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Education company Lincoln Educational (NASDAQ:LINC) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 16.1% year on year to $102.9 million. The company expects the full year's revenue to be around $426.5 million, in line with analysts' estimates. It made a GAAP loss of $0.02 per share, down from its profit of $0.57 per share in the same quarter last year.
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Lincoln Educational (LINC) Q2 CY2024 Highlights:
- Revenue: $102.9 million vs analyst estimates of $100.6 million (2.3% beat)
- EPS: -$0.02 vs analyst estimates of -$0.01 (-$0.01 miss)
- The company slightly lifted its revenue guidance for the full year from $423 million to $426.5 million at the midpoint
- EBITDA guidance for the full year is $40.5 million at the midpoint, above analyst estimates of $39.63 million
- Gross Margin (GAAP): 55.7%, in line with the same quarter last year
- EBITDA Margin: 6.1%, up from 2.8% in the same quarter last year
- Enrolled Students: 14,481, up 1,477 year on year
- Market Capitalization: $366.3 million
Established in 1946, Lincoln Educational (NASDAQ:LINC) is a provider of specialized technical training in the United States, offering career-oriented programs to provide practical skills required in the workforce.
Education ServicesA whole industry has emerged to address the problem of rising education costs, offering consumers alternatives to traditional education paths such as four-year colleges. These alternative paths, which may include online courses or flexible schedules, make education more accessible to those with work or child-rearing obligations. However, some have run into issues around the value of the degrees and certifications they provide and whether customers are getting a good deal. Those who don’t prove their value could struggle to retain students, or even worse, invite the heavy hand of regulation.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Unfortunately, Lincoln Educational's 8.9% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Lincoln Educational's annualized revenue growth of 9.3% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.
We can better understand the company's revenue dynamics by analyzing its number of enrolled students, which reached 14,481 in the latest quarter. Over the last two years, Lincoln Educational's enrolled students averaged 2.6% year-on-year growth. Because this number is lower than its revenue growth during the same period, we can see the company's monetization has risen.
This quarter, Lincoln Educational reported robust year-on-year revenue growth of 16.1%, and its $102.9 million of revenue exceeded Wall Street's estimates by 2.3%. Looking ahead, Wall Street expects sales to grow 6.7% over the next 12 months, a deceleration from this quarter.
Operating MarginLincoln Educational's operating margin has shrunk over the last year and averaged 6.2%. The company's profitability was mediocre for a consumer discretionary business and shows it couldn't pass its higher operating expenses onto its customers.
In Q2, Lincoln Educational generated an operating profit margin of negative 1.1%, down 27.6 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.
Key Takeaways from Lincoln Educational's Q2 Results It was good to see Lincoln Educational beat analysts' revenue expectations this quarter. We were also glad it raised its full-year revenue and EBITDA guidance, which came in higher than Wall Street's estimates. On the other hand, its EPS missed. Overall, this was a decent quarter for Lincoln Educational. The stock remained flat at $11.65 immediately after reporting.
