XML 28 R19.htm IDEA: XBRL DOCUMENT

Goodwill and Intangible Assets

6 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

12. Goodwill and Intangible Assets

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


	December 31,		June 30,		December 31,
	2022		2022		2021
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		651,052		651,052		649,848
AUC		68,321		68,321		68,321
RUSM and RUSVM		237,173		237,173		237,173
Total	$	961,262	$	961,262	$	960,058

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


	December 31,		June 30,		December 31,
	2022		2022		2021
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		651,052		651,052		649,848
Medical and Veterinary		305,494		305,494		305,494
Total	$	961,262	$	961,262	$	960,058

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


					Medical and
	Chamberlain		Walden		Veterinary		Total
June 30, 2021	$	4,716	$	—	$	305,494	$	310,210
Acquisition		—		649,848		—		649,848
December 31, 2021		4,716		649,848		305,494		960,058
Purchase accounting adjustments		—		1,204		—		1,204
June 30, 2022		4,716		651,052		305,494		961,262
December 31, 2022	$	4,716	$	651,052	$	305,494	$	961,262

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


	December 31, 2022				June 30, 2022				December 31, 2021
	Gross Carrying		Accumulated		Gross Carrying		Accumulated		Gross Carrying		Accumulated		Weighted-Average
	Amount		Amortization		Amount		Amortization		Amount		Amortization		Amortization Period
Student relationships	$	161,900	$	(116,551)	$	161,900	$	(87,457)	$	161,900	$	(42,943)	3 Years
Curriculum		56,091		(15,427)		56,091		(9,817)		56,091		(4,207)	5 Years
Total	$	217,991	$	(131,978)	$	217,991	$	(97,274)	$	217,991	$	(47,150)

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


	December 31,		June 30,		December 31,
	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):


	December 31,		June 30,		December 31,
	2022		2022		2021
Chamberlain	$	1,200	$	1,200	$	1,200
Walden		615,360		615,360		615,360
Medical and Veterinary		136,300		136,300		136,300
Total	$	752,860	$	752,860	$	752,860

Amortization expense for amortized intangible assets was $16.2 million and $34.7 million in the three and six months ended December 31, 2022, respectively, and $30.7 million and $47.2 million in the three and six months ended December 31, 2021, respectively. Future intangible asset amortization expense, by reporting unit, is expected to be as follows (in thousands):


Fiscal Year	Walden
2023 (remaining)	$	26,535
2024		35,644
2025		11,220
2026		11,220
2027		1,394
Total	$	86,013

Curriculum is amortized on a straight-line basis. Student relationships is amortized based on the estimated retention of the students and giving consideration to the revenue and cash flow associated with these existing students.

Indefinite-lived intangible assets related to trade names and Title IV eligibility and accreditations 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.

Adtalem has four reporting units that contain goodwill. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment 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 four reporting units, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value as of December 31, 2022.

Adtalem has four reporting units that contain indefinite-lived intangible assets. For indefinite-lived intangible assets, management first analyzes qualitative factors, including results of operations and business conditions of the four reporting units that 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 four reporting units, it was determined that it was more likely than not that these assets’ fair values exceeded their carrying values as of December 31, 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 no impairments as of the end of fiscal year 2022, and that no interim events or deviations from planned operating results occurred as of December 31, 2022 that would cause management to reassess these conclusions. The recent increase in interest rates has not resulted in a significant enough change to the discount rate used to value Adtalem’s reporting units and indefinite-lived intangible assets that would result in a triggering event based on how much previously calculated fair values exceed carrying values. We have not yet experienced significant inflationary pressures on wages or other costs of delivering our educational services, so no significant decreases in long-term cash flow projections are anticipated based on these factors. Should inflation persist in the overall economy, cost increases could affect our projections in the future to the point where a triggering event would exist and require reassessment of the fair values of goodwill and intangible assets and potential impairments. Although the COVID-19 pandemic is expected to have a negative effect on the operating results of all four 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.