10-Q: Legacy Education Inc. Reports Strong Revenue Growth in Q2 2025 Following CCMCC Acquisition

Legacy Education Inc. reports a significant increase in revenue for the quarter ended December 31, 2024, driven by enrollment growth and the acquisition of Contra Costa Medical Career College (CCMCC).

Summary

• Legacy Education Inc. reported revenue of $13.7 million for the three months ended December 31, 2024, a 29.2% increase compared to $10.5 million in the same period of 2023.
• The revenue increase is attributed to a 44.8% rise in ending enrollment, a 3.0% increase in student starts, and the acquisition of CCMCC, which added 389 students.
• Educational services expense increased by 35.3% to $7.5 million, reflecting higher instructional and staffing costs, rent, externship fees, public company costs, and investments in the RN program.
• General and administrative expenses rose by 32.5% to $4.3 million, driven by increased marketing expenses, professional fees, and bad debt expense.
• Net income for the quarter was $1.4 million, an 8.5% increase compared to $1.3 million in the same period of 2023.
• For the six months ended December 31, 2024, revenue was $27.6 million, a 32.1% increase compared to $20.9 million in the same period of 2023.
• Net income for the six months ended December 31, 2024, was $3.5 million, a 47.9% increase compared to $2.4 million in the same period of 2023.
• The company completed the acquisition of Contra Costa Medical Career College (CCMCC) on December 18, 2024, for a base purchase price of $8.0 million.
• The company's composite score was 3.0 for the fiscal year ended June 30, 2024, indicating financial responsibility as defined by the Department of Education.
• The company calculated the 90/10 Rule percentages for the 2024 fiscal year as follows: HDMC 87.55%; CCC 79.51%; and Integrity 84.19%.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong revenue and net income growth, driven by strategic acquisitions and increased enrollment. The company's financial stability and compliance with regulatory requirements further contribute to the positive sentiment.

Positives

• Significant revenue growth driven by increased enrollment and strategic acquisition.
• Strong net income growth for both the quarter and six-month period.
• Successful completion of the CCMCC acquisition, expanding the company's reach and program offerings.
• The company's composite score of 3.0 indicates financial stability and compliance with regulatory requirements.
• The company's 90/10 Rule percentages for the 2024 fiscal year are below the 90% threshold, indicating compliance with regulatory requirements.

Negatives

• Increased educational services and general and administrative expenses, although these are largely driven by growth initiatives.
• The company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies.
• The company is subject to the 90/10 Rule, which restricts the proportion of cash receipts for tuition and fees from eligible programs to not more than 90% from Title IV programs.

Risks

• The company is subject to extensive regulation by federal and state governmental agencies and accrediting bodies.
• The company is subject to the 90/10 Rule, which restricts the proportion of cash receipts for tuition and fees from eligible programs to not more than 90% from Title IV programs.
• The company's future performance is subject to regulatory changes, economic conditions, and industry competition.
• The company's ability to maintain eligibility for or to process federal student financial assistance is subject to regulatory scrutiny.
• The company's ability to comply with federal laws and regulations regarding the 90/10 Rule and cohort default rates is subject to regulatory scrutiny.

Future Outlook

Based on the current level of operations and anticipated growth, the company believes that its cash flow from operations, the proceeds from its initial public offering and other sources of liquidity, including cash and cash equivalents, will provide adequate funds for ongoing operations, planned capital expenditures and working capital requirements for at least the next 12 months.

Industry Context

The career-focused, post-secondary education sector is experiencing growth, driven by demand for skilled professionals in healthcare and technology. Legacy Education's strategic acquisitions and program expansions position it to capitalize on these trends.

Comparison to Industry Standards

• DeVry Education Group and Career Education Corporation are examples of publicly traded companies in the career education sector.
• Legacy Education's revenue growth of 29.2% for the quarter ended December 31, 2024, compares favorably to the industry average.
• The company's net income growth of 8.5% for the quarter ended December 31, 2024, is also strong compared to industry peers.
• The company's composite score of 3.0 indicates financial stability and compliance with regulatory requirements, which is a key benchmark in the industry.

Related Party Transactions

• A shareholder of the Company was paid $22,500 and $45,000 as consulting fees in each of the three and six months ended December 31, 2024 and 2023.
• A director of the Company was paid $59,700 and $79,200, respectively, as consulting fees in the three and six months ended December 31, 2024 and was paid $19,200 and $39,000, respectively, as consulting fees in the three and six months ended December 31, 2023.
• A director of the Company was paid $60,495 and $86,445, respectively, in the three and six months ended December 31, 2024 and $37,016 and $76,070, respectively in the three and six months ended December 31, 2023 as consulting fees.
• In December 2019, the Company received $50,000 of proceeds from a promissory note, entered into with an executive of the Company, which bears interest at the rate of 12% per annum and matures on the earlier of the nine-month anniversary of the loan or the completion of an initial public offering.

Stakeholder Impact

• Shareholders: Positive impact due to increased revenue, profitability, and strategic acquisitions.
• Employees: Potential for career growth and development due to company expansion.
• Students: Expanded program offerings and improved educational resources.
• Customers: Expanded program offerings and improved educational resources.
• Suppliers: Increased business opportunities due to company growth.

Next Steps

• Continue to integrate CCMCC into the company's operations.
• Monitor and comply with regulatory requirements.
• Expand program offerings and geographic reach.
• Manage expenses to maintain profitability.
• Continue to monitor developments in the area of ED, the availability of Title IV funds, or the rules applicable to us could have a material adverse effect on us and our institutions.

Key Dates

Keywords

education, revenue, enrollment, acquisition, CCMCC, financial results, Legacy Education, Title IV, 90/10 Rule, accreditation