# Covista Inc. (CVSA) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from Covista Inc.'s 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/730464/000155837023014509/atge-20230630x10k.htm Accession: 0001558370-23-014509 Filing date: 2023-08-10 Report date: 2023-06-30 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/CVSA/ All MD&A years: /company/CVSA/mda/ Previous year: /company/CVSA/mda/fy2022/ (FY 2022) Next year: /company/CVSA/mda/fy2024/ (FY 2024) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), Adtalem Global Education Inc., together with its subsidiaries, is collectively referred to as “Adtalem,” “we,” “our,” “us,” or similar references. Discussions within this MD&A may contain forward-looking statements. See the “Forward-Looking Statements” section preceding Part I of this Annual Report on Form 10-K for details about the uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements. Throughout this MD&A, we sometimes use information derived from the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” and the notes thereto but not presented in accordance with U.S. generally 46 Table of Contents accepted accounting principles (“GAAP”). Certain of these items are considered “non-GAAP financial measures” under the Securities and Exchange Commission (“SEC”) rules. See the “Non-GAAP Financial Measures and Reconciliations” section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures. Certain items presented in tables may not sum due to rounding. Percentages presented are calculated from the underlying numbers in thousands. Discussions throughout this MD&A are based on continuing operations unless otherwise noted. The MD&A should be read in conjunction with the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” and the notes thereto. Segments We present three reportable segments as follows: Chamberlain – Offers degree and non-degree programs in the nursing and health professions postsecondary education industry. This segment includes the operations of Chamberlain University (“Chamberlain”). Walden – Offers more than 100 online certificate, 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. See Note 3 “Acquisitions” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on the acquisition. Medical and Veterinary – Offers degree and non-degree programs in the medical and veterinary postsecondary education industry. This segment includes the operations of the American University of the Caribbean School of Medicine (“AUC”), Ross University School of Medicine (“RUSM”), and Ross University School of Veterinary Medicine (“RUSVM”), which are collectively referred to as the “medical and veterinary schools.” “Home Office and Other” includes activities not allocated to a reportable segment. Financial and descriptive information about Adtalem’s reportable segments is presented in Note 22 “Segment Information” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.” Beginning in the second quarter of fiscal year 2022, Adtalem eliminated its Financial Services segment when the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), OnCourse Learning (“OCL”), and EduPristine were classified as discontinued operations and assets held for sale. In accordance with GAAP, we have classified the ACAMS, Becker, OCL, and EduPristine entities as “Held for Sale” and “Discontinued Operations” in all periods presented as applicable. As a result, all financial results, disclosures, and discussions of continuing operations in this Annual Report on Form 10-K exclude ACAMS, Becker, OCL, and EduPristine operations, unless otherwise noted. On March 10, 2022, we completed the sale of ACAMS, Becker, and OCL and on June 17, 2022, we completed the sale of EduPristine. 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 those costs are classified as expense within discontinued operations. See Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional discontinued operations information. Certain expenses previously allocated to ACAMS, Becker, OCL, and EduPristine within our former Financial Services segment during fiscal year 2021 and the first quarter of fiscal year 2022 have been reclassified to Home Office and Other based on discontinued operations reporting guidance regarding allocation of corporate overhead. Beginning in the second quarter of fiscal year 2022, these costs are being allocated to the Chamberlain, Walden, and Medical and Veterinary segments. Revision to Previously Issued Financial Statements During the third quarter of fiscal year 2023, Adtalem identified an error in its revenue recognition related to certain scholarship programs within its Medical and Veterinary segment. Certain scholarships and discounts offered within that segment provide students a discount on future tuition that constitute a material right under Accounting Standards 47 Table of Contents Codification (“ASC”) 606 “Revenue from Contracts with Customers” that should be accounted for as a separate performance obligation within a contract. Adtalem assessed the materiality of this error individually and in the aggregate with other previously identified errors to prior periods’ Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” and SAB 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” codified in ASC 250 “Accounting Changes and Error Corrections.” Adtalem concluded that the errors were not material to prior periods and therefore, amendments of previously filed reports are not required. However, Adtalem determined it was appropriate to revise its previously issued financial statements. Treating the discount on future tuition as a material right results in the deferral of revenue for a portion of tuition to future periods. In accordance with ASC 250, Adtalem corrected prior periods presented herein by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the Consolidated Financial Statements. In connection with this revision, Adtalem also corrected other immaterial errors in the prior periods, including certain errors that had previously been adjusted for as out of period corrections in the period identified. See Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information. Walden University Acquisition On August 12, 2021, Adtalem completed the acquisition of all the issued and outstanding equity interest in Walden e-Learning, LLC, a Delaware limited liability company (“e-Learning”), and its subsidiary, Walden University, LLC, a Florida limited liability company, from Laureate Education, Inc. (“Laureate” or “Seller”) in exchange for a purchase price of $1.5 billion in cash (the “Acquisition”). See the “Liquidity and Capital Resources” section of this MD&A for a discussion on the financing used to fund the Acquisition. Fiscal Year 2023 Highlights Financial and operational highlights for fiscal year 2023 include: [[GREPCENT_TABLE]] [["","\u25cf","Adtalem revenue increased $69.0 million, or 5.0%, to $1,450.9 million in fiscal year 2023 compared to the prior year. Excluding the timing of the Walden acquisition in the prior year, Adtalem revenue grew $4.8 million, or 0.3%, in fiscal year 2023 compared to the prior year driven by increased revenue at Chamberlain and Medical and Veterinary partially offset by a revenue decline at Walden."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Net income of $93.4 million ($2.05 diluted earnings per share) decreased $217.6 million ($4.38 diluted earnings per share) in fiscal year 2023 compared to net income of $311.0 million in the prior year. This decrease was primarily due to the gain on disposal of the Financial Services segment in the prior year, partially offset by decreased interest expense and business acquisition and integration expense in the current year compared to the prior year, and a gain on sale of assets in the current year. Adjusted net income of $192.2 million ($4.21 diluted adjusted earnings per share) increased $40.2 million ($1.10 diluted adjusted earnings per share), or 26.4%, in fiscal year 2023 compared to the prior year. This increase was due to the timing of the Walden acquisition in the prior year, increased adjusted operating income at Chamberlain, and decreased interest expense in fiscal year 2023 compared to the prior year."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","For fiscal year 2023, average total student enrollment at Chamberlain decreased 0.6% compared to the prior year. For the May 2023 session, total student enrollment at Chamberlain increased 1.2% compared to the same session last year."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","For fiscal year 2023, average total student enrollment at Walden decreased 7.5% compared to the prior year. As of June 30, 2023, total student enrollment at Walden decreased 4.8% compared to June 30, 2022."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","For fiscal year 2023, average total student enrollment at the medical and veterinary schools decreased 1.0% compared to the prior year. For the May 2023 semester, total student enrollment at the medical and veterinary schools decreased 8.2% compared to the same semester last year."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","On September 22, 2022 and November 22, 2022, we made prepayments of $100.0 million and $50.0 million, respectively, on our Term Loan B debt."]] [[/GREPCENT_TABLE]] 48 Table of Contents [[GREPCENT_TABLE]] [["","\u25cf","On March 14, 2022, we entered into an accelerated share repurchase (\u201cASR\u201d) agreement to repurchase $150.0 million of common stock. We received an initial delivery of 4,709,576 shares of common stock. The ASR agreement ended on October 14, 2022. Based on the volume-weighted average price of Adtalem\u2019s common stock during the term of the ASR agreement, Adtalem owed the counter party 332,212 shares of common stock. We elected to settle the contract in cash instead of delivering shares by making a cash payment of $13.2 million on November 2, 2022."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Adtalem repurchased a total of 3,207,036 shares of Adtalem\u2019s common stock under its share repurchase program at an average cost of $39.68 per share during fiscal year 2023. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors."]] [[/GREPCENT_TABLE]] Overview of the Impact of COVID-19 On March 11, 2020, the novel coronavirus (“COVID-19”) outbreak was declared a pandemic by the World Health Organization. COVID-19 has had tragic consequences across the globe and altered business and consumer activity across many industries. Management initiated several changes to the operations of our institutions and administrative functions in order to protect the health of our students and employees and to mitigate the financial effects of COVID-19 and its resultant economic slowdown. Management believes that enrollments were negatively impacted at Chamberlain and Walden, and to a lesser extent at Medical and Veterinary, by disruptions in the nursing and healthcare markets caused by COVID-19. The amount of revenue, operating income, and earnings per share losses in fiscal year 2023 and 2022 driven by this disruption are not quantifiable. While the COVID-19 public health emergency has ended, management believes that the stress caused by COVID-19 on healthcare professionals still affects decisions on pursuing healthcare professions and furthering education and may negatively affect enrollment in our healthcare programs. In fiscal year 2022, we experienced higher variable expenses associated with bringing students back to campus and providing a safe environment in the context of COVID-19 as in-person instruction returned at Chamberlain and the medical and veterinary schools. Although COVID-19 has had a negative effect on the operating results of all five reporting units that contain goodwill and indefinite-lived intangible assets as of June 30, 2023, none of the effects are considered significant enough to create an impairment triggering event during fiscal year 2023. In addition, our annual impairment assessment performed as of May 31, 2023 did not identify any impairments. 49 Table of Contents Results of Operations The following table presents selected Consolidated Statements of Income data as a percentage of revenue: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,","\u200b"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021"],["Revenue","\u200b","100.0","%","100.0","%","100.0","%"],["Cost of educational services","\u200b","44.7","%","47.7","%","50.9","%"],["Student services and administrative expense","\u200b","40.4","%","41.0","%","32.5","%"],["Restructuring expense","\u200b","1.3","%","1.9","%","0.8","%"],["Business acquisition and integration expense","\u200b","2.9","%","3.8","%","3.5","%"],["Gain on sale of assets","\u200b","(0.9)","%","0.0","%","0.0","%"],["Total operating cost and expense","\u200b","88.4","%","94.4","%","87.7","%"],["Operating income","\u200b","11.6","%","5.6","%","12.3","%"],["Interest expense","\u200b","(4.3)","%","(9.4)","%","(4.6)","%"],["Other income, net","\u200b","0.5","%","0.1","%","0.7","%"],["Income (loss) from continuing operations before income taxes","\u200b","7.7","%","(3.7)","%","8.4","%"],["(Provision for) benefit from income taxes","\u200b","(0.7)","%","1.1","%","(1.4)","%"],["Income (loss) from continuing operations","\u200b","7.0","%","(2.6)","%","7.1","%"],["(Loss) income from discontinued operations, net of tax","\u200b","(0.6)","%","25.1","%","0.7","%"],["Net income","\u200b","6.4","%","22.5","%","7.7","%"],["Net loss attributable to redeemable noncontrolling interest from discontinued operations","\u200b","0.0","%","0.0","%","0.0","%"],["Net income attributable to Adtalem","\u200b","6.4","%","22.5","%","7.8","%"]] [[/GREPCENT_TABLE]] Fiscal Year Ended June 30, 2023 vs. Fiscal Year Ended June 30, 2022 Revenue The following table presents revenue by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2023"],["\u200b","\u200b","Chamberlain","","Walden","","Medical and Veterinary","","Consolidated"],["Fiscal year 2022","\u200b","$","557,536","\u200b","$","485,393","\u200b","$","338,913","\u200b","$","1,381,842","\u200b"],["Organic growth (decline)","\u200b","\u200b","13,498","\u200b","\u200b","(15,818)","\u200b","\u200b","7,154","\u200b","\u200b","4,834","\u200b"],["Effect of acquisitions","\u200b","\u200b","\u2014","\u200b","\u200b","64,150","\u200b","\u200b","\u2014","\u200b","\u200b","64,150","\u200b"],["Fiscal year 2023","\u200b","$","571,034","\u200b","$","533,725","\u200b","$","346,067","\u200b","$","1,450,826","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fiscal year 2023 % change:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Organic growth (decline)","\u200b","\u200b","2.4","%","\u200b","(3.3)","%","\u200b","2.1","%","\u200b","0.3","%"],["Effect of acquisitions","\u200b","\u200b","\u2014","\u200b","\u200b","13.2","%","\u200b","\u2014","\u200b","\u200b","4.6","%"],["Fiscal year 2023 % change","\u200b","\u200b","2.4","%","\u200b","10.0","%","\u200b","2.1","%","\u200b","5.0","%"]] [[/GREPCENT_TABLE]] 50 Table of Contents Chamberlain Chamberlain Student Enrollment: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2023","\u200b"],["Session","\u200b","July 2022","\u200b","Sept. 2022","\u200b","Nov. 2022","\u200b","Jan. 2023","\u200b","Mar. 2023","\u200b","May 2023","\u200b"],["Total students","\u200b","31,371","\u200b","33,153","\u200b","33,390","\u200b","34,760","\u200b","34,847","\u200b","33,284","\u200b"],["% change from prior year","\u200b","(4.1)","%","(4.0)","%","(0.8)","%","1.8","%","2.0","%","1.2","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2022","\u200b"],["Session","\u200b","July 2021","\u200b","Sept. 2021","\u200b","Nov. 2021","\u200b","Jan. 2022","\u200b","Mar. 2022","\u200b","May 2022"],["Total students","\u200b","32,729","\u200b","34,539","\u200b","33,648","\u200b","34,141","\u200b","34,158","\u200b","32,891","\u200b"],["% change from prior year","\u200b","1.6","%","(2.8)","%","(2.1)","%","(4.5)","%","(4.3)","%","(5.8)","%"]] [[/GREPCENT_TABLE]] Chamberlain revenue increased 2.4%, or $13.5 million, to $571.0 million in fiscal year 2023 compared to the prior year, driven by an increase in fee revenue along with lower scholarships and discounts. Enrollment has begun to recover in several graduate and doctoral programs and the undergraduate Bachelor of Science-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. Management believes this decrease and the slow recovery in enrollment may partially be driven by prolonged stress on healthcare professionals. While the COVID-19 public health emergency has ended, management believes that the stress caused by COVID-19 on healthcare professionals still affects decisions on pursuing healthcare professions and furthering education and may have negatively affected enrollment in our healthcare programs in fiscal year 2023. Chamberlain’s revenue and our ability to provide educational services are not materially exposed to the economic impact from the volatile supply chain disruptions impacting the current global macroeconomic environment. Chamberlain currently operates 23 campuses in 15 states, including Chamberlain’s newest campus in Irwindale, California, which began instruction in May 2021. Tuition Rates: 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. Some of these tuition rates increased by 3% to 4% from the prior year. 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. Walden Walden Student Enrollment: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2023","\u200b"],["\u200b","\u200b","September 30,","\u200b","December 31,","\u200b","March 31,","\u200b","June 30,","\u200b"],["Period","\u200b","2022","\u200b","2022","\u200b","2023","\u200b","2023","\u200b"],["Total students","\u200b","40,772","\u200b","37,956","\u200b","39,427","\u200b","37,582","\u200b"],["% change from prior year","\u200b","(9.2)","%","(7.8)","%","(7.9)","%","(4.8)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2022","\u200b"],["\u200b","\u200b","September 30,","\u200b","December 31,","\u200b","March 31,","\u200b","June 30,","\u200b"],["Period","\u200b","2021","\u200b","2021","\u200b","2022","\u200b","2022","\u200b"],["Total students","\u200b","44,886","\u200b","41,158","\u200b","42,788","\u200b","39,470","\u200b"]] [[/GREPCENT_TABLE]] 51 Table of Contents Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue increased 10.0%, or $48.3 million, to $533.7 million in fiscal year 2023 compared to the prior year. Excluding the timing of the Walden acquisition in the prior year, Walden revenue decreased 3.3%, or $15.8 million. In fiscal year 2022, $8.6 million was excluded from revenue due to an adjustment required for purchase accounting to record Walden’s deferred revenue at fair value. Fiscal year 2023 did not require a similar adjustment. Excluding the timing of the Walden acquisition in the prior year and the $8.6 million deferred revenue adjustment, revenue decreased 4.9%, or $24.4 million in fiscal year 2023 compared to the prior year. Management believes that the decrease in total enrollment compared to the prior year, which is resulting in the lower revenue, may be driven by prolonged stress on healthcare professionals. While the COVID-19 public health emergency has ended, management believes that the stress caused by COVID-19 on healthcare professionals still affects decisions on pursuing healthcare professions and furthering education and may have negatively affected enrollment in our healthcare programs in fiscal year 2023. Walden’s revenue and our ability to provide educational services are not materially exposed to the economic impact from the volatile supply chain disruptions impacting the current global macroeconomic environment. Tuition Rates: 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 technology fee that ranges from $50 to $230 per term as well as a clinical fee of $150 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 3.0% to 6.6% 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. Medical and Veterinary Schools Medical and Veterinary Schools Student Enrollment: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2023","\u200b"],["Semester","\u200b","Sept. 2022","\u200b","Jan. 2023","\u200b","May 2023","\u200b"],["Total students","\u200b","5,634","\u200b","5,312","\u200b","4,869","\u200b"],["% change from prior year","\u200b","3.4","%","1.6","%","(8.2)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2022","\u200b"],["Semester","\u200b","Sept. 2021","\u200b","Jan. 2022","\u200b","May 2022"],["Total students","\u200b","5,449","\u200b","5,228","\u200b","5,304","\u200b"],["% change from prior year","\u200b","(6.9)","%","(1.2)","%","3.5","%"]] [[/GREPCENT_TABLE]] Medical and Veterinary revenue increased 2.1%, or $7.2 million, to $346.1 million in fiscal year 2023 compared to the prior year, driven by tuition rate increases at all three institutions in this segment, partially offset by an average total student enrollment decline of 1.0% compared to the prior year and the higher use of scholarships to attract and retain students at AUC and RUSM. Medical and Veterinary’s revenue and our ability to provide educational services are not materially exposed to the economic impact from the volatile supply chain disruptions impacting the current global macroeconomic environment. Management is executing its plan to differentiate the medical and veterinary schools from the competition, with a core goal of increasing international students, increasing affiliations with historically black colleges and universities (“HBCU”) and Hispanic-serving institutions (“HSI”), expanding AUC’s medical education program based in the U.K. in partnership with the University of Central Lancashire (“UCLAN”), and improving the effectiveness of marketing and enrollment investments. 52 Table of Contents Tuition Rates: [[GREPCENT_TABLE]] [["","\u25cf","Effective for semesters beginning in September 2022, for students enrolled prior to May 2022, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC\u2019s medical program are $24,990 and $27,955, respectively, per semester. These tuition rates represent a 5.0% increase from the prior academic year. Effective for semesters beginning in September 2022, for students first enrolled in May 2022 and after, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC\u2019s medical program are $20,202 and $25,116, respectively, per semester. In addition, students first enrolled in May 2022, and after, pay administrative fees of $5,086 and $3,427 for the basic sciences and final clinical rotation portions of the program, respectively, per semester."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Effective for semesters beginning in September 2022, for students who first enrolled prior to May 2022, tuition rates for the beginning basic sciences and final clinical rotation portions of RUSM\u2019s medical program are $25,988 and $28,676, respectively, per semester. These tuition rates represent a 5.0% increase from the prior academic year. Effective for semesters beginning in September 2022, for students first enrolled in May 2022 and after, tuition rates for the beginning basic sciences and final clinical rotation portions of RUSM\u2019s medical program are $21,966 and $25,893, respectively, per semester. In addition, students first enrolled in May 2022, and after, pay administrative fees ranging from $5,552 to $6,287 for the basic sciences portion of the program and $3,228 for the final clinical rotation portion of the program, per semester."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","For students who entered the RUSVM program in September 2018 or later, the tuition rate for the pre-clinical (Semesters 1-7) and clinical curriculum (Semesters 8-10) is $22,683 per semester effective September 2022. For students who entered RUSVM before September 2018, tuition rates for the pre-clinical and clinical curriculum are $21,069 and $26,449, respectively, per semester effective September 2022. All of these tuition rates represent a 5.0% increase from the prior academic year."]] [[/GREPCENT_TABLE]] The respective tuition rates for AUC, RUSM, and RUSVM do not include the cost of transportation, living expenses, or health insurance. Cost of Educational Services The largest component of cost of educational services is the cost of faculty and staff who support educational operations. This expense category also includes the costs of facilities, adjunct faculty, supplies, housing, bookstore, other educational materials, student education-related support activities, and the provision for bad debts. We have not experienced significant inflationary pressures on wages or other costs of delivering our educational services; however, should inflation persist in the overall economy, cost increases could affect our results of operations in the future. The following table presents cost of educational services by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2023"],["\u200b","","Chamberlain","","Walden","","Medical and Veterinary","\u200b","Consolidated","\u200b"],["Fiscal year 2022","","$","254,768","\u200b","$","202,680","","$","202,328","","$","659,776","\u200b"],["Cost decrease","","","(6,041)","\u200b","","(26,066)","\u200b","","(2,194)","","","(34,301)","\u200b"],["Effect of acquisitions","","","\u2014","\u200b","","23,011","","","\u2014","","","23,011","\u200b"],["Fiscal year 2023","","$","248,727","\u200b","$","199,625","","$","200,134","","$","648,486","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fiscal year 2023 % change:","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Cost decrease","","\u200b","(2.4)","%","","(12.9)","%","\u200b","(1.1)","%","\u200b","(5.2)","%"],["Effect of acquisitions","","\u200b","\u2014","\u200b","","11.4","%","\u200b","\u2014","\u200b","\u200b","3.5","%"],["Fiscal year 2023 % change","","\u200b","(2.4)","%","","(1.5)","%","\u200b","(1.1)","%","\u200b","(1.7)","%"]] [[/GREPCENT_TABLE]] Cost of educational services decreased 1.7%, or $11.3 million, to $648.5 million in fiscal year 2023 compared to the prior year. Excluding the timing of the Walden acquisition in the prior year, cost of educational services decreased 5.2%, or $34.3 million, in fiscal year 2023 compared to the prior year. This cost decrease was primarily driven by cost reduction efforts across all institutions and the effect of workforce reductions which occurred in the prior year. 53 Table of Contents As a percentage of revenue, cost of educational services was 44.7% in fiscal year 2023 compared to 47.7% in the prior year. The decrease in the percentage was primarily the result of cost reduction efforts and the influence of Walden’s higher gross margins, which impacted the full fiscal year 2023 compared to only a portion of fiscal year 2022. Walden’s fully online operating model results in lower comparable cost of educational services. Student Services and Administrative Expense The student services and administrative expense category includes expenses related to student admissions, marketing and advertising, general and administrative, and amortization expense of finite-lived intangible assets related to business acquisitions. We have not experienced significant inflationary pressures on wages or other costs of providing services to our students and educational institutions; however, should inflation persist in the overall economy, cost increases could affect our results of operations in the future. The following table presents student services and administrative expense by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2023"],["\u200b","","Chamberlain","","Walden","","Medical and Veterinary","","Home Office and Other","\u200b","Consolidated","\u200b"],["Fiscal year 2022","\u200b","$","175,516","\u200b","$","283,967","\u200b","$","67,436","\u200b","$","39,575","\u200b","$","566,494","\u200b"],["Cost increase (decrease)","\u200b","","11,289","\u200b","","9,890","\u200b","","11,162","\u200b","","(7,748)","\u200b","","24,593","\u200b"],["Effect of acquisitions","\u200b","","\u2014","\u200b","","27,152","\u200b","","\u2014","\u200b","","\u2014","\u200b","","27,152","\u200b"],["Intangible amortization expense","\u200b","\u200b","\u2014","\u200b","\u200b","(36,035)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(36,035)","\u200b"],["Litigation reserve","\u200b","\u200b","\u2014","\u200b","\u200b","10,000","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","10,000","\u200b"],["CEO transition costs","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(6,195)","\u200b","\u200b","(6,195)","\u200b"],["Fiscal year 2023","\u200b","$","186,805","\u200b","$","294,974","\u200b","$","78,598","\u200b","$","25,632","\u200b","$","586,009","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fiscal year 2023 % change:","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Cost increase","\u200b","\u200b","6.4","%","","3.5","%","\u200b","16.6","%","","NM","\u200b","\u200b","4.3","%"],["Effect of acquisitions","\u200b","","\u2014","\u200b","","9.6","%","","\u2014","\u200b","","NM","\u200b","","4.8","%"],["Effect of intangible amortization expense","\u200b","","\u2014","\u200b","","(12.7)","%","","\u2014","\u200b","","NM","\u200b","","(6.4)","%"],["Effect of litigation reserve","\u200b","","\u2014","\u200b","","3.5","%","","\u2014","\u200b","","NM","\u200b","","1.8","%"],["Effect of CEO transition costs","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","NM","\u200b","","(1.1)","%"],["Fiscal year 2023 % change","\u200b","","6.4","%","","3.9","%","","16.6","%","","NM","\u200b","","3.4","%"]] [[/GREPCENT_TABLE]] Student services and administrative expense increased 3.4%, or $19.5 million, to $586.0 million in fiscal year 2023 compared to the prior year. Excluding the timing of the Walden acquisition in the prior year, intangible amortization expense, litigation reserve, and CEO transition costs, student services and administrative expense increased 4.3%, or $24.6 million, in fiscal year 2023 compared to the prior year. This cost increase was primarily driven by an increase in marketing expense, partially offset by cost reduction at home office. As a percentage of revenue, student services and administrative expense was 40.4% in fiscal year 2023 compared to 41.0% in the prior year. The decrease in the percentage was primarily the result of a decrease in intangible amortization expense in fiscal year 2023 and a decrease in CEO transition costs incurred in fiscal year 2022, partially offset by the litigation reserve in fiscal year 2023. Restructuring Expense Restructuring expense in fiscal year 2023 was $18.8 million compared to $25.6 million in the prior year. The decrease in restructuring expense in fiscal year 2023 compared to the prior year was primarily driven by a reduction in severance charges related to workforce reductions. See Note 6 “Restructuring Charges” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on restructuring charges. We continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities. 54 Table of Contents Business Acquisition and Integration Expense Business acquisition and integration expense in fiscal year 2023 was $42.7 million compared to $53.2 million in the prior year. These are transaction costs associated with acquiring Walden and costs associated with integrating Walden into Adtalem. In addition, during fiscal year 2023, we initiated transformation initiatives to accelerate growth and organizational agility. Certain costs relating to this transformation are included in business acquisition and integration costs in the Consolidated Statements of Income. We expect to incur additional integration costs in fiscal year 2024. Gain on Sale of Assets On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep Foundation (“DePaul College Prep”) for $52.0 million. Adtalem received $5.2 million of cash at the time of closing and held a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage was due on July 31, 2024 as a balloon payment and bore interest at a rate of 4% per annum, payable monthly. DePaul College Prep had an option to make prepayments. Due to Adtalem’s involvement with financing the sale, the transaction did not qualify as a sale for accounting purposes at the time of closing. Adtalem continued to maintain the assets associated with the sale on the Consolidated Balance Sheets. We recorded a note receivable of $40.3 million and a financing payable of $45.5 million at the time of the sale, which were classified as other assets, net and other liabilities, respectively, on the Consolidated Balance Sheets. On February 23, 2023, DePaul College Prep paid the mortgage in full. Upon receiving full repayment of the mortgage, Adtalem no longer is involved in the financing of the sale and therefore derecognized the note receivable, the financing payable, and the assets associated with the campus facility, which resulted in recognizing a gain on sale of assets of $13.3 million in fiscal year 2023. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 22 “Segment Information” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.” Operating Income The following table presents operating income by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2023"],["\u200b","\u200b","Chamberlain","","Walden","","Medical and Veterinary","","Home Office and Other","\u200b","Consolidated"],["Fiscal year 2022","\u200b","$","124,414","\u200b","$","(5,306)","\u200b","$","59,357","\u200b","$","(101,719)","\u200b","$","76,746"],["Organic change","\u200b","\u200b","8,251","\u200b","\u200b","(8,206)","\u200b","\u200b","(1,812)","\u200b","\u200b","7,747","\u200b","\u200b","5,980"],["Effect of acquisitions","\u200b","","\u2014","\u200b","","13,988","\u200b","","\u2014","\u200b","","\u2014","\u200b","","13,988"],["Deferred revenue adjustment change","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","8,561"],["CEO transition costs change","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","6,195"],["Restructuring expense change","\u200b","\u200b","2,020","\u200b","\u200b","808","\u200b","\u200b","2,104","\u200b","\u200b","1,879","\u200b","\u200b","6,811"],["Business acquisition and integration expense change","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","10,537","\u200b","\u200b","10,537"],["Intangible amortization expense change","\u200b","\u200b","\u2014","\u200b","\u200b","36,035","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","36,035"],["Litigation reserve change","\u200b","\u200b","\u2014","\u200b","\u200b","(10,000)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(10,000)"],["Gain on sale of assets change","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","13,317","\u200b","\u200b","13,317"],["Fiscal year 2023","\u200b","$","134,685","\u200b","$","35,880","\u200b","$","59,649","\u200b","$","(62,044)","\u200b","$","168,170"]] [[/GREPCENT_TABLE]] 55 Table of Contents The following table presents a reconciliation of operating income (GAAP) to adjusted operating income (non-GAAP) by segment (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Increase/(Decrease)","\u200b"],["\u200b","\u200b","2023","\u200b","2022","\u200b","$","\u200b","%","\u200b"],["Chamberlain:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","134,685","\u200b","$","124,414","\u200b","$","10,271","\u200b","8.3","%"],["Restructuring expense","\u200b","\u200b","818","\u200b","\u200b","2,838","\u200b","\u200b","(2,020)","\u200b","\u200b","\u200b"],["Adjusted operating income (non-GAAP)","\u200b","$","135,503","\u200b","$","127,252","\u200b","$","8,251","\u200b","6.5","%"],["Operating margin (GAAP)","\u200b","\u200b","23.6","%","\u200b","22.3","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","23.7","%","\u200b","22.8","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Walden:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (loss) (GAAP)","\u200b","$","35,880","\u200b","$","(5,306)","\u200b","$","41,186","\u200b","NM","\u200b"],["Deferred revenue adjustment","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","(8,561)","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","3,245","\u200b","\u200b","4,053","\u200b","\u200b","(808)","\u200b","\u200b","\u200b"],["Intangible amortization expense","\u200b","\u200b","61,239","\u200b","\u200b","97,274","\u200b","\u200b","(36,035)","\u200b","\u200b","\u200b"],["Litigation reserve","\u200b","\u200b","10,000","\u200b","\u200b","\u2014","\u200b","\u200b","10,000","\u200b","\u200b","\u200b"],["Adjusted operating income (non-GAAP)","\u200b","$","110,364","\u200b","$","104,582","\u200b","$","5,782","\u200b","5.5","%"],["Operating margin (GAAP)","\u200b","\u200b","6.7","%","\u200b","(1.1)","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","20.7","%","\u200b","21.5","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Medical and Veterinary:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","59,649","\u200b","$","59,357","\u200b","$","292","\u200b","0.5","%"],["Restructuring expense","\u200b","\u200b","7,687","\u200b","\u200b","9,791","\u200b","\u200b","(2,104)","\u200b","\u200b","\u200b"],["Adjusted operating income (non-GAAP)","\u200b","$","67,336","\u200b","$","69,148","\u200b","$","(1,812)","\u200b","(2.6)","%"],["Operating margin (GAAP)","\u200b","\u200b","17.2","%","\u200b","17.5","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","19.5","%","\u200b","20.4","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Home Office and Other:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating loss (GAAP)","\u200b","$","(62,044)","\u200b","$","(101,719)","\u200b","$","39,675","\u200b","39.0","%"],["CEO transition costs","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","(6,195)","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","7,067","\u200b","\u200b","8,946","\u200b","\u200b","(1,879)","\u200b","\u200b","\u200b"],["Business acquisition and integration expense","\u200b","\u200b","42,661","\u200b","\u200b","53,198","\u200b","\u200b","(10,537)","\u200b","\u200b","\u200b"],["Gain on sale of assets","\u200b","\u200b","(13,317)","\u200b","\u200b","\u2014","\u200b","\u200b","(13,317)","\u200b","\u200b","\u200b"],["Adjusted operating loss (non-GAAP)","\u200b","$","(25,633)","\u200b","$","(33,380)","\u200b","$","7,747","\u200b","23.2","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Adtalem Global Education:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","168,170","\u200b","$","76,746","\u200b","$","91,424","\u200b","119.1","%"],["Deferred revenue adjustment","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","(8,561)","\u200b","\u200b","\u200b"],["CEO transition costs","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","(6,195)","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","18,817","\u200b","\u200b","25,628","\u200b","\u200b","(6,811)","\u200b","\u200b","\u200b"],["Business acquisition and integration expense","\u200b","\u200b","42,661","\u200b","\u200b","53,198","\u200b","\u200b","(10,537)","\u200b","\u200b","\u200b"],["Intangible amortization expense","\u200b","\u200b","61,239","\u200b","\u200b","97,274","\u200b","\u200b","(36,035)","\u200b","\u200b","\u200b"],["Litigation reserve","\u200b","\u200b","10,000","\u200b","\u200b","\u2014","\u200b","\u200b","10,000","\u200b","\u200b","\u200b"],["Gain on sale of assets","\u200b","\u200b","(13,317)","\u200b","\u200b","\u2014","\u200b","\u200b","(13,317)","\u200b","\u200b","\u200b"],["Adjusted operating income (non-GAAP)","\u200b","$","287,570","\u200b","$","267,602","\u200b","$","19,968","\u200b","7.5","%"],["Operating margin (GAAP)","\u200b","\u200b","11.6","%","\u200b","5.6","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","19.8","%","\u200b","19.4","%","\u200b","\u200b","\u200b","\u200b","\u200b"]] [[/GREPCENT_TABLE]] Consolidated operating income increased 119.1%, or $91.4 million, to $168.2 million in fiscal year 2023 compared to the prior year. The primary drivers of the operating income increase in fiscal year 2023 were revenue increases at Chamberlain and Medical and Veterinary, cost reduction efforts across all institutions, the timing of the Walden acquisition in the prior year, decreased CEO transition costs, decreased business acquisition and integration expense, decreased intangible amortization expense, and the gain on sale of assets, partially offset by increased marketing expense. The decrease in amortization expense is driven by the decrease in amortization relating to the 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. Consolidated adjusted operating income increased 7.5%, or $20.0 million, to $287.6 million in fiscal year 2023 compared to the prior year. The primary drivers of the adjusted operating income increase were revenue increases at 56 Table of Contents Chamberlain and Medical and Veterinary, cost reduction efforts across all institutions, and the timing of the Walden acquisition in the prior year, partially offset by increased marketing expense. Chamberlain Chamberlain operating income increased 8.3%, or $10.3 million, to $134.7 million in fiscal year 2023 compared to the prior year. Segment adjusted operating income increased 6.5%, or $8.3 million, to $135.5 million in fiscal year 2023 compared to the prior year. The primary driver of the increase in adjusted operating income in fiscal year 2023 was the result of increased revenue and labor cost reductions. Walden Walden operating income was $35.9 million in fiscal year 2023 compared to operating loss of $5.3 million in the prior year that was impacted by intangible amortization expense and the deferred revenue purchase accounting adjustments. Segment adjusted operating income increased 5.5%, or $5.8 million, to $110.4 million in fiscal year 2023 compared to the prior year. The primary driver of the increase in adjusted operating income in fiscal year 2023 was the timing of the Walden acquisition in the prior year. Medical and Veterinary Medical and Veterinary operating income increased 0.5%, or $0.3 million, to $59.6 million in fiscal year 2023 compared to the prior year. Segment adjusted operating income decreased 2.6%, or $1.8 million, to $67.3 million in fiscal year 2023 compared to the prior year. The primary driver of the decrease in adjusted operating income in fiscal year 2023 was the result of increased marketing expense. Interest Expense Interest expense in fiscal year 2023 was $63.1 million compared to $129.3 million in the prior year. The decrease in interest expense was primarily the result of decreased borrowings in fiscal year 2023 compared to the prior year due to prepayments of debt and a result of the prior year incurring charges due to the write-off of issuance costs on the Prior Credit Facility and unused bridge fee (as defined and discussed in Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”). This decrease in interest expense was partially offset by rising interest rates on outstanding Term Loan B debt. The interest rate for borrowings under the Term Loan B debt was 9.19% and 5.60% as of June 30, 2023 and 2022, respectively. Other Income, Net Other income, net in fiscal year 2023 was $7.0 million compared to $1.1 million in the prior year. The increase in other income, net was primarily the result of an increase in interest income, partially offset by a $5.0 million investment impairment of an equity investment. (Provision for) Benefit from Income Taxes 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. Our income tax provision from continuing operations was $10.3 million in fiscal year 2023 and our income tax benefit from continuing operations was $15.5 million in fiscal year 2022. In addition, in fiscal year 2023, we recorded a net tax benefit of $6.4 million 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 net benefit is comprised of the release of a valuation allowance of $9.3 million offset by a reduction in state net operating loss carryforwards of $2.3 million and a revaluation of deferred tax assets due to a tax rate change of $0.6 million. Fiscal year 57 Table of Contents 2023 resulted in an income tax provision compared to an income tax benefit in the prior year primarily due to the impacts recognized in the prior year related to the Walden acquisition. The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) requires taxpayers to capitalize and subsequently amortize research and experimental (“R&E”) expenditures that fall within the scope of Internal Revenue Code Section 174 for tax years starting after December 31, 2021. This rule became effective for Adtalem during fiscal year 2023 and resulted in the deferred tax asset for capitalization of R&E costs of $8.1 million, based on interpretation of the law as currently enacted. Adtalem will capitalize and amortize these costs for tax purposes over 5 years for R&E performed in the U.S. and over 15 years for R&E performed outside of the U.S. Discontinued Operations Beginning in the second quarter of fiscal year 2022, ACAMS, Becker, OCL, and EduPristine operations were classified as discontinued operations. 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. Net loss from discontinued operations in the year ended June 30, 2023 was $8.4 million. This loss consisted of the following: (i) loss of $8.5 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 price and a tax return to provision adjustment; and (iii) a benefit from income taxes of $3.6 million associated with the items listed above. Net income from discontinued operations in the year ended June 30, 2022 was $346.9 million. This income consisted of the following: (i) loss of $1.0 million driven by ongoing litigation costs and settlements related to the DeVry University divestiture, partially offset by the operating results related to ACAMS, Becker, OCL, and EduPristine, and income from the DeVry University earn-out; (ii) a gain on the sale of ACAMS, Becker, OCL, and EduPristine of $473.5 million; and (iii) a provision for income taxes of $125.6 million associated with the items listed above. Fiscal Year Ended June 30, 2022 vs. Fiscal Year Ended June 30, 2021 Revenue The following table presents revenue by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2022"],["\u200b","\u200b","Chamberlain","","Walden","","Medical and Veterinary","","Consolidated"],["Fiscal year 2021","\u200b","$","563,814","\u200b","$","\u2014","\u200b","$","335,434","\u200b","$","899,248","\u200b"],["Organic (decline) growth","\u200b","\u200b","(6,278)","\u200b","\u200b","\u2014","\u200b","\u200b","3,479","\u200b","\u200b","(2,799)","\u200b"],["Effect of acquisitions","\u200b","\u200b","\u2014","\u200b","\u200b","485,393","\u200b","\u200b","\u2014","\u200b","\u200b","485,393","\u200b"],["Fiscal year 2022","\u200b","$","557,536","\u200b","$","485,393","\u200b","$","338,913","\u200b","$","1,381,842","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fiscal year 2022 % change:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Organic growth (decline)","\u200b","\u200b","(1.1)","%","\u200b","NM","\u200b","\u200b","1.0","%","\u200b","(0.3)","%"],["Effect of acquisitions","\u200b","\u200b","\u2014","\u200b","\u200b","NM","\u200b","\u200b","\u2014","\u200b","\u200b","54.0","%"],["Fiscal year 2022 % change","\u200b","\u200b","(1.1)","%","\u200b","NM","\u200b","\u200b","1.0","%","\u200b","53.7","%"]] [[/GREPCENT_TABLE]] 58 Table of Contents Chamberlain Chamberlain Student Enrollment: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2022","\u200b"],["Session","\u200b","July 2021","\u200b","Sept. 2021","\u200b","Nov. 2021","\u200b","Jan. 2022","\u200b","Mar. 2022","\u200b","May 2022"],["Total students","\u200b","32,729","\u200b","34,539","\u200b","33,648","\u200b","34,141","\u200b","34,158","\u200b","32,891","\u200b"],["% change from prior year","\u200b","1.6","%","(2.8)","%","(2.1)","%","(4.5)","%","(4.3)","%","(5.8)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2021","\u200b"],["Session","\u200b","July 2020","\u200b","Sept. 2020","\u200b","Nov. 2020","\u200b","Jan. 2021","\u200b","Mar. 2021","\u200b","May 2021"],["Total students","\u200b","32,198","\u200b","35,525","\u200b","34,387","\u200b","35,750","\u200b","35,702","\u200b","34,930","\u200b"],["% change from prior year","\u200b","12.2","%","11.9","%","10.2","%","5.6","%","5.8","%","4.6","%"]] [[/GREPCENT_TABLE]] Chamberlain revenue decreased 1.1%, or $6.3 million, to $557.5 million in fiscal year 2022 compared to fiscal year 2021, driven by declining total enrollments in the September 2021 through May 2022 sessions compared to the same sessions from fiscal year 2021. Management believes that a decrease in total student enrollment in several programs, with the most pronounced being in the RN-to-BSN online degree program, may have been partially by driven by prolonged COVID-19 disruptions in the healthcare industry. Tuition Rates (2022): Tuition for the BSN onsite and online degree program ranged from $675 to $699 per credit hour. Tuition for the RN-to-BSN online degree program was $590 per credit hour. Tuition for the online MSN degree program was $650 per credit hour. Tuition for the online FNP degree program was $665 per credit hour. Tuition for the online DNP degree program was $775 per credit hour. Tuition for the online MPH degree program was $550 per credit hour. Tuition for the online MSW degree program was $695 per credit hour. All of these tuition rates were unchanged from fiscal year 2021, except for the BSN rates which were $675 to $730 per credit hour in fiscal year 2021. 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. Walden Walden Student Enrollment: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2022","\u200b"],["\u200b","\u200b","September 30,","\u200b","December 31,","\u200b","March 31,","\u200b","June 30,","\u200b"],["Period","\u200b","2021","\u200b","2021","\u200b","2022","\u200b","2022","\u200b"],["Total students","\u200b","44,886","\u200b","41,158","\u200b","42,788","\u200b","39,470","\u200b"]] [[/GREPCENT_TABLE]] Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue was $485.4 million in fiscal year 2022, which includes the deferred revenue purchase accounting adjustment of $8.6 million. There was no comparable revenue in fiscal year 2021 as Adtalem acquired Walden on August 12, 2021. Management believes that the decrease in total enrollment during fiscal year 2022 may have been partially driven by prolonged COVID-19 disruptions in the healthcare industry and the negative publicity surrounding the now concluded U.S. Department of Justice inquiry into potential false representations and false advertising to students. This inquiry ultimately concluded favorably, with no findings of misconduct by Walden. In addition, the uncertainty from potential students around the change in control and the Walden acquisition may have negatively affected enrollment. Tuition Rates (2022): On a per credit hour basis, tuition for Walden programs ranged from $123 per credit hour to $1,020 per credit hour, with the wide range due to the nature of the programs. General education courses were 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 ranged from $1,500 to $6,970 per term. Students were charged a technology fee that ranged from $50 to $220 per 59 Table of Contents term as well as a clinical fee of $150 per course for specific programs. Some programs require students to attend residencies, skills labs, and pre-practicum labs, which were charged at a range of $938 to $2,475 per event. These tuition rates, event charges, and fees do not include the cost of books or personal technology, supplies, transportation, or living expenses. Medical and Veterinary Schools Medical and Veterinary Schools Student Enrollment: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2022","\u200b"],["Semester","\u200b","Sept. 2021","\u200b","Jan. 2022","\u200b","May 2022"],["Total students","\u200b","5,449","\u200b","5,228","\u200b","5,304","\u200b"],["% change from prior year","\u200b","(6.9)","%","(1.2)","%","3.5","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year 2021","\u200b"],["Semester","\u200b","Sept. 2020","\u200b","Jan. 2021","\u200b","May 2021"],["Total students","\u200b","5,850","\u200b","5,292","\u200b","5,126","\u200b"],["% change from prior year","\u200b","4.3","%","(6.2)","%","(1.2)","%"]] [[/GREPCENT_TABLE]] Medical and Veterinary revenue increased 1.0%, or $3.5 million, to $338.9 million in fiscal year 2022 compared to fiscal year 2021, driven by increased clinical revenue and housing revenue at RUSM, partially offset by lower enrollment. In the September 2021 semester, total student enrollment increased at AUC but declined at RUSM and RUSVM. In the January 2022 and May 2022 semesters, total student enrollment increased at AUC and RUSM but declined at RUSVM. Previous declines in total student enrollment at RUSM were partially driven by the inability to offer clinical experiences to all students caused by an increase in students waiting to pass their USMLE Step 1 exam. If a student has not yet started in a clinical program, is not eligible to be enrolled in a clinical program, or not participating in other educational experiences, they are not included in the enrollment count for that semester. In the January 2022 and May 2022 semesters, this clinical backlog continued to decrease. Management believes increased competition for students and hesitancy on participating in on campus instruction were drivers of lower total student enrollment in the basic science programs at RUSM and RUSVM. Tuition Rates (2022): [[GREPCENT_TABLE]] [["","\u25cf","Effective for semesters beginning in September 2021, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC\u2019s medical program were $23,800 and $26,625, respectively, per semester. These tuition rates represented a 2.4% increase from the prior academic year."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Effective for semesters beginning in September 2021, tuition rates for the beginning basic sciences and final clinical rotation portions of RUSM\u2019s medical program were $24,750 and $27,310, respectively, per semester. These tuition rates represented a 2.4% increase from the prior academic year."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","For students who entered the RUSVM program in September 2018 or later, the tuition rate for the pre-clinical (Semesters 1-7) and clinical curriculum (Semesters 8-10) was $21,603 per semester effective September 2021. For students who entered RUSVM before September 2018, tuition rates for the pre-clinical and clinical curriculum were $20,066 and $25,190, respectively, per semester effective September 2021. All of these tuition rates represented a 3.5% increase from the prior academic year."]] [[/GREPCENT_TABLE]] The respective tuition rates for AUC, RUSM, and RUSVM do not include the cost of transportation, living expenses, or health insurance. Cost of Educational Services The largest component of cost of educational services is the cost of faculty and staff who support educational operations. This expense category also includes the costs of facilities, adjunct faculty, supplies, housing, bookstore, other educational materials, student education-related support activities, and the provision for bad debts. We have not yet experienced significant inflationary pressures on wages or other costs of delivering our educational services; however, should inflation 60 Table of Contents persist in the overall economy, cost increases could affect our results of operations in the future. The following table presents cost of educational services by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2022"],["\u200b","","Chamberlain","","Walden","","Medical and Veterinary","\u200b","Home Office and Other","\u200b","Consolidated","\u200b"],["Fiscal year 2021","","$","252,422","\u200b","$","\u2014","","$","203,363","","$","2,120","","$","457,905","\u200b"],["Cost increase (decrease)","","","2,346","\u200b","","\u2014","\u200b","","(1,035)","","","(2,120)","","","(809)","\u200b"],["Effect of acquisitions","","","\u2014","\u200b","","202,680","","","\u2014","","","\u2014","","","202,680","\u200b"],["Fiscal year 2022","","$","254,768","\u200b","$","202,680","","$","202,328","","$","\u2014","","$","659,776","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fiscal year 2022 % change:","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Cost increase (decrease)","","\u200b","0.9","%","","NM","\u200b","\u200b","(0.5)","%","\u200b","NM","\u200b","\u200b","(0.2)","%"],["Effect of acquisitions","","\u200b","\u2014","\u200b","","NM","\u200b","\u200b","\u2014","\u200b","\u200b","NM","\u200b","\u200b","44.3","%"],["Fiscal year 2022 % change","","\u200b","0.9","%","","NM","\u200b","\u200b","(0.5)","%","\u200b","NM","\u200b","\u200b","44.1","%"]] [[/GREPCENT_TABLE]] Cost of educational services increased 44.1%, or $201.9 million, to $659.8 million in fiscal year 2022 compared to fiscal year 2021. Excluding the effect of the Walden acquisition, cost of educational services decreased 0.2%, or $0.8 million, in fiscal year 2022 compared to fiscal year 2021. Decreased costs excluding Walden in fiscal year 2022 were primarily driven by cost reduction efforts across all institutions, partially offset by return to campus cost increases at Chamberlain. As a percentage of revenue, cost of educational services was 47.7% in fiscal year 2022 compared to 50.9% in fiscal year 2021. The decrease in the percentage was primarily the result of the influence of Walden’s higher gross margins. Walden’s fully online operating model results in lower comparable cost of educational services. Student Services and Administrative Expense The student services and administrative expense category includes expenses related to student admissions, marketing and advertising, general and administrative, and amortization expense of finite-lived intangible assets related to business acquisitions. We have not yet experienced significant inflationary pressures on wages or other costs of providing services to our students and educational institutions; however, should inflation persist in the overall economy, cost increases could affect our results of operations in the future. The following table presents student services and administrative expense by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2022"],["\u200b","","Chamberlain","","Walden","","Medical and Veterinary","","Home Office and Other","\u200b","Consolidated","\u200b"],["Fiscal year 2021","\u200b","$","182,540","\u200b","$","\u2014","\u200b","$","71,874","\u200b","$","38,068","\u200b","$","292,482","\u200b"],["Cost decrease","\u200b","","(7,024)","\u200b","","\u2014","\u200b","","(4,438)","\u200b","","(4,688)","\u200b","","(16,150)","\u200b"],["Effect of acquisitions","\u200b","","\u2014","\u200b","","186,693","\u200b","","\u2014","\u200b","","\u2014","\u200b","","186,693","\u200b"],["Intangible amortization expense","\u200b","\u200b","\u2014","\u200b","\u200b","97,274","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","97,274","\u200b"],["CEO transition costs","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","6,195","\u200b"],["Fiscal year 2022","\u200b","$","175,516","\u200b","$","283,967","\u200b","$","67,436","\u200b","$","39,575","\u200b","$","566,494","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Fiscal year 2022 % change:","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Cost decrease","\u200b","\u200b","(3.8)","%","","NM","\u200b","\u200b","(6.2)","%","","NM","\u200b","\u200b","(5.5)","%"],["Effect of acquisitions","\u200b","","\u2014","\u200b","","NM","\u200b","","\u2014","\u200b","","NM","\u200b","","63.8","%"],["Effect of intangible amortization expense","\u200b","","\u2014","\u200b","","NM","\u200b","","\u2014","\u200b","","NM","\u200b","","33.3","%"],["Effect of CEO transition costs","\u200b","","\u2014","\u200b","","NM","\u200b","","\u2014","\u200b","","NM","\u200b","","2.1","%"],["Fiscal year 2022 % change","\u200b","","(3.8)","%","","NM","\u200b","","(6.2)","%","","NM","\u200b","","93.7","%"]] [[/GREPCENT_TABLE]] Student services and administrative expense increased 93.7%, or $274.0 million, to $566.5 million in fiscal year 2022 compared to fiscal year 2021. Excluding the effect of the Walden acquisition and CEO transition costs, student services and administrative expense decreased 5.5%, or $16.2 million, in fiscal year 2022 compared to fiscal year 2021. Decreased 61 Table of Contents costs excluding Walden in fiscal year 2022 were primarily driven by cost reduction efforts across all institutions and home office. As a percentage of revenue, student services and administrative expense was 41.0% in fiscal year 2022 compared to 32.5% in fiscal year 2021. The increase in the percentage was primarily the result of an increase in Chamberlain and Medical and Veterinary marketing expense, intangible amortization expense, and CEO transition costs. Restructuring Expense Restructuring expense in fiscal year 2022 was $25.6 million compared to $6.9 million in fiscal year 2021. The increased restructure expense in fiscal year 2022 was primarily driven by workforce reductions and contract terminations related to synergy actions with regard to the Walden acquisition and Medical and Veterinary and Adtalem’s home office real estate consolidations. See Note 6 “Restructuring Charges” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on restructuring charges. Business Acquisition and Integration Expense Business acquisition and integration expense in fiscal year 2022 was $53.2 million compared to $31.6 million in fiscal year 2021. These were transaction costs associated with acquiring Walden and costs associated with integrating Walden into Adtalem. Operating Income The following table presents operating income by segment detailing the changes from the prior year (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30, 2022"],["\u200b","\u200b","Chamberlain","","Walden","","Medical and Veterinary","","Home Office and Other","\u200b","Consolidated"],["Fiscal year 2021","\u200b","$","128,851","\u200b","$","\u2014","\u200b","$","60,199","\u200b","$","(78,651)","\u200b","$","110,399"],["Organic change","\u200b","\u200b","(1,599)","\u200b","\u200b","\u2014","\u200b","\u200b","8,949","\u200b","\u200b","6,809","\u200b","\u200b","14,159"],["Effect of acquisitions","\u200b","\u200b","\u2014","\u200b","\u200b","104,582","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","104,582"],["Deferred revenue adjustment change","\u200b","\u200b","\u2014","\u200b","\u200b","(8,561)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(8,561)"],["CEO transition costs change","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(6,195)","\u200b","\u200b","(6,195)"],["Restructuring expense change","\u200b","\u200b","(2,838)","\u200b","\u200b","(4,053)","\u200b","\u200b","(9,791)","\u200b","\u200b","(2,077)","\u200b","\u200b","(18,759)"],["Business acquisition and integration expense change","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(21,605)","\u200b","\u200b","(21,605)"],["Intangible amortization expense change","\u200b","\u200b","\u2014","\u200b","\u200b","(97,274)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","(97,274)"],["Fiscal year 2022","\u200b","$","124,414","\u200b","$","(5,306)","\u200b","$","59,357","\u200b","$","(101,719)","\u200b","$","76,746"]] [[/GREPCENT_TABLE]] 62 Table of Contents The following table presents a reconciliation of operating income (GAAP) to operating income excluding special items (non-GAAP) by segment (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Increase/(Decrease)","\u200b"],["\u200b","\u200b","2022","\u200b","2021","\u200b","$","\u200b","%","\u200b"],["Chamberlain:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","124,414","\u200b","$","128,851","\u200b","$","(4,437)","\u200b","(3.4)","%"],["Restructuring expense","\u200b","\u200b","2,838","\u200b","\u200b","\u2014","\u200b","\u200b","2,838","\u200b","\u200b","\u200b"],["Operating income excluding special items (non-GAAP)","\u200b","$","127,252","\u200b","$","128,851","\u200b","$","(1,599)","\u200b","(1.2)","%"],["Operating margin (GAAP)","\u200b","\u200b","22.3","%","\u200b","22.9","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","22.8","%","\u200b","22.9","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Walden:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (loss) (GAAP)","\u200b","$","(5,306)","\u200b","$","\u2014","\u200b","$","(5,306)","\u200b","NM","\u200b"],["Deferred revenue adjustment","\u200b","\u200b","8,561","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","4,053","\u200b","\u200b","\u2014","\u200b","\u200b","4,053","\u200b","\u200b","\u200b"],["Intangible amortization expense","\u200b","\u200b","97,274","\u200b","\u200b","\u2014","\u200b","\u200b","97,274","\u200b","\u200b","\u200b"],["Adjusted operating income (non-GAAP)","\u200b","$","104,582","\u200b","$","\u2014","\u200b","$","104,582","\u200b","NM","\u200b"],["Operating margin (GAAP)","\u200b","\u200b","(1.1)","%","\u200b","N/A","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","21.5","%","\u200b","N/A","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Medical and Veterinary:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","59,357","\u200b","$","60,199","\u200b","$","(842)","\u200b","(1.4)","%"],["Restructuring expense","\u200b","\u200b","9,791","\u200b","\u200b","\u2014","\u200b","\u200b","9,791","\u200b","\u200b","\u200b"],["Operating income excluding special items (non-GAAP)","\u200b","$","69,148","\u200b","$","60,199","\u200b","$","8,949","\u200b","14.9","%"],["Operating margin (GAAP)","\u200b","\u200b","17.5","%","\u200b","17.9","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","20.4","%","\u200b","17.9","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Home Office and Other:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating loss (GAAP)","\u200b","$","(101,719)","\u200b","$","(78,651)","\u200b","$","(23,068)","\u200b","(29.3)","%"],["CEO transition costs","\u200b","\u200b","6,195","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","8,946","\u200b","\u200b","6,869","\u200b","\u200b","2,077","\u200b","\u200b","\u200b"],["Business acquisition and integration expense","\u200b","\u200b","53,198","\u200b","\u200b","31,593","\u200b","\u200b","21,605","\u200b","\u200b","\u200b"],["Operating loss excluding special items (non-GAAP)","\u200b","$","(33,380)","\u200b","$","(40,189)","\u200b","$","6,809","\u200b","16.9","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Adtalem Global Education:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","76,746","\u200b","$","110,399","\u200b","$","(33,653)","\u200b","(30.5)","%"],["Deferred revenue adjustment","\u200b","\u200b","8,561","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","\u200b"],["CEO transition costs","\u200b","\u200b","6,195","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","25,628","\u200b","\u200b","6,869","\u200b","\u200b","18,759","\u200b","\u200b","\u200b"],["Business acquisition and integration expense","\u200b","\u200b","53,198","\u200b","\u200b","31,593","\u200b","\u200b","21,605","\u200b","\u200b","\u200b"],["Intangible amortization expense","\u200b","\u200b","97,274","\u200b","\u200b","\u2014","\u200b","\u200b","97,274","\u200b","\u200b","\u200b"],["Operating income excluding special items (non-GAAP)","\u200b","$","267,602","\u200b","$","148,861","\u200b","$","118,741","\u200b","79.8","%"],["Operating margin (GAAP)","\u200b","\u200b","5.6","%","\u200b","12.3","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin (non-GAAP)","\u200b","\u200b","19.4","%","\u200b","16.6","%","\u200b","\u200b","\u200b","\u200b","\u200b"]] [[/GREPCENT_TABLE]] Total consolidated operating income decreased 30.5%, or $33.7 million, to $76.7 million in fiscal year 2022 compared to fiscal year 2021. Excluding the effect of the Walden acquisition, total consolidated operating income decreased $28.3 million in fiscal year 2022 compared to fiscal year 2021. The primary drivers of the operating income decrease in fiscal year 2022 were decreased revenue at Chamberlain, increased costs at Chamberlain and Medical and Veterinary for return to campus, increased marketing expense at Chamberlain and Medical and Veterinary, CEO transition costs, increased restructuring costs, and increased business acquisition and integration costs. Consolidated operating income excluding special items increased 79.8%, or $118.7 million, in fiscal year 2022 compared to fiscal year 2021. The primary driver of the operating income excluding special items increase was the addition of operating income excluding special items from Walden. Chamberlain Chamberlain operating income decreased 3.4%, or $4.4 million, to $124.4 million in fiscal year 2022 compared to fiscal year 2021. Segment operating income excluding special items decreased 1.2%, or $1.6 million, to $127.3 million in fiscal 63 Table of Contents year 2022 compared to fiscal year 2021. Cost reduction efforts and a decrease in employee benefit costs were offset with a decrease in revenue, increased costs for return to campus, and increased marketing expense. Walden Walden operating loss was $5.3 million in fiscal year 2022, which was impacted by intangible amortization expense and the deferred revenue purchase accounting adjustments. Segment operating income excluding special items was $104.6 million in fiscal year 2022. There was no comparable operating income in fiscal year 2021 as Adtalem acquired Walden on August 12, 2021. Medical and Veterinary Medical and Veterinary operating income decreased 1.4%, or $0.8 million, to $59.4 million in fiscal year 2022 compared to fiscal year 2021. Segment operating income excluding special items increased 14.9%, or $8.9 million, to $69.1 million in fiscal year 2022 compared to fiscal year 2021. The primary drivers of the increase in operating income excluding special items were cost reduction efforts and decreased employee benefit costs. Interest Expense Interest expense in fiscal year 2022 was $129.3 million compared to $41.4 million in fiscal year 2021. The increase in interest expense was primarily the result of increased borrowings (as discussed in Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”) to finance the Walden acquisition and fiscal year 2022 incurring charges due to the write-offs of issuance costs on the Prior Credit Facility and unused bridge fee (as defined and discussed in Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”). Other Income, Net Other income, net in fiscal year 2022 was $1.1 million compared to $6.7 million in fiscal year 2021. The decrease in other income, net was primarily the result of an investment loss incurred on the rabbi trust investments in fiscal year 2022 compared to an investment gain in fiscal year 2021. See Note 7 “Other Income, Net” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on these investment gains and losses. Benefit from (Provision for) Income Taxes Our income tax benefit from continuing operations was $15.5 million in fiscal year 2022 and our income tax expense from continuing operations was $12.3 million in fiscal year 2021. The fiscal year 2022 income tax benefit was the result of the loss incurred in fiscal year 2022. The effective tax rate included a tax benefit of $1.7 million from a loss for certain uncollectible subsidiary receivables as well as a benefit of $1.2 million to adjust deferred state tax balances for the acquisition of Walden and the sale of ACAMS, Becker, and OCL, offset by $3.0 million for limitations on deductions for executive compensation. Discontinued Operations Beginning in the second quarter of fiscal year 2022, ACAMS, Becker, OCL, and EduPristine operations were classified as discontinued operations. 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. Net income from discontinued operations for the year ended June 30, 2022 was $347.0 million. This income consisted of the following: (i) loss of $1.0 million driven by the operating results and divestiture costs related to ACAMS, Becker, OCL, and EduPristine, and ongoing litigation costs and settlements to the DeVry University divestiture; (ii) a gain on the sale of ACAMS, Becker, OCL, and EduPristine of $473.5 million; and (iii) a provision for income taxes of $125.6 million associated with the items listed above. 64 Table of Contents Net income from discontinued operations for the year ended June 30, 2021 was $6.1 million. This income consisted of the following: (i) income of $9.3 million driven by the operating results of ACAMS, Becker, OCL, and EduPristine and ongoing litigation costs and settlements related to the DeVry University divestiture and (ii) a provision for income taxes of $3.2 million associated with the items listed above. Regulatory Environment 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” for a discussion of student financial aid related risks. In addition, government-funded financial assistance programs are governed by extensive and complex regulations in the U.S. Like any other educational institution, Adtalem’s administration of these programs is periodically reviewed by various regulatory agencies and is subject to audit or investigation by other governmental authorities. Any violation could be the basis for penalties or other disciplinary action, including initiation of a suspension, limitation, or termination proceeding. If the U.S. Department of Education (“ED”) determines that we have failed to demonstrate either financial responsibility or administrative capability in any pending program review, or otherwise determines that an institution has violated the terms of its Program Participation Agreement (“PPA”), we could be subject to sanctions including: fines, penalties, reimbursement for discharged loan obligations, a requirement to post a letter of credit, and/or suspension or termination of our eligibility to participate in the Title IV programs. Chamberlain was most recently recertified and issued an unrestricted PPA in September 2020, with an expiration date of March 31, 2024. Walden was issued a Temporary Provisional PPA (“TPPPA”) on September 17, 2021 in connection with their acquisition by Adtalem. 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 PPA recertification have been timely submitted to ED. The provisional nature of the existing agreements for AUC, RUSM, and RUSVM stemmed from increased and/or repeated Title IV compliance audit findings. 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. No similar requirements were imposed on AUC, RUSM, or RUSVM. While corrective actions have been taken to resolve past compliance matters and eliminate the incidence of repetition, if AUC, RUSM, or RUSVM fail to maintain administrative capability as defined by ED while under provisional status or otherwise fail to comply with ED requirements, the institution(s) could lose eligibility to participate in Title IV programs or have that eligibility adversely conditioned, which could have a material adverse effect on the businesses, financial condition, results of operations, and cash flows. ED may alternatively issue new PPAs for continued Title IV participation. 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 participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. Walden is currently on a TPPPA which is required for participation in Title IV programs on a month-to-month basis. Walden’s 65 Table of Contents 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 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 also is subject to a letter of credit and is subject to additional cash management requirements with respect to its disbursements of Title IV funds, as well as 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). Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of June 30, 2023 in favor of the ED on behalf of Walden, which allows Walden to participate in Title IV programs. On January 18, 2023, we received a letter from ED, requesting Adtalem to provide a letter of credit in the amount of $76.2 million related to ED’s review of the Same Day Balance Sheet, which is the consolidated Adtalem balance sheet as of August 12, 2021, the date of the Walden acquisition. On February 21, 2023, Adtalem provided the $76.2 million letter of credit to ED. 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 Title IV-eligible institutions for fiscal years 2022 and 2021. Final data for fiscal year 2023 is not yet available. As 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. [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Fiscal Year"],["\u200b","\u200b","2022","\u200b","2021"],["Chamberlain University","","65","%","66","%"],["Walden University","\u200b","73","%","n/a","\u200b"],["American University of the Caribbean School of Medicine","","81","%","80","%"],["Ross University School of Medicine","","85","%","85","%"],["Ross University School of Veterinary Medicine","","81","%","82","%"],["Consolidated","","72","%","73","%"]] [[/GREPCENT_TABLE]] An ED defined financial responsibility test is required for continued participation by an institution in Title IV aid programs. For Adtalem’s institutions, this test is calculated at the consolidated Adtalem level. Applying various financial elements from the fiscal year audited financial statements, the test is based upon a composite score 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 minimum score of 1.5 is necessary to meet ED’s financial standards. Institutions with scores of less than 1.5 but greater than or equal to 1.0 are considered financially responsible but require additional oversight. These institutions are subject to heightened cash monitoring and other participation requirements. An institution with a score of less than 1.0 is considered not financially responsible. However, an institution with a score of less than 1.0 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). For the past several years, Adtalem’s composite score has exceeded the required minimum of 1.5. As a result of the acquisition of Walden, Adtalem expects ED will conclude its consolidated composite score will fall below 1.5. As a result, ED may impose certain additional conditions for continued access to federal funding including heightened cash monitoring 66 Table of Contents and/or an additional letter of credit. Management does not believe such conditions, if any, will have a material adverse effect on Adtalem’s operations. ED also has proposed rules to amend the financial responsibility regulations. We anticipate any rules will be effective on July 1, 2024. Liquidity and Capital Resources Adtalem’s primary source of liquidity is the cash received from payments for student tuition, fees, books, and other educational materials. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational loans, employer educational reimbursements, scholarships, and student and family financial resources. Adtalem continues to provide financing options for its students, including Adtalem’s credit extension programs. The pattern of cash receipts during the year is seasonal. Adtalem’s cash collections on accounts receivable peak at the start of each institution’s term. Accounts receivable reach their lowest level at the end of each institution’s term. Adtalem’s consolidated cash and cash equivalents balance of $273.7 million and $347.0 million as of June 30, 2023 and 2022, respectively, included cash and cash equivalents held at Adtalem’s international operations of $7.2 million and $34.2 million as of June 30, 2023 and 2022, respectively, which is available to Adtalem for general corporate purposes. Under the terms of Adtalem institutions’ participation in financial aid programs, certain cash received from state governments and ED is maintained in restricted bank accounts. Adtalem receives these funds either after the financial aid authorization and disbursement process for the benefit of the student is completed, or just prior to that authorization. Once the authorization and disbursement process for a particular student is completed, the funds may be transferred to unrestricted accounts and become available for Adtalem to use in operations. This process generally occurs during the academic term for which such funds have been authorized. Cash in the amount of $1.4 million and $1.0 million was held in these restricted bank accounts as of June 30, 2023 and 2022, respectively. Cash Flow Summary Operating Activities The following table provides a summary of cash flows from operating activities (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","2023","\u200b","2022"],["Income (loss) from continuing operations","\u200b","$","101,752","\u200b","$","(35,955)"],["Non-cash items","\u200b","","196,924","\u200b","","283,158"],["Changes in assets and liabilities","\u200b","","(92,992)","\u200b","","(83,201)"],["Net cash provided by operating activities-continuing operations","\u200b","$","205,684","\u200b","$","164,002"]] [[/GREPCENT_TABLE]] Net cash provided by operating activities from continuing operations in fiscal year 2023 was $205.7 million compared to $164.0 million in the prior year. The increase was driven by a decrease in interest payments and improvements in our operating results. The decrease of $86.2 million in non-cash items between fiscal year 2023 and 2022 was principally driven by a decrease in amortization of intangible assets, a decrease in amortization and write-off of debt discount and issuance costs, and an increase in gain on sale of assets. The decrease of $9.8 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. Investing Activities Capital expenditures in fiscal year 2023 were $37.0 million compared to $31.1 million in the prior year. The capital expenditures in fiscal year 2023 primarily consisted of spending for Chamberlain’s new campus development and improvements and Adtalem’s home office, including information technology investments. Capital spending for fiscal year 2024 will support continued investment for new campus development at Chamberlain, maintenance at the medical and 67 Table of Contents veterinary schools, and information technology. Management anticipates fiscal year 2024 capital spending to be in the $50 to $60 million range. The source of funds for this capital spending will be from operations or the Credit Facility (as defined and discussed in Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”). During fiscal year 2023 and 2022, we received proceeds from the sale of marketable securities held in a Rabbi Trust of $7.6 million and $3.4 million, respectively, and made additional investments in marketable securities held by this trust of $1.5 million and $3.6 million, respectively. The reinvestments in proceeds declined in fiscal year 2023 as funds were used to payout participant balances under the nonqualified deferred compensation plan. On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep for $52.0 million. Adtalem received $5.2 million of cash at the time of closing and held a mortgage loan, secured by the property, from DePaul College Prep for $46.8 million. The mortgage loan was due on July 31, 2024 as a balloon payment and bore interest at a rate of 4% per annum, payable monthly. The buyer had an option to make prepayments. On February 23, 2023, DePaul College Prep paid the mortgage loan in full. The $46.8 million received during fiscal year 2023 is classified as an investing activity in the Consolidated Statements of Cash Flows. On August 12, 2021, Adtalem completed the acquisition of 100% of the equity interest of Walden for $1,488.1 million, net of cash and restricted cash of $83.4 million. During fiscal year 2022, we received the loan repayment of $10.0 million on the DeVry University promissory note, dated as of December 11, 2018. On March 10, 2022, Adtalem completed the sale of ACAMS, Becker, and OCL to Wendel Group and Colibri Group (“Purchaser”), pursuant to the Equity Purchase Agreement (“Purchase Agreement”) dated January 24, 2022. Adtalem received $962.7 million, net of cash of $21.5 million, in sale proceeds. On June 17, 2022, Adtalem completed the sale of EduPristine for de minimis consideration, which resulted in a transfer of $1.9 million in cash to EduPristine. During fiscal year 2023, we paid $3.2 million for a working capital adjustment to the initial sales price for ACAMS, Becker, and OCL. Financing Activities The following table provides a summary of cash flows from financing activities (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","2023","\u200b","2022"],["Repurchases of common stock for treasury","\u200b","$","(123,133)","\u200b","$","(120,000)"],["Payment on equity forward contract","\u200b","\u200b","(13,162)","\u200b","\u200b","(30,000)"],["Net repayments of long-term debt","\u200b","\u200b","(150,861)","\u200b","\u200b","(229,713)"],["Payment of debt discount and issuance costs","\u200b","\u200b","\u2014","\u200b","\u200b","(49,553)"],["Payment for purchase of redeemable noncontrolling interest of subsidiary","\u200b","\u200b","\u2014","\u200b","\u200b","(1,790)"],["Other","\u200b","","(1,359)","\u200b","","6,580"],["Net cash used in financing activities","\u200b","$","(288,515)","\u200b","$","(424,476)"]] [[/GREPCENT_TABLE]] On November 8, 2018, we announced that the Board authorized Adtalem’s eleventh share repurchase program, which allowed Adtalem to repurchase up to $300.0 million of its common stock through December 31, 2021. The eleventh share repurchase program commenced in January 2019 and was completed in January 2021. On February 4, 2020, we announced that the Board authorized Adtalem’s twelfth share repurchase program, which allowed Adtalem to repurchase up to $300.0 million of its common stock through December 31, 2021. The twelfth share repurchase program commenced in January 2021 and expired on December 31, 2021. 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, and we repurchased shares under that program during fiscal year 2023. As of June 30, 2023, $172.7 million of authorized share repurchases were remaining under the current share repurchase program. The timing and amount of any 68 Table of Contents future repurchases will be determined based on an evaluation of market conditions and other factors. See Note 16 “Share Repurchases” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our share repurchase programs. On March 14, 2022, we entered into an ASR agreement to repurchase $150.0 million of common stock. We received an initial delivery of 4,709,576 shares of common stock representing approximately 80% of the total shares expected to be delivered at the time of executing the ASR based on the per share price on the day prior to the execution date. The final number of shares to be repurchased was based on the volume-weighted average price of Adtalem’s common stock during the term of the ASR agreement, less a discount and subject to adjustments pursuant to the terms of the ASR agreement. The ASR agreement ended on October 14, 2022. Based on the volume-weighted average price of Adtalem’s common stock during the term of the ASR agreement, Adtalem owed the counter party 332,212 shares of common stock. We elected to settle the contract in cash instead of delivering shares by making a cash payment of $13.2 million on November 2, 2022. On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap agreement (the “Swap”) with a multinational financial institution to mitigate risks associated with the variable interest rate on our Prior Term Loan B (as defined in Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”) debt. We paid interest at a fixed rate of 0.946% and received variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Prior Term Loan B. The effective date of the Swap was March 31, 2020 and settlements with the counterparty occurred on a monthly basis. The Swap was set to terminate on February 28, 2025. On July 29, 2021, prior to refinancing our Prior Credit Agreement (as discussed below), we settled and terminated the Swap for $4.5 million, which resulted in a charge to interest expense for this amount in fiscal year 2022. During the operating term of the Swap, the annual interest rate on the amount of the Prior Term Loan B was fixed at 3.946% (including the impact of the 3% interest rate margin on LIBOR loans) for the applicable interest rate period. The Swap was designated as a cash flow hedge and as such, changes in its fair value were recognized in accumulated other comprehensive loss on the Consolidated Balance Sheets and were reclassified into the Consolidated Statements of Income within interest expense in the periods in which the hedged transactions affected earnings. As discussed in the previous section of this MD&A titled “Walden University Acquisition,” on August 12, 2021, Adtalem acquired all of the issued and outstanding equity interest in Walden, in exchange for a purchase price of $1.5 billion in cash. 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 replaced the Prior Credit Facility and Prior Credit Agreement (as defined in Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”) by entering 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 proceeds of the Notes and the Term Loan B were used, among other things, to finance the Acquisition, refinance Adtalem’s Prior Credit Agreement, and pay fees and expenses related to the Acquisition. 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, resulting in a gain on extinguishment of $2.1 million recorded within interest expense in the Consolidated Statements of Income for the year ended June 30, 2022. 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 June 30, 2023, the amount of debt outstanding under the Notes and Credit Facility was $708.3 million. See Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on the Notes and our Credit Agreement. In the event of unexpected market conditions or negative economic changes, including those caused by COVID-19, that could negatively affect Adtalem’s earnings and/or operating cash flow, Adtalem maintains a $400.0 million revolving credit facility with availability of $323.8 million as of June 30, 2023. While COVID-19 may continue to have an effect on operations and, as a result, liquidity, we believe the current balances of cash, cash generated from operations, and our Credit Facility will be sufficient to fund both Adtalem’s current domestic and international operations and growth plans for the foreseeable future. 69 Table of Contents Material Cash Requirements Long-Term Debt – We have outstanding $405.0 million of Notes and $303.3 million of Term Loan B, which requires interest payments. With the 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 $323.8 million as of June 30, 2023. Adtalem has a letter of credit outstanding under this revolving credit facility of $76.2 million as of June 30, 2023, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. See Note 14 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our Notes and Credit Agreement. Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of June 30, 2023, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. Many states require private-sector postsecondary education institutions to post surety bonds for licensure. In the U.S., Adtalem has posted $31.9 million of surety bonds with regulatory authorities on behalf of Chamberlain, Walden, AUC, RUSM, and RUSVM. Operating Lease Obligations – We have operating lease obligations for the minimum payments required under various lease agreements which are recorded on the Consolidated Balance Sheets. In addition, we sublease certain space to third parties, which partially offsets the lease obligations at these facilities. See Note 12 “Leases” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our lease agreements. Contingencies For information regarding legal proceedings, including developments in legal proceedings, see Note 21 “Commitments and Contingencies” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.” Critical Accounting Estimates We describe our significant accounting policies in the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.” The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Critical accounting estimates discussed below are those that we believe involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Management has discussed our critical accounting estimates with the Audit and Finance Committee of the Board. Although management believes its assumptions and estimates are reasonable, actual results could differ from those estimates. Although our current estimates contemplate current conditions, including, but not limited to, the impact of (i) the COVID-19 pandemic, (ii) rising interest rates, and (iii) labor and material cost increases and shortages, and how we anticipate them to change in the future, as appropriate, it is reasonably possible that actual conditions could differ from what was anticipated in those estimates, which could materially affect our results of operations and financial condition. Credit Losses The allowance for credit losses represents an estimate of the lifetime expected credit losses inherent in our accounts receivable balances as of each balance sheet date. In evaluating the collectability of all our accounts receivable balances, we utilize historical events, current conditions, and reasonable and supportable forecasts about the future. The estimate of our credit losses involves a significant level of uncertainty as it requires significant judgment to estimate the amount we will collect in the future on our account receivable balances. See Note 10 “Accounts Receivable and Credit Losses” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our credit losses. 70 Table of Contents Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset or asset group, the amount of the impairment is the difference between the carrying amount and the fair value of the asset or asset group. Events that may trigger an impairment analysis could include a decision by management to exit a market or a line of business or to consolidate operating locations. Goodwill and Intangible Assets Goodwill and indefinite-lived intangible assets are not amortized, but are tested for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Our annual testing date is May 31. We have the option to assess goodwill for impairment by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is determined that the reporting unit fair value is more likely than not less than its carrying value, or if we do not elect the option to perform an initial qualitative assessment, we perform a quantitative assessment of the reporting unit’s fair value. If the carrying value of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized equal to the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying value of goodwill. We also have the option to perform a qualitative assessment to test indefinite-lived intangible assets for impairment by determining whether it is more likely than not that the indefinite-lived intangible assets are impaired. If it is determined that the indefinite-lived intangible asset is more likely than not impaired, or if we do not elect the option to perform an initial qualitative assessment, we perform a quantitative assessment of the indefinite-lived intangible assets. If the carrying value of the indefinite-lived intangible assets exceeds its fair value, an impairment loss is recognized to the extent the carrying value exceeds fair value. For intangible assets with finite lives, we evaluate for potential impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset or asset group, the amount of the impairment is the difference between the carrying amount and the fair value of the asset or asset group. Intangible assets with finite lives are amortized over their expected economic lives, ranging from 3 to 5 years. All intangible assets and certain goodwill are being amortized for tax reporting purposes over statutory lives. Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. Significant assumptions used in the determination of reporting unit fair value measurements generally include forecasted cash flows, discount rates, terminal growth rates and earnings multiples. The discounted cash flow models used to determine the fair value of our Walden reporting unit during 2023 reflected our most recent cash flow projections, a discount rate of 12.5% and terminal growth rates of 3%. Each of these inputs can significantly affect the fair values of our reporting units. Based on this quantitative assessment, it was determined that the fair value of the Walden reporting unit exceeded its carrying value by approximately 15% and therefore no goodwill impairment was identified. Significant judgments and assumptions were used in determining the fair value of intangible assets. The with and without method of the income approach and the relief from royalty model used in the determination of the fair values of our Walden Title IV eligibility and trade name intangible assets, respectively, during 2023 reflected our most recent revenue projections, a discount rate of 12.5%, a royalty rate of 2.25% and terminal growth rates of 3%. Each of these factors and assumptions can significantly affect the value of the intangible asset. Based on these quantitative assessments, it was determined that the fair values of these indefinite-lived intangible assets in the Walden reporting unit exceeded their carrying values by approximately 10% and no impairment was identified. Management bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates. If economic conditions deteriorate, interest rates continue to rise, or operating performance of our reporting units do not meet expectations such that we revise our long-term forecasts, we may recognize impairments of goodwill and other intangible assets in future periods. See Note 71 Table of Contents 13 “Goodwill and Intangible Assets” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our goodwill and intangible assets impairment analysis. Income Taxes Adtalem accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Adtalem also recognizes future tax benefits associated with tax loss and credit carryforwards as deferred tax assets. Adtalem’s deferred tax assets are reduced by a valuation allowance, when in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Adtalem measures deferred tax assets and liabilities using enacted tax rates in effect for the year in which Adtalem expects to recover or settle the temporary differences. The effect of a change in tax rates on deferred taxes is recognized in the period that the change is enacted. Adtalem reduces its net tax assets for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions Adtalem has taken. Contingencies Adtalem is subject to contingencies, such as various claims and legal actions that arise in the normal conduct of its business. We record an accrual for those matters where management believes a loss is probable and can be reasonably estimated. For those matters for which we have not recorded an accrual, their possible impact on Adtalem’s business, financial condition, or results of operations, cannot be predicted at this time. A significant amount of judgment and the use of estimates are required to quantify our ultimate exposure in these matters. The valuation of liabilities for these contingencies is reviewed on a quarterly basis to ensure that we have accrued the proper level of expense. While we believe that the amount accrued to-date is adequate, future changes in circumstances could impact these determinations. See Note 21 “Commitments and Contingencies” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our loss contingencies. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.” 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 this Annual Report on Form 10-K: Adjusted net income (most comparable GAAP measure: net income attributable to Adtalem) – Measure of Adtalem’s net income attributable to Adtalem 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 attributable to Adtalem. 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 attributable to Adtalem. 72 Table of Contents 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 attributable to Adtalem) – Measure of Adtalem’s net income attributable to Adtalem adjusted for net loss (income) from discontinued operations attributable to Adtalem, interest expense, other income, 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, net is not recorded at the reportable segments, and therefore, the segment adjusted EBITDA reconciliations begin with operating income (loss). A description of special items in our non-GAAP financial measures described above are as follows: [[GREPCENT_TABLE]] [["","\u25cf","Deferred revenue adjustment related to a revenue purchase accounting adjustment to record Walden\u2019s deferred revenue at fair value."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","CEO transition costs related to acceleration of stock-based compensation expense."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Restructuring expense primarily related to plans to achieve synergies with the Walden acquisition and real estate consolidations at Walden, Medical and Veterinary, and Adtalem\u2019s home office. We do not include normal, recurring, cash operating expenses in our restructuring expense."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","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."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Intangible amortization expense on acquired intangible assets."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Gain on sale of Adtalem\u2019s Chicago, Illinois, campus facility."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","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."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Net tax benefit related to a valuation allowance release."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Net loss (income) from discontinued operations attributable to Adtalem 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."]] [[/GREPCENT_TABLE]] The following tables provide a reconciliation from the most directly comparable GAAP measure to these non-GAAP financial measures. The operating income reconciliation is included in the results of operations section within this MD&A. 73 Table of Contents Net income attributable to Adtalem reconciliation to adjusted net income (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021"],["Net income attributable to Adtalem (GAAP)","\u200b","$","93,358","\u200b","$","310,991","\u200b","$","70,027"],["Deferred revenue adjustment","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","\u2014"],["CEO transition costs","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","\u2014"],["Restructuring expense","\u200b","\u200b","18,817","\u200b","\u200b","25,628","\u200b","\u200b","6,869"],["Business acquisition and integration expense","\u200b","\u200b","42,661","\u200b","\u200b","53,198","\u200b","\u200b","31,593"],["Intangible amortization expense","\u200b","\u200b","61,239","\u200b","\u200b","97,274","\u200b","\u200b","\u2014"],["Gain on sale of assets","\u200b","\u200b","(13,317)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, and investment impairment","\u200b","\u200b","19,226","\u200b","\u200b","48,804","\u200b","\u200b","26,746"],["Net tax benefit related to a valuation allowance release","\u200b","\u200b","(6,184)","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Income tax impact on non-GAAP adjustments (1)","\u200b","\u200b","(31,997)","\u200b","\u200b","(51,683)","\u200b","\u200b","(16,297)"],["Net loss (income) from discontinued operations attributable to Adtalem","\u200b","\u200b","8,394","\u200b","\u200b","(346,946)","\u200b","\u200b","(6,579)"],["Adjusted net income (non-GAAP)","\u200b","$","192,197","\u200b","$","152,022","\u200b","$","112,359"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Represents the income tax impact of non-GAAP continuing operations adjustments that is recognized in our GAAP financial statements."]] [[/GREPCENT_TABLE]] Earnings per share reconciliation to adjusted earnings per share (shares in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","2023","\u200b","2022","\u200b","2021"],["Earnings per share, diluted (GAAP)","\u200b","$","2.05","\u200b","$","6.43","\u200b","$","1.36"],["Effect on diluted earnings per share:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Deferred revenue adjustment","\u200b","\u200b","-","\u200b","\u200b","0.18","\u200b","\u200b","-"],["CEO transition costs","\u200b","\u200b","-","\u200b","\u200b","0.13","\u200b","\u200b","-"],["Restructuring expense","\u200b","\u200b","0.41","\u200b","\u200b","0.53","\u200b","\u200b","0.13"],["Business acquisition and integration expense","\u200b","\u200b","0.94","\u200b","\u200b","1.09","\u200b","\u200b","0.61"],["Intangible amortization expense","\u200b","\u200b","1.34","\u200b","\u200b","1.99","\u200b","\u200b","-"],["Gain on sale of assets","\u200b","\u200b","(0.29)","\u200b","\u200b","-","\u200b","\u200b","-"],["Pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, and investment impairment","\u200b","\u200b","0.42","\u200b","\u200b","1.00","\u200b","\u200b","0.52"],["Net tax benefit related to a valuation allowance release","\u200b","\u200b","(0.14)","\u200b","\u200b","-","\u200b","\u200b","-"],["Income tax impact on non-GAAP adjustments (1)","\u200b","\u200b","(0.70)","\u200b","\u200b","(1.06)","\u200b","\u200b","(0.32)"],["Net loss (income) from discontinued operations attributable to Adtalem","\u200b","\u200b","0.18","\u200b","\u200b","(7.17)","\u200b","\u200b","(0.13)"],["Adjusted earnings per share, diluted (non-GAAP)","\u200b","$","4.21","\u200b","$","3.11","\u200b","$","2.18"],["Diluted shares used in non-GAAP EPS calculation","\u200b","\u200b","45,600","\u200b","\u200b","48,804","\u200b","\u200b","51,645"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(1)","Represents the income tax impact of non-GAAP continuing operations adjustments that is recognized in our GAAP financial statements."]] [[/GREPCENT_TABLE]] 74 Table of Contents Reconciliation to adjusted EBITDA (in thousands): [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Increase/(Decrease)","\u200b"],["\u200b","\u200b","2023","\u200b","2022","\u200b","$","\u200b","%","\u200b"],["Chamberlain:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","134,685","\u200b","$","124,414","\u200b","$","10,271","\u200b","8.3","%"],["Restructuring expense","\u200b","\u200b","818","\u200b","\u200b","2,838","\u200b","\u200b","(2,020)","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","17,264","\u200b","\u200b","18,547","\u200b","\u200b","(1,283)","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","4,719","\u200b","\u200b","6,707","\u200b","\u200b","(1,988)","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","157,486","\u200b","$","152,506","\u200b","$","4,980","\u200b","3.3","%"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","27.6","%","\u200b","27.4","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Walden:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (loss) (GAAP)","\u200b","$","35,880","\u200b","$","(5,306)","\u200b","$","41,186","\u200b","NM","\u200b"],["Deferred revenue adjustment","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","(8,561)","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","3,245","\u200b","\u200b","4,053","\u200b","\u200b","(808)","\u200b","\u200b","\u200b"],["Intangible amortization expense","\u200b","\u200b","61,239","\u200b","\u200b","97,274","\u200b","\u200b","(36,035)","\u200b","\u200b","\u200b"],["Litigation reserve","\u200b","\u200b","10,000","\u200b","\u200b","\u2014","\u200b","\u200b","10,000","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","9,492","\u200b","\u200b","9,255","\u200b","\u200b","237","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","3,861","\u200b","\u200b","3,029","\u200b","\u200b","832","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","123,717","\u200b","$","116,866","\u200b","$","6,851","\u200b","5.9","%"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","23.2","%","\u200b","24.1","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Medical and Veterinary:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","59,649","\u200b","$","59,357","\u200b","$","292","\u200b","0.5","%"],["Restructuring expense","\u200b","\u200b","7,687","\u200b","\u200b","9,791","\u200b","\u200b","(2,104)","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","12,475","\u200b","\u200b","13,890","\u200b","\u200b","(1,415)","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","3,003","\u200b","\u200b","3,896","\u200b","\u200b","(893)","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","82,814","\u200b","$","86,934","\u200b","$","(4,120)","\u200b","(4.7)","%"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","23.9","%","\u200b","25.7","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Home Office and Other:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating loss (GAAP)","\u200b","$","(62,044)","\u200b","$","(101,719)","\u200b","$","39,675","\u200b","39.0","%"],["CEO transition costs","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","(6,195)","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","7,067","\u200b","\u200b","8,946","\u200b","\u200b","(1,879)","\u200b","\u200b","\u200b"],["Business acquisition and integration expense","\u200b","\u200b","42,661","\u200b","\u200b","53,198","\u200b","\u200b","(10,537)","\u200b","\u200b","\u200b"],["Gain on sale of assets","\u200b","\u200b","(13,317)","\u200b","\u200b","\u2014","\u200b","\u200b","(13,317)","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","2,344","\u200b","\u200b","2,882","\u200b","\u200b","(538)","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","2,716","\u200b","\u200b","2,784","\u200b","\u200b","(68)","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","(20,573)","\u200b","$","(27,714)","\u200b","$","7,141","\u200b","25.8","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Adtalem Global Education:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income attributable to Adtalem (GAAP)","\u200b","$","93,358","\u200b","$","310,991","\u200b","$","(217,633)","\u200b","(70.0)","%"],["Net loss (income) from discontinued operations attributable to Adtalem","\u200b","\u200b","8,394","\u200b","\u200b","(346,946)","\u200b","\u200b","355,340","\u200b","\u200b","\u200b"],["Interest expense","\u200b","\u200b","63,100","\u200b","\u200b","129,348","\u200b","\u200b","(66,248)","\u200b","\u200b","\u200b"],["Other income, net","\u200b","\u200b","(6,965)","\u200b","\u200b","(1,108)","\u200b","\u200b","(5,857)","\u200b","\u200b","\u200b"],["Provision for (benefit from) income taxes","\u200b","\u200b","10,283","\u200b","\u200b","(15,539)","\u200b","\u200b","25,822","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","\u200b","168,170","\u200b","\u200b","76,746","\u200b","\u200b","91,424","\u200b","\u200b","\u200b"],["Depreciation and amortization","\u200b","\u200b","102,814","\u200b","\u200b","141,848","\u200b","\u200b","(39,034)","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","14,299","\u200b","\u200b","16,416","\u200b","\u200b","(2,117)","\u200b","\u200b","\u200b"],["Deferred revenue adjustment","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","(8,561)","\u200b","\u200b","\u200b"],["CEO transition costs","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","(6,195)","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","18,817","\u200b","\u200b","25,628","\u200b","\u200b","(6,811)","\u200b","\u200b","\u200b"],["Business acquisition and integration expense","\u200b","\u200b","42,661","\u200b","\u200b","53,198","\u200b","\u200b","(10,537)","\u200b","\u200b","\u200b"],["Litigation reserve","\u200b","\u200b","10,000","\u200b","\u200b","\u2014","\u200b","\u200b","10,000","\u200b","\u200b","\u200b"],["Gain on sale of assets","\u200b","\u200b","(13,317)","\u200b","\u200b","\u2014","\u200b","\u200b","(13,317)","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","343,444","\u200b","$","328,592","\u200b","$","14,852","\u200b","4.5","%"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","23.7","%","\u200b","23.8","%","\u200b","\u200b","\u200b","\u200b","\u200b"]] [[/GREPCENT_TABLE]] ​ 75 Table of Contents [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended June 30,"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","Increase/(Decrease)","\u200b"],["\u200b","\u200b","2022","\u200b","2021","\u200b","$","\u200b","%","\u200b"],["Chamberlain:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","124,414","\u200b","$","128,851","\u200b","$","(4,437)","\u200b","(3.4)","%"],["Restructuring expense","\u200b","\u200b","2,838","\u200b","\u200b","\u2014","\u200b","\u200b","2,838","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","18,547","\u200b","\u200b","16,123","\u200b","\u200b","2,424","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","6,707","\u200b","\u200b","5,181","\u200b","\u200b","1,526","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","152,506","\u200b","$","150,155","\u200b","$","2,351","\u200b","1.6","%"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","27.4","%","\u200b","26.6","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Walden:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating loss (GAAP)","\u200b","$","(5,306)","\u200b","$","\u2014","\u200b","$","(5,306)","\u200b","NM","\u200b"],["Deferred revenue adjustment","\u200b","\u200b","8,561","\u200b","\u200b","\u2014","\u200b","\u200b","8,561","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","4,053","\u200b","\u200b","\u2014","\u200b","\u200b","4,053","\u200b","\u200b","\u200b"],["Intangible amortization expense","\u200b","\u200b","97,274","\u200b","\u200b","\u2014","\u200b","\u200b","97,274","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","9,255","\u200b","\u200b","\u2014","\u200b","\u200b","9,255","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","3,029","\u200b","\u200b","\u2014","\u200b","\u200b","3,029","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","116,866","\u200b","$","\u2014","\u200b","$","116,866","\u200b","NM","\u200b"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","24.1","%","\u200b","N/A","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Medical and Veterinary:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating income (GAAP)","\u200b","$","59,357","\u200b","$","60,199","\u200b","$","(842)","\u200b","(1.4)","%"],["Restructuring expense","\u200b","\u200b","9,791","\u200b","\u200b","\u2014","\u200b","\u200b","9,791","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","13,890","\u200b","\u200b","14,431","\u200b","\u200b","(541)","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","3,896","\u200b","\u200b","3,321","\u200b","\u200b","575","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","86,934","\u200b","$","77,951","\u200b","$","8,983","\u200b","11.5","%"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","25.7","%","\u200b","23.2","%","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Home Office and Other:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating loss (GAAP)","\u200b","$","(101,719)","\u200b","$","(78,651)","\u200b","$","(23,068)","\u200b","(29.3)","%"],["CEO transition costs","\u200b","\u200b","6,195","\u200b","\u200b","\u2014","\u200b","\u200b","6,195","\u200b","\u200b","\u200b"],["Restructuring expense","\u200b","\u200b","8,946","\u200b","\u200b","6,869","\u200b","\u200b","2,077","\u200b","\u200b","\u200b"],["Business acquisition and integration expense","\u200b","\u200b","53,198","\u200b","\u200b","31,593","\u200b","\u200b","21,605","\u200b","\u200b","\u200b"],["Depreciation","\u200b","\u200b","2,882","\u200b","\u200b","3,334","\u200b","\u200b","(452)","\u200b","\u200b","\u200b"],["Stock-based compensation","\u200b","\u200b","2,784","\u200b","\u200b","4,322","\u200b","\u200b","(1,538)","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","(27,714)","\u200b","$","(32,533)","\u200b","$","4,819","\u200b","14.8","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Adtalem Global Education:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income attributable to Adtalem (GAAP)","\u200b","$","310,991","\u200b","$","70,027","\u200b","$","240,964","\u200b","344.1","%"],["Net income from discontinued operations attributable to Adtalem","\u200b","\u200b","(346,946)","\u200b","\u200b","(6,579)","\u200b","\u200b","(340,367)","\u200b","\u200b","\u200b"],["Interest expense","\u200b","\u200b","129,348","\u200b","\u200b","41,365","\u200b","\u200b","87,983","\u200b","\u200b","\u200b"],["Other income, net","\u200b","\u200b","(1,108)","\u200b","\u200b","(6,732)","\u200b","\u200b","5,624","\u200b","\u200b","\u200b"],["(Benefit from) provision for income 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expense","\u200b","\u200b","53,198","\u200b","\u200b","31,593","\u200b","\u200b","21,605","\u200b","\u200b","\u200b"],["Adjusted EBITDA (non-GAAP)","\u200b","$","328,592","\u200b","$","195,573","\u200b","$","133,019","\u200b","68.0","%"],["Adjusted EBITDA margin (non-GAAP)","\u200b","\u200b","23.8","%","\u200b","21.7","%","\u200b","\u200b","\u200b","\u200b","\u200b"]] [[/GREPCENT_TABLE]] ​ ​ ​