CVSA 10-K & 10-Q changes, risk factors and insider trading

Adtalem’sCovista’s business operations are subject to numerous risks and uncertainties, some of which are not entirely within our control. Investors should carefully consider the risk factors described below and all other information contained in this Annual Report on Form 10-K before making an investment decision with respect to Adtalem’sCovista’s common stock. If any of the following risks are realized, Adtalem’sCovista’s business, results of operations, financial condition, and cash flows could be materially and adversely affected, and as a result, the price of Adtalem’sCovista’s common stock could be materially and adversely affected. Management cannot predict all the possible risks and uncertainties that may arise. Risks and uncertainties that may affect Adtalem’sCovista’s business include the following:

Risks Related to Adtalem’sCovista’s Regulated Industry

We are subject to regulatory audits, investigations, lawsuits, or other proceedings relating to compliance by the institutions in the AdtalemCovista portfolio with numerous laws and regulations in the U.S. and foreign jurisdictions applicable to the postsecondary education industry.

Due to the regulated nature of proprietary postsecondary institutions, we are subject to audits, compliance reviews, inquiries, complaints, investigations, claims of non-compliance, and lawsuits by federal and state governmental agencies, regulatory agencies, accrediting agencies, present and former students and employees, shareholders, and other third parties, any of whom may allege violations of any of the legal and regulatory requirements applicable to us. If the results of any such claimsclaims, actions, or actionsallegations thereof are unfavorable to us or one or more of our institutions, we may be required to pay monetary judgments, fines, or penalties, be required to repay funds received under Title IV programs or state financial aid programs, have restrictions placed on or terminate our schools’ or programs’ eligibility to participate in Title IV programs or state financial aid programs, have limitations placed on or terminate our schools’ operations or ability to grant degrees and certificates, have our schools’ accreditations restricted or revoked, or be subject to civil or criminal penalties. ED regulations regarding financial responsibility provide that, if any one of our Title IV institutions is unable to pay its obligations under its Program Participation Agreement (“PPA”) as a result of operational issues and/or an enforcement action, our other Title IV institutions, regardless of their compliance with applicable laws and regulations, would not be able to maintain their Title IV eligibility without assisting in the repayment of the non-compliant institution’s Title IV obligations. As a result, even though Adtalem’sCovista’s Title IV institutions are operated through independent entities, an enforcement action against one of our institutions could also have a material adverse effect on the businesses, financial condition, results of operations, and cash flows of Adtalem’sCovista’s other Title IV institutions.

The ongoing regulatory effort aimed at all Title IV participating institutions could be a catalyst for additional or more restrictive legislative or regulatory restrictions, investigations, enforcement actions, and claims.

ED has issued regulations setting forth new standards and procedures related to Borrower Defense to Repayment of Title IV loan obligations,obligations and ED’s right of recoveries against institutions following a successful borrower defense and institutional financial responsibility. It is possible that a findingfinding, allegation, or allegationassertion arising from current or future legal proceedings or governmental administrative actions may create significant liability under the proposedapplicable Borrower Defense to Repayment regulations.

Although OBBBA blockeddelayed implementation of the 2023 Borrower Defense to Repayment regulations until July 1, 2035, the 2020 regulations have been restored and the outcome of any legal proceeding instituted by a private party or governmental authority, facts asserted in pending or future lawsuits, and/or the outcome of any future governmental inquiry, lawsuit, or enforcement action (including matters described in Note 18 “Commitments and Contingencies” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”) could serve asform the basis for claims by students or ED under the Borrower Defense to Repayment regulations, the posting of substantial letters of credit, liability to ED for recoupment of forgiven federal student loans, or the termination of eligibility of our institutions to participate in the Title IV program based on ED’s institutional administrative capability assessment, any of which could, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

We may settle certain matters due to uncertainty in potential outcome, for strategic reasons, as a part of a resolution of other matters, or in order to avoid potentially worse consequences in inherently uncertain judicial or administrative processes. The terms of any such settlement could have a material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate. Additionally, although inconsistent with its usual practices, ED and other regulatory and accrediting bodies havepossess broad discretion to impose significant limitations on us and our business operations arising from acts it determines are in violation of their regulations or standards. Such discretion may be exercised based on facts, allegations, or patterns of conduct, even in the absence of final adjudicated findings. As a result, foreseeable and unforeseeable consequences of prior and prospective adjudicated or settled legal proceedings and regulatory matters could have a material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

ED regulations could require AdtalemCovista to post multiple and substantial letters of credit or other securities in connection with, among other things, certain pending and future claims, investigations, and program reviews, in certain circumstances, regardless of the merits of our actions or available defenses, or, potentially, the severity of any findings or facts stipulated. The aggregate amount of these letters of credit or other required security could materially and adversely limit our borrowing capacity under our credit agreement and our ability to make capital expenditures and other investments aimed at growing and diversifying our operations, sustain and fund our operations, and make dividend payments to shareholders. Adtalem’sCovista’s credit agreement allows AdtalemCovista to post up to $500.0 million in letters of credit. In the event AdtalemCovista is required to post letters of credit in excess of the $500.0 million limit, AdtalemCovista would be required to seek an amendment to its credit agreement or seek an alternative means of providing security required by ED. AdtalemCovista may not be able to obtain the excess letters of credit or security or may only be able to obtain such excess letters of credit or security at significant cost.

In particular, the HEA subjects schools that participate in the various federal student financial aid programs under Title IV, which includes all AdtalemCovista Title IV institutions, to significant regulatory scrutiny. Adtalem’sCovista’s Title IV institutions collectively receive 77%78% of their revenue from Title IV programs. As a result, the suspension, limitation, or termination of the eligibility of any of our institutions to participate in Title IV programs could have a material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

Our institutions that participate in Title IV programs each do so pursuant to a PPA that, among other things, includes commitments to abide by all applicable laws and regulations, such as Incentive Compensation and Substantial Misrepresentation. Alleged violations of such laws or regulations may form the basis of civil actions for violation of state and/or federal false claims statutes predicated on violations of a PPA, including pursuant to lawsuits brought by private plaintiffs on behalf of governments (qui tam actions), that have the potential to generate very significant damages linked to our receipt of Title IV funding from the government over a period of severalmultiple years.

Our Title IV institutions collectively receive 77%78% of their revenue from TitleFederal IVeducation programs.assistance funds. As a result, any reductions in funds available to our students or any delays in payments to us under Title IV and other Federal programs could have a material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

Action by the U.S. Congress to revise the laws governing the federal student financial aid programs or reduce funding for those programs could reduce Adtalem’sCovista’s student enrollment and/or increase its costs of operation. Political and budgetary concerns significantly affect Title IV programs. The U.S. Congress enacted the HEA to be reauthorized on a periodic basis, which most recently occurred in August 2008.

The U.S. Congress can change the laws affecting Title IV programs in annual federal appropriations bills and other laws it enacts between the HEA reauthorizations, as it did in the recent OBBBA,OBBBA. asWe discussedare incontinuing detailto in Item 7. “Management’s Discussionevaluate and Analysisimplement ofthe Financialchanges Conditionmade by OBBBA and Resultsthe ofeffect Operations.”those changes may have on Covista.

At this time, AdtalemCovista cannot predict what additional changeschanges, if any, the U.S. Congress may ultimately make. Since a significant percentage of Adtalem’s revenue is tied to Title IV programs, anyAny action by the U.S. Congress that significantly reduces Title IV program funding or the ability of Adtalem’sCovista’s degree-granting institutions or students to participate in Title IV programs could have a material adverse effect on Adtalem’sCovista’s business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate. Certain legislation, provisions in proposed legislation if enacted, or implementation of existing or future law by a current or future administration, could have a material adverse effect on our business, including but not limited to legislation that limits the enrollment of U.S. citizens in foreign medical schools, legislation that could require institutions to share in the risk of defaulted federal student loans, and legislation that ties institutions’ eligibility for Title IV funds to the earnings of its graduates.

Our ability to comply with several ED regulations is not entirely within our control. In particular, our ability to participate in federal Title IV programs is partially dependent on other factors including the ability of our past students to avoid default on student loans, obtain sufficiently remunerative employment, and of our future students to pay for a portion of their education with private funds. These factors are influenced by broader economic drivers, including the personal or family wealth of our students, the overall employment outlook for their area of study, and the availability of private financing sources. An economic downturn could impact these factors, which could have a material adverse effect on our business, financial condition, results of operation, and cash flows and result in the imposition of significant restrictions on us and our ability to operate. Additionally, institutions may lose Title IV eligibility if the most recent cohort default rate on student loans exceeds 40% or if each of the three most recent cohort default rates exceed 30%. According to ED, the default rate for all Title IV institutions nationally was 0.0% for the fiscal year 20212022 cohort, 0.0% for the fiscal year 20202021 cohort, and 2.3%0.0% for the fiscal year 20192020 cohort. The recently enacted Do No Harm provisions of OBBBA are discussed in detail in Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.Business.” We are currentlycontinuing evaluatingto whetherevaluate the potential impact of the Do No Harm willprovisions impactand anyED’s Adtalemregulations on Covista’s programs.

ED regulations applicable to institutions participating in effectTitle forIV federal Stafford loansprograms prohibit any “substantial misrepresentation” by our Title IV institutions, employees, and agents regarding the nature of the institution’s educational programs, its financial charges, or the employability of its graduates. These regulations may, among other things, subject us to claims of sanctions for statements containing errors made to non-students, including any member of the public, impose liability on us for the conduct of others and expose us to liability even when no actual harm occurs. A “substantial misrepresentation” is any misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment. It is possible that despite our effortscompliance controls to prevent misrepresentations, our employees or service providers may make statements that could be construed as substantial misrepresentations. As a result, we may face complaints from students and prospective students over statements made by us and our agents in advertising and marketing, during the enrollment, admissions and financial aid process, and throughout attendance at any of our Title IV institutions, which would expose us to increased risk of enforcement action and applicable sanctions or other penalties, including potential Borrower Defense to Repayment liabilities, and increased risk of private qui tam actions under the Federal False Claims Act. If ED determines that an institution has engaged in substantial misrepresentation, ED may (1) fine the institution; (2) discharge students’ debt and hold the institution liable for the discharged debt under the HEA and the Borrower Defense to Repayment regulations; and/or (3) suspend or terminate an institution’s participation in Title IV programs. Alternatively, ED may impose certain other limitations on the institution’s participation in Title IV programs, which could include the denial of applications for approval of new programs or locations, a requirement to post a substantial letter of credit, or the imposition of one of ED’s heightened cash monitoring processes. Any of the foregoing actions could have a material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

A failure to demonstrate financial responsibility or administrative capability may result in the loss of eligibilityeligibility, or the imposition of conditions, including provisional certification, to participate in Title IV programs.

Each of our Title IV institutions operates under a PPA. There can be no assurance that ED will recertify anany institutionof our institutions after its PPA expires or that ED will not limit the period of recertification to participate in Title IV programs to less than six years, place the institution on provisional certification, or impose conditions or other restrictions on the institution as a condition of granting our application for recertification. If ED does not renew or withdraws the certification to participate in Title IV programs for one or more of our institutions at any time, students at such institution would no longer be able to receive Title IV program funds. Alternatively, ED could (1) renew the certifications for an institution, but restrict or delay receipt of Title IV funds, limit the number of students to whom an institution could disburse such funds, or place other restrictions on that institution, or (2) delay recertification after an institution’s PPA expires, in which case the institution’s certification would continue on a month-to-month basis, any of which could have a material adverse effect on the businesses, financial condition, results of operations, and cash flows of the institution or AdtalemCovista as a whole and could result in the imposition of significant restrictions on the ability of the institution or AdtalemCovista as a whole to operate. See “Program Participation Agreement” in Item 1. “Business” for additional information.

If regulators do not approve, or delay their approval, of transactions involving a material change of ownership or change of control of Adtalem,Covista, the eligibility of our institutions to participate in Title IV programs, our institutions’ accreditations and our institutions’ state licenses may be impaired in a manner that materially and adversely affects our business.

Any material change of ownership or change of control of Adtalem,Covista, depending on the type of change, may have significant regulatory consequences for each of our Title IV institutions. Such a change of ownership or control could require recertification by ED, the reevaluation of accreditation by each institution’s accreditors, reauthorization by each institution’s state licensing agencies, and/or providing financial protections. If AdtalemCovista experiences a material change of ownership or change of control, then our Title IV institutions may cease to be eligible to participate in Title IV programs until recertified by ED. The continuing participation of each of our Title IV institutions in Title IV programs is critical to our business. Any disruption in an institution’s eligibility to participate in Title IV programs would materially and adversely impact our business, financial condition, results of operations, and cash flows.

In the event of a bankruptcy filing by Adtalem,Covista, all of our Title IV institutions would lose their eligibility to participate in Title IV programs, pursuant to statutory provisions of the HEA, notwithstanding the automatic stay provisions of federal bankruptcy law, which would make any reorganization difficult to implement. Similarly, in the event of a bankruptcy filing by any of Adtalem’sCovista’s subsidiaries that own a Title IV institution, such institution would lose its eligibility to participate in Title IV programs. In the event of any bankruptcy affecting one or more of our Title IV institutions, ED could hold our other Title IV institutions jointly liable for any Title IV program liabilities, whether asserted or unasserted at the time of such bankruptcy, of the institution whose Title IV program eligibility was terminated.

Our Title IV institutions may lose their eligibility to participate in Title IV programs if their student loan default rates are greater than standards set by ED. An educational institution may lose its eligibility to participate in some or all Title IV programs, if, for three consecutive federal fiscal years, 30% or more of its students who were required to begin repaying their student loans in the relevant federal fiscal year default on their payment by the end of the next two federal fiscal years. In addition, an institution may lose its eligibility to participate in some or all Title IV programs if its default rate for a federal fiscal year wasis greater than 40%. If any of our Title IV institutions lose eligibility to participate in Title IV programs because of high student loan default rates, it would have a material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate. See “Cohort Default Rate” in Item 1. “Business” for additional information. Nevertheless, Adtalem’sCovista’s cohort default rates are far below such thresholds as discussed in “Cohort Default Rate” in Item 1. “Business.”

Our Title IV institutions could lose their eligibility to participate in federal student financial aid programs if the percentage of their revenue derived from those programs werewas too high.

Our Title IV institutions may lose eligibility to participate in Title IV programs if, on a cash basis, the percentage of the institution’s revenue derived from TitleFederal IVeducation programsassistance funds for two consecutive fiscal years is greater than 90%. Further, if an institution exceeds the 90% threshold for any single fiscal year, ED could place that institution on provisional certification status for the institution’s following two fiscal years. See “The 90/10 Rule” in Item 1. “Business” for additional information.

If we fail to maintain any of our state authorizations, we would lose our ability to operate in that state and could lose eligibility to participate in Title IV programs in that state.

Our Title IV institutions must be authorized to operate by the appropriate postsecondary regulatory authorityauthorities in each state in which the institution is located. See “State Authorization” in Item 1. “Business” for a description of Adtalem’sCovista’s current U.S. approvals.

The loss of state authorization would, among other things, render the affected institution ineligible to participate in Title IV programs, at least at those state campus locations, and otherwise limit that school’s ability to operate in that state. If these pressures and uncertaintyuncertainties continue in the future, or if one or more of our institutions are unable to offer programs in one or more states, it could have a material adverse impact on our enrollment, revenue, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

Our ability to place our medicalstudents schools’in studentsclinicals in hospitals in the U.S. may be limited by efforts of certain state government regulatory bodies, which may limit the growth potential of our medical schools, put our medical schools at a competitive disadvantage to other medical schools, or force our medical schools to substantially reduce their class sizes.

AUC and RUSM enter into affiliation agreements with hospitals across the U.S. to place their third and fourth year students in clinical programs at such hospitals. Certain states with regulatory programs that require state approval of clinical education programs may preclude, limit, or impose onerous requirements on Adtalem’sCovista’s entry into affiliation agreements with hospitals in their states. If states limit access to affiliation arrangements, our medical schools may be at a competitive disadvantage to other medical schools, and our medical schools may be required to substantially restrict their enrollment due to limited clinical opportunities for enrolled students. The impact on enrollment, and the potential for enrollment growth, of such restrictions on our medical schools’ clinical placements could have a material adverse effect on our business, financial conditions, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

In addition, the reduction or elimination of these non-Title IVnon-federal sources of student funding may adversely affect our 90/10 Rule percentage. See “The 90/10 Rule” in Item 1. “Business” for additional information.

A failure of our vendors to comply with applicable regulations in the servicing of our students and institutions or meet our requirements could subject us to fines or restrictions on or loss of our ability to participate in Title IV programs.programs or otherwise damage our business.

We contract with unaffiliated entities for student software systems and services related to the administration of portions of our Title IV and financing programs. Because each of our institutions may be jointly and severally liable for the actions of third-party servicers and vendors, failure of such servicers to comply with applicable regulations could have a material adverse effect on our institutions, including fines and the loss of eligibility to participate in Title IV programs, which could have a material adverse effect on our enrollment, revenue, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate. If any of our third-party servicers discontinues providing such services to us,us or provides services that are materially deficient, we may not be able to replace such third-party servicer in a timely, cost-efficient, or effective manner, or at all, and we could lose our ability to comply with collection, lending, and Title IV requirements, which could have a material adverse effect on our enrollment, revenue, results of operations, and cash flows and result in the imposition of significant restrictions on us and our ability to operate.

As an educational institution participating in federal and state student assistance programs and collecting financial receiptsfunds from enrollees or their sponsors, we collect and retain certain confidential information. Such information is subject to federal and state privacy and security rules, including the Family EducationEducational RightRights toand Privacy Act, the Health Insurance Portability and Accountability Act, and the Fair and Accurate Credit Transactions Act. Release or failure to secure confidential information or other non-compliance with these rules could subject us to fines, loss of our capacity to conduct electronic commerce, and loss of eligibility to participate in Title IV programs, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Risks Related to Adtalem’sCovista’s Business

Natural disasters or other extraordinary eventsevents, political disruptions, armed conflicts or political disruptionswars may interrupt our operations, cause us to close some of our schoolsschools, or suffer casualty losses.

We may experience business interruptions or casualty losses resulting from natural disasters, inclement weather, transit disruptions, political disruptions, armed conflicts or wars, or other events in one or more of the geographic areas in which we operate, particularly in the West Coast and Gulf States of the U.S., and the Caribbean. These events could impair the value of our assets and/or cause us to close schools, temporarily or permanently, and could affect student recruiting opportunities in those locations, causing enrollment and revenue to decline, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Due to the sensitive nature of the information contained on our networks, such as students’ financial information and grades, our networks may be targeted by hackers. Attacks could have a significant negative impact on our systems and operations. Anyone who circumvents security measures could misappropriate proprietary or confidential information or cause interruptions or malfunctions in our operations. Although we use security and business controls to limit access and use of personal information, a third-partythird party may be able to circumvent those security and business controls, which could result in a breach of privacy. In addition, errors in the storage, use, or transmission of personal information could result in a breach of privacy. Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could require notification of data breaches and restrict our use of personal information. We cannot assure that a breach, loss, or theft of personal information will not occur. A breach, theft, or loss of personal information regarding our students and their families, employees, or contractors that is held by us or our vendors could have a material adverse effect on our reputation and results of operations and result in liability under state and federal privacy statutes and legal actions by federal or state authorities and private litigants, any of which could have a material adverse effect on our business and result in the imposition of significant restrictions on us and our ability to operate.

The performance and reliability of our computer networks and system applications, especially online educational platforms and student operational and financial aid packaging applications, are critical to our reputationreputation, operations, and ability to attract and retain students. System errors, disruptions or failures, including those arising from unauthorized access, computer hackers, computer viruses, denial of service attacks, and other security threats, could adversely impact our delivery of educational content to our students or result in delays and/or errors in processing student financial aid and related disbursements. Such events could have a material adverse effect on the reputation of our institutions, our financial condition, results of operations, and cash flows. We may be required to expend significant resources to protect against system errors, failures or disruptions, or the threat of security breaches, or to repair or otherwise mitigate problems caused by any actual errors, disruptions, failures, or breaches. We cannot ensure that these efforts will protect our computer networks, or fully mitigate the resulting impact of interruptions or malfunctions in our operations, despite our regular monitoring of our technology infrastructure security and business continuity plans.

We may be unable to attract, retain, and develop key employees with appropriate educational qualifications and experience. In addition, we may be unable to effectively plan and prepare for changes in key employees. Such matters may cause us to incur higher wagecompensation expensecosts and/or provide less student support and customer service, which could adversely affect enrollment, revenue, and expense. A significant amount of our compensation for key employees is tied to our financial performance. We may require new employees in order to execute some of our strategic plans. Uncertainty regarding our future financial performance may limit our ability to attract new employees with competitive compensation or increase our cost of recruiting and retaining such new employees.

As part of our strategy, we are actively exploring acquisition opportunities primarily in the U.S.opportunities. We have acquired and may in the future acquire additional education institutions or education related businesses aligned to our strategy. Any acquisition involves significant risks and uncertainties, including, but not limited to:

Our effective tax rate couldmay befluctuate subjectas toa volatilityresult orof beevolving adverselyU.S. impactedand by changes to federalinternational tax lawsrules, governingincluding thethose taxationstemming of foreign earnings of U.S. based companies. For example, recent changes to U.S. tax laws significantly impacted how U.S. multinational corporations are taxed on foreign earnings. Numerous countries are evaluating their existing tax laws, due in part to recommendations made byfrom the Organization for Economic Co-operation and Development’s (“OECD’s”) Base Erosion and Profit Shifting (“BEPS”) project.initiative. This project includes a two-pillar approach to global taxation focusing on global projectprofit allocation (Pillar One) and a global minimum tax rate of 15% (Pillar Two). CertainThe jurisdictionsimplementation inof whichPillar weTwo’s operate15% enactedglobal legislationminimum consistenttax, along with onerelated orcoordination moreframeworks ofsuch as the OECDrecently Pillarintroduced Two“side-by-side” modelapproach, rules,is which,ongoing inacross general, are applicable for our fiscal year 2025. We are continuing to evaluate emerging developments related to the Pillar Two model rules and related legislation inmultiple jurisdictions in which we operate. TheseAs changescountries increaseadopt these rules, we may experience increased compliance costs, greater complexity in our tax uncertaintyprofile, and mayhigher cash taxes. These developments could adversely impact our effective tax rate and results of operations in future years.

Our future effective tax rates couldmay be subject to volatility ordue adverselyto affecteda by:number earningsof beingfactors, including the geographic mix of earnings, with lower than anticipatedexpected income in countriesjurisdictions wherewith wefavorable have lower statutorytax rates and higher than anticipatedexpected earningsincome in countries where we have higher statutorytax ratesjurisdictions; changes in the valuation of our deferred tax assets and liabilities; expirationthe ofexpiration, modification, or lapses inof various tax law provisions; the tax treatment of stock-based compensation; and costs relatedassociated towith intercompany or other restructurings;transactions or otherbusiness restructurings. In addition, changes in tax rates, laws, regulations, accounting principles, or interpretations thereof.thereof Incould addition,further we are subject to examination ofimpact our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. Although we have accrued tax and related interest for potential adjustments to tax liabilities for prior years, there can be no assurance that the outcomes from these continuous examinations will not have a material effect, either positive or negative, on our business, financial condition, and results of operations.position.

Adtalem’sCovista’s market capitalization can be affected by, among other things, changes in industry or market conditions, changes in results of operations, and changes in forecasts or market expectations related to future results. If our market capitalization were to remain below its carrying value for a sustained period of time or if such a decline becomes indicative that the fair values of our reporting units have declined below their carrying values, an impairment test may result in a non-cash impairment charge. As of June 30, 2025,2026, intangible assets from business combinations totaled $765.5$754.3 million and goodwill totaled $961.3 million. Together, these assets equaled 63%57% of total assets as of such date. If our business results and financial condition were materially and adversely impacted, then such intangible assets and goodwill could be impaired, requiring a possible write-off of up to $765.5$754.3 million of intangible assets and up to $961.3 million of goodwill.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our and our subsidiaries’ financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business, competitive, legislative, regulatory, and other factors beyond our control. As a result, we may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. In addition, because we conduct a significant portion of our operations through our subsidiaries, repayment of our indebtedness is also dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment, or otherwise. Our subsidiaries are distinct legal entities and other than the guarantors on our indebtedness, they do not have any obligation to pay amounts due on theour Notesdebt obligations or to make funds available for that purpose or for other obligations. Pursuant to applicable state limited liability company laws and other laws and regulations, our non-guarantor subsidiaries may not be able to, or may not be permitted to, make distributions to us in order to enable us to make payments in respect of the Notes (as defined in Note 13 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”) and our Termdebt Loan B (as defined in Note 13 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”).obligations. In the event that we do not receive distributions from our non-guarantor subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

If we cannot make scheduled payments on our indebtedness, we will be in default, and holdersinvestors of theour Notesdebt obligations could declare all outstanding principal and interest to be due and payable, the lenders under the credit facilities could terminate their commitments to loan money, our secured lenders (including the lenders under the credit facilities and the holders of the Notes) could foreclose against the assets securing their loans and the Notes and we could be forced into bankruptcy or liquidation.

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read with and is qualified in its entirety by the Consolidated Financial Statements and the notes thereto included in this report. It should also be read in conjunction with the Cautionary Disclosure Regarding Forward-Looking Statements (see the Introduction section preceding Part I), the Risk Factors (see Item 1A. “Risk Factors”), and the Financial Aid and Legislative and Regulatory Requirements (see Item 1. “Business”) disclosures set forth in this report. AdtalemCovista reports on a fiscal year period ending on June 30.

Certain items presented in tables may not sum due to rounding. Percentages presented are calculated from the underlying numbers in thousands. Discussions throughout this MD&A are based on continuing operations unless otherwise noted. The MD&A should be read in conjunction with the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” and the notes thereto.

The following discussion is on the comparison between fiscal year 2026 and fiscal year 2025 results. For a discussion on the comparison between fiscal year 2025 and fiscal year 2024 results. For a discussion on the comparison between fiscal year 2024 and fiscal year 2023 results, see the MD&A included in Adtalem’sCovista’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024,2025, as filed with the SEC.

Medical and Veterinary – This segment includes the operations of AUC, RUSM, and RUSVM, collectively referred to as the “medical and veterinary schools,” which offersoffer degree and certificate programs in the medical and veterinary postsecondary education industry.

“Home Office” includes activities not allocated to a reportable segment. Financial and descriptive information about Adtalem’sCovista’s reportable segments is presented in Note 19 “Segment Information” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.”

Chamberlain revenue increased 14.6%,3.4%, or $92.3$24.4 million, to $725.8$750.2 million in fiscal year 20252026 compared to the prior year,year driven by an increase in enrollment, higher tuition rates,rates and anenrollment. increaseEnrollment increased in averagepre-licensure creditnursing hoursprograms perin student.all Enrollmentfiscal improvementyear 2026 sessions; however, enrollment has primarily been driven by the undergraduate Bachelor of Sciencedeclined in Nursingpost-licensure (“BSN”)nursing andprograms theduring Masterfiscal ofyear Science in Nursing (“MSN”) degree programs.2026. Chamberlain is achieving pre-licensure growth by optimizing investments in student enrollment and experience while leveraging scale through a national footprint andwith providing a full breadth of nursing programsin-person and online curriculum delivery modalities. Management is focused on optimizing marketing and enrollment operations to address post-licensure enrollment.

TuitionCurrent tuition rates in the current fiscal year 2026 increased compared to the prior fiscal year for the Bachelor of Science in Nursing (“BSN”) onsite and online degree, Master of Science in Nursing (“MSN”), onlineMaster degree,of Social Work (“MSW”) and DoctorMaster of NursingPublic PracticeHealth (“DNPMPH”) online degree programs. The average increase across all of these programs was approximately 4.3%3.4% from the prior year.

Tuition rates for Walden programs, including general education are charged on a per credit hour basis that varies based on the nature of the program. For other programs such as those with a subscription-based learning modality, tuition is charged on a per term basis. Students are also charged program and clinical fees depending on the specific programs. Some programs require students to attend residencies, skills labs, and pre-practicum labs, for which tuition is charged per event. InThe mostaverage programs,increase thesein tuition rates, event charges, and fees increasedacross byall programs was approximately 2.0%2.6% from the prior year.

Medical and Veterinary revenue increased 3.7%,8.1%, or $13.3$29.9 million, to $369.1$398.9 million in fiscal year 20252026 compared to the prior year,year driven by tuitionan rate increases at all three institutionsincrease in thisenrollment segment.and Management’shigher tuition rates. Management continues to focus is on increasing enrollment and renewingdriving operational effectiveness, specifically around academic support and the enrollment experience.

The cost of educational services expense category includes expenses related to the cost of faculty and staff who support educational operations, facilities, adjunct faculty, supplies, housing, bookstore, other educational materials, student education-related support activities, and the provision for badcredit debts.losses. The following table presents cost of educational services by segment detailing the changes from the prior year (in thousands):

Cost of educational services increased 10.4%,8.1%, or $72.9$62.2 million, to $771.4$833.7 million in fiscal year 20252026 compared to the prior year. This cost increase was primarily driven by an increase in labor and other costs to support increased enrollment and the provision for bad debts.enrollment.

As a percentage of revenue, cost of educational services was 43.1%42.7% in fiscal year 20252026 compared to 44.1%43.1% in the prior year. The decrease in the percentage was primarily the result of revenue growth accompanied withby cost efficiencies.

Student services and administrative expense increased 6.2%,8.7%, or $39.0$58.7 million, to $672.0$730.7 million in fiscal year 20252026 compared to the prior year. After excluding amortization of acquired intangible assets, litigation reserves,reserve, asset impairments, strategic advisory costs, loss on assets held for sale, and debt modification costs, student services and administrative expense increased 11.0%,8.1%, or $69.4$54.2 million, in fiscal year 20252026 compared to the prior year. This cost increase was primarily driven by an increase in marketing expense,expense and investments to support growth initiatives, and stock-based compensation.initiatives.

As a percentage of revenue, student services and administrative expense was 37.6%37.4% in fiscal year 20252026 compared to 39.9%37.6% in the prior year. The decrease in the percentage was primarily the result of revenue growth accompanied by decreases in amortization of acquired intangible assets and litigation reserves, partially offset by increases in asset impairments and strategic advisory costs.growth.

Restructuring expense was $3.3$6.3 million and $1.9$3.3 million in fiscal year 20252026 and 2024,2025, respectively. This increase was primarily driven by workforce reductionsreductions. andIn costsaddition, to exit certain course offerings. Wewe continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities.

Consolidated operating income increased 57.4%,12.2%, or $124.5$41.8 million, to $341.5$383.4 million in fiscal year 20252026 compared to the prior year. The operating income increase in fiscal year 20252026 was primarily driven by an increase in revenue and decreasesa reduction in businessasset integration expense, amortization of acquired intangible assets, and litigation reserves,impairments, partially offset by a reduction in litigation reserves in the prior year, and increases in asset impairments, strategic advisory costs, labor and other costs to support increased enrollment, marketing expense, and investments to support growth initiatives, the provision for bad debts, and stock-based compensation.initiatives. The decrease in amortization of acquired intangible assets is driven by the decrease in amortization relating to the Walden student relationships intangible asset, which was fully amortized as of June 30, 2024. The decreasereduction in litigation reserves was due to receiving $5.6 million in fiscal year 2025 represented a $5.6 million receipt in the second quarter of fiscal year 2025 from ana claim made for indemnification claim under the Membership Interest Purchase Agreement with Laureate Education, Inc.

SegmentConsolidated adjusted operating income increased 40.6%,13.3%, or $53.0$49.3 million, to $183.6$419.5 million in fiscal year 20252026 compared to the prior year. The adjusted operating income increase in fiscal year 20252026 was primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, stock-based compensation, marketing expense, and investments to support growth initiatives.

Segment adjusted operating income decreased 3.2%,6.3%, or $2.3$9.7 million, to $69.3$143.6 million in fiscal year 20252026 compared to the prior year. The adjusted operating income decrease in fiscal year 20252026 was primarily driven by increases in labor and other costs to support increased enrollment, marketing expense, and investments to support initiativesgrowth to drive future growth, investments in academic support, and stock-based compensation,initiatives, partially offset by an increase in revenue.

Interest expense was $52.3$45.4 million and $63.7$52.3 million in fiscal year 20252026 and 2024,2025, respectively. This decrease was primarily driven by lower interest expense on our Term Loan B due to decreased borrowings and a lower interest rate on our Term Loan B, and lower letters of credit fees, partially offset by an increase in a loss on debt extinguishment from the write-off of debt issuance costs (as discussed in Note 13 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data”).

Other income, net was income of $9.3$7.2 million and income of $10.5$9.3 million in fiscal year 20252026 and 2024,2025, respectively. This decrease was primarily driven by decreasesa decrease in interest income anddue to lower invested cash balances, partially offset by higher investment income.gains.

Our effective income tax rate from continuing operations can differ from the 21% U.S. federal statutory rate due to several factors, including tax on global intangible low-taxed income (“GILTI”), limitation of tax benefits on certain executive compensation, the rate of tax applied by state and local jurisdictions, the rate of tax applied to earnings outside the U.S., tax incentives, tax credits related to research and development expenditures, changes in valuation allowance, changes in uncertainunrecognized tax positions,benefits, and tax benefits on stock-based compensation awards.compensation.

Our effective tax rate from continuing operations was 22.1%22.5% and 16.0%22.1% in fiscal year 20252026 and 2024,2025, respectively. The effective tax rate for fiscal year 20252026 increased compared to the prior year primarily due to taxes on foreign earnings net of U.S. foreign tax credits, partially offset by an increase in the percentage of earnings from operations in higherlower taxed jurisdictions and a limitation of tax benefits on certain executive compensation. In addition, in fiscal year 2024, the effective tax rate included a benefit from the lapsing of statutes of limitations for unrecognized tax benefits.jurisdictions.

We had a loss from discontinued operations in fiscal year 2026 of $15.8 million and income from discontinued operations in fiscal year 2025 of $4.4 million and loss from discontinued operations in fiscal year 2024 of $0.9 million. We recorded income within discontinued operations related to the DeVry University earn-out of $7.0$0.5 million and $5.5$7.0 million in fiscal year 20252026 and 2024,2025, respectively. In addition, we continue to incurhave costsactivity associated with ongoing litigation and settlements related to divestitures, which areis classified as expenses within discontinued operations.

Adtalem’sCovista’s primary source of liquidity is the cash received from payments for student tuition, fees, books, and other educational materials. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational loans, employer educational reimbursements, scholarships, and student and family financial resources. AdtalemCovista continues to provide financing options for its students, including Adtalem’sCovista’s credit extension programs.

The pattern of cash receipts during the year is seasonal. Adtalem’sCovista’s cash collections on accounts receivable peak at the start of each institution’s term. Accounts receivable reach their lowest level at the end of each institution’s term.

Adtalem’sCovista’s consolidated cash and cash equivalents balance of $199.6$406.3 million and $219.3$199.6 million as of June 30, 20252026 and 2024,2025, respectively, included cash and cash equivalents held at Adtalem’sCovista’s international operations of $22.9$58.3 million and $4.6$22.9 million as of June 30, 20252026 and 2024,2025, respectively, which is available to AdtalemCovista for general corporate purposes.

Net cash provided by operating activities from continuing operations in fiscal year 20252026 increased $45.4$137.1 million to $333.7$470.8 million, compared to $288.4$333.7 million in the prior year. This increase was primarily driven by a $124.5$173.9 million increase in operatingcash income primarily due to increased revenuecollected from students and a $11.2 million decrease in interest payments. The increase in cash provided by operating activities from continuing operations was partially offset bystudents, a $22.9 million increasedecrease in net legal settlement payments, a $20.3 million increase in management incentive bonus payments, and a $60.6$17.8 million decrease in income tax payments, partially offset by a $76.4 million increase in payments to employees and vendors.

Net cash used in investing activities in fiscal year 20252026 and 20242025 was $41.9$83.7 million and $47.9$41.9 million, respectively, and was primarily driven by capital expenditures of $50.3$77.7 million and $48.9$50.3 million, respectively,respectively. partiallyIn offsetaddition, byin fiscal year 2026, we made a $5.0 million minority investment in a business and in fiscal year 2025, we received proceeds of $7.3 million received in fiscal year 2025 from the sale of a building in Naperville, Illinois. The capitalCapital expenditures infor fiscal year 20252026 primarily consisted of spending forincluded information technology investments and Chamberlain’snew campus development.development at Chamberlain.

On MayDecember 6,15, 2025, we announced that the Board of Directors (the “Board”) Adtalem’sauthorized fifteenthCovista’s sixteenth share repurchase program, which allows AdtalemCovista to repurchase up to $150.0$750.0 million of its common stock through MayDecember 6,15, 2028. As of June 30, 2025,2026, $150.0$661.8 million of authorized share repurchases remained under the fifteenthsixteenth share repurchase program. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. See Note 14 “Share Repurchases” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our share repurchase programs.

Long-Term Debt – As of June 30, 2025,2026, weunder havethe Credit Facility, Covista had an outstanding principal balances of $405.0 million of 5.50% Senior Secured Notes due 2028 (the “Notes”), which matureamount on March 1, 2028 and $153.3 million ofits Term Loan B underof our$510.0 Creditmillion, Facility,which matures on March 2, 2033 and outstanding borrowings on its Revolver of $163.0 million, which matures on August 12,6, 20282030. and requires interest payments. As a result of previousThe Term Loan B prepayments, we are no longer required to makerequires quarterly principal installment payments on the Term Loan B.payments. See Note 13 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on the Notes and our Credit Agreement.Facility. On July 1, 2026, we repaid the outstanding borrowings of $163.0 million on the Revolver.

As of June 30, 2025,2026, AdtalemCovista had $179.0$202.6 million of surety-backed letters of credit outstanding in favor of ED. See “Off-Balance Sheet Arrangements” in Note 13 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information.

In the event of unexpected market conditions or negative economic changes that could negatively affect Adtalem’sCovista’s earnings and/or operating cash flow, Adtalemour maintainedCredit Facility includes a $400.0$500.0 million revolving credit facilityRevolver with availabilityavailable capacity of $400.0$337.0 million as of June 30, 2025.2026. On August 6, 2025, we entered into Amendment No. 4 to Credit Agreement and Incremental Assumption Agreement (the “Amendment”), which increasedWith the revolving$163.0 creditmillion facility to $500.0 million. See Note 13 “Debt” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional informationrepayment on the Amendment.Revolver referenced above, the available capacity was $500.0 million as of July 1, 2026.

Operating Lease Obligations – We have operating lease obligations for the minimum payments required under various lease agreements which are recorded on the Consolidated Balance Sheets. In addition, we sublease certain space to third parties, which partially offsets the lease obligations at these facilities. See Note 11 “Leases” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our lease agreements.obligations.

We believe our cash flows from operations, and our existing cash balances, combined with availability under our credit facility and access to the debt markets, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, capital spending, and anticipated stock repurchases for a period that includes the next twelve months as well as the next several years. However, our ability to maintain sufficient liquidity may be affected by numerous factors, many of which are outside our control. Depending on our liquidity levels, conditions in the capital markets, and other factors, we may from time to time consider the issuance of debt, equity, or other securities, the proceeds of which could provide additional liquidity for our operations.

As part of our annual impairment review of goodwill and indefinite-lived intangible assets, we elected to perform a quantitative assessment of the RUSMAUC reporting unit’s fair value and indefinite-lived intangible assets. Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. Significant assumptions used in the determination of reporting unit fair value measurements generally include forecasted cash flows, discount rates, terminal growth rates, and earnings multiples. The discounted cash flow method used to determine the fair value of our RUSMAUC reporting unit during fiscal year 20252026 reflected our most recent cash flow projections, a discount rate of 13.8%,11.7%, and a terminal growth rate of 3.0%. The significant assumptions used in the market comparable method include earnings multiples for comparable companies. Each of these inputs can significantly affect the fair values of our reporting units. Based on this quantitative assessment, it was determined that the fair value of the RUSMAUC reporting unit exceeded its carrying value by approximately 165%34% and therefore no goodwill impairment was identified.

Significant judgments and assumptions were used in determining the fair value of the RUSMAUC reporting unit’s indefinite-lived intangible assets. The relief-from-royaltyrelief from royalty method of the income approach and the with-and-withoutwith and without method of the income approach used in the determination of the fair values of our RUSMAUC trade name and RUSMAUC Title IV eligibility and accreditation indefinite-lived intangible assets, respectively, during fiscal year 20252026 reflected our most recent revenue projections, a discount rate of 13.8%,11.7%, a royalty rate of 5.5%, and a terminal growth rate of 3.0%. Each of these factors and assumptions can significantly affect the value of the intangible asset. Based on these quantitative assessments, it was determined that the fair values of thesethe AUC trade name and AUC Title IV eligibility and accreditation indefinite-lived intangible assets in the RUSMAUC reporting unit exceeded their carrying values by over169% 2,000%and 24%, respectively, and therefore no impairment was identified.

AdtalemCovista accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. AdtalemCovista also recognizes future tax benefits associated with tax loss and credit carryforwards as deferred tax assets. Adtalem’sCovista’s deferred tax assets are reduced by a valuation allowance, when in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. To assess whether it is more likely than not that deferred tax assets will be realized and whether a valuation allowance needs to be recorded against them, we consider future reversals of existing taxable temporary differences, expected future earnings, prior earnings history, and tax planning strategies. Such assessments involve significant judgments and are subject to change in the future particularly if earnings are significantly different from expectations.

AdtalemCovista is subject to audit by federal, state, and foreign tax authorities and AdtalemCovista reduces its net tax assets for the estimated additional tax and interest that may result from those tax authorities disputing uncertain tax positions AdtalemCovista has taken. Evaluating the exposure associated with uncertain tax positions involves significant judgment and we record reserves based on our past experience with similar situations and on the technical support for the positions. Our effective tax rate for a given period could be impacted by changes in the measurement of uncertain tax positions.

AdtalemCovista is subject to contingencies, such as various claims and legal actions that arise in the normal conduct of its business. We record an accrual for those matters where management believes a loss is probable and can be reasonably estimated. For those matters for which we have not recorded an accrual, their possible impact on Adtalem’sCovista’s business, financial condition, or results of operations, cannot be predicted at this time. A significant amount of judgment and the use of estimates are required to quantify our ultimate exposure in these matters. The valuation of liabilities for these contingencies is reviewed on a quarterly basis and any necessary adjustments to the accrual on the Consolidated Balance Sheets are recorded. While we believe that the amount accrued to-date is adequate, future changes in circumstances could impact these determinations. See Note 18 “Commitments and Contingencies” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information on our loss contingencies.

For information regarding recent accounting pronouncements, seeSee Note 2 “Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data.Data” for a description of recent accounting standards and their anticipated effects on our Consolidated Financial Statements.

There have been no material changes to Adtalem’sCovista’s risk factors from those set forth since Item 1A. “Risk Factors” contained in our 2025 Form 10-K.

This management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read with and is qualified in its entirety by the Consolidated Financial Statements and the notes thereto included in this report. It should also be read in conjunction with our consolidated financial statements and the related Management’s Discussion and Analysis of Financial Condition and Results of Operation as contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (the “2025 Form 10-K), the Cautionary Disclosure Regarding Forward-Looking Statements, the Risk Factors included in orthe incorporated2025 byForm reference in this report (see Item 1A. “Risk Factors”),10-K, and the Financial Aid and Legislative and Regulatory Requirements disclosures set forth in this report. AdtalemCovista reports on a fiscal year period ending on June 30. Therefore, this Quarterly Report for the quarterly period ended DecemberMarch 31, 20252026 is for our secondthird quarter of fiscal year 2026.

Certain items presented in tables may not sum due to rounding. Percentages presented are calculated from the underlying numbers in thousands. Discussions throughout this MD&A are based on continuing operations unless otherwise noted. The MD&A should be read in conjunction with the Consolidated Financial Statements and the notes thereto.

We use our website (www.adtalem.comwww.covista.com) as a routine channel of distribution of company information, including press releases, presentations, and supplemental information, as one means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investorsyou should monitor our website in addition to following press releases, SEC filings, and public conference calls and webcasts. Investors and othersYou can receive notifications of new information posted on our investor relations website in real time by signing up for email alerts. You may also access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as well as other reports relating to us that are filed with or furnished to the SEC, free of charge in the investor relations section of our website as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The content of the websites mentioned above is not incorporated into and should not be considered a part of this report.

“Home Office” includes activities not allocated to a reportable segment. Financial and descriptive information about Adtalem’sCovista’s reportable segments is presented in Note 18 “Segment Information” to the Consolidated Financial Statements.

SecondThird Quarter Highlights

Financial and operational highlights for the secondthird quarter of fiscal year 2026 include:

Chamberlain revenue increased 1.6%,2.3%, or $2.8$4.4 million, to $183.8$197.0 million in the secondthird quarter and increased 4.0%,3.4%, or $14.1$18.5 million, to $363.0$560.0 million in the first sixnine months of fiscal year 2026 compared to the prior year periods,periods. The increase in revenue in the third quarter of fiscal year 2026 was driven by anhigher increasetuition inrates and increased enrollment in the SeptemberMarch session andas increases in pre-licensure nursing program enrollment more than offset declines in post-licensure nursing program enrollment. The increase in revenue in the first nine months of fiscal year 2026 was driven by higher tuition rates.rates and enrollment. Enrollment increased in pre-licensure nursing programs in all fiscal year 2026 sessions; however, thisenrollment growthhas was offset by a declinedeclined in post-licensure nursing programprograms enrollment.during fiscal year 2026. Chamberlain is achieving pre-licensure growth by optimizing investments in student enrollment and experience while leveraging scale through a national footprint with in-person and providingonline acurriculum full breadth of nursing programs anddelivery modalities. Management is focused on optimizing marketing and enrollment operations to address post-licensure enrollment.

Tuition rates in the current fiscal year increased in January 2026 compared to the prior fiscal year for the Bachelor of Science in Nursing (“BSN”) onsite and online degree, Master of Science in Nursing (“MSN”), onlineMaster degree,of Social Work (“MSW”) and DoctorMaster of NursingPublic PracticeHealth (“DNPMPH”) online degree programs. The average increase across all of these programs was approximately 4.6%3.3% from the prior year.

Walden total student enrollment represents those students attending instructional sessions as of the dates identified above. Walden revenue increased 27.0%,4.6%, or $46.3$8.2 million, to $217.6$186.6 million in the secondthird quarter and increased 22.4%,16.2%, or $74.7$82.9 million, to $407.5$594.1 million in the first sixnine months of fiscal year 2026 compared to the prior year periods, driven by an increase in enrollment, higher tuition rates, and an increase in average credit hours per student. In addition, Walden recognizedrevenue for the third quarter of fiscal year 2026 was impacted by the shift of one additionalacademic week from the third quarter to the second quarter, which resulted in $18.0 million of revenue being recognized during the second quarter of fiscal year 2026 compared to the prior year period due to the timing of its academic calendar.2026. Walden’s improved enrollment has been accelerated by investments in student experience and brand along with providing flexibility to working adults through part-time and Tempo Learning® competency-based programs.

Medical and Veterinary revenue increased 6.9%,8.9%, or $6.6$8.4 million, to $102.0$103.5 million in the secondthird quarter and increased 6.4%,7.2%, or $11.7$20.2 million, to $195.1$298.6 million in the first sixnine months of fiscal year 2026 compared to the prior year periods, driven by an increase in enrollment and higher tuition rates. Management continues to focus on increasing enrollment and renewingdriving operational effectiveness, specifically around academic support and the enrollment experience.

The cost of educational services expense category includes expenses related to the cost of faculty and staff who support educational operations, facilities, adjunct faculty, supplies, housing, bookstore, other educational materials, student education-related support activities, and the provision for bad debts. The following tables present cost of educational services by segment detailing the changes from the prior year periods (in thousands):

Cost of educational services increased 10.1%,5.4%, or $18.8$10.9 million, to $205.4$210.7 million in the secondthird quarter and increased 9.0%,7.8%, or $33.6$44.4 million, to $406.2$616.9 million in the first sixnine months of fiscal year 2026 compared to the prior year periods. TheseThe cost increasesincrease werein the third quarter and first nine months of fiscal year 2026 was primarily driven by an increase in labor and other costs to support increased enrollment.

As a percentage of revenue, cost of educational services was 40.8%43.3% and 42.1%42.5% in the secondthird quarter and first sixnine months of fiscal year 2026, respectively, compared to 41.7%42.9% and 43.1%43.0% in the prior year periods. The decreasesincrease in the percentagespercentage werefor the third quarter of fiscal year 2026 was primarily the result of the $18.0 million impact on Walden revenue due to the shift of one academic week from the third quarter to the second quarter of fiscal year 2026. The decrease in the percentage for the first nine months of fiscal year 2026 was primarily the result of revenue growth accompanied by cost efficiencies.

Student services and administrative expense increased 16.5%,5.1%, or $25.9$8.9 million, to $182.8$184.1 million in the secondthird quarter and increased 13.5%,10.5%, or $42.6$51.5 million, to $358.5$542.6 million in the first sixnine months of fiscal year 2026 compared to the prior year periods. After excluding litigationasset reserveimpairments and strategic advisory costs, student services and administrative expense increased 7.8%,7.6%, or $12.2$13.2 million, in the secondthird quarter of fiscal year 2026 compared to the prior year period. After excluding litigation reserve, asset impairments, strategic advisory costs, and debt modification costs, student services and administrative expense increased 8.8%,8.4%, or $27.9$41.2 million, in the first sixnine months of fiscal year 2026 compared to the prior year period. These increases were primarily driven by an increase in marketing expense and investments to support growth initiatives.

As a percentage of revenue, student services and administrative expense was 36.3%37.8% and 37.1%37.4% in the secondthird quarter and first sixnine months of fiscal year 2026, respectively, compared to 35.0%37.6% and 36.5%36.9% in the prior year periods. The increasesincrease in the percentagespercentage werefor the third quarter of fiscal year 2026 was primarily the result of the $18.0 million impact on Walden revenue due to the shift of one academic week from the third quarter to the second quarter of fiscal year 2026. The increase in the percentage for the first nine months of fiscal year 2026 was primarily the result of an increase in strategic advisory costs in the current year period and a reduction in litigation reserves in the prior year period, partially offset by revenue growth in the current year period. The reduction in litigation reserves in fiscal year 2025 represented a $5.6 million receipt in the second quarter of fiscal year 2025 from a claim made for indemnification under the Membership Interest Purchase Agreement with Laureate Education, Inc.

Restructuring expense was $4.1$0.9 million and $4.4$5.2 million in the secondthird quarter and first sixnine months of fiscal year 2026, respectively, compared to $0.3$0.5 million and $2.4$2.9 million in the prior year periods. The increases in fiscal year 2026 were primarily driven by workforce reductions. In addition, we continue to incur restructuring charges or reversals related to exited leased space from previous restructuring activities.

Consolidated adjusted operating income increased 24.3%,0.9%, or $24.6$0.8 million, to $126.1$91.3 million in the secondthird quarter and increased 22.0%,8.8%, or $39.1$23.3 million, to $216.4$287.9 million in the first sixnine months of fiscal year 2026 compared to the prior year periods. TheWhile adjustedconsolidated operatingrevenue income increasesincreased in the secondthird quarter and first six months of fiscal year 2026 werecompared primarilyto the prior year period, Walden revenue for the third quarter of fiscal year 2026 was impacted by a shift of one academic week from the third quarter to the second quarter, which resulted in $18.0 million of revenue being recognized during the second quarter of fiscal year 2026. The operating income increase in the third quarter of fiscal year 2026 was also driven by ana increasereduction in revenue,asset impairments, partially offset by increases in strategic advisory costs, labor and other costs to support increased enrollment, marketing expense, and investments to support growth initiatives. The operating income increase in the first nine months of fiscal year 2026 was primarily driven by an increase in revenue and a reduction in asset impairments, partially offset by a reduction in litigation reserves in the prior year period, and increases in strategic advisory costs, labor and other costs to support increased enrollment, marketing expense, and investments to support growth initiatives.

SegmentConsolidated adjusted operating income increaseddecreased 70.0%,3.0%, or $32.3$3.1 million, to $78.5$102.2 million in the secondthird quarter and increased 51.5%,12.7%, or $45.7$35.9 million, to $134.5$318.6 million in the first sixnine months of fiscal year 2026 compared to the prior year periods. While consolidated revenue increased in the third quarter of fiscal year 2026 compared to the prior year period, Walden revenue for the third quarter of fiscal year 2026 was impacted by a shift of one academic week from the third quarter to the second quarter, which resulted in $18.0 million of revenue being recognized during the second quarter of fiscal year 2026. The adjusted operating income increasesdecrease in the secondthird quarter of fiscal year 2026 was also driven by increases in labor and other costs to support increased enrollment, marketing expense, and investments to support growth initiatives. The adjusted operating income increase in the first sixnine months of fiscal year 2026 werewas primarily driven by an increase in revenue, partially offset by increases in labor and other costs to support increased enrollment, marketing expense, and investments to support growth initiatives.

Segment adjusted operating income increased 16.3%,0.8%, or $3.5$0.4 million, to $25.0$47.9 million in the secondthird quarter and increaseddecreased 15.3%,8.8%, or $5.6$10.3 million, to $41.8$107.3 million in the first sixnine months of fiscal year 2026 compared to the prior year periods. The adjusted operating income increasesincrease in the secondthird quarter and first six months of fiscal year 2026 werewas primarily driven by an increase in revenue, partially offset by increases in labor and other costs of educational services, marketing expense, and investments to support initiativesgrowth toinitiatives. driveThe growthadjusted operating income decrease in the first nine months of fiscal year 2026 was primarily driven by increases in labor and other costs of educational services, marketing expense, and investments to support growth initiatives, partially offset by an increase in academic support.revenue.

Interest expense was $10.9$13.6 million and $22.0$35.6 million in the secondthird quarter and first sixnine months of fiscal year 2026, respectively, compared to $13.9$13.1 million and $28.4$41.5 million in the prior year periods. The interest expense decreasesincrease in the secondthird quarter and first six months of fiscal year 2026 werewas primarily driven by loweran interestincrease expensein a loss on ourdebt Termextinguishment Loanfrom Bthe due to decreased borrowings and a lower interest rate, and lower outstanding letterswrite-off of creditdebt balancesissuance during the periodcosts (as discussed in Note 13 “Debt” to the Consolidated Financial Statements). The interest expense decrease in the first nine months of fiscal year 2026 was primarily driven by lower interest expense due to decreased borrowings and a lower interest rate on our Term Loan B, and lower outstanding letters of credit balances during the period, partially offset by an increase in a loss on debt extinguishment from the write-off of debt issuance costs.

Other income, net was $1.7$0.2 million and $4.2$4.4 million in the secondthird quarter and first sixnine months of fiscal year 2026, respectively, compared to $2.2$1.9 million and $4.9$6.8 million in the prior year periods. TheseThe decreasesdecrease werein the third quarter of fiscal year 2026 was primarily driven by decreasesa decrease in interest income driven by lower invested cash balances and dividendhigher income,investment losses. The decrease in the first nine months of fiscal year 2026 was primarily driven by a decrease in interest income driven by lower invested cash balances, partially offset by higher investment gains.

Our effective tax rate from continuing operations was 25.2%25.6% and 23.2%24.0% in the secondthird quarter and first sixnine months of fiscal year 2026, respectively, and 22.8%23.4% and 22.0%22.5% in the secondthird quarter and first sixnine months of fiscal year 2025, respectively. The effective tax rate for the secondthird quarter of fiscal year 2026 increased compared to the prior year period primarily due to an increase in the limitation of tax benefits on certain executive compensation, partially offset by a decrease in the percentage of earnings from operations in higher taxed jurisdictions. The effective tax rate for the first sixnine months of fiscal year 2026 increased compared to the prior year period primarily due to an increase in the limitation of tax benefits on certain executive compensation, partially offset by a decrease in the percentage of earnings from operations in higher taxed jurisdictions and an increase in tax benefits on stock-based compensation.

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which introduced substantial changes to U.S. tax provisions. The most relevant provisions to AdtalemCovista for fiscal year 2026 include allowing accelerated tax deductions for qualified property and research and development expenditures. The impacts of OBBBA were not material to the income tax provision for the secondthird quarter and sixnine months ended DecemberMarch 31, 2025.2026.

We had incomea loss from discontinued operations of $0.2$16.3 million and $1.0$15.4 million in the secondthird quarter and first sixnine months of fiscal year 2026, respectively, compared to $4.7income of $0.04 million and $4.6 million in the prior year periods. We recorded income within discontinued operations related to the DeVry University earn-out of $0.5 million and $7.0 million in the second quarter and first sixnine months of fiscal year 2026 and 2025, respectively. In addition, we continue to incurhave costsactivity associated with ongoing litigation and settlements related to divestitures, which areis classified as expenses within discontinued operations.

Like other higher education institutions, Adtalem’sCovista’s institutions are dependent upon the timely receipt of federal financial aid funds. All public financial aid programs are subject to political and governmental budgetary considerations. Adtalem’sCovista’s institutions and their students participate in a wide range of financial aid programs, including U.S. federal financial aid, state financial aid, Canadian financial aid, private loan programs, tax-favored programs, Adtalem-providedCovista-provided financial assistance, and employer-provided financial assistance. In the U.S., the Higher Education Act (as reauthorized, the “HEA”) guides the federal government’s support of postsecondary education. Changes to financial aid programs that restrict student eligibility or reduce funding levels could have a material adverse effect on Adtalem’sCovista’s business, financial condition, results of operations, and cash flows. See Item 1A. “Risk Factors” in our 2025 Form 10-K for a discussion of student financial aid related risks.

Government-funded financial assistance programs are governed by extensive and complex regulations in the U.S. Like any other educational institution, Adtalem’sCovista’s institutions’ administration of these programs is periodically reviewed by regulatory agencies and is subject to audit or investigation by other authorities. Any violation could be the basis for penalties or other disciplinary action, including initiation of a suspension, limitation, or termination proceeding.

Institutions must pass an ED financial responsibility test, also known as a “composite score,” to maintain eligibility to participate in Title IV aid programs. For Adtalem’sCovista’s institutions, this test is calculated at the consolidated AdtalemCovista level. Applying various financial elements from annual audited financial statements, the score is a composite of three ratios: an equity ratio that measures the institution’s capital resources; a primary reserve ratio that measures an institution’s ability to fund its operations from current resources; and a net income ratio that measures an institution’s ability to operate profitably. A score greater than or equal to 1.5 indicates the institution is considered financially responsible. A score less than 1.5 but greater than or equal to 1.0 is considered financially responsible but requires additional oversight. For example, an institution with a score in this range is subject to heightened cash monitoring and other participation requirements. An institution with a score of less than 1.0 is not considered financially responsible but may continue to participate in the Title IV programs under provisional certification. In addition, this lower score typically requires that the institution be subject to heightened cash monitoring requirements and post a letter of credit (equal to a minimum of 10% of the Title IV aid it received in the institution's most recent fiscal year).

Prior to fiscal year 2022, Adtalem’sCovista’s composite score was greater than 1.5. However, on September 25, 2023, ED notified AdtalemCovista that its fiscal year 2022 composite score had declined to 0.2. As previously disclosed, this was expected due to the acquisition of Walden and other transactions. ED advised that Adtalem’sCovista’s five institutions will be permitted to continue to participate in Title IV under provisional certifications with heightened cash monitoring and continued reporting. Management does not believe these conditions will have a material adverse effect on Adtalem’sCovista’s operations. At ED’s request, AdtalemCovista maintains three surety-backed letters of credit in favor of ED totaling $202.6 million representing 10% of the consolidated Title IV funds Adtalem’sCovista’s institutions received during fiscal year 2025. See “Off-Balance Sheet Arrangements” in Note 13 “Debt” to the Consolidated Financial Statements for additional information.

The provisional nature of the PPAs stemmed from Adtalem’sCovista’s composite score declining and failing to meet ED’s standards of financial responsibility as described above.

Walden, AUC, RUSM, and RUSVM’s provisional PPAs included financial requirements, such as letter of credit and heightened cash monitoring, and AUC, RUSM,RUSM and RUSVM’s provisional PPAs require additional reporting. We do not believe these requirements will have a material effect on Adtalem’sCovista’s financial condition or results of operations. With the approval of its change in ownership, Walden has the ability to request ED approval for new programs.

The HEA requires certificate programs at all Title IV institutions and degree programs at proprietary Title IV institutions to prepare students for gainful employment in a recognized occupation. In October 2023, ED released new Financial Value Transparency (“FVT”) and Gainful Employment (“GE”) rules effective July 1, 2024. GE programs must meet a debt-to-earnings test in which graduates’ annual debt payments must not exceed 8% of their annual earnings or 20% of their discretionary earnings. GE programs must also meet an earnings premium test in which graduates’ earnings must exceed those of a typical high school graduate. Under the regulation, programs that fail either metric must provide warnings to students and prospective students that the program is at risk of losing Title IV eligibility and programs that fail the same measure in two out of three consecutive years lose Title IV eligibility. The GE regulation also includes a transparency framework in which debt-to-earnings, earnings premium, and a wide range of other program outcomes for all Title IV programs are disclosed on a website hosted by ED. Because there are many factors and unknowns, including the earnings of program graduates, AdtalemCovista is reviewing the regulation to determine what impact, if any, the regulation will have on its programs. In addition, multiple parties sought to block enforcement of the FVT/GE rule under the Administrative Procedure Act and other legal theories. On October 2, 2025, a federal district judge ruled in ED’s favor, upholding the FVT/GE rules. The decision is subject to appeal. On February 14, 2025, ED extended the institutional reporting deadline for 2023-2024 and earlier award years until September 30, 2025. The reporting deadline for the 2024-2025 award year was October 1, 2025. On July 25, 2025, ED announced its intent to establish negotiated rulemaking committees in advance of issuing draft regulations on various topics, including FVT/GE. The negotiating committee addressing FVT/GE met in December 2025 and January 2026. ED’s initial proposal includes amendments to the FVT/GE rules including elimination of debt to earnings.

An ED regulation known as the 90/10 Rule affects only proprietary institutions participating in Title IV programs, including each of Adtalem’sCovista’s institutions. Under this regulation, an institution that derives more than 90% of its revenue on a cash basis from TitleFederal IV student financialeducation assistance programsfunds in two consecutive fiscal years loses eligibility to participate in Title IV programs. The following table shows the 90/10 rates for each AdtalemCovista institution for fiscal year 2025 and fiscal year 2024. We are also providing aA consolidated rate for AdtalemCovista is also provided even though it is not subject to 90/10 requirements.

Under the HEA, ED is authorized to specify acts or omissions of an institution that a borrower may assert as a Borrower Defense to Repayment (“BDR”) of their Title IV loans made under the Federal Direct Loan Program. The 2022 BDR regulations were scheduled to go into effect on July 1, 2023 that included a lower threshold for establishing misrepresentation, no statute of limitation for claims submission, expanded reasons to file a claim including aggressive or deceptive recruitment tactics and omission of fact, weakened due processes afforded to institutions, and reinstated provisions for group discharges. ED also included a six-year statute of limitations for recovery of funds from institutions. These changes would increase financial liability risk and reputational risk for Adtalem.Covista. However, the updated rules were delayed by litigation from another party and the July 2025 enactment of OBBBAOBBBA, which restored the 2019 BDR regulations and delayed the 2022 regulations until July 1, 2035. Consequently, on August 8, 2025, the parties in the litigation dismissed the appeal of the preliminary injunction order, returning the merits of the case to the district court.

Adtalem’sCovista’s primary source of liquidity is the cash received from payments for student tuition, fees, books, and other educational materials. These payments include funds originating as financial aid from various federal and state loan and grant programs, student and family educational loans, employer educational reimbursements, scholarships, and student and family financial resources. AdtalemCovista continues to provide financing options for its students, including Adtalem’sCovista’s credit extension programs.

The pattern of cash receipts during the year is seasonal. Adtalem’sCovista’s cash collections on accounts receivable peak at the start of each institution’s term. Accounts receivable reach their lowest level at the end of each institution’s term.

Adtalem’sCovista’s consolidated cash and cash equivalents balance of $56.3$147.0 million and $199.6 million as of DecemberMarch 31, 20252026 and June 30, 2025, respectively, included cash and cash equivalents held at Adtalem’sCovista’s international operations of $5.7$3.3 million and $22.9 million as of DecemberMarch 31, 20252026 and June 30, 2025, respectively, which is available to AdtalemCovista for general corporate purposes.

Net cash provided by operating activities from continuing operations in the sixnine months ended DecemberMarch 31, 20252026 increased $94.2$72.6 million to $160.1$346.4 million, compared to $66.0$273.8 million in the prior year period. This increase was primarily driven by a $81.0$125.3 million increase in cash collected from students, a $22.9 million decrease in net legal settlement payments, and a $9.2$6.8 million decrease in interest payments, and a $2.3 million decrease in income tax payments, partially offset by a $11.7$82.1 million increase in payments to employees and vendors and a $6.2 million increase in income tax payments.vendors.

Net cash used in investing activities in the sixnine months ended DecemberMarch 31, 20252026 and 20242025 was $35.6$55.9 million and $20.2$30.3 million, respectively, and was primarily driven by capital expenditures of $30.6$50.9 million and $21.1$31.3 million, respectively. In addition, during the sixnine months ended DecemberMarch 31, 20252026, we made a $5.0 million minority investment in a business. Capital expenditures for fiscal year 2026 are expected toprimarily include information technology investments and new campus development at Chamberlain.

Net cash used in financing activities in the sixnine months ended DecemberMarch 31, 20252026 was $267.2$342.9 million, primarily driven by share repurchases of $172.4$239.9 million, net repayments under long-term debt obligations of $50.0$50.8 million, and employee taxes paid on withholding shares of $42.0$42.1 million. Net cash used in financing activities in the sixnine months ended DecemberMarch 31, 20242025 was $75.9$248.0 million, primarily driven by share repurchases of $74.1$146.4 million and net repayments under long-term debt obligations of $100.0 million.

On December 15, 2025, we announced that the Board authorized Adtalem’sCovista’s sixteenth share repurchase program, which allows AdtalemCovista to repurchase up to $750.0 million of its common stock through December 15, 2028. As of DecemberMarch 31, 2025,2026, $727.5$661.8 million of authorized share repurchases remained under the sixteenth share repurchase program. The timing and amount of any future repurchases will be determined based on an evaluation of market conditions and other factors. See Note 14 “Share Repurchases” to the Consolidated Financial Statements for additional information on our share repurchase programs.

Long-Term Debt – As of DecemberMarch 31, 2025,2026, weCovista havehad principal balances of $405.0 million of 5.50% Senior Secured Notes due 2028 (the “Notes”), which mature on March 1, 2028 and $103.3 million ofa Term Loan B principal amount of $510.0 million under ourits Credit Facility, which matures on AugustMarch 12,2, 20282033 and requires quarterly interest payments. As a result of previous Term Loan B prepayments, we are no longer required to make quarterly principal installment payments on the Term Loan B. See Note 13 “Debt” to the Consolidated Financial Statements for additional information on the Notes and our Credit Facility.

As of DecemberMarch 31, 2025,2026, AdtalemCovista had $202.6 million of surety-backed letters of credit outstanding in favor of ED. See “Off-Balance Sheet Arrangements” in Note 13 “Debt” to the Consolidated Financial Statements for additional information.

As of DecemberMarch 31, 2025,2026, AdtalemCovista had posted $74.9$76.9 million of surety bonds to satisfy certain state regulatory requirements for licensure.