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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

 

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

36-3150143

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

500 West Monroe Street

Chicago, Illinois

60661

(Address of principal executive offices)

(Zip Code)

(312) 651-1400

(Registrant’s telephone number; including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.01 par value per share

ATGE

New York Stock Exchange

Common stock, $0.01 par value per share

ATGE

Chicago Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

þ

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No þ

As of October 23, 2024, there were 37,490,808 shares of the registrant’s common stock, $0.01 par value per share outstanding.

Part I. Financial Information

Item 1. Financial Statements

Adtalem Global Education Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except par value)

September 30,

June 30,

2024

2024

Assets:

Current assets:

Cash and cash equivalents

$

264,798

$

219,306

Restricted cash

 

2,074

 

1,896

Accounts and financing receivables, net

 

171,509

 

126,833

Prepaid expenses and other current assets

 

78,533

 

70,050

Total current assets

 

516,914

 

418,085

Noncurrent assets:

 

 

Property and equipment, net

244,503

248,524

Operating lease assets

 

171,921

 

176,755

Deferred income taxes

 

33,454

 

49,088

Intangible assets, net

 

773,889

 

776,694

Goodwill

 

961,262

 

961,262

Other assets, net

 

107,939

 

103,184

Assets held for sale

7,825

7,825

Total noncurrent assets

 

2,300,793

 

2,323,332

Total assets

$

2,817,707

$

2,741,417

Liabilities and shareholders' equity:

 

Current liabilities:

 

Accounts payable

$

91,421

$

102,626

Accrued payroll and benefits

 

49,839

 

71,373

Accrued liabilities

 

87,212

 

96,957

Deferred revenue

 

290,571

 

185,272

Current operating lease liabilities

 

32,266

 

31,429

Total current liabilities

 

551,309

 

487,657

Noncurrent liabilities:

 

 

Long-term debt

 

649,318

 

648,712

Long-term operating lease liabilities

 

161,757

 

167,712

Deferred income taxes

 

30,348

 

29,526

Other liabilities

 

35,023

 

38,675

Total noncurrent liabilities

 

876,446

 

884,625

Total liabilities

 

1,427,755

 

1,372,282

Commitments and contingencies

 

 

Shareholders' equity:

 

 

Common stock, $0.01 par value per share, 200,000 shares authorized; 37,716 and 37,681 shares outstanding as of September 30, 2024 and June 30, 2024, respectively

 

838

 

832

Additional paid-in capital

 

631,033

 

611,949

Retained earnings

 

2,586,674

 

2,540,509

Accumulated other comprehensive loss

 

(2,227)

 

(2,227)

Treasury stock, at cost, 46,113 and 45,513 shares as of September 30, 2024 and June 30, 2024, respectively

 

(1,826,366)

 

(1,781,928)

Total shareholders' equity

 

1,389,952

 

1,369,135

Total liabilities and shareholders' equity

$

2,817,707

$

2,741,417

See accompanying Notes to Consolidated Financial Statements.

1

Adtalem Global Education Inc.

Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)

Three Months Ended

September 30,

2024

2023

Revenue

$

417,400

$

368,845

Operating cost and expense:

 

Cost of educational services

 

185,995

 

168,618

Student services and administrative expense

 

159,073

 

166,095

Restructuring expense

 

2,094

 

676

Business integration expense

 

 

5,262

Total operating cost and expense

 

347,162

 

340,651

Operating income

 

70,238

 

28,194

Interest expense

 

(14,482)

 

(15,657)

Other income, net

 

2,646

 

2,214

Income from continuing operations before income taxes

 

58,402

 

14,751

Provision for income taxes

 

(12,157)

 

(2,792)

Income from continuing operations

 

46,245

 

11,959

Discontinued operations:

 

Loss from discontinued operations before income taxes

 

(107)

 

(1,765)

Benefit from income taxes

 

27

 

452

Loss from discontinued operations

 

(80)

 

(1,313)

Net income and comprehensive income

$

46,165

$

10,646

Earnings (loss) per share:

 

Basic:

 

Continuing operations

$

1.23

$

0.29

Discontinued operations

$

(0.00)

$

(0.03)

Total basic earnings per share

$

1.22

$

0.26

Diluted:

 

 

Continuing operations

$

1.18

$

0.28

Discontinued operations

$

(0.00)

$

(0.03)

Total diluted earnings per share

$

1.18

$

0.25

Weighted-average shares outstanding:

Basic shares

37,721

41,399

Diluted shares

39,109

42,184

See accompanying Notes to Consolidated Financial Statements.

2

Adtalem Global Education Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

Three Months Ended

September 30,

2024

2023

Operating activities:

Net income

$

46,165

$

10,646

Loss from discontinued operations

 

80

 

1,313

Income from continuing operations

46,245

11,959

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Stock-based compensation

 

9,451

 

7,455

Amortization and impairments to operating lease assets

6,948

8,765

Depreciation

 

9,803

 

9,338

Amortization of acquired intangible assets

 

2,805

 

10,677

Amortization of debt discount and issuance costs

1,113

1,155

Provision for bad debts

13,720

10,226

Deferred income taxes

 

16,456

 

2,165

Loss on disposals of property and equipment

 

107

 

38

(Gain) loss on investments

(613)

447

Changes in assets and liabilities:

 

 

Accounts and financing receivables

 

(56,803)

 

(54,867)

Prepaid expenses and other current assets

 

(7,389)

 

(5,532)

Cloud computing implementation assets

 

(7,888)

 

(4,224)

Accounts payable

 

(8,508)

 

(2,818)

Accrued payroll and benefits

(21,501)

(8,882)

Accrued liabilities

 

(8,467)

 

13,770

Deferred revenue

 

106,156

 

98,658

Operating lease liabilities

(7,232)

(10,053)

Other assets and liabilities

 

(4,836)

 

(2,163)

Net cash provided by operating activities-continuing operations

 

89,567

 

86,114

Net cash (used in) provided by operating activities-discontinued operations

 

(251)

 

8,959

Net cash provided by operating activities

 

89,316

 

95,073

Investing activities:

 

Capital expenditures

 

(10,414)

 

(10,434)

Proceeds from sales of marketable securities

 

2,187

 

400

Purchases of marketable securities

 

(1,308)

 

(300)

Net cash used in investing activities

 

(9,535)

 

(10,334)

Financing activities:

 

Proceeds from exercise of stock options

 

9,498

 

550

Employee taxes paid on withholding shares

 

(10,717)

 

(5,651)

Proceeds from stock issued under Colleague Stock Purchase Plan

 

298

 

190

Repurchases of common stock for treasury

 

(33,190)

 

(90,477)

Proceeds from issuance of long-term debt

 

9,873

 

Repayments of long-term debt

 

(9,873)

 

Net cash used in financing activities

 

(34,111)

 

(95,388)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

45,670

 

(10,649)

Cash, cash equivalents and restricted cash at beginning of period

 

221,202

 

275,075

Cash, cash equivalents and restricted cash at end of period

$

266,872

$

264,426

Non-cash investing and financing activities:

Accrued capital expenditures

$

4,193

$

6,087

Accrued liability for repurchases of common stock

$

800

$

3,600

Accrued excise tax on share repurchases

$

3,259

$

1,928

See accompanying Notes to Consolidated Financial Statements.

3

Adtalem Global Education Inc.

Consolidated Statements of Shareholders’ Equity

(unaudited)

(in thousands)

Accumulated

Additional

Other

Common Stock

Paid-In

Retained

Comprehensive

Treasury Stock

Shares

Amount

Capital

Earnings

Loss

Shares

Amount

Total

June 30, 2023

82,232

$

822

$

568,761

$

2,403,750

$

(2,227)

39,922

$

(1,513,770)

$

1,457,336

Net income

 

 

 

 

10,646

 

 

 

 

10,646

Stock-based compensation

 

 

 

7,455

 

 

 

 

 

7,455

Net activity from stock-based compensation awards

 

373

 

4

 

546

 

 

 

130

 

(5,651)

 

(5,101)

Proceeds from stock issued under Colleague Stock Purchase Plan

(4)

(18)

(6)

233

211

Repurchases of common stock for treasury

2,158

(91,884)

(91,884)

September 30, 2023

82,605

$

826

$

576,758

$

2,414,378

$

(2,227)

42,204

$

(1,611,072)

$

1,378,663

June 30, 2024

83,194

$

832

$

611,949

$

2,540,509

$

(2,227)

45,513

$

(1,781,928)

$

1,369,135

Net income

 

46,165

 

 

46,165

Stock-based compensation

 

9,451

 

9,451

Net activity from stock-based compensation awards

 

635

6

9,492

143

(10,717)

 

(1,219)

Proceeds from stock issued under Colleague Stock Purchase Plan

 

141

(5)

190

 

331

Repurchases of common stock for treasury

462

(33,911)

(33,911)

September 30, 2024

83,829

$

838

$

631,033

$

2,586,674

$

(2,227)

46,113

$

(1,826,366)

$

1,389,952

See accompanying Notes to Consolidated Financial Statements.

4

1. Nature of Operations

In this Quarterly Report on Form 10-Q, Adtalem Global Education Inc., together with its subsidiaries, is collectively referred to as “Adtalem,” “we,” “our,” “us,” or similar references. Adtalem reports on a fiscal year period ending on June 30. Therefore, this Quarterly Report for the quarterly period ended September 30, 2024 is for our first quarter of fiscal year 2025.

Adtalem is the leading healthcare educator in the U.S. Our schools consist of Chamberlain University (“Chamberlain”), Walden University (“Walden”), American University of the Caribbean School of Medicine (“AUC”), Ross University School of Medicine (“RUSM”), and Ross University School of Veterinary Medicine (“RUSVM”). AUC, RUSM, and RUSVM are collectively referred to as the “medical and veterinary schools.” “Home Office” includes activities not allocated to a reportable segment. See Note 18 “Segment Information” for information on our reportable segments.

2. Summary of Significant Accounting Policies

Basis of Presentation

Our significant accounting policies are described in Note 2 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (which are normal and recurring in nature) considered necessary for a fair presentation have been included. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. We use the same accounting policies in preparing quarterly and annual financial statements. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations. Unless indicated, or the context requires otherwise, references to years refer to Adtalem’s fiscal years. Certain items presented in tables may not sum due to rounding. Prior period amounts have been revised to conform with the current period presentation. These consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Business integration expense was $5.3 million in the three months ended September 30, 2023. We did not incur business integration expense in the three months ended September 30, 2024. In the prior year, we incurred costs associated with integrating Walden into Adtalem. In addition, we initiated transformation initiatives to accelerate growth and organizational agility, and certain costs relating to the transformation were included in business integration expense in the Consolidated Statements of Income.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07: “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The guidance was issued to improve disclosures about reportable segments and addresses requests from investors for additional, more detailed information about a reportable segment’s expenses by requiring entities to provide disclosures of significant segment expenses and other segment items. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments should be applied retrospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The amendments will impact our segment disclosures but will not otherwise impact Adtalem’s Consolidated Financial Statements.

6

In December 2023, the FASB issued ASU No. 2023-09: “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The guidance was issued to enhance the transparency and decision usefulness of income tax disclosures by requiring entities to provide additional information in the rate reconciliation and additional disclosures about income taxes paid. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2024. The amendments should be applied prospectively, however retrospective application is permitted. Early adoption of the amendments is permitted. The amendments will impact our income tax disclosures but will not otherwise impact Adtalem’s Consolidated Financial Statements.

We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our Consolidated Financial Statements.

Revision to Previously Issued Financial Statements

During the fourth quarter of fiscal year 2024, Adtalem identified an error in the presentation of capitalized cloud computing implementation costs in its previously issued financial statements. In accordance with Accounting Standards Codification (“ASC”) 350-40 “Intangibles, Goodwill and Other, Internal-Use Software,” capitalized cloud computing implementation costs should be presented in the same line item on the Consolidated Balance Sheets as a prepayment of the fees for the associated hosting arrangement, and the cash flows from capitalized implementation costs should be presented in the same manner as cash flows for the fees associated with the hosting arrangement. Adtalem previously presented capitalized cloud implementation costs in property and equipment, net rather than as prepaid expenses and other current assets and other assets, net on the Consolidated Balance Sheets. Adtalem previously presented the cash flows from capitalized implementation costs as capital expenditures within investing activities rather than within cash flows from operating activities in the Consolidated Statements of Cash Flows. Adtalem assessed the materiality of this error individually and in the aggregate with other previously identified errors to prior periods’ Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” and SAB 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” codified in ASC 250 “Accounting Changes and Error Corrections.” Adtalem concluded that the error was not material to prior periods and therefore, amendments of previously filed reports are not required. However, Adtalem determined it was appropriate to revise its previously issued financial statements. In accordance with ASC 250, Adtalem corrected the prior period presented herein by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the Consolidated Financial Statements. The impact of this revision on Adtalem’s previously reported Consolidated Financial Statements are detailed below. We have also revised impacted amounts within the accompanying Notes to Consolidated Financial Statements.

The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Cash Flows (in thousands):

Three Months Ended September 30, 2023

As Reported

Adjustment

As Revised

Operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

$

9,778

$

(440)

$

9,338

Changes in assets and liabilities:

Cloud computing implementation assets

(4,224)

(4,224)

Accounts payable

(2,870)

52

(2,818)

Net cash provided by operating activities-continuing operations

90,726

(4,612)

86,114

Net cash provided by operating activities

99,685

(4,612)

95,073

Investing activities:

Capital expenditures

(15,046)

4,612

(10,434)

Net cash used in investing activities-continuing operations

(14,946)

4,612

(10,334)

Net cash used in investing activities

(14,946)

4,612

(10,334)

Non-cash investing and financing activities:

Accrued capital expenditures

9,217

(3,130)

6,087

3. Discontinued Operations

On December 11, 2018, Adtalem completed the sale of DeVry University to Cogswell Education, LLC (“Cogswell”) for de minimis consideration. As the sale represented a strategic shift that had a major effect on Adtalem’s operations and

7

financial results, DeVry University is presented in Adtalem’s Consolidated Financial Statements as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20.0 million over a ten-year period payable based on DeVry University’s financial results. Adtalem received $5.5 million, $4.1 million, and $2.9 million during the second quarter of fiscal year 2024, 2023, and 2022, respectively, related to the earn-out. We have received a total of $12.5 million related to the earn-out thus far.

The following is a summary of income statement information reported as discontinued operations, which includes expense from ongoing litigation costs and settlements related to the DeVry University and Carrington College divestitures (in thousands):

Three Months Ended

September 30,

2024

2023

Revenue

$

$

Operating cost and expense:

 

 

Student services and administrative expense

 

107

 

1,765

Total operating cost and expense

 

107

 

1,765

Loss from discontinued operations before income taxes

(107)

(1,765)

Benefit from income taxes

 

27

 

452

Loss from discontinued operations

$

(80)

$

(1,313)

4. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers (students), in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The following tables disaggregate revenue by source (in thousands):

Three Months Ended September 30, 2024

Chamberlain

Walden

 

Medical and
Veterinary

Consolidated

Tuition and fees

 

$

167,930

 

$

161,513

 

$

84,987

 

$

414,430

Other

2,970

2,970

Total

 

$

167,930

 

$

161,513

 

$

87,957

 

$

417,400

Three Months Ended September 30, 2023

Chamberlain

Walden

 

Medical and
Veterinary

Consolidated

Tuition and fees

$

142,596

 

$

141,608

 

$

81,157

 

$

365,361

Other

3,484

3,484

Total

 

$

142,596

 

$

141,608

 

$

84,641

 

$

368,845

In addition, see Note 18 “Segment Information” for a disaggregation of revenue by geographical region.

Performance Obligations and Revenue Recognition

Tuition and fees: The majority of revenue is derived from tuition and fees, which is recognized on a straight-line basis over the academic term as instruction is delivered.

Other: Other revenue consists of housing and other miscellaneous services. Other revenue is recognized over the period in which the applicable performance obligation is satisfied.

Arrangements for payment are agreed to prior to registration of the student’s first academic term. The majority of U.S. students obtain Title IV or other financial aid resulting in institutions receiving a significant amount of the transaction price at the beginning of the academic term. Students not utilizing Title IV or other financial aid funding may pay after the academic term is complete.

8

Transaction Price

Revenue, or transaction price, is measured as the amount of consideration expected to be received in exchange for transferring goods or services.

Students may receive scholarships, discounts, or refunds, which gives rise to variable consideration. The amounts of scholarships or discounts are generally applied to individual student accounts when such amounts are awarded. Therefore, the transaction price is immediately reduced directly by these scholarships or discounts from the amount of the standard tuition rate charged. Scholarships and discounts that are only applied to future tuition charged are considered a separate performance obligation if they represent a material right in accordance with ASC 606. In those instances, we defer the value of the related performance obligation associated with the future scholarship or discount based on estimates of future redemption based on our historical experience of student persistence toward completion of study. The contract liability associated with these material rights is presented as deferred revenue within current liabilities and other liabilities within noncurrent liabilities on the Consolidated Balance Sheets based on the amounts expected to be redeemed in the next 12 months. The contract liability amount associated with these material rights within current liabilities is $28.3 million and $24.1 million as of September 30, 2024 and June 30, 2024, respectively, and the amount within noncurrent liabilities is $20.5 million and $19.6 million as of September 30, 2024 and June 30, 2024, respectively. The noncurrent contract liability associated with these material rights is expected to be earned over approximately the next four fiscal years.

Upon withdrawal, a student may be eligible to receive a refund, or partial refund, the amount of which is dependent on the timing of the withdrawal during the academic term. If a student withdraws prior to completing an academic term, federal and state regulations and accreditation criteria permit Adtalem to retain a set percentage of the total tuition received from such student, which varies with, but generally equals or exceeds, the percentage of the academic term completed by such student. Payment amounts received by Adtalem in excess of such set percentages of tuition are refunded to the student or the appropriate funding source. For contracts with similar characteristics and historical data on refunds, the expected value method is applied in determining the variable consideration related to refunds. Estimates of Adtalem’s expected refunds are determined at the outset of each academic term, based upon actual refunds in previous academic terms. Reserves related to refunds are presented as refund liabilities within accrued liabilities on the Consolidated Balance Sheets. All refunds are netted against revenue during the applicable academic term.

Management reassesses collectability on a student-by-student basis throughout the period revenue is recognized. This reassessment is based upon new information and changes in facts and circumstances relevant to a student’s ability to pay. Management also reassesses collectability when a student withdraws from the institution and has unpaid tuition charges. Such unpaid charges do not meet the threshold of reasonably collectible and are recognized as revenue on a cash basis.

Contract Balances

Students are billed at the beginning of each academic term and payment is due at that time. Adtalem’s performance obligation is to provide educational services in the form of instruction during the academic term and to provide for any scholarships or discounts that are deemed a material right under ASC 606. As instruction is provided or the deferred value of material rights are redeemed, deferred revenue is reduced. A significant portion of student payments are from Title IV financial aid and other programs and are generally received during the first month of the respective academic term. For students utilizing Adtalem’s credit extension programs (see Note 9 “Accounts and Financing Receivables”), payments are generally received after the academic term, and the corresponding performance obligation, is complete. When payments are received, accounts and financing receivables are reduced.

Deferred revenue within current liabilities is $290.6 million and $185.3 million as of September 30, 2024 and June 30, 2024, respectively, and deferred revenue within noncurrent liabilities is $20.5 million and $19.6 million as of September 30, 2024 and June 30, 2024, respectively. Revenue of $166.4 million and $150.1 million was recognized during the three months ended September 30, 2024 and 2023, respectively, that was included in the deferred revenue balance at the beginning of fiscal year 2025 and 2024, respectively.

The difference between the opening and closing balances of deferred revenue includes decreases from revenue recognized during the period, increases from charges related to the start of academic terms beginning during the period,

9

increases from payments received related to academic terms commencing after the end of the period, and increases from recognizing additional performance obligations for material rights during the period.

5. Restructuring Expense

During the three months ended September 30, 2024, Adtalem recorded restructuring expense primarily driven by workforce reductions, costs to exit certain course offerings, and prior real estate consolidations at Adtalem’s home office. We continue to incur restructuring charges or reversals related to exited leased space from previous restructuring actions. During the three months ended September 30, 2023, Adtalem recorded restructuring expense primarily driven by prior real estate consolidations at Adtalem’s home office. When estimating costs of exiting lease space, estimates are made which could differ materially from actual results and may result in additional restructuring charges or reversals in future periods. Termination benefit charges represent severance pay and benefits for employees impacted by workforce reductions. Restructuring expense by segment were as follows (in thousands):

Three Months Ended September 30, 2024

Real Estate
and Other

Termination
Benefits

Total

Chamberlain

$

897

 

$

961

 

$

1,858

Medical and Veterinary

59

 

 

59

Home Office

177

 

 

177

Total

$

1,133

$

961

$

2,094

Three Months Ended September 30, 2023

Real Estate
and Other

Termination
Benefits

Total

Medical and Veterinary

$

74

 

$

40

 

$

114

Home Office

562

 

 

562

Total

$

636

$

40

$

676

The following table summarizes the separation and restructuring plan activity for fiscal years 2024 and 2025, for which cash payments are required (in thousands):

Liability balance as of June 30, 2023

$

741

Increase in liability (separation and other charges)

 

40

Reduction in liability (payments and adjustments)

 

(781)

Liability balance as of June 30, 2024

 

Increase in liability (separation and other charges)

 

961

Reduction in liability (payments and adjustments)

 

Liability balance as of September 30, 2024

$

961

These liability balances are recorded as accrued liabilities on the Consolidated Balance Sheets.

6. Other Income, Net

Other income, net consisted of the following (in thousands):

Three Months Ended

September 30,

2024

2023

Interest and dividend income

$

2,033

$

2,661

Investment gain (loss)

613

(447)

Other income, net

$

2,646

$

2,214

Investment gain (loss) includes trading gains and losses related to the rabbi trust used to fund nonqualified deferred compensation plan obligations.

10

7. Income Taxes

Our effective tax rates from continuing operations were 20.8% and 18.9% in the three months ended September 30, 2024 and 2023, respectively. The effective tax rate for the three months ended September 30, 2024 increased compared to the prior year period primarily due to an increase in the percentage of earnings from operations in higher taxed jurisdictions and a limitation of tax benefits on certain executive compensation. The income tax provisions reflect the U.S. federal tax rate of 21% adjusted for taxes related to global intangible low-taxed income (“GILTI”), limitation of tax benefits on certain executive compensation, the rate of tax applied by state and local jurisdictions, the rate of tax applied to earnings outside the U.S., tax incentives, tax credits related to research and development expenditures, changes in valuation allowance, liabilities for uncertain tax positions, and tax benefits on stock-based compensation.

RUSM and RUSVM each have agreements with their respective domestic governments that exempt them from local income taxation. RUSM has an exemption in Barbados until 2039 and RUSVM has an exemption in St. Kitts until 2038.

8. Earnings per Share

The following table sets forth the computations of basic and diluted earnings per share and antidilutive shares (in thousands, except per share data):

Three Months Ended

September 30,

2024

2023

Numerator:

Net income (loss):

 

 

Continuing operations

$

46,245

$

11,959

Discontinued operations

(80)

(1,313)

Net income

$

46,165

$

10,646

Denominator:

Weighted-average basic shares outstanding

 

37,721

 

41,399

Effect of dilutive stock awards

 

1,388

 

785

Weighted-average diluted shares outstanding

 

39,109

 

42,184

Earnings (loss) per share:

Basic:

Continuing operations

$

1.23

$

0.29

Discontinued operations

$

(0.00)

$

(0.03)

Total basic earnings per share

$

1.22

$

0.26

Diluted:

Continuing operations

$

1.18

$

0.28

Discontinued operations

$

(0.00)

$

(0.03)

Total diluted earnings per share

$

1.18

$

0.25

Weighted-average antidilutive shares

332

9. Accounts and Financing Receivables

Our accounts receivables relate to student balances occurring in the normal course of business. Accounts receivables have a term of less than one year and are included in accounts and financing receivables, net on our Consolidated Balance Sheets. Our financing receivables relate to credit extension programs where the student is provided payment terms in excess of one year with their respective school and are included in accounts and financing receivables, net and other assets, net on our Consolidated Balance Sheets.

11

The classification of our accounts and financing receivable balances was as follows (in thousands):

September 30, 2024

Gross

Allowance

Net

Accounts receivables, current

$

205,610

$

(36,691)

$

168,919

Financing receivables, current

5,319

(2,729)

2,590

Accounts and financing receivables, current

$

210,929

$

(39,420)

$

171,509

Financing receivables, current

$

5,319

$

(2,729)

$

2,590

Financing receivables, noncurrent

35,277

(10,738)

24,539

Total financing receivables

$

40,596

$

(13,467)

$

27,129

June 30, 2024

Gross

Allowance

Net

Accounts receivables, current

$

159,406

$

(35,336)

$

124,070

Financing receivables, current

5,239

(2,476)

2,763

Accounts and financing receivables, current

$

164,645

$

(37,812)

$

126,833

Financing receivables, current

$

5,239

$

(2,476)

$

2,763

Financing receivables, noncurrent

36,214

(10,082)

26,132

Total financing receivables

$

41,453

$

(12,558)

$

28,895

Our financing receivables relate to credit extension programs available to students at Chamberlain, AUC, RUSM, and RUSVM. These credit extension programs are designed to assist students who are unable to completely cover educational costs consisting of tuition, fees, and books, and are available only after all other student financial assistance has been applied toward those purposes. In addition, AUC, RUSM, and RUSVM allow students to finance their living expenses. Repayment plans for financing agreements are developed to address the financial circumstances of the particular student. Interest charges at rates from 3.0% to 12.0% per annum accrue each month on the unpaid balance once a student withdraws or graduates from a program. Most students are required to begin repaying their loans while they are still in school with a minimum payment level designed to demonstrate their capability to repay. Payments may increase upon completing or departing school. After a student leaves school, the student typically will have a monthly installment repayment plan.

Credit Quality

The primary credit quality indicator for our financing receivables is delinquency. Balances are considered delinquent when contractual payments on the loan become past due. We write-off financing receivable balances when they are at least 181 days past due. Payments are applied first to outstanding interest and then to the unpaid principal balance.

The credit quality analysis of financing receivables as of September 30, 2024 was as follow