What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-02 · 199 added, 86 removed, 327 unchanged (47% of the section changed)

54 unchanged sentences

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

As such, these subsidiaries are classified as assets held for sale as of March 31, 2024.

As such, these subsidiaries are classified as assets held for sale as of June 30, 2024.

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 2023, two parcels of land at campuses in Mexico and a parcel of land in the United States met the criteria for classification as held for sale under ASC 360-10-45-9.

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

In addition, during 2023 and 2024, several parcels of land and buildings at campuses in Mexico and a parcel of land in the United States met the criteria for classification as held for sale under ASC 360-10-45-9.

The sale of the parcel of land in the United States was completed during the second quarter of 2024.

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

Our segments generate revenues by providing an education that emphasizes profession-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines.

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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 the countries in which we compete.

We compete with other private higher education institutions on the basis of price, educational quality,

reputation and location.

The target demographics are primarily 18- to 24-year-olds in the 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.

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

The following information for our reportable segments is presented as of March 31, 2024:

The following information for our reportable segments is presented as of June 30, 2024:

Institutions Enrollment 2024 YTD Revenues

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

For countries that have enacted the global minimum tax, such taxes generally become effective for the Company beginning in 2024.

For countries that have enacted the global minimum tax, such taxes generally became 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.

6 unchanged sentences

Summary Comparison of Consolidated Results

Comparison of Consolidated Results for the Three Months Ended March 31, 2024 and 2023

Comparison of Consolidated Results for the Three Months Ended June 30, 2024 and 2023

Better/(Worse)

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General and administrative expenses 13.7 12.0 (14) %

Loss on impairment of assets — 1.6 100 %

Operating income 166.6 154.5 8 %

Interest expense, net of interest income (3.1) (4.1) 24 %

Other non-operating expense (9.2) (28.4) 68 %

Loss from continuing operations before income taxes and equity in net income of affiliates

Other non-operating income (expense) 27.6 (32.5) 185 %

Income from continuing operations before income taxes 191.0 117.8 62 %

Income tax expense (63.1) (57.5) (10) %

Income from continuing operations 128.0 60.4 112 %

Income (loss) from discontinued operations, net of tax

0.4 (4.0) 110 %

Net income 128.4 56.3 128 %

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

Net income attributable to Laureate Education, Inc.

$ 128.1 $ 56.2 128 %

Comparison of Consolidated Results for the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023

Revenues increased by $37.1 million to $499.2 million for the three months ended June 30, 2024 (the 2024 fiscal quarter) from $462.1 million for the three months ended June 30, 2023 (the 2023 fiscal quarter).

This increase in revenues was attributable to:

(1) higher average total organic enrollment at our institutions during the 2024 fiscal quarter, which increased revenues by $18.3 million compared to the 2023 fiscal quarter;

(2) the effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing, which increased revenues by $14.1 million compared to the 2023 fiscal quarter;

and (3) the effect of a net change in foreign currency exchange rates, which increased revenues by $4.6 million, mainly due to the strengthening of the Mexican peso against the USD compared to the 2023 fiscal quarter.

Other Corporate changes accounted for an increase in revenues of $0.1 million.

Direct costs and general and administrative expenses combined increased by $26.7 million to $332.7 million for the 2024 fiscal quarter from $306.0 million for the 2023 fiscal quarter.

This increase in direct costs was driven by the effect of operational changes, which increased costs by $21.0 million, primarily due to the result of higher enrollment at our institutions.

In addition, the effect of a net change in foreign currency exchange rates increased costs by $4.0 million compared to the 2023 fiscal quarter.

Other Corporate expenses accounted for an increase in costs of $1.7 million for the 2024 fiscal quarter compared to the 2023 fiscal quarter.

Operating income increased by $12.1 million to $166.6 million for the 2024 fiscal quarter from $154.5 million for the 2023 fiscal quarter.

The increase in operating income was mainly driven by higher operating income at both our Mexico and Peru segments, partially offset by higher operating costs at Corporate compared to the 2023 fiscal quarter.

Other non-operating income (expense) changed by $60.1 million to income of $27.6 million for the 2024 fiscal quarter from expense of $(32.5) million for the 2023 fiscal quarter.

This increase in other non-operating income was primarily attributable to a gain on foreign currency exchange for the 2024 fiscal quarter compared to a loss for the 2023 fiscal quarter for a change of $59.9 million, mainly related to intercompany loan arrangements.

In addition, other income was higher by $0.2 million compared to the 2023 fiscal quarter.

Income tax expense increased by $5.6 million to $63.1 million for the 2024 fiscal quarter from $57.5 million for the 2023 fiscal quarter.

This increase was attributable to a benefit recorded in the 2023 fiscal quarter related to the release of a valuation allowance, as well as changes in the jurisdictional mix of earnings.

Comparison of Consolidated Results for the Six Months Ended June 30, 2024 and 2023

Better/(Worse)

(in millions) 2024 2023 2024 vs.

Revenues $ 774.6 $ 713.3 9 %

Direct costs 573.0 519.3 (10) %

General and administrative expenses 23.9 22.3 (7) %

Loss on impairment of assets — 1.6 100 %

Operating income 177.7 170.1 4 %

Interest expense, net of interest income (5.9) (8.0) 26 %

Other non-operating income (expense) 18.3 (60.9) 130 %

Income from continuing operations before income taxes

190.2 101.3 88 %

Income tax expense (73.0) (67.7) (8) %

Loss from continuing operations (10.8) (26.7) 60 %

Loss from discontinued operations, net of tax

Net loss (10.8) (26.8) 60 %

Net loss attributable to noncontrolling interests 0.1 0.2 50 %

Net loss attributable to Laureate Education, Inc.

Income from continuing operations 117.2 33.6 nm

Income (loss) from discontinued operations, net of tax

0.3 (4.1) 107 %

Net income 117.5 29.6 nm

Net income attributable to noncontrolling interests

Net income attributable to Laureate Education, Inc.

$ 117.4 $ 29.6 nm

nm - percentage changes not meaningful

Comparison of Consolidated Results for the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

Revenues increased by $24.1 million to $275.4 million for the three months ended March 31, 2024 (the 2024 fiscal quarter) from $251.3 million for the three months ended March 31, 2023 (the 2023 fiscal quarter).

This increase was primarily attributable to the effect of a net change in foreign currency exchange rates, which increased revenues by $20.4 million, mostly driven by the strengthening of the Mexican peso against the USD compared to the 2023 fiscal quarter.

In addition, higher average total organic enrollment at our institutions increased revenues by $14.9 million compared to the 2023 fiscal quarter.

These increases in revenues were partially offset by the effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing, which decreased revenues by $11.1 million for the 2024 fiscal quarter.

Other Corporate changes accounted for a decrease in revenues of $0.1 million.

Direct costs and general and administrative expenses combined increased by $28.7 million to $264.3 million for the 2024 fiscal quarter from $235.6 million for the 2023 fiscal quarter.

The effect of a net change in foreign currency exchange rates increased direct costs by $16.3 million, mostly driven by the strengthening of the Mexican peso against the USD compared to the 2023 fiscal quarter.

Additionally, the effect of operational changes increased direct costs by $12.9 million compared to the 2023 fiscal quarter.

These increases in direct costs were partially offset by other Corporate expenses, which accounted for a decrease in costs of $0.5 million in the 2024 fiscal quarter compared to the 2023 fiscal quarter.

Operating income decreased by $4.5 million to $11.1 million for the 2024 fiscal quarter from $15.6 million for the 2023 fiscal quarter.

This decrease was primarily a result of higher operating loss at our Peru segment, partially offset by higher operating income at our Mexico segment compared to the 2023 fiscal quarter.

Interest expense, net of interest income decreased by $1.0 million to $2.8 million for the 2024 fiscal quarter from $3.8 million for the 2023 fiscal quarter.

The decrease in interest expense was primarily attributable to lower average debt balances compared to the 2023 fiscal quarter.

Other non-operating expense decreased by $19.2 million to $9.2 million for the 2024 fiscal quarter from $28.4 million for the 2023 fiscal quarter.

This decrease was attributable to a lower loss on foreign currency exchange of $23.4 million compared to the 2023 fiscal quarter, mainly related to intercompany loan arrangements.

This decrease in other non-operating expense was partially offset by a loss on disposal of subsidiaries for the 2024 fiscal quarter compared to a gain for the 2023 fiscal quarter, primarily attributable to the release of accumulated foreign currency translation balances upon the liquidation of certain subsidiaries, for a change of $3.4 million.

Additionally, other expense was higher by $0.8 million compared to the 2023 fiscal quarter.

Income tax expense decreased by $0.3 million to $9.9 million for the 2024 fiscal quarter from $10.2 million for the 2023 fiscal quarter.

Comparison of Consolidated Results for the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

Revenues increased by $61.3 million to $774.6 million for the six months ended June 30, 2024 (the 2024 fiscal period) from $713.3 million for the six months ended June 30, 2023 (the 2023 fiscal period).

This increase in revenues was attributable to:

(1) higher average total organic enrollment at our institutions, which increased revenues by $34.0 million compared to the 2023 fiscal period;

(2) the effect of a net change in foreign currency exchange rates, which increased revenues by $25.0 million, mostly driven by the strengthening of the Mexican peso against the USD compared to the 2023 fiscal period;

and (3) the effect of changes in product mix, pricing and timing, which increased revenues by $2.2 million for the 2024 fiscal period.

Other Corporate changes accounted for an increase in revenues of $0.1 million.

Direct costs and general and administrative expenses combined increased by $55.3 million to $596.9 million for the 2024 fiscal period from $541.6 million for the 2023 fiscal period.

This increase in direct costs was driven by the effect of operational changes, which increased direct costs by $33.6 million compared to the 2023 fiscal period, primarily due to the result of higher enrollment at our institutions.

Additionally, the effect of a net change in foreign currency exchange rates increased direct costs by $20.4 million, mostly driven by the strengthening of the Mexican peso against the USD compared to the 2023 fiscal period.

Other Corporate expenses accounted for an increase in costs of $1.3 million for the 2024 fiscal period compared to the 2023 fiscal period.

Operating income increased by $7.6 million to $177.7 million for the 2024 fiscal period from $170.1 million for the 2023 fiscal period.

This increase was as a result of higher operating income at our Mexico segment, partially offset by lower operating income at our Peru segment compared to the 2023 fiscal period, due in part to higher bad debt expense, as well as higher operating costs at Corporate.

Interest expense, net of interest income decreased by $2.1 million to $5.9 million for the 2024 fiscal period from $8.0 million for the 2023 fiscal period.

The decrease in interest expense was primarily attributable to lower average debt balances compared to the 2023 fiscal period.

Other non-operating income (expense) changed by $79.2 million to income of $18.3 million for the 2024 fiscal period from expense of $(60.9) million for the 2023 fiscal period.

This increase in other non-operating income was attributable to a gain on foreign currency exchange for the 2024 fiscal period compared to a loss for the 2023 fiscal period for a change of $83.1 million, mainly related to intercompany loan arrangements.

This increase in other non-operating income was partially offset by a loss on disposal of subsidiaries for the 2024 fiscal period compared to a gain for the 2023 fiscal period, primarily attributable to the release of accumulated foreign currency translation balances upon the liquidation of certain subsidiaries, for a change of $3.4 million.

Additionally, other expense was higher by $0.5 million compared to the 2023 fiscal period.

Income tax expense increased by $5.3 million to $73.0 million for the 2024 fiscal period from $67.7 million for the 2023 fiscal period.

This increase was attributable to a benefit recorded in the 2023 fiscal period related to the release of a valuation allowance, as well as changes in the jurisdictional mix of earnings.

Non-GAAP Financial Measure

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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 Net loss to Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

The following table presents Adjusted EBITDA and reconciles Net income to Adjusted EBITDA for the three months ended June 30, 2024 and 2023:

Better/(Worse)

(in millions) 2024 2023 2024 vs.

Net loss $ (10.8) $ (26.8) 60 %

Loss from discontinued operations, net of tax 0.1 — nm

Loss from continuing operations (10.8) (26.7) 60 %

Net income $ 128.4 $ 56.3 128 %

(Income) loss from discontinued operations, net of tax (0.4) 4.0 110 %

Income from continuing operations 128.0 60.4 112 %

Income tax expense 63.1 57.5 (10) %

Loss from continuing operations before income taxes

Income from continuing operations before income taxes 191.0 117.8 62 %

Foreign currency exchange (gain) loss, net (27.5) 32.4 185 %

Other (income) expense, net (0.1) 0.1 200 %

Interest expense 5.1 6.1 16 %

Interest income (2.0) (2.0) — %

Operating income 166.6 154.5 8 %

Depreciation and amortization 17.4 17.3 (1) %

EBITDA 184.0 171.8 7 %

Share-based compensation expense (a)

2.9 2.0 (45) %

Loss on impairment of assets (b)

Adjusted EBITDA $ 186.9 $ 175.4 7 %

(a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718, “Stock Compensation.”

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

The following table presents Adjusted EBITDA and reconciles Net income to Adjusted EBITDA for the six months ended June 30, 2024 and 2023:

Better/(Worse)

(in millions) 2024 2023 2024 vs.

Net income $ 117.5 $ 29.6 nm

(Income) loss from discontinued operations, net of tax (0.3) 4.1 107 %

Income from continuing operations 117.2 33.6 nm

Income tax expense 73.0 67.7 (8) %

Income from continuing operations before income taxes

190.2 101.3 88 %

Loss (gain) on disposal of subsidiaries, net 3.1 (0.3) nm

Foreign currency exchange loss, net 5.6 29.0 81 %

Foreign currency exchange (gain) loss, net (21.8) 61.3 136 %

Other expense (income), net 0.4 (0.1) nm

6 unchanged sentences

4.3 3.1 (39) %

Loss on impairment of assets (b)

Adjusted EBITDA $ 217.5 $ 208.9 4 %

1 unchanged sentence

(a) Represents non-cash, share-based compensation expense pursuant to the provisions of ASC 718, “Stock Compensation.”

Comparison of Depreciation and Amortization for the Three Months Ended March 31, 2024 and 2023

Depreciation and amortization increased by $1.4 million to $18.1 million for the 2024 fiscal quarter from $16.7 million for the 2023 fiscal quarter.

The effects of foreign currency exchange increased depreciation and amortization expense by $1.1 million for the 2024 fiscal quarter.

Other items increased depreciation and amortization by $0.3 million.

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

Segment Results

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For a further description of our segments, see Overview.

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

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

(in millions) % Change

Better/(Worse)

For the three months ended March 31, 2024 2023 2024 vs.

For the three months ended June 30, 2024 2023 2024 vs.

Mexico $ 218.6 $ 192.1 14 %

4 unchanged sentences

Mexico $ 48.2 $ 38.2 26 %

Peru (20.7) (6.5) nm

Peru 150.3 147.2 2 %

Corporate (11.6) (10.0) (16) %

Consolidated Total Adjusted EBITDA $ 186.9 $ 175.4 7 %

(in millions) % Change

Better/(Worse)

For the six months ended June 30, 2024 2023 2024 vs.

Mexico $ 432.7 $ 374.1 16 %

Peru 341.9 339.2 1 %

Corporate 0.1 — nm

Consolidated Total Revenues $ 774.6 $ 713.3 9 %

Adjusted EBITDA:

Mexico $ 108.1 $ 87.1 24 %

Peru 129.6 140.7 (8) %

Corporate (20.2) (19.0) (6) %

Consolidated Total Adjusted EBITDA $ 217.5 $ 208.9 4 %

nm - percentage changes not meaningful

Financial Overview

Comparison of Mexico Results for the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

Comparison of Mexico Results for the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023

(in millions) Revenues Direct Costs Adjusted EBITDA

March 31, 2023 $ 182.0 $ 133.1 $ 48.9

June 30, 2023 $ 192.1 $ 153.9 $ 38.2

Organic enrollment (1)

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Foreign exchange 6.8 4.8 2.0

March 31, 2024 $ 214.1 $ 154.2 $ 59.9

June 30, 2024 $ 218.6 $ 170.4 $ 48.2

(1) ) Organic enrollment and product mix, pricing and timing are not separable for the calculation of direct costs and therefore are combined and defined as Organic constant currency for the calculation of Adjusted EBITDA.

Revenues increased by $32.1 million, an 18% increase from the 2023 fiscal quarter.

Revenues increased by $26.5 million, a 14% increase from the 2023 fiscal quarter.

• Organic enrollment increased during the fiscal quarter by 9%, increasing revenues by $15.8 million.

• Revenue for the quarter was unfavorably affected by the timing of the academic calendar as compared to the 2023 fiscal quarter.

• Revenues from our Mexico segment represented 44% of our consolidated total revenues for the 2024 fiscal quarter, compared to 42% for the 2023 fiscal quarter.

Adjusted EBITDA increased by $10.0 million, a 26% increase from the 2023 fiscal quarter.

Comparison of Mexico Results for the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2023 $ 374.1 $ 287.0 $ 87.1

Organic enrollment (1)

Product mix, pricing and timing (1)

Organic constant currency 32.5 18.9 13.6

Foreign exchange 26.1 18.7 7.4

June 30, 2024 $ 432.7 $ 324.6 $ 108.1

(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.

Revenues increased by $58.6 million, a 16% increase from the 2023 fiscal period.

• Organic enrollment increased during the 2024 fiscal period by 9%, increasing revenues by $29.5 million.

• Revenue for the 2024 fiscal period was unfavorably affected by the timing of the academic calendar as compared to the 2023 fiscal period.

• Revenues from our Mexico segment represented 56% of our consolidated total revenues for the 2024 fiscal period, compared to 52% for the 2023 fiscal period.

Adjusted EBITDA increased by $21.0 million, a 24% increase from the 2023 fiscal period.

Financial Overview

Comparison of Peru Results for the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

Comparison of Peru Results for the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023

(in millions) Revenues Direct Costs Adjusted EBITDA

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

June 30, 2023 $ 270.0 $ 122.8 $ 147.2

Organic enrollment (1)

2 unchanged sentences

Foreign exchange (2.2) (1.1) (1.1)

March 31, 2024 $ 61.2 $ 81.9 $ (20.7)

June 30, 2024 $ 280.6 $ 130.3 $ 150.3

Revenues decreased by $8.0 million, a 12% decrease from the 2023 fiscal quarter.

• Revenues decreased primarily due to timing of the academic calendar compared to the 2023 fiscal quarter.

Revenues increased by $10.6 million, a 4% increase from the 2023 fiscal quarter.

• Organic enrollment increased during the 2024 fiscal quarter by 1%, increasing revenues by $2.5 million.

• Revenues from our Peru segment represented 56% of our consolidated total revenues for the 2024 fiscal quarter, compared to 58% for the 2023 fiscal quarter.

Adjusted EBITDA decreased by $14.2 million from the 2023 fiscal quarter, primarily due to lower revenues related to academic calendar timing and higher operating expenses.

Adjusted EBITDA increased by $3.1 million, a 2% increase from the 2023 fiscal quarter.

Comparison of Peru Results for the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2023 $ 339.2 $ 198.5 $ 140.7

Organic enrollment (1)

Product mix, pricing and timing (1)

Organic constant currency 3.8 13.5 (9.7)

Foreign exchange (1.1) 0.3 (1.4)

June 30, 2024 $ 341.9 $ 212.3 $ 129.6

Revenues increased by $2.7 million, a 1% increase from the 2023 fiscal period.

• Organic enrollment increased during the 2024 fiscal period by 2%, increasing revenues by $4.5 million.

• Revenue for the 2024 fiscal period was unfavorably affected by the timing of the academic calendar as compared to the 2023 fiscal period.

• Revenues from our Peru segment represented 44% of our consolidated total revenues for the 2024 fiscal period compared to 48% for the 2023 fiscal period.

Adjusted EBITDA decreased by $11.1 million, an 8% decrease from the 2023 fiscal period, primarily due to higher bad debt expense.

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

Comparison of Corporate Results for the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

Comparison of Corporate Results for the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023

Better/(Worse)

3 unchanged sentences

Adjusted EBITDA $ (11.6) $ (10.0) (16) %

Adjusted EBITDA increased by $0.4 million, a 4% increase from the 2023 fiscal quarter, mainly driven by a decrease in contract labor expenses and other professional fees.

Adjusted EBITDA decreased by $1.6 million, a 16% decrease from the 2023 fiscal quarter, mainly driven by an increase in labor costs and other professional fees.

Comparison of Corporate Results for the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

Better/(Worse)

(in millions) 2024 2023 2024 vs.

Revenues $ 0.1 $ — nm

Expenses 20.3 19.0 (7) %

Adjusted EBITDA $ (20.2) $ (19.0) (6) %

Adjusted EBITDA decreased by $1.2 million, a 6% decrease from the 2023 fiscal period, mainly driven by an increase in labor costs and other professional fees.

Liquidity and Capital Resources

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

As of March 31, 2024, our secondary source of liquidity was cash and cash equivalents of $126.2 million.

As of June 30, 2024, our secondary source of liquidity was cash and cash equivalents of $128.8 million.

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

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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.” In accordance with the terms of the credit agreement, any proceeds drawn on the Revolving Credit Facility may be used for general corporate purposes.

As of March 31, 2024, the Company had borrowed $121.0 million of the $300.0 million of available capacity.

As of June 30, 2024, the Company had borrowed $134.0 million of the $300.0 million of available capacity.

If certain conditions are satisfied, the Amended Credit Agreement also provides for an incremental revolving and term loan facilities, at the request of the Company, not to exceed (i) the greater of (a) $172.5 million and (b) 50% of the consolidated EBITDA of the Company, plus (ii) additional amounts so long as both immediately before and after giving effect to such incremental facilities the Company’s Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Amended Credit Agreement, on a pro forma basis, does not exceed 2.25x, plus (iii) the aggregate amounts of any voluntary repayments of term loans, if any, and aggregate amount of voluntary repayments of revolving credit facilities that are accompanied by a corresponding termination or reduction of revolving credit commitments.

Liquidity Restrictions

Our liquidity is affected by restricted cash balances, which totaled $7.6 million as of March 31, 2024 and $7.5 million as of December 31, 2023.

Our liquidity is affected by restricted cash balances, which totaled $7.6 million as of June 30, 2024 and $7.5 million as of December 31, 2023.

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

1 unchanged sentence

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

As of March 31, 2024, $121.3 million of our total $126.2 million of cash and cash equivalents were held by foreign subsidiaries.

As of June 30, 2024, $109.8 million of our total $128.8 million of cash and cash equivalents were held by foreign subsidiaries.

As of December 31, 2023, $82.7 million of our total $89.4 million of cash and cash equivalents were held by foreign subsidiaries.

17 unchanged sentences

and payments of other third-party obligations.

As of March 31, 2024, our debt obligations consisted of $121.0 million of borrowings under the Senior Secured Credit Facility and $45.2 million of other debt.

As of June 30, 2024, our debt obligations consisted of $134.0 million of borrowings under the Senior Secured Credit Facility and $44.2 million of other debt.

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

In addition, our finance lease obligations and sale-leaseback financings were $54.3 million.

Loan modification

In December 2017, one of our subsidiaries in Mexico entered into an agreement with a bank for a loan of MXN 1,700.0 million (approximately $89.0 million at the time of the loan).

The loan was scheduled to mature in June 2024.

During the second quarter of 2024, our Mexico subsidiary entered into a loan modification agreement with the bank, which extended the maturity of the loan to June 2029.

The loan 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 (12.74% as of June 30, 2024).

Under the loan modification agreement, quarterly principal repayments will resume in December 2024, beginning at MXN 4.3 million ($0.2 million at June 30, 2024) and increasing to MXN 23.4 million ($1.3 million at June 30, 2024), with a balloon payment of MXN 170.0 million ($9.4 million at June 30, 2024) due at maturity.

As of June 30, 2024 and December 31, 2023, the outstanding balance of this loan was $23.5 million and $29.5 million, respectively.

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.

1 unchanged sentence

The agreement also provides that if less than 25% of the revolving credit facility is utilized as of that date, then such financial covenant shall not apply.

As of March 31, 2024, more than 25% of the revolving credit facility was utilized and we were in compliance with the leverage ratio covenant.

As of June 30, 2024, more than 25% of the revolving credit facility was utilized and we were in compliance with the leverage ratio covenant.

In addition, indebtedness at some of our locations contain financial maintenance covenants.

We were in compliance with those covenants as of March 31, 2024.

We were in compliance with those covenants as of June 30, 2024.

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

As of March 31, 2024 and December 31, 2023, the present value of operating lease liabilities was $402.1 million and $417.6 million, respectively.

As of June 30, 2024 and December 31, 2023, the present value of operating lease liabilities was $372.4 million and $417.6 million, respectively.

Capital Expenditures

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

Our total capital expenditures, excluding receipts from the sale of subsidiaries and property equipment, were $15.9 million and $5.8 million during the three months ended March 31, 2024 and 2023, respectively.

Our total capital expenditures, excluding receipts from the sale of subsidiaries and property and equipment, were $26.6 million and $14.9 million during the six months ended June 30, 2024 and 2023, respectively.

The increase in capital expenditures was primarily due to the purchase of a parcel of land for a new campus.

Additionally, capital expenditures in Mexico were higher due to campus consolidation costs related to the implementation of a real estate optimization plan.

Share Repurchase Program

On February 22, 2024, the Company announced that its Board of Directors had approved a stock repurchase program to acquire up to $100 million of the Company’s common stock.

The Company’s 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 also be effected pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act.

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

As of March 31, 2024, the approximate dollar value of shares yet to be purchased under this stock repurchase program was $67.1 million.

As of June 30, 2024, the approximate dollar value of shares yet to be purchased under this stock repurchase program was $28.3 million.

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

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

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023:

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023:

(in millions) 2024 2023

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Net change in cash and cash equivalents and restricted cash $ 39.6 $ 26.7

Comparison of Cash Flows for the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

Comparison of Cash Flows for the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

Operating Activities

Cash provided by operating activities increased by $6.7 million to $33.2 million for the 2024 fiscal quarter from $26.5 million for the 2023 fiscal quarter.

This increase in operating cash was largely attributable to lower cash paid for taxes of $22.3 million, from $43.4 million for the 2023 fiscal quarter to $21.1 million for the 2024 fiscal quarter, due primarily to higher cash taxes paid during the 2023 fiscal quarter for Mexico and the Netherlands.

In addition, cash paid for interest decreased by $1.1 million, from $5.3 million for the 2023 fiscal quarter to $4.2 million for the 2024 fiscal quarter, mostly due to lower average debt balances.

These increases in operating cash were partially offset by the net effect of changes in operating assets and liabilities combined with lower operating income, which decreased operating cash by $16.7 million compared to the 2023 fiscal quarter.

Cash provided by operating activities decreased by $5.4 million to $73.4 million for the 2024 fiscal period from $78.8 million for the 2023 fiscal period.

This decrease in operating cash flows was attributable to higher cash paid for taxes of $13.0 million, from $78.8 million for the 2023 fiscal period to $91.8 million for the 2024 fiscal period, primarily related to taxes paid during the 2024 fiscal period as a result of the distribution of certain intercompany loans.

This decrease in operating cash flows was partially offset by the net effect of changes in operating assets and liabilities combined with higher operating income, which increased operating cash by $4.4 million compared to the 2023 fiscal period.

Additionally, cash paid for interest decreased by $3.2 million from $11.4 million for the 2023 fiscal period to $8.2 million for the 2024 fiscal period, mostly due to lower average debt balances.

Investing Activities

Cash used in investing activities increased by $10.4 million to $(16.0) million for the 2024 fiscal quarter from $(5.6) million for the 2023 fiscal quarter.

This increase in cash used in investing activities was primarily attributable to higher capital expenditures of $10.1 million during the 2024 fiscal quarter compared to the 2023 fiscal quarter, mainly driven by the purchase of a parcel of land for a new campus.

In addition, the year-over-year change in cash flows related to run out activity from previously sold discontinued operations decreased investing cash flows by $0.5 million.

Cash used in investing activities increased by $8.1 million to $(22.6) million for the 2024 fiscal period from $(14.5) million for the 2023 fiscal period.

This increase in cash used in investing activities was primarily attributable to higher capital expenditures of $11.8 million during the 2024 fiscal period compared to the 2023 fiscal period, mainly driven by the purchase of a parcel of land for a new campus.

This increase in investing cash outflows was partially offset by higher cash proceeds from the sale of property and equipment of $3.1 million, mainly related to the sale of a parcel of land in the United States during the second quarter of 2024.

In addition, the year-over-year change in cash flows related to run out activity from previously sold discontinued operations increased investing cash flows by $0.5 million.

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

Financing Activities

Cash provided by financing activities decreased by $2.7 million to $18.4 million for the 2024 fiscal quarter from $21.1 million for the 2023 fiscal quarter.

This decrease in financing cash inflows was primarily attributable to payments for common stock repurchases of $32.9 million during the 2024 fiscal quarter.

In addition, proceeds from the exercise of stock options were lower by $1.4 million compared to the 2023 fiscal quarter.

These decreases in financing cash flows were partially offset by higher net proceeds of long-term debt during the 2024 fiscal quarter of $31.8 million.

Cash used in financing activities decreased by $37.4 million to $(8.3) million for the 2024 fiscal period from $(45.7) million for the 2023 fiscal period.

This decrease in financing cash outflows was primarily attributable to higher net proceeds of long-term debt during the 2024 fiscal period of $110.7 million, partially offset by higher payments for common stock repurchases of $71.4 million compared to the 2023 fiscal period.

Other items accounted for the remaining difference of $1.9 million.

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For a complete discussion of our critical accounting policies, see the “Critical Accounting Policies and Estimates” section of the MD&A in our 2023 Form 10-K.

During the three months ended March 31, 2024, there were no significant changes to our critical accounting policies.

During the six months ended June 30, 2024, there were no significant changes to our critical accounting policies.

Recently Adopted Accounting Standards

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis