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ITEM 8. FINANCIAL STATEMENTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 001-38002

Laureate Education, Inc.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Its Charter)

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

          Securities registered pursuant to Section 12(g) of the Act:None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No ý

          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 ý    No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisthe Form 10-K or any amendment to thisthe Form 10-K.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 definitionthe definitions of "large accelerated filer," "accelerated filer," "smaller reporting company"company," and 'emerging"emerging growth company'company" in Rule 12b-2 of the Exchange Act.

          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 Act). Yes o    No ý

          As of June 30, 201729, 2018 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the Class A common stock held by non-affiliates of the registrant was $547 million$1.163 billion (based on the closing price of the registrant's Class A common stock on that date as reported on the Nasdaq Global Select Market).

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

          DOCUMENTS INCORPORATED BY REFERENCE

          The registrant incorporates by reference its definitive proxy statement with respect to its 20182019 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of its fiscal year, into Part III of this Annual Report on Form 10-K.

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INDEX

INDEX

        As used in this Annual Report on Form 10-K (this "Form 10-K"), unless otherwise stated or the context otherwise requires, references to "we," "us," "our," the "Company," "Laureate" and similar references refer collectively to Laureate Education, Inc. and its subsidiaries. Unless otherwise stated or the context requires, references to theLaureate International Universities network include Santa Fe University of Art and Design ("SFUAD"), which is owned by Wengen Alberta, Limited Partnership, an Alberta limited partnership ("Wengen"), our controlling stockholder. Laureate is affiliated with SFUAD, but does not own or control it and, accordingly, SFUAD is not included in the financial results of Laureate presented in this Form 10-K.

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Trademarks and Tradenames

        LAUREATE, LAUREATE INTERNATIONAL UNIVERSITIES and the leaf symbol are trademarks of Laureate Education, Inc. in the United States and other countries. This Form 10-K also includes other trademarks of Laureate and trademarks of other persons, which are properties of their respective owners.

Industry and Market Data

        We obtained the industry, market and competitive position data used throughout this Form 10-K from our own internal estimates and research as well as from industry publications and research, surveys and studies conducted by third-party sources. This Form 10-K also contains the results from a study by Kantar Vermeer, a leading third-party market research organization. We commissioned the

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Kantar Vermeer study as part of our periodic evaluation of employment rates and starting salary information for our graduates.

        Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified industry, market and competitive position data from third-party sources. While we believe our internal business estimates and research are reliable and the market definitions are appropriate, neither such estimates, research nor these definitions have been verified by any independent source.

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Forward-Looking Statements

        This Form 10-K contains "forward-looking statements" within the meaning of the federal securities laws, which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates" or "anticipates" or similar expressions that concern our strategy, plans or intentions. All statements we make relating to estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results, and all statements we make relating to our planned divestitures, the expected proceeds generated therefrom and the expected reduction in revenue resulting therefrom, are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. All of these forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those we expected. We derive most of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, including, without limitation, in conjunction with the forward-looking statements included in this Form 10-K, are disclosed under various sections throughout this Form 10-K, including, but not limited to, Item 1—Business, Item 1A—Risk Factors, and Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the factors discussed in this Form 10-K. Some of the factors that we believe could affect our results include:

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the risks associated with conducting our operation of an increasingly global business,operations, including complex management,business, foreign currency, political, legal, regulatory, tax and economic risks;



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our ability to effectively manage the growth of our business, implement a common operating model and platform, and increase our operating leverage;



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the development and expansion of our global education network and programs and the effect of new technology applications in the educational services industry;



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our ability to successfully complete planned divestitures and make strategic acquisitions, and to successfully integrate and operate acquired businesses;



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the effect of existing international and U.S. laws and regulations governing our business or changes into those laws and regulations;regulations or in their application to our business;



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changes in the political, economic and business climate in the international or the U.S. markets where we operate;



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risks of downturns in general economic conditions and in the educational services and education technology industries, that could, among other things, impair our goodwill and intangible assets;

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possible increased competition from other educational service providers;



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market acceptance of new service offerings by us or our competitors and our ability to predict and respond to changes in the markets for our educational services;



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the effect on our business and results of operations from fluctuations in the value of foreign currencies;



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our ability to attract and retain key personnel;



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the fluctuations in revenues due to seasonality;

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our ability to generate anticipated savings from ourExcellence in Process ("EiP") program or our shared services organizations ("SSOs");



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our ability to maintain proper and effective internal controls or remediate any of our current material weaknesses necessary to produce accurate financial statements on a timely basis;



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our focus on a specific public benefit purpose and producing a positive effect for society may negatively influence our financial performance; and



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the future trading prices of our Class A common stock and the impact of any securities analysts' reports on these prices.prices; and



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our ability to maintain and, subsequently, increase tuition rates and student enrollments in our institutions.

        We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Form 10-K may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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PART I

ITEM 1.    BUSINESS

Basis of Presentation

        As previously reported in our filings with the SEC, we have undertaken strategic reviews of our global portfolio and have announced plans to divest certain of our subsidiaries as part of a strategic shift. This strategic shift will have a significant effect on our operations and financial results. Accordingly, as a result of the strategic shift announced in August 2018, we account for all of the divestitures that are currently part of this strategic shift as discontinued operations for all periods presented. Unless otherwise indicated, the information in or incorporated by reference into this Form 10-K, including our segment information, relates only to our continuing operations.

Strategic Developments

        As announced previously, we have reviewed our global portfolio of institutions with the goals of simplifying and focusing our operations, reducing complexity, mitigating risks (such as political, regulatory, economic and currency), exiting smaller markets where our operations have less scale and maximizing our exposure to what we believe are the most attractive and scalable markets for our network. We have undertaken a series of divestitures calculated to simplify and streamline our business. In 2017, we announced the divestiture of certain subsidiaries in our then-existing Europe, Middle East, Africa and Asia Pacific ("EMEAA") and Central America & U.S. Campuses segments. On August 9, 2018, we announced that we plan to divest additional subsidiaries located in Europe, Asia and Central America, which were included in the then-existing EMEAA, Andean & Iberian, and Central America & U.S. Campuses segments. As of September 30, 2018, we refer to the EMEAA segment as our "Rest of World" segment and to the Andean & Iberian segment as our "Andean" segment. We have decided to focus principally on the Latin American markets where we operate large-scale platforms, as well as on the online market in the United States.

General

        We are the largest globalinternational network of degree-granting higher education institutions, primarily focused in Latin America, with more than one millionapproximately 875,000 students enrolled at over 6025 institutions inwith more than 20 countries, and on more than 200150 campuses, which we collectively refer to as theLaureate International Universities network. The institutions in theLaureate International Universities network are leading brands in their respective markets and offer a broad range of undergraduate and graduate degrees through campus-based, online and hybrid programs. Approximately 94%As of December 31, 2018, approximately 93% of our students attend traditional, campus-based institutions offering multi-year degrees, similar to leading private and public higher education institutions in developed markets such as the United States and Europe. Nearly two thirds of our students are enrolled in programs of four or more years in duration.

        Our programs are designed with a distinct emphasis on applied, professional-oriented content for growing career fields and are focused on academic disciplines that we believe offer strong employment opportunities and high earnings potential for our students. We continually and proactively adapt our curriculum to the needs of the market. In 1999,particular, we made our first investmentemphasize science, technology, engineering and math (STEM) and business disciplines, areas in higher educationwhich we believe that there is large and since that time,growing demand, especially in developing countries. Since 2009, we have developed intomore than doubled our enrollment of students pursuing degrees in Medicine & Health Sciences, Engineering & Information Technology and Business & Management, our three largest disciplines. We believe the global leaderwork of our graduates in higher education, basedthese disciplines creates a positive impact on the number of students, institutionscommunities we serve and countries making upstrengthens our network.institutions' reputations within their respective markets. Our focus on private-pay and our track record for delivering high-quality outcomes to our students, while stressing affordability and accessibility, has been a key reason for our long record of success, including 18 consecutive yearssuccess.

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        We believe the global higher education market presents an attractive long-term opportunity, primarily because of the large and growing imbalance between the supply and demand for affordable, quality higher education in many parts of the world. We believe the combination of the projected growth in the middle class, limited government resources dedicated to higher education, and a clear value proposition demonstrated by the higher earnings potential afforded by higher education, creates substantial opportunities for high-quality private institutions to meet this growing and unmet demand. By offering high-quality, outcome-focused education, we believe that we enable students to prosper and thrive in the dynamic and evolving knowledge economy.

        Across the world, weWe operate institutions that address regional, national and local supply and demand imbalances in higher education. As the globalinternational leader in higher education, we believe we are uniquely positioned to deliver high-quality education across different brands and tuition levels in the markets in which we operate. In many developing markets, 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 growing student demands and employer requirements. Our institutions in these markets offer traditional higher education students a private education alternative, often with multiple brands and price points in each market, with innovative programs and strong career-driven outcomes. In many of these same markets, non-traditional students such as working adults and distance learners have limited options for pursuing higher education. Through targeted programs and multiple teaching modalities, we are able to serve the differentiated needs of this unique demographic. Our flexible approach across geographies allows Laureate to access a broader addressable market of students by efficiently tailoring institutions to meet the needs of a particular geography and student population.

        We continually and proactively adapt our curriculum to the needs of the market. In particular, we emphasize science, technology, engineering and math (STEM) and business disciplines, areas in which we believe that there is large and growing demand, especially in developing countries. Since 2009, we have more than doubled our enrollment of students pursuing degrees in Business & Management, Medicine & Health Sciences and Engineering & Information Technology, our three largest disciplines. We believe the work of our graduates in these disciplines creates a positive impact on the communities we serve and strengthens our institutions' reputations within their respective markets.

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        Our program and level of study mix for 20172018 was as follows:

Program Mix		Level of Study Mix
Based on 12/31/2018 total enrollments
Based on 12/31/20172018 total enrollments.		Based on 12/31/2017 total enrollments.
		enrollments High school students are primarily in Mexico.Mexico

        TheLaureate International Universities network enables us to educate our students locally while connecting them to a globalan international community and offering them the advantages of our shared infrastructure, technology, curricula and operational best practices. For example, our students can take advantage of shared curricula, optional international programs and services, including English language instruction, dual-degree and study abroad programs and other benefits offered by other institutions in our network. We believe that the benefits of the network translate into better career opportunities and higher earnings potential for our graduates.

Our Segments

        We have six reportingfive reportable segments, which are summarized in the map and the tablecharts below. We group our institutions by geography in Brazil, Mexico, Andean & Iberian, Central America & U.S. Campuses, and Europe, Middle East, Africa and Asia Pacific ("EMEAA")Rest of World for reporting purposes. Our Online & Partnerships segment includes our fully online universities.

        The following information for our operating segments is presented as of December 31, 2017, except where otherwise indicated. For further information related to our segment revenues, see

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"Item 7—Management's Discussion and AnalysisOnline & Partnerships segment principally consists of Financial Condition and Results of Operations—Results of Operations—Segment Results."

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Walden University. The mapfollowing information for our segments is presented as of December 31, 2017 and does not reflect completed or pending dispositions of institutions within the EMEAA and Central America & U.S. Campuses segments. See "—Recent Developments."

2018.

		Brazil		Mexico		Andean & Iberian		Central America & U.S. Campuses*		EMEAA*		Online & Partnerships#		Total
Countries†		1		1		4		4		13		2		24
Institutions		13		2		15		8		25		3		66
Enrollments (rounded to nearest hundred)		271,200		214,200		321,800		69,200		128,100		63,500		1,068,000
Year ended December 31, 2017 Revenues ($ in millions)‡		$765.7		$646.2		$1,313.9		$291.9		$697.2		$690.4		$4,378.0
% Contribution to year ended December 31, 2017 Revenues‡		17	%	15	%	30	%	6	%	16	%	16	%	100	%

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*

The table is presented as of December 31, 2017 and does not reflect completed or pending dispositions of institutions within the EMEAA and Central America & U.S. Campuses segments. See "—Recent Developments."

#

In December 2017, we stopped accepting new enrollments at the University of Roehampton, an institution in our Online & Partnerships segment.

†

Our Central America & U.S. Campuses and Online & Partnerships segments both have institutions in the United States. The total reflects the elimination of this duplication.

‡

The elimination of intersegment revenues and amounts related to Corporate, which total $27.3 million, is not separately presented.

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Our Industry

        We are the leaderoperate in the globalinternational market for higher education, which is characterized by a significant imbalance between supply and demand, especially in developing economies. In many countries, demand for higher education is large and growing. GSV Advisors ("GSV") estimates that higher education institutions accounted for total revenues of approximately $1.5 trillion globally in 2015, with the higher education market expected to grow by approximately 5% per annum through 2020. Global growth in higher education is being 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. At the same time, many governments have limited resources to devote to higher education, resulting in a diminished ability by the public sector to meet growing demand, and creating opportunities for private education providers to enter these markets and deliver high-quality education. As a result, the private sector plays a large and growing role in higher education globally. While theLaureate International Universities network is the largest globalinternational network of degree-granting higher education institutions in the world, our total enrollment at December 31, 20172018 of more than one millionapproximately 875,000 students represents only 0.5%0.4% of worldwide higher education students.

        Large, Growing and Underpenetrated Population of Qualified Higher Education Students.    According to United Nations Educational, Scientific and Cultural Organization ("UNESCO"), 214.1220 million students worldwide were enrolled in higher education institutions in 2015,2016, more than double the 99.7100.2 million students enrolled in 2000, and approximately 90% of those students were enrolled at institutions outside of the United States as of 2015.States. In many countries, including throughout Latin America Asia and other developing regions, there is growing demand for higher education based on favorable demographics, increasing secondary completion rates and increasing higher education participation rates, resulting in continued growth in higher education enrollments. While global participation rates have increased for traditional higher education students (defined as 18-24 year olds), the market for higher education is still significantly underpenetrated, particularly in developing countries. For example, participation rates in Brazil and Mexico in 20152016 were approximately 36% and approximately 23%28%, respectively, as compared to approximately 63% in the United States for the same period.

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        Strong Economic Incentives for Higher Education.    According to the Brookings Institution, approximately 3.2 billion people in the world composed the middle class in 2016, a number that is expected to be over five billion people by 2028. We believe that members of this large and growing group seek advanced education opportunities for themselves and their children in recognition of the vast differential in earnings potential with and without higher education. According to 2015 data from the Organization for Economic Co-operation and Development ("OECD"), in the United States and European Union countries that are members of the OECD, the earnings from employment for an adult completing higher education were approximately 74% and approximately 53% higher, respectively, than those of an adult with only an upper secondary education. This income gap is even more pronounced in many developing countries around the world, including a differential of approximately 149% in Brazil, and approximately 102% in Mexico. We believe the cumulative impact of favorable demographic and socio-economic trends, coupled with the superior earnings potential of higher education graduates, will continue to expand the market for private higher education.

        Increasing Role of the Private Sector in Higher Education.    In many of our markets, the private sector plays a meaningful role in higher education, bridging supply and demand imbalances created by a lack of capacity at public universities. In addition to capacity limitations, we believe that limited public resources, and the corresponding policy reforms to make higher education systems less dependent on the financial and operational support of local governments, have resulted in increased enrollments in private institutions relative to public institutions. For example, Brazil relies heavily upon

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private institutions to deliver quality higher education to students, with approximately 74% (in 2015) of higher education students in Brazil enrolled in private institutions.

        Favorable Industry Dynamics in Key Latin American Markets.    In the large Latin American markets in which we operate, many of the industry trends described above are even more prevalent, with strong growth in higher education over the past 15 years.

					No. of Students ('000)‡						Participation Rate*
		% Private Sector#															Wage Premium#
					2000			2016			2000			2016
Brazil			74	%		2,781			8,319			12	%		36	%		149	%
Mexico			30	%		1,963			4,244			15	%		28	%		102	%
Peru			N/A			900			1,930			26	%		47	%		N/A
Chile			73	%		452			1,237			27	%		63	%		137	%

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#

Based on 2015 OECD data.

‡

Based on 2016 UNESCO data.

*

Based on 2016 UNESCO data; defined as 18-24 year olds.

        Increasing Demand for Online Offerings.    The acceptance of online learning in higher education is well-established, as evidenced by a survey conducted by the Babson Survey Research Group that reported that approximately 71% of academic leaders rated online learning outcomes as the same or superior to classroom learning in 2014. Furthermore,We believe that increasing student demand (for example, students taking at least one distance education course made up approximately 30% of all higher education enrollments in the United States as of the second half of 2015 according to the Distance Education Enrollment Report 2017. We believe that increasing student demand,2017), new instruction methodologies designed for the online medium, and growing employer and regulatory acceptance of degrees obtained through online and hybrid modalities will continue to drive online learning growth globally. Moreover, increasing the percentage of courses taught online in a hybrid educational model has significant cost and capital efficiency benefits as a greater number of students can be accommodated in existing physical campus space.

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        Growth in Outsourced Academic and Administrative Services.    To adapt to changing student preferences and greater demand for online and distance learning solutions, university leaders are refocusing their strategies around core academic functions, while seeking to outsource specialized technology functions and other administrative services. Private sector partners offering operational expertise and economies of scale are increasingly assisting universities through long-term relationships in areas such as online program management, technology support, facilities management, student services and procurement. According to a survey conducted by Inside Higher Ed in 2017, approximately 27% of college business officers in the United States believe that outsourcing more administrative services is a strategy they will implement in 2017-2018. We believe that these trends will increase opportunities for private sector partners to deploy their capabilities to traditional educational providers.

Our Strengths and Competitive Advantages

        We believe our key competitive strengths that will enable us to execute our strategy include the following:

        Largest Global Higher EducationScaled Platform Institutions Across Our Network.    The size and breadth of our global networkOur scale facilitates distinct advantages for our students and allows us to leverage our operating model across our network more efficiently. It would take a competitor considerable time and expense to establish an integrateda network of international universities of similar scale with the high-quality brands, intellectual property and accreditations that we possess.

        Our network facilitates competitive advantages related to:

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Curricula and Programs.  We are able to leverage our curricula and resources across our globalinternational network, allowing for the rapid deployment of new programs in our markets. Increasing amounts of our curricula are being standardized across our global network, allowing us to lower the cost of program development by reusing and sharing content, while improving the quality of our programs globally.programs. For example, the resources and support of our globalinternational network enabled the rapid expansion of our medicine and health sciences offerings, contributing to the opening of sixeight new medical schools since 2010 and increasing enrollment in the number of students pursuing degrees in the fields of medicine and health sciences from approximately 75,00050,000 students in 2009 to more than 250,000225,000 students as of December 31, 2017.2018. We are also able to utilize our network to provide innovative offerings to our students, such as international joint and dual degree programs.



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Best Practices.  Through collaboration across our network, best practices for key operational processes, such as campus design, faculty training, student services and recruitment are identified and then rolled out to the institutions in our network.



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Unified Systems.  Our scale also permits increased investment in unified technology systems and an opportunity to leverage standardization of processes, centralization of common services (such as information technology, finance and procurement) and intellectual property, and implementing a common operating model and platform for content development, digital campus experiences, student services, recruitment and administrative services across our network. We believe this operating leverage positions us well for enhanced growth in profitability and cash flow relative to our enrollments and revenue.

        In particular, the scale of our business in the markets in Latin America in which we operate confers a competitive advantage, in that we are well-positioned to leverage our scale across these large markets that are relatively homogeneous in many ways (e.g., language, geography and regulatory environments). We are creating a common operating model for our network institutions that integrates multiple software components, including SaaS-based information technology capabilities, student information system ("SIS"), enterprise resource planning ("ERP"), learning management system ("LMS"), and customer relationship management ("CRM"), into a single unified platform. We

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anticipate that implementation of the common operating model in these markets will create additional operational leverage that can be deployed not just at a brand or institution level, but more broadly across Brazil, Chile, Peru and Mexico.

        Leading Intellectual Property.Property and Technology.    We have developed an extensive collection of intellectual property that has in part been enabled by investments in unified technology systems. We believe this collection of intellectual property, including online capabilities, campus management, recruitment of transnational students, faculty training, curriculum design and quality assurance, among other proprietary solutions, provides our students a truly differentiated learning experience and creates a significant competitive advantage for our institutions over competitors.

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Technology. We have made significant investments to create unified technology systems across our network. These systems will provide data and insights on a global scale that we believe will allow us to improve student experience, retention rates and outcomes, while also enabling a more efficient and lower cost educational delivery model.



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Best Practices.  Through collaboration across our global network, best practices for key operational processes, such as campus design, faculty training, student services and recruitment are identified and then rolled out to the institutions in our network.

        Long-Standing and Respected University Brands.    We believe we have established a reputation for providing high-quality higher education aroundin the world,countries in which we operate, and many of our institutions are among the most respected higher education brands in their local markets. Many of our institutions have over 50-year histories and are ranked among the best in their respective countries. For example, Universidade Anhembi Morumbi in Brazil is ranked by Guia do Estudante as one of São Paulo's top universities, UVM Mexico, the largest private university in Mexico, was ranked seventh among all public and private higher education institutions in that country byGuía Universitaria, an annual publication ofReader's Digest, Universidad Peruana de Ciencias Aplicadas ("UPC") recently attained a 4-Star Rating from QS Stars™, making it the only 4-Star Rated university in that country, and Universidad Europea de MadridAndrés Bello in Chile is ranked by SCImago among the second largest private university in Spain and received four starsfive best universities in the prestigious 2015 QS StarsTM.country.

        Many of our institutions and programs have earned the highest accreditation available, which provides us with a strong competitive advantage in local markets. For example, medical school licenses are often the most difficult to obtain and are only granted to institutions that meet rigorous standards. We serve more than 250,000225,000 students in the fields of medicine and health sciences across more than 100 campuses throughout theLaureate International Universities network, including 2220 medical schools and 2015 dental schools. We believe the existence of medical schools at many of our institutions further validates the quality of our institutions and programs and increases brand awareness.

        Commitment to Academic Quality.    We offer high-quality undergraduate, graduate and specialized programs in a wide range of disciplines that generate strong interest from students and provide attractive employment prospects. Our commitment to quality is demonstrated by, for example, the fact that our Brazilian institutions' IGC scores (an indicator used by the Brazilian Ministry of Education ("MEC") to evaluate the quality of higher education institutions) have increased by more than 26%30% on average from 2010 to 2016,2017, placing threefour of our institutions in the top quarter, and 98%all of our students in Brazil enrolled in institutions ranked in the top third, of all private higher education institutions in the country. We focus on programs that prepare our students to become employed in high demand professions. Our curriculum development process includes employer surveys and ongoing research into business trends to determine the skills and knowledge base that will be required by those employers in the future. This information results in timely curriculum upgrades, which helps ensure that our graduates acquire the skills that will make them marketable to employers. We are also committed to continually evaluating our institutions to ensure we are providing the highest quality education to our students. Our proprietary management tool, the Laureate Education Assessment Framework ("LEAF"), is used to evaluate institutional performance based on 44 unique criteria across five different categories: Employability, Learning Experience, Personal Experience, Access & Outreach and Academic Excellence. LEAF, in conjunction with additional external assessment methodologies, such as

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QS StarsTM,Stars™, allows us to identify key areas for improvement in order to drive a culture of quality and continual innovation at our institutions.

        Strong Student Outcomes.    We track and measure our student outcomes to ensure we are delivering on our commitments to students and their families. In 2017, we commissioned a study by Kantar Vermeer, a leading third-party market research organization, of graduates at Laureate institutions representing over 65% of total Laureate enrollments. Graduates at 1210 of our 1412 surveyed international institutions achieved, on average, equal or higher employment rates within 12 months of graduation as compared to graduates of other institutions in the same markets. In addition, in 1210 of the 14

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12 institutions surveyed, graduates achieved equal or higher starting salaries as compared to graduates of other institutions in those same markets (salary premium to market benchmarks ranged from approximately 15% to approximately 58%47%). Furthermore, a joint study by Laureate and the IFC/World Bank Group in 2014 showed that graduates of Laureate institutions in Mexico experienced higher rates of social mobility, finding jobs, and moving up in socioeconomic status than their peers in non-Laureate institutions. In 2016, we conducted a similar study with the IFC in Peru for two of our network institutions, Universidad Peruana de Ciencias AplicadasUPC and Cibertec, which showed that graduates from the larger programs of both institutions had higher salaries than their control group counterparts. Additionally, graduates from UPC were found to experience a larger positive change in their socioeconomic status than their peers who completed studies at non-Laureate institutions.

Attractive Financial Model.

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Consistent Growth.  We have a proven track record of delivering consistent operational results through various cycles, as evidenced by the fact that we have experienced growth in enrollments every year since our founding in 1999.



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Private Pay Model.  Approximately 75%71% of our total revenues for the year ended December 31, 20172018 were generated from private pay sources. We believe students' and families' willingness to allocate personal resources to fund higher education at our institutions validates our strong value proposition.



•

Revenue Visibility Enhanced by Program Length and Strong Retention.  The length of our programs provides us with a high degree of revenue visibility. The majority of the academic programs offered by our institutions last between three and five years, and nearly two thirds of our students were enrolled in programs of at least four years or more in duration as of December 31, 2017.2018. Additionally, we actively monitor and manage student retention because of the impact it has on student outcomes and our financial results. The historical annual student retention rate, which we define as the proportion of prior year students returning in the current year (excluding graduating students), of over 80% has not varied by more than twothree percentage points in any one year over the last five years. Given our high degree of revenue visibility, we are able to make attractive capital investments and execute other strategic initiatives to help drive sustainable growth in our business.



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Attractive Margin Profile with Significant Operating Leverage.  Our international network of universities provides significant advantages of scale, enabling us to operate efficiently with attractive margin levels. Throughlevels by leveraging the scale of our network. In 2014, we launched our firstExcellence in Process ("EiP") initiatives (see "—enterprise-wide initiative to optimize and standardize our processes to enable sustained growth and margin expansion. Given the success of the first wave of EiP, we have expanded the initiative into other back- and mid-office areas, as well as certain student-facing activities, in order to generate additional efficiencies and create a more efficient organizational structure. Our Strategy—Increase Operating Efficiencies")EiP programs have implemented vertical integration of procurement, information technology, finance, accounting, and investment in unified technologyhuman resources, enabling us to fully leverage the growing size and scope of our local operations while also enhancing our internal controls and have expanded to leveraging additional opportunities for efficiencies and savings related to the mid-office functions (including, for example, student information systems we continue to focus on standardization of processes, centralization of common services and intellectual property, and implementing a common operating model and platform for content development, digital campus experiences, student services, recruitmentthe enrollment-to-graduation cycle) as well as general and administrative services. We believe this operating leverage positions us well for enhanced growth in profitabilitystructure and cash flow relative to our enrollments and revenue.certain student-facing activities.

Our Strategy

        In 2017, we initiated a review of our portfolio of institutions, with the joint goals of simplifying operations, reducing complexity, and mitigating risks (such as political, regulatory, economic and currency), while maximizing our exposure to what we consider are the most attractive and scalable markets for our network. During the year, we announced the divestitures of certain operations, and have deployed proceeds received to date from these divestitures to reduce our debt obligations and better manage our currency exposure. We believe the actions taken in 2017 have positioned the Company to execute on its strategy going forward.

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        We employ a focused approach to operational excellence. We plan to invest future resources in markets and assets that we believe can achieve scale that is meaningful for our company, and which align to our mission and enhance our network. Further, we intend to continue to leverage the scale of our network to generate additional operating efficiencies and continue to grow in a capital efficient manner while ensuring that academic quality and student experience remain a core priority.Our Strategy

        The execution of our strategy will be enabled by the following initiatives:

        Integration of Latin American Campus-Based Operations Through Common Operating Model.    We anticipate that our focus on our core, scaled markets will allow us to integrate our campus-based operations in those markets. Our institutions in Latin America serve approximately 800,000 students in a relatively homogenous operating environment, creating a unique opportunity to harvest the benefits of scale. We believe that by implementing and optimizing our common operating model, we will be able to transition our institutions from operating as decentralized, stand-alone units to operating as an integrated and scaled network.

        Tighter integration of our Latin American campus-based operations will also enable us to significantly reduce our cost structure and allow us to leverage the benefits of our scale across our more than 20 brands in these markets. By continuing to build on our success with the implementation of EiP, we believe that we can increase consistency and achieve scale with respect to back and mid-office functions, as well as certain front-office functions which impact the student from enrollment through graduation.

        We anticipate that the common operating model will enable closer collaboration across our network and will facilitate network-wide innovation and improved student experiences, such as joint program development initiatives, global classrooms, increased sharing of best practices and additional coordinated investments in unified technology systems and new capabilities such as artificial intelligence ("AI") and enhanced data analytics. We believe that this unification will enable us to be more nimble in our day-to-day operations and will allow us to extract valuable insights from more data across our network. We believe this will enable further innovation and efficiency in our academic model and operations. Further, we believe that this common operating system will enable us to lower the cost of delivery of education, which we believe should lead to improved margins and expanded market share. We plan to continue to centralize the development of certain curriculum, allowing us to build common teaching modules and courses at a lower cost and at higher quality, as compared to building modules and courses in each local market, as we can dedicate more resources to each course or module.

        Leverage and Expand Existing Portfolio.    We will continue to focus on opportunities to expand our programs and the type of students that we serve, as well as our capacity in our markets to meet local demand, leveraging our existing platform to execute on attractive organic growth opportunities. In particular, we intend to add new programs and course offerings, expand target student demographics and, where appropriate, increase capacity at existing campuses, open new campuses and enter new cities in existing markets. We believe these initiatives will drive growth and provide an attractive return on capital.

•

Add New Programs and Course Offerings.  We will continue to develop new programs and course offerings to address the changing needs in the markets. New programs and course offerings enable us to consistently provide a high-quality education that we believe is desired by students and prospective employers.



•

Expand Target Student Demographics.  In many of our markets, weWe use sophisticated analytical techniques to identify opportunities to provide quality education to new or underserved student populations where market demand is not being met, such as non-traditional students (e.g., working adults) who may value flexible scheduling options, as well as traditional students. Our ability to provide quality education to these underserved markets has provided additional growth opportunities to our network and we intend to leverage our management capabilities and local knowledge to further capitalize on these higher education opportunities in new and existing markets.



•

Increase Capacity at Existing and New Campus Locations.  We will continue to make demand-driven investments in additional capacity throughout our network by expanding existing

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campuses and opening new campuses, including in new cities. We employ a highly analytical process based on economic and demographic trends, and demand data for the local market to determine when and where to expand capacity. When opening a new campus or expanding existing facilities, we use best practices that we have developed over more than the past decade to cost-effectively expedite the opening and development of that location.



•
Targeted Strategic Acquisitions.  While we will continue to make organic investments to scale existing markets and enhance the value of our network, we may also make strategic acquisitions to further expand our portfolio, leveraging our track record and expertise.

        Expand Online and Hybrid Education Programs Globally.Programs.    We intend to increase the number of our students that receive their education through fully online or hybrid programs to meet the growing demands of students. Our online initiative is designed to not only provide students with access to innovative programs and modern digital experiences, but also to diversify our offerings, increase our enrollments and expand our digital solutions in a capital efficient manner, leveraging current infrastructure and improving classroom utilization.

        For 2018, the percentage of student credit hours taken online in our campus-based institutions was approximately 24%, an increase from approximately 11% in 2015. With a common LMS implemented throughout our network covering approximately 98% of our students as of December 31, 2018, scaling up to 100% during the first half of 2019, we believe we have the scale to execute on this market opportunity, allowing us to differentiate ourselves further from our competitors.

        We continue to accelerate the advancement of online education programs and technology-enabled solutions that deliver high-quality differentiated student experiences for our institutions at scale, including leveraging our network-wide launch ofOneCampus® by Laureate, our global online campus.OneCampus® brings global connections, opportunities, courses, and workplace experiences to our students, who become "members" in the broader Laureate network of institutions and gain access to unique global opportunities online. Furthermore, it creates a channel for Laureate to manage online

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initiatives globallyacross the network and continually expand our portfolio of online global offerings—reaching students, faculty, and alumni in the Laureate network and offering them a distinct market advantage.

        For 2017, the percentage of student credit hours taken online in our campus-based institutions was 20%, an increase from 11% in 2015, and our goal is to increase that percentage of student credit hours to 25% by the end of 2019. With a common learning management system ("LMS") implemented throughout our network currently covering 95% of our students, we believe we have the scale to execute on this market opportunity, allowing us to differentiate ourselves further from our competitors.        Our strategy for the online opportunity includes the following components:

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Fully Online Programs.  Many students require flexible learning modules to accommodate work and personal responsibilities. Often, these students are working adults who are looking to either complete an undergraduate or post-graduate degree, or who want to gain a credential to accelerate or change careers. Our fully online programs provide students with a high-quality curriculum experience to achieve their goals.



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Hybrid Online Programs.  Traditional 18-24 year old students attending campus-based institutions are increasingly seeking digital learning experiences that are blended with in-person learning. We provide those students with a hybrid learning experience, mixing face-to-face classroom experience with technology through our online platform, which we believe improves the student experience by providing them with a wide range of online courses, interactive discussions, virtual experiences, digital resources, and simulations that enhance their learning experiences both within and outside the classroom.



•

Fully Online Programs.  Many students require flexible learning modules to accommodate work and personal responsibilities. Often, these students are working adults who are looking to either complete an undergraduate or post-graduate degree, or who want to gain a credential to accelerate or change careers. Our fully online programs provide students with a high-quality curriculum experience to achieve their goals.



•

Distance Learning Opportunity in Brazil.  The Brazil market offers a unique opportunity to provide a quality and at-scale distance learning offering. The distance learning format reduces the need for on-site support, providing students with flexibility to plan their studies. With an established presence of over 400 active learning centers and nearly 1,000polo licenses as of December 31, 2017,2018, we plan to continuehave continued to leverage our local brands in Brazil to capitalize on our investment in distance learning centers to support demand. We anticipate that this initiative will allow us to expand our reach into areas that are currently outside of the geographic areas that we currently serve.

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Our scale allows usSegments and Institutions

        Effective August 9, 2018 (giving effect to generate operational leverage in many aspectsdiscontinued operations and the renaming of our business model.segments), Laureate offers its educational services through five reportable segments:

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Common Operating Model.  We are creating a common operating model for our network institutions that integrates multiple software components, including student information system ("SIS"), enterprise resource planning ("ERP"), LMS, and customer relationship management ("CRM"), into a single unified platform. We believe that this unification will enable us to be more nimble in our day-to-day operations and will allow us to collect more data efficiently across our network, potentially offering insights into further operational and academic improvements. Further, we believe that this common operating system will enable us to lower the cost of delivery of education, thereby increasing operating efficiency.Brazil;



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Enhanced Curriculum.  We plan to continue to centralize the development of certain curriculum, allowing us to build common teaching modules and courses at a lower cost as compared to building modules and courses in each local market. We anticipate that this will also allow us to dedicate more resources to each course or module, contributing to a higher quality product for our students.Mexico;



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EiP Wave 1—Back-Office/Procurement Integration.Andean;  In 2014, we launched EiP as an enterprise-wide initiative to optimize



•

Rest of World; and standardize our processes to enable sustained growth and margin expansion. The program, which we refer to as EiP Wave 1, was developed to enable vertical integration of procurement, information technology, finance, accounting, and human resources, thus enabling us to fully leverage the growing size and scope of our local operations



•

Online & Partnerships.

        We determine our segments based on information utilized by our chief operating decision maker to allocate resources and assess performance. See Note 8, Business and Geographic Segment Information, in our consolidated financial statements for financial information regarding our operating segments and financial information about geographic areas; see also "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Segment Results and—Overview—Factors Affecting Comparability—Seasonality" in this Form 10-K.

        The following table presents information about the institutions as of December 31, 2018, and excludes institutions that are part of discontinued operations as of that date.

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Operating Segment (Enrollment)		Country		Higher Education Institution		Year Joined Laureate Network			Year Founded
				Instituto Profesional Escuela Moderna de Música (EMM)			2008			1940
				Universidad Viña del Mar (UVM Chile)			*2009			1988
		Peru		Universidad Peruana de Ciencias Aplicadas (UPC)			2004			1994
				CIBERTEC			2004			1983
				Universidad Privada del Norte (UPN)			2007			1994
Rest of World (18,700)		Australia		THINK Education Group (THINK)			2013			2006
				Torrens University Australia (TUA)			2014			2014
		China		Blue Mountains International Hotel Management School—Suzhou (Blue Mountains Suzhou)			‡2008			2004
		New Zealand		Media Design School (MDS)			2011			1998
		Saudi Arabia		International Tourism and Hospitality College at Riyadh (ITHCR)			#2013			2013
				International Technical College at Jeddah (ITCJ)			#2013			2013
				International Technical Female College at Makkah (ITCM)			#2013			2013
				International Technical Female College at Al-Kharj (ITCAK)			#2013			2013
				International Tourism and Hospitality College at Al-Madinah (ITHCAM)			#2014			2014
				International Technical Female College at Al-Nammas (ITCAN)			#2015			2015
				International Technical Female College at Buraydah (ITCB)			#2015			2015
				International Technical Female College at Wadi Al-Dawaser (ITCWAD)			#2014			2014
Online & Partnerships (60,600)		United Kingdom		Laureate Online Education B.V. (University of Liverpool)			†2004			1881
				Laureate Online Education B.V. (University of Roehampton)			†2012			2004
		United States		Walden University			2001			1970

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*

Not-for-profit institution consolidated by Laureate as a variable interest entity.



‡

Managed by Laureate as part of a joint venture arrangement.



#

Managed by Laureate under a contract with the Kingdom of Saudi Arabia that expires in 2019.



†

In December 2017, we stopped accepting new enrollments at the University of Roehampton. In 2018, we stopped accepting new enrollments at the University of Liverpool.




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Competition

        We face competition in each of our internal controls. This initiativeoperating segments. We believe competition focuses on price, educational quality, reputation, location and facilities.

Brazil, Mexico, Andean and Rest of World

        The market for higher education outside the United States is largely completedhighly fragmented and has generated significant cost savings,marked by large numbers of local competitors. The target demographics are primarily 18- to 24-year-olds in the individual countries in which we compete. We generally compete with approximately $85 million in run-rate savings realized asboth public and private higher education institutions on the basis of December 31, 2017, with an additional $15 million anticipatedprice, educational quality, reputation and location. Public institutions tend to be realizedless expensive, if not free, but more selective and less focused on practical programs aligned around career opportunities. We believe we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by December 31, 2018.our network. At present, we believe no other company has a similar network of international institutions. There are a number of other private and public institutions in each of the countries in which we operate. Because the concept of private higher education institutions is fairly new in many countries, 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 markets mature.

United States

        The postsecondary education market is highly competitive, with no private or public institution holding a significant market share. We compete primarily with public and private degree-granting regionally accredited colleges and universities. Our competitors include both traditional and proprietary colleges and universities offering online programs. Traditional colleges and universities increasingly offer a variety of distance education alternatives to professional adults. Competition from traditional colleges and universities is expected to increase as they expand their online offerings.

        We believe that the competitive factors in the postsecondary education market primarily include the following:

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EiP Wave 2—Mid-Office & Student-Facing Activities Integration.relevant, high-quality and accredited program offerings;  Given



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reputation of the successcollege or university and marketability of EiP Wave 1 in leveraging our global scalethe degree;



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flexible, convenient, and dependable access to programs and courses;



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regulatory approvals;



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qualified and experienced faculty;



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level of learner support;



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affordability of the learnings from that initiative, we further evaluated additional opportunities for efficienciesprogram;



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availability of Title IV funds;



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marketing and savings relatedrecruiting effectiveness; and



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the time necessary to the mid-office functions (including, for example, student information systems and the enrollment-to-graduation cycle) as well as general and administrative structure and certain student-facing activities. We anticipate realizing $75 to $100 million of annual savings (generated primarily from general and administrative expense and technology-enabled efficiency solutions) by year end 2019. To achieve these savings, we expect to have approximately $125 million of one-time costs associated with severance and restructuring expenses, as well as costs related to technology investments. Approximately 50% of these one-time costs were incurred in 2017; we anticipate that the remainder will be incurred in 2018 and 2019.earn a degree.

        Expand PartnershipOnline & Partnerships

        The market for fully online higher education is highly fragmented and Services Portfolio.    We intend to leverage our suite of intellectual property, proprietary technology, common operating model, curriculum, and best practices to capitalize on additional opportunities in the form of partnership and service models thatcompetitive, with no single institution having any significant market share. The target demographic for Walden University is adult working professionals who are designed to address the growing needs of traditional institutions and governments around the world. We have partneredover 25 years old. Walden University competes with traditional public and private nonprofit institutions and for-profit schools. In recent years, the competition for online




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enrollments has increased as more traditional campus-based institutions are becoming online-enabled. Typically, public institutions charge lower tuitions than Walden University because they receive state subsidies, government and foundation grants, and tax-deductible contributions and have access to other financial sources not available to Walden University. However, tuition at private nonprofit institutions is typically higher than the average tuition rates charged by Walden University. Walden University competes with other educational institutions principally based upon price, educational quality, reputation, location, educational programs and student services.

        See "Item 1A—Risk Factors—Risks Relating to Our Business—The higher education market is very competitive, and we may not be able to compete effectively."

Recent Developments

Sale of Spanish and Portuguese Institutions

        On December 12, 2018, Iniciativas Culturales de España S.L., a Spanish private limited liability company ("ICE"), and Laureate I B.V., a Netherlands private limited liability company ("Laureate I"), both of which are indirect wholly owned subsidiaries of the Company, entered into a Sale and Purchase Agreement (the "Agreement") with Samarinda Investments, S.L., a Spanish limited liability company (the "Purchaser"). Pursuant to the Agreement, the Purchaser will purchase from ICE all of the issued and outstanding shares in the capital of each of Universidad Europea de Madrid, S.L.U., Iniciativas Educativas de Mallorca, S.L.U., Iniciativa Educativa UEA, S.L.U., Universidad Europea de Canarias, S.L.U., and Universidad Europea de Valencia, S.L.U. (together, the "Spain Companies"), and the Purchaser will purchase from Laureate I all of the issued and outstanding shares in the capital of Ensilis—Educação e Formação, Unipessoal, Lda. (the "Portugal Company"). Three of the Spain Companies are the entities that operate Universidad Europea de Madrid, Universidad Europea de Canarias, and Universidad Europea de Valencia. The Portugal Company is the entity that operates Universidade Europeia, a comprehensive university in Portugal, and Instituto Português de Administração de Marketing (IPAM Lisbon and IPAM Porto), post-secondary schools of marketing in Portugal.

        The transaction value under the Agreement is €770 million (or approximately $878 million at the December 31, 2018 rate of exchange), subject to customary closing adjustments, and the parties expect that the transaction will close within the first half of 2019, subject to customary closing conditions, including approvals by applicable competition and education regulatory authorities. For the 12-month period ended September 30, 2018, the Spain Companies and the Portugal Company, both of which are accounted for by the Company as discontinued operations, collectively had approximately $251.5 million in revenue, $46.2 million in operating income and $12.0 million in depreciation and amortization and, as of September 30, 2018, collectively had approximately 23,000 students.

Closing of Sale of University of St. Augustine for Health Sciences

        As previously reported, on April 24, 2018, the Company, and Exeter Street Holdings, LLC (the "Seller") and University of St. Augustine for Health Sciences, LLC ("USAHS"), both of which are wholly owned subsidiaries of the Company, entered into a Membership Interest Purchase Agreement (the "Agreement") with University of St. Augustine Acquisition Corp. (the "Purchaser"), an affiliate of Altas Partners LP, to purchase from the Seller all of the issued and outstanding membership interests of USAHS. On February 1, 2019, the transaction contemplated by the Agreement was completed following the required regulatory approvals. Upon completion of the sale, the Seller received net proceeds of $346.4 million, which includes $11.7 million of closing adjustments, net of $58.1 million debt assumed by the Purchaser and fees of $7.2 million. The Company used $340 million of the net proceeds to repay a portion of its U.S. term loan, with the remaining $6.4 million in proceeds utilized to repay borrowings outstanding under its revolving line of credit.




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Amendment of Agreement to Sell Institution in Malaysia

        As previously reported, on December 11, 2017, Exeter Street Holdings Sdn. Bhd., a Malaysia corporation (the "Seller"), and Laureate Education Asia Limited, a Hong Kong corporation (the "Guarantor"), both of which are indirect wholly owned subsidiaries of the Company, entered into a Share Sale & Purchase Agreement (the "Agreement") with Comprehensive Education Pte. Ltd., a Singapore corporation (the "Purchaser") that is an affiliate of Affinity Equity Partners, a private equity firm based in Hong Kong. Pursuant to the Agreement, the Purchaser agreed to purchase from the Seller all of the issued and outstanding shares in the capital of Inti Education Holdings Sdn. Bhd., a Malaysia corporation ("Inti Holdings"), and the Guarantor agreed to guarantee certain obligations of the Seller. Inti Holdings is the indirect owner of INTI University and Colleges, higher education institutions with five campuses in Malaysia ("INTI"). In connection with the Agreement, the Seller entered into a separate agreement with the current minority owner of the equity of Inti Holdings relating to the purchase by the Seller of the minority owner's 10.10% interest in Inti Holdings, the closing of which is a precondition to the closing of the transactions under the Agreement. The total purchase price, including the payment to the current minority owner, would have been US$180.0 million. The net transaction value to the Company under the Agreement would have been US$161.8 million, subject to customary closing adjustments.

        The closing of the transaction under the Agreement was subject to certain conditions, including approval by regulators in Malaysia within a prescribed period, which approval has not been obtained. On January 17, 2019, the parties agreed to amend the Agreement to provide additional time for the Purchaser to obtain all required regulatory approvals. As part of that amendment, the parties agreed to reduce the total purchase price to US$140.0 million, which would result in a net transaction value to the Company of US$125.86 million, subject to customary closing adjustments. The parties now expect the transaction to close in the first half of 2019.

Sale of Institution in Thailand

        On February 12, 2019, LEI Singapore Holdings Pte. Ltd., a Singapore corporation (the "Seller"), an indirect wholly owned subsidiary of the Company, and believe thereLaureate I B.V., a Netherlands corporation (the "Seller Guarantor"), an indirect wholly owned subsidiary of the Company, entered into a Share Sale & Purchase Agreement (the "Agreement") with China YuHua Education Investment Limited, a British Virgin Islands corporation (the "Purchaser"), and China YuHua Education Corporation Limited, a Cayman Islands corporation (the "Purchaser Guarantor"). Pursuant to the Agreement, the Purchaser purchased from the Seller all of Seller's interests in the issued share capital of Thai Education Holdings Company Limited, a Thailand corporation ("TEDCO"), and in Far East Stamford International Co Ltd ("FES"), a Thailand corporation, and to arrange the assignment of certain amounts receivable from the Thai group, the Seller Guarantor agreed to guarantee certain obligations of the Seller under the Agreement, and the Purchaser Guarantor agreed to guarantee certain obligation of the Purchaser under the Agreement. TEDCO is the owner of a controlling interest in FES, which is the license holder for Stamford International University, a member of theLaureate International Universities network with three campuses in Thailand. The total purchase price to the Seller under the Agreement was approximately $35.3 million, and net proceeds to the Seller were approximately $27.9 million, net of $7.1 million of net debt assumed by the Purchaser and $0.3 million of other customary closing adjustments. The transaction closed on the same date. Of the $27.9 million in net proceeds, the Seller received $23.7 million at closing. The balance of $4.2 million will be opportunitiespayable on the satisfaction of certain post-closing requirements. For the 12-month period ended December 31, 2018, TEDCO, FES and Stamford International University, which are accounted for by the Company as discontinued operations, collectively had approximately $20.0 million in revenue, an operating loss of $0.4 million, and $1.4 million in depreciation and amortization and, as of December 31, 2018, had approximately 4,400 students.




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Intellectual Property

        We currently own, or have filed applications for, trademark registrations for the word "Laureate," for "Laureate International Universities" and for the Laureate leaf logo in the trademark offices of all jurisdictions around the world where we operate institutions of higher learning. We have also registered or filed applications in the applicable jurisdictions where we operate for the marks "Laureate Online International" and "Laureate Online Education." In addition, we have the rights to expandtrade names, logos, and innovate those platforms with other independentintellectual property specific to most of our higher education institutions, in the future. Additionally,countries in which those institutions operate.

Employees

        As of December 31, 2018, including discontinued operations, we had approximately 60,000 employees, of which approximately 6,000 were full-time academic teaching staff and 21,000 were part-time academic teaching staff. In addition, we have approximately 200 part-time academic teaching staff who are classified as contractors, principally in Chile and Brazil. Our employees at many of our institutions outside the United States are represented by labor unions under collective bargaining agreements, as is customary or required under local law in those jurisdictions. At various points throughout the year, we negotiate to renew collective bargaining agreements that have expired or that will expire in the near term. We consider ourselves to be in good standing with all of the labor unions of which our employees are members and believe we have good relations with all of our employees.

Effect of Environmental Laws

        We believe we are continually addingin compliance with all applicable environmental laws, in all material respects. We do not expect future compliance with environmental laws to have a material adverse effect on our suite of solutions, and we believe many of these products and services will provide additional contractual and licensing opportunities for us in the future.business.

Our History

        We were founded in 1989 as Sylvan Learning Systems, Inc., a provider of a broad array of supplemental and remedial educational services. In 1999, we made our first investment in global higher education with our acquisition of Universidad Europea de Madrid, and in 2001 we entered the market for online delivery of higher education services in the United States with our acquisition of Walden University. In 2003, we sold the principal operations that made up our then K-12 educational services business and certain venture investments deemed not strategic to our higher education business, and in 2004 we changed our name to Laureate Education, Inc. In August 2007, we were acquired in a leveraged buyout by a consortium of investment funds and other investors. WeOn February 6, 2017, we consummated our initial public offering ("IPO") on February 6, 2017 and shares of our Class A Common Stock began trading on the Nasdaq under the symbol "LAUR".

Public Benefit Corporation Status

        In October 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. Public benefit corporations are a relatively new class of corporations that are intended to produce a public benefit and to operate in a responsible and sustainable manner. Under Delaware law, public benefit corporations are required to identify in their certificate of incorporation the public benefit or benefits they will promote and their directors have a duty to manage the affairs of the corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation's conduct, and the specific public benefit or public benefits identified in the public benefit corporation's certificate of incorporation. Public benefit corporations organized in Delaware are




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also required to assess their benefit performance internally and to disclose publicly at least biennially a report detailing their success in meeting their benefit objectives.




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        Our public benefit, as provided in our certificate of incorporation, is: to produce a positive effect (or a reduction of negative effects) for society and persons by offering diverse education programs delivered online and on premises operated in the communities that we serve. By doing so, we believe that we provide greater access to cost-effective, high-quality higher education that enables more students to achieve their academic and career aspirations. Most of our operations are outside the United States, where there is a large and growing imbalance between the supply and demand for quality higher education. Our stated public benefit is firmly rooted in our company mission and our belief that when our students succeed, countries prosper and societies benefit. Becoming a public benefit corporation underscores our commitment to our purpose and our stakeholders, including students, regulators, employers, local communities and stockholders.

Certified B Corporation

        While not required by Delaware law or the terms of our certificate of incorporation, we have elected to have our social and environmental performance, accountability and transparency assessed against the proprietary criteria established by an independent non-profit organization. As a result of this assessment, we have been designated as a "Certified B Corporation^TM" under the standards set by an independent organization, which refers to companies that are certified as meeting certain levels of social and environmental performance, accountability and transparency.

        The following description of the certification processes and standards was provided to us by the independent organization that designated us as a Certified B Corporation. The first step in becoming a Certified B Corporation is taking and passing a comprehensive and objective assessment of a business's positive impact on society and the environment. The assessment varies depending on the company's size (number of employees), sector and location. The standards in the assessment are created and revised by an independent governing body that determines eligibility to be a Certified B Corporation.

        By completing a set of over 200 questions, which are customized for the company being assessed, that reflect impact indicators, best practices and outcomes, a company receives a composite score on a 200-point scale representative of its overall impact on its employees, customers, communities and the environment. Representative indicators in the assessment range from payment above a living wage, employee benefits, charitable giving/community service, use of renewable energy and, in the case of educational institutions like Laureate, student outcomes such as retention, graduation and employment rates.

        Certification as a Certified B Corporation requires that a company achieve a reviewed assessment score of at least an 80. The review process includes a phone review, a random selection of indicators for verifying documentation and a random selection of company locations for onsite reviews, including employee interviews and facility tours. In the case of Laureate's assessment, each subsidiary, as well as the corporate office in Baltimore, was required to complete an individual assessment for review that would be aggregated based on size to calculate an overall score. The assessment also includes a disclosure questionnaire, including any sensitive practices, fines and sanctions related to the company or its partners.

        For Laureate, certification also required us to adopt the public benefit corporation structure, a step we have already completed. Once certified, every Certified B Corporation must make its assessment score transparent on the independent non-profit organization's website. Acceptance as a Certified B Corporation and continued certification is at the sole discretion of the independent organization.

        On January 22, 2018, Laureate was recertified as a Certified B Corporation by the independent third party.




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Our Operating Segments and Institutions

        Effective August 1, 2017, Laureate offers its educational services through six operating segments:

•

Brazil;



•

Mexico;



•

Andean & Iberian (Chile, Peru, Spain and Portugal);



•

Central America & U.S. Campuses (Costa Rica, Honduras, Panama, St. Augustine, Kendall and New School);



•

EMEAA (Europe, Middle East, Africa and Asia Pacific); and



•

Online & Partnerships.

        We determine our operating segments based on information utilized by our chief operating decision maker to allocate resources and assess performance. See Note 7, Business and Geographic Segment Information, in our consolidated financial statements for financial information regarding our operating segments and financial information about geographic areas; see also "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Segment Results and—Overview—Factors Affecting Comparability—Seasonality."

        The following table presents information about the institutions as of December 31, 2017, except where otherwise indicated:

Operating Segment (Enrollment)		Country		Higher Education Institution		Year Joined Laureate Network			Year Founded
Brazil (271,200)		Brazil		Universidade Anhembi Morumbi (UAM Brazil)			2005			1970
				Universidade Potiguar (UnP)			2007			1981
				Centro Universitário dos Guararapes (CUG)			2007			2002
				Faculdade Internacional da Paraíba (FPB)			2007			2005
				Business School São Paulo (BSP)			2008			1994
				Centro Universitário do Norte (UniNorte)			2008			1994
				FADERGS Centro Universitário (FADERGS)			2008			2004
				Instituton Brasileiro de Medicina de Reabilitação (Uni IBMR)			2009			1974
				Universidade Salvador (UNIFACS)			2010			1972
				Centro Universitário Ritter dos Reis (UniRitter)			2010			1971
				Faculdade dos Guararapes de Recife (FGR)			2012			1990
				FMU Education Group (FMU)			2014			1968
				Faculdade Porto-Alegrense (FAPA)			2014			2008
Mexico (214,200)		Mexico		Universidad del Valle de México (UVM Mexico)			2000			1960
				Universidad Tecnológica de México (UNITEC Mexico)			2008			1966
Andean & Iberian (321,800)		Chile		Universidad de Las Américas (UDLA Chile)			*2000			1988
				Instituto Profesional AIEP (AIEP)			2003			1960




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Operating Segment (Enrollment)		Country		Higher Education Institution		Year Joined Laureate Network			Year Founded
				Universidad Andrés Bello (UNAB)			*2003			1989
				Instituto Profesional Escuela Moderna de Música (EMM)			2008			1940
				Universidad Viña del Mar (UVM Chile)			*2009			1988
		Peru		Universidad Peruana de Ciencias Aplicadas (UPC)			2004			1994
				CIBERTEC			2004			1983
				Universidad Privada del Norte (UPN)			2007			1994
				Instituto Tecnológico del Norte (ITN)			2007			1984
		Portugal		Universidade Europeia (UE)			2011			1962
				Instituto Português de Administração de Marketing de Porto (IPAM Porto)			2015			1984
				Instituto Português de Administração de Marketing de Lisboa (IPAM Lisboa)			2015			1987
		Spain		Universidad Europea de Madrid (UEM)			1999			1995
				Universidad Europea de Canarias (UEC)			2010			2010
				Universidad Europea de Valencia (UEV)			2012			2012
Central America & U.S. Campuses (69,200)		Costa Rica		Universidad Latina de Costa Rica (ULatina)			2003			1989
				Universidad Americana (UAM Costa Rica)			2008			1998
		Honduras		Universidad Tecnológica Centroamericana (UNITEC Honduras)			*2005			1987
		Panama		Universidad Interamericana de Panamá (UIP)			2003			1994
		United States		NewSchool of Architecture and Design (New School)			2008			1980
				Kendall College			**2008			1934
				Santa Fe University of Art and Design (SFUAD)			†2009			1859
				University of St. Augustine for Health Sciences (St. Augustine)			2013			1979
EMEAA		Australia		THINK Education Group (THINK)			2013			2006
(128,100)				Torrens University Australia (TUA)			2014			2014
		China		Blue Mountains International Hotel Management School—Suzhou (Blue Mountains Suzhou)			‡2008			2004
				Hunan International Economics University (HIEU)			+2009			1997
		Cyprus		European University Cyprus (EUC)			**2005			1961
		Germany		University of Applied Sciences Europe (UAS)			2007			2000
				HTK Academy of Design (HTK)			2011			1987
		India		Pearl Academy (Pearl)			*2011			1993
				University of Petroleum and Energy Studies (UPES)			*2013			2003
		Italy		Nuova Accademia di Belle Arti Milano (NABA)			**2009			1980
		Malaysia		INTI Education Group (INTI Malaysia)			**2008			1986
		Morocco		Université Internationale de Casablanca (UIC)			**2010			2010




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Operating Segment (Enrollment)		Country		Higher Education Institution		Year Joined Laureate Network			Year Founded
		New Zealand		Media Design School (MDS)			2011			1998
		Saudi Arabia		Riyadh Polytechnic Institute (RPI)			‡2010			2010
				International Tourism and Hospitality College at Riyadh (ITHCR)			#2013			2013
				International Technical College at Jeddah (ITCJ)			#2013			2013
				International Technical Female College at Makkah (ITCM)			#2013			2013
				International Technical Female College at Al-Kharj (ITCAK)			#2013			2013
				International Tourism and Hospitality College at Al-Madinah (ITHCAM)			#2014			2014
				International Technical Female College at Al-Nammas (ITCAN)			#2015			2015
				International Technical Female College at Buraydah (ITCB)			#2015			2015
				International Technical Female College at Wadi Al-Dawaser (ITCWAD)			#2014			2014
		South Africa		Monash South Africa (MSA)			2013			2001
		Thailand		Stamford International University (SIU)			*2011			1995
		Turkey		Istanbul Bilgi University			*2006			1996
Online & Partnerships		United Kingdom		Laureate Online Education B.V. (University of Liverpool)			2004			1881
(63,500)				Laureate Online Education B.V. (University of Roehampton)			2012			2004
		United States		Walden University			2001			1970

---

*

Not-for-profit institution consolidated by Laureate as a variable interest entity.



**

Indicates that the institution was part of a completed or pending disposition as of December 31, 2017. See "—Recent Developments."



†

SFUAD is separately owned by Wengen. Laureate provides support services to SFUAD pursuant to contractual arrangements. See Note 18, Related Party Transactions, in our consolidated financial statements for more information. On April 12, 2017, SFUAD announced that it plans to close after the end of the 2017-2018 academic year and will work with its students on a phased teach-out and transfer process leading up to the graduation of students who are eligible to complete their degrees by May 2018 and appropriate transfer opportunities for other students.



‡

Managed by Laureate as part of a joint venture arrangement.



#

Managed by Laureate under contract with the Kingdom of Saudi Arabia.



+

Not-for-profit institution consolidated by Laureate as a variable interest entity. This institution was pending disposition as of December 31, 2017. See "—Recent Developments."

     In December 2017, we stopped accepting new enrollments at this institution.

Competition

        We face competition in each of our operating segments. We believe competition focuses on price, educational quality, reputation, location and facilities.




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Brazil, Mexico, Andean & Iberian, Central America and EMEAA

        The market for higher education outside the United States is highly fragmented and marked by large numbers of local competitors. The target demographics are primarily 18- to 24-year-olds in the individual countries in which we compete. We generally compete with both public and private higher education institutions on the basis of price, educational quality, reputation and location. Public institutions tend to be less expensive, if not free, but more selective and less focused on practical programs aligned around career opportunities. We believe we compare favorably with competitors because of our focus on quality, professional-oriented curriculum and the competitive advantages provided by our global network. At present, we believe no other company has a similar network of international institutions. There are a number of other private and public institutions in each of the countries in which we operate. Because the concept of private higher education institutions is fairly new in many countries, 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 markets mature.

United States

        The postsecondary education market is highly competitive, with no private or public institution holding a significant market share. We compete primarily with public and private degree-granting regionally accredited colleges and universities. Our competitors include both traditional and proprietary colleges and universities offering online programs. Traditional colleges and universities increasingly offer a variety of distance education alternatives to professional adults. Competition from traditional colleges and universities is expected to increase as they expand their online offerings.

        We believe that the competitive factors in the postsecondary education market primarily include the following:

•

Relevant, high-quality and accredited program offerings;



•

Reputation of the college or university and marketability of the degree;



•

Flexible, convenient, and dependable access to programs and courses;



•

Regulatory approvals;



•

Qualified and experienced faculty;



•

Level of learner support;



•

Affordability of the program;



•

Availability of Title IV funds;



•

Marketing and recruiting effectiveness; and



•

The time necessary to earn a degree.

Online & Partnerships

        The market for fully online higher education is highly fragmented and competitive, with no single institution having any significant market share. The target demographics for our Global Online institutions are adult working professionals who are over 25 years old. Our Global Online institutions compete with traditional public and private nonprofit institutions and for-profit schools. Typically, public institutions charge lower tuitions than our Global Online institutions because they receive state subsidies, government and foundation grants, and tax-deductible contributions and have access to other financial sources not available to our Global Online institutions. However, tuition at private nonprofit institutions is typically higher than the average tuition rates charged by our Global Online institutions. Our Global Online institutions compete with other educational institutions principally based upon price, educational quality, reputation, location, educational programs and student services.

        See "Item 1A—Risk Factors—Risks Relating to Our Business—The higher education market is very competitive, and we may not be able to compete effectively."




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Recent Developments

Sale of Cyprus and Italy Institutions

        On November 22, 2017, LEI European Investments B.V., a Netherlands private limited company (the "Seller"), and Laureate International B.V., a Netherlands private limited company (the "Guarantor"), both of which are indirect wholly owned subsidiaries of Laureate Education, Inc. (the "Company"), entered into a Sale and Purchase Agreement (the "Agreement") with Galileo Global Education Midco S.à R.L., a Luxembourg limited liability company (the "Purchaser"). Pursuant to the Agreement, the Purchaser purchased from the Seller all of the issued and outstanding shares in the capital of European University—Cyprus Ltd ("EUC") and Laureate Italy S.r.L. ("Laureate Italy"). EUC is the corporate entity that operates European University Cyprus, a leading fully comprehensive university in Cyprus, and Laureate Italy is the parent company of Nuova Accademia, S.r.L., which operates Nuova Accademia di Belle Arti Milano (NABA) and Domus Academy, which collectively make up one of the largest private fine arts academies in Milan, Italy. The transaction closed on January 11, 2018, and the Seller received closing proceeds of approximately $275 million. For the year ended December 31, 2017, EUC and Laureate Italy collectively had $87.8 million in revenue, $18.2 million in operating income and $2.6 million in depreciation and amortization and as of December 31, 2017 collectively had approximately 9,500 students.

Sale of Malaysia Institution

        On December 11, 2017, Exeter Street Holdings Sdn. Bhd., a Malaysia corporation (the "Seller"), and Laureate Education Asia Limited, a Hong Kong corporation (the "Guarantor"), both of which are indirect wholly owned subsidiaries of Laureate Education, Inc. (the "Company"), entered into a Share Sale & Purchase Agreement (the "Agreement") with Comprehensive Education Pte. Ltd., a Singapore corporation (the "Purchaser") that is an affiliate of Affinity Equity Partners, a private equity firm based in Hong Kong. Pursuant to the Agreement, the Purchaser will purchase from the Seller all of the issued and outstanding shares in the capital of Inti Education Holdings Sdn. Bhd., a Malaysia corporation ("Inti Holdings"), and the Guarantor will guarantee certain obligations of the Seller. Inti Holdings is the indirect owner of INTI University and Colleges, a higher education institution with five campuses in Malaysia ("INTI"). In connection with the Agreement, the Seller entered into a separate agreement with the current minority owner of the equity of Inti Holdings relating to the purchase by the Seller of the minority owner's 10.10% interest in Inti Holdings, the closing of which is a precondition to the closing of the transactions under the Agreement.

        The total purchase price, including the payment to the current minority owner, will be $180.0 million. The net transaction value to the Company under the Agreement will be $161.8 million, subject to customary closing adjustments, and the parties expect that the transaction will close by the end of the second quarter of 2018, subject to customary closing conditions. For the year ended December 31, 2017, INTI had $69.9 million in revenue, $9.2 million in operating income and $4.8 million in depreciation and amortization and as of December 31, 2017 had approximately 16,700 students.

Sale of China Institution

        On December 27, 2017, LEI China Limited, a Hong Kong private limited company (the "Seller"), a wholly owned subsidiary of Laureate Education, Inc. (the "Company"), entered into a Share Purchase Agreement (the "Agreement") with China YuHua Education Investment Limited, a British Virgin Islands corporation (the "Purchaser"), a wholly owned subsidiary of China YuHua Education Corporation Limited. Pursuant to the Agreement, the Purchaser purchased from the Seller all of the issued and outstanding shares in the capital of LEI Lie Ying Limited, a Hong Kong private limited company ("LEILY"). LEILY is the legal and beneficial owner of a 70% equity interest in Hunan Lie




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Ying Industry Co., Ltd., a Sino-foreign equity joint venture organized under the laws of the People's Republic of China, which in turn owns 100% of the sponsorship or equity interests in the following entities: Hunan International Economics University; Hunan Lie Ying Mechanic School; Hunan Lie Ying Property Management Co., Ltd.; and Hunan International Economics University Vocational Skills Training Center (collectively, the "Entities").

        The transaction value under the Agreement is the Hong Kong Dollar (HK$) equivalent of RMB 1,430 million, which comprises cash payment of HK$ equivalent of RMB 1,215.2 million, subject to customary adjustments post-closing, and payment of RMB 214.8 million by an affiliate of the Purchaser to Laureate Investment Consulting (Shanghai) Co., Ltd., a wholly owned subsidiary of the Seller ("Laureate Shanghai"), for assignment of Laureate Shanghai's creditor's right over a debt owed by Hunan International Economics University. The transaction closed in January 2018 and Seller received a portion of the transaction value, totaling approximately $130 million, net of fees and taxes, at closing. In addition, the Purchaser shall pay to the Seller, six months after the closing date, the HK$ equivalent of RMB 120 million, and, 12 months after the closing date, the HK$ equivalent of RMB 60 million, subject to deduction of any indemnifiable losses payable by the Seller to the Purchaser pursuant to the Agreement. The remaining portion of the transaction value was paid into an escrow account and will be distributed to Seller pursuant to the terms and conditions of the escrow agreement.

        For the year ended December 31, 2017, the Entities, in which the Company had a 70% equity interest, collectively had $64.5 million in revenue, $21.2 million in operating income and $6.1 million in depreciation and amortization and as of December 31, 2017 collectively had approximately 29,100 students.

Sale of Morocco Institution

        On November 29, 2017, Laureate Middle East Holdings B.V. ("LMEH"), a Netherlands company and indirect wholly owned subsidiary of Laureate Education, Inc. ("Laureate"), and La Société Maroc Emirats Arabes Unis de Développement ("SOMED"), a Morocco company (LMEH and SOMED, together, the "Sellers"), Laureate I B.V. (the "Guarantor"), a Netherlands company and indirect wholly owned subsidiary of Laureate, and UPM Pédagogique, a Morocco company (the "Purchaser"), entered into a Share Purchase Agreement (the "Agreement") pursuant to which the Purchaser will purchase from the Sellers all of the issued and outstanding capital shares of Laureate Somed Holding, a Morocco company ("Laureate Somed"), for a total transaction value of 500 million Moroccan Dirhams (approximately US$53.0 million at the December 31, 2017 exchange rate), subject to customary adjustments at closing, and the Guarantor will guarantee certain obligations of LMEH under the Agreement. Laureate Somed is the operator of Université Internationale de Casablanca, a comprehensive campus-based university in Casablanca, Morocco. LMEH owns approximately 60% of the capital shares of Laureate Somed, while SOMED owns the remaining approximately 40% of the capital shares of Laureate Somed.

        The parties expect that the transaction will close by the end of the first quarter of 2018, subject to customary closing conditions. For the year ended December 31, 2017, Laureate Somed had $11.5 million in revenue, an operating loss of $0.8 million and $1.1 million in depreciation and amortization and as of December 31, 2017 had approximately 2,200 students.

Sale of U.S. Institution

        On January 15, 2018, Kendall College, LLC, an Illinois limited liability company (the "Seller"), The Dining Room at Kendall NFP, an Illinois not for profit corporation, National Louis University, an Illinois not for profit corporation (the "Buyer"), and Laureate Education, Inc., a Delaware public benefit corporation (the "Company"), solely as guarantor of certain of Seller's obligations thereunder, entered into an Asset Purchase Agreement (the "Agreement"). Seller is an indirect wholly owned




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subsidiary of the Company. Pursuant to the Agreement, at the closing of the transaction Seller will transfer to Buyer certain assets, including all of Seller's educational programs, subject to certain conditions, in exchange for consideration of one dollar. As part of the Agreement, at the closing Seller will pay to Buyer up to $14 million to support Buyer's construction of facilities for the acquired culinary arts, baking and pastry, and hospitality programs on Buyer's campus, subject to possible partial recoupment under specified conditions during the 10-year period post-closing. In addition, Seller has paid Buyer $0.5 million to reimburse Buyer for its expenses in connection with the transactions contemplated by the Agreement.

        The closing of the transaction is subject to prior receipt of regulatory consents, including those of the U.S. Department of Education and the Higher Learning Commission, which consents do not contain certain conditions that would not be acceptable to the Buyer or to the Seller, and the Company anticipates that the closing will occur during the second half of 2018. For the year ended December 31, 2017, the Seller had $23.3 million in revenue, an operating loss of $23.0 million and $1.7 million in depreciation and amortization and as of December 31, 2017 had approximately 1,100 students.

Intellectual Property

        We currently own, or have filed applications for, trademark registrations for the word "Laureate," for "Laureate International Universities" and for the Laureate leaf logo in the trademark offices of all jurisdictions around the world where we operate institutions of higher learning. We have also registered or filed applications in the applicable jurisdictions where we operate for the marks "Laureate Online International" and "Laureate Online Education." In addition, we have the rights to trade names, logos, and other intellectual property specific to most of our higher education institutions, in the countries in which those institutions operate.

Employees

        As of December 31, 2017, we had approximately 65,000 employees, of which approximately 9,000 were full-time academic teaching staff and 21,000 were part-time academic teaching staff. In addition, we have approximately 700 part-time academic teaching staff who are classified as contractors, principally in Chile and Brazil. Our employees at many of our institutions outside the United States are represented by labor unions under collective bargaining agreements, as is customary or required under local law in those jurisdictions. At various points throughout the year, we negotiate to renew collective bargaining agreements that have expired or that will expire in the near term. We consider ourselves to be in good standing with all of the labor unions of which our employees are members and believe we have good relations with all of our employees.

Effect of Environmental Laws

        We believe we are in compliance with all applicable environmental laws, in all material respects. We do not expect future compliance with environmental laws to have a material adverse effect on our business.

Available Information

        Our principal executive offices are located at 650 S. Exeter Street, Baltimore, Maryland 21202, telephone (410) 843-6100. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available free of charge to shareholders and other interested parties through the "Investor Relations" portion of our website at http://investors.laureate.net as soon as reasonably practical after they are filed with the Securities and Exchange Commission ("SEC"). The SEC maintains a website, www.sec.gov, which contains reports and other information filed electronically with the SEC by us.SEC. Various corporate governance




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documents, including our Audit Committee Charter, Compensation Committee Charter, Nominations and Corporate Governance Committee Charter, and Code of Conduct and Ethics are available without charge through the "Investor Relations," "Corporate Governance" portion of our investor relations website, listed above.

Industry Regulation

Australian Regulation

        We operate two post-secondary educational institutions in Australia—Torrens University Australia Ltd ("Torrens") and Think: Colleges Pty Ltd ("Think").

        In Australia a distinction is made between higher education organizations and vocational education.

        Higher education providers consist of public and private universities, Australian branches of overseas universities and other higher education providers. Higher education qualifications consist of undergraduate awards (bachelor degrees, associate degrees and diplomas) and postgraduate awards (graduate certificates and diplomas, master's degrees and doctoral degrees). The regulation of higher education providers is undertaken at a national level by the Tertiary Education Quality and Standards Agency ("TEQSA"). All organizations that offer higher education qualifications in or from Australia must be registered by TEQSA. Higher education providers that have not been granted self-accrediting status must also have their courses of study accredited by TEQSA. Registration as a higher education provider is for a fixed period of up to seven years. TEQSA regularly reviews the conduct and operation of accredited higher education providers.

        The vocational education and training ("VET") sector consists of technical and further education institutes, agricultural colleges, adult and community education providers, community organizations, industry skill centers and private providers. VET qualifications include certificates, diplomas and advanced diplomas. The regulation of VET providers is undertaken at a national level by the Australian Skills Quality Authority ("ASQA"). Organizations providing VET in Australia must be registered by ASQA as a Registered Training Organisation. Courses offered by Registered Training Organisations need to be accredited by ASQA. Registration as a registered training organization is for a fixed period of up to seven years. ASQA regularly reviews the conduct and operations of registered training organizations.

        Torrens is one of 43 universities in Australia. It is a for-profit entity and registered as a university by TEQSA and has applied to renew its registration. As a self-accrediting university it is not required to have its courses of study accredited by TEQSA. Torrens is also registered by ASQA as a Registered Training Organisation and is thus entitled to offer vocational and training courses.

        Think is one of approximately 5,000 Registered Training Organisations in Australia and in that capacity is regulated by ASQA. It is also registered as a higher education provider by TEQSA. Its higher education courses require, and have received, accreditation by TEQSA.

        Australia also maintains a Commonwealth Register of Institutions and Courses for Overseas Students ("CRICOS") for Australian educational providers that recruit, enroll and teach overseas




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students. Registration in CRICOS allows providers to offer courses to overseas students studying on Australian student visas. Both Torrens and Think are so registered.

        The Commonwealth government has established income-contingent loan schemes that assist eligible fee-paying students to pay all or part of their tuition fees (separate schemes exist for higher education and vocational courses). Under the schemes the relevant fees are paid directly to the institutions. A corresponding obligation then exists from the participating student to the Commonwealth government. Neither Torrens nor Think have any responsibility in connection with the repayment of these loans by students and, generally, this assistance is not available to international students. Both Torrens and Think are registered for the purposes of these plans (a precondition to their students being eligible to receive these loans).

Brazilian Regulation

        The Brazilian educational system is organized according to a system of cooperation among federal, state and local governments. Higher education (i.e., undergraduate and graduate level education provided by public and private higher education institutions ("HEI")) is regulated primarily at the federal level, particularly in terms of public policy goals, accreditation and academic oversight; however, theoversight. The legislative influence of state and municipal governments are also involved, principally in relationis generally restricted to taxation, real estate and operational permitting issues.

        With respect to the federal role, The National Educational Basis and Guidelines Law ("LDB"), provides the general framework for the provision of educational services in Brazil and establishes the duty of the federal government to:

•

coordinate the national educational policy;



•

define the National Education Plan, in coordination with the states, the Federal District of Brasilia and municipalities;



•

provide technical and financial assistance to the states, the Federal District of Brasilia and municipalities;



•

establish, in collaboration with the states, the Federal District of Brasilia and municipalities, skills and guidelines for early childhood education, elementary and secondary education that will guide the curriculum and their minimum syllabus, ensuring the regular basic education;



•

ensure national process of evaluation of higher education institutions, with the cooperation of evaluation agencies that have responsibility for this level of education;



•

and to create an evaluation process for the academic performance of elementary, secondary and higher education in collaboration with educational institutions in order to improve the quality of education; and



•

issue rules and regulations regarding higher education.

        The responsibility of the Federal Governmentfederal government in regulating, monitoring and evaluating higher education institutions and undergraduate programs is exercised by MEC,the Ministry of Education ("MEC"), along with a number of other federal agencies and offices that are related to MEC.offices.

MEC

        MEC is the highest authority of the higher education system in Brazil and has the power to:to issue implementing rules (regulations, notices, and technical advisories governing the conduct of higher education), as well as to regulate and monitor the higher education segment.

•

        By exercising its duties, MEC has the power to confirm the decisions offrom the National Board of Education ("CNE") regarding the accreditation and reaccreditation of institutions of higher education;



•

confirmeducation, as well as legal opinions and regulatory proposals coming from the systemsBoard. MEC is also responsible for validating the criteria and evaluation criteria adoptedmethodology employed by the National Institute of Educational Studies Anísio Teixeira ("INEP");



•

confirm opinions and regulatory proposals issued by the CNE;



•

issue implementing rules, (regulations, notices, and technical advisories governing the conduct of higher education); and



.

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•

regulate and monitor the system of higher education.

CNE—National Board of Education

        CNE is a consultative advisory and deliberative body of MEC. It consists of the Board of Basic Education and the Board of Higher Education, each composed of 12 members appointed by the President of Brazil. The Board of Higher Education has the power to:

•

support the development and monitor the implementation of the National Education Plan;



•

to (i) analyze and issue opinions on the results of the evaluation procedures of higher education;



•

offer suggestions for drafting the National Education Plan and to monitor their implementation;



•

decide on the curriculum guidelines proposed by the MEC, for undergraduate courses;



•

education quality assessment; (ii) deliberate on the reports submitted by MEC on the recognition




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programmatic accreditation and qualifications offered by higher education institutions, as well as on prior authorization from those offered by non-university institutions;



•

and (iii) approve the authorization, accreditation and periodic reaccreditation of higher education institutions, based on official reports and assessments provided by MEC;



•

approve the statutes of universities and the regiment of the other higher education institutions that are part of the Federal educational system;



•

deliberate on the reportsquality assessments.

        The CNE is also responsible for periodic recognition of master's and doctoral programs, prepared by the MEC, based on the evaluation of the programs;



•

analyze matters relating to the implementation of legislation regarding higher education; and



•

advise MEC in higher education norms and advising MEC on related matters.

INEP—National Institute of Educational Studies Anísio Teixeira

        INEP is a federal agency linked to MEC that is the primary statistical and information-gathering body for the entire Brazilian education system. The performance data it collects and publishes is used by MEC, the legislature and the rest of the executive branch, as well as the public, to debate and make policy and programmatic decisions about education. INEP has the power to:

•

carry out visits to institutions of higher educationis responsible for on-site evaluations in the process of accreditation and reaccreditation of institutions and in the authorization, recognition, accreditation and renewal of recognition processes of undergraduate and sequential programs;



•

conduct research and analysis of data related to education in Brazil; and



•

implement the National Higher Education Evaluation System ("SINAES").

, and will coordinate and execute on-site visits to Higher Education institutions in the process of accreditation/reaccreditation of institutions and undergraduate programs.

CONAES—National Commission on Higher Education Evaluation

        CONAES is a committee under MEC supervision composed of 13 members. CONAES has the power to:

•

members, created to coordinate and monitor SINAES;



•

SINAES. To fulfill that duty, CONAES can establish guidelines to be followed by INEP in the development of programmatic evaluation tools;



•

approve the evaluation tools, and submit them for approval by the Minister of Education; and




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•

as well as submit the list of programs to be evaluated by the National Examination of Student Performance ("ENADE") examination, to the Minister of Education.

.

SERES—Higher Education Regulation and Supervision Secretariat

        In 2011, SERES, SERES—which operates as an arm ofa MEC branch—became the specific agency directly responsible for regulation and supervision of public and private HEIs, as well as undergraduate courses andlato sensu post-graduategraduate programs, for both in-personface-to-face and distance learning modalities. Its mission is to elevate the quality level of all higher education through the establishment of guidelines for the expansion of HEIs and their courses, in accordance with national curriculum guidelines and proprietary quality parameters,parameters.

        SERES plans and include:

•

to plan and coordinatecoordinates the policy-making process for higher education and has been granted the regulationpower to (i) accredit HEIs and supervision of higher education;



•

to accredittheir undergraduate (and sequential) courses, both through in-person and distance learning;



•

tocourses; (ii) oversee HEIs and courses, in order to fulfill the educational legislation and to induce improvements in the quality of higher education standards, applying the penalties provided for in legislation;



•

to establish guidelines for the preparation of assessment instruments forstandards; and higher education courses;



•

to manage the public system of registration and database of HEIs and higher education courses; and



•

to propose the(iii) design of actions and updating of reference andupdate curriculum guidelines for undergraduate courses,programs, as well as benchmarks for quality distance education, considering curricular guidelines and various forms of technology.

SERES can also establish guidelines for the preparation of assessment instruments for higher education courses and ultimately manages the public system of registration and database of HEIs and higher education programs. Finally, SERES can apply the penalties provided for in regulation, following due process.

        According to the LDB, higher education can be offered by public or private higher education institutions. A private institution of higher education shall be controlled, managed and maintained by an individual person(s) or legal entity, in either case referred to as the "mantenedora." The mantenedora is responsible for obtaining resources to meet the needs of the duly authorized HEI, which in regulatory terms is referred to as the "mantida." A mantenedora may be authorized to operate more than one mantida. In any case, the mantenedora is legally and financially responsible for all of its mantidas. Each of our HEIs in Brazil is maintained by a Laureate-controlled mantenedora.

        Private institutions of higher education may be:

•

private institutions of higher education with profit purposes created and maintained by one or more individuals or private legal entities;



•

community institutions, founded by groups of individuals or one or more legal entities, including cooperatives, teachers and students that include community representatives in its supporting entity;



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religious institutions, instituted by individuals or groups for one or more legal entities that meet specific religious and ideological orientation and that include community representatives in its supporting entity; or



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nonprofit private institutions, charitable or not charitable, which are also sometimes referred to as philanthropic or nonphilanthropic.




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        According toRegarding their organizational and academic prerogatives, institutions of undergraduate learning can be:

•

Colleges (faculdades): Colleges are institutions of public or private education offering degree programs in more than one area of knowledge and that are supported by a single supporting entity and have specific administration and management. Colleges may offer programs at the following levels: traditional undergraduate programs, technological undergraduate programs, specialization and graduate programs (master's and Ph.D. degrees). Colleges do not have minimum requirements for the qualifications of professors and their labor practices, and cannot establish new campuses or create programs and new locations without the prior permission of MEC.



•

University Centers (centro universitários): University centers are public or private educational institutions that offer a variety of programs in higher education, including undergraduate programs, extension courses andlato sensu graduate programs—master's and Ph.D. degrees; they must also provide learning opportunities and career development for their professors. At least one third of the faculty of a university center must be composed of persons with masters or doctorate degrees. In addition, at least one fifth of its professors must be composed of professors who work full time. University centers have the autonomy to create, organize and extinguish individual courses and degree programs, as well as relocate or expand locations in their existing programs in the municipality where the university center's headquarters is located, without prior permission of MEC. A university center cannot open campuses outside the municipality where its seat is located.



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Universities (universidades): Universities are public or private institutions of higher education that offer several degree programs, extension activities and development of institutional research. Like the university centers, at least one third of the faculty of a university must be composed of persons with masters or doctorate degrees. In addition, at least one third of a university's faculty must be composed of professors who work full time. Similar to university centers, universities have autonomy to create, organize and extinguish individual courses and degree programs, as well as to relocate or expand locations in their existing programs in the municipality where the university's headquarters is located, without prior permission of MEC. Additionally, universities have the ability, upon prior authorization by MEC, to apply for accreditation of new campuses and courses outside the municipality where the university's seat is located, provided that they are within the same state as the seat.

        Among the HEIHEIs in theLaureate International Universities network, there are threefaculdades (Faculdade Internacional da Paraíba, located in João Pessoa, PB; Faculdades Porto-Alegrense, located in Porto Alegre, RS; and Faculdade dos Guararapes de Recife, located in Recife, PE), six university centers (FADERGS Centro Universitário, located in Porto Alegre, RS; Centro Universitário dos Guararapes, located in Jaboatão dos Guararapes, PE; FMU Education Group, located in São Paulo, SP; Centro Universitário Ritter dos Reis, located in Porto Alegre, RS; Centro Universitário do Norte, located in Manaus, AM; and Instituto Brasileiro de Medicina de Reabilitação—IBMR, located in Rio de Janeiro, RJ), as well as three universities (Universidade Potiguar, located in Natal, RN; UNIFACS—Universidade Salvador, located in Salvador, BA; and Universidade Anhembi Morumbi, located in São Paulo, SP). In addition, Business School São Paulo, which is a professional degree-granting institution, is owned and operated by Universidade Anhembi Morumbi, and CEDEPE Business School, which is a professional degree-granting institution, is operated as a division of Faculdade dosthe Guararapes de Recife.operation. As noted below, each form of HEI is entitled to a different level of autonomy within the regulatory framework. In turn, we factor the respective levels of autonomy into the operational strategy for each HEI, as the requirement of prior or post-facto MEC approval can delay or nullify specific new campus expansion projects, new course offerings, and increases in the number of authorized seats per course.




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        Legislation provides for specific levels of didactic, scientific and administrative autonomy to universities, university centers and colleges in differing degrees with the aim of limiting outside influence by other institutions or persons outside of the HEI's internal governance structure.

        The LDB provides that the following powers are guaranteed to universities and university centers in the exercise of their autonomy:

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creation, organization, (i) to create, organize and extinguishment of degreeterminate undergraduate programs in their facilities, subject to applicable regulations;



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establishment of (ii) to establish the curriculum, of their courses and programs, subject to applicable general guidelines;



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establishment of plans, programs (iii) to plan and projects related toexecute scientific research, artistic production and extracurricular activities;



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establishment of (iv) to quantify the number of available seats;seats for each program, except in respect ofspecific undergraduate programs in law, medicine, dentistry and psychology, where the total number of available seats in the entire system is controlled by MEC in conjunction with the input of the relevant professional associations;



•

preparation (v) to prepare and amendment ofamend their bylaws in accordance with the general applicable standards; and



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the right (vi) to grant degrees, diplomas and other qualifications.

        LDB provides that the following powers are guaranteed to colleges in the exercise of their autonomy:

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establishment of the curriculum of their courses and programs, subject to applicable general guidelines;



•

establishment of plans, programs and projects related to scientific research, artistic production and extracurricular activities;



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preparation and amendment of their bylaws in accordance with the general applicable standards; and



•

the right to grant degrees, diplomas and other qualifications.

        Although colleges have administrative autonomy, they do not enjoy academic autonomy and, therefore, are subject to MEC's prior authorization to create new programs and degree programs.

        Distance education.    Distance Education, or Educação a Distância ("EaD"), in Brazil is primarily regulated by the LDB. The law defines EaD as an educational modality in which the didactic and pedagogical measurement in teaching and learning processes occur with the use of media, information and communication technologies, with students and teachers developing educational activities at a different place and/or time.

        EaD programs can be offered at different levels and types of higher education, covering continuing education programs, undergraduate, specialization, master's and Ph.D., as well as professional education (including technical, medium and technological level of higher education). Universities and university centers accredited to offer EaD programs may create, organize and terminate programs, upon notice to MEC. Colleges ('faculdades') must seek prior MEC authorization.

        The new regulatory framework for distance education (Decree # 9.057/2017) significantly reduced the regulatory and operational hindrances to the expansion of undergraduate and postgraduate, allowing a specific accreditation to offer EaD programs exclusively, without the need of a prior face-to-face HEI accreditation, making it possible to create a HEI dedicated to EaD programs, with lower operational costs and reduced regulatory complexity. Further, another characteristic of EaD programs in Brazil—the mandatory presence of brick-and-mortar support facilities, or 'polos', for in-person activities such as professional practice labs and exams—has been relaxed, thus making full online programs possible.

        Under the new regulation, the need for classroom activities to be developed at thepolos will be determined by the pedagogical projects of the respective programs, according to an HEI's own discretion. However, curriculum guidelines published by the National Board of Education may require activities to be developed in laboratory or professional settings, which may compromise some of this prerogative.

        The decree also eliminated the need for priorpolo accreditation, which becomes another prerogative of the accredited HEIs. However, a maximum number of newpolos to be created annually by HEIs was stipulated, based on their institutional evaluation, or CI score (resulting from official onsite evaluations). HEIs with a CI score equal to 3 can create up to 50 newpolos per year, whereas those with CI score of 4 can create 150 newpolos. HEIs with a maximum CI score equal to 5 can create up to 250 newpolos per year.

        HEIs offering EaD programs, including theirpolos, are subject to inspection by the MEC at any time, as to determine compliance with legal and regulatory requirements. EaD certificates or diplomas issued by accredited HEIs have national validity, with the same force and effect as those issued for face-to-face programs.




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        Accreditation.    The first accreditation of an institution of higher education is necessarily as a college. The accreditation as a university or university center is only granted after the institution has operated as a college for at least six years and has demonstrated that it has met satisfactory quality standards, including positive evaluation by the SINAES, as well as met legal requirements applicable to each type of institution of undergraduate learning, including minimum degree attainment and terms of faculty employment.

        LDB establishes that higher education shall include the following programs:

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continuing education programs (cursos sequênciais), open to applicants who meet the requirements established by the higher educational institutions, provided they have completed high school or equivalent;



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undergraduate programs, including traditional and technological undergraduate programs, that are open to applicants who have completed secondary education or the equivalent and have passed the selection process or university entrance examination;




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•

graduate programs, including master's degrees and Ph.D.s, specialization programs, advanced training courses and others, open to applicants who have an undergraduate degree and meet the requirements set by the educational institutions; and



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extension programs with a social character that grant certificates to students, open to applicants who meet the requirements established, in each case, by the educational institutions.

Following accreditation, colleges must obtain MEC permission to offer new undergraduate degree programs. As a consequence of their autonomy, universities and university centers do not require MEC authorization to create programs in the city where the university's or university center's seat isheadquarters are located. They need only inform MEC about the programs they offer for registration, evaluation and subsequent recognition. However, the creation of graduate programs in law, medicine, dentistry, nursing and psychology, whether by colleges, universities or university centers, are subject to the opinion of the proper professional associations. These associations are also consulted

        Once a non-autonomous institution gets authorization to offer a particular program, it has to seek accreditation in the reaccreditation process.

        Inperiod between 50% and 75% of the last quarter of 2017, significant changes in the regulatory framework that regulates institutionalprogram's completion. Institutional and programmatic accreditation were introduced, establishing a new relationship between HEIs andhas to be renewed periodically in accordance with the MEC.regularly applicable MEC evaluation process.

        Decree n. 9.235, published in December 2017, condensed various directives that were containedpresent in several normative instruments, aiming setting procedural standards and decision models for accreditation. The new regulation eliminated the need for a previous mandatory decision of the MEC, which effectively granted wider autonomy to HEIs. Such autonomy, however, is tied to a performance score beyond the merely satisfactory grade in the official evaluation integrated with the accreditation process.

        The expansion ofThis increased autonomy primarily benefits university-like structures (i.e,(i.e., universidades andcentros universitarios).Universidades are now allowed to have the same autonomy prerogatives at their satellite campuses that they already enjoy at their headquarters, such as program creation, seat openings, etc. They must, however, sustain above average performance scores, and the same minimum proportion of faculty (one-third) working full time and/or with a Masters/PhDmaster's/Ph.D. at each campus receiving autonomy.

Centros universitarios, once geographically limited to the headquarters municipality, are now allowed to expand statewide, although there will be no autonomy prerogatives for such units; their new programs and seat expansion initiatives will have to be authorized by the MEC.

        Once an institution has obtained the authorization to offer a particular program, it also has to seek accreditation for such course as a condition for national validation of the diploma. The accreditation application has to be filed during the period between 50% and 75% of the program's completion. Institutional and programmatic accreditation has to be renewed periodically in accordance with the regularly applicable MEC evaluation process.

        Evaluation.    SINAES was established to evaluate HEI as institutions of higher education, traditional degree and technology degree programs and student academic performance. The main objective of this evaluation system isperformance, so as to improve the quality of higher education in Brazil. In practice, the CONAES conducts the monitoring and coordination efforts of SINAES. The results of the institutional and course evaluations are represented on a scale of five levels, and are considered in the process of accreditation, recognition and renewal of accreditation of programs and accreditation and reaccreditation of institutions.

        In the case ofwhen facing unsatisfactory results, the HEI will be required to enter into an agreement with MEC that establishesto establish a remediation program that includes among other requirements: (i) diagnosis of the unsatisfactory conditions; (ii) development and implementation of measures to be taken to remedy the unsatisfactory conditions; and (iii) establishment of deadlines and goals for remediation.




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initiative. Failure to comply, in whole or in part, with the conditions provided in the term of commitment may result in one or more penalties imposed by MEC, including temporary suspension of the opening of the selective process for undergraduate programs and cancellation of accreditation or reaccreditation of the institution and the authorization for operation of its programs.

        External evaluations of institutions of higher education are carried out by the INEP in two instances, first, when an institution applies for its first accreditation and second, by the end of each evaluation cycle of SINAES. Institutions of higher education are evaluatedSINAES's evaluation; primarily based on the following criteria, among others:criteria: (i) institutional development plan; (ii) social and institutional responsibility; (iii) infrastructure and financial condition; and (iv) pedagogical monitoring of student academic performance.




        The evaluationTable of undergraduate programs is made at the time of the first accreditation by MEC, and consists of the analysis of academic methodology, faculty, student and technical-administrative bodies and the infrastructure of the institution and is periodically updated at the end of each evaluation cycle of SINAES.Contents

        The evaluation of graduate programs is made by the Coordinating Agency for theCoordination of Superior Level Staff Improvement of Highly Educated Persons ("CAPES"), which is responsible for establishing the quality standard required of masters and doctoral programs, along with the identification and evaluation of the courses that meet this standard. Its recommendations are subject to the approval of the CNE. Programs are evaluated according to the requirements established for each specific program. CAPES updates its evaluation of graduate programs every three years, which is the validity period of an authorization.

        The evaluation of student academic performance is conducted by INEP, which requires each student to sit for the ENADE in order to verify the knowledge and technical skill of the student body. Each ENADE test is developed in accordance with the content and specific curriculum of each educational program. Students enrolled in undergraduate programs take the ENADE every three years. In this system, students are evaluated at the end of the last year of each program.

        The overall grade for each class of students is calculated based on the weighted arithmetic average of all students in a specific program selected for the exam. INEP evaluates the standard deviation of the student's evolution in each program in order to compare it with national standards.

        Transfer of control of mantenedoras.control.    The change of control of mantenedoras does not require prior approval from MEC. A change of control need only be reported to MEC after the fact. However, the transfer of an HEI (mantida) to another mantenedora must be previously approved by MEC. The new mantenedora must meet the necessary requirements for accreditation of an institution of higher education and provide all appropriate documentation proving economic, financial and academic capacity to do so. Laureate's usual method for the acquisition of control is to acquire an interest in a pre-existing mantenedora. There may be circumstances in the future that warrant a departure from this course of conduct, in which case Laureate will follow the prescribed MEC requirements.

    Although changes of control exercised by Laureate do not ordinarily need MEC prior approval or review, due to the level of Laureate's consolidated gross revenues throughout Brazil, current Brazilian law requires that every control transaction, with limited exceptions, that Laureate enters into must be submitted to the Brazilian anti-trust authority, the Conselho Administrativo de Defesa Economico (the "CADE"), for approval. Such request for approval must be granted prior to the definitive closing of such transaction. CADE has the power to reject and/or alter any transaction or any part of a transaction that it deems to unduly restrict competition.




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        Incentive program.programs.    Programa Universidade Para Todos ("PROUNI") is a federal program of tax benefits designed to increase higher education participation rates by making college more affordable. PROUNI provides private HEIHEIs with an exemption from certain federal taxes in exchange for granting partial and full scholarships to low-income students enrolled in traditional and technology undergraduate programs. All of our HEIHEIs adhere to PROUNI.

        HEIHEIs may join PROUNI by signing a term of membership valid for ten years and renewable for the same period. This term of membership shall include the number of scholarships to be offered in each program, unit and class, and a percentage of scholarships for degree programs to be given to indigenous and Afro-Brazilians. To join PROUNI, an educational institution must maintain a certain relationship between the number of scholarships granted toand the number of regular paying students. The relationship between the number of scholarships and regular paying students is tested annually. If this relationship is not observed during a given academic year due to the departure of students, the institution must adjust the number of scholarships in a proportional manner the following academic year.

        An HEI that has joined PROUNI and remains in good standing is exempted, in whole or in part, from the following taxes during the period in which the term of membership is in effect:

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IRPJ (income tax) and CSLL (social contribution), with respect to the portion of net income in proportion to revenues from traditional and technology undergraduate programs; and



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Cofins (Contribution for the Financing of Social Security) and PIS (Program of Social Integration), concerning revenues from traditional and technology undergraduate programs.

        A number of municipal and state governments have sought to replicate PROUNI by creating their own programs that, for example, offer tax incentives through a reduction in, or credits against, the ISS (Municipal Services Tax) in exchange for scholarships to targeted social groups or professions. Laureate owns and operates HEIHEIs in several jurisdictions where such local incentive programs are in force.

        Student financing program.    Fundo de Financiamento Estudantil ("FIES") is a federal program established to provide financing to students enrolled in courses in private institutions of higher education that have maintained a minimum satisfactory evaluation according to SINAES and receive a grade of 3 or higher out of 5 on the ENADE. The primary factor in determining whether a student is eligible to receive full or partial financing is how he or she scores on the program's means testing of household income relative to the cost of tuition.




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        Under this basic structure, FIES targets both of the government's education policy goals: increased access and improved academic quality outcomes. The HEI receives the benefit of the FIES program through its participation in the intermediation of CFT-E (Certificado Financeiro do Tesouro) bonds, which are public bonds issued to the HEI by the federal government that the HEI may use to pay the national social security tax imposed by the INSS (National Social Security Institute) and certain other federal tax obligations. If the HEI is current with its taxes (i.e., it possesses a tax clearance certificate and is not otherwise involved in any tax-related disputes with the federal government that are not being defended in compliance with applicable security/bond requirements), then the HEI also has the option to sell the bonds for cash in a public auction conducted by one of the government-sponsored banks.

        Following changes initiated in 2014, a new FIES reform was implemented by the Provisional Presidential Decree (Medida Provisória) n. 785/2017, which amended the FIES legal statute (Law n. 10.260/2001). The current FIES offer conditions were consolidated for the selection rules for the 2018.1 semester.

        The traditional FIES financing program continues to be offered to about one third of vacancies announced for the program in 2018. For the traditional offering, the candidate should have family income of up to three times the minimum wage, and while the previous 18-month grace period was




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eliminated, financing will have a zero interest rate. The risk is borne by a new guarantee fund—calledFG-FIES—which may have initial public contributions of up to R$ 3 billion, and contributions from HEIs ranging from 13% for the first year, between 10% and 25% for the second to fifth year (according to delinquency-related variances), and at least 10% from the sixth year on.

        The second financing offer—calledP-FIES—has two variables, according to the funding sources (a. Constitutional/Regional Development Funds or b. the BNDES). The distribution of vacancies for this modality favors programs offered in corresponding regional limits. This FIES offer will be operated strictly by financial agents, who will also bear the risks of the operation.

        As of December 31, 2017,2018, approximately 16%11% of our students in Brazil participated in FIES, representing approximately 24%20% of our Brazil 20172018 net revenues.

        Distance education.    Distance Education, or Educação a Distância ("EaD"), in Brazil is regulated by the LDB and Decree # 9.057/17. The law defines EaD as an educational modality in which the didactic and pedagogical measurement in teaching and learning processes occur with the use of media, information and communication technologies, with students and teachers developing educational activities at a different place and/or time.

        EaD programs can be offered at different levels and types of higher education, covering continuing education programs, undergraduate, specialization, masters and PhD; as well as professional education (including technical, medium and technological level of higher education). EaD programs may only be offered by HEIs that are regularly accredited by the MEC.

        Universities and university centers accredited to offer EaD programs may create, organize and terminate programs, upon notice to MEC. Colleges ('faculdades') must seek prior MEC authorization.

        On May 25, 2017, Decree # 9.057 was enacted as a new regulatory framework for distance education. This regulation reduced significantly the regulatory and operational hindrances to the expansion of undergraduate and postgraduate EaD offerings.

        The first major change is the introduction of a specific HEI accreditation to offer EaD programs exclusively, without the need of a prior presential HEI accreditation. It is now possible to create a HEI dedicated to EaD programs, with lower operational costs and reduced regulatory complexity. Further, another characteristic of EaD programs in Brazil—the use of brick-and-mortar support facilities, or 'polos', for mandatory in-person activities such as professional practice labs and exams—has been abolished, thus making full online programs possible.

        Under the new regulation, the need for classroom activities—to be developed at thepolos—will be determined by the pedagogical projects of the respective programs, according to an HEI's own discretion. However, curriculum guidelines published by the National Board of Education may require activities to be developed in laboratory or professional settings, which may compromise some of this prerogative.

        The decree also eliminated the need for priorpolo accreditation, which becomes another prerogative of the accredited HEIs. However, a maximum number of newpolos to be created annually by HEIs was stipulated, based on their institutional evaluation, or CI (resulting from official onsite evaluations). HEIs with a CI equal to 3 can create up to 50 newpolos per year, whereas those with CI of 4 can create 150 newpolos. HEIs with a maximum CI score equal to 5 can create up to 250 newpolos.

        HEIs offering EaD programs, including theirpolos, are subject to inspection by the MEC at any time. Those inspections aim to demonstrate whether those HEIs are compliant with legal and regulatory requirements. In the event of any irregularity not timely addressed within the given deadlines, HEIs may be subject to penalties (from new intake limitations to accreditation loss).




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        EaD certificates or diplomas issued by accredited HEIs have national validity, with the same force and effect as those certificates or diplomas issued for the completion of in-person programs.

Chilean Regulation

        The Political Constitution of the Republic of Chile guarantees every individual's right to education and sets forth the state's obligation to promote the development of education at all levels. It also provides for liberty in teaching, which includes the right to open, organize and maintain educational institutions, providing that a Constitutional Organic Law, which requires a super-majority vote in the Chilean Congress, must establish the requirements for the official recognition of educational institutions.

        The General Law on Education sets forth the requirements and the procedure for the official recognition of educational institutions, providing for an educational system that is mixed in nature, including a form of education owned and managed by the state and its bodies and another one that is privately provided. The principles that inspire the Chilean educational system include those of universality, by virtue of which education should be affordable to all individuals, quality of education, and respect for and promotion of the autonomy of the educational institutions, within the framework of the laws governing them.

        In the case of higher education, the law provides a licensing system for new institutions that, once completed, makes it possible for these institutions to achieve full autonomy. This autonomy consists of every higher education institution's right to govern itself, as provided in its bylaws, in all matters regarding the fulfillment of its purpose, and encompasses academic, economic and administrative autonomy. Academic autonomy includes the higher education entities' power to decide by themselves the manner in which their teaching, research and extension functions will be fulfilled and the




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establishment of their curricula and programs. Economic autonomy makes it possible for those establishments to manage their resources to fulfill their goals pursuant to their bylaws and the laws, while administrative autonomy empowers each higher education establishment to organize its operation in the form deemed most appropriate in accordance with its bylaws and the relevant laws.

        The Ministry of Education ("MINEDUC") is the department of state in charge of promoting the development of education at all levels. Its functions include those of proposing and assessing the policies and plans for educational and cultural development, assigning the necessary resources for the conduct of educational and cultural extension activities, evaluating the development of education, discussing and proposing general norms applicable to the sector and overseeing their enforcement, granting official recognition to educational institutions, supervising the activities of its dependent units and fulfilling the other functions assigned by the law.

        The MINEDUC's Higher Education Division is the unit in charge of overseeing compliance with the legal and regulatory norms that govern higher education, of providing advice on the proposal of policies at this level of education and of establishing institutional relations with the officially recognized higher education institutions.

        The New Higher Education Law (the "New Law"), enacted on May 29, 2018, introduced major changes in the higher education sector. It created the Superintendency of Higher Education, whose purpose is to supervise and oversee compliance with the legal and regulatory provisions that regulate the higher education institutions in its field of competence as well as to supervise the allocation of resources by higher education institutions to ensure their allocation to appropriate purposes in accordance with the law and each institution's bylaws. The Superintendency of Higher Education is empowered to enter the premises of the universities it supervises when necessary, in order to request documents for inspection processes, and carry out on-site audits. In the case of related parties, the Superintendency may request any information it deems appropriate for its audit processes, may supervise "by the means it deems appropriate" all operations, assets, files, etc. of the individuals or institutions supervised, as well as of the related third entities, and will be able to summon for depositionany person related to the institution who has had transactions with the institution. The Superintendency is empowered to issue regulations to effectuate its responsibilities under the New Law. See "—Recent Developments."

        The Undersecretary of Higher Education, which will replace the MINEDUC's Higher Education Division, will serve as a direct collaborator with the Minister of Education in the preparation, coordination, execution and evaluation of policies and programs for higher education, especially in matters relating to its development, promotion, internationalization and ongoing improvement, both in the university and in the technical-professional subsystems.

        The National Education Council (Consejo Nacional de Educación) is an autonomous entity composed of ten members who must be academicians, professors or professionals with an outstanding career in teaching and educational management and whose functions, regarding higher education, consist of:

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managing the license-granting system for new institutions;



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deciding on institutional projects submitted by institutions for the purpose of their official recognition;



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verifying the development of institutional projects of the institutions that have been approved;






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establishing selective examination systems for the subjects or courses of study delivered by the higher education institutions subject to license-granting processes in order to evaluate compliance with the curricula and programs and the performance of students;




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•

requesting from the MINEDUC, on a supported basis, the revocation of official recognition of the universities, professional institutes and technical training centers under the license-granting process;



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managing the revocation process of higher education institutions;



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assisting the MINEDUC in the management of the shutdown processes of autonomous higher education institutions, especially as to the process of awarding diplomas and degrees to students who are in the course of their education at the time of shutdown; and



•

serving as an appeals body for decisions of the National Accreditation Commission.

        The National Accreditation Commission (Comisión Nacional de Acreditación) is an autonomous entity, the function of which is to verify and promote the quality of the autonomous universities, professional institutes and technical training centers and of the courses of study and programs offered by them. In particular, the National Accreditation Commission is required to deliver an opinion on the institutional accreditation of higher education institutions, authorize the private agencies in charge of accreditation of courses of study and undergraduate programs and bachelor programs and specialty programs in the area of health, and supervise their operation.

        The Managing Commission of the Credit System for Higher Education Studies (Comisión Administradora del Sistema de Créditos para Estudios Superiores) is an entity whose functions include defining and assessing policies for the development and implementation of financing arrangements for higher education studies, entering into and proposing modifications to any necessary agreements with both domestic and foreign public and private financing entities and implementing those arrangements, and defining and evaluating the policies for higher education loans guaranteed by the state.

        Organization and recognition of higher education institutions.    The law recognizes state-owned higher education institutions, which may only be created by a law, and private institutions that must be organized in accordance with provisions contained in the law. The Chilean legislation provides that the state will officially recognize the following higher education institutions:

•

Universities:  Universities may grant professional certificates and all kinds of academic degrees, including graduate certificates, bachelor's degrees and Ph.Ds. Universities are the only institutions entitled to grant professional certificates with respect to which the law requires having previously obtained a bachelor's degree.



•

Professional Institutes:  Professional institutes may only confer professional certificates of the type that do not require a bachelor's degree, and technical certificates of a superior level to those students who have completed programs of at least 1,600 class hours without receiving a bachelor's degree.



•

Technical Training Centers:  Technical training centers may only confer a technical certificate of a superior level to those students who have completed programs of at least 1,600 class hours.



•

Educational institutions of the armed forces and police.

        Private universities must be created in accordance with the procedures set forth by law, and must always be not-for-profit entities in order to be officially recognized.

        Private professional institutes and technical training centers may be created by any individual or legal entity, they may be organized as for-profit or not-for-profit entities, and their sole purpose must be the creation, organization and maintenance of a professional institute or technical training center.




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        In order to be officially recognized, universities, professional institutes and technical training centers must have the necessary teaching, didactic, economic, financial and physical resources to offer the academic degrees, professional certificates or technical certificates, as appropriate, which must be




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certified by the National Education Council. Additionally, these institutions must have a certification granted by the National Education Council evidencing that the entity has had both its institutional project and its academic programs approved and that it will have the progressive verification of its institutional development performed. Higher education institutions may only start their teaching activities once the official recognition has been granted. In Chile, theLaureate International Universities network comprises three universities and two professional institutes.

        The official recognition of a higher education institution may be revoked and, in the case of universities, their legal existence may be revoked through a supported Statutory Decree of the MINEDUC, after a decision of the National Education Council adopted by the majority of its members in a meeting called for that sole purpose and after hearing the affected party, if that party (i) fails to comply with the objectives set forth in its bylaws, (ii) conducts activities contrary to morals, public order, good customs or national security, (iii) commits gross violations of its bylaws, or (iv) ceases to confer professional certificates to its graduates.

        The law provides for a system of license grants to higher education institutions, which includes the approval of institutional project and the evaluation, progress and materialization of its educational project for a period of no less than six years, at the end of which they may become fully autonomous.

        National system of quality assurance in higher education.    The law provides for a system of quality assurance in higher education that includes a system of institutional accreditation that consists of a process of analysis of existing mechanisms within the autonomous higher education institutions to guarantee their quality, bearing in mind both the existence of those mechanisms and their application and results, and a process of accreditation of courses of study or programs, consisting of a process of verification of the quality of the courses of study or programs offered by the autonomous higher education institutions, on the basis of their declared purposes and the criteria set forth by the respective academic and professional communities.

        Both the institutional accreditation and the accreditation of courses of study and undergraduate programs are voluntary, except that the courses of study and academic programs leading to the professional degrees of Surgeon, Elementary Education Teacher, Secondary Education Teacher, Differential Education Teacher and Nursery School Teacher are subject to mandatory accreditation.

        The institutional accreditation is filed with the National Accreditation Commission, whereas the accreditation of courses of study and undergraduate programs can be performed by domestic, foreign or international accreditation entities authorized by the National Accreditation Commission.

        Tax benefits.    Chilean universities recognized by the state, and the associations, corporations, partnerships and foundations that are created, organized or maintained by those universities, are exempted from paying tax on the income arising exclusively from their educational activities. Likewise, educational institutions are exempted from paying value-added tax, an exemption that is limited to the revenues arising from their teaching activities. Additionally, universities are exempted from paying withholding taxes for payments made abroad. There are also specific tax benefits for donations made to universities.

        Financing.    The Chilean state contributes to the direct financing of universities existing as of December 31, 1980 by means of contributions from the state. In addition, all universities, professional institutes and technical training centers recognized as higher education institutions receive an indirect contribution from the state, which is distributed on the basis of the scores obtained in the university admission test by the students enrolled in each higher education institution.




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        Under the Crédito con Aval del Estado (the "CAE Program"), the state guarantees up to 90% of the principal plus interest on loans granted by financial institutions to students of higher education at autonomous, accredited institutions officially recognized by the state that select their first-year students




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on the basis of the score obtained in the university admission test and that use the aforesaid indirect contribution by the state exclusively for institutional development purposes.

        TheNuevo Milenio Scholarship ("NMS") program supports access to vocational and technical education for students in the lowest 70% who met or exceeded certain academic standards by providing annual scholarships (i) under NMS I in amounts up to CLP 600,000; (ii) under NMS II in amounts up to CLP 850,000 per year for students who come from the first five income deciles if the tech/voc institution in which they are enrolled is organized as a not-for-profit legal entity or, if the tech/voc institution is not so organized, the institution has stated in writing its intention to become a not-for-profit entity and to be accredited; and (iii) under NMS III in amounts up to CLP 900,000 per year, provided that such students and the institution in which they enroll meet the requirements for NMS II and the tech/voc institution was, on December 31, 2015, accredited for four years or more.

        Provisional administrator.    In December 2014, the Chilean Congress adopted the Provisional Administrator Law (the "Provisional Administrator Law"), which provides for the appointment of a provisional administrator or closing administrator to handle the affairs of failing universities or universities found to have breached their bylaws.

        Recent developments.    On January 24,May 29, 2018 a new Higher Educationthe New Law (the "New Law") was passed by the Chilean Congress and, assuming that it passes review by the Constitutional Court, it is expected to be signed into law by the President of Chile as early as the first quarter of 2018.enacted. Among other things, the New Law will prohibit for-profit organizations, such as Laureate, from controllingcreated the boardsUndersecretary of universities in Chile. The New Law also prohibitsHigher Education and the Superintendency of Higher Education, provided that for profit entities may control not-for-profit institutions, but prohibited conflicts of interests and related party transactions with notable exceptions, including the provision of services that are educational in nature or essential for the university's purposes.purposes, and introduced changes to the national system of quality assurance in higher education. The New Law provides for a transition period between one and two years. The incoming Chilean presidential administration, which took office on March 11, 2018, will have the responsibility to both interpret the legislative mandates and implement new compliance processes.

        The Company is currently reviewing the impact the New Law willcould have on its Chilean operations, including the extent to which the New Law will affect existing contractual relationships that the Company maintains with its Chilean non-profit universities. As a result ofThe Superintendent is required to issue regulations by May 29, 2019. Once the New Law,Superintendent issues the regulations, the Company currently expects that it will be requiredand the Chilean universities may need to deconsolidate its three Chilean non-profit universities, which are accounted for as variable interest entities, and its Chilean real estate subsidiary, althoughevaluate additional modifications to the Company expects it will retain an approximately 30% equity ownership interest in the real estate subsidiary. The deconsolidation could happen as early as the first quarter of 2018.existing contractual relationships.

        On February 18, 2014, the MINEDUC disclosed that on November 15, 2013 and February 11, 2014, it had initiated internal investigations into UDLA Chile and UNAB, respectively. The investigations were initiated upon referrals from the National Education Council and the National Accreditation Commission, which had conveyed to the MINEDUC their concerns regarding certain agreements entered into by UDLA Chile and UNAB with their controlling entities, including concerns about the amount and real use made by the universities of the services provided under those agreements. The investigations were intended by the MINEDUC to determine whether it should begin formal sanction proceedings against the universities. The MINEDUC also disclosed that it had delivered relevant documentation on the matter to the Public Prosecutor. In January 2016, the MINEDUC announced that it had closed the investigation into UNAB. The UDLA Chile investigation is being conducted by an investigator appointed by the MINEDUC under the Provisional Administrator Law.




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        In June 2016, the MINEDUC notified UNAB that it was opening an investigation into possible violations of the not-for-profit nature of UNAB. In September 2016, the MINEDUC notified UVM Chile that it was opening a similar investigation of UVM Chile. Each




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        On October 11, 2018, the MINEDUC announced that it had closed the investigations into UNAB, UDLA and UVM. In its final resolution the MINEDUC found no specific, sanctionable conduct on the part of any of the institutions continuesnot-for-profit universities while reaffirming the obligation to be responsive to the MINEDUC's requests as part of these investigations. Each investigation is being conducted by an investigator appointed by the MINEDUC under the Provisional Administrator Law. Procedural safeguards in the investigation process include notice, the right to present written statements and evidence, and the requirementensure that the decision be based on the formal record. Under the Provisional Administrator Law, at the end of the investigation the MINEDUC can either close the investigation or issue a report imposing one of the following measures: (i) ordering a recovery plan for the investigated institution, should the MINEDUC verify severe breaches of the institution's financial, administrative, labor or academic commitments; (ii)their conduct comply with the prior consent of the National Education Council, naming a provisional administrator for the institution if the MINEDUC determines that (a) there are serious risks to the administrative or financial viability of the institution that may affect the continuity of its educational programs, (b) there are serious and recurring breaches of the academic commitments of the institution to its students due to a lack of educational or teaching resources available to grant professional or technical degrees, (c) it is impossible for the institution to maintain its academic functions due to sanctions, injunctions or foreclosures affecting the institution, its campuses or its assets, (d) the institution is declared bankrupt or (e) a recovery plan pursuant to (i) above has not been presented, has been rejected or has been breached by the institution; or (iii) initiating a process to revoke the institution's license, in which case it would name a closing administrator. If the MINEDUC were to impose any sanctions, UDLA Chile, UNAB or UVM Chile, as the case may be, would have several routes to appeal or challenge that decision, both within the MINEDUC and in the courts or other governmental bodies. UDLA Chile, UNAB and UVM Chile are cooperating with the investigation.New Law when implemented.

        In December 2016, ServicioServicios de Impuestos Internos Chile ("SII") notified separately UDLA Chile and UNAB that as part of the general audit program called "Auditoría Integral a Universidades," it was requesting supporting documentation from them for the tax periods between November 2013 and October 2016. On March 21, 2017, SII sent a similar notification to UVM Chile regarding the tax periods from May 2014 to October 2016. Each institution has submitted responsive documents that support taxes paid related to its revenues and expenses, including to the extent such revenues and expenses involve financial dealingsarrangements with Laureate for-profit entities. On November 29, 2017, the SII notified UVM Chile that its audit detected "no differences" between the taxes paid and the taxes owed and provided UVM Chile with a written closure letter. In June 19, 2018, the SII notified UNAB and in June 29, 2018 the SII notified UDLA, that its audits detected "no differences" between the taxes paid and the taxes owed and provided UNAB and UDLA with a written closure letter.

Mexican Regulation

        Mexican law provides that private entities are entitled to render education services in accordance with applicable legal provisions. These provisions regulate the education services rendered by the federal government, the states and private entities and contain guidelines for the allocation of the higher education role among the federal government, the states and the municipalities, including their respective economic contributions, in order to jointly participate in the development and coordination of higher education.

        There are three levels of regulation in Mexico: federal; state;federal, state and municipal. The federal authority is the Federal Ministry of Public Education (Secretaría de Educación Pública). Each of the 31 states and Mexico City has the right to establish a local Ministry of Education, and each municipality of each state may establish a municipal education authority that only has authority to advertise and promote educational services and/or activities. Additionally, since February 26, 2013, the National Institute for the Evaluation of Educational Services (Instituto Nacional para la Evaluación de la Educación) is in charge of, among other things, evaluating the quality of the study plans and programs for Basic and Mid-Superior education services (as further described below).




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        Some functions are exclusive to the Federal Ministry of Education, such as the establishment of study plans and programs for Basic and Mid-Superior education services Other functions are exclusive to the state Ministries of Education such as the coordination and administration of the local registry of students, teachers, education institutions and schools.services. There are also concurrent functions, such as the granting and withdrawal of governmental recognition of validity of studies (Reconocimiento de Validez Oficial de Estudios) ("REVOEs," for its acronym in Spanish).

        The General Law on Education (Ley General de Educación) in Mexico classifies studies in the following three categories: (i) Basic Education, which includes pre-school (kindergarten), elementary school and junior high school (secundaria); (ii) Mid-Superior Education, which includes high school (preparatoria) and equivalent studies, as well as professional education that does not considerpreparatoria as a prerequisite; and (iii) Superior Education, which includes the studies taught afterpreparatoria, including undergraduate school (licenciatura), specialties (especialidades), masters studies, doctorate studies and studies for teachers (educación normal).

        The General Law on Education provides that in order for private entities to be able to provide Basic Education Services and studies for teachers (educación normal), a prior governmental authorization is required (the "Authorization"). For other studies, including Mid-Superior and Superior Education Services, no prior governmental authorization is required. However, if the private entities desire to provide Mid-Superior and Superior Education Services, and want those studies to be integrated into the federal and/or local public educational system, they must obtain a REVOE by the federal and/or local Ministry of Education, respectively.

        The REVOEs are issued either by the Federal Ministry of Education under the General Law on Education or by any of the state Ministries of Education under the applicable state law. REVOEs are granted for each program taught inat each campus. If there is a change in the program or in the campus inat which it is taught, the entity will need to get a new REVOE.

        The Federal Ministry of Education has issued a set of general resolutions (Acuerdos) that regulate the general requirements for obtaining REVOEs. The mainAcuerdos are (i) Acuerdo 243, issued on May 27, 1998, to setwhich sets the general guidelines for obtaining an Authorization or REVOE, andREVOE; (ii) Acuerdo 17/11/17, issued on November 10, 2017, to setwhich sets the procedures related to REVOEs for




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Superior Education studies.studies; and (iii) Acuerdo 18/11/18, issued on November 27, 2018, which defines the different levels, models and educational options at Superior Education. The Federal Ministry of Education recommends to the local Ministries of Education the adoption and inclusion of the provisions contained inAcuerdo 243 andAcuerdo 17/11/17 in the local Law on Education and other applicable local laws and regulations.

        In general terms, federal and state laws in Mexico provide for three requirements for granting REVOEs:

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personnel that have adequate qualifications to render education services and that comply with the appropriate administrative requirements;



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facilities that meet the hygiene, security and pedagogic conditions determined by the authority; and



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studies, plans and programs that the authority considers appropriate.

        Depending on each state, other requirements may apply, for example, that private institutions that provide educational services with REVOEs need to be registered with the corresponding local authorities.

        Acuerdo 17/11/17 regulates in detail the provisions contained under the General Law on Education to grant REVOEs for Superior Education studies, regarding faculty, plans and programs of studies, inspection visits, procedures, etc.Acuerdo 17/11/17 also provides that private institutions that provide Superior Education services in accordance with presidential decrees or secretarial resolutions (acuerdos secretariales) issued specifically to them may maintain the obligations provided to them thereunder and




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may function under the simplified provisions ofAcuerdo 17/11/17. Currently, Universidad Tecnológica de México, S.C. and Universidad del Valle de México, S.C. have secretarial resolutions that were issued in their favor before the issuance ofAcuerdo 17/11/17. The obligations contained in these secretarial resolutions generally conform to the obligations provided underAcuerdo 17/11/17.

        The regulatory authorities are entitled to conduct inspection visits to the facilities of educational institutions to verify compliance with applicable legal provisions. Failure to comply with applicable legal provisions may result in the imposition of fines, in the cancellation of the applicable REVOE and in the closure of the education facilities.

        Private institutions with REVOEs are required to grant a minimum percentage of scholarships to students.Acuerdo 17/11/17 provides thatrequires private institutions to grant scholarships to at least five percent of the total students registered during each academic term. Scholarships consist, in whole or in part, of payment of the registration and tuition fees established by the educational institution. The granting of scholarships has to be provided for in the internal regulations of the educational institution, which regulations must provide:

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authority of the institution that will coordinate the application and supervision of the compliance with the applicable provisions;



•

terms and procedures for the expedition and dissemination of the scholarships grant;



•

requirements with which the applicants of scholarships will have to comply;



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types of scholarships offered;



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procedures for the delivery of results; and



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conditions to maintain and to cancel scholarships.

        Private entities may also obtain the recognition of validity of their programs from the National Autonomous University of Mexico (Universidad Nacional Autónoma de México or "UNAM"). The General Regulations of Incorporation and Validation of Studies issued by UNAM provide that programs followed in private entities may be "incorporated" to UNAM in order for UNAM to recognize their validity. For the programs to be incorporated the following general requirements must be met:

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they have to be complete cycles and not isolated subjects;



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the private entity must have appropriate infrastructure (workshops, laboratories, libraries, etc.);



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the private entity must have professors, study plans, programs and other academic elements approved by UNAM; and



•

the private entity must be subject to the inspection and surveillance of UNAM and pay the corresponding fees.

        The UNAM regulations also provide thatrequire private entities incorporated to UNAM mustto grant scholarships to at least five percent of the total students registered inat such entity. These scholarships shall consist of the exemption in whole of payment of the registration and tuition fees established by the educational entity. The students entitled to have this benefit will be selected by UNAM. Some of our high school programs and one of our medical programs are incorporated to UVM Mexico.UNAM.

Peruvian Regulation

        We operate fourthree post-secondary education institutions in Peru, two of which are universities and twoone of which areis a technical-vocational institutes.institute. Peruvian law provides that universities and technical-vocational institutes can be operated as public or private entities, and that the private entities may be




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organized for profit. The Ministry of Education has overall responsibility for the national education system.

        In 2014, the Peruvian Congress enacted a new University Law to regulate the establishment, operation, monitoring and closure of universities. The law also promotes continuous improvement of quality at Peruvian universities. The law created a new agency, the Superintendencia de Educación Superior Universitaria ("SUNEDU"), which is responsible for carrying out the governmental role in university regulation, including ensuring quality. While institutional autonomy is still recognized, and universities are permitted to create their own internal governance rules and determine their own




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academic, management and economic systems, including curriculum design and entrance and graduation requirements, all of these matters are now subject to review and evaluation by SUNEDU through its periodic review of universities as part of a license renewal process.

        Under the new law, university licenses are temporary but renewable, and are granted by SUNEDU for a maximum of sixeight years. On November 24, 2015 the Board of SUNEDU promulgated regulations for the university licensing process. For licenses to be renewed, universities have to demonstrate to SUNEDU that they comply with, at a minimum, certain Basic Quality Conditions ("BQCs") (i.e., that they have specified academic goals and that the degrees granted and plans of study are aligned with those goals, that their academic offerings are compatible with their planning goals, (e.g., there is sufficient labor demand for careers offered) that there are only two regular semesters of studies per year, that they have appropriate infrastructure and equipment, that they engage in research, that they have a sufficient supply of qualified teachers, at least 25% of whom will need to be full-time, that they supply adequate basic complementary educational services (e.g., medical and psychological services and sports activities), that they provide appropriate placement office services, and that they have transparency of institutional information). Both UPC and UPN had their licenses renewed in 2017, in each case for a period of six years.

        Technical-vocational institutes are regulated by the Ministry of Education, which grants operating licenses for not less than three nor more than six years, after which the Ministry conducts a revalidation process. The approval of new institute licenses is based on the evaluation by the Ministry of the institute's institutional goals, the curricula of its education programs and their link with careers needed in the Peruvian economy, the availability of adequate qualified teachers, the institute's infrastructure, the institute's financial resources, and the favorable opinion of the National System of Assessment, Accreditation and Certification of Education Quality ("SINEACES") regarding the appropriateness of the programs the institute is offering. SINEACES is also responsible for the accreditation of programs and careers at all higher education institutions. On November 2, 2016 a new law regarding technical-vocational institutes (the "Institutes Law") was enacted. Under the Institutes Law, technical-vocational institutes are regulated by the Ministry of Education, which grants operating licenses. The Institutes Law has created two types of institutes, Higher Education Institutes ("Institutes") and Higher Education Colleges ("Colleges"). Institutes are dedicated to technical careers and Colleges are devoted to technical careers related to education as well as science and information Technology. Colleges grant Technical Bachelor Degrees and Professional Technical Degrees. Institutes and Colleges are subject to a mandatory license granted by the Ministry of Education, based on an evaluation to determine compliance with BQCs. BQCs include: an appropriate institutional management guaranteeing a proper relation with the educational model of the institution; appropriate academic management and proper program studies aligned with the Ministry of Education norms; appropriate infrastructure and equipment to develop educational activities; adequate teachers and staff which, at a minimum, should consist of 20% full-time staff; and appropriate financial and economic provisions. The Law provides that the process will last no more than 90 days and will grant a license for a five-year period to be renewed once expired. Unlike licenses, quality accreditation is voluntary except for certain careers for which it might be mandatory as determined by law. Such accreditation will be taken into consideration for access to public grants for scholarships and research among other




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things. Private Institutes and Colleges may be organized as for-profit or not-for-profit entities under Peruvian law. Not-for-profit Colleges' and Institutes' income is exempt from taxes on their educational activities. For-profit Colleges and Institutes are subject to income taxes, but may qualify for a tax credit on 30% of their reinvested income, subject to a reinvestment program to be filed with the Ministry of Education for a maximum term of five years. The specific requirements of such programs were determined by regulations in August 2017. According to the schedule determined by the regulations, in May 2018 Cibertec filed itswas granted a license petition during November and December 2017, and a resolution fromby the Ministry of Education is expected during the first half of 2018.

Turkish Regulation and Internal Investigation

        Through our EMEAA segment, we operate Istanbul Bilgi University ("Bilgi"),for a network institution located in Turkey that consolidates under the variable interest entity model. Bilgi is established as a "Foundation High Education Institution" (a "Foundation University") under the Turkish higher education law, sponsored by an educational foundation (the "the Bilgi Foundation"). As such, it is subject to regulation, supervision and inspection by the Turkish Higher Education Council (the "YÖK"). In 2014, the Turkish parliament amended the higher education law to provide expanded authority to the YÖK with respect to Foundation Universities, including authorizing additional remedies for violations of the higher education law and of regulations adopted by the YÖK. On November 19, 2015, the YÖK promulgated an "Ordinance Concerned with Amendment to Foundation High Education Institutions" (the "Ordinance") the principal effects of which relate to the supervision and inspection of Foundation Universities by the YÖK. Under the Ordinance, the YÖK has expanded authority to inspect accounts, transactions, activities and assets of Foundation Universities, as well as their academic units, programs, projects and subjects. The Ordinance establishes a progressive series of five remedies that the YÖK can take in the event it finds a violation of the Ordinance, ranging from (1) a warning and request for correction to (2) the suspension of the Foundation University's ability to establish new academic units or programs to (3) limiting the number of students the Foundation University can admit, including ceasing new admissions, to (4) provisional suspension of the Foundation University's license to (5) cancellation of the Foundation University's license. Since the promulgation of the Ordinance, the YÖK has cancelled the licenses of 15 Foundation Universities.

        The Ordinance specifies that Foundation Universities cannot be established by foundations in order to gain profit for themselves, and prohibits specified types of fund transfers from Foundation Universities to their sponsoring foundation, with certain exceptions for payments made under contractual arrangements for various goods and services that are provided at or below current market rates. Bilgi has entered into contractual arrangements with a subsidiary of Laureate that is a member of the board of trustees of the Bilgi Foundation, and has affiliates that are also members of that board, to provide Bilgi with management, operational and student services and certain intellectual property at fair market rates. The YÖK conducts annual audits of the operations of Bilgi. On April 18, 2017, Bilgi received from the YÖK the results of its 2015-2016 annual audit (the "2015-2016 Annual Audit"). The 2015-2016 Annual Audit report required, among other things, that (i) with respect to the 2017-2018 academic year, there be a reduction in the quota for the number of new students permitted to be admitted into Bilgi's degree programs and (ii) Bilgi be reimbursed, not later than October 18, 2017, approximately $29 million for payments previously made by Bilgi to a subsidiary of the Company for certain management, operational and student services, and intellectual property. The Company and Bilgi believe the charges to Bilgi for these services were at fair value and Bilgi has contested the findings of the 2015-2016 Annual Audit that they constituted an improper wealth transfer. Demands also were made in the 2015-2016 Annual Audit for the return or payment to Bilgi, by October 18, 2017, of other amounts involving approximately $8 million. These deadlines have been extended to April 16, 2018. In the meantime, the YÖK has been conducting a supplemental audit, the results of which have not been released.five-year period.




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        Bilgi has appealedIn November 2018, Laureate Education Peru SRL, acquired Instituto de Educación Superior Tecnológico Privado Red Avansys S.A.C. ("Avansys"). Avansys is an Institute that offers 25 careers to close to 3,000 students in a single campus located in downtown Lima in an educational cluster for Institutes. Avansys obtained its license from the YÖK's decisionMinistry of Education in April 2018, for a five-year period. Cibertec and Avansys merged from a corporate and tax perspective as of February 1, 2019. Following the recording of the merger in the Turkish court system and has not been reimbursed for any ofPublic Registry, the payments made to the Company's subsidiary for the services described above. As the Company currently consolidates Bilgi under the variable interestmerged entity model, if the Company is unable to provide services under its contracts with Bilgi and receive the economic benefits from those contracts as a result of the determinations in the 2015-2016 Annual Audit, deconsolidation of Bilgi could be required. Deconsolidation, if required, could have a material adverse effect on the Company's business, financial condition and results of operations, including possible write-off of all or a portion of the Company's investment in Bilgi and a reduction in operating income. At December 31, 2017 and December 31, 2016, Bilgi had total assets of approximately $112 million and $83 million, respectively, and total liabilities of $84 million and $63 million, respectively. Total liabilities include approximately $37 million and $19 million of net intercompany liabilities as of December 31, 2017 and December 31, 2016, respectively. During fiscal year 2017, Bilgi generated approximately $101 million of the Company's consolidated revenue and approximately $28 million of the Company's consolidated operating income and incurred approximately $6 million of depreciation and amortization expense.

        As previously disclosed, during the fourth quarter of 2014, we recorded an operating expense of $18.0 million (the value of 40.0 million Turkish Liras at the date of donation)("Cibertec-Avansys") will ask for a donation by our network institution in Turkeynew educational license which, according to a charitable foundation. We believedlaw, should be granted not later than 90 days after the donation was encouraged by the Turkish government to further a public project supported by the government and expected that it would enhance the position and ongoing operations of our institution in Turkey. The Company has learned that the charitable foundation which received the donation disbursed the funds at the direction of a former senior executive at our network institution in Turkey and other external individuals to a third party without our knowledge or approval.

        In June 2016, the Audit Committee of the Board of Directors initiated an internal investigation into this matter with the assistance of external counsel. The investigation concerns the facts surrounding the donation, violations of the Company's policies, and possible violations of U.S. Foreign Corrupt Practices Act (the "FCPA") and other applicable laws in what appears to be a fraud perpetrated by the former senior executive at our network institution in Turkey and other external individuals. This includes an investigation to determine if the diversion was part of a scheme to misappropriate the funds and whether any portion of the funds was paid to government officials. We have not identified that any other officers or employees outside of Turkey were involved in the diversion of the intended donation. Although we are pursuing efforts to recover the diverted funds, including through legal proceedings, therepetition is no assurance that we will be successful. As a result of the investigation, we took steps to remove the former senior executive at our network institution in Turkey and he is no longer affiliated with that institution.

        We have been advised by Turkish counsel that, under Turkish law, a Foundation University may not make payments that cause a decrease in the university's wealth or do not otherwise benefit the university. Given the uncertainty of recovery of the diverted donation and to mitigate any potential regulatory issues in Turkey relating to the donation, certain Laureate-owned entities that are members of the foundation that controls our network institution in Turkey have contributed an amount of approximately $13.0 million (the value of 40.0 million Turkish Liras on November 4, 2016, the date of contribution) to our network institution in Turkey to reimburse it for the donation.




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        In September 2016, we voluntarily disclosed the investigation to the U.S. Department of Justice (the "DOJ") and the Securities and Exchange Commission ("SEC"). The Company is fully cooperating with these agencies in their investigations and inquiries relating to this matter. The Company has internal controls and compliance policies and procedures that are designed to prevent misconduct of this nature and support compliance with laws and best practices throughout its global operations. The Company is taking steps to enhance these internal controls and compliance policies and procedures. The governmental and Company investigations relating to these matters are ongoing, and we cannot predict the outcome at this time, or the impact, if any, to the Company's consolidated financial statements or predict how the resulting consequences, if any, may impact our internal controls and compliance policies and procedures, business, ability or right to operate in Turkey, results of operations or financial position. If we are found to have violated the FCPA or other laws applicable to us, we may be subject to criminal and civil penalties and other remedial measures, which could materially adversely affect our business, financial condition, results of operations and liquidity.

        See "Item 1A—Risk Factors—Risks Relating to Our Business—We currently have four material weaknesses in our internal control over financial reporting that, if not corrected, could result in material misstatements of our financial statements" and "Item 1A—Risk Factors—Risks Relating to Our Business—Our institutions are subject to uncertain and varying laws and regulations, and any changes to these laws or regulations or their application to us may materially adversely affect our business, financial condition and result of operations."filed.

U.S. Regulation

        Our institutions in the United States are subject to extensive regulation by the U.S. Department of Education (the "DOE"), accrediting agencies and state educational agencies. The regulations, standards and policies of these agencies cover substantially all of the operations of our higher education institutions in the United States ("U.S. Institutions"), including their educational programs, facilities, instructional and administrative staff, administrative procedures, marketing, recruiting, finances, results of operations and financial condition.

        As institutions of higher education that grant degrees and diplomas, our U.S. Institutions are required to be authorized by appropriate state educational agencies. In addition, the DOE regulates our U.S. Institutions due to their participation in federal student financial aid programs under Title IV of the U.S. Higher Education Act (the "HEA"), or Title IV programs. Title IV programs currently include grants and educational loans provided directly by the federal government, including loans to students and parents through the William D. Ford Federal Direct Loan Program (the "Direct Loan Program"). The Direct Loan Program offers Federal Stafford Loans, Federal Parent PLUS Loans, Federal Grad PLUS Loans and Federal Consolidation Loans. Prior to July 1, 2010, Title IV programs also included educational loans issued by private banks with below-market interest rates that are guaranteed by the federal government in the event of a student's default on repaying the loan. A significant percentage of students at our U.S. Institutions rely on the availability of Title IV programs to finance their cost of attendance.

        ToIn addition to complying with specific requirements contained in the HEA and regulations issued thereunder by the DOE, in order to participate in Title IV programs, our U.S. Institutions also are required to both maintain authorization by the appropriate state educational agency or agencies and be accredited by an accrediting agency recognized by the DOE. The HEA requires accrediting agencies recognized by the DOE to review and monitor many aspects of an institution's operations and to take appropriate action if the institution fails to meet the accrediting agency's standards.

        We plan and implement our business activities to comply with the standards of these regulatory agencies. To monitor compliance with this regulatory environment, institutions participating in Title IV programs undergo periodic reviews to demonstrate, among other things, that they maintain proper




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accreditation, state authorization, and adequate financial resources. Historically, our U.S. Institutions have maintained eligibility to access Title IV funding.

State Education LicensureAuthorization and Regulation

        Our U.S. Institutions are required by the HEA to be authorized by applicable state educational agencies in the states where we are located to participate in Title IV programs. To maintain requisite state authorizations, our U.S. Institutions are required to continuously meet standards relating to, among other things, educational programs, facilities, instructional and administrative staff, marketing and recruitment, financial operations, addition of new locations and educational programs and various operational and administrative procedures. These standards can be different thanfrom and conflict with the requirements of the DOE and other applicable regulatory bodies. State laws and regulations are subject to change and may limit our ability to offer educational programs and offer certain degrees. Some states may also prescribe financial regulations that are different from those of the DOE and may




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require the posting of surety bonds. Failure to comply with the requirements of applicable state educational agencies could result in us losing our authorization to offer educational programs in those states. If that were to occur, the applicable state educational agency could force us to cease operationsenrolling students in their state. Alternatively, the state educational licensing agencies could restrict the institution's ability to offer certain degree or diploma programs. The loss of an authorization by athe state in which the institution is based could also impact the ability of such institution to participate in Title IV programs.

        Each of our U.S. Institutions maintains an authorization from the pertinent state regulatory authority in which such institutions are physically located, or is exempt under current state law from a requirement to be specifically authorized. If any of the authorizations provided to one or more of our U.S. Institutions are determined not to comply with the DOE regulations, or one or more of our U.S. Institutions is unable to obtain or maintain an authorization that satisfies the DOE requirements, students at the pertinent institution may be unable to access Title IV funds, which could force the institution to cease operations in the state.

        Additionally, the DOE is currently reviewing its state and have a material adverse effect on our business, financial condition and results of operations in the United States.

authorization requirements pertaining to distance education. On December 19, 2016, the DOE published final regulations regarding state authorization for programs offered through distance education and state authorization for foreign locations of institutions. Among other provisions, these final regulations require that an institution participating in the Title IV federal student aid programs and offering postsecondarypost-secondary education through distance education be authorized by each state in which the institution enrolls students, if such authorization is required by the state. The final regulations also require that foreign additional locationsstate, as well as required each institution to document and branch campuses be authorized by the appropriate foreign government agency and, if at least 50% of a program can be completed at the location/branch, be approved by the institution's accrediting agency and be reported to the state where the main campus is located. The regulations also require institutions to: documentmake certain disclosures regarding the state process for resolving complaints from students enrolled infor programs offered through distance education or correspondence courses; and make certain public and individualized disclosures to enrolled and prospective students about their distance education programs.correspondence. The regulations alsoDOE would recognize, although not specifically require, authorization through participation in a state authorization reciprocity agreement.agreement, if the agreement does not prevent a state from enforcing its own laws. These final regulations will become effectivewere meant to take effect on July 1, 2018.2018, but the DOE announced a delay and has since begun a new rulemaking process in January of 2019 that includes a review of these regulations. We cannot predict with certainty when these new regulations would be finalized or effective.

        Independent of this matter of federal regulation, severalSeveral states have asserted jurisdiction over educational institutions offering online degree programs that have no physical location or other presence in the state, but that have some activity in the state, such as enrolling or offering educational services to students who reside in the state, conducting practica or sponsoring internships in the state, employing faculty who reside in the state or advertising to or recruiting prospective students in the state. Thus, our activities in certain states constitute a presence requiring licensure or authorization under requirements of state law, regulation or policy of the state educational agency, even though we do not have a physical facility in such states. Therefore, in addition to the states where we maintain




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physical facilities, we have obtained, or are in the process of obtaining, approvals or exemptions that we believe are necessary in connection with our activities that may constitute a presence in such states requiring licensure or authorization by the state educational agency based on the laws, rules or regulations of that state. Some of our approvals are pending or are in the renewal process. Some of our U.S. Institutions do not have current approvals or exemptions from all of the state educational agencies that may require such an approval or exemption due to the U.S. Institution enrolling students via distance education in the state.

        Notwithstanding our efforts to obtain approvals or exemptions, state regulatory requirements for online education vary among the states, are not well developed in many states, are imprecise or unclear in some states and can change frequently. Because our U.S. Institutions enroll students in online degree programs, we expect that regulatory authorities in other states where we are not currently licensed or authorized may request that we seek additional licenses or authorizations for these institutions in their states in the future. In recent years, regional state compacts have created the National Council for State Authorization Reciprocity Agreements ("NC-SARA"), which is a voluntary




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agreement among member states and U.S. territories that establishes comparable national standards for interstate offering of postsecondary distance-education courses and programs. As of the date of this filing, all states except California participate in NC-SARA. NC-SARA requires each participating institution to have a federal composite score as measured by the DOE at the parent level of a 1.5 (or a 1.0 with justification acceptable to the state). Neither of our U.S. Institutions participates in NC-SARA because Laureate has a composite score of below 1.0. Accordingly, our U.S. Institutions must apply for and comply with each state's authorization requirements. Many states have established or are proposing legislation to create new or different criteria for authorization of "non-SARA" institutions, including requiring them to post bonds and/or meet composite score requirements. If our U.S. Institutions do not meet these requirements, they may not enroll students in that state. If any of our U.S. Institutions fails to comply with state licensing or authorization requirements for a state or fails to obtain licenses or authorizations when required, that institution could lose its state licensure or authorization by that state, which could prohibit it from recruiting prospective students, or offering services to current students in that state. We could also be subject toproviding educational programs and other sanctions, including restrictions on activities in that state, and fines and penalties. We review the licensure or authorization requirements of other states when we believe that it is appropriate to determine whether our activities in those states may constitute a presence or otherwise may require licensure or authorization by the respective state education agencies. In addition, state laws and regulations may limit our ability to offer educational programs and to award degrees and may limit the ability of our students to sit for certification exams in their chosen fields of study. New laws, regulations or interpretations related to offering educational programs online could increase our cost of doing business and affect our ability to recruit students in particular states, which could, in turn, adversely affect our U.S. Institutions' enrollments and revenues and have a material adverse effect on our business.revenues.

        We also are subject to extensive state laws and regulations, including standards for instruction, qualifications of faculty, administrative procedures, marketing, recruiting, financial operations and other operational matters.        In recent years, the proprietary education industry has experienced broad-based, intensifying scrutiny in the form of increased investigations and enforcement actions. Attorneys general and educational authorizing agencies in several states, as well as the U.S. Federal Trade Commission (the "FTC") and Consumer Financial Protection Bureau have become more active in enforcing consumer protection laws, especially related to recruiting practices and the financing of education at proprietary educational institutions. The U.S. Federal Trade Commission ("FTC") has also issued civil investigative demands to several other U.S. proprietary educational institutions, which require the institutions to provide documents and information related to the advertising, marketing, or sale of secondary or postsecondary educational products or services, or educational accreditation products or services. The Consumer Financial Protection Bureau (the "CFPB") also has investigated the lending practices of post-secondary institutions. If our past or current business practices are found to violate applicable consumer protection laws, or if we are found to have made misrepresentations to our current or prospective students about our educational programs, we could be subject to monetary fines or penalties and possible limitations on the manner in which we conduct our business, which could materially and adversely affect our business, financial condition, results of operations and cash flows. To the extent that more states or government agencies commence investigations, act in concert, or direct their focus on our U.S. Institutions, the cost of responding to these inquiries and investigations could increase significantly, and the potential impact on our business would be substantially greater.

        In addition to state or government agency actions, we are subject to litigation and complaints to state educational agencies by current and former students alleging violations of state consumer protection laws. See "Item 3—Legal Proceedings" for more information regarding student litigation matters. On September 8, 2016, the Minnesota Office of Higher Education ("MOHE") sent to Walden




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University an information request regarding its doctoral programs and complaints filed by doctoral students, as part of a program review that MOHE is conducting. We have been informed by MOHE that in an effort to better understand the context, background and issues related to doctoral student complaints in Minnesota, MOHE is initiating a full review of doctoral programs for certain institutions registered in Minnesota. MOHE has informed us that it expects to issue a report regarding its program review in 2018.

State Professional Licensure

        Many states have specific licensure requirements that an individual must satisfy to be licensed as a professional in specified fields, including fields such as education and healthcare. These requirements vary by state and by field. A student's success in obtaining licensure following graduation typically depends on several factors, includingwhich may include, but are not limited to: the background and qualifications of the individual graduate; whether the institution andor the program were approved by the applicable state agencies in the state in which the graduate seeks licensure; whether the program from which the student graduated meets all requirements for professional licensure in that state; whether the institution andor the program are accredited and, if so, by what accrediting agencies; and whether the institution's degrees are recognized by other states in which a student may seek to work. Several states also require that graduates pass a state test or examination as a prerequisite to becoming certified in certain fields, such as teaching and nursing. In several states, an educational program must be approvedaccredited by an accrediting agency affiliated with a professional association in order for graduates to be licensed in that professional field. In the field of psychology, an increasing number of states require approval by either the American Psychological Association ("APA") or the Association of State and Provincial Psychology Boards ("ASPPB"). To date, Walden University has been unable to obtain approval of its Ph.D. program in Counseling Psychology from the ASPPB or APA. Additionally, states often require a criminal background clearance before granting certain professional licensures or certifications. The catalogs for our U.S. Institutions inform students that it is incumbent upon the student to verify whether a specific criminal background clearance is required in their field of study prior to beginning course work.

        Additionally, under the HEA, proprietary schools generally are eligible to participate in Title IV programs in respect of educational programs that lead to "gainful employment in a recognized occupation." As part of regulations promulgated by the DOE to more specifically define "gainful employment," which became effective on July 1, 2015 and are described in more detail below, the DOE requires each of our U.S. Institutions to certify that its educational programs meet the applicable requirements for graduates to be professionally or occupationally certified in the state in which the institution is located. Failure to provide such certification may result in such programs being ineligible for Title IV program funds. ItDue to GE certification requirements, it is possible that several programs offered by our schools may be adversely affected by this requirement due to lack of specialized program accreditation, licensure, or certification in the states in which such institutions are based.




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Accreditation

        Accreditation is a private, non-governmental process for evaluating the quality of educational institutions and their programs in areas, including student performance, governance, integrity, educational quality, faculty, physical resources, administrative capability and resources and financial stability. To be recognized by the DOE, accrediting agencies must comply with DOE regulations, which require, among other things, that accrediting agencies adopt specific standards for their review of educational institutions, conduct peer review evaluations of institutions and publicly designate those institutions that meet their criteria. An accredited institution is subject to periodic review or review when necessary by its accrediting agencies to determine whether it continues to meet the performance, integrity and quality required for accreditation. Kendall College and Walden University areis institutionally accredited by the Higher Learning Commission, a regional accrediting agency recognized




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by the DOE. NewSchool of Architecture and Design and St. Augustine areis institutionally accredited by the AccreditingWASC Senior College and University Commission for Senior Colleges and Universities of the Western Association of Colleges and Schools ("WASC"WSCUC"). Accreditation by these accrediting agencies is important to us for several reasons, one being that it enables eligible students at our U.S. Institutions to receive Title IV financial aid. In addition, other colleges and universities depend, in part, on an institution's accreditation in evaluating transfers of credit and applications to graduate schools. Employers also rely on the accredited status of institutions when evaluating candidates' credentials, and students and corporate and government sponsors under tuition reimbursement programs consider accreditation as assurance that an institution maintains quality educational standards. If any of our U.S. Institutions fails to satisfy the standards of its respective accrediting agency, that institution could lose its accreditation by that accrediting agency, which would cause it to lose its eligibility to participate in Title IV programs.

        The HEA and regulations issued by the DOE require accrediting agencies to monitor the growth of institutions that they accredit. Our U.S. Institutions' respective accrediting agencies require all affiliated institutions, including us, to complete an annual data report. If the non-financial data, particularly enrollment information, and any other information submitted by the institution indicate problems, rapid change or significant growth, the staff of the respective accrediting agency may require that the institution address any concerns arising from the data report in the next self-study and visit process or may recommend additional monitoring. In addition, DOE regulations require the Higher Learning Commission to notify the DOE if an institution it accredits that offers distance learning programs, such as Kendall College and Walden University, experiences an increase in its headcount enrollment of 50% or more in any fiscal year. The DOE may consider that information in connection with its own regulatory oversight activities.

        In addition to institution-wide accreditation, there are numerous specialized accrediting agencies that accredit specific programs or schools within their jurisdiction, many of which are in healthcare and professional fields. Accreditation of specific programs by one of these specialized accrediting agencies signifies that those programs have met the additional standards of those agencies. In addition to being accredited by regional and/or national accrediting agencies, our U.S. InstitutionsWalden University also havehas the following specialized accreditations:

•

the American Culinary Federation Education Foundation Accrediting Commission accredits the A.A.S. in Culinary Arts and the A.A.S. in Baking & Pastry programs in the School of Culinary Arts at Kendall College;



•

the Council for Accreditation of Counseling and Related Educational Programs accredits the M.S. in Clinical Mental Health Counseling, M.S. in Marriage, Couple and Family Counseling, M.S. in Addictions Counseling, M.S. in School Counseling and Ph.D. in Counselor Education and Supervision programs at Walden University;programs;



•

the Commission on Collegiate Nursing Education accredits the Bachelor of Science in Nursing, Master of Science in Nursing and Doctor of Nursing Practice programs at Walden University, and the Master of Science in Nursing program at St. Augustine holds new applicant status;programs;



•

the Accreditation Council for Business Schools and Programs accredits the B.S. in Business Administration, Master of Business Administration, Doctor of Business Administration and Ph.D. in Management programs at Walden University and granted Specialized Accounting Accreditation to the B.S. in Accounting and M.S. in Accounting programs at Walden University;



•

the National Architecture Accrediting Board accredits NewSchool of Architecture and Design's professional architecture programs;




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•

the Council for the Accreditation of Educator Preparation (formerly the National Council for Accreditation of Teacher Education) accredits the Richard W. Riley College of Education and Leadership at Walden University;Leadership;



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the Project Management Institute Global Accreditation Center for Project Management Education Program accredits the M.S. in Project Management program at Walden University;program;



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the ABET accredits the B.S. in Information Technology online program at Walden University;



•

the Commission for Accreditation of Physical Therapy Education accredits the Doctor of Physical Therapy at St. Augustine;



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the Accreditation Council for Occupational Therapy Education accredits the Master's in Occupational Therapy and doctorate in Occupational Therapy programs at St. Augustine;



•

the International Association for Continuing Education and Training accredits the St. Augustine as an Authorized Provider of continuing education programs;program;



•

the Council on Social Work Education accredits the master's in social work program, at Walden University, and the bachelor's in social work program at Walden University holds candidacy status; and



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The Master's in Public Health program is an applicant for accreditation by the Council on Education for Public Health has granted candidacy status toHealth.

In addition, the Master's in Public Health program at Walden University;National Architecture Accrediting Board accredits NewSchool of Architecture and



•
the American Board of Physical Therapy Residency & Fellowship Education (ABPTRFE) accredits the Orthopaedic Manual Physical Therapy Fellowship and the Clinical Orthopaedic Residency at St. Augustine.

administrative capability requirements, then the institution's students could lose, or be limited in their access to, Title IV program funding.

        Financial responsibility.    The HEA and DOE regulations establish extensive standards of financial responsibility that institutions such as ours must satisfy to participate in Title IV programs. The DOE evaluates institutions for compliance with these standards on an annual basis based on the institution's annual audited financial statements as well as when the institution applies to the DOE to have its eligibility to participate in Title IV programs recertified. The most significant financial responsibility standard is the institution's composite score, which is derived from a formula established by the DOE based on three financial ratios: (1) equity ratio, which measures the institution's capital resources, financial viability and ability to borrow; (2) primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and (3) net income ratio, which measures the institution's ability to operate at a profit or within its means. The DOE assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0 reflecting financial weakness and positive 3.0 reflecting financial strength. The DOE then assigns a weighting percentage to each ratio and adds the weighted scores for the three ratios together to

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produce a composite score for the institution. The composite score must be at least 1.5 for the institution to be deemed financially responsible without the need for further DOE oversight. In addition to having an acceptable composite score, an institution must, among other things, provide the administrative resources necessary to comply with Title IV program requirements, meet all of its financial obligations including required refunds to students and any Title IV liabilities and debts, be current in its debt payments and not receive an adverse, qualified or disclaimed opinion by its accountants in its audited financial statements.

        If the DOE determines that an institution does not meet the financial responsibility standards due to a failure to meet the composite score or other factors, the institution is able to establish financial responsibility on an alternative basis permitted by the DOE. This alternative basis could include, in the Department's discretion, posting a letter of credit, accepting provisional certification, complying with additional DOE monitoring requirements, agreeing to receive Title IV program funds under an arrangement other than the DOE's standard advance funding arrangement, such as the reimbursement method of payment or heightened cash monitoring, or complying with or accepting other limitations on the institution's ability to increase the number of programs it offers or the number of students it enrolls.

        The DOE measures the financial responsibility of several of our U.S. Institutions on the basis of the Laureate consolidated audited financial statements and not at the individual institution level. Based on Laureate's composite score for its fiscal year ended December 31, 2016,2017, the DOE determined that it, and consequently, Walden University and NewSchool of Architecture and Design Kendall College and St. Augustine failed to meet the standards of financial responsibility. As a result, in a letter dated October 30, 2017,sent to Laureate on November 20, 2018, the DOE required Laureate to increase its existing letter of credit to $136,887,941$139,002,398 (15% of Title IV program funds that the schools received during the most recently completed fiscal year), continued the institutions on Heightened Cash Monitoring 1 and required Laureate to continue to comply with additional notification and reporting requirements, including submitting bi-weekly cash flow statements for Laureate and monthly student rosters of the institutions. Ininstitutions, which has been a letter dated March 1, 2018,requirement since April 2018. The DOE has calculated a composite score for Walden unofficially for state authorization purposes, and the DOE required Laureate to provide additional ongoing information about its current operations and future plans, including bi-weekly updates on its cash balances and monthly cash flow statements and student rosters for its U.S. Institutions, beginning in April 2018.score is 2.9 out of a possible 3.0.

        In December 2015, the DOE required us to provide a letter of credit in the amount of $14,967 for St. Augustine (25% of the total Title IV program refunds the institution made or should have made during the fiscal year ended December 31, 2014). This requirement was due to the fact that St. Augustine was found to have untimely processed returns of Title IV program funds for withdrawn students for more than 5% of the students in its auditor's sample for the 2014 fiscal year. We have obtained this letter of credit.        Any requirement to provide, maintain or increase a letter of credit or other sanctions that may be imposed by the DOE could increase our cost of regulatory compliance and could affect our cash flows. The DOE has the discretion to increase our letter of credit requirements at any time. If our U.S. Institutions are unable to meet the minimum composite score requirement or comply with the other standards of financial responsibility, and could not post a required letter of credit or comply with the

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alternative bases for establishing financial responsibility, then students at our U.S. Institutions could lose their access to Title IV program funding.

        On November 1, 2016, as part of its defense to repayment rulemaking, the DOE issued a rule to revise its general standards of financial responsibility to include various actions and events that would require institutions to provide the DOE with irrevocable letters of credit upon the occurrence of certain triggering events. In June 2017, however, the DOE announced an indefinite delay in implementing the rule and its intentDue to establish a negotiated rulemaking committee to develop proposed revisions tolitigation, these regulations.regulations are reinstated as of October, 2018. For additional information regarding this rule and the current rulemaking, see "—DOE rulemaking activities." If we are required to repay the DOE for any successful DTR claims by students who attended our U.S. Institutions, or we are required to obtain

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additional letters of credit or increase our current letter of credit, it could materially affect our business, financial conditions and results of operations.

        Return of Title IV funds for students who withdraw.        When a student who has received Title IV funds withdraws from school, the institution must determine the amount of Title IV program funds the student has "earned." The institution must return any unearned Title IV program funds to the appropriate lender or the DOE in a timely manner, which is generally no later than 45 days after the date the institution determined that the student withdrew. If such payments are not timely made, the institution will be required to submit a letter of credit to the DOE equal to 25% of the Title IV funds that the institution should have returned for withdrawn students in its most recently completed fiscal year. Under DOE regulations, late returns of Title IV program funds for 5% or more of the withdrawn students in the audit sample in the institution's annual Title IV compliance audit for either of the institution's two most recent fiscal years or in a DOE program review triggers this letter of credit requirement.

        The "90/10 Rule."    A requirement of the HEA commonly referred to as the "90/10 Rule" provides that an institution loses its eligibility to participate in Title IV programs, if, under a complex regulatory formula that requires cash basis accounting and other adjustments to the calculation of revenue, the institution derives more than 90% of its revenues for any fiscal year from Title IV program funds. This rule applies only to for-profit post-secondary educational institutions, including our U.S. Institutions. An institution is subject to loss of eligibility to participate in Title IV programs if it exceeds the 90% threshold for two consecutive fiscal years, and an institution whose rate exceeds 90% for any single fiscal year will be placed on provisional certification and may be subject to addition conditions or sanctions imposed by the DOE.

        Using the DOE's formula under the "90/10 Rule," Kendall CollegeNewSchool of Architecture and Design derived approximately 31%36%, 34%35% and 36%37% of its revenues (calculated on a cash basis) from Title IV program funds in fiscal years 2018, 2017 2016 and 2015, respectively. NewSchool of Architecture and Design derived approximately 35%, 37% and 43% of its revenues (calculated on a cash basis) from Title IV program funds in fiscal years 2017, 2016, and 2015, respectively. St. Augustine derived approximately 65%, 57% and 49% of its revenues (calculated on a cash basis) from Title IV program funds in fiscal years 2017, 2016 and 2015, respectively. Walden University derived approximately 73%76%, 73% and 73% of its revenues (calculated on a cash basis) from Title IV program funds in fiscal years 2018, 2017 2016 and 2015,2016, respectively.

        The ability of our U.S. Institutions to maintain 90/10 rates below 90% will depend on our enrollments, any increases in students Title IV funding eligibility in the future, and other factors outside of our control, including any reduction in government assistance for military personnel, including veterans, or changes in the treatment of such funding for the purposes of the 90/10 calculation. In recent years, several members of Congress have introduced proposals and legislation that would modify the 90/10 Rule. One such proposal would revise the 90/⁹⁰/10 Rule to an 85/15 rule and would count DoD tuition assistance and GI Bill education benefits toward that limit. We cannot predict whether, or the extent to which, these actions could result in legislation or further rulemaking affecting the 90/10 Rule. To the extent that any such laws or regulations are enacted, our U.S. Institutions' financial condition could be adversely affected.

        Student loan defaults.    Under the HEA, an educational institution may lose its eligibility to participate in some or all Title IV programs if defaults by its students on the repayment of federal student loans received under Title IV programs exceed certain levels. For each federal fiscal year, the DOE calculates a rate of student defaults on such loans for each institution, known as a "cohort default rate." Under current regulations, an institution will lose its eligibility to participate in Title IV programs if its three-year cohort default rate equals or exceeds 30% for three consecutive cohort years or 40% for any given year.

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        The DOE generally publishes official cohort default rates annually in September for the repayment period that ended the prior September 30. Kendall College's official cohort default rates for the 2014, 2013 and 2012 federal fiscal years were 11.3%, 10.0% and 7.9%, respectively. NewSchool of Architecture and Design's official cohort default rates for the 2015, 2014 2013 and 20122013 federal fiscal years were 5.2%7.4%, 5.1%5.2% and 10.2%, respectively. St. Augustine's official cohort default rates for the 2014, 2013 and 2012 federal fiscal years were 0.0%, 0.2% and 0.5%5.1%, respectively. Walden University's official cohort default rates for the 2015, 2014 2013 and 20122013 federal fiscal years were 7.5%7.3%, 6.7%7.5% and 6.8%6.7%, respectively. The average national student loan default rates published by the DOE for all institutions that participated in the federal student aid programs for 2015, 2014 and 2013 were 10.8%, 11.5% and 2012 were 11.5%, 11.3% and 11.8%, respectively, and for all proprietary institutions that participated in the federal student aid programs for 2015, 2014 and 2013 were 15.6%, 15.5% and 2012 were 15.5%, 15.0% and 15.8%, respectively.

        Incentive compensation rule.    Under the HEA an educational institution that participatesparticipating in Title IV programs may not makepay any commission, bonus or other incentive payments to any persons or entitiesperson involved in student recruitment or admissions activities or in the awarding of financial aid pertaining to U.S. citizens, permanent residents and others temporarily residing in the United States with the intention of becoming a citizen or permanent resident. The DOE has taken the position that any commission, bonus or other incentive compensationTitle IV program funds, if such payments are based in any part, directly or indirectly, on success in enrolling students or securing enrollment or awarding financial aid is inconsistent with the statutory prohibition against incentive compensation. The DOE has maintained that institutions may make merit-based adjustments to employee compensation, provided that those adjustments are not based, in any part, directly or indirectly, upon securing enrollments or awardingobtaining student financial aid. In sub-regulatory correspondenceFailure to institutions regarding its regulatory changes,comply could result in monetary penalties and/or sanctions imposed by the DOE, provided additional guidance regarding the scope of the prohibition onwhich could result in lower enrollments, revenue, and net operating income. The law and regulations governing this requirement do not establish clear criteria for compliance in all circumstances, creating uncertainty about what constitutes incentive compensation and which employees are covered by the regulation, rendering development of effective and compliant performance metrics more difficult to what employees and types of activities the prohibition applies.establish.

        In addition, in recent years, other post-secondary educational institutions have been named as defendants to whistleblower lawsuits, known as "qui tam" cases, brought by current or former employees pursuant to the Federal False Claims Act, alleging that their institutions' compensation practices did not comply with the incentive compensation rule. Aqui tam case is a civil lawsuit brought by one or more individuals (a "relator") on behalf of the federal government for an alleged submission to the government of a false claim for payment. The relator, often a current or former employee, is entitled to a share of the government's recovery in the case, including the possibility of treble damages. Any such litigation could be costly and could divert management's time and attention away from the business, regardless of whether a claim has merit.

        Substantial misrepresentation.    AnThe DOE has specific rules prohibiting substantial misrepresentations to students, members of the public, accrediting agencies and state licensing agencies, as well as the DOE. In the event that the DOE determines that an institution participatingengaged in a substantial misrepresentation, it can revoke the institution's program participation agreement, impose limitations on the institution's participation in Title IV programs, is prohibited from making misrepresentations regarding the nature of its educational programs, the nature of financial charges and availability of financial assistance, or the employability of graduates. A misrepresentation is defined in the regulations as any false, erroneous or misleading statement to any student or prospective student, any memberdeny participation applications on behalf of the public, an accrediting agency, a state agencyinstitution, or the DOE, and, significantly, the regulations as promulgated by the DOE define misleading statementsseek to broadly include any statements that have a likelihoodfine, suspend or tendency to deceive. If any of our U.S. Institutions—or any entity, organization, or person with whom the institution has an agreement to provide educational programs or to provide marketing, advertising, recruiting, or admissions services—committed a misrepresentation for which a person could reasonably be expected to rely, or has reasonably relied, to that person's detriment, the DOE could initiate proceedings to revoketerminate the institution's participation in Title IV eligibility, deny applications made byprograms. These regulations provide grounds for private litigants to seek to enforce the institution, impose fines, or initiate a limitation, suspension or termination proceeding against the institution.

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        Compliance reviews.    Our U.S. Institutions are subject to announced and unannounced compliance reviews and audits by various external agencies, including the DOE, its Office of Inspector General, state licensing agencies, various state approving agencies for financial assistance to veterans and accrediting agencies. In general, after the DOE conducts a site visit and reviews data supplied by an institution, the DOE sends the institution a program review report and affords the institution with an opportunity to respond to any findings. The DOE then issues a final program review determination letter, which identifies any liabilities.

        On September 21, 2015, the Higher Learning Commission notified Kendall College that the Higher Learning Commission placed the school on ongoing financial monitoring over the next 24 months. Such action was primarily due to concerns over the school's continued reliance upon Laureate to provide financial support to sustain its operations. The Higher Learning Commission also conducted a separate on-site mid-cycle review of Kendall on May 1, 2017. At its March 2018 meeting, the Institutional Actions Council of the Higher Learning Commission will consider the report for that mid-cycle review and Kendall's response. The Institutional Actions Council's recommendation will be considered by the Higher Learning Commission Board at its June 2018 meeting.

The Higher Learning Commission conducted an on-site mid-cycle review of Walden University on May 1, 2017. The Higher Learning Commission determined that Walden University met the accreditation criteria, with the exception of two, for which it is requiring the school to submit follow-up reports. Specifically, Walden University mustwas required to submit an interim report by May 2018 regarding its progress in addressing the "material weakness" (pertaining to Laureate's control over information technology systems) as identified by its auditors in its December 31, 2016 financial statements, and must submit a second interim report by May 2019 regarding retention and graduation rate improvements to doctoral programs.

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        On September 8, 2016, MOHE sent to Walden University an information request regarding its doctoral programs and complaints filed by doctoral students as part of a program review that MOHE is conducting.conducting and we have responded to this request. We have been informed by MOHE that in an effort to better understandcannot predict the context, background and issues related to doctoral student complaints in Minnesota, MOHE is initiating a full reviewtiming or outcome of doctoral programs for certain institutions registered in Minnesota. MOHE has informed us that it expects to issue a report regarding its program review in 2018.this matter.

        As part of the DOE's ongoing monitoring of institutions' administration of Title IV programs, the HEA also requires institutions to annually submit to the DOE a Title IV compliance audit conducted by an independent certified public accountant in accordance with applicable federal and DOE audit standards. In addition, to enable the DOE to make a determination of an institution's financial responsibility, each institution must annually submit audited financial statements prepared in accordance with DOE regulations.

        DOE rulemaking activities.Borrower Defense-to-Repayment.    On December 19, 2016, the DOE published final regulations regarding state authorization for programs offered through distance education and state authorization for foreign locations of institutions. For additional information regarding these regulations, see "—State Education Licensure and Regulation."

    On November 1, 2016, the DOE published a rule that, among other provisions, established new standards and processes for determining whether a Direct Loan Program borrower has a defense to repayment ("DTR") on a loan due to acts or omissions by the institution at which the loan was used by the borrower for educational expenses.expenses (the "2016 DTR regulations"). The 2016 DTR regulations were to take effect on July 1, 2017. On June 15, 2017, the DOE announced an indefinite delay to its implementation of the 2016 DTR regulations, and on June 16, 2017 published a notice of intent to establish a negotiated rulemaking committee to develop proposed revisions to the rule.

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        Among other topics, the now-delayed rule2016 DTR regulations established permissible borrower defense claims for discharge, procedural rules under which claims would be adjudicated, time limits for borrowers' claims, and guidelines for recoupment by the DOE of discharged loan amounts from institutions of higher education. ItThey also prohibited schools from using any pre-dispute arbitration agreements, prohibited schools from prohibiting relief in the form of class actions by student borrowers, and invalidated clauses imposing requirements that students pursue an internal dispute resolution process before contacting authorities regarding concerns about an institution. For proprietary institutions, the now-delayed rule2016 DTR regulations described the threshold for loan repayment rates that would require specific disclosures to current and prospective students and the applicable loan repayment rate methodology. The now-delayed rule2016 DTR regulations also established important new financial responsibility and administrative capacity requirements for both not-for-profit and for-profit institutions participating in the Title IV programs. Under the now-delayed rule,2016 DTR regulations, certain events would automatically trigger a letter of credit, and the DOE retained discretion to impose a letter of credit upon the occurrence of other events.

        The DOE held negotiated rulemaking sessions in November 2017, January 2018 and Februaryearly 2018 regarding the DTR regulations. The DOE and negotiators failed to reach consensus on revised DTR regulations, andregulations. On July 31, 2018, the DOE is now expected to issue revisedpublished in the Federal Register a proposed rule which would replace most substantive provisions of the 2016 DTR regulations, forwith a 30-day public comment by the summer of 2018, with the rules becomingperiod. The DOE did not issue a final rule by November 1, 2018. If issued, any new2018, however it is possible the DOE may implement these revised rules or seek to further revise these rules prior to implementation.

        On July 6, 2017, the attorneys general of 18 states and the District of Columbia filed suit against the DOE claiming that its delay of the 2016 DTR regulations would be effective July 1, 2019. We cannot state with any certainty howviolated applicable law, including the revisedAdministrative Procedure Act. Through a series of orders dated September 12 and 17, and October 12, 2018, the U.S. District Court for the District of Columbia held that procedural delays by the DOE in implementing the 2016 DTR regulations will differ fromwere improper and required that the now-delayed rule. Any new2016 DTR regulations whether or not they are similarbe reinstated as of October 16, 2018.

        DOE Rulemaking Activities.    On July 31, 2018, the DOE published a notice in the Federal Register announcing its intention to the now-delayedestablish a negotiated rulemaking committee to draft proposed regulations could have a directregarding topics such as distance education, accreditation, innovation, competency-based programs, faith-based institutions and substantial impact on our U.S. Institutions. In the meantime, regardlessTEACH grants. The first two of the statusthree scheduled negotiated rulemaking

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committee meetings took place in January and February 2019 and the last one is scheduled to student loan discharge liabilities. If we are required to repay the DOE for any successful DTR claims by students who attended our U.S. Institutions, or we are required to obtain additional letters of credit or increase our current letter of credit, it could materially affect our business, financial conditions and results of operations.take place in March 2019.

        Privacy of student records.    The Family Educational Rights and Privacy Act of 1974 ("FERPA"), and the DOE's FERPA regulations require educational institutions to protect the privacy of students' educational records by limiting an institution's disclosure of a student's personally identifiable information without the student's prior written consent. FERPA also requires institutions to allow students to review and request changes to their educational records maintained by the institution, to notify students at least annually of this inspection right and to maintain records in each student's file listing requests for access to and disclosures of personally identifiable information and the interest of such party in that information. If an institution fails to comply with FERPA, the DOE may require corrective actions by the institution or may terminate an institution's receipt of further federal funds. In addition, our U.S. Institutions are obligated to safeguard student information pursuant to the Gramm-Leach-Bliley Act (the "GLBA"), a federal law designed to protect consumers' personal financial information held by financial institutions and other entities that provide financial services to consumers. The GLBA and the applicable GLBA regulations require an institution to, among other things, develop and maintain a comprehensive, written information security program designed to protect against the unauthorized disclosure of personally identifiable financial information of students, parents or other individuals with whom such institution has a customer relationship. If an institution fails to comply with the applicable GLBA requirements, it may be required to take corrective actions, be subject to monitoring and oversight by the FTC,U.S. Federal Trade Commission ("FTC"), and be subject to fines or penalties imposed by the FTC. For-profit educational institutions are also subject to the general deceptive practices jurisdiction of the FTC with respect to their collection, use and disclosure of student information. The institution must also comply with the FTC Red Flags Rule, a section of the federal Fair Credit Reporting Act, that requires the establishment of guidelines and policies regarding identity theft related to student credit accounts.

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        Potential effect of regulatory violations.    If any of our U.S. Institutions fails to comply with the regulatory standards governing Title IV programs, the DOE could impose one or more sanctions, including requiring us to repay Title IV program funds, requiring us to post a letter of credit in favor of the DOE as a condition for continued Title IV certification, taking emergency action against us, initiating proceedings to impose a fine or to limit, suspend or terminate our participation in Title IV programs or referring the matter for civil or criminal prosecution. Because our U.S. Institutions are provisionally certified to participate in Title IV programs, the DOE may revoke the certification of these institutions without advance notice or advance opportunity for us to challenge that action. If such sanctions or proceedings were imposed against us and resulted in a substantial curtailment or termination of our participation in Title IV programs, our enrollments, revenues and results of operations could be materially and adversely affected.

        In addition to the actions that may be brought against us as a result of our participation in Title IV programs, we are also subject to complaints and lawsuits relating to regulatory compliance brought not only by regulatory agencies, but also by other government agencies and third parties, such as current or former students or employees and other members of the public.

Regulatory Standards that May Restrict Institutional Expansion or Other Changes in the United States

        Many actions that we may wish to take in connection with expanding our operations or other changes in the United States are subject to review or approval by the applicable regulatory agencies.

        Adding teaching locations, implementingImplementing new educational programs and increasing enrollment.    The requirements and standards of state education agencies, accrediting agencies and the DOE limit our ability in certain instances to establish additional teaching locations, implement new educational programs or increase enrollment in certain programs. Many states require review and approval before institutions can add new locations or programs. Our U.S. Institutions' state educational agencies and institutional and specialized accrediting agencies that authorize or accredit our U.S. Institutions and their programs generally require institutions to notify them in advance of adding new locations or implementing

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new programs, and upon notification may undertake a review of the quality of the facility or the program and the financial, academic and other qualifications of the institution.

        With respect to the DOE, if an institution participating in Title IV programs plans to add a new location or educational program, the institution must generally apply to the DOE to have the additional location or educational program designated as within the scope of the institution's Title IV eligibility. As a condition for an institution to participate in Title IV programs on a provisional basis, as in our case, the DOE can require prior approval of such programs or otherwise restrict the number of programs an institution may add or the extent to which an institution can modify existing educational programs. If an institution that is required to obtain the DOE's advance approval for the addition of a new program or new location fails to do so, the institution may be liable for repayment of the Title IV program funds received by the institution or students in connection with that program or enrolled at that location.program.

        Provisional certification.    Each institution must apply to the DOE for continued certification to participate in Title IV programs at least every six years and when it undergoes a change in control. An institution may also come under the DOE's review when it expands its activities in certain ways, such as opening an additional location, adding an educational program or modifying the academic credentials that it offers.

        The DOE may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards. In addition, if a company acquires an institution from another entity, the acquired institution will automatically be placed on provisional certification when the DOE approves the transaction. During the period of provisional certification, the

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institution must comply with any additional conditions or restrictions included in its program participation agreement with the DOE. Students attending provisionally certified institutions remain eligible to receive Title IV program funds, but if the DOE finds that a provisionally certified institution is unable to meet its responsibilities under its program participation agreement, it may seek to revoke the institution's certification to participate in Title IV programs without advance notice or advance opportunity for the institution to challenge that action. In addition, the DOE may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another institution or make any other significant change. All of our U.S. Institutions currently participate in Title IV programs pursuant to provisional participation agreements due to our conversion to a public benefit corporation and our initial public offering, as well as because we do not meet the DOE's standards of financial responsibility.

        Acquiring other institutions.    We have acquired other institutions in the past, and we may seek to do so in the future. The DOE and virtually all state education agencies and accrediting agencies require a company to obtain their approval if it wishes to acquire another institution. The level of review varies by individual state and accrediting agency, with some requiring approval of such an acquisition before it occurs while others only consider approval after the acquisition has occurred. The approval of the applicable state education agencies and accrediting agencies is a necessary prerequisite to the DOE certifying the acquired institution to participate in Title IV programs. The restrictions imposed by any of the applicable regulatory agencies could delay or prevent our acquisition of other institutions in some circumstances or could delay the ability of an acquired institution to participate in Title IV programs.

        Change in ownership resulting in a change in control.    The DOE and many states and accrediting agencies require institutions of higher education to report or obtain approval of certain changes in control and changes in other aspects of institutional organization or control. Under DOE's regulations, an institution that undergoes a change in control loses its eligibility to participate in Title IV programs and must apply to the DOE to reestablish such eligibility. If an institution files the required application and follows other procedures, the DOE may temporarily certify the institution on a provisional basis following the change in control, so that the institution's students retain continued access to Title IV

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program funds. In addition, the DOE may extend such temporary provisional certification if the institution timely files certain required materials, including the approval of the change in control by its state authorizing agency and accrediting agency and certain financial information pertaining to the financial condition of the institution or its parent corporation.

        The types of and thresholds for such reporting and approval vary among the states and accrediting agencies. Certain accrediting agencies may require that an institution must obtain its approval in advance of a change in control, structure or organization for the institution to retain its accredited status. In addition, in the event of a change in control, structure or organization, certain accrediting agencies may require a post-transaction focused visit or other evaluation to review the appropriateness of its approval of the change and whether the institution has met the commitment it made to the accrediting agency prior to the approval. Other specialized accrediting agencies also require an institution to obtain similar approval before or after the event that constitutes a change in control under their standards. Many states include the transfer of a controlling interest of common stock in the definition of a change in control requiring approval. Some state educational agencies that regulate us may require us to obtain approval of the change in control to maintain authorization to operate in that state, and in some cases such states could require us to obtain advance approval of a change in control.

Other Regulatory Considerations

        In Australia, the Commonwealth government has established income-contingent loan schemes that assist eligible fee-paying students to pay all or part of their tuition fees (separate schemes exist for higher education and vocational courses). Under the schemes the relevant fees are paid directly to the

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institutions. A corresponding obligation then exists from the participating student to the Commonwealth government. The Australian institutions have no responsibility in connection with the repayment of these loans by students and, generally, this assistance is not available to international students. In December 2016, the Australian government introduced a new loan scheme for vocational courses. THINK has been registered for the purposes of this scheme (a precondition to its students being eligible to receive loans for vocational courses) up to December 31, 2021. TUA has also been registered for this purpose (to cover vocational courses which it may wish to offer in the future) up to December 31, 2021. TUA currently only provides higher education programs which are not affected by these changes. The Australia institutions have been deliberately placing emphasis on higher education courses in TUA in anticipation of these changes.

        In Thailand, there are also government programs available to our students, however, they do not represent a material portion of the revenues of our institutions in this country. In the Kingdom of Saudi Arabia, our students' tuition is fully funded by the government and the government pays the tuition for each student either directly to us or, in the case of RPI, to the institution which, in turn, pays us. The government also provides a monthly stipend to each student enrolled at the eight colleges of excellence, while at RPI, the private companies sponsoring the students pay the stipend. The payments are based on our enrollments, with minimum payments set for each institution.

ITEM 1A.    RISK FACTORS

        The following are certain risks that could affect our business and our results of operations. The risks identified below are not all encompassing but should be considered in establishing an opinion of our future operations.

Risks Relating to Our Continuing Business

We are a globalmultinational business with continuing operations in more than 20ten countries around the world, predominantly in Latin America, and are subject to complex business, economic, legal, political, tax and foreign currency risks, which risks may be difficult to adequately address.

        In each of 2018, 2017 2016 and 2015,2016, over 80% of our revenues from continuing operations were generated from operations outside of the United States. Our continuing operations in four Latin American countries provided 73% of our revenues in 2018. We own or control 5229 institutions and manage or have relationships with 11nine other licensed institutions in more than 20ten countries, each of which is subject to complex business, economic, legal, political, tax and foreign currency risks. As we continue to expand our international operations, weWe may have difficulty managing and administering a globallyan internationally dispersed business and we may need to expend additional funds to, among other things, staff key management positions, obtain additional information technology infrastructure and successfully implement relevant course and program offerings for a significant number of international markets, which may materially adversely affect our business, financial condition and results of operations.

        Additional challenges associated with the conduct of our business overseas that may materially adversely affect our operating results include:

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the large size of our network and diverse range of institutions present numerous challenges, including difficulty in staffing and managing foreign operations as a result of distance, language, legal and other differences;



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our concentration in Latin America presents risks relating to regional economic pressures;



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each of our institutions is subject to unique business risks and challenges including competitive pressures and diverse pricing environments at the local level;



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difficulty maintaining quality standards consistent with our brands and with local accreditation requirements;

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potential economic and political instability in the countries in which we operate, including student unrest;



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fluctuations in exchange rates, possible currency devaluations, inflation and hyperinflation;



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difficulty selecting, monitoring and controlling partners outside of the United States;



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compliance with a wide variety of domestic and foreign laws and regulations;



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expropriation of assets by governments;



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political elections and changes in government policies;



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difficulty protecting our intellectual property rights overseas due to, among other reasons, the uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property rights;



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lower levels of availability or use of the Internet, through which our online programs are delivered;



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limitations on the repatriation and investment of funds and foreign currency exchange restrictions;



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limitations on our ability to realize economic benefits from certain institutions that are organized as not-for-profit or non-stock entities and that we account for as variable interest entities; and



•

acts of terrorism, public health risks, crime and natural disasters, particularly in areas in which we have significant operations.

        Our success in growing our business will depend, in part, on the ability to anticipate and effectively manage these and other risks related to operating in various countries. Any failure by us to effectively manage the challenges associated with the international expansion of our operations could materially adversely affect our business, financial condition and results of operations.

If we do not effectively manage our growth and business, our results of operations may be materially adversely affected.

        We have expanded our business through the expansion of existing institutions and the acquisition of higher education institutions, and we intend to continue to do so in the future. We also have established and intend to establish new institutions in certain markets. Planned growth will require us to add management personnel and upgrade our financial and management systems and controls and information technology infrastructure. There is no assurance that we will be able to maintain or accelerate the current growth rate, effectively manage expanding operations, build expansion capacity, integrate new institutions or achieve planned growth on a timely or profitable basis. If our revenue growth is less than projected, the costs incurred for these additions and upgrades could have a material adverse effect on our business, financial condition and results of operations.

If we cannot maintain student enrollments in our institutions and maintain tuition levels, our results of operations may be materially adversely affected.

        Our strategy for growth and profitability depends, in part, upon maintaining and, subsequently, increasing student enrollments in our institutions and maintaining tuition levels. Attrition rates are often due to factors outside our control. Students sometimes face financial, personal or family constraints that require them to drop out of school. They also are affected by economic and social factors prevalent in their countries. In some markets in which we operate, transfers between universities are not common and, as a result, we are less likely to fill spaces of students who drop out. In addition, our ability to attract and retain students may require us to discount tuition from published levels, and

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may prevent us from increasing tuition levels at a rate consistent with inflation and increases in our costs. If we are unable to control the rate of student attrition, our overall enrollment levels are likely to decline or if we are unable to charge tuition rates that are both competitive and cover our rising expenses, our business, financial condition, cash flows and results of operations may be materially adversely affected. In addition, student enrollment may be negatively affected by our reputation and any negative publicity related to us.

We have incurred net losses in certain prior fiscal years.

        We had net income of $93.8 million in 2017, net income of $366.2 million in 2016, and net loss of $315.8 million in 2015. Our operating expenses may increase in the foreseeable future as we continue to expand our operations and theLaureate International Universities network. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenues sufficiently to offset any higher expenses. Any failure to increase our revenues could prevent us from attaining profitability. We cannot be certain that we will be able to attain profitability on a quarterly or annual basis. If we are unable to manage these risks and difficulties effectively as we encounter them, our business, financial condition and results of operations may be materially adversely affected.

We may not be able to identify, acquire or establish control of, and integrate additional higher education institutions, or effectively integrate previously acquired institutions, which could materially adversely affect our growth.

        We have previously relied on, and we expect to continue to rely on, acquisitions as an element of our growth. In 2017, we made one acquisition for $8.3 million, in 2016, we made no acquisitions, in 2015, we made two acquisitions totaling $11.6 million, in 2014, we made three acquisitions totaling $469.2 million, in 2013, we made four acquisitions totaling $321.7 million, in 2012, we made two acquisitions totaling $8.6 million, and in 2011, we made six acquisitions totaling $58.9 million, including debt assumed. However, there is no assurance that we will be able to continue to identify suitable acquisition candidates or that we will be able to acquire or establish control of any acquisition candidate on favorable terms, or at all. In addition, in many countries, the approval of a regulatory agency is needed to acquire or operate a higher education institution, which we may not be able to obtain. Furthermore, there is no assurance that any acquired institution can be integrated into our operations successfully or be operated profitably. Acquisitions involve a number of risks, including:

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diversion of management's time and resources;



•

adverse short-term effects on reported operating results;



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competition from other acquirors, which could lead to higher prices and lost opportunities;



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cultural issues related to acquisition of closely held institutions in countries around the world;



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failures of due diligence during the acquisition process;



•

integration of acquired institutions' operations, including reporting systems and internal controls; and



•

loss of key employees of the acquired business.

        If we do not make acquisitions or make fewer acquisitions than we have historically, or if our acquisitions are not managed successfully, our growth and results of operations may be materially adversely affected.

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Our divestiture activities and the ongoing strategic shift in our business may disrupt our ongoing business, may involve increased expenses and may present risks not contemplated at the time of the transactions.

        We have divestedare continuing to pursue our previously announced strategy of simplifying and mayfocusing our business, including our announced plan to divest assets in Europe, Africa, Asia and Central America and create two scaled enterprises—one campus-based business primarily focused on emerging markets

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in Latin America, and one fully online platform in the U.S. These currently contemplated divestitures, along with past and any future divest certain assets or businesses that no longer fit withdivestitures, and the ongoing strategic shift in our strategic direction or growth targets. See "Item 1—Business—Recent Developments." Divestituresbusiness involve significant financial, operational and managerial risks and uncertainties, including:

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inability to find potential buyers or otherwise complete transactions on favorable terms;



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failure to effectively transfer liabilities, contracts, facilities and employees to buyers;



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requirements that we indemnify buyers against certain liabilities and obligations;



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the possibility that we will become subject to third-party claims arising out of sucha divestiture;



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challenges in identifying and separating the intellectual property and data to be divested from the intellectual property and data that we wish to retain;



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inability to reduce fixed costs previously associated with the divested assets or business;



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challenges in collecting the proceeds from any divestiture;



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the possible need to restructure our capital and debt structure;



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realization of our intended tax treatment of a divestiture;



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inability to eliminate or reduce overhead and fixed costs associated with the divested assets or business and operate the retained business on a cost-effective and efficient basis;



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disruption of our retained ongoing business and distraction of management; and



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loss of key employees who leave the Company as a result of a divestiture.contemplated or completed divestiture

        Because divestitures are inherently risky, our transactionsWe may not be successful in overcoming the above risks and uncertainties or any other problems encountered in connection with a divestiture, which may in some cases, harmadversely affect our operating results operations and financial results. In addition, there is no assurance that our currently contemplated divestitures—or financial condition.future divestitures—will be completed at all or within our contemplated timeframe, or will be completed on terms sufficient to allow us to achieve the anticipated benefits from the divestitures.

Our success depends substantially on the value of the local brands of each of our institutions as well as the Laureate International Universities network brand, which may be materially adversely affected by changes in current and prospective students' perception of our reputation and the use of social media.

        Each of our institutions has worked hard to establish the value of its individual brand. Brand value may be severely damaged, even by isolated incidents, particularly if the incidents receive considerable negative publicity. There has been a marked increase in use of social media platforms, including weblogs (blogs), social media websites, and other forms of Internet-based communications that allow individuals access to a broad audience of interested persons. We believe students and prospective employers value readily available information about our institutions and often act on such information without further investigation or authentication, and without regard to its accuracy. In addition, many of our institutions use the Laureate name in promoting their institutions and our success is dependent in large part upon our ability to maintain and enhance the value of the Laureate andLaureate International Universities brands. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on the accuracy of the content posted. Information concerning our company and our institutions may be posted on such platforms and devices at any time. Information posted may be materially adverse to our interests, it may be inaccurate, and it may harm our performance, prospects and business.

Our reputation may be negatively influenced by the actions of other for-profit and private institutions.

        In recent years, there have been a number of regulatory investigations and civil litigation matters targeting post-secondary for-profit education institutions in the United States and private higher education institutions in other countries, such as Chile. These investigations and lawsuits have alleged,

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among other things, deceptive trade practices, false claims against the United States and noncompliance with state and DOE regulations, and breach of the requirement that universities in Chile be operated as not-for-profit institutions. These allegations have attracted adverse media coverage and have been the subject of federal and state legislative hearings and investigations in the United States and in other