UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2019

OR

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________.

Commission File Number: 001-38002

Laureate Education, Inc.

(Exact name of registrant as specified in its charter)

Delaware	52-1492296
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
650 S. Exeter Street, Baltimore, Maryland	21202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (410) 843-6100

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.004 per share	LAUR	The NASDAQ Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                             Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)

Smaller reporting company oEmerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class	Outstanding at March 31, 2019
Class A common stock, par value $0.004 per share	107,782,733 shares
Class B common stock, par value $0.004 per share	116,857,483 shares

INDEX
PART I. - FINANCIAL INFORMATION		Page No.
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations - Three months ended March 31, 2019 and March 31, 2018	2
	Consolidated Statements of Comprehensive Income - Three months ended March 31, 2019 and March 31, 2018	3
	Consolidated Balance Sheets - March 31, 2019 and December 31, 2018	4
	Consolidated Statements of Cash Flows - Three months ended March 31, 2019 and March 31, 2018	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	59
PART II. - OTHER INFORMATION
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	61
Item 6.	Exhibits	62
SIGNATURES		67

1

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

IN THOUSANDS, except per share amounts

For the three months ended March 31,	2019			2018
	(Unaudited)			(Unaudited)
Revenues	$	621,796		$	632,216
Costs and expenses:
Direct costs	652,414			677,535
General and administrative expenses	53,911			47,302
Operating loss	(84,529		)	(92,621		)
Interest income	3,553			3,268
Interest expense	(54,655		)	(63,335		)
Loss on debt extinguishment	(10,622		)	(7,481		)
Gain (loss) on derivatives	5,183			(19,340		)
Other income, net	359			2,597
Foreign currency exchange loss, net	(4,659		)	(11,782		)
Loss from continuing operations before income taxes	(145,370		)	(188,694		)
Income tax benefit	35,056			23,059
Loss from continuing operations	(110,314		)	(165,635		)
Income from discontinued operations, including tax expense of ($9,350) and ($46,382), respectively	56,574			18,853
Gain on sales of discontinued operations, net, including tax benefit of $287 and $20,792, respectively	248,005			318,327
Net income	194,265			171,545
Net income attributable to noncontrolling interests	(3,022		)	(2,666		)
Net income attributable to Laureate Education, Inc.	$	191,243		$	168,879
Accretion of other redeemable noncontrolling interests and equity and Series A convertible redeemable preferred stock	263			(57,403		)
Net income available to common stockholders	$	191,506		$	111,476

Basic and diluted earnings (loss) per share:
Loss from continuing operations	$	(0.50	)	$	(1.20	)
Income from discontinued operations	1.35			1.79
Basic and diluted earnings per share	$	0.85		$	0.59

The accompanying notes are an integral part of these consolidated financial statements.

2

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

IN THOUSANDS

For the three months ended March 31,	2019			2018
	(Unaudited)			(Unaudited)
Net income	$	194,265		$	171,545
Other comprehensive income:
Foreign currency translation adjustment, net of tax of $0 for both periods	49,551			83,369
Unrealized gain on derivative instruments, net of tax of $0 for both periods	2,609			2,210
Minimum pension liability adjustment, net of tax of $0	—			376
Total other comprehensive income	52,160			85,955
Comprehensive income	246,425			257,500
Net comprehensive income attributable to noncontrolling interests	(3,052		)	(2,387		)
Comprehensive income attributable to Laureate Education, Inc.	$	243,373		$	255,113

The accompanying notes are an integral part of these consolidated financial statements.

3

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

IN THOUSANDS, except per share amounts

	March 31, 2019			December 31, 2018
Assets	(Unaudited)
Current assets:
Cash and cash equivalents (includes VIE amounts of $75,019 and $158,387, see Note 2)	$	278,782		$	388,490
Restricted cash	203,633			201,300
Receivables:
Accounts and notes receivable	606,235			399,322
Other receivables	13,429			11,596
Allowance for doubtful accounts	(165,011		)	(161,649		)
Receivables, net	454,653			249,269
Income tax receivable	82,269			18,515
Prepaid expenses and other current assets	72,474			53,187
Current assets held for sale	308,650			306,372
Total current assets (includes VIE amounts of $590,857 and $483,613, see Note 2)	1,400,461			1,217,133
Notes receivable, net	7,159			2,397
Property and equipment:
Land	239,536			234,826
Buildings	651,359			645,177
Furniture, equipment and software	995,564			968,468
Leasehold improvements	330,749			356,824
Construction in-progress	38,500			60,919
Accumulated depreciation and amortization	(1,018,103		)	(987,279		)
Property and equipment, net	1,237,605			1,278,935
Operating lease right-of-use assets, net	952,890			—
Land use rights, net	1,592			1,552
Goodwill	1,738,228			1,707,089
Other intangible assets:
Tradenames	1,134,342			1,126,244
Other intangible assets, net	2,476			25,429
Deferred costs, net	68,049			66,835
Deferred income taxes	145,455			136,487
Derivative instruments	6,197			3,259
Other assets	177,855			172,817
Long-term assets held for sale	961,212			1,031,459
Total assets (includes VIE amounts of $1,360,948 and $1,196,813, see Note 2)	$	7,833,521		$	6,769,636

The accompanying notes are an integral part of these consolidated financial statements.

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LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

IN THOUSANDS, except per share amounts

	March 31, 2019			December 31, 2018
Liabilities and stockholders' equity	(Unaudited)
Current liabilities:
Accounts payable	$	70,629		$	67,303
Accrued expenses	241,368			227,583
Accrued compensation and benefits	143,194			196,355
Deferred revenue and student deposits	556,384			193,226
Current portion of operating leases	97,517			—
Current portion of long-term debt and finance leases	105,264			101,866
Current portion of due to shareholders of acquired companies	25,251			23,820
Income taxes payable	22,288			20,901
Derivative instruments	1,223			4,021
Other current liabilities	23,033			46,621
Current liabilities held for sale	315,521			308,391
Total current liabilities (includes VIE amounts of $358,368 and $207,977, see Note 2)	1,601,672			1,190,087
Long-term operating leases, less current portion	871,588			—
Long-term debt and finance leases, less current portion	2,136,328			2,593,585
Due to shareholders of acquired companies, less current portion	21,044			21,571
Deferred compensation	12,918			12,778
Income taxes payable	89,706			93,460
Deferred income taxes	217,886			217,558
Derivative instruments	—			6,656
Other long-term liabilities	166,385			214,306
Long-term liabilities held for sale	374,179			354,293
Total liabilities (includes VIE amounts of $521,229 and $274,744, see Note 2)	5,491,706			4,704,294
Redeemable noncontrolling interests and equity	13,909			14,396
Stockholders' equity:
Preferred stock, par value $0.001 per share – 49,889 shares authorized as of March 31, 2019 and December 31, 2018, respectively, no shares issued and outstanding as of March 31, 2019 and December 31, 2018	—			—
Class A common stock, par value $0.004 per share – 700,000 shares authorized, 107,783 shares issued and outstanding as of March 31, 2019 and 107,450 shares issued and outstanding as of December 31, 2018	431			430
Class B common stock, par value $0.004 per share – 175,000 shares authorized, 116,857 shares issued and outstanding as of March 31, 2019 and 116,865 shares issued and outstanding as of December 31, 2018	467			467
Additional paid-in capital	3,705,787			3,703,796
Accumulated deficit	(310,732		)	(530,919		)
Accumulated other comprehensive loss	(1,060,565		)	(1,112,695		)
Total Laureate Education, Inc. stockholders' equity	2,335,388			2,061,079
Noncontrolling interests	(7,482		)	(10,133		)
Total stockholders' equity	2,327,906			2,050,946
Total liabilities and stockholders' equity	$	7,833,521		$	6,769,636

The accompanying notes are an integral part of these consolidated financial statements.

5

LAUREATE EDUCATION, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

IN THOUSANDS

For the three months ended March 31,	2019			2018
Cash flows from operating activities	(Unaudited)			(Unaudited)
Net income	$	194,265		$	171,545
Adjustments to reconcile net income to net cash provided by (uesd in) operating activities:
Depreciation and amortization	47,644			67,762
Amortization of operating lease right-of-use assets	33,374			—
Gain on sales of subsidiaries and disposal of property and equipment, net	(246,803		)	(297,479		)
(Gain) loss on derivative instruments	(5,343		)	19,132
Payments for settlement of derivative contracts	(8,233		)	—
Loss on debt extinguishment	10,622			7,481
Non-cash interest expense	5,076			4,645
Non-cash share-based compensation expense	3,149			(3,756		)
Bad debt expense	23,650			22,153
Deferred income taxes	8,835			(26,560		)
Unrealized foreign currency exchange loss	5,458			1,082
Non-cash loss from non-income tax contingencies	4,561			2,121
Other, net	1,537			(315		)
Changes in operating assets and liabilities:
Receivables	(264,944		)	(268,434		)
Prepaid expenses and other assets	(62,433		)	(20,158		)
Accounts payable and accrued expenses	(47,929		)	(61,087		)
Income tax receivable/payable, net	(45,012		)	(14,810		)
Deferred revenue and other liabilities	387,500			389,602
Net cash provided by (used in) operating activities	44,974			(7,076		)
Cash flows from investing activities
Purchase of property and equipment	(32,319		)	(44,245		)
Expenditures for deferred costs	(3,488		)	(3,365		)
Receipts from sales of discontinued operations and property and equipment, net of cash sold	330,998			359,510
Settlement of derivatives related to sale of discontinued operations	—			(9,960		)
Business acquisitions, net of cash acquired	(1,194		)	—
Payments from related parties	87			750
Net cash provided by investing activities	294,084			302,690
Cash flows from financing activities
Proceeds from issuance of long-term debt, net of original issue discount	90,630			188,563
Payments on long-term debt	(532,592		)	(541,812		)
Payments of deferred purchase price for acquisitions	(369		)	(5,534		)
Payments to purchase noncontrolling interests	—			(127		)
Payment of dividends on Series A Preferred Stock	—			(9,719		)
Withholding of shares to satisfy tax withholding for vested stock awards	(1,420		)	(803		)
Payments of debt issuance costs and redemption premiums	(5,226		)	(148		)
(Distributions to) contributions from noncontrolling interest holders	(625		)	581
Net cash used in financing activities	(449,602		)	(368,999		)
Effects of exchange rate changes on Cash and cash equivalents and Restricted cash	2,045			22,150
Change in cash included in current assets held for sale	1,124			(100		)
Net change in Cash and cash equivalents and Restricted cash	(107,375		)	(51,335		)
Cash and cash equivalents and Restricted cash at beginning of period	589,790			532,782
Cash and cash equivalents and Restricted cash at end of period	$	482,415		$	481,447

The accompanying notes are an integral part of these consolidated financial statements.

6

Laureate Education, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars and shares in thousands)

Note 1. Description of Business

Laureate Education, Inc. and subsidiaries (hereinafter Laureate, we, us, our, or the Company) provide higher education programs and services to students through an international network of licensed universities and higher education institutions (institutions). Laureate's programs are provided through institutions that are campus-based and internet-based, or through electronically distributed educational programs (online). On October 1, 2015, we redomiciled in Delaware as a public benefit corporation as a demonstration of our long-term commitment to our mission to benefit our students and society. The Company completed its initial public offering (IPO) on February 6, 2017 and its shares are listed on the Nasdaq Global Select Market under the symbol ‘‘LAUR.’’

Discontinued Operations

On August 9, 2018, the Company announced the divestiture of additional subsidiaries located in Europe, Asia and Central America, which are included in the Rest of World (formerly called EMEAA), Andean (formerly called Andean & Iberian), and Central America & U.S. Campuses segments. Previously, the Company had announced the divestiture of certain subsidiaries in the Rest of World and Central America & U.S. Campuses segments. After completing all of these announced divestitures, the Company’s remaining principal markets will be Brazil, Chile, Mexico and Peru, along with the Online & Partnerships segment and the institutions in Australia and New Zealand. This represents a strategic shift that will have a major effect on the Company's operations and financial results. Accordingly, all of the divestitures that are part of this strategic shift, including the divestitures announced on August 9, 2018 and those announced previously, are now accounted for as discontinued operations for all periods presented in accordance with Accounting Standards Codification (ASC) 205-20, ‘‘Discontinued Operations’’ (ASC 205). See Note 4, Discontinued Operations and Assets Held for Sale, for more information. Unless indicated otherwise, the information in the footnotes to the Consolidated Financial Statements relates to continuing operations.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, these financial statements include all adjustments considered necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. These unaudited Consolidated Financial Statements should be read in conjunction with Laureate's audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the 2018 Form 10-K).

7

Note 2. Significant Accounting Policies

The Variable Interest Entity (VIE) Arrangements

Laureate consolidates in its financial statements certain internationally based educational organizations that do not have shares or other equity ownership interests. Although these educational organizations may be considered not-for-profit entities in their home countries and they are operated in compliance with their respective not-for-profit legal regimes, we believe they do not meet the definition of a not-for-profit entity under GAAP, and therefore we treat them as "for-profit" entities for accounting purposes. These entities generally cannot declare dividends or distribute their net assets to the entities that control them.

Under ASC 810-10, ‘‘Consolidation,’’ we have determined that these institutions are VIEs and that Laureate is the primary beneficiary of these VIEs because we have, as further described herein: (1) the power to direct the activities of the VIEs that most significantly affect their educational and economic performance and (2) the right to receive economic benefits from contractual and other arrangements with the VIEs that could potentially be significant to the VIEs. We account for the acquisition of the right to control a VIE in accordance with ASC 805, ‘‘Business Combinations.’’

The VIEs in Brazil and Mexico comprise several not-for-profit foundations that have insignificant revenues and operating expenses. Selected Consolidated Statements of Operations information for VIEs that are included in continuing operations was as follows, net of the charges related to the above-described contractual arrangements:

For the three months ended March 31,	2019			2018
Selected Statements of Operations information:
Revenues, by segment:
Brazil	$	—		$	—
Mexico	—			—
Andean	56,450			55,036
Revenues	56,450			55,036
Depreciation and amortization	6,096			6,744
Operating loss, by segment:
Brazil	(18		)	(18		)
Mexico	(97		)	(157		)
Andean	(27,220		)	(39,251		)
Operating loss	(27,335		)	(39,426		)
Net loss	(24,200		)	(34,994		)
Net loss attributable to Laureate Education, Inc.	(24,200		)	(34,994		)

8

The following table reconciles the Net (loss) income attributable to Laureate Education, Inc. as presented in the table above, to the amounts in our Consolidated Statements of Operations:

For the three months ended March 31,	2019			2018
Net (loss) income attributable to Laureate Education, Inc.:
Variable interest entities	$	(24,200	)	$	(34,994	)
Other operations	(45,211		)	(18,268		)
Corporate and eliminations	260,654			222,141
Net income attributable to Laureate Education, Inc.	$	191,243		$	168,879

The following table presents selected assets and liabilities of the consolidated VIEs. Except for Goodwill, the assets in the table below include the assets that can be used only to settle the obligations for the VIEs. The liabilities in the table are liabilities for which the creditors of the VIEs do not have recourse to the general credit of Laureate.

Selected Consolidated Balance Sheet amounts for these VIEs were as follows:

	March 31, 2019				December 31, 2018
	VIE		Consolidated		VIE		Consolidated
Balance Sheets data:
Cash and cash equivalents	$	75,019	$	278,782	$	158,387	$	388,490
Current assets held for sale	194,353		308,650		183,880		306,372
Other current assets	321,485		813,029		141,346		522,271
Total current assets	590,857		1,400,461		483,613		1,217,133
Goodwill	172,675		1,738,228		168,473		1,707,089
Tradenames	68,273		1,134,342		66,929		1,126,244
Other intangible assets, net	—		2,476		—		25,429
Operating lease right-of-use assets, net	76,149		952,890		—		—
Long-term assets held for sale	170,787		961,212		165,087		1,031,459
Other long-term assets	282,207		1,643,912		312,711		1,662,282
Total assets	1,360,948		7,833,521		1,196,813		6,769,636
Current liabilities held for sale	91,912		315,521		101,320		308,391
Other current liabilities	266,456		1,286,151		106,657		881,696
Long-term operating leases, less current portion	65,649		871,588		—		—
Long-term liabilities held for sale	63,847		374,179		42,265		354,293
Long-term debt and other long-term liabilities	33,365		2,644,267		24,502		3,159,914
Total liabilities	521,229		5,491,706		274,744		4,704,294
Total stockholders' equity	839,719		2,327,906		922,069		2,050,946
Total stockholders' equity attributable to Laureate Education, Inc.	839,323		2,335,388		921,747		2,061,079

On January 24, 2018, a new Higher Education Law (the New Law) was passed by the Chilean Congress. Among other things, the New Law prohibits conflicts of interests and related party transactions involving universities and their controlling parties, with certain exceptions. These exceptions include the provision of services that are educational in nature or essential for the university's purposes.

The New Law, which has an implementation date of May 29, 2019, established a Superintendency of Higher Education, with authority to regulate institutions of higher education and promulgate regulations and procedures implementing the New Law. We anticipate that the Superintendent of Higher Education will promulgate regulations or other guidance. In anticipation of the implementation of the New Law, we have modified and will continue to modify some of our relationships with the Chilean universities in our network and we will continue to evaluate the impact the New Law will have on our Chilean operations. We do not believe the New Law will change our relationship with our two tech/voc institutions in Chile that are for-profit entities.

9

Additionally, we will continue to evaluate our accounting treatment of the Chilean non-profit universities to determine whether we can continue to consolidate them. Our continuing evaluation of the impact of the New Law may result in changes to our expectations due to changes in our interpretations of the law, assumptions used, and additional guidance that may be issued.

Recently Adopted Accounting Standards

Accounting Standards Update (ASU) No. 2016-02 (ASU 2016-02), Leases (Topic 842)

On February 25, 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02, which requires lessees to recognize on their balance sheet a right-of-use (ROU) asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability is equal to the present value of the lease payments. The asset is based on the liability, subject to adjustment, such as for initial direct costs and uneven rent payments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases result in straight-line expense (similar to operating leases prior to adoption of ASU 2016-02) while finance leases will result in a front-loaded expense pattern (similar to capital leases prior to adoption of ASU 2016-02).

Laureate adopted ASU 2016-02 as of January 1, 2019 under a modified retrospective method. The standard provided companies with an additional, optional transition method that allowed entities to prospectively apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We elected this optional transition method. In accordance with Topic 842 we also elected the package of practical expedients, which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient, which permits entities to use hindsight in determining the lease term and assessing impairment. We elected the practical expedient to combine our lease and related nonlease components for our building leases.

Adopting ASU 2016-02 had a material impact on our Consolidated Balance Sheet as we recorded significant asset and liability balances in connection with our leased properties. The most significant impacts to our Consolidated Financial Statements of adopting this standard are as follows:

• The recognition of ROU assets and lease liabilities for operating leases, which totaled $952,890 and $969,105, respectively, as of March 31, 2019;

• An increase in 2019 rent expense of approximately $13,000 for continuing operations primarily related to build-to-suit arrangements where Laureate was deemed to be the owner of the construction. Upon adoption of this standard, these arrangements were classified on the balance sheet as operating leases and the related ROU asset is being amortized to rent expense rather than depreciation expense; and

• A cumulative-effect adjustment to retained earnings upon adoption of $28,944, which is primarily attributable to the reclassification into retained earnings of deferred gain liabilities related to sale-leaseback transactions that were classified as operating leases upon adoption.

ASU No. 2017-12 (ASU 2017-12), Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities

On August 28, 2017, the FASB issued ASU 2017-12, which contains significant amendments to the hedge accounting model. The new guidance is intended to simplify the application of hedge accounting and should allow for more hedging strategies to qualify for hedge accounting. ASU 2017-12 also amends the presentation and disclosure requirements and changes how companies assess effectiveness. Public business entities like Laureate will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, such as a regression analysis, if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. We adopted this ASU on January 1, 2019 and the impact was not material.

10

ASU No. 2018-15 (ASU 2018-15)  Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)

In August 2018, the FASB issued ASU 2018-15, which addresses the accounting for implementation costs associated with a hosted service. The standard provides amendments to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Laureate elected to early adopt ASU 2018-15 on January 1, 2019, and the impact on our Consolidated Financial Statements was not material.

Note 3. Revenue

Revenue Recognition

Laureate's revenues primarily consist of tuition and educational service revenues. We also generate other revenues from student fees, dormitory/residency fees and other education-related activities. These other revenues are less material to our overall financial results and have a tendency to trend with tuition revenues. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. These revenues are recognized net of scholarships and other discounts, refunds, waivers and the fair value of any guarantees made by Laureate related to student financing programs. Laureate's institutions have various billing and academic cycles.

We determine revenue recognition through the five-step model prescribed by ASC Topic 606, Revenue from Contracts with Customers, as follows:

•Identification of the contract, or contracts, with a customer;

•Identification of the performance obligations in the contract;

•Determination of the transaction price;

•Allocation of the transaction price to the performance obligations in the contract; and

•Recognition of revenue when, or as, we satisfy a performance obligation.

We assess collectibility on a portfolio basis prior to recording revenue. Generally, students cannot re-enroll for the next academic session without satisfactory resolution of any past-due amounts. If a student withdraws from an institution, Laureate's obligation to issue a refund depends on the refund policy at that institution and the timing of the student's withdrawal. Generally, our refund obligations are reduced over the course of the academic term. We record refunds as a reduction of deferred revenue as applicable.

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The following table shows the components of Revenues by reportable segment and as a percentage of total net revenue for the three months ended March 31, 2019 and 2018:

	Brazil			Mexico			Andean			Rest of World			Online & Partnerships			Corporate(1)			Total
2019
Tuition and educational services	$	201,254		$	164,802		$	137,403		$	54,080		$	181,050		$	—		$	738,589		118	%
Other	1,926			26,496			15,847			3,177			12,008			491			59,945			10	%
Gross revenue	$	203,180		$	191,298		$	153,250		$	57,257		$	193,058		$	491		$	798,534		128	%
Less: Discounts / waivers / scholarships	(93,211		)	(34,834		)	(14,308		)	(3,101		)	(31,284		)	—			(176,738		)	(28	)%
Total	$	109,969		$	156,464		$	138,942		$	54,156		$	161,774		$	491		$	621,796		100	%
2018
Tuition and educational services	$	202,103		$	166,310		$	135,964		$	53,315		$	181,245		$	—		$	738,937		117	%
Other	2,859			25,279			15,542			2,189			14,182			(1,834		)	58,217			9	%
Gross revenue	$	204,962		$	191,589		$	151,506		$	55,504		$	195,427		$	(1,834	)	$	797,154		126	%
Less: Discounts / waivers / scholarships	(82,170		)	(35,690		)	(16,452		)	(3,230		)	(27,396		)	—			(164,938		)	(26	)%
Total	$	122,792		$	155,899		$	135,054		$	52,274		$	168,031		$	(1,834	)	$	632,216		100	%

⁽¹⁾ Includes the elimination of intersegment revenues.

Contract Balances

The timing of billings, cash collections and revenue recognition results in accounts receivable (contract assets) and deferred revenue and student deposits (contract liabilities) on the Consolidated Balance Sheets. We have various billing and academic cycles and recognize student receivables when an academic session begins, although students generally enroll in courses prior to the start of the academic session. Receivables are recognized only to the extent that it is probable that we will collect substantially all of the consideration to which we are entitled in exchange for the goods and services that will be transferred to the student. We receive advance payments or deposits from our students before revenue is recognized, which are recorded as contract liabilities in deferred revenue and student deposits. Payment terms vary by university with some universities requiring payment in advance of the academic session and other universities allowing students to pay in installments over the term of the academic session.

All of our contract assets are considered accounts receivable and are included within the Accounts and notes receivable balance in the accompanying Consolidated Balance Sheets. Total accounts receivable from our contracts with students were $606,235 and $399,322 as of March 31, 2019 and December 31, 2018, respectively. The increase in the contract assets balance at March 31, 2019 compared to December 31, 2018 is primarily driven by our enrollment cycles. The first and third calendar quarters generally coincide with the primary and secondary intakes for our larger institutions. All contract asset amounts are classified as current.

Contract liabilities in the amount of $556,384 and $193,226 were included within the Deferred revenue and student deposits balance in the current liabilities section of the accompanying Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018, respectively. The increase in the contract liability balance during the period ended March 31, 2019 is the result of semester billings and cash payments received in advance of satisfying performance obligations, offset by revenue recognized during that period. Revenue recognized for the three months ended March 31, 2019 that was included in the contract liability balance at the beginning of the year was approximately $141,000.

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Note 4. Discontinued Operations and Assets Held for Sale

As discussed in Note 1, Description of Business, on August 9, 2018, the Company announced that it plans to focus on its principal markets and will divest certain of its other markets. The principal markets that will remain (the Continuing Operations) include Brazil, Chile, Mexico, and Peru, along with the Online & Partnerships segment and the institutions in Australia and New Zealand. The markets to be divested (the Discontinued Operations) include the institutions in Portugal and Spain, which are part of the Andean segment, all remaining institutions in the Central America & U.S. Campuses segment, and all remaining institutions in the Rest of World segment, except for Australia, New Zealand and the managed institutions in the Kingdom of Saudi Arabia and China. The institutions in the Kingdom of Saudi Arabiaare managed under a contract that expires in August 2019. Included in the Discontinued Operations are six VIE institutions.

The divestitures are expected to create a more focused and simplified business model and generate proceeds that will be used for further repayment of long-term debt. The timing and ability to complete any of these transactions is uncertain and will be subject to market and other conditions, which may include regulatory approvals and consents of third parties.

Summarized operating results and cash flows of the Discontinued Operations are presented in the following tables:

For the three months ended March 31,	2019			2018
Revenues	$	202,616		$	253,072
Depreciation and amortization	—			10,793
Share-based compensation expense	162			321
Other direct costs	139,648			176,799
Operating income	62,806			65,159
Other non-operating income	3,118			76
Pretax income of discontinued operations	65,924			65,235
Income tax expense	(9,350		)	(46,382		)
Income from discontinued operations, net of tax	$	56,574		$	18,853
Operating cash flows of discontinued operations	$	16,124		$	20,682
Investing cash flows of discontinued operations	$	(7,410	)	$	(11,253	)
Financing cash flows of discontinued operations	$	(15,473	)	$	(5,421	)

The assets and liabilities of the Discontinued Operations, which are subject to finalization, have been classified as held for sale as of March 31, 2019 and December 31, 2018, in accordance with ASC 205. The assets and liabilities are recorded at the lower of their carrying values or their estimated 'fair values less costs to sell.' In addition to the Discontinued Operations, UniNorte, an institution in the Brazil segment, has also been classified as held for sale as of March 31, 2019. UniNorte is included in Continuing Operations as it is not part of the strategic shift described above. As described in Note 21, Subsequent Events, on April 16, 2019, the Company entered into an agreement to divest UniNorte, which it expects to close during the second half of 2019.

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The carrying amounts of the major classes of assets and liabilities that were classified as held for sale are presented in the following tables:

	March 31, 2019		December 31, 2018
Assets of Discontinued Operations
Cash and cash equivalents	$	215,599	$	214,934
Receivables, net	55,295		38,588
Property and equipment, net	558,226		667,527
Goodwill	72,990		131,329
Tradenames	94,235		124,932
Operating lease right-of-use assets, net	122,913		—
Other assets	82,235		99,566
Subtotal: assets of Discontinued Operations	$	1,201,493	$	1,276,876
Other assets classified as held for sale: UniNorte Brazil
Receivables, net	$	7,435	$	6,983
Property and equipment, net	14,248		16,726
Goodwill	15,243		15,165
Tradenames	8,188		8,146
Operating lease right-of-use assets, net	18,652		—
Other assets	4,603		13,935
Subtotal: other assets classified as held for sale	$	68,369	$	60,955
Total assets held for sale	$	1,269,862	$	1,337,831

	March 31, 2019		December 31, 2018
Liabilities of Discontinued Operations
Deferred revenue and student deposits	$	99,759	$	115,969
Operating leases, including current portion	132,720		—
Long-term debt and finance leases, including current portion	183,365		278,074
Other liabilities	248,810		253,397
Subtotal: liabilities of Discontinued Operations	$	664,654	$	647,440
Other liabilities classified as held for sale: UniNorte Brazil
Deferred revenue and student deposits	$	2,553	$	469
Operating leases, including current portion	11,594		—
Long-term debt and finance leases, including current portion	2,493		5,370
Other liabilities	8,406		9,405
Subtotal: other liabilities classified as held for sale	$	25,046	$	15,244
Total liabilities held for sale	$	689,700	$	662,684

Note 5. Dispositions

Sale of the University of St. Augustine for Health Sciences, LLC (St. Augustine)

As previously disclosed in our 2018 Form 10-K, the sale of St. Augustine was completed on February 1, 2019. The total transaction value under the sale agreement was $400,000. Upon completion of the sale, the Company received net proceeds of approximately $346,400, which included $11,700 of customary closing adjustments, and was net of $58,100 of debt assumed by the purchaser

14

and fees of $7,200. The proceeds net of cash sold were approximately $301,500, which the Company used to repay outstanding indebtedness under its U.S. term loan and revolving credit facility. The Company recognized a pre-tax gain on the sale of approximately $223,500, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations.

Sale of Thailand Operations

As previously disclosed in our 2018 Form 10-K, on February 12, 2019, the Company completed the sale of its interests in Thai Education Holdings Company Limited, a Thailand corporation (TEDCO), and Far East Stamford International Co. Ltd. (FES), a Thailand corporation. TEDCO was the owner of a controlling interest in FES, which was the license holder for Stamford International University, which had three campuses in Thailand. The total purchase price was approximately $35,300, and net proceeds were approximately $27,900, net of debt assumed by the buyer and other customary closing adjustments. Of the $27,900 in net proceeds, $23,700, or $20,300 net of cash sold, was received at closing. The balance of $4,200 is payable upon satisfaction of certain post-closing requirements. The Company recognized a pre-tax gain on the sale of approximately $10,800, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations.

Additional Gain on Sale of China Operations

As previously disclosed in our 2018 Form 10-K, on January 25, 2018, the Company completed the sale of LEI Lie Ying Limited (LEILY). A portion of the purchase price was held back and subject to deduction of any indemnifiable losses payable to the buyer pursuant to the sale purchase agreement. On January 25, 2019, Laureate received HKD 71,463 (approximately US $9,100 at date of receipt) for the second and final holdback payment, net of legal fees. Also, as of December 31, 2018, the Company had recorded a liability of approximately $14,300 related to loss contingencies for which the Company had indemnified the buyer. During the first quarter of 2019, the legal matter that this loss contingency related to was settled, with no cost to the Company. Accordingly, during the three months ended March 31, 2019, the Company reversed the loss contingency and recognized additional gain on the sale of LEILY of approximately $13,700, which is included in gain on sales of discontinued operations on the Consolidated Statements of Operations. The remaining liability recorded relates to certain legal fees. Additionally, at the closing of the sale on January 25, 2018, a portion of the total transaction value was paid into an escrow account and will be distributed to the Company pursuant to the terms and conditions of the escrow agreement. As of both March 31, 2019 and December 31, 2018, the Company has recorded a receivable of approximately $25,900 for the portion of the escrowed amount that the Company expects to receive.

Note 6. Due to Shareholders of Acquired Companies

The amounts due to shareholders of acquired companies generally arise in connection with Laureate’s acquisition of a majority or all of the ownership interest of these companies. Promissory notes payable to the sellers of acquired companies, referred to as “seller notes,” are commonly used as a means of payment for business acquisitions. Seller note payments are classified as Payments of deferred purchase price for acquisitions within financing activities in our Consolidated Statements of Cash Flows. The amounts due to shareholders of acquired companies, currencies, and interest rates applied were as follows:

	March 31, 2019		December 31, 2018		Nominal Currency	Interest Rate %
Universidade Anhembi Morumbi (UAM Brazil)	$	31,744	$	30,912	BRL	CDI + 2%
University of St. Augustine for Health Sciences, LLC (St. Augustine) (1)	11,395		11,395		USD	7%
Faculdade Porto-Alegrense (FAPA)	2,030		1,943		BRL	IGP-M
IADE Group	1,126		1,141		EUR	3%
Total due to shareholders of acquired companies	46,295		45,391
Less: Current portion of due to shareholders of acquired companies	25,251		23,820
Due to shareholders of acquired companies, less current portion	$	21,044	$	21,571

⁽¹⁾Although St. Augustine was sold and is included in Discontinued Operations, this promissory note is the legal obligation of a corporate entity, and therefore is included in Continuing Operations and remains outstanding following the sale of St. Augustine.

BRL: Brazilian Real	CDI: Certificados de Depósitos Interbancários (Brazil)
USD: United States Dollar	IGP-M: General Index of Market Prices (Brazil)
EUR: European Euro

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Note 7. 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. The 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. As described in Note 21, Subsequent Events, on April 16, 2019, the Company entered into an agreement to divest UniNorte, a traditional higher education institution in Manaus, Brazil.

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 U.S. Department of Education (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 and South Africa. Additionally, the Rest of World segment manageseight 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 institutions in the Kingdom of Saudi Arabiaare managed under a contract that expires in August 2019. Also, as described in Note 21, Subsequent Events, on April 8, 2019, the Company completed the sale of its institution in South Africa.

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.We no longer accept new enrollments at the University of Liverpool and the University of Roehampton.

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As discussed in Note 1, Description of Business, and Note 4, Discontinued Operations and Assets Held for Sale, 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, net, Other income, 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 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 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.

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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 March 31,	2019			2018
Revenues
Brazil	$	109,969		$	122,792
Mexico	156,464			155,899
Andean	138,942			135,054
Rest of World	54,156			52,274
Online & Partnerships	161,774			168,031
Corporate	491			(1,834		)
Revenues	$	621,796		$	632,216
Adjusted EBITDA of reportable segments
Brazil	$	(30,656	)	$	(26,016	)
Mexico	25,828			30,443
Andean	(33,243		)	(39,431		)
Rest of World	4,500			2,990
Online & Partnerships	48,576			44,974
Total Adjusted EBITDA of reportable segments	15,005			12,960
Reconciling items:
Corporate	(36,611		)	(42,627		)
Depreciation and amortization expense	(47,644		)	(56,969		)
Loss on impairment of assets	—			—
Share-based compensation expense	(2,987		)	4,077
EiP expenses	(12,292		)	(10,062		)
Operating loss	(84,529		)	(92,621		)
Interest income	3,553			3,268
Interest expense	(54,655		)	(63,335		)
Loss on debt extinguishment	(10,622		)	(7,481		)
Gain (loss) on derivatives	5,183			(19,340		)
Other income, net	359			2,597
Foreign currency exchange loss, net	(4,659		)	(11,782		)
Loss from continuing operations before income taxes	$	(145,370	)	$	(188,694	)

	March 31, 2019		December 31, 2018
Assets
Brazil	$	1,173,337	$	1,011,391
Mexico	1,305,525		971,309
Andean	1,971,141		1,608,406
Rest of World	249,863		231,421
Online & Partnerships	1,260,983		1,308,854
Corporate and Discontinued Operations	1,872,672		1,638,255
Total assets	$	7,833,521	$	6,769,636

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Note 8. Goodwill

The change in the net carrying amount of Goodwill from December 31, 2018 through March 31, 2019 was composed of the following items:

	Brazil		Mexico		Andean		Rest of World		Online & Partnerships		Total
Balance at December 31, 2018	$	406,452	$	498,219	$	254,259	$	87,419	$	460,740	$	1,707,089
Acquisitions	1,327		—		—		—		—		1,327
Dispositions	—		—		—		—		—		—
Impairments	—		—		—		—		—		—
Currency translation adjustments	2,066		22,213		4,781		752		—		29,812
Adjustments to prior acquisitions	—		—		—		—		—		—
Balance at March 31, 2019	$	409,845	$	520,432	$	259,040	$	88,171	$	460,740	$	1,738,228

In March 2019, the Company's indirect, wholly owned subsidiary, UAM Brazil, acquired a company in Brazil that, prior to the acquisition, was a vendor providing distance-learning and marketing services to the Company's Brazil operations. The total purchase price was BRL 5,000 ($1,327 at the date of purchase), which was recorded as Goodwill given the immaterial nature of the acquisition. The acquiree is being merged into UAM Brazil.

Note 9. Debt

Outstanding long-term debt was as follows:

	March 31, 2019		December 31, 2018
Senior long-term debt:
Senior Secured Credit Facility (stated maturity dates April 2022 and April 2024), net of discount	$	921,127	$	1,321,629
Senior Notes (stated maturity date May 2025)	800,000		800,000
Total senior long-term debt	1,721,127		2,121,629
Other debt:
Lines of credit	38,612		37,899
Notes payable and other debt	494,882		504,522
Total senior and other debt	2,254,621		2,664,050
Finance lease obligations and sale-leaseback financings	69,434		119,642
Total long-term debt and finance leases	2,324,055		2,783,692
Less: total unamortized deferred financing costs	82,463		88,241
Less: current portion of long-term debt and finance leases	105,264		101,866
Long-term debt and finance leases, less current portion	$	2,136,328	$	2,593,585

Estimated Fair Value of Debt

The estimated fair value of our debt was determined using observable market prices, as the majority of our securities, including the Senior Secured Credit Facility and the Senior Notes due 2025, are traded in a brokered market. The fair value of our remaining debt instruments approximates carrying value based on their terms. As of March 31, 2019 and December 31, 2018, our long-term debt was classified as Level 2 within the fair value hierarchy, based on the frequency and volume of trading in the brokered market. The estimated fair value of our debt was as follows:

	March 31, 2019				December 31, 2018
	Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Total senior and other debt	$	2,254,621	$	2,323,394	$	2,664,050	$	2,677,024

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Loss on Debt Extinguishment

As discussed in Note 5, Dispositions, the Company completed the sale of St. Augustine on February 1, 2019 and used approximately $340,000 of the total $346,400 of net proceeds to repay a portion of the term loan that matures in April 2024 (the 2024 Term Loan) under its Senior Secured Credit Facility, with the remaining proceeds utilized to repay borrowings outstanding for the revolver under its Senior Secured Credit Facility. In addition, during the first quarter of 2019, the Company elected to repay approximately $35,000 of the approximately $51,700 principal balance outstanding for certain notes payable at a real estate subsidiary in Chile.

In connection with these debt repayments, the Company recorded a Loss on debt extinguishment of $10,622, primarily related to the write off of a pro-rata portion of the unamortized deferred financing costs associated with the repaid debt balances.

Certain Covenants

As of March 31, 2019, our senior long-term debt contained certain negative covenants including, among others: (1) limitations on additional indebtedness; (2) limitations on dividends; (3) limitations on asset sales, including the sale of ownership interests in subsidiaries and sale-leaseback transactions; and (4) limitations on liens, guarantees, loans or investments. The Second Amended and Restated Credit Agreement provides, solely with respect to the Revolving Credit Facility, that the Company shall not permit its Consolidated Senior Secured Debt to Consolidated EBITDA ratio, as defined in the Second Amended and Restated Credit Agreement, to exceed 3.50x as of the last day of each quarter ending June 30, 2018 and thereafter. However, the agreement also provides that if (i) the Company’s Consolidated Total Debt to Consolidated EBITDA ratio, as defined in the Second Amended and Restated Credit Agreement, is not greater than 4.75x as of such date and (ii) less than 25% of the Revolving Credit Facility is utilized as of that date, then such financial covenant shall not apply. As ofMarch 31, 2019, these conditions were satisfied and, therefore, we were not subject to the leverage ratio covenant.In addition, notes payable at some of our locations contain financial maintenance covenants.

Note 10. Leases

Laureate conducts a significant portion of its operations at leased facilities. These facilities include our corporate headquarters, other office locations, and many of Laureate's higher education facilities. Laureate analyzes each lease agreement to determine whether it should be classified as a finance lease or an operating lease. As a result of adopting ASC Topic 842, we recorded significant asset and liability balances associated with the operating leases that are now classified on the balance sheet, as described further below.

Operating Leases

Our operating lease agreements are primarily for real estate space and are included within operating lease ROU assets and operating lease liabilities on the Consolidated Balance Sheets. The terms of our operating leases vary and generally contain renewal options. Certain of these operating leases provide for increasing rent over the term of the lease. Laureate also leases certain equipment under noncancellable operating leases, which are typically for terms of 60 months or less.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Many of our lessee agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. On occasion, Laureate has entered into sublease agreements for certain leased office space; however, the sublease income from these agreements is immaterial.

20

Supplemental balance sheet information related to leases was as follows:

Leases	Classification	March 31, 2019
Assets:
Operating	Operating lease right-of-use assets, net	$	952,890
Finance	Buildings, Furniture, equipment and software, net	21,541
Total leased assets		$	974,431
Liabilities:
Current
Operating	Current portion of operating leases	$	97,517
Finance	Current portion of long-term debt and finance leases	4,705
Non-current
Operating	Long-term operating leases, less current portion	871,588
Finance	Long-term debt and finance leases, less current portion	20,763
Total lease liabilities		$	994,573

Lease Term and Discount Rate	March 31, 2019
Weighted average remaining lease terms
Operating leases	9.5 years
Finance leases	8.9 years
Weighted average discount rate
Operating leases	9.80	%
Finance leases	9.90	%

The components of lease cost were as follows:

Lease Cost	Classification	For the three months ended March 31, 2019
Operating lease cost	Direct costs	$	45,716
Finance lease cost
Amortization of leased assets	Direct costs	1,146
Interest on leased assets	Interest expense	621
Short-term lease costs	Direct costs	677
Variable lease costs	Direct costs	3,848
Sublease income	Other income, net	(959		)
Total lease cost		$	51,049

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As of March 31, 2019, maturities of lease liabilities were as follows:

Maturity of Lease Liability	Operating Leases			Finance Leases
Year 1	$	180,166		$	5,783
Year 2	169,420			4,709
Year 3	159,952			4,155
Year 4	151,139			3,958
Year 5	140,294			3,147
Thereafter	651,535			14,138
Total lease payments	$	1,452,506		$	35,890
Less: interest and inflation	(483,401		)	(10,422		)
Present value of lease liabilities	$	969,105		$	25,468

Supplemental cash flow information related to leases was as follows:

Other Information	For the three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	47,367
Operating cash flows from finance leases	621
Financing cash flows from finance leases	984
Leased assets obtained for new finance lease liabilities	125
Leased assets obtained for new operating lease liabilities	149

As disclosed in our 2018 Form 10-K, future minimum lease payments at December 31, 2018, prior to the adoption of ASC Topic 842, by year and in the aggregate, under all noncancellable operating leases were as follows:

	Lease Payments
2019	$	151,795
2020	142,995
2021	135,426
2022	128,441
2023	119,955
Thereafter	482,220
Total	$	1,160,832

Note 11. Commitments and Contingencies

Noncontrolling Interest Holder Put Arrangements

The following section provides a summary table and description of the various noncontrolling interest holder put arrangements, all of which relate to Discontinued Operations, that Laureate had outstanding as of March 31, 2019. Laureate has elected to accrete changes in the arrangements’ redemption values over the period from the date of issuance to the earliest redemption date. The redeemable noncontrolling interests are recorded at the greater of the accreted redemption value or the traditional noncontrolling interest. Until the first exercise date, the put instruments’ reported values may be lower than the final amounts that will be required to settle the minority put arrangements. As of March 31, 2019, the carrying value of all noncontrolling interest holder put arrangements was $12,195.

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If the minority put arrangements were all exercised at March 31, 2019, Laureate would be obligated to pay the noncontrolling interest holders an estimated amount of $12,195, as summarized in the following table:

	Nominal Currency	First Exercisable Date	Estimated Value as of March 31, 2019 redeemable within 12-months:		Reported Value
Noncontrolling interest holder put arrangements
INTI Education Holdings Sdn Bhd (Inti Holdings) - 10.10%	MYR	Current	$	10,109	$	10,109
Pearl Retail Solutions Private Limited (Pearl) - 10%	INR	Current	2,086		2,086
Total noncontrolling interest holder put arrangements			12,195		12,195
Puttable common stock - not currently redeemable	USD	*	—		1,714
Total redeemable noncontrolling interests and equity			$	12,195	$	13,909

* Contingently redeemable

MYR: Malaysian Ringgit

INR: Indian Rupee

Laureate’s noncontrolling interest put arrangements are specified in agreements with each noncontrolling interest holder. The terms of these agreements determine the measurement of the redemption value of the put options based on a non-GAAP measure of earnings before interest, taxes, depreciation and amortization (EBITDA, or recurring EBITDA), the definition of which varies for each particular contract.

Commitments and contingencies are generally denominated in foreign currencies.

Other Loss Contingencies

Laureate is subject to legal actions arising in the ordinary course of its business. In management's opinion, we have adequate legal defenses, insurance coverage and/or accrued liabilities with respect to the eventuality of such actions. We do not believe that any settlement would have a material impact on our Consolidated Financial Statements.

Contingent Liabilities for Taxes

As of March 31, 2019 and December 31, 2018, Laureate has recorded cumulative liabilities totaling $54,026 and $52,880, respectively, for taxes other-than-income tax, principally payroll-tax-related uncertainties recorded at the time of an acquisition, of which $4,725 and $4,999, respectively, was classified as held for sale. The changes in this recorded liability are related to acquisitions, interest and penalty accruals, changes in tax laws, expirations of statutes of limitations, settlements and changes in foreign currency exchange rates. The terms of the statutes of limitations on these contingencies vary but can be up to 10 years. These liabilities were included in current and long-term liabilities on the Consolidated Balance Sheets. Changes in the recorded values of non-income tax contingencies impact operating income and interest expense, while changes in the related indemnification assets impact only operating income. The total decrease to operating income for adjustments to non-income tax contingencies and indemnification assets was $4,561 and $2,121, respectively, for the three months ended March 31, 2019 and 2018.

In addition, as of March 31, 2019 and December 31, 2018, Laureate has recorded cumulative liabilities for income tax contingencies of $62,322 and $64,157, respectively, of which $12,182 and $11,208, respectively, were classified as held for sale. As of March 31, 2019 and December 31, 2018, indemnification assets primarily related to acquisition contingencies were $79,621 and $82,061, respectively, of which $391 and $476, respectively, were classified as held for sale. These indemnification assets primarily cover contingencies for income taxes and taxes other-than-income taxes. We have also recorded a receivable of approximately $19,500from the former owner of one of our Brazil institutions which is guaranteed by future rental payments to the former owner.

In addition, we have identified certain contingencies, primarily tax-related, that we have assessed as being reasonably possible of loss, but not probable of loss, and could have an adverse effect on the Company’s results of operations if the outcomes are unfavorable. In most cases, Laureate has received indemnifications from the former owners and/or noncontrolling interest holders of the acquired businesses for contingencies, and therefore, we do not believe we will sustain an economic loss even if we are required to pay these additional amounts. In cases where we are not indemnified, the unrecorded contingencies are not individually material and are primarily in Brazil. In the aggregate, we estimate that the reasonably possible loss for these unrecorded contingencies in Brazil could be up to approximately $42,000 if the outcomes were unfavorable in all cases.

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Other Loss Contingencies

Laureate has accrued liabilities for certain civil actions against our institutions, a portion of which existed prior to our acquisition of these entities. Laureate intends to vigorously defend against these matters. As of March 31, 2019 and December 31, 2018, approximately $31,000 and $29,000, respectively, of loss contingencies were included in Other long-term liabilities and Other current liabilities on the Consolidated Balance Sheets. In addition, as of March 31, 2019 and December 31, 2018, $4,100 and $18,000, respectively, of loss contingencies for Discontinued Operations were classified as liabilities held for sale. The decrease is primarily related to the reversal of loss contingencies recorded in 2018 in connection with the sale of LEILY in China, as discussed in Note 5, Dispositions. During the first quarter of 2019, loss contingencies were reversed following the settlement of a legal matter related to LEILY with no cost to the Company, resulting in additional gain on sale.

Material Guarantees – Student Financing

The accredited Chilean institutions in the Laureate network also participate in a government-sponsored student financing program known as Crédito con Aval del Estado (the CAE Program). The CAE Program was formally implemented by the Chilean government in 2006 to promote higher education in Chile for lower socio-economic level students in good academic standing. The CAE Program involves tuition financing and guarantees that are provided by our institutions and the government. As part of the CAE Program, these institutions provide guarantees which result in contingent liabilities to third-party financing institutions, beginning at 90% of the tuition loans made directly to qualified students enrolled through the CAE Program and declining to 60% over time. The guarantees by these institutions are in effect during the period in which the student is enrolled, and the guarantees are assumed entirely by the government upon the student’s graduation. When a student leaves one of Laureate's institutions and enrolls in another CAE-qualified institution, the Laureate institution will remain guarantor of the tuition loans that have been granted up to the date of transfer, and until the student's graduation from a CAE-qualified institution. The maximum potential amount of payments our institutions could be required to make under the CAE Program was approximately$509,000 and $499,000atMarch 31, 2019 and December 31, 2018, respectively. This maximum potential amount assumes that all students in the CAE Program do not graduate, so that our guarantee would not be assigned to the government, and that all students default on the full amount of the CAE-qualified loan balances.As ofMarch 31, 2019 and December 31, 2018, we recorded$37,417 and $28,254, respectively, as estimated long-term guarantee liabilities for these obligations.

Material Guarantees – Other

In conjunction with the purchase of Universidade Potiguar in Brazil (UNP), Laureate pledged all of the acquired shares as a guarantee of our payments of rents as they become due. In the event that we default on any payment, the pledge agreement provides for a forfeiture of the relevant pledged shares. In the event of forfeiture, Laureate may be required to transfer the books and management of UNP to the former owners.

Laureate acquired the remaining 49% ownership interest in UAM Brazil in April 2013. As part of the agreement to purchase the 49% ownership interest, Laureate pledged 49% of its total shares in UAM Brazil as a guarantee of our payment obligations under the purchase agreement. In the event that we default on any payment, the agreement provides for a forfeiture of the pledged shares.

In connection with the purchase of FMU Education Group on September 12, 2014, Laureate pledged 75% of the acquired shares to third-party lenders as a guarantee of our payment obligations under the loans that financed a portion of the purchase price. Laureate pledged the remaining 25% of the acquired shares to the sellers as a guarantee of our payment obligations under the purchase agreement for the seller notes. In the event that we default on any payment of the loans or seller notes, the purchase agreement provides for a forfeiture of the relevant pledged shares. After the payment of the seller notes in September 2017, the shares pledged to the sellers were pledged to the third-party lenders until full payment of the loans, which mature in April 2021.

In connection with a loan agreement entered into by a Laureate subsidiary in Peru, all of the shares of Universidad Privada del Norte, one of our universities, were pledged to the third-party lender as a guarantee of the payment obligations under the loan.

Standby Letters of Credit, Surety Bonds and Other Commitments

As of March 31, 2019 and December 31, 2018, Laureate's outstanding letters of credit (LOCs) and surety bonds primarily consisted of the items discussed below.

As of both March 31, 2019 and December 31, 2018, we had approximately $139,000 posted as LOCs in favor of the DOE. These LOCs were required to allow Walden, NewSchool of Architecture and Design and St. Augustine to continue participating in the DOE Title IV program. These LOCs are recorded on Walden and a corporate entity and are fully collateralized with cash equivalents

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and certificates of deposit, which are classified as Restricted cash on our March 31, 2019 and December 31, 2018 Consolidated Balance Sheets.

As of March 31, 2019 and December 31, 2018, we had approximately $5,700 posted as cash collateral for LOCs related to the Spanish tax audits, which was recorded in Continuing Operations and classified as Restricted cash on our March 31, 2019 and December 31, 2018 Consolidated Balance Sheets. The cash collateral is related to the final assessment issued by the Spanish Taxing Authority (STA) in October 2018 for the 2011 to 2013 tax audit period.

As part of our normal operations, our insurers issue surety bonds on our behalf, as required by various state education authorities in the United States. We are obligated to reimburse our insurers for any payments made by the insurers under the surety bonds. As of March 31, 2019 and December 31, 2018, the total face amount of these surety bonds was $22,235 and $22,204, respectively. These bonds are fully collateralized with cash, which was classified as Restricted cash on our March 31, 2019 and December 31, 2018 Consolidated Balance Sheets.

In November 2016, in order to continue participating in Prouni, a federal program that offers tax benefits designed to increase higher education participation rates in Brazil, UAM Brazil posted a guarantee in the amount of $15,300. In connection with the issuance of the guarantee, UAM Brazil obtained a non-collateralized surety bond from a third party in order to secure the guarantee. The cost of the surety bond was $1,400, of which half was reimbursed by the former owner of UAM Brazil, and is being amortized over the five-year term. The Company believes that this matter will not have a material impact on our Consolidated Financial Statements.

Note 12. Financing Receivables

Laureate’s financing receivables consist primarily of trade receivables related to student tuition financing programs with an initial term in excess of one year. We have offered long-term financing through the execution of note receivable agreements with students at some of our institutions. Our disclosures include financing receivables that are classified in our Consolidated Balance Sheets as both current and long-term, reported in accordance with ASC 310, “Receivables.”

Laureate’s financing receivables balances were as follows:

	March 31, 2019			December 31, 2018
Financing receivables	$	25,816		$	16,531
Allowance for doubtful accounts	(6,477		)	(6,395		)
Financing receivables, net of allowances	$	19,339		$	10,136

We do not purchase financing receivables in the ordinary course of our business. We may sell certain receivables that are significantly past due. No material amounts of financing receivables were sold during the periods reported herein.

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Delinquency is the primary indicator of credit quality for our financing receivables. Receivable balances are considered delinquent when contractual payments on the loan become past due. Delinquent financing receivables are placed on non-accrual status for interest income. The accrual of interest is resumed when the financing receivable becomes contractually current and when collection of all remaining amounts due is reasonably assured. We record an Allowance for doubtful accounts to reduce our financing receivables to their net realizable value. The Allowance for doubtful accounts is based on the age of the receivables, the status of past-due amounts, historical collection trends, current economic conditions, and student enrollment status. Each of our institutions evaluates its balances for potential impairment. We consider impaired loans to be those that are past due one year or greater, and those that are modified as a troubled debt restructuring (TDR). The aging of financing receivables grouped by country portfolio was as follows:

	Chile		Other		Total
As of March 31, 2019
Amounts past due less than one year	$	10,728	$	433	$	11,161
Amounts past due one year or greater	3,006		153		3,159
Total past due (on non-accrual status)	13,734		586		14,320
Not past due	10,202		1,294		11,496
Total financing receivables	$	23,936	$	1,880	$	25,816
As of December 31, 2018
Amounts past due less than one year	$	7,618	$	644	$	8,262
Amounts past due one year or greater	2,879		192		3,071
Total past due (on non-accrual status)	10,497		836		11,333
Not past due	4,980		218		5,198
Total financing receivables	$	15,477	$	1,054	$	16,531

The following is a rollforward of the Allowance for doubtful accounts related to financing receivables for the three months ended March 31, 2019 and 2018, grouped by country portfolio:

	Chile			Other			Total
Balance at December 31, 2018	$	(6,108	)	$	(287	)	$	(6,395	)
Charge-offs	414			76			490
Recoveries	—			—			—
Reclassifications	—			—			—
Provision	(361		)	(72		)	(433		)
Currency adjustments	(124		)	(15		)	(139		)
Balance at March 31, 2019	$	(6,179	)	$	(298	)	$	(6,477	)
Balance at December 31, 2017	$	(6,107	)	$	(365	)	$	(6,472	)
Charge-offs	331			—			331
Recoveries	(1		)	—			(1		)
Reclassifications	—			—			—
Provision	(731		)	28			(703		)
Currency adjustments	(164		)	(9		)	(173		)
Balance at March 31, 2018	$	(6,672	)	$	(346	)	$	(7,018	)

Restructured Receivables

A TDR is a financing receivable in which the borrower is experiencing financial difficulty and Laureate has granted an economic concession to the student debtor that we would not otherwise consider. When we modify financing receivables in a TDR, Laureate typically offers the student debtor an extension of the loan maturity and/or a reduction in the accrued interest balance. In certain situations, we may offer to restructure a financing receivable in a manner that ultimately results in the forgiveness of contractually specified principal balances. Our only TDRs are in Chile.

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The number of financing receivable accounts and the pre- and post-modification account balances modified under the terms of a TDR during the three months ended March 31, 2019 and 2018 were as follows:

	Number of Financing Receivable Accounts	Pre-Modification Balance Outstanding		Post-Modification Balance Outstanding
2019	296	$	898	$	867
2018	409	$	1,372	$	1,262

The preceding table represents accounts modified under the terms of a TDR during the three months ended March 31, 2019, whereas the following table represents accounts modified as a TDR between January 1, 2018 and March 31, 2019 that subsequently defaulted during the three months ended March 31, 2019:

	Number of Financing Receivable Accounts	Balance at Default
Total	155	$	251

The following table represents accounts modified as a TDR between January 1, 2017 and March 31, 2018 that subsequently defaulted during the three months ended March 31, 2018:

	Number of Financing Receivable Accounts	Balance at Default
Total	138	$	339

Note 13. Share-based Compensation

Share-based compensation expense was as follows:

For the three months ended March 31,	2019		2018
Continuing operations
Stock options, net of estimated forfeitures	$	823	$	(7,247	)
Restricted stock awards	2,164		3,170
Total continuing operations	$	2,987	$	(4,077	)
Discontinued operations
Share-based compensation expense for discontinued operations	162		321
Total continuing and discontinued operations	$	3,149	$	(3,756	)

The negative stock options expense for the three months ended March 31, 2018 relates to the correction of an immaterial error.

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Note 14. Stockholders' Equity

The components of net changes in stockholders' equity for the three months ended March 31, 2019 were as follows:

	Laureate Education, Inc. Stockholders
	Class A Common Stock			Class B Common Stock				Additional paid-in capital			(Accumulated deficit) retained earnings			Accumulated other comprehensive (loss) income			Non-controlling interests			Total stockholders' equity
	Shares	Amount		Shares		Amount
Balance at December 31, 2018	107,450	$	430	116,865		$	467	$	3,703,796		$	(530,919	)	$	(1,112,695	)	$	(10,133	)	$	2,050,946
Adoption of accounting standards	—	—		—		—		—			28,944			—			—			28,944
Balance at January 1, 2019	107,450	430		116,865		467		3,703,796			(501,975		)	(1,112,695		)	(10,133		)	2,079,890
Non-cash stock compensation	—	—		—		—		3,149			—			—			—			3,149
Conversion of Class B shares to Class A shares	8	—		(8	)	—		—			—			—			—			—
Vesting of restricted stock, net of shares withheld to satisfy tax withholding	325	1		—		—		(1,421		)	—			—			—			(1,420		)
Distributions to noncontrolling interest holders	—	—		—		—		—			—			—			(625		)	(625		)
Accretion of redeemable noncontrolling interests and equity	—	—		—		—		263			—			—			—			263
Reclassification of redeemable noncontrolling interests and equity	—	—		—		—		—			—			—			224			224
Net income	—	—		—		—		—			191,243			—			3,022			194,265
Foreign currency translation adjustment, net of tax of $0	—	—		—		—		—			—			49,521			30			49,551
Unrealized gain on derivatives, net of tax of $0	—	—		—		—		—			—			2,609			—			2,609
Balance at March 31, 2019	107,783	$	431	116,857		$	467	$	3,705,787		$	(310,732	)	$	(1,060,565	)	$	(7,482	)	$	2,327,906

As described in Note 2, Significant Accounting Policies, the change in beginning retained earnings resulting from the adoption of accounting standards represents the cumulative impact of adopting ASU 2016-02.

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The components of net changes in stockholders' equity for the three months ended March 31, 2018 were as follows:

	Laureate Education, Inc. Stockholders
	Class A Common Stock			Class B Common Stock				Additional paid-in capital			(Accumulated deficit) retained earnings			Accumulated other comprehensive (loss) income			Non-controlling interests		Total stockholders' equity
	Shares	Amount		Shares		Amount
Balance at December 31, 2017	55,052	$	220	132,443		$	530	$	3,446,206		$	(946,236	)	$	(925,556	)	$	12,118	$	1,587,282
Adoption of accounting standards	—	—		—		—		—			5,074			—			—		5,074
Balance at January 1, 2018	55,052	220		132,443		530		3,446,206			(941,162		)	(925,556		)	12,118		1,592,356
Non-cash stock compensation	—	—		—		—		(3,756		)	—			—			—		(3,756		)
Conversion of Class B shares to Class A shares	59	—		(59	)	—		—			—			—			—		—
Vesting of restricted stock, net of shares withheld to satisfy tax withholding	145	1		59		—		(804		)	—			—			—		(803		)
Distributions from noncontrolling interest holders