Q4 2023 Lincoln Educational Services Corporation Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the Lincoln Educational Services fourth quarter and full year 2023 earnings and full year. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again.
Good day, and thank you for standing by.
Welcome to the Lincoln educational services fourth quarter, and full year 2023 earnings and full year conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Twice a question during the session you will need to press star one one on your telephone.
You will then hear an automated message advising but your hand is raised.
To withdraw your question. Please press star one one again.
Operator: Please be advised that today's conference is being held. I would now like to hand the conference over to your speaker today, Michael Polivio, the Master of Relations. Please go ahead.
Please be advised that today's conference is being recorded.
I would now like to hand the conference.
Over to your speaker today.
Michael Polybius Investor Relations. Please go ahead.
Michael Polivio: Thank you, Daniel. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued its news release reporting financial results for the fourth quarter and full year ended December 31, 2023. The release is available on the investor relations portion of the company's corporate website at www.lincolntech.edu. Joining us today on the call are Scott Shaw, President and CEO, and Brian Myers, Chief Financial Officer. Today's call is being recorded and is being broadcast live on the company's website, and a replay of the call will also be archived on the company's website.
Thank you Daniel Good morning, everyone before the market opened today Lincoln educational services issued its news release reporting financial results for the fourth quarter and full year ended December 31 2023.
The release is available on the Investor Relations portion of the company's corporate website at Www Dot Lincoln Tech Dog E D.
Joining us today on the call are Scott Shaw, President and CEO, and Brian Meyers Chief Financial Officer, today's call is being recorded.
Being broadcast live on the company's website and a replay of the call will be.
Michael Polivio: 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 defined 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 or results. The company cautions you that these statements reflect current expectations about the company's future performance or event and 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 statement and the projections upon which the segment and the statements are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the risk factor section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Overlook and statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events.
Archived also 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 term is identified in federal securities laws.
Words may will expect believe anticipate project plan intend estimate and continue as well as similar expressions are intended to identify.
We're looking statements forward looking statements should not be read as a guarantee of future performance or results.
Company cautions you that these statements reflect current 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 that may influence the accuracy of the statements and the projections upon which the segment and statements are based.
Factors that may affect the company's results include but are not limited to the risks and uncertainties discussed in the risk factors section of the annual report on Form 10-K, and quarterly report on Form 10-Q filed with Securities and Exchange Commission.
Forward looking statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events.
Scott Shaw: 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 information, future events, or otherwise after the date thereof. Now, I would like to hand the call over to Scott Shaw, President and CEO of Lincoln Educational Services. Scott, please go ahead.
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 information future events or otherwise after the date thereof.
Now I would like to hand, the call over to Scott Shaw, President and CEO of Lincoln Educational services.
Scott Shaw: Thanks, Michael, and good morning, everyone. This morning, we released our financial results for the fourth quarter and full year that reflect the strong operating and financial performance of our company. Our team is successfully executing our transformative growth strategies, which has led to increased student starts, retention, graduation, and placement. At the same time, we are benefiting from the building interest in skilled trade careers despite continued record low unemployment, as well as the ever-present skills gap impacting corporate America's ability to grow.
Please go ahead, thanks, Michael and good morning, everyone. This morning, we released our financial results for the fourth quarter and full year that reflect the strong operating and financial performance of our company.
Our team is successfully executing our transfer made of transformative growth strategies, which has led to increased student starts retention graduation, and placement rates at the same time, we are benefiting from the building interest in skilled trades careers.
<unk> continued record low unemployment as well as the ever present skills gap impacting corporate America is ability to grow as a result of these dynamics, we achieved all of our objectives during 2023 and our momentum has carried over into the first two months of 2024 for.
Scott Shaw: As a result of these dynamics, we achieved all of our objectives during 2023, and our momentum has carried over into the first two months of 2024. For the full year, we achieved 10.3% same-campus revenue growth and 11.4% same-campus student start growth, which we believe exceeds our peer group's organic growth rate. During the fourth quarter, same-campus revenue growth was up 13.6%, while student starts grew 16%.
For the full year, we achieved 10, 3% same campus revenue growth and 11, 4% same campus student start growth, which we believe exceeds our peer group's organic growth rate during the fourth quarter same campus revenue growth was up 13, 6% while student starts grew 16%.
Scott Shaw: We entered the new year with a student population that is approximately 1,000 students higher than at the beginning of 2023, which provides us with a platform for further growth in 2024. While we executed our capital investment strategy during 2023 to complete the build-out of our new East Point campus in Atlanta, to begin the build-out of our new Houston campus, to implement the relocation programs of our Nashville and Philadelphia campuses, as well as program extensions at four campuses, we finished the year with more than $80 million in cash and no debt. In addition, we recently closed on a new expanded credit facility, which can provide up to an additional $60 million of availability.
Enter the new year with the student population is approximately 1000 students higher than at the beginning of 2023, which provides us with a platform for further growth in 2024.
We executed our capital investment strategy during 2023 to complete the Buildout of our new esports campus in Atlanta to begin to build out of our new Houston campus to implement the relocation programs of our Nashville, and Philadelphia campus as well as program extensions at four campuses.
We finished the year with more than $80 million in cash and no debt. In addition, we recently closed on a new expanded credit facility, which can provide up to an additional $60 million of availability.
Scott Shaw: Lincoln is in the best financial condition of the company's recent history and extremely well-positioned to execute our future capital investment plans for growth. Our exceptional fourth quarter top-line growth is being driven by our strong student starts and the highest level of student retention in Lincoln's recent history and a 5.4% increase in average revenue per student. Our hybrid instructional platform, or Lincoln 10.0, is a key driver of this increase in average revenue per student and has been incorporated into approximately three-quarters of our adaptable programs. While it will be the first half of 2025 before Lincoln 10.0 is fully implemented, we do expect some bottom line efficiencies to emerge during the second half of 2024 in the form of lower instructional costs as a percentage of revenue.
Lincoln is in the best financial condition of the company's recent history and extremely well positioned to execute our future capital investment plans for growth.
Our exceptional fourth quarter top line growth is being driven by our strong student starts and the highest level of student retention and Lincoln's recent history and five 4% increase in average revenue per student.
Hybrid instruction or platform or Lincoln 10 point out is a key driver of this increase in average revenue per student and has been incorporated into approximately three quarters of our adaptable programs. While it will be the first half of 2025 before Lincoln 10 point always fully implemented we do expect some bottom line efficiencies emerging during.
The second half of 2024 in the form of lower instructional costs as a percentage of revenue.
Scott Shaw: The new model combines hands-on learning at campus facilities with a greater component of classroom work delivered through online instruction. The new model enables our students to work part-time or manage other commitments while pursuing their Lincoln education and is specifically designed to help a higher percentage of students to graduate. As I mentioned a few moments ago, during the fourth quarter, Lincoln achieved its highest level of student retention in more than a decade, and we believe the biggest contributing factor to this development is the implementation of Lincoln 10.0.
The new model combines hands on learning at campus facilities with a greater component of classroom work delivered through online instruction. The model enables our students to work part time or manage other commitments, while pursuing a Lincoln education, and specifically designed to help a higher percentage of students to graduate as I mentioned, a few moments ago during the <unk>.
Fourth quarter Lincoln achieved our highest level of student retention and more than a decade and we believe the biggest contributing factor to this development is the implementation of Lincoln 10 point out.
Scott Shaw: Another key factor behind our students' initial growth is the continued increase of leads generated by our marketing programs. This lead generation is occurring across the board, both geographically and from a curriculum perspective, and is accompanied by a healthy conversion rate of these leads. In addition, we are achieving some lead generation leverage in markets where we have more than one campus. We recently began marketing for our new East Point, Georgia campus and have not only been pleasantly surprised by the demand for the new campus but have also experienced an increase in interest in our Marietta campus, which is approximately 45 minutes north of East Point, depending on Atlanta traffic. The new East Point campus is the first result of our strategy to open one new campus per year, offering hands-on training in the automotive and skilled trades fields.
Another key factor behind our student start growth is the continued increase of leads generated by our marketing programs. This lead generation is occurring across the board both geographically and from a curriculum perspective and is accompanied by a healthy conversion rate of these leads. In addition, we are achieving some lead generation leverage in markets where.
We have more than one campus. We recently began marketing for our new East point GA campus and have not only been pleasantly surprised by the demand for the new campus, but have also experienced an increase in interest in our Marietta campus, which is approximately 45 minutes north of east point, depending on Atlanta traffic.
The new eight point campus is the first result of our strategy to open one new campus per year offering hands on training in the automotive and skilled trades fields.
Scott Shaw: The campus has 56,000 square feet of training space, including 15 automotive service bays and up to 60 welding booths, labs, classrooms, and work areas. We are now enrolling students for training in four essential skilled career paths, with the first class commencing in March as planned. We are proud of the campus and will be showcasing the facility during our in-person analyst day on March 19th. We believe that the East Point campus is unique among trade schools.
<unk> has 56000 square feet of training space, including 15, automotive service space and up to 60 welding boots labs classrooms and work areas. We are now enrolling students for training and for central skilled career paths with the first class commencing in March as planned we are proud of the campus and we will be showcasing the facility during.
Our in person analyst day on March 19, we believe that the East point campus is unique among trade schools. The facility capitalizes on the best ideas from all of our campuses, while elevating the experience with its sleek modern design the labs in shops had the latest technology with lots of opportunities for hands on learning.
Scott Shaw: The facility capitalizes on the best ideas from all of our campuses while elevating the experience with its sleek, modern design. The labs and shops have the latest technology with lots of opportunities for hands-on learning. We are also excited to be the first school in the nation to incorporate Elect2 training aids into our automotive program. We have partnered with Elect2 to develop our automotive curriculum since they are the world leader in automotive training education. The agenda for Investor Day includes a debriefing of Lincoln 10.0 and how our transformative growth strategy positions Lincoln for increasing long-term returns. Additionally, members of my management team will present an overview of operations and actions to drive growth and even better outcomes. I highly encourage you to attend. We have timed the event so that analysts and institutional investors can fly into Atlanta that morning, attend our event, tour the new facility, and fly home in the late afternoon. For those that are unable to attend in person, we do anticipate webcasting some of the presentations and will provide that information as we get closer to the event.
We are also excited to be the first school in the nation to incorporate elect to training AIDS into our automotive program. We have partnered with <unk> to develop our automotive curriculum since they are the world leader in automotive training education the.
The agenda for the Investor Day includes a deep briefing of Lincoln 10 point out and how our transformative growth strategy positions Lincoln, We're increasing long term returns members of my management team will present, an overview of operational I'm, sorry, you have operations in actions to drive growth and even better outcomes.
We encourage you to attend we have timing events, so that analysts and institutional investors can fly into Atlanta that morning attend our event towards the new facility and fly home in the late afternoon.
Those that are unable to attend in person, we do anticipate webcasting some of their presentations, we will provide that information as we get closer to the event.
Scott Shaw: A key component of our growth strategy is to develop one new campus per year, and as we announced last year, our second greenfield site is in Houston, Texas. We remain on schedule to welcome our first classes at this campus, our second in Texas, in the first quarter of 2026. The campus is located in the heart of one of Houston's busiest commercial corridors and is strategically located for both student convenience and maximum graduate exposure to area hiring managers. The new campus will feature an approximately 100,000 square foot training center, offering career opportunities in the auto, diesel, welding, HVAC, and electrical fields. Of the 2.4 million jobs that are expected to become available nationwide in these industries by 2032, over 290,000 of those jobs are projected to be in Texas.
A key component of our growth strategy is to develop one new campus per year and as we announced last year. Our second Greenfield site is in Houston, Texas, We remain on schedule to welcome. Our first classes at this campus, which is our second in Texas in the first quarter of 2026. The campus is located in the heart of one of Houston's busiest <unk>.
Corridors and strategically located for both student convenience and maximum graduate exposure to area hiring managers. The new campus will feature and approximately 100000 square foot training center offering career opportunities in the auto diesel welding HVAC and electrical fields of the $2 4 million jobs.
Theyre expected to become available nationwide in these industries by 2032 over 290000 of those jobs are projected to be in Texas.
Scott Shaw: In addition to new campuses in Atlanta and Houston, we are relocating existing campuses in Nashville and Philadelphia to new locations that facilitate existing program expansion and our replication strategy. Over the next two years, as we layer on new campus openings in the program replication strategy, we consistently expand our opportunities to increase overall student starts, while we remain focused on continuing the impressive organic start growth at existing programs. I'm pleased by all the progress we have made and will continue to make. The need for our program...
In addition to new campuses in Atlanta, Houston, we are relocating existing campuses in Nashville, and Philadelphia to new locations at facilitate existing program expansion and our replication strategy over the next two years as we layer on new campus openings in the program replication strategy, we consistently expand our opportunities to <unk>.
Kris overall students starts while we remain focused on continuing the impressive organic start growth at existing programs.
I am pleased by all the progress we have made and will continue to make the need for our programs by employers has been with us for years and it now appears that student demand is growing to meet this need.
A new campus and program replication perspective, our biggest obstacle is receiving regulatory approvals in a timely manner. It seems that many governmental agencies, whether at the state or national level are understaffed and the delay from one organization then creates a cascade of delays along the way we have taken this new reality into our planning and so.
Let me summarize for you the timing of our growth opportunities in 2023, we replicated for programs in 2024, we will replicate six programs and open the east point campus and in 2025, we will replicate six to eight programs in the first quarter of 2026, we will open the Houston.
<unk> with a possible other new campus by the end of 2026 as other opportunities arise. We will certainly look to take advantage of them, but as of today. These are our program in campus openings and just to reiterate we expect each new program to generate annually on average $1 million of additional EBITDA and each new campus on average.
To generate at least 6 million of EBITDA after being opened for 36 months.
During the fourth quarter and during the first two months of 2024, we continue to learn of studies and surveys questioning the value of a four year degree and the accompanying deck.
Any students that eventually graduate from a four year degree don't have the marketable are applicable skills that today's employers demand at Lincoln, we strive to provide strong ROI programs that lead to solid in demand careers and we deliver these programs in a supportive environment that focuses on graduating in placing students.
So their careers, we offer will most likely not be replaced by artificial intelligence or moved offshore adding security to our students career decision.
We continue to expand our corporate partnerships that play a key role in our graduate placement rate. Most recently peterbilt truck signed on to expand our partnership at the Nashville campus to our Denver campus and we are in active negotiations with several existing corporate partners to expand their programs to additional campuses as well.
Additionally, we have established a partnership with Hyundai Genesis and we'll be offering students at six campuses opportunities for this advanced level training.
Also to further expand our reach into the HVAC industry. We participated in a panel discussion at the recent HR Expo, which brings together manufacturers and suppliers of all sizes and specialties to share ideas and showcase the future of HVA ACR technology.
We discussed how Lincoln helps attract and train people for the industry and how we partner with major corporations to provide specialized training that meets their specific needs.
Our Expo is the HBC industry's largest place for Oems engineers contractors facility operators architects educators and other professionals to experience everything new and build the vital relationships that grow businesses and careers.
We are discussing with several partners ways to build enrollments in their programs through student debt management scholarships based on metric achievements and higher skilled level programs. We're also talking with institutions outside corporate America to determine the feasibility of applying skilled trade training programs to non corporate organizations any students start to achieve.
Over the long term from these discussions will layer on to the high single digit organic growth rate. We believe we will achieve during 2024.
23 was an excellent year for Lincoln, we exceeded all of our financial goals starts were up double digits revenues were up double digits and EBITDA exceeded the top end of our guidance and be ready to new Greenfield campus increased graduate placement rate and continue to have more demand from employers that we have students as our strong graduation.
Placement rates provide excellent reference points are.
Our balance sheet, which has never been stronger as enabling Lincoln to expand our programs and locations, which will create long lasting benefits to our students. Our graduates are instructors, our corporate partners and increasing returns to our shareholders. We finished the year in excellent financial shape and are very well positioned to continue both our operating and financial moat.
<unk> in 2024, now I'd like to turn the call over to Bryan. So he can review some of our recent financial highlights and presenting our guidance for 2020 for Bryan. Thanks.
Thanks, Scott Good morning, and thank you for joining our fourth quarter earnings call. As Scott mentioned 2023 was another successful year, we exceeded all guidance metrics achieved an impressive double digit growth in both student starts of 11, 4% of revenue of 10, 3% year over year.
We finished the year with over 1000 more students than last year at $80 million in cash with no debt outstanding after investing over $40 million in total capital expenditures. Our momentum has continued into 2024 and current visibility calls for continued growth, which is reflected in our guidance for 2024.
To start I'd like to recap top five growth initiatives in 2023, which are shaping our operational landscape.
All of these initiatives are significant is that the each intel in investment over $10 million, we believe that each will deliver a strong ROI and advance our progress toward achieving our long term strategic goals, we are determined to drive innovation greater efficiencies and higher financial returns.
Our first two initiatives expand our footprint to 23 locations first and our new East point GA.
<unk> cabinets in Georgia, which is set to welcome its first class in the coming weeks and.
In 2023, we incurred capital expenditures in excess of $10 million to build a new state of the art facility, providing students at superior educational experience in training. This campus as in all of our new location wasn't designed from the ground up to take advantage of the efficiencies of our new hybrid learning model.
This allows us to deliver for our core programs out of our 56000 square foot facility, we will incur losses as the population ramps up in this first year, but expect the campus will be accretive to earnings in 2025 and second year of operations.
Second in our new Houston, Texas campus, which isn't the beginning preconstruction phase and likely to open their students in early 2026 offering career opportunities at auto welding HVAC and electrical we estimate that we'll incur capital expenditures of approximately $15 million in 2024 for the bill.
Out of this 100000 square foot campus.
Our third initiative is that with natural campus relocation towards newer more efficient facility.
The new 120000 square foot facility will enable us to add two new programs electrical and HVAC, while also expanding our industry partnerships in 2024, we expect to invest around $20 million and capital expenditures to build out this new location, which is expected to open in late 2025.
The fourth initiative is our Philadelphia cap its relocation to nearby Levittown, Pennsylvania.
As discussed we purchases facility in September of last year, and subsequently entered into a sale leaseback agreement announced in February of this year.
Sell in purchase transactions were essentially neutral our new campus will significantly expand our market presence from our only single program campus, a 30000 square feet to 90000 square foot modern multi program Capex.
Currently we expect to invest approximately $15 million of capital expenditures to prepare this new location to open during the second half of 2025.
Lastly, the fifth initiative is the expansion of our program offerings at our existing campuses to drive organic growth in 2023, we initiated the build out of separate program replication, mostly in with mostly within the skilled trades, but we expanded the capacity of two of our welding programs.
Paul a couple of programs have been rolled out with a small number of starts in 2023, we continue to make progress with the remaining programs. Accordingly, we expect to see a benefit in student's thoughts in the second half of 2024 and see the new program take a positive contribution to our bottom line in 2025.
In total during 2023, we invested close to $10 million and capital expenditures to implement these new programs will continue to expand new programs in the current year.
In summary, we are well into executing our growth strategies and have set out aggressive goals. Our team is working efficient efficiently to execute on these projects simultaneously. Thank you to everyone for your hard work and commitment.
Now turning to our fourth quarter performance.
Please keep in mind that discuss financial results exclude preopening costs of our new East point campus, our campus pre relocation expenses and nonrecurring expenses in the transitional segment.
The transitional segment, it's made about made up of a single campus in Somerville, Massachusetts, which was successfully taught out at the end of October that will no longer be part of our financial results going forward.
Starting with the top line revenue grew an impressive 13, 6% or $12 3 million to $102 5 million. The increase was due to growth in both average student population up seven 8% and average revenue per student up five 4% compared to prior year.
We are very pleased with our organic new student start growth for the quarter, which increased an impressive 16% outperformed and are outperforming our initial expectations.
Our soonest thoughts last year has positioned us to deliver strong revenue growth in 2024.
During the new year with a 1000 more students than we had in the prior year, which will continue through.
Two the revenue acceleration in 2024.
Operating expenses were $89 million after adjusting for nonrecurring items detailed in our adjusted EBITDA calculation reflected in our Q4 earnings release.
While expenses came in above our <unk>.
Total plan the overage was mainly driven by instructional expenses, resulting from population growth. In addition performance based incentives increased based on our improved financial results.
In terms of EBITDA, we ended the fourth quarter with adjusted EBITDA of approximately $16 million after adjusting for nonrecurring items detailed in our Q4 earnings release.
Now turning to our balance sheet and cash flow. We continue to have a very strong balance sheet, which benefited from our business generating more than $22 million in cash flow from operations during the fourth quarter.
As mentioned earlier, our year end cash balance was over $80 million compared to 65 million in the prior year or over a year and we had working capital in excess of $60 million.
Capital expenses for.
For the full year were $41 million, including the purchase of the Levittown, Pennsylvania facility for $10 million and net total of $31 million, excluding levittown is consistent with our guidance.
A 75% of the net 31 million capex related to growth initiatives.
In terms of liquidity, we now have more flexibility as we recently entered into a new three year $40 million credit facility with fifth third Bank. In addition, the agreement includes a $20 million accordion option, which provides greater financial flexibility and funding should the company decided to pursue a sizeable.
Inorganic growth transaction, while we do not anticipate any recent draw on the credit facility in the near term access to the credit facility further enhances the company's financial strength stability and ability to execute on growth opportunities.
Lastly in terms of the key regulatory compliance metrics, we project to be in very good standing with both our financial responsibility ratio and a 90 10 ratio. We project our 2023 financial responsibility composite score to be three point out that Maximo chew achievable score and projected.
90, 10 ratio to be approximately 81% compared to 70, 575% in the prior year. The increase is the result of the new calculation the rules, which became effective for 2023. The main rule change relates to better the fares benefits, which are now treated as federal funds and counted in the <unk>.
<unk> side, along with title for a while the change in the calculation methodology resulted in a ratio increasing by several percentage points, we expect to continue to be well under the 90% threshold.
Now as we turn to 2024 the positive momentum generated during 2023 has carried over into the first two months of the new year.
Year guidance for adjusted EBITDA, and adjusted net income will exclude the impact from one new campus in campus relocation cost to program expansions and three noncash stock based compensation.
We are forecasting 2020 for revenue to range between $410 million and $420 million adjust.
The adjusted EBITDA range of between $35 million $40 million adjusted net income ranging between $10 million 15 million students starts student start growth ranging between 7% and 12% capital expenditures ranging between $65 million and $70 million.
Our capital expenditure.
<unk> plan on this was the confidence we have in our growth initiatives.
The largest components of the Capex plans of the build out of the Houston, Texas campus and the relocation for Nashville, and Philadelphia with Polo Route 50 million for all three projects.
We expect to fund these.
Significant capital investments through the combination of our cash liquidity of $80 million cash flow from operations generated in 2024 and $10 million of proceeds associated with leveraged our Pennsylvania facility sale leaseback completed in February.
In terms of net interest expense, while while we do not expect to have interest expense associated with borrowings. We project net interest expense of approximately 700000.
Total interest expense.
Is projected to be $2 7 million.
Similar to others measure all new leases to determine the appropriate accounting treatment.
As such we have two new finance leases in 2024, resulting in $2 2 million of interest expense.
Remainder the remainder relates to fees associated with our new credit facility. This expense will be largely offset by approximately $2 million of interesting.
With that I'll conclude my remarks by thanking our entire team, including our faculty and students for their outstanding efforts. During 2023, we look forward to communicating our progress throughout 2024, and now I'll turn the call back over to the operator, So we can take your questions operator.
Thank you.
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Please standby, while we compile the Q&A roster.
Our first question comes from Alex Paris, with Barrington Research. Your line is now open.
Good morning, guys. Thanks for taking my question and congratulations on the big beat in the guidance above consensus expectations for 2024.
Thanks, Alex.
Hi.
I wanted to dive into the starts momentum a little bit because that was a significant outperformance in the quarter.
I think starts were up 16%.
Year over year, excluding the transition segment.
Came out at close to 3200, new students versus our estimate of $28 50.
And then if you look at it by.
Feel the study transportation and skilled trades, let it up about 21% where health care and other professionals were up 10, 11% you did a pretty good job.
In my opinion covering it in your prepared comments, but what other color could you offer us in terms of just great momentum that.
It leads us to above average guidance in 2024.
Sure Thanks, Alex well, we constantly.
Daily or monitoring are leads that are coming in and we did strategically invest more in marketing in the fourth quarter. Because we constantly are just managing what's the cost per start and whenever we see opportunity to invest more than we take advantage of that and so we did spend more in marketing in the fourth.
Order than the prior year, and I think that that frankly.
With us in the fourth quarter, and frankly seems to be also generating increased demand in the first quarter.
So that's one thing that we're doing and we're constantly refining our marketing we're constantly looking at getting out of lower return investments in marketing areas. So that we can hopefully get the best returning leads as possible and we have a new partner that we started with last year, which has certainly helped us.
Those objectives, and we anticipate frankly, even more efficiencies.
In 2024, now that we've been working with them for a year and then as we've mentioned it does seem as if the world is waking up to the fact that these are a great careers and where there certainly is a lot more anecdotal evidence to suggest that.
With that said, though.
When you look at all of our starts in any number of ways and I can't say that.
People are coming to us in any greater number than I'll say the older people. The average age of our student is around 25 26 years old and if I look at the makeup of our starts over the last 12 months the percentage at each I'll say age from 18 19, 20% to 21 Hasnt changed year over year. So while we know that high school.
Students and parents are talking a lot more about maybe I don't need to go to college, we're kind of seeing that benefit across the board frankly.
That's very helpful. Thank you and then let me just ask a quick question about guidance too before I get back in the queue guidance was better than expected versus consensus expectations. It looks like in that guidance. If you use the midpoint of guidance, we're expecting revenue acceleration.
Sure.
Adjusted EBITDA margin expansion, but even at that.
The adjust.
Adjusted EBITDA margin guidance is about 9% versus 7% in 2023 to 200 basis points, but Havent you said in the past that you thought mid teens is a good target for adjusted EBITDA and when do you think you'd get there.
Yes, absolutely absolutely, we should be able to get to that 15% EBITDA level and.
And we anticipate as Youre seeing some acceleration in some of that expansion of our profitability and we think that as these new programs rollout as we get the benefit of Lincoln 10 point out as we continue to refine our marketing you will see hopefully an acceleration of that increase so to get to 15%.
It's not going to be in 2020 for 2025, but I would anticipate shortly thereafter.
Great. That's helpful. Thanks, and congratulations again, I will get back into the queue.
Thanks, Alex.
Thank you one moment for our next question.
Our next question comes from Steven Frankel with Rosenblatt Securities. Your line is now open.
Good morning, very impressive metrics all the way around could you detail for us what the graduation and placement rates were in 2023.
Sure. So placement rates were around let's say, 82% and our graduation rates as we track them cross the 70% threshold. So just around 70% as we look at how we are managing that our actual accs's graduation rates could be slightly less.
Because they look at a different timeframe than what we're looking at but anyway. We ended up at the 70% number which is as you may recall, our goal that I've set out for our company is to get 85% placement rate and 70% graduation rate.
Okay, that's great.
Starts are very impressive.
What do you think youre doing differently from a marketing perspective that.
Enabling you to gain efficiencies.
Sure well, we know that as I said with this new partner, where it seemed to be not seem we are achieving better I'll say purchasing of.
Key words, and we're also kind of narrow down the scope of the number of keywords that we're buying which is creating some efficiencies. So we're in constant dialogue with our partner on this and we're looking at metrics all the time and we're also testing.
But that's kind of the beauty of the Internet marketing you can test different words are different styles of presenting things in one market to see if it is creating a difference and then when it does then we look to replicate that in other markets. So it's working with a strong vendor and constantly being on top of things.
Okay, great. Thank you very much I'll jump back in the queue.
Sure. Thanks, David.
Thank you.
A reminder to ask a question. Please press star one one on your telephone keypad.
Again that is star one one on your telephone.
For our next question.
Okay.
Our next question comes from Eric Martin Mucci List Lake Street Capital markets. Your line is now open.
Yes, I know we're not.
Disclosing kind of a forecast on the new student starts by by trade group, whether it's transportation.
<unk> or health care, but just curious to know if youre seeing the same demand trends. The two historic sides of the business I think it's been about a 70 30 mix between transportation and skilled trades versus health care and other.
Yes, I would say that transportation skilled trades still tend to be slightly stronger for us than healthcare.
And one of the.
Writing parts is.
I'll just throw this out.
Our automotive business grew by 11% and we have an opening any new auto programs. So that kind of shows you the underlying strength in these core.
Careers that we're offering but overall to your point automotive and skilled trades is definitely slightly better than the health care sector at this point.
Okay.
Alright, and then the.
Your forecast for 2024.
The macroeconomic assumptions built in because historically.
We faced headwinds around interest rates inflation unemployment is at an assumption that the status quo persist for the rest of the year.
Yes, we.
Basically based off of what we're seeing already in the first quarter and yes, we assumed that the economy will be the same.
Let's see I think many people have been surprised at the strength of the economy unemployment is still remains very low.
So if that were to change I could see that only benefiting us meaning unemployment increases, but again, what's so exciting is the fact that we're able to get this type of growth in this low unemployment market, which to me suggests theres been a fundamental shift to our benefit taking place out there.
Got it congrats on the quarter and the outlook.
Thanks, Thank you.
Thank you.
As a reminder to ask a question. Please press star one one on your telephone keypad again star one one on your telephone keypad.
One moment, while we compile the Q&A roster.
Yeah.
Okay.
I'm showing no further questions at this time I would now like to turn it back to Scott Shaw CEO for closing remarks.
Thank you all for joining us today to listen to our strong performance and progress to date at Lincoln, We all could not be more excited about all of our opportunities and our leadership position to continue to eliminate the skills gap is.
As most exciting could be what I'll refer to as a renaissance of skilled trades after decades of societal pressure to only go to college, we are seeing and hearing that more and more people are becoming aware of the robust and enduring careers available by working with your hands for more than 75 years Lincoln has been solely focused.
On providing the best hands on training possible and it's increasingly feeling that America is getting on board.
Wanted to thank all of our instructors and staff for their steadfast commitment to our students into our mission of changing lives and I hope that you will join US on March 19th at our East point GA campus for our first ever Investor Day.
<unk> that you will walk away from the event with as much excitement as we have for Lincoln's future. Thank you all and have a great day.
This concludes today's conference call.
Thank you for participating you may now disconnect.
Okay.
Okay.
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Thanks.
Thank you.
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Yeah.