Business Overview and History

Adtalem Global Education Inc. (ATGE) is the leading healthcare educator in the United States, playing a vital role in addressing the country's critical shortage of healthcare professionals. Through its family of prestigious institutions, including Chamberlain University, Walden University, American University of the Caribbean School of Medicine, Ross University School of Medicine, and Ross University School of Veterinary Medicine, Adtalem is shaping the future of healthcare education and driving positive change in communities nationwide.

Adtalem was founded in 1973 as DeVry Inc., a for-profit education provider initially focused on technical and career-oriented education through DeVry University, which was founded in 1931. Over the decades, the company has undergone a strategic transformation, expanding its portfolio to include a diverse range of healthcare-focused educational offerings. In 2017, the company rebranded to Adtalem Global Education to better reflect its mission and commitment to empowering students to achieve their educational and career goals.

Adtalem's growth strategy has included strategic acquisitions, such as Chamberlain College of Nursing in 2005 and Walden University in 2017. The acquisition of Walden University significantly expanded Adtalem's reach and online education capabilities, although the integration process presented challenges that required substantial resources to overcome. In 2018, Adtalem made a strategic decision to sell DeVry University to Cogswell Education, LLC, allowing the company to streamline its operations and focus on its core healthcare education offerings.

Throughout its history, Adtalem has maintained a commitment to academic excellence and strong student outcomes. This dedication has been recognized across its institutions, contributing to the company's reputation as a leader in healthcare education.

Financial Performance and Strength

In the fiscal year 2024, Adtalem reported revenue of $1.58 billion, a 9% increase from the prior year. The company's net income stood at $136.78 million, with a net profit margin of 8.7%. Adtalem's strong financial performance is underpinned by its robust operating cash flow, which reached $295.77 million in fiscal year 2024, and free cash flow of $246.88 million.

For the second quarter of fiscal year 2025, Adtalem reported consolidated revenue of $447.73 million, representing a 13.9% increase compared to the prior year period. Net income for the quarter rose significantly by 90.2% to $75.86 million. This substantial growth in net income was primarily attributed to increased revenue across all segments, as well as decreases in business integration expenses, amortization of acquired intangible assets, litigation reserves, and loss on assets held for sale. These positive factors were partially offset by increases in labor, marketing, and other costs associated with supporting growth initiatives.

The company's balance sheet remains healthy, with a current ratio of 1.06 and a debt-to-equity ratio of 0.60 as of December 31, 2024. Adtalem's strong liquidity position is further evidenced by its cash and cash equivalents of $194.0 million and an available credit line of $301 million from its $400 million revolving credit facility. This robust financial foundation has enabled Adtalem to weather economic challenges and invest in strategic initiatives to drive long-term growth.

Segmental Performance

Adtalem operates through three reportable segments: Chamberlain, Walden, and Medical and Veterinary.

Chamberlain

Chamberlain University is the country's largest nursing school, offering a range of degree programs, including bachelor's, master's, and doctoral degrees in nursing. In the second quarter of fiscal year 2025, Chamberlain's revenue grew by 17.9% to $181.0 million, driven by an 11.5% increase in total student enrollment for the November 2024 session. The segment's growth strategy focuses on optimizing investments in student enrollment and experience while leveraging its national footprint and providing a full breadth of nursing programs and modalities. Tuition rates for Chamberlain's programs increased approximately 4% on average from the prior year.

Walden

Walden University is a leading provider of online degree programs, with a focus on healthcare, education, and social sciences. In the second quarter of fiscal year 2025, Walden's revenue grew by 16.7% to $171.3 million, as total student enrollment increased by 13.2% as of December 31, 2024. Walden's improved enrollment has been accelerated by investments in student experience and brand, as well as providing flexibility to working adults through part-time and Tempo Learning competency-based programs. Tuition rates for Walden programs increased by approximately 2% from the prior year.

Medical and Veterinary

Adtalem's Medical and Veterinary segment includes the American University of the Caribbean School of Medicine, Ross University School of Medicine, and Ross University School of Veterinary Medicine. In the second quarter of fiscal year 2025, the segment's revenue increased by 2.8% to $95.4 million, driven by tuition rate increases at all three institutions, partially offset by decreased enrollment at Ross University School of Medicine. Tuition rates for the medical programs increased by 4.0% to 4.25%, while the veterinary program saw a 2.0% increase from the prior academic year.

Growth Strategies and Initiatives

Adtalem is executing a growth-with-purpose strategy that is centered on three key pillars: expanding access to quality education, optimizing the student experience, and prioritizing student outcomes. This strategy has enabled the company to drive consistent enrollment growth, improve operational efficiency, and deliver exceptional value to its students and stakeholders.

Key initiatives within this strategy include the expansion of Chamberlain's BSN Online program, which now offers clinical hubs in 36 states, enhancing accessibility and hands-on learning opportunities for nursing students. Walden University has also launched innovative offerings, such as the Believe and Achieve Scholarship and a new graduation award, to support student success and persistence.

In the Medical and Veterinary segment, Adtalem is focused on driving enrollment growth through initiatives like the "Return Home" program, which provides clinical training opportunities at partner hospitals, and enhanced USMLE student preparation efforts. The company is also leading the integration of AI and healthcare education, partnering with Hippocratic AI to equip students with practical AI skills.

Risks and Challenges

While Adtalem has demonstrated strong operational and financial performance, the company faces several risks and challenges that investors should be aware of. These include the highly competitive nature of the education industry, the potential for regulatory changes that could impact the company's operations, and the challenge of maintaining high student retention and graduation rates.

Additionally, Adtalem's reliance on federal financial aid programs, such as Title IV, exposes the company to risks related to changes in government policies and funding. The company must also navigate the ongoing healthcare workforce shortage, which could impact enrollment and demand for its programs.

Adtalem has faced some legal challenges, including a complaint against Walden University alleging violations related to the DBA program. This matter was settled for $28.5 million in October 2024, with Adtalem receiving $5.6 million in indemnification from Laureate Education. Additionally, a lawsuit alleging TCPA violations against Walden was settled for an immaterial amount in December 2024.

Geographic Performance

Adtalem conducts educational operations in the United States, Barbados, St. Kitts, and St. Maarten. In the second quarter of fiscal year 2025, domestic operations accounted for $352.29 million (78.7%) of revenue, while international operations in Barbados, St. Kitts, and St. Maarten contributed $95.44 million (21.3%) to the company's total revenue.

Outlook and Guidance

For the fiscal year 2025, Adtalem has raised its guidance, reflecting strong momentum and growth potential. The company now expects revenue to be in the range of $1.73 billion to $1.76 billion, representing a year-over-year increase of 9% to 11%. Adjusted earnings per share are projected to be between $6.10 and $6.30, indicating a growth of 21.5% to 25.5% compared to the prior year.

Adtalem anticipates greater than 100 basis points of adjusted EBITDA margin expansion in fiscal year 2025 and expects an adjusted effective tax rate of approximately 23%. This upward revision in guidance is attributed to the company's strong performance in the first half of fiscal year 2025, driven by the successful execution of its growth-with-purpose strategy and particularly strong enrollment growth at Chamberlain and Walden.

Conclusion

Adtalem Global Education Inc. (ATGE) is a standout performer in the education industry, leveraging its extensive portfolio of prestigious healthcare-focused institutions to drive transformative change in communities across the United States. With a proven track record of financial strength, operational excellence, and strategic growth initiatives, Adtalem is well-positioned to continue its trajectory as the leading healthcare educator, shaping the future of the industry and empowering the next generation of healthcare professionals.