Adtalem Global Education Inc. (ATGE Quick QuoteATGE - Free Report) reported impressive results for first-quarter fiscal 2023. Earnings and revenues surpassed their respective Zacks Consensus Estimate and increased year over year on the back of the Walden acquisition and cost synergies.

In this connection, Steve Beard, president and CEO of Adtalem, said, “Looking ahead to the balance of fiscal 2023, we remain cautiously optimistic that the demand environment will improve in the latter half of the year, allowing us to benefit from our new, more efficient operating model along with strategic investments made across a full range of enrollment and student support activities. We remain uniquely positioned through our high-quality institutions to produce highly trained, practice-ready healthcare professionals while driving superior student outcomes.”

Earnings & Revenues Discussion

Adjusted earnings of 88 cents per share topped the consensus mark of 71 cents by 23.9% and surged by 151.4% from 35 cents in the year-ago quarter.

Revenues of $354.6 million beat the consensus mark of $352 million by 0.7% and increased 22.7% year over year, driven by the benefits received from the Walden acquisition. For the fiscal first quarter, enrollment of total students fell 6.3% year over year to 79,559.

Adjusted operating income rose 78.7% from the prior-year quarter’s levels to $65.1 million. Adjusted operating margin expanded 580 basis points to 18.4%, driven by integration and cost reduction efforts. Adjusted EBITDA was $82.1 million, up 62.6% from the prior-year quarter’s levels. Adjusted EBITDA margin increased 560 bps to 23.1% year over year.

Segment Details

Chamberlain: Revenues in the segment were relatively flat from the year-ago quarter’s figure at $135.4 million. Adjusted operating income increased 25.6% from the prior-year quarter’s levels to $26.2 million, primarily backed by continued benefits from cost-reduction initiatives. Adjusted operating margin expanded 450 basis points to 19.9%. Adjusted EBITDA was $33.8 million, up 25.1% from the prior-year quarter’s levels. Adjusted EBITDA margins rose 500 basis points (bps) to 24.9%.

Total student enrollment declined 4% to 33,153 students, primarily owing to COVID-related headwinds in Chamberlain’s post-licensure programs, partially offset by improved enrollment in pre-licensure programs.

Walden: The segment generated revenues of $130.9 million, up 90.8% year over year. Total student enrollment in the quarter declined 9.2% year over year to 40,772 students due to COVID-related headwinds in Walden’s post-licensure nursing programs and a decline in the management and technology programs. The social and behavioral science programs continued to perform well.

Adjusted operating income came in at $23.4 million, up from $11 million a year ago. Adjusted operating margin expanded 190 basis points to 17.9%. Adjusted EBITDA was $27.9 million, up 107.7% from the prior-year period’s levels. Adjusted EBITDA margins expanded 170 bps to 21.3%.

Medical and Veterinary: Revenues in the segment increased 4.1% to $88.3 million from the year-ago quarter’s figure. Total student enrollment rose 3.4% from the prior-year quarter’s levels to 5,634 students, backed by growth in new student enrollment and higher persistence.

Adjusted operating income increased 10.8% from the prior-year quarter’s figure to $17.4 million on increased revenue. Adjusted operating margin expanded 120 basis points to 19.7%. Adjusted EBITDA was $21.9 million, up 9.4% from the prior-year quarter’s levels. Adjusted EBITDA margins rose 130 bps to 24.9%.

Liquidity & Cash Flow

As of Sep 30, 2022, Adtalem had cash and cash equivalents of $327.5 million compared with $346.97 million at the end of fiscal 2022. Long-term debt was $741.7 million, down from $838.9 million at the end of fiscal 2022.

For the first three months of fiscal 2023, cash provided by operating activities (continuing operations) totaled $91.5 million compared with $29.5 million in the year-ago period. Free cash flow in the quarter was $86 million compared with $22.8 million a year ago.

Fiscal 2023 Guidance Reaffirmed

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

Zacks Rank & Recent Consumer Discretionary Releases

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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