Lincoln Educational Services Q4 2024 Earnings Call Transcript

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Provided by Quartr
February 24, 2025
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Operator

Good day, and thank you for standing by. Welcome to the Q4 twenty twenty four Lincoln Educational Services Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to turn the conference over to Michael Polivieux. Please go ahead.

Michael Polyviou
Managing Member at EVC Group LLC

Thank you, Lisa. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results and recent corporate developments for the fourth quarter and full year ended 12/31/2024. 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 are Scott Shaw, President and CEO and Brian Myers, Chief Financial Officer.

Michael Polyviou
Managing Member at EVC Group LLC

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 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.

Michael Polyviou
Managing Member at EVC Group LLC

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 Factors section of the annual report on Form 10 K and the quarterly report on Form 10 Q filed with the Securities and Exchange Commission. Total listed statements are based on the 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 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 thereof. One other housekeeping matter.

Michael Polyviou
Managing Member at EVC Group LLC

During the Q and A portion of the call today, we would appreciate if questioners limit themselves to two questions and then requeue 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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

The past year's performance and our outlook for 2025 increased the team's confidence that we can achieve our objective of approximately $550,000,000 in organically generated revenue and approximately $90,000,000 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 $30,000,000 in cash flow from operations. At the end of the year, our balance sheet showed nearly $60,000,000 in cash and no debt.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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 in closing their workforce skills gap. Lincoln's ten point zero 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 provides increased flexibility to our students who often need to balance work and life while earning their certificate or degree. We achieve this flexibility by combining hands on learning at campus facilities with a component of classroom work delivered through online instruction.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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 curriculum 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. Linkedin ten point zero 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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

When we last talked with you, we discussed that we have laid out plans to expand 10 to our nursing programs. We expect the second phase of Lincoln ten point zero to begin implementation during 2026. After nursing transitions to the Lincoln ten point zero model and some smaller programs also transition, our goal is to have 95% of our students on Lincoln ten point zero by the end of twenty twenty seven. Lincoln '10 point zero 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 Eastpoint campus in Metropolitan Atlanta, the first new Greenfield campus developed by Lincoln in over a decade.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

The campus, which is our second in Greater Atlanta has been a tremendous success and exceeded all of our internal objectives. During 2024, Eastpoint enrolled more than 700 students by the third quarter and was operating in the black. Eastpoint'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 is expected to open during the third quarter.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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 Eastpoint campus. The building has 100 welding boots, which is 40 more than they have today, the latest alignment racks and other equipment from Hunter, brand new environmentally friendly spray boots from GFS, elective training equipment, a Peterbilt training center and much more.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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 when an industry leading career technical school looks like. Our third campus scheduled to open in late twenty twenty five is in Houston, Texas, which is a new market for Lincoln and will be our second campus in Texas.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

As with Eastpoint, this campus will have automotive, HVAC, electrical and welding. During the fourth quarter of twenty twenty four, 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 Eastpoint 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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

The plan is for the Hicksville campus to open in late twenty twenty six 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 twenty twenty five. 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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

We are 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 clear career paths. Our constant reassessing of the students' 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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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 ten point zero.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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 ten point zero 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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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. Additionally, I'll be in Boston and Montreal on March for a Lake Street sponsored non deal roadshow and in Chicago and Milwaukee on March 2425 respectively for Barrington sponsored non deal roadshow.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

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?

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

Thank you, Scott, and good morning, everyone. As we reflect on 2024 financial and operational performance, we can confidently say it was a defining year for Lincoln. It was a year marked by strong financial results, the successful opening of our first Greenfield campus in many years and significant progress in our key growth and efficiency initiatives that are reshaping our path to profitable growth. In terms of full year financial highlights, we exceeded our most recent guidance for both revenue and starts and achieved the high end of our guidance for adjusted EBITDA and adjusted net income. I'll provide more details on our full year performance, but first I'll review the fourth quarter results.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

For the fourth quarter, total revenue grew by $16,900,000 or 16.4% to $119,400,000 mainly driven by our average student population growth of 13.7% quarter over quarter. Other contributing factors include tuition increases and our new Eastpoint campus, which contributed $4,400,000 to the top line during the quarter. We welcome nearly 3,500 new students during Q4, representing stock growth of 9.6% over last year. This solid growth marks nine consecutive quarters of stock growth over prior year. Operating expenses were $108,400,000 up from $93,600,000 last year.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

This increase was largely due to our direct costs associated with servicing, our larger student population and our expansion activities. However, as Scott mentioned, education service and facility expense as a percentage of revenue continued to decrease as we begin to realize operation efficiencies from our Lincoln Ten Point Zero education initiative. Adjusted EBITDA for the fourth quarter increased 22% reaching $19,200,000 compared to $15,700,000 in the fourth quarter of twenty twenty three. The quarter's adjusted EBITDA margin was 16.1. Our income tax provision was $3,700,000 or 35.3% of pre tax income.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

This was slightly higher than our full year tax rate of 32.8%. The increase is primarily due to a reconciliation of our actual 2023 tax returns, which included a state tax surcharge higher than initially anticipated. Lastly, for the quarter, our net income was $6,800,000 or $0.22 per diluted share and our adjusted net income was $9,500,000 or 0.31 per diluted share based on weighted average common shares outstanding of approximately $31,100,000 Shifting to the cash flow and balance sheet. As expected and consistent with our seasonality, the fourth quarter was our strongest cash generating quarter. We generated cash flow from operations of approximately $30,000,000 up 38% from prior year.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

During the quarter, we had capital expenditures of approximately $32,000,000 with about $25,000,000 paid. This exceeded our 2024 CapEx projections due to the opportunities that arose to accelerate construction projects for campus locations under development. It is important to note that around 70% of our total CapEx spend is related to growth initiatives. The overage in the quarter is a timing difference with shifting fronts from 2025 to 2024. As a result, the total project cost for these projects remain unchanged.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

We ended the quarter with cash of nearly $60,000,000 and total liquidity nearly $100,000,000 with no debt outstanding. Moreover, we had positive networking capital of $21,000,000 Lastly, as previously announced, we completed the sale of our Euphoria campus in Las Vegas in January. Accordingly, the net assets of this campus were classified as held for sale on our balance sheet and its operational results are reflected on the transitional segment at year end. Next, I'll review our full year results. We delivered 440,100,000 in total revenue reflecting a robust 16.4% year over year growth.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

This growth is a direct result of our continued strong demand for Lincoln's programs with their 11.5% growth in our average student population driven by a 15.2 increase in student starts. We finished 2024 with approximately 1,900 more students than the prior year, positioning us for a strong start in 2025. We also delivered strong performance across adjusted EBITDA and adjusted net income, both coming in the high end of our guidance range. For the full year of adjusted EBITDA increased nearly 60% reaching $42,300,000 up from $26,500,000 in 2023. Also for the full year adjusted net income was $17,300,000 up 2,500,000 or 70% over prior year.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

One of the key drivers of our success in 2024 was our new East Point campus performance. This campus exceeded our initial internal projection by approximately $6,000,000 revenue and $2,000,000 in EBITDA. This strong opening performance and the rapid ramp up to profitability highlights our solid return on investment and reinforces our confidence in our new program and our new campus strategy. As mentioned, Lincoln is making a significant capital investments as part of its growth initiatives. For the full year, the company had capital expenditures of $64,100,000 of which $56,800,000 were paid and reported on the cash flow statement.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

Like the quarter, 70% of the total capital expenditures in 2024 relate to growth initiatives. In addition to our new campus locations, as Scott mentioned, we project to launch a total of 12 programs between 2024 and 2025, comprised of high in demand program replications or expansions at existing campuses. On average, these programs are estimated to generate around $1,000,000 in EBITDA after three years, determining significantly to future profitability. In addition to these growth initiatives, we are continuing to analyze acquisition opportunities and evaluating new and adjacent markets to expand our campus footprint. As always, our goal is to identify strategic investments that offer the highest return on investments that are consistent with our mission of providing training for in demand careers for our students.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

As we plan for long term growth, we have taken prudent steps to enhance our financial flexibility even with our strong cash flow and $100,000,000 of liquidity. For example, we are close to amending our credit agreement to increase our availability. Based on our strong performance in 2024 and our positive outlook for 2025, we remain confident in our ability to execute on our long term growth strategy. We are well positioned to achieve our target of $550,000,000 in revenue and $90,000,000 of adjusted EBITDA by 2027, reflecting our commitment to drive sustainable growth and creating value for our shareholders. We are pleased to announce the following guidance ranges for 2025.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

Revenue $480,000,000 to $490,000,000 adjusted EBITDA $55,000,000 to $60,000,000 net income $8,000,000 to $13,000,000 student stock growth of 8% to 12% capital expenditure of $70,000,000 to $75,000,000 As a reminder, our guidance excludes non cash stock based compensation and one time non recurring items. Additionally, guidance excludes pre opening costs as well as net operating losses for new campuses up to four quarters after campus opens or until the campus becomes profitable, whichever occurs first. For our relocated campuses, Nashville and Levittown, adjustments have been made to exclude pre opening costs and relocation costs through the first quarter in which the relocation is completed. Also in the case of program replications, adjustments are made to exclude net operating losses through the quarter in which the program is launched. These adjustments provide a clearer view of our underlying performance.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

I'd like to take a moment to share some additional color on our guidance. We project revenue growth to be approximately 10% at the guidance midpoint with the high single digit growth in each quarter except Q3, which is expected to deliver our strongest growth in low to mid single digits. The increased revenue results from both our higher 2025 beginning population with almost 1,900 more students and our higher student starts during 2025, which are projecting to increase 8% to 12% over 2024. Excluding the starts from our former euphoria campuses, We expect starts to follow our typical seasonality with the exception of a class start shift from Q2 to Q3 in 2025. Due to our new Lincoln ten point zero model, start dates can shift slightly year to year.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

In 2024, a start occurred in the June, but in 2025, it will move to the July. All other class starts remain comparable to 2024 within the same quarter. For reference, the June July start is one of our largest starts with approximately 2,300 starts in the late June twenty twenty four start, and we forecast a comparable number for the July 2025 start. Because of this shift, Q2 starts will decrease, but on a combined basis, Q2 and Q3 starts are projected to increase in the high single digits. It's important to note that timing change have minimum impact on overall revenue and expect year over year revenue growth in all quarters.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

At the midpoint of our guidance, we project adjusted EBITDA to increase 36% with around 30% increasing in the first half and a stronger growth in the second half at approximately 40% with Q4 delivering the highest growth percentage. The higher growth rate for adjusted EBITDA compared to projected revenue growth reflects the operating leverage of our business model. Regarding capital expenditures, we are expecting a range between $70,000,000 to $75,000,000 for the year with approximately 70% allocated growth initiative. Additionally, we plan to invest around $10,000,000 in our ongoing efforts to upgrade our training equipment, ensuring that our students have access to the latest tools and technology. The remaining capital expenditures will be focused on enhancing our facilities and classrooms, thus improving the student experience.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

With regard to depreciation and amortization, we expect a significant increase in 2025, projecting an expense of $21,500,000 compared to $12,400,000 in 2024. This increase is primarily driven by our recent capital investments. In terms of the quarterly cadence of depreciation and amortization expense, we expect Q1 to account for approximately 20% of the total expenses, Q2 and Q3 to each represent about 25% with the remaining 30% in Q4. For net interest expense, we expect an expense of approximately $2,500,000 reflecting an increase of around $2,000,000 compared to last year. This increase is primarily due to a decline in interest income.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

We expect the total expense for the year to be fairly evenly distributed across the quarters with a slight uptick in the later half of the year. Our income tax provision is expected to be approximately 30% of pretax income for 2025. In Q1 and Q2, we reject an offsetting tax benefit around $50,000 to $100,000 due to discrete tax item related to the vesting of stock. We forecast our diluted weighted average common shares outstanding for 2025 to range from $31,100,000 to $31,400,000 for the quarters and approximately $31,300,000 for the year. Finally, we project net income growth to be approximately 6% at the midpoint.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

While this represents growth, it is important to highlight that net income growth is somewhat more restrained compared to our adjusted EBITDA growth. This is primarily due to an increase in depreciation expense resulting from our ongoing capital investments. However, as these initiatives are completed and operations ramp up, we expect net income growth to align more closely with our adjusted EBITDA growth. For the full year, we anticipate that the first three quarters will be comparable to the prior year with growth in Q4 driving the overall improvement for 2025. As a side note, the projection we project our adjusted net income growth to be approximately 13% at the midpoint.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

In conclusion, we are extremely pleased with our performance in 2024 and remain optimistic about the continued strength of our business heading into 2025. Our commitment to strategic growth, operation efficiencies and creating value for both students and shareholders remain at the core of our mission. I'd like to take this opportunity to thank our dedicated Lincoln team for their hard work and unwavering commitment to providing exceptional education and training to our students, while driving shareholder value. Now I'll turn the call back over to the operator for questions. Operator?

Operator

Thank And our first question is coming from the line of Alex Paris of Barrington Research. Your line is open.

Alexander Paris
President & Senior MD at Barrington Research Associates

Thank you and thanks everyone for allowing my questions. Congrats on the beat and guide above for the quarter. First of all, first question about new campuses and new programs. In your prepared comments, Scott, are there any changes to that plan versus Q3? Q3?

Alexander Paris
President & Senior MD at Barrington Research Associates

It didn't sound like it to me. It sounded like Nashville is expected to be open in the first half. You're saying classes have already started this week with welding. Levittown, I think we had previously thought it opened in Q3 in Houston by year end. So that's my first question.

Alexander Paris
President & Senior MD at Barrington Research Associates

Any update there?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Yes, no, everything appreciate that Alex. Everything is on track. Actually Nashville, we moved in a little bit faster than we thought, which is good news. As I said, welding has already moved over. In the next couple of weeks, the rest of the students will move over.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

It's been quite fun frankly to see their expression as they go from, I'll just say, a very tired facility into this brand new facility. So that's been great. And then you have Levittown, I'm going to anticipate frankly that same excitement because the students are going to go from a 65 year old facility into this brand new facility and we anticipate that to be early Q3. So that will be a positive experience. And Houston remains on track.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

We're still building that out and that should open up in the last quarter. So everything is still status quo from what we told you last time, if not a little bit better.

Alexander Paris
President & Senior MD at Barrington Research Associates

Okay. And then a related and similar question on new programs. You did five last year, you expect to do seven this year. I added my notes that you were going to do four this year. Is that an increase or were my notes in error?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Well, there's always some little fluctuation in here. I don't know if your notes are in error or not, but the number that we just gave you is the right number out there.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

Right. One was a welding expansion, so you might not have had that one for 2024.

Alexander Paris
President & Senior MD at Barrington Research Associates

Got you.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

That's probably what it was.

Alexander Paris
President & Senior MD at Barrington Research Associates

Okay. That's great. I'll get back in the queue. Thank you.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Sure. Thanks, Alex.

Operator

Thank you. One moment for the next question. And our next question will come from the line of Steven Frankel of Rosenblatt Securities. Your line is open.

Steven Frankel
Managing Director, Senior Research Analyst at Rosenblatt Securities

Good morning and congratulations. Clearly with the new administration, we're in an environment where the regulatory burden is going to be eased and that's great news for companies like Lincoln. My question is, what about the other potential impact, which is a lot of turmoil within the Department of Education? What are you hearing? What can you do if there are delays in things like approving Title IV funds or expansions?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Yes, it's a good question. And actually I was in Washington, I guess two weeks ago at a conference and we were able to hear a lot of people from the department as well as others speak to us directly, as well as we are forming partnerships with individuals that have direct, I'll say access into both the administration and the Department of Education. And in those conversations, frankly, we've been talking about both aspects. We've been saying, first of all, we want this level playing field so that we get treated or all schools are treated the same. And that definitely seems to be a mindset that the new administration coming in believes in and will be implementing, which I think will be helpful to us and frankly helpful to students across the board to have an equal playing field.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

At the same time, we're also having conversations with them about the basic function of what the department should be doing in the blocking and tackling. And just as we had our Title IV not turned on as readily as it should have been when we opened up Eastpoint, we've been sharing those stories with the new administration and the folks going into the department. So my feeling is that it's certainly not going to be as bad as it was and it's only going to get better for us over time.

Steven Frankel
Managing Director, Senior Research Analyst at Rosenblatt Securities

Okay, great. And then any mix changes in the skilled trades as you look at the incoming population and the pipeline? Are you seeing any peak in things like auto, diesel and you did seem to hint about collision maybe not being as attractive as an area as it once was?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Yes. So on the skilled trades side, I'd say it's probably pretty consistent across the skilled trades. We're obviously replicating more of those programs right now than our other programs. So there's probably not probably there definitely is more growth in that area for us just because the skilled trades take up less space than rolling out another automotive program. As far as auto and diesel, there still remains good organic growth there.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

And you mentioned collision. Collision, it's interesting how the demand for that has softened. I remember over fifteen years ago, we had so much demand in collision at one campus, we actually had a midnight to five a. M. Shift, but those days are behind us.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

So we'll continue to manage collision and it takes up a lot of space. And as I mentioned in my remarks, we decided to teach it out at our Melrose facility just because we were seeing demand from other programs be so much greater. So we'll continue to look at our footprint, we'll continue to look at our programs, assess what the market wants and needs and then make adjustments accordingly.

Steven Frankel
Managing Director, Senior Research Analyst at Rosenblatt Securities

All right. Thank you. I'll jump back in the queue.

Operator

Thank you. One moment for the next question. Our next question will be coming from the line of Eric Martinelli of Lake Street. Your line is open.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yes. I wanted to refer to the strategic growth plan. The $550,000,000 revenue number, does that include the new Hicksville campus?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

It does. Right, Brian? It does. I apologize. I apologize.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

That will be one of our adjustments, missus, yes, because of the timing of the launch. So it does not.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Okay.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

And when is that expected to come online? I think you said 2026?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Yes, fourth quarter of twenty twenty six, so right at the end of the year.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Got you. Okay. And then as far as the adjusted EBITDA margin that's also included in the strategic growth plan, you're targeting 16%. You just gave a guide for '20 '20 '5 percent that's roughly 12%. Is this kind of a is it wrong to think of it as just kind of an incremental stair step year by year between 2025 and 2027?

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

Yes, I think that's fair. Yes, I think '26, we're hoping for it to ramp up a little quicker and then it'll ramp up a little bit from '26 to '27 a little bit more. As these new programs start rolling out, they really get add to our margin as well.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Okay. Thanks for taking my questions.

Operator

Thank

Operator

you. One moment. And we do have a follow-up from the line of Alex Paris of Barrington. Your line is open.

Alexander Paris
President & Senior MD at Barrington Research Associates

Hey, thanks for taking my follow-up. And just to kind of piggyback on a recent question about skilled trades and change in mix. I was looking at the healthcare and other professions starts and so on. And in the quarter, the starts were down 17% where they were up 31% in transportation and skilled trades. What color can you give us on healthcare and other professions, which again starts down 17%, but average population was still up modestly about 2%?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Sure, Alex. So there's a number of moving pieces there. One, we were exiting our cosmetology program. So there's no cosmetology in part of that and that was declining. We were getting out, as I mentioned, out of our culinary programs and so there's aren't as many starts there.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

We got out of a massage therapy program. We got out of another small IT program to expand electrical. So there's a little bit of noise in that kind of healthcare and other section. As well as on the nursing side, as we had reflected before at our one of our seven nursing campuses at Paramus, we aren't able to enroll students until we prove to the nursing board that our pass rates are above the benchmark, which we're now achieving. Now we just have to get them on board for that.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

So we have fewer nursing starts there. And then also just we had a delay in a nursing start from the fourth quarter into the first quarter. So long story short, a lot of little moving pieces there as far as leads and involved interest, there's no let up at all in the healthcare side. And I would expect to see that showing nice good growth in 2025.

Brian Meyers
Brian Meyers
Executive VP, CFO & Treasurer at Lincoln Educational Services

And Alex, to piggyback on that to give you a little bit more comfort for the year, when you look at programs that weren't being toward out like on a same program base for that segment, it would have been up for the year about 10% when you look at slightly below 10%, it would have been up. If you take out the nursing start, the nursing at Paramus and the other programs that Scott highlighted.

Alexander Paris
President & Senior MD at Barrington Research Associates

Starts would have been up 10 for the year.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

That's 10% for the year. Correct.

Alexander Paris
President & Senior MD at Barrington Research Associates

Yes. Got you. And then just a point of clarification, the PRAMIS test scores, are you saying that there where they need to be now, it's just a matter of waiting for the Nursing Board to approve new starts?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Yes, absolutely. So what we've been tracking it obviously quarter by quarter and certainly by the end of the March, we'll have four quarters where it's significantly above benchmark. Our challenge though is the Board doesn't necessarily look at it on a quarterly basis, but looks at an annual basis. So we'll be doing our best to educate them and hopefully get them to look at us faster than they typically would. But just to be completely transparent, we're not anticipating in our budget any starts in nursing and Paramus for all of 2025.

Alexander Paris
President & Senior MD at Barrington Research Associates

When does the nursing board gather to consider that? Is it end of year?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

End of year, end of year is when they would normally look at it. But as I said, we're trending way above benchmark. So from a quality standpoint, that makes me very comfortable to know that we've corrected the situation and cleaned up, I'll say, the hangover from COVID when so many students kind of put their nursing education a little bit to the side and hate to say it lost a bit of their knowledge when they went to take the test, but we've now kind of cleaned that up and provided all the training for these students. And so the pass rates are, as I said, very solid.

Alexander Paris
President & Senior MD at Barrington Research Associates

And so now essentially all seven campuses have NCLEX scores that are where they need to be?

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Yes, absolutely.

Alexander Paris
President & Senior MD at Barrington Research Associates

Good. Great to hear. Thank you very much. Congrats again.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

No problem. Thanks for your question.

Operator

And at this time, there are no more questions in the queue. I would like to go ahead and turn the call back over to Scott for closing remarks. Please go ahead.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

Thank you, Lisa. And thank you all for joining us today and learning about our strong 2024 and continued momentum as we enter 2025. We've passed an inflection point in our country as more and more people are seeking a quick cost effective path to enter the workforce and develop skills that can serve them a lifetime. Interest in our programs continues to grow as we expand our footprint and graduates continue to achieve a high ROI for their investment. At the end of the day, we are a people focused business and our success would not be possible without the commitment and dedication of our faculty and staff who day in and day out engage with our students to motivate, educate and inspire them to reach their potential.

Scott Shaw
Scott Shaw
Chief Executive Officer and President at Lincoln Educational Services

At Lincoln Tech, we know our success is directly linked to our student success and we will continue to share with the world that middle skills careers like the ones we offer lead to rewarding productive and fulfilling careers that our nation desperately needs. I'd like to thank our shareholders for their support and our entire team for their dedication to achieving our goals. I hope to see you during my time on the road visiting shareholders, employers and politicians as I share the Lincoln Tech story. Thank you all again and have a great day.

Operator

This does conclude today's conference call. You may all disconnect.

Executives
    • Scott Shaw
      Scott Shaw
      Chief Executive Officer and President
    • Brian Meyers
      Brian Meyers
      Executive VP, CFO & Treasurer
Analysts
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Earnings Conference Call
Lincoln Educational Services Q4 2024
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