Business and Geographic Segment Information

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

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, Central America & U.S. Campuses and Rest of World. 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 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 institutions in Portugal and Spain are included in Discontinued Operations.

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 DOE Title IV programs. The entire Central America & U.S. Campuses segment is included in Discontinued Operations.

The Rest of World segment includes an institution in the European country of Turkey, as well as institutions in the Middle East, Africa and Asia Pacific consisting of campus-based institutions with operations in Australia, India, Malaysia, New Zealand, South Africa and Thailand. Additionally, the Rest of World segment manages eight licensed institutions in the Kingdom of Saudi Arabia and manages one additional institution in China through a joint venture arrangement. The institutions in the Rest of World segment are included in Discontinued Operations, except for Australia, New Zealand and the managed institutions in the Kingdom of Saudi Arabia and China.

The Online & Partnerships segment includes fully online institutions that offer professionally oriented degree programs in the United States through Walden University (Walden), 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.

As discussed in Note 1, Description of Business, during the third quarter of 2018, a number of our subsidiaries met the requirements to be classified as discontinued operations, including the entire Central America & U.S. Campuses segment. As a result, the operations of the Central America & U.S. Campuses segment have been excluded from the segment information for all periods presented. In addition, the portions of the Andean and Rest of World reportable segments that are included in Discontinued Operations have also been excluded from the segment information for all periods presented.

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 include 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: Gain (loss) on sales of subsidiaries, net, Foreign currency exchange (loss) gain, net, Other income (expense), 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. EiP also includes certain non-recurring costs incurred in connection with the planned dispositions described in Note 4, Discontinued Operations and Assets Held for Sale, and the completed dispositions described in Note 6, Dispositions and Asset Sales.

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 (loss) income of affiliates, as reported in the Consolidated Statements of Operations, for the years ended December 31, 2018, 2017 and 2016:



	Brazil		Mexico		Andean		Rest of World		Online & Partnerships		Corporate			Total
2018
Revenues	$	654,300	$	646,134	$	1,155,691	$	238,006	$	664,226	$	(8,133	)	$	3,350,224
Adjusted EBITDA	103,969		143,221		317,126		40,367		194,742		(176,319		)	623,106
Depreciation and amortization expense	35,532		31,007		70,905		16,588		33,506		25,945			213,483
Loss on impairment of assets	—		—		—		3,080		10,030		—			13,110
Total assets	1,011,391		971,309		1,608,406		231,421		1,308,854		1,638,255			6,769,636
Expenditures for long-lived assets	32,423		31,376		59,493		14,791		21,079		27,280			186,442
2017
Revenues	$	765,746	$	646,154	$	1,085,640	$	214,720	$	690,374	$	(16,758	)	$	3,385,876
Adjusted EBITDA	134,205		147,171		301,249		32,411		204,543		(204,108		)	615,471
Depreciation and amortization expense	35,715		27,990		67,764		20,659		35,440		16,765			204,333
Loss on impairment of assets	3,320		—		2,530		—		257		1,014			7,121
Total assets	1,256,364		969,400		1,714,819		225,429		1,294,147		1,931,126			7,391,285
Expenditures for long-lived assets	50,244		38,615		72,098		9,697		23,730		24,001			218,385
2016
Revenues	$	690,804	$	626,011	$	969,717	$	330,423	$	704,976	$	(20,067	)	$	3,301,864
Adjusted EBITDA	95,442		143,741		225,538		53,352		208,237		(145,893		)	580,417
Depreciation and amortization expense	35,695		26,273		68,050		21,668		38,452		9,668			199,806
Loss on impairment of assets	—		—		—		—		—		—			—
Expenditures for long-lived assets	29,332		28,081		80,396		8,126		29,275		33,621			208,831

As discussed in Note 4, Discontinued Operations and Assets Held for Sale, a number of our entities have been classified as Discontinued Operations and their assets have been classified as assets held for sale and excluded from the segment information for all periods presented. Accordingly, in order to reconcile to total consolidated assets as of December 31, 2018 and 2017 in the table above, assets held for sale related to Discontinued Operations of $1,276,876 and $1,549,340, respectively, are included in the Corporate amounts.



For the years ended December 31,	2018			2017			2016
Adjusted EBITDA of reportable segments:
Brazil	$	103,969		$	134,205		$	95,442
Mexico	143,221			147,171			143,741
Andean	317,126			301,249			225,538
Rest of World	40,367			32,411			53,352
Online & Partnerships	194,742			204,543			208,237
Total Adjusted EBITDA of reportable segments	799,425			819,579			726,310
Reconciling items:
Corporate	(176,319		)	(204,108		)	(145,893		)
Depreciation and amortization expense	(213,483		)	(204,333		)	(199,806		)
Loss on impairment of assets	(13,110		)	(7,121		)	—
Share-based compensation expense	(9,738		)	(61,844		)	(35,852		)
EiP expenses	(95,793		)	(100,180		)	(54,082		)
Operating income	290,982			241,993			290,677
Interest income	11,856			11,865			14,414
Interest expense	(235,235		)	(334,901		)	(390,391		)
Loss on debt extinguishment	(7,481		)	(8,392		)	(17,363		)
Gain (loss) on derivatives	88,292			28,656			(6,084		)
Other income (expense), net	12,173			(1,892		)	457
Foreign currency exchange (loss) gain, net	(32,409		)	2,539			77,299
Gain (loss) on sales of subsidiaries, net	254			(10,490		)	398,081
Income (loss) from continuing operations before income taxes and equity in net (loss) income of affiliates	$	128,432		$	(70,622	)	$	367,090

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,	2018		2017		2016
External Revenues
Brazil ⁽¹⁾	$	654,070	$	765,358	$	690,377
Chile	654,002		617,213		564,592
Mexico ⁽¹⁾	643,348		644,015		624,939
United States	627,127		635,637		633,471
Peru	493,008		450,719		389,815
Other foreign countries	278,669		272,934		398,670
Consolidated total	$	3,350,224	$	3,385,876	$	3,301,864

⁽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,	2018		2017
Long-lived assets
Chile	$	338,187	$	387,422
Peru	336,898		327,908
Mexico	233,048		237,109
Brazil	198,071		245,781
United States	100,438		104,995
Other foreign countries	72,293		77,202
Consolidated total	$	1,278,935	$	1,380,417