Q1 2025 Lincoln Educational Services Corp Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to Q1 2025 Lincoln Educational Services Earnings Conference Call.
Speaker Change: Please be advised that today's conference is being recorded I would now turn the conference over to your speaker for today, Michael Bolivia. Please go ahead.
Michael Bolivia: Thank you Lisa good morning, everyone.
Michael Bolivia: Market open today, we can educational services issued a news release reporting financial results and recent corporate developments for the first quarter ended March 31, 2025 release.
Michael Bolivia: The release is available on the Investor Relations portion of the company's corporate website at Www Dot would protect you.
Speaker Change: Joining us today on the call for Scott Shaw, President and CEO, and Brian Meyers Chief Financial Officer today's.
Michael Bolivia: Today's call is being recorded and broadcast live on the company's website, a replay of the call will be archived on the company's website.
Michael Bolivia: Statements made by Lincoln's management on today's call regarding the company's business that are not historical facts may be forward looking statements as the term is identified in federal securities laws.
Michael Bolivia: Words may will expect believe anticipate project plan intend estimate and continue as well as similar expressions.
Michael Bolivia: <unk> statements.
Michael Bolivia: Forward looking statements should not be read as a guarantee of future performance. The company cautions you that these statements reflect certain expectations about the company's future performance or events and are subject to a number of uncertainties risks and other influences many of which are beyond the company's control that may influence the accuracy of the statements that projection upon which the segments.
Michael Bolivia: Statements are based.
Michael Bolivia: Factors that may affect the company's results include but are not limited to the.
Michael Bolivia: The risks and uncertainties discussed in the risk factors section of the annual report on Form 10-K.
Michael Bolivia: And the quarterly report on Form 10-Q filed with Securities Exchange Commission.
Michael Bolivia: Yeah.
Michael Bolivia: Forward looking statements are based on information available at the time those statements are made and management's good faith belief as of the time with respect to future events.
Michael Bolivia: Forward looking statements qualified in their entirety by this cautionary statement.
Michael Bolivia: <unk> undertakes no obligation to publicly revise or update any forward looking statement, whether as a result, Q information future events or otherwise after the date thereof.
Michael Bolivia: Other housekeeping matters during the Q&A portion of the call today.
Michael Bolivia: Ask questioners limit themselves to two questions and then re queue to ask any additional questions in advance we thank you for your cooperation.
Michael Bolivia: Now I'd like to turn the call over to Scott Shaw, President and CEO and educational services Scott.
Michael Bolivia: Go ahead.
Scott Shaw: Thank you Michael and good morning, everyone and I Hope you all had a nice mother's day yesterday.
Scott Shaw: For joining us today for our review of Lincoln's very strong first quarter financial and operating performance.
Scott Shaw: We've talked about the strategies, we've put in place to generate consistent growth, including the Lincoln 10.0 hybrid teaching model the new campus development program replicating high in demand programs at existing campuses.
Scott Shaw: <unk> corporate partnerships and consistently providing high value training and skills to our students to prepare them for rewarding careers.
Scott Shaw: During the first quarter of 2025, our financial results. Excluding the transitional segment illustrated increasing returns we are realizing from these strategies as revenue grew 16% and adjusted EBITDA grew 56%.
Scott Shaw: In addition, the results have enabled an increase in our full year financial guidance as well as our confidence in achieving our objective of approximately $550 million into organically generated revenue and approximately $90 million and adjusted EBITDA in 2027.
Scott Shaw: The past two years, the Lincoln <unk> hybrid teaching model has provided increased flexibility to our students who often need to balance work and life, while earning their certificate or degree.
Scott Shaw: We've achieved this flexibility by combining hands on learning at campus facilities with a component of classroom work delivered through online instruction.
Scott Shaw: The model enables our students to work part time or manage other commitments, while pursuing a Lincoln education and reduces the time needed to complete many of our curriculum accelerating our graduates onto their highly rewarding careers is helping a higher percentage of our students to graduate and is attractive to our corporate partners who remain.
Scott Shaw: Growth constrained by the lack of skilled employees.
Speaker Change: That's the first phase of Lincoln 10.0 was implemented we generated instructional efficiencies space efficiencies and organizational productivity with the first phase completed the efficiencies have increased which contributed to our adjusted EBITDA growth as compared to last year's first quarter, Brian will provide more detail on that.
Brian Meyers: Leverage we achieved from our operating expenses during the first quarter in a few moments.
Brian Meyers: Our student starts at 21 campuses operating in the first quarter grew an exceptional 20% over the prior year period and students starts have now increased at a double digit rate for six consecutive quarters.
Brian Meyers: As I mentioned, we believe Lincoln 10.0 has played an important part in this growth. In addition, our new East point campus continues to contribute to our strong start growth and our marketing programs continue to be increasingly effective at generating leads while lowering the cost of those leads.
Brian Meyers: Lincoln has successfully meeting the consistently growing demand for education alternatives to a traditional four year college as employers continue to seek solutions to closing their workforce skills gap.
Brian Meyers: Our new campus development strategy is designed to expand our model to underserved markets within the United States and during the first quarter generates substantial progress the first new campus under our expansion strategy each point in Metropolitan Atlanta opened in March of 2024 and has demonstrated.
Brian Meyers: Tremendous success in its first year of operation, becoming profitable well ahead of schedule.
Brian Meyers: <unk> performance at this point has reinforced our confidence in our new campus program strategy, which includes the opening of three new campuses during 2025.
Brian Meyers: First of the 2025 openings took place in the first quarter as we completed the relocating of the Nashville campus to a state of the art facility overlooking the city skyline.
Brian Meyers: Rebranded as the Nashville Auto diesel college or a D. C. The campus will expand its offerings to include new electrical and HVAC programs.
Brian Meyers: D C students and faculty.
Brian Meyers: <unk> War warmly embraced the new campuses 100 welding booths, the latest alignment racks from Hunter brand, new environmentally friendly spray booths from GFS elect to training equipment, our Peterbilt training center and much more we will mark this exciting milestone on June 5th with the Grand opening.
Brian Meyers: And Adcs historic position as a leading career technical college, serving this country since World War one.
Brian Meyers: This event will also exhibit the school's hall of Fame room, recognizing the one hundreds of graduates who have advanced into leadership positions throughout the automotive and diesel industry across the country.
Meanwhile, our new campus in Levittown.
Which will incorporate our current automotive program in Philadelphia is nearing completion and we remain on schedule to complete the move to this Dave Dr facility. This summer.
Brian Meyers: The efficiency and additional space at the Levittown campus is enabling us to add another three programs in the market.
Brian Meyers: We recently hosted local leaders at the campus, which generated a great deal of enthusiasm for the contributions Lincoln is making to the local community with this new facility.
Brian Meyers: Our third new campus scheduled to open late 2025 is our Houston campus, which is our second in Texas, but first in the Houston market, which represents vast opportunities. The current schedule calls for us to begin our first classes in automotive HVAC electrical and welding during the fourth quarter.
Brian Meyers: Our fourth new campuses Hicksville long island is underdevelopment.
Brian Meyers: Underdevelopment and we anticipated opening in the latter part of 2026.
As always we continue to explore other underserved markets to determine additional new campus opportunities for Lincoln and we expect to announce additional new school openings before year end.
Brian Meyers: Program replication at existing campuses as another of our key growth initiatives. During the first quarter. We opened an electrical program at our Lincoln, Rhode Island campus and expansion of our welding program at our Denver campus. We have five additional programs scheduled to begin operation as the year progresses.
Brian Meyers: Our efforts to enter into new corporate partnerships continued during the first quarter. The interest from corporate America in Lincoln as a solution to closing the workforce skills gap remains strong however decision, making timelines have lengthened primarily due to ongoing economic uncertainty.
Brian Meyers: We continue to see resources being made available to students learning essential skills and training that will enable us to live the life, we have grown accustomed to at.
Brian Meyers: At the same time, our proven commitment to providing high ROI programs continues benefiting students their families and their communities.
Brian Meyers: High graduation rate as well as graduate placement rate indicate we offer an excellent return on investment.
Brian Meyers: I believe that Lincoln Tech is uniquely positioned to capture an increasing share of the growing skilled trades training market.
Brian Meyers: Over 78 years, we've remained focused on delivering high quality life changing career education and no one else has or combination of longevity scale and proven experience.
Brian Meyers: Growth strategy is simple we will continue to expand our network of schools by replicating our most in demand programs at our existing campuses, while building new campuses in new and existing markets. Despite the uncertainty that many face with the ever changing economic landscape.
Brian Meyers: Our path forward is quite certain.
Brian Meyers: Our country has an existing severe skills gap.
Brian Meyers: Which most likely will get worse before it gets better there are major initiatives underway that will drive this increased demand for skilled workers, whether it's our navy's need for 250000 skilled workers over the next 10 years to build three new submarines a year what are the electric utilities dire need to build new sources of <unk>.
Brian Meyers: Eric power to fuel rapidly expanding demand caused by AI and the move towards electrification in general or the expected massive onshoring efforts of our manufacturing base by the current administration to create greater economic security and prosperity the demand for more talented men and women to enter the skilled trades.
Brian Meyers: We will only increase and Lincoln Tech will be there to meet that demand.
Brian Meyers: The good news for Lincoln Tech in our country is the resurgent interest in the skilled trades depressed is labeled this generation the tool belt generation, we and others have had numerous stories of national and local television highlighting the need for skilled workers.
Brian Meyers: More and more people are turning to the trades and why schools like Lincoln Tech provide an excellent alternative to obtaining a four year degree.
Brian Meyers: Across the country, we are seeing increased demand by adult and high school students the audiences and engagement with parents is growing even among those communities with historically high number of students going to the traditional four year colleges. The message is sticking and its being reflected in our results in rising interest.
Brian Meyers: As we saw with the latest jobs report for April employers continue to struggle to find technicians, electricians welders and health care health care workers and through our lead generation programs, we've seen record level of interest in our curriculum we.
Brian Meyers: We continue to see the demand for what we do growing regardless of macroeconomic conditions or political agendas and have transformed our company into an exceptional provider of educational services meeting the needs of America's corporations as well as America's workforce as we continue to work to be a leading voice for middle skills learning.
Brian Meyers: In this country.
Brian Meyers: Our increasing financial performance over the past several quarters has enabled us to put in place the financial resources to carry out our growth strategies achieve our objectives and generate increasing return to our shareholders.
Brian Meyers: Finally, I'd like to note I'll be meeting with investors over the coming weeks at various locations around the country. These include the B Riley annual Investor Conference in Marina del Rey, California on May 22nd the ideas conference and on June 11th in New York and the Northland Securities Virtual Conference on June 25th.
Brian Meyers: Additionally, I will be in Portland, Oregon on June 17th in Denver on June 18th with Barrington hosted non deal Roadshow.
Brian Meyers: The level of interest coincides with our performance.
Brian Meyers: And I believe the successful execution of our growth strategy has the potential for further price appreciation depreciation as we continue to grow our student population and generate an increasing level of operating efficiencies.
Speaker Change: Now I'll turn the call over to Brian Meyers. So he can review some of our recent financial highlights and guidance Brian. Thanks.
Brian Meyers: Thanks, Scott Good morning, and thank you for joining us today I'm pleased to provide an overview of our financial performance for the first quarter of 2025 discuss some key developments and share our updated outlook for the remainder of the year.
Brian Meyers: As Scott mentioned, we exceeded internal expectations in Q1, driven by robust stock growth and improved operating leverage. These key drivers translated to higher operating margins and improved profitability. Our results reflect the strength of Lincoln's business and the momentum we built over the past several years. Please.
Brian Meyers: Please note that throughout our discussion will refer to financial results compared to prior year that exclude the transitional segment.
Brian Meyers: As a reminder, the transitional segment consisted of the former Summerlin Las Vegas campus, which was sold late 2024 and bus impacts of the prior year comparisons.
Brian Meyers: We delivered solid year over to Europe growth across all across the board in Q1 revenue increased 16% to $117 5 million Bakken the eighth consecutive quarter of double digit revenue growth. This strong performance was primarily driven by a six 2% increase in average student.
Brian Meyers: Population.
Brian Meyers: Our stock growth for the quarter was an impressive 29% as we enrolled over 4600 students during the quarter. During Q1 2025. There is strong interest in our programs has remained consistent as evidenced by our double digit stock growth over the past six consecutive quarters.
Brian Meyers: To provide additional context around our stock growth the transportation and skilled trades programs increased by a robust 32, 4%. This strong performance was driven by growing demand combined with our efforts to replicate these programs across additional campuses.
Brian Meyers: Within the healthcare and other professions. The total the total stock declined six 3%. However, this decline was directly attributed to two reasons.
Brian Meyers: First in 2024, we temporarily suspended new enrollment in our nursing program at our Paramus, New Jersey campus.
Brian Meyers: Second we discontinue enrolling new students into massage therapy and culinary programs.
Brian Meyers: These changes are part of our ongoing strategy to optimize our campus operations by phasing out lower demand programs and replace them with offerings that have the highest student interests and employer demand assuming the impact of these changes our hops programs achieved approximately 6% organic growth, reflecting continuing to.
Brian Meyers: Dan.
Dan: In terms of capital expenditures, we committed approximately $25 million during the first quarter of 'twenty the.
Speaker Change: During the first quarter of which $20 million as reflected on the cash flow statement.
Scott Shaw: As Scott mentioned during the quarter, we completed the relocation of our Nashville campus and launched two of the seven planned program replications in 2025.
Scott Shaw: In addition, we made solid progress on our major construction projects.
Scott Shaw: Keeping us all are keeping us on track to open our levittown and using campuses in the second half of the year pending regulatory approval.
Scott Shaw: For the full year, we anticipate capex to range between $70 million to $75 million consistent with our long term growth plans. This investment supports two.
Scott Shaw: Two new campuses to campus relocations, seven replication or expansions of our skilled trades programs at existing campuses and increased maintenance capex to refresh and modernized training equipment further enhancing the quality of instruction hands on training student experience and outcomes.
Scott Shaw: We are highly confident that each of these investments will generate strong returns for.
Scott Shaw: For example, we expect each new campus to deliver approximately $6 million million to EBITDA and each program replication that contribute 1 million to EBITDA 36 months after opening.
Scott Shaw: To ensure we have the financial flexibility if needed to fund. These initiatives. We have recently amended our credit facility with fifth third Bank. This amendment increased our line of credit from 40 million to $60 million and expanded the accordion feature from 20 million to $25 million our capital structure remains robust as we ended the quarter with approximately.
Scott Shaw: $90 million in total liquidity and no debt outstanding.
Scott Shaw: Turning to expenses operating expenses were $114 3 million up from $101 2 million last year. This was in line with our plan as such the increase aligns with our growing student population and it and expenses related to our growth initiatives.
Scott Shaw: We also continue to generate operating efficiencies during the quarter, notably education service and facility costs as a percentage of revenue declined to 43% from 41, 3%, partially driven by efficiencies from our Lincoln 10.0 education initiatives. Additionally.
Scott Shaw: Additionally, our marketing efficiencies improves.
Scott Shaw: Significantly with our total marketing spend declining achieving a 20% reduction in cost per start compared to Q1 2024.
Scott Shaw: Turning to a key topic in the macro environment the impact of tariffs we have been notified of only minimum cost increases as such we do not currently anticipated material impact on our cost our capital expenditures in 2025.
Scott Shaw: Our adjusted EBITDA for the first quarter increased by 56% to $10 6 million up from $6 8 million in the first quarter of 2020 for the.
Scott Shaw: The adjusted EBITDA margin also rose to 9% compared to 7% in the prior year adjust.
Scott Shaw: Adjusted EBITDA was favorably impacted by a shift of approximately $1 million in operating expenses into the second quarter.
Scott Shaw: Without this benefit of the timing shift our adjusted EBITDA would have still grown by almost 45%.
Scott Shaw: The primary drivers of our improved profitability, where instructional and marketing expenses, both of which experienced meaningfully operating leverage in.
Scott Shaw: In addition, bad debt expense declined both in absolute terms and as a percentage of revenue, reflecting the positive impact of several initiatives implemented over the past year.
Scott Shaw: Finally, net income was $1 9 million or <unk> <unk> per diluted share and our adjusted net income was $3 5 million or 11 cents per diluted share based on weighted average diluted common shares outstanding of approximately $31 1 million.
Scott Shaw: The first quarter performance moves us closer to our long term objectives, we outlined at last year's analyst day, which included reaching $550 million in revenue and $90 million and adjusted EBITDA by 2027.
I encourage you to review our plan, which is available in our latest investor presentation on our website.
Scott Shaw: Looking ahead to the remainder of 2025.
Scott Shaw: Given the strength of our Q1 results and the positive trends, we're seeing across the business. We are raising our full year financial guidance, we now expect.
Scott Shaw: Revenue ranging from $485 million to $495 million adjusted EBITDA in the range of $58 million to $63 million net income ranging from $10 million to $15 million suit and stock growth of 10% to 14%.
Scott Shaw: As always during our last call. We expect starts to default typical seasonality with one notable exception.
Scott Shaw: We have a significant class start shift from Q2 to Q3 in 2025% due to a link and 10.0 teaching model, which can slightly change start dates from year to year. In 2024, we had a start in the last week of June of approximately 2300 students. However in 2025 stock class will move to July one.
Scott Shaw: And there could be reported in the third quarter.
Scott Shaw: While the shift in start dates will reduce Q2 starts it will have a minimum impact on our Q2 revenue on a combined basis, we anticipate Q2 and Q3 starts to grow into high single digits given.
Scott Shaw: Given the timing of this ship shift that we expect to provide additional insights on us second quarter investor call.
Scott Shaw: Overall, it's important to note that timing shifts such as this have minimum impact on the cadence of our quarterly revenue.
Scott Shaw: Our final guidance metric is our capital expenses, which is unchanged ranging from ranging between 70 and $75 million as frequently as previously mentioned.
Scott Shaw: As a reminder, in order to provide a clearer view of our underlying performance our guidance excludes stock based compensation and onetime nonrecurring items.
Scott Shaw: Additionally, excludes preopening costs as well as net operating losses from new and relocating campuses.
Scott Shaw: For additional guidance guidance details please refer to our earnings release filed earlier today.
Scott Shaw: In closing I want to thank our entire team for their hard work and ongoing commitment to delivering strong outcomes.
Scott Shaw: For our students and stakeholders. We are encouraged by the start of the year remained focus on executing our strategy and delivering shareholder value.
Scott Shaw: Look forward to sharing our continued progress next quarter with that I'll turn the call back over to the operator for questions operator.
Scott Shaw: Thank you and as a reminder, if you would like to ask a question. Please press star one one of your telephone.
Scott Shaw: The automated message advising your hand is raised to withdraw your question Press Star. One again, we also ask that you. Please wait for your name and company to be announced before proceeding with your question one moment, while we start the Q&A session.
Scott Shaw: The first question will be coming from the line of Alex Paris of Barrington Research. Your line is open.
Alex Paris: Hi, guys. Thanks for taking my call and congratulations on the strong start to 2025.
Scott Shaw: Ill.
Scott Shaw: Pleasure.
Scott Shaw: So I'll do my first.
Scott Shaw: My two questions.
Scott Shaw: From the top down really.
Scott Shaw: First.
Scott Shaw: Wanted to discuss the strong demand.
Scott Shaw: During the first quarter and those increased marketing efficiencies.
Scott Shaw: Such that your cost of your comp.
Scott Shaw: It was down 10% year over year, so maybe a little additional color. There and then my follow up question will be more top down regulatory.
Scott Shaw: Sure. So I mean, we're obviously always monitoring and measuring our our marketing efforts are always looking for ways to become more efficient.
Scott Shaw: And.
Scott Shaw: Part of it is I would say actions that we've taken and working with some of our vendors to get more with less also though to be honest with you part of it is just as increased awareness and demand in the general environment, which then helps US drive more people. We're also getting more referrals and other actions like that which helped lower the overall.
Scott Shaw: The average cost is unusually impressive improvement in marketing costs in the first quarter, we're continuing to see strong demand overall.
Scott Shaw: And I'm anticipating that the savings year over year should hold out throughout the year, probably not to the degree that it did in the first quarter, but time will tell.
Scott Shaw: And I think it goes without saying based on your overview comments that that.
Scott Shaw: April and May have exhibited the same strong demand.
Scott Shaw: Okay.
Scott Shaw: Demand remains out there.
Scott Shaw: It's very consistent.
Scott Shaw: And then.
Scott Shaw: For my second question I was wondering if you could give us an update on regular regulatory changes in tone at the top coming out of Washington D. C. Since your last conference call in late February a lot has happened.
Scott Shaw: Including a <unk>.
Scott Shaw: Significant reduction in the number of people at.
Scott Shaw: The Department of Education, there has been a important bill that's moved out of committee and at the <unk>.
Scott Shaw: House of sweeping higher education, Bill that'll be.
Scott Shaw: Part of the reconciliation Bill the one big beautiful Bill.
Scott Shaw: Which among other things proposes the elimination of gainful employment and 90 10.
Scott Shaw: And then specifically how it may have impacted you in the first quarter you mentioned that.
Scott Shaw: The welding program and it was.
Scott Shaw: In Lincoln, Rhode Island.
Scott Shaw: It is now up and running suggesting that you got your approval and then.
Scott Shaw: The approvals for the Houston campus later this year.
Scott Shaw: Yes. So a lot is going on just a quick clarification, we haven't launched the welding and Lincoln, Rhode Island as of yet we did launch our electrical program. So welding are coming later in the year, but in general I mean, it's obviously I think everyone knows that what's happening in Washington is a little bit fast pay.
Scott Shaw: And ever changing long story short, though the good news is that we're on the right side I'll say of where the certainly the administration wants to go from an educational standpoint, they definitely want to see more people go into the trades. They are hearing that from companies in general and just part of their overall initiatives in play.
Scott Shaw: <unk> for our country require more people to go into the trades. So from that high level perspective, we're in a good position from the activities that they've taken at the department of Ed Yes, a lot of the people that we typically deal with frankly are no longer at the department. However, we do have some high level contacts and we're staying very close.
Scott Shaw: Those two those individuals to make sure that certainly our needs can be met in a timely manner and we've had no indication to date that that's not the case.
Scott Shaw: Obviously theres lots as you mentioned builds going through it and Congress has some positive aspects and possibly some negative aspects, but overall, it's all working more in our favor there is more definitely a lot more good coming out of everything in Washington for us than bad So I feel good about it frankly.
Speaker Change: As do I just wanted to hear your color. So I appreciate that ill get back into the queue at this point.
Alex Paris: Thanks, Alex.
Scott Shaw: Okay.
Scott Shaw: Thank you NY moment for the next question.
The next question will be coming from the line of Martin Im sorry of Eric <unk> of Lake Street Capital markets. Your line is open.
Scott Shaw: Yes, I wanted to follow up on the new program progression here. So it sounds like we rely upon to and then we've got five more expected throughout 2025 are all five of those green lit by the department of Ed.
Scott Shaw: Oh, well, they're all the only thing the only one that is not I'll say green lit by the department of Ed is the welding program in Rhode Island, and that's simply because that <unk> doesn't have a welding program to date and that's what requires additional effort from the department of Ed, but as I also just mentioned with Alex.
Scott Shaw: We're in constant dialogue with folks in the department. They know the urgency of our need and we anticipate that we certainly will be getting it certainly in the next four to five months.
Scott Shaw: Okay.
Scott Shaw: And then I wanted to follow up on the new student start contraction within health care.
Scott Shaw: About the.
Scott Shaw: And we stopped enrolling in.
Scott Shaw: Massage therapy and culinary when do we anniversary that enrollment.
Scott Shaw: Enrollment suspension at those in those programs.
Scott Shaw: Well.
Scott Shaw: We have different times as we stop them.
Scott Shaw: Periods of time, but certainly by.
Scott Shaw: This coming November is my understanding we should no longer have any students in either of those programs.
Scott Shaw: Okay, and so the assumption is that the.
Health care and other will be in growth mode, beginning in Q4 or growth, yes, okay. Yes.
Scott Shaw: Yes.
Scott Shaw: And also as Brian mentioned as you know we had to suspend enrollments at our Paramus campus simply because of the pass rates being below the benchmark, but I'm very pleased to announce that as of March for the prior 12 months and I think they had about an 80, 788% pass rate the benchmark is 70.
Scott Shaw: Five so we're approaching the board of nursing in New Jersey to hopefully have them reinstate us sooner than having to wait to the end of the year just given the strong performance, but we'll have to wait and see.
Scott Shaw: Got it thank you.
Scott Shaw: Yes.
Scott Shaw: Thank you Eric next question.
Speaker Change: And the next question will be coming from the line of Steven Frankel of Rosenblatt Securities. Your line is open.
Speaker Change: Morning, and thank you just two.
Speaker Change: Go back to the healthcare start situation could you.
Speaker Change: Maybe help us understand how much of that weakness is attributed to paramus situation.
Speaker Change: Versus.
Speaker Change: The ending of the courses in summerlin or maybe another way to look at it outside those two factors.
Speaker Change: What are healthcare starts doing.
Speaker Change: Yes, I think that Brian go ahead, Bryan so outside of that they grew I think by almost six 6%, yes, yes outside of that and those two were almost evenly split between.
Speaker Change: The teach out of those two programs into nursing.
Speaker Change: Okay, Great. That's really helpful. And then you had some comments about the cadence of starts between Q2 and Q3 that I didn't quite get it into my notes. So maybe you could just go through the door and more time.
Speaker Change: Yeah, no problem, so given our the calendar the start calendar. It just happens that the start that last year took place in the last week of June is now going to take place on July 1st of this year. So just by having it move by four days it moves it from a Q2 event to a Q3 event.
Speaker Change: But from a revenue and economic standpoint, there's really no material impact whatsoever in those four days of having a large start take place a little bit later, so Brian just wanted to make everyone aware that when you look at the Q2 actual starts youre not going to see as robust a number as we had.
Speaker Change: Last year, they're all going to get put into Q3. So Q3 is going to be I'll, just say exaggerated compared to the prior year, but economically from growth in revenue and profitability youre going to see a similar.
Speaker Change: Pattern as what you saw last year and just add on to that was a large sort of 'twenty 300 students. So it is significant on a combined basis, it's going to be high single digits, Q2, and Q3, but because of the timing of it is coming out July one on a pro forma basis. When we release Q2 numbers will be able to tell you.
Speaker Change: Take into account what that one starting July one what's his thoughts would have bid.
Speaker Change: Yeah.
Speaker Change: In the second quarter, so it'll be more of an apples to apples comparison.
Speaker Change: Okay, and again just to be clear even with this shift in starts you still should report high single digit start growth in each quarter. Two two in Q3 no no on a combined basis for Q2 and Q3, it will be high single digits there'll be down because of that start because there's such a large startup over 'twenty 300 stood.
Speaker Change: Good.
Speaker Change: In Q2 and Q2.
Speaker Change: Okay. That's what I wanted to make sure I think you're right.
Speaker Change: Alright, alright, but to your point on a pro forma basis. You are correct, we are going to show growth in both quarters.
Speaker Change: Okay. Thank you.
Speaker Change: No problem.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And the next question will be coming from the line of rats.
Rama: Rama of Texas Capital Bank. Your line is open.
Rama: Yes. Thank you for taking my question is again good morning, great execution solid results congratulations.
Speaker Change: It's great to see it was great to see the operating leverage improving EBITDA.
Speaker Change: Operating expenses grew slower than.
Speaker Change: And then the revenues.
Speaker Change: My question is around fiscal 'twenty five EBITDA.
Speaker Change: Guidance.
Speaker Change: How much is the growth Opex thats been is it being excluded or included in that guidance.
Speaker Change: And if you could comment on next year are those expenses.
Speaker Change: Are you planning on.
Speaker Change: Sort of opening of two.
Speaker Change: New programs and how that would impact.
Speaker Change: The growth in.
Speaker Change: The EBITDA growth that you could possibly project.
Speaker Change: Sure So I'll.
Speaker Change: I'll start on it.
Speaker Change: In the press really solve rise, we do put out or the midpoint of the range. So it does exclude.
Speaker Change: The new campuses like our new Houston campus at Preopening.
Speaker Change: Losses, there because we had a little bit of rent earlier. So it excludes the preopening courses of and also some of our new programs. So for this year, we do lay it out you can see that in the midpoint of that so we do add that back those losses for.
Speaker Change: For 2026.
Speaker Change: We're in discussions we may not have we might not no longer do that because now that we're opening up new schools every year. When this is going to be going forward, we'll still report on a pro forma basis, because we think it's important for you to know how much of these expenses are for our growth initiatives that can take place yet going forward, but it may not be part of our guide.
It's.
Speaker Change: And just in general for our guidance going up to out to 2027. It really just assumes about a 200 basis point a year improvement obviously, the first quarter, we've already shown that 200 basis points of improvement.
Speaker Change: Depending on how well 2025 comp that certainly could be.
Speaker Change: Might be delivering it at an accelerated pace.
Speaker Change: So that was a 200 basis points improvement in the EBITDA margins.
Speaker Change: Yes, yes, Raj each year each year got it thank.
Speaker Change: Thank you that's very helpful and then.
Speaker Change: My next question was really on trying to understand where the demand is.
Speaker Change: It starts is coming from you have long said that.
Speaker Change: This is this is a counter cyclical business and you would expect.
Speaker Change: Starts to kind of pick up if the economy was showing any signs of slowdown of Hollywood is going up but.
Speaker Change: Where do you see the demand coming from it is just.
Speaker Change: Shoring and the need and the skilled gap or are you seeing any.
Speaker Change: Sort of pick up from.
Speaker Change: Maybe some layoffs in some sectors.
Speaker Change: Sure, Yes, I mean, we're definitely not seeing because of layoffs and any kind of sectors affecting us.
Speaker Change: It's been surprising to be honest since COVID-19 the demand level that were seeking as you started off typically we get these.
Speaker Change: Huge growth opportunities during recessions and we're far from a recession and we are growing nicely and it's all because of this trend that people are realizing that not everyone needs or should go to college and they're a great job opportunities out there by not going to a college and going to a trade school like ours, where you can get into the workforce.
Speaker Change: Cheaper faster and frankly, probably more securely because so many people are concerned today about AI AI is designed to take away the mind it doesn't take away the hands than we are.
Speaker Change: Doing hands on training and just more people are seeing the need more people are realizing the personal satisfaction. They can get by being in the trades and doing something that is helping other people where they can see the results of their work each and every day.
Speaker Change: A fundamental shift that's taken place and as I mentioned in my remarks.
Speaker Change: One to several different communities now an upscale areas where.
Speaker Change: The local school boards brag about 98% going on to college and yet parents in the room wanted to know maybe Mike Charles Shouldnt go to college I want my child to do what's best for them and I see some of these trades as being great opportunities for them and if these conversations continue which I think they will and as I mentioned are there.
Speaker Change: Huge driving forces that are going to require more people than we even have today with a whole lot of electrical grid needs to be rebuilt our armed forces are looking to be rebuilt. The administration is striving to bring manufacturing back all those things require technology and automation and so on.
Speaker Change: Needs to maintain all that otherwise it doesn't work so anyway, there's a lot of really positive trends happening for us.
Speaker Change: We just have to make sure that we can stay ahead of them frankly, so we can capitalize as much as possible.
Speaker Change: Got it.
Speaker Change: Thank you for that very encouraging.
Speaker Change: Demand trends.
Speaker Change: <unk>.
Speaker Change: So thank you I'll take any questions offline.
Speaker Change: Thank you Josh.
Speaker Change: Okay.
Speaker Change: Thank you one moment. Please next question.
Speaker Change: And the next question will come from the line of Luke Horton of Northland Capital markets. Your line is open.
Luke Horton: Yeah, Hey, guys. Thanks for taking the question and congrats on the really nice quarter here.
Luke Horton: I did want to touch on your comment Scott in the prepared remarks, just about talking about some additional new campus announcements, possibly coming here throughout the rest of the year. Just wondering if these would be net new campuses or if they would be relocations.
Luke Horton: And any other sort of color around these new campus announcements that youre expecting.
Luke Horton: Sure, Thanks, Luc and welcome to the call.
Luke Horton: Yes, these would not be relocations that we've done, let's say with Nashville, and Philadelphia. These would be new campuses in either new or existing markets, where we see demand.
Speaker Change: Okay got it and then also just wanted to touch on the 2025 guide as far as how much contribution are you guys kind of baking in on the Nashville relocation as.
Luke Horton: As well as the Philly campus coming this summer.
Speaker Change: And I guess also just kind of how are you.
Speaker Change: Nashville trended here, so far since opening up in March.
Speaker Change: Yes, we really don't break it out that way in general, but obviously, we have it in our models how each one is going to impact us, but it's too early to say with Nashville. They just relocated in March and we won't start seeing some of the benefit till the high school students start this summer, but in all honesty, it's really going to be.
Speaker Change: Next year that you're going to see the real benefit because at that point, we will have opened up the electrical and HVAC programs, which are new and we'll also be out there marketing for a full year the brand new campus, which should help drive even more enrollments from our high schools into that campus. So 2026 is going to be the real impactful year.
Speaker Change: Would anticipate for the Nashville campus.
Speaker Change: Okay, great awesome and thanks for taking the question guys will take the rest offline.
Speaker Change: No problem. Thank you.
Speaker Change: Thank you and the next question will be coming from the line.
Speaker Change: Question boss.
Speaker Change: DRAM Securities Your line is open.
Speaker Change: Hi, Thanks for taking my questions good to see the solid demand trends in the quarter and going forward. Just one for me curious about the the Capex cadence for the year I had originally anticipated kind of a lighter Q1 with maybe a bit more ramp going through the rest of the year, but.
Speaker Change: We basically expect kind of a similar cadence to Q1 throughout the year.
Speaker Change: Just to hit that $775 million target or is it going to come perhaps heavier in the back out there.
Speaker Change: It's actually Q2 right now we're forecasting to be one of the heaviest quarters in our Capex spend.
Speaker Change: So it should slightly exceed actually Q1, which was $25 million and then it will be Q3 would be.
Speaker Change: Maybe a similar a little bit less in Q1, and then the remainder in the fourth quarter.
Speaker Change: Okay understood. That's helpful. Thanks, a lot and I appreciate again, congratulations on a solid amount.
Speaker Change: Thank you I appreciate it and look forward to the conference coming up.
Speaker Change: Thank you and we have a follow up from the line of Alex Paris Barrington Research. Your line is open.
Alex Paris: Hey, guys. Thanks for taking my follow up just a question about the East point Atlanta campus. It opened up in March of 2024.
Speaker Change: So the comparison in this Q1 is apples and oranges.
Speaker Change: What did <unk> contribute in terms of revenue in the first quarter versus the first quarter a year ago.
Speaker Change: Right.
Speaker Change: I do not have that I can follow up with the revenue until you were going to ask a different question I do not have their revenue right.
Speaker Change: Okay.
Speaker Change: Do you have it on an EBITDA basis, or a starts basis or actually I do if you give me one second I can actually give you the revenue point.
Speaker Change: Alright.
Speaker Change: Revenue was.
Speaker Change: Slightly over 4 million for Q1 and since it opened up last year they had about 100000.
Speaker Change: So they contribute over $4 million.
Speaker Change: Got you Okay. That's helpful.
Speaker Change: And then remind me along the same lines what is the campus operating model suggested in year four is that your $420 million in revenue.
Speaker Change: $5 million in EBITDA is that what it was.
Yes, five five to six depending on the campus of.
Speaker Change: Correct, yes, hopefully by year four after it opens it should be $6 million worth of EBITDA and over $20 million worth of revenue.
Speaker Change: But it is profitable now one year into the process is that right yes.
Speaker Change: Yes.
Speaker Change: He's point ahead of schedule when it went into the third quarter third quarter and hit profitability.
Speaker Change: Great could you say.
Speaker Change: Could you say on a.
Speaker Change: Last 12 month basis, how much revenue each point is at this point.
Speaker Change: On a last 12 months basis, either in the last 12 months or in a run rate basis, where are we with the new Atlanta campus.
Speaker Change: Yes so.
Speaker Change: Do not have last year is in front of me full year or so.
Speaker Change: We can do it offline.
Speaker Change: Yes, no problem Here's my final question, great progress on bad debt.
Speaker Change: I think bad debt in 2024 was 12% of revenue and in the first quarter. If my math is right it's more like.
Speaker Change: 10%.
Speaker Change: What have you done there to get that number down.
Speaker Change: Do you have a target for bad debt, either absolute or as a percentage of revenue.
Right. So for the full year last year was it got up to 13% in Q1 was like you said it was 12% this year is 10%.
Speaker Change: We had great cash collections because now we.
Speaker Change: As we mentioned on prior calls we changed.
We implemented a new software system it kind of didn't work out for US then we implement we implemented another system our old system with a lot more enhancements that working out very well for US we went for.
Speaker Change: Hybrid model so everything.
Speaker Change: Well, our cash collections are doing very well some of that was for past due collections, which you can't keep.
Speaker Change: Collecting on pad two that did help slightly but.
Speaker Change: We're optimistic that.
Speaker Change: We'll keep showing improvement every single quarter right now.
Speaker Change: We're hoping for like I said it was 13% last year. So we're hoping to be hopefully I would be happy with 11% and maybe there is.
Speaker Change: And up to that 11% to 12% for the next couple of quarters without wanting to claim victory yet, but things are looking very good as well as when we look at the percentage of students at how quick they're getting package year over year, it's much quicker. So hopefully it will even help which start rate going forward as well so things are going extremely well.
Speaker Change: In our financial aid Department, though.
Speaker Change: That's great to hear thank you very much that's all I have.
Speaker Change: Thank you.
Speaker Change: Thank you there are no more questions in the queue and I would like to turn the call back over to Scott Shaw for closing remarks. Please go ahead.
Speaker Change: Thank you operator, and thank you all for joining us today and learning about our strong start to 2025 and increased financial guidance for the full year as more and more people. Both high school graduates in adults seek a time efficient cost effective path to develop skills that can serve them a lifetime interest in our programs continues to.
Speaker Change: To grow we are well positioned to grow through the expansion of our footprint in existing campus development. Our success is only made possible by the commitment and dedication of our faculty and staff, who day in and day out engage with our students to motivate educate and inspire them to reach their potential.
Speaker Change: At Lincoln Tech, we know our success is directly linked.
Speaker Change: Student success, and we will continue to share with the world that middle skills careers like the ones, we offer lead to rewarding productive and fulfilling careers that our nation desperately needs I'd like to thank our shareholders for their support and our entire team for their dedication to achieving our goals I hope to see you.
Speaker Change: During my time on the road visiting shareholders employers and politicians as a share of the Lincoln Tech story.
Speaker Change: You all again and have a great day.
Speaker Change: Thank you all for participating in today's conference call you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].