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 June 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 now 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 and 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 quarterly segment information beginning in the third quarter of 2017, the period in which the change occurred. As required, the 2016 segment information that is presented for comparative purposes 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 and has contractual relationships with a licensed institution in Ecuador. 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 (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. Certain non-recurring costs incurred in connection with the planned dispositions described in Note 4, Assets Held for Sale, are also included in EiP. The increased EiP expenses during the nine months ended September 30, 2017 as compared to the nine months ended September 30, 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 three months ended September 30,						For the nine months ended September 30,
	2017			2016			2017			2016
Revenues
Brazil	$	170,497		$	152,768		$	547,971		$	479,628
Mexico	141,175			140,400			451,993			455,130
Andean & Iberian	314,788			289,182			930,335			835,477
Central America & U.S. Campuses	69,598			65,602			219,081			207,142
EMEAA	126,353			116,967			468,339			584,979
Online & Partnerships	168,375			173,303			520,982			531,063
Corporate	(7,392		)	(8,367		)	(21,935		)	(25,120		)
Revenues	$	983,394		$	929,855		$	3,116,766		$	3,068,299
Adjusted EBITDA of reportable segments
Brazil	$	9,138		$	11,856		$	61,289		$	63,174
Mexico	6,465			24,775			78,590			89,292
Andean & Iberian	74,983			63,979			240,273			179,846
Central America & U.S. Campuses	9,731			7,472			38,480			31,657
EMEAA	(13,655		)	(24,365		)	54,166			67,951
Online & Partnerships	42,883			51,250			145,753			149,097
Total Adjusted EBITDA of reportable segments	129,545			134,967			618,551			581,017
Reconciling items:
Corporate	(42,976		)	(36,379		)	(141,556		)	(100,255		)
Depreciation and amortization expense	(67,930		)	(66,824		)	(199,394		)	(202,735		)
Loss on impairment of assets	—			—			—			—
Share-based compensation expense	(8,632		)	(8,030		)	(43,969		)	(28,939		)
EiP expenses	(15,703		)	(11,232		)	(58,344		)	(37,175		)
Operating (loss) income	(5,696		)	12,502			175,288			211,913
Interest income	5,840			3,437			14,994			13,305
Interest expense	(76,454		)	(104,781		)	(278,049		)	(314,383		)
Loss on debt extinguishment	—			(15,682		)	(8,425		)	(17,363		)
(Loss) gain on derivatives	(19,930		)	516			19,187			(8,235		)
Other (expense) income, net	(718		)	353			(667		)	(964		)
Foreign currency exchange gain (loss), net	7,327			26,329			(109		)	80,263
Gain (loss) on sales of subsidiaries, net	—			155,151			(172		)	398,412
(Loss) income from continuing operations before income taxes and equity in net income of affiliates	$	(89,631	)	$	77,825		$	(77,953	)	$	362,948



	September 30, 2017		December 31, 2016
Assets
Brazil	$	1,288,014	$	1,245,264
Mexico	1,087,323		972,171
Andean & Iberian	2,264,689		1,951,864
Central America & U.S. Campuses	339,816		345,238
EMEAA	1,147,354		958,883
Online & Partnerships	1,215,107		1,297,798
Corporate	440,261		291,252
Total assets	$	7,782,564	$	7,062,470