Adtalem Education (ATGE) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue in the second quarter increased 58.4% to $371.2 million compared with the prior year driven by the acquisition of Walden [19] - Consolidated operating income, excluding special items, was $70.2 million, a 70% increase compared with the prior year [19] - Net income from continuing operations, excluding special items, was $37.8 million, a 17.3% increase compared with the prior year [19] - Diluted earnings per share, excluding special items, for the quarter was $0.75, an increase of 23% compared with the same period in the prior year [20] Business Line Data and Key Metrics Changes - Chamberlain segment reported second quarter revenue of $139.1 million, a decrease of 2% compared with the prior year, with operating income dropping from $32.5 million to $25.5 million [20] - Walden segment revenue was $140.6 million, with a segment operating loss of $2.4 million driven primarily by intangible amortization expense [21] - Medical and Vet segment revenue was $91.5 million, a decline of 1% compared with the prior year, while segment operating income increased from $18.8 million to $19.5 million [23] Market Data and Key Metrics Changes - New and total student enrollment in Chamberlain's November session decreased 0.5% and 2.1% respectively compared with the prior year [20] - Walden's new and total student enrollment during the quarter decreased 18.3% and 9.1% respectively compared with the prior year [22] - The overall pressure on enrollments is most pronounced in nursing, particularly in post-licensure programs [40] Company Strategy and Development Direction - The company is focused on simplifying its portfolio with an enhanced focus on core healthcare assets, including the divestiture of the Financial Services segment for $1 billion [7][8] - Integration of Walden University is progressing as planned, with projected cost synergies of $60 million within two years [9][21] - The company aims to enhance operational efficiency through a new enterprise-wide operating model and strategic use of shared services [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing COVID-related headwinds affecting higher education, particularly in post-licensure nursing programs [14] - Despite these challenges, management remains confident in the long-term demand for healthcare professionals exceeding supply [15] - The divestiture of the Financial Services segment is expected to enhance financial flexibility and focus on healthcare education [26] Other Important Information - The company will retroactively report the Financial Services segment as a discontinued operation starting with Q2 of fiscal 2022 [18] - Adjusted revenue guidance for the remainder of fiscal 2022 is expected to be between $1.35 billion and $1.39 billion [24] - The divestiture is anticipated to be dilutive to adjusted earnings per share from continuing operations by approximately $0.90 on a full-year basis [26] Q&A Session Summary Question: Clarification on adjusted EPS guidance - The prior guidance for adjusted EPS was $4.20 to $4.45, now revised to $2.90 to $3.10, with $0.90 impacted by the Financial Services divestiture and $0.40 by COVID-related headwinds [30][31] Question: Confidence in post-licensure programs - Management believes the current decline in post-licensure programs is temporary, expecting relief from the Omicron spike and a return to strong incentives for continuing education [34] Question: Change in enrollment data reporting - The company will transition to reporting total enrollment instead of new enrollment to provide a clearer view of business trends [35][36] Question: Goodwill impairment charge - Management does not anticipate taking a goodwill impairment charge [38] Question: Non-nursing enrollment at Chamberlain - There is downward pressure on enrollments across the board, but it is most acute in nursing, particularly in post-licensure programs [40]