Lincoln Educational Services(US:LINC)2025-08-11 20:41PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements for June 30, 2025, reflect increased revenue, a shift to net income, asset growth driven by property investments, and a decrease in cash due to substantial capital expenditures and new long-term debt Condensed Consolidated Balance Sheets As of June 30, 2025, total assets grew to $447.3 million, primarily from property and equipment, while cash decreased and liabilities rose due to new long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $16,701 | $59,273 | | Total current assets | $79,629 | $111,252 | | Property, Equipment and Facilities, net | $149,142 | $103,533 | | Total Assets | $447,321 | $436,556 | | Liabilities & Equity | | | | Total current liabilities | $88,252 | $90,212 | | Long-term debt | $13,000 | $0 | | Total liabilities | $266,643 | $258,292 | | Total stockholders' equity | $180,678 | $178,264 | Condensed Consolidated Statements of Operations Q2 2025 saw a turnaround to $1.6 million net income on 13.2% revenue growth, with H1 2025 net income reaching $3.5 million on 13.4% revenue growth Q2 2025 vs Q2 2024 Performance (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $116,474 | $102,914 | | Operating Income (Loss) | $2,878 | $(1,116) | | Net Income (Loss) | $1,554 | $(682) | | Diluted EPS | $0.05 | $(0.02) | H1 2025 vs H1 2024 Performance (in thousands, except per share) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenue | $233,980 | $206,281 | | Operating Income (Loss) | $6,292 | $(1,575) | | Net Income (Loss) | $3,499 | $(896) | | Diluted EPS | $0.11 | $(0.03) | Condensed Consolidated Statements of Cash Flows H1 2025 saw $8.1 million cash used in operations, $45.8 million in investing activities driven by capital expenditures, and $11.3 million from financing, resulting in a $42.6 million net cash decrease Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(8,079) | $(6,599) | | Net cash used in investing activities | $(45,772) | $(3,007) | | Net cash provided by (used in) financing activities | $11,279 | $(3,676) | | Net Decrease in Cash | $(42,572) | $(13,282) | - Capital expenditures significantly increased to $46.3 million in H1 2025 from $12.7 million in H1 2024, reflecting investments in campus growth initiatives23159 Notes to Condensed Consolidated Financial Statements Notes detail business segments, accounting policies, and financial components, including a new credit facility, share repurchase program, and the absence of active transitional campuses - The company operates 21 campuses in 12 states and is expanding with two new campuses planned for Houston, TX (H2 2025) and Hicksville, NY (end of 2026)26 - The business is organized into two segments: Campus Operations (continuing campuses) and Transitional (closed/sold campuses); as of June 30, 2025, no campuses were in the Transitional segment following the sale of the Summerlin campus on January 1, 20252984 - On March 11, 2025, the company amended its credit facility, increasing the principal amount from $40.0 million to $60.0 million and extending the maturity to March 7, 2028; as of June 30, 2025, $13.0 million was outstanding6567 - The company's share repurchase program was extended through May 24, 2026, with approximately $29.7 million remaining for repurchases; no shares were repurchased in H1 20257879 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Strong H1 2025 performance, driven by student growth and operational efficiency, is supported by a growth strategy involving new campuses and program expansion, though liquidity is impacted by capital expenditures and new regulatory changes Business Strategy The business strategy focuses on geographic expansion, program replication, operational efficiency, facility utilization, and enhancing the hybrid teaching platform Planned Campus Openings and Relocations | Campus Location | Type | Status | Opening Date | | :--- | :--- | :--- | :--- | | East Point, GA | New Campus | Opened | March 2024 | | Nashville, TN | Campus Relocation | Opened | March 2025 | | Levittown, PA | Campus Relocation | Opened | August 2025 | | Houston, TX | New Campus | In Progress | Second half of 2025 | | Hicksville, NY | New Campus | In Progress | By the end of 2026 | - Strategic priorities include expanding the program portfolio with in-demand offerings, improving margins by centralizing operations, and completing the implementation of the Lincoln 10.0 hybrid teaching platform by year-end116 Results of Operations H1 2025 revenue grew 13.4% to $234.0 million, driven by a 14.5% student population increase, leading to a significant operating income improvement to $6.3 million due to better margins Six Months Ended June 30, 2025 vs 2024 Key Metrics | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue (millions) | $234.0 | $206.3 | 13.4% | | Average student population | 15,742 | 13,745 | 14.5% | | Total new student starts | 10,531 | 8,920 | 18.1% | | Operating Income (Loss) (millions) | $6.3 | $(1.6) | 499.5% | - The Campus Operations segment saw an 80.1% increase in operating income to $41.0 million for H1 2025, driven by a 15.5% revenue increase from a 17.4% rise in average student population148149150 - Marketing efficiency improved, with cost per start declining 17.3% in H1 2025 compared to the prior-year period143 - Corporate expenses increased by $11.2 million to $34.7 million in H1 2025, driven by workforce expansion, higher medical claims, and increased performance-based incentive compensation152 Liquidity and Capital Resources Liquidity, primarily from Title IV aid, decreased due to $45.8 million in capital expenditures for campus expansion, necessitating a $13.0 million draw on the expanded credit facility - Cash and cash equivalents decreased to $16.7 million as of June 30, 2025, from $67.0 million as of June 30, 2024, mainly due to increased capital expenditures153 - Capital expenditures for H1 2025 were $46.3 million, a substantial increase from $12.7 million in H1 2024, funding the relocation of two campuses and the buildout of two new campuses159 - The company's credit facility was increased to $60.0 million and extended to 2028, providing financial flexibility for growth; $13.0 million was outstanding as of June 30, 2025166168 Regulatory Updates New DOE rulemaking and the OBBB Act, effective July 1, 2026, introduce changes to Title IV loan limits and accountability metrics, requiring company evaluation of potential impacts - The DOE is conducting negotiated rulemaking sessions which may lead to new regulations for Title IV programs171172 - The OBBB Act, effective July 1, 2026, will introduce new Title IV loan limits and accountability metrics that could impact student enrollment and program eligibility174179 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure were identified for the three months ended June 30, 2025 - No material changes in market risk exposure were identified for the quarter ended June 30, 2025178 Item 4. Controls and Procedures Disclosure controls and procedures were deemed effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures are effective as of June 30, 2025180 - No material changes to internal control over financial reporting occurred during the most recently completed fiscal quarter181 PART II. OTHER INFORMATION Item 1. Legal Proceedings No material developments occurred in previously disclosed legal proceedings, and other routine legal matters are not expected to have a material adverse effect - No material developments have occurred in previously disclosed legal proceedings183 Item 1A. Risk Factors No new or additional material risk factors were identified for the quarter ended June 30, 2025, beyond those previously disclosed - No new or additional risk factors were identified for the quarter ended June 30, 2025185 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The share repurchase program was extended to May 24, 2026, with $29.7 million remaining, and no shares were repurchased in Q2 2025 - The company did not repurchase any shares in Q2 2025; the share repurchase program was extended to May 24, 2026, with $29.7 million remaining authorized for repurchases190 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, CEO/CFO certifications, and iXBRL financial statements