Lincoln Educational Services Corp: Form 10-Q for the period ended Jun 30, 2025

All references in this Quarterly Report on Form 10-Q (“Form 10-Q”) to “we,” “our,” “us” and the “Company” refer to Lincoln Educational Services Corporation and its subsidiaries unless the context indicates otherwise.

The following discussion may contain forward-looking statements regarding the Company, our business, prospects, and our results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects, and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Such statements may be identified by the use of words such as “expect,” “estimate,” “assume,” “believe,” “anticipate,” “may,” “will,” “forecast,” “outlook,” “plan,” “project,” or similar words and include, without limitation, statements relating to future enrollment, revenues, revenues per student, earnings growth, operating expenses, capital expenditures, and the effect of pandemics and its ultimate effect on the Company’s business and results. These statements are based on the Company’s current expectations and are subject to a number of assumptions, risks and uncertainties. Additional factors that could cause or contribute to differences between our actual results and those anticipated include, but are not limited to, those described in the “Risk Factors” section of our Form 10-K and in our other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this Form 10-Q and in our other reports filed with the SEC that advise interested parties of the risks and factors that may affect our business.

The Company’s business is organized into two reportable business segments: Campus Operations; and Transitional. The Campus Operations segment includes campuses that are continuing in operation and contribute to the Company’s core operations and performance. The Transitional segment refers to campuses that have been marked for closure and are being taught out. As of June 30, 2025 no campuses were classified in the Transitional segment. In the prior year, the Company’s Summerlin, Las Vegas campus was classified in the Transitional segment and its sale was consummated on January 1, 2025.

We evaluate performance based on operating results. Adjustments to reconcile segment results with consolidated results are included in the caption “Corporate,” which primarily includes unallocated corporate activity. The interim financial statements and related notes thereto appearing elsewhere in this Form 10-Q and the discussions contained herein should be read in conjunction with the annual financial statements and notes thereto included in our Form 10-K, which includes audited Consolidated Financial Statements for the last three fiscal years ended December 31, 2024.

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. The Company entered into the Houston lease and Hicksville lease on October 31, 2023 and December 12, 2024, respectively. The Company offers programs in skilled trades, automotive, health sciences and information technology. 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.

Critical Accounting Policies and Estimates

For a description of our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” and Note 1 to the Consolidated Financial Statements included in our Form 10-K and Note 1 to the Condensed Consolidated Financial Statements included in this Form 10-Q.

Effect of Inflation

Inflation has not had a material effect on our operations.

Business Strategy

Key elements of our business strategy include:

• Expand Geographically. We plan to open new campuses and enter new markets using existing resources or acquisitions. 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.
• Replicate Programs and Expand Existing Areas of Study. We are expanding our program portfolio by introducing in-demand offerings at existing campuses and replicating proven in-demand offerings across locations.
• Increase Operating Efficiency. We aim to improve margins and scalability by centralizing operations, standardizing curricula, and leveraging technology to streamline campus functions.
• Maximize Utilization of Existing Facilities. We focus on increasing facility usage through enrollment growth, new programs, and industry partnerships.
• Expand Teaching Platform. We are transitioning to a hybrid teaching platform, Lincoln 10.0, the implementation of which has been substantially completed and is expected to be finalized by the end of the year for all planned programs, to offer greater flexibility, efficiency, and value to students.

Planned campus openings

Results of Operations for the Three and Six Months Ended June 30, 2025

The following table sets forth selected Condensed Consolidated Statements of Operations data as a percentage of revenues for each of the periods indicated:

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Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Consolidated Results of Operations

Revenue. Revenue increased $13.6 million, or 13.2% to $116.5 million for the three months ended June 30, 2025 from $102.9 million in the prior year comparable period. Revenue growth was primarily due to a 16.0% increase in average student population, reflecting 21.4% start growth during the first half in 2025 from our campus operations.

* Includes 2,764 student starts on July 1, 2025, to align with comparable student start activity in the prior year which occurred in the last week of June 2024

Educational services and facilities expense. Educational services and facilities expense increased by $1.2 million, or 2.7%, to $46.8 million for the three months ended June 30, 2025, compared to $45.6 million for the same period in 2024. This increase includes a $1.0 million reduction related to the Transitional segment, which incurred expenses in the prior year but not in the current period. On a comparable basis, educational services and facilities expense increased by $2.3 million.

The primary driver of the increase was $1.4 million or 44.3% in depreciation expense, largely resulting from capital investments to support our growth initiatives, including two new campus expansions, new program development, and the relocation of two campuses to modern facilities. The remaining increase was attributable to higher costs associated with supporting a larger student population, including market-based adjustments to instructional compensation to remain competitive and retain talent.

As a percentage of revenue, instructional expenses decreased to 20.2% for the three months ended June 30, 2025, from 22.3% in the prior-year period, reflecting improved operating efficiency. Similarly, educational services and facilities expense as a percentage of revenue declined to 40.2% from 44.3% in the prior year. These improvements demonstrate continued margin expansion as we scale operations.

Selling, general and administrative expense. Selling, general and administrative expense increased $9.2 million, or 15.9% to $67.1 million for the three months ended June 30, 2025, compared to $57.9 million for the same period in 2024. This includes a $1.1 million reduction related to the Transitional segment, which had expenses in the prior year but none in the current period.

Administrative expenses rose $7.6 million, or 36.5%, primarily due to higher medical claims and increased costs associated with our expanding student population and improved financial performance.

Student services expense increased $0.9 million or 17.3%, driven by continued investments in staffing and support infrastructure to serve a growing student base.

Marketing expense increased modestly by $0.3 million, or 2.8%. Despite the increase in absolute dollars, marketing expense declined as a percentage of revenue, reflecting improved efficiency. Notably, cost per start declined 14.0% compared to the prior-year period, underscoring a higher return on marketing investment.

Selling, general and administrative expenses, as a percentage of revenue was 57.6% for the three months ended June 30, 2025, compared to 56.2% for the same period in 2024.

(Gain) Loss on Sale of Assets. Gain on sale was $0.3 million for the three months ended June 30, 2025, compared to a loss of $0.6 million in the prior year.

Net interest income/(expense). Net interest expense was $0.8 million for the three months ended June 30, 2025, compared to an immaterial amount in the same period in 2024. The increase was primarily driven by a reduction in interest income resulting from lower average cash balances during the period, as funds were used for capital expenditures.

Income taxes. Income tax provision was $0.5 million for the three months ended June 30, 2025, representing an effective tax rate of 25.1% of pre-tax income. This compares to an income tax benefit of $0.5 million in the prior-year period, which reflected a 40.4% effective tax rate on a pre-tax net loss. The change in effective tax rate was primarily driven by the shift from a pre-tax loss to pre-tax income, as well as the impact of discrete tax items recognized in each period.

Segment Results of Operations

The Company’s business is organized into two reportable business segments: Campus Operations and Transitional. These segments are defined below:

Campus Operations – The Campus Operations segment includes all campuses that are continuing in operation and contribute to the Company’s core operations and performance.

Transitional – The Transitional segment refers to campuses that have been marked for closure and are being taught out. As of June 30, 2025, no campuses were classified in the Transitional segment. During the prior year, the Company’s Summerlin, Las Vegas campus was classified in the Transitional segment. The sale of the Summerlin campus was consummated on January 1, 2025.

We evaluate performance based on operating results. Adjustments to reconcile segment results with consolidated results are included in the caption “Corporate,” which primarily includes unallocated corporate activity.

The following table presents selected operating metrics for our two reportable segments for the three months ended June 30, 2025 and 2024:

* Includes 2,764 student starts on July 1, 2025, to align with comparable student start activity in the prior year which occurred in the last week of June 2024

Campus Operations

Operating income increased $9.2 million, or 90.4% to $19.3 million for the three months ended June 30, 2025 from $10.1 million in the prior year comparable period. The change compared to the prior year comparable period was mainly driven by the following factors:

• Revenue increased $15.2 million, or 15.1% to $116.5 million for the three months ended June 30, 2025 from $101.2 million in the prior year comparable period. Revenue growth was primarily due to a 18.7% increase in average student population.
• Educational services and facilities expense increased $2.3 million, or 5.1% to $46.8 million for the three months ended June 30, 2025 from $44.5 million in the prior year comparable period. The primary driver of the increase was $1.4 million in depreciation expense, largely resulting from capital investments to support our growth initiatives, including campus expansions, new program development, and the relocation of certain campuses to updated, modern facilities. The remaining increase was attributable to higher costs associated with supporting a larger student population.
• Total educational services and facilities expense and instructional expense declined as a percentage of revenue by 3.8% and 1.8%, respectively for the three months ended June 30, 2025, compared to the prior year comparable period, reflecting continued margin expansion.
• Selling, general, and administrative expenses increased $4.6 million, or 10.1%, to $50.6 million for the quarter ended June 30, 2025, compared to $46.0 million in the prior year. This increase was primarily driven by higher administrative expenses associated with supporting a larger student population, as well as increased medical claims. Additionally, student services costs rose in line with the growing student base. While sales and marketing expenses increased in absolute terms, marketing efficiency improved, as demonstrated by a 14.0% decrease in cost per start.

Transitional

In the fourth quarter of 2024, the Board of Directors approved a plan to close the Summerlin, Las Vegas campus. The sale of the Summerlin campus was consummated on January 1, 2025. During the prior year, the Summerlin campus was classified in the Transitional segment.

• Revenue decreased $1.7 million, or 100.0% to zero for the three months ended June 30, 2025, from $1.7 million in the prior year comparable period.
• Total operating expenses decreased $2.2 million, or 100.0% to zero for the three months ended June 30, 2025, from $2.2 million in the prior year comparable period.

The change in operating performance was the result of closing the Summerlin campus and no longer enrolling new students at the campus.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were $16.4 million for the three months ended June 30, 2025, compared to $10.7 million in the prior year. The increase was primarily driven by higher salaries and benefits due to workforce expansion to support a larger student population and to execute our growth initiatives. Additionally, medical claims increased, and performance-based incentive compensation increased in line with improved financial performance.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Consolidated Results of Operations

Revenue. Revenue increased $27.7 million, or 13.4% to $234.0 million for the six months ended June 30, 2025 from $206.3 million in the prior year comparable period. Revenue growth was primarily due to a 14.5% increase in average student population.

* Includes 2,764 student starts on July 1, 2025, to align with comparable student start activity in the prior year which occurred in the last week of June 2024

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Educational services and facilities expense. Educational services and facilities expense increased by $5.6 million, or 6.3%, to $94.2 million for the six months ended June 30, 2025, compared to $88.6 million for the same period in 2024. This increase includes a $2.2 million reduction related to the Transitional segment, which incurred expenses in the prior year but not in the current period. On a comparable basis, educational services and facilities expense increased by $7.8 million.

The primary driver of the increase was $2.2 million or 37.6% in depreciation expense, largely resulting from capital investments to support our growth initiatives, including two new campus expansions, new program development, and the relocation of two campuses to modern facilities. The remaining increase was attributable to higher costs associated with supporting a larger student population, including market-based adjustments to instructional compensation to remain competitive and retain talent.

As a percentage of revenue, instructional expenses decreased to 19.9% for the six months ended June 30, 2025, from 22.0% in the prior-year period, reflecting improved operating efficiency. Similarly, educational services and facilities expense as a percentage of revenue declined to 40.3% from 42.9% in the prior year. These improvements demonstrate continued margin expansion as we scale operations.

Selling, general and administrative expense. Selling, general and administrative expense increased $15.6 million, or 13.2%, to $134.0 million for the six months ended June 30, 2025, compared to $118.4 million for the same period in 2024. This includes a $2.3 million reduction related to the Transitional segment, which had expenses in the prior year but none in the current period.

Administrative expenses rose $13.8 million, or 31.5%, primarily due to higher medical claims and increased costs associated with our expanding student population and improved financial performance.

Student services expense increased $1.7 million, or 15.2%, driven by continued investments in staffing and support infrastructure to serve a growing student base.

Marketing expense slightly decreased by $0.5 million or 2.3% year over year, demonstrating improved efficiencies. Notably, cost per start declined 17.3% compared to the prior-year period, underscoring a higher return on marketing investment.

Selling, general and administrative expenses, as a percentage of revenue, was 57.3%, consistent with the prior year.

(Gain) Loss on Sale of Assets. Gain on sale was $0.5 million for the six months ended June 30, 2025, compared to a loss of $0.9 million in the prior year.

Net interest income/(expense). Net interest expense was $1.4 million for the six months ended June 30, 2025 compared to net interest income of $0.1 million for the six months ended June 30, 2024, primarily driven by a reduction in interest income resulting from lower average cash balances during the period, as funds were used for capital expenditures.

Income taxes. Income tax provision was $1.4 million for the six months ended June 30, 2025, representing an effective tax rate of 28.6% of pre-tax income. This compares to an income tax benefit of $0.6 million in the prior-year period, which reflected a 39% effective tax rate on a pre-tax net loss.

Segment Results of Operations

We evaluate performance based on operating results. Adjustments to reconcile segment results with consolidated results are included in the caption “Corporate,” which primarily includes unallocated corporate activity.

The following table presents selected operating metrics for our two reportable segments for the six months ended June 30, 2025 and 2024:

* Includes 2,764 student starts on July 1, 2025, to align with comparable student start activity in the prior year which occurred in the last week of June 2024

Campus Operations

Operating income increased $18.2 million, or 80.1% to $41.0 million for the six months ended June 30, 2025 from $22.8 million in the prior year comparable period. The change compared to the prior year was mainly driven by the following factors:

• Revenue increased $31.4 million, or 15.5% to $234.0 million for the six months ended June 30, 2025 from $202.6 million in the prior year comparable period. Revenue growth was primarily due to a 17.4% increase in average student population.
• Educational services and facilities expense increased $7.8 million, or 9.1% to $94.2 million for the six months ended June 30, 2025 from $86.4 million in the prior year comparable period. The primary driver of the increase was attributable to higher costs associated with supporting a larger student population as well as $2.3 million or 38.4% higher depreciation expense, largely resulting from capital investments to support our growth initiatives, including campus expansions, new program development, and the relocation of certain campuses to updated, modern facilities.
• Selling, general and administrative expenses increased $6.5 million, or 7.0% to $99.3 million for the six months ended June 30, 2025, compared to $92.8 million in the prior year. The increase was primarily driven by higher administrative expenses associated with supporting a larger student population, as well as increased medical claims. Additionally, student services costs rose in line with the growing student base. While sales and marketing expenses increased in absolute terms, marketing efficiency improved, as demonstrated by a 17.3% decrease in cost per start.

Transitional

In the fourth quarter of 2024, the Board of Directors approved a plan to close the Summerlin, Las Vegas campus. The sale of the Summerlin campus was consummated on January 1, 2025. During the prior year, the Summerlin campus was classified in the Transitional segment.

• Revenue decreased $3.7 million, or 100.0% to zero for the six months ended June 30, 2025, from $3.7 million in the prior year comparable period.
• Total operating expenses decreased $4.5 million, or 100.0% to zero for the six months ended June 30, 2025, from $4.5 million in the prior year comparable period.

The change in operating performance was the result of closing the campus and no longer enrolling new students.

Corporate and Other

This category includes unallocated expenses incurred on behalf of the entire Company. Corporate and other expenses were $34.7 million for the six months ended June 30, 2025 compared to $23.5 million in the prior year. The increase was primarily driven by higher salaries and benefits due to workforce expansion to support a larger student population and to execute our growth initiatives. Additionally, medical claims increased and performance-based incentive compensation increased in line with improved financial performance.

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 months ended June 30, 2025 and 2024:

As of June 30, 2025, the Company had $16.7 million in cash and cash equivalents, compared to $67.0 million in cash and cash equivalents as of June 30, 2024. The change in cash position from the prior year was primarily driven by increased capital expenditures due to campus expansion and continued use of cash in operating activities, partially offset by net proceeds from financing activities.

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” of our Form 10-K.

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 used in operating activities was $8.1 million for the six months ended June 30, 2025 compared to net cash used in operating activities of $6.6 million in the prior year comparable period. The decrease in cash position was primarily driven by changes in working capital, partially offset by higher net income.

Investing Activities

Net cash used in investing activities was $45.8 million for the six months ended June 30, 2025 compared to $3.0 million net cash provided by investing activities in the prior year comparable period primarily driven by higher capital expenditures associated with growth initiatives.

Capital expenditures for the six months ending June 30, 2025 were $46.3 million compared to $12.7 million in prior period. The increase in planned capital expenditures include the buildouts to relocate the Nashville, Tennessee, Levittown, Pennsylvania campuses and buildout for the new campuses in Houston, Texas and Hicksville, New York. In addition, we continue to invest to expand programs at existing campuses which demonstrate high market demand and successful student outcomes. We expect to fund future capital expenditures with cash generated from operating activities and cash on hand.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2025 was $11.3 million, compared to $3.7 million of cash used in financing activity in the six months ended June 30, 2024. The increase in cash position was primarily due to net borrowings in the current period.

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, 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. For the three and six months ended June 30, 2025 the Company paid approximately $0.1 million, compared to less than $0.1 million in the three and six months ended June 30, 2024, in unused facility fees, which were expensed as incurred. 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. For the three and six months ended June 30, 2025 and 2024 those fees were not material.

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.

On July 18, 2024, the Company entered into a first amendment (the “First Amendment”) to the Fifth Third Credit Agreement with Bank. Among other things, the First 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 First 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 First Amendment does not materially alter the Fifth Third Credit Agreement.

On March 11, 2025, the Company entered into a second amendment (the “Second Amendment”) to the Fifth Third Credit Agreement, which increased the aggregate principal amount available under the Facility from $40.0 million to $60.0 million. The Second Amendment also expanded the accordion feature from $20.0 million to $25.0 million and extended the maturity date of the Facility from February 16, 2027 to March 7, 2028. The Second Amendment provides additional financial flexibility to support the Company’s long-term growth objectives. Except as set forth above, the Second Amendment does not materially alter the Fifth Third Credit Agreement.

In connection with the Fifth Third Credit Agreement, total fees paid during 2024 were approximately $0.5 million, which included bank and legal costs, in addition to other customary expenses and reimbursements. These fees have been capitalized in the prior year and are being amortized over the term of the Fifth Third Credit Agreement. During the six months ended June 30, 2025, the Company has entered into a Second Amendment to the Fifth Third Credit Agreement and has incurred additional bank and legal fees of $0.1 million. The fees have been capitalized and are being amortized over the term of the Second Amendment.

As of June 30, 2025, the Company had $13.0 million outstanding under the Facility.

Contractual Obligations

Current portion of Long-Term Debt, Long-Term Debt and Lease Commitments. As of June 30, 2025, we had $13.0 million in debt outstanding under the Facility. We lease offices, educational facilities and various items of equipment for varying periods through the year 2045 at basic annual rental rates (excluding taxes, insurance, and other expenses under certain leases).

As of June 30, 2025, we had outstanding loan principal commitments to our active students of $52.0 million. These are institutional loans and no cash is advanced to students. The full loan amount is not guaranteed unless the student completes the program. The institutional loans are considered commitments because the students are required to fund their education using these funds and they are not reported on our financial statements.

Regulatory Updates

Negotiated Rulemaking

On April 4, 2025, the DOE published a notice in the Federal Register announcing its intention to commence negotiated rulemaking and to establish one or more negotiated rulemaking committees to prepare proposed regulations related to the Title IV Programs. The DOE conducted negotiated rulemaking sessions from June 30 to July 2, 2025 to discuss potential proposed regulations on issues related to public service student loan forgiveness and loan repayment plan programs, but did not reach consensus on the final content of the proposed regulations. The DOE is expected to proceed with preparing and publishing proposed regulations for public notice and comment before publishing final regulations.

On July 24, 2025, the DOE announced in the Federal Register its intent to establish two negotiated rulemaking committees. One committee will consider changes to the federal student loan programs and the other committee will consider changes to institutional and programmatic accountability, the Pell Grant Program, and other changes to the Title IV, HEA programs. This rulemaking is necessary to implement recent statutory changes to the Title IV, HEA programs included in the OBBB Act, as well as to implement other Trump Administration priorities.

We cannot predict the timing, scope, and final content of any regulations or guidance the DOE might issue as a result of either of the ongoing negotiated rulemaking processes or during any other process the DOE might complete in the future. Although some or all of future DOE regulations could be favorable to us and our schools, new DOE regulations 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.

Congressional and Presidential Action

Political and budgetary concerns significantly affect Title IV Programs. Congress periodically revises the HEA (“Higher Education Act”) and other laws governing Title IV Programs. See 10-K Part I, Item 1 at “Regulatory Environment – Congressional and Presidential Action.” Congress passed a law signed by the President on July 4, 2025, entitled the “One Big Beautiful Bill Act,” (“the OBBB Act”). The OBBB Act has a general effective date of July 1, 2026 (with exceptions) and enacts several changes to the HEA that will impact us and our schools including, but not limited to:

• Loan Limits: The OBBB Act establishes new limits on the amount of Title IV loans that students and parents can borrow in some circumstances.
• Undergraduate Loans: The OBBB Act places a $20,000 annual limit and a $65,000 aggregate limit on PLUS loans that parents may borrow for undergraduate programs but generally does not change the existing annual and aggregate limits on loans that students may borrow for undergraduate programs. The reduction in availability of funding could impact the ability of some of our prospective students to enroll and finance their education without access to loans in excess of the new loan limits. We are currently in the process of evaluating the impact of the new law, but we believe the impact may be limited.
• Lifetime Loans: The OBBB Act also establishes a lifetime loan limit of $257,500 for all borrowers (but excluding Federal Direct PLUS loans) and also imposes a requirement to prorate loans to students attending on a less than full-time basis. We are evaluating these limitations to determine the extent to which they could have an impact on our enrollment and revenues.
• Grandfathering Provisions: The OBBB Act contains grandfathering provisions that indicate that the new limits do not apply to currently enrolled borrowers for Direct Loans, and Grad and Parent PLUS loans as of June 30, 2026. These student borrowers can continue to borrow under current limits up to the current program of study’s “expected time to completion” which is the lesser of 3 years or the difference between the length of the program the student is currently enrolled in and the period of program the student has completed as of July 1, 2026.
• Accountability Metrics: The OBBB Act imposes new accountability metrics on undergraduate degree and graduate programs that must be met in order for the program to avoid losing Direct Loan eligibility. Ten Lincoln schools offer undergraduate degree programs. Specifically, an undergraduate degree program does not comply with the accountability metric if the majority of completers four years after graduation earn less than the median high school graduate in the same state who is a working adult, with only a high school diploma or GED and is not enrolled in higher education. If a program fails to comply with the applicable accountability metric for two years in a three-year period, the program loses its Direct Loan eligibility for a period of at least 2 years. The program does not lose eligibility until the institution has an opportunity to appeal the determination under rules to be established by the DOE. If the program fails to comply with the applicable accountability metric for one year, the institution is required to provide disclosures to students regarding the potential for the program to lose eligibility.

The new accountability metrics do not apply to our non-degree undergraduate programs (although all our non-degree and degree programs are within the scope of the gainful employment regulations). See 10-K Part I, Item 1 at “Regulatory Environment – Gainful Employment.” Moreover, we are still reviewing the new law and waiting for further rules and guidance from the DOE regarding the implementation of the new law. Accordingly, it is difficult for us to predict with certainty how our educational programs will perform under the new metrics and the extent to which certain programs, if any, could lose Direct Loan eligibility.

• Regulatory Relief: The OBBB Act also delays until July 1, 2035 the effective date of the borrower defense to repayment and closed school loan discharge regulations, originally published on November 1, 2022. Instead, for loans originated prior to July 1, 2035, the OBBB Act restores and revives the borrower defense to repayment regulations that previously took effect on July 1, 2020, and the closed school loan discharge regulations that were in effect prior to the November 1, 2022 regulations. See 10-K Part I, Item 1 at “Business – Regulatory Environment – Borrower Defense to Repayment” and “Business – Regulatory Environment – Closed School Loan Discharges.”

The OBBB Act has a general effective date of July 1, 2026 with certain exceptions and grandfathering provisions. We cannot predict the timing and content of any rules or guidance the DOE may issue to implement or interpret the OBBB Act, nor can we predict with certainty the extent to which our schools and our educational programs will be able to comply with the revised requirements or the extent to which the revisions and reduced aid eligibility will impact our enrollments.

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.

There have been no material changes in our market risk exposure during the three months ended June 30, 2025. See Part II Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” of our Form 10-K.

(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of the end of the quarterly period covered by this Form 10-Q, have concluded that our disclosure controls and procedures are adequate and effective to reasonably ensure that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act

is recorded, processed, summarized and reported within the time periods specified by the SEC’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.

(b) Changes in Internal Control Over Financial Reporting. There were no changes made during our most recently completed fiscal quarter in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A of our Form 10-K and those contained in our previously filed Form 10-Qs, which could affect our business, financial condition, or operating results. The risks we describe in our periodic reports are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, or operating results. For the quarter ended June 30, 2025, the Company is not aware of any specific new and additional risk factors that were not previously disclosed.