Lincoln Educational Services Stock

Lincoln Educational Services Corporation and its subsidiaries provide diversified career-oriented post-secondary education to high school graduates and working adults.

The company, which operates 22 campuses in 14 states, offers programs in skilled trades (which include heating, ventilating and air conditioning (HVAC), welding and computerized numerical control and electrical and electronic systems technology, among other programs), automotive technology, healthcare services (which include nursing, dental assistant and medical administrative assistant, among other programs), hospitality services (which include culinary, therapeutic massage, cosmetology and aesthetics) and information technology (which consists of information technology programs). The schools operate under Lincoln Technical Institute, Lincoln College of Technology, Lincoln Culinary Institute, and Euphoria Institute of Beauty Arts and Sciences and associated brand names. Most of the 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.

Segments

The company operates through three segments: Transportation and Skilled Trades, Healthcare and Other Professions (HOPS), and Transitional, which refers to campuses that have been marked for closing and are being taught out.

As of December 31, 2022, the Somerville campus is the only campus classified in the Transitional Segment. As of December 31, 2022, the company had 12,388 students enrolled at 22 campuses. The company’s average enrollment for the fiscal year ended December 31, 2022 was 12,894 students.

Business Strategy

The key elements of the company’s strategy are to increase operating efficiency; replicate programs and expand existing areas of study; maximize utilization of existing facilities; expand geographically; expand teaching platform; and expand market.

Programs and Areas of Study

The company structures its program offerings to provide its students with a practical, career-oriented education and position them for attractive entry-level job opportunities in their chosen fields. The company’s diploma/certificate programs typically require between 19 to 136 weeks to complete, with tuition ranging from $10,000 to $45,000. The company’s associate’s degree programs typically require between 73 to 92 weeks to complete, with tuition ranging from $33,000 to $44,000. As of December 31, 2022, all of the company’s schools offered diploma and certificate programs and nine of its schools are approved to offer associate’s degree programs. The company typically offers courses four to five days per week in three shifts per day and start new classes every month. The company updates and expands its programs frequently to reflect the latest technological advances in each field, providing its students with the specific skills and knowledge required in the marketplace. Classroom instruction combines lectures and demonstrations by the company’s experienced faculty with comprehensive hands-on laboratory exercises in simulated workplace environments.

Skilled Trades: For the fiscal year ended December 31, 2022, skilled trades were the company’s largest area of study, representing 36% of its total average student enrollment. The company’s skilled trades programs range from 28 to 98 weeks in length, with tuition rates ranging from $22,000 to $38,000. The company’s skilled trades programs include electrical, heating and air conditioning repair, welding, computerized numerical control and electronic and electronic systems technology. Graduates of these programs are qualified to obtain entry-level employment positions, such as electrician, CNC machinist, cable installer, welder, wiring and heating, ventilating and air conditioning, or HVAC installer. The company’s graduates are employed by a wide variety of employers, including residential and commercial construction, telecommunications installation companies and architectural firms. As of December 31, 2022, the company offered skilled trades programs at 15 campuses.

Automotive Technology: Automotive technology is the company’s second largest area of study, with 30% of its total average student enrollment for the fiscal year ended December 31, 2022. The company’s automotive technology programs range from 28 to 136 weeks in length, with tuition rates ranging from $18,000 to $45,000. The company is a leading provider of automotive technology education in each of its local markets. Graduates of these programs are qualified to obtain entry-level employment in positions, such as technicians, mechanics and various apprentice-level positions. The company’s graduates are employed by a wide variety of companies, ranging from automotive and diesel dealers, to independent auto body paint and repair shops and trucking and construction companies. As of December 31, 2022, the company offered programs in automotive technology at 12 of its campuses and most of these campuses offered other technical programs as well. The company’s campuses in East Windsor, Connecticut; Nashville, Tennessee; Grand Prairie, Texas; Indianapolis, Indiana; and Denver, Colorado are destination campuses, attracting students throughout the United States and, in some cases, from abroad.

Health Sciences: For the fiscal year ended December 31, 2022, 25% of the company’s total average student enrollment was in its health science program. The company’s health science programs range from 27 to 104 weeks in length, with tuition rates ranging from $15,000 to $33,000. Graduates of these programs are qualified to obtain positions, such as licensed practical nurse, registered nurse, dental assistant, medical assistant, medical administrative assistant, and claims examiner. The company’s graduates are employed by a wide variety of employers, including hospitals, laboratories, insurance companies, and doctors' offices. The company’s practical nursing and medical assistant programs are its largest health science programs. As of December 31, 2022, the company offered health science programs at 12 of its campuses.

Hospitality Services: For the fiscal year ended December 31, 2022, 7% of the company’s total average student enrollment was in its hospitality services programs. The company’s hospitality services programs range from 19 to 88 weeks in length, with tuition rates ranging from $10,000 to $27,000. The company’s hospitality programs include culinary, therapeutic massage, cosmetology and aesthetics. Graduates work in salons, spas, cruise ships or are self-employed. The company offers massage programs at three of its campuses and cosmetology programs at one campus. The company’s culinary graduates are employed by restaurants, hotels, cruise ships and bakeries. As of December 31, 2022, the company offered culinary programs at two of its campuses.

Information Technology: For the fiscal year ended December 31, 2022, 2% of the company’s total average student enrollment was in its information technology programs. The company’s information technology programs are 42 to 64 weeks in length, with tuition rates of $24,000 to $26,000. The company has focused its information technology, or IT, program offerings on those that are most in demand, such as its computer and network support technician program. The company’s graduates obtain entry-level positions with both small and large corporations. As of December 31, 2022, the company offered these programs at five of its campuses.

Marketing and Student Recruitment

The company utilizes a variety of marketing and recruiting methods to attract students and increase enrollment. The company’s marketing and recruiting efforts are targeted at prospective students who are high school graduates entering the workforce, or who are underemployed or unemployed and require additional training to enter or re-enter the workforce.

Marketing and Advertising: The company utilizes a fully integrated marketing approach in its lead generation and admissions process that includes the use of traditional media, such as television, radio, billboards, direct mail, a variety of print media and event marketing campaigns intended to raise brand awareness. In addition, the company continually grows and enhances its digital marketing efforts, which include paid search, paid and organic social media, search engine optimization, online video and display advertising and pay-per-lead channels. These channels drive the majority of the company’s new student leads and enrollments. The company’s fully integrated marketing campaigns direct prospective students to contact it directly or visit its website or other customized landing pages on the Internet where they will find details regarding its programs and campuses and can request additional information regarding the programs that interest them. Prospective students may also apply for admission online. The company’s internal systems enable it to closely monitor and track the effectiveness of each marketing execution on a daily or weekly basis and make adjustments accordingly to enhance its efficiency and limit its student acquisition costs.

Referrals: Referrals from students, high school counselors and satisfied graduates and their employers have historically represented approximately 14% of the company’s new student starts. During the fiscal year ended December 31, 2022, referrals were approximately 13% of its new student starts. The company’s school administrators actively work with its students to encourage them to recommend its programs to prospective students. The company endeavors to build and retain strong relationships with high school guidance counselors and instructors by offering annual seminars at its training facilities to further familiarize these individuals on the strengths of its programs.

Recruiting: The company’s recruiting efforts are conducted by a group of approximately 250 campus-based and field representatives who meet directly with prospective students during presentations conducted at high schools, in the prospective students’ homes or during a visit to one of its campuses. The company also recruits adult career-seekers or career-changers through its campus-based representatives.

During the fiscal year ended December 31, 2022, the company recruited approximately 23% of its students directly out of high school. Field sales continue to be a large part of the company’s business and developing local community relationships is one of its most important recruiting functions.

Student Admissions, Enrollment and Retention

Admissions: In order to attend the company’s schools, students must have either a high school diploma or a high school equivalency certificate (or General Education Development Certificate, GED). In addition, students must complete an admissions interview and complete a learner assessment. The company takes admissions requirements very seriously as they are the best indicators of its students’ likelihood for program success and completion thus leading to successful employment in the industry.

Enrollment: The company enrolls students continuously throughout the year, with its largest classes enrolling in late summer or early fall following high school graduation. As of December 31, 2022, the company had 12,388 students enrolled at 22 campuses and its average enrollment for the fiscal year ended December 31, 2022 was 12,894 students.

Retention: The company monitors its retention rates by instructor, course, program and school. When the company become aware that a particular instructor or program is experiencing a higher than normal dropout rate, it quickly seek to determine the cause of the problem and attempt to correct it. When the company identifies that a student is experiencing difficulty academically, it offers tutoring. As it moved to online delivery of instruction the company saws a slight decline in its student retention rate, but this is temporary and will improve as its as faculty becomes better skilled at hybrid teaching and to ensure that this happens, it has developed online teacher training for all faculty.

Job Placement

The company is assisting its graduates in securing employment after completing their program of study is critical to its mission as a post-secondary educational institution, as well as to its ability to attract high quality students and enhance its reputation in the industry. The company’s non-destination schools work closely with local employers to ensure that it is training students with skills that local employers seek. Each school has an advisory council consists of local employers who provide it with direct feedback on how well it is preparing students to succeed in the workplace. This enables the company to tailor its programs to the marketplace. The placement staff in each of the company’s destination schools maintains databases of potential employers throughout the country, allowing it to more effectively assist its graduates in securing employment in their career fields upon graduation. Throughout each year, the company holds numerous job fairs at its facilities where it provides the opportunity for its students to meet and interact with potential employers. In addition, many of its schools have internship programs that provide its students with opportunities to work with employers prior to graduation. For example, some of the students in the company’s automotive programs have the opportunity to complete a portion of their hands-on training in an actual work environment. In addition, some of the company’s students in health sciences programs are required to participate in an externship program in which they work in the field as part of their career training. The company also assists students with resume writing, interviewing and other job search skills.

Regulatory Environment

Students seeking financial aid under Title IV Programs obtain access to federal student financial aid through a DOE-prescribed application and eligibility certification. Each of the company’s schools participates in the Title IV Programs. For the year ended December 31, 2021, approximately 74% (calculated based on cash receipts) of the company’s revenues were derived from the Title IV Programs.

The company is subject to oversight by other federal agencies, including the Consumer Financial Protection Bureau (CFPB), the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), the Internal Revenue Service and the Departments of Veterans Affairs (VA), Defense (DOD), Treasury, Labor, and Justice.

The various approvals granted by the regulatory entities to which the company is subject are what allow its schools to operate and to participate in a variety of government-sponsored financial aid programs that assist students in paying for their education the most significant of which are the federal student aid programs administered by the DOE under the Higher Education Act of 1965, as amended (the HEA).

The company’s schools are subject to audits, program reviews, site visits, and other reviews by various federal and state regulatory agencies, including but not limited to, the DOE, the DOE’s Office of Inspector General (OIG), state education agencies and other state regulators, the VA and other federal agencies (such as, for example, the FTC or the CFPB), and by its accrediting commissions. In addition, each of its institutions must retain an independent certified public accountant to conduct an annual compliance audit of the institution’s administration of Title IV Program funds. The institution must submit the resulting annual compliance audit report to the DOE for review. The annual compliance audit reports for the company’s institutions contain findings on topics that were the subject of findings in prior audits although the amount of questioned funds in the reports are immaterial and have been repaid. The reoccurrence of findings in the company’s compliance audit reports could result in the DOE initiating an adverse action against one or more of its institutions. Significant violations of Title IV Program requirements by any of the company’s institutions could become the basis for the DOE to impose liabilities on it or initiate an adverse action to limit, suspend, terminate, revoke, or decline to renew the participation of the affected institution in Title IV Programs or to seek civil or criminal penalties. Generally, a termination of Title IV Program eligibility extends for 18 months before the institution may apply for reinstatement of its participation. Some of the findings in the annual Title IV Program compliance audits for some of the company’s institutions resulted in the DOE placing those institutions on provisional certification.

As a post-secondary educational institution, the company is subject to a broad range of consumer protection and other laws, such as recruiting, marketing, the protection of personal information, student financing and payment servicing, enforced by federal agencies such as the FTC and CFPB and various state agencies and state attorneys general.

History

Lincoln Educational Services Corporation was founded in 1946. The company was incorporated in New Jersey in 2003.