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 2017 Form 10-K, 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. As required, the segment information presented for comparative purposes for the three months ended March 31, 2017 has 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.

As of March 31, 2018, the EMEAA segment included institutions in the European countries of Germany and Turkey, as well as locations in the Middle East, Africa and Asia Pacific consisting of campus-based institutions with operations in Australia, 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. As discussed in Note 21, Subsequent Events, we completed the sales of our German and Moroccan operations in April 2018.

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: Gain on sales of subsidiaries, net, Foreign currency exchange (loss) gain, net, Other income, net, (Loss) gain 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.

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, as reported in the Consolidated Statements of Operations:



For the three months ended March 31,	2018			2017
Revenues
Brazil	$	122,792		$	116,833
Mexico	155,899			150,859
Andean & Iberian	216,230			181,151
Central America & U.S. Campuses	79,027			76,371
EMEAA	147,034			159,833
Online & Partnerships	168,031			177,066
Corporate	(3,725		)	(6,180		)
Revenues	$	885,288		$	855,933
Adjusted EBITDA of reportable segments
Brazil	$	(26,016	)	$	(39,125	)
Mexico	30,443			37,874
Andean & Iberian	(6,894		)	(18,469		)
Central America & U.S. Campuses	17,637			17,094
EMEAA	23,278			29,796
Online & Partnerships	44,974			54,095
Total Adjusted EBITDA of reportable segments	83,422			81,265
Reconciling items:
Corporate	(35,934		)	(32,666		)
Depreciation and amortization expense	(67,762		)	(64,514		)
Loss on impairment of assets	—			—
Share-based compensation expense	3,756			(22,388		)
EiP expenses	(10,941		)	(24,563		)
Operating loss	(27,459		)	(62,866		)
Interest income	6,129			4,694
Interest expense	(69,465		)	(102,633		)
Loss on debt extinguishment	(7,481		)	(1,515		)
(Loss) gain on derivatives	(19,340		)	12,147
Other income, net	2,406			436
Foreign currency exchange (loss) gain, net	(8,754		)	2,290
Gain on sales of subsidiaries, net	298,041			—
Income (loss) from continuing operations before income taxes	$	174,077		$	(147,447	)



	March 31, 2018		December 31, 2017
Assets
Brazil	$	1,270,981	$	1,256,364
Mexico	1,045,381		969,400
Andean & Iberian	2,318,081		2,117,317
Central America & U.S. Campuses	366,058		376,070
EMEAA	870,789		1,022,569
Online & Partnerships	1,280,811		1,294,147
Corporate	364,657		355,856
Total assets	$	7,516,758	$	7,391,723