Lincoln Educational Services Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 12, 2025

Key Takeaways

  • In Q1 2025, Lincoln reported 16% revenue growth and 56% adjusted EBITDA growth year‐over‐year, driven by a 20% increase in student starts and a 6.2% rise in average student population.
  • The company raised its full‐year 2025 guidance to $485M–$495M in revenue, $58M–$63M in adjusted EBITDA, $10M–$15M in net income, and 10%–14% student start growth.
  • The Lincoln Ten Point Zero hybrid teaching model delivered improved instructional and space efficiencies, enhanced student flexibility, and has supported double‐digit start growth for six consecutive quarters.
  • Lincoln’s new campus development strategy advanced with East Point Atlanta turning profitable ahead of schedule and three additional campuses opening in 2025 (Nashville Auto Diesel College relocation, Levittown PA, and Houston), each expected to generate ~$6M EBITDA and ~$20M revenue by year four.
  • Operational efficiencies led to a 20% year‐over‐year reduction in cost per start, lower education service & facility costs as a percentage of revenue, and declining bad debt expense, supporting margin expansion.
AI Generated. May Contain Errors.
Earnings Conference Call
Lincoln Educational Services Q1 2025
00:00 / 00:00

Transcript Sections

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Operator

Good day and thank you for standing by. Welcome to Q1 twenty twenty five Lincoln Educational Services Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press 11 on your telephone.

Operator

You will then hear an automated message advising your hand is raised. To answer your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Michael Polivio. 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 first quarter ended 03/31/2025. 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 a term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, and continue, as well as similar expressions are intended to identify forward looking statements. Forward looking statements should not be read as a guarantee of future performance.

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 ks and the quarterly report on Form 10 Q filed with the Securities and Exchange Commission. Forward looking statements are based on 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 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 ask listeners to 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, and I hope you all had a nice Mother's Day yesterday. Thank you for joining us today for our review of Lincoln's very strong first quarter financial and operating performance. We've talked about the strategies we've put in place to generate consistent growth, including the Lincoln ten point zero hybrid teaching model, the new campus development program, replicating high in demand programs at existing campuses, signing corporate partnerships, and consistently providing high value training and skills to our students to prepare them for rewarding careers. During the first quarter of twenty twenty five, our financial results excluding the Transitional segment illustrated the increasing returns we are realizing from these strategies as revenue grew 16% and adjusted EBITDA grew 56%. In addition, the results have enabled an increase in our full year financial guidance as well as our confidence in achieving our objective of approximately $550,000,000 in organically generated revenue and approximately $90,000,000 in adjusted EBITDA in 2027.

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

For the past two years, the Lincoln ten point zero hybrid teaching model has provided increased flexibility to our students who often need to balance work and life while earning their certificate or degree. We've 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 to 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. As the first phase of Lincoln ten point zero was implemented, we generated instructional efficiencies, space efficiencies, and organizational productivity.

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

With the first phase completed, the efficiencies have increased, which contributed to our adjusted EBITDA growth as compared to last year's first quarter. Brian will provide more detail on the leverage we achieved from our operating expenses during the first quarter in a few moments. Our student starts at 21 campuses operating in the first quarter grew an exceptional 20% over the prior period and student starts have now increased at a double digit rate for six consecutive quarters. As I mentioned, we believe Lincoln ten point zero has played an important part in this growth. In addition, our new East Point campus continues to contribute to our strong start growth and our marketing programs continue to be increasingly effective at generating leads while lowering the cost of those leads.

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

Lincoln is 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. Our new campus development strategy is designed to expand our model to underserved markets within The United States and during the first quarter generated substantial progress. The first new campus under our expansion strategy, East Point in Metropolitan Atlanta opened in March of twenty twenty four and has demonstrated tremendous success in its first year of operation, becoming profitable well ahead of schedule. The strong performance of East Point has reinforced our confidence in our new campus program strategy, which includes the opening of three new campuses during 2025. The first of the twenty twenty five openings took place in the first quarter as we completed the relocating of the Nashville campus to a state of the art facility overlooking the city skyline.

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

Rebranded as the Nashville Auto Diesel College or NADC, the campus will expand its offerings to include new electrical and HVAC programs. NADC students and faculty have warm warmly embraced the new campus's 100 welding booths, the latest alignment racks from Hunter, brand new environmentally friendly spray booths from GFS, Elektude training equipment, a Peterbilt training center, and much more. We will mark this exciting milestone on June 5 with a grand opening honoring NADC's historic position as a leading career technical college serving this country since World War I. This event will also exhibit the school's Hall Of Fame Room recognizing the hundreds of graduates who have advanced into leadership positions throughout the automotive and diesel industry across the country. Meanwhile, our new campus in Levittown, PA, which will incorporate our current automotive program in Philadelphia is nearing completion and we remain on schedule to complete the move to this state of the art facility this summer.

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

The efficiency and additional space at the Levittown campus is enabling us to add another three programs in the market. We recently hosted local leaders at the campus, which generated a great deal of enthusiasm for the contributions Lincoln is making to the local community with this new facility. Our third new campus scheduled to open late twenty twenty five is our Houston campus, which is our second in Texas, but first in the Houston market, which represents fast opportunities. The current schedule calls for us to begin our first classes in automotive, HVAC, electrical and welding during the fourth quarter. Our fourth new campus is Hicksville, Long Island is under development and we anticipate it opening in the latter part of twenty twenty six.

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

As always, we continue to explore other underserved markets to determine additional new campus opportunities for Lincoln and we expect to announce additional new school openings before year end. Program replication at existing campuses is another of our key growth initiatives. During the first quarter, we opened an electrical program at our Lincoln, Rhode Island campus and expansion of our welding program at our Denver campus. We have five additional programs scheduled to begin operation as the year progresses. Our efforts to enter into new corporate partnerships continued during the first quarter.

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

The interest from Corporate America and Lincoln as a solution to closing the workforce skills gap remains strong. However, decision making timelines have lengthened primarily due to ongoing economic uncertainty. We continue to see resources being made available to students learning essential skills and training that enable us to live the life we have grown accustomed to. At the same time, our proven commitment to providing high ROI programs continues benefiting 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.

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

I believe that Lincoln Tech is uniquely positioned to capture an increasing share of the growing skilled trades training market. For over seventy eight years, we've remained focused on delivering high quality, life changing career education and no one else has our combination of longevity, scale and proven experience. Our growth strategy is simple. We will continue to expand our network of schools by replicating our most in demand programs at our existing campuses, while building new campuses in new and existing markets. Despite the uncertainty that many face with the ever changing economic landscape, our path forward is quite certain.

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

Our country has an existing severe skills gap, which most likely will get worse before it gets better. There are major initiatives underway that will drive this increased demand for skilled workers. Whether it's our Navy's need for 250,000 skilled workers over the next ten years to build three new submarines a year, or the electric utilities dire need to build new sources of electric power to fuel rapidly expanding demand caused by AI and the move towards electrification in general, or the expected massive on shoring efforts of our manufacturing base by the current administration to create greater economic security and prosperity, the demand for more talented men and women to enter the skilled trades will only increase and Lincoln Tech will be there to meet that demand. The good news for Lincoln Tech in our country is the resurgent interest in the skilled trades. The press has labeled this generation the tool belt generation.

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

We and others have had numerous stories on national and local TV highlighting the need for skilled workers, why more and more people are turning to the trades, and why schools like Lincoln Tech provide an excellent alternative to obtaining a four year degree. Across the country, we're seeing increased demand by adults and high school students. The audiences and engagement with parents is growing, even among those communities with historically high number of students going to the traditional four year colleges. The message is sticking and it's being reflected in our results and rising interest. As we saw with the latest jobs report for April, employers continue to struggle to find technicians, electricians, welders, and healthcare workers.

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

And through our lead generation programs, we've seen record level of interest in our curriculums. We continue to see the demand 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. Our increasing financial performance over the past several quarters has enabled us to put in place the financial resources to carry out our growth strategies, achieve our objectives and generate increasing return 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. These include the B.

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

Riley Annual Investor Conference in Marina Del Rey, California on May 22, the IDEAS Conference on June 11 in New York, and the Northland Securities Virtual Conference on June 25. Additionally, I will be in Portland, Oregon on June 17 and Denver on June 18 with a Barrington hosted non deal roadshow. The level of interest coincides with our performance. And I believe the successful execution of our growth strategy has the potential for further price appreciation as we continue to grow our student population and generate an increasing level of operating efficiencies. 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

Thanks Scott. Good morning and thank you for joining us today. I'm pleased to provide an overview of our financial performance for the first quarter of twenty twenty five, discuss some key developments, share our updated outlook for the remainder of the year. As Scott mentioned, we exceeded internal expectations in Q1, driven by robust stock growth and improved operating leverage. These key drivers translated to higher operating margins and improved profitability.

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

Our results reflect the strength of Lincoln's business and the momentum we've built over the past several years. Please note that throughout our discussion, we'll refer to financial results compared to prior year that exclude the transitional segment. As a reminder, the transitional segment consisted of the former Summerlin, Las Vegas campus, which was sold late twenty twenty four and thus impacts the prior year comparisons. We delivered solid year over year growth across the board in Q1. Revenue increased 16% to $117,500,000 marking the eighth consecutive quarter of double digit revenue growth.

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

This strong performance was primarily driven by a 6.2 increase in average student population. Our stock growth for the quarter was an impressive 20.9% as we enrolled over 4,600 students during the quarter, during Q1 twenty twenty five. The strong interest in our programs has remained consistent as evidenced by our double digit stock growth over the past six consecutive quarters. To provide additional context around our stock growth, the Transportation and Skilled Trades programs increased by a robust 32.4%. This strong performance was driven by growing demand combined with our efforts to replicate these programs across additional campuses.

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

Within the healthcare and other professions, the total the total stock declined 6.3%. However, this decline was directly attributed to two reasons. First, in 2024, we temporarily suspended new enrollments in our nursing program at our Paramus, New Jersey campus. Second, we discontinue enrolling new students into massage therapy and culinary programs. These changes are part of our ongoing strategy to optimize our campus operations by phasing out lower demand programs and replace them with offerings that have the highest student interest and employer demand.

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

Assuming the impact of these changes, our HOPs programs achieved approximately 6% organic growth, reflecting continuing demand. In terms of capital expenditures, we committed approximately $25,000,000 during the first quarter of which $20,000,000 is reflected on the cash flow statement. As Scott mentioned, during the quarter, we completed the relocation of our national campus and launched two of the seven planned program replications in 2025. In addition, we made solid progress on our major construction project, keeping us on keeping us on track to open our Levittown and Houston campuses in the second half of the year pending regulatory approval. For the full year, we anticipate CapEx to range between 70 to 75,000,000 consistent with our long term growth plans.

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

This investment supports two new campuses, two campus relocations, seven replication or expansions of our skilled trade programs at existing campuses, and increased maintenance CapEx to refresh and modernize training equipment, further enhancing the quality of instruction, hands on training, student experience, and outcomes. We are highly confident that each of these investments will generate strong returns. For example, we expect each new campus to deliver approximately 6,000,000 million to EBITDA and each program replication to contribute 1,000,000 to EBITDA thirty six months after opening. To ensure we have the financial flexibility if needed to fund these initiatives, we have recently amended our credit facility with Fifth Third Bank. This amendment increased our line of credit from $40,000,000 to 60,000,000 and expanded the accordion feature from $20,000,000 to $25,000,000 Our capital structure remains robust as we ended the quarter with approximately $90,000,000 in total liquidity and no debt outstanding.

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

Turning to expenses. Operating expenses were a hundred and 14,300,000.0, up from a hundred and 1 point 2 million last year. This was in line with our plan. As such, the increase aligns with our growing student population and expenses related to our growth initiatives. We also continue to generate operating efficiencies during the quarter.

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

Notably, education service and facility cost as a percentage of revenue declined to 40.3% from 41.3%, partially driven by efficiencies from our Lincoln Ten Point Zero education initiative. Additionally, our marketing efficiencies improved significantly with our total marketing spend declining, achieving a 20% reduction in cost per start compared to Q1 twenty twenty four. Turning to a key topic in the macro environment, the impact of tariffs. We have been notified of only minimum cost increases. As such, we do not currently anticipate a material impact on our costs or capital expenditures in 2025.

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

Our adjusted EBITDA for the first quarter increased by 56% to 10,600,000 up from 6,800,000.0 in the first quarter of twenty twenty four. The adjusted EBITDA margin also rose to 9% compared to 7% in the prior year. Adjusted EBITDA was favorably impacted by a shift of $1,000,000 in operating expenses into the second quarter. Without this benefit of the timing shift, our adjusted EBITDA would have still grown by almost 45%. The primary drivers of our improved profitability were instructional and marketing expenses, both of which experienced meaningfully operating leverage.

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

In addition, bad debt expense declined both in absolute terms and as a percentage of revenue, reflecting the positive impact of several initiatives implemented over the past year. Finally, net income was $1,900,000 or $06 per diluted share. And our adjusted net income was $3,500,000 or $0.11 per diluted share based on weighted average diluted common shares outstanding of approximately 31,100,000.0. The first quarter performance moves us closer to our long term objectives we outlined at last year's Analyst Day, which included reaching five fifty million dollars in revenue and $90,000,000 in adjusted EBITDA by 2027. I encourage you to review our plan, is available in our latest investor presentation on our website.

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

Looking ahead to the remainder of 2025, given the strength of our Q1 results and the positive trends we're seeing across the business, we are raising our full year financial guidance. We now expect revenue ranging from $485,000,000 to $495,000,000 adjusted EBITDA in the range of $58,000,000 to $63,000,000 net income ranging from $10,000,000 to $15,000,000 student start growth of 10% to 14%. As noted during our last call, we expect starts to follow typical seasonality with one notable exception. We have a significant class start shift from q two to q three in 2025 due to our Lincoln ten point o teaching model, which can slightly change start dates from year to year. In 2024, we had a start in the June of approximately 2,300 students.

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

However, in 2025, the start class will move to July 1 and therefore be reported in the third quarter. While the shift in start dates will reduce Q2 starts, it will have a minimum impact on our Q2 revenue. On a combined basis, we anticipate Q2 and Q3 starts to grow in the high single digits. Given the timing of this shift, we expect to provide additional insights during our second quarter investor call. Overall, it's important to note that timing shifts such as this have minimum impact on the cadence of our quarterly revenue.

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

Our final guidance metric is our capital expenses, which is unchanged ranging between 70,000,000 and $75,000,000 as previously mentioned. As a reminder, in order to provide a clearer view of our underlying performance, our guidance excludes stock based compensation and one time non recurring items. Additionally, excludes pre opening costs, as well as net operating losses from new and relocating campuses. For additional guidance details, please refer to our earnings release filed earlier today. In closing, I want to thank our entire team for their hard work and ongoing commitment to delivering strong outcomes for our students and stakeholders.

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

We are encouraged by the start of the year and remain focused on executing our strategy and delivering shareholder value. We look forward to sharing our continued progress next quarter. With that, I'll turn the call back over to the operator for questions. Operator?

Operator

Thank To withdraw your question, press 1 again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we start the Q and A session. The first question will be coming from the line of Alex Paris of Barrington Research. Your line is open.

Alex Paris
President at Barrington Research Associates

Hi, guys. Thanks for taking my call and congratulations on the strong start to 2025. Pleasure. So I'll do my first my two questions from the top down, really. First, I wanted to discuss this strong demand during the first quarter and those increased marketing efficiencies such that your cost perspective is down 10% year over year.

Alex Paris
President at Barrington Research Associates

So maybe a little additional color there and then my follow-up question will be more top down regulatory.

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

Sure. So, I mean, we're obviously always monitoring and measuring our marketing efforts, always looking for ways to become more efficient. And part of it is, I would say, actions that we've taken in working with some of our vendors to get more with less. Also, to be honest with you, part of it is just this increased awareness and demand in the general environment, which then helps us drive more people. We're also getting more referrals and other actions like that, which help lower the overall average cost.

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

It's an unusually impressive improvement in marketing costs in the first quarter. We're continuing to see strong demand overall. And I'm anticipating that the savings year over year, should hold out throughout the year. Probably not to the degree that it did in the first quarter, but time will tell.

Alex Paris
President at Barrington Research Associates

And I think it goes without saying based on your overview comments that April and early May have exhibited the same strong demand.

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

Yeah, the demand remains out there. It is very consistent.

Alex Paris
President at Barrington Research Associates

And then for my second question, was wondering if you could give us an update on regulatory changes and tone at the top coming out of Washington DC. Since your last conference call in late February, a lot has happened, including a significant reduction in the number of people at the Department of Education. There's been a important bill that's moved out of committee and at the house, a sweeping higher education bill that'll be part of the reconciliation bill, the one big beautiful bill, which among other things proposes the elimination of gainful employment in 09/2010. And then specifically how it may have impacted you in the first quarter. Mentioned that the welding program, it was in Lincoln Rhode Island is now up and running suggesting that you got your approval.

Alex Paris
President at Barrington Research Associates

And then the approvals for the Houston campus later this year.

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

Yeah, so, yeah, a lot is going on. Just a quick clarification. We haven't launched the welding in Lincoln, Rhode Island as of yet. We did launch our electrical program. So welding is coming later in year.

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

But in general, I mean, it's obviously, I think everyone knows that what's happening in Washington is a little bit fast paced and ever changing. Long story short, though, the good news is that we're on the right side. I'll say it where certainly the administration wants to go from an educational standpoint. They definitely want to see more people go into the trades. They're hearing that from companies in general and just part of their overall initiatives and plans for our country require more people to go into the trades.

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

So from that high level perspective, we're in a good position. From the activities that they've taken at the Department of Ed, yes, a lot of the people that we typically deal with, frankly, are no longer at the department. However, we do have some high level contacts, and we're staying very close to those individuals to make sure that certainly our needs can be met in a timely manner. And we've had no indication to date that that's not the case. Obviously, there's lots, as you mentioned, bills going through in Congress has some positive aspects and possibly some negative aspects.

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

But overall, it's all working more in our favor. There's more definitely a lot more good coming out of everything in Washington for us than bad. So I feel good about it,

Alex Paris
President at Barrington Research Associates

As do I. I just wanted to hear your color. So I appreciate that. I'll get back into the queue at this point.

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

Thanks, Alex.

Operator

Thank you. And one moment for the next question. The next question will be coming from the line of Eric Martizini of Lake Street Capital Markets. Your line is open.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yeah, I wanted to follow-up on the new program progression here. So it sounds like we were live on two, and then we've got five more expected throughout 2025. Are all five of those greenlit by the Department of Ed?

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

Oh, well, they're all the only thing that the only one that is not, I'll say green lit by the Department of Ed is the welding program in Rhode Island. And that's simply because that OPID doesn't have a welding program to date, and that's what requires additional effort from the Department of Ed. But as I also just mentioned, with Alex, we're in constant dialogue with folks in the department. They know the urgency of our need, and we anticipate that we certainly will be getting it certainly in the next four to five months.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Okay. And then I wanted to follow-up on the new student start contraction within healthcare. You called out hey, we stopped enrolling in massage therapy and culinary. When do we anniversary that enrollment suspension in those programs?

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

Well, be at different times as we stop them at different periods of time. But certainly by this coming November is my understanding, we should no longer have any students in either of those programs.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Okay, and so the assumption is that healthcare and other will be in growth mode beginning in Q4?

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

Yep.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Okay.

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

Yes. So we and also, as Brian mentioned, as you know, we had to suspend enrollment at our Paramus campus, simply because of the pass rates being below the benchmark. But I'm very pleased to announce that as of March for the prior twelve months, I think they had about an 87%, eighty eight % pass rate, the benchmark is 75%. So we're approaching the Board of Nursing in New Jersey to hopefully have them reinstate us sooner than having to wait to the end of the year, just given the strong performance, but we'll have to wait and see.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Got it. Thank you.

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

Yep.

Operator

Thank you. One moment for the the next question will be coming 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 thank you. Just to go back to the healthcare start situation, could you maybe help us understand how much of that weakness is attributed to the Paramus situation versus the ending of the courses in Summerlin, or maybe another way to look at it outside those two factors, what our healthcare starts doing?

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

Yes, I think that Brian go ahead, Brian.

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

So outside of that, they grew, I think, by almost 6%. Six %. Yes. Outside of that. And those two are almost evenly split between the teach out of those two programs and the nursing.

Steven Frankel
Managing Director, Senior Research Analyst at Rosenblatt Securities

Okay, great. That's really helpful. And then you had some comments about the cadence of starts between Q2 and Q3 that I didn't quite get into my notes. Maybe you could just go through that one more time.

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

Yeah. No problem. So given our our the calendar, the start calendar, it just happens that the start that last year took place in the June is now gonna take place on July first of this year. So just by having it moved by four days, it moves it from a Q2 event to a Q3 event. But from a revenue and economic standpoint, there's really no material impact whatsoever in those four days of having a large start take place a little bit later.

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

So Brian just wanted to make everyone aware that when you look at the Q2 actual starts, you're not going to see as robust a number as we had last year. They're all going to get put into Q3. So Q3 is gonna be, I'll just say, exaggerated compared to the prior year. But economically from growth in revenue and profitability, you're gonna see a similar pattern as what you saw last year.

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

And just to add on to that, it was a large start of 2,300 students. So it is significant on a combined basis. It's going be high single digits Q2 and Q3. But because of the timing of it, it's coming out July 1. On a pro form a basis, when we release Q2 numbers, we'll be able to tell you, take into account what that one start in July 1, what the starts would have been in the second quarter.

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

So it'll be more of an apples to apples comparison.

Steven Frankel
Managing Director, Senior Research Analyst at Rosenblatt Securities

Okay. And again, just to be clear, even with this shift in starts, you still should report high single digit start growth in each quarter, Q2 and Q3?

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

No, no, on a combined basis for Q2 and Q3, it'll be high single digits. It'll be down because of that start, because it's such a large start of over 2,300 students. In Q2.

Steven Frankel
Managing Director, Senior Research Analyst at Rosenblatt Securities

Okay. That's what I wanted to make sure of. Thank you.

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

Right, to your point, on a pro form a basis, you're correct, what's going to show growth in both quarters.

Steven Frankel
Managing Director, Senior Research Analyst at Rosenblatt Securities

Okay, thank you.

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

No problem.

Operator

Thank you. One moment for the next question. And the next question will be coming from the line of Raj Chawarma of Texas Capital Bank. Your line is open.

Raj Sharma
Raj Sharma
Managing Director at Texas Capital

Yes, thank you for taking my questions again. Good morning. Great execution. Solid results. Congratulations.

Raj Sharma
Raj Sharma
Managing Director at Texas Capital

It's great to see it was great to see the operating leverage improving the EBITDA. Operating expenses grew slower than the revenues. My question is around fiscal 'twenty five EBITDA guidance. How much is the growth OpEx that's being is it being excluded or included in that guidance? If you could comment on next year, are those expenses are you planning on sort of opening up two new programs and how that would impact the growth in the EBITDA growth that you could possibly project?

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

Sure.

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

So I'll start on it. In the press release, Raj, we do put out the midpoint of the range. So it does exclude the new campuses, like our new Houston campus pre opening losses there because we had a little bit of rent earlier. So it excludes the pre opening courses and also some of our new programs. So for this year, we do lay it out.

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

You can see it in the midpoint of that. So we do add that back, those losses. For 2026, we're in discussions. We might no longer do that because now that we're opening up new schools every year, and this is going be going forward. We'll still report on a pro form a basis because we think it's important for you to know how much of these expenses are for growth initiatives that didn't take place yet going forward, but it might not be part of our guidance.

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

And just in general, for our guidance going up to out to 2027, it really just assumes about a 200 basis point a year improvement. Obviously, first quarter we've already shown that 200 basis points of improvement, depending on how well 2025 comes, that certainly could be, we might be delivering that at an accelerated pace.

Raj Sharma
Raj Sharma
Managing Director at Texas Capital

So that was a 200 basis points improvement in the EBITDA margins?

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

Yes, yes, Raj. Each year. Each year.

Raj Sharma
Raj Sharma
Managing Director at Texas Capital

Got it. Thank you. That's very helpful. And then my next question was really on trying to understand where the demand and growth it starts is coming from.

Raj Sharma
Raj Sharma
Managing Director at Texas Capital

You've long said that this is a countercyclical business, you would expect it starts to kind of pick up. The economy was showing any signs of slowdown or the unemployment rate was going up. But where do you see the demand coming from? Is it just reshoring and the need and the skills gap? Or are you seeing any sort of pickup from maybe some layoffs in some sectors?

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

Sure. Yeah, I mean, we're definitely not seeing because of layoffs in any kind of sectors affecting us. I mean, it's been surprising, to be honest, since COVID. The demand level that we're seeking, as you started off, typically, we get these huge growth opportunities during recessions, and we're far from a recession, and we're growing nicely. And it's all because of this trend that people are realizing that not everyone needs or should go to college.

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

And there are great job opportunities out there by not going to a college and going to a trade school like ours, where you can get into the workforce cheaper, faster, and frankly, probably more securely. Because so many people are concerned today about AI. AI is designed to take away the mind. It doesn't take away the hands. And we're doing hands on training.

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

And just more people are seeing the need. More people are realizing the personal satisfaction they can get by being in the trades and doing something that's helping other people, where they can see the results of their work each and every day. Mean, it's a fundamental shift that's taken place. And as I mentioned in my remarks, I mean, I've gone to several different communities now in upscale areas where the local school boards brag about 98% going on to college, and yet parents in the room wanna know, maybe my child shouldn't go to college. I want my child to do what's best for them.

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

And I see some of these traits as being great opportunities for them. And if these conversations continue, which I think they will, and as I mentioned, there are these huge driving forces that are gonna require more people than we even have today with the whole electrical grid needs to be rebuilt, our armed forces are looking to be rebuilt. The administration is striving to bring manufacturing back. All those things require technology and automation, and someone needs to maintain all that. Otherwise, it doesn't work.

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

So anyway, there's a lot of really positive trends happening for us. And we just have to make sure that we can stay ahead of them, frankly, so we can capitalize as much as possible.

Raj Sharma
Raj Sharma
Managing Director at Texas Capital

Got it. Thank you for that. It's very encouraging demand trends that continue. So thank you all for taking questions offline. Thanks. Congratulations.

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

Thank you, Raj.

Operator

Thank you. One moment for the next question. And the next question will come from the line of Luke Harden of Northland Capital Markets. Your line is open.

Luke Horton
VP - Senior Equity Research Analyst at Northland Capital Markets

Yeah. Hey, guys. Thanks for taking the question, and congrats on the the really nice quarter here. I did wanna touch on your comments, Scott, in the prepared remarks just about talking about some additional new campus announcements possibly coming here throughout the rest of the year. Just wondering if these would be net new campuses or if they would be relocations and any other sort of color around these new campus announcements that you're expecting.

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

Sure. Thanks, Luke, and welcome to the call. Yeah, these would not be relocations that we've done, let's say, with Nashville and Philadelphia. These would be new campuses in either new or existing markets where we see demand.

Luke Horton
VP - Senior Equity Research Analyst at Northland Capital Markets

Okay, got it. And then also just want to touch on the 2025 guide as far as how much contribution are you guys kind of baking in on the Nashville relocation as well as the Philly campus come in this summer? I guess also just kind of how has Nashville trended here so far since opening up in March?

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

Yeah, we really don't break it out that way in general, but obviously, we have it in our models, how each one's going to impact us, but it's too early to say with Nashville, they just relocated in March, and we won't start seeing some of the benefit till the high school students start this summer. But in all honesty, it's really going to be next year that you're to see the real benefit, because at that point, we'll have opened up the electrical and HVAC programs, which are new, and will also be out there marketing for a full year, the brand new campus, which should help drive even more enrollments from our high schools into that campus. So 2026 is going to be the real impactful year, I would anticipate for the Nashville campus.

Luke Horton
VP - Senior Equity Research Analyst at Northland Capital Markets

Okay, great. Awesome. Well, thanks for taking the question, guys. We'll take the rest offline.

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

No problem. Thank you.

Operator

Thank you. And the next question will be coming from the line of Griffin Boss Riley Securities. Your line is open.

Griffin Boss
Equity Research Analyst at B.Riley Securities

Hi, thanks for taking my questions. Good to see the solid demand trends in the quarter and going forward. Just one for me, curious about the CapEx cadence for the year. I had originally anticipated kind of a lighter Q1 with maybe a bit more ramp going through the rest of the year. But should we basically expect kind of a similar cadence to Q1 throughout the year hit that $145,000,000 target?

Griffin Boss
Equity Research Analyst at B.Riley Securities

Or is it going to come perhaps heavier in the back half of year? Thanks.

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

It's actually Q2 right now we're forecasting to be one of the heaviest quarters in our CapEx spend. So it should slightly exceed actually Q1, which was at $25,000,000 And then it will be Q3 would be maybe a similar, a little bit less than Q1 and then the remainder in the fourth quarter.

Griffin Boss
Equity Research Analyst at B.Riley Securities

Okay, understood. That's helpful. Thanks a lot and appreciate it again. Congratulations on the solid demand.

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

Thank you. Appreciate it. Look forward to the conference coming up.

Operator

Thank you. And we have a follow-up from the line of Alex Paris of Barrington Research. Your line is open.

Alex Paris
President at Barrington Research Associates

Hi, guys. Thanks for taking my follow-up. Just a question about the East Point Atlanta campus. It opened up in March of twenty twenty four. So the comparison in this Q1 is apples and oranges.

Alex Paris
President at Barrington Research Associates

What did Eastpoint contribute in terms of revenue in the first quarter versus the first quarter a year ago?

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

Right. I do not have that. I can follow-up with the revenue. Thought you were gonna ask a different question. I do not have their revenue right here.

Alex Paris
President at Barrington Research Associates

Okay. Well, do you have it on an EBITDA basis or a starts basis or something along the

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

I I do. If you give me one second, I can actually give you the revenue for East Point.

Alex Paris
President at Barrington Research Associates

Alright.

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

Revenue was slightly over $4,000,000 for the Q1, and since it opened up last year, they had about $100,000 So they contribute over $4,000,000

Alex Paris
President at Barrington Research Associates

Gotcha. Okay. That's helpful. And then remind me along the same lines, what what is the campus operating model suggest in year four? Is it year four, 20,000,000 in revenue and 5,000,000 in EBITDA, is that what it was?

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

Yeah, five to six, depending on the campus of EBITDA.

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

Correct.

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

Hopefully, by year four, after it opens, it should be $6,000,000 worth of EBITDA and over $20,000,000 worth of revenue.

Alex Paris
President at Barrington Research Associates

But it's profitable now, one year into the process. Is that right?

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

Yeah. It's know, he's point ahead of schedule when it went into the third quarter. Yeah. Third quarter is a profitability.

Alex Paris
President at Barrington Research Associates

Great. Could you say on a last twelve month basis, how much revenue East Point is at this point?

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

On the last twelve months basis? Either in the

Alex Paris
President at Barrington Research Associates

last twelve months or on a run rate basis. Where are we with the new Atlanta campus?

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

Yes. I do not have last year's in front of me, full year.

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

So can do it offline, Alex.

Alex Paris
President at Barrington Research Associates

Yeah, no problem. Here's my final question. Great progress on bad debt. I think bad debt in 2024 was 12% of revenue. And in the first quarter, if my math is right, it's more like, 10%.

Alex Paris
President at Barrington Research Associates

What have you done there to get that number down? And, do you have a target for bad debt, either absolute or as a percentage of revenue?

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

Right. So for the full year last year, it got up to 13%. In Q1, like you said, was 12%. This year is 10%. We had great cash collections, because now as I mentioned on prior calls, we implemented a new software system.

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

It didn't work out for us. And then we implemented another system, our old system, with a lot more enhancements that's working out very well for us. We went for a hybrid model, so everything's doing well. Our cash collections are doing very well. Some of that was for past due collections, which you can't keep collecting on past due.

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

That did help slightly. But we're optimistic that it will keep showing improvement every single quarter. Right now we're hoping for, like I said, was 13% last year. So we're hoping to be hopefully, I would be happy with 11%, and maybe there is an up to that, so 11% to 12% for the next couple of quarters. We're not willing to claim victory yet, but things are looking very good as well as when we look at the percentage of students and how quick they're getting packaged year over year, it's much quicker.

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

Hopefully it will even help with start rate going forward as well. So things are going extremely well in our financial aid department now.

Alex Paris
President at Barrington Research Associates

That's great to hear. Thank you very much. That's all I have.

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

Thanks, Helen.

Operator

Thank you. There are no more questions in the queue. And I would like to turn the call back over to Scott Shaw for closing remarks. Please go ahead.

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

Thank you, operator, and thank you all for joining us today and learning about our strong start to 2025 and increased financial guidance for the full year. As more and more people, both high school graduates and adults seek a time efficient, cost effective path to develop skills that can serve them a lifetime, interest in our programs continues to grow. We are well positioned to grow through the expansion of our footprint and existing campus development. Our success is only made possible by 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. At Lincoln Tech, we know our success is directly linked to our students' 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.

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

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

Thank you all for participating in today's conference call. You may now disconnect.

Executives
    • Scott Shaw
      Scott Shaw
      Chief Executive Officer and President
    • Brian Meyers
      Brian Meyers
      Executive VP, CFO & Treasurer
Analysts
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