Adtalem Global Education Inc

Previous wording

Walden – Offers online certificate programs and bachelor’s, master’s, and doctoral degrees, including those in nursing, education, counseling, business, psychology, public health, social work and human services, public administration and public policy, and criminal justice. This segment includes the operations of Walden University (“Walden”), which was acquired by Adtalem on August 12, 2021.

Current wording

Walden – Offers online certificate programs and bachelor’s, master’s, and doctoral degrees, including those in nursing, education, counseling, business, psychology, public health, social work and human services, public administration and

Previous wording

Financial and operational highlights for the second quarter of fiscal year 2024 include:

Current wording

Financial and operational highlights for the third quarter of fiscal year 2024 include:

Previous wording

Chamberlain revenue increased 8.6%, or $12.2 million, to $153.6 million in the second quarter and increased 7.0%, or $19.3 million, to $296.1 million in the first six months of fiscal year 2024 compared to the year-ago periods, driven by an increase in enrollment and higher tuition rates. Enrollment has improved in several graduate and doctoral programs and the undergraduate Bachelor of Science in Nursing (“BSN”) programs. These improvements have been partially offset by a decrease in total student enrollment in the Registered Nurse to Bachelor of Science in Nursing (“RN-to-BSN”) online degree program.

Current wording

Chamberlain revenue increased 13.8%, or $20.6 million, to $170.3 million in the third quarter and increased 9.4%, or $39.9 million, to $466.5 million in the first nine months of fiscal year 2024 compared to the year-ago periods, driven by an increase in enrollment and higher tuition rates. Enrollment has improved in several graduate and doctoral programs and the undergraduate Bachelor of Science in Nursing (“BSN”) programs. In the March 2024 session, the Registered Nurse to Bachelor of Science in Nursing (“RN-to-BSN”) online degree program also saw increased total enrollment. Management believes Chamberlain is achieving growth through leveraging scale and national footprint and providing a full breadth of nursing programs and modalities.

Previous wording

Tuition for the BSN onsite and online degree program ranges from $675 to $753 per credit hour. Tuition for the RN-to-BSN online degree program is $590 per credit hour. Tuition for the online Master of Science in Nursing (“MSN”) degree program is $675 per credit hour. Tuition for the online Family Nurse Practitioner (“FNP”) degree program is $690 per credit hour. Tuition for the online Doctor of Nursing Practice (“DNP”) degree program is $800 per credit hour. Tuition for the online Master of Public Health (“MPH”) degree program is $550 per credit hour. Tuition for the online Master of Social Work (“MSW”) degree program is $695 per credit hour. Tuition for the onsite Master of Physician Assistant Studies (“MPAS”) is $8,000 per session. In some cases, these tuition rates increased by approximately 3% to 4% from the prior year for new students. These tuition rates do not include the cost of course fees, books, supplies, transportation, clinical fees, living expenses, or other fees as listed in the Chamberlain academic catalog.

Current wording

Tuition for the BSN onsite and online degree program ranges from $705 to $753 per credit hour. Tuition for the RN-to-BSN online degree program is $635 per credit hour. Tuition for the online Master of Science in Nursing (“MSN”) degree program is $695 per credit hour. Tuition for the online Family Nurse Practitioner (“FNP”) degree program is $710 per credit hour. Tuition for the online Doctor of Nursing Practice (“DNP”) degree program is $806 per credit hour. Tuition for the online Master of Public Health (“MPH”) degree program is $590 per credit hour. Tuition for the online Master of Social Work (“MSW”) degree program is $695 per credit hour. Tuition for the onsite Master of Physician Assistant Studies (“MPAS”) is $8,000 per session. In some cases, these tuition rates increased by approximately 3% to 8% from the prior year for new students. These tuition rates do not include the cost of course fees, books, supplies, transportation, clinical fees, living expenses, or other fees as listed in the Chamberlain academic catalog.

Previous wording

Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue increased 11.3%, or $14.9 million, to $146.8 million in the second quarter and increased 9.7%, or $25.6 million, to $288.4 million in the first six months of fiscal year 2024 compared to the year-ago periods, driven by an increase in enrollment, higher tuition rates, and an increase in average credit hours per student. Management believes its marketing efforts to differentiate the Walden brand, combined with operational improvements in enrollment, marketing, and admissions, have driven the turnaround in enrollment in the first six months of fiscal year 2024.

Current wording

Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue increased 13.3%, or $17.7 million, to $150.6 million in the third quarter and increased 10.9%, or $43.3 million, to $439.0 million in the first nine months of fiscal year 2024 compared to the year-ago periods, driven by an increase in enrollment, higher tuition rates, and an increase in average credit hours per student. Management believes Walden’s performance turnaround in enrollment in the first nine months of fiscal year 2024 has been accelerated by

Previous wording

On a per credit hour basis, tuition for Walden programs range from $130 per credit hour to $1,060 per credit hour, with the wide range due to the nature of the programs. General education courses are charged at $333 per credit hour. Other programs such as those with a subscription-based learning modality or those billed on a subscription period or term basis range from $1,500 to $7,180 per term. Students are charged a program fee that ranges from $50 to $230 per term as well as a clinical fee of $160 per course for specific programs. Some programs require students to attend residencies, skills labs, and pre-practicum labs, which are charged at a range of $1,000 to $2,550 per event. In most cases, these tuition rates, event charges, and fees represent increases of approximately 0% to 7% with an average of approximately 3% from the prior year. These tuition rates, event charges, and fees do not include the cost of books or personal technology, supplies, transportation, or living expenses.

Current wording

On a per credit hour basis, tuition for Walden programs range from $130 per credit hour to $1,060 per credit hour, with the wide range due to the nature of the programs. General education courses are charged at $340 per credit hour. Other programs such as those with a subscription-based learning modality or those billed on a subscription period or term basis range from $1,550 to $7,325 per term. Students are charged a program fee that ranges from $50 to $230 per term as well as a clinical fee of $160 per course for specific programs. Some programs require students to attend residencies, skills labs, and pre-practicum labs, which are charged at a range of $1,000 to $2,550 per event. In most cases, these tuition rates, event charges, and fees represent increases of approximately 0% to 4% with an average of approximately 2% from the prior year. These tuition rates, event charges, and fees do not include the cost of books or personal technology, supplies, transportation, or living expenses.

Previous wording

Medical and Veterinary revenue increased 3.8%, or $3.4 million, to $92.9 million in the second quarter and was flat in the first six months of fiscal year 2024 compared to the year-ago periods, driven by tuition rate increases at all three institutions in this segment, partially offset by decreased enrollment.

Current wording

Medical and Veterinary revenue increased 6.1%, or $5.2 million, to $91.7 million in the third quarter and increased 2.0%, or $5.3 million, to $269.2 million in the first nine months of fiscal year 2024 compared to the year-ago periods, driven by tuition rate increases at all three institutions in this segment, partially offset by decreased enrollment.

Previous wording

Cost of educational services increased 8.0%, or $12.8 million, to $172.1 million in the second quarter and increased 6.8%, or $21.7 million, to $340.7 million in the first six months of fiscal year 2024 compared to the year-ago periods. These cost increases were primarily driven by an increase in labor and other costs to support increased enrollment and an increase in provision for bad debts, partially offset by a decrease in clinical costs at Medical and Veterinary.

Current wording

Cost of educational services increased 5.7%, or $9.5 million, to $175.3 million in the third quarter and increased 6.4%, or $31.2 million, to $516.0 million in the first nine months of fiscal year 2024 compared to the year-ago periods. These cost increases were primarily driven by an increase in labor and other costs to support increased enrollment, and an increase in provision for bad debts at Chamberlain and Walden.

Previous wording

As a percentage of revenue, cost of educational services was essentially unchanged at 43.8% and 44.7% in the second quarter and first six months of fiscal year 2024, respectively, compared to 43.9% and 44.5% in the year-ago periods.

Current wording

As a percentage of revenue, cost of educational services was 42.5% and 43.9% in the third quarter and first nine months of fiscal year 2024, respectively, compared to 44.9% and 44.6% in the year-ago periods. The decreases in the percentages were primarily the result of revenue growth accompanied with cost efficiencies.

Previous wording

Student services and administrative expense increased 9.7%, or $13.8 million, to $155.6 million in the second quarter and increased 11.6%, or $33.5 million, to $321.7 million in the first six months of fiscal year 2024 compared to the year-ago periods. Excluding intangible amortization expense and loss on assets held for sale, student services and administrative expense increased 14.1%, or $20.0 million, in the second quarter of fiscal year 2024 compared to the year-ago period. Excluding intangible amortization expense, litigation reserve, and loss on assets held for sale, student services and administrative expense increased 10.1%, or $29.0 million, in the first six months of fiscal year 2024 compared to the year-ago period. These cost increases were primarily driven by an increase in incentive compensation expense, marketing expense, severance costs, and investments to support growth initiatives.

Current wording

Student services and administrative expense increased 8.4%, or $12.2 million, to $156.7 million in the third quarter and increased 10.6%, or $45.7 million, to $478.4 million in the first nine months of fiscal year 2024 compared to the year-ago periods. Excluding intangible amortization expense and debt modification costs, student services and administrative expense increased 11.9%, or $17.3 million, in the third quarter of fiscal year 2024 compared to the year-ago period. Excluding intangible amortization expense, litigation reserve, loss on assets held for sale, and debt modification costs, student services and administrative expense increased 10.7%, or $46.3 million, in the first nine months of fiscal year 2024 compared to the year-ago period. These cost increases were primarily driven by an increase in incentive compensation expense, marketing expense, and investments to support growth initiatives.

Previous wording

As a percentage of revenue, student services and administrative expense was 39.6% and 42.2% in the second quarter and first six months of fiscal year 2024, respectively, compared to 39.1% and 40.2% in the year-ago periods. The increases in the percentages were primarily the result of increased incentive compensation expense, marketing expense, severance costs, and litigation reserves in the first six months of fiscal year 2024.

Current wording

As a percentage of revenue, student services and administrative expense was 38.0% and 40.7% in the third quarter and first nine months of fiscal year 2024, respectively, compared to 39.2% and 39.8% in the year-ago periods. The decrease in the percentage for the third quarter of fiscal year 2024 was primarily the result of efficiencies in marketing spend and a decrease in intangible amortization expense. The increase in the percentage for the first nine months of fiscal year 2024 was primarily the result of increased incentive compensation expense and litigation reserves in the first nine months of fiscal year 2024, partially offset by a decrease in intangible amortization expense.

Previous wording

Restructuring expense in the second quarter and first six months of fiscal year 2024 was $0.1 million and $0.7 million, respectively, compared to $1.4 million and $16.4 million in the year-ago periods. The restructuring expense decreases in the second quarter and first six months of fiscal year 2024 were primarily driven by higher real estate consolidations in the second quarter and first six months of fiscal year 2023 at Walden, Medical and Veterinary, and Adtalem’s home office resulting in impairments on operating lease assets and property and equipment. See Note 5 “Restructuring Charges” to the Consolidated Financial Statements for additional information on restructuring charges. We continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities.

Current wording

third quarter and first nine months of fiscal year 2023 at Walden, Medical and Veterinary, and Adtalem’s home office resulting in impairments on operating lease assets and property and equipment. See Note 5 “Restructuring Charges” to the Consolidated Financial Statements for additional information on restructuring charges. We continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities.

Previous wording

Business integration expense in the second quarter and first six months of fiscal year 2024 was $6.9 million and $12.2 million, respectively, compared to $14.8 million and $24.4 million in the year-ago periods. These are costs associated with integrating Walden into Adtalem. In addition, during the first quarter of fiscal year 2023, we initiated transformation initiatives to accelerate growth and organizational agility. Certain costs relating to this transformation are included in business integration expense in the Consolidated Statements of Income. We expect to incur additional integration expense through the remainder of fiscal year 2024.

Current wording

Business integration expense in the third quarter and first nine months of fiscal year 2024 was $18.5 million and $30.6 million, respectively, compared to $11.3 million and $35.7 million in the year-ago periods. These are costs associated with integrating Walden into Adtalem. In addition, during the first quarter of fiscal year 2023, we initiated transformation initiatives to accelerate growth and organizational agility. Certain costs relating to this transformation are included in business integration expense in the Consolidated Statements of Income. We expect to incur additional business integration expense through the remainder of fiscal year 2024 at a decreasing rate.

Previous wording

Consolidated operating income increased 28.7%, or $13.1 million, to $58.6 million in the second quarter and increased 25.5%, or $17.6 million, to $86.8 million in the first six months of fiscal year 2024 compared to the year-ago periods. The operating income increase in the second quarter of fiscal year 2024 was primarily driven by an increase in revenue and decreases in restructuring expense, business integration expense, and intangible amortization expense, partially offset by increases in incentive compensation expense, marketing expense, provision for bad debts, and labor and other costs to support increased enrollment. The operating income increase in the first six months of fiscal year 2024 was primarily driven by an increase in revenue and decreases in restructuring expense, business integration expense, and intangible amortization expense, partially offset by increases in litigation reserves, incentive compensation expense, marketing expense, provision for bad debts, and labor and other costs to support increased enrollment. The decrease in intangible amortization expense is driven by the decrease in amortization relating to the Walden student relationships intangible asset. This intangible asset is amortized based on the estimated retention of the students and considers the revenue and cash flow associated with these existing students, which are concentrated at the beginning of the asset’s useful life.

Current wording

Consolidated operating income increased 3.9%, or $2.3 million, to $61.7 million in the third quarter and increased 15.5%, or $19.9 million, to $148.5 million in the first nine months of fiscal year 2024 compared to the year-ago periods. The operating income increase in the third quarter of fiscal year 2024 was primarily driven by an increase in revenue and decreases in restructuring expense and intangible amortization expense, partially offset by increases in incentive compensation expense, business integration expense, marketing expense, provision for bad debts, and labor and other costs to support increased enrollment, and the gain on sale of assets in the year-ago period. The operating income increase in the first nine months of fiscal year 2024 was primarily driven by an increase in revenue and decreases in restructuring expense, business integration expense, and intangible amortization expense, partially offset by increases in litigation reserves, incentive compensation expense, marketing expense, provision for bad debts, and labor and other costs to support increased enrollment, and the gain on sale of assets in the year-ago period. The decrease in intangible amortization expense is driven by the decrease in amortization relating to the Walden student relationships intangible asset. This intangible asset

Previous wording

Consolidated adjusted operating income decreased 3.0%, or $2.3 million, to $75.6 million in the second quarter and decreased 4.0%, or $5.8 million, to $138.9 million in the first six months of fiscal year 2024 compared to the year-ago periods. The adjusted operating income decreases in the second quarter and first six months of fiscal year 2024 were primarily driven by the increases in labor and other costs to support increased enrollment, marketing expense, provision for bad debts, incentive compensation expense, and severance costs, partially offset by an increase in revenue.

Current wording

Consolidated adjusted operating income increased 23.0%, or $16.8 million, to $89.8 million in the third quarter and increased 5.1%, or $11.0 million, to $228.7 million in the first nine months of fiscal year 2024 compared to the year-ago periods. The adjusted operating income increases in the third quarter and first nine months of fiscal year 2024 were primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, marketing expense, provision for bad debts, and incentive compensation expense.

Previous wording

Chamberlain operating income decreased 10.8%, or $3.6 million, to $29.6 million in the second quarter and decreased 9.2%, or $5.4 million, to $54.0 million in the first six months of fiscal year 2024 compared to the year-ago periods. Segment adjusted operating income decreased 10.8%, or $3.6 million, to $29.6 million in the second quarter and decreased 10.4%, or $6.3 million, to $54.0 million in the first six months of fiscal year 2024 compared to the year-ago periods. The adjusted operating income decrease in the second quarter and first six months of fiscal year 2024 was primarily driven by the increases in labor and other costs to support increased enrollment, marketing expense and provision for bad debts, partially offset by an increase in revenue.

Current wording

Chamberlain operating income increased 9.5%, or $3.8 million, to $43.3 million in the third quarter and decreased 1.7%, or $1.7 million, to $97.3 million in the first nine months of fiscal year 2024 compared to the year-ago periods. Segment adjusted operating income increased 9.5%, or $3.8 million, to $43.3 million in the third quarter and decreased 2.5%, or $2.5 million, to $97.3 million in the first nine months of fiscal year 2024 compared to the year-ago periods. The adjusted operating income increase in the third quarter of fiscal year 2024 was primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, marketing expense, and provision for bad debts. The adjusted operating income decrease in the first nine months of fiscal year 2024 was primarily driven by the increases in labor and other costs to support increased enrollment, marketing expense, and provision for bad debts, partially offset by an increase in revenue.

Previous wording

Interest expense in the second quarter and first six months of fiscal year 2024 was $16.7 million and $32.4 million, respectively, compared to $15.6 million and $33.3 million in the year-ago periods. The interest expense increase in the second quarter of fiscal year 2024 was primarily driven by the increase in letter of credit fees and a higher interest rate on outstanding Term Loan B debt (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements), partially offset by the year-ago period incurring charges due to the write-off of debt discount and issuance costs on the Term Loan B upon repayment of a portion of the debt. The interest expense decrease in the first six months of fiscal year 2024 was primarily driven by the year-ago period incurring charges due to the write-off of debt discount and issuance costs on the Term Loan B upon repayment of a portion of the debt, partially offset by an increase in letter of credit fees and a higher interest rate on outstanding Term Loan B debt.

Current wording

Interest expense in the third quarter and first nine months of fiscal year 2024 was $16.6 million and $48.9 million, respectively, compared to $14.5 million and $47.8 million in the year-ago periods. The interest expense increase in the third quarter of fiscal year 2024 was primarily driven by the increase in letter of credit fees and a write-off of debt discount and issuance costs on the Term Loan B upon repayment of a portion of the debt. The interest expense increase in the first nine months of fiscal year 2024 was primarily driven by the increase in letter of credit fees and a higher interest rate on outstanding Term Loan B debt (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements), partially offset by a decrease in write-off of debt discount and issuance costs on the Term Loan B upon repayment of a portion of the debt.

Previous wording

Other income (expense), net in the second quarter and first six months of fiscal year 2024 was income of $3.6 million and $5.8 million, respectively, compared to expense of $1.4 million and expense of $0.7 million in the year-ago periods. The other income, net, increase in the second quarter and first six months of fiscal year 2024 was primarily driven by the year-ago periods incurring a $5.0 million investment impairment of an equity investment, which more than offset interest income.

Current wording

nine months of fiscal year 2024 was primarily driven by the year-ago period incurring a $5.0 million investment impairment of an equity investment.

Previous wording

Our effective tax rate from continuing operations was 17.1% and 17.5% in the three and six months ended December 31, 2023, respectively, and 15.4% and 15.7% in the three and six months ended December 31, 2022, respectively. The income tax provision for the second quarter and first six months of fiscal year 2024 increased compared to the year-ago periods primarily due to an increase in the percentage of earnings from domestic operations, which are generally taxed at higher rates than foreign earnings.

Current wording

Our effective tax rates from continuing operations were 22.1% and 19.5% in the three and nine months ended March 31, 2024, respectively, and 0.8% and 7.0% in the three and nine months ended March 31, 2023, respectively. The income tax provision for the third quarter and first nine months of fiscal year 2024 increased compared to the year-ago periods primarily due to us recording a net tax benefit of $6.2 million in the year-ago periods primarily for the release of a valuation allowance on certain deferred tax assets based on our reassessment of the amount of state net operating loss carryforwards that are more likely than not to be realized. The current year income tax provision also increased due to an increase in the percentage of earnings from domestic operations, which are generally taxed at higher rates than foreign earnings.

Previous wording

Income from discontinued operations in the second quarter of fiscal year 2023 was $0.5 million. This income consisted of the following: (i) income of $0.5 million driven from the DeVry University earn-out, partially offset by ongoing litigation costs and settlements related to the DeVry University divestiture; (ii) a gain on the sale of Becker and OCL of $0.2 million for working capital adjustments to the initial sales prices; and (iii) a provision from income taxes of $0.2 million associated with the items listed above.

Current wording

Loss from discontinued operations in the third quarter of fiscal year 2024 was $0.6 million. This loss consisted of the following: (i) loss of $0.8 million driven by ongoing litigation costs and settlements related to the DeVry University divestiture and (ii) a benefit from income taxes of $0.2 million associated with the items listed above.

Previous wording

Income from discontinued operations in the first six months of fiscal year 2024 was $0.9 million. This income consisted of the following: (i) income of $1.2 million driven from the DeVry University earn-out, partially offset by ongoing litigation costs and settlements related to the DeVry University and Carrington College divestitures; and (ii) a provision from income taxes of $0.3 million associated with the items listed above.

Current wording

Income from discontinued operations in the first nine months of fiscal year 2024 was $0.2 million. This income consisted of the following: (i) income of $0.3 million driven from the DeVry University earn-out, partially offset by ongoing litigation costs and settlements related to DeVry University and Carrington College divestitures; and (ii) a provision from income taxes of $0.1 million associated with the items listed above.

Previous wording

Loss from discontinued operations in the first six months of fiscal year 2023 was $4.4 million. This loss consisted of the following: (i) loss of $2.7 million driven by ongoing litigation costs and settlements related to the DeVry University divestiture, partially offset by income from the DeVry University earn-out; (ii) a loss on the sale of ACAMS, Becker, and OCL of $3.2 million for working capital adjustments to the initial sales prices; and (iii) a benefit from income taxes of $1.5 million associated with the items listed above.

Current wording

Loss from discontinued operations in the first nine months of fiscal year 2023 was $7.1 million. This loss consisted of the following: (i) loss of $6.7 million driven by ongoing litigation costs and settlements related to the DeVry University divestiture, partially offset by income from the DeVry University earn-out; (ii) a loss on the sale of ACAMS, Becker, and OCL of $3.6 million for working capital adjustments to the initial sales prices and a tax return to provision adjustment; and (iii) a benefit from income taxes of $3.2 million associated with the items listed above.

Previous wording

Like other higher education companies, Adtalem is highly dependent upon the timely receipt of federal financial aid funds. All financial aid and assistance programs are subject to political and governmental budgetary considerations. In the U.S., the Higher Education Act (“HEA”) guides the federal government’s support of postsecondary education. If there are

Current wording

Like other higher education companies, Adtalem is highly dependent upon the timely receipt of federal financial aid funds. All financial aid and assistance programs are subject to political and governmental budgetary considerations. In the U.S., the Higher Education Act (“HEA”) guides the federal government’s support of postsecondary education. If there are changes to financial aid programs that restrict student eligibility or reduce funding levels, Adtalem’s financial condition and cash flows could be materially and adversely affected. See Item 1A. “Risk Factors” in our fiscal year 2023 Form 10-K for a discussion of student financial aid related risks.

Previous wording

Chamberlain was most recently recertified and issued an unrestricted PPA in September 2020, with a reapplication date of March 31, 2024. During the fourth quarter of fiscal year 2020 and the first quarter of fiscal year 2021, ED provisionally recertified AUC, RUSM, and RUSVM’s Title IV PPAs with expiration dates of December 31, 2022, March 31, 2023, and June 30, 2023, respectively. The lengthy PPA recertification process is such that ED allows unhampered continued access to Title IV funding after PPA expiration, so long as materially complete applications are submitted at least 90 days in advance of expiration. Complete applications for AUC, RUSM, and RUSVM’s PPA recertification have been timely submitted to ED.

Current wording

Chamberlain was most recently recertified and issued an unrestricted PPA in September 2020, with a reapplication date that has been extended by ED to June 30, 2024, due to a delay in ED’s system platform implementation used for such applications. During the fourth quarter of fiscal year 2020 and the first quarter of fiscal year 2021, ED provisionally recertified AUC, RUSM, and RUSVM’s Title IV PPAs with expiration dates of December 31, 2022, March 31, 2023, and June 30, 2023, respectively. AUC and RUSM have been notified that their applications to renew their participation in Title IV programs have been completed and approved by ED. The lengthy PPA recertification process is such that ED allows unhampered continued access to Title IV funding after PPA expiration, so long as materially complete applications are submitted at least 90 days in advance of expiration. A complete application for RUSVM’s PPA recertification has been timely submitted to ED. RUSVM is awaiting an update on its renewal application from ED.

Previous wording

Walden must apply periodically to ED for continued certification to participate in Title IV programs. Such recertification generally is required every six years, but may be required earlier, including when an institution undergoes a change in control. ED may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards and in certain other circumstances, such as when an institution is certified for the first time or undergoes a change in control. During the period of provisional certification, the institution must comply with any additional conditions included in the institution’s PPA. In addition, ED may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another institution, or make any other significant change. Students attending provisionally certified institutions remain eligible to receive Title IV program funds. If ED determines that a provisionally certified institution is unable to meet its responsibilities under its PPA, it may seek to revoke the institution’s certification to

Current wording

Walden must apply periodically to ED for continued certification to participate in Title IV programs. Such recertification generally is required every six years, but may be required earlier, including when an institution undergoes a change in control. ED may place an institution on provisional certification status if it finds that the institution does not

Previous wording

participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. Walden was issued a Temporary Provisional PPA (“TPPPA”) on September 17, 2021 in connection with its acquisition by Adtalem. Walden’s provisional certification prior to acquisition was due to Walden’s prior parent company (Laureate Education, Inc.) failing composite score under ED’s financial responsibility standards, previously described above, and ED’s approval of Laureate’s initial public offering in February 2017, which it viewed as a change in control. As a result of Adtalem’s acquisition of Walden, the provisional nature of Walden’s PPA remains in effect on a month-to-month basis while ED reviews the change in ownership application relating to the acquisition of Walden by Adtalem. Walden’s TPPPA included financial requirements, which were in place prior to acquisition, such as a letter of credit, heightened cash monitoring, and additional reporting. Walden also is subject to a restriction on changes to its educational programs, including a prohibition on the addition of new programs or locations that had not been approved by ED prior to the change in ownership during the period in which Walden participates under provisional certification (either as a result of the change in ownership or because of the continuation of the financial responsibility letter of credit).

Current wording

fully satisfy all of the eligibility and certification standards and in certain other circumstances, such as when an institution is certified for the first time or undergoes a change in control. During the period of provisional certification, the institution must comply with any additional conditions included in the institution’s PPA. In addition, ED may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another institution, or make any other significant change. Students attending provisionally certified institutions remain eligible to receive Title IV program funds. If ED determines that a provisionally certified institution is unable to meet its responsibilities under its PPA, it may seek to revoke the institution’s certification to participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. Walden was issued a Temporary Provisional PPA (“TPPPA”) on September 17, 2021 in connection with its acquisition by Adtalem. Walden’s provisional certification prior to acquisition was due to Walden’s prior parent company (Laureate Education, Inc.) failing composite score under ED’s financial responsibility standards, previously described above, and ED’s approval of Laureate’s initial public offering in February 2017, which it viewed as a change in control. As a result of Adtalem’s acquisition of Walden, the provisional nature of Walden’s PPA remains in effect on a month-to-month basis while ED reviews the change in ownership application relating to the acquisition of Walden by Adtalem. Walden’s TPPPA included financial requirements, which were in place prior to acquisition, such as a letter of credit, heightened cash monitoring, and additional reporting. Walden also is subject to a restriction on changes to its educational programs, including a prohibition on the addition of new programs or locations that had not been approved by ED prior to the change in ownership during the period in which Walden participates under provisional certification (either as a result of the change in ownership or because of the continuation of the financial responsibility letter of credit).

Previous wording

Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of December 31, 2023, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. In addition, Adtalem had a letter of credit outstanding under its Revolver in the amount of $76.2 million as of December 31, 2023, in favor of ED, which also allows Walden to participate in Title IV programs. Lastly, as noted earlier in this section, Adtalem had a letter of credit outstanding under its Revolver in the amount of $157.9 million as of December 31, 2023, in favor of ED, which allows Adtalem institutions to participate in Title IV programs.

Current wording

ED has recently allowed reductions in our letters of credit totaling $90.8 million. On January 31, 2024, ED allowed a $76.2 million letter of credit in favor of ED to expire without any requirement for Adtalem to renew it. Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of March 31, 2024, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. In addition, Adtalem had a letter of credit outstanding under its Revolver in the amount of $157.9 million as of March 31, 2024, in favor of ED, which allows Adtalem institutions to participate in Title IV programs. As of March 31, 2024, Adtalem had $241.9 million of letters of credit outstanding in favor of ED. On April 26, 2024, ED indicated that it will permit Adtalem to reduce the surety-backed letter of credit from $84.0 million to $69.4 million and requested that this letter of credit be extended through December 31, 2024. As of when this further reduction takes place, Adtalem will have $227.3 million of letters of credit outstanding in favor of ED. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on the Notes and our Credit Agreement.

Previous wording

On September 27, 2023, ED announced final Gainful Employment (“GE”) rules effective July 1, 2024. The regulation applies to all Title IV certificate programs at all institutions and to all Title IV degree programs at proprietary institutions. Programs must meet a debt-to-earnings test in which graduates’ annual debt payments must not exceed 8% of their annual earnings or 20% of their discretionary earnings. Programs must also pass an earnings premium test in which graduates’ earnings must exceed those of a typical high school graduate. Under the rule, programs that fail either metric must provide warnings to students and prospective students that the program is at risk of losing Title IV eligibility and programs that fail the same measure in two out of three consecutive years lose Title IV eligibility. We are reviewing the rule to determine what impact, if any, it will have on our programs. The GE rules also include a transparency framework in which debt-to-earnings, earnings premium, and a wide range of other program outcomes are disclosed on a website to be hosted by ED.

Current wording

On September 27, 2023, ED announced a final Gainful Employment (“GE”) regulation effective July 1, 2024. The regulation applies to all Title IV certificate programs at all institutions and to all Title IV degree programs at proprietary institutions. Covered programs must meet a debt-to-earnings test in which graduates’ annual debt payments must not exceed 8% of their annual earnings or 20% of their discretionary earnings and must also pass an earnings premium test in which graduates’ earnings must exceed those of a typical high school graduate. Under the regulation, programs that fail either metric must provide warnings to students and prospective students that the program is at risk of losing Title IV eligibility and programs that fail the same measure in two out of three consecutive years lose Title IV eligibility. The GE regulation also includes a transparency framework in which debt-to-earnings, earnings premium, and a wide range of other program outcomes are disclosed on a website to be hosted by ED. We are reviewing the regulation to determine what impact, if any, the regulation will have on our programs.

Previous wording

An ED regulation known as the “90/10 Rule” affects only proprietary postsecondary institutions, such as Chamberlain, Walden, AUC, RUSM, and RUSVM. Under this regulation, an institution that derives more than 90% of its revenue on a cash basis from Title IV student financial assistance programs in two consecutive fiscal years loses eligibility to participate in these programs for at least two fiscal years. The American Rescue Plan Act of 2021 (the “Rescue Act”) enacted on March 11, 2021 amended the 90/10 rule to require that a proprietary institution derive no more than 90% of its revenue from federal education assistance funds, including but not limited to previously excluded U.S. Department of Veterans Affairs and military tuition assistance benefits. This change was subject to negotiated rulemaking, which ended in March 2022. The amended rule applies to institutional fiscal years beginning on or after January 1, 2023. The following table details the percentage of revenue on a cash basis from federal financial assistance programs as calculated under the current regulations (excluding the U.S. Department of Veterans Affairs and military tuition assistance benefits) for each of Adtalem’s institutions for fiscal years 2023 and 2022. As an institution’s 90/10 compliance must be calculated using the financial results of an entire fiscal year, we are including Walden’s amounts for the full fiscal year 2022 in the table below, including the portion of the year not under Adtalem’s ownership.

Current wording

from federal education assistance funds, including but not limited to previously excluded U.S. Department of Veterans Affairs and military tuition assistance benefits. This change was subject to negotiated rulemaking, which ended in March 2022. The amended rule applies to institutional fiscal years beginning on or after January 1, 2023. The following table details the percentage of revenue on a cash basis from federal financial assistance programs as calculated under the current regulations (excluding the U.S. Department of Veterans Affairs and military tuition assistance benefits) for each of Adtalem’s institutions for fiscal years 2023 and 2022. As an institution’s 90/10 compliance must be calculated using the financial results of an entire fiscal year, we are including Walden’s amounts for the full fiscal year 2022 in the table below, including the portion of the year not under Adtalem’s ownership.

Previous wording

Adtalem’s consolidated cash and cash equivalents balance of $182.9 million and $273.7 million as of December 31, 2023 and June 30, 2023, respectively, included cash and cash equivalents held at Adtalem’s international operations of $9.9 million and $7.2 million as of December 31, 2023 and June 30, 2023, respectively, which is available to Adtalem for general corporate purposes.

Current wording

Adtalem’s consolidated cash and cash equivalents balance of $179.8 million and $273.7 million as of March 31, 2024 and June 30, 2023, respectively, included cash and cash equivalents held at Adtalem’s international operations of $5.4 million and $7.2 million as of March 31, 2024 and June 30, 2023, respectively, which is available to Adtalem for general corporate purposes.

Previous wording

Net cash provided by operating activities from continuing operations in the six months ended December 31, 2023 was $83.1 million compared to $42.3 million in the year-ago period. The increase was driven by an increase in income from continuing operations and changes in working capital, partially offset by lower non-cash items. The decrease of $25.4 million in non-cash items between the six months ended December 31, 2023 and the six months ended December 31, 2022 was primarily driven by decreases in impairments to operating lease assets and amortization of intangible assets. The increase of $46.2 million in cash generated from changes in assets and liabilities was primarily due to timing differences in accounts receivable, prepaid assets, prepaid income taxes, accounts payable, accrued payroll and benefits, accrued liabilities, accrued interest, and deferred revenue.

Current wording

Net cash provided by operating activities from continuing operations in the nine months ended March 31, 2024 was $246.8 million compared to $149.8 million in the year-ago period. The increase was driven by an increase in income from continuing operations and changes in working capital, partially offset by lower non-cash items. The decrease of $14.2 million in non-cash items between the nine months ended March 31, 2024 and the nine months ended March 31, 2023 was primarily driven by decreases in impairments to operating lease assets and amortization of intangible assets. The increase of $102.3 million in cash generated from changes in assets and liabilities was primarily due to timing differences in accounts and financing receivables, prepaid assets, prepaid income taxes, accounts payable, accrued payroll and benefits, accrued liabilities, accrued interest, and deferred revenue.

Previous wording

Capital expenditures in the first six months of fiscal year 2024 and 2023 were $30.3 million and $9.7 million, respectively. The capital expenditures in the first six months of fiscal year 2024 primarily consisted of spending for information technology investments and Chamberlain’s campus development. For the remainder of fiscal year 2024, we expect capital spending on information technology, new campus development at Chamberlain, and facility improvements at the medical and veterinary schools. Management anticipates full fiscal year 2024 capital spending to be in the $50 to $60 million range, including $30.3 million spent during the first six months of fiscal year 2024. The source of funds for

Current wording

Capital expenditures in the first nine months of fiscal year 2024 and 2023 were $52.0 million and $19.1 million, respectively. The capital expenditures in the first nine months of fiscal year 2024 primarily consisted of spending for information technology investments and Chamberlain’s campus development. For the remainder of fiscal year 2024, we expect capital spending on information technology, new campus development at Chamberlain, and facility improvements at the medical and veterinary schools. Management anticipates full fiscal year 2024 capital spending to be in the $65 to $70 million range. The source of funds for this capital spending will be from operations or the Credit Facility (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements).

Previous wording

During the first six months of fiscal year 2024 and 2023, we received proceeds from the sale of marketable securities held in a Rabbi Trust of $0.6 million and $1.3 million, respectively, and made additional investments in marketable securities held by this trust of $0.5 million and $1.3 million, respectively.

Current wording

During the first nine months of fiscal year 2024 and 2023, we received proceeds from the sale of marketable securities held in a Rabbi Trust of $0.6 million and $7.6 million, respectively, and made additional investments in marketable securities held by this trust of $0.5 million and $1.5 million, respectively.

Previous wording

During the first six months of fiscal year 2023, we paid $3.2 million for a working capital adjustment to the initial sales price for ACAMS, Becker, and OCL.

Current wording

During the first nine months of fiscal year 2023, we paid $3.2 million for a working capital adjustment to the initial sales prices for ACAMS, Becker, and OCL.

Previous wording

On March 1, 2022, we announced that the Board authorized Adtalem’s thirteenth share repurchase program, which allows Adtalem to repurchase up to $300.0 million of its common stock through February 25, 2025. As of December 31, 2023, after repurchases that were made during the six months ended December 31, 2023, there remained $11.6 million for additional share repurchases under the thirteenth share repurchase program. On January 16, 2024, Adtalem completed its thirteenth share repurchase program. On January 19, 2024, we announced that the Board authorized Adtalem’s fourteenth share repurchase program, which allows Adtalem to repurchase up to $300.0 million of its common stock through January 16, 2027. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. See Note 14 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

Current wording

On March 1, 2022, we announced that the Board authorized Adtalem’s thirteenth share repurchase program, which allows Adtalem to repurchase up to $300.0 million of its common stock through February 25, 2025. On January 16, 2024, Adtalem completed its thirteenth share repurchase program. On January 19, 2024, we announced that the Board authorized Adtalem’s fourteenth share repurchase program, which allows Adtalem to repurchase up to $300.0 million of its common stock through January 16, 2027. As of March 31, 2024, after repurchases that were made during the nine months ended March 31, 2024, there remained $220.2 million for additional share repurchases under the fourteenth share repurchase program. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. See Note 14 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

Previous wording

On March 1, 2021, we issued $800.0 million aggregate principal amount of 5.50% Senior Secured Notes due 2028 (the “Notes”), which mature on March 1, 2028. On August 12, 2021, Adtalem entered into its new credit agreement (the “Credit Agreement”) that provides for (1) a $850.0 million senior secured term loan (“Term Loan B”) with a maturity date of August 12, 2028 and (2) a $400.0 million senior secured revolving loan facility (“Revolver”) with a maturity date of August 12, 2026. We refer to the Term Loan B and Revolver collectively as the “Credit Facility.” The Revolver will be used to finance ongoing working capital and for general corporate purposes. During fiscal year 2022, we made a prepayment of $396.7 million on the Term Loan B. With that prepayment, we are no longer required to make quarterly installment payments. On April 11, 2022, we repaid $373.3 million of Notes at a price equal to 100% of the principal amount of the Notes. During June 2022, we repurchased on the open market an additional $20.8 million of Notes at a price equal to approximately 90% of the principal amount of the Notes. In July 2022, we repurchased an additional $0.9 million of Notes, on September 22, 2022, we made a prepayment of $100.0 million on the Term Loan B, and on November 22, 2022, we made a prepayment of $50.0 million on the Term Loan B. As of December 31, 2023, the principal balance of the Notes and Term Loan B was $405.0 million and $303.3 million, respectively. On January 26, 2024, we made an additional Term Loan B prepayment of $50.0 million, reducing the principal balance of the Term Loan B to $253.3 million as of that

Current wording

On March 1, 2021, we issued $800.0 million aggregate principal amount of 5.50% Senior Secured Notes due 2028 (the “Notes”), which mature on March 1, 2028. On August 12, 2021, Adtalem entered into its new credit agreement (the “Credit Agreement”) that provides for (1) a $850.0 million senior secured term loan (“Term Loan B”) with a maturity date of August 12, 2028 and (2) a $400.0 million senior secured revolving loan facility (“Revolver”) with a maturity date of August 12, 2026. We refer to the Term Loan B and Revolver collectively as the “Credit Facility.” The Revolver will be used to finance ongoing working capital and for general corporate purposes. During fiscal year 2022, we made a prepayment of $396.7 million on the Term Loan B. With that prepayment, we are no longer required to make quarterly installment payments. On April 11, 2022, we repaid $373.3 million of Notes at a price equal to 100% of the principal amount of the Notes. During June 2022, we repurchased on the open market an additional $20.8 million of Notes at a price equal to approximately 90% of the principal amount of the Notes. In July 2022, we repurchased an additional $0.9 million of Notes. On September 22, 2022, November 22, 2022, and January 26, 2024, we made prepayments of $100.0 million, $50.0 million, and $50.0 million, respectively, on the Term Loan B. As of March 31, 2024, the principal balance of the Notes and Term Loan B was $405.0 million and $253.3 million, respectively. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on the Notes and our Credit Agreement.

Previous wording

In the event of unexpected market conditions or negative economic changes that could negatively affect Adtalem’s earnings and/or operating cash flow, Adtalem maintains a $400.0 million revolving credit facility with availability of $165.9 million as of December 31, 2023.

Current wording

In the event of unexpected market conditions or negative economic changes that could negatively affect Adtalem’s earnings and/or operating cash flow, Adtalem maintains a $400.0 million revolving credit facility with availability of $242.1 million as of March 31, 2024.

Previous wording

Long-Term Debt– As of December 31, 2023, we have principal balances of $405.0 million of Notes and $303.3 million of Term Loan B, which requires interest payments. On January 26, 2024, we made an additional Term Loan B prepayment of $50.0 million, reducing the principal balance of the Term Loan B to $253.3 million as of that date. With the Term Loan B prepayment noted above, we are no longer required to make quarterly principal installment payments on the Term Loan B. In addition, we maintain a $400.0 million revolving credit facility with availability of $165.9 million as of December 31, 2023.

Current wording

Long-Term Debt– As of March 31, 2024, we have principal balances of $405.0 million of Notes and $253.3 million of Term Loan B, which requires interest payments. With the Term Loan B prepayment noted above, we are no longer required to make quarterly principal installment payments on the Term Loan B. In addition, we maintain a $400.0 million revolving credit facility with availability of $242.1 million as of March 31, 2024.

Previous wording

Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of December 31, 2023, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. In addition, Adtalem had a letter of credit outstanding under its Revolver in the amount of $76.2 million as of December 31, 2023, in favor of ED, which also allows Walden to participate in Title IV programs. Lastly, Adtalem had a letter of credit outstanding under its Revolver in the amount of $157.9 million as of December 31, 2023, in favor of ED, which allows Adtalem institutions to participate in Title IV programs. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on our Notes and Credit Agreement.

Current wording

ED has recently allowed reductions in our letters of credit totaling $90.8 million. On January 31, 2024, ED allowed a $76.2 million letter of credit in favor of ED to expire without any requirement for Adtalem to renew it. Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of March 31, 2024, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. In addition, Adtalem had a letter of credit outstanding under its Revolver in the amount of $157.9 million as of March 31, 2024, in favor of ED, which allows Adtalem institutions to participate in Title IV programs. As of March 31, 2024, Adtalem had $241.9 million of letters of credit outstanding in favor of ED. On April 26, 2024, ED indicated that it will permit Adtalem to reduce the surety-backed letter of credit from $84.0 million to $69.4 million and requested that this letter of credit be extended through December 31, 2024. As of when this further reduction takes place, Adtalem will have $227.3 million of letters of credit outstanding in favor of ED. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on our Notes and Credit Agreement.

Previous wording

Many states require private-sector postsecondary education institutions to post surety bonds for licensure. In the U.S., Adtalem has posted $41.0 million of surety bonds as of December 31, 2023 with regulatory authorities on behalf of Chamberlain, Walden, AUC, RUSM, and RUSVM.

Current wording

Many states require private-sector postsecondary education institutions to post surety bonds for licensure. In the U.S., Adtalem has posted $42.5 million of surety bonds as of March 31, 2024 with regulatory authorities on behalf of Chamberlain, Walden, AUC, RUSM, and RUSVM.