Lincoln Educational Services Corporation

Good day, everyone, and thank you for standing by. Welcome to the first quarter of 2022 Lincoln Educational Services Earnings 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 will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Michael Poliview. Thank you. You may begin.

Thank you, Delvin, and good morning, everyone. Before the market opened today, Lincoln Educational Services issued its news release reporting financial results for the first quarter ended March 31, 2022. 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 a 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 the 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 quarterly report on Form 10-Q 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 believe 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 further statements, whether as a result of new information, future events, or otherwise after the date thereof. Now, I'd like to 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 first quarter performance in corporate developments. Our first quarter results continue the strong momentum we built during 2021 as both top and bottom line results met our internal plan. Despite the extremely tight labor market and resulting wage inflation, we continue to generate strong interest in our programs from prospective students while our graduates remain in exceptionally high demand with corporate employers. Our student start rate compared favorably to a year ago levels during January and February but declined in March. As a result, total first quarter starts were approximately 200 students less than last year. Moreover, we had a tough comp since we grew starts almost 31% last year in the first quarter. We did increase the total number of enrolled students as of March 31st over last year's total, and we believe we will return to student start growth in the second quarter. Brian will provide a little more color on student starts later during his remarks. We are excited with our new partnership with Ford Motor Company and are proud to have been selected to kick this program off for them. This is a unique opportunity for Lincoln, as we will be providing specialized manufacturer-specific automotive training at our Indianapolis, Indiana campus. This is a four-week postgraduate training program designed to prepare eligible technicians for careers providing mobile repair and maintenance services on Ford cars, trucks, and SUVs. Our students will receive hands-on training specific to Ford's proprietary technologies and equipment and all the mobile repair services currently offered by Ford. They will include things such as tire rotation and replacement, oil changes, battery diagnostics and replacement, and all repair and maintenance services related to wipers, fluids, and onboard computer software updates. Brake surfaces will also be covered, and students will receive training on performing mobile multi-inspections as well as repairs and replacements related to manufacturer recalls. This is an exciting and innovative opportunity. And the program is scheduled to kick off in July and will be open to automotive technology graduates from any of Lincoln's campuses. Moreover, tuition for the program will be paid for by Ford, and they will also help arrange employment opportunities for successful graduates at Ford dealerships. Currently, more than 200 Ford dealerships around the country offer mobile services to their customers, meaning many graduates may be able to explore opportunities close to home. Ford's goal is to triple its available workforce of mobile technicians by the end of 2022. Graduate placement rates remain high as the demand for our highly skilled students remains extremely strong. In a 2020 report, which takes an in-depth dive into differences in lifetime earnings, ROI, costs, starting salaries, and more, it states that careers in skilled trades often yields an ROI much greater than many college degrees and also leads to higher lifetime savings. Our focus has always been 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. According to data reported to U.S. News in its annual survey, a college graduate from the class of 2020 who took out student loans borrowed nearly $30,000 on average. That's around $5,000 more than borrowers from the class of 2010 had to shoulder, representing a 20% increase in the amount students borrow. 11% of new graduates default in the first 12 months of repayment, and student loan defaults affect 9 million borrowers and their families. These are staggering figures, so a four-year college degree once coveted needs to be reconsidered for certain students with different career goals and ambitions. At Lincoln, we give these students skill-based learning with solid job opportunities and significantly less debt than a college degree. Our top line for the quarter grew nearly 6% and is in line with expectations. As of March 31st, our cash position was up significantly over the same period a year ago, as it includes the net proceeds from the sale leaseback transaction for the Denver and Grand Prairie campuses, which closed in Q4 of 2021. Our balance sheet will get stronger by another approximately $34 million when the sale of Nashville closes, which we now expect will occur in Q3. We will build a new Nashville campus, which will be funded from the sale of the existing campus, which we have previously said will cost approximately 15 to 20 million. While the campus will be physically smaller than the campus currently under contract to sell, it will be more efficient and drive profitability. Plus, it will give us flexibility to add programs that will enable us to attract and better serve students and the local businesses. With the same mindset, we will be adding programs at existing campuses which will help us deliver greater operating leverage. This year alone, we plan to expand five programs in skilled trades in healthcare. One of these is the 12-month dental assistant career training program we recently launched at our Islin, New Jersey campus. It's the fourth healthcare education option at this campus, which also has medical assisting, practical nursing, and patient care technician training. The program is designed to address the projected gap of more than 14,000 dental assistant job openings in New Jersey alone. We're pleased with the response to date, and ISLIN is now the third campus in the Lincoln system to offer dental assistant career training. Along with the new purpose-built Nashville campus, we believe a bigger footprint remains critical to achieving our objective of broadening our business aspirations. We have demonstrated throughout our 75-year history that we have successfully served the national needs of the Fortune 500 and as well as the local needs of your neighborhood automotive dealer, hospital, or electrical contractor. Working with our existing and potential corporate partners, we have identified several markets that are currently underserved from a skills training perspective. While a lot of planning goes into selecting new markets, we also evaluate student and employer demand along with competition since our goal is to be the market leader. Our current strategy is to open a new campus each year for the next several years And as I stated earlier, we plan to announce the newest campus later this year. We have examined and continue to evaluate opportunities to expand Lincoln through the acquisition model. Almost all of our efforts to date have focused on opportunities that are not currently for sale and we believe could strategically enhance our network of schools. However, convincing the owners to sell can take some time. Should we find the evaluations expected by sellers to present suitable shareholders return opportunities for Lincoln, Our strong balance sheet and access to resources enables us to quickly respond to development's merit. In addition to these initiatives, we are also looking inward to achieve greater efficiencies at the campus and corporate level. As such, we have already commenced the process to reduce the number of course start dates to just 15 by the end of 2023. We are also building out our hybrid learning model, which we feel will streamline the learning experience at the curriculum and campus level. While nothing envisioned will replace the classroom and hands-on learning experience, which we believe will account for 70% of the curriculum, we are planning to implement an online element to achieve the remaining curriculum. The implementation of this new hybrid learning model has already begun at several campuses and is enabling Lincoln to enhance its program quality with new efficiencies that benefit both our facility and our students. We are always focused on maximizing our students' return on their investments. We constantly strive to help a greater percentage graduate and find employment with their company of choice, and I'm happy to report we made good progress with both of these objectives. Both our retention rate and our placement rates improved in the quarter, once again demonstrating that our caring and supportive learning environment is making a difference in our students' lives. Our 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 gaining a foothold in a new market. Speaking of a strong partnership, fresh off the success of the first class, we enrolled and recently started our second class at Republic Services' 76,000-square-foot training facility in Dallas, for which we are the training provider. As a reminder, 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. Additionally, Our collaboration with the Food Processing Suppliers Association, or FPSA, continues to go well. Graduates of our Food Industry Technician, or FIT, program continue to find success in new careers with food processing employers across the country with an average starting salary of $50,000. In fact, a year ago, we announced that nearly all graduates of the initial program offered exclusively at Lincoln Tech's Indianapolis campus We're employed, and I'm pleased to say that we are expanding this program and doubling the number of graduates to meet the growing needs of the industry. In summary, we remain poised to achieve our 2022 objectives. Without a doubt, industry needs us, and demand from employers across the country has never been greater. Add on top of this the desire by the current generation to find alternatives to college that are cheaper, faster, and more sure to deliver skills and a job, and it is clear that the landscape for Lincoln to prosper is rich with opportunity. Our partnerships, including the new agreement with Ford, demonstrate that we bring value to their businesses, and we continue to develop new relationships with employers and industry organizations. Having just celebrated our 75th year, I believe we are positioning Lincoln to achieve success for another 75 years as we graduate more students into high-paying and fulfilling careers that are helping American industries close the immense skills gap. I'd now like to turn the call over to Brian for a review of our first quarter financial highlights and outlook.