Education company Lincoln Educational (NASDAQ:LINC) announced better-than-expected revenue in Q4 CY2024, with sales up 16.4% year on year to $119.4 million. The company’s full-year revenue guidance of $485 million at the midpoint came in 3.4% above analysts’ estimates. Its GAAP profit of $0.22 per share was 5.7% below analysts’ consensus estimates.
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Lincoln Educational (LINC) Q4 CY2024 Highlights:
- Revenue: $119.4 million vs analyst estimates of $111.6 million (16.4% year-on-year growth, 6.9% beat)
- EPS (GAAP): $0.22 vs analyst expectations of $0.23 (5.7% miss)
- Adjusted EBITDA: $19.23 million vs analyst estimates of $18.7 million (16.1% margin, 2.8% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $485 million at the midpoint, beating analyst estimates by 3.4% and implying 10.2% growth (vs 16.5% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $57.5 million at the midpoint, above analyst estimates of $51.77 million
- Operating Margin: 9.2%, in line with the same quarter last year
- Enrolled Students: 15,138, up 1,868 year on year
- Market Capitalization: $506.5 million
“We had a very strong finish to 2024, achieving or exceeding all of our guidance metrics while we continued to invest in our growth strategies,” said Scott Shaw, President & CEO.
Company Overview
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 Services
A 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 Growth
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Lincoln Educational’s sales grew at a tepid 10% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector and is a tough 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 12.4% over the last two years is above its five-year trend, but we were still disappointed by the results. 
Lincoln Educational also discloses its number of enrolled students, which reached 15,138 in the latest quarter. Over the last two years, Lincoln Educational’s enrolled students averaged 7.2% 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 year-on-year revenue growth of 16.4%, and its $119.4 million of revenue exceeded Wall Street’s estimates by 6.9%.
Looking ahead, sell-side analysts expect revenue to grow 8.3% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Over the last two years, Lincoln Educational’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 10.4%, meaning it lit $10.39 of cash on fire for every $100 in revenue.
Key Takeaways from Lincoln Educational’s Q4 Results
We were impressed by Lincoln Educational’s optimistic full-year revenue and EBITDA guidance, which blew past analysts’ expectations. We were also glad this quarter's revenue and EBITDA beat Wall Street’s estimates. On the other hand, its EPS missed. Still, we think this was a solid quarter. The areas below expectations seem to be driving the move, and shares traded down 1.1% to $15.91 immediately after reporting.
Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.