UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, ~~2021~~2022

	or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _____ to _____

	Commission ~~file number:~~File Number: 001-13988

Adtalem Global Education Inc.

(Exact name of registrant as specified in its charter)


Delaware	36-3150143
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

500 West Monroe Street
Chicago, Illinois	60661
(Address of principal executive offices)	(Zip Code)

(~~866~~312) ~~374-2678~~651-1400

(Registrant’s telephone number; including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock,, $0.01 par value per share	ATGE	New York Stock Exchange
Common stock, $0.01 par value per share	ATGE	Chicago Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	þ	Accelerated filer	☐
Non-accelerated filer	◻	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of October 27, ~~2021,~~2022, there were ~~49,764,733~~45,404,650 shares of the registrant’s common stock, $0.01 par value per share outstanding.

Table of Contents

Adtalem Global Education Inc.

Form 10-Q

Table of Contents

		Page
	Part I. Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income (Loss)	2
	Consolidated Statements of Comprehensive Income (Loss)	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Shareholders’ Equity	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5857
Item 4.	Controls and Procedures	58
	Part II. Other Information
Item 1.	Legal Proceedings	5958
Item 1A.	Risk Factors	5958
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	6059
Item 4.	Mine Safety Disclosures	6059
Item 5.	Other Information	6059
Item 6.	Exhibits	6160
	Signature	6261

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Adtalem Global Education Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except par value)

September 30,

June 30,

September 30,

2021

2021

2020
Assets:

Current assets:

Cash and cash equivalents

$
360,095

$
494,613

$
561,170
Restricted cash

20,220

819,003

947
Accounts receivable, net

163,211

67,996

99,536
Prepaid expenses and other current assets

165,731

133,341

106,820
Total current assets

709,257

1,514,953

768,473
Noncurrent assets:

Property and equipment, net

322,305

297,237

289,944
Operating lease assets

168,626

168,943

186,824
Deferred income taxes

31,315

22,479

18,325
Intangible assets, net

1,090,663

276,249

285,027
Goodwill

1,328,928

686,374

686,480
Other assets, net

117,096

87,601

94,824
Total noncurrent assets

3,058,933

1,538,883

1,561,424
Total assets

$
3,768,190

$
3,053,836

$
2,329,897

Liabilities and shareholders' equity:

Current liabilities:

Accounts payable

$
113,577

$
56,071

$
48,148
Accrued payroll and benefits

65,047

64,452

31,491
Accrued liabilities

126,818

129,258

107,148
Deferred revenue

266,654

100,697

168,253
Current operating lease liabilities

57,224

55,329

51,897
Current portion of long-term debt

6,375

3,000

3,000
Total current liabilities

635,695

408,807

409,937
Noncurrent liabilities:

Long-term debt

1,600,043

1,067,711

285,621
Long-term operating lease liabilities

164,675

167,855

189,607
Deferred income taxes

27,206

26,991

25,410
Other liabilities

73,600

79,612

85,590
Total noncurrent liabilities

1,865,524

1,342,169

586,228
Total liabilities

2,501,219

1,750,976

996,165
Commitments and contingencies (Note 19)

Redeemable noncontrolling interest

1,790

1,790

2,761
Shareholders' equity:

Common stock, $0.01 par value per share, 200,000 shares authorized; 49,753, 49,253, and 52,089 shares outstanding as of September 30, 2021, June 30, 2021, and September 30, 2020, respectively

817

811

810
Additional paid-in capital

537,402

519,826

508,487
Retained earnings

1,947,101

2,005,105

1,947,498
Accumulated other comprehensive loss

(740)

(7,365)

(8,612)
Treasury stock, at cost, 31,903, 31,846, and 28,912 shares as of September 30, 2021, June 30, 2021, and September 30, 2020, respectively

(1,219,399)

(1,217,307)

(1,117,212)
Total shareholders' equity

1,265,181

1,301,070

1,330,971
Total liabilities and shareholders' equity

$
3,768,190

$
3,053,836

$
2,329,897


	September 30,		June 30,		September 30,
	2022		2022		2021
Assets:
Current assets:
Cash and cash equivalents	$	327,515	$	346,973	$	323,994
Restricted cash		2,480		964		20,220
Accounts receivable, net		111,858		81,635		140,390
Prepaid expenses and other current assets		128,069		126,467		162,463
Current assets held for sale		—		—		62,725
Total current assets		569,922		556,039		709,792
Noncurrent assets:
Property and equipment, net		281,581		289,926		308,759
Operating lease assets		158,287		177,995		167,249
Deferred income taxes		49,318		51,093		61,654
Intangible assets, net		855,049		873,577		954,400
Goodwill		961,262		961,262		952,764
Other assets, net		120,630		119,283		113,819
Noncurrent assets held for sale		—		—		530,627
Total noncurrent assets		2,426,127		2,473,136		3,089,272
Total assets	$	2,996,049	$	3,029,175	$	3,799,064

Liabilities and shareholders' equity:
Current liabilities:
Accounts payable	$	64,407	$	57,140	$	99,691
Accrued payroll and benefits		55,034		66,642		57,463
Accrued liabilities		93,805		98,124		124,748
Deferred revenue		227,238		144,840		236,990
Current operating lease liabilities		50,065		50,781		55,925
Current portion of long-term debt		—		—		6,375
Current liabilities held for sale		—		—		55,038
Total current liabilities		490,549		417,527		636,230
Noncurrent liabilities:
Long-term debt		741,696		838,908		1,600,043
Long-term operating lease liabilities		164,840		177,045		164,172
Deferred income taxes		26,408		25,554		26,390
Other liabilities		62,517		65,074		72,688
Noncurrent liabilities held for sale		—		—		32,570
Total noncurrent liabilities		995,461		1,106,581		1,895,863
Total liabilities		1,486,010		1,524,108		2,532,093
Commitments and contingencies (Note 19)
Redeemable noncontrolling interest		—		—		1,790
Shareholders' equity:
Common stock, $0.01 par value per share, 200,000 shares authorized; 45,396, 45,177, and 49,753 shares outstanding as of September 30, 2022, June 30, 2022, and September 30, 2021, respectively		821		818		817
Additional paid-in capital		529,229		521,848		537,402
Retained earnings		2,325,002		2,322,810		1,947,101
Accumulated other comprehensive loss		(2,227)		(960)		(740)
Treasury stock, at cost, 36,703, 36,619, and 31,903 shares as of September 30, 2022, June 30, 2022, and September 30, 2021, respectively		(1,342,786)		(1,339,449)		(1,219,399)
Total shareholders' equity		1,510,039		1,505,067		1,265,181
Total liabilities and shareholders' equity	$	2,996,049	$	3,029,175	$	3,799,064

See accompanying ~~notes~~Notes to ~~consolidated financial statements.~~Consolidated Financial Statements.

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Income (Loss)

(unaudited)

(in thousands, except per share data)


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Revenue	$	348,327	$	268,241	$	354,559	$	289,070
Operating cost and expense:
Cost of educational services		163,110		113,698		159,645		152,050
Student services and administrative expense		159,479		100,178		148,341		129,436
Restructuring expense		3,916		4,223		15,065		3,094
Business acquisition and integration expense		26,553		13,436		8,415		26,553
Total operating cost and expense		353,058		231,535		331,466		311,133
Operating (loss) income		(4,731)		36,706
Operating income (loss)						23,093		(22,063)
Other income (expense):
Interest and dividend income		878		1,004
Interest income						1,567		878
Interest expense		(47,393)		(3,692)		(17,760)		(47,393)
Investment gain		0		518
Net other expense		(46,515)		(2,170)		(16,193)		(46,515)
(Loss) income from continuing operations before income taxes		(51,246)		34,536
Benefit from (provision for) income taxes		10,612		(7,090)
(Loss) income from continuing operations		(40,634)		27,446
Income (loss) from continuing operations before income taxes						6,900		(68,578)
Provision for income taxes						(1,054)		(8,604)
Income (loss) from continuing operations						5,846		(77,182)
Discontinued operations:
Loss from discontinued operations before income taxes		(23,382)		(10,084)		(3,438)		(6,050)
Loss on disposal of discontinued operations before income taxes						(3,359)		—
Benefit from income taxes		6,012		2,477		3,143		25,228
Loss from discontinued operations		(17,370)		(7,607)
Net (loss) income		(58,004)		19,839
Net loss attributable to redeemable noncontrolling interest		0		91
Net (loss) income attributable to Adtalem Global Education	$	(58,004)	$	19,930
(Loss) income from discontinued operations						(3,654)		19,178
Net income (loss)					$	2,192	$	(58,004)

Amounts attributable to Adtalem Global Education:
Net (loss) income from continuing operations	$	(40,634)	$	27,537
Net loss from discontinued operations		(17,370)		(7,607)
Net (loss) income attributable to Adtalem Global Education	$	(58,004)	$	19,930

Earnings (loss) per share attributable to Adtalem Global Education:
Earnings (loss) per share:
Basic:
Continuing operations	$	(0.82)	$	0.52	$	0.13	$	(1.55)
Discontinued operations	$	(0.35)	$	(0.14)	$	(0.08)	$	0.39
Net	$	(1.17)	$	0.38
Total basic earnings (loss) per share					$	0.05	$	(1.17)
Diluted:
Continuing operations	$	(0.82)	$	0.52	$	0.13	$	(1.55)
Discontinued operations	$	(0.35)	$	(0.14)	$	(0.08)	$	0.39
Net	$	(1.17)	$	0.38
Total diluted earnings (loss) per share					$	0.05	$	(1.17)

Weighted-average shares outstanding:
Basic shares		49,663		52,464		45,274		49,663
Diluted shares		49,663		52,797		46,342		49,663

See accompanying ~~notes~~Notes to ~~consolidated financial statements.~~Consolidated Financial Statements.

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

(in thousands)

Three Months Ended

September 30,

2021

2020

Net (loss) income

$
(58,004)

$
19,839

Other comprehensive income (loss), net of tax

(Loss) gain on foreign currency translation adjustments

(70)

318

Unrealized loss on available-for-sale marketable securities

0

(1)

Unrealized gain on interest rate swap

0

126

Comprehensive (loss) income before reclassification

(58,074)

20,282

Reclassification adjustment for unrealized loss on interest rate swap

6,695

0

Comprehensive (loss) income

(51,379)

20,282

Comprehensive loss attributable to redeemable noncontrolling interest

0

91

Comprehensive (loss) income attributable to Adtalem Global Education

$
(51,379)

$
20,373


		Three Months Ended
		September 30,
	2022		2021
Net income (loss)	$	2,192	$	(58,004)
Other comprehensive income (loss), net of tax
Loss on foreign currency translation adjustments		(1,267)		(70)
Comprehensive income (loss) before reclassification		925		(58,074)
Reclassification adjustment for loss on interest rate swap		—		6,695
Comprehensive income (loss)	$	925	$	(51,379)

See accompanying ~~notes~~Notes to ~~consolidated financial statements.~~Consolidated Financial Statements.

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

Three Months Ended

September 30,

2021

2020
Operating activities:

Net (loss) income

$
(58,004)

$
19,839
Loss from discontinued operations

17,370

7,607
(Loss) income from continuing operations

(40,634)

27,446
Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Stock-based compensation expense

9,906

4,004
Amortization and adjustments to operating lease assets

12,524

14,639
Depreciation

11,550

8,975
Amortization of intangible assets

18,937

2,518
Amortization of debt discount and issuance costs

17,858

392
Provision for bad debts

6,329

1,723
Deferred income taxes

(10,852)

4,346
Loss on disposals, accelerated depreciation, and adjustments to property and equipment

282

1,486
Realized and unrealized gain on investments

0

(518)
Changes in assets and liabilities:

Accounts receivable

(76,289)

(13,356)
Prepaid expenses and other current assets

(23,571)

(1,735)
Accounts payable

26,582

2,089
Accrued payroll and benefits

(23,768)

(17,341)
Accrued liabilities

(25,090)

(443)
Deferred revenue

154,999

76,664
Operating lease liabilities

(13,722)

(12,700)
Other assets and liabilities

(4,125)

(13,535)
Net cash provided by operating activities-continuing operations

40,916

84,654
Net cash used in operating activities-discontinued operations

(52)

(4,727)
Net cash provided by operating activities

40,864

79,927
Investing activities:

Capital expenditures

(7,324)

(14,443)
Proceeds from sales of marketable securities

0

1,014
Purchases of marketable securities

0

(963)
Payment for purchase of business, net of cash and restricted cash acquired

(1,481,789)

0
Net cash used in investing activities

(1,489,113)

(14,392)
Financing activities:

Proceeds from exercise of stock options

7,685

55
Employee taxes paid on withholding shares

(2,228)

(3,921)
Proceeds from stock issued under Colleague Stock Purchase Plan

114

31
Proceeds from long-term debt

850,000

0
Repayments of long-term debt

(291,000)

(750)
Payment of debt discount and issuance costs

(49,553)

0
Net cash provided by (used in) financing activities

515,018

(4,585)
Effect of exchange rate changes on cash, cash equivalents and restricted cash

(70)

62
Net (decrease) increase in cash, cash equivalents and restricted cash

(933,301)

61,012
Cash, cash equivalents and restricted cash at beginning of period

1,313,616

501,105
Cash, cash equivalents and restricted cash at end of period

$
380,315

$
562,117


	Three Months Ended
	September 30,
	2022		2021
Operating activities:
Net income (loss)	$	2,192	$	(58,004)
Loss (income) from discontinued operations		3,654		(19,178)
Income (loss) from continuing operations		5,846		(77,182)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation expense		6,145		9,711
Amortization and impairments to operating lease assets		19,708		12,323
Depreciation		10,805		10,499
Amortization of intangible assets		18,528		16,451
Amortization and write-off of debt discount and issuance costs		4,227		17,858
Provision for bad debts		5,991		6,189
Deferred income taxes		2,629		(10,186)
Loss on disposals, accelerated depreciation, and impairments to property and equipment		3,483		282
Gain on extinguishment of debt		(71)		—
Changes in assets and liabilities:
Accounts receivable		(33,219)		(78,283)
Prepaid expenses and other current assets		(1,602)		(199)
Accounts payable		7,586		26,706
Accrued payroll and benefits		(11,593)		(21,231)
Accrued liabilities		(9,010)		(24,846)
Deferred revenue		82,398		157,225
Operating lease liabilities		(12,921)		(13,397)
Other assets and liabilities		(7,406)		(2,414)
Net cash provided by operating activities-continuing operations		91,524		29,506
Net cash (used in) provided by operating activities-discontinued operations		(130)		11,358
Net cash provided by operating activities		91,394		40,864
Investing activities:
Capital expenditures		(5,551)		(6,691)
Payment for purchase of business, net of cash and restricted cash acquired		—		(1,481,789)
Net cash used in investing activities-continuing operations		(5,551)		(1,488,480)
Net cash used in investing activities-discontinued operations		—		(633)
Payment for working capital adjustment for sale of business		(811)		—
Net cash used in investing activities		(6,362)		(1,489,113)
Financing activities:
Proceeds from exercise of stock options		1,241		7,685
Employee taxes paid on withholding shares		(3,486)		(2,228)
Proceeds from stock issued under Colleague Stock Purchase Plan		132		114
Proceeds from long-term debt		—		850,000
Repayments of long-term debt		(100,861)		(291,000)
Payment of debt discount and issuance costs		—		(49,553)
Net cash (used in) provided by financing activities		(102,974)		515,018
Effect of exchange rate changes on cash, cash equivalents and restricted cash		—		(70)
Net decrease in cash, cash equivalents and restricted cash		(17,942)		(933,301)
Cash, cash equivalents and restricted cash at beginning of period		347,937		1,313,616
Cash, cash equivalents and restricted cash at end of period		329,995		380,315
Less: cash, cash equivalents and restricted cash of discontinued operations at end of period		—		36,101
Cash, cash equivalents and restricted cash of continuing operations at end of period	$	329,995	$	344,214
Non-cash investing and financing activities:
Accrued capital expenditures	$	4,713	$	6,576

See accompanying ~~notes~~Notes to ~~consolidated financial statements.~~Consolidated Financial Statements.

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Shareholders’ Equity

(unaudited)

(in thousands)


									Accumulated																Accumulated
					Additional				Other												Additional				Other
	Common Stock				Paid-In		Retained		Comprehensive		Treasury Stock						Common Stock				Paid-In		Retained		Comprehensive		Treasury Stock
	Shares		Amount		Capital		Earnings		Loss		Shares		Amount		Total		Shares		Amount		Capital		Earnings		Loss		Shares		Amount		Total
June 30, 2020		80,665	$	807	$	504,434	$	1,927,568	$	(9,055)		28,794	$	(1,113,333)	$	1,310,421
Net income attributable to Adtalem Global Education								19,930								19,930
Other comprehensive income, net of tax										443						443
Stock-based compensation						4,009										4,009
Net activity from stock-based compensation awards		336		3		52						119		(3,921)		(3,866)
Proceeds from stock issued under Colleague Stock Purchase Plan						(8)						(1)		42		34
September 30, 2020		81,001	$	810	$	508,487	$	1,947,498	$	(8,612)		28,912	$	(1,117,212)	$	1,330,971

June 30, 2021		81,099	$	811	$	519,826	$	2,005,105	$	(7,365)		31,846	$	(1,217,307)	$	1,301,070		81,099	$	811	$	519,826	$	2,005,105	$	(7,365)		31,846	$	(1,217,307)	$	1,301,070
Net loss attributable to Adtalem Global Education								(58,004)								(58,004)
Net loss																								(58,004)								(58,004)
Other comprehensive loss, net of tax										(70)						(70)										(70)						(70)
Reclassification adjustment for unrealized loss on interest rate swap										6,695						6,695
Reclassification adjustment for loss on interest rate swap																										6,695						6,695
Stock-based compensation						9,906										9,906						9,906										9,906
Net activity from stock-based compensation awards		557		6		7,679						61		(2,228)		5,457		557		6		7,679						61		(2,228)		5,457
Proceeds from stock issued under Colleague Stock Purchase Plan						(9)						(4)		136		127						(9)						(4)		136		127
September 30, 2021		81,656	$	817	$	537,402	$	1,947,101	$	(740)		31,903	$	(1,219,399)	$	1,265,181		81,656	$	817	$	537,402	$	1,947,101	$	(740)		31,903	$	(1,219,399)	$	1,265,181

June 30, 2022																		81,796	$	818	$	521,848	$	2,322,810	$	(960)		36,619	$	(1,339,449)	$	1,505,067
Net income																								2,192								2,192
Other comprehensive loss, net of tax																										(1,267)						(1,267)
Stock-based compensation																						6,145										6,145
Net activity from stock-based compensation awards																		303		3		1,238						88		(3,486)		(2,245)
Proceeds from stock issued under Colleague Stock Purchase Plan																						(2)						(4)		149		147
September 30, 2022																		82,099	$	821	$	529,229	$	2,325,002	$	(2,227)		36,703	$	(1,342,786)	$	1,510,039

See accompanying ~~notes~~Notes to ~~consolidated financial statements.~~Consolidated Financial Statements.

Table of Contents

Adtalem Global Education Inc.

Notes to Consolidated Financial Statements

(unaudited)

Table of Contents


Note		Page		Page
1	Nature of Operations	7	Nature of Operations	7
2	Summary of Significant Accounting Policies	7	Summary of Significant Accounting Policies	7
3	Acquisitions	8	Acquisitions	9
4	Discontinued Operations and Assets Held for Sale	10	Discontinued Operations and Assets Held for Sale	10
5	Revenue	11	Revenue	13
6	Restructuring Charges	13	Restructuring Charges	14
7	Income Taxes	14	Income Taxes	15
8	Earnings per Share	15	Earnings per Share	16
9	Accounts Receivable and Credit Losses	15	Accounts Receivable and Credit Losses	16
10	Property and Equipment, Net	18	Property and Equipment, Net	20
11	Leases	19	Leases	20
12	Goodwill and Intangible Assets	20	Goodwill and Intangible Assets	22
13	Debt	23	Debt	24
14	Redeemable Noncontrolling Interest	28	Redeemable Noncontrolling Interest	29
15	Share Repurchases	28	Share Repurchases	29
16	Accumulated Other Comprehensive Loss	29	Accumulated Other Comprehensive Loss	30
17	Stock-Based Compensation	30	Stock-Based Compensation	30
18	Fair Value Measurements	32	Fair Value Measurements	32
19	Commitments and Contingencies	33	Commitments and Contingencies	34
20	Segment Information	35	Segment Information	36

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1. Nature of Operations

In this Quarterly Report on Form 10-Q, Adtalem Global Education Inc., together with its subsidiaries, is collectively referred to as “Adtalem,” “we,” “our,” “us,” or similar references.

~~Adtalem is a leading workforce solutions provider. During~~Beginning in the ~~first~~second quarter of fiscal year 2022, Adtalem ~~made~~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 U.S. generally accepted accounting principles (“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 ~~change~~result, all financial results, disclosures, and discussions of continuing operations in this Quarterly Report on Form 10-Q 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 ~~its reportable segments~~incur costs associated with ongoing litigation and settlements related to ~~align with current strategic priorities~~the DeVry University divestiture, which was completed during fiscal year 2019, and ~~resource allocation.~~are classified as expense within discontinued operations. See Note 4 “Discontinued Operations and Assets Held for Sale” for additional information.

Adtalem is a leading healthcare educator. We present 4three 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.~~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. ~~Business acquisition and integration costs incurred for this transaction during the three months ended September 30, 2021 and 2020 were $26.6 million and $13.4 million, respectively.~~ See Note 3 “Acquisitions” for additional ~~information on the acquisition.~~information.

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.”

~~Financial Services~~ – Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), OnCourse Learning (“OCL”), and EduPristine. On August 4, 2021, Adtalem announced we are exploring strategic alternatives for the Financial Services segment.

“Home Office and Other” includes activities not allocated to a reportable segment. ~~See~~Financial and descriptive information about Adtalem’s reportable segments is presented in Note 20 “Segment ~~Information” for additional information.~~Information.”

~~We continue to incur~~Business acquisition and integration costs ~~associated with ongoing litigation~~incurred were $8.4 million and ~~settlements related to~~$26.6 million in the ~~DeVry University divestiture, which was completed~~three months ended September 30, 2022 and 2021, respectively. In addition, during the first quarter of fiscal year ~~2019,~~2023, we initiated transformation initiatives to accelerate growth and organizational agility and certain costs relating to this transformation are ~~classified as expense within discontinued operations. See Note 4 “Discontinued Operations~~included in business acquisition and ~~Assets Held for Sale” for additional information.~~integration costs in the Consolidated Statements of Income (Loss).

2. Summary of Significant Accounting Policies

Basis of Presentation

A full listing of our significant accounting policies is described in Note 2 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 (“~~2021~~2022 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with ~~U.S. generally accepted accounting principles (“GAAP”)~~GAAP for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (which are normal and recurring in nature) considered necessary for a fair presentation have been included. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. These consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto included in our ~~2021~~2022 Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.

~~Certain prior period amounts have been reclassified for consistency with the current period presentation.~~

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Use of Estimates

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. Actual results could differ from those estimates.

Although our current estimates contemplate current conditions, including the impact of the novel coronavirus (“COVID-19”) pandemic, 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. On March 11, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization, which recommended containment and mitigation measures worldwide. COVID-19 and the response of governmental and public health organizations in dealing with the pandemic included restricting general activity levels within communities, the economy, and operations of our customers. While we have experienced an impact to our business, operations, and financial results as a result of the COVID-19 pandemic, it may have even more far-reaching impacts on many aspects of our operations including the impact on customer behaviors, business operations, our employees, and the market in general. The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current estimates due to inherent uncertainties regarding the duration and further spread of COVID-19, actions taken to contain the virus, the efficacy and distribution of the vaccines, as well as, how quickly and to what extent normal economic and operating conditions can resume.

Recent Accounting Standards

Recently adopted accounting standards

In ~~December 2019,~~October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2019-12: “Income Taxes~~2021-08: “Business Combinations (Topic ~~740)~~805): ~~Simplifying the~~ Accounting for ~~Income Taxes.~~Contract Assets and Contract Liabilities from Contracts with Customers.” The ~~guidance was issued~~amendments require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as ~~part of FASB’s overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving~~if it had originated the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, “Income Taxes,” and simplification in several other areas.contracts. The guidance is effective for financial statements issued for fiscal years beginning after December 15, ~~2020,~~2022, and interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. We adopted this guidance on July 1, ~~2021~~2022 and ~~it did not have a material impact on Adtalem’s Consolidated Financial Statements.~~will apply the guidance to any future business combinations.

Recently issued accounting standards not yet adopted

In March 2022, the FASB issued ASU No. 2022-02: “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The guidance was issued as improvements to ASU No. 2016-13. The vintage disclosure changes are relevant to Adtalem and require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. Management expects to implement this guidance effective July 1, 2023. The amendments will impact our disclosures but will not otherwise impact Adtalem’s Consolidated Financial Statements.

We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our ~~consolidated financial statements.~~Consolidated Financial Statements.

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3. Acquisitions

Walden University

On August 12, 2021, Adtalem completed the acquisition of 100% of the equity ~~interests~~interest of Walden for ~~$1,481.8~~$1,488.1 million, net of cash and restricted cash of $83.4 million. Adtalem funded the purchase with the ~~$800~~$800.0 million in Notes (as defined in Note 13 “Debt”), the ~~$850~~$850.0 million Term Loan B (as defined in Note 13 “Debt”), and available cash on hand. Walden offers more than 100 online certificate, bachelor’s, master’s, and doctoral degrees. The acquisition furthers Adtalem’s growth strategy ~~into becoming~~as a leading ~~workforce solutions provider.~~healthcare educator.

The operations of Walden are included in Adtalem’s Walden reportable segment (see Note 20 “Segment Information”). The results of Walden’s operations have been included in the Consolidated Financial Statements of Adtalem since the date of acquisition, which included revenue of $68.6 million and net loss of $9.2 million from the operations of Walden for the three months ended September 30, 2021. In addition, we incurred acquisition-related costs of $22.3million ~~and $8.6 million for~~in the three months ended September 30, 2021, ~~and 2020, respectively,~~ which were included in business acquisition and integration expense in the Consolidated Statements of Income (Loss).

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The acquisition was accounted for as a business combination and the preliminary allocation of the purchase price to the assets acquired and liabilities assumed was based upon preliminary valuations performed to determine the fair values of the acquired items as of the acquisition date. As these valuations, particularly as they relate to intangible assets, were preliminary, they may be adjusted for up to one year after the closing date to reflect final valuations.

The following table summarizes the ~~preliminary~~ fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):


	August 12,		August 12,
	2021		2021
Assets acquired:
Cash and cash equivalents	$	65,010	$	65,010
Restricted cash		18,389		18,389
Accounts receivable, net		22,091
Accounts receivable				22,091
Prepaid expenses and other current assets		8,819		8,819
Property and equipment, net		25,882
Property and equipment				25,882
Operating lease assets		6,096		6,096
Deferred income taxes				59
Intangible assets		833,351		833,351
Goodwill		642,554		651,052
Other assets		21,316
Other assets, net				21,316
Total assets acquired		1,643,508		1,652,065
Liabilities assumed:
Accounts payable		31,971		31,971
Accrued payroll and benefits		24,376		25,639
Accrued liabilities		591		1,620
Deferred revenue		10,958		10,958
Current operating lease liabilities		1,983		1,983
Long-term operating lease liabilities		4,343		4,343
Other liabilities		4,098		4,098
Total liabilities assumed		78,320		80,612
Net assets acquired	$	1,565,188	$	1,571,453

The fair value of the assets acquired includes accounts receivable of $22.1 million. The gross amount due under contracts is $37.9 million, of which $15.8 million was expected to be uncollectible.

Goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired, was all assigned to the Walden reporting unit and reportable segment. The entire goodwill amount is ~~expected to be~~ tax deductible. Factors that contributed to a purchase price resulting in the recognition of goodwill includes Walden’s strategic fit into Adtalem’s ~~workforce solutions provider~~healthcare educator strategy, the reputation of the Walden brand as a leader in online education industry, and potential future growth opportunity. Of the $833.4 million of acquired intangible assets, $495.8 million was assigned to Title IV eligibility and accreditations and $119.6 million was assigned to trade names, each of which has been determined not to

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be subject to amortization. The ~~preliminary~~ values and estimated useful lives of other intangible assets acquired are as follows (in thousands):


	August 12, 2021
	Value		Estimated
	Assigned		Useful Life
Student relationships	$	161,900	3 years
Curriculum	$	56,091	5 years

The Title IV eligibility and accreditations intangible asset was valued using the with and without method of the income approach. The student relationships intangible asset was valued using the multi-period excess earnings method. The trade name intangible asset was valued using the relief-from-royalty method. The curriculum intangible asset was valued using the cost to replace method. Significant judgments and assumptions were used in these valuations.

~~Table~~ We applied judgment which involved the use of ~~Contents~~significant assumptions with respect to the discount rate and recovery period for the Title IV eligibility and accreditations intangible asset and royalty rate and discount rate for the trade name intangible asset. We also applied judgment which involved the use of assumptions, including the discount rate and EBITDA margin for the student relationships intangible asset and labor rates and hours and obsolescence rate for the curriculum intangible asset.

The following unaudited pro forma financial information summarizes our results of operations as though the acquisition occurred on July 1, 2020 (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2021
Revenue	$	417,566	$	435,601	$	417,566
Net loss attributable to Adtalem	$	(14,693)	$	(23,411)
Net loss					$	(14,693)

The unaudited pro forma financial information includes adjustments to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from July 1, 2020, with the consequential tax effects. The unaudited pro forma financial information also includes adjustments to reflect the additional interest expense on the debt we issued to fund the acquisition (see Note 13 “Debt” for additional information). As the ticking fees are representative of the historical interest expense incurred by Adtalem on the Term Loan B from the period of February 12, 2021 to August 12, 2021 and the unaudited pro forma financial information for ~~the three months ended September 30, 2020~~fiscal year 2021 has been adjusted to include interest expense assuming the Term Loan B had been entered into as of July 1, 2020, we have made a further adjustment to remove the ticking fees recognized in the unaudited pro forma financial information for the three months ended September 30, 2021 (see Note 13 “Debt” for additional information on ticking fees). Had the Term Loan B been drawn upon on July 1, 2020, none of the ticking fees would have been incurred and, accordingly, the inclusion of such amounts would be duplicative to the interest expense incurred by Adtalem on a pro forma basis. The acquisition transaction costs we incurred in connection with the Walden acquisition are reflected in the unaudited pro forma financial information results for ~~the three months ended September 30, 2020.~~fiscal year 2021.

This unaudited pro forma financial information is for informational purposes only. It does not reflect the integration of the business or any synergies that may result from the acquisition. As such, it is not indicative of the results of operations that would have been achieved had the acquisition been consummated on July 1, 2020. In addition, the unaudited pro forma financial information amounts are not indicative of future operating results.

4. Discontinued Operations and Assets Held for Sale

On December 11, 2018, Adtalem completed the sale of DeVry University to Cogswell Education, LLC (“Cogswell”) for de minimis consideration. As the sale represented a strategic shift that had a major effect on Adtalem’s operations and financial results, DeVry University is presented in Adtalem’s ~~financial reporting~~Consolidated Financial Statements as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to ~~$20~~$20.0 million over a ten-year period payable based on DeVry University’s free cash flow. Adtalem received $2.9 million during the second quarter of fiscal year 2022 related to the earn-out. In connection with the closing of the sale, Adtalem loaned to DeVry University $10.0 million under the terms of the promissory note, dated as of December 11, 2018 (the “ DeVry Note”). The DeVry

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Note ~~bears~~bore interest at a rate of 4% per annum, payable annually in arrears, and ~~has~~had a maturity date of January 1, 2022. ~~Based on~~We received the ~~terms~~loan repayment of $10.0 million during the ~~DeVry Note, DeVry University may make prepayments and may be required to make prepayments on the DeVry Note.~~third quarter of fiscal year 2022. The DeVry Note is included on the Consolidated Balance ~~Sheet~~Sheets in prepaid expenses and other current assets as of ~~each of~~ September 30, ~~2021 and June 30, 2021, and other assets, net as of September 30, 2020.~~2021. Adtalem has retained certain leases associated with DeVry University operations. Adtalem remains the primary lessee on these leases and subleases to DeVry University. In addition, Adtalem owns the buildings for certain DeVry University operating and administrative office locations and leases space to DeVry University under one-year operating leases, renewable annually at DeVry University’s option with the exception of 1one lease which expires in December 2023. Adtalem records the proceeds from these leases and subleases as an offset to operating costs. Adtalem also assigned certain leases to DeVry University but remains contingently liable under these leases.

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. Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, Adtalem sold the issued and outstanding shares of ACAMS, Becker, and OCL to the Purchaser for $962.7 million, net of cash of $21.5 million, subject to certain post-closing adjustments. In addition, 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. We recorded a loss of $3.4 million in the first quarter of fiscal year 2023 for post-closing working capital adjustments to the initial sales price for ACAMS, Becker, and OCL, which is included in loss on disposal of discontinued operations before income taxes in the Consolidated Statements of Income (Loss). These divestitures are the culmination of a long-term strategy to sharpen the focus of our portfolio and enhance our ability to address the rapidly growing and unmet demand for healthcare professionals in the U.S. As these sales represented a strategic shift that had a major effect on Adtalem’s operations and financial results, these businesses previously included in our former Financial Services segment are presented in Adtalem’s Consolidated Financial Statements as discontinued operations. In accordance with GAAP, we have classified ACAMS, Becker, OCL, and EduPristine entities as “Held for Sale” and “Discontinued Operations” in all periods presented as applicable.

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The following is a summary of balance sheet information of assets and liabilities reported as held for sale as of September 30, 2021, which includes ACAMS, Becker, OCL, and EduPristine (in thousands):


	September 30,
	2021
Assets:
Current assets:
Cash and cash equivalents	$	36,101
Accounts receivable, net		22,821
Prepaid expenses and other current assets		3,803
Total current assets held for sale		62,725
Noncurrent assets:
Property and equipment, net		13,546
Operating lease assets		1,377
Intangible assets, net		136,263
Goodwill		376,164
Other assets, net		3,277
Total noncurrent assets held for sale		530,627
Total assets held for sale	$	593,352

Liabilities:
Current liabilities:
Accounts payable	$	13,886
Accrued payroll and benefits		7,584
Accrued liabilities		2,605
Deferred revenue		29,664
Current operating lease liabilities		1,299
Total current liabilities held for sale		55,038
Noncurrent liabilities:
Long-term operating lease liabilities		503
Deferred income taxes		31,155
Other liabilities		912
Total noncurrent liabilities held for sale		32,570
Total liabilities held for sale	$	87,608

The following is a summary of income statement information of operations reported as discontinued operations, which includes ~~costs we continue to incur associated with ongoing litigation~~ACAMS, Becker, OCL, and ~~settlements~~EduPristine operations through the date of each respective sale, a loss from post-closing working capital adjustments, and activity related to the DeVry University divestiture, which ~~was completed during fiscal year 2019~~includes litigation and settlement costs we continue to incur (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Revenue	$	0	$	0	$	—	$	59,257
Operating cost and expense:
Cost of educational services						—		11,060
Student services and administrative expense		23,382		10,084		3,438		54,247
Operating loss		(23,382)		(10,084)
Total operating cost and expense						3,438		65,307
Loss from discontinued operations before income taxes						(3,438)		(6,050)
Loss on disposal of discontinued operations before income taxes						(3,359)		—
Benefit from income taxes		6,012		2,477		3,143		25,228
Net loss from discontinued operations attributable to Adtalem	$	(17,370)	$	(7,607)
(Loss) income from discontinued operations					$	(3,654)	$	19,178

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5. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers ~~(students and members)~~(students), in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The following tables disaggregate revenue by source (in thousands):


	Three Months Ended September 30, 2021										Three Months Ended September 30, 2022
	Chamberlain		Walden		Medical and Veterinary		Financial Services		Consolidated		Chamberlain		Walden		Medical and Veterinary		Consolidated
Higher education	$	135,639	$	68,617	$	82,475	$	0	$	286,731
Test preparation/certifications		0		0		0		37,821		37,821
Conferences/seminars		0		0		0		8,951		8,951
Memberships/subscriptions		0		0		0		12,485		12,485
Tuition and fees											$	135,405	$	130,901	$	85,514	$	351,820
Other		0		0		2,339		0		2,339		—		—		2,739		2,739
Total	$	135,639	$	68,617	$	84,814	$	59,257	$	348,327	$	135,405	$	130,901	$	88,253	$	354,559


	Three Months Ended September 30, 2020										Three Months Ended September 30, 2021
	Chamberlain		Walden		Medical and Veterinary		Financial Services		Consolidated		Chamberlain		Walden		Medical and Veterinary		Consolidated
Higher education	$	133,764	$	0	$	84,525	$	0	$	218,289
Test preparation/certifications		0		0		0		36,574		36,574
Conferences/seminars		0		0		0		2,081		2,081
Memberships/subscriptions		0		0		0		10,760		10,760
Tuition and fees											$	135,639	$	68,617	$	82,475	$	286,731
Other		0		0		537		0		537		—		—		2,339		2,339
Total	$	133,764	$	0	$	85,062	$	49,415	$	268,241	$	135,639	$	68,617	$	84,814	$	289,070

~~Certain prior period amounts in the above table have been reclassified for consistency with the current period presentation.~~ In addition, see Note 20 “Segment Information” for a disaggregation of revenue by geographical region.

Performance Obligations and Revenue Recognition

~~Higher education~~Tuition and fees: ~~Higher education revenue consists of tuition, fees, books, and other educational products.~~ The majority of revenue is derived from tuition and fees, which is recognized on a straight-line basis over the academic term as instruction is delivered. Books and other educational product revenue are recognized when products are shipped or students receive access to electronic materials. Under certain circumstances, we report revenue from these books and other educational products on a net basis because our performance obligation is to facilitate a transaction between the student and a vendor, which revenue was not significant for the three months ended September 30, ~~2021~~2022 and ~~2020.~~

~~Test preparation/certifications~~: Test preparation revenue consists of sales of self-study materials and test preparation course instruction. Becker test preparation revenue is primarily derived from self-study materials and is recognized when

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access to the materials is delivered to the customer. EduPristine test preparation revenue is primarily derived from course instruction and is recognized on a straight-line basis over the applicable instruction delivery period. Certification revenue consists of exam preparation guides, seminars, exam sitting fees, and recertification fees and is recognized when the applicable performance obligation is satisfied.

~~Conferences/seminars~~: Conference revenue consists of revenue from attendees, sponsors, and exhibitors. We recognize revenue for all items related to conferences at the time of the conference. Seminar revenue consists of seminars delivered in live, live-online, or on-demand online formats. We recognize revenue for live and live-online seminars on the day of the seminar. We recognize revenue for on-demand online seminars when customers are granted access to a webcast of the seminar.

~~Memberships/subscriptions~~~~: Membership revenue is recognized on a straight-line basis over the membership period. Subscription revenue is recognized on a straight-line basis over the subscription period.~~2021.

Other: Other revenue consists of housing and other miscellaneous services. Other revenue is recognized over the period in which the applicable performance obligation is satisfied.

Customer contracts generally have separately stated prices for each performance obligation contained in the contract. Therefore, each performance obligation generally has its own standalone selling price. For higher education students, arrangementsArrangements for payment are agreed to prior to registration of the student’s first academic term. The majority of U.S. students obtain Title IV or other financial aid resulting in institutions receiving a significant amount of the transaction price at the beginning of the academic term. Students not utilizing ~~private~~Title IV or other financial aid funding ~~or funding through Adtalem’s credit extension programs (see Note 9 “Accounts Receivable and Credit Losses” for additional information) generally~~may pay after the academic term is complete. ~~For non-higher education customers, payment is typically due and collected at the time a customer places an order.~~

Transaction Price

Revenue, or transaction price, is measured as the amount of consideration expected to be received in exchange for transferring goods or services.

~~For higher education, students~~Students may receive discounts, scholarships, or refunds, which gives rise to variable consideration. The amounts of discounts or scholarships are applied to individual student accounts when such amounts are awarded. Therefore, the transaction price is reduced directly by these discounts or scholarships from the amount of the standard tuition rate charged. Upon withdrawal, a student may be eligible to receive a refund, or partial refund, the amount of which is dependent on the timing of the withdrawal during the academic term. If a student withdraws prior to completing an academic term, federal and state regulations and accreditation criteria permit Adtalem to retain only a set percentage of the total tuition received from such student, which varies with, but generally equals or exceeds, the percentage of the academic term completed by such student. Payment amounts received by Adtalem in excess of such set percentages of tuition are refunded to the student or the appropriate funding source. For contracts with similar characteristics and historical data on refunds, the expected value method is applied in determining the variable consideration related to refunds. Estimates of Adtalem’s expected refunds are determined at the outset of each academic term, based upon actual refunds in previous academic terms.

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Reserves related to refunds are presented as refund liabilities within accrued liabilities on the Consolidated Balance Sheets. All refunds are netted against revenue during the applicable academic term.

Management reassesses collectability on a student-by-student basis throughout the period revenue is recognized. This reassessment is based upon new information and changes in facts and circumstances relevant to a student’s ability to pay. Management also reassesses collectability when a student withdraws from the institution and has unpaid tuition charges. Such unpaid charges do not meet the threshold of reasonably collectible and are recognized as revenue on a cash basis.

For test preparation and other Financial Services products, the transaction price is equal to the amount charged to the customer, which is the standard rate, less any discounts, and an estimate for refunds.

We believe it is probable that no significant reversal will occur in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is subsequently resolved. Therefore, the estimate of variable consideration is not constrained.

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Contract Balances

~~For our higher education institutions, students~~Students are billed at the beginning of each academic term and payment is due at that time. Adtalem’s performance obligation is to provide educational services in the form of instruction during the academic term. As instruction is provided, deferred revenue is reduced. A significant portion of student payments are from Title IV financial aid and other programs and are generally received during the first month of the respective academic term. For students utilizing Adtalem’s credit extension programs (see Note 9 “Accounts Receivable and Credit Losses”), payments are generally received after the academic term, and the corresponding performance obligation, is complete. When payments are received, accounts receivable is reduced.

For our Financial Services businesses, customers are billed and payment is generally due at the time of order placement. In most cases, performance obligations are delivered subsequent to payments received. Delivering our performance obligations reduces deferred revenue, and accounts receivable is reduced upon payments received. In instances when customers are offered a flexible payment plan option, payment is received after satisfying the performance obligation.

Revenue of ~~$84.1~~$140.7 million and $68.8 million was recognized during the first three months of fiscal year 2023 and 2022, respectively, that was included in the deferred revenue balance at the beginning of fiscal year ~~2022.~~2023 and 2022, respectively. Revenue recognized from performance obligations that were satisfied or partially satisfied in prior periods was not material.

The difference between the opening and closing balances of deferred revenue includes decreases from revenue recognized during the period, increases from charges related to the start of academic terms beginning during the period, and increases from payments received related to academic terms commencing after the end of the reporting ~~period, increases from payments from customers in advance~~period. In additional, for fiscal year 2022, the difference between the opening and closing balances of ~~Adtalem performing its applicable performance obligation, and increases~~deferred revenue included an increase from the Walden acquisition.

Practical Expedients

As our performance obligations have an original expected duration of one year or less, we have applied the practical expedient (as provided in ASC 606-10-50-14) to not disclose the information in ASC 606-10-50-13, which requires disclosure of the amount of the transaction price allocated to our performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period and when the entity expects to recognize this amount as revenue. All consideration from contracts with customers is included in the transaction price.

6. Restructuring Charges

During the first quarter of fiscal year 2023, Adtalem recorded restructuring charges primarily driven by real estate consolidations at Walden, Medical and Veterinary, and Adtalem’s home office resulting in impairments on operating lease assets and property and equipment. During the first quarter of fiscal year 2022, Adtalem recorded restructuring charges primarily ~~related to Adtalem’s home office~~driven by workforce reductions and contract terminations related to synergy actions with ~~regard~~regards to the Walden acquisition and Adtalem’s home office ~~real estate consolidations. During the first quarter of fiscal year 2021, Adtalem recorded restructuring charges primarily related to Adtalem’s home office and ACAMS~~ real estate consolidations. When estimating costs of exiting lease space, estimates are made which could differ materially from actual results and may result in additional restructuring charges or reversals in future periods. Termination benefit charges ~~represented~~represent severance pay and benefits for ~~these employees.~~employees impacted by workforce reductions. Adtalem’s home office is classified as “Home Office and Other” in Note 20 “Segment Information.” Pre-tax restructuring charges by segment were as follows (in thousands):

Three Months Ended September 30, 2021

Real Estate
and Other

Termination
Benefits

Total
Financial Services

$
821

$
0

$
821
Home Office and Other

989

2,106

3,095
Total

$
1,810

$
2,106

$
3,916

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Three Months Ended September 30, 2020

Real Estate
and Other

Termination
Benefits

Total
Financial Services

$
1,415

$
0

$
1,415
Home Office and Other

2,318

490

2,808
Total

$
3,733

$
490

$
4,223


	Three Months Ended September 30, 2022
	Real Estate and Other		Termination Benefits		Total
Chamberlain	$	818	$	—	$	818
Walden		3,026		54		3,080
Medical and Veterinary		6,826		—		6,826
Home Office and Other		4,069		272		4,341
Total	$	14,739	$	326	$	15,065


	Three Months Ended September 30, 2021
	Real Estate and Other		Termination Benefits		Total
Home Office and Other	$	989	$	2,105	$	3,094
Total	$	989	$	2,105	$	3,094

The following table summarizes the separation and restructuring plan activity for ~~the~~ fiscal years ~~2021~~2022 and ~~2022,~~2023, for which cash payments are required (in thousands):


Liability balance as of June 30, 2020	$	1,435
Increase in liability (separation and other charges)		490
Reduction in liability (payments and adjustments)		(1,925)
Liability balance as of June 30, 2021		—	$	—
Increase in liability (separation and other charges)		2,814		11,851
Reduction in liability (payments and adjustments)		—		(11,038)
Liability balance as of September 30, 2021	$	2,814
Liability balance as of June 30, 2022				813
Increase in liability (separation and other charges)				326
Reduction in liability (payments and adjustments)				(471)
Liability balance as of September 30, 2022			$	668

~~Of this~~The liability balance ~~$2.3~~of $0.7 million is recorded as accrued liabilities ~~and $0.5 million is recorded as other liabilities~~ on the Consolidated Balance ~~Sheet~~Sheets as of September 30, ~~2021. In addition to continuing~~2022. We continue to incur restructuring charges or reversals related to exiting leased space from previous restructuring ~~activities, we have begun implementing additional restructuring plans to achieve synergies with the Walden acquisition.~~activities.

7. Income Taxes

Our ~~effective~~ income tax ~~rates~~provisions from continuing operations were ~~20.7%~~$1.1 million and ~~20.5%~~$8.6 million in the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~effective~~income tax ~~rates~~provision for the first quarter of fiscal year 2023 decreased compared to the year-ago period primarily due to the impacts recognized in ~~fiscal years 2022 and 2021~~the year-ago period related to the Walden acquisition. The income tax expenses reflect the U.S. federal tax rate of 21% adjusted for taxes related to global intangible low-taxed income (“GILTI”), state and local taxes, benefits of the foreign rate differences, and benefits associated with local tax ~~incentives, changes in valuation allowances and liabilities for uncertain tax positions, and tax benefits on stock-based compensation awards.~~incentives.

~~NaN~~Three of Adtalem’s ~~operating units~~businesses benefit from local tax incentives: AUC, which operates in St. Maarten, RUSM, which operates in Barbados, and RUSVM, which operates in St. Kitts. AUC’s effective tax rate reflects benefits derived from investment incentives. RUSM and RUSVM each have agreements with their respective domestic governments that exempt them from local income taxation. RUSM has an exemption in Barbados until 2039. RUSVM has an exemption in St. Kitts until 2037.

On December 27, 2020, the Consolidated Appropriations Act, 2021 (the “Appropriations Act”) was enacted in response to the COVID-19 pandemic. The Appropriations Act, among other things, temporarily extends through December 31, 2025, certain expiring tax provisions, including look-through treatment of payments of dividends, interest, rents, and royalties received or accrued from related controlled foreign corporations. Additionally, the Appropriations Act enacted new provisions and extended certain provisions originated within the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act,”) enacted on March 27, 2020, including an extension of time for repayment of the deferred portion of employees’ payroll tax through December 31, 2021, and a temporary allowance for full deduction of certain business meals. Adtalem has elected not to defer the employees’ portion of payroll tax. Management does not expect that the other provisions of the Appropriations Act would result in a material tax or cash benefit.

On March 11, 2021, the American Rescue Plan Act of 2021 (the “Rescue Act”) was enacted in response to the COVID-19 pandemic. The Rescue Act, among other things, expands the number of employees subject to the tax deductibility limitation of employee compensation in excess of $1 million for tax years beginning after December 31, 2026 and repeals the election for U.S. affiliated groups to allocate interest expense on a worldwide basis. Management does not expect that the other provisions of the Rescue Act would result in a material tax or cash detriment.

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8. Earnings per Share

The following table sets forth the computations of basic and diluted earnings per share and stock awards not included in the computation of diluted earnings per share when their effect is antidilutive (in thousands, except per share data). As a result of incurring a net loss from continuing operations for the three months ended September 30, 2021, potential common ~~shares~~stock of 559 thousand shares were excluded from diluted loss per share because the effect would have been antidilutive. As further described in Note 15 “Share Repurchases,” on March 14, 2022, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $150.0 million of common stock. For purposes of calculating earnings per share for the periods presented, Adtalem reflected the ASR agreement as a repurchase of Adtalem common stock and as a forward contract indexed to its own common stock. As of September 30, 2022, based on the volume-weighted average price of Adtalem’s common stock per the terms of the ASR agreement, common stock of 306 thousand shares were contingently issuable by Adtalem under the ASR agreement and were included in the diluted earnings per share calculation for the three months ended September 30, 2022 because the effect would have been dilutive. Certain shares related to stock awards were excluded from the computation of earnings per share because the effect would have been antidilutive. The following table sets forth the computations of basic and diluted earnings per share and antidilutive shares (in thousands, except per share data):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Numerator:
Net income (loss) attributable to Adtalem:
Net income (loss):
Continuing operations	$	(40,634)	$	27,537	$	5,846	$	(77,182)
Discontinued operations		(17,370)		(7,607)		(3,654)		19,178
Net	$	(58,004)	$	19,930
Net income (loss)					$	2,192	$	(58,004)

Denominator:
Weighted-average basic shares outstanding		49,663		52,464		45,274		49,663
Effect of dilutive stock awards		—		333		762		—
Effect of ASR						306		—
Weighted-average diluted shares outstanding		49,663		52,797		46,342		49,663

Earnings (loss) per share attributable to Adtalem:
Earnings (loss) per share:
Basic:
Continuing operations	$	(0.82)	$	0.52	$	0.13	$	(1.55)
Discontinued operations	$	(0.35)	$	(0.14)	$	(0.08)	$	0.39
Net	$	(1.17)	$	0.38
Total basic earnings (loss) per share					$	0.05	$	(1.17)
Diluted:
Continuing operations	$	(0.82)	$	0.52	$	0.13	$	(1.55)
Discontinued operations	$	(0.35)	$	(0.14)	$	(0.08)	$	0.39
Net	$	(1.17)	$	0.38
Total diluted earnings (loss) per share					$	0.05	$	(1.17)

Weighted-average antidilutive stock awards		1,045		948
Weighted-average antidilutive shares						477		1,045

9. Accounts Receivable and Credit Losses

We categorize our accounts receivable balances as trade receivables or financing receivables. Our trade receivables relate to student ~~or customer~~ balances occurring in the normal course of business. Trade receivables have a term of less than one year and are included in accounts receivable, net on our Consolidated Balance Sheets. Our financing receivables relate to credit extension programs where the student is provided payment terms in excess of one year with their respective school and are included in accounts receivable, net and other assets, net on our Consolidated Balance Sheets.

~~The classification of our accounts receivable balances was as follows (in thousands):~~

September 30, 2021

Gross

Allowance

Net
Trade receivables, current

$
178,284

$
(18,122)

$
160,162
Financing receivables, current

8,294

(5,245)

3,049
Accounts receivable, current

$
186,578

$
(23,367)

$
163,211

Financing receivables, current

$
8,294

$
(5,245)

$
3,049
Financing receivables, noncurrent

37,509

(11,819)

25,690
Total financing receivables

$
45,803

$
(17,064)

$
28,739

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June 30, 2021

Gross

Allowance

Net
Trade receivables, current

$
79,062

$
(13,154)

$
65,908
Financing receivables, current

6,348

(4,260)

2,088
Accounts receivable, current

$
85,410

$
(17,414)

$
67,996

Financing receivables, current

$
6,348

$
(4,260)

$
2,088
Financing receivables, noncurrent

39,665

(12,572)

27,093
Total financing receivables

$
46,013

$
(16,832)

$
29,181

The classification of our accounts receivable balances was as follows (in thousands):


	September 30, 2020						September 30, 2022
		Gross		Allowance		Net		Gross		Allowance		Net
Trade receivables, current	$	106,980	$	(10,634)	$	96,346	$	142,071	$	(32,882)	$	109,189
Financing receivables, current		6,906		(3,716)		3,190		5,955		(3,286)		2,669
Accounts receivable, current	$	113,886	$	(14,350)	$	99,536	$	148,026	$	(36,168)	$	111,858

Financing receivables, current	$	6,906	$	(3,716)	$	3,190	$	5,955	$	(3,286)	$	2,669
Financing receivables, noncurrent		42,925		(13,099)		29,826		37,467		(12,338)		25,129
Total financing receivables	$	49,831	$	(16,815)	$	33,016	$	43,422	$	(15,624)	$	27,798


	June 30, 2022
		Gross		Allowance		Net
Trade receivables, current	$	109,882	$	(30,897)	$	78,985
Financing receivables, current		6,116		(3,466)		2,650
Accounts receivable, current	$	115,998	$	(34,363)	$	81,635

Financing receivables, current	$	6,116	$	(3,466)	$	2,650
Financing receivables, noncurrent		36,265		(11,425)		24,840
Total financing receivables	$	42,381	$	(14,891)	$	27,490


	September 30, 2021
		Gross		Allowance		Net
Trade receivables, current	$	153,838	$	(16,497)	$	137,341
Financing receivables, current		8,294		(5,245)		3,049
Accounts receivable, current	$	162,132	$	(21,742)	$	140,390

Financing receivables, current	$	8,294	$	(5,245)	$	3,049
Financing receivables, noncurrent		37,509		(11,819)		25,690
Total financing receivables	$	45,803	$	(17,064)	$	28,739

Our financing receivables relate to credit extension programs available to students at Chamberlain, AUC, RUSM, and RUSVM. These credit extension programs are designed to assist students who are unable to completely cover educational costs consisting of tuition, ~~books,~~fees, and ~~fees,~~books, and are available only after all other student financial assistance has been applied toward those purposes. In addition, AUC, RUSM, and RUSVM allow students to finance their living expenses. Repayment plans for financing agreements are developed to address the financial circumstances of the particular student. Interest charges at rates from 3.0% to 12.0% per annum accrue each month on the unpaid balance once a student withdraws or graduates from a program. Most students are required to begin repaying their loans while they are still in school with a minimum payment level designed to demonstrate their capability to repay, which reduces the possibility of over borrowing. Payments may increase upon completing or departing school. After a student leaves school, the student typically will have a monthly installment repayment plan.

Credit Quality

The primary credit quality indicator for our financing receivables is delinquency. Balances are considered delinquent when contractual payments on the loan become past due. We ~~charge-off~~write-off financing receivable balances after they have been sent to a third party collector, the timing of which varies by the institution granting the loan, but in most cases is when the financing agreement is at least 181 days past due. Payments are applied first to outstanding interest and then to the unpaid principal balance.

~~The credit quality analysis of financing receivables as of September 30, 2021 was as follows (in thousands):~~

Amortized Cost Basis by Origination Year

Prior

2018

2019

2020

2021

2022

Total
1-30 days past due

$
149

$
60

$
145

$
342

$
1,498

$
33

$
2,227
31-60 days past due

52

257

230

19

462

101

1,121
61-90 days past due

25

66

0

19

227

86

423
91-120 days past due

124

16

131

12

467

0

750
121-150 days past due

545

13

38

2

323

0

921
Greater than 150 days past due

9,347

1,826

1,195

891

1,083

0

14,342
Total past due

10,242

2,238

1,739

1,285

4,060

220

19,784
Current

6,670

2,710

1,930

1,280

11,638

1,791

26,019
Financing receivables, gross

$
16,912

$
4,948

$
3,669

$
2,565

$
15,698

$
2,011

$
45,803

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The credit quality analysis of financing receivables as of September 30, 2022 was as follows (in thousands):


	Amortized Cost Basis by Origination Year
	Prior		2019		2020		2021		2022		2023		Total
1-30 days past due	$	232	$	151	$	38	$	873	$	1,112	$	989	$	3,395
31-60 days past due		106		172		264		199		646		—		1,387
61-90 days past due		7		11		3		299		35		—		355
91-120 days past due		62		—		3		1,063		24		—		1,152
121-150 days past due		390		146		72		409		244		—		1,261
Greater than 150 days past due		7,472		1,175		634		1,948		657		—		11,886
Total past due		8,269		1,655		1,014		4,791		2,718		989		19,436
Current		6,971		1,321		1,179		7,592		5,062		1,861		23,986
Financing receivables, gross	$	15,240	$	2,976	$	2,193	$	12,383	$	7,780	$	2,850	$	43,422

The credit quality analysis of financing receivables as of June 30, ~~2021~~2022 was as follows (in thousands):


	Amortized Cost Basis by Origination Year														Amortized Cost Basis by Origination Year
	Prior		2017		2018		2019		2020		2021		Total		Prior		2018		2019		2020		2021		2022		Total
1-30 days past due	$	297	$	7	$	320	$	559	$	135	$	1,616	$	2,934	$	104	$	140	$	114	$	191	$	699	$	782	$	2,030
31-60 days past due		145		2		165		49		61		660		1,082		278		38		214		145		691		332		1,698
61-90 days past due		24		310		92		102		69		95		692		58		29		217		8		668		273		1,253
91-120 days past due		287		—		131		16		47		13		494		97		139		113		45		670		14		1,078
121-150 days past due		43		31		133		42		256		108		613		17		30		20		41		206		81		395
Greater than 150 days past due		7,468		2,973		1,919		1,431		475		872		15,138		6,978		876		1,077		683		1,596		377		11,587
Total past due		8,264		3,323		2,760		2,199		1,043		3,364		20,953		7,532		1,252		1,755		1,113		4,530		1,859		18,041
Current		4,565		1,955		2,601		1,586		1,548		12,805		25,060		4,687		2,229		1,483		1,167		8,910		5,864		24,340
Financing receivables, gross	$	12,829	$	5,278	$	5,361	$	3,785	$	2,591	$	16,169	$	46,013	$	12,219	$	3,481	$	3,238	$	2,280	$	13,440	$	7,723	$	42,381

The credit quality analysis of financing receivables as of September 30, ~~2020~~2021 was as follows (in thousands):


	Amortized Cost Basis by Origination Year														Amortized Cost Basis by Origination Year
	Prior		2017		2018		2019		2020		2021		Total		Prior		2018		2019		2020		2021		2022		Total
1-30 days past due	$	1,117	$	1,338	$	647	$	889	$	379	$	24	$	4,394	$	149	$	60	$	145	$	342	$	1,498	$	33	$	2,227
31-60 days past due		556		145		41		67		223		—		1,032		52		257		230		19		462		101		1,121
61-90 days past due		609		59		444		71		127		—		1,310		25		66		—		19		227		86		423
91-120 days past due		804		751		741		183		—		—		2,479		124		16		131		12		467		—		750
121-150 days past due		68		317		35		60		—		—		480		545		13		38		2		323		—		921
Greater than 150 days past due		7,307		2,088		1,699		889		334		—		12,317		9,347		1,826		1,195		891		1,083		—		14,342
Total past due		10,461		4,698		3,607		2,159		1,063		24		22,012		10,242		2,238		1,739		1,285		4,060		220		19,784
Current		11,634		4,994		3,732		4,682		2,384		393		27,819		6,670		2,710		1,930		1,280		11,638		1,791		26,019
Financing receivables, gross	$	22,095	$	9,692	$	7,339	$	6,841	$	3,447	$	417	$	49,831	$	16,912	$	4,948	$	3,669	$	2,565	$	15,698	$	2,011	$	45,803

Allowance for 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.

For our trade receivables, we primarily use historical loss rates based on an aging schedule and a student’s status to determine the allowance for credit losses. As these trade receivables are short-term in nature, management believes a student’s status provides the best credit loss estimate, while also factoring in delinquency. Students still attending classes, recently graduated, or current on payments are more likely to pay than those who are inactive due to being on a leave of absence, withdrawing from school, or not current on payments.

Table of Contents

For our financing receivables, we primarily use historical loss rates based on an aging schedule. As these financing receivables are based on long-term financing agreements offered by Adtalem, management believes that delinquency provides the best credit loss estimate. As the financing receivable balances become further past due, it is less likely we will receive payment, causing our estimate of credit losses to increase.

The following tables provide a rollforward of the allowance for credit losses (in thousands):


	Three Months Ended September 30, 2021						Three Months Ended September 30, 2022
	Trade		Financing		Total		Trade		Financing		Total
Beginning balance	$	13,154	$	16,832	$	29,986	$	30,897	$	14,891	$	45,788
Write-offs		(1,910)		(537)		(2,447)		(5,464)		(219)		(5,683)
Recoveries		1,318		0		1,318		2,408		2		2,410
Provision for credit losses		5,560		769		6,329		5,041		950		5,991
Ending balance	$	18,122	$	17,064	$	35,186	$	32,882	$	15,624	$	48,506

~~Table of Contents~~


	Three Months Ended September 30, 2020						Three Months Ended September 30, 2021
	Trade		Financing		Total		Trade		Financing		Total
Beginning balance	$	10,825	$	15,690	$	26,515	$	11,559	$	16,832	$	28,391
Write-offs		(759)		(256)		(1,015)		(1,733)		(537)		(2,270)
Recoveries		186		40		226		1,251		—		1,251
Provision for credit losses		382		1,341		1,723		5,420		769		6,189
Ending balance	$	10,634	$	16,815	$	27,449	$	16,497	$	17,064	$	33,561

Allowance for bad debts on short-term and long-term receivables as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020~~2021 was ~~$35.2~~$48.5 million, ~~$30.0~~$45.8 million, and ~~$27.4~~$33.6 million, respectively. The increase in the reserve from the year-ago period is driven by the provision for credit losses at Walden.

Other Financing Receivables

In connection with the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of the DeVry Note. The DeVry Note ~~bears~~bore interest at a rate of 4% per annum, payable annually in arrears, and ~~has~~had a maturity date of January 1, 2022. We received the loan payment of $10.0 million during the third quarter of fiscal year 2022. The DeVry ~~University loan receivable~~Note is included on the Consolidated Balance ~~Sheet~~Sheets in prepaid expenses and other current assets as of ~~each of~~ September 30, 2021 and ~~June 30, 2021, and other assets, net as of September 30, 2020, and is~~was estimated by discounting the future cash flows using an average of current rates for similar arrangements, which iswas estimated at 4% per annum. ~~Management has evaluated the collectability of this note and has determined 0 reserve is necessary.~~

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep Foundation (“DePaul College Prep”). In connection with the sale, Adtalem holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The carrying value of the DePaul College Prep loan receivable is included in other assets, net on the Consolidated Balance ~~Sheet~~Sheets as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020~~2021 is ~~$43.0~~$44.3 million, ~~$42.7~~$44.0 million, and ~~$41.7~~$43.0 million, respectively, and was originally determined by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum. Management has evaluated the collectability of this note and has determined 0no reserve is necessary.

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10. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30,		June 30,		September 30,		September 30,		June 30,		September 30,
	2021		2021		2020		2022		2022		2021
Land	$	44,460	$	44,331	$	44,049	$	44,476	$	44,478	$	44,460
Building		340,548		327,539		315,725		333,954		342,236		339,404
Equipment		285,210		254,994		259,340		256,864		268,352		264,418
Construction in progress		14,672		21,467		10,882		10,600		11,188		11,191
Property and equipment, gross		684,890		648,331		629,996		645,894		666,254		659,473
Accumulated depreciation		(362,585)		(351,094)		(340,052)		(364,313)		(376,328)		(350,714)
Property and equipment, net	$	322,305	$	297,237	$	289,944	$	281,581	$	289,926	$	308,759

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 holds a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The buyer has 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. Adtalem continues 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 ~~Sheet.~~Sheets. See Note 9 “Accounts Receivable and Credit Losses” for a discussion on the discounting of the note receivable.

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11. Leases

We determine if a contract contains a lease at inception. We have entered into operating leases for academic sites, housing facilities, and office space which expire at various dates through June 2032, most of which include options to terminate for a fee or extend the leases for an additional five-year period. The lease term includes the noncancelable period of the lease, as well as any periods for which we are reasonably certain to exercise extension options. We elected to account for lease and non-lease components (e.g., common-area maintenance costs) as a single lease component for all operating leases. Leases with an initial term of 12 months or less are not recorded on the ~~balance sheet.~~Consolidated Balance Sheets. We have not entered into any financing leases.

Operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets represent our right to use an underlying asset during the lease term. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. Operating lease assets are adjusted for any prepaid or accrued lease payments, lease incentives, initial direct costs, and impairments. Our incremental borrowing rate is utilized in determining the present value of the lease payments based upon the information available at the commencement date. Our incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease. Operating lease expense is recognized on a straight-line basis over the lease term.

As of September 30, ~~2021,~~2022, we entered into 1three additional ~~lease~~operating leases that ~~has~~have not yet commenced. ~~The~~One lease is expected to commence during the ~~fourth~~second quarter of fiscal year ~~2022,~~2023, has a 12-year lease term, and will result in an additional operating lease asset and operating lease liability of approximately $18.9 million.The second lease is expected to commence during the third quarter of fiscal year 2023, has a 10-year lease term, and will result in an additional operating lease asset and operating lease liability of approximately $5.3 million. The third lease is expected to commence during the second quarter of fiscal year 2024, has a 12-year lease term, and will result in an additional operating lease asset and operating lease liability of approximately $16.6 million.

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The components of lease cost were as follows (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Operating lease cost	$	14,387	$	12,780	$	12,375	$	14,225
Sublease income		(3,338)		(4,341)		(3,570)		(3,338)
Total lease cost	$	11,049	$	8,439	$	8,805	$	10,887

Maturities of lease liabilities by fiscal year as of September 30, ~~2021~~2022 were as follows (in thousands):


	Operating		Operating
Fiscal Year	Leases		Leases
2022 (remaining)	$	51,853
2023		56,899
2023 (remaining)			$	46,055
2024		44,370		54,027
2025		33,340		43,342
2026		20,118		30,470
2027				27,954
Thereafter		59,545		48,547
Total lease payments		266,125		250,395
Less: tenant improvement allowance not yet received		(4,886)
Less: imputed interest		(39,340)		(35,490)
Present value of lease liabilities	$	221,899	$	214,905

Lease term and discount rate were as follows:


	September 30,
	~~2021~~2022
Weighted-average remaining operating lease term (years)		~~5.5~~5.4
Weighted-average operating lease discount rate		~~5.6%~~5.5%

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Supplemental disclosures of cash flow information related to leases were as follows (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)	$	13,545	$	11,427	$	12,428	$	13,204
Operating lease assets obtained in exchange for operating lease liabilities	$	6,111	$	26,528	$	—	$	6,111

Adtalem maintains agreements to lease either a portion or the full space of 3two facilities owned by Adtalem to DeVry University with various expiration dates through December 2023. Adtalem maintains agreements to sublease either a portion or the full leased space at 1211 of its operating lease locations. Most of these subleases are a result of Adtalem retaining leases associated with restructured lease activities at DeVry University and Carrington College prior to their divestitures during fiscal year 2019. All sublease expirations with DeVry University and Carrington College coincide with Adtalem’s original head lease expiration dates. At that time, Adtalem will be relieved of its obligations. In addition, Adtalem has entered into subleases with non-affiliated entities for vacated or partially vacated space from restructuring activities. Adtalem’s sublease agreements expire at various dates through December 2025. We record sublease income as an offset against our lease expense recorded on the head lease. For leases which Adtalem vacated or partially vacated space, we recorded estimated restructuring charges in prior periods. Actual results may differ from these estimates, which

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could result in additional restructuring charges or ~~reversals.~~reversals in future periods. Future minimum lease and sublease rental income under these agreements as of September 30, ~~2021,~~2022, were as follows (in thousands):


Fiscal Year	Amount		Amount
2022 (remaining)	$	13,218
2023		16,078
2023 (remaining)			$	12,222
2024		10,261		10,261
2025		5,121		5,121
2026		2,038		2,038
Total lease and sublease rental income	$	46,716	$	29,642

~~12. Goodwill and Intangible Assets~~

~~The table below summarizes goodwill balances by reporting unit (in thousands):~~

September 30,

June 30,

September 30,
Reporting Unit

2021

2021

2020
Chamberlain

$
4,716

$
4,716

$
4,716
Walden

642,554

—

—
AUC

68,321

68,321

68,321
RUSM and RUSVM

237,173

237,173

237,173
Financial Services

376,164

376,164

376,270
Total

$
1,328,928

$
686,374

$
686,480

~~The table below summarizes goodwill balances by reportable segment (in thousands):~~

September 30,

June 30,

September 30,
Reportable Segment

2021

2021

2020
Chamberlain

$
4,716

$
4,716

$
4,716
Walden

642,554

—

—
Medical and Veterinary

305,494

305,494

305,494
Financial Services

376,164

376,164

376,270
Total

$
1,328,928

$
686,374

$
686,480

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12. Goodwill and Intangible Assets

The table below summarizes goodwill balances by reporting unit (in thousands):


	September 30,		June 30,		September 30,
Reporting Unit	2022		2022		2021
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		651,052		651,052		642,554
AUC		68,321		68,321		68,321
RUSM and RUSVM		237,173		237,173		237,173
Total	$	961,262	$	961,262	$	952,764

The table below summarizes goodwill balances by reportable segment (in thousands):


	September 30,		June 30,		September 30,
	2022		2022		2021
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		651,052		651,052		642,554
Medical and Veterinary		305,494		305,494		305,494
Total	$	961,262	$	961,262	$	952,764

The table below summarizes the changes in goodwill balances by reportable segment (in thousands):


					Medical and		Financial								Medical and
	Chamberlain		Walden		Veterinary		Services		Total		Chamberlain		Walden		Veterinary		Total
June 30, 2020	$	4,716	$	—	$	305,494	$	376,004	$	686,214
Foreign exchange rate changes		—		—		—		266		266
September 30, 2020		4,716		—		305,494		376,270		686,480
Foreign exchange rate changes		—		—		—		(106)		(106)
June 30, 2021		4,716		—		305,494		376,164		686,374	$	4,716	$	—	$	305,494	$	310,210
Acquisition		—		642,554		—		—		642,554		—		642,554		—		642,554
September 30, 2021	$	4,716	$	642,554	$	305,494	$	376,164	$	1,328,928		4,716		642,554		305,494		952,764
Purchase accounting adjustments												—		8,498		—		8,498
June 30, 2022												4,716		651,052		305,494		961,262
September 30, 2022											$	4,716	$	651,052	$	305,494	$	961,262

~~Intangible~~Amortizable intangible assets consisted of the following (in thousands):

September 30, 2021

Gross Carrying

Accumulated

Weighted-Average

Amount

Amortization

Amortization Period
Amortizable intangible assets:

Student relationships

$
161,900

$
(15,049)

3 Years
Customer relationships

68,900

(29,511)

10 Years
Curriculum/software

67,691

(5,913)

5 Years
Course delivery technology

6,700

(3,127)

5 Years
Total

$
305,191

$
(53,600)

Indefinite-lived intangible assets:

Walden trade name

$
119,560

AUC trade name

17,100

Ross trade name

5,100

Financial Services trade names

72,272

Chamberlain Title IV eligibility and accreditations

1,200

Walden Title IV eligibility and accreditations

495,800

AUC Title IV eligibility and accreditations

100,000

Ross Title IV eligibility and accreditations

14,100

Intellectual property

13,940

Total

$
839,072

June 30, 2021

Gross Carrying

Accumulated

Amount

Amortization
Amortizable intangible assets:

Customer relationships

$
68,900

$
(27,844)
Curriculum/software

11,600

(4,028)
Course delivery technology

6,700

(2,791)
Total

$
87,200

$
(34,663)
Indefinite-lived intangible assets:

AUC trade name

$
17,100

Ross trade name

5,100

Financial Services trade names

72,272

Chamberlain Title IV eligibility and accreditations

1,200

AUC Title IV eligibility and accreditations

100,000

Ross Title IV eligibility and accreditations

14,100

Intellectual property

13,940

Total

$
223,712


	September 30, 2022				June 30, 2022				September 30, 2021
	Gross Carrying		Accumulated		Gross Carrying		Accumulated		Gross Carrying		Accumulated		Weighted-Average
	Amount		Amortization		Amount		Amortization		Amount		Amortization		Amortization Period
Student relationships	$	161,900	$	(103,180)	$	161,900	$	(87,457)	$	161,900	$	(15,049)	3 Years
Curriculum		56,091		(12,622)		56,091		(9,817)		56,091		(1,402)	5 Years
Total	$	217,991	$	(115,802)	$	217,991	$	(97,274)	$	217,991	$	(16,451)

2122

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September 30, 2020

Gross Carrying

Accumulated

Amount

Amortization
Amortizable intangible assets:

Customer relationships

$
68,900

$
(22,744)
Curriculum/software

11,600

(2,578)
Course delivery technology

6,700

(1,786)
Total

$
87,200

$
(27,108)
Indefinite-lived intangible assets:

AUC trade name

$
17,100

Ross trade name

5,100

Financial Services trade names

73,495

Chamberlain Title IV eligibility and accreditations

1,200

AUC Title IV eligibility and accreditations

100,000

Ross Title IV eligibility and accreditations

14,100

Intellectual property

13,940

Total

$
224,935

Indefinite-lived intangible assets consisted of the following (in thousands):


	September 30,		June 30,		September 30,
	2022		2022		2021
Walden trade name	$	119,560	$	119,560	$	119,560
AUC trade name		17,100		17,100		17,100
Ross trade name		5,100		5,100		5,100
Chamberlain Title IV eligibility and accreditations		1,200		1,200		1,200
Walden Title IV eligibility and accreditations		495,800		495,800		495,800
AUC Title IV eligibility and accreditations		100,000		100,000		100,000
Ross Title IV eligibility and accreditations		14,100		14,100		14,100
Total	$	752,860	$	752,860	$	752,860

The table below summarizes the indefinite-lived intangible asset balances by reportable segment (in thousands):


	September 30,		June 30,		September 30,		September 30,		June 30,		September 30,
Reportable Segment	2021		2021		2020
							2022		2022		2021
Chamberlain	$	1,200	$	1,200	$	1,200	$	1,200	$	1,200	$	1,200
Walden		615,360		—		—		615,360		615,360		615,360
Medical and Veterinary		136,300		136,300		136,300		136,300		136,300		136,300
Financial Services		86,212		86,212		87,435
Total	$	839,072	$	223,712	$	224,935	$	752,860	$	752,860	$	752,860

Amortization expense for amortized intangible assets was ~~$18.9~~$18.5 million and ~~$2.5~~$16.5 million in the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. ~~Estimated~~Future intangible asset amortization expense, by reporting unit, is expected to be as follows (in thousands):


			Financial
Fiscal Year	Walden		Services		Total		Walden
2022 (remaining)	$	80,823	$	7,458	$	88,281
2023		61,239		9,792		71,031
2023 (remaining)							$	42,711
2024		35,644		9,509		45,153		35,644
2025		11,220		7,933		19,153		11,220
2026		11,220		5,959		17,179		11,220
Thereafter		1,394		9,400		10,794
2027								1,394
Total	$	201,540	$	50,051	$	251,591	$	102,189

~~All amortizable intangible assets except Walden student relationships and ACAMS customer relationships are~~Curriculum is amortized on a straight-line basis. ~~The amount amortized for Walden student relationships and ACAMS customer~~Student relationships is amortized based on the estimated retention of the students and ~~customers,~~ giving consideration to the revenue and cash flow associated with these existing ~~students and customers.~~students.

Indefinite-lived intangible assets related to trade names and Title IV eligibility and accreditations ~~and intellectual property~~ are not amortized, as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets to the reporting entity.

Goodwill and indefinite-lived intangibles 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.

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Adtalem has 5four reporting units that ~~contained goodwill as of the first quarter of fiscal year 2022.~~contain goodwill. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment ~~management and the Board of Directors (the “Board”).~~management. If the carrying amount of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized to the extent the fair value of the reporting unit goodwill is less than the carrying amount of the goodwill, up to the amount of goodwill recorded. In analyzing the results of operations and business conditions of all 5four reporting units, ~~as of September 30, 2021,~~ it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair ~~value.~~value as of September 30, 2022.

Adtalem has 5four reporting units that ~~contained~~contain indefinite-lived intangible ~~assets as of the first quarter of fiscal year 2022.~~assets. For indefinite-lived intangible assets, management first analyzes qualitative factors, including results of operations and business conditions of the 5four reporting

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units that ~~contained~~contain indefinite-lived intangible assets, significant changes in cash flows at the individual indefinite-lived intangible asset level, if applicable, as well as how much previously calculated fair values exceed carrying values to determine if it is more likely than not that the intangible assets associated with these reporting units have been impaired. In qualitatively assessing the indefinite-lived intangible assets of the 5four reporting units, it was determined that it was more likely than not that these assets’ fair values exceeded their carrying values as of September 30, ~~2021.~~2022.

These interim triggering event conclusions were based on the fact that the annual impairment review of Adtalem’s reporting units and indefinite-lived intangible assets resulted in 0no impairments as of the end of fiscal year ~~2021,~~2022, and that no interim events or deviations from planned operating results occurred as of September 30, ~~2021~~2022 that would cause management to reassess these conclusions. Although the COVID-19 pandemic is expected to have a negative effect on the operating results of all 5four reporting units that contain goodwill and indefinite-lived intangible assets, at this time none of the effects are considered significant enough to create a triggering event. The effects are currently projected to be short-term and would not significantly decrease long-term cash flow projections; however, should economic conditions continue to deteriorate, the revenue and operating results could also deteriorate to the point where a triggering event would exist and require reassessment of the fair values of goodwill and intangible assets and potential impairments.

Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. 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, which could lead to future impairments of goodwill or intangible assets.

13. Debt

Long-term debt consisted of the following senior secured credit facilities (in thousands):


	September 30,		June 30,		September 30,		September 30,		June 30,		September 30,
	2021		2021		2020		2022		2022		2021
Total debt:
Senior Secured Notes due 2028	$	800,000	$	800,000	$	—	$	404,950	$	405,882	$	800,000
Term Loan B		850,000		0		—		353,333		453,333		850,000
Prior Term Loan B		0		291,000		293,250
Total principal payments due		1,650,000		1,091,000		293,250		758,283		859,215		1,650,000
Unamortized debt discount and issuance costs		(43,582)		(20,289)		(4,629)		(16,587)		(20,307)		(43,582)
Total amount outstanding		1,606,418		1,070,711		288,621		741,696		838,908		1,606,418
Less current portion:
Term Loan B		(6,375)		0		—		—		—		(6,375)
Prior Term Loan B		0		(3,000)		(3,000)
Noncurrent portion	$	1,600,043	$	1,067,711	$	285,621	$	741,696	$	838,908	$	1,600,043

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Scheduled future maturities of long-term debt were as follows (in thousands):


	Maturity		Maturity
Fiscal Year	Payments		Payments
2022 (remaining)	$	4,250
2023		8,500
2023 (remaining)			$	—
2024		8,500		—
2025		8,500		—
2026		8,500		—
2027				—
Thereafter		1,611,750		758,283
Total	$	1,650,000	$	758,283

Senior Secured Notes due 2028

On March 1, 2021, Adtalem Escrow Corporation (the “Escrow Issuer”), a wholly-owned subsidiary of Adtalem, issued ~~$800~~$800.0 million aggregate principal amount of 5.50% Senior Secured Notes due 2028 (the “Notes”), which mature on March 1, 2028, pursuant to an indenture, dated as of March 1, 2021 (the “Indenture”), by and between the Escrow Issuer and U.S. Bank National Association, as trustee and notes collateral agent. The Notes were sold within the U.S. only to

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qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the U.S. to non-U.S. persons in reliance on Regulation S under the Securities Act.

The Escrow Issuer deposited the net proceeds of the offering, along with certain additional funds, into a segregated depositary account (the “Escrow Account”). On August 12, 2021, Adtalem used the net proceeds of the offering, along with other financing sources, to finance the purchase price paid in connection with the Walden acquisition, repay the then existing $291.0 million senior secured term loan B, and to pay related acquisition fees and expenses.

On August 12, 2021, the Escrow Issuer merged with and into Adtalem, with Adtalem continuing as the surviving corporation (the “Escrow Merger”), and Adtalem assumed all of the Escrow Issuer's obligations under the Notes, the Indenture, any supplemental indentures thereto, the applicable collateral documents, and the other applicable documents (the “Assumption”) and subject to the satisfaction of certain other conditions, the net proceeds from the offering and the other additional funds were released from the Escrow Account to the Issuer or its designee. The term “Issuer” refers (a) prior to the Assumption, to the Escrow Issuer and (b) from and after the Assumption, to Adtalem.

The Notes were issued at 100.0% of their par value. The Notes bear interest at a rate of 5.50% per year, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021, to holders of record on the preceding February 15 and August 15, as the case may be. The Notes were initially the senior secured obligations of the Escrow Issuer, secured only by the amounts deposited in the Escrow Account. As of August 12, 2021, the Notes are guaranteed by certain of Adtalem’s subsidiaries that are borrowers or guarantors under its senior secured credit facilities and certain of its other senior indebtedness, subject to certain exceptions (the “Guarantors”). As of August 12, 2021, the Notes are secured, subject to permitted liens and certain other exceptions, by first priority liens on the same collateral that secures the obligations under Adtalem’s senior secured credit facilities.

At any time prior to March 1, 2024, the Issuer may redeem all or a part of the Notes at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus a make-whole premium set forth in the Indenture and accrued and unpaid interest, if any, to, but not including, the redemption date. The Issuer may redeem the Notes, in whole or in part, at any time on or after March 1, 2024 at redemption prices equal to 102.75%, 101.375% and 100% of the principal amount of the Notes redeemed if the redemption occurs during the twelve-month periods beginning on March 1 of the years 2024, 2025, and 2026 and thereafter, respectively, in each case plus accrued and unpaid interest, if any, thereon to, but not including, the applicable redemption date. In addition, at any time prior to March 1, 2024, the Issuer may redeem up to 40% of the aggregate principal amount of the Notes at a redemption price equal to 105.5% of the aggregate principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, with the net cash proceeds the Issuer receives from one or more qualifying equity offerings.

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. This debt was subsequently retired. During the first quarter of fiscal year 2023, we repurchased on the open market an additional $0.9 million of Notes at a price equal to approximately 92% of the principal amount of the Notes, resulting in a gain on extinguishment of debt of $0.1 million recorded within interest expense in the Consolidated Statements of Income (Loss) for the three months ended September 30, 2022. This debt was subsequently retired.

Accrued interest on the Notes of ~~$3.7~~$1.9 million, $7.4 million, and ~~$14.7~~$3.7 million is recorded within accrued liabilities on the Consolidated Balance ~~Sheet~~Sheets as of September 30, ~~2021~~2022, June 30, 2022, and ~~June~~September 30, 2021, respectively.

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Credit ~~Facility~~Agreement

On February 12, 2021, Adtalem placed a ~~$850~~$850.0 million senior secured term loan (“Term Loan B”) into the loan market to provide future funding for the Walden acquisition. For 30 days beginning on March 15, 2021, Adtalem began accruing ticking fees at 50% of the applicable 4.5% margin. Beginning on April 14, 2021 and until the closing date of the Term Loan B, Adtalem accrued ticking fees at a rate equal to LIBOR plus a 4.5% margin, subject to a LIBOR floor of 0.75%. ~~Accrued ticking fees of $11.3 million is recorded within accrued liabilities on the Consolidated Balance Sheet as of June 30, 2021.~~ All ticking fees were paid at the time of the Term Loan B closing date, on August 12, 2021, and are recorded within interest expense as accrued in the Consolidated Statements of Income (Loss).

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On August 12, 2021, Adtalem replaced the ~~Prior Credit Facility and~~ Prior Credit Agreement (as defined below) by entering into its new credit agreement (the “Credit Agreement”) that provides for (1) a ~~$850~~$850.0 million senior secured term loan with a maturity date of August 12, 2028 and (2) a ~~$400~~$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 Revolver has availability for letters of credit and currencies other than U.S. dollars of up to ~~$400~~$400.0 million.

Term Loan B

Borrowings under the Term Loan B bear interest at Adtalem’s option at a rate per annum equal to LIBOR, subject to a LIBOR floor of 0.75%, plus an applicable margin ranging from 4.00% to 4.50% for eurocurrency term loan borrowings or 3.00% to 3.50% for alternative base rate (“ABR”) borrowings depending on Adtalem’s net first lien leverage ratio for such period. ~~The Term Loan B requires quarterly installment payments of $2.125 million beginning on March 31, 2022.~~ As of September 30, ~~2021,~~2022, the interest rate for borrowings under the Term Loan B facility was ~~5.25%~~7.05%, which approximated the effective interest rate. The proceeds of the Credit Facility were used, among other things, to finance the Walden acquisition, refinance Adtalem’s Prior Credit Agreement (as defined below), pay fees and expenses related to the Walden acquisition, and in the case of the Revolver, to finance ongoing working capital and for general corporate purposes. The Term Loan B originally required quarterly installment payments of $2.125 million beginning on March 31, 2022. On March 11, 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 September 22, 2022, we made an additional prepayment of $100.0 million on the Term Loan B.

Interest on our Term Loan B and the Revolver is set based on LIBOR, which is based on observable market transactions. The U.K. Financial Conduct Authority, which regulates LIBOR, has announced that ~~it has commitments from panel banks to continue to contribute to~~no new contracts referencing LIBOR are allowed. In addition, publication of one-week and two-month LIBOR rates ceased on December 31, 2021; however, all other LIBOR tenors will be published through ~~the end of calendar year 2021, but that it will not use its powers to compel contributions beyond such date.~~June 30, 2023. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. Management is monitoring their efforts. The Credit Agreement provides guidance surrounding the implementation of a replacement benchmark rate, however the specific replacement benchmark rate has not been identified. We expect to amend the Credit Agreement during fiscal year 2023 to transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

Revolver

Borrowings under the Revolver bear interest at a rate per annum equal to LIBOR, subject to a LIBOR floor of 0.75%, plus an applicable margin ranging from 3.75% to 4.25% for LIBOR borrowings or 2.75% to 3.25% for ABR borrowings depending on Adtalem’s net first lien leverage ratio for such period.

Adtalem had letters of credit outstanding of $153.4 million as of September 30, 2021 and $68.4 million as of each of June 30, 2021 and September 30, 2020. One letter of credit was for $68.4 million that was posted in the second quarter of fiscal year 2017 in relation to a settlement with the Federal Trade Commission (“FTC”) and requires the letter of credit to be equal to the greater of 10% of DeVry University’s annual Title IV disbursements or $68.4 million for a five-year period. Another letter of credit was for $83.6 million, which was assumed by Adtalem on August 12, 2021 after acquiring Walden. As of September 30, 2021, Adtalem is charged an annual fee equal to 4.25% and a 0.125% fronting fee, of the undrawn face amount of the outstanding letters of credit under the Revolver, payable quarterly. Adtalem continues to post the letter of credit in relation to the settlement with the FTC on behalf of DeVry University and is reimbursed by DeVry University for 2.00% of the outstanding amount of this letter of credit. The Credit Agreement ~~also~~ requires payment of a commitment fee equal to 0.25% as of September 30, ~~2021,~~2022, of the undrawn portion of the ~~Revolver.~~Revolver, and is recorded within interest expense in the Consolidated Statements of Income (Loss). The amount undrawn under the Revolver ~~which includes the impact of the outstanding letters of credit,~~ was ~~$246.6~~$400.0 million as of September 30, ~~2021.~~2022. The ~~letter of credit fees and~~ commitment fees are adjustable quarterly based upon Adtalem’s achievement of certain financial ratios.

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Prior Credit Agreement

On April 13, 2018, Adtalem entered into a credit agreement (the “Prior Credit Agreement”) that provided for (1) a ~~$300 million revolving facility (“Prior Revolver”), which was set to mature on April 13, 2023 and (2) a $300~~$300.0 million senior secured term loan (“Prior Term Loan B”), which was set to mature on April 13, ~~2025.~~2025 and (2) a $300.0 million revolving facility (“Prior Revolver”), which was set to mature on April 13, 2023. We refer to the Prior ~~Revolver~~Term Loan B and Prior ~~Term Loan B~~Revolver collectively as the “Prior Credit Facility.”

Prior Term Loan B

For eurocurrency rate loans, Prior Term Loan B interest is equal to LIBOR or a LIBOR-equivalent rate plus 3%. For base rate loans, Prior Term Loan B interest is equal to the base rate plus 2%. The Prior Term Loan B required quarterly installment payments of $750,000, with the balance due at maturity on April 13, 2025. ~~As of June 30, 2021 and September 30, 2020, the interest rate for borrowings under the Prior Term Loan B facility was 3.10% and 3.15%, respectively, which approximated the effective interest rate.~~

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 debt. We paid interest at a fixed rate of 0.946% and received variable interest of one-month LIBOR (subject to a minimum of

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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.

During the operating term of the Swap, the annual interest rate on the amount of the Prior Term Loan B ~~Loan~~ was fixed at 3.946% (including the impact of ~~our current~~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 ~~Sheet~~Sheets and ~~are~~were reclassified into the Consolidated Statements of Income (Loss) within interest expense in the periods in which the hedged transactions ~~affect~~affected earnings.

On July 29, 2021, prior to refinancing our Credit Agreement (as discussed above), we settled and terminated the Swap for $4.5 million, which resulted in a charge to interest expense in the three months ended September 30, 2021.

Prior Revolver

Prior Revolver interest iswas equal to LIBOR or a LIBOR-equivalent rate for eurocurrency rate loans or a base rate, plus an applicable margin based on Adtalem’s consolidated leverage ratio, as defined in the Prior Credit Agreement. The applicable ~~rate ranges~~margin ranged from 1.75% to 2.75% for eurocurrency rate loans and from 0.75% to 1.75% for base rate loans. ~~There were 0 outstanding borrowings under the Prior Revolver as of each of June 30, 2021 and September 30, 2020.~~

Debt Discount and Issuance Costs

The Term Loan B was issued at a price of 99% of its principal amount, resulting in an original issue discount of 1%. The debt discount and issuance costs related to the Notes and Term Loan B are capitalized and presented as a direct deduction from the face amount of the debt, while the debt issuance costs related to the Revolver are classified as other assets, net on the Consolidated Balance Sheets. The debt discount and issuance costs are amortized as interest expense over seven years for the Notes and Term Loan B and over five years for the Revolver. The remaining $6.0 million of unamortized debt issuance costs related to the Prior Credit Facility and the $10.3 million of debt issuances costs associated with an unused bridge facility, which was in place should the permanent financing not have been obtained, were expensed in interest expense in the Consolidated ~~Statement~~Statements of ~~Loss~~Income (Loss) in the three months ended September 30, 2021. In addition, based on the $100.0 million Term Loan B prepayment on September 22, 2022, we expensed $2.9 million in interest expense in the Consolidated Statements of Income (Loss) in the three months ended September 30, 2022, which was the proportionate amount of the remaining unamortized debt discount and issuance costs related to the Term Loan B as of the prepayment date. The following table summarizes the unamortized debt discount and issuance costs activity for the three months ended September 30, 2022 (in thousands):


	Notes		Term Loan B		Revolver		Total
Unamortized debt discount and issuance costs as of June 30, 2022	$	6,725	$	13,582	$	8,383	$	28,690
Amortization of debt discount and issuance costs		(281)		(544)		(507)		(1,332)
Debt discount and issuance costs write-off		(15)		(2,880)		—		(2,895)
Unamortized debt discount and issuance costs as of September 30, 2022	$	6,429	$	10,158	$	7,876	$	24,463

Letter of Credits

Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of September 30, 2022, which was assumed by Adtalem on August 12, 2021 after acquiring Walden, in favor of the U.S. Department of Education, which allows Walden to participate in Title IV programs.

Adtalem had a letter of credit outstanding of $68.4 million as of September 30, 2021, which was posted in the second quarter of fiscal year 2017 in relation to a settlement with the Federal Trade Commission (“FTC”) and required the letter of credit to be equal to the greater of 10% of DeVry University’s annual Title IV disbursements or $68.4 million for a five-year period. Adtalem continued to post the letter of credit in relation to the settlement with the FTC on behalf of DeVry

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~~ended~~University and was reimbursed by DeVry University for 2.00% of the outstanding amount of this letter of credit. This letter of credit expired during the second quarter of fiscal year 2022 and is no longer outstanding as of September 30, ~~2021. The following table summarizes the unamortized debt discount and issuance costs activity for the three months ended September 30, 2021 (in thousands):~~

Notes

Term Loan B

Bridge

Revolver

Total
Unamortized debt discount and issuance costs as of June 30, 2021

$
15,548

$
4,741

$
—

$
1,502

$
21,791
Payment of debt discount and issuance costs

0

29,078

10,329

10,146

49,553
Amortization of debt discount and issuance costs

(548)

(5,237)

(10,329)

(1,744)

(17,858)
Unamortized debt discount and issuance costs as of September 30, 2021

$
15,000

$
28,582

$
—

$
9,904

$
53,486

2022.

Interest Expense

The components of interest expense were as follows (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Notes interest expense	$	11,000	$	—	$	5,597	$	11,000
Term Loan B interest expense		6,198		—		7,001		6,198
Term Loan B ticking fees		5,330		—		—		5,330
Prior Term Loan B interest expense		1,272		2,378		—		1,272
Term Loan B debt discount and issuance costs write-off						2,880		—
Notes issuance costs write-off						15		—
Gain on extinguishment of debt						(71)		—
Unused bridge fee		10,329		—		—		10,329
Prior Credit Facility issuance costs write-off						—		6,000
Swap settlement		4,525		—		—		4,525
Prior Credit Facility deferred financing fees write-off		6,000		—
Amortization of debt discount and issuance costs						1,332		1,529
Other		2,739		1,314		1,006		1,210
Total interest expense	$	47,393	$	3,692	$	17,760	$	47,393

Covenants and Guarantees

The Credit Agreement and Notes contain customary covenants, including restrictions on our restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interest on assets, make acquisitions, loans, advances or investments, or sell or otherwise transfer assets.

Under the terms of the Credit Agreement, beginning on the fiscal quarter ending December 31, 2021 and through December 31, 2023, Adtalem is required to maintain a Total Net Leverage Ratio of equal to or less than 4.00 to 1.00, which requirement reduces to 3.25 to 1.00 for the fiscal quarter ending March 31, 2024 and thereafter. The Total Net Leverage Ratio under the Credit Agreement is defined as the ratio of (a) the aggregate principal amount of Consolidated Debt (as defined in the Credit Agreement) of Adtalem and its subsidiaries as of the last day of the most recently ended Test Period (as defined in the Credit Agreement) minus Unrestricted Cash (as defined in the Credit Agreement) and Permitted Investments (as defined in the Credit Agreement) of the Borrower and its subsidiaries for such Test Period to (b) EBITDA (as defined in the Credit Agreement) for such Test Period. EBITDA for purposes of these restrictive covenants includes incremental adjustments beyond those included in ~~our~~traditional EBITDA ~~non-GAAP measure.~~calculations. Specifically, the Credit Agreement EBITDA definition includes the pro forma impact of EBITDA to be received from certain acquisition-related synergies and cost optimization activities, subject to a 20% cap.

Obligations under the Credit Agreement are secured by a first-priority lien on substantially all of the assets of Adtalem and certain of its domestic wholly owned subsidiaries (the “Subsidiary Guarantors”), which Subsidiary Guarantors also guarantee the obligations of Adtalem under the Credit Agreement, subject to certain exceptions. The Credit Agreement contains customary affirmative and negative covenants customary for facilities of its type, which, among other things, generally limit (with certain exceptions): mergers, amalgamations, or consolidations; the incurrence of additional indebtedness (including guarantees); the incurrence of additional liens; the sale, assignment, lease, conveyance or transfer of assets; certain investments; dividends and stock redemptions or repurchases in excess of certain amounts; transactions with affiliates; engaging in materially different lines of business; payments and modifications of indebtedness or the

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governing documents of Adtalem or any Subsidiary Guarantor; and other activities customarily restricted in such agreements.

The Credit Agreement contains customary events of default for facilities of this type. If an event of default under the Credit Agreement occurs and is continuing, the commitments thereunder may be terminated and the principal amount

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outstanding thereunder, together with all accrued and unpaid interest and other amounts owed thereunder, may be declared immediately due and payable.

The Term Loan B requires mandatory prepayments equal to the net cash proceeds from an asset sale or disposition which is not reinvested in assets within one-year from the date of disposition if the asset sale or disposition is in excess of $20.0 million, among other mandatory prepayment terms (see the Credit Agreement, as filed under Form 8-K dated August 12, 2021, for additional information and term definitions). With the $396.7 million prepayment on March 11, 2022 on the Term Loan B, the $394.1 million prepayment on the Notes during the fourth quarter of fiscal year 2022, and the $100.0 million prepayment on September 22, 2022 on the Term Loan B, we satisfied the mandatory prepayment requirement resulting from the sale proceeds received from the sale of the Financial Services segment. No other mandatory prepayments have been required or made since the execution of the Credit Agreement.

The Notes contain covenants that limit the ability of the Issuer and each of the Guarantors to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the Guarantors to make dividends or other payments to Adtalem; designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell certain assets. These covenants are subject to a number of important exceptions and qualifications. The Indenture and the Notes also provide for certain customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Notes to become or be declared due and payable or would allow the trustee or the holders of at least 25% in principal amount of the then outstanding Notes to declare the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable by notice in writing to the Issuer and, upon such declaration, such principal and accrued and unpaid interest, if any, will be due and payable immediately.

~~Debt~~Adtalem was in compliance with the debt covenants related to the Credit Agreement ~~does not take effect until the second quarter of fiscal year 2022. Adtalem was in compliance with~~and the Notes covenants as of September 30, ~~2021.~~2022.

14. Redeemable Noncontrolling Interest

Prior to the third quarter of fiscal year 2022, Adtalem ~~maintains~~maintained a ~~71%~~69% ownership interest in EduPristine with the remaining ~~29%~~31% owned by Kaizen Management Advisors (“Kaizen”), an India-based private equity ~~firm, as of September 30, 2021.~~firm. Beginning on March 26, 2020, Adtalem has had the right to exercise a call option and purchase any remaining EduPristine stock from Kaizen. Likewise, Kaizen has had the right to exercise a put option and sell up to 33% of its remaining ownership interest in EduPristine to Adtalem. Beginning on March 26, 2022, Kaizen ~~will have~~had the right to exercise a put option and sell its remaining ownership interest in EduPristine to Adtalem. During the third quarter of fiscal year 2022, Adtalem purchased the remaining ownership interest in EduPristine from Kaizen for $1.8 million, resulting in Adtalem owning 100% of EduPristine. Subsequently, Adtalem sold EduPristine in its entirety on June 17, 2022 (see Note 4 “Discontinued Operations and Assets Held for Sale” for additional information).

Since the put option iswas out of the control of Adtalem, authoritative guidance ~~requires~~required the redeemable noncontrolling interest, which ~~includes~~included the value of the put option, to be displayed outside of the equity section of the Consolidated Balance Sheets. The estimated fair value of Kaizen’s noncontrolling interest is $1.8 million as of September 30, 2021. The adjustment to increase or decrease the put option to its expected redemption value each reporting period is recorded in retained earnings in accordance with GAAP.

~~The following table shows the changes in redeemable noncontrolling interest balance (in thousands):~~

Three Months Ended

September 30,

2021

2020
Balance at beginning of period

$
1,790

$
2,852
Net loss attributable to redeemable noncontrolling interest

0

(91)
Balance at end of period

$
1,790

$
2,761

15. Share Repurchases

Open Market Share Repurchase Programs

On ~~November 8, 2018,~~February 4, 2020, we announced that the Board of Directors (the “Board”) authorized Adtalem’s ~~eleventh~~twelfth share repurchase program, which allowed Adtalem to repurchase up to $300 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 allows Adtalem to repurchase up to $300$300.0 million of its common stock through December 31, 2021. The twelfth ~~and current~~ share repurchase program commenced

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in January 2021 and expired on December 31, 2021. ~~Adtalem has made~~On March 1, 2022, we announced that the ~~following share repurchases under its current~~Board authorized Adtalem’s thirteenth share repurchase program, ~~(in thousands, except shares and per share data):~~

Life-to-Date

Current Share

Repurchase Program
Total number of share repurchases

1,447,882
Total cost of share repurchases

$
54,769
Average price paid per share

$
37.83

which allows Adtalem to repurchase up to $300.0 million of its common stock through February 25, 2025.

We did 0tnot make any share repurchases during the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021. As of September 30, ~~2021, $245.2~~2022, $300.0 million of authorized share repurchases were remaining under the current share repurchase program. Repurchases under our share repurchase programs were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. In November 2020, Adtalem resumed repurchases under its share repurchase programs. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other

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factors. These repurchases may be made through the open market, including block purchases, in ~~privately~~private negotiated transactions, or otherwise. Repurchases will be funded through available cash balances and/or borrowings and may be suspended or discontinued at any time. Shares of stock repurchased under the programs are held as treasury shares. ~~These repurchased~~Repurchases under our share repurchase programs reduce the weighted-average number of shares ~~have~~of common stock outstanding for basic and diluted earnings per share calculations.

ASR Agreement

On March 14, 2022, we entered into an ASR agreement to repurchase $150.0 million of common stock. We received an initial delivery of 4,709,576shares 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. This initial delivery of shares has reduced the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations. The final number of shares to be repurchased is 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. See Note 8 “Earnings per Share” for information on the ASR impact to earnings per share for the three months ended September 30, 2022. 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 14, 2022, we recorded the $150.0 million purchase price of the ASR as a reduction to shareholders’ equity, consisting of a $120.0 million increase in treasury stock and a $30.0 million reduction in additional paid-in capital, which represented an equity forward contract, on the Consolidated Balance Sheets. During the second quarter of fiscal year 2023, the $30.0 million recorded in additional paid-in capital will be reclassified to treasury stock and an additional $13.2 million will be recorded in treasury stock, which represents our final cash settlement payment.

16. Accumulated Other Comprehensive Loss

The following table shows the changes in accumulated other comprehensive loss by component (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Foreign currency translation adjustments
Beginning balance	$	(670)	$	(1,383)	$	(960)	$	(670)
(Loss) gain on foreign currency translation		(70)		318
Ending balance	$	(740)	$	(1,065)

Available-for-sale marketable securities
Beginning balance, gross	$	0	$	242
Beginning balance, tax effect		0		(59)
Beginning balance, net of tax		0		183
Unrealized loss on available-for-sale marketable securities		0		(2)
Tax effect		0		1
Loss on foreign currency translation						(1,267)		(70)
Ending balance	$	0	$	182	$	(2,227)	$	(740)

Interest rate swap
Beginning balance, gross	$	(8,926)	$	(10,399)	$	—	$	(8,926)
Beginning balance, tax effect		2,231		2,544		—		2,231
Beginning balance, net of tax		(6,695)		(7,855)		—		(6,695)
Unrealized gain on interest rate swap		0		167
Tax effect		0		(41)
Reclassification from other comprehensive income		6,695		0		—		6,695
Ending balance	$	0	$	(7,729)	$	—	$	—

Total ending balance at September 30	$	(740)	$	(8,612)
Total ending balance					$	(2,227)	$	(740)

17. Stock-Based Compensation

Adtalem maintains two stock-based incentive plans: the Amended and Restated Incentive Plan of 2005 and the Fourth Amended and Restated Incentive Plan of 2013, which are administered by the Compensation Committee of the Board. Under these plans, directors, key executives, and managerial employees are eligible to receive incentive or nonqualified stock options to purchase shares of Adtalem’s common stock, and also permit the granting of stock appreciation rights, restricted stock units (“RSUs”), performance-based RSUs, and other stock and cash-based compensation. Although options remain outstanding under the 2005 incentive plan, no further grants will be issued under this plan. We issue options

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~~17. Stock-Based Compensation~~

~~Adtalem maintains 2 stock-based incentive plans:~~generally with a four-year graduated vesting from the ~~Amended~~grant date and Restated Incentive Plan of 2005 and the Fourth Amended and Restated Incentive Plan of 2013. Under these plans, directors, key executives, and managerial employees are eligible to receive incentive stock or nonqualified options to purchase shares of Adtalem’s common stock. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 also permit the granting of stock appreciation rights, restricted stock units (“RSUs”), performance-based RSUs, and other stock and cash-based compensation. Although options remain outstanding under the 2005 incentive plan, no further stock-based grants will be issued under this plan. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 are administered by the Compensation Committee of the Board. Options are granted for terms of up toexpire ten years ~~and can vest immediately or over periods of up to five years. The requisite service period is equal to~~from the ~~vesting period.~~grant date. The option price under the plans is the fair market value of the shares on the date of the grant. The Compensation Committee of the Board determined to no longer grant stock options beginning with the fiscal year 2023 stock-based grant awards.

Stock-based compensation expense is measured at the grant date based on the fair value of the award. Adtalem accounts for stock-based compensation granted to retirement eligible employees that fully vests upon an employee’s retirement under the non-substantive vesting period approach. Under this approach, the entire stock-based compensation expense is recognized at the grant date for stock-based grants issued to retirement eligible employees. For non-retirement eligible employees, stock-based compensation expense is recognized as expense over the employee requisite service period. We account for forfeitures of unvested awards in the period they occur.

As of September 30, ~~2021, 3,311,232~~2022, 2,892,138 shares were authorized for issuance but not issued or subject to outstanding awards under Adtalem’s stock-based incentive plans.

The following is a summary of options activity for the three months ended September 30, ~~2021:~~2022:


				Weighted-Average						Weighted-Average
				Remaining	Aggregate					Remaining	Aggregate
	Number of	Weighted-Average		Contractual Life	Intrinsic Value		Number of	Weighted-Average		Contractual Life	Intrinsic Value
	Options	Exercise Price		(in years)	(in thousands)		Options	Exercise Price		(in years)	(in thousands)
Outstanding as of July 1, 2021	1,561,049	$	32.05
Granted	181,825		37.00
Outstanding as of July 1, 2022							1,144,372	$	35.36
Exercised	(369,125)		20.82				(47,809)		25.96
Forfeited	(52,991)		37.37
Expired	(49,650)		41.87				(1,575)		18.60
Outstanding as of September 30, 2021	1,271,108		35.41	6.9	$	5,137
Exercisable as of September 30, 2021	846,866	$	34.79	5.8	$	4,088
Outstanding as of September 30, 2022							1,094,988		35.80	6.2	$	2,792
Exercisable as of September 30, 2022							820,207	$	35.74	5.4	$	2,338

The total intrinsic value of options exercised for the three months ended September 30, 2022 and 2021 ~~and 2020~~ was ~~$6.6~~$0.6 million and ~~$0.1~~$6.6 million, respectively.

The fair value of Adtalem’s ~~stock option awards~~options was estimated using a binomial model. This model uses historical cancellation and exercise experience of Adtalem to determine the option value. It also ~~takes into account~~considers the illiquid nature of employee options during the vesting period.

The weighted-average estimated grant date fair value of options granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal ~~years~~year 2022 ~~and 2021~~ was $14.72 ~~and $12.23,~~ per ~~share, respectively.~~share. No stock options were granted during the three months of fiscal year 2023. The fair value of Adtalem’s ~~stock~~ option grants was estimated assuming the following weighted-average assumptions:

Fiscal Year

2022

2021

Expected life (in years)

6.56

6.54

Expected volatility

39.99
%
39.27
%
Risk-free interest rate

0.94
%
0.45
%
Dividend yield

0.00
%
0.00
%


	Fiscal Year
	2022
Expected life (in years)	6.56
Expected volatility	39.99	%
Risk-free interest rate	0.94	%
Dividend yield	0.00	%

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The expected life of the options granted is based on the weighted-average exercise life with age and salary adjustment factors from historical exercise behavior. Adtalem’s expected volatility is computed by combining and weighting the implied market volatility, the most recent volatility over the expected life of the option grant, and Adtalem’s long-term historical volatility.

If factors change and different assumptions are employed in the valuation of stock-based grants in future periods, the stock-based compensation expense that Adtalem records may differ significantly from what was recorded in previous periods.

During the first three months of fiscal year ~~2022,~~2023, Adtalem granted ~~375,810~~281,550 RSUs to selected employees, all of which were non-performance-based RSUs. Our annual grant of performance-based RSUs are expected to be granted later in ~~the second quarter of~~ fiscal year ~~2022. Performance-based~~2023. We issue performance-based RSUs ~~are earned~~generally with a three-year cliff vest from the grant date. The final number of shares issued under performance-based RSUs is based on metrics approved by the ~~recipients over~~Compensation Committee of the Board. Prior to fiscal year 2023, we issued non-performance-based RSUs generally with a three-year period based on achievement of return on invested capital and free cash flow per share. Certain awards are subject to achievement of a minimum level of Adtalem’s earnings before interest, taxes, depreciation, and amortization, calculated on a non-GAAP basis. Non-performance-based RSUs are subject to restrictions which lapse ratably over ~~one~~, ~~two~~, ~~three, or~~ four-year ~~periods on~~graduated vesting from the grant ~~anniversary date based on~~date. Beginning in fiscal year 2023, we issue non-performance-based RSUs generally with a three-year

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graduated vesting from the ~~recipient’s continued service on~~grant date. We also regularly issue RSUs to our Board members with a one-year cliff vest from the ~~Board, employment with Adtalem, or upon retirement. During the restriction period, the~~grant date. The recipient of the non-performance-based RSUs has the right to receive dividend equivalents, if any. This right does not pertain to the performance-based RSUs. The following is a summary of RSU activity for the three months ended September 30, ~~2021:~~2022:


		Weighted-Average			Weighted-Average
	Number of	Grant Date		Number of	Grant Date
	RSUs	Fair Value		RSUs	Fair Value
Outstanding as of July 1, 2021	888,005	$	35.84
Unvested as of July 1, 2022				1,171,692	$	35.05
Granted	375,810		36.87	281,550		39.53
Vested	(194,389)		39.60	(254,743)		38.31
Forfeited	(71,143)		34.67	(48,135)		38.65
Outstanding as of September 30, 2021	998,283	$	35.58
Unvested as of September 30, 2022				1,150,364	$	35.27

The weighted-average estimated grant date fair values of RSUs granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal years 2023 and 2022 were $39.53 and ~~2021 were~~ $36.87, ~~and $32.02,~~ per share, respectively.

Stock-based compensation expense, which is ~~primarily~~ included in student services and administrative expense, and the related income tax benefit were as follows (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Stock-based compensation	$	9,906	$	4,004	$	6,145	$	9,711
Income tax benefit		(1,462)		(526)		(1,682)		(1,420)
Stock-based compensation, net of income taxes	$	8,444	$	3,478
Stock-based compensation, net of tax					$	4,463	$	8,291

As of September 30, ~~2021, $24.0~~2022, $22.6 million of total pre-tax unrecognized stock-based compensation expense related to unvested grants is expected to be recognized over a weighted-average period of ~~2.8~~2.5 years. The total fair value of options and RSUs vested during the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 was $12.0 million and ~~$16.3~~$12.0 million, respectively.

There was 0no capitalized stock-based compensation cost as of each of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020.~~

2021. Adtalem ~~has an established practice of issuing~~issues new shares of common stock to satisfy ~~stock-based grant exercises. However, Adtalem also may issue treasury shares to satisfy stock-based grant~~option exercises ~~under certain of its stock-based incentive plans.~~and RSU vests.

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18. Fair Value Measurements

Adtalem has elected not to measure any assets or liabilities at fair value other than those required to be measured at fair value on a recurring basis. Assets measured at fair value on a nonrecurring basis include goodwill, intangible assets, and assets of businesses where the long-term value of the operations have been impaired.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The guidance specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The guidance establishes fair value measurement classifications under the following hierarchy:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Observable inputs other than prices included in Level 1, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

Level 3 –Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

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When available, Adtalem uses quoted market prices to determine fair value, and such measurements are classified within Level 1. In cases where market prices are not available, Adtalem makes use of observable market-based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters such as interest rates and yield curves. These measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

The carrying value of our cash and cash equivalents approximates fair value because of their short-term nature and is classified as Level 1.

Adtalem maintains a rabbi trust with investments in stock and bond mutual funds to fund obligations under a nonqualified deferred compensation plan. The fair value of the investments in the rabbi trust ~~of $20.5 million, $20.6 million, and $9.4 million as of September 30, 2021, June 30, 2021, and September 30, 2020, respectively, were~~ included ~~on the Consolidated Balance Sheet within~~in prepaid expenses and other current ~~assets. All~~assets on the Consolidated Balance Sheets as of September 30, 2022, June 30, 2022, and September 30, 2021 was $17.0 million, $17.8 million, and $20.5 million, respectively. These investments ~~in marketable securities~~ are recorded at fair value based upon quoted market prices using Level 1 inputs.

The fair value of the credit extension programs, which approximates its carrying value, included in accounts receivable, net and other assets, net on the Consolidated Balance Sheets as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020~~2021 of ~~$28.7~~$27.8 million, ~~$29.2~~$27.5 million, and ~~$33.0~~$28.7 million, respectively, is estimated by discounting the future cash flows using current rates for similar arrangements and is classified as Level 2. See Note 9 “Accounts Receivable and Credit Losses” for additional information on these credit extension programs.

In connection with the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of the DeVry Note. The DeVry Note ~~bears~~bore interest at a rate of 4% per annum, payable annually in arrears, and ~~has~~had a maturity date of January 1, 2022. We received the loan repayment of $10.0 million during the third quarter of fiscal year 2022. The fair value of the DeVry ~~University loan receivable approximates~~Note approximated its carrying value of $10.0 million ~~for each reporting date.~~as of September 30, 2021. The carrying value is included ~~on the Consolidated Balance Sheet~~ in prepaid expenses and other current assets on the Consolidated Balance Sheets as ~~of each~~ of September 30, ~~2021 and June 30, 2021, and in other assets, net as of~~ ~~September 30, 2020~~.2021. Fair value iswas estimated by discounting the future cash flows using an average of current rates for similar arrangements, which iswas estimated at 4% per annum and is classified as Level 2.

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On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep. In connection with the sale, Adtalem holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The carrying value of the DePaul College Prep loan receivable, which approximates its fair value, included in other assets, net on the Consolidated Balance ~~Sheet~~Sheets as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020~~2021 is ~~$43.0~~$44.3 million, ~~$42.7~~$44.0 million, and ~~$41.7~~$43.0 million, respectively. Fair value is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum and is classified as Level 2.

Adtalem has a nonqualified deferred compensation plan for highly compensated employees and its Board members. The participant’s “investments” are in a hypothetical portfolio of investments which are tracked by an administrator. Changes in the fair value of the nonqualified deferred compensation obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units. Total liabilities under the plan ~~as of September 30, 2021, June 30, 2021, and September 30, 2020, were $20.7 million, $20.3 million, and $18.2 million, respectively, and are~~ included in accrued liabilities on the Consolidated Balance ~~Sheets.~~Sheets as of September 30, 2022, June 30, 2022, and September 30, 2021 were $15.3 million, $16.3 million, and $20.7 million, respectively. The fair value of the nonqualified deferred compensation obligation is classified as Level 2 because their inputs are derived principally from observable market data by correlation to the hypothetical investments.

As of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020,~~2021, borrowings under our long-term debt agreements were ~~$1,650.0~~$758.3 million, ~~$1,091.0~~$859.2 million, and ~~$293.3~~$1,650.0 million, respectively. The ~~carrying~~fair value of ~~our long-term debt approximates~~the Notes was $361.7 million as of September 30, 2022, which is based upon quoted market prices and is classified as Level 1. The fair value ~~because~~of the ~~interest rates on these borrowings approximated the effective interest rate~~Term Loan B was $350.0 million as of September 30, 2022, which is based upon quoted market prices in a non-active market and is classified as Level 2. See Note 13 “Debt” for additional information on our long-term debt agreements.

On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to fully mitigate risks associated with the variable interest rate on our Prior Term Loan B debt with an effective date33

Table of March 31, 2020. The fair value of our Swap was based in part on data received from the counterparty, and represented the estimated amount we would receive or pay to settle the Swap, taking into consideration current and projected future interest rates as well as the creditworthiness of the counterparty, all of which can be validated through readily observable data from external sources, in which case the measurements are classified within Level 2. The fair value of the Swap is represented within other liabilities on the Consolidated Balance Sheet with a balance of $8.9 million and $10.2 million as of June 30, 2021 and September 30, 2020, respectively. On July 29, 2021, prior to refinancing our Prior Credit Agreement, we settled and terminated the Swap for $4.5 million, which resulted in a charge to interest expense in the three months ended September 30, 2021. See Note 13 “Debt” for additional information on the Swap.Contents

As of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020,~~2021, there were 0no assets or liabilities measured at fair value using Level 3 inputs.

Assets measured at fair value on a nonrecurring basis include goodwill and indefinite-lived intangibles arising from a business combination. These assets are not amortized and charged to expense over time. Instead, goodwill and indefinite-lived intangibles must be reviewed annually for impairment or more frequently if circumstances arise indicating potential impairment. This impairment review was most recently completed as of May 31, ~~2021.~~2022. See Note 12 “Goodwill and Intangible Assets” for additional information on the impairment review, including valuation techniques and assumptions.

19. Commitments and Contingencies

Adtalem is subject to lawsuits, administrative proceedings, regulatory reviews, and investigations associated with financial assistance programs and other matters arising in the normal conduct of its business. As of September 30, ~~2021,~~2022, Adtalem believes it has adequately reserved for potential losses. The following is a description of pending legal and regulatory matters that may be considered other than ordinary, routine, and incidental to the business. Descriptions of certain matters from prior SEC filings may not be carried forward in this report to the extent we believe such matters no longer are required to be disclosed or there has not been, to our knowledge, significant activity relating to them. We have recorded accruals for those matters where management believes a loss is probable and can be reasonably estimated as of September 30, ~~2021.~~2022. 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. The continued defense, resolution, or settlement of any of the following matters could require us to expend significant resources and could have a material

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adverse effect on our business, financial condition, results of operations, and cash flows, and result in the imposition of significant restrictions on us and our ability to operate.

On April 13, 2018, a putative class action lawsuit was filed by Nicole Versetto, individually and on behalf of others similarly situated, against ~~the~~ Adtalem, DeVry University Inc., and DeVry/New York Inc. (collectively the “Adtalem Parties”) in the Circuit Court of Cook County, Illinois, Chancery Division. The complaint was filed on behalf of herself and 3three separate classes of similarly situated individuals who were citizens of the State of Illinois and who purchased or paid for a DeVry University program between January 1, 2008 and April 8, 2016. The plaintiff ~~claims~~claimed that defendants made false or misleading statements regarding DeVry University’s graduate employment rate and asserts causes of action under the Illinois Uniform Deceptive Trade Practices Act, Illinois Consumer Fraud and Deceptive Trade Practices Act, and Illinois Private Business and Vocational Schools Act, and claims of breach of contract, fraudulent misrepresentation, concealment, negligence, breach of fiduciary duty, conversion, unjust enrichment, and declaratory relief as to violations of state law. The plaintiff ~~seeks~~sought compensatory, exemplary, punitive, treble, and statutory penalties and damages, including pre-judgment and post-judgment interest, in addition to restitution, declaratory and injunctive relief, and attorneys’ fees. The ~~Adtalem Parties moved to dismiss this complaint on June 20, 2018. On March 11, 2019, the Court granted plaintiff’s motion for leave to file an amended complaint. The~~ plaintiff later filed an amended complaint ~~that same day,~~ asserting similar claims with a new lead plaintiff, Dave McCormick. ~~The defendants filed a motion to dismiss plaintiff’s amended complaint on April 15, 2019 and~~After discussions among the Court granted defendants’ motion on July 29, 2019, with leave to amend. The plaintiff filed an amended complaint on August 26, 2019. On October 18, 2019, defendants moved to dismiss this complaint as it was substantially similar toparties, the ~~one the Court previously dismissed. The Court~~court granted a Motion for Preliminary Approval of Class Action Settlement (the ~~“Settlement”~~“McCormick Settlement”) on May 28, 2020. In conjunction with the McCormick Settlement, Adtalem was required to establish a settlement fund by placing $44.95 million into an escrow account, which is recorded within prepaid expenses and other current assets on the Consolidated Balance ~~Sheet~~Sheets as of September 30, ~~2021,~~2022, June 30, ~~2021~~2022, and September 30, ~~2020.~~2021. Adtalem management determined a loss contingency was probable and reasonably estimable. As such, we also recorded a loss contingency accrual of $44.95 million on the Consolidated Balance ~~Sheet~~Sheets as of June 30, 2020 and charged the contingency loss within discontinued operations in the Consolidated ~~Statement~~Statements of ~~Loss~~Income (Loss) for the year ended June 30, 2020. As of June 30, 2020, we had anticipated the potential payments related to this loss contingency to be made from the escrow account during fiscal year 2021. We now anticipate the potential payments related to this loss contingency to be made from the escrow account during fiscal year ~~2022.~~2023. This loss contingency estimate could differ from actual results and result in additional charges or reversals in future periods. The ~~Court~~court issued an order approving the ~~settlement~~McCormick Settlement on October 7, 2020 and dismissed the action with prejudice. On November 2, 2020, Stoltmann Law Offices filed on behalf of Jose David Valderrama (“Valderrama”), a class member who objected to the terms of the ~~settlement,~~McCormick Settlement, a notice toof appeal of the ~~Court’s~~court’s order approving the ~~settlement.~~McCormick Settlement. On November 5, 2020, ~~Richard~~Richardo Peart (“Peart”), another class member who objected to the terms of the ~~settlement,~~McCormick Settlement, filed a similar notice ~~to appeal the Court’s order approving the settlement.~~of appeal. Those appeals ~~have been~~were consolidated before the Appellate Court of Illinois, First District and ~~have been~~ fully briefed. The Appellate Court agreed to stay Valderrama’s and Peart’s appeals of the McCormick Settlement pending the outcome of mediation involving the objections to the McCormick Settlement. The objections were not resolved at a mediation on February 1, 2022. Valderrama’s objection was withdrawn as part of the Stoltmann settlement discussed below. Peart’s

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objection remained pending a decision by the Appellate Court. On May 4, 2022, the Appellate Court denied Peart’s objection and affirmed the Circuit Court of Cook County’s approval of the McCormick Settlement. Adtalem settled with Peart and the McCormick Settlement is now final. The Circuit Court of Cook County is in the process of administering the $44.95 million settlement fund.

In addition to Valderrama, Stoltmann Law Offices ~~is representing hundreds~~represented 552 individuals (“Stoltmann Claimants”) who opted out of ~~individuals who have~~the McCormick Settlement and filed claims with the Judicial Arbitration and Mediation Services, Inc. (“JAMS”) alleging fraud-based claims based on DeVry University’s graduate employment statistics. Stoltmann Law Offices has paid the filing fees for certain of these arbitrations to move forward. JAMS has sent commencement letters in several waves. Respondents have filed answers in response to certain of these arbitration demands. These arbitrations are in various stages of litigation.

On November 2, 2021, Adtalem and the Stoltmann Law Offices participated in a mediation to resolve the claims ~~asserted in these arbitrations by the DeVry claimants represented by~~of the Stoltmann ~~Law Offices.~~Claimants. Adtalem and the Stoltmann Law Offices have reached agreement on settlement ~~terms.~~terms (“Stoltmann Settlement”). The ~~settlement remains subject to the approval of the~~ Adtalem Board of Directors ~~and is voidable at Adtalem’s option if a sufficient number~~approved the Stoltmann Settlement. The settlement amount, $20,375,000, was reduced by $75,000 for each of ~~claimants decline~~the Stoltmann Claimants that declined to participate in the settlement. Of Stoltmann’s 552 Claimants, six declined to participate, reducing the settlement amount by $450,000. On February 28, 2022, Adtalem remitted $19,925,000 to the Stoltmann Laws Offices on behalf of the 546 participating Stoltmann Claimants. Of the six Stoltmann Claimants that declined to participate in the settlement, two voluntarily dismissed their arbitrations; one arbitration was stayed at the Claimant’s request; and three Claimants have not recommenced their arbitrations.

On January 19, 2021, a putative class action was filed in the United States District Court for the Northern District of Ohio against Chamberlain by Tanesia Dean on behalf of herself and similarly situated students of Chamberlain. The complaint alleged breach of contract and unjust enrichment claims against Chamberlain related to its decision to transition all classes online in March 2020, in light of the global COVID-19 pandemic, without altering tuition or fees. The putative class was defined to include all students, nationwide, who paid tuition and fees during the following academic sessions: May 2020, July 2020, September 2020, November 2020, and January 2021. Plaintiff sought monetary relief exceeding $5 million, and attorneys’ fees, costs, and expenses. On April 5, 2021, Chamberlain filed a motion to dismiss the complaint in its entirety. The motion to dismiss was granted in full on August 16, 2021 and the case was dismissed. On September 14,

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2021, plaintiff filed an appeal in the 6^thSixth Circuit asserting that the trial judge erred in dismissing ~~Plaintiff’s~~plaintiff’s complaint. ~~Chamberlain intends to vigorously defend~~On June 16, 2022 the ~~appeal.~~Sixth Circuit affirmed the dismissal of the plaintiff’s complaint. The plaintiff did not request a rehearing and did not timely file a writ of certiorari with the U.S. Supreme Court. This matter is now final.

On March 12, 2021, Travontae Johnson, a current student of Chamberlain, filed a putative class action against Chamberlain in the Circuit Court of Cook County, Illinois, Chancery Division. The plaintiff claims that Chamberlain’s use of Respondus Monitor, an online remote proctoring tool for student examinations, violated the Illinois Biometric Information Privacy Act (“BIPA”), 740 ILCS 14/15. More particularly, the plaintiff claims that Chamberlain required students to use Respondus Monitor, which collected, captured, stored, used, and disclosed students’ biometric identifiers and biometric information without written and informed consent. The plaintiff also alleges that Chamberlain lacked a legally compliant written policy establishing a retention schedule and guidelines for destroying biometric identifiers and biometric information. The potential class purportedly includes all students who took an assessment using the proctoring tool, as a student of Chamberlain in Illinois, at any time from March 12, 2016 through January 20, 2021. The plaintiff and the putative class seek damages in excess of $50,000, ~~and attorneys’~~attorney’s fees and costs. The plaintiff and class also seek an unspecified amount of enhanced damages based on alleged negligent or reckless conduct by Chamberlain. ~~On April 19, 2021 and May 5, 2021, Chamberlain filed a motion for extension of time to answer or otherwise plead, which resulted in an extension until June 16, 2021.~~ On June 16, 2021, Chamberlain filed a motion to dismiss plaintiff’s complaint. On June 29, 2021, plaintiff filed an amended complaint. On July 19, 2021, Chamberlain filed its motion to dismiss the amended ~~complaint. Chamberlain believes~~complaint arguing that plaintiff’s lawsuit is expressly preempted by Title V of the ~~allegations are without merit and intends to vigorously defend this case.~~Gramm-Leach-Bliley Act. Chamberlain’s motion is pending.

On July 22, 2021, plaintiffs Cheryl Burleigh and Chad Harris (both contributing faculty members at Walden) filed a class action complaint in the Superior Court of Alameda County, California alleging violations of California wage and hour laws by Walden and Laureate Education, Inc. The complaint alleges that Walden’s “per assignment” pay scale results in uncompensated work time for ~~Plaintiffs~~plaintiffs and class members for time spent in trainings and meetings. Plaintiffs also allege that they were not paid for meal and rest breaks, that they were not reimbursed for necessary business expenses, that Walden did not provide wage statements as required by California state law, and that they were not paid wages due upon termination. Plaintiffs also allege derivative claims under California’s Unfair Competition Law. The complaint seeks restitution including pay for uncompensated hours of work, unreimbursed business expenses and interest, liquidated damages, declaratory relief, injunctive relief, penalties, and attorney fees and costs. Walden and Laureate have filed a ~~demurrer, and~~demurrer. On January 28, 2022, the parties ~~are engaging~~agreed to settle the complaint for an immaterial amount, subject to the approval

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of the Superior Court of Alameda County, California. The Plaintiffs filed their motion for preliminary approval of the settlement on June 7, 2022. The court issued a preliminary approval Order on July 26, 2022. The court has scheduled a hearing to consider final approval of the settlement on December 6, 2022.

On January 12, 2022, Walden was served with a complaint filed in ~~preliminary mediation discussions.~~the United States District Court for the District of Maryland by Aljanal Carroll, Claudia Provost Charles, and Tiffany Fair against Walden ~~believes these allegations are without merit~~for damages, injunctive relief, and ~~intends~~declaratory relief on behalf of themselves and all other similarly-situated individuals alleging violations of Title VI of the Civil Rights Act of 1964, the Equal Credit Opportunity Act, the Minnesota Prevention of Consumer Fraud Act, the Minnesota Uniform Deceptive Trade Practices Act, Minnesota statutes prohibiting false statements in advertising, and for common law fraudulent misrepresentation. Plaintiffs allege that Walden has targeted, deceived, and exploited Black and female Doctor of Business Administration (“DBA”) students by knowingly misrepresenting and understating the number of “capstone” credits required to ~~vigorously defend this case.~~complete the DBA program and obtain a degree. On March 23, 2022, Walden filed a Motion to Dismiss the Plaintiffs’ claims for failure to state a claim upon which relief can be granted. This motion is fully briefed and we await a ruling by the court.

As previously disclosed, pursuant to the terms of the Stock Purchase Agreement (“SPA”) by and between Adtalem and Cogswell Education, LLC (“Cogswell”), dated as of December 4, 2017, as amended, Adtalem sold DeVry University to Cogswell and Adtalem agreed to indemnify DeVry University for certain losses up to $340.0 million (the “Liability Cap”). Adtalem has previously disclosed DeVry University related matters that have consumed a portion of the Liability Cap.

20. Segment Information

~~During~~Beginning in the second quarter of fiscal year 2022, Adtalem eliminated its Financial Services segment when ACAMS, Becker, OCL, and EduPristine, were classified as discontinued operations. See Note 4 “Discontinued Operations and Assets Held for Sale” for additional information. Segment information presented excludes the results of the former Financial Services segment. Discontinued operations assets are included in the table below to reconcile to total consolidated assets presented on the Consolidated Balance Sheets. In addition, certain expenses previously allocated to ACAMS, Becker, OCL, and EduPristine within our former Financial Services segment during the first quarter of fiscal year 2022 ~~Adtalem made a change~~were reclassified to ~~its reportable segments~~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 ~~align with current strategic priorities~~the Chamberlain, Walden, and ~~resource allocation.~~ Medical and Veterinary segments.

We present 4three 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.

Walden – Offers more than 100 online certificate, bachelor’s, master’s, and doctoral ~~degrees.~~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” 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 AUC, RUSM, and RUSVM, which are collectively referred to as the “medical and veterinary schools.”

~~Financial Services~~ – Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of ACAMS, Becker, OCL, and EduPristine. On August 4, 2021, Adtalem announced we are exploring strategic alternatives for the Financial Services segment.

These segments are consistent with the method by which the Chief Operating Decision Maker (Adtalem’s President and Chief Executive Officer) evaluates performance and allocates resources. Performance evaluations are based on each segment’s adjusted operating ~~income excluding special items. Operating~~income. Adjusted operating income excludes special items, which consists of deferred

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revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, and ~~Walden~~ intangible asset amortization. Adtalem’s management excludes these items from its review of the results of the operating segments for purposes of measuring segment profitability and allocating resources. “Home Office and Other” includes activities not allocated to a reportable segment and is included to reconcile segment results to the Consolidated Financial Statements. Total assets by segment is not presented as our CODM does not review or allocated resources based on segment assets. Segments may have allocated depreciation expense related to depreciable assets reported as an asset in a ~~different segment. The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies.”~~

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different segment or at Home Office and Other. The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies.”

Summary financial information by reportable segment is as follows (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Revenue:
Chamberlain	$	135,639	$	133,764	$	135,405	$	135,639
Walden		68,617		—		130,901		68,617
Medical and Veterinary		84,814		85,062		88,253		84,814
Financial Services		59,257		49,415
Total consolidated revenue	$	348,327	$	268,241	$	354,559	$	289,070
Operating income excluding special items:
Adjusted operating income:
Chamberlain	$	20,855	$	30,169	$	27,002	$	20,855
Walden		11,012		—		23,391		11,012
Medical and Veterinary		15,665		22,841		17,354		15,665
Financial Services		13,449		8,687
Home Office and Other		(6,390)		(7,332)		(2,646)		(11,095)
Total consolidated operating income excluding special items		54,591		54,365
Total consolidated adjusted operating income						65,101		36,437
Reconciliation to Consolidated Financial Statements:
Deferred revenue adjustment		(6,207)		—		—		(6,207)
CEO transition costs		(6,195)		—		—		(6,195)
Restructuring expense		(3,916)		(4,223)		(15,065)		(3,094)
Business acquisition and integration expense		(26,553)		(13,436)		(8,415)		(26,553)
Walden intangible amortization expense		(16,451)		—
Total consolidated operating (loss) income		(4,731)		36,706
Intangible amortization expense						(18,528)		(16,451)
Total consolidated operating income (loss)						23,093		(22,063)
Net other expense		(46,515)		(2,170)		(16,193)		(46,515)
Total consolidated (loss) income from continuing operations before income taxes	$	(51,246)	$	34,536
Segment assets:
Chamberlain	$	229,061	$	212,177
Walden		1,703,019		—
Medical and Veterinary		730,096		764,205
Financial Services		592,029		579,634
Home Office and Other		513,985		773,881
Total consolidated assets	$	3,768,190	$	2,329,897
Total consolidated income (loss) from continuing operations before income taxes					$	6,900	$	(68,578)
Capital expenditures:
Chamberlain	$	3,645	$	7,751	$	1,426	$	3,645
Walden		184		—		825		184
Medical and Veterinary		1,255		1,515		573		1,255
Financial Services		633		2,127
Home Office and Other		1,607		3,050		2,727		1,607
Total consolidated capital expenditures	$	7,324	$	14,443	$	5,551	$	6,691
Depreciation expense:
Chamberlain	$	4,584	$	3,840	$	4,481	$	4,584
Walden		1,712		—		2,595		1,712
Medical and Veterinary		3,455		3,533		3,105		3,455
Financial Services		1,019		729
Home Office and Other		780		873		624		748
Total consolidated depreciation expense	$	11,550	$	8,975	$	10,805	$	10,499
Intangible asset amortization expense:
Walden	$	16,451	$	—	$	18,528	$	16,451
Financial Services		2,486		2,518
Total consolidated intangible asset amortization expense	$	18,937	$	2,518	$	18,528	$	16,451

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Adtalem conducts its educational ~~and financial services~~ operations in the U.S., Barbados, St. Kitts, and St. ~~Maarten, India, Europe, China, Canada, and the Middle East.~~Maarten. Revenue and long-lived assets by geographic area are as follows (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Revenue from unaffiliated customers:
Domestic operations	$	248,139	$	172,644	$	266,306	$	204,256
International operations:
Barbados, St. Kitts, and St. Maarten		84,814		85,062		88,253		84,814
Other		15,374		10,535
Total international		100,188		95,597
Total consolidated revenue	$	348,327	$	268,241	$	354,559	$	289,070
Long-lived assets:
Domestic operations	$	332,458	$	292,335	$	272,597	$	318,036
International operations:
Barbados, St. Kitts, and St. Maarten		157,972		183,343	��	167,271		157,972
Other		501		1,090
Total international		158,473		184,433
Total consolidated long-lived assets	$	490,931	$	476,768	$	439,868	$	476,008

Prior period amounts in the above table for long-lived assets have changed to conform with the current period presentation. We have changed our methodology to include only property and equipment, net and operating lease assets as long-lived assets for this disclosure. We believe these changes better reflects the usefulness of this disclosure.

No one customer accounted for more than 10% of Adtalem’s consolidated revenue for all periods presented.

Item 2. 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 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 and the notes thereto but not presented in accordance with U.S. generally 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 and the notes thereto.

Available Information

We use our website (www.adtalem.com) as a routine channel of distribution of company information, including press releases, presentations, and supplemental information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website in addition to following press releases, SEC filings, and public conference calls and webcasts. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts.

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You may also access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as well as other reports relating to us that are filed with or furnished to the SEC, free of charge in the investor relations section of our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The content of the websites mentioned above is not incorporated into and should not be considered a part of this report.

Segments

~~During~~Beginning in the ~~first~~second quarter of fiscal year 2022, Adtalem ~~made~~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

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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 ~~change~~result, all financial results, disclosures, and discussions of continuing operations in this Quarterly Report on Form 10-Q 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 ~~its reportable segments~~incur costs associated with ongoing litigation and settlements related to ~~align with current strategic priorities~~the DeVry University divestiture, which was completed during fiscal year 2019, and ~~resource allocation.~~ are classified as expense within discontinued operations. See Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements for additional discontinued operations information.

We present ~~four~~three reportable segments as follows:

Walden – Offers more than 100 online certificate, bachelor’s, master’s, and doctoral ~~degrees.~~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 for additional information on the acquisition.

“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 20 “Segment Information” to the Consolidated Financial Statements.

~~We continue~~Certain expenses previously allocated to ~~incur~~ACAMS, Becker, OCL, and EduPristine within our former Financial Services segment during 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 ~~associated with ongoing litigation and settlements related~~are being allocated to the ~~DeVry University divestiture, which was completed during fiscal year 2019,~~Chamberlain, Walden, and ~~are classified as expense within discontinued operations. See Note 4 “Discontinued Operations~~Medical and ~~Assets Held for Sale” to the Consolidated Financial Statements for additional discontinued operations information.~~Veterinary segments.

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 ~~$1.48~~$1.5 billion in cash ~~subject to certain adjustments set forth in the Membership Interest Purchase Agreement (the “Agreement)~~ (the “Acquisition”). See the “Liquidity and Capital Resources” section of this MD&A for a discussion on the financing used to fund the Acquisition. The risks and uncertainties related to the Acquisition are described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021~~2022 (“~~2021~~2022 Form 10-K”).

First Quarter Highlights

Financial and operational highlights for the first quarter of fiscal year ~~2022~~2023 include:

●

Adtalem revenue grew ~~$80.1~~$65.5 million, or ~~29.9%~~22.7%, in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago ~~quarter.~~period. Excluding the ~~effect~~timing of the Walden acquisition in the prior year, Adtalem revenue grew ~~$11.5~~$1.3 million, or ~~4.3%~~0.5%, in the first quarter of fiscal year 2023 compared to the year-ago period.

●

Net income of $2.2 million ($0.05 diluted earnings per share) increased $60.2 million ($1.22 diluted earnings per share) in the first quarter of fiscal year 2023 compared to net loss of $58.0 million in the year-ago period. This increase was primarily driven by decreased interest expense and business acquisition and integration expense in the first quarter of fiscal year 2023. Adjusted net income of $41.0 million ($0.88 diluted earnings per share) increased

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~~quarter of fiscal year 2022 compared to the year-ago quarter. The Chamberlain and Financial Services segments saw increased revenue.~~

●

~~Net loss attributable to Adtalem of $58.0~~$23.4 million ($1.17 diluted loss per share) decreased $77.9 million ($1.55 per share) in the first quarter of fiscal year 2022 compared to net income attributable to Adtalem of $19.9 million in the year-ago quarter. This decrease was primarily driven by an increase of $43.7 million in interest expense, $16.5 million in Walden intangible amortization expense, and $13.1 million in business acquisition and integration expense recorded in the first quarter of fiscal year 2022 compared to the year-ago quarter. Net income from continuing operations attributable to Adtalem excluding special items of $31.3 million ($0.620.53 diluted earnings per share) ~~decreased $9.9 million ($0.16 per share)~~, or ~~24.1%~~133.1%, in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago ~~quarter.~~period. This ~~decrease~~increase was ~~driven principally by~~due to the timing of the Walden acquisition in the prior year, increased adjusted operating income at Chamberlain and Medical and Veterinary, and decreased interest ~~expense, partially offset by a decrease in income tax expense driven by lower pre-tax income.~~expense.

●

For the July 2022 and September ~~2021 session, new and~~2022 sessions, total student enrollment at Chamberlain decreased ~~13.4%~~4.1% and ~~2.8%~~4.0%, respectively, compared to the same ~~session~~sessions last year. ~~Chamberlain experienced declining enrollment in several programs, with the most pronounced being in the Registered Nurse to Bachelor of Science in Nursing (“RN-to-BSN”) online degree program.~~

●

~~On August 12, 2021, Adtalem completed its acquisition~~As of ~~Walden. For the~~ September ~~2021 term, Adtalem added new and~~30, 2022, total student enrollment at Walden ~~of 8,413 and 44,886 students, respectively.~~decreased 9.2% compared to September 30, 2021.

●

For the September ~~2021~~2022 semester, ~~new and~~ total student enrollment at the medical and veterinary schools ~~decreased 4.6% and 6.9%, respectively,~~increased 3.4% compared to the same semester last year.

●

~~ACAMS memberships have increased to more than 86,000 as~~On September 22, 2022, we made a prepayment of ~~September 30, 2021 compared to more than 82,000 as of September 30, 2020.~~$100.0 million on our Term Loan B debt.

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 ~~Adtalem employees,~~our students and ~~customers~~employees and to mitigate the financial effects of COVID-19 and its resultant economic slowdown. We will continue to evaluate, and if appropriate, adopt other measures in the future required for the ongoing safety of our students ~~customers,~~ and employees.

Results of Operations

~~COVID-19 did not result~~Management believes that enrollments are negatively impacted at Chamberlain and Walden, and to a lesser extent at Medical and Veterinary, are partially driven by disruptions in ~~any significant~~the nursing and healthcare markets caused by COVID-19. The amount of revenue, operating income, orand earnings per share losses in the first quarter of fiscal year ~~2022.~~2023 and 2022 driven by this disruption are not quantifiable. Management anticipates COVID-19 ~~could still~~will continue to negatively affect consolidated revenue, operating ~~income, net~~ income, and earnings per share during the remainder of fiscal year ~~2022~~2023 and beyond or for as long as ~~social distancing~~the pandemic and ~~other measures established to combat COVID-19 continue to disrupt~~ the ~~normal business operations of our convention providers and Financial Services customers.~~various surges continue. In the first quarter of 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 ~~we continue to move back to~~ in-person instruction returned at Chamberlain and the medical and veterinary schools. ~~These higher variable expenses are expected to~~

Remote and hybrid work arrangements continue during the remainder of fiscal year 2022; however, these are expenses incurred in the normal course of on campus operations and will not be categorized as COVID-19 expenses. COVID-19 effects on the first quarter of fiscal year 2022 and 2021 results of operations of the Adtalem institutions are described below.

●~~Chamberlain~~: Approximately 30% of Chamberlain’s students are based at campus locations and pursuing their Bachelor of Science in Nursing (“BSN”) degree; at the onset of the COVID-19 outbreak, all campus-based students transitioned to online learning for didactic and select clinical experiences. The remaining 70% of Chamberlain’s students are enrolled in online programs that may or may not have clinical components and those programs continued to successfully operate. For the September 2021 session, students and employees returned to several Chamberlain campuses

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for onsite instruction. Management believes that COVID-19 disruptions in the healthcare industry may have driven the enrollment decisions of potential students in the September 2021 session; however, COVID-19 did not result in measurable revenue losses or increased costs at Chamberlain in the first quarters of fiscal year 2022 or 2021. The extent of the impact during the remainder of fiscal year 2022 and beyond will be determined based on the length and severity of the effects of COVID-19, the efficacy and distribution of the vaccines, and whether any pandemic surge affects healthcare facilities’ ability to continue to provide clinical experiences, all of which have resumed. Chamberlain has clinical partnerships with healthcare facilities across the U.S., minimizing the risk of suspension of all onsite clinical education experiences.

●~~Walden~~: Management believes that COVID-19 disruptions in the healthcare industry may have driven the enrollment decisions of potential students in the September 2021 session; however, COVID-19 did not result in measurable revenue losses or increased costs at Walden in the first quarter of fiscal year 2022. The extent of the impact during the remainder of fiscal year 2022 and beyond will be determined based on the length and severity of the effects of COVID-19 and the efficacy and distribution of the vaccines.

●~~AUC and RUSM~~: Medical students enrolled in the basic science portion of their program transitioned to online learning at the onset of the COVID-19 outbreak. Many students left St. Maarten and Barbados to continue their studies remotely from other locations. AUC and RUSM were able to provide remote learning and have students remain eligible for U.S. federal financial aid assistance under a waiver provided by the U.S. Secretary of Education that was included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law in March 2020. The waiver was dependent upon the host country’s coronavirus state of emergency declaration. The nation of St. Maarten lifted their declaration in June 2020, and as a result, AUC’s ability to offer distance education ended after the September 2020 semester, requiring all AUC students to return to St. Maarten for basic science instruction effective January 2021. A limited number of RUSM students began returning to Barbados in January and May 2021 with a full return occurring for the September 2021 semester. The Consolidated Appropriates Act, 2021 (the “Appropriations Act”) was signed into law in December 2020, and corrected technical errors in the CARES Act, which clarified the authority to operate via distance learning due to a declaration of an emergency in an applicable country or a qualifying emergency in the U.S. This section also extends these flexibilities through the end of the qualifying emergency or June 30, 2022, whichever is later. The Appropriations Act provides Adtalem’s foreign institutions the ability to continue distance education without disruption to their students’ Title IV federal financial aid. COVID-19 did not result in significant revenue losses or increased costs within the basic science programs at the medical schools in the first quarters of fiscal year 2022 or 2021, except with respect to housing operations, as discussed below. COVID-19 will likely have minimal impact on basic science program revenue in fiscal year 2022, unless students choose to not continue or start their studies during this time of uncertainty. The extent of the impact during the remainder of fiscal year 2022 and beyond will be determined based on the length and severity of the effects of COVID-19 and the efficacy and distribution of the vaccines. Students who have completed their basic science education progress to clinical rotations in the U.S. and the U.K. Clinical rotations for all students were temporarily suspended in March 2020; however, some students were able to participate in online clinical elective courses during this transition period and beyond. The COVID-19 surge experienced during the winter in fiscal year 2021 across the U.S. caused many partner hospitals to again reduce the hours available for clinical experiences. As a result, although many students were able to resume their clinical education during the second quarter of fiscal year 2021, management estimates that not being able to offer a full clinical program reduced combined revenue of AUC and RUSM by approximately $4 million and operating income losses by approximately $2 million in the first quarter of fiscal year 2021. As of June 2021, all clinical partners of AUC and RUSM have resumed their clinical programs. As a result, COVID-19 did not result in any lost clinical revenue in the first quarter of fiscal year 2022. Should future surges in COVID-19 again restrict the number of clinical hours available to our students, we could experience negative effects on revenue and operating income in future periods. Adtalem has clinical partnerships with hospitals across the U.S. and the U.K., minimizing the risk of suspension of all onsite clinical education experiences. In addition to the loss of clinical revenue and operating income at AUC and RUSM, management estimates losses of housing and student transportation revenue and operating income of approximately $5 million and $3 million, respectively, in the first quarter of fiscal year 2021 due to students not returning to the St. Maarten and Barbados campuses. All students were back on the two campuses in the first quarter of fiscal year 2022, and therefore, COVID-19 did not result in lost housing and student transportation revenue in the first quarter of fiscal year 2022.

●~~RUSVM:~~ All basic science veterinary students transitioned to online learning beginning in March 2020. Many students left St. Kitts in March 2020 to continue their studies remotely from other locations. As of May 2021, all basic

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science students have returned to St. Kitts where lectures continue to be delivered remotely and labs are in-person. COVID-19 did not result in significant revenue losses or increased costs within the basic science program in the first quarters of fiscal year 2022 or 2021. We do not expect a significant impact from COVID-19 on the basic science program in fiscal year 2022, unless students choose to not continue or start their studies during this time of uncertainty. RUSVM continued to provide remote learning during the pandemic and students remained eligible for U.S. federal financial aid assistance under a waiver provided by the CARES Act and the Appropriations Act. The Appropriations Act extends through the end of the qualifying emergency or June 30, 2022, whichever is later, as described above. Students who have completed their basic science education progress to clinical rotations at select universities in the U.S., Canada, Australia, Ireland, New Zealand, and the U.K. A few universities initially suspended onsite clinical experiences and transitioned students to online education. All universities have since resumed onsite clinical courses. The initial suspensions did not significantly reduce revenue or operating income in the first quarters of fiscal year 2022 or 2021. While we do not expect a significant impact from COVID-19 at RUSVM, the extent of the impact on clinical experiences during the remainder of fiscal year 2022 and beyond will be determined based on the length and severity of the effects of COVID-19 and the efficacy and distribution of the vaccines.

●~~Financial Services~~: Most Financial Services content, including exam preparation, certification training, continuing education, and subscriptions is delivered online. Any classroom-based learning was moved to online. COVID-19 did not result in significant revenue or operating income losses in the first quarter of fiscal year 2022. No significant COVID-19 related cost increases were realized in Financial Services in the first quarters of fiscal year 2022 or 2021. COVID-19 did result in estimated revenue and operating income losses of approximately $5 million and $3 million, respectively, in first quarter of fiscal year 2021, primarily driven by the replacement of the Las Vegas live conference with a virtual conference. ACAMS was able to offer a hybrid (live and virtual) Las Vegas conference in September 2021; however, live conference revenue is not expected to return to pre-pandemic levels until COVID-19 restrictions are fully lifted across the world and customer apprehension dissipates. Virtual conferences were conducted throughout the pandemic, and additional conference revenue will be generated with virtual or hybrid events in the future; however, virtual conferences are unlikely to generate the same level of revenue and operating income as live conferences. Management believes that other than the ACAMS conferences, longer-term operating results in the Financial Services segment will not be significantly affected by COVID-19 unless there are major employment losses with accounting professionals and recent accounting graduates, or in the banking and mortgage sectors. This is not known and cannot be predicted at this time. At Becker, CPA testing sites are operating with available capacity; however, management believes hiring at CPA firms has not yet fully recovered.

●~~Administrative Operations: Most institution and home office administrative operations continue to principally be performed remotely. This includes operations~~ in both the U.S. and ~~all~~at foreign ~~locations. These~~locations, and employees have begun to return to the office. The remote work arrangements have not adversely affected Adtalem’s ability to maintain operations, financial reporting systems, internal control over financial reporting, or disclosure controls and procedures. The effectiveness of our remote technology enables our ability to maintain these systems and controls. Management does not anticipate Adtalem will be materially impacted by any constraints or other impacts on our human capital resources and productivity. Travel restrictions and border closures are not expected to have a material impact on our ability to operate and achieve operational goals. While recent travel expenditures have ~~decreased,~~been lower than historical levels, we would expect these costs to increase as the effects of COVID-19 continue to dissipate. No significant home office costs ~~were incurred~~ related to COVID-19 were incurred in the first ~~quarters~~quarter of fiscal year 2023 and 2022, ~~or 2021~~ and no such costs are anticipated during the remainder of fiscal year ~~2022~~2023 and beyond.

Although COVID-19 has had a negative effect on the operating results of all ~~five~~four reporting units that contain goodwill and indefinite-lived intangible assets as of September 30, ~~2021, at this time~~2022, none of the effects are considered significant enough to create an impairment triggering event ~~since~~during the first quarter of fiscal year 2023. In addition, our annual ~~goodwill~~ impairment assessment onperformed as of May 31, ~~2021.~~2022 did not identify any impairments. While management has considered the effects of the COVID-19 pandemic in evaluating the existence of an impairment triggering event, it is possible that effects to revenue and cash flows will be more significant than currently expected if the effects of the COVID-19 pandemic and ~~social distancing~~ measures established to combat the virus become more severe and restrictive and continue for an extended period of time. Should economic conditions deteriorate beyond expectations during the remainder of fiscal year ~~2022,~~2023, an impairment triggering event could arise and require reassessment of the fair values of goodwill and intangible assets.

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Liquidity

Adtalem’s cash and cash equivalents balance as of September 30, ~~2021~~2022 was ~~$360.1~~$327.5 million. Adtalem generated ~~$40.9~~$91.5 million in operating cash flow from continuing operations in the first three months of fiscal year ~~2022.~~2023. In the event of

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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~~$400.0 million revolving credit facility with availability of ~~$246.6~~$400.0 million as of September 30, ~~2021.~~2022. Management currently projects that COVID-19 will continue to have an effect on operations; however, 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 infor the foreseeable future. See further discussion on the ~~new~~ financing executed to close the Acquisition in the section of this MD&A titled “Liquidity and Capital Resources.”

Results of Operations

The following table presents selected Consolidated Statements of Income (Loss) data as a percentage of revenue:


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of educational services	46.8	%	42.4	%	45.0	%	52.6	%
Student services and administrative expense	45.8	%	37.3	%	41.8	%	44.8	%
Restructuring expense	1.1	%	1.6	%	4.2	%	1.1	%
Business acquisition and integration expense	7.6	%	5.0	%	2.4	%	9.2	%
Total operating cost and expense	101.4	%	86.3	%	93.5	%	107.6	%
Operating (loss) income	(1.4)	%	13.7	%
Operating income (loss)					6.5	%	(7.6)	%
Net other expense	(13.4)	%	(0.8)	%	(4.6)	%	(16.1)	%
(Loss) income from continuing operations before income taxes	(14.7)	%	12.9	%
Benefit from (provision for) income taxes	3.0	%	(2.6)	%
(Loss) income from continuing operations	(11.7)	%	10.2	%
Loss from discontinued operations, net of tax	(5.0)	%	(2.8)	%
Net (loss) income	(16.7)	%	7.4	%
Net loss attributable to redeemable noncontrolling interest	0.0	%	0.0	%
Net (loss) income attributable to Adtalem	(16.7)	%	7.4	%
Income (loss) from continuing operations before income taxes					1.9	%	(23.7)	%
Provision for income taxes					(0.3)	%	(3.0)	%
Income (loss) from continuing operations					1.6	%	(26.7)	%
(Loss) income from discontinued operations, net of tax					(1.0)	%	6.6	%
Net income (loss)					0.6	%	(20.1)	%

Revenue

The following table presents revenue by segment detailing the changes from the year-ago period (in thousands):


	Three Months Ended September 30, 2021														Three Months Ended September 30, 2022
	Chamberlain			Walden		Medical and Veterinary			Financial Services			Consolidated			Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2021 as reported	$	133,764		$	—	$	85,062		$	49,415		$	268,241
Organic growth (decline)		1,875			—		(248)			9,842			11,469
Fiscal year 2022 as reported															$	135,639		$	68,617		$	84,814		$	289,070
Organic (decline) growth																(234)			(1,866)			3,439			1,339
Effect of acquisitions		—			68,617		—			—			68,617			—			64,150			—			64,150
Fiscal year 2022 as reported	$	135,639		$	68,617	$	84,814		$	59,257		$	348,327
Fiscal year 2023 as reported															$	135,405		$	130,901		$	88,253		$	354,559

Fiscal year 2022 % change:
Organic growth (decline)		1.4	%		NM		(0.3)	%		19.9	%		4.3	%
Fiscal year 2023 % change:
Organic (decline) growth																(0.2)	%		(2.7)	%		4.1	%		0.5	%
Effect of acquisitions		—			NM		—			—			25.6	%		—			93.5	%		—			22.2	%
Fiscal year 2022 % change as reported		1.4	%		NM		(0.3)	%		19.9	%		29.9	%
Fiscal year 2023 % change as reported																(0.2)	%		90.8	%		4.1	%		22.7	%

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Chamberlain

Chamberlain Student Enrollment:


	Fiscal Year 2022												Fiscal Year 2023
Session	July 2021		Sept. 2021										July 2022		Sept. 2022
New students	2,810		5,487
% change from prior year	1.5	%	(13.4)	%
Total students	32,729		34,539										31,371		33,153
% change from prior year	1.6	%	(2.8)	%									(4.1)	%	(4.0)	%

	Fiscal Year 2021												Fiscal Year 2022
Session	July 2020		Sept. 2020		Nov. 2020		Jan. 2021		Mar. 2021		May 2021		July 2021		Sept. 2021		Nov. 2021		Jan. 2022		Mar. 2022		May 2022
New students	2,768		6,333		2,931		5,202		3,283		4,363
% change from prior year	15.5	%	13.2	%	8.1	%	(1.7)	%	6.8	%	3.6	%
Total students	32,198		35,525		34,387		35,750		35,702		34,930		32,729		34,539		33,648		34,141		34,158		32,891
% change from prior year	12.2	%	11.9	%	10.2	%	5.6	%	5.8	%	4.6	%	1.6	%	(2.8)	%	(2.1)	%	(4.5)	%	(4.3)	%	(5.8)	%

Chamberlain revenue ~~increased 1.4%~~decreased 0.2%, or ~~$1.9~~$0.2 million, to ~~$135.6~~$135.4 million in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago period, driven by ~~an increase~~declining total enrollments in ~~total student enrollment during~~ the July ~~2021 session~~2022 and September 2022 sessions compared to the same ~~session~~sessions from the prior year. The July session contributes two-thirds of the revenue for the first quarter. Management believes that the launch of new programs, the addition of weekend and evening classes, the scaling provided by our multi-campus model, and the effectiveness of recent marketing investments have contributed to the enrollment increase and will drive future enrollment growth. Chamberlain admitted its largest class of campus students in September 2020, which partially explains the decline in the September 2021 comparable session, as enrollment returns to historical levels. Management believes that a decrease in ~~new and~~ total student enrollment in several programs, with the most pronounced being in the ~~RN-to-BSN~~Registered Nurse to Bachelor of Science in Nursing (“RN-to-BSN”) online degree program, may partially be driven by prolonged COVID-19 ~~pandemic~~ disruptions in the healthcare industry. It is expected disruptions caused by COVID-19 may continue to effect enrollment for as long as the pandemic and its aftermath continue to stress healthcare professionals. Chamberlain’s revenue and our ability to provide educational services are not materially exposed to the economic impact from the volatile supply chain disruptions that are a hallmark of 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 ~~Bachelor of Science in Nursing (“BSN”)~~BSN onsite and online degree program ranges from $675 to $730 per credit hour. Tuition for the ~~Registered Nurse to BSN (“RN-to-BSN”)~~RN-to-BSN online degree program is $590 per credit hour. Tuition for the online Master of Science in Nursing (“MSN”) degree program is $650 per credit hour. Tuition for the online Family Nurse Practitioner (“FNP”) degree program is $665 per credit hour. Tuition for the online Doctor of Nursing Practice (“DNP”) degree program is $775 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. The majority of the tuition rates are unchanged 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:


		~~Fiscal Year 2022~~
~~Term~~		~~Sept. 2021~~
~~New students~~		~~8,413~~
~~Total students~~		~~44,886~~


	Fiscal Year 2023
	September 30,
Period	2022
Total students	40,772
% change from prior year	(9.2)	%

	Fiscal Year 2022
	September 30,		December 31,	March 31,	June 30,
Period	2021		2021	2022	2022
Total students	44,886		41,158	42,788	39,470

Walden ~~new and~~ total student enrollment represents those students attending instructional sessions as of ~~September 30, 2021.~~the dates identified above. Walden revenue ~~was $68.6~~increased 90.8%, or $62.3 million, to $130.9 million in the first quarter of fiscal year ~~2022, which includes~~2023 compared to the ~~deferred revenue purchase accounting adjustment. There was no comparable revenue~~year-ago period. Excluding the timing of the Walden acquisition in the ~~year-ago period as Adtalem acquired~~prior year, Walden revenue

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~~on August 12, 2021.~~decreased 2.7%, or $1.9 million. In the first quarter of fiscal year 2022, $6.2 million was excluded from revenue due to an adjustment required for purchase accounting to record Walden’s deferred revenue at fair value. The first quarter of fiscal year 2023 did not require a similar adjustment. Excluding the timing of the Walden acquisition in the prior year and the $6.2 million deferred revenue adjustment, Walden revenue in the first quarter of fiscal year 2023 would have decreased 10.8%, or $8.1 million, compared to the year-ago period. Management believes ~~new and~~that the decrease in total enrollment ~~was possibly negatively affected~~compared to the prior year may be driven by prolonged COVID-19 disruptions in the healthcare ~~industry~~industry. It is expected disruptions caused by COVID-19 may continue to effect enrollment for as long as the pandemic and its aftermath continue to stress healthcare professionals. Walden’s revenue and our ability to provide educational services are not materially exposed to the ~~negative publicity surrounding~~economic impact from the ~~now concluded U.S. Department~~volatile supply chain disruptions that are a hallmark 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.~~current global macroeconomic environment.

Tuition Rates:

On a per credit hour basis, tuition for Walden programs range from ~~$120~~$123 per credit hour to ~~$995~~$1,020 per credit hour, with the wide range due to the nature of the programs. General education courses are charged at ~~$325~~$333 per credit hour. Other ~~subscription based~~programs such as those with a subscription-based learning ~~modalities are~~modality or those billed on a subscription period or term basis ~~and~~ range from $1,500 to ~~$6,800~~$6,970 per term. Students are charged a technology fee that ranges from ~~$75~~$50 to ~~$210~~$220 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 ~~$975~~$938 to $2,475 per event. All of these tuition rates did not materially change 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

Medical and Veterinary Student Enrollment:


	Fiscal Year 2022						Fiscal Year 2023
Semester	Sept. 2021						Sept. 2022
New students	878
% change from prior year	(4.6)	%
Total students	5,449						5,634
% change from prior year	(6.9)	%					3.4	%

	Fiscal Year 2021						Fiscal Year 2022
Semester	Sept. 2020		Jan. 2021		May 2021		Sept. 2021		Jan. 2022		May 2022
New students	920		589		611
% change from prior year	5.5	%	21.2	%	12.3	%
Total students	5,850		5,292		5,126		5,449		5,228		5,304
% change from prior year	4.3	%	(6.2)	%	(1.2)	%	(6.9)	%	(1.2)	%	3.5	%

Medical and Veterinary revenue ~~decreased 0.3%~~increased 4.1%, or ~~$0.2~~$3.4 million, to ~~$84.8~~$88.3 million in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago period, driven by ~~lower~~increased enrollment ~~partially offset by an increase in~~and clinical revenue at AUC and ~~RUSM~~RUSM. Medical and ~~increased housing~~Veterinary’s revenue ~~at RUSM.~~

~~In the September 2021 semester, total student enrollment increased at AUC but declined at RUSM~~ and ~~RUSVM while new student enrollment increased at RUSVM but declined at AUC and RUSM. The decline in total student enrollment at RUSM was driven by the inability~~our ability to offer clinical experiences to all eligible 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 otherprovide educational ~~experiences, they~~services are not ~~included in~~materially exposed to the ~~enrollment count for~~economic impact from the volatile supply chain disruptions that ~~semester. Management believes increased competition for students and hesitancy on participating in on campus instruction were drivers~~are a hallmark of ~~lower new student enrollment. Total enrollment at RUSM and RUSVM also declined due to higher student withdrawals and leaves of absence.~~ 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.

~~Table of Contents~~

Tuition Rates:

●

Effective for semesters beginning in September ~~2021,~~2022, for students enrolled prior to May 2022, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC’s medical program are ~~$23,800~~$24,990 and ~~$26,625,~~$27,955, respectively, per semester. These tuition rates represent a ~~2.4%~~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’s medical program are $20,202 and $25,116,

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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.

●

Effective for semesters beginning in September ~~2021,~~2022, for students who first enrolled prior to May 2022, tuition rates for the beginning basic sciences and final clinical rotation portions of RUSM’s medical program are ~~$24,750~~$25,988 and ~~$27,310,~~$28,676, respectively, per semester. These tuition rates represent a ~~2.4%~~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’s 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.

●

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 ~~$21,063~~$22,683 per semester effective September ~~2021.~~2022. For students who entered RUSVM before September 2018, tuition rates for the pre-clinical and clinical curriculum are ~~$20,066~~$21,069 and ~~$25,190,~~$26,449, respectively, per semester effective September ~~2021. These~~2022. All of these tuition rates represent a ~~3.5%~~5.0% increase from the prior academic year.

The respective tuition rates for AUC, RUSM, and RUSVM do not include the cost of transportation, living expenses, or health insurance.

~~Financial Services~~

Financial Services revenue increased 19.9%, or $9.8 million, to $59.3 million in the first quarter of fiscal year 2022 compared to the year-ago period, driven principally by increased revenue at ACAMS and Becker. The ACAMS revenue increase was driven by sales of certification and training products as well as a hybrid Las Vegas conference in the first quarter of fiscal year 2022, which was entirely virtual last year due to COVID-19 restrictions. ACAMS memberships have increased to more than 86,000 as of September 30, 2021 compared to more than 82,000 as of September 30, 2020, driven by strong growth in the European region. The Becker revenue increase was driven by sales of the Certified Management Accountant (“CMA”) exam review products as well as the CPA exam review products.

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 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 year-ago period (in thousands):


	Three Months Ended September 30, 2021																Three Months Ended September 30, 2022
	Chamberlain			Walden		Medical and Veterinary			Financial Services			Home Office and Other		Consolidated			Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2021 as reported	$	59,732		$	—	$	45,379		$	8,005		$	582	$	113,698
Cost increase (decrease)		5,956			—		6,930			3,055			(582)		15,359
Fiscal year 2022 as reported																	$	65,688		$	34,053		$	52,309		$	152,050
Cost decrease																		(5,515)			(8,611)			(1,290)			(15,416)
Effect of acquisitions		—			34,053		—			—			—		34,053			—			23,011			—			23,011
Fiscal year 2022 as reported	$	65,688		$	34,053	$	52,309		$	11,060		$	—	$	163,110
Fiscal year 2023 as reported																	$	60,173		$	48,453		$	51,019		$	159,645

Fiscal year 2022 % change:
Cost increase		10.0	%		NM		15.3	%		38.2	%		NM		13.5	%
Fiscal year 2023 % change:
Cost decrease																		(8.4)	%		(25.3)	%		(2.5)	%		(10.1)	%
Effect of acquisitions		—			NM		—			—			NM		30.0	%		—			67.6	%		—			15.1	%
Fiscal year 2022 % change as reported		10.0	%		NM		15.3	%		38.2	%		NM		43.5	%
Fiscal year 2023 % change as reported																		(8.4)	%		42.3	%		(2.5)	%		5.0	%

Cost of educational services increased ~~43.5%~~5.0%, or ~~$49.4~~$7.6 million, to ~~$163.1~~$159.6 million in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago ~~period.~~periods. Excluding the ~~effect~~timing of the Walden acquisition in the prior year, cost of ~~education~~educational services ~~increased 13.5%~~decreased 10.1%, or $15.4 ~~million,~~million. This cost decrease was primarily driven by cost reduction efforts across all institutions.

As a percentage of revenue, cost of educational services was 45.0% and 52.6% in the first quarter of fiscal year 2023 and 2022, respectively. 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 first quarter of fiscal year 2023 compared to ~~the year-ago period. Costs increased in~~only a portion of the first quarter of fiscal year ~~2022 primarily driven by return to campus~~2022. Walden’s fully online operating model results in lower comparable cost increases at Chamberlain, AUC, RUSM, and RUSVM, increased conference costs from delivering the ACAMS hybrid Las Vegas conference, increased clinical expense to support increased clinical hours and costs to support Chamberlain campus growth.of educational services.

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As a percentage of revenue, cost of educational services was 46.8% and 42.4% in the first quarter of fiscal year 2022 and 2021, respectively. The increase in the percentage was primarily the result of return to campus and the lower margins on ACAMS hybrid conferences.

Student Services and Administrative Expense

The student services and administrative expense category includes expenses related to ~~sales,~~ 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 year-ago period (in thousands):

Three Months Ended September 30, 2021

Chamberlain

Walden

Medical and
Veterinary

Financial
Services

Home Office
and Other

Consolidated

Fiscal year 2021 as reported

$
43,864

$
—

$
16,841

$
32,723

$
6,750

$
100,178

Cost increase (decrease)

5,232

—

(2)

2,025

(359)

6,896

Effect of acquisitions excluding special items

—

29,759

—

—

—

29,759

Walden intangible amortization expense

—

16,451

—

—

—

16,451

CEO transition costs

—

—

—

—

6,195

6,195

Fiscal year 2022 as reported

$
49,096

$
46,210

$
16,839

$
34,748

$
12,586

$
159,479

Fiscal year 2022 % change:

Cost increase (decrease)

11.9
%

NM

(0.0)
%

6.2
%

NM

6.9
%
Effect of acquisitions excluding special items

—

NM

—

—

NM

29.7
%
Effect of Walden intangible amortization expense

—

NM

—

—

NM

16.4
%
Effect of CEO transition costs

—

NM

—

—

NM

6.2
%
Fiscal year 2022 % change as reported

11.9
%

NM

(0.0)
%

6.2
%

NM

59.2
%


	Three Months Ended September 30, 2022
	Chamberlain			Walden			Medical and Veterinary			Home Office and Other		Consolidated
Fiscal year 2022 as reported	$	49,096		$	46,210		$	16,839		$	17,291	$	129,436
Cost (decrease) increase		(865)			2,146			3,041			(8,451)		(4,129)
Effect of acquisitions excluding special items		—			27,152			—			—		27,152
Intangible amortization expense change		—			2,077			—			—		2,077
CEO transition costs change		—			—			—			(6,195)		(6,195)
Fiscal year 2023 as reported	$	48,231		$	77,585		$	19,880		$	2,645	$	148,341

Fiscal year 2023 % change:
Cost (decrease) increase		(1.8)	%		4.6	%		18.1	%		NM		(3.2)	%
Effect of acquisitions excluding special items		—			58.8	%		—			NM		21.0	%
Effect of intangible amortization expense change		—			4.5	%		—			NM		1.6	%
Effect of CEO transition costs change		—			—			—			NM		(4.8)	%
Fiscal year 2023 % change as reported		(1.8)	%		67.9	%		18.1	%		NM		14.6	%

Student services and administrative expense increased ~~59.2%~~14.6%, or ~~$59.3~~$18.9 million, to ~~$159.5~~$148.3 million in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago period. Excluding the ~~effect~~timing of the Walden acquisition in the prior year, intangible amortization expense, and CEO transition costs, student services and administrative expense ~~increased 6.9%~~decreased 3.2%, or ~~$6.9 million, in the first quarter of fiscal year 2022 compared to the year-ago period. Increased costs at Chamberlain were~~$4.1 million. This cost decrease was primarily driven by ~~higher marketing expense. Costs increased at Financial Services to support growth.~~cost reduction efforts across all institutions and home office.

As a percentage of revenue, student services and administrative expense was ~~45.8%~~41.8% and ~~37.3%~~44.8% in the first quarter of fiscal year 2023 and 2022, respectively. The decrease in the percentage was primarily the result of the CEO transition costs incurred in the first quarter of fiscal year 2022 and ~~2021, respectively. The increase in the percentage was primarily the result of Walden intangible amortization expense and CEO transition costs.~~cost reduction efforts.

Restructuring Expense

Restructuring expense was ~~$3.9~~$15.1 million and ~~$4.2~~$3.1 million in the first quarter of fiscal year ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~primary driver of the decreased~~increased restructure expense in the first quarter of fiscal year ~~2022~~2023 was ~~the result of a higher amount of charges in the first quarter of fiscal year 2021 related to~~primarily driven by real estate consolidations at Walden, Medical and Veterinary, and Adtalem’s home office resulting in impairments on operating lease assets and ~~ACAMS real estate consolidations.~~property and equipment. See Note 6 “Restructuring Charges” to the Consolidated Financial Statements for additional information on restructuring charges.

~~In addition to continuing~~We continue to incur restructuring charges or reversals related to exiting leased space from previous restructuring ~~activities, we have begun additional restructuring plans to achieve synergies with the Walden acquisition.~~activities.

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Business Acquisition and Integration Expense

Business acquisition and integration expense was ~~$26.6~~$8.4 million and ~~$13.4~~$26.6 million in the first quarter of fiscal year ~~2022~~2023 and ~~2021,~~2022, respectively. These are transaction costs associated with acquiring Walden and costs associated with integrating Walden into Adtalem. In addition, during the first quarter of fiscal year 2023, we initiated transformation initiatives to accelerate growth and organizational agility and certain costs relating to this transformation are included in business

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acquisition and integration costs in the Consolidated Statements of Income (Loss). We expect to incur additional integration costs through the remainder of fiscal year ~~2022.~~2023.

Operating Income (Loss) ~~Income~~

The following table presents operating income (loss) ~~income~~ by segment detailing the changes from the year-ago period (in thousands):


	Three Months Ended September 30, 2021												Three Months Ended September 30, 2022
	Chamberlain		Walden		Medical and Veterinary		Financial Services		Home Office and Other		Consolidated		Chamberlain		Walden		Medical and Veterinary		Home Office and Other		Consolidated
Fiscal year 2021 as reported	$	30,169	$	—	$	22,841	$	7,272	$	(23,576)	$	36,706
Fiscal year 2022 as reported													$	20,855	$	(11,646)	$	15,665	$	(46,937)	$	(22,063)
Organic change		(9,314)		—		(7,176)		4,762		942		(10,786)		6,147		(1,609)		1,689		8,449		14,676
Effect of acquisitions excluding special items		—		11,012		—		—		—		11,012		—		13,988		—		—		13,988
Deferred revenue adjustment change		—		(6,207)		—		—		—		(6,207)		—		6,207		—		—		6,207
CEO transition costs change		—		—		—		—		(6,195)		(6,195)		—		—		—		6,195		6,195
Restructuring expense change		—		—		—		594		(287)		307		(818)		(3,080)		(6,826)		(1,247)		(11,971)
Business acquisition and integration expense change		—		—		—		—		(13,117)		(13,117)		—		—		—		18,138		18,138
Walden intangible amortization expense change		—		(16,451)		—		—		—		(16,451)
Fiscal year 2022 as reported	$	20,855	$	(11,646)	$	15,665	$	12,628	$	(42,233)	$	(4,731)
Intangible amortization expense change														—		(2,077)		—		—		(2,077)
Fiscal year 2023 as reported													$	26,184	$	1,783	$	10,528	$	(15,402)	$	23,093

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The following table presents a reconciliation of operating income (loss) ~~income~~ (GAAP) to adjusted operating income ~~excluding special items~~ (non-GAAP) by segment (in thousands):


							Three Months Ended
	Three Months Ended						September 30,
	September 30,												Increase/(Decrease)
	2021		2020		Increase (Decrease)		2022			2021			$		%
Chamberlain:
Operating income (GAAP)	$	20,855	$	30,169	(30.9)	%	$	26,184		$	20,855		$	5,329	25.6	%
Operating income excluding special items (non-GAAP)	$	20,855	$	30,169	(30.9)	%
Restructuring expense								818			—			818
Adjusted operating income (non-GAAP)							$	27,002		$	20,855		$	6,147	29.5	%
Operating margin (GAAP)								19.3	%		15.4	%
Operating margin (non-GAAP)								19.9	%		15.4	%

Walden:
Operating loss (GAAP)	$	(11,646)	$	—	NM
Operating income (loss) (GAAP)							$	1,783		$	(11,646)		$	13,429	NM
Deferred revenue adjustment		6,207		—				—			6,207			(6,207)
Walden intangible amortization expense		16,451		—
Operating income excluding special items (non-GAAP)	$	11,012	$	—	NM
Restructuring expense								3,080			—			3,080
Intangible amortization expense								18,528			16,451			2,077
Adjusted operating income (non-GAAP)							$	23,391		$	11,012		$	12,379	112.4	%
Operating margin (GAAP)								1.4	%		(17.0)	%
Operating margin (non-GAAP)								17.9	%		16.0	%

Medical and Veterinary:
Operating income (GAAP)	$	15,665	$	22,841	(31.4)	%	$	10,528		$	15,665		$	(5,137)	(32.8)	%
Operating income excluding special items (non-GAAP)	$	15,665	$	22,841	(31.4)	%

Financial Services:
Operating income (GAAP)	$	12,628	$	7,272	73.7	%
Restructuring expense		821		1,415				6,826			—			6,826
Operating income excluding special items (non-GAAP)	$	13,449	$	8,687	54.8	%
Adjusted operating income (non-GAAP)							$	17,354		$	15,665		$	1,689	10.8	%
Operating margin (GAAP)								11.9	%		18.5	%
Operating margin (non-GAAP)								19.7	%		18.5	%

Home Office and Other:
Operating loss (GAAP)	$	(42,233)	$	(23,576)	(79.1)	%	$	(15,402)		$	(46,937)		$	31,535	67.2	%
CEO transition costs		6,195		—				—			6,195			(6,195)
Restructuring expense		3,095		2,808				4,341			3,094			1,247
Business acquisition and integration expense		26,553		13,436				8,415			26,553			(18,138)
Operating loss excluding special items (non-GAAP)	$	(6,390)	$	(7,332)	12.8	%
Adjusted operating loss (non-GAAP)							$	(2,646)		$	(11,095)		$	8,449	76.2	%

Adtalem Global Education:
Operating (loss) income (GAAP)	$	(4,731)	$	36,706	NM
Operating income (loss) (GAAP)							$	23,093		$	(22,063)		$	45,156	NM
Deferred revenue adjustment		6,207		—				—			6,207			(6,207)
CEO transition costs		6,195		—				—			6,195			(6,195)
Restructuring expense		3,916		4,223				15,065			3,094			11,971
Business acquisition and integration expense		26,553		13,436				8,415			26,553			(18,138)
Walden intangible amortization expense		16,451		—
Operating income excluding special items (non-GAAP)	$	54,591	$	54,365	0.4	%
Intangible amortization expense								18,528			16,451			2,077
Adjusted operating income (non-GAAP)							$	65,101		$	36,437		$	28,664	78.7	%
Operating margin (GAAP)								6.5	%		(7.6)	%
Operating margin (non-GAAP)								18.4	%		12.6	%

~~Total consolidated~~Consolidated operating ~~loss~~income of ~~$4.7~~$23.1 million ~~decreased $41.4~~increased $45.2 million in the first quarter of fiscal year ~~2022~~2023 compared to operating ~~income~~loss of ~~$36.7 million~~$22.1 in the year-ago period. ~~Excluding the effect of the Walden acquisition, total consolidated operating income decreased $29.8 million.~~ The primary drivers of the decrease were increased costs at Chamberlain and Medical and Veterinary for return to campus, increased marketing expense at Chamberlain, increased business acquisition and integration costs, and CEO transition costs. These decreases were partially offset by increased operating income ~~at Financial Services which was driven by revenue growth within the segment. Consolidated operating income excluding special items increased~~increase in the first quarter of fiscal year ~~2022 to $54.6 million, or 0.4%, compared~~2023 was due to the ~~year-ago period. The addition~~timing of the Walden acquisition in the prior year and decreased business acquisition and integration costs.

Consolidated adjusted operating income ~~excluding special items from Walden was mostly offset by the drivers explained above for the other segments.~~

~~Chamberlain~~

~~Chamberlain operating income decreased 30.9%~~increased 78.7%, or ~~$9.3 million, to $20.9~~ $28.7million, in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago period. The primary drivers of the adjusted operating income increase was due to the timing of the Walden acquisition in the prior year and increased adjusted operating income at Chamberlain and Medical and Veterinary.

Chamberlain

Chamberlain operating income increased 25.6%, or $5.3 million, to $26.2 million in the first quarter of fiscal year 2023 compared to the year-ago period. Segment adjusted operating income increased 29.5%, or $6.1 million, to $27.0 million

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in the first quarter of fiscal year 2023 compared to the year-ago period. The primary driver of the ~~decrease~~increase in adjusted operating income in the first quarter of fiscal year 2023 was ~~an increase in costs for return to campus and increased marketing expense.~~

~~Table~~the result of ~~Contents~~labor cost reductions.

Walden

Walden operating ~~loss~~income was ~~$11.6~~$1.8 million in the first quarter of fiscal year ~~2022, driven~~2023 compared to operating loss of $11.6 million in the year-ago period, which were impacted by intangible amortization expense and the deferred revenue purchase accounting ~~adjustment.~~adjustments. Segment adjusted operating income ~~excluding special items was $11.0~~increased 112.4%, or $12.4 million, to $23.4 million in the first quarter of fiscal year ~~2022. There was no comparable operating income in~~2023 compared to the year-ago period, ~~as Adtalem acquired~~primarily due to the timing of the Walden ~~on August 12, 2021.~~acquisition in the prior year.

Medical and Veterinary

Medical and Veterinary operating income decreased ~~31.4%~~32.8%, or ~~$7.2~~ $5.1million, to ~~$15.7~~ $10.5million in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago period. ~~The primary driver of the decrease in operating income was an increase in costs for return to campus.~~

~~Financial Services~~

~~Financial Services~~Segment adjusted operating income increased ~~73.7%~~10.8%, or ~~$5.4~~$1.7 million, to ~~$12.6~~$17.4 million in the first quarter of fiscal year ~~2022~~2023 compared to the year-ago period. ~~Segment~~The increase in adjusted operating income ~~excluding special items increased 54.8%, or $4.8 million,~~ in the first quarter of fiscal year ~~2022 compared to~~2023 was primarily driven by the ~~year-ago period. The primary driver of this increase was an~~ increase in ~~revenue at ACAMS and Becker, which resulted in improved operating income.~~revenue.

Net Other Expense

Net other expense ~~was $46.5 million and $2.2 million~~ in the first quarter of fiscal year ~~2022 and 2021, respectively.~~2023 was $16.2 million compared to $46.5 million in the year-ago period. The ~~increase~~decrease in net other expense was primarily the result of ~~increased~~decreased borrowings in the first quarter of fiscal year 2023 compared to the year-ago period due to prepayments of debt and also from the year-ago period 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 13 “Debt” to the Consolidated Financial Statements) ~~to finance the Walden acquisition.~~.

~~Benefit from (Provision for)~~Provision for 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 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, changes in valuation allowances, liabilities for uncertain tax positions, and tax benefits on stock-based compensation awards. ~~Additionally, our ETR is impacted by the~~

Our income tax provisions from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which primarily includes a tax on global intangible low-taxed income (“GILTI”), a deduction for foreign derived intangible income (“FDII”), and a limitation of tax benefits on certain executive compensation. The impact of the Tax Act may be revised in future periods as we obtain additional data and consider any new regulations or guidance that may be released.

~~Our ETR~~ from continuing operations ~~was 20.7%~~were $1.1 million and ~~20.5%~~$8.6 million in the three months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively.

~~On December 27, 2020,~~ The income tax provision for the ~~Appropriations Act was enacted in response~~first quarter of fiscal year 2023 decreased compared to the COVID-19 pandemic. The Appropriations Act, among other things, temporarily extends through December 31, 2025, certain expiring tax provisions, including look-through treatment of payments of dividends, interest, rents, and royalties received or accrued from related controlled foreign corporations. Additionally, the Appropriations Act enacted new provisions and extended certain provisions originated within the CARES Act, enacted on March 27, 2020, including an extension of time for repayment of the deferred portion of employees’ payroll tax through December 31, 2021, and a temporary allowance for full deduction of certain business meals. Adtalem has elected not to defer the employees’ portion of payroll tax. Management does not expect that the other provisions of the Appropriations Act would result in a material tax or cash benefit.

~~On March 11, 2021, the American Rescue Plan Act of 2021 (the “Rescue Act”) was enacted in response~~year-ago period due to the ~~COVID-19 pandemic. The Rescue Act, among other things, expands~~impacts recognized in the ~~number of employees subject~~year-ago period related to the tax deductibility limitation of employee compensation in excess of $1 million for tax years beginning after December 31, 2026 and repeals the election for U.S. affiliated groups to allocate interest expense on a worldwide basis. Management does not expect that the other provisions of the Rescue Act would result in a material tax or cash detriment.Walden acquisition.

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Discontinued Operations

WeBeginning 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 first quarter of fiscal year 2023 was $3.7 million. This loss consisted of the following: (i) $3.4 million of expense primarily related to ongoing litigation costs and settlements related to the DeVry University divestiture; (ii) a loss on the sale of ACAMS, Becker, and OCL of $3.4 million for working capital adjustments to the initial sale prices; and (iii) a benefit from income taxes of $3.1 million associated with the items listed above.

Net income from discontinued operations in the first quarter of fiscal year 2022 was $19.2 million. This income consisted of the following: (i) loss of $6.1 million driven by the operating results and divestiture costs related to ACAMS, Becker, OCL, and EduPristine, and ongoing litigation costs and settlements related to the DeVry University divestiture; and (ii) a benefit from income taxes of $25.2 million associated with the items listed above.

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Regulatory Environment

Student Payments

Adtalem’s primary source of liquidity is the cash received from payments for student tuition, books, other educational materials, and fees. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational loans (“private 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 following table, which excludes ACAMS, Adtalem Brazil ~~Carrington,~~(divestiture completed during fiscal year 2020), Becker, EduPristine, and ~~DeVry University~~OCL revenue, summarizes Adtalem’s revenue by fund source as a percentage of total revenue for fiscal years ~~2020~~2021 and ~~2019.~~2020. Final data for fiscal year ~~2021~~2022 is not yet available.


	Fiscal Year				Fiscal Year
	2020		2019		2021		2020
Federal assistance (Title IV) program funding (grants and loans)	59	%	59	%	72	%	71	%
State grants					1	%	1	%
Private loans	2	%	2	%	2	%	2	%
Student accounts, cash payments, private scholarships, employer and military provided tuition assistance, and other	39	%	39	%	25	%	26	%
Total	100	%	100	%	100	%	100	%

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.

Financial Aid

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” in our ~~2021~~2022 Form 10-K 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 provisional nature of the agreements for AUC, RUSM, and RUSVM stemmed from increased and/or repeated Title IV compliance audit findings. NoWalden’s TPPPA included financial ~~ramifications,~~requirements, which were in place prior to acquisition, such as a letter of credit, heightened cash monitoring, ~~or student enrollment limitations,~~and additional reporting. No similar requirements were imposed on ~~any of these institutions.~~AUC, RUSM, or RUSVM. While corrective actions have been taken to resolve past compliance

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matters and eliminate the incidence of repetition, if AUC, RUSM, or RUSVM fail to maintain

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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.

On October 13, 2016, DeVry University and ED reached a negotiated agreement (the “ED Settlement”) to settle the claims asserted in a Notice of Intent to Limit from the Multi-Regional and Foreign School Participation Division of the Federal Student Aid office of the Department of Education (“ED FSA”). Under the terms of the ED Settlement, among other things, without admitting wrongdoing, DeVry University agreed to certain compliance requirements regarding its past and future advertising, that DeVry University’s participation in Title IV programs iswas subject to provisional certification for five years and that DeVry University iswas required to post a letter of credit equal to the greater of 10% of DeVry University’s annual Title IV disbursements or $68.4 million for a five-year period. The posted letter of credit ~~continues~~continued to be posted by Adtalem following the closing of the sale of DeVry ~~University~~University. This letter of credit expired during the second quarter of fiscal year 2022 and ~~reduces Adtalem’s borrowing capacity dollar-for-dollar under its Credit Facility (as defined in Note 13 “Debt” to the Consolidated Financial Statements).~~is no longer outstanding as of September 30, 2022.

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 ~~program participation agreement.~~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 ~~program participation agreement,~~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 ~~University~~ is currently on a ~~temporary provisional program participation agreement~~TPPPA which is required for participation in Title IV programs on a month-to-month basis. Walden’s 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 ~~program participation agreement~~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 ~~certain additional reporting and disclosure requirements.~~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). As of September 30, ~~2021,~~2022, Adtalem maintains a letter of credit for ~~$83.6~~$84.0 million in favor of ED, which allows Walden to participate in Title IV programs. This letter of credit, which was assumed in the Acquisition, reduces Adtalem’s borrowing capacity dollar-for-dollar under its Credit Facility (as defined in Note 13 “Debt” to the Consolidated Financial Statements).

We are required by various states to post a surety bond. The bonds reflect a financial guarantee of the total amount of non-Title IV adjusted gross tuition and fees from the enrollment of students. Restricted cash of $18.4 million related to these surety bonds was recorded within restricted cash on the Consolidated Balance Sheet as of September 30, 2021.

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 iswas subject to negotiated rulemaking, which ~~will not begin prior to January~~ended in March 2022. The amended rule will first apply 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 ~~(excluding~~as calculated under the ~~U.S. Department of Veterans Affairs~~

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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 ~~2020~~2021 and ~~2019.~~2020. Final data for fiscal year ~~2021~~2022 is not yet available.


	Fiscal Year				Fiscal Year
	2020		2019		2021		2020
Chamberlain University	62	%	62	%	66	%	62	%
American University of the Caribbean School of Medicine	81	%	75	%	80	%	81	%
Ross University School of Medicine	85	%	83	%	85	%	85	%
Ross University School of Veterinary Medicine	84	%	83	%	82	%	84	%

Fiscal year data for Walden is not available as they previously reported on a calendar year basis. As reported by Laureate Education, Inc. in their February 2021 Annual Report on Form 10-K, Walden derived approximately 76% of its revenues (calculated on a cash basis) from Title IV program funds for the year ended December 31, 2020.

In September 2016, Adtalem committed to voluntarily limit to 85% the amount of revenue that each of its Title IV-eligible institutions derive from federal funding, including the U.S. Department of Veterans Affairs and military tuition assistance benefits. As disclosed in the third party review reports that have been made publicly available, Adtalem’s institutions that were owned at each reporting date have met this lower threshold for each fiscal year since the commitment was made. Adtalem is committed to implementing measures to promote responsible recruitment and enrollment, successful student outcomes, and informed student choice. Management believes students deserve greater transparency to make informed choices about their education. This commitment builds upon a solid foundation and brings Adtalem to a new self-imposed level of public accountability and transparency.

A financial responsibility test is required for continued participation by an institution’s students in U.S. federal financial assistance programs. For Adtalem’s participating institutions, this test is calculated at the consolidated Adtalem level. 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. Changes to the manner in which the composite score is calculated that were effective on July 1, 2020 has negatively affected Adtalem’s composite score for fiscal year ~~2021~~2022 and will continue to negatively affect future Adtalem scores. At this time, management does not believe these changes by themselves will result in the score falling below 1.5. However, as a result of the acquisition of Walden and the related transactions, Adtalem expects its consolidated composite score to fall below 1.5 for its fiscal year 2022 financial responsibility test. If Adtalem becomes unable to meet requisite financial responsibility standards within the regulations, management believes it will be able to otherwise demonstrate its ability to continue to provide educational services; however, our institutions ~~could still~~will be ~~subject~~required to request additional state regulatory approvals, heightened cash monitoring, and/or be required to post a letter of credit to continue to participate in federal and state financial assistance programs.

ED has initiated rulemaking proceedings to amend the financial responsibility regulations. The earliest we believe any new rules will be effective is July 1, 2024.

Liquidity and Capital Resources

Adtalem’s consolidated cash and cash equivalents balance of ~~$360.1~~ $327.5million, ~~$494.6~~$347.0 million, and ~~$561.2~~$324.0 million as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020,~~2021, respectively, included cash and cash equivalents held at Adtalem’s international operations of ~~$73.7~~ $33.5million, ~~$127.2~~$34.2 million, and ~~$82.0~~$56.5 million as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020,~~2021, respectively, which is available to Adtalem for general corporate purposes.

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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

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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 ~~$1.8~~$2.5 million, ~~$0.4~~$1.0 million, and ~~$0.9~~$1.8 million was held in these restricted bank accounts as of September 30, ~~2021,~~2022, June 30, ~~2021,~~2022, and September 30, ~~2020,~~2021, respectively. In addition, restricted cash of $18.4 million related to ~~the~~ surety bonds discussed ~~above~~below was recorded within restricted cash on the Consolidated Balance ~~Sheet~~Sheets as of September 30, 2021. ~~Finally, $818.6 million was recorded within restricted cash on~~We are required by various states to post a surety bond. The bonds reflect a financial guarantee of the ~~Consolidated Balance Sheet as~~total amount of ~~June 30, 2021, which represents cash held in an escrow account designated to fund~~non-Title IV adjusted gross tuition and fees from the ~~Acquisition and was not available to Adtalem for general corporate purposes (see Note 13 “Debt” to the Consolidated Financial Statements for additional information).~~enrollment of students.

Cash Flow Summary

Operating Activities

The following table provides a summary of cash flows from operating activities (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
(Loss) income from continuing operations	$	(40,634)	$	27,446
Income (loss) from continuing operations					$	5,846	$	(77,182)
Non-cash items		66,534		37,565		71,445		63,127
Changes in assets and liabilities		15,016		19,643		14,233		43,561
Net cash provided by operating activities-continuing operations	$	40,916	$	84,654	$	91,524	$	29,506

Net cash provided by operating activities from continuing operations in the three months ended September 30, ~~2021~~2022 was ~~$40.9~~ $91.5million compared to ~~$84.7~~$29.5 million in the year-ago period. The ~~decrease~~increase was driven by ~~increased~~decreased interest payments and payments for business acquisition and integration expenses related to the Walden acquisition. The increase of ~~$29.0~~$8.3 million in non-cash items between the three months ended September 30, ~~2021~~2022 and the three months ended September 30, ~~2020~~2021 was principally driven by increases in ~~Walden intangible~~impairments to operating lease assets and deferred income taxes, partially offset by decreases in amortization ~~expense, amortization~~and write-off of ~~deferred financing fees,~~debt discount and issuance costs and stock-based compensation expense related to the CEO transition. The decrease of ~~$4.6~~ $29.3million in cash generated from changes in assets and liabilities was primarily due to ~~changes~~timing differences in accounts receivable, prepaid ~~expenses,~~assets, prepaid income taxes, accounts payable, accrued payroll and ~~related taxes,~~benefits, accrued liabilities, ~~accrued income taxes,~~ accrued interest, and deferred revenue.

Investing Activities

Capital expenditures in the first three months of fiscal year 2023 and 2022 ~~and 2021~~ were ~~$7.3~~ $5.6million and ~~$14.4~~$6.7 million, respectively. The capital expenditures in fiscal year ~~2022~~2023 primarily consisted of spending for ~~Chamberlain~~Chamberlain’s new campus development and ~~improvements.~~improvements and Adtalem’s home office. Capital spending for the remainder of fiscal year ~~2022~~2023 will support continued investment for new campus development at Chamberlain and maintenance at the medical and veterinary ~~schools, and Adtalem’s home office.~~schools. Management anticipates full fiscal year ~~2022~~2023 capital spending to be in the ~~$75~~$50 to ~~$85~~$60 million range, including ~~$7.3~~ $5.6million spent during the first three months of fiscal year ~~2022.~~2023. The source of funds for this capital spending will be from operations or the Credit Facility (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements).

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. The acquisition resulted in a cash outflow on the Consolidated Statements of Cash Flows for the three months ended September 30, 2021 of $1,481.8 million. An additional payment of $6.3 million was made during the second quarter of fiscal year 2022 due to certain post-closing adjustments.

During the first quarter of fiscal year 2023, we paid $0.8 million for a working capital adjustment to the initial sales price for ACAMS.

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Financing Activities

The following table provides a summary of cash flows from financing activities (in thousands):

Three Months Ended

September 30,

2021

2020
Net proceeds from (repayments of) long-term debt

$
559,000

$
(750)
Payment of debt discount and issuance costs

(49,553)

—
Other

5,571

(3,835)
Net cash provided by (used in) financing activities-continuing operations

$
515,018

$
(4,585)


	Three Months Ended
	September 30,
	2022		2021
Net (repayments) proceeds from long-term debt	$	(100,861)	$	559,000
Payment of debt discount and issuance costs		—		(49,553)
Other		(2,113)		5,571
Net cash (used in) provided by financing activities	$	(102,974)	$	515,018

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On November 8, 2018, we announced that the Board authorized Adtalem’s eleventh share repurchase program, which allowed Adtalem to repurchase up to $300 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 ~~allows~~allowed Adtalem to repurchase up to ~~$300~~$300.0 million of its common stock through December 31, 2021. The twelfth ~~and current~~ share repurchase program commenced in January 2021 and expired on December 31, 2021. ~~Repurchases were suspended in May 2021 after achieving management’s target~~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 ~~$100 million in repurchases for fiscal year 2021.~~its common stock through February 25, 2025. We did not make any share repurchases under these programs during the three months ended September 30, ~~2021~~2022 and 2020. As of September 30, 2021, $245.2 million of authorized share repurchases were remaining under the current share repurchase program. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.2021. See Note 15 “Share Repurchases” to the Consolidated Financial Statements 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 4,709,576shares 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 will be 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 as allowed under the terms of the ASR agreement 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 13 “Debt” to the Consolidated Financial Statements) 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. During the operating term of the Swap, the annual interest rate on the amount of the Prior Term B Loan is fixed at 3.946% (including the impact of our current 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 are recognized in accumulated other comprehensive loss on the Consolidated Balance Sheet and are reclassified into the Consolidated Statements of Income (Loss) within interest expense in the periods in which the hedged transactions affect earnings. 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 the ~~first quarter~~three months ended September 30, 2021. During the operating term of ~~fiscal year 2022.~~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 (Loss) 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 ~~$1.48~~$1.5 billion in ~~cash, subject to certain adjustments set forth in the Agreement.~~cash. On March 1, 2021, we issued ~~$800~~$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 13 “Debt” to the Consolidated Financial Statements) by entering into its new credit agreement (the “Credit Agreement”) that provides for (1) a ~~$850~~$850.0 million senior secured term loan (“Term Loan B”) with a maturity date of August 12, 2028 and (2) a ~~$400~~$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

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made a prepayment of $396.7 million on the Term Loan B. With this 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 (Loss) for the year ended June 30, 2022. In July 2022, we repurchased an additional $0.9 million of Notes and on September 22, 2022, we made a prepayment of $100.0 million on the Term Loan B. As of September 30, ~~2021,~~2022, the amount of debt outstanding under the Notes and Credit Facility was ~~$1,650.0~~$758.3 million. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on the Notes and our Credit Agreement.

Management currently projects that COVID-19 will continue to have an effect on operations and, as a result, liquidity, as discussed in the previous section of this MD&A titled “Overview of the Impact of COVID-19”; however, 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.

Material Cash Requirements

Long-Term Debt – We have ~~issued $800~~outstanding $405.0 million of Notes and $353.3 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 ~~$1,250~~$400.0 million revolving credit facility ~~which requires principal and interest payments.~~ Aswith availability of $400.0 million as of September 30, ~~2021, the amount of debt outstanding under the Notes and our Credit Facility~~ ~~was $1,650.0 million~~2022. . See Note 13 “Debt” to the Consolidated Financial Statements for additional information on our Notes and Credit Agreement.

Operating Lease Obligations – We have operating lease obligations for the minimum payments required under various lease agreements which are recorded on the Consolidated Balance ~~Sheet.~~Sheets. In addition, we sublease certain space to third

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parties, which partially offsets the lease obligations at these facilities. See Note 11 “Leases” to the Consolidated Financial Statements for additional information on our lease agreements.

Seasonality

The seasonal pattern of Adtalem’s enrollments and its educational programs’ starting dates affect the ~~results of operations and the~~ timing of cash ~~flows. Therefore, management believes that comparisons~~flows with higher cash inflows at the beginning of ~~its results of operations should primarily be made to the corresponding period in the preceding year.~~academic terms. Comparisons of financial position should be made to both the end of the previous fiscal year and to the end of the corresponding quarterly period in the preceding year.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates as disclosed in our ~~2021~~2022 Form 10-K.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact, which includes statements regarding the future impact of the COVID-19 pandemic, and the ~~efficacy and distribution of~~expected synergies from the ~~vaccines.~~recent Walden acquisition. Forward-looking statements can also be identified by words such as “future,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “may,” “will,” “would,” “could,” “can,” “continue,” “preliminary,” “range,” and similar terms. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our ~~2021~~2022 Form 10-K and this Quarterly Report on Form 10-Q, which should be read in conjunction with the forward-looking statements in this Quarterly Report on Form 10-Q. These forward-looking

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statements are based on information available to us as of the date any such statements are made, and we do not undertake any obligation to update any forward-looking statement, except as required by law.

Non-GAAP Financial Measures and Reconciliations

We believe that certain non-GAAP financial measures provide investors with useful supplemental information regarding the underlying business trends and performance of Adtalem’s ongoing operations as seen through the eyes of management and are useful for period-over-period comparisons. We use these supplemental non-GAAP financial measures internally in our assessment of performance and budgeting process. However, these non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The following are non-GAAP financial measures used in this Quarterly Report on Form 10-Q:

~~Net~~Adjusted net income ~~from continuing operations attributable to Adtalem excluding special items~~ (most comparable GAAP measure: net ~~(loss)~~ income ~~attributable to Adtalem)~~(loss)) – Measure of Adtalem’s net ~~(loss)~~ income ~~attributable to Adtalem~~(loss) adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, ~~Walden~~ intangible amortization expense, pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, and net loss (income) from discontinued operations.

~~Earnings~~Adjusted earnings per share ~~from continuing operations excluding special items~~ (most comparable GAAP measure: earnings (loss) ~~earnings~~ per share) – Measure of Adtalem’s diluted earnings (loss) ~~earnings~~ per share adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, ~~Walden~~ intangible amortization expense, pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, and net loss (income) from discontinued operations.

~~Operating~~Adjusted operating income ~~excluding special items~~ (most comparable GAAP measure: operating income (loss) ~~income)~~) – Measure of Adtalem’s operating income (loss) ~~income~~ adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense,

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business acquisition and integration expense, and ~~Walden~~ intangible amortization expense. 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 (loss)) – Measure of Adtalem’s net income (loss) adjusted for net loss (income) from discontinued operations, net other expense, provision for income taxes, depreciation and amortization, stock-based compensation, deferred revenue adjustment, CEO transition costs, restructuring expense, and business acquisition and integration expense. This measure is applied on a consolidated and segment basis, depending on the context of the discussion. Income taxes and net other expense 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:

●

Deferred revenue adjustment related to a revenue purchase accounting adjustment to record Walden’s deferred revenue at fair value.

●

CEO transition costs related to acceleration of stock-based compensation expense.

●

Restructuring ~~charges~~expense primarily related to plans to achieve synergies with the Walden acquisition and real estate consolidations at Walden, Medical and Veterinary, and Adtalem’s home ~~office and ACAMS.~~office.

●

Business acquisition and integration expense include expenses related to the Walden ~~acquisition.~~acquisition and growth transformation initiatives.

●

~~Walden~~Intangible amortization expense on acquired intangible assets.

●

Pre-acquisition interest expense, write-off of debt discount and issuance costs, and gain on extinguishment of debt related to financing arrangements in connection with the Walden ~~acquisition.~~acquisition and prepayment of debt.

●

~~Loss~~Net loss (income) from discontinued operations includes the operations of ACAMS, Becker, OCL, and EduPristine, in addition to costs related to DeVry University.

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.

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Net ~~(loss)~~ income ~~attributable to Adtalem~~(loss) reconciliation to adjusted net income ~~from continuing operations attributable to Adtalem excluding special items~~ (in thousands):


	Three Months Ended				Three Months Ended
	September 30,				September 30,
	2021		2020		2022		2021
Net (loss) income attributable to Adtalem (GAAP)	$	(58,004)	$	19,930
Net income (loss) (GAAP)					$	2,192	$	(58,004)
Deferred revenue adjustment		6,207		—		—		6,207
CEO transition costs		6,195		—		—		6,195
Restructuring expense		3,916		4,223		15,065		3,094
Business acquisition and integration expense		26,553		13,436		8,415		26,553
Walden intangible amortization expense		16,451		—
Pre-acquisition interest expense		31,634		—
Intangible amortization expense						18,528		16,451
Pre-acquisition interest expense, write-off of debt discount and issuance costs, and gain on extinguishment of debt						2,824		31,634
Income tax impact on non-GAAP adjustments (1)		(19,064)		(3,998)		(9,673)		4,640
Loss from discontinued operations		17,370		7,607
Net income from continuing operations attributable to Adtalem excluding special items (non-GAAP)	$	31,258	$	41,198
Net loss (income) from discontinued operations						3,654		(19,178)
Adjusted net income (non-GAAP)					$	41,005	$	17,592

(1)	Represents the income tax impact of non-GAAP continuing operations adjustments that is recognized in our GAAP financial statements.

Earnings (loss) per share reconciliation to adjusted earnings per share (shares in thousands):


	Three Months Ended
	September 30,
	2022		2021
Earnings (loss) per share, diluted (GAAP)	$	0.05	$	(1.17)
Effect on diluted earnings per share:
Deferred revenue adjustment		-		0.12
CEO transition costs		-		0.12
Restructuring expense		0.33		0.06
Business acquisition and integration expense		0.18		0.53
Intangible amortization expense		0.40		0.33
Pre-acquisition interest expense, write-off of debt discount and issuance costs, and gain on extinguishment of debt		0.06		0.63
Income tax impact on non-GAAP adjustments (1)		(0.21)		0.09
Net loss (income) from discontinued operations		0.08		(0.39)
Adjusted earnings per share, diluted (non-GAAP)	$	0.88	$	0.35
Diluted shares used in non-GAAP EPS calculation		46,342		50,222

(1)	Represents the income tax impact of non-GAAP continuing operations adjustments that is recognized in our GAAP financial statements.

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~~(Loss) earnings per share~~Net income (loss) reconciliation to ~~earnings per share from continuing operations excluding special items (shares~~adjusted EBITDA ( in thousands):

Three Months Ended

September 30,

2021

2020

(Loss) earnings per share, diluted (GAAP)

$
(1.17)

$
0.38

Effect on diluted earnings per share:

Deferred revenue adjustment

0.12

-

CEO transition costs

0.12

-

Restructuring expense

0.08

0.08

Business acquisition and integration expense

0.53

0.25

Walden intangible amortization expense

0.33

-

Pre-acquisition interest expense

0.63

-

Income tax impact on non-GAAP adjustments (1)

(0.38)

(0.08)

Loss from discontinued operations

0.35

0.14

Earnings per share from continuing operations excluding special items, diluted (non-GAAP)

$
0.62

$
0.78

Diluted shares used in non-GAAP EPS calculation

50,222

52,797

~~(1)~~

~~Represents the income tax impact of non-GAAP continuing operations adjustments that is recognized in our GAAP financial statements.~~


	Three Months Ended
	September 30,
							Increase/(Decrease)
	2022			2021			$		%
Chamberlain:
Operating income (GAAP)	$	26,184		$	20,855		$	5,329	25.6	%
Restructuring expense		818			—			818
Depreciation		4,481			4,584			(103)
Stock-based compensation		2,274			1,547			727
Adjusted EBITDA (non-GAAP)	$	33,757		$	26,986		$	6,771	25.1	%
Adjusted EBITDA margin (non-GAAP)		24.9	%		19.9	%

Walden:
Operating income (loss) (GAAP)	$	1,783		$	(11,646)		$	13,429	NM
Deferred revenue adjustment		—			6,207			(6,207)
Restructuring expense		3,080			—			3,080
Intangible amortization expense		18,528			16,451			2,077
Depreciation		2,595			1,712			883
Stock-based compensation		1,905			707			1,198
Adjusted EBITDA (non-GAAP)	$	27,891		$	13,431		$	14,460	107.7	%
Adjusted EBITDA margin (non-GAAP)		21.3	%		19.6	%

Medical and Veterinary:
Operating income (GAAP)	$	10,528		$	15,665		$	(5,137)	(32.8)	%
Restructuring expense		6,826			—			6,826
Depreciation		3,105			3,455			(350)
Stock-based compensation		1,475			928			547
Adjusted EBITDA (non-GAAP)	$	21,934		$	20,048		$	1,886	9.4	%
Adjusted EBITDA margin (non-GAAP)		24.9	%		23.6	%

Home Office and Other:
Operating loss (GAAP)	$	(15,402)		$	(46,937)		$	31,535	67.2	%
CEO transition costs		—			6,195			(6,195)
Restructuring expense		4,341			3,094			1,247
Business acquisition and integration expense		8,415			26,553			(18,138)
Depreciation		624			748			(124)
Stock-based compensation		491			334			157
Adjusted EBITDA (non-GAAP)	$	(1,531)		$	(10,013)		$	8,482	84.7	%

Adtalem Global Education:
Net income (loss) (GAAP)	$	2,192		$	(58,004)		$	60,196	NM
Net loss (income) from discontinued operations		3,654			(19,178)			22,832
Net other expense		16,193			46,515			(30,322)
Provision for income taxes		1,054			8,604			(7,550)
Operating income (loss) (GAAP)		23,093			(22,063)			45,156
Depreciation and amortization		29,333			26,950			2,383
Stock-based compensation		6,145			3,516			2,629
Deferred revenue adjustment		—			6,207			(6,207)
CEO transition costs		—			6,195			(6,195)
Restructuring expense		15,065			3,094			11,971
Business acquisition and integration expense		8,415			26,553			(18,138)
Adjusted EBITDA (non-GAAP)	$	82,051		$	50,452		$	31,599	62.6	%
Adjusted EBITDA margin (non-GAAP)		23.1	%		17.5	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The interest rate on Adtalem’s Term Loan B is based upon LIBOR for eurocurrency rate loans or an alternative base rate for periods typically ranging from one to three months. As of September 30, ~~2021,~~2022, Adtalem had ~~$850.0~~$353.3 million in outstanding borrowings under the Term Loan B with an interest rate of ~~5.25%~~7.05%. Based upon borrowings of ~~$850.0~~$353.3 million, a 100 basis point increase in short-term interest rates would result in ~~$2.8~~$3.5 million of additional annual interest expense.

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Interest on our Credit Facility is set based on LIBOR, which is based on observable market transactions. The U.K. Financial Conduct Authority, which regulates LIBOR, has announced that ~~it has commitments from panel banks to continue to contribute to~~no new contracts referencing LIBOR are allowed. In addition, publication of one-week and two-month LIBOR rates ceased on December 31, 2021; however, all other LIBOR tenors will be published through ~~the end of calendar year 2021, but that it will not use its powers to compel contributions beyond such date.~~June 30, 2023. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. Management is monitoring their efforts. The Credit Agreement provides guidance surrounding the implementation of a replacement benchmark rate, however the specific replacement benchmark rate has not been identified. We expect to amend the Credit Agreement during fiscal year 2023 to transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

There have been no other material changes in Adtalem’s market risk exposure during the first three months of fiscal year ~~2022.~~2023. For a discussion of Adtalem’s exposure to market risk, refer to Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of Adtalem’s management, Adtalem’s Chief Executive Officer and Chief Financial Officer have concluded that Adtalem’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of September 30, ~~2021~~2022 to ensure that information required to be disclosed by Adtalem in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to Adtalem’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

~~During~~There were no changes during the first quarter ~~ended September 30, 2021, Adtalem completed its acquisition~~ of Walden on August 12, 2021 (the “Acquired Company”). See Note 3 “Acquisitions” to the Consolidated Financial Statements included in Part I. Item 1. of this Quarterly Report on Form 10-Q for a discussion of the acquisition and related financial data. Adtalem is currently in the process of integrating the Acquired Company’s internal controls over financial reporting. Except for the inclusion of the Acquired Company, there has been no changefiscal year 2023 in our internal control over financial reporting that ~~occurred during the quarter ended September 30, 2021 that has~~have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 19 “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 1. “Financial Statements.”

Item 1A. Risk Factors

In addition to the other information set forth in this report, the factors discussed in Item 1A. “Risk Factors” in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021,~~2022, which could materially affect Adtalem’s business, financial condition, or future results, should be carefully considered. Such risks are not the only risks facing Adtalem. Additional risks and uncertainties not currently known to Adtalem or that management currently deems to be immaterial also may materially adversely affect its business, financial condition, and/or operating results. There have been no material changes to Adtalem’s risk factors since its Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2021 - July 31, 2021

—

$
—

—

$
245,231,124
August 1, 2021 - August 31, 2021

—

—

—

245,231,124
September 1, 2021 - September 30, 2021

—

—

—

245,231,124
Total

—

$
—

—

$
245,231,124

~~(1)~~

~~On November 8, 2018, we announced that the Board of Directors of Adtalem (the “Board”) authorized the eleventh share repurchase program, which allowed Adtalem to repurchase up to $300~~

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2022 - July 31, 2022

—

$
—

—

$
300,000,000
August 1, 2022 - August 31, 2022

—

—

—

300,000,000
September 1, 2022 - September 30, 2022

—

—

—

300,000,000
Total

—

$
—

—

$
300,000,000

(1)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 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 allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The twelfth and current share repurchase program commenced in January 2021. Repurchases were suspended in May 2021 after achieving management’s target of $100 million in repurchases for fiscal year 2021. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.

~~Table~~ of ~~Contents~~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. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. On March 14, 2022, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $150.0 million of common stock under which 4,709,576 shares were initially delivered. 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 as allowed under the terms of the ASR agreement by making a cash payment of $13.2 million on November 2, 2022. See Note 15 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs, including the ASR agreement.

Other Purchases of Equity Securities

Period

Total Number of Shares Purchased (1)

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

Total Number of Shares Purchased (1)

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

July 1, 2021 - July 31, 2021

—

August 1, 2021 - August 31, 2021

60,563

36.78

September 1, 2021 - September 30, 2021

—

July 1, 2022 - July 31, 2022

—

August 1, 2022 - August 31, 2022

76,302

39.78

September 1, 2022 - September 30, 2022

11,998

37.54

Total

60,563

36.78

88,300

39.48

(1)	Represents shares delivered back to Adtalem for payment of withholding taxes from employees for vesting restricted stock units and shares swapped for payment on exercise of incentive stock options pursuant to the terms of Adtalem’s stock incentive plans.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


10(a)*		~~Form of Nonqualified Stock Option Award Agreement for Executive Officers under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year 2022)~~
10(b)*		~~Form of Incentive Stock Option Award Agreement for Executive Officers under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year 2022)~~
~~10(c)~~*		Form of Restricted Stock Unit Award Agreement for Executive Officers under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year ~~2022)~~2023)
10(d)*		~~Form of Restricted Stock Unit Award Agreement for Directors under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year 2022)~~
~~10(e)~~10(b)*		Form of Restricted Stock Unit Award Agreement for Employees under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year ~~2022)~~2023)
~~10(f)~~10(c)*		Form of Performance-Based Restricted Stock Unit Award Agreement for Executive Officers under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year ~~2022)~~2023)
~~10(g)~~10(d)*		Form of Performance-Based Restricted Stock Unit Award Agreement for Employees under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year ~~2022)~~2023)
~~10(h)~~10(e)*		Form of Restricted Cash Award Agreement for Employees under the Fourth Amended and Restated Incentive Compensation Plan of 2013 (effective fiscal year ~~2022)~~2023)
10.110(f)		~~Executive Employment Agreement effective September 8, 2021, between the Registrant~~Registrant’s Fourth Amended and ~~Lisa W. Wardell (incorporated by reference to Exhibit 10.1 to Adtalem’s Current Report on Form 8-K/A filed with the SEC on September 13, 2021)~~
10.2*		Severance Agreement and General Release dated September 13, 2021 by and between the Registrant and Kathy Boden Holland (incorporated by reference to Exhibit 10.1 to Adtalem’s Current Report on Form 8-K/A filed with the SEC on September 14, 2021)Restated Incentive Plan of 2013
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Designates management contracts and compensatory plans or arrangements.

** Furnished herewith.

6160

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Adtalem Global Education Inc.

Date: November 3, ~~2021~~2022	By:	/s/ Robert J. Phelan
		Robert J. Phelan
		Senior Vice President and Chief Financial Officer
		(Principal Financial ~~Officer and Principal Accounting~~ Officer)

6261


	Three Months Ended September 30, 2021
	Real Estate and Other		Termination Benefits		Total
Financial Services	$	821	$	0	$	821
Home Office and Other		989		2,106		3,095
Total	$	1,810	$	2,106	$	3,916


	Notes		Term Loan B		Bridge		Revolver		Total
Unamortized debt discount and issuance costs as of June 30, 2021	$	15,548	$	4,741	$	—	$	1,502	$	21,791
Payment of debt discount and issuance costs		0		29,078		10,329		10,146		49,553
Amortization of debt discount and issuance costs		(548)		(5,237)		(10,329)		(1,744)		(17,858)
Unamortized debt discount and issuance costs as of September 30, 2021	$	15,000	$	28,582	$	—	$	9,904	$	53,486


	Life-to-Date
	Current Share
	Repurchase Program
Total number of share repurchases		1,447,882
Total cost of share repurchases	$	54,769
Average price paid per share	$	37.83


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2021 - July 31, 2021	—	$	—	—	$	245,231,124
August 1, 2021 - August 31, 2021	—		—	—		245,231,124
September 1, 2021 - September 30, 2021	—		—	—		245,231,124
Total	—	$	—	—	$	245,231,124