ATGE - Adtalem Global Education Announces Fiscal Fourth Quarter and Full Year 2023 Results

Results ahead of expectations

Continued improvement in total enrollment trends

FY 2023 diluted earnings per share $2.05; Adjusted EPS $4.21, YoY growth of 35%

Raising lower end of Adjusted EPS guidance for FY 2024

Fourth quarter and full year highlights

• Fourth quarter revenue $364.6 million, up 1.1% and full year revenue $1,450.8 million, up 5.0% year-over-year
• Fourth quarter total student enrollment 75,735, down 2.5% year-over-year, a quarterly sequential improvement of over 60 basis points
• Chamberlain University and Walden University strong demand led by nursing programs in the fourth quarter
• Achieved two-year $60 million cost synergy program
• Full year GAAP net income $93.4 million, and full year adjusted EBITDA $343.4 million, up 4.5% year-over-year

Full year capital allocation

• Repurchased $127 million of shares against $300 million Board authorized share repurchase program in addition to settling the remaining $13 million against the March 2022 announced $150 million accelerated share repurchase program in FY 2023
• Gross debt reduced by $151 million in FY 2023, net leverage 1.3x

Fiscal year 2024 guidance

• Revenue $1,460 million to $1,520 million
• Adjusted earnings per share $4.20 to $4.40

Adtalem Global Education Inc. (NYSE: ATGE), a national leader in post-secondary education and a leading provider of professional talent to the healthcare industry, today reported academic, operating and financial results for its fourth quarter and full year fiscal 2023 ended June 30, 2023.

“I am encouraged by the results we delivered this year. Adtalem is a systemically important component of the U.S. healthcare system, delivering day one ready clinicians at scale. Our renewed focus on operational excellence is strengthening our foundation for the future. And our value proposition as a purpose driven and mission led organization is more relevant than ever; resonating with students, faculty, and stakeholders alike,” said Steve Beard, president, and chief executive officer of Adtalem Global Education.

Beard continued, “Our strong fourth quarter results bode well for fiscal 2024, with improving enrollment trends and the delivery of our two-year cost synergy program. We have conviction in the efficacy of our Growth with Purpose strategy and the confidence to continue to invest in expanding access to high quality academic programs that lead to rewarding careers, and collectively serve to address workforce shortages and inequity in healthcare delivery.”

Financial Highlights

Selected financial data for the three months ended June 30, 2023:

• Revenue of $364.6 million increased 1.1% compared with the prior year.
• Operating income was $39.6 million, compared with $46.0 million in the prior year; adjusted operating income was $69.9 million, compared with $89.6 million in the prior year.
• Net income was $22.2 million, compared with $6.7 million in the prior year; adjusted net income was $45.3 million, compared with $58.6 million in the prior year.
• Diluted earnings per share was $0.50, compared with $0.15 in the prior year; adjusted earnings per share was $1.03, compared with $1.28 in the prior year.
• Adjusted EBITDA was $83.3 million, compared with $104.7 million in the prior year; adjusted EBITDA margin was 22.8% compared with 29.0% in the prior year.

Selected financial data for the full year ended June 30, 2023:

• Revenue of $1,450.8 million increased 5.0% compared with the prior year.
• Operating income was $168.2 million, compared with $76.7 million in the prior year; adjusted operating income was $287.6 million, compared with $267.6 million in the prior year. Operating margin improved to 11.6% from 5.6% and adjusted operating margin increased to 19.8% from 19.4% in the prior year.
• Net income was $93.4 million, compared with $311.0 million in the prior year; adjusted net income was $192.2 million, an increase of 26.4% compared with $152.0 million in the prior year.
• Diluted earnings per share decreased to $2.05 from $6.43 in the prior year; adjusted earnings per share increased to $4.21, up 35.4% compared with $3.11 in the prior year.
• Adjusted EBITDA was $343.4 million, an increase of 4.5% compared with $328.6 million in the prior year; adjusted EBITDA margin was 23.7% compared with 23.8% in the prior year.

Business Highlights

• Adtalem’s medical and veterinary schools graduated more than 1,400 students at their May 2023 commencement. Medical students from 44 states and 22 countries and veterinary students from 44 states and 5 countries, 27% of which identified as underrepresented minorities in medicine (by race or ethnicity), were amongst the graduating class.
• Chamberlain University continues expanding access and solving for critical nursing shortages, opening its second Georgia campus in Stockbridge, outside of Atlanta, with students starting in September 2023. Stockbridge campus, at capacity, will be able to serve as many as 600 students, including up to 200 who need the flexibility of an evening-and-weekend program.
• As a pioneer in online learning, Walden University continues to pave the way, recently being recognized by the United States Distance Learning Association (USDLA) for International Distance Learning Awards in the Trendsetter, Research, and Teaching/Learning categories for 2023.

Segment Highlights

• Total student enrollment increased 1.2% compared with the prior year, driven by continued growth in pre-licensure and post-licensure nursing programs as well as higher persistence.

• Total student enrollment decreased 4.8% compared with the prior year, primarily attributable to declines in non-healthcare programs and to a lesser extent to healthcare programs partially offset by higher persistence. Elimination of off-cycle start dates adversely impacted year-over-year total enrollment growth by 2.4%.

• Total student enrollment decreased 8.2% compared with the prior year, primarily due to medical programs.

Fiscal Year 2024 Outlook

Adtalem guidance for fiscal year 2024, reaffirms revenue in the range of $1,460 million to $1,520 million, and raises the low end of our adjusted earnings per share by 5 cents to be in the range of $4.20 to $4.40.

A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of special items that may be incurred in the future, although these special items could be material to Adtalem's results in accordance with GAAP.

Conference Call and Webcast Information

Adtalem will hold a conference call to discuss its fiscal 2023 fourth quarter and full year results today at 4:00 p.m. CDT (5:00 p.m. EDT).

The call can be accessed by dialing +1 877-407-6184 (U.S. participants) or +1 201-389-0877 (international participants) stating “Adtalem earnings call” or use conference ID: 13739937. The call will be simulcast through the Adtalem investor relations website at: https://investors.adtalem.com .

Adtalem will archive a replay of the call for 30 days. To access the replay, dial +1 877-660-6853 (U.S.) or +1 201-612-7415 (international), conference ID: 13739937, or visit the Adtalem investor relations website.

About Adtalem Global Education

Adtalem Global Education (NYSE: ATGE) is a national leader in post-secondary education and leading provider of professional talent to the healthcare industry. With a dedicated focus on driving strong outcomes that increase workforce preparedness, Adtalem empowers a diverse learner population to achieve their goals and make inspiring contributions to their communities. Adtalem is the parent organization of American University of the Caribbean School of Medicine, Chamberlain University, Ross University School of Medicine, Ross University School of Veterinary Medicine and Walden University. Adtalem’s family of institutions has more than 300,000 alumni and nearly 10,000 employees. Adtalem was named one of America’s Most Responsible Companies in 2021 and 2023 by Newsweek and Statista, and one of America’s Best Employers for Diversity in 2021 and 2022 by Forbes and Statista. Visit Adtalem.com for more information and follow on Twitter and LinkedIn .

Forward-Looking Statements

Certain statements contained in this release are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact, which includes statements regarding Adtalem’s future growth. Forward-looking statements can also be identified by words such as “future,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “may,” “will,” “would,” “could,” “can,” “continue,” “preliminary,” “range,” and similar terms. These forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those described in the statements. These risk and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) and our other filings with the SEC. These forward-looking statements are based on information available to us as of the date any such statements are made, and Adtalem assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized, except as required by law.

Non-GAAP Financial Measures and Reconciliations

We believe that certain non-GAAP financial measures provide investors with useful supplemental information regarding the underlying business trends and performance of Adtalem’s ongoing operations as seen through the eyes of management and are useful for period-over-period comparisons. We use these supplemental non-GAAP financial measures internally in our assessment of performance and budgeting process. However, these non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The following are non-GAAP financial measures used in the subsequent GAAP to non-GAAP reconciliation tables:

Adjusted net income (most comparable GAAP measure: net income) – Measure of Adtalem’s net income adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, intangible amortization expense, gain on sale of assets, pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, investment impairment, net tax benefit related to a valuation allowance release, and net loss (income) from discontinued operations.

Adjusted earnings per share (most comparable GAAP measure: earnings per share) – Measure of Adtalem’s diluted earnings per share adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, intangible amortization expense, gain on sale of assets, pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, investment impairment, net tax benefit related to a valuation allowance release, and net loss (income) from discontinued operations.

Adjusted operating income (most comparable GAAP measure: operating income) – Measure of Adtalem’s operating income adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, intangible amortization expense, litigation reserve, and gain on sale of assets. This measure is applied on a consolidated and segment basis, depending on the context of the discussion.

Adjusted EBITDA (most comparable GAAP measure: net income) – Measure of Adtalem’s net income adjusted for net loss (income) from discontinued operations, interest expense, other (income) expense, net, provision for (benefit from) income taxes, depreciation and amortization, stock-based compensation, deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, litigation reserve, and gain on sale of assets. This measure is applied on a consolidated and segment basis, depending on the context of the discussion. Income taxes, interest expense, and other (income) expense, net is not recorded at the reportable segments, and therefore, the segment adjusted EBITDA reconciliations begin with operating income (loss).

Free cash flow (most comparable GAAP measure: net cash provided by operating activities-continuing operations) – Defined as net cash provided by operating activities-continuing operations less capital expenditures.

Net debt – Defined as long-term debt less cash and cash equivalents.

Net leverage – Defined as net debt divided by adjusted EBITDA.

A description of special items in our non-GAAP financial measures described above are as follows:

• Deferred revenue adjustment related to a revenue purchase accounting adjustment to record Walden’s deferred revenue at fair value.
• CEO transition costs related to acceleration of stock-based compensation expense.
• Restructuring expense primarily related to plans to achieve synergies with the Walden acquisition and real estate consolidations at Walden, Medical and Veterinary, and Adtalem’s home office. We do not include normal, recurring, cash operating expenses in our restructuring expense.
• Business acquisition and integration expense include expenses related to the Walden acquisition and certain costs related to growth transformation initiatives. We do not include normal, recurring, cash operating expenses in our business acquisition and integration expense.
• Intangible amortization expense on acquired intangible assets.
• Gain on sale of Adtalem’s Chicago, Illinois, campus facility.
• Pre-acquisition interest expense related to financing arrangements in connection with the Walden acquisition, write-off of debt discount and issuance costs and gain on extinguishment of debt related to prepayments of debt, reserves related to significant litigation, and impairment of an equity investment.
• Net tax benefit related to a valuation allowance release.
• Net loss (income) from discontinued operations includes the operations of ACAMS, Becker, OCL, and EduPristine, including the after-tax gain on the sale of these businesses, in addition to costs related to DeVry University.