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Stock-Based Compensation | 3 Months Ended
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Sep. 30, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Stock-Based Compensation | 16. Stock-Based Compensation Adtalem maintains two stock-based incentive plans: the Amended and Restated Incentive Plan of 2005 and the Fourth Amended and Restated Incentive Plan of 2013. Under these plans, directors, key executives, and managerial employees are eligible to receive incentive stock or nonqualified options to purchase shares of Adtalem’s common stock. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 also permit the granting of stock appreciation rights, restricted stock units (“RSUs”), performance-based RSUs, and other stock and cash-based compensation. Although options remain outstanding under the 2005 incentive plan, no further stock-based grants will be issued under this plan. The Fourth Amended and Restated Incentive Plan of 2013 and the Amended and Restated Incentive Plan of 2005 are administered by the Compensation Committee of the Board. Options are granted for terms of up to ten years and can vest immediately or over periods of up to five years. The requisite service period is equal to the vesting period. The option price under the plans is the fair market value of the shares on the date of the grant. Stock-based compensation expense is measured at the grant date based on the fair value of the award. Adtalem accounts for stock-based compensation granted to retirement eligible employees that fully vests upon an employee’s retirement under the non-substantive vesting period approach. Under this approach, the entire stock-based compensation expense is recognized at the grant date for stock-based grants issued to retirement eligible employees. For non-retirement eligible employees, stock-based compensation expense is recognized as expense over the employee requisite service period. We account for forfeitures of outstanding but unvested grants in the period they occur. As of September 30, 2020, 3,803,197 shares were authorized for issuance but not issued or subject to outstanding awards under Adtalem’s stock-based incentive plans. The following is a summary of options activity for the three months ended September 30, 2020:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | Weighted-Average | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | Remaining | ​ | Aggregate
​ | ​ | Number of | ​ | Weighted-Average | ​ | Contractual Life | ​ | Intrinsic Value
​ | ​ | Options | ​ | Exercise Price | ​ | (in years) | ​ | (in thousands)
Outstanding as of July 1, 2020 |  | 1,439,630 | ​ | $ | 31.95 |  | ​ | ​ | ​ | ​
Granted |  | 281,075 | ​ |  | 32.03 |  | ​ | ​ | ​ | ​
Exercised |  | (5,450) | ​ |  | 23.30 |  | ​ | ​ | ​ | ​
Forfeited |  | — | ​ |  | — |  | ​ | ​ | ​ | ​
Expired |  | (35,050) | ​ |  | 41.84 |  | ​ | ​ | ​ | ​
Outstanding as of September 30, 2020 |  | 1,680,205 | ​ |  | 31.81 |  | 6.85 | ​ | $ | 1,690
Exercisable as of September 30, 2020 |  | 1,025,387 | ​ | $ | 29.03 |  | 5.67 | ​ | $ | 1,690
​ The total intrinsic value of options exercised for the three months ended September 30, 2020 and 2019 was $0.1 million and $0.5 million, respectively. The fair value of Adtalem’s stock option awards was estimated using a binomial model. This model uses historical cancellation and exercise experience of Adtalem to determine the option value. It also takes into account the illiquid nature of employee options during the vesting period. The weighted-average estimated grant date fair value of options granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal years 2021 and 2020 was $12.23 and $16.98, per share, respectively. The fair value of Adtalem’s stock option grants was estimated assuming the following weighted-average assumptions: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fiscal Year
​ | ​ | 2021 | ​ | 2020 | ​
Expected life (in years) |  | 6.54 |  | 6.51 |
Expected volatility |  | 39.27 | % | 37.66 | %
Risk-free interest rate |  | 0.45 | % | 1.40 | %
Dividend yield |  | 0.00 | % | 0.00 | %
​ The expected life of the options granted is based on the weighted-average exercise life with age and salary adjustment factors from historical exercise behavior. Adtalem’s expected volatility is computed by combining and weighting the implied market volatility, the most recent volatility over the expected life of the option grant, and Adtalem’s long-term historical volatility. If factors change and different assumptions are employed in the valuation of stock-based grants in future periods, the stock-based compensation expense that Adtalem records may differ significantly from what was recorded in previous periods. During the first three months of fiscal year 2021, Adtalem granted 332,890 RSUs to selected employees. Of these, 1,590 were performance-based RSUs and 331,300 were non-performance-based RSUs. Our annual grant of performance-based RSUs are expected to be granted in the second quarter of fiscal year 2021. Performance-based RSUs are earned by the recipients over a three-year period based on achievement of return on invested capital and free cash flow per share. Certain awards are subject to achievement of a minimum level of Adtalem’s earnings before interest, taxes, depreciation, and amortization, calculated on a non-GAAP basis. Non-performance-based RSUs are subject to restrictions which lapse ratably over one, three, or four-year periods on the grant anniversary date based on the recipient’s continued service on the Board, employment with Adtalem, or upon retirement. During the restriction period, the recipient of the non-performance-based RSUs has the right to receive dividend equivalents, if any. This right does not pertain to the performance-based RSUs. The following is a summary of RSU activity for the three months ended September 30, 2020: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Weighted-Average
​ | ​ | Number of | ​ | Grant Date
​ | ​ | RSUs | ​ | Fair Value
Outstanding as of July 1, 2020 |  | 767,973 | ​ | $ | 39.42
Granted |  | 332,890 | ​ |  | 32.02
Vested |  | (340,846) | ​ |  | 35.08
Forfeited |  | (7,831) | ​ |  | 37.70
Outstanding as of September 30, 2020 |  | 752,186 | ​ | $ | 38.13
​ The weighted-average estimated grant date fair values of RSUs granted at market price under Adtalem’s stock-based incentive plans during the first three months of fiscal years 2021 and 2020 were $32.02 and $43.39, per share, respectively. The following table shows total stock-based compensation expense included in the Consolidated Statements of Income (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​
​ | ​ | September 30, | ​
​ | ​ | 2020 | ​ | 2019 | ​
Cost of educational services | ​ | $ | 393 | ​ | $ | 455 | ​
Student services and administrative expense | ​ |  | 3,611 | ​ |  | 4,768 | ​
​ | ​ |  | 4,004 | ​ |  | 5,223 | ​
Income tax benefit | ​ |  | (526) | ​ |  | (2,533) | ​
Net stock-based compensation expense | ​ | $ | 3,478 | ​ | $ | 2,690 | ​
​ As of September 30, 2020, $27.3 million of total pre-tax unrecognized stock-based compensation expense related to unvested grants is expected to be recognized over a weighted-average period of 2.8 years. The total fair value of options and RSUs vested during the three months ended September 30, 2020 and 2019 was approximately $16.3 million and $12.1 million, respectively. There was no capitalized stock-based compensation cost as of each of September 30, 2020, June 30, 2020, and September 30, 2019. Adtalem has an established practice of issuing new shares of common stock to satisfy stock-based grant exercises. However, Adtalem also may issue treasury shares to satisfy stock-based grant exercises under certain of its stock-based incentive plans.

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