Legacy Education's Q1 2026 Earnings Call: Contradictions in Student Placement, International Expansion, and Capacity Constraints

Date of Call: September 30, 2025

Financials Results

• Revenue: $19.4M, up 38.5% YOY (from $14.0M)
• EPS: $0.16 per diluted share, compared to $0.21 last year; $0.22 on a normalized share count
• Operating Margin: Adjusted EBITDA margin 15.9%, compared to 20.1% prior year (down 4.2 percentage points)

Guidance:

• Expect sequential margin improvement as Q1 front‑loaded investments mature and revenue scales
• Four new programs to begin enrollment in Q2 with additional contributions in Q2/Q3 and beyond
• Continue to drive enrollment via digital marketing, employer partnerships and high‑school outreach
• Pursue accretive M&A (multi‑campus targets) and evaluate greenfield expansion within this fiscal year
• Anticipate normalizing operating cash flow as Title IV disbursement timing aligns

Business Commentary:

• Revenue and Enrollment Growth:
• Legacy Education reported revenue of $19.4 million for Q1 2026, up 38.5% year-on-year, driven by a 31.6% increase in new student starts to 1,117 and a 37.7% rise in ending student population to 3,495.

• Growth was attributed to strong demand for its high-demand allied health education programs and strategic enrollment initiatives.

• Operational Investments and Margin Impact:

• Adjusted EBITDA rose to $3.1 million, with a margin of 15.9%, reflecting a 9.6% increase year-on-year.

• The decline in margin was due to front-loaded investments in growth and nonrecurring charges, including new program approvals, faculty recruitment, and facility upgrades.

• Balance Sheet and Liquidity:

• The company maintained a strong balance sheet with $20.6 million in cash and low debt, providing flexibility for organic growth and accretive M&A.

• Operating cash flow was positive but lower year-over-year due to the timing of Federal Title IV disbursements, unrelated to government shutdowns.

• Program Expansion and Approval:

• Legacy Education received approval for four new programs, including MRI, cardiac sonography, surgical technology, and sterile processing.

• These approvals reflect the company's strategic focus on high-demand allied health fields and its commitment to expand its program offerings to meet market needs.

• Strategic Acquisitions and Expansion:

• The acquisition pipeline remains robust, with several opportunities elevated to the Board level, focusing on both single and multi-campus acquisitions within and outside of California.
• The company is on track to announce the next acquisition within the fiscal year, aligning with its expansion strategy.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management described a "strong start to fiscal 2026," reported 38.5% revenue growth to $19.4M, the 13th consecutive quarter of double‑digit revenue growth, and said adjusted EBITDA rose 9.6% while forecasting sequential margin expansion as investments mature.

Q&A:

• Question from Mike Grondahl (Northland Securities): I wanted to ask about the 4 new programs. I think they roughly started in October. Could you talk about how they started and sort of what capacity they have over the next, I don't know, a couple of quarters?
  Response: Each new degree program enrolls about 20–24 students per cohort, offered morning and evening, and the programs begin contributing starting in Q2.

• Question from Mike Grondahl (Northland Securities): Any sense of...did this add 50 students, 150 students?
  Response: No incremental enrollments were included in Q1; impacts will show in Q2, Q3 and beyond.

• Question from Mike Grondahl (Northland Securities): How is the acquisition pipeline looking? Are you spending more time there, less time there? Any color would be helpful. Is that roughly the next 6 months?
  Response: Pipeline is strong; targeting multi‑campus acquisitions inside and outside California with Board‑level review and expect an announcement within this fiscal year (roughly next six months).

• Question from Jeffrey Cohen (Ladenburg Thalmann): Are you nearing being capacity constrained with the existing buildings and facilities? What kind of total student population can you handle at this point?
  Response: Some campuses host 700–800 students and leases expiring in 12–24 months are being evaluated; hybrid delivery (6–9 months online before lab) mitigates near‑term campus capacity constraints.

• Question from Jeffrey Cohen (Ladenburg Thalmann): Can you talk about the placement side? Is Legacy itself in touch with ASCs and physician offices and hospitals directly?
  Response: Yes — Legacy maintains direct employer partnerships (e.g., RadNet, Sharp, Scripps) and placements are aligned with employer demand across nursing, MAs, MRI and cardiac roles.

• Question from Jeffrey Cohen (Ladenburg Thalmann): Are you placing any students outside of the state or outside the U.S.?
  Response: Placements outside the U.S. are minimal (a few into Canada); expansion beyond California occurs via M&A or greenfielding rather than current out‑of‑state enrollments.

Contradiction Point 1

Student Placement and Campus Capacity

It involves the company's ability to place students and its capacity constraints, which are crucial for evaluating the school's growth and demand for its programs.

Does Legacy directly contact ASCs, physician offices, and hospitals for placements? - Jeffrey Cohen (Ladenburg Thalmann)

20251114-2026 Q1: Legacy Education maintains direct relationships with various healthcare facilities for clinical and external placements. These facilities take Legacy graduates in multiple healthcare professions and are the direct source of hiring for new program graduates. - LeeAnn Rohmann(CEO)

What is Legacy's placement strategy? Does Legacy directly engage with ASCs, physician offices, and hospitals? - Jeffrey Cohen (Ladenburg Thalmann & Co. Inc.)

2026Q1: Legacy Education maintains partnerships with healthcare facilities, including hospitals and healthcare systems like RadNet, Sharp, and Scripps. These collaborations facilitate the placement of graduates in various positions, supporting the growth and demand for job-ready professionals. - LeeAnn Rohmann(CEO)

Contradiction Point 2

Placement of Students Outside the U.S.

It highlights the company's international expansion strategy and its current capabilities, which are important for future growth and geographical diversification.

Are you placing students outside the state or the U.S.? - Jeffrey Cohen (Ladenburg Thalmann)

20251114-2026 Q1: Legacy Education has minimal experience with placing students outside the U.S., with a few in Canada. - LeeAnn Rohmann(CEO)

Are you placing any students outside the state or outside the U.S.? - Jeffrey Cohen (Ladenburg Thalmann & Co. Inc.)

2026Q1: Legacy Education has not significantly placed students outside the U.S., with a few exceptions in Canada. The company is prepared for out-of-state and international expansion through future M&A activities and greenfielding opportunities. - LeeAnn Rohmann(CEO)

Contradiction Point 3

Capacity Constraints and Enrollment Capacity

It involves the company's ability to accommodate growth and enroll new students, which directly impacts revenue and student experience.

Are you approaching capacity limits in your current facilities? - Jeffrey Cohen(Ladenburg Thalmann)

20251114-2026 Q1: Legacy Education is not currently capacity constrained. Existing campuses handle up to 700-800 students per campus, and lease renewals are planned to accommodate future growth. The hybrid delivery model also reduces campus space requirements. - LeeAnn Rohmann(CEO)

Given your 7 facilities, are you facing square footage constraints that could limit organic growth? - Jeffrey Cohen(Ladenburg Thalmann & Co. Inc., Research Division)

2025Q4: We are well-positioned with additional square footage at existing campuses, and we have a hybrid model that provides ample space for our labs and online learning. - LeeAnn Rohmann(CEO)