Adtalem Global Education Inc.

Greetings, and welcome to the Ad Telum Global Education Third Quarter Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. The 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. Please note, this conference is being recorded. I will now turn the conference over to our host, Maureen Resack. Vice President, Treasury, and Investor Relations. Thank you. You may begin.

Thank you, and good afternoon. With me today from AdTalent's leadership team are Lisa Wardell, Chairman and Chief Executive Officer, and Mike Randolfi, Senior Vice President and Chief Financial Officer. I'd like to remind you that this conference call will contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to the future performance and financial condition of EdTalum's 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 fiscal year ended June 30, 2019, filed with the SEC on August 28, 2019, and our other filings with the SEC. Any forward-looking statement made by us is based only on information currently available to us. and speaks only as of the date on which it was made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments, or otherwise, except as required by law. During today's call, our commentary will refer to non-GAAP financial measures, which are intended to supplement, though not substitute, our most direct comparable gap measures. Our press release, which contains the gap financial and other quantitative information to be discussed today, as well as reconciliation of gaps to non-gap measures, is available on our website. Please note that all financial comparisons made during today's call are in comparison to the prior year period. unless otherwise stated. It is also important to note that our third quarter results reflect the application of discontinued operations for our former business and law segment as a result of the divestiture of AdTalent 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 third quarter, as well as provide some context for our business in light of the impact of the COVID-19 pandemic. I will then turn the call over to Mike to discuss our financial results before opening the call up for questions. We can all agree that this is an extraordinary crisis driving unprecedented uncertainty in global markets. While I can't predict all of the economic, social, and cultural implications of the crisis, I can tell you why we believe AdTalem is well-positioned to manage through this pandemic. Let me begin by recounting the journey AdTalem has taken in the four years since I have been CEO, as this helps provide context for our readiness for the crisis, the nature of our response, and the relative advantages we have given our legacy of virtual learning and our streamlined portfolio. In 2018, we transferred ownership of DeVry University and Carrington College to focus on serving employer needs in the medical and healthcare and financial services industries. Soon after, it became clear that our Brazil institutions, while driving excellent student outcomes, diluted our industry focus. In October of 2019, we announced the transfer of ownership of AdTal in Brazil, and last month, that transaction was closed, resulting in approximately 500 million of additional cash that allows us maximum optionality during these uncertain times. So, we now serve students and employers only in industries that are in great demand, producing physicians and nurses in healthcare, and elevating the governance, risk, and compliance, and critical finance and financial control capabilities of professionals and institutions in financial services. The world is racing to adopt modalities that AddTalent has used for decades. online learning, including significant faculty interaction, virtual events, webinars, modular at-your-own-pace education, and adaptive learning. Our longstanding history with these capabilities is a competitive differentiator for us in the new normal. I should also remind you that AdTalent has a history of resiliency and successful crisis response, appropriately focused on our top priority, which is the health and safety of our students faculty, customers, and colleagues. When the 2017 hurricanes caused a full displacement and relocation of both medical schools, we were able to continue student academic journeys without any delay in the academic year. And by strategically taking advantage of the crisis, we developed a UK track for AUC and permanently relocated Rossman to a more attractive island nation home in Barbados. strengthening its long-term competitive position. With the benefit of this experience, we were able to quickly react to the onset of the COVID-19 pandemic, shifting to robust online platforms for students and faculty and transitioning to remote work for our employees. In less than a week, we transitioned over 15,000 medical and nursing students that were previously on campus to online platforms, bringing the total number of online students to 40,000 with little disruption Student engagement and satisfaction have been high since this transition, in large part because we have faculty and institutions across our portfolio who have deep experience with virtual modalities and know the difference between just simply shifting to online lectures and actually teaching in a distance learning environment. To date, our enrollment and academic outcomes remain strong, with more than 920 physicians and 850 nurses entering the U.S. and Canadian workforces this year alone, at a time when the need for healthcare professionals has never been greater. In addition, we have moved quickly to adapt our programs to the new normal, which will require more virtual and more flexible interaction. For example, in the medical and healthcare vertical, we initiated online simulations, and in the financial services vertical, we launched CAM certification testing online with over 700 certification candidates for ACAMs scheduled for online exams in the first few weeks. The COVID-19 pandemic is highlighting the ongoing medical professional shortage across the U.S., which ADTALM has worked to address for decades, particularly in low-resource, very urban or very remote areas. The availability of healthcare workers was already stressed by the demands of caring for an aging U.S. population, coupled with the near-term retirement of scores of physicians and nurses. With more than 1 million registered nurses expected to reach retirement age within the next 10 to 15 years in the U.S., there is a need for approximately 200,000 additional new nurses each year through 2028 to fill new positions and to replace those who are retiring. This pandemic is exacerbating these trends and bringing the need for more healthcare professionals into sharp focus as a critical global issue. As the largest provider of healthcare professionals in the United States, it has been our priority to expand access to high quality medical education and deliver highly qualified professionals to the workforce. To further address this supply demand imbalance, last year we launched additional night and weekend BSN programs at Chamberlain University to accommodate additional qualified nursing students and provide class schedules conducive to the demands of adult learners. We also began the development of our hybrid BSN degree utilizing online instruction and in-person intensive learning, and we've officially launched marketing for our September 2020 cohort. Expanding the opportunity for learners to earn a BSN degree will be a crucial step to addressing the nursing shortage. The pandemic has allowed us to both accelerate and expand these additional programs and offerings that we already had in development at Chamberlain University. Despite what we believe are substantial competitive advantages in managing through the crisis, we will not escape the situation unscathed. There will be near-term negative impact on our business performance as a result of the pandemic. There will likely be a continuing impact to clinical weeks until hospital systems are once again able to accommodate students. We value our hospital system partners, and we are working with them to solve the clinical issue in a way that is safe for our students and does not further burden hospitals and staff that are already overwhelmed operationally and financially. Postponement of clinicals is both temporary and solvable. It's an issue that the entire medical education community is facing, along with an incredibly motivated student base that is dedicated to obtaining their degrees and filling positions within the healthcare system as soon as possible. The largest impacts to our financial services segment are twofold. responding to increased budgetary constraints of banking and enterprise customers, and managing cancellations of global conferences. Realizing that the burdens of governance, risk, and compliance for the finance industry will grow despite, and in some cases because of, the crisis, we have worked to quickly adapt our offerings to the needs of our members, customers, and employer partners in this new operating environment. While we recognize that there will be wide macroeconomic effects, such as general dampened consumer confidence, We are well positioned with a focused yet diversified portfolio of healthy businesses across the medical and healthcare and financial services industries poised for long-term growth. Further, our student population and the demographics we serve have the benefit of working towards careers that will be in high demand both during and after the crisis. We are well prepared to meet the potential surge in demand for these skill sets by leveraging existing technology and capabilities to further expand our product and program offerings and to ensure the continued superior student outcomes to an expanded student base. Despite the challenges we faced late in the quarter from the pandemic, we delivered strong third quarter performance with revenues growing roughly 5% and adjusted EPS growing 27%, highlighting that we were well on our way to meeting our financial goals for the full year prior to the crisis. Growth within our medical and healthcare vertical reflected the continued success of our investments in marketing and recruitment, which has been aided by our ability to keep the average cost of student acquisition relatively flat. These efficient investments have led to a new student enrollment growing 11.3% and total student enrollment growing 4.6% across the vertical. Chamberlain's new student enrollment increased at a double-digit rate for both January and March sessions, with total student enrollment growing mid-single digits compared to the prior year. This growth was driven by increased recruiting and marketing, coupled with restructuring of our HDS team, now our Workforce Solutions team, to better serve our hospital system partners and the implementation of an increasingly focused admissions process with an emphasis on proactive outreach from student advisors and improved student experiences from inquiry to enrollment. We continue to deliver strong student outcomes as shown by Chamberlain-graduated over 850 new nurses so far in 2020, and achieving a first-time NCLEX pass rate close to 88% on average in 2019. In addition, we see strong performance in the market across all of Chamberlain's offerings, particularly the pre-licensure BSN, family nurse practitioner, and BMP programs. In addition to growing our enrollment, we are equally focused on our overall mission in serving our global community, especially in the face of the COVID-19 pandemic. As part of this, in April, we kicked off a major support campaign for healthcare providers using the hashtag Care for Caregivers with over 9 million video views to date and website careforcaregivers.com to highlight our heroes, our alumni, and current students making an impact in the fight against COVID-19, as well as what others can do to support these caregivers in their lives. In addition, we announced our partnership with Ascend Learning to offer acute care readiness, a free online course developed for our employer partners who have licensed registered nurses not currently working in acute care settings, but needing instruction and skills to feel comfortable advancing in that setting. We have over 750 enrollees to date. New student enrollment in the medical and veterinary schools was up 3.2%, and total student enrollment was up 1.7%. driven primarily by Ross Vet. Ross Vet enrollment in January 2020 was among the strongest seen in the past seven years, coupled with one of the strongest entrance class GPA rates we've had to date. Brand awareness has continued to grow and we expect to capitalize on the strong rate of inquiries we are seeing for our May and September classes. We also continue to collaborate with strategic partners, evidenced by our partnership with Arkansas State University to drive workforce solutions to veterinary shortages. We have grown our medical and veterinary total enrollment while at the same time generating strong outcomes for our students. AUCM Ross Med showed very strong results, achieving a 91% and 93.5% residency match rate for graduates, respectively. These strong match rates help attract student interest and provide significant competitive advantage. Our ability to provide quality medical education at scale will prove to be a valuable differentiator as we work to fill the incremental demand for medical professionals and increase the number of qualified graduates in the healthcare workforce. It's important to note that our May sessions at all ADTALM healthcare institutions will start online with no disruption and increase services and connection opportunities for students and faculty. The financial services segment showed solid growth during the quarter, with revenue increasing 23%, driven by the addition of on-course learning. We continue to make strategic progress on multiple fronts within this vertical, most notably the appointment of Steve Beard as our group president, in addition to his role as chief operating officer. Steve has played a key role in repositioning AdTalent for its next phase of growth and the execution of its overall enterprise strategy, and he's focused on creating additional synergies and making strategic improvements across the financial services vertical. ACAMS is enhancing its product set to serve our employer partners with a more comprehensive solution set across compliance and risk and broader advisory services, more expansive language and regionalized offerings, and more valuable benchmarking through industry engagement and thought leadership. Our Global Sanctions Certification, CGSS, which we launched in Q2, is now available in over 90 countries and will be available in French and simplified Chinese by Q4. ACANS now has foundation certificate courses in AML in 11 languages and sanctions in five languages to provide our employer partners with the ability to train a broader, frontline group of employees to bolster their first line of defense against financial crime. In addition, we have begun pre-sales for our advanced CAM certification, which allows compliance professionals to expand their specialized knowledge while providing employer partners the ability to retain their key talents. Last quarter, we announced our partnership with MasterCard for a SaaS-based risk assessment tool for their card issuer financial institution customers, and we expect to go live in Q1 of fiscal 2021. More recently, we have entered into a partnership agreement with ING to provide ACAM's training and qualifications to their employees in 40 countries in which ING operates, with several qualifications being offered in nine languages. At less than 2% growth for Q3, ACAMS is falling short of our expectations, even accounting for COVID-19 disruption. But we have put the organizational changes in place, including accelerating the delivery of solutions directly responsive to current market demand that will yield better results post-pandemic and over the long term. Becker has implemented competitive changes within its core accounting business, including subscription packages, targeted marketing efforts, and more strategic pricing. We continue to build our continuing education capabilities and offerings, which have shown initial traction in both the B2C and B2B markets, and which we believe have significant long-term potential. Josh Bronstein was appointed president of OnCourse Learning at a critical juncture in the company's growth. Josh has a wealth of experience in strategically growing market share and expanding offerings to core customers, and he will be instrumental in growing OCL market share within the mortgage education segment. Q3 traction was driven by a combination of OnCourse's training platforms for loan officers, including signing enterprise renewals with major B2B customers such as Quicken Loans, increased content through webinars, a focused effort on government regulation and compliance offerings, and strategic pricing initiatives. AdTalent continues to maintain a strong balance sheet with ample liquidity and flexibility supported by additional cash on hand with the completion of the sale of our Brazil assets. This divestiture demonstrates our team's ability to close a transaction under crisis circumstances and further positions us to execute on our strategy and drive value for our shareholders. While our position on the use of transaction proceeds has always been a three-pronged balance of efficient return of capital to shareholders, prudent investments in our business to accelerate growth, In the near term, we will balance those priorities with the need to preserve liquidity and optionality in this uncertain and complex global environment. Prior to the COVID-19 pandemic, we strongly believed that ad talent had been undervalued, even prior to current valuations, and accordingly, we continued to execute our share repurchase program prior to the onset of the pandemic, which caused us to stop the share repurchase activity on March 12th. We have the liquidity to resume share repurchases when we think the time is right to do so. When we do so, we will be disciplined in our approach, as we have always been, but leaving aside the world economy and the effects on the U.S. equity market, we continue to believe that we are undervalued as a company. In conclusion, I am confident that AdTalent has a fully streamlined portfolio, serving needs in critical industries. I am so proud of the entire AdTalent team for not only their unwavering commitment to our education mission, but for their profound demonstration of our values, teamwork, energy, accountability, community, and heart always, but particularly during this crisis. AdTalent will emerge from this crisis stronger and prepared to outperform with new revenue sources and a more streamlined operation that can capitalize on the inherent strengths of the portfolio. With that, I will now turn the call over to Mike to discuss our financial highlights.

Thank you, Lisa, and good afternoon, everyone. As Lisa mentioned, while COVID-19 has created global disruptions to which we've responded, we believe we are well positioned to weather this and ultimately drive for long-term growth in our business, which will be well supported by underlying demand for healthcare professionals and financial expertise. For the third quarter, COVID-19 had a minimal impact on our financial results. While we expect that COVID-19 will have a more material negative impact on our business in the fourth quarter, it is too early yet to determine the extent of that impact. As Lisa mentioned, the two biggest variables are the ability for graduate level nursing students and medical students to fully complete their clinical rotations, and for financial services to both host conferences, as well as help B2B customers prioritize needed training in the face of budgetary constraints. To help offset potential headwinds created by COVID-19, we are being mindful of costs and specifically making efforts to constrain spending through increasing efficiency and reducing discretionary expenses. As a result of these efforts, and the nature of our portfolio, we ended the third quarter with solid operating income growth supported by our investments in the first half of fiscal year 2020 in both marketing and student recruitment. In addition to these investments, ongoing prudent cost management drove Q3 earnings per share growth of 27%, which was above our expectations. Prior to the disruption from COVID-19, we were well on the path of achieving our full-year revenue and earnings expectations. Providing more detail on the third quarter, we grew revenue 4.9% to $271.5 million. This increase was driven by growth across both segments, including double-digit growth in our financial services segment. Cost of educational services was $118.7 million in the third quarter, a 1.2% decrease. An increase related to the addition of on-course learning was more than offset by increased cost efficiency at our medical and veterinary schools. Student services and administrative expenses were $96.4 million in the third quarter, compared with $90.7 million, a 6.3% increase, driven by $6 million of inorganic costs due to the on-course learning acquisition and approximately $5 million for increased marketing and student recruiting expense to support future enrollment growth. These increases were partially offset by cost efficiency measures. Operating income from continuing operations excluding special items was $56.3 million compared with $47.8 million. net income from continuing operations excluding special items was $43.2 million compared with $37.4 million. And diluted earnings per share from continuing operations excluding special items was $0.81 compared to $0.64 in the prior year. Turning to our segment results. Starting with medical and healthcare, revenue increased 1.7% to $227.3 million. Chamberlain revenue increased 5.4% as new student enrollment increased 11.2 and 12.7% in the January and March sessions, respectively, while total student enrollment increased 4.6 and 5.1% in the January and March sessions, respectively. It is important to note that our new student enrollment growth in both January and March was aided by double digit year over year growth in our RN to BSN program. Revenue in the third quarter for the medical and veterinary schools decreased 3.3% from the prior year, with the majority of that impact driven by COVID-19 and the resulting reduced clinical weeks in March. Excluding special items, the medical and healthcare segment operating income for the third quarter increased 8.7% to $57.6 million. The increase in segment operating income is the result of strong Chamberlain enrollment trends and efforts to increase efficiency and reduce travel and discretionary spend partially offset by corporate costs that were previously allocated to our former business and law segments. Turning now to our financial services segment, third quarter revenue increased 22.8% to $44.1 million. Third quarter revenue included $8.5 million from the on-course learning acquisition, more than offsetting the $1.4 million decrease in revenue from the sale of Becker's health care assets. Operating income in the third quarter declined 17.6%, to $4.2 million. The decrease in operating income is the result of marketing investments and corporate costs that were previously allocated to our former business and law segment. As we turn to our balance sheet and liquidity, a few points to note. First, AdTalum generated over $100 million of free cash flow in the third quarter. Second, AdTalum's overall level of leverage is fairly modest. And third, we had a significant cash balance as of March 31st prior to the closing of AdTal in Brazil, which provides additional liquidity. Net cash provided by continuing operations for the third quarter totaled $116 million, a 10.3% increase compared with the prior year. Our capital expenditures for the third quarter totaled $11.6 million. As a result, our free cash flow in the third quarter was $104.4 million, as we defined free cash flow to be cash provided by continuing operations, less capital expenditures. On a trailing 12-month basis, we generated free cash flow of $125.7 million. We closed the third quarter with cash and cash equivalents of $167.8 million and and outstanding bank borrowings of $455 million, which includes $160 million drawn on our revolver. Our strong balance sheet ensures we have ample liquidity to successfully operate and continue to execute on our strategic priorities in a challenging external environment. Prior to suspension of our share repurchase program on March 12th due to the COVID-19 crisis, we repurchased approximately 1.2 million shares at an average price of $31.67 per share for a total of $36.9 million during the third quarter. As Lisa mentioned, on April 24, 2020, the divestiture of our Brazil assets was completed, with $424 million in net cash proceeds further supporting our balance sheet and bolstering liquidity. In addition, about $73 million of cash previously residing in discontinued operations is now available to us. As a reminder, our $168 million in cash as of March 31st does not include these additional proceeds with the sale of AddTalent Brazil or the cash residing in discontinued operations. In addition, As of March 31st, we had $72 million undrawn on our revolving credit facility. Suffice it to say, our liquidity position is solid, with over a half a billion dollars of cash on hand in addition to the ability to draw on our revolver. During the third quarter, we recorded a pre-tax unrealized gain of $111.8 million on the deal contingent hedge arrangement entered into the in connection with the sale of the Brazil assets, as the Brazilian real has depreciated relative to the US dollar. Preserving financial flexibility is a critical priority. However, investing in our future to drive long-term growth and fulfilling the needs of our students and customers remains equally important. Moving to our view on the remainder of the fiscal year. During these uncertain times, we recognize that there is a range of potential outcomes as we enter the fourth quarter. And while we are confident in our ability to exit this period of disruption in a position of strength, we are not providing full-year guidance and withdraw any previously issued guidance. We look forward to providing more context regarding the landscape and trends we are seeing on our next earnings call. With that, I will now turn the call over to the operator for Q&A.

Thank you. At this time, we will conduct our 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 that your line is in the question queue. You may press star followed by the number 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. Our first question comes from Henry Tian with BMO. Please state your question.

Hey, good afternoon, everyone. Yeah, understanding that the uncertainty preventing any kind of guidance or estimates, I was wondering if you could share perhaps maybe trends in April with respect to the different businesses, if that's something you could share.

Sure. Thanks for the question. Starting with medical health care, obviously we talked about January and March enrollments. As we look across those institutions for May, our new student enrollment trends are in line with our expectations pre-COVID, likely aided by the fact that our May sessions at all of the institutions have already announced that they'll start online. We have no disruption in terms of and the students who have gone to online who were previously on campus, Chamberlain as an example, we've had good success and good feedback from those programs as well as the medical schools. So from an enrollment perspective, May is right in line with our prior expectations. In terms of med health, I may as well just address it here. The uncertainty rate that we mentioned is really around clinicals. Let me break that into three pieces. What our priority is, the potential impact in terms of the bookends there, and then what our mitigation plan is. If you first think about it in terms of our priority, we have to help, it's our responsibility to keep our students on track for their clinical weeks so that they don't have any delay in their academic journey. Those where we have not had any such as RothBet, those clinicals are in place and moving forward, and then Chamberlain on the graduate program, we're able to use telehealth problems, et cetera. Where we do obviously need physical clinicals, as does the rest of the medical education is in the medical schools, our clinical revenue there is about 20% of the vertical revenue. across the two schools, but obviously that is broken into core and elective clinicals, and in this case, the elective clinicals, we've been able to transition quite successfully through telehealth, through virtual clinicals, et cetera. And so our mitigation plan, the third piece, is really around how we get students back into those clinicals. for their core programs. From our perspective, we've got a couple of things that we are continuing to work on that are working quite well. At AUC, we have a UK track that has UK elective hospital systems with current capacity that we are hoping will involve the US clinical capacity for AUC, as well as expand AUC and Ross core clinical capacity. And then just in terms of online offerings, as I said, for the elective weeks, and then there's some policy modifications both for us as well as for those state and federal requirements to just give greater optionality to the students. So that would be the biggest challenge in terms of May and the Q4. But in terms of new enrollments, we are on track. In financial services, we mentioned basically there's the physical conferences, primarily ACAMS. We do then also have the SOL, for example, in ACAMS where we provide the certification testing for CAMS. We've been able to transition that online. And we have lots of students, almost 1,000 students who are signed up to continue and get their certification. Whereas in Becker, the CPA exam, by way of exam, don't control and they do not yet have the testing centers open. But we are following that closely and obviously in conversations with those industry and associations that do hold that testing. So we... anticipate more impact in Q4, both from a clinical perspective as well as just budget challenges for some of the financial services side. As we mentioned, certainly we've been able to transition a lot of our certification that wasn't online to online. as well as provide virtual and hybrid conferencing as we've done for some time. So long answer, but I think that probably answers quite a few questions in the queue as we think about our greatest challenges going into Q4 and Q1.

Got it. Okay, yeah, great. Thanks for the color. And just real quick on the QETAM claims, just in the take ages now, what's sort of the exposure for the company in that respect?

I'm sorry, the QTAM? I'm sorry, could you repeat the question?

Yeah, it looks like there was a press release about the unsealing of two, maybe I'm not pronouncing it right, QTAMs. Oh, QTAMs, all right. Yeah. Yeah, they're in the...

Yeah, they're probably in the queue disclosures. I apologize. I could not hear what you were saying. We don't see any additional concerns or risk associated with that in terms of our litigation update at all.

Okay. Got it. Okay, great. Yeah, that's all I got.

You guys are all good.

Yeah, stay safe, Henry.

Thanks. Our next question comes from Jeff Mueller with Baird. Please state your question.

Good evening. A couple of clarifying questions from your answer there, Lisa, the first one. So when you said that medical and healthcare is with your expectations in May, are you saying new enrollment trends on plan for MedVet and Chamberlain in May? Yes.

Yes, so, and sorry, I only really talked about MedVet, I guess, at that point. Yes, we are at Chamberlain. Our pre-licensure new enrollment is very strong, and we're seeing year-over-year growth, and we're seeing those trends move into the May session, and as you know, obviously, July is online. We're seeing some pressure, understandably, on RN to BSN, right, as those nurses have a few things to do, but certainly in terms of, you know, it's in line with our forecast, a bit down from prior year, but that's, again, expected as we're trying to support those nurses on the front line. FNP, DNP, our graduate program, are on track right now for May enrollment.

That's helpful. And then you hit on it in the answer in terms of physical in-person clinicals for medical and seeing some disruption there. But on the nursing side, is that also disruptive to you, or are you able to accommodate fully with their digital experiences or telehealth or other options?

Sure, great question. So pre-licensure on completely virtual online and getting good in terms of the clinical experiences and getting really good feedback there from the students. So we have that one sold until obviously there's an ability to go back in. Our FMP, our family nurse practitioner, would be where we obviously need that direct patient care. We have solved, I would say, probably about 25% or so, about a quarter, through telehealth, telemedicine. I see that growing as, obviously, we're all experiencing that. Telehealth is just becoming much more utilized and popular as folks just can't wait, you know, for elective and other services. non-COVID-19 things. And so we're actually seeing good traction there. And then finally, we're starting to have the conversations with the hospital systems. I mean, they want those students back in there too because they need the help. And so our focus there is obviously on making sure that there's all the PPE, that we've got all the safety equipment, controls, et cetera. But that one on the Chamberlain side, we don't – we see as having my – I'm sure the president of Chamberlain would not say easy, but easier solutions to get those clinicals back on track. So not as much impact at all.

Okay. And then what's the campus – type revenue for the Caribbean universities, I guess, non-tuition revenue. Is it at all meaningful for you? I didn't hear you call that out as a headwind.

Yeah, so only the RASMED housing, really, that's affected with the students transitioning to online, that's somewhere between $3 and $4 million dollars. That is a headwind for us, obviously, until that campus opens, which will be based on, obviously, the trajectory of the crisis.

Okay. Thank you.

Yes, you're welcome.

Thank you. Just a reminder, to ask a question, press star 1. Our next question comes from Greg Pendy with Sedoti. Please state your question.

Hey, guys. Thanks for taking my question. I think earlier in the call you mentioned maybe this quarter had about a $5 million bump up in marketing. I'm not 100% sure, but could you just kind of remind us, as this year has been a step up in marketing to kind of improve the value message of the Chamberlain programs, how much year-to-date was a step up in marketing, and was there a learning process in some of this, you know, something that's going to be the new normal as we think about next year, or was this just kind of a one-time event? Thanks.

Yeah, I'll start and then Mike jump in. So we're certainly continuing to make those marketing investments because we're actually seeing really good results from them. So our Step Forward program, as an example, has really driven some good campus or pre-licensure enrollments. As you know, we had – not only allocated marketing, but also shifted our marketing expense and really focused in specific channels for our marketing for RN to BSN. One of the, I guess, negatives of the crisis from a business perspective for us is we have been seeing really good growth and traction on that RN to BSN, and for obvious reasons, that's going to be the most challenged area of nursing in general. So we expect to continue to drive those marketing dollars, but we're certainly seeing a lot more efficiency as we've now sort of rounded out the pricing strategies that we put in place, I guess probably Q1 of this year.

Yeah, and to tag on, I think you're asking approximately how much we're spending and what the trend was. We've been spending approximately $5 million more per quarter this year than we did last year. And, you know, a disproportionate amount, not all, but a disproportionate amount has been to support Chamberlain. And obviously, I mean, when you look at the January enrollment figures, the March enrollment figures, you really see that bearing fruit. You know, we're also investing as well in the Fin Services space. on the Becker side to support continuing education and the potentially growing business over there over time, as well as ACAM. So overall, we're pleased with the investments we're making, and we're certainly seeing good traction on those investments.

That's very helpful. Thanks a lot.

Thank you. Ladies and gentlemen, there are no further questions at this time. I'll turn it back to Maureen Resack for closing remarks. Actually, one moment. We do have one question that just came up. That question comes from Jeff Mueller with Baird. Please state your question.

Yeah, thanks for taking the follow-up. So I understand you have the mitigating steps for the person clinical requirement. What happens in the instances where you're not able to mitigate? Does it delay their education? Are they, I guess I just don't, I understand that it's a revenue hit to you. Actually, you can just try and understand what the implication is ultimately on the student and at what point it comes to a head.

Yeah, sure. And really, that last part of the question is the question at what point it comes to a head, right? So as an example, in And it also depends on how this pandemic plays out. So as an example, those students who had, you know, I don't know, I think it was two to four weeks left on their clinicals, they were able to, from an accreditation and a regulator standpoint, obviously we don't make those decisions. they were able to graduate and take their match places, go into the match, even though they didn't have those weeks. That decision was made so those physicians of which 920 of them graduated from Ross and AUC are now in the system. The question then is, as you know, many people are contemplating is there going to be another wave in the fall, et cetera, et cetera. What will the decisions be that are going to be made by the accrediting bodies at that time? In the meantime, if there are not exceptions made in terms of policies to allow them to graduate short. And of course, this is real education that they need to get. We need to mitigate. From our perspective, we really have a couple of months until we get to a point that we can't then channel into electives, you know, shift to electives first, don't have telehealth, et cetera. And we're already seeing in several of the states where we are preparing to have those students back. If we're on this trajectory that we're currently on with the three stages of the containment and the recovery and the new normal, at least here in the US and Canada, then we will be able to mitigate and have them graduate on time. If not, and there's something crisis-related not necessarily controllable for us, then we would have to re-look at that. But my guess is that LCME and others would also then look at what is missing from their academic training and what they could do to help those students stay on track because it's really for that 2021 residency match in March.

Okay. Helpful. And then... I heard you that you're not satisfied with the ACAM's revenue growth figure. But I guess I'm not totally clear on the underlying drivers and what specifically they're changing to improve it.

Yeah. Okay. So let me split that one into sort of – Pre-COVID execution and then post-COVID. So pre-COVID, and we've talked about this a couple of times, but we've done a couple of things. One, we have made a talent change at the leadership level, and so we have a new group president in Steve Beard, who is not new to ACAM's orphan services because he's been the chief operating officer for some time. So in doing a deep dive over the last few months, we have further identified some things that we can put in place and, in fact, are putting in place. So we are seeing traction, but from a timing perspective, later than we would have liked. So as an example, we had a whole sales team structure shift. Those folks were supposed to be in and on the ground and working. driving sales by December. They actually started in February right before the crisis hit. And we're seeing traction there. We have product and program offering changes that we need to do across ACAMs. To sort of put it in one easy sentence, we need way more foundational courses. So we've got the CAM certification, but we need those courses. And we're being told by our customers that they want courses that are shorter and more introductory. so that they can train many, many more, you know, thousands versus hundreds of their employees. As evidenced by the fact that we just closed the ING partnership, which I have to say the team closed during the height of COVID in Europe, so kudos to them. But that's a sort of significant multi-year, and it includes a broader solution set. So those types of things. are in place and execution that frankly, we started before the crisis, we will continue and we know we need to do in order to see this kind of growth trajectory. From a COVID-19 perspective, it's really around temporal shifts. So the sort of intellectually helpful thing about and actually operationally helpful thing about ACAMS is that we have Asia, European and US businesses as you know, Asia now, while it did not have the growth that we had planned for this quarter, is now showing this traction as they come out of moving through. They moved, obviously, through the containment phase way before the U.S. and Europe, and we're now seeing some of those deals that we've been working on, and we're expecting in Q3 and Q4. So I expect that that will be temporal and shift through Asia, Europe, and the U.S. Not that we're not doing – business as usual, but it's sort of business as new normal, new usual, and obviously all remote in ACAM. So I think there's a bit of that, but I absolutely would not sit on this call and say that there are not execution things that we are driving very, very hard because we just see so much opportunity there in terms of growth for ACAM.

Okay. Thank you. Thank you. I'll now turn it back to Maureen Resack for closing remarks.

Thank you. Thank you, everyone, for joining us today. As always, if you have follow-up questions, please contact me directly.

Thank you. This concludes today's conference. I'll pardon you at this connect. Have a great evening.