Lincoln Educational Services Corporation Reports Fourth Quarter and Full Year 2015 Results and Outlook for 2016
Total Company Q4 Revenue of $77.9 million; Total Company Full Year Revenue of$306.1 Million - Q4 Revenue from Continuing Operations of
$48.9 Million ;$193.2 Million for Full Year Total Company Q4 EPS of $0.37; Full Year Net Loss of$0.14 Per Share- Year-End Cash, Cash Equivalents and Restricted Cash of
$61.0 Million vs$42.3 Million as of12/31/14 - Cash Flow from Operations of
$14.3 Million for Full Year Compared to$12.0 Million for 2014 - Q4 2015 Cash Flow from Operations of
$11.8 Million Compared to Q4 2014 of$10.7 Million - Preliminary 2016 Outlook Provided
- Conference Call Today at
10 a.m. ET
“During the fourth quarter, Lincoln made steady progress toward achieving our goal of sustainable profitability while continuing to meet the needs of our students,” said Scott Shaw, President and Chief Executive Officer. “Our team’s execution of our strategic plan led to a second consecutive quarter of operating income from continuing operations. We also exceeded our financial performance guidance for the full year by aggressively reducing costs. Further, the Company is expected to exceed the Department of Education’s (DOE) financial responsibility ratio which stipulates an institution must have a minimum composite score of 1.5 to be considered financially responsible. This improvement in our score should allow us to operate outside of our previously designated parameters of ‘Heightened Cash Monitoring 1’. In addition, the DOE has also released our draft cohort default rates for 2013 which ranged from 9.9% to 15.5%. The draft default rates demonstrate marked improvement over prior years and reflect our focus on higher quality outcomes. In 2015, we continued to implement our plan to divest the Company’s Healthcare and Other Professions segment and focus on the Transportation and Skilled Trades segment. In addition, we continued to build industry partnerships and, during 2015, more than doubled the number of national corporate placement relationships to 17. Despite continuing strong headwinds facing our industry, we are quite confident in our strategy which we expect will allow us to meet the dynamic needs of our students and build shareholder returns.”
FOURTH QUARTER RESULTS (CONTINUING OPERATIONS):
In
Revenue from continuing operations for the fourth quarter was $48.9 million compared with
Operating income for the period was $4.4 million compared with operating income of
The Company’s educational services and facilities expenses from continuing operations decreased during the fourth quarter by 6.5% primarily due to a decrease of instructional expenses and expenses associated with books and tools in each case as a result of lower average student population. Educational services and facilities expenses, as a percentage of revenue, increased to 46.4% from 45.7%. Selling, general and administrative expenses for continuing operations decreased by 10.4% primarily due to a 34.7% decline in Transitional segment due to the closing of these campuses. As a percentage of revenues, selling, general and administrative expense decreased to 41.3% in the fourth quarter of 2015 from 42.4% in the prior year.
The fourth quarter’s net income from continuing operations improved 31.2% to
FOURTH QUARTER SEGMENT FINANCIAL PERFORMANCE
Transportation and Skilled Trades segment revenue for the fourth quarter decreased 5.6% to $46.8 million as compared to
The Transitional segment, consisting of the Fern Park, Florida campus and the
2015 FINANCIAL RESULTS (CONTINUING OPERATIONS)
Revenue was $193.2 million for the year ended December 31, 2015 versus
Operating income for the year was
Operating income excluding the Transitional segment for the year was
Transportation and Skilled Trades segment revenue was $183.8 million for 2015, versus $188.7 million during 2014. As would be expected, Transitional segment revenue was $9.4 million down from $14.2 million in the prior year.
The net loss from continuing operations improved by 81.7% to $2.7 million, or $0.12 per share, compared to
2016 OUTLOOK
“Looking ahead to 2016, we have a number of positive operational developments that we expect will make us a stronger Company in the long term,” continued Mr. Shaw. “First, we will fully exit our Transitional segment campuses and reduce our annual losses incurred by these two campuses by an estimated
“Our Transportation and Skilled Trades segment population started 2016 with approximately 590 fewer students than in the beginning of 2015, leading to a projected decline in 2016 revenue,” continued Mr. Shaw. “Our goal is to finish 2016 with the same student population level as at the beginning of the year. If we are able to achieve our student population goal, we believe that our revenue for the year for the segment will decline by low to mid-single digits compared to 2015’s revenue for continuing operations. In addition, we believe we will generate slightly positive net income for the year from continuing operations excluding our Transitional segment. Our profitability outlook does anticipate recording a one-time non-cash gain in 2016 of approximately
CONFERENCE CALL INFO
Lincoln will host a conference call today at 10:00 a.m. Eastern Time. The conference call can be accessed by going to the IR portion of our website at www.lincolnedu.com. Participants can also listen to the conference call by dialing 877-330-3431 (domestic) or 615-247-5916 (international) and citing code 36913378. Please log in or dial in at least 10 minutes prior to the start time to ensure a connection. 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 36913378.
About Lincoln Educational Services Corporation
Lincoln Educational Services Corporation is a provider of diversified career-oriented post-secondary education. Lincoln offers recent high school graduates and working adults degree and diploma programs. The Company operates under two reportable segments: Transportation and Skilled Trades, and Transitional. Lincoln has provided the workforce with skilled technicians since its inception in 1946.
SAFE HARBOR
Statements in this press release regarding Lincoln’s business that are not historical facts may be “forward-looking statements” that involve risks and uncertainties. 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. 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 in a cost-effective manner or on a timely basis; risks associated with changes in applicable federal laws and regulations, including final rules that took effect during 2011 and other pending rulemaking by the U.S. Department of Education; 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 our annual report on Form 10-K for the year ended December 31, 2014. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in Lincoln’s annual report on Form 10-K for the year ended December 31, 2014. All forward-looking statements are qualified in their entirety by this cautionary statement, and Lincoln undertakes no obligation to revise or update this news release to reflect events or circumstances after the date hereof.
(Tables to Follow)
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
REVENUE | $ | 48,856 | $ | 53,146 | $ | 193,220 | $ | 202,889 | |||||||
COSTS AND EXPENSES: | |||||||||||||||
Educational services and facilities | 22,692 | 24,273 | 92,165 | 100,335 | |||||||||||
Selling, general and administrative | 20,177 | 22,516 | 98,319 | 110,901 | |||||||||||
Loss (Gain) on sale of assets | 1,550 | 3 | 1,742 | (57 | ) | ||||||||||
Impairment of goodwill and long-lived assets | - | 1,521 | 216 | 3,201 | |||||||||||
Total costs & expenses | 44,419 | 48,313 | 192,442 | 214,380 | |||||||||||
OPERATING INCOME (LOSS) | 4,437 | 4,833 | 778 | (11,491 | ) | ||||||||||
OTHER: | |||||||||||||||
Interest income | 12 | - | 52 | 62 | |||||||||||
Interest expense | (2,325 | ) | (1,363 | ) | (7,438 | ) | (5,169 | ) | |||||||
Other income | 3,362 | 149 | 4,142 | 297 | |||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 5,486 | 3,619 | (2,466 | ) | (16,301 | ) | |||||||||
PROVISION (BENEFIT) FOR INCOME TAXES | 92 | (494 | ) | 242 | (1,479 | ) | |||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | 5,394 | 4,113 | (2,708 | ) | (14,822 | ) | |||||||||
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES | 3,163 | 525 | (642 | ) | (41,311 | ) | |||||||||
NET INCOME (LOSS) | $ | 8,557 | $ | 4,638 | $ | (3,350 | ) | $ | (56,133 | ) | |||||
Basic | |||||||||||||||
Earnings (loss) per share from continuing operations | $ | 0.23 | $ | 0.18 | $ | (0.12 | ) | $ | (0.65 | ) | |||||
Earnings (loss) per share from discontinued operations | 0.14 | 0.02 | (0.02 | ) | (1.81 | ) | |||||||||
Net Earnings (loss) per share | $ | 0.37 | $ | 0.20 | $ | (0.14 | ) | $ | (2.46 | ) | |||||
Diluted | |||||||||||||||
Earnings (loss) per share from continuing operations | $ | 0.23 | $ | 0.18 | $ | (0.12 | ) | $ | (0.65 | ) | |||||
Earnings (loss) per share from discontinued operations | 0.14 | 0.02 | (0.02 | ) | (1.81 | ) | |||||||||
Net Earnings (loss) per share | $ | 0.37 | $ | 0.20 | $ | (0.14 | ) | $ | (2.46 | ) | |||||
Weighted average number of common shares outstanding: | |||||||||||||||
Basic | 23,247 | 22,888 | 23,167 | 22,814 | |||||||||||
Diluted | 23,347 | 23,004 | 23,167 | 22,814 | |||||||||||
Other data: | |||||||||||||||
Adjusted EBITDA (1) | $ | 10,955 | $ | 11,174 | $ | 17,056 | $ | 7,310 | |||||||
Depreciation and amortization from continuing operations | $ | 3,156 | $ | 3,683 | $ | 11,920 | $ | 15,303 | |||||||
Number of campuses from continuing operations | 14 | 14 | 14 | 14 | |||||||||||
Average enrollment from continuing operations | 7,548 | 8,321 | 7,553 | 8,132 | |||||||||||
Stock-based compensation | $ | 242 | $ | 109 | $ | 1,127 | $ | 2,621 | |||||||
Net cash provided by operating activities | $ | 11,845 | $ | 10,701 | $ | 14,337 | $ | 12,022 | |||||||
Net cash used in investing activities | $ | (608 | ) | $ | (2,676 | ) | $ | (1,767 | ) | $ | (7,405 | ) | |||
Net cash (used in) provided by financing activities | $ | (5,239 | ) | $ | (8,428 | ) | $ | 13,551 | $ | (5,204 | ) |
Selected Consolidated Balance Sheet Data: | December 31, 2015 | ||
(In thousands) | (Unaudited) | ||
Cash and cash equivalents | $ | 38,420 | |
Restricted cash | $ | 22,621 | |
Current assets | 105,264 | ||
Working capital | 33,818 | ||
Total assets | 210,279 | ||
Current liabilities | 71,446 | ||
Long-term debt and capital lease | 58,224 | ||
obligations, including current portion | |||
Total stockholders' equity | 80,997 |
(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, Adjusted EBITDA and Total Revenue are measurements not recognized in financial statements presented in accordance with accounting principles generally accepted in
Following is a reconciliation of net income (loss) from continuing operations to EBITDA, Adjusted EBITDA and Total Revenue:
Three Months Ended December 31, | Year-Ended December 31, | |||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net income (loss) from continuing operations | $ | 5,394 | $ | 4,113 | $ | (2,708 | ) | $ | (14,822 | ) | ||||||
Interest expense, net | 2,313 | 1,363 | 7,386 | 5,107 | ||||||||||||
Provision (benefit) for income taxes | 92 | 494 | 242 | (1,479 | ) | |||||||||||
Depreciation and amortization | 3,156 | 3,683 | 11,920 | 15,303 | ||||||||||||
EBITDA | 10,955 | 9,653 | 16,840 | 4,109 | ||||||||||||
Impairment of goodwill and long-lived assets | - | 1,521 | 216 | 3,201 | ||||||||||||
Adjusted EBITDA | $ | 10,955 | $ | 11,174 | $ | 17,056 | $ | 7,310 | ||||||||
Three Months Ended December 31, | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Auto | Transitional | Corporate | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Net income (loss) from continuing operations | $ | 8,095 | $ | 9,768 | $ | 1,364 | $ | (2,765 | ) | $ | (4,065 | ) | $ | (2,890 | ) | |||||||||
Interest expense, net | 348 | 336 | 523 | 532 | 1,442 | 495 | ||||||||||||||||||
Provision (benefit) for income taxes | - | - | - | - | 92 | 494 | ||||||||||||||||||
Depreciation and amortization | 2,448 | 2,875 | 482 | 542 | 226 | 266 | ||||||||||||||||||
EBITDA | 10,891 | 12,979 | 2,369 | (1,691 | ) | (2,305 | ) | (1,635 | ) | |||||||||||||||
Impairment of goodwill and long-lived assets | 1,521 | |||||||||||||||||||||||
Adjusted EBITDA | $ | 10,891 | $ | 12,979 | $ | 2,369 | $ | (170 | ) | $ | (2,305 | ) | $ | (1,635 | ) | |||||||||
Year-Ended December 31, | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Auto | Transitional | Corporate | ||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Net income (loss) from continuing operations | $ | 25,264 | $ | 18,278 | $ | (4,924 | ) | $ | (9,476 | ) | $ | (23,048 | ) | $ | (23,624 | ) | ||||||||
Interest expense, net | 1,614 | 1,241 | 2,106 | 2,128 | 3,666 | 1,738 | ||||||||||||||||||
Provision (benefit) for income taxes | - | - | - | - | 242 | (1,479 | ) | |||||||||||||||||
Depreciation and amortization | 9,162 | 12,085 | 1,953 | 2,233 | 805 | 985 | ||||||||||||||||||
EBITDA | 36,040 | 31,604 | (865 | ) | (5,115 | ) | (18,335 | ) | (22,380 | ) | ||||||||||||||
Impairment of goodwill and long-lived assets | 216 | 1,680 | - | 1,521 | - | - | ||||||||||||||||||
Adjusted EBITDA | $ | 36,256 | $ | 33,284 | $ | (865 | ) | $ | (3,594 | ) | $ | (18,335 | ) | $ | (22,380 | ) | ||||||||
Three Months Ended December 31, | Year-Ended December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenue from continuing operations | $ | 48,855 | $ | 53,147 | $ | 193,220 | $ | 202,889 | |||||||
Revenue from discontinued operation | 29,087 | 32,237 | 112,882 | 124,273 | |||||||||||
Total revenue | $ | 77,942 | $ | 85,384 | $ | 306,102 | $ | 327,162 |
REPORTABLE SEGMENT RESULTS (Unaudited):
Year Ended December 31, | |||||||||||
2015 | 2014 | % Change | |||||||||
Revenue: | |||||||||||
Transportation and Skilled Trades | $ | 183,821 | $ | 188,669 | -2.6 | % | |||||
Transitional | 9,399 | 14,220 | -33.9 | % | |||||||
Total | $ | 193,220 | $ | 202,889 | -4.8 | % | |||||
Operating Income (Loss): | |||||||||||
Transportation and Skilled Trades | $ | 26,778 | $ | 19,519 | 37.2 | % | |||||
Transitional | (6,859 | ) | (7,647 | ) | 10.3 | % | |||||
Corporate | (19,141 | ) | (23,363 | ) | 18.1 | % | |||||
Total | $ | 778 | $ | (11,491 | ) | 106.8 | % | ||||
Starts: | |||||||||||
Transportation and Skilled Trades | 7,794 | 8,289 | -6.0 | % | |||||||
Transitional | 224 | 488 | -54.1 | % | |||||||
Total | 8,018 | 8,777 | -8.6 | % | |||||||
Average Population: | |||||||||||
Transportation and Skilled Trades | 7,238 | 7,603 | -4.8 | % | |||||||
Transitional | 315 | 529 | -40.5 | % | |||||||
Total | 7,553 | 8,132 | -7.1 | % | |||||||
End of Period Population: | |||||||||||
Transportation and Skilled Trades | 6,617 | 7,210 | -8.2 | % | |||||||
Transitional | 194 | 418 | -53.6 | % | |||||||
Total | 6,811 | 7,628 | -10.7 | % |
Quarter Ended December 31, | |||||||||||
2015 | 2014 | % Change | |||||||||
Revenue: | |||||||||||
Transportation and Skilled Trades | $ | 46,835 | $ | 49,592 | -5.6 | % | |||||
Transitional | 2,021 | 3,554 | -43.1 | % | |||||||
Total | $ | 48,856 | $ | 53,146 | -8.1 | % | |||||
Operating Income (Loss): | |||||||||||
Transportation and Skilled Trades | $ | 8,443 | $ | 10,104 | -16.4 | % | |||||
Transitional | (1,476 | ) | (2,382 | ) | 38.0 | % | |||||
Corporate | (2,530 | ) | (2,889 | ) | 12.4 | % | |||||
Total | $ | 4,437 | $ | 4,833 | 8.2 | % | |||||
Starts: | |||||||||||
Transportation and Skilled Trades | 919 | 934 | -1.6 | % | |||||||
Transitional | - | 23 | -100.0 | % | |||||||
Total | 919 | 957 | -4.0 | % | |||||||
Average Population: | |||||||||||
Transportation and Skilled Trades | 7,305 | 7,823 | -6.6 | % | |||||||
Transitional | 243 | 498 | -51.2 | % | |||||||
Total | 7,548 | 8,321 | -9.3 | % | |||||||
End of Period Population: | |||||||||||
Transportation and Skilled Trades | 6,617 | 7,210 | -8.2 | % | |||||||
Transitional | 194 | 418 | -53.6 | % | |||||||
Total | 6,811 | 7,628 | -10.7 | % | |||||||
Lincoln Educational Services Corporation Brian Meyers , CFO 973-736-9340EVC Group, Inc. Doug Sherk , dsherk@evcgroup.com; 415-652-9100Chris Dailey , cdailey@evcgroup.com; 646-445-4801Lincoln Educational Services Corporation