Good day, and thank you for standing by. Welcome to the Third Quarter 2025 Lincoln Educational Services Earnings Conference Call. [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. You may begin.

Thank you, Kevin. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results for the third quarter ended September 30, 2025, as well as recent corporate developments. 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 statements and projections 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 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 the cautionary statement. 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. One other housekeeping matter. During the Q&A portion of the call today, we would ask them to limit themselves to 2 questions and then requeue as an addition. 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 another exceptional quarter of operating and financial performance for Lincoln Tech. Our third quarter student start growth of 6% exceeded our internal forecast and marked the 12th consecutive quarter we grew student starts over the prior year's period. We also continue to realize double-digit growth rates in total student population, total revenue, and consolidated adjusted EBITDA over the prior year periods, while also recording the third consecutive quarter of declining year-over-year bad debt levels. We generated $0.12 a share in net income while continuing to invest in our highly successful and expanding growth strategies, and once again are increasing our guidance for full-year financial results. Brian will provide the details on the guidance. Lincoln has earned a well-deserved reputation for setting the standard of excellence in helping American corporations and organizations in their constant search for employees trained and skilled in trades such as HVAC installation and repair, residential and commercial real estate electrical systems, installation and repair, automotive and diesel systems maintenance and repair, welding, and nursing and other health care professions. Careers in these fields offer graduates secure, rewarding, and advancement opportunities likely to remain in strong long-term demand despite advancements in artificial intelligence. Recently, our growth has accelerated due to the nation's increased interest in skilled trade careers and through our successful development of greenfield campuses and the expansion of successful programs to existing campuses. Since the beginning of 2024, we have opened new campuses in East Point, Georgia, and Houston, Texas, while relocating outdated and space-constrained campuses in Nashville and Philadelphia to new and expanded state-of-the-art facilities. As we reported during our second quarter call, East Point's start rate after 18 months of operation achieved a level we plan…

Thanks, Scott, and good morning, everyone. Lincoln delivered another strong quarter with several key metrics once again exceeding our internal forecast. Continued momentum in enrollment growth, combined with improved operating efficiencies, was the primary driver of this performance. These results reflect the strength of our model and our continued focus on operational execution. Before I get into the quarter's financial results, a couple of reminders about our year-over-year comparisons: first, the financial comparisons in my remarks exclude the Transitional segment, which consists of our former Summerlin Las Vegas campus, which we sold in late 2024. Second, as noted on last quarter's earnings call, our reported Q2 starts include an adjustment for the 2,764 students that start on July 1 to align with the prior year class start timing. For this quarter's comparison, we have excluded those starts to maintain consistency with the prior year. With those points in mind, let's turn to the quarter's financial highlights. Revenue for the quarter was $141.4 million, an increase of 25.4%. The strong performance reflects the continued momentum in student starts year-to-date. Turning to student starts. Starts for the quarter were approximately 6,400, representing a 6% growth. We had originally expected starts to be relatively flat, given the strong 22.5% growth in last year's third quarter. Achieving a 6% growth over such a high comparative base underscores the persistent demand we are seeing for our programs. The outperformance was mainly in skilled trades, which experienced better-than-anticipated starts, particularly in our new programs and replications. Revenue per student increased by 4.8%, reflecting both tuition increases and the timing of book and tool revenue. The average student population grew by nearly 20% and the ending population increased by about 17%. As we closed the quarter with over 2,500 more students than the prior year, the ending…

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

I just wanted to ask a couple more clarifying questions on 2026. Actually, Brian's final comments in his prepared comments. So this year, in 2025, the adjusted EBITDA guidance of $65 million to $67 million. That includes the impact or the add-back of roughly $10 million in pre-opening costs and so on?

Correct. You're talking about in 2025?

Yes, in 2025. And then you said regarding 2026, it sounded like you're forecasting maybe another $10 million of preopening costs.

Correct. And even without those add-backs, we'll be able to exceed the $90 million that we originally had in our plan with the add-back of that $10 million.

And you'll exceed the $65 million to $67 million that you're going to do in 2025 based on guidance?

Correct.

This is my follow-up question. What about CapEx for 2026? I think you said $70 million to $80 million this year to my notes here somewhere.

We haven't put anything out yet for 2026. We'll announce that in February. It will probably be similar or maybe slightly down from this year.

Our next question comes from Luke Horton with Northland Capital Markets.

Congrats again on a nice quarter. Just wondering if we could get a sense of what drove this strong performance? I mean, a little bit from a campus level or from a program mix perspective. Just looking at the updated guide for 2025 starts, I mean, this implies nearly a 30% start growth in 4Q. So, a little bit for the quarter, what drove the beat, and then the expectation in 4Q of that strong start from a campus-level or program mix perspective?

Right. So at the low end of the range, that's actually a 15% stock growth for Q4. And at the high end of the range, it will be about a 20% stock growth for Q4. So, not exactly 30%, but with that being said, we are forecasting robust stock growth for Q4.

Which is what we guided to before, just based on the trends we're seeing, as we are seeing strong interest overall, as well as the performance of our new campuses and programs.

And then you guys did mention building out some more square footage at East Point. Can we get a sense of student capacity with these ads? Is this a meaningful expansion here, just trying to rightsize the space?

Sure. So we're probably adding, frankly, about 500 student capacity with this addition.

And then just lastly, on the health care side, you guys talked about expanding to RN programs beyond just the LPN. You said in the near future, I guess, could you just walk us through the timeline of this, or from a regulatory perspective, what needs to be done here? And then would that give you accreditation to offer these across all campuses? Or is it a state-by-state accreditation?

Yes, it's a good question. So it's a long process, and it is step-by-step. Today, where we have our LPN program, we're not degree-granting. And in order to offer an RN, we have to become degree-granting. So we have applications to become degree-granting in New Jersey, New York, and Connecticut. And so that process could take anywhere from 12 months to, frankly, 48 months, depending on the state. We're obviously pushing to make it happen as quickly as possible. But we know that our LPN students, a large percentage of them are going on to become RNs as well, as naturally the RN career itself is the largest in the health care sector. And in these states, and particularly New Jersey, is one of the highest that has the greatest shortfall of nurses to population. So we feel really good about the opportunity. It's the process of getting through the regulatory hurdles to get there. But we're also looking in certain other states where we have degree-granting already, but don't have an LPN program; we're evaluating putting an RN program there. But there's been nothing decided as of yet.

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

The 2027 new guide, I just wanted to make sure I'm apples-to-apples with the old guide. I think the $550 million excluded Atlanta, Houston, and then the program expansions at Levittown and Nashville. Can you clarify that?

Go ahead, Brian.

No, it always included -- it didn't include Houston because when we first put that out, Houston, what wasn't announced yet. It was really only included for the new campuses, the East Point. So it included revenue from East Point. Now exceeding $600 million, that includes everything announced as of today for revenue.

So that would be assuming Pikesville and Rowlett are online, they would contribute towards that 600?

Correct. [indiscernible] online first quarter of '27. Correct.

And then the decline in the hop starts. You clarified that that was tied to Paramus, and we're going to get the green light for Paramus in 2026. And then the massage and culinary, we're choosing not to pursue those. At what point do we get back to organic positive growth? And were we positive ex the Paramus and the massage and culinary here in Q3?

Yes. So as I mentioned, the two core programs that represent more than 80% of the students in health care are LPN and medical assisting. And those two programs grew at 2% in the third quarter. I would anticipate next year that we should be positive again, especially with the opening of nursing at our Paramus campus. So in 2026, certainly, those two programs will continue to grow.

Our next question comes from Raj Sharma with Texas Capital.

Congratulations on solid results again, especially given where some of the other players in the education space are talking about. So it seems like in the healthcare starts, there's a lot of noise. There are programs that are going out, and the programs are coming back in. So what starts, and what kind of growth do you expect? I know you just said about 2%. Is that overall, your other noise goes away in the health care arena, and now you're left with LP, and can you talk about just ongoing in the next couple of years, what should we expect from the health care and nursing segment?

Sure. So again, let's just put this all in perspective. Today, the health care and other segments are 20% of our population. So the bulk of what we're doing is all in the automotive and skilled trades, and those are the programs today that we're replicating. As we said in the call, the core programs in health care, LPN, and MA are still growing, and we would anticipate that to continue into the future. We are going to complement that in the future with an RN. But again, it's too early in the game to say where things are going. All I can share with you is that all of our guidance and all the information that we're sharing incorporates all these changes that are taking place. And the overall message is that our business is very, very robust and our growth rates will reflect that. I don't know if that helps you.

Yes. And then just following on, I know Brian had touched on the guidance of fiscal '26. So the way I read it is you're talking about the EBITDA guidance, the apples-to-apples would be the $65 million, $67 million this year would have been $75 million, $77 million at least for fiscal '24. Are you saying anything about start of next year's revenue growth? Do you see anything on the horizon that would disrupt the current starts growth for transportation or health care?

No. I mean, as I think we said in our remarks, things are, frankly, very robust, have been very steady, and we're seeing just strong conversions and strong interest, both also, as we said, from the adult market and the high school market. And I'll just highlight that the high school market is seeing increased interest, and that's an exciting opportunity for us, and we're going to capitalize on that more so in 2026, given the investments we're making today. And then that will grow even more, I believe, into 2027.

And then just lastly, on the regulatory horizon, any developments that we should be on the lookout for? I mean, anything happening in the negotiated rulemaking that we should be on the watch out for?

Sure. There's nothing that I'm aware of that affects Lincoln Tech that's out there. Obviously, we have to stay on top of it because things change in this environment very quickly. But as of right now, Raj, I don't see anything that's going to derail us from what our plans are and where we're going as a company.

[Operator Instructions] Our next question comes from Steve Frankel with Rosenblatt Securities.

What did you learn from East Point that maybe you're going to change as you open this new campus in Texas? Is there anything that you take away from the early days of East Point that says, well, maybe we could do these things to get an even faster start?

Yes. I think that the biggest thing we took away is that we made East Point very efficient. It was less than 60,000 square feet, and it filled up so quickly that in planning our next campuses, we already realized that we should be looking at larger square footage, as our more recent campuses, even our relocations, Philadelphia is at 90,000, Houston is at around 90,000. And as we mentioned, Roulette will be around 90,000. And I also highlight that within that 90,000, we have about 10,000 to 12,000 of undeveloped space for future programs. So we just decided, given the success that we were seeing, that we should build facilities that could accommodate more in those local markets, as well as build in some opportunity for future expansion opportunities for us. So that's the biggest lesson. The others are operational. We hadn't opened a new campus in about 18 years. And I think that we've now figured out what the model is and when to staff it, and how to get the excitement within the market up before our campuses open up. I mean, East Point was a market where we already had a presence with our campus in Marietta. Houston is a market where our name isn't as well-known. So we're spending a little bit more to make it well known, but we're starting to see similar results as in East Point. So things are going well, and we constantly learn as we open up new programs and replicate in each market.

And then from a 30,000-foot view, have you seen any material decline in interest for legacy auto diesel programs? Or does that continue to be a healthy portion of the skilled trade mix?

We're still seeing positive growth, but certainly, the skilled trades are growing faster at this point. Things fluctuate. Obviously, if you look at our numbers overall or I would say we've replicated the skilled trades the most. Simply because it's the most cost-effective for us to do that. So we have more skilled trades programs today than we have auto programs. But we are still seeing, as I've mentioned, our organic growth has been, frankly, very strong due to improvements in the Lincoln 10.0 and due to increased marketing efforts to get the word out, and frankly, the receptivity that's out there. So skilled trades are definitely growing more for Lincoln than auto, but we're seeing positive growth in, frankly, all segments.

Our next question comes from Griffin Boss with B. Riley Securities.

So I'll just start off, you sort of back out an average tuition per student. That came in very strong in the quarter. I think Brian mentioned something about structurally higher tuition. But curious if you could expand on that. Is this higher average tuition per student just pricing? Or is it also program mix?

It's a good question. For the quarter, we got the benefit of the timing of books and tools. I think I might have mentioned that in my prepared remarks. When we give out tools, we earn the revenue when it was given out, but we also have the expense. So, that big start that happened on July 1, we did have a pickup in revenue there, but we also have an offsetting expense on that as well. We benefited from that for Q3 as well.

But just to be clear, we raised tuition by 3% or less. It varies by program, and that happens just once a year, so usually at the beginning of the year. So the changes that Brian is mentioning could either be a somewhat program mix or, as he said, we got the benefit of all these starts. And so when students start, we book a lot of the books and tools revenue at that point. So that can distort it slightly.

Right. Because overall, it was about 4%. So as Scott was saying, about, I would say, 2% to 3% is tuition increases. We do benefit from a little bit of our program mix being slightly higher with our starts, but then some of it was due to the book and tool revenue.

And then just last one for me. Can you remind us what maybe the average ramp-up period is for new campuses? Obviously, you talk a lot about revenue and EBITDA expectations, but you mentioned that this new Routed campus will have 1,600 student capacity. How long does it take you to fill those seats? When you open up a campus, do you expect to have a certain amount of capacity initially that maybe increases over time? How do you think about that?

Sure. So I mean, just looking at East Point as an example, obviously, a very strong performer for us. Within the first 18 months, it has about 700 to 800 students. We would anticipate that our other campuses will perform similarly in the first 18 to 24 months. When we say it has about 1,600 student capacity to get our return on investment that we're looking for, we don't need that many. Frankly, we're basing that off of closer to, let's say, 850 to maybe 1,000 students. So I hope that helps you.

Our next question comes from Alex Paris with Barrington Research.

Just a quick follow-up. I meant to ask on the previous -- In light of Veterans Day tomorrow, you mentioned military. Just curious, what is Lincoln's overall military exposure as a percent of total enrollment? And what is the character of that military enrollment? Is it military tuition assistance for active duty? Or is it the Veterans Administration GI bill?

Yes, it's a good question. Well, as a reminder, we started as a military training organization by our founder to train vets from World War II. And unfortunately, we're down to only about 5% to 6% of our students today who are military. And part of that is because when we move to the Lincoln 10.0 model, you're not allowed to provide housing benefits to our military through the GI bill if it's a diploma hybrid program unless you have a degree program. So our initiative to get degrees in a number of states where we don't have degrees will enable us to start reenrolling veterans in those areas. So they're all using their GI benefits. So these are people who have left the military. And we would anticipate as we get, as I said, degree branding, particularly in the states of New Jersey and New York, that we'll start seeing, frankly, a growth again in our veteran population.

So to be clear, it's veterans, and that's what I thought. You don't have a material amount of active duty. And GI bill funds are flowing. It had been an issue for another one of your competitors, the American public.

Yes, that is correct. That's what I tried to say in my remarks, I mean for us, for Lincoln, for what we do, who we serve, the shutdown and the changes that are taking place in Washington have not negatively impacted our business, and that's why we're able to get those strong results that we've been achieving to date and that's why I believe that we'll continue to achieve these strong results going forward.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Scott Shaw for any closing remarks.

Great. Thank you, operator, and thank you all for joining us today as we reviewed our continued progress, growth, and increased financial guidance for the full year. As more and more high school graduates and adults seek a time-efficient, cost-effective path to develop skills that can serve them a lifetime, interest in our programs continues to grow. And with our student start growth, new campus development, and increasing level of operating efficiencies, we believe we have numerous opportunities to generate increasing levels of shareholder returns over several years. Our success is only made possible by the commitment and dedication of our faculty and staff to our students and their 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 during my time on the road visiting shareholders, employers, and politicians as I share the Lincoln Tech story. Thank you all again, and have a great day. Bye-bye.

Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.