Business and Geographic Segment Information

Laureate’s educational services are offered through six operating segments: Brazil, Mexico, Andean & Iberian, Central America & U.S. Campuses, EMEAA and Online & Partnerships. Laureate determines its operating segments based on information utilized by the chief operating decision maker to allocate resources and assess performance.

As previously disclosed in our Quarterly Report on Form 10-Q for the period ended September 30, 2017, effective August 1, 2017, we changed our operating segments in order to realign our segments according to how our chief operating decision maker allocates resources and assesses performance. The change includes the creation of three operating segments (Brazil, Mexico and Andean & Iberian) from the previous Latin America (LatAm) segment. Our institutions in Spain and Portugal (Iberian) have moved from the Europe, Middle East, Africa and Asia Pacific (EMEAA) segment and combined with our institutions in Chile and Peru to form the Andean & Iberian segment. In addition, our institutions in Central America, which were previously part of the LatAm segment, have combined with our campus-based institutions in the United States, which were previously part of the GPS segment, to form the Central America & U.S. Campuses segment. The Online & Partnerships segment consists of the online institutions that were previously part of the GPS segment. This change has been reflected in the segment information for the year ended December 31, 2017. As required, the segment information presented for comparative purposes for the years ended December 31, 2016 and 2015 has also been revised to reflect this change.

Our campus-based segments generate revenues by providing an education that emphasizes professional-oriented fields of study with undergraduate and graduate degrees in a wide range of disciplines. Our educational offerings are increasingly utilizing online and hybrid (a combination of online and in-classroom) courses and programs to deliver their curriculum. Many of our largest campus-based operations are in developing markets which are experiencing a growing demand for higher education based on favorable demographics and increasing secondary completion rates, driving increases in participation rates and resulting in continued growth in the number of higher education students. Traditional higher education students (defined as 18-24 year olds) have historically been served by public universities, which have limited capacity and are often underfunded, resulting in an inability to meet the growing student demand and employer requirements. This supply and demand imbalance has created a market opportunity for private sector participants. Most students finance their own education. However, there are some government-sponsored student financing programs which are discussed below. These campus-based segments include Brazil, Mexico, Andean & Iberian, Central America & U.S. Campuses and EMEAA. Specifics related to each of these campus-based segments and our Online & Partnerships segment are discussed below:

In Brazil, approximately 75% of post-secondary students are enrolled in private higher education institutions. While the federal government defines the national curricular guidelines, institutions are licensed to operate by city. Laureate owns 13 institutions in eight states throughout Brazil, with a particularly strong presence in the competitive São Paulo market. Many students finance their own education while others rely on the government-sponsored programs such as Prouni and FIES.

Public universities in Mexico enroll approximately two-thirds of students attending post-secondary education. However, many public institutions are faced with capacity constraints or the quality of the education is considered low. Laureate owns two institutions and is present throughout the country with a footprint of over 40 campuses. Each institution in Mexico has a national license. Students in our Mexican institutions typically finance their own education.

The Andean & Iberian segment includes institutions in Chile, Peru, Portugal and Spain. In Chile, private universities enroll approximately 80% of post-secondary students. In Peru, the public sector plays a significant role but private universities are increasingly providing the capacity to meet growing demand. In Spain and Portugal, the high demand for post-secondary education places capacity constraints on the public sector, pushing students to turn to the private sector for high-quality education. Chile has government-sponsored student financing programs, while in the other countries students generally finance their own education.

The Central America & U.S. Campuses segment includes institutions in Costa Rica, Honduras, Panama and the United States. Students in Central America typically finance their own education while students in the United States finance their education in a variety of ways, including Title IV programs.

The EMEAA segment includes institutions in the European countries of Cyprus, Germany, Italy and Turkey, as well as locations in the Middle East, Africa and Asia Pacific consisting of campus-based institutions with operations in Australia, China, India, Malaysia, Morocco, New Zealand, South Africa and Thailand. Additionally, EMEAA manages nine licensed institutions in the Kingdom of Saudi Arabia and manages one additional institution in China through a joint venture arrangement.

The Online & Partnerships segment includes fully online institutions operating globally that offer professionally-oriented degree programs in the United States through Walden University, a U.S.-based accredited institution, and through the University of Liverpool and the University of Roehampton in the United Kingdom. These online institutions primarily serve working adults with undergraduate and graduate degree program offerings. Students in the United States finance their education in a variety of ways, including Title IV programs.

Intersegment transactions are accounted for in a similar manner as third-party transactions and are eliminated in consolidation. The “Corporate” amounts presented in the following tables includes corporate charges that were not allocated to our reportable segments and adjustments to eliminate intersegment items.

We evaluate segment performance based on Adjusted EBITDA, which is a non-GAAP performance measure defined as Income (loss) from continuing operations before income taxes and equity in net income of affiliates, adding back the following items: (Loss) gain on sales of subsidiaries, net, Foreign currency exchange gain (loss), net, Other (expense) income, net, Gain (loss) on derivatives, Loss on debt extinguishment, Interest expense, Interest income, Depreciation and amortization expense, Loss on impairment of assets, Share-based compensation expense and expenses related to our Excellence-in-Process (EiP) initiative. EiP is an enterprise-wide initiative to optimize and standardize Laureate’s processes, creating vertical integration of procurement, information technology, finance, accounting and human resources. It includes the establishment of regional shared services organizations (SSOs) around the world, as well as improvements to the Company's system of internal controls over financial reporting. We have also expanded the EiP initiative into other back- and mid-office areas, as well as certain student-facing activities. Certain non-recurring costs incurred in connection with the planned dispositions described in Note 3, Assets Held for Sale, are also included in EiP. The increased EiP expenses during the year ended December 31, 2017 as compared to the year ended December 31, 2016 relates primarily to severance costs that are predominantly contractual termination benefits recognized in accordance with ASC 712, ‘‘Compensation—Nonretirement Postemployment Benefits.’’

When we review Adjusted EBITDA on a segment basis, we exclude intercompany revenues and expenses, related to network fees and royalties between our segments, which eliminate in consolidation. We use total assets as the measure of assets for reportable segments.

The following tables provide financial information for our reportable segments, including a reconciliation of Adjusted EBITDA to Income (loss) from continuing operations before income taxes and equity in net income of affiliates, as reported in the Consolidated Statements of Operations, for the years ended December 31, 2017, 2016 and 2015:



	Brazil		Mexico		Andean & Iberian		Central America & U.S. Campuses		EMEAA		Online & Partnerships		Corporate			Total
2017
Revenues	$	765,746	$	646,154	$	1,313,872	$	291,877	$	697,244	$	690,374	$	(27,278	)	$	4,377,989
Adjusted EBITDA	134,205		147,171		360,135		48,298		125,083		204,543		(187,695		)	831,740
Depreciation and amortization expense	35,715		27,990		81,644		15,723		51,558		35,440		16,672			264,742
Loss on impairment of assets	3,320		—		2,530		17,499		15,977		257		1,014			40,597
Total assets	1,256,364		969,400		2,117,317		376,070		1,022,569		1,294,147		355,856			7,391,723
Expenditures for long-lived assets	50,244		38,615		80,435		35,997		40,758		23,730		24,001			293,780
2016
Revenues	$	690,804	$	626,011	$	1,188,599	$	274,860	$	788,683	$	704,976	$	(29,741	)	$	4,244,192
Adjusted EBITDA	95,442		143,741		283,397		43,464		127,710		208,237		(136,390		)	765,601
Depreciation and amortization expense	35,695		26,273		82,982		17,360		54,543		38,452		9,574			264,879
Loss on impairment of assets	—		—		—		—		23,465		—		—			23,465
Total assets	1,245,264		972,171		1,951,864		345,238		958,883		1,297,798		291,252			7,062,470
Expenditures for long-lived assets	29,332		28,081		86,961		12,749		36,674		29,275		33,622			256,694
2015
Revenues	$	672,917	$	678,193	$	1,121,408	$	263,283	$	881,664	$	707,998	$	(33,804	)	$	4,291,659
Adjusted EBITDA	81,322		150,136		255,115		31,637		109,574		191,019		(115,395		)	703,408
Depreciation and amortization expense	34,261		35,156		80,556		22,935		65,069		37,161		7,808			282,946
Loss on impairment of assets	—		—		—		—		—		—		—			—
Total assets	1,054,870		1,157,814		1,841,239		378,023		1,407,909		1,225,140		338,450			7,403,445
Expenditures for long-lived assets	36,730		34,715		138,367		31,803		69,522		33,842		21,879			366,858



For the years ended December 31,	2017			2016			2015
Adjusted EBITDA of reportable segments:
Brazil	$	134,205		$	95,442		$	81,322
Mexico	147,171			143,741			150,136
Andean & Iberian	360,135			283,397			255,115
Central America & U.S. Campuses	48,298			43,464			31,637
EMEAA	125,083			127,710			109,574
Online & Partnerships	204,543			208,237			191,019
Total Adjusted EBITDA of reportable segments	1,019,435			901,991			818,803
Reconciling items:
Corporate	(187,695		)	(136,390		)	(115,395		)
Depreciation and amortization expense	(264,742		)	(264,879		)	(282,946		)
Loss on impairment of assets	(40,597		)	(23,465		)	—
Share-based compensation expense	(64,788		)	(38,809		)	(39,021		)
EiP expenses	(104,826		)	(55,555		)	(44,484		)
Operating income	356,787			382,893			336,957
Interest income	19,669			18,670			13,328
Interest expense	(362,904		)	(421,936		)	(398,042		)
Loss on debt extinguishment	(8,392		)	(17,363		)	(1,263		)
Gain (loss) on derivatives	28,656			(6,084		)	(2,607		)
Other (expense) income, net	(2,193		)	910			195
Foreign currency exchange gain (loss), net	5,838			67,450			(149,178		)
(Loss) gain on sales of subsidiaries, net	(10,662		)	406,557			—
Income (loss) from continuing operations before income taxes and equity in net income of affiliates	$	26,799		$	431,097		$	(200,610	)

Geographic Information

No individual customer accounted for more than 10% of Laureate’s consolidated revenues. Revenues from customers by geographic area, primarily generated by students enrolled at institutions in those areas, were as follows:



For the years ended December 31,	2017		2016		2015
External Revenues ⁽¹⁾
Brazil	$	765,358	$	690,377	$	672,372
United States	760,455		743,712		737,460
Mexico	644,015		624,939		678,030
Chile	617,258		564,631		536,542
Peru	450,719		389,815		356,684
Spain	191,806		197,970		200,284
Other foreign countries	948,378		1,032,748		1,110,287
Consolidated total	$	4,377,989	$	4,244,192	$	4,291,659

⁽¹⁾ Excludes intercompany revenues and therefore does not agree to the table above

Long-lived assets are composed of Property and equipment, net. Laureate’s long-lived assets of continuing operations by geographic area were as follows:



December 31,	2017		2016
Long-lived assets
Chile	$	450,224	$	432,499
Peru	327,908		299,014
Brazil	245,781		252,289
Mexico	237,109		218,531
United States	180,595		199,171
Spain	179,627		163,740
China ⁽¹⁾	—		125,697
Other foreign countries	313,660		460,692
Consolidated total	$	1,934,904	$	2,151,633

⁽¹⁾ As discussed in Note 3, Assets Held for Sale, in December 2017 we entered into an agreement to sell LEILY, the entity that is

the beneficial owner of a 70% equity interest in Hunan Lie Ying Industry Co, Ltd., which in turn owns 100% of the sponsorship or equity interest in the Entities, a group of entities that includes HIEU. As a result, Long-lived assets of $128,797 have been included in Long-term assets held for sale.