Adtalem Global Education Inc.

Greetings and welcome to the Ad Talem second quarter 2019 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Shaka Patterson, Vice President and Deputy General Counsel. Thank you. Please begin.

Thank you and good afternoon. With me today from Ad Talent's leadership team are Lisa Wardell, President and Chief Executive Officer, and Patrick Unziker, Chief Financial Officer and Treasurer. I'd like to remind you that this conference call will contain forward-looking statements which are based on the expectations, estimates, and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict, which could cause actual results to differ materially from those expressed or implied in these statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to our annual report on Form 10-K for the year ended June 30, 2018, and other recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating results and financial condition. We disclaim any intentions or obligations to update or revise any forward-looking statements, except as required by law. During today's call, we will refer to non-GAAP financial measures, which are intended to supplement, though not substitute, for our most directly comparable GAAP measures. Our press release, which contains the financial and other quantitative information to be discussed today, as well as a reconciliation of non-GAAP to GAAP measures is also available on our website. Telephone and webcast replays of today's call are available for 30 days. To access the replays, please refer to today's release. And with that, I now turn the call over to Lisa.

Good afternoon, and thank you for joining our second quarter fiscal 2019 earnings call. During the quarter, we delivered growing enrollments in our medical and healthcare segment and strong results in our professional education segment, driven by the refreshed product differentiation in the Becker business and continued growth in ACAMS. Through our January 2019 term, ADTALIM new student enrollment increased 4.9%, while total student enrollment increased 2.9% from the prior year. Compared to the prior year period, second quarter 2019 revenue increased nearly 3%, and operating income increased approximately 17%. aided largely by a one-time benefit from insurance proceeds related to Hurricanes Irma and Maria. Excluding the one-time insurance benefit and other special items, operating income decreased by about 5%, in line with our expectations. Further, we achieved several major milestones in the quarter, including the successful completion of the DeVry University and Carrington College transfers of ownership, as well as the permanent relocation of the Ross University School of Medicine to Barbados. These initiatives required tremendous energy from the entire team, and with their successful conclusion, we are now focused on pursuing additional business development opportunities across our portfolio. Before I talk about our plans for the second half of fiscal 2019, let me give you a high-level overview of our segment results during the quarter. Enrollments in our medical and healthcare segment were strong. Further, we're seeing traction for our new facilities and newly developed partnerships in the vertical. With regard to Ross University School of Medicine, we opened the doors to its permanent home in Barbados in January. While it is still early, we're already seeing encouraging trends and inquiries from prospective students now that RUSM has a permanent home. Our new medical sciences campus in Barbados represents a state-of-the-art academic institution including a Society for Simulation in Healthcare, SSH accredited, simulation center. Additionally, a cutting edge virtual anatomy lab and a best in class patient care center allows our faculty to better prepare medical students for the clinical experiences they pursue upon completion of their basic medical sciences training, giving them an early competitive advantage relative to their peers. As we discussed last quarter, the new location for ROSMED has greatly improved airlift access from the United States, Canada, and Europe. This will allow us to drive student enrollment growth toward and potentially above the previous peak enrollment that we achieved in 2014. ROSVET continues to capitalize on the supply and demand imbalances in veterinary medicine, as well as building awareness for its new research center, which continues to attract clinicians and academicians from around the globe, including Dr. Robert Gilbert, Professor Emeritus at Cornell University and a leading professor of animal reproductive biology, and Dr. Kerry Rolfe, a leading European specialist in companion animal internal medicine and former faculty member at the University of Edinburgh. In November 2018, ROSVET hosted the annual West Indies Veterinary Conference, the largest to date with nearly 500 attendees. further enhancing Ross Vet's reputation in the global veterinary profession. Meanwhile, the American University of the Caribbean School of Medicine has established a partnership with the University of Central Lancashire in Preston, England, providing a presence in the UK with its first cohort of medical school students expected to start in September of 2019. AUC also launched the Caribbean Center for Disaster Medicine in partnership with Harvard Medical Faculty Physicians of Beth Israel Deaconess Medical Center. In March of this year, the center will host its first Caribbean Disaster Medicine International Conference. Dr. Gregory Citone, international expert in disaster medicine from Harvard Medical School, is headlining the event. The lineup also includes experts from Harvard T.H. Chan School of Public Health, Johns Hopkins University School of Nursing, and other global institutions. And finally, Chamberlain University continues to see strong market demand for its campus-based BSN program, including at the Ashna co-located campus in Louisiana, and with the recent increases in enrollment caps at Las Vegas, Troy, Michigan, and North Brunswick, New Jersey, all three are experiencing market demand well in excess of the previous enrollment caps. This market demand is driven largely by more students enrolling directly into BSN programs rather than RNs pursuing the BSN credential. Chamberlain also continued to experience solid market demand for its master and doctoral nursing programs. NCLEX pass rates for Chamberlain students continue to strengthen, showing a significant upward trend from 2017's annual rate of 84%, with a third quarter calendar combined total pass rate of 91.4%. Twelve of our 19 campuses that had NCLEX test takers exceeded the national NCLEX rate average. In our professional education segment, we had a strong quarter with revenue growth of approximately 39%, including the improved performance of the Becker Business Unit due to enhanced marketing effectiveness and refreshed product differentiation. In addition to growth in accounting products and services, including exam preparation, where we're expanding our professional development content to support key changes in the accounting profession, including the training of STEM professionals in the industry. For example, Becker is partnering with a large global accounting firm to co-develop an accounting and auditing for non-accountants training course for the firm's STEM professionals. The content helps to speed onboarding of STEM professionals to accounting and audit services engagements. In ACAMS, we continue to see solid growth globally, including in the U.S., Europe, and Latin America. Our European efforts include expansion into Poland and Germany. We have also gained some early traction in Panama, Mexico, and Brazil. Our conferences continue to post record year-over-year growth, with the Las Vegas conference attendees growing over 10%. While we are encouraged by our results, we continue to invest in the core business in order to position ourselves for further rapid expansion. And finally, in Brazil, while we continue to face currency headwinds and some top-line revenue pressure, we remain confident that the recent change in administration will settle the economy and provide ongoing stability. The growth trends in distance learning since our soft launch in March 2018 are very positive, and we're certain that this trend will continue based on our ability to deliver high-quality academic programs and experience to our students. Our academic quality rankings by the Brazilian Ministry of Education As reflected in our IGC score, a composite score focused on the National End-of-Program Exam , faculty credentials and student satisfaction continues to consistently improve. Our average IGC result was 282 this year, the sixth year of improvement in that metric for ADTAL and Brazil. Among the main national private institutions, ADTAL and Brazil institutions are ranked as the number one institution in eight of the 13 cities we serve based on the Brazilian Ministry of Education's IGC metric. As we enter the second half of fiscal 2019, we remained poised for continued organic growth in revenue and earnings driven by student enrollment increases, the addition of new differentiated programs and products, and enhanced technology-enabled student learning environments. We have accomplished a great deal over the course of the last several years. and believe we are a stronger business for it today. As we look ahead to the balance of fiscal 2019, we have strong cash flow, brands that are associated with market leadership in each of our verticals, products and services that are clearly differentiated in their respective markets, and a team that understands both scale and profitability. Our team is more experienced, diverse, and growth-oriented, and that is reflected in our ability to deliver consistent operating results. We will continue to focus and strategically align our portfolio to deliver growth while driving improved operating efficiencies across our organization and prudently balancing our capital allocation by investing in platforms for growth while providing direct returns to our owners in the form of share repurchases. Our continued share repurchases reflect our ongoing confidence and excitement in our business. As always, we are committed to building a long-term value for our fellow owners. With that, let me turn the call over to Patrick for a deeper look at our financials for the quarter.

Thank you, Lisa, and good afternoon, everyone. Now, turning to our results, during the second quarter, ad talum revenue of $317 million grew nearly 3% from the prior year. Growing enrollments in our medical and healthcare segment and the strength in our professional education segment driven by the improved performance of Becker and growth in ACAMS was somewhat offset by foreign currency headwinds in Brazil. On a constant currency basis, ad talum revenue in the quarter increased 6.2% compared to the prior year. Operating costs, excluding special items, were $258 million in the second quarter compared to $247 million in the prior year. The 4.6% increase was due primarily to investments, including Ross University School of Medicine Barbados transitionary costs and Chamberlain new campus startup expenses. as well as the impact of stranded costs. We are tracking to our plan to reduce our home office expenses. Operating income from continuing operations excluding special items was $58.4 million compared to $61.3 million in the prior year. Net income from continuing operations excluding special items was $44.5 million compared to $50.3 million in the prior year. Diluted earnings per share from continuing operations excluding special items with 74 cents compared to 81 cents in the prior year in line with our expectations fiscal 2019 second quarter results also reflect total pre-tax special items including restructuring charges of 3.6 million primarily related to exiting the ross university school of medicine campus in dominica and real estate consolidations and add talens home office in addition we recorded a gain of $15.6 million from insurance proceeds related to Hurricanes Irma and Maria. Turning to our second quarter segment results, starting with medical and healthcare, revenue of $213 million increased 4.6% compared to the prior year. Chamberlain revenue increased 6.2% in the quarter. For the November session, which is only a post-licensure intake, new student enrollment decreased 6.7 percent. Total student enrollment grew 3.7 percent compared to the prior year. In January, new student enrollment grew 6.4 percent and total students increased 3.3 percent. New student enrollment growth included an impressive increase of 31 percent in our on-campus BSN programs as well as growth across our master and doctoral-level nursing programs. Revenue in the quarter for the medical and veterinary schools increased 2.4% to $90 million as compared to the prior year. New student enrollment declined 8.5% and total student enrollment declined 6.6% in the January 2019 semester compared to the same semester last year. The decline in new students is due to a shift in starts of students in the prior year from the September to January session due to Hurricanes Irma and Maria. Excluding this impact, new student enrollments increased 6.6%. Segment operating income, excluding special items in the second quarter, was $47.5 million compared to $55 million in the prior year. The 14% decrease was due to cost increases to support future growth and return to a normal level of expense at the medical schools. Now turning to our professional education segment, second quarter revenue increased 39% to $42 million compared to the prior year. The significant improvement was due to a 16% increase in Becker revenue due to enhanced marketing effectiveness, while ACAMs increased almost 65% due in part to the impact of the planned timing shift of the North American Annual Conference from Fiscal Q1 in the prior year to Fiscal 2Q in 2019. Revenue associated with this conference totaled approximately $5 million during the quarter. Segment operating income was $9.6 million compared to $2.2 million in the prior year, driven by revenue growth across both Becker and ACAMS. Second quarter technology and business segment revenue totaled 62.6 million, a decrease of 16.6% and down 2.4% on a constant currency basis. The decreases included lower tuition pricing necessary to offset the effect of student financial aid program reductions and increased competition. However, the segment is well positioned for new student enrollment growth and its online platforms. Segment operating income in the second quarter was $8.5 million compared to $14 million in the prior year. Second quarter operating income on a constant currency basis was $10.6 million. The operating income reduction in the quarter was primarily driven by lower revenue. The Brazilian government recently changed regulations on opening and operating distance learning in the country. The approval process for launching online facilities was streamlined making this segment more economically attractive to larger institutions. EdTalent Brazil began offering several bachelor's and associate's degree programs via distance learning in February 2018. These programs are offered under the Widen online brand. They are delivered through the Damasio network of over 200 learning centers, which currently has the infrastructure and staff necessary to support distance learning degrees. 2,085 new students enrolled in Widen Online in the September 2018 session. Our effective tax rate from continuing operations, excluding special items, was 17% in the second quarter. Now turning to our balance sheet and financial position, cash flow from operations for the first six months of fiscal 2019 totaled $23 million compared to $50 million in the prior year. Fiscal year-to-date capital expenditures totaled $35 million compared to $32 million in the prior year. Our net accounts receivable at December 31, 2018 was $139 million, an increase of 3.3% driven by the timing of financial aid receipts. For the first six months of the fiscal year, bad debt as a percentage of revenue was 1.1% compared to 1.3% in the prior year, reflecting the quality of our programs and solid student outcomes. We close the quarter with cash and cash equivalents of $295 million and outstanding bank borrowings of $299 million. We are committed to maintaining a healthy balance sheet to support our growth strategy and enhance shareholder returns. During the first six months of fiscal year 2019, we repurchased approximately 2.4 million shares of common stock at an average purchase price of $49.01 per share for a total of $115.9 million. In January 2019, we completed our 10th share repurchase program. We are now buying back shares under the $300 million program approved by our Board last November 2018. We remain confident and committed to executing our long-term strategic plan, including share repurchasing, as a part of our capital allocation strategy. Now turning to our outlook. For the fiscal third quarter of 2019, we expect revenue to grow 1% to 2% compared to the prior year. We expect third quarter 2019 operating costs before special items to increase 3% to 4% compared to the prior year. The third quarter outlook assumes an exchange rate of 3.77 Brazilian real to the U.S. dollar. Consistent with our previous fiscal 2019 full-year outlook, we expect revenue to increase approximately 3% to 4% compared to the prior year, and earnings per share from continuing operations before special items to grow in the 2 to 3 percent range compared to the prior year. We anticipate our effective income tax rate to be in the 16 to 17 percent range. The full-year outlook assumes an exchange rate of 3.8 Brazilian Rai to the U.S. dollar. Full-year capital spending is expected to be in the 65 to 70 million dollar range, including approximately 20 to 25 million for the relocation of RUSM to Barbados. With that, I will now turn the call over to the operator for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You will press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And thank you. Our first question comes from the line of Peter Appert with Piper Jaffray. Please proceed.

Thanks. Good afternoon. So maybe you could just expand a little bit on what you're seeing in Brazil. You highlighted increased competition, and I guess the FIAS exposure is an issue. It seems like those issues might persist. What would give you some confidence that you can improve the financial results there?

Yeah, hi, Peter. So a couple of things. Certainly, while we believe that the macro environment is stabilizing somewhat with the new administration, et cetera, we certainly understand that we don't have the controllables there. As we look at our market, we've seen pricing pressure primarily on the widened institutions, so separate from the MAC or online, et cetera. There's a couple of things there. One is that pricing pressure, a lot of it is coming from the FIAS, students that are using FIAS. Our FIAS percentage now is around 18% across all of our portfolio, certainly below 20%, which is less than half of what it was just a couple of years ago. And then as we look at pricing, we've certainly become more competitive in the market at the But we're focused on a couple of things, making sure that we're differentiating those programs so that they are not as price sensitive. We certainly have had some successes there, and that's trending the right way. We are seeing growth in that segment as you look at the enrollments. And then as we look at widened onsite, very early on in that, excuse me, online, very early on in that program, we're seeing that come through the Damasio channel, and obviously that's going to do that and improve our operating margins because that's flowing through to the bottom line, not as much of the onsite variable cost. So I think between that and some of the things that we're doing in the IBIMAC program and with that brand, We're seeing really good growth there across some of the new programs, partnerships, et cetera. We're pretty confident that we are going to be able to face those headwinds in Brazil as it relates to currency, et cetera. No doubt there's a risk return, so we're in that type of emerging market, but we are really well positioned from a brand perspective, from a product perspective, differentiation perspective, from a program perspective, and across different elements of that market, we're pretty confident.

Peter, seeing very nice continuation of a build in our new student enrollments in response to some of the pricing actions we've taken. So if you recall, back in September, new student enrollments in Brazil were up about 24%. You know, it's a very successful continuation of our online launch. Even excluding that, the base business new student enrollments were up almost 9.5%. So as we come into the key enrollment cycle here in February and March and where we stand, we're feeling increasingly confident on a nice continuation of those trends.

Got it. Okay. Thank you for that. And then on the nursing, it really feels like it's a tale of two stories here, right? The RN to BSN quite weak, the pre-licensure quite strong. Anything you can do or anything structurally pricing-wise, marketing-wise, I'm not sure what, to perhaps stabilize the RN to BSN side of things?

Yeah, I mean, certainly, if you look at RN to BSN in terms of the decline, we're closing that gap, and a lot of that has to do certainly with the marketing and some of the operational things we're trying to do to drive that. As you look at – part of it is the overall market, and we've discussed that before, and we feel that, you know, certainly it's good to be positioned with the onsite. If you look at, you know, a 31 percent growth there helps us understand that the market is shifting a bit. While we see some of the pricing and some of the competitive trends there, one of the things that we really are focusing on, Peter, is thinking about how we can continue to work our hospital system and partnership systems there so that we continue to decrease those marketing costs and we're getting those students directly. I mean, Ochsner is a, co-location is a perfect example, but certainly with a more aggressive look at that across across the portfolio. So, yes, certainly understand that. But we feel like we've got the right actions in place on both sides of those and very confident on the onsite as the market continues to shift.

And sticking with that for a sec, Lisa, the Ochsner relationship obviously has worked really well for you. Any thoughts in terms of new campus locations, perhaps with other hospital partners?

Yes, so obviously we wanted to prove out that model for one quarter dozen a trend make. We feel that we're at that point now where we are really stepping up across that, across Chamberlain University in general. Our partnership discussions, we are not at a point now where we could identify, you know, here's the next one, but certainly we've identified this is a model that works for us, works for the hospital partners, so as we start to think more about solving the pain points for a hospital system across their kind of workforce model, this Partnership with Oxnard really helps us understand how to do that better, and we're able to really view what are the costs that we're able to save and streamline because of that. So we are actively looking. As you may recall, we have a new campus, the next one in terms of a standalone or a Chamberlain University campus is scheduled for San Antonio, Texas. That is on track, and so we will open that. But absolutely, it's thoughts of being able to do something in parallel should we get the right partner, and we've got a few in the funnel.

And then, Peter, just to add with that, we've seen very nice increases in our enrollment caps based on the continuation of very solid NCLEX results. So we've seen caps increased in Michigan, Las Vegas, North Brunswick, New Jersey. So as that market continues to shift, as Lisa said, we're really well positioned with our campus footprint. But increasingly so, our ability to increase the campus size is to meet that market demand.

Right. Understood. And last thing, and I'll let someone else get on. Pat, the guide would suggest very strong fiscal fourth quarter numbers, I think, if I'm doing my math correctly. Can you just highlight some of the things that are really causing the inflection in the results later in the year?

Yeah, that's very much consistent with our point of view. Increasingly as we exit fiscal 2019 and then start to see an acceleration of both revenue and earnings in fiscal 2020, we'll start to all share that and see that in the fourth quarter. Driven by the continuation of the very nice build in total student enrollments at Chamberlain, increasingly as we see total student enrollments build at Brazil, And then with the increased contribution and the nice stability that we're seeing with Becker in ProfEd, those are all coming together quite nicely. And then, of course, the inherent leverage in the business is that flows through the bottom line to see both revenue and earnings grow.

Great. Thank you, guys.

Thank you, Dan.

Thank you. Our next question comes from the line of Jeff Silver with BMO Capital Markets. Please proceed.

Thank you so much. I wanted to focus on margins for the medical and health care business. They were down somewhat year over year, and I know there was some noise in terms of a timing shift and maybe some relocation costs. Would we expect margins on a year over year basis in that segment to be up year over year in the second half?

On a full year basis, we'd expect margins to be Somewhat comparable to slightly lower, just slightly lower than prior year, full year FY18, just as a result of a little bit of that noise you referenced and some higher absorption of home office costs. But as we move into 2020 then, we'll start to see the margins expand with the benefit of the growing enrollments.

Okay, great. That's helpful. And just focusing on the, I think you said there was a 31% year-over-year increase in in enrollment on campus in your BSN program. I knew you had a number of caps lifted. If I remember correctly, there were also some new schools that were opened. Do you have that on a same school basis, excluding the caps? I'm just trying to normalize what the growth was.

Really, as you look about it, the way we think about it, this is on a same school basis with the exception of Ochsner, which would have contributed about 30 new student enrollments.

Okay, wow, that's a pretty good number. And then you had mentioned in your prepare remarks about, I think you called it additional business development activities across the portfolio. If we can just get a little bit more color on what you're referring to. Thanks.

Yeah, sure. So really as we look at this back half of 19, this is really the first time that we've been able to clear out a lot of the noise, as you can imagine, a lot of our resources and focus across the, certainly across home offices. and the entire portfolio has been very focused on both divestitures as well as the RAS relocation. And so as we go into the back half of the year, we have been having a lot more conversations across the portfolios that relates to how we can better serve our employers. So we have employer relationships, obviously the hospital systems, but multinational finance institutions on the ACAMS and Becker side. We're starting to see traction in terms of partnerships and potential partnerships to cross sell within professional education between Becker and ACAMS. We had mentioned it before, but really was more of a paper exercise versus getting those partnerships in place. On the medical side, as an example, AUC now having a campus where we will actually have students in September on the UCAN clan campus in the UK. Small class to start, but certainly growth potential there as we build. That's incremental students and revenue for us. On the Ross Med side, articulation agreements where we announced Charles Drew, we have several others that will be announced in the next month or so, or actually this month, that will allow us to both drive students, lower marketing costs, that type of thing. So we're really getting out as we now have this group president model that we think about it the last A person to fill that team out for me, I mentioned before, was Kathy Bodenholland on the medical healthcare group just last May, June timeframe. So now with the reload of Ross complete and having a permanent home there, we are geared up to do what we do quite well when we have the time and capacity, and that is to develop relationships that drive new student enrollment across the portfolio.

Okay, great. Thanks so much. You're welcome.

Thank you. Our next question comes from the line of Alex Perez with Barrington Research. Please proceed.

Good afternoon. This is Chris Howe sitting in for Alex. Hey, Chris. Hey. My first question is, you touched on it many times and provided some great color on this. Just in regard to ACAMs and Becker, you mentioned the longer-term guidance for ACAMs. prior to this call, how should we look at these two businesses on a longer-term basis beyond this fiscal year? Where would you say it is as far as its runway for growth and its contribution to longer-term guidance?

Great question, Chris. And we are very much in line and in tracking with the longer-term guidance that we provided back in May at Investor Day. that we would see very nice continuation of double-digit revenue growth and then see a very nice flow-through and margins continuing to expand over time, but as we continue to reinvest in the business. So very much on track with what we had shared in our five-year plan and very pleased to see some very nice stabilization of Becker and a continuation of those trends.

That's great. Thank you, Pat. And this leads me to my follow-up question. Lisa touched on it a little bit about the different cross-selling opportunities between Becker and ACAMS. Where would you say you are as far as the awareness of these opportunities and the realization of monetizing the cross-selling opportunities here?

Yeah, sure. I would say the good news is it's early stage in terms of the monetization, easy for me to say, making revenue from that. But in terms of awareness, it's very high, right? Because we now have, as I mentioned, a group president that is able to shift in among the institutions as well as obviously the folks who run those institutions and sort of putting in some new talent six to nine months ago or almost a year now for ACAMs is really starting to pay dividends as we see these connections. So I think accounting for STEM is just early stage. We're seeing lots of different things that we're able to do as we think about not only the ACAMs model but what are the other places in terms of certifications, et cetera, that we'd be able to use that model because we are recognized in the market as it relates to certifications, et cetera. So more to come there, but certainly feel like we have a long runway for that in terms of revenue, but probably, you know, five or six out of ten in terms of awareness as we talk to our employers, customers, et cetera.

Very helpful. That's all the questions I have right now.

Great.

Thank you. Our next question comes from the line of Jeff Mueller with Baird. Please proceed.

Yeah, thank you. Maybe to start just, I guess, glass half-empty take on the guidance question. The Q3 guidance, just given that, you know, really strong implied Q4, is there anything in Q3 that we should be considering from a timing or comp perspective or something along those lines, just given that there's, I guess, slower growth in Q3 and I know Q2 benefited from the timing of the ACAMS conference, but just any other comments on considerations for Q3 guidance?

Yes, Jeff, we will have, and once we're out of Q3 of next year, have overlapped some of the noise from the hurricanes. So if you go back and look, we've been very transparent in our prior disclosures on the quantification there. But, of course, there was a shift of revenue as we needed to delay classes for a couple weeks. So revenue that we would have normally taught and would have recognized in the second quarter had shifted into the third quarter the prior year. So we'll be overcoming a little bit of that. And then, of course, just the seasonality of the third quarter is one of our weaker in earnings because Brazil isn't teaching but just a month and a half in that quarter. And then we'll obviously see the nice acceleration there. And again, as we sit here today, very much unchanged from our full year guidance in terms of both revenue and EPS.

Right, so I was just going to add.

Go ahead, Lisa.

So yeah, you know me, Jeff. To make it the glass half full, I would say we've got significant upside and confidence in our Q4, particularly as some of these other corporate development initiatives are driving through the portfolio. So very confident in our full-year guidance, and again, as Patrick said, been very transparent about what shifted as it relates to Q3.

Got it. And then on the nursing enrollment cap increases, I guess, to what extent is that a direct link to the improved NCLEX passage rates and can increased caps kind of become a regular thing that we see year in and year out?

Yes, so it is a direct correlation. Each state, as you know, this is part of our competitive differentiation because each state board of nursing makes these distinctions, particularly when you start talking about when you become uncapped as in New Brunswick, and then it's all about your capacity to take new students. And so we absolutely anticipate that that will continue when you think about our three newest campuses all testing at 100% pass rate for the NCLEX students that came through Sacramento, et cetera, the newer campuses, we would anticipate that those caps would get lifted obviously a lot earlier depending on our ability to continue to show post those kind of NCLEX scores. So while the academic quality piece is the most important to us just because our mission is education, it really does tie very nicely to how we think about financial metrics and revenue growth.

Okay. And then Becker, really impressive turnaround there. I guess I'm just trying to vet the sustainability or how you think about underlying growth potential of that business following the changes to product and marketing?

Yeah, so very much see this as being very sustainable as we've pivoted specifically in sharpening our value prop and our competitiveness pricing in the B2C side of the business. That represents about 30% of Becker's overall revenue. So we have seen a very strong market response to the improved product and some of the pricing changes. And we're starting to see a continuation of that into the current quarter. And again, as we stack three, four quarters in a row here, we're increasingly confident in terms of the stabilization of that business. And then I think as we think about Becker-Moore strategically, the continued growth of the continued professional education So look, we help 40,000 students a year prepare and start their career as a CPA, and now we want to leverage that reputation, the impact that we've had, in keeping them in their career with continuing professional education. And we've had some very nice wins lately with some large accounting firms and helping them solve some workforce problems. So we're really starting to see a nice continuation and growing Becker beyond just being known for the CPA test prep.

Okay, and then last one from me. Lisa, can you just help me better understand Stephen's role with the promotion? I guess, you know, from my perspective, usually I see COOs have either P&L or some sort of business unit responsibility. So the description reads a little different, and then I think he also leads IR, but he doesn't have a formal role on conference calls. So just, if you could just maybe talk about that promotion and his role, thanks.

Sure, absolutely. So it actually ties directly to some of the things that I've been talking about here, but obviously in general terms because we want to make sure that we're ticked and tied and announced. And that's really on the strategic strategy and corporate development side. And so if you think about what I have done in the past and actually what Steve did in his past role, it's really around corporate development, business development relationships, Certainly M&A, we have both organic and inorganic as we think about across the longer strategic time horizon. And so his role in terms of adding the chief operating officer is really to enable us to have that capacity and have someone who can drive these things from start to finish as we work with the group presidents and think about how we can better position ourselves as it relates to being responsive to employers beyond the institutions themselves. Obviously, that is important as we educate. But beyond that, as we think about how do we have lifelong learners and how do we drive through the workforce or employer sort of life cycle and student life cycle, that's something that he can really be helpful with as we think about his past experience and then how he interacts in and among the institutions and the units here.

Okay. Thank you.

Well, we would like to thank everybody for joining the AdTalem Global Education Q2 conference call. We really appreciate your support, and we look forward to talking to you next quarter.

Okay. Thank you, everybody.

And thank you. This will conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.