Trading under NASDAQ, under the symbol LINC. From the company, we have President and CEO, Scott Shaw.
Thank you, and good afternoon. Just a quick question. How many of you, by chance, sat through the UTI presentation? Oh, three. Okay, so almost everyone. It is going to be a very similar story, very similar type of company. You are not going to hear anything probably too different, but maybe with a different twist. Lincoln Tech, next year we will celebrate our 80th year. We are a leader in skilled trades. This is all we have done in our 80 years of existence. We started off training people to be auto mechanics, fixing automatic transmissions, and installing air conditioning in homes. That started to happen really after World War II. Today we have about 30% of our students in Transportation programs, 40% are in skilled trades, and about 30% in Healthcare . We are usually number one or number two in each of our markets that we serve. We are growing, and that is a really good thing because typically trade schools like ours only grow during recessionary periods. We have been growing quite robustly with unemployment still near 50-year lows, hovering around 4% because of a shift that has taken place, which I will talk about more going forward. We have a very good operating model so that as we fill up, just like if we filled up this office venue today with more seats and everyone was paying me an extra dollar, I would have a lot more dollars in my pocket at the end of the day. The same is true with our schools. As we put more students into each classroom, we get a lot of operating leverage. It is the same classroom, same training stuff, same faculty member, but each of the additional dollars drop to the bottom line because unlike an airline, we are not discounting those additional seats. Everyone is paying the same amount, and so therefore our profitability is growing. We have a nice solid balance sheet. We finished the quarter with about $13 million worth of debt, but we will be debt-free by year-end. We have about a $60 million credit facility with a $20 million accordion feature if we want to make an acquisition. We have tons of liquidity. We are increasingly making our model more and more efficient. Several years ago, we moved to a blended learning model, which we call Lincoln 10.0, and we are continuing to look for ways, especially using AI, to help eliminate costs and operational expenses in our organization to further drive up our operating margins. We had a really good second quarter, even though our stock went down, but that's for you all to figure out. All I'm going to do is continue to grow our business, and things are looking good. Revenue is up 15%, starts were up 22%, profitability was up nicely. We increased our guidance, both the lower end and the higher end of it. We feel very good about where we're going, and we have a lot of good things happening. We just moved in March into a new facility for our Nashville campus. That new facility will enable us to add electrical and HVAC programs, which will start next month. Actually, no, it'll start in October. On August 1st, we moved from our old Philadelphia facility into a new facility in Levittown. Philadelphia today is a solo discipline school with just automotive. It moved into Levittown, and next month it'll start offering HVAC, electrical, and welding in addition to it. Also, next month we're going to open up our Houston campus, which is a month earlier than we thought. It's a new market for us. It also has HVAC, electrical, and welding in automotive. That campus also has about another 18,000 sq ft that we haven't developed so that we can offer new programs in the future and continue growing down there. We opened our first new campus last year in March, which was the first new campus in 18 years. That campus was in East Point in Atlanta that has automotive, electrical, welding, and HVAC, just like all the other programs, campuses I just mentioned. That campus cost us about $18 million. That's including operating losses. We forecast that by the end of this year, for the 12 months in 2025, that campus should generate $7 million of cash flow for us. A good quick ramp up, and I'm anticipating that our Houston campus should perform similarly. We did put some guidance out there a couple of years ago for 2027, showing about $550 million in revenue and $90 million of adjusted EBITDA. We mentioned during our last earnings call, we will update these forecasts at our November earnings call after our third quarter. Also, next year in March, probably in the third or fourth week of March, we'll have another Investor Day where we'll give guidance out to 2030. Basically, our plan is to grow organically. We can grow our existing business. We got good momentum, lots of interest in the trades. Our marketing has become very effective. We didn't announce on the second quarter that the cost per start in the second quarter for us went down 14%, which means we're getting good return on our investment. We can continue to spend money in marketing to continue to drive our core business. We will also, though, grow through replicating new programs into our campuses. Last year, we replicated four programs and had one program expansion. This year, we have four programs being replicated with two program expansions. You know, next year we'll probably have only maybe two program replications, but that's case in point. Here in Chicago, we have a campus in Melrose. I was just there yesterday. We'll start and launch our HVAC program in that campus next month. We had some space that we were utilizing for collision repair. We had maybe 60 students in the collision repair program. We decided to exit that program. In that same space, we added 25 welding booths, which will be 75 students. We added an HVAC program, which will add 225 students. We also built out our third Tesla training center, all in that same space. It's a way for us to get better utilization out of that space. We also will grow through opening up these new campuses that I mentioned. Houston is the next one. We've also announced that we've signed a lease for a property in Hicksville, Long Island. We'll start construction on that property in the fourth quarter, and that will open in the fourth quarter of 2026. That also will have HVAC, electrical, welding, and automotive. We're already in the New York City market, very dense market, as you can imagine. This is us moving out further on Long Island. Our campus in Queens, New York, is quite populated, and this will just give us opportunity to expand in a market that already knows our brand, frankly, for 80 years. It should be good. Finally, there in red, are acquisitions. We do look at acquisitions. When I joined Lincoln 24 years ago, we made lots of acquisitions between 2001 and 2010, or 2009. We haven't made an acquisition since 2009, but we probably look at 12 different opportunities a year. We continue to look at it to find the right property. What we're looking for is either an entrance into a market that we want to get into, and the school that we would buy would be basically a buy versus build. It would have programs that we're looking to offer in that market. We might buy a school that has programs that we would like to expand into, such as nursing and RN program, or let's say aviation, mechanics. We're just looking for opportunities to expand our business overall, just replicating what we have on a grander scale. We're not going to get into other programs that are not involving your hands, because that's one of our, I think, advantages. Students and parents realize that AI is not going to take away the jobs that we're offering. AI might help our mechanics better assess and evaluate a car or an HVAC system, but you're still going to need someone to go in there and fix it, take away the broken part, put the new part in, or use your hands. We find that we think that's a very safe, long-term career opportunity, and more and more people are coming to that same conclusion. This is our model for opening up and buying a new campus. When we sign a lease, it takes us about 18 months- 20 months to get the campus open. That's between building out the classrooms and buying all the equipment and getting all the regulatory approvals. Shortly thereafter, the campuses start becoming profitable. As I mentioned, the campus that we opened last year within, let's say that year two proposition is going to make us $7 million on that $18 million investment. The new campuses going forward, they do cost a lot. They're $18 million- $25 million worth of CapEx. We do build very nice campuses. While the community colleges are our number one competitor and they're not very good competitors from the standpoint, they're certainly not going to take away business from us. They do build sometimes very nice facilities because they get a lot of grants and a lot of money. They just don't know how to run a very effective school and they don't do marketing. I want to make sure that our campuses are just as attractive, if not more attractive than theirs. You complement that with our very customer service approach and much richer, deeper curriculum, and you have a winning combination in my mind. Since COVID, this is one of the other reasons why more people are interested in the trades. It's all being elevated. Our students that were employed remained employed during COVID because we needed nurses in the hospitals. We needed people fixing HVAC systems and electrical systems in hospitals, in your homes, and in delivery situations. All the Amazon trucks needed to be up and running. All these students became called essential workers, and that's the market that we focus on. This repeats a lot of things. The only point I'll put out here is this was done on June 30th . You'll see that the stock price at that point was $23. We had our earnings call announcing all of our great earnings. Our stock went down. Our stock today is around 15% below this number. I'm very confident, just as we had an earnings call, we raised our guidance. Nothing's really changed. I don't understand the stock market. That's your job. I just run the business, and I feel really good about where it's going. We have lots of opportunity. Lincoln started in Newark, New Jersey, so we have a high concentration in the Northeast. We're also not in a lot of the growth areas, especially in the South and the West. We'll eventually get to California. It's not number one on my list. Very unfriendly regulatory environment, but there's plenty of places for us to grow. We're not in Florida. We're just opening our second campus in Texas, in Houston. Lots of opportunities for further penetration. You can see we have a lot of schools around New York City, and we're even adding that Hicksville campus. We only have one campus here in Chicago. There's no reason why we shouldn't have more. Only one in Dallas, only one in Philadelphia, only one in Houston. Even in those markets that we already exist, there are opportunities to add more campuses. Basically, most of our students come from a 30-minute drive around the campus, and the average age of our student is 25. We're appealing more to the working adult, but we get about 20% of our students right out of high school as well. Everything we're focused on are the middle skills, which are skills that aren't going away as of yet. Low skills are skills that don't require anything beyond a high school education. One would argue a lot of technology is coming into play. That's why when you go to Target or to your supermarket, you don't have checkout people, but machines doing things. The higher skills are obviously people with bachelor's degrees and master's degrees and doctorate degrees that all thought they were safe, but maybe AI might eat into that in the future. Middle skills are those that require more than a high school level education, but less than a bachelor's degree. Obviously, everything that's happening in the world is there's technology involved. Everyone needs some form of training these days to do their job. That's the place where we play. There's this huge imbalance that's certainly very much in the news over the last 24 months. We've known about it just because the employers have been coming to us for years, frankly, haven't been able to find people. Back in the 1980s, we made that decision everyone should go to college to help accommodate that. We eliminated shop classes and things like that at a lot of high schools to dedicate more time to academics, to hopefully prepare more people to go to college. Obviously, the results are, if you look at them, only 63% of people graduate from college in six years. I'm sure we all know people who graduate from college that don't have a job and really don't have skills that the marketplace wants. People are really rethinking that. Just as the baby boomers are retiring and companies haven't really replenished their workforce, there's this huge gap that's forming. As I mentioned, everything requires technology today. The sectors we service, whether they are manufacturing, healthcare, transportation, construction, are all growing. Given the trends that are out there, the military needs to rebuild all of their ships and all their submarines. They're anticipating they'll need a quarter of a million people just to do that. They're not quite sure where they'll come from. Our electric grid was already weak. Then you add on top of it all the demand from AI. You're not only going to have to redo the electrical grid, but build more power plants. Our infrastructure is old and aging. Everything built in the 1960s and 1970s needs to be redone. They want to reshore all this manufacturing. Facilities need to be built, then have to be maintained. Everything is speaking to increased need and demand out there for the skilled trades. When you look at how many jobs today are out there, this is BLS data of how many new people need to be hired in all these fields. These are the fields that we train people for. If you just simply look at how many graduates we have versus what the need is out there, we have less than 2% market share. Obviously, in certain markets, it's higher, but the point being it's a very fragmented market out there with lots of opportunity for us to continue to grow. As any competitive company needs to have a good product, and I think we do have a superior product out there, both superior to the community colleges and frankly superior to most of our peers, if not all of our peers out there. Our programs are designed to get people into the workforce as quickly as possible with skills that make them employable. Twice a year, we invite employers to come in, tell us what's good about our programs, what's bad about it, where's the industry going, how do we make our programs better so that our students are in demand by you and more productive by you. All of our faculty members are from industry. They're not academics. They've all done the job, and now they're coming back to share what they've learned and how you, as a young person, could be as successful as they are and enjoy the trades going forward. I mentioned earlier, we build very robust learning environments to replicate the professional environment as much as possible, to give them all the same equipment that you would have if you walked into a BMW or Mercedes shop or walked into any major corporation that needed someone to do electrical work or HVAC work or become a welder. We have them in uniforms. We buy all the same equipment. They get all the same professional tools. They're not getting tools from Sears. It's all whatever that industry standard is out there. We are very much focused on being very customer service oriented. Our students, as I mentioned, are working adults. They're usually first generation folks. They usually don't have a lot of support systems, both from an emotional standpoint or financial standpoint. Many have families, many have a job, many have family jobs and are trying to get an education. Life does get in the way for many of them at times, and it's a lot easier just to pull the plug and not continue. It's obviously in our best interest that as many of them as possible graduate, and we want that to happen. That reflects better on us. We do provide a lot more care and support, I would say, than what you would get at a traditional school, whereby the mentality is more sink or swim. If you get through us, that's proof of your mettle and your ability to succeed. While that might be true, we have a different philosophy of how we approach it. That's why our graduation rates are twice those of a community college, and our placement rates are about 82%. That's 82% in the field which they studied. If they went to us and got a degree, or not degree, certificate in automotive, but then worked in an Amazon warehouse, that wouldn't count for us as a placement. These are only placing people into what they studied. As a company that started in Newark, New Jersey, and as you saw from that earlier map, high concentration in the Northeast, we're the largest provider of students in the trades and automotive area coming out of post-secondary education, basically on the East Coast. We're sixth on the West Coast. Our goal, though, is eventually to be national. Obviously, when we open up another campus in Houston, that'll be helpful. We'll be opening up other campuses in that gray section, as well as opening campuses in the red section. There's lots of opportunity for us. Due to our longevity and the success of our programs and the scale of what we offer and the quality of what we offer, we do attract a lot of companies to become partners of ours. These companies partner with us in different ways. Some donate equipment so that our students become more facile with what they offer, as well as introduce them so that they'll use the equipment at whatever employer they have. Others, we're providing kind of like a graduate level of programming. They'll graduate from our electrical program, let's say, and then we train them on Johnson Controls specific equipment with Johnson Controls training manuals so they can, after three months, go right into Johnson Controls as an already trained technician. There are different models out there. We're constantly adding new partners, not very many, but we'll add a handful every year. This is an opportunity for us to strengthen our brand, give greater job opportunities to our students. Somewhat, it's another revenue stream. It's very small for us. It's $6 million of revenue. It's something that could grow. It's a bit different sell, though. It's a B2B sell versus a B2C. We're obviously not that good at the B2B right now, but it's something that we're working on. I mentioned some of these statistics. We're a highly regulated company, highly regulated industry, and we strive to be at the top of every metric that we can. 90/10 is a metric that says that you can't receive more than 90% of your funding from the federal government. Overall, around 82%, so safely below the 90% threshold. CDR is cohort default rates. This is zero because since COVID, up until the Trump administration, you did not have to repay any student loans, interest, or principal. However, that's now changed. You now have to repay your loans. Cohort default rates will start to reappear again in probably 2027, as they look two years back. Just to put you in perspective, prior to them no longer requiring repayment, our cohort default rate is around 9%, which is the industry average for all education. I'm anticipating the cohort default rate will be frankly much higher than that when it starts up again, because if you have five years of telling people you don't need to repay loans, it's going to take them a while to kind of get back in that habit. I'm confident that we'll get our numbers down quickly. At the bottom there, these are our most recent statistics that we have to supply to our creditor with a 70% graduation rate and 82% placement rate. This is, again, a summary of kind of the strong second quarter that we had, just reiterating that we have a strong balance sheet with lots of liquidity to help us execute our growth plans going forward. This just kind of shows you our progression over the last four years, looking at the second quarter numbers, revenue and margins all increasing quarter- over- quarter, all increasing six months over six months, all going in the right direction. This is looking at it through with starts, same sorts of things. You can see on the six month numbers, there is some acceleration of the starts year -over -year. We are, though, forecasting about 13% growth in our starts for the full year. Just to reiterate, we did announce that our starts will be flat in Q3 and then ramp up again in Q4 to be more in line with the first half of the year. That's all we're looking for is low teens types of growth going forward. We are very seasonal, though, as a business. Our busiest time is right now. Since we do have some high school students, they all start in the summertime. Some of our programs, most of our programs, are about a year in length. Some go up to 13, 14 months. Basically, we have peak population starting in October, actually, halfway through September, up until, let's say, November 1st. You have peak population, same cost structure, so a lot of profitability drops to the bottom line. We get 60% - 80% of our profits in the last five months of the year. In summary, again, we are a leader in the trades. We've been doing this for a long period of time. We've been experiencing very robust organic growth. We have the opportunity to do inorganic growth, which we haven't done yet, but we're constantly looking. The skills gap is real. You can see it all the time in the news about the need for more tradespeople. If there ever is a recession again, those are periods of time that we do even better, just because there's that many more people with time and interest to go back to school. We will continue to take advantage of our strong financial health to expand our footprint, which I shared with you earlier, because there's lots of room for growth. Overall, we will remain focused on providing a quality product that attracts more students, keeps you compliant, and who doesn't want to be the best? That's my presentation. Any questions? Yes, sir. Yeah, sure. We're an accredited institution. Just like the University of Chicago, their students fill out the FAFSA, the Free Application for Financial Aid. Our students do the same, and then they get certain amounts of aid. We have a large, I'll say, underserved population. We get a lot of our students get Pell Grants. That's free money from the federal government. Of our $480 million, $490 million of revenue this year, we'll probably get $105 million in Pell Grants. Then we'll get several hundred million in Title IV loans. The gap is funded either through loans that we provide. About a third of our students could get a loan from us. When I say a loan, we're not giving them money. It's just credit to their tuition. They might get some scholarships. They might have third-party loans. We also have students who pay for their education while in school on a monthly basis. Yes. Oh yeah. Oh yeah. The Title IV, nothing has slowed down as of yet. They have cut a lot of people. Everyone that we used to deal with in the Department of Ed is gone because they got rid of the whole sector that dealt with large companies like ourselves. With that said, we haven't missed a beat yet. Doesn't mean that we're not going to miss a beat going forward. If we were to do an acquisition, that requires more, I'll say, effort on the Department of Ed. That could be a slower process than it would be in the prior period of time. You know, they're talking about moving Title IV out of the Department of Ed. They said the Small Business Administration, they legally can't do that. Congress would have to approve it. They might move it to Treasury. Who knows which way it'll go. Obviously, the government doesn't do things very well. If it does get moved, I'm sure there'll be some dislocation, which is obviously a concern. Not much I can do besides just be prepared for it if it happens, but things are kind of being held up. They do talk about still eliminating more people from the Department of Education. That could impact us trying to do new things. All I can tell you is that everything that we have in place today and everything that we've been executing on has been better in this administration than the prior administration.
How much does the credit, equity, and finance piece of the situation have to set your bank? How does that show up in your financial statements?
Oh, it's in receivables. If we give them a loan and we haven't collected on it yet, it would show up on the receivables. Correct. It's a receivable, and then we reserve against it. Whatever's on the balance sheet's already been reserved for. I'm not sure. I think we do, as I know from when my CFO is here. Basically, about a third of our students take out those loans, and the average loan is around $7,000. In general, the average student who graduates from Lincoln graduates with about $14,000 worth of debt, which translates into about $150 a month, which is their 10-year loans. The interest rate we charge is only one percentage point higher than what the government charges because we want them to take out the government loan first. We're not in the loan business, but between our loan and the government loan, it's $14,000 at $150 a month. Not a small number, but also not a huge overwhelming number either. Yes, sir.
Do you overlap much with UTI?
Yep.
You said you're more north.
We're overlapping more and more. We're better. The difference comes down to people, in many regards. Also, our program is a little bit different than theirs. Their program is now 50/50, meaning 50% on campus, 50% online. Ours is 70% on campus, 30% online. I would argue we provide more hands-on training, and I'd argue that's what students come for is hands-on training. Also, I would say that we are more family-focused oriented, and they're more corporate. That's what I've been told from people that feel that come.
What's your cost?
Yep. Yep. We mark everything now. When I started, it was Yellow Pages and TV, and now it's all Google for the most part and social media. It's 90% digital. You're putting, just buying keywords like, how do I become an electrician? How do I become a welder? Tell me top, you know, automotive schools. You're just buying keywords, trying to get people to come to your website, and then having very effective admissions folks that can tell the story, interview the students, figure out why they're coming, and make sure this is the right decision for them to come, and you take it from there. Our acquisition cost, we don't give out the specific number, I don't think. I just never know what I say, where I say it. We did say on the earnings call, our acquisition cost in the second quarter was down 14% per student, just because it's a very receptive market. Now, out of two out of ten people that hear our message, we're getting four out of ten, as an example, responding. It's the same thing that happens when there's a high unemployment rate. It's a lot easier to attract people. Yes, sir.
I was going to hear you say that, but you're messing up. I'm assuming this is asking me for the probability that you have now.
Yep.
I'm getting to the walkthrough, the formal talk, you know.
Yep. Yep. As an example, the East Point campus, since that's the first one that we've opened, it was including the CapEx, $18 million, so about $16 million of capital and about $2 million of operating losses before it turned profitable. We sign a lease roughly, in the case of East Point, I think 20 months later, we opened the campus, which was in March. Then 20 months after that, in the trailing 12 months, that thing's generating $7 million of cash flow. I can't promise everyone will be that efficient and effective, but we'll be close to that in that ballpark, if that helps you. I can tell you that the Houston campus, this next one we're opening, the population that's within that 30-minute drive of the campus is twice as large as what East Point was. It shouldn't have good economics.
What's the operating leverage you gain?
Yeah, it's like filling up the classroom. I have a class of 10 students or have a class of 25 students. Same classroom, same teacher. That's where most of the operating leverage comes from.
Your experience is making the return on the future because it's actually better than building smaller.
Yes. We built probably East Point too small. We're just about to take down another 10,000 sq ft in the neighboring buildings so that we can accommodate more growth. We are building them smaller overall because with the blended learning model, we can do it in a smaller footprint. We also have capacity. At both Philadelphia and Houston, our two most recent campuses, we have an additional 18,000 sq ft at both campuses that are just virgin warehouse space that we didn't develop as of yet, to figure out where the market's going. It could be, we might put healthcare in there in the future. We might add more skilled trades if what we have is growing, or we might bring in, let's say, an industry partner. All the cost for the rent is already factored in, and we can make our numbers with it. It just adds for future growth opportunity. I'd rather have situations like East Point where we need to take down additional space to meet or match industry demand than build something too big where I'm struggling to get the capacity utilization I want to drive the margins I want.
Population aside, what are two or three metrics?
Population demand for jobs in that marketplace is we have to place the students, and that's going to drive interest. We do Google searches, how many people are in that market looking for the trades we're offering. We look at how many students are already graduating from other schools or other systems in that marketplace and find the one that has the biggest gap. Anything else? If you're in the Chicago area or any area, I welcome you to come visit a school. You have a much better appreciation for what we do and how we do it and see students, talk to faculty. Yes, sir.
Yeah, you said essentials.
Correct.
You said more open and active than what you get out of the students now, given.
We're always open. We're just far more disciplined at what we want to buy than we were back 20 years ago when I first joined. There are lots of things we would have bought in the past, but then we would have grown, had more profitability. Over time, as one of my former board members would say, have a hodgepodge of programs that you then have to manage. Right now, we basically have seven, eight programs that represent 90% of our students. We just want to kind of stay focused, become the best in those. It's a lot easier to manage. You might add a program or two over time, but kind of have that model versus be like a small community college type model. Anything else? Great. Thank you for your time.