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Leases

6 Months Ended

Dec. 31, 2024

11. Leases

We determine if a contract contains a lease at inception. We have entered into operating leases for academic sites, housing facilities, and office space which expire at various dates through August 2040, most of which include options to terminate for a fee or extend the leases for an additional five-year period. The lease term includes the noncancelable period of the lease, as well as any periods for which we are reasonably certain to exercise extension options. We elected to account for lease and non-lease components (e.g., common-area maintenance costs) as a single lease component for all operating leases. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets. We have not entered into any financing leases.

Operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets represent our right to use an underlying asset during the lease term. Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. Operating lease assets are adjusted for any prepaid or accrued lease payments, lease incentives, initial direct costs, and impairments. Our incremental borrowing rate is utilized in determining the present value of the lease payments based upon the information available at the commencement date. Our incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease. Operating lease expense is recognized on a straight-line basis over the lease term.

As of December 31, 2024, we had entered into one operating lease that has not yet commenced. The lease is expected to commence during the fourth quarter of fiscal year 2025, has a 13-year lease term, and will result in an additional operating lease asset and operating lease liability of approximately $2.8 million.

The components of lease cost were as follows (in thousands):


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2024		2023		2024		2023
Operating lease cost	$	11,379	$	11,519	$	22,110	$	23,070
Sublease income		(1,298)		(2,700)		(2,794)		(5,381)
Total lease cost	$	10,081	$	8,819	$	19,316	$	17,689

Maturities of lease liabilities as of December 31, 2024 were as follows (in thousands):


	Operating
Fiscal Year	Leases
2025 (remaining)	$	22,966
2026		46,543
2027		46,018
2028		40,525
2029		31,631
Thereafter		139,547
Total lease payments		327,230
Less: lease incentives not yet received		(16,546)
Less: imputed interest		(96,000)
Present value of lease liabilities	$	214,684

Lease term and discount rate were as follows:


	December 31,
	2024
Weighted-average remaining operating lease term (years)		7.7
Weighted-average operating lease discount rate		7.6%

Supplemental disclosures of cash flow information related to leases were as follows (in thousands):


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2024		2023		2024		2023
Cash paid for amounts in the measurement of operating lease liabilities (net of sublease receipts)	$	6,904	$	10,989	$	16,285	$	21,615
Operating lease assets obtained in exchange for operating lease liabilities	$	24,023	$	14,383	$	26,137	$	19,526

Adtalem maintains agreements to sublease either a portion or the full leased space at three of its operating lease locations. Adtalem’s sublease agreements expire at various dates through December 2025. We record sublease income as an offset against our lease expense recorded on the head lease. For leases which Adtalem vacated or partially vacated space, we recorded estimated restructuring charges in prior periods. Actual results may differ from these estimates, which could result in additional restructuring charges or reversals in future periods. Future minimum sublease rental income under these agreements as of December 31, 2024 was as follows (in thousands):


Fiscal Year	Amount
2025 (remaining)	$	2,504
2026		2,038
Total sublease rental income	$	4,542