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Leases

9 Months Ended

Mar. 31, 2024

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 November 2039, 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, 2024, we had entered into one operating lease that has not yet commenced. The lease is expected to commence during the second quarter of fiscal year 2025, has a 15-year lease term, and will result in an additional operating lease asset and operating lease liability of approximately $6.3 million.

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


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2024		2023		2024		2023
Operating lease cost	$	10,944	$	12,302	$	34,014	$	36,272
Sublease income		(1,928)		(3,301)		(7,310)		(10,388)
Total lease cost	$	9,016	$	9,001	$	26,704	$	25,884

Maturities of lease liabilities as of March 31, 2024 were as follows (in thousands):


	Operating
Fiscal Year	Leases
2024 (remaining)	$	11,271
2025		44,524
2026		41,027
2027		39,533
2028		32,472
Thereafter		104,857
Total lease payments		273,684
Less: tenant improvement allowance not yet received		(8,631)
Less: imputed interest		(72,861)
Present value of lease liabilities	$	192,192

Lease term and discount rate were as follows:


	March 31,
	2024
Weighted-average remaining operating lease term (years)		6.8
Weighted-average operating lease discount rate		7.3%

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


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2024		2023		2024		2023
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)	$	9,596	$	11,643	$	31,210	$	36,461
Operating lease assets obtained in exchange for operating lease liabilities	$	—	$	7,489	$	19,526	$	20,528

Adtalem maintains agreements to sublease either a portion or the full leased space at four 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 sublease rental income under these agreements as of March 31, 2024 were as follows (in thousands):


Fiscal Year	Amount
2024 (remaining)	$	1,735
2025		5,255
2026		2,038
Total sublease rental income	$	9,028