Adtalem Global Education Inc.

Hello, and welcome to the Adtelem Global Education first quarter fiscal year 2021 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Maureen Resack, Vice President, Treasury and Investor Relations. Ms. Resak, please go ahead.

Thank you. With me today from ADTELM's leadership team are Lisa Wardell, Chairman and Chief Executive Officer, Mike Randolphi, Senior Vice President and Chief Financial Officer, and Steven Beard, Chief Operating Officer. 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 ad tellem global education that involve risks and uncertainties. Actual results may differ materially from those projected or implied by these forward-looking statements. Potential risks could cause results to differ are described more fully in Item 1A, Risk Factors, of our most recent annual report on Form 10-K, filed with the SEC on August 18, 2020, and our other filings with the SEC. Any forward-looking statement made by us is based only on the 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 verbal, 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 GAAP measures. as reconciliation of GAAP to non-GAAP measures is available on our website. Please note that all financial results and comparisons made during today's call are on a continuing operations basis, exclude special items, and are in comparison to the prior year period unless otherwise stated. Telephone and webcast And with that, I'll now turn the call over to Lisa.

Thank you for joining us on our call today. I will begin by discussing the highlights from our first quarter before turning to our performance in our business segments and our strategic outlook, and we'll provide an update on our announcement to acquire Walden University. I will then turn the call over to Mike to discuss our financial results before we open up the line for questions. We entered fiscal 2021 with significant momentum, delivering exceptional results in the quarter with revenue growth of 5.4% and EPS growth of nearly 130% compared to the prior year. A key highlight of our results is our double-digit new and total student enrollment growth, driven by double-digit growth at Chamberlain and mid-single-digit enrollment growth within our medical and veterinary schools. Further, we saw solid performance in our financial services vertical with mid-single-digit revenue growth and a doubling of operating income led by strength in on-course learning. The results of our focus on strong student outcomes, strategic marketing investments, new product offerings, and operational execution demonstrate that our workforce solution strategy that we rolled out at our 2019 Investor Day is working. While clearly there were disruptions throughout our business from COVID-19, our teams pivoted to leverage our online and virtual technology capabilities and adjust offerings for our students, customers, and employer partners. which helped mitigate the negative impact and allowed us to generate strong results this quarter. Turning to our agreement to acquire Walden University, which we announced in September. As you may have seen in our 10Q filing, we provided an update on the acquisition. On September 16th, five days after signing the agreement, Laurier disclosed to us the receipt of an inquiry from the U.S. Department of Justice regarding the content and cost of Walden's Master of Science in Nursing program and the availability of clinical site placements for this program. We have exercised our rights under the purchase agreement and launched our own investigation into the allegations, which we intend to complete prior to any closing of the transaction. As you know, we take these matters extremely seriously, and we're committed to doing what's right for our company, our students, and academic institutions, and our shareholders. We have experience with these types of matters, Should our investigation into the Walden matter substantiate the allegations contained in the DOJ inquiry, we will pursue all options available to us to protect the interests of our stakeholders. In the meantime, we continue to believe in the strategic and financial merits of the acquisition, and we're continuing to work to satisfy the closing conditions of the purchase agreement and ensure our ability to fully realize the synergies we identified when we announced the transaction. Luria indicated in their 10-Q filing earlier today that Walden University had strong results and enrollment growth this past quarter. With regard to our legacy institutions, as noted, our strategic refinements and investments in new program offerings and marketing are generating the returns we predicted when we made the investments in previous quarters. Our continued focus on driving superior academic outcomes for learners is evidenced by recent data published by the Department of Education, which shows that from fiscal year 2017, Our talent institutions had a combined three-year cohort default rate of 3.1%, which is well below the combined rate for private for-profit schools of 14.7%, and is less than half of the rate for private not-for-profit schools of 6.7%. Strong academic outcomes are critical in ensuring our students realize their professional ambitions and that taxpayers realize the superior return on investment for taxpayers' funding of Title IV funds. With a calendar year 2020 first-time NCLEX pass rate of 92% for Chamberlain through June 30th, a 2018 to 2019 first-time NAVLE pass rate of 88% at Ross Veterinary Medicine, and a 95-plus first-time residency match rate at Ross Med, and a 92% first-time residency match rate at AUC for the 2019-2020 graduates, our students are well-positioned to be successful in their professions. While there has been a chronic shortage of healthcare professionals for some time, the burdens of that shortage became even more evident during the pandemic. We are addressing this important need with the over 2,700 newly minted Bachelor of Science nurses and over 800 physicians graduating from our institutions this past year. Turning to our exceptional first quarter results, We delivered revenue of $268 million and EPS of $0.78, supported by strong growth in both verticals. In our medical and healthcare segment, we are working to fill the supply-domain gap for healthcare professionals by getting our students back to in-person clinical experiences. As of today, as a result of our strong institutional relationships, I would note that across our medical schools, in-person clinicals are back at over 90% of our sites. At Chamberlain, we focused on strengthening student outcomes, leadership capacity, and our brand health over the past several years, and those initiatives are producing the results we're seeing today. Demand for our offerings has increased, with this quarter representing the largest enrollment in Chamberlain University's history. During the September session, new student enrollment increased 13%, while total student enrollment increased almost 12%. I would note that this is the fifth consecutive session of record-setting new student starts at Chamberlain University. The strength in Chamberlain's results was driven by our brand value proposition and continued focus on student outcomes across the portfolio. On-campus contributions to growth in the quarter included the San Antonio campus, which opened in October last year, cap increases at the Las Vegas and Troy, Michigan campuses, increased mid-session starts, and the expansion of our evening and weekend programs that were launched in September of 2019. However, over 50% of the growth came from existing programs at nearly all of our campuses. It is important to note that 16 of our 22 campuses do not have caps on enrollment. Online contributions to growth were driven by increases in our graduate programs, partially offset by declines in our RN to BSN program, understandable given that frontline workers are challenged with the work demands of the pandemic. Our students' academic success speaks to the strength of our programs with calendar year 2020 first-time NCLEX pass rates of 92% through June 30th, in line with the national average and FMP overall pass rates of 90%. We are seeing our students continuing with their studies despite the challenges this pandemic has presented. In fact, over the last 12 months, over 13,500 students have earned a degree from Chamberlain. Further, advances in telehealth have accelerated as person-to-person interactions have been universally limited. We expect demand for telehealth services to remain elevated over the long term. As such, we're focused on further developing our existing capabilities in this space to ensure the continued success of our students in a post-pandemic environment. We continue to strengthen our virtual healthcare curriculum at Chamberlain, as well as at our medical schools. In summary, Chamberlain graduates more individuals with nursing degrees than any other school in the U.S. Chamberlain has strong academic outcomes, an experienced leadership team, a recognized brand, and a solid digital marketing position. This positions Chamberlain well to both grow enrollment and deliver strong operating margins, whether through our on-site campuses or our online programs. It's clear that the strengths of Chamberlain, coupled with strategic investments in marketing and brand awareness over the last year and a half, have resulted in Chamberlain being the first choice for many students. Our medical schools also achieved strong enrollment growth during the quarter. In the September session, AUC generated double-digit new student growth, and Rothman grew more new student enrollment in the high single digits, which reflects strong academic outcomes, investments in leadership talent, and refinements to marketing and recruiting that leverage the strengths of our brands and academic outcomes. As many of you will recall, in 2017, the impact of hurricanes Irma and Maria caused severe disruptions to both RosMed and AUC. Since prospective students select their medical school about a year prior to attending, this impacted new student enrollment growth for some time. We have focused our efforts over the last year on continuing to enhance the student experience and academic support as well as refining our marketing and recruitment to new students, which is now driving higher new student enrollment. At this point, I'm pleased to note that we have put the hurricane impact behind us. Rothman continued to drive strong student results with a first-time residency match rate of 95% and a USMLE Step 1 first-time pass rate of 97% in 2019. AUC has maintained a solid first-time residency match rate of 92%, and USMLE Step 1 pass rates of 94%. These outcomes are critical, as USMLE performance and residency match rates are two determinants for student choice of medical school attendance. AUC and Rosamond are uniquely positioned to address the physician shortage across the nation, as their three annual enrollment cycles create additional opportunities for students to matriculate at more frequent intervals. This enables us to drive qualified graduates into the workforce throughout the year. At the beginning of the pandemic, more than 900 students and graduates attained residency positions in the United States and Canada, with more than half already graduated and therefore immediately able to contribute to the fight against COVID-19. We have also been successful in leveraging our strong clinical relationships to ensure that our students will be able to complete all of the clinical experiences that are needed to participate in the residency match process. As a result, since June, we have had over 2,300 medical students engaged in clinical training online and in person across our network of clinical sites. In addition to filling nursing and physician workforce shortages, AppTalent is committed to continuing to increase diversity in the healthcare workforce. Since September 2018, we have enrolled over 580 HBCU and HSI graduates in our medical school programs. But to further strengthen that pipeline, beginning in fiscal year 2019, RossMed partnered with several minority serving institutions to create a prescriptive path to medical training for their graduates. This increases opportunities for aspiring medical students to pursue careers in the field, while helping to improve the participation of physicians of color, especially in primary care medicine. The initiative was expanded further in fiscal year 2020, and as of September 30th, 2020, Ross Med had a total of 10 historically black colleges and universities and Hispanic-serving institution partners, relationships that we are now working to extend to AUC. Ross Med had a strong quarter, due in part to the fact that the progression of students has been minimally impacted by the pandemic, and students have been able to successfully move forward to complete required clinical semesters without disruption. RASVET's strong relationship with the island nation of St. Kitts and Nevis has resulted in the university being able to safely bring designated cohorts of students back to the island to complete clinical and lab courses at our facilities. Demand for veterinary professionals has surged as many people nationwide are working from home and spending more time with their pets. This has exacerbated an existing veterinarian shortage and underscores why it's even more critical to supply qualified veterinarians to the workforce. Based on these results and operational improvements, we expect growth of our medical school enrollment to continue. Turning to financial services, we continue to invest in our infrastructure and processes to position the vertical for long-term growth. ACAMS held a virtual three-day Las Vegas conference that began on September 29th and attracted over 1,500 paid attendees. Through the success of this conference, we see a strong opportunity to launch new global programs including multilingual offerings in areas where we might have previously been limited due to the constraints of in-person conferences. Further, these conferences serve as an important opportunity for CAMS certificate holders to earn continuing education credits in a virtual environment without disruption to their certification. We have focused on attracting proven talent to the ACAMS organization. In addition to Dr. Justine Walker, who joined our team earlier this year as ACAM's head of global sanctions and risk, we hired David Carl, vice president of global sales at ACAM. David comes with almost 15 years of experience leading international sales organizations in the financial services sector, including digital banking, payment services and fraud, as well as money transfer and remittance service sectors. During the first quarter, ACAMS rolled out a web-based compliance training program for Dutch banking group ING in partnership with Elephant Bank. ING, which has a presence in over 40 countries serving over 38 million customers, places great emphasis on compliance, know your customer, and enhanced due diligence training. Additionally, other Dutch banks have cohorts going through a similar training program, and the initial feedback has been very positive. As a result, we believe we have developed a best-in-class product for training frontline employees that can be replicated and rolled out for other employer partners. Furthermore, ACAMS recently has been awarded contracts by the U.S. Embassy in Panama and the European Bank of Reconstruction and Development to deliver training to government officials on anti-money laundering. In addition, we are in the process of developing and launching a number of products aimed at countries that are or will be going through mutual evaluations. a peer review performed by the Financial Action Task Force, whereby the country is provided an in-depth analysis of its system for preventing criminal abuse and its financial system. We believe this is a market where we have the expertise and right to win. As we have discussed previously, we continue to raise awareness around the global issue of human trafficking. FAST, Finance Against Slavery and Trafficking, together with ACANS, launched a new modern-day Slavery and Human Trafficking Prevention Certificate. This is the first of its kind certificate, which has been very successful with over 4,000 professionals from over 120 countries enrolled in the course as of the end of the first quarter. At Becker, approximately 90% of testing centers are now open and operating near capacity, resulting in a substantial recovery from Q4 to Q1. Despite the impacts of COVID-19, we captured growth within Becker's B2C channels. which largely offset declines in Becker's B2B channel. The growth in B2C reflects investments that we previously made in improving our e-commerce and digital marketing capabilities, while we believe the declines in the B2B channel reflect delayed and deferred hiring at accounting firms. We continue to innovate on how we bundle, position, price, and promote each of Becker's offerings. We expect this innovation to position as well as we scale up our continuing education business, which, while still nascent, is showing strong growth. On-course learning delivered increases in both B2C and B2B offerings, driven by execution to capture the demand as new loan originators enter into a strong mortgage market. Despite the uncertainty around the election and the regulatory landscape, we do not foresee significant headwinds in the mortgage industry in the near term. On-course learning is also continuing to invest in and develop its training products for the banking and credit union sector. but we continue to gain traction. Regarding the election, we will continue to work across the aisle on bipartisan issues such as One Health, mental health support for frontline workers during the pandemic, and our work with HBCUs and HSIs as we address the healthcare profession's diversity gap. These issues are critical to the country's broader healthcare system and the populations it serves. Our efforts on bipartisan issues Combined with our work to address the healthcare workforce shortages and our contributions to a diverse health professions workforce make us a very valuable partner to any administration. In summary, we are well on the path to continue to grow long-term revenue in the mid-single digits and earning per share in the low double digits. Mike will discuss our fiscal year 2021 guidance, which reflects the strength we expect for the remainder of the year. Overall, we'd like to thank our teams for their remarkable efforts and strong execution during the pandemic as they focus on our students and our employer partners with resiliency and dedication. At the same time, we are capturing benefits from our strategic marketing initiatives and cost efficiency measures. These efforts drove this quarter's strong results. As the year progresses, we remain focused on continuing this momentum to drive forward our workforce solutions provider strategy and accelerate growth to foster superior student outcomes and generate shareholder value. With that, I will now turn the call over to Mike to discuss our financial highlights.