Adtalem Global Education: A Leading Healthcare Educator In A Growing Industry

Core Insights - Adtalem Global Education (ATGE) is a leader in post-secondary education and a significant provider of talent to the healthcare industry, reporting robust revenue growth over the past three years [2][38] - For 3Q24, ATGE's revenue grew 11.8% year-over-year to approximately $412.7 million, driven by strong enrolment and tuition rates [28][38] - The healthcare industry is facing significant labour shortages, which are expected to worsen, impacting growth targets for healthcare companies [32][34][38] Financial Performance - Total revenue for ATGE was $899.2 million in 2021, increasing to $1.381 billion in 2022 due to the acquisition of Walden, and further rising to $1.450 billion in 2023 [26] - The adjusted operating income margin improved from 17.4% in 2021 to 19.8% in 2023, despite a drop in GAAP operating income margin in 2022 [26][27] - Adjusted net income margin remained stable, reporting 12.49% in 2021, contracting to 11% in 2022, and expanding to 13.25% in 2023 [27] Segment Performance - In 3Q24, Chamberlain's revenue grew 13.8%, Walden's revenue increased by 13.3%, and Medical and Veterinary's revenue rose by 6.1% [28] - Total student enrolment increased by 7.8% year-over-year, with Chamberlain and Walden showing growth of 9% and 8.4%, respectively, while Medical and Veterinary saw a decline of 4.5% [28] Cost and Margin Analysis - The cost of educational services decreased from 44.9% to 42.5% of revenue, attributed to top-line growth and cost efficiencies [30] - Student services and administrative expenses fell from 39.2% to 38% of revenue, due to efficient marketing spending and reduced intangible amortisation expenses [30] - Adjusted EBITDA margin expanded from 23.30% to 25.90%, and adjusted net income margin increased from 13.97% to 14.38% [30] Industry Context - Labour shortages in the healthcare sector have been a top concern for hospital CEOs for three consecutive years, with about half indicating that these shortages will hinder growth targets over the next five years [32][38] - Current estimates suggest a shortage of 200,000 nurses, expected to rise to 400,000 by 2025, and a physician shortage of 60,000, projected to expand to 120,000 by 2034 [34] Valuation and Guidance - ATGE is trading at a P/E ratio of 13.39x, lower than the peers' median of 14.22x, reflecting its underperformance in growth outlook and profitability margins [36] - Management raised the FY2024 revenue guidance to between $1.56 billion and $1.58 billion, indicating confidence in future growth [36][38]