What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-08-01 · 107 added, 106 removed, 420 unchanged (34% of the section changed)

25 unchanged sentences

• the risks associated with disruptions to our computer networks and other cybersecurity incidents, including misappropriation of personal or proprietary information;

• the risks and uncertainties associated with an epidemic, pandemic or other public health emergency, such as the global coronavirus (COVID-19) pandemic, including, but not limited to, effects on student enrollment, tuition pricing, and collections in future periods;

• the risks and uncertainties associated with an epidemic, pandemic or other public health emergency including, but not limited to, effects on student enrollment, tuition pricing, and collections in future periods;

• the risks associated with protests, strikes or natural or other disasters;

26 unchanged sentences

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

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

As such, these subsidiaries are classified as assets held for sale as of September 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 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 sales of certain real estate in the United States and Mexico were completed during 2024.

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

21 unchanged sentences

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

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

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

Institutions Enrollment 2024 YTD Revenues

90 unchanged sentences

Summary Comparison of Consolidated Results

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

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

Better/(Worse)

3 unchanged sentences

General and administrative expenses 10.6 11.8 10 %

Loss on impairment of assets — 1.6 100 %

Operating income 72.0 58.7 23 %

Interest expense, net of interest income (2.6) (2.4) (8) %

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

Other non-operating income 15.4 13.2 17 %

Income from continuing operations before income taxes 84.9 69.5 22 %

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

Income tax benefit (expense) 0.5 (33.7) 101 %

Income from continuing operations 85.3 35.7 139 %

Income (loss) from discontinued operations, net of tax

Income from discontinued operations, net of tax

— 0.2 (100) %

Net income 85.3 36.0 137 %

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

Net loss attributable to noncontrolling interests 0.1 0.2 50 %

Net income attributable to Laureate Education, Inc.

$ 85.5 $ 36.2 136 %

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.

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

Revenues increased by $7.1 million to $368.6 million for the three months ended September 30, 2024 (the 2024 fiscal quarter) from $361.5 million for the three months ended September 30, 2023 (the 2023 fiscal quarter).

This increase in revenues was attributable to higher average total organic enrollment at our institutions during the 2024 fiscal quarter, which increased revenues by $18.7 million compared to the 2023 fiscal quarter.

In addition, the effect of changes in tuition rates and enrollments in programs at varying price points (product mix), pricing and timing increased revenues by $12.2 million compared to the 2023 fiscal quarter.

These increases in revenues were partially offset by the effect of a net change in foreign currency exchange rates, which decreased revenues by $23.8 million compared to the 2023 fiscal quarter.

Direct costs and general and administrative expenses combined decreased by $6.3 million to $296.6 million for the 2024 fiscal quarter from $302.9 million for the 2023 fiscal quarter.

This decrease in direct costs was primarily driven by the effect of a net change in foreign currency exchange rates that decreased costs by $21.1 million compared to the 2023 fiscal quarter, partially offset by the effect of operational changes, which increased costs by $16.4 million, primarily due to the result of higher enrollment at our institutions.

Other Corporate expenses accounted for a decrease in costs of $1.6 million for the 2024 fiscal quarter compared to the 2023 fiscal quarter.

Operating income increased by $13.3 million to $72.0 million for the 2024 fiscal quarter from $58.7 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.

The increase in operating income was mainly driven by higher operating income at our Peru segment.

Other non-operating income increased by $2.2 million to $15.4 million for the 2024 fiscal quarter from $13.2 million for the 2023 fiscal quarter.

This increase in other non-operating income was primarily attributable to an increase of $4.7 million in the gain on foreign currency exchange for the 2024 fiscal quarter as compared to the 2023 fiscal quarter, mainly related to intercompany loan arrangements.

In addition, other income was higher by $0.8 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

These year-over-year increases were partially offset by a year-over-year decrease of $3.3 million in gain on disposal of subsidiaries, which was primarily attributable to the release of an accumulated foreign currency translation gain upon the liquidation of a subsidiary during the 2023 fiscal quarter.

Income tax benefit (expense) changed by $34.2 million to a benefit of $0.5 million for the 2024 fiscal quarter from an expense of $(33.7) million for the 2023 fiscal quarter.

This change was primarily attributable to a discrete tax benefit of approximately $37.9 million that was recorded during the 2024 fiscal quarter related to an entity restructuring.

Comparison of Consolidated Results for the Nine Months Ended September 30, 2024 and 2023

Better/(Worse)

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Income tax expense (72.5) (101.4) 29 %

Income from continuing operations 117.2 33.6 nm

Income from continuing operations 202.5 69.3 192 %

Income (loss) from discontinued operations, net of tax

1 unchanged sentence

Net income 202.8 65.5 nm

Net income attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Net income attributable to Laureate Education, Inc.

$ 202.8 $ 65.7 nm

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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).

Comparison of Consolidated Results for the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

Revenues increased by $68.3 million to $1,143.2 million for the nine months ended September 30, 2024 (the 2024 fiscal period) from $1,074.9 million for the nine months ended September 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 $52.8 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.

(2) the effect of changes in product mix, pricing and timing, which increased revenues by $14.2 million for the 2024 fiscal period;

(3) the effect of a net change in foreign currency exchange rates, which increased revenues by $1.2 million compared to the 2023 fiscal period;

and (4) other Corporate changes, which accounted for an increase in revenues of $0.1 million.

Direct costs and general and administrative expenses combined increased by $49.1 million to $893.5 million for the 2024 fiscal period from $844.4 million for the 2023 fiscal period.

This increase in direct costs was driven by the effect of operational changes, which increased direct costs by $49.8 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.

This increase was partially offset by the effect of a net change in foreign currency exchange rates, which decreased direct costs by $0.6 million compared to the 2023 fiscal period.

Other Corporate expenses accounted for a decrease in costs of $0.1 million for the 2024 fiscal period compared to the 2023 fiscal period.

Operating income increased by $21.0 million to $249.8 million for the 2024 fiscal period from $228.8 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.

This increase was a result of higher operating income at both our Mexico and Peru segments.

Other non-operating income (expense) changed by $81.6 million to income of $33.8 million for the 2024 fiscal period from expense of $(47.8) 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 $88.0 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.

Additionally, other income was higher by $0.3 million compared to the 2023 fiscal period.

These increases in other non-operating income were partially offset by a loss on disposal of subsidiaries for the 2024 fiscal period compared to a gain for the 2023 fiscal period for a change of $6.7 million related to the release of accumulated foreign currency translation balances upon the liquidation of certain subsidiaries.

Income tax expense decreased by $28.9 million to $72.5 million for the 2024 fiscal period from $101.4 million for the 2023 fiscal period.

This decrease was primarily attributable to a discrete tax benefit of approximately $37.9 million that was recorded during the 2024 fiscal period related to an entity restructuring, partially offset by a tax benefit recorded in the 2023 fiscal period related to the release of a valuation allowance.

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 income to Adjusted EBITDA for the three months ended June 30, 2024 and 2023:

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

Better/(Worse)

1 unchanged sentence

Net income $ 85.3 $ 36.0 137 %

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

Income from discontinued operations, net of tax — (0.2) (100) %

Income from continuing operations 85.3 35.7 139 %

Income tax expense 63.1 57.5 (10) %

Income tax (benefit) expense (0.5) 33.7 101 %

Income from continuing operations before income taxes 84.9 69.5 22 %

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

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

Gain on disposal of subsidiaries, net — (3.3) (100) %

Foreign currency exchange gain, net (14.5) (9.8) 48 %

Other income, net (0.9) (0.1) nm

Interest expense 5.0 5.2 4 %

5 unchanged sentences

2.8 1.8 (56) %

Loss on impairment of assets (b)

Adjusted EBITDA $ 91.4 $ 78.4 17 %

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(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:

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

Better/(Worse)

2 unchanged sentences

(Income) loss from discontinued operations, net of tax (0.3) 3.8 108 %

Income from continuing operations 117.2 33.6 nm

Income from continuing operations 202.5 69.3 192 %

Income tax expense 72.5 101.4 29 %

1 unchanged sentence

275.0 170.7 61 %

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

Loss (gain) on disposal of subsidiaries, net 3.1 (3.6) (186) %

Foreign currency exchange (gain) loss, net (36.4) 51.6 171 %

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

Other income, net (0.5) (0.2) 150 %

Interest expense 14.8 17.3 14 %

12 unchanged sentences

We have two reportable segments:

Mexico and Peru, as discussed in Overview.

Mexico and Peru.

For purposes of the following comparison of results discussion, “ segment direct costs ” represent direct costs incurred by the segment as they are included in Adjusted EBITDA, such that depreciation and amortization expense, loss on impairment of assets and share-based compensation expense have been excluded.

4 unchanged sentences

Better/(Worse)

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

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

Mexico $ 182.5 $ 185.4 (2) %

Peru 186.1 176.2 6 %

Corporate — (0.1) 100 %

Corporate — — nm

Consolidated Total Revenues $ 368.6 $ 361.5 2 %

6 unchanged sentences

Better/(Worse)

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

For the nine months ended September 30, 2024 2023 2024 vs.

Mexico $ 615.2 $ 559.5 10 %

9 unchanged sentences

Financial Overview

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

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

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2023 $ 192.1 $ 153.9 $ 38.2

September 30, 2023 $ 185.4 $ 163.5 $ 21.9

Organic enrollment (1)

2 unchanged sentences

Foreign exchange (19.7) (17.4) (2.3)

June 30, 2024 $ 218.6 $ 170.4 $ 48.2

September 30, 2024 $ 182.5 $ 162.5 $ 20.0

(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 $26.5 million, a 14% increase from the 2023 fiscal quarter.

Revenues decreased by $2.9 million, a 2% decrease from the 2023 fiscal quarter.

• The revenue decrease was driven by the weakening of the Mexican peso against the USD compared to the 2023 fiscal quarter.

• Organic enrollment increased during the fiscal quarter by 9%, increasing revenues by $14.8 million.

• Revenues from our Mexico segment represented 50% of our consolidated total revenues for the 2024 fiscal quarter, compared to 51% 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

Adjusted EBITDA decreased by $1.9 million, a 9% decrease from the 2023 fiscal quarter.

Comparison of Mexico Results for the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2023 $ 374.1 $ 287.0 $ 87.1

September 30, 2023 $ 559.5 $ 450.4 $ 109.1

Organic enrollment (1)

2 unchanged sentences

Foreign exchange 6.4 1.4 5.0

June 30, 2024 $ 432.7 $ 324.6 $ 108.1

September 30, 2024 $ 615.2 $ 487.1 $ 128.1

(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.

5 unchanged sentences

Financial Overview

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

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

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2023 $ 270.0 $ 122.8 $ 147.2

September 30, 2023 $ 176.2 $ 109.9 $ 66.3

Organic enrollment (1)

2 unchanged sentences

Foreign exchange (4.1) (2.5) (1.6)

June 30, 2024 $ 280.6 $ 130.3 $ 150.3

September 30, 2024 $ 186.1 $ 106.3 $ 79.8

3 unchanged sentences

Adjusted EBITDA increased by $13.5 million, a 20% 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

Comparison of Peru Results for the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

(in millions) Revenues Direct Costs Adjusted EBITDA

June 30, 2023 $ 339.2 $ 198.5 $ 140.7

September 30, 2023 $ 515.4 $ 308.3 $ 207.1

Organic enrollment (1)

2 unchanged sentences

Foreign exchange (5.2) (2.2) (3.0)

June 30, 2024 $ 341.9 $ 212.3 $ 129.6

September 30, 2024 $ 528.0 $ 318.6 $ 209.4

1 unchanged sentence

• Organic enrollment increased during the 2024 fiscal period by 2%, increasing revenues by $8.4 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 46% 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.

Adjusted EBITDA increased by $2.3 million, a 1% increase from the 2023 fiscal period.

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

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

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

Better/(Worse)

(in millions) 2024 2023 2024 vs.

Revenues $ — $ (0.1) 100 %

Revenues $ — $ — nm

Expenses 8.3 9.9 16 %

Adjusted EBITDA $ (8.3) $ (9.9) 16 %

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

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Adjusted EBITDA increased by $1.6 million, a 16% increase from the 2023 fiscal quarter, mainly driven by a reduction in labor and professional services costs.

Comparison of Corporate Results for the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

Better/(Worse)

3 unchanged sentences

Adjusted EBITDA $ (28.6) $ (28.8) 1 %

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.

nm - percentage changes not meaningful

Adjusted EBITDA increased by $0.2 million, a 1% increase from the 2023 fiscal period.

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

As of September 30, 2024, our secondary source of liquidity was cash and cash equivalents of $134.4 million.

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

The Company also maintains a revolving credit facility under its credit agreement (the Amended Credit Agreement) that provides for $145.0 million of revolving credit loans maturing October 2024 (the Series 2024 Tranche) and $155.0 million of revolving credit loans maturing September 2028 (the Series 2028 Tranche) for a $300.0 million aggregate revolving credit facility (the Revolving Credit Facility).

As of September 30, 2024, the Company also maintained a revolving credit facility under its credit agreement (the Amended Credit Agreement) that provided for $145.0 million of revolving credit loans, which matured on October 7, 2024, and $155.0 million of revolving credit loans maturing September 2028 for a $300.0 million aggregate revolving credit facility (the Revolving Credit Facility).

Accordingly, effective October 7, 2024, the borrowing capacity of the Revolving Credit Facility is $155.0 million.

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

As of September 30, 2024, the Company had borrowed $66.0 million of the 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 June 30, 2024 and $7.5 million as of December 31, 2023.

Our liquidity is affected by restricted cash balances, which totaled $6.3 million as of September 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 June 30, 2024, $109.8 million of our total $128.8 million of cash and cash equivalents were held by foreign subsidiaries.

As of September 30, 2024, $112.3 million of our total $134.4 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 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.

As of September 30, 2024, our debt obligations consisted of $66.0 million of borrowings under the Senior Secured Credit Facility and $38.0 million of other debt.

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

4 unchanged sentences

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.

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 (12.24% as of September 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 September 30, 2024) and increasing to MXN 23.4 million ($1.2 million at September 30, 2024), with a balloon payment of MXN 170.0 million ($8.7 million at September 30, 2024) due at maturity.

As of September 30, 2024 and December 31, 2023, the outstanding balance of this loan was $21.7 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 June 30, 2024, more than 25% of the revolving credit facility was utilized and we were in compliance with the leverage ratio covenant.

As of September 30, 2024, these conditions were satisfied and, therefore, we were not subject to the leverage ratio covenant.

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

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

We were in compliance with those covenants as of September 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 June 30, 2024 and December 31, 2023, the present value of operating lease liabilities was $372.4 million and $417.6 million, respectively.

As of September 30, 2024 and December 31, 2023, the present value of operating lease liabilities was $347.3 million and $417.6 million, respectively.

Capital Expenditures

9 unchanged sentences

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

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

Our total capital expenditures, excluding receipts from the sale of subsidiaries and property and equipment, were $34.6 million and $26.7 million during the nine months ended September 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

Share Repurchase Programs

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 Exchange Act.

This program was completed in September 2024.

On September 13, 2024, the Company announced that its Board of Directors had approved a new 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 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 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.

As of September 30, 2024, no shares were repurchased under this new program.

The Company intends to finance the 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.

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

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

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

(in millions) 2024 2023

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Net change in cash and cash equivalents and restricted cash $ 43.8 $ 44.7

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

Comparison of Cash Flows for the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

Operating Activities

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.

Cash provided by operating activities increased by $4.6 million to $192.0 million for the 2024 fiscal period from $187.4 million for the 2023 fiscal period.

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 $12.0 million compared to the 2023 fiscal period.

Additionally, cash paid for interest decreased by $3.2 million from $16.3 million for the 2023 fiscal period to $13.1 million for the 2024 fiscal period, mostly due to lower average debt balances.

These increases in operating cash were partially offset by higher cash paid for taxes of $10.6 million, from $120.0 million for the 2023 fiscal period to $130.6 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.

Investing Activities

Cash used in investing activities increased by $4.3 million to $(30.5) million for the 2024 fiscal period from $(26.2) 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 primarily attributable to higher capital expenditures of $7.8 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 $3.0 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 used in financing activities decreased by $8.5 million to $(111.7) million for the 2024 fiscal period from $(120.2) 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.

This decrease in financing cash outflows was primarily attributable to lower net payments of long-term debt during the 2024 fiscal period of $110.7 million compared to the 2023 fiscal period.

This decrease in financing cash outflows was partially offset by payments for common stock repurchases of $100.0 million during the 2024 period, as well as

lower proceeds from the exercise of stock options of $3.0 million compared to the 2023 fiscal period.

Other items accounted for the remaining difference of $0.8 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 six months ended June 30, 2024, there were no significant changes to our critical accounting policies.

During the nine months ended September 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