LINCOLN EDUCATIONAL SERVICES CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and Chief Financial Officer, after evaluating, together with management, the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as of December 31, 2024 have concluded that our disclosure controls and procedures are effective to reasonably ensure that material information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by Securities and Exchange Commission’s Rules and Forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Internal Control Over Financial Reporting During the quarter ended December 31, 2024, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management’s Annual Report on Internal Control over Financial Reporting and Attestation Report of Independent Registered Public Accounting Firm The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013) . Based on its assessment, management believes that, as of December 31, 2024, the Company’s internal control over financial reporting is effective. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Deloitte & Touche LLP, an independent registered public accounting firm, audited the Company’s internal control over financial reporting as of December 31, 2024, as stated in their report included in this Form 10-K that follows. ITEM 9B. OTHER INFORMATION During the three months ended December 31, 2024, none of the Company's directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted , terminated or modified a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" (as such terms are defined in Item 408 of Regulation S-K). ITEM 9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. 57 Index PART III. Certain information required by this item will be included in a definitive proxy statement for the Company’s annual meeting of shareholders or an amendment to this Annual Report on Form 10-K, in either case filed with the Securities and Exchange Commission within 120 days after December 31, 2024, and is incorporated by reference herein. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors and Executive Officers Certain information required by this Item 10 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024. Code of Ethics We have adopted a Code of Business Ethics and Conduct applicable to our directors, officers and employees and certain other persons, including our Chief Executive Officer and Chief Financial Officer. A copy of our Code of Business Ethics and Conduct is available on our website at www.lincolntech.edu . If any amendments to or waivers from the Code of Business Ethics and Conduct are made, we will disclose such amendments or waivers on our website. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item 12 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item 13 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item 14 of Part III is incorporated by reference from a definitive proxy statement or an amendment to this Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission within 120 days after December 31, 2024. PART IV. ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 1. Financial Statements See “Index to Consolidated Financial Statements” on page F-1 of this Annual Report on Form 10-K. 2. Financial Statement Schedules See “Index to Consolidated Financial Statements” on page F-1 of this Annual Report on Form 10-K. 3. Exhibits Required by Securities and Exchange Commission Regulation S-K 58 Index Exhibit Number Description 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 7, 2005. 3.2 Certificate of Amendment, dated November 14, 2019, to the Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-3 filed October 6, 2020). 3.3 Bylaws of the Company, as amended on March 8, 2019 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed April 30, 2020). 4.1 Specimen Stock Certificate evidencing shares of Common Stock (incorporated by reference to the Company’s Registration Statement on Form S-1/A (Registration No. 333-123644) filed June 21, 2005). 4.2 Registration Rights Agreement, dated as of November 14, 2019, between the Company and the investors parties thereto (incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed November 14, 2019). 4.3 Description of Securities of the Company (incorporated by reference to Exhibit 4.3 of the Company’s Annual Report on Form 10-K filed March 9, 2021). 10.1+ Employment Agreement, dated as of December 13, 2022, between the Company and Scott M. Shaw (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 16, 2022). 10.2+ Employment Agreement, dated as of December 13, 2022, between the Company and Brian K. Meyers (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed December 16, 2022). 10.3+ Employment Agreement dated as of December 13, 2022 between the Company and Chad D Nyce (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed December 16, 2022) . 10.4*+ Employment Agreement dated as of December 13, 2022 between the Company and Stephen A. Ace. 10.5*+ Employment Agreement dated as of December 13, 2022 between the Company and Alexandra M. Luster. 10.6+ Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan (as amended) (incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 filed February 16, 2024). 10.7*+ Form of Agreement Pursuant to the Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan as to Time-Restricted Shares and Performance-Restricted Shares. 10.8*+ Form of Agreement Pursuant to the Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan as to Performance-Restricted Shares. 10.9+ Lincoln Educational Services Corporation Severance and Retention Policy (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 7, 2022). 10.10 Securities Purchase Agreement, dated as of November 14, 2019, between the Company and the investor parties thereto (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2019). 10.11 Credit Agreement dated as of February 16, 2024 among Lincoln Educational Services Corporation and its subsidiaries and Fifth Third Bank, National Association (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed February 23, 2024). 10.12 Amendment to Credit Agreement, dated July 18, 2024, between Lincoln Educational Services Corporation and Fifth Third Bank, National Association (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 23, 2024). 10.13 Form of Indemnification Agreement between the Company and each director of the Company (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2019). 59 Index 10.14 Indemnification Agreement between the Company and John A. Bartholdson (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2019. 19.1* Insider Trading Policy. 21.1* Subsidiaries of the Company. 23* Consent of Independent Registered Public Accounting Firm. 24* Power of Attorney (included on the Signature page of this Annual Report on Form 10-K). 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97.1+ Compensation Recovery Policy ( incorporated by reference to Exhibit 97.1 of the Company’s Annual Report on Form 10-K filed March 5, 2024). 101* The following financial statements from Lincoln Educational Services Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024, formatted in iXBRL: (i) Consolidated Statements of Operations, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Comprehensive (Loss) Income, (v) Consolidated Statement of Changes in Stockholders’ Equity and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail. 104 Cover Page Interactive Data File (formatted as Inline iXBRL and contained in Exhibit 101*. * Filed herewith. + Indicates management contract or compensatory plan or arrangement required to be filed or incorporated by reference as an exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K. ITEM 16. FORM 10-K SUMMARY None. 60 Index SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LINCOLN EDUCATIONAL SERVICES CORPORATION By: /s/ Brian Meyers Brian Meyers Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) Date: March 4, 2025 61 Index POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned constitutes and appoints Scott M. Shaw and Brian K. Meyers, and each of them, as attorneys-in-fact and agents, with full power of substitution and re-substitution, for and in the name, place and stead of the undersigned, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Scott M. Shaw Chief Executive Officer and Director March 4, 2025 Scott M. Shaw /s/ Brian K. Meyers Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) March 4, 2025 Brian K. Meyers /s/ John A. Bartholdson Dire March 4, 2025 John A. Bartholdson /s/ James J. Burke, Jr. Director March 4, 2025 James J. Burke, Jr. /s/ Kevin M. Carney Director March 4, 2025 Kevin M. Carney /s/ Michael A. Plater Director March 4, 2025 Michael A. Plater /s/ Felecia J. Pryor Director March 4, 2025 Felecia J. Pryor /s/ Carlton Rose Director March 4, 2025 Carlton Rose /s/ Sylvia J. Young Director March 4, 2025 Sylvia J. Young /s/ Anna Cabral Director March 4, 2025 Anna Cabral /s/ Marta Newhart Director March 4, 2025 Marta Newhart 62 Index INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Number Reports of Independent Registered Public Accounting Firm - Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-5 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 F-7 Consolidated Statements of Other Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 F-8 Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022 F-9 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 F-10 Notes to Consolidated Financial Statements F-12 Schedule II-Valuation and Qualifying Accounts F-34 F-1 Index REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Lincoln Educational Services Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lincoln Educational Services Corporation and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, other comprehensive income, changes in convertible preferred stock and stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in with conformity accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 4, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses – Refer to Note 5 to the financial statements Critical Audit Matter Description Student receivables represent funds owed to the Company in exchange for the educational services provided to the student. Student receivables are reported net of an allowance for credit losses as determined by management at the end of each reporting period. Management’s student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables. Its estimation methodology considers a number of quantitative and qualitative factors that, based on collection experience, have an impact on repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact the estimate of the allowance for credit losses. The factors include, but are not limited to repayment history, changes in the current economic, legislative, or regulatory environments, cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, the allowance estimation process for student receivables is assessed by comparing estimated and actual performance. F-2 Index Given the significant amount of judgment required by management in assessing the allowance for credit losses under Topic 326, performing audit procedures to evaluate the reasonableness of the estimate of the lifetime expected losses for student receivables required a high degree of auditor judgement and an increased extent of effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the allowance for credit losses included the following, among others: • Tested the design and operating effectiveness of controls relating to establishing the allowance for credit losses. • Assessed the appropriateness of management’s methodology for calculating the allowance including the significant inputs and assumptions utilized, including any changes in the current economic, legislative or regulatory environments, cash collection forecasts and the ability to complete the federal financial aid process with the student. • Recalculated the estimated allowance rates applied to the respective accounts receivable allowance categories determined according to funding sources and other criteria. • Tested the completeness and accuracy of data underlying management’s assertions and calculations by selecting and reperforming the calculations for a selection of students, and compared our recalculations to management’s analysis to determine whether management’s conclusions were reasonable. • Tested on a sample basis the rates of reserve percentages and subsequent cash collections from a student through our evaluation of a selection of students. • Evaluated Topic 326 related financial statement disclosures. /s/ Deloitte & Touche LLP Morristown, New Jersey March 4, 2025 We have served as the Company’s auditor since 1999. F-3 Index REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Lincoln Educational Services Corporation Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Lincoln Educational Services Corporation and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated March 4, 2025, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Morristown, New Jersey March 4, 2025 F-4 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) December 31, 2024 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 59,273 $ 75,992 Restricted cash - 4,277 Accounts receivable, less allowance of $ 42,615 and $ 34,441 at December 31, 2024 and 2023 , respectively 42,983 35,692 Inventories 3,053 2,948 Prepaid expenses and other current assets 4,793 5,556 Asset held for sale 1,150 10,198 Total current assets 111,252 134,663 PROPERTY, EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation and amortization of $ 141,271 and $ 140,161 at December 31, 2024 and 2023 , respectively 103,533 50,857 OTHER ASSETS: Noncurrent receivables, less allowance of $ 22,957 and $ 19,370 at December 31, 2024 and 2023 , respectively 19,627 17,504 Deferred finance charges 323 - Deferred income taxes, net 25,359 23,217 Operating lease right-of-use assets 136,034 89,923 Finance lease right-of-use assets 26,745 15,797 Goodwill 10,742 10,742 Other assets, net 1,387 1,787 Pension plan assets, net 1,554 759 Total other assets 221,771 159,729 TOTAL ASSETS $ 436,556 $ 345,249 See Notes to Consolidated Financial Statements. F-5 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Continued) December 31, 2024 2023 LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Unearned tuition $ 30,631 $ 26,906 Accounts payable 37,026 18,152 Accrued expenses 11,986 13,680 Income taxes payable 1,072 2,832 Current portion of operating lease liabilities 9,497 11,737 Current portion of finance lease liabilities - 70 Other short-term liabilities - 33 Total current liabilities 90,212 73,410 NONCURRENT LIABILITIES: Long-term portion of operating lease liabilities 138,803 88,853 Long-term portion of finance lease liabilities 29,261 16,126 Other long-term liabilities 16 56 Total liabilities 258,292 178,445 COMMITMENTS AND CONTINGENCIES SERIES A CONVERTIBLE PREFERRED STOCK Preferred stock, no par value - authorized 10,000,000 shares at December 31, 2024 and 2023 , respectively. - - STOCKHOLDERS’ EQUITY: Common stock, no par value - authorized 100,000,000 shares at December 31, 2024 and 2023 , issued and outstanding 31,462,640 shares at December 31, 2024 and 31,359,110 shares at December 31, 2023 48,181 48,181 Additional paid-in capital 50,639 49,380 Retained earnings 79,170 69,279 Accumulated other comprehensive loss (income) 274 ( 36 ) Total stockholders’ equity 178,264 166,804 TOTAL LIABILITIES, SERIES A CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY $ 436,556 $ 345,249 See Notes to Consolidated Financial Statements. F-6 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2024 2023 2022 REVENUE $ 440,064 $ 378,070 $ 348,287 COSTS AND EXPENSES: Educational services and facilities 181,759 162,275 148,746 Selling, general and administrative 243,803 209,135 182,391 Loss (gain) on sale of assets 2,119 ( 30,918 ) ( 177 ) Gain on insurance proceeds ( 2,794 ) - - Impairment of goodwill and long-lived assets - 4,220 1,049 Total costs and expenses 424,887 344,712 332,009 OPERATING INCOME 15,177 33,358 16,278 OTHER: Interest income 2,099 2,628 318 Interest expense ( 2,565 ) ( 347 ) ( 160 ) INCOME BEFORE INCOME TAXES 14,711 35,639 16,436 PROVISION FOR INCOME TAXES 4,820 9,642 3,802 NET INCOME 9,891 25,997 12,634 PREFERRED STOCK DIVIDENDS - - 1,111 INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 9,891 $ 25,997 $ 11,523 Basic Net income per common share $ 0.32 $ 0.86 $ 0.36 Diluted Net income per common share $ 0.32 $ 0.85 $ 0.36 Weighted average number of common shares outstanding: Basic 30,580 30,105 25,879 Diluted 30,891 30,541 25,879 See Notes to Consolidated Financial Statements F-7 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED S TATEMENTS OF OTHER COMPREHENSIVE INCOME (In thousands) December 31, 2024 2023 2022 Net income $ 9,891 $ 25,997 $ 12,634 Other comprehensive income Employee pension plan adjustments, net of taxes (a) 310 924 280 Comprehensive income $ 10,201 $ 26,921 $ 12,914 (a) Taxes related to pension plan adjustments were $ 0.1 million, $ 0.3 million, and $ 0.1 million for each of the years ended December 31, 2024, 2023, and 2022, respectively. See Notes to Consolidated Financial Statements F-8 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (In thousands, except share amounts) Stockholders’ Equity Accumulated Series A Additional Other Convertible Common Stock Paid-in Treasury Retained Comprehensive Preferred Stock Shares Amount Capital Stock Earnings Loss Total Shares Amount BALANCE - January 1, 2022 27,000,687 $ 141,377 $ 32,439 $ ( 82,860 ) $ 39,702 $ ( 1,240 ) $ 129,418 12,700 $ 11,982 Net income - - - - 12,634 - 12,634 - - Preferred stock dividend - - - - ( 1,111 ) - ( 1,111 ) - - Preferred Stock Conversion 5,381,356 - 11,982 - - - 11,982 ( 12,700 ) ( 11,982 ) Employee pension plan adjustments - - - - - 280 280 - - Stock-based compensation expense Restricted stock 606,950 - 3,111 - - - 3,111 - - Share repurchase ( 1,572,414 ) ( 9,445 ) - - - - ( 9,445 ) - - Treasury stock cancellation - ( 82,860 ) - 82,860 - - - - - Net share settlement for equity-based compensation ( 268,654 ) - ( 1,992 ) - - - ( 1,992 ) - - BALANCE - December 31, 2022 31,147,925 49,072 45,540 - 51,225 ( 960 ) 144,877 - - Net cumulative effect from adoption of ASC 326 (a) - - - - ( 7,943 ) - ( 7,943 ) - - Net income - - - - 25,997 - 25,997 - - Employee pension plan adjustments - - - - - 924 924 - - Stock-based compensation expense Restricted stock 713,299 - 5,894 - - - 5,894 - - Share repurchase ( 165,064 ) ( 891 ) - - - - ( 891 ) - - Net share settlement for equity-based compensation ( 337,050 ) - ( 2,054 ) - - - ( 2,054 ) - - BALANCE - December 31, 2023 31,359,110 48,181 49,380 - 69,279 ( 36 ) 166,804 - - Net income - - - - 9,891 - 9,891 Employee pension plan adjustments - - - - - 310 310 Stock-based compensation expense Restricted stock 434,256 - 4,629 - - - 4,629 Share repurchase - - - - - - - Net share settlement for equity-based compensation ( 330,726 ) - ( 3,370 ) - - - ( 3,370 ) BALANCE - December 31, 2024 31,462,640 $ 48,181 $ 50,639 $ - $ 79,170 $ 274 $ 178,264 - $ - (a) Net cumulative adjustment to equity based on the adoption of Accounting Standards Update No. 2016-13 Financial Instruments - Credit Losses. See Note 5 to the Consolidated Financial Statements. See Notes to Consolidated Financial Statements. F-9 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,891 $ 25,997 $ 12,634 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,334 6,596 6,362 Amortization of deferred finance fees 133 - - Finance lease amortization 1,622 175 - Deferred income taxes ( 2,242 ) 1,632 1,294 Loss on sale of assets 2,119 ( 30,918 ) ( 177 ) Gain on insurance proceeds ( 2,794 ) - - Proceeds from insurance 2,794 - - Impairment of goodwill and long-lived assets - 4,220 1,049 Fixed asset donation ( 277 ) ( 239 ) ( 408 ) Provision for credit losses 56,578 41,637 34,915 Stock-based compensation expense 4,629 5,894 3,111 (Increase) decrease in assets: Accounts receivable ( 65,984 ) ( 45,757 ) ( 48,637 ) Inventories ( 184 ) ( 330 ) 103 Prepaid expenses and current assets ( 687 ) 900 ( 11 ) Other assets 110 1,041 450 Increase (decrease) in liabilities: Accounts payable 11,583 5,039 ( 2,033 ) Accrued expenses ( 1,667 ) 5,027 ( 7,016 ) Unearned tuition 3,770 2,752 ( 1,251 ) Income taxes payable ( 1,760 ) 777 1,038 Other liabilities 338 1,115 ( 541 ) Total adjustments 19,415 ( 439 ) ( 11,752 ) Net cash provided by operating activities 29,306 25,558 882 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 56,866 ) ( 40,699 ) ( 8,986 ) Proceeds from sale of property and equipment 9,895 33,310 2,390 Proceeds from sale of short-term investments - 39,102 - Purchase of short-term investments - ( 24,344 ) ( 14,758 ) Net cash (used in) provded by investing activities ( 46,971 ) 7,369 ( 21,354 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of deferred finance fees ( 456 ) - - Net share settlement for equity-based compensation ( 3,370 ) ( 2,054 ) ( 1,992 ) Dividend payment for preferred stock - - ( 1,111 ) Finance lease principal ( 267 ) - - Tenant allowance finance leases 762 - - Share repurchase - ( 891 ) ( 9,445 ) Net cash used in financing activities ( 3,331 ) ( 2,945 ) ( 12,548 ) NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 20,996 ) 29,982 ( 33,020 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of year 80,269 50,287 83,307 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of year $ 59,273 $ 80,269 $ 50,287 See Notes to Consolidated Financial Statements. F-10 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Continued) Year Ended December 31, 2024 2023 2022 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 2,354 $ 110 $ 171 Income taxes $ 8,836 $ 7,201 $ 1,471 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Liabilities accrued for or noncash purchases of property and equipment $ 8,181 $ 3,522 $ 1,300 See Notes to Consolidated Financial Statements. F-11 Index LINCOLN EDUCATIONAL SERVICES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2024, 2023, AND 2022 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2024 (In thousands, except share and per share amounts, schools, campuses and unless otherwise stated) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activities — Lincoln Educational Services Corporation and its subsidiaries (collectively, the “Company”, “we”, “our” and “us”, as applicable) provide diversified career-oriented postsecondary education to recent high school graduates and working adults. The Company, which currently operates 21 campuses in 12 states, has entered into leases for two new campuses: one in Houston, Texas, with programs expected to begin in the second half of 2025, and one in Hicksville, New York, with programs expected to begin by the end of 2026 . Lincoln Educational Services Corporation offers programs in skilled trades (which include Heating Ventilation 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 assistant, among other programs) and hospitality services and information technology (which include culinary and aesthetics and information technology programs). The schools operate under the brands Lincoln Technical Institute, Lincoln College of Technology and Nashville Auto Diesel College . Most of the Company’s 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. The Company was incorporated in New Jersey in 2003 as the successor-in-interest to various acquired schools including Lincoln Technical Institute, Inc. which opened its first campus in Newark, New Jersey in 1946. The Company manages its business, evaluates performance and allocates resources based on two reportable business segments, Campus Operations and Transitional: Campus Operations - The Campus Operations segment includes campuses that are continuing in operation and contribute to the Company’s core operations and performance. All of the campuses continuing in operation are classified in this segment. The majority of the campuses offer programs across various areas of study. Transitional – The Transitional segment refers to campuses that are marked for closure and are currently being taught-out, in addition to campuses that are held-for-sale or sold. As of December 31, 2024, the net assets for the Summerlin, Las Vegas campus were classified as held for sale, with operating results classified within the Transitional segment. The sale of the campus was consummated effective January 1, 2025. In addition, the Company closed the Somerville, Massachusetts campus in the prior year. It was fully taught-out as of December 31, 2023. This campus is classified in the Transitional segment in the prior year’s statement of operations. Liquidity — As of December 31, 2024, the Company had $ 59.3 million in cash and cash equivalents compared to $ 80.3 million in cash and cash equivalents and restricted cash in the prior year. The Company believes that its likely sources of cash should be sufficient to fund operations for the next 12 months and thereafter for the foreseeable future . Principles of Consolidation —The accompanying Consolidated Financial Statements include the accounts of Lincoln Educational Services Corporation and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Cash and Cash Equivalents —Cash and cash equivalents include all cash balances and highly-liquid short-term investments, which contain original maturities within three months of purchase. Pursuant to the DOE’s cash management requirements, the Company retains funds from financial aid programs under Title IV of the Higher Education Act of 1965 in segregated cash management accounts. The segregated accounts do not require a restriction on use of the cash and, as such, these amounts are classified as cash and cash equivalents on the consolidated balance sheets. Restricted Cash – Restricted cash consists of cash currently utilized as collateral for the Company’s letters of credit. Short-term Investments – Short-term investments not considered cash and cash equivalents are investments with maturity dates of three months to 12 months from the date of purchase. Accounts Receivable —The Company reports accounts receivable at net realizable value, which is equal to the gross receivable less an estimated allowance for uncollectible accounts. Noncurrent accounts receivable represents amounts due from graduates in excess of 12 months from the balance sheet date. F-12 Index Allowance for Credit Losses— On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . As a result of the adoption, the Company has revised the way in which it calculates reserves on outstanding student accounts receivable balances. Details considered by management in the estimate include the following: We extend credit to a portion of the students who are enrolled at our academic institutions for tuition and certain other educational costs. Based upon past experience and judgment, we establish an allowance for credit losses with respect to student receivables which we estimate will ultimately not be collectible. Our standard student receivable allowance is based on an estimate of lifetime expected credit losses for student receivables that considers vintages of receivables to determine a loss rate. Our estimation methodology considers a number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, changes in the current economic, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trending analysis and comparing estimated and actual performance. The Company evaluates its provision for credit losses on at least a quarterly basis, considering factors such as micro and macro-economic conditions, the current political climate, and other industry factors. Management makes a series of assumptions to determine what is believed to be the appropriate level of allowance for credit losses. Management determines a reasonable and supportable forecast based on the expectation of future conditions over a supportable forecast period as described above, as well as qualitative adjustments based on current and future conditions that may not be fully captured in the historical modeling factors described above. All of these estimates are susceptible to significant change. We monitor our collections and write-off experience to assess whether or not adjustments to our allowance percentage estimates are necessary. Changes in trends in any of the factors that we believe impact the collection of our student receivables, as noted above, or modifications to our collection practices, and other related policies may impact our estimate of our allowance for credit losses and our results from operations. Because a substantial portion of our revenue is derived from Title IV Programs, any legislative or regulatory action that significantly reduces the funding available under Title IV Programs, or the ability of our students or institutions to participate in Title IV Programs, would likely have a material impact on the realizability of our receivables. Inventories —Inventories consist mainly of textbooks, computers, tools and supplies. Inventories are valued at the lower of cost or market on a first-in, first-out basis. Property, Equipment and Facilities — Depreciation and Amortization —Property, equipment and facilities are stated at cost. Major renewals and improvements are capitalized, while repairs and maintenance are expensed when incurred. Upon the retirement, sale or other disposition of assets, costs and related accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in operating income. For financial statement purposes, depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets, and amortization of leasehold improvements is computed over the lesser of the term of the lease or its estimated useful life. Asset Retirement Obligation — Lincoln recognizes and records an asset retirement obligation (“ARO”) if there is a clear obligation at the termination of a lease, and the potential obligation is measurable in both potential cost and time. If both conditions are met Lincoln will record the ARO at the Present Value (“PV”) of the future obligation and incur accretion expense over the course of the term, using the lease end date as the termination date. Should the components or assumptions used to assess the ARO materially change, the ARO is re-measured, and adjustments recorded. Advertising Costs —Costs related to advertising are expensed as incurred and are approximately $ 43.3 million, $ 38.2 million, and $ 35.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. These amounts are included in selling, general and administrative expenses in the Consolidated Statements of Operations. Goodwill — Goodwill represents the excess of purchase price over the fair value of tangible net assets and identifiable intangible assets of the businesses acquired. Lincoln tests goodwill for impairment annually, in the fourth quarter of each year, unless there are events or changes in circumstances that indicate an impairment may have occurred. Impairment may result from deterioration in performance, adverse market conditions, adverse changes in laws or regulations, the restriction of activities associated with the acquired business, and/or a variety of other circumstances. If we determine that impairment has occurred, we record a write-down of the carrying value and charge the impairment as an operating expense in the period the determination is made. F-13 Index Impairment of Long-Lived Assets — The Company reviews the carrying value of its long-lived assets and identifiable intangibles for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. For other long-lived assets, including right-of-use (“ROU”) lease assets, the Company evaluates assets for recoverability when there is an indication of potential impairment. Factors the Company considers important, which could trigger an impairment review, include significant changes in the manner of the use of the asset, significant changes in historical trends in operating performance, significant changes in projected operating performance, and significant negative economic trends. If the undiscounted cash flows from a group of assets being evaluated is less than the carrying value of that group of assets, the fair value of the asset group is determined and the carrying value of the asset group is written down to fair value. When we perform the quantitative impairment test for long-lived assets, we examine estimated future cash flows using Level 3 inputs. These cash flows are evaluated by using weighted probability techniques as well as comparisons of past performance against projections. Assets may also be evaluated by identifying independent market values. If the Company determines that an asset’s carrying value is impaired, it will record a write-down of the carrying value of the asset and charge the impairment as an operating expense in the period in which the determination is made . On December 31, 2024, as a result of impairment testing, it was determined that there was no impairment of long-lived assets. On June 8, 2023, the Company consummated the sale of its Nashville, Tennessee property. See “Note 8, Real Estate Transactions.” The result of the sale created a change in the trajectory of the fair value of the Nashville, Tennessee operations, and as such, the Company recorded a pre-tax non-cash impairment charge of $ 0.4 million relating to long-lived assets. On December 31, 2022, as a result of impairment testing, it was determined that there was a long-lived asset impairment of $ 1.0 million. The impairment was the result of an assessment of the current market value, as compared to the carrying value of the assets. Concentration of Credit Risk —Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments. The Company places its cash and cash equivalents with high credit quality financial institutions. The Company’s cash balances with financial institutions typically exceed the Federal Deposit Insurance Corporation (“FDIC”) limit of $ 0.25 million. The Company’s cash balances on deposit as of December 31, 2024, exceeded the balance insured by the FDIC by approximately $ 58.7 million. The Company has not experienced any losses to date on its invested cash. The Company extends credit for tuition and fees to many of its students. The credit risk with respect to these accounts receivable is mitigated by the students’ participation in federally funded financial aid programs unless students withdraw prior to the receipt of federal funds for those students. In addition, the remaining tuition receivables are primarily comprised of smaller individual amounts due from students. With respect to student receivables, the Company had no significant concentrations of credit risk as of each of December 31, 2024 and 2023, respectively. Use of Estimates in the Preparation of Financial Statements —The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the period. On an ongoing basis, the Company evaluates the estimates and assumptions, including those used to determine the incremental borrowing rate to calculate lease liabilities and ROU assets, lease term to calculate lease cost, revenue recognition, bad debts, impairments, fixed assets, income taxes, benefit plans, stock-based compensation, and certain accruals. Actual results could differ from those estimates. Income Taxes — The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes (“ASC 740”). This statement requires an asset and a liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered. In accordance with ASC 740, the Company assesses our deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable. A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. In accordance with ASC 740, our assessment considers whether there has been sufficient income in recent years and whether sufficient income is expected in future years in order to utilize the deferred tax asset. In evaluating the realizability of deferred income tax assets, the Company considers, among other things, historical levels of income, expected future income, the expected timing of the reversals of existing temporary reporting differences, and the expected impact of tax planning strategies that may be implemented to prevent the potential loss of future income tax benefits. Significant judgment is required in determining the future tax consequences of events that have been recognized in our Consolidated Financial Statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on the Company’s consolidated financial position or results of operations. Changes in, among other things, income tax legislation, statutory income tax rates or future income levels could materially impact the Company’s valuation of income tax assets and liabilities and could cause our income tax provision to vary significantly among financial reporting periods. F-14 Index On August 16, 2022, the Inflation Reduction Act was enacted and signed into law. The Inflation Reduction Act is a budget reconciliation package that includes significant changes relating to tax, climate change, energy and health care. The income tax provision of the act includes, among other items, a corporate alternative minimum tax of 15.0%, an excise tax of 1.0% on corporate stock buybacks, energy-related tax credits, and additional IRS funding. The tax provisions of the Inflation Reduction Act have not had a material impact on the Company’s Consolidated Financial Statements. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the fiscal years ended December 31, 2024, 2023, and 2022, we did no t record any interest and penalties expense associated with uncertain tax positions, as we do no t have any uncertain tax positions. Start-up Costs — Costs related to the start of new campuses are expensed as incurred. New Accounting Pronouncements – In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Topic 220); Disaggregation of Income Statement Expenses, which requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application for periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact this ASU will have on our financial statement disclosures. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. As required in this ASU, the Company has adopted the new disclosure requirements retrospectively within Note 16 to the Consolidated Financial Statements. In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amendments in this ASU require that public business entities on an annual basis 1) disclose specific categories in the rate reconciliation, and 2) provide additional information for reconciling items that meet a quantitative threshold. The amendments require disclosure about income taxes paid by federal, state and foreign taxes, and by individual jurisdictions in which income taxes paid is equal or greater than 5 percent of total income taxes paid. The amendment also requires entities to disclose income or loss from continuing operations before income tax expense disaggregated between domestic and foreign and income tax expense or benefit from continuing operations disaggregated by federal, state and foreign. For all public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024; early adoption is permitted. This ASU has not had a material impact to the Consolidated Financial Statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequently issued additional guidance that modified ASU 2016-13. The ASU and the subsequent modifications were identified as Accounting Standard Codification (“ASC”) Topic 326. The standard requires an entity to change its accounting approach in determining impairment of certain financial instruments, including trade receivables, from an “incurred loss” methodology to a “current expected credit loss” methodology (the “CECL methodology”). The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses on financial assets measured at amortized cost at the time the financial asset is originated or acquired. The allowance is adjusted each period for changes in expected lifetime credit losses. The CECL methodology represents a significant change from prior U.S. GAAP, which generally required that a loss be incurred before it was recognized. Further, the FASB issued ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-11 and ASU No. 2022-02 to provide additional guidance on the credit losses standard. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) . This ASU deferred the effective date of ASU 2016-13 for public companies that are considered smaller reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Additionally, in February and March 2020, the FASB issued ASU 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) . ASU 2020-02 added an SEC paragraph pursuant to the issuance of SEC Staff Accounting Bulletin No. 119 on loan losses to FASB Codification Topic 326 and also updated the SEC section of the codification for the change in the effective date of Topic 842. As of the January 1, 2023 date of adoption, based on forecasts of macroeconomic conditions and exposures at that time, the aggregate impact to the Company resulted in an opening balance sheet adjustment increasing the allowance for credit losses related to the Company’s accounts receivables of approximately $ 10.8 million, a decrease in retained earnings of $ 7.9 million, after-tax and a deferred tax asset increase of $ 2.9 million. F-15 Index 2. FINANCIAL AID AND REGULATORY COMPLIANCE Financial Aid The Company’s schools and students participate in a variety of government-sponsored financial aid programs that assist students in paying for the cost of their education. The largest source of such support is the federal programs of student financial assistance under Title IV of the Higher Education Act of 1965, as amended, commonly referred to as the Title IV Programs, which are administered by the DOE. During the fiscal years ended December 31, 2024, 2023, and 2022, approximately 82 %, 81 %, and 74 %, respectively, of net revenues on a cash basis were indirectly derived from funds distributed under Title IV Programs. For the fiscal years ended December 31, 2024, 2023, and 2022, the Company calculated that no individual DOE reporting entity received more than 90 % of its revenue, determined on a cash basis pursuant to DOE regulations, from the Title IV Program funds. The Company’s calculations may be subject to review by the DOE. Under DOE regulations, a proprietary institution that derives more than 90% of its total revenue from the Title IV Programs for two consecutive fiscal years becomes immediately ineligible to participate in the Title IV Programs and may not reapply for eligibility until the end of two fiscal years. An institution with revenues exceeding 90% of its total revenue for a single fiscal year, will be placed in provisional certification status and may be subject to other enforcement measures. If one of the Company’s institutions violated the 90/10 Rule and became ineligible to participate in Title IV Programs but continued to disburse Title IV Program funds, the DOE would require the institution to repay all Title IV Program funds received by the institution after the effective date of the loss of eligibility. Regulatory Compliance All institutions participating in Title IV Programs must satisfy specific standards of financial responsibility. The DOE evaluates institutions for compliance with these standards each year, based on the institution’s annual audited financial statements, as well as following a change in ownership resulting in a change of control of the institution. The most significant financial responsibility measurement is the institution ’ s composite score, which is calculated by the DOE based on three ratios: • the equity ratio, which measures the institution ’ s capital resources, ability to borrow and financial viability; • the primary reserve ratio, which measures the institution ’ s ability to support current operations from expendable resources; and • the net income ratio, which measures the institution ’ s ability to operate at a profit. The DOE assigns a strength factor to the results of each of these ratios on a scale from negative 1.0 to positive 3.0 , with negative 1.0 reflecting financial weakness and positive 3.0 reflecting financial strength. The DOE then assigns a weighting percentage to each ratio and adds the weighted scores for the three ratios together to produce a composite score for the institution. The composite score must be at least 1.5 for the institution to be deemed financially responsible without the need for further oversight. If an institution’s composite score is below 1.5 , but is at least 1.0 , it is in a category denominated by the DOE as “the zone.” Under the DOE regulations, institutions that are in the zone typically may be permitted by the DOE to continue to participate in the Title IV Programs by choosing one of two alternatives: 1) the “Zone Alternative” under which an institution is required to make disbursements to students under the Heightened Cash Monitoring 1 (“HCM1”) payment method, or a different payment method other than the advance payment method, and to notify the DOE within 10 days after the occurrence of certain oversight and financial events or 2) submit a letter of credit to the DOE equal to 50 percent of the Title IV Program funds received by the institution during its most recent fiscal year. The DOE permits an institution to participate under the “Zone Alternative” for a period of up to three consecutive fiscal years. Under the HCM1 payment method, the institution is required to make Title IV Program disbursements to eligible students and parents before it requests or receives funds for the amount of those disbursements from the DOE. As long as the student accounts are credited before the funding requests are initiated, an institution is permitted to draw down funds through the DOE’s electronic system for grants management and payments for the amount of disbursements made to eligible students. Unlike the Heightened Cash Monitoring 2 (“HCM2”) and the reimbursement payment methods, the HCM1 payment method typically does not require schools to submit documentation to the DOE and wait for DOE approval before drawing down Title IV Program funds. Effective July 1, 2016, a school under HCM1, HCM2 or reimbursement payment methods must also pay any credit balances due to a student before drawing down funds for the amount of those disbursements from the DOE, even if the student or parent provides written authorization for the school to hold the credit balance. If an institution’s composite score is below 1.0 , the institution is considered by the DOE to lack financial responsibility. If the DOE determines that an institution does not satisfy the DOE’s financial responsibility standards, depending on its composite score and other factors, that institution may establish its eligibility to participate in the Title IV Programs on an alternative basis by, among other things: F-16 Index • posting a letter of credit in an amount equal to at least 50 % of the total Title IV Program funds received by the institution during the institution ’ s most recently completed fiscal year; or • posting a letter of credit in an amount equal to at least 10 % of the Title IV Program funds received by the institution during its most recently completed fiscal year accepting provisional certification status; complying with additional DOE monitoring requirements and agreeing to receive Title IV Program funds under an arrangement other than the DOE’s standard advance funding arrangement. For the 2024, 2023, and 2022 fiscal years, we calculated our composite score to be 2.5 , 3.0 , and 2.9 , respectively. These scores are subject to determination by the DOE based on its review of our consolidated audited financial statements for the 2023 and 2022 fiscal years, but we believe it is likely that the DOE will determine that our institutions comply with the composite score requirement. 3. NET INCOME PER COMMON SHARE Basic and diluted earnings per share (“EPS”) are determined in accordance with ASC Topic 260, “ Earnings per Share ”, which specifies the computation, presentation and disclosure requirements for EPS. Basic EPS excludes all dilutive Common Stock equivalents. It is based upon the weighted average number of common shares outstanding during the period. Diluted EPS, as calculated using the treasury stock method, reflects the potential dilution that would occur if our dilutive outstanding stock options and stock awards were issued. During the year ended December 31, 2022, the Company presented its basic and diluted income per common share using the two-class method, which requires all outstanding Series A Preferred Stock (“Series A Preferred Stock”) and unvested shares of Restricted Stock that contain rights to non-forfeitable dividends and therefore participate in undistributed income with common shareholders to be included in computing income per common share. Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of Common Stock and participating security. The remaining undistributed income is then allocated to Common Stock and participating securities based on their respective rights to receive dividends. Series A Preferred Stock and shares of unvested Restricted Stock contain non-forfeitable rights to dividends on an if-converted basis and on the same basis as shares of the Company’s Common Stock, respectively, and are considered participating securities. The Series A Preferred Stock and unvested Restricted Stock are not included in the computation of basic income per common share in periods in which we have a net loss, as the Series A Preferred Stock and unvested Restricted Stock are not contractually obligated to share in our net losses. However, the cumulative dividends on Series A Preferred Stock for the period decreases the income or increases the net loss allocated to common shareholders unless the dividend is paid in the period. Basic income per common share has been computed by dividing net income allocated to common shareholders by the weighted-average number of common shares outstanding. On November 30, 2022, the Company exercised in full its right of mandatory conversion of the Company’s Series A Preferred Stock. In connection with the conversion, each share of Series A Preferred Stock was cancelled and converted into 423.729 shares of the Company’s Common Stock, no par value per share (the “Common Stock”). No shares of Series A Preferred Stock remain outstanding and all rights of the holders to receive future dividends have been terminated. As a result of the conversion, the aggregate 12,700 shares of Series A Preferred Stock outstanding were converted into 5,381,356 shares of Common Stock. As of December 31, 2024, the Company still maintains Restricted Stock, but these shares do not participate in the disbursement of dividends. F-17 Index The following is a reconciliation of the numerator and denominator of the net income per share computations for the years ended December 31, 2024, 2023, and 2022: Year Ended December 31, (in thousands, except share data) 2024 2023 2022 Numerator: Net income $ 9,891 $ 25,997 $ 12,634 Less: preferred stock dividend - - ( 1,111 ) Less: allocation to preferred stockholders - - ( 1,753 ) Less: allocation to restricted stockholders - - ( 559 ) Net income allocated to common stockholders $ 9,891 $ 25,997 $ 9,211 Basic net income per share: Denominator: Weighted average common shares outstanding 30,580,381 30,105,194 25,879,483 Basic net income per share $ 0.32 $ 0.86 $ 0.36 Diluted net income per share: Denominator: Weighted average number of: Common shares outstanding 30,890,790 30,540,628 25,879,483 Dilutive shares outstanding 30,890,790 30,540,628 25,879,483 Diluted net income per share $ 0.32 $ 0.85 $ 0.36 The following table summarizes the potential weighted average shares of Common Stock that were excluded from the determination of our diluted shares outstanding as they were anti-dilutive: Year Ended December 31, 2024 2023 2022 Unvested restricted stock - - 516,233 - - 516,233 4. REVENUE RECOGNITION Substantially all of our revenues are considered to be revenues from contracts with students. We determine standalone selling price based on the price at which the distinct services or goods are sold separately. The related accounts receivable balances are recorded in our balance sheets as student accounts receivable. We do not have significant revenue recognized from performance obligations that were satisfied in prior periods, and we do not have any transaction price allocated to unsatisfied performance obligations other than in our unearned tuition. We record revenue for students who withdraw from our schools only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recog nized will not occur. In addition, to reduce the amount of outstanding accounts receivable balances due from our students, the Company employs a continuous collection effort. Unearned tuition represents contract liabilities primarily related to our tuition revenue. We have assessed the costs incurred to obtain a contract with a student and determined them to be immaterial. Unearned tuition in the amount of $ 30.6 million and $ 26.9 million is recorded in the current liabilities section of the accompanying Consolidated Balance Sheets as of December 31, 2024 and 2023, respectively. The change in this contract liability balance during the fiscal year ended December 31, 2024 is the result of payments received in advance of satisfying performance obligations, offset by revenue recognized during that period. Revenue recognized for the fiscal year ended December 31, 2024 that was included in the contract liability balance at the beginning of the year was $ 26.0 million. F-18 Index The following table depicts the timing of revenue recognition by segment: Year ended December 31, 2024 Campus Operations Transitional Consolidated Timing of Revenue Recognition Services transferred at a point in time $ 26,877 $ 1,180 $ 28,057 Services transferred over time 406,089 5,918 412,007 Total revenues $ 432,966 $ 7,098 $ 440,064 Year ended December 31, 2023 Campus Operations Transitional Consolidated Timing of Revenue Recognition Services transferred at a point in time $ 21,403 $ 1,534 $ 22,937 Services transferred over time 345,830 9,303 355,133 Total revenues $ 367,233 $ 10,837 $ 378,070 Year ended December 31, 2022 Campus Operations Transitional Consolidated Timing of Revenue Recognition Services transferred at a point in time $ 19,591 $ 2,131 $ 21,722 Services transferred over time 311,305 15,260 326,565 Total revenues $ 330,896 $ 17,391 $ 348,287 5. STUDENT RECEIVABLES Student receivables represent funds owed to us in exchange for the educational services provided to a student. Student receivables are reflected net of an allowance for credit losses at the end of the reporting period. Student receivables, net, are reflected on our Consolidated Balance Sheets as components of both current and non-current assets. Our students pay for their costs through a variety of funding sources, including federal loan and grant programs, institutional payment plans, Veterans Administration and other military funding and grants, private and institutional scholarships and cash payments. Cash receipts from government-related sources are typically received during the current academic term. Students who have not applied for any type of financial aid generally set up a payment plan with the institution and make payments on a monthly basis as per the terms of the payment plan. A student receivable balance is written off when deemed uncollectable, which is typically once a student is out of school and there has been no payment activity on the account for 150 days . If, however, the student does remit a payment during this time period, the 150-day policy for write-off starts again until either (1) the student continues making payments, or (2) the student does not make any additional payments after which the student receivable balance is written off after 150 days . In an effort to reduce the risk for writing off a student’s account, the Company employs a continuous collection effort to minimize exposure from outstanding receivables. Students enrolled in the Company’s programs are provided with a variety of funding resources, including financial aid, grants, scholarships and private loans. After exhausting all fund options, if the student is still in need of additional financing, the Company may offer an institutional loan as a lender of last resort. Our standard student receivable allowance is based on an estimate of lifetime expected credit losses on student receivables that considers vintages of receivables to determine a loss rate. In considering lifetime credit losses, if the expected life goes beyond the Company’s reasonable ability to forecast, the Company then reverts back to historical loss experience as an indicator of collections. In determining the expected credit losses for the period, student receivables were disaggregated and pooled into two different categories to refine the calculation. Other information considered included external factors outside the Company’s control. Given that collection history during the COVID-19 pandemic was not considered to be a reliable indicator of a student’s repayment history, the Company adjusted the historical loss calculation by normalizing the financial data relating to that time period. Our estimation methodology further considered a number of quantitative and qualitative factors that, based on our collection experience, we believe have an impact on our repayment risk and ability to collect student receivables. Changes in the trends in any of these factors may impact our estimate of the allowance for credit losses. These factors include, but are not limited to: internal repayment history, student status, changes in the current economic condition, legislative or regulatory environments, internal cash collection forecasts and the ability to complete the federal financial aid process with the student. These factors are monitored and assessed on a regular basis. Overall, our allowance estimation process for student receivables is validated by trending analysis and comparing estimated and actual performance. F-19 Index Student Receivables The Company has student receivables that are due greater than 12 months from the date of our Consolidated Balance Sheets. As of December 31, 2024, and December 31, 2023, the amount of non-current student receivables under payment plans that is longer than 12 months in duration, net of allowance for credit losses, was $ 19.6 million and $ 17.5 million, respectively. The following table presents the amortized cost basis of student receivables as of December 31, 2024 and 2023 by year of origination. Year Ended Year Ended December 31, 2024 December 31, 2023 Student Student Year Receivables (1) Write-Off’s (2) Year Receivables (1) Write-Off’s (2) 2024 $ 96,459 $ 12,970 2023 $ 77,113 $ 9,540 2023 14,231 26,345 2022 12,548 19,731 2022 6,815 3,216 2021 6,799 3,194 2021 3,999 1,311 2020 3,036 727 2020 1,597 540 2019 2,019 535 Thereafter 1,401 435 Thereafter 1,031 310 Total $ 124,502 $ 44,817 Total $ 102,546 $ 34,037 (1) Student receivables are presented on a gross basis from the individual students. The total receivable amount above excludes federal subsidies reflected on the students’ accounts but not yet received from the government. Also, it excludes all receivables from industry relationships, which are otherwise included under accounts receivable in our Consolidated Balance Sheets. (2) Write-off amounts are based on the students school departure year. The Company does not utilize or maintain data pertaining to student credit information. Allowance for Credit Losses We define student receivables as a portfolio segment under ASC Topic 326 . Changes in our current and non-current allowance for credit losses related to our student receivable portfolio are calculated in accordance with the guidance effective January 1, 2023 under CECL for the year ended December 31, 2024 and 2023, respectively. Year Ended December 31, 2024 2023 Balance, beginning of period $ 53,811 $ 35,370 Cumulative effect of ASC Topic 326 - 10,841 Adjusted beginning of period balance 53,811 46,211 Provision for credit losses 56,578 41,637 Write-off’s ( 44,817 ) ( 34,037 ) Balance, at end of period $ 65,572 $ 53,811 Fair Value Measurements The carrying amount reported in our Consolidated Balance Sheets for the current portion of student receivables approximates fair value because of the nature of these financial instruments as they generally have short maturity periods. It is not practicable to estimate the fair value of the non-current portion of student receivables, since observable market data is not readily available, and no reasonable estimation methodology exists. 6. LEASES The Company determines if an arrangement is a lease at its inception. The Company considers any contract where there is an identified asset as to which the Company has the right to control its use in determining whether the contract contains a lease. An operating lease ROU asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are to be recognized at the commencement date based on the present value of lease payments over the lease term. As all of the Company’s operating leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. We estimate the incremental borrowing rate based on a yield curve analysis, utilizing the interest rate derived from the fair value analysis of our credit facility and adjusting it for factors that appropriately reflect the profile of secured borrowing over the expected term of the lease. The operating lease ROU assets include any lease payments made prior to the rent commencement date and exclude lease incentives. Our leases have remaining lease terms of one year to 21 years . Lease terms may include options to extend the lease term used in determining the lease obligation when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments are recognized on a straight-line basis over the lease term for operating leases. F-20 Index On December 12, 2024, the Company entered into a lease for approximately 65,000 square feet of space to serve as the Company’s new campus in Hicksville, New York. The lease term is currently planned to commence on or about May 1, 2025, with an initial lease term of 15 years and 9 months . The lease contains a renewal option allowing for either a 10-year renewal or two five-year renewals. The Company signed the lease commitment on January 1, 2025. However, the Company will not take possession until the lease commencement date. On October 31, 2023, the Company entered into a lease for approximately 100,000 square feet of space to serve as the Company’s new campus in Houston, Texas. The lease term commenced on January 2, 2024, with an initial lease term of 21 years and 6 months . The lease contains three five-year renewal options. On October 18, 2023, the Company entered into a lease for approximately 120,000 square feet of space. to serve as the Company’s new Nashville, Tennessee campus. The lease term commenced on November 1, 2023, with an initial lease term of 15 years . The lease contains two five-year renewal options. See Note 8, “Real Estate Transactions”. On September 28, 2023, the Company purchased a 90,000 square foot property located at 311 Veterans Highway, Levittown, Pennsylvania for approximately $ 10.2 million. On January 30, 2024, the Company entered into a sale-leaseback transaction for this property. See Note 8, “Real Estate Transactions”. As of December 31, 2023, this property was classified as held-for-sale on the Consolidated Balance Sheets. On November 3, 2022, the Board of Directors approved a plan to close the Somerville, Massachusetts campus, which as of December 31, 2023 was fully taught-out. On June 30, 2022, the Company executed a lease for approximately 55,000 square feet of space to serve as the Company’s new campus in East Point, Georgia. The lease term commenced in August 2022, with total payments due on an undiscounted basis of $ 12.2 million over the 12-year initial term. The lease contains two five-year renewal options that may be exercised by the Company at the end of the initial lease term. The Company had no involvement in the construction or design of the facilities on the property and was not deemed to be in control of the asset prior to the lease commencement date. The following table presents components of lease cost and classification on the Consolidated Statement of Operations: Year Ended December 31, in thousands Consolidated Statement of Operations Classification 2024 2023 2022 Operating Lease Cost Selling, general and administrative $ 19,665 $ 19,235 $ 18,943 Finance lease cost Amortization of leased assets Depreciation and amortization 1,622 175 - Interest on lease Liabilities Interest expense 2,155 224 - Variable lease cost Selling, general and administrative 423 475 55 $ 23,865 $ 20,109 $ 18,998 The net change in ROU asset and operating lease liability is included in the net change in other assets in the Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2024, 2023, and 2022. The net change in ROU asset and finance lease liability is split between principal payments, interest expense and amortization expense. Principal payments are classified in the financing section, interest expense is included in net income and amortization expense is broken out separately in the operating section of the Consolidated Statements of Cash Flows. F-21 Index Supplemental cash flow information and non-cash activity related to our leases are as follows: December 31, 2024 2023 2022 Cash flow information: Cash paid for amounts included in the measurement of lease liabilities Operating Cash Flows - operating leases $ 17,989 $ 16,103 $ 18,443 Operating Cash Flows - finance leases $ 2,155 $ - $ - Financing Cash Flows - finance leases $ 495 $ - $ - Non-cash activity: Lease liabilities arising from obtaining right-of-use assets Operating leases $ 59,061 $ 10,477 $ 13,820 Finance leases $ 12,570 $ 15,971 $ - During the fiscal year ended December 31, 2024, the Company entered into one new operating lease, one new finance lease and eleven lease modifications. The Company obtained the operating and finance ROU asset in exchange for an operating and finance lease liability of $ 15.7 million and $ 12.6 million, respectively. In addition, the eleven lease modifications resulted in a noncash re-measurement of the related ROU asset and operating lease liability of $ 43.3 million. Weighted-average remaining lease term and discount rate for our leases are as follows: Year Ended December 31, 2024 2023 Weighted-average remaining lease term Operating leases 12.81 years 11.16 years Finance leases 16.40 years 15.09 years Weighted-average discount rate Operating leases 6.60 % 6.89 % Finance leases 7.69 % 8.39 % Maturities of lease liabilities by fiscal year for our leases as of December 31, 2024 are as follows: As of December 31, 2024 Operating Leases Finance Leases Year ending December 31, 2025 $ 18,404 $ 506 2026 18,976 2,817 2027 18,188 2,918 2028 18,948 3,023 2029 17,237 3,132 Thereafter 131,509 43,417 Total lease payments 223,262 55,813 Less: imputed interest ( 74,962 ) ( 26,552 ) Present value of lease liabilities $ 148,300 $ 29,261 F-22 Index 7. GOODWILL Changes in the carrying amount of goodwill during the fiscal years ended December 31, 2024 and 2023 are as follows: Gross Goodwill Balance Accumulated Impairment Losses Net Goodwill Balance Balance as of January 1, 2023 $ 117,176 $ ( 102,640 ) $ 14,536 Adjustments - ( 3,794 ) ( 3,794 ) Balance as of December 31, 2023 117,176 ( 106,434 ) 10,742 Adjustments - - - Balance as of December 31, 2024 $ 117,176 $ ( 106,434 ) $ 10,742 When we perform our annual goodwill impairment assessment we have the option to perform a qualitative assessment based on a number of factors impacting our reporting units (step 0). When a qualitative assessment is performed, a number of factors are evaluated to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Our qualitative assessment is subjective. It includes a review of macroeconomic and industry factors, review of financial and non-financial performance measures, including projected student starts and assessment of adverse events that may negatively impact a reporting unit’s carrying value. Adverse events would include, but are not limited to, difficulty in accessing capital, a greater competitive environment, decline in market-dependent multiples or metrics, regulatory or political developments, change in key personnel, strategy, or customers, or litigation. If we conclude based on our qualitative review that it is more likely than not that the fair value of the reporting unit is less than the carrying value, we proceed with a quantitative impairment test. When we perform our quantitative impairment test we believe the most critical assumptions and estimates in determining the estimated fair value of our reporting units include, but are not limited to, future tuition revenues, operating costs, working capital changes, capital expenditures and a discount rate. The assumptions used in determining our expected future cash flows consider various factors such as historical operating trends particularly in student enrollment and pricing and long-term operating strategies and initiatives. If we determine that quantitative tests are necessary, we determine the fair value of each reporting unit using an equal weighting of the discounted cash flow model and the market approach, or if required, we will evaluate other asset value-based approaches. Our judgment is necessary in forecasting future cash flows and operating results, critical assumptions include growth rates, changes in operating costs, capital expenditures, changes in weighted average costs of capital, and the fair value of an asset based on the price that would be received in a current transaction to sell the asset. Additionally, we obtain independent market metrics for the industry and our peers to assist in the development of these key assumptions. This process is consistent with our internal forecasts and operating plans. For the years ended December 31, 2024, 2023, and 2022, there were impairments relating to goodwill of zero , $ 3.8 million, and zero , respectively. On June 8, 2023, the Company consummated the sale of its Nashville, Tennessee property. See Note 8, “Real Estate Transactions.” The result of the sale created a change in the trajectory of the fair value of the Nashville, Tennessee operations and as such, the Company recorded a pre-tax non-cash impairment charge of $ 3.8 million relating to goodwill. No further impairments to goodwill were deemed necessary as of December 31, 2023. 8. REAL ESTATE TRANSACTIONS Asset Purchase Agreement – Summerlin, Las Vegas On November 11, 2024, the Company, entered into an agreement with DVMD LLS (IntelliTec College) for the sale of the Summerlin, Las Vegas (“Euphoria”) campus. As a result of the intended sale, the Company recorded the carrying amount of the net assets totaling $ 1.2 million as held for sale on the Consolidated Balance Sheets. The net assets related to the Summerlin, Las Vegas campus consisted of $ 2.1 million in assets and $ 0.9 million in liabilities. The sale of the campus was consummated effective January 1, 2025. Purchase and Sale-leaseback Transaction – Philadelphia, Pennsylvania Area Campus On September 28, 2023, the Company purchased a 90,000 square foot property located at 311 Veterans Highway, Levittown, Pennsylvania for approximately $ 10.2 million and subsequently on January 30, 2024 entered into a sale-leaseback transaction for the same property. As of December 31, 2023, this property was classified as held-for-sale on the Consolidated Balance Sheets. During the year ended December 31, 2024, the Company has invested approximately $ 11.7 million in capital investments. F-23 Index Property Sale Agreement - Nashville, Tennessee Campus On September 24, 2021, Nashville Acquisition, L.L.C., a subsidiary of the Company, entered into a Contract for the Purchase of Real Estate (the “Nashville Contract”) to sell the nearly 16 -acre property located at 524 Gallatin Avenue, Nashville, Tennessee 37206, at which the Company operates its Nashville campus, to SLC Development, LLC, a subsidiary of Southern Land Company (“SLC”). On June 8, 2023, the Company closed on the sale of its Nashville, Tennessee property to East Nashville Owner, LLC, an affiliate of SLC, for approximately $ 33.8 million pursuant to the Nashville Contract. The net proceeds from the Nashville sale, net of closing costs, are available for working capital, acquisitions, other strategic initiatives, and general corporate purposes. In connection with the sale, the parties entered into a lease agreement allowing Lincoln to continue to occupy the campus and operate it on a rent-free basis for a period of 15 months plus options to extend the lease for up to three consecutive 30 -day terms at $ 150,000 per extension term. The carrying value of the campus was approximately $ 4.5 million and the estimated fair value of the rent for the 15 -month rent-free period was approximately $ 2.3 million at the consummation of the leas e. As of December 31, 2024, the total rent free period has been fully expensed . 9. PROPERTY, EQUIPMENT AND FACILITIES Property, equipment and facilities consist of the following: At December 31, Useful life (years) 2024 2023 Land - $ 52 $ 52 Buildings and improvements 1 - 25 104,081 101,540 Equipment, furniture and fixtures 1 - 7 84,352 80,214 Vehicles 3 1,556 1,592 Construction in progress - 54,763 7,620 244,804 191,018 Less accumulated depreciation and amortization ( 141,271 ) ( 140,161 ) $ 103,533 $ 50,857 The increase in property, equipment and facilities was driven by several factors, including a $ 37.0 million investment relating to the build-out of the new Nashville, Tennessee, Levittown, Pennsylvania and Houston Texas campuses, $ 10.9 million in new and expanded programs at various campuses, expansions and additional programs focused on Welding, Electrical and Electronic Systems Technology (“EEST”), Heating Ventilation and Air Conditioning (“HVAC”), and Auto and Medical Assistant (“MA”), and $ 17.2 million of facilities upgrades including security and branding, with the remainder focusing on training materials and equipment. Depreciation and amortization expense of property, equipment and facilities was $ 12.9 million and $ 6.8 million for the years ended December 31, 2024 and 2023, respectively. 10. ACCRUED EXPENSES Accrued expenses consist of the following: At December 31, 2024 2023 Accrued compensation and benefits $ 7,515 $ 9,845 Accrued real estate taxes 1,700 1,733 Other accrued expenses 2,771 2,102 $ 11,986 $ 13,680 11. LONG-TERM DEBT Credit Facility On February 16, 2024, the Company entered into a secured credit agreement (the “Fifth Third Credit Agreement”) with Fifth Third Bank, National Association (the “Bank”), pursuant to which the Company, as borrower, has obtained a revolving credit facility in the aggregate principal amount of $ 40.0 million including a $ 10.0 million letter of credit sublimit and a $ 20.0 million accordion feature (the “Facility”), the proceeds of which are to be used for working capital, general corporate and certain other permitted purposes. The Facility is guaranteed by the Company’s wholly-owned subsidiaries and is secured by a first priority lien in favor of the Bank on substantially all of the personal property owned by the Company and its subsidiaries. The term of the Facility is 36 months , maturing on February 16, 2027 . F-24 Index Each advance under the Facility will bear interest on the outstanding principal amount thereof from the date when made at an interest rate determined at the election of the Company at either the Tranche Rate (which is the forward-looking Secured Overnight Financing Rate (SOFR) for one or three months ), or the Base Rate (which is a variable per annum rate, as of any date of determination, equal to the Bank’s Prime Rate), plus an Applicable Margin. The Applicable Margin is determined pursuant to a Pricing Grid, which for loans subject to the Tranche Rate varies from 1.75 % to 2.50 % and for loans subject to the Base Rate varies from 0.75 % to 1.50 %. The Applicable Margin may change quarterly based on the Total Leverage Ratio at such time. The Total Leverage Ratio is determined with respect to the Company and its subsidiaries on a consolidated basis for an applicable quarterly period by dividing the aggregate principal amount of various forms of borrowed indebtedness as of the last day of a determination period by EBITDA (earnings before interest expense, taxes, depreciation and amortization) for such period. Interest is paid in arrears, either quarterly or monthly depending on the Company’s interest rate election, with the principal due at maturity. Under the terms of the Fifth Third Credit Agreement, the Company will pay to the Bank an unused facility fee on the average daily unused balance of the Facility at a rate per annum equal to 0.50 %, which fee is payable in arrears on dates when interest is due and payable. As of December 31, 2024, the Company has paid approximately $ 200,000 in unused facility fees. The Company will also pay to the Bank a letter of credit fee equal to the Applicable Margin for loans subject to the Tranche Rate multiplied by the maximum amount available to be drawn under such letter of credit. The Fifth Third Credit Agreement contains customary representations, warranties and affirmative and negative covenants, as well as events of default customary for facilities of this type. In connection with the Fifth Third Credit Agreement, the Company paid fees of approximately $ 456,000 consisting of bank fees, closing fees, legal costs and other customary fees and reimbursements. On July 18, 2024, Company entered into a first amendment (the “Amendment”) of the Fifth Third Credit Agreement with the Bank. Among other things, the Amendment effects certain modifications to (i) clarify certain representations and affirmative covenants of the Company, (ii) clarify certain conditions to each advance, (iii) clarify and/or replace certain events of default and (iv) delete or revise certain definitions in order to harmonize them with the other modifications made. The Amendment also contains customary releases, representations and warranties and reaffirmations consistent with the original terms of the Fifth Third Credit Agreement. Except as set forth above, the Amendment does not materially alter the Fifth Third Credit Agreement. 12. STOCKHOLDERS’ EQUITY Common Stock Holders of our Common Stock are entitled to receive dividends when and as declared by our Board of Directors and have the right to one vote per share on all matters requiring shareholder approval. The Company has no t declared or paid any cash dividends on our Common Stock since the Company’s Board of Directors discontinued our quarterly cash dividend program in February 2015. The Company has no current intentions to resume the payment of cash dividends in the foreseeable future. Preferred Stock On November 30, 2022, the Company exercised in full its right of mandatory conversion of the Company’s Series A Preferred Stock. In connection with the conversion, each share of Series A Preferred Stock has been cancelled and converted into the right to receive 423.729 shares of the Company’s Common Stock, no par value per share. Shares of the Series A Preferred Stock are no longer outstanding and all rights of the holders to receive future dividends have terminated. As a result of the conversion, the aggregate 12,700 shares of Series A Preferred Stock outstanding were converted into 5,381,356 shares of Common Stock. Dividends Dividends on the Series A Preferred Stock (“Series A Dividends”), at the initial annual rate of 9.6 % is to be paid, in arrears, from the date of issuance quarterly on each December 31, March 31, June 30 and September 30 with September 30, 2020 being the first dividend payment date. For the year ended December 31, 2022, we have paid $ 1.1 million in cash dividends on the outstanding shares of Series A Preferred Stock. With the exercise of the mandatory conversion of the Company’s Series A Preferred Stock there will not be any additional dividend payment related to the Series A Preferred Stock going forward. Dividends are included in the Consolidated Balance Sheets within additional paid-in-capital when the Company maintains an accumulated deficit. Treasury Stock On May 24, 2022, the Board of Directors authorized the cancellation of 5,910,541 shares of Treasury Stock, which reduced Treasury Stock and Common Stock by $ 82.9 million. Restricted Stock The Company currently has only one active stock incentive plan: the Lincoln Educational Services Corporation 2020 Long-Term Incentive Plan (the “LTIP”) On March 26, 2020, the Board of Directors adopted the LTIP to provide an incentive to certain directors, officers, employees and consultants of the Company to align their interests in the Company’s success with those of its shareholders through the grant of equity-based awards. On June 16, 2020, the shareholders of the Company approved the LTIP. The LTIP is administered by the Compensation Committee of the Board of Directors, or such other qualified committee appointed by the Board of Directors, which will, among other duties, have the full power and authority to take all actions and make all determinations required or provided for under the LTIP. Pursuant to the LTIP, the Company may grant options, share appreciation rights, restricted shares, restricted share units, incentive stock options and nonqualified stock options. Under the LTIP, employees may surrender shares as payment of applicable income tax withholding on the vested Restricted Stock. The LTIP has a duration of 10 years. On February 23, 2023, the Board of Directors approved, subject to shareholder approval, the amendment of the LTIP to increase the aggregate number of shares available under the LTIP from 2,000,000 shares to 4,000,000 shares. The amendment was approved and adopted by the shareholders at the Annual Meeting of Shareholders held on May 5, 2023 . F-26 Index F or the years ended December 31, 2024, 2023, and 2022, respectively, the Company completed a net share settlement for 330,726 , 337,050 , and 268,654 restricted shares on behalf of certain employees that participate in the LTIP upon the vesting of the restricted shares pursuant to the terms of the LTIP. The net share settlement was in connection with income taxes incurred on restricted shares that vested and were transferred to the employees during 2024, 2023, and/or 2022, creating taxable income for the employees. At the employees’ request, the Company has paid these taxes on behalf of the employees in exchange for the employees returning an equivalent value of restricted shares to the Company. These transactions resulted in a decrease of $ 3.4 million, $ 2.0 million, and $ 2.0 million for each of the years ended December 31, 2024, 2023, and 2022, respectively, to equity on the Consolidated Balance Sheets as the cash payment of the taxes effectively was a repurchase of the restricted shares granted in previous years . The following is a summary of transactions pertaining to Restricted Stock: Shares Weighted Average Grant Date Fair Value Per Share Nonvested restricted stock outstanding at January 1, 2023 1,548,266 5.18 Granted 751,240 6.10 Cancelled ( 37,941 ) 6.15 Vested ( 862,890 ) 3.76 Nonvested restricted stock outstanding at December 31, 2023 1,398,675 5.16 Granted 459,181 9.83 Cancelled ( 24,925 ) 9.03 Vested ( 898,543 ) 6.74 Nonvested restricted stock outstanding at December 31, 2024 934,388 8.02 The Restricted Stock expense for the fiscal years ended December 31, 2024, 2023, and 2022 was $ 4.6 million, $ 5.9 million, and $ 3.1 million, respectively. The unrecognized Restricted Stock expense as of December 31, 2024, 2023, and 2022 was $ 4.3 million, $ 4.3 million, and $ 7.9 million, respectively. As of December 31, 2024, outstanding Restricted Shares under the LTIP had an aggregate intrinsic value of $ 14.8 million. Share Repurchase Program On May 24, 2022, the Company announced that its Board of Directors had authorized a share repurchase program of up to $ 30.0 million of the Company’s outstanding Common Stock. The repurchase program was authorized for 12 months. Pursuant to the program, purchases may be made, from time to time, in open-market transactions at prevailing market prices, in privately negotiated transactions or by other means as determined by the Company’s management and in accordance with applicable federal securities laws. The timing of purchases and the number of shares repurchased under the program will depend on a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions. The Company retains the right to limit, terminate or extend the share repurchase program at any time without prior notice. On February 27, 2023, the Board of Directors extended the share repurchase program for an additional 12 months and authorized the repurchase of an additional $ 10.0 million of the Company’s Common Stock, for an aggregate of up to $ 30.6 million in additional repurchases. On May 7, 2024, the Company announced that its Board of Directors had authorized an extension of the share repurchase program for an additional 12 months through May 24, 2025. During the years ended December 31, 2024, 2023, and 2022, the Company repurchased zero shares, 165,064 shares, and 1,572,414 shares, respectively. As of December 31, 2024, the Company had approximately $ 29.7 million remaining for additional repurchases under the program. Since inception of the program, the Company has made repurchases of approximately 1.7 million shares of the Company’s Common Stock at an average share price of $ 5.95 for an aggregate expenditure of approximately $ 10.3 million F-27 Index The following table presents information about our repurchases of Common Stock, all of which were completed through open market purchases: Year Ended December 31, (in thousands, except share data) 2024 2023 2022 Total number of shares repurchased 1 - 165,064 1,572,414 Total cost of shares repurchased $ - $ 891 $ 9,445 1 These shares were subsequently canceled and recorded as a reduction of Common Stock. S-3 Registration On December 24, 2024, the Company filed a Form S-3 with the Securities and Exchange Commission (“SEC”) using a “shelf” registration process. Under this shelf registration process, we may sell the securities described in this prospectus in one or more offerings up to a total dollar amount of $ 150.0 million. 13. PENSION PLAN The Company sponsors a noncontributory defined benefit pension plan covering substantially all of the Company’s union employees. Benefits are provided based on employees’ years of service and earnings. This plan was frozen on December 31, 1994 for non-union employees. The Company has terminated its defined benefit pension plan as of December 31, 2024. In connection with this termination, the Company is expecting to offer plan participants a choice between a lump sum payment and the continuation of their benefits through an annuity contract with a third-party insurance provider. The termination is not expected to have a material impact on the Company’s financial condition or results of operations in 2024, but the final settlement accounting will be recorded during the year ended December 31, 2025. The following table sets forth the plan’s funded status and amounts recognized in the Consolidated Financial Statements: Year Ended December 31, 2024 2023 CHANGES IN BENEFIT OBLIGATIONS: Benefit obligation-beginning of year $ 16,621 $ 17,113 Interest cost 758 792 Actuarial (gain) loss ( 550 ) 4 Benefits paid ( 1,264 ) ( 1,288 ) Benefit obligation at end of year 15,565 16,621 CHANGE IN PLAN ASSETS: Fair value of plan assets-beginning of year 17,380 16,445 Actual return on plan assets 1,010 2,223 Benefits paid ( 1,271 ) ( 1,288 ) Fair value of plan assets-end of year 17,119 17,380 FAIR VALUE IN EXCESS OF BENEFIT OBLIGATION FUNDED STATUS: $ 1,554 $ 759 For the fiscal year ended December 31, 2024, the actuarial loss of zero was due to the decrease in the discount rate from 4.90 % to 4.71 %. Amounts recognized in the Consolidated Balance Sheets consist of: At December 31, 2024 2023 Noncurrent assets $ 1,554 $ 759 Amounts recognized in accumulated other comprehensive income (loss) consist of: Year Ended December 31, 2024 2023 2022 Accumulated loss $ ( 793 ) $ ( 1,219 ) $ ( 2,480 ) Deferred income taxes 1,067 1,183 1,520 Accumulated other comprehensive income (loss) $ 274 $ ( 36 ) $ ( 960 ) The accumulated benefit obligation was $ 15.5 million and $ 16.6 million at December 31, 2024 and 2023, respectively. F-28 Index The following table provides the components of net periodic cost for the plan: Year Ended December 31, 2024 2023 2022 COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $ - $ - $ 37 Interest cost 758 792 542 Expected return on plan assets ( 1,127 ) ( 1,065 ) ( 1,217 ) Recognized net actuarial loss - 106 81 Net periodic benefit income $ ( 369 ) $ ( 167 ) $ ( 557 ) The estimated net income and prior service cost for the plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year is zero . The following tables present plan assets using the fair value hierarchy as of December 31, 2024 and 2023, respectively. The fair value hierarchy has three levels based on the reliability of inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using observable prices that are based on inputs not quoted in active markets but observable by market data, while Level 3 includes the fair values estimated using significant non-observable inputs. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (Level 1) (Level 2) (Level 3) Total Equity securities $ - $ - $ - $ - Fixed income 16,050 - - 16,050 International equities - - - - Real estate - - - - Cash and equivalents 1,069 - - 1,069 Balance at December 31, 2024 $ 17,119 $ - $ - $ 17,119 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (Level 1) (Level 2) (Level 3) Total Equity securities $ 4,231 $ - $ - $ 4,231 Fixed income 8,065 - - 8,065 International equities 3,466 - - 3,466 Real estate 1,062 - - 1,062 Cash and equivalents 556 - - 556 Balance at December 31, 2023 $ 17,380 $ - $ - $ 17,380 Fair value of total plan assets by major asset category as of December 31: 2024 2023 Equity securities 0 % 25 % Fixed income 94 % 47 % International equities 0 % 20 % Real estate 0 % 6 % Cash and equivalents 6 % 2 % Total 100 % 100 % F-29 Index Weighted-average assumptions used to determine benefit obligations as of December 31: 2024 2023 2022 Discount rate 5.30 % 4.71 % 4.90 % Rate of compensation increase 2.50 % 2.50 % 2.50 % Weighted-average assumptions used to determine net periodic pension cost for years ended December 31: 2024 2023 2022 Discount rate 4.71 % 4.71 % 4.90 % Rate of compensation increase 2.50 % 2.50 % 2.50 % Long-term rate of return 6.75 % 6.75 % 6.75 % The Company has terminated its pension plan and has revised its strategy to adjust the allocation to a full liability investment strategy. The plan currently allocates all funds to fully fixed income investment and cash allocation, attempting to eliminate funding level fluctuations during the termination process. The Company does not expect to make contributions to the plan in 2025. The total amount of the Company’s contributions paid under its pension plan was zero for each of the fiscal years ended December 31, 2024 and 2023, and 2022, respectively. Information about the expected benefit payments for the plan is as follows: Year Ending December 31, 2025 $ 4,087 2026 1,242 2027 1,210 2028 1,173 2029 1,135 Years 2030-2034 5,048 The Company has a 401(k) defined contribution plan for all eligible employees. Employees may contribute up to 75 % of their compensation into the plan. The Company may contribute up to an additional 15 % of the employee’s contributed amount up to 6 % of compensation. For each of the fiscal years ended December 31, 2024, 2023, and 2022, the Company’s expense for the 401(k) plan amounted to $ 0.8 million, $ 0.8 million, and $ 0.7 million, respectively. 14. INCOME TAXES Components of the provision for income taxes were as follows: Year Ended December 31, 2024 2023 2022 Current: Federal $ 4,496 $ 5,825 $ 1,864 State 2,566 2,185 644 Total 7,062 8,010 2,508 Deferred: Federal ( 1,555 ) 989 767 State ( 687 ) 643 527 Total ( 2,242 ) 1,632 1,294 Total provision $ 4,820 $ 9,642 $ 3,802 Effective Tax rate The reconciliation of the effective tax rate to the U.S. Statutory Federal Income tax rate was: Year Ended December 31, 2024 2023 2022 Income before taxes $ 14,711 $ 35,639 $ 16,436 Expected tax $ 3,089 21.0 % $ 7,484 21.0 % $ 3,452 21.0 % State tax (net of federal benefit) 1,483 10.1 % 2,234 6.3 % 925 5.6 % Other 248 1.7 % ( 76 ) - 0.2 % ( 575 ) - 3.5 % Total $ 4,820 32.8 % $ 9,642 27.1 % $ 3,802 23.1 % F-31 Index Deferred Taxes The components of the non-current deferred tax assets (liabilities) were as follows: At December 31, 2024 2023 Gross noncurrent deferred tax assets (liabilities) Operating lease liability $ 40,209 $ 26,835 Provision for credit losses 17,558 14,388 Finance lease liability 7,835 4,390 Depreciation and amortization 3,142 4,180 Stock-based compensation 843 1,223 Net operating loss carryforwards 807 1,040 Accrued expenses 26 225 Other intangibles 23 24 Pension plan liabilities ( 416 ) ( 202 ) Goodwill ( 603 ) ( 618 ) Finance lease right of use assets ( 7,161 ) ( 4,224 ) Operating lease right-of-use assets ( 36,904 ) ( 24,043 ) Noncurrent deferred tax assets, net $ 25,359 $ 23,218 As of December 31, 2024, and 2023, the Company had gross net operating losses (“NOL”) of $ 14.0 million and $ 18.1 million, respectively, for state tax purposes and none for federal. While some states NOL can be carried forward indefinitely, the majority of state NOLs expire in 2033 and end in 2037 if not utilized . 15. FAIR VALUE The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers: Level 1: Defined as quoted market prices in active markets for identical assets or liabilities. Level 2: Defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Defined as unobservable inputs that are not corroborated by market data. F-31 Index The following table presents the fair value of the financial instruments measured on a recurring basis as of December 31, 2024 and 2023. December 31, 2024 Carrying Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Amount (Level 1) (Level 2) (Level 3) Total C ash equivalents : Money market fund $ 44,425 $ 44,425 $ - $ - $ 44,425 Total cash equivalents and short-term investment s $ 44,425 $ 44,425 $ - $ - $ 44,425 December 31, 2023 Carrying Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Amount (Level 1) (Level 2) (Level 3) Total C ash equivalents : Money market fund $ 9,037 $ 9,037 $ - $ - $ 9,037 Treasury bill 20,343 20,343 - - 20,343 Total cash equivalents and short-term investment s $ 29,380 $ 29,380 $ - $ - $ 29,380 The Company measures the fair value of money market funds and treasury bills using Level 1 inputs. Pricing sources may include industry standard data providers, security master files from large financial institutions and other third-party sources used to determine a daily market value. The carrying amount of the Company’s financial instruments, including cash equivalents, short-term investments, prepaid expenses and other current assets, accrued expenses and other short-term liabilities approximate fair value due to the short-term nature of these items. 16. SEGMENT REPORTING The Company’s manages its business, evaluates performance and allocates resources based on two reportable business segments, Campus Operations and Transitional. Campus Operations – The Campus Operations segment includes campuses that are continuing in operation and contribute to the Company’s core operations and performance. All of the campuses continuing in operation are classified in this segment. The majority of the campuses offer programs across various areas of study. Transitional – The Transitional segment refers to campuses that are marked for closure and are currently being taught-out, in addition to campuses that are held-for-sale or sold. As of December 31, 2024, the net assets for the Summerlin, Las Vegas campus were classified as held for sale, with operating results classified within the Transitional segment. The sale of the campus was consummated effective January 1, 2025. In addition, the Company closed the Somerville, Massachusetts campus in the prior year. It was fully taught-out as of December 31, 2023. This campus was classified in the Transitional segment in the prior year’s statement of operations. The individual operating segments have been aggregated into the two main reportable segments based on the method by which our Chief Operating Decision Maker (“CODM”) 1) evaluates performance and allocates resources and 2) as a result of the Company’s judgment, that the reporting units have similar products, production processes, types of customers, methods of distribution, regulatory environment and economic characteristics. The Company’s CODM is comprised of a team of executives deemed the “Executive Committee” which is made up of the following individuals: 1. Scott Shaw – Chief Executive Officer and Director 2. Brian Meyers – Executive Vice President, Chief Financial Officer, and Treasurer The CODM assesses segment financial performance by reviewing segment revenue and segment operating income, which includes certain Corporate overhead allocations relating directly to the segments disclosed. Some of the allocated costs include the centralization of the Company’s financial aid process, national sales and receivables and default costs. The CODM will make decisions to allocate resources based on the review of monthly, quarterly and annual financial information categorized by segment. The financial information is presented to the CODM using actual-to-actual results and budget-to-actual results. F-32 Index Year Ended December 31, Consolidated Campus Operations Transitional Corporate 2024 2023 2022 2024 2023 2022 2024 2023 2022 2024 2023 2022 REVENUE $ 440,064 $ 378,070 $ 348,287 $ 432,966 $ 367,233 $ 330,896 $ 7,098 $ 10,837 $ 17,391 $ - $ - $ - COSTS AND EXPENSES: Instructional 90,566 85,311 79,021 88,207 82,228 75,274 2,359 3,083 3,747 - - - Books and Tools 32,146 26,177 23,623 31,161 24,802 21,642 985 1,375 1,981 - - - Facilities 46,791 44,647 40,327 45,842 42,475 38,071 949 2,172 2,256 - - - Depreciation 12,256 6,140 5,775 12,200 6,030 5,669 56 110 106 - - - Educational services and facilities 181,759 162,275 148,746 177,410 155,535 140,656 4,349 6,740 8,090 - - - Sales and marketing 75,236 65,553 61,241 73,532 64,159 58,561 1,704 1,394 2,680 - - - Student services 21,874 18,693 16,077 21,012 17,314 15,004 862 1,379 1,073 - - - Bad debt 56,578 41,637 34,915 55,600 39,978 32,731 975 1,659 2,187 3 - ( 3 ) Administrative 89,415 82,622 69,571 41,235 37,976 35,068 1,236 2,030 2,066 46,944 42,616 32,437 Depreciation 700 630 587 - - - - - - 700 630 587 Selling, general and administrative 243,803 209,135 182,391 191,379 159,427 141,364 4,777 6,462 8,006 47,647 43,246 33,021 Loss (gain) on sale of assets 2,119 ( 30,918 ) ( 177 ) 619 20 28 11 1 - 1,489 ( 30,939 ) ( 205 ) Gain on insurance proceeds ( 2,794 ) - - - - - - - - ( 2,794 ) - - Impairment of goodwill and long-lived assets - 4,220 1,049 - 4,220 1,049 - - - - - - Total costs and expenses 424,887 344,712 332,009 369,408 319,202 283,097 9,137 13,203 16,096 46,342 12,307 32,816 OPERATING INCOME (LOSS) $ 15,177 $ 33,358 $ 16,278 $ 63,558 $ 48,031 $ 47,799 $ ( 2,039 ) $ ( 2,366 ) $ 1,295 $ ( 46,342 ) $ ( 12,307 ) $ ( 32,816 ) 17. COMMITMENTS AND CONTINGENCIES Litigation and Regulatory Matters — O n June 22, 2022, the DOE and the plaintiff student loan borrowers in a class action against the DOE initiated on June 25, 2019 in the U.S. District Court for the Northern District of California (Sweet v. Cardona, No. 3:19-cv-3674 (N.D. Cal.)) announced a proposed settlement agreement to resolve claims that the DOE had failed to timely decide Borrower Defense to Repayment applications submitted to the DOE. The proposed settlement included three categories of relief for student loan borrowers. First, the DOE would agree to discharge loans and refund prior loan payments to class members with loan debt associated with an institution on the list included in the settlement (which includes Lincoln institutions). The class action plaintiffs and the DOE stated that the DOE had determined that attendance at one of the listed institutions justifies presumptive relief allegedly based on strong indicia regarding substantial misconduct by the institutions, whether credibly alleged or in some instances proven, and the purportedly high rate of class members with applications related to the listed schools. Second, the proposed settlement included new procedures for the DOE to resolve pending borrower defense claims associated with other schools not on the list. Third, for any student loan borrower who submitted a borrower defense application after June 22, 2022 and before the final approval of the settlement, the proposed settlement would require the DOE to review the applications under the DOE’s 2016 regulatory standards and issue decisions within 36 months, or else the applications would be discharged in full. On November 16, 2022, the federal district court approved the settlement as proposed and the DOE began implementing the settlement relief while Lincoln and other parties appealed the settlement’s final approval to the U.S. Court of Appeals for the Ninth Circuit. On November 5, 2024, the Ninth Circuit upheld the settlement on appeal. One or more parties are expected to continue to appeal the final approval of the settlement, but Lincoln does not intend to continue participating in the appeal. As a result of this final approval, the DOE has estimated that approximately 196,000 student loan borrowers who attended one of the listed schools (including Lincoln institutions) will receive automatic student loan discharges; that another approximately 100,000 student loan borrowers who attended other schools not on the list would receive decisions under new procedures; and that approximately 250,000 student loan borrowers who submitted borrower defense applications between June 22, 2022 and November 16, 2022 would receive decisions under the DOE’s 2016 regulatory standards within 36 months or else receive automatic student loan discharges. It is not possible at this time to predict whether the settlement will continue to be upheld on appeal, what additional actions the DOE might take as the settlement continues to be upheld on appeal, or whether the DOE or other agencies might take actions against Lincoln institutions. Such actions could have a material adverse effect on our business and results of operations. We believe the DOE already may have discharged some or all of the pending applications. In addition to the foregoing, in the ordinary conduct of our business, we are subject to additional periodic lawsuits, investigations, regulatory proceedings and other claims, including, but not limited to, claims involving students or graduates, routine employment matters and business disputes. We cannot predict the ultimate resolution of these lawsuits, investigations, regulatory proceedings and other claims asserted against us, but we do not believe that any of these matters will have a material adverse effect on our business, financial condition, results of operations or cash flows. S tudent Financing Plans — At December 31, 2024, the Company had outstanding net financing commitments to its students to assist them in financing their education of approximately $ 44.6 million, net of interest. Executive Employment Agreements —The Company entered into employment contracts with key executives that provide for continued salary payments if the executives are terminated for reasons other than cause, as defined in the agreements. The future employment contract commitments for such employees were approximately $ 9.6 million at December 31, 2024. F-33 Index Surety Bonds —Each of the Company’s campuses must be authorized by the applicable state education agency in which the campus is located to operate and to grant degrees, diplomas or certificates to its students. The campuses are subject to extensive, ongoing regulation by each of these states. In addition, the Company’s campuses are required to be authorized by the applicable state education agencies of certain other states in which the campuses recruit students. The Company is required to post surety bonds on behalf of its campuses and education representatives with multiple states to maintain authorization to conduct its business. At December 31, 2024, the Company has posted surety bonds in the total amount of approximately $ 17.0 million. LINCOLN EDUCATIONAL SERVICES CORPORATION Schedule II—Valuation and Qualifying Accounts (in thousands) Description Balance at Beginning of Period Charged to Expense Accounts Written-off Balance at End of Period Allowance accounts for the year ended: December 31, 2024 Student receivable allowance $ 53,811 $ 56,578 $ ( 44,817 ) $ 65,572 December 31, 2023 Student receivable allowance $ 35,370 $ 41,637 $ ( 23,196 ) 1 $ 53,811 December 31, 2022 Student receivable allowance $ 31,921 $ 34,915 $ ( 31,466 ) $ 35,370 1 On January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13 Financial Instruments - Credit Losses . The adoption resulted in an opening balance sheet adjustments of $ 10.8 million increasing the allowance for credit losses relating to the Company’s outstanding receivables. The adoption also resulted in a decrease to retained earnings of $ 7.9 million, after tax and a deferred tax asset increase of $ 2.9 million . F-34