Lincoln Educational Services Corporation

Good day and thank you for standing by. Welcome to the third quarter 2025 Lincoln Educational Services Earnings Conference call. At this time, all participants are on 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today. Michael Poliview, you may begin.

Thank you, Kevin. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results for the third quarter ended September 30, 2025, as well as recent corporate developments. 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 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 forward-looking statements as a term that's identified in the 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. Prolipid 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 Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-look-up statements are based on information available at the time those statements are made and management's good faith believes as of the time with respect to future events. All forward-look-up statements are qualified in their entirety by the cautionary statement. Lincoln takes no obligation to publicly revise or update any forward-look-up statements, 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 ask questioners to limit themselves to two questions and then re-queue to ask any additional questions. In advance, we thank you for your cooperation. 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 for our review of another exceptional quarter of operating and financial performance for Lincoln Tech. Our third quarter student start growth of 6% exceeded our internal forecast and marked the 12th consecutive quarter we grew student starts over the prior year's period. We also continued to realize double-digit growth rates in total student population, total revenue, and consolidated adjusted EBITDA over the prior year periods, while also recording the third consecutive quarter of declining year-over-year bad debt levels. We generated 12 cents a share in net income while continuing to invest in our highly successful and expanding growth strategies, and once again, are increasing our guidance for full-year financial results. Brian will provide the details on the guidance. Lincoln has earned the well-deserved reputation for setting the standard of excellence in helping American corporations and organizations in their constant search for employees trained in skilled trades, such as HVAC installation repair, residential and commercial real estate electrical systems installation and repair, automotive and diesel systems maintenance and repair, welding and nursing, and other healthcare professions. Careers in these fields offer graduates secure, rewarding, and advancement opportunities likely to remain in strong long-term demand despite advancements in artificial intelligence. Recently, our growth has accelerated due to the nation's increased interest in skilled trade careers and through our successful development of Greenfield campuses and the expansion of successful programs to existing campuses. Since the beginning of 2024, we have opened new campuses in East Point, Georgia and Houston, Texas, while relocating outdated and space-contrained campuses in Nashville and Philadelphia to new and expanded state-of-the-art facilities. As we reported during our second quarter call, East Point's start rate after 18 months of operation achieved a level we plan to achieve after three years of operation. Due to this exceptional growth, we have secured an additional 15,000 square feet of space immediately adjacent to our current facility to meet the increasing demand. Meanwhile, at Nashville, starts and existing programs at the new campus exceeded our expectations. The expanded campus enabled the addition of electrical and HVAC programs, which also added to the momentum. In Levittown, Pennsylvania, we completed the transfer of our automotive program from Philadelphia and have started our first classes in HVAC, welding, and electrical. Finally, we began our first classes in our new Houston, Texas campus during the third quarter, and the response also is exceeding our pre-opening expectations. East Point, Nashville, Levittown, and Houston are generating stronger and faster returns than we anticipated when we made these investments. This both increases conviction in our greenfield and expansion strategy and is accelerating our growth, allowing us to fund our ambitious growth plans from operating cash flow supplemented with our credit facility for seasonal needs. New campus development has driven about half of our recent start growth, and the implementation of our innovative Lincoln 10.0 hybrid teaching platform, increasing returns from marketing efforts, and the expansion or addition of programs have generated good solid organic growth at existing campuses. As a result, we are realizing increasing levels of instructional efficiencies, space efficiencies, and organizational productivity through Lincoln 10.0 and other initiatives. Brian will provide more details on the progress we are making by leveraging our operating expenses to generate cash flow that is funding our expanded growth objectives in a few minutes. As the overall national growth and new job creation slows, interest in skilled trade training as an alternative to the traditional four-year college education continues to expand. The federal government's actions impacting student loans have further fueled this interest, and our team is executing our updated growth strategies for the benefit of our students, corporate partners, instructors, and shareholders. Last week, we announced plans to expand Lincoln's presence in Texas by developing a new state-of-the-art campus in Rowlett, Texas, a northern suburb of Dallas. This new campus, our 24th nationwide, is located near major interstate highways 635 and 30 and will complement our highly successful Lincoln Tech campus in Grand Prairie, Texas, which is west of Dallas. The new 88,000 square foot campus will have a capacity for over 1,600 students and will offer automotive, welding, electrical, and HVAC training when it opens in the beginning of 2017. We have found that by having two strategically located campuses in growing metropolitan markets, we are able to leverage resources and enhance our ability to serve students, instructors, and corporate partners. In Atlanta, our two campuses located in Marietta and East Point have both benefited from marketing and other corporate resources, resulting in higher-than-expected starts at both campuses. We are hoping to generate similar leveraging opportunities in the Dallas market when the Rowlett campus opens. Similarly, our new campus under development in Hicksville, Long Island is progressing towards opening in late 2026 and will be our second campus in the metropolitan New York City area where we have successfully operated our Queens campus for over 20 years. With each new campus, our objective is to achieve 25 to 30 million in annualized revenue and 7 to 10 million in EBITDA for the fourth year of operation, if not sooner. In addition to new campus development, program expansion or replication at existing campus, sorry, in addition to new campus development, program expansion or replication at existing campuses is contributing to Lincoln's growth. We added or expanded six programs at existing campuses during 2024 and are well on the way to add five more this year. In total, these 11 programs are a key contributor to our start growth. Lincoln's partnerships with corporations throughout America have long been a contributor to our success. Our tailored training for these companies helps them close the workforce skills gap while providing graduates with secure, rewarding career opportunities with advancement potential. This year, many potential partners have extended decision-making timelines, largely due to ongoing economic uncertainty. However, during the third quarter, we did expand our innovative training program with CMC Corporation, under which we are training their employees at their facilities rather than at Lincoln campuses. We signed our original five-year agreement with the company in 2023 and believe our extended partnership with CMC illustrates the contribution we are making to closing their workforce skills gap. Another key growth initiative at Lincoln involves our healthcare programs. Our new leadership for this segment is hard at work developing changes to our instructional model and improving operating effectiveness and efficiency. One area of focus is to expand our offerings beyond the current LPN certificate so that students can earn RN degrees. Such a development would substantially increase our addressable market in the nursing field. Meanwhile, last quarter we talked about our efforts to regain enrollment status at our Paramus Nursing Program. We have now exceeded the graduation benchmark at this program for the past 12 months and have received approval from the State Board of Nursing to begin re-enrolling students starting in January of 2026. This is great news and is a testament to our ability to deliver quality nursing training across New Jersey. New Jersey, like most of the nation, faces a severe shortage of nurses at all levels, and we look forward to doing our part to lessen the shortage and bring greater and better nursing care to the state. We also introduce you to our high school share program during our last call and have made some substantial progress with this initiative. For instance, at our Mahwah, New Jersey campus, the number of students enrolled through high school share has doubled from last year. More and more school districts in New Jersey, as well as other states where Lincoln operates, have inquired about implementing a share program at their schools. Under this program, students attend linking classes during their junior and senior year and then continue after high school to gain their certificate in less time, which accelerates their entry into rewarding careers. With school districts under constant budgetary challenges, our initiative enables the continuation of skilled trades training within the high school while building our enrollment. We are quite excited about the potential for this initiative. It, along with additional investments in our high school outreach programs, lead us to be optimistic about our opportunities to enroll more high school students graduating in the spring and summer of 2026. In addition to these initiatives, we're also exploring expansion efforts through corporate development activities, including acquisitions and joint ventures. Recently, several startups targeting skilled trades have contacted Lincoln to explore ways we could facilitate their strategy through our capabilities. These discussions are in the early stage and require little, if any, of our development resources, but do illustrate the expanded interest in increasing skilled trades training in America to address the continuing skills gap. While there is a decided focus on growth at Lincoln, we continue to make investments in people and processes to ensure that we deliver an exceptional learning experience for our students. We want to be the best, and we want the best for our students. To achieve this goal, we are constantly evaluating new software, curriculum, and training aids. In addition, we want our instructors to have industry-recognized credentials that ensure they have the most up-to-date knowledge in their field so our students have an edge on their competition. With technology ever-changing, we are constantly in pursuit of what will help our students master the skills they desire to become the technicians, welders, and healthcare providers that will lead the next generation of skilled, hands-on professionals. We believe one way to measure the effectiveness of our investments in people and processes is our graduation rate, as well as the employment of our graduates in their field of training. Despite our growth in students, both metrics remain strong, and we are constantly evaluating ways to build on this success rate. For nearly 80 years, Lincoln has remained focused on delivering high-quality, life-changing career education, and no one else has our combination of longevity, scale, and proven experience. By continuing to expand our network of schools, replicating our most in-demand programs at our existing campuses while building new campuses in new and existing markets, we believe we will comfortably surpass the objectives established last year of approximately $550 million in revenue and approximately $90 million of adjusted EBITDA in 2027. Therefore, today, we are increasing our targets, which Brian will review in more detail in a few moments. While we are always evaluating acquisitions that make strategic and financial sense for our company and our shareholders, our new 2027 milestones will be achieved organically through our existing operations and new campuses developed internally. As I've discussed before, our country's existing severe skills gap will likely get worse before getting better, and we believe there are many significant underserved markets in America where employers and employees will benefit from our innovative and proven approach to skilled trades training. Despite all this positive news and solid execution, it appears that the market still does not understand who we are and what we can become. Furthermore, while others in our sector have had their businesses negatively impacted by internal execution challenges and from the external environment, we at Lincoln Tech have not. Consequently, I want to bring additional clarity to our story. First, while the government shutdown has been the longest in history, our students have continued to receive timely disbursements of federal aid used to finance their education at our schools. The US Department of Education reminded the higher education community of the minimal impact on students at the beginning of the shutdown and our businesses have not been affected. Second, we continue to see strong interest in our programs and the current environment for us has not lessened. Third, the decline in our healthcare segment is not meaningful, nor is it a concern. We've been rationalizing our program offerings for the past several years to focus resources on our most in-demand programs to meet market demand, as well to ensure that we have industry-leading curriculums and training experiences that will set our students apart and give them an edge in the employment market. Within our reported healthcare segment, there are non-healthcare programs such as culinary and IT, as well as small allied health programs such as patient care tech and dental assisting. We are selectively exiting these non-core programs and will continue to do so when we see better opportunities for the classroom space. Our focus currently is on our licensed practical nursing and medical assisting programs And during this quarter, these grew by 2%. And this is without LPN starts at our Paramus campus, which will restart in a few months. As we have mentioned in the past, we are continuing to work on plans to offer registered nursing programs in the not so distant future. Fourth, growth initiatives are meeting and exceeding our expectations and guidance. We are replicating our most successful programs wherever there is demand and we have space. And we are opening new campuses that our research tells us are underserved. In simple terms, we are constantly looking to double down on our success. Our minimum expectations for all these investments to achieve a threshold 20% IRR on a fully burdened basis, including all direct costs needed to open and operate these facilities. I'm very proud to say that to date we've exceeded this threshold. Fifth, We've been investing in our team to ensure that we have the talent to not only deliver on what we've announced to date, but also to enable us to capitalize on new opportunities as they arise. One clear example of this is our significant refocus on growing our high school student population. Our recent high school results, along with the increased outreach by numerous high schools around the country who are asking for ways for us to help with vocational training, are clear indicators that the stigma of career technical training is lessening. students, parents, and even high school guidance counselors are more interested in the trades than ever before. To tap into this opportunity, over the past seven months, we have hired new talent and are reinvigorating our high school recruiting strategy, and we are already seeing good results. As many of you know, I've been with Lincoln Tech for nearly 25 years, and I believe that our organization has never been stronger nor has had as much growth opportunity as we have today. Moreover, we have consistently proven to ourselves that we can capture opportunities. We have achieved what we have set out to achieve and continue to find new opportunities. Recent survey results show that our employees have never been more engaged and satisfied. We are all working for the common good of our students so that they can graduate, launch their careers, and find satisfaction and pride. As obstacles arise, and they always do, we find solutions. Our business is strong and our company is vibrant. Finally, I'd like to note we will be continuing our investor outreach during the remainder of the fourth quarter. This week, we have several virtual meetings scheduled by Think Equity. Next week, we will be attending the Southwest Ideas Conference in Dallas. And later this month, we will be in Montreal on November 26th with Barrington. Next month, Brian will be attending Northland's virtual conference on December 16th. Additionally, we will be hosting an Investor Analyst Day at our new Nashville campus on March 19, 2026, to showcase the site and review our long-term growth plan and operating objectives. I urge you to contact Michael Polivio if you would like to attend. Finally, with Veterans Day being observed tomorrow, I want to extend our appreciation to our military members and their families for their valued service and sacrifice to our country. Now I'll turn the call over to Brian Myers so he can review some of our recent financial highlights and guidance. Brian. Thanks, Scott, and good morning, everyone.