Income Taxes

12 Months Ended

Jun. 30, 2025

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

Income from continuing operations before income taxes, classified by source of income, was as follows (in thousands):

	Year Ended June 30,
	2025		2024		2023
Domestic	$	221,225	$	89,752	$	51,422
Foreign		77,289		74,185		60,613
Total	$	298,514	$	163,937	$	112,035

The components of the provision for income taxes were as follows (in thousands):

	Year Ended June 30,
	2025		2024		2023
Current tax provision (benefit):
U.S. federal	$	40,742	$	11,243	$	13,761
State and local		7,070		3,489		824
Foreign		(388)		419		614
Total current		47,424		15,151		15,199
Deferred tax provision (benefit):
U.S. federal		9,296		4,870		(1,099)
State and local		6,786		2,745		(4,347)
Foreign		2,331		3,458		530
Total deferred		18,413		11,073		(4,916)
Provision for income taxes	$	65,837	$	26,224	$	10,283

The effective tax rate differs from the statutory tax rates as follows (in thousands):

	Year Ended June 30,
	2025				2024				2023
Income tax at statutory rate	$	62,688	21.0	%	$	34,427	21.0	%	$	23,527	21.0	%
Lower rates on foreign operations		(10,999)	(3.7)	%		(11,419)	(7.0)	%		(11,668)	(10.4)	%
State income taxes		10,263	3.4	%		4,767	2.9	%		2,656	2.4	%
Research and development tax credits		(1,908)	(0.6)	%		(1,589)	(1.0)	%		(1,862)	(1.7)	%
Change in valuation allowance		—	—	%		(621)	(0.4)	%		(9,769)	(8.7)	%
Reduction in state loss carryforwards		—	—	%		—	—	%		2,340	2.1	%
Permanent (taxable) non-deductible items		(2,286)	(0.8)	%		(904)	(0.6)	%		785	0.7	%
Limitations on executive compensation		5,812	1.9	%		2,987	1.8	%		908	0.8	%
Foreign tax provisions under GILTI		6,110	2.0	%		4,908	3.0	%		3,569	3.2	%
Change in unrecognized tax benefits		(490)	(0.2)	%		(6,849)	(4.2)	%		791	0.7	%
Other		(3,353)	(1.1)	%		517	0.3	%		(994)	(0.9)	%
Provision for income taxes	$	65,837	22.1	%	$	26,224	16.0	%	$	10,283	9.2	%

Our effective tax rate from continuing operations was 22.1%, 16.0%, and 9.2% in fiscal year 2025, 2024, and 2023, respectively. The effective tax rate for fiscal year 2025 increased compared to fiscal year 2024 primarily due to an increase in the percentage of earnings from operations in higher taxed jurisdictions and a limitation of tax benefits on certain executive compensation. In addition, in fiscal year 2024, the effective tax rate included a benefit from the lapsing of statutes of limitations for unrecognized tax benefits. The income tax provisions reflect the U.S. federal tax rate of 21% adjusted for taxes related to 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, changes in uncertain tax positions, and tax benefits on stock-based compensation.

Deferred income tax assets and liabilities result primarily from temporary differences in the recognition of various expenses for tax and financial statement purposes, and from the recognition of the tax benefits of net operating loss carryforwards. The components of the deferred income tax assets and liabilities were as follows (in thousands):

	June 30,
	2025		2024
Employee benefits	$	16,428	$	15,866
Stock-based compensation		8,990		7,664
Receivable reserve		10,756		9,028
Capitalized research and experimental costs		17,738		9,322
Operating lease liabilities		50,201		42,526
Other reserves		7,399		12,439
Loss and credit carryforwards, net		10,303		15,426
Gross deferred tax assets		121,815		112,271
Depreciation		(8,054)		(8,298)
Deferred taxes on unremitted foreign earnings		(307)		(210)
Amortization of intangible assets		(72,487)		(50,035)
Operating lease assets		(39,867)		(34,166)
Gross deferred tax liability		(120,715)		(92,709)
Net deferred tax asset	$	1,100	$	19,562

Adtalem has the following tax net operating loss (tax effected), interest (tax effected), and credit carryforwards as of June 30, 2025 (in thousands):

	June 30,		Years of Expiration
	2025		Beginning	Ending
U.S. credit carryforwards	$	672	2027	2030
State net operating loss carryforwards		7,089	2026	2043
State interest expense carryforwards		439	no expiration
Foreign net operating loss carryforwards		2,103	2032	2033
Total loss and credit carryforwards, net	$	10,303

As of June 30, 2025, Adtalem had $123.9 million of gross, post apportioned state net operating loss carryforwards, and $6.1 million of gross foreign net operating loss carryforwards in St. Maarten. As of June 30, 2024, Adtalem had $164.4 million of gross, post apportioned state net operating loss carryforwards, and $13.0 million of gross foreign net operating loss carryforwards in St. Maarten.

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 and RUSVM has an exemption in St. Kitts until 2038.

Adtalem does not assert that the accumulated undistributed earnings of its foreign subsidiaries are indefinitely reinvested in foreign jurisdictions. Accrued state income and foreign withholding taxes on such undistributed earnings were not material.

The changes in our valuation allowances were as follows (in thousands):

	Year Ended June 30,
	2025		2024		2023
Balance at beginning of period	$	—	$	621	$	10,390
Charged to costs and expenses		—		—		(2,677)
Deductions		—		(621)		(7,092)
Balance at end of period	$	—	$	—	$	621

Adtalem reviews the realizability of its deferred tax assets and related valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a

valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset are considered, along with any other positive or negative evidence. A valuation allowance is established when, based on the weight of available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized. Based on our review of all available positive and negative evidence, it is more likely than not that we will recognize all deferred tax assets and, therefore, we do not have a valuation allowance on our deferred tax assets as of June 30, 2025 and June 30, 2024. The valuation allowance on our deferred tax assets was $0.6 million as of June 30, 2023 and mainly related to foreign net operating loss carryforwards. Insufficient projected taxable income in certain jurisdictions may give rise to the need for a valuation allowance. We will continue to evaluate the need for valuation allowances and, as circumstances change, the valuation allowance may change.

The changes in our unrecognized tax benefits were as follows (in thousands):

	Year Ended June 30,
	2025		2024		2023
Balance at beginning of period	$	6,723	$	13,128	$	11,645
Increases from positions taken during prior periods		235		953		1,299
Decreases from positions taken during prior periods		—		(1,248)		—
Increases from positions taken during the current period		656		554		665
Reductions due to lapse of statute		(764)		(6,664)		(481)
Balance at end of period	$	6,850	$	6,723	$	13,128

As of June 30, 2025 and 2024, the total amount of gross unrecognized tax benefits for uncertain tax positions was $6.9 million and $6.7 million, respectively, which if recognized, would impact the effective tax rate. We expect that our unrecognized tax benefits will decrease during the next 12 months due to the settlement of various audits and the lapsing of statutes of limitation. We estimate this decrease to not be material. Adtalem classifies interest and penalties on tax uncertainties as a component of the provision for income taxes. The total amount of interest and penalties accrued as of June 30, 2025 and 2024 was $1.2 million and $1.2 million, respectively. Interest and penalties expense recognized during the years ended June 30, 2025, 2024, and 2023 were nil, a net decrease of $0.4 million, and a net increase of $0.7 million, respectively.

Adtalem files tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions based on existing tax laws and incentives. Adtalem remains generally subject to examination in the U.S. for years beginning on or after July 1, 2021; in various states for years beginning on or after July 1, 2019; and in our significant foreign jurisdictions for years beginning on or after July 1, 2018.

In July 2025, the U.S. Congress enacted the One Big Beautiful Bill Act (“OBBBA”), which introduces substantial changes to the federal tax landscape. Key provisions include the permanent renewal of certain measures initially set to expire under the Tax Cuts and Jobs Act, adjustments to the international tax regime, and the reinstatement of beneficial tax treatment for select business-related items. The legislation features staggered effective dates to be phased in through our fiscal year 2027. We are currently evaluating the tax impacts of the changes made by OBBBA which will begin to be reflected in our fiscal year 2026 consolidated financial statements.