Adtalem Education (ATGE) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue in Q4 increased 62% to $361.2 million compared to the prior year, driven by the acquisition of Walden [21] - For the full year, revenue was $1.39 billion, up 53% or $480.2 million versus the prior year [21] - Consolidated operating income for Q4 was $88.1 million, an increase of 175% compared to the prior year, resulting in operating margins of 24% [22] - Full year net income from continuing operations increased 33% to $158.2 million, with diluted earnings per share of $3.24, a 40% increase compared to the prior year [23] Business Line Data and Key Metrics Changes - Chamberlain segment reported Q4 revenue of $140.2 million, a decrease of 1% year-over-year, but operating income increased 37% to $41.1 million [23] - Walden's Q4 revenue was $137.1 million, with operating income of $12.8 million, and total student enrollment decreased 9.5% compared to the prior year [24] - Medical and vet segment revenue increased 3% to $83.9 million in Q4, with operating income rising 30% to $14.5 million [25] Market Data and Key Metrics Changes - Total student enrollment decreased 5.8% in Q4 compared to the prior year, primarily due to COVID-related headwinds in post-licensure nursing programs [24] - Enrollment in pre-licensure on-campus programs continued to grow, aided by improved persistence [24] - The company noted a rise in federal student aid applications by 5% year-over-year, driven by low-income and underrepresented students [17] Company Strategy and Development Direction - The company aims to be the leading provider of professional talent to the healthcare industry, focusing on health care education [8] - A $150 million accelerated share repurchase program was initiated to return capital to shareholders and demonstrate confidence in long-term prospects [8] - The company is enhancing operational effectiveness through improved customer experience and marketing initiatives [11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for improved demand in the latter half of fiscal '23, despite current challenges in the higher education industry [17] - The company expects revenue for fiscal 2023 to be in the range of $1.38 billion to $1.45 billion, with adjusted diluted earnings per share between $3.95 and $4.20 [19] - Management highlighted that the business is not materially exposed to economic impacts from supply chain disruptions or oil price fluctuations [19] Other Important Information - The company reduced net leverage to 1.5x, well below the target of 2x, while executing a balanced approach to capital deployment [28] - The company is focused on driving productivity and increasing operating efficiency through expense management initiatives and cost synergies from the Walden integration [31] Q&A Session Summary Question: Understanding guidance and market assumptions - Management noted encouraging signs in Med Vet and social and behavioral sciences programs, expecting enrollment trends to improve in the back half of the year [33] Question: Operating margin assumptions - Management expects further margin expansion over the fiscal year, despite planned investments in marketing and persistence initiatives [35] Question: Update on operational constraints - Management stated that clinical opportunities and faculty are not currently constraints on growth [40] Question: Regulatory updates regarding the 90-10 rule - Management expressed confidence that they would not face challenges with the new rule, and they have a passing composite score with the Department of Education [42][43] Question: Update on the Department of Education announcement - Management indicated no updates on the situation and believes the risk profile remains unchanged [56]