Accounts and Financing Receivable

9 Months Ended

Mar. 31, 2024

Receivables [Abstract]

Accounts and Financing Receivable

9. Accounts and Financing Receivables

Our accounts receivables relate to student balances occurring in the normal course of business. Accounts receivables have a term of less than one year and are included in accounts and financing receivables, 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 and financing receivables, net and other assets, net on our Consolidated Balance Sheets.

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

	March 31, 2024
		Gross		Allowance		Net
Accounts receivables, current	$	176,083	$	(37,873)	$	138,210
Financing receivables, current		4,972		(2,273)		2,699
Accounts and financing receivables, current	$	181,055	$	(40,146)	$	140,909
Financing receivables, current	$	4,972	$	(2,273)	$	2,699
Financing receivables, noncurrent		36,081		(9,285)		26,796
Total financing receivables	$	41,053	$	(11,558)	$	29,495

	June 30, 2023
		Gross		Allowance		Net
Accounts receivables, current	$	129,318	$	(29,190)	$	100,128
Financing receivables, current		4,757		(2,136)		2,621
Accounts and financing receivables, current	$	134,075	$	(31,326)	$	102,749
Financing receivables, current	$	4,757	$	(2,136)	$	2,621
Financing receivables, noncurrent		36,368		(9,332)		27,036
Total financing receivables	$	41,125	$	(11,468)	$	29,657

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.

The credit quality analysis of financing receivables as of March 31, 2024 was as follows (in thousands):

	Amortized Cost Basis by Origination Year
	Prior		2020		2021		2022		2023		2024		Total
1-30 days past due	$	637	$	126	$	522	$	153	$	464	$	1,472	$	3,374
31-60 days past due		43		102		46		249		206		117		763
61-90 days past due		279		4		61		144		254		239		981
91-120 days past due		33		—		196		43		993		133		1,398
121-150 days past due		54		—		76		71		176		192		569
Greater than 150 days past due		2,670		470		1,211		1,208		1,805		467		7,831
Total past due		3,716		702		2,112		1,868		3,898		2,620		14,916
Current		6,033		736		4,309		2,137		6,099		6,823		26,137
Financing receivables, gross	$	9,749	$	1,438	$	6,421	$	4,005	$	9,997	$	9,443	$	41,053
Gross write-offs	$	1,063	$	279	$	483	$	593	$	619	$	—	$	3,037

The credit quality analysis of financing receivables as of June 30, 2023 was as follows (in thousands):

	Amortized Cost Basis by Origination Year
	Prior		2019		2020		2021		2022		2023		Total
1-30 days past due	$	186	$	79	$	115	$	137	$	735	$	1,944	$	3,196
31-60 days past due		61		34		—		359		573		1,103		2,130
61-90 days past due		97		39		110		65		559		368		1,238
91-120 days past due		2		17		2		13		77		200		311
121-150 days past due		62		37		26		45		147		129		446
Greater than 150 days past due		2,641		734		708		2,071		1,457		381		7,992
Total past due		3,049		940		961		2,690		3,548		4,125		15,313
Current		6,199		1,112		820		5,350		2,608		9,723		25,812
Financing receivables, gross	$	9,248	$	2,052	$	1,781	$	8,040	$	6,156	$	13,848	$	41,125

Allowance for Credit Losses

The allowance for credit losses represents an estimate of the lifetime expected credit losses inherent in our accounts and financing receivable balances as of each balance sheet date. In evaluating the collectability of all our accounts and financing receivable balances, we utilize historical events, current conditions, and reasonable and supportable forecasts about the future.

For our accounts 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 accounts 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.

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 roll-forward of the allowance for credit losses (in thousands):

	Three Months Ended March 31, 2024						Nine Months Ended March 31, 2024
	Accounts		Financing		Total		Accounts		Financing		Total
Beginning balance	$	35,020	$	13,326	$	48,346	$	29,190	$	11,468	$	40,658
Write-offs		(13,374)		(1,880)		(15,254)		(32,925)		(3,037)		(35,962)
Recoveries		2,973		649		3,622		7,901		1,093		8,994
Provision for credit losses		13,254		(537)		12,717		33,707		2,034		35,741
Ending balance	$	37,873	$	11,558	$	49,431	$	37,873	$	11,558	$	49,431

	Three Months Ended March 31, 2023						Nine Months Ended March 31, 2023
	Accounts		Financing		Total		Accounts		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