LINCOLN EDUCATIONAL SERVICES CORPORATION 2024 ANNUAL REPORT
NO LIMITS. NO BOUNDARIES.
2024 ANNUAL REPORT
To Our Shareholders,
For the past several years, Lincoln Educational Services Corporation has consistently delivered strong operating
and financial performance by providing high-value training and skills development to students seeking a time-
efficient and cost-effective path to enter the workforce. As a result of this focus, we are meeting the growing
demand for educational alternatives to traditional four-year colleges while also providing employers seeking
solutions to close their workforce’s skills gap with trained and skilled workers.
In 2024, we continued to build on our track record and ended the year well-positioned for both short and long-term growth. Our
financial performance in 2024 was highlighted by a 16.4% year-over-year revenue increase. For the full year, our new student starts grew
by 15.2% to nearly 18,700, and our end-of-year population increased by approximately 1,900 students. Our Adjusted EBITDA grew by
nearly 60% over 2023 levels, and as of year-end, we had approximately $60 million in cash and no debt.
While achieving strong financial performance, we continued to invest in our growth strategies. We completed the first phase of
implementing our Lincoln 10.0 hybrid teaching platform, which provides greater flexibility to our students and improves operational
efficiencies.
Our progress in new campus development and program expansion was another highlight of 2024. In March, we opened our East Point
campus in metropolitan Atlanta, our first greenfield campus in a number of years. This campus has exceeded all expectations, enrolling
more than 700 students and achieving profitability by the third quarter. Their success has reinforced our confidence in the future of our
other planned campuses, with three set to open in 2025.
In Nashville, we relocated our campus to a new, state-of-the-art facility, welcoming our first class in March 2025. The new Nashville
campus, rebranded as NADC (Nashville Auto Diesel College), builds on its historic legacy of serving the automotive and diesel
industries since World War I. The expanded offerings at NADC will include programs in the welding, HVAC, and electrical fields, as
well as a Peterbilt Training Center.
Our new Levittown, Pennsylvania campus, set to replace our Philadelphia facility, is scheduled to open in the second half of 2025. The
new facility will allow Lincoln to introduce three high-demand skilled trades programs that were not feasible at our Philadelphia location
and enable us to serve an expanded student population.
The upcoming Houston campus, anticipated to open in late 2025, will be our second campus in Texas, opening a new market for
Lincoln. This campus will feature an approximately 100,000 square foot training center, offering career opportunities in automotive,
diesel, welding, HVAC and electrical and electronic fields.
In addition, we recently announced plans to develop a new campus in Hicksville, New York. We expect this new campus to complement
our successful Whitestone, Queens campus, just as our East Point campus has benefited our Marietta, Georgia campus since opening in
March 2024. The 65,000 square-foot training center will offer specialized career training in automotive, welding, HVAC and electrical
and electronics fields. The targeted opening for the Hicksville campus is currently set for the end of 2026.
Beyond campus developments, we successfully replicated and expanded five high-demand programs at existing campuses during
2024 and anticipate adding more high-demand programs throughout 2025. On the corporate partnership front, in 2024, we added,
expanded, or renewed relationships with several corporations. As an example, we entered into a 5-year workforce development agreement
with Container Maintenance Corporation (CMC), Inc. to help train CMC technicians.
In 2025, we aim to build further on our excellent operating and financial results by adding new campuses as well as new programs
at existing campuses as noted above, while enhancing efficiencies across the system. With our strong balance sheet and our recently
expanded $60 million credit facility, we have the resources to drive our growth and are well positioned to achieve our objectives of
approximately $550 million in revenue and approximately $90 million in Adjusted EBITDA in 2027.
At Lincoln, we recognize that our success is intrinsically tied to our students’ success. We will continue to advocate for middle-skills
careers, like those we offer, which can lead to rewarding, productive, and fulfilling careers that America needs. I want to thank our
dedicated faculty and staff, who, day in and day out, motivate, educate, and inspire our students to reach their full potential. Finally, I
want to thank our shareholders for their continued support as we strive for even greater returns.
Sincerely,
Scott Shaw
President & Chief Executive Officer
Lincoln Educational Services Corporation
Scott Shaw
President & CEO
_________________________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
________________________________________________________________________________________________________
Commission File Number 000-51371
________________________________________________________________________________________________________
LINCOLN EDUCATIONAL SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey
57-1150621
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
14 Sylvan Way, Suite A
Parsippany, NJ 07054
(Address of principal executive offices)
(973) 736-9340
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol (s)
Name of exchange on which
registered
Common Stock, no par
LINC
The NASDAQ Stock Market LLC
value per share
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously filed financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the 25,958,682 shares of Common Stock held by non-affiliates of the registrant issued and outstanding as of
June 30, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, was $307,869,969. This amount is based on
the closing price of the Common Stock on the Nasdaq Global Select Market of $11.86 per share on that date. Shares of Common Stock held by
executive officers, directors and 10% or greater stockholders have been excluded since such persons may be deemed affiliates. This determination
of affiliate status is not a determination for any other purpose.
The number of shares of the registrant’s Common Stock outstanding as of March 3, 2025 was 31,592,807.
Documents Incorporated by Reference
Certain information required in Part III of this Annual Report on Form 10-K will be included in a definitive proxy statement for the registrant’s
annual meeting of shareholders or an amendment to this Annual Report on Form 10-K, in either case filed with the Commission within 120 days
after December 31, 2024, and is incorporated by reference herein.
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024
PART I.
1
ITEM 1.
BUSINESS
1
ITEM 1A. RISK FACTORS
22
ITEM 1B. UNRESOLVED STAFF COMMENTS
34
ITEM 1C. CYBERSECURITY
34
ITEM 2.
PROPERTIES
36
ITEM 3.
LEGAL PROCEEDINGS
36
ITEM 4.
MINE SAFETY DISCLOSURES
37
PART II.
37
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
37
ITEM 6.
[RESERVED]
40
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
41
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
56
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
57
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
57
ITEM 9A. CONTROLS AND PROCEDURES
57
ITEM 9B. OTHER INFORMATION
57
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
57
PART III.
58
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
58
ITEM 11.
EXECUTIVE COMPENSATION
58
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
58
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
58
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
58
PART IV.
58
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
58
ITEM 16.
FORM 10-K SUMMARY
60
SIGNATURES
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K and the documents incorporated by reference contain “forward-looking statements,” within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which include information relating to future events, future
financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking
statements include, without limitation, statements regarding: proposed new programs; expectations that regulatory developments or other
matters will or will not have a material adverse effect on our consolidated financial position, results of operations or liquidity; statements
concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operating results and future
economic performance; and statements of management’s goals and objectives and other similar expressions concerning matters that are not
historical facts. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,”
“intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking
statements.
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:
•
compliance with the extensive existing regulatory framework applicable to our industry or our failure to timely obtain and
maintain regulatory approvals and accreditation;
•
compliance with continuous changes in applicable federal laws and regulations including pending rulemaking by the U.S.
Department of Education;
•
the effect of current and future Title IV Program regulations arising out of negotiated rulemakings, including any potential
reductions in funding or restrictions on the use of funds received through Title IV Programs;
•
successful updating and expansion of the content of existing programs and developing new programs in a cost-effective manner
or on a timely basis;
•
uncertainties regarding our ability to comply with federal laws and regulations regarding the 90/10 Rule and cohort default rates;
•
successful implementation of our strategic plan;
•
our inability to maintain eligibility for or to process federal student financial assistance;
•
regulatory investigations of, or actions commenced against, us or other companies in our industry;
•
changes in the state regulatory environment or budgetary constraints;
•
enrollment declines;
•
challenges in our students’ ability to find employment as a result of economic conditions;
•
maintenance and expansion of existing industry relationships and develop new industry relationships;
•
a loss of members of our senior management or other key employees;
•
uncertainties associated with opening of new campuses and closing existing campuses;
•
uncertainties associated with integration of acquired schools;
•
industry competition;
•
the effect of any cybersecurity incident;
•
the effect of public health outbreaks, epidemics and pandemics;
•
conditions and trends in our industry;
•
general economic conditions; and
•
other factors discussed under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
Forward-looking statements speak only as of the date the statements are made. Except as required under the federal securities
laws and rules and regulations of the United States Securities and Exchange Commission, we undertake no obligation to update or revise
forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking
information. We caution you not to unduly rely on the forward-looking statements when evaluating the information presented herein.
1
PART I.
ITEM 1.
BUSINESS
Overview
Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”, “we”, “our” and “us”, as applicable) provide
diversified career-oriented postsecondary education to recent high school graduates and working adults. The Company, which currently
operates 21 campuses in 12 states, has entered into leases for two new campuses: one in Houston, Texas, with programs expected to begin
in the second half of 2025, and one in Hicksville, New York, with programs expected to begin by the end of 2026. Lincoln Educational
Services Corporation offers programs in skilled trades (which include Heating Ventilation and Air Conditioning (“HVAC”), welding and
computerized numerical control and electrical and electronic systems technology, among other programs), automotive technology,
healthcare services (which include nursing, dental assistant and medical assistant, among other programs) and hospitality services and
information technology (which include culinary and aesthetics and information technology programs). The schools operate under the
brands Lincoln Technical Institute, Lincoln College of Technology and Nashville Auto Diesel College.
Most of the Company’s campuses serve major metropolitan markets and each typically offers courses in multiple areas of study. Five of
the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The
Company’s other campuses primarily attract students from their local communities and surrounding areas. All of the campuses are
nationally accredited and are eligible to participate in federal financial aid programs administered by the U.S. Department of Education
(the “DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal
student loans as well as other forms of financial aid. The Company was incorporated in New Jersey in 2003 as the successor-in-interest to
various acquired schools including Lincoln Technical Institute, Inc. which opened its first campus in Newark, New Jersey in 1946.
The Company manages its business, evaluates performance and allocates resources based on two reportable business segments, Campus
Operations and Transitional:
Campus Operations - The Campus Operations segment includes campuses that are continuing in operation and contribute to the
Company’s core operations and performance. All of the campuses continuing in operation are classified in this segment. The majority of
the campuses offer programs across various areas of study.
Transitional – The Transitional segment refers to campuses that are marked for closure and are currently being taught-out, in addition to
campuses that are held-for-sale or sold. As of December 31, 2024, the net assets for the Summerlin, Las Vegas campus were classified as
held for sale, with operating results classified within the Transitional segment. The sale of the campus was consummated effective January
1, 2025. In addition, the Company closed the Somerville, Massachusetts campus in the prior year. It was fully taught-out as of December
31, 2023. This campus is classified in the Transitional segment in the prior year’s statement of operations.
As of December 31, 2024, we had 15,138 students enrolled at 21 campuses. Our average enrollment for the fiscal year ended
December 31, 2024 was 14,426 students and our revenues were $440.1 million, which represented an increase of 16.4% over the prior
fiscal year. For more information relating to our revenues, profits and financial condition, please refer to our Consolidated Financial
Statements included in this Annual Report on Form 10-K.
We believe that we provide our students with the highest quality career-oriented training available for our areas of study in our markets
thereby serving students, local employers and their communities. The skills gap continues to expand as talent retires faster than new
employees are hired and as the need for education and training increases in all careers with the accelerating pace of technological change.
We offer programs in areas of study that we believe are typically underserved by traditional providers of postsecondary education and for
which we believe there exists significant demand among students and employers. Furthermore, we believe our convenient class
scheduling, career-focused curricula and emphasis on job placement offer our students valuable advantages that have been previously
unaddressed by the traditional academic sector. By combining virtual training with traditional classroom-based training led by experienced
instructors, we believe we offer our students a unique opportunity to develop practical job skills in many of the key areas of expected job
demand. We believe these job skills enable our students to compete effectively for employment opportunities and to pursue salary and
career advancement.
In the last several years, we have further implemented our plan of improving the student experience by adding program offerings,
enhancing existing program offerings and expanding geographically with new state of the art campuses. See Part II. Item 8. “Financial
Statements and Supplemental Data - Notes to Consolidated Financial Statements – Note 6 Leases and Note 8 Real Estate Transactions.”
2
Business Strategy
We strive to strengthen our position as a leading provider of career-oriented postsecondary education by continuing to pursue the following
strategy:
Increase Operating Efficiency. Our existing schools are a result of strategic acquisitions and expansion, and, while the programs
may be very similar across the campuses, each campus operates on its own calendar. As we move most of our curriculum to a
hybrid teaching model of virtual and traditional classroom-based in-person training, we are taking this opportunity to also
standardize the programs and course calendars so that new students will begin on the same day across all campuses. In addition,
we are removing certain functions from the campuses and centralizing them to remove distractions from the campuses while
creating more efficient and effective services for our students. By simplifying, centralizing and standardizing our operations, we
believe we will improve our margins and be more scalable. We are continuously evaluating our processes and implementing new
technologies to increase efficiency across the organization.
Replicate Programs and Expand Existing Areas of Study. Whenever possible, we seek to replicate programs across our
campuses. Adding proven in-demand programs to an existing campus enables that campus to further serve that market while
increasing the operating efficiency at that campus. In addition, we believe we can leverage our operations to expand our program
offerings in existing areas of study.
Maximize Utilization of Existing Facilities. We are focused on improving capacity utilization of existing facilities through
increased enrollments, the introduction of new programs and relationships with companies in the industry. In addition, we see
opportunities to adjust our real estate needs with the advancement of our hybrid teaching model.
Expand Geographically. We plan to deploy our resources to strengthen our brand, invest in new programs and seek opportunities
to expand our footprint into new markets. We have a solid portfolio of corporate entities requesting that we explore new
geographies to serve them better. Regardless of whether we expand our current campuses to take advantage of the operating
leverage or establish new campuses, our goal is to remain competitive and prudently deploy our resources. Our expansion plans
may be achieved organically through the opening of new campuses with existing resources or through acquisitions. We opened
our first new campus in over a decade in the Atlanta market in the first half of 2024, and we have signed leases for a new campus
in Houston, Texas that we expect to open in the second half of 2025 and for a new campus in Hicksville, New York that we
expect will open by the end of 2026.
Expand Teaching Platform. Using the lessons learned from the COVID-19 pandemic, we expect to continue to transform our in-
person education model to a hybrid teaching model, which we call Lincoln 10.0. The Lincoln 10.0 model provides students with
greater flexibility and convenience, which should help us attract more students. Moreover, we believe blended learning will
create operating efficiencies that will enable us to contain tuition increases over the coming years and thus provide our students
with a higher return on investment in their education in addition to the increased flexibility and convenience. As of December 31,
2024, we have transitioned all of our major programs to the hybrid model, except for our licensed practical nursing program,
which we expect will commence transitioning to the hybrid model in 2026.
Programs and Areas of Study
We structure our program offerings to provide our students with a practical, career-oriented education and position them for attractive
entry-level job opportunities in their chosen fields. Our diploma/certificate programs typically take between 27 to 104 weeks to complete,
with tuition ranging from $14,500 to $42,000. Our associate degree programs typically take between 69 to 94 weeks to complete, with
tuition ranging from $31,000 to $42,000. As of December 31, 2024, all of our schools offer diploma and certificate programs and ten of
our schools are currently approved to offer associate degree programs. In order to accommodate the schedules of our students and
maximize classroom utilization at some of our campuses, we typically offer courses four to five days a week in three shifts per day and
start new classes every month. We update and expand our programs frequently to reflect the latest technological advances in the field,
providing our students with the specific skills and knowledge required in the current marketplace. Classroom instruction combines lectures
and demonstrations by our experienced faculty with comprehensive hands-on laboratory exercises in simulated workplace environments.
3
The following table lists the programs offered as of December 31, 2024:
Area of Study
Associate's Degree
Diploma and Certificate
Skilled Trades
Electrical and Electronic
Systems Technology
Service Management,
HVAC
Electrical & Electronics Systems Technology, Electrician
Training, HVAC, Welding Technology, Welding Fabrication
Technology, Welding and Metal Fabrication Technology,
Welding with Introduction to Pipefitting, CNC Machining and
Manufacturing, Advanced Manufacturing with Robotics
Automotive
Automotive Service
Management, Collision
Repair & Refinishing
Service Management,
Diesel & Truck Service
Management, Heavy
Equipment Maintenance
Service Management
Automotive Technology, Automotive Technology with BMW,
Automotive Technology with Mopar X-Press, Automotive
Technology with Volkswagen, Collision Repair and Refinishing
Technology, Diesel & Truck Technology, Diesel & Truck
Technology with Alternate Fuel Technology, Diesel & Truck
Technology with Transport Refrigeration, Heavy Equipment
Service Technology
Health Sciences & Information
Technology
Medical Assisting
Technology
Medical Assistant, Patient Care Technician, Dental Assistant,
Licensed Practical Nursing, Computer Systems Support
Technician
Current Programs Offered
Skilled Trades. For the year ended December 31, 2024, skilled trades were our largest area of study, representing 45% of our total
average student enrollment. Our skilled trades programs are 32 to 81 weeks in length, with tuition rates ranging from $21,000 to $36,000.
Our skilled trades programs include electrical, heating and air conditioning repair, welding, computerized numerical control and electronic
and electronic systems technology. Graduates of our programs are qualified to obtain entry-level employment positions such as electrician,
CNC machinist, cable installer, welder, wiring and heating, ventilating and air conditioning, or HVAC installer. Our graduates are
employed by a wide variety of employers, including residential and commercial construction, telecommunications installation companies
and architectural firms. As of December 31, 2024, we offered skilled trades programs at 17 campuses.
Automotive Technology. Automotive technology is our second largest area of study, with 29% of our total average student enrollment
for the year ended December 31, 2024. Our automotive technology programs are 52 to 98 weeks in length, with tuition rates ranging from
$27,000 to $42,000. We believe we are a leading provider of automotive technology education in each of our local markets. Graduates of
our programs are qualified to obtain entry-level employment ranging from positions as technicians and mechanics to various apprentice
level positions. Our graduates are employed by a wide variety of companies, ranging from automotive and diesel dealers, to independent
auto body paint and repair shops to trucking and construction companies. As of December 31, 2024, we offered programs in automotive
technology at 13 campuses. Our campuses in East Windsor, Connecticut; Nashville, Tennessee; Grand Prairie, Texas; Indianapolis,
Indiana; and Denver, Colorado are destination campuses, attracting students throughout the United States and, in some cases, from abroad.
Health Sciences & Information Technology. For the year ended December 31, 2024, 26% of our total average student enrollment was in
our health science & information technology programs. Our health science & information technology programs are 27 to 104 weeks in
length, with tuition rates ranging from $15,000 to $33,000. Our health sciences graduates are employed by a wide variety of employers,
including hospitals, laboratories, insurance companies, and doctors' offices. Our IT graduates obtain entry-level positions with both small
and large corporations. As of December 31, 2024, we offered health science programs at 12 of our campuses and IT programs at four
campuses.
Marketing and Student Recruitment
We utilize a variety of marketing and recruiting methods to attract students and increase enrollment. Our marketing and recruiting efforts
are targeted at prospective students who are high school graduates entering the workforce, or who are currently underemployed or
unemployed and require additional training to enter or re-enter the workforce.
Marketing and Advertising. We utilize a fully integrated marketing approach in our lead generation and admissions process that includes
the use of traditional media such as television, radio, billboards, direct mail, a variety of print media and event marketing campaigns
intended to raise brand awareness. In addition, we continually grow and enhance our digital marketing efforts, which include paid search,
paid and organic social media, search engine optimization, online video and display advertising and pay-per-lead channels. These digital
4
channels currently drive the majority of our new student leads and enrollments. Our fully integrated marketing campaigns direct
prospective students to contact us directly or visit our website or other customized landing pages on the internet where they will find
details regarding our programs and campuses and can request additional information regarding the programs that interest
them. Prospective students may also apply for admission online. Our internal systems enable us to closely monitor and track the
effectiveness of each marketing execution on a daily or weekly basis and make adjustments accordingly to enhance our efficiency and
limit our student acquisition costs.
Referrals. Referrals from current students, high school counselors and satisfied graduates and their employers have historically
represented approximately 11.0% of our new student starts. Our school administrators actively work with our current students to
encourage them to recommend our programs to prospective students. We endeavor to build and retain strong relationships with high school
guidance counselors and instructors by offering annual seminars at our training facilities to further familiarize these individuals on the
strengths of our programs.
Recruiting. Our recruiting efforts are conducted by a group of approximately 278 campus-based and field representatives who meet
directly with prospective students during presentations conducted at high schools, in the prospective students’ homes or during their visit
to one of our campuses. We also recruit adult career-seekers or career-changers through our campus-based representatives.
During the fiscal year ended December 31, 2024, we recruited approximately 21% of our students directly out of high school. Field sales
continue to be a large part of our business and developing local community relationships is one of our most important recruiting functions.
Student Admissions, Enrollment and Retention
Admissions. To attend our schools, students must have either a high school diploma or a high school equivalency certificate (or General
Education Development Certificate, GED). In addition, students must complete both an admissions interview and learner assessment. We
take admissions requirements very seriously as they are the best indicators of our students’ likelihood for program success and completion,
leading to successful employment in their chosen industry. The learner assessment is a questionnaire designed to discover challenges and
help us to address them prior to the student attending. While each of our programs has different admissions criteria, we screen all
applications and counsel prospective students on the most appropriate program to increase the likelihood that they complete the requisite
coursework and obtain and sustain employment following graduation.
Enrollment. We enroll students continuously throughout the year, with our largest classes enrolling in late summer or early fall
following high school graduation. As of December 31, 2024, we had 15,138 students enrolled at 21 campuses and our average enrollment
during the fiscal year ended December 31, 2024 was 14,426 students.
Retention. To maximize student retention, the staff at each school is trained to recognize the early warning signs of a potential drop and
to assist and advise students on academic, financial and employment matters. We monitor our retention rates by instructor, course,
program, and campus. When we become aware that a particular instructor or program is experiencing a higher-than-normal dropout rate,
we quickly seek to determine the cause of the problem and attempt to correct it. When we identify that a student is having trouble
academically, we offer tutoring. As we moved to online delivery of instruction, we saw a slight decline in our student retention rate, but we
believe this is temporary and will improve as our faculty becomes better skilled at hybrid teaching. To ensure that this happens, we have
developed online teacher training for all faculty.
Job Placement
We believe that assisting our graduates in securing employment after completing their program of study is critical to our mission as a
postsecondary educational institution as well as to our ability to attract high quality students and enhance our reputation in the industry. In
addition, we believe that high job placement rates result in low student loan default rates, an important requirement for continued
participation in Title IV of the Higher Education Act of 1965, as amended (“Title IV Programs”). See Part I, Item 1. “Business -
Regulatory Environment—Regulation of Federal Student Financial Aid Programs.” Accordingly, we dedicate significant resources to
maintaining an effective graduate placement program. Our non-destination schools work closely with local employers to ensure that we are
training students with skills that local employers seek. Each school has an advisory council comprised of local employers who provide us
with direct feedback on how well we are preparing our students to succeed in the workplace. This enables us to tailor our programs to the
marketplace. The placement staff in each of our destination schools maintains databases of potential employers throughout the country,
allowing us to more effectively assist our graduates in securing employment in their career fields upon graduation. Throughout each year,
we hold numerous job fairs at our facilities where we provide the opportunity for our students to meet and interact with potential
employers. We also assist students with resume writing, interviewing and other job search skills.
In addition, many of our schools have internship programs that provide our students with opportunities to work with potential employers
prior to graduation. For example, some of the students in our automotive programs have the opportunity to complete a portion of their
hands-on training in an actual work environment. Also, some of our students in health sciences programs are required to participate in an
externship program in which they work in the field as part of their career training. Further, we have formed industry relationships with
5
several Fortune 500 companies to assist them with their hiring needs. We provide these companies with various services including
providing graduating student candidates for interviews and providing company-specific training to selected individuals that accelerates
their on-boarding. These industry relationships not only provide our students with career opportunities which may include signing bonuses
and tuition assistance plans, but also benefit Lincoln by sometimes providing equipment donations, scholarships and advice that enables us
to design our curricula to better meet industry needs.
Human Capital Management
Overview
We believe that each of our employees plays an important role in our enterprise. This is particularly true of our faculty. We are focused
on attracting and retaining the highly qualified personnel needed to support our objectives of providing superior education in the programs
that our schools provide.
As of December 31, 2024, we had approximately 2,475 employees, including approximately 600 full-time instructors and approximately
450 part-time instructors, and approximately 1,425 employees serving in various administrative and management positions. We had no
seasonal workers. The number of individuals comprising our workforce increased by approximately 8.0% in the most recently completed
fiscal year.
Staffing Our Schools
Our schools typically are staffed by a school president, a director of career services, a director of education, a director of administrative
services, a director of admissions and a variety of instructors, all of whom are industry professionals with experience in the areas of study
at that particular school.
Our average student to teacher ratio was approximately 16.5 to 1 during the fiscal year ended December 31, 2024.
Equal Opportunity
We strive to create a culture of opportunity and excellence through our human capital management practices. Our recruitment practices
and outreach efforts are designed to maximize the applicant pool to ensure that we are able to hire the most qualified individuals in the
market. The varied perspectives and experiences of our personnel enhance our work. In accordance with our obligations to provide a
discrimination-free and harassment-free workplace, we work hard to ensure equal opportunity in hiring, promotions, training and
development, working conditions and compensation. In addition, the Company has adopted a Human Rights Policy that reflects, among
other things, our commitment to anti-discrimination in hiring and otherwise.
Development, Training and Retention
The Company employs staff to attract and engage talent and applies fully integrated recruiting software to track and manage hiring
processes for our campuses and corporate functions. We hire our faculty in accordance with established criteria, including relevant work
experience, educational background and accreditation and state regulatory standards. We require meaningful industry experience of our
teaching staff to maintain the high quality of instruction in all of our programs that we expect and to address current and industry-specific
issues in our course content. In addition, we provide intensive instructional training and continuing education, including quarterly
instructional development seminars, annual reviews, technical upgrade training, faculty development plans and weekly staff meetings.
The Company acknowledges the importance of managing productivity and efficiency of its workforce. The Company uses current
technology resources for sales and student services tasks, education support, graduate placement services, and internal talent management.
Through the application of these technology tools, productivity data is obtained for key positions and used for process improvement,
training, and evaluative purposes.
The Company recognizes the value to both the Company and our students of employee knowledge and skill development throughout their
careers and of preparing current employees for succession opportunities. Therefore, employees receive position-based training, as well as
online access to a multitude of programs designed to support their effectiveness and growth potential. The Company identifies high-
performing employee participants for acceleration training programs to develop internal candidates for succession opportunities in key
functions.
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Labor Relations
We believe that we have good relationships with all of our employees. At seven of our 21 campuses, the teaching professionals are
represented by various unions. In 2024, the faculty at one of our campuses voted to be represented through collective bargaining.
Approximately 230 employees are now covered by collective bargaining agreements that expire between 2025 and 2027. Those
agreements expiring in the short term, as well as the agreement for the additional campus, are in the process of negotiation. We believe
that we have good relationships with these unions and with the employees covered by these collective bargaining agreements and do not
foresee issues with entering into satisfactory new agreements.
Our Management
We believe that our management team has the experience necessary to effectively implement our growth strategy and continue to drive
positive educational and employment outcomes for our students. For a discussion of the risks relating to the attraction and retention of
management and executive management employees, see Item 1A. “Risk Factors.”
Competition
The for-profit, postsecondary education industry is highly competitive and highly fragmented with no one provider controlling significant
market share. Direct competition between career-oriented schools like ours and traditional four-year colleges or universities is limited.
Thus, our main competitors are other for-profit, career-oriented schools, not-for-profit public schools and private schools, and public and
private two-year junior and community colleges, most of which are eligible to receive funding under the federal programs of student
financial aid authorized by Title IV Programs. Competition is generally based on location, the type of programs offered, the quality of
instruction, placement rates, reputation, recruiting and tuition rates; therefore, our competition is different in each market depending on,
among other things, the availability of other options. Public institutions are generally able to charge lower tuition than our schools, due in
part to government subsidies and other financial sources not available to for-profit schools. In addition, some of our other competitors have
a more extensive network of schools and campuses, which enables them to recruit students more efficiently from a wider geographic area.
Nevertheless, we believe that we are able to compete effectively in our local markets because of the diversity of our program offerings,
quality of instruction, the strength of our brands, our reputation and our graduates’ success in securing employment after completing their
programs of study.
Our competition differs in each market depending on the curriculum that we offer. For example, a school offering automotive technology,
healthcare services and skilled trades programs will have a different group of competitors than a school offering healthcare services and IT
technology programs. Also, because schools can add new programs within six to 12 months, competition can emerge relatively quickly.
Moreover, with online education becoming more prevalent, the number of competitors in each market has increased because students can
now attend classes from an online institution. On average, each of our schools has at least three direct competitors and at least a dozen
indirect competitors.
Environmental Matters
We use limited amounts of hazardous materials at our training facilities and campuses, and generate small quantities of regulated waste
such as used oil, antifreeze, paint and car batteries. As a result, our facilities and operations are subject to a variety of environmental laws
and regulations governing, among other things, the use, storage and disposal of solid and hazardous substances and waste, and the clean-up
of contamination at our facilities or off-site locations to which we send or have sent waste for disposal. We are also required to obtain
permits for our air emissions and to meet operational and maintenance requirements at certain of our campuses. In the event we do not
maintain compliance with any of these laws and regulations, or are responsible for a spill or release of hazardous materials, we could incur
significant costs for cleanup or damages and fines or penalties.
We are committed to sustainability, conserving energy and limiting waste and regularly review our impact on the environment with a view
to improvement. In addition, we have adopted an Environmental Policy reflecting our commitment in this regard.
Regulatory Environment
The education industry is highly regulated by a wide range of federal and state agencies as well as institutional and programmatic
accrediting agencies including the U.S. Department of Education (“DOE”). The vast regulatory schemes to which our industry is subject
cover a significant portion of our operations such as our programs, instructional staff, administrative procedures, marketing and recruiting
efforts, third-party servicers, private loan programs, and facilities, among other things. The various regulatory bodies with oversight over
our business periodically issue new requirements, revise existing requirements, and modify their interpretations of existing requirements.
These regulatory requirements also impact our ability to acquire or open new campuses, change our existing programs and institute new
programs.
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We also are subject to oversight by other federal agencies including the Consumer Financial Protection Bureau (“CFPB”), the Federal
Trade Commission (“FTC”), and the Departments of Veterans Affairs (“VA”) and Defense (“DOD”). We cannot predict how any of the
regulatory requirements to which we are subject will be applied or whether each of our schools will be able to comply with such
requirements in the future.
The various approvals granted by the regulatory entities to which we are subject are what collectively allow our schools to operate and to
participate in a variety of government-sponsored financial aid programs that assist students in paying for their education, the most
significant of which are the federal student aid programs administered by the DOE under the Higher Education Act of 1965, as amended
(the “HEA”). See Part I, Item 1. “Business - Regulatory Environment – State Authorization,” “Regulatory Environment – Accreditation,”
“Regulatory Environment – Regulation of Federal Student Financial Aid Programs,” and “Regulatory Environment – Other Financial
Assistance Programs.” The HEA and the regulations of the DOE specify extensive criteria and numerous standards that we must satisfy in
order to participate in federal financial aid programs under Title IV of the HEA (“Title IV Programs”). Generally, to participate in Title IV
Programs, an institution must be licensed or otherwise legally authorized to operate in the state where it is physically located, be accredited
by an accreditor recognized by the DOE, be certified as an eligible institution by the DOE, offer at least one eligible program of education,
and comply with other statutory and regulatory requirements. Students seeking financial aid under Title IV Programs obtain access to
federal student financial aid through a DOE-prescribed application and eligibility certification. Each of our schools currently participates
in Title IV Programs. For the fiscal year ended December 31, 2024, approximately 82.0% (calculated based on cash receipts) of our
revenues were derived from Title IV Programs. Congress periodically revises the HEA and other laws governing Title IV Programs and
annually determines the funding level for each Title IV Program. Further, the President could issue executive orders or take other actions
and the DOE could establish new regulations that could make it more difficult for our schools to operate and comply with applicable
regulations.
Also, all of our schools are currently offering both online and in-person learning. Accrediting agencies and some state bodies require
schools to obtain approval and meet certain requirements in order to offer programs via distance education in states where the school does
not have a campus. The DOE also generally requires schools that offer a program through distance education to students in a state in
which the school is not physically located to meet the requirements of the state in order to offer programs by distance education in the
state. All of our schools are currently approved to offer both distance and in-person learning by the DOE, ACCSC, and the states in which
they are physically located. In addition, our Indianapolis school is an institutional participant in the National Council for State
Authorization Reciprocity Agreement (“NC-SARA”) which is a voluntary agreement among member states which enables participating
schools who are authorized by the state in which they are physically located to offer distance education in other participating states without
obtaining additional authorization in those states.
State Authorization
To operate and offer postsecondary educational programs and to be certified to participate in Title IV Programs, each of our schools must
be authorized and maintain authorization from the state in which it is physically located. Further, in order for a school to engage in
educational or recruiting activities outside of its state of physical location, the school also may be required to obtain and maintain
authorization from the states in which it is recruiting students or in which its students are receiving online instruction. The level of
regulatory oversight varies substantially from state to state and is extensive in some states. State laws may establish standards for
instruction, qualifications of faculty, location and nature of facilities and equipment, administrative procedures, marketing, recruiting,
student outcomes reporting, disclosure obligations to students, limitations on mandatory arbitration clauses in enrollment agreements,
requirements for distance learning including online and blended courses, financial operations, and other operational matters. Some states
prescribe standards of financial responsibility and mandate that institutions post surety bonds. We have posted surety bonds on behalf of
our schools and education representatives with multiple states in an aggregate amount of approximately $17.0 million. Currently, each of
our schools is authorized by the applicable state education agencies to offer distance and in-person learning in the states in which the
school is physically located and is authorized to recruit students in the states in which it recruits students. Our Indianapolis school also is
an institutional participant in NC-SARA which enables it to offer distance learning to students located in other states. Our other schools
have entered into a consortium agreement with our Indianapolis school that has been approved by ACCSC and applicable state education
agencies and that enables students enrolled in one of the other schools to take courses online through the Indianapolis school.
Some of our educational programs prepare students for occupations that require professional licensure in order to work in the occupation.
These programs are subject to the requirements of state occupational agencies that require our schools that offer the programs to obtain
agency approval of the programs and to comply with the applicable requirements of these boards. For example, each of our schools that
offers a nursing program is required to obtain and periodically renew approvals from the applicable occupational agencies that regulate
these programs in the state in which the schools are physically located. If we fail to maintain our approvals or comply with applicable
requirements, we could lose our authority to offer the impacted programs and could be subject to other sanctions.
The practical nursing program offered at three of our campuses in New Jersey also is subject to the requirements of the New Jersey Board
of Nursing (“NJBON”), a state occupational agency. Among the various requirements applicable to the practical nursing program is the
requirement that at least 75% of the program’s graduates pass the state licensure examination on their first attempt. On July 12, 2024, the
NJBON placed our Paramus, New Jersey campus (the “Paramus campus”) practical nursing program on probation because, for three
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consecutive calendar years, less than 75% of the program’s graduates passed the state licensure examination on their first attempt. The
program also is offered at the Company’s other campuses in Iselin and Moorestown, New Jersey where the licensure pass rate requirement
has been successfully achieved by the graduates of the program at these campuses.
As a result of the probationary status of the Paramus campus program, the Paramus campus was required to submit to the NJBON an 18-
month action plan demonstrating its plan for improving the licensure pass rate to at least 75% in the next calendar year (or within an
extension period if granted by the NJBON). Furthermore, during this probationary period, the NJBON will not allow the Paramus campus
to enroll any new students or accept any transfer students in its practical nursing program. If the program does not achieve the required
licensure pass rate within one calendar year (or within an extension period if granted by the NJBON), the NJBON rules indicate that the
program would not be eligible for restoration to accredited status and, therefore, would lose accreditation permanently for this program.
While the loss of the ability to enroll new students or accept transfer students during the probationary period, or the ultimate loss of
accreditation for the practical nursing program at the Paramus campus (should that occur), would not be expected to be material to the
Company, it could have a negative reputational impact and have an adverse financial impact on the Paramus campus if we are unable to
enroll more students in other existing programs at the Paramus campus and/or to add other programs at this campus. We would expect that
the loss in practical nursing students at this location would be offset, at least in part, by increased enrollments at our Iselin and
Moorestown, New Jersey campuses.
In general, if any of our schools fail to comply with state licensing requirements, they may be subject to the loss of state licensure or
authorization. If any one of our schools lost its authorization from the education agency of the state in which the school is located, or failed
to comply with the DOE’s state authorization requirements, that school would lose its eligibility to participate in Title IV Programs, the
Title IV Program eligibility of its related additional locations could be affected, the impacted schools would be unable to offer its
programs, and we could be forced to close the schools. If one of our schools lost its state authorization from a state other than the state in
which the school is located, the school would not be able to recruit students or to operate in that state.
Accreditation
Accreditation is a non-governmental process through which a school submits to ongoing qualitative and quantitative review by an
organization of peer institutions. Accrediting agencies primarily examine the academic quality of the school’s instructional programs, and
a grant of accreditation is generally viewed as confirmation that the school’s programs meet generally accepted academic standards.
Accrediting agencies also review the administrative and financial operations of the schools they accredit to ensure that each school has the
resources necessary to perform its educational mission.
Accreditation by an accrediting agency recognized by the DOE is required for an institution to be certified to participate in Title IV Programs.
In order to be recognized by the DOE, accrediting agencies must adopt specific standards for their review of educational institutions. As of
December 31, 2024, 21 of our campuses are institutionally accredited by the Accrediting Commission of Career Schools and Colleges (the
“ACCSC”) which is recognized by the DOE.
If the DOE withdraws the recognition of an accrediting agency, the HEA indicates that the DOE may continue the eligibility of qualified
institutions accredited by the accrediting agency for a period of up to 18 months from the date of the withdrawal of the DOE’s recognition
of the accrediting agency. If provided, this period would allow time for institutions to apply for accreditation from another DOE-
recognized accrediting body. The DOE could impose provisional certification status and other conditions and restrictions on such
institutions during this time period. If the DOE declines to continue its recognition of ACCSC and if the subsequent period for obtaining
accreditation from another DOE-recognized accrediting agency lapses before we obtain accreditation from another DOE-recognized
accrediting agency (or if the DOE does not provide such a period for institutions to obtain other accreditation), our schools could lose Title
IV eligibility. On May 25, 2023, the DOE notified ACCSC that it would continue the DOE’s recognition of the agency as a nationally
recognized accreditor for three years.
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The following is a list of the dates on which each campus was accredited by its accrediting commission and the date by which its
accreditation must be renewed.
Accrediting Commission of Career Schools and Colleges Reaccreditation Dates
School
Last Accreditation Letter
Next Accreditation
September 1, 2023
May 1, 2028
August 14, 2024
February 1,2029
October 15, 2020
August 1, 2024
4
November 21, 2024
November 1, 2029
September 6, 2022
February 1, 2026
September 1, 2023
February 1, 2027
May 26, 2022
August 1, 2026
May 23, 2023
January 1, 2027
March 8, 2023
May 1, 2027
May 23, 2023
November 1, 2026
December 1, 2023
January 1, 2028
May 23, 2023
September 1, 2028
November 21, 2024
June 1, 2028
March 13, 2024
February 1, 2028
August 14, 2024
August 1, 2029
May 15, 2018
May 15, 2023
4
May 28, 2024
May 1, 2028
August 14, 2024
May 15, 2028
September 4, 2024
May 1, 2028
May 1, 2022
May 1, 2027
December 20, 2023
December 20, 2025
4
1 Branch campus of main campus in Indianapolis, IN
2 Branch campus of main campus in New Britain, CT
3 Branch campus of main campus in Iselin, NJ
4 Campus going through reaccreditation
Lincoln, RI
3
Marietta, GA
3
East Point, GA
2
Queens, NY
1
East Windsor, CT
2
South Plainfield, NJ
1
Iselin, NJ
Moorestown, NJ
3
Paramus, NJ
3
Shelton, CT
2
Philadelphia, PA
2
Union, NJ
1
Mahwah, NJ
1
Melrose Park, IL
2
Denver, CO
1
Columbia, MD
2
Grand Prairie, TX
1
Allentown, PA
2
Nashville, TN
1
Indianapolis, IN
New Britain, CT
If one of our schools fails to comply with accrediting commission requirements, the institution and its main and/or branch campuses are
subject to the loss of accreditation or may be placed on probation or a special monitoring or reporting status which, if the noncompliance is
not resolved, could result in loss of accreditation or restrictions on the addition of new locations, new programs, or other substantive
changes. If any one of our schools loses its accreditation, students attending that school would no longer be eligible to receive Title IV
Program funding.
Programmatic accreditation is yet another approval necessary in certain circumstances. Specifically, it is the process through which
specific programs are reviewed and approved by industry and program-specific accrediting entities. Although programmatic accreditation
is not generally necessary for Title IV Program eligibility, such accreditation may be required to operate the program in the state, to allow
students to sit for certain licensure exams, or to work in a particular profession or career or to meet other requirements.
Nature of Federal and State Support for Post-Secondary Education
As noted above, the federal government provides a substantial part of the financial support for postsecondary education through Title IV
Programs, in the form of grants and loans to students who can use those funds at any institution that has been certified as eligible by the
DOE. Most aid under Title IV Programs is awarded on the basis of financial need, generally defined as the difference between the cost of
attending the institution and the expected amount a student and his or her family can reasonably contribute to that cost. A recipient of
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Title IV Program funds must maintain a satisfactory grade point average and progress in a timely manner toward completion of his or her
program of study and must meet other applicable eligibility requirements for the receipt of Title IV Program funds. In addition, each
school must ensure that Title IV Program funds are properly accounted for and disbursed in the correct amounts to eligible students and
provide reports on recipient data.
Other Financial Assistance Programs
Some of our students receive financial aid from federal sources other than Title IV Programs, such as programs administered by the VA. In
addition, some states also provide financial aid to our students in the form of grants, loans or scholarships. The eligibility requirements for
state financial aid and these other federal aid programs vary among the funding agencies and by program. States that provide financial aid
to our students are facing significant budgetary constraints and some of them have reduced the level of state financial aid available to our
students. Due to state budgetary shortfalls and constraints in certain states in which we operate, we believe that the overall level of state
financial aid for our students is likely to continue to decrease in the near term, but we cannot predict how significant any such reductions
will be or how long they will last. Federal budgetary shortfalls and constraints, or decisions by federal lawmakers to limit or prohibit
access by our institutions or their students to federal financial aid, could result in a decrease in the level of federal financial aid for our
students.
In fiscal year 2024, we derived approximately 5.5% of our revenues, on a cash basis, from veterans’ benefits programs, which include the
Post-9/11 GI Bill and Veteran Readiness and Employment services. To continue participation in veterans’ benefits programs, an
institution must comply with certain requirements established by the VA, including that the institution must, among other things, report on
the enrollment status of eligible students, maintain student records and make such records available for inspection, follow rules applicable
to the individual benefits programs, comply with rules applicable to distance education and hybrid programs, and comply with applicable
limits on the percentage of students having a portion of their tuition or other institutional charges paid by the school or with certain
veterans’ benefits. If we fail to comply with these or other applicable requirements, we could be subject to liabilities or sanctions
including the loss of eligibility to participate in the programs.
The VA shares responsibility for VA benefit approval and oversight with designated State Approving Agencies (“SAAs”). SAAs play a
critical role in evaluating institutions and their programs to determine if they meet VA benefit eligibility requirements. Processes and
approval criteria, as well as interpretation of applicable requirements, can vary from state to state. Therefore, approval in one state does not
necessarily result in approval in all states. Changes in the applicable statutes, regulations, or appropriations applicable to the programs
could impact our eligibility or funding under the programs.
The VA imposes limitations on the percentage of students per program who have a portion of their tuition or other institutional charges
paid by the school or with certain veterans’ benefits, unless the program qualifies for certain waivers. On January 16, 2024, the VA
published new regulations that, among other things, eliminate certain exceptions from these limitations and changed the criteria for
obtaining a waiver of these rules. The VA simultaneously issued a bulletin delaying the applicability date to one year after the publication
of the regulation to allow institutions to implement any necessary changes in their policies to comply with the new regulations. These new
rules could make it more difficult for our programs to comply with these limitations. If the VA determines that a program is out of
compliance with these limitations, the VA will continue to provide benefits to current students, but new students will not be eligible to use
their veterans’ benefits for an affected program until we demonstrate compliance. Additionally, the VA requires a campus be in operation
for two years in certain cases before it can apply to participate in VA benefit programs. All of our campuses that are currently in operation
are eligible to participate in VA education benefit programs.
During 2012, President Obama signed an Executive Order directing the U.S. Department of Defense (“DOD”), the VA and DOE to
establish “Principles of Excellence” (the “Principles”), based on certain guidelines set forth in the Executive Order, to apply to educational
institutions receiving federal funding for service members, veterans and family members. As requested, we provided written confirmation
of our intent to comply with the Principles to the VA in June 2012. We are required to comply with the Principles to continue recruitment
activities at military installations. Additionally, there is a requirement to execute a memorandum of understanding (“MOU”) with the
DOD as well as with certain individual installations. Each of our institutions has an MOU with the DOD. If our campuses fail to comply
with VA, DOD, SAA, and other requirements applicable to financial aid programs for veterans or active military members, our schools
and students could lose access to this funding or could be subject to restrictions or conditions on ability to receive such funding.
Regulation of Federal Student Financial Aid Programs
As noted above, in order to participate in Title IV Programs, an institution must be authorized to offer its programs by the state education
agencies in the state in which it is physically located, be accredited by an accrediting commission recognized by the DOE and be certified
as eligible by the DOE. The DOE will certify an institution to participate in Title IV Programs only after reviewing and approving the
institution’s application to participate in Title IV Programs. The DOE defines an institution to consist of both a main campus and its
additional locations, if any. Under this definition, for DOE purposes as of December 31, 2024 we had the following three institutions,
collectively consisting of three main campuses and 19 additional locations:
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Main Institution/Campus(es)
Additional Location(s)
Moorestown, NJ
Paramus, NJ
Lincoln, RI
Marietta, GA
Shelton, CT
Philadelphia, PA
East Windsor, CT
Melrose Park, IL
Allentown, PA
Columbia, MD
East Point, GA
Grand Prairie, TX
Nashville, TN
Denver, CO
Union, NJ
Mahwah, NJ
Queens, NY
South Plainfield, NJ
Iselin, NJ
New Britain, CT
Indianapolis, IN
Each institution must periodically apply to the DOE for continued certification to participate in Title IV Programs. The institution also
must apply for recertification when it undergoes a change in ownership resulting in a change of control and may come under DOE review
when it undergoes a substantive change that requires the submission of an application, such as opening an additional location or raising the
highest academic credential it offers. All institutions are recertified on various dates for various periods of time. The following table sets
forth the expiration dates for each of our institutions’ current Title IV Program participation agreements:
Expiration Date of Current
Program Participation
Agreement
December 31, 2024
1
December 31, 2024
1
December 31, 2024
1
1 Provisionally certified and recertification application under review.
Institution
Iselin, NJ
Indianapolis, IN
New Britain, CT
Each of our institutions has submitted an application to the DOE for continued certification to participate in Title IV Programs. The DOE
regulations state that an institution’s existing certification will be extended on a month-to-month basis following the expiration of the
institution’s period of participation until the end of the month in which the DOE issues a decision on the application for a renewal of
certification as long as the institution has submitted a materially complete application by the applicable deadline prior to the expiration
date of its current period of participation. Each of our three institutions submitted a materially complete application prior to the applicable
expiration date. The DOE has confirmed in writing that each institution remains eligible to participate in Title IV Programs while the DOE
reviews its recertification application.
The DOE typically provides provisional certification status to an institution following a change in ownership resulting in a change of
control and also may provisionally certify an institution for other reasons, including, but not limited to, noncompliance with certain
standards of administrative capability and financial responsibility. The DOE provisionally certified all of our institutions based on findings
in recent audits of each institution’s Title IV Program compliance that the DOE alleges identified deficiencies related to DOE regulations
regarding an institution’s level of administrative capability. An institution that is provisionally certified receives fewer due process rights
than those received by other institutions in the event the DOE takes certain adverse actions against the institution, is required to obtain
prior DOE approvals of new campuses and educational programs, and may be subject to heightened scrutiny by the DOE. Provisional
certification status makes it easier for the DOE to revoke or decline to renew our Title IV eligibility if the DOE chooses to take such an
action against us and other provisionally certified for-profit schools without undergoing a formal administrative appeal process. The DOE
could attempt to use an institution’s provisional certification status as a basis for imposing additional conditions or restrictions on the
institution.
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On October 31, 2023, the DOE published final regulations on a variety of topics including, but not limited to, regulations to authorize
additional conditions and restrictions on provisionally certified institutions. See Part I, Item 1. “Business - Regulatory Environment –
Negotiated Rulemaking.” The regulations had a general effective date of July 1, 2024 and expand the grounds for placing institutions on
provisional certification status, expand the types of conditions the DOE may impose on provisionally certified institutions, and expand the
number of requirements contained in the institution’s program participation agreement with the DOE (including, among other
requirements, an obligation to comply with all state laws related to closure).
The final regulations allow the DOE to place institutions on provisional certification status if, among other reasons, the institution does not
meet financial responsibility factors or administrative capability standards, if the institution is required by the DOE to submit a letter of
credit as a result of a mandatory or discretionary triggering event, or if the DOE deems the institution to be at risk of closure. The final
regulations also allow the DOE to determine whether to certify or impose conditions on an institution based on consideration of factors
including, for example, the institution’s withdrawal rate, the amounts the institution spent on recruiting activities, advertising, and other
pre-enrollment activities, and the passage rate for licensure exams for programs that are designed to meet the educational requirements for
a professional license required for employment in an occupation.
The final regulations also expand the types of conditions that the DOE can impose on provisionally certified institutions including, for
example, restrictions on the addition of new programs or locations, restrictions on the rate of growth or new enrollment of students or of
Title IV volume, restrictions on the institution providing a teach-out on behalf of another institution, restrictions on the acquisition of
another participating institution (including financial protection requirements), additional reporting requirements, limitations on entering
into certain written arrangements with institutions or entities for providing part of an educational program, requirements to submit
marketing and recruiting materials to DOE for approval (if the institution is alleged or found to have engaged in substantial
misrepresentations to students, engaged in aggressive recruiting practices, or violated incentive compensation rules), reporting
requirements for institutions that received a government formal inquiry such as a subpoena related to its marketing or recruitment or its
federal financial aid, and other potential conditions imposed by the DOE.
The new regulations increase the possibility that our schools could remain in provisional certification status, be subject to additional
reporting requirements and other conditions and sanctions such as letter of credit requirements and be subject to a potential loss of Title IV
eligibility if our efforts to comply with the new regulations are unsuccessful.
As noted above, the DOE is responsible for overseeing compliance with Title IV Program requirements. As a result, each of our schools is
subject to detailed oversight and review, and must comply with a complex framework of laws and regulations. Additionally, the DOE
periodically revises its regulations and changes its interpretation of existing laws and regulations.
Significant factors relating to Title IV Programs that could adversely affect us include the following:
Congressional and Presidential Action. Political and budgetary concerns significantly affect Title IV Programs. Congress periodically
revises the HEA and other laws governing Title IV Programs. It is not known if or when Congress will pass final legislation that
comprehensively reauthorizes and amends the HEA or other laws affecting U.S. federal student aid.
In addition, Congress reviews and determines federal appropriations for Title IV Programs on an annual basis. Congress can also make
changes in the laws affecting Title IV Programs in the annual appropriations bills and in other laws it enacts between the HEA
reauthorizations such as its recent amendment to the 90/10 rule in the HEA. See Part I, Item 1. “Business - Regulatory Environment –
90/10 Rule.” Similarly, the President could issue executive orders or take other actions and the DOE could establish new regulations or
publish new guidance that could make it more difficult for our schools to operate and comply with applicable regulations. Moreover,
Congress, or the President could take action to downsize or eliminate the DOE or transfer some or all of the authority and responsibilities
of the DOE to another agency. Because a significant percentage of our revenues are derived from Title IV Programs, any action by
Congress, the President or the DOE that significantly reduces Title IV Program funding, that limits or restricts the ability of our schools,
programs, or students to receive funding through the Title IV Programs, or that imposes new restrictions or constraints upon our business
or operations could reduce our student enrollment and our revenues, and could increase our administrative costs and require us to arrange
for alternative sources of financial aid for our students and require us to modify our practices in order for our schools to comply fully with
Title IV Program requirements. Further, current requirements for student or school participation in Title IV Programs may change or one
or more of the present Title IV Programs could be replaced by other programs with materially different student or school eligibility
requirements. The potential for changes related to the DOE or Title IV Programs that may be adverse to us and other for-profit schools like
ours may increase as a result of changes in political leadership. We cannot predict the scope, timing or likelihood of future actions and
changes by Congress, the President or the DOE with respect to the operations and existence of the DOE or the laws and regulations
applicable to and the funding for the Title IV Programs. If we cannot comply with the provisions of the HEA and the regulations of the
DOE as they may be revised or with the terms of an executive order or the Presidential action or if the cost of such compliance is excessive
or if funding is materially reduced or disrupted by changes in Title IV Programs or DOE, our revenues or profit margin could be materially
adversely affected.
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Gainful Employment. On October 10, 2023, the DOE published final new gainful employment and financial value transparency
regulations which had a general effective date of July 1, 2024.
The new regulations establish rules for annually evaluating each of our educational programs based on the calculation of debt-to-earnings
rates (an annual debt-to-earnings rate and a discretionary debt-to-earnings rate) and an earnings premium measure based on an evaluation
of median annual earnings. The DOE will calculate these rates and measures under complex regulatory formulas outlined in the regulations
and using data such as student debt (including not only Title IV loans but also certain private loans and extensions of credit), student
earnings data, and comparative median earnings data for young working adults with only a high school diploma or GED (including state-
by-state annual earnings thresholds for 2024 published by the DOE on December 31, 2024). If one or more of our educational programs
were to yield debt-to-earnings rates or an earnings premium measure that do not comply with regulatory benchmarks for two of three
consecutive years, we would lose Title IV eligibility for each of the impacted educational programs. The regulations will also require us to
provide warnings to current and prospective students for programs in danger of losing of Title IV eligibility (which could deter prospective
students from enrolling and current students from continuing their respective programs). The regulations also include provisions for
providing certifications and reporting data to the DOE and providing required student disclosures related to gainful employment.
The regulations include gainful employment rates and measures that will be based in part on data that is not readily accessible to us and
other institutions, which make it difficult for us to predict with certainty how our educational programs will perform under the new gainful
employment benchmarks and the extent to which certain programs could become ineligible for Title IV participation. The DOE released
performance data at the time it published the proposed regulations that calculates rates for each school’s program while acknowledging
that the methodology used to produce the calculations differs from the methodology in the proposed regulations due to limitations in data
availability. Because we do not have access to all of the data that will ultimately be used under the regulations to evaluate our programs
and the DOE has not made this data available to us, we cannot predict whether, or the extent to which, our programs could fail to comply
with the new gainful employment benchmarks. Moreover, we do not have control over some of the factors that could impact the rates and
measures for our programs which will limit our ability to eliminate or mitigate the impact of the regulations on us and our educational
programs.
The DOE announced at the time it released the final gainful employment regulations that the first official outcome rates would be
published in early 2025 and that programs that fail the gainful employment metric in the first two years the rates are issued would become
ineligible in 2026. However, on February 14, 2025, the DOE announced it had extended the deadline for reporting gainful employment
and financial value transparency data to the DOE to September 30, 2025, and stated it does not plan to produce any gainful employment
and financial value transparency metrics prior to the new September 30, 2025 deadline. Additionally, as part of a consent motion to stay
proceedings in a lawsuit in a federal district court in Texas seeking to stop the implementation of the gainful employment regulations, the
DOE stated it does not expect to issue any gainful employment metrics before the fall of 2025, and stated the new Presidential
administration is evaluating its position regarding the issues in the case. We cannot predict when the DOE will publish the first official
outcome rates or what those rates will be. We also cannot predict the outcome of the pending lawsuit and whether it will result in the delay
or prevention of the implementation of the new gainful employment regulations. The implementation of new gainful employment
regulations could require us to eliminate or modify certain educational programs, could result in the loss of our students’ access to Title IV
Program funds for the affected programs, and could have a significant impact on the rate at which students enroll in our programs and on
our business and results of operations.
Borrower Defense to Repayment Regulations. The DOE’s Borrower Defense to Repayment (“BDR”) regulations establish processes for
borrowers to receive from the DOE a discharge of the obligation to repay certain Title IV Program loans based on certain acts or omissions
by the institution or a covered party. The regulations also establish processes for the DOE to seek recovery from the institution of the
amount of discharged loans.
On November 1, 2022, the DOE published new final BDR regulations with a general effective date of July 1, 2023 that also addressed
other topics. The final regulations are extensive and generally make it easier for borrowers to obtain discharges of student loans and for
the DOE to assess liabilities and other sanctions on institutions based on the loan discharges. The final regulations are currently under an
injunction ordered by the Fifth Circuit Court of Appeals and currently under appeal to the U.S. Supreme Court. Therefore, the challenged
amendments to the BDR regulations that were to take effect on July 1, 2023 are not in effect, but the previous BDR regulations generally
remain in effect in the meantime and apply different substantive standards and procedures based on when a BDR claimant’s loans were
disbursed. We cannot predict the duration of the injunction, the ultimate outcome of the lawsuit, whether the DOE under the new
administration will continue to defend against the lawsuit, or if and when the revised BDR regulations might take effect.
Between April 2021 and February 2024, the Company received three separate notifications from the DOE that the DOE was in receipt of
borrower defense claims containing allegations concerning our schools and requiring that the DOE undertake a fact-finding process
pursuant to DOE regulations. The three separate notifications contained a total of approximately 3,000 borrower defense claims. Among
other things, the communication outlined a process by which the DOE would provide the applications and allow us the opportunity to
submit responses to them. Based upon publicly available information, it appears that the DOE has undertaken similar reviews of other
educational institutions which have also been the subject of various borrower defense applications. We have received the borrower
application claims and have completed the process of thoroughly reviewing and responding to each borrower application as well as
providing information in response to the DOE’s requests.
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In January 2025, the DOE published a press release announcing the discharge of a large number of loans at a large number of schools
which included loans totaling approximately $1.4 million for 280 borrowers who attended our Massachusetts schools between 2010 and
2013. The notice does not acknowledge or evaluate our prior responses to those applications. The DOE may attempt to impose liability on
the Company for reimbursement for the discharged loans. If the DOE seeks reimbursement from us for the discharged loan amounts, we
would consider our options for challenging the legal and factual bases for such actions. In the event that the DOE were to prevail in any
efforts seeking reimbursement for the discharged loans, it could have a material adverse effect on our business and results of operations.
As previously reported, on June 22, 2022, the DOE and the plaintiff student loan borrowers in a class action against the DOE initiated on
June 25, 2019 in the U.S. District Court for the Northern District of California (Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.))
announced a proposed settlement agreement to resolve claims that the DOE had failed to timely decide Borrower Defense to Repayment
applications submitted to the DOE. The proposed settlement included three categories of relief for student loan borrowers. First, the DOE
would agree to discharge loans and refund prior loan payments to the class members with loan debt associated with an institution on the
list included in the proposed settlement (which includes Lincoln institutions). The class action plaintiffs and the DOE stated that the DOE
had determined that attendance at one of the listed institutions justifies presumptive relief allegedly based on strong indicia regarding
substantial misconduct by the institutions, whether credibly alleged or in some instances proven, and the purportedly high rate of class
members with applications related to the listed schools. Second, the proposed settlement included new procedures for the DOE to resolve
pending borrower defense claims associated with other schools not on the list. Third, for any student loan borrower who submitted a
borrower defense application after June 22, 2022 and before the final approval of the settlement, the proposed settlement would require the
DOE to review the applications under the DOE’s 2016 regulatory standards and issue decisions within 36 months, or else the applications
would be discharged in full.
At the time that the class action plaintiffs and the DOE announced the proposed settlement, Lincoln was not a party to the lawsuit and none
of the named plaintiffs had attended a Lincoln institution. In August 2022, Lincoln and three other schools were granted permission to
intervene in the lawsuit to protect their interests in the finalization and implementation of any settlement agreement that the court might
approve. On November 16, 2022, the federal district court approved the settlement as proposed and the DOE began implementing the
settlement relief while Lincoln and other parties appealed the settlement’s final approval to the U.S. Court of Appeals for the Ninth Circuit.
On November 5, 2024, the Ninth Circuit upheld the settlement on appeal. One or more parties are expected to continue to appeal the final
approval of the settlement, but Lincoln does not intend to continue participating in the appeal. See Part I, Item I. “Business – Regulatory
Environment – Borrower Defense to Repayment Regulations.”
The settlement provides automatic debt forgiveness and refunds, or a streamlined review process, for former students of over 150 schools,
including our institutions, who had submitted borrower defense claims or before June 22, 2022. Based upon publicly available information,
approximately 264,000 borrower defense claims associated with all schools were eligible for automatic relief or a streamlined review
process as of June 22, 2022. The settlement also provides a 36-month deadline for the DOE to decide borrower defense claims submitted
between June 23, 2022 and November 16, 2022, the date of the court’s final approval of the settlement, under the DOE’s 2016 regulatory
standards. If the DOE does not decide those claims within 36 months, the applicants will receive automatic debt forgiveness and refunds
without considering the merits of the claims. As a result of publicity about the opportunity afforded by the settlement, approximately
206,000 additional student borrowers submitted 250,000 applications prior to November 16, 2022.
On January 13, 2023, Lincoln appealed the settlement’s final approval to the U.S. Court of Appeals for the Ninth Circuit. Two of the three
other intervener schools also appealed on the same date. The three schools appealing also sought to stay the implementation of the
settlement while their appeals were being decided, but the requested stay was denied by the district court, the Ninth Circuit, and the U.S.
Supreme Court. As a result, the DOE began implementing the settlement relief while the three schools appeal the settlement’s final
approval. The Ninth Circuit issued a panel decision on November 5, 2024, denying the appeal. Although the other appealing schools may
continuing efforts to appeal this matter (including to the U.S. Supreme Court), we do not intend to continue to participate in the appeal
process.
It is not possible at this time to predict whether the settlement will continue to be upheld on appeal, what additional actions the DOE might
take as the settlement continues to be upheld on appeal, or whether the DOE or other agencies might take actions against Lincoln
institutions. Such actions could have a material adverse effect on our business and results of operations.
It also remains unclear what loan discharge applications the DOE may receive and grant in the future and whether the DOE will assert
repayment claims against us. As a result, we are not able to predict the ultimate outcome of the DOE’s review of these applications at this
time. If the DOE disagrees with our legal and factual grounds for contesting the applications, or if the DOE fails to adjudicate the claims
within 36 months, the DOE could discharge the loans associated with the applications and award refunds to student borrowers. We believe
that the DOE already may have discharged loans associated with some of the pending applications, but the DOE has not furnished
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definitive data to us necessary to determine the extent to which applications have been granted. The DOE may attempt to seek recoupment
from applicable schools relating to loan discharges. If the DOE seeks reimbursement from us for the discharged loan amounts in any or all
approved applications, we would consider our options for challenging the legal and factual bases for such actions. We cannot predict the
outcome of any challenges we might make to such actions. In the event that the DOE were to prevail in any efforts seeking
reimbursement for the discharged loans, it could have a material adverse effect on our business and results of operations.
The "90/10 Rule." Under the HEA, a proprietary institution that derives more than 90% of its total revenue from Title IV Programs (its
“90/10 Rule percentage”) for two consecutive fiscal years becomes immediately ineligible to participate in Title IV Programs and may not
reapply for eligibility until the end of at least two fiscal years. An institution with revenues exceeding 90% for a single fiscal year will be
placed in provisional certification status and may be subject to other enforcement measures, including a potential requirement to submit a
letter of credit. See Part I, Item 1. “Business - Regulatory Environment – Financial Responsibility Standards.” If an institution violated
the 90/10 Rule and became ineligible to participate in Title IV Programs but continued to disburse Title IV Program funds, the DOE would
require the institution to repay all Title IV Program funds received by the institution after the effective date of the loss of eligibility. A loss
of eligibility to participate in Title IV Programs for any of our institutions would have a significant impact on the rate at which our students
enroll in our programs and on our business and results of operations.
We have calculated that for the fiscal year ended December 31, 2024, our institutions’ 90/10 Rule percentages ranged from approximately
80% to 84%. For fiscal year 2024, none of our existing institutions derived more than 90% of its revenues from Title IV Programs. Our
calculations are subject to review by the DOE.
In March 2021, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law. Among other provisions, the ARPA includes a
provision that amends the 90/10 Rule by treating other “federal funds that are disbursed or delivered to or on behalf of a student to be used
to attend such institution” in the same way as Title IV Program funds are currently treated in the 90/10 Rule calculation. This means that
our institutions are now required to limit the combined amount of Title IV Program funds and applicable “federal funds” revenue in a
fiscal year to no more than 90% in a fiscal year as calculated under the rule. Consequently, the ARPA change to the 90/10 Rule is expected
to increase the 90/10 Rule calculations at our institutions. The ARPA does not identify the specific federal funding programs that will be
covered by this provision, but it is expected to include funding from federal student aid programs such as the veterans’ benefits programs,
which include the Post-9/11 GI Bill and Veterans Readiness and Employment services, from which we derived approximately 5.5% of our
revenues on a cash basis in fiscal year 2024.
The ARPA states that the amendments to the 90/10 Rule apply to institutional fiscal years beginning on or after January 1, 2023 and are
subject to the HEA’s negotiated rulemaking process. Beginning in January 2022, the DOE convened negotiated rulemaking committee
meetings on a variety of topics including the 90/10 Rule. The committee reached consensus on proposed 90/10 Rule regulations during
meetings in March 2022. On July 28, 2022, the DOE published proposed regulations regarding the 90/10 Rule among other topics. The
DOE published final regulations on October 28, 2022 with a general effective date of July 1, 2023.
The new 90/10 Rule regulations contain several new and amended provisions on a variety of topics including, among other things,
confirming that the rules apply to fiscal years ending on or after January 1, 2023; noting that the DOE plans to identify the types of federal
funds to be included in the 90/10 Rule in a notice in the Federal Register (which the DOE subsequently confirmed in a published notice on
December 21, 2022 includes a wide range of federal student aid programs including VA and DOD programs); requiring institutions to
disburse funds that students are eligible to receive for a fiscal year before the end of the fiscal year rather than delaying disbursements until
a subsequent fiscal year; updating requirements for counting revenues generated from certain educational activities associated with
institutional programs, from certain non-Title IV eligible educational programs, and from institutional aid programs such as institutional
loans, scholarships, and income share agreements; updating technical rules for the 90/10 Rule calculation; including rules for sanctions for
noncompliance with the 90/10 Rule and for required notifications to students and the DOE by the institution of noncompliance with the
90/10 Rule. The new regulations under the 90/10 Rule could have a material adverse effect on us and other schools like ours.
We continue to evaluate the impact of the new 90/10 Rule regulations on our business. We continue to make changes to our operations in
order to address the provisions in the 90/10 Rule and in order to maintain the 90/10 Rule percentages at our institutions below the 90%
threshold as calculated under DOE regulations. However, we do not have significant control over the amount of Title IV Program funds
that our students may receive and borrow. Our institutions’ 90/10 Rule percentages can be increased by increases in Title IV Programs aid
availability (including, for example, increases in Pell Grant funds) and can be decreased by decreases in the availability of state grant
program funding and other sources of student aid that do not count as Title IV Programs funds in the 90/10 Rule calculation. Our
institutions’ 90/10 Rule percentages also will continue to increase when the ARPA amendments to the 90/10 Rule take effect to the extent
that students eligible to receive military and veteran education assistance enroll and use their financial assistance at our institutions. We
cannot be certain that the changes we continue to make to comply with the amended 90/10 Rule will succeed in maintaining our
institutions’ 90/10 Rule percentages below the required levels or that the changes will not materially impact our business operations,
revenues, and operating costs. It also is possible that Congress or the DOE could amend the 90/10 Rule in the future to lower the 90%
threshold, change the calculation methodology, or make other changes to the 90/10 Rule that could make it more difficult for our
institutions to comply with the 90/10 Rule.
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As noted above, if any of our institutions lose eligibility to participate in Title IV Programs, that loss would also adversely affect our
students’ access to various government-sponsored student financial aid programs, and would have a significant impact on the rate at which
our students enroll in our programs and on our business and results of operations.
Student Loan Defaults. The HEA limits participation in Title IV Programs by institutions whose former students defaulted on the
repayment of federally guaranteed or funded student loans above a prescribed rate (the “cohort default rate”). The DOE calculates these
rates based on the number of students who have defaulted, not the dollar amount of such defaults. The cohort default rate is calculated on
a federal fiscal year basis and measures the percentage of students who enter repayment of a loan during the federal fiscal year and default
on the loan on or before the end of the federal fiscal year or the subsequent two federal fiscal years.
Under the HEA, an institution whose Federal Family Education Loan, or FFEL, and Federal Direct Loan, or FDL, cohort default rate is
30% or greater for three consecutive federal fiscal years loses eligibility to participate in the FFEL, FDL, and Pell programs for the
remainder of the federal fiscal year in which the DOE determines that such institution has lost its eligibility and for the two subsequent
federal fiscal years. An institution whose FFEL and FDL cohort default rate for any single federal fiscal year exceeds 40% loses its
eligibility to participate in the FFEL and FDL programs for the remainder of the federal fiscal year in which the DOE determines that such
institution has lost its eligibility and for the two subsequent federal fiscal years. If an institution’s three-year cohort default rate equals or
exceeds 30% in two of the three most recent federal fiscal years for which the DOE has issued cohort default rates, the institution may be
placed on provisional certification status and could be required to submit a letter of credit to the DOE. See Part I, Item 1. “Business -
Regulatory Environment – Financial Responsibility Standards.”
In September 2024, the DOE released the final cohort default rates for the 2021 federal fiscal year. These are the most recent final rates
published by the DOE. The rates for our existing institutions for the 2021 federal fiscal year were zero. None of our institutions had a
cohort default rate equal to or greater than 30% for the 2020 federal fiscal year. The DOE implemented a temporary suspension of
repayment obligations and interest accruals on federal student loans during the COVID-19 pandemic for a period of over three years which
contributed to a substantial reduction in our cohort default rates. We expect borrower defaults to increase during periods after the
expiration of the temporary suspension which we expect will result in higher cohort default rates in the future particularly if borrowers do
not successfully resume timely repayment of their federal student loans. We cannot predict how high our cohort default rates will increase
in the future.
In February 2025, the DOE released draft three-year cohort default rates for the 2022 federal fiscal year. The draft cohort default rates are
subject to change pending receipt of the final cohort default rates, which the DOE is expected to publish in September 2025. The draft
rates for our institutions for the 2022 federal fiscal year were zero.
Financial Responsibility Standards.
All institutions participating in Title IV Programs must satisfy specific standards of financial responsibility. The DOE evaluates
institutions for compliance with these standards each year, based on the institution's annual audited financial statements, as well as
following a change in ownership resulting in a change of control of the institution.
The most significant financial responsibility measurement is the institution's composite score, which is calculated by the DOE based on
three ratios:
the equity ratio, which measures the institution's capital resources, ability to borrow and financial viability;
the primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and
the net income ratio, which measures the institution's ability to operate at a profit.
The DOE assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0
reflecting financial weakness and positive 3.0 reflecting financial strength. The DOE then assigns a weighting percentage to each ratio and
adds the weighted scores for the three ratios together to produce a composite score for the institution. The composite score must be at least
1.5 for the institution to be deemed financially responsible without the need for further oversight.
If an institution's composite score is below 1.5, but is at least 1.0, it is in a category denominated by the DOE as "the zone." Under the
DOE regulations, institutions that are in the zone typically may be permitted by the DOE to continue to participate in the Title IV
Programs by choosing one of two alternatives: 1) the “Zone Alternative” under which an institution is required to make disbursements to
students under the Heightened Cash Monitoring 1 (“HCM1”) payment method, or a different payment method other than the advance
payment method, and to notify the DOE within 10 days after the occurrence of certain oversight and financial events or 2) submit a letter
of credit to the DOE equal to 50 percent of the Title IV Program funds received by the institution during its most recent fiscal year. The
DOE permits an institution to participate under the “Zone Alternative” for a period of up to three consecutive fiscal years. Under the
HCM1 payment method, the institution is required to make Title IV Program disbursements to eligible students and parents before it
requests or receives funds for the amount of those disbursements from the DOE. As long as the student accounts are credited before the
funding requests are initiated, an institution is permitted to draw down funds through the DOE’s electronic system for grants management
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and payments for the amount of disbursements made to eligible students. Unlike the Heightened Cash Monitoring 2 (“HCM2”) and the
reimbursement payment methods, the HCM1 payment method typically does not require schools to submit documentation to the DOE and
wait for DOE approval before drawing down Title IV Program funds. A school under HCM1, HCM2 or reimbursement payment methods
must also pay any credit balances due to a student before drawing down funds for the amount of those disbursements from the DOE, even
if the student or parent provides written authorization for the school to hold the credit balance.
If an institution's composite score is below 1.0, the institution is considered by the DOE to lack financial responsibility. If the DOE
determines that an institution does not satisfy the DOE's financial responsibility standards, depending on its composite score and other
factors, that institution may establish its eligibility to participate in the Title IV Programs on an alternative basis by, among other things:
posting a letter of credit in an amount equal to at least 50% of the total Title IV Program funds received by the institution during
the institution's most recently completed fiscal year; or
posting a letter of credit in an amount equal to at least 10% of the Title IV Program funds received by the institution during its
most recently completed fiscal year accepting provisional certification status; complying with additional DOE monitoring
requirements and agreeing to receive Title IV Program funds under an arrangement other than the DOE's standard advance
funding arrangement.
For the 2024 fiscal year, we calculated our composite score to be 2.5. Composite scores are subject to determination by the DOE based on
its review of our consolidated audited financial statements, but we believe it is likely that the DOE will determine that our institutions
comply with the composite score requirement.
On October 31, 2023, the DOE published final regulations with a general effective date of July 1, 2024, that, among other things, modify
and substantially expand the existing list in the regulations of triggering events that could result in the DOE determining that an institution
lacks financial responsibility and must submit to the DOE a letter of credit or other form of acceptable financial protection and accept other
conditions on the institution’s Title IV Program eligibility. The regulations create lists of mandatory triggering events and discretionary
triggering events.
Examples of mandatory triggering events under the final rules include a lawsuit by a federal or state authority or a qui tam lawsuit in
which the Federal government has intervened, where the suit has been pending for 120 days as measured under the regulation; an action
where the DOE seeks to recover the cost of adjudicated claims in favor of borrowers under the Borrower Defense to Repayment
regulations and the claims would lower the institution’s composite score below 1.0; certain judgments, awards, or settlements in certain
lawsuits, mediations, or administrative or arbitration proceedings; certain withdrawals of owner’s equity including by dividend; gainful
employment issues; accreditor requirements to submit a teach-out plan for reasons related to financial concerns; certain actions taken
against a publicly-traded company or failure to timely file certain annual or quarterly reports; 90/10 Rule issues; cohort default rate issues;
contributions and distributions occurring near the fiscal year end that materially impact the composite score; certain defaults or other
adverse events under a financing arrangement; or certain financial exigencies or receiverships.
Examples of discretionary triggering events under the final regulations include certain accrediting agency actions, certain accreditor
events, fluctuations in Title IV volume, high annual dropout rates, indicators of significant change in the financial condition of the
institution, the formation by DOE of a group process to consider borrower defense claims against the institution, the institution’s
discontinuation of education programs affecting at least 25 percent of enrolled students receiving Title IV funds, the institution’s closure
of locations that enroll more than 25 percent of its students who receive Title IV funds, certain state licensing agency actions, the loss of
institutional or program eligibility in another federal educational assistance program, a requirement to disclose in a public filing that the
company is under investigation for possible violations of law, or if the institution is cited and faces loss of education assistance funds from
another federal agency if it does not comply with agency requirements. The final regulations also establish new rules for evaluating
financial responsibility during a change in ownership.
The final regulations increase the likelihood that the DOE could impose a financial protection requirement and other conditions on us and
our institutions. The final rules require the institution to notify the DOE of a triggering event and provide information demonstrating why
the event does not warrant the submission of a letter of credit or imposition of other requirements. The final rules state that, if the DOE
requires financial protection as a result of more than one mandatory or discretionary trigger, the DOE will require separate financial
protection for each individual trigger, which could substantially increase the amount of financial protection we and other institutions could
be required to provide to the DOE.
The expanded financial responsibility regulations could result in the DOE recalculating and reducing our composite score to account for
DOE estimates of potential losses under one or more of the extensive list of triggering circumstances and also could result in the
imposition of conditions and requirements, including a requirement to provide one or more letters of credit or other forms of financial
protection.
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Return of Title IV Program Funds. An institution participating in Title IV Programs must calculate the amount of unearned Title IV
Program funds that have been disbursed to students who withdraw from their educational programs before completing them, and must
return those unearned funds to the DOE or the applicable lending institution in a timely manner, which is generally within 45 days from
the date the institution determines that the student has withdrawn.
If an institution is cited in an audit or program review for returning Title IV Program funds late for 5% or more of the students in the audit
or program review sample, or if the regulatory auditor identifies a material weakness in the institution’s report on internal controls relating
to the return of unearned Title IV Program funds, the institution may be required to post a letter of credit in favor of the DOE in an amount
equal to 25% of the total amount of Title IV Program funds that should have been returned for students who withdrew in the institution's
prior fiscal year.
On January 11, 2018, the DOE sent letters to our then existing Columbia, Maryland and Iselin, New Jersey institutions requiring each
institution to submit a letter of credit to the DOE based on findings of late returns of Title IV Program funds in the annual Title IV
Program compliance audits submitted to the DOE for the fiscal year ended December 31, 2016. Accordingly, we submitted letters of
credit in the amounts of $0.5 million and $0.1 million to the DOE by the February 23, 2018, deadline and we continue to comply with the
letter of credit requirement. By letter dated February 16, 2021, the DOE notified us that our Columbia and Iselin institutions failed to
comply with the refund requirements based on their 2017, 2018, and 2019 audits. Consequently, the DOE has required us to maintain with
the DOE a letter of credit in the amount of $600,020. The DOE extended the expiration date of this letter of credit until January 31, 2026
based on its conclusion that the compliance audits for the three institutions for 2020 through 2022 contained compliance findings related to
refunds even though many of the audits did not contain late refund findings.
More recently, the DOE commenced a negotiated rulemaking process and conducted meetings from January through March 2024 for a
negotiated rulemaking committee to discuss proposed regulations on a number of topics including plans to amend the regulations on the
requirements for institutions to return unearned Title IV funds to students who withdraw from their educational programs before
completing them. The DOE published final regulations on January 3, 2025 with a general effective date of July 1, 2026 on topics
including, among others, refunds for students who do not begin attendance at the school or who withdraw from school, the requirement to
determine the date a student withdrew from school, the refund calculations for clock hour programs, and the calculation of withdrawal
dates and refunds for programs provided in modules The DOE did not include a proposal regarding attendance requirements for distance
education programs. We are in the process of reviewing these new regulations and their potential impact on our business and results of
operations. See Part I, Item 1. “Business - Regulatory Environment – Negotiated Rulemaking.”
Negotiated Rulemaking. The DOE initiated rulemaking on several topics in January 2022 and, after delaying the process, announced in
January 2023 its intention to reinitiate the rulemaking process on topics including gainful employment, financial responsibility,
administrative capability, certification procedures, ability to benefit, and improving income-driven repayment of loans. On May 19, 2023,
the DOE published a notice of proposed rulemaking in the Federal Register that included proposed regulations on topics including gainful
employment, financial responsibility, administrative capability, certification, and ability to benefit. On October 10, 2023, the DOE
published the final gainful employment regulations which had a general effective date of July 1, 2024. See Part I, Item 1. “Business -
Regulatory Environment – Gainful Employment.” On October 31, 2023, the DOE published final regulations regarding financial
responsibility, administrative capability, certification standards and procedures, and ability to benefit. The regulations had a general
effective date of July 1, 2024. See Part I, Item 1. “Business - Regulatory Environment – Financial Responsibility,” “Regulatory
Environment – Administrative Capability,” and “Regulatory Environment – Regulation of Federal Student Financial Aid Programs.”
The final regulations impose a broad range of additional requirements on institutions and especially on for-profit institutions like our
schools, which increase the possibility that our schools could be subject to additional reporting requirements, potential liabilities and
sanctions, and potential loss of Title IV eligibility if our efforts to modify our operations to comply with the new regulations are
unsuccessful, which could have a significant impact on our business and results of operations.
The DOE also commenced a new negotiated rulemaking process with meetings conducted from January through March 2024 on several
topics including state authorization, accreditation, return of unearned Title IV Program funds for students who withdraw from school
without completing their educational programs, cash management, and distance education. See Part I, Item 1. “Business – Regulatory
Environment – State Authorization,” “Regulatory Environment – Accreditation,” and “Regulatory Environment – Return of Title IV
Program Funds.”
On July 24, 2024, the DOE published a notice of proposed rulemaking on distance education, return of Title IV funds, and other topics.
The DOE published the final rule on January 3, 2025 with a general effective date of July 1, 2026. The distance education rules, among
other changes, add a definition of ‘‘distance education course’’ and require institutions to report information about which Title IV students
are enrolled in distance education courses. The DOE did not move forward with other distance education proposals such as expanding the
definition of additional location to include virtual locations for programs offered entirely online or through correspondence or disallowing
asynchronous distance education in clock hour programs for Title IV purposes. The final regulations also amended certain portions of the
return of Title IV funds regulations. See Part I, Item I. “Business – Regulatory Environment – Return of Title IV Funds.”
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The DOE could issue new regulations and guidance in the future. For example, the DOE previously announced its intention to conduct
negotiated rulemaking at a date to be determined to consider regulations related to third-party servicers on topics including, for example,
the definition of third-party servicers, audit requirements for servicers, an application process for servicers, and reporting, financial, past
performance, and other compliance requirements. The DOE also previously announced that it plans to issue revised guidance on how
institutions of higher education may compensate their recruiters. See Part I, Item 1. “Business - Regulatory Environment – Restrictions on
payment of Commissions, Bonuses and Other Incentive Payments.” We cannot predict the timing and scope of any regulations or
guidance the DOE might issue on these or other topics (or whether the DOE under the new administration will issue such regulations or
guidance), but new regulations or guidance on these or other topics could increase the possibility that our schools could be subject to
additional reporting requirements, to potential liabilities and sanctions such as letter of credit requirements, and to potential loss of Title IV
eligibility if our efforts to modify our operations to comply with any new requirements are unsuccessful which could have a significant
impact on our business and results of operations.
Substantial Misrepresentation. The DOE’s regulations prohibit an institution that participates in Title IV Programs from engaging in
substantial misrepresentation of the nature of its educational programs, financial charges, graduate employability or its relationship with
the DOE. A “misrepresentation” includes any false, erroneous, or misleading statement (whether made in writing, visually, orally, or
through other means) that is made by an eligible institution, by one of its representatives, or by a third party that provides to the institution
educational programs, marketing, advertising, recruiting, or admissions services and that is made to a student, prospective student, any
member of the public, an accrediting or state agency, or to DOE. The DOE defines a “substantial misrepresentation” to include any
misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that
person’s detriment. The definition of “substantial misrepresentation” is broad and, therefore, it is possible that a statement made by the
institution or one of its service providers or representatives could be construed by the DOE to constitute a substantial misrepresentation.
On January 16, 2025, the DOE published guidance reinforcing that the misrepresentation rules apply equally to various types of statements
made by a third-party entity engaged by the institution and their respective employees, contractors, and representatives and that institutions
may be responsible for the consequences of misrepresentation committed by any external service provider that they engage. If the DOE
determines that one of our institutions has engaged in substantial misrepresentation, the DOE may impose sanctions or other conditions
upon the institution including, but not limited to, initiating an action to fine the institution or limit, suspend, or terminate its eligibility to
participate in the Title IV Programs and may seek to discharge students’ loans and impose liabilities upon the institution. The DOE
published final regulations on November 1, 2022 on a variety of topics including, amended and expanded regulations on substantial
misrepresentations. Specifically, the new regulations expand the types of conduct that could result in a discharge of student loans
including: 1) an expanded list of substantial misrepresentations; 2) a new section regarding substantial omissions of fact; 3) breaches of
contract; 4) a new section regarding aggressive and deceptive recruitment; or 5) state or federal judgments or final DOE actions that could
result in a borrower defense claim. Some of these forms of conduct also could result in further scrutiny of marketing and recruiting
practices by institutions like our schools and could increase the chances of the DOE finding practices to be noncompliant and imposing
sanctions based on the alleged noncompliance up to and including fines and potential loss of Title IV eligibility. See Part I, Item 1.
“Business - Regulatory Environment – Borrower Defense to Repayment Regulations.”
In March 2022, the DOE published guidance about the enforcement of the requirements regarding substantial misrepresentations. The
DOE indicated that it is monitoring complaints and Borrower Defense to Repayment applications from veterans, service members, and
their family members who report that personnel and representatives of postsecondary schools suggested during the enrollment process that
their military education benefits would cover all of the costs of their program but were told subsequently they would have to take out
student loans to finish the program. The DOE stated that it would ensure that institutions engaging in misrepresentations are held
accountable if they cause a student to incur extra costs unwittingly or without a full understanding of the implications of borrowing. The
DOE also indicated that such students could be entitled to discharge of their student loans and that it would share information and
complaints about military-connected students with the DOD and VA for potential agency action.
School Acquisitions/Change of Control. When a company acquires a school that is eligible to participate in Title IV Programs, that
school undergoes a change of ownership resulting in a “change of control” as defined by the DOE. Upon such a change of control, a
school's eligibility to participate in Title IV Programs is generally suspended until it has applied for recertification by the DOE as an
eligible school under its new ownership, which requires that the school also re-establish its state authorization and accreditation. Thus, any
plans to expand our business through acquisition of additional schools and have them certified by the DOE to participate in Title IV
Programs must take into account the approval requirements of the DOE and the relevant state education agencies and accrediting
commissions. On October 30, 2022, the DOE published final regulations with a general effective date of July 1, 2023 concerning change
of control which, among other things, expand the requirements applicable to school acquisitions in ways that could make it more difficult
to acquire additional schools.
In addition to school acquisitions, other types of transactions can also cause a change of control. The DOE, most state education agencies
and our accrediting commissions have standards pertaining to the change of control of schools, but these standards are not uniform. DOE
regulations describe some transactions that constitute a change of control, including the transfer of a controlling interest in the voting stock
of an institution or the institution's parent corporation. For a publicly traded corporation, DOE regulations provide that a change of control
occurs in one of two ways: (a) if a person acquires ownership and control of the corporation so that the corporation is required to file a
Current Report on Form 8-K with the Securities and Exchange Commission disclosing the change of control or (b) if the corporation has a
shareholder that owns at least 25% of the total outstanding voting stock of the corporation and is the largest shareholder of the corporation,
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and that shareholder ceases to own at least 25% of such stock or ceases to be the largest shareholder. These standards are subject to
interpretation by the DOE. A significant purchase or disposition of our Common Stock could be determined by the DOE to be a change
of control under this standard.
Most of the states and our accrediting commissions include the sale of a controlling interest of Common Stock in the definition of a change
of control although some agencies could determine that the sale or disposition of a smaller interest would result in a change of control. A
change of control under the definition of one of these agencies would require the affected school to reaffirm its state authorization or
accreditation. Some agencies would require approval prior to a sale or disposition that would result in a change of control in order to
maintain authorization or accreditation. The requirements to obtain such reaffirmation from the states and our accrediting commissions
vary widely.
A change of control could occur as a result of future transactions in which the Company or our schools are involved. Some corporate
reorganizations and some changes in the Board of Directors of the Company are examples of such transactions. Moreover, the potential
adverse effects of a change of control could influence future decisions by us and our shareholders regarding the sale, purchase, transfer,
issuance or redemption of our stock. In addition, the adverse regulatory effect of a change of control also could discourage bids for shares
of our Common Stock and could have an adverse effect on the market price of our shares.
Opening Additional Schools and Adding Educational Programs. For-profit educational institutions must be authorized by their state
education agencies and be fully operational for two years before applying to the DOE to participate in Title IV Programs. However, an
institution that is certified to participate in Title IV Programs may establish an additional location and apply to participate in Title IV
Programs at that location without reference to the two-year requirement, if such additional location satisfies all other applicable DOE
eligibility requirements. Our strategic plans for future expansion are based, in part, on our ability to open new schools as additional
locations of our existing institutions and take into account the applicable approval requirements of the DOE and our other regulatory
agencies.
A student may use Title IV Program funds only to pay the costs associated with enrollment in an eligible educational program offered by
an institution participating in Title IV Programs. Generally, unless otherwise required by the DOE or by DOE regulations, an institution
that is eligible to participate in Title IV Programs may add a new educational program without DOE approval. However, institutions that
are provisionally certified may be required to obtain approval of new educational programs. Our institutions are provisionally certified
and required to obtain prior DOE approval of new locations and of new educational programs. If an institution erroneously determines that
an educational program is eligible for purposes of Title IV Programs, the institution would likely be liable for repayment of Title IV
Program funds provided to students in that educational program. Our expansion plans are based, in part, on our ability to add new
educational programs at our existing schools.
Some of the state education agencies and our accrediting commission also have requirements that may affect our schools' ability to open a
new campus, establish an additional location of an existing institution or begin offering a new educational program. The DOE has
published final regulations that further restrict the ability of some schools – such as schools that are provisionally certified – to add new
locations or educational programs, which could impact our ability to make such changes if we are provisionally certified or subject to other
criteria in the regulations.
Closed School Loan Discharges. The DOE may grant closed school loan discharges of federal student loans based upon applications by
qualified students. The DOE also may initiate discharges on its own for students who have not reenrolled in another Title IV Program
eligible school within three years after the closure and who attended campuses that closed on or after November 1, 2013, as did some of
our former campuses. If the DOE discharges some or all of these loans, the DOE may seek to recover the cost of the loan discharges from
us. As noted above, the DOE published final regulations on November 1, 2022 with a general effective date of July 1, 2023 on a variety of
topics, including closed school loan discharges (and, among other things, the reintroduction of automatic closed school loan discharges),
which would make it easier for borrowers to obtain discharges of their loans and for the DOE to recover liabilities from institutions. As
also noted above, certain borrower defense and closed school loan discharge provisions of the new regulations are currently under an
injunction ordered by the Fifth Circuit Court of Appeals and currently under appeal to the U.S. Supreme Court. Therefore, the challenged
amendments to the BDR and closed school discharge regulations that were to take effect on July 1, 2023 are not in effect, but the previous
BDR and closed school discharge regulations in effect prior to July 1, 2023, generally remain in effect in the meantime. See Part I, Item I.
“Business – Regulatory Environment – Borrower Defense to Repayment.” We cannot predict with certainty any additional closed school
loan discharges that the DOE may approve or the liabilities that the DOE may seek from us for campuses that have closed in the past or
any possible school closures in the future.
Subsequent to the end of the third quarter of 2024, our Board of Directors approved a plan to sell the assets related to the Las Vegas,
Nevada campus operated under Euphoria Institute of Beauty Arts & Sciences (“Euphoria”). The Company entered into a signed agreement
and closed the transaction on January 1, 2025. While the transaction is not material, the transaction will be treated as a school closure by
Lincoln for regulatory purposes. There were approximately 300 students enrolled in programs at Euphoria as of the closing date of the
transaction. Such students are being permitted to transfer to the purchaser-operated school post-closing and continue their programs such
that the sale should not have a significant impact on the student experience.
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The DOE confirmed that the transaction will not be treated as a change in ownership and, instead, will be treated as the closure of
Euphoria and the establishment of a new location by the purchaser at the site of Euphoria. Although the parties continue to work toward
enabling our students at the Las Vegas, Nevada campus at the time of the transaction to complete their programs with the purchaser,
certain current and former students could qualify for closed school loan discharges if they do not continue and complete their programs
and, in turn, the DOE could impose liabilities and other sanctions on us based on any such closed school loan discharges. We cannot
predict at this time the potential amount of any closed school discharge liabilities related to the Euphoria transaction, but we do not expect
the dollar amount of such discharges to have a material adverse effect on our business and results of operations. Also, we will be required
to comply with other DOE, state, and accreditor requirements associated with the transaction, the transfer of the site, and the teaching of
current students.
Administrative Capability. The DOE assesses the administrative capability of each institution that participates in Title IV Programs under
a series of separate standards. Failure to satisfy any of the standards may lead the DOE to find the institution ineligible to participate in
Title IV Programs or to place the institution in provisional certification status as a condition of its participation. These criteria require,
among other things, that the institution:
comply with all applicable federal student financial aid requirements;
have capable and sufficient personnel to administer the federal student Title IV Programs;
administer Title IV Programs with adequate checks and balances in its system of internal controls over financial reporting;
divide the function of authorizing and disbursing or delivering Title IV Program funds so that no office has the responsibility for
both functions;
establish and maintain records required under the Title IV Program regulations;
develop and apply an adequate system to identify and resolve discrepancies in information from sources regarding a student’s
application for financial aid under the Title IV Program;
have acceptable methods of defining and measuring the satisfactory academic progress of its students;
refer to the Office of the Inspector General any credible information indicating that any applicant, student, employee, third party
servicer or other agent of the school has been engaged in any fraud or other illegal conduct involving Title IV Programs;
not be, and not have any principal or affiliate who is, debarred or suspended from federal contracting or engaging in activity that
is cause for debarment or suspension;
provide adequate financial aid counseling to its students;
submit in a timely manner all reports and financial statements required by the Title IV Program regulations; and
not otherwise appear to lack administrative capability.
The DOE has placed all of our institutions in provisional certification status based on findings in recent audits of the institutions’ Title IV
compliance that the DOE alleges identified deficiencies in regulations related to DOE regulations regarding an institution’s level of
administrative capability. See Part I. Item 1. “Business - Regulatory Environment – Regulation of Federal Student Financial Aid
Programs.”
The DOE published final regulations on October 31, 2023 that, among other issues, expand the scope of the administrative capability
regulations to include other requirements (such as, for example, providing adequate financial aid counseling and career services, ensuring
the availability of clinical and externship opportunities, the disbursement of Title IV funds in a timely manner, compliance with high
school diploma requirements, preventing substantial misrepresentations, complying with gainful employment requirements, and avoiding
significant negative actions with a federal, state, or accrediting agency). The regulations had a general effective date of July 1, 2024.
Failure by us to satisfy any of these or other administrative capability criteria could cause our institutions to be subject to sanctions or other
actions by the DOE including the loss of eligibility to participate in Title IV Programs, which would have a significant impact on our
business and results of operations.
Restrictions on Payment of Commissions, Bonuses and Other Incentive Payments. An institution participating in Title IV Programs may
not provide any commission, bonus or other incentive payment based directly or indirectly on success in securing enrollments or financial
aid to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of
Title IV Program funds. The DOE’s regulations established 12 “safe harbors” identifying types of compensation that may be paid without
violating the incentive compensation rule. On October 29, 2010, the DOE adopted final rules that took effect on July 1, 2011 and amended
the incentive compensation rule by, among other things, eliminating the 12 safe harbors (thereby reducing the scope of permissible
compensatory payments under the rule) and expanding the scope of compensatory payments and employees subject to the rule. We cannot
predict how the DOE will interpret and enforce the revised incentive compensation rule and the limited published guidance that the DOE
has provided, nor how it will apply the rule and guidance to our past, present, and future compensation practices, or whether the DOE will
issue new regulations or guidance on the subject. See Part I, Item I. “Business – Regulatory Environment – Negotiated Rulemaking.” The
implementation of the final regulations have required us to change our compensation practices and has had and will continue to have a
significant impact on the productivity of our employees, on the retention of our employees and on our business and results of operations.
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Compliance with Regulatory Standards and Effect of Regulatory Violations. Our schools are subject to audits, program reviews, site
visits, and other reviews by various federal and state regulatory agencies, including, but not limited to, the DOE, the DOE’s Office of
Inspector General (“OIG”), state education agencies and other state regulators, the VA and other federal agencies (such as, for example,
the FTC or the CFPB), and by our accrediting commissions. In addition, each of our institutions must retain an independent certified public
accountant to conduct an annual compliance audit of the institution’s administration of Title IV Program funds. The institution must
submit the resulting annual compliance audit report to the DOE for review. The annual compliance audit reports for our institutions
contain findings on topics that were the subject of findings in prior audits although the amount of questioned funds in the reports are
immaterial. The reoccurrence of findings in our compliance audit reports could result in the DOE initiating an adverse action against one
or more of our institutions. Significant violations of Title IV Program requirements by any of our institutions could become the basis for
the DOE to impose liabilities on us or initiate an adverse action to limit, suspend, terminate, revoke, or decline to renew the participation of
the affected institution in Title IV Programs or to seek civil or criminal penalties. Generally, a termination of Title IV Program eligibility
extends for 18 months before the institution may apply for reinstatement of its participation. Some of the findings in the annual Title IV
Program compliance audits for some of our institutions resulted in the DOE placing those institutions in provisional certification status.
See Part I. Item 1. “Business - Regulatory Environment – Regulation of Federal Student Financial Aid Programs.”
If one of our schools fails to comply with accrediting or state licensing requirements, such school and its main and/or branch campuses
could be subject to the loss of state licensure or accreditation, which in turn could result in a loss of eligibility to participate in Title IV
Programs. If the DOE or another agency determined that one of our institutions improperly disbursed Title IV Program funds or violated a
provision of the HEA or DOE regulations, the institution could be required to repay such funds and related costs to the DOE and lenders,
and could be assessed an administrative fine. The DOE could also place the institution in provisional certification status and/or transfer the
institution to the reimbursement or cash monitoring system of receiving Title IV Program funds, under which an institution must disburse
its own funds to students and document the students' eligibility for Title IV Program funds before receiving such funds from the DOE. See
Part I, Item 1. “Business - Regulatory Environment – Financial Responsibility Standards.”
Consumer Protection Laws and Scrutiny of the For-Profit Postsecondary Education Sector. As a postsecondary educational institution,
we are subject to a broad range of consumer protection and other laws, such as recruiting, marketing, the protection of personal
information, student financing and payment servicing, enforced by federal agencies such as the FTC and CFPB and various state agencies
and state attorneys general. We devote significant effort to complying with state and federal consumer protection laws. In recent years,
Congress, the DOE, state legislatures and regulatory agencies, accrediting agencies, the CFPB, the FTC, the SEC, the Department of
Justice, state attorneys general and the media have scrutinized the for-profit postsecondary education sector. Congressional hearings and
other inquiries have occurred regarding various aspects of the education industry, including issues surrounding student debt as well as
publicly reported student outcomes that may be used as part of an institution’s recruiting and admissions practices, and reports have been
issued that are highly critical of for-profit colleges and universities.
In addition to Title IV Programs and other government-administered programs, all of our schools offer extended financing programs to
their students. This extension of credit helps fill the gap between what the student receives from all financial aid sources and what the
student may need to cover the full cost of his or her education. Students or their parents can apply to a number of different unaffiliated
lenders for this funding at current market interest rates. In such regard, we are required to comply with applicable federal and state laws
related to certain consumer and educational loans and credit extensions, which may be subject to the supervisory authority of the CFPB.
Available Information.
The Company’s website is www.lincolntech.edu. The Company makes available free of charge on its website its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it electronically files such material with, or furnishes it
to, the SEC. Information contained on the Company’s website is not a part of this Annual Report on Form 10-K and is not incorporated
herein by reference.
Item 1A.
RISK FACTORS
The risk factors described below and other information included elsewhere in this Annual Report on Form 10-K are among the numerous
risks faced by our Company and should be carefully considered before deciding to invest in, sell or retain shares of our Common Stock.
These are factors that, individually or in the aggregate, could cause our actual results to differ materially from expected and historical
results and the risks and uncertainties described below are not the only ones we face. Investors should understand that it is not possible to
predict or identify all such risks and, as such, should not consider the following to be a complete discussion of all potential risks and
uncertainties that may affect the Company. Investors should consider carefully the risks and uncertainties described below in addition to
other information contained in this Annual Report on Form 10-K, including our Consolidated Financial Statements and related notes.
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RISKS RELATED TO OUR INDUSTRY
Our failure to comply with the extensive regulatory requirements applicable to our participation in Title IV Programs and our
school operations could result in financial penalties, restrictions on our operations and loss of external financial aid funding, which
could affect our revenues and impose significant operating restrictions upon us.
Our industry is highly regulated by federal and state governmental agencies and by accrediting commissions. The various regulatory
agencies applicable to our business periodically revise their requirements and modify their interpretations of existing requirements and
restrictions. We cannot predict with certainty how any of these regulatory requirements will be applied or whether each of our schools will
be able to comply with such revised requirements in the future. Given the complex nature of the regulations and the fact that they are
subject to interpretation, it is reasonable to conclude that in the conduct of our business, we may inadvertently violate such regulations. In
particular, the HEA and DOE regulations specify extensive criteria and numerous standards that an institution must satisfy to establish to
participate in the Title IV Programs. For a description of these federal, state, and accrediting agency criteria, see Part I, Item 1. “Business -
Regulatory Environment.”
If we are found to have not satisfied the HEA or the DOE's requirements for Title IV Programs funding, one or more of our institutions,
including its additional locations, could be limited in its access to, or lose, Title IV Program funding, which could adversely affect our
revenue, as we received approximately 82% of our revenue (calculated based on cash receipts) from Title IV Programs during the fiscal
year ended December 31, 2024, and have a significant impact on our business and results of operations. If we or any of our schools fail to
comply with applicable federal, state, or accrediting agency requirements, our regulators could take a variety of adverse actions against us,
and our schools could be subject to, among other things, a) the loss of, or placement of material restrictions or conditions on (i) state
licensure or accreditation, (ii) eligibility to participate in and receive funds under the Title IV Programs or other federal or state financial
assistance programs, or (iii) capacity to grant degrees, diplomas and certificates or b) the imposition of liabilities or monetary penalties, or
a requirement to provide a letter of credit or other financial protection, any of which could have a material adverse effect on academic or
operational initiatives, revenues or financial condition, and impose significant operating restrictions upon us. See Part I, Item 1. “Business
– Regulatory Environment – Compliance with Regulatory Standards and Effect of Regulatory Violations” and “Business – Regulatory
Environment – Other Financial Assistance Programs.”
If we fail to demonstrate “administrative capability” to the DOE, our business could suffer.
DOE regulations specify extensive criteria an institution must satisfy to establish that it has the requisite “administrative capability” to
participate in Title IV Programs, and the DOE recently published new regulations that expand the number and scope of these criteria. For a
description of these criteria, see Part I, Item 1. “Business - Regulatory Environment – Administrative Capability.”
If we are found not to have satisfied the DOE’s “administrative capability” requirements, or to have otherwise failed to comply with one or
more DOE requirements, one or more of our institutions and its additional locations could be limited in its access to, or lose, Title IV
Program funding. This could adversely affect our revenue, as we received approximately 82% of our revenue (calculated based on cash
receipts) from Title IV Programs in 2024, which would have a significant impact on our business and results of operations. The DOE has
placed all of our institutions in provisional certification status based on findings in recent audits of the institutions’ Title IV compliance
that the DOE alleges identified deficiencies in regulations related to DOE regulations regarding an institutions’ level of administrative
capability. See Part I, Item 1. “Business - Regulatory Environment – Regulation of Federal Student Financial Aid Programs.”
Congress, the President and the DOE may make changes to the DOE or the laws and regulations applicable to, or reduce funding
for, Title IV Programs, which could reduce our student population, revenues or profit margin.
Congress periodically revises the HEA and other laws governing Title IV Programs and annually determines the funding level for each
Title IV Program. We cannot predict what, if any, legislative or other actions will be taken or proposed by Congress in connection with the
reauthorization of the HEA or other such activities of Congress, although Congress recently made a change to the 90/10 Rule that will
make it harder for schools like ours that are subject to the rule to comply with the rule. See Part I, Item 1. “Business - Regulatory
Environment – Congressional Action.” Similarly, the President could issue executive orders or take other actions and the DOE could
establish new regulations, that could make it more difficult for our schools to operate and comply with applicable regulations. Moreover,
Congress, or the President, could take action to downsize or eliminate the DOE or transfer some or all of the DOE’s authority or
responsibilities to another agency or to the States. Because a significant percentage of our revenues is derived from the Title IV Programs,
any action by Congress, the President, or the DOE that significantly reduces funding for Title IV Programs or that limits the ability of our
schools, programs, or students to receive funding through such programs, that disrupts the operations of such programs, or that imposes
new restrictions upon our business or operations could reduce our student enrollment and our revenues, increase our administrative costs,
require us to arrange for alternative sources of financial aid for our students, and require us to modify our practices in order to fully
comply. In addition, current requirements for Title IV Program participation may change or the present Title IV Programs could be
replaced by other programs with materially different eligibility requirements. The potential for changes to the DOE or the Title IV
Programs that may be adverse to us and other for-profit schools like ours may increase as a result of changes in political leadership. The
DOE continues to engage in a process to establish new regulations that have increased, and will continue to increase, the number and scope
of regulatory requirements applicable to our schools. See Part I, Item 1. “Business – Regulatory Environment – Negotiated Rulemaking.”
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We cannot predict the scope, timing or likelihood of future actions and changes by Congress, the President or the DOE with respect to the
operations or existence of the DOE or the laws and regulations applicable to and the funding for the Title IV Programs. If we cannot
comply with the provisions of the HEA and the regulations of the DOE, as they may be revised, or with the terms of an executive order or
other executive action, or if the cost of such compliance is excessive, or if funding is materially reduced, or if funding is materially reduced
or disrupted by changes to Title IV Programs, our revenues or profit margin could be materially adversely affected.
We could be subject to liabilities, letter of credit requirements, and other sanctions under the DOE’s Borrower Defense to
Repayment regulations.
The DOE’s Borrower Defense to Repayment regulations establish processes for borrowers to receive from the DOE a discharge of the
obligation to repay certain Title IV Program loans based on certain acts or omissions by the institution or a covered party. The regulations
also establish processes for the DOE to seek recovery from the institution of the amount of discharged loans. The regulations regarding
Borrower Defense to Repayment and regarding closed school loan discharges are extensive and generally make it easier for borrowers to
obtain discharges of student loans and for the DOE to assess liabilities and other sanctions on institutions based on the loan discharges.
The implementation and enforcement of these Borrower Defense to Repayment and closed school loan discharge regulations could have a
material adverse effect on our business and results of operations. See Part I, Item 1. “Business - Regulatory Environment – Borrower
Defense to Repayment Regulations” and “Business – Regulatory Environment – Closed School Loan Discharges.”
The U.S. District Court for the Northern District of California (Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.)) has approved a
class action settlement that could result in the granting of all borrower defense applications submitted to the DOE concerning our
institutions and, potentially, could lead to the DOE seeking recoupment from us of all loan amounts in the granted applications.
On June 22, 2022, the DOE and the plaintiff student loan borrowers in a class action against the DOE initiated on June 25, 2019 in the U.S.
District Court for the Northern District of California (Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.)) announced a proposed settlement
agreement to resolve claims that the DOE had failed to timely decide Borrower Defense to Repayment applications submitted to the DOE.
The proposed settlement included three categories of relief for student loan borrowers. First, the DOE would agree to discharge loans and
refund prior loan payments to class members with loan debt associated with an institution on the list included in the settlement (which
includes Lincoln institutions). The class action plaintiffs and the DOE stated that the DOE had determined that attendance at one of the
listed institutions justifies presumptive relief allegedly based on strong indicia regarding substantial misconduct by the institutions,
whether credibly alleged or in some instances proven, and the purportedly high rate of class members with applications related to the listed
schools. Second, the proposed settlement included new procedures for the DOE to resolve pending borrower defense claims associated
with other schools not on the list. Third, for any student loan borrower who submitted a borrower defense application after June 22, 2022
and before the final approval of the settlement, the proposed settlement would require the DOE to review the applications under the DOE’s
2016 regulatory standards and issue decisions within 36 months, or else the applications would be discharged in full. On November 16,
2022, the federal district court approved the settlement as proposed and the DOE began implementing the settlement relief while Lincoln
and other parties appealed the settlement’s final approval to the U.S. Court of Appeals for the Ninth Circuit. On November 5, 2024, the
Ninth Circuit upheld the settlement on appeal. One or more schools are expected to continue to appeal the final approval of the settlement,
but Lincoln does not intend to continue participating in the appeal. As a result of this final approval, the DOE has estimated that
approximately 196,000 student loan borrowers who attended one of the listed schools (including Lincoln institutions) will receive
automatic student loan discharges; that another approximately 100,000 student loan borrowers who attended other schools not on the list
would receive decisions under new procedures; and that approximately 250,000 student loan borrowers who submitted borrower defense
applications between June 22, 2022 and November 16, 2022 would receive decisions under the DOE’s 2016 regulatory standards within 36
months or else receive automatic student loan discharges.
It is not possible at this time to predict whether the settlement will continue to be upheld on appeal, what additional actions the DOE might
take as the settlement continues to be upheld on appeal, or whether the DOE or other agencies might take actions against Lincoln
institutions. Such actions could have a material adverse effect on our business and results of operations. We believe the DOE already may
have discharged some or all of the pending applications. See Part I, Item I. “Business – Regulatory Environment – Borrower Defense to
Repayment Regulations.”
The DOE’s Gainful Employment regulations could have a significant impact on our business and results of operations.
On October 10, 2023, the DOE published final gainful employment and financial value transparency regulations, which had a general
effective date of July 1, 2024 and which establish rules for annually evaluating each of our educational programs based on the calculation
of debt-to-earnings rates (an annual debt-to-earnings rate and a discretionary debt-to-earnings rate) and an earnings premium measure
based on an evaluation of median annual earnings under complex regulatory formulas outlined in the regulations. See Part I, Item 1.
“Business - Regulatory Environment – Gainful Employment.” If one or more of our educational programs were to yield debt-to-earnings
rates or an earnings premium measure that do not comply with regulatory benchmarks for two of three consecutive years, we would lose
Title IV eligibility for each of the impacted educational programs. The regulations will also require us to provide warnings to current and
prospective students for programs in danger of losing of Title IV eligibility (which could deter prospective students from enrolling and
current students from continuing their respective programs). The regulations also include provisions for providing certifications and
reporting data to the DOE and providing required student disclosures related to gainful employment.
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The regulations include gainful employment rates and measures that will be based in part on data that is not readily accessible to us and
other institutions, which make it difficult for us to predict with certainty how our educational programs will perform under the new gainful
employment benchmarks and the extent to which certain programs could become ineligible for Title IV participation. The DOE released
performance data at the time it published the proposed regulations that calculates rates for each school’s program while acknowledging
that the methodology used to produce the calculations differs from the methodology in the proposed regulations due to limitations in data
availability. Because we do not have access to all of the data that will ultimately be used under the regulations to evaluate our programs
and the DOE has not made this data available, we cannot predict whether, or the extent to which, our programs could fail to comply with
the new gainful employment benchmarks. Moreover, we do not have control over some of the factors that could impact the rates and
measures for our programs which will limit our ability to eliminate or mitigate the impact of the regulations on us and our educational
programs. The DOE announced at the time it released the final gainful employment regulations that the first official outcome rates will be
published in early 2025 and that programs that fail the same gainful employment metric in the first two years the rates are issued will
become ineligible in 2026
The implementation of new gainful employment regulations could require us to eliminate or modify certain educational programs, could
result in the loss of our students’ access to Title IV Program funds for the affected programs, and could have a significant impact on the
rate at which students enroll in our programs and on our business and results of operations.
The DOE has changed its regulations, and may make other changes in the future, in a manner which could require us to incur
additional costs in connection with our administration of Title IV Programs, affect our ability to remain eligible to participate in
Title IV Programs, impose restrictions on our participation in Title IV Programs, affect the rate at which students enroll in our
programs, or otherwise have a significant impact on our business and results of operations.
The DOE periodically issues new regulations and guidance that can have an adverse effect on our institutions. We cannot predict the
timing and content of any new regulations or guidance that the DOE may seek to impose or whether and to what extent the DOE may issue
new regulations and guidance that could adversely impact for-profit schools including our institutions. The DOE recently published new
regulations on a variety of topics with a general effective date of July 1, 2024 and other regulations with a general effective date of July 1,
2026 and could engage in additional rulemaking processes in the future that could result in new regulations that could adversely impact
institutions including our institutions. See Part I, Item 1. “Business – Regulatory Environment – Negotiated Rulemaking.”
If we cannot comply with the provisions of these or other regulations, as they currently exist or may be revised, or if the cost of such
compliance is excessive, or if funding is materially reduced, our revenues or profit margin could be materially adversely affected.
We cannot predict how the DOE would interpret and enforce current or future regulations or how these regulations, or any regulations that
may arise out of a negotiated rulemaking process or any other regulations that DOE may promulgate, may impact our schools’
participation in Title IV Programs; however, current or future regulations could have a material adverse effect on our schools’ business and
results of operations, and the broad sweep of the recent rules and the rules that the DOE is currently developing may, in the future, require
our schools to submit a letter of credit based on expanded standards of financial responsibility.
If we or our eligible institutions do not meet the financial responsibility standards prescribed by the DOE, we may be required to
post letters of credit or our eligibility to participate in Title IV Programs could be terminated or limited, which could significantly
reduce our student population and revenues.
To participate in Title IV Programs, an eligible institution must satisfy specific measures of financial responsibility prescribed by the DOE
or post a letter of credit in favor of the DOE and possibly accept other conditions on its participation in Title IV Programs. The DOE
published new regulations that established expanded standards of financial responsibility, which could result in a requirement that we
submit to the DOE a substantial letter of credit or other form of financial protection in an amount determined by the DOE, and be subject
to other conditions and requirements, based on any one of an extensive list of triggering circumstances. See Part I, Item 1. “Business -
Regulatory Environment – Financial Responsibility Standards.” Any obligation to post one or more letters of credit would increase our
costs of regulatory compliance. Our inability to obtain a required letter of credit or limitations on, or termination or revocation of, our
participation in Title IV Programs could limit our students’ access to various government-sponsored student financial aid programs, which
could significantly reduce our student population and revenues.
We are subject to fines and other sanctions if we make incentive payments to individuals involved in certain recruiting, admissions
or financial aid activities, which could increase our cost of regulatory compliance and adversely affect our results of operations.
An institution participating in Title IV Programs may not provide any commission, bonus or other incentive payment based directly or
indirectly on success in enrolling students or securing financial aid to any person involved in any student recruiting or admission activities
or in making decisions regarding the awarding of Title IV Program funds. See Part I, Item 1. “Business - Regulatory Environment --
Restrictions on Payment of Commissions, Bonuses and Other Incentive Payments.” We cannot predict how the DOE will interpret and
enforce the incentive compensation rule and the limited published guidance that the DOE has provided, nor how it will apply the rule and
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guidance to our past, present, and future compensation practices. These regulations have had and may continue to have a significant
impact on the rate at which students enroll in our programs and on our business and results of operations. If we are found to have violated
this law, we could be fined or otherwise sanctioned by the DOE or we could face litigation filed under the qui tam provisions of the
Federal False Claims Act.
If our schools do not maintain their state licensure and accreditation, they may not participate in Title IV Programs, which could
adversely affect our student population and revenues.
An institution must be accredited by an accrediting commission recognized by the DOE and by applicable state educational agencies in
order to participate in Title IV Programs. See Part I, Item 1. “Business - Regulatory Environment – State Authorization” and “Business –
Regulatory Environment – Accreditation.” If any of our schools fail to comply with accrediting or state requirements, the institution and
its main and/or branch campuses are subject to the loss of accreditation or state authorization or may be placed on probation or a special
monitoring or reporting status which, if the noncompliance with accrediting commission requirements is not resolved, could result in loss
of accreditation. If the DOE declines to continue its recognition of ACCSC in the future and if the subsequent period for obtaining
accreditation from another DOE-recognized accrediting agency lapses before we obtain accreditation from another DOE-recognized
accrediting agency (or if the DOE does not provide such a period for institutions to obtain other accreditation), our schools could lose their
Title IV eligibility. Loss of accreditation by any of our main campuses would result in the termination of that school’s eligibility and all of
its branch campuses to participate in Title IV Programs and could cause us to close the school and its branches, which could have a
significant adverse impact on our business and operations.
Programmatic accreditation is the process through which specific programs are reviewed and approved by industry- and program-specific
accrediting entities. Although programmatic accreditation is not generally necessary for Title IV Program eligibility, such accreditation
may be required to allow students to sit for certain licensure exams or to work in a particular profession or career or to meet other
requirements. Failure to obtain or maintain such programmatic accreditation may lead to a decline in enrollments in such programs.
Our institutions would lose eligibility to participate in Title IV Programs if the percentage of their revenues derived from those
programs exceeds 90%, which could reduce our student population and revenues.
A proprietary institution that derives more than 90% of its total revenue from Title IV Programs for two consecutive fiscal years becomes
immediately ineligible to participate in Title IV Programs and may not reapply for eligibility until the end of at least two fiscal years. An
institution with revenues exceeding 90% for a single fiscal year will be placed in provisional certification status and may be subject to
other enforcement measures.
In March 2021, the ARPA amended the 90/10 Rule by treating other “federal funds that are disbursed or delivered to or on behalf of a
student to be used to attend such institution” in the same way as Title IV funds are currently treated in the 90/10 Rule calculation. See Part
I, Item 1. “Business – Regulatory Environment – 90/10 Rule.” The ARPA states that the amendments to the 90/10 Rule apply to
institutional fiscal years beginning on or after January 1, 2023 and are subject to the HEA’s negotiated rulemaking process. The DOE
published new final 90/10 Rule regulations on October 28, 2022 with a general effective date of July 1, 2023. The 90/10 Rule regulations
could have a materially adverse effect on us and other schools like ours. See Part I, Item 1. “Business – Regulatory Environment – 90/10
Rule” and “Business – Regulatory Environment – Negotiated Rulemaking.” We cannot be certain that the changes we make to our
operations in the future to address the new 90/10 Rule regulations will succeed in maintaining our institutions’ 90/10 Rule percentages
below required levels or that the changes will not materially impact our business operations, revenues, and operating costs. It also is
possible that Congress or the DOE could amend the 90/10 Rule in the future to lower the 90% threshold, change the calculation
methodology, or make other changes to the 90/10 Rule that could make it more difficult for our institutions to comply with the 90/10 Rule.
If any of our institutions loses eligibility to participate in Title IV Programs, that loss would also adversely affect our students’ access to
various government-sponsored student financial aid programs, and would have a significant impact on the rate at which our students enroll
in our programs and on our business and results of operations.
Our institutions would lose eligibility to participate in Title IV Programs if their former students defaulted on repayment of their
federal student loans in excess of specified levels, which could reduce our student population and revenues.
An institution may lose its eligibility to participate in some or all Title IV Programs if the rates at which the institution's current and former
students default on their federal student loans exceed specified percentages. See Part I, Item 1. “Business - Regulatory Environment –
Student Loan Defaults.” If former students defaulted on repayment of their federal student loans in excess of specified levels, our
institutions would lose eligibility to participate in Title IV Programs, would also adversely affect our students’ access to various
government-sponsored student financial aid programs, and would have a significant impact on the rate at which our students enroll in our
programs and on our business and results of operations.
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We are subject to sanctions if we fail to correctly calculate and timely return Title IV Program funds for students who withdraw
before completing their educational programs, which could increase our cost of regulatory compliance and decrease our profit
margin.
An institution participating in Title IV Programs must correctly calculate the amount of unearned Title IV Program funds that have been
credited to students who withdraw from their educational programs before completing them and must return those unearned funds in a
timely manner, generally within 45 days of such student’s withdrawal. If the unearned funds are not properly calculated and timely
returned, we may have to post a letter of credit in favor of the DOE or may be otherwise sanctioned by the DOE, which could increase our
cost of regulatory compliance and adversely affect our results of operations. Based upon the findings of an annual Title IV Program
compliance audit of our Columbia and Iselin institutions, we are required to maintain a letter of credit in the amount of $600,020 to the
DOE. More recently, on January 3, 2025, the DOE issued amendments to the regulations on the requirements for institutions to return
unearned Title IV funds to students who withdraw from their educational programs before completing them. See Part I, Item 1. “Business
- Regulatory Environment – Return of Title IV Program Funds.”
We are subject to sanctions if we fail to comply with the DOE’s regulations regarding prohibitions against substantial
misrepresentations, which could increase our cost of regulatory compliance and decrease our profit margin.
The DOE’s regulations prohibit an institution that participates in the Title IV Programs from engaging in substantial misrepresentation of
the nature of its educational programs, financial charges, graduate employability or its relationship with the DOE. The DOE published
final regulations on November 1, 2022 that, among other things, expanded the categories of conduct deemed to be a misrepresentation or
substantial omission of fact and that also established new prohibitions on certain types of recruiting tactics and conduct that the DOE
deems to be aggressive or deceptive. See Part I, Item 1. “Business - Regulatory Environment – Substantial Misrepresentation.” If the
DOE determines that one of our institutions has engaged in substantial misrepresentation or other prohibited conduct, the DOE may
impose sanctions or other conditions upon the institution including, but not limited to, initiating an action to fine the institution or limit,
suspend, or terminate its eligibility to participate in Title IV Programs and may seek to discharge students’ loans and impose liabilities
upon the institution. The regulations also could result in further scrutiny of marketing and recruiting practices by institutions like our
schools and could increase the chances of the DOE finding practices to be noncompliant and imposing sanctions based on the alleged
noncompliance.
All of our institutions are provisionally certified by the DOE, which may make them more vulnerable to unfavorable DOE action
and place additional regulatory burdens on its operations.
All of our institutions are provisionally certified by the DOE. See Part I, Item 1. “Business - Regulatory Environment – Regulation of
Federal Student Financial Aid Programs.” The DOE typically places an institution in provisional certification status following a change in
ownership resulting in a change of control, and may provisionally certify an institution for other reasons including, but not limited to,
failure to comply with certain standards of administrative capability or financial responsibility. During the time when an institution is
provisionally certified, it may be subject to adverse action with fewer due process rights than those afforded to other institutions. In
addition, an institution that is provisionally certified must apply for and receive approval from the DOE for certain substantive changes
including, but not limited to, the establishment of an additional location, an increase in the level of academic offerings or the addition of
new programs. The DOE published final regulations with a general effective date of July 1, 2024 that, among other issues, establish rules
to authorize additional conditions and restrictions on provisionally certified institutions and expand existing regulations regarding
administrative capability and financial responsibility. See Part I, Item 1. “Business – Regulatory Environment – Regulation of Federal
Student Financial Aid Programs.” Any adverse action by the DOE or increased regulatory burdens as a result of the provisional
certification status of one of our institutions could have a material adverse effect on enrollments and our revenues, financial condition, cash
flows and results of operations.
Regulatory agencies or third parties may conduct compliance reviews, bring claims or initiate litigation against us. If the results of
these reviews or claims are unfavorable to us, our results of operations and financial condition could be adversely affected.
Because we operate in a highly regulated industry, we are subject to compliance reviews and claims of noncompliance and lawsuits by
government agencies and third parties. We may be subject to further reviews related to, among other things, issues of noncompliance
identified in recent audits and reviews related to our institutions’ compliance with Title IV Program requirements or related to liabilities
for the discharge of loans to certain students who attended campuses of our institutions that are now closed. See Part I, Item 1. “Business -
Regulatory Environment – Compliance with Regulatory Standards and Effect of Regulatory Violations.” If the results of these reviews or
proceedings are unfavorable to us, or if we are unable to defend successfully against third-party lawsuits or claims, we may be required to
pay money damages or be subject to fines, limitations on the operations of our business, loss of federal and state funding, injunctions or
other penalties. Even if we adequately address issues raised by an agency review or successfully defend a third-party lawsuit or claim, we
may have to divert significant financial and management resources from our ongoing business operations to address issues raised by those
reviews or defend those lawsuits or claims. Certain of our institutions are subject to ongoing reviews and proceedings. See Part I, Item 1.
“Business – Regulatory Environment – Accreditation,” “Regulatory Environment – Other Financial Assistance Programs,” “Regulatory
Environment – Borrower Defense to Repayment,” “Regulatory Environment - Compliance with Regulatory Standards and Effect of
Regulatory Violations,” and “Regulatory Environment - Scrutiny of the For-Profit Postsecondary Education Sector.”
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Our business could be adversely impacted by additional legislation, regulations, or investigations regarding private student
lending because students attending our schools rely on private student loans to pay tuition and other institutional charges.
Our private education loans are subject to regulation and oversight by federal and state regulatory agencies. The CFPB has exercised
supervisory authority over private education loan providers. The CFPB has initiated investigations into the lending practices of institutions
in the for-profit education sector. Any adverse legislation, regulations, or investigations regarding private student lending could limit the
availability of private student loans to our students or lead to sanctions or liabilities, which could have a significant impact on our business
and operations.
Changes in the executive branch of our federal government as a result of the outcome of elections or other events could result in
further legislation, appropriations, executive orders, regulations and enforcement actions that could materially or adversely affect
our business.
Our industry is subject to an intensive ongoing federal and state regulatory environment that affects our industry. The composition of
federal and state executive offices, executive agencies and legislatures that are subject to change based on the results of elections,
appointments and other events, may adversely impact our industry through constant changes in that regulatory environment resulting from
the disparate views towards the for-profit education industry. See Part I, Item 1. “Business – Regulatory Environment – Scrutiny of the
For-Profit Postsecondary Education Sector.” Any laws or other actions that are adopted that limit our or our students’ participation in Title
IV Programs or in programs to provide funds for active duty service members and veterans or the amount of student financial aid for which
our students are eligible, or any decreases in enrollment related to the congressional activity concerning this sector, could have a material
adverse effect on our academic or operational initiatives, cash flows, results of operations, or financial condition.
Adverse publicity arising from scrutiny of us or other for-profit postsecondary schools may negatively affect us or our schools.
In recent years, Congress, the DOE, state legislatures, accrediting agencies, the CFPB, the FTC, state attorneys general and the media have
scrutinized the for-profit postsecondary education sector. See Part I, Item 1. “Business – Regulatory Environment – Scrutiny of the For-
Profit Postsecondary Education Sector.” Adverse publicity regarding any past, pending, or future investigations, claims, settlements,
and/or actions against us or other for-profit postsecondary schools could negatively affect our reputation, student enrollment levels,
revenue, profit, and/or the market price of our Common Stock. Unresolved investigations, claims, and actions, or adverse resolutions
or settlements thereof, could also result in additional inquiries, administrative actions or lawsuits, increased scrutiny, the loss or
withholding of accreditation, state licensure, or eligibility to participate in the Title IV Programs or other financial assistance programs,
and/or the imposition of other sanctions by federal, state, or accrediting agencies which, individually or in the aggregate, could have a
material adverse effect on our business, financial condition, results of operations, and cash flows and result in the imposition of
significant restrictions on us and our ability to operate.
If regulators deny, delay, or condition their approval of transactions involving a change of ownership or control of us or of
institutions that we own or acquire, it could have a significant impact on our business and results of operations.
When a company acquires a school that is eligible to participate in Title IV Programs, that school undergoes a change of ownership and
control that generally requires approval of the DOE and applicable accrediting and state authorizing agencies to continue to operate and
participate in Title IV Programs. See Part I, Item 1. “Business - Regulatory Environment - School Acquisitions/Change of Control.” Thus,
any plans to expand our business through acquisition of additional schools and have them certified by the DOE to participate in Title IV
Programs must take into account the approval requirements of the DOE and the relevant state education agencies and accrediting
commissions.
In addition, a change of control could occur as a result of future transactions in which the Company or our schools are involved and require
our schools to obtain approval of the DOE, ACCSC, and the applicable state authorizing agencies to continue operating and participating
in Title IV Programs. The DOE, most state education agencies and our accrediting commissions have standards pertaining to the change of
control of schools, but these standards are not uniform. DOE regulations describe some transactions that constitute a change of control,
including the transfer of a controlling interest in the voting stock of an institution or the institution's parent corporation. Examples of such
transactions include but are not limited to a significant purchase or disposition of stock, some corporate reorganizations, and some changes
in the Board of Directors of the Company. See Part I, Item 1. “Business - Regulatory Environment - School Acquisitions/Change of
Control.” The potential adverse effects of a change of control could influence future decisions by us and our shareholders regarding the
sale, purchase, transfer, issuance or redemption of our stock. In addition, the adverse regulatory effect of a change of control also could
discourage bids for shares of our Common Stock and could have an adverse effect on the market price of our shares. The failure to obtain
applicable approvals from the DOE and other applicable regulators without delay or material condition in connection with the acquisition
of a school or with a change of ownership or control of us or our schools could have a significant impact on our business and results of
operations.
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If regulators deny, delay, or condition their approval of new locations and educational programs at our schools, it could have a
significant impact on our business and results of operations.
Our strategic plans for future expansion are based, in part, on our ability to open new schools as additional locations of our existing
institutions, to add new educational programs at our existing schools, and take into account the applicable approval requirements of the
DOE and our other regulatory agencies for adding new locations and educational programs. See Part I, Item 1. “Business - Regulatory
Environment - Opening Additional Schools and Adding Educational Programs”. Our institutions are provisionally certified and required
to obtain prior DOE approval of new locations and of new educational programs. If an institution erroneously determines that an
educational program is eligible for purposes of Title IV Programs, the institution would likely be liable for repayment of Title IV Program
funds provided to students in that educational program. The failure to obtain applicable approvals from the DOE and other applicable
regulators without delay or material condition in connection with the addition of a new location or educational program could have a
significant impact on our business and results of operations.
Public health pandemics, epidemics or outbreaks, such as the COVID-19 pandemic, could have a material adverse effect on our
business and operations.
Public health pandemics, epidemics or outbreaks, such as the COVID-19 pandemic, and the resulting containment measures to be taken in
response to such events have caused and may in the future cause economic and financial disruptions globally. The extent to which any
rapidly spreading contagious illness may impact our business and operations will depend on a variety of factors beyond our control,
including the actions of governments, businesses and other enterprises in response thereto, the effectiveness of those actions, and vaccine
availability, distribution and adoption, all of which cannot be predicted with any level of certainty. We believe that the spread of such
illnesses could adversely impact our business and operations, including as a result of workforce limitations and travel restrictions and
related government actions. If a significant percentage of our workforce is unable to work, including because of illness or travel or
government restrictions in connection with pandemics or disease outbreaks, our operations and enrollment may be negatively impacted.
Finally, state and federal regulators, including the DOE, are augmenting existing regulatory processes, waiving others, and overseeing
various emergency relief and aid programs. It is highly uncertain how long such regulatory accommodations will continue, or how long
and in what amount emergency relief and aid funds will continue to be available. We also cannot predict the types of conditions that may
be attached to participation in emergency relief and aid programs, and whether and to what extent compliance with such conditions will be
monitored and enforced. If further outbreaks occur and students elect to take a leave of absence, withdraw, or do not make up the required
in person labs on a timely basis, our future revenues could be impacted.
RISKS RELATED TO OUR BUSINESS
Our success depends in part on our ability to update and expand the content of existing programs and develop new programs in a
cost-effective manner and on a timely basis.
Prospective employers of our graduates increasingly demand that their entry-level employees possess appropriate technological skills.
These skills are becoming more sophisticated in line with technological advancements in the automotive, diesel, information technology,
and skilled trades. Accordingly, educational programs at our schools must keep pace with those technological advancements. The
expansion of our existing programs and the development of new programs may not be accepted by our students, prospective employers or
the technical education market. Even if we are able to develop acceptable new programs, we may not be able to introduce these new
programs as quickly as our students require or as competitors or employers demand. If we are unable to adequately respond to changes in
market requirements due to financial or regulatory constraints, unusually rapid technological changes or other factors, our ability to attract
and retain students could be impaired, our placement rates could suffer and our revenues could be adversely affected. In addition, if we are
unable to adequately anticipate the requirements of the employers we serve, we may offer programs that do not teach skills useful to
prospective employers, which could affect our placement rates and our ability to attract and retain students, causing our revenues to be
adversely affected.
Competition could decrease our market share and cause us to lower our tuition rates.
The postsecondary education market is highly competitive. We compete for students and faculty with traditional public and private two-
year and four-year colleges and universities and other proprietary schools, many of which have greater financial resources than we do.
Some traditional public and private colleges and universities, as well as other private career-oriented schools, offer programs that may be
perceived by students to be similar to ours. Most public institutions are able to charge lower tuition than our schools, due in part to
government subsidies and other financial resources not available to for-profit schools. Some of our competitors also have substantially
greater financial and other resources than we have which may, among other things, allow our competitors to secure strategic relationships
with some or all of the companies with which we have existing relationships or develop other high profile strategic relationships, or devote
more resources to expanding their programs and their school network, or provide greater financing alternatives to their students, all of
which could affect the success of our marketing programs. In addition, some of our competitors have a larger network of schools and
campuses than we do, enabling them to recruit students more effectively from a wider geographic area. This strong competition could
adversely affect our business.
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We may be required to reduce tuition or increase spending in response to competition in order to retain or attract students or pursue new
market opportunities. As a result, our market share, revenues and operating margin may be decreased. We cannot be sure that we will be
able to compete successfully against current or future competitors or that the competitive pressures we face will not adversely affect our
revenues and profitability.
Our financial performance depends in part on our ability to continue to develop awareness and acceptance of our programs
among high school graduates and working adults looking to return to school.
The awareness of our programs among high school graduates and working adults looking to return to school is critical to the continued
acceptance and growth of our programs. Our inability to continue to develop awareness of our programs could reduce our enrollments and
impair our ability to increase our revenues or maintain profitability. The following are some of the factors that could prevent us from
successfully marketing our programs:
student dissatisfaction with our programs and services;
diminished access to high school student populations;
our failure to maintain or expand our brand or other factors related to our marketing or advertising practices; and
our inability to maintain relationships with employers in the automotive, diesel, skilled trades and IT services industries.
An increase in interest rates could adversely affect our ability to attract and retain students.
Our students and their families have benefitted from historic lows on student loan interest rates in prior years. Much of the financing our
students receive is tied to floating interest rates. Recently, student loan interest rates have been higher, making borrowing for education
more expensive. Increases in interest rates result in a corresponding increase in the cost to our existing and prospective students of
financing their education, which could result in a reduction in the number of students attending our schools and could adversely affect our
results of operations and revenues. Higher interest rates could also contribute to higher default rates with respect to our students' repayment
of their educational loans. Higher default rates may in turn adversely impact our eligibility for Title IV Program participation or the
willingness of private lenders to make private loan programs available to students who attend our schools, which could result in a
reduction in our student population.
A substantial decrease in student financing options, or a significant increase in financing costs for our students, could have a
significant impact on our student population, revenues and financial results.
The consumer credit markets in the United States have recently suffered from increases in default rates and foreclosures on mortgages.
Adverse market conditions for consumer and federally guaranteed student loans could result in providers of alternative loans reducing the
attractiveness and/or decreasing the availability of alternative loans to postsecondary students, including students with low credit scores
who would not otherwise be eligible for credit-based alternative loans. Prospective students may find that these increased financing costs
make borrowing prohibitively expensive and abandon or delay enrollment in postsecondary education programs. Private lenders could also
require that we pay them new or increased fees in order to provide alternative loans to prospective students. If any of these scenarios were
to occur, our students’ ability to finance their education could be adversely affected and our student population could decrease, which
could have a significant impact on our financial condition, results of operations and cash flows.
In addition, any actions by the U.S. Congress or by states that significantly reduce funding for Title IV Programs or other student financial
assistance programs, or the ability of our students to participate in these programs, or establish different or more stringent requirements for
our schools to participate in those programs, could have a significant impact on our student population, results of operations and cash
flows.
We cannot predict our future capital needs, and if we are unable to secure additional financing when needed, our operations and
revenues would be adversely affected.
We may need to raise additional capital in the future to fund acquisitions, working capital requirements, expand our markets and program
offerings or respond to competitive pressures or perceived opportunities. We cannot be sure that additional financing will be available to us
on favorable terms, or at all. If adequate funds are unavailable when required or on acceptable terms, we may be forced to forego
attractive acquisition opportunities, or cease operations. Even if we are able to continue our operations, our ability to increase student
enrollment and revenues would be adversely affected.
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We may not be able to retain our key personnel or hire and retain the personnel we need to sustain and grow our business.
Our success has depended, and will continue to depend, largely on the skills, efforts and motivation of our executive officers who
generally have significant experience within the postsecondary education industry. Our success also depends in large part upon our ability
to attract and retain highly qualified faculty, school directors, administrators and corporate management. Due to the nature of our business,
we face significant competition in the attraction and retention of personnel who possess the skill sets that we seek. In addition, key
personnel may leave us and subsequently compete against us. Furthermore, we do not currently carry "key man" life insurance on any of
our employees. The loss of the services of any of our key personnel, or our failure to attract and retain other qualified and experienced
personnel on acceptable terms, could have an adverse effect on our ability to operate our business efficiently and to execute our growth
strategy.
Our total assets include goodwill. In the event that our schools do not achieve satisfactory operating results, we may be required to
write-off a significant portion of the goodwill which would negatively affect our results of operations.
Our total assets reflect amounts for goodwill. At December 31, 2024, goodwill associated with our acquisitions decreased to approximately
2.5% from 3.1% of total assets at December 31, 2023. On at least an annual basis, we assess whether there has been an impairment in the
value of goodwill. If the carrying value of the tested asset exceeds its estimated fair value, impairment is deemed to have occurred. In this
event, the amount is written down to fair value. Under current accounting rules, this would result in a charge to operating earnings. Any
determination requiring the write-off of goodwill would negatively affect our results of operations and total capitalization, which could be
material. See Part II. Item 8. “Financial Statements and Supplemental Data - Notes to Consolidated Financial Statements – Note 7
Goodwill.”
Strikes by our employees may disrupt our ability to hold classes as well as our ability to attract and retain students, which could
materially adversely affect our operations. In addition, we contribute to multiemployer benefit plans that could result in liabilities
to us if these plans are terminated or we withdraw from them.
As of December 31, 2024, the teaching professionals at seven of our campuses are represented by unions and covered by collective
bargaining agreements that expire between 2025 and 2027. The faculty of the Company’s Union, New Jersey campus voted to be
represented through collective bargaining in 2024. Although we believe that we have good relationships with these unions and with our
employees, any strikes or work stoppages by our employees could adversely impact our relationships with our students, hinder our ability
to conduct business and increase costs.
We also contribute to multiemployer pension plans for some employees covered by collective bargaining agreements. These plans are not
administered by us, and contributions are determined in accordance with provisions of negotiated labor contracts. The Employee
Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, imposes certain
liabilities upon employers who are contributors to a multiemployer plan in the event of the employer’s withdrawal from, or upon
termination of, such plan. We do not routinely review information on the net assets and actuarial present value of the multiemployer
pension plans’ unfunded vested benefits allocable to us, if any, and we are not presently aware of any material amounts for which we may
be contingently liable if we were to withdraw from any of these plans. In addition, if any of these multiemployer plans enters “critical
status” under the Pension Protection Act of 2006, we could be required to make significant additional contributions to those plans.
System disruptions to our technology infrastructure could impact our ability to generate revenue and could damage the reputation
of our institutions.
The performance and reliability of our technology infrastructure is critical to our reputation and to our ability to attract and retain students.
We license the software and related hosting and maintenance services for our online platform and our student information system from
third-party software providers. Any system error or failure, or a sudden and significant increase in bandwidth usage, could result in the
unavailability of systems to us or our students or result in delays and/or errors in processing student financial aid and related
disbursements. Any such system disruptions could impact our ability to generate revenue and affect our ability to access information about
our students and could also damage the reputation of our institutions. Any of the cyberattacks, breaches or other disruptions or damage
described above could interrupt our operations, result in theft of our and our students’ data or result in legal claims and proceedings,
liability and penalties under privacy laws and increased cost for security and remediation, each of which could adversely affect our
business and financial results. We may be required to expend significant resources to protect against system errors, failures or disruptions
or to repair problems caused by any actual errors, disruptions or failures.
32
We are subject to privacy and information security laws and regulations due to our collection and use of personal information, and
any violations of those laws or regulations, or any breach, theft or loss of that information, could adversely affect our reputation
and operations.
Our efforts to attract and enroll students result in the Company collecting, using and storing substantial amounts of personal information
regarding applicants, our students, their families and alumni, including social security numbers and financial data. We also maintain
personal information about our employees in the ordinary course of our activities. Our services, the services of many of our health plan and
benefit plan vendors, and other information can be accessed globally through the internet. We rely extensively on our network of
interconnected applications and databases for day to day operations as well as financial reporting and the processing of financial
transactions. Our computer networks and those of our vendors that manage confidential information for us or provide services to our
students may be vulnerable to computer hackers, organized cyberattacks and physical or electronic breaches or unauthorized access, acts of
vandalism, ransomware, software viruses and other similar types of malicious activities. Regular patching of our computer systems and
frequent updates to our virus detection and prevention software with the latest virus and malware signatures may not catch newly
introduced malware and viruses or “zero-day” viruses, prior to their infecting our systems and potentially disrupting our data integrity,
taking sensitive information or affecting financial transactions. While we utilize security and business controls to limit access to and use of
personal information, any breach of student or employee privacy or errors in storing, using or transmitting personal information could
violate privacy laws and regulations resulting in fines or other penalties. A wide range of high-profile data breaches in recent years has led
to renewed interest in federal data and cybersecurity legislation that could increase our costs and/or require changes in our operating
procedures or systems. A breach, theft or loss of personal information held by us or our vendors, or a violation of the laws and regulations
governing privacy could have a material adverse effect on our reputation or result in lawsuits, additional regulation, remediation and
compliance costs or investments in additional security systems to protect our computer networks, the costs of which may be substantial.
We cannot assure you that a breach, loss, or theft of personal information will not occur.
Changes in U.S. tax laws or adverse outcomes from examination of our tax returns could have an adverse effect upon our financial
results.
We are subject to income tax requirements in various jurisdictions in the United States. Legislation or other changes in the tax laws of the
jurisdictions where we do business could increase our liability and adversely affect our after-tax profitability. In addition, we are subject to
examination of our income tax returns by the Internal Revenue Service and the taxing authorities of various states. We regularly assess the
likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of our provision for income taxes and we have
accrued tax and related interest for potential adjustments to tax liabilities for prior years. However, there can be no assurance that the
outcomes from these tax examinations will not have a material effect, either positive or negative, on our business, financial conditions and
results of operations.
The occurrence of natural or man-made catastrophes, including those caused by climate change and other climate-related causes,
could materially and adversely affect our business, financial condition, results of operations and prospects.
All of our campuses are located at leased premises in various areas some of which can experience hurricanes, severe storms, floods, coastal
storms, tornadoes, power outages and other severe weather events. If these events were to occur and cause damage to our campus facilities,
or limit the ability of our students or faculty to participate in or contribute to our academic programs or our ability to comply with federal
and state educational requirements, our business may be adversely affected. Disruptions of this kind may also result in increases in student
attrition, voluntary or mandatory closure of some or all of our facilities, or our inability to procure essential supplies or travel during the
pendency of mandated travel restrictions. We may not be able to effectively shift our operations due to disruptions arising from the
occurrence of such events, and our business and results of operations could be affected adversely as a result. Moreover, damage to or total
destruction of our campus facilities from various weather events may not be covered in whole or in part by any insurance we may have.
Our success depends, in part, on the effectiveness of our marketing and advertising programs in recruiting new students.
Maintaining our revenues and margins and further increasing them requires us to continue to develop our admissions programs and attract
new students in a cost-effective manner. The scope and focus of our marketing and advertising efforts and the strategies used are
determined by, among other factors, the specific geographic markets, regulatory compliance requirements and the nature of each institution
and its students. If we are unable to advertise and market our institutions and programs successfully, our ability to attract and enroll new
students could be materially adversely affected and, consequently, our financial performance could suffer. We use marketing tools such as
the internet, radio, television and print media advertising to promote our institutions and programs. Our representatives also make
presentations at high schools and career fairs. Additionally, we rely on the general reputation of our institutions and referrals from current
students, alumni and employers as a source of new enrollment. As part of our marketing and advertising, we also subscribe to lead-
generating databases in certain markets, the cost of which may increase. Among the factors that could prevent us from marketing and
advertising our institutions and programs successfully are the failure of our marketing tools and strategies to appeal to prospective
students, regulatory constraints on marketing, current student and/or employer dissatisfaction with our program offerings or results and
diminished access to high school campuses and military bases. In order to maintain our growth, we will need to attract a larger percentage
of students in existing markets and increase our addressable market by adding locations in new markets and rolling out new academic
programs. Any failure to accomplish this may have a material adverse effect on our future growth.
33
Our business could be negatively impacted by cybersecurity and other security threats or disruptions.
Like other companies in our industry, the performance and reliability of our computer networks is essential to our existing operations, our
ability to attract and retain students and our reputation. And, like all companies that utilize technology, we face significant cybersecurity
and other security threats that include, among other things, attempts to gain unauthorized access to sensitive student and employee
information; attempts to compromise the integrity, confidentiality and/or availability of our systems, hardware and networks, and the
information on them; insider threats; malware; ransomware; threats to the safety of our directors, officers and employees; and threats to our
facilities, infrastructure and services. We are also subject to increasing government, student information and cybersecurity and other
security requirements, including disclosure obligations.
We continue to invest in the cybersecurity and resiliency of our networks and products and enhance our internal controls and processes,
which are designed to help protect our systems and infrastructure, and the information they contain. These include timely detection of
incidents through monitoring, training, incident response capabilities, and mitigating cybersecurity and other risks to our data, systems and
services. However, given the complex, continuing and evolving nature of cybersecurity threats and other security threats, including threats
from targeting by more advanced and persistent adversaries, these efforts may not be fully effective, particularly against previously
unknown vulnerabilities that could go undetected for extended periods of time. Successful attacks could lead to losses or misuse of
sensitive information or capabilities; theft or corruption of data; harm to personnel, infrastructure or products; financial costs and
liabilities; protracted disruptions in our operations and performance; as well as damage to our reputation as a provider of educational
services.
Our students and corporate business entities to whom we entrust confidential data, and on whom we rely to provide services, face similar
threats and growing requirements, including ones for which others may seek to hold us responsible. We depend on our students, suppliers,
and other business entities to implement and verify adequate controls and safeguards to protect against and report cybersecurity incidents.
If they fail to deter, detect or report cybersecurity incidents in a timely manner, we may suffer financial and other harm, including to our
information, operations, performance, employees and reputation.
Additionally, while we maintain insurance against certain losses relating to cybersecurity threats and incidents that we believe to be at
adequate levels of coverage, such coverage may not be sufficient to address an incident and we may not always be able to obtain adequate
insurance to cover our losses.
We also face threats to our physical security, including to our facilities and the safety and the well-being of our people. These threats could
involve terrorism, insider threats, workplace violence, civil unrest, natural disasters, damaging weather, or fires, which could adversely
affect our company. Such acts could detrimentally impact our ability to perform our operations. We could also incur unanticipated costs to
remediate impacts and lost business. The occurrence and impact of these various risks are difficult to predict, but one or more of them
could have a material adverse effect on our financial position, results of operations and/or cash flows.
RISKS RELATED TO OUR CAPITAL STRUCTURE
Anti-takeover provisions in our Amended and Restated Certificate of Incorporation, our Bylaws and New Jersey law could
discourage a change of control that our shareholders may favor, which could negatively affect our stock price.
Provisions in our Amended and Restated Certificate of Incorporation and our Bylaws and applicable provisions of the New Jersey
Business Corporation Act may make it more difficult and expensive for a third party to acquire control of the Company even if a change of
control would be beneficial to the interests of our shareholders. These provisions could discourage potential takeover attempts and could
adversely affect the market price of our Common Stock. For example, applicable provisions of the New Jersey Business Corporation Act
may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested
shareholder for a period of five years after the person becomes an interested shareholder. Furthermore, our Amended and Restated
Certificate of Incorporation and Bylaws:
authorize the issuance of blank check Preferred Stock that could be issued by our Board of Directors to thwart a takeover attempt;
prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of stock to
elect some directors;
require super-majority voting to effect amendments to certain provisions of our Amended and Restated Certificate of
Incorporation;
limit who may call special meetings of both the Board of Directors and shareholders;
prohibit shareholder action by non-unanimous written consent and otherwise require all shareholder actions to be taken at a
meeting of the shareholders;
establish advance notice requirements for nominating candidates for election to the Board of Directors or for proposing matters
that can be acted upon by shareholders at shareholders’ meetings; and
require that vacancies on the Board of Directors, including newly created directorships, be filled only by a majority vote of
directors then in office.
34
We can issue shares of Preferred Stock without general shareholder approval, which could adversely affect the rights of common
shareholders.
Our Amended and Restated Certificate of Incorporation permits us to establish the rights, privileges, preferences and restrictions, including
voting rights, of future series of our Preferred Stock and to issue such stock without approval from our shareholders. The rights of holders
of our Common Stock may suffer as a result of the rights granted to holders of Preferred Stock that may be issued in the future. In addition,
we could issue Preferred Stock to prevent a change in control of our Company, depriving common shareholders of an opportunity to sell
their stock at a price in excess of the prevailing market price.
The trading price of our Common Stock may continue to fluctuate substantially in the future.
Our stock price may fluctuate significantly as a result of a number of factors, some of which are not in our control. These factors may
include:
general economic conditions;
general conditions in the for-profit, postsecondary education industry;
negative media coverage of the for-profit, postsecondary education industry;
failure of certain of our schools or programs to maintain compliance under the gainful employment regulation, 90/10 Rule or with
financial responsibility standards;
the impact of DOE rulemaking and other changes in the highly regulated environment in which we operate;
the initiation, pendency or outcome of litigation, accreditation reviews and regulatory reviews, inquiries and investigations;
loss of key personnel;
quarterly variations in our operating results;
our ability to meet or exceed, or changes in, expectations of investors and analysts, or the extent of analyst coverage of us; and
decisions by any significant investors to reduce their investment in our Common Stock.
In addition, the trading volume of our Common Stock is relatively low. This may cause our stock price to react more to these factors and
various other factors and may impact an investor’s ability to sell our Common Stock at the desired time at a price considered satisfactory.
Any of these factors may adversely affect the trading price of our Common Stock, regardless of our actual operating performance, and
could prevent an investor from selling shares of our Common Stock at or above the price at which the investor purchased them.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
We recognize the critical importance of maintaining the safety and security of our systems and data and we take a holistic approach to the
oversight and management of cybersecurity and related risks. This approach is supported by our Board of Directors and management who
are actively involved in the oversight of our risk management program.
Our cybersecurity team, which maintains our cybersecurity function, is comprised of technology and cybersecurity professionals in the
information technology department, and is led by our Chief Information Officer (“CIO”), who prior to joining the Company has held positions
as CIO, Chief Technology Officer (“CTO”), and other key leadership positions in the travel, finance, internet, engineering, and
pharmaceutical industries. Our CIO is responsible for management of cybersecurity risk and the protection and defense of our networks and
systems. The cybersecurity team has broad experience and expertise, including cybersecurity threat assessment and detection, mitigation
technologies, cybersecurity training, incident response, cyber forensics, insider threats and regulatory compliance.
Like all companies that utilize technology, we face significant cybersecurity threats that include, among other things, attempts to gain
unauthorized access to sensitive student and employee information; attempts to compromise the integrity, confidentiality and/or
availability of our systems, hardware and networks, and the information on them; insider threats; malware; ransomware; threats to the
safety of our directors, officers and employees; and threats to our facilities, infrastructure and service. As cybersecurity threats may arise,
the cybersecurity team focuses on responding to and containing the threat and minimizing any business impact, as appropriate. In the event
of a perceived threat or possible cybersecurity incident, the cybersecurity team is trained to assess, among other factors, student safety
impact, data and personal information impact, the possibility of business operations disruption, projected cost, if any, and potential for
reputational harm, with support from external technical, legal and law enforcement support, as appropriate.
Our Board of Directors, in coordination with our Audit Committee, is responsible for overseeing our enterprise risk management. In
connection with such oversight, the Board of Directors receives periodic updates, as appropriate (and no less frequently than annually),
from our CIO regarding the Company’s cybersecurity risk management processes and the risk trends related to cybersecurity. The Audit
Committee assists the Board in its oversight of risks, generally and risks related to cybersecurity.
35
Our approach to cybersecurity risk management includes the following key elements:
• Multi-Layered Defense Technology – We work to protect our computing environments and products from cybersecurity threats through
multi-layered defenses and apply lessons learned from our defense and monitoring efforts to help prevent future attacks. We utilize data
analytics to detect anomalies and search for cybersecurity threats.
• Continuous Monitoring and Analysis – We utilize a third-party Security Operations Center which maintains a 24/7 monitoring system
and provides comprehensive cyber threat detection and response capabilities which complements the Lincoln cybersecurity team and
leverages the technology, processes and threat detection techniques used to monitor, manage, and mitigate cybersecurity threats. For
additional visibility and perspective, we engage with a different third-party security firm for monthly reviews and analysis. From time to
time, we engage additional third-party consultants or other advisors to assist in assessing, identifying and/or managing
cybersecurity threats including formalized penetration and cybersecurity testing.
• Third Party Risk Assessments – We conduct information security assessments before sharing or allowing the hosting of sensitive data in
computing environments managed by third parties, and our standard contracts contain terms and conditions requiring certain security
protections.
• Training and Awareness – We provide monthly awareness training and testing to help our employees identify, avoid and mitigate
cybersecurity threats, including spear phishing and other awareness testing.
• Response Policy – We maintain a data breach response policy defining our incident analysis and response actions. This policy describes
our initial actions upon learning of an incident, confirmation steps, notification to affected parties if any, risk mitigation planning, and post
incident procedures.
While we have experienced minor cybersecurity threats in the past, such as spear phishing or smishing (SMS phishing), to date no such
threats have materially affected the Company or our financial position, results of operations and/or cash flows.
We continue to invest in the cybersecurity and resiliency of our networks and to enhance our internal controls and processes, which are
designed to help protect our systems and infrastructure, and the information contained therein.
We maintain cybersecurity insurance coverage in amounts that we believe are adequate to address any incidents such as data destruction,
extortion, theft, hacking, denial of service attacks and other such incidents.
For more information concerning the risks that we face from cybersecurity threats, please see Part I, Item 1A, “Risk Factors”.
36
ITEM 2.
PROPERTIES
As of December 31, 2024, we lease all of our properties. We continue to reevaluate our facilities to maximize our facility utilization and
efficiency and to allow us to introduce new programs and attract more students. As of December 31, 2024, all of our existing leases expire
between 2025 and 2045.
The following table provides information relating to our facilities as of December 31, 2024, including our corporate office:
Brand
Approximate Square Footage
Lincoln College of Technology
111,000
Lincoln College of Technology
213,000
Lincoln College of Technology
158,000
Lincoln College of Technology
126,000
Lincoln College of Technology
30,000
Lincoln College of Technology
88,000
Lincoln Technical Institute
25,000
Lincoln Technical Institute
289,000
Lincoln Technical Institute
32,000
Lincoln Technical Institute
66,000
Lincoln Technical Institute
79,000
Lincoln Technical Institute
49,000
Lincoln Technical Institute
36,000
Lincoln Technical Institute
30,000
Lincoln Technical Institute
30,000
Lincoln Technical Institute
50,000
Lincoln Technical Institute
57,000
Lincoln Technical Institute
60,000
Lincoln Technical Institute
56,000
Nashville Auto Diesel College
292,000
Lincoln Technical Institute
56,000
Corporate Office
17,000
Brand
Approximate Square Footage
Lincoln Technical Institute
65,000
Lincoln College of Technology
100,000
Nashville Auto Diesel College
124,000
Lincoln Technical Institute
91,000
1
2
3
4
Indianapolis, Indiana
Current Locations
Columbia, Maryland
Denver, Colorado
Grand Prairie, Texas
Queens, New York
Marietta, Georgia
Melrose Park, Illinois
Allentown, Pennsylvania
East Windsor, Connecticut
Iselin, New Jersey
Lincoln, Rhode Island
Mahwah, New Jersey
Moorestown, New Jersey
New Britain, Connecticut
Paramus, New Jersey
Philadelphia, Pennsylvania
Shelton, Connecticut
South Plainfield, New Jersey
Union, New Jersey
Nashville, Tennessee
East Point, Georgia
Parsippany, New Jersey
Future Locations
Hicksville, New York
1
Houston, Texas
2
Nashville, Tennessee
3
Levitttown, Pennsylania
4
We believe that our facilites are suitable for their intendedn puposes.
On December 12, 2024, the Company entered into a lease for approximately 65,000 square feet of space to serve as the Company’s new campus in
Hicksville, New York. The lease term is currently planned to commence on or about May 1, 2025, with an initial lease term of 15 years and 9 months. The
lease contains a renewal option allowing for either a 10-year renewal or two five-year renewals.
On October 31, 2023, the Company entered into a lease for approximately 100,000 square feet of space to serve as the Company’s new campus in
Houston, Texas. The lease term commenced on January 2, 2024, with an initial lease term of 21-years and 6 months with three five-year renewal options.
On October 18, 2023, the Company entered into a lease for approximately 120,000 square feet of space. to serve as the Company’s new Nashville,
Tennessee campus. The lease term commenced on November 1, 2023, with an initial lease term of 15-years with two five-year renewal options.
On September 28, 2023, the Company purchased a 90,000 square foot property located at 311 Veterans Highway, Levittown, Pennsylvania for
approximately $10.2 million and, subsequently on January 30, 2024, entered into a sale-leaseback transaction for this property. As of December 31, 2023,
this property was classified as held-for-sale on the Consolidated Balance Sheets.
ITEM 3.
LEGAL PROCEEDINGS
On June 22, 2022, the DOE and the plaintiff student loan borrowers in a class action against the DOE initiated on June 25, 2019 in the U.S.
District Court for the Northern District of California (Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.)) announced a proposed settlement
agreement to resolve claims that the DOE had failed to timely decide Borrower Defense to Repayment applications submitted to the DOE.
The proposed settlement included three categories of relief for student loan borrowers. First, the DOE would agree to discharge loans and
refund prior loan payments to class members with loan debt associated with an institution on the list included in the settlement (which
includes Lincoln institutions). The class action plaintiffs and the DOE stated that the DOE had determined that attendance at one of the
listed institutions justifies presumptive relief allegedly based on strong indicia regarding substantial misconduct by the institutions,
whether credibly alleged or in some instances proven, and the purportedly high rate of class members with applications related to the listed
schools. Second, the proposed settlement included new procedures for the DOE to resolve pending borrower defense claims associated
37
with other schools not on the list. Third, for any student loan borrower who submitted a borrower defense application after June 22, 2022
and before the final approval of the settlement, the proposed settlement would require the DOE to review the applications under the DOE’s
2016 regulatory standards and issue decisions within 36 months, or else the applications would be discharged in full. On November 16,
2022, the federal district court approved the settlement as proposed and the DOE began implementing the settlement relief while Lincoln
and other parties appealed the settlement’s final approval to the U.S. Court of Appeals for the Ninth Circuit. On November 5, 2024, the
Ninth Circuit upheld the settlement on appeal. One or more schools are expected to continue to appeal the final approval of the settlement,
but Lincoln does not intend to continue participating in the appeal. As a result of this final approval, the DOE has estimated that
approximately 196,000 student loan borrowers who attended one of the listed schools (including Lincoln institutions) will receive
automatic student loan discharges; that another approximately 100,000 student loan borrowers who attended other schools not on the list
would receive decisions under new procedures; and that approximately 250,000 student loan borrowers who submitted borrower defense
applications between June 22, 2022 and November 16, 2022 would receive decisions under the DOE’s 2016 regulatory standards within 36
months or else receive automatic student loan discharges.
It is not possible at this time to predict whether the settlement will continue to be upheld on appeal, what additional actions the DOE might
take as the settlement continues to be upheld on appeal, or whether the DOE or other agencies might take actions against Lincoln
institutions. Such actions could have a material adverse effect on our business and results of operations. We believe the DOE already may
have discharged some or all of the pending applications. See Part I, Item I. “Business – Regulatory Environment – Borrower Defense to
Repayment Regulations.”
In addition to the foregoing, in the ordinary conduct of our business, we are subject to additional periodic lawsuits, investigations,
regulatory proceedings and other claims, including, but not limited to, claims involving students or graduates, routine employment matters
and business disputes. We cannot predict the ultimate resolution of these lawsuits, investigations, regulatory proceedings and other claims
asserted against us, but we do not believe that any of these matters will have a material adverse effect on our business, financial condition,
results of operations or cash flows.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II.
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market for our Common Stock
Our Common Stock, no par value per share, is quoted on the Nasdaq Global Select Market under the symbol “LINC”.
On February 26, 2025, the last reported sale price of our Common Stock on the Nasdaq Global Select Market was $18.29 per share.
Holders
As of February 26, 2025, based on the information provided by Continental Stock Transfer & Trust Company, there were 42 shareholders
of record of our Common Stock.
Dividend Policy
The Company has not declared or paid any cash dividends on its Common Stock since the Company’s Board of Directors discontinued our
quarterly cash dividend program in February 2015. The Company has no current intentions to resume the payment of cash dividends on its
Common Stock in the foreseeable future.
During the fiscal year ended December 31, 2022, the Company paid a total of $1.1 million in cash dividends to holders of its Series A
Convertible Preferred Stock (the “Series A Preferred Stock”) pursuant to the Securities Purchase Agreement entered into on November 14,
2019 and the Company’s Amended and Restated Certificate of Incorporation.
On November 30, 2022, the Company exercised in full its right of mandatory conversion of the Company’s Series A Preferred Stock. In
connection with the conversion, each share of Series A Preferred Stock has been cancelled and converted into 423.729 shares of the
Company’s Common Stock, no par value per share. Shares of the Series A Preferred Stock are no longer outstanding and all rights of the
holders to receive future dividends have terminated. As a result of the conversion, the aggregate 12,700 shares of Series A Preferred Stock
were converted into 5,381,356 shares of Common Stock.
38
Equity Compensation Plan Information
We have various equity compensation plans under which equity securities are authorized for issuance. Information regarding these
securities as of December 31, 2024, is as follows:
Plan Category
Number of
Securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights (a)
Weighted-
average
exercise
price of
outstanding
options,
warrants and
rights
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
Equity compensation plans approved by security holders
-
-
$
1,684,587
Equity compensation plans not approved by security holders
-
-
-
Total
-
-
$
1,684,587
39
Stock Performance Graph
This stock performance graph compares our total cumulative stockholder return on our Common Stock for the five years ended December
31, 2024 with the cumulative return on the Russell 2000 Index, S&P 500 and an index of peer companies. The companies in the index of
peer issuers, which were selected in good faith on the basis of the similar nature of their business as postsecondary educational institutions,
include American Public Education, Inc., Adtalem Global Education Inc., Strategic Education, Inc., Universal Technical Institute, Inc., and
Perdoceo Education Corporation. The graph assumes that $100 was invested on December 31, 2019 and any dividends were reinvested on
the date on which they were paid.
The information provided under the heading "Stock Performance Graph" shall not be considered "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 or incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent that we specifically incorporate it by reference into a filing.
$0
$100
$200
$300
$400
$500
$600
$700
Stock Performance Graph
(12/31/19 - 12/31/24)
LINC
Peer Group
S&P 500
Russell 2000
Share Repurchases
On May 24, 2022, the Company announced that the Board of Directors had approved a share repurchase program for 12 months
authorizing purchases of up to $30.0 million. On February 27, 2023, the Board of Directors extended the share repurchase program for an
additional 12 months and authorized the repurchase of an additional $10.0 million of the Company’s Common Stock, for an aggregate of
up to $30.6 million in additional repurchases. On May 7, 2024, the Company announced that its Board of Directors had authorized an
extension of its share repurchase program for an additional 12 months through May 24, 2025. During the year ended December 31, 2024,
the Company did not repurchase any shares.
40
The following table presents the number and average price of shares purchased during the three months ended December 31, 2024. The
remaining authorized amount for share repurchases under the program at December 31, 2024 was approximately $29.7 million.
Period
Total Number of
Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publically
Announced Plan
Maximum Dollar
Value of Shares
Remaining to be
Purchased Under
the Plan
October 1, 2024 to October 31, 2024
-
-
$
-
29,663,667
$
November 1, 2024 to November 30, 2024
-
-
-
-
December 1, 2024 to December 31, 2024
-
-
-
-
Total
-
-
-
For more information on the share repurchase program, See Part II. Item 8. “Financial Statements and Supplemental Data - Notes to
Consolidated Financial Statements – Note 12 Stockholders Equity.”
ITEM 6.
[RESERVED]
41
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion together with the “Forward-Looking Statements” and the Consolidated Financial Statements
and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking
statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual
results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of
factors, including those we discuss under “Risk Factors” and “Forward-Looking Statements” and elsewhere in this Annual Report on
Form 10-K.
GENERAL
Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”, “we”, “our” and “us”, as applicable) provide
diversified career-oriented postsecondary education to recent high school graduates and working adults. The Company, which currently
operates 21 campuses in 12 states, has entered into leases for two new campuses: one in Houston, Texas, with programs expected to begin
in the second half of 2025, and one in Hicksville, New York, with programs expected to begin by the end of 2026. Lincoln Educational
Services Corporation offers programs in skilled trades (which include Heating Ventilation and Air Conditioning (“HVAC”), welding and
computerized numerical control and electrical and electronic systems technology, among other programs), automotive technology,
healthcare services (which include nursing, dental assistant and medical assistant, among other programs) and hospitality services and
information technology (which include culinary and aesthetics and information technology programs). The schools operate under the
brands Lincoln Technical Institute, Lincoln College of Technology and Nashville Auto Diesel College.
Most of the Company’s campuses serve major metropolitan markets and each typically offers courses in multiple areas of study. Five of
the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The
Company’s other campuses primarily attract students from their local communities and surrounding areas. All of the campuses are
nationally accredited and are eligible to participate in federal financial aid programs administered by the U.S. Department of Education
(the “DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal
student loans as well as other forms of financial aid. The Company was incorporated in New Jersey in 2003 as the successor-in-interest to
various acquired schools including Lincoln Technical Institute, Inc. which opened its first campus in Newark, New Jersey in 1946.
The Company manages its business, evaluates performance and allocates resources based on two reportable business segments, Campus
Operations and Transitional:
Campus Operations - The Campus Operations segment includes campuses that are continuing in operation and contribute to the
Company’s core operations and performance. All of the campuses continuing in operation are classified in this segment. The majority of
the campuses offer programs across various areas of study.
Transitional – The Transitional segment refers to campuses that are marked for closure and are currently being taught-out, in addition to
campuses that are held-for-sale or sold. As of December 31, 2024, the net assets for the Summerlin, Las Vegas campus were classified as
held for sale, with operating results classified within the Transitional segment. The sale of the campus was consummated effective
January 1, 2025. In addition, the Company closed the Somerville, Massachusetts campus in the prior year. It was fully taught-out as of
December 31, 2023. This campus is classified in the Transitional segment in the prior year’s statement of operations.
As of December 31, 2024, we had 15,138 students enrolled at 21 campuses. Our average enrollment for the fiscal year ended
December 31, 2024 was 14,426 students and our revenues were $440.1 million, which represented an increase of 16.4% over the prior
fiscal year. For more information relating to our revenues, profits and financial condition, please refer to our Consolidated Financial
Statements included in this Annual Report on Form 10-K.
We believe that we provide our students with the highest quality career-oriented training available for our areas of study in our markets
thereby serving students, local employers and their communities. The skills gap continues to expand as talent retires faster than new
employees are hired and as the need for education and training increases in all careers with the accelerating pace of technological change.
We offer programs in areas of study that we believe are typically underserved by traditional providers of postsecondary education and for
which we believe there exists significant demand among students and employers. Furthermore, we believe our convenient class
scheduling, career-focused curricula and emphasis on job placement offer our students valuable advantages that have been previously
unaddressed by the traditional academic sector. By combining virtual training with traditional classroom-based training led by experienced
instructors, we believe we offer our students a unique opportunity to develop practical job skills in many of the key areas of expected job
demand. We believe these job skills enable our students to compete effectively for employment opportunities and to pursue salary and
career advancement.
42
In the last several years, we have further implemented our plan of improving the student experience by adding program offerings,
enhancing existing program offerings and expanding geographically with new state of the art campuses. See Part II. Item 8. “Financial
Statements and Supplemental Data - Notes to Consolidated Financial Statements – Note 6 Leases and Note 8 Real Estate Transactions.”
Our revenues consist primarily of student tuition and fees derived from the programs we offer. Our revenues are reduced by scholarships
granted by us to some of our students. We recognize revenues from tuition and one-time fees, such as application fees, ratably over the
length of a program, including internships or externships that take place prior to graduation. We also earn revenues from our bookstores,
dormitories, cafeterias and contract training services. These non-tuition revenues are recognized upon delivery of goods or as services are
performed and represent less than 10% of our revenues.
Our revenues are directly dependent on the average number of students enrolled in our schools and the courses in which they are enrolled.
Our average enrollment is impacted by the number of new students starting, re-entering, graduating and withdrawing from our schools.
Our diploma/certificate programs range in duration from 27 to 104 weeks, our associate’s degree programs range in duration from 69 to 94
weeks, and students attend classes for different amounts of time per week depending on the school and program in which they are enrolled.
Because we start new students every month, our total student population changes monthly. The number of students enrolling or re-entering
our programs each month is driven by the demand for our programs, the effectiveness of our marketing and advertising, the availability of
financial aid and other sources of funding, the number of recent high school graduates, the job market and seasonality. Our retention and
graduation rates are influenced by the quality and commitment of our teachers and student services personnel, the effectiveness of our
programs, the placement rate and success of our graduates and the availability of financial aid and other sources of funding. Although
similar courses have comparable tuition rates, the tuition rates vary among our numerous programs.
The majority of students enrolled at our schools rely on funds received under various government-sponsored student financial aid
programs to pay a substantial portion of their tuition and other education-related expenses. The largest of these programs are Title IV
Programs which represented approximately 82%, 81%, and 74% of our revenue on a cash basis while the remainder is primarily derived
from state grants and cash payments made by students during fiscal years 2024, 2023, and 2022, respectively. The HEA requires
institutions to use the cash basis of accounting when determining its compliance with the 90/10 Rule. See Part I, Item 1. “Business -
Regulatory Environment.”
We extend credit for tuition and fees to many of our students that attend our campuses. Our credit risk is mitigated by the students’
participation in federally funded financial aid programs unless students withdraw prior to the receipt by us of Title IV Program funds for
those students. Under Title IV Programs, the government funds a certain portion of a student’s tuition, with the remainder, referred to as
“the gap,” financed by the students themselves under third party private party loans and once these financial options have been fully
exhausted, the Company may offer extended payment plans. The gap amount has continued to increase over the last several years as we
have raised tuition on average for the last several years by 2-3% per year.
The additional extension of credit that we are providing to students may expose us to greater credit risk and can impact our liquidity.
However, we believe that these risks are somewhat mitigated by the following:
our internal extension of credit is provided to students only after all other funding resources have been exhausted; thus, by the time
this funding is available, students have completed approximately two-thirds of their curriculum and are more likely to graduate and,
as a consequence, more likely to pay outstanding tuition amounts;
funding for students who interrupt their education is typically covered by Title IV Program funds as long as they have been properly
packaged for financial aid.
The operating expenses associated with an existing school do not increase or decrease proportionally as the number of students enrolled at
the school increases or decreases. We categorize our operating expenses as:
Educational services and facilities. Major components of educational services and facilities expenses include faculty
compensation and benefits, expenses of books and tools, facility rent, maintenance, utilities, depreciation and amortization of
property and equipment used in the provision of education services and other costs directly associated with teaching our
programs excluding student services which is included in selling, general and administrative expenses.
Selling, general and administrative. Selling, general and administrative expenses include compensation and benefits of
employees who are not directly associated with the provision of educational services (such as executive management and
school management, finance and central accounting, legal, human resources and business development), marketing and
student enrollment expenses (including compensation and benefits of personnel employed in sales and marketing and student
admissions), costs to develop curriculum, costs of professional services, bad debt expense, rent for our corporate
43
headquarters, depreciation and amortization of property and equipment that is not used in the provision of educational
services and other costs that are incidental to our operations. Selling, general and administrative expenses also includes the
cost of all student services including financial aid and career services. All marketing and student enrollment expenses are
recognized in the period incurred.
Real Estate Transactions
Asset Purchase Agreement – Summerlin, Las Vegas
On November 11, 2024, the Company entered into an agreement with DVMD LLS (IntelliTec College) for the sale of the Summerlin, Las
Vegas (“Euphoria”) campus. As a result of the intended sale, the Company recorded the carrying amount of the net assets totaling $1.2
million as held for sale on the Consolidated Balance Sheets. The net assets related to the Summerlin, Las Vegas campus consisted of $2.1
million in assets and $0.9 million in liabilities. The sale of the campus was consummated effective January 1, 2025.
Purchase and Sale-leaseback Transaction – Philadelphia, Pennsylvania Area Campus
On September 28, 2023, the Company purchased a 90,000 square foot property located at 311 Veterans Highway, Levittown, Pennsylvania
for approximately $10.2 million and subsequently on January 30, 2024 entered into a sale-leaseback transaction for the same property. As
of December 31, 2023, this property was classified as held-for-sale on the Consolidated Balance Sheets. During the year ended December
31, 2024, the Company has invested approximately $11.7 million in capital investments.
Property Sale Agreement - Nashville, Tennessee Campus
On September 24, 2021, Nashville Acquisition, L.L.C., a subsidiary of the Company, entered into a Contract for the Purchase of Real Estate
(the “Nashville Contract”) to sell the nearly 16-acre property located at 524 Gallatin Avenue, Nashville, Tennessee 37206, at which the
Company operates its Nashville campus, to SLC Development, LLC, a subsidiary of Southern Land Company (“SLC”).
On June 8, 2023, the Company closed on the sale of its Nashville, Tennessee property to East Nashville Owner, LLC, an affiliate
of SLC, for approximately $33.8 million pursuant to the Nashville Contract. The net proceeds from the Nashville sale, net of closing costs,
are available for working capital, acquisitions, other strategic initiatives, and general corporate purposes. In connection with the sale, the
parties entered into a lease agreement allowing Lincoln to continue to occupy the campus and operate it on a rent-free basis for a period of
15 months plus options to extend the lease for up to three consecutive 30-day terms at $150,000 per extension term. The carrying value of
the campus is approximately $4.5 million and the estimated fair value of the rent for the 15-month rent-free period was approximately $2.3
million at the consummation of the lease. As of December 31, 2024, the total rent free period has been fully expensed.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussions of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have
been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the
reported amounts of revenues and expenses during the period. On an ongoing basis, we evaluate our estimates and assumptions, including
those related to revenue recognition, bad debts, goodwill and impairment of long-lived assets and income taxes. Actual results could differ
from those estimates. The critical accounting policies discussed herein are not intended to be a comprehensive list of all of our accounting
policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not result in
significant management judgment in the application of such principles. We believe that the following accounting policies are most critical
to us in that they represent the primary areas where financial information is subject to the application of management's estimates,
assumptions and judgment in the preparation of our Consolidated Financial Statements.
Revenue recognition. Substantially all of our revenues are considered to be revenues from contracts with students. The related accounts
receivable balances are recorded in our balance sheets as student accounts receivable. We do not have significant revenue recognized from
performance obligations that were satisfied in prior periods, and we do not have any transaction price allocated to unsatisfied performance
obligations other than in our unearned tuition. We record revenue for students who withdraw from our schools only to the extent that it is
probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Unearned tuition represents contract
liabilities primarily related to our tuition revenue. We have elected not to provide disclosure about transaction prices allocated to
unsatisfied performance obligations if original contract durations are less than one-year, or if we have the right to consideration from a
student in an amount that corresponds directly with the value provided to the student for performance obligations completed to date in
accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contract with Customers. We have assessed the
costs incurred to obtain a contract with a student and determined them to be immaterial.
44
Allowance for Credit Losses. On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. As a result of the adoption, the
Company has revised the way in which it calculates reserves on outstanding student accounts receivable balances. Details considered by
management in the estimate include the following:
We extend credit to a portion of the students who are enrolled at our academic institutions for tuition and certain other educational costs.
Based upon past experience and judgment, we establish an allowance for credit losses with respect to student receivables which we
estimate will ultimately not be collectible. Our standard student receivable allowance is based on an estimate of lifetime expected credit
losses for student receivables that considers vintages of receivables to determine a loss rate. Our estimation methodology considers a
number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk
and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit
losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory
environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors
are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trending
analysis and comparing estimated and actual performance. The Company evaluates its provision for credit losses on at least a quarterly
basis, considering factors such as micro and macro-economic conditions, the current political climate, and other industry factors.
Management makes a series of assumptions to determine what is believed to be the appropriate level of allowance for credit losses.
Management determines a reasonable and supportable forecast based on the expectation of future conditions over a supportable forecast
period as described above, as well as qualitative adjustments based on current and future conditions that may not be fully captured in the
historical modeling factors described above. All of these estimates are susceptible to significant change.
We monitor our collections and write-off experience to assess whether or not adjustments to our allowance percentage estimates are
necessary. Changes in trends in any of the factors that we believe impact the collection of our student receivables, as noted above, or
modifications to our collection practices, and other related policies may impact our estimate of our allowance for credit losses and our
results from operations.
Because a substantial portion of our revenue is derived from Title IV Programs, any legislative or regulatory action that significantly
reduces the funding available under Title IV Programs, or the ability of our students or institutions to participate in Title IV Programs,
would likely have a material impact on the realizability of our receivables.
Our bad debt expense as a percentage of revenues for the fiscal years ended December 31, 2024, 2023, and 2022 was 12.9%, 11.0%, and
10.0%, respectively. A 1% increase in our bad debt expense as a percentage of revenues for the fiscal years ended December 31, 2024,
2023, and 2022 would have resulted in an increase in bad debt expense of $4.4 million, $3.8 million, and $3.5 million, respectively.
We do not believe that there is any direct correlation between tuition increases, the credit we extend to students and our financing
commitments. The extended financing plans we offer to our students are made on a student-by-student basis and are predominantly a
function of the specific student’s financial condition. We only extend credit to the extent there is a financing gap between the tuition and
fees charged for the program and the amount of grants, loans and parental loans each student receives. Each student’s funding
requirements are unique. Factors that determine the amount of aid available to a student include whether they are dependent or
independent students, Pell Grants awarded, federal Direct Loans awarded, PLUS loans awarded to parents and the student’s personal
resources and family contributions. As a result, it is extremely difficult to predict the number of students that will need us to extend credit
to them.
Because a substantial portion of our revenues is derived from Title IV Programs, any legislative or regulatory action that significantly
reduces the funding available under Title IV Programs or the ability of our students or schools to participate in Title IV Programs could
have a material effect on the realizability of our receivables.
Goodwill. Goodwill represents the excess of purchase price over the fair value of tangible net assets and identifiable intangible assets of
the businesses acquired. Lincoln tests goodwill for impairment annually, in the fourth quarter of each year, unless there are events or
changes in circumstances that indicate an impairment may have occurred. Impairment may result from deterioration in performance,
adverse market conditions, adverse changes in laws or regulations, the restriction of activities associated with the acquired business, and/or
a variety of other circumstances. If we determine that impairment has occurred, we record a write-down of the carrying value and charge
the impairment as an operating expense in the period the determination is made.
As of December 31, 2024, goodwill was approximately $10.7 million, or 2.5%, of our total assets.
When we perform our annual goodwill impairment assessment we have the option to perform a qualitative assessment based on a number
of factors impacting our reporting units (Step 0). When a qualitative assessment is performed, a number of factors are evaluated to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Our qualitative assessment
is subjective. It includes a review of macroeconomic and industry factors, review of financial and non-financial performance measures,
including projected student starts and assessment of adverse events that may negatively impact a reporting units carrying value. Adverse
events would include, but are not limited to, difficulty in accessing capital, a greater competitive environment, decline in market-dependent
45
multiples or metrics, regulatory or political developments, change in key personnel, strategy, or customers, or litigation. If we conclude
based on our qualitative review that it is more likely than not that the fair value of the reporting unit is less than the carrying value, we
proceed with a quantitative impairment test.
When we perform our quantitative impairment test we believe the most critical assumptions and estimates in determining the estimated fair
value of our reporting units include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital
expenditures and a discount rate. The assumptions used in determining our expected future cash flows consider various factors such as
historical operating trends particularly in student enrollment and pricing and long-term operating strategies and initiatives.
If we determine that quantitative tests are necessary, we determine the fair value of each reporting unit using an equal weighting of the
discounted cash flow model and the market approach, or if required, we will evaluate other asset value-based approaches. Our judgment is
necessary in forecasting future cash flows and operating results, critical assumptions include growth rates, changes in operating costs,
capital expenditures, changes in weighted average costs of capital, and the fair value of an asset based on the price that would be received
in a current transaction to sell the asset. Additionally, we obtain independent market metrics for the industry and our peers to assist in the
development of these key assumptions. This process is consistent with our internal forecasts and operating plans.
For the year ended December 31, 2024, there were no impairments related to goodwill.
On June 8, 2023, the Company consummated the sale of its Nashville, Tennessee property (see Part II. Item 8. “Financial Statements and
Supplemental Data” - Notes to Consolidated Financial Statements – Note 8 Real Estate Transactions”). The result of the sale created a
change in the trajectory of the fair value of the Nashville, Tennessee operations and as such, the Company recorded a pre-tax non-cash
impairment charge of $3.8 million relating to goodwill.
During the year ended December 31, 2022, there were no impairments related to goodwill.
Impairment of Long-Lived Assets. The Company reviews the carrying value of its long-lived assets and identifiable intangibles for
possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. For other
long-lived assets, including right-of-use (“ROU”) lease assets, the Company evaluates assets for recoverability when there is an indication
of potential impairment. Factors the Company considers important, which could trigger an impairment review, include significant changes
in the manner of the use of the asset, significant changes in historical trends in operating performance, significant changes in projected
operating performance, and significant negative economic trends. If the undiscounted cash flows from a group of assets being evaluated is
less than the carrying value of that group of assets, the fair value of the asset group is determined and the carrying value of the asset group
is written down to fair value.
When we perform the quantitative impairment test for long-lived assets, we examine estimated future cash flows using Level 3 inputs.
These cash flows are evaluated by using weighted probability techniques as well as comparisons of past performance against projections.
Assets may also be evaluated by identifying independent market values. If the Company determines that an asset’s carrying value is
impaired, it will record a write-down of the carrying value of the asset and charge the impairment as an operating expense in the period in
which the determination is made.
For the year ended December 31, 2024, there were no impairments related to long-lived assets.
During the year ended December 31, 2023, as a result of the Nashville sale discussed above, the Company also recorded a pre-tax non-cash
impairment charge of $0.4 million relating to long-lived assets.
On December 31, 2022, as a result of impairment testing, it was determined that there was a long-lived asset impairment of $1.0 million.
The impairment was the result of an assessment of the current market value, as compared to the carrying value of the assets.
Income taxes. The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”). This statement
requires an asset and a liability approach for measuring deferred taxes based on temporary differences between the financial statement and
tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid
or recovered.
In accordance with ASC 740, the Company assesses our deferred tax asset to determine whether all or any portion of the asset is more
likely than not unrealizable. A valuation allowance is required to be established or maintained when, based on currently available
information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, our
assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in
order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, the Company considers, among other
things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting
differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax
benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in our
Consolidated Financial Statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax
46
consequences could have a material impact on the Company’s consolidated financial position or results of operations. Changes in, among
other things, income tax legislation, statutory income tax rates or future income levels could materially impact the Company’s valuation of
income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the fiscal years ended
December 31, 2024, 2023, and 2022, we did not record any interest and penalties expense associated with uncertain tax positions, as we do
not have any uncertain tax positions.
Results of Operations for the Three Years Ended December 31, 2024
The following table sets forth selected consolidated statements of operations data as a percentage of revenues for each of the periods
indicated:
2024
2023
2022
Revenue
100.0%
100.0%
100.0%
Costs and expenses:
Educational services and facilities
41.3%
42.9%
42.7%
Selling, general and administrative
55.4%
55.3%
52.4%
Loss (gain) on sale of assets
0.5%
-8.2%
-0.1%
Gain on insurance proceeds
-0.6%
0.0%
0.0%
Impairment of goodwill and long-lived assets
0.0%
1.1%
0.3%
Total costs and expenses
96.6%
91.2%
95.3%
Operating income
3.4%
8.8%
4.7%
Interest expense, net
-0.1%
0.6%
0.0%
Income from operations before income taxes
3.3%
9.4%
4.7%
Provision for income taxes
1.1%
2.6%
1.1%
Net income
2.2%
6.8%
3.6%
Year Ended Dec 31,
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Consolidated Results of Operations
Revenue. Revenue increased $62.0 million, or 16.4% to $440.1 million for the fiscal year ended December 31, 2024 from $378.1 million
in the prior year. Revenue growth was driven by several factors including an 11.5% increase in average student population, driven in part
by beginning the year with 7.1%, or 882 more students than in the prior year and student start growth up 15.2% over the prior year.
Included in the increase over the prior year was $9.6 million of revenue generated from the recently opened East Point, Georgia campus.
Educational services and facilities expense. Our educational services and facilities expense increased $19.5 million, or 12.0% to $181.8
million for the fiscal year ended December 31, 2024 from $162.3 million in the prior year. The increase over the prior year includes
approximately $4.3 million in preopening costs for the new Houston, Texas campus, which is expected to begin classes in the second half
of 2025, costs related to the relocation of each of the Nashville, Tennessee and Levittown, Pennsylvania campuses, which are expected to
open in the first half of 2025 and the second half of 2025, respectively, and investments to implement and expand new programs at existing
campuses. Additional costs of $4.8 million are included in the current year as a result of the new East Point, Georgia campus that opened
during the first quarter of 2024.
Instructional expenses and books and tools expense increased $8.8 million, primarily resulting from costs associated with an increased
student population.
Facilities and Depreciation expense increased approximately $4.0 million, primarily driven by additional assets placed in service resulting
from increased investments in capital expenditures in the current year.
Partially offsetting these costs was a $2.4 million decrease in expense related to campuses included in the Transitional segment.
Educational services and facilities expense, as a percentage of revenue, decreased to 41.3% from 42.9% for the fiscal years ended
December 31, 2024 and 2023, respectively. The decrease from the prior year was most notable in the instructional expenses, which
demonstrates an increase in operational efficiencies year-over-year.
47
Selling, general and administrative expense. Our selling, general and administrative expense increased $34.7 million, or 16.6% to $243.8
million for the fiscal year ended December 31, 2024, from $209.1 million in the prior year. The increase over the prior year includes
approximately $0.6 million in preopening costs for the new Houston, Texas campus, which is expected to begin classes in the second half
of 2025, costs related to the relocation of each of the Nashville, Tennessee and Levittown, Pennsylvania campuses, which are expected to
open in the first half of 2025 and the second half of 2025, respectively, and investments to implement and expand new programs at existing
campuses. Additional costs of $5.4 million are included in the current year as a result of the new East Point, Georgia campus that opened
during the first quarter of 2024.
Administrative costs increased $20.5 million, driven primarily by additional salaries expense due to increased personnel combined with
merit increases and an increase in the provision for credit losses largely driven by revenue growth. Partially offsetting these costs were
decreases in stock compensation expense, as a result of expense recorded related to the number of awards expected to vest at December 31,
2023.
Marketing investments increased $2.7 million, while the cost per start over the prior year remained relatively flat demonstrating continued
effectiveness per marketing dollars spent. Additional investments in marketing year-over-year have helped contribute to the 15.2% start
growth.
Sales and student services increased $7.1 million, primarily driven by increased personnel to continue to help drive student start growth
and program expansions.
Partially offsetting these costs was a $1.7 million decrease in expense related to campuses included in the Transitional segment.
Selling, general and administrative expense, as a percentage of revenue, increased slightly to 55.4% from 55.3% for the fiscal years ended
December 31, 2024 and 2023, respectively.
Loss on sale of assets. Loss on sale of assets was $2.1 million compared to a gain on sale of assets of $30.9 million for the fiscal years
ended December 31, 2024 and 2023, respectively. The current year loss was primarily driven by the sale of the Summerlin, Las Vegas
campus, while the gain in the prior year resulted from the sale of the Company’s Nashville, Tennessee property during the second quarter
of 2023. Net proceeds from the sale were approximately $33.3 million.
Gain on insurance proceeds. Gain on insurance proceeds for the year ended December 31, 2024 was $2.8 million relating to hail damage
at one of our campuses.
Impairment of goodwill and long-lived assets. Impairment of goodwill and long-lived assets was zero and $4.2 million for the fiscal years
ended December 31, 2024 and 2023, respectively. The impairment in the prior year was driven by the sale the Nashville, Tennessee
property on June 8, 2023. The result of the sale created a change in the trajectory of the fair value of the Nashville, Tennessee operations,
and as such, the Company recorded a pre-tax non-cash impairment charge of $3.8 million relating to goodwill and an additional $0.4
million impairment relating to long-lived assets.
Net interest expense / income. Net interest expense was $0.5 million compared to net interest income of $2.3 million for the fiscal years
ended December 31, 2024 and 2023, respectively. Interest expense in the current year was primarily driven by the addition of two
additional finance leases.
Income taxes. Our income tax provision for the year ended December 31, 2024 was $4.8 million, or 32.8% of pre-tax income compared to
$9.6 million, or 27.1% of pre-tax net income in the prior year. The increase in the effective tax rate was mainly due to lower pre-tax
income, reduced discrete tax item benefit and tax return reconciliation from estimate to actuals.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Consolidated Results of Operations
Revenue. Revenue increased $29.8 million, or 8.6% to $378.1 million for the fiscal year ended December 31, 2023 from $348.3 million
during the fiscal year ended December 31, 2022. Excluding the Transitional segment revenue of $10.8 million and $17.4 million for the
fiscal year ended December 31, 2023, and 2022, respectively, our revenue would have increased $36.3 million, or 11.0%. The remaining
increase in revenue was driven by several factors including student start growth of 13.3% and an increase in average revenue per student of
7.8%, driven in part by the continuing rollout of the Company’s hybrid teaching model in combination with tuition increases. The
Company’s hybrid teaching model increases program efficiency and delivers accelerated revenue recognition in certain evening programs.
Educational services and facilities expense. Our educational services and facilities expense increased $13.5 million, or 9.1% to $162.3
million for the fiscal year ended December 31, 2023 from $148.7 million during the fiscal year ended December 31, 2022. Excluding the
Transitional segment educational services and facilities expense of $6.7 million and $8.1 million for the fiscal years ended December 31,
48
2023 and 2022, respectively, our educational services and facilities expense would have increased $14.9 million, or 10.6%. Increased
costs were primarily concentrated in instructional expense, facilities expense and books and tools expense.
Instructional expenses increased $7.0 million, driven primarily by higher instructional salaries resulting from higher staffing levels due to
increases in our student population and merit salary increases. In addition, the Company is experiencing higher staffing levels at several
campuses that have launched the hybrid teaching model as the Company is providing instruction through both the new and traditional
learning models for an interim period of time. Further increases resulted from student testing, primarily related to our nursing program,
and increased consumables costs driven by a higher student population and inflation.
Facilities expense increased by approximately $4.4 million, driven primarily by a $2.4 million increase in rent expense relating to lease
extensions at several campuses, additional space taken at one of our campuses, non-cash rent expense relating to the new East Point,
Georgia campus, and the sale-leaseback of our existing Nashville, Tennessee property. In connection with the sale of the Nashville,
Tennessee property, the Company entered into a lease agreement allowing the Company to continue to occupy the campus and operate it
on a rent-free basis for a period of 15 months. At the consummation of the sale, the Company took the fair value of the 15-month rent free
period, valued at $2.3 million, and included the balance in prepaid expenses and other current assets on the Company’s Consolidated
Balance Sheets. During the 15-month rent-free period, the Company will straight-line the expense until the rent-free period has expired.
Also contributing to the increased costs were higher utility expense driven by inflation and an increase in repairs and maintenance at
several campuses.
Books and tools expense increased $3.2 million, driven by a 14.6% increase in student starts year-over-year and vendor price increases.
Educational services and facilities expense, as a percentage of revenue, increased to 42.9% from 42.7% for the fiscal years ended
December 31, 2023 and 2022, respectively.
Selling, general and administrative expense. Our selling, general and administrative expense increased $26.7 million, or 14.7% to $209.1
million for the fiscal year ended December 31, 2023, from $182.4 million during the fiscal year ended December 31, 2022. Excluding the
Transitional segment selling, general and administrative expense of $6.5 million and $8.0 million for the fiscal years ended December 31,
2023 and 2022, respectively, our selling general and administrative expense would have increased $28.3 million, or 16.2%. Increased
costs were driven by the following:
Administrative costs increased $20.3 million, driven by several factors including a) an increase in performance-based incentives driven by
improved financial performance above plan, b) increased stock-based compensation due to achieving financial targets, c) additional bad
debt expense driven by revenue growth of $36.3 million and a slight deterioration in collection rates and d) higher legal costs. In addition,
at December 31, 2023, the Company provided all employees, who are not part of the Company’s bonus incentive plan with a holiday
bonus.
Marketing investments increased $4.1 million, helping drive additional student starts, up 11.4% year-over-year. Increased investments
were driven in part by continued incremental marketing support for the two new programs that were launched in the third quarter of 2023,
which included Medical Assistant at our Columbia, MD campus and Electrical & Electronic Systems Technology at our Grand Prairie, TX
campus. Marketing investment in the fourth quarter of 2023 also included the start of an awareness building media campaign for the new
East Point, GA campus . Despite additional investments in marketing for the year, the total cost to obtain a student remained flat
demonstrating the effectiveness of the current marketing campaign.
Student services increased $2.3 million, primarily resulting from costs associated with an increased student population.
Selling, general and administrative expense, as a percentage of revenue, increased to 55.3% from 52.4% for the fiscal years ended
December 31, 2023 and 2022, respectively.
Gain on sale of assets. Gain on sale of assets was $30.9 million, for the fiscal year ended December 31, 2023 resulting from the sale of the
Company’s Nashville, Tennessee property during the second quarter of 2023. Net proceeds from the sale were approximately $33.3
million.
Gain on sale of assets was $0.2 million for the fiscal year ended December 31, 2022, resulting from the sale of the Suffield, Connecticut
campus during the second quarter of 2022. Net proceeds from the sale were approximately $2.4 million.
Impairment of goodwill and long-lived assets. Impairment of goodwill and long-lived assets was $4.2 million for the fiscal year ended
December 31, 2023 driven by the sale the Nashville, Tennessee property on June 8, 2023. The result of the sale created a change in the
trajectory of the fair value of the Nashville, Tennessee operations, and as such, the Company recorded a pre-tax non-cash impairment
charge of $3.8 million relating to goodwill and an additional $0.4 million impairment relating to long-lived assets.
For the fiscal year ended December 31, 2022, as a result of the Company’s annual test of goodwill and long-lived assets, it was determined
that there was sufficient evidence to conclude that a $1.0 million impairment existed. The impairment was the result of an assessment of
49
the current market value, as compared to the current carrying value of the assets. Approximately $0.6 million of the Company’s ROU
asset was impaired in addition to $0.4 million of long-lived assets.
Net interest income. Net interest income was $2.3 million for the fiscal year ended December 31, 2023 compared to $0.2 million during
the fiscal year ended December 31, 2022. The increase in net interest income was primarily driven by the Company’s investment of its
cash reserves into various short-term investments for the full fiscal year ended December 31, 2023, compared to investing cash reserves in
the fourth quarter of 2022. The current year net interest income is partially offset by approximately $0.2 million of additional interest
expense relating to a finance lease obligation for our new Nashville, Tennessee property.
Income taxes. Our income tax provision for the year ended December 31, 2023 was $9.6 million, or 27.1% of pre-tax income compared to
$3.8 million, or 23.1% of pre-tax income for the year ended December 31, 2022. During the year ended December 31, 2023, the increase
in effective tax rate was mainly due to a lesser tax benefit derived from restricted stock vesting and higher pre-tax income.
Segment Results of Operations
The Company manages its business, evaluates performance and allocates resources based on two reportable business segments, Campus
Operations and Transitional:
Campus Operations - The Campus Operations segment includes campuses that are continuing in operation and contribute to the
Company’s core operations and performance. All of the campuses continuing in operation are classified in this segment. The majority of
the campuses offer programs across various areas of study.
Transitional – The Transitional segment refers to campuses that are marked for closure and are currently being taught-out, in addition to
campuses that are held-for-sale or sold. As of December 31, 2024, the net assets for the Summerlin, Las Vegas campus were classified as
held for sale, with operating results classified within the Transitional segment. The sale of the campus was effectuated on January 1, 2025.
In addition, the Company closed the Somerville, Massachusetts campus in the prior year. It was fully taught-out as of December 31, 2023.
This campus is classified in the Transitional segment in the prior year’s statement of operations.
We evaluate performance based on operating results. Adjustments to reconcile segment results to consolidated results are included in the
caption “Corporate,” which primarily includes unallocated corporate activity.
50
The following table presents results for the activity for our reportable operating segments for the fiscal years ended December 31, 2024
and 2023:
2024
2023
% Change
Revenue:
Campus Operations
432,966
$
367,233
$
17.9%
Transitional
7,098
10,837
-34.5%
Total
440,064
$
378,070
$
16.4%
Operating Income (Loss):
Campus Operations
63,558
$
48,031
$
32.3%
Transitional
(2,039)
(2,366)
13.8%
Corporate
(46,342)
(12,307)
-276.5%
Total
15,177
$
33,358
$
-54.5%
Starts:
Campus Operations
18,153
15,526
16.9%
Transitional
507
673
-24.7%
Total
18,660
16,199
15.2%
Average Population:
Campus Operations
14,100
12,436
13.4%
Transitional
326
505
-35.4%
Total
14,426
12,941
11.5%
End of Period Population:
Campus Operations
14,838
12,900
15.0%
Transitional
300
370
-18.9%
Total
15,138
13,270
14.1%
Year Ended December 31,
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Campus Operations
Operating income was $63.6 million and $48.0 million for the fiscal years ended December 31, 2024 and 2023, respectively. The change
year-over-year was mainly driven by the following factors:
Revenue increased $65.7 million, or 17.9% to $432.9 million for the fiscal year ended December 31, 2024 from $367.2
million in the prior year. Revenue growth was driven by several factors including an 13.4% increase in average student
population, driven in part by beginning the year with 10.2% or approximately 1,100 more students than in the prior year and
student start growth up 16.9% over the prior year. Included in the increase over the prior year was $9.6 million of revenue
generated from the recently opened East Point, Georgia campus.
Educational services and facilities expense increased $21.9 million, or 14.1% to $177.4 million for the fiscal year ended
December 31, 2024 from $155.5 million in the prior year. The increase over the prior year includes approximately $4.3
million in preopening costs for the new Houston, Texas campus, which is expected to begin classes in the second half of
2025, costs related to the relocation of each of the Nashville, Tennessee and Levittown, Pennsylvania campuses, which are
expected to open in the first half of 2025 and the second half of 2025, respectively, and investments to implement and expand
new programs at existing campuses. Additional costs of $4.8 million are included in the current year as a result of the new
East Point, Georgia campus that opened during the first quarter of 2024. Remaining cost increases were driven by increased
instructional expenses, additional books and tools expense and an increase in depreciation expense, all of which are discussed
above in the Consolidated Results of Operations.
Selling, general and administrative expense increased $32.0 million, or 20.0% to $191.4 million for the fiscal year ended
December 31, 2024, from $159.4 million in the prior year. The increase over the prior year includes approximately $0.4
million in preopening costs for the new Houston, Texas campus, which is expected to begin classes in the second half of
2025, costs related to the relocation of each of the Nashville, Tennessee and Levittown, Pennsylvania campuses, which are
expected to open in the first half of 2025 and the second half of 2025, respectively, and investments to implement and expand
51
new programs at existing campuses. Additional costs of $5.4 million are included in the current year as a result of the new
East Point, Georgia campus that opened during the first quarter of 2024. Remaining cost increases were primarily driven by
increased administrative costs, marketing investments and sales, and student services, all of which are discussed above in the
Consolidated Results of Operations.
Impairment of goodwill and long-lived assets was zero and $4.2 million for the fiscal years ended December 31, 2024 and
2023, respectively, as discussed above in the Consolidated Results of Operations.
Transitional
As of December 31, 2024, the assets of the Company’s Summerlin, Las Vegas campus were classified as held for sale on the balance sheet
and has classified statement of operating results within the Transitional segment. Previously, in November, 2022, the Board of Directors
approved a plan to close the Somerville, Massachusetts campus. It was fully taught-out as of December 31, 2023 and was classified in the
Transitional segment in the prior year’s statement of operations.
Revenue decreased $3.7 million, or 34.5% to $7.1 million for the fiscal year ended December 31, 2024, from $10.8 million in the
prior year.
Total operating expenses decreased $4.1 million, or 30.8% to $9.1 million for the fiscal year ended December 31, 2024, from
$13.2 million in the prior year.
The primary reason for the decrease in both revenue and operating expenses year-over-year was due to one campus, the Summerlin, Las
Vegas campus, being classified in the Transitional segment in the current year and two campuses, the Summerlin, Las Vegas campus and
the Somerville, Massachusetts campus, being included in the Transitional segment in the fiscal year ended December 31, 2023.
Corporate and Other
This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were $46.3 million
and $12.3 million for the years ended December 31, 2024 and 2023, respectively. Included in the current year is a $1.5 million loss on sale
of assets mostly related to the sale of our Summerlin, Las Vegas campus and a $2.8 million gain related to insurance proceeds received as
a result of hail damage at one of our campuses. The prior year balance includes a $30.9 million gain on sale of assets resulting from the
sale of the Nashville, Tennessee property. The increase in expense from the prior year is primarily related to additional salaries and
benefits expense, partially offset by reduced stock compensation expense.
52
The following table presents results for the activity for our reportable operating segments for the fiscal years ended December 31, 2023
and 2022:
2023
2022
% Change
Revenue:
Campus Operations
367,233
$
330,896
$
11.0%
Transitional
10,837
17,391
-37.7%
Total
378,070
$
348,287
$
8.6%
Operating Income (Loss):
Campus Operations
48,031
$
47,799
$
0.5%
Transitional
(2,366)
1,295
282.7%
Corporate
(12,307)
(32,816)
62.5%
Total
33,358
$
16,278
$
104.9%
Starts:
Campus Operations
15,526
13,709
13.3%
Transitional
673
1,211
-44.4%
Total
16,199
14,920
8.6%
Average Population:
Campus Operations
12,436
12,079
3.0%
Transitional
505
815
-38.0%
Total
12,941
12,894
0.4%
End of Period Population:
Campus Operations
12,900
11,703
10.2%
Transitional
370
685
-46.0%
Total
13,270
12,388
7.1%
Year Ended December 31,
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Campus Operations
Operating income was $48.0 million and $47.8 million for the fiscal years ended December 31, 2023 and 2022, respectively. The change
year-over-year was mainly driven by the following factors:
Revenue increased $36.3 million, or 11.0% to $367.2 million for the fiscal year ended December 31, 2023 from $330.9
million for the fiscal year ended December 31, 2022. The increase in revenue was driven by several factors including student
start growth of 13.3% and an increase in average revenue per student of 7.8%, driven in part by the continuing rollout of the
Company’s hybrid teaching model in combination with tuition increases. The Company’s hybrid teaching model increases
program efficiency and delivers accelerated revenue recognition in certain evening programs.
Educational services and facilities expense increased $14.9 million, or 10.6% to $155.5 million for the fiscal year ended
December 31, 2023 from $140.7 million during the fiscal year ended December 31, 2022. Increased costs were primarily
concentrated in instructional, facilities expense, and books and tools expense.
o
Instructional expenses increased $7.0 million, driven primarily by higher instructional salaries resulting from higher
staffing levels due to increases in our student population and merit salary increases. In addition, the Company is
experiencing higher staffing levels at several campuses that have launched the hybrid teaching model as the
Company is providing instruction through both the new and traditional learning models for an interim period of
time. Further increases resulted from student testing, primarily related to our nursing program, and increased
consumables costs driven by a higher student population and inflation.
o
Facilities expense increased by approximately $4.4 million, driven primarily by a $2.4 million increase in rent
expense relating to lease extensions at several campuses, additional space taken at one of our campuses, non-cash
rent expense relating to the new East Point, Georgia campus, and the sale-leaseback of our existing Nashville,
53
Tennessee property. In connection with the sale of the Nashville, Tennessee property, the Company entered into a
lease agreement allowing the Company to continue to occupy the campus and operate it on a rent-free basis for a
period of 15 months. At the consummation of the sale, the Company took the fair value of the 15-month rent free
period, valued at $2.3 million, and included the balance in prepaid expenses and other current assets on the
Company’s Consolidated Balance Sheets. During the 15-month rent-free period, the Company will straight-line the
expense until the rent-free period has expired. Also contributing to the increased costs were higher utility expense
driven by inflation and an increase in repairs and maintenance at several campuses.
o
Books and tools expense increased $3.2 million, driven by a 14.6% increase in student starts year-over-year.
Selling, general and administrative expense increased $18.0 million, or 12.8% to $159.4 million for the fiscal year ended
December 31, 2023, from $141.4 million during the fiscal year ended December 31, 2022. The increase was primarily driven
by an increase in administrative costs, marketing investments, and student services, all of which are discussed above in the
Consolidated Results of Operations.
Impairment of goodwill and long-lived assets was $4.2 million and $1.0 million for the fiscal years ended December 31, 2023
and 2022, respectively, as discussed above in the Consolidated Results of Operations.
Transitional
On November 3, 2022, the Board of Directors approved a plan to close the Somerville, Massachusetts campus. The owner of the
Somerville property has exercised an option to terminate the lease on December 8, 2023 and the Company has since determined not to
pursue relocating the campus in this geographic region. The campus has been fully taught-out, and total costs to close the campus were
approximately $2.0 million. Additionally, statement of operations information for the Summerlin, Las Vegas campus for the years ended
December 31, 2023 and 2022, respectively, has been included in the Transitional segment revenue and operating expense information for
comparability.
Revenue decreased $6.5 million, or 37.7% to $10.8 million for the fiscal year ended December 31, 2023, from $17.4 million
during the fiscal year ended December 31, 2022.
Total operating expenses decreased $2.9 million, or 18.0% to $13.2 million for the fiscal year ended December 31, 2023, from
$16.1 million during the fiscal year ended December 31, 2022.
For the year ended December 31, 2023, the Transitional segment included normal full year operations for the Summerlin, Las Vegas
campus and a teach-out at the Somerville, Massachusetts campus, which was winding down operations and no longer accepting new
students. During the year ended December 31, 2022, the Transitional segment included normal full year operations for both the
Summerlin, Las Vegas and Somerville, Massachusetts campuses.
Corporate and Other
This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were $43.2 million
and $33.0 million after excluding a $30.9 million gain in 2023, resulting from the sale of our Nashville, Tennessee property and a $0.2
million gain in 2022 driven by the sale of our former campus property in Suffield, Connecticut. Increased costs were driven by several
factors including additional performance-based incentives, stock-based compensation, and an increase in legal costs.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital requirements are for maintenance and expansion of our facilities and the development of new programs. Our principal
source of liquidity has been cash provided by operating activities. The following chart summarizes the principal elements of our cash flow
for each of the three fiscal years in the period ended December 31, 2024:
2024
2023
2022
Net cash provided by operating activities
29,306
$
25,558
$
882
$
Net cash (used in) provided by investing activities
(46,971)
$
7,369
$
(21,354)
$
Net cash used in financing activities
(3,331)
$
(2,945)
$
(12,548)
$
Cash Flow Summary
Year Ended December 31,
(In thousands)
As of December 31, 2024, the Company had $59.3 million in cash and cash equivalents, compared to $80.3 million in cash and cash
equivalents and restricted cash as of December 31, 2023. The change in cash position from the end of the year was driven in part by the
payment of incentive compensation during the first quarter and investments in capital expenditures relating to our recently opened East
Point, Georgia campus, the new Houston Texas campus, the relocation of each of the Nashville, Tennessee and Levittown, Pennsylvania
campuses, and new programs and program expansions. Further, the prior year cash position benefited from $33.3 million in proceeds
resulting from the sale of our Nashville, Tennessee property.
54
As of December 31, 2023, the Company had $80.3 million in cash and cash equivalents and restricted cash, compared to $50.3 million in
cash and cash equivalents and restricted cash, including $14.7 million in short-term investments as of December 31, 2022. The change in
cash position from the prior year was primarily driven by several factors including the sale of our Nashville, Tennessee property, which
yielded approximately $33.3 million in proceeds, cash flow generated from operations of $25.9 million, and an increase of $2.1 million
relating to additional interest income driven by the investment of cash reserves into various short-term investment vehicles during the year
ended December 31, 2023. Partially offsetting the increase in cash position were investments of $41.2 million in capital expenditures,
which includes the buildout of the new East Point, Georgia campus and the purchase of the new Levittown, Pennsylvania property for
approximately $10.2 million on September 28, 2023. Also contributing to the change in cash year-over-year were incentive compensation
payments, share repurchases made under the share repurchase program, and one-time costs incurred in connection with the teach-out of our
Somerville, Massachusetts campus.
On May 24, 2022, the Company announced that its Board of Directors had authorized a share repurchase program of up to $30.0 million of
the Company’s outstanding Common Stock. The share repurchase program was authorized for 12 months. On February 27, 2023, the
Board of Directors extended the share repurchase program for an additional 12 months and authorized the repurchase of an additional
$10.0 million of the Company’s Common Stock, for an aggregate of up to $30.6 million in additional repurchases.
On May 7, 2024, the Company announced that its Board of Directors had authorized an extension of its share repurchase program for an
additional 12 months through May 24, 2025. During the year ended December 31, 2024, the Company did not repurchase any additional
shares. As of December 31, 2024, the Company had approximately $29.7 million remaining for additional repurchases under the program.
On December 24, 2024, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission (“SEC”)
registering securities for potential future use. Under the Registration Statement, we may sell the securities described in the prospectus
from time to time in one or more offerings up to a total dollar amount of $150 million.
Our primary source of cash is tuition collected from our students. The majority of students enrolled at our schools rely on funds received
under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related
expenses. The most significant source of student financing is Title IV Programs, which represented approximately 82% of our cash
receipts relating to revenues in 2024. Pursuant to applicable regulations, students must apply for a new loan for each academic period.
Federal regulations dictate the timing of disbursements of funds under Title IV Programs and loan funds are generally provided by lenders
in two disbursements for each academic year. The first disbursement is usually received approximately 31 days after the start of a student’s
academic year and the second disbursement is typically received at the beginning of the sixteenth week from the start of the student's
academic year. Certain types of grants and other funding are not subject to a 31-day delay. In certain instances, if a student withdraws
from a program prior to a specified date, any paid but unearned tuition or prorated Title IV Program financial aid is refunded according to
federal, state and accrediting agency standards.
As a result of the significant amount of Title IV Program funds received by our students, we are highly dependent on these funds to operate
our business. Any reduction in the level of Title IV Program funds that our students are eligible to receive for tuition payment to us or any
restriction on our eligibility to receive Title IV Program funds would have a significant impact on our operations and our financial
condition. For more information, See Part I, Item 1A. “Risk Factors - Risks Related to Our Industry”.
Operating Activities
Operating cash flow results primarily from cash received from our students, offset by changes in working capital demands. Working
capital can vary at any point in time based on several factors including seasonality, timing of cash receipts and payments and vendor
payment terms.
Net cash provided by operating activities for the years ended December 31, 2024 and 2023 was $29.3 million and $25.5 million,
respectively. The increase from prior year was primarily driven by higher net income after adjusting for non-operational income items.
Net cash provided by operating activities for the years ended December 31, 2023 and 2022 was $25.5 million and $0.8 million,
respectively. The $24.7 million increase was driven by several factors including a $12.0 million increase in accrued expenses, primarily
driven by additional performance-based incentives in the current year as a result of improved financial performance, in addition to a $13.6
million change in accounts receivable, also considering the provision for credit losses and unearned tuition. Increases in accounts
receivable were primarily driven by a $29.8 million increase in revenue year-over-year.
Investing Activities
Net cash used in investing activities was $47.0 million for the fiscal year ended December 31, 2024, compared to net cash provided by
investing activities of $7.3 million for the fiscal year ended December 31, 2023. The primary reason for the decrease in net cash was due
to increased investments in capital expenditures in the current year, partially offset by a proceeds from the sale of the Levittown,
Pennsylvania property. The December 31, 2023 cash position benefited from several factors including the sale of the Nashville, Tennessee
55
property and proceeds received from short-term investments. Partially offsetting these cash inflows was the purchase of additional short-
term investments.
Net cash provided by investing activities was $7.3 million for the fiscal year ended December 31, 2023, compared to net cash used in
investing activities of $21.4 million for the fiscal year ended December 31, 2022. The increase of $28.7 million was driven by several
factors including a $30.9 million increase in proceeds from the sale of property and equipment driven by the sale of our Nashville,
Tennessee property during the second quarter of 2023, in addition to an increase in net proceeds from investments of $29.5
million. Partially offsetting the cash inflows was an increase in investments in capital expenditures of $31.7 million, which was primarily
driven by the buildout of the new East Point, Georgia campus and the purchase of the new Levittown, Pennsylvania property for
approximately $10.2 million, which was consummated on September 28, 2023.
We currently lease all of our campuses.
Capital expenditures were 13.1% of revenues in 2024 and are expected to be approximately 16.0% of revenues in 2025. The increase in
planned capital expenditures over the prior year will be driven by several factors that include but are not limited to the buildout of the
Nashville, Tennessee, Levittown, Pennsylvania, Houston, Texas and Hicksville, New York campuses. In addition, we plan to invest $2.5
million into expanding programs at the Melrose, Illinois and Allentown, Pennsylvania campuses and we plan to invest an additional $20.0
million for educational equipment, real estate improvements, and information technology across various campuses. We expect to fund
future capital expenditures with cash generated from operating activities and cash on hand.
Financing Activities
Net cash used in financing activities for the fiscal years ended December 31, 2024 and 2023 was $3.3 million and $2.9 million,
respectively. The increase in cash used of $0.4 million was driven by several factors including the payment of $0.4 million of deferred
financing fees paid for implementing the new credit facility with Fifth Third Bank National Association, a $1.3 million increase in cash
outflow relating to the tax impact for vested stock grants, and a $0.3 million cash outflow relating to lease payments made under the
Company’s two additional finance leases. Partially offsetting these cash outflows was a $0.8 million inflow for a tenant allowance
relating to one of the Company’s finance leases in the current year. The fiscal year ended December 31, 2023 also included a $0.9 million
cash outflow relating to the Company’s share repurchase plan.
Net cash used in financing activities for the fiscal years ended December 31, 2023 and 2022 was $2.9 million and $12.5 million,
respectively. The decrease in cash used of $9.6 million was primarily driven by a $8.5 million reduction in repurchases made under the
Company’s share repurchase program in the current year, in addition to $1.1 million of dividend payments made in the prior year.
Credit Facility
On February 16, 2024, the Company entered into a secured credit agreement (the “Fifth Third Credit Agreement”) with Fifth Third Bank,
National Association (the “Bank”), pursuant to which the Company, as borrower, has obtained a revolving credit facility in the aggregate
principal amount of $40.0 million including a $10.0 million letter of credit sublimit and a $20.0 million accordion feature (the “Facility”),
the proceeds of which are to be used for working capital, general corporate and certain other permitted purposes. The Facility is guaranteed
by the Company’s wholly-owned subsidiaries and is secured by a first priority lien in favor of the Bank on substantially all of the personal
property owned by the Company and its subsidiaries. The term of the Facility is 36 months, maturing on February 16, 2027.
Each advance under the Facility will bear interest on the outstanding principal amount thereof from the date when made at an interest rate
determined at the election of the Company at either the Tranche Rate (which is the forward-looking Secured Overnight Financing Rate
(SOFR) for one or three months), or the Base Rate (which is a variable per annum rate, as of any date of determination, equal to the Bank’s
Prime Rate), plus an Applicable Margin. The Applicable Margin is determined pursuant to a Pricing Grid, which for loans subject to the
Tranche Rate varies from 1.75% to 2.50% and for loans subject to the Base Rate varies from 0.75% to 1.50%. The Applicable Margin may
change quarterly based on the Total Leverage Ratio at such time. The Total Leverage Ratio is determined with respect to the Company and
its subsidiaries on a consolidated basis for an applicable quarterly period by dividing the aggregate principal amount of various forms of
borrowed indebtedness as of the last day of a determination period by EBITDA (earnings before interest expense, taxes, depreciation and
amortization) for such period. Interest is paid in arrears, either quarterly or monthly depending on the Company’s interest rate election, with
the principal due at maturity.
Under the terms of the Fifth Third Credit Agreement, the Company will pay to the Bank an unused facility fee on the average daily unused
balance of the Facility at a rate per annum equal to 0.50%, which fee is payable in arrears on dates when interest is due and payable. As of
December 31, 2024, the Company has paid approximately $200,000 in unused facility fees. The Company will also pay to the Bank a
letter of credit fee equal to the Applicable Margin for loans subject to the Tranche Rate multiplied by the maximum amount available to be
drawn under such letter of credit.
56
The Fifth Third Credit Agreement contains customary representations, warranties and affirmative and negative covenants, as well as events
of default customary for facilities of this type. In connection with the Fifth Third Credit Agreement, the Company paid fees of
approximately $456,000 consisting of bank fees, closing fees, legal costs and other customary fees and reimbursements.
On July 18, 2024, Company entered into a first amendment (the “Amendment”) of the Fifth Third Credit Agreement with the Bank.
Among other things, the Amendment effects certain modifications to (i) clarify certain representations and affirmative covenants of the
Company, (ii) clarify certain conditions to each advance, (iii) clarify and/or replace certain events of default and (iv) delete or revise
certain definitions in order to harmonize them with the other modifications made. The Amendment also contains customary releases,
representations and warranties and reaffirmations consistent with the original terms of the Fifth Third Credit Agreement. Except as set
forth above, the Amendment does not materially alter the Fifth Third Credit Agreement.
Climate Change
Climate change has not had and is not expected to have a significant impact on our operations.
Contractual Obligations
Current portion of Long-Term Debt, Long-Term Debt and Lease Commitments. As of December 31, 2024, we have no debt
outstanding. We lease offices, educational facilities, and various items of equipment for varying periods through the year 2045 under
basic annual rentals.
As of December 31, 2024, the Company entered into one new operating lease, one new finance lease, and eleven lease modifications. The
Company obtained the operating and finance Right of Use (“ROU”) asset in exchange for an operating and finance lease liability of $15.7
million and $12.6 million, respectively. In addition, the eleven lease modifications resulted in a noncash re-measurement of the related
ROU asset and operating lease liability of $43.3 million.
We had no off-balance sheet arrangements as of December 31, 2023, except for existing surety bonds. We are required to post surety
bonds on behalf of our campuses and education representatives with multiple states to maintain authorization to conduct our business. At
December 31, 2024, we posted surety bonds in the aggregate amount of approximately $17.0 million. These off-balance sheet
arrangements do not adversely impact our liquidity or capital resources.
As of December 31, 2024 and 2023, we had outstanding extensions of credit commitments to our active students of $44.6 million and
$33.6 million, respectively. These are institutional extensions of credit and no cash is advanced to students. The full extension of credit
amount is not guaranteed unless the student completes the program. The institutional extensions of credit are considered commitments
because the students are required to fund their education using these funds and they are not reported in our Consolidated Financial
Statements.
SEASONALITY AND OUTLOOK
Seasonality
Our revenue and operating results normally fluctuate as a result of seasonal variations in our business, principally due to changes in total
student population. Student population varies due to new student enrollments, graduations and student attrition. Historically, our schools
have had lower student populations in our first and second quarters and we have experienced larger class starts in the third quarter and
higher student attrition in the first half of the year. The growth that we generally experience in the second half of the year is largely
dependent on a successful high school recruiting season. We recruit high school students several months ahead of their scheduled start
dates and, as a consequence, while we have visibility on the number of students who have expressed interest in attending our schools, we
cannot predict with certainty the actual number of new student enrollments in any given year and the related impact on revenue. Our
expenses, however, typically do not vary significantly over the course of the year with changes in our student population and revenue.
Effect of Inflation
Inflation has not had a material effect on our operations.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the year ended December 31, 2024, we invested cash reserves into money market funds. As of December 31, 2024, we have
invested approximately $44.4 million in cash equivalents and have earned interest income of approximately $2.1 million. Due to our
conservative investment approach, the Company expects minimal financial exposure to interest rate fluctuations affecting interest income.
Additionally, the Company does not believe that current market events have had a significant impact on the value or liquidity of the
Company’s cash, cash equivalents, or investments.
57
Details of the Company’s outstanding credit agreement can be found in Note 11 of the Consolidated Financial Statements in Part II, Item 8
of this Annual Report on Form 10-K. For the year ended December 31, 2024, the Company remained debt free and recorded interest
expense of $0.4 million primarily related to deferred costs associated with the implementation of the credit agreement and unused fees for
the credit line.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See “Index to Consolidated Financial Statements” on page F-1 of this Annual Report on Form 10-K.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, after evaluating, together with management, the effectiveness of our disclosure
controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of December 31, 2024 have concluded that our
disclosure controls and procedures are effective to reasonably ensure that material information required to be disclosed by us in the reports
that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the
time periods specified by Securities and Exchange Commission’s Rules and Forms and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
Internal Control Over Financial Reporting
During the quarter ended December 31, 2024, there was no change in our internal control over financial reporting that materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting and Attestation Report of Independent Registered
Public Accounting Firm
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control system was designed to
provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 based on the
framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework (2013). Based on its assessment, management believes that, as of December 31, 2024, the Company’s internal control over
financial reporting is effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Deloitte & Touche LLP, an independent registered public accounting firm, audited the Company’s internal control over financial reporting
as of December 31, 2024, as stated in their report included in this Form 10-K that follows.
ITEM 9B.
OTHER INFORMATION
During the three months ended December 31, 2024, none of the Company's directors or officers (as defined in Rule 16a-1(f) of the
Exchange Act) adopted, terminated or modified a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (as such
terms are defined in Item 408 of Regulation S-K).
ITEM 9C.
DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
58
PART III.
Certain information required by this item will be included in a definitive proxy statement for the Company’s annual meeting of
shareholders or an amendment to this Annual Report on Form 10-K, in either case filed with the Securities and Exchange Commission
within 120 days after December 31, 2024, and is incorporated by reference herein.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Certain information required by this Item 10 of Part III is incorporated by reference from a definitive proxy statement or an amendment to
this Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31,
2024.
Code of Ethics
We have adopted a Code of Business Ethics and Conduct applicable to our directors, officers and employees and certain other persons,
including our Chief Executive Officer and Chief Financial Officer. A copy of our Code of Business Ethics and Conduct is available on our
website at www.lincolntech.edu. If any amendments to or waivers from the Code of Business Ethics and Conduct are made, we will
disclose such amendments or waivers on our website.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item 11 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this
Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this
Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this
Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this
Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024.
PART IV.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
1.
Financial Statements
See “Index to Consolidated Financial Statements” on page F-1 of this Annual Report on Form 10-K.
2.
Financial Statement Schedules
See “Index to Consolidated Financial Statements” on page F-1 of this Annual Report on Form 10-K.
3.
Exhibits Required by Securities and Exchange Commission Regulation S-K
59
Exhibit
Number
Description
3.1
Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s
Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 7, 2005.
3.2
Certificate of Amendment, dated November 14, 2019, to the Amended and Restated Certificate of Incorporation
of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-3
filed October 6, 2020).
3.3
Bylaws of the Company, as amended on March 8, 2019 (incorporated by reference to Exhibit 3.1 of the
Company’s Form 8-K filed April 30, 2020).
4.1
Specimen Stock Certificate evidencing shares of Common Stock (incorporated by reference to the Company’s
Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 21, 2005).
4.2
Registration Rights Agreement, dated as of November 14, 2019, between the Company and the investors parties
thereto (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 14, 2019).
4.3
Description of Securities of the Company (incorporated by reference to Exhibit 4.3 of the Company’s Annual
Report on Form 10-K filed March 9, 2021).
10.1+
Employment Agreement, dated as of December 13, 2022, between the Company and Scott M. Shaw
(incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 16,
2022).
10.2+
Employment Agreement, dated as of December 13, 2022, between the Company and Brian K. Meyers
(incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed December 16,
2022).
10.3+
Employment Agreement dated as of December 13, 2022 between the Company and Chad D Nyce
(incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed December 16,
10.4*+
10.5*+
2022).
Employment Agreement dated as of December 13, 2022 between the Company and Stephen A. Ace.
Employment Agreement dated as of December 13, 2022 between the Company and Alexandra M. Luster.
10.6+
Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan (as amended) (incorporated by
reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 filed February 16, 2024).
10.7*+
Form of Agreement Pursuant to the Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan as
to Time-Restricted Shares and Performance-Restricted Shares.
10.8*+
10.9+
Form of Agreement Pursuant to the Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan as
to Performance-Restricted Shares.
Lincoln Educational Services Corporation Severance and Retention Policy (incorporated by reference to Exhibit
10.1 of the Company’s Quarterly Report on Form 10-Q filed November 7, 2022).
10.10
Securities Purchase Agreement, dated as of November 14, 2019, between the Company and the investor parties
thereto (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed
November 14, 2019).
10.11
Credit Agreement dated as of February 16, 2024 among Lincoln Educational Services Corporation and its
subsidiaries and Fifth Third Bank, National Association (incorporated by reference to Exhibit 10.1 of the
Company’s Current Report on Form 8-K filed February 23, 2024).
10.12
Amendment to Credit Agreement, dated July 18, 2024, between Lincoln Educational Services Corporation and
Fifth Third Bank, National Association (incorporated by reference to Exhibit 10.1 of the Company’s Current
Report on Form 8-K filed July 23, 2024).
60
10.13
Form of Indemnification Agreement between the Company and each director of the Company (incorporated by
reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2019).
10.14
Indemnification Agreement between the Company and John A. Bartholdson (incorporated by reference to Exhibit
10.5 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2019.
19.1*
Insider Trading Policy.
21*
Subsidiaries of the Company.
23*
Consent of Independent Registered Public Accounting Firm.
24*
Power of Attorney (included on the Signature page of this Annual Report on Form 10-K).
31.1 *
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1+
Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 of the Company’s Annual Report on
Form 10-K filed March 5, 2024).
101*
The following financial statements from Lincoln Educational Services Corporation’s Annual Report on Form 10-
K for the year ended December 31, 2024, formatted in iXBRL: (i) Consolidated Statements of Operations,
(ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of
Comprehensive (Loss) Income, (v) Consolidated Statement of Changes in Stockholders’ Equity and (vi) the
Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
104
Cover Page Interactive Data File (formatted as Inline iXBRL and contained in Exhibit 101*.
________________________________________________
*
Filed herewith.
+
Indicates management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an
exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K.
ITEM 16.
FORM 10-K SUMMARY
None.
61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
LINCOLN EDUCATIONAL SERVICES CORPORATION
By:
/s/ Brian Meyers
Brian Meyers
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Accounting and Financial Officer)
Date:
March 4, 2025
62
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned constitutes and appoints Scott M. Shaw and Brian
K. Meyers, and each of them, as attorneys-in-fact and agents, with full power of substitution and re-substitution, for and in the name, place
and stead of the undersigned, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the
same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that each of said attorney-in-fact or substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Scott M. Shaw
Scott M. Shaw
Chief Executive Officer and Director
March 4, 2025
/s/ Brian K. Meyers
Brian K. Meyers
Executive Vice President, Chief Financial Officer and
Treasurer (Principal Accounting and Financial Officer)
March 4, 2025
/s/ John A. Bartholdson
John A. Bartholdson
Director
March 4, 2025
/s/ James J. Burke, Jr.
James J. Burke, Jr.
Director
March 4, 2025
/s/ Kevin M. Carney
Kevin M. Carney
Director
March 4, 2025
/s/ Michael A. Plater
Michael A. Plater
Director
March 4, 2025
/s/ Felecia J. Pryor
Felecia J. Pryor
Director
March 4, 2025
/s/ Carlton Rose
Carlton Rose
Director
March 4, 2025
/s/ Sylvia J. Young
Sylvia J. Young
Director
March 4, 2025
/s/ Anna Cabral
Anna Cabral
Director
March 4, 2025
/s/ Marta Newhart
Marta Newhart
Director
March 4, 2025
F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number
Reports of Independent Registered Public Accounting Firm - Report of Independent Registered
Public Accounting Firm (PCAOB ID No. 34)
F-2
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-5
Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022
F-7
Consolidated Statements of Other Comprehensive Income for the years ended December 31, 2024,
2023 and 2022
F-8
Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity for
the years ended December 31, 2024, 2023 and 2022
F-9
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
F-10
Notes to Consolidated Financial Statements
F-12
Schedule II-Valuation and Qualifying Accounts
F-35
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Lincoln Educational Services Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Lincoln Educational Services Corporation and subsidiaries (the
"Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, other comprehensive income,
changes in convertible preferred stock and stockholders’ equity, and cash flows, for each of the three years in the period ended
December 31, 2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial
statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2024, in with conformity accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal
Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 4, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the
critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or
disclosures to which it relates.
Allowance for Credit Losses – Refer to Note 5 to the financial statements
Critical Audit Matter Description
Student receivables represent funds owed to the Company in exchange for the educational services provided to the student. Student
receivables are reported net of an allowance for credit losses as determined by management at the end of each reporting period.
Management’s student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables. Its
estimation methodology considers a number of quantitative and qualitative factors that, based on collection experience, have an
impact on repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact the
estimate of the allowance for credit losses. The factors include, but are not limited to repayment history, changes in the current
economic, legislative, or regulatory environments, cash collection forecasts and the ability to complete the federal financial aid
process with the student. These factors are monitored and assessed on a regular basis. Overall, the allowance estimation process for
student receivables is assessed by comparing estimated and actual performance.
F-3
Given the significant amount of judgment required by management in assessing the allowance for credit losses under Topic 326,
performing audit procedures to evaluate the reasonableness of the estimate of the lifetime expected losses for student receivables
required a high degree of auditor judgement and an increased extent of effort.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the allowance for credit losses included the following, among others:
Tested the design and operating effectiveness of controls relating to establishing the allowance for credit losses.
Assessed the appropriateness of management’s methodology for calculating the allowance including the significant inputs and
assumptions utilized, including any changes in the current economic, legislative or regulatory environments, cash collection
forecasts and the ability to complete the federal financial aid process with the student.
Recalculated the estimated allowance rates applied to the respective accounts receivable allowance categories determined
according to funding sources and other criteria.
Tested the completeness and accuracy of data underlying management’s assertions and calculations by selecting and reperforming
the calculations for a selection of students, and compared our recalculations to management’s analysis to determine whether
management’s conclusions were reasonable.
Tested on a sample basis the rates of reserve percentages and subsequent cash collections from a student through our evaluation
of a selection of students.
Evaluated Topic 326 related financial statement disclosures.
/s/ Deloitte & Touche LLP
Morristown, New Jersey
March 4, 2025
We have served as the Company’s auditor since 1999.
F-4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Lincoln Educational Services Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Lincoln Educational Services Corporation and subsidiaries (the
“Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control —
Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated March 4,
2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Morristown, New Jersey
March 4, 2025
F-5
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
2024
2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
59,273
$
75,992
$
Restricted cash
-
4,277
Accounts receivable, less allowance of $42,615 and $34,441 at December 31, 2024 and
2023, respectively
Inventories
3,053
2,948
Prepaid expenses and other current assets
4,793
5,556
Asset held for sale
1,150
10,198
Total current assets
111,252
134,663
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation
and amortization of $141,271 and $140,161 at December 31, 2024 and 2023, respectively
OTHER ASSETS:
Noncurrent receivables, less allowance of $22,957 and $19,370 at December 31, 2024 and
2023, respectively
Deferred finance charges
323
-
Deferred income taxes, net
25,359
23,217
Operating lease right-of-use assets
136,034
89,923
Finance lease right-of-use assets
26,745
15,797
Goodwill
10,742
10,742
Other assets, net
1,387
1,787
Pension plan assets, net
1,554
759
Total other assets
221,771
159,729
TOTAL ASSETS
436,556
$
345,249
$
103,533
50,857
19,627
17,504
42,983
35,692
December 31,
See Notes to Consolidated Financial Statements.
F-6
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Continued)
2024
2023
LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Unearned tuition
30,631
$
26,906
$
Accounts payable
37,026
18,152
Accrued expenses
11,986
13,680
Income taxes payable
1,072
2,832
Current portion of operating lease liabilities
9,497
11,737
Current portion of finance lease liabilities
-
70
Other short-term liabilities
-
33
Total current liabilities
90,212
73,410
NONCURRENT LIABILITIES:
Long-term portion of operating lease liabilities
138,803
88,853
Long-term portion of finance lease liabilities
29,261
16,126
Other long-term liabilities
16
56
Total liabilities
258,292
178,445
COMMITMENTS AND CONTINGENCIES
SERIES A CONVERTIBLE PREFERRED STOCK
Preferred stock, no par value - authorized 10,000,000 shares at December 31, 2024
and 2023, respectively.
STOCKHOLDERS' EQUITY:
Common stock, no par value - authorized 100,000,000 shares at December 31, 2024
and 2023, issued and outstanding 31,462,640 shares at December 31, 2024 and
31,359,110 shares at December 31, 2023
Additional paid-in capital
50,639
49,380
Retained earnings
79,170
69,279
Accumulated other comprehensive loss (income)
274
(36)
Total stockholders' equity
178,264
166,804
TOTAL LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
436,556
$
345,249
$
December 31,
-
-
48,181
48,181
See Notes to Consolidated Financial Statements.
F-7
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
2024
2023
2022
REVENUE
440,064
$
378,070
$
348,287
$
COSTS AND EXPENSES:
Educational services and facilities
181,759
162,275
148,746
Selling, general and administrative
243,803
209,135
182,391
Loss (gain) on sale of assets
2,119
(30,918)
(177)
Gain on insurance proceeds
(2,794)
-
-
Impairment of goodwill and long-lived assets
-
4,220
1,049
Total costs and expenses
424,887
344,712
332,009
OPERATING INCOME
15,177
33,358
16,278
OTHER:
Interest income
2,099
2,628
318
Interest expense
(2,565)
(347)
(160)
INCOME BEFORE INCOME TAXES
14,711
35,639
16,436
PROVISION FOR INCOME TAXES
4,820
9,642
3,802
NET INCOME
9,891
25,997
12,634
PREFERRED STOCK DIVIDENDS
-
-
1,111
INCOME AVAILABLE TO COMMON STOCKHOLDERS
9,891
$
25,997
$
11,523
$
Basic
Net income per common share
0.32
$
0.86
$
0.36
$
Diluted
Net income per common share
0.32
$
0.85
$
0.36
$
Weighted average number of common shares outstanding:
Basic
30,580
30,105
25,879
Diluted
30,891
30,541
25,879
Year Ended December 31,
See Notes to Consolidated Financial Statements
F-8
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME
(In thousands)
2024
2023
2022
Net income
$ 9,891
$ 25,997
$ 12,634
Other comprehensive income
Employee pension plan adjustments, net of taxes (a)
310
924
280
Comprehensive income
10,201
$
26,921
$
12,914
$
December 31,
(a) Taxes related to pension plan adjustments were $0.1 million, $0.3 million, and $0.1 million for each of the years
ended December 31, 2024, 2023, and 2022, respectively.
See Notes to Consolidated Financial Statements
F-9
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
A c c um ula te d
A dditio na l
Othe r
P a id-in
Tre a s ury
R e ta ine d
C o m pre he ns iv e
S ha re s
A m o unt
C a pita l
S to c k
Ea rning s
Lo s s
To ta l
S ha re s
A m o unt
BALANCE - J anuary 1, 2022
27,000,687
141,377
$
32,439
$
(82,860)
$
39,702
$
(1,240)
$
129,418
$
12,700
11,982
$
Net inco me
-
-
-
-
12,634
-
12,634
-
-
P referred s to ck dividend
-
-
-
-
(1,111)
-
(1,111)
-
-
P referred Sto ck Co nvers io n
5,381,356
-
11,982
-
-
-
11,982
(12,700)
(11,982)
Emplo yee pens io n plan adjus tments
-
-
-
-
-
280
280
-
-
Sto ck-bas ed co mpens atio n expens e
Res tricted s to ck
606,950
-
3,111
-
-
-
3,111
-
-
Share repurchas e
(1,572,414)
(9,445)
-
-
-
-
(9,445)
-
-
Treas ury s to ck cancellatio n
-
(82,860)
-
82,860
-
-
-
-
-
Net s hare s ettlement fo r
equity-bas ed co mpens atio n
(268,654)
-
(1,992)
-
-
-
(1,992)
-
-
BALANCE - December 31, 2022
31,147,925
49,072
45,540
-
51,225
(960)
144,877
-
-
Net cumulative effect fro m ado ptio n o f ASC 326 (a)
-
-
-
-
(7,943)
-
(7,943)
-
-
Net inco me
-
-
-
-
25,997
-
25,997
-
-
Emplo yee pens io n plan adjus tments
-
-
-
-
-
924
924
-
-
Sto ck-bas ed co mpens atio n expens e
Res tricted s to ck
713,299
-
5,894
-
-
-
5,894
-
-
Share repurchas e
(165,064)
(891)
-
-
-
-
(891)
-
-
Net s hare s ettlement fo r
equity-bas ed co mpens atio n
(337,050)
-
(2,054)
-
-
-
(2,054)
-
-
BALANCE - December 31, 2023
31,359,110
48,181
49,380
-
69,279
(36)
166,804
-
-
Net inco me
-
-
-
-
9,891
-
9,891
Emplo yee pens io n plan adjus tments
-
-
-
-
-
310
310
Sto ck-bas ed co mpens atio n expens e
-
-
-
-
-
-
-
Res tricted s to ck
434,256
-
4,629
-
-
-
4,629
Share repurchas e
-
-
-
-
-
-
-
Net s hare s ettlement fo r
-
equity-bas ed co mpens atio n
(330,726)
-
(3,370)
-
-
-
(3,370)
BALANCE - December 31, 2024
31,462,640
48,181
$
50,639
$
-
$
79,170
$
274
$
178,264
$
-
-
$
C o nv e rtible
Stockholders' Equity
S e rie s A
C o m m o n S to c k
P re fe rre d S to c k
(a) Net cumulative adjustment to equity based on the adoption of Accounting Standards Update No. 2016-13 Financial Instruments - Credit Losses. See Note 5 to the
Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
F-10
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
9,891
$
25,997
$
12,634
$
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
11,334
6,596
6,362
Amortization of deferred finance fees
133
-
-
Finance lease amortization
1,622
175
-
Deferred income taxes
(2,242)
1,632
1,294
Loss on sale of assets
2,119
(30,918)
(177)
Gain on insurance proceeds
(2,794)
-
-
Proceeds from insurance
2,794
-
-
Impairment of goodwill and long-lived assets
-
4,220
1,049
Fixed asset donation
(277)
(239)
(408)
Provision for credit losses
56,578
41,637
34,915
Stock-based compensation expense
4,629
5,894
3,111
(Increase) decrease in assets:
Accounts receivable
(65,984)
(45,757)
(48,637)
Inventories
(184)
(330)
103
Prepaid expenses and current assets
(687)
900
(11)
Other assets
110
1,041
450
Increase (decrease) in liabilities:
Accounts payable
11,583
5,039
(2,033)
Accrued expenses
(1,667)
5,027
(7,016)
Unearned tuition
3,770
2,752
(1,251)
Income taxes payable
(1,760)
777
1,038
Other liabilities
338
1,115
(541)
Total adjustments
19,415
(439)
(11,752)
Net cash provided by operating activities
29,306
25,558
882
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(56,866)
(40,699)
(8,986)
Proceeds from sale of property and equipment
9,895
33,310
2,390
Proceeds from sale of short-term investments
-
39,102
-
Purchase of short-term investments
-
(24,344)
(14,758)
Net cash (used in) provded by investing activities
(46,971)
7,369
(21,354)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deferred finance fees
(456)
-
-
Net share settlement for equity-based compensation
(3,370)
(2,054)
(1,992)
Dividend payment for preferred stock
-
-
(1,111)
Finance lease principal
(267)
-
-
Tenant allowance finance leases
762
-
-
Share repurchase
-
(891)
(9,445)
Net cash used in financing activities
(3,331)
(2,945)
(12,548)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(20,996)
29,982
(33,020)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of year
80,269
50,287
83,307
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of year
59,273
$
80,269
$
50,287
$
Year Ended December 31,
See Notes to Consolidated Financial Statements.
F-11
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Continued)
2024
2023
2022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest
2,565
$
110
$
171
$
Income taxes
8,836
$
7,201
$
1,471
$
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Liabilities accrued for or noncash purchases of property and equipment
8,181
$
3,522
$
1,300
$
Year Ended December 31,
See Notes to Consolidated Financial Statements.
F-12
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024, 2023, AND 2022 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2024
(In thousands, except share and per share amounts, schools, campuses and unless otherwise stated)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activities—Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”, “we”, “our” and “us”,
as applicable) provide diversified career-oriented postsecondary education to recent high school graduates and working adults. The
Company, which currently operates 21 campuses in 12 states, has entered into leases for two new campuses: one in Houston, Texas, with
programs expected to begin in the second half of 2025, and one in Hicksville, New York, with programs expected to begin by the end of
2026. Lincoln Educational Services Corporation offers programs in skilled trades (which include Heating Ventilation and Air
Conditioning (“HVAC”), welding and computerized numerical control and electrical and electronic systems technology, among other
programs), automotive technology, healthcare services (which include nursing, dental assistant and medical assistant, among other
programs) and hospitality services and information technology (which include culinary and aesthetics and information technology
programs). The schools operate under the brands Lincoln Technical Institute, Lincoln College of Technology and Nashville Auto Diesel
College.
Most of the Company’s campuses serve major metropolitan markets and each typically offers courses in multiple areas of study. Five of
the campuses are destination schools, which attract students from across the United States and, in some cases, from abroad. The
Company’s other campuses primarily attract students from their local communities and surrounding areas. All of the campuses are
nationally accredited and are eligible to participate in federal financial aid programs administered by the U.S. Department of Education
(the “DOE”) and applicable state education agencies and accrediting commissions which allow students to apply for and access federal
student loans as well as other forms of financial aid. The Company was incorporated in New Jersey in 2003 as the successor-in-interest to
various acquired schools including Lincoln Technical Institute, Inc. which opened its first campus in Newark, New Jersey in 1946.
The Company manages its business, evaluates performance and allocates resources based on two reportable business segments, Campus
Operations and Transitional:
Campus Operations - The Campus Operations segment includes campuses that are continuing in operation and contribute to the
Company’s core operations and performance. All of the campuses continuing in operation are classified in this segment. The majority of
the campuses offer programs across various areas of study.
Transitional – The Transitional segment refers to campuses that are marked for closure and are currently being taught-out, in addition to
campuses that are held-for-sale or sold. As of December 31, 2024, the net assets for the Summerlin, Las Vegas campus were classified as
held for sale, with operating results classified within the Transitional segment. The sale of the campus was consummated effective
January 1, 2025. In addition, the Company closed the Somerville, Massachusetts campus in the prior year. It was fully taught-out as of
December 31, 2023. This campus is classified in the Transitional segment in the prior year’s statement of operations.
Liquidity—As of December 31, 2024, the Company had $59.3 million in cash and cash equivalents compared to $80.3 million in cash and
cash equivalents and restricted cash in the prior year. The Company believes that its likely sources of cash should be sufficient to fund
operations for the next 12 months and thereafter for the foreseeable future.
Principles of Consolidation—The accompanying Consolidated Financial Statements include the accounts of Lincoln Educational Services
Corporation and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents—Cash and cash equivalents include all cash balances and highly-liquid short-term investments, which
contain original maturities within three months of purchase. Pursuant to the DOE’s cash management requirements, the Company retains
funds from financial aid programs under Title IV of the Higher Education Act of 1965 in segregated cash management accounts. The
segregated accounts do not require a restriction on use of the cash and, as such, these amounts are classified as cash and cash equivalents
on the consolidated balance sheets.
Restricted Cash – Restricted cash consists of cash currently utilized as collateral for the Company’s letters of credit.
Short-term Investments – Short-term investments not considered cash and cash equivalents are investments with maturity dates of three
months to 12 months from the date of purchase.
Accounts Receivable—The Company reports accounts receivable at net realizable value, which is equal to the gross receivable less an
estimated allowance for uncollectible accounts. Noncurrent accounts receivable represents amounts due from graduates in excess of 12
months from the balance sheet date.
F-13
Allowance for Credit Losses—On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. As a result of the adoption, the
Company has revised the way in which it calculates reserves on outstanding student accounts receivable balances. Details considered by
management in the estimate include the following:
We extend credit to a portion of the students who are enrolled at our academic institutions for tuition and certain other educational costs.
Based upon past experience and judgment, we establish an allowance for credit losses with respect to student receivables which we
estimate will ultimately not be collectible. Our standard student receivable allowance is based on an estimate of lifetime expected credit
losses for student receivables that considers vintages of receivables to determine a loss rate. Our estimation methodology considers a
number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk
and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit
losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory
environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors
are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trending
analysis and comparing estimated and actual performance. The Company evaluates its provision for credit losses on at least a quarterly
basis, considering factors such as micro and macro-economic conditions, the current political climate ,and other industry factors.
Management makes a series of assumptions to determine what is believed to be the appropriate level of allowance for credit losses.
Management determines a reasonable and supportable forecast based on the expectation of future conditions over a supportable forecast
period as described above, as well as qualitative adjustments based on current and future conditions that may not be fully captured in the
historical modeling factors described above. All of these estimates are susceptible to significant change.
We monitor our collections and write-off experience to assess whether or not adjustments to our allowance percentage estimates are
necessary. Changes in trends in any of the factors that we believe impact the collection of our student receivables, as noted above, or
modifications to our collection practices, and other related policies may impact our estimate of our allowance for credit losses and our
results from operations.
Because a substantial portion of our revenue is derived from Title IV Programs, any legislative or regulatory action that significantly
reduces the funding available under Title IV Programs, or the ability of our students or institutions to participate in Title IV Programs,
would likely have a material impact on the realizability of our receivables.
Inventories—Inventories consist mainly of textbooks, computers, tools and supplies. Inventories are valued at the lower of cost or market
on a first-in, first-out basis.
Property, Equipment and Facilities—Depreciation and Amortization—Property, equipment and facilities are stated at cost. Major
renewals and improvements are capitalized, while repairs and maintenance are expensed when incurred. Upon the retirement, sale or other
disposition of assets, costs and related accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in
operating income. For financial statement purposes, depreciation of property and equipment is computed using the straight-line method
over the estimated useful lives of the assets, and amortization of leasehold improvements is computed over the lesser of the term of the
lease or its estimated useful life.
Asset Retirement Obligation—Lincoln recognizes and records an asset retirement obligation (“ARO”) if there is a clear obligation at the
termination of a lease, and the potential obligation is measurable in both potential cost and time. If both conditions are met Lincoln will
record the ARO at the Present Value (“PV”) of the future obligation and incur accretion expense over the course of the term, using the
lease end date as the termination date. Should the components or assumptions used to assess the ARO materially change, the ARO is re-
measured, and adjustments recorded.
Advertising Costs—Costs related to advertising are expensed as incurred and are approximately $43.3 million, $38.2 million, and
$35.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. These amounts are included in selling, general and
administrative expenses in the Consolidated Statements of Operations.
Goodwill—Goodwill represents the excess of purchase price over the fair value of tangible net assets and identifiable intangible assets of
the businesses acquired. Lincoln tests goodwill for impairment annually, in the fourth quarter of each year, unless there are events or
changes in circumstances that indicate an impairment may have occurred. Impairment may result from deterioration in performance,
adverse market conditions, adverse changes in laws or regulations, the restriction of activities associated with the acquired business, and/or
a variety of other circumstances. If we determine that impairment has occurred, we record a write-down of the carrying value and charge
the impairment as an operating expense in the period the determination is made.
Impairment of Long-Lived Assets—The Company reviews the carrying value of its long-lived assets and identifiable intangibles for
possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. For other
long-lived assets, including right-of-use (“ROU”) lease assets, the Company evaluates assets for recoverability when there is an indication
of potential impairment. Factors the Company considers important, which could trigger an impairment review, include significant changes
F-14
in the manner of the use of the asset, significant changes in historical trends in operating performance, significant changes in projected
operating performance, and significant negative economic trends. If the undiscounted cash flows from a group of assets being evaluated is
less than the carrying value of that group of assets, the fair value of the asset group is determined and the carrying value of the asset group
is written down to fair value.
When we perform the quantitative impairment test for long-lived assets, we examine estimated future cash flows using Level 3 inputs.
These cash flows are evaluated by using weighted probability techniques as well as comparisons of past performance against projections.
Assets may also be evaluated by identifying independent market values. If the Company determines that an asset’s carrying value is
impaired, it will record a write-down of the carrying value of the asset and charge the impairment as an operating expense in the period in
which the determination is made.
On December 31, 2024, as a result of impairment testing, it was determined that there was no impairment of long-lived assets.
On June 8, 2023, the Company consummated the sale of its Nashville, Tennessee property. See “Note 8, Real Estate Transactions.” The
result of the sale created a change in the trajectory of the fair value of the Nashville, Tennessee operations, and as such, the Company
recorded a pre-tax non-cash impairment charge of $0.4 million relating to long-lived assets.
On December 31, 2022, as a result of impairment testing, it was determined that there was a long-lived asset impairment of $1.0 million.
The impairment was the result of an assessment of the current market value, as compared to the carrying value of the assets.
Concentration of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of temporary cash investments. The Company places its cash and cash equivalents with high credit quality financial
institutions. The Company's cash balances with financial institutions typically exceed the Federal Deposit Insurance Corporation (“FDIC”)
limit of $0.25 million. The Company’s cash balances on deposit as of December 31, 2024, exceeded the balance insured by the FDIC by
approximately $58.7 million. The Company has not experienced any losses to date on its invested cash.
The Company extends credit for tuition and fees to many of its students. The credit risk with respect to these accounts receivable is
mitigated by the students’ participation in federally funded financial aid programs unless students withdraw prior to the receipt of federal
funds for those students. In addition, the remaining tuition receivables are primarily comprised of smaller individual amounts due from
students. With respect to student receivables, the Company had no significant concentrations of credit risk as of each of December 31,
2024 and 2023, respectively.
Use of Estimates in the Preparation of Financial Statements—The preparation of financial statements in conformity with generally
accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial
Statements and the reported amounts of revenues and expenses during the period. On an ongoing basis, the Company evaluates the
estimates and assumptions, including those used to determine the incremental borrowing rate to calculate lease liabilities and ROU assets,
lease term to calculate lease cost, revenue recognition, bad debts, impairments, fixed assets, income taxes, benefit plans, stock-based
compensation, and certain accruals. Actual results could differ from those estimates.
Income Taxes— The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740,
Income Taxes (“ASC 740”). This statement requires an asset and a liability approach for measuring deferred taxes based on temporary
differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates
for years in which taxes are expected to be paid or recovered.
In accordance with ASC 740, the Company assesses our deferred tax asset to determine whether all or any portion of the asset is more
likely than not unrealizable. A valuation allowance is required to be established or maintained when, based on currently available
information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, our
assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in
order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, the Company considers, among other
things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting
differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax
benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in our
Consolidated Financial Statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax
consequences could have a material impact on the Company’s consolidated financial position or results of operations. Changes in, among
other things, income tax legislation, statutory income tax rates or future income levels could materially impact the Company’s valuation of
income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods.
On August 16, 2022, the Inflation Reduction Act was enacted and signed into law. The Inflation Reduction Act is a budget reconciliation
package that includes significant changes relating to tax, climate change, energy and health care. The income tax provision of the act
F-15
includes, among other items, a corporate alternative minimum tax of 15.0%, an excise tax of 1.0% on corporate stock buybacks, energy-
related tax credits, and additional IRS funding. The tax provisions of the Inflation Reduction Act have not had a material impact on the
Company’s Consolidated Financial Statements.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the fiscal years ended
December 31, 2024, 2023, and 2022, we did not record any interest and penalties expense associated with uncertain tax positions, as we do
not have any uncertain tax positions.
Start-up Costs—Costs related to the start of new campuses are expensed as incurred.
New Accounting Pronouncements– In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03,
Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220); Disaggregation of Income
Statement Expenses, which requires additional disclosure of certain amounts included in the expense captions presented on the statement
of operations, as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective
application for periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early
adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact this
ASU will have on our financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,
which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about
significant segment expenses and increased interim disclosure requirements, among others. The amendments in ASU 2023-07 are effective
for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. As
required in this ASU, the Company has adopted the new disclosure requirements retrospectively within Note 16 to the Consolidated
Financial Statements.
In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The
amendments in this ASU require that public business entities on an annual basis 1) disclose specific categories in the rate reconciliation,
and 2) provide additional information for reconciling items that meet a quantitative threshold. The amendments require disclosure about
income taxes paid by federal, state and foreign taxes, and by individual jurisdictions in which income taxes paid is equal or greater than 5
percent of total income taxes paid. The amendment also requires entities to disclose income or loss from continuing operations before
income tax expense disaggregated between domestic and foreign and income tax expense or benefit from continuing operations
disaggregated by federal, state and foreign. For all public business entities, ASU 2023-09 is effective for annual periods beginning after
December 15, 2024; early adoption is permitted. This ASU has not had a material impact to the Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments and subsequently issued additional guidance that modified ASU 2016-13. The ASU and the subsequent
modifications were identified as Accounting Standard Codification (“ASC”) Topic 326. The standard requires an entity to change its
accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss”
methodology to a “current expected credit loss” methodology (the “CECL methodology”). The CECL methodology utilizes a lifetime
“expected credit loss” measurement objective for the recognition of credit losses on financial assets measured at amortized cost at the time
the financial asset is originated or acquired. The allowance is adjusted each period for changes in expected lifetime credit losses. The
CECL methodology represents a significant change from prior U.S. GAAP, which generally required that a loss be incurred before it was
recognized. Further, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-11 and ASU No. 2022-02 to provide
additional guidance on the credit losses standard. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit
Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This ASU deferred the effective date of ASU 2016-13
for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15,
2022, including interim periods within those fiscal years. Additionally, in February and March 2020, the FASB issued ASU 2020-02,
Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff
Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases
(Topic 842). ASU 2020-02 added an SEC paragraph pursuant to the issuance of SEC Staff Accounting Bulletin No. 119 on loan losses to
FASB Codification Topic 326 and also updated the SEC section of the codification for the change in the effective date of Topic 842. As
of the January 1, 2023 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact
to the Company resulted in an opening balance sheet adjustment increasing the allowance for credit losses related to the Company’s
accounts receivables of approximately $10.8 million, a decrease in retained earnings of $7.9 million, after-tax and a deferred tax asset
increase of $2.9 million.
F-16
2.
FINANCIAL AID AND REGULATORY COMPLIANCE
Financial Aid
The Company’s schools and students participate in a variety of government-sponsored financial aid programs that assist students in paying
for the cost of their education. The largest source of such support is the federal programs of student financial assistance under Title IV of
the Higher Education Act of 1965, as amended, commonly referred to as the Title IV Programs, which are administered by the DOE.
During the fiscal years ended December 31, 2024, 2023, and 2022, approximately 82%, 81%, and 74%, respectively, of net revenues on a
cash basis were indirectly derived from funds distributed under Title IV Programs.
For the fiscal years ended December 31, 2024, 2023, and 2022, the Company calculated that no individual DOE reporting entity received
more than 90% of its revenue, determined on a cash basis pursuant to DOE regulations, from the Title IV Program funds. The Company’s
calculations may be subject to review by the DOE. Under DOE regulations, a proprietary institution that derives more than 90% of its
total revenue from the Title IV Programs for two consecutive fiscal years becomes immediately ineligible to participate in the Title IV
Programs and may not reapply for eligibility until the end of two fiscal years. An institution with revenues exceeding 90% of its total
revenue for a single fiscal year, will be placed in provisional certification status and may be subject to other enforcement measures. If one
of the Company’s institutions violated the 90/10 Rule and became ineligible to participate in Title IV Programs but continued to disburse
Title IV Program funds, the DOE would require the institution to repay all Title IV Program funds received by the institution after the
effective date of the loss of eligibility.
Regulatory Compliance
All institutions participating in Title IV Programs must satisfy specific standards of financial responsibility. The DOE evaluates
institutions for compliance with these standards each year, based on the institution's annual audited financial statements, as well as
following a change in ownership resulting in a change of control of the institution.
The most significant financial responsibility measurement is the institution's composite score, which is calculated by the DOE based on
three ratios:
the equity ratio, which measures the institution's capital resources, ability to borrow and financial viability;
the primary reserve ratio, which measures the institution's ability to support current operations from expendable resources; and
the net income ratio, which measures the institution's ability to operate at a profit.
The DOE assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0, with negative 1.0
reflecting financial weakness and positive 3.0 reflecting financial strength. The DOE then assigns a weighting percentage to each ratio and
adds the weighted scores for the three ratios together to produce a composite score for the institution. The composite score must be at least
1.5 for the institution to be deemed financially responsible without the need for further oversight.
If an institution's composite score is below 1.5, but is at least 1.0, it is in a category denominated by the DOE as "the zone." Under the
DOE regulations, institutions that are in the zone typically may be permitted by the DOE to continue to participate in the Title IV
Programs by choosing one of two alternatives: 1) the “Zone Alternative” under which an institution is required to make disbursements to
students under the Heightened Cash Monitoring 1 (“HCM1”) payment method, or a different payment method other than the advance
payment method, and to notify the DOE within 10 days after the occurrence of certain oversight and financial events or 2) submit a letter
of credit to the DOE equal to 50 percent of the Title IV Program funds received by the institution during its most recent fiscal year. The
DOE permits an institution to participate under the “Zone Alternative” for a period of up to three consecutive fiscal years. Under the
HCM1 payment method, the institution is required to make Title IV Program disbursements to eligible students and parents before it
requests or receives funds for the amount of those disbursements from the DOE. As long as the student accounts are credited before the
funding requests are initiated, an institution is permitted to draw down funds through the DOE’s electronic system for grants management
and payments for the amount of disbursements made to eligible students. Unlike the Heightened Cash Monitoring 2 (“HCM2”) and the
reimbursement payment methods, the HCM1 payment method typically does not require schools to submit documentation to the DOE and
wait for DOE approval before drawing down Title IV Program funds. Effective July 1, 2016, a school under HCM1, HCM2 or
reimbursement payment methods must also pay any credit balances due to a student before drawing down funds for the amount of those
disbursements from the DOE, even if the student or parent provides written authorization for the school to hold the credit balance.
If an institution's composite score is below 1.0, the institution is considered by the DOE to lack financial responsibility. If the DOE
determines that an institution does not satisfy the DOE's financial responsibility standards, depending on its composite score and other
factors, that institution may establish its eligibility to participate in the Title IV Programs on an alternative basis by, among other things:
posting a letter of credit in an amount equal to at least 50% of the total Title IV Program funds received by the institution during
the institution's most recently completed fiscal year; or
posting a letter of credit in an amount equal to at least 10% of the Title IV Program funds received by the institution during its
F-17
most recently completed fiscal year accepting provisional certification status; complying with additional DOE monitoring
requirements and agreeing to receive Title IV Program funds under an arrangement other than the DOE's standard advance
funding arrangement.
For the 2024, 2023, and 2022 fiscal years, we calculated our composite score to be 2.5, 3.0, and 2.9, respectively. These scores are subject
to determination by the DOE based on its review of our consolidated audited financial statements for the 2023 and 2022 fiscal years, but
we believe it is likely that the DOE will determine that our institutions comply with the composite score requirement.
3.
NET INCOME PER COMMON SHARE
Basic and diluted earnings per share (“EPS”) are determined in accordance with ASC Topic 260, “Earnings per Share”, which specifies
the computation, presentation and disclosure requirements for EPS. Basic EPS excludes all dilutive Common Stock equivalents. It is based
upon the weighted average number of common shares outstanding during the period. Diluted EPS, as calculated using the treasury stock
method, reflects the potential dilution that would occur if our dilutive outstanding stock options and stock awards were issued.
During the year ended December 31, 2022, the Company presented its basic and diluted income per common share using the two-class
method, which requires all outstanding Series A Preferred Stock (“Series A Preferred Stock”) and unvested shares of Restricted Stock that
contain rights to non-forfeitable dividends and therefore participate in undistributed income with common shareholders to be included in
computing income per common share. Under the two-class method, net income is reduced by the amount of dividends declared in the
period for each class of Common Stock and participating security. The remaining undistributed income is then allocated to Common Stock
and participating securities based on their respective rights to receive dividends. Series A Preferred Stock and shares of unvested
Restricted Stock contain non-forfeitable rights to dividends on an if-converted basis and on the same basis as shares of the Company’s
Common Stock, respectively, and are considered participating securities. The Series A Preferred Stock and unvested Restricted Stock are
not included in the computation of basic income per common share in periods in which we have a net loss, as the Series A Preferred Stock
and unvested Restricted Stock are not contractually obligated to share in our net losses. However, the cumulative dividends on Series A
Preferred Stock for the period decreases the income or increases the net loss allocated to common shareholders unless the dividend is paid
in the period. Basic income per common share has been computed by dividing net income allocated to common shareholders by the
weighted-average number of common shares outstanding.
On November 30, 2022, the Company exercised in full its right of mandatory conversion of the Company’s Series A Preferred Stock. In
connection with the conversion, each share of Series A Preferred Stock was cancelled and converted into 423.729 shares of the Company’s
Common Stock, no par value per share (the “Common Stock”). No shares of Series A Preferred Stock remain outstanding and all rights of
the holders to receive future dividends have been terminated. As a result of the conversion, the aggregate 12,700 shares of Series A
Preferred Stock outstanding were converted into 5,381,356 shares of Common Stock. As of December 31, 2024, the Company still
maintains Restricted Stock, but these shares do not participate in the disbursement of dividends.
F-18
The following is a reconciliation of the numerator and denominator of the net income per share computations for the years ended
December 31, 2024, 2023, and 2022:
(in thousands, except share data)
2024
2023
2022
Numerator:
Net income
9,891
$
25,997
$
12,634
$
Less: preferred stock dividend
-
-
(1,111)
Less: allocation to preferred stockholders
-
-
(1,753)
Less: allocation to restricted stockholders
-
-
(559)
Net income allocated to common stockholders
9,891
$
25,997
$
9,211
$
Basic net income per share:
Denominator:
Weighted average common shares outstanding
30,580,381
30,105,194
25,879,483
Basic net income per share
0.32
$
0.86
$
0.36
$
Diluted net income per share:
Denominator:
Weighted average number of:
Common shares outstanding
30,890,790
30,540,628
25,879,483
Dilutive shares outstanding
30,890,790
30,540,628
25,879,483
Diluted net income per share
0.32
$
0.85
$
0.36
$
Year Ended December 31,
The following table summarizes the potential weighted average shares of Common Stock that were excluded from the determination of
our diluted shares outstanding as they were anti-dilutive:
2024
2023
2022
Unvested restricted stock
-
-
516,233
-
-
516,233
Year Ended December 31,
4.
REVENUE RECOGNITION
Substantially all of our revenues are considered to be revenues from contracts with students. We determine standalone selling price based
on the price at which the distinct services or goods are sold separately. The related accounts receivable balances are recorded in our
balance sheets as student accounts receivable. We do not have significant revenue recognized from performance obligations that were
satisfied in prior periods, and we do not have any transaction price allocated to unsatisfied performance obligations other than in our
unearned tuition. We record revenue for students who withdraw from our schools only to the extent that it is probable that a significant
reversal in the amount of cumulative revenue recognized will not occur. In addition, to reduce the amount of outstanding accounts
receivable balances due from our students, the Company employs a continuous collection effort. Unearned tuition represents contract
liabilities primarily related to our tuition revenue. We have assessed the costs incurred to obtain a contract with a student and determined
them to be immaterial.
Unearned tuition in the amount of $30.6 million and $26.9 million is recorded in the current liabilities section of the accompanying
Consolidated Balance Sheets as of December 31, 2024 and 2023, respectively. The change in this contract liability balance during the
fiscal year ended December 31, 2024 is the result of payments received in advance of satisfying performance obligations, offset by
revenue recognized during that period. Revenue recognized for the fiscal year ended December 31, 2024 that was included in the contract
liability balance at the beginning of the year was 26.0 million.
F-19
The following table depicts the timing of revenue recognition by segment:
Campus
Operations
Transitional
Consolidated
Timing of Revenue Recognition
Services transferred at a point in time
26,877
$
1,180
$
28,057
$
Services transferred over time
406,089
5,918
412,007
Total revenues
432,966
$
7,098
$
440,064
$
Campus
Operations
Transitional
Consolidated
Timing of Revenue Recognition
Services transferred at a point in time
21,403
$
1,534
$
22,937
$
Services transferred over time
345,830
9,303
355,133
Total revenues
367,233
$
10,837
$
378,070
$
Campus
Operations
Transitional
Consolidated
Timing of Revenue Recognition
Services transferred at a point in time
19,591
$
2,131
$
21,722
$
Services transferred over time
311,305
15,260
326,565
Total revenues
330,896
$
17,391
$
348,287
$
Year ended December 31, 2024
Year ended December 31, 2023
Year ended December 31, 2022
5.
STUDENT RECEIVABLES
Student receivables represent funds owed to us in exchange for the educational services provided to a student. Student receivables are
reflected net of an allowance for credit losses at the end of the reporting period. Student receivables, net, are reflected on our Consolidated
Balance Sheets as components of both current and non-current assets.
Our students pay for their costs through a variety of funding sources, including federal loan and grant programs, institutional payment
plans, Veterans Administration and other military funding and grants, private and institutional scholarships and cash payments. Cash
receipts from government-related sources are typically received during the current academic term. Students who have not applied for any
type of financial aid generally set up a payment plan with the institution and make payments on a monthly basis as per the terms of the
payment plan. A student receivable balance is written off when deemed uncollectable, which is typically once a student is out of
school and there has been no payment activity on the account for 150 days. If, however, the student does remit a payment during this time
period, the 150-day policy for write-off starts again until either (1) the student continues making payments, or (2) the student does not
make any additional payments after which the student receivable balance is written off after 150 days. In an effort to reduce the risk for
writing off a student’s account, the Company employs a continuous collection effort to minimize exposure from outstanding receivables.
Students enrolled in the Company’s programs are provided with a variety of funding resources, including financial aid, grants,
scholarships and private loans. After exhausting all fund options, if the student is still in need of additional financing, the Company may
offer an institutional loan as a lender of last resort.
Our standard student receivable allowance is based on an estimate of lifetime expected credit losses on student receivables that considers
vintages of receivables to determine a loss rate. In considering lifetime credit losses, if the expected life goes beyond the Company’s
reasonable ability to forecast, the Company then reverts back to historical loss experience as an indicator of collections. In determining
the expected credit losses for the period, student receivables were disaggregated and pooled into two different categories to refine the
calculation. Other information considered included external factors outside the Company’s control. Given that collection history during
the COVID-19 pandemic was not considered to be a reliable indicator of a student’s repayment history, the Company adjusted the
historical loss calculation by normalizing the financial data relating to that time period. Our estimation methodology further considered a
number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk
and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit
losses. These factors include, but are not limited to: internal repayment history, student status, changes in the current economic condition,
legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with
the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables
is validated by trending analysis and comparing estimated and actual performance.
F-20
Student Receivables
The Company has student receivables that are due greater than 12 months from the date of our Consolidated Balance Sheets. As of
December 31, 2024, and December 31, 2023, the amount of non-current student receivables under payment plans that is longer than 12
months in duration, net of allowance for credit losses, was $19.6 million and $17.5 million, respectively.
The following table presents the amortized cost basis of student receivables as of December 31, 2024 and 2023 by year of origination.
Student
Student
Year
Receivables (1)
Write-Off's (2)
Year
Receivables (1)
Write-Off's (2)
2024
96,459
$
12,970
$
2023
77,113
$
9,540
$
2023
14,231
26,345
2022
12,548
19,731
2022
6,815
3,216
2021
6,799
3,194
2021
3,999
1,311
2020
3,036
727
2020
1,597
540
2019
2,019
535
Thereafter
1,401
435
Thereafter
1,031
310
Total
124,502
$
44,817
$
Total
102,546
$
34,037
$
Year Ended
Year Ended
December 31, 2024
December 31, 2023
(1) Student receivables are presented on a gross basis from the individual students. The total receivable amount above excludes
federal subsidies reflected on the students’ accounts but not yet received from the government. Also, it excludes all receivables
from industry relationships, which are otherwise included under accounts receivable in our Consolidated Balance Sheets.
(2) Write-off amounts are based on the students school departure year.
The Company does not utilize or maintain data pertaining to student credit information.
Allowance for Credit Losses
We define student receivables as a portfolio segment under ASC Topic 326. Changes in our current and non-current allowance for credit
losses related to our student receivable portfolio are calculated in accordance with the guidance effective January 1, 2023 under CECL for
the year ended December 31, 2024 and 2023, respectively.
2024
2023
Balance, beginning of period
53,811
$
35,370
$
Cumulative effect of ASC Topic 326
-
10,841
Adjusted beginning of period balance
53,811
46,211
Provision for credit losses
56,578
41,637
Write-off's
(44,817)
(34,037)
Balance, at end of period
65,572
$
53,811
$
Year Ended December 31,
Fair Value Measurements
The carrying amount reported in our Consolidated Balance Sheets for the current portion of student receivables approximates fair value
because of the nature of these financial instruments as they generally have short maturity periods. It is not practicable to estimate the fair
value of the non-current portion of student receivables, since observable market data is not readily available, and no reasonable estimation
methodology exists.
6.
LEASES
The Company determines if an arrangement is a lease at its inception. The Company considers any contract where there is an identified
asset as to which the Company has the right to control its use in determining whether the contract contains a lease. An operating lease
ROU asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make
lease payments arising from the lease. Operating lease ROU assets and liabilities are to be recognized at the commencement date based on
the present value of lease payments over the lease term. As all of the Company’s operating leases do not provide an implicit rate, the
Company uses an incremental borrowing rate based on the information available on the commencement date in determining the present
value of lease payments. We estimate the incremental borrowing rate based on a yield curve analysis, utilizing the interest rate derived
from the fair value analysis of our credit facility and adjusting it for factors that appropriately reflect the profile of secured borrowing over
the expected term of the lease. The operating lease ROU assets include any lease payments made prior to the rent commencement date and
exclude lease incentives. Our leases have remaining lease terms of one year to 21 years. Lease terms may include options to extend the
F-21
lease term used in determining the lease obligation when it is reasonably certain that the Company will exercise that option. Lease
expense for lease payments are recognized on a straight-line basis over the lease term for operating leases.
On December 12, 2024, the Company entered into a lease for approximately 65,000 square feet of space to serve as the Company’s new
campus in Hicksville, New York. The lease term is currently planned to commence on or about May 1, 2025, with an initial lease term of
15 years and 9 months. The lease contains a renewal option allowing for either a 10-year renewal or two five-year renewals. The
Company signed the lease commitment on January 1, 2025. However, the Company will not take possession until the lease
commencement date.
On October 31, 2023, the Company entered into a lease for approximately 100,000 square feet of space to serve as the Company’s new
campus in Houston, Texas. The lease term commenced on January 2, 2024, with an initial lease term of 21 years and 6 months. The lease
contains three five-year renewal options.
On October 18, 2023, the Company entered into a lease for approximately 120,000 square feet of space. to serve as the Company’s new
Nashville, Tennessee campus. The lease term commenced on November 1, 2023, with an initial lease term of 15 years. The lease contains
two five-year renewal options. See Note 8, “Real Estate Transactions”.
On September 28, 2023, the Company purchased a 90,000 square foot property located at 311 Veterans Highway, Levittown,
Pennsylvania for approximately $10.2 million. On January 30, 2024, the Company entered into a sale-leaseback transaction for this
property. See Note 8, “Real Estate Transactions”. As of December 31, 2023, this property was classified as held-for-sale on the
Consolidated Balance Sheets.
On November 3, 2022, the Board of Directors approved a plan to close the Somerville, Massachusetts campus, which as of December 31,
2023 was fully taught-out.
On June 30, 2022, the Company executed a lease for approximately 55,000 square feet of space to serve as the Company’s new campus in
East Point, Georgia. The lease term commenced in August 2022, with total payments due on an undiscounted basis of $12.2 million over
the 12-year initial term. The lease contains two five-year renewal options that may be exercised by the Company at the end of the initial
lease term. The Company had no involvement in the construction or design of the facilities on the property and was not deemed to be in
control of the asset prior to the lease commencement date.
The following table presents components of lease cost and classification on the Consolidated Statement of Operations:
in thousands
Consolidated Statement of Operations Classification
2024
2023
2022
Operating Lease Cost
Selling, general and administrative
19,665
$
19,235
$
18,943
$
Finance lease cost
Amortization of leased assets
Depreciation and amortization
1,622
175
-
Interest on lease Liabilities
Interest expense
2,155
224
-
Variable lease cost
Selling, general and administrative
423
475
55
23,865
$
20,109
$
18,998
$
Year Ended December 31,
The net change in ROU asset and operating lease liability is included in the net change in other assets in the Consolidated Statements of
Cash Flows for the fiscal years ended December 31, 2024, 2023, and 2022.
The net change in ROU asset and finance lease liability is split between principal payments, interest expense and amortization expense.
Principal payments are classified in the financing section, interest expense is included in net income and amortization expense is broken
out separately in the operating section of the Consolidated Statements of Cash Flows.
F-22
Supplemental cash flow information and non-cash activity related to our leases are as follows:
2024
2023
2022
Cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Operating Cash Flows - operating leases
17,989
$
16,103
$
18,443
$
Operating Cash Flows - finance leases
2,155
$
-
$
-
$
Financing Cash Flows - finance leases
495
$
-
$
-
$
Non-cash activity:
Lease liabilities arising from obtaining right-of-use assets
Operating leases
59,061
$
10,477
$
13,820
$
Finance leases
12,570
$
15,971
$
-
$
December 31,
During the fiscal year ended December 31, 2024, the Company entered into one new operating lease, one new finance lease and eleven
lease modifications. The Company obtained the operating and finance ROU asset in exchange for an operating and finance lease liability
of $15.7 million and $12.6 million, respectively. In addition, the eleven lease modifications resulted in a noncash re-measurement of the
related ROU asset and operating lease liability of $43.3 million.
Weighted-average remaining lease term and discount rate for our leases are as follows:
2024
2023
Weighted-average remaining lease term
Operating leases
12.81 years
11.16 years
Finance leases
16.40 years
15.09 years
Weighted-average discount rate
Operating leases
6.60%
6.89%
Finance leases
7.69%
8.39%
Year Ended
December 31,
Maturities of lease liabilities by fiscal year for our leases as of December 31, 2024 are as follows:
Operating Leases
Finance Leases
Year ending December 31,
2025
18,404
$
506
$
2026
18,976
2,817
2027
18,188
2,918
2028
18,948
3,023
2029
17,237
3,132
Thereafter
131,509
43,417
Total lease payments
223,262
55,813
Less: imputed interest
(74,962)
(26,552)
Present value of lease liabilities
148,300
$
29,261
$
As of December 31, 2024
F-23
7.
GOODWILL
Changes in the carrying amount of goodwill during the fiscal years ended December 31, 2024 and 2023 are as follows:
Gross
Goodwill
Balance
Accumulated
Impairment
Losses
Net
Goodwill
Balance
Balance as of January 1, 2023
117,176
$
(102,640)
$
14,536
$
Adjustments
-
(3,794)
(3,794)
Balance as of December 31, 2023
117,176
(106,434)
10,742
Adjustments
-
-
Balance as of December 31, 2024
117,176
$
(106,434)
$
10,742
$
When we perform our annual goodwill impairment assessment we have the option to perform a qualitative assessment based on a number
of factors impacting our reporting units (step 0). When a qualitative assessment is performed, a number of factors are evaluated to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Our qualitative assessment
is subjective. It includes a review of macroeconomic and industry factors, review of financial and non-financial performance measures,
including projected student starts and assessment of adverse events that may negatively impact a reporting unit’s carrying value. Adverse
events would include, but are not limited to, difficulty in accessing capital, a greater competitive environment, decline in market-
dependent multiples or metrics, regulatory or political developments, change in key personnel, strategy, or customers, or litigation. If we
conclude based on our qualitative review that it is more likely than not that the fair value of the reporting unit is less than the carrying
value, we proceed with a quantitative impairment test.
When we perform our quantitative impairment test we believe the most critical assumptions and estimates in determining the estimated
fair value of our reporting units include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital
expenditures and a discount rate. The assumptions used in determining our expected future cash flows consider various factors such as
historical operating trends particularly in student enrollment and pricing and long-term operating strategies and initiatives.
If we determine that quantitative tests are necessary, we determine the fair value of each reporting unit using an equal weighting of the
discounted cash flow model and the market approach, or if required, we will evaluate other asset value-based approaches. Our judgment is
necessary in forecasting future cash flows and operating results, critical assumptions include growth rates, changes in operating costs,
capital expenditures, changes in weighted average costs of capital, and the fair value of an asset based on the price that would be received
in a current transaction to sell the asset. Additionally, we obtain independent market metrics for the industry and our peers to assist in the
development of these key assumptions. This process is consistent with our internal forecasts and operating plans.
For the years ended December 31, 2024, 2023, and 2022, there were impairments relating to goodwill of zero, $3.8 million, and zero,
respectively.
On June 8, 2023, the Company consummated the sale of its Nashville, Tennessee property. See Note 8, “Real Estate Transactions.” The
result of the sale created a change in the trajectory of the fair value of the Nashville, Tennessee operations and as such, the Company
recorded a pre-tax non-cash impairment charge of $3.8 million relating to goodwill. No further impairments to goodwill were deemed
necessary as of December 31, 2023.
8.
REAL ESTATE TRANSACTIONS
Asset Purchase Agreement – Summerlin, Las Vegas
On November 11, 2024, the Company, entered into an agreement with DVMD LLS (IntelliTec College) for the sale of the Summerlin, Las
Vegas (“Euphoria”) campus. As a result of the intended sale, the Company recorded the carrying amount of the net assets totaling $1.2
million as held for sale on the Consolidated Balance Sheets. The net assets related to the Summerlin, Las Vegas campus consisted of $2.1
million in assets and $0.9 million in liabilities. The sale of the campus was consummated effective January 1, 2025.
Purchase and Sale-leaseback Transaction – Philadelphia, Pennsylvania Area Campus
On September 28, 2023, the Company purchased a 90,000 square foot property located at 311 Veterans Highway, Levittown,
Pennsylvania for approximately $10.2 million and subsequently on January 30, 2024 entered into a sale-leaseback transaction for the same
property. As of December 31, 2023, this property was classified as held-for-sale on the Consolidated Balance Sheets. During the year
ended December 31, 2024, the Company has invested approximately $11.7 million in capital investments.
F-24
Property Sale Agreement - Nashville, Tennessee Campus
On September 24, 2021, Nashville Acquisition, L.L.C., a subsidiary of the Company, entered into a Contract for the Purchase of Real Estate
(the “Nashville Contract”) to sell the nearly 16-acre property located at 524 Gallatin Avenue, Nashville, Tennessee 37206, at which the
Company operates its Nashville campus, to SLC Development, LLC, a subsidiary of Southern Land Company (“SLC”).
On June 8, 2023, the Company closed on the sale of its Nashville, Tennessee property to East Nashville Owner, LLC, an affiliate
of SLC, for approximately $33.8 million pursuant to the Nashville Contract. The net proceeds from the Nashville sale, net of closing costs,
are available for working capital, acquisitions, other strategic initiatives, and general corporate purposes. In connection with the sale, the
parties entered into a lease agreement allowing Lincoln to continue to occupy the campus and operate it on a rent-free basis for a period of
15 months plus options to extend the lease for up to three consecutive 30-day terms at $150,000 per extension term. The carrying value of
the campus was approximately $4.5 million and the estimated fair value of the rent for the 15-month rent-free period was
approximately $2.3 million at the consummation of the lease. As of December 31, 2024, the total rent free period has been fully expensed.
9.
PROPERTY, EQUIPMENT AND FACILITIES
Property, equipment and facilities consist of the following:
Useful life
(years)
2024
2023
Land
-
52
$
52
$
Buildings and improvements
1-25
104,081
101,540
Equipment, furniture and fixtures
1-7
84,352
80,214
Vehicles
3
1,556
1,592
Construction in progress
-
54,763
7,620
244,804
191,018
Less accumulated depreciation and amortization
(141,271)
(140,161)
103,533
$
50,857
$
At December 31,
The increase in property, equipment and facilities was driven by several factors, including a $37.0 million investment relating to the build-
out of the new Nashville, Tennessee, Levittown, Pennsylvania and Houston Texas campuses, $10.9 million in new and expanded
programs at various campuses, expansions and additional programs focused on Welding, Electrical and Electronic Systems Technology
(“EEST”), Heating Ventilation and Air Conditioning (“HVAC”), and Auto and Medical Assistant (“MA”), and $17.2 million of facilities
upgrades including security and branding, with the remainder focusing on training materials and equipment. Depreciation and
amortization expense of property, equipment and facilities was $12.9 million and $6.8 million for the years ended December 31, 2024 and
2023, respectively.
10.
ACCRUED EXPENSES
Accrued expenses consist of the following:
2024
2023
Accrued compensation and benefits
7,515
$
9,845
$
Accrued real estate taxes
1,700
1,733
Other accrued expenses
2,771
2,102
11,986
$
13,680
$
At December 31,
11.
LONG-TERM DEBT
Credit Facility
On February 16, 2024, the Company entered into a secured credit agreement (the “Fifth Third Credit Agreement”) with Fifth Third Bank,
National Association (the “Bank”), pursuant to which the Company, as borrower, has obtained a revolving credit facility in the aggregate
principal amount of $40.0 million including a $10.0 million letter of credit sublimit and a $20.0 million accordion feature (the “Facility”),
the proceeds of which are to be used for working capital, general corporate and certain other permitted purposes. The Facility is
F-25
guaranteed by the Company’s wholly-owned subsidiaries and is secured by a first priority lien in favor of the Bank on substantially all of
the personal property owned by the Company and its subsidiaries. The term of the Facility is 36 months, maturing on February 16, 2027.
Each advance under the Facility will bear interest on the outstanding principal amount thereof from the date when made at an interest rate
determined at the election of the Company at either the Tranche Rate (which is the forward-looking Secured Overnight Financing Rate
(SOFR) for one or three months), or the Base Rate (which is a variable per annum rate, as of any date of determination, equal to the Bank’s
Prime Rate), plus an Applicable Margin. The Applicable Margin is determined pursuant to a Pricing Grid, which for loans subject to the
Tranche Rate varies from 1.75% to 2.50% and for loans subject to the Base Rate varies from 0.75% to 1.50%. The Applicable Margin may
change quarterly based on the Total Leverage Ratio at such time. The Total Leverage Ratio is determined with respect to the Company and
its subsidiaries on a consolidated basis for an applicable quarterly period by dividing the aggregate principal amount of various forms of
borrowed indebtedness as of the last day of a determination period by EBITDA (earnings before interest expense, taxes, depreciation and
amortization) for such period. Interest is paid in arrears, either quarterly or monthly depending on the Company’s interest rate election, with
the principal due at maturity.
Under the terms of the Fifth Third Credit Agreement, the Company will pay to the Bank an unused facility fee on the average daily unused
balance of the Facility at a rate per annum equal to 0.50%, which fee is payable in arrears on dates when interest is due and payable. As of
December 31, 2024, the Company has paid approximately $200,000 in unused facility fees. The Company will also pay to the Bank a
letter of credit fee equal to the Applicable Margin for loans subject to the Tranche Rate multiplied by the maximum amount available to be
drawn under such letter of credit.
The Fifth Third Credit Agreement contains customary representations, warranties and affirmative and negative covenants, as well as
events of default customary for facilities of this type. In connection with the Fifth Third Credit Agreement, the Company paid fees of
approximately $456,000 consisting of bank fees, closing fees, legal costs and other customary fees and reimbursements.
On July 18, 2024, Company entered into a first amendment (the “Amendment”) of the Fifth Third Credit Agreement with the Bank.
Among other things, the Amendment effects certain modifications to (i) clarify certain representations and affirmative covenants of the
Company, (ii) clarify certain conditions to each advance, (iii) clarify and/or replace certain events of default and (iv) delete or revise
certain definitions in order to harmonize them with the other modifications made. The Amendment also contains customary releases,
representations and warranties and reaffirmations consistent with the original terms of the Fifth Third Credit Agreement. Except as set
forth above, the Amendment does not materially alter the Fifth Third Credit Agreement.
12.
STOCKHOLDERS' EQUITY
Common Stock
Holders of our Common Stock are entitled to receive dividends when and as declared by our Board of Directors and have the right to one
vote per share on all matters requiring shareholder approval. The Company has not declared or paid any cash dividends on our Common
Stock since the Company’s Board of Directors discontinued our quarterly cash dividend program in February 2015. The Company has no
current intentions to resume the payment of cash dividends in the foreseeable future.
Preferred Stock
On November 30, 2022, the Company exercised in full its right of mandatory conversion of the Company’s Series A Preferred Stock. In
connection with the conversion, each share of Series A Preferred Stock has been cancelled and converted into the right to receive 423.729
shares of the Company’s Common Stock, no par value per share. Shares of the Series A Preferred Stock are no longer outstanding and all
rights of the holders to receive future dividends have terminated. As a result of the conversion, the aggregate 12,700 shares of Series A
Preferred Stock outstanding were converted into 5,381,356 shares of Common Stock.
Dividends
Dividends on the Series A Preferred Stock (“Series A Dividends”), at the initial annual rate of 9.6% is to be paid, in arrears, from the date
of issuance quarterly on each December 31, March 31, June 30 and September 30 with September 30, 2020 being the first dividend
payment date. For the year ended December 31, 2022, we have paid $1.1 million in cash dividends on the outstanding shares of Series A
Preferred Stock. With the exercise of the mandatory conversion of the Company’s Series A Preferred Stock there will not be any
additional dividend payment related to the Series A Preferred Stock going forward. Dividends are included in the Consolidated Balance
Sheets within additional paid-in-capital when the Company maintains an accumulated deficit.
Treasury Stock
On May 24, 2022, the Board of Directors authorized the cancellation of 5,910,541 shares of Treasury Stock, which reduced Treasury
Stock and Common Stock by $82.9 million.
F-26
Restricted Stock
The Company currently has only one active stock incentive plan: the Lincoln Educational Services Corporation 2020 Long-Term
Incentive Plan (the “LTIP”)
On March 26, 2020, the Board of Directors adopted the LTIP to provide an incentive to certain directors, officers, employees and
consultants of the Company to align their interests in the Company’s success with those of its shareholders through the grant of equity-
based awards. On June 16, 2020, the shareholders of the Company approved the LTIP. The LTIP is administered by the Compensation
Committee of the Board of Directors, or such other qualified committee appointed by the Board of Directors, which will, among other
duties, have the full power and authority to take all actions and make all determinations required or provided for under the LTIP. Pursuant
to the LTIP, the Company may grant options, share appreciation rights, restricted shares, restricted share units, incentive stock options and
nonqualified stock options. Under the LTIP, employees may surrender shares as payment of applicable income tax withholding on the
vested Restricted Stock. The LTIP has a duration of 10 years. On February 23, 2023, the Board of Directors approved, subject to
shareholder approval, the amendment of the LTIP to increase the aggregate number of shares available under the LTIP from 2,000,000
shares to 4,000,000 shares. The amendment was approved and adopted by the shareholders at the Annual Meeting of Shareholders held on
May 5, 2023.
For the years ended December 31, 2024, 2023, and 2022, respectively, the Company completed a net share settlement for 330,726,
337,050, and 268,654 restricted shares on behalf of certain employees that participate in the LTIP upon the vesting of the restricted shares
pursuant to the terms of the LTIP. The net share settlement was in connection with income taxes incurred on restricted shares that vested
and were transferred to the employees during 2024, 2023, and/or 2022, creating taxable income for the employees. At the employees’
request, the Company has paid these taxes on behalf of the employees in exchange for the employees returning an equivalent value of
restricted shares to the Company. These transactions resulted in a decrease of $3.4 million, $2.0 million, and $2.0 million for each of the
years ended December 31, 2024, 2023, and 2022, respectively, to equity on the Consolidated Balance Sheets as the cash payment of the
taxes effectively was a repurchase of the restricted shares granted in previous years.
The following is a summary of transactions pertaining to Restricted Stock:
Shares
Weighted
Average Grant
Date Fair Value
Per Share
Nonvested restricted stock outstanding at January 1, 2023
1,548,266
5.18
Granted
751,240
6.10
Cancelled
(37,941)
6.15
Vested
(862,890)
3.76
Nonvested restricted stock outstanding at December 31, 2023
1,398,675
5.16
Granted
459,181
9.83
Cancelled
(24,925)
9.03
Vested
(898,543)
6.74
Nonvested restricted stock outstanding at December 31, 2024
934,388
8.02
The Restricted Stock expense for the fiscal years ended December 31, 2024, 2023, and 2022 was $4.6 million, $5.9 million, and $3.1
million, respectively. The unrecognized Restricted Stock expense as of December 31, 2024, 2023, and 2022 was $4.3 million, $4.3
million, and $7.9 million, respectively. As of December 31, 2024, outstanding Restricted Shares under the LTIP had an aggregate intrinsic
value of $14.8 million.
Share Repurchase Program
On May 24, 2022, the Company announced that its Board of Directors had authorized a share repurchase program of up to $30.0 million
of the Company’s outstanding Common Stock. The repurchase program was authorized for 12 months. Pursuant to the program,
purchases may be made, from time to time, in open-market transactions at prevailing market prices, in privately negotiated transactions or
by other means as determined by the Company’s management and in accordance with applicable federal securities laws. The timing of
purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume,
corporate and regulatory requirements and market conditions. The Company retains the right to limit, terminate or extend the share
repurchase program at any time without prior notice.
F-27
On February 27, 2023, the Board of Directors extended the share repurchase program for an additional 12 months and authorized the
repurchase of an additional $10.0 million of the Company’s Common Stock, for an aggregate of up to $30.6 million in additional
repurchases.
On May 7, 2024, the Company announced that its Board of Directors had authorized an extension of the share repurchase program for an
additional 12 months through May 24, 2025. During the years ended December 31, 2024, 2023, and 2022, the Company repurchased zero
shares, 165,064 shares, and 1,572,414 shares, respectively. As of December 31, 2024, the Company had approximately $29.7 million
remaining for additional repurchases under the program. Since inception of the program, the Company has made repurchases of
approximately 1.7 million shares of the Company’s Common Stock at an average share price of $5.95 for an aggregate expenditure of
approximately $10.3 million
The following table presents information about our repurchases of Common Stock, all of which were completed through open market
purchases:
(in thousands, except share data)
2024
2023
2022
Total number of shares repurchased
1
-
165,064
1,572,414
Total cost of shares repurchased
-
$
891
$
9,445
$
1 These shares were subsequently canceled and recorded as a reduction of Common Stock
December 31,
Year Ended
S-3 Registration
On December 24, 2024, the Company filed a Form S-3 with the Securities and Exchange Commission (“SEC”) using a “shelf” registration
process. Under this shelf registration process, we may sell the securities described in this prospectus in one or more offerings up to a total
dollar amount of $150.0 million.
13.
PENSION PLAN
The Company sponsors a noncontributory defined benefit pension plan covering substantially all of the Company's union employees.
Benefits are provided based on employees’ years of service and earnings. This plan was frozen on December 31, 1994 for non-union
employees.
The Company has terminated its defined benefit pension plan as of December 31, 2024. In connection with this termination, the Company
is expecting to offer plan participants a choice between a lump sum payment and the continuation of their benefits through an annuity
contract with a third-party insurance provider. The termination is not expected to have a material impact on the Company’s financial
condition or results of operations in 2024, but the final settlement accounting will be recorded during the year ended December 31, 2025.
F-28
The following table sets forth the plan's funded status and amounts recognized in the Consolidated Financial Statements:
2024
2023
CHANGES IN BENEFIT OBLIGATIONS:
Benefit obligation-beginning of year
16,621
$
17,113
$
Interest cost
758
792
Actuarial (gain) loss
(550)
4
Benefits paid
(1,264)
(1,288)
Benefit obligation at end of year
15,565
16,621
CHANGE IN PLAN ASSETS:
Fair value of plan assets-beginning of year
17,380
16,445
Actual return on plan assets
1,010
2,223
Benefits paid
(1,271)
(1,288)
Fair value of plan assets-end of year
17,119
17,380
FAIR VALUE IN EXCESS OF BENEFIT OBLIGATION FUNDED STATUS:
1,554
$
759
$
Year Ended December 31,
For the fiscal year ended December 31, 2024, the actuarial loss of zero was due to the decrease in the discount rate from 4.90% to 4.71%.
Amounts recognized in the Consolidated Balance Sheets consist of:
2024
2023
Noncurrent assets
1,554
$
759
$
At December 31,
Amounts recognized in accumulated other comprehensive income (loss) consist of:
2024
2023
2022
Accumulated loss
(793)
$
(1,219)
$
(2,480)
$
Deferred income taxes
1,067
1,183
1,520
Accumulated other comprehensive income (loss)
274
$
(36)
$
(960)
$
Year Ended December 31,
The accumulated benefit obligation was $15.5 million and $16.6 million at December 31, 2024 and 2023, respectively.
The following table provides the components of net periodic cost for the plan:
2024
2023
2022
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost
-
$
-
$
37
$
Interest cost
758
792
542
Expected return on plan assets
(1,127)
(1,065)
(1,217)
Recognized net actuarial loss
-
106
81
Net periodic benefit income
(369)
$
(167)
$
(557)
$
Year Ended December 31,
The estimated net income and prior service cost for the plan that will be amortized from accumulated other comprehensive income into net
periodic benefit cost over the next year is zero.
The following tables present plan assets using the fair value hierarchy as of December 31, 2024 and 2023, respectively. The fair value
hierarchy has three levels based on the reliability of inputs used to determine fair value. Level 1 refers to fair values determined based on
quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using observable prices that are based on inputs
not quoted in active markets but observable by market data, while Level 3 includes the fair values estimated using significant non-
observable inputs. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest
level input that is significant to the fair value measurement in its entirety.
F-29
Quoted Prices in
Active Markets
for Identical
Assets
Significant Other
Observable Inputs
Significant
Unobservable
Inputs
(Level 1)
(Level 2)
(Level 3)
Total
Equity securities
-
$
-
$
-
$
-
$
Fixed income
16,050
-
-
16,050
International equities
-
-
-
-
Real estate
-
-
-
-
Cash and equivalents
1,069
1,069
Balance at December 31, 2024
17,119
$
-
$
-
$
17,119
$
Quoted Prices in
Active Markets
for Identical
Assets
Significant Other
Observable Inputs
Significant
Unobservable
Inputs
(Level 1)
(Level 2)
(Level 3)
Total
Equity securities
4,231
$
-
$
-
$
4,231
$
Fixed income
8,065
-
-
8,065
International equities
3,466
-
-
3,466
Real estate
1,062
-
-
1,062
Cash and equivalents
556
-
-
556
Balance at December 31, 2023
17,380
$
-
$
-
$
17,380
$
Fair value of total plan assets by major asset category as of December 31:
2024
2023
Equity securities
0%
25%
Fixed income
94%
47%
International equities
0%
20%
Real estate
0%
6%
Cash and equivalents
6%
2%
Total
100%
100%
Weighted-average assumptions used to determine benefit obligations as of December 31:
2024
2023
2022
Discount rate
5.30%
4.71%
4.90%
Rate of compensation increase
2.50%
2.50%
2.50%
Weighted-average assumptions used to determine net periodic pension cost for years ended December 31:
2024
2023
2022
Discount rate
4.71%
4.71%
4.90%
Rate of compensation increase
2.50%
2.50%
2.50%
Long-term rate of return
6.75%
6.75%
6.75%
The Company has terminated its pension plan and has revised its strategy to adjust the allocation to a full liability investment strategy.
The plan currently allocates all funds to fully fixed income investment and cash allocation, attempting to eliminate funding level
fluctuations during the termination process.
The Company does not expect to make contributions to the plan in 2025.
F-30
The total amount of the Company’s contributions paid under its pension plan was zero for each of the fiscal years ended December 31,
2024 and 2023, and 2022, respectively.
Information about the expected benefit payments for the plan is as follows:
Year Ending December 31,
2025
4,087
$
2026
1,242
2027
1,210
2028
1,173
2029
1,135
Years 2030-2034
5,048
The Company has a 401(k) defined contribution plan for all eligible employees. Employees may contribute up to 75% of their
compensation into the plan. The Company may contribute up to an additional 15% of the employee's contributed amount up to 6% of
compensation. For each of the fiscal years ended December 31, 2024, 2023, and 2022, the Company's expense for the 401(k) plan
amounted to $0.8 million, $0.8, and $0.7 million, respectively.
14.
INCOME TAXES
Components of the provision for income taxes were as follows:
2024
2023
2022
Current:
Federal
4,496
$
5,825
$
1,864
$
State
2,566
2,185
644
Total
7,062
8,010
2,508
Deferred:
Federal
(1,555)
989
767
State
(687)
643
527
Total
(2,242)
1,632
1,294
Total provision
4,820
$
9,642
$
3,802
$
Year Ended December 31,
Effective Tax rate
The reconciliation of the effective tax rate to the U.S. Statutory Federal Income tax rate was:
2022
Income before taxes
14,711
$
35,639
$
16,436
$
Expected tax
3,089
$
21.0%
7,484
$
21.0%
3,452
$
21.0%
State tax (net of federal benefit)
1,483
10.1%
2,234
6.3%
925
5.6%
Other
248
1.7%
(76)
-0.2%
(575)
-3.5%
Total
4,820
$
32.8%
9,642
$
27.1%
3,802
$
23.1%
Year Ended December 31,
2024
2023
F-31
Deferred Taxes
The components of the non-current deferred tax assets (liabilities) were as follows:
2024
2023
Gross noncurrent deferred tax assets (liabilities)
Operating lease liability
40,209
$
26,835
$
Provision for credit losses
17,558
14,388
Finance lease liability
7,835
4,390
Depreciation and amortization
3,142
4,180
Stock-based compensation
843
1,223
Net operating loss carryforwards
807
1,040
Accrued expenses
26
225
Other intangibles
23
24
Pension plan liabilities
(416)
(202)
Goodwill
(603)
(618)
Finance lease right of use assets
(7,161)
(4,224)
Operating lease right-of-use assets
(36,904)
(24,043)
Noncurrent deferred tax assets, net
25,359
$
23,218
$
At December 31,
As of December 31, 2024, and 2023, the Company had gross net operating losses (“NOL”) of $14.0 million and $18.1 million,
respectively, for state tax purposes and none for federal. While some states NOL can be carried forward indefinitely, the majority of state
NOLs expire in 2033 and end in 2037 if not utilized.
15.
FAIR VALUE
The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to
measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair
value hierarchy consists of three tiers:
Level 1: Defined as quoted market prices in active markets for identical assets or liabilities.
Level 2: Defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are
observable in the market or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level 3: Defined as unobservable inputs that are not corroborated by market data.
F-32
The following table presents the fair value of the financial instruments measured on a recurring basis as of December 31, 2024 and 2023.
Carrying
Quoted Prices
in Active
Markets for
Identical
Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Amount
(Level 1)
(Level 2)
(Level 3)
Total
Cash equivalents:
Money market fund
44,425
$
44,425
$
-
$
-
$
44,425
$
Total cash equivalents and short-term investments
44,425
$
44,425
$
-
$
-
$
44,425
$
Carrying
Quoted Prices
in Active
Markets for
Identical
Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Amount
(Level 1)
(Level 2)
(Level 3)
Total
Cash equivalents:
Money market fund
9,037
$
9,037
$
-
$
-
$
9,037
$
Treasury bill
20,343
20,343
-
-
20,343
Total cash equivalents and short-term investments
29,380
$
29,380
$
-
$
-
$
29,380
$
December 31, 2024
December 31, 2023
The Company measures the fair value of money market funds and treasury bills using Level 1 inputs. Pricing sources may include
industry standard data providers, security master files from large financial institutions and other third-party sources used to determine a
daily market value.
The carrying amount of the Company’s financial instruments, including cash equivalents, short-term investments, prepaid expenses and
other current assets, accrued expenses and other short-term liabilities approximate fair value due to the short-term nature of these items.
16.
SEGMENT REPORTING
The Company’s manages its business, evaluates performance and allocates resources based on two reportable business segments, Campus
Operations and Transitional.
Campus Operations - The Campus Operations segment includes campuses that are continuing in operation and contribute to the
Company’s core operations and performance. All of the campuses continuing in operation are classified in this segment. The majority of
the campuses offer programs across various areas of study.
Transitional – The Transitional segment refers to campuses that are marked for closure and are currently being taught-out, in addition to
campuses that are held-for-sale or sold. As of December 31, 2024, the net assets for the Summerlin, Las Vegas campus were classified as
held for sale, with operating results classified within the Transitional segment. The sale of the campus was consummated effective
January 1, 2025. In addition, the Company closed the Somerville, Massachusetts campus in the prior year. It was fully taught-out as of
December 31, 2023. This campus was classified in the Transitional segment in the prior year’s statement of operations.
The individual operating segments have been aggregated into the two main reportable segments based on the method by which our Chief
Operating Decision Maker (“CODM”) 1) evaluates performance and allocates resources and 2) as a result of the Company’s judgment,
that the reporting units have similar products, production processes, types of customers, methods of distribution, regulatory environment
and economic characteristics. The Company’s CODM is comprised of a team of executives deemed the “Executive Committee” which is
made up of the following individuals:
1. Scott Shaw – Chief Executive Officer and Director
2. Brian Meyers – Executive Vice President, Chief Financial Officer, and Treasurer
The CODM assesses segment financial performance by reviewing segment revenue and segment operating income, which includes certain
Corporate overhead allocations relating directly to the segments disclosed. Some of the allocated costs include the centralization of the
Company’s financial aid process, national sales and receivables and default costs. The CODM will make decisions to allocate resources
based on the review of monthly, quarterly and annual financial information categorized by segment. The financial information is presented
to the CODM using actual-to-actual results and budget-to-actual results.
F-33
2024
2023
2022
2024
2023
2022
2024
2023
2022
2024
2023
2022
REVENUE
440,064
$
378,070
$
348,287
$
432,966
$
367,233
$
330,896
$
7,098
$
10,837
$
17,391
$
-
$
-
$
-
$
COSTS AND EXPENSES:
Instructional
90,566
85,311
79,021
88,207
82,228
75,274
2,359
3,083
3,747
-
-
-
Books and Tools
32,146
26,177
23,623
31,161
24,802
21,642
985
1,375
1,981
-
-
-
Facilities
46,791
44,647
40,327
45,842
42,475
38,071
949
2,172
2,256
-
-
-
Depreciation
12,256
6,140
5,775
12,200
6,030
5,669
56
110
106
-
-
-
Educational services and facilities
181,759
162,275
148,746
177,410
155,535
140,656
4,349
6,740
8,090
-
-
-
Sales and marketing
75,236
65,553
61,241
73,532
64,159
58,561
1,704
1,394
2,680
-
-
-
Student services
21,874
18,693
16,077
21,012
17,314
15,004
862
1,379
1,073
-
-
-
Bad debt
56,578
41,637
34,915
55,600
39,978
32,731
975
1,659
2,187
3
-
(3)
Administrative
89,415
82,622
69,571
41,235
37,976
35,068
1,236
2,030
2,066
46,944
42,616
32,437
Depreciation
700
630
587
-
-
-
-
-
700
630
587
Selling, general and administrative
243,803
209,135
182,391
191,379
159,427
141,364
4,777
6,462
8,006
47,647
43,246
33,021
Loss (gain) on sale of assets
2,119
(30,918)
(177)
619
20
28
11
1
-
1,489
(30,939)
(205)
Gain on insurance proceeds
(2,794)
-
-
(2,794)
-
-
Impairment of goodwill and long-lived assets
-
4,220
1,049
-
4,220
1,049
-
-
-
-
-
Total costs and expenses
424,887
344,712
332,009
369,408
319,202
283,097
9,137
13,203
16,096
46,342
12,307
32,816
OPERATING INCOME (LOSS)
15,177
$
33,358
$
16,278
$
63,558
$
48,031
$
47,799
$
(2,039)
$
(2,366)
$
1,295
$
(46,342)
$
(12,307)
$
(32,816)
$
Year Ended December 31,
Consolidated
Campus Operations
Transitional
Corporate
17.
COMMITMENTS AND CONTINGENCIES
Litigation and Regulatory Matters— On June 22, 2022, the DOE and the plaintiff student loan borrowers in a class action against the
DOE initiated on June 25, 2019 in the U.S. District Court for the Northern District of California (Sweet v. Cardona, No. 3:19-cv-3674
(N.D. Cal.)) announced a proposed settlement agreement to resolve claims that the DOE had failed to timely decide Borrower Defense to
Repayment applications submitted to the DOE. The proposed settlement included three categories of relief for student loan borrowers.
First, the DOE would agree to discharge loans and refund prior loan payments to class members with loan debt associated with an
institution on the list included in the settlement (which includes Lincoln institutions). The class action plaintiffs and the DOE stated that
the DOE had determined that attendance at one of the listed institutions justifies presumptive relief allegedly based on strong indicia
regarding substantial misconduct by the institutions, whether credibly alleged or in some instances proven, and the purportedly high rate of
class members with applications related to the listed schools. Second, the proposed settlement included new procedures for the DOE to
resolve pending borrower defense claims associated with other schools not on the list. Third, for any student loan borrower who submitted
a borrower defense application after June 22, 2022 and before the final approval of the settlement, the proposed settlement would require
the DOE to review the applications under the DOE’s 2016 regulatory standards and issue decisions within 36 months, or else the
applications would be discharged in full.
On November 16, 2022, the federal district court approved the settlement as proposed and the DOE began implementing the settlement
relief while Lincoln and other parties appealed the settlement’s final approval to the U.S. Court of Appeals for the Ninth Circuit. On
November 5, 2024, the Ninth Circuit upheld the settlement on appeal. One or more parties are expected to continue to appeal the final
approval of the settlement, but Lincoln does not intend to continue participating in the appeal. As a result of this final approval, the DOE
has estimated that approximately 196,000 student loan borrowers who attended one of the listed schools (including Lincoln institutions)
will receive automatic student loan discharges; that another approximately 100,000 student loan borrowers who attended other schools not
on the list would receive decisions under new procedures; and that approximately 250,000 student loan borrowers who submitted borrower
defense applications between June 22, 2022 and November 16, 2022 would receive decisions under the DOE’s 2016 regulatory standards
within 36 months or else receive automatic student loan discharges.
It is not possible at this time to predict whether the settlement will continue to be upheld on appeal, what additional actions the DOE might
take as the settlement continues to be upheld on appeal, or whether the DOE or other agencies might take actions against Lincoln
institutions. Such actions could have a material adverse effect on our business and results of operations. We believe the DOE already
may have discharged some or all of the pending applications.
In addition to the foregoing, in the ordinary conduct of our business, we are subject to additional periodic lawsuits, investigations,
regulatory proceedings and other claims, including, but not limited to, claims involving students or graduates, routine employment matters
and business disputes. We cannot predict the ultimate resolution of these lawsuits, investigations, regulatory proceedings and other claims
asserted against us, but we do not believe that any of these matters will have a material adverse effect on our business, financial condition,
results of operations or cash flows.
Student Financing Plans—At December 31, 2024, the Company had outstanding net financing commitments to its students to assist them
in financing their education of approximately $44.6 million, net of interest.
Executive Employment Agreements—The Company entered into employment contracts with key executives that provide for continued
salary payments if the executives are terminated for reasons other than cause, as defined in the agreements. The future employment
contract commitments for such employees were approximately $9.6 million at December 31, 2024.
F-34
Surety Bonds—Each of the Company’s campuses must be authorized by the applicable state education agency in which the campus is
located to operate and to grant degrees, diplomas or certificates to its students. The campuses are subject to extensive, ongoing regulation
by each of these states. In addition, the Company’s campuses are required to be authorized by the applicable state education agencies of
certain other states in which the campuses recruit students. The Company is required to post surety bonds on behalf of its campuses and
education representatives with multiple states to maintain authorization to conduct its business. At December 31, 2024, the Company has
posted surety bonds in the total amount of approximately $17.0 million.
F-35
LINCOLN EDUCATIONAL SERVICES CORPORATION
Schedule II—Valuation and Qualifying Accounts
(in thousands)
Balance at
Beginning
of Period
Charged to
Expense
Accounts
Written-off
Balance at
End of
Period
Student receivable allowance
Student receivable allowance
1
Student receivable allowance
1
Description
Allowance accounts for the year ended:
December 31, 2024
53,811
$
56,578
$
(44,817)
$
65,572
$
December 31, 2023
35,370
$
41,637
$
35,370
$
On January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13 Financial
Instruments - Credit Losses . The adoption resulted in an opening balance sheet adjustments of $10.8
million increasing the allowance for credit losses relating to the Company's outstanding receivables. The
adoption also resulted in a decrease to retained earnings of $7.9 million, after tax and a deferred tax
asset increase of $2.9 million.
(23,196)
$
53,811
$
December 31, 2022
31,921
$
34,915
$
(31,466)
$
Exhibit 21.1
Subsidiaries of the Company
The following is a list of Lincoln Educational Services Corporation’s subsidiaries as of December 31, 2024:
Name
DBA
Jurisdiction
Lincoln Technical Institute, Inc (wholly-owned)
Lincoln Technical Institute
New Jersey
Lincoln College of Technology
Lincoln Tech
New England Acquisition, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
Lincoln Technical Institute
Delaware
Lincoln Tech
Nashville Acquisition LLC (wholly-owned through Lincoln Technical Institute, Inc.)
Nashville Auto Diesel College
Delaware
Lincoln College of Technology
Euphoria Acquisition, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
Euphoria Institute of Beauty Arts & Sciences
Delaware
Lincoln Technical Institute
LTI Holdings, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
N/A
Delaware
NN Acquisition, LLC (wholly-owned through Lincoln Technical Institute, Inc.)
Lincoln Technical Institute
Delaware
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-248506, 333-249352, and 333-283768 on Form S-3 and
333-188240, 333-203806, 333-211213, 333-239453 and 333-277159 on Form S-8 of our reports dated March 4, 2025, relating to the
consolidated financial statements and financial statement schedule of Lincoln Educational Services Corporation and subsidiaries, and the
effectiveness Lincoln Educational Services Corporation and subsidiaries internal control over financial reporting appearing in this Annual
Report on Form 10-K of Lincoln Educational Services Corporation for the year ended December 31, 2024.
/s/ Deloitte & Touche LLP
Morristown, New Jersey
March 4, 2025
EXHIBIT 31.1
CERTIFICATION
I, Scott Shaw, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Lincoln Educational Services Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(e)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 4, 2025
/s/ Scott Shaw
Scott Shaw
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Brian Meyers, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Lincoln Educational Services Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 4, 2025
/s/ Brian Meyers
Brian Meyers
Chief Financial Officer
EXHIBIT 32
CERTIFICATION
Pursuant to 18 U.S.C. 1350 as adopted by
Section 906 of the Sarbanes-Oxley Act of 2002
Each of the undersigned, Scott Shaw, Chief Executive Officer of Lincoln Educational Services Corporation (the “Company”), and
Brian Meyers, Chief Financial Officer of the Company, has executed this certification in connection with the filing with the Securities and
Exchange Commission of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Report”).
Each of the undersigned hereby certifies that, to his respective knowledge:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date:
March 4, 2025
/s/ Scott Shaw
Scott Shaw
Chief Executive Officer
/s/ Brian Meyers
Brian Meyers
Chief Financial Officer
Shares of Common Stock held by executive officers and directors and persons who own 5% or more of the outstanding Common Stock have been
excluded since such persons may be deemed affiliates. This determination of affiliate status is not a determination for any other purpose.
BOARD OF DIRECTORS
John A. Bartholdson
Non-Executive Chair
Co-founder and Partner,
Juniper Investment Company LLC
Scott M. Shaw
President and
Chief Executive Officer
James J. Burke, Jr. (1) (2)
Managing Partner,
J. Burke Capital Partners
Anna Cabral (3)
Former Treasurer,
United States of America
Kevin M. Carney (3)
Former Executive Vice President
& Chief Financial Officer,
Web.com Group Inc.
Marta Newhart (2)
Former Executive, Westinghouse
Electric, Boeing, Johnson Controls
& Medtronic
Michael A. Plater, Ph.D. (2) (3)
Former University President,
Strayer University
Felecia J. Pryor (1) (2)
Senior Vice President & Chief
People Officer, John Deere
Carlton E. Rose (1) (3)
Former President,
Global Fleet Maintenance
& Engineering, UPS
Sylvia J. Young (1) (3)
Former President
& Chief Executive Officer,
HCA Continental Division
EXECUTIVE TEAM
Scott M. Shaw
President and
Chief Executive Officer
Brian K. Meyers
Executive Vice President,
Chief Financial Officer
and Treasurer
Chad D. Nyce
Executive Vice President and
Chief Operating Officer
Alexandra M. Luster
Senior Vice President,
General Counsel and Secretary
Stephen E. Ace
Senior Vice President and
Chief Human Resources Officer
Francis S. Giglio
Senior Vice President
of Compliance and Regulatory
Services
Jay A. Rasmussen, Jr.
Senior Vice President
of Admissions
David B. Shaw
Senior Vice President
of Finance
Valerian J. Thomas
Senior Vice President and
Chief Information Officer
Gina L. Zaffino
Senior Vice President
of Education
CORPORATE
HEADQUARTERS
14 Sylvan Way, Suite A
Parsippany, NJ 07054
973.736.9340
www.lincolntech.edu
AUDITORS
Deloitte & Touche LLP
Morristown, NJ
TRANSFER AGENT
Continental Stock Transfer
& Trust Company
17 Battery Place
New York, NY 10004
212.509.4000
COMMON STOCK
Traded on the NASDAQ
Global Select Market under
the symbol “LINC”
ANNUAL MEETING OF
SHAREHOLDERS
The annual meeting of shareholders
of Lincoln Educational Services
Corporation will be held on
May 8, 2025.
REPORTS AND
PUBLICATIONS
Copies of Lincoln’s Annual and
Quarterly Reports and other reports
filed with the Securities Exchange
Commission may be obtained
without charge by accessing the
SEC’s web site at www.sec.gov
or the company’s website at
www.lincolntech.edu.
(1) Member of Compensation Committee
(2) Member of Governance Committee
(3) Member of Audit Committee
CORPORATE INFORMATION
Lincoln Educational Services Corporation
14 Sylvan Way, Suite A
Parsippany, NJ 07054
973-736-9340
THE LINCOLN GROUP OF SCHOOLS
Lincoln Technical Institute
www.lincolntech.edu
Allentown, PA
East Windsor, CT
Iselin, NJ
Lincoln, RI
Mahwah, NJ
Moorestown, NJ
New Britain, CT
Paramus, NJ
Philadelphia, PA
Queens, NY
Shelton, CT
South Plainfield, NJ
Union, NJ
Lincoln College of Technology
www.lincolntech.edu
Columbia, MD
Denver, CO
East Point, GA
Grand Prairie, TX
Indianapolis, IN
Marietta, GA
Melrose Park, IL
Nashville Auto-Diesel College
www.nadc.edu
Nashville, TN