Lincoln Educational Services Corporation (Nasdaq: LINC) today
announced operating and financial results for the first quarter as
well as recent business developments.
First Quarter 2023 Financial Highlights and Recent Operating
Developments*
- Revenues of $86.4 million grew 6.9%
- New student starts increased 6.4%
- Adjusted EBITDA of $2.2 million
- Increasing outlook for revenues and earnings for the full
year
*Note: The highlighted financial results exclude the
Transitional segment and results and guidance in this release,
including the highlights above, include references to non-GAAP
operating measures. A reconciliation of GAAP / non-GAAP measures is
included in this release.
“Our efforts to build more scalable and higher return operations
that benefit our students, our faculty, our corporate partners and
our shareholders generated solid results during the first quarter,”
said Scott Shaw, President & CEO. “New student starts increased
by 6.4% and revenues grew by nearly 7% and Adjusted EBITDA by more
than 15% in our Campus Operations segment. At the same time, we
continued to execute our key growth initiatives including
implementing our hybrid teaching model, centralizing our financial
aid application process, and preparing to launch ten new program
replications across our existing campuses over the next 21 months
and to open our new Atlanta, Georgia area campus later this year.
With our momentum continuing into the second quarter, we are
increasing our revenue and earnings outlook for the full year.”
2023 FIRST QUARTER FINANCIAL
RESULTS(Quarter ended March 31, 2023 compared to
March 31, 2022)
- Revenue increased $5.6 million, or 6.9% to
$86.4 million from $80.8 million in the prior year comparable
period excluding the Transitional segment. The revenue increase is
attributable to the Company’s new hybrid teaching model, which
increases program efficiency and delivers accelerated revenue
recognition in certain evening programs combined with a 9.0%
increase in average revenue per student driven by tuition
increases. While average student population benefitted from the
6.4% increase in new student starts excluding the Transitional
segment, it remained below last year during the quarter due to the
lower beginning population.
- Educational services and facilities
expense increased $1.9 million, or 5.2% to $38.1
million from $36.2 million in the prior year comparable period.
Increased costs were primarily concentrated in instructional and
facilities expense. Instructional increases were driven primarily
by salaries from higher staffing levels and merit
increases. Facility expenses increased primarily due to
additional rent expense from the new Atlanta, Georgia campus lease,
which was executed at the end of the second quarter of 2022.
Partially offsetting the additional costs was a decrease in
expenses within the Transitional segment.
- Selling, general and administrative expense
increased $3.6 million, or 7.8% to $50.3 million from $46.7 million
in the prior year comparable period. Increased expense was driven
by several factors including additional administrative costs due to
increased salaries and benefits expense, increased investments in
marketing initiatives and an increase in student services driven by
costs associated with the centralization of the financial aid
department.
- Net interest income was $0.4 million compared
to net interest expense of less than $0.1 million in the prior year
comparable period. The increase to net interest income reflects the
investment of cash reserves into higher yielding short-term
investments.
- Benefit for income taxes was $0.6 million for
the three months ended March 31, 2023, and 2022, respectively. The
benefit for income taxes in both periods resulted from a pre-tax
book loss and a discrete item relating to restricted stock
vesting. The effective tax rate for the three months
ended March 31, 2023 and 2022 was 28.3% and 28.2%, respectively
prior to consideration of discrete items.
RECENT BUSINESS DEVELOPMENTS
Share Repurchase Program. During the first
quarter, the Company repurchased approximately 104,000 shares of
its common stock for approximately $0.5 million. Since the adoption
of the share repurchase program in May 2022, the Company has
repurchased a total of 1.7 million shares of its common stock for a
total investment of $10.0 million.
New Accounting Pronouncement. On January 1,
2023, the Company adopted Accounting Standard Update (“ASU”) No.
2016-13, Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments, commonly
known as “CECL.” Upon adoption during the first quarter, the
Company recorded a decrease in retained earnings of
$7.9 million, net of taxes. For the three months ended March
31, 2023, the adoption of ASU No. 2016-13 did not have a
significant impact on the Company’s quarterly condensed
consolidated statement of operations. The Company did not deem any
other adjustments necessary in applying this new
guidance.
FIRST QUARTER SEGMENT RESULTSBased on trends in
student demand and program expansions, there have been more
cross-offerings of programs among the various campuses. Given this
change, the Company has revised the way it manages the business,
evaluates performance, and allocates resources, resulting in an
updated segment structure. As of March 31, 2023, the Company’s
business is now organized into two reportable business segments:
Campus Operations and Transitional along with Corporate and Other
which includes unallocated expenses incurred on behalf of the
entire Company. The Campus Operations segment includes all campuses
that are continuing in operation and contribute to the Company’s
core operations and performance. The Transitional segment refers to
campuses that are currently being closed and being
taught-out. As of March 31, 2023, the only campus classified
in the Transitional segment is the Somerville, Massachusetts
campus, which has been marked for closure and is expected to be
fully taught-out prior to December 31, 2023.
Campus Operations SegmentRevenue increased $5.6
million, or 6.9% to $86.4 million for the three months ended March
31, 2023 from $80.8 million in the prior year comparable period.
The revenue increase is attributable to the Company’s new hybrid
teaching model combined with a 9.0% increase in average revenue per
student driven by tuition increases and a 6.4% increase in student
starts. Adjusted EBITDA was $11.6 million compared to
$10.0 million in the prior year. The current quarter
includes $0.3 million in start-up costs for the new Atlanta,
Georgia campus.
Transitional SegmentRevenue decreased $0.8
million, or 47.4% to $0.9 million for the three months ended March
31, 2023, from $1.7 million in the prior year comparable
period. Total operating expenses decreased $0.7
million, or 38.6%, to $1.1 million for the three months ended March
31, 2023, from $1.8 million in the prior year comparable period.
The Somerville, Massachusetts campus is no longer enrolling new
students and will be fully taught-out and closed by year-end.
Corporate and OtherCorporate and other expenses
were $11.0 million and $8.9 million for the three months ended
March 31, 2023 and 2022, respectively. Increased costs were driven
by several factors including additional salaries and benefits,
increased legal expenses in the quarter and an increase in workers
compensation relating to prior year claims.
FULL YEAR 2023 OUTLOOKBased on the financial
results achieved during the first quarter and the current outlook
for the remainder of the year, the Company is increasing its
financial guidance for Revenue, Adjusted EBITDA and Adjusted Net
Income as follows:
- Revenue in the range of $355 million to $365 million
- Adjusted EBITDA* in the range of $21 million to $25
million
- Adjusted Net income* in the range of $9 million to $12
million
The outlook for student start growth of 5% to 10% and capital
expenditures in the range of $35 million to $40 million remains
unchanged.
*The guidance in this release includes references to non-GAAP
operating measures. A reconciliation of GAAP / non-GAAP measures
can be found at the end of this release.
The 2023 guidance excludes the impact of the new Atlanta,
Georgia campus, apart from capital expenditures. In addition,
guidance further excludes costs associated with the Company’s
Transitional segment, one-time expenses not considered part of the
Company’s normal business operations, and the anticipated gain from
the pending sale of the Nashville, Tennessee property.
This guidance may be revised as the year progresses due to changes
in student demand and other factors.
CONFERENCE CALL INFOLincoln will host a
conference call today at 10:00 a.m. Eastern Standard Time
to discuss results. To access the live webcast of the conference
call, please go to the investor relations section of Lincoln’s
website at http://www.lincolntech.edu. Participants may also
register via teleconference at: Q1 2023 Lincoln Educational
Services Earnings Conference Call. Once registration is
completed, participants will be provided with a dial-in number
containing a personalized PIN to access the call. Participants are
requested to register at a minimum 15 minutes before the start of
the call.
An archived version of the webcast will be
accessible for 90 days at http://www.lincolntech.edu.
ABOUT LINCOLN EDUCATIONAL SERVICES
CORPORATION
Lincoln Educational Services Corporation is a
leading provider of diversified career-oriented post-secondary
education helping to provide solutions to America’s skills gap.
Lincoln offers recent high school graduates and working adult’s
career-oriented programs in five principal areas of study:
automotive technology, health sciences, skilled trades, business
and information technology and hospitality services. Lincoln has
provided the workforce with skilled technicians since its inception
in 1946 and currently operates 22 campuses in 14 states under 4
brands: Lincoln College of Technology, Lincoln Technical Institute,
Lincoln Culinary Institute and Euphoria Institute of Beauty Arts
and Sciences. For more information, please go to
www.lincolntech.edu.
FORWARD-LOOKING
STATEMENTSStatements in this press release and in oral
statements made from time to time by representatives of Lincoln
Educational Services Corporation regarding Lincoln’s business that
are not historical facts, including those made in a conference
call, may be “forward-looking statements” as that term is defined
in the federal securities law. The words “may,” “will,” “expect,”
“believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,”
and “continue,” and their opposites and similar expressions are
intended to identify forward-looking statements. Forward-looking
statements are based on information available at the time those
statements are made and/or management’s good faith belief as of
that time with respect to future events, and are subject to risks
and uncertainties that could cause actual performance or results to
differ materially from those expressed in or suggested by the
forward-looking statements. Forward-looking statements should not
be read as a guarantee of future performance or results and will
not necessarily be accurate indications of the times at, or by,
which such performance or results will be achieved, if at all.
Generally, these statements relate to business plans or strategies
and projections involving anticipated revenues, earnings or other
aspects of the Company’s operating results. Such forward-looking
statements include the Company’s current belief that it is taking
appropriate steps regarding the pandemic and that student growth
will continue. The Company cautions you that these statements
concern current expectations about the Company’s future performance
or events and are subject to a number of uncertainties, risks and
other influences many of which are beyond the Company’s control,
that may influence the accuracy of the statements and the projects
upon which the statements are based including, without limitation,
impacts related to the COVID-19 pandemic or other epidemics or
pandemics, our inability to close on the sale of our Nashville,
Tennessee campus; our failure to comply with the extensive
regulatory framework applicable to our industry or our failure to
obtain timely regulatory approvals in connection with acquisitions
or a change of control of our Company; our success in updating and
expanding the content of existing programs and developing new
programs for our students in a cost-effective manner or on a timely
basis; risks associated with changes in applicable federal laws and
regulations; uncertainties regarding our ability to comply with
federal laws and regulations, such as the 90/10 rule and prescribed
cohort default rates; risks associated with the opening of new
campuses; risks associated with integration of acquired schools;
industry competition; our ability to execute our growth strategies;
conditions and trends in our industry; general economic conditions;
and other factors discussed in the “Risk Factors” section of our
Annual Reports and Quarterly Reports filed with the Securities and
Exchange Commission. All forward-looking statements are
qualified in their entirety by this cautionary statement, and
Lincoln undertakes no obligation to publicly revise or update any
forward-looking statements, whether as a result of new information,
future events or otherwise after the date hereof.
(Tables to Follow)(In Thousands)
|
Three Months Ended |
|
March 31, |
|
(Unaudited) |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
REVENUE |
$ |
87,284 |
|
|
$ |
82,554 |
|
COSTS AND EXPENSES: |
|
|
|
Educational services and facilities |
|
38,093 |
|
|
|
36,196 |
|
Selling, general and administrative |
|
50,307 |
|
|
|
46,684 |
|
Total costs & expenses |
|
88,400 |
|
|
|
82,880 |
|
OPERATING LOSS |
|
(1,116 |
) |
|
|
(326 |
) |
OTHER: |
|
|
|
Interest income |
|
467 |
|
|
|
- |
|
Interest expense |
|
(25 |
) |
|
|
(43 |
) |
LOSS BEFORE INCOME TAXES |
|
(674 |
) |
|
|
(369 |
) |
BENEFIT FOR INCOME TAXES |
|
(565 |
) |
|
|
(641 |
) |
NET (LOSS) INCOME |
$ |
(109 |
) |
|
$ |
272 |
|
PREFERRED STOCK DIVIDENDS |
|
- |
|
|
|
304 |
|
LOSS AVAILABLE TO COMMON STOCKHOLDERS |
$ |
(109 |
) |
|
$ |
(32 |
) |
Basic and Diluted |
|
|
|
Net loss per share |
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
Weighted average number of common shares outstanding: |
|
|
|
Basic and Diluted |
|
30,039 |
|
|
|
25,721 |
|
|
|
|
|
Other data: |
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
$ |
2,196 |
|
|
$ |
2,757 |
|
Depreciation and amortization |
$ |
1,253 |
|
|
$ |
1,528 |
|
Number of campuses |
|
22 |
|
|
|
22 |
|
Average enrollment |
|
12,387 |
|
|
|
12,884 |
|
Stock-based compensation |
$ |
812 |
|
|
$ |
1,239 |
|
Net cash used in operating activities |
$ |
(214 |
) |
|
$ |
(14,367 |
) |
Net cash used in investing activities |
$ |
(3,249 |
) |
|
$ |
(1,045 |
) |
Net cash used in financing activities |
$ |
(2,335 |
) |
|
$ |
(2,296 |
) |
|
|
|
|
Selected Consolidated Balance Sheet Data: |
March 31, 2023 |
|
|
(Unaudited) |
|
|
|
|
Cash and cash equivalents |
$ |
40,280 |
|
Restricted cash |
|
4,209 |
|
Short-term investments |
|
14,758 |
|
Current assets |
|
107,587 |
|
Working capital |
|
53,013 |
|
Total assets |
|
281,093 |
|
Current liabilities |
|
54,574 |
|
Total stockholders' equity |
|
135,254 |
|
|
|
|
LIQUIDITYThe Company ended the quarter with
$59.2 million in cash and cash equivalents, restricted cash and
short-term investments. As disclosed previously, the Company
anticipates its cash position increasing through the contemplated
consummation of the sale of the Nashville, Tennessee campus, which
is currently expected to close in the second quarter of 2023 and
through the addition of a new credit facility. Additional liquidity
will be reinvested in the Company for growth initiatives and
creation of efficiencies.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURESIn
addition to disclosing financial results that are determined in
accordance with U.S. generally accepted accounting principles
(“GAAP”), the Company believes it is useful to present non-GAAP
financial measures that exclude certain significant items as a
means to understand the performance of its business. EBITDA,
Adjusted EBITDA, Adjusted net income and total liquidity are
measures not recognized in financial statements presented in
accordance with GAAP.
- We define EBITDA as income (loss) before interest expense (net
of interest income), provision (benefit) for income taxes,
depreciation and amortization.
- We define Adjusted EBITDA as EBITDA plus stock compensation
expense and adjustments for items not considered part of the
Company’s normal recurring operations.
- We define Adjusted net income as net income plus adjustments
for items not considered part of the Company’s normal recurring
operations.
- We define Total liquidity as the Company’s cash and cash
equivalents, short-term investments and restricted cash.
EBITDA, Adjusted EBITDA, Adjusted net income and total liquidity
are presented because we believe they are useful indicators of the
Company’s performance and ability to make strategic investments and
meet capital expenditures and debt service requirements. However,
they are not intended to represent cash flows from operations as
defined by GAAP and should not be used as an alternative to net
income (loss) as indicators of operating performance or cash flow
as a measure of liquidity. EBITDA, Adjusted EBITDA, Adjusted net
income and total liquidity are not necessarily comparable to
similarly titled measures used by other companies.
The following is a reconciliation of net (loss) income to
EBITDA, Adjusted EBITDA, Adjusted net income and total
liquidity:
|
Three Months Ended March 31, |
|
(Unaudited) |
|
Consolidated Operations |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
Net (loss) income |
$ |
(109 |
) |
|
$ |
272 |
|
Interest (income) expense, net |
|
(442 |
) |
|
|
43 |
|
Provision for income taxes |
|
(565 |
) |
|
|
(641 |
) |
Depreciation and amortization |
|
1,253 |
|
|
|
1,528 |
|
EBITDA |
|
137 |
|
|
|
1,202 |
|
Stock compensation expense |
|
812 |
|
|
|
1,239 |
|
New campus start-up costs |
|
260 |
|
|
|
- |
|
Transitional segment |
|
193 |
|
|
|
56 |
|
Severance and other one time costs |
|
794 |
|
|
|
260 |
|
Adjusted EBITDA |
$ |
2,196 |
|
|
$ |
2,757 |
|
|
|
|
|
|
Three Months Ended March 31, |
|
(Unaudited) |
|
Campus Operations |
|
Transitional |
|
Corporate |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
10,109 |
|
$ |
8,614 |
|
$ |
(197 |
) |
|
$ |
(63 |
) |
|
$ |
(10,021 |
) |
$ |
(8,279 |
) |
Interest (income) expense, net |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(442 |
) |
|
|
43 |
|
Provision for income taxes |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
(565 |
) |
|
|
(641 |
) |
Depreciation and amortization |
|
1,099 |
|
|
1,391 |
|
|
4 |
|
|
|
7 |
|
|
|
150 |
|
|
|
130 |
|
EBITDA |
|
11,208 |
|
|
10,005 |
|
|
(193 |
) |
|
|
(56 |
) |
|
|
(10,878 |
) |
|
|
(8,747 |
) |
Stock compensation expense |
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
812 |
|
|
|
1,239 |
|
New campus start-up costs |
|
260 |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Transitional segment |
|
- |
|
|
- |
|
|
193 |
|
|
|
56 |
|
|
|
- |
|
|
|
- |
|
Severance and Other one time costs |
|
84 |
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
710 |
|
|
|
260 |
|
Adjusted EBITDA |
$ |
11,552 |
|
$ |
10,005 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(9,356 |
) |
|
$ |
(7,248 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
(Unaudited) |
|
|
2023 |
|
|
|
2022 |
|
Net (loss) income |
$ |
(109 |
) |
|
$ |
272 |
|
|
|
|
|
One-time non-recurring adjustments: |
|
|
|
New campus start-up costs |
|
260 |
|
|
|
- |
|
Transitional segment |
|
193 |
|
|
|
56 |
|
Severance and other one time costs |
|
973 |
|
|
|
260 |
|
Total one-time non-recurring adjustments |
|
1,426 |
|
|
|
316 |
|
Income tax effect |
|
(406 |
) |
|
|
(89 |
) |
Adjusted net income, non-GAAP |
$ |
911 |
|
|
$ |
499 |
|
|
|
|
|
GAAP effective income tax rate |
|
28.5% |
|
|
|
28.2% |
|
|
|
|
|
|
|
|
As of |
|
March 31, 2023 |
Cash and cash equivalents |
$ |
40,280 |
Restricted cash |
|
4,209 |
Short-term investments |
|
14,758 |
Total Liquidity |
$ |
59,247 |
|
|
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
Revenue: |
|
|
|
|
|
Campus Operations |
$ |
86,352 |
|
|
$ |
80,782 |
|
|
6.9 |
% |
Transitional |
|
932 |
|
|
|
1,772 |
|
|
-47.4 |
% |
Total |
$ |
87,284 |
|
|
$ |
82,554 |
|
|
5.7 |
% |
|
|
|
|
|
|
Operating Income (loss): |
|
|
|
|
|
Campus Operations |
$ |
10,109 |
|
|
$ |
8,614 |
|
|
17.4 |
% |
Transitional |
|
(197 |
) |
|
|
(62 |
) |
|
217.7 |
% |
Corporate |
|
(11,028 |
) |
|
|
(8,878 |
) |
|
-24.2 |
% |
Total |
$ |
(1,116 |
) |
|
$ |
(326 |
) |
|
242.3 |
% |
|
|
|
|
|
|
Starts: |
|
|
|
|
|
Campus Operations |
|
3,440 |
|
|
|
3,234 |
|
|
6.4 |
% |
Transitional |
|
- |
|
|
|
119 |
|
|
-100.0 |
% |
Total |
|
3,440 |
|
|
|
3,353 |
|
|
2.6 |
% |
|
|
|
|
|
|
Average Population: |
|
|
|
|
|
Campus Operations |
|
12,225 |
|
|
|
12,562 |
|
|
-2.7 |
% |
Transitional |
|
162 |
|
|
|
322 |
|
|
-49.7 |
% |
Total |
|
12,387 |
|
|
|
12,884 |
|
|
-3.9 |
% |
|
|
|
|
|
|
End of Period Population: |
|
|
|
|
|
Campus Operations |
|
12,413 |
|
|
|
12,639 |
|
|
-1.8 |
% |
Transitional |
|
131 |
|
|
|
335 |
|
|
-60.9 |
% |
Total |
|
12,544 |
|
|
|
12,974 |
|
|
-3.3 |
% |
|
|
|
|
|
|
Information included in the table below provides student starts
and population under the Campus Operations segment with a breakdown
by Transportation and Skilled Trade programs and Healthcare and
Other Professions programs. This information is not comparable to
the Company’s prior period segment reporting, which was performed
on a campus basis rather than a program basis.
|
|
|
|
|
|
Population by Program (Campus Operations
Segment): |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2023 |
|
2022 |
|
% Change |
Starts: |
|
|
|
|
|
Transportation and Skilled Trades |
2,263 |
|
2,131 |
|
6.2 |
% |
Healthcare and Other Professions |
1,177 |
|
1,103 |
|
6.7 |
% |
Total |
3,440 |
|
3,234 |
|
6.4 |
% |
|
|
|
|
|
|
Average Population: |
|
|
|
|
|
Transportation and Skilled Trades |
8,281 |
|
8,588 |
|
-3.6 |
% |
Healthcare and Other Professions |
3,944 |
|
3,974 |
|
-0.8 |
% |
Total |
12,225 |
|
12,562 |
|
-2.7 |
% |
|
|
|
|
|
|
End of Period Population: |
|
|
|
|
|
Transportation and Skilled Trades |
8,488 |
|
8,598 |
|
-1.3 |
% |
Healthcare and Other Professions |
3,925 |
|
4,041 |
|
-2.9 |
% |
Total |
12,413 |
|
12,639 |
|
-1.8 |
% |
|
|
|
|
|
|
LINCOLN EDUCATIONAL SERVICES
CORPORATIONBrian Meyers, CFO973-736-9340
EVC GROUP LLCInvestor Relations: Michael
Polyviou, mpolyviou@evcgroup.com, 732-933-2755Media Relations: Tom
Gibson, 201-476-0322
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