Lincoln Educational Services(LINC) - 2025 Q4 - Annual Report

Enrollment and Revenue - As of December 31, 2025, the company had 17,046 students enrolled at 22 campuses, with an average enrollment of 16,622 students for the fiscal year, and annual revenue of $518.2 million, representing a 17.8% increase over the prior fiscal year[21]. - Skilled trades programs accounted for 52% of total average student enrollment, with program lengths of 32 to 88 weeks and tuition rates ranging from $21,000 to $36,000[29]. - Automotive programs represented 26% of total average student enrollment, with program lengths of 52 to 94 weeks and tuition rates ranging from $27,000 to $44,000[30]. - Health sciences programs comprised 22% of total average student enrollment, with program lengths of 27 to 104 weeks and tuition rates ranging from $15,000 to $34,000[31]. - Approximately 23% of students were recruited directly out of high school during the fiscal year ended December 31, 2025[36]. Campus and Program Development - The company plans to open new campuses in Hicksville, New York, and Rowlett, Texas, with programs expected to begin by the end of 2026 and in the first quarter of 2027, respectively[28]. - The company is transitioning to a hybrid teaching platform, Lincoln 10.0, expected to be finalized by the end of 2026 for most programs, enhancing flexibility and scalability[28]. - The company maintains strong relationships with local employers to ensure training aligns with job market needs, facilitating high job placement rates for graduates[40]. Marketing and Recruitment - The company utilizes a fully integrated digital marketing approach, driving the majority of new student leads and enrollments through various online channels[33]. - Referrals from current students and high school counselors historically represent about 11% of new student starts, highlighting the importance of community relationships[34]. Workforce and Employee Development - As of December 31, 2025, the company had approximately 2,590 employees, reflecting a 5.0% increase in workforce from the previous fiscal year[43]. - The average student to teacher ratio was approximately 17.7 to 1 during the fiscal year ended December 31, 2025[45]. - The company recognizes the importance of employee knowledge and skill development, providing position-based training and online access to various programs for growth[50]. - The company employs fully integrated recruiting software to manage hiring processes and enhance productivity across its campuses and corporate functions[48]. - Approximately 270 employees are covered by collective bargaining agreements that will expire between 2026 and 2030, with renegotiations expected in 2026[51]. Financial Overview - Approximately 84.7% of the company's revenues for the fiscal year ended December 31, 2025, were derived from Title IV Programs[59]. - The company has posted surety bonds totaling approximately $20.0 million on behalf of its schools and education representatives with multiple states[61]. - The company is committed to sustainability and regularly reviews its environmental impact, adhering to various environmental laws and regulations[55]. - In the fiscal year ended December 31, 2025, the company derived approximately 4.8% of its revenues from veterans' benefits programs, including the Post-9/11 GI Bill and Veteran Readiness and Employment services[74]. - The company must comply with certain requirements established by the VA to continue participation in veterans' benefits programs, including reporting on enrollment status and maintaining student records[74]. Regulatory Compliance and Challenges - The DOE has issued new regulations that could increase the likelihood of the company being placed on provisional certification status, which may lead to additional reporting requirements and potential loss of Title IV eligibility[84]. - The company is subject to detailed oversight and review by the DOE, which periodically revises its regulations and changes interpretations of existing laws[85]. - The expiration dates for the current Title IV program participation agreements for the company's institutions are December 31, 2028, for Iselin, NJ, and New Britain, CT, and June 30, 2029, for Indianapolis, IN[79]. - The company must periodically apply to the DOE for continued certification to participate in Title IV Programs, and changes in ownership or substantive changes may trigger a review[79]. - The VA imposes limitations on the percentage of students per program who can have tuition covered by veterans' benefits, which could affect the company's programs if not compliant[76]. - Federal budgetary shortfalls and constraints could result in a decrease in the level of federal financial aid available to the company's students[73]. - The company is required to comply with the "Principles of Excellence" to continue recruitment activities at military installations[77]. - Changes in applicable statutes, regulations, or appropriations could impact the company's eligibility or funding under veterans' benefits programs[75]. - The Department of Education (DOE) announced a reduction in force impacting nearly 50% of its workforce, which may lead to delays in Title IV funding approvals for schools[89]. - A potential government shutdown could disrupt the ability to draw down Title IV federal student aid, adversely affecting schools and students[90]. - A significant percentage of the company's revenues are derived from Title IV Programs, making it vulnerable to any disruptions or reductions in funding[91]. Financial Regulations and Liabilities - The OBBB Act, effective July 1, 2026, introduces new limits on Title IV loans and accountability metrics for educational programs, which could impact enrollment and revenue[94]. - The DOE's new gainful employment regulations, effective July 1, 2024, will evaluate educational programs based on debt-to-earnings rates, risking Title IV eligibility if benchmarks are not met[96][97]. - The proposed regulations under the OBBB Act could lead to loss of Direct Loan program access if programs fail to achieve a positive earnings premium for two out of three years[99]. - The DOE's Borrower Defense to Repayment regulations, delayed until July 1, 2035, could impact the company's financial liabilities related to discharged loans[103]. - Approximately 3,000 borrower defense claims have been received by the DOE concerning the company's schools, requiring a fact-finding process[104]. - The company may face liability for approximately $1.4 million in discharged loans for 280 borrowers from its Massachusetts schools[105]. - The current 90/10 Rule requires institutions to limit Title IV and federal funds to no more than 90% of total revenue, with the company deriving approximately 4.8% of revenues from federal student aid programs in 2025[111]. - For the fiscal year ended December 31, 2025, the institutions' 90/10 Rule percentages ranged from approximately 82.9% to 88.0%[113]. - The company is making operational changes to maintain 90/10 Rule percentages below the 90% threshold, but lacks significant control over Title IV Program funds availability[114]. - The cohort default rates for the 2022 federal fiscal year were zero, with no institutions exceeding the 30% threshold for the 2020 or 2021 fiscal years[117]. - The company's composite score for the 2025 fiscal year is calculated to be 2.0, indicating financial responsibility[121]. - The Department of Education (DOE) published final regulations on October 31, 2023, that modify triggering events for financial responsibility assessments, effective July 1, 2024[122]. - The final regulations increase the likelihood of the DOE imposing financial protection requirements on the company and its institutions[125]. Proposed Changes and Future Implications - Proposed regulations may impose a $20,000 annual limit and a $65,000 aggregate limit on PLUS loans for parents, potentially impacting student enrollment[132]. - A lifetime loan limit of $257,500 for all borrowers (excluding Federal Direct PLUS loans) is proposed, with implications for enrollment and revenues[133]. - The company is evaluating the impact of new Title IV loan limits on prospective student enrollment and financing options[132]. - The DOE's negotiated rulemaking process aims to amend regulations regarding the return of unearned Title IV funds, with final regulations expected by July 1, 2026[130]. - The AHEAD Committee proposed regulations for the Workforce Pell program, allowing short-term workforce programs to disburse Pell grants if they meet specific requirements, expected to take effect on July 1, 2026[134]. - The DOE plans to initiate a negotiated rulemaking process to amend existing regulations for accrediting agencies, which could impact institutional eligibility[135]. - New regulations could lead to additional reporting requirements and potential liabilities, affecting the company's operations and results[136]. - The DOE's regulations prohibit substantial misrepresentation, which could result in sanctions or loss of Title IV eligibility if violated[137]. - A change of control occurs when a company acquires a school eligible for Title IV Programs, leading to a suspension of eligibility until recertification is completed[141]. - The DOE published final regulations effective July 1, 2023, expanding requirements for school acquisitions, potentially complicating future acquisitions[141]. - Institutions may add new educational programs without DOE approval unless provisionally certified, impacting expansion plans[147]. - Closed school loan discharges may be granted by the DOE, which could lead to financial liabilities for the company[149]. - The DOE assesses administrative capability under various standards, with failure to meet them risking ineligibility for Title IV Programs[150]. - Final regulations published in 2023 expand administrative capability requirements, effective July 1, 2024, including financial aid counseling and compliance with gainful employment requirements[151]. - The company is subject to significant regulatory scrutiny, including audits and compliance reviews by federal and state agencies, which could adversely affect its operations and financial condition[154]. - Non-compliance with Title IV Program requirements could lead to liabilities or sanctions, including loss of eligibility to participate in federal financial assistance programs[156]. Financial Position - As of December 31, 2025, the company had no outstanding borrowings, indicating a strong liquidity position[347]. - The company recorded interest expense of $0.8 million for the year ended December 31, 2025, primarily related to borrowings and fees on the unused portion of its credit facility[348]. - The company has invested cash reserves into money market funds, expecting minimal financial exposure to interest rate fluctuations[346]. - The company offers extended financing programs to students, which helps bridge the gap between financial aid and education costs[158]. - Regulatory changes have required the company to alter its compensation practices, impacting employee productivity and retention[153]. - The company is under scrutiny from various federal and state agencies regarding consumer protection laws, which could affect its recruiting and marketing practices[157]. - The company must submit annual compliance audit reports to the DOE, which could result in adverse actions if findings are repeated[154]. - Significant violations of Title IV Program requirements could lead to civil or criminal penalties, affecting the institution's ability to operate[156].