Q4 2021 Adtalem Global Education Inc Earnings Call
[music].
Greetings and welcome to the AD tell them Global education fourth quarter fiscal year 2021 earnings call at.
At this time all participants are in a listen only mode.
And answer session will follow the formal presentation, if anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad. Please.
Please note that this conference is being recorded.
I will now turn the conference over to our host John Kristoff, Vice President of Communications and Investor Relations. Thank you you may begin thank you.
I would like to remind you that this conference call will contain forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act of 1095 with respect to the future performance and financial condition of add talent global education that involve risks and uncertainties.
Actual results may differ materially from those projected or implied by these forward looking statements potential risks uncertainties and other factors that could cause results to differ are described more fully in item one a risk factors of our most recent annual report on Form 10-K filed with the SEC and our other filings with the SEC.
Any forward looking statement made by US is based only on information currently available to us and speaks only as of the date on which it was made we undertake no obligation to publicly update any forward looking statement, whether written or verbal that may be made from time to time, whether due to new information future developments or otherwise except as required.
By law.
During today's call our commentary will refer to non-GAAP financial measures, which are intended to supplement though not substitute for our most direct comparable GAAP measures. Our press release, which contains the GAAP financial and other quantitative information to be discussed today as well as reconciliation of GAAP to non-GAAP measures is available on our.
Our website.
Please note that all financial results and comparisons made during today's call are on a continuing operations basis exclude special items and are in comparison to the prior year period, unless otherwise stated teller.
Telephone and webcast replays of today's call are available for 30 days to access the replays. Please refer to today's press release.
We'll begin today's presentation with prepared remarks from Lisa Wardell and talents Chairman and Chief Executive Officer, Bob failing interim Chief Financial Officer, and Steve Beard, Chief Operating officer. Following the prepared remarks, we will have a question and answer session.
And with that I'll now turn the call over to Lisa.
Thank you Chad.
Thank you all for joining us on our fourth quarter and full year 2021 earnings call fiscal 2021 was a year of significant progress of that talent as we continue to strengthen our position as a leading workforce solutions provider. This year. We further extended our mission to be the market leader in health care education.
Helping employers address the critical workforce shortages and talent gaps that exist in the medical and health care sectors, while continuing to expand access to education within diverse communities with the completion of the Walden acquisition, we are even better positioned going forward to address the increasing demand for health care workers.
And we are uniquely positioned to help underserved communities before we get into the results for the quarter and fiscal year I wanted to briefly outline our agenda for today's call I'll start off by discussing our results for the fiscal year and quarter. Our decision to begin exploring strategic alternatives for our financial services segment and.
The ongoing CEO transition I'll, then hand over to Bob to discuss our results in greater detail. Steve will then conclude by discussing discussing the successful close of the Walden transaction, which we announced on August 12, and perspective on future growth under his leadership as the incoming CEO.
The path of the COVID-19 virus and the broader macroeconomic environment remains unpredictable and the alarming rise and the new cases, and hospitalizations related to the Delta variant magnified the increasing need for skilled health care workers, particularly in underserved communities. We are energized that add talent will be able to play an even greater role.
In solving these worked worker shortages through the increased scale and differentiated capabilities made possible by our acquisition of Walden.
Now turning to our results for the quarter and the fiscal year.
Starting with the fourth quarter, we had a solid finish to the year as our strategy continued to deliver results. Our strong financial performance was driven by increasing demand for our programs and offerings strong student outcomes across our institutions and programs and previous investments in marketing financial services delivered particularly strong performance with nearly 18.
Percent revenue growth in the quarter as the leadership changes and prior investments continued to drive improved operating performance.
Our full year performance was in line with our outlook. Despite lingering COVID-19 headwinds are health care institutions performed well as strong student outcomes continue to drive demand for the programs new student enrollment at our medical and veterinary institutions. For example grew 12% in the May session.
<unk> with the medical and healthcare segment at Chamberlain, New student enrollment increased approximately 4% in the may session with growth in total student enrollment of about 5% driven by growth in our campus based BSN and doctorate level programs, we continue to see strength in total enrollment across our campuses, including even week.
And in hybrid option. We also had the cap on New Orleans program lifted while our new Brunswick campus had their cap increased.
And May Chamberlain in L. C. M C health established a program to address L. Cmc's workforce needs. This innovative quality care scholars program is the first of its kind nursing program that addresses the need for more nurses by expanding access for <unk> to obtain a BSN degree.
Through a forgivable loan program, all CMC health will fund, 100% of tuition costs for up to 90, B a BSN students per year through this alliance with Chamberlain in exchange for those students committing to work for <unk> health for up to three years after graduation, and passing the uncollected exam and just last week.
We signed an agreement with Emory healthcare in Atlanta, one of our most innovative and forward thinking partners Emory is working to address the enormous nurse staffing challenges across the country and is committed to supporting their experienced registered nurses achieve a BSN Emory chose to partner with Chamberlain is done the depth and quality of its RN to BSN.
Program and the superior student outcomes that Chamberlain continues to demonstrate in all of its nursing programs. These partnerships are perfect. Examples of our workforce solutions provided strategy in action and our medical and veterinary schools may session, New student enrollment increased 12% the highest may session new students.
Start in over six years total student enrollment declined 1% as we continued to work through the pandemic induced backlog of students waiting to begin clinical in Q4.
I also want to say I'm very proud of the more than 1000, Ross Med and AUC students who graduated in May an incredible achievement in the face of the pandemic first time residency match rate at Ross Med and AUC were both 91% historically Ross med and AUC graduates have entered primary care with the physician.
Shortage is protect projected to be most severe at twice the rate of their U S. Medical school graduate counterparts and that trend continues for our 2021 graduates.
To round out the medical and healthcare segment rock that May session, New enrollment was in line with last year's strong may session, reflecting continued interest in the veterinary profession and returns on previous investments in student support and marketing we believe that the strong demand for veterinarians will continue post pandemic.
Turning to our financial services segment strong revenue growth continued in Q4, our ability to capture demand generated by strong secular trends delivered double digit revenue growth. We're also establishing prominent growth factors to enable expansion and diversity diversification into new markets.
Investments in new offerings are positioning this segment for long term growth with respect to each of our individual programs a cams the premier anti financial crimes organization continued to see strong demand in the fourth quarter non conference revenue increased 19% in the quarter driven by demand for compliant certification.
In Q4 year over year conference revenue was substantially higher its Atms held at first in person conference since the start of the pandemic. The Australia Conference in June was the inaugural event in the region and successfully hosted nearly 260 in person attendees.
Next planned in person event as the Las Vegas Conference scheduled for the end of September for both in person and virtual participants the pandemic remains a dynamic situation and we will continue to moderate closely.
The favorable mortgage environment continued in the fourth quarter and on course learning leveraged its leading position to drive strong mortgage pre licensing sales results. Continuing education sales also grew as businesses are retaining a high number of mortgage loan officers to meet refinance and new purchase mortgage neat OCR is well positioned to dry.
Long term growth as we continue to build new relationships and expand existing ones.
That's a continues its leading position in the CPA test preparation market Becker CPA test preparation sales grew slightly in the quarter as hiring them on large CPA firms in our institutional clients improved Becker is poised to capture future CPA review demand as the tests take a market returns to pre COVID-19 levels Becker continuing education.
Offerings performed well and remain a source of future growth, attracting b to B and C customers in July we named Josh Bronstein, as President and managing director of Becker. In addition to his role as President of LCL, Jeff was the interim leader at Becker and he will continue to scale and leverage the two organizations core competencies and strengths.
To help drive continued growth.
On August 4th we announced that we are beginning to explore strategic alternatives for our financial services segment. This decision is consistent with our long standing commitment to delivering long term shareholder value and is a natural progression of our efforts to focus the portfolio on the health care industry.
Each of the brands within our financial services portfolio are the leaders in their respective markets together they comprise a premium platform in an industry with attractive tailwind as the regulatory and compliance burdens on the financial services industry proliferate driving increased demand for the unique solutions that these businesses offer.
As we said at the time of the announcement no timetable has been established with the completion of the strategic review and as the anti <unk> Board approves specific action or otherwise concludes the strategic review, we will disclose further developments to our stakeholders I want to take this opportunity to reiterate my thanks to the entire financial services.
<unk>, whose hard work and dedication have created a highly attractive set of businesses, enabling us to take this path I am extraordinarily proud of the teams at eight cams OCR <unk> and Becker.
Alongside the financial services News, we also announced on August 4th that's deep vehicle succeed me as the CEO and I will turn the transition to the role of executive Chairman of our board of directors effective September eight it has been a great honor serving as the CEO of that talent over the last five years.
That time, we have redefined the companies a density built a diverse inclusive and mission driven culture streamlined our portfolio of institutions and brands delivered strong returns and value to our shareholders and reposition the company to become a pure play health care educator through our successful acquisition of Walden.
University, which we'll discuss in further detail later in the call.
Delivering superior academic outcomes has been a primary focus for add talent throughout my five year tenure as CEO and I am immensely proud of everything we've achieved this year first time residency match rates at Ross Med and AUC were both 91% more than 70% of our 2019.2020.
Medical graduates choke to enter critical roles in the primary care.
Across all 50 U S States and Puerto Rico and at Chamberlain, we ever see we have first time <unk> pass rates of over at 91%. These outcomes demonstrate that our dedication has paid off and we remain committed to building a pipeline of highly qualified talent to solve complex issues and the health care industry.
Ari.
<unk> is in a position of strength and it's set up for long term growth. Following a solid end to the year I am still excited about the future of that talent under Steve's leadership. Many of you have witnessed deep operational and strategic expertise over the last four years in the various positions he's held it at talent first serving as our.
General Counsel and then as our Chief operating Officer, Steve's leadership has been instrumental as we divested non core assets such as AD talent, Brazil, Devry University, and Carrington College repositioned, our financial services companies for long term profitable growth, attracting key leadership talent to the company and <unk>.
Energized and aligned the team around our enterprise strategy.
Steve's leadership of the financial services segment, the brands have enhanced our market leadership positions diversified and expanded their product portfolios and customer bases and recruited world class talent and leverage best in class capabilities across the segment, resulting in double digit revenue growth and expanded.
<unk> margins.
Steve also spearheaded our successful acquisition of Walden and drove the integration planning process, marking a pivotal step in expanding our scale as a leading workforce solutions provider.
Navigating leadership transitions is a core competency of a highly effective board and I am gratified that are well designed and well executed succession plan has presented the opportunity to promote an internal successor, who has been instrumental to the strategic direction and execution of that talent for the last four years.
Looking forward to continuing to partner with Steve My Fellow directors and our leadership team to continue driving results and superior student outcomes.
Now I'd like to turn it over to Bob to discuss our results in further detail after which Steve will provide some thoughts on recent announcement announcements and the year ahead.
Thank you Lisa and Hello, everyone. We delivered fiscal year 2021 revenue growth in the middle of the range of our prior full year outlook and EPS growth near the top of that range fiscal 2021 revenue increased five 7% to $1.1 billion driven by growth.
In both medical and healthcare and financial services.
<unk> earnings per share from continuing operations, excluding special items for the fiscal year 2021 was $2.98, a 37% increase from the prior year.
In the fourth quarter revenue increased seven 9% to $284 million on strong demand across our businesses driven by the strength of our student outcomes and our investments in marketing and new offerings.
Cost of educational services was $125.6 million in the fourth quarter, an increase of eight 3% compared with the prior year.
Student services and administrative expense was $107.9 million in the fourth quarter, a four 1% increase when compared with the prior year.
Consolidated operating income excluding special items in the fourth quarter.
Greece, 17, 1% to $46.9 million buyers, primarily driven by increased revenue and operating leverage across the business.
Net income from continuing operations, excluding special items was $35.1 million, a 14, 9% increase compared with the prior year and diluted earnings per share from continuing operations, excluding special items was 70% compared to 58 eight.
A 27% year over year increase.
Now turning to our segment results for the quarter and.
In medical and health care revenue for the vertical was $223.5 million and five 7% increase compared with the prior year.
Revenue in Chamberlain in the fourth quarter increased five 3% compared with the prior year period, driven by continued growth in new student enrollment.
New and total student enrollment increased three 6% and four 6% respectively for the May session.
Revenue for the medical and vet schools in the fourth quarter increased six 3% compared with the prior year, primarily driven by new student enrollment growth.
New student Med and vet enrollment in the May session grew 12, 3%, while total enrollment in the session decreased one 2% as Lisa mentioned total enrollment was negatively impacted by the clinical placement headwinds we view as transitory.
Medical and healthcare segment operating income excluding special items for the fourth quarter was $41.3 million a three 4% increase the increase was driven by higher revenue in the segment, partially offset by higher operating costs.
Turning now to our financial services segment fourth quarter revenue was $56.9 million, an increase of 17, 8% compared with the prior year driven by revenue growth at Atms.
<unk> and Becker.
<unk> revenue increased as the main conference certification offerings continue to perform well in conference revenue began to show a recovery.
Course, learnings continued focus on execution and a favorable mortgage market and strength and its continuing education business drove increased revenue in the quarter Becker.
Becker's revenue increase was driven by growth in its continuing education program offerings and an increase in CPA exam prep.
Fourth quarter operating income excluding special items in the financial services segment increased 29, 8% to $11 million.
Turning now to our balance sheet, we ended the fiscal year with cash and cash equivalents of $494.6 million and outstanding Bank borrowings under our existing term loan b of $291 million.
We repurchased 481000 shares in the fourth quarter for a total of $18.4 million in fiscal year 2021, we repurchased two 9 million shares for a total of $100 million.
As of June 32021, we had 49.3 million shares outstanding.
Turning to cash flow in the fourth quarter net cash provided by continuing operations was $56 million our capital expenditures for the quarter totaled $13.8 million as a result free cash flow in the fourth quarter was $42.1 million as a reminder.
We define free cash flow as cash provided by continuing operations less capital expenditures.
For the full fiscal year net cash provided by continuing operations was $223.2 million capital expenditures totaled $48.7 million, resulting in a free cash flow of $174.5 million compared with a free cash flow of $105.4 million in the prior P.
<unk>.
As discussed previously.
Previously discussed we continue to expect significant free cash flow growth in the coming years post Walden integration, we would expect that tell them to generate over $300 million of free cash flow on an annual basis.
Strong free cash flow generation supports our commitment to delever the balance sheet to below two times net leverage within 24 months.
Moving on to our outlook with the close of Walden acquisition, we will present, our future financials on an adjusted basis for the full fiscal year 2022, we expect revenue to be within the range of $165 billion and $1.73 5 billion.
And adjusted diluted earnings per share of $4.20 to.
Two $4.45 from continuing operations, excluding special items.
With that I will now turn the call over to Steve.
Thanks, Bob.
I'm honored to serve as that challenge next CEO and to lead the organization during such an exciting and pivotal time.
Over the last four years at least and I have worked closely together and she led the company's repositioning to a leading workforce solutions provider with the scale to help solve complex challenges for our employer partners.
Anyone who works with Lisa no. She is deeply committed to high performance and positive social impact.
Her leadership has resulted in superior student outcomes and significant value creation for our shareholders.
Leaving us well positioned for long term growth.
On behalf of the entire <unk> family I want to thank.
Lisa or her extraordinary contributions to our collective mission.
Whatever success, we enjoyed in the future rests fully an entirely on the strength of the foundation she has built.
Thank you Lisa.
I look forward to partnering with you as chairman at the Atoll onboard.
Last Thursday, we announced the successful close of our acquisition of Walden University.
Positioning our talent is a leading health care educator, providing more license positions than any other school in the United States and having the largest undergraduate and graduate nursing enrollments in the United States.
This transaction is a pivotal step in expanding our scale as a workforce solutions provider and.
It enables us to better address critical workforce shortages and in equities that exist in the health care sector.
As you know there continues to be strong demand for health care practice and health care support professionals.
With demand currently exceeding supply by 44% and 9% respectively.
With a concentration of online graduate level health and behavioral sciences programs that are highly complementary to our core curriculum.
Walden significantly expands our national health care education footprint.
And will further enable us to re imagine the future of health care education.
Walden immediately strengthens our core nursing offering it allows us to expand into attractive high demand adjacencies include.
Including the social and behavioral Sciences.
We're also extending the customer lifecycle from pre licensure programs to graduate and advanced degrees.
All of this will have a direct benefit to our employer partners.
Make us more competitive.
And ultimately generate significant long term shareholder value.
Walden is a high quality asset with market leading programs.
An innovative business model and.
A dynamic leadership.
We're pleased to have completed the acquisition in the first quarter of fiscal 2022 as planned.
Turning to our financial expectations for Walden, we're excited about the incredible opportunities for revenue and margin expansion.
Remain extremely confident in achieving at least $60 million in annual run rate cost synergies.
Moreover.
We expect to realize half of those run rate savings within the first year.
Post integration, we believe will generate more than $300 million of free cash flow annually.
And significant adjusted earnings per share accretion of $1.15 in the first 12 months.
And $2.35 by year four.
Our integration of Walden kicked off immediately after close and we're delighted to welcome more than 6000, new Walden colleagues to add talent.
We're also pleased to officially welcome Paula singer.
We'll continue to serve its Walden, president managing strategy and operations for the University.
In closing.
I am bullish on <unk> future and excited about our next phase of growth.
With our acquisition of Walden now complete we are establishing a market leading position in the rapidly growing health care sector.
And we do so while continuing to deliver superior academic outcomes for students.
Outcomes that propelled the kind of successful career journeys that change lives and lift communities.
Our role in helping to meet the significant demand for diverse and qualified health care professionals. It's one of the more compelling attributes of our strategy.
These talent shortages.
And by the pandemic create a tremendous market opportunity for qualified graduates in the health and behavioral Sciences professions.
We're extremely gratified to be able to play an increasingly important role in meeting this market demand.
And do so at a time when global health.
Has never been more important.
And with that ill.
I'll turn the call over to the operator for Q&A.
Thank you.
Ladies and gentlemen at this time, we will be conducting our question and answer session.
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Our first question comes from Jeff Silber with BMO capital markets. Please state your question.
Thanks, so much and Lisa I want to wish you all the luck in the world and thank you for everything and Steve Best of luck to you as well in your new role.
Hum.
On the call I'm, sorry about that.
Talk a bit on the call about some of the clinical issues that you've been facing in some of the programs and youre, hoping that they're just transitory can add a little bit more color, what's been happening with that and when do you think they'll become non transitory.
Yeah, absolutely let me start by saying this is the medical school.
The clinical for medical students at AUC and Ross, who are just finished as basic sciences. So not on the other side of that that helps so as we talked about last quarter. There was a backlog simply because obviously theyre or hospitals that weren't taking clinical patients through.
Through COVID-19 and sort of getting to a place where.
Clinical could be in place.
Certainly, we then had a backlog of students and then of course, we've got students coming through and enrollments have increased and so it's really getting through that backlog into those hospital systems, which now has.
For the most part figured out my friend and a real surge area figured out how to do both because of course.
It's helpful for them to have.
And frankly.
The students and their marketing et cetera, and so.
If you think about it now we've got some.
Prioritize those students who were waiting right, we've got more students coming to the queue.
But we see that over the next couple of quarters to our being able to level out one of the things that the team has been able to do is actually expand our clinical partnerships through this whole process because of course, we were having to sort of move regionally asked as if COVID-19 surge I'm sure there'll be more.
More of that with our with the Delta there and then sort of the risk there. So.
Many medium and long term job this is going to be beneficial for us because it really does expand the number of slots that we have across the network of our clinical operation in the short term, we've got to get those newer students through step one and into clinical I'm some of them taking longer to get there and then those students who are in.
The backlog into clinical so another couple of quarters I think last quarter. We said this was going to be something that was gonna rectified in FY 'twenty two we got a bit of that guy in this past Q4, and we will see more of that as we go into into FY 'twenty two.
Thank you.
And our next question comes from Jeff Mueller with Baird. Please state your question.
Thank you and congratulations to both of you.
So just on the starting point on the guidance just trying to understand like what the.
Tell them growth is so you said if the transaction closed at the end of the quarter I think it would've been in the 86% contribution if it on a 12 month basis. It's $1.15, So I guess do we split the difference or just anything that you can say about what kind of tell them.
Our growth is assumed in the in the guidance.
Yes, I think I think the best answer is to split that that difference and you wind up at about a dollar.
In terms of the incremental EPS accretion at that point okay.
So can you give us any sense of you have I guess three different pieces you have remain co and tell our medical and health you have acquired co Walden and then died.
The Vasco financial services is still on the guidance can you give us any sense of what kind of growth you're expecting for different parts of the business, especially since that.
What's in guidance as expected no longer being accompanied by the end of the year.
Yes, I think at this point, what I would say is that our guidance is relatively consistent with what we've done.
With guidance in the past, which is in that 5% to 7% range.
Whether you're talking about the at home.
Previous.
Our add talent plus Walden.
That's the way I would look at that range low and high end.
And just to jump in a little bit on.
The financial services side, obviously, they had a great quarter.
And certainly for phones that we don't break them out, but certainly on a cabinet wholesale OCR, you're looking at double digit growth.
And those are those organizations and Becker also grew so we expect that trajectory to continue into FY 'twenty two.
Okay and then.
Just given your response listen to the last question it sounds like the clinical headwinds should lessen.
As you said in the prepared remarks, you are getting back to some in person conferences.
Hum.
The Covid estimated impact was a 50 cent EPS headwind in 2000.
'twenty one.
What are you assuming in the 2022 guidance just wondering how much of the kind of Ed tell them growth and the guidance is coming from a lessening of COVID-19 headwinds versus maybe more core growth.
Yeah, I'll I'll, let Bob jump in on that on the EPS piece, but let me just think from sort of those risks and the continuing COVID-19 rescue can you sort of see in med health that the total student when lessening that gap as I said is the clinical kit get filled up but we do have to keep continue to monitor.
A couple of things right one on the a cam conferences, we had a successful in person and in Australia. We are scheduled to do so in Vegas, and you'll recall that Jeff that that September conferences. The big one we also have.
Gonna be hybrid so we have option Apple play blackout, we will need to continue to look at that and just in general across nursing enrollment right.
To date, we've really been able to navigate that and in fact, the demand has been quite strong, but we all know right desktop nursing profession in general right now just like all health care workers is.
<unk> seen some fatigue and things like that so.
That's how I think about the overall risks from a qualitative perspective and I'll let.
I'll jump in on the guidance.
Sure on the guidance I guess, what I would say is that as part of the reason on the low end that we're actually at 420, because if you just did a calculation you'd come up slightly higher than that but with the variation due to not not knowing where we're going to do with Covid. We wanted to provide a little bit more of a wider range there on the guidance and Thats both.
On the low end as well as the high end.
Okay, and then just one last one for me I'm not sure if it's best for Steve really soft or maybe do you pull apart, but I guess why is now the right time for our CEO transition, while you have a large.
A large divestiture pending and a large acquisition closing it seems like a lot to.
And you have our interim CFO for the time being so it seems like a lot going on to two time, a CEO transition that's it for me. Thank you.
Got it so I will start and I'll, let I'll, let Steve jump in also.
For me this is actually.
Perfect time as I think about my time in the seat and in this role a little over five years now. So if you think about the portfolio, where it started how we thought about streamlining that portfolio and where we wanted that focus for the organization to be as we as we as we gravitated and in fact really proved.
Our our right to win all of that health care side. It makes sense to pursue this transition as you know with this transition as well I mean, the transaction as well as our.
Most transactions in this space, we've got 10 months to really do two things one prepare for synergies and to prepare for what does the future look like and who is best served to take us on that next piece of the journey and as I said internally here at Palo.
Steve has been a partner in this journey for all of Us.
Almost a little up for actually for years now and so he is not coming into the seat without a great understanding both of our mission and where we need to really focus from an academic outcome perspective.
It's important both for our internal stakeholders, but also external I mean, that's why we're here and why we come here every day, but he also understands the challenges across the institution and what we really need to do to drive synergies and so from my perspective. This really de risks this entire transition because I am.
Not going anywhere I am going to be in that executive chairman role I'm gonna be working with the team and with the board to make sure not only that this.
Transaction and integration is successful, but also to continue to tell our story as it relates to what we're really trying to deal with change in the health care education industry. So that's my two cents I'll, let Steve jump.
Not a lot I can add to that except to reiterate that both sides of the leadership transition are really intended to.
To ensure continuity and no loss of momentum overtime. So as Lisa pointed out I've been involved in all of these critical activities from their inception.
Very very matched in the near term activity, whether it's related to the integration Walden.
Related to the divestiture.
Assets, whether it's related to.
What we're attempting to do with this coming fiscal year from a performance perspective.
I'm grateful for the opportunity equally grateful to have leased as a partner as the chair of our board that has a critical role as we go through these activities and you can believe on not letting her off the hook anytime soon.
Sounds good thank you.
Okay.
Thank you. Our next question comes from Alex Paris, with Barrington Research. Please state your question.
Alex Paris. Your line is open please limit yourself.
Sorry, I was on mute I apologize.
Congratulations on the strong finish to the year and a special congratulations to Steve and Lisa Steve on the promotion Alicia on your numerous accomplishments during your tenure.
Been great working with you.
Thanks.
So a similar question to the last.
Why is now the right time for our financial services a strategic review.
To start with.
Yes, great.
Great question, So I wont I will start off of let's let Steve jump there.
So.
We have always said that as we think about the portfolio. We want to make sure that we are focused on those areas, where we can really drive.
Our momentum across the entire portfolio, obviously, when we signed the transaction up to to acquire Walden University, We've really had shifted the center of gravity of the organization to medical and health care and it certainly doesn't mean that we believe the financial services don't have our mission has always sad right.
That we are helping people remain relevant in their current roles and have a career journey and not just a job and we do that I'll come back but in terms of timing.
This is a time, where these businesses are on a great growth trajectory, where a lot of the investments that we've made and talked about with you all.
Quarter over quarter in a quarter out half are starting to really come to fruition here, whether it's marketing technology et cetera, and we also have the right leadership and teams in all organizations now.
Which as you all know we went through those transition over the last year or two so from our perspective. This is the right time for us to determine a home that can really focus on them and the financial services programs and offerings.
They have.
Yes.
Concur with all of that the overall trajectory of the <unk> businesses is one that we're quite proud of at this point, we feel really good about the leadership that are in place.
Thank you.
We've got better visibility into the forward momentum of those businesses.
Notwithstanding.
And given the investments we've made in the what is now the core healthcare business. We think it's a great time.
To try to realize.
That value for our shareholders and buy a home for those businesses, where they can continue to grow and continue to be the beneficiary of investments to grow consistent with their trajectory. So we're excited about that since the announcement.
Lots of inbound interest. We think these are highly attractive assets that you can attract ton of interest.
It's a high quality sooner. So we're excited about that process and we believe in.
In a way that is highly valuable tomorrow on us.
Great well thanks for that additional color a question about Walden at the time of the acquisition announcement last September you gave a trailing 12 months revenue and adjusted EBITDA of.
Can you do that now on a trailing 12 months basis or will you do that now.
No. That's I mean, that's something we have not disclosed at this point. So I would just say we don't update at this time.
Alright, and then is any of the assumptions changed you had posted expectations for free cash flow in year, one through four and adjusted EPS contribution here one through four it sounds like that Hasnt changed at all.
Yes, that's correct the only thing.
We've said, we're saying at the beginning of this what we obviously will have a full 12 months in this fiscal year is just a month and a half, but if you if you're writing the EPS on that absolutely.
Nothing has changed.
Okay, Great and then the last question and I'll, let you go is.
I think you said $60 million worth of synergies.
I just didn't jot it down quick enough as it have in fiscal 'twenty, two and then the full $60 million in fiscal 'twenty three and beyond is that what you said.
That's correct.
Obviously.
We expect to receive the full $60 million within the first two years of the transaction, we expect to realize half of that in the first year, we don't necessarily expect to realize that on a ratable basis across the year given we just taking possession of the assets. So we expect that to be back end loaded in year, one, but we are committed to delivering.
<unk> within 24 months.
Great and then what's the expectation for the one time costs associated with those synergies.
The estimate was.
It was we've already incurred roughly $15 million, we estimate another $30 million for the current year and then there will be roughly another $15 million in fiscal 'twenty 360 billion in October right.
Okay, So 60 million in synergies and at a one to one kind of cost basis.
One time $6 million costs were $60 million run rate synergies annually annual right and got.
Got it alright that sounds great. Thanks, again I appreciate the additional color.
Thank you.
Yeah.
Our next question comes from Gregory <unk> with Sidoti. Please state your question.
Hey, guys. Thanks for taking my question just one quick one I mean, just in light of the annual guidance you said on.
On the prior question you know, it's not going to happen Ratably can you give us a little bit of color on how to think about the cadence as it is back half loaded as we sort of build to that $30 million in and synergies just that we have.
Kind of from a quarterly.
Standpoint, a way to think about it.
Yes, I think there is theres a number of things one is what Steve just went through in terms of.
The fact that the $30 million of synergies would be backend loaded really for the first year. So that's one point, but also what Lisa talked about is with the clinical that's another thing that we would be.
Again looking at a little bit more backend loaded in terms of getting that back and then the other thing I should point out is just.
The fact that we're closing in August.
And the Walden transaction is that we've only got a half of a quarter.
For that so really once again youre going to see lower numbers in the first quarter relative to that.
And more in the second third and fourth.
And one thing I would add to that.
Sorry, the only thing I would add to that as well.
Confident in those numbers, because we're hitting the ground running because we've had 10 months basically about for worse are we got 10 months waiting for regulatory approvals et cetera.
Put the planning process in place so it's not so much.
We have the plan, it's just that it's.
That said, we will only happen in about half of Q1.
Okay, Great and then.
Just one last final one if I'm not mistaken in the past maybe a few years ago you sold your test prep business for veterinary and if I am correct can you talk a little bit about the valuation that you received for that as we kind of think about financial services and Becker.
Wow.
Yeah, I think you're referring to to the Becker health.
<unk> okay.
A part of that business.
Yeah.
In revenue so we can get that for you Greg on the on the individual call, but not not comparable to this this type of.
On the call.
Got it Okay Fair fair point, Okay. Thanks, a lot.
Thank you and just sort of minor to ask a question press star one on your telephone.
Yeah.
Our next question comes from Jeff Silber with BMO capital markets. Please state your question.
I'm, sorry, I got cut off earlier.
Don't know if this was asked but you did talk about the Walden impact for 2022, you mentioned that you only have half a quarter's worth.
And this year and how the synergies are going to be back end loaded beyond those two can we talk about the cadence of the Walden business by quarter.
Are there any peaks and valleys that we should be aware of on a seasonal basis.
Yeah, So I think it's.
In some respects, it's a bit like Chamberlain right. So it's all about the session. So I live examples there Q3, our coupon.
They had a session in August they will not have another session before.
Before or do you want to or they will not have another session until we get into into Q2. After some of their programs. Some of their programs are more integral so as we start.
Reporting Walden as part of our.
Our ordinary course, and you'll see that that will highlight that and Youll recall for example in July we have that online only session Chamberlain until it <unk>.
As the numbers will make sure that we get that to you. So that you don't have to dig for it.
And as we as we add them to their reporting.
So are you going to be reporting Walden as a separate segment as well.
I think we have to work on determining how we're going to report segment at this point that's something that's still in the works that was underway yep, Okay, but hope, but hope you will get enrollment data and hopefully revenue and EBITDA data from all of that separately, even if it's not a separate cycle.
I think that.
We will be able to help you understand the trends there, but as we do today right enveloped Chamberlain in Walden.
And just as we do as we talk about bad debt et cetera.
Have no okay appreciate it.
Okay. Thanks, so much I appreciate that and best of luck.
No.
Thank you that concludes our question and answer session I'll now turn it back to John Kristoff for closing remarks.
Alright, Thank you everyone for joining us and as always if you have additional questions.
Sorry, Lisa.
No I just was going to say thank you to everybody who has been so supportive of US certainly during my tenure and I have to say during this this last year.
The team here at town reminds us every day and now seem to be Walden team also we've had a lot of interaction with them reminds us every day why we come here and why we do what we do and that this is really a social mission company and for all of you who are listening to this call I just I just so appreciate the support.
That you show me and I'm really excited about partnering with Steve and watching him in this role and I know that you will be supportive to handful. Thank you to all of you for joining our call today.
Thanks Lisa.
That concludes our call. Thank you everyone.
Thank you. This concludes today's call all parties may disconnect have a great day. Thank you.