LAUREATE EDUCATION, INC. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk primarily from fluctuations in interest rates and foreign currency exchange rates. We may seek to control a portion of these risks through a risk-management program that includes the use of derivatives to reduce earnings and cash flow volatility associated with changes in interest rates and foreign currency exchange rates. As a policy, we do not engage in speculative or leveraged transactions, nor do we hold or issue derivatives for trading purposes. Interest Rate Risk We are subject to risk from fluctuations in interest rates, primarily relating to our Senior Secured Credit Facility and certain local debt, which bear interest at variable rates. Based on our outstanding variable-rate debt as of December 31, 2023, an increase of 100 basis points in our weighted-average interest rate would result in an increase in interest expense of $0.9 million on an annual basis. Foreign Currency Exchange Risk We use the USD as our reporting currency. We derived substantially all of our revenues outside of the United States for the year ended December 31, 2023. Our business is transacted through a network of international and domestic subsidiaries, generally in the local currency, considered the functional currency for that subsidiary. Our foreign currency exchange rate risk is related to the following items: • Adjustments relating to the translation of our assets and liabilities from the subsidiaries' functional currencies to USD. These adjustments are recorded in accumulated other comprehensive income (loss) on our consolidated balance sheets. • Gains and losses resulting from foreign currency exchange rate changes related to intercompany loans that are not deemed to have the characteristics of a long-term investment. These gains and losses are recorded in foreign currency 53 exchange gain (loss) on our consolidated statements of operations. • Gains and losses on foreign currency transactions. These gains and losses are recorded in foreign currency exchange gain (loss) on our consolidated statements of operations. For the year ended December 31, 2023, a hypothetical 10% adverse change in average annual foreign currency exchange rates would have decreased Operating income and Adjusted EBITDA by approximately $40.6 million and $47.7 million, respectively. We monitor the impact of foreign currency movements related to differences between our subsidiaries' local currencies and the USD. 54