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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, DC 20549

 

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FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

 

Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported): November 11, 2020

LINCOLN EDUCATIONAL SERVICES CORPORATION

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(Exact Name of Registrant as Specified in Charter)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Securities registered pursuant to Section 12(b) of the Act:

 

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On November 11, 2020, Lincoln Educational Services Corporation. (the “Company”) issued a press release announcing financial results for the third quarter ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated in this Item 2.02 by reference.

 The information contained under this Item 2.02 in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. Furthermore, the information contained under this Item 2.02 in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.  The furnishing of the information under this Item 2.02 in this Current Report is not intended to, and does not, constitute a determination or admission by the Company that the information contained under this Item 2.02 in this Current Report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Company.

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

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Exhibit 99.1

Lincoln Educational Services Reports Strong Third Quarter Results;

Third Quarter Net Income More than Doubles as Revenue Rises 8.5%;

15.3% Student Start Growth

Conference call today at 10 a.m. ET

Operational and Financial Highlights for the Third Quarter Ended September 30, 2020

(as compared to quarter ending September 30, 2019)

 

 

 

 

 

 

 

 

“Despite the continued challenges presented by the COVID-19 pandemic, Lincoln’s performance is beginning to demonstrate our growth potential as well as our operating leverage as we help a growing number of students acquire new skills for in-demand essential careers,” said Scott Shaw, President and Chief Executive Officer.  “During the quarter, we grew student starts more than 15 percent, our second consecutive quarter of double-digit student start growth – a significant accomplishment in the current environment.  In addition, we increased our student population, substantially reduced the number of students on leave of absence, increased graduation rates and began to implement program replications at several campuses that are expected to contribute to our results beginning in the summer of 2021. Financially, we increased cash flow from operations, significantly reduced our debt and more than doubled our net income. The quarter’s performance and the early momentum we are experiencing in the current fourth quarter puts us in an excellent position to exceed our original, pre-COVID objectives for 2020, which is strong proof of our team’s capabilities and operating execution.”

THIRD QUARTER FINANCIAL RESULTS

(Quarter ended September 30, 2020 compared to quarter ending September 30, 2019)

 

 

 

 

 

 

 

 

THIRD QUARTER SEGMENT RESULTS

Transportation and Skilled Trades Segment

Revenue increased $4.1 million, or 7.9%, to $56.8 million from $52.7 million in the prior year.  The increase is due primarily to a 5.0% increase in average student population, driven by a 17.2% increase in student starts.  The revenue increase was despite the continued impact of COVID-19, which caused a $0.4 million decrease in non-tuition revenue.  Operating income increased 35.3% to $9.1 million from $6.8 million in the prior year comparable period.

Healthcare and Other Professions Segment

Revenue increased $2.1 million, or 10.1%, to $22.0 million from $19.9 million in the prior year.  The increase quarter over quarter is due primarily to a 14.6% increase in average student population, driven by a 10.6% increase in student starts.  The increases in revenue was despite the continued impact of COVID-19 during the third quarter that deferred $0.4 million of revenue to the fourth quarter as a result of extended graduation dates for certain programs and a $0.1 million decrease in non-tuition revenue.  Operating income increased 17.9% to $1.7 million from $1.4 million in the prior year comparable period.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company.  Corporate and other expenses were $6.9 million, a $0.9 million increase compared to $6.0 in the prior year.  Additional expenses were the result of several factors including increases in incentive compensation accrual due to financial performance, stipends provided to all employees due to the COVID-19 pandemic and increase in non-cash stock expense.

NINE MONTHS FINANCIAL RESULTS

(Period ended September 30, 2020 compared to September 30, 2019)

Total revenue increased by $11.9 million, or 6.0%, to $211.3 million, as compared to $199.4 million in the prior year comparable period.  The Transportation and Skilled Trades segment revenue increased to $148.8 million a $7.8 million increase compared to $141.0 million in 2019.   The Healthcare and Other Professions segment revenue increased to $62.5 million a $4.1 million increase compared to $58.4 million in 2019.  Operating income increased to $3.7 million as compared to an operating loss of $4.8 million in the prior year comparable period

CARES ACT FUNDS

Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Federal Government and Department of Education have demonstrated their recognition that students are being adversely affected by the continued disruption caused by COVID-19.  Lincoln was awarded a grant of approximately $27.4 million to help ensure the continued education of its students.  The majority of the funds have been disbursed to students to offset their additional expenses related to the disruption of school operations including eligible expenses under a student’s cost of attendance, such as food, housing, course materials, technology, health care and childcare.

CONFERENCE CALL INFO

Lincoln will host a conference call today at 10:00 a.m. Eastern Daylight Time.  To access the live webcast of the conference call, please go to the Investor Relations section of Lincoln’s website at http://www.lincolntech.edu. Participants can also listen to the conference call by dialing 844-413-0946 (domestic) or 216-562-0456 (international) and providing access code 1857026. 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.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 1857026.

ABOUT LINCOLN EDUCATIONAL SERVICES CORPORATION

Lincoln Educational Services Corporation is a provider of diversified career-oriented post-secondary education 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.lincolntech.edu.

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 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. 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 and projections involving anticipated revenues, earnings or other aspects of the Company’s operating results. Such forward-looking statements include the Company’s current belief that it is taking appropriate steps regarding the pandemic and that students will return from leave of absence and be able to complete their programs of study with in-person labs and available externships and that student growth will continue. 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 including, without limitation, impacts related to the COVID-19 pandemic, our failure to comply with the extensive regulatory framework applicable to our industry or our failure to obtain timely regulatory approvals in connection with acquisitions or a change of control of our Company; 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, such as the 90/10 rule and prescribed 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; the COVID-19 pandemic and its impact on our business and the U.S. and global economics; general economic conditions; and other factors discussed in the “Risk Factors” section of our Annual Reports and Quarterly Reports filed with the Securities and Exchange Commission.  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)

(In Thousands)

*	Includes $11.5 million in Cares Act funds.

As of September 30, 2020, the Company had cash, cash equivalents and restricted cash of $27.6 million, which includes cash received under the CARES Act of $11.5 million.  As of September 30, 2020, the Company had a net cash balance of $9.9 million calculated as cash, cash equivalents and restricted cash, less both the short-term and long-term portion of the Company’s Credit Facility. Excluding cash deposits from the CARES Act of $11.5 million, the Company had a reconciled net debt balance of $1.5 million.  As of September 30, 2020, the Company also can borrow an additional $21.0 million under its Credit Facility.

During the third quarter, the Company paid a $1.1 million cash dividend to its Series A preferred shareholders pursuant to the Securities Purchase Agreement entered into on November 14, 2019 and the Company’s Amended and Restated Certificate of Incorporation.  This dividend covered the period from November 14, 2019 through September 30, 2020.  The Company has the option to pay the preferred stock dividends in cash or through an increase in the stated value of the preferred shares.  The company elected to pay the dividend in cash given its strengthened liquidity position and the significantly higher stock price over the conversion price at the time of the payment.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Following is a reconciliation of net income (loss) to EBITDA, adjusted cash provided by (used in) operating activities, total liquidity, and reconciled net (debt) cash:

 

 

		September 30, 2020
		(Unaudited)
Cash and cash equivalents		$	26,520
CARES Act impact			(10,387	)
Subtotal			16,133
Add: availability under current credit line			21,000
Total liquidity		$	37,133

LINCOLN EDUCATIONAL SERVICES CORPORATION

Brian Meyers, CFO

973-736-9340

EVC GROUP LLC

Investor Relations: Michael Polyviou, Mpolyviou@evcgroup.com 732-933-2755

Media Relations: Tom Gibson, 201-476-0322

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