UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2023
	or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____
	Commission File Number: 001-13988

Adtalem Global Education Inc.

(Exact name of registrant as specified in its charter)

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

(312) 651-1400

(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
Common stock, $0.01 par value per share	ATGE	Chicago 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

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

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

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

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

As of October 20, 2023, there were 39,828,454 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	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Cash Flows	3
	Consolidated Statements of Shareholders’ Equity	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
	Part II. Other Information
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	49
	Signature	50

Part I. Financial Information

Item 1. Financial Statements

Adtalem Global Education Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except par value)

	September 30,		June 30,
	2023		2023
Assets:
Current assets:
Cash and cash equivalents	$	262,438	$	273,689
Restricted cash		1,988		1,386
Accounts receivable, net		147,752		102,749
Prepaid expenses and other current assets		60,750		100,715
Total current assets		472,928		478,539
Noncurrent assets:
Property and equipment, net		264,766		258,522
Operating lease assets		171,055		174,677
Deferred income taxes		54,855		56,694
Intangible assets, net		801,661		812,338
Goodwill		961,262		961,262
Other assets, net		67,634		68,509
Total noncurrent assets		2,321,233		2,332,002
Total assets	$	2,794,161	$	2,810,541
Liabilities and shareholders' equity:
Current liabilities:
Accounts payable	$	76,866	$	81,812
Accrued payroll and benefits		43,138		52,041
Accrued liabilities		89,395		105,806
Deferred revenue		250,555		153,871
Current operating lease liabilities		35,681		37,673
Total current liabilities		495,635		431,203
Noncurrent liabilities:
Long-term debt		695,725		695,077
Long-term operating lease liabilities		160,523		163,441
Deferred income taxes		26,394		26,068
Other liabilities		37,221		37,416
Total noncurrent liabilities		919,863		922,002
Total liabilities		1,415,498		1,353,205
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value per share, 200,000 shares authorized; 40,401 and 42,310 shares outstanding as of September 30, 2023 and June 30, 2023, respectively		826		822
Additional paid-in capital		576,758		568,761
Retained earnings		2,414,378		2,403,750
Accumulated other comprehensive loss		(2,227)		(2,227)
Treasury stock, at cost, 42,204 and 39,922 shares as of September 30, 2023 and June 30, 2023, respectively		(1,611,072)		(1,513,770)
Total shareholders' equity		1,378,663		1,457,336
Total liabilities and shareholders' equity	$	2,794,161	$	2,810,541

See accompanying Notes to Consolidated Financial Statements.

1

Adtalem Global Education Inc.

Consolidated Statements of Income

(unaudited)

(in thousands, except per share data)

	Three Months Ended
	September 30,
	2023		2022
Revenue	$	368,845	$	354,269
Operating cost and expense:
Cost of educational services		168,618		159,645
Student services and administrative expense		166,095		146,385
Restructuring expense		676		15,065
Business integration expense		5,262		9,540
Total operating cost and expense		340,651		330,635
Operating income		28,194		23,634
Interest expense		(15,657)		(17,760)
Other income, net		2,214		761
Income from continuing operations before income taxes		14,751		6,635
Provision for income taxes		(2,792)		(1,122)
Income from continuing operations		11,959		5,513
Discontinued operations:
Loss from discontinued operations before income taxes		(1,765)		(3,265)
Loss on disposal of discontinued operations before income taxes		—		(3,359)
Benefit from income taxes		452		1,703
Loss from discontinued operations		(1,313)		(4,921)
Net income and comprehensive income	$	10,646	$	592
Earnings (loss) per share:
Basic:
Continuing operations	$	0.29	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total basic earnings per share	$	0.26	$	0.01
Diluted:
Continuing operations	$	0.28	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total diluted earnings per share	$	0.25	$	0.01
Weighted-average shares outstanding:
Basic shares		41,399		45,274
Diluted shares		42,184		46,342

See accompanying Notes to Consolidated Financial Statements.

2

Adtalem Global Education Inc.

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

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

See accompanying Notes to Consolidated Financial Statements.

3

Adtalem Global Education Inc.

Consolidated Statements of Shareholders’ Equity

(unaudited)

(in thousands)

									Accumulated
					Additional				Other
	Common Stock				Paid-In		Retained		Comprehensive		Treasury Stock
	Shares		Amount		Capital		Earnings		Loss		Shares		Amount		Total
June 30, 2022		81,796	$	818	$	521,848	$	2,310,396	$	(2,227)		36,619	$	(1,339,449)	$	1,491,386
Net income								592								592
Stock-based compensation						6,145										6,145
Net activity from stock-based compensation awards		303		3		1,238						88		(3,486)		(2,245)
Proceeds from stock issued under Colleague Stock Purchase Plan						(2)						(4)		149		147
September 30, 2022		82,099	$	821	$	529,229	$	2,310,988	$	(2,227)		36,703	$	(1,342,786)	$	1,496,025
June 30, 2023		82,232	$	822	$	568,761	$	2,403,750	$	(2,227)		39,922	$	(1,513,770)	$	1,457,336
Net income								10,646								10,646
Stock-based compensation						7,455										7,455
Net activity from stock-based compensation awards		373		4		546						130		(5,651)		(5,101)
Proceeds from stock issued under Colleague Stock Purchase Plan						(4)		(18)				(6)		233		211
Repurchases of common stock for treasury												2,158		(91,884)		(91,884)
September 30, 2023		82,605	$	826	$	576,758	$	2,414,378	$	(2,227)		42,204	$	(1,611,072)	$	1,378,663

See accompanying Notes to Consolidated Financial Statements.

4

Adtalem Global Education Inc.

Notes to Consolidated Financial Statements

(unaudited)

Table of Contents

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

5

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 national leader in post-secondary education and a leading provider of professional talent to the healthcare industry. Our schools consist of Chamberlain University (“Chamberlain”), Walden University (“Walden”), American University of the Caribbean School of Medicine (“AUC”), Ross University School of Medicine (“RUSM”), and Ross University School of Veterinary Medicine (“RUSVM”). AUC, RUSM, and RUSVM are collectively referred to as the “medical and veterinary schools.” See Note 18 “Segment Information” for information on our reportable segments.

2. Summary of Significant Accounting Policies

Basis of Presentation

A full listing of our significant accounting policies is described in Note 2 “Summary of Significant Accounting Policies” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“2023 Form 10-K”). We have prepared the accompanying unaudited consolidated financial statements in accordance with U.S generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (which are normal and recurring in nature) considered necessary for a fair presentation have been included. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. These consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto included in our 2023 Form 10-K.

We use the same accounting policies in preparing quarterly and annual financial statements. Unless otherwise noted, amounts presented within the Notes to Consolidated Financial Statements refer to our continuing operations.

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

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Standards

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

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

6

Revision to Previously Issued Financial Statements

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

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

	Three Months Ended September 30, 2022
	As reported		Adjustment		As revised
Revenue	$	354,559	$	(290)	$	354,269
Operating cost and expense:
Student services and administrative expense		148,341		(1,956)		146,385
Business integration expense		8,415		1,125		9,540
Total operating cost and expense		331,466		(831)		330,635
Operating income		23,093		541		23,634
Other income, net		1,567		(806)		761
Income from continuing operations before income taxes		6,900		(265)		6,635
Provision for income taxes		(1,054)		(68)		(1,122)
Income from continuing operations		5,846		(333)		5,513
Discontinued operations:
Loss from discontinued operations before income taxes		(3,438)		173		(3,265)
Benefit from income taxes		3,143		(1,440)		1,703
Loss from discontinued operations		(3,654)		(1,267)		(4,921)
Net income		2,192		(1,600)		592
Earnings (loss) per share:
Basic:
Continuing operations	$	0.13	$	(0.01)	$	0.12
Discontinued operations	$	(0.08)	$	(0.03)	$	(0.11)
Total basic earnings per share	$	0.05	$	(0.04)	$	0.01
Diluted:
Continuing operations	$	0.13	$	(0.01)	$	0.12
Discontinued operations	$	(0.08)	$	(0.03)	$	(0.11)
Total diluted earnings per share	$	0.05	$	(0.04)	$	0.01

To conform to current period presentation, the previously reported interest income line is now included within other income, net.

7

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

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

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

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

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

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

3. Discontinued Operations

On December 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 had a major effect on Adtalem’s operations and financial results, DeVry University is presented in Adtalem’s Consolidated Financial Statements as a discontinued operation. The purchase agreement includes an earn-out entitling Adtalem to payments of up to $20.0 million over a ten-year period payable based on DeVry University’s free cash flow. Adtalem received $4.1 million and $2.9 million during

8

the second quarter of fiscal year 2023 and 2022, respectively, related to the earn-out, resulting in a total of $7.0 million being received thus far.

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

The following is a summary of income statement information of operations reported as discontinued operations, which includes expense from ongoing litigation costs and settlements related to the DeVry University divestiture and a loss on the sale of ACAMS, Becker, and OCL for working capital adjustments to the initial sales prices (in thousands):

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

4. Revenue

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

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

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

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

9

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

Performance Obligations and Revenue Recognition

Tuition and fees: The majority of revenue is derived from tuition and fees, which is recognized on a straight-line basis over the academic term as instruction is delivered.

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

Arrangements for payment are agreed to prior to registration of the student’s first academic term. The 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 not utilizing Title IV or other financial aid funding may pay after the academic term is complete.

Transaction Price

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

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

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

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

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

10

Contract Balances

Students are billed at the beginning of each academic term and payment is due at that time. Adtalem’s performance obligation is to provide educational services in the form of instruction during the academic term and to provide for any scholarships or discounts that are deemed a material right under ASC 606. As instruction is provided or the deferred value of material rights are redeemed, deferred revenue is reduced. A significant portion of student payments are from Title IV financial aid and other programs and are generally received during the first month of the respective academic term. For students utilizing Adtalem’s credit extension programs (see Note 9 “Accounts Receivable and Credit Losses”), payments are generally received after the academic term, and the corresponding performance obligation, is complete. When payments are received, accounts receivable is reduced.

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

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

5. Restructuring Charges

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

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

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

11

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

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

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

6. Other Income, Net

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

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

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

7. Income Taxes

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

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

8. Earnings per Share

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

12

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

	Three Months Ended
	September 30,
	2023		2022
Numerator:
Net income (loss):
Continuing operations	$	11,959	$	5,513
Discontinued operations		(1,313)		(4,921)
Net income	$	10,646	$	592
Denominator:
Weighted-average basic shares outstanding		41,399		45,274
Effect of dilutive stock awards		785		762
Effect of ASR		—		306
Weighted-average diluted shares outstanding		42,184		46,342
Earnings (loss) per share:
Basic:
Continuing operations	$	0.29	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total basic earnings per share	$	0.26	$	0.01
Diluted:
Continuing operations	$	0.28	$	0.12
Discontinued operations	$	(0.03)	$	(0.11)
Total diluted earnings per share	$	0.25	$	0.01
Weighted-average antidilutive shares		332		477

9. Accounts Receivable and Credit Losses

We categorize our accounts receivable balances as trade receivables or financing receivables. Our trade receivables relate to student balances occurring in the normal course of business. Trade receivables have a term of less than one year and are included in accounts receivable, net on our Consolidated Balance Sheets. Our financing receivables relate to credit extension programs where the student is provided payment terms in excess of one year with their respective school and are included in accounts receivable, net and other assets, net on our Consolidated Balance Sheets.

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

	September 30, 2023
		Gross		Allowance		Net
Trade receivables, current	$	177,537	$	(32,361)	$	145,176
Financing receivables, current		4,811		(2,235)		2,576
Accounts receivable, current	$	182,348	$	(34,596)	$	147,752
Financing receivables, current	$	4,811	$	(2,235)	$	2,576
Financing receivables, noncurrent		36,625		(9,951)		26,674
Total financing receivables	$	41,436	$	(12,186)	$	29,250

13

	June 30, 2023
		Gross		Allowance		Net
Trade receivables, current	$	129,318	$	(29,190)	$	100,128
Financing receivables, current		4,757		(2,136)		2,621
Accounts receivable, current	$	134,075	$	(31,326)	$	102,749
Financing receivables, current	$	4,757	$	(2,136)	$	2,621
Financing receivables, noncurrent		36,368		(9,332)		27,036
Total financing receivables	$	41,125	$	(11,468)	$	29,657

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

Credit Quality

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

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

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

14

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

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

Allowance for Credit Losses

The allowance for credit losses represents an estimate of the lifetime expected credit losses inherent in our accounts receivable balances as of each balance sheet date. In evaluating the collectability of all our accounts receivable balances, we utilize historical events, current conditions, and reasonable and supportable forecasts about the future.

For our trade receivables, we primarily use historical loss rates based on an aging schedule and a student’s status to determine the allowance for credit losses. As these trade receivables are short-term in nature, management believes a student’s status provides the best credit loss estimate, while also factoring in delinquency. Students still attending classes, recently graduated, or current on payments are more likely to pay than those who are inactive due to being on a leave of absence, withdrawing from school, or not current on payments.

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

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

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

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

15

10. Property and Equipment, Net

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

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

11. Leases

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

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

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

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

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

16

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

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

Lease term and discount rate were as follows:

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

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

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

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

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

17

12. Goodwill and Intangible Assets

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

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

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

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

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

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

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

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

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

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

18

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

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

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

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

Goodwill and indefinite-lived intangible assets are not amortized, but are tested for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Our annual testing date is May 31.

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

These interim triggering event conclusions were based on the fact that the annual impairment review of Adtalem’s reporting units and indefinite-lived intangible assets resulted in no impairments as of the end of fiscal year 2023, and that no interim events or deviations from planned operating results occurred as of September 30, 2023 that would cause management to reassess these conclusions.

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

19

13. Debt

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

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

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

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

Senior Secured Notes due 2028

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

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

 At any time prior to March 1, 2024, we may redeem all or a part of the Notes at a redemption price equal to 100% of the principal amount of the Notes being redeemed plus a make-whole premium set forth in the Indenture and accrued and unpaid interest, if any, to, but not including, the redemption date. We may redeem the Notes, in whole or in part, at any time on or after March 1, 2024 at redemption prices equal to 102.75%, 101.375%, and 100% of the principal amount of the Notes redeemed if the redemption occurs during the twelve-month periods beginning on March 1 of the years 2024, 2025, and 2026 and thereafter, respectively, in each case plus accrued and unpaid interest, if any, thereon to, but not including, the applicable redemption date. In addition, at any time prior to March 1, 2024, Adtalem may redeem up to 40% of the aggregate principal amount of the Notes at a redemption price equal to 105.5% of the aggregate principal amount of the Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, with the net cash proceeds we receive from one or more qualifying equity offerings.

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

20

92% of the principal amount of the Notes, resulting in a gain on extinguishment of debt of $0.1 million recorded within interest expense in the Consolidated Statements of Income for the three months ended September 30, 2022. This debt was subsequently retired. The principal balance of the Notes is $405.0 million as of September 30, 2023.

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

Credit Agreement

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

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

Term Loan B

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

Revolver

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

The Credit Agreement requires payment of a commitment fee equal to 0.25% as of September 30, 2023, of the unused portion of the Revolver. The commitment fee expense is recorded within interest expense in the Consolidated Statements of Income. The amount unused under the Revolver was $323.8 million as of September 30, 2023.

Debt Discount and Issuance Costs

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

21

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

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

Off-Balance Sheet Arrangements

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

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

Interest Expense

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

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

Covenants and Guarantees

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

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

22

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

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

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

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

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

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

14. Share Repurchases

Open Market Share Repurchase Programs

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

23

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

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

As of September 30, 2023, $80.9 million of authorized share repurchases were remaining under the current share repurchase program. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. These repurchases may be made through the open market, including block purchases, in private 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. Repurchases under our share repurchase programs reduce the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations.

ASR Agreement

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

On March 14, 2022, we recorded the $150.0 million purchase price of the ASR as a reduction to shareholders’ equity, consisting of a $120.0 million increase in treasury stock and a $30.0 million reduction in additional paid-in capital, which represented an equity forward contract, on the Consolidated Balance Sheets. During the second quarter of fiscal year 2023, the $30.0 million initially recorded as a reduction in additional paid-in capital was reclassified to treasury stock and an additional $13.2 million was recorded in treasury stock, which represented our final cash settlement payment.

15. Stock-Based Compensation

Adtalem’s current stock-based incentive plan is its Fourth Amended and Restated Incentive Plan of 2013, which is administered by the Compensation Committee of the Board. Under the plan, directors, key executives, and managerial employees are eligible to receive stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”), and other forms of stock awards. As of September 30, 2023, 2,275,788 shares of common stock were available for future issuance under this plan.

Stock-based compensation expense is recognized on a straight-line basis over the required service period. Adtalem accounts for stock-based compensation granted to retirement eligible employees that fully vests upon an employee’s retirement under the non-substantive vesting period approach. Under this approach, the entire stock-based compensation expense is recognized at the grant date for stock-based grants issued to retirement eligible employees. For non-retirement eligible employees, stock-based compensation expense is recognized as expense over the employee requisite service period. We account for forfeitures of unvested awards in the period they occur. Adtalem issues new shares of common stock to satisfy stock option exercises, RSU vests, and PSU vests.

24

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

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

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

Stock Options

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

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

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

RSUs

Prior to fiscal year 2023, we granted RSUs generally with a four-year graduated vesting from the grant date. Beginning in fiscal year 2023, we grant RSUs generally with a three-year graduated vesting from the grant date. We also regularly grant RSUs to our Board members with a one-year cliff vest from the grant date. The recipient of the RSUs has the right to receive dividend equivalents, if any. The fair value of RSUs is the closing market price of our common stock on the grant date. The following table summarizes RSU activity for the three months ended September 30, 2023:

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

The weighted-average grant date fair value of RSUs granted in the three months ended September 30, 2023 and 2022 was $42.98 and $39.53, respectively. The fair value of RSUs that vested during the three months ended September 30, 2023 and 2022 was $8.7 million and $6.4 million, respectively. As of September 30, 2023, $22.5 million of unrecognized

25

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

PSUs

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

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

The weighted-average grant date fair value of PSUs granted in the three months ended September 30, 2023 was $42.98. We did not grant any PSUs for the three months ended September 30, 2022. The fair value of PSUs that vested during the three months ended September 30, 2023 and 2022 was $4.1 million and $3.4 million, respectively. As of September 30, 2023, $12.9 million of unrecognized stock-based compensation expense related to unvested PSUs is expected to be recognized over a remaining weighted-average period of 1.8 years.

16. Fair Value Measurements

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

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

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

Level 2 – 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.

26

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

The carrying value of our cash and cash equivalents approximates fair value because of their short-term nature and is classified as Level 1.

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

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

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

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

As of September 30, 2023 and June 30, 2023, there were no assets or liabilities measured at fair value using Level 3 inputs.

Assets measured at fair value on a nonrecurring basis include goodwill and indefinite-lived intangible assets arising from a business combination. These assets are not amortized and charged to expense over time. Instead, goodwill and indefinite-lived intangible assets must be reviewed annually for impairment or more frequently if circumstances arise indicating potential impairment. This impairment review was most recently completed as of May 31, 2023. See Note 12 “Goodwill and Intangible Assets” for additional information on the impairment review, including valuation techniques and assumptions.

17. 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. Adtalem believes it has adequately reserved for potential losses. The following is a description of pending legal and regulatory matters that may be considered other than ordinary, routine, and incidental to the business. Descriptions of certain matters from prior SEC filings may not be carried forward in this report to the extent we believe such matters no longer are required to be disclosed or there has not been, to our knowledge, significant activity relating to them. We have recorded accruals for those matters where management believes a loss is probable and can be reasonably estimated. For those matters for which we have not recorded an accrual, their possible impact on Adtalem’s business, financial condition, or results of operations, cannot be predicted at this time. The continued defense, resolution, or settlement of any of the following matters could require us to expend significant resources and could have a material adverse effect on our business, financial condition, results of operations, and cash flows, and result in the imposition of significant restrictions on us and our ability to operate.

27

On April 13, 2018, a putative class action lawsuit was filed by Nicole Versetto, individually and on behalf of others similarly situated, against Adtalem, DeVry University Inc., and DeVry/New York Inc. (collectively the “Adtalem Parties”) in the Circuit Court of Cook County, Illinois, Chancery Division. The complaint was filed on behalf of herself and three separate classes of similarly situated individuals who were citizens of the State of Illinois and who purchased or paid for a DeVry University program between January 1, 2008 and April 8, 2016. The plaintiff claimed 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 sought compensatory, exemplary, punitive, treble, and statutory penalties and damages, including pre-judgment and post-judgment interest, in addition to restitution, declaratory and injunctive relief, and attorneys’ fees. The plaintiff later filed an amended complaint asserting similar claims with a new lead plaintiff, Dave McCormick. After discussions among the parties, the court granted a Motion for Preliminary Approval of Class Action Settlement (the “McCormick Settlement”) on May 28, 2020. As such, we recorded a loss contingency accrual of $44.95 million on the Consolidated Balance Sheets as of June 30, 2020 and charged the contingency loss within discontinued operations in the Consolidated Statements of Income (Loss) for the year ended June 30, 2020. In conjunction with the McCormick Settlement, Adtalem was required to establish a settlement fund by placing $44.95 million into an escrow account, which was recorded within prepaid expenses and other current assets on the Consolidated Balance Sheets. The court issued an order approving the McCormick Settlement on October 7, 2020 and dismissed the action with prejudice. On May 4, 2022, the Appellate Court of Illinois, First District affirmed the Circuit Court of Cook County’s approval of the McCormick Settlement. The $44.95 million settlement fund was reduced by $8.92 million reflecting an offset of amounts paid to the Settlement Class. The $36.03 million settlement fund is being distributed to the Settlement Class. Adtalem received the $8.92 million return of escrow on July 18, 2023. As a result, the loss contingency accrual and prepaid expense asset associated with the previous escrow balance are no longer outstanding on the Consolidated Balance Sheets as of September 30, 2023.

On March 12, 2021, Travontae Johnson, a Chamberlain student, filed a putative class action against Chamberlain in the Circuit Court of Cook County, Illinois, Chancery Division. The plaintiff claimed that Chamberlain’s use of Respondus Monitor, an online remote proctoring tool for student examinations, violated the Illinois Biometric Information Privacy Act (“BIPA”), 740 ILCS 14/15. More particularly, the plaintiff claimed that Chamberlain required students to use Respondus Monitor, which collected, captured, stored, used, and disclosed students’ biometric identifiers and biometric information without written and informed consent. The plaintiff also alleged that Chamberlain lacked a legally compliant written policy establishing a retention schedule and guidelines for destroying biometric identifiers and biometric information. The potential class purportedly included all students who took an assessment using the proctoring tool, as a student of Chamberlain in Illinois, at any time from March 12, 2016 through January 20, 2021. The plaintiff and the putative class sought damages in excess of $50,000, attorney’s fees and costs. The plaintiff and class also sought an unspecified amount of enhanced damages based on alleged negligent or reckless conduct by Chamberlain. On July 19, 2021, Chamberlain filed its motion to dismiss the complaint arguing that plaintiff’s lawsuit is expressly preempted by Title V of the Gramm-Leach-Bliley Act. On February 1, 2023, the Court granted Chamberlain’s motion to dismiss plaintiff’s complaint. On March 3, 2023, plaintiff filed an appeal. On September 14, 2023, plaintiff’s appeal was dismissed for lack of prosecution. The plaintiff had until October 5, 2023 to file for reconsideration of the dismissal. Plaintiff failed to timely file a motion for reconsideration. This matter is concluded.

On January 12, 2022, Walden was served with a complaint filed in the United States District Court for the District of Maryland by Aljanal Carroll, Claudia Provost Charles, and Tiffany Fair against Walden for damages, injunctive relief, and declaratory relief on behalf of themselves and all other similarly-situated individuals alleging violations of Title VI of the Civil Rights Act of 1964, the Equal Credit Opportunity Act, the Minnesota Prevention of Consumer Fraud Act, the Minnesota Uniform Deceptive Trade Practices Act, Minnesota statutes prohibiting false statements in advertising, and for common law fraudulent misrepresentation. Plaintiffs allege that Walden has targeted, deceived, and exploited Black and female Doctor of Business Administration (“DBA”) students by knowingly misrepresenting and understating the number of “capstone” credits required to complete the DBA program and obtain a degree. On March 23, 2022, Walden filed a Motion to Dismiss the Plaintiffs’ claims for failure to state a claim upon which relief can be granted. On November 27, 2022, the Court denied Walden’s motion to dismiss the complaint. Plaintiffs filed an amended complaint to add an additional plaintiff, Tareion Fluker. Walden answered the amended complaint on February 2, 2023. The parties participated in a non-binding mediation on May 4, 2023 and settlement discussions continued. The parties filed a joint motion to stay

28

discovery through October 10, 2023 pending the outcome of a second non-binding mediation held on September 21, 2023. At this mediation, the parties agreed on a $28.5 million payment to resolve the issues in the case, subject to agreement on non-financial terms, discussions about which are ongoing. We have recorded a $28.5 million loss contingency accrual for this matter within accrued liabilities on the Consolidated Balance Sheets as of September 30, 2023. If a tentative settlement is reached, it is subject to approval by Adtalem’s Board of Directors and the court.

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

As previously disclosed, pursuant to the terms of the Stock Purchase Agreement (“SPA”) by and between Adtalem and Cogswell, dated as of December 4, 2017, as amended, Adtalem sold DeVry University to Cogswell and Adtalem agreed to indemnify DeVry University for certain losses up to $340.0 million (the “Liability Cap”). Adtalem has previously disclosed DeVry University related matters that have consumed a portion of the Liability Cap.

18. Segment Information

We present three reportable segments as follows:

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

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

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

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

29

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

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

Adtalem conducts its educational operations in the U.S., Barbados, St. Kitts, and St. Maarten. Revenue by geographic area is as follows (in thousands):

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

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

30

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), Adtalem Global Education Inc., together with its subsidiaries, is collectively referred to as “Adtalem,” “we,” “our,” “us,” or similar references.

Discussions within this MD&A may contain forward-looking statements. See the “Forward-Looking Statements” section for details about the uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements.

Throughout this MD&A, we sometimes use information derived from the Consolidated Financial Statements and the notes thereto but not presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these items are considered “non-GAAP financial measures” under the Securities and Exchange Commission (“SEC”) rules. See the “Non-GAAP Financial Measures and Reconciliations” section for the reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures.

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

Available Information

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

Segments

We present three reportable segments as follows:

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

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

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

“Home Office and Other” includes activities not allocated to a reportable segment. Financial and descriptive information about Adtalem’s reportable segments is presented in Note 18 “Segment Information” to the Consolidated Financial Statements.

31

Revision to Previously Issued Financial Statements

During the third quarter of fiscal year 2023, Adtalem identified an error in its revenue recognition related to certain scholarship programs within its Medical and Veterinary segment. Certain scholarships and discounts offered within that segment provide students a discount on future tuition that constitute a material right under Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers” that should be accounted for as a separate performance obligation within a contract. Adtalem assessed the materiality of this error individually and in the aggregate with other previously identified errors to prior periods’ Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 99 “Materiality” and SAB 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” codified in ASC 250 “Accounting Changes and Error Corrections.” Adtalem concluded that the errors were not material to prior periods and therefore, amendments of previously filed reports were not required. However, Adtalem determined it was appropriate to revise its previously issued financial statements. Treating the discount on future tuition as a material right results in the deferral of revenue for a portion of tuition to future periods. In accordance with ASC 250, Adtalem corrected the prior period presented herein by revising the financial statement line item amounts previously disclosed in SEC filings in order to achieve comparability in the Consolidated Financial Statements. In connection with this revision, Adtalem also corrected other immaterial errors in the prior period, including certain errors that had previously been adjusted for as out of period corrections in the period identified. See Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements for additional information.

First Quarter Highlights

Financial and operational highlights for the first quarter of fiscal year 2024 include:

● Adtalem revenue increased $14.6 million, or 4.1%, in the first quarter of fiscal year 2024 compared to the year-ago period driven by increased revenue at Chamberlain and Walden, partially offset by a revenue decline at Medical and Veterinary.

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

● For the July 2023 and September 2023 sessions, total student enrollment at Chamberlain increased 2.6% and 5.2%, respectively, compared to the same sessions last year.

● As of September 30, 2023, total student enrollment at Walden increased 0.5% compared to September 30, 2022.

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

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

32

Results of Operations

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

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

Revenue

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

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

Chamberlain

Chamberlain Student Enrollment:

	Fiscal Year 2024
Session	July 2023		Sept. 2023
Total students	32,175		34,889
% change from prior year	2.6	%	5.2	%
	Fiscal Year 2023
Session	July 2022		Sept. 2022		Nov. 2022		Jan. 2023		Mar. 2023		May 2023
Total students	31,371		33,153		33,390		34,760		34,847		33,284
% change from prior year	(4.1)	%	(4.0)	%	(0.8)	%	1.8	%	2.0	%	1.2	%

Chamberlain revenue increased 5.3%, or $7.2 million, to $142.6 million in the first quarter of fiscal year 2024 compared to the year-ago period, driven by an increase in enrollment and higher tuition rates. Enrollment has improved in several graduate and doctoral programs and the undergraduate Bachelor of Science in Nursing (“BSN”) programs. These improvements have been partially offset by a decrease in total student enrollment in the Registered Nurse to Bachelor of Science in Nursing (“RN-to-BSN”) online degree program.

33

Tuition Rates:

Tuition for the BSN onsite and online degree program ranges from $675 to $753 per credit hour. Tuition for the RN-to-BSN online degree program is $590 per credit hour. Tuition for the online Master of Science in Nursing (“MSN”) degree program is $675 per credit hour. Tuition for the online Family Nurse Practitioner (“FNP”) degree program is $690 per credit hour. Tuition for the online Doctor of Nursing Practice (“DNP”) degree program is $800 per credit hour. Tuition for the online Master of Public Health (“MPH”) degree program is $550 per credit hour. Tuition for the online Master of Social Work (“MSW”) degree program is $695 per credit hour. Tuition for the onsite Master of Physician Assistant Studies (“MPAS”) is $8,000 per session. In some cases, these tuition rates increased by approximately 3% to 4% from the prior year for new students. These tuition rates do not include the cost of course fees, books, supplies, transportation, clinical fees, living expenses, or other fees as listed in the Chamberlain academic catalog.

Walden

Walden Student Enrollment:

	Fiscal Year 2024
	September 30,
Period	2023
Total students	40,975
% change from prior year	0.5	%
	Fiscal Year 2023
	September 30,		December 31,		March 31,		June 30,
Period	2022		2022		2023		2023
Total students	40,772		37,956		39,427		37,582
% change from prior year	(9.2)	%	(7.8)	%	(7.9)	%	(4.8)	%

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

Tuition Rates:

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

34

Medical and Veterinary

Medical and Veterinary Student Enrollment:

	Fiscal Year 2024
Semester	Sept. 2023
Total students	5,209
% change from prior year	(7.5)	%
	Fiscal Year 2023
Semester	Sept. 2022		Jan. 2023		May 2023
Total students	5,634		5,312		4,869
% change from prior year	3.4	%	1.6	%	(8.2)	%

Medical and Veterinary revenue decreased 3.8%, or $3.3 million, to $84.6 million in the first quarter of fiscal year 2024 compared to the year-ago period, driven by decreased enrollment, partially offset by tuition rate increases at all three institutions in this segment.

Management’s plan to increase enrollment centers around the core goals of increasing international students, increasing affiliations with historically Black colleges and universities (“HBCU”) and Hispanic-serving institutions (“HSI”), expanding AUC’s medical education program based in the U.K. in partnership with the University of Central Lancashire (“UCLAN”), and improving the effectiveness of marketing and enrollment investments.

Tuition Rates:

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

● Effective for semesters beginning in September 2023, for students first enrolled prior to May 2022, tuition rates for the beginning basic sciences and final clinical rotation portions of RUSM’s medical program are $27,547 and $30,397, respectively, per semester. These tuition rates represent a 6.0% increase from the prior academic year. Effective for semesters beginning in September 2023, for students first enrolled in May 2022 and after, tuition rates for the beginning basic sciences and final clinical rotation portions of RUSM’s medical program are $23,284 and $27,447, respectively, per semester. In addition, students first enrolled in May 2022 and after are charged administrative fees ranging from $5,883 to $6,662 for the basic sciences portion of the program and $3,420 for the final clinical rotation portion of the program, per semester. These tuition rates and fees represent a 6.0% increase from the prior academic year.

● Effective for semesters beginning in September 2023, for students who first enrolled prior to September 2018, tuition rates for the pre-clinical (semesters 1-7) and clinical curriculum (semesters 8-10) of RUSVM’s veterinary program are $22,334 and $28,034, respectively, per semester. Effective for semesters beginning in September 2023, for students first enrolled in September 2018 and after, tuition rates for the pre-clinical and clinical curriculum of RUSVM’s veterinary program are $24,044 per semester. All of these tuition rates represent a 6.0% increase from the prior academic year.

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

35

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. We have not experienced significant inflationary pressures on wages or other costs of delivering our educational services; however, should inflation persist in the overall economy, cost increases could affect our results of operations in the future. The following table presents cost of educational services by segment detailing the changes from the year-ago period (in thousands):

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

Cost of educational services increased 5.6%, or $9.0 million, to $168.6 million in the first quarter of fiscal year 2024 compared to the year-ago period. This cost increase was primarily driven by an increase in provision for bad debts and an increase in labor costs to support increased enrollment, partially offset by a decrease in clinical costs at Medical and Veterinary.

As a percentage of revenue, cost of educational services was 45.7% and 45.1% in the first quarter of fiscal year 2024 and 2023, respectively. The increase in the percentage was primarily the result of the increase in the provision for bad debts.

Student Services and Administrative Expense

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

	Three Months Ended September 30, 2023
	Chamberlain			Walden			Medical and Veterinary			Home Office and Other		Consolidated
Fiscal year 2023	$	48,231		$	76,435		$	19,880		$	1,839	$	146,385
Cost increase (decrease)		4,634			(1,444)			1,102			4,769		9,061
Intangible amortization expense change		—			(7,851)			—			—		(7,851)
Litigation reserve change		—			18,500			—			—		18,500
Fiscal year 2024	$	52,865		$	85,640		$	20,982		$	6,608	$	166,095
Fiscal year 2024 % change:
Cost increase (decrease)		9.6	%		(1.9)	%		5.5	%		NM		6.2	%
Effect of intangible amortization expense change		—			(10.3)	%		—			NM		(5.4)	%
Effect of litigation reserve change		—			24.2	%		—			NM		12.6	%
Fiscal year 2024 % change		9.6	%		12.0	%		5.5	%		NM		13.5	%

Student services and administrative expense increased 13.5%, or $19.7 million, to $166.1 million in the first quarter of fiscal year 2024 compared to the year-ago period. Excluding intangible amortization expense and litigation reserve, student services and administrative expense increased 6.2%, or $9.1 million. This cost increase was primarily driven by an increase in incentive compensation, severance, and investments to support growth initiatives.

36

As a percentage of revenue, student services and administrative expense was 45.0% and 41.3% in the first quarter of fiscal year 2024 and 2023, respectively. The increase in the percentage was primarily the result of the litigation reserve in the first quarter of fiscal year 2024.

Restructuring Expense

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

Business Integration Expense

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

Operating Income

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

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

37

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

	Three Months Ended
	September 30,
							Increase/(Decrease)
	2023			2022			$		%
Chamberlain:
Operating income (GAAP)	$	24,324		$	26,184		$	(1,860)	(7.1)	%
Restructuring expense		—			818			(818)
Adjusted operating income (non-GAAP)	$	24,324		$	27,002		$	(2,678)	(9.9)	%
Operating margin (GAAP)		17.1	%		19.3	%
Operating margin (non-GAAP)		17.1	%		19.9	%
Walden:
Operating income (GAAP)	$	1,938		$	2,933		$	(995)	(33.9)	%
Restructuring expense		—			3,080			(3,080)
Intangible amortization expense		10,677			18,528			(7,851)
Litigation reserve		18,500			—			18,500
Adjusted operating income (non-GAAP)	$	31,115		$	24,541		$	6,574	26.8	%
Operating margin (GAAP)		1.4	%		2.2	%
Operating margin (non-GAAP)		22.0	%		18.7	%
Medical and Veterinary:
Operating income (GAAP)	$	14,363		$	10,238		$	4,125	40.3	%
Restructuring expense		114			6,826			(6,712)
Adjusted operating income (non-GAAP)	$	14,477		$	17,064		$	(2,587)	(15.2)	%
Operating margin (GAAP)		17.0	%		11.6	%
Operating margin (non-GAAP)		17.1	%		19.4	%
Home Office and Other:
Operating loss (GAAP)	$	(12,431)		$	(15,721)		$	3,290	20.9	%
Restructuring expense		562			4,341			(3,779)
Business integration expense		5,262			9,540			(4,278)
Adjusted operating loss (non-GAAP)	$	(6,607)		$	(1,840)		$	(4,767)	(259.1)	%
Adtalem Global Education:
Operating income (GAAP)	$	28,194		$	23,634		$	4,560	19.3	%
Restructuring expense		676			15,065			(14,389)
Business integration expense		5,262			9,540			(4,278)
Intangible amortization expense		10,677			18,528			(7,851)
Litigation reserve		18,500			—			18,500
Adjusted operating income (non-GAAP)	$	63,309		$	66,767		$	(3,458)	(5.2)	%
Operating margin (GAAP)		7.6	%		6.7	%
Operating margin (non-GAAP)		17.2	%		18.8	%

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

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

38

Chamberlain

Chamberlain operating income decreased 7.1%, or $1.9 million, to $24.3 million in the first quarter of fiscal year 2024 compared to the year-ago period. Segment adjusted operating income decreased 9.9%, or $2.7 million, to $24.3 million in the first quarter of fiscal year 2024 compared to the year-ago period. The decrease in adjusted operating income in the first quarter of fiscal year 2024 was primarily driven by increased labor costs and provision for bad debts, partially offset by the increase in revenue.

Walden

Walden operating income decreased 33.9%, or $1.0 million, to $1.9 million in the first quarter of fiscal year 2024 compared to the year-ago period. Segment adjusted operating income increased 26.8%, or $6.6 million, to $31.1 million in the first quarter of fiscal year 2024 compared to the year-ago period. The increase in adjusted operating income in the first quarter of fiscal year 2024 was primarily driven by the increase in revenue, partially offset by increased labor costs, provision for bad debts, and graduation expense.

Medical and Veterinary

Medical and Veterinary operating income increased 40.3%, or $4.1 million, to $14.4 million in the first quarter of fiscal year 2024 compared to the year-ago period. Segment adjusted operating income decreased 15.2%, or $2.6 million, to $14.5 million in the first quarter of fiscal year 2024 compared to the year-ago period. The decrease in adjusted operating income in the first quarter of fiscal year 2024 was primarily driven by the decrease in revenue, partially offset by decreased clinical costs.

Interest Expense

Interest expense was $15.7 million and $17.8 million in the first quarter of fiscal year 2024 and 2023, respectively. The decrease in interest expense was primarily the result of the year-ago period incurring charges due to the write-off of debt discount and issuance costs on the Term Loan B (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements) upon repayment of a portion of the debt. This decrease in interest expense was partially offset by rising interest rates on outstanding Term Loan B debt. The interest rate for borrowings under the Term Loan B debt was 9.43% and 7.05% as of September 30, 2023 and 2022, respectively.

Other Income, Net

Other income, net was $2.2 million and $0.8 million in the first quarter of fiscal year 2024 and 2023, respectively. The increase in other income, net was primarily the result of an increase in interest income.

Provision for Income Taxes

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

Our effective tax rates from continuing operations were 18.9% and 16.9% in the three months ended September 30, 2023 and 2022, respectively. The income tax provision for the first quarter of fiscal year 2024 increased compared to the year-ago period due to a decrease in the percentage of earnings from foreign operations, which are generally taxed at lower rates than domestic earnings.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) requires taxpayers to capitalize and subsequently amortize research and experimental (“R&E”) expenditures that fall within the scope of Internal Revenue Code Section 174 for tax years starting after December 31, 2021. This rule became effective for Adtalem during fiscal year 2023 and resulted in the deferred tax asset for capitalization of R&E costs of $8.1 million, based on interpretation of the law as currently enacted.

39

Adtalem will capitalize and amortize these costs for tax purposes over 5 years for R&E performed in the U.S. and over 15 years for R&E performed outside of the U.S.

Discontinued Operations

Beginning in the second quarter of fiscal year 2022, the Association of Certified Anti-Money Laundering Specialists (“ACAMS”), Becker Professional Education (“Becker”), OnCourse Learning (“OCL”), and EduPristine operations were classified as discontinued operations. In addition, we continue to incur costs associated with ongoing litigation and settlements related to the DeVry University divestiture, which was completed during fiscal year 2019, and are classified as expense within discontinued operations.

Net loss from discontinued operations in the first quarter of fiscal year 2024 was $1.3 million. This loss consisted of the following: (i) $1.8 million of expense primarily from ongoing litigation costs and settlements related to the DeVry University divestiture; and (ii) a benefit from income taxes of $0.5 million associated with the items listed above.

Net loss from discontinued operations in the first quarter of fiscal year 2023 was $4.9 million. This loss consisted of the following: (i) loss of $3.3 million of expense primarily from ongoing litigation costs and settlements related to the DeVry University divestiture; (ii) a loss on the sale of ACAMS, Becker, and OCL of $3.4 million for working capital adjustments to the initial sales prices; and (iii) a benefit from income taxes of $1.7 million associated with the items listed above.

Regulatory Environment

Like other higher education companies, Adtalem is highly dependent upon the timely receipt of federal financial aid funds. All financial aid and assistance programs are subject to political and governmental budgetary considerations. In the U.S., the Higher Education Act (“HEA”) guides the federal government’s support of postsecondary education. If there are changes to financial aid programs that restrict student eligibility or reduce funding levels, Adtalem’s financial condition and cash flows could be materially and adversely affected. See Item 1A. “Risk Factors” in our 2023 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.

Chamberlain was most recently recertified and issued an unrestricted PPA in September 2020, with an expiration date of March 31, 2024. Walden was issued a Temporary Provisional PPA (“TPPPA”) on September 17, 2021 in connection with their acquisition by Adtalem. During the fourth quarter of fiscal year 2020 and the first quarter of fiscal year 2021, ED provisionally recertified AUC, RUSM, and RUSVM’s Title IV PPAs with expiration dates of December 31, 2022, March 31, 2023, and June 30, 2023, respectively. The lengthy PPA recertification process is such that ED allows unhampered continued access to Title IV funding after PPA expiration, so long as materially complete applications are submitted at least 90 days in advance of expiration. Complete applications for PPA recertification have been timely submitted to ED. The provisional nature of the existing agreements for AUC, RUSM, and RUSVM stemmed from increased and/or repeated Title IV compliance audit findings. Walden’s TPPPA included financial requirements, which were in place prior to acquisition, such as a letter of credit, heightened cash monitoring, and additional reporting. No similar requirements were imposed on AUC, RUSM, or RUSVM. While corrective actions have been taken to resolve past compliance matters and eliminate the incidence of repetition, if AUC, RUSM, or RUSVM fail to maintain administrative capability as defined by ED while under provisional status or otherwise fail to comply with ED requirements, the institution(s) could lose eligibility to participate in Title IV programs or have that eligibility adversely conditioned, which

40

could have a material adverse effect on the businesses, financial condition, results of operations, and cash flows. ED may alternatively issue new PPAs for continued Title IV participation.

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

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

For the past several years, Adtalem’s composite score had exceeded the required minimum of 1.5. However, on September 25, 2023, Adtalem was notified by ED that the fiscal year 2022 composite score had declined to 0.2. As previously disclosed, this was expected due to the acquisition of Walden. ED advised that Adtalem’s five institutions will be permitted to continue to participate in Title IV under provisional certifications with heightened cash monitoring and continued reporting. A letter of credit in the amount of $157.9 million, representing 10% of the consolidated Title IV funds Adtalem’s institutions received during fiscal year 2022, must be delivered to ED by November 9, 2023. Management does not believe these conditions will have a material adverse effect on Adtalem’s operations.

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

41

earnings or 20% of their discretionary earnings. Programs must also pass an earnings premium test in which graduates’ earnings must exceed those of a typical high school graduate. Under the rule, programs that fail either metric must provide warnings to students and prospective students that the program is at risk of losing Title IV eligibility and programs that fail the same measure in two out of three consecutive years lose Title IV eligibility. We are reviewing the rule to determine what impact, if any, it will have on our programs. The GE rules also include a transparency framework in which debt-to-earnings, earnings premium, and a wide range of other program outcomes are disclosed on a website to be hosted by ED.

An ED regulation known as the “90/10 Rule” affects only proprietary postsecondary institutions, such as Chamberlain, Walden, 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 American Rescue Plan Act of 2021 (the “Rescue Act”) enacted on March 11, 2021 amended the 90/10 rule to require that a proprietary institution derive no more than 90% of its revenue from federal education assistance funds, including but not limited to previously excluded U.S. Department of Veterans Affairs and military tuition assistance benefits. This change was subject to negotiated rulemaking, which ended in March 2022. The amended rule applies to institutional fiscal years beginning on or after January 1, 2023. The following table details the percentage of revenue on a cash basis from federal financial assistance programs as calculated under the current regulations (excluding the U.S. Department of Veterans Affairs and military tuition assistance benefits) for each of Adtalem’s Title IV-eligible institutions for fiscal years 2022 and 2021. Final data for fiscal year 2023 is not yet available. As an institution’s 90/10 compliance must be calculated using the financial results of an entire fiscal year, we are including Walden’s amounts for the full fiscal year 2022 in the table below, including the portion of the year not under Adtalem’s ownership.

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

Liquidity and Capital Resources

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

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

Adtalem’s consolidated cash and cash equivalents balance of $262.4 million and $273.7 million as of September 30, 2023 and June 30, 2023, respectively, included cash and cash equivalents held at Adtalem’s international operations of $14.5 million and $7.2 million as of September 30, 2023 and June 30, 2023, respectively, which is available to Adtalem for general corporate purposes.

Under the terms of Adtalem institutions’ participation in financial aid programs, certain cash received from state governments and ED is maintained in restricted bank accounts. Adtalem receives these funds either after the financial aid authorization and disbursement process for the benefit of the student is completed, or just prior to that authorization. Once the authorization and disbursement process for a particular student is completed, the funds may be transferred to unrestricted accounts and become available for Adtalem to use in operations. This process generally occurs during the academic term for which such funds have been authorized. Cash in the amount of $2.0 million and $1.4 million was held in these restricted bank accounts as of September 30, 2023 and June 30, 2023, respectively.

42

Cash Flow Summary

Operating Activities

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

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

Net cash provided by operating activities from continuing operations in the three months ended September 30, 2023 was $90.7 million compared to $91.5 million in the year-ago period. The decrease was driven by lower non-cash items, partially offset by an increase in income from continuing operations and changes in working capital. The decrease of $21.6 million in non-cash items between the three months ended September 30, 2023 and the three months ended September 30, 2022 was principally driven by decreases in impairments to operating lease assets and amortization of intangible assets. The increase of $14.4 million in cash generated from changes in assets and liabilities was primarily due to timing differences in accounts receivable, prepaid assets, prepaid income taxes, accounts payable, accrued payroll and benefits, accrued liabilities, accrued interest, and deferred revenue.

Investing Activities

Capital expenditures in the first three months of fiscal year 2024 and 2023 were $15.0 million and $5.6 million, respectively. The capital expenditures in fiscal year 2024 primarily consisted of spending for information technology investments and Chamberlain’s campus development. For the remainder of fiscal year 2024, we expect capital spending on information technology, new campus development at Chamberlain, and facility improvements at the medical and veterinary schools. Management anticipates full fiscal year 2024 capital spending to be in the $50 to $60 million range, including $15.0 million spent during the first three months of fiscal year 2024. The source of funds for this capital spending will be from operations or the Credit Facility (as defined and discussed in Note 13 “Debt” to the Consolidated Financial Statements).

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

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

Financing Activities

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

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

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

43

for additional share repurchases under the current share repurchase program. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. See Note 14 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

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

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

In the event of unexpected market conditions or negative economic changes that could negatively affect Adtalem’s earnings and/or operating cash flow, Adtalem maintains a $400.0 million revolving credit facility with availability of $323.8 million as of September 30, 2023. This availability will be reduced to $165.9 million in November 2023 upon issuance of the letter of credit to ED as described above.

Material Cash Requirements

Long-Term Debt – We have principal balances of $405.0 million of Notes and $303.3 million of Term Loan B, which requires interest payments. With the prepayment noted above, we are no longer required to make quarterly principal installment payments on the Term Loan B. In addition, we maintain a $400.0 million revolving credit facility with availability of $323.8 million as of September 30, 2023. Adtalem has a letter of credit outstanding under this revolving credit facility of $76.2 million as of September 30, 2023, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs. On September 25, 2023, we received a letter from ED, requiring Adtalem to provide a letter of credit in the amount of $157.9 million to be provided by November 9, 2023. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on our Notes and Credit Agreement.

Adtalem had a surety-backed letter of credit outstanding of $84.0 million as of September 30, 2023, in favor of ED on behalf of Walden, which allows Walden to participate in Title IV programs.

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

Operating Lease Obligations – We have operating lease obligations for the minimum payments required under various lease agreements which are recorded on the Consolidated Balance Sheets. In addition, we sublease certain space to third parties, which partially offsets the lease obligations at these facilities. See Note 11 “Leases” to the Consolidated Financial Statements for additional information on our lease agreements.

44

Critical Accounting Estimates

There have been no material changes in our critical accounting estimates as disclosed in our 2023 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 contained 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 Adtalem’s future growth. Forward-looking statements can also be identified by words such as “future,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “may,” “will,” “would,” “could,” “can,” “continue,” “preliminary,” “range,” and similar terms. These forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our 2023 Form 10-K and that might be contained in this Quarterly Report on Form 10-Q, which should be read in conjunction with these forward-looking statements. These forward-looking statements are based on information available to us as of the date any such statements are made, and Adtalem assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized, except as required by law.

Non-GAAP Financial Measures and Reconciliations

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

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

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

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

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

45

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

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

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

● Intangible amortization expense on acquired intangible assets.

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

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

The following tables provide a reconciliation from the most directly comparable GAAP measure to these non-GAAP financial measures. The operating income reconciliation is included in the results of operations section within this MD&A.

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

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

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

Earnings per share reconciliation to adjusted earnings per share (shares in thousands):

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

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

46

Reconciliation to adjusted EBITDA (in thousands):

	Three Months Ended
	September 30,
							Increase/(Decrease)
	2023			2022			$		%
Chamberlain:
Operating income (GAAP)	$	24,324		$	26,184		$	(1,860)	(7.1)	%
Restructuring expense		—			818			(818)
Depreciation		4,316			4,481			(165)
Stock-based compensation		2,907			2,274			633
Adjusted EBITDA (non-GAAP)	$	31,547		$	33,757		$	(2,210)	(6.5)	%
Adjusted EBITDA margin (non-GAAP)		22.1	%		24.9	%
Walden:
Operating income (GAAP)	$	1,938		$	2,933		$	(995)	(33.9)	%
Restructuring expense		—			3,080			(3,080)
Intangible amortization expense		10,677			18,528			(7,851)
Litigation reserve		18,500			—			18,500
Depreciation		2,162			2,595			(433)
Stock-based compensation		1,864			1,905			(41)
Adjusted EBITDA (non-GAAP)	$	35,141		$	29,041		$	6,100	21.0	%
Adjusted EBITDA margin (non-GAAP)		24.8	%		22.2	%
Medical and Veterinary:
Operating income (GAAP)	$	14,363		$	10,238		$	4,125	40.3	%
Restructuring expense		114			6,826			(6,712)
Depreciation		2,944			3,105			(161)
Stock-based compensation		1,640			1,475			165
Adjusted EBITDA (non-GAAP)	$	19,061		$	21,644		$	(2,583)	(11.9)	%
Adjusted EBITDA margin (non-GAAP)		22.5	%		24.6	%
Home Office and Other:
Operating loss (GAAP)	$	(12,431)		$	(15,721)		$	3,290	20.9	%
Restructuring expense		562			4,341			(3,779)
Business integration expense		5,262			9,540			(4,278)
Depreciation		356			624			(268)
Stock-based compensation		1,044			491			553
Adjusted EBITDA (non-GAAP)	$	(5,207)		$	(725)		$	(4,482)	(618.2)	%
Adtalem Global Education:
Net income (GAAP)	$	10,646		$	592		$	10,054	1,698.3	%
Net loss from discontinued operations		1,313			4,921			(3,608)
Interest expense		15,657			17,760			(2,103)
Other income, net		(2,214)			(761)			(1,453)
Provision for income taxes		2,792			1,122			1,670
Operating income (GAAP)		28,194			23,634			4,560
Depreciation and amortization		20,455			29,333			(8,878)
Stock-based compensation		7,455			6,145			1,310
Restructuring expense		676			15,065			(14,389)
Business integration expense		5,262			9,540			(4,278)
Litigation reserve		18,500			—			18,500
Adjusted EBITDA (non-GAAP)	$	80,542		$	83,717		$	(3,175)	(3.8)	%
Adjusted EBITDA margin (non-GAAP)		21.8	%		23.6	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in Adtalem’s market risk exposure during the first three months of fiscal year 2024 from those set forth in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in Adtalem’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

47

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on an evaluation of our disclosure controls and procedures (as such term in set forth in Exchange Act Rule 13a-15(e)) that was conducted under the supervision and with the participation of Adtalem’s management, including our Chief Executive Officer and Chief Financial Officer, our Chief Executive Officer and Chief Financial Officer concluded that Adtalem’s disclosure controls were effective as of September 30, 2023.

Changes in Internal Control Over Financial Reporting

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

Part II. Other Information

Item 1. Legal Proceedings

For information regarding legal proceedings, see Note 17 “Commitments and Contingencies” to the Consolidated Financial Statements included in Item 1. “Financial Statements.”

Item 1A. Risk Factors

There have been no material changes to Adtalem’s risk factors from those set forth since Item 1A. “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

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

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2023 - July 31, 2023	667,987	$	39.41	667,987	$	146,421,843
August 1, 2023 - August 31, 2023	673,792	$	43.89	673,792	$	116,852,143
September 1, 2023 - September 30, 2023	816,619	$	44.07	816,619	$	80,862,017
Total	2,158,398	$	42.57	2,158,398

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

Other Purchases of Equity Securities

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2023 - July 31, 2023	129	$	41.23	NA	NA
August 1, 2023 - August 31, 2023	117,359	$	43.37	NA	NA
September 1, 2023 - September 30, 2023	12,920	$	44.22	NA	NA
Total	130,408	$	43.45	NA	NA

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

48

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed or furnished herewith.

49

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: October 26, 2023	By:	/s/ Robert J. Phelan
		Robert J. Phelan
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

50