Adtalem Global Education Announces Fiscal Fourth Quarter and Year End 2019 Results

Adtalem Global Education Inc. ATGE, a leading workforce solutions provider, today reported academic, operating and financial results for its fiscal 2019 fourth quarter and year ended June 30, 2019.

"We made significant progress in transforming Adtalem Global Education into a leading workforce solutions provider in fiscal 2019. We completed the divestitures of DeVry University and Carrington College, streamlined our three verticals to support our enterprise growth strategy and expanded the financial services customer base through our acquisition of OnCourse Learning," said Lisa Wardell, chairman and CEO of Adtalem. "In the fourth quarter, we capitalized on strong demand, employer partnerships and superior student outcomes to deliver revenue growth in line with expectations despite some top-line challenges in Brazil. Our students achieved NCLEX pass rates of 90 percent at Chamberlain, and first-time residency attainment rates at the American University of the Caribbean School of Medicine and Ross University School of Medicine were 91% and 92% respectively. I am excited about the future of Adtalem, and I want to thank our dedicated faculty and staff for their ongoing hard work and dedication to our students and employer partners."

Financial Highlights

Selected financial highlights for the three months ended June 30, 2019:

• Revenue of $330.3 million increased 3.3 percent compared with the prior year
• Operating income from continuing operations was $71.9 million compared with $65.2 million in the prior year; operating income from continuing operations excluding special items was $70.1 million compared with $67.1 million in the prior year
• Net income was $49.5 million compared with $62.8 million in the prior year; net income from continuing operations excluding special items was $55.4 million compared with $53.0 million in the prior year
• Diluted earnings per share was $0.86 compared with $1.02 in the prior year; diluted earnings per share from continuing operations excluding special items was $0.97 compared with $0.86 in the prior year
• Approximately 1.67 million shares of common stock were repurchased during the fourth quarter of fiscal 2019 at an average purchase price of $45.35 for a total of $75.9 million

Selected financial highlights for the 12 months ended June 30, 2019:

• Revenue of $1,239.7 million increased 0.7 percent compared with the prior year
• Operating income from continuing operations was $186.0 million compared with $207.5 million in the prior year; operating income from continuing operations excluding special items was $215.7 million compared with $212.5 million in the prior year
• Net income was $95.2 million compared with $33.8 million in the prior year; net income from continuing operations excluding special items was $167.2 million compared with $172.9 million in the prior year
• Diluted earnings per share was $1.60 compared with $0.54 in the prior year; diluted earnings per share from continuing operations excluding special items was $2.82 compared with $2.78 in the prior year
• Approximately 5.31 million shares of common stock were repurchased during fiscal 2019 at an average purchase price of $47.65 for a total of $252.9 million

Fiscal 2019 fourth quarter results contained special items including total pre-tax restructuring charges of $8.8 million, primarily related to real estate consolidations at Adtalem's home office and a pre-tax gain of $10.6 million related to settlement of certain derivative lawsuits.

Adtalem completed the transfer of ownership of DeVry University and Carrington College during the second quarter of fiscal 2019. An additional loss on discontinued operations of $2.3 million was recorded in the fourth quarter of fiscal 2019 related to these divestitures.

Segment Highlights

Medical and Healthcare

Fourth quarter segment revenue increased 5.2 percent to $211.6 million compared with the prior year.

Chamberlain revenue in the fourth quarter increased 6.9 percent compared with the prior year. Fourth quarter new student average enrollment increased 0.9 percent while total student enrollment increased 2.4 percent compared with the prior year with growth in the campus Bachelor of Science of Nursing program as well as the graduate programs.

Revenue in the fourth quarter for the medical and veterinary schools increased 3.0 percent from the prior year.

In the May 2019 session, new student enrollment declined 0.6 percent while total student enrollment declined 6.0 percent compared with the prior year.

Segment operating income in the fourth quarter was $39.7 million compared with $48.1 million in the prior year. Excluding special items, segment operating income in the fourth quarter declined 17.0 percent to $40.1 million compared with $48.3 million in the prior year. The decrease in segment operating income is the result of increased marketing expenses to drive future enrollment growth and a higher level of corporate allocation expense.

Financial Services

Fourth quarter segment revenue increased 18.1 percent to $53.5 million compared with the prior year. Becker Accounting revenue grew 8.4 percent and the Association of Anti-Money Laundering Specialists (ACAMS) revenue increased 26.8 percent. Segment operating income in the quarter was $14.7 million compared with $12.6 million in the prior year. Excluding special items, segment operating income in the fourth quarter grew 23.3 percent to $16.0 million compared with $13.0 million in the prior year.

Business and Law

Fourth quarter segment revenue decreased 11.1 percent to $66.1 million compared with the prior year. On a constant currency basis, revenue decreased 3.7 percent compared with the prior year driven by higher scholarships and discounts to offset reductions in government financial aid funding.

Despite the decrease in revenue, segment operating income in the fourth quarter increased to $14.3 million compared with $13.7 million in the prior year. Excluding special items, fourth quarter segment operating income grew 2.4 percent to $15.3 million compared with $14.9 million in the prior year. The increase in operating income is the result of reductions in back office and administrative costs.

Adtalem Outlook

Fiscal Year 2020

• Revenue is expected to grow 5 to 7 percent compared with the prior year
• Effective income tax rate is expected to be in the 17 to 18 percent range
• Earnings per share from continuing operations, excluding special items, are expected to grow in the 7 to 9 percent range compared with the prior year
• Full-year capital spending is expected to be in the $45 to $50 million range

Conference Call and Webcast Information

Adtalem will hold a conference call to discuss its fourth quarter fiscal 2019 earnings on Thursday, August 22, at 4 p.m. CT (5 p.m. ET). The conference call will be led by Lisa Wardell, chairman, and CEO, and Patrick Unzicker, chief financial officer and treasurer.

For those wishing to participate by telephone, dial 877-407-6184 (domestic) or 201-389-0877 (international) and ask for the Adtalem call or use conference ID: 13689883. Adtalem will also broadcast the conference call on the Adtalem website at: https://78449.themediaframe.com/dataconf/productusers/age/mediaframe/31613/indexl.html.

Please access the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

Adtalem will archive a telephone replay of the call until Sept. 22, 2019. To access the replay, dial 877-660-6853 (domestic) or 201-612-7415 (international), conference ID: 13689883. To access the webcast replay, please visit Adtalem's website at https://investors.adtalem.com/overview/default.aspx.

About Adtalem Global Education

The purpose of Adtalem Global Education is to empower students to achieve their goals, find success and make inspiring contributions to our global community. Adtalem Global Education Inc. ATGE member S&, P MidCap 400 Index))) is a leading workforce solutions provider and the parent organization of Adtalem Educacional do Brasil (IBMEC, Damásio and Wyden institutions), American University of the Caribbean School of Medicine, Association of Certified Anti-Money Laundering Specialists, Becker Professional Education, Chamberlain University, EduPristine, OnCourse Learning, Ross University School of Medicine and Ross University School of Veterinary Medicine. For more information, please visit adtalem.com and follow us on Twitter (@adtalemglobal) and LinkedIn.

Forward-Looking Statement

Certain statements contained in this release concerning Adtalem Global Education's expected future performance, including those statements concerning expectations or plans, constitute "forward-looking statements" within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. These forward-looking statements generally can be identified by phrases such as Adtalem Global Education or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates," "plans," "intends," "continues," "may," "will," "should," "could," or other words or phrases of similar import which predict or indicate future events or trends or that are not statements of historical matters. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include the risks discussed in Item 1A, "Risk Factors," in our most recent Annual Report on Form 10-K for the year ending June 30, 2018 filed with the Securities and Exchange Commission (SEC) on August 24, 2018 and our other filings with the SEC. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. All forward-looking statements set forth in this release are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this release speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.

NON-GAAP INFORMATION

In accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the operating results of DeVry University and Carrington College ("Carrington") are reclassified as discontinued operations for the fourth quarter and full fiscal year 2019 and 2018. During the fourth quarter and full fiscal year 2019, Adtalem recorded special items related to the following: (i) restructuring charges, including asset write-offs, primarily related to the closing of the Ross University School of Medicine ("RUSM"), which is part of the Medical and Healthcare segment, campus in Dominica and real estate consolidations and workforce reductions at Adtalem Brazil, which is part of the Business and Law segment, and Adtalem's home office (not related to any segment); (ii) insurance settlement gain related to the final proceeds received for damages from Hurricanes Irma and Maria at the American University of the Caribbean School of Medicine ("AUC"), which is part of the Medical and Healthcare segment, and RUSM; (iii) gain related to a lawsuit settlement against the Adtalem Board of Directors; and (iv) adjustments to the preliminary income tax charges related to the implementation of the Tax Cuts and Jobs Act of 2017 and tax charges related to the divestiture of DeVry University. During the fourth quarter and full fiscal year 2018, Adtalem recorded special items related to the following: (i) restructuring charges related to workforce reductions and real estate consolidations at the medical and veterinary schools, which is part of the Medical and Healthcare segment, Becker Professional Education, which is part of the Financial Services segment, and Adtalem's home office; (ii) asset impairment charges at Adtalem Brazil related to the planned fiscal year 2019 dispositions of the São Luis and Joao Pessoa institutions (presented as restructuring expense), which were completed in fiscal year 2019; (iii) income tax charges related to the implementation of the Tax Cuts and Jobs Act of 2017; and (iv) a net tax benefit for the loss on Adtalem's investment in Carrington. The following tables illustrate the effects of the discontinued operations and special items on Adtalem's operating income from continuing operations excluding special items and net income from continuing operations excluding special items. Management believes that the non-GAAP disclosure of operating income from continuing operations, net income from continuing operations and earnings per share excluding the discontinued operations and special items provides investors with useful supplemental information regarding the underlying business trends and performance of Adtalem's ongoing operations and is useful for period-over-period comparisons of such operations given the special nature of discontinued operations, restructuring charges, settlement gains and certain income tax charges and deductions. Adtalem uses these supplemental financial measures internally in its management and budgeting process. However, these non-GAAP financial measures should be viewed in addition to, and not as a substitute for, Adtalem's reported results prepared in accordance with GAAP. The following tables reconcile these non-GAAP measures to the most directly comparable GAAP information.