Lincoln Educational Services Corporation Q3 FY2025 earnings call

• Student start growth of 6% in Q3 exceeded internal forecast, marking 12th consecutive quarter of year-over-year growth.
• Double-digit growth in total student population, total revenue, and consolidated adjusted EBITDA over prior year periods, with declining bad debt levels for third consecutive quarter.
• Opened new campuses in East Point, Georgia, and Houston, Texas, and relocated outdated campuses in Nashville and Philadelphia to state-of-the-art facilities. East Point's start rate exceeded expectations, and Nashville's new campus expanded programs. Levittown and Houston campuses also saw strong starts.
• Expanded growth strategies include new campus in Rowlett, Texas, program expansions at existing campuses, and focus on health care programs to expand beyond LPN to RN degrees. High school share program made progress.
• Committed to investing in people and processes to ensure exceptional learning experience, with strong graduation and employment rates for graduates.

Revenue for the third quarter was $141.4 million, an increase of 25.4%. Student starts for the quarter were approximately 6,400, representing a 6% growth. Transportation and skilled trade programs delivered an 11.8% increase in starts, while health care and other professional programs experienced a 13.7% decline in starts. Revenue per student increased by 4.8%, average student population grew by nearly 20%, and ending population climbed to about 18,200 compared to 15,600 in the prior year.

• Raised full-year 2025 guidance: revenue $505M-$510M, adjusted EBITDA $65M-$67M, net income $17M-$19M, student starts growth 15%-16%, capital expenditures $75M-$80M.
• Expect 2026 adjusted EBITDA to exceed 2025 guidance.
• Project 2027 revenue over $600M and adjusted EBITDA over $90M, achieved organically through existing operations and new campuses.

• Regulatory hurdles in obtaining degree-granting status for health care programs, which could delay expansion plans.
• Market perception issues where the company believes the market doesn't fully understand its potential.

Q: Clarifying questions on 2026 guidance, CapEx, and health care program expansion.

A: Brian and Scott addressed guidance adjustments, CapEx plans, and the timeline/regulatory process for expanding health care programs to RN degrees.

Q: Sense of what drove strong performance, campus-level impact, and East Point expansion.

A: Brian and Scott discussed drivers of performance, campus-level contributions, and the 500-student capacity expansion at East Point.

Q: Health care segment timeline and regulatory perspective for RN programs.

A: Scott explained the multi-state process of becoming degree-granting to offer RN programs, taking 12-48 months depending on state.

Q: 2027 guidance clarification, health care starts growth, and regulatory developments.

A: Scott and Brian clarified 2027 guidance, health care segment growth expectations, and noted no material regulatory disruptions.

Q: Learnings from East Point for new Texas campus, and legacy auto diesel program interest.

A: Scott discussed lessons from East Point on campus size and operational learnings, and ongoing positive growth in skilled trades and other segments.

Q: Average tuition per student growth, and military enrollment.

A: Brian and Scott explained tuition growth factors (pricing, program mix, book/tool timing) and military enrollment details, noting veterans using GI benefits and plans to increase enrollment with degree programs.

Q: Military enrollment details, including active duty and GI bill usage.

A: Scott clarified that military enrollment is ~5%-6% of students, primarily veterans using GI benefits, with plans to increase enrollment with degree programs in certain states.