Adtalem Global Education : Transcript Open Event Link, Document, 05/08/2025,

Published: 2025-05-09 08:02:56 ET ATGE

Published on 05/09/2025 at 08:02

08-May-2025

Adtalem Global Education, Inc. (ATGE)

Q3 2025 Earnings Call

Jay Spitzer

Vice President-Investor Relations, Adtalem Global Education, Inc.

Stephen Wayne Beard

Chairman & Chief Executive Officer, Adtalem Global Education, Inc.

Robert J. Phelan

Chief Financial Officer & Senior Vice President, Adtalem Global Education, Inc.

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Jack Slevin

Analyst, Jefferies LLC

Jeffrey M. Silber

Analyst, BMO Capital Markets Corp.

Alexander Paris

Analyst, Barrington Research Associates, Inc.

Steven Pawlak

Analyst, Robert W. Baird & Co., Inc.

I will now turn the conference over to your host, Jay Spitzer, Vice President of Investor Relations. Thank you. You may begin.

Jay Spitzer

Vice President-Investor Relations, Adtalem Global Education, Inc.

Good afternoon and welcome to our earnings call for the third quarter fiscal year 2025 results. On the call with me today are Steve Beard, Chairman and Chief Executive Officer of Adtalem Global Education; and Bob Phelan, Chief Financial Officer.

Before I hand you over to Steve, I will, as usual, take you through the legal Safe Harbor and cautionary declarations. Certain statements and projections of future results made in this presentation constitute as forward-looking statements that are based on our current market, competitive and regulatory expectations, and are subject to risks and uncertainties that could cause actual results to vary materially.

We undertake no obligation to update publicly any forward-looking statement after this presentation as a result of new information, future events, changes in assumptions or otherwise. Please see our latest Form 10-K, Form 10-Q for discussion of risk factors as it relate to forward-looking statements.

In today's presentation, we'll use certain non-GAAP financial measures. We refer you to the appendix of the presentation materials available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information. You can find a link to our webcast on our Investor

Relations website at investors.adtalem.com. After this call, the presentation webcast will be archived on the website for 30 days.

I will now hand you over to Steve.

Stephen Wayne Beard

Chairman & Chief Executive Officer, Adtalem Global Education, Inc.

Thanks, Jay. Good afternoon, everyone and thank you for joining us. At Adtalem, our Innovative Model, Steadfast Commitment to Access and Growth with Purpose strategy are driving exceptional performance and delivering transformative results. As patient populations surge and clinical workforce shortages deepen, our mission to shape the future of healthcare education has never been more urgent or impactful.

Our third quarter results reflect this momentum. Revenue grew by 13% to $466 million. Total enrollment climbed to 9.8% year-over-year, marking seven consecutive quarters of growth, with over 94,000 students now choosing Adtalem Institutions. Adjusted EBITDA margin expanded by 150 basis points, fueling a 28% surge in adjusted earnings per share to a $1.92.

Now let's dive into our segment performance and strategic progress. Chamberlain University, the nation's largest nursing school, continued its strong trajectory. Enrollment rose 6.8% to over 40,000 students. Our BSN Online program, now available in 36 states with 53 clinical hubs, has surpassed 3,000 students, bringing nursing education to urban and rural communities alike.

Our Practice Ready Specialty Focused Program is transforming nursing education by providing early hands-on exposure to high-demand specialties. Importantly, this program has been developed in partnership with leading healthcare providers. Since its inception, over 4,000 students have enrolled, with 900 completing specialty rotations across 70-plus partner sites. This innovative program allows students to explore high-value specialties like perioperative nursing during their clinical training, ensuring that they're well prepared for their chosen path. Graduates who pursue these specialties are highly sought after by our partner health systems.

Walden University achieved a remarkable 13.5% enrollment increase, reaching 48,500 students exceeding pre-pandemic levels. Our Get the W campaign, paired with digital innovations, has boosted inquiries and conversion rates. Predictive analytics and advanced learning tools are enhancing retention and academic outcomes. This spring, Walden 72nd commencement celebrated 6,000 graduates, including 2,500 nurses and 2,100 social behavioral and health professionals. Proof of our ability to deliver talent where it's needed most.

Our Medical and Veterinary segment returned to growth, with enrollment up 1.2%. And we believe that our two medical schools, AUC and Ross Vet, are positioned for long-term growth. Our deepened partnership with Hippocratic AI is pioneering AI-driven curricula, enabling future physicians to elevate care quality. For the fourth consecutive year, AUC and Ross Vet achieved a 95%-plus first-time residency attainment rate, placing over 615 students in over 325 healthcare facilities. Critically, over 40% of these placements are in medically underserved areas, addressing a projected US physician shortfall of 187,000 by the year 2037.

Ross Vet, operating near capacity, secured the nation's top spots for graduates matched into selective internships and residencies. And based on this collective strength, we're raising our 2025 guidance. We now expect revenue of $1.760 billion to $1.775 billion, and we expect adjusted EPS of $6.40 to $6.60. Our robust cash flow and strong balance sheet enabled us to complete our $300 million share repurchase program. And we subsequently announced a new $150 million repurchase program through May of 2028, underscoring our confidence in our strategic outlook.

Adtalem aims to change the face of healthcare for better tomorrow. Our Growth with Purpose strategy rooted in integrity, relentless execution and disciplined innovation, creates lasting value for students, partners and shareholders. Demand for our programs in nursing, medicine, mental health and veterinary sciences isn't just strong, it's growing. Students choose us because we empower them to build meaningful careers that change lives.

Looking ahead, we're investing to expand program capacity and doubling down on innovation to meet this demand. Our commitment is clear, deliver operational excellence, drive shareholder value, and lead the charge in building the healthcare workforce of tomorrow. The market is recognizing our vision. Our strategy is delivering.

Our future is brighter than ever.

And with that, I'll turn it over to Bob for a deeper dive into our financials.

Robert J. Phelan

Chief Financial Officer & Senior Vice President, Adtalem Global Education, Inc.

Thank you, Steve. And hello, everyone. Our third quarter results continue to showcase the robust financial returns that our Growth with Purpose strategy delivers. Diligent execution against our organic growth strategy yielded an increased level of profitability and operating cash flow. We continue to be disciplined capital allocators, striking a balance between investing in our innovative education model, expanding access to our in-demand programs, and enhancing our student-facing capabilities, all while strengthening our balance sheet and returning excess cash to our shareholders.

I'll now review our financial results and key drivers for our third quarter performance. Later in my remarks, I'll discuss our expectations and assumptions for the remainder of fiscal year 2025. Starting with the top line, revenue in the third quarter increased by 12.9% to $466.1 million, driven by all three segments, in particular, through enrollment growth at Walden and Chamberlain.

Consolidated adjusted EBITDA came in at $127.8 million, up 19.3% compared to the prior year from traffic growth at Walden and Chamberlain. Adjusted EBITDA margin of 27.4% expanded 150 basis points from last year.

Adjusted operating income was $105.4 million, up 17.4% compared to the prior year as revenue growth and efficiencies generated operational leverage, which is partially offset by investments in our strategic growth initiatives.

Adjusted net income for the quarter was $73.3 million, up 23.4% compared to last year, attributed to adjusted operating income growth and lower interest expense resulting from our actions to reduce outstanding debt and our borrowing costs, partially offset by a higher provision for income taxes. Adjusted earnings per share was

$1.92 or a 28% increase compared with the prior year. We repurchased 791,000 shares of our common stock within the quarter, resulting in a third quarter diluted shares outstanding of $38.2 million or $1.4 million lower than last year.

Next, I'll discuss third quarter financial highlights by segment. Chamberlain reported third quarter revenue of

$192.6 million, an increase of 13.1% compared with the prior year, driven by growth in enrollments, pricing optimization and program mix, as we strategically grow our in-demand pre-licensure BSN Online offering, which comprise a significant amount of our total enrollment growth in the quarter.

Total student enrollment during the quarter increased 6.8% compared to the prior year, its ninth consecutive quarter of growth in both pre-licensure and post-licensure nursing programs along with high continued persistence

rates. Adjusted EBITDA increased by 12.6% to $56.8 million for the quarter. Adjusted EBITDA margin of 29.5% was 10 basis points lower than the prior year, as our operational leverage was offset by our investments into our students to support the growth in enrollments, improving academic outcomes and other expenses.

Turning to Walden. Third quarter revenue of $178.4 million, an increase of 18.5% versus the prior year was driven primarily by strong growth in enrollments. Total student enrollment was up 13.5% compared to the prior year from robust enrollment growth, particularly in the Master's and Undergrad degrees and continued high persistence rates. Growth in our healthcare programs was led by both social and behavioral health and nursing. Our non-healthcare programs also grew in the quarter.

Adjusted EBITDA increased by 50.6% to $54 million. Adjusted EBITDA margin expanded by 650 basis points versus the prior year to 30.3% as our operational excellence generated efficiencies and leverage that outpaced the student-facing digital investments and additional student support commensurate with the high levels of new enrollment.

For the Medical and Veterinary segment. Third quarter revenue was $95 million, an increase of 3.6% versus prior year. Total student enrollment was up 1.2% as a result of our operational plans and early returns against our longterm strategic growth initiatives. At our medical schools, initiatives such as clinical Return Home and creating a more seamless enrollment experience have led to an increase in inquiry to enrollment yield, resulting in new enrollment growth at our medical schools for the January intake cycle. And that continues to operate near capacity.

Adjusted EBITDA declined 15.3% versus the prior year to $22.9 million. Adjusted EBITDA margin was 540 basis points lower versus the prior year at 24%, as we remained focused on operating our institutions with a cost structure generally in line with our total enrollment level, while making long-term growth investments.

Shifting to cash flow and the balance sheet. We continue to enhance our financial strength through robust cash generation and disciplined capital deployment. On a trailing 12 months basis, free cash flow was $287 million from strong operational performance. Our balance sheet remains healthy, ending the third quarter with $219 million in cash and a low adjusted EBITDA net leverage of 0.8 times.

As I mentioned on last quarter's call on January 17, we further strengthened our balance sheet, repaying $100 million on our higher interest rate Term Loan B, which reduces the outstanding balance to $153.3 million. As Steve highlighted, we recently completed our $300 million share repurchase authorization on May 5, representing a significant return to shareholders. Since February 2022, we returned $763 million to shareholders, reducing shares outstanding by 28% at an average repurchase price of $49.

We have achieved exceptional performance thus far in fiscal year 2025, ahead of our original expectations set heading into the year as we continue to execute our Growth with Purpose strategy creating greater efficiencies and scale. And as a result, we are raising our guidance with revenue now in the range of $1.760 billion to $1.775 billion, approximately 11% to 12% growth year-over-year, with adjusted earnings per share of $6.40 to $6.60, approximately 28% to 32% growth year-over-year.

For the full-year, our new level of revenue guidance results in incremental operating leverage. Also included in our new guidance range is our anticipation that we'll increase the level of growth investments we plan to make in the fourth quarter, setting us up well heading into fiscal year 2026. We aim to optimally balance an increased level of investment for future growth with the expanding of our profitability. In turn, we now anticipate adjusted EBITDA

Disclaimer

Adtalem Global Education Inc. published this content on May 09, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 09, 2025 at 11:49 UTC.