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Adtalem (ATGE) Q3 Earnings & Revenue Beat, Margins Rise Y/Y

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Adtalem Global Education Inc. (ATGE - Free Report) reported strong results for fourth-quarter fiscal 2022. The company’s earnings and revenue surpassed the Zacks Consensus Estimate and increased year over year on the back of the Walden acquisition and cost synergies.

Despite lingering macro challenges for the industry, the company provided solid fiscal 2023 guidance.

In this connection, Steve Beard, president and CEO of Adtalem, said, “We have been proactive and purposeful in transforming our portfolio. Today, Adtalem is comprised of high-quality assets with market-leading brands, an experienced management team and an attractive healthcare focus. We are poised to win in the markets in which we compete.”

Earnings & Revenues Discussion

Adjusted earnings of $1.31 per share topped the consensus mark of $1.28 by 2.3% and surged by 172.9% from 48 cents in the year-ago quarter.

Revenues of $361.2 million beat the consensus mark of $347 million by 4.1% and increased 61.6% year over year, driven by the Walden acquisition. For the fiscal fourth quarter, enrollment of total students fell 7.2% year over year to 77,665.

Adjusted operating income rose 174.7% from the prior-year quarter’s levels to $88.1 million. Adjusted operating margin expanded a whopping 1000 basis points to 24.4%. Adjusted EBITDA was $103.2 million, up 139.9% from the prior-year quarter’s levels. Adjusted EBITDA margin increased 930 bps to 28.6% year over year.

Segment Details

Chamberlain: Revenues in the segment fell 1.1% from the year-ago quarter’s figure to $140.2 million. Adjusted operating income increased 38.6% from the prior-year quarter’s levels to $41.7 million, primarily due to lower marketing and continued benefit from cost synergies. Adjusted EBITDA was $47.8 million, up 35.8% from the prior-year quarter’s levels.

Total student enrollment declined 5.8%, primarily owing to COVID-related headwinds in Chamberlain’s post-licensure programs, partially offset by improved enrollment and persistence in on-campus pre-licensure programs.

Walden: The segment generated revenues of $137.1 million. Total student enrollment in the quarter declined 9.5% year over year due to COVID-related headwinds in Walden’s post-licensure nursing programs and a decline in the management and technology programs. Adjusted operating income came in at $36.1 million. Adjusted EBITDA was $39.3 million.

Medical and Veterinary: Revenues in the segment increased 2.7% to $83.9 million from the year-ago quarter’s figure. Total student enrollment inched up 3.5% from the prior-year quarter’s levels, backed by growth in new student enrollment and higher persistence. Adjusted operating income increased 74.4% from the prior-year quarter’s figure to $19.6 million on increased revenue and the benefit from cost synergies. Adjusted EBITDA was $23.9 million, up 54.3% from the prior-year quarter’s levels.

Liquidity & Cash Flow

As of Jun 30, 2022, Adtalem had cash and cash equivalents of $346.97 million compared with $476.38 million at the fiscal 2021-end. Long-term debt was $838.9 million, up from $1.07 billion at the fiscal 2021-end.

For fiscal 2022, cash provided by operating activities totaled $10.4 million compared with $192.2 million in the year-ago period. Free cash flow in the quarter was $96.6 million compared with $31.8 million a year ago.

Fiscal 2022 Highlights

For fiscal 2022, the company reported adjusted earnings of $3.24 per share, up 40.3% year over year. Revenues were up 53% from a year ago to $1.39 billion. Adjusted operating and EBITDA margins expanded 230 bps and 160 bps year over year, respectively.

Fiscal 2023 Guidance

For fiscal 2023, Adtalem expects revenues within $1,380-$1,450 million. The company expects adjusted earnings per share within $3.95-$4.20.

Zacks Rank

Adtalem currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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