Adtalem Global Education Inc (ATGE) 2020 Q4 法說會逐字稿

Greetings, and welcome to the Adtalem Global Education Fourth Quarter Fiscal Year 2020 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I will now turn the conference over to our host, Maureen Resac, Vice President, Treasury and Investor Relations. Thank you. You may begin.

Thank you, and good afternoon. With me today from Adtalem'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 provision of the Private Securities Litigation Reform Act of 1995 with respect to the future performance and financial condition of Adtalem 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 of our most recent annual report on Form 10-K filed with the SEC 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 GAAP measures. Our press release, which contains the GAAP financial and other quantitative information to be discussed today as well as a reconciliation of GAAP to non-GAAP 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 fourth quarter and full year results reflect the application of discontinued operations for our former Business & Law segment as a result of the divestiture of Adtalem 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 today. On our call, I will discuss the highlights from our fourth quarter and full fiscal year before turning to performance in our business segments and our strategic outlook. I will then turn the call over to Mike to discuss our financial results before we open the line up for questions.

When we began fiscal 2020, we were confident that we would continue to grow our enrollments and revenue based on, one, our workforce solutions provider enterprise strategy; and two, the improvements we have made in the previous year in our talent, marketing and student services operations. We ended the fourth quarter of fiscal 2020 on a strong note, delivering healthy revenue and earnings results and demonstrating that we were on track prior to the COVID-19 pandemic to meet our financial plan.

Additionally, we have navigated through the unprecedented challenges brought on by the pandemic. Our businesses proved resilient as we pivoted quickly, leveraging our prior experience in crisis management, our online learning tools and virtual formats and our strong leadership team to continue driving results.

Our workforce solutions provider strategy, including the further streamlining of our portfolio through the completion of the divestiture of Adtalem Brazil, which narrowed our focus solely on both Medical and Healthcare and Financial Services industries and serve to fortify our balance sheet, has allowed us to further focus on the health care supply and demand imbalances we have been highlighting for decades as they have now become a national dialogue.

And as upskilling and certification in financial services is now more than ever important to continued employment for current employees and new employment for those displaced from other industries as a result of the pandemic, we remain on track towards achieving our long-term growth targets.

While we were not immune to the challenges brought on by this global health crisis as the postponement of clinical weeks across Medical and Healthcare and the shift to virtual conferences and reduced spending by our Financial Services customers adversely impacted our results, our ability to utilize our existing infrastructure and our underlying strength in online learning modalities to employ new and emerging technologies and maintain superior academic quality and enhance the overall student experience allowed us to drive positive results.

Demand for our earnings remains strong, and in particular, our on-campus BSN Program, all of which is currently online, experienced significant enrollment growth during the fourth quarter. And we anticipate this trend to continue into fiscal 2021 as the demand for health care workers continues to increase. Also in the second half of the fiscal year 2020, we increased new student enrollment within the RN to BSN program nearly 4% over the same period in the prior year.

Our proactive approach provided (sic - proved) critical throughout this difficult time. We paid close attention to the needs of our students and invested in providing the additional support they needed, which included a focus on mental health and counseling resources and increased touch points between students. As a result, students have taken notice and can be seen by an overall increase in our Chamberlain Net Promoter Score results across all of our programs.

Other proactive changes we made during the fourth quarter included the launch of online CAMS certification testing and our 24-hour virtual ACAMS conference, which both helped to minimize disruption from members obtaining continuing credits towards ongoing certification and resulted in the largest number of paying participants of any ACAMS conference to date.

Every indication we have seen points to increased recognition amongst the learners and consumers that these virtual education modalities are effective in delivering quality education. As a result, underlying demand for our programs continues to increase.

In our Medical and Healthcare segment, the biggest challenge we faced was managing clinical weeks for students to keep their education on track. As the hospital system operating environment rapidly shut down early in the quarter, clinicals were temporarily halted across the country, while health care institutions turned their full attention to combating the pandemic.

Undoubtedly, in-person clinicals remain a challenge that all medical schools currently face. However, given the growing medical professional shortage in the U.S., these clinicals cannot be postponed until the pandemic subsides.

Fortunately, health care systems are becoming more agile and the drive to return to in-person clinicals is a top priority. In particular, we are seeing increasing willingness of clinical partners to conduct in-person clinicals safely in a COVID-19 environment as the general understanding is that treating COVID-19 patients is an important experience for prospective doctors' and nurses' education.

As the largest provider of health care professionals in the U.S., the geographic diversity of our clinical partners has proven to be a significant differentiator for Chamberlain and our medical and veterinary schools, allowing us to leverage the availability of partners in areas that are not COVID-19 hotspots. Where practical, we have also increasingly supplemented in-person clinicals with virtual training, including utilizing capabilities within telehealth to address these challenges.

Medical and Healthcare demonstrated strong results and drove superior academic outcomes for our students in Q4. New and total student enrollment increased 5.9% and 6.9% across the vertical, respectively. Demand for offerings within Chamberlain remained robust as new student enrollments in the May session reached an all-time May enrollment time.

Within Chamberlain, students have achieved a first-time NCLEX pass rate of 92%, on par with the national average. We continue to add quality curriculum to our programs, recently adding training on how to provide virtual health care via telehealth. With this program, we have also increased our touch points with students, moved our student academic support online and started to work with them in a simulated care environment until in-person clinicals can resume.

To accommodate the added demands of the COVID-19 environment and to be responsive to our students, many of whom are working, we have instituted the care-to-pause program within Chamberlain, allowing students the ability to temporarily pause their participation in a program and then seamlessly, reenter once they are ready without academic or financial penalty.

We believe that providing this flexibility is critical and will support the long-term enrollment of our students. It will also continue to build the brand as a partner to our students and employers. This added flexibility across our programs has been well received, and we see strong total enrollment within our post-licensure programs.

Additionally, to further support our students, we deployed approximately $8 million of CARES Act funds amongst nearly 8,000 students. Although we were only required to deploy half of the CARES Act fund to students, we chose to deploy all of the funds we received directly to students in the form of emergency financial support in their time of need.

At the same time, we have developed opportunities that encourage new, former and prospective students to experience Chamberlain, which further supports brand awareness. Our acute care readiness program has registered over 3,000 applicants to date. In addition, we have developed an NCLEX readiness course with 7,000 registereds from a wide variety of nursing schools across the country and a contact tracing course with over 2,000 registered in just 3 weeks of availability.

In addition, our #CareforCaregivers effort launched to support and celebrate frontline health care workers has had tremendous success. To date, we've had over 40 million views of the associated videos and 300,000-plus visits to the website. This type of cross-segment brand building and links to discounts or offers from brands such as Crocs, Aerosoles, (inaudible) Counseling and Uber Eats, amongst others, is a demonstration of our values, thought leadership and positioning in the market.

AUC and Ross Med Residency match rates have increased, with Ross Med now exceeding 95% and AUC reaching 92%. Ross Vet had a very strong quarter with all-time high May enrollments bolstered by strong demand for our vet prep course, which is currently being offered online. The long-term effectiveness of our brand awareness efforts within Ross Vet has delivered with applicants for the September 2020 session continuing to show strong increases.

Additionally, Ross Vet's most recent first time NAVLE pass rate was 88%. We continue to focus on investing in superior online instruction and advancing partnerships across the medical and health care institution by developing our content for online and virtual instruction in lockstep with our clinical partners.

A recent organizational restructuring that facilitates our medical schools sharing and developing best practices is enabling our 2 medical schools to collectively work together to obtain clinical partners, creating additional opportunities for our students to get access to required clinical training.

Addressing the health care shortage, while at the same time, maintaining our commitment to creating equitable access to education has long been a cornerstone of Adtalem's mission. Through partnerships with 5 HBCUs and 4 HSIs as well as our already diverse student population, we are supporting a more diverse workforce within the U.S. health care system. And we will continue to strive to provide high-quality education to help underserved communities and tackle those health care disparities highlighted by the current pandemic.

Near-term demand remains strong for nurses, doctors and veterinarians, which is evidenced in the positive employment trends. In addition, we are working with our hospital partners to help solve issues arising out of the pandemic, including managing staff burnout. As the significant supply and demand imbalance continues, our programs are uniquely positioned to address these challenges and assist our employer partners in high-quality patient care.

Turning to Financial Services. During the fourth quarter, our financial services vertical made substantial progress mitigating downside risk and capturing demand increased by the pandemic. ACAMS widely expanded certifications and training, offering a greater range of value to banking and compliance customers by providing enhanced tools and training to front line workers to better combat fraud in an increasingly virtual environment.

Becker, which faced disruption from the closure of CPA testing centers, continues to work closely with testing organizations to manage through their backlog and launched a first of its kind webinar for incoming students to introduce and walk them through the examination preparation process.

ACAMS global conferences have been significantly affected by the COVID-19 pandemic, and mitigating this impact remains a focus area for our teams. With in-person conferences being an important component of ACAMS, to replace those experiences we launched our 24-hour virtual summit to connect the global compliance community and increase accessibility to our conferences in an online format.

We are encouraged by the results so far as this completely digital conference brought in 2,600 paid attendees, 65% of whom had never previously attended an ACAMS conference. Attendees joined from over 100 countries, drawing increased attendance through the elimination of travel logistics and expenses. Participants also have the opportunity to earn CAMS certification continuing education credits serving as an additional emphasis to drive conference attendance.

Feedback from attendees has been positive, underscored by a strong conference Net Promoter Score with many attendees applauding the live feeling of the setting and drawing favorable comparisons to the environment of our in-person conferences. While the price point for this conference was lower than our in-person setting, we are confident that virtual conferences can deliver a similar margin profile to in-person alternatives.

Further, the increased accessibility and attendance of the virtual conferences illustrates the potential for incremental operating income growth. We anticipate that all conferences in the first half of fiscal year 2021 will be held virtually, including our Las Vegas conference at the end of September.

In addition to conferences, ACAMS has pivoted to meet the heightened needs of cybersecurity and fraud offerings driven by the shift to an entirely virtual environment, expanding into areas with the strongest demand from enterprise customers, we developed familiar customer and transactions monitoring short course offerings launched for frontline and operational teams in the Financial Services sector.

These courses equip professionals with the core competencies required to perform due diligence for their customers in this high-risk environment. Tools such as these are invaluable to the compliance community and operational teams in the financial sector that serve as the frontline to defend against fraud. We are also investing in other areas where fraud has increased, particularly in cryptocurrency fraud as the trends towards digital banking accelerate.

Sanctions training and other certifications to meet regulatory requirements remain a significant opportunity. Our global sanction certification, CGSS, sold in 93 countries, has gained momentum since its launch in January, with more than 580 professionals certified. In June to provide an introduction to the necessary steps for the financial sector to meet growing requirements around modern slavery and human trafficking risks, we launched our first new modern slavery and human trafficking certificate.

Although Becker has experienced some COVID-19 headwinds, including delayed CPA testing and budget constraints at our B2B partners, we are now seeing testing centers reopen, and we continue to leverage alternative modalities for test prep. Becker has developed an increased focus on B2B sales and is making progress with product bundles developed for CPA and CPE offerings.

We are investing heavily in the CPE market, which represents a significant opportunity for us to leverage back our strong brand recognition to grow market share. For example, we have hosted CPE webinars to help the financial sector better understand the evolving tax environment.

OnCourse Learning has shown strong performance improvement as it has ramped up, particularly driven by tailwinds in the current mortgage environment. We continue to see high demand for mortgage loan officer training and have continued to strengthen our virtual delivery format.

We are driving persistent growth through our strong enterprise relationships, such as our partnership with Quicken Loans. We have successfully trained over 8,000 Quicken Loan mortgage offices over the past decade as they continue to expand the number of mortgage loan officers and use OnCourse Learning's products to meet state licensing requirements.

Adtalem continues to maintain its leading position across both verticals, meeting demand in attractive and growing markets. Our newly streamlined portfolio has kept us agile, allowing us to adapt and enhance our offerings to address the changing needs of members, customers and employer partners as the pandemic continues to result in disruption, keeping us aligned with our mission.

Our experienced leadership team has a history of resiliency and crisis response and has mitigated challenges to successfully manage through the current operating environment, supported by our solid financial program -- profile. We have a strong balance sheet with ample liquidity and flexibility, supported by additional cash on hand following the completion of the sale of our Brazil assets in the fourth quarter as we are focused on leveraging the strength to drive growth across both verticals.

As we turn our attention to fiscal year 2021, we are confident that we are well positioned to meet increased demand in the industries we serve. Given the uncertainty presented by the COVID-19 pandemic, we will not be providing guidance for fiscal year 2021 at this time. However, as I noted earlier, the current trends we are seeing, coupled with the strength of our team and offerings, gives us confidence in our long-term revenue and earnings growth trajectory.

In conclusion, we remain focused on our workforce solutions provider strategy, allowing Adtalem to accelerate growth, enhance our operational effectiveness and invest in academic quality and superior student outcome. I am so proud of the entire Adtalem team, not only for their steadfast commitment to our education mission but for their agility and nimbleness to adjust during these times of uncertainty as well as their continued demonstration of our values.

With that, I will now turn the call over to Mike to discuss our financial highlights.

Thank you, Lisa, and good afternoon, everyone. For our fiscal year 2020, revenue increased 3.8% to $1.1 billion, which was driven by growth in both Medical and Healthcare and Financial Services. Diluted earnings per share from continuing operations, excluding special items, for the fiscal year 2020 was $2.28 per share, in line with the prior year.

As Lisa mentioned, the COVID-19 pandemic brought challenges for our business. The most significant variables to our performance are the ability for medical students to fully complete their clinical rotations and for financial services to host in person conferences as well as B2B customers prioritizing needed training in the face of budgetary constraints. For the fiscal year 2020, the estimated impact from these variables to revenue and earnings per share was approximately $29 million and in the range of $0.27 to $0.29 per share.

As you may recall from our last quarter earnings call, we recognize that the COVID-19 pandemic brought a range of potential outcomes as we entered the fourth quarter, and we chose not to provide guidance. It is important to note that excluding the impact of COVID-19, we estimate that we would have met or exceeded our previously issued full year guidance for revenue growth of between 5% and 7% and earnings per share, excluding special items, growth of between 7% and 9%.

Despite these challenges during fiscal 2020, we continue to successfully execute our workforce solutions provider strategy. The resiliency of our team, coupled with our continued execution and ability to react quickly, gives us confidence that we remain on track to achieve our longer-term goals.

Turning to the fourth quarter 2020 more specifically, we delivered solid results. We pivoted quickly to evolve our offerings to meet the needs of our learners and customers highlighted by our successful transition to our online platforms for classes as well as virtual conferences and clinicals.

In addition, we worked diligently to enhance efficiencies through broad-based cost containment initiatives, further mitigating the adverse impact on our profitability and positioning Adtalem for long-term margin expansion.

During the fourth quarter, revenue decreased 1.7% to $259.7 million. Temporary COVID-19 disruptions across the business drove the year-over-year revenue decline. The revenue decline was due to reduced clinical weeks for medical schools, the impact of canceling in-person conferences with ACAMS and constrained B2B customer spending across financial services.

The estimated impact of COVID-19 on revenue in the fourth quarter of this year was approximately $28 million, and we deployed mitigation steps, which significantly reduced the impact COVID-19 had on our business. Although we already had strong online and virtual capabilities, we have continued to invest in enhancements to our offerings in light of the change in learning modalities driven by this pandemic.

Cost of educational services was $116.1 million in the fourth quarter compared with $122 million in the prior year period, a 4.9% decrease year-over-year. An increase related to the addition of OnCourse Learning was more than offset by increased cost efficiencies across the organization.

Some reductions in expense were temporary and driven by variable costs associated with our reduction in revenue. However, we also experienced sustainable cost reduction due to leveraging of technology throughout our business and improved processes.

Student services and administrative expenses were $103.7 million in the fourth quarter compared with $90.2 million in the prior year period, which included $5 million of inorganic cost increase due to the OnCourse Learning acquisition. We also increased our investments in marketing and advertising, while at the same time, supporting projects aimed at identifying areas to both drive revenue and generate greater cost efficiencies, which we believe will allow us to deliver profitable growth as we navigate the current environment.

Operating income, excluding special items, was $40 million compared with $52.1 million in the prior year. The estimated impact of the COVID-19 pandemic on operating income was approximately $16 million for the quarter.

Net income from continuing operations, excluding special items, was $30.5 million compared with $37.8 million in the prior year period. And diluted earnings per share from continuing operations, excluding special items, was $0.58 compared to $0.66 in the prior year period.

Now turning to our segment results for the quarter. Starting with Medical and Healthcare, revenue for the fourth quarter was $211.4 million, which was flat year-over-year. Revenue growth at Chamberlain was offset by declines at our medical schools due to lower clinical and housing revenue as a result of COVID-19.

Chamberlain revenue increased 9.1% year-over-year as new and total student enrollment increased 5.4% and 8.2%, respectively. Our May new student enrollment is the highest May enrollment in our history, demonstrating the return on marketing investments we have made over the past several quarters.

Revenue in the fourth quarter for the medical and veterinary schools declined 12.9% year-over-year, driven largely by the impact of COVID-19 on reduced clinical weeks at the medical schools and loss of housing revenue. Importantly, absent COVID-19, we estimate that medical and veterinary revenue would have delivered year-over-year growth in the quarter.

The Medical and Healthcare segment operating income for the fourth quarter was $39.6 million, remaining nearly flat year-over-year despite the clinical revenue headwind from COVID-19. We were able to offset this negative impact through strong student enrollment and prudent cost management within the vertical.

Turning now to our Financial Services segment. Fourth quarter revenue decreased 9.7% to $48.3 million. The overall segment decline was driven by COVID-19 impacts in ACAMS and Becker. ACAMS revenue declined as a result of the cancellation of in-person conferences. Becker's revenue decrease was driven by the temporary closure of CPA test-taking centers and constrained spend on the part of our B2B customers. This decrease was partially offset by the addition of OnCourse Learning revenue, which continues to ramp up and meet heightened demand for its mortgage offerings.

Excluding special items, operating income in the fourth quarter declined 46.9% to $8.5 million. The decrease in segment operating income is primarily the result of COVID-driven declines in ACAMS and Becker revenue and corporate costs that were previously allocated to our former Business & Law segment.

Turning to our balance sheet and liquidity. Adtalem continues to maintain a robust financial position, which we are focused on leveraging to execute our workforce solutions provider strategy and accelerate growth. Net cash provided by continuing operations for fiscal 2020 totaled $149.6 million, a 19.4% decrease compared with the prior year.

Our capital expenditures for the year totaled $44.1 million. As a result, we generated free cash flow of $105.4 million compared with $127.9 million last year. This decline is largely driven by lower earnings impacted by COVID-19. We define free cash flow as cash provided by continuing operations less capital expenditures.

We closed fiscal 2020 with cash and cash equivalents of $500.5 million and outstanding bank borrowings of $294 million. We have no borrowings under our revolver. Our balance sheet ensures ample liquidity to continue to successfully manage through the pandemic while executing on our strategic growth priorities in the current environment.

We remain committed to a thoughtful capital allocation approach, which includes strategic M&A, investing to grow the business and returning capital to shareholders as we continue to maintain financial flexibility.

Moving to our forward-looking perspective. We are confident in our long-term trajectory and our ability to grow revenue in the mid-single digits and earnings per share in the low double digits over the long term. However, for fiscal year 2021, we will not be providing full year guidance at this time due to uncertainties associated with COVID-19.

With that, I will now turn the call over to the operator for Q&A.

(Operator Instructions) Our first question comes from Jeff Silber with BMO Capital Markets.

I appreciate you guys trying to highlight the COVID-19 impact on the quarterly and annual results. Were there seasonal issues in the fourth quarter? And the reason I'm asking, would it make sense if this pandemic continues for the next -- for the rest of your fiscal year to just kind of annualize the impact on the fourth quarter over the rest of the year?

Jeff, this is Lisa. Thank you for the question. So what I would say is we do expect some continued impact into Q1 and moving into next year, but very different, as we control the controllables, than we saw in Q4.

So if I break down the 3 buckets, just as a reminder from our last call, the majority of the impact, and you see that in the results is from clinicals and specific to the 2 medical schools. As we sit here today, about 80% of the clinical students are back -- the clinicals are open and students are back in those clinicals, and students are currently placed and/or they're in the elective virtual clinicals, but a smaller percentage by far of those students not currently placed in clinicals.

Ross Vet has their seventh semester students back on-campus and in the needed clinicals. And then, of course, on the Chamberlain nursing side, while we don't have specifically clinical revenue, so to speak, clinicals are needed for FNP and some of the other programs, as you know. And those, for the most part, are now being placed, whether it's telehealth or back into the hospital system as those open up.

And so our primary sort of confidence here is that we're currently doing quite well. But of course, we don't know what will happen with the pandemic in terms of further surges or second wave, et cetera, into the fall and certainly for the first half of the fiscal year, but that is the primary impact that you're seeing in these results.

Second, on the Financial Services side, there's 2 pieces. Becker, those testing sites were closed. We now know that 90% of the Prometric testing centers are open at about 60% capacity for social distancing, but that allows us then to have students go through and then, obviously, will be the impetus for students to take that CPA review.

And then finally, the ACAMS conferences, transitioning those from physical to virtual and seeing what the impact will be there, certainly our first virtual conference was successful. And the next largest one that is a highlight of the conference schedule for ACAMS for the year Las Vegas is virtual, and we're seeing good momentum in terms of paid registrants. So that's how we view COVID sort of moving into the next fiscal year.

Okay. That's actually very helpful. I appreciate that. Can you give us some insight on both the nursing side and the medical side in terms of current enrollment trends, I guess, for the starts that are coming up this fall or, I guess, the July start even in Chamberlain?

Yes, sure can. So I'll start with the medical schools. You can see that the enrollments there for May trending well. We're seeing continued momentum for the medical and vet schools, so Med, Vet schools in the September session. Actually, we have visibility there. And we have not seen any adverse effect on those enrollments given that we will be starting at the September session online for the basic sciences for those 3 schools. Trended -- the enrollments and admissions are trending quite well.

Chamberlain had a record enrollment period for May. The on-site BSN, which I use as a moniker, obviously, that is online currently, was up in double-digit growth as we see that demand for the BSN and the healthcare professions being even accelerated with the pandemic.

We do see some pressure on the RN to BSN, which is understandable going into the fall as these nurses are obviously on the front line. But certainly, not in any way in a negative trend at all, but just a slower growth there, which makes sense. And the other online programs, good trends both for May and into September. So we're feeling very good about the momentum for admissions and enrollment into the fall season.

Okay. Great. One question. You disclosed in your K about some provisional recertification for AUC and Ross because of -- I'm just reading it here, increase in our repeated Title IV compliance audit filings. Can we just get a little bit more color about what's going on there? And should this be a concern for investors?

Yes, sure. No, not a concern. Obviously, something we always wanted to disclose. That had to do with processing around some Title IV funding, et cetera. But to give you some context of the couple hundreds of students at AUC, I'll use the AUC number because I believe I know that one from memory, [slot IV] claims will be the slow processing of Title IV or not getting the right funds.

Obviously, as we transition to now having folks in the office and the remote work and things like that, we had some issues there, minor, all been managed through, and we have a good relationship there. So no concerns for investors that that's a larger issue at all.

Our next question comes from Jeff Meuler with Baird.

How are you thinking about kind of the marketing budget across the medical and health care institutions? There was the period where you pulled back post the hurricanes and then you kind of had to normalize it. But it seems like the trends are going well from a new enrollment perspective. So do you further lean in? And should we expect another increase? Or is it at a point where you'd expect to start to show some leverage?

Yes. I will start, and then I will ask Mike to further comment on that, Jeff -- Jeff Meuler, so that everyone knows how to say your name. On the Chamberlain side, you will recall that we were doing some marketing, certainly, obviously, on the RN to BSN to turn that. And we feel very confident that we have done so, and this is macro trends as we look at RN to BSN.

We've also invested in Chamberlain as a brand. The pandemic has actually helped us to do that even more as we look at our care for caregivers and some of the items that I mentioned in the prepared remarks, we've really been able to drive some brand awareness through that marketing. And I think from a Chamberlain perspective, we've got the right level of investment there for the growth that we're seeing.

And in fact, the growth we're seeing, while, obviously, some of it is driven by just the burgeoning demand, some of it is from quarter-to-quarter investment in the last [3] to 4 quarters specifically. Mike, why don't I ask you to comment on the [med schools] and the overall marketing percentages and we'll see if we've got the question answered?

Sure. So to your point, Jeff, this past year, we stepped up marketing in a meaningful way. And I would just say that that was inherently driven by analytics around marketing where we started -- we continue to look at what's the incremental return on marketing investment versus the cost of the incremental marketing investment.

As we looked earlier in the year, we were underinvested, and you now see the benefits in new enrollment trends in Chamberlain and in med vet. And so this year, we obviously had a fairly significant step-up in marketing.

What I would say as we move forward, we could still see some increase in marketing, but I wouldn't necessarily expect the step-up that you saw this past year. But ultimately, it's going to be return driven. If we see opportunities to profitably, with good ROI characteristics, invest to generate high-quality inquiries that we think have a good propensity to convert, we're going to continue to lean in.

And we're taking a view well beyond the current quarter. We're taking a view of what's the payback on that over the next couple of years. And that's the way we are thinking about it.

Got it. And then -- and that makes sense. Can you address the restructuring actions? And I guess a little bit unclear to me to what extent -- so first, what did you do? What type of savings would you expect? But then I guess maybe from a qualitative perspective, is this more directly in reaction to COVID? Or is this kind of post the Brazil divestiture and kind of rightsizing the size of the overall organization?

Yes. Let me just start before I flip it over to Mike on the details by saying here at Adtalem, this is really about not letting any crisis go to waste. And so there were several pieces that we knew for some time that we needed to address just really from an efficiency perspective.

And then added to that within things within and around the pandemic that lots of companies are seeing real estate footprint as an example when we're seeing the productivity of people at home and then understanding that we don't need necessarily the same number of satellite offices that we have before by way of example. Mike, did you want to add some color to specifics there?

Sure. So of the $18 million restructuring charge, the large majority of that, it was primarily driven by reducing our real estate footprint. To what Lisa indicated, as we evaluated -- as we looked at COVID and we evaluated where people are working and how people work, we looked at certain locations, and we made the decision to close certain offices we had in Chicago, New York and in Florida markets. That makes up the primary element of the restructuring charge.

And obviously, from that, we will have cost savings on an ongoing basis in the low single-digit millions of dollars on an annual basis from these restructuring charges. But we think it's continued cost effectiveness and cost efficiency. And this is one of the things that we're -- we look at these types of things and how to gain -- become more efficient over time.

Okay. And then on Becker accounting, what's the revenue mix between B2B and B2C? And for the B2B customers, how do they typically pay or like is this annual contracts being negotiated lower? Or is there just some big upfront fee when things are signed? Just trying to understand the size of the impact in the quarter.

Yes. Mike, I'll let you start, and then I'll chime in on the mix piece if you like.

Sure. The majority of the revenue in Becker, it ultimately comes through B2B relationships. A large number of them come through contracts that we ultimately negotiate primarily with accounting firms. So everything from the big 4 to the next -- the other next 3 as well in terms of the global 7 as well as a whole series of accounting firms. So we're negotiating contracts on a continued basis with them. That makes up the majority of the revenue. And so it comes through contracts.

The B2C, which is an area during COVID which we've actually started to see -- we've seen more strength, is actually more like traditional e-commerce business where someone's coming through our portal and they're purchasing their CPA test prep product, and they are consuming it, in this instance, primarily online. Historically, some would conduct it online, some would do live in-person classes.

And Jeff, just to put a point on the B2B because, obviously, we've mentioned that there's pressure on those budgets. We have -- our contracts are there, but there are also any number of either CPE offerings or other offerings that CPAs who are already employed and upskilling or wanting certain skills would come to us through the B2B channel.

We just don't know what that's going to look like into the next couple of quarters given that [folks are] pushing out start dates as an example from September to January for new hires, et cetera. We have not had any of the large B2B contracts not renew or anything of that nature, but just are not sure what other spend they're going to have in and around CPAs.

On the B2C side, I would say that is -- we see good momentum, and that is growing primarily -- CPEs did I say, yes -- CPE on the B2C side and part of that we're really leaning into with marketing, et cetera, as well as product development and content development because we see that as an ongoing trend, particularly through the pandemic.

And then I think the other issue with Becker, as I mentioned before, is just this should have hold up in terms of testing. If you're thinking about taking that test, you want to take that review pretty close to when you're actually going to be able to go and sit and schedule your test. And just now over the last couple of weeks, employers have -- and Becker have been encouraging students to go ahead and sign up as these testing centers open.

(Operator Instructions) Next question comes from Greg Pendy with Sidoti.

Just in light of the NCLEX pass rates, hitting 92% and I guess, the demand being there, are there any notable caps in place over the next 12 months that we should be aware of at any of the campuses that are up maybe for review?

Greg, thanks for the question. So what I would say is the opportunity likely is more where we've recently been uncapped or had our caps increased. And so we now have enrollment ability in New Brunswick, as an example, where we can -- the only thing stand in the way of growth there is our ability to have the capacity from a faculty perspective for the students.

So I think the main opportunities there are going to be at campuses that have just either been uncapped or we've had our caps listed as it relates to pre-licensure BSN, so Sacramento, New Brunswick, et cetera, Louisiana. And then that with our master's program there, yes, we are seeing and, in fact, applying for caps to be lifted on the programs. Those are online, so they could be anywhere of an actual program due to results and students coming through and their academic outcomes. So we do see some good momentum there.

Great. And then just one more, if I can. I think on the last call, you mentioned an underperformance. I think specifically at ACAMS, not the financial services. If I'm speaking out of place, just let me know. But just how would you think about this, I guess, after the fourth quarter results on a go-forward basis?

And just given the fact that you've narrowed your focus now to 2 divisions, how are you going to be rating the financial services overall? How should we be thinking about that sort of internally from your scorecard? How are you thinking about what the targets are and hurdle rates are?

Yes. And so let me just start with a little bit of context on that because I think it's really important for us to understand that while the financial services companies are certainly smaller from a relative size perspective to our med healthcare, they represent, of course, 3 companies that are not Title IV and drive revenue that broadens our payer base significantly. So very important to us.

What I mentioned before was not so much decline in ACAMS, but our desire to see it grow a lot faster, given what we know are the opportunities. And frankly, that has just increased from an opportunity perspective, given the pandemic, in large part because of the acceleration into virtual assets and digital banking. So whereas it was always coming, we've sort of seen 2 years of momentum there in a couple of months as the whole world has continued to go virtual.

So from our perspective, we're at an inflection point at ACAMS, growth has plateaued a bit. And we are investing. And of course, it's difficult because you're investing in period for future period momentum and growth. But we are investing in sales and sales talent. We're investing in technology, marketing and a whole product development, and we're seeing some early trends that are really encouraging on the top line.

We mentioned CGSS as an example. But more recently, have introduced our Know Your Customer and other short certifications for those frontline workers who are no longer going into physical branch locations, they are doing their work with folks who are banking digitally.

So lots of opportunity there, but also a need for investment. And for us, it's critical, as we think about our enterprise strategy of being a workforce solutions provider of solving problems for employers. We do that in both finserv and the medical and healthcare industry.

Your next question comes from Alex Paris with Barrington Research.

So I just want to dive a little deeper or get a little clarification on clinicals. Obviously, the biggest challenge within medical and health care for the quarter. Obviously, clinical is going to be postponed until COVID is gone, as you had said, and you're seeing -- and you did note the clinicals were halted early in the quarter. I might have missed it, but where do we stand at this point in terms of clinicals in the medical schools and then specifically within the graduate level nursing, FNP and so on?

Sure. So on the medical side, perhaps what would be helpful is me sort of walking through what has changed. So last quarter, when the pandemic -- and I'll just talk about U.S., when the pandemic really hit the hospital system here sort of in different regions of the country, hospital -- 2 things happened.

The hospitals were not prepared to maintain having those clinical students in there in a safe environment. They didn't have the PPE. And they also had not isolated their, what they call, COVID wards or COVID hospitals. So there was not a place where clinical students could get their practical experience on non-COVID patients.

Over the last 2 to 4 months, depending on the hospital system, that has changed. And students are able to go back safely into clinical settings, and our students have been invited back to about 80% of the clinical spaces that we would otherwise have been in.

We still are working on capacity because, of course, we had students that missed a few weeks or did weeks of elective online and now need to get their physical clinical practicums as well as the new students who are in that stage of going into clinicals. But we feel very confident that we can get them there, that changed.

And then the second thing that changed that I mentioned in my prepared remarks, recall that this is not a hurricane. This is a problem that every medical school in the United States has. And so the general Academic Medical College Academy has said, we have to get clinical students back into the hospitals for 2 reasons: one, the health care system is stretched. And frankly, they could use that workforce and those students, particularly to help with the non-COVID patients.

But then secondly, that this is a really important clinical experience for those nurses and physicians who are ultimately going to go out and be a part of our health care system.

So with those 2 changes, we've seen good momentum in getting the clinicals back, like I said, about 80%. And the only thing we remain cautious about, of course, is if those COVID surges overcome hospital systems again in different pockets. And then we sort of have a plan of action of trying to make sure we're able to move, region by region, these clinical students. So that's what's happening in medical.

If I just take a moment for Chamberlain, to recall, our clinical [share] is not a clinical revenue impact, but it is an incredibly important piece of the education for our students, particularly though of family nurse practitioner. They cannot maintain their track and getting graduated out and getting their placements unless they're able to get clinicals. And so that's our key there.

We've done 2 things, keeping the students and their safety in mind, and that's our top priority. One is really shifting to telehealth, telemedicine clinicals that are actually going extremely well and will also prepare our students because we're going to see as a nation a lot more telehealth from now going forward. That's not going to go away. So it's a great experience for them.

And then we've also done the same thing, made sure that we've got opportunities for them where it's safe, there's PPE, and they're getting the exposure, obviously, in a safe way to how to treat patients. So we're feeling pretty good about being able to place most or almost all of our students who are currently in the pipeline and needing clinical experience in med and in the nursing school.

So the 80% comment that you made, that refers to the medical schools only or does that also include graduate level nursing?

The 80% is a medical school number. The nursing, we're a little higher than that. We have certain students that we need to place. But in general, as we look across the several thousand students, they're either in virtual or telehealth with affiliates or actual clinicals at this point.

Okay. Good. And then lastly, on the Becker, you made a comment that 90% of the Prometric centers are now open. Short of resurgence or a second wave, that should continue to improve going forward?

That's right. But just as a reminder, the capacity in those centers is about 60%. So of course, we've got to encourage students to get in and get signed up, but the actual centers are open. And again, we're all learning, right, how to live in this new normal.

So they figured out how to mask and clean and do all those things that we're all doing to get to that. So I anticipate that those will remain open barring some, like I said, second wave surge or something that changes lots of things, not just that.

So I would think then, kind of summing it up, you should be in a position to give guidance again if it weren't for the big question mark of resurgence and second wave.

Yes. I think that that's accurate. It's just -- it's a pandemic. And so the last thing we want to do with the U.S. public schools, "Yes, let's open. Oops, I'm sorry," 2 days later. So we're just trying to be cautious, but we're also trying to make sure that we're being very transparent about the controllables. And we feel like we've got a really, really good handle, Alex, on the controllables.

There are no further questions at this time. I'll turn it back to Maureen Resac for closing remarks.

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

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.