Lincoln Educational Services Corporation

Good day and thank you for standing by and welcome to the Lincoln Educational Service burning conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that this call is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your host today, Michael Polivu. Please go ahead.

Thank you, Justin, and good morning, everyone. Before the market opened today, Lincoln Educational Services issued its news release reporting financial results for the fourth quarter and full year ended December 31, 2021. The release is available on the investor relations portion of the company's corporate website at www.lincolntech.edu. Joining us today on the call are Scott Shaw, President and CEO, and Brian Myers, Chief Financial Officer. Today's call is being broadcast live on the company's website and the replay of the call will be archived on the company's website. Statements made by Lincoln's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as a term is identified in federal securities laws. The words may will expect, believe, anticipate, project, plan, intend, estimate, and continue, as well as similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond the company's control that may influence the accuracy of the statements and the projections upon which the segment and statements are based. Factors that may affect the company's results include but are not limited to the risks and uncertainties discussed in the risk factor section of the annual report on Form 10-K and the quarterly report on Form 10Q filed with the Securities and Exchange Commission. Forward-looking statements are based on the information available at the time those statements are made and management's good faith to leave as of the time with respect to the future events. All forward-looking statements are qualified in their entirety by this cautionary statement, and Lincoln undertakes no obligation to publicly revise or update any forward-looking statement, whether as a result of new information, future events, or otherwise after the date they're up. Now, I'd like to turn the call over to Scott Shaw, President and CEO of Lincoln Educational Services. Scott, please go ahead.

Thank you, Michael, and good morning, everyone. Thank you for joining us today to review Lincoln's fourth quarter and full-year performance in corporate developments. We had a solid end to a successful year as we exceeded or performed at the high end of our previously stated outlook. Furthermore, we dramatically improved our liquidity by completing the sale-leaseback of our Denver and Grand Prairie properties giving us one of the strongest balance sheets in our 75-year history. At Lincoln, we are now entering what we believe will be a period of growth and expansion. We currently have the non-dilutive capital resources in place to fully execute our growth strategies for 2022 and beyond, which I'll talk about shortly. Our positive Q4 student starts resulted in our fourth consecutive year of organic growth, and graduate placement rates continue to be robust as the demand for our highly skilled students remains extremely strong. Our focus remains on providing our students with the best ROI on their educational investment while also providing industry with work-ready talent that will help them thrive. All in all, 2021 was a strong year for Lincoln, and we are excited by our opportunities for continued growth as we work to decrease the growing skills gap for hands-on talent. Financially, our top line for the quarter grew more than 7%. In addition, operating income increased by more than 200%, and we continued to generate significant cash from operations as each campus generated positive EBITDA for the quarter and full year. As of December 31st, our unrestricted cash position was up threefold over the same period a year ago, which includes the net proceeds from the sale-leaseback transaction for the Denver and Grand Prairie campuses. Our balance sheet is strong and will improve by approximately another $34 million when the sale of the Nashville campus closes sometime in Q2. As many of you know, in the recent past, our balance sheet constrained our ability to grow. With that obstacle now behind us, we can now complement the improving performance of our existing campuses with various projects designed to build long-term growth. Specifically, we are adding programs at existing campuses which strives greater operating leverage. This year alone, we plan to expand five programs in skilled trades and healthcare. We expect to start the build-out of our new Nashville campus, which will be funded from the sale of the existing campus, which we have previously stated will cost between $15 and $20 million. The campus will be physically smaller than the campus currently under contract to sell, but will offer greater efficiencies, profitability, and opportunities for additional programs that will enable us to better serve students and the local business needs. And we are planning to open our first new campus in a market that we have identified as currently underserved. We see many opportunities to enter new markets, especially in light of the heightened need for hands-on talent created by the pandemic. Strong demand by corporate partners has only increased over the past 24 months, and we are currently searching in several underserved markets for new campus locations. Additionally, we will be launching other initiatives that offer greater efficiencies at the campus and corporate level to improve our bottom line. For example, we will dramatically reduce the number of course start dates, which can range to over 150 today, to just 15 by the end of 2023. And we have commenced the build-out of our blended learning model to streamline the learning experience, both at the curriculum and campus level. It will take us upwards of two years to fully implement this plan across Lincoln's operations, but we've already launched our first program with more to follow shortly. Our goal is to improve the overall student experience. We have learned a tremendous amount about our students and our capabilities as a result of the pandemic. We know our students can and want to learn online, but they still prefer the hands-on in-person experience for which we are famous. Our new curriculum delivery will mean that students will be in our shops and labs 70% of the time when on campus. We are also standardizing our curriculum across our platform, which will make us more efficient and scalable. We are centralizing administrative functions that have been proven to be more effectively done from our corporate office, thus freeing up campus staff to focus on supporting students and not on paperwork. We are creating three equal shifts in our day, which will enable us to better utilize our faculty and facilities, while also shortening the time it takes to complete our night program, which will improve student outcomes. The landscape of growth opportunities is vast, and by simplifying and standardizing our operations, we will be able to more rapidly capitalize on these opportunities. Beyond these near to short-term initiatives, we will continue to seek further expansion opportunities internally and externally. We believe a bigger footprint remains critical to achieving our objective of building the nation's highest quality hands-on career school capable of serving the national needs of the Fortune 500, as well as the local needs of your neighborhood automotive dealer, hospital, or electrical contractor. Our process has already identified several new markets, each representing a significant growth opportunity. In evaluating new markets, we evaluate student demand, employer demand, and competition. In addition, we seek input from our corporate partners since they are constantly asking us to help them with their workforce needs. This close collaboration with industry demonstrates and confirms our importance to our partners while emphasizing the value of developing innovative strategies to attract and train personnel to help their businesses grow. We firmly believe aligning our interest with that of our corporate partners gives us additional name recognition and a jump start on getting a foothold in a new market. In addition, we see opportunities to offer lower cost, shorter programs that are non-Title IV funded and enable students to more rapidly enter the workforce. We know that not everyone can dedicate a year to getting an education, and so we are launching pilot programs to test market demand as well as employer acceptance. Moreover, we continue to attract corporate demand for specialized training programs, both for new employees and existing employees, and we'll be increasing our resources in this area. To fund these various growth and efficiency measures, we expect to incur approximately $2 million of one-time costs, which has been factored into our guidance that Brian will share shortly. Speaking of strong partnerships, in October we celebrate the opening of Republic Services' 76,000-square-foot training facility in Dallas, for which we are the training provider. The first class of graduates is already back into the field, with the next class about to join them. The classes are staffed with instructors from our Grand Prairie, Texas campus, and the curriculum was developed in part by Lincoln's Diesel Technology Advisory Committee and designed to meet Republic's needs for qualified diesel technicians. In order to grow, you need a strong foundation, and Lincoln has clearly demonstrated our ability to grow no matter the economic environment. We just concluded our fourth consecutive year of student growth, revenue growth, and given our high operating leverage, strong profitability growth. We achieved this consistent performance during a period when we had the lowest unemployment rate in 50 years pre-COVID, and then we were faced with a world-changing event of the pandemic. We had to temporarily shut down our campuses, move to 100% online education, and then safely reopen our campuses. We had to reschedule thousands of students to follow CDC safety protocols, and we had to keep our operations serving our students despite the great resignation and challenges in staffing. Due to the determination, creativity, and dedication of our people, we and our students prospered while so many others had to retreat. I'm proud to say that given our ability to keep our doors open and We continue to serve our existing students while enabling new students to commence their education. Consequently, today we have more than 1,000 additional students graduating this year and entering the workforce just when industry needs them. And despite this growth, we continue to have employers asking for more students than we currently have enrolled. This speaks to my next point, and that is the realities of our country's skills gap for hands-on talent. Decades of stigmatizing blue-collar jobs while pushing everyone into four-year schools, whether they were interested in them or not, have resulted in significant shortages of hands-on workers and has saddled college students with unnecessary and excessive debt. Along with these social issues is the fact that, in general, American companies have cut back on training and remain skeptical of their ROI in their training of entry-level talent. All of these factors and more create a tremendous opportunity for Lincoln Tech. We are positioned, like no one else, to help close the skills gap. We will build on our 75 years of experience in attracting and training motivated individuals and giving them the skills, knowledge, and experience to enter the workforce with confidence. Through a number of our industry partnerships, we have demonstrated the ability to create workforce-ready talent that stays with the employer, thus providing a clear ROI. Now that we have greater financial resources, we are making investments in people, processes, and our physical scale that will provide long-term growth. We are making our programs more engaging by adding more hands-on lessons, greater use of simulations, and adding gamification and other technologies. We are creating greater student value by offering blended learning, which lowers the students' cost to attend school and provides increased schedule flexibility. We are reducing our costs by centralizing more functions and aligning our class schedules across all campuses. We have identified more than five markets for future expansion and are currently negotiating a lease on one and have been actively searching for locations at others. We continue to pursue acquisition opportunities that are both active in the market as well as privately negotiated. And finally, we are exploring various short-term training opportunities, both with corporate partners as well as consumer opportunities. The need for training is immense, and we have never seen so many opportunities to leverage our skills, experience, and talent to grow our business. Before I conclude, I want to thank our faculty and staff for their unrelenting dedication. Their tireless efforts, especially over the past couple of years, continue to propel Lincoln, so the recent industry acknowledgments are well deserved. According to HVAC's excellence, the nation's largest and oldest accrediting body for the HVAC industry, Lincoln leads all educational institutions in the country with 36 certified master HVAC slash R educators. In fact, More than 25% of all certified master educators in the HVAC industry are now employed by Lincoln. Also, the National Center for Construction Education and Research, or NCCER, recently granted accreditation to our South Plainfield Campus's welding program. NCCER credentials, career training programs related to the construction industry, and Lincoln's welding and metal fabrication technology program was verified as having met the foundation's stringent requirements. In summary, we achieved our 2021 operating objectives and entered 2022 with approximately 850 more students compared to the year-ago level. This, combined with the continued strong interest and lead generation, give us great confidence to achieve our 2022 goals, which Brian will share during his prepared remarks. Other positive factors, including a better outlook for the high school student starts compared to a year ago, will also contribute heavily to our success. Also, from a regulatory perspective, our 90-10 further improved to 75-25, and our composite score should be 3.0, which is the highest level one can achieve. And lastly, we have a balance sheet that gives us greater flexibility and allows us to implement several growth initiatives simultaneously. I'd now like to turn the call over to Brian for a review of our fourth quarter and financial highlights and the introduction of our 2022 guidance. Brian?