Adtalem (NYSE:ATGE) Surprises With Strong Q1, Guides For Strong Full-Year Sales

Kayode Omotosho /
2024/05/02 4:48 pm EDT

Vocational education company Adtalem Global Education (NYSE:ATGE) beat analysts' expectations in Q1 CY2024, with revenue up 11.8% year on year to $412.7 million. The company's full-year revenue guidance of $1.57 billion at the midpoint also came in 1.8% above analysts' estimates. It made a non-GAAP profit of $1.50 per share, improving from its profit of $1.13 per share in the same quarter last year.

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Adtalem (ATGE) Q1 CY2024 Highlights:

  • Revenue: $412.7 million vs analyst estimates of $391.7 million (5.4% beat)
  • EPS (non-GAAP): $1.50 vs analyst estimates of $1.16 (29.7% beat)
  • The company lifted its revenue guidance for the full year from $1.54 billion to $1.57 billion at the midpoint, a 1.9% increase
  • Gross Margin (GAAP): 57.5%, up from 55.1% in the same quarter last year
  • Free Cash Flow of $142.1 million is up from -$22.38 million in the previous quarter
  • Market Capitalization: $1.98 billion

“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.

Formerly known as DeVry Education Group, Adtalem Global Education (NYSE:ATGE) is a global provider of workforce solutions and educational services.

Education Services

A whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.

Sales Growth

Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Adtalem's annualized revenue growth rate of 7.6% over the last five years was weak for a consumer discretionary business. Adtalem Total RevenueWithin consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Adtalem's annualized revenue growth of 11.1% over the last two years is above its five-year trend, suggesting some bright spots.

This quarter, Adtalem reported robust year-on-year revenue growth of 11.8%, and its $412.7 million of revenue exceeded Wall Street's estimates by 5.4%. Looking ahead, Wall Street expects sales to grow 4.7% over the next 12 months, a deceleration from this quarter.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Adtalem has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 10.7%, slightly better than the broader consumer discretionary sector.

Adtalem Free Cash Flow Margin

Adtalem's free cash flow came in at $142.1 million in Q1, equivalent to a 34.4% margin and up 43.9% year on year. Over the next year, analysts predict Adtalem's cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 15.6% will decrease to 10.4%.

Key Takeaways from Adtalem's Q1 Results

We were impressed by how significantly Adtalem blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates as it recorded 85,809 student enrollments.

Looking ahead, the company raised its full-year revenue and EPS guidance significantly beating Wall Street's projections. Overall, we think this was a strong quarter that should satisfy shareholders. The stock is flat after reporting and currently trades at $52.4 per share.

So should you invest in Adtalem right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.