LINCOLN EDUCATIONAL SERVICES CORP (LINC)·Q3 2025 Earnings Summary

Executive Summary

• Strong beat-and-raise quarter: revenue grew 23.6% year over year to $141.4M, driven by 17.2% average student population growth, while adjusted EBITDA rose 65.1% to $16.9M; guidance raised across revenue, adjusted EBITDA, net income and student starts .
• Mix shift toward Transportation & Skilled Trades continued: starts +11.8% in Skilled Trades versus -13.7% in Healthcare & Other Professions, as management rationalizes non-core programs and prepares RN expansion; core LPN/MA grew ~2% .
• Operating leverage improved: educational services & facilities spend fell to 40.5% of revenue from 42.0% despite scaling costs; bad debt declined as a percent of revenue for the third straight quarter under the Lincoln 10.0 hybrid model .
• Catalysts: Raised FY25 outlook (revenue $505–$510M, adj. EBITDA $65–$67M), new Rowlett campus lease (opening 1Q27), Paramus LPN re-enrollment (Jan 2026), and Investor Day set for Mar 19, 2026; long-term targets lifted to >$600M revenue and >$90M adjusted EBITDA by 2027 .

What Went Well and What Went Wrong

What Went Well

• Twelve consecutive quarters of student start growth; Q3 starts beat internal forecasts despite a tough comp, reflecting strong Skilled Trades demand and effective program expansions and replications .
• Operating efficiency gains: instructional leverage from Lincoln 10.0 and improved space utilization drove lower instructional costs as a percent of revenue and supported the adjusted EBITDA step-up .
• Strategic expansion momentum: new Houston campus opened; Levittown relocation completed; lease signed for Rowlett, TX campus (88K sq. ft., capacity >1,600); Hicksville, NY build-out progressing for late 2026 opening .

Key quotes:

• “We have now experienced twelve consecutive quarters of student start growth… total revenue, and consolidated adjusted EBITDA all grew at double-digit rates… As a result, we are, once again, raising our outlook for the full year.” — Scott Shaw, CEO .
• “Adjusted EBITDA grew by 65.1%… highlighting operating leverage generated by Lincoln 10.0 and other initiatives.” — Brian Meyers, CFO .
• “With our updated guidance today… we are raising our 2027 objectives to more than $600 million in revenue and $90 million in adjusted EBITDA.” — Scott Shaw, CEO .

What Went Wrong

• Healthcare and Other Professions starts declined 13.7% as the company exits smaller/non-core programs; healthcare mix remains under review until RN programs can launch (state-by-state approvals could take 12–48 months) .
• SG&A rose $14.5M (+22.8%) y/y due to workforce expansion, incentive comp, and marketing investments; corporate expenses almost doubled to $16.8M, reflecting scale-up costs .
• Capital intensity elevated: YTD capex $68.1M; quarter capex ~$21.7M with cash down to $13.5M and $8.0M revolver outstanding at quarter end (management expects net cash and no debt by year-end given Q4 seasonality) .

Financial Results

Segment breakdown (Q3 YoY):

KPIs:

Non-GAAP adjustments (Q3 2025):

• Adjusted net income $6.338M vs GAAP $3.799M; key adjustments include new campus/relocation costs $2.660M, program expansions $0.964M, and tax effect $(1.088)M .

Guidance Changes

Additional outlook commentary:

• 2026 methodology change: beginning in 2026, adjusted EBITDA will no longer add back pre-opening and net operating losses for new campuses and program expansions; management expects 2026 adjusted EBITDA (under revised method) to exceed FY25 guidance of $65–$67M .
• Long-term targets: >$600M revenue and >$90M adjusted EBITDA by 2027, without ~$10M add-backs previously included in long-term plan .

Earnings Call Themes & Trends

Management Commentary

• Growth strategy: “New campus development has driven about half of our recent start growth… Lincoln 10.0… marketing efforts… generated good, solid organic growth at existing campuses.” — Scott Shaw, CEO .
• 2027 targets increased: “We are increasing our targets… more than $600 million in revenue and over $90 million in adjusted EBITDA by 2027.” — Brian Meyers, CFO .
• Healthcare strategy: “We are pursuing degree-granting approval to offer a registered nurse program… process could take 12–48 months… LPN re-enrollments at Paramus start January 2026.” — Brian Meyers, CFO .
• Expansion execution: “Rowlett will be around 90,000 [sq. ft.]… with 10–12K undeveloped space for future programs… East Point at 700–800 students in 18 months.” — Scott Shaw, CEO .

Q&A Highlights

• Starts and Q4 trajectory: Management clarified Q4 starts growth implied by guidance is ~15–20%, not ~30%; strong interest and new campuses/programs underpin outlook .
• Capacity expansion: East Point addition adds ~500 student capacity, reflecting demand strength and rapid ramp profiles .
• 2026 adjusted EBITDA methodology: Even without add-backs for pre-opening/program losses, 2026 adjusted EBITDA is expected to exceed FY25’s $65–$67M .
• Healthcare outlook: Core LPN/MA grew 2% in Q3; overall healthcare expected to turn positive in 2026 with Paramus LPN re-enrollment and RN expansion workstreams .
• Regulatory backdrop: No known developments expected to derail plans; GI Bill funding flows unaffected for Lincoln’s veteran population (~5–6% of students) .

Estimates Context

Values retrieved from S&P Global*.

Implications:

• The revenue beat and GAAP EPS beat should prompt upward estimate revisions for FY25/FY26 revenues and EPS as management raised guidance and highlighted stronger starts momentum and operating leverage .

Key Takeaways for Investors

• Beat-and-raise quarter with broad-based operational momentum; revenue and adjusted EBITDA outperformed and FY25 guidance increased across key metrics .
• Mix shift toward Skilled Trades accelerates growth and profitability; healthcare headwinds are tactical and likely to abate with Paramus LPN re-enrollment and RN program approvals .
• Operating leverage from Lincoln 10.0 and improved collections underpin margin expansion despite scaling investments; instructional costs as a percent of revenue declined y/y .
• Capital deployment remains heavy near term (new campuses/relocations), but management expects to exit FY25 with no debt and higher net cash, benefiting seasonality in Q4 cash generation .
• Long-term trajectory strengthened: >$600M revenue and >$90M adjusted EBITDA in 2027 without add-backs; rowlett and Hicksville expand presence in under-served markets .
• Near-term trading: Positive setup given revenue/EPS beat, guidance raise, and campus expansion announcements; watch Q4 starts execution and SG&A trajectory.
• Medium-term thesis: Scale benefits, expanding footprint, and high-school pipeline enhance visibility; regulatory path for RN programs is the key gating factor to re-accelerate healthcare contribution .

Appendix: Additional Data Points

• Cash & Liquidity: Cash $13.5M; credit facility availability $52.0M; total liquidity $65.5M; $8.0M revolver outstanding as of 9/30/25 .
• YTD trends: Nine-month revenue $375.4M (+17.1%); adjusted EBITDA $38.1M (+64.9%); net income $7.3M (+138.7%) .
• Segment operating income (YTD): Campus Operations $64.241M (+67.9%); Corporate $(51.664)M; Transitional $(1.434)M (sold 1/1/25) .
• Rowlett campus announcement (11/7/25): 88,000 sq. ft., automotive, welding, electrical, HVAC training; opening 1Q27 pending approvals/build-out .