Adtalem Global Education Inc

Previous wording

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read with and is qualified in its entirety by the Consolidated Financial Statements and the notes thereto included in this report. It should also be read in conjunction with the Cautionary Disclosure Regarding Forward-Looking Statements, the Risk Factors included in or incorporated by reference in this report (see Item 1A. “Risk Factors”), and the Financial Aid and Legislative and Regulatory Requirements disclosures set forth in this report. 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.

Current wording

It should also be read in conjunction with the Cautionary Disclosure Regarding Forward-Looking Statements, the Risk Factors included in or incorporated by reference in this report (see Item 1A. “Risk Factors”), and the Financial Aid and Legislative and Regulatory Requirements disclosures set forth in this report. Adtalem reports on a fiscal year period ending on June 30. Therefore, this Quarterly Report for the quarterly period ended December 31, 2024 is for our second quarter of fiscal year 2025.

Previous wording

This MD&A has been amended to give effect to the revision discussed in Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements.

Current wording

This MD&A has been presented giving effect to the revision discussed in Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements.

Previous wording

Financial and operational highlights for the first quarter of fiscal year 2025 include:

Current wording

Financial and operational highlights for the second quarter of fiscal year 2025 include:

Previous wording

Chamberlain revenue increased 17.8%, or $25.3 million, to $167.9 million in the first quarter of fiscal year 2025 compared to the prior year period, driven by an increase in enrollment and higher tuition rates. Enrollment has improved in all graduate and doctoral programs and the undergraduate Bachelor of Science in Nursing (“BSN”) programs. In the July and September 2024 sessions, the Registered Nurse to Bachelor of Science in Nursing (“RN-BSN”) online degree program also saw increased total enrollment. Chamberlain is achieving growth by leveraging scale through a national footprint and providing a full breadth of nursing programs and modalities.

Current wording

Chamberlain revenue increased 17.9%, or $27.4 million, to $181.0 million in the second quarter and increased 17.8%, or $52.8 million, to $348.9 million in the first six months of fiscal year 2025 compared to the prior year periods, driven by an increase in enrollment and higher tuition rates. Enrollment has improved in all graduate and doctoral programs, the undergraduate Bachelor of Science in Nursing (“BSN”) programs, and the Registered Nurse to Bachelor of Science in Nursing (“RN-BSN”) online degree program. Chamberlain is achieving growth by optimizing investments in student enrollment and experience while leveraging scale through a national footprint and providing a full breadth of nursing programs and modalities.

Previous wording

Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue increased 14.1%, or $19.9 million, to $161.5 million in the first quarter of fiscal year 2025 compared to the prior year period, driven by an increase in enrollment, higher tuition rates, and an increase in average credit hours per student. Walden’s improved enrollment has been accelerated by investments in student experience and brand along with providing flexibility to working adults through part-time and Tempo Learning® competency-based programs.

Current wording

Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue increased 16.7%, or $24.5 million, to $171.3 million in the second quarter and increased 15.4%, or $44.4 million, to $332.8 million in the first six months of fiscal year 2025 compared to the prior year periods, driven by an increase in enrollment, higher tuition rates, and an increase in average credit hours per student. Walden’s improved enrollment has been accelerated by investments in student experience and brand along with providing flexibility to working adults through part-time and Tempo Learning® competency-based programs.

Previous wording

Medical and Veterinary revenue increased 3.9%, or $3.3 million, to $88.0 million in the first quarter of fiscal year 2025 compared to the prior year period, driven by tuition rate increases at all three institutions in this segment, partially offset by decreased enrollment. Management’s focus is on increasing enrollment and renewing operational effectiveness, specifically around academic support, the enrollment experience, and marketing.

Current wording

Medical and Veterinary revenue increased 2.8%, or $2.6 million, to $95.4 million in the second quarter and increased 3.3%, or $5.9 million, to $183.4 million in the first six months of fiscal year 2025 compared to the prior year periods, driven by tuition rate increases at all three institutions in this segment, partially offset by decreased enrollment at RUSM. Management’s focus is on increasing enrollment and renewing operational effectiveness, specifically around academic support, the enrollment experience, and marketing.

Previous wording

The cost of educational services expense category includes expenses related to the cost of faculty and staff who support educational operations, facilities, adjunct faculty, supplies, housing, bookstore, other educational materials, student education-related support activities, and the provision for bad debts. The following table presents cost of educational services by segment detailing the changes from the prior year period (in thousands):

Current wording

The cost of educational services expense category includes expenses related to the cost of faculty and staff who support educational operations, facilities, adjunct faculty, supplies, housing, bookstore, other educational materials, student education-related support activities, and the provision for bad debts. The following tables present cost of educational services by segment detailing the changes from the prior year periods (in thousands):

Previous wording

Cost of educational services increased 10.3%, or $17.4 million, to $186.0 million in the first quarter of fiscal year 2025 compared to the prior year period. This cost increase was primarily driven by an increase in labor and other costs to support increased enrollment and an increase in the provision for bad debts.

Current wording

Cost of educational services increased 8.5%, or $14.6 million, to $186.6 million in the second quarter and increased 9.4%, or $31.9 million, to $372.6 million in the first six months of fiscal year 2025 compared to the prior year periods. These cost increases were primarily driven by an increase in labor and other costs to support increased enrollment and an increase in the provision for bad debts.

Previous wording

As a percentage of revenue, cost of educational services was 44.6% and 45.7% in the first quarter of fiscal year 2025 and 2024, respectively. The decrease in the percentage was primarily the result of revenue growth accompanied with cost efficiencies.

Current wording

As a percentage of revenue, cost of educational services was 41.7% and 43.1% in the second quarter and first six months of fiscal year 2025, respectively, compared to 43.8% and 44.7% in the prior year periods. The decreases in the percentages were primarily the result of revenue growth accompanied with cost efficiencies.

Previous wording

The student services and administrative expense category includes expenses related to student admissions, marketing and advertising, general and administrative, and amortization expense of acquired intangible assets. The following table presents student services and administrative expense by segment detailing the changes from the prior year period (in thousands):

Current wording

The student services and administrative expense category includes expenses related to student admissions, marketing and advertising, general and administrative, and amortization of acquired intangible assets. The following tables present student services and administrative expense by segment detailing the changes from the prior year periods (in thousands):

Previous wording

Student services and administrative expense decreased 4.2%, or $7.0 million, to $159.1 million in the first quarter of fiscal year 2025 compared to the prior year period. Excluding amortization of acquired intangible assets, litigation reserve, and debt modification costs, student services and administrative expense increased 11.2%, or $18.6 million, in the first quarter of fiscal year 2025 compared to the prior year period. This increase was primarily driven by an increase in marketing expense and investments to support growth initiatives.

Current wording

Student services and administrative expense increased 0.8%, or $1.3 million, to $156.9 million in the second quarter and decreased 1.8%, or $5.7 million, to $316.0 million in the first six months of fiscal year 2025 compared to the prior year periods. Excluding amortization of acquired intangible assets, litigation reserves, and loss on assets held for sale, student services and administrative expense increased 9.0%, or $14.0 million, in the second quarter of fiscal year 2025 compared to the prior year period. Excluding amortization of acquired intangible assets, litigation reserves, loss on assets held for sale, and debt modification costs, student services and administrative expense increased 10.2%, or $32.7 million, in the first six months of fiscal year 2025 compared to the prior year period. These increases were primarily driven by an increase in marketing expense and investments to support growth initiatives.

Previous wording

As a percentage of revenue, student services and administrative expense was 38.1% and 45.0% in the first quarter of fiscal year 2025 and 2024, respectively. The decrease in the percentage was primarily the result of a decrease in amortization of acquired intangible assets and litigation reserve.

Current wording

As a percentage of revenue, student services and administrative expense was 35.0% and 36.5% in the second quarter and first six months of fiscal year 2025, respectively, compared to 39.6% and 42.2% in the prior year periods. The decreases in the percentage were primarily the result of revenue growth accompanied by decreases in amortization of acquired intangible assets and litigation reserves.

Previous wording

Restructuring expense was $2.1 million and $0.7 million in the first quarter of fiscal year 2025 and 2024, respectively. This increase was primarily driven by workforce reductions, costs to exit certain course offerings, and prior real estate consolidations at Adtalem’s home office in the first quarter of fiscal year 2025. We continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities.

Current wording

Restructuring expense in the second quarter and first six months of fiscal year 2025 was $0.3 million and $2.4 million, respectively, compared to $0.1 million and $0.7 million in the prior year periods. These increases were primarily driven by workforce reductions, costs to exit certain course offerings, and prior real estate consolidations at Adtalem’s home office in the second quarter and first six months of fiscal year 2025. We continue to incur restructuring expense or reversals related to exited leased space from previous restructuring activities.

Previous wording

Business integration expense was $5.3 million in the first quarter of fiscal year 2024. We did not incur business integration expense during the first quarter of fiscal year 2025. 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.

Current 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. We did not incur business integration expense during the second quarter and first six months of fiscal year 2025. 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.

Previous wording

Consolidated operating income increased 149.1%, or $42.0 million, to $70.2 million in the first quarter of fiscal year 2025 compared to the prior year period. The operating income increase in the first quarter of fiscal year 2025 was primarily driven by an increase in revenue and decreases in business integration expense, amortization of acquired intangible assets, and litigation reserve, partially offset by increases in labor and other costs to support increased enrollment, marketing expense, investments to support growth initiatives, and provision for bad debts. The decrease in amortization of acquired intangible assets is driven by the decrease in amortization relating to the Walden student relationships intangible asset, which was fully amortized as of June 30, 2024.

Current wording

Consolidated operating income increased 77.2%, or $45.3 million, to $103.9 million in the second quarter and increased 100.6%, or $87.3 million, to $174.1 million in the first six months of fiscal year 2025 compared to the prior year periods. The operating income increases in the second quarter and first six months of fiscal year 2025 were primarily driven by an increase in revenue and decreases in business integration expense, amortization of acquired intangible assets, litigation reserve, and loss on assets held for sale, partially offset by increases in labor and other costs to support increased enrollment, marketing expense, investments to support growth initiatives, and provision for bad debts. The decreases in amortization of acquired intangible assets are driven by the decreases in amortization relating to the Walden student relationships intangible asset, which was fully amortized as of June 30, 2024. The decrease in litigation reserves includes

Previous wording

Consolidated adjusted operating income increased 19.8%, or $12.5 million, to $75.8 million in the first quarter of fiscal year 2025 compared to the prior year period. The adjusted operating income increase in the first quarter of fiscal year 2025 was primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, marketing expense, investments to support growth initiatives, and provision for bad debts.

Current wording

Consolidated adjusted operating income increased 34.2%, or $25.9 million, to $101.4 million in the second quarter and increased 27.7%, or $38.4 million, to $177.3 million in the first six months of fiscal year 2025 compared to the prior year periods. The adjusted operating income increases in the second quarter and first six months of fiscal year 2025 were primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, marketing expense, investments to support growth initiatives, and provision for bad debts.

Previous wording

Chamberlain operating income increased 6.8%, or $1.7 million, to $26.0 million in the first quarter of fiscal year 2025 compared to the prior year period. Segment adjusted operating income increased 14.4%, or $3.5 million, to $27.8 million in the first quarter of fiscal year 2025 compared to the prior year period. The adjusted operating income increase in the first quarter of fiscal year 2025 was primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, investments to support growth initiatives, and marketing expense.

Current wording

Walden operating income increased 126.4%, or $27.3 million, to $48.9 million in the second quarter and increased 277.0%, or $65.2 million, to $88.7 million in the first six months of fiscal year 2025 compared to the prior year periods. Segment adjusted operating income increased 53.1%, or $16.0 million, to $46.2 million in the second quarter and increased 44.9%, or $27.5 million, to $88.8 million in the first six months of fiscal year 2025 compared to the prior year periods. The adjusted operating income increases in the second quarter and first six months of fiscal year 2025 were primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, investments to support growth initiatives, and marketing expense.

Previous wording

Medical and Veterinary operating income increased 2.1%, or $0.3 million, to $14.7 million in the first quarter of fiscal year 2025 compared to the prior year period. Segment adjusted operating income increased 1.7%, or $0.3 million, to $14.7 million in the first quarter of fiscal year 2025 compared to the prior year period. The adjusted operating income increase in the first quarter of fiscal year 2025 was primarily driven by an increase in revenue, partially offset by investments to support initiatives to drive future growth and provision for bad debts.

Current wording

Medical and Veterinary operating income decreased 2.5%, or $0.6 million, to $21.5 million in the second quarter and decreased 0.7%, or $0.2 million, to $36.1 million in the first six months of fiscal year 2025 compared to the prior year periods. Segment adjusted operating income decreased 2.6%, or $0.6 million, to $21.5 million in the second quarter and decreased 0.9%, or $0.3 million, to $36.2 million in the first six months of fiscal year 2025 compared to the prior year periods. The adjusted operating income decreases in the second quarter and first six months of fiscal year 2025 were primarily driven by increases in investments to support initiatives to drive future growth and provision for bad debts, partially offset by increases in revenue.

Previous wording

Interest expense was $14.5 million and $15.7 million in the first quarter of fiscal year 2025 and 2024, respectively. This decrease was primarily driven by lower interest expense on our Term Loan B due to decreased borrowings and a lower interest rate, partially offset by an increase in letter of credit fees (as discussed in Note 13 “Debt” to the Consolidated Financial Statements).

Current wording

Interest expense in the second quarter and first six months of fiscal year 2025 was $13.9 million and $28.4 million, respectively, compared to $16.7 million and $32.4 million in the prior year periods. The interest expense decreases in the second quarter and first six months of fiscal year 2025 was primarily driven by lower interest expense on our Term Loan B due to decreased borrowings and a lower interest rate (as discussed in Note 13 “Debt” to the Consolidated Financial Statements).

Previous wording

Our effective income tax rate (“ETR”) from continuing operations can differ from the 21% U.S. federal statutory rate due to several factors, including tax on 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 awards.

Current wording

Our effective income tax rate (“ETR”) from continuing operations can differ from the 21% U.S. federal statutory rate due to several factors, including tax on 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, changes in uncertain tax positions, and tax benefits on stock-based compensation awards.

Previous wording

Our effective tax rate from continuing operations was 20.8% and 18.9% in the three months ended September 30, 2024 and 2023, respectively. The effective tax rate for the first quarter of fiscal year 2025 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.

Current wording

Our effective tax rate from continuing operations was 22.8% and 22.0% in the three and six months ended December 31, 2024, respectively, and 17.1% and 17.5% in the three and six months ended December 31, 2023, respectively. The effective tax rate for the three and six months ended December 31, 2024 increased compared to the prior year periods 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.

Previous wording

Loss from discontinued operations was $0.1 million and $1.3 million in the first quarter of fiscal year 2025 and 2024, respectively. We continue to incur costs associated with ongoing litigation and settlements related to the DeVry University and Carrington College divestitures, which were completed during fiscal year 2019, and are classified as expense within discontinued operations.

Current wording

Income from discontinued operations in the second quarter and first six months of fiscal year 2025 was $4.7 million and $4.6 million, respectively, compared to $2.2 million and $0.9 million in the prior year periods. We recorded income within discontinued operations related to the DeVry University earn-out of $7.0 million and $5.5 million in the second quarter and first six months of fiscal year 2025 and 2024, respectively. In addition, we continue to incur costs associated with ongoing litigation and settlements related to the DeVry University divestiture, which was completed during fiscal year 2019, and are classified as expense within discontinued operations.

Previous wording

Like other higher education institutions, Adtalem’s institutions are dependent upon the timely receipt of federal financial aid funds. All public financial aid programs are subject to political and governmental budgetary considerations. Adtalem’s institutions and their students participate in a wide range of financial aid programs, including U.S. federal financial aid, state financial aid, Canadian financial aid, private loan programs, tax-favored programs, Adtalem-provided financial assistance, and employer-provided financial assistance. In the U.S., the Higher Education Act (as reauthorized, the “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 Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for a discussion of student financial aid related risks.

Current wording

Like other higher education institutions, Adtalem’s institutions are dependent upon the timely receipt of federal financial aid funds. All public financial aid programs are subject to political and governmental budgetary considerations. Adtalem’s institutions and their students participate in a wide range of financial aid programs, including U.S. federal financial aid, state financial aid, Canadian financial aid, private loan programs, tax-favored programs, Adtalem-provided financial assistance, and employer-provided financial assistance. In the U.S., the Higher Education Act (as reauthorized, the “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 2024 Form 10-K.

Previous wording

Institutions must pass a U.S. Department of Education (“ED”) financial responsibility test, also known as a “composite score,” to maintain eligibility to participate in Title IV aid programs. For Adtalem’s institutions, this test is calculated at the consolidated Adtalem level. Applying various financial elements from annual audited financial statements, the score is a composite of three ratios: an equity ratio that measures the institution’s capital resources; a primary reserve ratio that measures an institution’s ability to fund its operations from current resources; and a net income ratio that measures an institution’s ability to operate profitably. A score greater than or equal to 1.5 indicates the institution is considered financially responsible. A score of less than 1.5 but greater than or equal to 1.0 is considered financially responsible but require additional oversight. For example, an institution with a score in this range is subject to heightened cash monitoring and other participation requirements. An institution with a score of less than 1.0 is not considered financially responsible but may continue to participate in the Title IV programs under provisional certification. In addition, this lower score typically requires that the institution be subject to heightened cash monitoring requirements and post a letter of credit (equal to a minimum of 10% of the Title IV aid it received in the institution's most recent fiscal year).

Current wording

Institutions must pass a U.S. Department of Education (“ED”) financial responsibility test, also known as a “composite score,” to maintain eligibility to participate in Title IV aid programs. For Adtalem’s institutions, this test is calculated at the consolidated Adtalem level. Applying various financial elements from annual audited financial statements, the score is a composite of three ratios: an equity ratio that measures the institution’s capital resources; a primary reserve ratio that measures an institution’s ability to fund its operations from current resources; and a net income ratio that measures an institution’s ability to operate profitably. A score greater than or equal to 1.5 indicates the institution is considered financially responsible. A score less than 1.5 but greater than or equal to 1.0 is considered financially responsible but requires additional oversight. For example, an institution with a score in this range is subject to heightened cash monitoring and other participation requirements. An institution with a score of less than 1.0 is not considered financially responsible but may continue to participate in the Title IV programs under provisional certification. In addition, this lower score typically requires that the institution be subject to heightened cash monitoring requirements and post a letter of credit (equal to a minimum of 10% of the Title IV aid it received in the institution's most recent fiscal year).

Previous wording

For the past several years, Adtalem’s composite score was greater than 1.5. However, on September 25, 2023, ED notified Adtalem that its fiscal year 2022 composite score had declined to 0.2. As previously disclosed, this was expected due to the acquisition of Walden and other transactions. ED advised that Adtalem’s five institutions will be permitted to continue to participate in Title IV under provisional certifications with heightened cash monitoring and continued reporting. A letter of credit in the amount of $157.9 million, representing 10% of the consolidated Title IV funds Adtalem’s institutions received during fiscal year 2022, was delivered to ED on November 1, 2023. Management does not believe these conditions will have a material adverse effect on Adtalem’s operations.

Current wording

Prior to fiscal year 2022, Adtalem’s composite score was greater than 1.5. However, on September 25, 2023, ED notified Adtalem that its fiscal year 2022 composite score had declined to 0.2. As previously disclosed, this was expected due to the acquisition of Walden and other transactions. ED advised that Adtalem’s five institutions will be permitted to continue to participate in Title IV under provisional certifications with heightened cash monitoring and continued reporting. A letter of credit in the amount of $157.9 million, representing 10% of the consolidated Title IV funds Adtalem’s institutions received during fiscal year 2022, was delivered to ED on November 1, 2023 with an expiration date of December 31, 2024. On December 3, 2024, ED requested Adtalem amend the letter of credit to $179.0 million, representing 10% of the consolidated Title IV funds Adtalem’s institutions received during fiscal year 2024 with an expiration date of January 31, 2026. As requested, Adtalem delivered this amended letter of credit to ED on December 13, 2024. Adtalem satisfied this request by securing a $99.0 million letter of credit under its Revolver and an $80.0 million surety-backed letter of credit. Management does not believe these conditions will have a material adverse effect on Adtalem’s operations.

Previous wording

All institutions 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

Current wording

All institutions 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 participate in Title IV programs without advance notice or opportunity for the institution to challenge the action.

Previous wording

During the first quarter of fiscal year 2025, ED approved Walden’s change in ownership application and issued Walden a provisional PPA through June 30, 2025.

Current wording

ED approved Walden’s change in ownership application and issued Walden a provisional PPA through June 30, 2025, with its application for PPA recertification due March 31, 2025.

Previous wording

During the fourth quarter of fiscal year 2024, ED provisionally recertified AUC and RUSM’s Title IV PPAs through March 31, 2025. During the first quarter of fiscal year 2025, ED provisionally recertified RUSVM’s Title IV PPA through March 31, 2027.

Current wording

ED provisionally recertified AUC and RUSM’s Title IV PPAs through March 31, 2025. Complete applications for AUC and RUSM’s PPA recertification have been timely submitted to ED. ED has provisionally recertified RUSVM’s Title IV PPA through March 31, 2027.

Previous wording

Walden, AUC, and RUSM’s provisional PPAs included financial requirements, such as letter of credit, heightened cash monitoring, and additional reporting. We do not believe these requirements will have a material effect on Adtalem’s financial position or results of operations. Walden also is subject to customary restrictions following an acquisition limiting 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 for a period established by ED. With the approval of its change in ownership, Walden has the ability to request ED approval for new programs.

Current wording

Walden, AUC, RUSM, and RUSVM’s provisional PPAs included financial requirements, such as letter of credit, heightened cash monitoring, and additional reporting. We do not believe these requirements will have a material effect on Adtalem’s financial position or results of operations. With the approval of its change in ownership, Walden has the ability to request ED approval for new programs.

Previous wording

As of September 30, 2024, Adtalem had $227.3 million of letters of credit outstanding in favor of ED. See “Off-Balance Sheet Arrangements” in Note 13 “Debt” to the Consolidated Financial Statements for additional information.

Current wording

As of December 31, 2024, Adtalem had $179.0 million of letters of credit outstanding in favor of ED. See “Off-Balance Sheet Arrangements” in Note 13 “Debt” to the Consolidated Financial Statements for additional information.

Previous wording

An ED regulation known as the “90/10 Rule” affects only proprietary institutions participating in Title IV programs, including each of Adtalem’s institutions. An institution that does not meet the 90% threshold for two consecutive fiscal years loses its eligibility to participate in Title IV programs. Previously, an institution could not derive more than 90% of its revenue on a cash basis from Title IV financial aid funds. In March 2021, the American Rescue Plan Act amended the 90/10 calculation to require no more than 90% of revenue at proprietary institutions be derived from any federal education assistance funds, including but not limited to previously excluded U.S. Department of Veterans Affairs benefits and Department of Defense tuition assistance funds. This change was subject to negotiated rulemaking with the final rule

Current wording

An ED regulation known as the “90/10 Rule” affects only proprietary institutions participating in Title IV programs, including each of Adtalem’s institutions. An institution that does not meet the 90% threshold for two consecutive fiscal years loses its eligibility to participate in Title IV programs. Previously, an institution could not derive more than 90% of its revenue on a cash basis from Title IV financial aid funds. In March 2021, the American Rescue Plan Act amended the 90/10 calculation to require no more than 90% of revenue at proprietary institutions be derived from any federal education assistance funds, including but not limited to previously excluded U.S. Department of Veterans Affairs benefits and Department of Defense tuition assistance funds. This change was subject to negotiated rulemaking with the final rule published by ED in October 2022. The amended rule applies to an institution’s fiscal years beginning on or after January 1, 2023. For Adtalem’s institutions, the updated 90/10 rule is therefore effective with the calculation for fiscal year 2024. The following table shows the 90/10 rates for each Adtalem institution for fiscal year 2024 based on the new 90/10 rules and fiscal year 2023 based on the old 90/10 rules that were still in effect for that period. We are also providing a consolidated rate for Adtalem even though it is not subject to 90/10 requirements.

Previous wording

Adtalem’s consolidated cash and cash equivalents balance of $264.8 million and $219.3 million as of September 30, 2024 and June 30, 2024, respectively, included cash and cash equivalents held at Adtalem’s international operations of $4.6 million and $4.6 million as of September 30, 2024 and June 30, 2024, respectively, which is available to Adtalem for general corporate purposes.

Current wording

Adtalem’s consolidated cash and cash equivalents balance of $194.0 million and $219.3 million as of December 31, 2024 and June 30, 2024, respectively, included cash and cash equivalents held at Adtalem’s international operations of $5.8 million and $4.6 million as of December 31, 2024 and June 30, 2024, respectively, which is available to Adtalem for general corporate purposes.

Previous wording

Net cash provided by operating activities from continuing operations in the three months ended September 30, 2024 was $89.6 million compared to $86.1 million in the prior year period. The increase was driven by income from continuing operations and non-cash items, partially offset by changes in working capital. The increase of $9.5 million in non-cash items between the three months ended September 30, 2024 and the three months ended September 30, 2023 was primarily driven by an increase in deferred income taxes partially offset by a decrease in amortization of acquired intangible assets. The decrease of $40.4 million in cash generated from changes in assets and liabilities between the three months ended September 30, 2024 and the three months ended September 30, 2023 was primarily due to timing differences in accounts and financing receivables, prepaid assets, cloud computing implementation assets, 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 six months ended December 31, 2024 was $66.0 million compared to $72.4 million in the prior year period. The decrease was driven by changes in working capital, partially offset by income from continuing operations and non-cash items. The increase of $19.4 million in non-cash items between the six months ended December 31, 2024 and the six months ended December 31, 2023 was primarily driven by an increase in deferred income taxes and stock-based compensation, partially offset by a decrease in amortization of acquired intangible assets. The decrease of $93.6 million in cash generated from changes in assets and liabilities between the six months ended December 31, 2024 and the six months ended December 31, 2023 was primarily due to timing differences in accounts and financing receivables, prepaid assets, cloud computing implementation assets, accounts payable, accrued payroll and benefits, accrued liabilities, accrued interest, and deferred revenue.

Previous wording

Net cash used in investing activities during the three months ended September 30, 2024 and 2023 was $9.5 million and $10.3 million, respectively, and was primarily driven by capital expenditures of $10.4 million and $10.4 million, respectively. The capital expenditures in fiscal year 2025 primarily consisted of spending for information technology investments and Chamberlain’s campus development. For the remainder of fiscal year 2025, 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 2025 capital spending to be in the $55 to $75 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).

Current wording

Net cash used in investing activities during the six months ended December 31, 2024 and 2023 was $20.2 million and $19.5 million, respectively, and was primarily driven by capital expenditures of $21.1 million and $19.6 million, respectively. The capital expenditures in fiscal year 2025 primarily consisted of spending for information technology investments and Chamberlain’s campus development. For the remainder of fiscal year 2025, 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 2025 capital spending to be in the $55 to $65 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

On March 1, 2022, we announced that the Board authorized Adtalem’s thirteenth share repurchase program, which allowed 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 September 30, 2024, $177.7 million of authorized share repurchases were remaining 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.

Current wording

On March 1, 2022, we announced that the Board authorized Adtalem’s thirteenth share repurchase program, which allowed 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 December 31, 2024, $140.1 million of authorized share repurchases were remaining 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.” As of September 30, 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.

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.” As of December 31, 2024, the principal balance of the Notes and Term Loan B was $405.0 million and $253.3 million, respectively. On January 17, 2025, we made an additional prepayment of $100.0 million on the Term Loan B, reducing the principal balance on the Term Loan B to $153.3 million as of January 17, 2025. 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 $242.1 million as of September 30, 2024.

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 $301.0 million as of December 31, 2024.

Previous wording

Long-Term Debt– As of September 30, 2024, we have principal balances of $405.0 million of Notes and $253.3 million of Term Loan B, which requires interest payments. With previous Term Loan B prepayments, we are no longer required to make quarterly principal installment payments on the Term Loan B. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on the Notes and our Credit Agreement.

Current wording

Long-Term Debt– As of December 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 previous Term Loan B prepayments, we are no longer required to make quarterly principal installment payments on the Term Loan B. On January 17, 2025, we made an additional prepayment of $100.0 million on the Term Loan B, reducing the principal balance on the Term Loan B to $153.3 million as of January 17, 2025. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on the Notes and our Credit Agreement.

Previous wording

ED has recently allowed reductions totaling $90.8 million in our letters of credit. As of September 30, 2024, Adtalem had $227.3 million of letters of credit outstanding in favor of ED. See “Off-Balance Sheet Arrangements” in Note 13 “Debt” to the Consolidated Financial Statements for additional information.

Current wording

As of December 31, 2024, Adtalem had $179.0 million of letters of credit outstanding in favor of ED. See “Off-Balance Sheet Arrangements” in Note 13 “Debt” to the Consolidated Financial Statements for additional information.

Previous wording

Many states require private-sector postsecondary education institutions to post surety bonds for licensure. In the U.S., Adtalem has posted $58.3 million of surety bonds as of September 30, 2024 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 $63.9 million of surety bonds as of December 31, 2024 with regulatory authorities on behalf of Chamberlain, Walden, AUC, RUSM, and RUSVM.