Q3 2025 Adtalem Global Education Inc Earnings Call
Speaker Change: [music].
Operator: Greetings and welcome to the Adtalem Global Education 3rd Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the tell them Global Education third quarter 2025 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the presentation.
Operator: A question and answer session will follow the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
Jay Spitzer: I will now turn the conference over to your host, Jay Spitzer, Vice President of Investor Relations. Thank you. You may begin.
Speaker Change: I will now turn the conference over to your host Jay Spitzer, Vice President of Investor Relations. Thank you you may begin.
Jay Spitzer: Good afternoon, and welcome to our earnest call for the third core fiscal year 2025 results.
Jay Spitzer: Good afternoon, and welcome to our earnings call for the third quarter fiscal year 2025 results on the call today are Steve Beard, Chairman and Chief Executive Officer of town Global Education, and Bob failing Chief Financial Officer before I hand, you over to Steve I always use will take you through the legal safe Harbor and cautionary declarations certain state.
Jay Spitzer: On the call with me today are Steve Beard, Chairman and Chief Executive Officer of Adtalem Global Education, and Bob Phelan, Chief Financial Officer.
Jay Spitzer: Before I hand you over to Steve, I will, as usual, take you through the legal, safe harbor, and cautionary declarations. Certain statements and projections of future results made in this presentation constitute as forward-looking statements that are based on our current market, competitive, and regulatory expectations and are subject to risks and uncertainties that could cause actual results to vary materially. We undertake no obligation to update publicly any forward-looking statement after this presentation as a result of new information, future events, changes in assumption, or otherwise.
Jay Spitzer: <unk> and projections of future results maintenance presentation constitute as forward looking statements that are based on our current market competitive and regulatory expectations and are subject to risks and uncertainties that could cause actual results to vary materially we undertake no obligation to update publicly any forward looking statement. After this presentation as a result of new information future events.
Jay Spitzer: The assumption or otherwise please see our latest Form 10-K Form 10-Q for a discussion of risk factors as it relate to forward looking statements in today's presentation will use certain non-GAAP financial measures refer you to the tanks in our presentation materials are available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information.
Jay Spitzer: Please see our latest Form 10-K, Form 10-Q for discussion of risk factors as related to forward-looking statements. In today's presentation, we'll use certain non-GAAP financial measures. We refer you to the appendix of the presentation materials available on our Investor Relations website for reconciliations to the most directly comparable GAAP financial measures and related information.
Jay Spitzer: You can find a link to our webcast on our Investor Relations website at investors.adtalem.com. After this call, the presentation webcast will be archived on the website for 30 days.
Steve Beard: You can find a link to our webcast on our Investor Relations website at investors don't add talent Dot com. After this call the presentation and webcast will be archived on the website for 30 days I will now hand, you over to Steve.
Steve Beard: I will now hand you over to Steve. Thanks, Jay. Good afternoon, everyone, and thank you for joining.
Steve Beard: Thanks, Jay Good afternoon, everyone and thank you for joining us.
Steve Beard: Adtalem, our innovative model, steadfast commitment to access, and growth with purpose strategy. are driving exceptional performance and delivering transformative. patient population surge and clinical workforce shortages. Our mission to shape the future of healthcare education has never been more urgent. Your third quarter results reflect this moment. Revenue grew by 13% to $466 million. Total enrollment climbed to 9.8% year-over-year, marking seven consecutive quarters of... with over 94,000 students now choosing Adtalem. Adjusted EBITDA margin expanded by 150 basis. fueling a 28% surge in adjusted earnings per share to $1.92.
Steve Beard: And at Palomar innovative model steadfast commitment to access and broker purpose strategy are driving exceptional performance and delivering transformative results as patient.
Steve Beard: Population, Serge and clinical workforce shortages deepen our mission to shape the future of health care education has never been more urgent or impactful.
Steve Beard: Our third quarter results reflect this momentum.
Steve Beard: Revenue grew by 13% to $466 million.
Steve Beard: Total enrollment climbed to nine 8% year over year, marking seven consecutive quarters of growth with over 94000 students now choosing Italian institutions.
Steve Beard: Adjusted EBITDA margin expanded by 150 basis points fueling a 28% surge in adjusted earnings per share to $1.92.
Steve Beard: Now let's dive into our segment performance and strategic.
Steve Beard: Now, let's dive into our segment performance and strategic progress.
Steve Beard: Chamberlain University, the nation's largest nursing school, continues its strong trajectory. Enrollment rose 6.8% to over 40,000. Our BSN Online program, now available in 36 states, with 53 clinical and the past 3,000 students. bringing nursing education to urban and rural communities. Practice Ready, Specialty Focused. transforming nursing education by providing early hands-on exposure to high-demand specialists. And most importantly, this program has been developed in partnership with leading healthcare providers.
Steve Beard: Chamberlain University, the nation's largest nursing school continued its strong trajectory.
Steve Beard: Enrollment rose, 6.8% to over 40000 students.
Steve Beard: Our BSN online program now available in 36 states with 53 clinical hubs has surpassed 3000 students.
Steve Beard: Nursing education to urban and rural communities alike.
Steve Beard: Our practice ready specialty focused program is transforming nursing education by providing early hands on exposure to high demand specialties.
Steve Beard: Importantly, this program that's been developed in partnership with leading health care providers.
Steve Beard: Since its inception, over 4,000 students have enrolled, with 900 completing specialty rotations across 70-plus partner programs. This innovative program allows students to explore high-value specialties like perioperative nursing during their clinical ensuring that they're well prepared for their chosen. Graduates who pursue these specialties are highly sought after by our partners.
Steve Beard: Since its inception over 4000 students have enrolled with 900, completing specialty rotations across 70 plus partner sites.
Steve Beard: This innovative program allows students to explore high value specialties like perioperative nursing during their clinical training, ensuring that they're well prepared for their chosen path.
Steve Beard: Graduate to pursue these specialties are highly sought after by our partner health systems.
Steve Beard: Walden University achieved a remarkable 13.5% enrollment reaching 48,500 students, exceeding pre-pandemic. or get the W... Paired with digital innovations has boosted inquiries and conversion. Predictive analytics and advanced learning tools are enhancing retention and academic outcomes.
Steve Beard: Eldon University achieved a remarkable 13.5% enrollment increase reaching 48500 students exceeding pre pandemic levels.
Steve Beard: Forget the W campaign paired with digital innovations has boosted inquiries and conversion rates.
Steve Beard: Predictive analytics and advanced learning tools are enhancing retention and academic outcomes.
Steve Beard: This spring, Walden's 72nd Commencement celebrated 6,000 graduates. including 2,500 nurses and 2,100 social, behavioral, and health. proof of our ability to deliver talent where it's needed.
Steve Beard: The spring Walden Seventy-second commencement celebrated 6000 graduates, including 2500 nurses in 'twenty 100, social behavioral health professionals proof of our ability to deliver talent, where it's needed most.
Steve Beard: Our medical and veterinary segment returned to growth with enrollment up 1.2%.
Steve Beard: Our medical and veterinary segment returned to growth with enrollment up one 2% and we believe that our two medical schools AUC and Ross Med are positioned for long term growth.
Steve Beard: And we believe that our two medical schools, AUC and Ross Med, are positioned for long-term Our deepened partnership with Hippocratic AI is pioneering AI-driven curricula, enabling future physicians to elevate care quality. And for the fourth consecutive year, AUC and Ross Med achieved a 95 percent plus first-time residency attainment. placing over 615 students and over 325 health care. Critically, over 40% of these placements are in medically underserved areas. addressing a projected U.S. physician shortfall of 187,000 by the year 2030.
Steve Beard: Our deepened partnership with Hippocratic AI is pioneering AI driven curricula.
Steve Beard: Enabling future positions to elevate care quality.
Steve Beard: For the fourth consecutive year, AUC and Ross Med achieved a 95% plus first time residency attainment rate.
Steve Beard: Placing over 615th students and over 325 health care facilities.
Steve Beard: Critically over 40% of these placements are in medically underserved areas addressing a projected U S position shortfall of 187000 by the year 'twenty 37.
Steve Beard: Ross Vette, Operating Near Capacity, secured the nation's top spots for graduates matched into selective internships and residency.
Steve Beard: Ross vet operating near capacity secured the nation's top spots for graduate smashed into selective internships and residencies.
Steve Beard: Based on this collective strength, we're raising our 2025. We now expect revenue of 1.76 billion dollars to 1.775. and we expect adjusted EPS of $6.46.
Steve Beard: And based on this collective strength, we're raising our 2025 guidance.
Steve Beard: We now expect revenue of $1.76 billion to $1.775 billion and.
Steve Beard: We expect adjusted EPS of $6 40 to $6 and 66.
Steve Beard: Our robust cash flow and strong balance sheet enabled us to complete our $300 million share And we subsequently announced a new $150 million repurchase program through May of 2020. underscoring our confidence in our strategic Adtalem aims to change the face of health care for a better A growth of purpose strategy rooted in integrity, relentless execution, and disciplined innovation. creates lasting value for students, partners, and shareholders. Demand for our programs in nursing, medicine, mental health, and veterinary sciences isn't just strong, it's growing. Students choose us because we empower them to build meaningful careers that change lives.
Steve Beard: Our robust cash flow and strong balance sheet enabled us to complete a $300 million share repurchase program.
Steve Beard: And we subsequently announced a new $150 million repurchase program through May of 2028 under.
Steve Beard: Your scoring our confidence in our strategic outlook.
Steve Beard: At Tallo aims to change the face of health care for a better tomorrow.
Steve Beard: Our growth with purpose strategy rooted in integrity relentless execution and disciplined innovation creates lasting value for students partners and shareholders.
Steve Beard: Demand for our programs in nursing Medicine, Middle Health and Veterinary Sciences is it just strong it's growing.
Steve Beard: Students choose us because we empower them to build meaningful careers that change lives.
Steve Beard: Looking ahead, we're investing to expand program capacity and doubling down on innovation to meet. Commitment is clear. deliver operational excellence. drive shareholder value, and lead the charge in building the healthcare workforce of tomorrow.
Steve Beard: Looking ahead, we're investing to expand program capacity and doubling down on innovation to meet this demand.
Steve Beard: Our commitment is clear dilip.
Steve Beard: Deliver operational excellence drive shareholder value and lead the charge in building the health care workforce up tomorrow.
Steve Beard: The market is recognizing our vision, our strategy is delivering, our future is brighter than ever, and with that, I'll turn it over to Bob for a deeper dive into our future.
Steve Beard: The market is recognizing our vision our strategy is delivering our future is brighter than ever and with that I'll turn it over to Bob for a deeper dive into our financials.
Bob Phelan: Thank you, Steve, and hello, everyone. Our third quarter results continue to showcase the robust financial returns that our growth with purpose strategy delivers. Diligent execution against our organic growth strategy yielded an increased level of profitability in operating cash flow. We continue to be disciplined capital allocators. Striking a balance between investing in our innovative education model, expanding access to our in-demand programs, and enhancing our student-facing capabilities, all while strengthening our balance sheet and returning excess cash to our shareholders.
Bob Failing: Thank you, Steve and Hello, everyone. Our third quarter results continue to showcase the robust financial returns that our growth with purpose strategy delivers.
Bob Failing: <unk> execution against our organic growth strategy yielded an increased level of profitability and operating cash flow.
Bob Failing: We continue to be disciplined capital allocators striking a balance between investing in our innovative education model expanding access to our in demand programs and enhancing our student facing capabilities, all while strengthening our balance sheet and returning excess cash to our shareholders.
Bob Phelan: I'll now review our financial results and key drivers for our third quarter performance. Later in my remarks, I'll discuss our expectations and assumptions for the remainder of fiscal year 2025. Starting with the top line, revenue in the third quarter increased by 12.9% to $466.1 million, driven by all three segments, in particular through enrollment growth at Walden and Chamberlain. Consolidated Adjusted EBITDA came in at $127.8 million, up 19.3% compared to the prior year from profit growth at Waldman and Chamberlain. Adjusted EBITDA margin of 27.4% expanded 150 basis points from last year. Adjusted operating income was $105.4 million, up 17.4% compared to the prior year, as revenue growth and efficiencies generated operational leverage, which is partially offset by investments in our strategic growth initiatives.
Bob Failing: I'll now review, our financial results and key drivers for our third quarter performance.
Bob Failing: Later in my remarks, I'll discuss our expectations and assumptions for the remainder of fiscal year 2025.
Bob Failing: Starting with the top line revenue in the third quarter increased by 12, 9% to $466 $1 million driven by all three segments in particular through enrollment growth at Walden in Chamberlain.
Bob Failing: Consolidated adjusted EBITDA came in at $127.8 million up 19.3% compared to the prior year from profit growth at Walden in Chamberlain.
Bob Failing: Adjusted EBITDA margin of 27.4% expanded 150 basis points from last year.
Bob Failing: Adjusted operating income was $105.4 million up 17.4% compared to the prior year as revenue growth and efficiencies generated operational leverage which was partially offset by investments in our strategic growth initiatives.
Bob Phelan: Adjusted net income for the quarter was $73.3 million, up 23.4% compared to last year, attributed to adjusted operating income growth and lower interest expense resulting from our actions to reduce outstanding debt and our borrowing costs, partially offset by a higher provision for income tax. Adjusted earnings per share was $1.92, or a 28% increase compared with the prior year. We repurchased 791,000 shares of our common stock within a quarter, resulting in a third quarter diluted shares outstanding of $38.2 million, or $1.4 million lower than last year.
Bob Failing: Adjusted net income for the quarter was $73.3 million up 23.4% compared to last year.
Bob Failing: [noise] tribute to adjusted operating income growth and lower interest expense, resulting from our actions to reduce outstanding debt and our borrowing costs, partially offset by a higher provision for income taxes.
Bob Failing: Adjusted earnings per share was $1 92, or 28% increase compared with the prior year.
Bob Failing: We repurchased 791000 shares of our common stock within the quarter, resulting in the third quarter diluted shares outstanding of $38 2 million or 1.4 million lower than last year.
Bob Phelan: Next, I'll discuss third quarter financial highlights by segment. Chamberlain reported third quarter revenue of $192.6 million, an increase of 13.1% compared with the prior year, driven by growth in enrollments, pricing optimization, and program mix as we strategically grow our in-demand, pre-licensure BSN online offering, which comprised a significant amount of our total enrollment growth in the quarter. Total student enrollment during the quarter increased 6.8% compared to the prior year. its ninth consecutive quarter of growth in both pre-licensure and post-licensure nursing programs along with high continued persistence rates. adjusted EBITDA increased by 12.6% to $56.8 million for the quarter.
Bob Failing: Next I'll discuss third quarter financial highlights by segment.
Bob Failing: Chamberlain reported third quarter revenue of $192.6 million, an increase of 13.1% compared with the prior year driven by growth in enrollments pricing optimization and program mix as we strategically grow our in demand pre licensure BSN online offering which comprise a significant amount.
Bob Failing: Our total enrollment growth in the quarter.
Bob Failing: Total student enrollment during the quarter increased six 8% compared to the prior year.
Bob Failing: Its ninth consecutive quarter of growth in both pre licensure and post licensure nursing programs, along with high continued persistence rates.
Bob Failing: Adjusted EBITDA increased by 12.6% to $56 $8 million for the quarter.
Bob Phelan: Adjusted EBITDA margin of 29.5% was 10 basis points lower than the prior year as our operational leverage was offset by our investments into our students to support the growth in enrollments, improving academic outcomes, and other expenses. Turning to Walden, third quarter revenue of $178.4 million, an increase of 18.5% versus the prior year, was driven primarily by strong growth in enrollments. Total student enrollment was up 13.5% compared to the prior year, from robust enrollment growth, particularly in the master's and undergrad degrees, and continued high persistence rates. Growth in our health care programs was led by both social and behavioral health and nursing.
Bob Failing: Adjusted EBITDA margin of 29.5% was 10 basis points lower than the prior year as our operational leverage was offset by our investments into our students to support the growth in enrollments improving academic outcomes and other expenses turning to Walden third quarter revenue of $178.4 million.
Bob Failing: An increase of 18.5% versus the prior year.
Bob Failing: Was driven primarily by strong growth in enrollments.
Bob Failing: Total student enrollment was up 13.5% compared to the prior year from.
Bob Failing: From robust enrollment growth, particularly in the masters in undergrad degrees and continued high persistence rates.
Bob Failing: Growth in our health care programs was led by both social and behavioral health and nursing or non health care programs also grew in the quarter.
Bob Phelan: Our non-healthcare programs also grew in the quarter. adjusted EBITDA increased by 50.6% to $54 million. adjusted EBITDA margin expanded by 650 basis points versus the prior year to 30.3% as our operational excellence generated efficiencies and leverage that outpaced the student facing digital investments and additional student support commensurate with the high levels of new enrollment.
Bob Failing: Adjusted EBITDA increased by 50.6% to $54 million adjust.
Bob Failing: Adjusted EBITDA margin expanded by 650 basis points versus the prior year to 30.3% as our operational excellence generated efficiencies and leverage that outpaced the student facing digital investments and additional students support commensurate with the high levels of new enrollment for the medical and veterinary segment.
Bob Phelan: For the medical and veterinary segment, third quarter revenue was $95 million, an increase of 3.6% versus prior year. Total student enrollment was up 1.2% as a result of our operational plans and early returns against our long-term strategic growth initiative. At our medical schools, initiatives such as clinical return home and creating a more seamless enrollment experience have led to an increase in inquiry to enrollment yield, resulting in new enrollment growth at our medical schools for the January intake cycle. and VET continues to operate near capacity. Adjusted EBITDA declined 15.3% versus the prior year to $22.9 million.
Bob Failing: Third quarter revenue was $95 million, an increase of 3.6% versus prior year.
Bob Failing: Total student enrollment was up 1.2% as a result of our operational plans and early returns against our long term strategic growth initiatives.
Bob Failing: At our medical schools initiatives, such as clinical return home and creating a more seamless enrollment experience have led to an increase in inquiry to enrollment yield resulting in new enrollment growth at our medical schools for the January intake cycle.
Bob Failing: And that continues to operate near capacity.
Bob Failing: Adjusted EBITDA declined 15.3% versus the prior year to $22.9 million adjusted EBITDA margin was 540 basis points lower versus the prior year at 24% as we remained focused on operating our institutions with a cost structure generally inline with our total enrollment level.
Bob Phelan: Adjusted EBITDA margin was 540 basis points lower versus the prior year at 24%, as we remain focused on operating our institutions with a cost structure generally in line with our total enrollment level while making long-term growth investments.
Bob Failing: While making long term growth investments shifting to cash flow and the balance sheet, we continue to enhance our financial strength through robust cash generation and disciplined capital deployment.
Bob Phelan: Shifting the cash flow into balance sheet, we continue to enhance our financial strength through robust cash generation and disciplined capital deployment. On a trailing 12-month basis, free cash flow was $287 million from strong operational performance. Our balance sheet remains healthy, ending the third quarter with $219 million in cash and a low adjusted EBITDA net leverage of 0.8 times. As I mentioned on last quarter's call, on January 17th, we further strengthened our balance sheet, repaying $100 million on our higher interest rate Term Loan B, which reduces the outstanding balance to $153.3 million. As Steve highlighted, we recently completed our $300 million share repurchase authorization on May 5th, representing a significant return to shareholders.
Bob Failing: On a trailing 12 months basis free cash flow was $287 million from strong operational performance.
Bob Failing: Our balance sheet remains healthy ending the third quarter with $219 million in cash and a low adjusted EBITDA and net leverage of 0.8 times as.
Bob Failing: As I mentioned on last quarter's call on January 17th we further strengthened our balance sheet repaying $100 million on our higher interest rate term loan b, which reduces the outstanding balance to $153.3 million as Steve highlighted we recently completed our $300 million share repurchase.
Bob Failing: Authorization on May 5th representing a significant return to shareholders.
Bob Phelan: Since February 2022, we returned $763 million to shareholders, reducing shares outstanding by 28% and an average repurchase price of $49. We have achieved exceptional performance thus far in fiscal year 2025 ahead of our original expectations set heading into the year as we continue to execute our growth with purpose strategy, creating greater efficiencies and scale.
Bob Failing: Since February 2022 we returned $763 million to shareholders, reducing shares outstanding by 28% and an average repurchase price of $49.
Bob Failing: We have achieved exceptional performance, thus far in fiscal year 'twenty twenty-five ahead of our original expectations set heading into the year as we continue to execute our growth with purpose strategy, creating greater efficiencies and scale.
Bob Phelan: And as a result, we are raising our guidance with revenue now in the range of $1.76 billion to $1.775 billion, approximately 11% to 12% growth year over year, with adjusted earnings per share of $6.40 to $6.60, approximately 28% to 32% growth year over year. For the full year, our new level of revenue guidance results in incremental operating leverage. Also included in our new guidance range is our anticipation that we will increase the level of growth investments we plan to make in the fourth quarter, setting us up well heading into fiscal year 2026. We aim to optimally balance an increased level of investment for future growth with the expanding of our profitability.
Bob Failing: And as a result, we are raising our guidance with revenue now in the range of 1.76 billion to $1.775 billion, approximately 11% to 12% growth year over year with adjusted earnings per share of $6.40 to $6 60, approximately 28%.
Bob Failing: <unk> to 32% growth year over year.
Bob Failing: For the full year, our new level of revenue guidance results in incremental operating leverage.
Bob Failing: Also included in our new guidance range is our anticipation that we will increase the level of growth investments, we plan to make in the fourth quarter setting us up well heading into fiscal year 'twenty 'twenty six we aimed to optimally balance an increased level of investment for future growth with the expanding of our profitability.
Bob Phelan: In turn, we now anticipate adjusted EBITDA margin expansion in fiscal year 2025 to be greater than 150 basis points, an increase to our prior assumption of greater than 100 basis points expansion. We've created a strong foundation with an operating model that is based on agility to move swiftly. Our top priority remains to invest in our business. executing on expanding our inclusive access mission and delivering positive student outcomes. We will continue to deploy capital to meet the healthcare education market's growing demand, maximizing long-term value, and ultimately generating high returns for all stakeholders.
Bob Failing: In turn we now anticipate adjusted EBITDA margin expansion in fiscal year, 'twenty twenty-five to be greater than 150 basis points, an increase to our prior assumption of greater than 100 basis points expansion. We've created a strong foundation with an operating model that is based on agility to move swiftly.
Bob Failing: Our top priority remains to invest in our business.
Bob Failing: Executing on expanding our inclusive access mission and delivering positive student outcomes.
Bob Failing: We will continue to deploy capital to meet the health care education markets growing demand maximizing long term value and ultimately generating high returns for all stakeholders.
Operator: And with that, I'll now turn the call over to the operator for Q&A. Thank you. At this time, we'll conduct our question and answer session.
Bob Failing: And with that I'll now turn the call over to the operator for Q&A.
Bob Failing: Thank you.
Speaker Change: At this time, we'll conduct a question and answer session if.
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Speaker Change: Confirmation tone will indicate that your line is in the question queue.
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Jack Slevin: Our first question comes from Jack Slevin with Jeffries Police. Hey, good afternoon. Thanks for taking the question and congrats on the really strong quarter. I appreciate all the commentary you gave on.
Speaker Change: Our first question comes from Jack Slevin with Jefferies. Please state your question.
Jack Slevin: Hey, good afternoon. Thanks for taking my question and congrats on the really.
Speaker Change: Really strong quarter.
Speaker Change: I appreciate all the commentary you gave on <unk>.
Steve Beard: This is a question about the investments you're going to make in Q4 to set you up for future growth. Looking back at your 2023 Investor Day targets for FY26, you've obviously seen pretty big outperformance on really all fronts, you know, for 24 and 25. And as we're coming towards the close of 25, I sort of wanted to check in on how those targets for 26 stand, sort of balancing some of the investments you're making, the momentum you have in the business, and where things are today. Yeah, thanks for the question. The targets that we set in Investor Day were reasonable and appropriate for the outlook we had for the business at the time.
Speaker Change: The investments Youre going to make in Q4 to set you up for future growth I wanted to just sort of frame. This says.
Speaker Change: Looking back at your 2023 Investor day targets for FY 'twenty six you've obviously seen pretty big outperformance on really all fronts.
Speaker Change: For 24, and 25 and as we're coming towards the close of twenty-five I sort of wanted to check in on on how those targets for twenty-six stands sort of balancing some of the investments you're making the momentum you have in the business and where things are today.
Speaker Change: Yes. Thanks for the question the targets that we set at Investor day were reasonable and appropriate for the outlook. We have for the business at a time, where obviously gratified that we've been able to pace ahead of those.
Steve Beard: We're obviously gratified that we've been able to pace ahead of those. And as we look ahead to our next Investor Day, which we expect we'll do sometime early in the calendar year next year, we'll be recalibrating long term growth targets based on the experience we've had with growth with purpose to date. But for now, you know, those represent, we think, reasonable benchmarks, and to the extent we're able to outperform them, we're gratified. Okay, got it. Really helpful.
Speaker Change: And as we look ahead to our next Investor Day, which we expect will do some time early in the calendar year next year, we'll be recalibrating long term growth targets based on the experience we've had with growth with purpose to date, but for now those represent we think reasonable benchmarks and to the extent, we're able to outperform them, we're gratified to do so.
Speaker Change: Okay got it really helpful and then maybe maybe more high level.
Steve Beard: And then maybe, maybe more high-level, Steve, just, um... Thinking about all the moving pieces in D.C. and obviously we saw The House.
Speaker Change: Steve just.
Speaker Change: Thinking about all the moving pieces in D. C and obviously, we saw sort of the house you know education committee pushing through a proposed sort of framework last week for what could feed into this big beautiful Bill.
Steve Beard: Education Committee pushing through, you know, a proposed sort of framework last week for what could feed into this big, beautiful bill, acknowledging there's a lot of sort of time left and things that could move around, but could you just give some thoughts on sort of what you saw in that package on the student loan front and on some of the accountability regulations and whether you think, you know, those might have an impact, positive or negative, for the business and maybe more broadly just on what you're thinking about the impact of the change in administration in D.C.
Speaker Change: Acknowledging there's a lot of sort of time left and things that could move around but could you just give some thoughts on sort of what you saw in that package on on the student loan front end on some of the the.
Speaker Change: The accountability regulations, and and whether you think you know those might have an impact positive or negative for the business and maybe more broadly just on on what you're thinking about the impact of the change in administration in D C and how that could could impact things going forward. Thanks.
Steve Beard: and how that could impact things going forward. Sure, so we monitor those developments closely, both in the executive branch at the Department of Education, but also some of the things that are happening on the legislative side of Capitol Hill. We're a long way away from any of those proposals becoming actionable, and there are a lot of stakeholders that have yet to weigh in on some of the implications of things that have been proposed. I think our view of it is that there's generally a concern about student borrowing for programs where the return on investment is low.
Speaker Change: Sure. So we monitor those developments closely both in.
Speaker Change: In the executive branch at the Department of Education, but also.
Some of the things that are happening on the legislative side of Capitol Hill were long way away from any of those proposals becoming.
Speaker Change: Actionable.
Speaker Change: And there are a lot of stakeholders that have yet to weigh in on some of the implications of things that have been proposed.
Speaker Change: I think our view of it is that there is generally a concern about student borrowing for programs, where the return on investment is low.
Steve Beard: That is not an issue that's particularly relevant for us, given the nature of our programs. They're market responsive, they're career oriented, and the return on investment for students is high. To your macro question, I think we just view this as a generally positive environment for our industry and our space in particular. The new administration is focused on, again, career-focused education with clear return on investment. And in that backdrop, we think we thrive quite well.
Speaker Change: That is not an issue that's particularly relevant for us given the nature of our programs there market responsive to career oriented and the return on investment for students is high.
Speaker Change: To your macro question I think we just view this as a generally positive environment for our industry in our space in particular, the New administration is focused on again career focused education clear return on investment in in that backdrop, we think we drive quite well so a long way from anything that I could comment on specifically given.
Jack Slevin: So, a long way from anything that I could comment on specifically, given the early and nascent nature of these proposals. But we still feel that this is a good environment for us, our students, and our stakeholders. Really helpful. Appreciate the questions and congrats again on the call. Thank you.
Speaker Change: The early and decent nature of these proposals but.
Speaker Change: But we still feel that this is a good environment for us our students and our stakeholders.
Speaker Change: Really helpful. I appreciate the questions and congrats again on the quarter. Thank.
Speaker Change: Thank you.
Jeff Silber: Your next question comes from Jeff Silber with BMO Capital Markets.
Speaker Change: Your next question comes from Jeff Silber with BMO capital markets. Please state your question.
Jeff Silber: Please state your... Thank you so much. I just wanted to follow up from the last question and maybe take it from a macro to a micro level. Are you seeing any hesitancy on behalf of students, with all the noise coming down in Washington, maybe rethinking whether they should enroll in any of your programs because there could be some funding pressure? No, not at all. I don't. I don't see anything in the consumer behavior for our students, either prospective or current, that suggests any concerns about the ability to finance their educations. So nothing along those lines.
Speaker Change: Thank you so much just wanted to follow up from the last question and maybe take it from a macro to micro level.
Speaker Change: Are you seeing any hesitance.
Speaker Change: Is it an excuse me on behalf of students.
Speaker Change: With all the noise coming down in Washington, maybe rethinking whether they should enroll in any of your programs because there could be some funding pressure now.
Speaker Change: No not at all I don't.
Speaker Change: I don't see anything in the consumer behavior for our students either perspective of current that suggests any concerns about the ability to finance their education.
Speaker Change: So nothing along those lines at all alright.
Jeff Silber: All right, that's great. I appreciate that.
Speaker Change: Alright, that's great appreciate that.
Jeff Silber: And then just specifically focusing on the quarter, it was great to see the medical and the veterinary business return to growth again, but you saw some pretty sizable margin degradation in the quarter.
Speaker Change: And then just specifically focusing on the quarter. It was great to see the medical and veterinary business returned to growth again, but he saw some pretty sizable.
Speaker Change: Sizable margin degradation in the quarter. If we can just get a little bit color. I know you said you are making investments that maybe we can talk about that and do you envision that business returning to margin expansion maybe in 2026.
Steve Beard: If we can just get a little bit of color, I know you said you're making investments, but maybe we can talk about that. And do you envision that business returning to margin expansion maybe in 2026?
Bob Phelan: I'll open and let Bob weigh in. As we often do, we try not to focus attention too much on the quarter-by-quarter story as it relates to margins, because we've got a tremendous amount of confidence in the long, full-year projections for margin expansion. A lot of the change here is driven by the timing of some investments, but I'll let Bob speak to them. Yeah, I think it's a combination, really, of one-time costs as well as some of the structural costs to position ourselves, really, to execute on those growth plans. So as Steve mentioned, we've turned a corner on positive enrollments this quarter.
Speaker Change: Yeah, I'll I'll open and let let Bob weigh in as we often do we we try not to focus attention too much on a quarter by quarter story as it relates to margins.
Speaker Change: Because we've got a tremendous amount of confidence in the long full year projections for margin expansion.
Speaker Change: A lot of the change is driven by the timing of some investments, but I'll, let bob speak to them specifically.
Bob Failing: Yeah, I think it's a combination really of one time costs as well as <unk>.
Bob Failing: Some of the structural cost to position ourselves really to execute on those growth plans. So as Steve mentioned, we've turned the corner and positive enrollments. This quarter, we do plan to build on that for next year.
Jeff Silber: We do plan to build on that. All right, great. I'll get back in the queue. Thanks so much.
Speaker Change: Alright, great ill get back in the queue. Thanks, so much.
Bob Failing: Thank you.
Alex Paris: And your next question comes from Alex Paris with Barrington Research. Please stay. Hi guys, thanks for taking my question. Congrats on the quarter and the strong nine months. First off, you're saying now, Bob, that adjusted EBITDA margins can expand more than 150 BIPs in 2025, up from more than 100. I think previously you had said that 2026 should expand by 100 basis points. Any change to that thought? No, no change to that.
Bob Failing: And your next question comes from Alex Paris, with Barrington Research. Please state your question.
Alex Paris: Hi, guys. Thanks for taking my question.
Bob Failing: Congrats on the quarter and the strong.
Alex Paris: Nine months.
Alex Paris: First off.
Speaker Change: You're saying now Bob that the adjusted EBITDA margins can expand more than 150 bps in 2025 up from more than 100. I think previously you had said that 2026, it should expand by 100 basis points any change to that thought.
Alex Paris: No no change to that.
Bob Phelan: Great.
Bob Phelan: And then while I got you, Bob, I think I noticed there were some fairly significant asset impairment and strategic advisory costs on the P&L. Yeah, I can address the asset impairment relates to a property that we've moved out of, basically, a new property we moved into from a headquarters perspective. So there was an asset impairment there. When it comes to the second point, the strategic advisory costs, really, that's work that we're doing to develop a plan for further enhancement of our strategic position. So it involves what you may have seen in some of our comments about expansion of capacity and Great.
Speaker Change: Great.
Speaker Change: And then well I got you, Bob but I think I noticed there were some fairly significant asset impairment and strategic advisory costs on the P&L.
Speaker Change: Yeah, I can address the asset impairment relates to a property that we've moved out of basically.
Speaker Change: New property, we moved into from a headquarters perspective, so there was an asset impairment there.
Speaker Change: When it comes to the second point the strategic advisory costs really that's work that we're doing to develop a plan further enhancement of our strategic position. So it involves what you may have seen in some of our comments about expansion of capacity and capabilities.
Alex Paris: And then just sort of my last question is to dig a little deeper into the regulatory and legislative, Steve. You know, there's been so much change, obviously, you know, and since the new administration came into the White House and big changes at the Department of Education, 50% RIF, and then the legislation that you passed out of committee that was referred to by an earlier question.
Speaker Change: Great.
Speaker Change: And then.
Speaker Change: Just sort of my last question has to dig a little deeper into the regulatory and legislative Steve.
Speaker Change: You know theres been so much change obviously you know in it since the new administration came into the White House and big changes at the Department of Education.
Speaker Change: 50% risk.
Speaker Change:
Speaker Change: And then the legislation that.
Speaker Change: Passed out of committee that was referred to by an earlier question.
Steve Beard: I'm just wondering what is the tone in Washington? What is the tone from the Department of Education? It seems to be much more business friendly and I'm hearing things anecdotally from some of the other publicly traded companies in the group that the Department of Education actually reaches out and asks questions and pushes things through faster because they're much more cooperative.
Speaker Change: I'm just wondering what what is the tone in Washington, what is the tone in.
Speaker Change: From the department of Education.
Speaker Change: It seems to be much more business friendly and and and.
Speaker Change: I'm hearing things anecdotally from some of the other publicly traded companies in the group that.
Speaker Change: The department of education actually reaches out and ask ask questions and and pushes things through faster because they're much more cooperative so.
Steve Beard: So big, big changes, proposals to eliminate gainful employment, proposals to eliminate 90-10. I'm just wondering what you are able to say in terms of your interaction with DC. Has it changed significantly for the better? Our interactions in the Capitol and at the Department of Education in particular have been extremely constructive. We've gotten a welcoming audience across the issues that are important to us. We've been able to engage them on our agenda, both educational and health care, talk to them about ways we think our programs can address challenges in both those industries, and they've been constructive and receptive.
Speaker Change: Big Big changes proposals to eliminate gainful employment proposals to eliminate 90 10, I'm just wondering what your U.
Speaker Change: What are you are able to say in terms of your interaction with D. C has it changed significantly for the better.
Speaker Change: Our interactions in in the capital and at the Department of Education in particular have been extremely constructive.
Speaker Change: We've gotten.
Speaker Change: A welcoming audience across the issues that are important to us.
Speaker Change: We've been able to engage them.
Speaker Change: On our agenda, both educational and health care.
Speaker Change: To them about ways, we think our programs can address challenges in both of those industries and they've been constructive and receptive. So your characterization of what you're hearing about the tone. There is aligned with our experience to date.
Steve Beard: So your characterization of what you're hearing about the tone there is aligned with our experience.
Steve Beard: And then, you know, with a 50% RIF, who did they cut? It seems like the department is more efficient than it ever has been. I had no idea, but we've not had any trouble. getting in touch with them. We've had no trouble getting responses on the issues that are important to us. So while they have done a number of layoffs, as is the case across Washington, we've seen no diminution in their response.
Speaker Change: And then you know with a 50% risk who did they cut it seems like the environment is more efficient than it ever has been.
Speaker Change: No idea.
Speaker Change: But we've not had any any trouble.
Speaker Change: Getting in touch with them, we've had no trouble getting responses on the issues that are important to us.
Speaker Change: So while they have done a number of layoffs as is the case across Washington D. C. No diminishing in their responsiveness to us.
Alex Paris: It's great to hear. Thank you very much. That's all I have. Thank you.
Speaker Change: That's great to hear thank you very much that's all I had.
Speaker Change: Okay.
Speaker Change: Thank you.
Steve Pawlak: Your next question comes from Steve Pawlak with Baird Police. Yeah, thank you. Steve, the Walden growth was really strong this quarter.
Speaker Change: Your next question comes from Steve Pollack with Baird. Please state your question.
Steve Pollack: Yes. Thank you.
Speaker Change: Steve.
Steve Beard: I heard you reference the digital innovation and analytics to drive retention, which I'd love any sort of additional clarity on kind of what that means in practice. I just want to make sure I'm following your question, Steve. How are we using digital technology to drive... Yeah, what's the, just like that, any more clarity on sort of what the digital innovation means and how it's, you know, the mechanism for how it's improving retention or enrollment? Yes, so with respect to Walden, I think we are now three quarters in to the implementation of what has proven to be a very effective, predictive, analytic tool for us around student engagement.
Speaker Change: Volume growth was really strong this quarter.
Speaker Change: You referenced the digital innovation and analytics to drive retention, which would love any sort of additional clarity on kind of what that means in practice.
Speaker Change: I just want to make sure I'm. Following your question, Steve what how are we using.
Speaker Change: The allergy to drive.
Speaker Change: What's the what's the just like that any more clarity on sort of what did.
Speaker Change: The digital innovation means and how it's you know the mechanism for how it is improving.
Speaker Change: The retort retention or enrollment.
Speaker Change: Yes, so with respect to Walt and I think we are now three quarters in.
Speaker Change: The implementation of what has proven to be a very effective predictive.
Speaker Change: Analytic tool for us around student engagement and so at Walden.
Steve Beard: And so at Walden, we've increased and enhanced our ability to intervene in the student journey in ways that keep our students pacing through materials in ways that ensure they're successful. So we contracted for that platform a few quarters ago. We've integrated it into our systems, and we're really pleased with the results we're getting there. Walden's enjoying near-record persistence across its largest programs, and obviously persistence is an extremely important measure of our ability to drive student success.
Speaker Change: We've increased and enhanced our ability to intervene in the student journey in ways.
Speaker Change: That keep our students pacing through.
Speaker Change: Materials and in ways that ensure they are successful so we contracted for that platform a few quarters ago, we've integrated it into our systems and we're really pleased with the results. We're getting there walton's enjoying near near record persistence across its largest programs and obviously persistence.
Speaker Change: It is an extremely important measure of our ability to drive student success.
Steve Pawlak: Okay, and then on...
Speaker Change: Alright, and then on.
Steve Beard: sort of the bigger picture sort of innovations and investments you're making to meet the demand that you talked about. What are the primary limitations on being able to scale up capacity because, you know, good demand, good conversion, I guess kind of what's the ceiling for enrollment growth to be just from an operational perspective? So, I would think of it in two buckets. First, there's still opportunity to grow enrollments in our existing program portfolio. The only place where that's a challenge is at the vet school where we operate near capacity. We continue to work hard to utilize the headroom we have in programs where we have that headroom.
Speaker Change: Sort of the.
Speaker Change: Bigger picture sort of innovations and investments you're making to them.
Speaker Change: Meet the demand that you talked about.
Speaker Change: What are the primary limitations on scaled.
Speaker Change: Scaled capacity, because if we get good demand good conversion.
Speaker Change: I guess kind of what's the ceiling for.
Speaker Change: Enrollment growth I mean, just from an operational perspective.
Speaker Change: So I would think of it in into two buckets first.
Speaker Change: There's still opportunity to grow enrollments in our existing program portfolio.
Speaker Change: The only place where that to challenges at the vet school, we operate near capacity.
Speaker Change: We continue to work hard to utilize.
Speaker Change: The headroom, we have in programs, where we have that headroom in addition.
Steve Beard: In addition, as we talk to employer partners, as we talk to prospective students, there are new programs that we'd like to bring online that we think are responsive to their interests and responsive to industry needs. We think there's opportunity for geographic expansion that's complementary to our existing footprint and we're taking a hard look at that. And the vehicles that we would use to accomplish bringing on that new capacity are everything from, again, investments in existing programs to acquiring new programs to standing up new de novo programs. And all of that's on the table because we think the market opportunity in healthcare education is sufficiently robust that we should leverage all of those vehicles in our pursuit of making a real dent in the workforce challenges U.S.
Speaker Change: As we talk to our employer partners as we talk to prospective students. There are new programs that we'd like to bring online that we think are responsive to their interests.
Speaker Change: And responsive to industry needs.
Speaker Change: We think theres opportunity for geographic expansion, that's complementary to our existing footprint and we're taking a hard look at that and the vehicles that we would use to accomplish bringing on that new capacity are everything from again investments in existing programs to acquiring new programs to standing up new de Novo programs and all of that's on.
Speaker Change: A table because we think the market opportunity in health care education is sufficiently robust.
Speaker Change: But we should we should leverage all of those vehicles are in our pursuit of making a real dent in the workforce challenges U S health care is struggling with.
Steve Beard: healthcare is struggling with.
Steve Pawlak: Thank you very much.
Speaker Change: Thanks, so much.
Steve Pawlak: Thank you.
Speaker Change: In Q.
Speaker Change: Thank you.
Operator: And ladies and gentlemen, at this time we've reached the end of the question and answer session.
Speaker Change: And ladies and gentlemen at this time, we've reached the end of the question and answer session I'll now hand, the floor back to Steve Beard for closing remarks.
Steve Beard: I'll now hand the floor back to Steve Beard for closing remarks. I just wanted to take a moment and thank the Adtalem team across all five of our institutions. In an environment where there's no shortage of distractions, you've remained focused on the most important thing, which is helping our students succeed, and that's showing up in our results of operations. So thank you to the Adtalem family. Thank you.
Speaker Change: I just wanted to take a moment and thank the add talent team across all five of our institutions and an environment, where there are no shortage of distractions. You've remained focused on the most important thing which is helping our students succeed and that's showing up in our results of operations. So thank you to the <unk> family.
Speaker Change: Thank you.
Operator: And with that, we conclude today's call. All parties may disconnect.
Speaker Change: And with that we conclude today's call all parties may disconnect have a good day.
Speaker Change: Yeah.
Speaker Change: Yeah.