PARSIPPANY, N.J., May 08, 2023 (GLOBE NEWSWIRE) — 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 RESULTS
Based 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 Segment
Revenue 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 Segment
Revenue 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 Other
Corporate 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 OUTLOOK
Based 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.
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.
