Filing summary
Entity and period: The supplied filing is Adtalem Global Education Inc.’s Form 10-K for the fiscal year ended June 30, 2023—not a filing for Covista Inc. or “2022 Q4.” The summary below reflects the filing’s FY2023 results and FY2022 comparison. Adtalem provides postsecondary education through Chamberlain, Walden, and Medical and Veterinary; divested businesses are reported as discontinued operations.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $1,450.8 million | $1,381.8 million |
| Operating income (GAAP) | $168.2 million; 11.6% margin | $76.7 million; 5.6% margin |
| Adjusted operating income (non-GAAP) | $287.6 million; 19.8% margin | $267.6 million; 19.4% margin |
| Income from continuing operations | $101.8 million | Loss of $36.0 million |
| Net income attributable to Adtalem | $93.4 million; diluted EPS $2.05 | $311.0 million; diluted EPS $6.43 |
| Cash from continuing operating activities | $205.7 million | $164.0 million |
| Capital expenditures | $37.0 million | $31.1 million |
- Revenue rose 5.0%, including $64.2 million from the timing of Walden’s inclusion in the prior-year comparison. Excluding that acquisition timing, revenue grew 0.3%: Chamberlain increased 2.4%, Medical and Veterinary 2.1%, and Walden declined 3.3% organically.
- GAAP operating income improved substantially, partly reflecting lower interest and intangible-amortization expense, lower acquisition and restructuring costs, and a $13.3 million gain on sale of assets. Adjusted net income was $192.2 million, up 26.4%, and adjusted diluted EPS was $4.21 versus $3.11.
- Reported net income fell 70.0% because FY2022 included a $473.5 million pre-tax gain on divestitures. FY2023 discontinued operations recorded an $8.4 million net loss, including DeVry-related legal costs.
- Cash and cash equivalents were $273.7 million at year-end, down from $347.0 million. Current assets were $478.5 million and current liabilities $431.2 million. Continuing operating cash flow increased year over year; investing cash flow included $46.8 million repayment of the DePaul College Prep mortgage.
- Debt principal outstanding was $708.3 million ($405.0 million of senior notes and $303.3 million of Term Loan B); its balance-sheet carrying amount, net of discounts and issuance costs, was $695.1 million. Debt principal was $859.2 million a year earlier. The Term Loan B rate was 9.19% at June 30, 2023; the company estimated a 100-basis-point rate increase would add about $3.0 million in annual interest expense.
- The $400 million revolving facility had $323.8 million available at year-end; a $76.2 million letter of credit drawn under the facility supports Walden’s Title IV participation. A separate $84.0 million surety-backed letter of credit also supports Walden.
Material changes and operating trends
- Adtalem completed the $1.5 billion Walden acquisition in August 2021 and sold ACAMS, Becker, and OnCourse Learning in March 2022 for $962.7 million net of cash, followed by the EduPristine sale in June 2022. Continuing results exclude these divested operations.
- Average enrollment declined year over year at all three segments in FY2023: Chamberlain 0.6%, Walden 7.5%, and Medical and Veterinary 1.0%. At the specified year-end or May 2023 measurement dates, Chamberlain enrollment rose 1.2%, Walden enrollment fell 4.8%, and Medical and Veterinary enrollment fell 8.2%.
- Cost of educational services declined 1.7% to $648.5 million, and fell to 44.7% of revenue from 47.7%. Student services and administrative expense rose 3.4% to $586.0 million, including higher marketing costs. Restructuring expense was $18.8 million, down from $25.6 million.
- Interest expense declined to $63.1 million from $129.3 million, reflecting lower debt balances and prior-year refinancing charges, partly offset by higher rates. Adtalem prepaid $150.0 million of Term Loan B principal in FY2023.
- The company repurchased 3.2 million shares for $127.3 million during FY2023. The repurchase authorization had $172.7 million remaining at year-end. Adtalem paid no dividends in FY2023 or FY2022 and said it did not expect cash dividends in the foreseeable future.
Outlook, risks, and unusual items
- Management expects FY2024 capital expenditures of $50 million to $60 million, funded from operations or the credit facility. It expects available cash, operating cash flow, and facility capacity to fund operations and growth plans for the foreseeable future. The filing does not provide numerical revenue or earnings guidance.
- Management attributed enrollment weakness in part to lingering stress on healthcare professionals following COVID-19 disruptions; it said the financial effect was not quantifiable. It also cited lower Walden enrollment and increased marketing investment.
- Regulatory exposure is significant: the institutions collectively derived 72% of revenue from Title IV programs under the FY2022 calculation. FY2023 90/10 results were not yet available in the filing. Walden remained under a temporary provisional participation agreement with additional requirements, including letters of credit and cash-management conditions. Adtalem expected its consolidated Department of Education financial-responsibility score could fall below 1.5, potentially prompting additional oversight or security requirements.
- New federal borrower-defense regulations took effect July 1, 2023, and proposed changes to financial-responsibility, certification, administrative-capability, state-authorization, and gainful-employment rules were expected no earlier than July 1, 2024. Changes or adverse regulatory actions could affect Title IV eligibility, enrollment, cash receipts, and operating flexibility.
- Pending matters include a Walden doctoral-program class action, a Telephone Consumer Protection Act/Florida solicitation case, and an appeal of the dismissal of a Chamberlain biometric-information class action. The filing says losses are accrued when probable and reasonably estimable; the possible impact of matters without accruals cannot be predicted. DeVry-related litigation and settlements remain a source of discontinued-operations costs.
- Financial-statement revision: Adtalem identified errors in accounting for certain Medical and Veterinary scholarships that grant discounts on future tuition. It concluded prior-period errors were not material enough to require amended filings, but revised comparative statements in this 10-K; the accounting defers revenue for certain material rights. The auditor issued an unqualified opinion and found internal control over financial reporting effective. The Walden goodwill and intangible-asset impairment assessment was a critical audit matter; no impairment was recorded, but valuation headroom was limited for certain Walden assets.
- Other risks include competition, student recruitment and retention, clinical-placement availability, cybersecurity and privacy, wage and benefit costs, interest-rate exposure, and potential impairment of goodwill and intangible assets. Goodwill was $961.3 million and intangible assets were $812.3 million at year-end.
Investor verification priorities
- Confirm the filing identity and period: this is Adtalem Global Education Inc., FY2023, not Covista Inc. or a calendar-quarter filing.
- Review the revised scholarship revenue accounting and the revised FY2022 comparatives; distinguish these revisions from a formal restatement, which the company said was not required.
- Track enrollment trends, particularly Walden’s continued decline and the May 2023 Medical and Veterinary decrease, against subsequent reported periods.
- Verify Walden’s current Department of Education certification, letter-of-credit requirements, and Adtalem’s financial-responsibility score; FY2023 90/10 data was not available in this filing.
- Assess cash generation against debt service, the 9.19% variable-rate Term Loan B, remaining revolving capacity, planned capital spending, and share repurchases.
- Review updates to the disclosed litigation and DeVry-related contingencies, and test whether goodwill and intangible-asset valuation assumptions remain supportable.