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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

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)
  
(I.R.S. Employer Identification No.)

14 Sylvan Way, Suite A
  
07054
Parsippany, NJ
  
(Zip Code)
(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 each exchange on which registered
Common Stock, no par value per share
LINC
The NASDAQ Stock Market LLC

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 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 an 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of August 11, 2025, there were 31,618,405 shares outstanding of the registrant’s Common Stock.

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025

PART I.
2
Item 1.
2

2

3

4

5

7
Item 2.
19
Item 3.
30
Item 4.
31
PART II.
32
Item 1.
32
Item 1A.
32
Item 2.
32
Item 3.
32
Item 4.
32
Item 5.
32
Item 6.
33

34

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 development of 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 in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as applicable.

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 – FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS

LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
    June 30,     December 31,  
 
2025
    
2024
  
             
ASSETS
            
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
16,701
    
$
59,273
  
Accounts receivable, less allowance of $43,128 and $42,615 at June 30, 2025 and  December 31, 2024, respectively
    
47,256
      
42,983
  
Inventories
    
4,504
      
3,053
  
Prepaid income taxes
     2,794       -  
Prepaid expenses and other current assets
    
8,374
      
4,793
  
Asset held for sale
     -       1,150  
Total current assets
    
79,629
      
111,252
  
                 
PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $145,468 and $141,271 at June 30, 2025 and December 31, 2024, respectively
    
149,142
      
103,533
  
                 
OTHER ASSETS:
                
Noncurrent receivables, less allowance of $24,726 and $22,957 at June 30, 2025 and December 31, 2024, respectively
    
21,139
      
19,627
  
Deferred finance charges
     354       323  
Deferred income taxes, net
    
24,812
      
25,359
  
Operating lease right-of-use assets
    
132,713
      
136,034
  
Finance lease right-of-use assets
     25,910       26,745  
Goodwill
    
10,742
      
10,742
  
Other assets, net
    
1,325
      
1,387
  
Pension plan assets, net
     1,555       1,554  
Total other assets
    
218,550
      
221,771
  
TOTAL ASSETS
  
$
447,321
    
$
436,556
  

           
LIABILITIES AND STOCKHOLDERS’ EQUITY
            
CURRENT LIABILITIES:
            
Unearned tuition
  
$
28,083
    
$
30,631
  
Accounts payable
    
33,990
      
37,026
  
Accrued expenses
    
15,438
      
11,986
  
Income taxes payable
    
-
      
1,072
  
Current portion of operating lease liabilities
    
10,741
      
9,497
  
Total current liabilities
    
88,252
      
90,212
  
NONCURRENT LIABILITIES:
                
Long-term portion of operating lease liabilities
    
134,494
      
138,803
  
Long-term portion of finance lease liabilities
     30,897       29,261  
Long-term debt
     13,000       -  
Other long-term liabilities
     -       16  
Total liabilities
    
266,643
      
258,292
  
COMMITMENTS AND CONTINGENCIES
            
STOCKHOLDERS’ EQUITY:
                
Common stock, no par value - authorized 100,000,000 shares at  June 30, 2025 and December 31, 2024 , issued and outstanding 31,625,285 shares at June 30, 2025 and 31,462,640 shares at December 31, 2024
    
48,181
      
48,181
  
Additional paid-in capital
    
49,554
      
50,639
  
Retained earnings
    
82,669
      
79,170
  
Accumulated other comprehensive loss
    
274
      
274
  
Total stockholders’ equity
    
180,678
      
178,264
  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  
$
447,321
    
$
436,556
  

See Notes to Condensed Consolidated Financial Statements (Unaudited).
2
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited)
    Three Months Ended     Six Months Ended  
 
June 30,
    
June 30,
  
   
2025
    
2024
    
2025
    
2024
  
                         
REVENUE
  
$
116,474
    
$
102,914
    
$
233,980
    
$
206,281
  
COSTS AND EXPENSES:
                                
Educational services and facilities
    
46,791
      
45,561
      
94,199
      
88,584
  
Selling, general and administrative
    
67,061
      
57,865
      
133,965
      
118,359
  
(Gain) loss on sale of assets
     (256 )     604       (476 )     913  
Total costs & expenses
    
113,596
      
104,030
      
227,688
      
207,856
  
OPERATING INCOME (LOSS)
    
2,878
      
(1,116
)
    
6,292
      
(1,575
)
OTHER:
                                
Interest income     11       638       125       1,336  
Interest expense
    
(813
)
    
(667
)
    
(1,514
)
    
(1,234
)
INCOME (LOSS) BEFORE INCOME TAXES
    
2,076
      
(1,145
)
    
4,903
      
(1,473
)
PROVISION (BENEFIT) FOR INCOME TAXES
    
522
      
(463
)
    
1,404
      
(577
)
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
 
$
1,554
    
$
(682
)
  
$
3,499
    
$
(896
)
Basic
                               
Net income (loss) per common share
  
$
0.05
    
$
(0.02
)
  
$
0.11
    
$
(0.03
)
Diluted                                
Net income (loss) per common share
   $ 0.05     $ (0.02 )   $ 0.11     $ (0.03 )
Weighted average number of common shares outstanding:
                                
Basic
   
30,990
      
30,660
      
30,900
      
30,481
  
Diluted
    31,271       30,660       31,172       30,481  

See Notes to Condensed Consolidated Financial Statements (Unaudited).
3
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
 
Stockholders’ Equity
  
                      Accumulated        
          Additional           Other        
   
Common Stock
    
Paid-in
    
Retained
    
Comprehensive
        
   
Shares
    
Amount
    
Capital
    
Earnings
    
Income
    
Total
  
BALANCE - January 1, 2025
    
31,462,640
    
$
48,181
    
$
50,639
    
$
79,170
    
$
274
    
$
178,264
  
Net income     -
       -       -       1,944       -       1,944  
Stock-based compensation expense
                                                
Restricted stock
    
328,140
      
-
      
1,205
      
-
      
-
      
1,205
  
Net share settlement for equity-based compensation
    
(197,973
)
    
-
      
(3,633
)
    
-
      
-
      
(3,633
)
BALANCE - March 31, 2025
    
31,592,807
      
48,181
      
48,211
      
81,114
      
274
      
177,780
  
Net Income
    
-
      
-
      
-
      
1,554
      
-
      
1,554
  
Stock-based compensation expense
                                                
Restricted stock
     -      
-
      
1,344
      
-
      
-
      
1,344
  
Net share settlement for equity-based compensation
    32,478       -       -       -       -       -  
BALANCE - June 30, 2025
    
31,625,285
    
$
48,181
    
$
49,555
    
$
82,668
    
$
274
    
$
180,678
  

 
Stockholders’ Equity
  
                      Accumulated        
          Additional           Other        
   
  
Common Stock
    
Paid-in
    
Retained
   
Comprehensive
        
   
Shares
    
Amount
    
Capital
    
Earnings
   
Loss
    
Total
  
BALANCE - January 1, 2024
    
31,359,110
    
$
48,181
    
$
49,380
    
$
69,279
    
$
(36
)
  
$
166,804
  
Net loss
   
-
      
-
      
-
      
(214
)
    
-
      
(214
)
Stock-based compensation expense
                                                
Restricted stock
    
400,212
      
-
      
1,059
      
-
      
-
      
1,059
  
Net share settlement for equity-based compensation
    
(315,611
)
    
-
      
(3,156
)
    
-
      
-
      
(3,156
)
BALANCE - March 31, 2024
    
31,443,711
      
48,181
      
47,283
      
69,065
      
(36
)
    
164,493
  
Net loss
    
-
      
-
      
-
      
(682
)
    
-
      
(682
)
Stock-based compensation expense
                                                
Restricted stock
    
47,128
      
-
      
1,045
      
-
      
-
      
1,045
  
BALANCE - June 30, 2024
    
31,490,839
    
$
48,181
    
$
48,328
    
$
68,383
    
$
(36
)
  
$
164,856
  


See Notes to Condensed Consolidated Financial Statements (Unaudited).
4
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
    Six Months Ended  
 
June 30,
  
   
2025
    
2024
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income (loss)
  
$
3,499
    
$
(896
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                
Depreciation and amortization
    
7,637
      
5,501
  
Finance lease amortization
    835       787  
Amortization of deferred finance charges
    90       57  
Deferred income taxes
    
547
      
421
  
(Gain) loss on sale of assets
     (476 )     913  
Fixed asset donations
    
(197
)
    
(178
)
Provision for credit losses
   
25,012
      
25,537
  
Stock-based compensation expense
    
2,548
      
2,104
  
(Increase) decrease in assets:
                
Accounts receivable
    
(30,797
)
    
(32,977
)
Inventories
    
(1,451
)
    
603
  
Prepaid income taxes
    
(2,794
)
    
(5,220
)
Prepaid expenses and current assets
    
(3,611
)
    
1,154
  
Other assets, net
    
(657
)
    
806
  
Increase (decrease) in liabilities:
                
Accounts payable
    
(9,768
)
    
(472
)
Accrued expenses
    
3,452
      
(2,069
)
Unearned tuition
    
(2,548
)
    
(2,578
)
Income taxes payable
     (1,072 )     -
  
Other liabilities
    
1,672
      
(92
)
Total adjustments
    
(11,578
)
    
(5,703
)
Net cash used in operating activities
    
(8,079
)
    
(6,599
)
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Capital expenditures
    
(46,276
)
    
(12,725
)
Proceeds from sale of property and equipment
   
504
      
9,718
  
Net cash used in investing activities
    
(45,772
)
    
(3,007
)
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from borrowings
     25,000       -  
Payments on borrowings
     (12,000 )     -  
Payment of deferred finance fees
    
(121
)
    
(456
)
Finance lease principal paid
     (179 )     (64 )
Tenant allowance finance leases
     2,212
       -
 
Net share settlement for equity-based compensation
    
(3,633
)
    
(3,156
)
Net cash provided by (used in) financing activities
    
11,279
      
(3,676
)
NET DECREASE IN CASH AND CASH EQUIVALENTS
    
(42,572
)
    
(13,282
)
CASH AND CASH EQUIVALENTS —Beginning of period
    
59,273
      
80,269
  
CASH AND CASH EQUIVALENTS—End of period
  
$
16,701
    
$
66,987
  

See Notes to Condensed Consolidated Financial Statements (Unaudited).
5
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
(Continued)
    Six Months Ended  

June 30,
  
 
2025
  
2024
  
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
        
Cash paid for:
        
Interest
  
$
1,391
    
$
1,063
  
Income taxes
  
$
4,721
    
$
4,221
  
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
                
Liabilities accrued for or noncash additions of fixed assets
  
$
14,023
    
$
2,041
  

See Notes to Condensed Consolidated Financial Statements (Unaudited).
6
LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024
(In thousands, except share and per share amounts and unless otherwise stated)
(Unaudited)

1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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. 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.

Basis of Presentation – The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements.  Certain information and footnote disclosures normally included in annual financial statements have been omitted or condensed pursuant to such regulations. These financial statements, which should be read in conjunction with the December 31, 2024 audited Consolidated Financial Statements and notes thereto and related disclosures of the Company included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (“Form 10-K”), reflect all adjustments, consisting of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows for such periods.  The results of operations for the six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2025.

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 currently being taught-out, in addition to campuses that are held-for sale or sold.  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 unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries.  All intercompany accounts and transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements – 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 Condensed 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 right-of-use (“ROU”) assets, lease term to calculate lease cost, bad debts, impairments, useful lives of fixed assets, income taxes, benefit plans, stock-based compensation, and certain accruals.  Actual results could differ from those estimates.

7
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 Accounting Standard Update (“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. The Company has adopted the new disclosure requirements retrospectively in our Condensed Consolidated Financial Statements.

In December 2023, the 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 the amount of income taxes paid disaggregated (1) by federal, state and foreign taxes, and (2) 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, this ASU is effective for annual periods beginning after December 15, 2024; early adoption is permitted.  We do not expect this ASU will have a material impact on our Condensed Consolidated Financial Statements.

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 Condensed 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.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the six months ended June 30, 2025 and 2024, we did not record any interest and penalties expense associated with uncertain tax positions, as we did not have any uncertain tax positions.

On July 4, 2025, the U.S. enacted legislation which generally extends the tax provisions enacted in 2017 that were set to expire at the end of 2025 as well as making other changes to federal tax law for multinational corporations. The Company is currently evaluating the impact of the new legislation but does not expect it to have a material impact on the financial results of operations for the current year.

8
2.
NET EARNINGS PER COMMON SHARE

Basic and diluted earnings per share (“EPS”) are calculated in accordance with ASC 260, Earnings Per Share (“ASC 260”), which specifies the computation, presentation and disclosure requirements for EPS. Under ASC 260, basic EPS excludes all dilutive Common Stock equivalents. It is computed by dividing net income by the number of weighted average number of common shares outstanding during the period. Diluted EPS, as calculated using the treasury stock method, reflects the potential dilution from employee incentive plans during the period.

The weighted average number of common shares used to compute basic and diluted earnings per share for the three and six months ended June 30, 2025 and 2024 was as follows:
 

  Three Months Ended     Six Months Ended  

 
June 30,
     June 30,  

 
2025
    
2024
     2025     2024  
Basic shares outstanding
    
30,990,392
      
30,659,878
       30,900,349       30,480,677  
Dilutive effect of Restricted Stock
    
280,862
      
-
       272,130       -  
Diluted shares outstanding
    
31,271,254
      
30,659,878
       31,172,479       30,480,677  

3.
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 elected not to provide disclosure about transaction prices allocated to unsatisfied performance obligations if the 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 ASC Topic 606, Revenue from Contracts with Customers. 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 $28.1 million and $30.6 million is recorded in the current liabilities section of the accompanying Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024, respectively. The change in this contract liability balance during the six-month period ended June 30, 2025 is the result of payments received in advance of satisfying performance obligations, offset by revenue recognized during that period. Revenue recognized for the six-month period ended June 30, 2025 that was included in the contract liability balance at the beginning of the year was $29.4 million.

The following table depicts the timing of revenue recognition by segment:

 
Three Months Ended June 30, 2025
    
Six months ended June 30, 2025
  
   
Campus
Operations
     Transitional    
Consolidated
    
Campus
Operations
     Transitional    
Consolidated
  
Timing of Revenue Recognition
                                    
Services transferred at a point in time
  
$
5,598
    
$
-
    
$
5,598
    
$
12,599
    
$
-
    
$
12,599
  
Services transferred over time
    
110,876
      
-
      
110,876
      
221,381
      
-
      
221,381
  
Total revenues
  
$
116,474
    
$
-
    
$
116,474
    
$
233,980
    
$
-
    
$
233,980
  


 
Three Months Ended June 30, 2024
    
Six months ended June 30, 2024
  
   
Campus
Operations
     Transitional    
Consolidated
    
Campus
Operations
     Transitional    
Consolidated
  
Timing of Revenue Recognition
                                    
Services transferred at a point in time
  
$
6,787
    
$
219
    
$
7,006
    
$
12,199
    
$
555
    
$
12,754
  
Services transferred over time
    
94,446
      
1,462
      
95,908
      
190,356
      
3,171
      
193,527
  
Total revenues
  
$
101,233
    
$
1,681
    
$
102,914
    
$
202,555
    
$
3,726
    
$
206,281
  

9
4.
LEASES

The Company enters into contracts to utilize office space, educational facilities, and various items of equipment under lease agreements and accounts for them in accordance with ASC 842, Leases (“ASC 842”). To determine whether a contract contains a lease, the Company assesses whether there is an identified asset and whether the Company has the right to control its use throughout the period of use. The Company classifies leases as either operating or finance leases at lease commencement date in accordance with ASC 842. As required under ASC 842, the Company recognizes a ROU asset and a corresponding lease liability on the balance sheet, measured at the present value of lease payments over the term of the lease. An operating lease ROU asset represents the Company’s right to use the underlying asset during the lease term and the corresponding lease liability represents its obligation to make lease payments. Operating lease ROU assets and liabilities are amortized over the lease term, with lease expense recognized on a straight-line basis within operating expenses in the Condensed Consolidated Statement of Operations. Finance lease arrangements result in separate recognition of interest expense on the lease liability using the effective interest method and amortization expense of the ROU asset on a straight-line basis over the lease term, in addition to principal payments.

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 1 year to 20 years. Lease terms may include options to extend the 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 campus in Hicksville, New York. The lease term is scheduled to commence in August 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.
 
10
The following table presents components of lease cost and classification on the Condensed Consolidated Statements of Operations:


 
 
Three Months Ended
 June 30,
    
Six Months Ended
  June 30,
  
in thousands
  
 Consolidated Statement of Operations Classification
  
2025
    
2024
      2025      2024  
Operating Lease Cost
  
 Selling, general and administrative
  
$
4,982
    
$
4,819
     $ 9,971     $ 9,619  
Finance lease cost
  
 
                    
         
Amortization of leased assets
  
 Depreciation and amortization
    
418
      
418
       835       787  
Interest on lease Liabilities
  
 Interest expense
    
591
      
552
       1,173       1,039  
Variable lease cost
  
 Selling, general and administrative
    
244
      
88
       460       176  
 
  
       
  
$
6,235
    
$
5,877
      $ 12,439      $ 11,621  

The net change in ROU asset and operating lease liability is included in the net change in other assets in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024.

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.

Supplemental cash flow information and non-cash activity related to our leases are as follows:

   
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
   
2025
    
2024
     2025     2024  
Cash flow information:
                        
Cash paid for amounts included in the measurement of lease liabilities
                        
Operating Cash Flows - operating leases
   $ 4,913     $ 4,515     $ 9,697     $ 9,010  
Operating Cash Flows - finance leases
   $ 591     $ 552     $ 1,173     $ 1,039  
Financing Cash Flows - finance leases
   $ (925 )   $ 107     $ (2,033 )   $ 64  
                                 
Non-cash activity:
                                
Lease liabilities arising from obtaining right-of-use assets
                                
Operating leases
   $ -     $ 6,681     $ -     $ 22,395  
Finance leases
   $ -     $ -     $ -     $ 12,570  

There were no new finance leases or lease modifications during the six months ended June 30, 2025.

Weighted-average remaining lease term and discount rate for our leases are as follows:  


 
As of
June 30,
  
   
2025
   
2024
 
Weighted-average remaining lease term
  

   

 
Operating leases
 		  12.64 years
 		    12.11 years
 		 
Finance leases
 		  16.04 years
 		      16.83 years
 

             
Weighted-average discount rate
  
         
Operating leases
 		    6.58 %     6.74 %
Finance leases
 		    7.67 %     7.71%  
 
11
Maturities of lease liabilities by fiscal year for our leases as of June 30, 2025, are as follows:
 

 
Operating Leases
    
Finance Leases
  
Year ending December 31,
            
2025 (excluding the six months ending June 30, 2025)
  
$
8,910
     $ 1,366  
2026
    
19,332
       2,817  
2027
    
18,332
       2,918  
2028
    
19,140
       3,023  
2029
    
17,355
       3,132  
2030
    
14,555
       3,244  
Thereafter
    
118,024
       40,174  
Total lease payments
    
215,648
       56,674  
Less: imputed interest
    
(70,810
)
     (25,379 )
Present value of lease liabilities
  
$
144,838
     $ 31,295  

5.
GOODWILL AND LONG-LIVED ASSETS

The Company reviews the carrying value of its long-lived assets and identifiable intangibles annually, or more frequently if necessary, for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.  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 other long-lived assets, including ROU lease assets, the Company evaluates assets for recoverability when there is an indication of potential impairment. 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.

During the three and six months ended June 30, 2025 and 2024, there were no impairments of goodwill or long-lived assets.

The carrying amount of goodwill on June 30, 2025 was as follows:


 
Gross
Goodwill
Balance
    
Accumulated
Impairment
Losses
    
Net
Goodwill
Balance
  
Balance as of December 31, 2024
  
$
117,176
    
$
(106,434
)
  
$
10,742
  
Adjustments
    
-
      
-
      
-
  
Balance as of June 30, 2025
  
$
117,176
    
$
(106,434
)
  
$
10,742
  
11

6.
PROPERTY, EQUIPMENT AND FACILITIES

As of June 30, 2025 and December 31, 2024, property, equipment and facilities consisted of the following:


 
Useful life
(years)
    
June 30,
2025
    
December 31,
2024
  
Land
    
-
    
$
52
    
$
52
  
Buildings and improvements
    
1-25
      
133,551
      
104,081
  
Equipment, furniture and fixtures
    
1-7
      
100,704
      
84,352
  
Vehicles
    
3
      
1,906
      
1,556
  
Construction in progress
    
-
      
58,397
      
54,763
  
             
294,610
      
244,804
  
Less accumulated depreciation and amortization
            
(145,468
)
    
(141,271
)
           
$
149,142
    
$
103,533
  
 
Property, equipment and facilities are recorded at cost, with depreciation expense included in our educational services and facilities and selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

The increase in property, equipment and facilities was driven by several factors, including a $35.8 million investment relating to the build-out of the new campuses (Nashville, Tennessee; Levittown, Pennsylvania; Houston, Texas and Hicksville, New York); $5.0 million in new and expanded programs at various campuses; and $12.2 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 $4.7 million and $3.3 million for the three months ended June 30, 2025 and 2024 and $8.5 million and $6.3 million for the six months ended June 30, 2025 and 2024, respectively.

7.
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, 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.

13
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, 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.

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 were 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 entered into a Second amendment to the Fifth Third Credit Agreement and incurred additional bank and legal fees of $0.1 million. The fees have were 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.

8.
STOCKHOLDERS’ EQUITY

As of June 30, 2025, the Company had 100,000,000 shares of Common Stock authorized of which 31,625,285 shares were issued and outstanding. 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.

Long-Term Incentive Plan

The Company currently has 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 and employees 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, among other duties, has 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 to satisfy 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, an 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.

Time-Based and Performance-Based Restricted Stock Awards

We provide stock-based compensation to employees, officers and directors in the form of awards of restricted stock awards (“Restricted Stock Awards”) under our LTIP, which are conditioned upon either continued service (“Time-based Restricted Stock Awards”) or both continued service and achievement of performance goals (“Performance-based Restricted Stock Awards” or “Performance-Based Restricted Stock Shares”). Performance-based restricted stock shares granted prior to 2025 are eligible to vest only upon achievement of at least 100% of the performance target, with no shares vesting unless the target is met. In 2025, the Company granted Performance-based Restricted Stock Shares to employees, officers, and directors that vest based on the percentage of Adjusted EBITDA achieved for the immediately preceding year. Under such grants, no shares vest in the event that less than 80% of the target is achieved; vesting begins at 25% for 80% achievement and increase on a linear scale up to 200% vesting for achievement of 120% or more of the target. In 2025, the Company also granted Performance-Based Restricted Stock Shares to certain executives that vest based on the achievement of a specified percentage of target Adjusted EBITDA for fiscal year 2027. Under such grants, no shares vest in the event that less than 90% of the target is achieved; vesting begins at 25% for 90% achievement and increases on a linear scale up to 100% vesting for achievement of 100% or more of the target.

13
The Compensation Committee believes that a combination of time-based and Performance-based Restricted Stock Awards, of which performance-based awards comprise 50% of the total, is well designed to align the interests of directors, officers and employees with those of shareholders by tying compensation to the achievement of the Company’s long-term performance goals.

The Company accounts for Restricted Stock Awards in accordance with ASC 718 - Compensation-Stock Compensation, recognizing compensation expense based on the grant-date fair value of our Common Stock. Expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period, and for performance-based awards, only to the extent that it is probable the performance conditions will be achieved.

The expense related to Restricted Stock Awards for the three and six months ended June 30, 2025 was $1.3 million and $2.5 million, respectively, compared to $1.0 million and $2.1 million for the three and six months ended June 30, 2024, respectively.  The unrecognized Restricted stock expense as of June 30, 2025 and December 31, 2024 was $1.8 million and $4.3 million, respectively. As of June 30, 2025, the outstanding shares of Restricted Shares under the LTIP had an aggregate intrinsic value of $18.4 million compared to $11.8 million in the prior year.

For the three and six months ended June 30, 2025, the Company completed a net share settlement of zero shares and 197,973 shares, respectively, compared to zero shares and 315,611 restricted shares for the three and six months ended June 30, 2024, respectively. The net share settlement was performed 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 2025 and/or 2024, creating taxable income for the employees. At the employees’ request, the Company 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 zero and $3.6 million for the three and six months ended June 30, 2025, respectively, compared to zero and $3.2 million for the three and six months ended June 30, 2024, respectively. These transactions resulted in a decrease to equity on the Condensed 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 all of our Restricted Stock Awards:


 
Shares
    
Weighted
Average Grant
Date Fair Value
Per Share
  
Nonvested Restricted Stock outstanding at December 31, 2024
    
934,388
    
$
8.02
  
Granted
    
360,618
      
18.05
  
Canceled
 		    -
    -  
Vested
    
(498,005
)
    
7.88
  
                 
Nonvested Restricted Stock outstanding at June 30, 2025
    
797,001
    
$
12.65
  

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.

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 in February 2023 and thereafter in May 2024 and most recently on  May 8, 2025, when 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, 2026.


During the six months ended June 30, 2025 and 2024, the Company did not repurchase any shares under the share repurchase program. As of June 30, 2025, 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.

14
9.
COMMITMENTS AND CONTINGENCIES

Legal Proceedings

There are no material developments relating to previously disclosed legal proceedings. See the “Legal Proceedings” section of the Company’s Form 10-K and previous Form 10-Qs for information regarding existing legal proceedings.


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



As of June 30, 2025, the Company had outstanding net financing commitments to its students to assist them in financing their education of approximately $52.0 million, net of interest.

10.
SEGMENTS

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. The net assets of the Summerlin, Las Vegas campus were classified as held for sale as of December 31, 2024 and written down by $1.1 million in the fourth quarter of 2024.  On January 1, 2025, the Company completed the sale of the Summerlin campus, and no gain or loss was recognized on the sale. Operating results for the Summerlin campus were classified within the Transitional segment.



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”) evaluates performance and allocates resources and 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.



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.

15
Summary financial information by reporting segment is as follows:

   
Three Months Ended June 30,
  

 
Consolidated
    
Campus Operations
    
Transitional
    
Corporate
  
   
2025
    
2024
    
2025
    
2024
    
2025
    
2024
    
2025
    
2024
  
REVENUE
  
$
116,474
    
$
102,914
    
$
116,474
    
$
101,233
    
$
-
    
$
1,681
    
$
-
    
$
-
  
COSTS AND EXPENSES:
                                                                
Instructional
    
23,544
      
22,911
      
23,544
      
22,301
      
-
      
610
      
-
      
-
  
Books and tools
    
6,769
      
7,650
      
6,769
      
7,464
      
-
      
186
      
-
      
-
  
Facilities
    
11,933
      
11,852
      
11,933
      
11,617
      
-
      
235
      
-
      
-
  
Depreciation and amortization
    
4,545
      
3,148
      
4,545
      
3,130
      
-
      
18
      
-
      
-
  
Educational services and facilities
    
46,791
      
45,561
      
46,791
      
44,512
      
-
      
1,049
      
-
      
-
  
                                                                 
Sales and marketing
    
18,872
      
18,070
      
18,872
      
17,639
      
-
      
431
       -       -  
Student services
    
6,363
      
5,425
      
6,363
      
5,205
      
-
      
220
       -       -  
Bad debt
    
13,177
      
13,323
      
13,177
      
13,098
      
-
      
225
      
-
       -  
Administrative
    
28,484
      
20,872
      
12,218
      
10,037
      
-
      
265
      
16,266
      
10,570
  
Depreciation and amortization
    
165
      
175
      
-
      
-
      
-
       -      
165
      
175
  
Selling, general and administrative
    
67,061
      
57,865
      
50,630
      
45,979
      
-
      
1,141
      
16,431
      
10,745
  
(Gain) loss on sale of assets
    
(256
)
    
604
      
(256
)
     601       -       -      
-
      
3
  
Total costs and expenses
    
113,596
      
104,030
      
97,165
      
91,092
      
-
      
2,190
      
16,431
      
10,748
  
OPERATING INCOME (LOSS)
  
$
2,878
    
$
(1,116
)
  
$
19,309
    
$
10,141
    
$
-
    
$
(509
)
  
$
(16,431
)
  
$
(10,748
)
 

   
Six Months Ended June 30,
  

 
Consolidated
    
Campus Operations
    
Transitional
    
Corporate
  
   
2025
    
2024
    
2025
    
2024
    
2025
    
2024
    
2025
    
2024
  
REVENUE
  
$
233,980
    
$
206,281
    
$
233,980
    
$
202,555
    
$
-
    

3,726
    
$
-
    
$
-
  
COSTS AND EXPENSES:
                                                                
Instructional
    
46,559
      
45,422
      
46,559
      
44,195
      
-
      
1,227
      
-
      
-
  
Books and tools
    
14,477
      
14,000
      
14,477
      
13,517
      
-
      
483
      
-
      
-
  
Facilities
    
25,018
      
23,241
      
25,018
      
22,774
      
-
      
467
      
-
      
-
  
Depreciation and amortization
    
8,145
      
5,921
      
8,145
      
5,883
      
-
      
38
      
-
      
-
  
Educational services and facilities
    
94,199
      
88,584
      
94,199
      
86,369
      
-
      
2,215
      
-
      
-
  
                                                                 
Sales and marketing
    
38,573
      
37,829
      
38,573
      
37,020
      
-
      
809
       -       -  
Student services
    
12,601
      
10,937
      
12,601
      
10,483
      
-
      
454
       -       -  
Bad debt
    
25,012
      
25,537
      
24,975
      
25,053
      
-
      
484
      
37
       -  
Administrative
    
57,452
      
43,690
      
23,160
      
20,278
      
-
      
560
      
34,292
      
22,852
  
Depreciation and amortization
    
327
      
366
      
-
      
-
      
-
       -      
327
      
366
  
Selling, general and administrative
    
133,965
      
118,359
      
99,309
      
92,834
      
-
      
2,307
      
34,656
      
23,218
  
(Gain) loss on sale of assets
    
(476
)
    
913
      
(510
)
     601       -       -      
34
      
312
  
Total costs and expenses
    
227,688
      
207,856
      
192,998
      
179,804
      
-
      
4,522
      
34,690
      
23,530
  
OPERATING INCOME (LOSS)
  
$
6,292
    
$
(1,575
)
  
$
40,982
    
$
22,751
    
$
-
    
$
(796
)
  
$
(34,690
)
  
$
(23,530
)


11.
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.


16
Level 3:    Defined as unobservable inputs that are not corroborated by market data.


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 following table presents the fair value of the financial instruments measured on a recurring basis as of June 30, 2025 and December 31, 2024, respectively. 


   
  June 30, 2025
  
   
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
  
$
50
    
$
50
    
$
-
    
$
-
    
$
50
  
Total cash equivalents
  
$
50
    
$
50
    
$
-
    
$
-
    
$
50
  

   
December 31, 2024
  
   
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
  
$
44,425
    
$
44,425
    
$
-
    
$
-
    
$
44,425
  

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, approximates fair value due to the short-term nature of these items.

12.
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 Condensed 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.

16

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.


Student Receivables



The Company has student receivables that are due greater than 12 months from the date of our Condensed Consolidated Balance Sheets. As of June 30, 2025 and December 31, 2024, 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 $21.1 million and $19.6 million, respectively.



The following table presents the amortized cost basis of student receivables as of June 30, 2025, by year of origination.


        June 30, 2025
 
       
Student
          
Six Months Ended
  
 
Year
    
Receivables (1)
          
Write-Off’s (2)
  
 
2025
    
$
70,936
    
2025
    
$
-
  
 
2024
      
32,433
    
2024
      
19,876
  
 
2023
      
10,895
    
2023
      
1,727
  
 
2022
      
5,303
    
2022
      
535
  
 
2021
      
2,985
    
2021
      
305
  
 
Prior
      
1,992
    
Prior
      
287
  
 
Total
    
$
124,544
    
Total
    
$
22,730
  

(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 Condensed 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.

17

Allowance for Credit Losses


We define student receivables as a portfolio segment under ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). Changes in our current and non-current allowance for credit losses related to our student receivable portfolio were calculated in accordance with ASC 326 for the six months ended June 30, 2025 and 2024, respectively.
      Six Months Ended June 30,  

    2025     2024  
Balance, beginning of period
     $ 65,572     $ 53,811  
Provision for credit losses
       25,012       25,537  
Write-off’s
     (22,730 )     (21,117 )
Balance, at end of period
     $ 67,854     $ 58,231  



Fair Value Measurements



The carrying amount reported in our Condensed 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.

18
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

19
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

Campus Location
Type
Status
Opening Date
East Point, GA
New Campus
Opened
March 2024
Nashville, TN
Campus Relocation
Opened
March 2025
Levittown, PA
Campus Relocation
Opened
August 2025
Houston, TX
New Campus
In Progress
Second half of 2025
Hicksville, NY
New Campus
In Progress
By the end of 2026

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:

   
Three Months Ended
    
Six Months Ended
  
   
June 30,
    
June 30,
  
   
2025
    
2024
    
2025
    
2024
  
                         
Revenue
    
100.0
%
    
100.0
%
    
100.0
%
    
100.0
%
Costs and Expenses:
                                
Educational services and facilities
    
40.2
%
    
44.3
%
    
40.3
%
    
42.9
%
Selling, general and administrative
    
57.6
%
    
56.2
%
    
57.3
%
    
57.4
%
(Gain) loss on sale of assets
    
-0.2
%
    
0.6
%
    
-0.2
%
    
0.4
%
Total costs and expenses
    
97.5
%
    
101.1
%
    
97.3
%
    
100.8
%
Operating income (Loss)
    
2.5
%
    
-1.1
%
    
2.7
%
    
-0.8
%
Interest income (expense), net
    
-0.7
%
    
0.0
%
    
2.7
%
    
0.0
%
Income (Loss) from operations before income taxes
    
1.8
%
    
1.1
%
    
5.4
%
    
-0.7
%
Provision for income taxes
    
0.4
%
    
-0.4
%
    
0.6
%
    
-0.3
%
Net income (Loss)
    
1.3
%
    
-0.7
%
    
4.8
%
    
-0.4
%

20
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.

   
Three months ended June 30,
                    
Consolidated
  
2025
    
7/1 starts*
      
2025*

   
2024
    
% Change
    
% Change*
  
Revenue (millions)
  
$
116.5
                  
$
102.9
      
13.2
%
      
                                             
Total new student starts
    
3,157
      
2,764
      
5,921
      
4,953
      
-36.3
%
    
19.5
%
Average student population
    
15,554
      
460
      
16,014
      
13,811
      
12.6
%
    
16.0
%
End of period student population
    
14,356
      
2,764
      
17,120
      
14,481
      
-0.9
%
    
18.2
%

* 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

   
Three Months Ended June 30,
  
   
Consolidated
    
Campus Operations
    
Transitional
    
Corporate
  
   
2025
    
2024
    
2025
    
2024
    
2025
    
2024
    
2025
    
2024
  
REVENUE
  
$
116,474
    
$
102,914
    
$
116,474
    
$
101,233
    
$
-
    
$
1,681
    
$
-
    
$
-
  
COSTS AND EXPENSES:
                                                                
Instructional
    
23,544
      
22,911
      
23,544
      
22,301
      
-
      
610
      
-
      
-
  
Books and tools
    
6,769
      
7,650
      
6,769
      
7,464
      
-
      
186
      
-
      
-
  
Facilities
    
11,933
      
11,852
      
11,933
      
11,617
      
-
      
235
      
-
      
-
  
Depreciation and amortization
    
4,545
      
3,148
      
4,545
      
3,130
      
-
      
18
      
-
      
-
  
Educational services and facilities
    
46,791
      
45,561
      
46,791
      
44,512
      
-
      
1,049
      
-
      
-
  
                                                                 
Sales and marketing
    
18,872
      
18,070
      
18,872
      
17,639
      
-
      
431
      
-
      
-
  
Student services
    
6,363
      
5,425
      
6,363
      
5,205
      
-
      
220
      
-
      
-
  
Bad debt
    
13,177
      
13,323
      
13,177
      
13,098
      
-
      
225
      
-
      
-
  
Administrative
    
28,484
      
20,872
      
12,218
      
10,037
      
-
      
265
      
16,266
      
10,570
  
Depreciation and amortization
    
165
      
175
      
-
      
-
      
-
      
-
      
165
      
175
  
Selling, general and administrative
    
67,061
      
57,865
      
50,630
      
45,979
      
-
      
1,141
      
16,431
      
10,745
  
(Gain) loss on sale of assets
    
(256
)
    
604
      
(256
)
    
601
       -
      -
     
                   -
      
3
  
Total costs and expenses
    
113,596
      
104,030
      
97,165
      
91,092
      
-
      
2,190
      
16,431
      
10,748
  
OPERATING INCOME (LOSS)
  
$
2,878
    
$
(1,116
)
  
$
19,309
    
$
10,141
    
$
-
    
$
(509
)
  
$
(16,431
)
  
$
(10,748
)

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.

21
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.

22
The following table presents selected operating metrics for our two reportable segments for the three months ended June 30, 2025 and 2024:

   
Three Months Ended June 30,
        
   
2025
      
2025*
   
2024
    
% Change
    
% Change*
  
Revenue:
                                  
Campus Operations
  
$
116,474
            
$
101,233
      
15.1
%
      
Transitional
    
-
              
1,681
      
-100.0
%
      
Total
  
$
116,474
            
$
102,914
      
13.2
%
      
                                       
Operating Income (loss):
                                      
Campus Operations
  
$
19,310
            
$
10,141
      
90.4
%
      
Transitional
    
-
              
(509
)
    
100.0
%
      
Corporate
    
(16,432
)
            
(10,748
)
    
-52.9
%
      
Total
  
$
2,878
            
$
(1,116
)
    
357.8
%
      
                                       
Starts:
                                      
Campus Operations
    
3,157
      
5,921
      
4,863
      
-35.1
%
    
21.8
%
Transitional
    
-
      
-
      
90
      
-100.0
%
    
-100.0
%
Total
    
3,157
      
5,921
      
4,953
      
-36.3
%
    
19.5
%
                                         
Average Population:
                                        
Campus Operations
    
15,554
      
16,014
      
13,491
      
15.3
%
    
18.7
%
Transitional
    
-
      
-
      
320
      
-100.0
%
    
-100.0
%
Total
    
15,554
      
16,014
      
13,811
      
12.6
%
    
16.0
%
                                         
End of Period Population:
                                        
Campus Operations
    
14,356
      
17,120
      
14,198
      
1.1
%
    
20.6
%
Transitional
    
-
      
-
      
283
      
-100.0
%
    
-100.0
%
Total
    
14,356
      
17,120
      
14,481
      
-0.9
%
    
18.2
%

*
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.

23
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.

   
Six months ended June 30,
                    
Consolidated
  
2025
    
7/1 starts
      
2025*
   
2024
    
% Change
    
% Change*
  
Revenue (millions)
  
$
234.0
                  
$
206.3
      
13.4
%
      
                                             
Total new student starts
    
7,767
      
2,764
      
10,531
      
8,920
      
-12.9
%
    
18.1
%
Average student population
    
15,511
      
231
      
15,742
      
13,745
      
12.8
%
    
14.5
%
End of period student population
    
14,356
      
2,764
      
17,120
      
14,481
      
-0.9
%
    
18.2
%

*
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

   
Six Months Ended June 30,
  
   
Consolidated
    
Campus Operations
    
Transitional
    
Corporate
  
   
2025
    
2024
    
2025
    
2024
    
2025
    
2024
    
2025
    
2024
  
REVENUE
  
$
233,980
    
$
206,281
    
$
233,980
    
$
202,555
    
$
-
    
$
3,726
    
$
-
    
$
-
  
COSTS AND EXPENSES:
                                                                
Instructional
    
46,559
      
45,422
      
46,559
      
44,195
      
-
      
1,227
      
-
      
-
  
Books and tools
    
14,477
      
14,000
      
14,477
      
13,517
      
-
      
483
      
-
      
-
  
Facilities
    
25,018
      
23,241
      
25,018
      
22,774
      
-
      
467
      
-
      
-
  
Depreciation and amortization
    
8,145
      
5,921
      
8,145
      
5,883
      
-
      
38
      
-
      
-
  
Educational services and facilities
    
94,199
      
88,584
      
94,199
      
86,369
      
-
      
2,215
      
-
      
-
  
                                                                 
Sales and marketing
    
38,573
      
37,829
      
38,573
      
37,020
      
-
      
809
      
-
      
-
  
Student services
    
12,601
      
10,937
      
12,601
      
10,483
      
-
      
454
      
-
      
-
  
Bad debt
    
25,012
      
25,537
      
24,975
      
25,053
      
-
      
484
      
37
      
-
  
Administrative
    
57,452
      
43,690
      
23,160
      
20,278
      
-
      
560
      
34,292
      
22,852
  
Depreciation and amortization
    
327
      
366
      
-
      
-
      
-
       -
     
327
      
366
  
Selling, general and administrative
    
133,965
      
118,359
      
99,309
      
92,834
      
-
      
2,307
      
34,656
      
23,218
  
(Gain) loss on sale of assets
    
(476
)
    
913
      
(510
)
    
601
      
-
       -      
34
      
312
  
Total costs and expenses
    
227,688
      
207,856
      
192,998
      
179,804
      
-
      
4,522
      
34,690
      
23,530
  
OPERATING INCOME (LOSS)
  
$
6,292
    
$
(1,575
)
  
$
40,982
    
$
22,751
    
$
-
    
$
(796
)
  
$
(34,690
)
  
$
(23,530
)

24
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.

25
The following table presents selected operating metrics for our two reportable segments for the six months ended June 30, 2025 and 2024:

   
Six Months Ended June 30,
        
   
2025
      
2025*

   
2024
    
% Change
    
% Change*
  
Revenue:
                                  
Campus Operations
  
$
233,980
            
$
202,555
      
15.5
%
      
Transitional
    
-
              
3,726
      
-100.0
%
      
Total
  
$
233,980
            
$
206,281
      
13.4
%
      
                                       
Operating Income (loss):
                                      
Campus Operations
  
$
40,982
            
$
22,750
      
80.1
%
      
Transitional
    
-
              
(796
)
    
100.0
%
      
Corporate
    
(34,690
)
            
(23,529
)
    
-47.4
%
      
Total
  
$
6,292
            
$
(1,575
)
    
499.5
%
      
                                       
Starts:
                                      
Campus Operations
    
7,767
      
10,531
      
8,675
      
-10.5
%
    
21.4
%
Transitional
    
-
      
-
      
245
      
-100.0
%
    
-100.0
%
Total
    
7,767
      
10,531
      
8,920
      
-12.9
%
    
18.1
%
                                         
Average Population:
                                        
Campus Operations
    
15,511
      
15,742
      
13,402
      
15.7
%
    
17.4
%
Transitional
    
-
      
-
      
343
      
-100.0
%
    
-100.0
%
Total
    
15,511
      
15,742
      
13,745
      
12.8
%
    
14.5
%
                                         
End of Period Population:
                                        
Campus Operations
    
14,356
      
17,120
      
14,198
      
1.1
%
    
20.6
%
Transitional
    
-
      
-
      
283
      
-100.0
%
    
-100.0
%
Total
    
14,356
      
17,120
      
14,481
      
-0.9
%
    
18.2
%

*
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.

26

 •
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:

   
Six Months Ended
  
   
June 30,
  
   
2025
    
2024
  
Net cash used in operating activities
  
$
(8,079
)
  
$
(6,599
)
Net cash used in investing activities
  
$
(45,772
)
  
$
(3,007
)
Net cash provided by (used in) financing activities
  
$
11,279
    
$
(3,676
)

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.

27
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.
 
28
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.

o
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.

29

 o
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.

o
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.

Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

30
Item 4.
CONTROLS AND PROCEDURES

(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.

31
PART II. OTHER INFORMATION

Item 1.
LEGAL PROCEEDINGS

There are no material developments relating to previously disclosed legal proceedings.  See the “Legal Proceedings” section of the Company’s Form 10-K and previously filed Form 10-Qs for information regarding existing legal proceedings.
 
In the ordinary conduct of our business, the Company is 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 1A.
RISK FACTORS

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.

Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

  (a)
None.

(b)
None.

(c)
On May 24, 2022, the Company announced that the Board of Directors had approved a share repurchase program for 12 months authorizing repurchases of up to $30.0 million of the Company’s Common Stock.  On February 27, 2023, the Board of Directors extended the share repurchase program for an additional 12 months and authorized an additional $10.0 million in repurchases, for an aggregate of up to $40.0 million in 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 and, subsequently, on May 8, 2025, the Company announced that its Board of Directors had authorized an extension of the share repurchase program for another additional 12 months through May 24, 2026. The Company did not repurchase any additional shares in the three months ended June 30, 2025, and has approximately $29.7 million remaining for additional repurchases under the program. To date, the Company has made repurchases totaling approximately $1.7 million shares at an average share price of $5.95 for an aggregate expenditure of approximately $10.3 million.

For more information on the share repurchase plan, see Part I, Item 1. “Notes to Condensed Consolidated Financial Statements”, Note 8 – Stockholders’ Equity.

Item 3.
DEFAULTS UPON SENIOR SECURITIES


(a)
None.

(b)
None

Item 4.
MINE SAFETY DISCLOSURES

None.

Item 5.
OTHER INFORMATION


(a)
None.

(b)
None.

(c)
During the three months ended June 30, 2025, 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).

32
Item 6.
EXHIBITS

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).
   
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


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.
 
101*
The following financial statements from the Company’s 10-Q for the quarter ended June 30, 2025, formatted in Inline eXtensible Business Reporting Language (“iXBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.


104
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).

*
Filed herewith.
**
Furnished herewith.  This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

33
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
LINCOLN EDUCATIONAL SERVICES CORPORATION
     
Date: August 11, 2025
  
By: 
 /s/ Brian Meyers
 
Brian Meyers
 
Executive Vice President, Chief Financial Officer and Treasurer

34
Exhibit Index

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).
   
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).
   
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).
   
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
  
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
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.
   
101*
The following financial statements from the Company’s 10-Q for the quarter ended June 30, 2025, formatted in Inline eXtensible Business Reporting Language (“iXBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and in detail.
   
104
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

*
Filed herewith.
**
Furnished herewith.  This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.


35