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 2017 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. 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 an institution in the European country of Turkey, as well as locations 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, 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: Gain (loss) on sales of subsidiaries, net, Foreign currency exchange loss, net, Other income, net, 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 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, Assets Held for Sale, and the completed dispositions described in Note 5, Dispositions.

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 from continuing operations before income taxes, as reported in the Consolidated Statements of Operations:



	For the three months ended						For the six months ended
	June 30,						June 30,
	2018			2017			2018			2017
Revenues
Brazil	$	225,599		$	260,641		$	348,391		$	377,474
Mexico	159,645			159,959			315,543			310,819
Andean & Iberian	486,459			434,397			702,689			615,547
Central America & U.S. Campuses	78,419			73,112			157,445			149,483
EMEAA	138,445			182,153			285,479			341,986
Online & Partnerships	164,955			175,541			332,986			352,607
Corporate	(5,605		)	(8,364		)	(9,328		)	(14,544		)
Revenues	$	1,247,917		$	1,277,439		$	2,133,205		$	2,133,372
Adjusted EBITDA of reportable segments
Brazil	$	77,934		$	91,276		$	51,918		$	52,151
Mexico	27,806			34,250			58,250			72,124
Andean & Iberian	208,856			183,760			201,963			165,291
Central America & U.S. Campuses	14,592			11,654			32,229			28,748
EMEAA	21,266			38,026			44,544			67,821
Online & Partnerships	45,427			48,775			90,401			102,870
Total Adjusted EBITDA of reportable segments	395,881			407,741			479,305			489,005
Reconciling items:
Corporate	(34,694		)	(65,913		)	(70,630		)	(98,580		)
Depreciation and amortization expense	(62,402		)	(66,950		)	(130,164		)	(131,465		)
Loss on impairment of assets	—			—			—			—
Share-based compensation expense	(7,687		)	(12,949		)	(3,931		)	(35,337		)
EiP expenses	(25,325		)	(18,079		)	(36,266		)	(42,640		)
Operating income	265,773			243,850			238,314			180,983
Interest income	5,448			4,460			11,577			9,154
Interest expense	(65,969		)	(98,962		)	(135,434		)	(201,595		)
Loss on debt extinguishment	—			(6,915		)	(7,481		)	(8,430		)
Gain on derivatives	111,596			26,970			92,256			39,117
Other income (expense), net	2,099			(380		)	4,505			56
Foreign currency exchange loss, net	(17,867		)	(9,726		)	(26,621		)	(7,436		)
Gain (loss) on sales of subsidiaries, net	11,763			(172		)	309,804			(172		)
Income from continuing operations before income taxes and equity in net income of affiliates	$	312,843		$	159,125		$	486,920		$	11,677



	June 30, 2018		December 31, 2017
Assets
Brazil	$	1,131,655	$	1,256,364
Mexico	966,869		969,400
Andean & Iberian	2,107,779		2,117,317
Central America & U.S. Campuses	365,437		376,070
EMEAA	753,076		1,022,569
Online & Partnerships	1,256,671		1,294,147
Corporate	349,037		355,856
Total assets	$	6,930,524	$	7,391,723