Laureate Education(LAUR) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q2 2022 financial statements show significant performance improvement, shifting from net loss to net income, driven by increased operating income Q2 2022 Financial Metric | Financial Metric (in thousands) | Q2 2022 | Q2 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $385,381 | $327,579 | +17.6% | | Operating Income | $126,641 | $57,684 | +119.5% | | Income (Loss) from Continuing Operations | $39,414 | $(115,885) | N/A | | Net Income (Loss) Attributable to Laureate | $43,423 | $(29,000) | N/A | YTD 2022 Financial Metric | Financial Metric (in thousands) | YTD 2022 | YTD 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $594,944 | $522,280 | +13.9% | | Operating Income (Loss) | $135,675 | $(28,707) | N/A | | Loss from Continuing Operations | $(6,001) | $(280,410) | +97.9% | | Net Loss Attributable to Laureate | $(788) | $(193,928) | +99.6% | Balance Sheet Item | Balance Sheet Item (in thousands) | June 30, 2022 | Dec 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $156,909 | $324,801 | -51.7% | | Total Assets | $2,101,949 | $2,211,310 | -5.0% | | Total Liabilities | $1,085,324 | $1,070,038 | +1.4% | | Total Stockholders' Equity | $1,015,227 | $1,139,558 | -10.9% | Notes to Consolidated Financial Statements The notes detail the company's business structure, revenue recognition, and strategic review completion, focusing continuing operations on Mexico and Peru - The company has completed its strategic review process, with continuing operations now consisting only of its Mexico and Peru segments, and all other previously operated markets divested and accounted for as Discontinued Operations[29][37] - During the six months ended June 30, 2022, the company repurchased 17,498 thousand shares of its common stock for a total of $206.2 million under its authorized share repurchase program[67] - As of June 30, 2022, the company had no outstanding borrowings under its $410 million Senior Secured Credit Facility and was in compliance with all debt covenants[52][54] - The company recorded cumulative liabilities for income tax contingencies of $122.9 million as of June 30, 2022, an increase from $91.6 million at year-end 2021[60] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A details operational focus on Mexico and Peru, highlighting strong revenue growth, improved operating income and Adjusted EBITDA, and solid liquidity despite significant stock repurchases Overview The company now operates five higher education institutions in Mexico and Peru, with approximately 388,700 students, following the completion of all planned divestitures - Laureate's continuing operations are focused on Mexico and Peru, with all planned divestitures now complete[97] Segment Overview | Segment | Institutions | Enrollment | YTD 2022 Revenues ($M) | % of Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Mexico | 2 | 182,800 | $287.2 | 49% | | Peru | 3 | 205,900 | $304.6 | 51% | | Total | 5 | 388,700 | $591.8 | 100% | Results of Operations Q2 2022 revenues increased 18% to $385.4 million, with operating income surging 119% to $126.6 million, driven by enrollment growth and cost savings Metric | Metric (in millions) | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $385.4 | $327.6 | +18% | | Operating Income | $126.6 | $57.7 | +119% | | Adjusted EBITDA | $144.1 | $107.1 | +35% | - The increase in Q2 2022 revenue was primarily driven by higher average total organic enrollment ($38.0 million) and favorable pricing/mix ($16.4 million)[127] - The significant decrease in Q2 2022 expenses was largely due to lower Excellence-in-Process (EiP) program costs ($12.3 million), reduced depreciation & amortization ($12.3 million), and lower corporate expenses ($12.0 million)[128] Segment Adjusted EBITDA | Segment Adjusted EBITDA (in millions) | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Mexico | $19.5 | $17.2 | +13% | | Peru | $136.3 | $113.6 | +20% | | Corporate | $(11.7) | $(23.7) | +51% | Liquidity and Capital Resources Primary liquidity sources are cash from operations and an undrawn $410 million credit facility, with cash decreasing due to significant stock repurchases - Primary liquidity sources are cash flow from operations and an undrawn $410.0 million Senior Secured Credit Facility maturing in October 2024[171][174] Cash Flow Summary | Cash Flow Summary (in millions) | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $45.6 | $17.9 | | Net cash provided by investing activities | $2.0 | $650.0 | | Net cash used in financing activities | $(226.2) | $(1,162.7) | - Cash used in financing activities decreased significantly year-over-year, primarily due to lower net debt payments ($851.7 million) and reduced share repurchases ($45.1 million) compared to the 2021 period[189] Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk exposures have occurred since the fiscal year ended December 31, 2021 - There have been no significant changes in the company's market risk exposures since the fiscal year ended December 31, 2021[192] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[193] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[194] PART II - OTHER INFORMATION Legal Proceedings No new material legal proceedings or developments in previously disclosed matters have occurred since the 2021 Form 10-K filing - There have been no new material legal proceedings or material developments in previously disclosed proceedings since the 2021 Annual Report[196] Risk Factors No material changes to the risk factors disclosed in the 2021 Form 10-K have occurred - No material changes to the risk factors disclosed in the 2021 Form 10-K have occurred[197] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2022, the company repurchased approximately 8.0 million shares for $11.63 per share, with $0.9 million remaining in the authorized program Share Repurchase Summary | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | Approximate Dollar Value Remaining ($M) | | :--- | :--- | :--- | :--- | | April 2022 | 4,401 | $11.70 | $42.6 | | May 2022 | 3,612 | $11.54 | $0.9 | | June 2022 | 0 | N/A | $0.9 | | Q2 Total | 8,013 | $11.63 | $0.9 | - On March 14, 2022, the Board of Directors increased the share repurchase authorization by $50 million, bringing the total authorization to $650 million[198] Exhibits This section lists exhibits filed with the Form 10-Q, including transaction agreements, indemnity agreements, and required certifications