Lincoln Educational Services Reports Second Quarter Results; Student Starts for Healthcare and Other Professions Segment Up 2.7% Quarter over Quarter
- 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
“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
“In addition, we have made significant progress towards the reaccreditation of our HOPS campuses impacted by the loss of accreditation credentials by the
SECOND QUARTER RESULTS:
- Revenue decreased by
$6.2 million , or 9.1%, to$61.9 million for the three months endedJune 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 byDecember 31, 2017 . - Selling, general and administrative expense decreased by
$0.2 million , or 0.6%, to$35.6 million for the three months endedJune 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 withSterling National Bank effective onMarch 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
Student starts decreased by 9.0% for the three months ended
Operating income for the three months ended
Healthcare and Other Professions
Healthcare and Other Professions segment revenue was
Operating loss for the three months ended
Transitional
Revenue was
Operating loss decreased by
Corporate and Other
This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and Other costs increased by
Included in the Corporate and Other costs for the three months ended
SIX MONTH FINANCIAL RESULTS
Revenue was
Transportation and Skilled Trades segment revenue was
Healthcare and Other Professions segment revenue was
BALANCE SHEET INFORMATION
As of
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 andWest Palm Beach campuses, as well as theBrockton 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
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
SAFE HARBOR
Statements in this press release and in oral statements made from time to time by representatives of
(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 | $ | (5,287 | ) | $ | (1,954 | ) | $ | (19,166 | ) | $ | (6,072 | ) | |||
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
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 | $ | (5,287 | ) | $ | (1,954 | ) | $ | (19,166 | ) | $ | (6,072 | ) | |||
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 | $ | 4,832 | $ | (620 | ) | $ | 880 | ||||||
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 | ) | $ | (1,469 | ) | $ | (6,667 | ) | $ | (6,197 | ) | |||
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 | $ | 6,881 | $ | 10,738 | $ | (455 | ) | $ | 2,603 | ||||||
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 | ) | $ | (4,485 | ) | $ | (24,220 | ) | $ | (14,928 | ) | |||
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; 415-652-9100Amanda Prior , aprior@evcgroup.com; 646-445-4800