Lincoln Educational Services (LINC) Q4 2022 earnings summary

Executive summary

• FY22 revenue rose 3.9% to $348.3M, while operating income fell to $16.3M and net income to $12.6M, reflecting higher costs and a $22.5M sale-leaseback gain in the prior year.

• Graduation rate improved by over 5% and graduate placement exceeded 81%; average enrollment was 12,894, while year-end enrollment was 12,388.

• Priorities include completing the hybrid teaching rollout, centralizing financial aid, replicating programs and opening a second Atlanta campus.

Financial highlights

• Revenue increased 3.9% to $348.3M from $335.3M; average revenue per student rose 3.6%, while average student population was essentially flat YoY.

• Operating income was $16.3M versus $49.3M; net income was $12.6M versus $34.7M, and diluted EPS was $0.36 versus $1.04.

• Adjusted for asset-sale gains and the prior-year impairment, corporate and other expenses were $33.0M versus $36.4M; the prior year included a $22.5M sale-leaseback gain.

• Net cash from operations was $0.9M versus $27.4M; an approximately $8.0M Title IV funding delay was received in January 2023.

Outlook and guidance

• Management expects significantly higher profit margins beginning in 2024 as hybrid teaching, standardized calendars and centralized processes deliver efficiency.

• Adjusted EBITDA is forecast to approximately double from 2022 levels by 2025, supported by demand, program growth and the Atlanta campus.

• 2023 capital expenditures are expected to reach up to $40M, or approximately 11% of revenue, mainly for the Atlanta campus and other growth initiatives.

• Management expects full-year 2023 student starts to grow, despite near-term pressures from low unemployment, higher rates and inflation.