Beth Coronelli - Investor Relations Lisa Wardell - President and Chief Executive Officer Patrick Unzicker - Chief Financial Officer and Treasurer.

Corey Greendale - First Analysis Peter Appert - Piper Jaffray Chris Howe - Barrington Research Jeff Mueller - Robert W. Baird Jeff Silber - BMO Capital.

Greetings and welcome to the Adtalem Global Education Fiscal 2018 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Beth Coronelli. Thank you. You may begin..

Thank you and good afternoon. With me today from Adtalem’s leadership team are Lisa Wardell, President and Chief Executive Officer and Patrick Unzicker, the Chief Financial Officer and Treasurer.

I would like to remind you that this call contains forward-looking statements with respect to the future performance and financial condition of Adtalem Global Education that involve risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied.

These factors are discussed under Risk Factors and elsewhere in our quarterly reports in Form 10-K for fiscal 2017 filed with the SEC and available on our website at www.adtalem.com. Adtalem disclaims any obligation to update forward-looking statements made in this call.

During today’s call, we may refer to non-GAAP financial measures, which are intended to supplement, though not substitute for our most directly comparable GAAP measures.

Our press release, which contains the financial and other quantitative information to be discussed today as well as a reconciliation of non-GAAP to GAAP measures is also available on our website. A replay of today’s call will be available on the website. And with that, I will now turn the call over to Lisa. Thank you..

Thank you, Beth. Good afternoon, everyone and thank you for joining us on today’s call. Before I begin, I want to say a special and heartfelt thank you to Joan Walter as she leaves Adtalem for her dedication to our mission and her many years of service leading our Investor Relations efforts.

Beth Coronelli recently joined in a new role as Vice President of Investor Relations and Finance Operations. Welcome Beth. I took on the CEO role 18 months ago.

During that time, our focus has been to transform Adtalem, taking steps to stabilize and grow, streamline the organization, diversify our revenue sources and expand our presence within our core verticals, medical and healthcare, professional education and technology and business with the top priority being to create a culture focused on our students’ superior outcomes and academic excellence at all of our institutions.

During the last 1.5 year across our portfolio of institutions and companies, we have launched student commitments, including 85/15 federal funding limit, introduce new programs aligned to the needs of employers, re-branded and elevated how we differentiate our programs.

In short, we have the right leadership team in place, diligently managed our costs, realigned the organization to build a differentiated portfolio of quality institutions and companies in growth-oriented sectors that increased our long-term revenue potential, and signed an agreement to transfer ownership of DeVry University.

We have accomplished these priorities while demonstrating the resiliency of our team and their complete dedication to serving our students in tough circumstances as we saw this past fall in response to the hurricanes which hit our Caribbean medical schools.

At Adtalem, we transition to a portfolio management approach in which we align strategic and investment objectives, establish targets, focus on improving return on invested capital and balance risk against performance.

We have elevated our culture into one that’s driven by transparency accountability and performing to meet our financial and operating goals, while never losing sight of serving our students and demanding excellent academic quality. For me, financial performance and academic excellence are completely aligned.

If we put student success first, superior financial performance will follow. Our agreement to transfer ownership of DeVry University and Keller Graduate School of Management announced in December represents another major step in our transformation.

We are pleased to partner with Cogswell Education, which brings significant experience in higher education and a very strong commitment to DeVry students’ admission to deliver high-quality programs.

We will continue to actively manage our portfolio and seek avenues to expand within our core verticals, with an emphasis on diversifying, growing strategically and further enhancing our margins and returns. Before I turn the call over to Pat, I will provide an update on our portfolio.

We have good news to share this quarter and in areas with our challenges, we continue to position the organization for return to organic growth and improved operating results. We now drive 60% of our revenue from our medical and healthcare segment, while 21% is generated from technology and business and 11% comes from professional education.

In our medical and healthcare segment, the performance of our medical schools in the Caribbean has been solid given the adversity faced as a result of the hurricanes last fall.

The American University of the Caribbean School of Medicine and Ross University School of Medicine Communities represent a determined, talented and hardworking group of students, faculty and colleagues. By early January, both universities were able to complete the September semester serving students in alternative locations.

In January, we resumed teaching first, second and third semester students at AUC back in St. Martin. Fourth and fifth semester AUC students remain in the UK on the campus of University of Central Lancashire.

As Ross continues to rebuild from the damage caused by Hurricane Maria, our students now have been temporarily relocated to Knoxville, Tennessee at a campus owned by Lincoln Memorial University. Ross is using its own medical sciences curriculum and faculty, while making use of dedicated classrooms, laboratories and faculty offices at LMU.

We are continuing to work to assess the damage to our campus in Dominica and the facilities and services of the island, but it’s going to take some time given the extent of the damage. Ross University School of Veterinary Medicine continues to perform well with growth in total student enrollment year-over-year.

The team is executing on its plan to differentiate the veterinary in both medical schools with the core goal of increasing international students. Chamberlain University continues to perform well as it leverages its strong reputation, program offerings and network of alumni.

Chamberlain has numerous partnerships to address the increasing demand for highly qualified healthcare professionals. The new campus in New Orleans is planned to open in May pending regulatory approval and we will continue to explore opportunities to open campuses in other states with demonstrated demand.

From a program perspective, Chamberlain’s family nurse practitioner track of the Master of Science in Nursing program continues to receive a high volume of inquiries, along with strong ongoing retention from existing students. Other tracks within the Master of Science in Nursing program are also in demand and growing.

With regard to new programs, the University’s Master of Public Health program was launched in July 2017 and has received approval to begin the programmatic accreditation process. Chamberlain is working to introduce additional degree of certificate program to meet the growing need for healthcare professionals.

In professional education, the Association of Certified Anti-Money Laundering Specialists, ACAMS, is showing strong performance as we continue to make inroads into the large global market for accounting fraud prevention.

We recently announced reaching the significant milestone of 60,000 members worldwide, up from 37,000 members when it became a part of Adtalem in July of 2016. ACAMS has experienced particularly strong growth in the Asia-Pacific region as well as solid gains generated through expanding business-to-business partnership in Europe.

As we drive the top line through increased scale across our membership certification and conference revenue stream and further localize our product offerings in key regions, ACAMS is positioned for increased operating leverage and margin expansion, especially given its asset-light model.

At Becker, we have a new President in place and are focused on leveraging the institution’s strong brand, deep industry contacts and solid competitive position to develop new revenue streams and further strengthen our core products. Our team is putting particular emphasis on enhancing Becker’s digital presence and corresponding learning tools.

In our technology and business segment, Adtalem Brazil is executing on its plan to strategically launch new programs aimed at addressing supply and demand imbalances across the country.

In the distance learning phase, Adtalem Brazil began enrolling students in classes in February for an additional 12 bachelor and associate degree programs, including business, paralegal services and accounting.

These programs are being delivered to nearly 200 of Damásio’s 220 learning centers, which have the infrastructure and staff required to support distance learning degrees. Unifavip is being used as the base of the distance learning program because of its recognition as the university center in Brazil.

This distinction provides the institution with the flexibility to launch non-restricted undergraduate programs and expedite our rollout of programs to additional locations. During the quarter, our Brazil team also secured university center approval at our Fanor and FBV institutions.

These designations will further strengthen our strategic position and ability to leverage our resources and brand. Overall, our outlook in Brazil is strengthening as we see positive indications in new student enrollment and profitability. We are also seeing signs of improving macroeconomic environment. In our U.S.

Traditional Postsecondary segment, we saw solid increase in inquiries at Carrington and new student enrollment was up over 7%. This highlights progress in revising the institution’s program offering and marketing effort.

The team is also focused on streamlining administrative functions effectively managing the footprint and driving consistency in the curriculum.

We have made meaningful strides in building a portfolio focusing growth sectors, pushing for further differentiations, organizing for operational efficiency to drive consistency, diversifying our payer base and transforming to a performance-oriented culture across our portfolio.

Looking ahead, our opportunity for value creation comes from continuing to deliver in these areas with clear emphasis on academic excellence and successful student outcomes. I will now turn the call over to Patrick for the financial overview..

Thank you, Lisa and good afternoon everyone. As we reported our second quarter results, we continue to make solid progress in the execution of our strategic plan as we diversify our revenue profile within our core verticals and drive efficiencies to further improve our operating fundamentals across our operations.

First, a quick note on the DeVry University transaction, the results are now presented as discontinued operations. The historical reclassification of our results with this change was filed as an 8-K last week and is also reflected in my comments today.

Our agreement with Cogswell Education is subject to certain terms and conditions to be met during the transition process, including regulatory and creditor approval. The transaction is expected to close in early fiscal year 2019. Revenue for the second quarter of $337 million was up 1% in the prior year.

Growth at Chamberlain, Adtalem Brazil, and our Professional Education segment was partially offset by declines in Carrington. Operating costs, excluding special items for the second quarter, were $279 million, down 0.4% compared to last year.

The vast majority of hurricane expenses in the quarter were offset by received and committed insurance reimbursements. Pre-tax special items in the second quarter were $2.6 million related workforce reductions and real estate consolidation.

Operating income from continuing operations, excluding special items for the second quarter, increased 8% as compared to last year to $57.9 million.

Net income from continuing operations, excluding special items, was $47.3 million during the second quarter compared to $41.1 million in the prior year, with earnings per share from continuing operations, excluding special items this quarter of $0.76.

There was a one-time item in our tax expense for $101 million related to tax reform signed into law in December 2017 primarily related to taxes payable over 8 years on our undistributed foreign earnings. Now to review our segment performance, starting with Medical and Healthcare, revenue was up approximately 1% to $203.3 million.

Segment operating income increased 5.6% over the prior year to $55 million. Chamberlain revenue was up 1.9% in the quarter. For the November session, new students increased 5.5% and total students increased 5.1%. In January, new student enrollment grew 6.9% and total students increased 5.2%.

New enrollment growth was driven by our post-licensure programs from continued market demand from our MSN, family nurse practitioner specialty track and RBS and pre-licensure programs. Revenue at our medical and veterinary schools was down slightly during the quarter.

There was some hurricane-related impact on revenue in the quarter which was offset by tuition price increases as well as enrollment growth at Ross University School of Veterinary Medicine. In our medical and veterinary schools, new student enrollment for the January 2018 semester was up 11.5% and total students increased 1.3%.

Turning to our Professional Education segment, revenue increased approximately 11% to $30.4 million in the quarter, with strong growth coming from ACAMS, which was up 62% and was partially offset by lower revenue at Becker driven by a decrease in the number of CPA exam candidates compared to the prior year.

The segment operating income was $2.2 million for the quarter, up significantly from $134,000 in the prior year second quarter. In our Technology and Business Segment, revenue increased 2.4% to $75.1 million primarily driven by growth in total student enrollment, improved student persistence and favorable foreign currency.

The segment operating income was up 3.8% over the prior year to $14 million. Finally, in U.S. traditional postsecondary, revenue of $29 million was down 10.5% in the quarter as a result of declining enrollments at Carrington. We saw improvement in new student enrollment in the quarter, with an increase of 7.2% from the prior year.

Total students in the quarter were 5,644, which is a year-over-year decrease of 4.5%. Segment operating loss, excluding special items, was $4.7 million in the quarter compared to a loss of $3.9 million in the prior year. Turning to our outlook for the third quarter of fiscal 2018, we expect revenue to be up 3% to 4% year-over-year.

Revenue growth within medical and healthcare, professional education and our technology and business segments is expected to be partially offset by revenue declines at Carrington. Third quarter fiscal 2018 operating costs before special items are expected to increase 1% to 2% to support our continued investment in the portfolio.

We continue to focus on identifying efficiencies and realigning our cost structure. Third quarter expenses may be impacted by the timing of receipt of insurance proceeds for the reimbursement of hurricane-related expenses.

For the full 2018 fiscal year, revenue is expected to increase 1% to 2% compared to the prior year and earnings growth from continuing operations before special items is expected to be in the 10% to 12% range.

Our effective income tax rate from continuing operations, excluding special items, was 16.1% for the quarter and we expect our full year tax rate to be in the 16% to 17% range.

With regard to the impact of tax reform on Adtalem, the changes will allow us to repatriate offshore cash at more favorable economics relative to the previous corporate tax rate giving an increased flexibility in support of our capital allocation strategy.

Now, turning to our balance sheet and financial position, cash flow from operations for the second quarter was $50 million compared to $41 million in the prior year. Our cash and cash equivalents were $212 million at December 31, 2017, while its outstanding bank borrowings were $165 million.

This leaves us with a very healthy balance sheet with continued opportunity to diversify our capital structure to drive growth and shareholder returns. Our net accounts receivable was $149 million, an increase of 16% in the prior year primarily related to Brazilian fees long-term receivables, which are becoming current.

We closed the quarter with bad debt as a percentage of revenue at 1.5% compared to 1.9% last year. Capital expenditures in the first 6 months of 2018 were $33 million compared to $19 million in the prior year period.

We are targeting capital spending for fiscal year 2018 to be in the $60 million to $65 million range excluding hurricane spending primarily driven by investments within our medical and healthcare and technology and business segments, including a Chamberlain campus opening as well as facility improvements to enhance academic quality.

During the quarter, we repurchased approximately 1.14 million shares. For the first half of the year, we repurchased 2.68 million shares returning $93.2 million of capital to our owners. Now, I will ask the operator to open the call for the question-and-answer session..

[Operator Instructions] Our first question comes from Corey Greendale of First Analysis. Please proceed with your question..

Hi, good afternoon. First of all, I think this is the first time I had a call since the DeVry University deal was also announced, so congratulations on that and want to say hi to Beth, good to talk to you and just publicly thank Joan.

She was enormously helpful over the years in helping me to get to speed answering questions, so just wanted to thank her. So, couple of questions.

First of all on Carrington, a nice improvement in the quarter, can you give us some sense you gave a little bit of detail what drove that, but kind of how sustainable was that and what should we expect going forward?.

Yes. Sorry, I thought you were going to go with all three. Yes, we have questions at one time. So, at Carrington, as you see clearly on the new students we are focused on the right track.

It’s exactly what we talked about operationally before in terms of what are the programs that are in demand and making sure that we are looking at that on a campus by campus basis, because they do differ. We have certainly taken a look at that.

At the same time, we are aligning our structure there and while we have taken out some layers as it relates to management, it’s actually from our perspective increased our student services and our ability to sort of be close to the student in terms of what they need etcetera.

The other thing that we have done is looked at some non-Title IV programs, the shorter certificate programs there.

I know last time we mentioned phlebotomy, it was in its early stages on that call and we are seeing traction with that and some of the other certificate programs that really upping new students as well as diversifying on the Title IV base.

So it is nice progress certainly a ways to go as you know the total student always trailed behind as we closed that gap, but the gap is closing.

And I would finally just remind that Carrington is also a part of our portfolio management approach and we are holding them to performance with that at the median or above the median of their peers as we did with DeVry University and the team is energized to make that happen.

So, we are seeing that trend the right way as we go into the back half of the fiscal year..

Great. Sorry to be – Lisa, I will ask a couple and then I will get back in queue.

The other questions I had were on maybe you can give us a sense at DVU obviously discontinued now, but can you translate if you add the students undergrad and the course graduate how that’s trending relative to the expectation and the requirement in the merger agreement below which it can be broken? And then the other question which is if you could update us on thoughts on kind of the vet school, which I know had some issues related to gainful employment, but given the approach with gainful employment just how you are approaching that at this point?.

Great. Yes, let me take vet and gainful and then I will hand it over to Patrick who can give you some details there on the closing conditions etcetera for DVU. So gainful employment, we are quite happy that of course that rulemaking has been reopened there.

I am sure that folks have seen that we have both filed an appeal in terms of our cohort default rates there have and how those are calculated as have many others as well as participated and are continuing to participate in the regulatory process there as the department looks at those rules.

And from our perspective very positive movement there, those rules has anticipated to be completed by November calendar 2018, so those would going into effect July 2019, but our stance has really remained the same which is we conceptually agree that we need to make sure that our students which is why we have our student commitments that our students are getting transparent information, we have our know before you go etcetera information for our students there and we are also working to make sure that on the backend as we work with our corporate partners Banfield as an example that we are getting our students the best possible incomes as they come out, but we feel very comfortable that Washington regulatory perspective recognizes that the graduate programs and the way that income works as it relates to vet schools.

In fact, Secretary DeVos called out vet schools as one of those areas – our veterinary medicine is one of those areas that needs to be looked at. So, we feel that we are participating in the process in a really robust way and we are feeling good about the prospects there..

And with respect to DeVry University enrollment, we are tracking where we need to be with respect to our internal forecast and how they align with the contractual commitments for the DVU transition.

We were pleased to see a very nice narrowing of the gap with DVU undergraduate enrollments being down 3.5% and just getting very good traction with the changes that we have made to the marketing model there as well as new program rollouts and continued success with DeVry works and those will certainly position DVU well for its new owner..

Great. I will get back in queue. Thank you..

Thanks Corey..

Our next question comes from Peter Appert of Piper Jaffray. Please proceed with your question..

Thank you. Good afternoon.

Lisa, just sticking with DVU for a second, can you speak specifically to your confidence on the ability to get the deal closed?.

Yes. So, we are highly confident we are obviously right now in mode of transition and making sure that we have got our robust standup university there. We are working really well with Cogswell Education as it relates to what do they need.

Of course, we have lots of devil is in the detail in terms of lack of contracts in shared services and we have started really quite a bit ago prior to this deal signing to really think about that and how would that look just as a matter of best practice across our portfolio and so we are feeling very good on that side as it relates to IT, HR all of those things that need to happen.

And again, on the closing conditions and the closing terms, as you can imagine, we have really stress tested those prior to the signing in December, because we want this to be successful. It’s the right thing for our overall strategic direction for Adtalem.

And frankly, these are colleagues and faculty and students for that matter, but that have been with us at DeVry University for a really long time. And the last thing we want to do is start this and then have to come back with a change in plan. So, we are feeling very confident. We see no – we have seen no warning signs that we need to step back there.

As everyone knows and I will remind everyone, this requires regulatory and accreditor approval, but we are working closely with HLC and Department of Education and feel that we have the right resources there as it relates to making sure that we don’t get tripped up with that process..

Understood. Thanks, Lisa.

And then on Chamberlain, the results have looked quite solid both in terms of starts and total enrollments, revenue number is a little softer, so I assume it’s a mix issue, but maybe Pat, you could just talk about the seeming disconnect between the revenue growth and enrollment growth?.

Sure. There is a bit of a mix issue. We do see very nice solid enrollment growth in our post-licensure program. So, on a revenue per student, those are lower than the traditional BSN, so you will be seeing some mix there.

And then quite frankly, the RN to BSN marketplace is very competitive and we have adjusted some of our pricing and our discounts to be competitive in the marketplace around scholarships and some of the large agreements that we have with large healthcare providers. So, that’s what we are seeing there.

We were quite pleased though with both our post-licensure and pre-licensure enrollments in that we did see our pre-licensure enrollments our campuses as expected return to very nice new student enrollment growth in the January semester.

And we are quite pleased with how things are shaping up and aligning as we come into the May intake term for that program..

Great.

And then Pat, the new campus opening, does that have a meaningful impact on cost and just talk about the potential timing of other openings?.

Sure. So, in terms of meaningful impact, there is about $2 million or so of underwriting this year for our startup in developing campuses. That was pretty much in line with where we were last year, so not at least in this fiscal year, not a lot of pressure there. And then we would look to open 3 to 4 campuses over the next couple of years.

So, we would start to see some of those pre-opening costs as we move into FY ‘19 and of course ‘20..

Okay.

And then Pat, one more for you just how do we think about the pace of buyback activity in the second half?.

Sure. So, we were more aggressive in our buybacks in the first half of the year given where we saw a gap in the market valuation or intrinsic value. We did see a significant amount of that gap closed by an uptick in our share price for a number of reasons, obviously, our performance and some other events.

So, we still will be continued to be active in the market, but we certainly have closed that gap or at least narrowed the gap, but the gap still does exist..

Yes.

And the only thing I would add to that, Peter is we announced the share buyback I know that we had several conversations with our fellow owners around, well of course you get announced on what does that mean and we really wanted to make sure that as we looked at that $300 million number that we made a meaningful over that time period, a $100 million or so kind of dent in that.

Otherwise, you start to fallout of the category of doing what you say you are going to do. And I believe our numbers kind of have us there we will continue to have activity, but we want to be smart about it as we look at the average purchase price..

Got it. Understood. And one last thing Lisa, you gave some comments on Brazil, it sounded fairly encouraging in terms of the repositioning the programmatic offerings etcetera.

Maybe you can talk for a second about your confidence on the potential for reacceleration in enrollment growth or start growth there rather in second half?.

Yes, sure. And just to sort of recap in context from the last call, there really is some pricing pressure, particularly on the grad side, but in Brazil, I think the team has done a fantastic job in taking a look at that and making sure that they are aligning as it relates to the institution as a market or both.

We are quite confident and excited about the distance learning potential.

This is a new – not only new program for us, but new market right in terms of the change of regulation, so we really weren’t sure up until the end of the last calendar year and where we were going to fallout, whether we were going to be able to capture a part of that certainly from these results and also what we know as we are heading into the back half of the year.

We are so very encouraged by that and also just looking across that portfolio of different institutions, we are feeling that we got that traction back.

Of course in Brazil, I guess in anywhere, but in Brazil the macro environment does because of the way that obviously people are paying for education, the macro environment does have a bigger effect, but we are seeing strong signs in the macros in Brazil to show. So, we are pretty confident that the back half will be productive for us..

Great. Thanks, Lisa..

Yes, thank you..

Our next question comes from Alex Paris of Barrington Research. Please proceed with your question..

Good afternoon. This is Chris Howe sitting in for Alex Paris. I had a question for Pat.

In regard to the lower 2017 restated EPS versus the actual number, I guess I was going under the assumption that DVU was run to breakeven and I just wanted to gain some additional color on the $0.30 difference?.

Yes. First, we reclassified DVU as a discontinued operation there obviously not a restatement of our numbers. DVU in ‘17 did contribute more to overall at Adtalem obviously as a result of its declining top line.

And while we do recover expenses for it, so that you will see a bit of a lower amount of contribution this year relative to the prior year and part of that is also influenced by the amount of corporate overhead it absorbs in the discontinued operations versus when it was part of the continuing operations..

That’s helpful.

And I guess I had just one general question left, just in regard to once the deal is closed, does the company plan to update what was provided on the Investor Day as far as the long-term outlook strategic plan that was set forth to 2021?.

Yes, well certainly and we anticipate having another Investor Day in the late spring similar to what we had last year in May time period and look forward to sharing those with you and of course we will be profiling the organization. It will have a different look and feel to it with the portfolio of institutions going forward..

Thank you..

Our next question comes from Jeff Mueller of Robert W. Baird. Please proceed with your question..

Yes, thank you. Let me start simplest of follow-up on that last one of questioning.

So is $2.49 is the baseline that you are expecting to grow 10% to 12% off of, so basically 2018 adjusted EPS guidance of $2.74 to $2.79 is that correct?.

That’s correct..

And what were you saying about stranded costs or corporate overhead costs being reclassified as disco ops, I guess are there still stranded costs that you can reduce over time that are part of continuing ops and to the extent to actually, can you help size them up and are they in – are they all in the home office cost line or are some of them in the U.S.

traditional postsecondary line?.

You will see those costs in the reclassified P&L that we shared in our 8-K last week as well as with this results sitting down in our segment reporting in the corporate overhead line and we will see opportunity just as we have demonstrated our ability to continue to become more efficient and focused on those costs.

And as we move forward on the second half of this year, we want to position the organization to minimize to the extent we can, the laws of scale from DVU. So, we have done that in the past and we are on a good trajectory of where you want to be as we moved through these next 6 months into 2019..

Okay. And then on Chamberlain, the good new enrollment results, I guess just any views on the sustainability of it. In the past, I don’t know there were some clinical capacity constraints and then that pre-licensure was declining for a period of time.

I guess is this a sustainable level of growth and specific to pre-licensure is it more about anniversarying the changes in the enrollment requirements or what’s driving the improvement there?.

Got it. It’s a great question.

Consistent with where we were in our longer term outlook for Chamberlain in Investor Day, we see that mid single-digit new student enrollment growth is very responsible and sustainable for this organization obviously driven by opportunities that we continue to serve market demand in both our pre- and post-licensure programs.

We had experienced some volatility in our new student enrollments around our pre-licensure programs. And quite frankly, as we were very transparent, a lot of that was our own internal execution.

So, as we have worked through that and focused on ensuring, we have got the right marketing and admissions advising processes in place and right people to lead that we are starting to see what we would expect to be more predictable and sustainable results on the pre-licensure side.

And yes, we are overlapping a period where we were a bit challenged since we get a little bit of benefit there in full transparency. And then on our post-licensure, we still see very solid market demand for our MSN, FMP, clinical or FMP track and so we feel that mid single-digits is over the long-term is a very good target and attainable for us..

Okay..

Yes. And also specific to FMP, we do feel that from a clinical perspective, you will recall, we were also quite transparent about that. We have solved that issue..

Good to hear.

And then on insurance recoveries, just if I look at Q2, is there a recovery portion from expenses recognized in Q1 and just if you can help us kind of what that the timing of recognizing insurance recoveries and then I guess is the deductible fully paid at this point and there is kind of a full offset going forward?.

Yes, great question. So, we had met our deductible in the first quarter and that was obviously reflected in the year-over-year decline in earnings for the medical and healthcare segments and we have broken out a table in our first quarter. So, we are pretty explicit about what that was.

In the second quarter, the incremental expenses that we incurred along with fixed asset write-offs etcetera, we are offset almost dollar for dollar on insurance recoveries both in terms of cash received in the door and in terms of the receivable that we expect to or have collected on as we move into the third quarter.

So, there wasn’t much of a benefit if you will in second quarter, it was almost dollar-for-dollar with having that the kind of the bad news behind us are absorbed in the first quarter..

Okay, thank you..

Our next question comes from Jeff Silber of BMO Capital. Please proceed with your question..

Thanks so much. Wanted to focus on the medical and veterinary segment for a second, forgive me if I am lost here, but the new student numbers up 11.5% that pretty remarkable considering what happened to those schools.

Is there any – is there something going on there that I know it’s a smaller intake period, but those numbers are pretty sizable?.

Yes. So, it is a smaller intake period and we did get some benefit from those students who were going to or had enrolled, but didn’t complete and took an academic leave of absence.

So, they were not counted as new students in the September semester session, but did rejoin us as new students in January, but we are very comfortable with the value prop, the underlying supply demand imbalance and feel that we are well-positioned to return to consistent new student enrollment growth in medevac..

Yes, I don’t think, I would add so..

I’m sorry..

Sorry, I was just going to say so, if you look at AUC and you look at now in January they have 98% retention from that September class, same with Ross at 97%.

So, clearly that speaks to the faculty and team who made that happened, but fortunately or unfortunately, because these things happened, we don’t have a clear semester rate from back if you think call or so ago when we said hey, this is operational execution, we know what we need to do we are going to do it.

So we will be seeing that for the back half of the calendar year..

Got it.

And roughly how many students shifted from September into January?.

What if we get back to you on that one?.

Okay, no worries. I’ll follow-up offline. Okay, no worries. If we can now shift gears to Becker, I don’t think you disclosed Becker revenues anymore and I am just curious, I think the Becker revenues were down year-over-year.

If we can get a little bit more color on that, is that still kind of a lag impact of the change in the CPA exam last year, but if you can just talk about what’s going on in Becker and how we can get back on track? Thanks..

Yes, sure. So a couple of things, as you all recall, we brought in a new Group President of Professional Education, Mehul Patel in the fall.

He has since brought in a new leader, actually an internal hire, but a new leader for Becker, because really what we see there is well, there is clearly some reduced demand as it relates to sitting for the CPA exam, some of that is brought on from frankly companies, firms hiring non-CPAs to do some of the work that prior to would have required somebody to sit for that exam.

There clearly is also some competitive forces in the market that we need to be able to address a little better particularly and we have talked about this before with this group, but particularly around pricing on that CPA review course.

So, while we know we have the brand and really the gold standard brand there we have got to be more aligned to the changing needs of the market and the student and what they are willing to pay there. So, we are really on top of that.

And then at the same time what Becker also needs to do and is doing is really looking at that CPE market and looking at the continuing education, because the opportunity that we have for Becker is to go from sort of 50,001 and done customers, so that are new customers every year albeit coming through B2B channels are really a model of lifelong continuing learning for folks once they are within the CPA world.

And we have a lot to look to in terms of making that happen, because that’s exactly what ACAMS does as it relates to anti-money laundering fraud risk assessment etcetera on the other side. So long way to say, yes, operationally, we have got a new leader in there and we are confident that we will be turning that around on the top line..

Okay, great. And then finally just going back to the potential sale – their pending sale of DVU, can you just remind us what the milestones are what we should be looking for over the next few months? Thanks..

Sure. So, milestones would be continuing to partner and work with our accreditor HLC for a upcoming site visit. And then based on the results of that site visit, there would be change in control meeting in June.

And then after that, we would anticipate ed approval and then all along the way, there are a number of checkpoints of working with the various state and higher boards of education and in partnering very closely with Cogswell to do what we need to do there.

So, that’s kind of an external or outward facing and then internal as Lisa said on our response earlier to a question working very closely to standup this institution and partnering with Cogswell to do that to put us in position for a close anticipating sometime in early calendar – or I am sorry early fiscal year 2019..

Okay, great. Thank you so much..

Our next question is a follow-up from Corey Greendale of First Analysis. Please proceed with your question..

Hey, thanks for taking the follow-up. I will make this really quick. I will ask two questions together this time.

The first is that I know that your tax rate is going to be highly dependent on mix, but is the 16% to 17% about what we should expect kind of on a go forward basis after the effect of tax reform?.

No, we are getting some little bit of benefit this year as a result of tax reform.

Going forward in FY ‘19 I would expect the tax rate to be in the 18% to 20% range, but as we move forward in our May call and August call, we can give you a little more updated guidance there, but from 18% to 20% is a good, our best reasonable number right now in the out-years..

Okay, appreciate the forward-look.

And the other quick question is it’s the strong performance at ACAM, I was just hoping you might give us a little bit directionally kind of a sense of what margins it’s running at now and what target margin you think you can get to over time?.

Got it. So ACAMS grew about 62% in the quarter and I think in the mid 60s on a full year-to-date basis, we would expect that trajectory to continue to grow very, very nicely and it is tracking ahead of our deal valuation model.

But in terms of margin and where we wanted to be, we are tracking ahead of that as well, but also being very mindful there is a lot of good additional growth opportunities and making some reinvestments there.

So, we said that within longer term, margins of ACAMs could be higher than that of the professional segment or rather than Becker segment and we still see that it’s the case today..

Okay, thank you..

Ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back to Lisa Wardell for closing comments..

Thank you everyone for joining our call. We look forward to continuing to share our progress in future quarters and we appreciate your continued support of Adtalem Global Education..

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day..