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Goodwill and Intangible Assets

3 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

12. Goodwill and Intangible Assets

The table below summarizes goodwill balances by reporting unit (in thousands):


	September 30,		June 30,		September 30,
Reporting Unit	2021		2021		2020
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		642,554		—		—
AUC		68,321		68,321		68,321
RUSM and RUSVM		237,173		237,173		237,173
Financial Services		376,164		376,164		376,270
Total	$	1,328,928	$	686,374	$	686,480

The table below summarizes goodwill balances by reportable segment (in thousands):


	September 30,		June 30,		September 30,
Reportable Segment	2021		2021		2020
Chamberlain	$	4,716	$	4,716	$	4,716
Walden		642,554		—		—
Medical and Veterinary		305,494		305,494		305,494
Financial Services		376,164		376,164		376,270
Total	$	1,328,928	$	686,374	$	686,480

The table below summarizes the changes in goodwill balances by reportable segment (in thousands):


					Medical and		Financial
	Chamberlain		Walden		Veterinary		Services		Total
June 30, 2020	$	4,716	$	—	$	305,494	$	376,004	$	686,214
Foreign exchange rate changes		—		—		—		266		266
September 30, 2020		4,716		—		305,494		376,270		686,480
Foreign exchange rate changes		—		—		—		(106)		(106)
June 30, 2021		4,716		—		305,494		376,164		686,374
Acquisition		—		642,554		—		—		642,554
September 30, 2021	$	4,716	$	642,554	$	305,494	$	376,164	$	1,328,928

Intangible assets consisted of the following (in thousands):


	September 30, 2021
	Gross Carrying		Accumulated		Weighted-Average
	Amount		Amortization		Amortization Period
Amortizable intangible assets:
Student relationships	$	161,900	$	(15,049)	3 Years
Customer relationships		68,900		(29,511)	10 Years
Curriculum/software		67,691		(5,913)	5 Years
Course delivery technology		6,700		(3,127)	5 Years
Total	$	305,191	$	(53,600)
Indefinite-lived intangible assets:
Walden trade name	$	119,560
AUC trade name		17,100
Ross trade name		5,100
Financial Services trade names		72,272
Chamberlain Title IV eligibility and accreditations		1,200
Walden Title IV eligibility and accreditations		495,800
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	839,072


	June 30, 2021
	Gross Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	68,900	$	(27,844)
Curriculum/software		11,600		(4,028)
Course delivery technology		6,700		(2,791)
Total	$	87,200	$	(34,663)
Indefinite-lived intangible assets:
AUC trade name	$	17,100
Ross trade name		5,100
Financial Services trade names		72,272
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	223,712


	September 30, 2020
	Gross Carrying		Accumulated
	Amount		Amortization
Amortizable intangible assets:
Customer relationships	$	68,900	$	(22,744)
Curriculum/software		11,600		(2,578)
Course delivery technology		6,700		(1,786)
Total	$	87,200	$	(27,108)
Indefinite-lived intangible assets:
AUC trade name	$	17,100
Ross trade name		5,100
Financial Services trade names		73,495
Chamberlain Title IV eligibility and accreditations		1,200
AUC Title IV eligibility and accreditations		100,000
Ross Title IV eligibility and accreditations		14,100
Intellectual property		13,940
Total	$	224,935

The table below summarizes the indefinite-lived intangible asset balances by reportable segment (in thousands):


	September 30,		June 30,		September 30,
Reportable Segment	2021		2021		2020
Chamberlain	$	1,200	$	1,200	$	1,200
Walden		615,360		—		—
Medical and Veterinary		136,300		136,300		136,300
Financial Services		86,212		86,212		87,435
Total	$	839,072	$	223,712	$	224,935

Amortization expense for amortized intangible assets was $18.9 million and $2.5 million in the three months ended September 30, 2021 and 2020, respectively. Estimated intangible asset amortization expense, by reporting unit, is as follows (in thousands):


			Financial
Fiscal Year	Walden		Services		Total
2022 (remaining)	$	80,823	$	7,458	$	88,281
2023		61,239		9,792		71,031
2024		35,644		9,509		45,153
2025		11,220		7,933		19,153
2026		11,220		5,959		17,179
Thereafter		1,394		9,400		10,794
Total	$	201,540	$	50,051	$	251,591

All amortizable intangible assets except Walden student relationships and ACAMS customer relationships are amortized on a straight-line basis. The amount amortized for Walden student relationships and ACAMS customer relationships is based on the estimated retention of the students and customers, giving consideration to the revenue and cash flow associated with these existing students and customers.

Indefinite-lived intangible assets related to trade names, Title IV eligibility and accreditations, and intellectual property are not amortized, as there are no legal, regulatory, contractual, economic or other factors that limit the useful life of these intangible assets to the reporting entity.

Goodwill and indefinite-lived intangibles are not amortized, but are tested for impairment annually and when an event occurs or circumstances change such that it is more likely than not that an impairment may exist. Our annual testing date is May 31.

Adtalem has five reporting units that contained goodwill as of the first quarter of fiscal year 2022. These reporting units constitute components for which discrete financial information is available and regularly reviewed by segment management and the Board of Directors (the “Board”). If the carrying amount of a reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized to the extent the fair value of the reporting unit goodwill is less than the carrying amount of the goodwill, up to the amount of goodwill recorded. In analyzing the results of operations and business conditions of all five reporting units, as of September 30, 2021, it was determined that no triggering event had occurred that would indicate the carrying value of a reporting unit had exceeded its fair value.

Adtalem has five reporting units that contained indefinite-lived intangible assets as of the first quarter of fiscal year 2022. For indefinite-lived intangible assets, management first analyzes qualitative factors, including results of operations and business conditions of the five reporting units that contained indefinite-lived intangible assets, significant changes in cash flows at the individual indefinite-lived intangible asset level, if applicable, as well as how much previously calculated fair values exceed carrying values to determine if it is more likely than not that the intangible assets associated with these reporting units have been impaired. In qualitatively assessing the indefinite-lived intangible assets of the five reporting units, it was determined that it was more likely than not that these assets’ fair values exceeded their carrying values as of September 30, 2021.

These interim triggering event conclusions were based on the fact that the annual impairment review of Adtalem’s reporting units and indefinite-lived intangible assets resulted in no impairments as of the end of fiscal year 2021, and that no interim events or deviations from planned operating results occurred as of September 30, 2021 that would cause management to reassess these conclusions. Although the COVID-19 pandemic is expected to have a negative effect on the operating results of all five reporting units that contain goodwill and indefinite-lived intangible assets, at this time none of the effects are considered significant enough to create a triggering event. The effects are currently projected to be short-term and would not significantly decrease long-term cash flow projections; however, should economic conditions continue to deteriorate, the revenue and operating results could also deteriorate to the point where a triggering event would exist and require reassessment of the fair values of goodwill and intangible assets and potential impairments.

Determining the fair value of a reporting unit or an intangible asset involves the use of significant estimates and assumptions. Management bases its fair value estimates on assumptions it believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates, which could lead to future impairments of goodwill or intangible assets.