Lincoln Educational Services Corporation Continues Student Start Growth on Same School Basis; Raises 2018 Guidance and Expects to Achieve Positive Net Income for 2019
- Fourth consecutive quarter of student start growth. Total student starts increased 4.7%; same school starts up 7.5%; Transportation and Skilled Trades segment student starts up 10.2%; Healthcare and Other Professions segment student starts up 0.7%.
- Total Revenue of
$70.1 million ; Transportation and Skilled Trades$51.0 million ; Healthcare and Other Professions$18.3 million ; Transitional segment$0.8 million . Revenue on a same school basis increased 7.1%, or$4.6 million . - Company determines to teach-out and close the
Lincoln College of New England campus atSouthington , Connecticut. Expects to teach-out and close the campus byDecember 31 , 2018. Financial Results for this Campus are now Included in the Transitional segment. - Conference Call Today at 10 a.m. ET.
“Lincoln is achieving consistent student start growth through the combination of new programs, curriculum diversification and more efficient marketing,” said
THIRD QUARTER FINANCIAL RESULTS HIGHLIGHTS:
- Total revenue for the third quarter increased
$2.8 million , or 4.1%, to$70.1 million for the three months endedSeptember 30, 2018 from$67.3 million in the prior year comparable period. Revenue on a same school basis increased by 7.1%, or$4.6 million . - Total student starts increased by 4.7%. Transportation and Skilled Trades segment starts up 10.2% and Healthcare and Other Professions segment starts up 0.7%. Same schools starts up 7.5% resulting from continued investments in marketing, enhanced high school programs and improved admissions process driving more consistency from lead to start.
- Educational services and facilities expense decreased by
$0.6 million , or 1.7%, to$33.5 million for the three months endedSeptember 30, 2018 from$34.1 million in the prior year comparable period. The expense reductions were primarily due to the Transitional segment which accounted for$1.8 million in cost savings partially offset by$1.0 million in additional books and tools expense and$0.2 million in additional instructional expenses. Increases in books and tools expense were a result of the correlation between providing laptops for a growing number of program offerings and an increased student population. - Selling general and administrative expense increased by
$0.6 million , or 1.7%, to$36.1 million for the three months endedSeptember 30, 2018 from$35.5 million in the prior year comparable period. The Transitional segment and corporate accounted for$1.6 million and$0.5 million in cost reductions, which were fully offset by increased selling general and administrative expenses. The increase in expenses were due to higher bad debt expense of$2.0 million and increased marketing expense of$1.0 million . Bad debt expense has increased due to larger reserves, driven by a higher accounts receivable balance. The Company’s accounts receivable during the quarter was impacted by an increased number of student files selected for verification by theDepartment of Education . Consequently, this has resulted in additional documentation requests for students before the disbursement of scheduled funding. The change in the verification process has impacted the entire industry and has driven our average verification rate, which had been historically about 25%, to between 25% and 60%. Management expects this issue to normalize in the fourth quarter of 2018.
Marketing investments during the three months endedSeptember 30, 2018 were approximately$1.0 million over the prior year,$0.4 million of which was for creative development. While marketing investments have increased in the current quarter, the cost to obtain prospective students has remained essentially flat when compared to the prior year. Marketing dollars are providing a return on investment and are expected to yield start growth over the next several quarters.
- Loss on sale of assets was
$0.4 million for the three months endedSeptember 30, 2018 , compared to a gain on sale of asset of$1.5 million in the prior year comparable period. The$1.9 million variance was the result of a$0.4 million loss on the sale of a property located inWest Palm Beach, Florida onAugust 23, 2018 ; and a$1.5 million gain in the prior year comparable quarter from the sale of two properties located inWest Palm Beach, Florida onAugust 14 , 2017. The sale of theWest Palm Beach, Florida property during the current quarter yielded approximately$2.3 million in proceeds. However, pursuant to the third amendment of the Company’s credit facility withSterling National Bank , the net proceeds of the sale are held in a restricted cash account at the bank; the bank having reserved its right to apply the restricted cash to the repayment of loans outstanding under the credit facility at any time, which repayment would permanently reduce the amount available under the credit facility in a commensurate amount. - Operating income improved to
$0.1 million during the current quarter, from an operating loss of$0.8 million in the prior year comparable period. - Net loss for the quarter decreased by
$0.9 million to $0.6 million , or$0.02 per share, from$1.5 million , or$0.06 per share, in the prior year comparable quarter. - As a result of our improved financial condition, during the quarter, the Company was able to negotiate more favorable terms with our surety bond provider. This negotiation resulted in
$3 million of additional liquidity. Moreover, it anticipates an additional$1 million of liquidity during the fourth quarter of 2018.
THIRD QUARTER SEGMENT FINANCIAL PERFORMANCE
Transportation and Skilled Trades Segment
Transportation and Skilled Trades segment revenue increased by
Student starts increased 10.2% for the three months ended
Operating income increased to
Educational services and facilities expense increased by
Selling, general and administrative expenses increased by
Healthcare and Other Professions Segment
Healthcare and Other Professions segment revenue increased by
Student starts increased slightly by 0.7% for the three months ended
Operating income increased to
Educational services and facilities expense increased by
Selling general and administrative expense increased by
Transitional Segment
Transitional segment revenue was
Operating loss was
Corporate and Other
This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were
NINE MONTH FINANCIAL RESULTS
Revenue decreased by
Transportation and Skilled Trades segment revenue was
Healthcare and Other Professions segment revenue was
Transitional segment revenue was
2018 OUTLOOK
The Company is raising its outlook for 2018 as follows:
- Management now expects student starts for 2018 to increase by 5% to 7%, compared to the prior year excluding the Transitional segment.
- Management now expects revenue to increase by 3% to 6%, compared to prior year excluding the Transitional segment.
- Operating Income for 2018 is now expected to range between
$3 million and $1 million excluding the Transitional segment. - Year-end population is expected to be greater than that of the prior year excluding the Transitional segment.
- Management now expects to achieve net income in 2019.
CONFERENCE CALL INFO
Lincoln will host a conference call today at
An archived version of the webcast will be accessible for 90 days at http://www.lincolntech.edu. A replay of the call will also be available for seven days by calling 855-859-2056 (domestic) or 404-537-3406 (international) and providing access code 4696158.
ABOUT
SAFE HARBOR
Statements in this press release and in oral statements made from time to time by representatives of
(Tables to Follow)
(In Thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
REVENUE | $ | 70,078 | $ | 67,308 | $ | 193,087 | $ | 194,452 | |||||||
COSTS AND EXPENSES: | |||||||||||||||
Educational services and facilities | 33,488 | 34,070 | 94,169 | 99,183 | |||||||||||
Selling, general and administrative | 36,087 | 35,499 | 108,091 | 109,378 | |||||||||||
Loss (gain) on sale of assets | 427 | (1,530 | ) | 537 | (1,619 | ) | |||||||||
Total costs & expenses | 70,002 | 68,039 | 202,797 | 206,942 | |||||||||||
OPERATING INCOME (LOSS) | 76 | (731 | ) | (9,710 | ) | (12,490 | ) | ||||||||
OTHER: | |||||||||||||||
Interest income | 6 | 7 | 25 | 47 | |||||||||||
Interest expense | (632 | ) | (716 | ) | (1,743 | ) | (6,597 | ) | |||||||
LOSS BEFORE INCOME TAXES | (550 | ) | (1,440 | ) | (11,428 | ) | (19,040 | ) | |||||||
PROVISION FOR INCOME TAXES | 50 | 50 | 150 | 150 | |||||||||||
NET LOSS | $ | (600 | ) | $ | (1,490 | ) | $ | (11,578 | ) | $ | (19,190 | ) | |||
Basic | |||||||||||||||
Net loss per share | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.47 | ) | $ | (0.80 | ) | |||
Diluted | |||||||||||||||
Net loss per share | $ | (0.02 | ) | $ | (0.06 | ) | $ | (0.47 | ) | $ | (0.80 | ) | |||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 24,533 | 24,024 | 24,387 | 23,866 | |||||||||||
Diluted | 24,533 | 24,024 | 24,387 | 23,866 | |||||||||||
Other data: | |||||||||||||||
EBITDA (1) | $ | 2,178 | $ | 1,432 | $ | (3,421 | ) | $ | (6,052 | ) | |||||
Depreciation and amortization | $ | 2,102 | $ | 2,163 | $ | 6,289 | $ | 6,438 | |||||||
Number of campuses | 23 | 28 | 23 | 28 | |||||||||||
Average enrollment | 10,897 | 10,563 | 10,404 | 10,745 | |||||||||||
Stock-based compensation | $ | 20 | $ | 294 | $ | 501 | $ | 949 | |||||||
Net cash provided by (used in) operating activities | $ | 6,518 | $ | 2,904 | $ | (5,816 | ) | $ | (16,607 | ) | |||||
Net cash (used in) provided by investing activities | $ | (73 | ) | $ | 13,663 | $ | (1,869 | ) | $ | 11,687 | |||||
Net cash used in financing activities | $ | (13 | ) | $ | (15,500 | ) | $ | (28,866 | ) | $ | (28,329 | ) | |||
Selected Consolidated Balance Sheet Data: | September 30, 2018 | ||
(Unaudited) | |||
Cash and cash equivalents | $ | 10,183 | |
Current assets | 44,392 | ||
Working capital deficit | (10,956 | ) | |
Total assets | 122,581 | ||
Current liabilities | 55,348 | ||
Long-term debt obligations, including current portion | 24,374 | ||
Total stockholders' equity | 34,850 | ||
(1) Reconciliation of Non-GAAP Financial Measures
The Company believes it is useful to present non-GAAP financial measures that exclude certain significant items as a means to understand the performance of its business. EBITDA and same school basis revenue are measurements not recognized in financial statements presented in accordance with accounting principles generally accepted in
Following is a reconciliation of net loss to EBITDA and same school basis revenue:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net loss | $ | (600 | ) | $ | (1,490 | ) | $ | (11,578 | ) | $ | (19,190 | ) | |||
Interest expense, net | 626 | 709 | 1,718 | 6,550 | |||||||||||
Provision for income taxes | 50 | 50 | 150 | 150 | |||||||||||
Depreciation and amortization | 2,102 | 2,163 | 6,289 | 6,438 | |||||||||||
EBITDA | $ | 2,178 | $ | 1,432 | $ | (3,421 | ) | $ | (6,052 | ) | |||||
Three Months Ended September 30, | |||||||||||||||
(Unaudited) | |||||||||||||||
Transportation and Skilled Trades |
Healthcare and Other Professions |
||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 6,331 | $ | 6,122 | $ | 830 | $ | 276 | |||||||
Interest expense, net | - | - | - | - | |||||||||||
Provision for income taxes | - | - | - | - | |||||||||||
Depreciation and amortization | 1,892 | 1,997 | 68 | 27 | |||||||||||
EBITDA | $ | 8,223 | $ | 8,119 | $ | 898 | $ | 303 | |||||||
Three Months Ended September 30, | |||||||||||||||
(Unaudited) | |||||||||||||||
Transitional |
Corporate |
||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net loss | $ | (1,865 | ) | $ | (3,407 | ) | $ | (5,896 | ) | $ | (4,481 | ) | |||
Interest expense, net | - | - | 626 | 709 | |||||||||||
Provision for income taxes | - | - | 50 | 50 | |||||||||||
Depreciation and amortization | 4 | 1 | 138 | 138 | |||||||||||
EBITDA | $ | (1,861 | ) | $ | (3,406 | ) | $ | (5,082 | ) | $ | (3,584 | ) | |||
Nine Months Ended September 30, | |||||||||||||||
(Unaudited) |
|||||||||||||||
Transportation and Skilled Trades |
Healthcare and Other Professions |
||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 8,746 | $ | 8,824 | $ | 2,748 | $ | 915 | |||||||
Interest expense, net | - | (18 |
) | - | - | ||||||||||
Provision for income taxes | - | - | - | - | |||||||||||
Depreciation and amortization | 5,642 | 5,949 | 180 | 38 | |||||||||||
EBITDA | $ | 14,388 | $ | 14,755 | $ | 2,928 | $ | 953 | |||||||
Nine Months September 30, | |||||||||||||||
(Unaudited) | |||||||||||||||
Transitional |
Corporate |
||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net loss | $ | (2,895 | ) | $ | (5,704 | ) | $ | (20,177 | ) | $ | (23,225 | ) | |||
Interest expense, net | - | - | 1,718 | 6,568 | |||||||||||
Provision for income taxes | - | - | 150 | 150 | |||||||||||
Depreciation and amortization | 11 | 30 | 456 | 421 | |||||||||||
EBITDA | $ | (2,884 | ) | $ | (5,674 | ) | $ | (17,853 | ) | $ | (16,086 | ) | |||
Three Months Ended September 30, | |||||||||
(Unaudited) | |||||||||
|
|||||||||
Total | Total | % Change | |||||||
Company | Company | Same School Basis | |||||||
2018 | 2017 | 2018 | |||||||
Total Company Revenue | $ | 70,078 | $ | 67,308 | |||||
Less: Transitional Revenue | (821 | ) | (2,623 | ) | |||||
Revenue on Same School Basis | $ | 69,257 | $ | 64,685 | 7.1% | ||||
Three Months Months Ended September 30, | |||||||||
(Unaudited) | |||||||||
2018 | 2017 | % Change | |||||||
Revenue: | |||||||||
Transportation and Skilled Trades | $ | 51,008 | $ | 48,795 | 4.5% | ||||
Healthcare and Other Professions | 18,249 | 15,890 | 14.8% | ||||||
Transitional | 821 | 2,623 | -68.7% | ||||||
Total | $ | 70,078 | $ | 67,308 | 4.1% | ||||
Operating Income (Loss): | |||||||||
Transportation and Skilled Trades | $ | 6,330 | $ | 6,121 | 3.4% | ||||
Healthcare and Other Professions | 830 | 276 | 200.7% | ||||||
Transitional | (1,863 | ) | (3,406 | ) | 45.3% | ||||
Corporate | (5,221 | ) | (3,722 | ) | -40.3% | ||||
Total | $ | 76 | $ | (731 | ) | 110.4% | |||
Starts: | |||||||||
Transportation and Skilled Trades | 3,391 | 3,076 | 10.2% | ||||||
Healthcare and Other Professions | 1,232 | 1,224 | 0.7% | ||||||
Transitional | 30 | 145 | -79.3% | ||||||
Total | 4,653 | 4,445 | 4.7% | ||||||
Average Population: | |||||||||
Transportation and Skilled Trades | 7,453 | 7,194 | 3.6% | ||||||
Healthcare and Other Professions | 3,317 | 2,945 | 12.6% | ||||||
Transitional | 127 | 424 | -70.0% | ||||||
Total | 10,897 | 10,563 | 3.2% | ||||||
End of Period Population: | |||||||||
Transportation and Skilled Trades | 7,922 | 7,626 | 3.9% | ||||||
Healthcare and Other Professions | 3,637 | 3,280 | 10.9% | ||||||
Transitional | 173 | 609 | -71.6% | ||||||
Total | 11,732 | 11,515 | 1.9% | ||||||
Nine Months Ended September 30, | |||||||||
(Unaudited) | |||||||||
2018 | 2017 | % Change | |||||||
Revenue: | |||||||||
Transportation and Skilled Trades | $ | 135,838 | $ | 134,285 | 1.2% | ||||
Healthcare and Other Professions | 52,554 | 46,470 | 13.1% | ||||||
Transitional | 4,695 | 13,697 | -65.7% | ||||||
Total | $ | 193,087 | $ | 194,452 | -0.7% | ||||
Operating Income (Loss): | |||||||||
Transportation and Skilled Trades | $ | 8,747 | $ | 8,806 | -0.7% | ||||
Healthcare and Other Professions | 2,747 | 914 | 200.5% | ||||||
Transitional | (2,899 | ) | (5,703 | ) | 49.2% | ||||
Corporate | (18,305 | ) | (16,507 | ) | -10.9% | ||||
Total | $ | (9,710 | ) | $ | (12,490 | ) | 22.3% | ||
Starts: | |||||||||
Transportation and Skilled Trades | 7,156 | 6,695 | 6.9% | ||||||
Healthcare and Other Professions | 3,048 | 2,856 | 6.7% | ||||||
Transitional | 140 | 355 | -60.6% | ||||||
Total | 10,344 | 9,906 | 4.4% | ||||||
Average Population: | |||||||||
Transportation and Skilled Trades | 6,891 | 6,903 | -0.2% | ||||||
Healthcare and Other Professions | 3,245 | 2,965 | 9.5% | ||||||
Transitional | 269 | 877 | -69.3% | ||||||
Total | 10,404 | 10,745 | -3.2% | ||||||
End of Period Population: | |||||||||
Transportation and Skilled Trades | 7,922 | 7,626 | 3.9% | ||||||
Healthcare and Other Professions | 3,637 | 3,280 | 10.9% | ||||||
Transitional | 173 | 609 | -71.6% | ||||||
Total | 11,732 | 11,515 | 1.9% | ||||||
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Source: Lincoln Educational Services Corporation