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Table of Contents

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 September 30, 2020

 

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)

(866) 374-2678

(Registrant’s telephone number; including area code)

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

 

 

NYSE Chicago

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 October 29, 2020, there were 52,091,383 shares of the registrant’s common stock, $0.01 par value per share outstanding.

Table of Contents

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 (Loss)

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

35

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

54

Item 4.

Controls and Procedures

55

Part II. Other Information

Item 1.

Legal Proceedings

55

Item 1A.

Risk Factors

55

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3.

Defaults Upon Senior Securities

57

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

58

Signature 

59

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Adtalem Global Education Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except par value)

September 30, 

June 30, 

September 30, 

2020

2020

2019

Assets:

Current assets:

Cash and cash equivalents

$

561,170

$

500,516

$

121,079

Investments in marketable securities

 

9,434

 

8,968

 

8,763

Restricted cash

 

947

 

589

 

710

Accounts receivable, net

 

99,536

 

87,042

 

116,212

Prepaid expenses and other current assets

 

97,386

 

95,651

 

39,476

Current assets held for sale

 

 

 

169,873

Total current assets

 

768,473

 

692,766

 

456,113

Noncurrent assets:

 

 

 

Property and equipment, net

289,944

286,102

280,823

Operating lease assets

 

186,824

 

174,935

 

195,238

Deferred income taxes

 

18,325

 

22,277

 

9,814

Intangible assets, net

 

285,027

 

287,514

 

295,324

Goodwill

 

686,480

 

686,214

 

686,992

Other assets, net

 

94,824

 

78,879

 

91,086

Noncurrent assets held for sale

 

 

 

444,934

Total noncurrent assets

 

1,561,424

 

1,535,921

 

2,004,211

Total assets

$

2,329,897

$

2,228,687

$

2,460,324

Liabilities and shareholders' equity:

 

Current liabilities:

 

Accounts payable

$

48,148

$

46,484

$

44,674

Accrued payroll and benefits

 

31,491

 

48,835

 

30,071

Accrued liabilities

 

107,148

 

104,431

 

61,966

Deferred revenue

 

168,253

 

91,589

 

168,533

Current operating lease liabilities

 

51,897

 

51,644

 

54,057

Current portion of long-term debt

 

3,000

 

3,000

 

3,000

Current liabilities held for sale

 

 

 

50,174

Total current liabilities

 

409,937

 

345,983

 

412,475

Noncurrent liabilities:

 

 

 

Long-term debt

 

285,621

 

286,115

 

327,600

Long-term operating lease liabilities

 

189,607

 

176,032

 

192,055

Deferred income taxes

 

25,410

 

24,975

 

25,375

Other liabilities

 

85,590

 

82,309

 

89,646

Noncurrent liabilities held for sale

 

 

 

82,793

Total noncurrent liabilities

 

586,228

 

569,431

 

717,469

Total liabilities

 

996,165

 

915,414

 

1,129,944

Commitments and contingencies (Note 18)

 

 

 

Redeemable noncontrolling interest

 

2,761

 

2,852

 

3,187

Shareholders' equity:

 

 

 

Common stock, $0.01 par value per share, 200,000 shares authorized; 52,089, 51,871, and 54,649 shares outstanding as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively

 

810

 

807

 

805

Additional paid-in capital

 

508,487

 

504,434

 

492,151

Retained earnings

 

1,947,498

 

1,927,568

 

2,027,263

Accumulated other comprehensive loss

 

(8,612)

 

(9,055)

 

(176,739)

Treasury stock, at cost, 28,912, 28,794, and 25,862 shares as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively

 

(1,117,212)

 

(1,113,333)

 

(1,016,287)

Total shareholders' equity

 

1,330,971

 

1,310,421

 

1,327,193

Total liabilities and shareholders' equity

$

2,329,897

$

2,228,687

$

2,460,324

The accompanying notes are an integral part of these consolidated financial statements.

1

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)

Three Months Ended

September 30, 

2020

2019

Revenue

$

268,241

$

254,613

Operating cost and expense:

 

Cost of educational services

 

113,698

 

128,034

Student services and administrative expense

 

100,178

 

99,087

Restructuring expense

 

4,223

 

6,530

Business acquisition and integration expense

 

13,436

 

Gain on sale of assets

 

 

(4,779)

Total operating cost and expense

 

231,535

 

228,872

Operating income

 

36,706

 

25,741

Other income (expense):

 

Interest and dividend income

 

1,004

 

678

Interest expense

 

(3,692)

 

(5,328)

Investment gain

518

23

Net other expense

 

(2,170)

 

(4,627)

Income from continuing operations before income taxes

 

34,536

 

21,114

Provision for income taxes

 

(7,090)

 

(3,706)

Income from continuing operations

 

27,446

 

17,408

Discontinued operations:

 

Loss from discontinued operations before income taxes

 

(10,084)

 

(2,883)

Benefit from (provision for) income taxes

 

2,477

 

(273)

Loss from discontinued operations

 

(7,607)

 

(3,156)

Net income

 

19,839

 

14,252

Net loss attributable to redeemable noncontrolling interest

 

91

 

109

Net income attributable to Adtalem Global Education

$

19,930

$

14,361

Amounts attributable to Adtalem Global Education:

 

Net income from continuing operations

$

27,537

$

17,517

Net loss from discontinued operations

 

(7,607)

 

(3,156)

Net income attributable to Adtalem Global Education

$

19,930

$

14,361

Earnings (loss) per share attributable to Adtalem Global Education:

 

Basic:

 

Continuing operations

$

0.52

$

0.32

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Diluted:

 

 

Continuing operations

$

0.52

$

0.31

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Weighted-average shares outstanding:

Basic shares

52,464

55,493

Diluted shares

52,797

56,140

The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

(in thousands)

Three Months Ended

September 30, 

2020

2019

Net income

$

19,839

$

14,252

Other comprehensive income (loss), net of tax

 

 

Gain (loss) on foreign currency translation adjustments

 

318

 

(39,494)

Unrealized (loss) gain on marketable securities

 

(1)

 

45

Unrealized gain on interest rate swap

126

Comprehensive income (loss)

 

20,282

 

(25,197)

Comprehensive loss attributable to redeemable noncontrolling interest

 

91

 

184

Comprehensive income (loss) attributable to Adtalem Global Education

$

20,373

$

(25,013)

The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

Three Months Ended

September 30, 

2020

2019

Operating activities:

Net income

$

19,839

$

14,252

Loss from discontinued operations

 

7,607

 

3,156

Income from continuing operations

27,446

17,408

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Stock-based compensation expense

 

4,004

 

5,223

Amortization and adjustments to operating lease assets

14,639

12,804

Depreciation

 

8,975

 

8,393

Amortization of intangible assets

 

2,518

 

2,534

Amortization of deferred debt issuance costs

392

392

Provision for bad debts

1,723

5,554

Deferred income taxes

 

4,346

 

2,954

Loss on disposals, accelerated depreciation, and adjustments to property and equipment

 

1,486

 

1,053

Realized and unrealized gain on investments

(518)

(22)

Realized gain on sale of assets

(4,779)

Changes in assets and liabilities:

 

 

Accounts receivable

 

(13,356)

 

(38,206)

Prepaid expenses and other current assets

 

(1,735)

 

(13,646)

Accounts payable

 

2,089

 

(7,566)

Accrued payroll and benefits

(17,341)

(16,593)

Accrued liabilities

 

(443)

 

(2,417)

Deferred revenue

 

76,664

 

72,589

Operating lease liabilities

(12,700)

(13,681)

Other assets and liabilities

 

(13,535)

 

1,482

Net cash provided by operating activities-continuing operations

 

84,654

 

33,476

Net cash (used in) provided by operating activities-discontinued operations

 

(4,727)

 

13,992

Net cash provided by operating activities

 

79,927

 

47,468

Investing activities:

 

Capital expenditures

 

(14,443)

 

(10,436)

Proceeds from sales of marketable securities

1,014

290

Purchases of marketable securities

 

(963)

 

(292)

Proceeds from sale of assets

 

 

6,421

Net cash used in investing activities-continuing operations

 

(14,392)

 

(4,017)

Net cash used in investing activities-discontinued operations

 

 

(1,728)

Net cash used in investing activities

 

(14,392)

 

(5,745)

Financing activities:

 

Proceeds from exercise of stock options

 

55

 

828

Employee taxes paid on withholding shares

 

(3,921)

 

(5,045)

Proceeds from stock issued under Colleague Stock Purchase Plan

 

31

 

Repurchases of common stock for treasury

 

 

(40,255)

Borrowings under credit facility

 

 

30,000

Repayments under credit facility

 

(750)

 

(100,750)

Proceeds from down payment on seller loan

5,200

Payment for purchase of redeemable noncontrolling interest of subsidiary

 

 

(6,247)

Net cash used in financing activities-continuing operations

 

(4,585)

 

(116,269)

Net cash used in financing activities-discontinued operations

 

 

(480)

Net cash used in financing activities

 

(4,585)

 

(116,749)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

62

 

(6,750)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

61,012

 

(81,776)

Cash, cash equivalents and restricted cash at beginning of period

 

501,105

 

300,467

Cash, cash equivalents and restricted cash at end of period

 

562,117

 

218,691

Less: cash, cash equivalents and restricted cash of discontinued operations at end of period

 

 

96,902

Cash, cash equivalents and restricted cash at end of period

$

562,117

$

121,789

The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents

Adtalem Global Education Inc.

Consolidated Statements of Shareholders’ Equity

(unaudited)

(in thousands)

Accumulated

Additional

Other

Common

Paid-In

Retained

Comprehensive

Treasury

Stock

Capital

Earnings

Loss

Stock

Total

June 30, 2019

$

801

$

486,061

$

2,012,902

$

(137,290)

$

(970,944)

$

1,391,530

Net income attributable to Adtalem Global Education

 

 

 

14,361

 

 

 

14,361

Other comprehensive loss, net of tax

 

 

 

 

(39,449)

 

 

(39,449)

Stock-based compensation

 

 

5,225

 

 

 

 

5,225

Net activity from stock-based compensation awards

 

4

 

865

 

 

 

(5,088)

 

(4,219)

Repurchases of common shares for treasury

 

 

 

 

 

(40,255)

 

(40,255)

September 30, 2019

$

805

$

492,151

$

2,027,263

$

(176,739)

$

(1,016,287)

$

1,327,193

June 30, 2020

$

807

$

504,434

$

1,927,568

$

(9,055)

$

(1,113,333)

$

1,310,421

Net income attributable to Adtalem Global Education

 

19,930

 

19,930

Other comprehensive gain, net of tax

 

443

 

443

Stock-based compensation

 

4,009

 

4,009

Net activity from stock-based compensation awards

 

3

52

(3,921)

 

(3,866)

Proceeds from stock issued under Colleague Stock Purchase Plan

 

(8)

42

 

34

September 30, 2020

$

810

$

508,487

$

1,947,498

$

(8,612)

$

(1,117,212)

$

1,330,971

The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents

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

8

3

Discontinued Operations and Assets Held for Sale

9

4

Revenue

11

5

Restructuring Charges

13

6

Income Taxes

14

7

Earnings per Share

15

8

Accounts Receivable and Credit Losses

15

9

Property and Equipment, Net

18

10

Leases

18

11

Goodwill and Intangible Assets

20

12

Debt

23

13

Redeemable Noncontrolling Interest

25

14

Share Repurchases

26

15

Accumulated Other Comprehensive Loss

27

16

Stock-Based Compensation

27

17

Fair Value Measurements

29

18

Commitments and Contingencies

31

19

Segment Information

33

6

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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 leading workforce solutions provider. We present two reportable segments as follows:

Medical and Healthcare – Offers degree and non-degree programs in the medical and healthcare postsecondary education industry. This segment includes the operations of Chamberlain University (“Chamberlain”), 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 are collectively referred to as the “medical and veterinary schools.”

Financial Services – Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), OnCourse Learning (“OCL”), and EduPristine.

“Home Office and Other” includes activities not allocated to a reportable segment. See Note 19 “Segment Information” for additional information.

Adtalem Education of Brazil (“Adtalem Brazil”), Carrington College (“Carrington”), and DeVry University are presented as discontinued operations and assets held for sale in all periods presented as applicable. See Note 3 “Discontinued Operations and Assets Held for Sale” for additional information.

On September 11, 2020, Adtalem entered into a Membership Interest Purchase Agreement (the “Agreement”) with Laureate Education, Inc., a Delaware public benefit corporation (“Seller”), pursuant to which Adtalem has agreed to acquire from Seller all of 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 (together with e-Learning, “Walden”), in exchange for a purchase price of $1.48 billion in cash, subject to certain adjustments set forth in the Agreement (the “Acquisition”). Walden owns and operates Walden University, an online for-profit university headquartered in Minneapolis, Minnesota. The Board of Directors of Adtalem (the “Board”) has unanimously approved the Acquisition. The closing of the Acquisition is expected to occur in mid-calendar year 2021 and is subject to certain closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals.

Also on September 11, 2020, to provide future funding for the Acquisition, Adtalem entered into a commitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc. (“MSSF”), Barclays Bank PLC (“Barclays”), Credit Suisse AG, Cayman Islands Branch (“CS”) and Credit Suisse Loan Funding LLC (“CSLF” and, together with CS and their respective affiliates, “Credit Suisse”), and MUFG Bank, Ltd. (together with MSSF, Barclays and Credit Suisse, the “Commitment Parties”), pursuant to which the Commitment Parties committed to provide to Adtalem (i)(A) a senior secured term loan facility in an aggregate principal amount of $1 billion (the “Term Facility”) and (B) a senior secured revolving loan facility in an aggregate commitment amount of $400 million (the “Revolving Facility”) and (ii) to the extent one or more series of senior secured notes pursuant to a Rule 144A offering or other private placement in an aggregate principal amount of $650 million are not issued (in escrow or otherwise) prior to the consummation of the Acquisition, a senior secured bridge term loan credit facility in an aggregate principal amount of up to $650 million (together with the Term Facility and the Revolving Facility, the “Facilities”). The proceeds of the Facilities will be used, among other things, to finance the Acquisition, refinance Adtalem’s existing credit agreement, pay fees and expenses related to the Acquisition, and in the case of the Revolving Facility, to finance ongoing working capital and general corporate purposes. The commitments under the Commitment Letter are subject to customary closing conditions. Acquisition and integration costs incurred for this transaction, including costs related to the proposed financing, during the three months ended September 30, 2020 were $13.4 million.

On September 16, 2020, Laureate Education, Inc. (“Laureate”) advised Adtalem that Walden University had received a letter from the U.S. Department of Justice (the “DOJ”) indicating that the DOJ, along with several other government

7

Table of Contents

agencies, is conducting an investigation into allegations that Walden University may have violated the federal False Claims Act by misrepresenting its compliance with provisions of its Program Participation Agreement with the U.S. Department of Education relating, generally, to potential false representations to the Commission on Collegiate Nursing Education and false advertising to students about (1) the content and cost of Walden’s Masters of Science in Nursing program, or (2) the availability of clinical site placements required for mandatory practicum courses for such program (collectively, the “DOJ Investigation”). Subsequently, Walden disclosed the DOJ Investigation to the Higher Learning Commission (the “HLC”). On October 13, 2020, Laureate advised Adtalem that Walden University had received a letter from the HLC notifying Walden University that the HLC seeks to assign a public Governmental Investigation designation to Walden University. If imposed, the status would remain in place until the President of the HLC determines that it is no longer required because the institution has resolved the issues that led to the designation. Pursuant to HLC policy, on October 26, 2020, Walden University exercised its opportunity respond to the notice before the Governmental Investigation designation would be assigned and made public.

Pursuant to its access rights under the terms of the Agreement, Adtalem is conducting its own investigation of the matters addressed in the DOJ and HLC correspondence, including reviewing relevant documents and other information and interviewing relevant Laureate and/or Walden University personnel. As a condition to closing the acquisition, certain designated regulatory authorities, including the HLC, must consent to the acquisition. Pursuant to Section 5.05(a) of the Agreement, the parties are required to cooperate and use reasonable best efforts to obtain those designated pre-closing consents from, among others, the HLC. Consistent with the HLC’s policies and procedures, a Governmental Investigation designation by the HLC could delay or prevent the HLC’s approval of a substantive change application to approve the proposed acquisition of Walden University. We are in the early stages of evaluating these regulatory developments and the potential impact, if any, on our planned acquisition of Walden University.

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, 2020 (“2020 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles (“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 2020 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.

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 the impact of the novel coronavirus (“COVID-19”) pandemic, 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. The outbreak and the response of

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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 the outbreak, actions taken to contain the virus, as well as, how quickly and to what extent normal economic and operating conditions can resume.

Recent Accounting Standards

Recently adopted accounting standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13: “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The guidance was issued to provide financial statement users with more decision-useful information about the expected losses on financial instruments by replacing the incurred loss impairment methodology with a methodology that reflects expected credit losses by requiring a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We adopted this guidance, along with the related clarifications and improvements, effective July 1, 2020 using the modified-retrospective approach without adjusting prior comparative periods. The adoption of this standard did not have a material impact on Adtalem’s Consolidated Financial Statements, and therefore, no adjustments were made to retained earnings.

Recently issued accounting standards not yet adopted

None.

3. Discontinued Operations and Assets Held for Sale

On December 4, 2018, Adtalem completed the sale of Carrington to San Joaquin Valley College, Inc. (“SJVC”) for de minimis consideration. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, Carrington is presented in Adtalem’s financial reporting as a discontinued operation. Adtalem has retained certain leases associated with the Carrington operations. Adtalem remains the primary lessee on these leases and subleases to Carrington. Adtalem records the proceeds from these subleases as an offset to operating costs. Adtalem also assigned certain leases to Carrington but remains contingently liable under these leases. Adtalem recorded a pre-tax loss of $11.3 million on the sale of Carrington and transferred $9.9 million of cash and restricted cash balances to Carrington in fiscal year 2019, subject to post-closing adjustments to be completed in fiscal year 2021.

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 has a major effect on Adtalem’s operations and financial results, DeVry University is presented in Adtalem’s financial reporting as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20 million over a ten-year period payable based on DeVry University’s free cash flow. 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 “Note”). The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. DeVry University may make prepayments on the Note. This loan is recorded as other assets, net on the Consolidated Balance Sheets. 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 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. Adtalem recorded a pre-tax loss of $22.3 million on the sale of DeVry University and transferred $40.2 million of cash and restricted cash balances to DeVry University in fiscal year 2019.

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On April 24, 2020, Adtalem completed the sale of Adtalem Brazil to Estácio Participações S.A. (“Estácio”) and Sociedade de Ensino Superior Estaćio de Sá Ltda, a wholly owned subsidiary of Estácio (“Purchaser”), pursuant to the Stock Purchase Agreement dated October 18, 2019. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, Adtalem Brazil is presented in Adtalem’s financial reporting as a discontinued operation. Pursuant to the terms and subject to the conditions set forth in the purchase agreement, Adtalem sold the issued and outstanding shares of Adtalem Brasil Holding S.A. (a/k/a Adtalem Brazil) to the Purchaser for R$1,920 million, subject to certain post-closing adjustments pursuant to the purchase agreement. Adtalem received $345.9 million in sale proceeds and $56.0 million of Adtalem Brazil cash, for a combined $401.9 million upon the sale. Adtalem Brazil cash balance on the sale date was $88.4 million, resulting in $313.5 million of cash proceeds, net of this cash transferred. In addition, Adtalem received $110.7 million from the settlement of a deal-contingent foreign currency hedge arrangement entered into in connection with the sale of Adtalem Brazil to economically hedge the Brazilian Real sales price through the mitigation of the currency exchange rate risk. Adtalem recorded this settlement as a pre-tax gain on the hedge of $110.7 million in fiscal year 2020. The hedge agreement had a total notional amount of R$2,154 million. The derivative associated with the hedge agreement did not qualify for hedge accounting treatment under ASC 815, and as a result, all changes in fair value were recorded within the income statement.

The following is a summary of balance sheet information of assets and liabilities reported as held for sale as of September 30, 2019, which includes only Adtalem Brazil balances as Carrington and DeVry University were sold prior to that date (in thousands):

September 30, 

2019

Assets:

 

Current assets:

 

Cash and cash equivalents

$

96,902

Accounts receivable, net

 

64,915

Prepaid expenses and other current assets

 

8,056

Total current assets held for sale

 

169,873

Noncurrent assets:

 

Property and equipment, net

73,763

Operating lease assets

 

72,261

Deferred income taxes

 

5,163

Intangible assets, net

 

110,711

Goodwill

 

173,064

Other assets, net

 

9,972

Total noncurrent assets held for sale

 

444,934

Total assets held for sale

$

614,807

Liabilities:

 

Current liabilities:

 

Accounts payable

$

2,857

Accrued payroll and benefits

 

16,239

Accrued liabilities

 

9,800

Deferred revenue

 

11,104

Current operating lease liabilities

 

10,174

Total current liabilities held for sale

 

50,174

Noncurrent liabilities:

 

Long-term operating lease liabilities

 

62,367

Deferred income taxes

 

3,719

Other liabilities

 

16,707

Total noncurrent liabilities held for sale

 

82,793

Total liabilities held for sale

$

132,967

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The following is a summary of income statement information of operations reported as discontinued operations, which includes Adtalem Brazil’s, Carrington’s, and DeVry University’s operations through the date of each respective sale (in thousands):

Three Months Ended

September 30, 

2020

2019

Revenue

$

$

45,652

Operating cost and expense:

 

 

Cost of educational services

 

 

33,948

Student services and administrative expense

 

10,084

 

14,373

Restructuring expense

 

 

35

Total operating cost and expense

 

10,084

 

48,356

Operating loss

 

(10,084)

 

(2,704)

Other income (expense):

Interest and dividend income

978

Interest expense

(1,157)

Net other expense

 

 

(179)

Loss from discontinued operations before income taxes

(10,084)

(2,883)

Benefit from (provision for) income taxes

 

2,477

 

(273)

Net loss from discontinued operations attributable to Adtalem

$

(7,607)

$

(3,156)

We continue to incur costs, principally attorney fees, 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.

4. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers (students and members), 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 September 30, 2020

Medical and
Healthcare

Financial
Services

Consolidated

Higher education

$

218,289

$

$

218,289

Test preparation/certifications

27,276

27,276

Conferences/seminars

13,369

13,369

Memberships/subscriptions

7,995

7,995

Other

537

775

1,312

Total

 

$

218,826

 

$

49,415

 

$

268,241

Three Months Ended September 30, 2019

Medical and
Healthcare

Financial
Services

Consolidated

Higher education

$

201,453

$

$

201,453

Test preparation/certifications

24,972

24,972

Conferences/seminars

17,070

17,070

Memberships/subscriptions

4,867

4,867

Other

6,034

217

6,251

Total

 

$

207,487

 

$

47,126

 

$

254,613

In addition, see Note 19 “Segment Information” for a disaggregation of revenue by geographical region.

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Performance Obligations and Revenue Recognition

Higher education: Higher education revenue consists of tuition, fees, books, and other educational products. The majority of revenue is derived from tuition and fees, which is recognized on a straight-line basis over the term as instruction is delivered. Books and other educational product revenue are recognized when products are shipped or students receive access to electronic materials. Under certain circumstances, we report revenue from these books and other educational products on a net basis because our performance obligation is to facilitate a transaction between the student and a vendor. These amounts were not significant for the three months ended September 30, 2020 and 2019.

Test preparation/certifications: Test preparation revenue consists of sales of self-study materials and test preparation course instruction. Becker test preparation revenue is primarily derived from self-study materials and is recognized when access to the materials is delivered to the customer. EduPristine test preparation revenue is primarily derived from course instruction and is recognized on a straight-line basis over the applicable instruction delivery period. Certification revenue consists of exam preparation guides, seminars, exam sitting fees, and recertification fees and is recognized when the applicable performance obligation is satisfied.

Conferences/seminars: Conference revenue consists of revenue from attendees, sponsors, and exhibitors. We recognize revenue for all items related to conferences at the time of the conference. Seminar revenue consists of seminars delivered in live, live-online, or on-demand online formats. We recognize revenue for live and live-online seminars on the day of the seminar. We recognize revenue for on-demand online seminars when customers are granted access to a webcast of the seminar.

Memberships/subscriptions: Membership revenue is recognized on a straight-line basis over the membership period. Subscription revenue is recognized on a straight-line basis over the subscription period.

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.

Customer contracts generally have separately stated prices for each performance obligation contained in the contract. Therefore, each performance obligation generally has its own standalone selling price. For higher education students, 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 utilizing private funding or funding through Adtalem’s credit extension programs (see Note 8 “Accounts Receivable and Credit Losses” for additional information) generally pay after the academic term is complete. For non-higher education customers, payment is typically due and collected at the time a customer places an order.

Transaction Price

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

For higher education, students may receive discounts, scholarships, or refunds, which gives rise to variable consideration. The amounts of discounts or scholarships are applied to individual student accounts when such amounts are awarded. Therefore, the transaction price is reduced directly by these discounts or scholarships from the amount of the standard tuition rate charged. 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 throughout the period revenue is recognized by the Adtalem institutions, on a student-by-student basis. 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.

For test preparation and other Financial Services products, the transaction price is equal to the amount charged to the customer, which is the standard rate, less any discounts, and an estimate for returns or refunds.

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

For our higher education institutions, 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. As instruction is provided, 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 8 “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.

For our Financial Services businesses, customers are billed and payment is due at the time of order placement. In most cases, performance obligations are delivered subsequent to payments received. Delivering our performance obligations reduces deferred revenue, and accounts receivable is reduced upon payments received. Becker offers flexible payment plans with terms of up to 12-months as a financing option for the Becker CPA Exam Review Course (see Note 8 “Accounts Receivable and Credit Losses”). In this case, payment is received after satisfying the performance obligation.

Revenue of $75.6 million was recognized during the first three months of fiscal year 2021 that was included in the deferred revenue balance at the beginning of fiscal year 2021. 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, and increases from payments received related to academic terms commencing after the end of the reporting period.

Practical Expedients

As our performance obligations have an original expected duration of one year or less, we have applied the practical expedient (as provided in ASC 606-10-50-14) to not disclose the information in ASC 606-10-50-13, which requires disclosure of the amount of the transaction price allocated to our performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period and when the entity expects to recognize this amount as revenue. All consideration from contracts with customers is included in the transaction price.

5. Restructuring Charges

During the first quarter of fiscal year 2021, Adtalem recorded restructuring charges primarily related to Adtalem’s home office and ACAMS real estate consolidations. During the first quarter of fiscal year 2020, Adtalem recorded restructuring charges primarily related to the sale of Becker’s courses for healthcare students 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 result in additional restructuring charges or reversals in future periods. Termination benefit charges represented severance pay and benefits for these employees. Adtalem’s home office is classified as “Home Office and Other” in Note 19 “Segment Information.” Pre-tax restructuring charges by segment were as follows (in thousands):

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Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Real Estate
and Other

Termination
Benefits

Total

Real Estate
and Other

Termination
Benefits

Total

Medical and Healthcare

$

$

$

$

127

$

$

127

Financial Services

 

1,415

 

 

1,415

1,690

 

289

 

1,979

Home Office and Other

 

2,318

 

490

 

2,808

4,122

 

302

 

4,424

Total

$

3,733

$

490

$

4,223

$

5,939

$

591

$

6,530

The following table summarizes the separation and restructuring plan activity for the fiscal years 2020 and 2021, for which cash payments are required (in thousands):

Liability balance as of June 30, 2019

$

25,083

ASC 842 (leases) adjustment (1)

(25,030)

Liability balance as of July 1, 2019

 

53

Increase in liability (separation and other charges)

 

4,955

Reduction in liability (payments and adjustments)

 

(3,573)

Liability balance as of June 30, 2020

 

1,435

Increase in liability (separation and other charges)

 

490

Reduction in liability (payments and adjustments)

 

(1,688)

Liability balance as of September 30, 2020

$

237

(1) Reflects amounts reclassified out of the opening balance of restructuring reserve accruals as of June 30, 2019 to operating lease assets that was recorded with the adoption of ASC 842.

The liability balance of $0.2 million is recorded as accrued liabilities on the Consolidated Balance Sheet as of September 30, 2020. This liability balance represents costs for employees who have either not yet separated from Adtalem or for whom full severance has not yet been paid. All of these remaining costs are expected to be paid within the next 12 months. We have substantially completed our current restructuring plans. We continue to incur restructuring charges or reversals related to exiting leased space from previous restructuring activities. Management may institute future restructuring plans.

6. Income Taxes

Our effective income tax rates from continuing operations were 20.5% and 17.6% in the three months ended September 30, 2020 and 2019, respectively. The effective tax rates in fiscal years 2021 and 2020 reflect the U.S. federal tax rate of 21% adjusted for foreign rate differences, benefits associated with local tax incentives, changes in valuation allowances and liabilities for uncertain tax positions, and tax benefits on stock-based compensation awards.

Three of Adtalem’s operating units 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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7. Earnings per Share

The following table sets forth the computations of basic and diluted earnings per share and stock awards not included in the computation of diluted earnings per share when their effect is anti-dilutive (in thousands, except per share data):

Three Months Ended

September 30, 

2020

2019

Numerator:

Net income (loss) attributable to Adtalem:

 

 

Continuing operations

$

27,537

$

17,517

Discontinued operations

(7,607)

(3,156)

Net

$

19,930

$

14,361

Denominator:

Weighted-average shares outstanding

 

51,963

 

55,018

Unvested participating RSUs

 

501

 

475

Weighted-average basic shares outstanding

 

52,464

 

55,493

Effect of dilutive stock awards

 

333

 

647

Weighted-average diluted shares outstanding

 

52,797

 

56,140

Earnings (loss) per share attributable to Adtalem:

Basic:

Continuing operations

$

0.52

$

0.32

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Diluted:

Continuing operations

$

0.52

$

0.31

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Weighted-average anti-dilutive stock awards

948

329

8. Accounts Receivable and Credit Losses

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

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

September 30, 2020

Gross

Allowance

Net

Trade receivables, current

$

106,980

$

(10,634)

$

96,346

Financing receivables, current

6,906

(3,716)

3,190

Accounts receivable, current

$

113,886

$

(14,350)

$

99,536

Financing receivables, current

$

6,906

$

(3,716)

$

3,190

Financing receivables, noncurrent

42,925

(13,099)

29,826

Total financing receivables

$

49,831

$

(16,815)

$

33,016

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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, books, and fees, 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. 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, and minimizes interest being accrued on the loan balance. Payments may increase upon completing or departing school. After a student leaves school, the student typically will have a monthly installment repayment plan. In addition, Becker offered an 18-month credit extension program for its Becker CPA Exam Review Course which is considered a financing receivable. Becker is no longer offering credit extension under this program. Instead, Becker is offering flexible payment plans with terms of up to 12-months which is not considered a financing receivable.

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 charge-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 September 30, 2020 was as follows (in thousands):

Amortized Cost Basis by Origination Year

Prior

2017

2018

2019

2020

2021

Total

1-30 days past due

 

$

1,117

$

1,338

 

$

647

 

$

889

 

$

379

 

$

24

 

$

4,394

31-60 days past due

556

145

41

67

223

1,032

61-90 days past due

609

59

444

71

127

1,310

Greater than 90 days past due

8,179

3,156

2,475

1,132

334

15,276

Total past due

10,461

4,698

3,607

2,159

1,063

24

22,012

Current

11,634

4,994

3,732

4,682

2,384

393

27,819

Financing receivables, gross

$

22,095

$

9,692

$

7,339

$

6,841

$

3,447

$

417

$

49,831

The following table includes our financing receivables credit risk profile disclosures for prior periods before we adopted ASC 326 on July 1, 2020 (in thousands):

Over

Total

1-30 Days

31-60 Days

61-90 Days

90 Days

Total

Financing

Past Due

Past Due

Past Due

Past Due

Past Due

Current

Receivables

Financing receivables:

June 30, 2020

$

7,192

$

1,755

$

1,547

$

13,782

$

24,276

$

25,749

$

50,025

September 30, 2019

$

3,317

$

1,342

$

526

$

10,961

$

16,146

$

31,527

$

47,673

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 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. Students still attending classes and recently graduated are more likely to pay than those who are inactive due to being on a leave of absence or withdrawing from school.

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For our financing receivables, we primarily use historical loss rates based on an aging schedule specific to each school. 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 September 30, 2020

Trade

Financing

Total

Beginning balance

 

$

10,825

$

15,690

 

$

26,515

Write-offs

(759)

(256)

(1,015)

Recoveries

186

40

226

Provision for credit losses

382

1,341

1,723

Ending balance

$

10,634

$

16,815

$

27,449

Three Months Ended September 30, 2019

Trade

Financing

Total

Beginning balance

 

$

8,243

$

6,289

 

$

14,532

Write-offs

(1,598)

(26)

(1,624)

Recoveries

323

24

347

Provision for credit losses

2,263

3,291

5,554

Ending balance

$

9,231

$

9,578

$

18,809

Allowance for bad debts on short-term and long-term receivables as of September 30, 2020, June 30, 2020, and September 30, 2019 were $27.4 million, $26.5 million, and $18.8 million, respectively. The increase in the reserve from the year-ago quarter is driven by higher bad debt expense, primarily related to the credit extension programs at the medical and veterinary schools.

Accounts receivable, net decreased with an offsetting increase in other assets, net on the Consolidated Balance Sheet as of September 30, 2020 compared to the prior periods presented primarily due to a correction in the methodology on how we classify financing receivable balances between current and noncurrent assets.

Other Financing Receivables

In connection with the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of the Note. The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. The value of the DeVry University loan receivable included in other assets, net on the Consolidated Balance Sheet as of September 30, 2020, June 30, 2020, and September 30, 2019 is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 4% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.

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 holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The value of the DePaul College Prep loan receivable included in other assets, net on the Consolidated Balance Sheet as of September 30, 2020, June 30, 2020, and September 30, 2019 is $41.7 million, $41.4 million, and $40.4 million, respectively, which is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.

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9. Property and Equipment, Net

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

September 30, 

June 30, 

September 30, 

2020

2020

2019

Land

 

$

44,049

$

43,246

 

$

41,441

Building

315,725

313,068

309,893

Equipment

259,340

248,359

235,027

Construction in progress

10,882

12,449

8,681

Property and equipment, gross

629,996

617,122

595,042

Accumulated depreciation

 

(340,052)

 

(331,020)

 

(314,219)

Property and equipment, net

$

289,944

$

286,102

$

280,823

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 holds a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The buyer has 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 continues 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 Sheet. See Note 8 “Accounts Receivable and Credit Losses” for a discussion on the discounting of the note receivable. The $5.2 million received during the first quarter of fiscal year 2020 is classified as a financing activity on the Consolidated Statements of Cash Flows.

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus facility. Net proceeds from the sale of $6.4 million resulted in a gain on the sale of $4.8 million in the first three months of fiscal year 2020. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 19 “Segment Information.”

10. 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 January 2031, most of which include options to terminate for a fee or extend the leases for an additional five-year period. The lease term includes options to terminate or extend when it is reasonably certain that the option will be exercised. 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 balance sheet. 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 September 30, 2020, we entered into one additional operating lease that has not yet commenced. The operating lease will commence during the first quarter of fiscal year 2022, has an 11-year lease term, and will result in an additional lease asset and lease liability of approximately $21.3 million.

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

Three Months Ended

September 30, 

2020

2019

Operating lease cost

$

12,780

$

13,703

Sublease income

 

(4,341)

 

(5,126)

Total lease cost

$

8,439

$

8,577

Maturities of lease liabilities by fiscal year as of September 30, 2020 were as follows (in thousands):

Operating

Fiscal Year

Leases

2021 (remaining)

$

48,128

2022

62,330

2023

51,908

2024

38,213

2025

28,386

Thereafter

52,914

Total lease payments

 

281,879

Less: imputed interest

(40,375)

Present value of lease liabilities

$

241,504

Lease term and discount rate were as follows:

September 30, 

2020

Weighted-average remaining operating lease term (years)

5.4

Weighted-average operating lease discount rate

5.5%

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

Three Months Ended

September 30, 

2020

2019

Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)

$

11,427

$

11,963

Operating lease assets obtained in exchange for operating lease liabilities

$

26,528

$

4,868

Adtalem maintains agreements to lease either a portion or the full space of three facilities owned by Adtalem to DeVry University with various expiration dates through December 2023. Adtalem maintains agreements to sublease either a portion or the full leased space at 21 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 prior to their divestitures during fiscal year 2019. All sublease expirations with DeVry University and Carrington 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. Future minimum lease and sublease rental income under these agreements as of September 30, 2020, were as follows (in thousands):

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Fiscal Year

Amount

2021 (remaining)

$

14,270

2022

16,816

2023

 

16,078

2024

 

10,261

2025

 

5,121

Thereafter

2,038

Total lease and sublease rental income

$

64,584

11. Goodwill and Intangible Assets

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

September 30, 

June 30, 

September 30, 

Reporting Unit

2020

2020

2019

Chamberlain

$

4,716

$

4,716

$

4,716

AUC

 

68,321

 

68,321

 

68,321

RUSM and RUSVM

 

237,173

 

237,173

 

237,173

Financial Services

 

376,270

 

376,004

 

376,782

Total

$

686,480

$

686,214

$

686,992

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

September 30, 

June 30, 

September 30, 

Reportable Segment

2020

2020

2019

Medical and Healthcare

$

310,210

$

310,210

$

310,210

Financial Services

 

376,270

 

376,004

 

376,782

Total

$

686,480

$

686,214

$

686,992

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

Medical and 

Financial

Healthcare

Services

Total

June 30, 2019

$

310,210

$

377,046

$

687,256

Foreign exchange rate changes

 

 

(264)

 

(264)

September 30, 2019

310,210

376,782

686,992

Purchase accounting adjustments

 

 

(92)

 

(92)

Foreign exchange rate changes

(686)

(686)

June 30, 2020

310,210

376,004

686,214

Foreign exchange rate changes

 

 

266

 

266

September 30, 2020

$

310,210

$

376,270

$

686,480

The change in the Financial Services segment goodwill balance from June 30, 2020 is the result of a change in the foreign currency exchange rates on the EduPristine goodwill balance recorded in the Indian Rupee compared to the U.S. dollar.

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Intangible assets consisted of the following (in thousands):

September 30, 2020

Gross Carrying

Accumulated

Weighted-Average

Amount

Amortization

Amortization Period

Amortizable intangible assets:

 

Customer relationships

$

68,900

$

(22,744)

 

10 Years

Curriculum/software

 

11,600

 

(2,578)

 

6 Years

Course delivery technology

 

6,700

 

(1,786)

 

5 Years

Total

$

87,200

$

(27,108)

 

Indefinite-lived intangible assets:

 

 

 

Trade names

$

95,695

 

 

Chamberlain Title IV eligibility and accreditations

 

1,200

 

 

AUC Title IV eligibility and accreditations

 

100,000

 

 

Ross Title IV eligibility and accreditations

 

14,100

 

 

Intellectual property

 

13,940

 

 

Total

$

224,935

 

 

June 30, 2020

Gross Carrying

Accumulated 

Amount

Amortization

Amortizable intangible assets:

Customer relationships

$

68,900

$

(21,044)

Curriculum/software

11,600

(2,094)

Course delivery technology

7,200

(1,952)

Total

$

87,700

$

(25,090)

Indefinite-lived intangible assets:

 

 

Trade names

$

95,664

 

Chamberlain Title IV eligibility and accreditations

 

1,200

 

AUC Title IV eligibility and accreditations

 

100,000

 

Ross Title IV eligibility and accreditations

 

14,100

 

Intellectual property

 

13,940

 

Total

$

224,904

 

September 30, 2019

Gross Carrying

Accumulated

Amount

Amortization

Amortizable intangible assets:

 

 

Customer relationships

$

68,900

$

(15,865)

Curriculum/software

11,600

(644)

Course delivery technology

7,200

(853)

Total

$

87,700

$

(17,362)

Indefinite-lived intangible assets:

Trade names

$

95,746

Chamberlain Title IV eligibility and accreditations

1,200

AUC Title IV eligibility and accreditations

100,000

Ross Title IV eligibility and accreditations

14,100

Intellectual property

13,940

Total

$

224,986

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

September 30, 

June 30, 

September 30, 

Reportable Segment

2020

2020

2019

Medical and Healthcare

$

137,500

$

137,500

$

137,500

Financial Services

 

87,435

 

87,404

 

87,486

Total

$

224,935

$

224,904

$

224,986

Amortization expense for amortized intangible assets was $2.5 million and $2.5 million for the three months ended September 30, 2020 and 2019, respectively. Estimated intangible asset amortization expense is as follows (in thousands):

Financial

Fiscal Year

Services

2021 (remaining)

$

7,555

2022

 

9,943

2023

 

9,792

2024

 

9,509

2025

 

7,933

Thereafter

 

15,360

Total

$

60,092

All amortizable intangible assets except ACAMS customer relationships are amortized on a straight-line basis. The amount amortized for ACAMS customer relationships is based on the estimated retention of the customers, giving consideration to the revenue and cash flow associated with these existing customers.

Indefinite-lived intangible assets related to trade names, Title IV eligibility and accreditations, and intellectual property 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 contained goodwill as of the first quarter of fiscal year 2021. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management and the Board. 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, as of September 30, 2020, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value.

Adtalem has four reporting units that contained indefinite-lived intangible assets as of the first quarter of fiscal year 2021. For indefinite-lived intangible assets, management first analyzes qualitative factors, including results of operations and business conditions of the four reporting units that contained 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 September 30, 2020.

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 2020, and that no interim events or deviations from planned operating results occurred as of September 30, 2020 that would cause management to reassess these conclusions. 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

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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. Actual results may differ from those estimates, which could lead to future impairments of goodwill or intangible assets.

12. Debt

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

September 30, 

June 30, 

September 30, 

2020

2020

2019

Total debt:

 

Term B Loan

$

293,250

$

294,000

$

296,250

Revolver

 

 

 

40,000

Total principal payments due

 

293,250

 

294,000

 

336,250

Deferred debt issuance costs

 

(4,629)

 

(4,885)

 

(5,650)

Total amount outstanding

 

288,621

 

289,115

 

330,600

Less current portion:

 

Term B Loan

 

(3,000)

 

(3,000)

 

(3,000)

Noncurrent portion

$

285,621

$

286,115

$

327,600

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

Maturity

Fiscal Year

Payments

2021 (remaining)

$

2,250

2022

 

3,000

2023

 

3,000

2024

 

3,000

2025

 

282,000

Total

$

293,250

On April 13, 2018, Adtalem entered into a credit agreement (the “Credit Agreement”) that provides for (1) a $300 million revolving facility (“Revolver”) with a maturity date of April 13, 2023 and (2) a $300 million senior secured Term B loan (“Term B Loan”) with a maturity date of April 13, 2025. We refer to the Revolver and Term B Loan collectively as the “Credit Facility.” The Revolver has availability for currencies other than U.S. dollars of up to $200 million and $100 million available for letters of credit. Subject to certain conditions set forth in the Credit Agreement, the Credit Facility may be increased by $250 million.

Interest on the Term B Loan 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 it has commitments from panel banks to continue to contribute to LIBOR through the end of calendar year 2021, but that it will not use its powers to compel contributions beyond such date. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. Management is monitoring their efforts, and evaluating the need for an amendment to the Credit Agreement to accommodate a replacement rate. The Credit Agreement does not specify a replacement rate for LIBOR.

Term B Loan

For Eurocurrency rate loans, Term B Loan interest is equal to LIBOR or a LIBOR-equivalent rate plus 3%. For base rate loans, Term B Loan interest is equal to the base rate plus 2%. The Term B Loan amortizes in equal quarterly

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installments of $750,000, with the balance due at maturity on April 13, 2025. As of September 30, 2020, June 30, 2020, and September 30, 2019, the interest rate for borrowings under the Term B Loan facility was 3.15%, 3.18%, and 5.04%, respectively, which approximated the effective interest rate.

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 Term B Loan debt. We pay interest at a fixed rate of 0.946% and receive variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Term B Loan. The effective date of the Swap was March 31, 2020 and settlements with the counterparty occur on a monthly basis. The Swap will terminate on February 28, 2025.

During the operating term of the Swap, the annual interest rate on the amount of the Term B Loan is fixed at 3.946% (including the impact of our current 3% interest rate margin on LIBOR loans) for the applicable interest rate period.

The Swap is designated as a cash flow hedge and as such, changes in its fair value are recognized in accumulated other comprehensive loss on the Consolidated Balance Sheet and are reclassified into the Consolidated Statements of Income within interest expense in the periods in which the hedged transactions affect earnings.

Revolver

Revolver interest is equal to LIBOR or a LIBOR-equivalent rate for Eurocurrency rate loans or a base rate, plus an applicable rate based on Adtalem’s consolidated leverage ratio, as defined in the Credit Agreement. The applicable rate ranges from 1.75% to 2.75% for Eurocurrency rate loans and from 0.75% to 1.75% for base rate loans. As of September 30, 2019, borrowings under the Revolver were $40 million with a weighted-average interest rate of 4.20%. There were no outstanding borrowings under the Revolver as of each of September 30, 2020 and June 30, 2020.

Adtalem had a letter of credit outstanding of $68.4 million as of each of September 30, 2020, June 30, 2020, and September 30, 2019. This letter of credit was posted in the second quarter of fiscal year 2017 in relation to a settlement with the Federal Trade Commission (“FTC”) and requires 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. As of September 30, 2020, Adtalem is charged an annual fee equal to 2.25% of the undrawn face amount of the outstanding letters of credit under the Revolver, payable quarterly. Adtalem continues to post the letter of credit in relation to the settlement with the FTC on behalf of DeVry University and is reimbursed by DeVry University for 2.00% of the outstanding amount of this letter of credit. The Credit Agreement also requires payment of a commitment fee equal to 0.40% as of September 30, 2020, of the undrawn portion of the Revolver. The amount undrawn under the Revolver, which includes the impact of the outstanding letters of credit, was $231.6 million as of September 30, 2020. The letter of credit fees and commitment fees are adjustable quarterly, based upon Adtalem’s achievement of certain financial ratios.

Debt Issuance Costs

Adtalem incurred $9.9 million in fees that were capitalized in relation to the Credit Agreement, $7.1 million of which was related to the Term B Loan facility and $2.7 million of which was related to the Revolver facility. The deferred debt issuance costs related to the Term B Loan are presented as a direct deduction from the face amount of the debt, while the deferred debt issuance costs related to the Revolver are classified as other assets, net on the Consolidated Balance Sheets. The deferred debt issuance costs amortization is recorded in interest expense in the Consolidated Statements of Income. The following table summarizes the total deferred debt issuance costs for the Term B Loan and Revolver, which are being amortized over seven years and five years, respectively (in thousands):

Term B Loan

Revolver

Total

Deferred debt issuance costs as of June 30, 2020

$

4,885

$

1,516

$

6,401

Amortization of deferred debt issuance costs

 

(256)

 

(136)

 

(392)

Deferred debt issuance costs as of September 30, 2020

$

4,629

$

1,380

$

6,009

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Covenants and Guarantees

The Credit Agreement contains 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.

The Credit Agreement contains covenants that, among other things, require maintenance of certain financial ratios. Maintenance of these financial ratios could place restrictions on Adtalem’s ability to pay dividends. Adtalem has not paid a dividend since December 2016. These financial ratios include a consolidated fixed charge coverage ratio, a consolidated leverage ratio, and a U.S. Department of Education financial responsibility ratio based upon a composite score of an equity ratio, a primary reserve ratio, and a net income ratio. Failure to maintain any of these ratios or to comply with other covenants contained in the Credit Agreement would constitute an event of default and could result in termination of the Credit Agreement and require payment of all outstanding borrowings and replacement of outstanding letters of credit. Adtalem was in compliance with the debt covenants as of September 30, 2020.

The Term B Loan requires mandatory prepayments equal to a percentage of excess cash flow or equal to the net cash proceeds in excess of $50 million from a disposition which is not reinvested in assets within one-year from the date of disposition, among other mandatory prepayment terms (see the Credit Agreement, as filed under Form 8-K dated April 13, 2018, for additional information and term definitions). No mandatory prepayments have been required or made since the execution of the Credit Agreement.

The stock of all U.S. and certain foreign subsidiaries of Adtalem is pledged as collateral for borrowings under the Credit Agreement. Our borrowings under the Credit Facility are guaranteed by us and all of our domestic subsidiaries (subject to certain exceptions) and secured by a first lien on our assets and the assets of our guarantor subsidiaries (excluding real estate), including capital stock of the subsidiaries.

13. Redeemable Noncontrolling Interest

As of June 30, 2019, Adtalem maintained a 97.9% ownership interest in Adtalem Brazil with the remaining 2.1% owned by members of the Adtalem Brazil senior management group. Since July 1, 2015, Adtalem has had the right to exercise a call option and purchase any remaining Adtalem Brazil stock from Adtalem Brazil management. Likewise, Adtalem Brazil management has had the right to exercise a put option and sell its remaining ownership interest in Adtalem Brazil to Adtalem.

In addition, Adtalem maintains a 71% ownership interest in EduPristine with the remaining 29% owned by Kaizen Management Advisors (“Kaizen”), an India-based private equity firm, as of September 30, 2020. Beginning on March 26, 2020, Adtalem has had the right to exercise a call option and purchase any remaining EduPristine stock from Kaizen. Likewise, Kaizen has 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 will have the right to exercise a put option and sell its remaining ownership interest in EduPristine to Adtalem.

Since the put options are out of the control of Adtalem, authoritative guidance requires the noncontrolling interests, which includes the value of the put options, to be displayed outside of the equity section of the Consolidated Balance Sheets.

On July 1, 2019, the Adtalem Brazil management noncontrolling members exercised their put option and sold their remaining ownership interest in Adtalem Brazil to Adtalem resulting in Adtalem owning 100% of Adtalem Brazil until the sale of Adtalem Brazil, which was completed on April 24, 2020. In the first quarter of fiscal year 2020, $6.2 million of redeemable noncontrolling interest was removed from the Consolidated Balance Sheet as a result of the put option exercise. Adtalem has not adjusted the redemption value related to the Kaizen put option as management believes the redemption value has not materially changed since acquiring a majority stake in EduPristine.

The adjustment to increase or decrease the EduPristine noncontrolling interest for their respective proportionate share of EduPristine’s profit (loss) flows through the Consolidated Statements of Income each reporting period based on Adtalem’s noncontrolling interest accounting policy.

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The following is a reconciliation of the redeemable noncontrolling interest balance (in thousands):

Three Months Ended

September 30, 

2020

2019

Balance at beginning of period

$

2,852

$

9,543

Net loss attributable to redeemable noncontrolling interest

 

(91)

 

(109)

Payment for purchase of redeemable noncontrolling interest of subsidiary

(6,247)

Balance at end of period

$

2,761

$

3,187

14. Share Repurchases

On November 8, 2018, we announced that the Board authorized Adtalem’s current share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The current share repurchase program commenced in January 2019. Adtalem made share repurchases under the current repurchase program as follows (in thousands, except shares and per share data):

Three Months Ended

Life-to-Date

September 30, 

Current Share

2020

2019

Repurchase Program

Total number of share repurchases

918,807

6,383,431

Total cost of share repurchases

$

$

40,255

$

254,769

Average price paid per share

$

$

43.81

$

39.91

On February 4, 2020, we announced that the Board authorized Adtalem’s twelfth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The new program will commence when the repurchases from the current program are complete. As of September 30, 2020, $345.2 million of authorized share repurchases were remaining under the current and twelfth share repurchase programs. Repurchases under the current program were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. In October 2020, Adtalem determined to end the suspension of its current share repurchase program, and we may resume repurchases in accordance with the securities laws if market conditions are favorable. 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 privately 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. These repurchased shares have reduced the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

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15. Accumulated Other Comprehensive Loss

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

Three Months Ended

September 30, 

2020

2019

Foreign currency translation adjustments

Beginning balance

$

(1,383)

$

(137,389)

Gain (loss) on foreign currency translation

318

(39,494)

Ending balance

$

(1,065)

$

(176,883)

Marketable securities

Beginning balance, gross

$

242

$

131

Beginning balance, tax effect

(59)

(32)

Beginning balance, net of tax

183

99

Unrealized (loss) gain on marketable securities

(2)

59

Tax effect

1

(14)

Ending balance

$

182

$

144

Interest rate swap

Beginning balance, gross

$

(10,399)

$

Beginning balance, tax effect

2,544

Beginning balance, net of tax

(7,855)

Unrealized gain on interest rate swap

167

Tax effect

(41)

Ending balance

$

(7,729)

$

Total ending balance at September 30

$

(8,612)

$

(176,739)

16. 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. Under these plans, directors, key executives, and managerial employees are eligible to receive incentive stock or nonqualified options to purchase shares of Adtalem’s common stock. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 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 stock-based grants will be issued under this plan. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 are administered by the Compensation Committee of the Board. Options are granted for terms of up to ten years and can vest immediately or over periods of up to five years. The requisite service period is equal to the vesting period. The option price under the plans is the fair market value of the shares on the date of the grant.

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 outstanding but unvested grants in the period they occur.

As of September 30, 2020, 3,803,197 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 three months ended September 30, 2020:

Weighted-Average

Remaining

Aggregate

Number of

Weighted-Average

Contractual Life

Intrinsic Value

Options

Exercise Price

(in years)

(in thousands)

Outstanding as of July 1, 2020

 

1,439,630

$

31.95

 

Granted

 

281,075

 

32.03

 

Exercised

 

(5,450)

 

23.30

 

Forfeited

 

 

 

Expired

 

(35,050)

 

41.84

 

Outstanding as of September 30, 2020

 

1,680,205

 

31.81

 

6.85

$

1,690

Exercisable as of September 30, 2020

 

1,025,387

$

29.03

 

5.67

$

1,690

The total intrinsic value of options exercised for the three months ended September 30, 2020 and 2019 was $0.1 million and $0.5 million, respectively.

The fair value of Adtalem’s stock option awards was estimated using a binomial model. This model uses historical cancellation and exercise experience of Adtalem to determine the option value. It also takes into account 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 three months of fiscal years 2021 and 2020 was $12.23 and $16.98, per share, respectively. The fair value of Adtalem’s stock option grants was estimated assuming the following weighted-average assumptions:

Fiscal Year

2021

2020

Expected life (in years)

 

6.54

 

6.51

 

Expected volatility

 

39.27

%

37.66

%

Risk-free interest rate

 

0.45

%

1.40

%

Dividend yield

 

0.00

%

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.

If factors change and different assumptions are employed in the valuation of stock-based grants in future periods, the stock-based compensation expense that Adtalem records may differ significantly from what was recorded in previous periods.

During the first three months of fiscal year 2021, Adtalem granted 332,890 RSUs to selected employees. Of these, 1,590 were performance-based RSUs and 331,300 were non-performance-based RSUs. Our annual grant of performance-based RSUs are expected to be granted in the second quarter of fiscal year 2021. Performance-based RSUs are earned by the recipients over a three-year period based on achievement of return on invested capital and free cash flow per share. Certain awards are subject to achievement of a minimum level of Adtalem’s earnings before interest, taxes, depreciation, and amortization, calculated on a non-GAAP basis. Non-performance-based RSUs are subject to restrictions which lapse ratably over one, three, or four-year periods on the grant anniversary date based on the recipient’s continued service on the Board, employment with Adtalem, or upon retirement. During the restriction period, 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 three months ended September 30, 2020:

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Weighted-Average

Number of

Grant Date

RSUs

Fair Value

Outstanding as of July 1, 2020

 

767,973

$

39.42

Granted

 

332,890

 

32.02

Vested

 

(340,846)

 

35.08

Forfeited

 

(7,831)

 

37.70

Outstanding as of September 30, 2020

 

752,186

$

38.13

The weighted-average estimated grant date fair values of RSUs granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal years 2021 and 2020 were $32.02 and $43.39, per share, respectively.

The following table shows total stock-based compensation expense included in the Consolidated Statements of Income (in thousands):

Three Months Ended

September 30, 

2020

2019

Cost of educational services

$

393

$

455

Student services and administrative expense

 

3,611

 

4,768

 

4,004

 

5,223

Income tax benefit

 

(526)

 

(2,533)

Net stock-based compensation expense

$

3,478

$

2,690

As of September 30, 2020, $27.3 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 2.8 years. The total fair value of options and RSUs vested during the three months ended September 30, 2020 and 2019 was approximately $16.3 million and $12.1 million, respectively.

There was no capitalized stock-based compensation cost as of each of September 30, 2020, June 30, 2020, and September 30, 2019.

Adtalem has an established practice of issuing new shares of common stock to satisfy stock-based grant exercises. However, Adtalem also may issue treasury shares to satisfy stock-based grant exercises under certain of its stock-based incentive plans.

17. 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:

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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 to fund obligations under a non-qualified deferred compensation plan. The rabbi trust investments in stock and bond mutual funds, which are carried at fair value and classified as marketable securities on the Consolidated Balance Sheets. All investments in marketable securities are recorded at fair value based upon quoted market prices using Level 1 inputs.

The fair value of the credit extension programs included in accounts receivable, net and other assets, net on the Consolidated Balance Sheets as of September 30, 2020, June 30, 2020, and September 30, 2019 of $33.0 million, $34.3 million, and $38.1 million, respectively, is estimated by discounting the future cash flows using current rates for similar arrangements and is classified as Level 2. See Note 8 “Accounts Receivable and Credit Losses” for additional information on these credit extension programs.

In connection with the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of the Note. The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. The fair value of the DeVry University loan receivable included in other assets, net of $10.0 million on the Consolidated Balance Sheet as of each of September 30, 2020, June 30, 2020, and September 30, 2019 is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 4% per annum and is classified as Level 2.

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep. In connection with the sale, Adtalem holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The fair value of the DePaul College Prep loan receivable included in other assets, net on the Consolidated Balance Sheet as of September 30, 2020, June 30, 2020, and September 30, 2019 is $41.7 million, $41.4 million, and $40.4 million, respectively, which is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum and is classified as Level 2.

As of September 30, 2020, June 30, 2020, and September 30, 2019, borrowings under our Credit Facility were $293.3 million, $294.0 million, and $336.3 million, respectively. The carrying value of our long-term debt approximates fair value because the interest rates on these borrowings approximated the effective interest rate and is classified as Level 2. See Note 12 “Debt” for additional information on the Credit Facility.

On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to fully mitigate risks associated with the variable interest rate on our Term B Loan debt with an effective date of March 31, 2020. The fair value of our Swap is based in part on data received from the counterparty, and

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represents the estimated amount we would receive or pay to settle the Swap, taking into consideration current and projected future interest rates as well as the creditworthiness of the counterparty, all of which can be validated through readily observable data from external sources, in which case the measurements are classified within Level 2. The fair value of the Swap is represented within other liabilities on the Consolidated Balance Sheet with a balance of $10.2 million and $10.4 million as of September 30, 2020 and June 30, 2020, respectively. See Note 12 “Debt” for additional information on the Swap.

As of September 30, 2020, June 30, 2020, and September 30, 2019, there were no assets or liabilities measured at fair value using Level 3 inputs.

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, 2020. See Note 11 “Goodwill and Intangible Assets” for additional information on the impairment review, including valuation techniques and assumptions.

18. 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 September 30, 2020, 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 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 September 30, 2020. 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 the 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 claims 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 seeks 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 Adtalem Parties moved to dismiss this complaint on June 20, 2018. On March 11, 2019, the Court granted plaintiff’s motion for leave to file an amended complaint. Plaintiff filed an amended complaint that same day, asserting similar claims, with new lead plaintiff, Dave McCormick. Defendants filed a motion to dismiss plaintiff’s amended complaint on April 15, 2019 and the Court granted Defendants’ motion on July 29, 2019, with leave to amend. The plaintiff has filed an amended complaint on August 26, 2019. On October 18, 2019, defendants’ moved to dismiss this complaint as it is substantially similar to the one the Court previously dismissed. No hearing on the motion to dismiss is currently scheduled. The Court granted a Motion for Preliminary Approval of Class Action Settlement (the “Settlement”) on May 28, 2020. In conjunction with the 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 Sheet as of each of June 30, 2020 and September 30, 2020. 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 Sheet as of June 30, 2020 and charged the contingency loss within discontinued operations in the Consolidated Statement of Income (Loss) for the year ended June 30, 2020. We anticipate the potential payments related to this loss contingency

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to be made from the escrow account during fiscal year 2021. This loss contingency estimate could differ from actual results and result in additional charges or reversals in future periods. The Court issued an order finally approving the settlement on October 7, 2020, and dismissed the action with prejudice. On November 2, 2020, Stoltmann Law Offices filed on behalf of objector Jose David Valderrama a notice to appeal the Court’s order approving the settlement.

On May 8, 2018, the Carlson Law Firm (“Carlson”) filed a lawsuit against Adtalem and DeVry University, Inc., on behalf of 71 individual former DeVry University students in Rangel v. Adtalem and DeVry University, Inc. Carlson filed this lawsuit in the United States District Court for the Western District of Texas. Plaintiffs contend that DeVry University “made deceptive representations about the benefits of obtaining a degree from DeVry University” in violation of Texas state laws and seek full restitution of all monies paid to DeVry University and any student loan lenders, punitive damages, and attorneys’ fees. The defendants moved to dismiss this complaint on June 5, 2018. On June 27, 2018, Carlson filed a second lawsuit on behalf of 32 former DeVry University students against Adtalem and DeVry University, Inc. in Lindberg v. Adtalem and DeVry University, Inc. Carlson filed this lawsuit in the United States District Court for the Western District of Texas. The allegations are identical to the allegations in the lawsuit Carlson filed on May 8, 2018. Specifically, plaintiffs contend that DeVry University “made deceptive representations about the benefits of obtaining a degree from DeVry University” in violation of Texas state laws and seek full restitution of all monies paid to DeVry University and any student loan lenders, punitive damages, and attorneys’ fees. The defendants moved to dismiss this complaint on August 28, 2018. The court consolidated these two lawsuits on December 10, 2018. The defendants moved to dismiss the consolidated action on December 18, 2018. On January 2, 2019, Carlson filed a motion to intervene on behalf of 13 additional former DeVry University students seeking to join the consolidated lawsuit. The parties re-filed their briefing on the motions to dismiss so that the motion would apply to all three groups of plaintiffs. On April 24, 2019, the Court granted Adtalem’s and DeVry University’s motions to dismiss, with leave to amend. The plaintiffs filed an amended complaint on June 7, 2019. Defendants moved to dismiss the complaint on July 5, 2019. The motion to dismiss was referred to a magistrate judge. On December 13, 2019, the magistrate judge issued a report and recommendation denying defendants’ motion to dismiss. On January 3, 2020, defendants filed their objections to the report and recommendation on the motion to dismiss, and plaintiffs filed a response to the objections on January 8, 2020. The District Court judge adopted the Magistrate Judge’s report and recommendations on March 12, 2020, and the defendants filed an answer to the complaint on April 10, 2020. Discovery is ongoing. On September 28, 2020, defendants filed a motion for judgment on the pleadings. A hearing date on defendants’ motion has not yet been set by the Court. In conjunction with the Alvarez v. Adtalem matter referenced below, the parties participated in a mediation on August 4, 2020. On October 14, 2020, through continued negotiations with the mediator, the parties reached a confidential agreement in principal to settle all claims. The parties are preparing final settlement agreements that will memorialize the settlement, and will ultimately ask the Court to dismiss this matter with prejudice pursuant to the settlement.

On April 4, 2019, the Carlson Law Firm sent notice pursuant to California Legal Remedies Act, Civil Code § 1750, of 105 individuals who purportedly have claims against DeVry University and Adtalem based on allegedly deceptive comments made about the benefits of obtaining a DeVry University degree; specifically, that 90% of graduates obtained a job in their chosen field of study within six months of graduation, and that graduates were paid more than graduates of other universities. On July 16, 2019, the Carlson Law Firm filed a lawsuit in the United States District Court for the Northern District of California – San Jose Division against Adtalem and DeVry University on behalf of 102 individual former DeVry University students in Alvarez v. Adtalem and DeVry University, Inc. The plaintiffs contend that defendants misrepresented the benefits of graduating from DeVry University and falsely and misleadingly advertised the employment rate and income rate of their graduates to induce potential students to purchase educational products and services, and to remain students through graduation. The lawsuit seeks exemplary damages, restitution, economic damages, punitive damages, pre- and post-judgment interest, attorneys’ fees and the cost of suit. The plaintiffs brought claims for fraud by misrepresentation, fraud by concealment, negligent misrepresentation, civil theft, violation of the California Consumer Legal Remedies Act, violation of California’s Unfair Competition Law, and violation of California’s False Advertising Law. Defendants filed a motion to dismiss the complaint on October 1, 2019. On December 16, 2019, the Court granted in part and denied in part the motion to dismiss. Defendants filed an answer to the complaint on January 13, 2020. Plaintiffs filed an amended complaint on January 31, 2020, and defendants filed an amended answer on March 2, 2020. On September 28, 2020, defendants filed a motion for judgment on the pleadings. A hearing on defendants’ motion has been set for December 18, 2020. The parties participated in a court-ordered mediation on August 4, 2020. On October 14, 2020, through continued negotiations with the mediator, the parties reached a confidential agreement in principal to settle all claims. The parties are preparing final settlement agreements that will memorialize the settlement, and will ultimately ask the Court to dismiss this matter with prejudice pursuant to the settlement.

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On June 21, 2018, Stoltmann Law Offices filed a lawsuit against Adtalem in Cook County Circuit Court, alleging that Adtalem breached a contract with Stoltmann Law Offices to pay filing fees associated with arbitration claims Stoltmann Law Offices has filed with the Judicial Arbitration and Mediation Services, Inc. (“JAMS”). Stoltmann Law Offices is seeking specific performance from the court. Adtalem moved to dismiss this complaint on August 3, 2018. Prior to the court ruling on Adtalem’s motion to dismiss, Stoltmann Law Offices and 399 individuals filed an amended complaint on August 9, 2018, asserting claims for specific performance, declaratory judgment and a petition to compel arbitration. Adtalem moved to dismiss the amended complaint on August 31, 2018. The court granted Adtalem’s motion to dismiss on November 30, 2018, but granted plaintiffs leave to file a second amended complaint. A single individual plaintiff filed a second amended complaint on January 3, 2019. Adtalem moved to dismiss the complaint on May 23, 2019. On January 9, 2020, the court granted in part and denied in part defendants’ motion to dismiss. The court dismissed the petition to compel arbitration, and allowed the claim for declaratory judgment to proceed. Adtalem filed an answer to the complaint on February 10, 2020. Discovery is ongoing.

Stoltmann Law Offices is representing hundreds of individuals who have filed claims with JAMS alleging fraud-based claims based on DeVry University’s graduate employment statistics. Stoltmann Law Offices has paid the filing fees for certain of these arbitrations to move forward. JAMS has sent commencement letters in several waves. Respondents have filed answers in response to certain of these arbitration demands. These arbitrations are in various stages of litigation.

On or about April 1, 2019, Adtalem, Chamberlain and DeVry University received similar Civil Investigative Demands (“CID”) from the U.S. Department of Justice (the “DOJ”). The CIDs were issued pursuant to a False Claims Act inquiry concerning allegations that Adtalem, in particular Chamberlain and Adtalem’s former subsidiary DeVry University, submitted or caused the submission of false claims to the U.S. Department of Defense and U.S. Department of Veteran Affairs for federal funds under the GI Bill Programs and Tuition Assistance Program from 2011 to the date of the CIDs. It is specifically alleged that Chamberlain and DeVry University engaged in unlawful recruitment tactics, and provided incentive payments based directly or indirectly on securing federal financial aid. Adtalem cooperated with this DOJ inquiry and provided documents and other information requested by the DOJ. On February 27, 2020, the DOJ notified the U.S. District Court for the Northern District of Georgia that it would decline to intervene in two qui tam False Claims Act actions filed by former DeVry University employees related to the subject matter of the CIDs. Those actions were unsealed on March 2, 2020. The complaints had been filed by former employees Ashley Vandiver (2017 complaint) and Laura Moriarty (2018 complaint). Both complaints seek damages and relief allowed by law under the False Claims Act, 31 U.S.C. § 3729 et seq. Vandiver’s complaint is filed against Adtalem and DeVry University. Moriarty’s complaint is filed against Adtalem, Chamberlain, DeVry University, and others. In October 2020, Adtalem, DeVry University, and Moriarty reached an agreement in principle to settle the matter and dismiss the 2018 complaint. The settlement agreement does not need to be approved by the Court or any regulatory body. The 2017 complaint brought by Vandiver is not impacted by the pending Moriarty settlement and we cannot predict the outcome of the Vandiver matter.

19. Segment Information

Beginning in the first quarter of fiscal year 2020, Adtalem Brazil operations were classified as discontinued operations. See Note 3 “Discontinued Operations and Assets Held for Sale” for additional information. Segment information presented excludes the results of Adtalem Brazil. Adtalem eliminated its Business and Law reportable segment during the first quarter of fiscal year 2020 when Adtalem Brazil was classified as discontinued operations. Discontinued operations assets are included in the table below to reconcile to total consolidated assets presented on the Consolidated Balance Sheets.

We present two reportable segments as follows:

Medical and Healthcare – Offers degree and non-degree programs in the medical and healthcare postsecondary education industry. This segment includes the operations of Chamberlain, AUC, RUSM, and RUSVM. AUC, RUSM, and RUSVM are collectively referred to as the “medical and veterinary schools.”

Financial Services – Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of ACAMS, Becker, OCL, and EduPristine.

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These segments are consistent with the method by which the Chief Operating Decision Maker (Adtalem’s Chairman, President and Chief Executive Officer) evaluates performance and allocates resources. Performance evaluations are based on each segment’s operating income excluding special items. Operating income excludes special items, which consists of restructuring expense, business acquisition and integration expense, 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. Intersegment sales are accounted for at amounts comparable to sales to nonaffiliated customers and are eliminated in consolidation. “Home Office and Other” includes activities not allocated to a reportable segment and is included to reconcile segment results to the Consolidated Financial Statements. Segments may have allocated depreciation expense related to depreciable assets reported as an asset in a different segment. The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies.”

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

Three Months Ended

September 30, 

2020

2019

Revenue:

 

 

 

Medical and Healthcare

$

218,826

$

207,487

Financial Services

 

49,415

 

47,126

Total consolidated revenue

$

268,241

$

254,613

Operating income excluding special items:

 

 

Medical and Healthcare

$

53,010

$

28,627

Financial Services

 

8,687

 

4,107

Home Office and Other

 

(7,332)

 

(5,242)

Total consolidated operating income excluding special items

54,365

27,492

Reconciliation to Consolidated Financial Statements:

Restructuring expense

 

(4,223)

 

(6,530)

Business acquisition and integration expense

(13,436)

 

Gain on sale of assets

 

4,779

Total consolidated operating income

36,706

25,741

Net other expense

 

(2,170)

 

(4,627)

Total consolidated income from continuing operations before income taxes

$

34,536

$

21,114

Segment assets:

 

Medical and Healthcare

$

976,382

$

1,006,655

Financial Services

 

579,634

 

582,820

Home Office and Other

 

773,881

 

256,042

Discontinued Operations

 

 

614,807

Total consolidated assets

$

2,329,897

$

2,460,324

Capital expenditures:

 

Medical and Healthcare

$

9,266

$

6,467

Financial Services

 

2,127

 

539

Home Office and Other

 

3,050

 

3,430

Total consolidated capital expenditures

$

14,443

$

10,436

Depreciation expense:

 

Medical and Healthcare

$

7,373

$

7,231

Financial Services

 

729

 

294

Home Office and Other

 

873

 

868

Total consolidated depreciation expense

$

8,975

$

8,393

Intangible asset amortization expense:

 

Financial Services

$

2,518

$

2,534

Total consolidated intangible asset amortization expense

$

2,518

$

2,534

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Adtalem conducts its educational and financial services operations in the U.S., Barbados, St. Kitts, St. Maarten, India, Europe, China, Canada, and the Middle East. Revenue and long-lived assets by geographic area are as follows (in thousands):

Three Months Ended

September 30, 

2020

2019

Revenue from unaffiliated customers:

 

 

 

Domestic operations

$

172,644

$

152,037

International operations:

 

 

Barbados, St. Kitts, and St. Maarten

 

85,062

 

90,969

Other

 

10,535

 

11,607

Total international

 

95,597

 

102,576

Total consolidated revenue

$

268,241

$

254,613

Long-lived assets:

 

 

Domestic operations

$

216,628

$

196,331

International operations:

 

 

Barbados, St. Kitts, and St. Maarten

 

166,950

 

173,793

Other

 

1,190

 

1,785

Total international

 

168,140

 

175,578

Total consolidated long-lived assets

$

384,768

$

371,909

Prior period amounts within domestic operations and other international operations revenue in the above table have been reclassified for consistency with the current period presentation. We previously classified certain sales dependent upon the location of the legal entity reporting the sale. We have changed our methodology to classify these sales within the geographic area category where the sale originates. We believe this better reflects the usefulness of this disclosure.

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

Through its website, Adtalem offers its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other reports filed with the SEC. Adtalem’s website is http://www.adtalem.com. Except as otherwise stated in these reports, the information contained on our website or available by hyperlink from our website is not incorporated into our Annual Report on Form 10-K, this Quarterly Report on Form 10-Q, or other documents we file with, or furnish to, the SEC.

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Segments

As of September 30, 2019, Adtalem eliminated its Business and Law reportable segment when Adtalem Education of Brazil (“Adtalem Brazil”) was classified as discontinued operations and assets held for sale. In addition to the sale of Adtalem Brazil, which was completed on April 24, 2020, during the second quarter of fiscal year 2019, Adtalem divested Carrington College (“Carrington”) and DeVry University. In accordance with GAAP, we have classified the Adtalem Brazil, Carrington, and DeVry University entities as “Assets 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 Adtalem Brazil, Carrington, and DeVry University operations, unless otherwise noted. See Note 3 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements for additional discontinued operations information.

We present two reportable segments as follows:

Medical and Healthcare – Offers degree and non-degree programs in the medical and healthcare postsecondary education industry. This segment includes the operations of Chamberlain University (“Chamberlain”), 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 are collectively referred to as the “medical and veterinary schools.”

Financial Services – Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), OnCourse Learning (“OCL”), and EduPristine.

“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 19 “Segment Information” to the Consolidated Financial Statements.

On September 11, 2020, Adtalem entered into a Membership Interest Purchase Agreement (the “Agreement”) with Laureate Education, Inc., a Delaware public benefit corporation (“Seller”), pursuant to which Adtalem has agreed to acquire from Seller all of 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 (together with e-Learning, “Walden”), in exchange for a purchase price of $1.48 billion in cash, subject to certain adjustments set forth in the Agreement (the “Acquisition”). Walden owns and operates Walden University, an online for-profit university headquartered in Minneapolis, Minnesota. The Board of Directors of Adtalem (the “Board”) has unanimously approved the Acquisition. The closing of the Acquisition is expected to occur in mid-calendar year 2021 and is subject to certain closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals.

Also on September 11, 2020, to provide future funding for the Acquisition, Adtalem entered into a commitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc. (“MSSF”), Barclays Bank PLC (“Barclays”), Credit Suisse AG, Cayman Islands Branch (“CS”) and Credit Suisse Loan Funding LLC (“CSLF” and, together with CS and their respective affiliates, “Credit Suisse”), and MUFG Bank, Ltd. (together with MSSF, Barclays and Credit Suisse, the “Commitment Parties”), pursuant to which the Commitment Parties committed to provide to Adtalem (i)(A) a senior secured term loan facility in an aggregate principal amount of $1 billion (the “Term Facility”) and (B) a senior secured revolving loan facility in an aggregate commitment amount of $400 million (the “Revolving Facility”) and (ii) to the extent one or more series of senior secured notes pursuant to a Rule 144A offering or other private placement in an aggregate principal amount of $650 million are not issued (in escrow or otherwise) prior to the consummation of the Acquisition, a senior secured bridge term loan credit facility in an aggregate principal amount of up to $650 million (together with the Term Facility and the Revolving Facility, the “Facilities”). The proceeds of the Facilities will be used, among other things, to finance the Acquisition, refinance Adtalem’s existing credit agreement, pay fees and expenses related to the Acquisition, and in the case of the Revolving Facility, to finance ongoing working capital and general corporate purposes. The commitments under the Commitment Letter are subject to customary closing conditions. The risks and uncertainties related

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to the Acquisition are described in Item 1A. “Risk Factors.” Refer to the Form 8-K filed with the SEC on September 16, 2020 for additional information on the Acquisition and Commitment Letter.

On September 16, 2020, Laureate Education, Inc. (“Laureate”) advised Adtalem that Walden University had received a letter from the U.S. Department of Justice (the “DOJ”) indicating that the DOJ, along with several other government agencies, is conducting an investigation into allegations that Walden University may have violated the federal False Claims Act by misrepresenting its compliance with provisions of its Program Participation Agreement with the U.S. Department of Education relating, generally, to potential false representations to the Commission on Collegiate Nursing Education and false advertising to students about (1) the content and cost of Walden’s Masters of Science in Nursing program, or (2) the availability of clinical site placements required for mandatory practicum courses for such program (collectively, the “DOJ Investigation”). Subsequently, Walden disclosed the DOJ Investigation to the Higher Learning Commission (the “HLC”). On October 13, 2020, Laureate advised Adtalem that Walden University had received a letter from the HLC notifying Walden University that the HLC seeks to assign a public Governmental Investigation designation to Walden University. If imposed, the status would remain in place until the President of the HLC determines that it is no longer required because the institution has resolved the issues that led to the designation. Pursuant to HLC policy, on October 26, 2020, Walden University exercised its opportunity respond to the notice before the Governmental Investigation designation would be assigned and made public.

Pursuant to its access rights under the terms of the Agreement, Adtalem is conducting its own investigation of the matters addressed in the DOJ and HLC correspondence, including reviewing relevant documents and other information and interviewing relevant Laureate and/or Walden University personnel. As a condition to closing the acquisition, certain designated regulatory authorities, including the HLC, must consent to the acquisition. Pursuant to Section 5.05(a) of the Agreement, the parties are required to cooperate and use reasonable best efforts to obtain those designated pre-closing consents from, among others, the HLC. Consistent with the HLC’s policies and procedures, a Governmental Investigation designation by the HLC could delay or prevent the HLC’s approval of a substantive change application to approve the proposed acquisition of Walden University. We are in the early stages of evaluating these regulatory developments and the potential impact, if any, on our planned acquisition of Walden University.

First Quarter Highlights

Financial and operational highlights for the first quarter of fiscal year 2021 include:

Adtalem revenue grew $13.6 million, or 5.4%, in the first quarter of fiscal year 2021 compared to the year-ago quarter. Both the Medical and Healthcare and Financial Services segments saw increased revenue.
Net income attributable to Adtalem of $19.9 million increased $5.6 million, or 38.8%, in the first quarter of fiscal year 2021 compared to the year-ago quarter. This increase was primarily driven by the $13.6 million revenue increase, a reduction in bad debt expense of $3.8 million, and cost containment measures across all institutions and Adtalem’s home office, partially offset by $13.4 million in business acquisition and integration expense recorded in the first quarter of fiscal year 2021. Net income from continuing operations attributable to Adtalem excluding special items of $41.2 million increased $22.3 million, or 117.7%, in the first quarter of fiscal year 2021 compared to the year-ago quarter. This increase was principally attributable to revenue growth at Chamberlain and OCL, the reduction in bad debt expense, and cost containment measures across all institutions and Adtalem’s home office.
For the September 2020 session, new and total student enrollment at Chamberlain increased 13.2% and 11.9%, respectively, compared to the same session last year. Chamberlain continues to invest in its programs, student services, and campus locations.
For the September 2020 semester, new and total student enrollment at the medical and veterinary schools increased 5.5% and 4.3%, respectively, compared to the same semester last year.
ACAMS memberships have increased to more than 82,000 as of September 30, 2020 compared to more than 75,000 as of September 30, 2019.

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OCL experienced strong revenue growth in its mortgage loan officer training and continuing education business, attributable to increased demand in the current strong mortgage market.

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 is altering business and consumer activity across many industries. Management has initiated several changes to the operations of our institutions and administrative functions in order to protect the health of Adtalem employees, students, and customers 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, customers, and employees.

Results of Operations

COVID-19 resulted in estimated revenue losses of approximately $14 million, operating income losses of approximately $7 million, and loss of earnings per share of approximately $0.11 in the first quarter of fiscal year 2021. Management anticipates further negative COVID-19 effects to consolidated revenue, operating income, net income, and earnings per share further into fiscal year 2021 or as long as social distancing and other measures established to combat COVID-19 continue. We also expect higher variable expenses associated with bringing students back to campus and additional costs with providing a safe environment in the context of COVID-19 as we begin to move back to in-person instruction across both segments. COVID-19 effects on the first quarter of fiscal year 2021 results of operations of the Adtalem institutions are described below.

Chamberlain: Approximately 30% of Chamberlain’s students are based at campus locations and pursuing their Bachelor of Science in Nursing (“BSN”) degree; at the onset of the COVID-19 outbreak, all campus-based students transitioned to online learning for didactic and select clinical experiences. The remaining 70% of Chamberlain’s students are enrolled in online programs that may or may not have clinical components and those programs are continuing to successfully operate. For the September 2020 session, students and employees have returned to several Chamberlain campuses for limited onsite instruction. Plans are being developed for additional re-opening activities for the November 2020 session. COVID-19 did not result in significant revenue losses or cost increases at Chamberlain in the first quarter of fiscal year 2021. The extent of the impact further into fiscal year 2021 will be determined based on the length and severity of the effects of COVID-19 and whether the pandemic affects healthcare facilities’ ability to continue to provide clinical experiences, most of which have resumed as of September 2020. Chamberlain has clinical partnerships with healthcare facilities across the U.S., minimizing the risk of suspension of all onsite clinical education experiences.
AUC and RUSM: Medical students enrolled in the basic science portion of their program have transitioned to online learning. Many students have left St. Maarten and Barbados to continue their studies remotely from other locations. COVID-19 did not result in significant revenue losses or increased costs within the basic science programs at the medical schools in the first quarter of fiscal year 2021. COVID-19 will likely have minimal impact on the basic science program revenue in fiscal year 2021, unless students choose to not continue or start their studies during this time of uncertainty. AUC and RUSM were able to provide remote learning and have students remain eligible for U.S. federal financial aid assistance under a waiver provided by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The waiver was dependent upon the host country’s coronavirus state of emergency declaration. The nation of St. Maarten lifted their declaration in June 2020, and as a result, AUC’s ability to offer distance education ends after the September 2020 semester is completed. All AUC students must return to St. Maarten for basic science instruction effective January 2021, unless a new coronavirus aid package is passed and extends the foreign school distance education waiver. Management intends to move instruction back to St. Maarten for the January 2021 semester. A state of emergency still exists on Barbados, and as a result, the CARES Act waiver still applies to the basic science instruction at RUSM. The extent of the impact further into fiscal year 2021 will be determined based on the length and severity of the effects of COVID-19. Students who have completed their basic science education progress to clinical rotations in the U.S. (and in the U.K. for AUC). Clinical rotations for all students were temporarily suspended in March 2020; however, some students were able to participate in online clinical elective courses from April through June 2020. As of November 2020, almost all of the clinical partners of AUC and RUSM have resumed their clinical programs. Although many students were able to resume their clinical education during the first quarter of fiscal year 2021, management estimates that not being able to offer a full clinical program reduced combined revenue of AUC and RUSM by approximately $4 million and operating income by

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approximately $2 million in the first quarter of fiscal year 2021. The lower number of clinical hours available due to COVID-19 will likely have a negative effect on revenue and operating income into the second quarter of fiscal year 2021 and for as long as the pandemic affects hospitals’ ability to provide clinical experiences. Adtalem has clinical partnerships with hospitals across the U.S. (and in the U.K. for AUC), minimizing the risk of suspension of all onsite clinical education experiences. In addition to the loss of clinical revenue and operating income at AUC and RUSM, management estimates that housing and student transportation revenue of approximately $5 million and resulting operating income of approximately $3 million was also lost due to students moving off of St. Maarten and Barbados to continue basic science studies remotely.
RUSVM: All basic science veterinary students transitioned to online learning beginning in March 2020. Many students left St. Kitts in March 2020 to continue their studies remotely from other locations. A portion of students at specific junctures of their basic science education have traveled back to St. Kitts since July 2020 and resumed classroom based learning in August 2020. COVID-19 did not result in significant revenue losses or cost increases within the basic science program in the first quarter of fiscal year 2021. We do not expect a significant impact from COVID-19 on the basic science program in fiscal year 2021, unless students choose to not continue or start their studies during this time of uncertainty. RUSVM was able to provide remote learning during the pandemic and have students remain eligible for U.S. federal financial aid assistance under a waiver provided by the CARES Act. The waiver was dependent upon the host country’s coronavirus state of emergency declaration. A state of emergency still exists on St. Kitts, and as a result, the CARES Act waiver still applies to the basic science instruction at RUSVM. The extent of the impact on the basic science program further into fiscal year 2021 will be determined based on the length and severity of the effects of COVID-19. Students who have completed their basic science education progress to clinical rotations at select universities in the U.S., Canada, New Zealand, Australia, and Europe. A few universities suspended onsite clinical experiences and transitioned students to online education, while other universities have continued to offer onsite clinical courses. The suspensions did not significantly reduce revenue or operating income in the first quarter of fiscal year 2021. The extent of the impact on clinical experiences further into fiscal year 2021 will be determined based on the length and severity of the effects of COVID-19, but we do not expect a significant impact from COVID-19 at RUSVM.
Financial Services: Most Financial Services content, including exam preparation, certification training, continuing education, and subscriptions is delivered online. Any classroom-based learning has been moved to online. No significant COVID-19 related cost increases were realized in Financial Services in the first quarter of fiscal year 2021. COVID-19 did result in estimated revenue and operating income losses of approximately $5 million and $3 million, respectively, in the first quarter of fiscal year 2021, driven by the replacement of the Las Vegas live conference with a virtual conference. ACAMS live conference revenue will not be realized so long as social distancing and group gathering is limited. COVID-19 is expected to negatively impact Financial Services revenue and operating income further into fiscal year 2021, driven by the loss of ACAMS live conference revenue and possible weakness in demand at Becker, primarily with CPA firm customers. Virtual conferences were conducted in June 2020 and September 2020 and it is possible additional conference revenue could be replaced with virtual events in the future, but loss of conference revenue is likely as ACAMS has canceled all live conferences through December 2020. Virtual conferences are unlikely to generate the same level of revenue and operating income as live conferences. Management believes that other than the ACAMS conferences, longer-term operating results in the Financial Services segment will not be significantly affected by COVID-19 unless there are major employment losses with accounting professionals and recent accounting graduates, or in the banking and mortgage sectors. This is not known and cannot be predicted at this time. At Becker, CPA testing sites began reopening in June 2020 at limited capacity, however, management believes hiring at CPA firms has not yet fully recovered.
Administrative Operations: Most institution and home office administrative operations continue to be performed remotely. This includes operations in both the U.S. and all foreign locations. These remote work arrangements have not adversely affected Adtalem’s ability to maintain operations, financial reporting systems, internal control over financial reporting, or disclosure controls and procedures. The effectiveness of our remote technology enables our ability to maintain these systems and controls. Management does not anticipate Adtalem will be materially impacted by any constraints or other impacts on our human capital resources and productivity. Travel restrictions and border closures are not expected to have a material impact on our ability to operate and achieve operational goals. While recent travel expenditures have decreased we would expect these costs to increase as the effects of COVID-19 dissipate. No significant home office costs were incurred related to COVID-19 in the first quarter of fiscal year 2021 and no such costs are anticipated for the remainder of fiscal year 2021.

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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 September 30, 2020, at this time none of the effects are considered significant enough to create an impairment triggering event since our annual goodwill impairment assessment on May 31, 2020. While management has considered the effects of the COVID-19 pandemic in evaluating the existence of an impairment triggering event, it is possible that effects to revenue and cash flows will be more significant than currently expected if the effects of the COVID-19 pandemic and social distancing measures established to combat the virus continue for an extended period of time. Should economic conditions deteriorate beyond expectations further into fiscal year 2021, an impairment triggering event could arise and require reassessment of the fair values of goodwill and intangible assets.

Liquidity

Adtalem’s cash and cash equivalents balance was $561.2 million as of September 30, 2020. Adtalem generated $84.7 million in operating cash flow from continuing operations in the first three months of fiscal year 2021. 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 $300 million revolving credit facility with availability of $231.6 million as of September 30, 2020. Management currently projects that COVID-19 will continue to have an effect on operations; however, 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 in the foreseeable future, except in relation to the Acquisition of Walden as discussed in the previous section of this MD&A titled “Segments.” See further discussion on the future financing of the Acquisition in the section of this MD&A titled “Financing Activities” in the “Liquidity and Capital Resources” section.

As noted above, Adtalem maintains a credit agreement (the “Credit Agreement”) that provides for (1) a $300 million revolving facility (“Revolver”) with a maturity date of April 13, 2023 and (2) a $300 million senior secured Term B loan (“Term B Loan”) with a maturity date of April 13, 2025. We refer to the Revolver and Term B Loan collectively as the “Credit Facility.” With interest rates at historically low levels, management entered into an interest rate swap agreement in March 2020 with a multinational financial institution that effectively converts the variable rate interest on the Term B Loan borrowings to a fixed rate of 3.946% for essentially the remaining term of the Term B Loan. The Credit Facility contains covenants that, among other things, require maintenance of certain financial ratios, as defined in the Credit Agreement (see the Credit Agreement, as filed under Form 8-K dated April 13, 2018). These financial ratios include a consolidated fixed charge coverage ratio, a consolidated leverage ratio, and a U.S. Department of Education financial responsibility ratio based upon a composite score of an equity ratio, a primary reserve ratio, and a net income ratio. Failure to maintain any of these ratios or to comply with other covenants contained in the Credit Agreement would constitute an event of default and could result in termination of the Credit Agreement and require payment of all outstanding borrowings and replacement of outstanding letters of credit. Adtalem was in compliance with the debt covenants as of September 30, 2020.

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Results of Operations

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

Three Months Ended

September 30, 

2020

2019

Revenue

100.0

%

100.0

%

Cost of educational services

42.4

%

50.3

%

Student services and administrative expense

37.3

%

38.9

%

Restructuring expense

1.6

%

2.6

%

Business acquisition and integration expense

5.0

%

0.0

%

Gain on sale of assets

0.0

%

(1.9)

%

Total operating cost and expense

86.3

%

89.9

%

Operating income

13.7

%

10.1

%

Net other expense

(0.8)

%

(1.8)

%

Income from continuing operations before income taxes

12.9

%

8.3

%

Provision for income taxes

(2.6)

%

(1.5)

%

Income from continuing operations

10.2

%

6.8

%

Loss from discontinued operations, net of tax

(2.8)

%

(1.2)

%

Net income

7.4

%

5.6

%

Net loss attributable to redeemable noncontrolling interest

0.0

%

0.0

%

Net income attributable to Adtalem

7.4

%

5.6

%

Revenue

The following table presents revenue by segment detailing the changes from the year-ago quarter (in thousands):

Three Months Ended September 30, 2020

 

Medical and
Healthcare

 

Financial
Services

Consolidated

 

Fiscal year 2020 as reported

$

207,487

$

47,126

$

254,613

Organic growth

11,339

2,289

13,628

Fiscal year 2021 as reported

$

218,826

$

49,415

$

268,241

Fiscal year 2021 % change:

Organic growth

5.5

%

4.9

%

5.4

%

Medical and Healthcare

Revenue in the Medical and Healthcare segment increased 5.5%, or $11.3 million, to $218.8 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. The increase in revenue in the first quarter of fiscal year 2021 is driven primarily by student enrollment increases at Chamberlain. This increase was partially offset by the estimated loss of approximately $5 million in housing and student transportation revenue, primarily at RUSM as basic science students were not on campus due to COVID-19 remote learning, and $4 million of clinical revenue at AUC and RUSM due to the COVID-19 related clinical program limitations at partner hospitals, which were gradually eased during the first quarter of fiscal year 2021.

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Chamberlain

Chamberlain Student Enrollment:

Fiscal Year 2021

 

Session

July 2020

Sept. 2020

New students

2,768

6,333

% change from prior year

15.5

%

13.2

%

Total students

32,198

35,525

% change from prior year

12.2

%

11.9

%

Fiscal Year 2020

Session

July 2019

Sept. 2019

Nov. 2019

Jan. 2020

Mar. 2020

May 2020

 

New students

2,396

5,595

2,711

5,293

3,073

4,213

% change from prior year

(5.0)

%

2.9

%

3.6

%

11.2

%

12.7

%

5.4

%

Total students

28,691

31,736

31,215

33,850

33,748

33,407

% change from prior year

2.3

%

1.4

%

1.2

%

4.6

%

5.1

%

8.2

%

Chamberlain revenue increased 14.8%, or $17.2 million, to $133.8 million in the first quarter of fiscal year 2021 compared to the year-ago quarter, driven by increases in total student enrollment during each fiscal year 2021 enrollment session as well as non-tuition fee price increases. Chamberlain admitted its largest class of campus students in September 2020.

Chamberlain currently operates 22 campuses in 15 states. Chamberlain’s newest campus in San Antonio, Texas, began instruction in October 2019.

Tuition Rates:

Tuition for the Bachelor of Science in Nursing (“BSN”) onsite degree program ranges from $675 to $720 per credit hour. Tuition for the Registered Nurse to BSN (“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. All of these tuition rates are unchanged from the prior year. These tuition rates do not include the cost of books, supplies, transportation, or living expenses.

Medical and Veterinary Schools

Medical and Veterinary Schools Student Enrollment:

Fiscal Year 2021

Semester

Sept. 2020

New students

920

% change from prior year

5.5

%

Total students

5,850

% change from prior year

4.3

%

Fiscal Year 2020

Semester

Sept. 2019

Jan. 2020

May 2020

 

New students

872

486

544

% change from prior year

(1.9)

%

3.2

%

9.7

%

Total students

5,608

5,643

5,186

% change from prior year

(4.7)

%

1.7

%

(0.7)

%

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The medical and veterinary schools’ revenue decreased 6.5%, or $5.9 million, to $85.1 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. The principal drivers of the decrease was an estimated loss of $5 million in housing and student transportation revenue, primarily at RUSM as basic science students were not on campus due to COVID-19 remote learning, and $4 million of clinical revenue at AUC and RUSM due to the COVID-19 related clinical program limitations at partner hospitals, which were gradually eased during the first quarter of fiscal year 2021. These decreases were partially offset with student enrollment and revenue increases in the basic science programs at AUC and RUSVM.

In the September 2020 semester, total student enrollment increased at AUC, RUSM, and RUSVM. New student enrollment increased at AUC and RUSM but slightly declined at RUSVM due to the large cohort of May 2020 Vet Prep students progressing to September 2020, which was at maximum enrollment capacity. Management is executing its plan to differentiate the medical and veterinary schools from the competition, with a core goal of increasing international students, increasing RUSM 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 investments. Management believes the demand for medical and veterinary education remains strong and can support management’s longer-term expectations to grow new enrollments in the low-single digit range; however, competition may continue to adversely affect the medical and veterinary schools’ ability to continue to attract qualified students to its programs resulting in lower revenue.

In September 2019, AUC opened its medical education program in the U.K. in partnership with UCLAN. The program offers students a Post Graduate Diploma in International Medical Sciences from UCLAN, followed by their Doctor of Medicine degree from AUC. Students will then be eligible to do clinical rotations at AUC’s clinical sites, which include hospitals in the U.S., the U.K., and Canada. This program is aimed at preparing students for the U.S. Medical Licensing Examination (“USMLE”).

Tuition Rates:

Effective for semesters beginning in September 2020, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC’s medical program are $23,240 and $26,000, respectively, per semester. These tuition rates are unchanged from the prior academic year.
Effective for semesters beginning in September 2020, tuition rates for the beginning basic sciences and Internal Medicine Foundations/final clinical portion of the programs at RUSM are $24,170 and $26,676, respectively, per semester. These tuition rates are unchanged from the prior academic year.
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 $20,873 per semester effective September 2020. For students who entered RUSVM before September 2018, tuition rates for the pre-clinical and clinical curriculum are $19,387 and $24,339, respectively, per semester effective September 2020. These tuition rates are unchanged 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.

Financial Services

Revenue in the Financial Services segment increased 4.9%, or $2.3 million, to $49.4 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. The principal drivers of the increase were a result of increased revenue at OCL and an increase in ACAMS memberships, subscriptions, and certification revenue. In addition, Becker revenue increased through growth in both CPA and continuing education program offerings. The revenue increase was partially offset by a $5.4 million decline in ACAMS conference related revenue in the first quarter of fiscal year 2021 compared to the year-ago quarter, driven by the estimated loss of approximately $5 million of revenue from the COVID-19 related replacement of the Las Vegas live conference with a virtual conference. The remaining decline in conference revenue relates to the timing of conferences between comparable quarters. The entire Las Vegas conference was in the first quarter

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of fiscal year 2020, where one day out of the now three day virtual conference takes place in the second quarter of fiscal year 2021. ACAMS memberships have increased to more than 82,000 as of September 30, 2020 compared to more than 75,000 as of September 30, 2019, driven by strong growth in the European region.

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. The following table presents cost of educational services by segment detailing the changes from the year-ago quarter (in thousands):

Three Months Ended September 30, 2020

 

 

Medical and
Healthcare

 

Financial
Services

 

Home Office
and Other

Consolidated

Fiscal year 2020 as reported

 

$

116,739

$

10,678

 

$

617

 

$

128,034

Cost decrease

 

 

(11,628)

 

(2,673)

 

 

(35)

 

 

(14,336)

Fiscal year 2021 as reported

 

$

105,111

$

8,005

 

$

582

 

$

113,698

Fiscal year 2021 % change:

 

Cost decrease

 

(10.0)

%

 

(25.0)

%

 

NM

 

(11.2)

%

Cost of educational services decreased 11.2%, or $14.3 million, to $113.7 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. Cost decreased due to lower operating expenses driven by cost control initiatives across all institutions, lower costs of approximately $7 million associated with not delivering in-person instruction and clinical and other services, including ACAMS live conferences, due to the COVID-19 related revenue losses as noted above, and decreased bad debt expense of $3.8 million in the first quarter of fiscal year 2021, primarily related to the credit extension programs at the medical and veterinary schools.

As a percentage of revenue, cost of educational services was 42.4% in the first quarter of fiscal year 2021 compared to 50.3% in the year-ago quarter. The decrease in the percentage was primarily the result of cost reduction efforts and the increased revenue in the first quarter of fiscal year 2021.

Student Services and Administrative Expense

The student services and administrative expense category includes expenses related to sales, student admissions, marketing and advertising, general and administrative, curriculum development, and amortization expense of finite-lived intangible assets related to business acquisitions. The following table presents student services and administrative expense by segment detailing the changes from the year-ago quarter (in thousands):

Three Months Ended September 30, 2020

 

 

Medical and
Healthcare

 

Financial
Services

 

Home Office
and Other

Consolidated

Fiscal year 2020 as reported

$

62,120

$

32,341

$

4,626

$

99,087

Cost increase (decrease)

 

(1,415)

 

382

 

2,124

 

1,091

Fiscal year 2021 as reported

$

60,705

$

32,723

$

6,750

$

100,178

Fiscal year 2021 % change:

 

Cost increase (decrease)

(2.3)

%

 

1.2

%

 

NM

 

1.1

%

Student services and administrative expense increased 1.1%, or $1.1 million, to $100.2 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. As a percentage of revenue, student services and administrative expense was 37.3% in the first quarter of fiscal year 2021 compared to 38.9% in the year-ago quarter. The decrease in the percentage was primarily the result of the increased revenue and cost control initiatives across all institutions in the first quarter of fiscal year 2021.

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Restructuring Expense

Restructuring expense in the first quarter of fiscal year 2021 was $4.2 million compared to $6.5 million in the year-ago quarter. The primary driver of the decreased restructure expense was the result of lower real estate consolidation charges at Adtalem’s home office. See Note 5 “Restructuring Charges” to the Consolidated Financial Statements for additional information on restructuring charges.

We have substantially completed our current restructuring plans. We will continue to incur restructuring charges or reversals related to exiting leased space from previous restructuring activities. Management may institute future restructuring plans.

Business Acquisition and Integration Expense

Business acquisition and integration expense in the first quarter of fiscal year 2021 was $13.4 million. These are transaction costs associated with entering into the Agreement to acquire Walden and costs associated with integrating Walden into Adtalem. We expect to incur additional integration costs through the remainder of fiscal year 2021.

Gain on Sale of Assets

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus facility. Net proceeds of $6.4 million from the sale of this facility resulted in a gain on the sale of $4.8 million in the first quarter of fiscal year 2020. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 19 “Segment Information” to the Consolidated Financial Statements. There was no corresponding gain in the first quarter of fiscal year 2021.

Operating Income

The following table presents operating income by segment detailing the changes from the year-ago quarter (in thousands):

Three Months Ended September 30, 2020

Medical and
Healthcare

 

Financial
Services

 

Home Office
and Other

Consolidated

Fiscal year 2020 as reported

$

28,500

$

2,128

$

(4,887)

$

25,741

Organic change

24,383

4,580

(2,090)

26,873

Restructuring expense change

127

564

1,616

2,307

Business acquisition and integration expense change

(13,436)

(13,436)

Gain on sale of assets change

(4,779)

(4,779)

Fiscal year 2021 as reported

$

53,010

$

7,272

$

(23,576)

$

36,706

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

Three Months Ended

September 30, 

2020

2019

Increase
(Decrease)

Medical and Healthcare:

Operating income (GAAP)

$

53,010

$

28,500

86.0

%

Restructuring expense

127

NM

Operating income excluding special items (non-GAAP)

$

53,010

$

28,627

85.2

%

Financial Services:

Operating income (GAAP)

$

7,272

$

2,128

241.7

%

Restructuring expense

1,415

1,979

(28.5)

%

Operating income excluding special items (non-GAAP)

$

8,687

$

4,107

111.5

%

Home Office and Other:

Operating loss (GAAP)

$

(23,576)

$

(4,887)

(382.4)

%

Restructuring expense

2,808

4,424

(36.5)

%

Business acquisition and integration expense

13,436

NM

Gain on sale of assets

(4,779)

NM

Operating loss excluding special items (non-GAAP)

$

(7,332)

$

(5,242)

(39.9)

%

Adtalem Global Education:

Operating income (GAAP)

$

36,706

$

25,741

42.6

%

Restructuring expense

4,223

6,530

(35.3)

%

Business acquisition and integration expense

13,436

NM

Gain on sale of assets

(4,779)

NM

Operating income excluding special items (non-GAAP)

$

54,365

$

27,492

97.7

%

Total consolidated operating income increased $11.0 million, to $36.7 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. Consolidated operating income excluding special items increased 97.7%, or $26.9 million, in the first quarter of fiscal year 2021 compared to the year-ago quarter. The primary drivers of this increase were an increase in revenue of $13.6 million, primarily at Chamberlain and OCL, which generated higher incremental operating income than the lost revenue sources due to COVID-19, decreased bad debt expense of $3.8 million, primarily related to the credit extension programs at the medical and veterinary schools, and efforts to manage salary, travel, and discretionary spending across the organization.

Medical and Healthcare

Medical and Healthcare segment operating income increased 86.0%, or $24.5 million, to $53.0 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. The primary drivers of this increase related to increased revenue at Chamberlain of $17.2 million, which generated higher incremental operating income than the lost revenue sources due to COVID-19 as discussed below, decreased bad debt expense of $2.7 million, primarily related to the credit extension programs at the medical and veterinary schools, and efforts to manage salary, travel, and discretionary spending at all institutions. Lower revenue at AUC and RUSM due to the estimated COVID-19 related loss of clinical revenue contributed to approximately $2 million in lost operating income in the first quarter of fiscal year 2021. Lower COVID-19 related housing and student transportation revenue, primarily at RUSM as described above, resulted in approximately $3 million in lost operating income.

Financial Services

Financial Services segment operating income increased 241.7%, or $5.1 million, to $7.3 million in the first quarter of fiscal year 2021 compared to the year-ago quarter. Segment operating income excluding special items increased 111.5%, or $4.6 million, in the first quarter of fiscal year 2021 compared to the year-ago quarter. The primary driver of this increase was an increase in revenue at OCL. Conference revenue decreases at ACAMS due to COVID-19, as described above, contributed to $3 million in lost operating income in the first quarter of fiscal year 2021.

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Net Other Expense

Net other expense in the first quarter of fiscal year 2021 was $2.2 million compared to $4.6 million in the year-ago quarter. The decrease in net other expense was primarily the result of decreased borrowings under Adtalem’s Credit Facility (as discussed in Note 12 “Debt” to the Consolidated Financial Statements).

Provision for 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 the rate of tax applied to earnings outside the U.S., tax incentives, changes in valuation allowances, liabilities for uncertain tax positions, and tax benefits on stock-based compensation awards. Additionally, our ETR is impacted by the provisions from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which include primarily a tax on global intangible low-taxed income (“GILTI”), a deduction for foreign derived intangible income (“FDII”), and a limitation of tax benefits on certain executive compensation. The impact of the Tax Act may be revised in future periods as we obtain additional data and consider any new regulations or guidance that may be released.

The ETR from continuing operations for the first quarter of fiscal year 2021 was 20.5% compared to 17.6% in the year-ago quarter. The increase is primarily due to an increase in earnings from domestic operations and a reduction in tax benefits for stock-based compensation.

Discontinued Operations

Beginning in the second quarter of fiscal year 2018, DeVry University operations were classified as discontinued operations. Beginning in the fourth quarter of fiscal year 2018, Carrington operations were classified as discontinued operations. Beginning in the first quarter of fiscal year 2020, Adtalem Brazil operations were classified as discontinued operations. The divestitures of Carrington and DeVry University operations were completed in the second quarter of fiscal year 2019 and the divestiture of Adtalem Brazil operations was completed in the fourth quarter of fiscal year 2020. We continue to incur costs associated with ongoing litigation and settlements related to the DeVry University divestiture which is classified as expense within discontinued operations. Management no longer discloses other discussions of operating results of these entities as comparable results are no longer meaningful.

Regulatory Environment

Student Payments

Adtalem’s primary source of liquidity is the cash received from payments for student tuition, books, other educational materials, and fees. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational loans (“private 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 following table, which excludes Adtalem Brazil, Carrington, and DeVry University revenue, summarizes Adtalem’s revenue by fund source as a percentage of total revenue for fiscal years 2019 and 2018. Final data for fiscal year 2020 is not yet available.

Fiscal Year

 

2019

2018

 

Federal assistance (Title IV) program funding (grants and loans)

 

59

%

59

%

Private loans

 

2

%

2

%

Student accounts, cash payments, private scholarships, employer and military provided tuition assistance, and other

 

39

%

39

%

Total

 

100

%

100

%

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.

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Financial Aid

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 Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (“2020 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.

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 provisional nature of the agreements stemmed from increased and/or repeated Title IV compliance audit findings. No financial ramifications, such as a letter of credit, heightened cash monitoring, or student enrollment limitations, were imposed on any of these institutions. 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.

On October 13, 2016, DeVry University and ED reached a negotiated agreement (the “ED Settlement”) to settle the claims asserted in a Notice of Intent to Limit from the Multi-Regional and Foreign School Participation Division of the Federal Student Aid office of the Department of Education (“ED FSA”). Under the terms of the ED Settlement, among other things, without admitting wrongdoing, DeVry University agreed to certain compliance requirements regarding its past and future advertising, that DeVry University’s participation in Title IV programs is subject to provisional certification for five years and that DeVry University is required to post a letter of credit equal to the greater of 10% of DeVry University’s annual Title IV disbursements or $68.4 million for a five-year period. The posted letter of credit continues to be posted by Adtalem following the closing of the sale of DeVry University and reduces Adtalem’s borrowing capacity dollar-for-dollar under its Credit Facility (as defined in Note 12 “Debt” to the Consolidated Financial Statements).

An ED regulation known as the “90/10 Rule” affects only proprietary postsecondary institutions, such as Chamberlain, 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 following table details the percentage of revenue on a cash basis from federal financial assistance programs (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 2019 and 2018. Final data for fiscal year 2020 is not yet available.

Fiscal Year

 

2019

2018

 

Chamberlain University

 

62

%

62

%

American University of the Caribbean School of Medicine

 

75

%

74

%

Ross University School of Medicine

 

83

%

81

%

Ross University School of Veterinary Medicine

 

83

%

82

%

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In September 2016, Adtalem committed to voluntarily limit to 85% the amount of revenue that each of its Title IV-eligible institutions derive from federal funding, including the U.S. Department of Veterans Affairs and military tuition assistance benefits. As disclosed in the third party review reports that have been made publicly available, Adtalem’s institutions have met this lower threshold for each fiscal year since the commitment was made. Adtalem is committed to implementing measures to promote responsible recruitment and enrollment, successful student outcomes, and informed student choice. Management believes students deserve greater transparency to make informed choices about their education. This commitment builds upon a solid foundation and brings Adtalem to a new self-imposed level of public accountability and transparency.

A financial responsibility test is required for continued participation by an institution’s students in U.S. federal financial assistance programs. For Adtalem’s participating institutions, this test is calculated at the consolidated Adtalem level. 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 schools 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, a school 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 school 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. Changes to the manner in which the composite score is calculated that are effective on July 1, 2020 will negatively affect future Adtalem scores; however, management does not believe these changes by themselves will result in the score falling below 1.5. If Adtalem becomes unable to meet requisite financial responsibility standards or otherwise demonstrate, within the regulations, its ability to continue to provide educational services, then our institutions could be subject to heightened cash monitoring or be required to post a letter of credit to enable its students to continue to participate in federal financial assistance programs.

Liquidity and Capital Resources

Adtalem’s consolidated cash and cash equivalents balance of $561.2 million, $500.5 million, and $121.1 million as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively, included cash and cash equivalents held at Adtalem’s international operations of $82.0 million, $70.1 million, and $102.1 million as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively, which is available to Adtalem for general company 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 $0.9 million, $0.6 million, and $0.7 million was held in restricted bank accounts as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively.

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Cash Flow Summary

Operating Activities

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

Three Months Ended

September 30, 

2020

2019

Income from continuing operations

$

27,446

$

17,408

Non-cash items

 

37,565

 

34,106

Changes in assets and liabilities

 

19,643

 

(18,038)

Net cash provided by operating activities-continuing operations

$

84,654

$

33,476

Net cash provided by operating activities from continuing operations in the three months ended September 30, 2020 was $84.7 million compared to $33.5 million in the year-ago period. The increase of $51.2 million in cash generated from continuing operating activities between the three months ended September 30, 2020 and the three months ended September 30, 2019 was primarily due to (i) higher income from continuing operations; (ii) more timely collection of accounts receivable and application of financial aid funds to student accounts in the first three months of fiscal year 2021, primarily at the medical and veterinary schools; (iii) a decrease in prepaid expenses in the first three months of fiscal year 2021 compared to an increase in the first three months of fiscal year 2020; and (iv) timing of accounts payable and accrued expense disbursements.

Investing Activities

Capital expenditures in the first three months of fiscal year 2021 were $14.4 million compared to $10.4 million in the year-ago period. The capital expenditures in fiscal year 2021 include spending for Chamberlain new campus development, maintenance, and Adtalem’s home office. Capital spending for the remainder of fiscal year 2021 will support continued investment for new campus development at Chamberlain, maintenance at the medical and veterinary schools, and Adtalem’s home office. Management anticipates full fiscal year 2021 capital spending to be in the $50 to $55 million range, including $14.4 million spent during the first three months of fiscal year 2021. The source of funds for this capital spending will be from operations or the Credit Facility (as defined and discussed in Note 12 “Debt” to the Consolidated Financial Statements).

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus facility. Net proceeds of $6.4 million from the sale of this facility resulted in a gain on the sale of $4.8 million in the first three months of fiscal year 2020. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 19 “Segment Information” to the Consolidated Financial Statements.

Financing Activities

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

Three Months Ended

September 30, 

2020

2019

Repurchase of common stock for treasury

$

$

(40,255)

Net payments under credit facility

 

(750)

 

(70,750)

Payment for purchase of redeemable noncontrolling interest of subsidiary

(6,247)

Other

 

(3,835)

 

983

Net cash used in financing activities-continuing operations

$

(4,585)

$

(116,269)

On February 4, 2020, we announced that the Board authorized Adtalem’s twelfth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The new program will commence when the repurchases from the current program are complete. As of September 30, 2020, $345.2 million of

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authorized share repurchases were remaining under the current and twelfth share repurchase programs. Repurchases were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. In October 2020, Adtalem determined to end the suspension of its current share repurchase program, and we may resume repurchases in accordance with the securities laws if market conditions are favorable. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. See Note 14 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

As of September 30, 2020, the amount of debt outstanding under our credit facility was $293.3 million. See Note 12 “Debt” to the Consolidated Financial Statements for additional information on our credit agreement.

Management currently projects that COVID-19 will have an effect on operations and, as a result, liquidity, as discussed in the previous section of this MD&A titled “Overview of the Impact of COVID-19”; however, we believe the current balances of cash, cash generated from operations, and our Credit Facility (as defined and discussed in Note 12 “Debt” to the Consolidated Financial Statements) will be sufficient to fund both Adtalem’s current domestic and international operations and growth plans for the foreseeable future, except in relation to the Acquisition of Walden as discussed below.

As discussed in the previous section of this MD&A titled “Segments,” Adtalem agreed to acquire all of the issued and outstanding equity interest in Walden, in exchange for a purchase price of $1.48 billion in cash, subject to certain adjustments set forth in the Agreement. On September 11, 2020, to provide future funding for the Acquisition, Adtalem entered into a Commitment Letter with the Commitment Parties to provide to Adtalem the Facilities. The proceeds of the Facilities will be used, among other things, to finance the Acquisition, refinance Adtalem’s existing credit agreement, pay fees and expenses related to the Acquisition, and in the case of the Revolving Facility, to finance ongoing working capital and general corporate purposes. The commitments under the Commitment Letter are subject to customary closing conditions.

Contractual Obligations

Adtalem’s long-term contractual obligations consist of its $600 million Credit Facility (as defined and discussed in Note 12 “Debt” to the Consolidated Financial Statements), operating leases (discussed in Note 10 “Leases” to the Consolidated Financial Statements) on facilities, and agreements for various services.

As discussed in the previous section of this MD&A titled “Financing Activities,” Adtalem entered into a Commitment Letter with the Commitment Parties to provide funding for the Acquisition, refinance Adtalem’s existing credit agreement, pay fees and expenses related to the Acquisition, and in the case of the Revolving Facility, to finance ongoing working capital and general corporate purposes. The commitments under the Commitment Letter are subject to customary closing conditions.

In fiscal year 2018, Adtalem recorded a liability of $96.3 million for the one-time transition tax on the deemed repatriation of foreign earnings, pursuant to the Tax Act. This amount was reduced to $8.7 million after utilization of tax credits and current and prior year tax losses. In fiscal year 2020, Adtalem recorded an adjustment to the one-time transition tax, increasing the liability by $0.6 million to $9.4 million, and is payable over eight years. The first installment will be required in fiscal year 2022.

On December 11, 2018, Adtalem completed the sale of DeVry University to Cogswell. 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 “Note”). The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. DeVry University may make prepayments on the Note.

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 holds a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The buyer has an option to make prepayments.

Adtalem maintains agreements to lease either a portion or the full space of three facilities owned by Adtalem to DeVry University and to sublease either a portion of the full leased space of an additional 21 facilities, most of which are subleased to DeVry University and/or Carrington. Adtalem remains the primary lessee on the 21 underlying leases. These lease and

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sublease agreements were entered into at comparable market rates and the terms range from one to five years. Future minimum lease and sublease rental income under these agreements as of September 30, 2020, were as follows (in thousands):

Fiscal Year

Amount

2021 (remaining)

$

14,270

2022

16,816

2023

 

16,078

2024

 

10,261

2025

 

5,121

Thereafter

2,038

Total lease and sublease rental income

$

64,584

Adtalem also assigned certain leases to Carrington and DeVry University but remains contingently liable under these leases.

Seasonality

The seasonal pattern of Adtalem’s enrollments and its educational programs’ starting dates affect the results of operations and the timing of cash flows. Therefore, management believes that comparisons of its results of operations should primarily be made to the corresponding period in the preceding year. 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.

Off-Balance Sheet Arrangements

Adtalem is not a party to any off-balance sheet financing or contingent payment arrangements, nor are there any unconsolidated subsidiaries. Adtalem has not extended any loans to any officer, director, or other affiliated person. Adtalem has not entered into any synthetic leases, and there are no residual purchase or value commitments related to any facility lease.

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 Term B Loan debt. We pay interest at a fixed rate of 0.946% and receive variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Term B Loan. The effective date of the Swap was March 31, 2020 and settlements with the counterparty occur on a monthly basis. The Swap will terminate on February 28, 2025. During the operating term of the Swap, the annual interest rate on the amount of the Term B Loan is fixed at 3.946% (including the impact of our current 3% interest rate margin on LIBOR loans) for the applicable interest rate period. The Swap is designated as a cash flow hedge and as such, changes in its fair value are recognized in accumulated other comprehensive loss on the Consolidated Balance Sheet and are reclassified into the Consolidated Statements of Income within interest expense in the periods in which the hedged transactions affect earnings. As of September 30, 2020, the fair value of the Swap was a loss of $10.2 million.

Adtalem did not enter into any other derivatives, swaps, futures contracts, calls, hedges, or non-exchange traded contracts during the first three months of fiscal year 2021.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates as disclosed in our 2020 Form 10-K.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements.

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Forward-Looking Statements

Certain statements 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 the future impact of the COVID-19 pandemic and the pending Walden University 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 risk and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our 2020 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 we do not undertake any obligation to update any forward-looking statement, except as required by law.

Non-GAAP Financial Measures and Reconciliations

We believe that certain non-GAAP financial measures provides investors with useful supplemental information regarding the underlying business trends and performance of Adtalem’s ongoing operations and is 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:

Net income from continuing operations attributable to Adtalem excluding special items (most comparable GAAP measure: net income attributable to Adtalem) – Measure of Adtalem’s net income attributable to Adtalem adjusted for restructuring expense, business acquisition and integration expense, gain on sale of assets, and loss from discontinued operations.

Earnings per share from continuing operations excluding special items (most comparable GAAP measure: earnings per share) – Measure of Adtalem’s diluted earnings per share adjusted for restructuring expense, business acquisition and integration expense, gain on sale of assets, and loss from discontinued operations.

Operating income excluding special items (most comparable GAAP measure: operating income) – Measure of Adtalem’s operating income adjusted for 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.

A description of special items in our non-GAAP financial measures described above are as follows:

Restructuring charges primarily related to real estate consolidations at Adtalem’s home office and ACAMS and the sale of Becker’s courses for healthcare students.
Business acquisition and integration expense include expenses related to the pending Walden University acquisition.
Gain on the sale of Adtalem’s Columbus, Ohio, campus facility.
Loss from discontinued operations include the operations of Adtalem Brazil, Carrington, and 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 attributable to Adtalem reconciliation to net income from continuing operations attributable to Adtalem excluding special items (in thousands):

Three Months Ended

September 30, 

2020

2019

Net income attributable to Adtalem (GAAP)

$

19,930

$

14,361

Restructuring expense

4,223

6,530

Business acquisition and integration expense

13,436

Gain on sale of assets

(4,779)

Income tax impact on non-GAAP adjustments (1)

(3,998)

(343)

Loss from discontinued operations

7,607

3,156

Net income from continuing operations attributable to Adtalem excluding special items (non-GAAP)

$

41,198

$

18,925

(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 earnings per share from continuing operations excluding special items (shares in thousands):

Three Months Ended

September 30, 

2020

2019

Earnings per share, diluted (GAAP)

$

0.38

$

0.26

Effect on diluted earnings per share:

Restructuring expense

0.08

0.12

Business acquisition and integration expense

0.25

-

Gain on sale of assets

-

(0.09)

Income tax impact on non-GAAP adjustments (1)

(0.08)

(0.01)

Loss from discontinued operations

0.14

0.06

Earnings per share from continuing operations excluding special items, diluted (non-GAAP)

$

0.78

$

0.34

Diluted shares used in EPS calculation

52,797

56,140

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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 Term B Loan debt. We pay interest at a fixed rate of 0.946% and receive variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Term B Loan. The effective date of the Swap was March 31, 2020 and settlements with the counterparty occur on a monthly basis. The Swap will terminate on February 28, 2025. During the operating term of the Swap, the annual interest rate on the amount of the Term B Loan is fixed at 3.946% (including the impact of our current 3% interest rate margin on LIBOR loans) for the applicable interest rate period. The Swap is designated as a cash flow hedge and as such, changes in its fair value are recognized in accumulated other comprehensive loss on the Consolidated Balance Sheet and are reclassified into the Consolidated Statements of Income within interest expense in the periods in which the hedged transactions affect earnings. As of September 30, 2020, the fair value of the Swap was a loss of $10.2 million. As of September 30, 2020, a 100 basis point increase in short-term interest rates would result in a $12.7 million change in value of the Swap.

There have been no other material changes in Adtalem’s market risk exposure during the first three months of fiscal year 2021. 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, 2020.

54

Table of Contents

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 September 30, 2020 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 in internal control over financial reporting that occurred during the quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, Adtalem’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 18 “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 1. “Financial Statements.”

Item 1A. Risk Factors

In addition to the other information set forth in this report, the factors discussed in Item 1A. “Risk Factors” in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, which could materially affect Adtalem’s business, financial condition, or future results, should be carefully considered. Such risks are not the only risks facing Adtalem. Additional risks and uncertainties not currently known to Adtalem or that management currently deems to be immaterial also may materially adversely affect its business, financial condition, and/or operating results. Except for the risk factors discussed below, there have been no material changes to Adtalem’s risk factors since its Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Completion of the Acquisition is subject to the conditions contained in the Agreement and if these conditions are not satisfied or waived, the Acquisition will not be completed.

Our obligation to complete the Acquisition is subject to the satisfaction or waiver of a number of conditions, including, among others, the receipt of certain regulatory approvals including the U.S. Department of Education, the Higher Learning Commission (the “HLC”), and the expiration or termination of any applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Act.

Many of the conditions to the closing of the Acquisition are not within Adtalem’s or Seller’s control, and neither company can predict with certainty when or if these conditions will be satisfied. The failure to satisfy all of the required conditions could delay the completion of the Acquisition for a significant period of time or prevent it from occurring. Any delay in completing the Acquisition could cause us not to realize some or all of the benefits that we expect to achieve if the Acquisition is successfully completed within the expected time frame. There can be no assurance that the conditions to the closing of the Acquisition will be satisfied or waived or that the Acquisition will be completed.

The Acquisition is subject to the conditions contained in the Agreement, and if these conditions are not satisfied or waived, the Acquisition will not be completed.

Our obligation to complete the Acquisition is subject to the satisfaction or waiver of a number of conditions, including, among others, the receipt of certain regulatory approvals including the U.S. Department of Education and the HLC, and we cannot guarantee that we or the Seller will be able to obtain any of these approvals. For example, a “Governmental

55

Table of Contents

Investigation” designation by HLC could delay or prevent approval by HLC of a substantive change application on behalf of Walden University. There can be no assurance that any consents, clearances or approvals necessary or advisable to be obtained in connection with the Acquisition will be obtained in a timely manner or at all, or whether they will be subject to actions, conditions, limitations or restrictions that may jeopardize or delay the completion of the Acquisition, materially reduce or delay the anticipated benefits of the transaction or allow the parties to terminate the Agreement.

Additionally, many of the conditions to the closing of the Acquisition are not within Adtalem’s or Seller’s control, and we cannot predict when or if these conditions will be satisfied. The failure to satisfy all the required conditions could delay the completion of the Acquisition for a significant period of time or prevent it from occurring. Any delay or failure to consummate the Acquisition could cause us not to realize some or all of the financial and operational benefits that we expect to achieve.

Failure to complete the Acquisition could negatively impact our stock price and our future business and financial results.

If the Acquisition is not completed for any reason, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the Acquisition, we could be subject to a number of negative consequences, including, among others: (i) we may experience negative reactions from the financial markets, including negative impacts on our stock price; (ii) we will still be required to pay certain significant costs relating to the Acquisition, including legal, accounting, and financial advisor costs; (iii) we may be required to pay a cash termination fee as required by the Agreement; and (iv) matters related to the Acquisition (including integration planning) require substantial commitments or our time and resources, which could have resulted in our inability to pursue other opportunities that could have been beneficial to us.

If the Acquisition is not completed, any of these risks may materialize and may adversely affect our businesses, financial condition, financial results, and stock price.

The Acquisition will involve substantial costs.

We have incurred, and expect to continue to incur, a number of non-recurring costs associated with the Acquisition. The substantial majority of the non-recurring expenses will consist of transaction and regulatory costs related to the Acquisition. We will also incur transaction fees and costs related to formulating and implementing integration plans, including system consolidation costs and employment-related costs. We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred from the Acquisition and integration. Although we anticipate that the elimination of duplicative costs and the realization of other efficiencies and synergies related to the integration should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

In connection with the Acquisition, we will incur additional indebtedness, which could adversely affect Adtalem, including our business flexibility and will increase our interest expense.

We will have increased indebtedness following completion of the Acquisition in comparison to our recent historical basis, which could have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and increasing our interest expense. We will also incur various costs and expenses related to the financing of the Acquisition. The amount of cash required to pay interest on our increased indebtedness following completion of the Acquisition and thereby the demands on our cash resources will be greater than the amount of cash flow required to service our indebtedness prior to the Acquisition. The increased levels of indebtedness following completion of the Acquisition could also reduce funds available for working capital, capital expenditures, and other general corporate purposes, and may create competitive disadvantages for us relative to other companies with lower debt levels. If we do not achieve the expected synergies and cost savings from the Acquisition, or if our financial performance after the Acquisition does not meet our current expectations, then our ability to service the indebtedness may be adversely impacted.

56

Table of Contents

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)

July 1, 2020 - July 31, 2020

$

$

345,231,045

August 1, 2020 - August 31, 2020

345,231,045

September 1, 2020 - September 30, 2020

345,231,045

Total

$

$

345,231,045

(1)  On November 8, 2018, we announced that the Board of Directors of Adtalem (the “Board”) authorized the current share repurchase program to repurchase up to $300 million of Adtalem common stock through December 31, 2021. On February 4, 2020, we announced that the Board authorized Adtalem’s twelfth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The new program will commence when the repurchases from the current program are complete. Repurchases were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. In October 2020, Adtalem determined to end the suspension of its current share repurchase program, and we may resume repurchases in accordance with the securities laws if market conditions are favorable. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.

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

July 1, 2020 - July 31, 2020

2,173

$

31.92

NA

NA

August 1, 2020 - August 31, 2020

116,196

33.14

NA

NA

September 1, 2020 - September 30, 2020

22

29.04

NA

NA

Total

118,391

$

33.12

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 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.

57

Table of Contents

Item 6. Exhibits

2.1

Membership Interest Purchase Agreement by and between Adtalem Global Education Inc. and Laureate Education, Inc., dated as of September 11, 2020 (incorporated by reference to Exhibit 2.1 to Adtalem’s Current Report on Form 8-K filed with the SEC on September 16, 2020).

10.1

Commitment Letter, dated as of September 11, 2020, by and among Adtalem Global Education Inc. as borrower, and Morgan Stanley Senior Funding, Inc., Barclays Bank PLC, Credit Suisse AG, Cayman Islands Branch, Credit Suisse Loan Funding LLC and MUFG Bank, Ltd., as lead arrangers (incorporated by reference to Exhibit 10.1 to Adtalem’s Current Report on Form 8-K filed with the SEC on September 16, 2020).

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

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Furnished herewith.

58

Table of Contents

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: November 5, 2020

By: 

/s/ Michael O. Randolfi

Michael O. Randolfi

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

59

EXHIBIT 31.1

CERTIFICATION

I, Lisa W. Wardell, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Adtalem Global Education Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 5, 2020

/s/ Lisa W. Wardell

 

Lisa W. Wardell

 

Chairman of the Board, President and Chief Executive Officer

 

(Principal Executive Officer)


EXHIBIT 31.2

CERTIFICATION

I, Michael O. Randolfi, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Adtalem Global Education Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: November 5, 2020

/s/ Michael O. Randolfi

 

Michael O. Randolfi

 

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)


EXHIBIT 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Adtalem Global Education Inc. (“Adtalem”) for the quarterly period ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officers of Adtalem certifies pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Adtalem for the periods covered by the Report.

Date: November 5, 2020

/s/ Lisa W. Wardell

Lisa W. Wardell

Chairman of the Board, President and Chief Executive Officer

(Principal Executive Officer)

Date: November 5, 2020

/s/ Michael O. Randolfi

Michael O. Randolfi

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)


v3.20.2
Document And Entity Information - shares
3 Months Ended
Sep. 30, 2020
Oct. 29, 2020
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
Document Transition Report false  
Entity File Number 001-13988  
Entity Registrant Name Adtalem Global Education Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 36-3150143  
Entity Address, Address Line One 500 West Monroe Street  
Entity Address, City or Town Chicago  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60661  
City Area Code 866  
Local Phone Number 374-2678  
Title of 12(b) Security Common stock  
Trading Symbol ATGE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   52,091,383
Current Fiscal Year End Date --06-30  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Entity Central Index Key 0000730464  
Amendment Flag false  
New York Stock Exchange    
Document Information [Line Items]    
Security Exchange Name NYSE  
NYSE Chicago    
Document Information [Line Items]    
Security Exchange Name NYSE  
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Current assets:      
Cash and cash equivalents $ 561,170 $ 500,516 $ 121,079
Investments in marketable securities 9,434 8,968 8,763
Restricted cash 947 589 710
Accounts receivable, net 99,536 87,042 116,212
Prepaid expenses and other current assets 97,386 95,651 39,476
Current assets held for sale 0 0 169,873
Total current assets 768,473 692,766 456,113
Noncurrent assets:      
Property and equipment, net 289,944 286,102 280,823
Operating lease assets 186,824 174,935 195,238
Deferred income taxes 18,325 22,277 9,814
Intangible assets, net 285,027 287,514 295,324
Goodwill 686,480 686,214 686,992
Other assets, net 94,824 78,879 91,086
Noncurrent assets held for sale 0 0 444,934
Total noncurrent assets 1,561,424 1,535,921 2,004,211
Total assets 2,329,897 2,228,687 2,460,324
Current liabilities:      
Accounts payable 48,148 46,484 44,674
Accrued payroll and benefits 31,491 48,835 30,071
Accrued liabilities 107,148 104,431 61,966
Deferred revenue 168,253 91,589 168,533
Current operating lease liabilities 51,897 51,644 54,057
Current portion of long-term debt 3,000 3,000 3,000
Current liabilities held for sale 0 0 50,174
Total current liabilities 409,937 345,983 412,475
Noncurrent liabilities:      
Long-term debt 285,621 286,115 327,600
Long-term operating lease liabilities 189,607 176,032 192,055
Deferred income taxes 25,410 24,975 25,375
Other liabilities 85,590 82,309 89,646
Noncurrent liabilities held for sale 0 0 82,793
Total noncurrent liabilities 586,228 569,431 717,469
Total liabilities 996,165 915,414 1,129,944
Commitments and contingencies (Note 18)
Redeemable noncontrolling interest 2,761 2,852 3,187
Shareholders' equity:      
Common stock, $0.01 par value per share, 200,000 shares authorized; 52,089, 51,871, and 54,649 shares outstanding as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively 810 807 805
Additional paid-in capital 508,487 504,434 492,151
Retained earnings 1,947,498 1,927,568 2,027,263
Accumulated other comprehensive loss (8,612) (9,055) (176,739)
Treasury stock, at cost, 28,912, 28,794, and 25,862 shares as of September 30, 2020, June 30, 2020, and September 30, 2019, respectively (1,117,212) (1,113,333) (1,016,287)
Total shareholders' equity 1,330,971 1,310,421 1,327,193
Total liabilities and shareholders' equity $ 2,329,897 $ 2,228,687 $ 2,460,324
v3.20.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
shares in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Statement of Financial Position [Abstract]      
Common Stock, Par Value $ 0.01 $ 0.01 $ 0.01
Common Stock, Shares Authorized 200,000 200,000 200,000
Common Stock, Shares Outstanding 52,089 51,871 54,649
Treasury Stock, Shares 28,912 28,794 25,862
v3.20.2
Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Income Statement [Abstract]    
Revenue $ 268,241 $ 254,613
Operating cost and expense:    
Cost of educational services 113,698 128,034
Student services and administrative expense 100,178 99,087
Restructuring expense 4,223 6,530
Business acquisition and integration expense 13,436 0
Gain on sale of assets 0 (4,779)
Total operating cost and expense 231,535 228,872
Operating income 36,706 25,741
Other income (expense):    
Interest and dividend income 1,004 678
Interest expense (3,692) (5,328)
Investment gain 518 23
Net other expense (2,170) (4,627)
Income from continuing operations before income taxes 34,536 21,114
Provision for income taxes (7,090) (3,706)
Income from continuing operations 27,446 17,408
Discontinued operations:    
Loss from discontinued operations before income taxes (10,084) (2,883)
Benefit from (provision for) income taxes 2,477 (273)
Loss from discontinued operations (7,607) (3,156)
Net income 19,839 14,252
Net loss attributable to redeemable noncontrolling interest 91 109
Net income attributable to Adtalem Global Education 19,930 14,361
Amounts attributable to Adtalem Global Education:    
Net income from continuing operations 27,537 17,517
Net loss from discontinued operations (7,607) (3,156)
Net income attributable to Adtalem Global Education $ 19,930 $ 14,361
Basic:    
Continuing operations $ 0.52 $ 0.32
Discontinued operations (0.14) (0.06)
Net 0.38 0.26
Diluted:    
Continuing operations 0.52 0.31
Discontinued operations (0.14) (0.06)
Net $ 0.38 $ 0.26
Weighted-average shares outstanding:    
Basic shares 52,464 55,493
Diluted shares 52,797 56,140
v3.20.2
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Condensed Financial Information Of Parent Company Only Disclosure [Abstract]    
Net income $ 19,839 $ 14,252
Other comprehensive income (loss), net of tax    
Gain (loss) on foreign currency translation adjustments 318 (39,494)
Unrealized (loss) gain on marketable securities (1) 45
Unrealized gain on interest rate swap 126 0
Comprehensive income (loss) 20,282 (25,197)
Comprehensive loss attributable to redeemable noncontrolling interest 91 184
Comprehensive income (loss) attributable to Adtalem Global Education $ 20,373 $ (25,013)
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Operating activities:    
Net income $ 19,839 $ 14,252
Loss from discontinued operations 7,607 3,156
Income from continuing operations 27,446 17,408
Adjustments to reconcile net income to net cash provided by operating activities:    
Stock-based compensation expense 4,004 5,223
Amortization and adjustments to operating lease assets 14,639 12,804
Depreciation 8,975 8,393
Amortization of intangible assets 2,518 2,534
Amortization of deferred debt issuance costs 392 392
Provision for bad debts 1,723 5,554
Deferred income taxes 4,346 2,954
Loss on disposals, accelerated depreciation, and adjustments to property and equipment 1,486 1,053
Realized and unrealized gain on investments (518) (22)
Realized gain on sale of assets 0 (4,779)
Changes in assets and liabilities:    
Accounts receivable (13,356) (38,206)
Prepaid expenses and other current assets (1,735) (13,646)
Accounts payable 2,089 (7,566)
Accrued payroll and benefits (17,341) (16,593)
Accrued liabilities (443) (2,417)
Deferred revenue 76,664 72,589
Operating lease liabilities (12,700) (13,681)
Other assets and liabilities (13,535) 1,482
Net cash provided by operating activities-continuing operations 84,654 33,476
Net cash (used in) provided by operating activities-discontinued operations (4,727) 13,992
Net cash provided by operating activities 79,927 47,468
Investing activities:    
Capital expenditures (14,443) (10,436)
Proceeds from sales of marketable securities 1,014 290
Purchases of marketable securities (963) (292)
Proceeds from sale of assets 0 6,421
Net cash used in investing activities-continuing operations (14,392) (4,017)
Net cash used in investing activities-discontinued operations 0 (1,728)
Net cash used in investing activities (14,392) (5,745)
Financing activities:    
Proceeds from exercise of stock options 55 828
Employee taxes paid on withholding shares (3,921) (5,045)
Proceeds from stock issued under Colleague Stock Purchase Plan 31 0
Repurchases of common stock for treasury 0 (40,255)
Borrowings under credit facility 0 30,000
Repayments under credit facility (750) (100,750)
Proceeds from down payment on seller loan 0 5,200
Payment for purchase of redeemable noncontrolling interest of subsidiary 0 (6,247)
Net cash used in financing activities-continuing operations (4,585) (116,269)
Net cash used in financing activities-discontinued operations 0 (480)
Net cash used in financing activities (4,585) (116,749)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 62 (6,750)
Net increase (decrease) in cash, cash equivalents and restricted cash 61,012 (81,776)
Cash, cash equivalents and restricted cash at beginning of period 501,105 300,467
Cash, cash equivalents and restricted cash at end of period 562,117 218,691
Less: cash, cash equivalents and restricted cash of discontinued operations at end of period 0 96,902
Cash, cash equivalents and restricted cash at end of period $ 562,117 $ 121,789
v3.20.2
Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Loss [Member]
Treasury Stock [Member]
Total
Balance at the beginning of period - Net of Tax at Jun. 30, 2019 $ 801 $ 486,061 $ 2,012,902 $ (137,290) $ (970,944) $ 1,391,530
Net income attributable to Adtalem Global Education     14,361     14,361
Other comprehensive gain (loss), net of tax       (39,449)   (39,449)
Stock-based compensation   5,225       5,225
Net activity from stock-based compensation awards 4 865     (5,088) (4,219)
Repurchases of common shares for treasury         (40,255) (40,255)
Balance at the end of period - Net of Tax at Sep. 30, 2019 805 492,151 2,027,263 (176,739) (1,016,287) 1,327,193
Balance at the beginning of period - Net of Tax at Jun. 30, 2020 807 504,434 1,927,568 (9,055) (1,113,333) 1,310,421
Net income attributable to Adtalem Global Education     19,930     19,930
Other comprehensive gain (loss), net of tax       443   443
Stock-based compensation   4,009       4,009
Net activity from stock-based compensation awards 3 52     (3,921) (3,866)
Proceeds from stock issued under Colleague Stock Purchase Plan   (8)     42 34
Balance at the end of period - Net of Tax at Sep. 30, 2020 $ 810 $ 508,487 $ 1,947,498 $ (8,612) $ (1,117,212) $ 1,330,971
v3.20.2
Nature of Operations
3 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations

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 leading workforce solutions provider. We present two reportable segments as follows:

Medical and Healthcare – Offers degree and non-degree programs in the medical and healthcare postsecondary education industry. This segment includes the operations of Chamberlain University (“Chamberlain”), 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 are collectively referred to as the “medical and veterinary schools.”

Financial Services – Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), OnCourse Learning (“OCL”), and EduPristine.

“Home Office and Other” includes activities not allocated to a reportable segment. See Note 19 “Segment Information” for additional information.

Adtalem Education of Brazil (“Adtalem Brazil”), Carrington College (“Carrington”), and DeVry University are presented as discontinued operations and assets held for sale in all periods presented as applicable. See Note 3 “Discontinued Operations and Assets Held for Sale” for additional information.

On September 11, 2020, Adtalem entered into a Membership Interest Purchase Agreement (the “Agreement”) with Laureate Education, Inc., a Delaware public benefit corporation (“Seller”), pursuant to which Adtalem has agreed to acquire from Seller all of 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 (together with e-Learning, “Walden”), in exchange for a purchase price of $1.48 billion in cash, subject to certain adjustments set forth in the Agreement (the “Acquisition”). Walden owns and operates Walden University, an online for-profit university headquartered in Minneapolis, Minnesota. The Board of Directors of Adtalem (the “Board”) has unanimously approved the Acquisition. The closing of the Acquisition is expected to occur in mid-calendar year 2021 and is subject to certain closing conditions, including regulatory approval by the U.S. Department of Education and the Higher Learning Commission and required antitrust approvals.

Also on September 11, 2020, to provide future funding for the Acquisition, Adtalem entered into a commitment letter (the “Commitment Letter”) with Morgan Stanley Senior Funding, Inc. (“MSSF”), Barclays Bank PLC (“Barclays”), Credit Suisse AG, Cayman Islands Branch (“CS”) and Credit Suisse Loan Funding LLC (“CSLF” and, together with CS and their respective affiliates, “Credit Suisse”), and MUFG Bank, Ltd. (together with MSSF, Barclays and Credit Suisse, the “Commitment Parties”), pursuant to which the Commitment Parties committed to provide to Adtalem (i)(A) a senior secured term loan facility in an aggregate principal amount of $1 billion (the “Term Facility”) and (B) a senior secured revolving loan facility in an aggregate commitment amount of $400 million (the “Revolving Facility”) and (ii) to the extent one or more series of senior secured notes pursuant to a Rule 144A offering or other private placement in an aggregate principal amount of $650 million are not issued (in escrow or otherwise) prior to the consummation of the Acquisition, a senior secured bridge term loan credit facility in an aggregate principal amount of up to $650 million (together with the Term Facility and the Revolving Facility, the “Facilities”). The proceeds of the Facilities will be used, among other things, to finance the Acquisition, refinance Adtalem’s existing credit agreement, pay fees and expenses related to the Acquisition, and in the case of the Revolving Facility, to finance ongoing working capital and general corporate purposes. The commitments under the Commitment Letter are subject to customary closing conditions. Acquisition and integration costs incurred for this transaction, including costs related to the proposed financing, during the three months ended September 30, 2020 were $13.4 million.

On September 16, 2020, Laureate Education, Inc. (“Laureate”) advised Adtalem that Walden University had received a letter from the U.S. Department of Justice (the “DOJ”) indicating that the DOJ, along with several other government

agencies, is conducting an investigation into allegations that Walden University may have violated the federal False Claims Act by misrepresenting its compliance with provisions of its Program Participation Agreement with the U.S. Department of Education relating, generally, to potential false representations to the Commission on Collegiate Nursing Education and false advertising to students about (1) the content and cost of Walden’s Masters of Science in Nursing program, or (2) the availability of clinical site placements required for mandatory practicum courses for such program (collectively, the “DOJ Investigation”). Subsequently, Walden disclosed the DOJ Investigation to the Higher Learning Commission (the “HLC”). On October 13, 2020, Laureate advised Adtalem that Walden University had received a letter from the HLC notifying Walden University that the HLC seeks to assign a public Governmental Investigation designation to Walden University. If imposed, the status would remain in place until the President of the HLC determines that it is no longer required because the institution has resolved the issues that led to the designation. Pursuant to HLC policy, on October 26, 2020, Walden University exercised its opportunity respond to the notice before the Governmental Investigation designation would be assigned and made public.

Pursuant to its access rights under the terms of the Agreement, Adtalem is conducting its own investigation of the matters addressed in the DOJ and HLC correspondence, including reviewing relevant documents and other information and interviewing relevant Laureate and/or Walden University personnel. As a condition to closing the acquisition, certain designated regulatory authorities, including the HLC, must consent to the acquisition. Pursuant to Section 5.05(a) of the Agreement, the parties are required to cooperate and use reasonable best efforts to obtain those designated pre-closing consents from, among others, the HLC. Consistent with the HLC’s policies and procedures, a Governmental Investigation designation by the HLC could delay or prevent the HLC’s approval of a substantive change application to approve the proposed acquisition of Walden University. We are in the early stages of evaluating these regulatory developments and the potential impact, if any, on our planned acquisition of Walden University.

v3.20.2
Summary of Significant Accounting Policies
3 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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, 2020 (“2020 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles (“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 2020 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.

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 the impact of the novel coronavirus (“COVID-19”) pandemic, 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. The outbreak 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 the outbreak, actions taken to contain the virus, as well as, how quickly and to what extent normal economic and operating conditions can resume.

Recent Accounting Standards

Recently adopted accounting standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13: “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The guidance was issued to provide financial statement users with more decision-useful information about the expected losses on financial instruments by replacing the incurred loss impairment methodology with a methodology that reflects expected credit losses by requiring a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We adopted this guidance, along with the related clarifications and improvements, effective July 1, 2020 using the modified-retrospective approach without adjusting prior comparative periods. The adoption of this standard did not have a material impact on Adtalem’s Consolidated Financial Statements, and therefore, no adjustments were made to retained earnings.

Recently issued accounting standards not yet adopted

None.

v3.20.2
Discontinued Operations and Assets Held for Sale
3 Months Ended
Sep. 30, 2020
Discontinued Operations And Disposal Groups [Abstract]  
Discontinued Operations and Assets Held for Sale

3. Discontinued Operations and Assets Held for Sale

On December 4, 2018, Adtalem completed the sale of Carrington to San Joaquin Valley College, Inc. (“SJVC”) for de minimis consideration. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, Carrington is presented in Adtalem’s financial reporting as a discontinued operation. Adtalem has retained certain leases associated with the Carrington operations. Adtalem remains the primary lessee on these leases and subleases to Carrington. Adtalem records the proceeds from these subleases as an offset to operating costs. Adtalem also assigned certain leases to Carrington but remains contingently liable under these leases. Adtalem recorded a pre-tax loss of $11.3 million on the sale of Carrington and transferred $9.9 million of cash and restricted cash balances to Carrington in fiscal year 2019, subject to post-closing adjustments to be completed in fiscal year 2021.

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 has a major effect on Adtalem’s operations and financial results, DeVry University is presented in Adtalem’s financial reporting as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20 million over a ten-year period payable based on DeVry University’s free cash flow. 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 “Note”). The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. DeVry University may make prepayments on the Note. This loan is recorded as other assets, net on the Consolidated Balance Sheets. 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 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. Adtalem recorded a pre-tax loss of $22.3 million on the sale of DeVry University and transferred $40.2 million of cash and restricted cash balances to DeVry University in fiscal year 2019.

On April 24, 2020, Adtalem completed the sale of Adtalem Brazil to Estácio Participações S.A. (“Estácio”) and Sociedade de Ensino Superior Estaćio de Sá Ltda, a wholly owned subsidiary of Estácio (“Purchaser”), pursuant to the Stock Purchase Agreement dated October 18, 2019. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, Adtalem Brazil is presented in Adtalem’s financial reporting as a discontinued operation. Pursuant to the terms and subject to the conditions set forth in the purchase agreement, Adtalem sold the issued and outstanding shares of Adtalem Brasil Holding S.A. (a/k/a Adtalem Brazil) to the Purchaser for R$1,920 million, subject to certain post-closing adjustments pursuant to the purchase agreement. Adtalem received $345.9 million in sale proceeds and $56.0 million of Adtalem Brazil cash, for a combined $401.9 million upon the sale. Adtalem Brazil cash balance on the sale date was $88.4 million, resulting in $313.5 million of cash proceeds, net of this cash transferred. In addition, Adtalem received $110.7 million from the settlement of a deal-contingent foreign currency hedge arrangement entered into in connection with the sale of Adtalem Brazil to economically hedge the Brazilian Real sales price through the mitigation of the currency exchange rate risk. Adtalem recorded this settlement as a pre-tax gain on the hedge of $110.7 million in fiscal year 2020. The hedge agreement had a total notional amount of R$2,154 million. The derivative associated with the hedge agreement did not qualify for hedge accounting treatment under ASC 815, and as a result, all changes in fair value were recorded within the income statement.

The following is a summary of balance sheet information of assets and liabilities reported as held for sale as of September 30, 2019, which includes only Adtalem Brazil balances as Carrington and DeVry University were sold prior to that date (in thousands):

September 30, 

2019

Assets:

 

Current assets:

 

Cash and cash equivalents

$

96,902

Accounts receivable, net

 

64,915

Prepaid expenses and other current assets

 

8,056

Total current assets held for sale

 

169,873

Noncurrent assets:

 

Property and equipment, net

73,763

Operating lease assets

 

72,261

Deferred income taxes

 

5,163

Intangible assets, net

 

110,711

Goodwill

 

173,064

Other assets, net

 

9,972

Total noncurrent assets held for sale

 

444,934

Total assets held for sale

$

614,807

Liabilities:

 

Current liabilities:

 

Accounts payable

$

2,857

Accrued payroll and benefits

 

16,239

Accrued liabilities

 

9,800

Deferred revenue

 

11,104

Current operating lease liabilities

 

10,174

Total current liabilities held for sale

 

50,174

Noncurrent liabilities:

 

Long-term operating lease liabilities

 

62,367

Deferred income taxes

 

3,719

Other liabilities

 

16,707

Total noncurrent liabilities held for sale

 

82,793

Total liabilities held for sale

$

132,967

The following is a summary of income statement information of operations reported as discontinued operations, which includes Adtalem Brazil’s, Carrington’s, and DeVry University’s operations through the date of each respective sale (in thousands):

Three Months Ended

September 30, 

2020

2019

Revenue

$

$

45,652

Operating cost and expense:

 

 

Cost of educational services

 

 

33,948

Student services and administrative expense

 

10,084

 

14,373

Restructuring expense

 

 

35

Total operating cost and expense

 

10,084

 

48,356

Operating loss

 

(10,084)

 

(2,704)

Other income (expense):

Interest and dividend income

978

Interest expense

(1,157)

Net other expense

 

 

(179)

Loss from discontinued operations before income taxes

(10,084)

(2,883)

Benefit from (provision for) income taxes

 

2,477

 

(273)

Net loss from discontinued operations attributable to Adtalem

$

(7,607)

$

(3,156)

We continue to incur costs, principally attorney fees, 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.

v3.20.2
Revenue
3 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Revenue

4. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers (students and members), 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 September 30, 2020

Medical and
Healthcare

Financial
Services

Consolidated

Higher education

$

218,289

$

$

218,289

Test preparation/certifications

27,276

27,276

Conferences/seminars

13,369

13,369

Memberships/subscriptions

7,995

7,995

Other

537

775

1,312

Total

 

$

218,826

 

$

49,415

 

$

268,241

Three Months Ended September 30, 2019

Medical and
Healthcare

Financial
Services

Consolidated

Higher education

$

201,453

$

$

201,453

Test preparation/certifications

24,972

24,972

Conferences/seminars

17,070

17,070

Memberships/subscriptions

4,867

4,867

Other

6,034

217

6,251

Total

 

$

207,487

 

$

47,126

 

$

254,613

In addition, see Note 19 “Segment Information” for a disaggregation of revenue by geographical region.

Performance Obligations and Revenue Recognition

Higher education: Higher education revenue consists of tuition, fees, books, and other educational products. The majority of revenue is derived from tuition and fees, which is recognized on a straight-line basis over the term as instruction is delivered. Books and other educational product revenue are recognized when products are shipped or students receive access to electronic materials. Under certain circumstances, we report revenue from these books and other educational products on a net basis because our performance obligation is to facilitate a transaction between the student and a vendor. These amounts were not significant for the three months ended September 30, 2020 and 2019.

Test preparation/certifications: Test preparation revenue consists of sales of self-study materials and test preparation course instruction. Becker test preparation revenue is primarily derived from self-study materials and is recognized when access to the materials is delivered to the customer. EduPristine test preparation revenue is primarily derived from course instruction and is recognized on a straight-line basis over the applicable instruction delivery period. Certification revenue consists of exam preparation guides, seminars, exam sitting fees, and recertification fees and is recognized when the applicable performance obligation is satisfied.

Conferences/seminars: Conference revenue consists of revenue from attendees, sponsors, and exhibitors. We recognize revenue for all items related to conferences at the time of the conference. Seminar revenue consists of seminars delivered in live, live-online, or on-demand online formats. We recognize revenue for live and live-online seminars on the day of the seminar. We recognize revenue for on-demand online seminars when customers are granted access to a webcast of the seminar.

Memberships/subscriptions: Membership revenue is recognized on a straight-line basis over the membership period. Subscription revenue is recognized on a straight-line basis over the subscription period.

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.

Customer contracts generally have separately stated prices for each performance obligation contained in the contract. Therefore, each performance obligation generally has its own standalone selling price. For higher education students, 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 utilizing private funding or funding through Adtalem’s credit extension programs (see Note 8 “Accounts Receivable and Credit Losses” for additional information) generally pay after the academic term is complete. For non-higher education customers, payment is typically due and collected at the time a customer places an order.

Transaction Price

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

For higher education, students may receive discounts, scholarships, or refunds, which gives rise to variable consideration. The amounts of discounts or scholarships are applied to individual student accounts when such amounts are awarded. Therefore, the transaction price is reduced directly by these discounts or scholarships from the amount of the standard tuition rate charged. 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.

Management reassesses collectability throughout the period revenue is recognized by the Adtalem institutions, on a student-by-student basis. 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.

For test preparation and other Financial Services products, the transaction price is equal to the amount charged to the customer, which is the standard rate, less any discounts, and an estimate for returns or refunds.

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

For our higher education institutions, 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. As instruction is provided, 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 8 “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.

For our Financial Services businesses, customers are billed and payment is due at the time of order placement. In most cases, performance obligations are delivered subsequent to payments received. Delivering our performance obligations reduces deferred revenue, and accounts receivable is reduced upon payments received. Becker offers flexible payment plans with terms of up to 12-months as a financing option for the Becker CPA Exam Review Course (see Note 8 “Accounts Receivable and Credit Losses”). In this case, payment is received after satisfying the performance obligation.

Revenue of $75.6 million was recognized during the first three months of fiscal year 2021 that was included in the deferred revenue balance at the beginning of fiscal year 2021. 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, and increases from payments received related to academic terms commencing after the end of the reporting period.

Practical Expedients

As our performance obligations have an original expected duration of one year or less, we have applied the practical expedient (as provided in ASC 606-10-50-14) to not disclose the information in ASC 606-10-50-13, which requires disclosure of the amount of the transaction price allocated to our performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period and when the entity expects to recognize this amount as revenue. All consideration from contracts with customers is included in the transaction price.

v3.20.2
Restructuring Charges
3 Months Ended
Sep. 30, 2020
Restructuring and Related Activities [Abstract]  
Restructuring Charges

5. Restructuring Charges

During the first quarter of fiscal year 2021, Adtalem recorded restructuring charges primarily related to Adtalem’s home office and ACAMS real estate consolidations. During the first quarter of fiscal year 2020, Adtalem recorded restructuring charges primarily related to the sale of Becker’s courses for healthcare students 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 result in additional restructuring charges or reversals in future periods. Termination benefit charges represented severance pay and benefits for these employees. Adtalem’s home office is classified as “Home Office and Other” in Note 19 “Segment Information.” Pre-tax restructuring charges by segment were as follows (in thousands):

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Real Estate
and Other

Termination
Benefits

Total

Real Estate
and Other

Termination
Benefits

Total

Medical and Healthcare

$

$

$

$

127

$

$

127

Financial Services

 

1,415

 

 

1,415

1,690

 

289

 

1,979

Home Office and Other

 

2,318

 

490

 

2,808

4,122

 

302

 

4,424

Total

$

3,733

$

490

$

4,223

$

5,939

$

591

$

6,530

The following table summarizes the separation and restructuring plan activity for the fiscal years 2020 and 2021, for which cash payments are required (in thousands):

Liability balance as of June 30, 2019

$

25,083

ASC 842 (leases) adjustment (1)

(25,030)

Liability balance as of July 1, 2019

 

53

Increase in liability (separation and other charges)

 

4,955

Reduction in liability (payments and adjustments)

 

(3,573)

Liability balance as of June 30, 2020

 

1,435

Increase in liability (separation and other charges)

 

490

Reduction in liability (payments and adjustments)

 

(1,688)

Liability balance as of September 30, 2020

$

237

(1) Reflects amounts reclassified out of the opening balance of restructuring reserve accruals as of June 30, 2019 to operating lease assets that was recorded with the adoption of ASC 842.

The liability balance of $0.2 million is recorded as accrued liabilities on the Consolidated Balance Sheet as of September 30, 2020. This liability balance represents costs for employees who have either not yet separated from Adtalem or for whom full severance has not yet been paid. All of these remaining costs are expected to be paid within the next 12 months. We have substantially completed our current restructuring plans. We continue to incur restructuring charges or reversals related to exiting leased space from previous restructuring activities. Management may institute future restructuring plans.

v3.20.2
Income Taxes
3 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

6. Income Taxes

Our effective income tax rates from continuing operations were 20.5% and 17.6% in the three months ended September 30, 2020 and 2019, respectively. The effective tax rates in fiscal years 2021 and 2020 reflect the U.S. federal tax rate of 21% adjusted for foreign rate differences, benefits associated with local tax incentives, changes in valuation allowances and liabilities for uncertain tax positions, and tax benefits on stock-based compensation awards.

Three of Adtalem’s operating units 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.

v3.20.2
Earnings per Share
3 Months Ended
Sep. 30, 2020
Earnings per Share  
Earnings per Share

7. Earnings per Share

The following table sets forth the computations of basic and diluted earnings per share and stock awards not included in the computation of diluted earnings per share when their effect is anti-dilutive (in thousands, except per share data):

Three Months Ended

September 30, 

2020

2019

Numerator:

Net income (loss) attributable to Adtalem:

 

 

Continuing operations

$

27,537

$

17,517

Discontinued operations

(7,607)

(3,156)

Net

$

19,930

$

14,361

Denominator:

Weighted-average shares outstanding

 

51,963

 

55,018

Unvested participating RSUs

 

501

 

475

Weighted-average basic shares outstanding

 

52,464

 

55,493

Effect of dilutive stock awards

 

333

 

647

Weighted-average diluted shares outstanding

 

52,797

 

56,140

Earnings (loss) per share attributable to Adtalem:

Basic:

Continuing operations

$

0.52

$

0.32

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Diluted:

Continuing operations

$

0.52

$

0.31

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Weighted-average anti-dilutive stock awards

948

329

v3.20.2
Accounts Receivable and Credit Losses
3 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Accounts Receivable and Credit Losses

8. Accounts Receivable and Credit Losses

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

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

September 30, 2020

Gross

Allowance

Net

Trade receivables, current

$

106,980

$

(10,634)

$

96,346

Financing receivables, current

6,906

(3,716)

3,190

Accounts receivable, current

$

113,886

$

(14,350)

$

99,536

Financing receivables, current

$

6,906

$

(3,716)

$

3,190

Financing receivables, noncurrent

42,925

(13,099)

29,826

Total financing receivables

$

49,831

$

(16,815)

$

33,016

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, books, and fees, 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. 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, and minimizes interest being accrued on the loan balance. Payments may increase upon completing or departing school. After a student leaves school, the student typically will have a monthly installment repayment plan. In addition, Becker offered an 18-month credit extension program for its Becker CPA Exam Review Course which is considered a financing receivable. Becker is no longer offering credit extension under this program. Instead, Becker is offering flexible payment plans with terms of up to 12-months which is not considered a financing receivable.

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 charge-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 September 30, 2020 was as follows (in thousands):

Amortized Cost Basis by Origination Year

Prior

2017

2018

2019

2020

2021

Total

1-30 days past due

 

$

1,117

$

1,338

 

$

647

 

$

889

 

$

379

 

$

24

 

$

4,394

31-60 days past due

556

145

41

67

223

1,032

61-90 days past due

609

59

444

71

127

1,310

Greater than 90 days past due

8,179

3,156

2,475

1,132

334

15,276

Total past due

10,461

4,698

3,607

2,159

1,063

24

22,012

Current

11,634

4,994

3,732

4,682

2,384

393

27,819

Financing receivables, gross

$

22,095

$

9,692

$

7,339

$

6,841

$

3,447

$

417

$

49,831

The following table includes our financing receivables credit risk profile disclosures for prior periods before we adopted ASC 326 on July 1, 2020 (in thousands):

Over

Total

1-30 Days

31-60 Days

61-90 Days

90 Days

Total

Financing

Past Due

Past Due

Past Due

Past Due

Past Due

Current

Receivables

Financing receivables:

June 30, 2020

$

7,192

$

1,755

$

1,547

$

13,782

$

24,276

$

25,749

$

50,025

September 30, 2019

$

3,317

$

1,342

$

526

$

10,961

$

16,146

$

31,527

$

47,673

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 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. Students still attending classes and recently graduated are more likely to pay than those who are inactive due to being on a leave of absence or withdrawing from school.

For our financing receivables, we primarily use historical loss rates based on an aging schedule specific to each school. 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 September 30, 2020

Trade

Financing

Total

Beginning balance

 

$

10,825

$

15,690

 

$

26,515

Write-offs

(759)

(256)

(1,015)

Recoveries

186

40

226

Provision for credit losses

382

1,341

1,723

Ending balance

$

10,634

$

16,815

$

27,449

Three Months Ended September 30, 2019

Trade

Financing

Total

Beginning balance

 

$

8,243

$

6,289

 

$

14,532

Write-offs

(1,598)

(26)

(1,624)

Recoveries

323

24

347

Provision for credit losses

2,263

3,291

5,554

Ending balance

$

9,231

$

9,578

$

18,809

Allowance for bad debts on short-term and long-term receivables as of September 30, 2020, June 30, 2020, and September 30, 2019 were $27.4 million, $26.5 million, and $18.8 million, respectively. The increase in the reserve from the year-ago quarter is driven by higher bad debt expense, primarily related to the credit extension programs at the medical and veterinary schools.

Accounts receivable, net decreased with an offsetting increase in other assets, net on the Consolidated Balance Sheet as of September 30, 2020 compared to the prior periods presented primarily due to a correction in the methodology on how we classify financing receivable balances between current and noncurrent assets.

Other Financing Receivables

In connection with the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of the Note. The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. The value of the DeVry University loan receivable included in other assets, net on the Consolidated Balance Sheet as of September 30, 2020, June 30, 2020, and September 30, 2019 is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 4% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.

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 holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The value of the DePaul College Prep loan receivable included in other assets, net on the Consolidated Balance Sheet as of September 30, 2020, June 30, 2020, and September 30, 2019 is $41.7 million, $41.4 million, and $40.4 million, respectively, which is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.

v3.20.2
Property and Equipment, Net
3 Months Ended
Sep. 30, 2020
Property, Plant And Equipment [Abstract]  
Property and Equipment, Net

9. Property and Equipment, Net

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

September 30, 

June 30, 

September 30, 

2020

2020

2019

Land

 

$

44,049

$

43,246

 

$

41,441

Building

315,725

313,068

309,893

Equipment

259,340

248,359

235,027

Construction in progress

10,882

12,449

8,681

Property and equipment, gross

629,996

617,122

595,042

Accumulated depreciation

 

(340,052)

 

(331,020)

 

(314,219)

Property and equipment, net

$

289,944

$

286,102

$

280,823

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 holds a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The buyer has 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 continues 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 Sheet. See Note 8 “Accounts Receivable and Credit Losses” for a discussion on the discounting of the note receivable. The $5.2 million received during the first quarter of fiscal year 2020 is classified as a financing activity on the Consolidated Statements of Cash Flows.

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus facility. Net proceeds from the sale of $6.4 million resulted in a gain on the sale of $4.8 million in the first three months of fiscal year 2020. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 19 “Segment Information.”

v3.20.2
Leases
3 Months Ended
Sep. 30, 2020
Lessee Disclosure [Abstract]  
Leases

10. 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 January 2031, most of which include options to terminate for a fee or extend the leases for an additional five-year period. The lease term includes options to terminate or extend when it is reasonably certain that the option will be exercised. 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 balance sheet. 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 September 30, 2020, we entered into one additional operating lease that has not yet commenced. The operating lease will commence during the first quarter of fiscal year 2022, has an 11-year lease term, and will result in an additional lease asset and lease liability of approximately $21.3 million.

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

Three Months Ended

September 30, 

2020

2019

Operating lease cost

$

12,780

$

13,703

Sublease income

 

(4,341)

 

(5,126)

Total lease cost

$

8,439

$

8,577

Maturities of lease liabilities by fiscal year as of September 30, 2020 were as follows (in thousands):

Operating

Fiscal Year

Leases

2021 (remaining)

$

48,128

2022

62,330

2023

51,908

2024

38,213

2025

28,386

Thereafter

52,914

Total lease payments

 

281,879

Less: imputed interest

(40,375)

Present value of lease liabilities

$

241,504

Lease term and discount rate were as follows:

September 30, 

2020

Weighted-average remaining operating lease term (years)

5.4

Weighted-average operating lease discount rate

5.5%

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

Three Months Ended

September 30, 

2020

2019

Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)

$

11,427

$

11,963

Operating lease assets obtained in exchange for operating lease liabilities

$

26,528

$

4,868

Adtalem maintains agreements to lease either a portion or the full space of three facilities owned by Adtalem to DeVry University with various expiration dates through December 2023. Adtalem maintains agreements to sublease either a portion or the full leased space at 21 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 prior to their divestitures during fiscal year 2019. All sublease expirations with DeVry University and Carrington 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. Future minimum lease and sublease rental income under these agreements as of September 30, 2020, were as follows (in thousands):

Fiscal Year

Amount

2021 (remaining)

$

14,270

2022

16,816

2023

 

16,078

2024

 

10,261

2025

 

5,121

Thereafter

2,038

Total lease and sublease rental income

$

64,584

v3.20.2
Goodwill and Intangible Assets
3 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

11. Goodwill and Intangible Assets

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

September 30, 

June 30, 

September 30, 

Reporting Unit

2020

2020

2019

Chamberlain

$

4,716

$

4,716

$

4,716

AUC

 

68,321

 

68,321

 

68,321

RUSM and RUSVM

 

237,173

 

237,173

 

237,173

Financial Services

 

376,270

 

376,004

 

376,782

Total

$

686,480

$

686,214

$

686,992

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

September 30, 

June 30, 

September 30, 

Reportable Segment

2020

2020

2019

Medical and Healthcare

$

310,210

$

310,210

$

310,210

Financial Services

 

376,270

 

376,004

 

376,782

Total

$

686,480

$

686,214

$

686,992

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

Medical and 

Financial

Healthcare

Services

Total

June 30, 2019

$

310,210

$

377,046

$

687,256

Foreign exchange rate changes

 

 

(264)

 

(264)

September 30, 2019

310,210

376,782

686,992

Purchase accounting adjustments

 

 

(92)

 

(92)

Foreign exchange rate changes

(686)

(686)

June 30, 2020

310,210

376,004

686,214

Foreign exchange rate changes

 

 

266

 

266

September 30, 2020

$

310,210

$

376,270

$

686,480

The change in the Financial Services segment goodwill balance from June 30, 2020 is the result of a change in the foreign currency exchange rates on the EduPristine goodwill balance recorded in the Indian Rupee compared to the U.S. dollar.

Intangible assets consisted of the following (in thousands):

September 30, 2020

Gross Carrying

Accumulated

Weighted-Average

Amount

Amortization

Amortization Period

Amortizable intangible assets:

 

Customer relationships

$

68,900

$

(22,744)

 

10 Years

Curriculum/software

 

11,600

 

(2,578)

 

6 Years

Course delivery technology

 

6,700

 

(1,786)

 

5 Years

Total

$

87,200

$

(27,108)

 

Indefinite-lived intangible assets:

 

 

 

Trade names

$

95,695

 

 

Chamberlain Title IV eligibility and accreditations

 

1,200

 

 

AUC Title IV eligibility and accreditations

 

100,000

 

 

Ross Title IV eligibility and accreditations

 

14,100

 

 

Intellectual property

 

13,940

 

 

Total

$

224,935

 

 

June 30, 2020

Gross Carrying

Accumulated 

Amount

Amortization

Amortizable intangible assets:

Customer relationships

$

68,900

$

(21,044)

Curriculum/software

11,600

(2,094)

Course delivery technology

7,200

(1,952)

Total

$

87,700

$

(25,090)

Indefinite-lived intangible assets:

 

 

Trade names

$

95,664

 

Chamberlain Title IV eligibility and accreditations

 

1,200

 

AUC Title IV eligibility and accreditations

 

100,000

 

Ross Title IV eligibility and accreditations

 

14,100

 

Intellectual property

 

13,940

 

Total

$

224,904

 

September 30, 2019

Gross Carrying

Accumulated

Amount

Amortization

Amortizable intangible assets:

 

 

Customer relationships

$

68,900

$

(15,865)

Curriculum/software

11,600

(644)

Course delivery technology

7,200

(853)

Total

$

87,700

$

(17,362)

Indefinite-lived intangible assets:

Trade names

$

95,746

Chamberlain Title IV eligibility and accreditations

1,200

AUC Title IV eligibility and accreditations

100,000

Ross Title IV eligibility and accreditations

14,100

Intellectual property

13,940

Total

$

224,986

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

September 30, 

June 30, 

September 30, 

Reportable Segment

2020

2020

2019

Medical and Healthcare

$

137,500

$

137,500

$

137,500

Financial Services

 

87,435

 

87,404

 

87,486

Total

$

224,935

$

224,904

$

224,986

Amortization expense for amortized intangible assets was $2.5 million and $2.5 million for the three months ended September 30, 2020 and 2019, respectively. Estimated intangible asset amortization expense is as follows (in thousands):

Financial

Fiscal Year

Services

2021 (remaining)

$

7,555

2022

 

9,943

2023

 

9,792

2024

 

9,509

2025

 

7,933

Thereafter

 

15,360

Total

$

60,092

All amortizable intangible assets except ACAMS customer relationships are amortized on a straight-line basis. The amount amortized for ACAMS customer relationships is based on the estimated retention of the customers, giving consideration to the revenue and cash flow associated with these existing customers.

Indefinite-lived intangible assets related to trade names, Title IV eligibility and accreditations, and intellectual property 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 contained goodwill as of the first quarter of fiscal year 2021. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management and the Board. 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, as of September 30, 2020, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value.

Adtalem has four reporting units that contained indefinite-lived intangible assets as of the first quarter of fiscal year 2021. For indefinite-lived intangible assets, management first analyzes qualitative factors, including results of operations and business conditions of the four reporting units that contained 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 September 30, 2020.

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 2020, and that no interim events or deviations from planned operating results occurred as of September 30, 2020 that would cause management to reassess these conclusions. 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. Actual results may differ from those estimates, which could lead to future impairments of goodwill or intangible assets.

v3.20.2
Debt
3 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Debt

12. Debt

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

September 30, 

June 30, 

September 30, 

2020

2020

2019

Total debt:

 

Term B Loan

$

293,250

$

294,000

$

296,250

Revolver

 

 

 

40,000

Total principal payments due

 

293,250

 

294,000

 

336,250

Deferred debt issuance costs

 

(4,629)

 

(4,885)

 

(5,650)

Total amount outstanding

 

288,621

 

289,115

 

330,600

Less current portion:

 

Term B Loan

 

(3,000)

 

(3,000)

 

(3,000)

Noncurrent portion

$

285,621

$

286,115

$

327,600

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

Maturity

Fiscal Year

Payments

2021 (remaining)

$

2,250

2022

 

3,000

2023

 

3,000

2024

 

3,000

2025

 

282,000

Total

$

293,250

On April 13, 2018, Adtalem entered into a credit agreement (the “Credit Agreement”) that provides for (1) a $300 million revolving facility (“Revolver”) with a maturity date of April 13, 2023 and (2) a $300 million senior secured Term B loan (“Term B Loan”) with a maturity date of April 13, 2025. We refer to the Revolver and Term B Loan collectively as the “Credit Facility.” The Revolver has availability for currencies other than U.S. dollars of up to $200 million and $100 million available for letters of credit. Subject to certain conditions set forth in the Credit Agreement, the Credit Facility may be increased by $250 million.

Interest on the Term B Loan 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 it has commitments from panel banks to continue to contribute to LIBOR through the end of calendar year 2021, but that it will not use its powers to compel contributions beyond such date. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. Management is monitoring their efforts, and evaluating the need for an amendment to the Credit Agreement to accommodate a replacement rate. The Credit Agreement does not specify a replacement rate for LIBOR.

Term B Loan

For Eurocurrency rate loans, Term B Loan interest is equal to LIBOR or a LIBOR-equivalent rate plus 3%. For base rate loans, Term B Loan interest is equal to the base rate plus 2%. The Term B Loan amortizes in equal quarterly

installments of $750,000, with the balance due at maturity on April 13, 2025. As of September 30, 2020, June 30, 2020, and September 30, 2019, the interest rate for borrowings under the Term B Loan facility was 3.15%, 3.18%, and 5.04%, respectively, which approximated the effective interest rate.

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 Term B Loan debt. We pay interest at a fixed rate of 0.946% and receive variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Term B Loan. The effective date of the Swap was March 31, 2020 and settlements with the counterparty occur on a monthly basis. The Swap will terminate on February 28, 2025.

During the operating term of the Swap, the annual interest rate on the amount of the Term B Loan is fixed at 3.946% (including the impact of our current 3% interest rate margin on LIBOR loans) for the applicable interest rate period.

The Swap is designated as a cash flow hedge and as such, changes in its fair value are recognized in accumulated other comprehensive loss on the Consolidated Balance Sheet and are reclassified into the Consolidated Statements of Income within interest expense in the periods in which the hedged transactions affect earnings.

Revolver

Revolver interest is equal to LIBOR or a LIBOR-equivalent rate for Eurocurrency rate loans or a base rate, plus an applicable rate based on Adtalem’s consolidated leverage ratio, as defined in the Credit Agreement. The applicable rate ranges from 1.75% to 2.75% for Eurocurrency rate loans and from 0.75% to 1.75% for base rate loans. As of September 30, 2019, borrowings under the Revolver were $40 million with a weighted-average interest rate of 4.20%. There were no outstanding borrowings under the Revolver as of each of September 30, 2020 and June 30, 2020.

Adtalem had a letter of credit outstanding of $68.4 million as of each of September 30, 2020, June 30, 2020, and September 30, 2019. This letter of credit was posted in the second quarter of fiscal year 2017 in relation to a settlement with the Federal Trade Commission (“FTC”) and requires 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. As of September 30, 2020, Adtalem is charged an annual fee equal to 2.25% of the undrawn face amount of the outstanding letters of credit under the Revolver, payable quarterly. Adtalem continues to post the letter of credit in relation to the settlement with the FTC on behalf of DeVry University and is reimbursed by DeVry University for 2.00% of the outstanding amount of this letter of credit. The Credit Agreement also requires payment of a commitment fee equal to 0.40% as of September 30, 2020, of the undrawn portion of the Revolver. The amount undrawn under the Revolver, which includes the impact of the outstanding letters of credit, was $231.6 million as of September 30, 2020. The letter of credit fees and commitment fees are adjustable quarterly, based upon Adtalem’s achievement of certain financial ratios.

Debt Issuance Costs

Adtalem incurred $9.9 million in fees that were capitalized in relation to the Credit Agreement, $7.1 million of which was related to the Term B Loan facility and $2.7 million of which was related to the Revolver facility. The deferred debt issuance costs related to the Term B Loan are presented as a direct deduction from the face amount of the debt, while the deferred debt issuance costs related to the Revolver are classified as other assets, net on the Consolidated Balance Sheets. The deferred debt issuance costs amortization is recorded in interest expense in the Consolidated Statements of Income. The following table summarizes the total deferred debt issuance costs for the Term B Loan and Revolver, which are being amortized over seven years and five years, respectively (in thousands):

Term B Loan

Revolver

Total

Deferred debt issuance costs as of June 30, 2020

$

4,885

$

1,516

$

6,401

Amortization of deferred debt issuance costs

 

(256)

 

(136)

 

(392)

Deferred debt issuance costs as of September 30, 2020

$

4,629

$

1,380

$

6,009

Covenants and Guarantees

The Credit Agreement contains 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.

The Credit Agreement contains covenants that, among other things, require maintenance of certain financial ratios. Maintenance of these financial ratios could place restrictions on Adtalem’s ability to pay dividends. Adtalem has not paid a dividend since December 2016. These financial ratios include a consolidated fixed charge coverage ratio, a consolidated leverage ratio, and a U.S. Department of Education financial responsibility ratio based upon a composite score of an equity ratio, a primary reserve ratio, and a net income ratio. Failure to maintain any of these ratios or to comply with other covenants contained in the Credit Agreement would constitute an event of default and could result in termination of the Credit Agreement and require payment of all outstanding borrowings and replacement of outstanding letters of credit. Adtalem was in compliance with the debt covenants as of September 30, 2020.

The Term B Loan requires mandatory prepayments equal to a percentage of excess cash flow or equal to the net cash proceeds in excess of $50 million from a disposition which is not reinvested in assets within one-year from the date of disposition, among other mandatory prepayment terms (see the Credit Agreement, as filed under Form 8-K dated April 13, 2018, for additional information and term definitions). No mandatory prepayments have been required or made since the execution of the Credit Agreement.

The stock of all U.S. and certain foreign subsidiaries of Adtalem is pledged as collateral for borrowings under the Credit Agreement. Our borrowings under the Credit Facility are guaranteed by us and all of our domestic subsidiaries (subject to certain exceptions) and secured by a first lien on our assets and the assets of our guarantor subsidiaries (excluding real estate), including capital stock of the subsidiaries.

v3.20.2
Redeemable Noncontrolling Interest
3 Months Ended
Sep. 30, 2020
Noncontrolling Interest [Abstract]  
Redeemable Noncontrolling Interest

13. Redeemable Noncontrolling Interest

As of June 30, 2019, Adtalem maintained a 97.9% ownership interest in Adtalem Brazil with the remaining 2.1% owned by members of the Adtalem Brazil senior management group. Since July 1, 2015, Adtalem has had the right to exercise a call option and purchase any remaining Adtalem Brazil stock from Adtalem Brazil management. Likewise, Adtalem Brazil management has had the right to exercise a put option and sell its remaining ownership interest in Adtalem Brazil to Adtalem.

In addition, Adtalem maintains a 71% ownership interest in EduPristine with the remaining 29% owned by Kaizen Management Advisors (“Kaizen”), an India-based private equity firm, as of September 30, 2020. Beginning on March 26, 2020, Adtalem has had the right to exercise a call option and purchase any remaining EduPristine stock from Kaizen. Likewise, Kaizen has 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 will have the right to exercise a put option and sell its remaining ownership interest in EduPristine to Adtalem.

Since the put options are out of the control of Adtalem, authoritative guidance requires the noncontrolling interests, which includes the value of the put options, to be displayed outside of the equity section of the Consolidated Balance Sheets.

On July 1, 2019, the Adtalem Brazil management noncontrolling members exercised their put option and sold their remaining ownership interest in Adtalem Brazil to Adtalem resulting in Adtalem owning 100% of Adtalem Brazil until the sale of Adtalem Brazil, which was completed on April 24, 2020. In the first quarter of fiscal year 2020, $6.2 million of redeemable noncontrolling interest was removed from the Consolidated Balance Sheet as a result of the put option exercise. Adtalem has not adjusted the redemption value related to the Kaizen put option as management believes the redemption value has not materially changed since acquiring a majority stake in EduPristine.

The adjustment to increase or decrease the EduPristine noncontrolling interest for their respective proportionate share of EduPristine’s profit (loss) flows through the Consolidated Statements of Income each reporting period based on Adtalem’s noncontrolling interest accounting policy.

The following is a reconciliation of the redeemable noncontrolling interest balance (in thousands):

Three Months Ended

September 30, 

2020

2019

Balance at beginning of period

$

2,852

$

9,543

Net loss attributable to redeemable noncontrolling interest

 

(91)

 

(109)

Payment for purchase of redeemable noncontrolling interest of subsidiary

(6,247)

Balance at end of period

$

2,761

$

3,187

v3.20.2
Share Repurchases
3 Months Ended
Sep. 30, 2020
Dividends And Share Repurchase Program [Abstract]  
Share Repurchase

14. Share Repurchases

On November 8, 2018, we announced that the Board authorized Adtalem’s current share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The current share repurchase program commenced in January 2019. Adtalem made share repurchases under the current repurchase program as follows (in thousands, except shares and per share data):

Three Months Ended

Life-to-Date

September 30, 

Current Share

2020

2019

Repurchase Program

Total number of share repurchases

918,807

6,383,431

Total cost of share repurchases

$

$

40,255

$

254,769

Average price paid per share

$

$

43.81

$

39.91

On February 4, 2020, we announced that the Board authorized Adtalem’s twelfth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The new program will commence when the repurchases from the current program are complete. As of September 30, 2020, $345.2 million of authorized share repurchases were remaining under the current and twelfth share repurchase programs. Repurchases under the current program were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. In October 2020, Adtalem determined to end the suspension of its current share repurchase program, and we may resume repurchases in accordance with the securities laws if market conditions are favorable. 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 privately 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. These repurchased shares have reduced the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

v3.20.2
Accumulated Other Comprehensive Loss
3 Months Ended
Sep. 30, 2020
Comprehensive Income, Net Of Tax [Abstract]  
Accumulated Other Comprehensive Loss

15. Accumulated Other Comprehensive Loss

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

Three Months Ended

September 30, 

2020

2019

Foreign currency translation adjustments

Beginning balance

$

(1,383)

$

(137,389)

Gain (loss) on foreign currency translation

318

(39,494)

Ending balance

$

(1,065)

$

(176,883)

Marketable securities

Beginning balance, gross

$

242

$

131

Beginning balance, tax effect

(59)

(32)

Beginning balance, net of tax

183

99

Unrealized (loss) gain on marketable securities

(2)

59

Tax effect

1

(14)

Ending balance

$

182

$

144

Interest rate swap

Beginning balance, gross

$

(10,399)

$

Beginning balance, tax effect

2,544

Beginning balance, net of tax

(7,855)

Unrealized gain on interest rate swap

167

Tax effect

(41)

Ending balance

$

(7,729)

$

Total ending balance at September 30

$

(8,612)

$

(176,739)

v3.20.2
Stock-Based Compensation
3 Months Ended
Sep. 30, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

16. 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. Under these plans, directors, key executives, and managerial employees are eligible to receive incentive stock or nonqualified options to purchase shares of Adtalem’s common stock. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 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 stock-based grants will be issued under this plan. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 are administered by the Compensation Committee of the Board. Options are granted for terms of up to ten years and can vest immediately or over periods of up to five years. The requisite service period is equal to the vesting period. The option price under the plans is the fair market value of the shares on the date of the grant.

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 outstanding but unvested grants in the period they occur.

As of September 30, 2020, 3,803,197 shares were authorized for issuance but not issued or subject to outstanding awards under Adtalem’s stock-based incentive plans.

The following is a summary of options activity for the three months ended September 30, 2020:

Weighted-Average

Remaining

Aggregate

Number of

Weighted-Average

Contractual Life

Intrinsic Value

Options

Exercise Price

(in years)

(in thousands)

Outstanding as of July 1, 2020

 

1,439,630

$

31.95

 

Granted

 

281,075

 

32.03

 

Exercised

 

(5,450)

 

23.30

 

Forfeited

 

 

 

Expired

 

(35,050)

 

41.84

 

Outstanding as of September 30, 2020

 

1,680,205

 

31.81

 

6.85

$

1,690

Exercisable as of September 30, 2020

 

1,025,387

$

29.03

 

5.67

$

1,690

The total intrinsic value of options exercised for the three months ended September 30, 2020 and 2019 was $0.1 million and $0.5 million, respectively.

The fair value of Adtalem’s stock option awards was estimated using a binomial model. This model uses historical cancellation and exercise experience of Adtalem to determine the option value. It also takes into account 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 three months of fiscal years 2021 and 2020 was $12.23 and $16.98, per share, respectively. The fair value of Adtalem’s stock option grants was estimated assuming the following weighted-average assumptions:

Fiscal Year

2021

2020

Expected life (in years)

 

6.54

 

6.51

 

Expected volatility

 

39.27

%

37.66

%

Risk-free interest rate

 

0.45

%

1.40

%

Dividend yield

 

0.00

%

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.

If factors change and different assumptions are employed in the valuation of stock-based grants in future periods, the stock-based compensation expense that Adtalem records may differ significantly from what was recorded in previous periods.

During the first three months of fiscal year 2021, Adtalem granted 332,890 RSUs to selected employees. Of these, 1,590 were performance-based RSUs and 331,300 were non-performance-based RSUs. Our annual grant of performance-based RSUs are expected to be granted in the second quarter of fiscal year 2021. Performance-based RSUs are earned by the recipients over a three-year period based on achievement of return on invested capital and free cash flow per share. Certain awards are subject to achievement of a minimum level of Adtalem’s earnings before interest, taxes, depreciation, and amortization, calculated on a non-GAAP basis. Non-performance-based RSUs are subject to restrictions which lapse ratably over one, three, or four-year periods on the grant anniversary date based on the recipient’s continued service on the Board, employment with Adtalem, or upon retirement. During the restriction period, 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 three months ended September 30, 2020:

Weighted-Average

Number of

Grant Date

RSUs

Fair Value

Outstanding as of July 1, 2020

 

767,973

$

39.42

Granted

 

332,890

 

32.02

Vested

 

(340,846)

 

35.08

Forfeited

 

(7,831)

 

37.70

Outstanding as of September 30, 2020

 

752,186

$

38.13

The weighted-average estimated grant date fair values of RSUs granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal years 2021 and 2020 were $32.02 and $43.39, per share, respectively.

The following table shows total stock-based compensation expense included in the Consolidated Statements of Income (in thousands):

Three Months Ended

September 30, 

2020

2019

Cost of educational services

$

393

$

455

Student services and administrative expense

 

3,611

 

4,768

 

4,004

 

5,223

Income tax benefit

 

(526)

 

(2,533)

Net stock-based compensation expense

$

3,478

$

2,690

As of September 30, 2020, $27.3 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 2.8 years. The total fair value of options and RSUs vested during the three months ended September 30, 2020 and 2019 was approximately $16.3 million and $12.1 million, respectively.

There was no capitalized stock-based compensation cost as of each of September 30, 2020, June 30, 2020, and September 30, 2019.

Adtalem has an established practice of issuing new shares of common stock to satisfy stock-based grant exercises. However, Adtalem also may issue treasury shares to satisfy stock-based grant exercises under certain of its stock-based incentive plans.

v3.20.2
Fair Value Measurements
3 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

17. 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 to fund obligations under a non-qualified deferred compensation plan. The rabbi trust investments in stock and bond mutual funds, which are carried at fair value and classified as marketable securities on the Consolidated Balance Sheets. All investments in marketable securities are recorded at fair value based upon quoted market prices using Level 1 inputs.

The fair value of the credit extension programs included in accounts receivable, net and other assets, net on the Consolidated Balance Sheets as of September 30, 2020, June 30, 2020, and September 30, 2019 of $33.0 million, $34.3 million, and $38.1 million, respectively, is estimated by discounting the future cash flows using current rates for similar arrangements and is classified as Level 2. See Note 8 “Accounts Receivable and Credit Losses” for additional information on these credit extension programs.

In connection with the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of the Note. The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. The fair value of the DeVry University loan receivable included in other assets, net of $10.0 million on the Consolidated Balance Sheet as of each of September 30, 2020, June 30, 2020, and September 30, 2019 is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 4% per annum and is classified as Level 2.

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep. In connection with the sale, Adtalem holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The fair value of the DePaul College Prep loan receivable included in other assets, net on the Consolidated Balance Sheet as of September 30, 2020, June 30, 2020, and September 30, 2019 is $41.7 million, $41.4 million, and $40.4 million, respectively, which is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum and is classified as Level 2.

As of September 30, 2020, June 30, 2020, and September 30, 2019, borrowings under our Credit Facility were $293.3 million, $294.0 million, and $336.3 million, respectively. The carrying value of our long-term debt approximates fair value because the interest rates on these borrowings approximated the effective interest rate and is classified as Level 2. See Note 12 “Debt” for additional information on the Credit Facility.

On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to fully mitigate risks associated with the variable interest rate on our Term B Loan debt with an effective date of March 31, 2020. The fair value of our Swap is based in part on data received from the counterparty, and

represents the estimated amount we would receive or pay to settle the Swap, taking into consideration current and projected future interest rates as well as the creditworthiness of the counterparty, all of which can be validated through readily observable data from external sources, in which case the measurements are classified within Level 2. The fair value of the Swap is represented within other liabilities on the Consolidated Balance Sheet with a balance of $10.2 million and $10.4 million as of September 30, 2020 and June 30, 2020, respectively. See Note 12 “Debt” for additional information on the Swap.

As of September 30, 2020, June 30, 2020, and September 30, 2019, there were no assets or liabilities measured at fair value using Level 3 inputs.

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, 2020. See Note 11 “Goodwill and Intangible Assets” for additional information on the impairment review, including valuation techniques and assumptions.

v3.20.2
Commitments and Contingencies
3 Months Ended
Sep. 30, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

18. 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 September 30, 2020, 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 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 September 30, 2020. 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 the 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 claims 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 seeks 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 Adtalem Parties moved to dismiss this complaint on June 20, 2018. On March 11, 2019, the Court granted plaintiff’s motion for leave to file an amended complaint. Plaintiff filed an amended complaint that same day, asserting similar claims, with new lead plaintiff, Dave McCormick. Defendants filed a motion to dismiss plaintiff’s amended complaint on April 15, 2019 and the Court granted Defendants’ motion on July 29, 2019, with leave to amend. The plaintiff has filed an amended complaint on August 26, 2019. On October 18, 2019, defendants’ moved to dismiss this complaint as it is substantially similar to the one the Court previously dismissed. No hearing on the motion to dismiss is currently scheduled. The Court granted a Motion for Preliminary Approval of Class Action Settlement (the “Settlement”) on May 28, 2020. In conjunction with the 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 Sheet as of each of June 30, 2020 and September 30, 2020. 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 Sheet as of June 30, 2020 and charged the contingency loss within discontinued operations in the Consolidated Statement of Income (Loss) for the year ended June 30, 2020. We anticipate the potential payments related to this loss contingency

to be made from the escrow account during fiscal year 2021. This loss contingency estimate could differ from actual results and result in additional charges or reversals in future periods. The Court issued an order finally approving the settlement on October 7, 2020, and dismissed the action with prejudice. On November 2, 2020, Stoltmann Law Offices filed on behalf of objector Jose David Valderrama a notice to appeal the Court’s order approving the settlement.

On May 8, 2018, the Carlson Law Firm (“Carlson”) filed a lawsuit against Adtalem and DeVry University, Inc., on behalf of 71 individual former DeVry University students in Rangel v. Adtalem and DeVry University, Inc. Carlson filed this lawsuit in the United States District Court for the Western District of Texas. Plaintiffs contend that DeVry University “made deceptive representations about the benefits of obtaining a degree from DeVry University” in violation of Texas state laws and seek full restitution of all monies paid to DeVry University and any student loan lenders, punitive damages, and attorneys’ fees. The defendants moved to dismiss this complaint on June 5, 2018. On June 27, 2018, Carlson filed a second lawsuit on behalf of 32 former DeVry University students against Adtalem and DeVry University, Inc. in Lindberg v. Adtalem and DeVry University, Inc. Carlson filed this lawsuit in the United States District Court for the Western District of Texas. The allegations are identical to the allegations in the lawsuit Carlson filed on May 8, 2018. Specifically, plaintiffs contend that DeVry University “made deceptive representations about the benefits of obtaining a degree from DeVry University” in violation of Texas state laws and seek full restitution of all monies paid to DeVry University and any student loan lenders, punitive damages, and attorneys’ fees. The defendants moved to dismiss this complaint on August 28, 2018. The court consolidated these two lawsuits on December 10, 2018. The defendants moved to dismiss the consolidated action on December 18, 2018. On January 2, 2019, Carlson filed a motion to intervene on behalf of 13 additional former DeVry University students seeking to join the consolidated lawsuit. The parties re-filed their briefing on the motions to dismiss so that the motion would apply to all three groups of plaintiffs. On April 24, 2019, the Court granted Adtalem’s and DeVry University’s motions to dismiss, with leave to amend. The plaintiffs filed an amended complaint on June 7, 2019. Defendants moved to dismiss the complaint on July 5, 2019. The motion to dismiss was referred to a magistrate judge. On December 13, 2019, the magistrate judge issued a report and recommendation denying defendants’ motion to dismiss. On January 3, 2020, defendants filed their objections to the report and recommendation on the motion to dismiss, and plaintiffs filed a response to the objections on January 8, 2020. The District Court judge adopted the Magistrate Judge’s report and recommendations on March 12, 2020, and the defendants filed an answer to the complaint on April 10, 2020. Discovery is ongoing. On September 28, 2020, defendants filed a motion for judgment on the pleadings. A hearing date on defendants’ motion has not yet been set by the Court. In conjunction with the Alvarez v. Adtalem matter referenced below, the parties participated in a mediation on August 4, 2020. On October 14, 2020, through continued negotiations with the mediator, the parties reached a confidential agreement in principal to settle all claims. The parties are preparing final settlement agreements that will memorialize the settlement, and will ultimately ask the Court to dismiss this matter with prejudice pursuant to the settlement.

On April 4, 2019, the Carlson Law Firm sent notice pursuant to California Legal Remedies Act, Civil Code § 1750, of 105 individuals who purportedly have claims against DeVry University and Adtalem based on allegedly deceptive comments made about the benefits of obtaining a DeVry University degree; specifically, that 90% of graduates obtained a job in their chosen field of study within six months of graduation, and that graduates were paid more than graduates of other universities. On July 16, 2019, the Carlson Law Firm filed a lawsuit in the United States District Court for the Northern District of California – San Jose Division against Adtalem and DeVry University on behalf of 102 individual former DeVry University students in Alvarez v. Adtalem and DeVry University, Inc. The plaintiffs contend that defendants misrepresented the benefits of graduating from DeVry University and falsely and misleadingly advertised the employment rate and income rate of their graduates to induce potential students to purchase educational products and services, and to remain students through graduation. The lawsuit seeks exemplary damages, restitution, economic damages, punitive damages, pre- and post-judgment interest, attorneys’ fees and the cost of suit. The plaintiffs brought claims for fraud by misrepresentation, fraud by concealment, negligent misrepresentation, civil theft, violation of the California Consumer Legal Remedies Act, violation of California’s Unfair Competition Law, and violation of California’s False Advertising Law. Defendants filed a motion to dismiss the complaint on October 1, 2019. On December 16, 2019, the Court granted in part and denied in part the motion to dismiss. Defendants filed an answer to the complaint on January 13, 2020. Plaintiffs filed an amended complaint on January 31, 2020, and defendants filed an amended answer on March 2, 2020. On September 28, 2020, defendants filed a motion for judgment on the pleadings. A hearing on defendants’ motion has been set for December 18, 2020. The parties participated in a court-ordered mediation on August 4, 2020. On October 14, 2020, through continued negotiations with the mediator, the parties reached a confidential agreement in principal to settle all claims. The parties are preparing final settlement agreements that will memorialize the settlement, and will ultimately ask the Court to dismiss this matter with prejudice pursuant to the settlement.

On June 21, 2018, Stoltmann Law Offices filed a lawsuit against Adtalem in Cook County Circuit Court, alleging that Adtalem breached a contract with Stoltmann Law Offices to pay filing fees associated with arbitration claims Stoltmann Law Offices has filed with the Judicial Arbitration and Mediation Services, Inc. (“JAMS”). Stoltmann Law Offices is seeking specific performance from the court. Adtalem moved to dismiss this complaint on August 3, 2018. Prior to the court ruling on Adtalem’s motion to dismiss, Stoltmann Law Offices and 399 individuals filed an amended complaint on August 9, 2018, asserting claims for specific performance, declaratory judgment and a petition to compel arbitration. Adtalem moved to dismiss the amended complaint on August 31, 2018. The court granted Adtalem’s motion to dismiss on November 30, 2018, but granted plaintiffs leave to file a second amended complaint. A single individual plaintiff filed a second amended complaint on January 3, 2019. Adtalem moved to dismiss the complaint on May 23, 2019. On January 9, 2020, the court granted in part and denied in part defendants’ motion to dismiss. The court dismissed the petition to compel arbitration, and allowed the claim for declaratory judgment to proceed. Adtalem filed an answer to the complaint on February 10, 2020. Discovery is ongoing.

Stoltmann Law Offices is representing hundreds of individuals who have filed claims with JAMS alleging fraud-based claims based on DeVry University’s graduate employment statistics. Stoltmann Law Offices has paid the filing fees for certain of these arbitrations to move forward. JAMS has sent commencement letters in several waves. Respondents have filed answers in response to certain of these arbitration demands. These arbitrations are in various stages of litigation.

On or about April 1, 2019, Adtalem, Chamberlain and DeVry University received similar Civil Investigative Demands (“CID”) from the U.S. Department of Justice (the “DOJ”). The CIDs were issued pursuant to a False Claims Act inquiry concerning allegations that Adtalem, in particular Chamberlain and Adtalem’s former subsidiary DeVry University, submitted or caused the submission of false claims to the U.S. Department of Defense and U.S. Department of Veteran Affairs for federal funds under the GI Bill Programs and Tuition Assistance Program from 2011 to the date of the CIDs. It is specifically alleged that Chamberlain and DeVry University engaged in unlawful recruitment tactics, and provided incentive payments based directly or indirectly on securing federal financial aid. Adtalem cooperated with this DOJ inquiry and provided documents and other information requested by the DOJ. On February 27, 2020, the DOJ notified the U.S. District Court for the Northern District of Georgia that it would decline to intervene in two qui tam False Claims Act actions filed by former DeVry University employees related to the subject matter of the CIDs. Those actions were unsealed on March 2, 2020. The complaints had been filed by former employees Ashley Vandiver (2017 complaint) and Laura Moriarty (2018 complaint). Both complaints seek damages and relief allowed by law under the False Claims Act, 31 U.S.C. § 3729 et seq. Vandiver’s complaint is filed against Adtalem and DeVry University. Moriarty’s complaint is filed against Adtalem, Chamberlain, DeVry University, and others. In October 2020, Adtalem, DeVry University, and Moriarty reached an agreement in principle to settle the matter and dismiss the 2018 complaint. The settlement agreement does not need to be approved by the Court or any regulatory body. The 2017 complaint brought by Vandiver is not impacted by the pending Moriarty settlement and we cannot predict the outcome of the Vandiver matter.

v3.20.2
Segment Information
3 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segment Information

19. Segment Information

Beginning in the first quarter of fiscal year 2020, Adtalem Brazil operations were classified as discontinued operations. See Note 3 “Discontinued Operations and Assets Held for Sale” for additional information. Segment information presented excludes the results of Adtalem Brazil. Adtalem eliminated its Business and Law reportable segment during the first quarter of fiscal year 2020 when Adtalem Brazil was classified as discontinued operations. Discontinued operations assets are included in the table below to reconcile to total consolidated assets presented on the Consolidated Balance Sheets.

We present two reportable segments as follows:

Medical and Healthcare – Offers degree and non-degree programs in the medical and healthcare postsecondary education industry. This segment includes the operations of Chamberlain, AUC, RUSM, and RUSVM. AUC, RUSM, and RUSVM are collectively referred to as the “medical and veterinary schools.”

Financial Services – Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of ACAMS, Becker, OCL, and EduPristine.

These segments are consistent with the method by which the Chief Operating Decision Maker (Adtalem’s Chairman, President and Chief Executive Officer) evaluates performance and allocates resources. Performance evaluations are based on each segment’s operating income excluding special items. Operating income excludes special items, which consists of restructuring expense, business acquisition and integration expense, 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. Intersegment sales are accounted for at amounts comparable to sales to nonaffiliated customers and are eliminated in consolidation. “Home Office and Other” includes activities not allocated to a reportable segment and is included to reconcile segment results to the Consolidated Financial Statements. Segments may have allocated depreciation expense related to depreciable assets reported as an asset in a different segment. The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies.”

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

Three Months Ended

September 30, 

2020

2019

Revenue:

 

 

 

Medical and Healthcare

$

218,826

$

207,487

Financial Services

 

49,415

 

47,126

Total consolidated revenue

$

268,241

$

254,613

Operating income excluding special items:

 

 

Medical and Healthcare

$

53,010

$

28,627

Financial Services

 

8,687

 

4,107

Home Office and Other

 

(7,332)

 

(5,242)

Total consolidated operating income excluding special items

54,365

27,492

Reconciliation to Consolidated Financial Statements:

Restructuring expense

 

(4,223)

 

(6,530)

Business acquisition and integration expense

(13,436)

 

Gain on sale of assets

 

4,779

Total consolidated operating income

36,706

25,741

Net other expense

 

(2,170)

 

(4,627)

Total consolidated income from continuing operations before income taxes

$

34,536

$

21,114

Segment assets:

 

Medical and Healthcare

$

976,382

$

1,006,655

Financial Services

 

579,634

 

582,820

Home Office and Other

 

773,881

 

256,042

Discontinued Operations

 

 

614,807

Total consolidated assets

$

2,329,897

$

2,460,324

Capital expenditures:

 

Medical and Healthcare

$

9,266

$

6,467

Financial Services

 

2,127

 

539

Home Office and Other

 

3,050

 

3,430

Total consolidated capital expenditures

$

14,443

$

10,436

Depreciation expense:

 

Medical and Healthcare

$

7,373

$

7,231

Financial Services

 

729

 

294

Home Office and Other

 

873

 

868

Total consolidated depreciation expense

$

8,975

$

8,393

Intangible asset amortization expense:

 

Financial Services

$

2,518

$

2,534

Total consolidated intangible asset amortization expense

$

2,518

$

2,534

Adtalem conducts its educational and financial services operations in the U.S., Barbados, St. Kitts, St. Maarten, India, Europe, China, Canada, and the Middle East. Revenue and long-lived assets by geographic area are as follows (in thousands):

Three Months Ended

September 30, 

2020

2019

Revenue from unaffiliated customers:

 

 

 

Domestic operations

$

172,644

$

152,037

International operations:

 

 

Barbados, St. Kitts, and St. Maarten

 

85,062

 

90,969

Other

 

10,535

 

11,607

Total international

 

95,597

 

102,576

Total consolidated revenue

$

268,241

$

254,613

Long-lived assets:

 

 

Domestic operations

$

216,628

$

196,331

International operations:

 

 

Barbados, St. Kitts, and St. Maarten

 

166,950

 

173,793

Other

 

1,190

 

1,785

Total international

 

168,140

 

175,578

Total consolidated long-lived assets

$

384,768

$

371,909

Prior period amounts within domestic operations and other international operations revenue in the above table have been reclassified for consistency with the current period presentation. We previously classified certain sales dependent upon the location of the legal entity reporting the sale. We have changed our methodology to classify these sales within the geographic area category where the sale originates. We believe this better reflects the usefulness of this disclosure.

No one customer accounted for more than 10% of Adtalem’s consolidated revenue for all periods presented.

v3.20.2
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation

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, 2020 (“2020 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles (“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 2020 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.

Use of Estimates

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 the impact of the novel coronavirus (“COVID-19”) pandemic, 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. The outbreak 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 the outbreak, actions taken to contain the virus, as well as, how quickly and to what extent normal economic and operating conditions can resume.

Recent Accounting Standards

Recent Accounting Standards

Recently adopted accounting standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13: “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The guidance was issued to provide financial statement users with more decision-useful information about the expected losses on financial instruments by replacing the incurred loss impairment methodology with a methodology that reflects expected credit losses by requiring a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We adopted this guidance, along with the related clarifications and improvements, effective July 1, 2020 using the modified-retrospective approach without adjusting prior comparative periods. The adoption of this standard did not have a material impact on Adtalem’s Consolidated Financial Statements, and therefore, no adjustments were made to retained earnings.

Recently issued accounting standards not yet adopted

None.

v3.20.2
Discontinued Operations and Assets Held for Sale (Tables)
3 Months Ended
Sep. 30, 2020
Discontinued Operations And Disposal Groups [Abstract]  
Balance Sheet and Income Statement Information of Discontinued Operations

The following is a summary of balance sheet information of assets and liabilities reported as held for sale as of September 30, 2019, which includes only Adtalem Brazil balances as Carrington and DeVry University were sold prior to that date (in thousands):

September 30, 

2019

Assets:

 

Current assets:

 

Cash and cash equivalents

$

96,902

Accounts receivable, net

 

64,915

Prepaid expenses and other current assets

 

8,056

Total current assets held for sale

 

169,873

Noncurrent assets:

 

Property and equipment, net

73,763

Operating lease assets

 

72,261

Deferred income taxes

 

5,163

Intangible assets, net

 

110,711

Goodwill

 

173,064

Other assets, net

 

9,972

Total noncurrent assets held for sale

 

444,934

Total assets held for sale

$

614,807

Liabilities:

 

Current liabilities:

 

Accounts payable

$

2,857

Accrued payroll and benefits

 

16,239

Accrued liabilities

 

9,800

Deferred revenue

 

11,104

Current operating lease liabilities

 

10,174

Total current liabilities held for sale

 

50,174

Noncurrent liabilities:

 

Long-term operating lease liabilities

 

62,367

Deferred income taxes

 

3,719

Other liabilities

 

16,707

Total noncurrent liabilities held for sale

 

82,793

Total liabilities held for sale

$

132,967

The following is a summary of income statement information of operations reported as discontinued operations, which includes Adtalem Brazil’s, Carrington’s, and DeVry University’s operations through the date of each respective sale (in thousands):

Three Months Ended

September 30, 

2020

2019

Revenue

$

$

45,652

Operating cost and expense:

 

 

Cost of educational services

 

 

33,948

Student services and administrative expense

 

10,084

 

14,373

Restructuring expense

 

 

35

Total operating cost and expense

 

10,084

 

48,356

Operating loss

 

(10,084)

 

(2,704)

Other income (expense):

Interest and dividend income

978

Interest expense

(1,157)

Net other expense

 

 

(179)

Loss from discontinued operations before income taxes

(10,084)

(2,883)

Benefit from (provision for) income taxes

 

2,477

 

(273)

Net loss from discontinued operations attributable to Adtalem

$

(7,607)

$

(3,156)

v3.20.2
Revenue (Tables)
3 Months Ended
Sep. 30, 2020
Revenue from Contract with Customer [Abstract]  
Disaggregate revenue

The following tables disaggregate revenue by source (in thousands):

Three Months Ended September 30, 2020

Medical and
Healthcare

Financial
Services

Consolidated

Higher education

$

218,289

$

$

218,289

Test preparation/certifications

27,276

27,276

Conferences/seminars

13,369

13,369

Memberships/subscriptions

7,995

7,995

Other

537

775

1,312

Total

 

$

218,826

 

$

49,415

 

$

268,241

Three Months Ended September 30, 2019

Medical and
Healthcare

Financial
Services

Consolidated

Higher education

$

201,453

$

$

201,453

Test preparation/certifications

24,972

24,972

Conferences/seminars

17,070

17,070

Memberships/subscriptions

4,867

4,867

Other

6,034

217

6,251

Total

 

$

207,487

 

$

47,126

 

$

254,613

v3.20.2
Restructuring Charges (Tables)
3 Months Ended
Sep. 30, 2020
Restructuring and Related Activities [Abstract]  
Restructuring and Related Costs Pre-tax restructuring charges by segment were as follows (in thousands):

Three Months Ended September 30, 2020

Three Months Ended September 30, 2019

Real Estate
and Other

Termination
Benefits

Total

Real Estate
and Other

Termination
Benefits

Total

Medical and Healthcare

$

$

$

$

127

$

$

127

Financial Services

 

1,415

 

 

1,415

1,690

 

289

 

1,979

Home Office and Other

 

2,318

 

490

 

2,808

4,122

 

302

 

4,424

Total

$

3,733

$

490

$

4,223

$

5,939

$

591

$

6,530

Separation and Restructuring Plan Activity

The following table summarizes the separation and restructuring plan activity for the fiscal years 2020 and 2021, for which cash payments are required (in thousands):

Liability balance as of June 30, 2019

$

25,083

ASC 842 (leases) adjustment (1)

(25,030)

Liability balance as of July 1, 2019

 

53

Increase in liability (separation and other charges)

 

4,955

Reduction in liability (payments and adjustments)

 

(3,573)

Liability balance as of June 30, 2020

 

1,435

Increase in liability (separation and other charges)

 

490

Reduction in liability (payments and adjustments)

 

(1,688)

Liability balance as of September 30, 2020

$

237

(1) Reflects amounts reclassified out of the opening balance of restructuring reserve accruals as of June 30, 2019 to operating lease assets that was recorded with the adoption of ASC 842.

v3.20.2
Earnings per Share (Tables)
3 Months Ended
Sep. 30, 2020
Earnings per Share  
Earnings per Share

The following table sets forth the computations of basic and diluted earnings per share and stock awards not included in the computation of diluted earnings per share when their effect is anti-dilutive (in thousands, except per share data):

Three Months Ended

September 30, 

2020

2019

Numerator:

Net income (loss) attributable to Adtalem:

 

 

Continuing operations

$

27,537

$

17,517

Discontinued operations

(7,607)

(3,156)

Net

$

19,930

$

14,361

Denominator:

Weighted-average shares outstanding

 

51,963

 

55,018

Unvested participating RSUs

 

501

 

475

Weighted-average basic shares outstanding

 

52,464

 

55,493

Effect of dilutive stock awards

 

333

 

647

Weighted-average diluted shares outstanding

 

52,797

 

56,140

Earnings (loss) per share attributable to Adtalem:

Basic:

Continuing operations

$

0.52

$

0.32

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Diluted:

Continuing operations

$

0.52

$

0.31

Discontinued operations

$

(0.14)

$

(0.06)

Net

$

0.38

$

0.26

Weighted-average anti-dilutive stock awards

948

329

v3.20.2
Accounts Receivable and Credit Losses (Tables)
3 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Schedule of classification of our accounts receivable

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

September 30, 2020

Gross

Allowance

Net

Trade receivables, current

$

106,980

$

(10,634)

$

96,346

Financing receivables, current

6,906

(3,716)

3,190

Accounts receivable, current

$

113,886

$

(14,350)

$

99,536

Financing receivables, current

$

6,906

$

(3,716)

$

3,190

Financing receivables, noncurrent

42,925

(13,099)

29,826

Total financing receivables

$

49,831

$

(16,815)

$

33,016

Schedule of credit quality analysis of financing receivable

The credit quality analysis of financing receivables as of September 30, 2020 was as follows (in thousands):

Amortized Cost Basis by Origination Year

Prior

2017

2018

2019

2020

2021

Total

1-30 days past due

 

$

1,117

$

1,338

 

$

647

 

$

889

 

$

379

 

$

24

 

$

4,394

31-60 days past due

556

145

41

67

223

1,032

61-90 days past due

609

59

444

71

127

1,310

Greater than 90 days past due

8,179

3,156

2,475

1,132

334

15,276

Total past due

10,461

4,698

3,607

2,159

1,063

24

22,012

Current

11,634

4,994

3,732

4,682

2,384

393

27,819

Financing receivables, gross

$

22,095

$

9,692

$

7,339

$

6,841

$

3,447

$

417

$

49,831

Institutional Loan Balances and Related Allowances for Credit Losses

The following table includes our financing receivables credit risk profile disclosures for prior periods before we adopted ASC 326 on July 1, 2020 (in thousands):

Over

Total

1-30 Days

31-60 Days

61-90 Days

90 Days

Total

Financing

Past Due

Past Due

Past Due

Past Due

Past Due

Current

Receivables

Financing receivables:

June 30, 2020

$

7,192

$

1,755

$

1,547

$

13,782

$

24,276

$

25,749

$

50,025

September 30, 2019

$

3,317

$

1,342

$

526

$

10,961

$

16,146

$

31,527

$

47,673

Rollforward of the allowance for credit losses

The following tables provide a rollforward of the allowance for credit losses (in thousands):

Three Months Ended September 30, 2020

Trade

Financing

Total

Beginning balance

 

$

10,825

$

15,690

 

$

26,515

Write-offs

(759)

(256)

(1,015)

Recoveries

186

40

226

Provision for credit losses

382

1,341

1,723

Ending balance

$

10,634

$

16,815

$

27,449

Three Months Ended September 30, 2019

Trade

Financing

Total

Beginning balance

 

$

8,243

$

6,289

 

$

14,532

Write-offs

(1,598)

(26)

(1,624)

Recoveries

323

24

347

Provision for credit losses

2,263

3,291

5,554

Ending balance

$

9,231

$

9,578

$

18,809

v3.20.2
Property and Equipment, Net (Tables)
3 Months Ended
Sep. 30, 2020
Property, Plant And Equipment [Abstract]  
Schedule of Property and equipment, net

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

September 30, 

June 30, 

September 30, 

2020

2020

2019

Land

 

$

44,049

$

43,246

 

$

41,441

Building

315,725

313,068

309,893

Equipment

259,340

248,359

235,027

Construction in progress

10,882

12,449

8,681

Property and equipment, gross

629,996

617,122

595,042

Accumulated depreciation

 

(340,052)

 

(331,020)

 

(314,219)

Property and equipment, net

$

289,944

$

286,102

$

280,823

v3.20.2
Leases (Tables)
3 Months Ended
Sep. 30, 2020
Lessee Disclosure [Abstract]  
Summary of components of lease cost

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

Three Months Ended

September 30, 

2020

2019

Operating lease cost

$

12,780

$

13,703

Sublease income

 

(4,341)

 

(5,126)

Total lease cost

$

8,439

$

8,577

Summary of maturities of lease liabilities

Maturities of lease liabilities by fiscal year as of September 30, 2020 were as follows (in thousands):

Operating

Fiscal Year

Leases

2021 (remaining)

$

48,128

2022

62,330

2023

51,908

2024

38,213

2025

28,386

Thereafter

52,914

Total lease payments

 

281,879

Less: imputed interest

(40,375)

Present value of lease liabilities

$

241,504

Summary of lease term and discount rate

September 30, 

2020

Weighted-average remaining operating lease term (years)

5.4

Weighted-average operating lease discount rate

5.5%

Summary of supplemental disclosures of cash flow information related to leases

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

Three Months Ended

September 30, 

2020

2019

Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)

$

11,427

$

11,963

Operating lease assets obtained in exchange for operating lease liabilities

$

26,528

$

4,868

Schedule of Future minimum lease and sublease rental income Future minimum lease and sublease rental income under these agreements as of September 30, 2020, were as follows (in thousands):

Fiscal Year

Amount

2021 (remaining)

$

14,270

2022

16,816

2023

 

16,078

2024

 

10,261

2025

 

5,121

Thereafter

2,038

Total lease and sublease rental income

$

64,584

v3.20.2
Goodwill and Intangible Assets (Tables)
3 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Changes in Carrying Amount of Goodwill

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

September 30, 

June 30, 

September 30, 

Reporting Unit

2020

2020

2019

Chamberlain

$

4,716

$

4,716

$

4,716

AUC

 

68,321

 

68,321

 

68,321

RUSM and RUSVM

 

237,173

 

237,173

 

237,173

Financial Services

 

376,270

 

376,004

 

376,782

Total

$

686,480

$

686,214

$

686,992

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

September 30, 

June 30, 

September 30, 

Reportable Segment

2020

2020

2019

Medical and Healthcare

$

310,210

$

310,210

$

310,210

Financial Services

 

376,270

 

376,004

 

376,782

Total

$

686,480

$

686,214

$

686,992

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

Medical and 

Financial

Healthcare

Services

Total

June 30, 2019

$

310,210

$

377,046

$

687,256

Foreign exchange rate changes

 

 

(264)

 

(264)

September 30, 2019

310,210

376,782

686,992

Purchase accounting adjustments

 

 

(92)

 

(92)

Foreign exchange rate changes

(686)

(686)

June 30, 2020

310,210

376,004

686,214

Foreign exchange rate changes

 

 

266

 

266

September 30, 2020

$

310,210

$

376,270

$

686,480

Schedule of Intangible Assets

Intangible assets consisted of the following (in thousands):

September 30, 2020

Gross Carrying

Accumulated

Weighted-Average

Amount

Amortization

Amortization Period

Amortizable intangible assets:

 

Customer relationships

$

68,900

$

(22,744)

 

10 Years

Curriculum/software

 

11,600

 

(2,578)

 

6 Years

Course delivery technology

 

6,700

 

(1,786)

 

5 Years

Total

$

87,200

$

(27,108)

 

Indefinite-lived intangible assets:

 

 

 

Trade names

$

95,695

 

 

Chamberlain Title IV eligibility and accreditations

 

1,200

 

 

AUC Title IV eligibility and accreditations

 

100,000

 

 

Ross Title IV eligibility and accreditations

 

14,100

 

 

Intellectual property

 

13,940

 

 

Total

$

224,935

 

 

June 30, 2020

Gross Carrying

Accumulated 

Amount

Amortization

Amortizable intangible assets:

Customer relationships

$

68,900

$

(21,044)

Curriculum/software

11,600

(2,094)

Course delivery technology

7,200

(1,952)

Total

$

87,700

$

(25,090)

Indefinite-lived intangible assets:

 

 

Trade names

$

95,664

 

Chamberlain Title IV eligibility and accreditations

 

1,200

 

AUC Title IV eligibility and accreditations

 

100,000

 

Ross Title IV eligibility and accreditations

 

14,100

 

Intellectual property

 

13,940

 

Total

$

224,904

 

September 30, 2019

Gross Carrying

Accumulated

Amount

Amortization

Amortizable intangible assets:

 

 

Customer relationships

$

68,900

$

(15,865)

Curriculum/software

11,600

(644)

Course delivery technology

7,200

(853)

Total

$

87,700

$

(17,362)

Indefinite-lived intangible assets:

Trade names

$

95,746

Chamberlain Title IV eligibility and accreditations

1,200

AUC Title IV eligibility and accreditations

100,000

Ross Title IV eligibility and accreditations

14,100

Intellectual property

13,940

Total

$

224,986

Summary of Indefinite-Lived Intangible Assets Balances by Reporting Segment

September 30, 

June 30, 

September 30, 

Reportable Segment

2020

2020

2019

Medical and Healthcare

$

137,500

$

137,500

$

137,500

Financial Services

 

87,435

 

87,404

 

87,486

Total

$

224,935

$

224,904

$

224,986

Estimated Amortization Expense for Amortized Intangible Assets Estimated intangible asset amortization expense is as follows (in thousands):

Financial

Fiscal Year

Services

2021 (remaining)

$

7,555

2022

 

9,943

2023

 

9,792

2024

 

9,509

2025

 

7,933

Thereafter

 

15,360

Total

$

60,092

v3.20.2
Debt (Tables)
3 Months Ended
Sep. 30, 2020
Debt Instruments [Abstract]  
Schedule of Long-term Debt Instruments

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

September 30, 

June 30, 

September 30, 

2020

2020

2019

Total debt:

 

Term B Loan

$

293,250

$

294,000

$

296,250

Revolver

 

 

 

40,000

Total principal payments due

 

293,250

 

294,000

 

336,250

Deferred debt issuance costs

 

(4,629)

 

(4,885)

 

(5,650)

Total amount outstanding

 

288,621

 

289,115

 

330,600

Less current portion:

 

Term B Loan

 

(3,000)

 

(3,000)

 

(3,000)

Noncurrent portion

$

285,621

$

286,115

$

327,600

Schedule of Maturities of Long-term Debt

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

Maturity

Fiscal Year

Payments

2021 (remaining)

$

2,250

2022

 

3,000

2023

 

3,000

2024

 

3,000

2025

 

282,000

Total

$

293,250

Schedule Of Debt Issuance Costs

Term B Loan

Revolver

Total

Deferred debt issuance costs as of June 30, 2020

$

4,885

$

1,516

$

6,401

Amortization of deferred debt issuance costs

 

(256)

 

(136)

 

(392)

Deferred debt issuance costs as of September 30, 2020

$

4,629

$

1,380

$

6,009

v3.20.2
Redeemable Noncontrolling Interest (Tables)
3 Months Ended
Sep. 30, 2020
Noncontrolling Interest [Abstract]  
Reconciliation of Non-Controlling Interest Balance

The following is a reconciliation of the redeemable noncontrolling interest balance (in thousands):

Three Months Ended

September 30, 

2020

2019

Balance at beginning of period

$

2,852

$

9,543

Net loss attributable to redeemable noncontrolling interest

 

(91)

 

(109)

Payment for purchase of redeemable noncontrolling interest of subsidiary

(6,247)

Balance at end of period

$

2,761

$

3,187

v3.20.2
Share Repurchase (Tables)
3 Months Ended
Sep. 30, 2020
Treasury Stock, Number of Shares and Restriction Disclosures [Abstract]  
Shares Repurchased Under Programs Adtalem made share repurchases under the current repurchase program as follows (in thousands, except shares and per share data):

Three Months Ended

Life-to-Date

September 30, 

Current Share

2020

2019

Repurchase Program

Total number of share repurchases

918,807

6,383,431

Total cost of share repurchases

$

$

40,255

$

254,769

Average price paid per share

$

$

43.81

$

39.91

v3.20.2
Accumulated Other Comprehensive Loss (Tables)
3 Months Ended
Sep. 30, 2020
Comprehensive Income, Net Of Tax [Abstract]  
Schedule of accumulated other comprehensive income loss

Three Months Ended

September 30, 

2020

2019

Foreign currency translation adjustments

Beginning balance

$

(1,383)

$

(137,389)

Gain (loss) on foreign currency translation

318

(39,494)

Ending balance

$

(1,065)

$

(176,883)

Marketable securities

Beginning balance, gross

$

242

$

131

Beginning balance, tax effect

(59)

(32)

Beginning balance, net of tax

183

99

Unrealized (loss) gain on marketable securities

(2)

59

Tax effect

1

(14)

Ending balance

$

182

$

144

Interest rate swap

Beginning balance, gross

$

(10,399)

$

Beginning balance, tax effect

2,544

Beginning balance, net of tax

(7,855)

Unrealized gain on interest rate swap

167

Tax effect

(41)

Ending balance

$

(7,729)

$

Total ending balance at September 30

$

(8,612)

$

(176,739)

v3.20.2
Stock-Based Compensation (Tables)
3 Months Ended
Sep. 30, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of options Activity

The following is a summary of options activity for the three months ended September 30, 2020:

Weighted-Average

Remaining

Aggregate

Number of

Weighted-Average

Contractual Life

Intrinsic Value

Options

Exercise Price

(in years)

(in thousands)

Outstanding as of July 1, 2020

 

1,439,630

$

31.95

 

Granted

 

281,075

 

32.03

 

Exercised

 

(5,450)

 

23.30

 

Forfeited

 

 

 

Expired

 

(35,050)

 

41.84

 

Outstanding as of September 30, 2020

 

1,680,205

 

31.81

 

6.85

$

1,690

Exercisable as of September 30, 2020

 

1,025,387

$

29.03

 

5.67

$

1,690

Fair Values of Stock Option Awards Estimated Weighted Average Assumptions The fair value of Adtalem’s stock option grants was estimated assuming the following weighted-average assumptions:

Fiscal Year

2021

2020

Expected life (in years)

 

6.54

 

6.51

 

Expected volatility

 

39.27

%

37.66

%

Risk-free interest rate

 

0.45

%

1.40

%

Dividend yield

 

0.00

%

0.00

%

Summary of Restricted Stock Units Activity The following is a summary of RSU activity for the three months ended September 30, 2020:

Weighted-Average

Number of

Grant Date

RSUs

Fair Value

Outstanding as of July 1, 2020

 

767,973

$

39.42

Granted

 

332,890

 

32.02

Vested

 

(340,846)

 

35.08

Forfeited

 

(7,831)

 

37.70

Outstanding as of September 30, 2020

 

752,186

$

38.13

Total Stock-Based Compensation Expense Included in Consolidated Statement of Earnings

The following table shows total stock-based compensation expense included in the Consolidated Statements of Income (in thousands):

Three Months Ended

September 30, 

2020

2019

Cost of educational services

$

393

$

455

Student services and administrative expense

 

3,611

 

4,768

 

4,004

 

5,223

Income tax benefit

 

(526)

 

(2,533)

Net stock-based compensation expense

$

3,478

$

2,690

v3.20.2
Segment Information (Tables)
3 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Tabulation of Business Segment Information Based on Current Segmentation

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

Three Months Ended

September 30, 

2020

2019

Revenue:

 

 

 

Medical and Healthcare

$

218,826

$

207,487

Financial Services

 

49,415

 

47,126

Total consolidated revenue

$

268,241

$

254,613

Operating income excluding special items:

 

 

Medical and Healthcare

$

53,010

$

28,627

Financial Services

 

8,687

 

4,107

Home Office and Other

 

(7,332)

 

(5,242)

Total consolidated operating income excluding special items

54,365

27,492

Reconciliation to Consolidated Financial Statements:

Restructuring expense

 

(4,223)

 

(6,530)

Business acquisition and integration expense

(13,436)

 

Gain on sale of assets

 

4,779

Total consolidated operating income

36,706

25,741

Net other expense

 

(2,170)

 

(4,627)

Total consolidated income from continuing operations before income taxes

$

34,536

$

21,114

Segment assets:

 

Medical and Healthcare

$

976,382

$

1,006,655

Financial Services

 

579,634

 

582,820

Home Office and Other

 

773,881

 

256,042

Discontinued Operations

 

 

614,807

Total consolidated assets

$

2,329,897

$

2,460,324

Capital expenditures:

 

Medical and Healthcare

$

9,266

$

6,467

Financial Services

 

2,127

 

539

Home Office and Other

 

3,050

 

3,430

Total consolidated capital expenditures

$

14,443

$

10,436

Depreciation expense:

 

Medical and Healthcare

$

7,373

$

7,231

Financial Services

 

729

 

294

Home Office and Other

 

873

 

868

Total consolidated depreciation expense

$

8,975

$

8,393

Intangible asset amortization expense:

 

Financial Services

$

2,518

$

2,534

Total consolidated intangible asset amortization expense

$

2,518

$

2,534

Revenues and Long-Lived Assets by Geographic Area Revenue and long-lived assets by geographic area are as follows (in thousands):

Three Months Ended

September 30, 

2020

2019

Revenue from unaffiliated customers:

 

 

 

Domestic operations

$

172,644

$

152,037

International operations:

 

 

Barbados, St. Kitts, and St. Maarten

 

85,062

 

90,969

Other

 

10,535

 

11,607

Total international

 

95,597

 

102,576

Total consolidated revenue

$

268,241

$

254,613

Long-lived assets:

 

 

Domestic operations

$

216,628

$

196,331

International operations:

 

 

Barbados, St. Kitts, and St. Maarten

 

166,950

 

173,793

Other

 

1,190

 

1,785

Total international

 

168,140

 

175,578

Total consolidated long-lived assets

$

384,768

$

371,909

v3.20.2
Nature of Operations (Details)
$ in Millions
3 Months Ended
Sep. 11, 2020
USD ($)
Sep. 30, 2020
USD ($)
segment
Number of reporting segments | segment   2
Senior Secured Term Loan Facility [Member] | Scenario, Plan [Member]    
Debt instrument, face amount $ 1,000.0  
Senior Secured Revolving Loan Facility [Member] | Scenario, Plan [Member]    
Maximum borrowing capacity 400.0  
Senior Secured Notes [Member] | Scenario, Plan [Member]    
Debt instrument, face amount 650.0  
Senior Secured Bridge Term Loan Facility [Member] | Scenario, Plan [Member]    
Maximum borrowing capacity 650.0  
Walden [Member]    
Acquisition and integration costs   $ 13.4
Walden [Member] | Scenario, Plan [Member]    
Cash paid for acquisition $ 1,480.0  
v3.20.2
Discontinued Operations and Assets Held for Sale (Summary of Balance Sheet Information of Assets and Liabilities) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2019
Sep. 30, 2020
Jun. 30, 2020
Current assets:      
Cash and cash equivalents $ 96,902    
Accounts receivable, net 64,915    
Prepaid expenses and other current assets 8,056    
Total current assets held for sale 169,873 $ 0 $ 0
Noncurrent assets:      
Property and equipment, net 73,763    
Operating lease assets 72,261    
Deferred income taxes 5,163    
Intangible assets, net 110,711    
Goodwill 173,064    
Other assets, net 9,972    
Total noncurrent assets held for sale 444,934 0 0
Total assets held for sale 614,807    
Current liabilities:      
Accounts payable 2,857    
Accrued payroll and benefits 16,239    
Accrued liabilities 9,800    
Deferred revenue 11,104    
Current operating lease liabilities 10,174    
Total current liabilities held for sale 50,174 0 0
Noncurrent liabilities:      
Long-term operating lease liabilities 62,367    
Deferred income taxes 3,719    
Other liabilities 16,707    
Total noncurrent liabilities held for sale 82,793 $ 0 $ 0
Total liabilities held for sale $ 132,967    
v3.20.2
Discontinued Operations and Assets Held for Sale (Summary of Income Statement Information of Operations) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Discontinued Operations And Disposal Groups [Abstract]    
Revenue $ 0 $ 45,652
Operating cost and expense:    
Cost of educational services 0 33,948
Student services and administrative expense 10,084 14,373
Restructuring expense 0 35
Total operating cost and expense 10,084 48,356
Operating loss (10,084) (2,704)
Interest and dividend income 0 978
Interest expense 0 (1,157)
Net other expense 0 (179)
Loss from discontinued operations before income taxes (10,084) (2,883)
Benefit from (provision for) income taxes 2,477 (273)
Net loss from discontinued operations $ (7,607) $ (3,156)
v3.20.2
Discontinued Operations and Assets Held for Sale (Additional Information) (Detail)
$ in Thousands, R$ in Millions
3 Months Ended 12 Months Ended
Apr. 24, 2020
USD ($)
Dec. 11, 2018
USD ($)
Dec. 11, 2018
USD ($)
Sep. 30, 2020
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Apr. 24, 2020
BRL (R$)
Sep. 30, 2019
USD ($)
Cash balance               $ 96,902
Carrington College [Member] | Discontinued Operations, Disposed of by Sale                
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax           $ 11,300    
Cash and restricted cash transferred to discontinued operations           (9,900)    
DeVry University [Member]                
Discontinued Operation, Gain (Loss) from Disposal of Discontinued Operation, before Income Tax           22,300    
Earn Out Term     10 years          
Earn Out Maximum     $ 20,000          
Receivable with Imputed Interest, Face Amount   $ 10,000 $ 10,000          
Receivable with Imputed Interest, Effective Yield (Interest Rate)   4.00% 4.00%          
Receivable with Imputed Interest, Due Date   Jan. 01, 2022 Jan. 01, 2022          
Operating lease, option to extend       true        
Lessee, Operating Lease, Term of Contract       1 year        
Cash and restricted cash transferred to discontinued operations           $ (40,200)    
Adtalem Educational Do Brazil [Member] | Discontinued Operations, Disposed of by Sale                
Consideration from disposal | R$             R$ 1,920  
Proceeds from sale of business, net of cash transferred $ 313,500              
Proceeds From Sales Of Business Sale, Proceeds 345,900              
Proceeds From Sales Of Business, Cash 56,000              
Proceeds from Sales of Business, Affiliate and Productive Assets 401,900              
Cash balance $ 88,400              
Derivative notional amount | R$             R$ 2,154  
Derivative, Gain (Loss) on Derivative, Net         $ 110,700      
Gain (Loss) on Derivative Instruments, Net, Pretax         $ 110,700      
v3.20.2
Revenue (Disaggregate revenue) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Disaggregation of Revenue [Line Items]    
Revenue $ 268,241 $ 254,613
Higher Education [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 218,289 201,453
Test Preparation/Certifications [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 27,276 24,972
Conferences/Seminars [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 13,369 17,070
Memberships/Subscriptions [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 7,995 4,867
Other [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 1,312 6,251
Medical and Healthcare [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 218,826 207,487
Medical and Healthcare [Member] | Higher Education [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 218,289 201,453
Medical and Healthcare [Member] | Test Preparation/Certifications [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 0 0
Medical and Healthcare [Member] | Conferences/Seminars [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 0 0
Medical and Healthcare [Member] | Memberships/Subscriptions [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 0 0
Medical and Healthcare [Member] | Other [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 537 6,034
Financial Services [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 49,415 47,126
Financial Services [Member] | Higher Education [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 0 0
Financial Services [Member] | Test Preparation/Certifications [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 27,276 24,972
Financial Services [Member] | Conferences/Seminars [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 13,369 17,070
Financial Services [Member] | Memberships/Subscriptions [Member]    
Disaggregation of Revenue [Line Items]    
Revenue 7,995 4,867
Financial Services [Member] | Other [Member]    
Disaggregation of Revenue [Line Items]    
Revenue $ 775 $ 217
v3.20.2
Revenue (Additional Information) (Detail)
$ in Millions
3 Months Ended
Sep. 30, 2020
USD ($)
Disaggregation of Revenue [Line Items]  
Revenue recognized included in the deferred revenue $ 75.6
Maximum  
Disaggregation of Revenue [Line Items]  
Revenue practical expedient remaining performance obligation 1 year
v3.20.2
Restructuring Charges (Restructuring and Related Costs) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges $ 4,223 $ 6,530
Medical and Healthcare [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 0 127
Financial Services [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 1,415 1,979
Home Office And Other [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 2,808 4,424
Real Estate and Other [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 3,733 5,939
Real Estate and Other [Member] | Medical and Healthcare [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 0 127
Real Estate and Other [Member] | Financial Services [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 1,415 1,690
Real Estate and Other [Member] | Home Office And Other [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 2,318 4,122
Termination Benefits [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 490 591
Termination Benefits [Member] | Medical and Healthcare [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 0 0
Termination Benefits [Member] | Financial Services [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges 0 289
Termination Benefits [Member] | Home Office And Other [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges $ 490 $ 302
v3.20.2
Restructuring Charges (Separation and Restructuring Plan Activity) (Detail) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Jul. 01, 2019
Sep. 30, 2020
Jun. 30, 2020
Restructuring Cost and Reserve [Line Items]      
Liability beginning balance $ 25,083 $ 1,435 $ 25,083
Increase in liability (separation and other charges)   490 4,955
Reduction in liability (payments and adjustments)   (1,688) (3,573)
Liability ending balance 53 $ 237 $ 1,435
ASC 842      
Restructuring Cost and Reserve [Line Items]      
Reduction in liability from ASU implementation $ (25,030)    
v3.20.2
Restructuring Charges (Additional Information) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Jun. 30, 2020
Jul. 01, 2019
Jun. 30, 2019
Restructuring Cost and Reserve [Line Items]        
Liability balance $ 237 $ 1,435 $ 53 $ 25,083
Remaining costs expected to be paid period 12 months      
Accrued Liabilities [Member]        
Restructuring Cost and Reserve [Line Items]        
Liability balance $ 200      
v3.20.2
Income Taxes (Detail) - item
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Income Tax Disclosure [Abstract]    
Effective Income Tax Rate Reconciliation, Percent 20.50% 17.60%
Number of operating units benefit from local tax incentives 3  
U.S. federal corporate tax rate 21.00% 21.00%
v3.20.2
Earnings per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Numerator:    
Continuing operations $ 27,537 $ 17,517
Discontinued operations (7,607) (3,156)
Net income attributable to Adtalem Global Education $ 19,930 $ 14,361
Denominator:    
Weighted-average shares outstanding 51,963 55,018
Unvested participating RSUs 501 475
Weighted-average basic shares outstanding 52,464 55,493
Effect of dilutive stock awards 333 647
Weighted-average diluted shares outstanding 52,797 56,140
Basic:    
Continuing operations $ 0.52 $ 0.32
Discontinued operations (0.14) (0.06)
Net 0.38 0.26
Diluted:    
Continuing operations 0.52 0.31
Discontinued operations (0.14) (0.06)
Net $ 0.38 $ 0.26
Weighted Average    
Diluted:    
Weighted-average anti-dilutive stock awards 948 329
v3.20.2
Accounts Receivable and Credit Losses (Classification of Accounts Receivable) (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Jun. 30, 2019
Accounts Receivable, after Allowance for Credit Loss, Current [Abstract]        
Trade receivables, current - Gross $ 106,980      
Trade receivables, current - Allowance (10,634)      
Trade receivables, current - Net 96,346      
Financing Receivable, after Allowance for Credit Loss, Current [Abstract]        
Financing receivables, current - Gross 6,906      
Financing receivables, current - Allowance (3,716)      
Financing receivables, current - Net 3,190      
Accounts Receivable, after Allowance for Credit Loss [Abstract]        
Accounts receivable, current - Gross 113,886      
Accounts receivable, current - Allowance (14,350)      
Accounts receivable, current - Net 99,536 $ 87,042 $ 116,212  
Financing Receivable, after Allowance for Credit Loss, Noncurrent [Abstract]        
Financing receivables, noncurrent - Gross 42,925      
Financing receivables, noncurrent - Allowance (13,099)      
Financing receivables, noncurrent - Net 29,826      
Financing Receivable, after Allowance for Credit Loss [Abstract]        
Total 49,831 50,025 47,673  
Total Financing receivables - Allowance (16,815) $ (15,690) $ (9,578) $ (6,289)
Total Financing receivables - Net $ 33,016      
v3.20.2
Accounts Receivable and Credit Losses (Credit Quality Analysis of Financing Receivable) (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Financing Receivable, Credit Quality Indicator [Line Items]      
Total $ 49,831 $ 50,025 $ 47,673
Institutional Loans, Past Due   24,276 16,146
Institutional Loans, Current   25,749 31,527
Total Institutional Loans 49,831 50,025 47,673
Financing Receivables 1 To 30 Days Past Due [Member]      
Financing Receivable, Credit Quality Indicator [Line Items]      
Prior 1,117    
2017 1,338    
2018 647    
2019 889    
2020 379    
2021 24    
Total 4,394    
Institutional Loans, Past Due   7,192 3,317
Total Institutional Loans 4,394    
Financing Receivables 31 To 60Days Past Due [Member]      
Financing Receivable, Credit Quality Indicator [Line Items]      
Prior 556    
2017 145    
2018 41    
2019 67    
2020 223    
Total 1,032    
Institutional Loans, Past Due   1,755 1,342
Total Institutional Loans 1,032    
Financing Receivables 61 To 90 Days Past Due [Member]      
Financing Receivable, Credit Quality Indicator [Line Items]      
Prior 609    
2017 59    
2018 444    
2019 71    
2020 127    
Total 1,310    
Institutional Loans, Past Due   1,547 526
Total Institutional Loans 1,310    
Financing Receivables Greater Than 90 Days Past Due [Member]      
Financing Receivable, Credit Quality Indicator [Line Items]      
Prior 8,179    
2017 3,156    
2018 2,475    
2019 1,132    
2020 334    
Total 15,276    
Institutional Loans, Past Due   $ 13,782 $ 10,961
Total Institutional Loans 15,276    
Financing Receivable Past Due [Member]      
Financing Receivable, Credit Quality Indicator [Line Items]      
Prior 10,461    
2017 4,698    
2018 3,607    
2019 2,159    
2020 1,063    
2021 24    
Total 22,012    
Total Institutional Loans 22,012    
Financing Receivable Current [Member]      
Financing Receivable, Credit Quality Indicator [Line Items]      
Prior 11,634    
2017 4,994    
2018 3,732    
2019 4,682    
2020 2,384    
2021 393    
Total 27,819    
Total Institutional Loans 27,819    
Financing Receivable Gross [Member]      
Financing Receivable, Credit Quality Indicator [Line Items]      
Prior 22,095    
2017 9,692    
2018 7,339    
2019 6,841    
2020 3,447    
2021 417    
Total 49,831    
Total Institutional Loans $ 49,831    
v3.20.2
Accounts Receivable and Credit Losses (Financing Receivables Past Due Prior to Adopting ASC 326) (Detail) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Financing Receivable, Recorded Investment, Past Due [Line Items]      
Institutional Loans, Past Due   $ 24,276 $ 16,146
Institutional Loans, Current   25,749 31,527
Total Institutional Loans $ 49,831 50,025 47,673
Financing Receivables 1 To 30 Days Past Due [Member]      
Financing Receivable, Recorded Investment, Past Due [Line Items]      
Institutional Loans, Past Due   7,192 3,317
Total Institutional Loans 4,394    
Financing Receivables 31 To 60Days Past Due [Member]      
Financing Receivable, Recorded Investment, Past Due [Line Items]      
Institutional Loans, Past Due   1,755 1,342
Total Institutional Loans 1,032    
Financing Receivables 61 To 90 Days Past Due [Member]      
Financing Receivable, Recorded Investment, Past Due [Line Items]      
Institutional Loans, Past Due   1,547 526
Total Institutional Loans 1,310    
Financing Receivables Greater Than 90 Days Past Due [Member]      
Financing Receivable, Recorded Investment, Past Due [Line Items]      
Institutional Loans, Past Due   $ 13,782 $ 10,961
Total Institutional Loans $ 15,276    
v3.20.2
Accounts Receivable and Credit Losses (Rollforward of Allowances for Credit Losses) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Trade    
Beginning balance $ 10,825 $ 8,243
Write-offs (759) (1,598)
Recoveries 186 323
Provision for credit losses 382 2,263
Ending balance 10,634 9,231
Financing    
Beginning balance 15,690 6,289
Write-offs (256) (26)
Recoveries 40 24
Provision for credit losses 1,341 3,291
Ending balance 16,815 9,578
Allowance for credit losses    
Beginning balance 26,515 14,532
Write-offs (1,015) (1,624)
Recoveries 226 347
Provision for credit losses 1,723 5,554
Ending balance $ 27,449 $ 18,809
v3.20.2
Accounts Receivable and Credit Losses (Additional Information) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Jul. 31, 2019
Dec. 11, 2018
Dec. 11, 2018
Sep. 30, 2020
Sep. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Financing Receivables [Line Items]              
Net Institutional Student Loans, Current       $ 3,190      
Net Institutional Student Loans, Noncurrent       29,826      
Financing Receivable Allowance For Credit Losses       $ 16,815 $ 9,578 $ 15,690 $ 6,289
Minimum              
Financing Receivables [Line Items]              
Receivable with Imputed Interest, Effective Yield (Interest Rate)       3.00%      
Maximum              
Financing Receivables [Line Items]              
Receivable with Imputed Interest, Effective Yield (Interest Rate)       12.00%      
DeVry University [Member]              
Financing Receivables [Line Items]              
Financing Receivable Allowance For Credit Losses       $ 0      
Receivable with Imputed Interest, Face Amount   $ 10,000 $ 10,000        
Receivable with Imputed Interest, Effective Yield (Interest Rate)   4.00% 4.00%        
Receivable with Imputed Interest, Due Date   Jan. 01, 2022 Jan. 01, 2022        
Future Cash Flows Discounting Rate       4.00%      
DeVry University [Member] | Other Assets              
Financing Receivables [Line Items]              
Loan Receivable       $ 10,000 10,000 10,000  
Chicago, Illinois Campus [Member] | Other Assets              
Financing Receivables [Line Items]              
Loan Receivable       41,700 40,400 41,400  
Chicago, Illinois Campus [Member] | Discontinued Operations, Disposed of by Sale              
Financing Receivables [Line Items]              
Financing Receivable Allowance For Credit Losses       0      
Receivable with Imputed Interest, Face Amount $ 46,800            
Receivable with Imputed Interest, Effective Yield (Interest Rate) 4.00%            
Receivable with Imputed Interest, Due Date Jul. 31, 2024            
Loan Receivable       $ 41,700 $ 40,400 $ 41,400  
Future Cash Flows Discounting Rate         7.00%    
v3.20.2
Property and Equipment, Net (Schedule of Property and equipment, net) (Details) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Property and Equipment, Net      
Property and equipment, gross $ 629,996 $ 617,122 $ 595,042
Accumulated depreciation (340,052) (331,020) (314,219)
Property and equipment, net 289,944 286,102 280,823
Land [Member]      
Property and Equipment, Net      
Property and equipment, gross 44,049 43,246 41,441
Building [Member]      
Property and Equipment, Net      
Property and equipment, gross 315,725 313,068 309,893
Equipment [Member]      
Property and Equipment, Net      
Property and equipment, gross 259,340 248,359 235,027
Construction in progress [Member]      
Property and Equipment, Net      
Property and equipment, gross $ 10,882 $ 12,449 $ 8,681
v3.20.2
Property and Equipment, Net (Additional Information) (Details) - USD ($)
$ in Thousands
3 Months Ended
Sep. 27, 2019
Jul. 31, 2019
Sep. 30, 2020
Sep. 30, 2019
Jun. 30, 2020
Real Estate [Line Items]          
Depreciation expense     $ 8,975 $ 8,393  
Property and equipment, net     289,944 280,823 $ 286,102
Proceeds From Down Payment On Seller Loan     0 5,200  
Notes receivable       64,915  
Financing payables       16,707  
Proceeds from Sales of Assets, Investing Activities     0 6,421  
Realized Gain on Sale of Assets     $ 0 4,779  
Discontinued Operations, Disposed of by Sale | Chicago, Illinois Campus [Member]          
Real Estate [Line Items]          
Proceeds from disposal   $ 52,000      
Proceeds From Down Payment On Seller Loan   5,200   $ 5,200  
Receivable with Imputed Interest, Face Amount   $ 46,800      
Receivable with Imputed Interest, Effective Yield (Interest Rate)   4.00%      
Discontinued Operations, Disposed of by Sale | Chicago, Illinois Campus [Member] | Other Assets          
Real Estate [Line Items]          
Notes receivable   $ 40,300      
Discontinued Operations, Disposed of by Sale | Chicago, Illinois Campus [Member] | Other Liabilities          
Real Estate [Line Items]          
Financing payables   $ 45,500      
Discontinued Operations, Disposed of by Sale | Columbus, Ohio Campus          
Real Estate [Line Items]          
Proceeds from Sales of Assets, Investing Activities $ 6,400        
Discontinued Operations, Held-for-sale [Member] | Columbus, Ohio Campus          
Real Estate [Line Items]          
Realized Gain on Sale of Assets $ 4,800        
v3.20.2
Leases (Components of Lease Cost) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Lease, Cost [Abstract]    
Operating Lease Cost $ 12,780 $ 13,703
Sublease Income (4,341) (5,126)
Total Lease Cost $ 8,439 $ 8,577
v3.20.2
Leases (Maturities of Lease Liabilities) (Detail)
$ in Thousands
Sep. 30, 2020
USD ($)
Maturities of lease liabilities  
2021 (Remaining) $ 48,128
2022 62,330
2023 51,908
2024 38,213
2025 28,386
Thereafter 52,914
Total lease payments 281,879
Less: imputed interest (40,375)
Present value of lease liabilities $ 241,504
v3.20.2
Leases (Lease Term, Discount Rate and Cash Flow Information ) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Lessee Disclosure [Abstract]    
Weighted-average remaining operating lease term (years) 5 years 4 months 24 days  
Weighted-average operating lease discount rate 5.50%  
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts) $ 11,427 $ 11,963
Operating lease assets obtained in exchange for operating lease liabilities $ 26,528 $ 4,868
v3.20.2
Leases (Future Minimum Rental Commitments for Noncancelable Operating Leases ) (Detail)
$ in Thousands
Sep. 30, 2020
USD ($)
Lessor, Operating Lease, Payments, Fiscal Year Maturity [Abstract]  
2020 (Remaining) $ 14,270
2022 16,816
2023 16,078
2024 10,261
2025 5,121
Thereafter 2,038
Total $ 64,584
v3.20.2
Leases (Additional Information) (Detail)
$ in Thousands
3 Months Ended
Sep. 30, 2020
USD ($)
facility
item
location
Sep. 30, 2021
USD ($)
Jun. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Lessee, Lease, Description [Line Items]        
Option to terminate lease true      
Option to extend lease true      
Extension term 5 years      
Number of facilities owned by lessor | facility 3      
Number of operating lease locations the entity has agreements to sublease either a portion or the full leased space | location 21      
Number of leases yet to commence | item 1      
Operating Lease, Right-of-Use Asset $ 186,824   $ 174,935 $ 195,238
Operating Lease, Liability $ 241,504      
Operating Lease, Lease Not yet Commenced, Contract One [Member] | Forecast [Member]        
Lessee, Lease, Description [Line Items]        
Lease term on property lease that has not yet commenced   11 years    
Operating Lease, Right-of-Use Asset   $ 21,300    
Operating Lease, Liability   $ 21,300    
v3.20.2
Goodwill and Intangible Assets (Summary of Goodwill Balances by Reporting Unit) (Detail) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Goodwill [Line Items]      
Goodwill $ 686,480 $ 686,214 $ 686,992
Chamberlain University [Member]      
Goodwill [Line Items]      
Goodwill 4,716 4,716 4,716
AUC [Member]      
Goodwill [Line Items]      
Goodwill 68,321 68,321 68,321
RUSM and RUSVM [Member]      
Goodwill [Line Items]      
Goodwill 237,173 237,173 237,173
Financial Services [Member]      
Goodwill [Line Items]      
Goodwill $ 376,270 $ 376,004 $ 376,782
v3.20.2
Goodwill and Intangible Assets (Summary of Goodwill Balances by Reporting Segment) (Detail) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Goodwill [Line Items]      
Goodwill $ 686,480 $ 686,214 $ 686,992
Medical and Healthcare [Member]      
Goodwill [Line Items]      
Goodwill 310,210 310,210 310,210
Financial Services [Member]      
Goodwill [Line Items]      
Goodwill $ 376,270 $ 376,004 $ 376,782
v3.20.2
Goodwill and Intangible Assets (Changes in Carrying Amount of Goodwill, by Segment) (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Jun. 30, 2020
Goodwill [Line Items]      
Goodwill beginning balance $ 686,214 $ 687,256 $ 686,992
Purchase Accounting Adjustments     (92)
Foreign exchange rate changes 266 (264) (686)
Goodwill ending balance 686,480 686,992 686,214
Medical and Healthcare [Member]      
Goodwill [Line Items]      
Goodwill beginning balance 310,210 310,210 310,210
Purchase Accounting Adjustments     0
Foreign exchange rate changes 0 0 0
Goodwill ending balance 310,210 310,210 310,210
Financial Services [Member]      
Goodwill [Line Items]      
Goodwill beginning balance 376,004 377,046 376,782
Purchase Accounting Adjustments     (92)
Foreign exchange rate changes 266 (264) (686)
Goodwill ending balance $ 376,270 $ 376,782 $ 376,004
v3.20.2
Goodwill and Intangible Assets (Schedule of Intangible Assets) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Intangible Assets [Line Items]      
Amortizable Intangible Assets, Gross Carrying Amount $ 87,200 $ 87,700 $ 87,700
Amortizable Intangible Assets, Accumulated Amortization (27,108) (25,090) (17,362)
Indefinite-lived Intangible Assets, Gross Carrying Amount 224,935 224,904 224,986
Customer Relationships [Member]      
Intangible Assets [Line Items]      
Amortizable Intangible Assets, Gross Carrying Amount 68,900 68,900 68,900
Amortizable Intangible Assets, Accumulated Amortization $ (22,744) (21,044) (15,865)
Amortizable Intangible Assets, Weighted Average Amortization Period 10 years    
Curriculum/Software [Member]      
Intangible Assets [Line Items]      
Amortizable Intangible Assets, Gross Carrying Amount $ 11,600 11,600 11,600
Amortizable Intangible Assets, Accumulated Amortization $ (2,578) (2,094) (644)
Amortizable Intangible Assets, Weighted Average Amortization Period 6 years    
Course Delivery Technology      
Intangible Assets [Line Items]      
Amortizable Intangible Assets, Gross Carrying Amount $ 6,700 7,200 7,200
Amortizable Intangible Assets, Accumulated Amortization $ (1,786) (1,952) (853)
Amortizable Intangible Assets, Weighted Average Amortization Period 5 years    
Trade Names [Member]      
Intangible Assets [Line Items]      
Indefinite-lived Intangible Assets, Gross Carrying Amount $ 95,695 95,664 95,746
Chamberlain Title IV Eligibility And Accreditations [Member]      
Intangible Assets [Line Items]      
Indefinite-lived Intangible Assets, Gross Carrying Amount 1,200 1,200 1,200
AUC Title IV Eligibility And Accreditations [Member]      
Intangible Assets [Line Items]      
Indefinite-lived Intangible Assets, Gross Carrying Amount 100,000 100,000 100,000
Ross Title IV Eligibility And Accreditations [Member]      
Intangible Assets [Line Items]      
Indefinite-lived Intangible Assets, Gross Carrying Amount 14,100 14,100 14,100
Intellectual Property [Member]      
Intangible Assets [Line Items]      
Indefinite-lived Intangible Assets, Gross Carrying Amount $ 13,940 $ 13,940 $ 13,940
v3.20.2
Goodwill and Intangible Assets (Summary of Indefinite-Lived Intangible Assets Balances by Reporting Segment) (Detail) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Indefinite-lived Intangible Assets [Line Items]      
Indefinite-lived intangible assets balances $ 224,935 $ 224,904 $ 224,986
Medical and Healthcare [Member]      
Indefinite-lived Intangible Assets [Line Items]      
Indefinite-lived intangible assets balances 137,500 137,500 137,500
Financial Services [Member]      
Indefinite-lived Intangible Assets [Line Items]      
Indefinite-lived intangible assets balances $ 87,435 $ 87,404 $ 87,486
v3.20.2
Goodwill and Intangible Assets (Estimated Amortization Expense for Amortized Intangible Assets) (Detail) - Financial Services [Member]
$ in Thousands
Sep. 30, 2020
USD ($)
Intangible Assets [Line Items]  
2021 (remaining) $ 7,555
2022 9,943
2023 9,792
2024 9,509
2025 7,933
Thereafter 15,360
Total $ 60,092
v3.20.2
Goodwill and Intangible Assets (Additional Information) (Detail)
$ in Thousands
3 Months Ended 12 Months Ended
Sep. 30, 2020
USD ($)
segment
Sep. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]      
Number of reporting units | segment 4    
Amortization of Intangible Assets $ 2,518 $ 2,534  
Goodwill write-off     $ 0
v3.20.2
Debt (Long-term debt) (Detail) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Total Debt:      
Long-term Debt, Gross $ 293,250 $ 294,000 $ 336,250
Deferred Debt Issuance Costs (6,009) (6,401)  
Total Amount Outstanding 288,621 289,115 330,600
Less Current Portion:      
Term B Loan (3,000) (3,000) (3,000)
Noncurrent Portion 285,621 286,115 327,600
Revolver [Member]      
Total Debt:      
Long-term Debt, Gross   0 40,000
Term Loan [Member]      
Total Debt:      
Long-term Debt, Gross 293,250 294,000 296,250
Deferred Debt Issuance Costs $ (4,629) $ (4,885) $ (5,650)
v3.20.2
Debt (Scheduled maturities of long-term debt) (Detail) - USD ($)
$ in Thousands
Sep. 30, 2020
Jun. 30, 2020
Sep. 30, 2019
Debt Disclosure [Abstract]      
2021 (remaining) $ 2,250    
2022 3,000    
2023 3,000    
2024 3,000    
2025 282,000    
Long-term Debt $ 293,250 $ 294,000 $ 336,250
v3.20.2
Debt (Debt Issuance Costs) (Detail)
$ in Thousands
Sep. 30, 2020
USD ($)
Deferred Debt Issuance Costs at June 30, 2020 $ 6,401
Amortization of Deferred Debt Issuance Costs (392)
Deferred debt issuance costs as of September 30, 2020 6,009
Term B Loan [Member]  
Deferred Debt Issuance Costs at June 30, 2020 4,885
Amortization of Deferred Debt Issuance Costs (256)
Deferred debt issuance costs as of September 30, 2020 4,629
Revolver [Member]  
Deferred Debt Issuance Costs at June 30, 2020 1,516
Amortization of Deferred Debt Issuance Costs (136)
Deferred debt issuance costs as of September 30, 2020 $ 1,380
v3.20.2
Debt (Additional Information) (Detail) - USD ($)
3 Months Ended
Mar. 24, 2020
Apr. 13, 2018
Sep. 30, 2020
Dec. 31, 2016
Jun. 30, 2020
Sep. 30, 2019
Line of Credit Facility [Line Items]            
Letters of credit outstanding     $ 68,400,000 $ 68,400,000 $ 68,400,000 $ 68,400,000
Letter Of Credit Title Iv Disbursement Percentage       10.00%    
Letter of credit, repayment period       5 years    
Commitment fee percentage     0.40%      
Credit annual fee percentage reimbursement     2.00%      
Annual fee percentage     2.25%      
Line of Credit facility, initiation date   Apr. 13, 2018        
Outstanding letters of credit     $ 231,600,000      
Long-term debt     288,621,000   289,115,000 330,600,000
Increase in line of credit facility   $ 250,000,000        
Debt issuance costs, gross   $ 9,900,000        
Long-term debt, gross     $ 293,250,000   $ 294,000,000 $ 336,250,000
Term Loan [Member]            
Line of Credit Facility [Line Items]            
Interest rate for borrowings under the Term B Loan facility     3.15%   3.18% 5.04%
Debt instrument, maturity date   Apr. 13, 2025        
Debt instrument, face amount   $ 300,000,000        
Principal payment   750,000        
Debt issuance costs, gross   $ 7,100,000        
Amortization period   7 years        
Debt covenant reinvested term     1 year      
Eurocurrency Rate [Member] | Term Loan [Member]            
Line of Credit Facility [Line Items]            
Debt instrument, description of variable rate basis     LIBOR-equivalent rate plus 3%      
Basic spread rate 3.00%   3.00%      
Base Rate [Member] | Term Loan [Member]            
Line of Credit Facility [Line Items]            
Debt instrument, description of variable rate basis     base rate plus 2%      
Basic spread rate     2.00%      
Revolver [Member]            
Line of Credit Facility [Line Items]            
Maximum borrowing capacity   $ 300,000,000        
Line of credit facility, expiration date   Apr. 13, 2023        
Foreign currency borrowing capacity   $ 200,000,000        
Long-term Line of Credit     $ 0     $ 40,000,000
Debt issuance costs, gross   $ 2,700,000        
Amortization period   5 years        
Revolver [Member] | Minimum            
Line of Credit Facility [Line Items]            
Application rate, percentage     1.75%      
Revolver [Member] | Maximum            
Line of Credit Facility [Line Items]            
Application rate, percentage     2.75%      
Revolver [Member] | Weighted Average            
Line of Credit Facility [Line Items]            
Application rate, percentage           4.20%
Revolver [Member] | Prime Rate [Member] | Minimum            
Line of Credit Facility [Line Items]            
Application rate, percentage     0.75%      
Revolver [Member] | Prime Rate [Member] | Maximum            
Line of Credit Facility [Line Items]            
Application rate, percentage     1.75%      
Letter of Credit [Member]            
Line of Credit Facility [Line Items]            
Maximum borrowing capacity   $ 100,000,000        
Term B Loan [Member]            
Line of Credit Facility [Line Items]            
Debt Covenant, Mandatory Cash Payment In Excess Of Amount Minimum     $ 50,000,000      
Interest Rate Swap | Term Loan [Member]            
Line of Credit Facility [Line Items]            
Derivative, Fixed Interest Rate 0.946%          
Derivative, Swaption Interest Rate     3.946%      
Interest Rate Swap | LIBOR | Term Loan [Member]            
Line of Credit Facility [Line Items]            
Debt instrument, description of variable rate basis one-month LIBOR          
Interest Rate Swap | LIBOR | Minimum | Term Loan [Member]            
Line of Credit Facility [Line Items]            
Derivative, Floor Interest Rate 0.00%          
v3.20.2
Redeemable Noncontrolling Interest (Reconciliation of Non-Controlling Interest Balance) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Noncontrolling Interest [Abstract]    
Balance at Beginning of Period $ 2,852 $ 9,543
Net (loss) income attributable to redeemable noncontrolling interest (91) (109)
Payment for purchase of redeemable noncontrolling interest of subsidiary   (6,247)
Balance at End of Period $ 2,761 $ 3,187
v3.20.2
Redeemable Noncontrolling Interest (Additional Information) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2019
Sep. 30, 2020
Mar. 26, 2020
Jul. 01, 2019
Jun. 30, 2019
Noncontrolling Interest [Line Items]          
Decrease in noncontrolling interest $ 6,247        
Adtalem Brazil [Member]          
Noncontrolling Interest [Line Items]          
Ownership interest of parent in subsidiary       100.00% 97.90%
Decrease in noncontrolling interest $ 6,200        
Edupristine [Member]          
Noncontrolling Interest [Line Items]          
Ownership interest of parent in subsidiary   71.00%      
Ownership percentage held by minority available for purchase     33.00%    
Adtalem Brazil Senior Management Group [Member] | Adtalem Brazil [Member]          
Noncontrolling Interest [Line Items]          
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners         2.10%
Kaizen [Member] | Edupristine [Member]          
Noncontrolling Interest [Line Items]          
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners   29.00%      
v3.20.2
Share Repurchase (Detail) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Sep. 30, 2019
Sep. 30, 2020
Feb. 04, 2020
Nov. 08, 2018
Equity, Class of Treasury Stock [Line Items]        
Total number of share repurchases 918,807      
Total cost of share repurchases $ 40,255      
Average price paid per share $ 43.81      
Life-to-Date Current Shares Repurchase Program Total number of share repurchases   6,383,431    
Life-to-Date Current Shares Repurchase Program Total cost of share repurchases   $ 254,769    
Life-to-Date Current Shares Repurchase Program Average price paid per share   $ 39.91    
Authorized On February Fourth Two-Thousand Twenty [Member]        
Equity, Class of Treasury Stock [Line Items]        
Authorized amount for repurchase     $ 300,000  
Maximum        
Equity, Class of Treasury Stock [Line Items]        
Remaining authorized amount for repurchase   $ 345,200    
Maximum | Authorized On November Eighth Two-Thousand Twenty [Member]        
Equity, Class of Treasury Stock [Line Items]        
Authorized amount for repurchase       $ 300,000
v3.20.2
Accumulated Other Comprehensive Loss (Details) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Jun. 30, 2020
Accumulated Other Comprehensive Income (Loss) [Line Items]      
Balance at the beginning of period - Net of Tax $ 1,310,421 $ 1,391,530  
Retained earnings 1,947,498 2,027,263 $ 1,927,568
Balance at the end of period - Net of Tax 1,330,971 1,327,193  
Accumulated Other Comprehensive Loss [Member]      
Accumulated Other Comprehensive Income (Loss) [Line Items]      
Balance at the beginning of period - Net of Tax (9,055) (137,290)  
Balance at the end of period - Net of Tax (8,612) (176,739)  
Foreign currency translation adjustments      
Accumulated Other Comprehensive Income (Loss) [Line Items]      
Balance at the beginning of period - Net of Tax (1,383) (137,389)  
Other comprehensive income (loss) - Gross 318 (39,494)  
Balance at the end of period - Net of Tax (1,065) (176,883)  
Marketable Securities.      
Accumulated Other Comprehensive Income (Loss) [Line Items]      
Balance at the beginning of period - Gross 242 131  
Balance at the beginning of period - Tax (59) (32)  
Balance at the beginning of period - Net of Tax 183 99  
Other comprehensive income (loss) - Gross (2) 59  
Other comprehensive income (loss) - Tax 1 (14)  
Balance at the end of period - Net of Tax 182 $ 144  
Interest Rate Swap      
Accumulated Other Comprehensive Income (Loss) [Line Items]      
Balance at the beginning of period - Gross (10,399)    
Balance at the beginning of period - Tax 2,544    
Balance at the beginning of period - Net of Tax (7,855)    
Other comprehensive income (loss) - Gross 167    
Other comprehensive income (loss) - Tax (41)    
Balance at the end of period - Net of Tax $ (7,729)    
v3.20.2
Stock-Based Compensation (Summary of Options Activity) (Detail) - Stock Option
$ / shares in Units, $ in Thousands
3 Months Ended
Sep. 30, 2020
USD ($)
$ / shares
shares
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]  
Number of Options, Outstanding at beginning of period | shares 1,439,630
Number of Options, Granted | shares 281,075
Number of Options, Exercised | shares (5,450)
Number of Options Forfeited | shares 0
Number of Options Expired | shares (35,050)
Number of Options, Outstanding at end of period | shares 1,680,205
Number of Options, Exercisable at end of period | shares 1,025,387
Weighted Average Exercise Price at beginning of period | $ / shares $ 31.95
Weighted Average Exercise Price, Options Granted | $ / shares 32.03
Weighted Average Exercise Price, Options Exercised | $ / shares 23.30
Weighted Average Exercise Price, Options Forfeited | $ / shares 0
Weighted Average Exercise Price, Options Expired | $ / shares 41.84
Weighted Average Exercise Price, Outstanding at end of period | $ / shares 31.81
Weighted Average Exercise Price, Exercisable at end of period | $ / shares $ 29.03
Weighted Average Remaining Contractual Life, Outstanding at end of period 6 years 10 months 6 days
Weighted Average Remaining Contractual Life, Exercisable at end of period 5 years 8 months 1 day
Aggregate Intrinsic Value, Outstanding at End of period | $ $ 1,690
Aggregate Intrinsic Value, Exercisable at end of period | $ $ 1,690
v3.20.2
Stock-Based Compensation (Fair Values of Stock Option Awards Weighted Average Assumptions) (Detail)
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Expected Life (in Years) 6 years 6 months 14 days 6 years 6 months 3 days
Expected Volatility 39.27% 37.66%
Risk-free Interest Rate 0.45% 1.40%
Dividend Yield 0.00% 0.00%
v3.20.2
Stock-Based Compensation (Summary of Restricted Stock Units Activity) (Detail) - Restricted Stock Units - $ / shares
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Restricted Stock Units Outstanding at beginning of period 767,973  
Restricted Stock Units Outstanding, Shares Granted 332,890  
Restricted Stock Units Outstanding, Shares Vested (340,846)  
Restricted Stock Units Outstanding, Shares Forfeited (7,831)  
Restricted Stock Units Outstanding at end of period 752,186  
Weighted Average Grant Date Fair Value, Nonvested beginning balance $ 39.42  
Weighted Average Grant Date Fair Value, Shares Granted 32.02 $ 43.39
Weighted Average Grant Date Fair Value, Shares Vested 35.08  
Weighted Average Grant Date Fair Value, Shares Forfeited 37.70  
Weighted Average Grant Date Fair Value, Nonvested ending balance $ 38.13  
v3.20.2
Stock-Based Compensation (Total Stock-Based Compensation Expense Included in Consolidated Statement of Income) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-Based Compensation Expense $ 4,004 $ 5,223
Income Tax Benefit (526) (2,533)
Net Stock-Based Compensation Expense 3,478 2,690
Cost of Educational Services    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-Based Compensation Expense 393 455
Student Services And Administrative Expense    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Stock-Based Compensation Expense $ 3,611 $ 4,768
v3.20.2
Stock-Based Compensation (Additional Information) (Detail)
3 Months Ended 12 Months Ended
Sep. 30, 2020
USD ($)
item
$ / shares
shares
Sep. 30, 2019
USD ($)
$ / shares
Jun. 30, 2020
USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Total intrinsic value of options exercised | $ $ 100,000 $ 500,000  
Total pre-tax unrecognized compensation costs related to non-vested awards | $ $ 27,300,000    
Total pre-tax unrecognized compensation costs related to non-vested awards expected to be recognized, years 2 years 9 months 18 days    
Total fair value of options and Restricted Stock Units vested | $ $ 16,300,000 12,100,000  
Share-based Payment Arrangement, Amount Capitalized | $ $ 0 $ 0 $ 0
Stock Incentive Plans      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Share-based compensation arrangements plans | item 2    
Weighted average estimated grant date fair values, for options granted at market price, per share | $ / shares $ 12.23 $ 16.98  
Common Stock, Capital Shares Reserved for Future Issuance | shares 3,803,197    
Stock Incentive Plans | Maximum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Term of options (in years) 10 years    
Vesting Period (in years) 5 years    
Restricted Stock Units      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares $ 32.02 $ 43.39  
Restricted Stock Units Outstanding, Shares Granted | shares 332,890    
Performance Based Shares      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Term of options (in years) 3 years    
Restricted Stock Units Outstanding, Shares Granted | shares 1,590    
Non-Performance Based Shares      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Term of options (in years) 3 years    
Restricted Stock Units Outstanding, Shares Granted | shares 331,300    
Non-Performance Based Shares | Minimum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Term of options (in years) 1 year    
Non-Performance Based Shares | Maximum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Term of options (in years) 4 years    
v3.20.2
Fair Value Measurements (Details)
$ in Thousands
Jul. 31, 2019
USD ($)
Dec. 11, 2018
USD ($)
Dec. 11, 2018
USD ($)
Sep. 30, 2020
USD ($)
Jun. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Long-term debt, gross       $ 293,250 $ 294,000 $ 336,250
Accounts Receivable | Credit extension program            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Loans Receivable, Fair Value Disclosure       $ 33,000 $ 34,300 $ 38,100
DeVry University [Member]            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Receivable with Imputed Interest, Face Amount   $ 10,000 $ 10,000      
Receivable with Imputed Interest, Effective Yield (Interest Rate)   4.00% 4.00%      
Receivable with Imputed Interest, Due Date   Jan. 01, 2022 Jan. 01, 2022      
DeVry University [Member] | Discount rate | Level 2            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Debt Instrument, Measurement Input       0.04 0.04 0.04
DeVry University [Member] | Other Assets            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Loans Receivable, Fair Value Disclosure       $ 10,000 $ 10,000 $ 10,000
Chicago, Illinois Campus [Member] | Discontinued Operations, Disposed of by Sale            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Loans Receivable, Fair Value Disclosure       $ 41,700 $ 41,400 $ 40,400
Receivable with Imputed Interest, Face Amount $ 46,800          
Receivable with Imputed Interest, Effective Yield (Interest Rate) 4.00%          
Receivable with Imputed Interest, Due Date Jul. 31, 2024          
Chicago, Illinois Campus [Member] | Discount rate | Level 2            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Debt Instrument, Measurement Input       0.07 0.07 0.07
Chicago, Illinois Campus [Member] | Other Assets            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Loans Receivable, Fair Value Disclosure       $ 41,700 $ 41,400 $ 40,400
Interest Rate Swap | Other Assets            
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]            
Derivative Asset       $ 10,200 $ 10,400  
v3.20.2
Commitments and Contingencies (Detail)
Jul. 16, 2019
individual
May 23, 2019
individual
Apr. 04, 2019
individual
Jan. 02, 2019
individual
item
Jun. 27, 2018
individual
Jun. 21, 2018
lawsuit
May 08, 2018
individual
Apr. 13, 2018
class
Sep. 30, 2020
USD ($)
Jun. 30, 2020
USD ($)
Dec. 10, 2018
lawsuit
Loss Contingencies [Line Items]                      
Number of lawsuits | lawsuit                     2
Nicole Versetto [Member]                      
Loss Contingencies [Line Items]                      
Number of other individuals filed lawsuit | class               3      
Loss contingency accrual | $                   $ 44,950,000  
Nicole Versetto [Member] | Prepaid Expenses and Other Current Assets                      
Loss Contingencies [Line Items]                      
Settlement fund | $                 $ 44,950,000 $ 44,950,000  
Carlson Case [Member]                      
Loss Contingencies [Line Items]                      
Number of other individuals filed lawsuit 102     13 32   71        
Number of groups plaintiffs motions to dismiss | item       3              
Number of other individuals to whom notice has been sent     105                
Percentage of graduates obtained job in field of study     90.00%                
Stoltmann Case [Member]                      
Loss Contingencies [Line Items]                      
Number of other individuals filed lawsuit | lawsuit           399          
Number Of Individuals to File Second Amended Claim   1                  
v3.20.2
Segment Information (Tabulation of Business Segment Information Based on Current Segmentation) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Jun. 30, 2020
Segment Reporting Information [Line Items]      
Total Consolidated Revenue $ 268,241 $ 254,613  
Total Consolidated Assets 2,329,897 2,460,324 $ 2,228,687
Restructuring expense (4,223) (6,530)  
Business acquisition and integration expense 13,436 0  
Gain on sale of assets 0 4,779  
Total consolidated operating income excluding special items 36,706 25,741  
Net other income (expense) (2,170) (4,627)  
Total consolidated income from continuing operations before income taxes 34,536 21,114  
Total Consolidated capital expenditures 14,443 10,436  
Total Consolidated Depreciation Expense 8,975 8,393  
Total Consolidated Intangible Asset Amortization Expense 2,518 2,534  
Discontinued Operations, Held-for-sale [Member]      
Segment Reporting Information [Line Items]      
Total Consolidated Assets   614,807  
Medical and Healthcare [Member]      
Segment Reporting Information [Line Items]      
Total Consolidated Revenue 218,826 207,487  
Total Consolidated Assets 976,382 1,006,655  
Restructuring expense 0 (127)  
Total Consolidated capital expenditures 9,266 6,467  
Total Consolidated Depreciation Expense 7,373 7,231  
Financial Services [Member]      
Segment Reporting Information [Line Items]      
Total Consolidated Revenue 49,415 47,126  
Total Consolidated Assets 579,634 582,820  
Restructuring expense (1,415) (1,979)  
Total Consolidated capital expenditures 2,127 539  
Total Consolidated Depreciation Expense 729 294  
Total Consolidated Intangible Asset Amortization Expense 2,518 2,534  
Home Office And Other [Member]      
Segment Reporting Information [Line Items]      
Total Consolidated Assets 773,881 256,042  
Restructuring expense (2,808) (4,424)  
Total Consolidated capital expenditures 3,050 3,430  
Total Consolidated Depreciation Expense 873 868  
Operating Segments [Member]      
Segment Reporting Information [Line Items]      
Total consolidated operating income excluding special items 54,365 27,492  
Operating Segments [Member] | Medical and Healthcare [Member]      
Segment Reporting Information [Line Items]      
Total consolidated operating income excluding special items 53,010 28,627  
Operating Segments [Member] | Financial Services [Member]      
Segment Reporting Information [Line Items]      
Total consolidated operating income excluding special items 8,687 4,107  
Operating Segments [Member] | Home Office And Other [Member]      
Segment Reporting Information [Line Items]      
Total consolidated operating income excluding special items (7,332) (5,242)  
Segment Reconciling Items [Member]      
Segment Reporting Information [Line Items]      
Restructuring expense (4,223) (6,530)  
Business acquisition and integration expense (13,436)    
Gain on sale of assets $ 0 $ 4,779  
v3.20.2
Segment Information (Revenues and Long-Lived Assets by Geographic Area) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Segment Reporting Information [Line Items]    
Total Consolidated Revenue $ 268,241 $ 254,613
Total Consolidated Long-lived Assets 384,768 371,909
Domestic Operations [Member]    
Segment Reporting Information [Line Items]    
Total Consolidated Revenue 172,644 152,037
Total Consolidated Long-lived Assets 216,628 196,331
Barbados, St. Kitts, and St. Maarten    
Segment Reporting Information [Line Items]    
Total Consolidated Revenue 85,062 90,969
Total Consolidated Long-lived Assets 166,950 173,793
Other International Operations [Member]    
Segment Reporting Information [Line Items]    
Total Consolidated Revenue 10,535 11,607
Total Consolidated Long-lived Assets 1,190 1,785
International Operations [Member]    
Segment Reporting Information [Line Items]    
Total Consolidated Revenue 95,597 102,576
Total Consolidated Long-lived Assets $ 168,140 $ 175,578
v3.20.2
Segment Information (Additional Information) (Detail)
3 Months Ended
Sep. 30, 2020
segment
Segment Reporting [Abstract]  
Number of Reportable Segments 2