Adtalem Global Education Inc.

Greetings and welcome to the Ad Telum first quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. John Kristof, Vice President of Investor Relations. Thank you. You may begin.

Thank you, and good afternoon. With me today from ADTALM's leadership team are Lisa Wardell, Chairman and CEO, and Mike Randolphie, Senior Vice President and CFO. I'd like to remind you that this conference call will contain forward-looking statements within the meaning of the safe harbor for 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 risk 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 fiscal year ended June 30, 2019, filed with the SEC on August 28, 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 is 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, our commentary will refer to non-GAAP financial measures, which are intended to supplement, though not substitute, for our most direct comparable GAAP measures. Our press release, which contains the GAAP financial and other quantitative information to be discussed today, as well as a reconciliation of non-GAAP to GAAP measures, is available on our website. It is also important to note that our first quarter results and guidance reflect the application of discontinued operations for our business and law segment as a result of the recently announced divestiture of AdTal in Brazil, which made up the entire segment. 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. On today's call, I will discuss the highlights from our first quarter before turning to our strategic focus for fiscal year 2020. I will then turn the call over to Mike to discuss our financial results before we open the line up to your questions. Let me first begin by welcoming Mike. Mike is an accomplished CFO with significant leadership experience in the consumer services industry, and we are delighted that he has joined our team as we continue to execute on our workforce solution strategy to serve our students and employer partners. We had a busy start to fiscal year 2020. Last week, we announced the strategic divestiture of our Brazil assets, which include IBIMEC, Damasio, and Wyden. We reached an agreement to sell the assets to edukes the second largest education company in Brazil, which operates various universities, colleges, and distance learning centers. As a highly capable education provider, EDUCS has both the scale and resources to take these institutions to the next level and continue the highest academic quality for our students and partners. This transaction, valued at roughly $465 million, unlocked significant shareholder value as we were able to sell the business for 10 times EBITDA compared with AdTalum's current valuation of approximately seven and a half times EBITDA. Strategically, it better aligns our portfolio, allows us to address the global workforce skills gap to serve our markets in a more competitive and comprehensive way, and provides another meaningful milestone in our transformation into a leading workforce solutions provider. This divestiture also streamlines our enterprise, significantly reduces portfolio risk, and advances exciting opportunities for growth and innovation in both our medical and healthcare and financial services verticals. On that note, during the first quarter, we capitalized on healthy demand in our medical and healthcare and financial services verticals to deliver 7.5% revenue growth. However, we experienced declines in operating income and EPS in the quarter as we continued to increase our investments in marketing and student recruitment to drive future growth in enrollments and revenue. In addition, we encountered some one-time transitory costs in the quarter, which negatively impacted year-over-year comparisons. Mike will walk through these costs in more detail during his comments. Overall, we're pleased with our top-line growth in the quarter, and we believe our stepped-up investments in marketing, along with increased corporate cost discipline, position us well to deliver on our expectations for the full year. As such, we are reaffirming our revenue and earnings guidance for fiscal 2020. Now, let me walk you through the highlights of each of our segments. We posted another solid quarter overall in medical and healthcare, driven by growth in our Chamberlain on-site BSN and graduate programs, as well as a year-over-year increase in housing revenue from our Ross University School of Medicine campus in Barbados. Chamberlain saw increases in both revenue and enrollments for the quarter. The on-campus BSN program experienced high single-digit enrollment growth as we enrolled our highest September class ever with nearly 2,200 students. We also generated double-digit enrollment growth in some of our graduate programs, including the Doctor of Nursing Practice and the Master of Public Health. In addition, in September, we accepted our first class in Master of Social Work. The Nevada Board of Nursing recently approved an increase in the enrollment cap for Chamberlain's Las Vegas campus from 400 students to 600 students. and Chamberlain's new San Antonio campus opened and began teaching students just yesterday. As mentioned during our fourth quarter call, we are focused on keeping up the pace of new enrollments with a record number of graduations for our RN to BSN program in a very competitive environment. We're taking strategic actions to increase Chamberlain's level of competitiveness by better aligning our advertised pricing with what students actually pay in order to capture new students and bolster top-line growth. To date, these pricing initiatives have been rolled out across 21 states, and we're beginning to see some early positive traction in this initiative in its early stages. We are also diligently working on developing new educational partnerships with healthcare institutions, as well as further expanding the ones we've already established. One partnership we recently expanded is with the Cleveland Clinic in Florida. Our existing partnership, which includes some of Chamberlain's MSN and DNP clinical rotations, was recently expanded to include Ross University School of Medicine. All Ross students will now complete their first clinical clerkship, Internal Medicine Foundations, at the Cleveland Clinic. Through hands-on education, the physician-supervised clinical clerkship prepares RUSM students for their subsequent clinical rotations in a small group learning environment that lays the foundation for them to be residents ready. At Ross University School of Medicine, we continue to drive quality student outcomes at high benchmarks, achieving a first-time USMLE test pass rate average of 94% and a 92% first-time residency achievement rate. In addition, we have further expanded our institutional partnerships with Ross University School of Medicine with the recent addition of CSU Dominguez Hills and St. Peter's University, both notable Hispanic-serving institutions as a part of our continued effort to address physician diversity in the U.S. These mark the fifth and sixth partnerships with either an HBCU or HSI, respectively, that we have announced this year, and we saw our first enrolled students from these partnerships in the September class. Ross University School of Veterinary Medicine enrolled its largest fall class in more than seven years in September, and further strengthened student outcomes during the first quarter, with the average NAVLE score achieved by our students having now reached 88% of school records. We also began a new partnership with Ross Vet and Lincoln Memorial University, giving students a broader range of clinical options across a variety of locations. And we're expanding our partnerships into campuses in the UK, including Glasgow and Bristol, to provide new opportunities for students seeking global experience. At the American University of the Caribbean School of Medicine, we further develop relationships with key partners, including the University of Central Lancashire, or UCLan, in the UK, as we enrolled our first class in a new partnership where students can pursue a degree in international medical sciences from UCLan's Preston, England campus, followed by pursuing an MD degree from AUC in St. Martin. In addition, AUC received approval for an affiliation with the World Association for Disaster and Emergency Medicine. We also expanded our relationship with the Caribbean Disaster Emergency Management Agency, which has agreed to participate in our upcoming 11th Annual Caribbean Conference in March. We are also excited to share that Dr. Heidi Chumley, Executive Dean of AUC, was recently honored with a seat on the Hospital Supervisory Council in St. Martin. The financial services segment delivered strong double-digit growth in the first quarter, driven by robust growth in ACAMs and the addition of on-course learning. Becker saw the successful launch of its new website and e-commerce platform during the first quarter, which has begun to gain significant traction, better aligning academic support with learner needs and improving the overall student experience. Traffic to the Becker website is up nicely, and more importantly, our paid media conversion rate is up 36%. and a social media conversion rate increased 117%. Additionally, Becker has renewed over 70% of its large enterprise contracts and expects to renew the remainder prior to calendar year end. ACAMS had a particularly strong quarter with a 15% year-over-year increase in membership to more than 75,000 globally. Revenue growth was even stronger, driven by the successful Las Vegas conference, which shifted to the first quarter this year versus the second quarter last year. In addition to record attendance at the event, we experienced a sizable increase in sponsors for the conference this year, reflecting the strong demand for the content delivered at our conferences. Earlier this month, ACAMS also launched training packages for its first new certification in 16 years, the Certified Global Sanctions Specialist, and we are excited about the growth potential for this new offering. Finally, the strategic partnership between Becker, ACAMS, and Northeastern University launched its first offering, a certificate course in AI for Financial Services, bringing on several major corporate customers which have adopted the course offerings internally. As we advance into the new fiscal year, we are highly focused on driving growth across the business, which includes increased investments in our strategic initiatives while maintaining a disciplined approach to managing our costs. And better aligning our portfolio with our strategy, we believe, will drive substantial long-term shareholder value. Evolving our workforce solution provider offerings allows us to expand our payer base beyond federal funding and ensures continued excellence in our cohort default rates, all of which are well below comparable rates for for-profit and nonprofit institutions alike. Our strategy also demonstrates the return on investment of our education offerings as we gain greater share of wallet from our employer customers. I am encouraged by the progress we made in the first quarter and believe we have a number of opportunities ahead of us as we progress our transformation into a leading workforce solution provider. With that, let me turn the call over to Mike for a deeper look at our financials.