Core Viewpoint - Short seller Fahmi Quadir targets Adtalem Global Education, a $2 billion market cap for-profit education company, claiming it is a "toxic byproduct of an imperfect higher education system" and expressing concerns over its financial viability and ethical practices [1][2]. Company Overview - Adtalem operates institutions such as Walden University, Chamberlain University, and Ross University School of Medicine, with over 70% of its revenue derived from federal student aid [1][2]. - The company has seen its stock price increase over 75% in seven months, rising from just over $33 to more than $60 per share [4]. Financial Concerns - Quadir's report highlights that Adtalem's Walden University has a graduation rate of only 29%, while Chamberlain University has a rate of 40% [3]. - The Department of Education has lowered Adtalem's financial responsibility composite score to 0.2, which may require the company to secure additional letters of credit to continue receiving federal student loan funds [5]. - The Biden Administration is reinstating the "gainful employment rule," which could disqualify many of Adtalem's programs from federal student aid if they fail to meet specific performance metrics [6]. Investigations and Compliance - Walden University is under investigation by the Department of Education regarding its doctoral programs, although Adtalem asserts that there is no accusation of wrongdoing [5][7]. - Adtalem claims it is cooperating fully with the Department's requests for information and expects most of its programs to meet the new gainful employment standards [7]. Accounting Practices - Quadir questions the accounting practices related to Walden University's eligibility for federal student loans, particularly the valuation of its intangible assets, which Adtalem states is worth $496 million as of September 30, 2023 [6].

Part I [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Adtalem's unaudited consolidated financial statements for Q4 2023 detail an 8.4% revenue increase, higher net income, and decreased total assets [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements highlight revenue growth, increased net income, a decrease in total assets, and improved cash flow from operations Consolidated Statements of Income Highlights (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | **$393,242** | **$362,834** | **$762,087** | **$717,103** | | Operating Income | $58,612 | $45,550 | $86,806 | $69,184 | | **Net Income** | **$39,891** | **$24,653** | **$50,537** | **$25,245** | | Diluted EPS | $0.98 | $0.53 | $1.22 | $0.55 | Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $182,894 | $273,689 | | Total Assets | $2,700,925 | $2,810,541 | | Long-term debt | $696,373 | $695,077 | | Total Liabilities | $1,331,526 | $1,353,205 | | Total Shareholders' Equity | $1,369,399 | $1,457,336 | Consolidated Statements of Cash Flows Highlights (Six Months Ended Dec 31, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $92,584 | $41,415 | | Net cash used in investing activities | ($30,200) | ($12,922) | | Net cash used in financing activities | ($151,382) | ($166,420) | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes to financial statements detail accounting policies, a revenue recognition revision, debt structure, share repurchases, and a $28.5 million lawsuit settlement - Adtalem revised prior period financial statements to correct an error in revenue recognition related to certain scholarships in its Medical and Veterinary segment, now treated as a material right under ASC 606, resulting in revenue deferral to future periods[31](index=31&type=chunk) - In a lawsuit against Walden University alleging deceptive practices related to its Doctor of Business Administration (DBA) program, the parties agreed to a **$28.5 million** payment to resolve the issues, for which Adtalem recorded a loss contingency accrual[167](index=167&type=chunk) Long-Term Debt Composition (in thousands) | Debt Instrument | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | Senior Secured Notes due 2028 | $404,950 | $404,950 | | Term Loan B | $303,333 | $303,333 | | **Total Principal** | **$708,283** | **$708,283** | | Unamortized debt discount and issuance costs | ($11,910) | ($13,206) | | **Long-term debt, net** | **$696,373** | **$695,077** | - Adtalem repurchased **3,509,133 shares** for **$161.2 million** in the six months ended Dec 31, 2023, completing its 13th share repurchase program in January 2024 and authorizing a new **$300 million** program through January 2027[134](index=134&type=chunk)[136](index=136&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=52&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 FY2024 financial performance, highlighting an 8.4% revenue increase, segment growth, regulatory impacts, and liquidity management including share repurchases [Second Quarter Highlights](index=54&type=section&id=Second%20Quarter%20Highlights) Adtalem reported strong Q2 FY2024 results with an 8.4% revenue increase, significant net income growth, positive enrollment trends, and continued share repurchases - Revenue increased by **$30.4 million**, or **8.4%**, in Q2 FY2024 compared to the prior year, driven by growth at Chamberlain, Walden, and Medical and Veterinary segments[183](index=183&type=chunk) Q2 FY2024 Financial Performance vs. Q2 FY2023 (in millions) | Metric | Q2 FY2024 | Q2 FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Income | $39.9M | $24.7M | +$15.2M | | Diluted EPS | $0.98 | $0.53 | +$0.45 | | Adjusted Net Income | $50.3M | $53.8M | -$3.5M | | Adjusted Diluted EPS | $1.23 | $1.17 | +$0.06 | - Total student enrollment showed positive momentum, with Chamberlain increasing **6.6%** for the November 2023 session and Walden increasing **7.9%** as of December 31, 2023, compared to the prior year[185](index=185&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Q2 FY2024 consolidated revenue grew 8.4% driven by enrollment, while operating income increased 28.7% but adjusted operating income decreased 3.0% due to higher costs Revenue Growth by Segment (Q2 FY2024 vs Q2 FY2023, in thousands) | Segment | Q2 FY2024 Revenue | Q2 FY2023 Revenue | Growth $ | Growth % | | :--- | :--- | :--- | :--- | :--- | | Chamberlain | $153,553 | $141,396 | $12,157 | 8.6% | | Walden | $146,808 | $131,940 | $14,868 | 11.3% | | Medical and Veterinary | $92,881 | $89,498 | $3,383 | 3.8% | | **Consolidated** | **$393,242** | **$362,834** | **$30,408** | **8.4%** | - Consolidated operating income increased by **28.7%** to **$58.6 million** in Q2 FY2024, primarily due to higher revenue and significant decreases in business integration expense (down **$7.9 million**) and intangible amortization expense (down **$6.8 million**)[217](index=217&type=chunk)[219](index=219&type=chunk) - Despite higher GAAP operating income, consolidated adjusted operating income fell **3.0%** to **$75.6 million** in Q2 FY2024, reflecting increased operational costs to support growth, higher marketing spend, and increased incentive compensation[219](index=219&type=chunk)[221](index=221&type=chunk) [Liquidity and Capital Resources](index=76&type=section&id=Liquidity%20and%20Capital%20Resources) Adtalem's liquidity, primarily from tuition, saw increased operating cash flow, with major uses including share repurchases and debt prepayments, supported by a revolving credit facility - Net cash provided by operating activities for the first six months of FY2024 was **$83.1 million**, a substantial increase from **$42.3 million** in the same period last year, driven by higher income and favorable changes in working capital[255](index=255&type=chunk) - Significant financing activities in the first six months of FY2024 included the repurchase of **$160.5 million** of common stock, contrasting with **$150.9 million** in debt repayments in the prior-year period[260](index=260&type=chunk) - Subsequent to the quarter end, on January 26, 2024, the company made a **$50.0 million** prepayment on its Term Loan B, reducing the principal balance to **$253.3 million**[263](index=263&type=chunk)[266](index=266&type=chunk) [Regulatory Environment](index=70&type=section&id=Regulatory%20Environment) Adtalem operates in a highly regulated environment, facing a lowered ED financial responsibility score requiring a $157.9 million letter of credit, while monitoring new Gainful Employment rules - Adtalem was notified by the U.S. Department of Education (ED) that its FY2022 financial responsibility composite score was **0.2**, below the required **1.5**, an expected outcome of the Walden acquisition[240](index=240&type=chunk) - As a result of the low composite score, Adtalem's institutions will operate under provisional certification with heightened cash monitoring and were required to post a letter of credit for **$157.9 million**, completed on November 1, 2023[240](index=240&type=chunk) - All of Adtalem's proprietary institutions remain in compliance with the 90/10 Rule for fiscal years 2023 and 2022, with the consolidated percentage of revenue from federal financial aid at **75%** for FY2023[249](index=249&type=chunk)[251](index=251&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=85&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk exposure were reported for the first six months of fiscal year 2024 compared to the prior annual report - There were no material changes to Adtalem's market risk exposure since its last annual report for the fiscal year ended June 30, 2023[283](index=283&type=chunk) [Controls and Procedures](index=86&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of December 31, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that Adtalem's disclosure controls and procedures were effective as of the end of the period, December 31, 2023[284](index=284&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the second quarter of fiscal year 2024[285](index=285&type=chunk) Part II [Legal Proceedings](index=86&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings refer to Note 17, highlighting a $28.5 million settlement agreement in a class action lawsuit against Walden University - For information regarding legal proceedings, the report directs readers to Note 17 of the Consolidated Financial Statements[286](index=286&type=chunk) - A key legal development is a **$28.5 million** settlement agreement reached in a class action lawsuit against Walden University, for which a loss contingency has been accrued[167](index=167&type=chunk) [Risk Factors](index=86&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor addresses the potential impact of short-seller reports, including a recent one that adversely affected share price and could lead to legal or regulatory actions - A new risk factor was added regarding the company's potential vulnerability to short-selling strategies, which can drive down the stock price and create negative market momentum[287](index=287&type=chunk)[288](index=288&type=chunk) - The company specifically mentions a short-seller report published on January 30, 2024, which adversely affected its share price and could lead to costly legal or regulatory actions and distract management[289](index=289&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activity, with 1,350,735 shares repurchased at an average price of $51.31 during the quarter Issuer Purchases of Equity Securities (Q2 FY2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2023 | 711,096 | $44.60 | | Nov 2023 | 259,045 | $56.39 | | Dec 2023 | 380,594 | $60.38 | | **Total** | **1,350,735** | **$51.31** | [Other Information](index=87&type=section&id=Item%205.%20Other%20Information) On January 26, 2024, Adtalem amended its Credit Agreement, reducing the Term Loan B interest rate margin and making a $50.0 million prepayment - On January 26, 2024, Adtalem amended its Credit Agreement, resulting in a **0.50%** reduction in the interest rate margin for its Term Loan B borrowings[295](index=295&type=chunk)[296](index=296&type=chunk) - In addition to the repricing, Adtalem repaid **$50.0 million** of its Term Loan B, reducing the outstanding principal to **$253.3 million**[297](index=297&type=chunk)

CHICAGO--(BUSINESS WIRE)--Adtalem Global Education Inc. (NYSE: ATGE), today announced that its Board of Directors has authorized a new share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through Jan. 16, 2027. “We have completed our $300 million February 2022 share repurchase authorization, capitalizing on the significant intrinsic value disconnect existing in the market. As a national leader in post-secondary education and a systemically important componen ...

CHICAGO--(BUSINESS WIRE)--Adtalem Global Education Inc. (NYSE: ATGE) recently announced the appointment of Dr. Betty Vandenbosch as an independent member of Adtalem’s board of directors, effective January 8, 2024. A veteran in corporate and academic leadership with a diverse career background that includes technology, research and teaching, Dr. Vandenbosch brings nearly 30 years of experience to Adtalem. She is a dedicated leader who has worked with numerous academic institutions to launch diverse and in ...

Adtalem Global Education Inc. (NYSE:ATGE) Q1 2024 Earnings Conference Call October 26, 2023 5:30 PM ET Company Participants Jonathan Spitzer - Vice President-Investor Relations Steve Beard - President and Chief Executive Officer Bob Phelan - Chief Financial Officer Conference Call Participants Jeffrey Meuler - Robert W. Baird Ryan Griffin - BMO Capital Markets Operator Greetings, and welcome to the Adtalem Global Education's First Quarter Fiscal Year 2024 Earnings Call. [Operator Instructions] As a reminder ...

First Quarter 2024 Earnings October 26, 2023 ©2023 Adtalem Global Education Inc. All rights reserved Safe FORWARD-LOOKING STATEMENTS ...

Financial Performance - Adtalem's revenue increased by $14.6 million, or 4.1%, in Q1 fiscal year 2024 compared to the prior year, driven by growth in Chamberlain and Walden segments [175]. - Net income for Q1 fiscal year 2024 was $10.6 million, or $0.25 diluted earnings per share, an increase from $0.24 diluted earnings per share in the same period last year [175]. - Adjusted earnings per share increased by $0.03, or 3.3%, to $0.93 in Q1 fiscal year 2024 compared to the year-ago period [175]. - Consolidated operating income increased by 19.3%, or $4.6 million, to $28.2 million in Q1 FY2024 compared to the same period last year [201]. - Adjusted operating income decreased by 5.2%, or $3.5 million, to $63.3 million in Q1 FY2024 compared to the year-ago period [202]. - Adtalem's net income for the three months ended September 30, 2023, was $10.6 million, compared to $0.6 million for the same period in 2022 [258]. - Adjusted net income for the three months ended September 30, 2023, was $39.4 million, slightly down from $41.6 million in the prior year [258]. - Adjusted earnings per share (EPS) for the three months ended September 30, 2023, was $0.93, compared to $0.90 for the same period in 2022 [259]. - Adtalem's net income surged to $10,646, a significant increase of 1,698.3% from $592, driven by improved operating income [260]. Enrollment Trends - Total student enrollment at Chamberlain increased by 2.6% and 5.2% for the July and September 2023 sessions, respectively, compared to the same sessions last year [179]. - Walden's total student enrollment increased by 0.5% as of September 30, 2023, compared to September 30, 2022 [175]. - Total student enrollment for Walden increased by 0.5% to 40,975 in fiscal year 2024 compared to 40,772 in fiscal year 2023 [181]. - Enrollment at the medical and veterinary schools decreased by 7.5% for the September 2023 semester compared to the same semester last year [175]. Revenue by Segment - Chamberlain's revenue rose by 5.3%, or $7.2 million, to $142.6 million in Q1 fiscal year 2024, attributed to increased enrollment and higher tuition rates [179]. - Walden's revenue rose by 8.2%, or $10.7 million, to $141.6 million in the first quarter of fiscal year 2024, driven by increased enrollment and higher tuition rates [181]. - Medical and Veterinary revenue decreased by 3.8%, or $3.3 million, to $84.6 million in the first quarter of fiscal year 2024 due to decreased enrollment [184]. Operating Costs and Expenses - Total operating costs and expenses decreased to 92.4% of revenue in Q1 fiscal year 2024 from 93.3% in the prior year [176]. - Cost of educational services increased by 5.6%, or $9.0 million, to $168.6 million in the first quarter of fiscal year 2024, primarily due to increased provision for bad debts and labor costs [190]. - Student services and administrative expense rose by 13.5%, or $19.7 million, to $166.1 million in the first quarter of fiscal year 2024, driven by increased incentive compensation and investments in growth initiatives [193]. - The percentage of revenue attributed to cost of educational services was 45.7% in the first quarter of fiscal year 2024, up from 45.1% in the prior year [191]. Share Repurchase and Capital Management - Adtalem repurchased 2,158,398 shares of common stock at an average cost of $42.57 per share during the first quarter of 2024 [175]. - Adtalem repurchased $150.0 million of common stock under an ASR agreement, receiving 4,709,576 shares initially, with a final settlement of $13.2 million in cash [242]. - Capital expenditures for the first three months of fiscal year 2024 were $15.0 million, with expectations of total capital spending between $50 million and $60 million for the full fiscal year [235]. Debt and Liquidity - As of September 30, 2023, Adtalem's consolidated cash and cash equivalents were $262.4 million, a decrease from $273.7 million as of June 30, 2023 [230]. - Adtalem's principal balances included $405.0 million of Senior Secured Notes and $303.3 million of Term Loan B, with no required quarterly principal payments on Term Loan B due to a prepayment of $396.7 million [243][245]. - The company maintains a $400.0 million revolving credit facility, with $323.8 million available as of September 30, 2023, which will reduce to $165.9 million in November 2023 [244]. - Adtalem's liquidity is primarily sourced from student tuition and financial aid, with seasonal cash collection patterns peaking at the start of each term [229]. Regulatory and Compliance Issues - Walden University was issued a Temporary Provisional Program Participation Agreement (TPPPA) due to prior financial responsibility issues under its former parent company [221]. - Adtalem is subject to heightened cash monitoring and additional reporting requirements due to the provisional status of its institutions [223]. - The Gainful Employment rules effective July 1, 2024, will require programs to meet specific debt-to-earnings metrics to maintain Title IV eligibility [224]. - A letter of credit of $157.9 million, representing 10% of the consolidated Title IV funds received during fiscal year 2022, must be delivered to the U.S. Department of Education by November 9, 2023 [223]. Other Financial Metrics - Interest expense decreased to $15.7 million in Q1 FY2024 from $17.8 million in Q1 FY2023, primarily due to prior period charges related to debt write-off [206]. - Other income, net increased to $2.2 million in Q1 FY2024 from $0.8 million in Q1 FY2023, driven by higher interest income [207]. - Effective income tax rate increased to 18.9% in Q1 FY2024 from 16.9% in Q1 FY2023, due to a decrease in earnings from foreign operations [208]. - Net loss from discontinued operations was $1.3 million in Q1 FY2024, compared to a loss of $4.9 million in Q1 FY2023 [212][213]. Adjusted EBITDA and Operating Income - Chamberlain's adjusted EBITDA decreased by $2,210, or 6.5%, to $31,547, with an adjusted EBITDA margin of 22.1% compared to 24.9% in the previous year [260]. - Walden's adjusted EBITDA increased by $6,100, or 21.0%, to $35,141, with an adjusted EBITDA margin of 24.8%, up from 22.2% [260]. - Medical and Veterinary segment reported an operating income of $14,363, a 40.3% increase from $10,238, despite a decrease in adjusted EBITDA by $2,583, or 11.9% [260]. - Home Office and Other segment showed an operating loss improvement of $3,290, or 20.9%, from $(15,721) to $(12,431) [260]. - Adjusted EBITDA for Adtalem decreased by $3,175, or 3.8%, to $80,542, with a notable restructuring expense of $676 [260]. Legal and Compliance Matters - Litigation reserve increased by $18,500, indicating potential legal liabilities [260]. - Disclosure controls were deemed effective as of September 30, 2023, following an evaluation by management [262]. - No changes in internal control over financial reporting were noted that could materially affect the reporting [263].

Financial Data and Key Metrics Changes - Full year revenue reached $1.45 billion, up 5% year-over-year [9][23] - Adjusted earnings per share increased by 35% to $4.21 [9][24] - Adjusted EBITDA margin expanded to approximately 24%, a 200 basis point increase compared to fiscal year 2021 [6][9] - Free cash flow for the year was $169 million, a 27% increase year-over-year [28] Business Line Data and Key Metrics Changes - Chamberlain reported fourth quarter revenue of $144.5 million, a 3% increase year-over-year, with total student enrollment up 1.2% [25] - Walden's revenue in the fourth quarter was $138 million, a 0.7% increase, but total student enrollment decreased by 4.8% [26] - Medical and Veterinary segment revenue decreased by 1.5% to $82.1 million, with total student enrollment down 8.2% [27] Market Data and Key Metrics Changes - Total enrollment trends improved throughout the year, with a notable increase in inquiries across all institutions [11][20] - The demand for nursing programs at Chamberlain is outpacing capacity, leading to the opening of a new hybrid campus in Stockbridge, Georgia [13] Company Strategy and Development Direction - The company launched a "Growth with Purpose" strategy aimed at enhancing performance across five pillars: marketing, enrollment, retention, pricing, and programs [7][10] - Investments in adaptive learning technologies are being made to improve student outcomes [17] - The company is focused on addressing the talent deficit in U.S. healthcare through its educational programs [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to total enrollment growth by the end of fiscal year 2024, despite temporary challenges in the Medical and Veterinary segment [16][20] - The company raised its adjusted EPS guidance for fiscal 2024 to a range of $4.20 to $4.40, reflecting positive market signals [20][30] Other Important Information - The company achieved its target of $60 million in cost synergies from the Walden acquisition [24] - The Higher Learning Commission renewed Walden's national accreditation for a 10-year period [14] Q&A Session Summary Question: What were the execution problems in the medical schools and what are the remediation plans? - Management identified three dynamics affecting enrollment: a weaker May intake cycle, a larger graduating cohort, and students preparing for Step 1 USMLE. They are implementing new leadership and strategies to improve conversion rates from inquiries to enrollments [34][35] Question: What are the expected segment growth rates, particularly for Walden? - Management is optimistic about Walden's growth, especially in nursing and behavioral health programs, and expects Chamberlain to benefit from a normalized demand environment [37][38] Question: Why did total enrollment growth at Chamberlain decelerate? - The deceleration was largely driven by a larger-than-typical graduation cohort, which is seen as a positive issue [39][40] Question: Where will the investments be made this year? - Investments will focus on marketing, enrollment, retention, pricing, and new programs, with heavier spending expected in the first half of the fiscal year [42][43] Question: What is the momentum going into the new fiscal year? - Management noted improvements in persistence rates and new enrollment trends, indicating a positive start to the fiscal year [44][45] Question: What drove the raised adjusted EPS guidance? - The raised guidance reflects confidence in market signals for new enrollment and improvements in persistence rates [46][47]

Fourth Quarter & Full Year 2023 Earnings August 10, 2023 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to _____ Commission File Number: 001-13988 Adtalem Global Education Inc. (Exact name of registrant as specified in its charter) Delaware 36-3150 ...