Business context and reporting period
The supplied filing is Adtalem Global Education Inc.’s Form 10-K for the fiscal year ended June 30, 2021—not a Covista Inc. filing or a 2020 Q4 report. Adtalem provides higher-education and professional-training services through its Medical and Healthcare and Financial Services segments. Results exclude divested businesses, including Adtalem Brazil, Carrington College, and DeVry University, which are reported as discontinued operations.
After year-end, on August 12, 2021, Adtalem acquired Walden University for $1.48 billion in cash. The filing’s historical results do not include Walden.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $1,112.4 million | $1,052.0 million |
| Operating income | $161.5 million | $142.3 million |
| Operating margin | 14.5% | 13.5% |
| Income from continuing operations | $101.6 million | $243.5 million |
| Net income (loss) attributable to Adtalem | $76.9 million | $(85.3) million |
| Diluted EPS | $1.49 | $(1.58) |
| Operating cash flow, continuing operations | $223.2 million | $149.6 million |
| Capital expenditures | $48.7 million | $44.1 million |
FY2021 net income from continuing operations attributable to Adtalem excluding special items, a non-GAAP measure, was $153.7 million, or $2.98 diluted EPS, versus $123.5 million, or $2.28, in FY2020. FY2020 GAAP results included a $110.7 million pre-tax currency-hedge gain; FY2020 net loss also reflected a $287.6 million pre-tax loss on the sale of Adtalem Brazil and a $45.0 million legal-settlement loss.
Revenue increased 5.7%. Medical and Healthcare revenue rose 4.7% to $906.9 million; Financial Services revenue rose 10.7% to $205.5 million. Cost of educational services was 44.0% of revenue, down from 46.6%; student services and administrative expense was 37.8%, up from 37.6%. Reported net other expense was $34.6 million, compared with $94.9 million of net other income in FY2020, primarily reflecting the absence of the prior-year hedge gain and higher interest expense.
At June 30, 2021, cash and cash equivalents were $494.6 million; total debt principal was $1.091 billion ($291.0 million under the Term B Loan and $800 million of 5.50% secured notes due 2028). The balance sheet also included $818.6 million of restricted cash held in escrow for the Walden acquisition and unavailable for general corporate use. The existing revolving facility had $231.6 million available, net of letters of credit. After the acquisition, Adtalem put in place an $850 million term loan and a $400 million revolver and refinanced its prior credit agreement. Management said available cash, operating cash generation, and the new credit facility should fund operations and growth plans for the foreseeable future.
Material changes versus the prior year
- Operating income increased 13.5%; excluding special items, it increased 22.1% to $202.9 million.
- Chamberlain revenue rose 10.2% to $563.8 million, supported by enrollment growth and tuition and fee increases. May 2021 total enrollment was up 4.6% year over year.
- Medical and veterinary schools revenue declined 3.3% to $343.1 million, reflecting pandemic-related losses in clinical, housing, and transportation revenue; May 2021 total enrollment fell 1.2%, although new enrollment rose 12.3%.
- Financial Services revenue and operating income improved, including from strong mortgage-training demand at OCL; ACAMS conference revenue remained affected by pandemic cancellations.
- Adtalem repurchased $100 million of shares during FY2021, then suspended repurchases in May after reaching its annual target. No dividends were paid.
Outlook, risks, contingencies, and unusual items
Management expected further COVID-19 effects in FY2022, particularly from reduced ACAMS live-conference revenue and possible weakness in Becker demand, and anticipated higher variable costs as in-person instruction resumed. Estimated pandemic-related FY2021 impacts were approximately $47 million of lost revenue, $33 million of lost operating income, and $0.50 of EPS. Management forecast FY2022 capital expenditures of $50–$60 million, excluding Walden-related spending. The filing does not provide consolidated FY2022 revenue or EPS guidance.
Key risks include extensive regulation of higher education and Title IV funding dependence: Title IV Institutions collectively received 71% of revenue from those programs. AUC, RUSM, and RUSVM were provisionally recertified following repeated or increased compliance-audit findings, without current financial restrictions. Adtalem expected its next consolidated federal financial-responsibility composite score to fall below 1.5 following the Walden acquisition, potentially bringing heightened monitoring or letter-of-credit requirements. The amended 90/10 rule, effective for applicable fiscal years beginning on or after January 1, 2023, expands the sources counted as federal education assistance.
Other material risks include the integration and financing of Walden, increased leverage and interest expense, student enrollment and clinical-placement disruptions, accreditation or authorization challenges, and pending or future litigation. The company reported ongoing DeVry-related claims and arbitrations, a Chamberlain biometric-privacy class action, and other matters; outcomes may be uncertain. A putative Chamberlain tuition-refund case was dismissed on August 16, 2021, subject to appeal. Management identified goodwill and intangible assets as impairment-sensitive; FY2021’s annual impairment review found no trigger requiring a quantitative goodwill test. The auditor issued an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Confirm the registrant and period: this is Adtalem Global Education Inc., fiscal year ended June 30, 2021.
- Review post-year-end Walden financing, resulting debt and interest burden, and integration costs; FY2021 balance-sheet debt includes notes whose proceeds were escrowed for the transaction.
- Track the expected Title IV composite-score result, provisional certifications, and implementation of the revised 90/10 rule.
- Monitor COVID-19 effects on clinical rotations, campus housing, ACAMS conferences, and Becker demand, alongside enrollment and student outcomes.
- Assess outstanding litigation, DeVry-related liabilities, and any change in reserves or cash requirements.
- Check subsequent disclosures for Financial Services strategic alternatives, announced after year-end, and leadership transition effective September 2021.