Lincoln's Q3 2025 Earnings Call: Contradictions on EBITDA Growth Guidance 2026, 2027 Revenue Target Inclusions, Pre-Opening Costs, and Military Enrollment Strategy

Date of Call: November 10, 2025

Financials Results

• Revenue: $141.4M, up 25.4% YOY
• EPS: $0.20 per diluted share (adjusted), up from $0.13 prior year, +54.9%

Guidance:

• Full-year 2025 revenue expected $505M–$510M.
• 2025 adjusted EBITDA expected $65M–$67M.
• 2025 net income expected $17M–$19M.
• Student starts growth for 2025 expected 15%–16%.
• 2025 capital expenditures unchanged at $75M–$80M.
• Expect to end year debt-free with higher net cash.
• 2026 adjusted EBITDA (under revised methodology) expected to exceed 2025 guidance.
• 2027 now targeted at >$600M revenue and >$90M adjusted EBITDA.

Business Commentary:

• Student Start and Revenue Growth:
• Lincoln Educational Services reported student starts growth of 6% for Q3 2025, marking the 12th consecutive quarter of growth over the prior year.
• The increase in starts led to double-digit growth in total student population, total revenue, and consolidated adjusted EBITDA.

• The growth was driven by the success of greenfield campuses, program expansions, and improved marketing efforts.

  

• Capital Expenditure and Campus Expansion:

• Total capital expenditures were $21.7 million for Q3, primarily for growth initiatives including campus relocations and new campus development.
• The company announced plans to develop a new campus in Rowlett, Texas, with an anticipated opening in Q1 2027.

• Investments in new campuses are expected to generate IRRs exceeding their 20% threshold, supporting growth strategies.

• Healthcare Program Adjustments:

• Lincoln's health care programs experienced a decline of 13.7% in starts, mainly due to the discontinuation of smaller programs.
• The company is pursuing degree-granting approval to offer a registered nurse program, which could significantly expand its healthcare sector addressable market.

• The declines in smaller healthcare programs are part of a strategic focus on core, in-demand programs to improve profitability.

• Operating Efficiency Improvements:

• Adjusted EBITDA grew by 65.1%, reaching $16.9 million, reflecting improved operating efficiencies and reduced instructional costs.
• The Lincoln 10.0 hybrid teaching model has contributed to lower instructional costs as a percentage of revenue.
• These improvements highlight the effectiveness of operational initiatives in enhancing financial performance.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • "another exceptional quarter of operating and financial performance"; revenue $141.4M (+25.4%); adjusted EBITDA $16.9M (+65.1%); management: "we are raising our full-year guidance" and now projects 2027 revenue >$600M and adjusted EBITDA >$90M.

Q&A:

• Question from Alexander Paris (Barrington Research Associates, Inc.): Does the 2025 adjusted EBITDA guidance include roughly $10M of pre-opening/add-back costs?
  Response: Yes — the 2025 adjusted EBITDA range includes approximately $10M of preopening/add-back costs.

• Question from Alexander Paris (Barrington Research Associates, Inc.): Are you forecasting another ~$10M of preopening costs for 2026 and how does that affect longer-term targets?
  Response: Management expects roughly $10M of similar preopening costs for 2026 but says even without those add-backs they will exceed prior EBITDA targets (the $90M plan).

• Question from Alexander Paris (Barrington Research Associates, Inc.): Will you exceed the $65M–$67M adjusted EBITDA guide for 2025 based on current trends?
  Response: Yes — management expects to exceed the current 2025 adjusted EBITDA guidance going into 2026.

• Question from Alexander Paris (Barrington Research Associates, Inc.): What about CapEx guidance for 2026?
  Response: No formal 2026 CapEx guidance yet; to be provided in February and likely similar to or slightly down from 2025's level.

• Question from Lucas John Horton (Northland Capital Markets): What drove the quarter's outperformance and what explains the strong start forecast for Q4?
  Response: Outperformance driven by new campuses and stronger-than-expected skilled-trades starts; Q4 starts expected robust (roughly 15%–20% growth based on trends and new campus/program performance).

• Question from Lucas John Horton (Northland Capital Markets): How much capacity does the East Point expansion add?
  Response: East Point expansion adds roughly 500 student capacity.

• Question from Lucas John Horton (Northland Capital Markets): Timeline and regulatory steps to add RN programs and whether approvals are state-by-state?
  Response: Offering RN requires becoming degree-granting; applications filed in NJ, NY, CT; approvals are state-by-state and could take 12–48 months.

• Question from Eric Martinuzzi (Lake Street Capital Markets): Does the updated >$600M 2027 target include recently announced campuses like Houston, Levittown, etc.?
  Response: Yes — the >$600M projection includes all campuses announced as of today.

• Question from Eric Martinuzzi (Lake Street Capital Markets): Will Pikesville and Rowlett be online and contribute to the 2027 target?
  Response: Yes — Pikesville and Rowlett are expected online (Rowlett Q1 '27) and to contribute to 2027 results.

• Question from Eric Martinuzzi (Lake Street Capital Markets): With declines in some healthcare starts (Paramus, massage, culinary), are healthcare programs positive ex-those changes and when will organic growth return?
  Response: Core healthcare programs (LPN and medical assisting) grew ~2% in Q3; management expects healthcare to return to positive organic growth in 2026 after Paramus LPN restarts.

• Question from Rajiv Sharma (B. Riley Securities): What should we expect from the healthcare/nursing segment over the next couple of years?
  Response: Healthcare is ~20% of population; core LPN and MA are growing and management plans to complement with RN programs over time, but timing is uncertain.

• Question from Rajiv Sharma (B. Riley Securities): Any signs that starts growth in transportation or healthcare will be disrupted?
  Response: Management sees no anticipated disruptions — demand remains robust from adult and high-school markets and they expect continued growth.

• Question from Rajiv Sharma (B. Riley Securities): Any regulatory developments from negotiated rulemaking to watch for?
  Response: No current regulatory changes identified that would derail the company's plans.

• Question from Steven Frankel (Rosenblatt Securities): What operational lessons from East Point will you apply to new campuses to get faster starts?
  Response: Lesson: build larger, more flexible campuses (~90k sq ft with 10k–12k undeveloped space) and refine staffing/marketing to accelerate ramp.

• Question from Steven Frankel (Rosenblatt Securities): Have you seen a material decline in interest for legacy auto/diesel programs?
  Response: No — auto/diesel still growing, but skilled trades are growing faster and have become a larger portion of new replications.

• Question from Griffin Boss (B. Riley Securities): Is the higher revenue per student driven by pricing or program mix?
  Response: Mostly timing of books/tools revenue and ~2%–3% tuition increases, with some program-mix contribution.

• Question from Griffin Boss (B. Riley Securities): Typical ramp period for new campuses and how long to fill a 1,600 capacity site?
  Response: Expect similar performance to East Point: ~18–24 months to reach ~700–800 students; ROI modeled on ~850–1,000 students rather than full 1,600 capacity.

• Question from Alexander Paris (Barrington Research Associates, Inc.): What percent of enrollment is military and are they using tuition assistance or the GI Bill?
  Response: Military comprise ~5%–6% of students, predominantly veterans using GI Bill benefits; active-duty enrollment is not material.

Contradiction Point 1

EBITDA Growth Guidance for 2026

It involves changes in financial forecasts, specifically regarding EBITDA growth expectations for the following year, which are critical for investor expectations and strategic planning.

What drove this strong performance at the campus level or program mix perspective? - Lucas John Horton(Northland Capital Markets)

2025Q3: We are forecasting robust start growth for Q4, which is what we guided to before. - Scott Shaw(CEO)

Where is the demand and growth in starts coming from? - Raj Sharma(Texas Capital Bank)

2025Q1: We expect high single digits for both Q2 and Q3 combined. - Brian Meyers(CFO)

Contradiction Point 2

2027 Revenue Target and Inclusions

It involves the inclusion of new campuses and program expansions in the 2027 revenue target, which has been clarified in the latest quarter, potentially impacting investor expectations.

Can you clarify how the 2027 guide compares to the previous one regarding the $550 million allocation (excluded Atlanta/Houston and program expansions in Levittown/Nashville)? - Eric Martinuzzi(Lake Street)

2025Q3: No, it always included -- it didn't include Houston because when we first put that out, Houston, what wasn't announced yet. It was really only included for the new campuses, the East Point. - Brian Meyers(CFO)

Does the $550 million revenue target include the Hicksville campus? - Eric Martinuzzi(Lake Street)

2024Q4: It does. The Hicksville campus will contribute to this target, and it is expected to open in late 2026. - Scott Shaw(CEO)

Contradiction Point 3

Impact of Pre-Opening Costs on EBITDA

It involves the accounting treatment of pre-opening costs and their impact on EBITDA, which affects financial reporting and performance metrics.

Does the 2025 adjusted EBITDA guidance of $65 million to $67 million include the $10 million add-back for pre-opening costs? - Alexander Paris(Barrington Research Associates)

2025Q3: Correct. You're talking about in 2025? Yes, in 2025, it includes that $10 million. - Brian Meyers(CFO)

How much of the EBITDA growth guidance is attributed to OpEx, and what are the plans for next year? - Raj Sharma(Texas Capital Bank)

2025Q1: Our guidance excludes new campuses and pre-opening losses. - Brian Meyers(CFO)

Contradiction Point 5

Military Enrollment Strategy

It involves the company's strategy for military enrollment and degree programs, which could impact the student demographic and revenue streams.

What is Lincoln's overall military exposure as a percentage of total enrollment? - Alexander Paris(Barrington Research)

2025Q3: We are down to only about 5% to 6% of our students today who are military. - Scott Shaw(CEO)

What are your goals for the military veteran segment? - Rajiv Sharma(B. Riley Securities)

2025Q2: Currently, military enrollment is less than 10% due to limitations in offering degree programs. - Scott Shaw(CEO)