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 March 31, 2023
	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: 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)

(312) 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 April 28, 2023, there were 43,609,242 shares of the registrant’s common stock, $0.01 par value per share outstanding.

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	2
	Consolidated Statements of Comprehensive Income	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	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64
Item 4.	Controls and Procedures	65
	Part II. Other Information
Item 1.	Legal Proceedings	65
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
	Signature	68

Part I. Financial Information

Item 1. Financial Statements

Adtalem Global Education Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except par value)

	March 31,		June 30,		March 31,
	2023		2022		2022
Assets:
Current assets:
Cash and cash equivalents	$	315,373	$	346,973	$	788,729
Restricted cash		1,804		964		1,266
Accounts receivable, net		113,284		81,635		96,064
Prepaid expenses and other current assets		102,573		127,532		124,968
Current assets held for sale		—		—		1,432
Total current assets		533,034		557,104		1,012,459
Noncurrent assets:
Property and equipment, net		252,797		289,926		294,538
Operating lease assets		173,271		177,995		186,968
Deferred income taxes		54,494		51,093		47,574
Intangible assets, net		824,641		873,577		896,884
Goodwill		961,262		961,262		961,262
Other assets, net		67,618		119,283		120,145
Noncurrent assets held for sale		—		—		93
Total noncurrent assets		2,334,083		2,473,136		2,507,464
Total assets	$	2,867,117	$	3,030,240	$	3,519,923
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable	$	73,307	$	57,140	$	67,252
Accrued payroll and benefits		56,023		67,792		57,510
Accrued liabilities		86,691		98,124		176,921
Deferred revenue		175,488		149,810		171,937
Current operating lease liabilities		46,411		50,781		51,335
Current liabilities held for sale		—		—		1,417
Total current liabilities		437,920		423,647		526,372
Noncurrent liabilities:
Long-term debt		694,429		838,908		1,225,360
Long-term operating lease liabilities		164,185		177,045		188,955
Deferred income taxes		27,237		25,554		25,862
Other liabilities		32,961		73,700		74,380
Noncurrent liabilities held for sale		—		—		41
Total noncurrent liabilities		918,812		1,115,207		1,514,598
Total liabilities		1,356,732		1,538,854		2,040,970
Commitments and contingencies (Note 19)
Shareholders' equity:
Common stock, $0.01 par value per share, 200,000 shares authorized; 44,232, 45,177, and 45,138 shares outstanding as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively		822		818		818
Additional paid-in capital		564,363		521,848		517,431
Retained earnings		2,381,506		2,310,396		2,303,650
Accumulated other comprehensive loss		(2,227)		(2,227)		(3,417)
Treasury stock, at cost, 37,939, 36,619, and 36,621 shares as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively		(1,434,079)		(1,339,449)		(1,339,529)
Total shareholders' equity		1,510,385		1,491,386		1,478,953
Total liabilities and shareholders' equity	$	2,867,117	$	3,030,240	$	3,519,923

See accompanying Notes to Consolidated Financial Statements.

1

Adtalem Global Education Inc.

Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Revenue	$	369,082	$	364,281	$	1,086,185	$	1,021,195
Operating cost and expense:
Cost of educational services		165,820		166,027		484,768		498,497
Student services and administrative expense		144,526		148,863		432,713		433,379
Restructuring expense		1,278		10,518		17,706		16,999
Business acquisition and integration expense		11,346		5,924		35,702		41,537
Gain on sale of assets		(13,317)		—		(13,317)		—
Total operating cost and expense		309,653		331,332		957,572		990,412
Operating income		59,429		32,949		128,613		30,783
Interest expense		(14,457)		(36,585)		(47,806)		(109,907)
Other income (expense), net		3,980		(327)		3,301		2,435
Income (loss) from continuing operations before income taxes		48,952		(3,963)		84,108		(76,689)
(Provision for) benefit from income taxes		(389)		8,363		(5,906)		39,597
Income (loss) from continuing operations		48,563		4,400		78,202		(37,092)
Discontinued operations:
(Loss) income from discontinued operations before income taxes		(3,993)		3,426		(6,734)		1,535
(Loss) gain on disposal of discontinued operations before income taxes		(402)		474,003		(3,576)		474,003
Benefit from (provision for) income taxes		1,701		(134,089)		3,222		(134,201)
(Loss) income from discontinued operations		(2,694)		343,340		(7,088)		341,337
Net income	$	45,869	$	347,740	$	71,114	$	304,245
Earnings (loss) per share:
Basic:
Continuing operations	$	1.08	$	0.09	$	1.73	$	(0.75)
Discontinued operations	$	(0.06)	$	7.02	$	(0.16)	$	6.90
Total basic earnings per share	$	1.02	$	7.11	$	1.57	$	6.15
Diluted:
Continuing operations	$	1.06	$	0.09	$	1.70	$	(0.75)
Discontinued operations	$	(0.06)	$	6.95	$	(0.15)	$	6.90
Total diluted earnings per share	$	1.00	$	7.04	$	1.54	$	6.15
Weighted-average shares outstanding:
Basic shares		45,125		48,925		45,276		49,459
Diluted shares		45,801		49,377		46,089		49,459

See accompanying Notes to Consolidated Financial Statements.

2

Adtalem Global Education Inc.

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2023		2022		2023		2022
Net income	$	45,869	$	347,740	$	71,114	$	304,245
Other comprehensive income (loss), net of tax:
(Loss) gain on foreign currency translation adjustments		—		(24)		—		12
Comprehensive income before reclassification		45,869		347,716		71,114		304,257
Reclassification adjustment for realized gain on foreign currency translation adjustments		—		(906)		—		(906)
Reclassification adjustment for loss on interest rate swap		—		—		—		6,695
Comprehensive income	$	45,869	$	346,810	$	71,114	$	310,046

See accompanying Notes to Consolidated Financial Statements.

3

Adtalem Global Education Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine Months Ended
	March 31,
	2023		2022
Operating activities:
Net income	$	71,114	$	304,245
Loss (income) from discontinued operations		7,088		(341,337)
Income (loss) from continuing operations		78,202		(37,092)
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		10,908		18,604
Amortization and impairments to operating lease assets		37,928		35,251
Depreciation		31,618		33,471
Amortization of intangible assets		48,936		73,967
Amortization and write-off of debt discount and issuance costs		7,974		34,481
Provision for bad debts		23,391		19,552
Deferred income taxes		(1,718)		3,425
Loss on disposals, accelerated depreciation, and impairments to property and equipment		3,999		2,274
Gain on extinguishment of debt		(71)		—
Loss on investments		4,122		807
Gain on sale of assets		(13,317)		—
Changes in assets and liabilities:
Accounts receivable		(43,345)		(40,520)
Prepaid expenses and other current assets		7,034		2,398
Accounts payable		12,286		(5,737)
Accrued payroll and benefits		(11,719)		(22,416)
Accrued liabilities		(20,275)		(92,528)
Deferred revenue		26,038		92,507
Operating lease liabilities		(37,758)		(36,159)
Other assets and liabilities		(14,412)		(23,514)
Net cash provided by operating activities-continuing operations		149,821		58,771
Net cash used in operating activities-discontinued operations		(404)		(6,915)
Net cash provided by operating activities		149,417		51,856
Investing activities:
Capital expenditures		(19,056)		(22,249)
Proceeds from sale of marketable securities		7,635		941
Purchases of marketable securities		(1,508)		(1,315)
Proceeds from note receivable related to property sold		46,800		—
Payment for purchase of business, net of cash and restricted cash acquired		—		(1,488,054)
Cash received on DeVry University loan		—		10,000
Net cash provided by (used in) investing activities-continuing operations		33,871		(1,500,677)
Net cash used in investing activities-discontinued operations		—		(3,287)
Proceeds from sale of business, net of cash transferred		—		962,652
Payment for working capital adjustment for sale of business		(3,174)		—
Net cash provided by (used in) investing activities		30,697		(541,312)
Financing activities:
Proceeds from exercise of stock options		1,622		8,433
Employee taxes paid on withholding shares		(4,214)		(2,727)
Proceeds from stock issued under Colleague Stock Purchase Plan		451		400
Repurchases of common stock for treasury		(44,710)		(120,000)
Payment on equity forward contract		(13,162)		(30,000)
Proceeds from long-term debt		—		850,000
Repayments of long-term debt		(150,861)		(687,667)
Payment of debt discount and issuance costs		—		(49,553)
Payment for purchase of redeemable noncontrolling interest of subsidiary		—		(1,790)
Net cash used in financing activities		(210,874)		(32,904)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		—		12
Net decrease in cash, cash equivalents and restricted cash		(30,760)		(522,348)
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		317,177		791,268
Less: cash, cash equivalents and restricted cash of discontinued operations at end of period		—		1,273
Cash, cash equivalents and restricted cash of continuing operations at end of period	$	317,177	$	789,995
Non-cash investing and financing activities:
Accrued capital expenditures	$	10,474	$	5,408
Accrued liability for repurchases of common stock	$	2,699	$	—
Accrued excise tax on share repurchases	$	361	$	—
Settlement of financing liability with assets	$	38,606	$	—

See accompanying Notes to Consolidated Financial Statements.

4

Adtalem Global Education Inc.

Consolidated Statements of Shareholders’ Equity

(unaudited)

(in thousands)

									Accumulated
					Additional				Other
	Common Stock				Paid-In		Retained		Comprehensive		Treasury Stock
	Shares		Amount		Capital		Earnings		Loss		Shares		Amount		Total
December 31, 2021		81,705	$	817	$	542,296	$	1,955,910	$	(2,487)		31,908	$	(1,219,543)	$	1,276,993
Net income								347,740								347,740
Other comprehensive loss, net of tax										(24)						(24)
Reclassification adjustment for realized gain on foreign currency translation adjustments										(906)						(906)
Stock-based compensation						4,953										4,953
Net activity from stock-based compensation awards		54		1		232						9		(209)		24
Proceeds from stock issued under Colleague Stock Purchase Plan						(50)						(6)		223		173
Repurchases of common stock for treasury												4,710		(120,000)		(120,000)
Equity forward contract						(30,000)										(30,000)
March 31, 2022		81,759	$	818	$	517,431	$	2,303,650	$	(3,417)		36,621	$	(1,339,529)	$	1,478,953
December 31, 2022		82,156	$	822	$	561,376	$	2,335,641	$	(2,227)		36,713	$	(1,386,395)	$	1,509,217
Net income								45,869								45,869
Stock-based compensation						2,795										2,795
Net activity from stock-based compensation awards		15				199						2		(106)		93
Proceeds from stock issued under Colleague Stock Purchase Plan						(7)		(4)				(5)		192		181
Repurchases of common stock for treasury												1,229		(47,770)		(47,770)
March 31, 2023		82,171	$	822	$	564,363	$	2,381,506	$	(2,227)		37,939	$	(1,434,079)	$	1,510,385
June 30, 2021		81,099	$	811	$	519,826	$	1,999,405	$	(9,218)		31,846	$	(1,217,307)	$	1,293,517
Net income								304,245								304,245
Other comprehensive income, net of tax										12						12
Reclassification adjustment for realized gain on foreign currency translation adjustments										(906)						(906)
Reclassification adjustment for loss on interest rate swap										6,695						6,695
Stock-based compensation						19,240										19,240
Net activity from stock-based compensation awards		660		7		8,426						78		(2,727)		5,706
Proceeds from stock issued under Colleague Stock Purchase Plan						(61)						(13)		505		444
Repurchases of common stock for treasury												4,710		(120,000)		(120,000)
Equity forward contract						(30,000)										(30,000)
March 31, 2022		81,759	$	818	$	517,431	$	2,303,650	$	(3,417)		36,621	$	(1,339,529)	$	1,478,953
June 30, 2022		81,796	$	818	$	521,848	$	2,310,396	$	(2,227)		36,619	$	(1,339,449)	$	1,491,386
Net income								71,114								71,114
Stock-based compensation						10,908										10,908
Net activity from stock-based compensation awards		375		4		1,617						105		(4,214)		(2,593)
Proceeds from stock issued under Colleague Stock Purchase Plan						(10)		(4)				(14)		516		502
Settlement of equity forward contract						30,000								(43,162)		(13,162)
Repurchases of common stock for treasury												1,229		(47,770)		(47,770)
March 31, 2023		82,171	$	822	$	564,363	$	2,381,506	$	(2,227)		37,939	$	(1,434,079)	$	1,510,385

See accompanying Notes to Consolidated Financial Statements.

5

Adtalem Global Education Inc.

Notes to Consolidated Financial Statements

(unaudited)

Table of Contents

Note		Page
1	Nature of Operations	7
2	Summary of Significant Accounting Policies	7
3	Acquisitions	11
4	Discontinued Operations and Assets Held for Sale	13
5	Revenue	15
6	Restructuring Charges	17
7	Income Taxes	18
8	Earnings per Share	19
9	Accounts Receivable and Credit Losses	19
10	Property and Equipment, Net	22
11	Leases	23
12	Goodwill and Intangible Assets	25
13	Debt	27
14	Redeemable Noncontrolling Interest	32
15	Share Repurchases	32
16	Accumulated Other Comprehensive Loss	34
17	Stock-Based Compensation	34
18	Fair Value Measurements	36
19	Commitments and Contingencies	37
20	Segment Information	39

6

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 national leader in post-secondary education and a leading provider of professional talent to the healthcare industry. Our schools consist of Chamberlain University (“Chamberlain”), Walden University (“Walden”), the American University of the Caribbean School of Medicine (“AUC”), Ross University School of Medicine (“RUSM”), and Ross University School of Veterinary Medicine (“RUSVM”). AUC, RUSM, and RUSVM is collectively referred to as the “medical and veterinary schools.” See Note 20 “Segment Information” for information on our reportable segments.

Beginning in the second quarter of fiscal year 2022, Adtalem 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 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 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. See Note 4 “Discontinued Operations and Assets Held for Sale” for additional information.

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, 2022 (“2022 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with 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 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. Other income (expense), net in the Consolidated Statements of Income for the three months ended March 31, 2023 consists of interest income of $3.2 million and investment gain of $0.8 million, and for the nine months ended March 31, 2023 consists of interest income of $7.4 million, investment gain of $0.9 million, and investment impairment of $5.0 million. Other income (expense), net for the three months ended March 31, 2022 consists of interest income of $1.1 million and investment loss of $1.4 million, and for the nine months ended March 31, 2022 consists of interest income of $3.2 million and investment loss of $0.8 million.

Business acquisition and integration expense was $11.3 million and $35.7 million in the three and nine months ended March 31, 2023, respectively, and $5.9 million and $41.5 million in the three and nine months ended March 31, 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. Certain costs relating to this transformation are included in business acquisition and integration costs in the Consolidated Statements of Income.

7

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, but not limited to, the impact of (i) the novel coronavirus (“COVID-19”) pandemic, (ii) rising interest rates, and (iii) labor and material cost increases and shortages, 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 October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08: “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The 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 if it had originated the contracts. 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 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, 2022 and 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.

8

Revision to Previously Issued Financial Statements

During the third quarter of fiscal year 2023, Adtalem identified an error in its revenue recognition related to certain scholarship programs within its Medical and Veterinary segment. Certain scholarships and discounts offered within that segment provide students a discount on future tuition that constitute a material right under Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers” that should be accounted for as a separate performance obligation within a contract. Adtalem assessed the materiality of this error individually and in the aggregate with other previously identified errors to prior periods’ Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” and SAB 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” codified in ASC 250 “Accounting Changes and Error Corrections.” Adtalem concluded that the errors were not material to prior periods and therefore, amendments of previously filed reports are not required. However, Adtalem determined it was appropriate to revise its previously issued financial statements. In accordance with ASC 250, Adtalem corrected prior periods presented herein by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the Consolidated Financial Statements. The impact of this revision of Adtalem’s previously reported Consolidated Financial Statements are detailed below. In connection with this revision, Adtalem also corrected other immaterial errors in the prior periods, including certain errors that had previously been adjusted for as out of period corrections in the period identified.

The following table summarizes the effect of the revisions on the affected line items within the Consolidated Balance Sheets (in thousands):

	June 30, 2022						March 31, 2022
	As reported		Adjustment		As revised		As reported		Adjustment		As revised
Assets:
Current assets:
Prepaid expenses and other current assets	$	126,467	$	1,065	$	127,532	$	123,505	$	1,463	$	124,968
Total current assets		556,039		1,065		557,104		1,010,996		1,463		1,012,459
Total assets		3,029,175		1,065		3,030,240		3,518,460		1,463		3,519,923
Liabilities and shareholders' equity:
Current liabilities:
Accrued payroll and benefits		66,642		1,150		67,792		56,705		805		57,510
Deferred revenue		144,840		4,970		149,810		167,576		4,361		171,937
Total current liabilities		417,527		6,120		423,647		521,206		5,166		526,372
Noncurrent liabilities:
Other liabilities		65,074		8,626		73,700		65,729		8,651		74,380
Total noncurrent liabilities		1,106,581		8,626		1,115,207		1,505,947		8,651		1,514,598
Total liabilities		1,524,108		14,746		1,538,854		2,027,153		13,817		2,040,970
Shareholders' equity:
Retained earnings		2,322,810		(12,414)		2,310,396		2,314,796		(11,146)		2,303,650
Accumulated other comprehensive loss		(960)		(1,267)		(2,227)		(2,209)		(1,208)		(3,417)
Total shareholders' equity		1,505,067		(13,681)		1,491,386		1,491,307		(12,354)		1,478,953
Total liabilities and shareholders' equity		3,029,175		1,065		3,030,240		3,518,460		1,463		3,519,923

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The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Income (in thousands, except per share data):

	Three Months Ended March 31, 2022						Nine Months Ended March 31, 2022
	As reported		Adjustment		As revised		As reported		Adjustment		As revised
Revenue	$	365,623	$	(1,342)	$	364,281	$	1,025,891	$	(4,696)	$	1,021,195
Operating cost and expense:
Student services and administrative expense		149,890		(1,027)		148,863		432,923		456		433,379
Total operating cost and expense		332,359		(1,027)		331,332		989,956		456		990,412
Operating income		33,264		(315)		32,949		35,935		(5,152)		30,783
Other income (expense), net		1,045		(1,372)		(327)		2,784		(349)		2,435
Loss from continuing operations before income taxes		(2,276)		(1,687)		(3,963)		(71,188)		(5,501)		(76,689)
Benefit from income taxes		8,133		230		8,363		38,897		700		39,597
Income (loss) from continuing operations		5,857		(1,457)		4,400		(32,291)		(4,801)		(37,092)
Discontinued operations:
Income from discontinued operations before income taxes		4,071		(645)		3,426		2,180		(645)		1,535
Income from discontinued operations		343,985		(645)		343,340		341,982		(645)		341,337
Net income		349,842		(2,102)		347,740		309,691		(5,446)		304,245
Earnings (loss) per share:
Basic:
Continuing operations	$	0.12	$	(0.03)	$	0.09	$	(0.65)	$	(0.10)	$	(0.75)
Discontinued operations	$	7.03	$	(0.01)	$	7.02	$	6.91	$	(0.01)	$	6.90
Total basic earnings per share	$	7.15	$	(0.04)	$	7.11	$	6.26	$	(0.11)	$	6.15
Diluted:
Continuing operations	$	0.12	$	(0.03)	$	0.09	$	(0.65)	$	(0.10)	$	(0.75)
Discontinued operations	$	6.97	$	(0.02)	$	6.95	$	6.91	$	(0.01)	$	6.90
Total diluted earnings per share	$	7.09	$	(0.05)	$	7.04	$	6.26	$	(0.11)	$	6.15

To conform to current period presentation, the previously reported interest and dividend income and investment gain lines have been condensed to other income (expense), net.

The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Comprehensive Income (in thousands):

	Three Months Ended March 31, 2022						Nine Months Ended March 31, 2022
	As reported		Adjustment		As revised		As reported		Adjustment		As revised
Net income	$	349,842	$	(2,102)	$	347,740	$	309,691	$	(5,446)	$	304,245
Comprehensive income before reclassification		349,818		(2,102)		347,716		309,703		(5,446)		304,257
Reclassification adjustment for realized gain on foreign currency translation adjustments		(1,551)		645		(906)		(1,551)		645		(906)
Comprehensive income		348,267		(1,457)		346,810		314,847		(4,801)		310,046

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The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Cash Flows (in thousands):

	Nine Months Ended March 31, 2022
	As reported		Adjustment		As revised
Operating activities:
Net income	$	309,691	$	(5,446)	$	304,245
Income from discontinued operations		(341,982)		645		(341,337)
Loss from continuing operations		(32,291)		(4,801)		(37,092)
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on investments		—		807		807
Changes in assets and liabilities:
Prepaid expenses and other current assets		3,531		(1,133)		2,398
Accrued payroll and benefits		(23,221)		805		(22,416)
Deferred revenue		87,811		4,696		92,507
Net cash provided by operating activities-continuing operations		58,397		374		58,771
Net cash provided by operating activities		51,482		374		51,856
Investing activities:
Proceeds from sales of marketable securities		—		941		941
Purchases of marketable securities		—		(1,315)		(1,315)
Net cash used in investing activities-continuing operations		(1,500,303)		(374)		(1,500,677)
Net cash used in investing activities		(540,938)		(374)		(541,312)

The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Shareholders’ Equity (in thousands):

	As reported		Adjustment		As revised
June 30, 2021
Retained earnings	$	2,005,105	$	(5,700)	$	1,999,405
Accumulated other comprehensive loss		(7,365)		(1,853)		(9,218)
Total shareholders' equity		1,301,070		(7,553)		1,293,517
December 31, 2021
Retained earnings		1,964,954		(9,044)		1,955,910
Accumulated other comprehensive loss		(634)		(1,853)		(2,487)
Total shareholders' equity		1,287,890		(10,897)		1,276,993
March 31, 2022
Retained earnings		2,314,796		(11,146)		2,303,650
Accumulated other comprehensive loss		(2,209)		(1,208)		(3,417)
Total shareholders' equity		1,491,307		(12,354)		1,478,953
June 30, 2022
Retained earnings		2,322,810		(12,414)		2,310,396
Accumulated other comprehensive loss		(960)		(1,267)		(2,227)
Total shareholders' equity		1,505,067		(13,681)		1,491,386
December 31, 2022
Retained earnings		2,349,146		(13,505)		2,335,641
Total shareholders' equity		1,522,722		(13,505)		1,509,217
Three Months Ended March 31, 2022
Net income		349,842		(2,102)		347,740
Reclassification adjustment for realized gain on foreign currency translation adjustments		(1,551)		645		(906)
Nine Months Ended March 31, 2022
Net income		309,691		(5,446)		304,245
Reclassification adjustment for realized gain on foreign currency translation adjustments		(1,551)		645		(906)

3. Acquisitions

Walden University

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. Adtalem funded the purchase with the $800.0 million in Notes (as defined in Note 13 “Debt”), the $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

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growth strategy as a national leader in post-secondary education and leading provider of professional talent to the healthcare industry.

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 $139.1 million and $348.3 million and net loss of $2.4 million and $13.2 million from the operations of Walden for the three and nine months ended March 31, 2022, respectively. In addition, we incurred acquisition-related costs of $22.3 million in the nine months ended March 31, 2022, which were included in business acquisition and integration expense in the Consolidated Statements of Income.

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

	August 12,
	2021
Assets acquired:
Cash and cash equivalents	$	65,010
Restricted cash		18,389
Accounts receivable		22,091
Prepaid expenses and other current assets		8,819
Property and equipment		25,882
Operating lease assets		6,096
Deferred income taxes		59
Intangible assets		833,351
Goodwill		651,052
Other assets, net		21,316
Total assets acquired		1,652,065
Liabilities assumed:
Accounts payable		31,971
Accrued payroll and benefits		25,639
Accrued liabilities		1,620
Deferred revenue		10,958
Current operating lease liabilities		1,983
Long-term operating lease liabilities		4,343
Other liabilities		4,098
Total liabilities assumed		80,612
Net assets acquired	$	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 tax deductible. Factors that contributed to a purchase price resulting in the recognition of goodwill includes Walden’s strategic fit into Adtalem’s 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 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. We applied judgment which involved the use of 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		Nine Months Ended
	March 31,		March 31,
	2022		2022
Revenue	$	364,281	$	1,090,434
Net income	$	357,956	$	369,454

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 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 nine months ended March 31, 2022 (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 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 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,

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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. 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 loss of $0.4 million and $3.6 million in the three and nine months ended March 31, 2023, respectively, for post-closing working capital adjustments to the initial sales price for ACAMS, Becker, and OCL and a tax return to provision adjustment, which is included in (loss) gain on disposal of discontinued operations before income taxes in the Consolidated Statements of Income. These divestitures are the culmination of a long-term strategy to sharpen the focus of our portfolio and enhance our ability to address the 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, which includes only EduPristine balances as ACAMS, Becker, and OCL were sold as of March 31, 2022 (in thousands):

	March 31,
	2022
Assets:
Current assets:
Cash and cash equivalents	$	1,273
Accounts receivable, net		140
Prepaid expenses and other current assets		19
Total current assets held for sale		1,432
Noncurrent assets:
Other assets, net		93
Total noncurrent assets held for sale		93
Total assets held for sale	$	1,525
Liabilities:
Current liabilities:
Accounts payable	$	884
Deferred revenue		533
Total current liabilities held for sale		1,417
Noncurrent liabilities:
Other liabilities		41
Total noncurrent liabilities held for sale		41
Total liabilities held for sale	$	1,458

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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 loss from post-closing working capital adjustments and a tax return to provision adjustment, 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				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Revenue	$	—	$	41,105	$	—	$	153,444
Operating cost and expense:
Cost of educational services		—		6,872		—		26,846
Student services and administrative expense		3,993		30,256		6,734		123,563
Restructuring expense		—		551		—		1,500
Total operating cost and expense		3,993		37,679		6,734		151,909
(Loss) income from discontinued operations before income taxes		(3,993)		3,426		(6,734)		1,535
(Loss) gain on disposal of discontinued operations before income taxes		(402)		474,003		(3,576)		474,003
Benefit from (provision for) income taxes		1,701		(134,089)		3,222		(134,201)
(Loss) income from discontinued operations	$	(2,694)	$	343,340	$	(7,088)	$	341,337

5. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers (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 March 31, 2023
	Chamberlain		Walden		Medical and Veterinary		Consolidated
Tuition and fees	$	149,737	$	132,874	$	83,359	$	365,970
Other		—		—		3,112		3,112
Total	$	149,737	$	132,874	$	86,471	$	369,082

	Nine Months Ended March 31, 2023
	Chamberlain		Walden		Medical and Veterinary		Consolidated
Tuition and fees	$	426,538	$	395,715	$	255,312	$	1,077,565
Other		—		—		8,620		8,620
Total	$	426,538	$	395,715	$	263,932	$	1,086,185

	Three Months Ended March 31, 2022
	Chamberlain		Walden		Medical and Veterinary		Consolidated
Tuition and fees	$	142,550	$	139,081	$	79,881	$	361,512
Other		—		—		2,769		2,769
Total	$	142,550	$	139,081	$	82,650	$	364,281

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	Nine Months Ended March 31, 2022
	Chamberlain		Walden		Medical and Veterinary		Consolidated
Tuition and fees	$	417,310	$	348,325	$	247,502	$	1,013,137
Other		—		—		8,058		8,058
Total	$	417,310	$	348,325	$	255,560	$	1,021,195

In addition, see Note 20 “Segment Information” for a disaggregation of revenue by geographical region.

Performance Obligations and Revenue Recognition

Tuition and fees: 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.

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.

Arrangements 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 Title IV or other financial aid funding may pay after the academic term is complete.

Transaction Price

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

Students may receive discounts, scholarships, or refunds, which gives rise to variable consideration. The amounts of discounts or scholarships are generally applied to individual student accounts when such amounts are awarded. Therefore, the transaction price is immediately reduced directly by these discounts or scholarships from the amount of the standard tuition rate charged. Scholarships and discounts that are only applied to future tuition charged are considered a separate performance obligation if they represent a material right in accordance with ASC 606. In those instances, we defer the value of the related performance obligation associated with the future scholarship or discount based on estimates of future redemption based on our historical experience of student persistence toward completion of study. The contract liability associated with these material rights are presented as deferred revenue within current liabilities and other liabilities within noncurrent liabilities on the Consolidated Balance Sheets based on the amounts expected to be redeemed in the next 12 months. The contract liability amount associated with these material rights within current liabilities is $10.2 million, $8.2 million, and $7.5 million as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively, and the amount within noncurrent liabilities is $9.0 million, $8.6 million, and $8.7 million as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively. The noncurrent contract liability associated with these material rights is expected to be earned over approximately the next four fiscal years.

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. 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.

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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.

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.

Contract Balances

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 and to provide for any scholarships or discounts that are deemed a material right under ASC 606. As instruction is provided or the deferred value of material rights are redeemed, 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.

Deferred revenue within current liabilities is $175.5 million, $149.8 million, and $171.9 million as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively, and deferred revenue within noncurrent liabilities is $9.0 million, $8.6 million, and $8.7 million as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively. Revenue of $2.0 million and $147.6 million was recognized during the third quarter and first nine months of fiscal year 2023, respectively, that was included in the deferred revenue balance at the beginning of fiscal year 2023. Revenue of $0.7 million and $71.0 million of revenue was recognized during the third quarter and first nine months of fiscal year 2022, respectively, that was included in the deferred revenue balance at the beginning of fiscal year 2022. 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, increases from payments received related to academic terms commencing after the end of the reporting period, and increases from recognizing additional performance liabilities for material rights. In addition, for fiscal year 2022, the difference between the opening and closing balances of deferred revenue included an increase from the Walden acquisition.

6. Restructuring Charges

During the third quarter and first nine months 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 third quarter and first nine months ended of fiscal year 2022, Adtalem recorded restructuring charges primarily driven by workforce reductions and contract terminations related to synergy actions with regards to the Walden acquisition and Medical and Veterinary and Adtalem’s home office 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 represent severance pay and benefits for employees impacted by workforce reductions. Adtalem’s home

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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 March 31, 2023						Nine Months Ended March 31, 2023
	Real Estate and Other		Termination Benefits		Total		Real Estate and Other		Termination Benefits		Total
Chamberlain	$	—	$	—	$	—	$	818	$	—	$	818
Walden		53		—		53		3,120		54		3,174
Medical and Veterinary		81		340		421		6,994		340		7,334
Home Office and Other		804		—		804		5,430		950		6,380
Total	$	938	$	340	$	1,278	$	16,362	$	1,344	$	17,706

	Three Months Ended March 31, 2022						Nine Months Ended March 31, 2022
	Real Estate and Other		Termination Benefits		Total		Real Estate and Other		Termination Benefits		Total
Chamberlain	$	—	$	1,931	$	1,931	$	263	$	2,003	$	2,266
Walden		—		2,225		2,225		—		4,016		4,016
Medical and Veterinary		2,709		1,860		4,569		2,771		1,986		4,757
Home Office and Other		1,446		347		1,793		3,092		2,868		5,960
Total	$	4,155	$	6,363	$	10,518	$	6,126	$	10,873	$	16,999

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

Liability balance as of June 30, 2021	$	—
Increase in liability (separation and other charges)		11,851
Reduction in liability (payments and adjustments)		(11,038)
Liability balance as of June 30, 2022		813
Increase in liability (separation and other charges)		1,343
Reduction in liability (payments and adjustments)		(1,293)
Liability balance as of March 31, 2023	$	863

The liability balance of $0.9 million is recorded as accrued liabilities on the Consolidated Balance Sheets as of March 31, 2023. We continue to incur restructuring charges or reversals related to exiting leased space from previous restructuring activities.

7. Income Taxes

Our income tax provisions from continuing operations were $0.4 million and $5.9 million in the three and nine months ended March 31, 2023, respectively, and our income tax benefits from continuing operations were $8.4 million and $39.6 million in the three and nine months ended March 31, 2022, respectively. The three and nine months ended March 31, 2023 resulted in income tax provisions compared to income tax benefits in the year-ago periods primarily due to the impacts recognized in the year-ago periods related to the Walden acquisition. In addition, in the three months ended March 31, 2023, we recorded a net tax benefit of $6.2 million primarily for the release of a valuation allowance on certain deferred tax assets based on our reassessment of the amount of state net operating loss carryforwards that are more likely than not to be realized. 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, tax credits related to research and development expenditures, a net tax benefit for the release of a valuation allowance on state net operating loss carryforwards, and benefits associated with local tax incentives.

Three of Adtalem’s 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.

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8. Earnings per Share

As a result of incurring a net loss from continuing operations for the nine months ended March 31, 2022, potential common stock of 413 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. Based on the volume-weighted average price of Adtalem’s common stock per the terms of the ASR agreement, common stock of 102 thousand shares were contingently issuable by Adtalem under the ASR agreement and were included in the diluted earnings per share calculation for the nine months ended March 31, 2023 because the effect would have been dilutive. As of March 31, 2023, the ASR agreement is no longer outstanding. 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				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Numerator:
Net income (loss):
Continuing operations	$	48,563	$	4,400	$	78,202	$	(37,092)
Discontinued operations		(2,694)		343,340		(7,088)		341,337
Net income	$	45,869	$	347,740	$	71,114	$	304,245
Denominator:
Weighted-average basic shares outstanding		45,125		48,925		45,276		49,459
Effect of dilutive stock awards		676		452		711		—
Effect of ASR		—		—		102		—
Weighted-average diluted shares outstanding		45,801		49,377		46,089		49,459
Earnings (loss) per share:
Basic:
Continuing operations	$	1.08	$	0.09	$	1.73	$	(0.75)
Discontinued operations	$	(0.06)	$	7.02	$	(0.16)	$	6.90
Total basic earnings per share	$	1.02	$	7.11	$	1.57	$	6.15
Diluted:
Continuing operations	$	1.06	$	0.09	$	1.70	$	(0.75)
Discontinued operations	$	(0.06)	$	6.95	$	(0.15)	$	6.90
Total diluted earnings per share	$	1.00	$	7.04	$	1.54	$	6.15
Weighted-average antidilutive shares		429		2,074		424		2,187

9. Accounts Receivable and Credit Losses

We categorize our accounts receivable balances as trade receivables or financing receivables. Our trade receivables relate to student 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.

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

	March 31, 2023
		Gross		Allowance		Net
Trade receivables, current	$	138,392	$	(27,766)	$	110,626
Financing receivables, current		6,178		(3,520)		2,658
Accounts receivable, current	$	144,570	$	(31,286)	$	113,284
Financing receivables, current	$	6,178	$	(3,520)	$	2,658
Financing receivables, noncurrent		39,947		(13,670)		26,277
Total financing receivables	$	46,125	$	(17,190)	$	28,935

	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

	March 31, 2022
		Gross		Allowance		Net
Trade receivables, current	$	120,428	$	(26,696)	$	93,732
Financing receivables, current		6,996		(4,664)		2,332
Accounts receivable, current	$	127,424	$	(31,360)	$	96,064
Financing receivables, current	$	6,996	$	(4,664)	$	2,332
Financing receivables, noncurrent		40,170		(13,410)		26,760
Total financing receivables	$	47,166	$	(18,074)	$	29,092

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, fees, and 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 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.

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The credit quality analysis of financing receivables as of March 31, 2023 was as follows (in thousands):

	Amortized Cost Basis by Origination Year
	Prior		2019		2020		2021		2022		2023		Total
1-30 days past due	$	290	$	199	$	2	$	930	$	612	$	959	$	2,992
31-60 days past due		158		67		189		242		569		240		1,465
61-90 days past due		34		22		160		140		404		384		1,144
91-120 days past due		43		51		—		21		78		423		616
121-150 days past due		67		21		38		138		48		23		335
Greater than 150 days past due		7,945		1,058		718		2,966		1,261		19		13,967
Total past due		8,537		1,418		1,107		4,437		2,972		2,048		20,519
Current		6,173		1,034		811		5,648		3,591		8,349		25,606
Financing receivables, gross	$	14,710	$	2,452	$	1,918	$	10,085	$	6,563	$	10,397	$	46,125

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

	Amortized Cost Basis by Origination Year
	Prior		2018		2019		2020		2021		2022		Total
1-30 days past due	$	104	$	140	$	114	$	191	$	699	$	782	$	2,030
31-60 days past due		278		38		214		145		691		332		1,698
61-90 days past due		58		29		217		8		668		273		1,253
91-120 days past due		97		139		113		45		670		14		1,078
121-150 days past due		17		30		20		41		206		81		395
Greater than 150 days past due		6,978		876		1,077		683		1,596		377		11,587
Total past due		7,532		1,252		1,755		1,113		4,530		1,859		18,041
Current		4,687		2,229		1,483		1,167		8,910		5,864		24,340
Financing receivables, gross	$	12,219	$	3,481	$	3,238	$	2,280	$	13,440	$	7,723	$	42,381

The credit quality analysis of financing receivables as of March 31, 2022 was as follows (in thousands):

	Amortized Cost Basis by Origination Year
	Prior		2018		2019		2020		2021		2022		Total
1-30 days past due	$	93	$	98	$	90	$	179	$	473	$	342	$	1,275
31-60 days past due		344		137		318		218		297		128		1,442
61-90 days past due		113		228		30		131		575		273		1,350
91-120 days past due		39		239		44		93		249		155		819
121-150 days past due		259		4		—		15		81		102		461
Greater than 150 days past due		8,239		1,751		1,412		946		2,241		129		14,718
Total past due		9,087		2,457		1,894		1,582		3,916		1,129		20,065
Current		6,198		2,343		1,664		987		10,950		4,959		27,101
Financing receivables, gross	$	15,285	$	4,800	$	3,558	$	2,569	$	14,866	$	6,088	$	47,166

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.

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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 March 31, 2023						Nine Months Ended March 31, 2023
	Trade		Financing		Total		Trade		Financing		Total
Beginning balance	$	27,516	$	16,045	$	43,561	$	30,897	$	14,891	$	45,788
Write-offs		(11,575)		(161)		(11,736)		(31,751)		(777)		(32,528)
Recoveries		3,613		402		4,015		7,869		436		8,305
Provision for credit losses		8,212		904		9,116		20,751		2,640		23,391
Ending balance	$	27,766	$	17,190	$	44,956	$	27,766	$	17,190	$	44,956

	Three Months Ended March 31, 2022						Nine Months Ended March 31, 2022
	Trade		Financing		Total		Trade		Financing		Total
Beginning balance	$	21,335	$	17,710	$	39,045	$	11,559	$	16,832	$	28,391
Write-offs		(3,915)		(16)		(3,931)		(8,463)		(762)		(9,225)
Recoveries		2,670		11		2,681		6,024		28		6,052
Provision for credit losses		6,606		369		6,975		17,576		1,976		19,552
Ending balance	$	26,696	$	18,074	$	44,770	$	26,696	$	18,074	$	44,770

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 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 payment of $10.0 million during the third quarter of fiscal year 2022.

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 held a mortgage from DePaul College Prep for $46.8 million. The mortgage was due on July 31, 2024 as a balloon payment and bore interest at a rate of 4% per annum, payable monthly. The carrying value of the DePaul College Prep loan receivable was included in other assets, net on the Consolidated Balance Sheets as of June 30, 2022 and March 31, 2022 in the amount of $44.0 million and $43.6 million, respectively, and was determined by discounting the future cash flows using an average of current rates for similar arrangements, which was estimated at 7% per annum. On February 23, 2023, DePaul College Prep paid the mortgage in full, which resulted in derecognition of the note receivable from the Consolidated Balance Sheets.

10. Property and Equipment, Net

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

	March 31,		June 30,		March 31,
	2023		2022		2022
Land	$	38,345	$	44,478	$	44,478
Building		303,034		342,236		341,026
Equipment		220,731		268,352		266,384
Construction in progress		20,980		11,188		8,137
Property and equipment, gross		583,090		666,254		660,025
Accumulated depreciation		(330,293)		(376,328)		(365,487)
Property and equipment, net	$	252,797	$	289,926	$	294,538

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 held a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage was due on July 31, 2024 as a balloon payment and bore interest at a rate of 4% per

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annum, payable monthly. The buyer had 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 continued 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 Sheets. See Note 9 “Accounts Receivable and Credit Losses” for a discussion on the discounting of the note receivable. On February 23, 2023, DePaul College Prep paid the mortgage in full. The $46.8 million received during the third quarter of fiscal year 2023 is classified as an investing activity in the Consolidated Statements of Cash Flows. Upon receiving full repayment of the mortgage, Adtalem no longer is involved in the financing of the sale and therefore derecognized the note receivable, the financing payable, and the assets associated with the campus facility, which resulted in recognizing a gain on sale of assets of $13.3 million in the three and nine months ended March 31, 2023. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 20 “Segment Information.”

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 December 2034, 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 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 March 31, 2023, we entered into one additional operating lease that has not yet commenced. The 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. Subsequent to March 31, 2023, we entered into an additional lease, which will require approximately $13.4 million of minimum lease payments over the next 12 fiscal years.

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Operating lease cost	$	12,302	$	13,794	$	36,272	$	42,381
Sublease income		(3,301)		(3,599)		(10,388)		(10,430)
Total lease cost	$	9,001	$	10,195	$	25,884	$	31,951

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Maturities of lease liabilities by fiscal year as of March 31, 2023 were as follows (in thousands):

	Operating
Fiscal Year	Leases
2023 (remaining)	$	14,663
2024		56,090
2025		46,742
2026		33,944
2027		31,505
Thereafter		70,104
Total lease payments		253,048
Less: imputed interest		(42,452)
Present value of lease liabilities	$	210,596

Lease term and discount rate were as follows:

	March 31,
	2023
Weighted-average remaining operating lease term (years)		5.7
Weighted-average operating lease discount rate		6.0%

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)	$	11,643	$	13,071	$	36,461	$	39,799
Operating lease assets obtained in exchange for operating lease liabilities	$	7,489	$	42,293	$	20,528	$	48,609

Adtalem maintains agreements to lease either a portion or the full space of two facilities owned by Adtalem to DeVry University with expiration dates through December 2023. Adtalem maintains agreements to sublease either a portion or the full leased space at nine 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 could result in additional restructuring charges or reversals in future periods. Future minimum lease and sublease rental income under these agreements as of March 31, 2023, were as follows (in thousands):

Fiscal Year	Amount
2023 (remaining)	$	3,727
2024		10,261
2025		5,121
2026		2,038
Total lease and sublease rental income	$	21,147

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12. Goodwill and Intangible Assets

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

	March 31,		June 30,		March 31,
	2023		2022		2022
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		651,052		651,052		651,052
AUC		68,321		68,321		68,321
RUSM and RUSVM		237,173		237,173		237,173
Total	$	961,262	$	961,262	$	961,262

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

	March 31,		June 30,		March 31,
	2023		2022		2022
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		651,052		651,052		651,052
Medical and Veterinary		305,494		305,494		305,494
Total	$	961,262	$	961,262	$	961,262

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		—		651,052		—		651,052
March 31, 2022		4,716		651,052		305,494		961,262
June 30, 2022		4,716		651,052		305,494		961,262
March 31, 2023	$	4,716	$	651,052	$	305,494	$	961,262

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

	March 31, 2023				June 30, 2022				March 31, 2022
	Gross Carrying		Accumulated		Gross Carrying		Accumulated		Gross Carrying		Accumulated		Weighted-Average
	Amount		Amortization		Amount		Amortization		Amount		Amortization		Amortization Period
Student relationships	$	161,900	$	(127,978)	$	161,900	$	(87,457)	$	161,900	$	(66,955)	3 Years
Curriculum		56,091		(18,232)		56,091		(9,817)		56,091		(7,012)	5 Years
Total	$	217,991	$	(146,210)	$	217,991	$	(97,274)	$	217,991	$	(73,967)

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

	March 31,		June 30,		March 31,
	2023		2022		2022
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

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

	March 31,		June 30,		March 31,
	2023		2022		2022
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 $14.2 million and $48.9 million in the three and nine months ended March 31, 2023, respectively, and $26.8 million and $74.0 million in the three and nine months ended March 31, 2022, respectively. Future intangible asset amortization expense, by reporting unit, is expected to be as follows (in thousands):

Fiscal Year	Walden
2023 (remaining)	$	12,303
2024		35,644
2025		11,220
2026		11,220
2027		1,394
Total	$	71,781

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 March 31, 2023.

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 March 31, 2023.

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 March 31, 2023 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 exceeded carrying values. We have not yet

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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. If economic conditions deteriorate, interest rates continue to rise, or operating performance of our reporting units do not meet expectations such that we revise our long-term forecasts, we may recognize impairments of goodwill and other intangible assets in future periods.

13. Debt

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

	March 31,		June 30,		March 31,
	2023		2022		2022
Total debt:
Senior Secured Notes due 2028	$	404,950	$	405,882	$	800,000
Term Loan B		303,333		453,333		453,333
Total principal payments due		708,283		859,215		1,253,333
Unamortized debt discount and issuance costs		(13,854)		(20,307)		(27,973)
Total amount outstanding and noncurrent	$	694,429	$	838,908	$	1,225,360

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

	Maturity
Fiscal Year	Payments
2023 (remaining)	$	—
2024		—
2025		—
2026		—
2027		—
Thereafter		708,283
Total	$	708,283

Senior Secured Notes due 2028

On March 1, 2021, Adtalem Escrow Corporation (the “Escrow Issuer”), a wholly-owned subsidiary of Adtalem, issued $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 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

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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 for the nine months ended March 31, 2023. This debt was subsequently retired.

Accrued interest on the Notes of $1.9 million, $7.4 million, and $3.7 million is recorded within accrued liabilities on the Consolidated Balance Sheets as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively.

Credit Agreement

On February 12, 2021, Adtalem placed an $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%. 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.

On August 12, 2021, Adtalem replaced the Prior Credit Agreement (as defined below) by entering into its new credit agreement (the “Credit Agreement”) that provides for (1) a $850.0 million senior secured term loan with a maturity date of August 12, 2028 and (2) a $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 $400.0 million.

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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. As of March 31, 2023, the interest rate for borrowings under the Term Loan B facility was 8.84%, which approximated the effective interest rate. The proceeds of the Term Loan B were used, among other things, to finance the Walden acquisition, refinance Adtalem’s Prior Credit Agreement (as defined below), and pay fees and expenses related to the Walden acquisition. 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. We made additional Term Loan B prepayments of $100.0 million and $50.0 million on September 22, 2022 and November 22, 2022, respectively.

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 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 June 30, 2023. 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.

The Credit Agreement requires payment of a commitment fee equal to 0.25% as of March 31, 2023, of the unused portion of the Revolver. The commitment fee expense is recorded within interest expense in the Consolidated Statements of Income. The amount unused under the Revolver was $323.8 million as of March 31, 2023.

Prior Credit Agreement

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

Prior Term Loan B

For eurocurrency rate loans, Prior Term Loan B interest was equal to LIBOR or a LIBOR-equivalent rate plus 3%. For base rate loans, Prior Term Loan B interest was 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.

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 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 was fixed at 3.946% (including the impact of the 3% interest rate margin on LIBOR loans) for the applicable interest rate period.

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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 within interest expense in the periods in which the hedged transactions 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 nine months ended March 31, 2022.

Prior Revolver

Prior Revolver interest was 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 margin ranged from 1.75% to 2.75% for eurocurrency rate loans and from 0.75% to 1.75% for base rate loans.

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 Statements of Income in the nine months ended March 31, 2022. In addition, based on the $100.0 million and $50.0 million Term Loan B prepayments on September 22, 2022 and November 22, 2022, respectively, we expensed $4.3 million in interest expense in the Consolidated Statements of Income in the nine months ended March 31, 2023, which was the proportionate amount of the remaining unamortized debt discount and issuance costs related to the Term Loan B as of the prepayment dates. The following table summarizes the unamortized debt discount and issuance costs activity for the nine months ended March 31, 2023 (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		(839)		(1,317)		(1,521)		(3,677)
Debt discount and issuance costs write-off		(15)		(4,282)		—		(4,297)
Unamortized debt discount and issuance costs as of March 31, 2023	$	5,871	$	7,983	$	6,862	$	20,716

Letters of Credit

Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of March 31, 2023, in favor of the U.S. Department of Education (“ED”) on behalf of Walden, which allows Walden to participate in Title IV programs. In addition, Adtalem has posted a letter of credit under its Revolver in the amount of $76.2 million as of March 31, 2023, in favor of ED, which also allows Walden to participate in Title IV programs.

Adtalem had a letter of credit of $68.4 million, 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 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.

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Interest Expense

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Notes interest expense	$	5,568	$	11,000	$	16,733	$	33,000
Term Loan B interest expense		6,468		9,941		19,919		27,544
Term Loan B ticking fees		—		—		—		5,330
Prior Term Loan B interest expense		—		—		—		1,272
Term Loan B debt discount and issuance costs write-off		—		12,471		4,282		12,471
Notes issuance costs write-off		—		—		15		—
Gain on extinguishment of debt		—		—		(71)		—
Unused bridge fee		—		—		—		10,329
Prior Credit Facility issuance costs write-off		—		—		—		6,000
Swap settlement		—		—		—		4,525
Amortization of debt discount and issuance costs		1,155		2,025		3,677		5,681
Other		1,266		1,148		3,251		3,755
Total interest expense	$	14,457	$	36,585	$	47,806	$	109,907

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

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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 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.

Adtalem was in compliance with the debt covenants related to the Credit Agreement and the Notes covenants as of March 31, 2023.

14. Redeemable Noncontrolling Interest

Prior to the third quarter of fiscal year 2022, Adtalem maintained a 69% ownership interest in EduPristine with the remaining 31% owned by Kaizen Management Advisors (“Kaizen”), an India-based private equity firm. Beginning on March 26, 2020, Adtalem had the right to exercise a call option and purchase any remaining EduPristine stock from Kaizen. Likewise, Kaizen 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 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 was out of the control of Adtalem, authoritative guidance required the redeemable noncontrolling interest, which included the value of the put option, to be displayed outside of the equity section of the Consolidated Balance Sheets.

15. Share Repurchases

Open Market Share Repurchase Programs

On February 4, 2020, we announced that the Board of Directors (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 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. Adtalem made share

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repurchases under its share repurchase programs as follows, which includes the market price of the shares, commissions, and excise tax (in thousands, except shares and per share data):

	Three Months Ended				Nine Months Ended				Life-to-Date
	March 31,				March 31,				Current Share
	2023		2022		2023		2022		Repurchase Program
Total number of share repurchases		1,228,890		—		1,228,890		—		1,228,890
Total cost of share repurchases	$	47,770	$	—	$	47,770	$	—	$	47,770
Average price paid per share	$	38.87	$	—	$	38.87	$	—	$	38.87

As of March 31, 2023, $252.2 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. These repurchases may be made through the open market, including block purchases, in 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. Repurchases under our share repurchase programs reduce the weighted-average number of shares 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 4,709,576 shares 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 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 was 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 nine months ended March 31, 2023. 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 initially recorded as a reduction in additional paid-in capital was reclassified to treasury stock and an additional $13.2 million was recorded in treasury stock, which represented our final cash settlement payment.

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16. Accumulated Other Comprehensive Loss

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Foreign currency translation adjustments
Beginning balance	$	(2,227)	$	(2,487)	$	(2,227)	$	(2,523)
(Loss) gain on foreign currency translation		—		(24)		—		12
Reclassification from other comprehensive income		—		(906)		—		(906)
Ending balance	$	(2,227)	$	(3,417)	$	(2,227)	$	(3,417)
Interest rate swap
Beginning balance, gross	$	—	$	—	$	—	$	(8,926)
Beginning balance, tax effect		—		—		—		2,231
Beginning balance, net of tax		—		—		—		(6,695)
Reclassification from other comprehensive income		—		—		—		6,695
Ending balance	$	—	$	—	$	—	$	—
Total ending balance	$	(2,227)	$	(3,417)	$	(2,227)	$	(3,417)

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 generally with a four-year graduated vesting from the grant date and expire ten years from the 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 March 31, 2023, 2,714,891 shares were authorized for issuance but not issued or subject to outstanding awards under Adtalem’s stock-based incentive plans.

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The following is a summary of options activity for the nine months ended March 31, 2023:

				Weighted-Average
				Remaining	Aggregate
	Number of	Weighted-Average		Contractual Life	Intrinsic Value
	Options	Exercise Price		(in years)	(in thousands)
Outstanding as of July 1, 2022	1,144,372	$	35.36
Exercised	(62,214)		26.06
Forfeited	(3,975)		36.46
Expired	(1,575)		18.60
Outstanding as of March 31, 2023	1,076,608		35.92	5.7	$	4,346
Exercisable as of March 31, 2023	805,802	$	35.91	5.0	$	3,456

The total intrinsic value of options exercised for the nine months ended March 31, 2023 and 2022 was $0.8 million and $6.8 million, respectively.

The fair value of Adtalem’s options was estimated using a binomial model. This model uses historical cancellation and exercise experience of Adtalem to determine the option value. It also 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 nine months of fiscal year 2022 was $14.72 per share. No stock options were granted during the first nine months of fiscal year 2023. The fair value of Adtalem’s option grants was estimated assuming the following weighted-average assumptions:

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

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.

During the first nine months of fiscal year 2023, Adtalem granted 521,690 RSUs to selected employees and directors. Of these, 200,720 were performance-based RSUs and 320,970 were non-performance-based RSUs. We issue performance-based RSUs 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 Compensation Committee of the Board. Prior to fiscal year 2023, we issued non-performance-based RSUs generally with a four-year graduated vesting from the grant date. Beginning in fiscal year 2023, we issue non-performance-based RSUs generally with a three-year graduated vesting from 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 nine months ended March 31, 2023:

		Weighted-Average
	Number of	Grant Date
	RSUs	Fair Value
Unvested as of July 1, 2022	1,171,692	$	35.05
Granted	521,690		40.08
Vested	(313,167)		37.33
Forfeited	(107,053)		36.97
Unvested as of March 31, 2023	1,273,162	$	36.39

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The weighted-average estimated grant date fair values of RSUs granted at market price under Adtalem’s stock-based incentive plans during the first nine months of fiscal years 2023 and 2022 were $40.08 and $35.15, per share, respectively.

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Stock-based compensation	$	2,795	$	4,673	$	10,908	$	18,604
Income tax benefit		(721)		(1,137)		(3,024)		(3,630)
Stock-based compensation, net of tax	$	2,074	$	3,536	$	7,884	$	14,974

As of March 31, 2023, $23.6 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 2.1 years. The total fair value of options and RSUs vested during the nine months ended March 31, 2023 and 2022 was $14.0 million and $14.5 million, respectively. There was no capitalized stock-based compensation cost as of each of March 31, 2023, June 30, 2022, and March 31, 2022. Adtalem issues new shares of common stock to satisfy option exercises and RSU vests.

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.

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 included in prepaid expenses

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and other current assets on the Consolidated Balance Sheets as of March 31, 2023, June 30, 2022, and March 31, 2022 was $12.0 million, $17.8 million, and $20.2 million, respectively. These investments are recorded at fair value based upon quoted market prices using Level 1 inputs.

The carrying value of the credit extension programs, which approximates its fair value, is included in accounts receivable, net and other assets, net on the Consolidated Balance Sheets and was $28.9 million, $27.5 million, and $29.1 million as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively, and is classified as Level 2. See Note 9 “Accounts Receivable and Credit Losses” for additional information on these credit extension programs.

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep. In connection with the sale, Adtalem held a mortgage from DePaul College Prep for $46.8 million. The mortgage was due on July 31, 2024 as a balloon payment and bore 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, is included in other assets, net on the Consolidated Balance Sheets and was $44.0 million and $43.6 million as of June 30, 2022 and March 31, 2022, respectively. Fair value was estimated by discounting the future cash flows using an average of current rates for similar arrangements, which was estimated at 7% per annum and was classified as Level 2. On February 23, 2023, DePaul College Prep paid the mortgage in full, which resulted in derecognition of the note receivable from the Consolidated Balance Sheets.

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 included in accrued liabilities on the Consolidated Balance Sheets as of March 31, 2023, June 30, 2022, and March 31, 2022 were $12.2 million, $16.3 million, and $20.0 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 March 31, 2023, June 30, 2022, and March 31, 2022, borrowings under our long-term debt agreements were $708.3 million, $859.2 million, and $1,253.3 million, respectively. The fair value of the Notes was $384.7 million as of March 31, 2023, which is based upon quoted market prices and is classified as Level 1. The fair value of the Term Loan B was $303.7 million as of March 31, 2023, 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.

As of March 31, 2023, June 30, 2022, and March 31, 2022, there were no assets or liabilities measured at fair value using Level 3 inputs.

We recorded an impairment of $5.0 million on an equity investment with no readily determinable fair value within other income (expense), net in the Consolidated Statements of Income in the nine months ended March 31, 2023 as the carrying value is no longer recoverable. Since initial recognition of the investment, there have been no upward or downward adjustments as a result of observable price changes. Following the impairment, the carrying amount of $5.0 million was reduced to zero.

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, 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 March 31, 2023, 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

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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 March 31, 2023. 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 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 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 three 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 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 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 plaintiff later filed an amended complaint asserting similar claims with a new lead plaintiff, Dave McCormick. After discussions among the parties, the court granted a Motion for Preliminary Approval of Class Action Settlement (the “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 Sheets as of March 31, 2023, June 30, 2022, and March 31, 2022. 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 Sheets as of June 30, 2020 and charged the contingency loss within discontinued operations in the Consolidated Statements of 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 2023. This loss contingency estimate could differ from actual results and result in additional charges or reversals in future periods. The court issued an order approving the 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 McCormick Settlement, a notice of appeal of the court’s order approving the McCormick Settlement. On November 5, 2020, Richardo Peart (“Peart”), another class member who objected to the terms of the McCormick Settlement, filed a similar notice of appeal. Those appeals were consolidated before the Appellate Court of Illinois, First District and 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 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 represented 552 individuals (“Stoltmann Claimants”) who opted out of 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.

On November 2, 2021, Adtalem and the Stoltmann Law Offices participated in a mediation to resolve the claims of the Stoltmann Claimants. Adtalem and the Stoltmann Law Offices reached agreement on settlement terms (“Stoltmann Settlement”). The Adtalem Board of Directors approved the Stoltmann Settlement. The settlement amount, $20,375,000, was reduced by $75,000 for each of 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

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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 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, 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 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 arguing that plaintiff’s lawsuit is expressly preempted by Title V of the Gramm-Leach-Bliley Act. On February 1, 2023, the Court granted Chamberlain’s motion to dismiss plaintiff’s complaint. On March 3, 2023, plaintiff filed an appeal, which is pending.

On January 12, 2022, Walden was served with a complaint filed in the United States District Court for the District of Maryland by Aljanal Carroll, Claudia Provost Charles, and Tiffany Fair against Walden for damages, injunctive relief, and 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 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. On November 27, 2022, the Court denied Walden’s motion to dismiss the complaint. Plaintiffs filed an amended complaint to add an additional plaintiff, Tareion Fluker. Walden answered the amended complaint on February 2, 2023. The parties have agreed to a non-binding mediation scheduled to begin on May 4, 2023. The court has granted a 30 day stay of discovery pending the outcome of mediation.

On June 6, 2022, plaintiff Rajesh Verma filed a lawsuit on behalf of himself and a class of similarly situated individuals in the Circuit Court of the Fourth Judicial Circuit, Duval County Florida, against Walden alleging that Walden was placing telephonic sales calls to persons on the National Do-Not-Call Registry, in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. Although originally filed in state court, Walden removed the case to federal court and filed a motion to dismiss plaintiff’s complaint. On August 26, 2022, plaintiff filed a motion to remand Count I of the complaint to state court. On March 2, 2023, plaintiff filed an amended complaint to add a Florida state law claim against Walden under the Florida Telephone Solicitation Act (“FTSA”). On March 16, 2023, Walden filed its answer to the amended complaint. On March 29, 2023, Walden’s motion to dismiss plaintiff’s complaint and plaintiff’s motion to remand Count I of the complaint were denied. Discovery is ongoing and the next case management hearing is scheduled for May 8, 2023.

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

We present three 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.

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Walden – Offers more than 100 online certificate, bachelor’s, master’s, and doctoral 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, 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.”

Certain expenses previously allocated to 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 are being allocated to the Chamberlain, Walden, and Medical and Veterinary segments.

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. Adjusted operating income excludes special items, which consists of deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, intangible asset amortization, and gain on sale of assets. 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 allocate resources based on segment assets. The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies.”

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Revenue:
Chamberlain	$	149,737	$	142,550	$	426,538	$	417,310
Walden		132,874		139,081		395,715		348,325
Medical and Veterinary		86,471		82,650		263,932		255,560
Total consolidated revenue	$	369,082	$	364,281	$	1,086,185	$	1,021,195
Adjusted operating income:
Chamberlain	$	39,589	$	38,910	$	99,820	$	85,556
Walden		24,628		25,843		78,181		68,796
Medical and Veterinary		16,893		18,140		56,506		50,157
Home Office and Other		(8,142)		(6,685)		(16,867)		(26,467)
Total consolidated adjusted operating income		72,968		76,208		217,640		178,042
Reconciliation to Consolidated Financial Statements:
Deferred revenue adjustment		—		—		—		(8,561)
CEO transition costs		—		—		—		(6,195)
Restructuring expense		(1,278)		(10,518)		(17,706)		(16,999)
Business acquisition and integration expense		(11,346)		(5,924)		(35,702)		(41,537)
Intangible amortization expense		(14,232)		(26,817)		(48,936)		(73,967)
Gain on sale of assets		13,317		—		13,317		—
Total consolidated operating income		59,429		32,949		128,613		30,783
Interest expense		(14,457)		(36,585)		(47,806)		(109,907)
Other income (expense), net		3,980		(327)		3,301		2,435
Total consolidated income (loss) from continuing operations before income taxes	$	48,952	$	(3,963)	$	84,108	$	(76,689)
Capital expenditures:
Chamberlain	$	4,002	$	3,255	$	6,920	$	9,869
Walden		1,198		1,629		2,291		4,561
Medical and Veterinary		1,277		891		2,192		2,650
Home Office and Other		2,832		1,702		7,653		5,169
Total consolidated capital expenditures	$	9,309	$	7,477	$	19,056	$	22,249
Depreciation expense:
Chamberlain	$	4,405	$	4,738	$	12,985	$	14,048
Walden		2,439		2,573		7,303		6,801
Medical and Veterinary		3,231		3,397		9,367		10,497
Home Office and Other		82		633		1,963		2,125
Total consolidated depreciation expense	$	10,157	$	11,341	$	31,618	$	33,471
Intangible asset amortization expense:
Walden	$	14,232	$	26,817	$	48,936	$	73,967
Total consolidated intangible asset amortization expense	$	14,232	$	26,817	$	48,936	$	73,967

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Adtalem conducts its educational operations in the U.S., Barbados, St. Kitts, and St. Maarten. Revenue and long-lived assets by geographic area are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Revenue from unaffiliated customers:
Domestic operations	$	282,611	$	281,631	$	822,253	$	765,635
Barbados, St. Kitts, and St. Maarten		86,471		82,650		263,932		255,560
Total consolidated revenue	$	369,082	$	364,281	$	1,086,185	$	1,021,195
Long-lived assets:
Domestic operations	$	266,985	$	296,838	$	266,985	$	296,838
Barbados, St. Kitts, and St. Maarten		159,083		184,668		159,083		184,668
Total consolidated long-lived assets	$	426,068	$	481,506	$	426,068	$	481,506

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. 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

Beginning in the second quarter of fiscal year 2022, Adtalem 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 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 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. See Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements for additional discontinued operations information.

We present three 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, 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.

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.”

“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.

Certain expenses previously allocated to 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 are being allocated to the Chamberlain, Walden, and Medical and Veterinary segments.

Revision to Previously Issued Financial Statements

During the third quarter of fiscal year 2023, Adtalem identified an error in its revenue recognition related to certain scholarship programs within its Medical and Veterinary segment. Certain scholarships and discounts offered within that segment provide students a discount on future tuition that constitute a material right under Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers” that should be accounted for as a separate performance obligation within a contract. Adtalem assessed the materiality of this error individually and in the aggregate with other previously identified errors to prior periods’ Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” and SAB 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” codified in ASC 250 “Accounting Changes and Error Corrections.” Adtalem concluded that the errors were not material to prior periods and therefore, amendments of previously filed reports are not required. However, Adtalem determined it was appropriate to revise its previously issued financial statements. In accordance with ASC 250, Adtalem corrected prior periods presented herein by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the Consolidated Financial Statements. In connection with this revision, Adtalem also corrected other immaterial errors in the prior periods, including certain errors that had previously been adjusted for as out of period corrections in the period identified. See Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for additional information.

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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 $1.5 billion in cash (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, 2022 (“2022 Form 10-K”).

Third Quarter Highlights

Financial and operational highlights for the third quarter of fiscal year 2023 include:

● Adtalem revenue increased $4.8 million, or 1.3%, in the third quarter of fiscal year 2023 compared to the year-ago period driven by increased revenue at Chamberlain and Medical and Veterinary partially offset by a revenue decline at Walden.

● Net income of $45.9 million ($1.00 diluted earnings per share) decreased $301.9 million ($6.04 diluted earnings per share) in the third quarter of fiscal year 2023 compared to net income of $347.7 million in the year-ago period. This decrease was primarily driven by the gain on the disposal of ACAMS, Becker, and OCL in the year-ago period. Adjusted net income of $51.6 million ($1.13 diluted adjusted earnings per share) increased $10.2 million ($0.29 diluted adjusted earnings per share), or 24.7%, in the third quarter of fiscal year 2023 compared to the year-ago period. This increase was driven by a decrease in interest expense for the third quarter of fiscal year 2023 compared to the year-ago period.

● For the January 2023 and March 2023 sessions, total student enrollment at Chamberlain increased 1.8% and 2.0%, respectively, compared to the same sessions last year.

● As of March 31, 2023, total student enrollment at Walden decreased 7.9% compared to March 31, 2022.

● For the January 2023 semester, total student enrollment at the medical and veterinary schools increased 1.6% compared to the same semester last year.

● Adtalem repurchased a total of 1,228,890 shares of Adtalem’s common stock under its share repurchase program at an average cost of $38.87 per share during the third quarter of fiscal year 2023. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.

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 our students and 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 and employees.

Management believes that enrollments are negatively impacted at Chamberlain and Walden, and to a lesser extent at Medical and Veterinary, by disruptions in the nursing and healthcare markets caused by COVID-19. The amount of revenue, operating income, and earnings per share losses in the third quarter and first nine months of fiscal year 2023 and 2022 driven by this disruption are not quantifiable. While COVID-19 continues to dissipate, management anticipates that the stress caused by COVID-19 on healthcare professionals will continue to negatively affect consolidated revenue, operating income, and earnings per share during the remainder of fiscal year 2023 and for as long as the pandemic and the various surges continue to stress healthcare professionals.

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Although COVID-19 has had a negative effect on the operating results of all four reporting units that contain goodwill and indefinite-lived intangible assets as of March 31, 2023, none of the effects are considered significant enough to create an impairment triggering event during the third quarter of fiscal year 2023. In addition, our annual impairment assessment performed as of May 31, 2022 did not identify any impairments.

Results of Operations

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of educational services	44.9	%	45.6	%	44.6	%	48.8	%
Student services and administrative expense	39.2	%	40.9	%	39.8	%	42.4	%
Restructuring expense	0.3	%	2.9	%	1.6	%	1.7	%
Business acquisition and integration expense	3.1	%	1.6	%	3.3	%	4.1	%
Gain on sale of assets	(3.6)	%	—	%	(1.2)	%	0.0	%
Total operating cost and expense	83.9	%	91.0	%	88.2	%	97.0	%
Operating income	16.1	%	9.0	%	11.8	%	3.0	%
Interest expense	(3.9)	%	(10.0)	%	(4.4)	%	(10.8)	%
Other income (expense), net	1.1	%	(0.1)	%	0.3	%	0.2	%
Income (loss) from continuing operations before income taxes	13.3	%	(1.1)	%	7.7	%	(7.5)	%
(Provision for) benefit from income taxes	(0.1)	%	2.3	%	(0.5)	%	3.9	%
Income (loss) from continuing operations	13.2	%	1.2	%	7.2	%	(3.6)	%
(Loss) income from discontinued operations, net of tax	(0.7)	%	94.3	%	(0.7)	%	33.4	%
Net income	12.4	%	95.5	%	6.5	%	29.8	%

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Revenue

The following tables present revenue by segment detailing the changes from the year-ago periods (in thousands):

	Three Months Ended March 31, 2023
	Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2022 as reported	$	142,550		$	139,081		$	82,650		$	364,281
Organic growth (decline)		7,187			(6,207)			3,821			4,801
Fiscal year 2023 as reported	$	149,737		$	132,874		$	86,471		$	369,082
Fiscal year 2023 % change:
Organic growth (decline)		5.0	%		(4.5)	%		4.6	%		1.3	%

	Nine Months Ended March 31, 2023
	Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2022 as reported	$	417,310		$	348,325		$	255,560		$	1,021,195
Organic growth (decline)		9,228			(16,760)			8,372			840
Effect of acquisitions		—			64,150			—			64,150
Fiscal year 2023 as reported	$	426,538		$	395,715		$	263,932		$	1,086,185
Fiscal year 2023 % change:
Organic growth (decline)		2.2	%		(4.8)	%		3.3	%		0.1	%
Effect of acquisitions		—			18.4	%		—			6.3	%
Fiscal year 2023 % change as reported		2.2	%		13.6	%		3.3	%		6.4	%

Chamberlain

Chamberlain Student Enrollment:

	Fiscal Year 2023
Session	July 2022		Sept. 2022		Nov. 2022		Jan. 2023		Mar. 2023
Total students	31,371		33,153		33,390		34,760		34,847
% change from prior year	(4.1)	%	(4.0)	%	(0.8)	%	1.8	%	2.0	%
	Fiscal Year 2022
Session	July 2021		Sept. 2021		Nov. 2021		Jan. 2022		Mar. 2022		May 2022
Total students	32,729		34,539		33,648		34,141		34,158		32,891
% change from prior year	1.6	%	(2.8)	%	(2.1)	%	(4.5)	%	(4.3)	%	(5.8)	%

Chamberlain revenue increased 5.0%, or $7.2 million, to $149.7 million in the third quarter and increased 2.2%, or $9.2 million, to $426.5 million in the first nine months of fiscal year 2023 compared to the year-ago periods, driven by an increase in total enrollment and in fee revenue along with lower scholarships and discounts. Enrollment has begun to recover in several graduate and doctoral programs. These improvements have been partially offset by a decrease in total student enrollment in several undergraduate programs, with the most pronounced being in the Registered Nurse to Bachelor of Science in Nursing (“RN-to-BSN”) online degree program. Management believes these decreases may partially be driven by prolonged stress on healthcare professionals. 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.

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Tuition Rates:

Tuition for the BSN onsite and online degree program ranges from $675 to $730 per credit hour. Tuition for the 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 2023
	September 30,		December 31,		March 31,
Period	2022		2022		2023
Total students	40,772		37,956		39,427
% change from prior year	(9.2)	%	(7.8)	%	(7.9)	%
	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 total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue decreased 4.5%, or $6.2 million, to $132.9 million in the third quarter and increased 13.6%, or $47.4 million, to $395.7 million in the first nine months of fiscal year 2023 compared to the year-ago periods. Excluding the timing of the Walden acquisition in the prior year, Walden revenue decreased 4.8%, or $16.8 million, in the first nine months of fiscal year 2023 compared to the year-ago period. In the first nine months of fiscal year 2022, $8.6 million was excluded from revenue due to an adjustment required for purchase accounting to record Walden’s deferred revenue at fair value. The first nine months of fiscal year 2023 did not require a similar adjustment. Excluding the timing of the Walden acquisition in the prior year and the $8.6 million deferred revenue adjustment, revenue decreased 7.1%, or $25.3 million in the first nine months of fiscal year 2023 compared to the year-ago period. Management believes that the decrease in total enrollment compared to the prior year, which is resulting in the lower revenue, may be driven by prolonged stress on healthcare professionals. 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 economic impact from the volatile supply chain disruptions that are a hallmark of the current global macroeconomic environment.

Tuition Rates:

On a per credit hour basis, tuition for Walden programs range from $130 per credit hour to $1,060 per credit hour, with the wide range due to the nature of the programs. General education courses are charged at $333 per credit hour. Other programs such as those with a subscription-based learning modality or those billed on a subscription period or term basis range from $1,500 to $7,180 per term. Students are charged a technology fee that ranges from $50 to $230 per term as well as a clinical fee of $160 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 $1,000 to $2,550 per event. In most cases, these tuition rates, event charges and fees represent increases of approximately 3.0% to 6.6% 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.

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Medical and Veterinary

Medical and Veterinary Student Enrollment:

	Fiscal Year 2023
Semester	Sept. 2022		Jan. 2023
Total students	5,634		5,312
% change from prior year	3.4	%	1.6	%
	Fiscal Year 2022
Semester	Sept. 2021		Jan. 2022		May 2022
Total students	5,449		5,228		5,304
% change from prior year	(6.9)	%	(1.2)	%	3.5	%

Medical and Veterinary revenue increased 4.6%, or $3.8 million, to $86.5 million in the third quarter and increased 3.3%, or $8.4 million, to $263.9 million in the first nine months of fiscal year 2023 compared to the year-ago periods, driven by tuition rate increases at all three institutions in this segment and increased enrollment at in the segment, partially offset by the higher use of scholarships to attract and retain students at AUC and RUSM. Medical and Veterinary’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.

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.

Tuition Rates:

● Effective for semesters beginning in September 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 $24,990 and $27,955, respectively, per semester. These tuition rates represent a 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, 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 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 $25,988 and $28,676, respectively, per semester. These tuition rates represent a 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 $22,683 per semester effective September 2022. For students who entered RUSVM before September 2018, tuition rates for the pre-clinical and clinical curriculum are $21,069 and $26,449, respectively, per semester effective September 2022. All of these tuition rates represent a 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.

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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 tables present cost of educational services by segment detailing the changes from the year-ago periods (in thousands):

	Three Months Ended March 31, 2023
	Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2022 as reported	$	62,707		$	55,960		$	47,360		$	166,027
Cost increase (decrease)		2,546			(4,935)			2,182			(207)
Fiscal year 2023 as reported	$	65,253		$	51,025		$	49,542		$	165,820
Fiscal year 2023 % change:
Cost increase (decrease)		4.1	%		(8.8)	%		4.6	%		(0.1)	%

	Nine Months Ended March 31, 2023
	Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2022 as reported	$	194,992		$	149,691		$	153,814		$	498,497
Cost decrease		(8,923)			(23,097)			(4,720)			(36,740)
Effect of acquisitions		—			23,011			—			23,011
Fiscal year 2023 as reported	$	186,069		$	149,605		$	149,094		$	484,768
Fiscal year 2023 % change:
Cost decrease		(4.6)	%		(15.4)	%		(3.1)	%		(7.4)	%
Effect of acquisitions		—			15.4	%		—			4.6	%
Fiscal year 2023 % change as reported		(4.6)	%		(0.1)	%		(3.1)	%		(2.8)	%

Cost of educational services decreased 0.1%, or $0.2 million, to $165.8 million in the third quarter and decreased 2.8%, or $13.7 million, to $484.8 million in the first nine months of fiscal year 2023 compared to the year-ago periods. Excluding the timing of the Walden acquisition in the prior year, cost of educational services decreased 7.4%, or $36.7 million, in the first nine months of fiscal year 2023 compared to the year-ago period. These cost decreases were primarily driven by cost reduction efforts across all institutions including workforce reductions.

As a percentage of revenue, cost of educational services was 44.9% and 44.6% in the third quarter and first nine months of fiscal year 2023, respectively, compared to 45.6% and 48.8% in the year-ago periods. The decreases in the percentages were primarily the result of cost reduction efforts and the influence of Walden’s higher gross margins, which impacted the full first nine months of fiscal year 2023 compared to only a portion of the first nine months of fiscal year 2022. Walden’s fully online operating model results in lower comparable cost of educational services.

Student Services and Administrative Expense

The student services and administrative expense category includes expenses related to 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 tables present student services and administrative expense by segment detailing the changes from the year-ago periods (in thousands):

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	Three Months Ended March 31, 2023
	Chamberlain			Walden			Medical and Veterinary			Home Office and Other		Consolidated
Fiscal year 2022 as reported	$	40,934		$	84,094		$	17,150		$	6,685	$	148,863
Cost increase (decrease)		3,961			(56)			2,886			1,457		8,248
Intangible amortization expense change		—			(12,585)			—			—		(12,585)
Fiscal year 2023 as reported	$	44,895		$	71,453		$	20,036		$	8,142	$	144,526
Fiscal year 2023 % change:
Cost increase (decrease)		9.7	%		(0.1)	%		16.8	%		NM		5.5	%
Effect of intangible amortization expense change		—			(15.0)	%		—			NM		(8.5)	%
Fiscal year 2023 % change as reported		9.7	%		(15.0)	%		16.8	%		NM		(2.9)	%

	Nine Months Ended March 31, 2023
	Chamberlain			Walden			Medical and Veterinary			Home Office and Other		Consolidated
Fiscal year 2022 as reported	$	136,763		$	212,366		$	51,589		$	32,661	$	433,379
Cost increase (decrease)		3,886			2,378			6,744			(9,600)		3,408
Effect of acquisitions		—			27,152			—			—		27,152
Intangible amortization expense change		—			(25,031)			—			—		(25,031)
CEO transition costs change		—			—			—			(6,195)		(6,195)
Fiscal year 2023 as reported	$	140,649		$	216,865		$	58,333		$	16,866	$	432,713
Fiscal year 2023 % change:
Cost increase		2.8	%		1.1	%		13.1	%		NM		0.8	%
Effect of acquisitions		—			12.8	%		—			NM		6.3	%
Effect of intangible amortization expense change		—			(11.8)	%		—			NM		(5.8)	%
Effect of CEO transition costs change		—			—			—			NM		(1.4)	%
Fiscal year 2023 % change as reported		2.8	%		2.1	%		13.1	%		NM		(0.2)	%

Student services and administrative expense decreased 2.9%, or $4.3 million, to $144.5 million in the third quarter and decreased 0.2%, or $0.7 million, to $432.7 million in the first nine months of fiscal year 2023 compared to the year-ago periods. Excluding intangible amortization expense, student services and administrative expense increased 5.5%, or $8.2 million, in the third quarter compared to the year-ago period. Excluding the timing of the Walden acquisition in the prior year, intangible amortization expense, and CEO transition costs, student services and administrative expense increased 0.8%, or $3.4 million, in the first nine months of fiscal year 2023 compared to the year-ago period. The cost increases in the third quarter and the first nine months of fiscal year 2023 were primarily driven by an increase in marketing expense, partially offset by cost reduction at home office.

As a percentage of revenue, student services and administrative expense was 39.2% and 39.8% in the third quarter and first nine months of fiscal year 2023, respectively, compared to 40.9% and 42.4% in the year-ago periods. The decreases in the percentages were primarily the result of a decrease in intangible amortization expense in the third quarter and first nine months of fiscal year 2023 and a decrease in the CEO transition costs incurred in the first nine months of fiscal year 2022.

Restructuring Expense

Restructuring expense in the third quarter and first nine months of fiscal year 2023 was $1.3 million and $17.7 million, respectively, compared to $10.5 million and $17.0 million in the year-ago periods. The decrease in restructuring expense in the third quarter of fiscal year 2023 compared to the year-ago period was primarily driven by a reduction in restructuring activity including severance charges related to workforce reductions and real estate consolidations at Medical and Veterinary and Adtalem’s home office. The increase in restructuring expense in the first nine months of fiscal year 2023 compared to the year-ago period was primarily driven by real estate consolidations at Walden, Medical and Veterinary,

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and Adtalem’s home office resulting in impairments on operating lease assets and property and equipment. See Note 6 “Restructuring Charges” to the Consolidated Financial Statements for additional information on restructuring charges.

We continue to incur restructuring charges or reversals related to exiting leased space from previous restructuring activities.

Business Acquisition and Integration Expense

Business acquisition and integration expense in the third quarter and first nine months of fiscal year 2023 was $11.3 million and $35.7 million, respectively, compared to $5.9 million and $41.5 million in the year-ago periods. 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. Certain costs relating to this transformation are included in business acquisition and integration costs in the Consolidated Statements of Income. We expect to incur additional integration costs through the remainder of fiscal year 2023 and in fiscal year 2024.

Gain on Sale of Assets

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep Foundation (“DePaul College Prep”) for $52.0 million. Adtalem received $5.2 million of cash at the time of closing and held a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage was due on July 31, 2024 as a balloon payment and bore interest at a rate of 4% per annum, payable monthly. DePaul College Prep had 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 at the time of closing. Adtalem continued 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 Sheets. On February 23, 2023, DePaul College Prep paid the mortgage in full. Upon receiving full repayment of the mortgage, Adtalem no longer is involved in the financing of the sale and therefore derecognized the note receivable, the financing payable, and the assets associated with the campus facility, which resulted in recognizing a gain on sale of assets of $13.3 million in the three and nine months ended March 31, 2023. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 20 “Segment Information” to the Consolidated Financial Statements.

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Operating Income

The following tables present operating income by segment detailing the changes from the year-ago periods (in thousands):

	Three Months Ended March 31, 2023
	Chamberlain		Walden		Medical and Veterinary		Home Office and Other		Consolidated
Fiscal year 2022 as reported	$	36,979	$	(3,199)	$	13,571	$	(14,402)	$	32,949
Organic change		679		(1,215)		(1,247)		(1,457)		(3,240)
Restructuring expense change		1,931		2,172		4,148		989		9,240
Business acquisition and integration expense change		—		—		—		(5,422)		(5,422)
Intangible amortization expense change		—		12,585		—		—		12,585
Gain on sale of assets change		—		—		—		13,317		13,317
Fiscal year 2023 as reported	$	39,589	$	10,343	$	16,472	$	(6,975)	$	59,429

	Nine Months Ended March 31, 2023
	Chamberlain		Walden		Medical and Veterinary		Home Office and Other		Consolidated
Fiscal year 2022 as reported	$	83,290	$	(17,748)	$	45,400	$	(80,159)	$	30,783
Organic change		14,264		(4,603)		6,349		9,600		25,610
Effect of acquisitions		—		13,988		—		—		13,988
Deferred revenue adjustment change		—		8,561		—		—		8,561
CEO transition costs change		—		—		—		6,195		6,195
Restructuring expense change		1,448		842		(2,577)		(420)		(707)
Business acquisition and integration expense change		—		—		—		5,835		5,835
Intangible amortization expense change		—		25,031		—		—		25,031
Gain on sale of assets		—		—		—		13,317		13,317
Fiscal year 2023 as reported	$	99,002	$	26,071	$	49,172	$	(45,632)	$	128,613

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

	Three Months Ended										Nine Months Ended
	March 31,										March 31,
							Increase/(Decrease)										Increase/(Decrease)
	2023			2022			$		%		2023			2022			$		%
Chamberlain:
Operating income (GAAP)	$	39,589		$	36,979		$	2,610	7.1	%	$	99,002		$	83,290		$	15,712	18.9	%
Restructuring expense		—			1,931			(1,931)				818			2,266			(1,448)
Adjusted operating income (non-GAAP)	$	39,589		$	38,910		$	679	1.7	%	$	99,820		$	85,556		$	14,264	16.7	%
Operating margin (GAAP)		26.4	%		25.9	%						23.2	%		20.0	%
Operating margin (non-GAAP)		26.4	%		27.3	%						23.4	%		20.5	%
Walden:
Operating income (loss) (GAAP)	$	10,343		$	(3,199)		$	13,542	NM		$	26,071		$	(17,748)		$	43,819	NM
Deferred revenue adjustment		—			—			—				—			8,561			(8,561)
Restructuring expense		53			2,225			(2,172)				3,174			4,016			(842)
Intangible amortization expense		14,232			26,817			(12,585)				48,936			73,967			(25,031)
Adjusted operating income (non-GAAP)	$	24,628		$	25,843		$	(1,215)	(4.7)	%	$	78,181		$	68,796		$	9,385	13.6	%
Operating margin (GAAP)		7.8	%		(2.3)	%						6.6	%		(5.1)	%
Operating margin (non-GAAP)		18.5	%		18.6	%						19.8	%		19.8	%
Medical and Veterinary:
Operating income (GAAP)	$	16,472		$	13,571		$	2,901	21.4	%	$	49,172		$	45,400		$	3,772	8.3	%
Restructuring expense		421			4,569			(4,148)				7,334			4,757			2,577
Adjusted operating income (non-GAAP)	$	16,893		$	18,140		$	(1,247)	(6.9)	%	$	56,506		$	50,157		$	6,349	12.7	%
Operating margin (GAAP)		19.0	%		16.4	%						18.6	%		17.8	%
Operating margin (non-GAAP)		19.5	%		21.9	%						21.4	%		19.6	%
Home Office and Other:
Operating loss (GAAP)	$	(6,975)		$	(14,402)		$	7,427	51.6	%	$	(45,632)		$	(80,159)		$	34,527	43.1	%
CEO transition costs		—			—			—				—			6,195			(6,195)
Restructuring expense		804			1,793			(989)				6,380			5,960			420
Business acquisition and integration expense		11,346			5,924			5,422				35,702			41,537			(5,835)
Gain on sale of assets		(13,317)			—			(13,317)				(13,317)			—			(13,317)
Adjusted operating loss (non-GAAP)	$	(8,142)		$	(6,685)		$	(1,457)	(21.8)	%	$	(16,867)		$	(26,467)		$	9,600	36.3	%
Adtalem Global Education:
Operating income (GAAP)	$	59,429		$	32,949		$	26,480	80.4	%	$	128,613		$	30,783		$	97,830	317.8	%
Deferred revenue adjustment		—			—			—				—			8,561			(8,561)
CEO transition costs		—			—			—				—			6,195			(6,195)
Restructuring expense		1,278			10,518			(9,240)				17,706			16,999			707
Business acquisition and integration expense		11,346			5,924			5,422				35,702			41,537			(5,835)
Intangible amortization expense		14,232			26,817			(12,585)				48,936			73,967			(25,031)
Gain on sale of assets		(13,317)			—			(13,317)				(13,317)			—			(13,317)
Adjusted operating income (non-GAAP)	$	72,968		$	76,208		$	(3,240)	(4.3)	%	$	217,640		$	178,042		$	39,598	22.2	%
Operating margin (GAAP)		16.1	%		9.0	%						11.8	%		3.0	%
Operating margin (non-GAAP)		19.8	%		20.9	%						20.0	%		17.4	%

Consolidated operating income increased 80.4%, or $26.5 million, to $59.4 million in the third quarter and increased 317.8%, or $97.8 million, to $128.6 million in the first nine months of fiscal year 2023 compared to the year-ago periods. The primary drivers of the operating income increase in the third quarter of fiscal year 2023 were revenue increases at Chamberlain and Medical and Veterinary, decreased restructuring expense, decreased intangible amortization expense, and the gain on sale of assets, partially offset by increased business acquisition and integration expense. The primary drivers of the operating income increase in the first nine months of fiscal year 2023 were revenue increases at Chamberlain and Medical and Veterinary, cost reduction efforts across all institutions, the timing of the Walden acquisition in the prior year, decreased CEO transition costs, decreased business acquisition and integration expense, decreased intangible

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amortization expense, and the gain on sale of assets. The decrease in amortization expense is driven by the decrease in amortization relating to the student relationships intangible asset. This intangible asset is amortized based on the estimated retention of the students and giving consideration to the revenue and cash flow associated with these existing students, which are concentrated at the beginning of the asset’s useful life.

Consolidated adjusted operating income decreased 4.3%, or $3.2 million, to $73.0 million in the third quarter and increased 22.2%, or $39.6 million, to $217.6 million in the first nine months of fiscal year 2023 compared to the year-ago periods. The primary driver of the adjusted operating income decrease in the third quarter of fiscal year 2023 was increased marketing costs. The primary drivers of the adjusted operating income increase in the first nine months of fiscal year 2023 were the timing of the Walden acquisition in the prior year and cost reduction efforts across all institutions, partially offset by increased marketing costs.

Chamberlain

Chamberlain operating income increased 7.1%, or $2.6 million, to $39.6 million in the third quarter and increased 18.9%, or $15.7 million, to $99.0 million in the first nine months of fiscal year 2023 compared to the year-ago periods. Segment adjusted operating income increased 1.7%, or $0.7 million, to $39.6 million in the third quarter and increased 16.7%, or $14.3 million, to $99.8 million in the first nine months of fiscal year 2023 compared to the year-ago periods. The primary driver of the increases in adjusted operating income in the third quarter and first nine months of fiscal year 2023 was the result of increased revenue and labor cost reductions.

Walden

Walden operating income was $10.3 million and $26.1 million in the third quarter and first nine months of fiscal year 2023, respectively, compared to operating losses of $3.2 million and $17.7 million in the year-ago periods, which were impacted by intangible amortization expense and the deferred revenue purchase accounting adjustments. Segment adjusted operating income decreased 4.7%, or $1.2 million, to $24.6 million in the third quarter and increased 13.6%, or $9.4 million, to $78.2 million in the first nine months of fiscal year 2023 compared to the year-ago periods. The primary driver of the decrease in adjusted operating income in the third quarter of fiscal year 2023 was the decrease in revenue, which was partially offset by lower costs. The primary driver of the increase in adjusted operating income in the first nine months of fiscal year 2023 was the timing of the Walden acquisition in the prior year.

Medical and Veterinary

Medical and Veterinary operating income increased 21.4%, or $2.9 million, to $16.5 million in the third quarter and increased 8.3%, or $3.8 million, to $49.2 million in the first nine months of fiscal year 2023 compared to the year-ago periods. Segment adjusted operating income decreased 6.9%, or $1.2 million, to $16.9 million in the third quarter and increased 12.7%, or $6.3 million, to $56.5 million in the first nine months of fiscal year 2023 compared to the year-ago periods. The primary driver of the decrease in adjusted operating income in the third quarter of fiscal year 2023 was the result of increased marketing costs and higher facility operating costs. The primary driver of the increase in adjusted operating income in the first nine months of fiscal year 2023 was the result of an increase in revenue and lower labor and rent expense.

Interest Expense

Interest expense in the third quarter and first nine months of fiscal year 2023 was $14.5 million and $47.8 million, respectively, compared to $36.6 million and $109.9 million in the year-ago periods. The decreases in interest expense was primarily the result of decreased borrowings in the third quarter and first nine months of fiscal year 2023 compared to the year-ago periods due to prepayments of debt. In addition, the decrease in the first nine months of fiscal year 2023 compared to the year-ago period was also a result of 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). These decreases in interest expense were partially offset by rising interest rates on outstanding debt. As of March 31, 2023, the interest rate for borrowings under the Term Loan B facility was 8.84% compared to 5.25% as of March 31, 2022.

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Other Income (Expense), Net

Other income, net in the third quarter and first nine months of fiscal year 2023 was $4.0 million and $3.3 million, respectively, compared to expense of $0.3 million and income of $2.4 million in the year-ago periods. The increase in other income (expense), net in the third quarter of fiscal year 2023 compared to the year-ago period was primarily the result of an increase in interest income. The increase in other income (expense), net in the first nine months of fiscal year 2023 compared to the year-ago period was primarily driven by an increase in interest income partially offset by a $5.0 million investment impairment of an equity investment.

(Provision for) Benefit from 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 global intangible low-taxed income (“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, tax credits related to research and development expenditures, changes in valuation allowance, liabilities for uncertain tax positions, and tax benefits on stock-based compensation awards.

Our income tax provisions from continuing operations were $0.4 million and $5.9 million in the three and nine months ended March 31, 2023, respectively, and our income tax benefits from continuing operations were $8.4 million and $39.6 million in the three and nine months ended March 31, 2022, respectively. In addition, in the three months ended March 31, 2023, we recorded a net tax benefit of $6.2 million primarily for the release of a valuation allowance on certain deferred tax assets based on our reassessment of the amount of state net operating loss carryforwards that are more likely than not to be realized. The three and nine months ended March 31, 2023 resulted in income tax provisions compared to income tax benefits in the year-ago periods primarily due to the impacts recognized in the year-ago periods related to the Walden acquisition.

Discontinued Operations

Beginning 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 third quarter of fiscal year 2023 was $2.7 million. This loss consisted of the following: (i) loss of $4.0 million driven by ongoing litigation costs and settlements related to the DeVry University divestiture; (ii) a loss on the sale of ACAMS, Becker, and OCL of $0.4 million for a tax return to provision adjustment; and (iii) a benefit from income taxes of $1.7 million associated with the items listed above.

Net income from discontinued operations in the third quarter of fiscal year 2022 was $343.3 million. This income consisted of the following: (i) income of $3.4 million driven by the operating results related to ACAMS, Becker, OCL, and EduPristine, partially offset by ongoing litigation costs and settlements related to the DeVry University divestiture; (ii) a gain on the sale of ACAMS, Becker, and OCL of $474.0 million; and (iii) a provision for income taxes of $134.1 million associated with the items listed above.

Net loss from discontinued operations in the first nine months of fiscal year 2023 was $7.1 million. This loss consisted of the following: (i) loss of $6.7 million driven by ongoing litigation costs and settlements related to the DeVry University divestiture, partially offset by income from the DeVry University earn-out; (ii) a loss on the sale of ACAMS, Becker, and OCL of $3.6 million for working capital adjustments to the initial sale prices and a tax return to provision adjustment; and (iii) a benefit from income taxes of $3.2 million associated with the items listed above.

Net income from discontinued operations in the first nine months of fiscal year 2022 was $341.3 million. This income consisted of the following: (i) income of $1.5 million driven by the operating results related to ACAMS, Becker, OCL, and EduPristine and income from the DeVry University earn-out, partially offset by ongoing litigation costs and settlements related to the DeVry University divestiture; (ii) a gain on the sale of ACAMS, Becker, and OCL of $474.0 million; and (iii) a provision for income taxes of $134.2 million associated with the items listed above.

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Regulatory Environment

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 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 lengthy PPA recertification process is such that ED allows unhampered continued access to Title IV funding after PPA expiration, so long as materially complete applications are submitted at least 90 days in advance of expiration. Complete applications for PPA recertification have been or will be timely submitted to ED. The provisional nature of the existing agreements for AUC, RUSM, and RUSVM stemmed from increased and/or repeated Title IV compliance audit findings. Walden’s TPPPA included financial requirements, which were in place prior to acquisition, such as a letter of credit, heightened cash monitoring, and additional reporting. No similar requirements were imposed on AUC, RUSM, or RUSVM. While corrective actions have been taken to resolve past compliance matters and eliminate the incidence of repetition, if AUC, RUSM, or RUSVM fail to maintain 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. ED may alternatively issue new PPAs for continued Title IV participation.

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 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 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 is currently on a 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 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

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additional cash management requirements with respect to its disbursements of Title IV funds, as well as 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). Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of March 31, 2023 in favor of the ED on behalf of Walden, which allows Walden to participate in Title IV programs. On January 18, 2023, we received a letter from ED, requesting Adtalem to provide a letter of credit in the amount of $76.2 million related to ED’s review of the Same Day Balance Sheet, which is the consolidated Adtalem balance sheet as of August 12, 2021, the date of the Walden acquisition. On February 21, 2023, Adtalem provided the $76.2 million letter of credit to ED.

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 was subject to negotiated rulemaking, which ended in March 2022. The amended rule applies 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 as calculated under the 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 2022 and 2021. As institution’s 90/10 compliance must be calculated using the financial results of an entire fiscal year, we are including Walden’s amounts for the full fiscal year 2022 in the table below, including the portion of the year not under Adtalem’s ownership.

	Fiscal Year
	2022		2021
Chamberlain University	65	%	66	%
Walden University	73	%	n/a
American University of the Caribbean School of Medicine	81	%	80	%
Ross University School of Medicine	85	%	85	%
Ross University School of Veterinary Medicine	81	%	82	%
Consolidated	72	%	73	%

An ED defined financial responsibility test is required for continued participation by an institution in Title IV aid programs. For Adtalem’s institutions, this test is calculated at the consolidated Adtalem level. Applying various financial elements from the fiscal year audited financial statements, 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. As a result of acquisition of Walden, Adtalem expects ED will conclude its consolidated composite score will fall below 1.5. As a result, ED may impose certain additional conditions for continued access to federal funding including heightened cash monitoring and/or an additional letter of credit. Management does not believe such conditions, if any, will have a material adverse effect on Adtalem’s operations.

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

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Liquidity and Capital Resources

Adtalem’s primary source of liquidity is the cash received from payments for student tuition, fees, books, and other educational materials. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational 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 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.

Adtalem’s consolidated cash and cash equivalents balance of $315.4 million, $347.0 million, and $788.7 million as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively, included cash and cash equivalents held at Adtalem’s international operations of $5.6 million, $34.2 million, and $46.6 million as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively, which is available to Adtalem for general corporate purposes.

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 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 million, $1.0 million, and $1.3 million was held in these restricted bank accounts as of March 31, 2023, June 30, 2022, and March 31, 2022, respectively.

Cash Flow Summary

Operating Activities

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

	Nine Months Ended
	March 31,
	2023		2022
Income (loss) from continuing operations	$	78,202	$	(37,092)
Non-cash items		153,770		221,832
Changes in assets and liabilities		(82,151)		(125,969)
Net cash provided by operating activities-continuing operations	$	149,821	$	58,771

Net cash provided by operating activities from continuing operations in the nine months ended March 31, 2023 was $149.8 million compared to $58.8 million in the year-ago period. The increase was driven by a decrease in interest payments and improvements in our operating results. The decrease of $68.1 million in non-cash items between the nine months ended March 31, 2023 and the nine months ended March 31, 2022 was principally driven by a decrease in amortization of intangible assets, a decrease in amortization and write-off of debt discount and issuance costs, and an increase in gain on sale of assets. The increase of $43.8 million in cash generated from changes in assets and liabilities was primarily due to timing differences in accounts receivable, prepaid assets, prepaid income taxes, accounts payable, accrued payroll and benefits, accrued liabilities, accrued interest, and deferred revenue.

Investing Activities

Capital expenditures in the first nine months of fiscal year 2023 and 2022 were $19.1 million and $22.2 million, respectively. The capital expenditures in fiscal year 2023 primarily consisted of spending for Chamberlain’s new campus development and improvements and Adtalem’s home office, including information technology investments. Capital spending for the remainder of fiscal year 2023 will support continued investment for new campus development at Chamberlain, maintenance at the medical and veterinary schools, and information technology. Management anticipates full fiscal year 2023 capital spending to be in the $25 to $35 million range, including $19.1 million spent during the first

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nine months of fiscal year 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).

During the first nine months of fiscal year 2023 and 2022, we received proceeds from the sale of marketable securities held in a Rabbi Trust of $7.6 million and $0.9 million, respectively, and made additional investments in securities held by this trust of $1.5 million and $1.3 million, respectively.

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 held a mortgage loan, secured by the property, from DePaul College Prep for $46.8 million. The mortgage loan was due on July 31, 2024 as a balloon payment and bore interest at a rate of 4% per annum, payable monthly. The buyer had an option to make prepayments. On February 23, 2023, DePaul College Prep paid the mortgage loan in full. The $46.8 million received during the third quarter of fiscal year 2023 is classified as an investing activity in the Consolidated Statements of Cash Flows.

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.

During the first nine months of fiscal year 2022, we received the loan repayment of $10.0 million on the DeVry University promissory note, dated as of December 11, 2018.

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. Adtalem received $962.7 million, net of cash of $21.5 million, in sale proceeds.

During the first nine months of fiscal year 2023, we paid $3.2 million for a working capital adjustment to the initial sales price for ACAMS, Becker, and OCL.

Financing Activities

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

	Nine Months Ended
	March 31,
	2023		2022
Repurchases of common stock for treasury	$	(44,710)	$	(120,000)
Payment on equity forward contract		(13,162)		(30,000)
Net (repayments) proceeds from long-term debt		(150,861)		162,333
Payment of debt discount and issuance costs		—		(49,553)
Payment for purchase of redeemable noncontrolling interest of subsidiary		—		(1,790)
Other		(2,141)		6,106
Net cash used in financing activities	$	(210,874)	$	(32,904)

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 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, and we repurchased shares under that program during the three and nine months ended March 31, 2023. As of March 31, 2023, $252.2 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. 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 4,709,576 shares 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 was based on the volume-weighted average price of Adtalem’s common stock during

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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 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. 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 nine months ended March 31, 2022. During the operating term of 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 $1.5 billion in cash. On March 1, 2021, we issued $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 $850.0 million senior secured term loan (“Term Loan B”) with a maturity date of August 12, 2028 and (2) a $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 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 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, on September 22, 2022, we made a prepayment of $100.0 million on the Term Loan B, and on November 22, 2022, we made a prepayment of $50.0 million on the Term Loan B. As of March 31, 2023, the amount of debt outstanding under the Notes and Credit Facility was $708.3 million. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on the Notes and our Credit Agreement.

In the event of 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 $400.0 million revolving credit facility with availability of $323.8 million as of March 31, 2023. While COVID-19 will continue to have an effect on operations and, as a result, liquidity, 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 outstanding $405.0 million of Notes and $303.3 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 $400.0 million revolving credit facility with availability of $323.8 million as of March 31, 2023. Adtalem has a letter of credit outstanding under this revolving credit agreement of $76.2 million as of March 31, 2023, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV

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programs. 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 Sheets. In addition, we sublease certain space to third 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 timing of cash flows with higher cash inflows at the beginning of 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 Estimates

There have been no material changes in our critical accounting estimates as disclosed in our 2022 Form 10-K. Although our current estimates contemplate current conditions, including, but not limited to, the impact of (i) the novel coronavirus (“COVID-19”) pandemic, (ii) rising interest rates, and (iii) labor and material cost increases and shortages, 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.

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 contained 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 Adtalem’s future growth, the future impacts of the COVID-19 pandemic, and the expected synergies from the 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 risk 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 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 statements are based on information available to us as of the date any such statements are made, and Adtalem assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized, 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:

Adjusted net income (most comparable GAAP measure: net income) – Measure of Adtalem’s net income adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, intangible amortization expense, gain on sale of assets, pre-acquisition interest expense, write-off of debt discount and

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issuance costs, gain on extinguishment of debt, investment impairment, net tax benefit related to a valuation allowance release, and net loss (income) from discontinued operations.

Adjusted earnings per share (most comparable GAAP measure: earnings per share) – Measure of Adtalem’s diluted earnings per share adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, intangible amortization expense, gain on sale of assets, pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, investment impairment, net tax benefit related to a valuation allowance release, and net loss (income) from discontinued operations.

Adjusted operating income (most comparable GAAP measure: operating income) – Measure of Adtalem’s operating income adjusted for deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, intangible amortization expense, and gain on sale of assets. 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 ) – Measure of Adtalem’s net income adjusted for net loss (income) from discontinued operations, interest expense, other (income) expense, net, provision for (benefit from) income taxes, depreciation and amortization, stock-based compensation, deferred revenue adjustment, CEO transition costs, restructuring expense, business acquisition and integration expense, and gain on sale of assets. This measure is applied on a consolidated and segment basis, depending on the context of the discussion. Income taxes, interest expense, and other (income) expense, net 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 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. We do not include normal, recurring, cash operating expenses in our restructuring expense.

● Business acquisition and integration expense include expenses related to the Walden acquisition and certain costs related to growth transformation initiatives. We do not include normal, recurring, cash operating expenses in our business acquisition and integration expense.

● Intangible amortization expense on acquired intangible assets.

● Gain on sale of Adtalem’s Chicago, Illinois, campus facility.

● Pre-acquisition interest expense related to financing arrangements in connection with the Walden acquisition, write-off of debt discount and issuance costs and gain on extinguishment of debt related to prepayments of debt, and impairment of an equity investment.

● Net tax benefit related to a valuation allowance release.

● Net loss (income) from discontinued operations includes the operations of ACAMS, Becker, OCL, including the after-tax gain on the sale of these businesses, and EduPristine operations, 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 income reconciliation to adjusted net income (in thousands):

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Net income (GAAP)	$	45,869	$	347,740	$	71,114	$	304,245
Deferred revenue adjustment		—		—		—		8,561
CEO transition costs		—		—		—		6,195
Restructuring expense		1,278		10,518		17,706		16,999
Business acquisition and integration expense		11,346		5,924		35,702		41,537
Intangible amortization expense		14,232		26,817		48,936		73,967
Gain on sale of assets		(13,317)		—		(13,317)		—
Pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, and investment impairment		—		12,471		9,226		44,105
Net tax benefit related to a valuation allowance release		(6,184)		—		(6,184)		—
Income tax impact on non-GAAP adjustments (1)		(4,359)		(18,769)		(23,341)		(60,871)
Net loss (income) from discontinued operations		2,694		(343,340)		7,088		(341,337)
Adjusted net income (non-GAAP)	$	51,559	$	41,361	$	146,930	$	93,401

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

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Earnings per share, diluted (GAAP)	$	1.00	$	7.04	$	1.54	$	6.15
Effect on diluted earnings per share:
Deferred revenue adjustment		-		-		-		0.17
CEO transition costs		-		-		-		0.12
Restructuring expense		0.03		0.21		0.38		0.34
Business acquisition and integration expense		0.25		0.12		0.77		0.83
Intangible amortization expense		0.31		0.54		1.06		1.48
Gain on sale of assets		(0.29)		-		(0.29)		-
Pre-acquisition interest expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, and investment impairment		-		0.25		0.20		0.88
Net tax benefit related to a valuation allowance release		(0.14)		-		(0.13)		-
Income tax impact on non-GAAP adjustments (1)		(0.10)		(0.38)		(0.51)		(1.22)
Net loss (income) from discontinued operations		0.06		(6.95)		0.15		(6.90)
Adjusted earnings per share, diluted (non-GAAP)	$	1.13	$	0.84	$	3.19	$	1.87
Diluted shares used in non-GAAP EPS calculation		45,801		49,377		46,089		49,872

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

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Reconciliation to adjusted EBITDA (in thousands):

	Three Months Ended										Nine Months Ended
	March 31,										March 31,
							Increase/(Decrease)										Increase/(Decrease)
	2023			2022			$		%		2023			2022			$		%
Chamberlain:
Operating income (GAAP)	$	39,589		$	36,979		$	2,610	7.1	%	$	99,002		$	83,290		$	15,712	18.9	%
Restructuring expense		—			1,931			(1,931)				818			2,266			(1,448)
Depreciation		4,405			4,738			(333)				12,985			14,048			(1,063)
Stock-based compensation		923			1,869			(946)				3,600			5,104			(1,504)
Adjusted EBITDA (non-GAAP)	$	44,917		$	45,517		$	(600)	(1.3)	%	$	116,405		$	104,708		$	11,697	11.2	%
Adjusted EBITDA margin (non-GAAP)		30.0	%		31.9	%						27.3	%		25.1	%
Walden:
Operating income (loss) (GAAP)	$	10,343		$	(3,199)		$	13,542	NM		$	26,071		$	(17,748)		$	43,819	NM
Deferred revenue adjustment		—			—			—				—			8,561			(8,561)
Restructuring expense		53			2,225			(2,172)				3,174			4,016			(842)
Intangible amortization expense		14,232			26,817			(12,585)				48,936			73,967			(25,031)
Depreciation		2,439			2,573			(134)				7,303			6,801			502
Stock-based compensation		754			841			(87)				2,945			2,308			637
Adjusted EBITDA (non-GAAP)	$	27,821		$	29,257		$	(1,436)	(4.9)	%	$	88,429		$	77,905		$	10,524	13.5	%
Adjusted EBITDA margin (non-GAAP)		20.9	%		21.0	%						22.3	%		22.4	%
Medical and Veterinary:
Operating income (GAAP)	$	16,472		$	13,571		$	2,901	21.4	%	$	49,172		$	45,400		$	3,772	8.3	%
Restructuring expense		421			4,569			(4,148)				7,334			4,757			2,577
Depreciation		3,231			3,397			(166)				9,367			10,497			(1,130)
Stock-based compensation		587			1,075			(488)				2,291			2,974			(683)
Adjusted EBITDA (non-GAAP)	$	20,711		$	22,612		$	(1,901)	(8.4)	%	$	68,164		$	63,628		$	4,536	7.1	%
Adjusted EBITDA margin (non-GAAP)		24.0	%		27.4	%						25.8	%		24.9	%
Home Office and Other:
Operating loss (GAAP)	$	(6,975)		$	(14,402)		$	7,427	51.6	%	$	(45,632)		$	(80,159)		$	34,527	43.1	%
CEO transition costs		—			—			—				—			6,195			(6,195)
Restructuring expense		804			1,793			(989)				6,380			5,960			420
Business acquisition and integration expense		11,346			5,924			5,422				35,702			41,537			(5,835)
Gain on sale of assets		(13,317)			—			(13,317)				(13,317)			—			(13,317)
Depreciation		82			633			(551)				1,963			2,125			(162)
Stock-based compensation		531			888			(357)				2,072			2,023			49
Adjusted EBITDA (non-GAAP)	$	(7,529)		$	(5,164)		$	(2,365)	(45.8)	%	$	(12,832)		$	(22,319)		$	9,487	42.5	%
Adtalem Global Education:
Net income (GAAP)	$	45,869		$	347,740		$	(301,871)	(86.8)	%	$	71,114		$	304,245		$	(233,131)	(76.6)	%
Net loss (income) from discontinued operations		2,694			(343,340)			346,034				7,088			(341,337)			348,425
Interest expense		14,457			36,585			(22,128)				47,806			109,907			(62,101)
Other (income) expense, net		(3,980)			327			(4,307)				(3,301)			(2,435)			(866)
Provision for (benefit from) income taxes		389			(8,363)			8,752				5,906			(39,597)			45,503
Operating income (GAAP)		59,429			32,949			26,480				128,613			30,783			97,830
Depreciation and amortization		24,389			38,158			(13,769)				80,554			107,438			(26,884)
Stock-based compensation		2,795			4,673			(1,878)				10,908			12,409			(1,501)
Deferred revenue adjustment		—			—			—				—			8,561			(8,561)
CEO transition costs		—			—			—				—			6,195			(6,195)
Restructuring expense		1,278			10,518			(9,240)				17,706			16,999			707
Business acquisition and integration expense		11,346			5,924			5,422				35,702			41,537			(5,835)
Gain on sale of assets		(13,317)			—			(13,317)				(13,317)			—			(13,317)
Adjusted EBITDA (non-GAAP)	$	85,920		$	92,222		$	(6,302)	(6.8)	%	$	260,166		$	223,922		$	36,244	16.2	%
Adjusted EBITDA margin (non-GAAP)		23.3	%		25.3	%						24.0	%		21.9	%

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 March 31, 2023, Adtalem had $303.3 million in

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outstanding borrowings under the Term Loan B with an interest rate of 8.84%. Based upon borrowings of $303.3 million, a 100 basis point increase in short-term interest rates would result in $3.0 million of additional annual interest expense.

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 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 June 30, 2023. 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 nine months of fiscal year 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, 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 March 31, 2023 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.

Changes in Internal Control Over Financial Reporting

There were no changes during the third quarter of fiscal year 2023 in our internal control over financial reporting that 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, including developments in legal proceedings, see Note 19 “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 1. “Financial Statements,” which is incorporated herein by this reference.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 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)
January 1, 2023 - January 31, 2023	—	$	—	—	$	300,000,000
February 1, 2023 - February 28, 2023	410,869		40.64	410,869		283,301,393
March 1, 2023 - March 31, 2023	818,021		37.98	818,021		252,229,901
Total	1,228,890	$	38.87	1,228,890	$	252,229,901

(1) See Note 15 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

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
January 1, 2023 - January 31, 2023	—	$	—	NA	NA
February 1, 2023 - February 28, 2023	2,652		39.94	NA	NA
March 1, 2023 - March 31, 2023	—		—	NA	NA
Total	2,652	$	39.94	NA	NA

(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

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)

* Filed or furnished herewith.

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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: May 2, 2023	By:	/s/ Robert J. Phelan
		Robert J. Phelan
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

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