Good day, and thank you for standing by. Welcome to the Third Quarter 2024 Lincoln Educational Services Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ 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. Please go ahead.

Thank you, Michelle. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results and recent corporate developments for the third quarter and nine months ended September 30, 2024. 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. A replay of the call will be archived on the company's website. Statements made by Lincoln's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as 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. The company cautions you that these statements reflect certain expectations about the company's future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond the company's control and may influence the accuracy of the statement and projection upon which the segmented statements are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-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 statement, whether as a result of new information, future events or otherwise after the date thereof. One other housekeeping matter. During the Q&A portion of the call today, we would appreciate if questioners limit themselves to two questions and then re-queue to ask any additional questions. In advance, we thank you for your cooperation. Now, I'd like to turn the call over to Scott Shaw, President and CEO of Lincoln Educational Services. Scott, please go ahead.

Thank you, Michael, and good morning, everyone. Thank you for joining us today for our review of an exceptionally productive third quarter at Lincoln. Before I begin, I want to acknowledge today's date, Veterans Day, and extend our appreciation and gratitude for those who have, to those who continue to serve in our armed forces. Lincoln Tech was founded by a veteran to help serve his fellow veterans acquire skills to reenter the workforce. We are proud to have graduated thousands of veterans of the US armed forces. And assisting servicemen, women and their families remains at the core of our mission, as they have since our founding in 1946. Led by our double-digit student start and revenue growth, our third quarter financial results built on the strong momentum generated during the first half of the year. During the quarter, we continued to execute our key growth initiatives, including new campus development and program replication openings at existing campuses. We also neared completion of the first phase rollout of our Lincoln 10.0 hybrid teaching model, while laying the groundwork to begin implementing the platform at our nursing programs. We signed new corporate partnerships and expanded numerous existing ones, achieved 67% adjusted EBITDA growth and increased cash flow from operations. When combined with current trends, our results and progress have led to an increase in our guidance for the full year 2024, while increasing our confidence of continued growth in 2025. Brian will share more in his remarks. I've mentioned during previous calls how Lincoln is capitalizing on the nation's growing interest in skilled trades training as an alternative to the traditional four-year college education. During the third quarter, we saw more and more examples of this trend in media coverage and political leader discussion. Our marketing programs have become increasingly…

Thank you, Scott, and good morning, everyone. Thank you for joining our third quarter earning [Technical Difficulty] our financial results, I too would like to take a moment to honor Veterans Day and express our gratitude to all our students, instructors and alumni who served and continue to serve in the armed forces. Today, I will cover highlights of our financial performance, provide an update on key growth initiatives and review our raised guidance for 2024. In terms of campus performance, as Scott mentioned, the new East Point, Georgia campus has delivered strong operational and financial performance since its opening in March of 2024. East Point's financial results during its first seven months of operations exceeded our initial internal plan by a wide margin. As a result, we are pleased to report that the campus achieved positive EBITDA for the third quarter. With the campus now profitable, the financial results for the campus are no longer included as an adjustment in our adjusted EBITDA calculation beginning with this third quarter. Moreover, the campus is projected to continue to be profitable in the fourth quarter, further contributing to our overall growth and financial stability. The success of the new East Point campus strengthens our confidence in our growth strategy and strong return on investment. Building on this momentum, and as Scott outlined, we are excited about the upcoming relocation of our Nashville campus, followed by the anticipated relocation of our Levittown and the opening of our Houston in the latter half of 2025. While each of these projects represent a significant investment with total capital expenditures of around $75 million between 2024 and 2025, we are confident that we can achieve similar results to those at our East Point campus, driving our long-term growth trajectory. Turning to our strong financial performance…

[Operator Instructions] Our first question is going to come from the line of Alex Paris with Barrington Research. Your line is open. Please go ahead.

Hi, guys. Thanks for taking my questions, and congratulations on the beat and raise.

Thanks, Alex.

All right. So my two questions are going to be as follows. I want to talk about new campuses and then program replications. New campuses, you kind of did a good job, overview -- providing an overview in the prepared comments. I'm curious about the announcement today, the Long Island campus plans. Maybe you can give us a little bit more color on that, how that came to pass and the regulatory framework within New York State.

Sure. So we're at the cusp of hopefully signing the lease for this new property. We started looking in Long Island just with the same methodology that we used in selecting the East Point campus location, also highlighted the need out in Long Island for another campus. And as I mentioned, we already have a partnership with the Greater New York Dealers Association. And so, they have many members out there on Long Island. And so, we've known for a long period of time that it's a long commute for those students to come to our Queens campus, and so there definitely was an untapped market. On top of that, just given where the skilled trades are and our ability to launch a new campus that's going to have welding, electrical and HVAC also was a very positive driver for us to select this location. So it's something that -- hopefully, the lease will be signed within the next coming weeks, if not sooner, and we hope to have the school up and running within 24 months.

Great. And then, related, is there any special concerns with regard to New York State regulation of for-profit post-secondary education that we should be aware of?

Well, there's always -- New York is a challenging state. If we were going into de novo, I'd have more concern. Since we have been operating a campus there for 20 years, I do feel like we have an established relationship. With that said, as you highlight properly, it can be a challenging state to operate in and move forward. My expectation, though, that it's just a matter of timing, not a matter of whether it will happen or not.

Got you. And then, still related, your decision to close the Euphoria Institute in Las Vegas, that's not a big surprise. That doesn't really fit with the transportation skilled trades and allied healthcare and nursing for that matter.

So I'll just jump right in, Alex. So, first of all, we're not closing it. It's going to have a new owner. As you just mentioned, it is a one-off. It's our only cosmetology program. It's not an area that we're looking to invest. And as we look to hone our program offering, we had this in the works for quite some time, trying to find the proper home for it. And we think that we've found someone, and we, again, hopefully, will be announcing very shortly the finalization of those plans. But they'll be able to work with a smaller organization that has other cosmetology schools, which I think will enable them to grow and prosper and be much more effective than being kind of an orphan school within the Lincoln system.

But beginning in Q4, it will be part of transition campus for P&L reporting.

Correct. And it will be held for sale on the balance sheet. And we're looking to close on this in Q1 of next year.

Great. I’ll go back into the queue and let a few other people ask questions. And maybe I’ll have a follow-up. Thank you.

Okay. Thanks, Alex.

Thank you. One moment for our next question. Our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets. Your line is open. Please go ahead.

Yeah. Size-wise, the new Long Island campus -- I think you said East Point is 56,000 square feet. What square footage are we looking at for Long Island?

Around 65,000, so a little bit larger than East Point.

Okay. All right. And then, for the -- you talked about lead gen being robust. Is this a -- do you feel like you're getting smarter at lead gen or that there's an increase in macro demand?

Well, certainly, if I talk to my marketing people, we're getting smarter at lead gen. But I think it's like anything in life. It's a combination. Definitely, there is just much more interest by people. So, that always helps. And we constantly are looking at every way we generate leads and are constantly evaluating the performance. So I think it's a bit of both. But I'd say probably the overall macro trend that's happening out there is definitely giving us a nice boost.

Got it. Thanks for taking my questions.

Yeah, no problem.

Thank you. One moment for our next question. Our next question is going to come from the line of Steven Frankel with Rosenblatt Securities. Your line is open. Please go ahead.

Good morning, thank you. Tremendous performance on the skilled trade side of the business. Healthcare, you had strong double-digit starts. But how should we think about the flattish population? Is this just a timing difference versus last year?

Yes. It's timing of some of the starts. Also, as you may know that our one campus in Paramus, New Jersey is below benchmark. And so, we had to stop enrolling some students for that program. Given its current performance, we expect it to go back above benchmark in 2025. I feel very good about that. But in the interim, that one campus -- that's one of the seven campuses that has nursing -- won't have starts. So, that will, I'll say, dampen some of the population. Populations are robust at the other campuses. So I'm not concerned there.

As well as one of our biggest declines on that side is that Euphoria campus as well.

Okay, great. That's helpful. Thank you That's all the questions I had.

No problem.

Thank you. [Operator Instructions] Our next question comes from the line of Raj Sharma with B. Riley. Your line is open. Please go ahead.

Yeah. Thank you for taking my questions again. Congratulations on solid results and the raised guidance.

Thanks, Raj.

Yeah. On lead levels, they are very strong, even despite unemployment rates are not that impacted yet. Is this -- can you talk a little bit about the general environment? What -- are you seeing this trend is looking to stay positive like this?

I definitely think so. We're definitely seeing very strong interest. And as you say, the fact is unemployment has not increased, and yet we're seeing growth in our leads almost as if it were a high unemployment environment. I believe that, that really speaks to what many have been noticing and talking about and we certainly reiterate the fact that people realize that college isn't for everyone. There are a lot of solid job opportunities out there. We are a faster, cheaper way to get into the workforce than pursuing a lot of these four-year degrees. And people, I think, in general, are looking to do something different. And as we say, all of our programs are essential workers. These are all jobs that people can feel good about. These are all jobs that require skills to be developed with your hands. These are all jobs that, frankly, AI is not going to take away. So we are in an area at the right time with the right programs in the right environment. So it's all moving very well for us.

Thank you for that. That was really helpful. And then, with the change in the administration and with the Trump win, traditionally, the party has been less onerous on you or on your industry, do you foresee any changes in regulation? Do you foresee any changes in your SG&A in terms of the outlays for -- outlays that you've been making in lobbying?

Yeah. Well, our lobbying efforts -- they're really education efforts -- will continue because as we know, administrations come and go. Certainly, in the last Trump administration, a lot of the rules and regulations became less onerous. So I would anticipate that, that's going to happen again. But we are doing everything geared around the long term regardless of who's in office. What we do hope could happen, though, in this administration is that a lot of the redundant and unnecessary rules and regulations are hopefully altered, and ideally, though, we want changes that are going to be more permanent. And at the end of the day, what we are looking for is simply a level playing field, give every student the opportunity to assess what is a good program, where they can get a good return on their investment, and we will happily compete with anyone. It's just a matter of not being on a level playing field. But overall, I think that this is going to be a good period for us because hopefully, the administration will have less burdensome regulations like the borrower defense for repayment. Certainly, if someone has been defrauded, they should be -- get their money back, but you just can't give people a blank check just to go after every school in the country just as you feel like you didn't get what was promised to you. So I think that there's hopefully going to be greater sensibility put into the rules and regulations. And certainly, on the margin, it has to be beneficial to us. But as to whether or not I can say it's going to cut $1 million of expense out, I definitely would not say that.

Got it. Again, thank you for answering my questions. Excellent results and congratulations again. I'll take it offline. Thanks.

Thanks, Raj.

[Operator Instructions] I'm showing no further questions at this time, and I would like to turn the conference back over to Scott Shaw for any closing remarks.

Thank you, operator, and thank you all for joining us today and hearing about our strong performance and healthy momentum. For over 78 years, Lincoln has delivered quality education and partnered with companies locally and nationally to develop a productive middle skills workforce. Our success is directly tied to the strength and commitment of our people. I take great pride in visiting our campuses and meeting with students, faculty, staff and employers. Their stories of transformation and success inspire all of us, and I could not be more appreciative of everything that they do. An inflection point has definitely occurred as more and more people are seeking a quick, cost-effective path to enter the workforce and develop skills that can serve them a lifetime. Lincoln Tech is ready and able to meet this growing demand. Our programs are proven and constantly being updated to meet current industry needs. Our instructors are world-class, both in their knowledge and desire to help students. Our balance sheet is strong, which will enable us to expand into new markets and continually reinvest in our facilities to remain the leader in each market we serve. We're excited by the future and where we are going, and I look forward to updating you in February. Until then, have a wonderful upcoming holiday season. And once again, thank you to all of our veterans for their sacrifice and commitment to this country. I hope you all have a wonderful day.

This concludes today's conference call. Thank you for participating. You may now disconnect.