Lincoln Educational Services Corporation (LINC) is a leading provider of diversified career-oriented post-secondary education, serving recent high school graduates and working adults across the United States. With a rich history dating back to 1946, the company has been at the forefront of equipping students with the skills and training necessary to thrive in in-demand industries.

Company History and Mission

Founded by a U.S. veteran, Lincoln Tech has long held a steadfast commitment to supporting servicemen and women in their career transitions, having graduated thousands of members of the armed forces. This unwavering focus on serving those who have served their country has been a defining characteristic of the company’s ethos since its inception. Over the decades, Lincoln Tech has expanded its reach and diversified its offerings to meet the evolving needs of students and employers alike. The company now operates under various brand names, including Lincoln Technical Institute, Lincoln College of Technology, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts & Sciences, each catering to specific career paths and industries.

Throughout its history, Lincoln has demonstrated remarkable resilience in the face of industry challenges. As a for-profit education provider, the company has successfully navigated regulatory scrutiny and changes to federal student aid programs that have impacted the sector. Lincoln’s ability to adapt to these challenges while maintaining its commitment to quality education has been a key factor in its longevity and success.

Current Operations

Today, Lincoln operates 22 campuses across 13 states, offering programs in skilled trades, automotive technology, healthcare services, hospitality services, and information technology. The company’s diverse portfolio of educational offerings caters to the evolving needs of the modern workforce, providing students with the practical, hands-on training required to excel in a wide range of high-growth fields.

Financials

Lincoln’s financial performance has exhibited impressive resilience and growth. For the fiscal year ended December 31, 2023, the company reported revenue of $378.07 million, net income of $26.00 million, operating cash flow (OCF) of $25.56 million, and free cash flow (FCF) of -$15.14 million.

For the most recent quarter (Q3 2024), Lincoln reported revenue of $114.41 million, representing a 14.8% increase compared to the prior year quarter. Net income for the quarter was $3.95 million, with OCF of $5.61 million and FCF of -$13.76 million. The increase in revenue was primarily driven by a 10.6% increase in average student population, fueled by four consecutive quarters of double-digit start growth. The new East Point, Georgia campus also contributed $3.4 million to the revenue increase.

Operating expenses increased 11.3% over the prior year quarter, mainly due to higher educational services and facilities costs associated with the new campus and program expansions, as well as increased depreciation and marketing expenses. However, educational services and facilities expense as a percentage of revenue decreased from 43.3% to 42.0%, demonstrating operating efficiencies.

Lincoln operates two reportable business segments: Campus Operations and Transitional. The Campus Operations segment, which includes all campuses that are continuing in operation and contribute to Lincoln’s core operations and performance, generated $320.69 million in revenue for the nine months ended September 30, 2024, an increase of 17% compared to the prior year period. This increase was primarily driven by an 11.4% increase in average student population, with four consecutive quarters of double-digit start growth, up 16.6% for the nine-month period. The recently opened East Point, Georgia campus contributed $5.2 million to the revenue increase.

Operating income for the Campus Operations segment increased 40.7% to $36.82 million for the nine months ended September 30, 2024, compared to $26.17 million in the prior year period. This was driven by the revenue growth as well as improvements in educational services and facilities expense as a percentage of revenue, declining from 44.0% to 42.6%. Selling, general and administrative expenses increased 18.2% but remained flat as a percentage of revenue.

The Transitional segment, which refers to campuses that have been marked for closure and are being taught out, had no campuses classified in this segment as of September 30, 2024. The Somerville, Massachusetts campus, which was previously in this segment, was fully taught out as of December 31, 2023.

The Corporate and Other category, which includes unallocated expenses incurred on behalf of the entire company, reported expenses of $32.57 million for the nine months ended September 30, 2024, which included a $2.80 million gain related to insurance proceeds from hail damage at one of the campuses.

Overall, Lincoln’s consolidated revenue increased 16.4% to $320.69 million for the nine months ended September 30, 2024, driven by growth in the Campus Operations segment. The company has continued to invest in new campuses, program expansions, and campus relocations, which has impacted profitability but is expected to support future growth.

Liquidity

As of September 30, 2024, Lincoln had no outstanding debt and maintained a strong liquidity position. The company has a new $40 million revolving credit facility with Fifth Third Bank that matures in 2027. Lincoln reported $54.0 million in cash and cash equivalents as of September 30, 2024.

The company’s current ratio was 1.57 and quick ratio was 1.53 as of September 30, 2024, indicating strong short-term liquidity.

Strategic Initiatives

Innovative Teaching Model

One of the key drivers of Lincoln’s success has been its ability to adapt to shifting market dynamics and student preferences. The company’s recent introduction of its transformative “Lincoln 10.0” hybrid teaching model has been a game-changer, enhancing the student experience, improving instructor effectiveness, and boosting operational efficiency. By the end of 2024, this cutting-edge platform is expected to serve approximately 65% of Lincoln’s student population, with plans to expand it to nursing programs as well.

Campus Expansion

Lincoln’s strategic growth initiatives have also been a hallmark of the company’s performance. The successful launch of the East Point, Georgia campus in 2024, which exceeded internal expectations, has bolstered the company’s confidence in its ability to replicate this model in other high-potential markets. The company is currently in various stages of development for three additional campuses, slated to open in Nashville, Tennessee, Levittown, Pennsylvania, and Houston, Texas by 2025. Additionally, Lincoln is in negotiations to open a new campus on Long Island, New York to serve the greater New York City metropolitan area.

Corporate Partnerships

Furthermore, Lincoln’s robust corporate partnership network has been instrumental in driving its expansion. The company’s five-year, $6 million workforce development agreement with Container Maintenance Corporation is a testament to Lincoln’s ability to forge strategic alliances and leverage its curriculum and training resources to upskill employees at partner facilities. Such innovative collaborations not only bolster Lincoln’s revenue streams but also underscore the trust and value that industry leaders place in the company’s educational offerings.

Regulatory Compliance

Despite the challenges faced by the for-profit education sector, Lincoln has consistently demonstrated its ability to navigate the regulatory landscape. The company’s unwavering commitment to compliance and its focus on delivering high-quality, career-oriented programs have positioned it as a trusted partner for students, employers, and regulatory bodies alike.

Market Demand and Growth

As the nation’s skills gap continues to widen, the demand for Lincoln’s programs remains strong. The company’s robust student start growth, up 21.1% in the third quarter of 2024, underscores the growing appeal of its specialized technical training among recent high school graduates and working adults seeking to acquire in-demand skills.

Future Outlook

Looking ahead, Lincoln’s management team has expressed confidence in the company’s ability to sustain its growth trajectory. The company has raised its full-year 2024 guidance, projecting revenue between $430 million and $435 million, adjusted EBITDA in the range of $41 million to $43 million, adjusted net income between $16 million and $18 million, student start growth of 13% to 15%, and capital expenditures of $50 million to $55 million.

Furthermore, Lincoln has reiterated its long-term 2027 targets of approximately $550 million in revenue and $90 million in adjusted EBITDA, demonstrating the company’s commitment to sustained growth and profitability.

Conclusion

In conclusion, Lincoln Educational Services Corporation’s longstanding history, innovative educational approaches, strategic growth initiatives, and strong industry partnerships have positioned the company as a leading force in the specialized technical training sector. With its robust financial performance, successful campus expansions, and increasing demand for its programs, Lincoln is well-positioned to capitalize on the growing need for skilled workers in the coming years. As the company continues to execute its growth strategy and leverage its operational efficiencies, it is expected to drive continued success and value creation for stakeholders in the years to come.

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