Adtalem Global Education Inc.

Greetings, and welcome to the Ad Talem fourth quarter 2019 earnings call. At this time, all participants are in 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. John Kristof, Vice President, Investor Relations. Thank you, sir. You may begin.

Thank you, and good afternoon. With me today from ADTALM's leadership team are Lisa Wardell, Chairman, President, and CEO, and Patrick Unziger, CFO and Treasurer. I'd like to remind you that this conference call will contain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995 with respect to the future performance and financial condition of ADTALM global education that involve risks and uncertainties. Actual results may differ materially from those projected or implied by these forward-looking statements. Potential risks, uncertainties, and other factors that could cause results to differ are described more fully in item 1A, Risk Factors, in the most recent annual report on Form 10-K for the year ending June 30, 2018, previously filed with the FCC on August 24, 2018, and its most recent quarterly report on Form 10Q for the quarter ending March 31, 2019, filed with the SEC on May 2, 2019. Any forward-looking statement made by us is based only on information currently available to us and speaks only as of the date on which it was made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise. 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 results. Our press release, which contains 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 press release. And with that, I'll now turn the call over to Lisa.

Good afternoon, and thank you for joining us today. During our call, I will discuss the highlights from our fourth quarter and full fiscal year before turning to performance in our business segments and strategic focus and outlook for fiscal 2020. I will then turn the call over to Patrick to discuss our financial results before we open the lineup to your questions. In the fourth quarter, we delivered revenue and EPS growth within our expectations and prior guidance, driven by continued growth in two of our three segments. In our business and law segment, we experienced a double-digit revenue decline in the quarter as a result of the previously reported headwinds in Brazil. However, our leadership team in Brazil has done a tremendous job stabilizing the business and controlling administrative and other non-academic-related costs, which resulted in a slight increase in operating income for the segment during the quarter. During the quarter, we continued to achieve superior student outcomes with NCLEX pass rates at Chamberlain of 90% and first-time residency attainment rates at AUC and Ross University School of Medicine of 91% and 92%, respectively. These academic outcomes increase our competitive differentiation and position us well for future growth in enrollment and revenue. We also continued our strong revenue growth in financial services, which was driven not only by sustained double-digit growth in ACAMs, but also strong performance from Becker, continuing the momentum from the third quarter. Finally, we are pleased with the 4.2% increase in total student enrollment in the quarter. Looking back at the recently completed fiscal year, we made significant progress on our strategy to transform Ad Palum into a leading workforce solutions provider. We achieved a number of critical milestones. including completing the divestitures of DeVry University and Carrington College, which allowed us to refocus our three verticals to better support our enterprise growth strategy. We also expanded our portfolio through the strategic acquisition of on-course learning, providing us increased exposure to banking, credit union, mortgage, and insurance markets, and cross-selling expansion opportunities with ACAMS. The repositioning of our portfolio through both M&A and divestitures has allowed us to leverage our strengths streamline our business, and pivot ahead of the market. During our investor day in May, we unveiled our workforce solutions provider strategy, which permits us to serve our markets in a more competitive, responsive, and comprehensive way. We're already seeing the positive impact of this strategy with our employer partners, and I'm excited to further execute on this journey in fiscal 2020. Turning to our operating segments, medical and healthcare, we posted another solid quarter overall. driven by growth in Chamberlain overall student enrollment, as well as through year-over-year increases in certain tuition, housing, and fee revenue across the segment. Operating income margin decreased in the quarter, driven by increased marketing expenses to drive future enrollment growth and a higher level of corporate allocation expense. Overall, enrollments in this segment during the quarter were mixed, with modest growth at Chamberlain and a slight decrease in MADVAPs. At Chamberlain, we saw growth in overall enrollment and revenue during the fourth quarter. In the most recent July enrollment session, which consists almost entirely of online programs, the majority of which is RN to BSN, we saw a 5% decrease in new student enrollment. This continues an ongoing trend as we face challenges to keep the pace of new enrollments aligned with the record number of graduates from this program during the year. As the pool of RNs wishing to pursue a BSN plateau, the market is becoming more competitive. To strengthen Chamberlain's level of competitiveness in RN to BSN, we continue to focus on our superior student outcomes. In addition, we have begun testing and refinements to our pricing model in certain markets to better align our advertised credit hour price with what students are actually paying to attend Chamberlain's RN to BSN program today. Through these efforts, we believe we can attract more new students and bolster top line growth over time. During the fourth quarter, Chamberlain also launched several new initiatives, with students starting in September, including an evening and weekend BSN program at our Chicagoland Addison campus, as well as the accelerated Master of Science in Nursing program. Our San Antonio campus is now operational and recruiting for its first class to start in November 2019, while our enrollment caps at our campuses in St. Louis and New Orleans were increased by 27 and 20 students, respectively. I'm incredibly proud of the fact that besides running the largest nursing program in the country, Chamberlain is currently the largest grantor of BSN degrees to underrepresented minorities in the United States. RUSM delivered strong student outcomes in the spring term as well, achieving a first-time residency attainment rate of 92%. As part of our strategy to address physician diversity in the U.S., We announced a partnership between RUSM and Tuskegee University to increase the number of African American students who enter medical school. This partnership offers qualified Tuskegee students who earn full acceptance into the medical school a scholarship covering full tuition for their first semester. This agreement is in addition to the four agreements we developed previously with historically black colleges and universities to further our commitment to improve diversity among doctors across our country. These partnerships are off to a great start And I'm proud to share that we already have more than 15 students representing all of these HBCUs, starting at Ross University School of Medicine or in our Medical Education Readiness Program, MERP, in Miramar, Florida. Ross University School of Veterinary Medicine experienced healthy revenue growth in the quarter, primarily driven by the year-over-year tuition increases. And we have already seen a record number of applications for the upcoming September terms. which positions us well to maximize our seat capacity going into the fall. At the American University of the Caribbean School of Medicine, operating income during the fourth quarter was negatively impacted by lower clinicals, with the smaller size of classes from the semesters impacted by the 27 hurricane now reaching their clinical semesters. Despite this, AUC has been working hard to manage operating expenses and continues to improve the student experience. We continued our momentum in the financial services segment, driven by strong performance across both ACAMS and Becker. I'm encouraged by the rapid growth we have generated in ACAMS, which has now surpassed 75,000 active members in more than 175 countries. We remain focused on expanding internationally by identifying strategic partnerships that will entrench ACAMS within large organizations across the world. This is especially true in Europe and Asia, where we see a large opportunity to capture value in financial crime prevention. We are also working towards the launch of the Certified Global Sanctions Specialist Certification, which is the first new ACAM certification in 16 years, and anticipate this becoming available to students in early calendar 2020. We've accelerated growth in Becker, continuing to grow CPA test prep and driving revenue growth of 8.4% in this business. I'm confident that we have reinvigorated the Becker brand and product offerings, repositioning the business for long-term growth. We have strengthened our core CPA value proposition, better aligning it with student expectations, and expanded our CPE product offerings. Business-to-business contract awards have continued to gain traction with large corporate partners, allowing Becker to further broaden our presence as a workforce solutions provider. As I mentioned earlier, our acquisition of on-course learning also represents a long-term growth opportunity for the vertical, complementing our current portfolio and giving us broader exposure to banking and compliance credentials. Having closed the acquisition at the beginning of June, we're now intently focused on integrating the business and investing in growth. Finally, as I previously mentioned, we continue to face revenue headwinds in business and law during the quarter, stemming from foreign currency exchange and the current political landscape in Brazil. Total enrollment grew 5.6% in Brazil in the fourth quarter, with cost and pricing pressures remaining unchanged versus the prior year. We remain diligent in our efforts to maintain profitability amid this challenging but stabilized operating environment. and the new leadership team in Brazil has been doing a great job managing the factors within our control. During the fourth quarter, we implemented significant cost savings and were able to do so while maintaining the quality of student outcomes and positive momentum of the team. As we turn our attention to fiscal year 2020, we remain focused on leveraging our strong financial position to accelerate growth by expanding our customer base, product offerings, and markets. We are committed to unlocking value creation opportunities as a workforce solutions provider and aligning our business with our mission and student commitments to drive long-term growth and enhanced profitability. Shortly, Patrick will walk you through our financial expectations for fiscal 2020 as part of his comments. We have maintained our outlook from investor day in May, adjusting only for the acquisition of OCL. While the overall economic outlook for 2020 has become increasingly volatile of late, I would emphasize that our business model and end markets tend to be resistant to economic cyclicality, positioning us well to execute our transformation growth strategy going into fiscal 2020. With that, let me turn the call over to Patrick for a deeper look at our financials for the quarter and outlook for fiscal 2020.