Print Page     Close Window     

News Release

CORRECTION: Lincoln Educational Services Corrects Arithmetical Error in the Reconciliation of Consolidated Net Loss to EBITDA in August 7, 2017 Earnings Release
  • Total Revenue of $61.9 Million; Transportation & Skilled Trades Segment $41.3 Million, Healthcare and Other Professions Segment (HOPS) $17.9 Million; and Transitional Segment $2.6 Million
  • Revenue for the Transportation and Skilled Trades Segment Up Approximately 1%, HOPS Revenue Down Approximately 4% Compared to Prior Year
  • Sale of West Palm Beach, Florida Properties for $15.7 Million Expected to Close in Mid-August
  • Company Modifies Previously Provided Guidance
  • Conference Call Today at 10 a.m. ET

WEST ORANGE, N.J., Aug. 09, 2017 (GLOBE NEWSWIRE) -- Lincoln Educational Services Corporation (Nasdaq:LINC) today reported financial results for the second quarter ended June 30, 2017.

“The Company experienced a number of positive developments during the second quarter which included a 2.7% increase in our HOPS starts; a stable student retention rate and an increased graduate placement rate; the initiation of the first Mini automotive technician program with a fully enrolled class and the roll out of a new collision repair program model which is shorter in duration and 25% delivered online," said Scott Shaw, President & CEO.

“In addition, we have made significant progress towards the reaccreditation of our HOPS campuses impacted by the loss of accreditation credentials by the Accrediting Council for Independent Colleges and Schools (“ACICS”) and the sale of the West Palm Beach, Florida properties is expected to close mid- August.  At the same time, we had an unexpected 9% decline in student starts in our Transportation and Skilled Trades segment due to lower than expected high school start rate.  We have since established an action plan to address this challenge,” concluded Mr. Shaw.

SECOND QUARTER RESULTS:

  • Revenue decreased by $6.2 million, or 9.1%, to $61.9 million for the three months ended June 30, 2017 from $68.1 million for the prior year comparable period.  The decrease in revenue was mainly attributable to the suspension of new student enrollments at campuses in the Transitional segment, which accounted for approximately 93% of the total revenue decline.
  • Educational services and facilities expenses decreased by $3.2 million, or 8.9%, to $32.4 million from $35.6 million in the prior year comparable period.  The decrease was driven by the Transitional segment which accounted for $3.1 million in cost reductions from the teach-out of several campuses that are on schedule to be fully taught-out by December 31, 2017.
  • Selling, general and administrative expense decreased by $0.2 million, or 0.6%, to $35.6 million for the three months ended June 30, 2017 from $35.8 million in the comparable quarter of 2016.  The decrease was primarily due to the Transitional Segment, which accounted for approximately $3.2 million in cost reductions as campuses in this segment prepare to close during this fiscal year.  Partially offsetting the cost reductions are $2.0 million in increased administrative costs mainly due to bad debt and medical expenses and $1.3 million in additional sales and marketing expense.
  • Interest expense for the quarter decreased by $0.8 million, or 55% to $0.7 million from $1.5 million in the prior year comparable period.  The cost reductions resulted from favorable terms under our new Credit Facility with Sterling National Bank effective on March 31, 2017.
  • Other income decreased by $1.7 million from the prior year comparable period.  The $1.7 million in 2016 reflected the amortization of a one-time gain from the modification of a lease at three of Lincoln’s campuses which were previously accounted for as finance obligations in the prior year.
  • Net loss for the quarter was $6.8 million, or $0.28 per share, compared to a net loss of $3.1 million, or $0.13 per share, in the prior year comparable period.

SECOND QUARTER SEGMENT FINANCIAL PERFORMANCE

Transportation and Skilled Trades

Transportation and Skilled Trades segment revenue increased slightly by $0.3 million, to $41.3 million for the three months ended June 30, 2017 from $41.0 million in the prior year comparable period.  The increase in revenue was primarily driven by higher carry in population compared to prior year comparable period.

Student starts decreased by 9.0% for the three months ended June 30, 2017 as compared to the prior year comparable period.  The decline was the result of lower than expected high school start rate.  The majority of the Company’s high school shortfall mainly occurred at three campuses and was directly attributable to two factors including affordability and student engagement between enrollment and start date.  Keeping students engaged with the school requires constant contact, especially when students are enrolling months in advance.  In addition, as the Company strives to find the optimum affordability balance the Company experienced a start decline in markets where we scaled back the volume of scholarships. Certain external factors are also driving the softer-than-expected start rate include low unemployment rates and increased wages for both skilled and unskilled labor. The Company believes such factors have caused many potential students to postpone training and enter the workforce directly upon graduation.  Further, contributing to the decline in high school student starts is the lead time between the initial recruitment efforts and the actual start date, which could be up to one year.  High school students make up approximately 30% of the segment’s population.  In an effort to increase high school enrollments, the Company made various changes to its processes and organizational structure.  As a result, enrollments for the quarter remained essentially flat, however, starts declined.  

Operating income for the three months ended June 30, 2017 declined to $0.9 million from $2.4 million in the prior year comparable period primarily as a result of selling, general and administrative expenses, which increased by $1.8 million.  The increase in selling, general and administrative expenses was largely due to $0.9 million of additional bad debt expense mainly driven by higher student accounts receivable balance, higher account write-offs and timing of Title IV funds receipts.  Additionally, sales and marketing expenses increased by $0.7 million resulting from strategic marketing initiatives intended to reach more students.  These initiatives resulted in a slight improvement in starts in the adult demographic quarter over quarter. 

Healthcare and Other Professions

Healthcare and Other Professions segment revenue was $17.9 million for the three months ended June 30, 2017, as compared to $18.7 million in the prior year comparable period.  The decrease in revenue is mainly attributable to a 3.4% decline in average revenue per student due to shifts in program mix combined with tuition rate decreases in various programs.  Slightly offsetting the decline in revenue was a 2.7% increase in student starts for the quarter compared to the prior year comparable period.

Operating loss for the three months ended June 30, 2017 was $0.6 million, compared to operating income of $0.9 million in the prior year comparable period.  The decline of $1.5 million was mainly the result of a $0.7 million decrease in revenue which was mainly attributable to a 3.4% decline in average revenue per student, a $0.6 million increase in sales and marketing expense which has driven student starts up 2.7% quarter over quarter and a $0.3 million increase in administrative expense resulting from increased bad debt expense mainly due to higher student accounts receivable balance, higher write-offs and timing of Title IV fund receipts.

Transitional

Revenue was $2.6 million for the three months ended June 30, 2017 as compared to $8.4 million in the prior year comparable period mainly attributable to the closing of campuses within this segment.

Operating loss decreased by $0.6 million to $0.8 million for the three months ended June 30, 2017 from $1.5 million in the prior year comparable period.  The decrease is primarily attributable to a reduction in personnel salaries and benefits as the campuses prepare to close.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company.  Corporate and Other costs increased by $0.3 million, or 5.7%, to $5.4 million from $5.1 million, for the prior year.  The increase in Corporate and Other expenses was driven in part by a $1.0 million increase in medical costs as compared to prior year.  In 2016, the Company had historically low medical claims as compared to this year resulting in the significant increase quarter over quarter.  Partially offsetting the increase was a reduction in salaries and benefits of $0.7 million.

Included in the Corporate and Other costs for the three months ended June 30, 2017 are approximately $0.3 million of additional dormitory costs directly relating to the closure of the Hartford, Connecticut campus on December 31, 2016.

SIX MONTH FINANCIAL RESULTS

Revenue was $127.1 million for the six months ended June 30, 2017 versus $138.7 million in the comparable six month period of 2016.  Operating loss for the six months ended June 30, 2017 increased by $2.3 million when compared against the comparable six month period of 2016.  Educational services and facilities expense decreased by $7.6 million, or 10.4%, to $65.1 million for the six months ended June 30, 2017 from $72.7 million in the comparable six month period of 2016. Selling, general and administrative expense decreased by $2.0 million, or 2.7%, to $73.9 million for the six months ended June 30, 2017 from $75.9 million in the comparable six month period of 2016.

Transportation and Skilled Trades segment revenue was $83.5 million for the six months ended June 30, 2017, versus $83.3 million in the comparable six month period of 2016.

Healthcare and Other Professions segment revenue was $36.8 million for the six months ended June 30, 2017, versus $38.5 million in the comparable six month period of 2016.

BALANCE SHEET INFORMATION

As of June 30, 2017, the Company had a net debt balance of $19.6 million compared to a net cash balance of $3.4 million as of December 31, 2016. The increase in our net debt was mainly the result of the net loss during the six months ended June 30, 2017 and the seasonality of the business.

2017 OUTLOOK

The Company is modifying the guidance provided for 2017 due to lower than expected high school starts in the Transportation and Skilled Trades segment which resulted in a decrease in this segment’s student population.  The modified guidance is as follows:

  • For the full year, the Company expects revenue to range from essentially flat to a low single digit decline in the Transportation and Skilled Trades segment.
  • The Company expects revenue to range from essentially flat to low single digit decline for Healthcare and Other Professions segment.
  • For the full year, the Company expects to breakeven or incur a slight operating loss, excluding the impact of closed campuses.
  • The Company expects to breakeven or incur a slight net loss for the last nine months of the year.
  • The Company anticipates completing the previously disclosed teach-out of the Northeast Philadelphia, Center City Philadelphia and West Palm Beach campuses, as well as the Brockton and Lowell campuses which were new to the Transitional segment in the first quarter of 2017.

CONFERENCE CALL INFO

Lincoln will host a conference call today at 10:00 a.m. Eastern Daylight Time.  The conference call can be accessed by going to the IR portion of our website at www.lincolnedu.com. To access the live webcast of the conference call, please go to the investor relations section of Lincoln’s website at http://www.lincolnedu.com. Participants can also listen to the conference call by dialing 844-413-0946 (domestic) or 216-562-0456 (international) and providing access code 54599977. Please log in or dial into the call at least 10 minutes prior to the start time.

An archived version of the webcast will be accessible for 90 days at http://www.lincolnedu.com. 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 54599977.

ABOUT LINCOLN EDUCATIONAL SERVICES CORPORATION

Lincoln Educational Services Corporation is a provider of diversified career-oriented post-secondary education and helping to provide solutions to America’s skills gap. Lincoln offers recent high school graduates and working adults degree and diploma programs.  The Company operates under three reportable segments: Transportation and Skilled Trades, Healthcare and Other Professions and Transitional. Lincoln has provided the nation’s workforce with skilled technicians since its inception in 1946. For more information, go to www.lincolnedu.com.

SAFE HARBOR

Statements in this press release and in oral statements made from time to time by representatives of Lincoln Educational Services Corporation regarding Lincoln’s business that are not historical facts may be “forward-looking statements” as that term is defined in the federal securities law. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all.  Generally, these statements relate to business plans or strategies, projected or anticipated benefits from acquisitions or dispositions to be made by the Company or projections involving anticipated revenues, earnings or other aspects of the Company’s operating results.  The Company cautions you that these statements concern current expectations about the Company’s future performance or events and are subject to a number of uncertainties, risks and other influences many of which are beyond the Company’s control, that may influence the accuracy of the statements and the projects upon which the statements are based. The events described in forward-looking statements may not occur at all. Factors which may affect the Company’s results include, but are not limited to, the risks and uncertainties discussed in the Company’s Annual Report on Form 10-K, Quarterly Reports on From 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange commission.  Any one or more of these uncertainties, risks and other influences could materially affect the Company’s results of operations and financial condition and whether forward-looking statements made by the Company ultimately prove to be accurate and, as such, the Company’s actual results, performance and achievements could materially differ from those expressed or implied in these forward-looking statements. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, our failure to comply with the extensive regulatory framework applicable to our industry or our failure to obtain timely regulatory approvals in connection with a change of control of our Company or acquisitions; our success in updating and expanding the content of existing programs and developing new programs for our students in a cost-effective manner or on a timely basis; risks associated with changes in applicable federal laws and regulations; uncertainties regarding our ability to comply with federal laws and regulations regarding the 90/10 rule and cohort default rates; risks associated with the opening of new campuses; risks associated with integration of acquired schools; industry competition; our ability to execute our growth strategies; conditions and trends in our industry; general economic conditions; and other factors discussed in the “Risk Factors” section of our annual and quarterly reports. All forward-looking statements are qualified in their entirety by this cautionary statement, and Lincoln undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise after the date hereof.

(Tables to Follow)

       
   Three Months Ended     Six Months Ended 
   June 30,     June 30, 
   (Unaudited)     (Unaudited) 
  2017   2016   2017   2016
               
REVENUE $ 61,865     $ 68,080     $ 127,144     $ 138,724  
COSTS AND EXPENSES:              
Educational services and facilities   32,405       35,569       65,113       72,691  
Selling, general and administrative   35,554       35,750       73,879       75,905  
Gain on sale of assets   (63 )     (6 )     (89 )     (395 )
Total costs & expenses   67,896       71,313       138,903       148,201  
OPERATING LOSS   (6,031 )     (3,233 )     (11,759 )     (9,477 )
OTHER:              
Interest income   9       8       40       72  
Interest expense   (699 )     (1,541 )     (5,881 )     (3,132 )
Other income   -       1,678       -       3,431  
LOSS BEFORE INCOME TAXES   (6,721 )     (3,088 )     (17,600 )     (9,106 )
PROVISION FOR INCOME TAXES   50       50       100       100  
NET LOSS $ (6,771 )   $ (3,138 )   $ (17,700 )   $ (9,206 )
Basic              
Net loss per share $ (0.28 )   $ (0.13 )   $ (0.74 )   $ (0.39 )
Diluted              
Net loss per share $ (0.28 )   $ (0.13 )   $ (0.74 )   $ (0.39 )
Weighted average number of common shares outstanding:              
Basic   23,962       23,448       23,787       23,400  
Diluted   23,962       23,448       23,787       23,400  
               
Other data:              
               
EBITDA $ (3,907 )   $ 1,112     $ (7,484 )   $ 48  
Depreciation and amortization $ 2,124     $ 2,667     $ 4,275     $ 6,094  
Number of campuses/training sites   28       30       28       30  
Average enrollment   10,582       11,517       10,836       11,703  
Stock-based compensation $ 294     $ 304     $ 654     $ 676  
Net cash used in operating activities $ (8,037 )   $ (8,969 )   $ (19,511 )   $ (18,138 )
Net cash used in investing activities $ (1,170 )   $ (234 )   $ (1,766 )   $ (307 )
Net cash provided by (used in) financing activities $ 7,710     $ (13 )   $ 7,423     $ (9,025 )
               


Selected Consolidated Balance Sheet Data: June 30, 2017
(In thousands)  
   
Cash and cash equivalents $ 13,399  
Current assets   52,827  
Working capital   (4,107 )
Total assets   130,231  
Current liabilities   56,934  
Long-term debt obligations, including current portion   25,000  
Total stockholders' equity   37,892  
   

(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 Net debt (cash) measurements not recognized in financial statements presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  We define EBITDA as income (loss) from continuing operations before interest expense (net of interest income), provision for income taxes and depreciation and amortization.  We define net debt as long term debt including current portion plus deferred finance fees less cash, cash equivalents and restricted cash.  EBITDA and net debt are presented because we believe they are a useful indicator of our performance and our ability to make strategic acquisitions and meet capital expenditure and debt service requirements.  It is not, however, intended to represent cash flows from operations as defined by GAAP and should not be used as an alternative to net income (loss) as an indicator of operating performance or to cash flow as a measure of liquidity.  EBITDA and net debt are not necessarily comparable to similarly titled measures used by other companies.

Following is a reconciliation of net loss to EBITDA and net debt:

   Three Months Ended June 30,     Six Months Ended June 30, 
   (Unaudited)     (Unaudited) 
               
  2017
  2016
  2017
  2016
               
Net loss $ (6,771 )   $ (3,138 )   $ (17,700 )   $ (9,206 )
Interest expense, net   690       1,533       5,841       3,060  
Provision for income taxes   50       50       100       100  
Depreciation and amortization   2,124       2,667       4,275       6,094  
EBITDA $ (3,907 )   $ 1,112     $ (7,484 )   $ 48  
               


   Three Months Ended June 30, 
  (Unaudited)
  Transportation and Skilled Trades   Healthcare and Other Professions
  2017   2016   2017   2016
               
Net income $ 850     $ 2,380     $ (635 )   $ 897  
Interest expense, net   -       50       -       20  
Provision for income taxes   -       -       -       -  
Depreciation and amortization   1,981       2,502       15       3  
EBITDA $ 2,831     $ 4,932     $ (620 )   $ 920  
               
               
   Three Months Ended June 30, 
  (Unaudited)
  Transitional   Corporate
  2017   2016   2017   2016
               
Net loss $ (833 )   $ (1,470 )   $ (6,153 )   $ (4,945 )
Interest expense, net   -       12       690       1,451  
Provision for income taxes   -       -       50       50  
Depreciation and amortization   2       13       126       149  
EBITDA $ (831 )   $ (1,445 )   $ (5,287 )   $ (3,295 )
                               


   Six Months Ended June 30, 
  (Unaudited)
  Transportation and Skilled Trades   Healthcare and Other Professions
  2017   2016   2017   2016
               
Net income $ 2,916     $ 5,749     $ (470 )   $ 2,637  
Interest expense, net   (18)       47       -       39  
Provision for income taxes   -       -       -       -  
Depreciation and amortization   3,947       5,036       15       5  
EBITDA $ 6,845     $ 10,832     $ (455 )   $ 2,681  
               
               
   Six Months Ended June 30, 
  (Unaudited)
  Transitional   Corporate
  2017   2016   2017   2016
               
Net loss $ (1,401 )   $ (5,115 )   $ (18,745 )   $ (12,477 )
Interest expense, net   -       89       5,859       2,885  
Provision for income taxes   -       -       100       100  
Depreciation and amortization   29       719       284       334  
EBITDA $ (1,372 )   $ (4,307 )   $ (12,502 )   $ (9,158 )
                               


  June 30,   December 31,
  2017   2016
   (Unaudited) 
Current portion of credit agreement and term loan $ 8,000     $ 11,713  
Long-term credit agreement and term loan   24,023       30,244  
Deferred finance fees   977       2,310  
Cash and cash equivalents   (7,210 )     (21,064 )
Restricted cash   (6,189 )     (6,399 )
Noncurrent restricted cash   -       (20,252 )
Net debt (cash) $ 19,601     $ (3,448 )
               

 

  Three Months Months Ended June 30, 2017
  2017   2016   % Change
Revenue:          
Transportation and Skilled Trades $ 41,310     $ 41,032     0.7 %
Healthcare and Other Professions   17,932       18,661     -3.9 %
Transitional   2,623       8,387     -68.7 %
Total $ 61,865     $ 68,080     -9.1 %
           
Operating Income (Loss):          
Transportation and Skilled Trades $ 850     $ 2,430     -65.0 %
Healthcare and Other Professions   (634 )     918     -169.1 %
Transitional   (833 )     (1,458 )   42.9 %
Corporate   (5,414 )     (5,123 )   -5.7 %
Total $ (6,031 )   $ (3,233 )   -86.5 %
           
Starts:          
Transportation and Skilled Trades   1,762       1,936     -9.0 %
Healthcare and Other Professions   842       820     2.7 %
Transitional   -       348     -100.0 %
Total   2,604       3,104     -16.1 %
           
Average Population:          
Transportation and Skilled Trades   6,532       6,490     0.6 %
Healthcare and Other Professions   3,471       3,492     -0.6 %
Transitional   579       1,535     -62.3 %
Total   10,582       11,517     -8.1 %
           
End of Period Population:          
Transportation and Skilled Trades   6,809       6,950     -2.0 %
Healthcare and Other Professions   3,219       3,160     1.9 %
Transitional   372       1,398     -73.4 %
Total   10,400       11,508     -9.6 %
           


  Six Months Ended June 30, 2017
  2017   2016   % Change
Revenue:          
Transportation and Skilled Trades $ 83,477     $ 83,304     0.2 %
Healthcare and Other Professions   36,769       38,470     -4.4 %
Transitional   6,898       16,950     -59.3 %
Total $ 127,144     $ 138,724     -8.3 %
           
Operating Income (Loss):          
Transportation and Skilled Trades $ 2,898     $ 5,796     -50.0 %
Healthcare and Other Professions   (474 )     2,673     -117.7 %
Transitional   (1,401 )     (5,101 )   72.5 %
Corporate   (12,782 )     (12,845 )   0.5 %
Total $ (11,759 )   $ (9,477 )   -24.1 %
           
Starts:          
Transportation and Skilled Trades   3,486       3,596     -3.1 %
Healthcare and Other Professions   1,843       1,933     -4.7 %
Transitional   132       806     -83.6 %
Total   5,461       6,335     -13.8 %
           
Average Population:          
Transportation and Skilled Trades   6,553       6,521     0.5 %
Healthcare and Other Professions   3,552       3,618     -1.8 %
Transitional   731       1,564     -53.3 %
Total   10,836       11,703     -7.4 %
           
End of Period Population:          
Transportation and Skilled Trades   6,809       6,950     -2.0 %
Healthcare and Other Professions   3,219       3,160     1.9 %
Transitional   372       1,398     -73.4 %
Total   10,400       11,508     -9.6 %
           


LINCOLN EDUCATIONAL SERVICES CORPORATION
Brian Meyers, CFO
973-736-9340

EVC GROUP, INVESTOR RELATIONS:
Doug Sherk, dsherk@evcgroup.com; 415-652-9100
Amanda Prior, aprior@evcgroup.com; 646-445-4800

Lincoln Educational Services Corporation

© Lincoln Educational Services and its licensors. All Rights Reserved.