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MarketScreener Homepage  >  Equities  >  Nyse  >  Adtalem Global Education Inc.    ATGE

ADTALEM GLOBAL EDUCATION INC.

(ATGE)
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ADTALEM GLOBAL EDUCATION : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/05/2020 | 04:40pm EST
In this Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A"), Adtalem Global Education Inc., together with its
subsidiaries, is collectively referred to as "Adtalem," "we," "our," "us," or
similar references.

Discussions within this MD&A may contain forward-looking statements. See the
"Forward-Looking Statements" section for details about the uncertainties that
could cause our actual results to be materially different than those expressed
in our forward-looking statements.

Throughout this MD&A, we sometimes use information derived from the Consolidated
Financial Statements and the notes thereto but not presented in accordance with
U.S. generally accepted accounting principles ("GAAP"). Certain of these items
are considered "non-GAAP financial measures" under the Securities and Exchange
Commission ("SEC") rules. See the "Non-GAAP Financial Measures and
Reconciliations" section for the reasons we use these non-GAAP financial
measures and the reconciliations to their most directly comparable GAAP
financial measures.

Certain items presented in tables may not sum due to rounding. Percentages
presented are calculated from the underlying numbers in thousands. Discussions
throughout this MD&A are based on continuing operations unless otherwise noted.
The MD&A should be read in conjunction with the Consolidated Financial
Statements and the notes thereto.

Available Information


Through its website, Adtalem offers its Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, and other reports filed with the SEC. Adtalem's website is
http://www.adtalem.com. Except as otherwise stated in these reports, the
information contained on our website or available by hyperlink from our website
is not incorporated into our Annual Report on Form 10-K, this Quarterly Report
on Form 10-Q, or other documents we file with, or furnish to, the SEC.

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Segments

As of September 30, 2019, Adtalem eliminated its Business and Law reportable
segment when Adtalem Education of Brazil ("Adtalem Brazil") was classified as
discontinued operations and assets held for sale. In addition to the sale of
Adtalem Brazil, which was completed on April 24, 2020, during the second quarter
of fiscal year 2019, Adtalem divested Carrington College ("Carrington") and
DeVry University. In accordance with GAAP, we have classified the Adtalem
Brazil, Carrington, and DeVry University entities as "Assets Held for Sale" and
"Discontinued Operations" in all periods presented as applicable. As a result,
all financial results, disclosures, and discussions of continuing operations in
this Quarterly Report on Form 10-Q exclude Adtalem Brazil, Carrington, and DeVry
University operations, unless otherwise noted. See Note 3 "Discontinued
Operations and Assets Held for Sale" to the Consolidated Financial Statements
for additional discontinued operations information.

We present two reportable segments as follows:


Medical and Healthcare - Offers degree and non-degree programs in the medical
and healthcare postsecondary education industry. This segment includes the
operations of Chamberlain University ("Chamberlain"), American University of the
Caribbean School of Medicine ("AUC"), Ross University School of Medicine
("RUSM"), and Ross University School of Veterinary Medicine ("RUSVM"). AUC,
RUSM, and RUSVM are collectively referred to as the "medical and veterinary
schools."

Financial Services - Offers test preparation, certifications, conferences, seminars, memberships, and subscriptions to business professionals in the areas of accounting, anti-money laundering, banking, and mortgage lending. This segment includes the operations of the Association of Certified Anti-Money Laundering Specialists ("ACAMS"), Becker Professional Education ("Becker"), OnCourse Learning ("OCL"), and EduPristine.

"Home Office and Other" includes activities not allocated to a reportable segment. Financial and descriptive information about Adtalem's reportable segments is presented in Note 19 "Segment Information" to the Consolidated Financial Statements.

On September 11, 2020, Adtalem entered into a Membership Interest Purchase
Agreement (the "Agreement") with Laureate Education, Inc., a Delaware public
benefit corporation ("Seller"), pursuant to which Adtalem has agreed to acquire
from Seller all of the issued and outstanding equity interest in Walden
e-Learning, LLC, a Delaware limited liability company ("e-Learning"), and its
subsidiary, Walden University, LLC, a Florida limited liability company
(together with e-Learning, "Walden"), in exchange for a purchase price of $1.48
billion in cash, subject to certain adjustments set forth in the Agreement (the
"Acquisition"). Walden owns and operates Walden University, an online for-profit
university headquartered in Minneapolis, Minnesota. The Board of Directors of
Adtalem (the "Board") has unanimously approved the Acquisition. The closing of
the Acquisition is expected to occur in mid-calendar year 2021 and is subject to
certain closing conditions, including regulatory approval by the U.S. Department
of Education and the Higher Learning Commission and required antitrust
approvals.

Also on September 11, 2020, to provide future funding for the Acquisition,
Adtalem entered into a commitment letter (the "Commitment Letter") with Morgan
Stanley Senior Funding, Inc. ("MSSF"), Barclays Bank PLC ("Barclays"), Credit
Suisse AG, Cayman Islands Branch ("CS") and Credit Suisse Loan Funding LLC
("CSLF" and, together with CS and their respective affiliates, "Credit Suisse"),
and MUFG Bank, Ltd. (together with MSSF, Barclays and Credit Suisse, the
"Commitment Parties"), pursuant to which the Commitment Parties committed to
provide to Adtalem (i)(A) a senior secured term loan facility in an aggregate
principal amount of $1 billion (the "Term Facility") and (B) a senior secured
revolving loan facility in an aggregate commitment amount of $400 million (the
"Revolving Facility") and (ii) to the extent one or more series of senior
secured notes pursuant to a Rule 144A offering or other private placement in an
aggregate principal amount of $650 million are not issued (in escrow or
otherwise) prior to the consummation of the Acquisition, a senior secured bridge
term loan credit facility in an aggregate principal amount of up to $650 million
(together with the Term Facility and the Revolving Facility, the "Facilities").
The proceeds of the Facilities will be used, among other things, to finance the
Acquisition, refinance Adtalem's existing credit agreement, pay fees and
expenses related to the Acquisition, and in the case of the Revolving Facility,
to finance ongoing working capital and general corporate purposes. The
commitments under the Commitment Letter are subject to customary closing
conditions. The risks and uncertainties related

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Table of Contents


to the Acquisition are described in Item 1A. "Risk Factors." Refer to the Form
8-K filed with the SEC on September 16, 2020 for additional information on the
Acquisition and Commitment Letter.

On September 16, 2020, Laureate Education, Inc. ("Laureate") advised Adtalem
that Walden University had received a letter from the U.S. Department of Justice
(the "DOJ") indicating that the DOJ, along with several other government
agencies, is conducting an investigation into allegations that Walden University
may have violated the federal False Claims Act by misrepresenting its compliance
with provisions of its Program Participation Agreement with the U.S. Department
of Education relating, generally, to potential false representations to the
Commission on Collegiate Nursing Education and false advertising to students
about (1) the content and cost of Walden's Masters of Science in Nursing
program, or (2) the availability of clinical site placements required for
mandatory practicum courses for such program (collectively, the "DOJ
Investigation"). Subsequently, Walden disclosed the DOJ Investigation to the
Higher Learning Commission (the "HLC"). On October 13, 2020, Laureate advised
Adtalem that Walden University had received a letter from the HLC notifying
Walden University that the HLC seeks to assign a public Governmental
Investigation designation to Walden University. If imposed, the status would
remain in place until the President of the HLC determines that it is no longer
required because the institution has resolved the issues that led to the
designation. Pursuant to HLC policy, on October 26, 2020, Walden University
exercised its opportunity respond to the notice before the Governmental
Investigation designation would be assigned and made public.

Pursuant to its access rights under the terms of the Agreement, Adtalem is
conducting its own investigation of the matters addressed in the DOJ and HLC
correspondence, including reviewing relevant documents and other information and
interviewing relevant Laureate and/or Walden University personnel. As a
condition to closing the acquisition, certain designated regulatory authorities,
including the HLC, must consent to the acquisition. Pursuant to Section 5.05(a)
of the Agreement, the parties are required to cooperate and use reasonable best
efforts to obtain those designated pre-closing consents from, among others, the
HLC. Consistent with the HLC's policies and procedures, a Governmental
Investigation designation by the HLC could delay or prevent the HLC's approval
of a substantive change application to approve the proposed acquisition of
Walden University. We are in the early stages of evaluating these regulatory
developments and the potential impact, if any, on our planned acquisition of
Walden University.

First Quarter Highlights

Financial and operational highlights for the first quarter of fiscal year 2021 include:

Adtalem revenue grew $13.6 million, or 5.4%, in the first quarter of fiscal

? year 2021 compared to the year-ago quarter. Both the Medical and Healthcare and

Financial Services segments saw increased revenue.

Net income attributable to Adtalem of $19.9 million increased $5.6 million, or

38.8%, in the first quarter of fiscal year 2021 compared to the year-ago

quarter. This increase was primarily driven by the $13.6 million revenue

increase, a reduction in bad debt expense of $3.8 million, and cost containment

measures across all institutions and Adtalem's home office, partially offset by

? $13.4 million in business acquisition and integration expense recorded in the

first quarter of fiscal year 2021. Net income from continuing operations

attributable to Adtalem excluding special items of $41.2 million increased

$22.3 million, or 117.7%, in the first quarter of fiscal year 2021 compared to

the year-ago quarter. This increase was principally attributable to revenue

growth at Chamberlain and OCL, the reduction in bad debt expense, and cost

containment measures across all institutions and Adtalem's home office.

For the September 2020 session, new and total student enrollment at Chamberlain

? increased 13.2% and 11.9%, respectively, compared to the same session last

year. Chamberlain continues to invest in its programs, student services, and

campus locations.

For the September 2020 semester, new and total student enrollment at the

? medical and veterinary schools increased 5.5% and 4.3%, respectively, compared

to the same semester last year.

? ACAMS memberships have increased to more than 82,000 as of September 30, 2020

   compared to more than 75,000 as of September 30, 2019.




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OCL experienced strong revenue growth in its mortgage loan officer training and

? continuing education business, attributable to increased demand in the current

   strong mortgage market.



Overview of the Impact of COVID-19

On March 11, 2020, the novel coronavirus ("COVID-19") outbreak was declared a
pandemic by the World Health Organization. COVID-19 has had tragic consequences
across the globe and is altering business and consumer activity across many
industries. Management has initiated several changes to the operations of our
institutions and administrative functions in order to protect the health of
Adtalem employees, students, and customers and to mitigate the financial effects
of COVID-19 and its resultant economic slowdown. We will continue to evaluate,
and if appropriate, adopt other measures in the future required for the ongoing
safety of our students, customers, and employees.

Results of Operations

COVID-19 resulted in estimated revenue losses of approximately $14 million,
operating income losses of approximately $7 million, and loss of earnings per
share of approximately $0.11 in the first quarter of fiscal year 2021.
Management anticipates further negative COVID-19 effects to consolidated
revenue, operating income, net income, and earnings per share further into
fiscal year 2021 or as long as social distancing and other measures established
to combat COVID-19 continue. We also expect higher variable expenses associated
with bringing students back to campus and additional costs with providing a safe
environment in the context of COVID-19 as we begin to move back to in-person
instruction across both segments. COVID-19 effects on the first quarter of
fiscal year 2021 results of operations of the Adtalem institutions are described
below.

?Chamberlain: Approximately 30% of Chamberlain's students are based at campus
locations and pursuing their Bachelor of Science in Nursing ("BSN") degree; at
the onset of the COVID-19 outbreak, all campus-based students transitioned to
online learning for didactic and select clinical experiences. The remaining 70%
of Chamberlain's students are enrolled in online programs that may or may not
have clinical components and those programs are continuing to successfully
operate. For the September 2020 session, students and employees have returned to
several Chamberlain campuses for limited onsite instruction. Plans are being
developed for additional re-opening activities for the November 2020 session.
COVID-19 did not result in significant revenue losses or cost increases at
Chamberlain in the first quarter of fiscal year 2021. The extent of the impact
further into fiscal year 2021 will be determined based on the length and
severity of the effects of COVID-19 and whether the pandemic affects healthcare
facilities' ability to continue to provide clinical experiences, most of which
have resumed as of September 2020. Chamberlain has clinical partnerships with
healthcare facilities across the U.S., minimizing the risk of suspension of all
onsite clinical education experiences.
?AUC and RUSM: Medical students enrolled in the basic science portion of their
program have transitioned to online learning. Many students have left St.
Maarten and Barbados to continue their studies remotely from other locations.
COVID-19 did not result in significant revenue losses or increased costs within
the basic science programs at the medical schools in the first quarter of fiscal
year 2021. COVID-19 will likely have minimal impact on the basic science program
revenue in fiscal year 2021, unless students choose to not continue or start
their studies during this time of uncertainty. AUC and RUSM were able to provide
remote learning and have students remain eligible for U.S. federal financial aid
assistance under a waiver provided by the Coronavirus Aid, Relief, and Economic
Security Act (the "CARES Act"). The waiver was dependent upon the host country's
coronavirus state of emergency declaration. The nation of St. Maarten lifted
their declaration in June 2020, and as a result, AUC's ability to offer distance
education ends after the September 2020 semester is completed. All AUC students
must return to St. Maarten for basic science instruction effective January 2021,
unless a new coronavirus aid package is passed and extends the foreign school
distance education waiver. Management intends to move instruction back to St.
Maarten for the January 2021 semester. A state of emergency still exists on
Barbados, and as a result, the CARES Act waiver still applies to the basic
science instruction at RUSM. The extent of the impact further into fiscal year
2021 will be determined based on the length and severity of the effects of
COVID-19. Students who have completed their basic science education progress to
clinical rotations in the U.S. (and in the U.K. for AUC). Clinical rotations for
all students were temporarily suspended in March 2020; however, some students
were able to participate in online clinical elective courses from April through
June 2020. As of November 2020, almost all of the clinical partners of AUC and
RUSM have resumed their clinical programs. Although many students were able to
resume their clinical education during the first quarter of fiscal year 2021,
management estimates that not being able to offer a full clinical program
reduced combined revenue of AUC and RUSM by approximately $4 million and
operating income by

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approximately $2 million in the first quarter of fiscal year 2021. The lower
number of clinical hours available due to COVID-19 will likely have a negative
effect on revenue and operating income into the second quarter of fiscal year
2021 and for as long as the pandemic affects hospitals' ability to provide
clinical experiences. Adtalem has clinical partnerships with hospitals across
the U.S. (and in the U.K. for AUC), minimizing the risk of suspension of all
onsite clinical education experiences. In addition to the loss of clinical
revenue and operating income at AUC and RUSM, management estimates that housing
and student transportation revenue of approximately $5 million and resulting
operating income of approximately $3 million was also lost due to students
moving off of St. Maarten and Barbados to continue basic science studies
remotely.
?RUSVM: All basic science veterinary students transitioned to online learning
beginning in March 2020. Many students left St. Kitts in March 2020 to continue
their studies remotely from other locations. A portion of students at specific
junctures of their basic science education have traveled back to St. Kitts since
July 2020 and resumed classroom based learning in August 2020. COVID-19 did not
result in significant revenue losses or cost increases within the basic science
program in the first quarter of fiscal year 2021. We do not expect a significant
impact from COVID-19 on the basic science program in fiscal year 2021, unless
students choose to not continue or start their studies during this time of
uncertainty. RUSVM was able to provide remote learning during the pandemic and
have students remain eligible for U.S. federal financial aid assistance under a
waiver provided by the CARES Act. The waiver was dependent upon the host
country's coronavirus state of emergency declaration. A state of emergency still
exists on St. Kitts, and as a result, the CARES Act waiver still applies to the
basic science instruction at RUSVM. The extent of the impact on the basic
science program further into fiscal year 2021 will be determined based on the
length and severity of the effects of COVID-19. Students who have completed
their basic science education progress to clinical rotations at select
universities in the U.S., Canada, New Zealand, Australia, and Europe. A few
universities suspended onsite clinical experiences and transitioned students to
online education, while other universities have continued to offer onsite
clinical courses. The suspensions did not significantly reduce revenue or
operating income in the first quarter of fiscal year 2021. The extent of the
impact on clinical experiences further into fiscal year 2021 will be determined
based on the length and severity of the effects of COVID-19, but we do not
expect a significant impact from COVID-19 at RUSVM.
?Financial Services: Most Financial Services content, including exam
preparation, certification training, continuing education, and subscriptions is
delivered online. Any classroom-based learning has been moved to online. No
significant COVID-19 related cost increases were realized in Financial Services
in the first quarter of fiscal year 2021. COVID-19 did result in estimated
revenue and operating income losses of approximately $5 million and $3 million,
respectively, in the first quarter of fiscal year 2021, driven by the
replacement of the Las Vegas live conference with a virtual conference. ACAMS
live conference revenue will not be realized so long as social distancing and
group gathering is limited. COVID-19 is expected to negatively impact Financial
Services revenue and operating income further into fiscal year 2021, driven by
the loss of ACAMS live conference revenue and possible weakness in demand at
Becker, primarily with CPA firm customers. Virtual conferences were conducted in
June 2020 and September 2020 and it is possible additional conference revenue
could be replaced with virtual events in the future, but loss of conference
revenue is likely as ACAMS has canceled all live conferences through December
2020. Virtual conferences are unlikely to generate the same level of revenue and
operating income as live conferences. Management believes that other than the
ACAMS conferences, longer-term operating results in the Financial Services
segment will not be significantly affected by COVID-19 unless there are major
employment losses with accounting professionals and recent accounting graduates,
or in the banking and mortgage sectors. This is not known and cannot be
predicted at this time. At Becker, CPA testing sites began reopening in June
2020 at limited capacity, however, management believes hiring at CPA firms has
not yet fully recovered.
?Administrative Operations: Most institution and home office administrative
operations continue to be performed remotely. This includes operations in both
the U.S. and all foreign locations. These remote work arrangements have not
adversely affected Adtalem's ability to maintain operations, financial reporting
systems, internal control over financial reporting, or disclosure controls and
procedures. The effectiveness of our remote technology enables our ability to
maintain these systems and controls. Management does not anticipate Adtalem will
be materially impacted by any constraints or other impacts on our human capital
resources and productivity. Travel restrictions and border closures are not
expected to have a material impact on our ability to operate and achieve
operational goals. While recent travel expenditures have decreased we would
expect these costs to increase as the effects of COVID-19 dissipate. No
significant home office costs were incurred related to COVID-19 in the first
quarter of fiscal year 2021 and no such costs are anticipated for the remainder
of fiscal year 2021.

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Although COVID-19 has had a negative effect on the operating results of all four
reporting units that contain goodwill and indefinite-lived intangible assets as
of September 30, 2020, at this time none of the effects are considered
significant enough to create an impairment triggering event since our annual
goodwill impairment assessment on May 31, 2020. While management has considered
the effects of the COVID-19 pandemic in evaluating the existence of an
impairment triggering event, it is possible that effects to revenue and cash
flows will be more significant than currently expected if the effects of the
COVID-19 pandemic and social distancing measures established to combat the virus
continue for an extended period of time. Should economic conditions deteriorate
beyond expectations further into fiscal year 2021, an impairment triggering
event could arise and require reassessment of the fair values of goodwill and
intangible assets.

Liquidity

Adtalem's cash and cash equivalents balance was $561.2 million as of September
30, 2020. Adtalem generated $84.7 million in operating cash flow from continuing
operations in the first three months of fiscal year 2021. In the event of
unexpected market conditions or negative economic changes, including those
caused by COVID-19, that could negatively affect Adtalem's earnings and/or
operating cash flow, Adtalem maintains a $300 million revolving credit facility
with availability of $231.6 million as of September 30, 2020. Management
currently projects that COVID-19 will continue to have an effect on operations;
however, we believe the current balances of cash, cash generated from
operations, and our credit facility will be sufficient to fund both Adtalem's
current domestic and international operations and growth plans in the
foreseeable future, except in relation to the Acquisition of Walden as discussed
in the previous section of this MD&A titled "Segments." See further discussion
on the future financing of the Acquisition in the section of this MD&A titled
"Financing Activities" in the "Liquidity and Capital Resources" section.

As noted above, Adtalem maintains a credit agreement (the "Credit Agreement")
that provides for (1) a $300 million revolving facility ("Revolver") with a
maturity date of April 13, 2023 and (2) a $300 million senior secured Term B
loan ("Term B Loan") with a maturity date of April 13, 2025. We refer to the
Revolver and Term B Loan collectively as the "Credit Facility." With interest
rates at historically low levels, management entered into an interest rate swap
agreement in March 2020 with a multinational financial institution that
effectively converts the variable rate interest on the Term B Loan borrowings to
a fixed rate of 3.946% for essentially the remaining term of the Term B Loan.
The Credit Facility contains covenants that, among other things, require
maintenance of certain financial ratios, as defined in the Credit Agreement (see
the Credit Agreement, as filed under Form 8-K dated April 13, 2018). These
financial ratios include a consolidated fixed charge coverage ratio, a
consolidated leverage ratio, and a U.S. Department of Education financial
responsibility ratio based upon a composite score of an equity ratio, a primary
reserve ratio, and a net income ratio. Failure to maintain any of these ratios
or to comply with other covenants contained in the Credit Agreement would
constitute an event of default and could result in termination of the Credit
Agreement and require payment of all outstanding borrowings and replacement of
outstanding letters of credit. Adtalem was in compliance with the debt covenants
as of September 30, 2020.

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Results of Operations

The following table presents selected Consolidated Statements of Income data as
a percentage of revenue:


                                                          Three Months Ended
                                                            September 30,
                                                          2020         2019
Revenue                                                     100.0 %      100.0 %
Cost of educational services                                 42.4 %       50.3 %
Student services and administrative expense                  37.3 %       38.9 %
Restructuring expense                                         1.6 %        2.6 %
Business acquisition and integration expense                  5.0 %        0.0 %
Gain on sale of assets                                        0.0 %      (1.9) %
Total operating cost and expense                             86.3 %       89.9 %
Operating income                                             13.7 %       10.1 %
Net other expense                                           (0.8) %      (1.8) %
Income from continuing operations before income
taxes                                                        12.9 %        8.3 %
Provision for income taxes                                  (2.6) %      (1.5) %
Income from continuing operations                            10.2 %        6.8 %
Loss from discontinued operations, net of tax               (2.8) %      (1.2) %
Net income                                                    7.4 %        5.6 %
Net loss attributable to redeemable noncontrolling
interest                                                      0.0 %        0.0 %
Net income attributable to Adtalem                            7.4 %       
5.6 %


Revenue

The following table presents revenue by segment detailing the changes from the year-ago quarter (in thousands):


                                    Three Months Ended September 30, 2020
                                Medical and       Financial
                                 Healthcare        Services       Consolidated
Fiscal year 2020 as reported   $      207,487$     47,126$      254,613
Organic growth                         11,339           2,289            13,628
Fiscal year 2021 as reported   $      218,826$     49,415$      268,241

Fiscal year 2021 % change:
Organic growth                            5.5 %           4.9 %             5.4 %


Medical and Healthcare

Revenue in the Medical and Healthcare segment increased 5.5%, or $11.3 million,
to $218.8 million in the first quarter of fiscal year 2021 compared to the
year-ago quarter. The increase in revenue in the first quarter of fiscal year
2021 is driven primarily by student enrollment increases at Chamberlain. This
increase was partially offset by the estimated loss of approximately $5 million
in housing and student transportation revenue, primarily at RUSM as basic
science students were not on campus due to COVID-19 remote learning, and $4
million of clinical revenue at AUC and RUSM due to the COVID-19 related clinical
program limitations at partner hospitals, which were gradually eased during the
first quarter of fiscal year 2021.

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Chamberlain

Chamberlain Student Enrollment:


                                      Fiscal Year 2021
Session                            July 2020   Sept. 2020
New students                           2,768        6,333
% change from prior year                15.5 %       13.2 %
Total students                        32,198       35,525
% change from prior year                12.2 %       11.9 %

                                                             Fiscal Year 2020
Session                            July 2019   Sept. 2019   Nov. 2019   Jan. 2020   Mar. 2020   May 2020
New students                           2,396        5,595       2,711       5,293       3,073      4,213
% change from prior year               (5.0) %        2.9 %       3.6 %      11.2 %      12.7 %      5.4 %
Total students                        28,691       31,736      31,215      33,850      33,748     33,407
% change from prior year                 2.3 %        1.4 %       1.2 %    

4.6 % 5.1 % 8.2 %

Chamberlain revenue increased 14.8%, or $17.2 million, to $133.8 million in the
first quarter of fiscal year 2021 compared to the year-ago quarter, driven by
increases in total student enrollment during each fiscal year 2021 enrollment
session as well as non-tuition fee price increases. Chamberlain admitted its
largest class of campus students in September 2020.

Chamberlain currently operates 22 campuses in 15 states. Chamberlain's newest campus in San Antonio, Texas, began instruction in October 2019.

Tuition Rates:


Tuition for the Bachelor of Science in Nursing ("BSN") onsite degree program
ranges from $675 to $720 per credit hour. Tuition for the Registered Nurse to
BSN ("RN-to-BSN") online degree program is $590 per credit hour. Tuition for the
online Master of Science in Nursing ("MSN") degree program is $650 per credit
hour. Tuition for the online Family Nurse Practitioner ("FNP") degree program is
$665 per credit hour. Tuition for the online Doctor of Nursing Practice ("DNP")
degree program is $775 per credit hour. Tuition for the online Master of Public
Health ("MPH") degree program is $550 per credit hour. Tuition for the online
Master of Social Work ("MSW") degree program is $695 per credit hour. All of
these tuition rates are unchanged from the prior year. These tuition rates do
not include the cost of books, supplies, transportation, or living expenses.

Medical and Veterinary Schools

Medical and Veterinary Schools Student Enrollment:


                           Fiscal Year 2021
Semester                      Sept. 2020
New students                            920
% change from prior year                5.5 %
Total students                        5,850
% change from prior year                4.3 %

                                      Fiscal Year 2020
Semester                      Sept. 2019      Jan. 2020   May 2020
New students                            872         486        544
% change from prior year              (1.9) %       3.2 %      9.7 %
Total students                        5,608       5,643      5,186
% change from prior year              (4.7) %       1.7 %    (0.7) %


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The medical and veterinary schools' revenue decreased 6.5%, or $5.9 million, to
$85.1 million in the first quarter of fiscal year 2021 compared to the year-ago
quarter. The principal drivers of the decrease was an estimated loss of $5
million in housing and student transportation revenue, primarily at RUSM as
basic science students were not on campus due to COVID-19 remote learning, and
$4 million of clinical revenue at AUC and RUSM due to the COVID-19 related
clinical program limitations at partner hospitals, which were gradually eased
during the first quarter of fiscal year 2021. These decreases were partially
offset with student enrollment and revenue increases in the basic science
programs at AUC and RUSVM.

In the September 2020 semester, total student enrollment increased at AUC, RUSM,
and RUSVM. New student enrollment increased at AUC and RUSM but slightly
declined at RUSVM due to the large cohort of May 2020Vet Prep students
progressing to September 2020, which was at maximum enrollment capacity.
Management is executing its plan to differentiate the medical and veterinary
schools from the competition, with a core goal of increasing international
students, increasing RUSM affiliations with historically black colleges and
universities ("HBCU") and Hispanic-serving institutions ("HSI"), expanding AUC's
medical education program based in the U.K. in partnership with the University
of Central Lancashire ("UCLAN"), and improving the effectiveness of marketing
investments. Management believes the demand for medical and veterinary education
remains strong and can support management's longer-term expectations to grow new
enrollments in the low-single digit range; however, competition may continue to
adversely affect the medical and veterinary schools' ability to continue to
attract qualified students to its programs resulting in lower revenue.

In September 2019, AUC opened its medical education program in the U.K. in
partnership with UCLAN. The program offers students a Post Graduate Diploma in
International Medical Sciences from UCLAN, followed by their Doctor of Medicine
degree from AUC. Students will then be eligible to do clinical rotations at
AUC's clinical sites, which include hospitals in the U.S., the U.K., and Canada.
This program is aimed at preparing students for the U.S. Medical Licensing
Examination ("USMLE").

Tuition Rates:

Effective for semesters beginning in September 2020, tuition rates for the

? beginning basic sciences and final clinical rotation portions of AUC's medical

program are $23,240 and $26,000, respectively, per semester. These tuition

rates are unchanged from the prior academic year.

Effective for semesters beginning in September 2020, tuition rates for the

? beginning basic sciences and Internal Medicine Foundations/final clinical

portion of the programs at RUSM are $24,170 and $26,676, respectively, per

semester. These tuition rates are unchanged from the prior academic year.

For students who entered the RUSVM program in September 2018 or later, the

tuition rate for the pre-clinical (Semesters 1-7) and clinical curriculum

(Semesters 8-10) is $20,873 per semester effective September 2020. For students

? who entered RUSVM before September 2018, tuition rates for the pre-clinical and

clinical curriculum are $19,387 and $24,339, respectively, per semester

effective September 2020. These tuition rates are unchanged from the prior

academic year.

The respective tuition rates for AUC, RUSM, and RUSVM do not include the cost of transportation, living expenses, or health insurance.

Financial Services

Revenue in the Financial Services segment increased 4.9%, or $2.3 million, to
$49.4 million in the first quarter of fiscal year 2021 compared to the year-ago
quarter. The principal drivers of the increase were a result of increased
revenue at OCL and an increase in ACAMS memberships, subscriptions, and
certification revenue. In addition, Becker revenue increased through growth in
both CPA and continuing education program offerings. The revenue increase was
partially offset by a $5.4 million decline in ACAMS conference related revenue
in the first quarter of fiscal year 2021 compared to the year-ago quarter,
driven by the estimated loss of approximately $5 million of revenue from the
COVID-19 related replacement of the Las Vegas live conference with a virtual
conference. The remaining decline in conference revenue relates to the timing of
conferences between comparable quarters. The entire Las Vegas conference was in
the first quarter

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of fiscal year 2020, where one day out of the now three day virtual conference
takes place in the second quarter of fiscal year 2021. ACAMS memberships have
increased to more than 82,000 as of September 30, 2020 compared to more than
75,000 as of September 30, 2019, driven by strong growth in the European region.

Cost of Educational Services


The largest component of cost of educational services is the cost of faculty and
staff who support educational operations. This expense category also includes
the costs of facilities, adjunct faculty, supplies, housing, bookstore, other
educational materials, student education-related support activities, and the
provision for bad debts. The following table presents cost of educational
services by segment detailing the changes from the year-ago quarter (in
thousands):


                                          Three Months Ended September 30, 2020
                               Medical and     Financial     Home Office
                                Healthcare      Services      and Other      Consolidated

Fiscal year 2020 as reported $ 116,739$ 10,678 $ 617 $ 128,034 Cost decrease

                      (11,628)       (2,673)            (35)   

(14,336)

Fiscal year 2021 as reported   $    105,111$    8,005   $         582   $      113,698

Fiscal year 2021 % change:
Cost decrease                        (10.0) %      (25.0) %            NM           (11.2) %


Cost of educational services decreased 11.2%, or $14.3 million, to $113.7
million in the first quarter of fiscal year 2021 compared to the year-ago
quarter. Cost decreased due to lower operating expenses driven by cost control
initiatives across all institutions, lower costs of approximately $7 million
associated with not delivering in-person instruction and clinical and other
services, including ACAMS live conferences, due to the COVID-19 related revenue
losses as noted above, and decreased bad debt expense of $3.8 million in the
first quarter of fiscal year 2021, primarily related to the credit extension
programs at the medical and veterinary schools.

As a percentage of revenue, cost of educational services was 42.4% in the first
quarter of fiscal year 2021 compared to 50.3% in the year-ago quarter. The
decrease in the percentage was primarily the result of cost reduction efforts
and the increased revenue in the first quarter of fiscal year 2021.

Student Services and Administrative Expense

The student services and administrative expense category includes expenses
related to sales, student admissions, marketing and advertising, general and
administrative, curriculum development, and amortization expense of finite-lived
intangible assets related to business acquisitions. The following table presents
student services and administrative expense by segment detailing the changes
from the year-ago quarter (in thousands):


                                          Three Months Ended September 30, 2020
                               Medical and     Financial     Home Office
                                Healthcare      Services      and Other      Consolidated

Fiscal year 2020 as reported $ 62,120$ 32,341$ 4,626$ 99,087 Cost increase (decrease)

            (1,415)           382           2,124   

1,091

Fiscal year 2021 as reported   $     60,705$   32,723$       6,750$      100,178

Fiscal year 2021 % change:
Cost increase (decrease)              (2.3) %         1.2 %            NM              1.1 %


Student services and administrative expense increased 1.1%, or $1.1 million, to
$100.2 million in the first quarter of fiscal year 2021 compared to the year-ago
quarter. As a percentage of revenue, student services and administrative expense
was 37.3% in the first quarter of fiscal year 2021 compared to 38.9% in the
year-ago quarter. The decrease in the percentage was primarily the result of the
increased revenue and cost control initiatives across all institutions in the
first quarter of fiscal year 2021.

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Restructuring Expense

Restructuring expense in the first quarter of fiscal year 2021 was $4.2 million
compared to $6.5 million in the year-ago quarter. The primary driver of the
decreased restructure expense was the result of lower real estate consolidation
charges at Adtalem's home office. See Note 5 "Restructuring Charges" to the
Consolidated Financial Statements for additional information on restructuring
charges.

We have substantially completed our current restructuring plans. We will
continue to incur restructuring charges or reversals related to exiting leased
space from previous restructuring activities. Management may institute future
restructuring plans.

Business Acquisition and Integration Expense

Business acquisition and integration expense in the first quarter of fiscal year
2021 was $13.4 million. These are transaction costs associated with entering
into the Agreement to acquire Walden and costs associated with integrating
Walden into Adtalem. We expect to incur additional integration costs through the
remainder of fiscal year 2021.

Gain on Sale of Assets


On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus
facility. Net proceeds of $6.4 million from the sale of this facility resulted
in a gain on the sale of $4.8 million in the first quarter of fiscal year 2020.
This gain was recorded at Adtalem's home office, which is classified as "Home
Office and Other" in Note 19 "Segment Information" to the Consolidated Financial
Statements. There was no corresponding gain in the first quarter of fiscal
year
2021.

Operating Income

The following table presents operating income by segment detailing the changes from the year-ago quarter (in thousands):


                                                    Three Months Ended September 30, 2020
                                         Medical and      Financial     Home Office
                                         Healthcare       Services       and Other      Consolidated
Fiscal year 2020 as reported            $      28,500$     2,128$     (4,887)$       25,741
Organic change                                 24,383          4,580         (2,090)           26,873
Restructuring expense change                      127            564           1,616            2,307
Business acquisition and integration
expense change                                      -              -        (13,436)         (13,436)
Gain on sale of assets change                       -              -         (4,779)          (4,779)
Fiscal year 2021 as reported            $      53,010$     7,272   $   
(23,576)   $       36,706


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The following table presents a reconciliation of operating income (GAAP) to
operating income excluding special items (non-GAAP) by segment (in thousands):


                                                           Three Months Ended
                                                             September 30,
                                                                             Increase
                                                   2020          2019       (Decrease)
Medical and Healthcare:
Operating income (GAAP)                         $   53,010$   28,500          86.0 %
Restructuring expense                                    -           127            NM
Operating income excluding special items
(non-GAAP)                                      $   53,010$   28,627          85.2 %

Financial Services:
Operating income (GAAP)                         $    7,272$    2,128         241.7 %
Restructuring expense                                1,415         1,979        (28.5) %
Operating income excluding special items
(non-GAAP)                                      $    8,687$    4,107         111.5 %

Home Office and Other:
Operating loss (GAAP)                           $ (23,576)$  (4,887)       (382.4) %
Restructuring expense                                2,808         4,424        (36.5) %
Business acquisition and integration expense        13,436             -   

NM

Gain on sale of assets                                   -       (4,779)   

NM

Operating loss excluding special items
(non-GAAP)                                      $  (7,332)$  (5,242)        (39.9) %

Adtalem Global Education:
Operating income (GAAP)                         $   36,706$   25,741          42.6 %
Restructuring expense                                4,223         6,530        (35.3) %
Business acquisition and integration expense        13,436             -   

NM

Gain on sale of assets                                   -       (4,779)   

NM

Operating income excluding special items
(non-GAAP)                                      $   54,365$   27,492

97.7 %



Total consolidated operating income increased $11.0 million, to $36.7 million in
the first quarter of fiscal year 2021 compared to the year-ago quarter.
Consolidated operating income excluding special items increased 97.7%, or $26.9
million, in the first quarter of fiscal year 2021 compared to the year-ago
quarter. The primary drivers of this increase were an increase in revenue of
$13.6 million, primarily at Chamberlain and OCL, which generated higher
incremental operating income than the lost revenue sources due to COVID-19,
decreased bad debt expense of $3.8 million, primarily related to the credit
extension programs at the medical and veterinary schools, and efforts to manage
salary, travel, and discretionary spending across the organization.

Medical and Healthcare


Medical and Healthcare segment operating income increased 86.0%, or $24.5
million, to $53.0 million in the first quarter of fiscal year 2021 compared to
the year-ago quarter. The primary drivers of this increase related to increased
revenue at Chamberlain of $17.2 million, which generated higher incremental
operating income than the lost revenue sources due to COVID-19 as discussed
below, decreased bad debt expense of $2.7 million, primarily related to the
credit extension programs at the medical and veterinary schools, and efforts to
manage salary, travel, and discretionary spending at all institutions. Lower
revenue at AUC and RUSM due to the estimated COVID-19 related loss of clinical
revenue contributed to approximately $2 million in lost operating income in the
first quarter of fiscal year 2021. Lower COVID-19 related housing and student
transportation revenue, primarily at RUSM as described above, resulted in
approximately $3 million in lost operating income.

Financial Services


Financial Services segment operating income increased 241.7%, or $5.1 million,
to $7.3 million in the first quarter of fiscal year 2021 compared to the
year-ago quarter. Segment operating income excluding special items increased
111.5%, or $4.6 million, in the first quarter of fiscal year 2021 compared to
the year-ago quarter. The primary driver of this increase was an increase in
revenue at OCL. Conference revenue decreases at ACAMS due to COVID-19, as
described above, contributed to $3 million in lost operating income in the first
quarter of fiscal year 2021.

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Net Other Expense

Net other expense in the first quarter of fiscal year 2021 was $2.2 million compared to $4.6 million in the year-ago quarter. The decrease in net other expense was primarily the result of decreased borrowings under Adtalem's Credit Facility (as discussed in Note 12 "Debt" to the Consolidated Financial Statements).

Provision for Income Taxes

Our effective income tax rate ("ETR") from continuing operations can differ from
the 21% U.S. federal statutory rate due to several factors, including the rate
of tax applied to earnings outside the U.S., tax incentives, changes in
valuation allowances, liabilities for uncertain tax positions, and tax benefits
on stock-based compensation awards. Additionally, our ETR is impacted by the
provisions from the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), which include
primarily a tax on global intangible low-taxed income ("GILTI"), a deduction for
foreign derived intangible income ("FDII"), and a limitation of tax benefits on
certain executive compensation. The impact of the Tax Act may be revised in
future periods as we obtain additional data and consider any new regulations or
guidance that may be released.

The ETR from continuing operations for the first quarter of fiscal year 2021 was
20.5% compared to 17.6% in the year-ago quarter. The increase is primarily due
to an increase in earnings from domestic operations and a reduction in tax
benefits for stock-based compensation.

Discontinued Operations


Beginning in the second quarter of fiscal year 2018, DeVry University operations
were classified as discontinued operations. Beginning in the fourth quarter of
fiscal year 2018, Carrington operations were classified as discontinued
operations. Beginning in the first quarter of fiscal year 2020, Adtalem Brazil
operations were classified as discontinued operations. The divestitures of
Carrington and DeVry University operations were completed in the second quarter
of fiscal year 2019 and the divestiture of Adtalem Brazil operations was
completed in the fourth quarter of fiscal year 2020. We continue to incur costs
associated with ongoing litigation and settlements related to the DeVry
University divestiture which is classified as expense within discontinued
operations. Management no longer discloses other discussions of operating
results of these entities as comparable results are no longer meaningful.

Regulatory Environment

Student Payments


Adtalem's primary source of liquidity is the cash received from payments for
student tuition, books, other educational materials, and fees. These payments
include funds originating as financial aid from various federal and state loan
and grant programs, student and family educational loans ("private loans"),
employer educational reimbursements, scholarships, and student and family
financial resources. Adtalem continues to provide financing options for its
students, including Adtalem's credit extension programs.

The following table, which excludes Adtalem Brazil, Carrington, and DeVry
University revenue, summarizes Adtalem's revenue by fund source as a percentage
of total revenue for fiscal years 2019 and 2018. Final data for fiscal year
2020
is not yet available.


                                                                 Fiscal Year
                                                                2019      2018
Federal assistance (Title IV) program funding (grants and
loans)                                                             59 %      59 %
Private loans                                                       2 %    

2 % Student accounts, cash payments, private scholarships, employer and military provided tuition assistance, and other 39 %

 39 %
Total                                                             100 %     100 %


The pattern of cash receipts during the year is seasonal. Adtalem's cash
collections on accounts receivable peak at the start of each institution's term.
Accounts receivable reach their lowest level at the end of each institution's
term.

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Financial Aid
Like other higher education companies, Adtalem is highly dependent upon the
timely receipt of federal financial aid funds. All financial aid and assistance
programs are subject to political and governmental budgetary considerations. In
the U.S., the Higher Education Act ("HEA") guides the federal government's
support of postsecondary education. If there are changes to financial aid
programs that restrict student eligibility or reduce funding levels, Adtalem's
financial condition and cash flows could be materially and adversely affected.
See Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the fiscal
year ended June 30, 2020 ("2020 Form 10-K") for a discussion of student
financial aid related risks.

In addition, government-funded financial assistance programs are governed by
extensive and complex regulations in the U.S. Like any other educational
institution, Adtalem's administration of these programs is periodically reviewed
by various regulatory agencies and is subject to audit or investigation by other
governmental authorities. Any violation could be the basis for penalties or
other disciplinary action, including initiation of a suspension, limitation, or
termination proceeding.

If the U.S. Department of Education ("ED") determines that we have failed to
demonstrate either financial responsibility or administrative capability in any
pending program review, or otherwise determines that an institution has violated
the terms of its Program Participation Agreement ("PPA"), we could be subject to
sanctions including: fines, penalties, reimbursement for discharged loan
obligations, a requirement to post a letter of credit, and/or suspension or
termination of our eligibility to participate in the Title IV programs.

During the fourth quarter of fiscal year 2020 and the first quarter of fiscal
year 2021, ED provisionally recertified AUC, RUSM, and RUSVM's Title IV PPAs
with expiration dates of December 31, 2022, March 31, 2023, and June 30, 2023,
respectively. The provisional nature of the agreements stemmed from increased
and/or repeated Title IV compliance audit findings. No financial ramifications,
such as a letter of credit, heightened cash monitoring, or student enrollment
limitations, were imposed on any of these institutions. While corrective actions
have been taken to resolve past compliance matters and eliminate the incidence
of repetition, if AUC, RUSM, or RUSVM fail to maintain administrative capability
as defined by ED while under provisional status or otherwise fail to comply with
ED requirements, the institution(s) could lose eligibility to participate in
Title IV programs or have that eligibility adversely conditioned, which could
have a material adverse effect on the businesses, financial condition, results
of operations, and cash flows.

On October 13, 2016, DeVry University and ED reached a negotiated agreement (the
"ED Settlement") to settle the claims asserted in a Notice of Intent to Limit
from the Multi-Regional and Foreign School Participation Division of the Federal
Student Aid office of the Department of Education ("ED FSA"). Under the terms of
the ED Settlement, among other things, without admitting wrongdoing, DeVry
University agreed to certain compliance requirements regarding its past and
future advertising, that DeVry University's participation in Title IV programs
is subject to provisional certification for five years and that DeVry University
is required to post a letter of credit equal to the greater of 10% of DeVry
University's annual Title IV disbursements or $68.4 million for a five-year
period. The posted letter of credit continues to be posted by Adtalem following
the closing of the sale of DeVry University and reduces Adtalem's borrowing
capacity dollar-for-dollar under its Credit Facility (as defined in Note 12
"Debt" to the Consolidated Financial Statements).

An ED regulation known as the "90/10 Rule" affects only proprietary
postsecondary institutions, such as Chamberlain, AUC, RUSM, and RUSVM. Under
this regulation, an institution that derives more than 90% of its revenue on a
cash basis from Title IV student financial assistance programs in two
consecutive fiscal years loses eligibility to participate in these programs for
at least two fiscal years. The following table details the percentage of revenue
on a cash basis from federal financial assistance programs (excluding the U.S.
Department of Veterans Affairs and military tuition assistance benefits) for
each of Adtalem's Title IV-eligible institutions for fiscal years 2019 and 2018.
Final data for fiscal year 2020 is not yet available.


                                                           Fiscal Year
                                                          2019     2018
Chamberlain University                                       62 %    62 %

American University of the Caribbean School of Medicine 75 % 74 % Ross University School of Medicine

                           83 %    81 %
Ross University School of Veterinary Medicine                83 %    82 %


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In September 2016, Adtalem committed to voluntarily limit to 85% the amount of
revenue that each of its Title IV-eligible institutions derive from federal
funding, including the U.S. Department of Veterans Affairs and military tuition
assistance benefits. As disclosed in the third party review reports that have
been made publicly available, Adtalem's institutions have met this lower
threshold for each fiscal year since the commitment was made. Adtalem is
committed to implementing measures to promote responsible recruitment and
enrollment, successful student outcomes, and informed student choice. Management
believes students deserve greater transparency to make informed choices about
their education. This commitment builds upon a solid foundation and brings
Adtalem to a new self-imposed level of public accountability and transparency.

A financial responsibility test is required for continued participation by an
institution's students in U.S. federal financial assistance programs. For
Adtalem's participating institutions, this test is calculated at the
consolidated Adtalem level. The test is based upon a composite score of three
ratios: an equity ratio that measures the institution's capital resources; a
primary reserve ratio that measures an institution's ability to fund its
operations from current resources; and a net income ratio that measures an
institution's ability to operate profitably. A minimum score of 1.5 is necessary
to meet ED's financial standards. Institutions with scores of less than 1.5 but
greater than or equal to 1.0 are considered financially responsible, but require
additional oversight. These schools are subject to heightened cash monitoring
and other participation requirements. An institution with a score of less than
1.0 is considered not financially responsible. However, a school with a score of
less than 1.0 may continue to participate in the Title IV programs under
provisional certification. In addition, this lower score typically requires that
the school be subject to heightened cash monitoring requirements and post a
letter of credit (equal to a minimum of 10% of the Title IV aid it received in
the institution's most recent fiscal year).

For the past several years, Adtalem's composite score has exceeded the required
minimum of 1.5. Changes to the manner in which the composite score is calculated
that are effective on July 1, 2020 will negatively affect future Adtalem scores;
however, management does not believe these changes by themselves will result in
the score falling below 1.5. If Adtalem becomes unable to meet requisite
financial responsibility standards or otherwise demonstrate, within the
regulations, its ability to continue to provide educational services, then our
institutions could be subject to heightened cash monitoring or be required to
post a letter of credit to enable its students to continue to participate in
federal financial assistance programs.

Liquidity and Capital Resources

Adtalem's consolidated cash and cash equivalents balance of $561.2 million,
$500.5 million, and $121.1 million as of September 30, 2020, June 30, 2020, and
September 30, 2019, respectively, included cash and cash equivalents held at
Adtalem's international operations of $82.0 million, $70.1 million, and $102.1
million as of September 30, 2020, June 30, 2020, and September 30, 2019,
respectively, which is available to Adtalem for general company purposes.

Under the terms of Adtalem institutions' participation in financial aid
programs, certain cash received from state governments and ED is maintained in
restricted bank accounts. Adtalem receives these funds either after the
financial aid authorization and disbursement process for the benefit of the
student is completed, or just prior to that authorization. Once the
authorization and disbursement process for a particular student is completed,
the funds may be transferred to unrestricted accounts and become available for
Adtalem to use in operations. This process generally occurs during the academic
term for which such funds have been authorized. Cash in the amount of $0.9
million, $0.6 million, and $0.7 million was held in restricted bank accounts as
of September 30, 2020, June 30, 2020, and September 30, 2019, respectively.
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Cash Flow Summary

Operating Activities

The following table provides a summary of cash flows from operating activities
(in thousands):


                                                              Three Months Ended
                                                                September 30,
                                                              2020           2019
Income from continuing operations                          $    27,446    $

17,408

Non-cash items                                                  37,565     

34,106

Changes in assets and liabilities                               19,643     

(18,038)

Net cash provided by operating activities-continuing
operations                                                 $    84,654    $

33,476

Net cash provided by operating activities from continuing operations in the
three months ended September 30, 2020 was $84.7 million compared to $33.5
million in the year-ago period. The increase of $51.2 million in cash generated
from continuing operating activities between the three months ended September
30, 2020 and the three months ended September 30, 2019 was primarily due to (i)
higher income from continuing operations; (ii) more timely collection of
accounts receivable and application of financial aid funds to student accounts
in the first three months of fiscal year 2021, primarily at the medical and
veterinary schools; (iii) a decrease in prepaid expenses in the first three
months of fiscal year 2021 compared to an increase in the first three months of
fiscal year 2020; and (iv) timing of accounts payable and accrued expense
disbursements.

Investing Activities


Capital expenditures in the first three months of fiscal year 2021 were $14.4
million compared to $10.4 million in the year-ago period. The capital
expenditures in fiscal year 2021 include spending for Chamberlain new campus
development, maintenance, and Adtalem's home office. Capital spending for the
remainder of fiscal year 2021 will support continued investment for new campus
development at Chamberlain, maintenance at the medical and veterinary schools,
and Adtalem's home office. Management anticipates full fiscal year 2021 capital
spending to be in the $50 to $55 million range, including $14.4 million spent
during the first three months of fiscal year 2021. The source of funds for this
capital spending will be from operations or the Credit Facility (as defined and
discussed in Note 12 "Debt" to the Consolidated Financial Statements).

On September 27, 2019, Adtalem closed on the sale of its Columbus, Ohio, campus
facility. Net proceeds of $6.4 million from the sale of this facility resulted
in a gain on the sale of $4.8 million in the first three months of fiscal year
2020. This gain was recorded at Adtalem's home office, which is classified as
"Home Office and Other" in Note 19 "Segment Information" to the Consolidated
Financial Statements.

Financing Activities

The following table provides a summary of cash flows from financing activities
(in thousands):


                                                            Three Months Ended
                                                              September 30,
                                                           2020           2019
Repurchase of common stock for treasury                 $         -    $  

(40,255)

Net payments under credit facility                            (750)       

(70,750)

Payment for purchase of redeemable noncontrolling
interest of subsidiary                                            -       

(6,247)

Other                                                       (3,835)        

983

Net cash used in financing activities-continuing
operations                                              $   (4,585)    $ 

(116,269)



On February 4, 2020, we announced that the Board authorized Adtalem's twelfth
share repurchase program, which allows Adtalem to repurchase up to $300 million
of its common stock through December 31, 2021. The new program will commence
when the repurchases from the current program are complete. As of September
30,
2020, $345.2 million of

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authorized share repurchases were remaining under the current and twelfth share
repurchase programs. Repurchases were suspended on March 12, 2020 due to the
economic uncertainty caused by the COVID-19 pandemic. In October 2020, Adtalem
determined to end the suspension of its current share repurchase program, and we
may resume repurchases in accordance with the securities laws if market
conditions are favorable. The timing and amount of any future repurchases will
be determined based on an evaluation of market conditions and other factors. See
Note 14 "Share Repurchases" to the Consolidated Financial Statements for
additional information on our share repurchase programs.

As of September 30, 2020, the amount of debt outstanding under our credit facility was $293.3 million. See Note 12 "Debt" to the Consolidated Financial Statements for additional information on our credit agreement.


Management currently projects that COVID-19 will have an effect on operations
and, as a result, liquidity, as discussed in the previous section of this MD&A
titled "Overview of the Impact of COVID-19"; however, we believe the current
balances of cash, cash generated from operations, and our Credit Facility (as
defined and discussed in Note 12 "Debt" to the Consolidated Financial
Statements) will be sufficient to fund both Adtalem's current domestic and
international operations and growth plans for the foreseeable future, except in
relation to the Acquisition of Walden as discussed below.

As discussed in the previous section of this MD&A titled "Segments," Adtalem
agreed to acquire all of the issued and outstanding equity interest in Walden,
in exchange for a purchase price of $1.48 billion in cash, subject to certain
adjustments set forth in the Agreement. On September 11, 2020, to provide future
funding for the Acquisition, Adtalem entered into a Commitment Letter with the
Commitment Parties to provide to Adtalem the Facilities. The proceeds of the
Facilities will be used, among other things, to finance the Acquisition,
refinance Adtalem's existing credit agreement, pay fees and expenses related to
the Acquisition, and in the case of the Revolving Facility, to finance ongoing
working capital and general corporate purposes. The commitments under the
Commitment Letter are subject to customary closing conditions.

Contractual Obligations


Adtalem's long-term contractual obligations consist of its $600 million Credit
Facility (as defined and discussed in Note 12 "Debt" to the Consolidated
Financial Statements), operating leases (discussed in Note 10 "Leases" to the
Consolidated Financial Statements) on facilities, and agreements for various
services.

As discussed in the previous section of this MD&A titled "Financing Activities,"
Adtalem entered into a Commitment Letter with the Commitment Parties to provide
funding for the Acquisition, refinance Adtalem's existing credit agreement, pay
fees and expenses related to the Acquisition, and in the case of the Revolving
Facility, to finance ongoing working capital and general corporate purposes. The
commitments under the Commitment Letter are subject to customary closing
conditions.

In fiscal year 2018, Adtalem recorded a liability of $96.3 million for the
one-time transition tax on the deemed repatriation of foreign earnings, pursuant
to the Tax Act. This amount was reduced to $8.7 million after utilization of tax
credits and current and prior year tax losses. In fiscal year 2020, Adtalem
recorded an adjustment to the one-time transition tax, increasing the liability
by $0.6 million to $9.4 million, and is payable over eight years. The first
installment will be required in fiscal year 2022.

On December 11, 2018, Adtalem completed the sale of DeVry University to
Cogswell. In connection with the closing of the sale, Adtalem loaned to DeVry
University$10.0 million under the terms of the promissory note, dated as of
December 11, 2018 (the "Note"). The Note bears interest at a rate of 4% per
annum, payable annually in arrears, and has a maturity date of January 1, 2022.
DeVry University may make prepayments on the Note.

On July 31, 2019, Adtalem sold its Chicago, Illinois, campus facility to DePaul
College Prep Foundation ("DePaul College Prep") for $52.0 million. Adtalem
received $5.2 million of cash at the time of closing and holds a mortgage,
secured by the property, from DePaul College Prep for $46.8 million. The
mortgage is due on July 31, 2024 as a balloon payment and bears interest at a
rate of 4% per annum, payable monthly. The buyer has an option to make
prepayments.

Adtalem maintains agreements to lease either a portion or the full space of
three facilities owned by Adtalem to DeVry University and to sublease either a
portion of the full leased space of an additional 21 facilities, most of which
are subleased to DeVry University and/or Carrington. Adtalem remains the primary
lessee on the 21 underlying leases. These lease and

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sublease agreements were entered into at comparable market rates and the terms
range from one to five years. Future minimum lease and sublease rental income
under these agreements as of September 30, 2020, were as follows (in thousands):


Fiscal Year                               Amount
2021 (remaining)                         $ 14,270
2022                                       16,816
2023                                       16,078
2024                                       10,261
2025                                        5,121
Thereafter                                  2,038

Total lease and sublease rental income $ 64,584

Adtalem also assigned certain leases to Carrington and DeVry University but remains contingently liable under these leases.

Seasonality

The seasonal pattern of Adtalem's enrollments and its educational programs'
starting dates affect the results of operations and the timing of cash flows.
Therefore, management believes that comparisons of its results of operations
should primarily be made to the corresponding period in the preceding year.
Comparisons of financial position should be made to both the end of the previous
fiscal year and to the end of the corresponding quarterly period in the
preceding year.

Off-Balance Sheet Arrangements


Adtalem is not a party to any off-balance sheet financing or contingent payment
arrangements, nor are there any unconsolidated subsidiaries. Adtalem has not
extended any loans to any officer, director, or other affiliated person. Adtalem
has not entered into any synthetic leases, and there are no residual purchase or
value commitments related to any facility lease.

On March 24, 2020, we executed a pay-fixed, receive-variable interest rate swap
agreement (the "Swap") with a multinational financial institution to mitigate
risks associated with the variable interest rate on our Term B Loan debt. We pay
interest at a fixed rate of 0.946% and receive variable interest of one-month
LIBOR (subject to a minimum of 0.00%), on a notional amount equal to the amount
outstanding under the Term B Loan. The effective date of the Swap was March 31,
2020 and settlements with the counterparty occur on a monthly basis. The Swap
will terminate on February 28, 2025. During the operating term of the Swap, the
annual interest rate on the amount of the Term B Loan is fixed at 3.946%
(including the impact of our current 3% interest rate margin on LIBOR loans) for
the applicable interest rate period. The Swap is designated as a cash flow hedge
and as such, changes in its fair value are recognized in accumulated other
comprehensive loss on the Consolidated Balance Sheet and are reclassified into
the Consolidated Statements of Income within interest expense in the periods in
which the hedged transactions affect earnings. As of September 30, 2020, the
fair value of the Swap was a loss of $10.2 million.

Adtalem did not enter into any other derivatives, swaps, futures contracts, calls, hedges, or non-exchange traded contracts during the first three months of fiscal year 2021.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates as disclosed in our 2020 Form 10-K.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 2 "Summary of Significant Accounting Policies" to the Consolidated Financial Statements.

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  Table of Contents

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q are forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements provide current expectations of future events based
on certain assumptions and include any statement that does not directly relate
to any historical or current fact, which includes statements regarding the
future impact of the COVID-19 pandemic and the pending Walden University
acquisition. Forward-looking statements can also be identified by words such as
"future," "believe," "expect," "anticipate," "estimate," "plan," "intend,"
"may," "will," "would," "could," "can," "continue," "preliminary," "range," and
similar terms. These forward-looking statements are subject to risk and
uncertainties that could cause actual results to differ materially from those
described in the statements. These risk and uncertainties include the risk
factors described in Item 1A. "Risk Factors" of our 2020 Form 10-K and this
Quarterly Report on Form 10-Q, which should be read in conjunction with the
forward-looking statements in this Quarterly Report on Form 10-Q. These
forward-looking statements are based on information available to us as of the
date any such statements are made, and we do not undertake any obligation to
update any forward-looking statement, except as required by law.

Non-GAAP Financial Measures and Reconciliations

We believe that certain non-GAAP financial measures 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. We use these supplemental non-GAAP financial measures internally in
our assessment of performance and budgeting process. However, these non-GAAP
financial measures should not be considered as a substitute for, or superior to,
measures of financial performance prepared in accordance with GAAP. The
following are non-GAAP financial measures used in this Quarterly Report on Form
10-Q:

Net income from continuing operations attributable to Adtalem excluding special
items (most comparable GAAP measure: net income attributable to Adtalem) -
Measure of Adtalem's net income attributable to Adtalem adjusted for
restructuring expense, business acquisition and integration expense, gain on
sale of assets, and loss from discontinued operations.

Earnings per share from continuing operations excluding special items (most comparable GAAP measure: earnings per share) - Measure of Adtalem's diluted earnings per share adjusted for restructuring expense, business acquisition and integration expense, gain on sale of assets, and loss from discontinued operations.


Operating income excluding special items (most comparable GAAP measure:
operating income) - Measure of Adtalem's operating income adjusted for
restructuring expense, business acquisition and integration expense, and gain on
sale of assets. This measure is applied on a consolidated and segment basis,
depending on the context of the discussion.

A description of special items in our non-GAAP financial measures described above are as follows:

Restructuring charges primarily related to real estate consolidations at

? Adtalem's home office and ACAMS and the sale of Becker's courses for healthcare

students.

? Business acquisition and integration expense include expenses related to the

pending Walden University acquisition.

? Gain on the sale of Adtalem's Columbus, Ohio, campus facility.

? Loss from discontinued operations include the operations of Adtalem Brazil,

Carrington, and DeVry University.

The following tables provide a reconciliation from the most directly comparable GAAP measure to these non-GAAP financial measures. The operating income reconciliation is included in the results of operations section within this MD&A.


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  Table of Contents

Net income attributable to Adtalem reconciliation to net income from continuing operations attributable to Adtalem excluding special items (in thousands):


                                                           Three Months Ended
                                                             September 30,
                                                           2020           2019
Net income attributable to Adtalem (GAAP)               $    19,930    $  

14,361

Restructuring expense                                         4,223        

6,530

Business acquisition and integration expense                 13,436        

-

Gain on sale of assets                                            -       

(4,779)

Income tax impact on non-GAAP adjustments (1)               (3,998)        

(343)

Loss from discontinued operations                             7,607        

3,156

Net income from continuing operations attributable to Adtalem excluding special items (non-GAAP)

           $    41,198    $   

18,925

(1) Represents the income tax impact of non-GAAP continuing operations

adjustments that is recognized in our GAAP financial statements.

Earnings per share reconciliation to earnings per share from continuing operations excluding special items (shares in thousands):


                                                           Three Months Ended
                                                             September 30,
                                                           2020           2019
Earnings per share, diluted (GAAP)                      $      0.38    $   

0.26

Effect on diluted earnings per share:
Restructuring expense                                          0.08        

0.12

Business acquisition and integration expense                   0.25        

-

Gain on sale of assets                                            -       

(0.09)

Income tax impact on non-GAAP adjustments (1)                (0.08)       

(0.01)

Loss from discontinued operations                              0.14        

0.06

Earnings per share from continuing operations
excluding special items, diluted (non-GAAP)             $      0.78    $   

0.34

Diluted shares used in EPS calculation                       52,797       

56,140

(1) Represents the income tax impact of non-GAAP continuing operations

adjustments that is recognized in our GAAP financial statements.

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Financials (USD)
Sales 2021 1 113 M - -
Net income 2021 128 M - -
Net cash 2021 233 M - -
P/E ratio 2021 17,2x
Yield 2021 -
Capitalization 2 019 M 2 019 M -
EV / Sales 2021 1,60x
EV / Sales 2022 1,43x
Nbr of Employees 3 971
Free-Float 63,3%
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NameTitle
Lisa W. Wardell Chairman, President & Chief Executive Officer
Stephen Wayne Beard COO, Secretary, Senior VP & General Counsel
Michael O. Randolfi Chief Financial Officer, Treasurer & Senior VP
Christopher C. Nash Chief Information Officer & Senior Vice President
Lyle L. Logan Independent Director
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