Business and Geographic Segment Information

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Business and Geographic Segment Information

Business and Geographic Segment Information

Laureate’s educational services are offered through two reportable segments: Mexico and Peru (formerly Andean). Following the September 2020 sale of Chile, the former Andean segment is now called the Peru segment. Laureate determines its segments based on information utilized by the chief operating decision maker to allocate resources and assess performance.

Our segments generate revenues by providing an education that emphasizes profession-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. In response to the COVID-19 pandemic, we have temporarily transitioned the educational delivery method at all of our institutions to be online and are leveraging our existing technologies and learning platforms to serve students outside of the traditional classroom setting. The Mexico and Peru markets are characterized by what we believe is a significant imbalance between supply and demand. The demand for higher education is large and growing and is fueled by several demographic and economic factors, including a growing middle class, global growth in services and technology-related industries and recognition of the significant personal and economic benefits gained by graduates of higher education institutions. The target demographics are primarily 18- to 24-year-olds in the countries in which we compete. We compete with other private higher education institutions on the basis of price, educational quality, reputation and location. We believe that we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by our network. There are a number of private and public institutions in both of the countries in which we operate, and it is difficult to predict how the markets will evolve and how many competitors there will be in the future. We expect competition to increase as the Mexican and Peruvian markets mature. Essentially all of our revenues were generated from private pay sources as there are no material government-sponsored loan programs in Mexico or Peru. Specifics related to both of our reportable segments are discussed below.

Private education providers in Mexico constitute 35% of the total higher-education market. The private sector plays a meaningful role in higher education, bridging supply and demand imbalances created by a lack of capacity at public universities. Laureate owns two institutions and is present throughout the country with a footprint of over 35 campuses. Each institution in Mexico has a national license. Students in our Mexican institutions typically finance their own education.

In Peru, private universities are increasingly providing the capacity to meet growing demand and constitute 72% of the total higher-education market. Laureate owns three institutions in Peru.

As discussed in Note 1, Description of Business, and Note 4, Discontinued Operations and Assets Held for Sale, a number of our subsidiaries have met the requirements to be classified as Discontinued Operations. As a result, the Discontinued Operations have 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: Loss on disposal of subsidiaries, net, Foreign currency exchange gain, net, Other income (expense), 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 included 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. The EiP initiative also includes other back- and mid-office areas, as well as certain student-facing activities, expenses associated with streamlining the organizational structure, an enterprise-wide program aimed at revenue growth, and 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 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 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 March 31,	2021		2020
Revenues
Mexico	$	135,397	$	154,207
Peru	57,498		36,527
Corporate	1,806		1,585
Revenues	$	194,701	$	192,319
Adjusted EBITDA of reportable segments
Mexico	$	17,269	$	23,310
Peru	11,594		(26,667)
Total Adjusted EBITDA of reportable segments	28,863		(3,357)
Reconciling items:
Corporate	(19,202)		(25,993)
Depreciation and amortization expense	(22,761)		(19,650)
Loss on impairment of assets	(56,650)		(3,768)
Share-based compensation expense	(1,334)		(1,539)
EiP expenses	(15,307)		(22,779)
Operating loss	(86,391)		(77,086)
Interest income	711		622
Interest expense	(23,518)		(25,290)
Loss on debt extinguishment	(13)		—
Gain on derivatives	29,330		802
Other income (expense), net	34		(81)
Foreign currency gain, net	28,183		78,716
Loss on disposal of subsidiaries, net	—		(1,800)
Loss from continuing operations before income taxes and equity in net income of affiliates	$	(51,664)	$	(24,117)

	March 31, 2021		December 31, 2020
Assets
Mexico	$	1,186,678	$	1,278,198
Peru	623,988		623,294
Corporate and Discontinued Operations	2,673,382		3,069,402
Total assets	$	4,484,048	$	4,970,894