CVSA 8-K
Covista Inc. (CVSA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Item 2.02 Results of Operations and Financial Condition
On May 2, 2024, Adtalem Global Education Inc. (“Adtalem”) issued a press release announcing its fiscal 2024 third quarter academic, operating and financial results. The press release is attached hereto as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.
The information furnished pursuant to this Item 2.02, including Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Adtalem under the Securities Act of 1933, as amended, or the Exchange Act.
Forward-Looking Statements
Certain statements contained in this Form 8-K and related press release are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact, which includes statements regarding Adtalem’s future growth. Forward-looking statements can also be identified by words such as “future,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “may,” “will,” “would,” “could,” “can,” “continue,” “preliminary,” “range,” and similar terms. These forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) and our other filings with the SEC.
These forward-looking statements are based on information as of May 2, 2024, and Adtalem assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized, except as required by law.
Item 9.01 Financial Statements and Exhibits
99.1 |
| Press Release of Adtalem Global Education Inc., dated May 2, 2024. |
104 | Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ADTALEM GLOBAL EDUCATION INC. | ||
By: | /s/ Robert J. Phelan | |
Robert J. Phelan | ||
Senior Vice President and Chief Financial Officer (Principal Financial Officer) | ||
Date: May 2, 2024
Exhibit 99.1
| News Release Investor Contact Jay Spitzer +1 312-906-6600 Media Contact Britt Mitchell +1 872-270-0301 |
Adtalem Global Education Fiscal Third Quarter 2024 Results; Guidance Raised
Revenue up 11.8% YoY
Total enrollment up 7.8% YoY
Diluted earnings per share $0.93; Adjusted EPS $1.50, growth of 32.7% YoY
Third Quarter Highlights
| ● | Revenue $412.7 million, up 11.8% year-over-year |
| ● | Total student enrollment 85,809, up 7.8% year-over-year |
| ● | Chamberlain University fifth straight quarter of total enrollment growth, up 9.0% year-over-year, highest total enrollment in university history |
| ● | Walden University third straight quarter of total enrollment growth, up 8.4% year-over-year |
| ● | Investing in Growth with Purpose strategy, GAAP net income $36.8 million, and adjusted EBITDA $107.1 million, up 24.6% year-over-year |
Capital Allocation
| ● | Repurchased $91 million of shares |
| ● | Net leverage 1.3x as of March 31, 2024 |
Fiscal Year 2024 Guidance
| ● | Revenue $1,560 million to $1,580 million |
| ● | Adjusted earnings per share $4.80 to $5.00 |
CHICAGO Ill. – May 2, 2024 – Adtalem Global Education Inc. (NYSE: ATGE), the leading healthcare educator in the United States, today reported third quarter fiscal 2024 results (quarter ended March 31, 2024) reflecting robust operating performance through accelerated total enrollment growth and enhanced profitability.
“Our Growth with Purpose strategy, with its emphasis on operational excellence, continues to accelerate top- and bottom-line performance, permitting us to expand access to high-quality, in-demand programs,” said Steve Beard, president and chief executive officer, Adtalem Global Education.
“The momentum is built on strong enrollments, improved persistence and outstanding academic outcomes. With over 81,000 students graduated in the last three years, we are innately focused on our ability to have an outsized impact on U.S. healthcare.”
Financial Highlights
Selected financial data for the three months ended March 31, 2024:
| ● | Revenue of $412.7 million increased 11.8% compared with the prior year. |
| ● | Operating income was $61.7 million, compared with $59.4 million in the prior year; adjusted operating income was $89.8 million, compared with $73.0 million in the prior year. |
| ● | Net income was $36.8 million, compared with $45.9 million in the prior year; adjusted net income was $59.4 million, compared with $51.6 million in the prior year. |
| ● | Diluted earnings per share was $0.93, compared with $1.00 in the prior year; adjusted earnings per share was $1.50, compared with $1.13 in the prior year. |
| ● | Adjusted EBITDA was $107.1 million, compared with $85.9 million in the prior year; adjusted EBITDA margin was 25.9%, compared with 23.3% in the prior year. |
Business Highlights
| ● | American University of the Caribbean School of Medicine and Ross University School of Medicine achieved a combined 98% first-time residency attainment rate for 2023-2024 graduates1, for the second straight year, placing more than 815 students and graduates into over 350 unique healthcare facilities spanning 44 states and territories. Over 500 will enter primary care residencies, poised to enhance healthcare outcomes for some of the more than 83 million Americans in underserved areas lacking adequate access to primary care. Of the more than 815 students and graduates, 189 identify as Black/African American or Hispanic, helping diversify the pipeline of physicians in the U.S. healthcare system where, |
| based on 2021 data, Black Americans make up 13% of the population but only 6% of physicians, and Hispanics represent 19% of the population but only 7% of physicians. |
| ● | Scott Liles rejoined Adtalem on April 1 as president of our Medical and Veterinary segment. Liles most recently served as the chief executive officer and executive board member for the Association of Certified Anti-Money Laundering Specialists (ACAMS). Liles was instrumental in returning ACAMS to growth in preparation for Adtalem’s divestiture of its Financial Services segment and in establishing ACAMS as an independent company. |
| ● | Chamberlain University continues to expand its specialized nursing education that addresses areas of acute nursing shortages through its Practice Ready. Specialty Focused.™ model and a new partnership with the Emergency Nurses Association (ENA), offering in-depth introduction into emergency nursing. The ENA emergency nursing offering is in addition to partnerships with DaVita® for nephrology, BrightStar Care® for home healthcare as well as the Association of periOperative Registered Nurses for perioperative nursing. Chamberlain’s proprietary specialty model, created with a grant from the American Nurses Foundation, is now offered at all 23 Chamberlain campuses. |
| ● | Walden University experienced some of the strongest new enrollment growth in its history, offering flexibility to working adults through part-time, self-paced and Tempo Learning® competency-based programs. |
| ● | Walden University celebrated over 5,500 graduates at its 70th anniversary commencement. |
College of Nursing and the College of Social and Behavioral Health degrees accounted for more than 60% of the degrees awarded, further showcasing Adtalem’s commitment to delivering practice-ready professionals at scale to the U.S. healthcare system.
Segment Highlights
Chamberlain
$ in millions | | Three Months Ended Mar. 31, | ||
|
| 2024 | 2023 | % Change |
Revenue | | $170.3 | $149.7 | 13.8% |
Operating Income | | $43.3 | $39.6 | 9.5% |
Adj. Operating Income | | $43.3 | $39.6 | 9.5% |
Adj. EBITDA | | $50.5 | $44.9 | 12.3% |
Total Students (2) | | 37,985 | 34,847 | 9.0% |
| ● | Total student enrollment increased 9.0% compared with the prior year, driven by continued growth in pre-licensure and post-licensure nursing programs as well as higher persistence. |
Walden
$ in millions | | Three Months Ended Mar. 31, | ||
|
| 2024 | 2023 | % Change |
Revenue | | $150.6 | $132.9 | 13.3% |
Operating Income | | $23.6 | $10.3 | 128.0% |
Adj. Operating Income | | $31.9 | $24.6 | 29.4% |
Adj. EBITDA | | $35.9 | $27.8 | 28.9% |
Total Students (2) | | 42,751 | 39,427 | 8.4% |
| ● | Total student enrollment increased 8.4% compared with the prior year, driven by growth in healthcare programs and high persistence. |
Medical and Veterinary
$ in millions | | Three Months Ended Mar. 31, | ||
|
| 2024 | 2023 | % Change |
Revenue | | $91.7 | $86.5 | 6.1% |
Operating Income | | $22.8 | $16.5 | 38.2% |
Adj. Operating Income | | $23.0 | $16.9 | 35.9% |
Adj. EBITDA | | $27.0 | $20.7 | 30.3% |
Total Students (2) | | 5,073 | 5,312 | (4.5)% |
| ● | Total student enrollment decreased 4.5% compared with the prior year, primarily driven by declines at the medical schools. |
Fiscal Year 2024 Outlook
Adtalem guidance for fiscal year 2024, raises revenue guidance to a range of $1,560 million to $1,580 million from $1,520 million to $1,560 million, and raises adjusted earnings per share to be in the range of $4.80 to $5.00 from $4.55 to $4.75.
Conference Call and Webcast Information
Adtalem will hold a conference call to discuss its fiscal third quarter 2024 results today at 4:00 p.m. CT (5:00 p.m. ET).
The call can be accessed by dialing +1 877-407-6184 (U.S. participants) or +1 201-389-0877 (international participants) stating “Adtalem earnings call” or use conference ID: 13745553. The call will be simulcast through the Adtalem investor relations website at: https://investors.adtalem.com.
Adtalem will archive a replay of the call for 30 days. To access the replay, dial +1 877-660-6853 (U.S.) or +1 201-612-7415 (international), conference ID: 13745553, or visit the Adtalem investor relations website.
About Adtalem Global Education
Adtalem Global Education (NYSE: ATGE) is the No. 1 provider of healthcare education in the U.S.3 and a systemically important solution for preparing a diverse talent workforce that meets needs of the healthcare industry. We are redefining the education pathway into healthcare and meeting the evolving patient needs for a thriving society. Adtalem recognizes the potential in each individual and guides them to success while maintaining the top-tier standards and rigor needed to fill the workforce deficit, by creating more opportunities to connect practice-ready clinicians with employers at scale. We empower a diverse learner population to achieve their goals and make inspiring contributions to their communities with a family of institutions dedicated to nursing, medicine, veterinary medicine, social work and more. Our community is comprised of approximately 80,000 students, over 300,000 alumni and nearly 10,000 employees. Visit Adtalem.com for more information and follow us on LinkedIn, Instagram and Facebook.
Forward-Looking Statements
Certain statements contained in this release are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact, which includes statements regarding Adtalem’s future growth. Forward-looking statements can also be identified by words such as “future,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “may,” “will,” “would,” “could,” “can,” “continue,” “preliminary,” “range,” and similar terms. These forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those described in the statements. These risk and uncertainties include the risk factors described in Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) and our other filings with the SEC. These forward-looking statements are based on information available to us as of the date any such statements are made, and Adtalem assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized, except as required by law.
A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of special items that may be incurred in the future, although these special items could be material to Adtalem’s results in accordance with GAAP.
1 First-time residency attainment rate is the percent of students attaining a 2024-25 residency position out of all graduates or expected graduates in 2023-24 who were active applicants in the 2024 NRMP match or who attained a residency position outside the NRMP match.
2 Represents total students attending sessions during each institution’s most recent enrollment period in Q3 FY 2024 and Q3 FY 2023.
3 Based on most recent reported year, 2022, according to U.S. government IPEDS database.
###
Adtalem Global Education Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands)
|
| March 31, |
| June 30, | ||
| | 2024 | | 2023 | ||
Assets: | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 179,762 | | $ | 273,689 |
Restricted cash | | | 7,562 | | | 1,386 |
Accounts and financing receivables, net | | | 140,909 | | | 102,749 |
Prepaid expenses and other current assets | | | 59,401 | | | 100,715 |
Total current assets | | | 387,634 | | | 478,539 |
Noncurrent assets: | | | | | | |
Property and equipment, net | | | 272,792 | | | 258,522 |
Operating lease assets | | | 169,498 | | | 174,677 |
Deferred income taxes | | | 64,213 | | | 56,694 |
Intangible assets, net | | | 784,042 | | | 812,338 |
Goodwill | | | 961,262 | | | 961,262 |
Other assets, net | | | 67,768 | | | 68,509 |
Assets held for sale | | | 7,825 | | | — |
Total noncurrent assets | | | 2,327,400 | | | 2,332,002 |
Total assets | | $ | 2,715,034 | | $ | 2,810,541 |
| | | | | | |
Liabilities and shareholders’ equity: | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | 92,198 | | $ | 81,812 |
Accrued payroll and benefits | | | 67,647 | | | 52,041 |
Accrued liabilities | | | 114,224 | | | 105,806 |
Deferred revenue | | | 202,566 | | | 153,871 |
Current operating lease liabilities | | | 32,475 | | | 37,673 |
Total current liabilities | | | 509,110 | | | 431,203 |
Noncurrent liabilities: | | | | | | |
Long-term debt | | | 648,106 | | | 695,077 |
Long-term operating lease liabilities | | | 159,717 | | | 163,441 |
Deferred income taxes | | | 28,937 | | | 26,068 |
Other liabilities | | | 48,201 | | | 37,416 |
Total noncurrent liabilities | | | 884,961 | | | 922,002 |
Total liabilities | | | 1,394,071 | | | 1,353,205 |
Commitments and contingencies | | | | | | |
Total shareholders’ equity | | | 1,320,963 | | | 1,457,336 |
Total liabilities and shareholders’ equity | | $ | 2,715,034 | | $ | 2,810,541 |
Adtalem Global Education Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | March 31, | | March 31, | ||||||||
| | 2024 | | 2023 | | 2024 | | 2023 | ||||
Revenue |
| $ | 412,658 |
| $ | 369,082 |
| $ | 1,174,745 |
| $ | 1,086,185 |
Operating cost and expense: | | | | | | | | | | | | |
Cost of educational services | | | 175,321 | | | 165,820 | | | 516,008 | | | 484,768 |
Student services and administrative expense | | | 156,689 | | | 144,526 | | | 478,368 | | | 432,713 |
Restructuring expense | | | 473 | | | 1,278 | | | 1,217 | | | 17,706 |
Business integration expense | | | 18,450 | | | 11,346 | | | 30,621 | | | 35,702 |
Gain on sale of assets | | | — | | | (13,317) | | | — | | | (13,317) |
Total operating cost and expense | | | 350,933 | | | 309,653 | | | 1,026,214 | | | 957,572 |
Operating income | | | 61,725 | | | 59,429 | | | 148,531 | | | 128,613 |
Interest expense | | | (16,560) | | | (14,457) | | | (48,910) | | | (47,806) |
Other income, net | | | 2,871 | | | 3,980 | | | 8,648 | | | 3,301 |
Income from continuing operations before income taxes | | | 48,036 | | | 48,952 | | | 108,269 | | | 84,108 |
Provision for income taxes | | | (10,595) | | | (389) | | | (21,156) | | | (5,906) |
Income from continuing operations | | | 37,441 | | | 48,563 | | | 87,113 | | | 78,202 |
Discontinued operations: | | | | | | | | | | | | |
(Loss) income from discontinued operations before income taxes | | | (832) | | | (3,993) | | | 329 | | | (6,734) |
Loss on disposal of discontinued operations before income taxes | | | — | | | (402) | | | — | | | (3,576) |
Benefit from (provision for) income taxes | | | 212 | | | 1,701 | | | (84) | | | 3,222 |
(Loss) income from discontinued operations | | | (620) | | | (2,694) | | | 245 | | | (7,088) |
Net income and comprehensive income | | $ | 36,821 | | $ | 45,869 | | $ | 87,358 | | $ | 71,114 |
| | | | | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | |
Continuing operations | | $ | 0.97 | | $ | 1.08 | | $ | 2.18 | | $ | 1.73 |
Discontinued operations | | $ | (0.02) | | $ | (0.06) | | $ | 0.01 | | $ | (0.16) |
Total basic earnings per share | | $ | 0.95 | | $ | 1.02 | | $ | 2.18 | | $ | 1.57 |
Diluted: | | | | | | | | | | | | |
Continuing operations | | $ | 0.94 | | $ | 1.06 | | $ | 2.13 | | $ | 1.70 |
Discontinued operations | | $ | (0.02) | | $ | (0.06) | | $ | 0.01 | | $ | (0.15) |
Total diluted earnings per share | | $ | 0.93 | | $ | 1.00 | | $ | 2.14 | | $ | 1.54 |
| | | | | | | | | | | | |
Weighted-average shares outstanding: | | | | | | | | | | | | |
Basic shares | | | 38,713 | | | 45,125 | | | 40,000 | | | 45,276 |
Diluted shares | | | 39,636 | | | 45,801 | | | 40,874 | | | 46,089 |
Adtalem Global Education Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
| | Nine Months Ended | ||||
| | March 31, | ||||
| | 2024 | | 2023 | ||
Operating activities: |
| | |
| |
|
Net income | | $ | 87,358 | | $ | 71,114 |
(Income) loss from discontinued operations | | | (245) | | | 7,088 |
Income from continuing operations | | | 87,113 | | | 78,202 |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Stock-based compensation expense | | | 19,405 | | | 10,908 |
Amortization and impairments to operating lease assets | | | 24,705 | | | 37,928 |
Depreciation | | | 32,106 | | | 31,618 |
Amortization of intangible assets | | | 28,296 | | | 48,936 |
Amortization and write-off of debt discount and issuance costs | | | 4,550 | | | 7,974 |
Provision for bad debts | | | 35,741 | | | 23,391 |
Deferred income taxes | | | (4,650) | | | (1,718) |
Loss on disposals, accelerated depreciation, and impairments to property and equipment | | | 50 | | | 3,999 |
Gain on extinguishment of debt | | | — | | | (71) |
(Gain) loss on investments | | | (1,281) | | | 4,122 |
Gain on sale of assets | | | — | | | (13,317) |
Unrealized loss on assets held for sale | | | 647 | | | — |
Changes in assets and liabilities: | | | | | | |
Accounts and financing receivables | | | (73,661) | | | (56,477) |
Prepaid expenses and other current assets | | | (2,484) | | | 7,034 |
Accounts payable | | | 10,841 | | | 12,286 |
Accrued payroll and benefits | | | 15,671 | | | (11,719) |
Accrued liabilities | | | 39,748 | | | (20,275) |
Deferred revenue | | | 60,935 | | | 26,038 |
Operating lease liabilities | | | (28,448) | | | (37,758) |
Other assets and liabilities | | | (2,475) | | | (1,280) |
Net cash provided by operating activities-continuing operations | | | 246,809 | | | 149,821 |
Net cash provided by (used in) operating activities-discontinued operations | | | 8,396 | | | (404) |
Net cash provided by operating activities | | | 255,205 | | | 149,417 |
Investing activities: | | | | | | |
Capital expenditures | | | (52,014) | | | (19,056) |
Proceeds from sales of marketable securities | | | 626 | | | 7,635 |
Purchases of marketable securities | | | (498) | | | (1,508) |
Proceeds from note receivable related to property sold | | | — | | | 46,800 |
Net cash (used in) provided by investing activities-continuing operations | | | (51,886) | | | 33,871 |
Payment for working capital adjustment for sale of business | | | — | | | (3,174) |
Net cash (used in) provided by investing activities | | | (51,886) | | | 30,697 |
Financing activities: | | | | | | |
Proceeds from exercise of stock options | | | 15,412 | | | 1,622 |
Employee taxes paid on withholding shares | | | (6,600) | | | (4,214) |
Proceeds from stock issued under Colleague Stock Purchase Plan | | | 581 | | | 451 |
Repurchases of common stock for treasury | | | (250,463) | | | (44,710) |
Payment on equity forward contract | | | — | | | (13,162) |
Proceeds from issuance of long-term debt | | | 1,896 | | | — |
Repayments of long-term debt | | | (51,896) | | | (150,861) |
Net cash used in financing activities | | | (291,070) | | | (210,874) |
Net decrease in cash, cash equivalents and restricted cash | | | (87,751) | | | (30,760) |
Cash, cash equivalents and restricted cash at beginning of period | | | 275,075 | | | 347,937 |
Cash, cash equivalents and restricted cash at end of period | | $ | 187,324 | | $ | 317,177 |
Non-cash investing and financing activities: | | | | | | |
Accrued capital expenditures | | $ | 11,086 | | $ | 10,474 |
Accrued liability for repurchases of common stock | | $ | 2,995 | | $ | 2,699 |
Accrued excise tax on share repurchases | | $ | 3,257 | | $ | 361 |
Settlement of financing liability with assets | | $ | — | | $ | 38,606 |
Adtalem Global Education Inc.
Segment Information
(unaudited)
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||
| | March 31, | | March 31, | | ||||||||||||||||||
| | | | | | Increase/(Decrease) | | | | | | Increase/(Decrease) | | ||||||||||
| | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % | | ||||||
Revenue: |
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Chamberlain | | $ | 170,338 | | $ | 149,737 | | $ | 20,601 | | 13.8 | % | $ | 466,487 | | $ | 426,538 | | $ | 39,949 | | 9.4 | % |
Walden | | | 150,607 | | | 132,874 | | | 17,733 | | 13.3 | % | | 439,023 | | | 395,715 | | | 43,308 | | 10.9 | % |
Medical and Veterinary | | | 91,713 | | | 86,471 | | | 5,242 | | 6.1 | % | | 269,235 | | | 263,932 | | | 5,303 | | 2.0 | % |
Total consolidated revenue | | $ | 412,658 | | $ | 369,082 | | $ | 43,576 | | 11.8 | % | $ | 1,174,745 | | $ | 1,086,185 | | $ | 88,560 | | 8.2 | % |
Operating income (loss): | | | | | | | | | | | | | | | | | | | | | | | |
Chamberlain | | $ | 43,349 | | $ | 39,589 | | $ | 3,760 | | 9.5 | % | $ | 97,313 | | $ | 99,002 | | $ | (1,689) | | (1.7) | % |
Walden | | | 23,585 | | | 10,343 | | | 13,242 | | 128.0 | % | | 47,121 | | | 26,071 | | | 21,050 | | 80.7 | % |
Medical and Veterinary | | | 22,759 | | | 16,472 | | | 6,287 | | 38.2 | % | | 59,142 | | | 49,172 | | | 9,970 | | 20.3 | % |
Home Office and Other | | | (27,968) | | | (6,975) | | | (20,993) | | (301.0) | % | | (55,045) | | | (45,632) | | | (9,413) | | (20.6) | % |
Total consolidated operating income | | $ | 61,725 | | $ | 59,429 | | $ | 2,296 | | 3.9 | % | $ | 148,531 | | $ | 128,613 | | $ | 19,918 | | 15.5 | % |
Non-GAAP Financial Measures and Reconciliations
We believe that certain non-GAAP financial measures provide investors with useful supplemental information regarding the underlying business trends and performance of Adtalem’s ongoing operations as seen through the eyes of management and are useful for period-over-period comparisons. We use these supplemental non-GAAP financial measures internally in our assessment of performance and budgeting process. However, these non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The following are non-GAAP financial measures used in the subsequent GAAP to non-GAAP reconciliation tables:
Adjusted net income (most comparable GAAP measure: net income) – Measure of Adtalem’s net income adjusted for restructuring expense, business integration expense, intangible amortization expense, gain on sale of assets, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, investment impairment, loss on assets held for sale, debt modification costs, net tax benefit related to a valuation allowance release, and loss (income) from discontinued operations.
Adjusted earnings per share (most comparable GAAP measure: diluted earnings per share) – Measure of Adtalem’s diluted earnings per share adjusted for restructuring expense, business integration expense, intangible amortization expense, gain on sale of assets, write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, investment impairment, loss on assets held for sale, debt modification costs, net tax benefit related to a valuation allowance release, and loss (income) from discontinued operations.
Adjusted operating income (most comparable GAAP measure: operating income) – Measure of Adtalem’s operating income adjusted for restructuring expense, business integration expense, intangible amortization expense, litigation reserve, loss on assets held for sale, debt modification costs, and gain on sale of assets. This measure is applied on a consolidated and segment basis, depending on the context of the discussion.
Adjusted EBITDA (most comparable GAAP measure: net income) – Measure of Adtalem’s net income adjusted for loss (income) from discontinued operations, interest expense, other income, net, provision for income taxes, depreciation and amortization, stock-based compensation, restructuring expense, business integration expense, litigation reserve, loss on assets held for sale, debt modification costs, and gain on sale of assets. This measure is applied on a consolidated and segment basis, depending on the context of the discussion. Provision for income taxes, interest expense, and other income, net is not recorded at the reportable segments, and therefore, the segment adjusted EBITDA reconciliations begin with operating income.
Free cash flow (most comparable GAAP measure: net cash provided by operating activities-continuing operations) – Defined as net cash provided by operating activities-continuing operations less capital expenditures.
Net debt – Defined as long-term debt less cash and cash equivalents.
Net leverage – Defined as net debt divided by adjusted EBITDA.
A description of special items in our non-GAAP financial measures described above are as follows:
| ● | Restructuring expense primarily related to real estate consolidations at Walden, Medical and Veterinary, and Adtalem’s home office. We do not include normal, recurring, cash operating expenses in our restructuring expense. |
| ● | Business integration expense include expenses related to the Walden acquisition and certain costs related to growth transformation initiatives. We do not include normal, recurring, cash operating expenses in our business integration expense. |
| ● | Intangible amortization expense on acquired intangible assets. |
| ● | Gain on sale of Adtalem’s Chicago, Illinois, campus facility. |
| ● | Write-off of debt discount and issuance costs and gain on extinguishment of debt related to prepayments of debt, reserves related to significant litigation, impairment of an equity investment, loss on assets held for sale related to a fair value write-down on assets, and debt modification costs related to refinancing our Term Loan B loan. |
| ● | Net tax benefit related to a valuation allowance release. |
| ● | Loss (income) from discontinued operations includes expense from ongoing litigation costs and settlements related to the DeVry University and Carrington College divestitures, a loss on sale of ACAMS, Becker, and OCL for working capital adjustments to the initial sales prices and a tax return to provision adjustment, and the earn-outs we received. |
Adtalem Global Education Inc.
Non-GAAP Operating Income by Segment
(unaudited)
(in thousands)
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| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||
| | March 31, | | March 31, | | ||||||||||||||||||
| | | | | | Increase/(Decrease) | | | | | | Increase/(Decrease) | | ||||||||||
| | 2024 | | 2023 | | $ | | % | | 2024 | | 2023 | | $ | | % | | ||||||
Chamberlain: |
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Operating income (GAAP) | | $ | 43,349 | | $ | 39,589 | | $ | 3,760 | | 9.5 | % | $ | 97,313 | | $ | 99,002 | | $ | (1,689) | | (1.7) | % |
Restructuring expense | | | — | | | — | | | — | | | | | — | | | 818 | | | (818) | | | |
Adjusted operating income (non-GAAP) | | $ | 43,349 | | $ | 39,589 | | $ | 3,760 | | 9.5 | % | $ | 97,313 | | $ | 99,820 | | $ | (2,507) | | (2.5) | % |
Operating margin (GAAP) | | | 25.4 | % | | 26.4 | % | | | | | | | 20.9 | % | | 23.2 | % | | | | | |
Operating margin (non-GAAP) | | | 25.4 | % | | 26.4 | % | | | | | | | 20.9 | % | | 23.4 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Walden: | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (GAAP) | | $ | 23,585 | | $ | 10,343 | | $ | 13,242 | | 128.0 | % | $ | 47,121 | | $ | 26,071 | | $ | 21,050 | | 80.7 | % |
Restructuring expense | | | — | | | 53 | | | (53) | | | | | (776) | | | 3,174 | | | (3,950) | | | |
Intangible amortization expense | | | 8,286 | | | 14,232 | | | (5,946) | | | | | 28,296 | | | 48,936 | | | (20,640) | | | |
Litigation reserve | | | — | | | — | | | — | | | | | 18,500 | | | — | | | 18,500 | | | |
Adjusted operating income (non-GAAP) | | $ | 31,871 | | $ | 24,628 | | $ | 7,243 | | 29.4 | % | $ | 93,141 | | $ | 78,181 | | $ | 14,960 | | 19.1 | % |
Operating margin (GAAP) | | | 15.7 | % | | 7.8 | % | | | | | | | 10.7 | % | | 6.6 | % | | | | | |
Operating margin (non-GAAP) | | | 21.2 | % | | 18.5 | % | | | | | | | 21.2 | % | | 19.8 | % | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Medical and Veterinary: | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (GAAP) | | $ | 22,759 | | $ | 16,472 | | $ | 6,287 | | 38.2 | % | $ | 59,142 | | $ | 49,172 | | $ | 9,970 | | 20.3 | % |
Restructuring expense | | | 194 | | | 421 | | | (227) | | | | | 379 | | | 7,334 | | | (6,955) | | | |
Adjusted operating income (non-GAAP) | | $ | 22,953 | | $ | 16,893 | | $ | 6,060 | | 35.9 | % | $ | 59,521 | | $ | 56,506 | | $ | 3,015 | | 5.3 | % |
Operating margin (GAAP) | | | 24.8 | % | | 19.0 | % | | | | | | | 22.0 | % | | 18.6 | % | | | | | |
Operating margin (non-GAAP) | | | 25.0 | % | | 19.5 | % | | | | | | | 22.1 | % | | 21.4 | % | | | | | |
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Home Office and Other: | | | | | | | | | | | | | | | | | | | | | | | |
Operating loss (GAAP) | | $ | (27,968) | | $ | (6,975) | | $ | (20,993) | | (301.0) | % | $ | (55,045) | | $ | (45,632) | | $ | (9,413) | | (20.6) | % |
Restructuring expense | | | 279 | | | 804 | | | (525) | | | | | 1,614 | | | 6,380 | | | (4,766) | | | |
Business integration expense | | | 18,450 | | | 11,346 | | | 7,104 | | | | | 30,621 | | | 35,702 | | | (5,081) | | | |
Loss on assets held for sale | | | — | | | — | | | — | | | | | 647 | | | — | | | 647 | | | |
Debt modification costs | | | 848 | | | — | | | 848 | | | | | 848 | | | — | | | 848 | | | |
Gain on sale of assets | | | — | | | (13,317) | | | 13,317 | | | | | — | | | (13,317) | | | 13,317 | | | |
Adjusted operating loss (non-GAAP) | | $ | (8,391) | | $ | (8,142) | | $ | (249) | | (3.1) | % | $ | (21,315) | | $ | (16,867) | | $ | (4,448) | | (26.4) | % |
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Adtalem Global Education: | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (GAAP) | | $ | 61,725 | | $ | 59,429 | | $ | 2,296 | | 3.9 | % | $ | 148,531 | | $ | 128,613 | | $ | 19,918 | | 15.5 | % |
Restructuring expense | | | 473 | | | 1,278 | | | (805) | | | | | 1,217 | | | 17,706 | | | (16,489) | | | |
Business integration expense | | | 18,450 | | | 11,346 | | | 7,104 | | | | | 30,621 | | | 35,702 | | | (5,081) | | | |
Intangible amortization expense | | | 8,286 | | | 14,232 | | | (5,946) | | | | | 28,296 | | | 48,936 | | | (20,640) | | | |
Litigation reserve | | | — | | | — | | | — | | | | | 18,500 | | | — | | | 18,500 | | | |
Loss on assets held for sale | | | — | | | — | | | — | | | | | 647 | | | — | | | 647 | | | |
Debt modification costs | | | 848 | | | — | | | 848 | | | | | 848 | | | — | | | 848 | | | |
Gain on sale of assets | | | — | | | (13,317) | | | 13,317 | | | | | — | | | (13,317) | | | 13,317 | | | |
Adjusted operating income (non-GAAP) | | $ | 89,782 | | $ | 72,968 | | $ | 16,814 | | 23.0 | % | $ | 228,660 | | $ | 217,640 | | $ | 11,020 | | 5.1 | % |
Operating margin (GAAP) | | | 15.0 | % | | 16.1 | % | | | | | | | 12.6 | % | | 11.8 | % | | | | | |
Operating margin (non-GAAP) | | | 21.8 | % | | 19.8 | % | | | | | | | 19.5 | % | | 20.0 | % | | | | | |
Adtalem Global Education Inc.
Non-GAAP Adjusted EBITDA by Segment
(unaudited)
(in thousands)
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| | Three Months Ended | | | Nine Months Ended | | ||||||||||||||||||
| | March 31, | | | March 31, | | ||||||||||||||||||
| | | | | | | | Increase/(Decrease) | | | | | | | | | Increase/(Decrease) | | ||||||
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| 2023 |
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Chamberlain: | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (GAAP) | | $ | 43,349 | | $ | 39,589 | | $ | 3,760 | | 9.5 | % | | $ | 97,313 | | $ | 99,002 | | $ | (1,689) | | (1.7) | % |
Restructuring expense | | | — | | | — | | | — | | | | | | — | | | 818 | | | (818) | | | |
Depreciation | | | 5,312 | | | 4,405 | | | 907 | | | | | | 14,790 | | | 12,985 | | | 1,805 | | | |
Stock-based compensation | | | 1,795 | | | 923 | | | 872 | | | | | | 6,791 | | | 3,600 | | | 3,191 | | | |
Adjusted EBITDA (non-GAAP) | | $ | 50,456 | | $ | 44,917 | | $ | 5,539 | | 12.3 | % | | $ | 118,894 | | $ | 116,405 | | $ | 2,489 | | 2.1 | % |
Adjusted EBITDA margin (non-GAAP) | | | 29.6 | % | | 30.0 | % | | | | | | | | 25.5 | % | | 27.3 | % | | | | | |
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Walden: | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (GAAP) | | $ | 23,585 | | $ | 10,343 | | $ | 13,242 | | 128.0 | % | | $ | 47,121 | | $ | 26,071 | | $ | 21,050 | | 80.7 | % |
Restructuring expense | | | — | | | 53 | | | (53) | | | | | | (776) | | | 3,174 | | | (3,950) | | | |
Intangible amortization expense | | | 8,286 | | | 14,232 | | | (5,946) | | | | | | 28,296 | | | 48,936 | | | (20,640) | | | |
Litigation reserve | | | — | | | — | | | — | | | | | | 18,500 | | | — | | | 18,500 | | | |
Depreciation | | | 2,214 | | | 2,439 | | | (225) | | | | | | 6,681 | | | 7,303 | | | (622) | | | |
Stock-based compensation | | | 1,770 | | | 754 | | | 1,016 | | | | | | 5,822 | | | 2,945 | | | 2,877 | | | |
Adjusted EBITDA (non-GAAP) | | $ | 35,855 | | $ | 27,821 | | $ | 8,034 | | 28.9 | % | | $ | 105,644 | | $ | 88,429 | | $ | 17,215 | | 19.5 | % |
Adjusted EBITDA margin (non-GAAP) | | | 23.8 | % | | 20.9 | % | | | | | | | | 24.1 | % | | 22.3 | % | | | | | |
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Medical and Veterinary: | | | | | | | | | | | | | | | | | | | | | | | | |
Operating income (GAAP) | | $ | 22,759 | | $ | 16,472 | | $ | 6,287 | | 38.2 | % | | $ | 59,142 | | $ | 49,172 | | $ | 9,970 | | 20.3 | % |
Restructuring expense | | | 194 | | | 421 | | | (227) | | | | | | 379 | | | 7,334 | | | (6,955) | | | |
Depreciation | | | 3,174 | | | 3,231 | | | (57) | | | | | | 9,228 | | | 9,367 | | | (139) | | | |
Stock-based compensation | | | 851 | | | 587 | | | 264 | | | | | | 3,687 | | | 2,291 | | | 1,396 | | | |
Adjusted EBITDA (non-GAAP) | | $ | 26,978 | | $ | 20,711 | | $ | 6,267 | | 30.3 | % | | $ | 72,436 | | $ | 68,164 | | $ | 4,272 | | 6.3 | % |
Adjusted EBITDA margin (non-GAAP) | | | 29.4 | % | | 24.0 | % | | | | | | | | 26.9 | % | | 25.8 | % | | | | | |
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Home Office and Other: | | | | | | | | | | | | | | | | | | | | | | | | |
Operating loss (GAAP) | | $ | (27,968) | | $ | (6,975) | | $ | (20,993) | | (301.0) | % | | $ | (55,045) | | $ | (45,632) | | $ | (9,413) | | (20.6) | % |
Restructuring expense | | | 279 | | | 804 | | | (525) | | | | | | 1,614 | | | 6,380 | | | (4,766) | | | |
Business integration expense | | | 18,450 | | | 11,346 | | | 7,104 | | | | | | 30,621 | | | 35,702 | | | (5,081) | | | |
Loss on assets held for sale | | | — | | | — | | | — | | | | | | 647 | | | — | | | 647 | | | |
Debt modification costs | | | 848 | | | — | | | 848 | | | | | | 848 | | | — | | | 848 | | | |
Gain on sale of assets | | | — | | | (13,317) | | | 13,317 | | | | | | — | | | (13,317) | | | 13,317 | | | |
Depreciation | | | 692 | | | 82 | | | 610 | | | | | | 1,407 | | | 1,963 | | | (556) | | | |
Stock-based compensation | | | 1,484 | | | 531 | | | 953 | | | | | | 3,105 | | | 2,072 | | | 1,033 | | | |
Adjusted EBITDA (non-GAAP) | | $ | (6,215) | | $ | (7,529) | | $ | 1,314 | | 17.5 | % | | $ | (16,803) | | $ | (12,832) | | $ | (3,971) | | (30.9) | % |
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Adtalem Global Education: | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (GAAP) | | $ | 36,821 | | $ | 45,869 | | $ | (9,048) | | (19.7) | % | | $ | 87,358 | | $ | 71,114 | | $ | 16,244 | | 22.8 | % |
Loss (income) from discontinued operations | | | 620 | | | 2,694 | | | (2,074) | | | | | | (245) | | | 7,088 | | | (7,333) | | | |
Interest expense | | | 16,560 | | | 14,457 | | | 2,103 | | | | | | 48,910 | | | 47,806 | | | 1,104 | | | |
Other income, net | | | (2,871) | | | (3,980) | | | 1,109 | | | | | | (8,648) | | | (3,301) | | | (5,347) | | | |
Provision for income taxes | | | 10,595 | | | 389 | | | 10,206 | | | | | | 21,156 | | | 5,906 | | | 15,250 | | | |
Operating income (GAAP) | | | 61,725 | | | 59,429 | | | 2,296 | | | | | | 148,531 | | | 128,613 | | | 19,918 | | | |
Depreciation and amortization | | | 19,678 | | | 24,389 | | | (4,711) | | | | | | 60,402 | | | 80,554 | | | (20,152) | | | |
Stock-based compensation | | | 5,900 | | | 2,795 | | | 3,105 | | | | | | 19,405 | | | 10,908 | | | 8,497 | | | |
Restructuring expense | | | 473 | | | 1,278 | | | (805) | | | | | | 1,217 | | | 17,706 | | | (16,489) | | | |
Business integration expense | | | 18,450 | | | 11,346 | | | 7,104 | | | | | | 30,621 | | | 35,702 | | | (5,081) | | | |
Litigation reserve | | | — | | | — | | | — | | | | | | 18,500 | | | — | | | 18,500 | | | |
Loss on assets held for sale | | | — | | | — | | | — | | | | | | 647 | | | — | | | 647 | | | |
Debt modification costs | | | 848 | | | — | | | 848 | | | | | | 848 | | | — | | | 848 | | | |
Gain on sale of assets | | | — | | | (13,317) | | | 13,317 | | | | | | — | | | (13,317) | | | 13,317 | | | |
Adjusted EBITDA (non-GAAP) | | $ | 107,074 | | $ | 85,920 | | $ | 21,154 | | 24.6 | % | | $ | 280,171 | | $ | 260,166 | | $ | 20,005 | | 7.7 | % |
Adjusted EBITDA margin (non-GAAP) | | | 25.9 | % | | 23.3 | % | | | | | | | | 23.8 | % | | 24.0 | % | | | | | |
Adtalem Global Education Inc.
Non-GAAP Earnings Disclosure
(unaudited)
(in thousands, except per share data)
| | Three Months Ended | | Nine Months Ended | ||||||||
| | March 31, | | March 31, | ||||||||
|
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Net income (GAAP) | | $ | 36,821 | | $ | 45,869 | | $ | 87,358 | | $ | 71,114 |
Restructuring expense | | | 473 | | | 1,278 | | | 1,217 | | | 17,706 |
Business integration expense | | | 18,450 | | | 11,346 | | | 30,621 | | | 35,702 |
Intangible amortization expense | | | 8,286 | | | 14,232 | | | 28,296 | | | 48,936 |
Gain on sale of assets | | | — | | | (13,317) | | | — | | | (13,317) |
Write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, investment impairment, loss on assets held for sale, and debt modification costs | | | 1,961 | | | — | | | 21,108 | | | 9,226 |
Net tax benefit related to a valuation allowance release | | | — | | | (6,184) | | | — | | | (6,184) |
Income tax impact on non-GAAP adjustments (1) | | | (7,260) | | | (4,359) | | | (19,355) | | | (23,341) |
Loss (income) from discontinued operations | | | 620 | | | 2,694 | | | (245) | | | 7,088 |
Adjusted net income (non-GAAP) | | $ | 59,351 | | $ | 51,559 | | $ | 149,000 | | $ | 146,930 |
| (1) | Represents the income tax impact of non-GAAP continuing operations adjustments that is recognized in our GAAP financial statements. |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | March 31, | | March 31, | ||||||||
|
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Diluted earnings per share (GAAP) | | $ | 0.93 | | $ | 1.00 | | $ | 2.14 | | $ | 1.54 |
Effect on diluted earnings per share: | | | | | | | | | | | | |
Restructuring expense | | | 0.01 | | | 0.03 | | | 0.03 | | | 0.38 |
Business integration expense | | | 0.47 | | | 0.25 | | | 0.75 | | | 0.77 |
Intangible amortization expense | | | 0.21 | | | 0.31 | | | 0.69 | | | 1.06 |
Gain on sale of assets | | | — | | | (0.29) | | | — | | | (0.29) |
Write-off of debt discount and issuance costs, gain on extinguishment of debt, litigation reserve, investment impairment, loss on assets held for sale, and debt modification costs | | | 0.05 | | | — | | | 0.52 | | | 0.20 |
Net tax benefit related to a valuation allowance release | | | — | | | (0.14) | | | — | | | (0.13) |
Income tax impact on non-GAAP adjustments (1) | | | (0.18) | | | (0.10) | | | (0.47) | | | (0.51) |
Loss (income) from discontinued operations | | | 0.02 | | | 0.06 | | | (0.01) | | | 0.15 |
Adjusted earnings per share (non-GAAP) | | $ | 1.50 | | $ | 1.13 | | $ | 3.65 | | $ | 3.19 |
Diluted shares used in non-GAAP EPS calculation | | | 39,636 | | | 45,801 | | | 40,874 | | | 46,089 |
Note: May not sum due to rounding.
| (1) | Represents the income tax impact of non-GAAP continuing operations adjustments that is recognized in our GAAP financial statements. |
Adtalem Global Education Inc.
Non-GAAP Free Cash Flow Disclosure
(unaudited)
(in thousands)
| | Three Months Ended | | Nine Months Ended | | Twelve Months Ended | |||||||||||||||||||||
| | FY24 | | FY23 | | FY24 | | FY23 | | FY24 | | FY24 | | FY24 | | FY23 | | FY23 | |||||||||
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| Q3 |
| Q3 |
| Q3 |
| Q3 |
| Q3 |
| Q2 |
| Q1 |
| Q4 |
| Q3 | |||||||||
Net cash provided by operating activities-continuing operations (GAAP) | | $ | 163,740 | | $ | 107,544 | | $ | 246,809 | | $ | 149,821 | | $ | 302,672 | | $ | 246,476 | | $ | 204,934 | | $ | 205,684 | | $ | 255,052 |
Capital expenditures | | | (21,686) | | | (9,309) | | | (52,014) | | | (19,056) | | | (69,966) | | | (57,589) | | | (46,503) | | | (37,008) | | | (27,861) |
Free cash flow (non-GAAP) | | $ | 142,054 | | $ | 98,235 | | $ | 194,795 | | $ | 130,765 | | $ | 232,706 | | $ | 188,887 | | $ | 158,431 | | $ | 168,676 | | $ | 227,191 |
Adtalem Global Education Inc.
Non-GAAP Net Leverage Disclosure
(unaudited)
(in thousands)
| | Twelve Months Ended | |
|
| March 31, 2024 | |
Adtalem Global Education: | | | |
Net income (GAAP) | | $ | 109,602 |
Loss from discontinued operations | | | 1,061 |
Interest expense | | | 64,204 |
Other income, net | | | (12,312) |
Provision for income taxes | | | 25,533 |
Depreciation and amortization | | | 82,662 |
Stock-based compensation | | | 22,796 |
Restructuring expense | | | 2,328 |
Business integration expense | | | 37,580 |
Litigation reserve | | | 28,500 |
Loss on assets held for sale | | | 647 |
Debt modification costs | | | 848 |
Adjusted EBITDA (non-GAAP) | | $ | 363,449 |
| | | |
| | March 31, 2024 | |
Long-term debt | | $ | 658,283 |
Less: Cash and cash equivalents | | | (179,762) |
Net debt (non-GAAP) | | $ | 478,521 |
| | | |
Net leverage (non-GAAP) | | | 1.3 x |