Lincoln Educational Services(LINC) - 2024 Q2 - Quarterly Results

Lincoln Educational Services Q2 2024 Earnings Release Performance Highlights and Management Commentary The company reported strong double-digit growth in Q2 2024 revenue and student starts, raising its full-year outlook based on successful strategic initiatives Q2 2024 Financial Highlights (vs. Q2 2023) | Metric | Q2 2024 | Change | | :--- | :--- | :--- | | Revenue | $102.9 million | +16.1% | | Student Starts | N/A | +12.3% | | Quarter-End Student Population | N/A | +11.4% | | Net Loss | ($0.7) million | N/A | | Adjusted EBITDA | $6.2 million | >+100% | | Total Liquidity | >$100 million | N/A | - The company's growth strategies are capitalizing on increased public interest in alternatives to traditional four-year degrees and employer demand for skilled graduates[2] - Strategic initiatives include the near-complete rollout of the Lincoln 10.0 hybrid teaching platform and campus expansion; the new East Point, GA campus has exceeded its full-year student start forecast in its first four months[2] - The campus development pipeline includes relocations in Nashville, TN and Levittown, PA (opening H1 2025), and a new campus in Houston, TX (opening end of 2025)[2] Financial Results Financial performance showed significant top-line growth driven by a substantial increase in student population and improved operating leverage Second Quarter 2024 Financial Results Q2 2024 revenue grew 16.1% driven by student population growth, while net loss was impacted by a prior-year one-time gain on a property sale Q2 2024 vs Q2 2023 Financial Performance (Consolidated) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $102.9M | $88.6M | +16.1% | | Educational Services Expense | $45.5M | $40.0M | +13.8% | | SG&A Expense | $57.9M | $51.8M | +11.7% | | Operating (Loss) Income | ($1.1M) | $23.5M | -104.7% | | Net (Loss) Income | ($0.7M) | $17.3M | -104.0% | - The significant decrease in Net Income is primarily due to a $30.9 million gain on the sale of the Nashville property recognized in Q2 2023, which did not recur[4][7] - Expense increases were driven by costs for new and relocated campuses ($2.6M in Educational Services, $1.2M in SG&A) and a $2.0M marketing investment to boost student starts[4] Six Months 2024 Financial Results For the first six months of 2024, total revenue grew 17.3%, driven entirely by the Campus Operations Segment as the Transitional Segment concluded Six Months Ended June 30, 2024 vs 2023 | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $206.3M | $175.9M | +17.3% | | Campus Operations Revenue | $206.2M | $174.5M | +18.2% | | Transitional Segment Revenue | $0 | $1.4M | -100% | Segment Results The core Campus Operations segment demonstrated strong growth in revenue and Adjusted EBITDA, while the Transitional Segment is now fully wound down - Campus Operations: Q2 revenue increased 16.7% to $102.9 million, and Adjusted EBITDA grew 52.9% to $15.8 million[5] - Transitional Segment: The teach-out of the Somerville, MA campus was completed in Q4 2023, resulting in no revenue or operating expenses in Q2 2024, compared to $0.4 million in revenue and $0.9 million in expenses in Q2 2023[6] - Corporate and Other: Expenses were $10.7 million, down from $11.1 million in the prior year (excluding the 2023 property sale gain), mainly due to lower stock-based compensation expense[7] Key Operating Metrics Operating metrics show robust growth, with total student starts increasing by 12.3% and the student population growing by 11.4% year-over-year in Q2 2024 Overall Operating Metrics In Q2 2024, total student starts rose 12.3%, the average student population grew 10.9%, and the end-of-period population increased 11.4% year-over-year Key Operating Metrics (Year-over-Year) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Student Starts | 4,953 | 4,411 | +12.3% | | Average Population | 13,811 | 12,453 | +10.9% | | End of Period Population | 14,481 | 13,004 | +11.4% | Six-Month Operating Metrics (Year-over-Year) | Metric | H1 2024 | H1 2023 | % Change | | :--- | :--- | :--- | :--- | | Student Starts | 8,920 | 7,851 | +13.6% | | Average Population | 13,745 | 12,420 | +10.7% | Program-Level Metrics (Campus Operations) Growth was predominantly driven by the Transportation and Skilled Trades programs, which saw a 20.9% increase in student starts in Q2 2024 Q2 2024 Student Starts by Program (vs. Q2 2023) | Program | Q2 2024 Starts | % Change YoY | | :--- | :--- | :--- | | Transportation and Skilled Trades | 3,648 | +20.9% | | Healthcare and Other Professions | 1,305 | -6.4% | | Total | 4,953 | +12.3% | Six-Month 2024 Student Starts by Program (vs. H1 2023) | Program | H1 2024 Starts | % Change YoY | | :--- | :--- | :--- | | Transportation and Skilled Trades | 6,330 | +19.9% | | Healthcare and Other Professions | 2,590 | +0.7% | | Total | 8,920 | +13.6% | Full Year 2024 Outlook The company raised its full-year 2024 guidance for revenue and earnings while reducing its capital expenditures forecast due to project timing Updated Full Year 2024 Guidance | Metric | Low End | High End | | :--- | :--- | :--- | | Revenue | $423 M | $430 M | | Adjusted EBITDA | $39 M | $42 M | | Adjusted Net Income | $14 M | $17 M | | Capital Expenditures | $45 M | $55 M | | Student Starts Growth | 9% | 12% | - The reduction in capital expenditure guidance is primarily due to a shift in the timing of spending for the new Houston, Texas campus from 2024 to 2025[8] Financial Statements and Non-GAAP Reconciliations This section provides detailed consolidated financial statements and reconciles GAAP measures to non-GAAP metrics to clarify core operational performance Consolidated Financial Statements The statements show a Q2 2024 net loss of $0.7 million, influenced by a prior-year property sale, and a cash position of $67.0 million Selected Consolidated Balance Sheet Data (As of June 30, 2024) | Account | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $66,987 | | Working capital | $52,499 | | Total assets | $366,379 | | Total stockholders' equity | $164,856 | Selected Cash Flow Data (Three Months Ended June 30) | Activity | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Net cash from operating activities | $8,335 | $10,617 | | Net cash (used in) from investing activities | ($11,041) | $16,072 | | Net cash used in financing activities | ($82) | ($610) | Non-GAAP Reconciliations The company reconciles its GAAP net loss of $0.7 million to a non-GAAP Adjusted EBITDA of $6.2 million for Q2 2024 by adjusting for specific items - The company presents non-GAAP measures like EBITDA and Adjusted EBITDA as it believes they are useful indicators of performance, ability to make strategic investments, and meet capital requirements[17][18] Q2 2024 Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Amount | | :--- | :--- | | Net (loss) income | ($682) | | Interest expense (income), net | $29 | | (Benefit) for income taxes | ($463) | | Depreciation and amortization | $3,323 | | EBITDA | $2,207 | | Stock compensation expense | $1,045 | | New campus and campus relocation costs | $2,623 | | Program expansions | $365 | | Adjusted EBITDA | $6,240 |