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Adtalem Global Education Announces Second Quarter Fiscal 2018 Results

CHICAGO--(BUSINESS WIRE)--

Adtalem Global Education (ATGE), a leading global education provider, today reported academic, operating and financial results for its fiscal 2018 second quarter ended December 31, 2017, including enrollment results at Carrington College, Chamberlain University, its medical and veterinary schools and DeVry University/Keller Graduate School of Management.

“Our revenue profile and growth outlook continue to improve as we execute on our strategic plan,” said Lisa Wardell, president and CEO of Adtalem Global Education. “We are expanding our presence across our core sectors and directing our resources toward the most promising revenue opportunities within our verticals. Everything we do is centered on increasing the value proposition we provide to our students and their employers, while positioning our portfolio to grow in a profitable and sustainable manner. Our strong cash flow generation, healthy financial position and increasing operating leverage support our ongoing commitment to balanced capital allocation that includes returning capital to our fellow owners.”

Financial and Operating Highlights

Selected financial data for the three months ended December 31, 2017:

  • Revenue of $337.2 million increased 1.0 percent compared to the prior year
  • Net loss of $81.2 million compared to net income of $14.4 million in the prior year; net income from continuing operations excluding special items was $47.3 million, compared to $41.1 million in the prior year
  • Diluted loss per share was $1.33, compared to earnings per share of $0.23 in the prior year; diluted earnings per share from continuing operations excluding special items was $0.76, compared to $0.64 in the prior year
  • Operating cash flow for the first six months of fiscal year 2018 was $49.6 million, compared to $41.5 million in the prior year
  • Cash and cash equivalents were $212.2 million as of December 31, 2017, compared to $197.9 million as of December 31, 2016. Outstanding bank borrowings were $165.0 million as of December 31, 2017, compared to $225.0 million as of December 31, 2016
  • Approximately 1.14 million shares of common stock were repurchased during the second quarter of fiscal 2018

During the second quarter, Adtalem signed an agreement to transfer ownership of DeVry University to Cogswell Education LLC. The agreement is subject to certain terms and conditions to be met during the transition process, including regulatory and accreditor approval, and the transaction is anticipated to be completed in early fiscal year 2019. As a result of this transaction, DeVry University has been classified as a discontinued operation. Adtalem recorded an after-tax loss from discontinued operations of $25.4 million in the second quarter, which includes $47.2 million of pre-tax charges related to impairment of intangible and long-lived assets.

The fiscal 2018 second quarter results contained special items for restructuring charges of $2.6 million (pre-tax) related to workforce reductions and real estate consolidations at Carrington and Adtalem’s home office, and tax expense of $101.2 million related to adoption of the Tax Cuts and Jobs Act of 2017.

Segment Highlights

Medical and Healthcare Segment

Second quarter segment revenue of $203.3 million increased 0.9 percent compared to the prior year, with growth at Chamberlain University partially offset by decreased revenue at the medical and veterinary schools. Chamberlain revenue in the quarter increased 1.9 percent from the prior year to $115.1 million, while revenue for the medical and veterinary schools decreased 0.3 percent from the prior year to $88.2 million.

Second quarter operating income for the segment was $55.0 million, representing an increase of 5.6 percent from the prior year.

American University of the Caribbean School of Medicine (AUC) reopened its campus in St. Maarten in January, following repairs to address the damage caused by Hurricane Irma. Ross University School of Medicine (RUSM) in Dominica continues to assess the damage caused by Hurricane Maria, and students have been temporarily relocated to Knoxville, Tenn. at a campus owned by Lincoln Memorial University.

Additional expenses in the second quarter related to maintaining alternative teaching sites for both AUC and RUSM and remediating the property damage to the campuses in St. Maarten and Dominica were largely offset by received and committed reimbursements under Adtalem’s insurance policies, after deductibles, which were met during the first quarter.

Professional Education

Second quarter segment revenue increased 10.9 percent compared to the prior year to $30.4 million, driven by growth from Association of Certified Anti Money Laundering Specialists (ACAMS). Segment operating income for the second quarter was $2.2 million, up from $0.1 million in the prior year driven by revenue growth at ACAMS.

In the second quarter, ACAMS’ revenue increased 62 percent with particularly strong results coming from the Asia Pacific region, as well as solid gains generated through expanding partnerships in Europe.

Technology and Business

Second quarter segment revenue increased 2.4 percent to $75.1 million compared to the prior year. On a constant currency basis, revenue in the segment grew 0.9 percent. Segment operating income in the second quarter increased 3.8 percent over the prior year to $14.0 million as a result of revenue growth and cost efficiencies.

US Traditional Postsecondary

Second quarter segment revenue declined 10.5 percent to $29.0 million compared to the prior year. An operating loss of $5.8 million was reported in the second quarter compared to an operating loss of $6.3 million in the prior year. Excluding special items, the segment reported an operating loss of $4.7 million for the quarter, compared to an operating loss of $3.9 million in the prior year.

Carrington showed improvement in new student enrollment in the quarter, which was up 7.2 percent, highlighting the efforts to revise the institution’s program offerings and marketing efforts.

Adtalem Outlook

Fiscal 2018 third quarter revenue is expected to increase 3 to 4 percent compared to the prior year. Revenue growth within the Medical and Healthcare, Professional Education and Technology and Business segments is expected to offset declining revenue within the US Traditional Postsecondary segment. Third quarter operating costs before special items are expected to increase 1 to 2 percent compared to the prior year. Third quarter expenses may be impacted by the timing of the receipt of insurance proceeds for the reimbursement of hurricane-related expenses.

Fiscal 2018 full year revenue is expected to increase 1 to 2 percent compared to the prior year and earnings growth from continuing operations before special items is expected to be 10 to 12 percent compared to the prior year. Full year capital spending is expected to be in the $60 to $65 million range, excluding hurricane-related spending. The effective income tax rate on continuing operations for the fiscal year is expected to be in the range of 16 to 17 percent, before special items. Adtalem’s outlook excludes potential charges related to restructuring plans and the pending sale of DeVry University.

Conference Call and Webcast Information

Adtalem will hold a conference call to discuss its fiscal 2018 second quarter earnings on Tuesday, February 6, at 4 p.m. CST (5 p.m. EST). The conference call will be led by Lisa Wardell, president and chief executive officer; and Patrick Unzicker, chief financial officer and treasurer.

For those wishing to participate by telephone, dial 877-407-6184 (domestic) or 201-389-0877 (international). Ask for the Adtalem call or use conference ID: 13674998. Adtalem will also broadcast the conference call on Adtalem's website at: http://www.investorcalendar.com/event/23549.

Please access the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

Adtalem will archive a telephone replay of the call until Mar. 6, 2018. To access the replay, dial 877-660-6853 (domestic) or 201-612-7415 (international), conference ID: 13674998. To access the webcast replay, please visit Adtalem's website at: http://www.investorcalendar.com/event/23549.

About Adtalem Global Education

The purpose of Adtalem Global Education is to empower students to achieve their goals, find success, and make inspiring contributions to our global community. Adtalem Global Education Inc. (NYSE: ATGE; member S&P MidCap 400 Index) is a leading global education provider and the parent organization of Adtalem Educacional do Brasil, American University of the Caribbean School of Medicine, Association of Certified Anti-Money Laundering Specialists, Becker Professional Education, Carrington College, Chamberlain University, DeVry University and its Keller Graduate School of Management, Ross University School of Medicine and Ross University School of Veterinary Medicine. For more information, please visit adtalem.com.

Forward Looking Statement

Certain statements contained in this release concerning Adtalem Global Education’s future performance, including those statements concerning expectations or plans, may constitute forward-looking statements subject to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Adtalem Global Education or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Actual results may differ materially from those projected or implied by these forward-looking statements. Potential risks, uncertainties and other factors that could cause results to differ are described more fully in Item 1A, "Risk Factors," in the most recent Annual Report on Form 10-K for the year ending June 30, 2017 and filed with the Securities and Exchange Commission (SEC) on August 24, 2017 and its most recent Quarterly Report on Form 10-Q for the quarter ending December 31, 2017 and filed with the SEC on February 6, 2018.

Enrollment from Continuing Operations

     
FY 2018 FY 2017 % Change
Adtalem Global Education Student Enrollments(1)
New students 6,528 6,084 +7.3%
Total students 121,255 118,424 +2.4%
 
 
Chamberlain University
November Session(2)
New students 2,806 2,660 +5.5%
Total students 29,719 28,268 +5.1%
January Session
New students 4,472 4,185 +6.9%
Total students 31,333 29,789 +5.2%
 
Carrington College
3 months ending December 31, 2017
New students 1,541 1,437 +7.2%
Total students 5,644 5,910 -4.5%
 
Medical and Veterinary(3)
January Term
New students 515 462 +11.5%
Total students 5,938 5,863 +1.3%

Enrollment from Discontinued Operations

     
DeVry University FY 2018 FY 2017 % Change
Undergraduate – November Session
New students 2,359 3,092 -23.7%
Total students 18,385 24,015 -23.4%
Undergraduate – January Session
New students 2,439 2,528 -3.5%
Total students 17,859 22,994 -22.3%
Graduate – November Session
Coursetakers(4) 7,488 9,589 -21.9%
Graduate – January Session
Coursetakers(4) 7,602 9,553 -20.4%

1) Includes the most recently reported enrollments at Adtalem’s postsecondary institutions, excluding DeVry University

2) Post-licensure online programs only; pre-licensure campus-based programs start in September, January and May

3) Includes enrollments in its medical and veterinary preparatory programs

4) The term “coursetaker” refers to the number of courses taken by a student. Thus one student taking two courses equals two coursetakers

ADTALEM GLOBAL EDUCATION INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
PRELIMINARY
           
December 31, June 30, December 31,
2017 2017 2016
ASSETS: (in thousands, except share and par value amounts)
Current Assets:
Cash and Cash Equivalents $ 212,239 $ 240,426 $ 197,860
Marketable Securities and Investments 4,268 4,013 3,844
Restricted Cash 566 4,759 5,622
Accounts Receivable, Net 148,638 161,405 127,941
Prepaid Expenses and Other 75,972 36,988 54,964
Current Assets Held for Sale 28,126   23,616   37,202  
Total Current Assets 469,809   471,207   427,433  
Land, Building and Equipment:
Land 46,918 48,947 48,595
Building 425,659 443,914 441,271
Equipment 365,394 352,622 361,608
Construction in Progress 26,520   22,240   15,380  
864,491 867,723 866,854
Accumulated Depreciation (446,152 ) (416,801 ) (406,295 )
Land, Building and Equipment Held for Sale, Net -   37,904   39,967  
Land, Building and Equipment, Net 418,339   488,826   500,526  
Other Assets:
Deferred Income Taxes, Net 31,090 33,772 26,618
Intangible Assets, Net 407,000 412,158 419,883
Goodwill 832,943 829,086 832,642
Other Assets, Net 38,091 40,696 56,227
Other Assets Held for Sale 13,450   38,290   38,104  
Total Other Assets 1,322,574   1,354,002   1,373,474  
TOTAL ASSETS $ 2,210,722   $ 2,314,035   $ 2,301,433  
 
LIABILITIES:
Current Liabilities:
Accounts Payable $ 37,818 $ 46,417 $ 32,119
Accrued Salaries, Wages and Benefits 63,417 81,661 64,680
Accrued Liabilities 77,891 90,306 94,938
Deferred Revenue 81,224 115,770 88,092
Current Liabilities Held for Sale 36,469   43,173   45,727  
Total Current Liabilities 296,819   377,327   325,556  
Other Liabilities:
Revolving Loan 165,000 125,000 225,000
Deferred Income Taxes, Net 31,745 34,712 32,452
Deferred Rent and Other 101,232 101,672 106,792
Income Taxes Payable 88,562   -   -  
Total Other Liabilities 386,539   261,384   364,244  
TOTAL LIABILITIES 683,358   638,711   689,800  
NONCONTROLLING INTEREST 7,405   6,285   6,720  
SHAREHOLDERS' EQUITY:
Common Stock, $0.01 Par Value, 200,000,000 Shares Authorized; 60,295,000,
62,371,000 and 62,776,000 Shares Outstanding at December 31, 2017,
June 30, 2017 and December 31, 2016, respectively 787 781 775
Additional Paid-in Capital 433,855 415,912 395,155
Retained Earnings 1,812,746 1,881,397 1,797,634
Accumulated Other Comprehensive Loss (60,745 ) (59,119 ) (50,828 )
Treasury Stock, at Cost, 18,451,000, 15,691,000 and 14,762,000 Shares at
December 31, 2017, June 30, 2017 and December 31, 2016, respectively (666,684 ) (569,932 ) (537,823 )
TOTAL SHAREHOLDERS' EQUITY 1,519,959   1,669,039   1,604,913  
TOTAL LIABILITIES, NONCONTROLLING INTEREST AND
SHAREHOLDERS' EQUITY $ 2,210,722   $ 2,314,035   $ 2,301,433  
ADTALEM GLOBAL EDUCATION INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
PRELIMINARY
           
Three Months Ended Six Months Ended
December 31, December 31,
2017 2016 2017 2016
(in thousands, except per share amounts)
REVENUE:
Tuition $ 302,184 $ 301,263 $ 582,207 $ 588,161
Other Educational 35,060   32,695   80,315   74,824  
Total Revenue 337,244   333,958   662,522   662,985  
OPERATING COST AND EXPENSE:
Cost of Educational Services 178,970 179,148 374,911 366,634
Student Services and Administrative Expense 100,336 101,167 201,544 204,632
Restructuring Expense 2,554 2,963 4,941 6,313
Regulatory Settlements -   52,150   -   52,150  
Total Operating Cost and Expense 281,860   335,428   581,396   629,729  
Operating Income (Loss) from Continuing Operations 55,384   (1,470 ) 81,126   33,256  
INTEREST:
Interest Income 1,365 988 3,483 2,032
Interest Expense (2,481 ) (2,300 ) (4,397 ) (4,415 )
Net Interest Expense (1,116 ) (1,312 ) (914 ) (2,383 )
Income (Loss) from Continuing Operations Before Income Taxes 54,268 (2,782 ) 80,212 30,873
Income Tax (Provision) Benefit (109,636 ) 10,082 (113,232 ) 2,363
Equity Method Investment Income (Loss) 6   -   (38 ) -  
(Loss) Income from Continuing Operations (55,362 ) 7,300   (33,058 ) 33,236  
DISCONTINUED OPERATIONS:
(Loss) Income from Discontinued Operations Before
Income Taxes (43,873 ) 6,321 (55,179 ) 4,716
Income Tax Benefit 18,453   1,134   20,371   1,952  
(Loss) Income from Discontinued Operations (25,420 ) 7,455   (34,808 ) 6,668  
NET (LOSS) INCOME (80,782 ) 14,755 (67,866 ) 39,904
Net Income Attributable to Noncontrolling Interest (374 ) (342 ) (505 ) (339 )
NET (LOSS) INCOME ATTRIBUTABLE TO ADTALEM GLOBAL
EDUCATION $ (81,156 ) $ 14,413   $ (68,371 ) $ 39,565  
 
AMOUNTS ATTRIBUTABLE TO ADTALEM GLOBAL
EDUCATION:
(Loss) Income from Continuing Operations $ (55,736 ) $ 6,958 $ (33,563 ) $ 32,897
(Loss) Income from Discontinued Operations (25,420 ) 7,455   (34,808 ) 6,668  
NET (LOSS) INCOME ATTRIBUTABLE TO ADTALEM GLOBAL
EDUCATION $ (81,156 ) $ 14,413   $ (68,371 ) $ 39,565  
 
(LOSS) EARNINGS PER COMMON SHARE ATTRIBUTABLE
TO ADTALEM GLOBAL EDUCATION SHAREHOLDERS:
Basic:
Continuing Operations $ (0.91 ) $ 0.11 $ (0.54 ) $ 0.52
Discontinued Operations $ (0.42 ) $ 0.12 $ (0.56 ) $ 0.11
Total $ (1.33 ) $ 0.23 $ (1.10 ) $ 0.62
Diluted:
Continuing Operations $ (0.91 ) $ 0.11 $ (0.54 ) $ 0.52
Discontinued Operations $ (0.42 ) $ 0.12 $ (0.56 ) $ 0.10
Total $ (1.33 ) $ 0.23 $ (1.10 ) $ 0.62
 
Cash Dividends Declared per Common Share $ - $ 0.18 $ - $ 0.18
ADTALEM GLOBAL EDUCATION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
PRELIMINARY
     
Six Months Ended
December 31,
2017 2016
(in thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (67,866 ) $ 39,904
Loss (Income) from Discontinued Operations 34,808 (6,668 )
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Operating Activities:
Stock-Based Compensation Expense 8,780 9,333
Depreciation 24,865 26,043
Amortization 5,311 6,047
Provision for Refunds and Uncollectible Accounts 20,305 20,111
Deferred Income Taxes 1,258 10,730
Loss on Disposals, Accelerated Depreciation and Adjustments to Land, Building and Equipment 30,201 3,229
Changes in Assets and Liabilities:
Accounts Receivable (7,150 ) (9,094 )
Prepaid Expenses and Other (30,810 ) (34,805 )
Accounts Payable (2,569 ) (8,200 )
Accrued Salaries, Wages, Benefits and Liabilities (28,204 ) (993 )
Deferred Revenue (34,570 ) (19,255 )
Income Taxes Payable, Long-Term 88,562   -  
Net Cash Provided by Operating Activities-Continuing Operations 42,921 36,382
Net Cash Provided by Operating Activities-Discontinued Operations 6,692   5,096  
NET CASH PROVIDED BY OPERATING ACTIVITIES 49,613   41,478  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (32,594 ) (18,771 )
Payment for Purchase of Businesses, Net of Cash Acquired (972 ) (330,567 )
Marketable Securities Purchased (136 ) (73 )
Net Cash Used in Investing Activities-Continuing Operations (33,702 ) (349,411 )
Net Cash Provided by (Used in) Investing Activities-Discontinued Operations 8,575   (1,635 )
NET CASH USED IN INVESTING ACTIVITIES (25,127 ) (351,046 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Exercise of Stock Options 9,582 13,784
Employee Taxes Paid on Withholding Shares (3,806 ) (2,650 )
Proceeds from Stock Issued Under Colleague Stock Purchase Plan 391 439
Repurchase of Common Stock for Treasury (93,178 ) (16,381 )
Cash Dividends Paid - (11,412 )
Payments of Seller Financed Obligations (7,941 ) (3,518 )
Borrowings Under Revolving Credit Facility 201,000 405,000
Repayments Under Revolving Credit Facility (161,000 ) (180,000 )
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (54,952 ) 205,262  
Effects of Exchange Rate Differences (1,043 ) (4 )
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (31,509 ) (104,310 )
Cash, Cash Equivalents and Restricted Cash at Beginning of Period 251,096   315,347  
Cash, Cash Equivalents and Restricted Cash at End of Period 219,587 211,037
Less: Cash, Cash Equivalents and Restricted Cash of Discontinued Operations at End of Period 6,782   7,555  
Cash, Cash Equivalents and Restricted Cash at End of Period $ 212,805   $ 203,482  
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ADTALEM GLOBAL EDUCATION INC.
SEGMENT INFORMATION
(Unaudited)
PRELIMINARY
                       
Three Months Ended Six Months Ended
December 31, December 31,
Increase Increase
2017   2016   (Decrease) 2017   2016   (Decrease)
REVENUE: (in thousands)
Medical and Healthcare $ 203,297 $ 201,409 0.9 % $ 394,582 $ 401,178 (1.6 )%
Professional Education 30,359 27,366 10.9 % 70,401 62,096 13.4 %
Technology and Business 75,133 73,387 2.4 % 137,572 131,627 4.5 %
U.S. Traditional Postsecondary 29,033 32,445 (10.5 )% 61,168 69,431 (11.9 )%
Home Office and Other (578 ) (649 ) 10.9 % (1,201 ) (1,347 ) 10.8 %
Total Consolidated Revenue 337,244   333,958   1.0 % 662,522   662,985   (0.1 )%
OPERATING INCOME (LOSS):
Medical and Healthcare 55,047 52,152 5.6 % 81,279 96,016 (15.3 )%
Professional Education 2,193 134 1,536.6 % 12,700 6,191 105.1 %
Technology and Business 13,991 13,482 3.8 % 15,852 11,506 37.8 %
U.S. Traditional Postsecondary (5,779 ) (6,281 ) 8.0 % (11,293 ) (8,301 ) (36.0 )%
Home Office and Other (10,068 ) (60,957 ) 83.5 % (17,412 ) (72,156 ) 75.9 %
Total Consolidated Operating Income (Loss) $ 55,384   $ (1,470 )