Q4 2020 Lincoln Educational Services Corp Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Lincoln Educational services, 2024th quarter and full year results Conference call.
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I would now like to hand, the conference over to your speaker for today, Michael per live you with a B C. You may begin.
Thank you to Wanda and good morning, everyone before the market opened today Lincoln educational services issued its news release reported financial results for the fourth quarter and full year ended December 31 2020.
The release is available on the Investor Relations portion of the company's corporate website at Www Dot Lincoln Tech Dot E D G.
Joining us today on the call are Scott Shaw, President and CEO and Brian Meyers Chief Financial Officer, today's call is being broadcast live on the company's website and a replay of the call will be archived on the company's website.
Statements made by Lincoln management on today's call regarding the company's business that are not historical facts may be forward looking statements as 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.
We're looking statements should not be read as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance or events that are subject to a number of uncertainties risks and other influences many of which are beyond the company's control that may influence the accuracy of the statements and the projections upon which the.
Segments and statements are based on.
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 quarterly report on form 10-Q filed with Securities and Exchange Commission.
So we're looking statements are based on the information available at the time those statements are made on the managements. Good faith belief as at the time with respect to the future events. All forward looking statements are qualified in their entirety by this cautionary statement and Lincoln undertakes no obligation to publicly revise or update any forward looking statements whether as a result of new.
Future events or otherwise after the date thereof.
Now I'd like to turn the call over to Scott Shaw, President and CEO educational services Scott. Please go ahead.
Thank you Michael and good morning, everyone. Thank you for joining our call to discuss Lincoln educational services exceptionally strong finish to 2020 as well as our outlook for 2021, we continue to hope that you and your families have been impacted as little as possible by the ongoing COVID-19, pandemic, especially from a health and well being.
Perspective.
I also wanted to thank the entire Lincoln organization for their dedication determination and absolute commitment to serving our students through the most challenging period that any of us have ever faced a year ago. At this time. During this earnings call I was very excited about all the progress we had made collectively in our bright future than two weeks.
Later, our world change, we had to shut down all of our schools and moved to distance education. We all had to operate in a way that none of us had done before but due to the heroic efforts of all Lincoln employees I sit here today proudly able to state that Lincoln is stronger now than it was a year ago.
During our previous 2020 quarterly conference calls, we shared some of the myriad of operating challenges our organization faced when the COVID-19 pandemic hit full force during the first quarter of last year. We also shared some of the steps we rapidly implemented to keep our students faculty administration and management as safe as possible, while providing trey.
<unk> for our central careers that remain in high demand.
As a result of our actions Lincoln continue to increase the number of students pursuing these careers careers as 'twenty 'twenty progressed during a period when other training methods and processes continue to be either inhibited or limited and many in our field had seen student enrollment decline Lincoln bucked. This trend for the first time in more than a decade.
Since 2009 to be precise Lincoln achieved double digit student start growth of 10, 7% per the entire year. The student start growth enabled the company to finish within an exemplary fourth quarter and positions us for continued progress and positive trends in 2021, which Brian will highlight during his comments as we.
We reintroduced financial performance guidance.
Importantly, we learned many lessons during our rapid transition to distance education and some of these lessons have been incorporated into our ongoing operations others are being implemented during 2021 will remain under examination.
These changes been benefit our students and our faculty, while improving our efficiencies we began to see the positive impact from some of these changes on all aspects of our operations during the fourth quarter and are excited about the potential to expand net impact is 'twenty 'twenty, one unfolds when reviewing our fourth quarter financial performance.
Common theme quickly services double digit growth.
Overall student starts grew 15% over the fourth quarter of last year. This student start growth, which positions the company for revenue growth in future quarters is coming at a time when others in our field are experiencing students start declines and reduced enrollment.
Several factors combined to drive the start growth on a macro level, we feel that we have begun to have some benefit from the high unemployment rate. However, the vast portion of our growth is coming from our team's successful execution, we've improved our ability to recruit students remotely and to help them through the financial aid process. We are trading students for a career.
And fields deemed essential and we are converting leads into start of students starts at an increasing rate.
Our graduation, and placement rates are higher than our nonprofit peers and.
And we've invested in new software systems and processes to better help our graduate secure their new careers. The double digit growth theme extended to other key fourth quarter metrics are revenue during the fourth quarter increased 10, 7% as compared to the year ago period as did our operating income and when we exclude the significant <unk>.
<unk> benefit that results in our net income nearly quadrupling for the fourth quarter, we still increase this metric by a healthy $17 one per cent and well not quite double digits. Our average student population for the quarter grew a healthy nine 4%.
Brian will review the other fourth quarter and full year financial highlights in a few minutes, but I'd like to point out two other double digit results that contributed to our performance. In addition, our debt under our long term credit agreement declined by more than 48% from the December 31, 2019 level and our cash at the end of 2020 increased.
Approximately 61% from the year ago level from all perspectives financial operational and strategic Lincoln is a much stronger company than we were a year ago. This strength is enabling Lincoln to expand our programs and curriculums to help a broader range of students gain the skills needed to begin or advance rewarding career.
Or is deemed as essential as a result, each of our campuses are providing hands on education, which has been the case since August this hands on experience is now supplemented with distance education components. These tweaks and modifications of enhance the student experience supported our student start growth and enhance the operating efficient.
<unk> of our campuses.
During 2020, and despite the need to shut down our campuses in March and immediately transition to a distance education model and then gradually reopened the campuses our team generated improved operating performance at our 22 campuses in some cases, we achieved impressive turnarounds a case in point is our Indianapolis campus.
Which as many of our shareholders know struggled in recent years through the combination of new leadership at the campus consolidating facilities, a new welding program, a reinvigorated corporate partnership changes to the admissions team and the implementation of some operating efficiencies Indianapolis has become a success story at both the top and bottom line.
During the fourth quarter as American industry began to reopen we began to see a pickup in employer interest in placing our students for the year graduate placements were down about 2%, but we are encouraged by recent trends, which are supported by the fact that approximately 90% of our students are currently pursuing careers that meet the U S Department of home.
Land security definition for critical infrastructural worker. These are well paying stable careers that are enabling our graduates to establish themselves soon after leaving Lincoln from our recent internal survey, we know that one of the top five reasons why students select Lincoln Tech is our high demand program offerings.
Our Lincoln Gravid graduate is often a stall out graduate and one of our corporate partners recently articulated why that is the case. This employer was and challenged it was challenged in finding skilled technicians and holding on to them. We work with them to develop an eight week training program that is offered to select students after completing our core HVAC.
Z program over the past three years, our partnership has inverted the two year retention rate for new hires prior to the Lincoln partnership the company was retaining only 40% of the tires at the first two years of employment with Lincoln that retention rate has increased to 80%. This is on oft repeated success.
Story, with our corporate partners and a contributing factor behind our student start growth over the past three years.
There are several contributors to this comparatively high retention rate first.
Two are 75 years of experience at training, our central workers Lincoln has identified the characteristics that contribute to employee retention when a student enters a corporate partnership training program. They do so after demonstrating commitment and interest in the career and obtaining the skills required another differentiating characteristic of the Lincoln approach.
The ability and eagerness to develop curriculum tailored to the individual corporations needs such an approach is virtually impossible to deploy through most other educational delivery models as our rapid changes to our curriculum when corporations need change. This customized approach extends to the student where we provide the individual a wide.
Variety of support to maximize their opportunity to both learn as well as excel in the program as well with the employer.
Finally, the distance education model deployed and refine during 2020 enhanced our company's ability to provide life skilled support to students. These life skills have often been the difference for corp, keeping a new hire and losing a new hire when combined with our career services, we provide well rounded professional and life skills.
Two our students that leads to enhancing their opportunities to build that life changing career.
As companies have reopened our conversations around how we can help solve their training needs picked up on our call in November we reported on our selection by Republic services to provide training to their employees at their state of the art New trading facility that they are building in Dallas, Texas Republic services as the nation's second largest non hazardous waste management comes.
<unk> in the country and we are rolling out a 12 week, 100% employee paid medium to heavy truck training program to assist Lincoln Tech graduates to transition into their organization as well as to Upskill. Their existing employees. This is another example, how we seek to eliminate the middle skills gap, while providing our.
Graduates and others with exciting career opportunities in the transportation industry.
Our efforts to explore other similar tailored opportunities continue and we hope to expand the approximately dozen corporate partnerships. Currently underway is 2021 unfolds at the same time, we are on schedule to begin opening four new programs at our existing campuses around the country. During the summer of this year. In addition.
To the top line growth opportunities in 2020. One we also seek to extend the operating leverage we have positioned the company to benefit from most of this leverage is occurring at the segment level, where for instance in the fourth quarter, we achieved a 50% operating margin within the healthcare and other profession segment at the corporate level. We also seek operating leverage.
By lowering fixed costs whenever possible. Our most recent initiative involves moving into a smaller corporate office space next month, which will generate approximately 20000 a month in savings since we anticipate more workers working remotely in the future. We leveraged the current weak office market to secure an attractive rent with less space.
Brian will shortly share with you our 'twenty 'twenty, one guidance and if need be we will update the guidance as the year progresses last year as you may recall, the rapid onset of the pandemic in the middle of March forced us to close all locations and as a result hundreds of students who were scheduled to start in Q1 moved into to the second quarter. This Shaw.
<unk> decreased last year's first quarter results and inflated second quarter's results as we stand today, we expect to have a very strong first quarter with starts exceeding a 20% increase we have less visibility towards the second quarter and be on but we see two trends and our future enrollments, we know that our summer high school start will most likely be.
Several hundred students less than last year simply because we are not able to engage as easily with students. So many high schools have been closed to in person visits. However, we also can you do see strong demand for our programs from adult students a trend that has been evident for several quarters. Consequently, our total year guidance for start growth is.
Lighter than what we've been currently achieving over the past five months, but if our adult leads remain as strong as they've been we would anticipate achieving higher starts than current forecast. We will keep you up to date on our progress in summary, Lincoln is achieving for its students corporate partners faculties and shareholders during the.
Past year of per share price has increased by more than 150% and we've put in place the strategies to continue growing the company improving the ROI for our students and building returns to our shareholders. We are optimistic about the year ahead with full recognition that developments beyond our control can affect our momentum however.
The experiences of the past 12 months do give us confidence in our operating flexibility to meet unexpected challenges now I would like to turn the call over to Brian for a review of our fourth quarter and four year results Brian. Thanks.
Thanks, Scott Good morning, and thank you for joining us today I'm pleased to share our fourth quarter and full year 2020 financial results, but first let me provide a perspective on the significance of our successful year Lincoln entered 2020 with a great deal momentum and optimism our new student starts had been growing from nine consecutive quarters.
We ended the year with us with a starting population 7.2% higher than the year before we had returned the company to net income profitability. After several challenging years, where we had completed a financing transaction that has significantly improved our liquidity and provide a growth capital.
Then as we were finishing a successful first quarter. The unthinkable occurred when the COVID-19 pandemic hit and completely altered our operations for the rest of the year our team rosy occasion, and again demonstrated resilience innovation and adaptability. The result, Twenty-twenty was a remarkable successful inspiring year.
<unk> the challenge test at our resolve and I'm pleased to say, we have emerge an even stronger organization.
Despite the difficult operating environment, we significantly increase our profitability in 2020 with pretax income of $13 5 million. This gives us a very strong financial footing as we enter 2021.
Now I'll begin my financial remarks, with the fourth quarter results revenue was $81 8 million up 7.9 million or 10, 7% over the prior year quarter. This increase was driven by a nine 4% increase in our average population I want to point out that this percentage is net of about 100 soon.
And so I'll leave of absence or L. O a mainly due to the lack of access to externships sites available to some of our LPN students as.
As such we expect the majority of these students to complete their programs during the first half of 2021.
So just thoughts for the quarter grew 5% over the prior year as both segments achieved double digit stock growth, most notably our sales and marketing investments continue to yield high returns evidenced by our lower cost per start.
Additionally, I want to emphasize this quarter's growth completed three consecutive years of quarterly student start growth with the only blip being the first quarter of last year. When our March starts were delayed by the early days of the impact of Covid.
Another positive metric was our ending student population, which grew eight 3% to 12200, representing about 900 students more than the prior year.
Once again these figures exclude approximately 100 students on leave of absence. This metric is very important because the higher beginning population as of January one 'twenty 'twenty, one will help drive our revenue and growth and financial results reflected in our 2021 guidance.
I will now shift to our operating expenses for the quarter.
Education service and facility expense increased 900000.
Our 3% to $31 5 million. This increase was driven by additional instructional expenses in books in total expense due to our largest student population quarter over quarter. This is one source of operating leverage as a 3% increase is lower than our population and revenue growth.
Selling general administration administrative expense increased $5 5 million or 16, 4% to $39 2 million share.
During the quarter, we took some actions to address the impact that COVID-19 had on both our students and employees, we provided siphons to all employees to assist with the impact of Covid and their transition to work from home. We also credit certain student balances for those who are adversely impacted by COVID-19, finally during the quarter.
It was an increase in incentive compensation accruals driven by our improved financial performance. The majority of these expenses were recorded as corporate expenses contributing to corporate increase of $4 9 million to $9 2 million quarter over quarter, and we do not expect to incur the same force in 2021.
Turning now to our bottom line results.
Our consolidated operating income increased by $1 1 million or 10, 7% to 11.1 million. Our EBITDA grew by 800000 to $13 million for the quarter at the segment level, the transportation and skilled trade segment achieved EBITDA of $17 2 million or $4 four.
Million improvement. This was achieved on a revenue increase of 5.9 million demonstrating significant operating leverage of 79%.
In the healthcare and other professional segment achieved EBITDA of $4 8 million or $1 3 million improvement on revenue growth of 1.9 billion. This reflects operating leverage of 67%. These strong results were achieved partly due to the increase in our top line coupled with the seasonality of our business on the <unk>.
O I's basis, we expect a more normalized operating level over approximately 40% on future revenue growth.
And finally pretax income increased $1 6 million or 70, or 17% the $10 8 million from $9 2 million in the prior year. After the release of our tax valuation allowance that provided a $35 2 million income tax benefit net income for the quarter was 40.
6 million compared to $9 2 million in the prior year.
I'll now take a moment to explain the significant income tax benefit in greater detail.
Back in 2013 due to our operating losses, we recorded an income tax valuation allowance due to the uncertainty of whether we would be able to utilize our deferred tax assets such as our net operating losses or Nols to offset future bolt taxable income.
Yeah.
Fast forward to year end 2020 at the considering our sustained profitability and forecast for 2020. One we determined that we should release, our valuation allowance of 35.9 million.
We expect to utilize our federal Nols of $43 million in our state Nols of $77 million to offset taxable income in 2021 and beyond.
As a result, we project our effective tax rate in 2021 to be approximately 27%. However, we do not anticipate paying any federal income taxes and only nominal state income taxes. This year.
Now I'll review now I'll review the balance sheet highlights followed by the full year results and conclude with our 2021 guidance.
Let's start with our strong year end cash position as of December 31st we had approximately 59 million on liquidity, which included 21 million of availability under our credit from a credit our current credit facility and 38 $38 million in cash and cash equivalents.
Cash provided by operating activity was $23 5 million and we generated free cash flow of $18 million for 2020.
And cashews and financing activity was $18 6 million as we lowered our outstanding debt and paid a $1 4 million of cash dividends on our preferred stock covering the period from November 2019 through December 2020, as I mentioned last quarter, we have the option to accrue additional preferred value and thus increase the number.
Conversion shares in lieu of paying cash however, we determined making the payment and cash is in the best interests of our shareholders now.
Now I would like to provide a recap of the cares Act funds. We received in total Lincoln received $27 4 million in two week will parts.
The first part equaling $13 7 million was earmarked for direct distribution to our students and in order to work offset additional expenses day incurred in connection with the disruption of school operations as of as of today. The full amount has been distributed to our students.
Second part also equaling $13 7 million could have been used to either offset Lincoln's increased cost associated with the significant changes in the delivery of instructions as a result of the pandemic or put towards additional aid to students. Following the D. O E guidance on permitted uses we utilized $5 eight.
8 million as of December 31, 2020.
Most of these funds were applied towards measures that directly benefit our students.
Lastly, we anticipate our financial responsibility score for 2020 to be 2.7 out of a possible 3.0. This is a strong indicator of Lincoln's healthy financial results and position at year end.
Turning now to the full year financial highlights.
As we have as we shared this morning, despite the COVID-19.
Inmates, we were able to achieve a strong results in 2020 as the team pivoted and adapted to the pandemic as.
As a point of reference our 2020 results exceeded our pre Covid financial guidance. We provided last March and later withdrew out of abundance of caution to the uncertainty surrounding COVID-19.
First revenue increased seven 2% over prior year to 20 to $293 1 million exceeding our previous estimates of 3% to 5%.
Second student starts increased 10, 7% over prior year more than twice on high end of our original guidance of 3% to 5% third we achieved EBITDA of $22 2 million up 66, 1% over prior year. This is also significantly so currently significantly above the original.
2020 guidance of 15 million to $17 million in every quarter. During 2020, we achieved positive EBITDA and increase over prior year.
And finally, we realized operating income of $14 8 million, which exceeded our initial seven to 9 million guidance.
To conclude my remarks, I would like to introduce to introduce our 2021 guidance. Despite the continued uncertainty surrounding COVID-19, we are cautiously optimistic we key operating and financial measures allow us to project continued growth in 2021 and with two thirds of the first quarter behind Us I.
Can say the trend is positive with that said I'll be remiss, if I didn't acknowledge that COVID-19 remains an area of concern and that crew riversleigh impact our future business operations based on the current state of the pandemic and what we learned about the company during the pandemic.
We know that soon it's like the flexibility provided by distance education and that and we know that we can provide.
Provide many of ours.
Our support services better and more timely remotely as a result, we are making a number of onetime investments and changes to our operations, which will result in increased cost in 2021, but lower costs in the future. One example of this is centralizing our financial aid process, which we believe will shorten the amount of time to pack.
As soon as two packages students and lead to greater operating efficiencies in total. These one time costs will be between $1 million to $2 million. All of this is incorporated into our guidance as follows first for 2021, we anticipate revenue to increase 7% to 12% over 2020 levels.
We expect student starts to grow 5% to 10% over 2020.
Third we expect our 'twenty 'twenty, one adjusted EBITDA to be between 29, and $34 million, which would which would represent a 22% to 43% increase over 2000 twenty's.
Adjusted EBITDA is calculated as EBITDA, adding back noncash stock compensation fourth we expect pre tax income beat.
Between 19, and $24 million, which would be a 41% to 78% increase over 2000, Twenty's pretax income and finally, we expect capital expenditures to be approximately $7 5 million.
We look forward to communicating our progress towards these goals throughout 2021 with you. Thank.
Thank you for your time today and with that I'll turn the call back over the operating so we can take your questions operator.
Thank you, ladies and gentlemen, as a reminder to ask a question you would need to press Star then one on your telephone.
Troy Your question press the pound key.
Again, Thats star one to ask the question.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Alex Paris with Barrington Research. Your line is open.
Thank you Steve.
I'm, sorry, guys I had on the and.
Congrats on the Q4 beaten.
On restoring guidance, which was which was ahead of consensus expectations I got a few questions.
On what you've addressed some of the things she talked about strong student starts growth of 15%, that's three consecutive quarters of 15% or greater growth.
Uh huh.
<unk> for the coming year is less than that I think you addressed that so.
So much on.
But what about leading indicators like inquiry flow.
Conversion in show rates.
How do we look.
Into early 2021 here.
Thanks, Alex.
We look good to be honest with you we're having good results. There's still strong interest as we indicate the first quarter will be very strong and the conversion rates continue to be as good if not better than the year before and our leads are certainly exceeding what our internal plans are.
As you know, though we we just tend to be more conservative on the on the longer term as you also know our third and fourth quarter tend to be very robust and we would anticipate that as we get closer to that period of time, we'll certainly update you on where we are you are correct. The last three quarters have been stronger than what our overall guidance is.
But.
Overall, I feel very very good about where we stand right now.
Okay, Great and then I had a question about leaves of absence it.
It was about the same level as at the end of the third quarter roughly 100 students from show now while this is down from the Q2 peak of 700 or more.
Is this a more normal level I mean, theres always fit in channel always right.
Well. These are students that are on L O ways because of Covid and it's really just at two campuses here in Northern New Jersey, where the clinical sites haven't opened up to our students. So they can complete their education. However, with that said just within the last week. There are signs that they may be reopening some of the nursing home.
And things of that nature to our our students. So they can complete their clinical work, but literally 88 of those hundred are these clinical students that were just waiting for the sites to open up so with the.
Vaccine and everything else, we are anticipating that will happen and then we really shouldnt have any more of these SP and unless something.
Spikes up again.
Got you Okay. That's helpful.
I think you mentioned that youre going to transplant for programs in 2021 first of all the way at that rate in the second Okay. These are welding programs I assume or is it a combination.
Once a welding program on the medical assisting program ones that debt dental assisting program.
So it's a mix of programs.
Gotcha.
Any.
New programs planned and one question I had very specifically in terms of new programs would be the opportunity within electric vehicles.
Okay.
Do you have courses on this topic right now are there a lot of technician opportunities and then taking that a step forward how about other interesting burgeoning areas like solar wind and things like that or are there opportunities for Lincoln technician training in any of those areas.
Well first of all our students already are being hired by Tesla on all the manufacturers of electric vehicles, because we cover all the basics of that training in our program. So there isn't a dedicated specialized program for that but I would anticipate certainly we'll be making our electrical aspects.
Of our auto program and diesel programs more robust simply because that is where the attention is at the dealerships where a lot of the repairs that are needed going forward, but also remember only about four percentage of vehicles sold worldwide are electric today, obviously, that's going to ramp up and as the fleet gets larger out there.
We will certainly make sure that our curriculum is addressing that need.
With regards to other programs, we already incorporate into our electrical program components of solar some of our schools have solar panels and so the our students are taught how to install those and manage those.
But to your point are there new opportunities, we view that as continuing to grow we view that there are greater efficiencies around energy efficiency in particular to help our hvac's students as we talk to different employers in different markets. They are asking us to tweak our programs to help address what they're seeing out there.
On the field and so we continue to do that and then we always are looking at overall new programs that we can launch.
One that we've kicked around for a long period of time and hopefully we'll launch it soon would probably be a plumbing program simply because that parallels very well with our HVAC.
Students are allowed the employers.
For that higher Hvac's students also need plumbers as well.
Sure that sounds like a complementary add on.
Just a couple left.
Since it's year end I thought I would ask Scott about 90, 10, I'm sure there'll be part of the 10-K, but where.
Where did you finish 2020, if you know.
For your net we finished at 77 overall for the company, 77% from sort of a.
Barry on the position yes.
And then that was done on actually 100 basis points from 2019.
Correct and then what percentage of your revenue is active military and veterans.
We're still on.
If we added back we'll still be under the 90 10.
Yes, we're still working towards that it's not as easy as the revenue, but yes, you will still be comfortably we believe under 90%.
Okay. So then under 12% would be T. A D a.
Correct Okay.
And then lastly, just a couple of cats and dogs, you said capex would be seven and a half million.
<unk> 2021.
That is higher year over year.
Where are you going to be spending the incremental dollars.
Most of that.
About half of it is as Scott was saying was the new programs that we're rolling out and at some future initiatives. So that number could come down if we don't you know if certain things don't materialize going forward.
So I would say half net.
More than half of it is based on growth.
Okay and then.
Since you gave guidance on adjusted EBIT by which include which adds back stock comp expense, what's your expectation for stock comp expense in 2021.
Alright.
Do we do.
Can do that as a follow up.
I will have the debt to you as a follow up Bob.
Thank God.
Year.
So it can be one more second I do have it have a lot of people.
Sure no problem.
And then while Youre looking for that the attach rate you just gave guidance of what was at 27% from 2021, I know you're not paying any actual taxes, but as far as the model runs are in Florida right presentation rate is approximately to 20.
27% correct.
Okay. Thanks.
And just back on your 90 10 last time that I had seen numbers. If you add back military were at $85 86 per.
So on and stock compensation for 2021 isn't going to be about <unk>.
$3 5 million.
Good.
That takes us.
Jeremy for now and now I'll follow up offline. Thank you.
Great. Thanks, Alex day, Phil Thank.
Thank you.
Our next question comes from the line of Steven Frankel Your.
Your line is open.
Good morning.
So you talked about.
Lower cost per student start maybe give us give us some insight in how youre achieving that have you altered the messaging or the channels or is this a scale.
What's driving it and how much.
Lower can you.
Take that Patrick.
Sure Stephen well there are a number of things driving it one better execution by our admissions folks are able to better communicate the value proposition we offer.
We are changing our mix of where we're getting students were certainly decreasing the number of I'll say third party leads that come to us who are achieving and finding better quality leads with the students that are more interested in our programs. We're obviously continuing to expand our efforts in social.
Media.
I mean basically it comes down to where the best places to go.
Looking for students to find ones that are most interested in our programs and so that constantly evolves and our team has lots of good statistics and information around what is working on what's not working and we constantly tweak it to ensure that we're getting the best investment from our dollars as possible. So it's better market.
Being reaching our students it's also better execution.
With our admissions folks on communicating the value proposition that we give our students and so.
We do anticipate that that will hopefully continue to decline in the future you know how low it can go I don't know, but that's certainly something that we constantly are monitoring to achieve lower costs per start.
Yeah.
Yeah.
Okay, and what's your today between high school Grads and.
Adults.
We were about last year last year, we had about 22% of our starts were high school students.
Okay.
Yeah.
Yes.
Yeah.
The what.
Terms.
Show rate.
Can you share what.
That metric was in 2020 and how that improved.
Year on year.
Yeah, we typically don't share that number but the number again that I look at is our lead to start just overall and we don't share that number as well, but I can tell you its been declining because as we become more efficient.
With our marketing initiatives it does get better.
I don't get too locked into show rates, because it seems to fluctuate.
Order by quarter again, I'm looking to drive cost down overall and achieve that by monitoring our lead to start rate. So again, it can be a fluctuation of greater conversion and start rates may decline or go up or or vice versa.
Okay, great. Thank you so much.
Thank you thanks, Steve.
Thank you.
Our next question comes from the line the Austin <unk> with Canaccord.
Your line is open.
Hey, Thanks for taking my questions.
Can you talk a little more about your employer partnership programs like with Republic, how many of those do you have in total on what is the pipeline look like some more on how exactly does pricing and payment work on these programs.
Sure Austin, So there are different models out there, let's say for the Republic model as an example, there Republic would be paying us Lincoln to run this program on their facility.
And the students as I mentioned paid nothing for that program. Then there are other programs whereby students might be paying the cost for getting the specialized industry training.
As I mentioned, we have about a dozen of these different types of programs.
Different types and we have probably have another <unk>.
Six or seven net we're working on currently.
Take a long time to bring to fruition, but again, what we like about them. So much as they are great career opportunities for students. These employers are really strong need for the students with his skill set.
I'll provide good compensation to our students and also flexibility for students because.
A lot of these employers are more national in presence and therefore with so many students with I'll say dual income.
Households, if one gets transferred to another area. The students are able to move to that other area and stay employed with that employer. So there are a lot of benefits by working with some of these national and large regional companies.
Just the growth in this channel operating cost per start down across the company on.
Because employers are funneling. The students to you are you know what impact on cost per start no.
I wish more employers we are sending our students I can't say that employers are sending our students I think it does help our value proposition by no students knowing that they have these opportunities with.
Name brand companies. So I think it does eventually translate into a better cost per start, but there's really no way to determine.
How how impactful it is at the end of the day again the biggest driver for me is ensuring that our students are getting good well paying jobs and that's what these partnerships definitely do bring.
Got it so you're you're acquiring the students for these partner program, yes, Yeah, and frankly, it's one of the value propositions, we bring to these employers do they seem to struggle to find people that have an interest in working with their hands.
That's certainly who are attracting both at our high school initiatives and through our marketing initiatives.
That is probably one of the biggest challenges that these employers have is just trying to find the pool of interested candidates. So as we look to expand our footprint over the years and go into more states and really build out our our presence.
<unk> should become even that much more valuable to these larger employers.
Again, a number of them just want us to help them locate students.
That will be highly motivated to work with their hands.
Got it and last question here.
Are you able to say what your total advertising expense was in Q4 and 2020 and maybe if you could talk about the outlook for.
You know, how you'll be crawling spending or not over time.
Well I can tell you we don't share that information first of all and I can tell you that we are looking at more modest increases going forward at this time booties were seeing good strong results.
But we also respond to the marketplace, and where we see opportunity and need to invest more we will but as Brian said and as I guess I've said, we constantly are looking at what the cost per start is so so far so good on the last three years, we've constantly been able to grow our business and lower that cost per start.
And right now we see all the same trends continuing in 2021.
Okay, Thanks, very much and congrats on the corner.
Great. Thanks appreciate your interest.
Thank you.
Our next question comes from the line of Raj Sharma with B Riley Your line is open.
Hi, Good morning, guys and congrats on the solid results.
Thanks Robyn.
They've been such great questions. Prior to me that debt, but I do have a few few more left so could you talk a little bit about the graduation rate. How your graduation rates has been affected during COVID-19.
The drop off rates gone up or I don't know if you can give some numbers on that but just trying to understand.
Any change in the pace of courseware completion outside of yellow as you just said 88 out of 100 clinical students weighted.
And yes, he reported revenues on that front.
Deferred revenue is pretty miniscule, I think it is less than $60000.
Yeah.
But with regards to the graduation rate again happy to talk about that because we are certainly very much focused on on that number so kind of like our placement rate it did dip a little bit.
In 'twenty 'twenty. So we typically say that we are in the mid sixties, so $65 66 per cent or so and that's where it is still hanging out for a graduation rate.
Did dip simply because.
You know a lot of students weren't expecting to go online and a lot of our faculty members werent expecting to teach online. So I think that given that transition, we did quite well but.
Again, our objective is to get up to a 70% graduation rate overall for our company and so what we've done to address this is we've hired.
And individual to help us with training of all of our educators on how to be more effective day.
Delivering their curriculum via online.
And we've already gone through one level of training with our instructors.
Level, two and three are in the works and will be rolled out.
All the confidence in the world that will be able to get back on to that improvement curve with our retention, but it is a transition for everybody, but I am very confident and again, we will get back to be in a more positive position.
Right, so, it's dipped a little but but but.
It will come back and sort of the pace of courseware completion are you finding medicines amongst students to any reluctance in sort of pacing along.
And though and any sort of changes in revenue recognition that you could do.
Yes, no no again, we have very few students as it we only have these about 89 students in our two campuses in paramus that are kind of on hold that or it would be impacting our revenue. They are the ones waiting to go back into the clinical sites otherwise frankly, our campuses are open and the students are quite anxious.
And frankly enjoy coming on to campus to do their hands on work. So they are not slowing down on their progression in all of our students have been caught up so they're going through the program at a normal pace right now.
That's great and just sort of moving on.
On the inquiries and the enrollments I know that the starts are up 15% year on year have the show rates.
I don't know if you can talk a lot, but on the show rates gone up gone down any sort of change in that.
You mentioned iron unemployment is kind of helping you.
You get a lot more inquiries are they sort of time being at the same rate or much higher on the show rates can you talk about the just the trends on the show rates on the interest yeah, absolutely yeah. So what we're seeing is really strong uptick.
In our leads in our interest and as that volume has increased our show rate has frankly has gone down a little bit but again at the end of the day as long as our lead to start rate goes up which it has I'm happy with that but I think that there's more opportunity for us I think debt when we centralize our fifth.
<unk> process, I think will become more efficient and that should hopefully drive a better show rate.
Time will tell but again as long as overall, we continue to improve our lead to start rate on <unk>.
Quite pleased with that progression very pleased with how the team is operating.
Great and then just on any particular geographical areas.
Are slower than others in their curriculum progression or.
No.
Net liquidity.
On the others.
No no no no no geographical differences Brian it's.
As Scott said earlier adjusted two schools in Northern New Jersey, those are the only ones with the 88 students that were waiting for Externships sites and they were optimistic that they're going to open up but other than that nothing.
Right, Okay and then.
I've still got two more I hope I have the time on the starts and sort of breaking down the starts and other up 15% any particular segment I know that's not doing what you mentioned the high Schoolers and then you think that that's going to continue to impact your start ups.
For the rest of the year could you talk a little bit about that.
Sure I should that continue.
Yeah. So so actually in the fourth quarter, we had a good number of high school students start.
The challenge that we have today with our high school students is more for the upcoming summer start.
Needless to say, depending on where the geography is some high schools just are not allowing people whether any schools to go in and talk to their students. So it's all being done virtually.
It can be done and we're doing it as robustly as possible, but with that said, it's not quite the same experience as being able to meet people face to face and interact with them. So as we look at where we stand today, we think that our high school.
Market for the summer time could be down.
100 to 300 students from what we had last year.
Hoping in a normal.
Course of business to have a couple of hundred more but as I also mentioned in our adult market is very strong and leading to very strong growth rates. So as we get closer to that summer period, and see where the results come out we'll share any updates.
But overall demand remains as we say the first quarter is going to be as strong as the quarter. We just finished and as we get closer into the second quarter, we'll have a better window into how that's performing but I have no indications right now to say that it should be anything less the only thing that is a little bit less is our high school market.
Got it. Thank you and then I just I know you just mentioned the title for the veterans from numbers.
Yes.
And could you please.
Touch upon that again.
Well, the 90 10 goes to including the veteran.
On.
As is the talk is where would you guys stand on that.
But yes, as we mentioned today, we're at 77 percentage of title four goes back into the numerator.
Still be under 90%, we're still evaluating it but we're very confident that it'll be you know under 90, 90% right. So.
Really under 90.
But we think so we're still you know.
Working with working through that but yes.
Okay, great. Thank you. So again I think great results I think thank you congratulations.
Thank you for answering my questions I'll take it off sure. Thank you. Thanks for your interest thank you.
Thank you on.
Our next question comes from the line of Justin Putnam with Atlanta Investment Group. Your line is open.
Thank you Scott and Brian.
Congratulations on.
Navigating a very incredible year.
I'd say, it's a quick question couple of quick questions for you kind of big picture type questions.
First of all.
Based on your guidance in the last couple of years that you're growing your EBITDA on average about 50 per cent a year, which is pretty incredible.
But your your valuation is not price it looks like it's.
A third to a half of kind of what you're seeing for from multiples in the stock market as a whole you're welcome to comment on that if you want but I.
I guess big picture on what I would like to know is.
In the summer.
<unk>.
The story with a little bit different with your industry, where there's a lot of talk about recession.
And in a lot of people getting laid off and we know historically, how your company has performed.
With in recessions and with with higher unemployment levels and you had some data on that in some of your presentations.
But of course, you can't have.
So many people laid off that they don't have jobs to go through because I would think that that would push against.
On your ability to continue to enroll students at some point.
Now as we sit here now today.
The talk is more about.
Although unemployment still highest talk about economic recovery now.
And maybe John with becoming more plentiful I'm just curious to know what you what you were.
What your thoughts are about where that balance sits right now.
Yeah. It's a good question, who is certainly one that we think about but I think debt.
Overall, we sit in a very good position again prior to the unemployment rate spiking, we were growing for two consecutive years. When we had the lowest unemployment in 50 years and I think that that trend will continue even if unemployment drops simply because I think more people.
<unk> are questioning the value of just jumping into a four year education I think more people are getting are tuned to the fact that there are faster quicker ways to get into the work force.
Especially as we're getting into the work force with meaningful jobs that have in themselves. Good long term career prospects. So I don't think that that dynamic is going to change I think that a lot of the dynamics that are occurring right now again really play too.
Give us greater opportunity because the people that remain unemployed tend to be the ones that are in.
Let's say lots of areas that would normally come to us because they are I'll say in a non a central career today and as I mentioned 90 per cent of the programs that we offer going into a central careers and these are essential because theres good demand and need in good times and bad for these careers. So the fact that there are more <unk>.
People unemployed in the nonessential careers should help us going forward so again.
Again, if we didn't have the strong success that we had prior to COVID-19 in the lowest unemployment period in the last 50 years as I said.
I wouldn't be maybe as bullish as I am but so many things have even happened over the last 12 months that seem to still indicate that the younger generation. Our current 20 to 25 year olds are really having a different thought process when it comes to.
Going to college or how to achieve.
The success that they want to achieve.
Okay, Great I got a few more questions, but I'll take them offline or just kind of housekeeping questions. Thank you sure sure.
Thank you.
I'm not showing any further questions in the queue I would now like to turn the call back over to Scott Shaw for closing remarks.
Great. Thank you operator as always I want to thank our employees for their continued dedication to serving our students and shareholders for your continued interest and support we remain excited about Lincoln's growth prospects. We entered 2021 stronger than we've been in a decade, and we expect our force first quarter enrollments to be at least as strong.
Last quarter, which should position us for a strong 2021, Brian and I look forward to sharing our 2021 first quarter results in May and until then I Hope you all stay safe. Thank you for your time.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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