Lincoln Educational Services Reports Improved Operating Performance for Transportation & Skilled Trades and Healthcare and Other Professions Segments for the Third Quarter
- Total Revenue of $67.3 Million; Transportation & Skilled Trades Segment
$47.7 Million , Healthcare and Other Professions Segment$18.4 Million , and Transitional Segment$1.2 Million for the Three Months EndedSeptember 30, 2017 - Revenue for both the Transportation and Skilled Trades Segment and the HOPS Segment Down Less than 1% for the Three Months Ended
September 30, 2017 Compared to Prior Year Comparable Period - Excluding the Transitional Segment, Company Would Have Generated Net Income for the Three Months Ended
September 30, 2017 - Completed Sale of Two
West Palm Beach, Florida Properties Resulting in a$1.5 Million Gain and Net Proceeds of$15.3 Million - Reduced Debt Obligations by
$15.5 Million to $17.5 million compared toJune 30, 2017 - Final 2014 Three-Year Cohort Default Rates of 10.3%; 2% Lower than Prior Year and Lower than Industry Average
- The Company Reiterates Previously Provided Guidance
- Conference Call Today at 10 a.m. ET
“Our MINI STEP automotive technician program got off to a very strong start and we have been asked by
“At the same time, we have continued our strong cohort default rate performance. According to the
“We have also continued our progress towards initial accreditation of our HOPS campuses that were impacted by the loss of recognition of our accrediting body,
THIRD QUARTER RESULTS:
- Revenue decreased by
$7.0 million , or 9.4%, to$67.3 million . The decrease in revenue was mainly attributable to the suspension of new student enrollments at campuses in the Transitional segment which have closed or will be closed by year end. This segment accounted for approximately 95% of the total revenue decline. - Total student starts decreased by 10.9% to approximately 4,400 from 5,000 for the three months ended
September 30, 2017 as compared to the prior year comparable period. Approximately 82% of the overall decrease was due to the Transitional segment noted above. The remaining decrease resulted from start underperformance at one campus in the Transportation and Skilled Trades segment and two campuses in the Healthcare and Other Professions segment. A third campus in the Healthcare and Other Profession segment contributed to the decline due to shifts in start dates. This campus is performing well and ahead of prior year for the nine months. Excluding the Transitional segment and these four campuses, starts for the third quarter would have grown over the prior year comparable period. - Educational services and facilities expense decreased by
$3.5 million , or 9.3%, to$34.1 million for the three months endedSeptember 30, 2017 from$37.5 million in the prior year comparable quarter. This decrease is mainly attributable to the Transitional segment which accounted for$3.2 million in cost reductions as three campuses in the segment have closed during the three months endedSeptember 30, 2017 and the remaining two campuses are preparing to close by the end of the year. - Selling, general and administrative expense decreased by
$1.9 million , or 5.1%, to$35.5 million for the three months endedSeptember 30, 2017 from$37.4 million in the comparable quarter of 2016. This decrease also was primarily due to the Transitional segment, which accounted for approximately$2.9 million in cost reductions. Partially offsetting the cost reductions was$0.6 million of corporate and other costs related to the closure of theHartford, Connecticut campus onDecember 31, 2016 . - Gain on sale of assets increased to
$1.5 million from less than$0.1 million in the prior year comparable period. The increase was due to the sale of two properties located inWest Palm Beach , Florida. - Net interest expense for the quarter decreased by
$0.7 million , or 50% to$0.7 million from$1.4 million in the prior year comparable period. The cost reductions resulted from lower debt outstanding in combination with favorable terms under the Company’s new Credit Facility withSterling National Bank , which became effective onMarch 31, 2017 , when compared to the terms of our previous loan facility. - 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
$1.5 million , or$0.06 per share, compared to a net loss of$0.5 million , or$0.02 per share, in the prior year comparable period.
THIRD QUARTER SEGMENT FINANCIAL PERFORMANCE
Transportation and Skilled Trades
Transportation and Skilled Trades segment revenue decreased slightly by
Student starts for the quarter decreased by 74 students or 2.4% compared to prior year comparable period. The decline in student starts is mainly the result of the underperformance of one campus which decreased by 98 students. Excluding this campus, student starts for the quarter would have grown over the prior year comparable period. In addition, as previously reported in the second quarter, there was a decline in starts as a result of a lower than expected high school start rate. 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.
Operating income remained essentially flat at
Educational services and facilities expense decreased by
Selling, general and administrative expense increased slightly by
Healthcare and Other Professions
Healthcare and Other Professions segment revenue decreased slightly by
This segment consists of 11 campuses and, despite the overall decrease in student starts, for the three months ended
Operating loss for the three months ended
Transitional
Transitional segment revenue was
Operating loss increased by
Corporate and Other
This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and Other expenses decreased by
NINE MONTH FINANCIAL RESULTS
Revenue was
Operating loss for the nine months ended
Educational services and facilities expense decreased by
Selling, general and administrative expense decreased by
Transportation and Skilled Trades segment revenue remained essentially flat at
Healthcare and Other Professions segment revenue was
BALANCE SHEET INFORMATION
As of
2017 OUTLOOK
The Company reiterated the guidance provided on
- For the full year, the Company expects revenue to range from essentially flat to a low single digit decline in each of the Transportation and Skilled Trades segment and the 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 has completed the teach-out of the previously disclosed closures of the
Northeast Philadelphia ,Center City Philadelphia andWest Palm Beach campuses. TheBrockton and Lowell campuses, previously part of the Healthcare and Other Professions segment and new to the Transitional segment in the first quarter of 2017, are on schedule to close byDecember 31, 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 6389829.
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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
REVENUE | $ | 67,308 | $ | 74,267 | $ | 194,452 | $ | 212,991 | |||||||
COSTS AND EXPENSES: | |||||||||||||||
Educational services and facilities | 34,070 | 37,543 | 99,183 | 110,234 | |||||||||||
Selling, general and administrative | 35,499 | 37,402 | 109,378 | 113,307 | |||||||||||
Gain on sale of assets | (1,530 | ) | (7 | ) | (1,619 | ) | (402 | ) | |||||||
Total costs & expenses | 68,039 | 74,938 | 206,942 | 223,139 | |||||||||||
OPERATING LOSS | (731 | ) | (671 | ) | (12,490 | ) | (10,148 | ) | |||||||
OTHER: | |||||||||||||||
Interest income | 7 | 69 | 47 | 141 | |||||||||||
Interest expense | (716 | ) | (1,497 | ) | (6,597 | ) | (4,629 | ) | |||||||
Other income | - | 1,678 | - | 5,109 | |||||||||||
LOSS BEFORE INCOME TAXES | (1,440 | ) | (421 | ) | (19,040 | ) | (9,527 | ) | |||||||
PROVISION FOR INCOME TAXES | 50 | 50 | 150 | 150 | |||||||||||
NET LOSS | $ | (1,490 | ) | $ | (471 | ) | $ | (19,190 | ) | $ | (9,677 | ) | |||
Basic | |||||||||||||||
Net loss per share | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.80 | ) | $ | (0.41 | ) | |||
Diluted | |||||||||||||||
Net loss per share | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.80 | ) | $ | (0.41 | ) | |||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 24,024 | 23,499 | 23,866 | 23,433 | |||||||||||
Diluted | 24,024 | 23,499 | 23,866 | 23,433 | |||||||||||
Other data: | |||||||||||||||
EBITDA | $ | 1,432 | $ | 3,503 | $ | (6,052 | ) | $ | 3,551 | ||||||
Depreciation and amortization | $ | 2,163 | $ | 2,496 | $ | 6,438 | $ | 8,590 | |||||||
Number of campuses | 25 | 30 | 25 | 30 | |||||||||||
Average enrollment | 10,563 | 11,844 | 10,745 | 11,750 | |||||||||||
Stock-based compensation | $ | 294 | $ | 412 | $ | 949 | $ | 1,088 | |||||||
Net cash provided by (used in) operating activities | $ | 2,904 | $ | 8,625 | $ | (16,607 | ) | $ | (9,513 | ) | |||||
Net cash provided by (used in) investing activities | $ | 12,663 | $ | (336 | ) | $ | 10,897 | $ | (643 | ) | |||||
Net cash (used in) provided by financing activities | $ | (15,500 | ) | $ | 1 | $ | (8,077 | ) | $ | (9,024 | ) |
Selected Consolidated Balance Sheet Data: | September 30, 2017 | ||
(In thousands) | |||
Cash and cash equivalents | $ | 7,277 | |
Current assets | 40,159 | ||
Working capital | (13,205 | ) | |
Total assets | 117,559 | ||
Current liabilities | 53,364 | ||
Long-term debt obligations, including current portion | 17,500 | ||
Total stockholders' equity | 37,136 |
(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 September 30, | Nine Months Ended September 30, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net loss | $ | (1,490 | ) | $ | (471 | ) | $ | (19,190 | ) | $ | (9,677 | ) | |||
Interest expense, net | 709 | 1,428 | 6,550 | 4,488 | |||||||||||
Provision for income taxes | 50 | 50 | 150 | 150 | |||||||||||
Depreciation and amortization | 2,163 | 2,496 | 6,438 | 8,590 | |||||||||||
EBITDA | $ | 1,432 | $ | 3,503 | $ | (6,052 | ) | $ | 3,551 |
Three Months Ended September 30, | |||||||||||||||
(Unaudited) | |||||||||||||||
Transportation and Skilled Trades | Healthcare and Other Professions | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 6,061 | $ | 6,129 | $ | (574 | ) | $ | (61 | ) | |||||
Interest expense, net | - | (9 | ) | - | 19 | ||||||||||
Provision for income taxes | - | - | - | - | |||||||||||
Depreciation and amortization | 1,993 | 2,306 | 32 | 1 | |||||||||||
EBITDA | $ | 8,054 | $ | 8,426 | $ | (542 | ) | $ | (41 | ) | |||||
Three Months Ended September 30, | |||||||||||||||
(Unaudited) | |||||||||||||||
Transitional | Corporate | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net loss | $ | (2,496 | ) | $ | (2,042 | ) | $ | (4,481 | ) | $ | (4,497 | ) | |||
Interest expense, net | - | 12 | 709 | 1,406 | |||||||||||
Provision for income taxes | - | - | 50 | 50 | |||||||||||
Depreciation and amortization | 1 | 22 | 137 | 167 | |||||||||||
EBITDA | $ | (2,495 | ) | $ | (2,008 | ) | $ | (3,585 | ) | $ | (2,874 | ) | |||
Nine Months Ended September 30, | |||||||||||||||
(Unaudited) | |||||||||||||||
Transportation and Skilled Trades | Healthcare and Other Professions | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 8,978 | $ | 11,879 | $ | (1,047 | ) | $ | 2,574 | ||||||
Interest expense, net | (18 | ) | 38 | - | 58 | ||||||||||
Provision for income taxes | - | - | - | - | |||||||||||
Depreciation and amortization | 5,940 | 7,342 | 48 | 6 | |||||||||||
EBITDA | $ | 14,900 | $ | 19,259 | $ | (999 | ) | $ | 2,638 | ||||||
Nine Months Ended September 30, | |||||||||||||||
(Unaudited) | |||||||||||||||
Transitional | Corporate | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net loss | $ | (3,897 | ) | $ | (7,156 | ) | $ | (23,224 | ) | $ | (16,974 | ) | |||
Interest expense, net | - | 101 | 6,568 | 4,291 | |||||||||||
Provision for income taxes | - | - | 150 | 150 | |||||||||||
Depreciation and amortization | 30 | 741 | 420 | 501 | |||||||||||
EBITDA | $ | (3,867 | ) | $ | (6,314 | ) | $ | (16,086 | ) | $ | (12,032 | ) |
September 30, | June 30, | ||||||
2017 | 2017 | ||||||
(Unaudited) | |||||||
Current portion of credit agreement and term loan | $ | - | $ | 8,000 | |||
Long-term credit agreement and term loan | 16,721 | 24,023 | |||||
Deferred finance fees | 779 | 977 | |||||
Cash and cash equivalents | (7,277 | ) | (7,210 | ) | |||
Restricted cash | (7,189 | ) | (6,189 | ) | |||
Noncurrent restricted cash | - | - | |||||
Net debt (cash) | $ | 3,034 | $ | 19,601 |
Three Months Months Ended Sept 30, 2017 | ||||||||||
2017 | 2016 | % Change | ||||||||
Revenue: | ||||||||||
Transportation and Skilled Trades | $ | 47,694 | $ | 47,939 | -0.5 | % | ||||
Healthcare and Other Professions | 18,428 | 18,559 | -0.7 | % | ||||||
Transitional | 1,186 | 7,769 | -84.7 | % | ||||||
Total | $ | 67,308 | $ | 74,267 | -9.4 | % | ||||
Operating Income (Loss): | ||||||||||
Transportation and Skilled Trades | $ | 6,061 | $ | 6,120 | -1.0 | % | ||||
Healthcare and Other Professions | (574 | ) | (41 | ) | 1300.0 | % | ||||
Transitional | (2,495 | ) | (2,029 | ) | -23.0 | % | ||||
Corporate | (3,723 | ) | (4,721 | ) | 21.1 | % | ||||
Total | $ | (731 | ) | $ | (671 | ) | -8.9 | % | ||
Starts: | ||||||||||
Transportation and Skilled Trades | 3,016 | 3,090 | -2.4 | % | ||||||
Healthcare and Other Professions | 1,429 | 1,453 | -1.7 | % | ||||||
Transitional | - | 448 | -100.0 | % | ||||||
Total | 4,445 | 4,991 | -10.9 | % | ||||||
Average Population: | ||||||||||
Transportation and Skilled Trades | 6,977 | 7,128 | -2.1 | % | ||||||
Healthcare and Other Professions | 3,327 | 3,286 | 1.2 | % | ||||||
Transitional | 259 | 1,429 | -81.9 | % | ||||||
Total | 10,563 | 11,843 | -10.8 | % | ||||||
End of Period Population: | ||||||||||
Transportation and Skilled Trades | 7,403 | 7,667 | -3.4 | % | ||||||
Healthcare and Other Professions | 3,957 | 3,826 | 3.4 | % | ||||||
Transitional | 155 | 1,362 | -88.6 | % | ||||||
Total | 11,515 | 12,855 | -10.4 | % |
Nine Months Ended Sept 30, 2017 | ||||||||||
2017 | 2016 | % Change | ||||||||
Revenue: | ||||||||||
Transportation and Skilled Trades | $ | 131,169 | $ | 131,243 | -0.1 | % | ||||
Healthcare and Other Professions | 55,199 | 57,030 | -3.2 | % | ||||||
Transitional | 8,084 | 24,718 | -67.3 | % | ||||||
Total | $ | 194,452 | $ | 212,991 | -8.7 | % | ||||
Operating Income (Loss): | ||||||||||
Transportation and Skilled Trades | $ | 8,960 | $ | 11,916 | -24.8 | % | ||||
Healthcare and Other Professions | (1,047 | ) | 2,634 | -139.7 | % | |||||
Transitional | (3,900 | ) | (7,132 | ) | 45.3 | % | ||||
Corporate | (16,503 | ) | (17,566 | ) | 6.1 | % | ||||
Total | $ | (12,490 | ) | $ | (10,148 | ) | -23.1 | % | ||
Starts: | ||||||||||
Transportation and Skilled Trades | 6,502 | 6,686 | -2.8 | % | ||||||
Healthcare and Other Professions | 3,272 | 3,386 | -3.4 | % | ||||||
Transitional | 132 | 1,254 | -89.5 | % | ||||||
Total | 9,906 | 11,326 | -12.5 | % | ||||||
Average Population: | ||||||||||
Transportation and Skilled Trades | 6,694 | 6,723 | -0.4 | % | ||||||
Healthcare and Other Professions | 3,477 | 3,508 | -0.9 | % | ||||||
Transitional | 574 | 1,519 | -62.2 | % | ||||||
Total | 10,745 | 11,750 | -8.6 | % | ||||||
End of Period Population: | ||||||||||
Transportation and Skilled Trades | 7,403 | 7,667 | -3.4 | % | ||||||
Healthcare and Other Professions | 3,957 | 3,826 | 3.4 | % | ||||||
Transitional | 155 | 1,362 | -88.6 | % | ||||||
Total | 11,515 | 12,855 | -10.4 | % |
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Source: Lincoln Educational Services Corporation