LINCOLN EDUCATIONAL SERVICES CORP
For the period ended Mar 31, 2025. Filed May 12, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 12, 2025
LINC$17.66+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001140361-24-046113
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-12.
0001140361-25-018385
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 114 previous paragraphs and 87 current paragraphs.
40 unchanged; 21 reworded; 25 added; 49 removed; 4 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (25)
Current report
Business Strategy
Current report
Key elements of our business strategy include:
Current report
Planned campus openings
Current report
Revenue. Revenue increased $14.1 million, or 13.7% to $117.5 million for the three months ended March 31, 2025 from $103.4 million in the prior year comparable period. Revenue growth was primarily due to a 13.1% increase in average student population.
Current report
Educational services and facilities expense. Oureducational services and facilities expense increased $4.4 million, or 10.2%, to $47.4 million for the three months ended March 31, 2025, compared to $43.0 million for the three months ended March 31, 2024.
Current report
The increase over the prior year includes approximately $1.1 million in preopening costs for the new Houston, Texas, and Hicksville, New York, campuses and costs related to the relocation of the Nashville, Tennessee and Levittown, Pennsylvania campuses, and investments to implement and expand new programs at existing campuses.
Current report
Total educational services and facilities expense increase was primarily driven by a $1.4 million or 21.4% higher books and tools expense due to 16.2% higher student starts and price increases;$1.7 million or 14.9% higher facilities expense primarily driven byhigher rent expense and other facilities-related costs. Remaining increase was primarily due to $0.8 million or 29.8% higher depreciation expense and $0.5 million or 2.2% higher instructional costs, which increased slightly but declined as a percentage of revenue, reflecting continued margin expansion.
Current report
Educational services and facilities expense, as a percentage ofrevenue, decreased to 40.3% from 41.6% for the three months ended March 31, 2025 and 2024,
Current report
respectively, reflecting positive margin leverage.
Current report
Selling, general and administrative expense. Our selling, general and administrative expense increased $6.4 million, or 10.6% to $66.9 million for the three months ended March 31, 2025, compared to $60.5 million for the three months ended March 31, 2024. Included in the increase over the prior year are approximately $0.4 million of preopening costs including new campusand campus relocation costs as well as costs associated with implementation and expansion of new programs at existing campuses. Total selling, general and administrative expense increase was primarily due to $6.1 million or 26.9% higher administrative expense, driven by increased compensation and benefits expense as a result of expanded workforce to support our larger student population, which included $1.0 million higher pay incentive expense due to improved financial performance; and $0.7 million higher student services expenses.
Current report
Selling, general and administrative expense, as a percentage of revenue, decreased to 56.9% from 58.5% for the three months ended March 31, 2025 and 2024, respectively, reflecting positive margin leverage.
Current report
(Gain) Loss on Sale of Assets. Gain on sale was $0.2 million for the three months ended March 31, 2025 associated with fixed assets sale, compared to $0.3 million of loss on sale of asset related to the sale of Levittown, Pennsylvania property for the three months ended March 31, 2024, respectively.
Current report
Net interest income/(expense). Net interest expensewas $0.6 millionfor the three months ended March 31, 2025 compared to net interest income of $0.1 million for the three months ended March 31, 2024 primarily driven by a decrease in net interest income due to lower cash investments and an increase in interest expense of $0.1 million related to capital leases.
Current report
Income taxes. Our income tax provision for the three months ended March 31, 2025 was $0.9 million, or 31.2% of pre-tax income compared to ($0.1) million, or 34.6% of pre-tax net loss in the prior year.
Current report
In the fourth quarter of 2024, the Board of Directors approved a plan to close the Summerlin, Las Vegas campus. The sale of the Summerlin campus was consummated on January 1, 2025. During the prior year, the Summerlin campus was classified in the Transitional segment.
Current report
This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were $18.3 million and $12.8 million for the three months ended March 31, 2025 and 2024, respectively. The increase over the prior year was primarily driven by salaries and benefits expense and higher pay incentive expense due to improved financial performance.
Current report
Net cash used in operating activities was $8.4 million for the three months ended March 31, 2025 compared to net cash used in operating activities of $14.9 million in the prior year comparable period. The increase in cash position was primarily driven by higher net income and improved cash collections, partially offset by changes in working capital.
Current report
Net cash used in investing activities was $19.6 million for the three months ended March 31, 2025 compared to $8.0 million net cash provided by investing activities in the prior year comparable period primarily driven by higher capital expenditures in the current period due to new campus expansion and relocation of new campuses.
Current report
On March 11, 2025, the Company entered into a second amendment (the “Second Amendment”) to the Fifth Third Credit Agreement, which increased the aggregate principal amount available under the Facility from $40.0 million to $60.0 million. The Second Amendment also expanded the accordion feature from $20.0 million to $25.0 million and extended the maturity date of the Facility from February 16, 2027 to March 7, 2028. The Second Amendment provides additional financial flexibility to support the Company’s long-term growth objectives. Except as set forth above, the Second Amendment does not materially alter the Fifth Third Credit Agreement.
Current report
For the three months ended March 31, 2025 the Company paid fees of approximately $0.1 million in connection with the Fifth Third Credit Agreement’s Second Amendment, consisting of bank fees, legal costs and other customary fees and reimbursements. The fees were capitalized and are being amortized over the term of Fifth Third Credit Agreement.
Current report
As previously disclosed, the DOE could issue new regulations and guidance in the future. See 10-K at “Business – Regulatory Environment – Negotiated Rulemaking.” On April 4, 2025, the DOE published a notice in the Federal Register announcing its intention to commence negotiated rulemaking and to establish one or more negotiated rulemaking committees to prepare proposed regulations related to the Title IV Programs. The DOE has not yet established a list of regulatory topics but has indicated that it is seeking feedback on ways to streamline current higher education regulations and federal assistance programs to create efficiencies for students, institutions, and key stakeholders. The DOE announced that it will receive feedback at two public hearings on April 29, 2025, and May 1, 2025, and from written comments from the public by May 5, 2025. We cannot predict the timing and scope of any regulations or guidance the DOE might issue during the negotiated rulemaking process or during any other process the DOE might complete in the future. Although some or all of the new DOE regulations could be favorable to us and our schools, the new DOE regulations could increase the possibility that our schools could be subject to additional reporting requirements, to potential liabilities and sanctions such as letter of credit requirements, and to potential loss of Title IV eligibility if our efforts to modify our operations to comply with any new requirements are unsuccessful which could have a significant impact on our business and results of operations.
Current report
Congressional and Presidential Action. As previously disclosed, Congress or the President could take action to downsize or eliminate the DOE or transfer some or all of the authority and responsibilities of the DOE to another agency. Because a significant percentage of our revenues are derived from Title IV Programs, any action by Congress, the President or the DOE that significantly reduces Title IV Program funding, that limits or restricts the ability of our schools, programs, or students to receive funding through the Title IV Programs, or that imposes new restrictions or constraints upon our business or operations could reduce our student enrollment and our revenues, and could increase our administrative costs and require us to arrange for alternative sources of financial aid for our students and require us to modify our practices in order for our schools to comply fully with Title IV Program requirements. See 10-K at “Business – Regulatory Environment – Congressional and Presidential Action.”
Current report
On March 20, 2025, the President signed an Executive Order (EO) to take all necessary steps to facilitate the closure of the DOE. The EO did not specify the precise steps or schedule that would be followed for closing the DOE or how the federal student aid programs would be administered or potentially transferred to another agency. The DOE was created in 1979 through Congressional action and similar Congressional action would be required to dissolve the DOE. Accordingly, we cannot predict whether, when, and to what extent the DOE will be downsized, eliminated or replaced and whether Congressional action and/or judicial action in response to lawsuits could impede efforts by the President and DOE to make such changes.
Current report
On March 11, 2025, the DOE announced a reduction in force (RIF) impacting nearly 50% of the DOE’s workforce and placing the impacted DOE staff on administrative leave beginning on March 21, 2025. The DOE noted that all divisions within the DOE were impacted by the RIF with some divisions requiring significant reorganization. However, notwithstanding these actions and assurances by the DOE, it is possible that the RIF and other changes at DOE could result in delays and disruptions to Title IV funding at our schools or to other actions by the DOE related to our participation in the Title IV Programs such as, but not limited to, granting approvals for school acquisitions, adding new programs to existing schools, or adding new school locations.
Current report
Further, as previously disclosed, current requirements for student or school participation in Title IV Programs may change or one or more of the present Title IV Programs could be replaced by other programs with materially different student or school eligibility requirements. The potential for changes related to the DOE or Title IV Programs that may be adverse to us and other for-profit schools like ours may increase as a result of changes in political leadership. We cannot predict the scope, timing or likelihood of future actions and changes by Congress, the President or the DOE with respect to the operations and existence of the DOE or the laws and regulations applicable to and the funding for the Title IV Programs. If we cannot comply with the provisions of the HEA and the regulations of the DOE as they may be revised or with the terms of an executive order or Presidential action or if the cost of such compliance is excessive or if funding is materially reduced or disrupted by changes in Title IV Programs or DOE, our revenues or profit margin could be materially adversely affected. See 10-K at “Business – Regulatory Environment – Congressional and Presidential Action.”
Removed paragraphs (49)
Previous report
Allowance for Credit Losses
Previous report
On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” –commonly known as “CECL” (“CECL”). As a result of the adoption, the Company has revised the way in which it calculates reserves on outstanding student accounts receivable balances. Details considered by management in the estimate include the following:
Previous report
We extend credit to a portion of the students who are enrolled at our academic institutions for tuition and certain other educational costs. Based upon past experience and judgment, we establish an allowance for credit losses with respect to student receivables which we estimate will ultimately not be collectible. Our standard student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables that considers vintages of receivables to determine a loss rate. Our estimation methodology considers a number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trending analysis and comparing estimated and actual performance.
Previous report
Management makes a series of assumptions to determine what is believed to be the appropriate level of allowance for credit losses. Management determines a reasonable and supportable forecast based on the expectation of future conditions over a supportable forecast period, as described above, as well as qualitative adjustments based on current and future conditions that may not be fully captured in the historical modeling factors described above. All of these estimates are susceptible to significant change.
Previous report
We monitor our collections and write-off experience to assess whether or not adjustments to our allowance percentage estimates are necessary. Changes in trends in any of the factors that we believe impact the collection of our student receivables, as noted above, or modifications to our collection practices and other related policies may impact our estimate of our allowance for credit losses and our results from operations.
Previous report
Because a substantial portion of our revenue is derived from Title IV Programs, any legislative or regulatory action that significantly reduces the funding available under Title IV Programs, or the ability of our students or institutions to participate in Title IV Programs, would likely have a material impact on the realizability of our receivables.
Previous report
We do not believe that there is any direct correlation between tuition increases, the credit we extend to students and our financing commitments. The extended financing plans we offer to our students are made on a student-by-student basis and are predominantly a function of the specific student’s financial condition. We only extend credit to the extent there is a financing gap between the tuition and fees charged for the program and the amount of grants, loans and parental loans each student receives. Each student’s funding requirements are unique. Factors that determine the amount of aid available to a student include whether they are dependent or independent students, Pell Grants awarded, federal Direct Loans awarded, PLUS loans awarded to parents and the student’s personal resources and family contributions. As a result, it is extremely difficult to predict the number of students that will need us to extend credit to them.
Previous report
Because a substantial portion of our revenues is derived from Title IV Programs, any legislative or regulatory action that significantly reduces the funding available under Title IV Programs or the ability of our students or schools to participate in Title IV Programs could have a material effect on the realizability of our receivables.
Previous report
Revenue. Revenue increased $14.8 million, or 14.8% to $114.4 million for the three months ended September 30, 2024 from $99.6 million in the prior year comparable period. Revenue growth was primarily due to a 10.6% increase in average student population, driven by four consecutive quarters of double digit start growth, which was up 21.1% for the three months ended September 30, 2024. Included in the increase was $3.4 million of revenue generated from the recently opened East Point, Georgia campus.
Previous report
Educational services and facilities expense. Our educational services and facilities expense increased $4.9 million, or 11.4% to $48.0 million for the three months ended September 30, 2024 from $43.1 million in the prior year comparable period. This increase over the prior quarter includes $2.3 million in costs associated with new programs in addition to expenses related to new campuses including the recently opened East Point, Georgia campus and the new Houston, Texas campus, which is expected to open in the second half of 2025. Also included in this increase are costs related to the relocation of the Nashville, Tennessee and Levittown, Pennsylvania campuses, which are expected to open in the first half of 2025 and the second half of 2025, respectively. The remaining expense increase was driven by several factors including additional depreciation expense, resulting from increased investments in capital expenditures, an increase in books and tools expense driven by a 21.1% increase in student starts and increased instructional costs driven by a larger student population, which as a percentage of revenue have declined over the prior year comparable period reflecting increased operational efficiencies. Partially offsetting these costs was a reduction of $0.5 million resulting from the Transitional segment.
Previous report
Educational services and facilities expense, as a percentage of revenue, decreased to 42.0% from 43.3% for the three months ended September 30, 2024 and 2023, respectively.
Previous report
Selling, general and administrative expense. Our selling, general and administrative expense increased $8.8 million, or 16.3% to $63.3 million for the three months ended September 30, 2024, from $54.5 million in the prior year comparable period. Included in the increase over the prior year are approximately $3.0 million of one-time items including new campus costs and campus relocation costs. The remaining expense increases were driven by several factors including higher administrative costs, increased marketing investments and additional sales and student services expense. Partially offsetting these costs was a reduction of $0.4 million resulting from the Transitional segment.
Previous report
Administrative costs increased $3.9 million driven by several factors including additional salary expense due to an increase in personnel combined with merit increases, increased stock-based compensation expense due to the acceleration of expense for certain employees, an increase in legal costs and a higher provision for credit losses driven in part by revenue growth.
Previous report
Selling, general and administrative expense, as a percentage of revenue, increased to 55.4% from 54.7% for the three months ended September 30, 2024 and 2023, respectively.
Previous report
Gain on insurance proceeds. During the three months ended September 30, 2024, the Company received gross insurance proceeds in the amount of $2.8 million relating to hail damage at one of our campuses.
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Net interest expense / income. Net interest expense was $0.2 million for the three months ended September 30, 2024 compared to net interest income of $0.9 million in the prior year comparable period. Interest income in the current period was lower than prior year by approximately $0.4 million due to higher investment amounts in combination with more favorable interest rates in the prior year. Interest expense increased by roughly $0.6 million in the current year resulting from two additional finance leases.
Previous report
Income taxes. The provision for income taxes was $1.7 million and $0.8 million for the three months ended September 30, 2024 and 2023, respectively. The increase in tax provision was primarily driven by an increase in pre-tax income.
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Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
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Consolidated Results of Operations
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Revenue. Revenue increased $45.1 million, or 16.4% to $320.6 million for the nine months ended September 30, 2024 from $275.5 million in the prior year comparable period. Revenue growth was primarily due to a 10.6% increase in average student population, driven by starting the year with approximately 9.0% or 1,100 more students combined with four consecutive quarters of double digit start growth, which was up 16.6% for the nine months ended September 30, 2024. Included in the increase was $5.2 million of revenue generated from the recently opened East Point, Georgia campus.
Previous report
Educational services and facilities expense. Our educational services and facilities expense increased $15.4 million, or 12.7% to $136.6 million for the nine months ended September 30, 2024 from $121.2 million in the prior year comparable period. This increase over the prior quarter includes $7.2 million in costs associated with new programs at existing campuses in addition to expenses related to new campuses including the recently opened East Point, Georgia campus and the new Houston, Texas campus, which is expected to open in the second half of 2025. Also included in this increase are costs related to the relocations of the Nashville, Tennessee and Levittown, Pennsylvania campuses, which are expected to open in the first half of 2025 and the second half of 2025, respectfully. The remaining expense increase was driven by several factors including additional depreciation expense, resulting from increased investments in capital expenditures, an increase in books and tools expense driven by a 16.6% increase in student starts and increased instructional costs driven by a larger student population, which as a percentage of revenue have declined over the prior year comparable period reflecting increased operational efficiencies. Partially offsetting these costs was a reduction of $1.6 million resulting from the Transitional segment.
Previous report
Educational services and facilities expense, as a percentage of revenue, decreased to 42.6% from 44.0% for the nine months ended September 30, 2024 and 2023, respectively.
Previous report
Selling, general and administrative expense. Our selling, general and administrative expense increased $25.1 million, or 16.0% to $181.7 million for the nine months ended September 30, 2024, from $156.6 million in the prior year comparable period. Included in the increase over the prior year are approximately $2.4 million of one-time items including new campus costs and campus relocation costs. The remaining expense increases were driven by several factors including higher administrative costs, increased marketing investments and additional sales and student services expense. Partially offsetting these costs was a reduction of $1.3 million resulting from the Transitional segment.
Previous report
Administrative costs increased $16.1 million driven by several factors including additional salary expense due to an increase in personnel combined with merit increases and a higher provision for credit losses driven in part by revenue growth. Partially offsetting the costs increases were reduced stock-based compensation expense and legal fees.
Previous report
Selling, general and administrative expense, as a percentage of revenue, decreased slightly to 56.7% from 56.8% for the nine months ended September 30, 2024 and 2023, respectively.
Previous report
Gain on insurance proceeds. During the nine months ended September 30, 2024, the Company received gross insurance proceeds in the amount of $2.8 million relating to hail damage at one of our campuses.
Previous report
Impairment of goodwill and long-lived assets. Impairment of goodwill and long-lived assets of $4.2 million in the prior year was the result of the sale of the Nashville, Tennessee property. The result of the sale created a change in the trajectory of the fair value of the Nashville, Tennessee operations and as such, the Company recorded a pre-tax non-cash impairment charge of $3.8 million related to goodwill and an additional $0.4 million impairment related to long-lived assets. During the nine months ended September 30, 2024, there were no impairments of goodwill or long-lived assets.
Previous report
Net interest expense / income. Net interest expense was $0.1 million for the nine months ended September 30, 2024 compared to interest income of $1.8 million in the prior year. Interest income for the nine months ended September 30, 2024 and 2023 remained essentially flat, with an increase in interest expense in the current year resulting from two additional finance leases.
Previous report
Income taxes. The provision for income taxes was $1.1 million and $7.0 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease in provision was primarily driven by a gain in the prior year due to the sale of the Nashville, Tennessee property during the second quarter of 2023, which drove an increase in the Company’s pre-tax income.
Previous report
On November 3, 2022, the Board of Directors approved a plan to close the Somerville, Massachusetts campus. The owner of the Somerville property exercised an option to terminate the lease on December 8, 2023 and the Company determined not to pursue relocating the campus in this geographic region. The campus was fully taught out as of December 31, 2023 and did not generate any expense for the current quarter.
Previous report
This category includes unallocated expense incurred on behalf of the entire Company. Corporate and other expense was $9.0 million and $9.1 million for the three months ended September 30, 2024 and 2023, respectively. Included in the current year is a gain of $2.8 million related to insurance proceeds received as a result of hail damage at one of our campuses. Partially offsetting the gain are additional expenses relating to salaries and benefits expense, increased stock-based incentives and legal costs.
Previous report
Campus Operations
Previous report
Operating income increased 40.7%, or $10.6 million to $36.8 million for the nine months ended September 30, 2024 from $26.2 million in the prior year comparable period. The change year-over-year was mainly driven by the following factors:
Previous report
Transitional
Previous report
On November 3, 2022, the Board of Directors approved a plan to close the Somerville, Massachusetts campus. The owner of the Somerville property exercised the option to terminate the lease on December 8, 2023 and the Company determined not to pursue relocating the campus in this geographic region. The campus was fully taught out as of December 31, 2023 and did not generate any expense for the current year.
Previous report
Corporate and Other
Previous report
This category includes unallocated expense incurred on behalf of the entire Company. Corporate and other expense were $32.6 million and $0.3 million for the nine months ended September 30, 2024 and 2023, respectively. Included in the current year is a gain of $2.8 million related to insurance proceeds received as a result of hail damage at one of our campuses. Prior year includesa $30.9 million gain on sale of assets resulting from the sale of the Nashville, Tennessee property. The increase in expense was primarily driven by additional salaries and benefits expense, partially offset by a reduction in stock-based compensation expense driven by a cumulative catch-up of expense in the prior year in addition to reduced legal costs in the current year.
Previous report
On May 24, 2022, the Company announced that its Board of Directors had authorized a share repurchase program of up to $30.0 million of the Company’s outstanding Common Stock. The share repurchase program was authorized for 12 months. On February 27, 2023, the Board of Directors extended the share repurchase program for an additional 12 months and authorized the repurchase of an additional $10.0 million of the Company’s Common Stock, for an aggregate of up to $30.6 million in additional repurchases.
Previous report
On May 7, 2024, the Company announced that its Board of Directors had authorized an extension of its share repurchase program for an additional 12 months through May 24, 2025. During the three and nine months ended September 30, 2024, the Company did not repurchase any additional shares. As of September 30, 2024, the Company had approximately $29.7 million remaining for repurchase under the program.
Previous report
Net cash used in operating activities was $1.0 million for the nine months ended September 30, 2024 compared to cash provided by operating activities of $3.6 million in the prior year comparable period. The decrease in cash position was primarily related to a higher accounts receivable balance due to the timing of cash receipts and Title IV disbursements, partially offset by an decrease in prepaid expenses representing a $4.8 million cash inflow and a $2.5 million increase in accounts payable, representing a cash inflow driven by the timing of vendor payments.
Showing the first 40 of 49 passages. Open the source sections for the rest.
Reworded paragraphs (21)
Previous wording
As of January 1, 2023, the Company’s business has been organized into two reportable business segments: (a) Campus Operations; and (b) Transitional. The Campus Operations segment includes campuses that are continuing in operation and contribute to the Company’s core operations and performance. The Transitional segment refers to campuses that have been marked for closure and are being taught out. As of September 30, 2024, no campuses were classified in the Transitional segment. During the prior year, the Company’s Somerville, Massachusetts campus was classified in the Transitional segment. The campus was fully taught out as of December 31, 2023.
Current wording
The Company’s business is organized into two reportable business segments: Campus Operations; and Transitional. The Campus Operations segment includes campuses that are continuing in operation and contribute to the Company’s core operations and performance. The Transitional segment refers to campuses that have been marked for closure and are being taught out. As of March 31, 2025 no campuses were classified in the Transitional segment. In the prior year, the Company’s Summerlin, Las Vegas campus was classified in the Transitional segment and its sale was consummated on January 1, 2025.
Previous wording
We evaluate performance based on operating results. Adjustments to reconcile segment results with consolidated results are included in the caption “Corporate,” which primarily includes unallocated corporate activity. The interim financial statements and related notes thereto appearing elsewhere in this Form 10-Q and the discussions contained herein should be read in conjunction with the annual financial statements and notes thereto included in our Form 10-K, which includes audited Consolidated Financial Statements for the last two fiscal years ended December 31, 2023.
Current wording
We evaluate performance based on operating results. Adjustments to reconcile segment results with consolidated results are included in the caption “Corporate,” which primarily includes unallocated corporate activity. The interim financial statements and related notes thereto appearing elsewhere in this Form 10-Q and the discussions contained herein should be read in conjunction with the annual financial statements and notes thereto included in our Form 10-K, which includes audited Consolidated Financial Statements for the last three fiscal years ended December 31, 2024.
Previous wording
Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”, “we”, “our”, and “us”, as applicable) provide diversified career-oriented post-secondary education to recent high school graduates and working adults. The Company, which currently operates 22 campuses in 13 states, offers programs in skilled trades (which include HVAC, welding, computerized numerical control and electrical and electronic systems technology, among other programs), automotive technology, healthcare services (which include nursing, dental assistant, and medical administrative assistant, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology, and aesthetics), and information technology. The schools operate under Lincoln Technical Institute, Lincoln College of Technology, Lincoln Culinary Institute, Euphoria Institute of Beauty Arts & Sciences, and associated brand names. Most of the campuses serve major metropolitan markets and each typically offers courses in multiple areas of study. Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company’s other campuses primarily attract students from their local communities and surrounding areas. All of the campuses are nationally accredited and are eligible to participate in federal financial aid programs by the U.S. Department of Education (“DOE”) and applicable state education agencies and accrediting commissions, which allow students to apply for and access federal student loans as well as other forms of financial aid.
Current wording
Most of the Company’s campuses serve major metropolitan markets and each typically offers courses in multiple areas of study. Five of the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The Company’s other campuses primarily attract students from their local communities and surrounding areas. All of the campuses are nationally accredited and are eligible to participate in federal financial aid programs administered by the U.S. Department of Education (“the DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal student loans as well as other forms of financial aid. The Company was incorporated in New Jersey in 2003 as the successor-in-interest to various acquired schools including Lincoln Technical Institute, Inc. which opened its first campus in Newark, New Jersey in 1946.
Previous wording
Results of Continuing Operations for the Three and Nine Months Ended September 30, 2024
Current wording
Results of Operations for the Three Months Ended March 31, 2025
Previous wording
Sales and student services expense increased $1.6 million, primarily driven by increased personnel to continue to support and drive student start growth and program expansions.
Current wording
Student services expense increased $0.7 million or 13.2%, primarily driven by increased personnel to continue to support and drive student population growth and program expansions.
Previous wording
Marketing investments increased $0.7 million, while the costs to obtain potential students declined, demonstrating increased efficiencies per dollar spent. Additional marketing initiatives have contributed to the 21.1% student start growth over the prior quarter and will continue to yield returns through the end of the year.
Current wording
Marketing expense decreased slightly year over year, demonstrating increased efficiencies per dollar spent with cost per start decreasing 20% compared to prior year. Additional marketing initiatives have contributed to the 16.2% student start growth over the prior year and will continue to yield returns through the end of the year.
Previous wording
Since January 1, 2023, the Company’s business has been organized into two reportable business segments: (a) Campus Operations; and (b) Transitional. These segments are defined below:
Current wording
The Company’s business is organized into two reportable business segments: Campus Operations and Transitional. These segments are defined below:
Previous wording
Transitional – The Transitional segment refers to campuses that have been marked for closure and are being taught out. As of September 30, 2024, no campuses were classified in the Transitional segment. During the prior year, the Company’s Somerville, Massachusetts campus was classified in the Transitional segment. The campus was fully taught out as of December 31, 2023.
Current wording
Transitional – The Transitional segment refers to campuses that have been marked for closure and are being taught out. As of March 31, 2025, no campuses were classified in the Transitional segment. During the prior year, the Company’s Summerlin, Las Vegas campus was classified in the Transitional segment. The sale of the Summerlin campus was consummated on January 1, 2025.
Previous wording
The following table presents results for our two reportable segments for the three months ended September 30, 2024 and 2023:
Current wording
The following table presents selected operating metrics for our two reportable segments for the three months ended March 31, 2025 and 2024:
Previous wording
Operating income increased $3.0 million, or 25.0% to $14.9 million for the three months ended September 30, 2024 from $11.9 million in the prior year comparable period. The change quarter-over-quarter was mainly driven by the following factors:
Current wording
Operating income increased $9.1 million, or 71.9% to $21.7 million for the three months ended March 31, 2025 from $12.6 million in the prior year comparable period. The change compared to the prior year was mainly driven by the following factors:
Previous wording
Our primary capital requirements are for the maintenance and expansion of our facilities and the development of new programs. Our principal sources of liquidity have been cash provided by operating activities and borrowings under our credit facility with Fifth Third Bank, National Association. The following chart summarizes the principal elements of our cash flow for each of the nine months ended September 30, 2024 and 2023:
Current wording
Our primary capital requirements are for maintenance and expansion of our facilities and the development of new programs. Our principal source of liquidity has been cash provided by operating activities. The following chart summarizes the principal elements of our cash flow for each of the three months ended March 31, 2025 and 2024:
Previous wording
As of September 30, 2024, the Company had $54.0 million in cash and cash equivalents, compared to $80.3 million in cash and cash equivalents and restricted cash as of December 31, 2023. The change in cash position from the end of the year was driven in part by the payment of incentive compensation during the first quarter and investments in capital expenditures related to our recently opened East Point, Georgia campus, the new Houston Texas campus, the relocations of the Nashville, Tennessee and Levittown, Pennsylvania campuses, and new programs and program expansions. Further, the prior year cash position benefited from $33.3 million in proceeds resulting from the sale of our Nashville, Tennessee property.
Current wording
As of March 31, 2025, the Company had $28.7 million in cash and cash equivalents, compared to $69.8 million in cash and cash equivalents as of March 31, 2024. The change in cash position from the prior year was primarily driven by increased capital expenditures due to campus expansion and continued use of cash in operating activities.
Previous wording
Our primary source of cash is tuition collected from our students. The majority of students enrolled at our schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses. The most significant source of student financing is Title IV Programs, which represented approximately 81% of our cash receipts related to revenues in 2023. Pursuant to applicable regulations, students must apply for a new loan for each academic period. Federal regulations dictate the timing of disbursements of funds under Title IV Programs and loan funds are generally provided by lenders in two disbursements for each academic year. The first disbursement is usually received approximately 31 days after the start of a student’s academic year and the second disbursement is typically received at the beginning of the sixteenth week from the start of the student's academic year. Certain types of grants and other funding are not subject to a 31-day delay. In certain instances, if a student withdraws from a program prior to a specified date, any paid but unearned tuition or prorated Title IV Program financial aid is refunded according to federal, state and accrediting agency standards.
Current wording
Our primary source of cash is tuition collected from our students. The majority of students enrolled at our schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses. The most significant source of student financing is Title IV Programs, which represented approximately 82% of our cash receipts relating to revenues in 2024. Pursuant to applicable regulations, students must apply for a new loan for each academic period. Federal regulations dictate the timing of disbursements of funds under Title IV Programs and loan funds are generally provided by lenders in two disbursements for each academic year. The first disbursement is usually received approximately 31 days after the start of a student’s academic year and the second disbursement is typically received at the beginning of the sixteenth week from the start of the student’s academic year. Certain types of grants and other funding are not subject to a 31-day delay. In certain instances, if a student withdraws from a program prior to a specified date, any paid but unearned tuition or prorated Title IV Program financial aid is refunded according to federal, state and accrediting agency standards.
Previous wording
As a result of the significant amount of Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV Program funds that our students are eligible to receive for tuition payments to us or any restriction on our eligibility to receive Title IV Program funds would have a significant impact on our operations and our financial condition. For more information, see Part I, Item 1A. “Risk Factors - Risks Related to Our Industry” of our Form 10-K..
Current wording
As a result of the significant amount of Title IV Program funds received by our students, we are highly dependent on these funds to operate our business. Any reduction in the level of Title IV Program funds that our students are eligible to receive for tuition payment to us or any restriction on our eligibility to receive Title IV Program funds would have a significant impact on our operations and our financial condition. For more information, see Part I, Item 1A. “Risk Factors - Risks Related to Our Industry” of our Form 10-K.
Previous wording
Capital expenditures were approximately 11.0% of revenues in 2023 and are expected to approximate 18.0% of revenues in 2024. The significant increase in planned capital expenditures over the prior year will be driven by several factors that include, but are not limited to, the buildout of our recently opened East Point, Georgia campus and the new Nashville, Tennessee campus, additional space, the planned introduction of three new programs at the Lincoln, Rhode Island campus, and the anticipated introduction of new programs at certain other campuses. We expect to fund future capital expenditures with cash generated from operating activities and cash on hand.
Current wording
Capital expenditures were 13.1% of revenues in 2024 and are expected to be approximately 16.0% of revenues in 2025. The increase in planned capital expenditures over the prior year will be driven by several factors that include but are not limited to the buildout of the Nashville, Tennessee, Levittown, Pennsylvania, Houston, Texas and Hicksville, New York campuses. In addition, we plan to invest $6.1 million into expanding programs at the Melrose, Illinois, Moorestown, New Jersey, South Plainfield, New Jersey and Allentown, Pennsylvania campuses and we plan to invest an additional $18.9 million for educational equipment, real estate improvements, and information technology across various campuses. We expect to fund future capital expenditures with cash generated from operating activities and cash on hand.
Previous wording
Net cash used in financing activities for the nine months ended September 30, 2024 and 2023 was $3.1 million and $2.9 million, respectively. The increase in cash used was primarily driven by cash outflows in the current year of $1.2 million related to the tax impact for vested stock grants, $0.5 million paid for implementing the new credit facility with Fifth Third Bank, National Association, and $0.2 million related to lease payments made under the Company’s two additional finance leases. Partially offsetting these cash outflows was a $0.8 million inflow for a tenant allowance related to one of the Company’s finance leases in the current year. The prior year also had $0.9 million in cash outflows related to the Company’s share repurchase plan.
Current wording
Net cash used in financing activities for the three months ended March 31, 2025 and 2024 was $2.6 million and $3.6 million, respectively. The decrease in cash used was primarily driven by tenant allowance payment received in the current quarter, partially offset by higher cash outflows in the current year related to the tax impact for vested stock grants.
Previous wording
On February 16, 2024, the Company entered into a secured credit agreement (the “Fifth Third Credit Agreement”) with Fifth Third Bank, National Association (the “Bank”), pursuant to which the Company, as borrower, obtained a revolving credit facility in the aggregate principal amount of $40.0 million including a $10.0 million letter of credit sublimit and a $20.0 million accordion feature (the “Facility”), the proceeds of which are to be used for working capital, general corporate and certain other permitted purposes. The Facility is guaranteed by the Company’s wholly-owned subsidiaries and is secured by a first priority lien in favor of the Bank on substantially all of the personal property owned by the Company and its subsidiaries. The term of the Facility is 36 months, maturing on February 16, 2027.
Current wording
On February 16, 2024, the Company entered into a secured credit agreement (the “Fifth Third Credit Agreement”) with Fifth Third Bank, National Association (the “Bank”), pursuant to which the Company, as borrower, has obtained a revolving credit facility in the aggregate principal amount of $40.0 million including a $10.0 million letter of credit sublimit and a $20.0 million accordion feature (the “Facility”), the proceeds of which are to be used for working capital, general corporate and certain other permitted purposes. The Facility is guaranteed by the Company’s wholly-owned subsidiaries and is secured by a first priority lien in favor of the Bank on substantially all of the personal property owned by the Company and its subsidiaries. The term of the Facility is 36 months, maturing on February 16, 2027.
Previous wording
Under the terms of the Fifth Third Credit Agreement, the Company will pay to the Bank an unused facility fee on the average daily unused balance of the Facility at a rate per annum equal to 0.50%, which fee is payable in arrears on dates when interest is due and payable. The Company will also pay to the Bank a letter of credit fee equal to the Applicable Margin for loans subject to the Tranche Rate multiplied by the maximum amount available to be drawn under such letter of credit.
Current wording
Under the terms of the Fifth Third Credit Agreement, the Company will pay to the Bank an unused facility fee on the average daily unused balance of the Facility at a rate per annum equal to 0.50%, which fee is payable in arrears on dates when interest is due and payable. For the three months ended March 31, 2025, the Company has paid less than $0.1 million in unused facility fees, which were expensed as incurred. The Company will also pay to the Bank a letter of credit fee equal to the Applicable Margin for loans subject to the Tranche Rate multiplied by the maximum amount available to be drawn under such letter of credit.
Previous wording
The Fifth Third Credit Agreement contains customary representations, warranties and affirmative and negative covenants, as well as events of default customary for facilities of this type. In connection with the Fifth Third Credit Agreement, the Company paid the Bank a closing fee in the amount of $200,000 and other customary fees and reimbursements.
Current wording
The Fifth Third Credit Agreement contains customary representations, warranties and affirmative and negative covenants, as well as events of default customary for facilities of this type.
Previous wording
On July 18, 2024, the Company entered into a first amendment of the Fifth Third Credit Agreement (“the Amendment”). Among other things, the Amendment contains certain modifications to (i) clarify certain representations and affirmative covenants of the Company, (ii) clarify certain conditions to each advance, (iii) clarify and/or replace certain events of default and (iv) delete or revise certain definitions in order to harmonize them with the other modifications made. The Amendment also contains customary releases, representations and warranties and reaffirmations consistent with the original terms of the Fifth Third Credit Agreement
Current wording
On July 18, 2024, the Company entered into a first amendment (the “First Amendment”) to the Fifth Third Credit Agreement with Bank. Among other things, the First Amendment effects certain modifications to (i) clarify certain representations and affirmative covenants of the Company, (ii) clarify certain conditions to each advance, (iii) clarify and/or replace certain events of default and (iv) delete or revise certain definitions in order to harmonize them with the other modifications made. The First Amendment also contains customary releases, representations and warranties and reaffirmations consistent with the original terms of the Fifth Third Credit Agreement. Except as set forth above, the First Amendment does not materially alter the Fifth Third Credit Agreement.
Previous wording
As of September 30, 2024, we had outstanding loan principal commitments to our active students of $38.4 million. These are institutional loans and no cash is advanced to students. The full loan amount is not guaranteed unless the student completes the program. The institutional loans are considered commitments because the students are required to fund their education using these funds and they are not reported on our financial statements.
Current wording
As of March 31, 2025, we had outstanding loan principal commitments to our active students of $48.9 million. These are institutional loans and no cash is advanced to students. The full loan amount is not guaranteed unless the student completes the program. The institutional loans are considered commitments because the students are required to fund their education using these funds and they are not reported on our financial statements.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”, “we”, “our”, and “us”, as applicable) provide diversified career-oriented postsecondary education to recent high school graduates and working adults. The Company, which currently operates 21 campuses in 12 states, has entered into leases for two new campuses: one in Houston, Texas, with programs expected to begin in the second half of 2025, and one in Hicksville, New York, with programs expected to begin by the end of 2026. The Company entered into the Houston lease and Hicksville lease on October 31, 2023 and December 12, 2024, respectively. The Company offers programs in skilled trades, automotive technology, healthcare services and information technology. The schools operate under the brands Lincoln Technical Institute, Lincoln College of Technology and Nashville Auto Diesel College.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Marketing investments increased $2.6 million, while the costs to obtain potential students declined, demonstrating increased efficiencies per dollar spent. Additional marketing initiatives have contributed to the 16.6% student start growth over the prior quarter and will continue to yield returns through the end of the year.
Previous report — wording carried elsewhere
Sales expense and student services increased $5.2 million, primarily driven by increased personnel to continue to support and drive student start growth and program expansions.
Previous report — wording carried elsewhere
The following table presents results for our two reportable segments for the nine months ended September 30, 2024 and 2023:
Previous report — wording carried elsewhere
The change in operating performance is the result of closing the campus and no longer enrolling new students.