Part I. Financial Information

Item 1. Financial Statements

Adtalem Global Education Inc.

~~ADTALEM GLOBAL EDUCATION INC.~~

Consolidated Balance Sheets

~~CONSOLIDATED BALANCE SHEETS~~(unaudited)

~~(Unaudited)~~(in thousands, except par value)


	September 30,		June 30,
	2023		2023
Assets:
Current assets:
Cash and cash equivalents	$	262,438	$	273,689
Restricted cash		1,988		1,386
Accounts receivable, net		147,752		102,749
Prepaid expenses and other current assets		60,750		100,715
Total current assets		472,928		478,539
Noncurrent assets:
Property and equipment, net		264,766		258,522
Operating lease assets		171,055		174,677
Deferred income taxes		54,855		56,694
Intangible assets, net		801,661		812,338
Goodwill		961,262		961,262
Other assets, net		67,634		68,509
Total noncurrent assets		2,321,233		2,332,002
Total assets	$	2,794,161	$	2,810,541

Liabilities and shareholders' equity:
Current liabilities:
Accounts payable	$	76,866	$	81,812
Accrued payroll and benefits		43,138		52,041
Accrued liabilities		89,395		105,806
Deferred revenue		250,555		153,871
Current operating lease liabilities		35,681		37,673
Total current liabilities		495,635		431,203
Noncurrent liabilities:
Long-term debt		695,725		695,077
Long-term operating lease liabilities		160,523		163,441
Deferred income taxes		26,394		26,068
Other liabilities		37,221		37,416
Total noncurrent liabilities		919,863		922,002
Total liabilities		1,415,498		1,353,205
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value per share, 200,000 shares authorized; 40,401 and 42,310 shares outstanding as of September 30, 2023 and June 30, 2023, respectively		826		822
Additional paid-in capital		576,758		568,761
Retained earnings		2,414,378		2,403,750
Accumulated other comprehensive loss		(2,227)		(2,227)
Treasury stock, at cost, 42,204 and 39,922 shares as of September 30, 2023 and June 30, 2023, respectively		(1,611,072)		(1,513,770)
Total shareholders' equity		1,378,663		1,457,336
Total liabilities and shareholders' equity	$	2,794,161	$	2,810,541

See accompanying Notes to Consolidated Financial Statements.

December 31, June 30, December 31,
2017 2017 2016

(in thousands, except share and par value amounts)
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 212,239 $ 240,426 $ 197,860
Marketable Securities and Investments 4,268 4,013 3,844
Restricted Cash 566 4,759 5,622
Accounts Receivable, Net 148,638 161,405 127,941
Prepaid Expenses and Other 75,972 36,988 54,964
Current Assets Held for Sale 28,126 23,616 37,202
Total Current Assets 469,809 471,207 427,433
Land, Building and Equipment:
Land 46,918 48,947 48,595
Building 425,659 443,914 441,271
Equipment 365,394 352,622 361,608
Construction in Progress 26,520 22,240 15,380
864,491 867,723 866,854
Accumulated Depreciation (446,152 ) (416,801 ) (406,295 )
Land, Building and Equipment Held for Sale, Net - 37,904 39,967
Land, Building and Equipment, Net 418,339 488,826 500,526
Other Assets:
Deferred Income Taxes, Net 31,090 33,772 26,618
Intangible Assets, Net 407,000 412,158 419,883
Goodwill 832,943 829,086 832,642
Other Assets, Net 38,091 40,696 56,227
Other Assets Held for Sale 13,450 38,290 38,104
Total Other Assets 1,322,574 1,354,002 1,373,474
TOTAL ASSETS $ 2,210,722 $ 2,314,035 $ 2,301,433

LIABILITIES:
Current Liabilities:
Accounts Payable $ 37,818 $ 46,417 $ 32,119
Accrued Salaries, Wages and Benefits 63,417 81,661 64,680
Accrued Liabilities 77,891 90,306 94,938
Deferred Revenue 81,224 115,770 88,092
Current Liabilities Held for Sale 36,469 43,173 45,727
Total Current Liabilities 296,819 377,327 325,556
Other Liabilities:
Revolving Loan 165,000 125,000 225,000
Deferred Income Taxes, Net 31,745 34,712 32,452
Deferred Rent and Other 101,232 101,672 106,792
Income Taxes Payable 88,562 - -
Total Other Liabilities 386,539 261,384 364,244
TOTAL LIABILITIES 683,358 638,711 689,800
COMMITMENTS AND CONTINGENCIES (NOTE 14)
NONCONTROLLING INTEREST 7,405 6,285 6,720
SHAREHOLDERS’ EQUITY:
Common Stock, $0.01 Par Value, 200,000,000 Shares Authorized; 60,295,000, 62,371,000 and 62,776,000 Shares Outstanding at December 31, 2017, June 30, 2017 and December 31, 2016, respectively 787 781 775
Additional Paid-in Capital 433,855 415,912 395,155
Retained Earnings 1,812,746 1,881,397 1,797,634
Accumulated Other Comprehensive Loss (60,745 ) (59,119 ) (50,828 )
Treasury Stock, at Cost, 18,451,000, 15,691,000 and 14,762,000 Shares at December 31, 2017, June 30, 2017 and December 31, 2016, respectively (666,684 ) (569,932 ) (537,823 )
TOTAL SHAREHOLDERS’ EQUITY 1,519,959 1,669,039 1,604,913
TOTAL LIABILITIES, NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY $ 2,210,722 $ 2,314,035 $ 2,301,433

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

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Adtalem Global Education Inc.

Consolidated Statements of Income

~~ADTALEM GLOBAL EDUCATION INC.~~(unaudited)

~~CONSOLIDATED STATEMENTS OF INCOME (LOSS)~~(in thousands, except per share data)

~~(Unaudited)~~


	Three Months Ended
	September 30,
	2023		2022
Revenue	$	368,845	$	354,269
Operating cost and expense:
Cost of educational services		168,618		159,645
Student services and administrative expense		166,095		146,385
Restructuring expense		676		15,065
Business integration expense		5,262		9,540
Total operating cost and expense		340,651		330,635
Operating income		28,194		23,634
Interest expense		(15,657)		(17,760)
Other income, net		2,214		761
Income from continuing operations before income taxes		14,751		6,635
Provision for income taxes		(2,792)		(1,122)
Income from continuing operations		11,959		5,513
Discontinued operations:
Loss from discontinued operations before income taxes		(1,765)		(3,265)
Loss on disposal of discontinued operations before income taxes		—		(3,359)
Benefit from income taxes		452		1,703
Loss from discontinued operations		(1,313)		(4,921)
Net income and comprehensive income	$	10,646	$	592

Earnings (loss) per share:
Basic:
Continuing operations	$	0.29	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total basic earnings per share	$	0.26	$	0.01
Diluted:
Continuing operations	$	0.28	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total diluted earnings per share	$	0.25	$	0.01

Weighted-average shares outstanding:
Basic shares		41,399		45,274
Diluted shares		42,184		46,342

See accompanying Notes to Consolidated Financial Statements.

Three Months Ended
December 31, Six Months Ended
December 31,
2017 2016 2017 2016

(in thousands, except per share amounts)
REVENUE:
Tuition $ 302,184 $ 301,263 $ 582,207 $ 588,161
Other Educational 35,060 32,695 80,315 74,824
Total Revenue 337,244 333,958 662,522 662,985
OPERATING COST AND EXPENSE:
Cost of Educational Services 178,970 179,148 374,911 366,634
Student Services and Administrative Expense 100,336 101,167 201,544 204,632
Restructuring Expense 2,554 2,963 4,941 6,313
Regulatory Settlements - 52,150 - 52,150
Total Operating Cost and Expense 281,860 335,428 581,396 629,729
Operating Income (Loss) from Continuing Operations 55,384 (1,470 ) 81,126 33,256
INTEREST:
Interest Income 1,365 988 3,483 2,032
Interest Expense (2,481 ) (2,300 ) (4,397 ) (4,415 )
Net Interest Expense (1,116 ) (1,312 ) (914 ) (2,383 )
Income (Loss) from Continuing Operations Before Income Taxes 54,268 (2,782 ) 80,212 30,873
Income Tax (Provision) Benefit (109,636 ) 10,082 (113,232 ) 2,363
Equity Method Investment Income (Loss) 6 - (38 ) -
(Loss) Income from Continuing Operations (55,362 ) 7,300 (33,058 ) 33,236
DISCONTINUED OPERATIONS (NOTE 2):
(Loss) Income from Discontinued Operations Before Income Taxes (43,873 ) 6,321 (55,179 ) 4,716
Income Tax Benefit 18,453 1,134 20,371 1,952
(Loss) Income from Discontinued Operations (25,420 ) 7,455 (34,808 ) 6,668
NET (LOSS) INCOME (80,782 ) 14,755 (67,866 ) 39,904
Net Income Attributable to Noncontrolling Interest (374 ) (342 ) (505 ) (339 )
NET (LOSS) INCOME ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION $ (81,156 ) $ 14,413 $ (68,371 ) $ 39,565

AMOUNTS ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION:
(Loss) Income from Continuing Operations $ (55,736 ) $ 6,958 $ (33,563 ) $ 32,897
(Loss) Income from Discontinued Operations (25,420 ) 7,455 (34,808 ) 6,668
NET (LOSS) INCOME ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION $ (81,156 ) $ 14,413 $ (68,371 ) $ 39,565

(LOSS) EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION SHAREHOLDERS:
Basic:
Continuing Operations $ (0.91 ) $ 0.11 $ (0.54 ) $ 0.52
Discontinued Operations $ (0.42 ) $ 0.12 $ (0.56 ) $ 0.11
Total $ (1.33 ) $ 0.23 $ (1.10 ) $ 0.62
Diluted:
Continuing Operations $ (0.91 ) $ 0.11 $ (0.54 ) $ 0.52
Discontinued Operations $ (0.42 ) $ 0.12 $ (0.56 ) $ 0.10
Total $ (1.33 ) $ 0.23 $ (1.10 ) $ 0.62

Cash Dividends Declared per Common Share $ - $ 0.18 $ - $ 0.18

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

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Adtalem Global Education Inc.

Consolidated Statements of Cash Flows

~~ADTALEM GLOBAL EDUCATION INC.~~(unaudited)

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~(in thousands)

~~(Unaudited)~~


	Three Months Ended
	September 30,
	2023		2022
Operating activities:
Net income	$	10,646	$	592
Loss from discontinued operations		1,313		4,921
Income from continuing operations		11,959		5,513
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		7,455		6,145
Amortization and impairments to operating lease assets		8,765		19,708
Depreciation		9,778		10,805
Amortization of intangible assets		10,677		18,528
Amortization and write-off of debt discount and issuance costs		1,155		4,227
Provision for bad debts		10,226		5,991
Deferred income taxes		2,165		2,629
Loss on disposals, accelerated depreciation, and impairments to property and equipment		38		3,483
Gain on extinguishment of debt		—		(71)
Loss on investments		447		901
Changes in assets and liabilities:
Accounts receivable		(50,116)		(33,219)
Prepaid expenses and other current assets		(5,532)		(2,483)
Accounts payable		(2,870)		8,711
Accrued payroll and benefits		(8,882)		(12,743)
Accrued liabilities		13,770		(9,010)
Deferred revenue		98,658		82,688
Operating lease liabilities		(10,053)		(12,921)
Other assets and liabilities		(6,914)		(7,406)
Net cash provided by operating activities-continuing operations		90,726		91,476
Net cash provided by (used in) operating activities-discontinued operations		8,959		(130)
Net cash provided by operating activities		99,685		91,346
Investing activities:
Capital expenditures		(15,046)		(5,551)
Proceeds from sale of marketable securities		400		356
Purchases of marketable securities		(300)		(308)
Net cash used in investing activities-continuing operations		(14,946)		(5,503)
Payment for working capital adjustment for sale of business		—		(811)
Net cash used in investing activities		(14,946)		(6,314)
Financing activities:
Proceeds from exercise of stock options		550		1,241
Employee taxes paid on withholding shares		(5,651)		(3,486)
Proceeds from stock issued under Colleague Stock Purchase Plan		190		132
Repurchases of common stock for treasury		(90,477)		—
Repayments of long-term debt		—		(100,861)
Net cash used in financing activities		(95,388)		(102,974)
Net decrease in cash, cash equivalents and restricted cash		(10,649)		(17,942)
Cash, cash equivalents and restricted cash at beginning of period		275,075		347,937
Cash, cash equivalents and restricted cash at end of period	$	264,426	$	329,995
Non-cash investing and financing activities:
Accrued capital expenditures	$	9,217	$	4,713
Accrued liability for repurchases of common stock	$	3,600	$	—
Accrued excise tax on share repurchases	$	1,928	$	—

See accompanying Notes to Consolidated Financial Statements.

Three Months Ended
December 31, Six Months Ended
December 31,
2017 2016 2017 2016

(in thousands)
NET (LOSS) INCOME $ (80,782 ) $ 14,755 $ (67,866 ) $ 39,904
OTHER COMPREHENSIVE INCOME, NET OF TAX
Currency Translation Loss (25,028 ) (1,632 ) (1,699 ) (8,462 )
Change in Fair Value of Available-For-Sale Securities 3 27 73 101
COMPREHENSIVE (LOSS) INCOME (105,807 ) 13,150 (69,492 ) 31,543
COMPREHENSIVE LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTEREST 147 (313 ) (467 ) (166 )
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION $ (105,660 ) $ 12,837 $ (69,959 ) $ 31,377

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

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Adtalem Global Education Inc.

~~ADTALEM GLOBAL EDUCATION INC.~~Consolidated Statements of Shareholders’ Equity

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~(unaudited)

~~(Unaudited)~~(in thousands)


									Accumulated
					Additional				Other
	Common Stock				Paid-In		Retained		Comprehensive		Treasury Stock
	Shares		Amount		Capital		Earnings		Loss		Shares		Amount		Total
June 30, 2022		81,796	$	818	$	521,848	$	2,310,396	$	(2,227)		36,619	$	(1,339,449)	$	1,491,386
Net income								592								592
Stock-based compensation						6,145										6,145
Net activity from stock-based compensation awards		303		3		1,238						88		(3,486)		(2,245)
Proceeds from stock issued under Colleague Stock Purchase Plan						(2)						(4)		149		147
September 30, 2022		82,099	$	821	$	529,229	$	2,310,988	$	(2,227)		36,703	$	(1,342,786)	$	1,496,025

June 30, 2023		82,232	$	822	$	568,761	$	2,403,750	$	(2,227)		39,922	$	(1,513,770)	$	1,457,336
Net income								10,646								10,646
Stock-based compensation						7,455										7,455
Net activity from stock-based compensation awards		373		4		546						130		(5,651)		(5,101)
Proceeds from stock issued under Colleague Stock Purchase Plan						(4)		(18)				(6)		233		211
Repurchases of common stock for treasury												2,158		(91,884)		(91,884)
September 30, 2023		82,605	$	826	$	576,758	$	2,414,378	$	(2,227)		42,204	$	(1,611,072)	$	1,378,663

Six Months Ended
December 31,
2017 2016

(in thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (67,866 ) $ 39,904
Loss (Income) from Discontinued Operations 34,808 (6,668 )
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Operating Activities:
Stock-Based Compensation Expense 8,780 9,333
Depreciation 24,865 26,043
Amortization 5,311 6,047
Provision for Refunds and Uncollectible Accounts 20,305 20,111
Deferred Income Taxes 1,258 10,730
Loss on Disposals, Accelerated Depreciation and Adjustments to Land, Building and Equipment 30,201 3,229
Changes in Assets and Liabilities:
Accounts Receivable (7,150 ) (9,094 )
Prepaid Expenses and Other (30,810 ) (34,805 )
Accounts Payable (2,569 ) (8,200 )
Accrued Salaries, Wages, Benefits and Liabilities (28,204 ) (993 )
Deferred Revenue (34,570 ) (19,255 )
Income Taxes Payable, Long-Term 88,562 �� -
Net Cash Provided by Operating Activities-Continuing Operations 42,921 36,382
Net Cash Provided by Operating Activities-Discontinued Operations 6,692 5,096
NET CASH PROVIDED BY OPERATING ACTIVITIES 49,613 41,478
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (32,594 ) (18,771 )
Payment for Purchase of Businesses, Net of Cash Acquired (972 ) (330,567 )
Marketable Securities Purchased (136 ) (73 )
Net Cash Used in Investing Activities-Continuing Operations (33,702 ) (349,411 )
Net Cash Provided by (Used in) Investing Activities-Discontinued Operations 8,575 (1,635 )
NET CASH USED IN INVESTING ACTIVITIES (25,127 ) (351,046 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Exercise of Stock Options 9,582 13,784
Employee Taxes Paid on Withholding Shares (3,806 ) (2,650 )
Proceeds from Stock Issued Under Colleague Stock Purchase Plan 391 439
Repurchase of Common Stock for Treasury (93,178 ) (16,381 )
Cash Dividends Paid - (11,412 )
Payments of Seller Financed Obligations (7,941 ) (3,518 )
Borrowings Under Revolving Credit Facility 201,000 405,000
Repayments Under Revolving Credit Facility (161,000 ) (180,000 )
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (54,952 ) 205,262
Effects of Exchange Rate Differences (1,043 ) (4 )
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (31,509 ) (104,310 )
Cash, Cash Equivalents and Restricted Cash at Beginning of Period 251,096 315,347
Cash, Cash Equivalents and Restricted Cash at End of Period 219,587 211,037
Less: Cash, Cash Equivalents and Restricted Cash of Discontinued Operations at End of Period 6,782 7,555
Cash, Cash Equivalents and Restricted Cash at End of Period $ 212,805 $ 203,482
Non-cash Investing and Financing Activity:
Increase in Redemption Value of Noncontrolling Interest Put Option $ 615 $ 1,269

See accompanying Notes to Consolidated Financial Statements.

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

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Adtalem Global Education Inc.

~~ADTALEM GLOBAL EDUCATION INC.~~

Notes to Consolidated Financial Statements

~~(Unaudited)~~(unaudited)

Table of Contents

~~NOTE 1: INTERIM FINANCIAL STATEMENTS~~


Note		Page
1	Nature of Operations	6
2	Summary of Significant Accounting Policies	6
3	Discontinued Operations	8
4	Revenue	9
5	Restructuring Charges	11
6	Other Income, Net	12
7	Income Taxes	12
8	Earnings per Share	12
9	Accounts Receivable and Credit Losses	13
10	Property and Equipment, Net	16
11	Leases	16
12	Goodwill and Intangible Assets	18
13	Debt	20
14	Share Repurchases	23
15	Stock-Based Compensation	24
16	Fair Value Measurements	26
17	Commitments and Contingencies	27
18	Segment Information	29

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1. Nature of Operations

~~The interim Consolidated Financial Statements include accounts of~~In this Quarterly Report on Form 10-Q, Adtalem Global Education Inc. ~~(“Adtalem”) and~~, together with its ~~wholly-owned and majority-owned subsidiaries. Adtalem’s wholly-owned~~ subsidiaries, ~~include:~~is collectively referred to as “Adtalem,” “we,” “our,” “us,” or similar references.

~~Chamberlain University (“Chamberlain”)~~

~~American University of the Caribbean School of Medicine (“AUC”)~~

~~Ross University School of Medicine (“RUSM”)~~

~~Ross University School of Veterinary Medicine (“RUSVM”)~~

~~Becker Professional Education (“Becker”)~~

~~Association of Certified Anti-Money Laundering Specialists (“ACAMS”)~~

~~Carrington College (“Carrington”)~~

~~DeVry University, presented as discontinued operations (see “Note 2: Discontinued Operations and Assets Held for Sale”)~~

~~In addition,~~ Adtalem ~~maintains~~is a ~~97.9% ownership interest~~national leader in ~~Adtalem Education of Brazil (“Adtalem Brazil”)~~post-secondary education and a ~~34% equity interest~~leading provider of professional talent to the healthcare industry. Our schools consist of Chamberlain University (“Chamberlain”), Walden University (“Walden”), 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.” See Note 18 “Segment Information” for information on our reportable segments.

2. Summary of Significant Accounting Policies

Basis of Presentation

A full listing of our significant accounting policies is described in ~~Neev Knowledge Management Private Limited (“Edupristine”).~~

~~These financial statements are unaudited but, in the opinion~~Note 2 “Summary of ~~management, contain all adjustments, consisting~~Significant Accounting Policies” of ~~normal recurring adjustments, necessary to present fairly the financial condition and results of operations of Adtalem.~~

~~The interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in Adtalem’s~~our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2017~~2023 (“2023 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 ~~Adtalem’s Quarterly Report on Form 10-Q for~~pursuant to the ~~quarter ended September 30, 2017, each as filed with~~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 2023 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.

Business integration expense was $5.3 million and $9.5 million in the three months ended September 30, 2023 and 2022, respectively. These are costs associated with integrating Walden into Adtalem. In addition, during the first quarter of fiscal year 2023, we initiated transformation initiatives to accelerate growth and organizational agility. Certain costs relating to this transformation are included in business integration expense in the Consolidated Statements of Income.

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.

Recent Accounting Standards

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-02: “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The guidance was issued as improvements to Accounting Standards Codification (“ASC”) 326. The vintage disclosure changes are relevant to Adtalem and require an entity to disclose current-period gross write-offs by year of ~~operations~~origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively. Early adoption of the ~~three~~amendments is permitted, including adoption in an interim period. We adopted this guidance on July 1, 2023. The amendments impacted our disclosures and ~~six months ended December 31, 2017~~did not otherwise impact Adtalem’s Consolidated Financial Statements.

We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our Consolidated Financial Statements.

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Revision to Previously Issued Financial Statements

During the third quarter of fiscal year 2023, Adtalem identified an error in its revenue recognition related to certain scholarship programs within its Medical and Veterinary segment. Certain scholarships and discounts offered within that segment provide students a discount on future tuition that constitute a material right under ASC 606 “Revenue from Contracts with Customers” that should be accounted for as a separate performance obligation within a contract. Adtalem assessed the materiality of this error individually and in the aggregate with other previously identified errors to prior periods’ Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” and SAB 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” codified in ASC 250 “Accounting Changes and Error Corrections.” Adtalem concluded that the errors were not material to prior periods and therefore, amendments of previously filed reports were not required. However, Adtalem determined it was appropriate to revise its previously issued financial statements. Treating the discount on future tuition as a material right results in the deferral of revenue for a portion of tuition to future periods. In accordance with ASC 250, Adtalem corrected the prior period presented herein by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the Consolidated Financial Statements. The impact of this revision of Adtalem’s previously reported Consolidated Financial Statements are ~~not necessarily indicative~~detailed below. In connection with this revision, Adtalem also corrected other immaterial errors in the prior period, including certain errors that had previously been adjusted for as out of ~~results~~period corrections in the period identified.

The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Income (in thousands, except per share data):


	Three Months Ended September 30, 2022
	As reported		Adjustment		As revised
Revenue	$	354,559	$	(290)	$	354,269
Operating cost and expense:
Student services and administrative expense		148,341		(1,956)		146,385
Business integration expense		8,415		1,125		9,540
Total operating cost and expense		331,466		(831)		330,635
Operating income		23,093		541		23,634
Other income, net		1,567		(806)		761
Income from continuing operations before income taxes		6,900		(265)		6,635
Provision for income taxes		(1,054)		(68)		(1,122)
Income from continuing operations		5,846		(333)		5,513
Discontinued operations:
Loss from discontinued operations before income taxes		(3,438)		173		(3,265)
Benefit from income taxes		3,143		(1,440)		1,703
Loss from discontinued operations		(3,654)		(1,267)		(4,921)
Net income		2,192		(1,600)		592

Earnings (loss) per share:
Basic:
Continuing operations	$	0.13	$	(0.01)	$	0.12
Discontinued operations	$	(0.08)	$	(0.03)	$	(0.11)
Total basic earnings per share	$	0.05	$	(0.04)	$	0.01
Diluted:
Continuing operations	$	0.13	$	(0.01)	$	0.12
Discontinued operations	$	(0.08)	$	(0.03)	$	(0.11)
Total diluted earnings per share	$	0.05	$	(0.04)	$	0.01

To conform to ~~be expected for~~current period presentation, the ~~entire fiscal year.~~previously reported interest income line is now included within other income, net.

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The following table summarizes the effect of the revisions on the affected line items within the previously reported Consolidated Statements of Comprehensive Income (in thousands):


	Three Months Ended September 30, 2022
	As reported		Adjustment		As revised
Net income	$	2,192	$	(1,600)	$	592
Other comprehensive income (loss), net of tax:
Loss on foreign currency translation adjustments		(1,267)		1,267		—
Comprehensive income before reclassification		925		(333)		592
Comprehensive income		925		(333)		592

~~NOTE 2: DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE~~The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Cash Flows (in thousands):


	Three Months Ended September 30, 2022
	As reported		Adjustment		As revised
Operating activities:
Net income	$	2,192	$	(1,600)	$	592
Loss from discontinued operations		3,654		1,267		4,921
Income from continuing operations		5,846		(333)		5,513
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on investments		—		901		901
Changes in assets and liabilities:
Prepaid expenses and other current assets		(1,602)		(881)		(2,483)
Accounts payable		7,586		1,125		8,711
Accrued payroll and benefits		(11,593)		(1,150)		(12,743)
Deferred revenue		82,398		290		82,688
Net cash provided by operating activities-continuing operations		91,524		(48)		91,476
Net cash provided by operating activities		91,394		(48)		91,346
Investing activities:
Proceeds from sales of marketable securities		—		356		356
Purchases of marketable securities		—		(308)		(308)
Net cash used in investing activities-continuing operations		(5,551)		48		(5,503)
Net cash used in investing activities		(6,362)		48		(6,314)

The following table summarizes the effect of the revisions on the affected line items within the Consolidated Statements of Shareholders’ Equity (in thousands):


	As reported		Adjustment		As revised
June 30, 2022
Retained earnings		2,322,810		(12,414)		2,310,396
Accumulated other comprehensive loss		(960)		(1,267)		(2,227)
Total shareholders' equity		1,505,067		(13,681)		1,491,386
September 30, 2022
Retained earnings		2,325,002		(14,014)		2,310,988
Total shareholders' equity		1,510,039		(14,014)		1,496,025
Three Months Ended September 30, 2022
Net income		2,192		(1,600)		592
Other comprehensive loss, net of tax		(1,267)		1,267		—

3. Discontinued Operations

On December ~~4, 2017,~~11, 2018, Adtalem ~~announced~~completed the ~~signing~~sale of ~~a definitive agreement to divest~~ DeVry University ~~pursuant~~ to ~~and subject to the terms and conditions of a stock purchase agreement with~~ Cogswell Education, LLC ~~with an expected closing date occurring in early fiscal year 2019. The decision to divest was made based on changes in strategic direction~~(“Cogswell”) for ~~the Adtalem portfolio of institutions.~~de minimis consideration. As the ~~potential~~ sale ~~represents~~represented a strategic shift that ~~will have~~had a major effect on Adtalem’s operations and financial results, ~~Devry~~DeVry University is ~~now~~ presented in Adtalem’s ~~financial reporting~~Consolidated Financial Statements as a discontinued operation. ~~All periods presented disclose the assets~~The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20.0 million over a ten-year period payable based on DeVry University’s free cash flow. Adtalem received $4.1 million and ~~liabilities as held for sale, and operations and cash flows~~$2.9 million during

Table of ~~DeVry University, which was previously a part of the U.S. Traditional Postsecondary reporting segment, as discontinued operations.~~Contents

In the second quarter of fiscal year ~~2018, asset impairment charges~~2023 and 2022, respectively, related to the earn-out, resulting in a total of ~~$47.2~~$7.0 million ~~were recorded to write-down intangible assets, goodwill, and building and equipment to zero based on the fair value market value of the DeVry University operations.During the second quarter of fiscal year 2018, management also~~being received thus far.

On March 10, 2022, Adtalem completed the sale of the ~~DeVry University~~Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), and ~~Carrington co-located campus~~OnCourse Learning (“OCL”) to Wendel Group and Colibri Group (“Purchaser”), pursuant to the Equity Purchase Agreement (“Purchase Agreement”) dated January 24, 2022. Pursuant to the terms and subject to the conditions set forth in ~~Pomona, California,~~the Purchase Agreement, Adtalem sold the issued and outstanding shares of ACAMS, Becker, and OCL to the Purchaser for ~~$11.1~~$962.7 million, net of cash of $21.5 million, subject to certain post-closing adjustments. In addition, on June 17, 2022, Adtalem completed the sale of EduPristine for de minimis consideration, which ~~was previously~~resulted in a transfer of $1.9 million in cash. We recorded a loss of $3.4 million in the first quarter of fiscal year 2023 for post-closing working capital adjustments to the initial sales price for ACAMS, Becker, and OCL, which is included in loss on disposal of discontinued operations before income taxes in the Consolidated ~~Balance Sheet as held~~Statements of Income. These divestitures are the culmination of a long-term strategy to sharpen the focus of our portfolio and enhance our ability to address the growing and unmet demand for ~~sale for $11.3 million, resulting~~healthcare professionals in the U.S. As these sales represented a ~~$0.2 million realized loss~~strategic shift that had a major effect on ~~sale of assets. The assets which were~~Adtalem’s operations and financial results, these businesses previously recorded as held for sale, the unrealized loss on assets held for sale and the loss on sale of assets associated with the Pomona, California, campus have all been classified within discontinued operations.

~~The following is a summary of balance sheet information of assets and liabilities reported~~included in our former Financial Services segment are presented in Adtalem’s Consolidated Financial Statements as discontinued ~~operations (in thousands).~~

December 31, June 30, December 31,
2017 2017 2016
ASSETS:
Current Assets:
Cash and Cash Equivalents $ 902 $ 1,553 $ 2,085
Restricted Cash 5,880 4,358 5,470
Accounts Receivable, Net 11,206 11,957 22,296
Prepaid Expenses and Other 10,138 5,748 7,351
Total Current Assets Held for Sale 28,126 23,616 37,202
Land, Building and Equipment Held for Sale, Net - 37,904 39,967
Other Assets:
Intangible Assets - 1,645 1,645
Goodwill - 22,196 22,196
Perkins Program Fund, Net 13,450 13,450 13,450
Other Assets, Net - 999 813
Total Other Assets Held for Sale 13,450 38,290 38,104
Total Assets Held for Sale $ 41,576 $ 99,810 $ 115,273

LIABILITIES:
Current Liabilities:
Accounts Payable $ 14,713 $ 17,868 $ 15,770
Accrued Salaries, Wages and Benefits 10,223 14,580 14,184
Accrued Liabilities 7,287 8,937 7,216
Deferred Revenue 4,246 1,788 8,557
Total Current Liabilities Held for Sale 36,469 43,173 45,727
Total Liabilities Held for Sale $ 36,469 $ 43,173 $ 45,727

operations.

The following is a summary of income statement information of operations reported as discontinued operations, ~~(in thousands).~~

Three Months Ended Six Months Ended
December 31, December 31,
2017 2016 2017 2016
REVENUE:
Tuition $ 86,172 $ 118,000 $ 172,840 $ 230,130
Other Educational 4,471 4,390 13,550 13,127
Total Revenue 90,643 122,390 186,390 243,257
OPERATING COST AND EXPENSE:
Cost of Educational Services 48,221 60,639 100,397 123,826
Student Services and Administrative Expense 36,624 44,484 85,896 102,084
Restructuring Expense 2,209 2,087 7,814 3,785
Asset Impairment Charge - Intangible and Goodwill 23,841 - 23,841 -
Asset Impairment Charge - Building and Equipment 23,391 - 23,391 -
Loss on Sale of Assets 230 - 230 -
Regulatory Settlements - 4,102 - 4,102
Loss on Assets Held for Sale - 4,764 - 4,764
Total Operating Cost and Expense 134,516 116,076 241,569 238,561
Operating (Loss) Income from Discontinued Operations (43,873 ) 6,314 (55,179 ) 4,696
Interest Income - 7 - 20
(Loss) Income from Discontinued Operations Before
Income Taxes (43,873 ) 6,321 (55,179 ) 4,716
Income Tax Benefit 18,453 1,134 20,371 1,952
(Loss) Income from Discontinued Operations $ (25,420 ) $ 7,455 $ (34,808 ) $ 6,668

~~NOTE 3: REGULATORY SETTLEMENTS~~

~~In the second quarter of fiscal year 2017, Adtalem, DeVry University Inc.,~~which includes expense from ongoing litigation costs and DeVry/New York Inc. (collectively, the “Adtalem Parties”) and the Federal Trade Commission (“FTC”) agreed to a Stipulation as to Entry of an Order for Permanent Injunction and Monetary Judgment (the “Agreement”) resolving litigation brought by the FTC regarding DeVry University’s use of employment statistics in former advertising. Under the terms of the Agreement, the Adtalem Parties agreed to pay $49.4 million to be distributed at the sole discretion of the FTC, to forgive $30.4 million of institutional loans issued before September 30, 2015, and to forgive outstanding DeVry University accounts receivable balances by $20.2 million for former students. In addition, the Adtalem Parties agreed that Adtalem institutions marketing to U.S. consumers will maintain specific substantiation to support any future advertising regarding graduate outcomes and educational benefits, and will implement training and other agreed-upon compliance measures. Adtalem chose to settle the FTC litigation after filing an answer denying all allegations of wrongdoing.

~~In the second quarter of fiscal year 2017, Adtalem also recorded charges~~settlements related to the resolution of an inquiry made by the Office of the Attorney General of the State of New York (“NYAG”) to the Adtalem Parties regarding DeVry University’s use of employment and salary statistics in former advertising. The Adtalem Parties chose to resolve the NYAG inquiry by entering into an Assurance of Discontinuance (the “Assurance”) with the NYAG on January 27, 2017, without admitting or denying the allegations therein. Pursuant to the Assurance, the Adtalem Parties agreed to pay $2.25 million for consumer restitution and $0.5 million in penalties, fees and costs. In addition, the Adtalem Parties agreed that Adtalem institutions marketing to New York consumers will maintain specific substantiation and present certain statistics as prescribed to support any future advertising regarding graduate outcomes and educational benefits, and will implement other agreed-upon compliance measures.

~~Student services and access to federal student loans are not impacted by the Agreement or the Assurance and at no time has the academic quality of a~~ DeVry University ~~education been questioned.~~

~~The regulatory settlements expense of $56.3 million recorded during the first six months of fiscal year 2017 consists of the $49.4 million cash payment to the FTC, the $4.1 million unreserved~~divestiture and expensed institutional loans and the $2.75 million cash payment to the NYAG. Of these regulatory settlement charges, $4.1 million is recorded within discontinued operations and $52.2 million was allocated to the Adtalem home office which is classified as “Home Office and Other” in “Note 15: Segment Information.”

~~Additionally, in the second quarter of fiscal year 2017, DeVry University reached~~ a settlement agreement with the U.S. Department of Education (“ED”) regarding its January 27, 2016 Notice of Intent to Limit (“Notice”). The Notice related narrowly to a specific graduate employment statistic previously used by DeVry University, calculated since 1975. The settlement includes, among other things, an agreement to no longer use the statistic in question or to make any other representations regarding the graduate employment outcomes of DeVry University graduates from 1975 to October 1980. DeVry University will also refrain from making any future graduate employment representations without possessing graduate-specific information, and, for five years after the effective date of the settlement, to post a letter of credit with ED equal to 10% of DeVry University’s annual Title IV disbursement. A $68.4 million letter of credit was posted in the second quarter of fiscal year 2017 in relation to this requirement. Upon the close ofloss on the sale of ~~DeVry University (see “Note 2: Discontinued Operations~~ACAMS, Becker, and ~~Assets Held~~OCL for ~~Sale”), Adtalem will continue~~working capital adjustments to ~~post this letter of credit on behalf of DeVry University. Also, as a result~~the initial sales prices (in thousands):


	Three Months Ended
	September 30,
	2023		2022
Revenue	$	—	$	—
Operating cost and expense:
Student services and administrative expense		1,765		3,265
Total operating cost and expense		1,765		3,265
Loss from discontinued operations before income taxes		(1,765)		(3,265)
Loss on disposal of discontinued operations before income taxes		—		(3,359)
Benefit from income taxes		452		1,703
Loss from discontinued operations	$	(1,313)	$	(4,921)

4. Revenue

Revenue is recognized when control of the ~~settlement agreement, DeVry University’s participation~~promised goods or services is transferred to our customers (students), in ~~Title IV programs will~~an amount that reflects the consideration we expect to be ~~under provisional certification. The settlement~~entitled to in ~~no way hinders DeVry University’s ability to serve current~~exchange for those goods or future students. DeVry University resolved the Notice in full cooperation with ED. The settlement allows DeVry University to continue communicating its strong student outcomes, while providing assurances regarding the extent of its graduate employment data.

~~NOTE 4: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Principles of Consolidation~~

services.

The ~~Consolidated Financial Statements include the accounts~~following tables disaggregate revenue by source (in thousands):


	Three Months Ended September 30, 2023
	Chamberlain		Walden		Medical and Veterinary		Consolidated
Tuition and fees	$	142,596	$	141,608	$	81,157	$	365,361
Other		—		—		3,484		3,484
Total	$	142,596	$	141,608	$	84,641	$	368,845


	Three Months Ended September 30, 2022
	Chamberlain		Walden		Medical and Veterinary		Consolidated
Tuition and fees	$	135,405	$	130,901	$	85,224	$	351,530
Other		—		—		2,739		2,739
Total	$	135,405	$	130,901	$	87,963	$	354,269

Table of ~~Adtalem~~Contents

In addition, see Note 18 “Segment Information” for a disaggregation of revenue by geographical region.

Performance Obligations and ~~its wholly-owned~~Revenue Recognition

Tuition and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Where our ownership interest is less than 100%, but greater than 50%, the noncontrolling ownership interest is reported on our Consolidated Balance Sheets.fees: The noncontrolling ownership interest earnings portion is classified as “Net Income Attributable to Noncontrolling Interest” in our Consolidated Statements of Income (Loss). Unless indicated, or the context requires otherwise, references to years refer to Adtalem’s fiscal years.

~~Equity Method Investment~~

The equity method of accounting is used for an investment where we have the ability to influence the operating and financial decisions of the investee but do not possess more than a 50% ownership interest. Generally, this occurs when the ownership interest is greater than 20%. The investment is initially recorded at cost and classified as Other Assets, Net on the Consolidated Balance Sheets. The carrying amount of the investment is adjusted in subsequent periods for Adtalem’s share of the earnings or losses of the investee, which is recorded in the Consolidated Statements of Income (Loss) as Equity Method Investment Income (Loss).

~~Cash and Cash Equivalents~~

Cash and cash equivalents can include time deposits, high-grade commercial paper, money market funds and bankers acceptances with original maturities of three months or less. Short-term investment objectives are to minimize risk and maintain liquidity. These investments are stated at cost (which approximates fair value) because of their short duration or liquid nature. Adtalem places its cash and temporary cash investments with high credit quality institutions. Cash and cash equivalent balances in U.S. bank accounts are generally in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. Cash and cash equivalent balances in Brazilian bank accounts are generally in excess of the deposit insurance limits for Brazilian banks. Adtalem has not experienced any losses on its cash and cash equivalents.

~~Management periodically evaluates the creditworthiness of the security issuers and financial institutions with which it invests and maintains deposit accounts.~~

~~Financial Aid and Restricted Cash~~

~~A significant portion~~majority of revenue is ~~received~~derived from ~~students who participate in government financial aid~~tuition and ~~assistance programs~~fees, which are subject to political and governmental budgetary considerations. There is no assurance that such funding will be maintained at current levels. Extensive and complex regulations in the U.S. and Brazil govern all of the government financial assistance programs in which students participate. Administration of these programs is periodically reviewed by various regulatory agencies. Any regulatory violation could be the basis for disciplinary action, which could include the suspension, limitation or termination from such financial aid programs.

Restricted cash represents amounts received from federal and state governments under various student aid grant and loan programs and such restricted funds are held in separate bank accounts. Once the financial aid authorization and disbursement process for the student has been completed, the funds are transferred to unrestricted accounts, and these funds then become available for use in Adtalem’s operations. This authorization and disbursement process that precedes the transfer of funds generally occurs within the period of the academic term for which such funds were authorized.

~~Revenue Recognition~~

~~Tuition~~

Chamberlain, Adtalem Brazil higher education and Carrington tuition revenue is recognized on a straight-line basis over their respective applicable academic terms. In addition, AUC, RUSM and RUSVM basic science curriculum revenue is recognized on a straight-line basis over the academic term as instruction is delivered.

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.

Arrangements for payment are agreed to prior to registration of the student’s first academic term. The ~~clinical portion~~majority of U.S. students obtain Title IV or other financial aid resulting in institutions receiving a significant amount of the ~~AUC, RUSM and RUSVM education programs are conducted primarily in U.S. teaching hospitals and veterinary schools under~~transaction price at the ~~oversight~~beginning of the institutions. AUC, RUSM and RUSVM are responsible for the billing and collection of tuition from their students during the period of clinical education. Revenue is recognized on a weekly basis based on actual program attendance during the period of the clinical program. Fees paid to the hospitals and veterinary schools to support the educational infrastructure required to train AUC, RUSM and RUSVM students are charged to expense on the same basis. Becker, ACAMS and Adtalem Brazil’s live classroom test preparation, and Adtalem Brazil’s online tuition revenue is recognized on a straight-line basis over the applicable delivery period. Revenue from conferences and training services, which are generally short-term in duration, is recognized when the conferenceacademic term. Students not utilizing Title IV or ~~training service is provided.~~

~~Other Educational~~

~~Sales of ACAMS subscriptions, membership dues and certifications, along with textbooks, electronic books and~~ other educational products, including Becker and ACAMS self-study sales, are included in Other Educational Revenue in the Consolidated Statements of Income (Loss). Revenue from subscriptions and membership dues is recognized on a straight-line basis over the applicable subscription or membership period. Revenue from certifications is recognized when the certification process is complete. Textbooks, electronic books and other educational products revenue is recognized when the sale occurs. In addition, fees from international licensees of the Becker programs are included in Other Educational Revenue and recognized when confirmation of course delivery is received.

~~Refunds and Provisions~~

Estimates of Adtalem’s expected refunds are determined at the outset of each academic term, based upon actual experience in previous terms. Inputs to this analysis include refunds issued, withdrawal rates and historical amounts owed by students for that portion of a term that was completed. 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.

The provisions for refunds, which are reported as a reduction to Tuition Revenue in the Consolidated Statements of Income (Loss), are recognized in the same ratable fashion as revenue to most appropriately match these costs with the tuition revenue in that term. Provisions for refunds were $4.6 million and $9.1 million for the three and six months ended December 31, 2017, respectively, and $4.0 million and $8.2 million for the three and six months ended December 31, 2016, respectively.

~~Provisions for refunds are monitored and adjusted as necessary within~~financial aid funding may pay after the academic term ~~and adjusted~~is complete.

Transaction Price

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

Students may receive discounts, scholarships, or refunds, ~~issued and withdrawn~~which gives rise to variable consideration. The amounts of discounts or scholarships are generally applied to individual student accounts ~~receivable balances at~~when such amounts are awarded. Therefore, the transaction price is immediately reduced directly by these discounts or scholarships from the amount of the standard tuition rate charged. Scholarships and discounts that are only applied to future tuition charged are considered a separate performance obligation if they represent a material right in accordance with ASC 606. In those instances, we defer the value of the related performance obligation associated with the future scholarship or discount based on estimates of future redemption based on our historical experience of student persistence toward completion of anstudy. The contract liability associated with these material rights is presented as deferred revenue within current liabilities and other liabilities within noncurrent liabilities on the Consolidated Balance Sheets based on the amounts expected to be redeemed in the next 12 months. The contract liability amount associated with these material rights within current liabilities is $12.0 million and $10.6 million as of September 30, 2023 and June 30, 2023, respectively, and the amount within noncurrent liabilities is $12.3 million and $10.4 million as of September 30, 2023 and June 30, 2023, respectively. The noncurrent contract liability associated with these material rights is expected to be earned over approximately the next four fiscal years.

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. ~~Reserves~~

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

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.

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Contract Balances

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 and to provide for any scholarships or discounts that are deemed a material right under ASC 606. As instruction is provided or the deferred value of material rights are redeemed, 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 9 “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.

Deferred revenue within current liabilities is $250.6 million and $153.9 million as of September 30, 2023 and June 30, 2023, respectively, and deferred revenue within noncurrent liabilities is $12.3 million and $10.4 million as of September 30, 2023 and June 30, 2023, respectively. Revenue of $150.1 million and $142.2 million was recognized during the first three months of fiscal year 2024 and 2023, respectively, that was included in the deferred revenue balance at the beginning of fiscal year 2024 and 2023, respectively.

The difference between the opening and closing balances of deferred revenue includes decreases from revenue recognized during the period, increases from charges related to ~~refunds~~the start of academic terms beginning during the period, increases from payments received related to academic terms commencing after the end of the reporting period, and ~~uncollectible~~increases from recognizing additional performance liabilities for material rights.

5. Restructuring Charges

During the first quarter of fiscal year 2024, Adtalem recorded restructuring charges primarily driven by prior real estate consolidations at Adtalem’s home office. We continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities. During the first quarter of fiscal year 2023, Adtalem recorded restructuring charges primarily driven by real estate consolidations at Walden, Medical and Veterinary, and Adtalem’s home office resulting in impairments on operating lease assets and property and equipment. When estimating costs of exiting lease space, estimates are made which could differ materially from actual results and may result in additional restructuring charges or reversals in future periods. Termination benefit charges represent severance pay and benefits for employees impacted by workforce reductions. Adtalem’s home office is classified as “Home Office and Other” in Note 18 “Segment Information.” Pre-tax restructuring charges by segment were as follows (in thousands):


	Three Months Ended September 30, 2023
	Real Estate and Other		Termination Benefits		Total
Medical and Veterinary	$	74	$	40	$	114
Home Office and Other		562		—		562
Total	$	636	$	40	$	676


	Three Months Ended September 30, 2022
	Real Estate and Other		Termination Benefits		Total
Chamberlain	$	818	$	—	$	818
Walden		3,026		54		3,080
Medical and Veterinary		6,826		—		6,826
Home Office and Other		4,069		272		4,341
Total	$	14,739	$	326	$	15,065

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The following table summarizes the separation and restructuring plan activity for fiscal years 2023 and 2024, for which cash payments are required (in thousands):


Liability balance as of June 30, 2022	$	813
Increase in liability (separation and other charges)		1,620
Reduction in liability (payments and adjustments)		(1,692)
Liability balance as of June 30, 2023		741
Increase in liability (separation and other charges)		40
Reduction in liability (payments and adjustments)		(488)
Liability balance as of September 30, 2023	$	293

The liability balance of $0.3 million is recorded as accrued liabilities on the Consolidated Balance Sheets as of September 30, 2023.

6. Other Income, Net

Other income, net consists of the following (in thousands):


	Three Months Ended
	September 30,
	2023		2022
Interest and dividend income	$	2,661	$	1,662
Investment loss		(447)		(901)
Other income, net	$	2,214	$	761

Investment loss includes trading gains and losses related to the rabbi trust used to fund nonqualified deferred compensation plan obligations.

7. Income Taxes

Our effective tax rates from continuing operations were 18.9% and 16.9% in the three months ended September 30, 2023 and 2022, respectively. The income tax provision for the first quarter of fiscal year 2024 increased compared to the year-ago period primarily due to a decrease in the percentage of earnings from foreign operations, which are generally taxed at lower rates than domestic earnings. The income tax provisions reflect the U.S. federal tax rate of 21% adjusted for taxes related to global intangible low-taxed income (“GILTI”), state and local taxes, benefits of the foreign rate differences, tax credits related to research and development expenditures, and benefits associated with local tax incentives. During the next 12 months our unrecognized tax benefits may decrease by approximately $7 million to $8 million due to the settlement of various audits and the lapsing of statutes of limitation.

Three of Adtalem’s businesses 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.

8. Earnings per Share

As further described in Note 14 “Share Repurchases,” on March 14, 2022, we entered into an accelerated share repurchase (“ASR”) agreement to repurchase $150.0 million of common stock. For purposes of calculating earnings per share for the periods presented, Adtalem reflected the ASR agreement as a repurchase of Adtalem common stock and as a forward contract indexed to its own common stock. Based on the volume-weighted average price of Adtalem’s common stock per the terms of the ASR agreement, common stock of 306 thousand shares were contingently issuable by Adtalem under the ASR agreement and were included in the diluted earnings per share calculation for the three months ended September 30, 2022 because the effect would have been dilutive. As of October 14, 2022, the ASR agreement is no longer outstanding. Certain shares related to stock awards were excluded from the computation of earnings per share because the

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effect would have been antidilutive. The following table sets forth the computations of basic and diluted earnings per share and antidilutive shares (in thousands, except per share data):


	Three Months Ended
	September 30,
	2023		2022
Numerator:
Net income (loss):
Continuing operations	$	11,959	$	5,513
Discontinued operations		(1,313)		(4,921)
Net income	$	10,646	$	592

Denominator:
Weighted-average basic shares outstanding		41,399		45,274
Effect of dilutive stock awards		785		762
Effect of ASR		—		306
Weighted-average diluted shares outstanding		42,184		46,342

Earnings (loss) per share:
Basic:
Continuing operations	$	0.29	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total basic earnings per share	$	0.26	$	0.01
Diluted:
Continuing operations	$	0.28	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total diluted earnings per share	$	0.25	$	0.01

Weighted-average antidilutive shares		332		477

9. Accounts Receivable and Credit Losses

We categorize our accounts ~~totaled $33.2 million, $30.6 million~~receivable balances as trade receivables or financing receivables. Our trade receivables relate to student balances occurring in the normal course of business. Trade receivables have a term of less than one year and ~~$35.0 million~~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 was as follows (in thousands):


	September 30, 2023
		Gross		Allowance		Net
Trade receivables, current	$	177,537	$	(32,361)	$	145,176
Financing receivables, current		4,811		(2,235)		2,576
Accounts receivable, current	$	182,348	$	(34,596)	$	147,752

Financing receivables, current	$	4,811	$	(2,235)	$	2,576
Financing receivables, noncurrent		36,625		(9,951)		26,674
Total financing receivables	$	41,436	$	(12,186)	$	29,250

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	June 30, 2023
		Gross		Allowance		Net
Trade receivables, current	$	129,318	$	(29,190)	$	100,128
Financing receivables, current		4,757		(2,136)		2,621
Accounts receivable, current	$	134,075	$	(31,326)	$	102,749

Financing receivables, current	$	4,757	$	(2,136)	$	2,621
Financing receivables, noncurrent		36,368		(9,332)		27,036
Total financing receivables	$	41,125	$	(11,468)	$	29,657

Our financing receivables relate to credit extension programs available to students at ~~December 31, 2017,~~Chamberlain, AUC, RUSM, and RUSVM. These credit extension programs are designed to assist students who are unable to completely cover educational costs consisting of tuition, fees, and books, and are available only after all other student financial assistance has been applied toward those purposes. In addition, AUC, RUSM, and RUSVM allow students to finance their living expenses. Repayment plans for financing agreements are developed to address the financial circumstances of the particular student. Interest charges at rates from 3.0% to 12.0% per annum accrue each month on the unpaid balance once a student withdraws or graduates from a program. Most students are required to begin repaying their loans while they are still in school with a minimum payment level designed to demonstrate their capability to repay, which reduces the possibility of over borrowing. Payments may increase upon completing or departing school. After a student leaves school, the student typically will have a monthly installment repayment plan.

Credit Quality

The primary credit quality indicator for our financing receivables is delinquency. Balances are considered delinquent when contractual payments on the loan become past due. We write-off financing receivable balances after they have been sent to a third-party collector, the timing of which varies by the institution granting the loan, but in most cases is when the financing agreement is at least 181 days past due. Payments are applied first to outstanding interest and then to the unpaid principal balance.

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


	Amortized Cost Basis by Origination Year
	Prior		2020		2021		2022		2023		2024		Total
1-30 days past due	$	314	$	116	$	211	$	141	$	1,812	$	340	$	2,934
31-60 days past due		264		13		367		194		1,376		316		2,530
61-90 days past due		242		—		393		52		165		19		871
91-120 days past due		76		90		60		429		687		—		1,342
121-150 days past due		12		—		—		192		276		—		480
Greater than 150 days past due		3,242		593		1,654		1,778		594		—		7,861
Total past due		4,150		812		2,685		2,786		4,910		675		16,018
Current		6,551		776		4,802		2,563		8,333		2,393		25,418
Financing receivables, gross	$	10,701	$	1,588	$	7,487	$	5,349	$	13,243	$	3,068	$	41,436
Gross write-offs	$	276	$	199	$	156	$	54	$	51	$	—	$	736

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The credit quality analysis of financing receivables as of June 30, ~~2017 and December 31, 2016, respectively.~~2023 was as follows (in thousands):


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

Allowance for Credit Losses

The allowance for ~~uncollectible accounts is determined by analyzing~~credit losses represents an estimate of the ~~current aging of~~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 ~~collections~~an aging schedule and 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, while also factoring in delinquency. Students still attending classes, recently graduated, or current on payments are more likely to pay than those who are inactive due to being on a leave of ~~accounts receivable.~~absence, withdrawing from school, or not current on payments.

For our financing receivables, we primarily use historical loss rates based on an aging schedule. As these financing receivables are based on long-term financing agreements offered by Adtalem, management believes that delinquency provides the best credit loss estimate. As the financing receivable balances become further past due, it is less likely we will receive payment, causing our estimate of credit losses to increase.

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


	Three Months Ended September 30, 2023
	Trade		Financing		Total
Beginning balance	$	29,190	$	11,468	$	40,658
Write-offs		(8,412)		(736)		(9,148)
Recoveries		2,621		190		2,811
Provision for credit losses		8,962		1,264		10,226
Ending balance	$	32,361	$	12,186	$	44,547


	Three Months Ended September 30, 2022
	Trade		Financing		Total
Beginning balance	$	30,897	$	14,891	$	45,788
Write-offs		(5,464)		(219)		(5,683)
Recoveries		2,408		2		2,410
Provision for credit losses		5,041		950		5,991
Ending balance	$	32,882	$	15,624	$	48,506

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10. Property and Equipment, Net

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


	September 30,		June 30,
	2023		2023
Land	$	38,345	$	38,345
Building		308,921		303,737
Equipment		241,342		226,600
Construction in progress		20,758		28,668
Property and equipment, gross		609,366		597,350
Accumulated depreciation		(344,600)		(338,828)
Property and equipment, net	$	264,766	$	258,522

11. Leases

We determine if a contract contains a lease at inception. We have entered into operating leases for academic sites, housing facilities, and office space which expire at various dates through March 2036, most of which include options to terminate for a fee or extend the leases for an additional five-year period. The lease term includes the noncancelable period of the lease, as well as any periods for which we are reasonably certain to exercise extension options. We elected to account for lease and non-lease components (e.g., common-area maintenance costs) as a single lease component for all operating leases. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. We have not entered into any financing leases.

Operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets represent our right to use an underlying asset during the lease term. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. Operating lease assets are adjusted for any prepaid or accrued lease payments, lease incentives, initial direct costs, and impairments. Our incremental borrowing rate is utilized in determining the present value of the lease payments based upon the information available at the commencement date. Our incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease. Operating lease expense is recognized on a straight-line basis over the lease term.

As of September 30, 2023, we entered into one additional operating lease that has not yet commenced. The lease is expected to commence during the second quarter of fiscal year 2024, has a 12-year lease term, and will result in an additional operating lease asset and operating lease liability of approximately $16.6 million.

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


	Three Months Ended
	September 30,
	2023		2022
Operating lease cost	$	11,551	$	12,375
Sublease income		(2,681)		(3,570)
Total lease cost	$	8,870	$	8,805

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Maturities of lease liabilities by fiscal year as of September 30, 2023 were as follows (in thousands):


	Operating
Fiscal Year	Leases
2024 (remaining)	$	36,191
2025		43,569
2026		38,253
2027		36,706
2028		29,590
Thereafter		76,992
Total lease payments		261,301
Less: tenant improvement allowance not yet received		(4,065)
Less: imputed interest		(61,032)
Present value of lease liabilities	$	196,204

Lease term and discount rate were as follows:


	September 30,
	2023
Weighted-average remaining operating lease term (years)		6.3
Weighted-average operating lease discount rate		6.7%

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


	Three Months Ended
	September 30,
	2023		2022
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)	$	10,625	$	12,428
Operating lease assets obtained in exchange for operating lease liabilities	$	5,143	$	—

Adtalem maintains an agreement to lease one facility owned by Adtalem to DeVry University with an expiration date of December 2023. Adtalem maintains agreements to sublease either a portion or the full leased space at seven of its operating lease locations. Most of these subleases are a result of Adtalem retaining leases associated with restructured lease activities at DeVry University and Carrington College prior to their divestitures during fiscal year 2019. All sublease expirations with DeVry University and Carrington College coincide with Adtalem’s original head lease expiration dates. At that time, Adtalem will be relieved of its obligations. In addition, Adtalem has entered into subleases with non-affiliated entities for vacated or partially vacated space from restructuring activities. Adtalem’s sublease agreements expire at various dates through December 2025. We record sublease income as an offset against our lease expense recorded on the head lease. For leases which Adtalem vacated or partially vacated space, we recorded estimated restructuring charges in prior periods. Actual results may differ from these estimates, which could result in additional restructuring charges or reversals in future periods. Future minimum lease and sublease rental income under these agreements as of September 30, 2023, were as follows (in thousands):


Fiscal Year	Amount
2024 (remaining)	$	6,887
2025		5,255
2026		2,038
Total lease and sublease rental income	$	14,180

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12. Goodwill and Intangible Assets

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


	September 30,		June 30,
	2023		2023
Chamberlain	$	4,716	$	4,716
Walden		651,052		651,052
AUC		68,321		68,321
RUSM		180,089		180,089
RUSVM		57,084		57,084
Total	$	961,262	$	961,262

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


	September 30,		June 30,
	2023		2023
Chamberlain	$	4,716	$	4,716
Walden		651,052		651,052
Medical and Veterinary		305,494		305,494
Total	$	961,262	$	961,262

Amortizable intangible assets consisted of the following (in thousands):


	September 30, 2023				June 30, 2023
	Gross Carrying		Accumulated		Gross Carrying		Accumulated		Weighted-Average
	Amount		Amortization		Amount		Amortization		Amortization Period
Student relationships	$	161,900	$	(145,348)	$	161,900	$	(137,476)	3 Years
Curriculum		56,091		(23,842)		56,091		(21,037)	5 Years
Total	$	217,991	$	(169,190)	$	217,991	$	(158,513)

Indefinite-lived intangible assets consisted of the following (in thousands):


	September 30,		June 30,
	2023		2023
Walden trade name	$	119,560	$	119,560
AUC trade name		17,100		17,100
RUSM trade name		3,500		3,500
RUSVM trade name		1,600		1,600
Chamberlain Title IV eligibility and accreditations		1,200		1,200
Walden Title IV eligibility and accreditations		495,800		495,800
AUC Title IV eligibility and accreditations		100,000		100,000
RUSM Title IV eligibility and accreditations		11,600		11,600
RUSVM Title IV eligibility and accreditations		2,500		2,500
Total	$	752,860	$	752,860

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


	September 30,		June 30,
	2023		2023
Chamberlain	$	1,200	$	1,200
Walden		615,360		615,360
Medical and Veterinary		136,300		136,300
Total	$	752,860	$	752,860

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Amortization expense for amortized intangible assets was $10.7 million and $18.5 million in the three months ended September 30, 2023 and 2022, respectively. Future intangible asset amortization expense, by reporting unit, is expected to be as follows (in thousands):


Fiscal Year	Walden
2024 (remaining)	$	24,967
2025		11,220
2026		11,220
2027		1,394
Total	$	48,801

Curriculum is amortized on a straight-line basis. Student relationships is amortized based on the estimated retention of the students and considers the revenue and cash flow associated with these existing students.

Indefinite-lived intangible assets related to trade names and Title IV eligibility and accreditations 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 intangible assets 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 five reporting units that contain goodwill and indefinite-lived intangible assets. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management. We have the option to assess goodwill for impairment by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is determined that the reporting unit fair value is more likely than not less than its carrying value, or if we do not elect the option to perform an initial qualitative assessment, we perform a quantitative assessment of the reporting unit’s fair value. If the carrying value of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized equal to the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying value of goodwill. We also have the option to perform a qualitative assessment to test indefinite-lived intangible assets for impairment by determining whether it is more likely than not that the indefinite-lived intangible assets are impaired. If it is determined that the indefinite-lived intangible asset is more likely than not impaired, or if we do not elect the option to perform an initial qualitative assessment, we perform a quantitative assessment of the indefinite-lived intangible assets. If the carrying value of the indefinite-lived intangible assets exceeds its fair value, an impairment loss is recognized to the extent the carrying value exceeds fair value. After analyzing the results of operations and business conditions of all five reporting units, we determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value as of September 30, 2023.

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 2023, and that no interim events or deviations from planned operating results occurred as of September 30, 2023 that would cause management ~~considers projections~~to reassess these conclusions.

If economic conditions deteriorate, interest rates continue to rise, or operating performance of our reporting units do not meet expectations such that we revise our long-term forecast, we may recognize impairments of goodwill and other intangible assets in future ~~receivable levels~~periods.

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13. Debt

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


	September 30,		June 30,
	2023		2023
Senior Secured Notes due 2028	$	404,950	$	404,950
Term Loan B		303,333		303,333
Total principal		708,283		708,283
Unamortized debt discount and issuance costs		(12,558)		(13,206)
Long-term debt	$	695,725	$	695,077

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


	Maturity
Fiscal Year	Payments
2024 (remaining)	$	—
2025		—
2026		—
2027		—
2028		404,950
2029		303,333
Total	$	708,283

Senior Secured Notes due 2028

On March 1, 2021, Adtalem issued $800.0 million aggregate principal amount of 5.50% Senior Secured Notes due 2028 (the “Notes”), which mature on March 1, 2028, pursuant to an indenture, dated as of March 1, 2021 (the “Indenture”), by and ~~collection loss rates.~~between Adtalem and U.S. Bank National Association, as trustee and notes collateral agent. The Notes were sold within the U.S. only to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the U.S. to non-U.S. persons in reliance on Regulation S under the Securities Act.

The Notes were issued at 100.0% of their par value. The Notes bear interest at a rate of 5.50% per year, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2021, to holders of record on the preceding February 15 and August 15, as the case may be. The Notes are guaranteed by certain of Adtalem’s subsidiaries that are borrowers or guarantors under its senior secured credit facilities and certain of its other senior indebtedness, subject to certain exceptions (the “Guarantors”). As of August 12, 2021, the Notes are secured, subject to permitted liens and certain other exceptions, by first priority liens on the same collateral that secures the obligations under Adtalem’s senior secured credit facilities.

At any time prior to March 1, 2024, we may redeem all or a part of the Notes at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus a make-whole premium set forth in the Indenture and accrued and unpaid interest, if any, to, but not including, the redemption date. We ~~monitor~~may redeem the ~~inputs~~Notes, in whole or in part, at any time on or after March 1, 2024 at redemption prices equal to ~~this analysis periodically throughout~~102.75%, 101.375%, and 100% of the ~~year. Provisions required to maintain~~principal amount of the ~~allowance at appropriate levels are charged to expense~~Notes redeemed if the redemption occurs during the twelve-month periods beginning on March 1 of the years 2024, 2025, and 2026 and thereafter, respectively, in each ~~period as required. Provisions for uncollectible accounts, which are included~~case plus accrued and unpaid interest, if any, thereon to, but not including, the applicable redemption date. In addition, at any time prior to March 1, 2024, Adtalem may redeem up to 40% of the aggregate principal amount of the Notes at a redemption price equal to 105.5% of the aggregate principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, with the net cash proceeds we receive from one or more qualifying equity offerings.

On April 11, 2022, we repaid $373.3 million of Notes at a price equal to 100% of the principal amount of the Notes. During June 2022, we repurchased on the open market an additional $20.8 million of Notes at a price equal to approximately 90% of the principal amount of the Notes. This debt was subsequently retired. During the first quarter of fiscal year 2023, we repurchased on the open market an additional $0.9 million of Notes at a price equal to approximately

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92% of the principal amount of the Notes, resulting in ~~the Cost~~a gain on extinguishment of ~~Educational Services~~debt of $0.1 million recorded within interest expense in the Consolidated Statements of Income ~~(Loss), were $5.1 million and $11.2 million~~ for the three ~~and six~~ months ended ~~December 31, 2017, respectively, and $6.4~~September 30, 2022. This debt was subsequently retired. The principal balance of the Notes is $405.0 million as of September 30, 2023.

Accrued interest on the Notes of $1.9 million and ~~$11.9~~$7.4 million is recorded within accrued liabilities on the Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023, respectively.

Credit Agreement

On August 12, 2021, in connection with the Walden acquisition, Adtalem entered into its new credit agreement (the “Credit Agreement”) that provides for (1) a $850.0 million senior secured term loan (“Term Loan B”) with a maturity date of August 12, 2028 and (2) a $400.0 million senior secured revolving loan facility (“Revolver”) with a maturity date of August 12, 2026. We refer to the Term Loan B and Revolver collectively as the “Credit Facility.” The Revolver has availability for letters of credit and currencies other than U.S. dollars of up to $400.0 million.

On June 27, 2023, Adtalem entered into Amendment No. 1 to Credit Agreement, identifying the Secured Overnight Financing Rate (“SOFR”) as the benchmark rate to replace LIBOR for eurocurrency rate loans within the Credit Agreement effective the first quarter of fiscal year 2024.

Term Loan B

Borrowings under the Term Loan B bear interest at Adtalem’s option at a rate per annum equal to SOFR, subject to a SOFR floor of 0.75%, plus an applicable margin ranging from 4.00% to 4.50% for eurocurrency term loan borrowings or 3.00% to 3.50% for alternative base rate (“ABR”) borrowings depending on Adtalem’s net first lien leverage ratio for such period. As of September 30, 2023, the interest rate for borrowings under the Term Loan B facility was 9.43%, which approximated the effective interest rate. The Term Loan B originally required quarterly installment payments of $2.125 million beginning on March 31, 2022. On March 11, 2022, we made a prepayment of $396.7 million on the Term Loan B. With that prepayment, we are no longer required to make quarterly installment payments. We made additional Term Loan B prepayments of $100.0 million and $50.0 million on September 22, 2022 and November 22, 2022, respectively. The principal balance of the Notes is $303.3 million as of September 30, 2023.

Revolver

Borrowings under the Revolver bear interest at a rate per annum equal to SOFR, subject to a SOFR floor of 0.75%, plus an applicable margin ranging from 3.75% to 4.25% for SOFR borrowings or 2.75% to 3.25% for ABR borrowings depending on Adtalem’s net first lien leverage ratio for such period. There were no borrowings under the Revolver during the three ~~and six~~ months ended ~~December 31, 2016, respectively.~~September 30, 2023 and 2022.

~~Internal-Use Software Development Costs~~

~~Adtalem capitalizes certain internal-use software development costs that are amortized using the straight-line method over the estimated lives~~The Credit Agreement requires payment of a commitment fee equal to 0.25% as of September 30, 2023, of the ~~software, not to exceed seven years. Capitalized costs include external direct costs~~unused portion of ~~equipment, materials and services consumed in developing or obtaining internal-use software and payroll-related costs for employees directly associated with~~ the ~~internal-use software development project. Capitalization of such costs ceases at the point at which the project~~Revolver. The commitment fee expense is ~~substantially complete and ready for its intended purpose. Capitalized internal-use software development costs for projects not yet complete are included as Construction in Progress~~recorded within interest expense in the ~~Land, Building~~Consolidated Statements of Income. The amount unused under the Revolver was $323.8 million as of September 30, 2023.

Debt Discount and ~~Equipment section~~Issuance Costs

The Term Loan B was issued at a price of 99% of its principal amount, resulting in an original issue discount of 1%. The debt discount and issuance costs related to the Notes and Term Loan B are capitalized and presented as a direct deduction from the face amount of the debt, while the debt issuance costs related to the Revolver are classified as other assets, net on the Consolidated Balance Sheets. The debt discount and issuance costs are amortized as interest expense over seven years for the Notes and Term Loan B and over five years for the Revolver. Based on the $100.0 million Term Loan B prepayment on September 22, 2022, we expensed $2.9 million in interest expense in the Consolidated Statements of Income in the three months ended September 30, 2022, which was the proportionate amount of the remaining unamortized debt discount and issuance costs related to the Term Loan B as of the prepayment date. The following table

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summarizes the unamortized debt discount and issuance costs activity for the three months ended September 30, 2023 (in thousands):


	Notes		Term Loan B		Revolver		Total
Unamortized debt discount and issuance costs as of June 30, 2023	$	5,592	$	7,614	$	6,355	$	19,561
Amortization of debt discount and issuance costs		(279)		(369)		(507)		(1,155)
Unamortized debt discount and issuance costs as of September 30, 2023	$	5,313	$	7,245	$	5,848	$	18,406

Off-Balance Sheet Arrangements

Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of September 30, 2023, in favor of the U.S. Department of Education (“ED”) on behalf of Walden, which allows Walden to participate in Title IV programs. In addition, Adtalem posted a letter of credit under its Revolver in the amount of $76.2 million as of September 30, 2023, in favor of ED, which also allows Walden to participate in Title IV programs. On September 25, 2023, we received a letter from ED, requiring Adtalem to provide a letter of credit in the amount of $157.9 million in order for all Adtalem institutions to participate in Title IV programs. This requirement resulted from ED’s review of Adtalem’s financial responsibility score for fiscal year 2022. The Revolver availability will be reduced to $165.9 million by November 9, 2023 upon issuance of the letter of credit to ED as described above.

Many states require private-sector postsecondary education institutions to post surety bonds for licensure. In the U.S., Adtalem has posted $31.4 million of surety bonds as of September 30, 2023 with regulatory authorities on behalf of Chamberlain, Walden, AUC, RUSM, and RUSVM.

Interest Expense

The components of interest expense were as follows (in thousands):


	Three Months Ended
	September 30,
	2023		2022
Notes interest expense	$	5,568	$	5,597
Term Loan B interest expense		7,255		7,001
Term Loan B debt discount and issuance costs write-off		—		2,880
Notes issuance costs write-off		—		15
Gain on extinguishment of debt		—		(71)
Amortization of debt discount and issuance costs		1,155		1,332
Letters of credit fees		1,441		727
Other		238		279
Total interest expense	$	15,657	$	17,760

Covenants and Guarantees

The Credit Agreement and Notes contain 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.

Under the terms of the Credit Agreement, beginning on the fiscal quarter ending December 31, 2021 and through December 31, 2023, Adtalem is required to maintain a Total Net Leverage Ratio of equal to or less than 4.00 to 1.00, which requirement reduces to 3.25 to 1.00 for the fiscal quarter ending March 31, 2024 and thereafter. The Total Net Leverage Ratio under the Credit Agreement is defined as the ratio of (a) the aggregate principal amount of Consolidated Debt (as defined in the Credit Agreement) of Adtalem and its subsidiaries as of the last day of the most recently ended Test Period (as defined in the Credit Agreement) minus Unrestricted Cash (as defined in the Credit Agreement) and Permitted Investments (as defined in the Credit Agreement) of the Borrower and its subsidiaries for such Test Period to

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(b) EBITDA (as defined in the Credit Agreement) for such Test Period. EBITDA for purposes of these restrictive covenants includes incremental adjustments beyond those included in traditional EBITDA calculations. Specifically, the Credit Agreement EBITDA definition includes the pro forma impact of EBITDA to be received from certain acquisition-related synergies and cost optimization activities, subject to a 20% cap.

Obligations under the Credit Agreement are secured by a first-priority lien on substantially all of the assets of Adtalem and certain of its domestic wholly-owned subsidiaries (the “Subsidiary Guarantors”), which Subsidiary Guarantors also guarantee the obligations of Adtalem under the Credit Agreement, subject to certain exceptions. The Credit Agreement contains customary affirmative and negative covenants customary for facilities of its type, which, among other things, generally limit (with certain exceptions): mergers, amalgamations, or consolidations; the incurrence of additional indebtedness (including guarantees); the incurrence of additional liens; the sale, assignment, lease, conveyance or transfer of assets; certain investments; dividends and stock redemptions or repurchases in excess of certain amounts; transactions with affiliates; engaging in materially different lines of business; payments and modifications of indebtedness or the governing documents of Adtalem or any Subsidiary Guarantor; and other activities customarily restricted in such agreements.

The Credit Agreement contains customary events of default for facilities of this type. If an event of default under the Credit Agreement occurs and is continuing, the commitments thereunder may be terminated and the principal amount outstanding thereunder, together with all accrued and unpaid interest and other amounts owed thereunder, may be declared immediately due and payable.

The Term Loan B requires mandatory prepayments equal to the net cash proceeds from an asset sale or disposition which is not reinvested in assets within one-year from the date of disposition if the asset sale or disposition is in excess of $20.0 million, among other mandatory prepayment terms (see the Credit Agreement, as filed under Form 8-K dated August 12, 2021, for additional information and term definitions). With the $396.7 million prepayment on March 11, 2022 on the Term Loan B, the $394.1 million prepayment on the Notes during the fourth quarter of fiscal year 2022, and the $100.0 million prepayment on September 22, 2022 on the Term Loan B, we satisfied the mandatory prepayment requirement resulting from the sale proceeds received from the sale of the Financial Services segment. No other mandatory prepayments have been required since the execution of the Credit Agreement.

The Notes contain covenants that limit the ability of Adtalem and each of the Guarantors to incur or guarantee additional debt or issue disqualified stock or preferred stock; pay dividends and make other distributions on, or redeem or repurchase, capital stock; make certain investments; incur certain liens; enter into transactions with affiliates; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; create certain restrictions on the Guarantors to make dividends or other payments to Adtalem; designate restricted subsidiaries as unrestricted subsidiaries; and transfer or sell certain assets. These covenants are subject to a number of important exceptions and qualifications. The Indenture and the Notes also provide for certain customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Notes to become or be declared due and payable or would allow the trustee or the holders of at least 25% in principal amount of the then outstanding Notes to declare the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable by notice in writing to Adtalem and, upon such declaration, such principal and accrued and unpaid interest, if any, will be due and payable immediately.

Adtalem was in compliance with the debt covenants related to the Credit Agreement and the Notes covenants as of September 30, 2023.

14. Share Repurchases

Open Market Share Repurchase Programs

On March 1, 2022, we announced that the Board of Directors (the “Board”) authorized Adtalem’s thirteenth share repurchase program, which allows Adtalem to repurchase up to $300.0 million of its common stock through February 25,

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2025. Adtalem made share repurchases under its current share repurchase program as follows, which includes the market price of the shares, commissions, and excise tax (in thousands, except shares and per share data):


	Three Months Ended
	September 30,
	2023		2022
Total number of share repurchases		2,158,398		—
Total cost of share repurchases	$	91,884	$	—
Average price paid per share	$	42.57	$	—

As of ~~December 31, 2017, June~~September 30, ~~2017~~2023, $80.9 million of authorized share repurchases were remaining under the current share repurchase program. The timing and ~~December 31, 2016, the net balance of capitalized internal-use software development costs was $8.6 million, $11.8 million and $15.0 million, respectively.~~

~~Impairment of Long-Lived Assets~~

~~Adtalem evaluates the carrying~~ amount of ~~its significant long-lived assets whenever changes~~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 ~~circumstances~~private negotiated transactions, or ~~events indicate that~~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 ~~value~~programs are held as treasury shares. Repurchases under our share repurchase programs reduce the weighted-average number of ~~such assets may not~~shares of common stock outstanding for basic and diluted earnings per share calculations.

ASR Agreement

On March 14, 2022, we entered into an ASR agreement to repurchase $150.0 million of common stock. We received an initial delivery of 4,709,576shares of common stock representing approximately 80% of the total shares expected to be ~~fully recoverable. Events that may trigger~~delivered at the time of executing the ASR based on the per share price on the day prior to the execution date. This initial delivery of shares reduced the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations. The final number of shares to be repurchased was based on the volume-weighted average price of Adtalem’s common stock during the term of the ASR agreement, less a discount and subject to adjustments pursuant to the terms of the ASR agreement. See Note 8 “Earnings per Share” for information on the ASR impact to earnings per share for the three months ended September 30, 2022. The ASR agreement ended on October 14, 2022. Based on the volume-weighted average price of Adtalem’s common stock during the term of the ASR agreement, Adtalem owed the counter party 332,212 shares of common stock. We elected to settle the contract in cash instead of delivering shares by making a cash payment of $13.2 million on November 2, 2022.

On March 14, 2022, we recorded the $150.0 million purchase price of the ASR as a reduction to shareholders’ equity, consisting of a $120.0 million increase in treasury stock and a $30.0 million reduction in additional paid-in capital, which represented an ~~impairment analysis could include a decision by management to exit a market or a line of business or to consolidate operating locations. In~~equity forward contract, on the Consolidated Balance Sheets. During the second quarter of fiscal year ~~2018, we recorded impairment charges of $23.4~~2023, the $30.0 million to write-down building, building improvements, furniture and equipment to zero based on the fair market value of the DeVry University operations, which is classified within discontinued operations. Additionally, during the first quarter of fiscal year 2018, the campuses of AUC and RUSM were damaged from Hurricanes Irma and Maria, respectively. Based on current estimates, we recorded hurricane-related impairment charges to building, building improvements, furniture and equipment of $19.0 million and $29.9 million in the three and six months ended December 31, 2017, respectively, along with receivables for insurance reimbursements of these amounts, less deductibles, of $20.8 million as of December 31, 2017. The impairment charges are included in Cost of Educational Services in the Consolidated Statements of Income (Loss). For a discussion of the impairment review of goodwill and intangible assets see “Note 10: Intangible Assets.”

~~Foreign Currency Translation~~

The financial position and results of operations of the AUC, RUSM and RUSVM Caribbean operations are measured using the U.S. dollar as the functional currency. As such, there is no translation gain or loss associated with these operations. Adtalem Brazil’s operations and Becker’s and ACAMS’s international operations are measured using the local currency as the functional currency. Assets and liabilities of these entities are translated to U.S. dollars using exchange rates in effect at the balance sheet dates. Income and expense items are translated at monthly average exchange rates. The resulting translation adjustments are included in the component of Shareholders’ Equity designated as Accumulated Other Comprehensive Loss. Transaction gains or losses during each of the three-month and six-month periods ended December 31, 2017 and 2016 were not material.

~~Noncontrolling Interest~~

Adtalem currently maintains a 97.9% ownership interest in Adtalem Brazil with the remaining 2.1% owned by members of the current Adtalem Brazil senior management group. The adjustment to increase or decrease the Adtalem Brazil noncontrolling interest each reporting period for its proportionate share of Adtalem Brazil’s profit (loss) flows through the Consolidated Statements of Income (Loss) based on Adtalem’s noncontrolling interest accounting policy.

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

The Adtalem Brazil management put option is being accreted to its redemption value in accordance with the terms of the related stock purchase agreement. The adjustment to increase or decrease the put option to its expected redemption value each reporting period is recorded in retained earnings in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

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

Three Months Ended
December 31,

Six Months Ended
December 31,

2017 2016 2017 2016
Balance at Beginning of Period $ 6,566 $ 5,043 $ 6,285 $ 5,112
Net Income Attributable to Noncontrolling Interest 374 342 505 339
Increase in Redemption Value of Noncontrolling
Interest Put Option 465 1,335 615 1,269
Balance at End of Period $ 7,405 $ 6,720 $ 7,405 $ 6,720

~~Earnings per Common Share~~

Basic earnings per share is computed by dividing net income attributable to Adtalem by the weighted average number of common shares outstanding during the period plus unvested participating restricted stock units (“RSUs”). Diluted earnings per share is computed by dividing net income attributable to Adtalem by the weighted average number of shares assuming dilution. As required by GAAP, because the three and six months ended December 31, 2017 resulted in a net loss from continuing operations, diluted earnings per share is computed by dividing the net loss attributable to Adtalem by the weighted average number of basic shares. Diluted shares are computed using the Treasury Stock Method and reflect the additional shares that would be outstanding if dilutive stock-based grants were exercised during the period. Excluded from the computations of diluted earnings per share were outstanding stock-based grants representing 1,377,000 and 1,866,000 shares of common stock for the three and six months ended December 31, 2017, respectively, and 2,643,000 and 2,808,000 shares of common stock for the three and six months ended December 31, 2016, respectively. These outstanding stock-based grants were excluded because the exercise prices were greater than the average market price of the common shares or the assumed proceeds upon exercise under the Treasury Stock Method resulted in the repurchase of more shares than would be issued; thus, their effect would be anti-dilutive.

~~The following is a reconciliation of basic shares to diluted shares (in thousands):~~

Three Months Ended
December 31,

Six Months Ended
December 31,

2017 2016 2017 2016
Weighted Average Shares Outstanding 60,529 62,685 61,271 62,639
Unvested Participating RSUs 705 884 738 855
Basic Shares 61,234 63,569 62,009 63,494
Effect of Dilutive Stock Options 789 459 696 377
Diluted Shares 62,023 64,028 62,705 63,871

~~Treasury Stock~~

Adtalem’s Board of Directors (the “Board”) has authorized share repurchase programs on ten occasions (see “Note 8: Dividends and Share Repurchase Programs”). The tenth share repurchase program was approved on February 16, 2017 and commenced in February 2017. Shares that are repurchased by Adtalem areinitially recorded as ~~Treasury Stock at cost and result in~~ a reduction ~~of Shareholders’ Equity.~~

~~From time~~in additional paid-in capital was reclassified to ~~time, shares of its common~~treasury stock are delivered back to Adtalem under a swap arrangement resulting from employees’ exercise of incentive stock options pursuant to the terms of the Adtalem Stock Incentive Plans (see “Note 5: Stock-Based Compensation”). In addition, shares of its common stock are delivered back to Adtalem for payment of withholding taxes from employees for vesting RSUs. These shares are recorded as Treasury Stock at cost and ~~result in a reduction of Shareholders’ Equity.~~

Treasury shares are reissued on a monthly basis, at market value, to the Adtalem Colleague Stock Purchase Plan in exchange for employee payroll deductions. When treasury shares are reissued, Adtalem uses an average cost method to reduce the Treasury Stock balance. Gains on the difference between the average cost and the reissuance price are credited to Additional Paid-in Capital. Losses on the difference are charged to Additional Paid-in Capital to the extent that previous net gains from reissuance are included therein, otherwise such losses are charged to Retained Earnings.

~~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 disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenue and expense reported during the period. Actual results could differ from those estimates.

~~Accumulated Other Comprehensive Loss~~

Accumulated Other Comprehensive Loss is composed of the change in cumulative translation adjustment, primarily at Adtalem Brazil, and unrealized gains on available-for-sale marketable securities, net of the effects of income taxes.

~~The Accumulated Other Comprehensive Loss balance at December 31, 2017, consists of $61.1~~additional $13.2 million of cumulative translation losses ($59.8 million attributable to Adtalem and $1.3 million attributable to noncontrolling interest) and $0.4 million of unrealized gains on available-for-sale marketable securities, net of tax of $0.2 million and all attributable to Adtalem. At June 30, 2017, this balance consisted of $59.4 million of cumulative translation losses ($58.1 million attributable to Adtalem and $1.3 million attributable to noncontrolling interest) and $0.3 million of unrealized gains on available-for-sale marketable securities, net of tax of $0.2 million and all attributable to Adtalem. At December 31, 2016, this balance consisted of $51.1 million of cumulative translation losses ($50.0 million attributable to Adtalem and $1.1 million attributable to noncontrolling interest) and $0.2 million of unrealized gains on available-for-sale marketable securities, net of tax of $0.1 million and all attributable to Adtalem.

~~Advertising Expense~~

Advertising costs are recognized as expense in the period in which materials are purchased or services are performed. Advertising expense, which is included in Student Services and Administrative Expense in the Consolidated Statements of Income (Loss), was $22.6 million and $49.0 million for the three and six months ended December 31, 2017, respectively, and $24.2 million and $48.5 million for the three and six months ended December 31, 2016, respectively.

~~Hurricane Expense~~

AUC and RUSM were affected by hurricane events occurring in the first quarter of fiscal year 2018. Adtalem recorded expenses of $30.3 million and $44.0 million associated with the evacuation process, temporary housing and transportation of students, faculty and staff, and incremental additional costs of teaching in alternate locations in the three months and six months ended December 31, 2017, respectively. Insurance proceeds and expected proceeds of $30.5 million and $39.8 million were recorded to offset these expenses in the three months and six months ended December 31, 2017, respectively. Based upon preliminary damage assessments of facilities, impairment write-downs of buildings, building improvements, furniture and equipment of $19.0 million and $29.9 million were recorded in the three and six months December 31, 2017, respectively. Expected insurance proceeds of $19.0 million and $20.8 million were recorded to offset these expenses in the three months and six months ended December 31, 2017, respectively. In total, no net expense was recorded in the three months ended December 31, 2017 and $13.4 million of net expense was recorded in Cost of Educational Services in the Consolidated Statement of Income (Loss) for the six months ended December 31, 2017. The expense primarilytreasury stock, which represented ~~the deductibles under insurance policies.~~our final cash settlement payment.

~~Restructuring Charges~~

15. Stock-Based Compensation

Adtalem’s financial statements include charges related to severance and related benefits for reductions in staff. These charges also include early lease termination or cease-of-use costs and accelerated depreciation and gains and losses on disposals of property and equipment related to campus and administrative office consolidations (see “Note 11: Restructuring Charges”).

~~Recent Accounting Pronouncements~~

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18: “Statement of Cash Flows (Topic 230): Restricted Cash.” This guidance was issued to address the diversity that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendments will require that the statement of cash flows explain the change during the period in total cash, cash equivalents and restricted cash. Changes in the restricted cash balance will no longer be included as cash provided by or used in operating activities since these balances will now be included in the beginning and ending balances of cash in the statement of cash flows. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. In the fourth quarter of fiscal year 2017, we retrospectively adopted this guidance. See “Reclassifications” section below within this footnote, which discusses the disclosure impact to the Consolidated Statement of Cash Flows.

In August 2016, FASB issued ASU No. 2016-15: “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This guidance was issued to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for the financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Management has determined that our current ~~accounting policies align with this guidance. Therefore, this guidance will have no impact on the Consolidated Financial Statements.~~

In June 2016, FASB issued ASU No. 2016-13: “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This 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 amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management is evaluating the impact the guidance will have on Adtalem’s Consolidated Financial Statements.

In March 2016, FASB issued ASU No. 2016-09: “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This guidance was issued to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeitures, and classification on the statement of cash flows. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Excess tax benefits and tax deficiencies will no longer be recorded to additional paid-in capital, but rather to income tax expense or benefit in the income statement, which may increase volatility in the income statement. An accounting policy election exists to account for forfeitures as they occur. Also, adoption will require changes to classification of certain stock-based compensation transactions on the statement of cash flows. The cash outflow from employee taxes paid when shares are withheld by the employer will be reclassified from operating activities to financing activities on the statement of cash flows. In the first quarter of fiscal year 2018, we retrospectively adopted this guidance. We elected to account for forfeitures when they occur versus our prior practice of applying a forfeiture rate. The election resulted in a cumulative adjustment to increase retained earnings and decrease additional paid-in-capital, each by $0.6 million and the corresponding tax effect to decrease retained earnings and increase deferred tax assets, each by $0.2 million. See “Reclassifications” section below within this footnote, which discusses the disclosure impact to the Consolidated Statements of Cash Flows.

In February 2016, FASB issued ASU No. 2016-02: “Leases (Topic 842).” This guidance was issued to increase transparency and comparability among organizations by recognizing right-to-use assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Management is evaluating the impact the guidance will have on Adtalem’s Consolidated Financial Statements and believes the adoption will impact the Consolidated Balance Sheet with significant increases in assets and liabilities.

In January 2016, FASB issued ASU No. 2016-01: “Financial Instruments–Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This guidance was issued to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The guidance eliminates the classification of equity securities into different categories (that is, trading or available-for-sale) and requires equity securities to be measured at fair value with changes in the fair value recognized through net income. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. This guidance will require Adtalem to record the changes in the fair value of its available-for-sale equity investments through net income. Management anticipates the adoption will not have a significant impact on Adtalem’s Consolidated Financial Statements.

In May 2014, FASB issued ASU No. 2014-09: “Revenue from Contracts with Customers (Topic 606).” This guidance was issued to clarify the principles for recognizing revenue and develop a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The guidance is effective for the fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Adtalem will implement this guidance effective July 1, 2018 using the retrospective approach. Management is currently assessing Adtalem’s revenue recognition policies and procedures, and based on the analysis performed to date, anticipates the adoption will not have a significant impact on Adtalem’s Consolidated Financial Statements.

~~Reclassifications~~

Beginning in the third quarter of fiscal year 2017, we changed our reportable segments as described in “Note 15: Segment Information.” Prior period amounts have been reclassified to conform to the current reportable segment presentation within the Notes to Consolidated Financial Statements.

Beginning in the second quarter of fiscal year 2018, DeVry University is classified as discontinued operations as discussed in “Note 2: Discontinued Operations and Assets Held for Sale.” Prior period amounts have been revised to conform to the current classification. Certain expenses previously allocated to DeVry University within the U.S. Traditional Postsecondary segment have been reclassified to the Home Office and Other segment based on discontinued operation reporting guidance regarding allocation of corporate overhead. See “Note 15: Segment Information” for additional information.

In the fourth quarter of fiscal year 2017, we retrospectively adopted ASU 2016-18: “Statement of Cash Flows (Topic 230): Restricted Cash.” Under ASU 2016-18, changes in restricted cash is no longer included as cash provided by or used in operating activities since these balances are now included in the beginning and ending balance of cash in the statement of cash flows. In addition, in the first quarter of fiscal year 2018, we retrospectively adopted ASU 2016-09: “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Under ASU 2016-09, cash outflows from employee taxes paid when shares are withheld are classified as a financing activity. Our prior practice classified these amounts as an operating activity in the statement of cash flows. Therefore, we changed line items on the Consolidated Statements of Cash Flows for the six months ended December 31, 2016 based on adopting ASU 2016-09 and 2016-18 as follows (in thousands):

Net Cash Provided by Operating Activities:
Previously Reported $ 34,919
ASU 2016-09 Adjustment 2,650
ASU 2016-18 Adjustment 3,909
As Currently Reported $ 41,478

Net Cash Provided by Financing Activities:
Previously Reported $ 207,912
ASU 2016-09 Adjustment (2,650 )
As Currently Reported $ 205,262

Net Decrease in Cash, Cash Equivalents and Restricted Cash:
Previously Reported $ (108,219 )
ASU 2016-18 Adjustment 3,909
As Currently Reported $ (104,310 )

Cash, Cash Equivalents and Restricted Cash at End of Year:
Previously Reported $ 199,945
ASU 2016-18 Adjustment 11,092
As Currently Reported $ 211,037

~~NOTE 5: STOCK-BASED COMPENSATION~~

~~Adtalem maintains three~~ stock-based incentive ~~plans: the 2003 Stock Incentive Plan, the Amended and Restated Incentive Plan of 2005 and the~~plan is its Fourth Amended and Restated Incentive Plan of ~~2013.~~2013, which is administered by the Compensation Committee of the Board. Under ~~these plans,~~the plan, directors, key executives, and managerial employees are eligible to receive ~~incentive~~ stock ~~or nonqualified~~ options, ~~to purchase~~restricted stock units (“RSUs”), performance stock units (“PSUs”), and other forms of stock awards. As of September 30, 2023, 2,275,788 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, RSUs, performance-based RSUs and other stock and cash-based compensation. Although options remain outstanding~~were available for future issuance under the 2003 and 2005 incentive plans, no further stock-based grants will be issued from these plans. 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.

this plan.

Stock-based compensation expense is ~~measured at~~recognized on a straight-line basis over the ~~grant date based on the fair value of the award.~~required service period. 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. ~~With the adoption of ASU 2016-09 on July 1, 2017, we~~We account for forfeitures of ~~outstanding but~~ unvested ~~grants~~awards in the period they occur.

~~At December 31, 2017, 8,797,617 authorized but unissued~~ Adtalem issues new shares of common stock ~~were reserved for issuance under Adtalem’s stock-based incentive plans.~~to satisfy stock option exercises, RSU vests, and PSU vests.

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Stock-based compensation expense, which is included in student services and administrative expense, and the related income tax benefit were as follows (in thousands):


	Three Months Ended
	September 30,
	2023		2022
Stock-based compensation	$	7,455	$	6,145
Income tax benefit		(2,495)		(1,682)
Stock-based compensation, net of tax	$	4,960	$	4,463

There was no capitalized stock-based compensation cost as of September 30, 2023 and June 30, 2023.

Stock Options

The Compensation Committee of the Board determined to no longer grant stock options beginning with the fiscal year 2023 stock-based grants. We granted options generally with a four-year graduated vesting from the grant date and expire ten years from the grant date. The option price under the plan is the fair value of the shares on the date of the grant. The following ~~is a summary of options~~table summarizes stock option activity for the ~~six~~three months ended ~~December 31, 2017:~~September 30, 2023:

Weighted
Weighted Average Aggregate
Average Remaining Intrinsic
Number of Exercise Contractual Value
Options Price Life (in Years) (in thousands)
Outstanding at July 1, 2017 2,794,850 $ 34.68
Options Granted 491,275 33.90
Options Exercised (308,805 ) 31.65
Options Forfeited (28,770 ) 28.31
Options Expired (559,349 ) 46.79
Outstanding at December 31, 2017 2,389,201 32.20 6.29 $ 26,675
Exercisable at December 31, 2017 1,291,547 $ 35.86 4.12 $ 11,010


				Weighted-Average
	Number of			Remaining	Aggregate
	Stock	Weighted-Average		Contractual Life	Intrinsic Value
	Options	Exercise Price		(in years)	(in thousands)
Outstanding as of July 1, 2023	1,045,801	$	36.02
Exercised	(15,400)		35.65
Expired	(1,144)		28.32
Outstanding as of September 30, 2023	1,029,257		36.03	5.3	$	7,405
Exercisable as of September 30, 2023	889,582	$	36.17	5.0	$	6,333

The ~~following is a summary~~fair value of stock ~~appreciation rights activity for~~options that vested during the ~~six~~three months ended ~~December 31, 2017:~~

Weighted
Number of Weighted Average Aggregate
Stock Average Remaining Intrinsic
Appreciation Exercise Contractual Value
Rights Price Life (in Years) (in thousands)
Outstanding at July 1, 2017 99,500 $ 45.04
Rights Exercised (34,100 ) 38.71
Rights Expired (65,400 ) 48.34
Outstanding at December 31, 2017 - - - $ -
Exercisable at December 31, 2017 - $ - - $ -

September 30, 2023 and 2022 was $1.9 million and $2.1 million, respectively. As of September 30, 2023, $0.7 million of unrecognized stock-based compensation expense related to unvested stock options is expected to be recognized over a remaining weighted-average period of 1.8 years. The total intrinsic value of options exercised for the ~~six~~three months ended ~~December 31, 2017~~September 30, 2023 and ~~2016~~2022 was ~~$2.3~~$0.1 million and ~~$3.6~~$0.6 million, respectively.

RSUs

~~The fair value of Adtalem’s stock option awards was estimated using~~Prior to fiscal year 2023, we granted RSUs generally with a ~~binomial model. This model uses historical cancelation and exercise experience of Adtalem to determine the option value. It also takes into account the illiquid nature of employee options during the~~four-year graduated 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 six months of fiscal years 2018 and 2017 was $14.63 and $9.09, per share, respectively. The fair value of Adtalem’s stock option grants was estimated assuming the following weighted average assumptions:

Fiscal Year
2018 2017
Expected Life (in Years) 6.68 6.88
Expected Volatility 41.45 % 42.41 %
Risk-free Interest Rate 1.95 % 1.41 %
Dividend Yield 0.00 % 1.19 %
Pre-vesting Forfeiture Rate NA 10.00 %

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. On February 16, 2017, Adtalem discontinued payment of cash dividends, resulting in the elimination of a dividend yield from the ~~assumptions. The pre-vesting stock option forfeiture rate for~~grant date. Beginning in fiscal year ~~2017 was based on Adtalem’s historical stock option forfeiture experience. With~~2023, we grant RSUs generally with a three-year graduated vesting from the ~~adoption of ASU 2016-09 on July 1, 2017, we account for forfeitures as they occur. Therefore, no pre-vesting stock option forfeiture rate applies for fiscal year 2018.~~

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 six months of fiscal year 2018, Adtalem granted 493,880~~grant date. We also regularly grant RSUs to ~~selected employees and directors. Of these, 239,290 are performance-based RSUs and 254,590 are non-performance-based RSUs. Performance-based RSUs are earned by the recipients over~~our Board members with a three-year period based on achievement of certain mission-based and academic goals, achievement of a minimum level of Adtalem’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) or achievement of a minimum level of return on invested capital (“ROIC”). Non-performance-based RSUs are subject to restrictions which lapse ratably over one, three or four-year periods onone-year cliff vest from 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~~date. The recipient of the ~~non-performance based~~ RSUs has the right to receive dividend equivalents, if any. ~~This right does not pertain to~~The fair value of RSUs is the ~~performance-based RSUs.~~closing market price of our common stock on the grant date. The following ~~is a summary of~~table summarizes RSU activity for the ~~six~~three months ended ~~December 31, 2017:~~September 30, 2023:

Weighted
Average
Number of Grant Date
RSUs Fair Value
Nonvested at July 1, 2017 1,279,667 $ 26.14
RSUs Granted 493,880 34.15
RSUs Vested (363,831 ) 31.28
RSUs Forfeited (102,563 ) 28.22
Nonvested at December 31, 2017 1,307,153 $ 27.93


		Weighted-Average
	Number of	Grant Date
	RSUs	Fair Value
Unvested as of July 1, 2023	737,733	$	37.22
Granted	354,030		42.98
Vested	(231,082)		37.55
Forfeited	(4,938)		40.02
Unvested as of September 30, 2023	855,743	$	39.50

The ~~weighted average estimated~~weighted-average grant date fair value of RSUs granted ~~at market price under Adtalem’s stock-based incentive plans~~in the three months ended September 30, 2023 and 2022 was $42.98 and $39.53, respectively. The fair value of RSUs that vested during the ~~first six~~three months ~~of fiscal years 2018~~ended September 30, 2023 and ~~2017~~2022 was ~~$34.15~~$8.7 million and ~~$23.84, per share,~~$6.4 million, respectively.

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

Three Months Ended
December 31,

Six Months Ended
December 31,

2017 2016 2017 2016
Cost of Educational Services $ 1,214 $ 1,147 $ 2,634 $ 2,987
Student Services and Administrative Expense 2,581 2,436 5,598 6,346
Restructuring Expense - - 548 -
3,795 3,583 8,780 9,333
Income Tax Benefit (1,667 ) (1,251 ) (4,101 ) (3,283 )
Net Stock-Based Compensation Expense $ 2,128 $ 2,332 $ 4,679 $ 6,050

As of ~~December 31, 2017, $30.3~~September 30, 2023, $22.5 million of ~~total pre-tax~~ unrecognized

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stock-based compensation expense related to ~~nonvested grants~~unvested RSUs is expected to be recognized over a ~~weighted average~~remaining weighted-average period of ~~2.7~~2.2 years.

PSUs

We issue PSUs generally with a three-year cliff vest from the grant date. Our annual grant of PSUs is expected to be granted later in fiscal year 2024. The ~~total~~ fair value of ~~options and RSUs~~PSUs is the closing market price of our common stock on the grant date. We estimate the number of shares that will vest under our PSU awards when recognizing stock-based compensation expense for each reporting period. The final number of shares that vest under our PSUs is based on metrics approved by the Compensation Committee of the Board. The following table summarizes PSU activity for the three months ended September 30, 2023:


		Weighted-Average
	Number of	Grant Date
	PSUs	Fair Value
Unvested as of July 1, 2023	490,300	$	35.17
Granted ⁽¹⁾	149,690		42.98
Vested	(126,918)		29.92
Forfeited	(42,952)		30.10
Unvested as of September 30, 2023	470,120	$	39.27
⁽¹⁾ Includes incremental PSUs awarded upon achievement of metrics.

The weighted-average grant date fair value of PSUs granted in the three months ended September 30, 2023 was $42.98. We did not grant any PSUs for the three months ended September 30, 2022. The fair value of PSUs that vested during the ~~six~~three months ended ~~December 31, 2017~~September 30, 2023 and ~~2016~~2022 was ~~approximately $14.2~~$4.1 million and ~~$12.8~~$3.4 million, respectively.

~~There was no capitalized~~ As of September 30, 2023, $12.9 million of unrecognized stock-based compensation ~~cost at each~~expense related to unvested PSUs is expected to be recognized over a remaining weighted-average period of ~~December 31, 2017, June 30, 2017 and December 31, 2016.~~1.8 years.

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.

~~NOTE 6: FAIR VALUE MEASUREMENTS~~

16. 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 – ~~Quoted~~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~~–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 ~~some~~ 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.

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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 with investments in stock and bond mutual funds to fund obligations under a nonqualified deferred compensation plan. The fair value of the investments in the rabbi trust included in prepaid expenses and other current assets on the Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023 was $12.1 million and $12.5 million, respectively. These investments are recorded at fair value based upon quoted market prices using Level 1 inputs.

The carrying value of the credit extension programs, which approximates its fair value, is included in accounts receivable, net and other assets, net on the Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023 of $29.3 million and $29.7 million, respectively, and is classified as Level 2. See Note 9 “Accounts Receivable and Credit Losses” for additional information on these credit extension programs.

Adtalem has a nonqualified deferred compensation plan for highly compensated employees and its Board members. The participant’s “investments” are in a hypothetical portfolio of investments which are tracked by an administrator. Changes in the fair value of the nonqualified deferred compensation obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units. Total liabilities under the plan included in accrued liabilities on the Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023 were $12.2 million and $12.6 million, respectively. The fair value of the nonqualified deferred compensation obligation is classified as Level 2 because their inputs are derived principally from observable market data by correlation to the hypothetical investments.

As of September 30, 2023 and June 30, 2023, borrowings under our long-term debt agreements were $708.3 million and $708.3 million, respectively. The fair value of the Notes was $373.9 million as of September 30, 2023, which is based upon quoted market prices and is classified as Level 1. The fair value of the Term Loan B was $303.5 million as of September 30, 2023, which is based upon quoted market prices in a non-active market and is classified as Level 2. See Note 13 “Debt” for additional information on our long-term debt agreements.

As of September 30, 2023 and June 30, 2023, 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~~intangible assets arising from a business combination. These assets are not amortized and charged to expense over time. Instead, goodwill and indefinite-lived ~~intangibles~~intangible assets 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, ~~2017.~~2023. See ~~“Note 10:~~Note 12 “Goodwill and Intangible Assets” for ~~further discussion~~additional information on the impairment review, including valuation techniques and assumptions.

~~The following table presents Adtalem’s assets~~17. Commitments and ~~liabilities at December 31, 2017, that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands).~~

Level 1 Level 2 Level 3
Cash and Cash Equivalents $ 212,239 $ - $ -
Available-for-Sale Investments:
Marketable Securities, short-term 4,268 - -
Institutional Loans Receivable, Net - 44,280 -
Deferred Acquisition Obligations - 23,903 -
FIES Receivable - 16,087 -
Total Financial Assets at Fair Value $ 216,507 $ 84,270 $ -

The following table presents Adtalem’s assets and liabilities at June 30, 2017, that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands).

Level 1 Level 2 Level 3
Cash and Cash Equivalents $ 240,426 $ - $ -
Available-for-Sale Investments:
Marketable Securities, short-term 4,013 - -
Institutional Loans Receivable, Net - 45,759 -
Deferred Acquisition Obligations - �� 26,590 -
FIES Receivable - 22,860 -
Total Financial Assets at Fair Value $ 244,439 $ 95,209 $ -

The following table presents Adtalem’s assets and liabilities at December 31, 2016, that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands).

Level 1 Level 2 Level 3
Cash and Cash Equivalents $ 197,860 $ - $ -
Available-for-Sale Investments:
Marketable Securities, short-term 3,844 - -
Institutional Loans Receivable, Net - 44,531 -
Deferred Acquisition Obligations - 29,499 -
FIES Long-Term Receivable - 13,151 -
Total Financial Assets at Fair Value $ 201,704 $ 87,181 $ -

~~Cash and Cash Equivalents and Investments in short-term Marketable Securities are valued using a market approach based on quoted market prices of identical instruments.~~

The fair value of the institutional loans receivable included in Accounts Receivable, Net and Other Assets, Net on the Consolidated Balance Sheets as of December 31, 2017, June 30, 2017 and December 31, 2016 is estimated by discounting the future cash flows using current rates for similar arrangements. See “Note 7: Financing Receivables” for further discussion on these institutional loans receivable.

The fair value of the deferred acquisition obligations is estimated by discounting the future cash flows using current rates for similar arrangements. $4.0 million, $14.8 million and $15.1 million was classified as Accrued Liabilities on the Consolidated Balance Sheets at December 31, 2017, June 30, 2017 and December 31, 2016, respectively, and $19.9 million, $11.8 million and $14.4 million was classified as Deferred Rent and Other Liabilities on the Consolidated Balance Sheets at December 31, 2017, June 30, 2017 and December 31, 2016, respectively.

The fair value of Adtalem Brazil’s receivable under Brazil’s FIES public loan program included in Accounts Receivable, Net on the Consolidated Balance Sheets as of December 31, 2017 and June 30, 2017, and in Other Assets, Net on the Consolidated Balance Sheet as of December 31, 2016 is estimated by discounting the future cash flows using published market data on Brazilian interest and inflation rates.

~~NOTE 7: FINANCING RECEIVABLES~~

Adtalem’s institutional loan programs are available to students at its Chamberlain, AUC, RUSM, RUSVM and Carrington institutions. These loan 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 loans may be used for students’ living expenses. Repayment plans for institutional loan program balances are developed to address the financial circumstances of the particular student. Interest charges accrue each month on the unpaid balance. Chamberlain and Carrington require that students begin repaying loans while they are still in school with a minimum payment level designed to demonstrate their capability to repay, reduce the possibility of over borrowing and minimize interest being accrued on the loan balance. Payments may increase upon completing or departing the program. After a student leaves school, the student typically will have a monthly installment repayment plan. In addition, the Becker CPA Exam Review Course can be financed through Becker with an 18-month term loan program.

Reserves for uncollectible loans are determined by analyzing the current aging of institutional loans and historical loss rates of loans at each institution. Management performs this analysis periodically throughout the year. Since all of Adtalem’s financing receivables are generated through the extension of credit to fund educational costs, all such receivables are considered part of the same loan portfolio.

~~The following table details the institutional loan balances along with the related allowances for credit losses (in thousands).~~

December 31, 2017 June 30, 2017 December 31, 2016
Gross Institutional Loans $ 57,397 $ 57,391 $ 54,070
Allowance for Credit Losses:
Balance at July 1 $ (11,632 ) $ (7,915 ) $ (7,915 )
Charge-offs and Adjustments 1,024 4,722 3,054
Recoveries (148 ) (573 ) (438 )
Additional Provision (2,361 ) (7,866 ) (4,240 )
Balance at End of Period (13,117 ) (11,632 ) (9,539 )
Net Institutional Loans $ 44,280 $ 45,759 $ 44,531

Of the net balances above, $20.8 million, $20.1 million and $18.1 million was classified as Accounts Receivable, Net on the Consolidated Balance Sheets at December 31, 2017, June 30, 2017 and December 31, 2016, respectively, and $23.5 million, $25.7 million and $26.4 million, representing amounts due beyond one year, was classified as Other Assets, Net on the Consolidated Balance Sheets at December 31, 2017, June 30, 2017 and December 31, 2016, respectively.

~~The following tables detail the credit risk profiles of the institutional loan balances based on payment activity and an aging of past due institutional loans (in thousands).~~

December 31, June 30, December 31,
2017 2017 2016
Institutional Loans:
Performing $ 45,495 $ 47,072 $ 46,559
Nonperforming 11,902 10,319 7,511
Total Institutional Loans $ 57,397 $ 57,391 $ 54,070

1-29 Days
Past Due 30-59
Days Past
Due 60-89
Days Past
Due Greater
Than 90
Days Past
Due Total Past
Due Current Total
Institutional
Loans
Institutional Loans:
December 31, 2017 $ 8,569 $ 1,021 $ 1,166 $ 11,902 $ 22,658 $ 34,739 $ 57,397
June 30, 2017 $ 7,162 $ 2,192 $ 583 $ 10,319 $ 20,256 $ 37,135 $ 57,391
December 31, 2016 $ 5,657 $ 2,904 $ 1,762 $ 7,511 $ 17,834 $ 36,236 $ 54,070

Loans are considered nonperforming if they are more than 90 days past due. At December 31, 2017, nonperforming loans totaled $11.9 million, of which $11.8 million had a specific allowance for credit losses. At June 30, 2017, nonperforming loans totaled $10.3 million, of which $10.2 million had a specific allowance for credit losses. At December 31, 2016, nonperforming loans totaled $7.5 million, of which $7.4 million had a specific allowance for credit losses.

~~NOTE 8: DIVIDENDS AND SHARE REPURCHASE PROGRAMS~~

~~Adtalem paid dividends of $11.4 million on December 22, 2016. On February 16, 2017, the Board determined to discontinue cash dividend payments. Future dividends will be at the discretion of the Board.~~

~~Adtalem has repurchased shares under the following programs as of December 31, 2017:~~

Date Shares Total Cost
Authorized Repurchased (in millions)
November 15, 2006 908,399 $ 35.0
May 13, 2008 1,027,417 50.0
November 11, 2009 972,205 50.0
August 11, 2010 1,103,628 50.0
November 10, 2010 968,105 50.0
May 20, 2011 2,396,143 100.0
November 2, 2011 3,478,299 100.0
August 29, 2012 2,005,317 62.7
December 15, 2015 1,672,250 36.6
February 16, 2017 3,460,922 121.2
Totals 17,992,685 $ 655.5

On February 16, 2017, the Board authorized Adtalem’s tenth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2020. A total of 2,675,626 shares were repurchased during the six months ended December 31, 2017 under the tenth share repurchase program for an aggregate of $93.2 million. The timing and amount of any repurchase will be determined based on 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. The buyback 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.

~~NOTE 9: BUSINESS COMBINATIONS~~

~~São Judas Tadeu~~

On November 1, 2017, Adtalem Brazil completed the acquisition of São Judas Tadeu (“SJT”). Under the terms of the agreement, Adtalem Brazil agreed to pay approximately $6.0 million in cash, in exchange for 100% of the stock of SJT. Approximately $1.0 million of payments were made in the second quarter of fiscal year 2018, with additional aggregate payments of approximately $5.0 million required over the succeeding four years. SJT offers medical doctor specialty test preparation and currently serves approximately 2,700 students located in São Paulo. The acquisition of SJT adds a new product offering to Adtalem Brazil’s test preparation business.

The operations of SJT are included in Adtalem’s Technology and Business segment. The results of SJT’s operations have been included in the Consolidated Financial Statements of Adtalem since the date of acquisition.

~~The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands).~~

November 1,
2017
Current Assets $ 558
Property and Equipment 16
Other Long-term Assets 1,838
Goodwill 4,121
Total Assets Acquired 6,533
Liabilities Assumed 569
Net Assets Acquired $ 5,964

Goodwill, which represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired, was all assigned to the Adtalem Brazil reporting unit which is classified within the Technology and Business segment. Factors that contributed to a purchase price resulting in the recognition of goodwill include SJT’s strategic fit into Adtalem’s expanding presence in test preparation and the acquired assembled workforce. None of the goodwill acquired is expected to be deductible for income tax purposes.

~~There is no pro forma presentation of operating results for this acquisition due to the insignificant effect on consolidated operations.~~

~~Association of Certified Anti-Money Laundering Specialists~~

On July 1, 2016, Becker completed the acquisition of 100% of the stock of ACAMS for $330.6 million, net of cash of $23.5 million. The payment for this purchase was made in the first quarter of fiscal year 2017, and was funded with available domestic cash balances and $175 million in borrowings under Adtalem’s revolving credit facility. ACAMS is an international membership organization dedicated to enhancing the knowledge and skills of anti-money laundering and financial crime prevention professionals. The acquisition furthers Adtalem’s global growth strategy into professional education and enhances Becker’s position as a leading provider of lifelong learning for professionals.

The operations of ACAMS are included in Adtalem’s Professional Education segment. The results of ACAMS’s operations have been included in the Consolidated Financial Statements of Adtalem since the date of acquisition.

~~The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands).~~

July 1, 2016

Current Assets $ 24,895
Property and Equipment 432
Other Long-term Assets 3,131
Intangible Assets 88,600
Goodwill 274,689
Total Assets Acquired 391,747
Liabilities Assumed 37,619
Net Assets Acquired $ 354,128

Goodwill, which represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired, was all assigned to the Becker and ACAMS reporting unit which is classified within the Professional Education segment. Factors that contributed to a purchase price resulting in the recognition of goodwill include ACAMS’s strategic fit into Adtalem’s expanding presence in professional education, the reputation of the ACAMS brand as a leader in the industry and potential future growth opportunity. None of the goodwill acquired is expected to be deductible for income tax purposes. Of the $88.6 million of acquired intangible assets, $39.9 million was assigned to Trade Names, which has been determined not to be subject to amortization. The remaining acquired intangible assets were determined to be subject to amortization with an average useful life of approximately nine years. The values and estimated useful lives by asset type are as follows (in thousands):

July 1, 2016
Value
Assigned Estimated
Useful Life
Customer Relationships $ 42,500 10 years
Curriculum 5,000 3 years
Non-compete Agreements 700 1 year
Proprietary Technology 500 4 years

~~There is no pro forma presentation of operating results for this acquisition due to the insignificant effect on consolidated operations.~~

~~NOTE 10: INTANGIBLE ASSETS~~

Intangible assets relate mainly to acquired business operations. These assets consist of the acquisition fair value of certain identifiable intangible assets acquired and goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.

~~Intangible assets consist of the following (in thousands):~~

December 31, 2017
Gross
Carrying
Amount Accumulated
Amortization Weighted Average
Amortization
Period
Amortizable Intangible Assets:
Student Relationships $ 11,049 $ (8,999 ) 5 Years
Customer Relationships 42,900 (7,261 ) 10 Years
Non-compete Agreements 700 (682 ) 1 Year
Curriculum/Software 7,143 (3,375 ) 4 Years
Franchise Contracts 10,597 (1,717 ) 18 Years
Clinical Agreements 392 (118 ) 15 Years
Trade Names 1,143 (1,000 ) 10 Years
Proprietary Technology 500 (187 ) 4 Years
Total $ 74,424 $ (23,339 )
Indefinite-Lived Intangible Assets:
Trade Names $ 109,462
Ross Title IV Eligibility and Accreditations 14,100
Intellectual Property 13,940
Chamberlain Title IV Eligibility and Accreditations 1,200
Carrington Title IV Eligibility and Accreditations 20,200
AUC Title IV Eligibility and Accreditations 100,000
Adtalem Brazil Accreditation 97,013
Total $ 355,915

June 30, 2017
Gross
Carrying
Amount Accumulated
Amortization
Amortizable Intangible Assets:
Student Relationships $ 12,459 $ (9,323 )
Customer Relationships 42,900 (4,923 )
Non-compete Agreements 700 (665 )
Curriculum/Software 7,147 (2,329 )
Franchise Contracts 10,615 (1,425 )
Clinical Agreements 393 (104 )
Trade Names 1,145 (945 )
Proprietary Technology 500 (125 )
Total $ 75,859 $ (19,839 )
Indefinite-Lived Intangible Assets:
Trade Names $ 109,519
Ross Title IV Eligibility and Accreditations 14,100
Intellectual Property 13,940
Chamberlain Title IV Eligibility and Accreditations 1,200
Carrington Title IV Eligibility and Accreditations 20,200
AUC Title IV Eligibility and Accreditations 100,000
Adtalem Brazil Accreditation 97,179
Total $ 356,138

December 31, 2016
Gross
Carrying
Amount Accumulated
Amortization
Amortizable Intangible Assets:
Student Relationships $ 12,657 $ (8,324 )
Customer Relationships 42,900 (2,547 )
Non-compete Agreements 1,640 (1,226 )
Curriculum/Software 8,143 (2,206 )
Franchise Contracts 10,783 (1,148 )
Clinical Agreements 399 (93 )
Trade Names 1,163 (901 )
Proprietary Technology 500 (63 )
Total $ 78,185 $ (16,508 )
Indefinite-Lived Intangible Assets:
Trade Names $ 110,048
Ross Title IV Eligibility and Accreditations 14,100
Intellectual Property 13,940
Chamberlain Title IV Eligibility and Accreditations 1,200
Carrington Title IV Eligibility and Accreditations 20,200
AUC Title IV Eligibility and Accreditations 100,000
Adtalem Brazil Accreditation 98,718
Total $ 358,206

Amortization expense for amortized intangible assets was $2.5 million and $5.0 million for the three and six months ended December 31, 2017, respectively, and $2.4 million and $5.7 million for the three and six months ended December 31, 2016, respectively. Estimated amortization expense for amortizable intangible assets for the next five fiscal years ending June 30 and in the aggregate, by reporting unit, is as follows (in thousands):

Becker and Adtalem
Fiscal Year ACAMS Brazil Total
2018 $ 6,501 $ 2,861 $ 9,362
2019 6,422 2,057 8,479
2020 4,671 1,448 6,119
2021 4,440 907 5,347
2022 4,300 615 4,915
Thereafter 15,386 6,387 21,773

All amortizable intangible assets except student relationships and customer relationships are being amortized on a straight-line basis. The amount being amortized for student relationships is based on the estimated progression of the students through the respective, Centro Universitário Vale do Ipojuca (“Unifavip”), Damásio Educacional (“Damasio”) and Grupo Ibmec Educacional S.A. (“Grupo Ibmec”) programs, giving consideration to the revenue and cash flow associated with both existing students and new applicants. The amount being amortized for customer relationships related to ACAMS 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, 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.

In accordance with GAAP, goodwill and indefinite-lived intangibles arising from a business combination are not amortized and charged to expense over time. Instead, these assets must be reviewed annually for impairment or more frequently if circumstances arise indicating potential impairment. Adtalem’s annual impairment review was most recently completed during the fourth quarter of fiscal year 2017, at which time, there was no impairment loss associated with recorded goodwill or indefinite-lived intangible assets for any reporting unit.

Adtalem had six reporting units that contained goodwill as of the start of the second quarter of fiscal year 2018. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management. If the carrying amount of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss to goodwill is recognized. In analyzing the results of operations and business conditions of all the reporting units as of December 31, 2017, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value, except at DeVry University. During the quarter, a triggering event did occur within the DeVry University reporting unit which resulted in a write-off of all goodwill balances as of December 31, 2017.

On December 4, 2017, Adtalem, entered into a Stock Purchase Agreement (the “Purchase Agreement”), pursuant to which Adtalem agreed to sell DeVry University to Cogswell Education, LLC (“Cogswell”). Subject to the terms and conditions of the Purchase Agreement, Adtalem will sell all of the outstanding equity interests of DeVry University, Inc. and DeVry New York Inc. to Cogswell for $1.00. As this sales price indicates a fair value that is less than the carrying value of the DeVry University goodwill and intangible asset balances, both amounts were written down to zero as of December 31, 2017. This resulted in impairment charges for goodwill of $22.2 million and indefinite-lived intangible assets of $1.6 million in the second quarter of fiscal year 2018. These amounts were charged to Discontinued Operations (see “Note 2: Discontinued Operations and Assets Held for Sale”).

For indefinite-lived intangible assets at the six reporting units that contained indefinite-lived intangible assets as of December 31, 2017, management first analyzes qualitative factors including results of operations and business conditions, 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. At Carrington, management is executing a plan to increase enrollment and control costs to improve profitability. As a result, as of the end of the second quarter of fiscal year 2018, management does not believe business conditions had deteriorated such that it was more likely than not that the fair value of the Title IV Eligibility and Accreditation indefinite-lived intangible asset had fallen below its carrying value.Should declines in student enrollment at Carrington result in financial performance that is significantly below management expectations, the carrying value of this reporting unit’s indefinite-lived intangible assets could be impaired. This could require a write-off of up to $20.2 million.

Management does not believe the effects of Hurricanes Irma and Maria created a triggering event which would require an impairment analysis of AUC’s or RUSM’s indefinite-lived intangible assets and goodwill. Damage to physical property will be repaired with the majority of costs expected to be reimbursable by insurance proceeds. The September 2017 semesters at both institutions were completed with minimal lost students and revenue and commencement of future semesters is not in question. Management believes it is probable that the response to the crisis and its ability to continue providing educational services demonstrates AUC’s and RUSM’s ability to generate future revenue and operating results sufficient to maintain fair values of these assets in excess of their carrying values.

These interim triggering event conclusions were based on the fact that the qualitative analysis of Adtalem’s reporting units and indefinite-lived intangible assets resulted in no impairment indicators as of the end of fiscal year 2017, except at the DeVry University reporting unit, and that no interim events or deviations from planned operating results occurred as of December 31, 2017, that would cause management to reassess these conclusions.

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 additional impairments of intangible assets or goodwill.

At December 31, 2017, intangible assets from business combinations totaled $407.0 million and goodwill totaled $832.9 million. Together, these assets equaled approximately 56% of total assets as of such date, and any impairment could significantly affect future results of operations.

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

December 31, June 30, December 31,
Reporting Unit 2017 2017 2016
Chamberlain $ 4,716 $ 4,716 $ 4,716
AUC 68,321 68,321 68,321
RUSM and RUSVM 237,173 237,173 237,173
Becker and ACAMS 306,808 306,653 306,382
Adtalem Brazil 215,925 212,223 216,050
Total $ 832,943 $ 829,086 $ 832,642

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

December 31, June 30, December 31,
Reporting Segment 2017 2017 2016
Medical and Healthcare $ 310,210 $ 310,210 $ 310,210
Professional Education 306,808 306,653 306,382
Technology and Business 215,925 212,223 216,050
Total $ 832,943 $ 829,086 $ 832,642

~~The table below summarizes the changes in the carrying amount of goodwill by reporting segment (in thousands):~~

U.S. Traditional
Postsecondary
Medical Technology Accumulated
and Professional and Impairment
Healthcare Education Business Gross Losses Total
Balance at June 30, 2016 310,210 32,043 223,558 185,717 (185,717 ) 565,811
Purchase Accounting Adjustments - - (3,122 ) - - (3,122 )
Acquisitions - 274,620 - - - 274,620
Foreign exchange rate changes - (281 ) (4,386 ) - - (4,667 )
Balance at December 31, 2016 310,210 306,382 216,050 185,717 (185,717 ) 832,642
Purchase Accounting Adjustments - 69 (481 ) - - (412 )
Foreign exchange rate changes - 202 (3,346 ) - - (3,144 )
Balance at June 30, 2017 310,210 306,653 212,223 185,717 (185,717 ) 829,086
Acquisitions - - 4,121 - - 4,121
Foreign exchange rate changes - 155 (419 ) - - (264 )
Balance at December 31, 2017 $ 310,210 $ 306,808 $ 215,925 $ 185,717 $ (185,717 ) $ 832,943

The increase in the goodwill balance from June 30, 2017 in the Professional Education segment is the result of a change in the value of the British Sterling Pound compared to the U.S. dollar. Since Becker’s European subsidiary’s goodwill is recorded in local currency, fluctuations in the value of the British Sterling Pound in relation to the U.S. dollar will cause changes in the balance of this asset. The increase in the goodwill balance from June 30, 2017 in the Technology and Business segment is the result of the addition of $4.1 million with the acquisition of SJT. The increase was partially offset by a change in the value of the Brazilian Real compared to the U.S. dollar. Since Adtalem Brazil goodwill is recorded in local currency, fluctuations in the value of the Brazilian Real in relation to the U.S. dollar will cause changes in the balance of this asset.

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

December 31, June 30, December 31,
Reporting Segment 2017 2017 2016
Medical and Healthcare $ 137,500 $ 137,500 $ 137,500
Professional Education 67,812 67,812 67,812
Technology and Business 130,403 130,626 132,694
U.S. Traditional Postsecondary 20,200 20,200 20,200
Total $ 355,915 $ 356,138 $ 358,206

Total indefinite-lived intangible assets decreased by $0.2 million from June 30, 2017. The decrease is the result of a change in the value of the Brazilian Real as compared to the U.S. dollar. Since Adtalem Brazil intangible assets are recorded in the local currency, fluctuations in the value of the Brazilian Real in relation to the U.S. dollar will cause changes in the balance of these assets.

~~NOTE 11: RESTRUCTURING CHARGES~~

During the first three and six months of fiscal year 2018, Adtalem recorded restructuring charges primarily related to reductions in force (“RIF”) and real estate consolidations at Carrington and Adtalem’s home office. Termination benefit charges, as a result of reducing Adtalem’s workforce by 98 positions in the first six months of fiscal year 2018, represented severance pay and benefits for these employees. We also recorded a reduction to restructuring charges in the first six months of fiscal year 2018 for an adjustment to previously accrued estimates for real estate consolidations at Adtalem’s home office. During the first three and six months of fiscal year 2017, Adtalem recorded restructuring charges primarily related to real estate consolidations at Carrington and Adtalem’s home office. Adtalem’s home office is classified as “Home Office and Other” in “Note 15: Segment Information” to the Consolidated Financial Statements. Pre-tax restructuring charges by segment were as follows (in thousands):

Three Months Ended December 31, 2017 Six Months Ended December 31, 2017

Real
Estate

Termination
Benefits
Total
Real
Estate

Termination
Benefits
Total
Medical and Healthcare $ - $ - $ - $ 26 $ 86 $ 112
U.S. Traditional Postsecondary 830 298 1,128 1,722 656 2,378
Home Office and Other 160 1,266 1,426 (465 ) 2,916 2,451
Total $ 990 $ 1,564 $ 2,554 $ 1,283 $ 3,658 $ 4,941

Three Months Ended December 31, 2016 Six Months Ended December 31, 2016

Real
Estate

Termination
Benefits
Total
Real
Estate

Termination
Benefits
Total
U.S. Traditional Postsecondary $ 2,335 $ - $ 2,335 $ 3,703 $ - $ 3,703
Home Office and Other 266 362 628 1,929 681 2,610
Total $ 2,601 $ 362 $ 2,963 $ 5,632 $ 681 $ 6,313

~~The following table summarizes the separation and restructuring plan activity for the fiscal years 2018 and 2017, for which cash payments are required (in thousands):~~

Liability balance at June 30, 2016 $ 48,223
Increase in liability (separation and other charges) 27,620
Reduction in liability (payments and adjustments) (29,728 )
Liability balance at June 30, 2017 46,115
Increase in liability (separation and other charges) 11,954
Reduction in liability (payments and adjustments) (16,304 )
Liability balance at December 31, 2017 $ 41,765

Of this liability balance, $16.4 million is recorded as Accrued Liabilities and $25.4 million is recorded as Deferred Rent and Other Liabilities on the Consolidated Balance Sheet at December 31, 2017. These liability balances primarily represent rent accruals and costs for employees that have either not yet separated from Adtalem or their full severance has not yet been paid. All of these remaining costs are expected to be paid over the next 12 months except for rent charges which may be paid out for periods of up to 8 years.

~~NOTE 12: INCOME TAXES~~

Tax expense from continuing operations of $109.6 million was recorded in the second quarter of fiscal year 2018. As discussed below, tax expense from continuing operations includes $101.2 million to record the one-time impact of the Tax Cuts and Jobs Act (the “Tax Act”), and generated effective tax rates on income from continuing operations of 202.0% and 141.2% for the second quarter and first six months of fiscal year 2018, respectively. The effective tax rates on income from continuing operations excluding tax expense related to the Tax Act were 15.6% for the second quarter and 15.0% for the first six months of fiscal year 2018. A tax benefit of $10.1 million was recorded in continuing operations in the second quarter of fiscal year 2017, driven primarily from the settlement costs of various regulatory litigation, and generated effective tax rates on income from continuing operations of 362.0% and -7.6% for the second quarter and first six months of fiscal year 2017. The effective tax rates on income from continuing operations excluding the settlements were 19.4% and 20.8% for the second quarter and first six months of fiscal year 2017. Excluding the one-time impact of the Tax Act and settlements, the decrease in tax rates reflects the decrease in the U.S. tax rate resulting from the Tax Act, as well as an increase in the percentage of earnings from foreign operations, which are taxed at lower rates than domestic earnings.

Four of Adtalem’s operating units, AUC, which operates in St. Maarten, RUSM, which operates in Dominica, RUSVM, which operates in St. Kitts, and Adtalem Brazil, which operates in Brazil, all benefit from local tax incentives. 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. Both of these agreements have been extended to provide, in the case of RUSM, an indefinite period of exemption and, in the case of RUSVM, exemption until 2037. Adtalem Brazil’s effective tax rate reflects benefits derived from its participation in PROUNI, a Brazilian program for providing scholarships to a portion of its undergraduate students.

Adtalem had not previously recorded a U.S. federal or state tax provision for the undistributed earnings of its international subsidiaries. As a result of the Tax Act, Adtalem has revised its intent to indefinitely reinvest accumulated cash balances, future cash flows and post-acquisition undistributed earnings and profits in foreign operations, and only intends to maintain this position with respect to cash balances, cash flows and accumulated and future earnings in Brazil. In accordance with this plan, cash held by the subsidiaries in Brazil will not be available for general company purposes, and no foreign or state tax has been recorded on such amount. As of December 31, 2017, the cumulative undistributed earnings attributable to operations in Brazil was approximately $91 million.

The Tax Act includes significant changes to the U.S. corporate income tax system, which reduces the U.S. federal corporate tax rate from 35.0% to 21.0% as of January 1, 2018; shifts to a modified territorial tax regime, which requires companies to pay a transition tax on earnings of certain foreign subsidiaries that were previously tax deferred; and creates new taxes on certain foreign-sourced earnings. The decrease in the U.S. federal corporate tax rate from 35.0% to 21.0% results in a blended statutory tax rate of 28.1% for the fiscal year ending June 30, 2018. The new taxes for certain foreign-sourced earnings under the Tax Act are effective for Adtalem after the fiscal year ending June 30, 2018.

The tax expense recorded in the quarter upon enactment of the Tax Act includes $96.3 million for the one-time transition tax on the deemed repatriation of foreign earnings, payable over eight years; $2.5 million to record the impact of the reduction in tax rates on our net deferred tax asset position; and $2.7 million for state income and foreign withholding taxes on undistributed foreign earnings that are no longer intended to be indefinitely reinvested in foreign operations, partially offset by $0.3 million to reduce tax expense recorded in the first quarter of fiscal year 2018 for the reduction in the U.S. tax rate. As of December 31, 2017, Adtalem had not fully completed its accounting for the tax effects of the enactment of the Tax Act. We are still evaluating various impacts of the enacted legislation and these impacts may materially differ from the estimated impacts recognized in the second quarter of fiscal year 2018 due to future treasury regulations, tax law technical corrections, and other potential guidance, notices, rulings, refined computations and actions we may take as a result of the tax legislation, and other items. The SEC has issued rules that allow for a measurement period of up to one year after the enactment date of the legislation to finalize the recording of the related tax impacts.

The Tax Act also includes provisions for Global Intangible Low-Taxed Income (“GILTI”) wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations. This income will effectively be taxed in general at a 10.5% tax rate. Because of the complexity of these provisions, Adtalem has not completed its analysis on the potential impact to its deferred tax assets and liabilities, or whether to (i) account for GILTI as a component of tax expense in the period in which Adtalem is subject to the rules (the “period cost method”), or (ii) account for GILTI in Adtalem’s measurement of deferred taxes (the “deferred method”).

~~NOTE 13: DEBT~~

~~Revolving Credit Facility~~

Adtalem entered into a revolving credit facility on March 31, 2015 which expires on March 31, 2020. The revolving credit agreement (as amended, the “Credit Agreement”) provides for a multi-currency revolving credit facility in the amount of $400 million (the “Aggregate Commitment”) with availability in currencies other than U.S. dollars of up to $200 million. Subject to certain conditions set forth in the Credit Agreement, the Aggregate Commitment may be increased up to $550 million. On October 4, 2016, Adtalem entered into a First Amendment to Credit Agreement, which amends the Aggregate Commitment to increase the amount available for letters of credit from $50 million to $100 million. Adtalem may select interest rates for borrowings under the Credit Agreement 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 2% to 3% for Eurocurrency Rate Loans and from 1% to 2% for Base Rate Loans. As of December 31, 2017, June 30, 2017 and December 31, 2016, Adtalem borrowings under this agreement were $165 million, $125 million and $225 million, respectively, with a weighted average interest rate of 3.42%, 3.18% and 2.73%, respectively. There are no required principal payments under the Credit Agreement and all borrowings and letters of credit mature on March 31, 2020. As a result of the agreement extending beyond one year, the borrowings are classified as long-term with the exception of amounts expected to be repaid in the 12 months subsequent to the balance sheet date, if any. Adtalem letters of credit outstanding under this agreement were $68.5 million as of each of December 31, 2017, June 30, 2017 and December 31, 2016. Of this amount, $68.4 million was posted in the second quarter of fiscal year 2017 in relation to the ED Settlement (see “Note: 3 Regulatory Settlements”). Upon the close of the sale of DeVry University (see “Note 2: Discontinued Operations and Assets Held for Sale”), Adtalem will continue to post this letter of credit on behalf of DeVry University. As of December 31, 2017, Adtalem is charged an annual fee equal to 2.0% of the undrawn face amount of the outstanding letters of credit under the agreement, payable quarterly. The agreement also requires payment of a commitment fee equal to 0.35% of the undrawn portion of the credit facility as of December 31, 2017. The interest rate, letter of credit fees and commitment fees are adjustable quarterly, based upon Adtalem’s achievement of certain financial ratios.

The Credit Agreement contains covenants that, among other things, require maintenance of certain financial ratios, as defined in the agreement. Maintenance of these financial ratios could place restrictions on Adtalem’s ability to pay dividends. 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 agreement would constitute an event of default and could result in termination of the 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 December 31, 2017.

~~The stock of all U.S. and certain foreign subsidiaries of Adtalem is pledged as collateral for the borrowings under the revolving credit facility.~~

Adtalem also has liabilities recorded for deferred purchase price agreements with sellers related to the purchases of Faculdade Diferencial Integral (“Facid”), Faculdade Ideal (“Faci”), Damasio, Grupo Ibmec, Faculdade de Imperatriz (“Facimp”) and SJT. This financing is in the form of holdbacks of a portion of the purchase price of these acquisitions or installment payments. Payments are made under these agreements based on payment schedules or the resolution of any pre-acquisition contingencies.

~~NOTE 14: COMMITMENTS AND CONTINGENCIES~~

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. 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. ~~The timing or outcome of the following~~We have recorded accruals for those matters orwhere management believes a loss is probable and can be reasonably estimated. 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.

Table of Contents

On August 28, 2015, DeVry University received a request from the Multi-Regional and Foreign School Participation Division of the Federal Student Aid office of the Department of Education (“ED FSA”) for documents and information regarding published employment outcomes and relative earnings information of DeVry University graduates (the “Inquiry”). The stated purpose of the Inquiry was to permit ED FSA to assess DeVry University’s compliance with applicable regulations under Title IV. On January 27, 2016, DeVry University received a Notice of Intent to Limit from ED FSA (the “ED January 2016 Notice”), based on a portion of the Inquiry, and on OctoberApril 13, ~~2016, DeVry University and the U.S. Department of Education (“ED”) reached a negotiated agreement to settle the ED January 2016 Notice (the “ED Settlement”).~~

~~On May 13, 2016,~~2018, a putative class action lawsuit was filed by ~~the Pension Trust Fund for Operating Engineers,~~Nicole Versetto, individually and on behalf of others similarly situated, against Adtalem, Daniel Hamburger, Richard M. Gunst, and Timothy J. Wiggins in the United States District Court for the Northern District of Illinois. The complaint was filed on behalf of a putative class of persons who purchased Adtalem common stock between February 4, 2011 and January 27, 2016. The complaint cites the ED January 2016 Notice and a civil complaint (the “FTC lawsuit”) filed by the U.S. Federal Trade Commission on January 27, 2016 against Adtalem, DeVry University Inc., and DeVry/New York Inc. (collectively the “Adtalem Parties”), which was resolved with the FTC in 2017, that alleged that certain of DeVry University’s advertising claims were false or misleading or unsubstantiated at the time they were made in violation of Section 5(a) of the Federal Trade Commission Act, as the basis for claims that defendants made false or misleading statements regarding DeVry University’s graduate employment rate and the earnings of DeVry University graduates relative to the graduates of other universities and colleges. As a result of these alleged false or misleading statements, the plaintiff alleged that defendants overstated Adtalem’s growth, revenue and earnings potential and made false or misleading statements about Adtalem’s business, operations and prospects. The plaintiff alleged direct liability against all defendants for violations of §10(b) and Rule 10b-5 of the Exchange Act and asserted liability against the individual defendants pursuant to §20(a) of the Exchange Act. The plaintiff sought monetary damages, interest, attorneys’ fees, costs and other unspecified relief. On July 13, 2016, the Utah Retirement System (“URS”) moved for appointment as lead plaintiff and approval of its selection of counsel, which was not opposed by the Pension Trust Fund for Operating Engineers and URS was appointed as lead plaintiff on August 24, 2016. URS filed a second amended complaint (“SAC”) on December 23, 2016. The SAC sought to represent a putative class of persons who purchased Adtalem common stock between August 26, 2011 and January 27, 2016 and names an additional individual defendant, Patrick J. Unzicker. Like the original complaint, the SAC asserted claims against all defendants for alleged violations of §10(b) and Rule 10b-5 of the Exchange Act and asserted liability against the individual defendants pursuant to §20(a) of the Exchange Act for alleged material misstatements or omissions regarding DeVry University graduate outcomes. On January 27, 2017, defendants moved to dismiss the SAC, which was granted on December 6, 2017 without prejudice. The plaintiffs filed a Third Amended Complaint on January 29, 2018.

On or about June 21, 2016, T’Lani Robinson and Robby Brown filed an arbitration demand with the American Arbitration Association in Chicago, seeking to represent a putative class of students who received a DeVry University education from January 1, 2008 until April 8, 2016 (the “Putative Class Period”). Following Adtalem’s filing of a declaratory judgment action in the ~~United States District~~Circuit Court ~~for the Northern District~~ of Cook County, Illinois, seeking, among other things, an order declaring that federal court is the appropriate venue for this putative class action, on September 12, 2016, Robinson and Brown voluntarily withdrew their demand for arbitration. On September 20, 2016, Robinson and Brown answered the declaratory judgement action and filed a putative class action counterclaim, individually and on behalf of others similarly situated, against Adtalem Inc., DeVry University, Inc., and DeVry/New York, Inc. in the United States District Court for the Northern District of Illinois. The counterclaim asserted causes of action for breach of contract, misrepresentation, concealment, negligence, violations of the Illinois Uniform Deceptive Trade Practices Act, the Illinois Consumer Fraud and Deceptive Trade Practices Act, and the Illinois Private Business and Vocational Schools Act, conversion, unjust enrichment, and declaratory relief. The plaintiffs sought monetary, declaratory, injunctive, and other unspecified relief. On November 4, 2016, following a stipulated dismissal of the declaratory action, the Adtalem Parties moved to dismiss the counterclaim after which plaintiffs voluntarily withdrew it. On December 2, 2016, Robinson and Brown filed an amended complaint adding two additional named plaintiffs. The amended complaint purports to assert nationwide class claims under the above-referenced Illinois statutes and common law theories on behalf of those who, during the Putative Class Period, (i) enrolled in DeVry University; (ii) financed their education with DeVry University with direct loans administered by ED; or (iii) entered into an enrollment agreement with DeVry University and otherwise paid for a DeVry University education. The amended complaint also seeks to represent a fourth class of individuals residing in, or enrolled in a DeVry University campus located in, California during the Putative Class Period bringing claims under the California Business and Profession Code. In addition to the claims previously asserted as described above, the amended complaint adds a claim for breach of fiduciary duty owed students in administering Title IV funds. The Adtalem Parties moved to dismiss the amended complaint on January 13, 2017.

On October 14, 2016, a putative class action lawsuit was filed by Debbie Petrizzo and five other former DeVry University students, individually and on behalf of others similarly situated, against the Adtalem Parties in the United States District Court for the Northern District of Illinois (the “~~Petrizzo~~ ~~Case”).~~Chancery Division. The complaint was filed on behalf of ~~a putative class~~herself and three separate classes of ~~persons consisting~~similarly situated individuals who were citizens of ~~those~~the State of Illinois and who ~~enrolled in and/~~purchased or ~~attended classes at~~paid for a DeVry University ~~from at least 2002 through the present~~program between January 1, 2008 and ~~who were unable to find employment within their chosen field of study within six months of graduation. Citing the FTC lawsuit, the plaintiffs~~April 8, 2016. The plaintiff claimed that defendants made false or misleading statements regarding DeVry University’s graduate employment rate and ~~asserted claims for unjust enrichment and violations~~asserts causes of ~~six different states’ consumer fraud, unlawful trade practices, and consumer protection laws. The plaintiffs seek monetary, declaratory, injunctive, and other unspecified relief.~~

~~On October 28, 2016, a putative class~~ action lawsuit was filed by Jairo Jara and eleven others, individually and on behalf of others similarly situated, against the Adtalem Parties in the United States District Court for the Northern District of Illinois (the “~~Jara~~ Case”). The individual plaintiffs claim to have graduated from DeVry University in 2001 or later and sought to proceed on behalf of a putative class of persons consisting of those who obtained a degree from DeVry University and who were unable to find employment within their chosen field of study within six months of graduation. Citing the FTC lawsuit, the plaintiffs claimed that defendants made false or misleading statements regarding DeVry University’s graduate employment rate and asserted claims for unjust enrichment and violations of ten different states’ consumer fraud, unlawful trade practices, and consumer protection laws. The plaintiffs seek monetary, declaratory, injunctive, and other unspecified relief.

~~By Order dated November 28, 2016, the district court ordered the~~~~Petrizzo~~ ~~and~~~~Jara~~ ~~Cases be consolidated~~ under the~~Petrizzo~~ caption for all further purposes. On December 5, 2016, plaintiffs filed an amended consolidated complaint on behalf of 38 individual plaintiffs and others similarly situated. The amended consolidated complaint seeks to bring claims on behalf of the named individuals and a putative nationwide class of individuals for unjust enrichment and alleged violations of the Illinois Uniform Deceptive Trade Practices Act, Illinois Consumer Fraud and Deceptive Trade Practices Act, and ~~the~~ Illinois Private ~~Businesses~~Business and Vocational Schools Act, and claims of ~~2012.~~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 sought 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 plaintiff later filed an amended complaint asserting similar claims with a new lead plaintiff, Dave McCormick. After discussions among the parties, the court granted a Motion for Preliminary Approval of Class Action Settlement (the “McCormick Settlement”) on May 28, 2020. As such, we recorded a loss contingency accrual of $44.95 million on the Consolidated Balance Sheets as of June 30, 2020 and charged the contingency loss within discontinued operations in the Consolidated Statements of Income (Loss) for the year ended June 30, 2020. In ~~addition, it purports~~conjunction with the McCormick Settlement, Adtalem was required to ~~assert causes~~establish a settlement fund by placing $44.95 million into an escrow account, which was recorded within prepaid expenses and other current assets on the Consolidated Balance Sheets. The court issued an order approving the McCormick Settlement on October 7, 2020 and dismissed the action with prejudice. On May 4, 2022, the Appellate Court of ~~action on behalf~~Illinois, First District affirmed the Circuit Court of ~~certain~~Cook County’s approval of the ~~named individuals~~McCormick Settlement. The $44.95 million settlement fund was reduced by $8.92 million reflecting an offset of amounts paid to the Settlement Class. The $36.03 million settlement fund is being distributed to the Settlement Class. Adtalem received the $8.92 million return of escrow on July 18, 2023. As a result, the loss contingency accrual and ~~15 individual state-specific~~prepaid expense asset associated with the previous escrow balance are no longer outstanding on the Consolidated Balance Sheets as of September 30, 2023.

On March 12, 2021, Travontae Johnson, a Chamberlain student, filed a putative ~~classes~~class action against Chamberlain in the Circuit Court of Cook County, Illinois, Chancery Division. The plaintiff claimed that Chamberlain’s use of Respondus Monitor, an online remote proctoring tool for student examinations, violated the Illinois Biometric Information Privacy Act (“BIPA”), 740 ILCS 14/15. More particularly, the plaintiff claimed that Chamberlain required students to use Respondus Monitor, which collected, captured, stored, used, and disclosed students’ biometric identifiers and biometric information without written and informed consent. The plaintiff also alleged ~~violations~~that Chamberlain lacked a legally compliant written policy establishing a retention schedule and guidelines for destroying biometric identifiers and biometric information. The potential class purportedly included all students who took an assessment using the proctoring tool, as a student of ~~15 different states’ consumer fraud, unlawful trade practices,~~Chamberlain in Illinois, at any time from March 12, 2016 through January 20, 2021. The plaintiff and ~~consumer protection laws. Finally, it seeks to bring individual claims under Georgia state law~~the putative class sought damages in excess of $50,000, attorney’s fees and costs. The plaintiff and class also sought an unspecified amount of enhanced damages based on ~~behalf of certain named plaintiffs. The plaintiffs seek monetary, declaratory, injunctive, and other unspecified relief. The Adtalem Parties moved~~alleged negligent or reckless conduct by Chamberlain. On July 19, 2021, Chamberlain filed its motion to dismiss the complaint onarguing that plaintiff’s lawsuit is expressly preempted by Title V of the Gramm-Leach-Bliley Act. On February 1, 2023, the Court granted Chamberlain’s motion to dismiss plaintiff’s complaint. On March 3, ~~2017.~~

2023, plaintiff filed an appeal. On September 14, 2023, plaintiff’s appeal was dismissed for lack of prosecution. The plaintiff had until October 5, 2023 to file for reconsideration of the dismissal. Plaintiff failed to timely file a motion for reconsideration. This matter is concluded.

On January ~~17, 2017, Harriet Myers filed~~12, 2022, Walden was served with a complaint ~~derivatively on behalf of Adtalem~~filed in the United States District Court for the Northern District of Illinois against individual defendants Daniel M. Hamburger, Timothy J. Wiggins, Richard M. Gunst, Patrick J. Unzicker, Christopher B. Begley, David S. Brown, Lisa W. Wardell, Ann Weaver Hart, Lyle Logan, Alan G. Merten, Fernando Ruiz, Ronald L. Taylor and James D. White. Adtalem was named as a nominal defendant only. The plaintiffs have agreed to a stipulated order moving the case to the United States District Court for the District of ~~Delaware. Citing the FTC lawsuit~~Maryland by Aljanal Carroll, Claudia Provost Charles, and ~~settlement, the ED January 2016 Notice~~Tiffany Fair against Walden for damages, injunctive relief, and ED Settlement, and the allegations in the lawsuit filed by the Pension Trust Fund for Operating Engineers, each referenced above, the plaintiff alleges that the individual defendants have breached their fiduciary duties and violated federal securities law since at least 2011. The plaintiff asserts that the individual defendants permitted Adtalem to engage in unlawful conduct, failed to correct misconduct or prevent its recurrence, and failed to ensure the accurate dissemination of information to shareholders. The complaint attempts to state three claims: (i) breach of fiduciary duty by all named defendants for allegedly allowing the illegal conduct to occur, (ii) unjust enrichment by all individual defendants in the receipt of compensation, and (iii) violation of Section 14(a) by failing to disclose the alleged illegal scheme in proxy statements and falsely stating that compensation was based on “pay for performance” where those performance results were allegedly false. The plaintiff seeksdeclaratory relief on behalf of ~~Adtalem monetary, injunctive~~themselves and all other ~~unspecified relief.~~

similarly-situated individuals alleging violations of Title VI of the Civil Rights Act of 1964, the Equal Credit Opportunity Act, the Minnesota Prevention of Consumer Fraud Act, the Minnesota Uniform Deceptive Trade Practices Act, Minnesota statutes prohibiting false statements in advertising, and for common law fraudulent misrepresentation. Plaintiffs allege that Walden has targeted, deceived, and exploited Black and female Doctor of Business Administration (“DBA”) students by knowingly misrepresenting and understating the number of “capstone” credits required to complete the DBA program and obtain a degree. On ~~June 20, 2017, the City of Hialeah Employees Retirement System~~March 23, 2022, Walden filed a ~~complaint derivatively on behalf of Adtalem in~~Motion to Dismiss the Plaintiffs’ claims for failure to state a claim upon which relief can be granted. On November 27, 2022, the Court of Chancery of the State of Delaware States District Court for the Northern District of Illinois against individual defendants Daniel M. Hamburger, Christopher B. Begley, Lisa W. Wardell, Lyle Logan, Fernando Ruiz, Ronald L. Taylor and James D. White. Adtalem was named as a nominal defendant only. Citing the FTC lawsuit and settlement, the ED January 2016 Notice and ED settlement, and documents produced in response to plaintiff’s request under Section 220 of the Delaware Code, the plaintiff alleges that the individual defendants have breached their fiduciary duties. The plaintiff asserts that the individual defendants permitted Adtalem and DeVry University to make, and failed to stop, false and misleading advertisements in breach of their fiduciary duties and in bad faith. The plaintiff seeks on behalf of Adtalem monetary and other unspecified relief. The Adtalem Parties moveddenied Walden’s motion to dismiss the complaint. Plaintiffs filed an amended complaint to add an additional plaintiff, Tareion Fluker. Walden answered the amended complaint on February 2, 2023. The parties participated in a non-binding mediation on May 4, 2023 and settlement discussions continued. The parties filed a joint motion to stay

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discovery through October 10, 2023 pending the outcome of a second non-binding mediation held on September ~~1, 2017.~~

~~NOTE 15: SEGMENT INFORMATION~~

~~Beginning~~21, 2023. At this mediation, the parties agreed on a $28.5 million payment to resolve the issues in the ~~second quarter of fiscal year 2018, DeVry University operations is classified as discontinued operations as discussed in “Note 2: Discontinued Operations and Assets Held~~case, subject to agreement on non-financial terms, discussions about which are ongoing. We have recorded a $28.5 million loss contingency accrual for Sale.” Therefore, segment information presented excludes the results of DeVry University, which is presented as discontinued operations in the Consolidated Financial Statements. Discontinued operations assets are included in the table below to reconcile to Total Consolidated Assets presentedthis matter within accrued liabilities on the Consolidated Balance ~~Sheets. In addition, certain expenses~~Sheets as of September 30, 2023. If a tentative settlement is reached, it is subject to approval by Adtalem’s Board of Directors and the court.

On June 6, 2022, plaintiff Rajesh Verma filed a lawsuit on behalf of himself and a class of similarly situated individuals in the Circuit Court of the Fourth Judicial Circuit, Duval County Florida, against Walden alleging that Walden was placing telephonic sales calls to persons on the National Do-Not-Call Registry, in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. Although originally filed in state court, Walden removed the case to federal court and filed a motion to dismiss plaintiff’s complaint. On August 26, 2022, plaintiff filed a motion to remand Count I of the complaint to state court. On March 2, 2023, plaintiff filed an amended complaint to add a Florida state law claim against Walden under the Florida Telephone Solicitation Act (“FTSA”). On March 16, 2023, Walden filed its answer to the amended complaint. On March 29, 2023, Walden’s motion to dismiss plaintiff’s complaint and plaintiff’s motion to remand Count I of the complaint were denied. A non-binding mediation was held on September 18, 2023. The parties reached a settlement for an immaterial amount, subject to Court approval.

As previously ~~allocated~~disclosed, pursuant to the terms of the Stock Purchase Agreement (“SPA”) by and between Adtalem and Cogswell, dated as of December 4, 2017, as amended, Adtalem sold DeVry University ~~within~~to Cogswell and Adtalem agreed to indemnify DeVry University for certain losses up to $340.0 million (the “Liability Cap”). Adtalem has previously disclosed DeVry University related matters that have consumed a portion of the ~~U.S. Traditional Postsecondary segment have been reclassified to the Home Office and Other segment based on discontinued operating reporting guidance regarding allocation of corporate overhead.~~Liability Cap.

18. Segment Information

~~Adtalem’s principal business is the provision of educational services. During the third quarter of fiscal year 2017, Adtalem effected a change to~~We present three reportable segments ~~to align with current strategic priorities~~as follows:

Chamberlain – Offers degree and ~~resource allocation. As of~~non-degree programs in the ~~quarter ended March 31, 2017, Adtalem presents four reporting segments: “Medical~~nursing and ~~Healthcare,” which~~health professions postsecondary education industry. This segment includes the operations of ~~Chamberlain~~Chamberlain.

Walden – Offers online certificate programs and bachelor’s, master’s, and doctoral degrees, including those in nursing, education, counseling, business, psychology, public health, social work and human services, public administration and public policy, and criminal justice. This segment includes the operations of Walden, which was acquired by Adtalem on August 12, 2021.

Medical and Veterinary – Offers degree and non-degree programs in the medical and veterinary ~~schools (which include AUC, RUSM and RUSVM); “Professional Education,” which~~postsecondary education industry. This segment includes the operations of ~~Becker~~AUC, RUSM, and ~~ACAMS; “Technology~~RUSVM, which are collectively referred to as the “medical and ~~Business,~~veterinary schools.” which includes the operations of Adtalem Brazil; and “U.S. Traditional Postsecondary,” which includes the operations of Carrington. Prior period amounts have been reclassified to conform to the current reportable segment presentation.

These segments are consistent with the method by which the Chief Operating Decision Maker (Adtalem’s President and Chief Executive Officer) evaluates performance and allocates resources. Performance evaluations are based ~~in part,~~ on each segment’s adjusted operating income. ~~Intersegment sales are accounted~~Adjusted operating income excludes special items, which consists of restructuring expense, business integration expense, intangible amortization expense, and litigation reserve. Adtalem’s management excludes these items from its review of the results of the operating segments for ~~at amounts comparable to sales to nonaffiliated customers~~purposes of measuring segment profitability and ~~are eliminated in consolidation.~~allocating resources. “Home Office and Other” includes ~~activity~~activities not allocated to a ~~reporting~~reportable segment and is included to reconcile segment results to the Consolidated Financial Statements. Total assets by segment is not presented as our CODM does not review or allocate resources based on segment assets. The accounting policies of the segments are the same as those described in ~~“Note 4: Summary~~Note 2 “Summary of Significant Accounting Policies.”

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

Three Months Ended
December 31, Six Months Ended
December 31,
2017 2016 2017 2016
Revenue:
Medical and Healthcare $ 203,297 $ 201,409 $ 394,582 $ 401,178
Professional Education 30,359 27,366 70,401 62,096
Technology and Business 75,133 73,387 137,572 131,627
U.S. Traditional Postsecondary 29,033 32,445 61,168 69,431
Home Office and Other (578 ) (649 ) (1,201 ) (1,347 )
Total Consolidated Revenue $ 337,244 $ 333,958 $ 662,522 $ 662,985
Operating Income (Loss):
Medical and Healthcare $ 55,047 $ 52,152 $ 81,279 $ 96,016
Professional Education 2,193 134 12,700 6,191
Technology and Business 13,991 13,482 15,852 11,506
U.S. Traditional Postsecondary (5,779 ) (6,281 ) (11,293 ) (8,301 )
Home Office and Other (1) (10,068 ) (60,957 ) (17,412 ) (72,156 )
Total Consolidated Operating Income (Loss) $ 55,384 $ (1,470 ) $ 81,126 $ 33,256
Segment Assets:
Medical and Healthcare $ 954,114 $ 956,510 $ 954,114 $ 956,510
Professional Education 444,029 456,824 444,029 456,824
Technology and Business 610,803 581,355 610,803 581,355
U.S. Traditional Postsecondary 55,008 57,246 55,008 57,246
Home Office and Other 105,192 134,225 105,192 134,225
Discontinued Operations 41,576 115,273 41,576 115,273
Total Consolidated Assets $ 2,210,722 $ 2,301,433 $ 2,210,722 $ 2,301,433
Additions to Long-Lived Assets:
Medical and Healthcare $ 8,669 $ 3,541 $ 14,336 $ 6,844
Professional Education 298 - 1,221 363,658
Technology and Business 12,407 2,828 15,748 7,613
U.S. Traditional Postsecondary 360 559 1,121 1,766
Home Office and Other 2,463 1,315 4,305 2,542
Total Consolidated Additions to Long-Lived Assets $ 24,197 $ 8,243 $ 36,731 $ 382,423
Reconciliation to Consolidated Financial Statements:
Capital Expenditures $ 20,060 $ 8,243 $ 32,594 $ 18,771
Increase in Capital Assets from Acquisitions 16 - 16 4,913
Increase in Intangible Assets and Goodwill 4,121 - 4,121 358,739
Total Increase in Consolidated Long-Lived Assets $ 24,197 $ 8,243 $ 36,731 $ 382,423
Depreciation Expense:
Medical and Healthcare $ 6,332 $ 6,720 $ 12,909 $ 13,198
Professional Education 289 180 527 347
Technology and Business 2,477 2,169 5,103 4,110
U.S. Traditional Postsecondary 1,169 1,201 2,300 2,392
Home Office and Other 1,853 3,060 4,026 5,996
Total Consolidated Depreciation Expense $ 12,120 $ 13,330 $ 24,865 $ 26,043
Intangible Asset Amortization Expense:
Professional Education $ 1,626 $ 1,884 $ 3,251 $ 3,786
Technology and Business 837 548 1,709 1,909
Total Consolidated Amortization Expense $ 2,463 $ 2,432 $ 4,960 $ 5,695


	Three Months Ended
	September 30,
	2023		2022
Revenue:
Chamberlain	$	142,596	$	135,405
Walden		141,608		130,901
Medical and Veterinary		84,641		87,963
Total consolidated revenue	$	368,845	$	354,269
Adjusted operating income:
Chamberlain	$	24,324	$	27,002
Walden		31,115		24,541
Medical and Veterinary		14,477		17,064
Home Office and Other		(6,607)		(1,840)
Total consolidated adjusted operating income		63,309		66,767
Reconciliation to Consolidated Financial Statements:
Restructuring expense		(676)		(15,065)
Business integration expense		(5,262)		(9,540)
Intangible amortization expense		(10,677)		(18,528)
Litigation reserve		(18,500)		—
Total consolidated operating income		28,194		23,634
Interest expense		(15,657)		(17,760)
Other income, net		2,214		761
Total consolidated income from continuing operations before income taxes	$	14,751	$	6,635
Capital expenditures:
Chamberlain	$	5,285	$	1,426
Walden		2,942		825
Medical and Veterinary		1,345		573
Home Office and Other		5,474		2,727
Total consolidated capital expenditures	$	15,046	$	5,551
Depreciation expense:
Chamberlain	$	4,316	$	4,481
Walden		2,162		2,595
Medical and Veterinary		2,944		3,105
Home Office and Other		356		624
Total consolidated depreciation expense	$	9,778	$	10,805
Intangible amortization expense:
Walden	$	10,677	$	18,528
Total consolidated intangible amortization expense	$	10,677	$	18,528

(1) Home Office and Other Operating Loss includes $52.2 million in charges in the three and six months ended December 31, 2016 for regulatory settlements as described in “Note 3: Regulatory Settlements.”

Adtalem conducts its educational operations in the U.S., ~~Dominica,~~Barbados, St. Kitts, and St. Maarten, Brazil, Canada, Europe, the Middle East, India, China and the Pacific Rim. Other international revenue, which is derived principally from Europe and the Pacific Rim, was less than 5% of total revenue for each of the three-month and six-month periods ended December 31, 2017 and 2016.Maarten. Revenue ~~and long-lived assets~~ by geographic area ~~are~~is as follows (in thousands):

Three Months Ended
December 31,

Six Months Ended
December 31,

2017 2016 2017 2016
Revenue from Unaffiliated Customers:
Domestic Operations $ 173,128 $ 171,196 $ 357,288 $ 352,363
International Operations:
Dominica, St. Kitts and St. Maarten 88,236 88,542 165,614 176,846
Brazil 75,133 73,387 137,572 131,627
Other 747 833 2,048 2,149
Total International 164,116 162,762 305,234 310,622
Total Consolidated Revenue $ 337,244 $ 333,958 $ 662,522 $ 662,985
Long-Lived Assets:
Domestic Operations $ 177,562 $
211,319
$ 177,562 $
211,319

International Operations:
Dominica, St. Kitts and St. Maarten 167,841 190,796 167,841 190,796
Brazil 106,884 111,096 106,884 111,096
Other 4,143 3,575 4,143 3,575
Total International 278,868 305,467 278,868 305,467
Total Consolidated Long-Lived Assets $ 456,430 $
516,786
$ 456,430 $
516,786


	Three Months Ended
	September 30,
	2023		2022
Revenue by geographic area:
Domestic operations	$	284,204	$	266,306
Barbados, St. Kitts, and St. Maarten		84,641		87,963
Total consolidated revenue	$	368,845	$	354,269

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

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~~ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Through its website, Adtalem Global Education Inc. (“Adtalem”) offers its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other reports filed with the Securities and Exchange Commission (“SEC”). Adtalem’s website is http://www.adtalem.com.

The following discussion of Adtalem’s results of operations and financial condition should be read in conjunction with Adtalem’s Consolidated Financial Statements and the related Notes thereto in “Item 1 – Financial Statements” inIn this Quarterly Report on Form 10-Q and Adtalem’s Consolidated Financial Statements and related Notes thereto in “Item 8 – Financial Statements and Supplementary Data” in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. Adtalem’s Annual Report on Form 10-K includes a description of critical accounting policies and estimates and assumptions used in the preparation of Adtalem’s financial statements. These include, but are not limited to, the use of estimates and assumptions that affect the reported amounts of assets and liabilities; revenue and expense recognition; allowance for uncollectible accounts; internal-use developed software; land, building and equipment; stock-based compensation; valuation of goodwill and other intangible assets; valuation of long-lived assets; and income taxes.

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.

As described further below, on December 4, 2017, Adtalem announced the signing of a definitive agreement to divest DeVry University, with an expected closing date occurring in early fiscal year 2019. Accordingly, the results of DeVry University are presented as discontinued operations within this Form 10-Q. Also see “Note 2: Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements in Part I, Item 1, for further discussion.

Following changes in strategic priorities that were implemented in the third quarter of fiscal year 2017, Adtalem is reporting its financial performance based on four reporting segments (Medical and Healthcare, Professional Education, Technology and Business, and U.S. Traditional Postsecondary). Prior periods are presented in accordance with these changes. Management has determined that these reporting segments align with Adtalem’s current strategic priorities and resource allocation. Adtalem’s Chief Operating Decision Maker, its President and Chief Executive Officer, regularly reviews financial information and evaluates operating and management performance based on these segments. See “Note 15: Segment Information” to the Consolidated Financial Statements in Part I, Item 1, for further discussion.

~~FORWARD-LOOKING STATEMENTS~~

Certain statements contained in this Quarterly Report on Form 10-Q, including those that affect Adtalem’s expectations or plans, may constitute “forward-looking statements” subject to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Adtalem or its management “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “foresees,” “intends,” “plans” or other words or phrases of similar import. Actual results may differ materially from those projected or implied by these forward-looking statements. Potential risks and uncertainties that could affect Adtalem’s results are described throughout this report, including those in Part I, Item 1, “Note 14: Commitments and Contingencies” to the Consolidated Financial Statements, “Item 1 – Legal Proceedings,” “Item 1A – Risk Factors,” and in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017 filed with the SEC on August 24, 2017, including, without limitation, in “Item 1A – Risk Factors” and in the subsections of “Item 1 – Business” entitled “Market Trends and Competition,” “Student Admissions,” “Accreditation,” “Tuition and Fees,” “Financial Aid and Financing Student Education,” “Legislative and Regulatory Requirements,” “Seasonality” and “Employees.”

The forward-looking statements should be considered in the context of the risk factors referred to above and discussed elsewhere in this Form 10-Q. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we are not under any obligation to update any forward-looking information whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements.

~~OVERVIEW~~

Adtalem’s financial results for the second quarter of fiscal year 2018 reflect revenue growth in the Medical and Healthcare, Professional Education and Technology and Business segments. These increases were partially offset by a decrease in revenue in the U.S. Traditional Postsecondary segment (which as of the second quarter of fiscal year 2018 consists of only Carrington College (“Carrington”)). Pre-tax income from continuing operations, excluding regulatory settlements, increased 9.9%, or $4.9 million, from the year-ago quarter primarily as a result of the increased revenue and cost control measures implemented across all Adtalem institutions and home office. Net income in the second quarter of fiscal year 2018 includes an increase in income tax expense of $101.2 million related to tax reform legislation signed into law in December 2017. Operational and financial highlights for the second quarter and first six months of fiscal year 2018 include:

Chamberlain University (“Chamberlain”) revenue grew by 1.9% in the second quarter of fiscal year 2018 compared to the year-ago quarter. For the November 2017 session, new student enrollment increased 5.5% and total student enrollment at Chamberlain increased 5.1% compared to the same term last year. For the January 2018 session, new student enrollment increased 6.9% and total student enrollment increased 5.2%. Chamberlain continues to invest in its programs, student services and campus locations.

Despite the serious business interruptions and property damage caused by Hurricanes Irma and Maria, both American University of the Caribbean School of Medicine (“AUC”) and Ross University School of Medicine (“RUSM”) were able to complete the September 2017 basic science semesters by January 5, 2018 (see “Hurricanes” discussion below). For the January 2018 semester, new student enrollment increased 11.5% and total student enrollment increased 1.3%.

Adtalem recorded pre-tax restructuring charges of $2.6 million in the second quarter of fiscal year 2018 related to severance for workforce reductions and real estate consolidations at Carrington and Adtalem’s home office. Adtalem expects to incur additional restructuring charges during the remainder of fiscal year 2018 as we continue to right-size operations to better align with current enrollment levels and the effects of the divestiture of DeVry University.

Adtalem continued its tenth share repurchase program by repurchasing a total of 1,142,769 shares of its common stock at an average cost of $37.46 per share during the second quarter of fiscal year 2018.

Adtalem financial position remained strong, generating $49.6 million of operating cash flow during the first six months of fiscal year 2018. As of December 31, 2017, cash and cash equivalents totaled $212.2 million and outstanding borrowings totaled $165.0 million.

~~HURRICANES~~

~~Hurricane Irma~~

On September 6, 2017, Category 5 Hurricane Irma (“Irma”) caused widespread damage to a large section of the islands of the Caribbean Sea. Irma forced the temporary shut-down of basic science academic instruction of AUC and caused significant damage to AUC’s physical property on the island of St. Maarten. All AUC facilities on the island suffered some degree of damage and could not sustain educational operations. The island’s infrastructure was severely incapacitated. Adtalem evacuated all students and faculty, and some staff from the island following the storm. Classes for AUC’s September 2017 semester had not commenced as of the date the hurricane struck St. Maarten. AUC management determined that repairs to its facilities and the island infrastructure could not be completed in time to teach the September 2017 basic science semester in St. Maarten; thus, an alternative teaching site was identified. AUC contracted with the University of Central Lancashire (“UCLAN”), a public university in Preston, United Kingdom to provide classroom facilities, housing and student support for AUC educational operations. All appropriate accreditation and regulatory approvals to teach in Preston were obtained and on September 29, 2017, AUC students began basic science academic instruction on the UCLAN campus.

As of December 31, 2017, AUC recorded expenses of $11.3 million associated with the evacuation process, temporary housing and transportation of students, faculty and staff, and incremental costs of teaching at UCLAN. Based upon preliminary damage assessments of the AUC facilities, impairment write-downs of building, building improvements, furniture and equipment of $15.4 million were recorded as of December 31, 2017. Management estimates that total costs to repair and replace damaged facilities and equipment will be in the range of $20 to $25 million. Costs and damage repairs are expected to be covered under AUC’s insurance policies, subject to deductibles. AUC received insurance proceeds of $10 million in November 2017 and received a commitment to a partial proof of loss in December 2017, authorizing an additional $10 million partial payment of insurance settlements. As of December 31, 2017, insurance proceeds of $9.8 million were recorded as an offset to the $11.3 million of evacuation expenses and incremental instructional costs incurred, less insurance deductibles of $1.5 million. Expected insurance proceeds of $11.6 million were recorded as income to offset the $15.4 million asset write-downs recorded through December 31, 2017, less insurance deductibles of $3.8 million.

The effects of starting the semester late in September 2017 reduced revenue in the first quarter of fiscal year 2018 by approximately $3.4 million, $2.0 million of which was recognized in the second quarter of fiscal year 2018, and $0.7 million, which was lost due to student withdrawals. The remaining $0.7 million will be recognized in the third quarter of fiscal year 2018 as AUC completed the September 2017 semester on January 5, 2018. Of the students originally registered for the September 2017 semester, approximately 94% continued the semester in Preston. Management expects that lost fiscal year 2018 revenue for students who decided not to attend AUC as a result of the hurricane will be reimbursable under its insurance policy, subject to deductibles. Beginning with the January 2018 semester, new AUC students, along with students in their second and third semesters will be back on the island of St. Maarten, while those in their fourth and fifth semesters will remain in Preston.

The operating results effect of Irma increased revenue by approximately $2.0 million in the second quarter and decreased revenue by approximately $1.4 million for the first six months of fiscal year 2018, compared to the year-ago periods. Operating expenses were not materially changed in the second quarter and increased by $5.3 million for the first six months of fiscal year 2018 compared to the year-ago periods. Management does not believe at this time that AUC has incurred significant uninsured costs associated with hurricane losses.

Management does not believe the effects of Irma have created a triggering event, which would require an impairment analysis of AUC’s indefinite-lived intangible assets and goodwill. Damage to physical property will be repaired with the majority of costs expected to be reimbursable by insurance proceeds. The September 2017 semester was completed with minimal lost students and revenue and commencement of future semesters is not in question. Management believes its response to the crisis and its ability to continue providing educational services demonstrates AUC’s ability to generate future revenue and operating results sufficient to maintain fair values of AUC’s assets in excess of their carrying values.

~~Hurricane Maria~~

On September 19, 2017, Category 5 Hurricane Maria (“Maria”) caused widespread damage to a large section of the islands of the Caribbean Sea. Maria forced the temporary shut-down of basic science academic instruction of RUSM and caused significant damage to RUSM’s physical property on the island of Dominica. All RUSM facilities on the island suffered some degree of damage and could not sustain educational operations. The island’s infrastructure was severely incapacitated. Adtalem evacuated all students and most faculty, and some staff from the island following the storm. RUSM basic science students had completed two weeks of classes in the September 2017 semester before the hurricane struck Dominica. Due to the significant damage on the island, repairs to the island infrastructure could not be completed in time to resume teaching the September 2017 semester in Dominica; thus, an alternative teaching site was identified. RUSM contracted with a cruise ship operator to provide a vessel, which was docked off of the island of St. Kitts and used for classroom facilities and housing for RUSM basic science educational operations. All appropriate accreditation and regulatory approvals to teach on the vessel in St. Kitts were obtained and on October 23, 2017, RUSM basic science students began completion of the September 2017 semester instruction on the ship.

As of December 31, 2017, RUSM recorded expenses of $32.7 million associated with the evacuation process, temporary housing and transportation of students, faculty and staff, and incremental additional costs of teaching on the ship in St. Kitts. Based upon preliminary damage assessments of the RUSM facilities, impairment write-downs of buildings, building improvements, furniture and equipment of $14.5 million were recorded as of December 31, 2017. Management estimates that total costs to repair and replace damaged facilities and equipment will be in the range of $40 to $50 million. Costs and damage repairs are expected to be covered under RUSM’s insurance policies, subject to deductibles. RUSM received insurance proceeds of $20 million in December 2017 and also received a commitment to a partial proof of loss in December 2017, authorizing an additional $10 million partial payment of insurance settlements. As of December 31, 2017, insurance proceeds of $30 million were recorded as an offset to the $32.7 million of evacuation expenses and incremental instructional costs incurred, less insurance deductibles of $2.7 million. Expected insurance proceeds of $9.2 million were recorded as income to offset the $14.5 million asset write-downs recorded through December 31, 2017, less insurance deductibles of $5.4 million.

The effect of interrupting the September 2017 semester, along with losing some students due to the transition from Dominica to St. Kitts, reduced revenue in the first six months of fiscal year 2018 by approximately $6.8 million. Approximately $4.0 million of this amount is expected to be recognized over the remainder of fiscal year 2018, as the semester was completed on January 5, 2018 and those students who took a leave of absence are expected to return for the January 2018 and May 2018 semesters. Of the students originally registered for the September 2017 semester, approximately 78% continued the semester in St. Kitts. Of those not continuing the September 2017 semester, approximately 89% returned for the January 2018 semester. Management expects that lost fiscal year 2018 revenue for students who decided not to attend RUSM as a result of the hurricane will be reimbursable under its insurance policy, subject to deductibles. Beginning with the January 2018 semester, RUSM students have been temporarily relocated to Knoxville, Tennessee at facilities owned by Lincoln Memorial University (“LMU”) and to a satellite facility on St. Kitts while the Dominica campus is repaired and rebuilt. Regulatory and accreditor approvals are expected to be finalized following a site visit by the Dominica Medical Board in early February 2018. RUSM is using its own medical sciences curriculum and faculty while making use of the LMU teaching and office facilities, including an anatomy lab.

The operating results effect of Maria decreased revenue by approximately $2.8 million in the second quarter and decreased revenue by approximately $6.8 million for the first six months of fiscal year 2018, compared to the year-ago periods. Operating expenses were not materially changed in the second quarter and increased by $8.1 million for the first six months of fiscal year 2018 compared to the year-ago periods. Management does not believe at this time that RUSM has incurred significant uninsured costs associated with hurricane losses.

Management does not believe the effects of Maria have created a triggering event, which would require an impairment analysis of RUSM’s indefinite-lived intangible assets and goodwill. Damage to physical property will be repaired with the majority of costs expected to be reimbursable by insurance proceeds. The September 2017 semester was completed with minimal lost students and management does not expect future extraordinary revenue loss or delays commencing classes. Management believes its response to the crisis and its ability to continue providing educational services demonstrates RUSM’s ability to generate future revenue and operating results sufficient to maintain fair values of RUSM’s assets in excess of their carrying values.

~~DIVESTITURE OF DEVRY UNIVERSITY~~

On December 4, 2017, Adtalem, entered into a Purchase Agreement, pursuant to which Adtalem agreed to sell DeVry University to Cogswell. Subject to the terms and conditions of the Purchase Agreement, Adtalem will sell all of the outstanding equity interests of DeVry University, Inc. and DeVry New York Inc. to Cogswell for de minimis consideration. To support DeVry University’s future success, Adtalem has committed to transferring DeVry University with a minimum working capital balance of $7.5 million, subject to increase under certain conditions of up to $20.1 million. The Purchase Agreement includes an earn-out entitling Adtalem to payments of up to $20 million paid over a ten-year period based on DeVry University’s free cash flow.

DeVry University is an operating segment and was previously included in the U.S. Traditional Postsecondary reporting segment. Subject to the terms and conditions of the Purchase Agreement it will be sold in its entirety. Divesting DeVry University is a strategic shift in the operations of Adtalem. This segment offers principally bachelor’s and master’s degrees in technology and business in the U.S., and Adtalem will be exiting this market with this disposition. Adtalem’s only other operating segment that grants primarily bachelor’s and master’s degrees is Chamberlain University, and these are in nursing and related medical fields. Selling the DeVry University operating segment will reduce the organization’s dependence on government Title IV funds for its revenue, which is a strategic imperative. This operating segment is discussed in depth in the business section of the Adtalem Annual Report on Form 10-K for the year ended June 30, 2017 and in the 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

We use our website (www.adtalem.com) as a routine channel of distribution of company information, including press releases, presentations, and supplemental information, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website in addition to following press releases, SEC filings, and public conference calls and webcasts. Investors and others can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts. You may also access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as well as other reports relating to us that are filed with or furnished to the SEC, free of charge in the investor relations section of ~~all quarterly~~our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The SEC also maintains a website that contains reports, proxy and ~~annual reports. DeVry~~information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The content of the websites mentioned above is not incorporated into and should not be considered a part of this report.

Segments

We present three reportable segments as follows:

Chamberlain – Offers degree and non-degree programs in the nursing and health professions postsecondary education industry. This segment includes the operations of Chamberlain University (“Chamberlain”).

Walden – Offers online certificate programs and bachelor’s, master’s, and doctoral degrees, including those in nursing, education, counseling, business, psychology, public health, social work and human services, public administration and public policy, and criminal justice. This segment includes the operations of Walden University (“Walden”), which was acquired by Adtalem on August 12, 2021.

Medical and Veterinary – Offers degree and non-degree programs in the medical and veterinary postsecondary education industry. This segment includes the operations of American University of the Caribbean School of Medicine (“AUC”), Ross University School of Medicine (“RUSM”), and Ross University School of Veterinary Medicine (“RUSVM”), which are collectively referred to as the “medical and veterinary schools.”

“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 18 “Segment Information” to the ~~legacy business~~Consolidated Financial Statements.

Table of Contents

Revision to Previously Issued Financial Statements

During the third quarter of fiscal year 2023, Adtalem identified an error in its revenue recognition related to certain scholarship programs within its Medical and ~~at one time~~Veterinary segment. Certain scholarships and discounts offered within that segment provide students a discount on future tuition that constitute a material right under Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers” that should be accounted for as a separate performance obligation within a contract. Adtalem assessed the ~~majority of its consolidated revenue and operating income. Disposal~~materiality of this ~~operating segment will have~~error individually and in the aggregate with other previously identified errors to prior periods’ Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” and SAB 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” codified in ASC 250 “Accounting Changes and Error Corrections.” Adtalem concluded that the errors were not material to prior periods and therefore, amendments of previously filed reports were not required. However, Adtalem determined it was appropriate to revise its previously issued financial statements. Treating the discount on future tuition as a ~~significant effect on~~material right results in the ~~operations and financial results~~deferral of ~~Adtalem. DeVry University employs approximately 1,100 full-time faculty and staff and requires significant home office administrative support, absorbing approximately 30%~~revenue for a portion of ~~all home office administrative costs.~~

tuition to future periods. In accordance with ~~U.S. Generally Accepted~~ASC 250, Adtalem corrected the prior period presented herein by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the Consolidated Financial Statements. In connection with this revision, Adtalem also corrected other immaterial errors in the prior period, including certain errors that had previously been adjusted for as out of period corrections in the period identified. See Note 2 “Summary of Significant Accounting ~~Principles (“GAAP”), we are classifying~~Policies” to the ~~DeVry University entity as “Held~~Consolidated Financial Statements for ~~Sale”~~additional information.

First Quarter Highlights

Financial and “Discontinued Operations” as of December 31, 2017. As a result, all financial results, disclosures and discussions of continuing operations in this Quarterly Report on Form 10-Q exclude DeVry University operations.

~~USE OF NON-GAAP FINANCIAL INFORMATION AND SUPPLEMENTAL RECONCILIATION SCHEDULE~~

~~During~~operational highlights for the ~~second~~first quarter ~~and first six months~~ of fiscal year ~~2018, Adtalem classified the operating results of DeVry University as discontinued operations, and recorded special items related to the following:~~

2024 include:

·●

~~Restructuring charges primarily related~~Adtalem revenue increased $14.6 million, or 4.1%, in the first quarter of fiscal year 2024 compared to ~~reductions in force (“RIF”)~~the year-ago period driven by increased revenue at Chamberlain and ~~real estate consolidations~~Walden, partially offset by a revenue decline at ~~Carrington~~Medical and ~~Adtalem’s home office.~~Veterinary.

·●

~~Income tax charges related~~Net income of $10.6 million ($0.25 diluted earnings per share) increased $10.1 million ($0.24 diluted earnings per share) in the first quarter of fiscal year 2024 compared to ~~implementation~~net income of $0.6 million in the ~~Tax Cuts~~year-ago period. This increase was primarily driven by increased revenue and ~~Jobs Act~~decreased intangible amortization expense, restructuring expense, and business integration expense in the first quarter of ~~2017.~~fiscal year 2024, partially offset by increased litigation reserve in the first quarter of fiscal year 2024. Adjusted net income of $39.4 million decreased $2.2 million, or 5.3%, in the first quarter of fiscal year 2024 compared to the year-ago period. This decrease was due to increased incentive compensation expense and investments to support growth initiatives. Diluted adjusted earnings per share of $0.93 increased $0.03, or 3.3%, in the first quarter of fiscal year 2024 compared to the year-ago period driven by lower diluted shares due to share repurchases which offset the lower adjusted net income.

~~During the second quarter and first six months of fiscal year 2017, Adtalem recorded special items related to the following:~~

·●

~~Restructuring charges primarily related~~For the July 2023 and September 2023 sessions, total student enrollment at Chamberlain increased 2.6% and 5.2%, respectively, compared to ~~real estate consolidations at Carrington and Adtalem’s home office in order to align its cost structure with enrollments.~~the same sessions last year.

·●

~~Charges arising from the settlement agreements with the Federal Trade Commission (“FTC”) and the Office~~As of ~~the Attorney General of the State of New York (“NYAG”).~~September 30, 2023, total student enrollment at Walden increased 0.5% compared to September 30, 2022.

●

For the September 2023 semester, total student enrollment at the medical and veterinary schools decreased 7.5% compared to the same semester last year.

●

Adtalem repurchased a total of 2,158,398shares of Adtalem’s common stock under its share repurchase program at an average cost of $42.57per share during the first quarter of fiscal year 2024. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.

~~In addition, in accordance with GAAP, the operating results~~Table of ~~DeVry University are reclassified as discontinued operations for the second quarter and first six months~~Contents

Results of ~~fiscal year 2017.~~

The following table illustrates the effects of the discontinued operations and special items on Adtalem’s net income. Management believes that the non-GAAP disclosure of net income and earnings per share excluding the discontinued operations and special items 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 of such operations given the nature of discontinued operations, restructuring charges and regulatory settlements. Adtalem uses these supplemental financial measures internally in its management and budgeting process. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, Adtalem’s reported results prepared in accordance with GAAP. The following table reconciles these non-GAAP measures to the most directly comparable GAAP information (in thousands, except per share amounts):

Three Months Ended
December 31,

Six Months Ended
December 31,

2017 2016 2017 2016
Net (Loss) Income $ (81,156 ) $ 14,413 $ (68,371 ) $ 39,565
(Loss) Earnings per Share (basic-2017, diluted-2016) $ (1.33 ) $ 0.23 $ (1.10 ) $ 0.62
Continuing Operations:
Restructuring Expense $ 2,554 $ 2,963 $ 4,941 $ 6,313
Effect on Earnings per Share (diluted) $ 0.04 $ 0.05 $ 0.08 $ 0.10
Tax Cuts and Jobs Act of 2017 $ 101,196 $ - $ 101,196 $ -
Effect on Earnings per Share (diluted) $ 1.63 $ - $ 1.61 $ -
Regulatory Settlements $ - $ 52,150 $ - $ 52,150
Effect on Earnings per Share (diluted) $ - $ 0.81 $ - $ 0.82
Income Tax Impact on Non-GAAP Adjustments (1) $ (695 ) $ (20,938 ) $ (1,284 ) $ (21,856 )
Effect on Earnings per Share (diluted) $ (0.01 ) $ (0.33 ) $ (0.02 ) $ (0.34 )
Discontinued Operations, net of tax $ 25,420 $ (7,455 ) $ 34,808 $ (6,668 )
Effect on Earnings per Share (diluted) $ 0.41 $ (0.12 ) $ 0.56 $ (0.10 )
Net Income from Continuing Operations Excluding
Special Items, net of tax $ 47,319 $ 41,133 $ 71,290 $ 69,504
Earnings per Share from Continuing Operations
Excluding Special Items (diluted) $ 0.76 $ 0.64 $ 1.14 $ 1.09
Shares used in EPS calculation
Basic 61,234 NA 62,009 NA
Diluted 62,023 64,028 62,705 63,871

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

~~RESULTS OF OPERATIONS~~

Operations

The following table presents ~~information with respect to the relative size to revenue of each item in the~~selected Consolidated Statements of Income ~~(Loss) for the first three and six months~~data as a percentage of ~~both the current and prior fiscal year. Percentages may not add because of rounding.~~revenue:

Three Months Ended
December 31,

Six Months Ended
December 31,

2017 2016 2017 2016
Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of Educational Services 53.1 % 53.6 % 56.6 % 55.3 %
Student Services and Administrative Expense 29.8 % 30.3 % 30.4 % 30.9 %
Restructuring Expense 0.8 % 0.9 % 0.7 % 1.0 %
Regulatory Settlements 0.0 % 15.6 % 0.0 % 7.9 %
Total Operating Cost and Expense 83.6 % 100.4 % 87.8 % 95.0 %
Operating Income (Loss) from Continuing Operations 16.4 % (0.4 )% 12.2 % 5.0 %
Net Interest Expense (0.3 )% (0.4 )% (0.1 )% (0.4 )%
Income (Loss) from Continuing Operations Before
Income Taxes 16.1 % (0.8 )% 12.1 % 4.7 %
Income Tax (Provision) Benefit (32.5 )% 3.0 % (17.1 )% 0.4 %
Equity Method Investment Income (Loss) 0.0 % 0.0 % (0.0 )% 0.0 %
(Loss) Income from Continuing Operations (16.4 )% 2.2 % (5.0 )% 5.0 %
(Loss) Income from Discontinued Operations, Net of Tax (7.5 )% 2.2 % (5.3 )% 1.0 %
Net (Loss) Income (24.0 )% 4.4 % (10.2 )% 6.0 %
Net Income Attributable to Noncontrolling Interest (0.1 )% (0.1 )% (0.1 )% (0.1 )%
Net (Loss) Income Attributable to Adtalem Global
Education (24.1 )% 4.3 % (10.3 )% 6.0 %


	Three Months Ended
	September 30,
	2023		2022
Revenue	100.0	%	100.0	%
Cost of educational services	45.7	%	45.1	%
Student services and administrative expense	45.0	%	41.3	%
Restructuring expense	0.2	%	4.3	%
Business integration expense	1.4	%	2.7	%
Total operating cost and expense	92.4	%	93.3	%
Operating income	7.6	%	6.7	%
Interest expense	(4.2)	%	(5.0)	%
Other income, net	0.6	%	0.2	%
Income from continuing operations before income taxes	4.0	%	1.9	%
Provision for income taxes	(0.8)	%	(0.3)	%
Income from continuing operations	3.2	%	1.6	%
Loss from discontinued operations, net of tax	(0.4)	%	(1.4)	%
Net income	2.9	%	0.2	%

~~REVENUE~~

All discussions of the results of operations exclude the results of DeVry University which are included in the discontinued operations section of the Consolidated Statements of Income (Loss) for all periods presented.

Revenue

The following ~~tables present~~table presents revenue by segment detailing the changes from the year-ago ~~comparative periods including disclosures of the effect of Hurricanes Irma and Maria, the effect of acquisitions and changes~~period (in thousands):


	Three Months Ended September 30, 2023
	Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2023	$	135,405		$	130,901		$	87,963		$	354,269
Growth (decline)		7,191			10,707			(3,322)			14,576
Fiscal year 2024	$	142,596		$	141,608		$	84,641		$	368,845
% change from prior year		5.3	%		8.2	%		(3.8)	%		4.1	%

Chamberlain

Chamberlain Student Enrollment:


	Fiscal Year 2024
Session	July 2023		Sept. 2023
Total students	32,175		34,889
% change from prior year	2.6	%	5.2	%

	Fiscal Year 2023
Session	July 2022		Sept. 2022		Nov. 2022		Jan. 2023		Mar. 2023		May 2023
Total students	31,371		33,153		33,390		34,760		34,847		33,284
% change from prior year	(4.1)	%	(4.0)	%	(0.8)	%	1.8	%	2.0	%	1.2	%

Chamberlain revenue increased 5.3%, or $7.2million, to $142.6million in the ~~value of the Brazilian Real compared to the U.S. dollar. Total consolidated revenue for the second~~first quarter of fiscal year ~~2018 of $337.2 million increased 1.0%, or $3.3 million,~~2024 compared to the year-ago ~~quarter. For the first six months of fiscal year 2018, total consolidated revenue of $662.5 million decreased 0.1%, or $0.5 million, compared to the year-ago period. Revenue results~~period, driven by ~~segment are discussed~~an increase in ~~more detail~~enrollment and higher tuition rates. Enrollment has improved in ~~the sections below.~~

Three Months Ended December 31, 2017
(in thousands)
Medical
and
Healthcare Professional
Education Technology
and
Business U.S.
Traditional
Postsecondary
Home Office
and
Other
Consolidated
Revenue:
Fiscal Year 2017 as Reported $ 201,409 $ 27,366 $ 73,387 $ 32,445 $ (649 ) $ 333,958
Organic Growth (Decline) 2,780 2,993 438 (3,412 ) 71 2,870
Effect of Acquisitions - - 218 - - 218
Hurricane Impact (892 ) - - - - (892 )
Effect of Currency Change - - 1,090 - - 1,090
Fiscal Year 2018 as Reported $ 203,297 $ 30,359 $ 75,133 $ 29,033 $ (578 ) $ 337,244

Fiscal Year 2018 % Change:
Organic Growth (Decline) 1.4 % 10.9 % 0.6 % (10.5 )% NM 0.9 %
Effect of Acquisitions - - 0.3 % - NM 0.1 %
Constant Currency Change 1.4 % 10.9 % 0.9 % (10.5 )% NM 0.9 %
Hurricane Impact (0.4 )% - - - NM (0.3 )%
Effect of Currency Change - - 1.5 % - NM 0.3 %
Fiscal Year 2018 % Change as Reported 0.9 % 10.9 % 2.4 % (10.5 )% NM 1.0 %

Six Months Ended December 31, 2017
(in thousands)
Medical
and
Healthcare Professional
Education Technology
and
Business U.S.
Traditional
Postsecondary
Home Office
and
Other
Consolidated
Revenue:
Fiscal Year 2017 as Reported $ 401,178 $ 62,096 $ 131,627 $ 69,431 $ (1,347 ) $ 662,985
Organic Growth (Decline) 1,640 8,305 2,948 (8,263 ) 146 4,776
Effect of Acquisitions - - 218 - - 218
Hurricane Impact (8,236 ) - - - - (8,236 )
Effect of Currency Change - - 2,779 - - 2,779
Fiscal Year 2018 as Reported $ 394,582 $ 70,401 $ 137,572 $ 61,168 $ (1,201 ) $ 662,522

Fiscal Year 2018 % Change:
Organic Growth (Decline) 0.4 % 13.4 % 2.2 % (11.9 )% NM 0.7 %
Effect of Acquisitions - - 0.2 % - NM 0.0 %
Constant Currency Change 0.4 % 13.4 % 2.4 % (11.9 )% NM 0.8 %
Hurricane Impact (2.1 )% - - - NM (1.2 )%
Effect of Currency Change - - 2.1 % - NM 0.4 %
Fiscal Year 2018 % Change as Reported (1.6 )% 13.4 % 4.5 % (11.9 )% NM (0.1 )%

~~Management expects that for the third quarter of fiscal year 2018, revenue will increase 3 to 4 percent compared to the third quarter of fiscal year 2017. Revenue growth within the Medical~~several graduate and Healthcare, Technology and Business, and Professional Education segments is expected to be partially offset by U.S. Traditional Postsecondary continuing revenue declines resulting from the impact of lower total student enrollment.

~~Medical and Healthcare~~

Revenue in the Medical and Healthcare segment increased 0.9%, or $1.9 million, to $203.3 million in the second quarter and decreased 1.6%, or $6.6 million, to $394.6 million for the first six months of fiscal year 2018 compared to the year-ago periods. Revenue decreases at the medical and veterinary schools, principally the result of hurricane related losses, in both the second quarter and first six months of fiscal year 2018 were fully offset in the second quarter and partially offset in first six months of fiscal year 2018 by revenue increases at Chamberlain. Key trends for Chamberlaindoctoral programs and the ~~medical and veterinary schools are set forth below.~~

~~Chamberlain University~~

~~Chamberlain University Undergraduate and Graduate Student Enrollment:~~

Fiscal Year 2018
Term July 2017 Sept. 2017 Nov. 2017 Jan. 2018
New Students 2,497 4,962 2,806 4,472
% Change from Prior Year 16.5 % (0.8 )% 5.5 % 6.9 %
Total Students 26,811 30,062 29,719 31,333
% Change from Prior Year 6.3 % 4.5 % 5.1 % 5.2 %

Fiscal Year 2017
Term July 2016 Sept. 2016 Nov. 2016 Jan. 2017 Mar. 2017 May 2017
New Students 2,144 5,003 2,660 4,185 2,713 3,779
% Change from Prior Year (1.7 )% 1.2 % 3.2 % (3.0 )% 11.7 % 4.0 %
Total Students 25,229 28,781 28,268 29,789 29,726 28,961
% Change from Prior Year 15.9 % 11.5 % 10.2 % 6.6 % 7.3 % 5.7 %

Chamberlain revenue increased 1.9%, or $2.2 million, to $115.1 million in the second quarter and increased 2.1%, or $4.6 million, to $229.0 million in the first six months of fiscal year 2018 compared to the year-ago periods, driven primarily by total enrollment increases. The improved new student enrollment in the second quarter of fiscal year 2018, was the result of improved execution on recruiting plans, particularly in the Masterundergraduate Bachelor of Science in Nursing (“~~MSN”~~BSN”) ~~degree programs, with retention improving as well, although this was~~programs. These improvements have been partially offset by ~~continued weakness~~a decrease in ~~new~~total student enrollment ~~for~~in the ~~online~~ Registered Nurse to Bachelor of Science in Nursing (“RN-to-BSN”) online degree program.

~~The Chamberlain campus~~Table of Contents

Tuition Rates:

Tuition for the BSN onsite and online degree program ranges from $675 to $753 per credit hour. Tuition for the RN-to-BSN online degree program is $590 per credit hour. Tuition for the online Master of Science in ~~Houston, Texas, was placed on conditional status, effective January 19, 2017, by~~Nursing (“MSN”) degree program is $675 per credit hour. Tuition for the ~~Texas Board~~online Family Nurse Practitioner (“FNP”) degree program is $690 per credit hour. Tuition for the online Doctor of Nursing Practice (“~~TBN”~~DNP”), as a result of falling below the state-required first time pass rate on the National Council of Nursing Licensure Exam (“NCLEX”). Conditional status prohibited the campus from admitting new students to its programs. The Houston campus improved its processes and achieved the required pass rate by the September 30, 2017 deadline. In January 2018, the TBN granted full approval status to the Houston campus. The campus degree program is ~~currently admitting new students~~$800 per credit hour. Tuition for the ~~May 2018~~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. Tuition for the onsite Master of Physician Assistant Studies (“MPAS”) is $8,000 per session.

~~Chamberlain currently operates 20 campuses in 14 states and has completed construction of a~~ In some cases, these tuition rates increased by approximately 3% to 4% from the prior year for new ~~campus in New Orleans, Louisiana. After obtaining appropriate regulatory approvals, we anticipate opening the New Orleans campus in May 2018.~~

~~Tuition Rates:~~

Effective for sessions beginning in May 2017, tuition is $675 per credit hour for students enrolling in the Bachelor of Science in Nursing (“BSN”) onsite program. This tuition rate is unchanged from the prior year.

Effective for sessions beginning in May 2017, tuition is $590 per credit hour for students enrolled in the RN-to-BSN online degree program. Tuition for students enrolled in the online MSN program is $650 per credit hour. For students enrolled in the Family Nurse Practitioner (“FNP”) track, tuition is $665 per credit hour for the ten FNP specialty courses. Tuition for the online Doctor of Nursing Practice (“DNP”) program is $750 per credit hour. All of these tuition rates are unchanged from the prior year.

~~Effective for sessions beginning in July 2017, tuition for the Master of Public Health (“MPH”) program is $550 per credit hour. This program was launched in July 2017.~~

students. These tuition rates do not include the cost of course fees, books, supplies, transportation, clinical fees, living expenses, or other fees as listed in the Chamberlain academic catalog.

Walden

Walden Student Enrollment:


	Fiscal Year 2024
	September 30,
Period	2023
Total students	40,975
% change from prior year	0.5	%

	Fiscal Year 2023
	September 30,		December 31,		March 31,		June 30,
Period	2022		2022		2023		2023
Total students	40,772		37,956		39,427		37,582
% change from prior year	(9.2)	%	(7.8)	%	(7.9)	%	(4.8)	%

Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue increased 8.2%, or $10.7million, to $141.6million in the first quarter of fiscal year 2024 compared to the year-ago period, driven by an increase in enrollment, higher tuition rates, and an increase in average credit hours per student. Management believes its marketing efforts to differentiate the Walden brand have driven the turnaround in enrollment in the first quarter of fiscal year 2024.

Tuition Rates:

On a per credit hour basis, tuition for Walden programs range from $130 per credit hour to $1,060 per credit hour, with the wide range due to the nature of the programs. General education courses are charged at $333 per credit hour. Other programs such as those with a subscription-based learning modality or those billed on a subscription period or term basis range from $1,500 to $7,180 per term. Students are charged a program fee that ranges from $50 to $230 per term as well as a clinical fee of $160 per course for specific programs. Some programs require students to attend residencies, skills labs, and pre-practicum labs, which are charged at a range of $1,000 to $2,550 per event. In most cases, these tuition rates, event charges, and fees represent increases of approximately 3% to 7% from the prior year. These tuition rates, event charges, and fees do not include the cost of books or personal technology, supplies, transportation, or living expenses.

Table of Contents

Medical and Veterinary

Medical and Veterinary ~~Schools~~Student Enrollment:


	Fiscal Year 2024
Semester	Sept. 2023
Total students	5,209
% change from prior year	(7.5)	%

	Fiscal Year 2023
Semester	Sept. 2022		Jan. 2023		May 2023
Total students	5,634		5,312		4,869
% change from prior year	3.4	%	1.6	%	(8.2)	%

Medical and Veterinary ~~Schools Student Enrollment:~~

Fiscal Year 2018
Term Sept. 2017 Jan. 2018
New Students 812 515
% Change from Prior Year 0.7 % 11.5 %
Total Students 5,744 5,938
% Change from Prior Year (6.9 )% 1.3 %

Fiscal Year 2017
Term Sept. 2016 Jan. 2017 May 2017
New Students 806 462 458
% Change from Prior Year (18.7 )% (10.8 )% (14.4 )%
Total Students 6,168 5,863 5,491
% Change from Prior Year (5.8 )% (8.0 )% (6.1 )%

~~The medical and veterinary schools~~ revenue decreased ~~0.3%~~3.8%, or ~~$0.3~~ $3.3million, to ~~$88.2 million in the second quarter and decreased 6.4%, or $11.2 million, to $165.6~~ $84.6million in the first ~~six months~~quarter of fiscal year ~~2018~~2024 compared to the year-ago ~~periods. The declines were~~period, driven ~~primarily~~ by revenue loss of approximately $0.9 million and $8.2 million, for the second quarter and first six months of fiscal year 2018, respectively, due to the effects of Hurricanes Irma and Maria. These events forced temporary shut-downs and postponements of the September 2017 semester basic science academic instruction at AUC and RUSM, along with students withdrawing due to these disruptions. In addition,decreased enrollment, ~~declines at AUC and RUSM in the May 2017 semester, which contributed revenue for the first two months of fiscal year 2018, resulted in decreased revenue. These enrollment declines were~~ partially offset by tuition ~~price~~rate increases at ~~AUC and RUSM for the September 2017 semester, as well as enrollment increases at Ross University School of Veterinary Medicine (“RUSVM”). Management is executing its~~all three institutions in this segment.

Management’s plan to ~~differentiate~~increase enrollment centers around the ~~medical and veterinary schools from the competition, with a~~ core ~~goal~~goals of increasing international students, increasing 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 ~~its~~ marketing ~~strategies by restructuring the marketing organization,~~ and shifting from traditional media and event-driven marketing to greater use of digital and social media channels to drive awareness throughout the year. These strategies were successful in improving recruitment results in the January 2018 semester, in which new and total student enrollment ~~increased.~~investments.

Management believes the demand for medical education remains strong and can support management’s longer-term growth expectations to grow new enrollments in the low-single digit range; however, heightened competition may adversely affect the medical and veterinary schools’ ability to continue to attract qualified students to its programs.

Tuition Rates:

·●

Effective for semesters beginning in September ~~2017,~~2023, for students first enrolled prior to May 2022, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC’s medical program are ~~$21,695~~$26,680 and ~~$24,272,~~$31,328, respectively, per semester, which represents a 6.8% and 12.0% increase, respectively, from the prior academic year. Effective for semesters beginning in September 2023, for students first enrolled in May 2022 and after, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC’s medical program are $21,568 and $28,146, respectively, per semester, which represents a 6.8% and 12.0% increase, respectively, from the prior academic year. In addition, students first enrolled in May 2022 and after are charged administrative fees of $5,430 and $3,841 for the basic sciences and final clinical rotation portions of the program, respectively, per semester, which represents a 6.8% and 12.0% increase, respectively, from the prior academic year.

●

Effective for semesters beginning in September 2023, for students first enrolled prior to May 2022, tuition rates for the beginning basic sciences and final clinical rotation portions of RUSM’s medical program are $27,547 and $30,397, respectively, per semester. These tuition rates represent a ~~3.5%~~6.0% increase ~~over~~from the prior academic year.

Effective for semesters beginning in September ~~2017,~~2023, for students first enrolled in May 2022 and after, tuition rates for the beginning basic sciences and ~~Internal Medicine Foundations/~~final clinical rotation portions of RUSM’s medical program are $23,284 and $27,447, respectively, per semester. In addition, students first enrolled in May 2022 and after are charged administrative fees ranging from $5,883 to $6,662 for the basic sciences portion of the ~~programs at RUSM are $22,345~~program and ~~$24,660, respectively,~~$3,420 for the final clinical rotation portion of the program, per semester. These tuition rates and fees represent a ~~4.8%~~6.0% increase ~~over~~from the prior academic year.

·●

Effective for semesters beginning in September ~~2017,~~2023, for students who first enrolled prior to September 2018, tuition rates for the ~~basic sciences~~pre-clinical (semesters 1-7) and ~~final~~ clinical ~~portion~~curriculum (semesters 8-10) of ~~the programs at RUSVM~~RUSVM’s veterinary program are ~~$18,310~~$22,334 and ~~$22,985,~~$28,034, respectively, per semester. ~~These~~Effective for semesters beginning in September 2023, for students first enrolled in September 2018 and after, tuition rates for the pre-clinical and clinical curriculum of RUSVM’s veterinary program are ~~unchanged~~$24,044 per semester. All of these tuition rates represent a 6.0% increase 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.

~~Professional Education~~

Revenue in the Professional Education segment increased 10.9%, or $3.0 million, to $30.4 million in the second quarter and increased 13.4%, or $8.3 million, to $70.4 million in the first six months of fiscal year 2018 compared to the year-ago periods. The increase is driven by revenue growth at the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), partially offset by a decline in the number of CPA exam candidates taking the Becker Exam Review Course compared to the year-ago periods. ACAMS’s membership has increased to over 60,000 which is an increase of approximately 62% since July 2016, driven by strong growth in the Asia Pacific region as well as expansion in the business-to-business partnerships in Europe.

~~Technology and Business~~

~~Revenue in the Technology and Business segment, which is composed solely~~Table of Adtalem Brazil, increased 2.4%, or $1.7 million, to $75.1 million in the second quarter and increased 4.5%, or $5.9 million, to $137.6 million in the first six months of fiscal year 2018 compared to the year-ago periods. The increase in value of the Brazilian Real compared to the U.S. dollar increased reported revenue in the second quarter and first six months of fiscal year 2018 by $1.1 million and $2.8 million, respectively, compared to the year-ago periods. Constant currency calculations assume conversions of local currency amounts at exchange rates in effect in the year-ago period compared to those conversions at exchange rates in effect during the current fiscal year period. On a constant currency basis, revenue increased by 0.9% and 2.4% in the second quarter and first six months of fiscal year 2018, respectively, compared to the year-ago periods. Revenue growth was driven primarily by increased total higher education student enrollment due to increased persistence, partially offset by a decline in the number of students enrolled in law exam test preparation courses. This decline is related to changes in the exam resulting in lower pass rates for the first level of the exam, which lowered demand for preparation courses for the subsequent level.Contents

Brazil’s economy continues to present challenges for enrollment growth and is creating pricing pressures in the education sector. Adtalem Brazil’s new student enrollment has been negatively impacted by these conditions as well as reductions in the “Fundo de Financiamento Estudantil” or “Students Financing Fund” (“FIES”) program. Should economic conditions continue to weaken and additional austerity measures be instituted by the Brazilian government, Adtalem Brazil’s ability to grow its student enrollment may be further impacted.

~~Key trends for Adtalem Brazil are set forth below.~~

~~Adtalem Brazil Student Enrollment:~~

Fiscal Year
2018 Fiscal Year 2017
Term Sept. 2017 Sept. 2016 Mar. 2017
New Students 14,507 15,892 22,531
% Change over Prior Year (8.7 )% 10.4 % (9.0 )%
Total Students 78,340 76,862 79,564
% Change over Prior Year 1.9 % 32.9 % 0.4 %

These enrollment figures include students enrolled in degree-granting programs and exclude students enrolled in the test preparation programs at Damásio Educacional (“Damasio”). The effect of acquisitions on the enrollment figures are as follows:

The acquisition of Faculdade de Imperatriz (“Facimp”), which occurred in the fourth quarter of fiscal year 2016, added 622 new student enrollments and 2,050 total student enrollment to the March 2017 semester totals. Excluding the effect of this acquisition, new enrollment decreased 11.5% and total enrollment decreased 2.2% in the March 2017 semester compared to the March 2016 semester.

The acquisitions of Grupo Ibmec Educacional S.A. (“Grupo Ibmec”), which occurred in the second quarter of fiscal year 2016, and Facimp added 3,322 new student enrollments and 16,688 total student enrollment to the September 2016 semester totals. Excluding the effect of these acquisitions, new enrollment decreased 12.7% and total enrollment increased 4.1% in the September 2016 semester compared to the September 2015 semester.

Adtalem Brazil students are eligible for loans under Brazil’s FIES public loan program, which is financed by the Brazilian government. Management believes the decrease in new student enrollment in the September 2017 semester is the result of changes in the FIES program. As of June 30, 2017, approximately 26% of Adtalem Brazil’s degree-seeking students have obtained financing under the FIES program. This represents approximately 28% of Adtalem Brazil’s revenue. The Brazilian government has stated that it is supportive of the FIES program, which is an important factor in helping to increase the number of college graduates. However, changes enacted in calendar year 2015 to the FIES regulations have added restrictions limiting student eligibility for FIES funding and extended the government’s time to pay participating institutions. These changes included reducing the number of new FIES contracts, decreasing the monthly maximum family income thresholds for students to qualify for a FIES loan and adding minimum required entrance test scores in order to qualify for a FIES loan.

Changes in the FIES program have impacted Adtalem Brazil’s growth due to fewer students qualifying for the FIES program. Adtalem Brazil institutions have increased efforts to attract more non-FIES students in order to diversify their payer mix. Also, Adtalem Brazil is working with private lenders to increase funding sources for prospective students. Management believes Adtalem Brazil institutions offer programs of study and operate in areas of the country that the Brazilian government favors in issuing FIES loans.

The Brazilian government recently changed regulations on opening and operating distance learning in the country. The approval process for launching online facilities was streamlined, making this segment more economically attractive to larger institutions. Adtalem Brazil will begin offering several bachelor’s and associate degree programs via distance learning in February 2018. These programs will be offered under the Damasio-Unifavip brand. They will be delivered through the Damasio network of over 200 learning centers, which currently have the infrastructure and staff necessary to support distance learning degrees.

~~U.S. Traditional Postsecondary~~

Revenue in the U.S. Traditional Postsecondary segment, which is composed solely of Carrington, decreased 10.5%, or $3.4 million, to $29.0 million in the second quarter and decreased 11.9%, or $8.3 million, to $61.2 million in the first six months of fiscal year 2018 compared to the year-ago periods. Revenue declined as a result of declines in student enrollment at Carrington as it repositions itself to stabilize enrollment. Key trends for Carrington are set forth below.

~~Carrington College~~

~~Carrington College Student Enrollment:~~

Fiscal Year 2018
Term Sept. 2017 Dec. 2017
New Students 2,155 1,541
% Change from Prior Year (7.8 )% 7.2 %
Total Students 5,258 5,644
% Change from Prior Year (20.8 )% (4.5 )%

Fiscal Year 2017
Term Sept. 2016 Dec. 2016 Mar. 2017 June 2017
New Students 2,338 1,437 1,892 1,384
% Change from Prior Year (9.5 )% (22.7 )% (8.1 )% (17.7 )%
Total Students 6,638 5,910 6,026 5,362
% Change from Prior Year (12.2 )% (18.0 )% (16.1 )% (17.1 )%

To improve enrollment results, management has focused on bringing relevant programs at competitive prices to serve areas of the workforce where supply and demand imbalances exist. These strategies resulted in improved new student enrollment in the latest term, reversing the trend of nine quarters of enrollment declines which were the result of changing demand for career education given low unemployment, rising wages and increased competition.

~~Tuition Rates:~~

On a per credit hour basis, tuition for Carrington programs range from $306 per credit hour to $1,684 per credit hour, with the wide range due to the nature of the programs. General education courses are charged at $335 to $371 per credit hour. Total program tuition ranges from approximately $13,000 to $20,000 for most certificate programs and up to approximately $62,000 for a few advanced programs. These amounts do not include the cost of books, fees, supplies, transportation or living expenses.

~~COSTS AND EXPENSES~~

Cost of Educational Services

The largest component of ~~Cost~~cost of ~~Educational Services~~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, ~~and~~ other educational materials, student education-related support activities, and the provision for ~~uncollectible student accounts.~~bad debts. We have not experienced significant inflationary pressures on wages or other costs of delivering our educational services; however, should inflation persist in the overall economy, cost increases could affect our results of operations in the future. The following table presents cost of educational services by segment detailing the changes from the year-ago period (in thousands):

Three Months Ended December 31, 2017
(in thousands)
Medical
and
Healthcare Professional
Education Technology
and
Business U.S.
Traditional
Postsecondary
Home Office
and
Other
Consolidated
Cost of Educational
Services:
Fiscal Year 2017 as Reported $ 101,735 $ 5,613 $ 47,525 $ 23,293 $ 982 $ 179,148
Cost (Reduction) Investment (383 ) 231 (330 ) (1,766 ) 975 (1,273 )
Effect of Acquisitions - - 141 - - 141
Hurricane Impact 245 - - - - 245
Effect of Currency Change - - 709 - - 709
Fiscal Year 2018 as Reported $ 101,597 $ 5,844 $ 48,045 $ 21,527 $ 1,957 $ 178,970

Fiscal Year 2018 % Change:
Cost (Reduction) Investment (0.4 )% 4.1 % (0.7 )% (7.6 )% NM (0.7 )%
Effect of Acquisitions - - 0.3 % - NM 0.1 %
Constant Currency Change (0.4 )% 4.1 % (0.4 )% (7.6 )% NM (0.6 )%
Hurricane Impact 0.2 % - - - NM 0.1 %
Effect of Currency Change - - 1.5 % - NM 0.4 %
Fiscal Year 2018 % Change as Reported (0.1 )% 4.1 % 1.1 % (7.6 )% NM (0.1 )%

Six Months Ended December 31, 2017
(in thousands)
Medical
and
Healthcare Professional
Education Technology
and
Business U.S.
Traditional
Postsecondary
Home Office
and
Other
Consolidated
Cost of Educational
Services:
Fiscal Year 2017 as Reported $ 208,325 $ 12,805 $ 95,677 $ 47,419 $ 2,408 $ 366,634
Cost (Reduction) Investment (3,631 ) 459 (2,334 ) (3,127 ) 1,489 (7,144 )
Effect of Acquisitions - - 141 - - 141
Hurricane Impact 13,372 - - - - 13,372
Effect of Currency Change - - 1,908 - - 1,908
Fiscal Year 2018 as Reported $ 218,066 $ 13,264 $ 95,392 $ 44,292 $ 3,897 $ 374,911

Fiscal Year 2018 % Change:
Cost (Reduction) Investment (1.7 )% 3.6 % (2.4 )% (6.6 )% NM (1.9 )%
Effect of Acquisitions - - 0.1 % - NM 0.0 %
Constant Currency Change (1.7 )% 3.6 % (2.3 )% (6.6 )% NM (1.9 )%
Hurricane Impact 6.4 % - - - NM 3.6 %
Effect of Currency Change - - 2.0 % - NM 0.5 %
Fiscal Year 2018 % Change as Reported 4.7 % 3.6 % (0.3 )% (6.6 )% NM 2.3 %


	Three Months Ended September 30, 2023
	Chamberlain			Walden			Medical and Veterinary			Consolidated
Fiscal year 2023	$	60,173		$	48,453		$	51,019		$	159,645
Cost increase (decrease)		5,233			5,577			(1,837)			8,973
Fiscal year 2024	$	65,406		$	54,030		$	49,182		$	168,618
% change from prior year		8.7	%		11.5	%		(3.6)	%		5.6	%

Cost of ~~Educational Services decreased 0.1%~~educational services increased 5.6%, or ~~$0.2~~ $9.0million, to ~~$179.0 million in the second quarter and increased 2.3%, or $8.3 million, to $374.9~~ $168.6million in the first six months of fiscal year 2018 compared to the year-ago periods. Excluding the effect of the increase in value of the Brazilian Real compared to the U.S. dollar, total consolidated Cost of Educational Services decreased 0.5%, or $0.9 million, in the second quarter of fiscal year ~~2018 compared to the year-ago quarter and increased 1.7%, or $6.4 million, in the first six months of fiscal year 2018~~2024 compared to the year-ago period. ~~Costs decreased in the second quarter of fiscal year 2018~~This cost increase was primarily ~~as a result of cost reduction measures at the medical and veterinary schools, Carrington and Adtalem Brazil. The~~driven by an increase in provision for bad debts and an increase in labor costs in the first six months of fiscal year 2018 was the result of $13.4 million in charges representing the deductibles under insurance policies, incurred for facility and equipment impairment write-offs and the evacuations of AUC and RUSM students, faculty and staff in the wakes of Hurricanes Irma and Maria. These costs wereto support increased enrollment, partially offset by ~~cost savings primarily as~~ a ~~result of cost reduction measures~~decrease in clinical costs at ~~the medical~~Medical and ~~veterinary schools, Carrington and Adtalem Brazil. Costs at the Professional Education segment increased in both the second quarter and first six months of fiscal year 2018 to support growth at ACAMS.~~

Veterinary.

As a percentage of revenue, ~~Cost~~cost of ~~Educational Services~~educational services was ~~53.1%~~45.7% and ~~56.6%~~45.1% in the ~~second quarter and~~ first ~~six months of fiscal year 2018, respectively, compared to 53.6% and 55.3%, respectively, during the year-ago periods. The decrease in the second~~ quarter of fiscal year ~~2018 was primarily a result of cost reduction efforts at Adtalem Brazil along with operating leverage at ACAMS.~~2024 and 2023, respectively. The increase in the ~~first six months of fiscal year 2018~~percentage was primarily the result of the ~~negative effects on revenue and expense from Hurricanes Irma and Maria.~~

increase in the provision for bad debts.

Student Services and Administrative Expense

The ~~Student Services~~student services and ~~Administrative Expense~~administrative expense category includes expenses related to student admissions, marketing and advertising, general and administrative, ~~curriculum development~~ and amortization expense of finite-lived intangible assets related to ~~acquisitions~~business acquisitions. We have not experienced significant inflationary pressures on wages or other costs of ~~businesses.~~providing services to our students and educational institutions; however, should inflation persist in the overall economy, cost increases could affect our results of operations in the future. The following table presents student services and administrative expense by segment detailing the changes from the year-ago period (in thousands):

Three Months Ended December 31, 2017
(in thousands)
Medical
and
Healthcare Professional
Education Technology
and
Business U.S.
Traditional
Postsecondary
Home Office
and
Other
Consolidated
Student Services and
Administrative Expense:
Fiscal Year 2017 as Reported $ 47,522 $ 21,618 $ 12,380 $ 13,099 $ 6,548 $ 101,167
Cost (Reduction) Investment (870 ) 704 566 (942 ) (440 ) (982 )
Effect of Acquisitions - - 10 - - 10
Effect of Currency Change - - 141 - - 141
Fiscal Year 2018 as Reported $ 46,652 $ 22,322 $ 13,097 $ 12,157 $ 6,108 $ 100,336

Fiscal Year 2018 % Change:
Cost (Reduction) Investment (1.8 )% 3.3 % 4.6 % (7.2 )% NM (1.0 )%
Effect of Acquisitions - - 0.1 % - NM 0.0 %
Constant Currency Change (1.8 )% 3.3 % 4.7 % (7.2 )% NM (1.0 )%
Effect of Currency Change - - 1.1 % - NM 0.1 %
Fiscal Year 2018 % Change as Reported (1.8 )% 3.3 % 5.8 % (7.2 )% NM (0.8 )%

Six Months Ended December 31, 2017
(in thousands)
Medical
and
Healthcare Professional
Education Technology
and
Business U.S.
Traditional
Postsecondary
Home Office
and
Other
Consolidated
Student Services and
Administrative Expense:
Fiscal Year 2017 as Reported $ 96,838 $ 43,100 $ 24,443 $ 26,609 $ 13,642 $ 204,632
Cost (Reduction) Investment (1,714 ) 1,337 1,470 (817 ) (3,780 ) (3,504 )
Effect of Acquisitions - - 10 - - 10
Effect of Currency Change - - 406 - - 406
Fiscal Year 2018 as Reported $ 95,124 $ 44,437 $ 26,329 $ 25,792 $ 9,862 $ 201,544

Fiscal Year 2018 % Change:
Cost (Reduction) Investment (1.8 )% 3.1 % 6.0 % (3.1 )% NM (1.7 )%
Effect of Acquisitions - - 0.0 % - NM 0.0 %
Constant Currency Change (1.8 )% 3.1 % 6.1 % (3.1 )% NM (1.7 )%
Effect of Currency Change - - 1.7 % - NM 0.2 %
Fiscal Year 2018 % Change as Reported (1.8 )% 3.1 % 7.7 % (3.1 )% NM (1.5 )%


	Three Months Ended September 30, 2023
	Chamberlain			Walden			Medical and Veterinary			Home Office and Other		Consolidated
Fiscal year 2023	$	48,231		$	76,435		$	19,880		$	1,839	$	146,385
Cost increase (decrease)		4,634			(1,444)			1,102			4,769		9,061
Intangible amortization expense change		—			(7,851)			—			—		(7,851)
Litigation reserve change		—			18,500			—			—		18,500
Fiscal year 2024	$	52,865		$	85,640		$	20,982		$	6,608	$	166,095

Fiscal year 2024 % change:
Cost increase (decrease)		9.6	%		(1.9)	%		5.5	%		NM		6.2	%
Effect of intangible amortization expense change		—			(10.3)	%		—			NM		(5.4)	%
Effect of litigation reserve change		—			24.2	%		—			NM		12.6	%
Fiscal year 2024 % change		9.6	%		12.0	%		5.5	%		NM		13.5	%

Student ~~Services~~services and ~~Administrative Expense decreased 0.8%~~administrative expense increased 13.5%, or ~~$0.8~~ $19.7million, to ~~$100.3 million in the second quarter and decreased 1.5%, or $3.1 million, to $201.5~~ $166.1million in the first ~~six months~~quarter of fiscal year ~~2018~~2024 compared to the year-ago ~~periods.~~period. Excluding ~~the effect of the~~intangible amortization expense and litigation reserve, student services and administrative expense increased 6.2%, or $9.1million. This cost increase was primarily driven by an increase in ~~value~~incentive compensation, severance, and investments to support growth initiatives.

Table of ~~the Brazilian Real compared to the U.S. dollar, total consolidated Student Services~~Contents

As a percentage of revenue, student services and ~~Administrative Expense decreased 1.0%, or $1.0 million,~~administrative expense was 45.0% and 41.3% in the ~~second~~first quarter of fiscal year ~~2018~~2024 and 2023, respectively. The increase in the percentage was primarily the result of the litigation reserve in the first quarter of fiscal year 2024.

Restructuring Expense

Restructuring expense was $0.7 million and $15.1 million in the first quarter of fiscal year 2024 and 2023, respectively. The decreased restructure expense in the first quarter of fiscal year 2024 was primarily driven by higher real estate consolidations in the first quarter of fiscal year 2023 at Walden, Medical and Veterinary, and Adtalem’s home office resulting in impairments on operating lease assets and property and equipment. See Note 5 “Restructuring Charges” to the Consolidated Financial Statements for additional information on restructuring charges. We continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities.

Business Integration Expense

Business integration expense was $5.3 million and $9.5 million in the first quarter of fiscal year 2024 and 2023, respectively. These are costs associated with integrating Walden into Adtalem. In addition, during the first quarter of fiscal year 2023, we initiated transformation initiatives to accelerate growth and organizational agility. Certain costs relating to this transformation are included in business integration expense in the Consolidated Statements of Income. We expect to incur additional integration expense through the remainder of fiscal year 2024.

Operating Income

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


	Three Months Ended September 30, 2023
	Chamberlain		Walden		Medical and Veterinary		Home Office and Other		Consolidated
Fiscal year 2023	$	26,184	$	2,933	$	10,238	$	(15,721)	$	23,634
Organic change		(2,678)		6,574		(2,587)		(4,767)		(3,458)
Restructuring expense change		818		3,080		6,712		3,779		14,389
Business integration expense change		—		—		—		4,278		4,278
Intangible amortization expense change		—		7,851		—		—		7,851
Litigation reserve change		—		(18,500)		—		—		(18,500)
Fiscal year 2024	$	24,324	$	1,938	$	14,363	$	(12,431)	$	28,194

Table of Contents

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


	Three Months Ended
	September 30,
							Increase/(Decrease)
	2023			2022			$		%
Chamberlain:
Operating income (GAAP)	$	24,324		$	26,184		$	(1,860)	(7.1)	%
Restructuring expense		—			818			(818)
Adjusted operating income (non-GAAP)	$	24,324		$	27,002		$	(2,678)	(9.9)	%
Operating margin (GAAP)		17.1	%		19.3	%
Operating margin (non-GAAP)		17.1	%		19.9	%

Walden:
Operating income (GAAP)	$	1,938		$	2,933		$	(995)	(33.9)	%
Restructuring expense		—			3,080			(3,080)
Intangible amortization expense		10,677			18,528			(7,851)
Litigation reserve		18,500			—			18,500
Adjusted operating income (non-GAAP)	$	31,115		$	24,541		$	6,574	26.8	%
Operating margin (GAAP)		1.4	%		2.2	%
Operating margin (non-GAAP)		22.0	%		18.7	%

Medical and Veterinary:
Operating income (GAAP)	$	14,363		$	10,238		$	4,125	40.3	%
Restructuring expense		114			6,826			(6,712)
Adjusted operating income (non-GAAP)	$	14,477		$	17,064		$	(2,587)	(15.2)	%
Operating margin (GAAP)		17.0	%		11.6	%
Operating margin (non-GAAP)		17.1	%		19.4	%

Home Office and Other:
Operating loss (GAAP)	$	(12,431)		$	(15,721)		$	3,290	20.9	%
Restructuring expense		562			4,341			(3,779)
Business integration expense		5,262			9,540			(4,278)
Adjusted operating loss (non-GAAP)	$	(6,607)		$	(1,840)		$	(4,767)	(259.1)	%

Adtalem Global Education:
Operating income (GAAP)	$	28,194		$	23,634		$	4,560	19.3	%
Restructuring expense		676			15,065			(14,389)
Business integration expense		5,262			9,540			(4,278)
Intangible amortization expense		10,677			18,528			(7,851)
Litigation reserve		18,500			—			18,500
Adjusted operating income (non-GAAP)	$	63,309		$	66,767		$	(3,458)	(5.2)	%
Operating margin (GAAP)		7.6	%		6.7	%
Operating margin (non-GAAP)		17.2	%		18.8	%

Consolidated operating income increased 19.3%, or $4.6million, to $28.2million in the first quarter of fiscal year 2024 compared to the year-ago period. The primary drivers of the operating income increase in the first quarter of fiscal year 2024 were decreased restructuring expense, intangible amortization expense, and business integration expense, partially offset by increased litigation reserve, provision for bad debts, and incentive compensation expense. The decrease in intangible amortization expense is driven by the decrease in amortization relating to the Walden student relationships intangible asset. This intangible asset is amortized based on the estimated retention of the students and considers the revenue and cash flow associated with these existing students, which are concentrated at the beginning of the asset’s useful life.

Consolidated adjusted operating income decreased ~~1.7%~~5.2%, or $3.5million, to $63.3million in the first ~~six months~~quarter of fiscal year ~~2018~~2024 compared to the year-ago period. The primary drivers of the decrease in adjusted operating income were the increase in costs to support the growth of the business, provision for bad debts, incentive compensation expense, and severance costs, partially offset by an increase in revenue.

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Chamberlain

Chamberlain operating income decreased 7.1%, or $1.9 million, to $24.3 million in the first quarter of fiscal year 2024 compared to the year-ago period. Segment adjusted operating income decreased 9.9%, or $2.7 million, to $24.3 million in the first quarter of fiscal year 2024 compared to the year-ago period. The decrease was primarily the result of cost reduction measures. Over the past several years, Adtalem has reduced costs through staffing adjustments primarily at the medical and veterinary schools, Carrington and Adtalem’s home office while maintaining services that drive successful student outcomes. Also, management is finding ways to be more efficient in marketing and recruiting efforts. The cost reductions were partially offset with cost increases to support growth at ACAMS and Adtalem Brazil. Amortization of finite-lived intangible assets was unchangedadjusted operating income in the ~~second quarter and decreased by $0.7 million during the~~ first ~~six months of fiscal year 2018 compared to the year-ago periods. Amortization expense is included entirely in the Student Services and Administrative Expense category.~~

As a percentage of revenue, Student Services and Administrative Expense decreased to 29.8% and 30.4% in the second quarter and first six months of fiscal year 2018, respectively, compared to 30.3% and 30.9%, respectively, during the year-ago periods. These decreases were primarily a result of the cost reduction measures noted above.

~~Management expects that for the third~~ quarter of fiscal year ~~2018, total~~2024 was primarily driven by increased labor costs and provision for bad debts, partially offset by the increase in revenue.

Walden

Walden operating ~~costs will increase 1~~income decreased 33.9%, or $1.0million, to ~~2 percent compared to~~$1.9 million in the ~~third~~first quarter of fiscal year 2017, driven by investments in growth at the Medical and Healthcare, Professional Education and Technology and Business segments, partially offset by the impact of savings from Adtalem’s continued cost reduction measures. Adtalem’s outlook excludes potential charges related to restructuring plans and the pending sale of DeVry University, as well as impacts from the timing of the receipt of insurance reimbursements for the hurricane-related expenses.

~~Restructuring Expense~~

During the first three and six months of fiscal year 2018, Adtalem recorded restructuring charges primarily related to reductions in force (“RIF”) and real estate consolidations at Carrington and Adtalem’s home office. Termination benefit charges, as a result of reducing Adtalem’s workforce by 98 positions in the first six months of fiscal year 2018, represented severance pay and benefits for these employees. We also recorded a reduction to restructuring charges in the first six months of fiscal year 2018 for an adjustment to previously accrued estimates for real estate consolidations at Adtalem’s home office. During the first three and six months of fiscal year 2017, Adtalem recorded restructuring charges primarily related to real estate consolidations at Carrington and Adtalem’s home office. Adtalem’s home office is classified as “Home Office and Other” in Part I, Item 1, “Note 15: Segment Information” to the Consolidated Financial Statements. Pre-tax restructuring charges by segment were as follows (in thousands):

Cash payments for restructuring charges were $16.3 million in the first six months of fiscal year 2018. The remaining accrual for these charges is $41.8 million as of December 31, 2017. The balance is expected to be paid within the next 12 months except for rent charges which may be paid out for periods of up to 8 years. Additional restructuring expense is expected to be recorded in the remainder of fiscal year 2018 as Adtalem continues to reduce cost where enrollment levels necessitate such realignment of expense.

~~Regulatory Settlements~~

In the second quarter of fiscal year 2017, Adtalem, DeVry University, Inc. and DeVry/New York Inc. (collectively, the “Adtalem Parties”) and the FTC agreed to a Stipulation as to Entry of an Order for Permanent Injunction and Monetary Judgment (the “Agreement”) resolving litigation brought by the FTC regarding DeVry University’s use of employment statistics in former advertising. Under the terms of the Agreement, the Adtalem Parties agreed to pay $49.4 million to be distributed at the sole discretion of the FTC, to forgive $30.4 million of institutional loans issued before September 30, 2015, and to forgive outstanding DeVry University accounts receivable balances by $20.2 million for former students. In addition, the Adtalem Parties agreed that Adtalem institutions marketing to U.S. consumers will maintain specific substantiation to support any future advertising regarding graduate outcomes and educational benefits, and will implement training and other agreed-upon compliance measures. Adtalem chose to settle the FTC litigation after filing an answer denying all allegations of wrongdoing.

In the second quarter of fiscal year 2017, Adtalem also recorded charges related to the resolution of an inquiry made by the NYAG to the Adtalem Parties regarding DeVry University’s use of employment and salary statistics in former advertising. The Adtalem Parties chose to resolve the NYAG inquiry by entering into an Assurance of Discontinuance (the “Assurance”) with the NYAG on January 27, 2017, without admitting or denying the allegations therein. Pursuant to the Assurance, the Adtalem Parties agreed to pay $2.25 million for consumer restitution and $0.5 million in penalties, fees and costs. In addition, the Adtalem Parties agreed that Adtalem institutions marketing to New York consumers will maintain specific substantiation and present certain statistics as prescribed to support any future advertising regarding graduate outcomes and educational benefits, and will implement other agreed-upon compliance measures.

Student services and access to federal student loans are not impacted by the Agreement or the Assurance, and at no time has the academic quality of a DeVry University education been questioned. See “Note 3: Regulatory Settlements” to the Consolidated Financial Statements in Part I, Item 1, of this Quarterly Report on Form 10-Q for further discussion.

The regulatory settlements expense of $56.3 million recorded during the first six months of fiscal year 2017 consists of the $49.4 million cash payment to the FTC, the $4.1 million unreserved and expensed institutional loans and the $2.75 million cash payment to the NYAG. Of these regulatory settlement charges, $4.1 million is recorded within discontinued operations and $52.2 million was allocated to the Adtalem home office which is classified as “Home Office and Other” in “Note 15: Segment Information” to the Consolidated Financial Statements in Part I, Item 1, of this Quarterly Report on Form 10-Q.

~~OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS~~

Total consolidated operating income from continuing operations increased to $55.4 million in the second quarter of fiscal year 2018 compared to a loss of $1.5 million in the year-ago quarter, and increased 143.9%, or $47.9 million, to $81.1 million in the first six months of fiscal year 20182024 compared to the year-ago period. ~~Excluding the regulatory settlements expense recorded~~Segment adjusted operating income increased 26.8%, or $6.6million, to $31.1million in the ~~second~~first quarter of fiscal year 2017, total consolidated operating income from continuing operations increased 9.3%, or $4.7 million, in the second quarter and decreased 5.0%, or $4.3 million, in the first six months of fiscal year 2018 compared to the year-ago periods. The primary drivers of the increase in operating income from continuing operations in the second quarter of fiscal year 2018 were cost reduction efforts across Adtalem and revenue growth in the Professional Education segment. The primary driver of the decrease in operating income from continuing operations in the first six months of fiscal year 2018, were $21.6 million in reduced revenue and additional costs incurred due to the impacts of Hurricanes Irma and Maria in the first six months of fiscal year 2018. Excluding the effects of the hurricanes and the regulatory settlements expense, consolidated operating income from continuing operations increased 20.3%, or $17.3 million, in the first six months of fiscal year 2018 compared to the year-ago period. Cost reduction efforts across Adtalem and revenue growth in the Professional Education and Technology and Business segments more than offset the effect on operating income from continuing operations of the revenue declines at Carrington.

~~Medical and Healthcare~~

Medical and Healthcare segment operating income increased 5.6%, or $2.9 million, to $55.0 million in the second quarter and decreased 15.3%, or $14.7 million, to $81.3 million in the first six months of fiscal year 2018 compared to the year-ago periods. The primary driver of the decrease in operating income in the first six months was $21.6 million in reduced revenue and additional costs incurred due to the impacts of Hurricanes Irma and Maria. Excluding the effects of the hurricanes, segment operating income increased 7.2%, or $6.9 million, to $102.9 million in the first six months of fiscal year 2018 compared to the year-ago period, primarily driven by revenue increases at Chamberlain and cost control across all institutions.

~~Professional Education~~

Professional Education segment operating income increased to $2.2 million in the second quarter of fiscal year 2018 compared to operating income of $134,000 in the year-ago quarter, and increased 105.1%, or $6.5 million, to $12.7 million in the first six months of fiscal year 20182024 compared to the year-ago period. The ~~increased~~increase in adjusted operating income isin the ~~result~~first quarter of fiscal year 2024 was primarily driven by the increase in revenue, ~~growth at ACAMS.~~

partially offset by increased labor costs, provision for bad debts, and graduation expense.

~~Technology~~Medical and ~~Business~~Veterinary

~~Technology~~Medical and ~~Business segment~~Veterinary operating income increased ~~3.8%~~40.3%, or ~~$0.5~~ $4.1million, to ~~$14.0 million in the second quarter and increased 37.8%, or $4.3 million, to $15.9~~ $14.4million in the first ~~six months~~quarter of fiscal year ~~2018~~2024 compared to the year-ago ~~periods. Included~~period. Segment adjusted operating income decreased 15.2%, or $2.6million, to $14.5million in the first quarter of fiscal year 2024 compared to the year-ago period. The decrease in adjusted operating income in the ~~second~~first quarter ~~and first six months~~ of fiscal year ~~2018 was $0.2 million and $0.5 million, respectively, from the effect of exchange rates. The increased operating income~~2024 was primarily driven by ~~higher education~~the decrease in revenue, ~~growth at Adtalem Brazil.~~partially offset by decreased clinical costs.

Interest Expense

~~U.S. Traditional Postsecondary~~

~~U.S. Traditional Postsecondary segment operating losses were $5.8~~Interest expense was $15.7 million and ~~$11.3~~$17.8 million in the ~~second quarter and~~ first six months of fiscal year 2018, respectively, compared to operating losses of $6.3 million and $8.3 million in the second quarter and first six months of fiscal year 2017, respectively. Excluding $1.1 million of restructuring expense, which decreased from $2.3 million in the year-ago quarter, the segment operating loss was $4.7 million in the second quarter of fiscal year ~~2018 compared to a loss of $3.9 million~~2024 and 2023, respectively. The decrease in the year-ago quarter. Excluding $2.4 million of restructuring expense, which decreased from $3.7 million in the year-ago period, the segment operating loss was $8.9 million in the first six months of fiscal year 2018 compared to a loss of $4.6 million in the year-ago period. These decreases were the result of a decline in revenue resulting from the impact of lower total student enrollments, partially offset by cost savings. Total segment expense in the second quarter and first six months of fiscal year 2018, excluding special charges, decreased $2.7 million, or 7.4%, and $3.9 million, or 5.3%, respectively, compared to the year-ago periods. These expense reductions at Carrington offset approximately 79% and 48% of the lower revenue in the second quarter and first six months of fiscal year 2018, respectively. Management continues to adjust costs to better align with current enrollment levels.

~~NET INTEREST EXPENSE~~

~~Net~~ interest expense in the second quarter and first six months of fiscal year 2018 was $1.1 million and $0.9 million, respectively, compared to net interest expense of $1.3 million and $2.4 million, respectively, in the year-ago periods. The net interest expense decrease was primarily the result of ~~increased~~the year-ago period incurring charges due to the write-off of debt discount and issuance costs on the Term Loan B (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements) upon repayment of a portion of the debt. This decrease in interest expense was partially offset by rising interest rates on outstanding Term Loan B debt. The interest rate for borrowings under the Term Loan B debt was 9.43% and 7.05% as of September 30, 2023 and 2022, respectively.

Other Income, Net

Other income, ~~from higher invested cash balances at Adtalem Brazil.~~

~~INCOME TAXES~~

~~Tax expense from continuing operations of $109.6~~net was $2.2 million ~~was recorded~~and $0.8 million in the ~~second~~first quarter of fiscal year ~~2018. Tax expense~~2024 and 2023, respectively. The increase in other income, net was primarily the result of an increase in interest income.

Provision for Income Taxes

Our effective income tax rate (“ETR”) from continuing operations ~~includes $101.2 million~~can differ from the 21% U.S. federal statutory rate due to ~~record~~several factors, including tax on global intangible low-taxed income (“GILTI”), limitation of tax benefits on certain executive compensation, the ~~one-time impact~~rate of tax applied by state and local jurisdictions, the ~~Tax Cuts~~rate of tax applied to earnings outside the U.S., tax incentives, tax credits related to research and ~~Jobs Act (the “Tax Act”),~~development expenditures, changes in valuation allowance, liabilities for uncertain tax positions, and ~~generated~~tax benefits on stock-based compensation awards.

Our effective tax rates ~~on income~~ from continuing operations ~~of 202.0%~~were 18.9% and ~~141.2%~~16.9% in the three months ended September 30, 2023 and 2022, respectively. The income tax provision for the ~~second quarter and~~ first six months of fiscal year 2018, respectively. The effective tax rates on income from continuing operations excluding tax expense related to the Tax Act were 15.6% for the second quarter and 15.0% for the first six months of fiscal year 2018. A tax benefit of $10.1 million was recorded in continuing operations in the second quarter of fiscal year ~~2017, driven primarily from~~2024 increased compared to the settlement costs of various regulatory litigation, and generated effective tax rates on income from continuing operations of 362.0% and -7.6% for the second quarter and first six months of fiscal year 2017. The effective tax rates on income from continuing operations excluding the settlements were 19.4% and 20.8% for the second quarter and first six months of fiscal year 2017. Excluding the one-time impact of the Tax Act and settlements, theyear-ago period due to a decrease ~~in tax rates reflects the decrease in the U.S. tax rate resulting from the Tax Act, as well as an increase~~ in the percentage of earnings from foreign operations, which are generally taxed at lower rates than domestic earnings.

~~Four~~The Tax Cuts and Jobs Act of ~~Adtalem’s operating units, AUC, which operates in St. Maarten, RUSM, which operates in Dominica, RUSVM, which operates in St. Kitts,~~2017 (the “Tax Act”) requires taxpayers to capitalize and subsequently amortize research and experimental (“R&E”) expenditures that fall within the scope of Internal Revenue Code Section 174 for tax years starting after December 31, 2021. This rule became effective for Adtalem ~~Brazil, which operates in Brazil, all benefit from local tax incentives. AUC’s effective tax rate reflects benefits derived from investment incentives. RUSM~~during fiscal year 2023 and ~~RUSVM each have agreements with their respective domestic governments that exempt them from local income taxation. Both of these agreements have been extended to provide,~~resulted in the ~~case~~deferred tax asset for capitalization of ~~RUSM, an indefinite period~~R&E costs of ~~exemption~~$8.1 million, based on interpretation of the law as currently enacted.

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Adtalem will capitalize and amortize these costs for tax purposes over 5 years for R&E performed in the ~~case of RUSVM, exemption until 2037. Adtalem Brazil’s effective tax rate reflects benefits derived from its participation in PROUNI, a Brazilian program~~U.S. and over 15 years for ~~providing scholarships to a portion of its undergraduate students.~~

~~Adtalem had not previously recorded a U.S. federal or state tax provision for the undistributed earnings of its international subsidiaries. As a result~~R&E performed outside of the Tax Act, Adtalem has revised its intent to indefinitely reinvest accumulated cash balances, future cash flows and post-acquisition undistributed earnings and profits in foreign operations, and only intends to maintain this position with respect to cash balances, cash flows and accumulated and future earnings in Brazil. In accordance with this plan, cash held by the subsidiaries in Brazil will not be available for general company purposes, and no foreign or state tax has been recorded on such amount. As of December 31, 2017, the cumulative undistributed earnings attributable to operations in Brazil was approximately $91 million.U.S.

Discontinued Operations

Adtalem’s effective tax rate was impacted by the Tax Act, which was enacted into law on December 22, 2017. Income tax effects resulting from changes in tax laws are required to be accounted for in the period in which the law is enacted and the effects are recorded as a component of provision for income taxes from continuing operations. As a result, an additional provision for income tax of $101.2 million resulting from the enactment of the Tax Act was recorded in the quarter. For additional information on the impact of the Tax Act, see “Note 12: Income Taxes” to the Consolidated Financial Statements in Part I, Item 1, of this Form 10-Q.

~~DISCONTINUED OPERATIONS~~

Beginning in the second quarter of fiscal year ~~2018, DeVry University~~2022, the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), OnCourse Learning (“OCL”), and EduPristine operations iswere classified as discontinued ~~operations as discussed in “Note 2: Discontinued Operations~~operations. In addition, we continue to incur costs associated with ongoing litigation and ~~Assets Held for Sale”~~settlements related to the ~~Consolidated Financial Statements in Part I, Item 1, of this Quarterly Report on Form 10-Q. Management will continue to disclose and discuss~~ DeVry University divestiture, which was completed during fiscal year 2019, and are classified as expense within discontinued operations.

Net loss from discontinued operations in ~~its public filings until the period the sale closes as these operations continue to have an effect on Adtalem’s reported net income (loss).~~

~~Revenue at DeVry University decreased 25.9%, or $31.7 million, to $90.6 million in the second quarter and decreased 23.4%, or $56.9 million, to $186.4 million for~~ the first six months of fiscal year 2018 compared to the year-ago periods driven by decreases in undergraduate and graduate enrollment. Management believes the decreases in enrollment and the resulting continued decline in revenue have been due to several internal and external factors, which have resulted in a reduction in interest and lower demand for DeVry University’s programs. Enrollment declines at DeVry University are expected to continue through fiscal year 2018, which will result in lower revenue. Key trends for DeVry University are set forth below.

~~DeVry University~~

~~DeVry University Undergraduate Student Enrollment:~~

Fiscal Year 2018
Term July 2017 Sept. 2017 Nov. 2017 Jan. 2018
New Students 2,616 2,825 2,359 2,439
% Change over Prior Year (11.4 )% (17.7 )% (23.7 )% (3.5 )%
Total Students 18,853 19,287 18,385 17,859
% Change over Prior Year (22.1 )% (21.4 )% (23.4 )% (22.3 )%

Fiscal Year 2017
Term July 2016 Sept. 2016 Nov. 2016 Jan. 2017 Mar. 2017 May 2017
New Students 2,953 3,432 3,092 2,528 2,545 2,406
% Change over Prior Year (26.2 )% 14.3 % 7.2 % (16.7 )% (14.3 )% (19.3 )%
Total Students 24,213 24,540 24,015 22,994 22,192 20,691
% Change over Prior Year (22.6 )% (22.9 )% (20.3 )% (21.6 )% (20.9 )% (21.9 )%

~~DeVry University Graduate Student Enrollment:~~

Fiscal Year 2018
Term July 2017 Sept. 2017 Nov. 2017 Jan. 2018
Total Coursetakers 7,442 7,915 7,488 7,602
% Change from Prior Year (23.6 )% (22.0 )% (21.9 )% (20.4 )%

Fiscal Year 2017
Term July 2016 Sept. 2016 Nov. 2016 Jan. 2017 Mar. 2017 May 2017
Total Coursetakers 9,742 10,146 9,589 9,553 9,185 8,469
% Change from Prior Year (19.4 )% (21.6 )% (23.1 )% (22.8 )% (21.5 )% (21.7 )%

~~DeVry University’s operating loss was $43.9 million in the second~~ quarter of fiscal year ~~2018 compared~~2024 was $1.3 million. This loss consisted of the following: (i) $1.8 million of expense primarily from ongoing litigation costs and settlements related to ~~operating~~the DeVry University divestiture; and (ii) a benefit from income taxes of ~~$6.3~~$0.5 million associated with the items listed above.

Net loss from discontinued operations in the ~~year-ago quarter. For the~~ first ~~six months of fiscal year 2018, the operating loss was $55.2 million compared to operating income of $4.7 million in the year-ago period. In the second~~ quarter of fiscal year ~~2018, asset impairment charges~~2023 was $4.9 million. This loss consisted of ~~$47.2~~the following: (i) loss of $3.3 million ~~were recorded~~of expense primarily from ongoing litigation costs and settlements related to ~~write-down intangible assets, goodwill, and building and equipment to zero based on the fair market value of~~ the DeVry University ~~operations. In addition, restructuring expense, regulatory settlement expense,~~divestiture; (ii) a loss on ~~assets held for sale and loss on~~the sale of ~~assets decreased to $2.4~~ACAMS, Becker, and OCL of $3.4 million in the second quarter of fiscal year 2018 compared to $11.0 million in the year-ago quarter, and decreased to $8.0 million in the first six months of fiscal year 2018 compared to $12.7 million in the year-ago period. Excluding the impairment and special charges, operating income was $5.8 million in the second quarter of fiscal year 2018 compared to $17.3 million in the year-ago quarter, and operating income was $0.1 million in the first six months of fiscal year 2018 compared to operating income of $17.4 million in the year-ago period. This decrease was the result of a decline in revenue resulting from the impact of lower new and total student enrollments, partially offset by cost savings. Total DeVry University expenses in the second quarter of fiscal year 2018, excluding special charges, decreased $20.3 million, or 19.3%, comparedfor working capital adjustments to the ~~year-ago quarter. For~~initial sales prices; and (iii) a benefit from income taxes of $1.7 million associated with the first six months of fiscal year 2018, these expenses decreased $39.6 million, or 17.5%, compared to the year-ago period. These expense reductions at DeVry University offset approximately 64% and 70% of the lower revenue in the second quarter and first six months of fiscal year 2018, respectively. In September 2017, DeVry University announced the closure of eight additional campus locations, which management expects will be completed in early calendar year 2018.items listed above.

Regulatory Environment

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~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 and student and family financial resources. Adtalem continues to provide financing options for its students, including Adtalem’s institutional loan programs.

~~The following table summarizes Adtalem’s cash receipts from tuition and related fee payments by fund source as a percentage of total revenue for fiscal years 2017 and 2016.~~

Fiscal Year
2017 2016
Funding Source:
Federal Assistance (Title IV) Program Funding (Grants and Loans) 53 % 58 %
Brazil FIES Public Loan Program 4 % 4 %
State Grants 0 % 1 %
Private Loans 1 % 1 %
Student accounts, cash payments, private scholarships, employer and military provided tuition assistance and other 42 % 36 %
Total 100 % 100 %

The table above includes DeVry University revenue. The increase in the “Student accounts, cash payments, private scholarships, employer and military provided tuition assistance and other” Funding Source is the result of management’s efforts to reduce Adtalem’s funding provided by U.S. federal and Brazilian FIES sources.

The pattern of cash receipts during the year is seasonal. Adtalem’s accounts receivable balances peak immediately after tuition bills are issued each semester/session. Accounts receivable reaches its lowest level at the end of each semester/session, dropping to its lowest point during the year at the end of December.

At December 31, 2017, total accounts receivable, net of related reserves, was $148.6 million compared to $127.9 million at December 31, 2016. The main drivers of the increase were a higher receivable balance at Adtalem Brazil from higher revenue and a reclassification of a long-term FIES receivable of $6.7 million to current accounts receivable. In addition, the student receivable balance at the medical and veterinary schools increased due to hurricane related delays in collections. These increases were partially offset by lower receivable balances at Becker from lower enrollment and revenue.

Adtalem’s consolidated cash balances of $212.2 million at December 31, 2017 included approximately $188.4 million of cash attributable to Adtalem’s international operations. As a result of the Tax Act, Adtalem has revised its intent to indefinitely reinvest accumulated cash balances, future cash flows and post-acquisition undistributed earnings and profits in foreign operations, and only intends to maintain this position with respect to cash balances, cash flows and accumulated and future earnings in Brazil. In accordance with this plan, only cash held by the subsidiaries in Brazil will not be available for general company purposes. As of December 31, 2017, the cash balance attributable to operations in Brazil was approximately $67.3 million. Management does not believe this policy will adversely affect Adtalem’s overall liquidity. Should it be necessary to repatriate the international cash balances at Adtalem Brazil to the U.S., the repatriated cash would be subject to taxation at certain state tax rates.

~~Financial Aid~~

Like other higher education ~~institutions,~~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. ~~Please see “Item 1A – Risk~~See Item 1A. “Risk Factors” in ~~Adtalem’s Annual Report on~~our 2023 Form 10-K ~~for the fiscal year ended June 30, 2017 filed with the SEC on August 24, 2017,~~ for a discussion of student financial aid related risks. ~~Certain of these risks are updated in “Item 1A – Risk Factors” of this Form 10-Q.~~

In addition, government-funded financial assistance programs are governed by extensive and complex regulations in the U.S. ~~and Brazil.~~ 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. ~~A comprehensive program review of DeVry University was initiated in August 2014 and remains open and ongoing. On January 27, 2016, DeVry University received a preliminary program review report from~~

If the U.S. Department of Education (“ED”), which identified findings relating to its fiscal administration, student eligibility and administrative capability and provides DeVry University an opportunity to respond to the preliminary findings. DeVry University provided a comprehensive response to the report on October 11, 2016 disputing most of the findings. The timing or final outcome of the DeVry University program review, or its possible impact on the business, financial condition or results of operations of DeVry University or Adtalem cannot be predicted at this time.

~~If 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.

~~On October 13, 2016, DeVry University~~Chamberlain was most recently recertified and issued an unrestricted PPA in September 2020, with an expiration date of March 31, 2024. Walden was issued a Temporary Provisional PPA (“TPPPA”) on September 17, 2021 in connection with their acquisition by Adtalem. During the fourth quarter of fiscal year 2020 and the first quarter of fiscal year 2021, ED ~~reached a negotiated agreement (the “ED Settlement”)~~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 lengthy PPA recertification process is such that ED allows unhampered continued access to ~~settle the claims asserted~~Title IV funding after PPA expiration, so long as materially complete applications are submitted at least 90 days in ~~a Notice~~advance of ~~Intent~~expiration. Complete applications for PPA recertification have been timely submitted to ~~Limit from the Multi-Regional and Foreign School Participation Division~~ED. The provisional nature 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 pastexisting agreements for AUC, RUSM, and ~~future advertising, DeVry University’s participation in the~~RUSVM stemmed from increased and/or repeated Title IV ~~programs will be subject~~compliance audit findings. Walden’s TPPPA included financial requirements, which were in place prior to ~~provisional certification for five years and DeVry University will be required to post~~acquisition, such as a letter of credit, ~~equal~~heightened cash monitoring, and additional reporting. No similar requirements were imposed on AUC, RUSM, or RUSVM. While corrective actions have been taken to resolve past compliance matters and eliminate the ~~greater~~incidence of ~~10% of DeVry University’s annual Title IV disbursements~~repetition, if AUC, RUSM, or ~~$68.4 million for a five-year period. The posted letter of credit, which will continue~~RUSVM fail to ~~be posted~~maintain administrative capability as defined by ~~Adtalem following the closing of the sale of DeVry University, reduces Adtalem’s borrowing capacity dollar-for-dollar under its credit facility. Institutions~~ED while under provisional ~~certification must obtain~~status or otherwise fail to comply with ED ~~approval before it may award or disburse Title IV funds based on a substantial change, including~~requirements, the establishment of a new location or the addition of an educational program. Provisional certification status also carries fewer due process protections than full certification. As a result, ED may withdraw an institution’s provisional certification more easily than if it is fully certified. Provisional certification does not otherwise limit accessinstitution(s) could lose eligibility to ~~Title IV program funds by students attending the institution.~~

In September 2017, ED completed the routine process of recertifying and updating the PPAs for all four Carrington College Office of Postsecondary Education Identification (“OPEID”) numbers. The Carrington College California OPEID was placed on a provisional PPA. The reason provided was the high Perkins loan cohort default rate, which was 33%. Because this rate was based on a very small cohort of six students, and Carrington California isparticipate in the process of voluntarily liquidating their Perkins loan portfolio, we requested that ED reconsider the provisional PPA. ED responded by shortening the term of the provisional PPA, with its expiration moved from September 30, 2020 to September 30, 2018.

In October 2017, ED approved our request for AUC to maintain Title IV eligibility while temporarily operating its basic science instruction in the United Kingdom (“UK”), following the widespread damage in St. Maarten caused by Hurricane Irma. The provisional PPA providing this approval extends to September 30, 2019, encompassing the duration of time we expect to be operating in the UK.

In December 2017, ED approved our request for RUSM to maintain Title IV eligibility while temporarily operating its basic science instruction on a cruise ship docked in St. Kitts, following the widespread damage in Dominica caused by Hurricane Maria. The provisional PPA providing this approval extends to September 30, 2019. Beginning with the January 2018 semester, RUSM students will be temporarily relocated to Knoxville, Tennessee at facilities owned by Lincoln Memorial University (“LMU”) and to a satellite facility in St. Kitts while the Dominica campus is assessed for ability for RUSM to return to serving students on the campus. Regulatory and accreditor approvals, including from ED, are expected to be finalized following a site visit by the Dominica Medical Board in February 2018.

Gainful Employment (“GE”) regulations became effective on July 1, 2015. Programs that fail the requirements of these regulations in two out of any three consecutive years or do not pass in any four consecutive years will be disqualified from participation in the Title IV programs ~~for a period~~or have that eligibility adversely conditioned, which

Table of ~~three years, and an institution is prohibited from establishing Title IV eligibility for any substantially similar program during that period.~~Contents

Approximately 11% of Adtalem’s 2014-2015 academic year programs fell into the failing category, and approximately 15% of Adtalem’s programs fell into the zone category, including the RUSVM’s veterinary medicine program. Adtalem provided required warnings to enrolled and prospective students with respect to GE programs considered under the regulations to be in jeopardy of losing Title IV eligibility in February 2017. Management expects that certain programs will be able to avoid falling into the zone or failing categories in future years through adjustments to program price, or, if appropriate and consistent with programmatic standards, the duration of programs. For programs where such adjustments or initiatives are not feasible, which may include RUSVM’s veterinary medicine program, we may discontinue such programs or direct students to third-party lenders for financial support of student tuition and other expenses. These adjustments or initiatives, or any requirement to issue warnings to enrolled and prospective students, could have a significant impact 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. Management expects RUSVM will continue to be in the zone for the 2015-2016 and 2016-2017 academic years, as well as, if potential initiatives to improve graduate gainful employment outcomes are not executable, are not executed or are unsuccessful, the 2017-2018 academic year. This is possible notwithstanding strong student outcomes and very low Cohort Default Rates for RUSVM graduates (0.7% as of September 30, 2013, the latest 3-year cohort period for which official data is available). In March 2017, ED delayed implementation of some portions of the GE reporting regulations until July 1, 2017. While the delay does not affect RUSVM’s status, ED indicated in the delay announcement that its action was taken to allow ED to further review the GE regulations and their implementation. On June 16, 2017, ED then announced its intention to re-negotiate these rules. The timing and effective date of any future final regulations cannot be determined at this time. If the GE regulations and guidance are not changed prior to 2019 and RUSVM’s veterinary program is determined by ED to be in the zone for the 2015-2016 and 2016-2017 academic years, RUSVM would be required to issue warnings to students as early as 2019 that Title IV funding may no longer be available to students attending RUSVM. Further, if RUSVM’s veterinary program is determined to be in the zone for the 2017-2018 academic year, RUSVM students would no longer have access to Title IV student aid as early as the beginning of 2020, which could have a material adverse effect on the ~~business,~~businesses, financial condition, results of operations, and cash flows. ED may alternatively issue new PPAs for continued Title IV participation.

Walden must apply periodically to ED for continued certification to participate in Title IV programs. Such recertification generally is required every six years, but may be required earlier, including when an institution undergoes a change in control. ED may place an institution on provisional certification status if it finds that the institution does not fully satisfy all of the eligibility and certification standards and in certain other circumstances, such as when an institution is certified for the first time or undergoes a change in control. During the period of provisional certification, the institution must comply with any additional conditions included in the institution’s PPA. In addition, ED may more closely review an institution that is provisionally certified if it applies for recertification or approval to open a new location, add an educational program, acquire another institution, or make any other significant change. Students attending provisionally certified institutions remain eligible to receive Title IV program funds. If ED determines that a provisionally certified institution is unable to meet its responsibilities under its PPA, it may seek to revoke the institution’s certification to participate in Title IV programs without advance notice or opportunity for the institution to challenge the action. Walden is currently on a TPPPA which is required for participation in Title IV programs on a month-to-month basis. Walden’s provisional certification prior to acquisition was due to Walden’s prior parent company (Laureate Education Inc.) failing composite score under ED’s financial responsibility standards and ED’s approval of Laureate’s initial public offering in February 2017, which it viewed as a change in control. As a result of Adtalem’s acquisition of Walden, the provisional nature of Walden’s PPA remains in effect on a month-to-month basis while ED reviews the change in ownership application relating to the acquisition of Walden by Adtalem. Walden also is subject to a letter of credit and is subject to additional cash management requirements with respect to its disbursements of Title IV funds, as well as a restriction on changes to its educational programs, including a prohibition on the addition of new programs or locations that had not been approved by ED prior to the change in ownership during the period in which Walden participates under provisional certification (either as a result of the change in ownership or because of the continuation of the financial responsibility letter of credit). Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of September 30, 2023 in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. On January 18, 2023, we received a letter from ED, requiring Adtalem to provide a letter of credit in the amount of $76.2 million related to ED’s review of the Same Day Balance Sheet, which is the consolidated Adtalem balance sheet as of August ~~18, 2017,~~12, 2021, the date of the Walden acquisition. On February 21, 2023, Adtalem provided the $76.2 million letter of credit to ED.

As indicated in the earlier refence to Laureate Education Inc., passage of an ED-defined financial responsibility test, also known as a “composite score,” is required for continued participation by an institution in Title IV aid programs. For Adtalem’s institutions, this test is calculated at the consolidated Adtalem level. Applying various financial elements from the fiscal year audited financial statements, 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 institutions 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, an institution 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 institution 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 had exceeded the required minimum of 1.5. However, on September 25, 2023, Adtalem was notified by ED that the fiscal year 2022 composite score had declined to 0.2. As previously disclosed, this was expected due to the acquisition of Walden. ED advised that Adtalem’s five institutions will be permitted to continue to participate in Title IV under provisional certifications with heightened cash monitoring and continued reporting. A letter of credit in the amount of $157.9 million, representing 10% of the consolidated Title IV funds Adtalem’s institutions received during fiscal year 2022, must be delivered to ED by November 9, 2023. Management does not believe these conditions will have a material adverse effect on Adtalem’s operations.

On September 27, 2023, ED announced ~~new deadlines for submitting notices~~final Gainful Employment (“GE”) rules effective July 1, 2024. The regulation applies to all Title IV certificate programs at all institutions and to all Title IV degree programs at proprietary institutions. Programs must meet a debt-to-earnings test in which graduates’ annual debt payments must not exceed 8% of ~~intent~~their annual

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earnings or 20% of their discretionary earnings. Programs must also pass an earnings premium test in which graduates’ earnings must exceed those of a typical high school graduate. Under the rule, programs that fail either metric must provide warnings to ~~file~~students and prospective students that the program is at risk of losing Title IV eligibility and programs that fail the same measure in two out of three consecutive years lose Title IV eligibility. We are reviewing the rule to determine what impact, if any, it will have on our programs. The GE ~~alternate~~rules also include a transparency framework in which debt-to-earnings, earnings ~~appeals~~premium, and ~~submitting those appeals. A notice~~a wide range of ~~intent~~other program outcomes are disclosed on a website to ~~file an appeal was submitted for RUSVM in advance of the October 6, 2017 deadline. RUSVM’s appeal was filed on February 1, 2018.~~

be hosted by ED.

An ED regulation known as the “90/10 Rule” affects only proprietary postsecondary institutions, such as Chamberlain, Walden, AUC, RUSM, ~~RUSVM, Carrington~~ and ~~DeVry University.~~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 American Rescue Plan Act of 2021 (the “Rescue Act”) enacted on March 11, 2021 amended the 90/10 rule to require that a proprietary institution derive no more than 90% of its revenue from federal education assistance funds, including but not limited to previously excluded U.S. Department of Veterans Affairs and military tuition assistance benefits. This change was subject to negotiated rulemaking, which ended in March 2022. The amended rule applies to institutional fiscal years beginning on or after January 1, 2023. The following table details the percentage of revenue on a cash basis from federal financial assistance programs as calculated under the current regulations (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 ~~2017~~2022 and ~~2016.~~

Fiscal Year
2017 2016
Chamberlain University 63 % 64 %
American University of the Caribbean School of Medicine 80 % 79 %
Ross University School of Medicine 82 % 82 %
Ross University School of Veterinary Medicine 83 % 83 %
Carrington College:
California 75 % 78 %
Boise 66 % 69 %
Portland 81 % 77 %
Phoenix 80 % 80 %
DeVry University 62 % 63 %

In September 2016, Adtalem committed to voluntarily limit to 85% the amount of revenue that each of its six 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 report that has been made publicly available, its institutions have met this lower threshold2021. Final data for fiscal year ~~2017.~~2023 is not yet available. As an institution’s 90/10 compliance must be calculated using the financial results of an entire fiscal year, we are including Walden’s amounts for the full fiscal year 2022 in the table below, including the portion of the year not under Adtalem’s ownership.


	Fiscal Year
	2022		2021
Chamberlain University	65	%	66	%
Walden University	73	%	n/a
American University of the Caribbean School of Medicine	81	%	80	%
Ross University School of Medicine	85	%	85	%
Ross University School of Veterinary Medicine	81	%	82	%
Consolidated	72	%	73	%

Liquidity and Capital Resources

Adtalem’s primary source of liquidity is the cash received from payments for student tuition, fees, books, and other educational materials. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational 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 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.

Adtalem’s consolidated cash and cash equivalents balance of $262.4 million and $273.7 million as of September 30, 2023 and June 30, 2023, respectively, included cash and cash equivalents held at Adtalem’s international operations of $14.5million and $7.2 million as of September 30, 2023 and June 30, 2023, respectively, which is available to Adtalem for general corporate 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 ~~$0.6 million, $4.8~~$2.0 million and ~~$5.6~~$1.4 million was held in these restricted bank accounts ~~at December 31, 2017,~~as of September 30, 2023 and June 30, ~~2017 and December 31, 2016,~~2023, respectively.

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Cash Flow Summary

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 less than 1.0 is considered not financially responsible. However, a school with a score 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. 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 Adtalem 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.

~~Cash Provided by~~ Operating Activities

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


	Three Months Ended
	September 30,
	2023		2022
Income from continuing operations	$	11,959	$	5,513
Non-cash items		50,706		72,346
Changes in assets and liabilities		28,061		13,617
Net cash provided by operating activities-continuing operations	$	90,726	$	91,476

Six Months Ended
December 31,

2017 2016
Net (Loss) Income from Continuing Operations $ (33,058 ) $ 33,236
Non-cash Items 90,720 75,493
Changes in Assets and Liabilities (14,741 ) (72,347 )
Net Cash Provided by Operating Activities-Continuing Operations $ 42,921 $ 36,382

~~Cash generated~~Net cash provided by operating activities from continuing operations in the ~~first six~~three months ~~of fiscal year 2018~~ended September 30, 2023 was ~~$42.9~~$90.7 million compared to $36.4 million in the year-ago period. Net income from continuing operations decreased by $66.3 million in the first six months of fiscal year 2018 compared to the year-ago period. The increase in non-cash items in the first six months of fiscal year 2018 compared to the year-ago period was the result of the following:

An increase of $25.8 million in depreciation and write-offs of building, building improvements, leasehold improvements, furniture and equipment. This was the result of recording a $29.9 million impairment charge at AUC and RUSM from Hurricanes Irma and Maria, respectively, in the first six months of fiscal year 2018. These charges were partially offset by $0.8 million of reduced depreciation on the impaired assets.

~~A decrease of $0.6 million in stock-based compensation expense resulting from workforce reductions.~~

~~A decrease of $0.7 million in amortization expense of intangible assets.~~

~~A change of $9.5 million in the deferred income tax provision related to the timing of deductions.~~

~~Changes in Assets and Liabilities from June 30, 2017 consisted of the following:~~

The increase in cash flows in the first six months of fiscal year 2018 due to changes in net prepaid expenses, accounts payable, accrued liabilities and income taxes payable was $71.0 million more than the combined change in the year-ago period driven by a $101.2 million accrual for income taxes related to implementation of the Tax Cuts and Jobs Act of 2017. This was offset by a $30.5 million receivable for insurance proceeds related to Hurricanes Irma and Maria within Prepaid Expenses and Other. Other offsets result in changes from the timing of the period-end relative to Adtalem’s payroll and bill payment cycles.

The decrease in cash flows in the first six months of fiscal year 2018 in combined accounts receivable (excluding the provisions for refunds and uncollectible accounts) and deferred revenue was $13.4 million more than the combined change in the year-ago period. The main drivers of this change were a higher receivable balance at Adtalem Brazil from a $6.7 million additional reclassification of long-term FIES receivable to current accounts receivable and an increase in student receivable balances at the medical and veterinary schools due to hurricane-related delays in collections and financial aid processing.

~~Cash Used in Investing Activities~~

~~Capital expenditures in the first six months of fiscal year 2018 were $32.6 million compared to $18.8~~$91.5 million in the year-ago period. The decrease was driven by lower non-cash items, partially offset by an increase in income from continuing operations and changes in working capital. The decrease of $21.6 million in non-cash items between the three months ended September 30, 2023 and the three months ended September 30, 2022 was principally driven by decreases in impairments to operating lease assets and amortization of intangible assets. The increase of $14.4 million in cash generated from changes in assets and liabilities was primarily due to timing differences in accounts receivable, prepaid assets, prepaid income taxes, accounts payable, accrued payroll and benefits, accrued liabilities, accrued interest, and deferred revenue.

Investing Activities

Capital expenditures in the first three months of fiscal year 2024 and 2023 were $15.0 million and $5.6 million, respectively. The capital expenditures ~~reflects increased~~in fiscal year 2024 primarily consisted of spending for information technology investments ~~at Adtalem Brazil~~ and ~~Chamberlain, in addition to $2.6 million in hurricane-related spending to repair the AUC and RUSM campuses.~~

~~Capital spending for~~Chamberlain’s campus development. For the remainder of fiscal year ~~2018 will support continued investment~~2024, we expect capital spending on information technology, new campus development at ~~RUSVM, a campus opening and facility improvements for~~ Chamberlain, and facility improvements ~~for Adtalem Brazil. Significant capital spending will also be necessary to repair~~at the medical and ~~replace hurricane damaged facilities and equipment at AUC and RUSM.~~veterinary schools. Management anticipates full fiscal year ~~2018~~2024 capital ~~spending, excluding hurricane-related~~ spending to be in the $50 to $60 million range, including $15.0 million spent during the first three months of fiscal year 2024. The source of funds for this capital spending will be from operations or the Credit Facility (as defined and discussed in Note 13 “Debt” to ~~$65~~ the Consolidated Financial Statements).

During the first three months of fiscal year 2024 and 2023, we received proceeds from the sale of marketable securities held in a Rabbi Trust of $0.4million ~~range.~~and $0.4 million, respectively, and made additional investments in marketable securities held by this trust of $0.3million and $0.3 million, respectively.

During the first quarter of fiscal year 2023, we paid $0.8 million for a working capital adjustment to the initial sales price for ACAMS.

Financing Activities

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


	Three Months Ended
	September 30,
	2023		2022
Repurchases of common stock for treasury	$	(90,477)	$	—
Repayments of long-term debt		—		(100,861)
Other		(4,911)		(2,113)
Net cash used in financing activities	$	(95,388)	$	(102,974)

On March 1, 2022, we announced that the Board authorized Adtalem’s thirteenth share repurchase program, which allows Adtalem to repurchase up to $300.0 million of its common stock through February 25, 2025. As of September 30, 2023, after repurchases that were made during the three months ended September 30, 2023, there remained $80.9 million

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for additional share repurchases under the current share repurchase program. 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.

On ~~November 1, 2017, Adtalem Brazil completed~~March 14, 2022, we entered into an ASR agreement to repurchase $150.0 million of common stock. We received an initial delivery of 4,709,576shares of common stock representing approximately 80% of the ~~acquisition~~total shares expected to be delivered at the time of ~~São Judas Tadeu (“SJT”). Under~~executing the ASR based on the per share price on the day prior to the execution date. The final number of shares to be repurchased was based on the volume-weighted average price of Adtalem’s common stock during the term of the ASR agreement, less a discount and subject to adjustments pursuant to the terms of the ASR agreement. The ASR agreement ended on October 14, 2022. Based on the volume-weighted average price of Adtalem’s common stock during the term of the ASR agreement, Adtalem ~~Brazil agreed~~owed the counter party 332,212 shares of common stock. We elected to ~~pay approximately $6.0 million~~settle the contract in cash ~~in exchange~~instead of delivering shares by making a cash payment of $13.2 million on November 2, 2022.

On March 1, 2021, we issued $800.0 million aggregate principal amount of 5.50% Senior Secured Notes due 2028 (the “Notes”), which mature on March 1, 2028. On August 12, 2021, Adtalem entered into its new credit agreement (the “Credit Agreement”) that provides for (1) a $850.0 million senior secured term loan (“Term Loan B”) with a maturity date of August 12, 2028 and (2) a $400.0 million senior secured revolving loan facility (“Revolver”) with a maturity date of August 12, 2026. We refer to the Term Loan B and Revolver collectively as the “Credit Facility.” The Revolver will be used to finance ongoing working capital and for general corporate purposes. During fiscal year 2022, we made a prepayment of $396.7 million on the Term Loan B. With that prepayment, we are no longer required to make quarterly installment payments. On April 11, 2022, we repaid $373.3 million of Notes at a price equal to 100% of the ~~stock~~principal amount of ~~SJT. Approximately $1.0~~the Notes. During June 2022, we repurchased on the open market an additional $20.8 million of ~~payments were~~Notes at a price equal to approximately 90% of the principal amount of the Notes. In July 2022, we repurchased an additional $0.9 million of Notes, on September 22, 2022, we made ina prepayment of $100.0 million on the ~~second quarter~~Term Loan B, and on November 22, 2022, we made a prepayment of ~~fiscal year 2018, with~~$50.0 million on the Term Loan B. As of September 30, 2023, the principal balance of the Notes and Term Loan B was $405.0 million and $303.3 million, respectively. See Note 13 “Debt” to the Consolidated Financial Statements for additional ~~aggregate payments~~information on the Notes and our Credit Agreement.

In the event of approximately $5.0 million required over the succeeding four years. SJT offers medical doctor specialty test preparation and currently serves approximately 2,700 students located in São Paulo. The acquisition of SJT adds a new product offering to Adtalem Brazil’s test preparation business.

~~On July 1, 2016, Becker acquired ACAMS, located in Miami, Florida, for $330.6 million, net of~~unexpected market conditions or negative economic changes that could negatively affect Adtalem’s earnings and/or operating cash acquired. Adtalem funded the purchase with available domestic cash balances and $175 million in borrowings under its revolving credit facility. ACAMS is an international membership organization dedicated to enhancing the knowledge and skills of anti-money laundering and financial crime prevention professionals. The acquisition furthers Adtalem’s global growth strategy into professional education and enhances Becker’s position as a leading provider of lifelong learning for professionals.

~~Cash (Used in) Provided by Financing Activities~~

Historically, Adtalem has produced positive domestic cash flows from operating activities sufficient to fund the delivery of its domestic educational programs and services as well as to fund capital investment and other activities including share repurchases and dividend payments. In addition,flow, Adtalem maintains a ~~$400~~$400.0 million revolving line of credit which can be expanded to $550 million subject to bank approval. For the first six months of fiscal year 2018, cash flows from domestic operating activities, including DeVry University, were approximately $64.2 million, which, along with $165 million borrowed under the revolving credit facility ~~were sufficient~~with availability of $323.8 million as of September 30, 2023. This availability will be reduced to ~~fund $35.1~~$165.9 million in November 2023 upon issuance of the letter of credit to ED as described above.

Material Cash Requirements

Long-Term Debt – We have principal balances of $405.0 million of ~~domestic capital investment, including DeVry University,~~Notes and ~~repurchase $93.2~~$303.3 million ~~in common stock. As~~of Term Loan B, which requires interest payments. With the prepayment noted above, we are no longer required to make quarterly principal installment payments on the Term Loan B. In addition, we maintain a result of the Tax Act, Adtalem has revised its intent to indefinitely reinvest accumulated cash balances, future cash flows and post-acquisition undistributed earnings and profits in foreign operations, and only intends to maintain this position with respect to cash balances, cash flows and accumulated and future earnings in Brazil. In accordance with this plan, beginning in the third quarter of fiscal year 2018, cash held by all foreign subsidiaries except those in Brazil will be available for general company purposes.

Adtalem has recorded liabilities for deferred purchase price agreements with sellers related to the acquisitions of Faculdade Diferencial Integral (“Facid”), Faculdade Ideal (“Faci”), Damasio, Grupo Ibmec, Facimp and SJT. This financing is in the form of holdbacks of a portion of the purchase price of these acquisitions or installment payments. Payments are made under these agreements based on payment schedules or the resolution of any pre-acquisition contingencies.

~~Management believes current balances of unrestricted cash, cash generated from operations and the~~$400.0 million revolving credit facility will be sufficient to fund both Adtalem’s current domestic and international operations, growth plans and current share repurchase program for the foreseeable future unless significant investment opportunities should arise.

~~Revolving Credit Facility~~

Adtalem entered into a revolving credit facility on March 31, 2015 which expires on March 31, 2020. The revolving credit agreement (as amended, the “Credit Agreement”) provides for a multi-currency revolving credit facility in the amount of $400 million (the “Aggregate Commitment”) with availability ~~in currencies other than U.S. dollars~~ of ~~up to $200 million. Subject to certain conditions set forth in the Credit Agreement, the Aggregate Commitment may be increased up to $550 million. On October 4, 2016,~~$323.8 million as of September 30, 2023. Adtalem ~~entered into~~has a First Amendment to Credit Agreement, which amends the Aggregate Commitment to increase the amount available for letters of credit from $50 million to $100 million. Adtalem may select interest rates for borrowings under the Credit Agreement 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 2% to 3% for Eurocurrency Rate Loans and from 1% to 2% for Base Rate Loans. As of December 31, 2017, June 30, 2017 and December 31, 2016, Adtalem borrowings under this agreement were $165 million, $125 million and $225 million, respectively, with a weighted average interest rate of 3.42%, 3.18% and 2.73%, respectively. There are no required principal payments under the Credit Agreement and all borrowings and letters of credit mature on March 31, 2020. As a result of the agreement extending beyond one year, the borrowings are classified as long-term with the exception of amounts expected to be repaid in the 12 months subsequent to the balance sheet date, if any. Adtalem lettersletter of credit outstanding under this ~~agreement were $68.5~~revolving credit facility of $76.2 million as of ~~each~~September 30, 2023, in favor of ~~December 31, 2017, June 30, 2017 and December 31, 2016. Of this amount, $68.4 million was posted~~ED on behalf of Walden, which allows Walden to participate in ~~the second quarter of fiscal year 2017 in relation~~Title IV programs. On September 25, 2023, we received a letter from ED, requiring Adtalem to the ED Settlement (see “Note: 3 Regulatory Settlements”). Upon the close of the sale of DeVry University (see “Note 2: Discontinued Operations and Assets Held for Sale”), Adtalem will continue to post thisprovide a letter of credit ~~on behalf of DeVry University. As of December 31, 2017, Adtalem is charged an annual fee equal to 2.0% of~~in the ~~undrawn face~~ amount of the outstanding letters of credit under the agreement, payable quarterly. The agreement also requires payment of a commitment fee equal to 0.35% of the undrawn portion of the credit facility as of December 31, 2017. The interest rate, letter of credit fees and commitment fees are adjustable quarterly, based upon Adtalem’s achievement of certain financial ratios.

~~The stock of all U.S. and certain foreign subsidiaries of Adtalem is pledged as collateral for the borrowings under the revolving credit facility.~~

~~Other Contractual Arrangements~~

~~Adtalem’s long-term contractual obligations consist of its $400~~$157.9 million revolving line of credit (discussed above), operating leases on facilities and equipment and agreements for various services. In addition, Adtalem has recorded liabilities for deferred purchase price agreements with sellers related to acquisitions at Adtalem Brazil (discussed above).

On December 4, 2017, Adtalem, entered into a Stock Purchase Agreement (the “Purchase Agreement”), pursuant to which Adtalem agreed to sell DeVry University to Cogswell Education, LLC (“Cogswell”). Subject to the terms and conditions of the Purchase Agreement, Adtalem will sell all of the outstanding equity interests of DeVry University, Inc. and DeVry New York Inc. to Cogswell for de minimis consideration. To support DeVry University’s future success, Adtalem has committed to transferring DeVry University with a minimum working capital balance of $7.5 million, subject to increase under certain conditions of up to $20.1 million. The Purchase Agreement includes an earn-out entitling Adtalem to payments of up to $20 million paid over a ten-year period based on DeVry University’s free cash flow. This sale is expected to be ~~completed in early fiscal year 2019.~~

Adtalem recorded a provisional liability of $96.3 million for the one-time transition tax on the deemed repatriation of foreign earnings, pursuant to the Tax Cuts and Jobs Act of 2017. This amount is payable over eight years, with the first installment of $7.7 million due on September 15, 2018. “Note 12: Income Taxes”provided by November 9, 2023. See Note 13 “Debt” to the Consolidated Financial Statements ~~in Part I, Item 1, of this Form 10-Q.~~

for additional information on our Notes and Credit Agreement.

Adtalem ~~is not~~had a ~~party~~surety-backed letter of credit outstanding of $84.0 million as of September 30, 2023, in favor of ED on behalf of Walden, which allows Walden to ~~any off-balance sheet financing or contingent payment arrangements, nor are there any unconsolidated subsidiaries.~~participate in Title IV programs.

Many states require private-sector postsecondary education institutions to post surety bonds for licensure. In the U.S., Adtalem has ~~not extended any loans~~posted $31.4 million of surety bonds as of September 30, 2023 with regulatory authorities on behalf of Chamberlain, Walden, AUC, RUSM, and RUSVM.

Operating Lease Obligations – We have operating lease obligations for the minimum payments required under various lease agreements which are recorded on the Consolidated Balance Sheets. In addition, we sublease certain space to ~~any officer, director or other affiliated person. Adtalem has not entered into any synthetic leases and there are~~third parties, which partially offsets the lease obligations at these facilities. See Note 11 “Leases” to the Consolidated Financial Statements for additional information on our lease agreements.

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Critical Accounting Estimates

There have been no residual purchase or value commitments related to any facility lease. Adtalem did not enter into any derivatives, swaps, futures contracts, calls, hedges or non-exchange traded contracts during the first six months of fiscal year 2018. Adtalem had no open derivative positions at December 31, 2017.material changes in our critical accounting estimates as disclosed in our 2023 Form 10-K.

~~RECENT ACCOUNTING PRONOUNCEMENTS~~

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see ~~“Note 4: Summary~~Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements.

Forward-Looking Statements

Certain statements contained in ~~Part I, Item 1, of~~ this Quarterly Report on Form ~~10-Q.~~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 Adtalem’s future growth. 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 risks and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our 2023 Form 10-K and that might be contained in this Quarterly Report on Form 10-Q, which should be read in conjunction with these forward-looking statements. These forward-looking statements are based on information available to us as of the date any such statements are made, and Adtalem assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized, except as required by law.

Non-GAAP Financial Measures and Reconciliations

We believe that certain non-GAAP financial measures provide investors with useful supplemental information regarding the underlying business trends and performance of Adtalem’s ongoing operations as seen through the eyes of management and are 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:

Adjusted net income (most comparable GAAP measure: net income) – Measure of Adtalem’s net income adjusted for restructuring expense, business integration expense, intangible amortization expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, and net loss from discontinued operations.

Adjusted earnings per share (most comparable GAAP measure: earnings per share) – Measure of Adtalem’s diluted earnings per share adjusted for restructuring expense, business integration expense, intangible amortization expense, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, and net loss from discontinued operations.

Adjusted operating income (most comparable GAAP measure: operating income) – Measure of Adtalem’s operating income adjusted for restructuring expense, business integration expense, intangible amortization expense, and litigation reserve. This measure is applied on a consolidated and segment basis, depending on the context of the discussion.

Adjusted EBITDA (most comparable GAAP measure: net income) – Measure of Adtalem’s net income adjusted for net loss from discontinued operations, interest expense, other income, net, provision for income taxes, depreciation and amortization, stock-based compensation, restructuring expense, business integration expense, and litigation reserve. This measure is applied on a consolidated and segment basis, depending on the context of the discussion. Income taxes, interest expense, and other income, net is not recorded at the reportable segments, and therefore, the segment adjusted EBITDA reconciliations begin with operating income.

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

●

Restructuring expense primarily related to real estate consolidations at Walden, Medical and Veterinary, and Adtalem’s home office. We do not include normal, recurring, cash operating expenses in our restructuring expense.

●

Business integration expense include expenses related to the Walden acquisition and certain costs related to growth transformation initiatives. We do not include normal, recurring, cash operating expenses in our business integration expense.

●

Intangible amortization expense on acquired intangible assets.

●

Write-off of debt discount and issuance costs and gain on extinguishment of debt related to prepayments of debt, and reserves related to significant litigation.

●

Net loss from discontinued operations includes expense from ongoing litigation costs and settlements related to the DeVry University divestiture and a loss on the sale of ACAMS, Becker, and OCL for working capital adjustments to the initial sales prices.

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.

Net income reconciliation to adjusted net income (in thousands):


	Three Months Ended
	September 30,
	2023		2022
Net income (GAAP)	$	10,646	$	592
Restructuring expense		676		15,065
Business integration expense		5,262		9,540
Intangible amortization expense		10,677		18,528
Write-off of debt discount and issuance costs, gain on extinguishment of debt, and litigation reserve		18,500		2,824
Income tax impact on non-GAAP adjustments ⁽¹⁾		(7,693)		(9,871)
Net loss from discontinued operations		1,313		4,921
Adjusted net income (non-GAAP)	$	39,381	$	41,599

(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 adjusted earnings per share (shares in thousands):


	Three Months Ended
	September 30,
	2023		2022
Earnings per share, diluted (GAAP)	$	0.25	$	0.01
Effect on diluted earnings per share:
Restructuring expense		0.02		0.33
Business integration expense		0.12		0.21
Intangible amortization expense		0.25		0.40
Write-off of debt discount and issuance costs, gain on extinguishment of debt, and litigation reserve		0.44		0.06
Income tax impact on non-GAAP adjustments ⁽¹⁾		(0.18)		(0.21)
Net loss from discontinued operations		0.03		0.11
Adjusted earnings per share, diluted (non-GAAP)	$	0.93	$	0.90
Diluted shares used in non-GAAP EPS calculation		42,184		46,342

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

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Reconciliation to adjusted EBITDA (in thousands):


	Three Months Ended
	September 30,
							Increase/(Decrease)
	2023			2022			$		%
Chamberlain:
Operating income (GAAP)	$	24,324		$	26,184		$	(1,860)	(7.1)	%
Restructuring expense		—			818			(818)
Depreciation		4,316			4,481			(165)
Stock-based compensation		2,907			2,274			633
Adjusted EBITDA (non-GAAP)	$	31,547		$	33,757		$	(2,210)	(6.5)	%
Adjusted EBITDA margin (non-GAAP)		22.1	%		24.9	%

Walden:
Operating income (GAAP)	$	1,938		$	2,933		$	(995)	(33.9)	%
Restructuring expense		—			3,080			(3,080)
Intangible amortization expense		10,677			18,528			(7,851)
Litigation reserve		18,500			—			18,500
Depreciation		2,162			2,595			(433)
Stock-based compensation		1,864			1,905			(41)
Adjusted EBITDA (non-GAAP)	$	35,141		$	29,041		$	6,100	21.0	%
Adjusted EBITDA margin (non-GAAP)		24.8	%		22.2	%

Medical and Veterinary:
Operating income (GAAP)	$	14,363		$	10,238		$	4,125	40.3	%
Restructuring expense		114			6,826			(6,712)
Depreciation		2,944			3,105			(161)
Stock-based compensation		1,640			1,475			165
Adjusted EBITDA (non-GAAP)	$	19,061		$	21,644		$	(2,583)	(11.9)	%
Adjusted EBITDA margin (non-GAAP)		22.5	%		24.6	%

Home Office and Other:
Operating loss (GAAP)	$	(12,431)		$	(15,721)		$	3,290	20.9	%
Restructuring expense		562			4,341			(3,779)
Business integration expense		5,262			9,540			(4,278)
Depreciation		356			624			(268)
Stock-based compensation		1,044			491			553
Adjusted EBITDA (non-GAAP)	$	(5,207)		$	(725)		$	(4,482)	(618.2)	%

Adtalem Global Education:
Net income (GAAP)	$	10,646		$	592		$	10,054	1,698.3	%
Net loss from discontinued operations		1,313			4,921			(3,608)
Interest expense		15,657			17,760			(2,103)
Other income, net		(2,214)			(761)			(1,453)
Provision for income taxes		2,792			1,122			1,670
Operating income (GAAP)		28,194			23,634			4,560
Depreciation and amortization		20,455			29,333			(8,878)
Stock-based compensation		7,455			6,145			1,310
Restructuring expense		676			15,065			(14,389)
Business integration expense		5,262			9,540			(4,278)
Litigation reserve		18,500			—			18,500
Adjusted EBITDA (non-GAAP)	$	80,542		$	83,717		$	(3,175)	(3.8)	%
Adjusted EBITDA margin (non-GAAP)		21.8	%		23.6	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~ITEM 3~~–~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Adtalem is not dependent upon the price levels, nor affected by fluctuations in pricing, of any particular commodity or group of commodities. However, more than 50% of Adtalem’s costs are in the form of wages and benefits. Changes in employment market conditions or escalations in employee benefit costs could cause Adtalem to experience cost increases at levels beyond what it has historically experienced.

The financial position and results of operations of AUC, RUSM and RUSVM Caribbean operations are measured using the U.S. dollar as the functional currency. Substantially all of these financial transactions are denominated in the U.S. dollar.

~~The financial position and results of operations of Adtalem Brazil operations are measured using the Brazilian Real as the functional currency. Adtalem Brazil has not entered into any~~There have been no material long-term contracts to purchase or sell goods and services, other than the lease agreements on teaching facilities and contingencies relating to prior acquisitions. Currently, Adtalem does not have any foreign exchange contracts or derivative financial instruments designed to mitigate changes in ~~the value of the Brazilian Real. Brazilian-based assets constitute 27.6% of~~ Adtalem’s ~~overall assets, and its Brazilian liabilities constitute 9.2% of overall liabilities. The value of the Brazilian Real has been volatile in relation to the U.S. dollar over the past several years. Over~~market risk exposure during the first ~~six~~three months of fiscal year ~~2018,~~2024 from those set forth in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in Adtalem’s Annual Report on Form 10-K for the value has remained fairly steady. Based upon the current value of the net assets in Adtalem Brazil’s operations, a change of $0.01 in the value of the Brazilian Real relative to the U.S. dollar results in a translation adjustment to Accumulated Other Comprehensive Loss of approximately $18.1 million. For the first six months of fiscal year ~~2018, the higher value~~ended June 30, 2023.

Table of ~~the Brazilian Real also resulted in higher U.S. translated revenue and operating income compared to the year-ago period.~~Contents

The interest rate on Adtalem’s revolving credit facility is based upon LIBOR or a LIBOR-equivalent rate for Eurocurrency Rate Loans or a base rate for periods typically ranging from one to three months. At December 31, 2017, Adtalem had $165 million in outstanding borrowings under this facility with a weighted average interest rate of 3.42%. Based upon borrowings of $165 million, a 100 basis point increase in short-term interest rates would result in $1.65 million of additional annual interest expense.

Adtalem’s customers are principally individual students enrolled in its various educational programs. Accordingly, concentration of accounts receivable credit risk is small relative to total revenue and accounts receivable. However, as discussed in “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the subsection “Liquidity and Capital Resources” of this Form 10-Q, the Adtalem Brazil FIES accounts receivable balance has remained elevated due to changes in government funding of the program. As of December 31, 2017, the FIES accounts receivable balance is $28.2 million compared to $38.0 million at December 31, 2016. The FIES funding for calendar year 2015 accounts for $16.1 million of the total outstanding FIES balance. In January 2016, Adtalem Brazil entered into a repayment agreement with the Brazilian government pursuant to which these 2015 funds will be paid in annual installments over three years. The first and second installments of $7.2 million and $6.8 million were received by Adtalem Brazil on July 1, 2016 and July 3, 2017, respectively.

Adtalem’s cash is held in accounts at various large, financially secure depository institutions. Although the amount on deposit at a given institution typically will exceed amounts subject to guarantee, Adtalem has not experienced any deposit losses to date, nor does management expect to incur such losses in the future.

Item 4. Controls and Procedures

~~ITEM 4~~ –~~CONTROLS AND PROCEDURES~~

~~Principal Executive~~Evaluation of Disclosure Controls and ~~Principal Financial Officer Certificates~~Procedures

~~The required compliance certificates signed by~~Based on an evaluation of our disclosure controls and procedures (as such term in set forth in Exchange Act Rule 13a-15(e)) that was conducted under the supervision and with the participation of Adtalem’s management, including our Chief Executive Officer and Chief Financial Officer, ~~are included as Exhibits 31 and 32 of this Quarterly Report on Form 10-Q.~~

~~Disclosure Controls and Procedures~~

Disclosure controls and procedures are designed to help ensure that all the information required to be disclosed in Adtalem’s reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified by the applicable rules and forms.

~~Adtalem’s~~our Chief Executive Officer and Chief Financial Officer ~~have~~ concluded ~~based on their evaluation as of the end of the period covered by this report,~~ that Adtalem’s disclosure controls ~~and procedures (as defined in Rule 13a-15(e)~~were effective as of the Exchange Act) are effective to ensure that information required to be disclosed in the reports that Adtalem files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) is 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.

September 30, 2023.

Changes in Internal Control Over Financial Reporting

There were no changes during the first quarter of fiscal year 2024 in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that ~~occurred during the first six months of fiscal year 2018 that~~have materially affected or are reasonably likely to materially affect ~~Adtalem’s~~our internal control over financial reporting.

~~PART II – OTHER INFORMATION~~

Part II. Other Information

~~ITEM 1 – LEGAL PROCEEDINGS~~

Item 1. Legal Proceedings

For ~~a discussion of~~information regarding legal proceedings, see ~~“Note 14: Commitments~~Note 17 “Commitments and Contingencies” to the Consolidated Financial Statements included in ~~Part I,~~ Item ~~1, of this Quarterly Report on Form 10-Q.~~1. “Financial Statements.”

Item 1A. Risk Factors

~~ITEM 1A – RISK FACTORS~~

~~In addition~~There have been no material changes to ~~the other information~~Adtalem’s risk factors from those set forth since Item 1A. “Risk Factors” contained in ~~this report, and the update to the risk factors described below, the factors discussed in “Item 1A – Risk Factors” in Adtalem’s~~our Annual Report on Form 10-K for the fiscal year ended June 30, 2017, 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.2023.

~~A delayed or unsuccessful sale of DeVry University could have a material adverse effect on the stock valuation of Adtalem or may impact the growth prospects or financial resources of Adtalem.~~

Adtalem has entered into a binding stock purchase agreement to sell DeVry University to Cogswell Education, LLC (“Cogswell”) (the “Transaction”). Adtalem’s transfer of ownership to Cogswell is subject to numerous closing conditions, including approvals of regulators and accrediting bodies. Additionally, Cogswell is not required to close the Transaction in certain circumstances, including in the event that DeVry University’s enrollment declines below a certain threshold, in the event that claims of former DeVry University students under ED’s Borrower Defense to Repayment process exceed a certain threshold, or DeVry University’s regional accreditor fails or declines to take action to approve the Transaction prior to June 30, 2018. If the Transaction is not completed, the valuation of Adtalem common stock may materially and adversely decline.

In addition, the separation of DeVry University from Adtalem is a substantial undertaking that will require, among other things, hiring colleagues and contracting for services for DeVry University in replacement of previously shared resources prior to closing the Transaction. In the event that the transaction is delayed, the expenses of the separation, including additional personnel costs, may materially increase, which could materially impact Adtalem’s available cash.

~~Proposed changes in, or lapses of, U.S. tax laws regarding earnings from international operations could adversely affect our financial results.~~

Our effective tax rate could be subject to volatility or be adversely impacted by changes to federal tax laws governing the taxation of foreign earnings of U.S. based companies. For example, as a consequence of the newly enacted Tax Cuts and Jobs Act (the “Tax Act”), foreign earnings are now deemed to be repatriated resulting in a higher effective tax rate for our fiscal year ending June 30, 2018. In addition, recent changes to U.S. tax laws will significantly impact how U.S. multinational corporations are taxed on foreign earnings. Numerous countries are evaluating their existing tax laws due in part, to recommendations made by the Organization for Economic Co-operation and Development’s (“OECD’s”) Base Erosion and Profit Shifting (“BEPS”) project. To address the impact of the recent U.S. tax law changes, we recorded a provisional tax amount of $96.3 million for the one-time transition tax on the deemed repatriation of foreign earnings, payable over eight years; $2.5 million to record the impact of the reduction in tax rates on our net deferred tax asset position; and $2.7 million for state income and foreign withholding taxes on undistributed foreign earnings that are no longer intended to be indefinitely reinvested in foreign operations. The provisional tax amounts recorded are based on our reasonable estimate until we fully complete our assessment and we may need additional information to complete our assessment. We are still evaluating the tax provisions related to Global Intangible Low-Taxed Income (“GILTI”) and we have not made a policy election on how to account for the GILTI provisions of the Tax Act as allowed by the U.S. Generally Accepted Accounting Principles. Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. In addition, the recent U.S. tax law changes are subject to further interpretations from the U.S. federal and state governments and regulatory organizations, such as Treasury Department and/or IRS and this could change the provisional tax liability or the accounting treatment of the provisional tax liability based on updated guidance and interpretations. A significant portion of the additional provisions for income taxes we have made due to the enactment of the Tax Act is payable by us over a period of up to eight years. As result, our cash flows from operating activities will be adversely impacted until the additional tax provisions are paid in full. In addition, Adtalem has benefitted from the ability to enter into international intercompany arrangements without incurring U.S. taxation due to a law, which expires in fiscal year 2020, deferring U.S. taxation of “foreign personal holding company income” such as foreign income from dividends, interest, rents and royalties. If this law is not extended, or a similar law adopted, our consolidated tax provision would be impacted beginning in our fiscal year 2021, and we may not be able to allocate international capital optimally without realizing U.S. income taxes, which would increase our effective income tax rate and adversely impact our earnings and cash flows.

~~Our goodwill and intangible assets could potentially be impaired if our business results and financial condition were materially and adversely impacted by risks and uncertainties.~~

Adtalem’s market capitalization can be affected by, among other things, changes in industry or market conditions, changes in results of operations and changes in forecasts or market expectations related to future results. If Adtalem’s market capitalization remains below its carrying value for a sustained period of time or if such a decline becomes indicative that the fair values of the Adtalem reporting units have declined below their carrying values, an impairment test may result in a non-cash impairment charge. At December 31, 2017, intangible assets from business combinations totaled $407.0 million and goodwill totaled $832.9 million. Together, these assets equaled approximately 56% of total assets as of such date. If Adtalem’s business results and financial condition were materially and adversely impacted, then such intangible assets and goodwill could be impaired, requiring possible write-off of up to $407.0 million of intangible assets and up to $832.9 million of goodwill.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~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
Publically Announced
Plans or Programs (1) Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs (1)
October 2017 612,375 $ 35.94 612,375 $ 199,614,125
November 2017 391,272 $ 37.55 391,272 $ 184,921,976
December 2017 139,122 $ 43.84 139,122 $ 178,822,428
Total 1,142,769 $ 37.46 1,142,769 $ 178,822,428

(1) On February 16, 2017, the Board of Directors of Adtalem authorized a share repurchase program to buy back up to $300 million of Adtalem common stock through December 31, 2020. The total remaining authorization under this share repurchase program was $178,822,428 as of December 31, 2017.


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, 2023 - July 31, 2023	667,987	$	39.41	667,987	$	146,421,843
August 1, 2023 - August 31, 2023	673,792	$	43.89	673,792	$	116,852,143
September 1, 2023 - September 30, 2023	816,619	$	44.07	816,619	$	80,862,017
Total	2,158,398	$	42.57	2,158,398

(1)

See Note 14 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

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
Publically Announced
Plans or Programs Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs
October 2017 - $ - NA NA
November 2017 8,364 $ 37.80 NA NA
December 2017 91 $ 45.15 NA NA
Total 8,455 $ 37.88 NA NA


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, 2023 - July 31, 2023	129	$	41.23	NA	NA
August 1, 2023 - August 31, 2023	117,359	$	43.37	NA	NA
September 1, 2023 - September 30, 2023	12,920	$	44.22	NA	NA
Total	130,408	$	43.45	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 the terms of Adtalem’s stock incentive plans.

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Item 3. Defaults Upon Senior Securities

(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 the terms of Adtalem's stock incentive plans.None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

~~ITEM 6 – EXHIBITS~~

Item 6. Exhibits

~~Exhibit 2.1~~	Stock Purchase Agreement, dated December 4, 2017, by and between Adtalem Global Inc. and Cogswell Education, LLC (incorporated by reference to Exhibit 2.1 to Adtalem’s Current Report on Form 8-K dated December 4, 2017).
31.1
~~Exhibit 31~~	Certification ~~Pursuant~~of Chief Executive Officer pursuant to ~~Rules~~Rule 13a-14(a) and Rule 15d-14(a) ~~under~~of the Securities Exchange Act of 1934, as ~~Amended~~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*
~~Exhibit~~ 32		~~Certification Pursuant~~Certifications pursuant to ~~Title~~ 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the ~~United States Code Section 1350~~Sarbanes-Oxley Act of 2002*
101.INS
~~101.INS~~	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed or furnished herewith.

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~~SIGNATURES~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Adtalem Global Education Inc.

Date: ~~February 6, 2018~~October 26, 2023	By:	/s/ Robert J. Phelan
	By	~~/s/ Patrick~~ Robert J. ~~Unzicker~~Phelan
		~~Patrick J. Unzicker~~
		Senior Vice President and Chief Financial Officer ~~and Treasurer (Principal~~
		(Principal Financial ~~Officer and Principal Accounting~~ Officer)


(Mark One)
þ
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ~~ended: December 31, 2017~~	ended September 30, 2023

	OR	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: 1-13988~~	File Number: 001-13988

~~DELAWARE~~	~~36-3150143~~
Delaware	36-3150143
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

500 ~~WEST MONROE~~West Monroe Street	~~60661~~
~~CHICAGO, ILLINOIS~~ Chicago, Illinois	~~(Zip Code)~~ 60661
(Address of principal executive offices)	(Zip Code)


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
Common stock, $0.01 par value per share	ATGE	Chicago Stock Exchange


Large accelerated filer	þ	Accelerated filer	¨ ☐
Non-accelerated filer	¨~~(Do not check if a smaller reporting company)~~ ◻	Smaller reporting company	¨ ☐
		Emerging growth company	¨ ☐

		Page #
	~~PART I – FINANCIAL INFORMATION~~ Part I. Financial Information
Item 11.	— Financial Statements ~~(Unaudited)~~	1
	Consolidated Balance Sheets	3 1
	Consolidated Statements of Income ~~(Loss)~~	4 2
	~~Consolidated Statements of Comprehensive Income (Loss)~~	5
	Consolidated Statements of Cash Flows	6 3
	Consolidated Statements of Shareholders’ Equity	4
	Notes to Consolidated Financial Statements	7 5
Item 22.	— Management’s Discussion and Analysis of Financial Condition and Results of Operations	35 31
Item 33.	— Quantitative and Qualitative Disclosures About Market Risk	59 47
Item 44.	— Controls and Procedures	59 48
	Part II. Other Information
Item 1.	~~PART II – OTHER INFORMATION~~Legal Proceedings	48
Item 11A.	~~— Legal Proceedings~~Risk Factors	60 48
Item 1A2.	~~— Risk Factors~~	60
~~Item 2~~	— Unregistered Sales of Equity Securities and Use of Proceeds	61 48
Item 63.	~~— Exhibits~~Defaults Upon Senior Securities	62 49
Item 4.	Mine Safety Disclosures	49
~~Signatures~~ Item 5.	Other Information	49
Item 6.	63Exhibits	49
	Signature	50

	December 31,			June 30,			December 31,
	2017			2017			2016

	(in thousands, except share and par value amounts)
ASSETS:
Current Assets:
Cash and Cash Equivalents	$	212,239		$	240,426		$	197,860
Marketable Securities and Investments		4,268			4,013			3,844
Restricted Cash		566			4,759			5,622
Accounts Receivable, Net		148,638			161,405			127,941
Prepaid Expenses and Other		75,972			36,988			54,964
Current Assets Held for Sale		28,126			23,616			37,202
Total Current Assets		469,809			471,207			427,433
Land, Building and Equipment:
Land		46,918			48,947			48,595
Building		425,659			443,914			441,271
Equipment		365,394			352,622			361,608
Construction in Progress		26,520			22,240			15,380
		864,491			867,723			866,854
Accumulated Depreciation		(446,152	)		(416,801	)		(406,295	)
Land, Building and Equipment Held for Sale, Net		-			37,904			39,967
Land, Building and Equipment, Net		418,339			488,826			500,526
Other Assets:
Deferred Income Taxes, Net		31,090			33,772			26,618
Intangible Assets, Net		407,000			412,158			419,883
Goodwill		832,943			829,086			832,642
Other Assets, Net		38,091			40,696			56,227
Other Assets Held for Sale		13,450			38,290			38,104
Total Other Assets		1,322,574			1,354,002			1,373,474
TOTAL ASSETS	$	2,210,722		$	2,314,035		$	2,301,433

LIABILITIES:
Current Liabilities:
Accounts Payable	$	37,818		$	46,417		$	32,119
Accrued Salaries, Wages and Benefits		63,417			81,661			64,680
Accrued Liabilities		77,891			90,306			94,938
Deferred Revenue		81,224			115,770			88,092
Current Liabilities Held for Sale		36,469			43,173			45,727
Total Current Liabilities		296,819			377,327			325,556
Other Liabilities:
Revolving Loan		165,000			125,000			225,000
Deferred Income Taxes, Net		31,745			34,712			32,452
Deferred Rent and Other		101,232			101,672			106,792
Income Taxes Payable		88,562			-			-
Total Other Liabilities		386,539			261,384			364,244
TOTAL LIABILITIES		683,358			638,711			689,800
COMMITMENTS AND CONTINGENCIES (NOTE 14)
NONCONTROLLING INTEREST		7,405			6,285			6,720
SHAREHOLDERS’ EQUITY:
Common Stock, $0.01 Par Value, 200,000,000 Shares Authorized; 60,295,000, 62,371,000 and 62,776,000 Shares Outstanding at December 31, 2017, June 30, 2017 and December 31, 2016, respectively		787			781			775
Additional Paid-in Capital		433,855			415,912			395,155
Retained Earnings		1,812,746			1,881,397			1,797,634
Accumulated Other Comprehensive Loss		(60,745	)		(59,119	)		(50,828	)
Treasury Stock, at Cost, 18,451,000, 15,691,000 and 14,762,000 Shares at December 31, 2017, June 30, 2017 and December 31, 2016, respectively		(666,684	)		(569,932	)		(537,823	)
TOTAL SHAREHOLDERS’ EQUITY		1,519,959			1,669,039			1,604,913
TOTAL LIABILITIES, NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY	$	2,210,722		$	2,314,035		$	2,301,433

	Three Months Ended December 31,						Six Months Ended December 31,
	2017			2016			2017			2016

	(in thousands, except per share amounts)
REVENUE:
Tuition	$	302,184		$	301,263		$	582,207		$	588,161
Other Educational		35,060			32,695			80,315			74,824
Total Revenue		337,244			333,958			662,522			662,985
OPERATING COST AND EXPENSE:
Cost of Educational Services		178,970			179,148			374,911			366,634
Student Services and Administrative Expense		100,336			101,167			201,544			204,632
Restructuring Expense		2,554			2,963			4,941			6,313
Regulatory Settlements		-			52,150			-			52,150
Total Operating Cost and Expense		281,860			335,428			581,396			629,729
Operating Income (Loss) from Continuing Operations		55,384			(1,470	)		81,126			33,256
INTEREST:
Interest Income		1,365			988			3,483			2,032
Interest Expense		(2,481	)		(2,300	)		(4,397	)		(4,415	)
Net Interest Expense		(1,116	)		(1,312	)		(914	)		(2,383	)
Income (Loss) from Continuing Operations Before Income Taxes		54,268			(2,782	)		80,212			30,873
Income Tax (Provision) Benefit		(109,636	)		10,082			(113,232	)		2,363
Equity Method Investment Income (Loss)		6			-			(38	)		-
(Loss) Income from Continuing Operations		(55,362	)		7,300			(33,058	)		33,236
DISCONTINUED OPERATIONS (NOTE 2):
(Loss) Income from Discontinued Operations Before Income Taxes		(43,873	)		6,321			(55,179	)		4,716
Income Tax Benefit		18,453			1,134			20,371			1,952
(Loss) Income from Discontinued Operations		(25,420	)		7,455			(34,808	)		6,668
NET (LOSS) INCOME		(80,782	)		14,755			(67,866	)		39,904
Net Income Attributable to Noncontrolling Interest		(374	)		(342	)		(505	)		(339	)
NET (LOSS) INCOME ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION	$	(81,156	)	$	14,413		$	(68,371	)	$	39,565

AMOUNTS ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION:
(Loss) Income from Continuing Operations	$	(55,736	)	$	6,958		$	(33,563	)	$	32,897
(Loss) Income from Discontinued Operations		(25,420	)		7,455			(34,808	)		6,668
NET (LOSS) INCOME ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION	$	(81,156	)	$	14,413		$	(68,371	)	$	39,565

(LOSS) EARNINGS PER COMMON SHARE ATTRIBUTABLE TO ADTALEM GLOBAL EDUCATION SHAREHOLDERS:
Basic:
Continuing Operations	$	(0.91	)	$	0.11		$	(0.54	)	$	0.52
Discontinued Operations	$	(0.42	)	$	0.12		$	(0.56	)	$	0.11
Total	$	(1.33	)	$	0.23		$	(1.10	)	$	0.62
Diluted:
Continuing Operations	$	(0.91	)	$	0.11		$	(0.54	)	$	0.52
Discontinued Operations	$	(0.42	)	$	0.12		$	(0.56	)	$	0.10
Total	$	(1.33	)	$	0.23		$	(1.10	)	$	0.62

Cash Dividends Declared per Common Share	$	-		$	0.18		$	-		$	0.18

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2017			2016		2017			2016
REVENUE:
Tuition	$	86,172		$	118,000	$	172,840		$	230,130
Other Educational		4,471			4,390		13,550			13,127
Total Revenue		90,643			122,390		186,390			243,257
OPERATING COST AND EXPENSE:
Cost of Educational Services		48,221			60,639		100,397			123,826
Student Services and Administrative Expense		36,624			44,484		85,896			102,084
Restructuring Expense		2,209			2,087		7,814			3,785
Asset Impairment Charge - Intangible and Goodwill		23,841			-		23,841			-
Asset Impairment Charge - Building and Equipment		23,391			-		23,391			-
Loss on Sale of Assets		230			-		230			-
Regulatory Settlements		-			4,102		-			4,102
Loss on Assets Held for Sale		-			4,764		-			4,764
Total Operating Cost and Expense		134,516			116,076		241,569			238,561
Operating (Loss) Income from Discontinued Operations		(43,873	)		6,314		(55,179	)		4,696
Interest Income		-			7		-			20
(Loss) Income from Discontinued Operations Before
Income Taxes		(43,873	)		6,321		(55,179	)		4,716
Income Tax Benefit		18,453			1,134		20,371			1,952
(Loss) Income from Discontinued Operations	$	(25,420	)	$	7,455	$	(34,808	)	$	6,668

Net Cash Provided by Operating Activities:
Previously Reported	$	34,919
ASU 2016-09 Adjustment		2,650
ASU 2016-18 Adjustment		3,909
As Currently Reported	$	41,478

Net Cash Provided by Financing Activities:
Previously Reported	$	207,912
ASU 2016-09 Adjustment		(2,650	)
As Currently Reported	$	205,262

Net Decrease in Cash, Cash Equivalents and Restricted Cash:
Previously Reported	$	(108,219	)
ASU 2016-18 Adjustment		3,909
As Currently Reported	$	(104,310	)

Cash, Cash Equivalents and Restricted Cash at End of Year:
Previously Reported	$	199,945
ASU 2016-18 Adjustment		11,092
As Currently Reported	$	211,037

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Exercise		Contractual		Value
	Options			Price		Life (in Years)		(in thousands)
Outstanding at July 1, 2017		2,794,850		$	34.68
Options Granted		491,275			33.90
Options Exercised		(308,805	)		31.65
Options Forfeited		(28,770	)		28.31
Options Expired		(559,349	)		46.79
Outstanding at December 31, 2017		2,389,201			32.20		6.29	$	26,675
Exercisable at December 31, 2017		1,291,547		$	35.86		4.12	$	11,010

	Fiscal Year
	2018			2017
Expected Life (in Years)		6.68			6.88
Expected Volatility		41.45	%		42.41	%
Risk-free Interest Rate		1.95	%		1.41	%
Dividend Yield		0.00	%		1.19	%
Pre-vesting Forfeiture Rate		NA			10.00	%

	Level 1		Level 2		Level 3
Cash and Cash Equivalents	$	212,239	$	-	$	-
Available-for-Sale Investments:
Marketable Securities, short-term		4,268		-		-
Institutional Loans Receivable, Net		-		44,280		-
Deferred Acquisition Obligations		-		23,903		-
FIES Receivable		-		16,087		-
Total Financial Assets at Fair Value	$	216,507	$	84,270	$	-

	December 31, 2017						June 30, 2017						December 31, 2016
Gross Institutional Loans				$	57,397					$	57,391					$	54,070
Allowance for Credit Losses:
Balance at July 1	$	(11,632	)				$	(7,915	)				$	(7,915	)
Charge-offs and Adjustments		1,024						4,722						3,054
Recoveries		(148	)					(573	)					(438	)
Additional Provision		(2,361	)					(7,866	)					(4,240	)
Balance at End of Period					(13,117	)					(11,632	)					(9,539	)
Net Institutional Loans				$	44,280					$	45,759					$	44,531

	1-29 Days Past Due		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Total Institutional Loans
Institutional Loans:
December 31, 2017	$	8,569	$	1,021	$	1,166	$	11,902	$	22,658	$	34,739	$	57,397
June 30, 2017	$	7,162	$	2,192	$	583	$	10,319	$	20,256	$	37,135	$	57,391
December 31, 2016	$	5,657	$	2,904	$	1,762	$	7,511	$	17,834	$	36,236	$	54,070

Date	Shares		Total Cost
Authorized	Repurchased		(in millions)
November 15, 2006		908,399	$	35.0
May 13, 2008		1,027,417		50.0
November 11, 2009		972,205		50.0
August 11, 2010		1,103,628		50.0
November 10, 2010		968,105		50.0
May 20, 2011		2,396,143		100.0
November 2, 2011		3,478,299		100.0
August 29, 2012		2,005,317		62.7
December 15, 2015		1,672,250		36.6
February 16, 2017		3,460,922		121.2
Totals		17,992,685	$	655.5

	November 1, 2017
Current Assets	$	558
Property and Equipment		16
Other Long-term Assets		1,838
Goodwill		4,121
Total Assets Acquired		6,533
Liabilities Assumed		569
Net Assets Acquired	$	5,964

	July 1, 2016
Current Assets	$	24,895
Property and Equipment		432
Other Long-term Assets		3,131
Intangible Assets		88,600
Goodwill		274,689
Total Assets Acquired		391,747
Liabilities Assumed		37,619
Net Assets Acquired	$	354,128

	July 1, 2016
	Value Assigned		Estimated Useful Life
Customer Relationships	$	42,500	10 years
Curriculum		5,000	3 years
Non-compete Agreements		700	1 year
Proprietary Technology		500	4 years

	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Weighted Average Amortization Period
Amortizable Intangible Assets:
Student Relationships	$	11,049	$	(8,999	)	5 Years
Customer Relationships		42,900		(7,261	)	10 Years
Non-compete Agreements		700		(682	)	1 Year
Curriculum/Software		7,143		(3,375	)	4 Years
Franchise Contracts		10,597		(1,717	)	18 Years
Clinical Agreements		392		(118	)	15 Years
Trade Names		1,143		(1,000	)	10 Years
Proprietary Technology		500		(187	)	4 Years
Total	$	74,424	$	(23,339	)
Indefinite-Lived Intangible Assets:
Trade Names	$	109,462
Ross Title IV Eligibility and Accreditations		14,100
Intellectual Property		13,940
Chamberlain Title IV Eligibility and Accreditations		1,200
Carrington Title IV Eligibility and Accreditations		20,200
AUC Title IV Eligibility and Accreditations		100,000
Adtalem Brazil Accreditation		97,013
Total	$	355,915

	June 30, 2017
	Gross Carrying Amount		Accumulated Amortization
Amortizable Intangible Assets:
Student Relationships	$	12,459	$	(9,323	)
Customer Relationships		42,900		(4,923	)
Non-compete Agreements		700		(665	)
Curriculum/Software		7,147		(2,329	)
Franchise Contracts		10,615		(1,425	)
Clinical Agreements		393		(104	)
Trade Names		1,145		(945	)
Proprietary Technology		500		(125	)
Total	$	75,859	$	(19,839	)
Indefinite-Lived Intangible Assets:
Trade Names	$	109,519
Ross Title IV Eligibility and Accreditations		14,100
Intellectual Property		13,940
Chamberlain Title IV Eligibility and Accreditations		1,200
Carrington Title IV Eligibility and Accreditations		20,200
AUC Title IV Eligibility and Accreditations		100,000
Adtalem Brazil Accreditation		97,179
Total	$	356,138

	Becker and		Adtalem
Fiscal Year	ACAMS		Brazil		Total
2018	$	6,501	$	2,861	$	9,362
2019		6,422		2,057		8,479
2020		4,671		1,448		6,119
2021		4,440		907		5,347
2022		4,300		615		4,915
Thereafter		15,386		6,387		21,773

									U.S. Traditional
									Postsecondary
	Medical					Technology					Accumulated
	and		Professional			and					Impairment
	Healthcare		Education			Business			Gross		Losses			Total
Balance at June 30, 2016		310,210		32,043			223,558			185,717		(185,717	)		565,811
Purchase Accounting Adjustments		-		-			(3,122	)		-		-			(3,122	)
Acquisitions		-		274,620			-			-		-			274,620
Foreign exchange rate changes		-		(281	)		(4,386	)		-		-			(4,667	)
Balance at December 31, 2016		310,210		306,382			216,050			185,717		(185,717	)		832,642
Purchase Accounting Adjustments		-		69			(481	)		-		-			(412	)
Foreign exchange rate changes		-		202			(3,346	)		-		-			(3,144	)
Balance at June 30, 2017		310,210		306,653			212,223			185,717		(185,717	)		829,086
Acquisitions		-		-			4,121			-		-			4,121
Foreign exchange rate changes		-		155			(419	)		-		-			(264	)
Balance at December 31, 2017	$	310,210	$	306,808		$	215,925		$	185,717	$	(185,717	)	$	832,943

	Three Months Ended December 31, 2017						Six Months Ended December 31, 2017
	Real Estate		Termination Benefits		Total		Real Estate			Termination Benefits		Total
Medical and Healthcare	$	-	$	-	$	-	$	26		$	86	$	112
U.S. Traditional Postsecondary		830		298		1,128		1,722			656		2,378
Home Office and Other		160		1,266		1,426		(465	)		2,916		2,451
Total	$	990	$	1,564	$	2,554	$	1,283		$	3,658	$	4,941

	Three Months Ended December 31, 2016						Six Months Ended December 31, 2016
	Real Estate		Termination Benefits		Total		Real Estate		Termination Benefits		Total
U.S. Traditional Postsecondary	$	2,335	$	-	$	2,335	$	3,703	$	-	$	3,703
Home Office and Other		266		362		628		1,929		681		2,610
Total	$	2,601	$	362	$	2,963	$	5,632	$	681	$	6,313

Liability balance at June 30, 2016	$	48,223
Increase in liability (separation and other charges)		27,620
Reduction in liability (payments and adjustments)		(29,728	)
Liability balance at June 30, 2017		46,115
Increase in liability (separation and other charges)		11,954
Reduction in liability (payments and adjustments)		(16,304	)
Liability balance at December 31, 2017	$	41,765

	Three Months Ended December 31, 2017
	(in thousands)
	Medical and Healthcare			Professional Education			Technology and Business			U.S. Traditional Postsecondary			Home Office and Other			Consolidated
Revenue:
Fiscal Year 2017 as Reported	$	201,409		$	27,366		$	73,387		$	32,445		$	(649	)	$	333,958
Organic Growth (Decline)		2,780			2,993			438			(3,412	)		71			2,870
Effect of Acquisitions		-			-			218			-			-			218
Hurricane Impact		(892	)		-			-			-			-			(892	)
Effect of Currency Change		-			-			1,090			-			-			1,090
Fiscal Year 2018 as Reported	$	203,297		$	30,359		$	75,133		$	29,033		$	(578	)	$	337,244

Fiscal Year 2018 % Change:
Organic Growth (Decline)		1.4	%		10.9	%		0.6	%		(10.5	)%		NM			0.9	%
Effect of Acquisitions		-			-			0.3	%		-			NM			0.1	%
Constant Currency Change		1.4	%		10.9	%		0.9	%		(10.5	)%		NM			0.9	%
Hurricane Impact		(0.4	)%		-			-			-			NM			(0.3	)%
Effect of Currency Change		-			-			1.5	%		-			NM			0.3	%
Fiscal Year 2018 % Change as Reported		0.9	%		10.9	%		2.4	%		(10.5	)%		NM			1.0	%

	Fiscal Year 2018
Term	July 2017			Sept. 2017			Nov. 2017			Jan. 2018
New Students		2,497			4,962			2,806			4,472
% Change from Prior Year		16.5	%		(0.8	)%		5.5	%		6.9	%
Total Students		26,811			30,062			29,719			31,333
% Change from Prior Year		6.3	%		4.5	%		5.1	%		5.2	%

	Fiscal Year 2017
Term	July 2016			Sept. 2016			Nov. 2016			Jan. 2017			Mar. 2017			May 2017
New Students		2,144			5,003			2,660			4,185			2,713			3,779
% Change from Prior Year		(1.7	)%		1.2	%		3.2	%		(3.0	)%		11.7	%		4.0	%
Total Students		25,229			28,781			28,268			29,789			29,726			28,961
% Change from Prior Year		15.9	%		11.5	%		10.2	%		6.6	%		7.3	%		5.7	%

	Fiscal Year 2018			Fiscal Year 2017
Term	Sept. 2017			Sept. 2016			Mar. 2017
New Students		14,507			15,892			22,531
% Change over Prior Year		(8.7	)%		10.4	%		(9.0	)%
Total Students		78,340			76,862			79,564
% Change over Prior Year		1.9	%		32.9	%		0.4	%

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs (1)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
October 2017		612,375	$	35.94		612,375	$	199,614,125
November 2017		391,272	$	37.55		391,272	$	184,921,976
December 2017		139,122	$	43.84		139,122	$	178,822,428
Total		1,142,769	$	37.46		1,142,769	$	178,822,428

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publically Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
October 2017		-	$	-	NA	NA
November 2017		8,364	$	37.80	NA	NA
December 2017		91	$	45.15	NA	NA
Total		8,455	$	37.88	NA	NA