Lincoln Educational Services Corporation (NASDAQ:LINC) Q1 2023 Earnings Conference Call May 8, 2023 10:00 AM ET Company Participants Michael Polyviou - Investor Relations Scott Shaw - President and Chief Executive Officer Brian Meyers - Chief Financial Officer Conference Call Participants Alex Paris - Barrington Research Steven Frankel - Rosenblatt Eric Martinuzzi - Lake Street Rajiv Sharma - B. Riley Operator Good day and thank you for standing by. Welcome to the Q1 2023 Lincoln Educational Services Earnin ...

Enrollment and Revenue - As of December 31, 2022, the company had 12,388 students enrolled across 22 campuses, with an average enrollment of 12,894 students for the fiscal year, and revenues of $348.3 million, reflecting a 3.9% increase year-over-year[22]. - Skilled trades programs accounted for 36% of total average student enrollment, with tuition rates ranging from $22,000 to $38,000 and program lengths between 28 to 98 weeks[27]. - Automotive technology programs represented 30% of total average student enrollment, with tuition rates ranging from $18,000 to $45,000 and program lengths from 28 to 136 weeks[28]. - Health sciences programs made up 25% of total average student enrollment, with tuition rates ranging from $15,000 to $33,000 and program lengths from 27 to 104 weeks[29]. - Approximately 74% of the company's revenues for the fiscal year ended December 31, 2022, were derived from Title IV Programs[57]. - In fiscal year 2022, approximately 74% of revenues were derived from veterans' benefits programs, including the Post-9/11 GI Bill[73]. - The company received approximately 74% of its revenue from Title IV Programs during the fiscal year ended December 31, 2022[154]. Campus Operations and Expansion - The company plans to close the Somerville, Massachusetts campus by the end of 2023, which is currently the only campus in the Transitional Segment[20]. - The company executed a lease for a 55,000 square foot facility for a second campus in the Atlanta area, incurring approximately $0.4 million in capital expenditures for the year ended December 31, 2022[21]. - The company is focused on expanding geographically and maximizing utilization of existing facilities through increased enrollments and new program introductions[26]. - The company is evaluating the impact of new regulations on school acquisitions, which could complicate future expansion plans[131]. - The DOE may grant closed school loan discharges, which could result in financial liabilities for the company if it does not comply with the new regulations[137]. Regulatory Compliance and Oversight - The company is subject to extensive regulatory oversight, impacting its ability to expand campuses and programs[55]. - The company holds surety bonds with multiple states in an aggregate amount of approximately $15.3 million to comply with state regulations[59]. - The company is in the process of evaluating the impact of new regulations in New Jersey that establish performance quality standards for career-oriented programs[60]. - The Department of Education (DOE) has placed all of the company's institutions on provisional certification due to alleged deficiencies in administrative capability[155]. - The DOE's regulations on substantial misrepresentation could lead to sanctions, including fines and loss of Title IV eligibility, if the company is found non-compliant[130]. - The company is required to post a letter of credit if it fails to comply with the 90/10 Rule or if certain triggering events occur, which could adversely affect its financial condition[125]. - The DOE required the company to maintain a letter of credit amounting to $600,020 due to non-compliance with refund requirements based on audits from 2017 to 2019[126]. - The DOE's expanded financial responsibility standards may require the company to post substantial letters of credit, increasing compliance costs[168]. Student Retention and Marketing - The company experienced a slight decline in student retention rates due to the transition to online instruction, but anticipates improvement as faculty become more skilled in hybrid teaching[40]. - The company aims to implement a hybrid teaching model, combining online and in-person instruction, to enhance flexibility and attract more students[26]. - The company's marketing efforts include a fully integrated approach utilizing traditional media and digital marketing, which drives the majority of new student leads and enrollments[34]. - Referrals accounted for approximately 13% of new student starts during the fiscal year ended December 31, 2022[35]. - The effectiveness of marketing and advertising programs is critical for recruiting new students; failure in these efforts could adversely impact financial performance[204]. Financial Responsibility and Liabilities - The company's composite scores for fiscal years 2022, 2021, and 2020 were calculated to be 2.9, 3.0, and 2.7, respectively, indicating compliance with financial responsibility standards[118]. - The DOE's financial responsibility standards require a composite score of at least 1.5 for institutions to be deemed financially responsible without further oversight[114]. - If an institution's composite score falls below 1.0, it may be deemed to lack financial responsibility, potentially affecting its eligibility for Title IV Programs[116]. - The company is evaluating the impact of the expanded financial responsibility regulations, which could lead to a recalculation of its composite score and additional requirements[121][122]. - The DOE may seek recoupment from institutions for discharged loans, which could significantly impact the company's financial position[87]. Legal and Litigation Risks - The proposed settlement agreement in the Sweet v. Cardona lawsuit could result in automatic loan discharges and refunds for approximately 200,000 class members, including those associated with the company's institutions[96]. - The company is appealing a court ruling that approved a settlement which could result in significant loan discharges without proper adjudication[164]. - The company has filed motions to intervene in the Sweet v. Cardona lawsuit to protect its interests regarding the proposed settlement agreement[97]. - The company faces potential fines and sanctions for incentive payments related to student recruitment, which could impact operational costs[169]. - The company is subject to increased scrutiny and potential liabilities due to ongoing litigation and regulatory changes affecting borrower defense claims[158]. Economic and Market Conditions - The post-secondary education market is highly competitive, with traditional institutions often able to charge lower tuition due to government subsidies, which could adversely affect the company's market share and revenues[189]. - Changes in Title IV Programs by Congress and the DOE could significantly reduce student enrollment and revenues, impacting profit margins[156]. - An increase in student loan interest rates could make education financing more expensive, potentially reducing student enrollment and adversely impacting revenues[192]. - A substantial decrease in student financing options or significant increases in financing costs could significantly impact the student population and financial results[193]. - Legislative changes that reduce funding for Title IV Programs could adversely affect student participation and financial outcomes[194]. Operational Risks - Employee strikes could disrupt class schedules and student retention, materially affecting operations[198]. - Public health crises, such as the COVID-19 pandemic, could disrupt operations and negatively impact future revenues[186]. - Natural or man-made catastrophes could materially affect business operations and financial condition[203]. - The company must adapt educational programs to meet evolving employer demands for technological skills to maintain student enrollment and revenue[187]. - The company is subject to privacy and information security laws, and any breaches could adversely affect reputation and operations[201]. - Changes in U.S. tax laws or adverse outcomes from tax examinations could negatively impact financial results[202].

Lincoln Educational Services Corporation (NASDAQ:LINC) Q4 2022 Earnings Conference Call February 27, 2023 10:00 AM ET Company Participants Michael Polyviou - Investor Relations Scott Shaw - President and Chief Executive Officer Brian Meyers - Chief Financial Officer Conference Call Participants Steven Frankel - Rosenblatt Eric Martinuzzi - Lake Street Alex Paris - Barrington Research Raj Sharma - B. Riley Operator Good day, and thank you for standing by. Welcome to the Q4 2022 Lincoln Educational Services E ...

Financial Data and Key Metrics Changes - Revenue for Q3 2022 increased by 3.1% or $2.7 million to $91.8 million, driven by a 5.9% increase in average revenue per student, which offset a 2.7% decline in average population [55][60] - Consolidated operating expenses rose to $86.9 million, up 4.3% year-over-year, primarily due to increased staffing levels and additional rent expenses [57][58] - Adjusted EBITDA for Q3 was $7.4 million, reflecting the impact of non-cash stock compensation and other adjustments [59] Business Line Data and Key Metrics Changes - Enrollments and graduation rates remained strong across 22 campuses, although starts during Q3 declined by 500 students compared to the previous year [11][44] - The new hybrid teaching model began contributing to topline performance, with expectations for further efficiencies as more programs transition to this model [10][17] Market Data and Key Metrics Changes - The company is experiencing a tight labor market, which has affected student starts, with a noted decline across various programs [39][105] - The demand for skilled students remains strong, with corporate partnerships helping to fill the skills gap in essential positions [21][45] Company Strategy and Development Direction - The company is focused on centralizing and automating its financial aid process and rolling out a new hybrid curriculum to improve student experience and operational efficiency [12][14] - A new campus is being established in the Atlanta area, with plans to open in Q3 2023, as part of a strategy to develop at least five new campuses nationally within five years [23][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from a low unemployment economy and rising interest rates but remains optimistic about growth opportunities and operational efficiencies [39][45] - The company expects to see positive growth in student starts for Q4, despite a decline in Q3, with a focus on improving retention and placement rates [40][106] Other Important Information - The company terminated a $15 million credit facility to enhance flexibility in cash management and investment opportunities [48][50] - The closure of the Somerville campus is expected to have a minimal financial impact, as it has been one of the smallest in terms of revenue and profitability [51][52] Q&A Session Summary Question: How did the third quarter results compare to expectations? - Management indicated that results were in line with expectations, although new student starts were slightly lower than anticipated due to postponed starts at the Somerville campus [64][65] Question: What is the outlook for student starts in Q4? - Management expressed confidence in a strong increase in student starts for Q4, projecting growth of about 6% to 7% [66][67] Question: Can you clarify the impact of the Series A preferred stock conversion? - Management confirmed that approximately 5.3 million shares would be converted, eliminating $304,000 in preferred dividends quarterly [70][72] Question: What is the strategic reasoning behind closing the Somerville campus? - The decision was based on overlapping opportunities with the Lincoln, Rhode Island campus and the lack of attractive growth prospects for the Somerville location [86][87] Question: How does the new hybrid model differ from the previous COVID-era model? - The new hybrid model is designed for optimal blended learning, allowing for shorter in-person sessions and better utilization of faculty, compared to the reactive model implemented during COVID [110][111]

Company Overview - Lincoln Tech operates 22 campuses in 14 states, serving approximately 13,000 students as of June 30, 2022[13] - The company's stock price was $631 as of June 30, 2022, with a market capitalization of $1699 million[11] - Lincoln Tech's 2021 revenues were $3353 million, with an adjusted EBITDA of $351 million[11] Financial Performance - For the six months ended June 2022, revenue was $1647 million, a 39% increase compared to $1585 million in 2021[36, 42] - Adjusted EBITDA for the six months ended June 2022 was $49 million, compared to $115 million in 2021[36, 45] - Lincoln Tech's market share in Transportation and Skilled Trades is approximately 20%, while in Healthcare and Other Professions it's about 05%[20, 21] Growth Strategy - Lincoln Tech is expanding its programs, including new Electrical and Welding programs, and exploring strategic acquisitions to expand market share and diversify program offerings[5] - The company is constructing new schools and creating a new efficient and streamlined campus model[5] - A new Atlanta campus is expected to open in Q3 2023, with a capacity for approximately 700 students and a capital expenditure of around $14 million[7] Regulatory and Compliance - Lincoln Tech's 90/10 ratio is 75% overall, indicating strong compliance with regulations[28] - The company's composite score is 30, reflecting a financially responsible institution[28]

Lincoln Educational Services Corporation (NASDAQ:LINC) Q2 2022 Earnings Conference Call August 8, 2022 10:00 AM ET CompanyParticipants Michael Polyviou - IR Scott Shaw - President and CEO Brian Meyers - CFO Conference Call Participants Alex Paris - Barrington Research Eric Martinuzzi - Lake Street Capital Markets Rajiv Sharma - B. Riley Justin Putman - Talanta Investment Group Operator Good day, and thank you for standing by. Welcome to the Second Quarter 2022 Lincoln Educational Services Earnings Conferenc ...

[Form 10-Q Cover Page](index=1&type=section&id=Form%2010-Q%20Cover%20Page) This quarterly report (Form 10-Q) for the period ended June 30, 2022, details LINCOLN EDUCATIONAL SERVICES CORPORATION's financial status - This is a Quarterly Report (Form 10-Q) filed by LINCOLN EDUCATIONAL SERVICES CORPORATION for the quarterly period ended **June 30, 2022**[2](index=2&type=chunk) - The registrant's common stock (**LINC**) is registered on The NASDAQ Stock Market LLC[3](index=3&type=chunk) - As of August 8, 2022, there were **26,819,501 shares** of the registrant's common stock outstanding[4](index=4&type=chunk) [Index to Form 10-Q](index=2&type=section&id=Index%20to%20Form%2010-Q) This section provides a comprehensive table of contents for the Form 10-Q filing [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and related notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $285,416 | $295,299 | | Total Liabilities | $146,933 | $153,899 | | Total Stockholders' Equity | $126,501 | $129,418 | | Cash and cash equivalents | $66,985 | $83,307 | - Total assets decreased by **$9.9 million** from $295.3 million at December 31, 2021, to **$285.4 million** at June 30, 2022[8](index=8&type=chunk) - Total liabilities decreased by **$7.0 million** from $153.9 million at December 31, 2021, to **$146.9 million** at June 30, 2022[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including revenue, operating income, and net income Condensed Consolidated Statements of Operations (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Revenue | $82,142 | $80,464 | 2.1% | $164,697 | $158,461 | 3.9% | | Operating income | $396 | $3,452 | -88.5% | $70 | $9,472 | -99.3% | | Net income | $259 | $2,426 | -89.3% | $532 | $6,915 | -92.3% | | Net (loss) income per common share (Basic and diluted) | $(0.00) | $0.06 | -100% | $(0.00) | $0.19 | -100% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's net income and other comprehensive income, reflecting total changes in equity Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $259 | $2,426 | $532 | $6,915 | | Other comprehensive income (loss) | $(10) | $(85) | $(40) | $(8) | | Comprehensive income | $249 | $2,341 | $492 | $6,907 | [Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders%27%20Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity) This section outlines changes in the company's equity, including common stock, preferred stock, and treasury stock - Stockholders' equity decreased from **$129.4 million** at December 31, 2021, to **$126.5 million** at June 30, 2022[11](index=11&type=chunk)[21](index=21&type=chunk) - The company repurchased **414,963 shares** at a cost of approximately **$2.5 million** during the six months ended June 30, 2022, which were subsequently canceled[21](index=21&type=chunk)[91](index=91&type=chunk) - Treasury stock of **5,910,541 shares**, valued at **$82.9 million**, was canceled, resulting in a reduction of common stock and treasury stock[21](index=21&type=chunk)[91](index=91&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash flows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change (in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :------------------------ | | Net cash (used in) provided by operating activities | $(9,992) | $1,067 | $(11,059) | | Net cash used in investing activities | $(1,192) | $(3,516) | $2,324 | | Net cash used in financing activities | $(5,138) | $(2,570) | $(2,568) | | Net decrease in cash and cash equivalents | $(16,322) | $(5,019) | $(11,303) | | Cash and cash equivalents — End of period | $66,985 | $33,007 | $33,978 | - Cash paid for interest decreased from **$566 thousand** in 2021 to **$118 thousand** in 2022, while cash paid for income taxes increased from **$652 thousand** to **$1,206 thousand** for the six months ended June 30[26](index=26&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information for the financial statements [Note 1. Description of Business and Basis of Presentation](index=10&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) This note describes the company's business, operating segments, and financial statement presentation - The Company operates **22 schools** in **14 states**, offering programs in automotive technology, skilled trades, healthcare services, hospitality services, and information technology[29](index=29&type=chunk) - The business is organized into two reportable segments: **Transportation and Skilled Trades**, and **Healthcare and Other Professions (HOPS)**[30](index=30&type=chunk) - The Company is currently assessing the impact of new accounting pronouncements, **ASU 2021-08 (Business Combinations)** and **ASU 2020-06 (Convertible Instruments)**, on its financial statements[34](index=34&type=chunk)[37](index=37&type=chunk) [Note 2. Net (Loss) Income Per Common Share](index=12&type=section&id=Note%202.%20Net%20(Loss)%20Income%20Per%20Common%20Share) This note details the calculation of basic and diluted net (loss) income per common share Net (Loss) Income Per Common Share (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net (loss) income allocated to common stockholders | $(45) | $1,630 | $(76) | $4,858 | | Basic and diluted net (loss) income per common share | $(0.00) | $0.06 | $(0.00) | $0.19 | - Potential common shares outstanding excluded from diluted EPS calculation due to anti-dilutive impact: **6,928,480 shares** for Q2 2022 and **6,981,247 shares** for YTD Q2 2022[46](index=46&type=chunk) [Note 3. Revenue Recognition](index=13&type=section&id=Note%203.%20Revenue%20Recognition) This note explains the company's policies for recognizing revenue from student contracts - Unearned tuition decreased from **$25.4 million** at December 31, 2021, to **$21.7 million** at June 30, 2022[49](index=49&type=chunk) - Revenue recognized for the six months ended June 30, 2022, that was included in the contract liability balance at the beginning of the year was **$24.4 million**[49](index=49&type=chunk) Timing of Revenue Recognition (in thousands) | Timing of Revenue Recognition | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Services transferred at a point in time | $4,973 | $6,348 | $9,763 | $11,200 | | Services transferred over time | $77,169 | $74,116 | $154,934 | $147,261 | | Total revenues | $82,142 | $80,464 | $164,697 | $158,461 | [Note 4. Leases](index=14&type=section&id=Note%204.%20Leases) This note details the company's operating lease assets, liabilities, and new lease agreements Lease Metrics (in thousands) | Lease Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease cost | $4,700 | $3,800 | $9,300 | $7,600 | | Cash paid for operating lease liabilities | $4,665 | $3,829 | $9,320 | $7,037 | - A new **12-year lease** for a school in Atlanta, Georgia, with total undiscounted payments of **$12.2 million**, is expected to commence in Q3 2022[53](index=53&type=chunk) Lease Term/Rate | Lease Term/Rate | June 30, 2022 | December 31, 2021 | | :---------------------- | :------------ | :---------------- | | Weighted-average remaining lease term | 11.35 years | 5.71 years | | Weighted-average discount rate | 7.36% | 10.93% | [Note 5. Goodwill and Long-Lived Assets](index=15&type=section&id=Note%205.%20Goodwill%20and%20Long-Lived%20Assets) This note provides information on goodwill, long-lived asset impairments, and property sales - Goodwill balance was **$14.5 million** as of June 30, 2022, and December 31, 2021, entirely attributable to the Transportation and Skilled Trades segment[61](index=61&type=chunk) - No long-lived asset impairments were recorded for the three or six months ended June 30, 2022 or 2021[59](index=59&type=chunk) - A **$0.7 million impairment** on the Suffield, Connecticut property was recorded on December 31, 2021, which was subsequently sold in Q2 2022 for net proceeds of **$2.4 million**, resulting in a **$0.2 million gain**[60](index=60&type=chunk) [Note 6. Long-Term Debt](index=16&type=section&id=Note%206.%20Long-Term%20Debt) This note details the company's long-term debt, Credit Facility, and compliance with covenants - **Zero debt outstanding** under the Credit Facility as of June 30, 2022, and December 31, 2021[68](index=68&type=chunk) - Letters of credit outstanding totaled **$4.0 million** as of June 30, 2022, and December 31, 2021[68](index=68&type=chunk) - The maturity date of the revolving loan was extended to **November 14, 2023**, through a third amendment to the Credit Agreement on August 5, 2022[68](index=68&type=chunk) [Note 7. Stockholders%27%20Equity](index=17&type=section&id=Note%207.%20Stockholders%27%20Equity) This note outlines changes in stockholders' equity, including dividends, share repurchases, and treasury stock - Preferred stock dividends of **$0.6 million** were paid in cash for the six months ended June 30, 2022[73](index=73&type=chunk) - A share repurchase program of up to **$30.0 million** was authorized on May 24, 2022, for twelve months[91](index=91&type=chunk) - By June 30, 2022, the company repurchased **414,963 shares** at a cost of approximately **$2.5 million** under the new program, with **$27.5 million** remaining authorized[91](index=91&type=chunk)[225](index=225&type=chunk) - The Board of Directors authorized the cancellation of **5,910,541 shares** of treasury stock, reducing treasury stock and common stock by **$82.9 million**[91](index=91&type=chunk) [Note 8. Income Taxes](index=21&type=section&id=Note%208.%20Income%20Taxes) This note presents the company's income tax provision or benefit and the effective tax rate Income Tax Provision (Benefit) (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Provision (benefit) for income taxes | $102 | $729 | $(539) | $1,975 | | Effective tax rate | 28.3% | 23.1% | 28.2% | N/A | [Note 9. Commitments and Contingencies](index=21&type=section&id=Note%209.%20Commitments%20and%20Contingencies) This note discloses the company's involvement in legal proceedings, investigations, and claims - The CFPB is assessing whether the company is subject to its supervisory authority regarding student credit extensions and has requested information[95](index=95&type=chunk) - The Massachusetts AGO issued a civil investigative demand to Lincoln Technical Institute in Somerville, MA, investigating possible unfair or deceptive practices related to fee refunds and disclosures[96](index=96&type=chunk) [Note 10. Segments](index=21&type=section&id=Note%2010.%20Segments) This note provides financial information for the company's two reportable segments Segment Performance (in thousands) | Segment | 3 Months Ended June 30, 2022 Revenue | 3 Months Ended June 30, 2021 Revenue | 3 Months Ended June 30, 2022 Operating Income | 3 Months Ended June 30, 2021 Operating Income | | :--------------------- | :----------------------------------- | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Transportation and Skilled Trades | $57,973 | $56,965 | $7,094 | $11,256 | | Healthcare and Other Professions | $24,169 | $23,499 | $1,609 | $2,962 | | Corporate | - | - | $(8,307) | $(10,766) | | Total | $82,142 | $80,464 | $396 | $3,452 | Segment Performance (in thousands) | Segment | 6 Months Ended June 30, 2022 Revenue | 6 Months Ended June 30, 2021 Revenue | 6 Months Ended June 30, 2022 Operating Income | 6 Months Ended June 30, 2021 Operating Income | | :--------------------- | :----------------------------------- | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Transportation and Skilled Trades | $116,758 | $112,636 | $14,340 | $23,581 | | Healthcare and Other Professions | $47,939 | $45,825 | $2,916 | $5,911 | | Corporate | - | - | $(17,186) | $(20,020) | | Total | $164,697 | $158,461 | $70 | $9,472 | [Note 11. Fair Value](index=22&type=section&id=Note%2011.%20Fair%20Value) This note discusses the fair value of financial instruments and the interest rate swap - The interest rate swap, designated as a cash flow hedge for the Term Loan, was paid in full on **October 29, 2021**, upon repayment of the Term Loan[107](index=107&type=chunk) Interest Expense (in thousands) | Interest Expense | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Interest Rate Swap | $0 | $100 | $0 | $200 | [Note 12. COVID-19 Pandemic and CARES Act](index=23&type=section&id=Note%2012.%20COVID-19%20Pandemic%20and%20CARES%20Act) This note details the impact of COVID-19 on operations and funds received under the CARES Act - The company received **$27.4 million** from the HEERF under the CARES Act, fully distributed by September 30, 2021[112](index=112&type=chunk) - An additional **$24.4 million** was allocated under CRRSAA and ARPA, with **$14.8 million** distributed to students by June 30, 2022[114](index=114&type=chunk) - The company deferred **$2.3 million** in FICA payroll taxes, with **50% repaid** by January 3, 2022, and the remaining **50% due by January 3, 2023**[112](index=112&type=chunk) [Note 13. Property Sale Agreements](index=24&type=section&id=Note%2013.%20Property%20Sale%20Agreements) This note describes significant property sale agreements, including the Nashville campus and sale-leasebacks - Contract to sell Nashville campus property for **$34.5 million**, with an expected closing within the next fifteen months, and the property is included in assets held for sale[115](index=115&type=chunk)[116](index=116&type=chunk) - Sale-leaseback of Denver and Grand Prairie campuses closed on **October 29, 2021**, for **$46.5 million**[117](index=117&type=chunk) - The Denver and Grand Prairie sale-leaseback resulted in a **$22.5 million gain** on sale of assets and the recognition of **$40.1 million** in ROU assets and lease liabilities[117](index=117&type=chunk) [Item 2. Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, operations, and regulatory updates [General](index=25&type=section&id=General) This section provides a general overview of the company's business, educational offerings, and segments - The Company provides career-oriented post-secondary education through **22 schools** in **14 states**, with programs in automotive technology, skilled trades, healthcare, hospitality, and IT[122](index=122&type=chunk) - Business is organized into two reportable segments: **Transportation and Skilled Trades**, and **Healthcare and Other Professions (HOPS)**[123](index=123&type=chunk) [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the key accounting policies and estimates impacting financial reporting - Critical accounting policies and estimates include revenue recognition, allowance for doubtful accounts, goodwill, long-lived assets, stock-based compensation, derivative instruments, borrowings, ROU assets, lease cost, income taxes, and employee benefit plans[125](index=125&type=chunk) [Effect of Inflation](index=25&type=section&id=Effect%20of%20Inflation) This section discusses the impact of inflation on operations, expenses, and student behavior - Inflation has not had a material effect on operations, except for inflationary pressures on instructional expenses and student reluctance to incur additional debt or travel costs[126](index=126&type=chunk) [Results of Continuing Operations](index=26&type=section&id=Results%20of%20Continuing%20Operations) This section analyzes the company's consolidated financial performance, including revenue, expenses, and net income [Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021](index=26&type=section&id=Three%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202021) This section compares the company's financial performance for Q2 2022 to the prior year Consolidated Performance (in thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY Change | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenue | $82,142 | $80,464 | 2.1% | | Educational services and facilities expense | $36,106 | $33,694 | 7.2% | | Selling, general and administrative expense | $45,835 | $43,318 | 5.8% | | Operating income | $396 | $3,452 | -88.5% | | Net income | $259 | $2,426 | -89.3% | - Revenue increase was driven by a **1.2% increase** in average student population[129](index=129&type=chunk) - Educational services and facilities expense increased due to higher instructional salaries (market conditions, staffing levels) and facility expenses (additional rent from sale-leaseback)[131](index=131&type=chunk)[132](index=132&type=chunk) - Selling, general and administrative expense increased due to additional bad debt expense (decreased repayment rates), higher medical expenses, and one-time growth initiative expenses[133](index=133&type=chunk) [Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021](index=27&type=section&id=Six%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202021) This section compares the company's financial performance for YTD Q2 2022 to the prior year Consolidated Performance (in thousands) | Metric | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY Change | | :---------------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Revenue | $164,697 | $158,461 | 3.9% | | Educational services and facilities expense | $72,302 | $66,037 | 9.5% | | Selling, general and administrative expense | $92,520 | $82,951 | 11.5% | | Operating income | $70 | $9,472 | -99.3% | | Net income | $532 | $6,915 | -92.3% | - Revenue increase was mainly due to a **2.8% increase** in average student population[138](index=138&type=chunk) - Educational services and facilities expense increased due to higher instructional salaries (market conditions, staffing, return to in-person instruction), increased consumables prices, and higher facility expenses (additional rent, maintenance)[140](index=140&type=chunk)[141](index=141&type=chunk) - Selling, general and administrative expense increased due to additional bad debt expense (lower repayment rates, prior year HEERF adjustment), higher medical expenses, stock compensation, and growth initiative expenses[142](index=142&type=chunk)[143](index=143&type=chunk) [Segment Results of Operations](index=28&type=section&id=Segment%20Results%20of%20Operations) This section analyzes the financial performance of the company's two operating segments [Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021](index=29&type=section&id=Three%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202021) This section compares segment-level financial performance for Q2 2022 to the prior year Segment Performance (in thousands) | Segment Performance | 3 Months Ended June 30, 2022 Revenue | 3 Months Ended June 30, 2021 Revenue | YoY % Change Revenue | 3 Months Ended June 30, 2022 Operating Income | 3 Months Ended June 30, 2021 Operating Income | YoY % Change Operating Income | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------ | | Transportation and Skilled Trades | $57,973 | $56,965 | 1.8% | $7,094 | $11,256 | -37.0% | | Healthcare and Other Professions | $24,169 | $23,499 | 2.9% | $1,609 | $2,962 | -45.7% | | Corporate | - | - | N/A | $(8,307) | $(10,766) | 22.8% | Student Metrics | Student Metrics | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | YoY % Change | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :----------- | | Total Starts | 3,852 | 3,703 | 4.0% | | Transportation and Skilled Trades Average Population | 8,315 | 8,014 | 3.8% | | Healthcare and Other Professions Average Population | 4,322 | 4,468 | -3.3% | - Corporate expenses decreased due to reduced incentive compensation and a **$0.2 million gain** from the sale of the Suffield, Connecticut property[158](index=158&type=chunk) [Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021](index=31&type=section&id=Six%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202021) This section compares segment-level financial performance for YTD Q2 2022 to the prior year Segment Performance (in thousands) | Segment Performance | 6 Months Ended June 30, 2022 Revenue | 6 Months Ended June 30, 2021 Revenue | YoY % Change Revenue | 6 Months Ended June 30, 2022 Operating Income | 6 Months Ended June 30, 2021 Operating Income | YoY % Change Operating Income | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------ | | Transportation and Skilled Trades | $116,758 | $112,636 | 3.7% | $14,340 | $23,581 | -39.2% | | Healthcare and Other Professions | $47,939 | $45,825 | 4.6% | $2,916 | $5,911 | -50.7% | | Corporate | - | - | N/A | $(17,186) | $(20,020) | 14.2% | Student Metrics | Student Metrics | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | YoY % Change | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :----------- | | Total Starts | 7,205 | 7,251 | -0.6% | | Transportation and Skilled Trades Average Population | 8,417 | 8,016 | 5.0% | | Healthcare and Other Professions Average Population | 4,344 | 4,394 | -1.1% | - Corporate expenses decreased due to reduced incentive compensation and a **$0.2 million gain** from the sale of the Suffield, Connecticut property, partially offset by increased stock-based compensation and severance[164](index=164&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to generate and manage cash from all activities [Operating Activities](index=33&type=section&id=Operating%20Activities) This section analyzes cash flows generated from or used in the company's primary business operations - Net cash used in operating activities was **$10.0 million** for the six months ended June 30, 2022, compared to **$1.1 million provided** in the prior year, driven by working capital changes and decreased net earnings[170](index=170&type=chunk) [Investing Activities](index=33&type=section&id=Investing%20Activities) This section details cash flows related to the acquisition and disposal of long-term assets - Net cash used in investing activities decreased to **$1.2 million** for the six months ended June 30, 2022, from **$3.5 million** in the prior year[171](index=171&type=chunk) - The decrease in cash used was driven by **$2.4 million** in net proceeds from the sale of the former Suffield, Connecticut campus[171](index=171&type=chunk) - Capital expenditures are expected to approximate **3% of revenues** in 2022[175](index=175&type=chunk) [Financing Activities](index=34&type=section&id=Financing%20Activities) This section outlines cash flows from debt, equity, and other financing transactions - Net cash used in financing activities increased to **$5.1 million** for the six months ended June 30, 2022, from **$2.6 million** in the prior year[176](index=176&type=chunk) - The increase in cash used was driven by the implementation of a share repurchase program during Q2 2022[176](index=176&type=chunk) [Credit Facility](index=34&type=section&id=Credit%20Facility) This section provides an update on the company's credit facility, outstanding debt, and covenants - **Zero debt outstanding** under the Credit Facility as of June 30, 2022, and December 31, 2021[183](index=183&type=chunk) - The revolving loan maturity date was extended to **November 14, 2023**, via a third amendment on August 5, 2022[183](index=183&type=chunk) - The company was in compliance with all debt covenants as of June 30, 2022[183](index=183&type=chunk) [Contractual Obligations](index=35&type=section&id=Contractual%20Obligations) This section details the company's financial commitments, including lease and loan obligations - No outstanding debt as of June 30, 2022[184](index=184&type=chunk) - Outstanding institutional loan principal commitments to active students totaled **$30.0 million** as of June 30, 2022[185](index=185&type=chunk) [Regulatory Updates](index=35&type=section&id=Regulatory%20Updates) This section provides an overview of recent and proposed regulatory changes impacting operations [Borrower Defense to Repayment Regulations](index=35&type=section&id=Borrower%20Defense%20to%20Repayment%20Regulations) This section discusses proposed DOE regulations and a class action settlement impacting student loan discharges - Proposed DOE regulations (July 13, 2022) would establish a new process for evaluating borrower applications for loan discharges, applying to all claims submitted or pending as of **July 1, 2023**, making it easier for borrowers to obtain discharges and for the DOE to recoup costs from institutions[188](index=188&type=chunk)[189](index=189&type=chunk) - A proposed class action settlement (June 22, 2022) could lead to automatic loan discharges and refunds for students at listed institutions, including Lincoln's, without individual adjudication of borrower defense claims[195](index=195&type=chunk)[198](index=198&type=chunk) - The company submitted a motion to intervene in the class action lawsuit to protect its interests, arguing against automatic discharges without adjudication and potential recoupment without due process[199](index=199&type=chunk) [The %2290%2F10%20Rule%22](index=37&type=section&id=The%20%2290%2F10%20Rule%22) This section explains changes to the 90/10 rule, including federal funds and its expected impact - ARPA amended the 90/10 rule to include other "Federal funds" (e.g., veterans' benefits, which were **~7% of 2021 cash revenues**) in the 90% calculation, expected to increase the company's 90/10 rule calculations[202](index=202&type=chunk) - Proposed regulations (July 28, 2022) confirm these changes apply to fiscal years ending on or after **January 1, 2023**, with final regulations expected by **November 1, 2022**, for a **July 1, 2023**, effective date[203](index=203&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) [Negotiated Rulemaking](index=38&type=section&id=Negotiated%20Rulemaking) This section outlines the DOE's rulemaking processes and anticipated timelines for new regulations - Proposed regulations on gainful employment, administrative capability, financial responsibility, eligibility certification, and ability to benefit are delayed until **April 2023**, with an earliest effective date of **July 1, 2024**[207](index=207&type=chunk) - Proposed regulations regarding the 90/10 rule and changes in ownership are expected to be published in **2022**, potentially taking effect **July 1, 2023**[208](index=208&type=chunk) [Compliance with Regulatory Standards and Effect of Regulatory Violations](index=39&type=section&id=Compliance%20with%20Regulatory%20Standards%20and%20Effect%20of%20Regulatory%20Violations) This section addresses the company's compliance with federal and state regulations and audit outcomes - Title IV Program compliance audits for 2020 at New Britain, Iselin, and Indianapolis institutions found alleged noncompliance, which were resolved, but serious findings were referred to a separate DOE office for potential adverse action[211](index=211&type=chunk) - An OIG audit of the Indianapolis institution regarding HEERF funds was resolved, with the DOE accepting responses to findings and imposing no liabilities or sanctions[212](index=212&type=chunk) [School Acquisitions](index=39&type=section&id=School%20Acquisitions) This section discusses the regulatory implications of school acquisitions, Title IV eligibility, and ownership rules - School acquisitions result in a change of ownership, suspending Title IV Program eligibility until recertification by the DOE, state education agencies, and accrediting commissions[214](index=214&type=chunk) - Proposed DOE regulations on changes in ownership, expected in **2022** and effective **July 1, 2023**, may expand requirements, potentially making future acquisitions more difficult[214](index=214&type=chunk) [Change of Control](index=40&type=section&id=Change%20of%20Control) This section explains how various transactions can trigger a change of control, impacting Title IV eligibility - A change of control can occur from corporate reorganizations or board changes, potentially affecting Title IV Program eligibility and discouraging stock transactions[215](index=215&type=chunk) - Proposed DOE regulations on ownership and control, expected in **2022** and effective **July 1, 2023**, could further influence future corporate decisions and stock market prices[215](index=215&type=chunk) [Seasonality](index=40&type=section&id=Seasonality) This section describes the seasonal fluctuations in the company's revenue, student population, and operating results - Revenue and operating results fluctuate seasonally, with lower student populations in Q1 and Q2, and larger class starts in Q3[216](index=216&type=chunk) - Expenses typically do not vary significantly with changes in student population and revenue[216](index=216&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) As a smaller reporting company, Lincoln Educational Services Corporation is not required to provide market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[217](index=217&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and absence of material internal control changes - Disclosure controls and procedures were deemed adequate and effective as of **June 30, 2022**[218](index=218&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[219](index=219&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part provides additional information on legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course lawsuits, investigations, and claims, including CFPB and Massachusetts AGO assessments - The CFPB is assessing whether the company is subject to its supervisory authority based on activities related to student credit extensions[221](index=221&type=chunk) - The Massachusetts AGO issued a civil investigative demand to Lincoln Technical Institute in Somerville, MA, investigating possible unfair or deceptive practices regarding fee refunds and disclosures[223](index=223&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company reported no changes to the Risk Factors previously disclosed in its Form 10-K - No changes to the Risk Factors disclosed in the company's Form 10-K[224](index=224&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase program, including authorization and shares repurchased - A share repurchase program of up to **$30.0 million** was authorized on **May 24, 2022**, for twelve months[225](index=225&type=chunk) Share Repurchase Program | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Value of Shares Purchased (approx.) | Remaining Authorized (approx.) | | :-------------------------- | :------------------------------- | :--------------------------- | :---------------------------------------- | :----------------------------- | | April 1, 2022 to June 30, 2022 | 414,963 | $6.12 | $2.5 million | $27.5 million | [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - No defaults upon senior securities[227](index=227&type=chunk) [Item 4. Mine Safety Disclosure](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) The company reported no mine safety disclosures - No mine safety disclosures[228](index=228&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) This section includes an update on the third amendment to the Credit Agreement, extending the revolving loan maturity - On **August 5, 2022**, the company extended the maturity date of its revolving loan through **November 14, 2023**, via a third amendment to its Credit Agreement[229](index=229&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key corporate documents and financial statements - Key exhibits include amendments to the Certificate of Incorporation and Bylaws, the Second and Third Amendments to the Credit Agreement, CEO/CFO certifications, and financial statements in iXBRL format[230](index=230&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) This section contains the official signatures certifying the accuracy and completeness of the Form 10-Q - The report was signed on **August 8, 2022**, by Brian Meyers, Executive Vice President, Chief Financial Officer and Treasurer[235](index=235&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from______ to______ Commission File Number 000-51371 LINCOLN EDUCATIONAL SERVICES CORPORATION (Exact name of registrant as specified in its charter) New Jersey 57- ...

Lincoln Educational Services Corporation (NASDAQ:LINC) Q1 2022 Earnings Conference Call May 9, 2022 10:00 AM ET Company Participants Michael Polyviou - IR Scott Shaw - President and CEO Brian Meyers - CFO Conference Call Participants Rajiv Sharma - B. Riley Alex Paris - Barrington Research Operator Good day, everyone and thank you for standing by, and welcome to the First Quarter of 2022 Lincoln Educational Services Earnings Conference Call. [Operator Instructions] I would now like to hand over the conferen ...

U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 Commission File Number 000-51371 LINCOLN EDUCATIONAL SERVICES CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) New Jersey 57-1150621 14 Sylvan Way, Suite A Parsippany, NJ 07054 (Address of prin ...