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

Kevin Estok – Piper Jaffray Nick Nikitas – Robert W. Baird.

Greetings, and welcome to the Adtalem Global Education Fiscal 2018 Third 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, Beth Coronelli. Thank you..

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

I’d like to remind you that this conference 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 and 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 any forward-looking statements made during the 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 the reconciliation of non-GAAP to GAAP measures, is also available on our website. And with that, I will now turn the call over to Lisa..

Medical and Healthcare, Professional Education and Technology and Business, delivering superior student outcomes and achieving academic excellence, developing and expanding our talent to deepen vertical expertise, broaden global perspective and increase innovative thinking and strategic capabilities across the portfolio, leveraging a portfolio management framework to increase management accountability and enhancing margins and returns on invested capital as we return to consistent growth and organize for increased operational efficiency.

Our agreement to transfer ownership of DeVry University and Keller Graduate School of Management is a major milestone in our transformation and remains on track to close in early fiscal year 2019.

Supported by our strong balance sheet, we are taking a disciplined approach as we align strategic and investment objectives in our portfolio to ensure a strong return on invested capital. The refinancing of our credit agreement provides additional flexibility to support our growth strategy.

In each of our segments, we’re focused on developing programs to address supply and demand imbalances and the workforce skills gap.

From a mix perspective, in the first 9 months of the fiscal year, approximately 80% of our operating income came from our Medical and Healthcare institutions, 10% from Professional Education and 10% from Technology and Business.

In our Medical and Healthcare segment, we are committed to delivering programs through proven instruction techniques and enhanced support designed to maximize student performance and encourage lifelong learning.

At Chamberlain, our goal is to provide robust support to help students succeed and encourage a natural education progression for health care professionals through their entire career lifecycle, including Bachelor in Science and nursing programs and advanced and specialty degrees in nursing and public health.

We also serve hospital partners to address health care worker skills gap, appropriately preparing and setting expectations for new health care professionals to help increase retention for our hospital partners. In the third quarter, we were pleased to see continued improvement in our NCLEX scores for our prelicensure campus-based programs.

New and total student enrollment increased, driven primarily by growth in BSN prelicensure and Master degrees programs. The New Orleans campus opened with very strong student interest, with a full class sitting in the first session.

This is Chamberlain’s 21st campus and the first facility to open in connection with a hospital system through an alliance with Ochsner Health, the largest health care provider in Louisiana. The campus is housed at Ochsner Medical Center and offers an on-site 3-year BSN.

The collaboration will extend beyond the clinical affiliation with a focus on improving patient care through evidence-based practice, nursing research and interprofessional education and care teams.

The teams at Ross University School of Medicine and the American University of the Caribbean School of Medicine continue to successfully operate in alternative locations following the impact of the hurricanes in September. And they are incorporating the valuable lessons learned from this experience into processes for future crisis preparedness.

We have approvals to continue to educate the RUSM student body at our temporary Knoxville location and our international RUSM students at our St. Kitts satellite location, both of which have served us well, while remediation is underway in Dominica. At AUC, we successfully relocated our first, second and third semester students back to St.

Maarten during the quarter, while our fourth and sixth semester students continue to complete their studies in the U.K. on the campus of University of Central Lancashire.

At Ross University School of Veterinary Medicine, the team is focused on differentiating the school and pursuing international students and we’re nearing completion of a state-of-the-art research and pathology building planned for an official opening in July.

RUSVM is also in the final stage of reaccreditation process with the American Veterinary Medical Association, recognized as the gold standard for institutions that offer degrees to U.S. and Canadian veterinary students. Ross is one of less than 50 institutions worldwide to receive this accreditation.

In our Professional Education segment, we provide offerings where there is intrinsic demand for lifelong learning through credentialing and continuing education.

The Association of Certified Anti-Money Laundering Specialists, ACAMS, serving in the governance risk management and compliance segment of Professional Education now has nearly 65,000 members.

As we increase our membership and build scale around our certification and conferences, the ACAMS team is focused on driving customer engagement and strengthening our core product offerings. Our recent Hollywood, Florida confidence – Conference was the largest to date and positions us well for continued membership growth.

At Becker, to address market changes in the number of candidates taking the CPA exam, we are working to diversify our revenue streams, primarily in compliance-related continuing education and developing digital learning tools to further enhance the student experience, including a more robust video library of CPA-related content.

Becker is exploring opportunities to partner with financial institutions to assist with ongoing training and compliance programs and also continues to focus on increasing share in the consumer market.

Also, we were pleased to receive notification last week from the Accrediting Commission of the Accrediting Council for Continuing Education and Training, granting Becker’s 3-year reaccreditation. This quarter, we increased our ownership to a majority position at EduPristine, our India-based training and certification platform.

EduPristine is a leading provider of training programs in finance, accounting, analytics, marketing and healthcare. This acquisition supports our global growth strategy and allows our talent to participate in the fast-growing Indian professional education market.

In our Technology and Business segment, Adtalem Brazil is executing on its plan to leverage the strength of its portfolio of institutions to strategically launch new programs. We return to new student enrollment growth this quarter. We also successfully rebranded DeVry Brazil to the new Wyden brand name.

The segment’s results were partially impacted in the quarter by delays in the Brazilian Federal Student loan programs. The delays which resulted in a decreased number of available loans for new students impacted the entire sector.

As the funding program resumes, our institutions are well positioned in future sessions to attract incoming students given our positioning in the market and the level of interest we’re seeing in our program offerings. In the distance learning space, Adtalem Brazil began an initial launch of a portfolio of degree programs in February.

With a foundation in place, our team is focused on further differentiating these program offerings and developing targeted marketing strategies for a competitive but growing market.

With regard to university center status, we have now achieved this important designation at 4 of our Brazilian institutions, including Fanor, Metrocamp, IBMEC Rio De Janeiro and our FBV institution.

These designations will further strengthen our long-term strategic position and ability to leverage our resources and brands to pursue in-demand opportunities. In the U.S. Traditional Postsecondary segment, Carrington revenue and student enrollment declined.

We are closely managing this trend as we streamline our operations and continue to execute on revising program offerings, marketing efforts and curriculum structure. We’ll continue to share our progress on these efforts.

As we continue on our path to transform Adtalem, we’re committed to expanding our portfolio in growth sectors with a focus on operating efficiently to drive consistency and transparency.

Before we move on to the review of our financial performance, I’d like to invite you to join us for our Investor Day on May 9 in New York, where you can hear from leaders in each of our core verticals directly. We will also discuss our enterprise strategy and provide an update on our long-term financial outlook.

I’ll now turn the call over to Patrick..

Thank you, Lisa, and good afternoon, everyone. Our third quarter report highlights our ongoing progress in improving our operating results, driving efficiencies and positioning our organization for long-term profitable growth. As a reminder, the results of DeVry University are presented as discontinued operations.

During the third quarter, the Adtalem revenue of $342.2 million grew nearly 3% over the prior year. Growth in our Medical and Healthcare and Professional Education segments was partially offset by declines in Technology and Business and U.S. Traditional Postsecondary.

Operating costs, excluding special items for the third quarter, were $288 million, an increase of 0.7% compared to last year. Operating income from continuing operations for the third quarter, excluding special items, was $54.4 million, an increase of 16.3% over the prior year period.

Net income from continuing operations and excluding special items was $44.9 million during the third quarter compared to $37.9 million in the prior year. Earnings per share from continuing operations, excluding special items, increased 22% to $0.72. Now to review our segment performance. Medical and Healthcare revenue increased 5.7% to $220.1 million.

Segment operating income, excluding special items, increased 19.7% over the prior year to $60.8 million. Chamberlain University revenue increased 2.9% in the quarter, with a 4.3% increase in new students and a 4.5% increase in total student enrollment in the March session.

Revenue at our Medical and Veterinary Schools increased 10% during the quarter, driven by increases in student enrollment as well as tuition price increases instituted in September 2017.

There was also a shift in revenue from the first half of the fiscal year to the third quarter as a result of the delayed September semester start due to disruption caused by the hurricanes. Turning to our Professional Education segment. Revenue increased 5.7% to $31.5 million in the quarter.

Growth coming from ACAMS, which was up 58.5%, was partially offset by lower revenue at Becker compared to the prior year. This segment’s operating income was $2.4 million for the quarter compared to $2.6 million in the prior year.

In the Technology and Business segment, revenue was $59 million, a decrease of 4.5% and 0.4% decrease on a constant-currency basis, driven by decline in the total student enrollment, given prior economic conditions and changes to the Brazilian student loan program.

The segment operating loss for the third quarter was $103,000 compared to income of $5.4 million in the prior year. We are encouraged by Adtalem Brazil’s return to new student enrollment growth for this current semester. Finally, in our U.S.

Traditional Postsecondary segment, revenue of $32.1 million, was down 4.2% in the quarter as a result of declining enrollments at Carrington. New student enrollment in the quarter was down 5.2% from the prior year, while total students decreased 8%.

The segment operating loss was narrowed to $251,000 in this quarter compared to a loss of $3.1 million in the prior year. Turning to our outlook. For the fourth quarter of fiscal 2018, we expect revenue to increase 1% to 2% compared to the prior year.

Revenue growth within Medical and Healthcare and Professional Education segments is expected to be partially offset by revenue declines in U.S. Traditional Postsecondary and Technology and Business segments. Fourth quarter fiscal 2018 operating costs before special items are expected to be flat to up 1% compared to the prior year.

We continue to focus on identifying efficiencies and realigning our cost structure. Fourth quarter expenses may be impacted by the timing of the 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 15.1% for the quarter, and we expect our full year tax rate to be in the 14% to 16% range. Now turning to our balance sheet and financial position. Cash flow from operations year-to-date was $183.3 million compared to $169.8 million in the prior year.

Our cash and cash equivalents were $265 million at March 31, 2018, while outstanding bank borrowings were $120 million. In April, we successfully refinanced our credit facility replacing our $400 million revolving line of credit with a $600 million facility comprised of a $300 million revolving credit facility and a $300 million term loan facility.

We used the net proceeds to pay down our existing debt, while further strengthening our financial position. Pro forma for the refinancing, we have a modest leverage profile of 1.2x. In association with the new facility, Adtalem received long-term credit ratings of Ba3 from Moody’s and BB+ from Standard & Poor’s.

The new credit facilities allow us to access long-term capital with a deep investor base and extend our debt maturity profile, while enhancing our operational and strategic flexibility as we evaluate accretive growth opportunities.

We are committed to maintaining a healthy balance sheet and ensuring we have ample resources to support our growth strategy.

Our net accounts receivable was $169 million, an increase of 27% from the prior year, primarily related to Brazilian government changes in approving and distributing fee as loans as well as the timing of financial aid receipts at the medical schools due to hurricane-related processing delays.

Year-to-date, bad debt as a percentage of revenue at 1.9% was compared to 2.3% last year. Our capital expenditures in the first 9 months of 2018 were $53 million compared to $30 million in the prior year.

We’re targeting capital spending for fiscal 2018 to be in the $60 million to $65 million range, excluding hurricane-related spending, primarily driven by investments within our Medical and Healthcare and Technology and Business segments, including our new Chamberlain campus opening and our Ross Vet Research Building as well as facility improvement to enhance academic quality.

During the quarter, we repurchased approximately 393,000 shares. For the first 9 months of the year, we repurchased approximately 3 million shares for $112 million, reflecting our confidence to execute our plan and continuing to create value for our fellow owners. Now, I’ll ask the operator to open the call for the question-and-answer session..

[Operator Instructions] Our first question comes from the line of Peter Appert from Piper Jaffray..

Hey, everyone. This is actually Kevin Estok in for Peter Appert.

How are you doing?.

Great..

Well, Kevin. Thank you..

So I guess, my first question has to do with margin leverage.

I guess, I’m wondering how we should look at margin levels in 2018, and I guess, on a longer term? And I guess, where do you think the biggest opportunities are to drive that improvement?.

Sure. So maybe we speak from the opportunities first. We see very nice opportunity to drive improvement within our medical and veterinary schools, as we return to consistent and stable new student enrollment growth following the hurricanes.

Increasingly, we see nice continued margin expansion at Chamberlain, as that university continues to meet very solid market demand for its programs and really leveraging its nice well-rounded campus structure of 21 and a very nice growth in the post-licensure structures are driving some nice flow there.

And then, increasingly, as ACAMS continues to grow very asset-light nice margin business. So those from a qualitative perspective will be positive influences on our margin.

And then with respect to kind of our longer-term perspective, we’ll be sharing those with our investors as well as the next week during our Investor Day on Wednesday in our 5-year outlook..

Okay, great. Thank you. And my second question has to do with nursing enrollment. So congratulations on opening up the new site.

And I guess, with that mind, how should we look at enrollments growth going forward in 2018 and so on?.

Sure. So – we based on our own analysis as well as on a mark-by-market basis, we feel very confident and consistent with our prior perspectives that we feel that new student enrollment growth at Chamberlain in the mid-single digits is very achievable..

Okay. Thank you..

Our next question comes from the line of Jeff Meuler from Robert W. Baird. Please proceed with your question..

Guys, you have Nick Nikitas on for Jeff. Thanks for taking the questions. Just first on the full year guidance. It looks like the EPS growth has maintained, the tax rate’s slightly lower.

I know it’s not a big difference, but any additional color on the drivers or segments relative to where you were at previously?.

No. We’re pretty much intact. In fact, Medical and Healthcare are doing a little bit better than we had anticipated. And then, in Professional, I just have little bit of weakness in Becker, but net-net, we’re pretty much in line with where we wanted to be..

Okay. And then DVU, pretty impressive starts trends for now, I think, the second consecutive quarter.

So anything you can say there? And I know the plan is to still get rid of it, but just what was going on in the end market and where you’re seeing some stronger trends?.

Yes. So Nick, obviously, for us, as we said, transferring ownership to an owner that can really continue to drive. The turnaround is our goal there and obviously, focusing on those students, but I think this really goes to the questions we have for a couple quarters now and what we continue to say is we own it until we don’t own it.

And it’s really impressive for us to see both the team driving this turnaround and getting this program differentiation right.

And I think it helps us with all of you as we talk about our portfolio management that we’re really serious about when students are hour students, obviously, from the financial perspective there and just go now, but we take this seriously. And for us, that positions well for the new owners or faculty or colleagues and our students.

So we are pleased to see it to..

Okay. Great. And then just last one on the Brazil processing delays.

How much of an impact was that to starts in the quarter? And from conversations, and what you guys are hearing, would you expect that to no longer be an issue when you get to the fall enrollment cycle?.

Right. It did have an adverse impact on our very proud of the team for returning Adtalem Brazilian new student enrollment growth.

But quite, frankly, we could have done better, but just given the lateness of when the contracts were announced and given the fact that the term had already started, we saw many students just saying, we’ll pick back up in the next session here or semester rather in late summer.

And I’ve tried to kind of jam everything in such a compressed time period..

Okay. Yes, I thought that was a good number to see, given the underline. Okay, thanks for taking the questions..

Yes. Thank you..

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

Yes, we’d like to thank you for your questions, and remind you that our next results call is scheduled for August 16 when we announce our fiscal 2018 fourth quarter and full year results. Thank you for 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..