset, beyond 2021.

As a result, the Company tested the asset for impairment and estimated the fair value of the tradename asset using the relief-from-royalty method, based on the projected revenues for each business over the estimated remaining useful life of the asset.

As a result of the impairment test, the Company concluded that the estimated fair value of the Laureate tradename was less than its carrying value by approximately $51.4 million and recorded an impairment charge for that amount.

The remaining carrying value of the tradename asset was fully amortized as of December 31, 2021.

Long-Lived Assets

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We earn substantially all of our income from subsidiaries located in countries outside the United States.

Deferred tax liabilities have not been recognized for undistributed historical foreign earnings because management believes that the historical retained earnings will be indefinitely reinvested outside the United States under the Company's planned tax-neutral methods.

Deferred tax liabilities have not been recognized for undistributed historical foreign earnings that would be subject to tax because management believes that the historical retained earnings will be indefinitely reinvested outside the United States under the Company's planned tax-neutral methods.

Our assertion that earnings from our foreign operations will be indefinitely reinvested is supported by projected working capital and long-term capital plans in each foreign subsidiary location in which the earnings are generated.

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Share-Based Compensation

We use the Black-Scholes-Merton option pricing model to calculate the fair value of stock options.

This option valuation model requires the use of subjective assumptions, including the estimated fair value of the underlying common stock, the expected stock price volatility, and the expected term of the option.

Prior to the IPO, the estimated fair value of the underlying common stock was based on third-party valuations.

After our IPO, the estimated fair value of the underlying common stock is based on the closing price of our common stock on the grant date.

Because we have only been publicly traded since February 2017, our volatility estimates are based on an average of:

(1) a peer group of companies and (2) Laureate's historical volatility.

We estimate the expected term of awards to be the weighted average mid-point between the vesting date and the end of the contractual term.

We use this method to estimate the expected term because we do not have sufficient historical exercise data.

We have granted restricted stock, restricted stock units and performance awards for which the vesting is based on our annual performance metrics.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis