Adtalem Global Education Inc.

Greetings and welcome to the Ad Talem Global Education Fourth Quarter Fiscal Year 2023 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, Jay Spitzer. Vice President of Investor Relations. Thank you, sir. You may begin.

Good afternoon, ladies and gentlemen, and welcome to our earnings call for the fourth quarter and fiscal year 2023 results. On the call with me today are Steve Beard, President and Chief Executive Officer of Ad Tilum Global Education, and Bob Phelan, Chief Financial Officer. Before I hand you over to Steve, I will, as usual, take you through the legal and safe harbor and cost share declarations. Certain statements and projections of future results made in this presentation constitute as forward-looking statements that are based on our current market competitive and regulatory expectations and are subject to risks and uncertainties that could cause actual results to vary materially. We undertake no obligation to update publicly any forward-looking statement after this presentation, whether as a result of new information, future events, changes in assumptions, or otherwise. Please see our latest Form 10-K, Form 10-Q, for latest discussion of risk factors as they relate to forward-looking statements. In today's presentation, we use certain non-GAAP financial measures and we refer you to the appendix of the presentation materials available on our Investor Relations website for reconciliations of the most directly comparable GAAP financial measures and related information. You will find a link to the webcast on our Investor Relations website at investor.adtelm.com. After this call, the presentation webcast will be archived on the website for 30 days. I will now hand you over to Steve.

Thanks, Jay. Good afternoon, everyone, and thank you for taking the time to join our fourth quarter and fiscal year 2023 earnings conference call. Fiscal year 2023 was another pivotal year for Ad Talem as we achieved a number of significant milestones. For starters, we completed the integration of Walden and our legacy institutions into a complementary portfolio of like-kind institutions all with a center of gravity in healthcare. We centralized our marketing and student experience capabilities into centers of excellence, where we can align and deploy best practices enterprise-wide and realize economies of scale in our efforts to enhance the student journey. We achieved our two-year, $60 million cost synergy program, creating significant efficiencies and a more profitable operating model. We expanded adjusted EBITDA margin to approximately 24% for fiscal year 2023, which is an increase of 200 basis points compared to fiscal year 2021. We've identified opportunities to invest for future growth, generate durable operating leverage, position ourselves to sustainably grow student enrollment, improve persistence, and further expand our margin profile. Finally, We formally launched our growth with purpose strategy, which focuses on improving and accelerating our performance across the critical value creating activities of the business, while continuing to expand access for aspiring students and delivering high quality academic outcomes. We're still early in that journey, but growth with purpose is already building total enrollment momentum. U.S. healthcare is struggling with a massive talent deficit that threatens the quality of care and exasperates health equities in communities across the country. We believe that we've uniquely repositioned ATALM to serve as a scaled solution in addressing these challenges. Our post-secondary programs are rigorous, responsive to the workforce needs of the healthcare industry, and serve to expand access to attractive careers through the delivery of high quality academic outcomes for over 75,000 students and for over 25,000 diverse students that we graduated in 2023. Our graduates are serving in communities across the country, both urban and rural, and doing so in some of the best known and highly regarded health systems in the country. It's no secret that opportunities for aspiring clinicians are exclusive and scarce. At Aptalum, we address the current and growing provider shortages at scale through an inclusive and access-focused model that we believe is unrivaled today. With respect to our results, we ended fiscal year 2023 ahead of our most recent expectations and surpassed the goals that we established at the outset of the year. Full-year revenue of $1.45 billion was up 5% for the year. Total enrollment trends have consistently improved throughout the year. Adjusted earnings per share ended the year at $4.21, increasing 35% year over year as our transformation and operational initiatives are generating their intended positive returns. Over the course of the year, we generated $169 million of free cash flow, and returned $140 million to our owners through shared repurchases. Our balance sheet continues to remain strong, closing the year with $274 million in cash on hand and net leverage of 1.3 times. As I mentioned earlier, we launched our growth with purpose strategy, which is designed to expand access and deliver enhanced student outcomes through optimizing five pillars of value creation. marketing, enrollment, retention, pricing, and programs. In the fourth quarter and throughout the year, we refined our marketing strategy to deliver good results through the application of data-driven insights, refreshed brand campaigns, and a more balanced approach to investments across the marketing funnel. We're generating increased brand awareness connecting with potential students at a deeper and more meaningful level, and importantly, educating thousands about our flexible programs that meet students where, when, and how they learn best. The team is creating opportunities for our institutions to grow as inbound demand grew quarter to quarter with key programs such as our RN to BSN program, our standard BSN program, and our counseling programs leading the way. Increased demand has translated to double-digit year-over-year inquiry growth, with all of our institutions achieving positive year-over-year inquiry growth in the fourth quarter. As part of the effort to sustainably grow enrollments, we remain committed to enhancing the student experience. Our enrollment teams have focused on streamlining and personalizing our engagement with prospective and existing students alike. In 2023, we launched our proactive affirmative registration process, which engaged over 18,000 students, simplifying the process to enroll in classes for the upcoming term. In addition, through our self-service digital assistant tool for students, we've addressed over 750,000 Chamberlain and Walden student increase since January in real time and with a success rate of over 90%. These automated tools provide answers 24 by 7, affording our student facing advisors more bandwidth and more opportunity to focus on engaging in personalized, high touch conversations with current and prospective students alike. Chamberlain University is expanding access both physically and online in markets with some of the highest nursing shortages. For example, In Atlanta, the demand for access to our curriculum is outpacing capacity at our existing campus. This September, we'll welcome our first cohort of students at our new hybrid campus in Stockbridge, Georgia. At scale, the Stockbridge campus will be able to accommodate up to 600 students, including 200 evening and weekend students. Collectively, these two locations will train up to 2000 students. positively impacting Georgia's nursing shortage. And as we've noted previously, Chamberlain's campus footprint keeps us at the forefront of providing maximum flexibility for students with online, hybrid, and campus-based pathways. We also continue to be pleased with progress at Walden. Our investment in brand and our shift in marketing mix have created momentum in new student growth, which is up over double digits in the fourth quarter on a year-over-year basis. And just as importantly, this growth was led by our nursing and social behavioral sciences programs. In addition, we're particularly proud of the gains Walden continues to achieve in student persistence, which was up again in the fourth quarter. Moreover, the Higher Learning Commission in July renewed Walden's national accreditation for a 10-year period. Skipping to MedVet, the Ross University School of Veterinary Medicine continues to operate near capacity with high persistence and matriculation. Inbound inquiry for both of our medical schools, the Ross University School of Medicine and the American University of the Caribbean School of Medicine, remain high and up year over year in the fourth quarter. However, total enrollments for the quarter were lower year over year, driven by a combination of factors, including a large graduating cohort, a sizable cohort on leave to prepare for Step 1 USMLE, and a challenging May intake cycle that fell short of our expectations. We're obviously proud of the fact that we graduated a greater number of medical professionals this quarter compared to last year, and that we were able to permit our students to persist in our programs through the pandemic. But to be sure, we have identified the conversion challenges contributing to the May intake shortfall and are already executing on remediation plans. I'm confident in the efficacy of those plans and expect total enrollment trends at MedVet to improve by the back half of 2024, returning to total enrollment growth as we exit the year. Temporary challenges notwithstanding, the value proposition of our medical schools remains strong. Focus on access, high-quality academic outcomes, including a five-year cumulative Step 1 USMLE pass rate of 89% from 2018 to 2022, as well as a 98% first-time residency attainment rate for 2022 and 2023, has tremendous appeal for aspiring physicians. This value proposition combined with our current focus on operational excellence gives me confidence in the long-term growth prospects of our medical programs. In the quarter, we bolstered our in-house adaptive learning capabilities by entering into a perpetual license agreement with EDAP Technologies. EDAP is an adaptive learning platform that leverages proprietary data to enable students to learn at their own pace in the classroom and beyond. The software creates reinforcement learning loops and continually updates with real-time assessments to improve the mastery of content, focusing on positive individualized student outcomes. We've been testing and iterating this adaptive learning tool at Chamberlain with over 13,000 nursing students, and we're really encouraged by the results. This is another unique differentiator driving personalized success as our students prepare for the NCLEX exam. In addition, we've already identified a number of additional use cases for adaptive learning tools to be applied across our institutions. On pricing, our optimization strategy is working. At Walden, the Believe and Achieve Scholarship Program has been well received by students, outpacing our expectations as it incentivizes and rewards matriculation and student success. This is a great example of a win-win innovation of the kind being developed at Walden, lowering the cost of net tuition, financially incentivizing student matriculation to graduation, and driving the realization of the lifetime value of enrollment. And finally, our fifth strategic pillar, programs. Walden's competency-based tempo program saw a 35% growth in new enrollments during the fourth quarter as a result of a new simplified strategy to strengthen the program positioning and launching a data-driven marketing campaign. Over at Chamberlain, specialty-focused tracks continue to generate significant interest with our MSN Psychiatric Mental Health Nurse Practitioner Program now enrolling over 1,700 students since launching two years ago. We're also excited to bring to market our home health and kidney care practice-ready specialty-focused models, which are being developed in partnership with leading providers like Bright Start Care and DaVita. With that, let me now provide some color on our outlook for fiscal 24 that builds on the guide we provided during our investor day back in June. We're raising the low end of our guidance range for adjusted EPS, and now anticipate adjusted earnings to be $4.20 to $4.40, while maintaining a revenue range of $1.46 billion to $1.52 billion. Fiscal 2024 is off to an encouraging start, driven by momentum in new enrollment and ongoing improvement in student persistence. Taken together, our strong foundation integrated operating model, and growth with purpose strategy strike an optimal balance between investing to accelerate near-term performance and expanding profitability in the long term. I'm confident in our ability to return to total enrollment growth while maintaining our industry-leading margin profile during fiscal year 2024. In closing, I truly believe that the best way to positively impact the future of healthcare is to provide more people the opportunity to change it. We're uniquely positioned to help elevate standards of care that's compassionate and culturally competent by changing the face of those who deliver that care. As a mission-driven organization, we remain committed to advancing health equity and delivering diverse highly qualified healthcare clinicians at scale. To that end, I want to thank the nearly 10,000 colleagues who continue to make Antalym a force for good. It's your exemplary leadership, passion, and willingness to go above and beyond which upholds our commitment to our students and delivers positive outcomes. I'll now hand the call over to Bob to take you through the fiscal year 2023 fourth quarter and fiscal year 2024 outlook in greater detail. Thank you.