Good day, and thank you for standing by. Welcome to the Lincoln Educational Services Fourth and Full Year 2023 Earnings 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. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Polyviou. Investor Relations. Please go ahead.

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 Meyers, 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 be 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 the term is identified in Federal Securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate and continue, as well as similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results. The 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 statement 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 the quarterly report on Form 10-Q filed with the 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. 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.

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 rates. 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. 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 was up 13.6%, while student starts grew 16%. We entered the new year with a student population as approximately 1, 000 students higher than at the beginning of 2023, which provides us with a platform for further growth in 2024. While we execute our capital investment strategy during 2023 to complete the build out of our new East Point campus in Atlanta, to begin the buildup of a new Houston campus, and to implement the relocation programs of the 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. 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.…

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 and achieved an impressive double digit growth in both student starts of 11.4% and revenue of 10.3% year-over-year. We finished the year with over a 1, 000 more students than last year and $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 our top five growth initiatives in 2023, which are shaping our operational landscape. While all these initiatives are significant in that they each entail an investment of 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, in our new East Point campus in Georgia, which is set to welcome its first class in the coming weeks. In 2023, we incurred capital expenditures in excess of $10 million to build a new state-of-the-art facility providing students a superior educational experience and training. This campus, as in all our new locations, was designed from the ground up to take advantage of the efficiencies of our new hybrid learning model. This allows us to deliver four-hour core programs out of our 56,000 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, its second year of operations. Second, in our new Houston, Texas campus, which is…

[Operator Instructions] Our first question comes from Alex Paris with Barrington Research.

Good morning, guys. Thanks for taking my question and congratulations on the big beat and the guidance above consensus expectations for 2024. 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 3, 200 new students versus [inaudible] of 2, 850. And then if you look at it by field of study, transportation and skill trades led it up about 21%, where healthcare and other professions 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 that just great momentum that leads us to above average guidance in 2024?

Sure. Thanks, Alex. Well, we constantly daily are monitoring our 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, then we take advantage of that. And so we did spend more in marketing in the fourth quarter than the prior year. And I think that frankly benefit 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 achieve 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 great careers and there certainly is a lot more anecdotal evidence to suggest that. With that said though, we look at all of our starts in any number of ways and I can't say that the younger 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 of each I'll say age from 18, 19, 20 to 21 hasn't changed year-over-year. So while we know that high school students and parents are talking a lot more about, oh, 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 and adjusted EBITDA margin expansion. But even at that the adjusted EBITDA margin guidance is about 9% versus 7% in 2023, 200 basis points. But haven't 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. We should be able to get to that 15% EBITDA level, and we anticipate, as you're seeing, some acceleration in some of that expansion of our profitability, and we think that as these new programs roll out, as we get the benefit of Lincoln 10.0, 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 2024, 2025, but I would anticipate shortly thereafter.

Our next question comes from Steven Frankel with Rosenblatt Securities.

Good morning, and 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 tracked them across the 70% threshold, so just around 70%, as we look at how we're managing that. Our actual ACCSC 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, a goal that I've set out for our company is to get 85% placement rate and 70% graduation rate.

Okay, that's great, and the starts are very impressive. What do you think you're doing differently from a marketing perspective that enabling you to gain this efficiency?

Sure, well we know that as I said with this new partner we seem to be not seen, we are achieving better I'll say purchasing of keywords and we're also kind of narrowed down the scope of the number of keywords that we're buying which is creating some efficiency. 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 or different styles of presenting things in one market to see if it's creating a difference and then when it does then we look to replicate that at other markets. So it's working with a strong vendor and constantly being on top of things.

Our next question comes from Eric Martinuzzi with Lake Street Capital Markets.

Yes, I know we're not disclosing kind of a forecast on the new student starts by trade group, whether it's transportation and skilled trades or healthcare, but just curious to know if you're 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 healthcare and other.

Yes, I would say that transportation skilled trades still tend to be slightly stronger for us than healthcare. And I mean, one of the exciting parts is, I'll just throw this out, our automotive business grew by 11%, and we have an open A in 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 healthcare sector at this point.

Okay. All right. And then your forecast for 2024, what's kind of the macroeconomic assumptions built in? Because historically, we've faced headwinds around interest rates, inflation, unemployment. Is it an assumption that the status quo persists for the rest of the year?

Yes. We're basically based off of what we're seeing already in the first quarter. And yes, we assume that the economy will be the same. Obviously, I think many people have been surprised at the strength of the economy. Unemployment still remains very low. So if that were to change, I could see that only benefiting us, meaning that 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 there's been a fundamental shift to our benefit taking place out there.

I'm showing no further questions at this time. I’d 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 today. 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. This most exciting could be what I will 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. I want to thank all of our instructors and staff for their steadfast commitment to our students and to our mission of changing lives. And I hope that you will join us on March 19th at our East Point, Georgia campus for our first ever Investor Day. I'm confident 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.