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Greetings, and welcome to Adtalem Global Education First Quarter Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the conference over to your host, Jay Spitzer, Vice President of Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to our earnings call for the first quarter fiscal year 2025 results. On the call with me today are Steve Beard, President and Chief Executive Officer of Adtalem Global Education; and Bob Phelan, Chief Financial Officer. Before I hand you over to Steve, I will as usual take you through legal and Safe Harbor and cautionary declarations. Certain statements and projections of future results made in this presentation constitute as forward-looking statements that are based on current market, competitive and regulatory expectations and are subject to risks and uncertainties that could cause actual results to vary materially. We undertake no obligation to update publicly any forward-looking statement after this presentation, whether result of new information, future events, changes in assumptions or otherwise. Please see our latest Form 10-K, Form 10-Q for a discussion of Risk Factors that relate to forward-looking statements. In today's presentation, we use certain non-GAAP financial measures. We refer you to the appendix of the presentation material available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information. You will find a link to the webcast on our Investor Relations website at investors.adtalem.com. After this call, the presentation and webcast will be archived on the website for 30 days. I will now hand you over to Steve.

Thanks, Jay. Good afternoon, everyone, and thank you for joining our first quarter fiscal year 2025 earnings call. We've commenced year two of our three-year growth with purpose strategy, which is driving strong momentum through our programmatic focus on operational excellence. This focus has enabled us to generate substantial value for all of our stakeholders and deliver financial results that exceed expectations. Our revenue for the quarter reached $417 million, reflecting a 13% increase compared to last year, while our adjusted EBITDA margin expanded by 140 basis points, leading to an impressive 39% jump in adjusted earnings per share to $1.29. Notably, total enrollment has improved for the 10th consecutive quarter, up 11.2% year-over-year, bringing our total enrollment to over 90,000 students. Our revitalized learning platform resonates well with our students and our innovative curriculum enhances the student experience, positioning us at the forefront of healthcare education. Our agile operating model allows us to allocate resources efficiently and increase investments where we anticipate the most attractive returns. This model enables us to more quickly meet the growing and evolving demands of U.S. healthcare with the goal of further differentiating ourselves as the preferred partner for healthcare providers nationwide. Recently, I had the privilege of speaking alongside Dr. Ngozi Ezike, President and CEO of Sinai Chicago. Sinai serves as a safety net health system for 1.5 million diverse individuals, many residing in under-resourced communities. Sinai aligns well with our mission to train day one, practice-ready physicians equipped to deliver compassionate care. Through our partnership with Sinai Chicago, over 1,000 diverse aspiring medical students from Ross and AUC have participated in clinical rotations or residency programs, strengthening those students' commitment to an aptitude for battling health and equities. Numerous partnerships with other esteemed systems across the country highlight our reach and impact, resulting in over 22,500 medical school alumni, making meaningful contributions often in critical leadership roles. Of course, this impact is further magnified by the outsized contributions of the nursing and behavioral health graduates of Chamberlain and Walden, who are working side-by-side with our physicians, elevate the quality of care, for vulnerable populations across the country. Chamberlain University, a premier national nursing school is enhancing its national footprint through a diverse array of nursing programs. Total enrollment increased 11.7% as Chamberlain surpassed its highest ever total enrollment for the second consecutive year. Notably, our BSN online option is now available in 36 states with over 2,000 students enrolled just four years post launch. Our new Stockbridge campus in Atlanta is exceeding expectations, achieving over 350 BSN students since opening last September. This growth demonstrates Chamberlain's commitment to leading the way in addressing chronic nursing shortages. We're also excited to announce a new partnership with the Oncology Nursing Society to expand our practice-ready specialty-focused program, to meet the increasing demand for specialized training in oncology. Turning to Walden. Our market strategy with a focus on flexible distance learning for the working adult and our commitment to operational excellence continue to drive robust enrollment, which has grown 12.2% year-over-year, surpassing pre-pandemic levels. Our investments in cutting-edge technology attract students while enhancing retention. Walden remains a national leader in nursing with over 16,000 nursing students currently enrolled predominantly in the critical masters' nurse practitioner program. Furthermore, enrollment in social and behavioral sciences exceeds pre-pandemic levels, reflecting strong interest in psychology, social work, and counseling. We continue to make strides in innovating the student experience through the implementation of AI capabilities. Last year, Chamberlain, leveraging Walden's AI learnings launched its first AI tutor, Nurse Ally, which has received positive student feedback leading to its rollout in additional programs. Moreover, our recent collaboration with Hippocratic AI will develop groundbreaking curricular for training healthcare professionals in the use of AI technologies and care delivery including the introduction of the first-ever AI certification for our students. In our Medical and Veterinary segment, we see positive signs of improvement with Ross Vet operating at near capacity and ranked third among 40 institutions in the competitive veterinary internship and residency matching program. Ross Med and AUC continue to demonstrate a strong value proposition and initiatives like the clinical Return Home program are differentiating our offerings. Remediation plans at our two medical schools continue to progress as expected. And with strong and durable demand for medical education in the United States, we remain optimistic about future enrollment trends at both institutions. Fiscal year 2025 is off to a strong start and we expect our Growth with Purpose strategy to deliver further growth in both revenue and profitability. With this positive momentum, we're raising our fiscal year 2025 guidance to project revenue between $1.69 billion and $1.73 billion and adjusted earnings per share of $5.75 to $5.95. Now, I'll hand the call over to Bob for a more expansive discussion of our operational and financial results.

Thank you, Steve, and hello, everyone. Our first quarter results reflect our ability to deliver accelerated performance while investing to create sustainable long-term value. As Steve shared earlier, we've entered the second year of our three-year Growth with Purpose strategy improving enrollment trends and delivering enhanced leverage through our disciplined operational performance. I'll begin with a review of our financial results and key drivers for our performance in the first quarter. Later in my remarks, I will discuss our expectations and assumptions for the remainder of fiscal year 2025. Starting with the top-line. Revenue in the first quarter increased by 13.2% to $417.4 million driven by all three segments, in particular, through accelerated enrollment growth at Walden and Chamberlain as Growth with Purpose initiatives enhanced our trajectory. Consolidated adjusted EBITDA came in at $96.7 million, up 20.1% compared to the prior year from profit growth in all three segments, led by Walden and Chamberlain, resulting in an adjusted EBITDA margin of 23.2%, a 140 basis point increase from last year. Adjusted operating income was $75.8 million, up 19.8% compared to the prior year as revenue growth and efficiencies generated operational leverage, which was partially offset by investments in strategic initiatives, higher employee benefit cost tied to our performance and other costs. Adjusted net income for the quarter was $50.5 million, up 28.3% compared to last year, attributed to adjusted operating income growth and lower interest expense as a result of our actions to reduce outstanding debt and lower our borrowing costs. Adjusted earnings per share was $1.29 or a 38.7% increase compared with the prior year. We repurchased 462,000 shares within the quarter, resulting in a first quarter diluted shares outstanding of 39.1 million or 3.1 million lower than last year. Next, I'll discuss the first quarter financial highlights by segment. Chamberlain reported first quarter revenue of $167.9 million, an increase of 17.8% when compared with the prior year, driven primarily by growth in enrollments. Total student enrollment during the quarter increased 11.7% compared to the prior year, a seventh consecutive quarter of both pre-licensure growth and post-licensure nursing program growth. Adjusted EBITDA increased by 17.2% to $37 million for the quarter. Adjusted EBITDA margin of 22% was 10 basis points lower than the prior year as our underlying operational leverage was offset by investments in marketing, student support for the growth in enrollments, and an enhanced focus on academic outcomes as well as other costs. Our marketing investments have accelerated Chamberlain's reach and market-leading position for our full breadth of nursing programs and modalities. We are capitalizing on our differentiated more seamless student experience. Our investments are intended to continue to deliver positive returns through increased future demand, continued strong persistence, and positive academic outcomes. Turning to Walden. First quarter revenue of $161.5 million, an increase of 14.1% versus the prior year was driven by strong growth in enrollments. Total student enrollment accelerated in the quarter, up 12.2% compared to the prior year from robust enrollment growth, particularly in the Masters and undergrad and continued high persistence rates. Within our healthcare programs, the strong growth was led by social and behavioral health and nursing with our non-healthcare programs also growing in the quarter. Adjusted EBITDA increased by 35.9% to $47.8 million, adjusted EBITDA margin expanded by 480 basis points versus the prior year to 29.6%, as our transformation and efficiencies generate operational leverage, which is being balanced with a sustainable level of long-term focused growth investments and additional student support commensurate with the high levels of new enrollment. For the Medical and Veterinary segment, revenue in the first quarter increased 3.9% to $88 million. The total enrollment growth trend sequentially improved, decreasing 0.7% compared with the prior year, as our plans remain on track at the medical schools and Ross Vet continues to operate near capacity. Adjusted EBITDA increased by 0.7% to $19.2 million. Adjusted EBITDA margin was 70 basis points lower versus the prior year at 21.8%. We remain focused on operating our institutions with a cost structure generally in line with our current total enrollment level, while making investments to leverage the existing capacity at our medical schools to address the current and growing U.S. physician shortages. Shifting to cash flow and the balance sheet. We continue to enhance our financial strength through robust cash generation and disciplined capital deployment. For the first three months of fiscal year 2025, free cash flow was $79 million. On a trailing 12-month basis, free cash flow was $243 million, up $85 million versus the prior period, inclusive of an $18 million increase in capital expenditures. Strong operational performance was partially offset by planned capital investments to expand our reach and impact. Our balance sheet remains healthy, ending the first quarter with $265 million in cash and equivalents and a low adjusted EBITDA net leverage of 1.0x. On August 21, we repriced our $253 million Term Loan B, reducing the interest rate by 75 basis points, which was in addition to the prior 50 basis point reduction we achieved previously in January. We also repurchased 462,000 shares during the quarter, continuing to execute on our existing share repurchase authorization. Our top priority remains to reinvest into our institutions as we aim to achieve optimal capacity and continue to deliver positive student outcomes. We will thoughtfully strengthen our balance sheet while we continue our balanced approach to capital allocation. We started the second year of our three-year Growth with Purpose strategy with strong results ahead of our original expectations. We continue to create sustainable enrollment momentum off a higher total enrollment base. In turn, we are raising our fiscal year 2025 guidance as we continue to execute and accelerate our performance. Our revenue guidance is now in the range of $1.69 billion to $1.73 billion, approximately 6.5% to 9% growth year-over-year with adjusted earnings per share of $5.75 to $5.95, approximately 14.5% to 18.5% growth year-over-year. As we capture the current healthcare education market demands, expanding our reach through inclusive access to education. As planned, we invested more into marketing during the first quarter versus last year. However, our dynamic marketing approach delivered spend efficiencies, while enterprise inquiries remained strong. And as a result, we shifted some of our planned marketing out of the first quarter and into the remainder of the year. We still anticipate a higher level of revenue growth during the first half of the year compared with the second half with first quarter revenue momentum persisting into the second quarter. We are continuing to plan for revenue and underlying operational leverage to grow faster than the level of year-over-year investments, resulting in approximately 100 basis points of adjusted EBITDA margin expansion. Included within our guidance are the capital allocation to-date. And finally, we anticipate a normalized adjusted effective tax rate of approximately 23% for the fiscal year. It has been a strong start to the year, and we're more optimistic than ever about our Growth with Purpose strategy, our ability to create long-term value and to generate high returns for all stakeholders. With that, I'll now turn the call over to the operator for Q&A.

Thank you. And at this time, we'll conduct our question-and-answer session. [Operator Instructions]. And our first question comes from Jeff Silber with BMO Capital Markets. Please state your question.

Thanks so much. I wanted to start with Chamberlain. The growth acceleration there was really impressive. Can we get a little bit more color exactly what's going on there and how sustainable you think that is?

Yes. Thanks for the question, Jeff. So we're enjoying what we think are really positive trends in new enrollment, and that's particularly true in the post-licensure RN/BSN category. And that's on top of what has proven to be increasingly strong persistence. So while the RN/BSN category is one that itself isn't growing, we continue to take share there. And so on that basis, we think that trend is one that is sustainable for the foreseeable future. In addition, the post-licensure degrees and the doctoral degrees continue to have strong demand in the marketplace. So we think across the program set, particularly in nursing at Chamberlain, there's still lots of room to run there to grow enrollments.

All right. Great. And then your comments about shifting some marketing expense from the first quarter through the rest of the year. Is that across the three major verticals? And also, is that going to be kind of spread evenly throughout the rest of the year? Or we see most of that in the second quarter?

Yes, I'll start and let Bob jump in. So it's not across the Board. We allocate marketing resource dynamically based on where we think we have the most attractive opportunities on an institution and occasionally on a program basis. So it's not across the Board, and it's not spread ratably. But Bob, feel free to jump in with any additional color.

Sure. The added thing I would say is that the cost really was primarily moved to Q2. There's a little bit to the balance of the back half of the year, but mostly Q2 shift.

All right. I'll just add one -- try to sneak one more in. Sorry, going back to Chamberlain again, revenue growth was really strong. Margins were somewhat flattish despite the fact that maybe some marketing may have been shifted into the second quarter. Is there other investments going on there? Any reason why you didn't really see more operating leverage there?

Yes. The thing I would say is despite the fact that we did move some marketing into the second quarter from what we had planned, we still had increased that marketing year-over-year for Chamberlain as well as for the overall company. So again, we did shift some, but that was based on what we originally planned. Year-over-year, we did have an increase in marketing in Chamberlain. But what we're doing there is really a mix shift of also doing branding as well as performance marketing. So it's really an investment in the balance of the year as well as into fiscal year 2026, as well.

Yes. And in addition to those marketing shifts, there's also some additional incremental investment in student support at Chamberlain, which we think is just important for maintaining the persistency rates that we enjoy.

Thank you so much. I'll jump back into queue.

Thank you. And our next question comes from Alex Paris with Barrington Research. Please state your question.

Hi guys, thanks for taking my question. Congrats on the beaten race. I had a follow-up question on marketing for starters. You invested more in marketing in the first quarter year-over-year, though some was shifted from Q1 to the rest of the year, mostly Q2 versus your budget, I take it. I'm wondering, given the very, very strong performance and enrollment across the Board, why the incremental investment in marketing, I know you still expect to leverage the increase in revenues for the full year with 100 basis points of improvement. But why increase it at this time?

Yes. So Alex, a couple of ways to think about the marketing spend. So on the one hand, there's performance marketing, which typically drives returns in period. But as you know, we take a balanced approach to investing both in performance marketing at the bottom of the funnel and brand marketing at the top of the funnel. And as you know, there's a longer tail on the return associated with that brand investments. And so while we started out at the beginning of last year with heavy-duty brand campaigns across all five institutions, we're now into very individualized programmatic approaches to brand across those programs. So there's a mix of investments that we expect to pay off in the future as well as those that are driven to drive return in period. So that's really the mix. I mean, we're investing to win today, but at the same time, investing to win tomorrow. So you shouldn't think about every incremental investment in marketing as being tied to some near-term objective.

Got you. That that makes sense. I appreciate that. With that said, your guidance -- your increased guidance for the full year at the mid-point calls for roughly 8% revenue growth year-over-year. Do you expect advertising dollars to exceed that on a year-over-year basis? Or will those marketing costs be leveraged this year?

No. The marketing costs will be leveraged. And I would point you back to last year as well, just as a point of reference, our marketing spend increased about 4% despite the fact that we had the revenue increase of 9%. So we expect that efficiency to continue into this year.

Okay. Thank you. And then a follow-on question, the same. Kind of going back to Investor Day 2023, I know those numbers are stale by now, particularly with the guidance that you just gave for fiscal 2025. But at that point, you said 4% to 6% revenue growth for fiscal 2025, we're at 8% as we sit right now. And then you said for fiscal 2026 revenue growth of 5% to 8%. Do you plan on revising those long-term targets, at least the 2026 targets at this point?

Well, we'll give guidance for 2026 in the ordinary course. And at our next Investor Day, we'll get multi-year targets.

Great. That's very helpful for me right now. Thank you. I'll get back into the queue.

Thank you.

Our next question comes from Steven Pawlak with Baird. Please state your question.

Yes. Thank you. I just wanted to clarify, is the full year guidance range solely flowing through a one -- first quarter beat? Or is there an improved outlook to the balance of the year as well?

So there is an improved outlook for the balance of the year when it comes to revenue in particular. But when it comes to EPS, there is some shift from the first quarter into the balance of the year based on what we had talked about with some of the expenses, in particular, the marketing.

Yes. Okay. And then, I guess, from a revenue perspective, what are sort of the risk factors that would put you to the low end of your guidance range?

I don't know that I described them as risk factors. Obviously, we're enjoying great momentum across new enrollment in Chamberlain and Walden. We are progressing well relative to our remediation efforts in the Med Vet segment. So I don't view it as a risk. I think there's upside potential as we go through the year and we think about how to take best advantage of market opportunities in particular programs with additional push in marketing. But I wouldn't describe it as a risk. I mean, we think we've got strong momentum with the opportunity for some real upside, and we hope to realize that.

All right. Appreciate it.