Lincoln Educational Services Corporation

Good day, and thank you for standing by. Welcome to the Q4 2024 Lincoln Educational Services Earnings Conference Call. At this time, all participants on a listen-only mode. After this presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Michael Poliviu. Please go ahead.

Thank you, Lisa. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results in recent corporate developments for the fourth quarter and full year ended December 31, 2024. 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 is Scott Shaw, President and CEO, Brian Myers, Chief Financial Officer. Today's call is being recorded and is being broadcast live on the company's website. 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 further looked at in the statement as the term is identified and 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. The company cautions you that these statements reflect certain 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 and may influence the accuracy of the statement and projection upon which the segmented 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 10-Q filed with the Securities and Exchange Commission. Correlated statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward-looking statements are qualified in their entirety by this cautionary statement, and Lincoln only takes 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 thereof. One other housekeeping matter. During the Q&A portion of the call today, we would appreciate if questions led themselves to two questions and then re-queued to ask any additional questions. In advance, we thank you for your cooperation. Now I'd like to call over 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 for our review of the exceptional year we had during 2024 and the very positive outlook we have for the year ahead. The operational and financial performance momentum that our organization has been building over the past several years continued throughout 2024. And for the full year, we achieved or exceeded all of our guidance metrics. At the same time, while we generated solid growth across the board, we continue to invest in our growth strategies. The past year's performance in our outlook for 2025 increased the team's confidence that we can achieve our objective of approximately $550 million in organically generated revenue and approximately $90 million in adjusted EBITDA in 2027. During our fourth quarter, we grew revenue more than 16%. Student starts grew nearly 10%, while our end of the quarter student population rose more than 14%. We generated strong increases in profitability and some $30 million in cash flow from operations. At the end of the year, our balance sheet showed nearly $60 million in cash and no debt. One of the critical factors driving Lincoln's strong financial performance is our focus on providing high-value training and skills development to our students and corporate partners. As a result of this focus, we are successfully meeting the consistently growing demand for educational alternatives to a traditional four-year college as employers continue to seek solutions to closing their workforce skills gap. Lincoln's 10.0 hybrid teaching model is a key component to the successful execution of our growth strategy. and we are pleased to report we've completed implementation of the platform's first phase. For those of you that are new to the Lincoln Tech story, 10.0 provides increased flexibility to our students who often need to balance work and life while earning their certificate or degree. We achieved this flexibility by combining hands-on learning at campus facilities with a component of classroom work delivered through online instruction. The model enables our students to work part-time or manage other commitments while pursuing their Lincoln education and reduces the time needed to complete many of our curriculums, accelerating our graduates on their highly rewarding careers. It is helping a higher percentage of our students to graduate and is attractive to our corporate partners who remain growth constrained by the lack of skilled employees. Importantly, the model is creating instructional efficiencies, space efficiencies, and increasing our organization's productivity. Lincoln 10.0 is playing a role in a student's decision to enroll with us and is contributing in a significant way to our student start growth. With the first phase completed, the model is now being used to teach approximately 65% of our student population. When we last talked with you, we discussed that we have laid out plans to expand 10.0 to our nursing programs. We expect the second phase of Lincoln 10.0 to begin implementation during 2026. After nursing transitions to the Lincoln 10.0 model, and some smaller programs also transition, our goal is to have 95% of our students on Lincoln 10.0 by the end of 2027. Lincoln 10.0 is truly transformational for our students, our instructors, and our entire organization, and has enabled the successful execution of our key growth initiatives which are focused on new campus development and program replication at existing campuses. During 2024, we opened the East Point campus in metropolitan Atlanta, the first new Greenfield campus developed by Lincoln in over a decade. The campus, which is our second in greater Atlanta, has been a tremendous success and exceeded all of our internal objectives. During 2024, East Point enrolled more than 700 students by the third quarter and was operating in the black. East Point's performance has increased our confidence in our new campus development strategy, which is set to make major strides in 2025. Overall, three new Lincoln campuses will open in 2025. Our Levittown campus is a relocation of our Philadelphia facility and is expected to open during the third quarter. The Levittown campus will enable us to add three high-in-demand programs that our previous facility space constrained us from doing. In Nashville, our relocated campus has already started a welding program with the remainder of the students moving over by the end of the first quarter. Then later in the year, we will launch the new HVAC and electrical programs there. This new facility replaces a tired collection of outdated facilities with one new state of the industry facility that has the look and feel of our very successful East Point campus. The building has 100 welding booths, which is 40 more than they have today, the latest alignment racks and other equipment from Hunter, brand new environmentally friendly spray booths from GFS, Electu training equipment, a Peterbilt training center, and much more. We also are rebranding this campus NADC, Nashville Auto Diesel College, in honor of its historic position as a leading career technical college that has served this country since World War I. Furthermore, we have recreated and updated the school's Hall of Fame room, which recognizes the hundreds of graduates who have moved into leadership positions throughout the automotive and diesel industry across the country. The campus sits on a hill along a major highway with a sweeping view of the Nashville skyline. I encourage any of our investors to visit this campus and see for yourself what an industry-leading career technical school looks like. Our third campus scheduled to open in late 2025 is in Houston, Texas, which is a new market for Lincoln and will be our second campus in Texas. As with East Point, this campus will have automotive, HVAC, electrical, and welding. During the fourth quarter of 2024, we announced we entered into a lease to develop a new campus in Hicksville, New York, which is on Long Island. We expect this new campus will complement our very successful campus in Whitestone, Queens, just as our East Point campus has benefited our Marietta, Georgia campus since its opening in March. We have a partnership with the Greater New York Automotive Dealers Association and know that there is consistent demand for technicians on Long Island. Through our electrical program added to the Whitestone campus several years ago, we also know there is also strong demand for the skilled trades in this region. The plan is for the Hicksville campus to open in late 2026 and offer automotive, welding, HVAC, and electrical. In addition to new campus development, we are also strategically replicating and expanding successful high in demand programs at our existing campuses. Our updated plan calls for adding 12 programs, five of which were launched in 2024 and seven more expected to be operational by the first half of 2025. As part of our program replication and new campus development effort, we are also constantly assessing the ability of our programs to develop the highest returns on investment for our students. As a result of this process, we decided to stop offering cosmetology, which resulted in the sale of our Euphoria campus in Las Vegas at the end of the fourth quarter. We're also exiting two culinary programs and a massage therapy program. Exiting these programs that deliver lower student return on investment often frees up facility space to implement our program replication strategy. For instance, at our Melrose Park campus, we are teaching out a collision program that had 80 students and using that space to add 80 more welding booths, an HVAC program, and our third Tesla program under our corporate partnership with them. As a result, the space that served only 80 students can now train upwards of three times as many students for careers with higher compensation and clearer career paths. Our constant reassessing of the student's return on investment as well as our real estate needs and uses is part of our plan to boost shareholder returns and achieve around 16% EBITDA on our revenue. On the corporate partnership front during 2024, we added, expanded, or renewed relationships with 10 corporations. The interest from corporate America in Lincoln is as high as it's ever been and the scope of services under our corporate partnerships continues to expand. An excellent example of this is the five-year workforce development agreement with Container Maintenance Corporation at their Charleston, South Carolina facility. And we're hoping that in 2025, we'll enter into new agreements structured somewhat similarly to this one with other companies. Our strong top line growth, particularly with student starts, has resulted in higher expense spending. However, we continue to see progress in operating efficiencies from the implementation of Lincoln 10.0. During the fourth quarter, we continue to see declines in educational services and facilities expense as a percentage of revenue, and we are generating higher returns from our marketing investments. We continue to make progress with our efforts to enhance operating leverage across our system, and the application of Lincoln 10.0 to our nursing programs should be a further contributor in the future. As we look ahead to 2025, we've had a very solid January and today provide guidance calling for continued solid growth as we layer on new campuses and new programs at existing campuses while continuing to drive efficiencies across our system. Brian will share with you shortly our guidance. With the new administration in Washington, we expect there will be a more level playing field among institutions providing educational services and skills training to individuals. At the same time, we believe resources will continue to be made available to students learning essential skills and training that will enable us to live the life we have grown accustomed to. We have proven our commitment to providing only high ROI programs that benefit students, their families, and their communities, and our high graduation rate as well as graduate placement rate indicate we offer an excellent return on investment. During our last call with you in November, I noted the opportunities for Lincoln have never been greater. If anything, that is even more the case today, four months later in late February. Employers continue to struggle to find technicians, electricians, welders, and healthcare workers, and through our lead generation programs, we have seen record levels of interest in our curriculums. We see the need for what we do growing, regardless of macroeconomic conditions or political agendas, and have transformed our company into an exceptional provider of educational services, meeting the needs of America's corporations, as well as America's workforce, as we continue to work to be a leading voice for middle skills learning in this country. We also have in place the financial resources to carry out our growth strategies, achieve our objectives, and generate increasing returns to our shareholders. Finally, I'd like to note, I'll be meeting with investors over the coming weeks at various locations around the country. Brian and I will be attending the annual Roth Conference next week, being held in Dana Point, California, from March 16th to 18th. Additionally, I'll be in Boston and Montreal on March 19th and 20th for a Lake Street-sponsored non-deal roadshow, and in Chicago and Milwaukee on March 24th and 25th, respectively, for a Barrington-sponsored non-deal roadshow. I believe our story resonates with many different investment philosophies. So making time to meet and educate investors about the exciting developments campus expansion, and enhanced valuation potential offered through our shares is an important goal of ours. Now I'll turn the call over to Brian Myers so he can review some of our recent financial highlights and guidance. Brian?