Discontinued Operations and Assets Held for Sale

6 Months Ended

Dec. 31, 2022

Discontinued Operations And Disposal Groups [Abstract]

Discontinued Operations and Assets Held for Sale

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 Consolidated Financial Statements as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20.0 million over a ten-year period payable based on DeVry University’s free cash flow. Adtalem received $4.1 million and $2.9 million during the second quarter of fiscal year 2023 and the second quarter of fiscal year 2022, respectively, related to the earn-out,

resulting in a total of $7.0 million being received thus far. 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 Note bore interest at a rate of 4% per annum, payable annually in arrears, and 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 DeVry Note is included on the Consolidated Balance Sheets in prepaid expenses and other current assets as of December 31, 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 one 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 gain of $0.2 million and a loss of $3.2 million in the three and six months ended December 31, 2022, respectively, for post-closing working capital adjustments to the initial sales price for ACAMS, Becker, and OCL, which is included in gain (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.

The following is a summary of balance sheet information of assets and liabilities reported as held for sale as of December 31, 2021, which includes ACAMS, Becker, OCL, and EduPristine (in thousands):

	December 31,
	2021
Assets:
Current assets:
Cash and cash equivalents	$	48,450
Accounts receivable, net		21,960
Prepaid expenses and other current assets		3,987
Total current assets held for sale		74,397
Noncurrent assets:
Property and equipment, net		14,065
Operating lease assets		1,172
Intangible assets, net		133,777
Goodwill		376,165
Other assets, net		4,149
Total noncurrent assets held for sale		529,328
Total assets held for sale	$	603,725
Liabilities:
Current liabilities:
Accounts payable	$	14,242
Accrued payroll and benefits		7,551
Accrued liabilities		3,752
Deferred revenue		31,017
Current operating lease liabilities		1,128
Total current liabilities held for sale		57,690
Noncurrent liabilities:
Long-term operating lease liabilities		342
Deferred income taxes		30,827
Other liabilities		917
Total noncurrent liabilities held for sale		32,086
Total liabilities held for sale	$	89,776

The following is a summary of income statement information of operations reported as discontinued operations, which includes ACAMS, Becker, OCL, and EduPristine operations through the date of each respective sale, a gain (loss) from post-closing working capital adjustments, and activity related to the DeVry University divestiture, which includes litigation and settlement costs we continue to incur and the earn-outs we received (in thousands):

	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2022		2021		2022		2021
Revenue	$	—	$	53,082	$	—	$	112,339
Operating cost and expense:
Cost of educational services		—		8,914		—		19,974
Student services and administrative expense		(524)		39,060		2,914		93,307
Restructuring expense		—		949		—		949
Total operating cost and expense		(524)		48,923		2,914		114,230
Income (loss) from discontinued operations before income taxes		524		4,159		(2,914)		(1,891)
Gain (loss) on disposal of discontinued operations before income taxes		185		—		(3,174)		—
(Provision for) benefit from income taxes		(182)		(25,340)		2,961		(112)
Income (loss) from discontinued operations	$	527	$	(21,181)	$	(3,127)	$	(2,003)