UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2020
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____
	Commission file number: 1-13988

Adtalem Global Education Inc.

(Exact name of registrant as specified in its charter)

Delaware	36-3150143
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
500 West Monroe Street
Chicago, Illinois	60661
(Address of principal executive offices)	(Zip Code)

(866) 374-2678

(Registrant’s telephone number; including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	ATGE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	þ	Accelerated filer	☐
Non-accelerated filer	◻	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of April 28, 2020, there were 51,802,441 shares of the registrant’s common stock, $0.01 par value per share outstanding.

Adtalem Global Education Inc.

Form 10-Q

Table of Contents

		Page
	Part I. Financial Information
Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Shareholders’ Equity	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 4.	Controls and Procedures	63
	Part II. Other Information
Item 1.	Legal Proceedings	63
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	65
	Signature	66

Part I. Financial Information

Item 1. Financial Statements

Adtalem Global Education Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except par value)

	March 31,		June 30,		March 31,
	2020		2019		2019
Assets:
Current assets:
Cash and cash equivalents	$	167,771	$	204,202	$	230,700
Investments in marketable securities		7,754		8,680		8,341
Restricted cash		807		1,022		391
Accounts receivable, net		98,732		83,560		89,578
Prepaid expenses and other current assets		126,785		29,313		44,524
Current assets held for sale		142,417		177,923		166,557
Total current assets		544,266		504,700		540,091
Noncurrent assets:
Property and equipment, net		286,346		283,433		279,387
Operating lease assets		188,629		—		—
Deferred income taxes		15,066		18,314		19,199
Intangible assets, net		290,092		297,989		237,013
Goodwill		686,235		687,256		627,685
Other assets, net		84,825		52,113		54,386
Other assets held for sale		348,561		398,891		390,942
Total noncurrent assets		1,899,754		1,737,996		1,608,612
Total assets	$	2,444,020	$	2,242,696	$	2,148,703
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable	$	33,932	$	53,385	$	39,092
Accrued payroll and benefits		40,373		46,664		39,439
Accrued liabilities		60,458		76,529		74,614
Deferred revenue		120,047		95,944		108,370
Current operating lease liabilities		51,926		—		—
Current portion of long-term debt		3,000		3,000		3,000
Current liabilities held for sale		34,950		36,109		44,690
Total current liabilities		344,686		311,631		309,205
Noncurrent liabilities:
Long-term debt		446,610		398,094		288,589
Long-term operating lease liabilities		179,195		—		—
Deferred income taxes		28,147		29,426		33,278
Other liabilities		91,011		86,326		88,190
Noncurrent liabilities held for sale		56,850		16,146		16,372
Total noncurrent liabilities		801,813		529,992		426,429
Total liabilities		1,146,499		841,623		735,634
Commitments and contingencies (Note 19)
Redeemable noncontrolling interest		2,962		9,543		8,482
Shareholders' equity:
Common stock, $0.01 par value per share, 200,000 shares authorized; 51,802, 55,303, and 56,954 shares outstanding as of March 31, 2020, June 30, 2019, and March 31, 2019, respectively		806		801		801
Additional paid-in capital		499,703		486,061		483,043
Retained earnings		2,183,620		2,012,902		1,964,169
Accumulated other comprehensive loss		(276,379)		(137,290)		(148,706)
Treasury stock, at cost, 28,790, 24,830, and 23,149 shares as of March 31, 2020, June 30, 2019, and March 31, 2019, respectively		(1,113,191)		(970,944)		(894,720)
Total shareholders' equity		1,294,559		1,391,530		1,404,587
Total liabilities and shareholders' equity	$	2,444,020	$	2,242,696	$	2,148,703

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

1

Adtalem Global Education Inc.

Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Revenue	$	271,487	$	258,703	$	792,272	$	749,603
Operating cost and expense:
Cost of educational services		118,712		120,192		374,004		349,803
Student services and administrative expense		96,434		90,746		292,169		269,161
Restructuring expense		1,854		2,186		10,339		45,194
Gain on sale of assets		—		—		(4,779)		—
Settlement gain		—		—		—		(15,571)
Total operating cost and expense		217,000		213,124		671,733		648,587
Operating income from continuing operations		54,487		45,579		120,539		101,016
Other income (expense):
Interest and dividend income		782		1,062		2,675		3,204
Interest expense		(5,191)		(4,786)		(15,585)		(14,710)
Investment (loss) gain		(1,548)		715		(1,106)		(407)
Gain on derivative		111,838		—		83,832		—
Net other income (expense)		105,881		(3,009)		69,816		(11,913)
Income from continuing operations before income taxes		160,368		42,570		190,355		89,103
Provision for income taxes		(6,937)		(7,843)		(18,213)		(17,370)
Income from continuing operations		153,431		34,727		172,142		71,733
Discontinued operations:
(Loss) income from discontinued operations before income taxes		(5,947)		3,222		(5,536)		1,271
Loss on disposal of discontinued operations before income taxes		—		(265)		—		(32,979)
Benefit from income taxes		3,228		182		3,778		5,762
(Loss) income from discontinued operations		(2,719)		3,139		(1,758)		(25,946)
Net income		150,712		37,866		170,384		45,787
Net loss attributable to redeemable noncontrolling interest from continuing operations		120		113		334		265
Net income attributable to redeemable noncontrolling interest from discontinued operations		—		(74)		—		(382)
Net income attributable to Adtalem Global Education	$	150,832	$	37,905	$	170,718	$	45,670
Amounts attributable to Adtalem Global Education:
Net income from continuing operations	$	153,551	$	34,840	$	172,476	$	71,998
Net (loss) income from discontinued operations		(2,719)		3,065		(1,758)		(26,328)
Net income attributable to Adtalem Global Education	$	150,832	$	37,905	$	170,718	$	45,670
Earnings (loss) per share attributable to Adtalem Global Education:
Basic:
Continuing operations	$	2.90	$	0.60	$	3.19	$	1.22
Discontinued operations	$	(0.05)	$	0.05	$	(0.03)	$	(0.44)
Net	$	2.85	$	0.65	$	3.15	$	0.77
Diluted:
Continuing operations	$	2.88	$	0.59	$	3.16	$	1.20
Discontinued operations	$	(0.05)	$	0.05	$	(0.03)	$	(0.44)
Net	$	2.83	$	0.64	$	3.13	$	0.76
Weighted-average shares outstanding:
Basic shares		52,955		58,061		54,117		59,199
Diluted shares		53,319		58,802		54,576		60,004

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

2

Adtalem Global Education Inc.

Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2020		2019		2020		2019
Net income	$	150,712	$	37,866	$	170,384	$	45,787
Other comprehensive income (loss), net of tax
Loss on foreign currency translation adjustments		(117,669)		(5,238)		(139,539)		(6,193)
Unrealized (loss) gain on marketable securities, net of tax		(44)		50		(2)		36
Unrealized gain on interest rate swap, net of tax		452		—		452		—
Comprehensive income		33,451		32,678		31,295		39,630
Comprehensive loss attributable to redeemable noncontrolling interest		271		138		586		51
Comprehensive income attributable to Adtalem Global Education	$	33,722	$	32,816	$	31,881	$	39,681

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

3

Adtalem Global Education Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine Months Ended
	March 31,
	2020		2019
Operating activities:
Net income	$	170,384	$	45,787
Loss from discontinued operations		1,758		25,946
Income from continuing operations		172,142		71,733
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		11,328		10,369
Amortization and adjustments to operating lease assets		32,369		—
Depreciation		25,773		24,726
Amortization		8,860		5,990
Provision for bad debts		12,955		5,150
Deferred income taxes		1,824		23,717
Loss on disposals, accelerated depreciation, and adjustments to property and equipment		147		41,082
Realized and unrealized loss on investments		1,106		407
Realized gain on sale of assets		(4,779)		—
Insurance settlement gain		—		(15,571)
Unrealized gain on derivative		(83,832)		—
Changes in assets and liabilities:
Accounts receivable		(19,922)		(24,511)
Prepaid expenses and other current assets		(17,123)		(11,948)
Accounts payable		(18,495)		(4,433)
Accrued payroll and benefits		(6,291)		(12,755)
Accrued liabilities		(4,810)		6,156
Deferred revenue		24,103		9,423
Operating lease liabilities		(41,628)		—
Other assets and liabilities		(2,041)		(22,355)
Net cash provided by operating activities-continuing operations		91,686		107,180
Net cash provided by operating activities-discontinued operations		13,845		21,355
Net cash provided by operating activities		105,531		128,535
Investing activities:
Capital expenditures		(31,934)		(45,269)
Insurance proceeds received for damage to buildings and equipment		—		35,706
Proceeds from sales of marketable securities		1,572		1,625
Purchases of marketable securities		(1,755)		(6,070)
Proceeds from sale of assets		6,421		—
Cash received on purchase price adjustment		92		—
Loan to DeVry University		—		(10,000)
Net cash used in investing activities-continuing operations		(25,604)		(24,008)
Net cash used in investing activities-discontinued operations		(3,803)		(7,417)
Cash and restricted cash transferred in divestitures of discontinued operations		—		(48,876)
Net cash used in investing activities		(29,407)		(80,301)
Financing activities:
Proceeds from exercise of stock options		2,276		16,825
Employee taxes paid on withholding shares		(5,315)		(6,527)
Proceeds from stock issued under Colleague Stock Purchase Plan		—		421
Repurchases of common stock for treasury		(136,889)		(176,903)
Borrowings under credit facility		225,000		—
Repayments under credit facility		(177,250)		(2,250)
Proceeds from down payment on seller loan		5,200		—
Payment for purchase of redeemable noncontrolling interest of subsidiary		(6,247)		—
Net cash used in financing activities-continuing operations		(93,225)		(168,434)
Net cash used in financing activities-discontinued operations		(2,920)		(2,154)
Net cash used in financing activities		(96,145)		(170,588)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(27,907)		(449)
Net decrease in cash, cash equivalents and restricted cash		(47,928)		(122,803)
Cash, cash equivalents and restricted cash at beginning of period		300,467		444,405
Cash, cash equivalents and restricted cash at end of period		252,539		321,602
Less: cash, cash equivalents and restricted cash of discontinued operations at end of period		83,961		90,511
Cash, cash equivalents and restricted cash at end of period	$	168,578	$	231,091

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

4

Adtalem Global Education Inc.

Consolidated Statements of Shareholders’ Equity

(unaudited)

(in thousands)

							Accumulated
			Additional				Other
	Common		Paid-In		Retained		Comprehensive		Treasury
	Stock		Capital		Earnings		Loss		Stock		Total
December 31, 2018	$	801	$	479,946	$	1,926,134	$	(143,518)	$	(833,716)	$	1,429,647
Net income attributable to Adtalem Global Education						37,905						37,905
Other comprehensive loss, net of tax								(5,188)				(5,188)
Change in redeemable noncontrolling interest put option						130						130
Stock-based compensation				3,039								3,039
Net activity from stock-based compensation awards				40						(126)		(86)
Proceeds from stock issued under Colleague Stock Purchase Plan				18						92		110
Repurchases of common shares for treasury										(60,970)		(60,970)
March 31, 2019	$	801	$	483,043	$	1,964,169	$	(148,706)	$	(894,720)	$	1,404,587
December 31, 2019	$	806	$	496,674	$	2,032,788	$	(159,118)	$	(1,076,238)	$	1,294,912
Net income attributable to Adtalem Global Education						150,832						150,832
Other comprehensive loss, net of tax								(117,261)				(117,261)
Stock-based compensation				2,811								2,811
Net activity from stock-based compensation awards				218						(83)		135
Repurchases of common shares for treasury										(36,870)		(36,870)
March 31, 2020	$	806	$	499,703	$	2,183,620	$	(276,379)	$	(1,113,191)	$	1,294,559
June 30, 2018	$	793	$	454,653	$	1,917,373	$	(142,168)	$	(711,365)	$	1,519,286
Cumulative effect adjustment upon the adoption of ASU 2016-01						381		(381)				—
Net income attributable to Adtalem Global Education						45,670						45,670
Other comprehensive loss, net of tax								(6,157)				(6,157)
Change in redeemable noncontrolling interest put option						745						745
Stock-based compensation				11,227								11,227
Net activity from stock-based compensation awards		8		17,075						(6,785)		10,298
Proceeds from stock issued under Colleague Stock Purchase Plan				88						333		421
Repurchases of common shares for treasury										(176,903)		(176,903)
March 31, 2019	$	801	$	483,043	$	1,964,169	$	(148,706)	$	(894,720)	$	1,404,587
June 30, 2019	$	801	$	486,061	$	2,012,902	$	(137,290)	$	(970,944)	$	1,391,530
Net income attributable to Adtalem Global Education						170,718						170,718
Other comprehensive loss, net of tax								(139,089)				(139,089)
Stock-based compensation				11,405								11,405
Net activity from stock-based compensation awards		5		2,237						(5,358)		(3,116)
Repurchases of common shares for treasury										(136,889)		(136,889)
March 31, 2020	$	806	$	499,703	$	2,183,620	$	(276,379)	$	(1,113,191)	$	1,294,559

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

5

Adtalem Global Education Inc.

Notes to Consolidated Financial Statements

(unaudited)

Table of Contents

Note		Page
1	Nature of Operations	7
2	Summary of Significant Accounting Policies	7
3	Acquisitions	9
4	Discontinued Operations and Assets Held for Sale	10
5	Revenue	13
6	Restructuring Charges	16
7	Income Taxes	17
8	Earnings per Share	18
9	Financing Receivables	18
10	Property and Equipment, Net	20
11	Leases	20
12	Goodwill and Intangible Assets	22
13	Debt	26
14	Redeemable Noncontrolling Interest	28
15	Share Repurchases	29
16	Accumulated Other Comprehensive Loss	30
17	Stock-Based Compensation	30
18	Fair Value Measurements	32
19	Commitments and Contingencies	34
20	Segment Information	37

6

1. Nature of Operations

In this Quarterly Report on Form 10-Q, Adtalem Global Education Inc., together with its subsidiaries, is collectively referred to as “Adtalem,” “we,” “our,” “us,” or similar references.

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

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

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

“Home Office and Other” includes activity not allocated to a reportable segment. See Note 20 “Segment Information” for additional information.

Adtalem Education of Brazil (“Adtalem Brazil”), Carrington College (“Carrington”), and DeVry University are presented as discontinued operations and assets held for sale in all periods presented as applicable. See Note 4 “Discontinued Operations and Assets Held for Sale” for additional information.

2. Summary of Significant Accounting Policies

Basis of Presentation

A full listing of our significant accounting policies is described in Note 4 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 (“2019 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (which are normal and recurring in nature) considered necessary for a fair presentation have been included. 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 2019 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.

The World Health Organization declared the novel coronavirus (“COVID-19” or “virus”) to be a public health emergency on January 30, 2020. The virus has had tragic consequences across the globe, and its full impact is not yet known as of the May 5, 2020 filing date of this Form 10-Q. While the virus did not have significant impacts to the third quarter of fiscal year 2020 results of operations, depending on the length and severity of social distancing and other measures established to combat the virus, there could be significant impacts on future results of operations. Due to the effects of COVID-19 on operations and the seasonal nature of our business, quarterly revenue, expenses, earnings, and cash flows are not necessarily indicative of the results that may be achieved for the full fiscal year.

Certain prior period amounts have been reclassified for consistency with the current period presentation.

7

Recent Accounting Standards

Recently adopted accounting standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02: “Leases (Topic 842).” This guidance was issued to increase transparency and comparability among organizations by recognizing right-of-use assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. We adopted this guidance, along with the related clarifications and improvements, effective July 1, 2019 using the modified retrospective approach without adjusting prior comparative periods. The adoption of this standard significantly impacts our Consolidated Balance Sheets, but did not impact our Consolidated Statements of Income. We elected the practical expedients package which allows us to forego reassessing (i) whether any expired or existing contracts are or contain leases; (ii) the lease classification for any expired or expiring leases; and (iii) initial direct costs for any existing leases. We did not elect the hindsight practical expedient, which permits the use of hindsight when determining the lease term and impairment of operating lease assets. See Note 11 “Leases” for the disclosures related to this new accounting standard.

The impact on the Consolidated Balance Sheet upon adoption of Accounting Standards Codification (“ASC”) 842 is as follows (in thousands, except par value):

	June 30,		Adjustments due to		July 1,
	2019		adoption of ASC 842		2019
Assets:
Current assets:
Cash and cash equivalents	$	299,445	$	—	$	299,445
Investments in marketable securities		8,680		—		8,680
Restricted cash		1,022		—		1,022
Accounts receivable, net		157,829		—		157,829
Prepaid expenses and other current assets		37,724		(3,483)		34,241
Total current assets		504,700		(3,483)		501,217
Noncurrent assets:
Property and equipment, net		364,683		—		364,683
Operating lease assets		—		282,978		282,978
Deferred income taxes		18,314		—		18,314
Intangible assets, net		418,097		—		418,097
Goodwill		874,451		—		874,451
Other assets, net		62,451		—		62,451
Total noncurrent assets		1,737,996		282,978		2,020,974
Total assets	$	2,242,696	$	279,495	$	2,522,191
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable	$	57,627	$	—	$	57,627
Accrued salaries, wages, and benefits		64,492		—		64,492
Accrued liabilities		86,722		(16,946)		69,776
Deferred revenue		99,790		—		99,790
Current operating lease liabilities		—		66,707		66,707
Current portion of long-term debt		3,000		—		3,000
Total current liabilities		311,631		49,761		361,392
Noncurrent liabilities:
Long-term debt		398,094		—		398,094
Long-term operating lease liabilities		—		269,387		269,387
Deferred income taxes		29,426		—		29,426
Other liabilities		102,472		(39,653)		62,819
Total noncurrent liabilities		529,992		229,734		759,726
Total liabilities		841,623		279,495		1,121,118
Redeemable noncontrolling interest		9,543		—		9,543
Shareholders' equity:
Common stock, $0.01 par value		801		—		801
Additional paid-in capital		486,061		—		486,061
Retained earnings		2,012,902		—		2,012,902
Accumulated other comprehensive loss		(137,290)		—		(137,290)
Treasury stock, at cost		(970,944)		—		(970,944)
Total shareholders' equity		1,391,530		—		1,391,530
Total liabilities and shareholders' equity	$	2,242,696	$	279,495	$	2,522,191

8

Upon the adoption of ASC 842, the following balances were removed from the Consolidated Balance Sheet as of July 1, 2019: (i) $3.5 million of prepaid rent balances within prepaid expenses and other current assets; (ii) $6.8 million of current deferred rent liability balances within accrued liabilities; (iii) $10.1 million of current restructure liability balances within accrued liabilities; (iv) $24.8 million of noncurrent deferred rent liability balances within other liabilities; and (v) $14.9 million of noncurrent restructure liability balances within other liabilities.

In March 2020, FASB issued ASU No. 2020-04: “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance was issued to provide for temporary optional expedients and exceptions to the current guidance on certain contract modifications and hedge relationships to ease the burdens related to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) or other reference rates to alternative reference rates. The guidance is effective as of March 12, 2020 through December 31, 2022. We adopted this guidance in the third quarter of fiscal year 2020 and is not expected to have a significant effect on Adtalem’s Consolidated Financial Statements.

Recently issued accounting standards not yet adopted

In June 2016, FASB issued ASU No. 2016-13: “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The guidance was issued to provide financial statement users with more decision-useful information about the expected losses on financial instruments by replacing the incurred loss impairment methodology with a methodology that reflects expected credit losses by requiring a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management is evaluating the impact the guidance will have on Adtalem’s Consolidated Financial Statements and believes the guidance will be applied to our allowance for bad debts on trade receivables and institutional loans and will not have a significant impact on Adtalem’s Consolidated Financial Statements.

Reclassifications

Beginning in the first quarter of fiscal year 2020, Adtalem Brazil operations were classified as discontinued operations. See Note 4 “Discontinued Operations and Assets Held for Sale” for additional information. Prior period amounts have been revised to conform to the current classification. Certain expenses in prior periods previously allocated to Adtalem Brazil within our former Business and Law segment have been reclassified to the Home Office and Other segment based on discontinued operation reporting guidance regarding allocation of corporate overhead. For fiscal year 2020, home office costs to support the remaining businesses are being allocated to the Medical and Healthcare and Financial Services segments. See Note 20 “Segment Information” for additional information.

3. Acquisitions

OnCourse Learning

On May 31, 2019, Adtalem completed the acquisition of 100% of the equity interests of OCL for $118.3 million, net of cash of $1.2 million. Adtalem paid $118.4 million for this purchase during the fourth quarter of fiscal year 2019, and funded the purchase with available domestic cash balances and $100 million in borrowings under Adtalem’s revolving credit facility. Adtalem received $0.1 million related to a net working capital adjustment during the second quarter of fiscal year 2020. OCL is a leading provider of compliance training, licensure preparation, continuing education, and professional development in the banking and mortgage industries across the U.S. The acquisition furthers Adtalem’s growth strategy into financial services.

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

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

	May 31,
	2019
Current assets	$	5,260
Property and equipment		1,197
Intangible assets		63,100
Goodwill		59,427
Total assets acquired		128,984
Liabilities assumed		9,445
Net assets acquired	$	119,539

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 Financial Services reporting unit and reportable segment. Factors that contributed to a purchase price resulting in the recognition of goodwill include OCL’s strategic fit into Adtalem’s expanding presence in financial services, the reputation of the OCL brand as a leader in the industry, and potential future growth opportunity. Of the $63.1 million of acquired intangible assets, $18.4 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 at the date of acquisition are as follows (in thousands):

	May 31, 2019
	Value		Estimated
	Assigned		Useful Life
Customer relationships	$	26,400	11 years
Curriculum		11,600	6 years
Course delivery technology		6,700	5 years

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

4. Discontinued Operations and Assets Held for Sale

On December 4, 2018, Adtalem completed the sale of Carrington to San Joaquin Valley College, Inc. (“SJVC”) for de minimis consideration. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, Carrington is presented in Adtalem’s financial reporting as a discontinued operation. Adtalem has retained certain leases associated with the Carrington operations. Adtalem remains the primary lessee on these leases and subleases to Carrington. Adtalem records the proceeds from these subleases as an offset to operating costs. Adtalem also assigned certain leases to Carrington but remains contingently liable under these leases. Adtalem recorded a pre-tax loss of $11.1 million on the sale of Carrington and transferred $9.9 million of cash and restricted cash balances to Carrington in the second quarter of fiscal year 2019, subject to post-closing adjustments to be completed in fiscal year 2020.

On December 11, 2018, Adtalem completed the sale of DeVry University to Cogswell Education, LLC (“Cogswell”) for de minimis consideration. As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, DeVry University is presented in Adtalem’s financial reporting as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20 million over a ten-year period payable based on DeVry University’s free cash flow. In connection with the closing of the sale, Adtalem loaned to DeVry University $10.0 million under the terms of the promissory note, dated as of December 11, 2018 (the “Note”). The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. DeVry University may make prepayments on the Note. This loan is recorded as other assets, net on the Consolidated Balance Sheets. Adtalem has retained certain leases associated with DeVry University operations. Adtalem remains the primary lessee on these leases and subleases to DeVry University. In addition, Adtalem owns the buildings for certain DeVry University operating and administrative office locations and leases space to DeVry University under one-year operating leases, renewable annually at DeVry University’s option with the exception of one lease which expires December 2023. Adtalem records

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the proceeds from these leases and subleases as an offset to operating costs. Adtalem also assigned certain leases to DeVry University but remains contingently liable under these leases. Adtalem recorded a pre-tax loss of $21.7 million on the sale of DeVry University and transferred $39.0 million of cash and restricted cash balances to DeVry University in the second quarter of fiscal year 2019.

On April 24, 2020, Adtalem completed the sale of Adtalem Brazil to Estácio Participações S.A. (“Estácio”) and Sociedade de Ensino Superior Estaćio de Sá Ltda, a wholly owned subsidiary of Estácio (“Purchaser”). As the sale represented a strategic shift that has a major effect on Adtalem’s operations and financial results, Adtalem Brazil is presented in Adtalem’s financial reporting as a discontinued operation. Pursuant to the terms and subject to the conditions set forth in the purchase agreement, Adtalem sold the issued and outstanding shares of Adtalem Brasil Holding S.A. (a/k/a Adtalem Brazil) to the Purchaser for R$1,920 million, subject to certain post-closing adjustments pursuant to the purchase agreement. Net proceeds received on April 24, 2020, after settlement of debt, transaction fees, taxes and hedge proceeds (described below) were $424.0 million, in addition to $73.0 million of cash previously unavailable, which is now available for general corporate use. In connection with the sale of Adtalem Brazil, Adtalem entered into a deal-contingent foreign currency hedge arrangement to economically hedge the Brazilian Real denominated sales price through mitigation of the currency exchange rate risk. The hedge agreement had a total notional amount of R$2,154 million (approximately $415 million as of March 31, 2020). The derivative associated with the hedge agreement did not qualify for hedge accounting treatment under ASC 815, and as a result, all changes in fair value were recorded within the income statement. Adtalem recorded a pre-tax unrealized gain on the hedge agreement derivative based on the foreign exchange forward spot rate as of March 31, 2020 of $111.8 million and $83.8 million for the three and nine months ended March 31, 2020, respectively, (see Note 18 “Fair Value Measurements” for additional information) with an $83.8 million asset included within prepaid expenses and other current assets on the March 31, 2020 Consolidated Balance Sheet. This deal-contingent foreign currency hedge was settled in conjunction with the close of the sale of Adtalem Brazil with cash proceeds of $110.7 million during the fourth quarter of fiscal year 2020.

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The following is a summary of balance sheet information of assets and liabilities reported as held for sale, which includes only Adtalem Brazil balances as Carrington and DeVry University were sold as of each period presented below (in thousands):

	March 31,		June 30,		March 31,
	2020		2019		2019
Assets:
Current assets:
Cash and cash equivalents	$	83,961	$	95,243	$	90,511
Accounts receivable, net		52,507		74,269		65,794
Prepaid expenses and other current assets		5,949		8,411		10,252
Total current assets held for sale		142,417		177,923		166,557
Noncurrent assets:
Property and equipment, net		57,610		81,250		80,234
Operating lease assets		54,092		—		—
Intangible assets, net		88,403		120,108		118,134
Goodwill		138,914		187,195		183,575
Other assets, net		9,542		10,338		8,999
Total noncurrent assets held for sale		348,561		398,891		390,942
Total assets held for sale	$	490,978	$	576,814	$	557,499
Liabilities:
Current liabilities:
Accounts payable	$	2,378	$	4,242	$	3,230
Accrued payroll and benefits		10,671		17,828		15,462
Accrued liabilities		4,891		10,193		12,008
Deferred revenue		8,688		3,846		13,990
Current operating lease liabilities		8,322		—		—
Total current liabilities held for sale		34,950		36,109		44,690
Noncurrent liabilities:
Long-term operating lease liabilities		46,747		—		—
Other liabilities		10,103		16,146		16,372
Total noncurrent liabilities held for sale		56,850		16,146		16,372
Total liabilities held for sale	$	91,800	$	52,255	$	61,062

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Revenue	$	41,355	$	49,906	$	142,160	$	355,506
Operating cost and expense:
Cost of educational services		28,940		36,147		98,605		222,837
Student services and administrative expense		17,781		11,252		47,860		130,615
Restructuring expense (gain)		199		(257)		625		(570)
Asset impairment charge - building and equipment		—		—		—		1,953
Total operating cost and expense		46,920		47,142		147,090		354,835
Operating (loss) income from discontinued operations		(5,565)		2,764		(4,930)		671
Other income (expense):
Interest and dividend income		425		941		2,164		2,917
Interest expense		(807)		(483)		(2,770)		(2,317)
Net other (expense) income		(382)		458		(606)		600
(Loss) income from discontinued operations before income taxes		(5,947)		3,222		(5,536)		1,271
Loss on disposal of discontinued operations before income taxes		—		(265)		—		(32,979)
Benefit from income taxes		3,228		182		3,778		5,762
(Loss) income from discontinued operations		(2,719)		3,139		(1,758)		(25,946)
Net income attributable to redeemable noncontrolling interest		—		(74)		—		(382)
Net (loss) income from discontinued operations attributable to Adtalem	$	(2,719)	$	3,065	$	(1,758)	$	(26,328)

5. Revenue

Revenue is recognized when control of the promised goods or services is transferred to our customers (students and members), in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services.

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

	Three Months Ended March 31, 2020
	Medical and Healthcare		Financial Services		Home Office and Other		Consolidated
Higher education	$	222,019	$	—	$	—	$	222,019
Test preparation/certifications		—		26,236		—		26,236
Conferences/seminars		—		11,925		—		11,925
Memberships/subscriptions		—		5,590		—		5,590
Other		5,325		392		—		5,717
Total	$	227,344	$	44,143	$	—	$	271,487

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	Nine Months Ended March 31, 2020
	Medical and Healthcare		Financial Services		Home Office and Other		Consolidated
Higher education	$	637,625	$	—	$	—	$	637,625
Test preparation/certifications		—		78,145		—		78,145
Conferences/seminars		—		42,738		—		42,738
Memberships/subscriptions		—		15,512		—		15,512
Other		17,386		866		—		18,252
Total	$	655,011	$	137,261	$	—	$	792,272

	Three Months Ended March 31, 2019
	Medical and Healthcare		Financial Services		Home Office and Other		Consolidated
Higher education	$	217,423	$	—	$	—	$	217,423
Test preparation/certifications		—		27,562		(807)		26,755
Conferences/seminars		—		3,860		—		3,860
Memberships/subscriptions		—		4,299		—		4,299
Other		6,152		214		—		6,366
Total	$	223,575	$	35,935	$	(807)	$	258,703

	Nine Months Ended March 31, 2019
	Medical and Healthcare		Financial Services		Home Office and Other		Consolidated
Higher education	$	630,083	$	—	$	—	$	630,083
Test preparation/certifications		—		83,576		(2,422)		81,154
Conferences/seminars		—		17,405		—		17,405
Memberships/subscriptions		—		12,135		—		12,135
Other		8,219		607		—		8,826
Total	$	638,302	$	113,723	$	(2,422)	$	749,603

Certain prior period amounts in the above tables have been reclassified for consistency with the current period presentation. In addition, see Note 20 “Segment Information” for a disaggregation of revenue by geographical region.

Performance Obligations and Revenue Recognition

Higher education: Higher education revenue consists of tuition, fees, books, and other educational products. The majority of revenue is derived from tuition and fees, which is recognized on a straight-line basis over the term as instruction is delivered. Books and other educational product revenue are recognized when products are shipped or students receive access to electronic materials. Under certain circumstances, we report revenue from these transactions on a net basis because our performance obligation is to facilitate a transaction between the student and a vendor.

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

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

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

Other: Other revenue consists of housing and other miscellaneous services. Other revenue is recognized over the period in which the applicable performance obligation is satisfied.

Customer contracts generally have separately stated prices for each performance obligation contained in the contract. Therefore, each performance obligation generally has its own standalone selling price. For higher education students, arrangements for payment are agreed to prior to registration of the student’s first academic term. The majority of U.S. students obtain Title IV or other financial aid resulting in institutions receiving a significant amount of the transaction price at the beginning of the academic term. Students utilizing private funding or funding through Adtalem’s institutional loan programs (see Note 9 “Financing Receivables” for additional information) generally pay after the academic term is complete. For non-higher education customers, payment is typically due and collected at the time a customer places an order.

Transaction Price

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

For higher education, students may receive discounts, scholarships, or refunds, which gives rise to variable consideration. The amounts of discounts or scholarships are applied to individual student accounts when such amounts are awarded. Therefore, the transaction price is reduced directly by these discounts or scholarships from the amount of the standard tuition rate charged. Upon withdrawal, a student may be eligible to receive a refund or partial refund, the amount of which is dependent on the timing of the withdrawal during the academic term. If a student withdraws prior to completing an academic term, federal and state regulations and accreditation criteria permit Adtalem to retain only a set percentage of the total tuition received from such student, which varies with, but generally equals or exceeds, the percentage of the academic term completed by such student. Payment amounts received by Adtalem in excess of such set percentages of tuition are refunded to the student or the appropriate funding source. For contracts with similar characteristics and historical data on refunds, the expected value method is applied in determining the variable consideration related to refunds. Estimates of Adtalem’s expected refunds are determined at the outset of each academic term, based upon actual refunds in previous academic terms. Reserves related to refunds are presented as refund liabilities within accrued liabilities on the Consolidated Balance Sheets. All refunds are netted against revenue during the applicable academic term.

Management reassesses collectability throughout the period revenue is recognized by the Adtalem institutions, on a student-by-student basis. This reassessment is based upon new information and changes in facts and circumstances relevant to a student’s ability to pay. Management also reassesses collectability when a student withdraws from the institution and has unpaid tuition charges. Such unpaid charges do not meet the threshold of reasonably collectible and are recognized as revenue on a cash basis.

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

We believe it is probable that no significant reversal will occur in the amount of cumulative revenue recognized when the uncertainty associated with the variable consideration is subsequently resolved. Therefore, the estimate of variable consideration is not constrained.

Contract Balances

For our higher education institutions, students are billed at the beginning of each academic term and payment is due at that time. Adtalem’s performance obligation is to provide educational services in the form of instruction during the academic term. As instruction is provided, deferred revenue is reduced. A significant portion of student payments are from Title IV financial aid and other programs and are generally received during the first month of the respective academic term. For students utilizing Adtalem’s institutional loan programs (see Note 9 “Financing Receivables”), payments are generally received after the academic term, and the corresponding performance obligation, is complete. When payments are received, accounts receivable is reduced.

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For our Financial Services businesses, customers are billed and payment is due at the time of order placement. In most cases, performance obligations are delivered subsequent to payments received. Delivering our performance obligations reduces deferred revenue, and accounts receivable is reduced upon payments received. Becker offers flexible payment plans with terms of up to 12-months as a financing option for the Becker CPA Exam Review Course (see Note 9 “Financing Receivables”). In this case, payment is received after satisfying the performance obligation.

Revenue of $91.0 million was recognized during the first nine months of fiscal year 2020 that was included in the deferred revenue balance at the beginning of fiscal year 2020. Revenue recognized from performance obligations that were satisfied or partially satisfied in prior periods was not material.

The difference between the opening and closing balances of deferred revenue includes decreases from revenue recognized during the period, increases from charges related to the start of academic terms beginning during the period, and increases from payments received related to academic terms commencing after the end of the reporting period.

Allowance for bad debts on short-term and long-term receivables as of March 31, 2020, June 30, 2019, and March 31, 2019 were $24.2 million, $14.5 million, and $11.0 million, respectively. The increase in the reserve is driven by higher bad debt expense, mainly at the medical and veterinary schools.

Practical Expedients

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

6. Restructuring Charges

During the third quarter and first nine months of fiscal year 2020, Adtalem recorded restructuring charges primarily related to the sale of Becker’s courses for healthcare students and Adtalem’s home office real estate consolidations and workforce reductions. During the third quarter and first nine months of fiscal year 2019, Adtalem recorded restructuring charges primarily related to the impairment of the property and equipment at the Dominica campus of RUSM and severance related to workforce reductions in Dominica. In January 2019, RUSM relocated its campus operations to Barbados with no plans to return to Dominica. The property and equipment in Dominica have been fully impaired as management determined the market value less the costs to sell the facilities or move the equipment was zero. In addition, during the third quarter and first nine months of fiscal year 2019, Adtalem recorded restructuring charges related to Adtalem’s home office real estate consolidations. When estimating costs of exiting lease space, estimates are made which could differ materially from actual results and result in additional restructuring charges or reversals in future periods. Termination benefit charges, resulting from reducing Adtalem’s workforce by 34 and 203 positions in the first nine months of fiscal year 2020 and 2019, respectively, represented severance pay and benefits for these employees. Adtalem’s home office is classified as “Home Office and Other” in Note 20 “Segment Information.” Pre-tax restructuring charges by segment were as follows (in thousands):

	Three Months Ended March 31, 2020						Nine Months Ended March 31, 2020
	Real Estate		Termination				Real Estate		Termination
	and Other		Benefits		Total		and Other		Benefits		Total
Medical and Healthcare	$	810	$	—	$	810	$	1,129	$	225	$	1,354
Financial Services		—		—		—		2,862		254		3,116
Home Office and Other		255		789		1,044		4,779		1,090		5,869
Total	$	1,065	$	789	$	1,854	$	8,770	$	1,569	$	10,339

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	Three Months Ended March 31, 2019						Nine Months Ended March 31, 2019
	Real Estate		Termination				Real Estate		Termination
	and Other		Benefits		Total		and Other		Benefits		Total
Medical and Healthcare	$	(110)	$	(23)	$	(133)	$	40,033	$	1,294	$	41,327
Home Office and Other		2,271		48		2,319		3,748		119		3,867
Total	$	2,161	$	25	$	2,186	$	43,781	$	1,413	$	45,194

The following table summarizes the separation and restructuring plan activity for the fiscal years 2020 and 2019, for which cash payments are required (in thousands):

Liability balance as of June 30, 2018	$	38,927
Increase in liability (separation and other charges)		8,870
Reduction in liability (payments and adjustments)		(22,714)
Liability balance as of June 30, 2019		25,083
ASC 842 (leases) adjustment (1)		(25,030)
Liability balance as of July 1, 2019		53
Increase in liability (separation and other charges)		3,551
Reduction in liability (payments and adjustments)		(3,331)
Liability balance as of March 31, 2020	$	273

⁽¹⁾ Reflects amounts reclassified out of the opening balance of restructuring reserve accruals as of June 30, 2019 to operating lease assets that was recorded with the adoption of ASC 842. See Note 2 “Summary of Significant Accounting Policies” for additional information.

The liability balance of $0.3 million is recorded as accrued liabilities on the Consolidated Balance Sheet as of March 31, 2020. This liability balance represents exit cost accruals and costs for employees who have either not yet separated from Adtalem or for whom full severance has not yet been paid. All of these remaining costs are expected to be paid within the next 12 months. Additional restructuring charges are expected to be recorded during the remainder of fiscal year 2020 as Adtalem completes its current restructuring plans by June 30, 2020. Adjustments to leases that have been placed in restructure will result in charges extending past fiscal year 2020 and will be presented as future restructuring expense. Management may institute future restructuring plans.

7. Income Taxes

Our effective income tax rates from continuing operations were 4.3% and 9.6% for the three and nine months ended March 31, 2020, respectively, and 18.4% and 19.5% for the three and nine months ended March 31, 2019, respectively. The effective tax rates in fiscal years 2020 and 2019 reflect the U.S. federal tax rate of 21% adjusted for foreign rate differences, benefits associated with local tax incentives, changes in valuation allowances and liabilities for uncertain tax positions, and tax benefits on stock-based compensation awards. Additionally, in the three and nine months ended March 31, 2020, we did not record a tax provision on the pre-tax unrealized gain of $111.8 million and $83.8 million, respectively, from a derivative contract related to the deal-contingent hedge agreement on the Adtalem Brazil sale completed on April 24, 2020 (see Note 4 “Discontinued Operations and Assets Held for Sale” for additional information).

Three of Adtalem’s operating units benefit from local tax incentives: AUC, which operates in St. Maarten, RUSM, which operates in Barbados, and RUSVM, which operates in St. Kitts. AUC’s effective tax rate reflects benefits derived from investment incentives. RUSM and RUSVM each have agreements with their respective domestic governments that exempt them from local income taxation. RUSM has an exemption in Barbados until 2039. RUSVM has an exemption in St. Kitts until 2037.

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, temporarily increases the amount of interest expense the company is allowed to deduct on its U.S. federal tax returns for fiscal years 2019 and 2020, modifies the Tax Credit and Jobs Act of 2017 to allow immediate expensing of qualified improvement property for U.S. federal income tax purposes retroactive to fiscal year 2018, and allows net operating losses incurred in fiscal years 2018, 2019, and 2020 to be carried back five-years and offset up to 100% of U.S. federal taxable income for tax years beginning before fiscal year

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2021. Management is currently evaluating the impact of the CARES Act, but at present time does not expect that the provisions of the CARES Act would result in a material tax or cash benefit.

Consistent with our 2019 Form 10-K disclosure, Adtalem continues to estimate its unrecognized tax benefits will decrease by $25 million to $27 million by June 30, 2020 due to the settlement of various audits and the lapsing of statutes of limitations.

8. Earnings per Share

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Numerator:
Net income (loss) attributable to Adtalem:
Continuing operations	$	153,551	$	34,840	$	172,476	$	71,998
Discontinued operations		(2,719)		3,065		(1,758)		(26,328)
Net	$	150,832	$	37,905	$	170,718	$	45,670
Denominator:
Weighted-average shares outstanding		52,498		57,583		53,647		58,656
Unvested participating RSUs		457		478		470		543
Weighted-average basic shares outstanding		52,955		58,061		54,117		59,199
Effect of dilutive stock awards		364		741		459		805
Weighted-average diluted shares outstanding		53,319		58,802		54,576		60,004
Earnings (loss) per share attributable to Adtalem:
Basic:
Continuing operations	$	2.90	$	0.60	$	3.19	$	1.22
Discontinued operations	$	(0.05)	$	0.05	$	(0.03)	$	(0.44)
Net	$	2.85	$	0.65	$	3.15	$	0.77
Diluted:
Continuing operations	$	2.88	$	0.59	$	3.16	$	1.20
Discontinued operations	$	(0.05)	$	0.05	$	(0.03)	$	(0.44)
Net	$	2.83	$	0.64	$	3.13	$	0.76
Weighted-average anti-dilutive stock awards		992		194		942		223

9. Financing Receivables

Adtalem’s financing receivables consist of trade receivables related to institutional loan programs available to students at Chamberlain, AUC, RUSM, and RUSVM. 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 at rates from 3.0% to 12.0% per annum accrue each month on the unpaid balance. Most students are required to begin repaying their loans while they are still in school with a minimum payment level designed to demonstrate their capability to repay, which reduces the possibility of over borrowing, and minimizes interest being accrued on the loan balance. Payments may increase upon completing or departing school. After a student leaves school, the student typically will have a monthly installment repayment plan. In addition, Becker offered an 18-month loan program for its Becker CPA Exam Review Course which is considered a

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financing receivable. Becker is no longer offering loans under this program. Instead, Becker is offering financing through flexible payment plans with terms of up to 12-months which is not considered a financing receivable.

Allowances 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 monthly and quarterly throughout the year. In evaluating the collectability of all our receivable balances, we set our bad debt reserves incorporating the most recent and updated circumstances, facts, and analytics. Changes in assumed collection rates will result in changes in the necessary reserves. Loans are considered nonperforming if they are over 90 days past due. Since all of Adtalem’s institutional loans 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):

	Nine Months Ended				Year Ended				Nine Months Ended
	March 31, 2020				June 30, 2019				March 31, 2019
Gross institutional loans			$	50,296			$	47,937			$	47,259
Allowance for credit losses:
Balance as of July 1	$	(6,289)			$	(10,003)			$	(10,003)
Charge-offs and adjustments		664				10,777				9,965
Recoveries		(40)				(83)				(73)
Additional provision		(9,026)				(6,980)				(4,571)
Balance as of end of period				(14,691)				(6,289)				(4,682)
Net institutional loans			$	35,605			$	41,648			$	42,577

Of the net balances above, $16.9 million, $16.6 million, and $15.7 million were classified as accounts receivable, net on the Consolidated Balance Sheets as of March 31, 2020, June 30, 2019, and March 31, 2019, respectively, and $18.7 million, $25.1 million, and $26.9 million, representing amounts due beyond one year, were classified as other assets, net on the Consolidated Balance Sheets as of March 31, 2020, June 30, 2019, and March 31, 2019, respectively.

The following table details the credit risk profiles of the institutional loan balances based on an aging of past due institutional loans (in thousands):

							Over						Total
	1-29 Days		30-59 Days		60-89 Days		90 Days		Total				Institutional
	Past Due		Past Due		Past Due		Past Due		Past Due		Current		Loans
Institutional loans:
March 31, 2020	$	3,484	$	1,145	$	1,673	$	13,382	$	19,684	$	30,612	$	50,296
June 30, 2019	$	3,578	$	2,458	$	687	$	9,888	$	16,611	$	31,326	$	47,937
March 31, 2019	$	4,092	$	4,412	$	4,125	$	4,543	$	17,172	$	30,087	$	47,259

In connection with the completion of the sale of DeVry University, Adtalem loaned $10.0 million to DeVry University under the terms of the Note. The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. The value of the DeVry University loan receivable included in other assets, net on the Consolidated Balance Sheet as of March 31, 2020, June 30, 2019, and March 31, 2019 is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 4% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep Foundation (“DePaul College Prep”). In connection with the sale, Adtalem holds a mortgage from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The value of the DePaul College Prep loan receivable included in other assets, net on the Consolidated Balance Sheet as of March 31, 2020 is $41.1 million, which is estimated by discounting the future cash flows using an average of current rates for similar arrangements, which is estimated at 7% per annum. Management has evaluated the collectability of this note and has determined no reserve is necessary.

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10. Property and Equipment, Net

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

	March 31,		June 30,		March 31,
	2020		2019		2019
Land	$	41,480	$	41,938	$	41,182
Building		319,006		322,657		314,927
Equipment		244,369		228,533		227,692
Construction in progress		13,899		13,545		14,540
Property and equipment, gross		618,754		606,673		598,341
Accumulated depreciation		(332,408)		(323,240)		(318,954)
Property and equipment, net	$	286,346	$	283,433	$	279,387

In September 2017, Hurricanes Irma and Maria caused damage and disrupted operations at AUC and RUSM. In December 2018, AUC and RUSM received the final insurance settlement proceeds related to the property damage and disruption of operations caused by Hurricanes Irma and Maria. These proceeds produced a gain of $15.6 million, which was recorded in the second quarter of fiscal year 2019.

In the first quarter of fiscal year 2019, Adtalem announced its decision to relocate RUSM’s campus operations to Barbados and not return to RUSM’s Dominica campus. We recorded impairment charges of $39.1 million in the nine months ended March 31, 2019 to fully impair the property and equipment in Dominica as management determined the market value less the costs to sell the facilities or move the equipment was zero. The impairment charges are included in restructuring expense in the Consolidated Statements of Income (see Note 6 “Restructuring Charges”).

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep for $52.0 million. Adtalem received $5.2 million of cash at the time of closing and holds a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The buyer has an option to make prepayments. Due to Adtalem’s involvement with financing the sale, the transaction did not qualify as a sale for accounting purposes. Adtalem continues to maintain the assets associated with the sale on the Consolidated Balance Sheets. We recorded a note receivable of $40.3 million and a financing payable of $45.5 million at the time of the sale, which were classified as other assets, net and other liabilities, respectively, on the Consolidated Balance Sheet. See Note 9 “Financing Receivables” for a discussion on the discounting of the note receivable. The $5.2 million received during the first quarter of fiscal year 2020 is classified as a financing activity on the Consolidated Statements of Cash Flows.

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus facility. Net proceeds from the sale of $6.4 million resulted in a gain on the sale of $4.8 million in the first nine months of fiscal year 2020. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 20 “Segment Information.”

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 February 2030, most of which include options to terminate for a fee or extend the leases for an additional five-year period. The lease term includes options to terminate or extend when it is reasonably certain that the option will be exercised. We elected to account for lease and non-lease components (e.g., common-area maintenance costs) as a single lease component for all operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We have not entered into any financing leases.

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

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same currency and term as the associated lease. Operating lease expense is recognized on a straight-line basis over the lease term.

As of March 31, 2020, we entered into two additional operating leases that have not yet commenced. One operating lease will commence during the fourth quarter of fiscal year 2020, has an 11-year lease term, and will result in an additional lease asset and lease liability of $9.7 million. The second operating lease will commence during the first quarter of fiscal year 2021, has an 10-year lease term, and will result in an additional lease asset and lease liability of $10.1 million.

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

	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2020		2020
Operating lease cost	$	14,121	$	43,129
Sublease income		(4,757)		(14,943)
Total lease cost	$	9,364	$	28,186

Maturities of lease liabilities by fiscal year as of March 31, 2020 were as follows (in thousands):

	Operating
Fiscal Year	Leases
2020 (remaining)	$	16,099
2021		62,274
2022		57,881
2023		47,249
2024		30,929
Thereafter		51,734
Total lease payments		266,166
Less: imputed interest		(35,045)
Present value of lease liabilities	$	231,121

Lease term and discount rate were as follows:

	March 31,
	2020
Weighted-average remaining operating lease term (years)		5.1
Weighted-average operating lease discount rate		5.4%

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

	Three Months Ended		Nine Months Ended
	March 31,		March 31,
	2020		2020
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)	$	12,559	$	36,576
Operating lease assets obtained in exchange for operating lease liabilities	$	12,532	$	18,187

Adtalem maintains agreements to lease four facilities owned by Adtalem to DeVry University with various expiration dates through December 2023. Adtalem maintains agreements to sublease either a portion or the full leased space at 23 of its operating lease locations. Most of these subleases are a result of Adtalem retaining leases associated with restructured lease activities at DeVry University and Carrington prior to their divestitures during fiscal year 2019. All sublease expirations with DeVry University and Carrington coincide with Adtalem’s original head lease expiration dates. At that time, Adtalem will be relieved of its obligations. In addition, Adtalem has entered into subleases with non-affiliated entities for vacated or partially vacated space from restructuring activities. Adtalem’s sublease agreements expire at various dates through December 2025. We record sublease income as an offset against our lease expense recorded on the head lease.

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For leases which Adtalem vacated or partially vacated space, we recorded estimated restructuring charges in prior periods. Actual results may differ from these estimates, which could result in additional restructuring charges or reversals. Future minimum lease and sublease rental income under these agreements as of March 31, 2020, were as follows (in thousands):

Fiscal Year	Amount
2020 (remaining)	$	5,796
2021		19,852
2022		16,935
2023		16,199
2024		10,438
Thereafter		7,307
Total lease and sublease rental income	$	76,527

As previously disclosed in our 2019 Form 10-K and under the previous lease accounting guidance in ASC 840, future minimum rental commitments for all noncancelable operating leases, adjusted to exclude Adtalem Brazil, having a remaining term in excess of one year at June 30, 2019, were as follows (in thousands):

Fiscal Year	Amount
2020	$	67,109
2021		60,781
2022		55,982
2023		44,970
2024		28,374
Thereafter		36,120
Total minimum lease payments	$	293,336

Rent expense, adjusted to exclude Adtalem Brazil, for the years ended June 30, 2019 and 2018 was $35.8 million and $25.0 million, respectively.

12. Goodwill and Intangible Assets

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

	March 31,		June 30,		March 31,
Reporting Unit	2020		2019		2019
Chamberlain	$	4,716	$	4,716	$	4,716
AUC		68,321		68,321		68,321
RUSM and RUSVM		237,173		237,173		237,173
Financial Services		376,025		377,046		317,475
Total	$	686,235	$	687,256	$	627,685

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

	March 31,		June 30,		March 31,
Reportable Segment	2020		2019		2019
Medical and Healthcare	$	310,210	$	310,210	$	310,210
Financial Services		376,025		377,046		317,475
Total	$	686,235	$	687,256	$	627,685

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

	Medical and		Financial
	Healthcare		Services		Total
June 30, 2018	$	310,210	$	317,699	$	627,909
Foreign exchange rate changes		—		(224)		(224)
March 31, 2019		310,210		317,475		627,685
Acquisitions		—		59,519		59,519
Foreign exchange rate changes		—		52		52
June 30, 2019		310,210		377,046		687,256
Purchase accounting adjustments		—		(92)		(92)
Foreign exchange rate changes		—		(929)		(929)
March 31, 2020	$	310,210	$	376,025	$	686,235

The decrease in the goodwill balance from June 30, 2019 in the Financial Services segment is primarily the result of a change in the value of the Indian Rupee compared to the U.S. dollar. Since EduPristine’s goodwill is recorded in local currency, fluctuations in the values of the Indian Rupee in relation to the U.S. dollar will cause changes in the balance of this asset.

Intangible assets consist of the following (in thousands):

	March 31, 2020
	Gross				Weighted-Average
	Carrying		Accumulated		Amortization
	Amount		Amortization		Period
Amortizable intangible assets:
Customer relationships	$	68,900	$	(19,318)	10 Years
Curriculum/software		11,600		(1,611)	6 Years
Course delivery technology		7,200		(1,585)	5 Years
Total	$	87,700	$	(22,514)
Indefinite-lived intangible assets:
Trade names	$	95,666
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	224,906

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	June 30, 2019
	Gross
	Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	69,300	$	(14,448)
Curriculum/software		16,600		(5,193)
Course delivery technology		7,200		(487)
Total	$	93,100	$	(20,128)
Indefinite-lived intangible assets:
Trade names	$	95,777
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	225,017

	March 31, 2019
	Gross
	Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	42,900	$	(13,071)
Curriculum/software		5,000		(4,583)
Course delivery technology		500		(344)
Total	$	48,400	$	(17,998)
Indefinite-lived intangible assets:
Trade names	$	77,371
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	206,611

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

	March 31,		June 30,		March 31,
Reportable Segment	2020		2019		2019
Medical and Healthcare	$	137,500	$	137,500	$	137,500
Financial Services		87,406		87,517		69,111
Total	$	224,906	$	225,017	$	206,611

Amortization expense for amortized intangible assets was $2.6 million and $7.7 million for the three and nine months ended March 31, 2020, respectively, and $1.6 million and $4.8 million for the three and nine months ended March 31, 2019, 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):

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	Financial
Fiscal Year	Services
2020 (remaining)	$	2,576
2021		10,073
2022		9,944
2023		9,792
2024		9,509
Thereafter		23,292
Total	$	65,186

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

Indefinite-lived intangible assets related to trade names, Title IV eligibility and accreditations, and intellectual property are not amortized, as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets to the reporting entity.

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 as of May 31, 2019, at which time there was no impairment loss associated with recorded goodwill or indefinite-lived intangible assets for any reporting unit.

Adtalem has four reporting units that contained goodwill as of the third quarter of fiscal year 2020. 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 March 31, 2020, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value.

Adtalem has four reporting units that contained indefinite-lived intangible assets as of the third quarter of fiscal year 2020. For indefinite-lived intangible assets, management first analyzes qualitative factors including results of operations and business conditions of the four reporting units that contained indefinite-lived intangible assets, significant changes in cash flows at the individual indefinite-lived intangible asset level, if applicable, as well as how much previously calculated fair values exceed carrying values to determine if it is more likely than not that the intangible assets associated with these reporting units have been impaired. In analyzing the results of operations and business conditions of all the reporting units, as of March 31, 2020, it was determined that no triggering event had occurred that would indicate the carrying value of any indefinite-lived intangible asset had exceeded its fair value.

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 impairment indicators as of the end of fiscal year 2019, and that no interim events or deviations from planned operating results occurred as of March 31, 2020 that would cause management to reassess these conclusions. Although the COVID-19 pandemic is expected to have a negative effect on the operating results of all four reporting units that contain goodwill and indefinite-lived intangible assets, at this time none of the effects are considered significant enough to create a triggering event. The effects are currently projected to be short-term and would not significantly decrease long-term cash flow projections; however, should economic conditions continue to deteriorate into fiscal year 2021, the revenue and operating results of some reporting units could also deteriorate to the point where a triggering event would exist and require reassessment of the fair values of goodwill and intangible assets and potential impairments.

Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. Management bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates, which could lead to future impairments of intangible assets or goodwill.

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13. Debt

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

	March 31,		June 30,		March 31,
	2020		2019		2019
Total debt:
Term B Loan	$	294,750	$	297,000	$	297,750
Revolver		160,000		110,000		—
Total principal payments due		454,750		407,000		297,750
Deferred debt issuance costs		(5,140)		(5,906)		(6,161)
Total amount outstanding		449,610		401,094		291,589
Less current portion:
Term B Loan		(3,000)		(3,000)		(3,000)
Noncurrent portion	$	446,610	$	398,094	$	288,589

Scheduled future maturities of long-term debt for the next five fiscal years ending June 30 and in the aggregate are as follows (in thousands):

	Maturity
Fiscal Year	Payments
2020 (remaining)	$	750
2021		3,000
2022		3,000
2023		163,000
2024		3,000
Thereafter		282,000
Total	$	454,750

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

Interest on the Term B Loan and the Revolver is set based on LIBOR, which is based on observable market transactions. The U.K. Financial Conduct Authority (“FCA”), which regulates LIBOR, has announced that it has commitments from panel banks to continue to contribute to LIBOR through the end of calendar year 2021, but that it will not use its powers to compel contributions beyond such date. Various parties, including government agencies, are seeking to identify an alternative rate to replace LIBOR. Management is monitoring their efforts, and evaluating the need for an amendment to the Credit Agreement to accommodate a replacement rate.

Term B Loan

For Eurocurrency rate loans, Term B Loan interest is equal to LIBOR or a LIBOR-equivalent rate plus 3%. For base rate loans, Term B Loan interest is equal to the base rate plus 2%. The Term B Loan amortizes in equal quarterly installments of $750,000, with the balance due at maturity on April 13, 2025. As of March 31, 2020, June 30, 2019, and March 31, 2019, the interest rate for borrowings under the Term B Loan facility was 3.99%, 5.40%, and 5.50%, respectively, which approximated the effective interest rate.

On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap agreement (the “Swap”) with a multinational financial institution to mitigate risks associated with the variable interest rate on our Term B Loan debt. We will pay interest at a fixed rate of 0.946% and receive variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Term B Loan. The effective date of the Swap is

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March 31, 2020 and settlements with the counterparty will occur on a monthly basis. The Swap will terminate on February 28, 2025.

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

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

Revolver

Revolver interest is equal to LIBOR or a LIBOR-equivalent rate for Eurocurrency rate loans or a base rate, plus an applicable rate based on Adtalem’s consolidated leverage ratio, as defined in the Credit Agreement. The applicable rate ranges from 1.75% to 2.75% for Eurocurrency rate loans and from 0.75% to 1.75% for base rate loans. As of March 31, 2020 and June 30, 2019, borrowings under the Revolver were $160 million and $110 million with a weighted-average interest rate of 2.86% and 4.66%, respectively. There were no outstanding borrowings under the Revolver as of March 31, 2019.

Adtalem had a letter of credit outstanding of $68.4 million as of each of March 31, 2020, June 30, 2019, and March 31, 2019. This letter of credit was posted in the second quarter of fiscal year 2017 in relation to a settlement with the Federal Trade Commission (“FTC”) and requires the letter of credit to be equal to the greater of 10% of DeVry University’s annual Title IV disbursements or $68.4 million for a five-year period. As of March 31, 2020, Adtalem is charged an annual fee equal to 2.25% of the undrawn face amount of the outstanding letters of credit under the Revolver, payable quarterly. Adtalem continues to post the letter of credit in relation to the settlement with the FTC on behalf of DeVry University and is reimbursed by DeVry University for 2.00% of the outstanding amount of this letter of credit. The Credit Agreement also requires payment of a commitment fee equal to 0.40% of the undrawn portion of the Revolver as of March 31, 2020. The amount undrawn under the Revolver, which includes the impact of the outstanding letters of credit, was $71.6 million as of March 31, 2020. The letter of credit fees and commitment fees are adjustable quarterly, based upon Adtalem’s achievement of certain financial ratios.

Debt Issuance Costs

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

	Term B Loan		Revolver		Total
Deferred debt issuance costs as of June 30, 2019	$	5,906	$	2,061	$	7,967
Amortization of deferred debt issuance costs		(766)		(408)		(1,174)
Deferred debt issuance costs as of March 31, 2020	$	5,140	$	1,653	$	6,793

Covenants and Guarantees

The Credit Agreement contains customary covenants, including restrictions on our restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interest on assets, make acquisitions, loans, advances or investments, or sell or otherwise transfer assets.

The Credit Agreement contains covenants that, among other things, require maintenance of certain financial ratios. Maintenance of these financial ratios could place restrictions on Adtalem’s ability to pay dividends. Adtalem has not paid

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a dividend since December 2016. These financial ratios include a consolidated fixed charge coverage ratio, a consolidated leverage ratio, and a U.S. Department of Education financial responsibility ratio based upon a composite score of an equity ratio, a primary reserve ratio, and a net income ratio. Failure to maintain any of these ratios or to comply with other covenants contained in the Credit Agreement would constitute an event of default and could result in termination of the Credit Agreement and require payment of all outstanding borrowings and replacement of outstanding letters of credit. Adtalem was in compliance with the debt covenants as of March 31, 2020.

The stock of all U.S. and certain foreign subsidiaries of Adtalem is pledged as collateral for borrowings under the Credit Agreement.

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

Our borrowings under the Credit Facility are guaranteed by us and all of our domestic subsidiaries (subject to certain exceptions) and secured by a first lien on our assets and the assets of our guarantor subsidiaries (excluding real estate), including capital stock of the subsidiaries.

14. Redeemable Noncontrolling Interest

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

In addition, Adtalem maintains a 71% ownership interest in EduPristine with the remaining 29% owned by Kaizen Management Advisors (“Kaizen”), an India-based private equity firm, as of March 31, 2020.

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

Beginning on March 26, 2020, Adtalem has had the right to exercise a call option and purchase any remaining EduPristine stock from Kaizen. Likewise, Kaizen has had the right to exercise a put option and sell up to 33% of its remaining ownership interest in EduPristine to Adtalem. Beginning on March 26, 2022, Kaizen will have the right to exercise a put option and sell its remaining ownership interest in EduPristine to Adtalem.

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

On July 1, 2019, the Adtalem Brazil management noncontrolling members exercised their put option and sold their remaining ownership interest in Adtalem Brazil to Adtalem resulting in Adtalem owning 100% of Adtalem Brazil. In the first quarter of fiscal year 2020, $6.2 million of redeemable noncontrolling interest was removed from the Consolidated Balance Sheet as a result of the put option exercise.

Prior to July 1, 2019, the Adtalem Brazil management put option was being accreted to its fair value in accordance with the terms of the related stock purchase agreement. The adjustments to increase or decrease the put option to its expected redemption value each reporting period was recorded in retained earnings in accordance with GAAP. Adtalem has not adjusted the redemption value related to the Kaizen put option as management believes the redemption value has not materially changed since acquiring a majority stake in EduPristine.

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Balance at beginning of period	$	3,082	$	8,651	$	9,543	$	9,110
Net (loss) income attributable to redeemable noncontrolling interest		(120)		(39)		(334)		117
Decrease in redemption value of redeemable noncontrolling interest put option		—		(130)		—		(745)
Payment for purchase of redeemable noncontrolling interest of subsidiary		—		—		(6,247)		—
Balance at end of period	$	2,962	$	8,482	$	2,962	$	8,482

15. Share Repurchases

On November 7, 2018, the Board of Directors (the “Board”) authorized Adtalem’s current share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The current share repurchase program commenced in January 2019. Adtalem made share repurchases under the current and former share repurchase programs as follows (in thousands, except shares and per share data):

	Three Months Ended				Nine Months Ended				Life-to-Date
	March 31,				March 31,				Current Share
	2020		2019		2020		2019		Repurchase Program
Total number of share repurchases		1,164,308		1,266,160		3,838,275		3,631,611		6,383,431
Total cost of share repurchases	$	36,870	$	60,970	$	136,889	$	176,903	$	254,769
Average price paid per share	$	31.67	$	48.15	$	35.66	$	48.71	$	39.91

As of March 31, 2020, $45.2 million of authorized share repurchases were remaining under the current share repurchase program. On January 29, 2020, the Board authorized Adtalem’s twelfth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The new program will commence when the repurchases from the current program are complete. Repurchases under the current program were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. These repurchases may be made through the open market, including block purchases, in privately negotiated transactions, or otherwise. Repurchases will be funded through available cash balances and/or borrowings and may be suspended or discontinued at any time. Shares of stock repurchased under the programs are held as treasury shares. These repurchased shares have reduced the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

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16. Accumulated Other Comprehensive Loss

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Foreign currency translation adjustments
Beginning balance	$	(159,259)	$	(143,529)	$	(137,389)	$	(142,574)
Loss on foreign currency translation		(117,669)		(5,238)		(139,539)		(6,193)
Ending balance	$	(276,928)	$	(148,767)	$	(276,928)	$	(148,767)
Marketable securities
Beginning balance, gross	$	186	$	15	$	131	$	537
Beginning balance, tax effect		(45)		(4)		(32)		(131)
Beginning balance, net of tax		141		11		99		406
ASU 2016-01 cumulative effect adjustment		—		—		—		(381)
Unrealized (loss) gain on marketable securities		(58)		66		(3)		48
Tax effect		14		(16)		1		(12)
Ending balance	$	97	$	61	$	97	$	61
Interest rate swap
Beginning balance, gross	$	—	$	—	$	—	$	—
Beginning balance, tax effect		—		—		—		—
Beginning balance, net of tax		—		—		—		—
Unrealized gain on interest rate swap		598		—		598		—
Tax effect		(146)		—		(146)		—
Ending balance	$	452	$	—	$	452	$	—
Total ending balance at March 31	$	(276,379)	$	(148,706)	$	(276,379)	$	(148,706)

17. Stock-Based Compensation

Adtalem maintains two stock-based incentive plans: the Amended and Restated Incentive Plan of 2005 and the Fourth Amended and Restated Incentive Plan of 2013. Under these plans, directors, key executives, and managerial employees are eligible to receive incentive stock or nonqualified options to purchase shares of Adtalem’s common stock. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 also permit the granting of stock appreciation rights, restricted stock units (“RSUs”), performance-based RSUs, and other stock and cash-based compensation. Although options remain outstanding under the 2005 incentive plan, no further stock-based grants will be issued under this plan. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 are administered by the Compensation Committee of the Board. Options are granted for terms of up to ten years and can vest immediately or over periods of up to five years. The requisite service period is equal to the vesting period. The option price under the plans is the fair market value of the shares on the date of the grant.

Stock-based compensation expense is measured at the grant date based on the fair value of the award. Adtalem accounts for stock-based compensation granted to retirement eligible employees that fully vests upon an employee’s retirement under the non-substantive vesting period approach. Under this approach, the entire stock-based compensation expense is recognized at the grant date for stock-based grants issued to retirement eligible employees. For non-retirement eligible employees, stock-based compensation expense is recognized as expense over the employee requisite service period. We account for forfeitures of outstanding but unvested grants in the period they occur.

As of March 31, 2020, 6,655,935 authorized but unissued shares of common stock were reserved for issuance under Adtalem’s stock-based incentive plans.

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The following is a summary of options activity for the nine months ended March 31, 2020:

				Weighted-Average
				Remaining	Aggregate
	Number of	Weighted-Average		Contractual Life	Intrinsic Value
	Options	Exercise Price		(in years)	(in thousands)
Outstanding as of July 1, 2019	1,488,478	$	31.33
Granted	229,125		43.39
Exercised	(85,234)		27.54
Forfeited	(65,946)		42.76
Expired	(70,604)		51.81
Outstanding as of March 31, 2020	1,495,819		31.90	6.61	$	2,937
Exercisable as of March 31, 2020	716,037	$	28.43	5.32	$	2,082

The total intrinsic value of options exercised for the nine months ended March 31, 2020 and 2019 was $0.9 million and $4.2 million, respectively.

The fair value of Adtalem’s stock option awards was estimated using a binomial model. This model uses historical cancellation and exercise experience of Adtalem to determine the option value. It also takes into account the illiquid nature of employee options during the vesting period.

The weighted-average estimated grant date fair value of options granted at market price under Adtalem’s stock-based incentive plans during the first nine months of fiscal years 2020 and 2019 was $16.98 and $20.96, per share, respectively. The fair value of Adtalem’s stock option grants was estimated assuming the following weighted-average assumptions:

	Fiscal Year
	2020		2019
Expected life (in years)	6.51		6.50
Expected volatility	37.66	%	39.60	%
Risk-free interest rate	1.40	%	2.73	%
Dividend yield	0.00	%	0.00	%

The expected life of the options granted is based on the weighted-average exercise life with age and salary adjustment factors from historical exercise behavior. Adtalem’s expected volatility is computed by combining and weighting the implied market volatility, the most recent volatility over the expected life of the option grant, and Adtalem’s long-term historical volatility.

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

During the first nine months of fiscal year 2020, Adtalem granted 408,520 RSUs to selected employees and directors. Of these, 135,660 are performance-based RSUs and 272,860 are non-performance-based RSUs. Performance-based RSUs are earned by the recipients over a three-year period based on achievement of return on invested capital and free cash flow per share. Certain awards are subject to achievement of a minimum level of Adtalem’s earnings before interest, taxes, depreciation, and amortization, calculated on a non-GAAP basis. Non-performance-based RSUs are subject to restrictions which lapse ratably over one, three, or four-year periods on the grant anniversary date based on the recipient’s continued service on the Board, employment with Adtalem, or upon retirement. During the restriction period, the recipient of the non-performance based RSUs has the right to receive dividend equivalents, if any. This right does not pertain to the performance-based RSUs. The following is a summary of RSU activity for the nine months ended March 31, 2020:

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		Weighted-Average
	Number of	Grant Date
	RSUs	Fair Value
Outstanding as of July 1, 2019	878,030	$	34.86
Granted	408,520		42.38
Vested	(362,036)		28.75
Forfeited	(121,914)		40.17
Outstanding as of March 31, 2020	802,600	$	39.08

The weighted-average estimated grant date fair values of RSUs granted at market price under Adtalem’s stock-based incentive plans during the first nine months of fiscal years 2020 and 2019 were $42.38 and $49.57, per share, respectively.

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Cost of educational services	$	260	$	279	$	1,027	$	976
Student services and administrative expense		2,521		2,729		10,301		9,393
		2,781		3,008		11,328		10,369
Income tax benefit		(642)		(692)		(3,887)		(3,930)
Net stock-based compensation expense	$	2,139	$	2,316	$	7,441	$	6,439

As of March 31, 2020, $21.8 million of total pre-tax unrecognized stock-based compensation expense related to unvested grants is expected to be recognized over a weighted-average period of 2.4 years. The total fair value of options and RSUs vested during the nine months ended March 31, 2020 and 2019 was approximately $13.5 million and $13.7 million, respectively.

There was no capitalized stock-based compensation cost at each of March 31, 2020, June 30, 2019, and March 31, 2019.

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

18. Fair Value Measurements

Adtalem has elected not to measure any assets or liabilities at fair value other than those required to be measured at fair value on a recurring basis. Assets measured at fair value on a nonrecurring basis include goodwill, intangible assets, and assets of businesses where the long-term value of the operations have been impaired.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The guidance specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The guidance establishes fair value measurement classifications under the following hierarchy:

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Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Observable inputs other than prices included in Level 1, such as quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

Level 3 –Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

When available, Adtalem uses quoted market prices to determine fair value, and such measurements are classified within Level 1. In cases where market prices are not available, Adtalem makes use of observable market-based inputs to calculate fair value, in which case the measurements are classified within Level 2. If quoted or observable market prices are not available, fair value is based upon internally developed models that use, where possible, current market-based parameters such as interest rates and yield curves. These measurements are classified within Level 3.

Fair value measurements are classified according to the lowest level input or value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

The carrying value of our cash and cash equivalents approximates fair value because of their short-term nature.

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

In connection with the sale of Adtalem Brazil completed on April 24, 2020, Adtalem entered into a deal-contingent foreign currency hedge arrangement to economically hedge the Brazilian Real denominated sales price through mitigation of the currency exchange rate risk. The hedge agreement has a total notional amount of R$2,154 million (approximately $415 million as of March 31, 2020). Adtalem recorded a pre-tax unrealized gain on the hedge agreement derivative based on the foreign exchange forward spot rate as of March 31, 2020 of $111.8 million and $83.8 million for the three and nine months ended March 31, 2020, respectively, with a $83.8 million asset included within prepaid expenses and other current assets on the March 31, 2020 Consolidated Balance Sheet. The fair value of this derivative was calculated using observable market-based inputs to a model to calculate fair value, in which case the measurements are classified within Level 2. These model inputs include foreign exchange forward contract spot rates and contract defined point adjustments and settlement prices.

On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap agreement with a multinational financial institution to fully mitigate risks associated with the variable interest rate on our Term B Loan debt with an effective date of March 31, 2020. The fair value of our Swap is based in part on data received from the counterparty, and represents the estimated amount we would receive or pay to settle the Swap, taking into consideration current and projected future interest rates as well as the creditworthiness of the counterparty, all of which can be validated through readily observable data from external sources, in which case the measurements are classified within Level 2. The fair value of the Swap is represented within other assets, net on the Consolidated Balance Sheet with a balance of $0.6 million as of March 31, 2020. See Note 13 “Debt” for additional information on the Swap.

As of March 31, 2020, June 30, 2019, and March 31, 2019, there were no assets or liabilities measured at fair value using Level 3 inputs.

Assets measured at fair value on a nonrecurring basis include goodwill and indefinite-lived intangibles arising from a business combination. These assets are not amortized and charged to expense over time. Instead, goodwill and indefinite-lived intangibles must be reviewed annually for impairment or more frequently if circumstances arise indicating potential impairment. This impairment review was most recently completed as of May 31, 2019. See Note 12 “Goodwill and Intangible Assets” for additional information on the impairment review, including valuation techniques and assumptions.

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19. Commitments and Contingencies

Adtalem is subject to lawsuits, administrative proceedings, regulatory reviews, and investigations associated with financial assistance programs and other matters arising in the normal conduct of its business. As of March 31, 2020, Adtalem believes it has adequately reserved for potential losses. The following is a description of pending legal and regulatory matters that may be considered other than ordinary, routine, and incidental to the business. Descriptions of certain matters from prior SEC filings may not be carried forward in this report to the extent we believe such matters no longer are required to be disclosed or there has not been, to our knowledge, significant activity relating to them. The timing or outcome of the following matters, or their possible impact on Adtalem’s business, financial condition, or results of operations, cannot be predicted at this time. The continued defense, resolution, or settlement of any of the following matters could require us to expend significant resources and could have a material adverse effect on our business, financial condition, results of operations, and cash flows, and result in the imposition of significant restrictions on us and our ability to operate.

On 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 Adtalem, DeVry University, Inc., and DeVry/New York Inc. (collectively the “Adtalem Parties”) in the United States District Court for the Northern District of Illinois (the “Petrizzo Case”). The complaint was filed on behalf of a putative class of persons consisting of those who enrolled in and/or attended classes at DeVry University during and after 2002 and who were unable to find employment within their chosen field of study within six months of graduation. Citing the civil complaint filed by the FTC on January 26, 2016 against the Adtalem Parties (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 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 claimed 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 sought monetary, declaratory, injunctive, and other unspecified relief.

By order dated November 28, 2016, the district court ordered the Petrizzo Case and the Jara Case 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 sought 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 Consumer Fraud and Deceptive Practices Act and the Illinois Private Businesses and Vocational Schools Act of 2012. In addition, it purported to assert causes of action on behalf of certain of the named individuals and 15 individual state-specific putative classes for alleged violations of 15 different states’ consumer fraud, unlawful trade practices, and consumer protection laws. Finally, it sought to bring individual claims under Georgia state law on behalf of certain named plaintiffs. The plaintiffs sought monetary, declaratory, injunctive, and other unspecified relief. A motion to dismiss the amended complaint was filed by the Adtalem Parties and granted by the court, without prejudice, on February 12, 2018.

On April 12, 2018, the Petrizzo plaintiffs refiled their complaint with a new lead plaintiff, Renee Heather Polly. The plaintiffs’ refiled complaint is nearly identical to the complaint previously dismissed by the court on February 12, 2018. The Adtalem Parties moved to dismiss this refiled complaint on May 14, 2018. The court granted defendants’ motion and dismissed the amended complaint with prejudice on February 13, 2019. On March 15, 2019, plaintiffs filed a notice of appeal and this matter is currently pending on appeal before the Seventh Circuit.

On April 13, 2018, a putative class action lawsuit was filed by Nicole Versetto, individually and on behalf of others similarly situated, against the Adtalem Parties in the Circuit Court of Cook County, Illinois, Chancery Division. The

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complaint was filed on behalf of herself and three separate classes of similarly situated individuals who were citizens of the State of Illinois and who purchased or paid for a DeVry University program between January 1, 2008 and April 8, 2016. The plaintiff claims that defendants made false or misleading statements regarding DeVry University’s graduate employment rate and asserts causes of action under the Illinois Uniform Deceptive Trade Practices Act, Illinois Consumer Fraud and Deceptive Trade Practices Act, and Illinois Private Business and Vocational Schools Act, and claims of breach of contract, fraudulent misrepresentation, concealment, negligence, breach of fiduciary duty, conversion, unjust enrichment, and declaratory relief as to violations of state law. The plaintiff seeks compensatory, exemplary, punitive, treble, and statutory penalties and damages, including pre-judgment and post-judgment interest, in addition to restitution, declaratory and injunctive relief, and attorneys’ fees. The Adtalem Parties moved to dismiss this complaint on June 20, 2018. On March 11, 2019, the court granted plaintiff’s motion for leave to file an amended complaint. Plaintiff filed an amended complaint that same day, asserting similar claims, with new lead plaintiff, Dave McCormick. Defendants filed a motion to dismiss plaintiff’s amended complaint on April 15, 2019 and the court granted Defendants’ motion on July 29, 2019, with leave to amend. The plaintiff has filed an amended complaint on August 26, 2019. On October 18, 2019, defendants’ moved to dismiss this complaint as it is substantially similar to the one the court previously dismissed. No hearing on the motion to dismiss is currently scheduled. A status hearing is scheduled for June 8, 2020. This matter is currently stayed.

On May 8, 2018, the Carlson Law Firm (“Carlson”) filed a lawsuit against Adtalem and DeVry University, Inc., on behalf of 71 individual former DeVry University students in Rangel v. Adtalem and DeVry University, Inc. Carlson filed this lawsuit in the United States District Court for the Western District of Texas. Plaintiffs contend that DeVry University “made deceptive representations about the benefits of obtaining a degree from DeVry University” in violation of Texas state laws and seek full restitution of all monies paid to DeVry University and any student loan lenders, punitive damages, and attorneys’ fees. The defendants moved to dismiss this complaint on June 5, 2018. On June 27, 2018, Carlson filed a second lawsuit on behalf of 32 former DeVry University students against Adtalem and DeVry University, Inc. in Lindberg v. Adtalem and DeVry University, Inc. Carlson filed this lawsuit in the United States District Court for the Western District of Texas. The allegations are identical to the allegations in the lawsuit Carlson filed on May 8, 2018. Specifically, plaintiffs contend that DeVry University “made deceptive representations about the benefits of obtaining a degree from DeVry University” in violation of Texas state laws and seek full restitution of all monies paid to DeVry University and any student loan lenders, punitive damages, and attorneys’ fees. The defendants moved to dismiss this complaint on August 28, 2018. The court consolidated these two lawsuits on December 10, 2018. The defendants moved to dismiss the consolidated action on December 18, 2018. On January 2, 2019, Carlson filed a motion to intervene on behalf of 13 additional former DeVry University students seeking to join the consolidated lawsuit. The parties re-filed their briefing on the motions to dismiss so that the motion would apply to all three groups of plaintiffs. On April 24, 2019, the Court granted Adtalem’s and DeVry University’s motions to dismiss, with leave to amend. The plaintiffs filed an amended complaint on June 7, 2019. Defendants moved to dismiss the complaint on July 5, 2019. The motion to dismiss was referred to a magistrate judge. On December 13, 2019, the magistrate judge issued a report and recommendation denying defendants’ motion to dismiss. On January 3, 2020, defendants filed their objections to the report and recommendation on the motion to dismiss, and plaintiffs filed a response to the objections on January 8, 2020. The District Court judge adopted the Magistrate Judge’s report and recommendations on March 12, 2020, and the defendants filed an answer to the complaint on April 10, 2020. Discovery is ongoing.

On April 4, 2019, the Carlson Law Firm sent notice pursuant to California Legal Remedies Act, Civil Code § 1750, of 105 individuals who purportedly have claims against DeVry University and Adtalem based on allegedly deceptive comments made about the benefits of obtaining a DeVry University degree; specifically, that 90% of graduates obtained a job in their chosen field of study within six months of graduation, and that graduates were paid more than graduates of other universities. On July 16, 2019, the Carlson Law Firm filed a lawsuit in the United States District Court for the Northern District of California – San Jose Division against Adtalem and DeVry University on behalf of 102 individual former DeVry University students in Alvarez v. Adtalem and DeVry University, Inc. The plaintiffs contend that defendants misrepresented the benefits of graduating from DeVry University and falsely and misleadingly advertised the employment rate and income rate of their graduates to induce potential students to purchase educational products and services, and to remain students through graduation. The lawsuit seeks exemplary damages, restitution, economic damages, punitive damages, pre- and post-judgment interest, attorneys’ fees and the cost of suit. The plaintiffs brought claims for fraud by misrepresentation, fraud by concealment, negligent misrepresentation, civil theft, violation of the California Consumer Legal Remedies Act, violation of California’s Unfair Competition Law, and violation of California’s False Advertising Law. Defendants filed a motion to dismiss the complaint on October 1, 2019. On December 16, 2019, the court granted in

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part and denied in part the motion to dismiss. Defendants filed an answer to the complaint on January 13, 2020. Plaintiffs filed an amended complaint on January 31, 2020, and defendants filed an amended answer on March 2, 2020. The parties court-ordered mediation on May 20, 2020 has been postponed due to COVID-19. Discovery is ongoing.

On August 13, 2019, a plaintiff, Magana, filed a putative class action lawsuit against Adtalem and DeVry University, Inc. in the United States District Court for the Eastern District of California, alleging damages based on allegedly deceptive statements made about the benefits of obtaining a DeVry University degree. Plaintiffs assert claims under the California Unfair Competition Law, California False Advertising Law, and claims of fraud/material misrepresentation, fraudulent concealment/intentional omission of material facts, negligent misrepresentation, breach of contract, breach of fiduciary duty, conversion, unjust enrichment, and declaratory relief. This matter is currently stayed.

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

On June 7, 2019, Stoltmann Law Offices filed a complaint in the Northern District of Illinois on behalf of Michael Forsythe seeking to compel arbitration of his consumer claims before JAMS. Adtalem moved to dismiss the complaint on July 1, 2019. The court dismissed the complaint as moot on January 31, 2020.

Stoltmann Law Offices is representing hundreds of individuals who have filed claims with JAMS alleging fraud-based claims based on DeVry University’s graduate employment statistics. Stoltmann Law Offices has paid the filing fees for thirty of these arbitrations to move forward. JAMS has sent commencement letters in several waves on June 14, 2019; August 2, 2019; August 5, 2019; November 6, 2019; November 15, 2019; November 25, 2019; February 14, 2020; March 13, 2020; and April 15, 2020. Defendants have filed answers in response to twenty-two arbitration demands. These arbitrations are in various stages of litigation and discovery.

On March 29, 2019, a putative class action lawsuit was filed by Robby Brown, individually and on behalf of all others similarly situated, against Adtalem and DeVry University, Inc., in the Western District of Missouri. The complaint was filed on behalf of himself and two separate classes of similarly situated individuals who were citizens of the State of Missouri and who purchased or paid for and received any part of a DeVry University program. The plaintiffs claim that defendants made false or misleading statements regarding DeVry University’s graduate employment rate and assert claims of breach of contract, negligent misrepresentation, fraudulent misrepresentation, fraudulent concealment, breach of fiduciary duty, conversion, unjust enrichment, and declaratory relief. The plaintiffs seek compensatory, exemplary, punitive, treble, and statutory penalties and damages as allowed by law, including pre-judgment and post-judgment interest disgorgement, restitution, injunctive and declaratory relief, and attorneys’ fees. Defendants filed a motion to dismiss the complaint on May 31, 2019. On October 9, 2019, the court granted in part and denied in part the motion to dismiss. The court dismissed plaintiffs’ claims for unjust enrichment and conversion, allowing the remaining claims to proceed. On October 29, 2019, defendants filed an answer to the complaint. This matter is currently stayed.

On or about April 1, 2019, Adtalem, Chamberlain and DeVry University received similar Civil Investigative Demands (“CID”) from the U.S. Department of Justice (the “DOJ”). The CIDs were issued pursuant to a False Claims Act inquiry concerning allegations that Adtalem, in particular Chamberlain and Adtalem’s former subsidiary DeVry University, submitted or caused the submission of false claims to the U.S. Department of Defense and U.S. Department of Veteran Affairs for federal funds under the GI Bill Programs and Tuition Assistance Program from 2011 to the date of the CIDs. It is specifically alleged that Chamberlain and DeVry University engaged in unlawful recruitment tactics, and provided incentive payments based directly or indirectly on securing federal financial aid. Adtalem cooperated with this DOJ inquiry

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and provided documents and other information requested by the DOJ. On February 27, 2020, the DOJ notified the U.S. District Court for the District of Georgia that it would decline to intervene in two qui tam False Claims Act actions filed by former DeVry University employees related to the subject matter of the CIDs and subsequently notified Adtalem that we are no longer needed to produce materials requested in the CID. Those actions were unsealed on March 2, 2020 and it is unknown whether the relators will pursue them. Although we cannot predict the ultimate outcome of these actions, we believe they are without merit and intend to vigorously defend against them.

On April 3, 2019, a putative class action lawsuit was filed by T’Lani Robinson, individually and on behalf of all others similarly situated, against Adtalem and DeVry University, Inc., in the Northern District of Georgia. The complaint was filed on behalf of herself and three separate classes of similarly situated individuals who were citizens of the State of Georgia who purchased or paid for and received any part of a DeVry University program. The plaintiffs claim that defendants made false or misleading statements regarding DeVry University’s graduate employment rate and assert claims of breach of contract, negligent misrepresentation, fraudulent misrepresentation, fraudulent concealment, breach of fiduciary duty, conversion, unjust enrichment, and declaratory relief. The plaintiffs seek compensatory, exemplary, punitive, treble, and statutory penalties and damages as allowed by law, including pre-judgment and post-judgment interest disgorgement, restitution, injunctive and declaratory relief, and attorneys’ fees. Defendants filed a motion to dismiss the complaint on May 31, 2019. On November, 25, 2019, the court granted in part and denied in part defendants’ motion to dismiss. The court dismissed the claims for breach of fiduciary duty and conversion with prejudice. The court dismissed the claims for negligent misrepresentation, fraudulent misrepresentation, fraudulent concealment, and unjust enrichment without prejudice, ordering plaintiffs’ to file an amended class-action complaint within fourteen days of the order. The court allowed the claims for breach of contract and declaratory relief to proceed. On December 9, 2019, plaintiff filed an amended class-action complaint. On December 23, 2019, defendants filed their answer to the amended class action complaint. The matter is currently stayed.

20. Segment Information

During the fourth quarter of fiscal year 2019, Adtalem renamed two of its segments: Professional Education was renamed Financial Services, and Technology and Business was renamed Business and Law.

Beginning in the first quarter of fiscal year 2020, Adtalem Brazil operations were classified as discontinued operations. See Note 4 “Discontinued Operations and Assets Held for Sale” for additional information. Segment information presented excludes the results of Adtalem Brazil. Adtalem eliminated its Business and Law reportable segment during the first quarter of fiscal year 2020 when Adtalem Brazil was classified as discontinued operations. In addition, DeVry University and Carrington are presented as discontinued operations, see Note 4 “Discontinued Operations and Assets Held for Sale” for additional information. Discontinued operations assets are included in the table below to reconcile to total consolidated assets presented on the Consolidated Balance Sheets. In addition, certain expenses previously allocated to Adtalem Brazil within our former Business and Law segment during fiscal year 2019 were reclassified to the Home Office and Other segment based on discontinued operations reporting guidance regarding allocation of corporate overhead. For fiscal year 2020, home office costs to support the remaining businesses are being allocated to the Medical and Healthcare and Financial Services segments.

We present two reportable segments as follows:

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

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

These segments are consistent with the method by which the Chief Operating Decision Maker (Adtalem’s Chairman, President and Chief Executive Officer) evaluates performance and allocates resources. Performance evaluations are based on each segment’s operating income excluding special items. Operating income excludes special items that consists of restructuring expense, gain on sale of assets, and settlement gain. Adtalem’s management excludes these items from its

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review of the results of the operating segments for purposes of measuring segment profitability and allocating resources. Intersegment sales are accounted for at amounts comparable to sales to nonaffiliated customers and are eliminated in consolidation. “Home Office and Other” includes activity not allocated to a reportable segment and is included to reconcile segment results to the Consolidated Financial Statements. Segments may have allocated depreciation expense related to depreciable assets reported as an asset in a different segment. The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies.”

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Revenue:
Medical and Healthcare	$	227,344	$	223,575	$	655,011	$	638,302
Financial Services		44,143		35,935		137,261		113,723
Home Office and Other		—		(807)		—		(2,422)
Total consolidated revenue	$	271,487	$	258,703	$	792,272	$	749,603
Operating income from continuing operations excluding special items:
Medical and Healthcare	$	57,559	$	52,960	$	127,786	$	141,152
Financial Services		4,190		5,086		13,976		19,469
Home Office and Other		(5,408)		(10,281)		(15,663)		(29,982)
Total consolidated operating income from continuing operations excluding special items		56,341		47,765		126,099		130,639
Reconciliation to Consolidated Financial Statements:
Restructuring expense		(1,854)		(2,186)		(10,339)		(45,194)
Gain on sale of assets		—		—		4,779		—
Settlement gain		—		—		—		15,571
Total consolidated operating income from continuing operations		54,487		45,579		120,539		101,016
Net other income (expense)		105,881		(3,009)		69,816		(11,913)
Total consolidated income from continuing operations before income taxes	$	160,368	$	42,570	$	190,355	$	89,103
Segment assets:
Medical and Healthcare	$	917,657	$	827,452	$	917,657	$	827,452
Financial Services		577,699		446,752		577,699		446,752
Home Office and Other		457,686		317,000		457,686		317,000
Discontinued Operations		490,978		557,499		490,978		557,499
Total consolidated assets	$	2,444,020	$	2,148,703	$	2,444,020	$	2,148,703
Capital expenditures:
Medical and Healthcare	$	7,274	$	10,978	$	20,108	$	37,696
Financial Services		568		84		1,980		1,487
Home Office and Other		3,781		2,149		9,846		6,086
Total consolidated capital expenditures	$	11,623	$	13,211	$	31,934	$	45,269
Depreciation expense:
Medical and Healthcare	$	7,127	$	7,680	$	21,898	$	20,449
Financial Services		556		480		1,438		1,212
Home Office and Other		866		653		2,437		3,065
Total consolidated depreciation expense	$	8,549	$	8,813	$	25,773	$	24,726
Intangible asset amortization expense:
Financial Services	$	2,576	$	1,605	$	7,686	$	4,816
Total consolidated intangible asset amortization expense	$	2,576	$	1,605	$	7,686	$	4,816

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Adtalem conducts its educational and financial services operations in the U.S., Barbados, St. Kitts, St. Maarten, India, Europe, China, Canada, and the Middle East. Other international revenue was less than 5% of total revenue for each of the three and nine months ended March 31, 2020 and 2019. Revenue and long-lived assets by geographic area are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Revenue from unaffiliated customers:
Domestic operations	$	176,946	$	160,949	$	507,482	$	468,788
International operations:
Barbados, Dominica, St. Kitts, and St. Maarten		92,259		95,366		277,934		274,207
Other		2,282		2,388		6,856		6,608
Total international		94,541		97,754		284,790		280,815
Total consolidated revenue	$	271,487	$	258,703	$	792,272	$	749,603
Long-lived assets:
Domestic operations	$	208,812	$	156,881	$	208,812	$	156,881
International operations:
Barbados, Dominica, St. Kitts, and St. Maarten		160,552		174,827		160,552		174,827
Other		1,807		2,065		1,807		2,065
Total international		162,359		176,892		162,359		176,892
Total consolidated long-lived assets	$	371,171	$	333,773	$	371,171	$	333,773

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

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

In this Quarterly Report on Form 10-Q, Adtalem Global Education Inc., together with its subsidiaries, is collectively referred to as “Adtalem,” “we,” “our,” “us,” or similar references.

Discussions within the 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 measurers” under the Securities and Exchange Commission (“SEC”) rules. See the “Non-GAAP Financial Measures and Reconciliations” section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures.

Certain items presented in tables may not sum due to rounding. Percentages presented are calculated from the underlying numbers in thousands. Discussions throughout this MD&A are based on continuing operations unless otherwise noted. The MD&A should be read in conjunction with the Consolidated Financial Statements and the notes thereto.

Available Information

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

Segments

During the fourth quarter of fiscal year 2019, Adtalem renamed two of its segments: Professional Education was renamed Financial Services, and Technology and Business was renamed Business and Law.

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As of September 30, 2019, Adtalem eliminated its Business and Law reportable segment when Adtalem Education of Brazil (“Adtalem Brazil”) was classified as discontinued operations and assets held for sale. In addition to the sale of Adtalem Brazil completed on April 24, 2020, during the second quarter of fiscal year 2019, Adtalem divested DeVry University and Carrington College (“Carrington”). In accordance with GAAP, we have classified the DeVry University, Carrington, and Adtalem Brazil entities as “Held for Sale” and “Discontinued Operations” in all periods presented as applicable. As a result, all financial results, disclosures, and discussions of continuing operations in this Quarterly Report on Form 10-Q exclude DeVry University, Carrington, and Adtalem Brazil operations, unless otherwise noted. See Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements for additional discontinued operations information.

We present two reportable segments as follows:

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

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

“Home Office and Other” includes activity not allocated to a reportable segment. Financial and descriptive information about Adtalem’s reportable segments is presented in Note 20 “Segment Information” to the Consolidated Financial Statements.

Certain expenses previously allocated to Adtalem Brazil within our former Business and Law segment during fiscal year 2019 have been reclassified to the Home Office and Other segment based on discontinued operations reporting guidance regarding allocation of corporate overhead. For fiscal year 2020, home office costs to support the remaining businesses are being allocated to the Medical and Healthcare and Financial Services segments.

Third Quarter Highlights

Financial and operational highlights for the third quarter of fiscal year 2020 include:

● Adtalem revenue grew $12.8 million, or 4.9%, in the third quarter of fiscal year 2020 compared to the year-ago quarter, driven by increased revenue in both the Medical and Healthcare and the Financial Services segments.

● Net income attributable to Adtalem of $150.8 million increased $112.9 million, or 297.9%, in the third quarter of fiscal year 2020 compared to the year-ago quarter primarily driven by an unrealized gain of $111.8 million recorded in the third quarter of fiscal year 2020 on the deal-contingent foreign currency hedge arrangement entered into in connection with the sale of Adtalem Brazil completed on April 24, 2020 to economically hedge the Brazilian Real denominated purchase price through mitigation of the currency exchange rate risk. Net income from continuing operations attributable to Adtalem excluding special items of $43.2 million increased $5.9 million, or 15.7%, in the third quarter of fiscal year 2020 compared to the year-ago quarter. This increase was principally attributable to revenue growth at Chamberlain and cost containment across all institutions and Adtalem home office.

● For the March 2020 session, new and total student enrollment at Chamberlain increased 12.7% and 5.1%, respectively, compared to the same term last year. Chamberlain continues to invest in its programs, student services, and campus locations.

● The acquisition of OCL in May 2019, contributed to revenue growth in the Financial Services segment of 22.8% in the third quarter of fiscal year 2020 compared to the year-ago quarter. ACAMS memberships have increased to more than 79,000 as of March 31, 2020.

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● Adtalem continued its eleventh share repurchase program by repurchasing a total of 1,164,308 shares of Adtalem’s common stock at an average cost of $31.67 per share during the third quarter of fiscal year 2020. Repurchases were suspended on March 12, 2020 due to the economic uncertainty caused by the novel coronavirus (“COVID-19” or “virus”) pandemic. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.

COVID-19

The World Health Organization declared COVID-19 to be a public health emergency on January 30, 2020. The virus has had tragic consequences across the globe, and its full impact is not yet known as of the May 5, 2020 filing date of this Form 10-Q. COVID-19 is altering business and consumer activity across almost all industries. Management has initiated several changes to the operations of our institutions and administrative functions in order to protect the health of Adtalem employees, students, and customers and to mitigate the financial effects of the virus and its resultant economic slowdown.

Results of Operations

COVID-19 did not result in significant revenue losses or cost increases in the third quarter of fiscal year 2020. Management anticipates more significant effects to consolidated revenue, net income, and earnings per share in the fourth quarter of fiscal year 2020 and possibly into fiscal year 2021 should the economic effects of social distancing and other measures established to combat the virus continue for an extended period of time. COVID-19 effects on third quarter of fiscal year 2020 and projected results of operations of the Adtalem institutions is described below.

●Chamberlain: Approximately 30% of Chamberlain’s students are based at campus locations and pursuing their Bachelor of Science of Nursing (“BSN”) degree; all campus-based students have transitioned to online learning for didactic and clinical experiences. The remaining 70% of Chamberlain’s students are enrolled in online programs and those programs are continuing to successfully operate. COVID-19 did not result in significant revenue losses or costs increases at Chamberlain in the third quarter of fiscal year 2020. The virus will likely negatively impact Chamberlain revenue and operating income in the fourth quarter of fiscal year 2020, principally from students who choose to postpone their studies due to the virus, especially if they are currently working in the healthcare field. Additionally, students who require onsite clinical experiences in order to complete their coursework may have to defer enrollment until onsite clinical experiences return. The extent of the impact in the fourth quarter of fiscal year 2020 and beyond will be determined based on the length and severity of the economic effects of COVID-19 and by the length of time the pandemic affects healthcare facilities’ ability to provide clinical experiences. Chamberlain has clinical partnerships with healthcare facilities across the U.S., which provides geographical diversity and is expected to reduce the risk that clinical education experiences will continue to be suspended for all clinical students.

●AUC and RUSM: Medical students enrolled in the basic science portion of their program have transitioned to online learning. Many students have moved from St. Maarten and Barbados and are continuing their studies remotely from their homes. COVID-19 did not result in significant revenue losses or costs increases within the basic science programs at the medical schools in the third quarter of fiscal year 2020. The virus may negatively impact basic science revenue and operating income in the fourth quarter of fiscal year 2020. The likely impact is principally from students who choose to not continue or start their studies during this time of uncertainty. The extent of the impact in the fourth quarter of fiscal year 2020 and beyond will be determined based on the length and severity of the economic effects of COVID-19. Students who have completed their basic science education progress to clinical rotations in the U.S. (and in the U.K. for AUC), and clinical rotations for all students were temporarily suspended in March 2020. This suspension did not significantly reduce revenue or operating income in the third quarter of fiscal year 2020 at either institution. The suspension will likely have a negative effect on revenue and operating income in the fourth quarter of fiscal year 2020 and for as long as the pandemic affects hospitals’ ability to provide clinical experiences. Adtalem has clinical partnerships with hospitals across the U.S. (and in the U.K. for AUC), which provide geographical diversity and are expected to reduce the risk that clinical education experiences will continue to be suspended for all clinical students.

●RUSVM: All basic science veterinary students have transitioned to online learning. Many students have moved from St. Kitts and are continuing their studies remotely from their homes. COVID-19 did not result in significant revenue losses or cost increases within the basic science program in the third quarter of fiscal year 2020. The virus may negatively impact basic science revenue and operating income in the fourth quarter of fiscal year 2020. The likely impact is principally from

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students who choose to not continue or start their studies during this time of uncertainty. The extent of the impact on the basic science program in the fourth quarter of fiscal year 2020 and beyond will be determined based on the length and severity of the economic effects of COVID-19. Students who have completed their basic science education progress to clinical rotations at select universities in the U.S., Canada, New Zealand, Australia, and Europe. A few universities have suspended onsite clinical experiences and transitioned students to online education, while other universities have continued to offer onsite clinical courses. The suspensions did not significantly reduce revenue or operating income in the third quarter of fiscal year 2020. The extent of the impact on clinical experiences in the fourth quarter of fiscal year 2020 and beyond will be determined based on the length and severity of the economic effects of COVID-19.

●Financial Services: Most Financial Services content, including exam preparation, certification training, continuing education, and subscriptions is delivered online. Any classroom-based learning has been moved to online. COVID-19 did not result in significant revenue losses or costs increases at Financial Services in the third quarter of fiscal year 2020. The virus is expected to negatively impact Financial Services revenue and operating income in the fourth quarter of fiscal year 2020, principally driven by the cancellation of ACAMS live conferences. Live conference revenue will not be realized so long as social distancing and group gathering is limited. COVID-19 did not result in any financial losses related to live conferences in the third quarter of fiscal year 2020, as there were no large conferences canceled. Adtalem maintains event cancellation insurance coverage and may be able to recover a portion of the lost operating income from cancelled conferences. It is possible large group gatherings may continue to be restricted into fiscal year 2021. These conferences could possibly be replaced with virtual events in the future but loss of conference revenue is likely. Management believes that other than the ACAMS conferences, longer-term operating results in the Financial Services segment will not be significantly affected by COVID-19 unless there are major employment losses with accounting professionals and recent accounting graduates, or in the banking and mortgage sectors. This is not known and cannot be predicted at this time.

●Administrative Operations: Virtually all institution and home office administrative operations are being delivered and performed remotely. This includes operations both in the U.S. and in all foreign locations. These remote work arrangements have not adversely affected Adtalem’s ability to maintain operations, financial reporting systems, internal control over financial reporting, and disclosure controls and procedures. The effectiveness of our remote technology enables our ability to maintain these systems and controls. Management does not anticipate Adtalem will be materially impacted by any constraints or other impacts on our human capital resources and productivity. Travel restrictions and border closures are not expected to have a material impact on our ability to operate and achieve operational goals. No significant home office costs are expected in the fourth quarter of fiscal year 2020 related to COVID-19.

Although COVID-19 has had a negative effect on the operating results of all four reporting units that contain goodwill and indefinite-lived intangible assets as of March 31, 2020, at this time none of the effects are considered significant enough to create an impairment triggering event. The effects are currently projected to be short-term and are not expected to significantly decrease long-term cash flow projections; however, should economic conditions continue to deteriorate into fiscal year 2021, the revenue and operating results of some reporting units could also deteriorate to the point where a triggering event could exist and require reassessment of the fair values of goodwill and intangible assets.

Liquidity

Adtalem’s cash balance at March 31, 2020, was $167.8 million. Adtalem generated $91.7 million in operating cash flow from continuing operations in the first nine months of fiscal year 2020. In the event of unexpected market conditions or negative economic changes, including those caused by COVID-19, that could negatively affect its earnings and/or operating cash flow, Adtalem maintains a $300 million revolving credit facility with availability of $71.6 million as of March 31, 2020. In addition, on April 24, 2020, Adtalem completed the sale of Adtalem Brazil. This generated $424.0 million in net cash proceeds in addition to releasing $73.0 million of cash previously unavailable, which is now available for general corporate use. Management currently projects that COVID-19 will have an effect on operations; however, we believe the current balances of unrestricted cash, cash generated from operations, cash proceeds from the sale of Adtalem Brazil, and our credit facility will be sufficient to fund both Adtalem’s current domestic and international operations and growth plans for the foreseeable future.

As noted above, Adtalem maintains a credit agreement (the “Credit Agreement”) that provides for (1) a $300 million revolving facility (“Revolver”) with a maturity date of April 13, 2023 and (2) a $300 million senior secured Term B loan (“Term B Loan”) with a maturity date of April 13, 2025. We refer to the Revolver and Term B Loan collectively as the

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“Credit Facility.” With interest rates at historically low levels, management entered into an interest rate swap agreement in March 2020 with a multinational financial institution that effectively converts the variable rate interest on the Term B Loan borrowings to a fixed rate of 3.946% for essentially the remaining term of the Term B Loan. The Credit Facility contains covenants that, among other things, require maintenance of certain financial ratios, as defined in the Credit Agreement (see the Credit Agreement, as filed under Form 8-K dated April 13, 2018). These financial ratios include a consolidated fixed charge coverage ratio, a consolidated leverage ratio, and a U.S. Department of Education financial responsibility ratio based upon a composite score of an equity ratio, a primary reserve ratio, and a net income ratio. Failure to maintain any of these ratios or to comply with other covenants contained in the Credit Agreement would constitute an event of default and could result in termination of the Credit Agreement and require payment of all outstanding borrowings and replacement of outstanding letters of credit. Adtalem was in compliance with the debt covenants as of March 31, 2020.

Results of Operations

The following table presents selected Consolidated Statements of Income data as a percentage of revenue for each of the periods indicated:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of educational services	43.7	%	46.5	%	47.2	%	46.7	%
Student services and administrative expense	35.5	%	35.1	%	36.9	%	35.9	%
Restructuring expense	0.7	%	0.8	%	1.3	%	6.0	%
Gain on sale of assets	0.0	%	0.0	%	(0.6)	%	0.0	%
Settlement gain	0.0	%	0.0	%	0.0	%	(2.1)	%
Total operating cost and expense	79.9	%	82.4	%	84.8	%	86.5	%
Operating income from continuing operations	20.1	%	17.6	%	15.2	%	13.5	%
Net other income (expense)	39.0	%	(1.2)	%	8.8	%	(1.6)	%
Income from continuing operations before income taxes	59.1	%	16.5	%	24.0	%	11.9	%
Provision for income taxes	(2.6)	%	(3.0)	%	(2.3)	%	(2.3)	%
Income from continuing operations	56.5	%	13.4	%	21.7	%	9.6	%
(Loss) income from discontinued operations, net of tax	(1.0)	%	1.2	%	(0.2)	%	(3.5)	%
Net income	55.5	%	14.6	%	21.5	%	6.1	%
Net loss (income) attributable to redeemable noncontrolling interest	0.0	%	0.0	%	0.0	%	(0.0)	%
Net income attributable to Adtalem	55.6	%	14.7	%	21.5	%	6.1	%

Revenue

The following tables present revenue by segment detailing the changes from the year-ago periods (in thousands):

	Three Months Ended March 31, 2020
	Medical and Healthcare			Financial Services			Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	223,575		$	35,935		$	(807)	$	258,703
Organic growth (decline)		3,769			(293)			807		4,283
Effect of acquisitions		—			8,501			—		8,501
Fiscal year 2020 as reported	$	227,344		$	44,143		$	—	$	271,487
Fiscal year 2020 % change:
Organic growth (decline)		1.7	%		(0.8)	%		NM		1.7	%
Effect of acquisitions		—			23.7	%		NM		3.3	%
Fiscal year 2020 % change as reported		1.7	%		22.8	%		NM		4.9	%

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	Nine Months Ended March 31, 2020
	Medical and Healthcare			Financial Services			Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	638,302		$	113,723		$	(2,422)	$	749,603
Organic growth (decline)		16,709			(695)			2,422		18,436
Effect of acquisitions		—			24,233			—		24,233
Fiscal year 2020 as reported	$	655,011		$	137,261		$	—	$	792,272
Fiscal year 2020 % change:
Organic growth (decline)		2.6	%		(0.6)	%		NM		2.5	%
Effect of acquisitions		—			21.3	%		NM		3.2	%
Fiscal year 2020 % change as reported		2.6	%		20.7	%		NM		5.7	%

Total consolidated revenue for the third quarter of fiscal year 2020 of $271.5 million increased 4.9%, or $12.8 million, compared to the year-ago quarter. Total consolidated revenue for the first nine months of fiscal year 2020 of $792.3 million increased 5.7%, or $42.7 million, compared to the year-ago period. Excluding the revenue added from OCL, which was acquired in the fourth quarter of fiscal year 2019, revenue grew 1.7%, or $4.3 million, in the third quarter and grew 2.5%, or $18.4 million, in the first nine months of fiscal year 2020 compared to the year-ago periods.

Medical and Healthcare

Revenue in the Medical and Healthcare segment increased 1.7%, or $3.8 million, to $227.3 million in the third quarter and increased 2.6%, or $16.7 million, to $655.0 million in the first nine months of fiscal year 2020 compared to the year-ago periods. The increase in revenue in the third quarter and first nine months of fiscal year 2020 is driven primarily by a revenue increase at Chamberlain primarily due to increasing total student enrollment and a revenue increase at the medical and veterinary schools in the first nine months of fiscal year 2020 primarily due to increased housing revenue at RUSM from its Barbados campus. Revenue decreased in the third quarter of fiscal year 2020 at AUC and RUSM driven primarily by lower basic science enrollment at RUSM and lower clinical hours delivered at AUC and RUSM.

Chamberlain

Chamberlain Student Enrollment:

	Fiscal Year 2020
Term	July 2019		Sept. 2019		Nov. 2019		Jan. 2020		Mar. 2020
New students	2,396		5,595		2,711		5,293		3,073
% change from prior year	(5.0)	%	2.9	%	3.6	%	11.2	%	12.7	%
Total students	28,691		31,736		31,215		33,850		33,748
% change from prior year	2.3	%	1.4	%	1.2	%	4.6	%	5.1	%
	Fiscal Year 2019
Term	July 2018		Sept. 2018		Nov. 2018		Jan. 2019		Mar. 2019		May 2019
New students	2,523		5,435		2,617		4,759		2,726		3,997
% change from prior year	1.0	%	9.5	%	(6.7)	%	6.4	%	(3.7)	%	2.6	%
Total students	28,037		31,295		30,833		32,354		32,104		30,867
% change from prior year	4.6	%	4.1	%	3.7	%	3.3	%	3.4	%	1.8	%

Chamberlain revenue increased 5.4%, or $6.9 million, to $135.1 million in the third quarter and increased 3.6%, or $13.0 million, to $377.1 million in the first nine months of fiscal year 2020 compared to the year-ago periods, driven by increases in total student enrollment during each fiscal year 2020 enrollment session. Chamberlain admitted its largest class of campus students in September 2019.

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

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Tuition Rates:

Tuition for the BSN onsite degree program range from $675 to $720 per credit hour. Tuition for the Registered Nurse to BSN (“RN-to-BSN”) online degree program is $590 per credit hour. Tuition for the online Master of Science in Nursing (“MSN”) degree program is $650 per credit hour. Tuition for the Family Nurse Practitioner (“FNP”) degree program is $665 per credit hour. Tuition for the online Doctor of Nursing Practice (“DNP”) degree program is $775 per credit hour. Tuition for the Master of Public Health (“MPH”) degree program is $550 per credit hour. Tuition for the online Master of Social Work (“MSW”) degree program, which began in September 2019, is $695 per credit hour. All of these tuition rates are unchanged from the prior year. These tuition rates do not include the cost of books, supplies, transportation, or living expenses.

Medical and Veterinary Schools

Medical and Veterinary Schools Student Enrollment:

	Fiscal Year 2020
Term	Sept. 2019		Jan. 2020
New students	872		486
% change from prior year	(1.9)	%	3.2	%
Total students	5,608		5,643
% change from prior year	(4.7)	%	1.7	%
	Fiscal Year 2019
Term	Sept. 2018		Jan. 2019		May 2019
New students	889		471		496
% change from prior year	9.5	%	(8.5)	%	(0.6)	%
Total students	5,887		5,548		5,220
% change from prior year	2.5	%	(6.6)	%	(6.0)	%

The medical and veterinary schools’ revenue decreased 3.3%, or $3.1 million, to $92.3 million in the third quarter and increased 1.4%, or $3.7 million, to $277.9 million in the first nine months of fiscal year 2020 compared to the year-ago periods. The decrease in revenue in the third quarter of fiscal year 2020 is driven primarily by a decrease in basic science enrollment at RUSM, increased discounts and scholarships at AUC from listed tuition rates, and a decline in clinical weeks delivered at AUC and RUSM. Both the lower enrollment and suspension of the clinical programs due to COVID-19 are expected to negatively affect revenue in the fourth quarter of fiscal year 2020. The increase in revenue in the first nine months of fiscal year 2020 is driven primarily by higher housing revenue at the new Barbados campus of RUSM. Partially offsetting this increase were declines in revenue driven by lower basic science enrollment at RUSM, increased discounts and scholarships at both AUC and RUSM from listed tuition rates, and the lower clinical weeks delivered.

In the January 2020 semester, total student enrollment increased at RUSM and RUSVM and declined at AUC. New student enrollment increased at AUC and RUSVM and declined at RUSM. Management is executing its plan to differentiate the medical and veterinary schools from the competition, with a core goal of increasing international students, increasing RUSM affiliations with historically black colleges and universities (“HBCU”) and Hispanic-serving institutions (“HSI”), expanding AUC’s medical education program based in the U.K. in partnership with the University of Central Lancashire (“UCLAN”), and improving the effectiveness of marketing investments. Management believes the demand for medical and veterinary education remains strong and can support management’s longer-term expectations to grow new enrollments in the low-single digit range; however, heightened competition may continue to adversely affect the medical and veterinary schools’ ability to continue to attract qualified students to its programs resulting in lower tuition revenue.

In September 2019, AUC opened its medical education program in the U.K. in partnership with UCLAN. The program offers students a postgraduate diploma in International Medical Sciences (“PGDip-IMS”) from UCLAN, followed by their Doctor of Medicine degree from AUC. Students will then be eligible to do clinical rotations at

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AUC’s clinical sites, which include hospitals in the U.S., the U.K., and Canada. This program is aimed at preparing students for the U.S. Medical Licensing Examination (“USMLE”).

In January 2019, RUSM moved its basic science instruction to a new location in Barbados. The academic facility is located in Bridgetown and student housing is located close to the academic facility in the parish of Christ Church and includes amenities, student services, and convenient transportation to campus.

Tuition Rates:

● Effective for semesters beginning in September 2019, tuition rates for the beginning basic sciences and final clinical rotation portions of AUC’s medical program are $23,240 and $26,000, respectively, per semester. These tuition rates represent a 3.5% increase over the prior academic year.

● Effective for semesters beginning in September 2019, tuition rates for the beginning basic sciences and Internal Medicine Foundations/final clinical portion of the programs at RUSM are $24,170 and $26,676, respectively, per semester. These tuition rates represent a 4.0% increase over the prior academic year.

● For students who entered the RUSVM program in September 2018 or later, the tuition rate for the pre-clinical (Semesters 1-7) and clinical curriculum (Semesters 8-10) is $20,873 per semester effective September 2019. For students who entered RUSVM before September 2018, tuition rates for the pre-clinical and clinical curriculum are $19,387 and $24,339, respectively, per semester effective September 2019. The tuition rates effective September 2019 represent a 2.8% increase over the prior academic year.

The respective tuition rates for AUC, RUSM, and RUSVM do not include the cost of transportation, living expenses, or health insurance.

Financial Services

Revenue in the Financial Services segment increased 22.8%, or $8.2 million, to $44.1 million in the third quarter and increased 20.7%, or $23.5 million, to $137.3 million in the first nine months of fiscal year 2020 compared to the year-ago periods. Excluding the revenue added from OCL, which was acquired in the fourth quarter of fiscal year 2019, revenue declined 0.8%, or $0.3 million, in the third quarter and declined 0.6%, or $0.7 million, in the first nine months of fiscal year 2020 compared to the year-ago periods. The divestiture of Becker’s courses for healthcare students, which was completed in August 2019, decreased revenue by $1.4 million and $4.3 million in the third quarter and the first nine months of fiscal year 2020, respectively These revenue decreases were partially offset by growth at Becker and in other ACAMS product sales. ACAMS memberships have increased to more than 79,000 as of March 31, 2020, driven by strong domestic growth as well as expansion in the Asia Pacific and European regions.

Cost of Educational Services

The largest component of cost of educational services is the cost of faculty and staff who support educational operations. This expense category also includes the costs of facilities, adjunct faculty, supplies, housing, bookstore, other educational materials, student education-related support activities, and the provision for bad debts. The following tables present cost of educational services by segment detailing the changes from the year-ago periods (in thousands):

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	Three Months Ended March 31, 2020
	Medical and Healthcare			Financial Services			Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	114,528		$	5,872		$	(208)	$	120,192
Cost increase (decrease)		(4,040)			(122)			648		(3,514)
Effect of acquisitions		—			2,034			—		2,034
Fiscal year 2020 as reported	$	110,488		$	7,784		$	440	$	118,712
Fiscal year 2020 % change:
Cost decrease		(3.5)	%		(2.1)	%		NM		(2.9)	%
Effect of acquisitions		—			34.6	%		NM		1.7	%
Fiscal year 2020 % change as reported		(3.5)	%		32.6	%		NM		(1.2)	%

	Nine Months Ended March 31, 2020
	Medical and Healthcare			Financial Services			Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	329,310		$	20,901		$	(408)	$	349,803
Cost increase (decrease)		15,904			(167)			2,031		17,768
Effect of acquisitions		—			6,433			—		6,433
Fiscal year 2020 as reported	$	345,214		$	27,167		$	1,623	$	374,004
Fiscal year 2020 % change:
Cost increase (decrease)		4.8	%		(0.8)	%		NM		5.1	%
Effect of acquisitions		—			30.8	%		NM		1.8	%
Fiscal year 2020 % change as reported		4.8	%		30.0	%		NM		6.9	%

Cost of educational services decreased 1.2%, or $1.5 million, to $118.7 million in the third quarter and increased 6.9%, or $24.2 million, to $374.0 million in the first nine months of fiscal year 2020 compared to the year-ago periods. Excluding the costs added with the acquisition of OCL, which occurred in the fourth quarter of fiscal year 2019, cost of educational services decreased 2.9%, or $3.5 million, in the third quarter and increased 5.1%, or $17.8 million, in the first nine months of fiscal year 2020 compared to the year-ago periods. Decreased costs in the third quarter of fiscal year 2020 were driven primarily by salary and travel cost reduction efforts and lower expense due to lower clinical hours delivered. Cost increased in the first nine months of fiscal year 2020 due to increased housing costs at RUSM’s Barbados campus, increased investment in growth across all reportable segments, and increased bad debt expense of $7.8 million in the first nine months of fiscal year 2020, primarily related to the institutional loan program at the medical and veterinary schools. Management evaluates the collectability of receivable balances monthly and quarterly and bad debt reserves incorporate the most recent facts and analytics. During the last several quarters management instituted changes in how the institutional loan portfolio is managed. Since the second quarter of fiscal year 2020, changes in collection efforts have resulted in greater insight as to the underlying performance of the portfolio. These insights coupled with our most recent set of circumstances, facts and analytics, resulted in management increasing the bad debt reserve.

As a percentage of revenue, cost of educational services was 43.7% and 47.2% in the third quarter and first nine months of fiscal year 2020, respectively, compared to 46.5% and 46.7% during the year-ago periods, respectively. The decrease in the percentage in the third quarter of fiscal year 2020 was primarily the result of cost reduction efforts. The increase in the percentage in the first nine months of fiscal year 2020 was primarily the result of revenue growth in the lower margin source of RUSM housing and the increase in bad debt expense, primarily at the medical and veterinary schools.

Student Services and Administrative Expense

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

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	Three Months Ended March 31, 2020
	Medical and Healthcare			Financial Services			Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	56,088		$	24,977		$	9,681	$	90,746
Cost increase (decrease)		3,208			466			(4,712)		(1,038)
Effect of acquisitions		—			6,726			—		6,726
Fiscal year 2020 as reported	$	59,296		$	32,169		$	4,969	$	96,434
Fiscal year 2020 % change:
Cost increase (decrease)		5.7	%		1.9	%		NM		(1.1)	%
Effect of acquisitions		—			26.9	%		NM		7.4	%
Fiscal year 2020 % change as reported		5.7	%		28.8	%		NM		6.3	%

	Nine Months Ended March 31, 2020
	Medical and Healthcare			Financial Services			Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	167,840		$	73,354		$	27,967	$	269,161
Cost increase (decrease)		14,170			3,783			(13,927)		4,026
Effect of acquisitions		—			18,982			—		18,982
Fiscal year 2020 as reported	$	182,010		$	96,119		$	14,040	$	292,169
Fiscal year 2020 % change:
Cost increase		8.4	%		5.2	%		NM		1.5	%
Effect of acquisitions		—			25.9	%		NM		7.1	%
Fiscal year 2020 % change as reported		8.4	%		31.0	%		NM		8.5	%

Student services and administrative expense increased 6.3%, or $5.7 million, to $96.4 million in the third quarter and increased 8.5%, or $23.0 million, to $292.2 million in the first nine months of fiscal year 2020 compared to the year-ago periods. Excluding the costs added with the acquisition of OCL, which occurred in the fourth quarter of fiscal year 2019, student services and administrative expense decreased 1.1%, or $1.0 million, in the third quarter and increased 1.5%, or $4.0 million, in the first nine months of fiscal year 2020 compared to the year-ago periods. The cost containment effort across all institutions and home office, focused on salary, travel, and discretionary spending, was the primary driver of decrease in expense in the third quarter of fiscal year 2020. Cost increases to support future enrollment growth at Chamberlain, the medical and veterinary schools, ACAMS, and Becker were the primary drivers of the increase in expense in the first nine months of fiscal year 2020. Amortization of finite-lived intangible assets increased $1.0 million and $2.9 million in the third quarter and first nine months of fiscal year 2020, respectively, compared to the year-ago periods, driven by OCL intangible asset amortization. In the tables above, approximately $4.5 and $13.6 million in the third quarter and first nine months of fiscal year 2020, respectively, of the cost reduction at home office was driven by reallocation of costs from Home Office and Other to the segments.

As a percentage of revenue, student services and administrative expense was 35.5% and 36.9% in the third quarter and first nine months of fiscal year 2020, respectively, compared to 35.1% and 35.9% during the year-ago periods, respectively. Amortization expense for OCL intangible assets and costs to support enrollment growth caused the increases in this percentage.

Restructuring Expense

Restructuring expense decreased 15.2%, or $0.3 million, to $1.9 million in the third quarter and decreased 77.1%, or $34.9 million, to $10.3 million in the first nine months of fiscal year 2020 compared to the year-ago periods. The primary driver of the decreased restructure expense in the third quarter of fiscal year 2020 was the result of lower real estate consolidation charges at Adtalem’s home office. The primary driver of the decreased restructure expense in the first nine months of fiscal year 2020 was the result of the impairment of property and equipment at the Dominica campus of RUSM and severance related to workforce reductions in Dominica recorded during the year-ago period. See Note 6 “Restructuring Charges” to the Consolidated Financial Statements for additional information on restructuring charges.

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Additional restructuring expense is expected to be recorded during the remainder of fiscal year 2020 as Adtalem completes its current restructuring plans by June 30, 2020. Adjustments to leases that have been placed in restructure will result in charges extending past fiscal year 2020 and will be presented as future restructuring expense. Management may initiate future restructuring programs.

Gain on Sale of Assets

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus facility. Net proceeds from the sale of $6.4 million resulted in a gain on the sale of $4.8 million in the first nine months of fiscal year 2020. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 20 “Segment Information” to the Consolidated Financial Statements. There was no corresponding gain in the first nine months of fiscal year 2019.

Settlement Gain

In December 2018, AUC and RUSM received the final insurance settlement proceeds related to the property damage and disruption of operations caused by Hurricanes Irma and Maria in fiscal year 2018. AUC and RUSM have completed substantially all planned repairs and replacement of damaged facilities and equipment. AUC and RUSM received total insurance proceeds of $110.0 million to fully cover the cumulative expense incurred for the evacuation process, temporary housing, and transportation of students, faculty and staff, incremental costs of teaching at alternative sites, and cumulative impairment write-downs. These costs totaled $106.7 million, less $12.3 million in deductibles, which were adjusted in the second quarter of fiscal year 2019 from $13.4 million recorded in the first quarter of fiscal year 2018. The resulting gain of $15.6 million was recorded in the second quarter of fiscal year 2019. There is no corresponding gain in the first nine months of fiscal year 2020.

Operating Income from Continuing Operations

The following tables present operating income from continuing operations by segment detailing the changes from the year-ago periods (in thousands):

	Three Months Ended March 31, 2020
	Medical and Healthcare		Financial Services		Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	53,093	$	5,086	$	(12,600)	$	45,579
Organic change		4,599		(637)		4,873		8,835
Effect of acquisitions		—		(259)		—		(259)
Restructuring expense change		(943)		—		1,275		332
Fiscal year 2020 as reported	$	56,749	$	4,190	$	(6,452)	$	54,487

	Nine Months Ended March 31, 2020
	Medical and Healthcare		Financial Services		Home Office and Other		Consolidated
Fiscal year 2019 as reported	$	115,396	$	19,469	$	(33,849)	$	101,016
Organic change		(13,366)		(4,311)		14,319		(3,358)
Effect of acquisitions		—		(1,182)		—		(1,182)
Restructuring expense change		39,973		(3,116)		(2,002)		34,855
Gain on sale of assets change		—		—		4,779		4,779
Settlement gain		(15,571)		—		—		(15,571)
Fiscal year 2020 as reported	$	126,432	$	10,860	$	(16,753)	$	120,539

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

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2020		2019		Increase (Decrease)		2020		2019		Increase (Decrease)
Medical and Healthcare:
Operating income (GAAP)	$	56,749	$	53,093	6.9	%	$	126,432	$	115,396	9.6	%
Restructuring expense		810		(133)	NM			1,354		41,327	(96.7)	%
Settlement gain		—		—	NM			—		(15,571)	NM
Operating income excluding special items (non-GAAP)	$	57,559	$	52,960	8.7	%	$	127,786	$	141,152	(9.5)	%
Financial Services:
Operating income (GAAP)	$	4,190	$	5,086	(17.6)	%	$	10,860	$	19,469	(44.2)	%
Restructuring expense		—		—	NM			3,116		—	NM
Operating income excluding special items (non-GAAP)	$	4,190	$	5,086	(17.6)	%	$	13,976	$	19,469	(28.2)	%
Home Office and Other:
Operating loss (GAAP)	$	(6,452)	$	(12,600)	48.8	%	$	(16,753)	$	(33,849)	50.5	%
Restructuring expense		1,044		2,319	(55.0)	%		5,869		3,867	51.8	%
Gain on sale of assets		—		—	NM			(4,779)		—	NM
Operating loss excluding special items (non-GAAP)	$	(5,408)	$	(10,281)	47.4	%	$	(15,663)	$	(29,982)	47.8	%
Adtalem Global Education:
Operating income (GAAP)	$	54,487	$	45,579	19.5	%	$	120,539	$	101,016	19.3	%
Restructuring expense		1,854		2,186	(15.2)	%		10,339		45,194	(77.1)	%
Gain on sale of assets		—		—	NM			(4,779)		—	NM
Settlement gain		—		—	NM			—		(15,571)	NM
Operating income excluding special items (non-GAAP)	$	56,341	$	47,765	18.0	%	$	126,099	$	130,639	(3.5)	%

Total consolidated operating income from continuing operations increased $8.9 million, to $54.5 million in the third quarter and increased $19.5 million, to $120.5 million in the first nine months of fiscal year 2020 compared to the year-ago periods. Consolidated operating income from continuing operations excluding special items increased 18.0%, or $8.6 million, in the third quarter of fiscal year 2020 compared to the year-ago quarter. The primary drivers of the increased operating income from continuing operations in the third quarter of fiscal year 2020 were increased revenue at Chamberlain and efforts to manage salary, travel, and discretionary spending.

The primary driver of the increased operating income from continuing operations in the first nine months of fiscal year 2020 was the decrease in restructuring expense of $34.9 million driven by the impairment of property and equipment at the Dominica campus of RUSM and severance related to workforce reductions in Dominica recorded during the first nine months of fiscal year 2019. This decrease was partially offset by the $15.6 million hurricane insurance settlement gain recorded in the first nine months of fiscal year 2019. Consolidated operating income from continuing operations excluding special items decreased 3.5%, or $4.5 million, in the first nine months of fiscal year 2020 compared to the year-ago period. The primary drivers of this decrease were an increase in bad debt expense of $7.8 million, primarily related to the institutional loan programs at the medical and veterinary schools, and higher costs at RUSM of operating in Barbados compared to the post-hurricane temporary location in Tennessee through December 2018. These negative drivers of operating income were partially offset by increased revenue at Chamberlain and efforts to manage salary, travel, and discretionary spending.

Medical and Healthcare

Medical and Healthcare segment operating income increased 6.9%, or $3.7 million, to $56.7 million in the third quarter and increased 9.6%, or $11.0 million, to $126.4 million in the first nine months of fiscal year 2020 compared to the year-ago periods. Segment operating income excluding special items increased 8.7%, or $4.6 million, in the third quarter and decreased 9.5%, or $13.4 million, in the first nine months of fiscal year 2020 compared to the year-ago periods. The primary driver of the increase in segment operating income excluding special items in the third quarter of fiscal year 2020 was the result of increased revenue at Chamberlain and efforts to manage salary, travel, and discretionary spending across

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the segment, partially offset by approximately $3.7 million of additional home office costs reallocated from Home Office and Other to the Medical and Healthcare segment in the third quarter of fiscal year 2020 compared to the year-ago quarter. The primary driver of the decrease in segment operating income excluding special items in the first nine months of fiscal year 2020 relate to increased marketing expense to drive future enrollment growth, increased bad debt expense, primarily related to the institutional loan programs at the medical and veterinary schools, higher costs at RUSM of operating in Barbados compared to the post-hurricane temporary location in Tennessee through December 2018, and an increase of approximately $11.1 million in the first nine months of fiscal year 2020 in home office costs reallocated from Home Office and Other to the Medical and Healthcare segment compared to the year-ago period.

Financial Services

Financial Services segment operating income decreased 17.6%, or $0.9 million, to $4.2 million in the third quarter and decreased 44.2%, or $8.6 million, to $10.9 million in the first nine months of fiscal year 2020 compared to the year-ago periods. Segment operating income excluding special items decreased 17.6%, or $0.9 million, in the third quarter and decreased 28.2%, or $5.5 million, in the first nine months of fiscal year 2020 compared to the year-ago periods. These operating income decreases were driven by increased costs at ACAMS to support future growth and operating losses generated by OCL. In addition, approximately $0.8 million in the third quarter and $2.5 million in the first nine months of fiscal year 2020 in home office costs were reallocated from Home Office and Other to the Financial Services segment compared to the year-ago periods.

Net Other Income (Expense)

Net other income in the third quarter and first nine months of fiscal year 2020 was $105.9 million and $69.8 million, respectively, compared to net other expense of $3.0 million and $11.9 million in the year-ago periods, respectively. The net other income increases were the result of an unrealized gain of $111.8 million and $83.8 million for the three and nine months ended March 31, 2020, respectively, on the deal-contingent foreign currency hedge arrangement entered into on October 18, 2019 in connection with the sale of Adtalem Brazil, which was completed on April 24, 2020 (as discussed in Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements) to economically hedge the Brazilian Real denominated purchase price through mitigation of the currency exchange rate risk. The hedge agreement has a total notional amount of R$2,154 million (approximately $415 million as of March 31, 2020). The derivative associated with the hedge agreement does not qualify for hedge accounting treatment under Accounting Standards Codification (“ASC”) 815, and as a result, all changes in fair value are recorded within the income statement. The change in value in this hedge does not result in a change in proceeds, net of the hedge settlement, from the amount originally expected from the sale transaction.

Provision for Income Taxes

Our effective income tax rate (“ETR”) from continuing operations can differ from the 21% U.S. federal statutory rate due to several factors, including the rate of tax applied to earnings outside the U.S., tax incentives, changes in valuation allowances, liabilities for uncertain tax positions, and tax benefits on stock compensation awards. Additionally, our ETR may be impacted by the provisions from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which include primarily a tax on global intangible low-taxed income (“GILTI”), a deduction for foreign derived intangible income (“FDII”), and a limitation of tax benefits on certain executive compensation. The impact of the Tax Act may be revised in future periods as we obtain additional data and any new regulations or guidance that may be released.

The ETR from continuing operations for the three months ended March 31, 2020 was 4.3%, a decrease from 18.4% for the three months ended March 31, 2019. This decrease is primarily due to not recording a tax provision on the pre-tax unrealized gain of $111.8 million from a derivative contract related to the deal-contingent hedge agreement on the Adtalem Brazil sale completed on April 24, 2020 (see Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements for additional information). Partially offsetting the decrease was a reduction in the percentage of earnings from foreign operations, which are taxed at rates lower than those applied to domestic earnings, and a reduction in tax benefits for stock-based compensation. Excluding the one-time effects of the derivative contract (a non-GAAP financial measure), the ETR from continuing operations for the three months ended March 31, 2020 and 2019, was 14.3% and 18.4%, respectively.

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The ETR for the nine months ended March 31, 2020 was 9.6%, a decrease from 19.5% for the nine months ended March 31, 2019. This decrease is primarily due to not recording a tax provision on the pre-tax unrealized gain of $83.8 million from the derivative contract discussed above. Partially offsetting the decrease was a decrease in the percentage of earnings from foreign operations compared to the year-ago period and an increased net charge associated with the impact of GILTI & FDII, offset by various impacts due to the sale of DeVry University in year-ago period. Excluding the one-time effects of the derivative contract and sale of DeVry University (a non-GAAP financial measure), the ETR from continuing operations for the nine months ended March 31, 2020 and 2019, was 17.1% and 17.8%, respectively.

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, temporarily increases the amount of interest expense the company is allowed to deduct on its U.S. federal tax returns for fiscal years 2019 and 2020, modifies the Tax Credit and Jobs Act of 2017 to allow immediate expensing of qualified improvement property for U.S. federal income tax purposes retroactive to fiscal year 2018, and allows net operating losses incurred in fiscal years 2018, 2019, and 2020 to be carried back five-years and offset up to 100% of U.S. federal taxable income for tax years beginning before fiscal year 2021. Management is currently evaluating the impact of the CARES Act, but at present time does not expect that the provisions of the CARES Act would result in a material tax or cash benefit.

Consistent with our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 (“2019 Form 10-K”) disclosure, Adtalem continues to estimate its unrecognized tax benefits will decrease by $25 million to $27 million by June 30, 2020 due to the settlement of various audits and the lapsing of statutes of limitations.

Discontinued Operations

Income (loss) from discontinued operations includes $7.7 million in the third quarter and $21.2 million in the first nine months of fiscal year 2020, respectively, in costs primarily consisting of ongoing litigation costs, settlements, and other divestiture costs related to the DeVry University, Carrington, and Adtalem Brazil divestitures. See Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements for additional information.

Beginning in the second quarter of fiscal year 2018, DeVry University operations were classified as discontinued operations. In addition, beginning in the fourth quarter of fiscal year 2018, Carrington operations were classified as discontinued operations. See Note 2 “Discontinued Operations” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” of our 2019 Form 10-K for additional information. The divestiture of both of these operations was completed in the second quarter of fiscal year 2019. As a result, management discontinued discussion of the DeVry University and Carrington operating results beginning with the second quarter of fiscal year 2019 Quarterly Report on Form 10-Q as comparable results are no longer meaningful. Due to the sale of Adtalem Brazil on April 24, 2020, management will no longer disclose and discuss Adtalem Brazil operations in its public filings following this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020.

Adtalem Brazil

The following table presents revenue for Adtalem Brazil detailing the changes from the year-ago periods (in thousands):

	Three Months Ended March 31, 2020			Nine Months Ended March 31, 2020
Fiscal year 2019 as reported	$	49,907		$	159,791
Organic growth		31			(3,979)
Effect of currency change		(8,583)			(13,652)
Fiscal year 2020 as reported	$	41,355		$	142,160
Fiscal year 2020 % change:
Organic growth (constant currency, non-GAAP)		0.1	%		(2.5)	%
Effect of currency change		(17.2)	%		(8.5)	%
Fiscal year 2020 % change as reported		(17.1)	%		(11.0)	%

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Revenue at Adtalem Brazil decreased 17.1%, or $8.6 million, to $41.4 million in the third quarter and decreased 11.0%, or $17.6 million, to $142.2 million in the first nine months of fiscal year 2020 compared to the year-ago periods. The decrease in value of the Brazilian Real compared to the U.S. dollar decreased reported revenue in the third quarter and first nine months of fiscal year 2020 by $8.6 million and $13.7 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 (a non-GAAP financial measure), revenue increased 0.1% in the third quarter and decreased 2.5% in the first nine months of fiscal year 2020 compared to the year-ago periods. Declines in enrollment at Wyden Educational institutions (“Wyden”) and in law exam test preparation courses, along with increased discounting were the primary drivers of the revenue decrease in the first nine months of fiscal year 2020.

Brazil’s economy presented challenges for enrollment growth and created pricing pressures in the education sector. Adtalem Brazil’s revenue results have been negatively impacted by these conditions as well as reductions in Brazil’s government-funded loan program, “Fundo de Financiamento Estudantil” or “Students Financing Fund” (“FIES”) and increased competition. Adtalem Brazil students are eligible for loans under the FIES program, which is financed by the Brazilian government. 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, the changes enacted during fiscal year 2018 reducing the number of contracts available for grant under the FIES program by approximately 31% to all higher education institutions in Brazil, have impacted Adtalem Brazil’s growth.

Adtalem Brazil Student Enrollment:

	Fiscal Year 2020				Fiscal Year 2019
Term	Sept. 2019		Mar. 2020		Sept. 2018		Mar. 2019
New students	17,588		31,792		17,956		27,505
% change from prior year	(2.0)	%	15.6	%	23.8	%	17.7	%
Total students	76,904		82,939		81,088		79,919
% change from prior year	(5.2)	%	3.8	%	3.5	%	5.6	%

These enrollment figures include students enrolled in degree-granting programs and exclude students enrolled in test preparation programs.

The following table presents operating income for Adtalem Brazil detailing the changes from the year-ago periods (in thousands):

	Three Months Ended March 31, 2020		Nine Months Ended March 31, 2020
Fiscal year 2019 as reported	$	727	$	13,081
Organic change		1,577		4,984
Restructuring expense change		1,517		1,276
Effect of currency change		(1,712)		(3,023)
Fiscal year 2020 as reported	$	2,109	$	16,318

Adtalem Brazil operating income increased $1.4 million to $2.1 million in the third quarter and increased $3.2 million to $16.3 million in the first nine months of fiscal year 2020 compared to the year-ago periods. Operating income was reduced by the effect of exchange rate changes by $1.7 million in the third quarter and $3.0 million in the first nine months of fiscal year 2020. On a constant currency basis and excluding the effect of restructuring charges (a non-GAAP financial measure), Adtalem Brazil operating income increased $1.6 million in the third quarter and increased $5.0 million in the first nine months of fiscal year 2020 compared to the year-ago periods, primarily driven by cost reduction measures to offset higher discounting. These operating income amounts in fiscal years 2020 and 2019 have been adjusted for the reduction in home office expenses allocated to Adtalem Brazil within discontinued operations and now allocated to continuing operations. For fiscal year 2020, home office costs to support the remaining businesses are being allocated to the Medical and Healthcare and Financial Services segments. For fiscal year 2019, these costs were allocated to Home Office and Other. See Note 20 “Segment Information” to the Consolidated Financial Statements for additional information.

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Regulatory Environment

Student Payments

Adtalem’s primary source of liquidity is the cash received from payments for student tuition, books, other educational materials, and fees. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational loans (“private loans”), employer educational reimbursements, scholarships, and student and family financial resources. Adtalem continues to provide financing options for its students, including Adtalem’s institutional loan programs.

The following table, which excludes DeVry University, Carrington, and Adtalem Brazil revenue, summarizes Adtalem’s revenue by fund source as a percentage of total revenue for fiscal years 2019 and 2018:

	Fiscal Year
Funding source:	2019		2018
Federal assistance (Title IV) program funding (grants and loans)	59	%	59	%
Private loans	2	%	2	%
Student accounts, cash payments, private scholarships, employer and military provided tuition assistance, and other	39	%	39	%
Total	100	%	100	%

The pattern of cash receipts during the year is seasonal. Adtalem’s cash collections on accounts receivable peak at the start of each institution’s term. Accounts receivable reach their lowest level at the end of each institution’s term.

Financial Aid

Like other higher education institutions, Adtalem is highly dependent upon the timely receipt of federal financial aid funds. All financial aid and assistance programs are subject to political and governmental budgetary considerations. In the U.S., the Higher Education Act (“HEA”) guides the federal government’s support of postsecondary education. If there are changes to financial aid programs that restrict student eligibility or reduce funding levels, Adtalem’s financial condition and cash flows could be materially and adversely affected. See Item 1A. “Risk Factors” in our 2019 Form 10-K for a discussion of student financial aid related risks.

In addition, government-funded financial assistance programs are governed by extensive and complex regulations in the U.S. Like any other educational institution, Adtalem’s administration of these programs is periodically reviewed by various regulatory agencies and is subject to audit or investigation by other governmental authorities. Any violation could be the basis for penalties or other disciplinary action, including initiation of a suspension, limitation, or termination proceeding.

If the U.S. Department of Education (“ED”) determines that we have failed to demonstrate either financial responsibility or administrative capability in any pending program review, or otherwise determines that an institution has violated the terms of its Program Participation Agreement (“PPA”), we could be subject to sanctions including: fines, penalties, reimbursement for discharged loan obligations, a requirement to post a letter of credit, and/or suspension or termination of our eligibility to participate in the Title IV programs.

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

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An ED regulation known as the “90/10 Rule” affects only proprietary postsecondary institutions, such as Chamberlain, AUC, RUSM, and RUSVM. Under this regulation, an institution that derives more than 90% of its revenue on a cash basis from Title IV student financial assistance programs in two consecutive fiscal years loses eligibility to participate in these programs for at least two fiscal years. The following table details the percentage of revenue on a cash basis from federal financial assistance programs (excluding the U.S. Department of Veterans Affairs and military tuition assistance benefits) for each of Adtalem’s Title IV-eligible institutions for fiscal years 2019 and 2018:

	Fiscal Year
	2019		2018
Chamberlain University	62	%	62	%
American University of the Caribbean School of Medicine	75	%	74	%
Ross University School of Medicine	83	%	81	%
Ross University School of Veterinary Medicine	83	%	82	%

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

A financial responsibility test is required for continued participation by an institution’s students in U.S. federal financial assistance programs. For Adtalem’s participating institutions, this test is calculated at the consolidated Adtalem level. The test is based upon a composite score of three ratios: an equity ratio that measures the institution’s capital resources; a primary reserve ratio that measures an institution’s ability to fund its operations from current resources; and a net income ratio that measures an institution’s ability to operate profitably. A minimum score of 1.5 is necessary to meet ED’s financial standards. Institutions with scores of less than 1.5 but greater than or equal to 1.0 are considered financially responsible, but require additional oversight. These schools are subject to heightened cash monitoring and other participation requirements. An institution with a score of less than 1.0 is considered not financially responsible. However, a school with a score of less than 1.0 may continue to participate in the Title IV programs under provisional certification. In addition, this lower score typically requires that the school be subject to heightened cash monitoring requirements and post a letter of credit (equal to a minimum of 10% of the Title IV aid it received in the institution's most recent fiscal year).

For the past several years, Adtalem’s composite score has exceeded the required minimum of 1.5. 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.

Liquidity and Capital Resources

Adtalem’s consolidated cash and cash equivalents balance of $167.8 million, $204.2 million, and $230.7 million as of March 31, 2020, June 30, 2019, and March 31, 2019, respectively, included cash and cash equivalents held at Adtalem’s international operations of $35.0 million, $75.3 million, and $65.2 million as of March 31, 2020, June 30, 2019, and March 31, 2019, respectively, which is available to Adtalem for general company purposes. In addition, on April 24, 2020, Adtalem completed the sale of Adtalem Brazil. This generated $424.0 million in net cash proceeds in addition to releasing $73.0 million of cash previously unavailable, which is now available for general corporate use (see Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements for additional information.

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

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academic term for which such funds have been authorized. Cash in the amount of $0.8 million, $1.0 million, and $0.4 million was held in restricted bank accounts as of March 31, 2020, June 30, 2019, and March 31, 2019, respectively.

Cash Flow Summary

Operating Activities

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

	Nine Months Ended
	March 31,
	2020		2019
Income from continuing operations	$	172,142	$	71,733
Non-cash items		5,751		95,870
Changes in assets and liabilities		(86,207)		(60,423)
Net cash provided by operating activities-continuing operations	$	91,686	$	107,180

Cash provided by operating activities by continuing operations in the first nine months of fiscal year 2020 was $91.7 million compared to $107.2 million in the year-ago period. Income from continuing operations increased by $100.4 million in the first nine months of fiscal year 2020 compared to the year-ago period.

The decrease in non-cash items of $90.1 million in the first nine months of fiscal year 2020 compared to the year-ago period was primarily driven by the following:

● A decrease of $39.9 million in depreciation and write-offs of property and equipment. This was primarily the result of recording $39.1 million in impairment write-downs of property and equipment at RUSM’s Dominica campus in the first nine months of fiscal year 2019.

● An increase of $32.4 million in amortization and adjustments to operating lease assets which results from the implementation of ASC 842 on July 1, 2019.

● A decrease of $21.9 million in the deferred income tax provision related to the timing of deductions.

● A decrease of $83.1 million in the realized and unrealized gain (loss) on investments and derivative contracts driven by an unrealized gain on the deal-contingent foreign currency hedge arrangement entered into in the second quarter of fiscal year 2020 to economically hedge the Brazilian Real denominated sales price of Adtalem Brazil through mitigation of the currency exchange rate risk.

● A decrease of $15.6 million in insurance settlement gain, which was recorded in fiscal year 2019 resulting from final settlement of hurricane claims which were in excess of expense recorded for hurricane related costs.

● An increase of $7.8 million in provision for bad debts due to increases in reserves for institutional student loans.

● An increase in realized gain on the sale of assets of $4.8 million from the sale of the Columbus, Ohio, campus facility.

Changes in assets and liabilities from June 30, 2019 reduced operating cash flow by $86.2 million, driven by the following:

● A $19.9 million decrease resulting from an increase in accounts receivable balances (excluding provisions for bad debts) at Chamberlain, which are higher at March 31, 2020 compared to June 30, 2019 due to the timing of financial aid receipts and an increase in average balance per account as the goal of higher persistence is achieved.

● A $24.1 million increase resulting from an increase in deferred revenue balances due to the timing of the Chamberlain academic term at March 31, 2020, which is the middle of a term, compared to June 30, 2019, which is the end of a term.

● A $41.6 million decrease in operating lease liabilities which results from the payments under operating lease liabilities recorded upon the implementation of ASC 842 on July 1, 2019.

● A $46.7 million decrease resulting from a change in prepaid expense and other current assets, accounts payable, accrued payroll and benefits, and accrued liabilities balances due to the timing of disbursements in the normal processing cycles.

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Investing Activities

Capital expenditures in the first nine months of fiscal year 2020 were $31.9 million compared to $45.3 million in the year-ago period. The capital expenditures in fiscal year 2020 include spending for Chamberlain new campus development, maintenance, and Adtalem’s home office reorganization.

Capital spending for the remainder of fiscal year 2020 will support continued investment for new campus development at Chamberlain and maintenance at the medical and veterinary schools. Management anticipates full fiscal year 2020 capital spending to be approximately $40 million, including $31.9 million spent during the first nine months of fiscal year 2020. 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 the Consolidated Financial Statements).

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus facility. Net proceeds from the sale of $6.4 million resulted in a gain on the sale of $4.8 million in the first nine months of fiscal year 2020. This gain was recorded at Adtalem’s home office, which is classified as “Home Office and Other” in Note 20 “Segment Information” to the Consolidated Financial Statements.

In the second quarter of fiscal year 2019, AUC and RUSM received the final insurance proceeds in settlement of claims made related to Hurricanes Irma and Maria. The total proceeds received from insurance settlements were in excess of expense recorded for hurricane-related evacuation processes, temporary housing, and transportation of students, faculty and staff, and incremental costs of teaching at alternative sites, less deductibles. The resulting excess proceeds of $35.7 million were applied against asset damages and capital repairs and replacement in the second quarter of fiscal year 2019, which requires classification of the gain as an investing activity.

On December 4, 2018, Adtalem completed the sale of its ownership of all the outstanding equity interests in U.S. Education Holdings LLC, the holding company of Carrington, to San Joaquin Valley College, Inc. (“SJVC”), pursuant to terms and conditions of the Membership Interest Purchase Agreement (“MIPA”), dated June 28, 2018. The equity interests were sold for de minimis consideration, subject to customary adjustments for working capital and required transfer of $9.9 million of cash and restricted cash balances in the second quarter fiscal year 2019.

On December 11, 2018, Adtalem completed the sale of the equity interest of DeVry University to Cogswell Education, LLC (“Cogswell”) under the terms of the purchase agreement dated December 4, 2017. The equity interests were sold for de minimis consideration, subject to customary adjustments for working capital and required $39.0 million of cash and restricted cash balances in the second quarter of fiscal year 2019. In connection with the completion of the sale, Adtalem loaned $10.0 million to DeVry University under the terms of the promissory note, dated December 11, 2018 (the “Note”). The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022.

Financing Activities

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

	Nine Months Ended
	March 31,
	2020		2019
Proceeds from exercise of stock options	$	2,276	$	16,825
Repurchase of common stock for treasury		(136,889)		(176,903)
Net borrowings (payments) under credit facility		47,750		(2,250)
Payment for purchase of redeemable noncontrolling interest of subsidiary		(6,247)		—
Other		(115)		(6,106)
Net cash used in financing activities-continuing operations	$	(93,225)	$	(168,434)

As of March 31, 2020, the amount available under the current share repurchase program, announced on November 7, 2018, totaled $45.2 million. On January 29, 2020, the Board of Directors (the “Board”) authorized Adtalem’s twelfth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The new program will commence when the repurchases from the current program are complete. See Note 15 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

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Repurchases were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.

As of March 31, 2020, the amount of debt outstanding under our credit facility was $454.8 million. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on our credit agreement.

Management currently projects that COVID-19 will have an effect on operations and, as a result, liquidity, as discussed in the previous section of this MD&A titled “COVID-19”; however, we believe the current balances of unrestricted cash, cash generated from operations, cash proceeds from the sale of Adtalem Brazil (discussed in Note 4 “Discontinued Operations and Assets Held for Sale” to the Consolidated Financial Statements) and our credit facility (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements) will be sufficient to fund both Adtalem’s current domestic and international operations and growth plans for the foreseeable future unless significant investment opportunities should arise.

Contractual Obligations

Adtalem’s long-term contractual obligations consist of its $600 million Credit Facility (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements), operating leases (discussed in Note 11 “Leases” to the Consolidated Financial Statements) on facilities, and agreements for various services.

In fiscal year 2018, Adtalem recorded a liability of $96.3 million for the one-time transition tax on the deemed repatriation of foreign earnings, pursuant to the Tax Act. This amount was reduced to $8.7 million after utilization of tax credits and current and prior year tax losses, and is payable over eight years. The first installment will be required in fiscal year 2021.

On December 11, 2018, Adtalem completed the sale of DeVry University to Cogswell. In connection with the closing of the sale, Adtalem loaned to DeVry University $10.0 million under the terms of the promissory note, dated as of December 11, 2018. The Note bears interest at a rate of 4% per annum, payable annually in arrears, and has a maturity date of January 1, 2022. DeVry University may make prepayments on the Note.

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul College Prep Foundation (“DePaul College Prep”) for $52.0 million. Adtalem received $5.2 million of cash at the time of closing and holds a mortgage, secured by the property, from DePaul College Prep for $46.8 million. The mortgage is due on July 31, 2024 as a balloon payment and bears interest at a rate of 4% per annum, payable monthly. The buyer has an option to make prepayments.

Adtalem is leasing space to DeVry University at four facilities owned by Adtalem and subleasing space, in full or in part, at an additional 23 facilities, of which 15 are subleased to DeVry University and/or Carrington. Adtalem remains the primary lessee on the 23 underlying leases. These lease and sublease agreements were entered into at comparable market rates and the terms range from one to six years. Future minimum lease and sublease rental income under these agreements as of March 31, 2020, were as follows (in thousands):

Fiscal Year	Amount
2020 (remaining)	$	5,796
2021		19,852
2022		16,935
2023		16,199
2024		10,438
Thereafter		7,307
Total lease and sublease rental income	$	76,527

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

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Seasonality

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

Off-Balance Sheet Arrangements

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

In connection with the sale of Adtalem Brazil completed on April 24, 2020, Adtalem entered into a deal-contingent foreign currency hedge arrangement to economically hedge the Brazilian Real denominated sales price through mitigation of the currency exchange rate risk. The hedge agreement has a total notional amount of R$2,154 million (approximately $415 million as of March 31, 2020). The derivative associated with the hedge agreement does not qualify for hedge accounting treatment under ASC 815, and as a result, all changes in fair value are recorded within the income statement. Adtalem recorded a pre-tax unrealized gain on the hedge agreement derivative based on the foreign exchange forward spot rate as of March 31, 2020 of $111.8 million and $83.8 million in the third quarter and first nine months of fiscal year 2020, respectively. The change in value in this hedge does not result in a change in proceeds, net of the hedge settlement, from the amount originally expected from the sale transaction.

On March 24, 2020, Adtalem executed a pay-fixed, receive-variable interest rate swap agreement (the “Swap”) with a multinational financial institution to mitigate risks associated with the variable interest rate on our Term B Loan debt. We will pay interest at a fixed rate of 0.946% and receive variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Term B Loan. The effective date of the Swap is March 31, 2020 and settlements with the counterparty will occur on a monthly basis. The Swap will terminate on February 28, 2025. During the operating term of the Swap, the annual interest rate on the amount of the Term B Loan will be fixed at 3.946% (including the impact of our current 3% interest rate margin on LIBOR loans) for the applicable interest rate period. The Swap is designated as a cash flow hedge and as such, changes in its fair value are recognized in accumulated other comprehensive loss on the Consolidated Balance Sheet and are reclassified into the Consolidated Statements of Income within interest expense in the periods in which the hedged transactions affect earnings. As of March 31, 2020, the fair value of the Swap was a gain of $0.6 million.

Adtalem did not enter into any other derivatives, swaps, futures contracts, calls, hedges, or non-exchange traded contracts during the first nine months of fiscal year 2020.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates as disclosed in our 2019 Form 10-K.

Recent Accounting Pronouncements

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

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact, which includes statements regarding the future impact of the COVID-19 pandemic. Forward-looking statements can also be identified by words such as “future,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “may,” “will,”

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“would,” “could,” “can,” “continue,” “preliminary,” “range,” and similar terms. These forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those described in the statements. These risk and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our 2019 Form 10-K and this Quarterly Report on Form 10-Q, which should be read in conjunction with the forward-looking statements in this Quarterly Report on Form 10-Q. These forward-looking statements are based on information available to us as of the date any such statements are made, and we do not undertake any obligation to update any forward-looking statement, except as required by law.

Non-GAAP Financial Measures and Reconciliations

We believe that certain non-GAAP financial measures provides investors with useful supplemental information regarding the underlying business trends and performance of Adtalem’s ongoing operations and is useful for period-over-period comparisons. We use these supplemental non-GAAP financial measures internally in our assessment of performance and budgeting process. However, these non-GAAP financial measures should be not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The following are non-GAAP financial measures used in this Quarterly Report on Form 10-Q:

Net income from continuing operations attributable to Adtalem excluding special items (most comparable GAAP measure: net income attributable to Adtalem) – Measure of Adtalem’s net income attributable to Adtalem adjusted for restructuring expense, gain on sale of assets, settlement gain, gain on derivative, tax charges related to the divestiture of DeVry University, and loss (income) from discontinued operations.

Earnings per share from continuing operations excluding special items (most comparable GAAP measure: earnings per share) – Measure of Adtalem’s diluted earnings per share adjusted for restructuring expense, gain on sale of assets, settlement gain, gain on derivative, tax charges related to the divestiture of DeVry University, and loss (income) from discontinued operations.

Operating income from continuing operations excluding special items (most comparable GAAP measure: operating income from continuing operations) – Measure of Adtalem’s operating income from continuing operations adjusted for restructuring expense, gain on sale of assets, and settlement gain. This measure is applied on a consolidated and segment basis, depending on the context of the discussion.

Effective income tax rate from continuing operations excluding special items (most comparable GAAP measure: effective income tax rate from continuing operations) – Measure of Adtalem’s effective tax rate adjusted for tax effect on gain on derivative and tax charges related to the divestiture of DeVry University.

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

● Restructuring charges primarily related to the sale of Becker’s courses for healthcare students, real estate consolidations and workforce reductions at Adtalem’s home office, and the closing of the RUSM campus in Dominica.

● Gain on the sale of Adtalem’s Columbus, Ohio, campus facility.

● Settlement gain related to the final insurance settlement related to Hurricanes Irma and Maria at AUC and RUSM.

● Gain on the deal-contingent foreign currency hedge arrangement entered into in connection with the sale of Adtalem Brazil completed on April 24, 2020 to economically hedge the Brazilian Real denominated purchase price through mitigation of the currency exchange rate risk.

● Tax charges related to the divestiture of DeVry University.

● Discontinued operations include the operations of Adtalem Brazil, Carrington, and DeVry University.

Constant currency – Certain information for Adtalem Brazil, which is classified as a discontinued operation, is presented on a constant currency basis, which is a non-GAAP measure, along with the nearest GAAP measure.

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 above and the constant currency disclosures are located within the Adtalem Brazil results of operations discussion above.

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Net income attributable to Adtalem reconciliation to net income from continuing operations attributable to Adtalem excluding special items (in thousands):

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Net income attributable to Adtalem (GAAP)	$	150,832	$	37,905	$	170,718	$	45,670
Restructuring expense		1,854		2,186		10,339		45,194
Gain on sale of assets		—		—		(4,779)		—
Settlement gain		—		—		—		(15,571)
Gain on derivative		(111,838)		—		(83,832)		—
Tax charges related to the divestiture of DeVry University		—		—		—		1,526
Income tax impact on non-GAAP adjustments (1)		(361)		328		(1,165)		(4,795)
Loss (income) from discontinued operations		2,719		(3,065)		1,758		26,328
Net income from continuing operations attributable to Adtalem excluding special items (non-GAAP)	$	43,206	$	37,354	$	93,039	$	98,352

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

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

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2020		2019		2020		2019
Earnings per share, diluted (GAAP)	$	2.83	$	0.64	$	3.13	$	0.76
Effect on diluted earnings per share:
Restructuring expense		0.03		0.04		0.19		0.75
Gain on sale of assets		-		-		(0.09)		-
Settlement gain		-		-		-		(0.26)
Gain on derivative		(2.10)		-		(1.54)		-
Tax charges related to the divestiture of DeVry University		-		-		-		0.03
Income tax impact on non-GAAP adjustments (1)		(0.01)		0.01		(0.02)		(0.08)
Loss (income) from discontinued operations		0.05		(0.05)		0.03		0.44
Earnings per share from continuing operations excluding special items, diluted (non-GAAP)	$	0.81	$	0.64	$	1.70	$	1.64
Diluted shares used in EPS calculation		53,319		58,802		54,576		60,004

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

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Effective income tax rate from continuing operations reconciliation to effective income tax rate from continuing operations excluding special items (in thousands):

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2020			2019			2020			2019
Pre-tax results:
Income from continuing operations before income taxes (GAAP)	$	160,368		$	42,570		$	190,355		$	89,103
Gain on derivative		(111,838)			—			(83,832)			—
Income from continuing operations before income taxes excluding special items (non-GAAP)	$	48,530		$	42,570		$	106,523		$	89,103
Taxes:
Provision for income taxes (GAAP)	$	(6,937)		$	(7,843)		$	(18,213)		$	(17,370)
Tax charges related to the divestiture of DeVry University		—			—			—			1,526
Provision for income taxes excluding special items (non-GAAP)	$	(6,937)		$	(7,843)		$	(18,213)		$	(15,844)
Tax rate:
Effective income tax rate (GAAP)		4.3	%		18.4	%		9.6	%		19.5	%
Effective income tax rate excluding special items (non-GAAP)		14.3	%		18.4	%		17.1	%		17.8	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In connection with the sale of Adtalem Brazil completed on April 24, 2020, Adtalem entered into a deal-contingent foreign currency hedge arrangement to economically hedge the Brazilian Real denominated sales price through mitigation of the currency exchange rate risk. The hedge agreement has a total notional amount of R$2,154 million (approximately $415 million as of March 31, 2020). The derivative associated with the hedge agreement does not qualify for hedge accounting treatment under ASC 815, and as a result, all changes in fair value are recorded within the income statement. Adtalem recorded a pre-tax unrealized gain on the hedge agreement derivative based on the foreign exchange forward spot rate as of March 31, 2020 of $111.8 million and $83.8 million in the third quarter and first nine months of fiscal year 2020, respectively. The change in value in this hedge does not result in a change in proceeds, net of the hedge settlement, from the amount originally expected from the sale transaction. This deal contingent foreign currency hedge was settled in conjunction with the close of the sale of Adtalem Brazil with cash proceeds of $110.7 million during the fourth quarter of fiscal year 2020.

On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap agreement (the “Swap”) with a multinational financial institution to mitigate risks associated with the variable interest rate on our Term B Loan debt. We will pay interest at a fixed rate of 0.946% and receive variable interest of one-month LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount outstanding under the Term B Loan. The effective date of the Swap is March 31, 2020 and settlements with the counterparty will occur on a monthly basis. The Swap will terminate on February 28, 2025. During the operating term of the Swap, the annual interest rate on the amount of the Term B Loan will be fixed at 3.946% (including the impact of our current 3% interest rate margin on LIBOR loans) for the applicable interest rate period. The Swap is designated as a cash flow hedge and as such, changes in its fair value are recognized in accumulated other comprehensive loss on the Consolidated Balance Sheet and are reclassified into the Consolidated Statements of Income within interest expense in the periods in which the hedged transactions affect earnings. As of March 31, 2020, the fair value of the Swap was a gain of $0.6 million.

There have been no other material changes in Adtalem’s market risk exposure during the first nine months of fiscal year 2020. For a discussion of Adtalem’s exposure to market risk, refer to Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of Adtalem’s management, Adtalem’s Chief Executive Officer and Chief Financial Officer have concluded that Adtalem’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of March 31, 2020 to provide reasonable assurance that information required to be disclosed by Adtalem in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to Adtalem’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, Adtalem’s internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 19 “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 1. “Financial Statements.”

Item 1A. Risk Factors

In addition to the other information set forth in this report, the factors discussed in Item 1A. “Risk Factors” in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, which could materially affect Adtalem’s business, financial condition, or future results, should be carefully considered. Such risks are not the only risks facing Adtalem. Additional risks and uncertainties not currently known to Adtalem or that management currently deems to be immaterial also may materially adversely affect its business, financial condition, and/or operating results. Except for the risk factor discussed below, there have been no material changes to Adtalem’s risk factors since its Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Outbreaks of communicable infections or diseases, or other public health pandemics, such as the global coronavirus outbreak currently being experienced, in the locations in which we, our students, faculty, and employees live, work, and attend classes, could substantially harm our business.

Disease outbreaks and other public health conditions, such as the current outbreak of the coronavirus currently being experienced, in the locations in which we, our students, faculty, and employees live, work, and attend classes could have a significant negative impact on our revenue, profitability, and business. We have developed and continue to develop plans to help mitigate the negative impact of the coronavirus to our business including all classes having shifted to online learning, all employees working from home, practice containment, recovery and normalization scenario planning, and emergency succession planning. The coronavirus outbreak continues to be fluid and uncertain, making it difficult to forecast the final impact it could have on our future operations. If our business experiences prolonged occurrences of adverse public health conditions, such as the coronavirus, and the attendant stay-at-home orders, we believe it could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Management expects more significant effects to consolidated revenue, net income, cash flows, and earnings per share in the fourth quarter of fiscal year 2020 and fiscal year 2021 if the economic effects of the COVID-19 pandemic and social distancing measures established to combat the virus continue for an extended period of time. If our business results and financial condition were materially and adversely impacted, then intangible assets and goodwill could be impaired, requiring a possible write-off. As of March 31, 2020, intangible assets from business combinations totaled $290.1 million and goodwill totaled $686.2 million.

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

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1, 2020 - January 31, 2020	58,817	$	35.61	58,817	$	380,006,562
February 1, 2020 - February 29, 2020	580,017		33.30	580,017		360,694,516
March 1, 2020 - March 31, 2020	525,474		29.43	525,474		345,231,045
Total	1,164,308	$	31.67	1,164,308	$	345,231,045

(1)  On November 7, 2018, the Board of Directors of Adtalem (the “Board”) authorized the current share repurchase program to repurchase up to $300 million of Adtalem common stock through December 31, 2021. On January 29, 2020, the Board authorized Adtalem’s twelfth share repurchase program, which allows Adtalem to repurchase up to $300 million of its common stock through December 31, 2021. The new program will commence when the repurchases from the current program are complete. Repurchases were suspended on March 12, 2020 due to the economic uncertainty caused by the COVID-19 pandemic. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors.

Other Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2020 - January 31, 2020	582	$	35.65	NA	NA
February 1, 2020 - February 29, 2020	1,831		33.90	NA	NA
March 1, 2020 - March 31, 2020	—		—	NA	NA
Total	2,413	$	34.32	NA	NA

(1)  Represents shares delivered back to Adtalem for payment of withholding taxes from employees for vesting restricted stock units and shares swapped for payment on exercise of incentive stock options pursuant to terms of Adtalem’s stock incentive plans.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

10.1	Offer Letter between Adtalem Global Education Inc. and Robert Phelan dated January 27, 2020 (incorporated by reference to Exhibit 10.1 to Adtalem’s Current Report on Form 8-K February 18, 2020)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
32	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Furnished herewith.

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SIGNATURE

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

	Adtalem Global Education Inc.
Date: May 5, 2020		/s/ Michael O. Randolfi
		Michael O. Randolfi
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

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