Alrighty, thanks everybody for attending. Up next, we have Lincoln Tech, traded under the symbol LINC. On behalf of the company, we have Scott Shaw, President and CEO.
Thank you. Quick safe harbor, which you all know, and I'll get right into it. I've been at Lincoln Tech. Next year will be my 25th year at the company, or our company will be celebrating its 80th anniversary next year. I've seen a lot of the cycles that the industry's gone through, and I can tell you, I don't know if this is a cycle or not, but it's probably the best time that I've witnessed during my 25 years at Lincoln Tech. Obviously, I think everyone knows that there's a skills gap out there. It's in the news now every day. We have a society that's been constantly pushing people since the 1980s to go to college, college, college.
We've taken vo-tech out of the high schools, so now we just have generations of kids who aren't exposed to the trades, and the need for the trades hasn't gone away. We've known this because we've had more employers than we've had students in the entire time that I've been at Lincoln, but that problem has just been exacerbated, so there's just a huge need out there. The good news is we are a leader in the field. We've been doing this for 80 years. We're the largest provider of automotive and skilled trades people coming out of post-secondary school east of the Mississippi, and we're usually the number one or two provider in each of the markets that we serve. We think we're really well positioned to take advantage of the market that's out there today.
We are growing, and typically, schools like ours would only grow during a recession when lots of people are unemployed. The good news is, especially since COVID, we've been growing in high single digits, mid-teens, because people realize that college isn't for everyone. The statistics are that for four-year schools across America, 63% graduate in six years, and we all know plenty of people who've graduated who can't find jobs. It's really a 50/50 shot if you're going to go into college. People are seeing the debt that's out there, and they're looking for cheaper, faster, more certain ways to get into a good job, and that's what we offer at Lincoln Tech. Our business model is very profitable. Just like if I could fill up more seats here in this classroom, each of those additional seats, the dollars drop to the bottom line. It's the same classroom.
You're paying for my time and everything else, and so we have good operating leverage, and about 30% of our additional growth revenue drops to the bottom line as a good metric. We have, as of the end of the third quarter, $5 million worth of debt. We'll have zero debt at the end of the year. Most of the debt that's on our Balance sheet is all due to leases. We don't own any of our facilities. They are all leased, and our business model is such that we do generate good Cash flow. We do have a lot of investments taking place this year and the next year, but our anticipation is that come 2027, we'll be able to continue that investment pace, but at that point, have real Free cash flow in our business. We are constantly looking to become more efficient.
We moved after COVID into a blended model. We call it Lincoln 10.0, where students come to us 30%, well, I should say students do 30% of their work every week online when it works into their schedule, and then they come to our schools four days a week, Monday through Thursday, for a four-hour shift. That shift could be in the morning, it could be in the afternoon, or it could be in the evening. We are looking for new ways to become more efficient. Obviously, like everyone else, there are lots of repetitive tasks and things that AI can do for us that we are slowly implementing to be able to, frankly, continue to scale our business at a lower cost going forward. We had a really strong third quarter that ended up. Revenues were up 25%. We grew our starts by 6%.
Long story short, we raised our guidance again after this performance. Our new guidance is to, you know, basically mid-point at about $500 million, and that's an $8 million in revenue, around $66 million of EBITDA, and our starts, as I said, will be in the mid-teens. We're growing very, very nicely as a company. I was just yesterday at our new campus in Houston, which we opened up during the third quarter. It's in southern Houston. Our competition is north of downtown. Huge market. Should be a really good performer for us. I'll talk about how our first new school to open in 18 years performed, and it looks like Houston will perform in a similar fashion. We also announced that we're opening, we will be the first quarter of 2027, opening our 24th campus about 22 miles northeast of here in Rowlett, Texas.
We have a campus today in Grand Prairie. We reached the whole Dallas market with our marketing and the need, but students aren't going to travel all that distance. Traffic can be much. We have done some analysis and figured out, obviously, not figured out, everyone knows North Dallas area is growing very nicely, so we're going to put a school up there, which we think will leverage our marketing dollars here, just like our second campus in Atlanta is leveraging our presence there, and just like the six campuses we have in New Jersey is leveraging our presence. Similarly, we'll be opening our 23rd campus in Long Island, New York. Basically, a year from now, we'll have students in that, and we have a campus today in Queens, New York, which is very robust, and we know the huge demand that's out there.
Again, that campus should benefit from our 80 years' presence in the New York City market. We gave some guidance several years ago, which we just updated after our last quarter to 2027, so we'll have over $600 million in revenue and over $90 million of EBITDA. Just for clarification, we used to show in that Adjusted EBITDA number adding back startup costs for the new programs and campuses, plus whatever stock options. This $90 million just has stock options added back, so it's a true Adjusted EBITDA number out there. We're going to get there, as I mentioned, through opening up some of the new campuses in Rowlett and in Hicksville, Long Island. We're also, though, seeing nice, solid organic growth at our core business.
Around 8% this year is core growth business, which again just reflects this whole transformation of people realizing that there are alternatives to college and more people are interested in the trades, so that's serving us very well. We are replicating certain programs that do exceedingly well for us and where we know that there's need in the marketplace or we have capacity to do so. Finally, there in the red, we do look at acquisitions. When I first joined Lincoln in 2001 to 2010, we probably made six acquisitions in that period of time. We haven't made any since then, and we have a bit of a different philosophy. We like the opening up new campuses versus acquiring them because we know exactly how they operate.
They don't have any regulatory issues assigned to it, and we can scale our operating processes a lot more easily than acquiring someone's business and making their business more in line with ours. With that said, there are markets that maybe buying someone could accelerate our penetration in that market, or there are trades that we don't offer today, for example, aircraft maintenance, that might benefit us from buying someone, or nursing, registered nursing. We do look at things. As I mentioned, our new hybrid model is really what's driving our future growth. We opened our first new campus in southern Atlanta last March. Our first new campus in 18 years, so we weren't quite sure how it would perform. We laid out a business plan. We did far better than that plan, much better. This is the new model.
The Atlanta campus is actually doing better than this, but this is what we're predicating all of our forecasts on, this type of performance. To put it in perspective, we spent about, in total, including operating losses, about $20 million for the new Atlanta campus. It opened in March of 2024, and come the end of next month, for the full 12 months of 2025, that campus should generate $6 to $7 million of EBITDA, which means next year it'll generate even more. We entered the year with about 600 students. We'll leave the year with about 900 students carrying into next year. It'll really do a good job for us, and that's why we're kind of focused on opening up two new campuses a year for the next five years. People are interested in the trades.
One of the reasons why they're interested in the trades is during COVID, all of our students remained employed. They became what the government deemed essential workers. Essential workers, obviously, all besides the need, besides calling them essential workers, besides the fact that AI is not going to take away these jobs, all these things are building to give parents more assurance that the trades are a good place for their students, their children, as well as just giving everyone a good feeling of going into the trades, which are good-paying jobs, and especially since COVID, even a higher-paying job. The facts are out there. The baby boomers are retiring. We haven't put enough new young people into these trades. Any of you that are investing in, I'll say, industrial companies, besides tariffs, are probably worried about where they're going to find their workforce.
Things are working really well in our favor. We're a company that started in Newark, New Jersey, so we have a strong presence in the northeast, but we are expanding. We're in 12 states right now. You can see in this map, blue is Rowlett. Our people are not very good with geography. That should be much closer to Grand Prairie, but the concept is there. It's in Texas. We're also opening up the new school up there in Hicksville, Long Island. The objective is hopefully about, ideally, every six months, announce a new location. Things don't go that way because we basically have our real estate folks out there searching for properties that meet all of our criteria, and we could go for a dry spell and not find something, and all of a sudden, we might find three at once.
The cadence that we're kind of looking for is around every six months. You can see that we're not in Florida, a huge growth state. We're not in California, another large state, but California has a lot of regulatory issues around it that we'll eventually get there, so we're just not going to hop there now. There are better states for us to operate in with lots of opportunity before then. Suffice it to say, we're mainly looking in the south, in the west, for new growth opportunities because we do want to build out our platform because it's very beneficial, especially for larger employers, to be able to work with one Lincoln Tech than, let's say, 15 different community colleges. Not only is it 15 different community colleges, but it's 15 different programs because their programs aren't standardized.
Versus working with us, the employer, let's say, Johnson Controls knows that an electrician coming out of Rowlett is the same one as coming out of Marietta, is the same one that's coming out of Chicago. That adds a lot of value to us in the employment arena. Middle schools is where we're focused. Middle skills are those that require more than a high school education, but less than a four-year degree. There are the low skills. Those are jobs that robots will take away. That's why when you go into Home Depot, you're checking out yourself versus someone else checking out for you. Now with high-skill jobs, that's what AI is going to take away. AI takes away your mind. It doesn't take away your hands. Everything that we're focused on is something that involves your hands.
We think it gives our students a good, long lifeline of a career. As I mentioned, there's this huge imbalance out there. We already know that everyone's been pushed to go to college and the trades have been looked down on. We know, though, that everything's becoming more technologically advanced, so you need training for that. The sectors that we're serving, construction, healthcare, transportation, are all growing, and now with the whole onsourcing of manufacturing, that's helping. With the AI boom, that will help. That requires electricians and HVAC techs, even some welders, to build these types of facilities. Everything's moving in our direction as far as this huge need out there by society for people in the trades, not enough people coming out of the trades.
As I said earlier, we're one of the leaders, highly experienced, so we're going to try and take advantage of that as much as possible to move forward. Even though we are a leader, we have a tiny market share. The education industry is highly fragmented. If you look at the BLS data for the number of new entry-level people every year that are needed in the fields for which we train, and then look at how many graduates we have, we have less than 2% market share. Obviously, since we're not in every state, there are places where we have a much higher market share, but the point is there's a lot of white space out there for us to go and grow and become a much larger company over time.
Our business model is different than our number one competitor, which is the community college. Our graduation rate's around 67%. Community colleges' graduation rate is around 33% over six years. We graduate our students in 12 months, and our graduation rate's calculated in 18 months. Much higher likelihood that you're going to get a job, or sorry, much more higher likelihood that you're going to graduate if you go to Lincoln Tech than going to a community college. As far as placement and getting a job, we have north of 80% placement into the field of study. You cannot get those statistics probably at any of the schools that you all attended because at my school as well, it's all self-reported. For us, it's all audited.
Every student that is placed in a job, we're calling to verify that, and then an outside auditing firm audits that as well. Also, the difference is at a community college, it's academics mostly teaching. All of our faculty are industry professionals. They've come out of the trade that they're teaching. We then give them skills to teach. Also, we have a much richer, robust learning environment. A typical community college might have 20, 30 auto techs. We'll have 230 auto techs. That means when you go into our shop, you're going to see lots of cars, lots of equipment. All the equipment's the same professional equipment. We have alignments with a number of industry players that provide the equipment to the dealerships.
They give us their high-end equipment many times for free so that we can also act as a training center for them so they can then sell their product. The point being, we give them all professional tools. They wear uniforms. We take attendance. Attendance shows up on their transcript. Everything we're doing is to set our students up to be successful in a professional environment. Kind of already mentioned this. Again, east of the Mississippi, we're the number one provider of automotive and skilled trades people coming out of post-secondary school. Obviously, with the new campus in Houston in Texas and the second one here in Dallas, we hope to start creeping up from number six in the west. We do have these industry partnerships where people come to us. We are the largest trainer of Tesla technicians besides Tesla themselves.
They tried to go the community college route, and they realized it wasn't very effective for them because community colleges weren't, as I'll say, engaged in the process. The number of students that they have isn't as large as us. They came to us. We opened up one campus. Twelve months later, they said, "Let's open a second campus." Twelve months later, they said, "Let's open a third campus." We'll probably stick with that. It's a nice brand. They're not the easiest people to work with, to be honest with you, but it is a sexy brand with good technology that we can leverage for all of our electrical programs. Another company here, Johnson Controls. We provide about a third of their techs for their alarm system business, and they'd like us to provide more, but we're just not in every state where they operate.
We've been working with them for five years, and I anticipate, we just expanded the relationship, and now they want to work with us for our HVAC students, for all their office automation products that they have out there. Most of these clients here we've worked with, with probably, I can't think of one of them here that we haven't worked with them for more than five years, and they just continue to renew. It brings prestige to our organization. It also brings better job opportunities for many students because a lot of these are real large, obviously, companies that have good growth prospects. Lots of the technicians can start off as a technician and then, over time, rise up within their organization into management positions. We're a highly regulated industry, so this is very important to have good statistics.
Some of these are esoteric things. If you're not familiar with our space, 90-10 means we are not allowed to get more than 90% of our revenue from the federal government. We're safely down in the low 80%. This isn't a constraint for us. CDR, that's cohort default rates, as you may or may not know. Students haven't had to repay any student loans for five years. The Trump administration is changing that. That's why there's a 0% out there. Prior to it becoming 0%, we were around 9%, which was average for all schools across the country. I can tell you when the next rate gets published, it'll probably be three times that rate because the students for so many years didn't think they had to repay their loans.
You tell them you have to repay their loans, they're still a little skeptical or hopeful that somehow someone's going to eliminate it for them. I anticipate that when this new rate comes out next year, excuse me, we'll probably be in the high 20s, but we'll just get people back in that mindset, and I'm very comfortable we'll get that down lower. From the statistics I've seen, there are 4,500 post-secondary schools out there, and there are over a thousand of them that have cohort default rates at 35% or higher out there right now, given the fact that government's trained everyone not to worry about their debt. You can see there at the bottom, 68% completion rate and 80% placement rate. Again, just again, we went through all this already, I think. Good third quarter. Everything's going in the right direction.
We have lots of liquidity, $65 million, plenty of cash to do what we need to do and grow our business and keep on the trajectory that we are. Again, just looking at the numbers on the far left is for Q3, and on the right is for the nine months. Everything's trending up. Our EBITDA margins, as I said, are increasing. As we increase our revenues, more of the dollars drop to the bottom line. I'd anticipate that our EBITDA margin should increase by about 150 basis points a year, probably over the next three to four years, to get up into the high teens as an overall company for 12 months. This is looking again at some other statistics more on an annual basis. Actually, this is, yeah, the quarterly basis there on the left. And then I guess that's, sorry, nine months still on the right.
Again, all the metrics are all moving in the right direction. The more we build our population, have a larger, I'll say, carry-in population to the next year, just sets the foundation for more growth. Our population tends to peak right around now in November. Most of our programs are about 12 to 13 months in length. 20% of our students come right out of high school, so that means they're going to start with us June, July, August, September. A lot of those students are still with us as we enter the second year, and that's why our population peaks in this period of time, and that's also why our profitability peaks. There's a slide here. I think I will be sharing it and actually coming up that shows you the seasonality of our business.
We make most of our money in the last five months of the year because of this peak in population and costs being fixed in our business. Oh, there it is. Here you can see the Adjusted EBITDA by quarter. You can see how much we generate in Q3 and Q4 out of the total, and you can see how well we're doing this year in comparison to last year, quarter by quarter. Below is kind of just how the population flows as well, which ties to that. In summary, we are a national leader in trades education. We're going to build on that leadership position. We've narrowed our focus to really just be focused on about seven to eight programs, and in those seven to eight programs, we want to be the best. I'm not sure if I said this.
We've had so many different conversations. About 50% of our students are in skilled trades, which is electrician, HVAC, welding, and CNC machining. 30% of our students are in transportation, so that'd be in automotive tech, diesel tech, collision repair tech, and 20% of our students are in healthcare, which is basically either medical assisting, which is when you go to your doctor, that's the person who takes your blood and your heart rate and does all the preliminary things before your doctor comes in, or a licensed practical nurse, which is the entry-level position in nursing.
We are growing very nicely, and since COVID, when the push to have more people go into the trades and with articles every day practically out there of how the plumbers are going to be the next millionaires and all these other types of things, all this helps build greater awareness and interest in what we're doing, and we're benefiting from that, from getting nice growth. If and when the next recession comes, though, we'll do even better because there'll be that many more people with that much more time to go to school as well as a greater desire to change their life through education. Let's see. Oh, we're going to continue to expand our footprint. As I said, we'll hopefully be opening up two new campuses on average a year. There's plenty of opportunity, as I shared with you, to do that.
As I mentioned, our next one that we announced is up in northern Dallas that will open up in about, you know, 13 months from now. We have plenty of capacity today. We're operating, and our profitability is at around a 60 to 65% capacity utilization, but that could be increased very easily. We don't have students in our schools Friday, Saturday, Sunday, so I could have a morning and afternoon shift in those three days, which would then, you know, move me from having three shifts to five shifts. At one point back in the Great Recession, we had one campus that had a shift from midnight to 5:00 A.M. I don't need to go to those types of extremes, but all the point being, there's lots of additional growth opportunity within the fixed asset base that we have.
Throughout it all, we always have to maintain high standards, which we will and do to have good quality outcomes so that we're safe from regulators, but also it's great for marketing to attract people. It makes us much more competitive in the local markets. That's all I have from kind of prepared remarks. I have a lot of time. Twelve minutes for questions if there are any questions.
Yes. I'm curious about some of the other reasons that your scale is compelling. You mentioned employer reliability that kind of encompasses the country, and maybe product diversity and geography might help the business volatility and consolidate over there. Is there anything else that you'd say scale actually gets you?
I think it helps build our brand. I mean, we're seeing where we might have one campus in a market like here, all of a sudden opening up a second, and I could envision a third. It helps with the marketing dollars because you're kind of reaching that whole market, but students don't want to drive more than 30 minutes. You can't, especially a big geography like Dallas and some other like Houston, you just can't cover everyone with one, two, or even three campuses. I mean, in New Jersey, we have three healthcare schools and three automotive schools. I see us benefiting more from even further penetration in our existing markets to get greater leverage.
Kind of all of this, when you go into a market, an existing school. Like a lot of.
Yeah. Yeah, we already compete. There's another publicly traded company called UTI. They're twice our size. We overlap with them in six markets. We're bigger today in all of our campuses than before they entered the market. The reality is there's a lot of pent-up demand. While everyone knows about it, you need marketing dollars to drive people to the schools. We find that even when we're in the same market as they are, they're spending lots of money for marketing. We're spending lots of money for marketing. It seems to lift all boats. Obviously, that's not forever, but there seems to be certainly right now, as I said, we just opened in Houston. They're in Houston. They're about to open in Atlanta. We've both been in Chicago for 30 years. We've both been in Philadelphia for 25 years.
It hasn't impacted us yet. What else?
I'll go there.
Do you see any scenarios where online-only schools are competition, or is it just from the nature of the process that the students work with things and so on that needs to be in-person or hybrid, as you mentioned? Or do you spit out a scenario where it's online-only, where you see a lot of them being AI-created or across and so on compared to business?
I will say that could exist because I didn't think you could do there are online-only medical assisting schools and there are online-only culinary schools. People can create ways to make it happen. Also, with technology, there'll probably be other ways for us to make it happen. I would say that for most of our students, they're first generation. They've been told they're not going to be successful. They don't have a lot of confidence.
You need to have a lot of confidence to take online school because it takes a lot more discipline. I think that there will be a venture market for that. For who we're serving for the most part, I think there's also a large market for those that want real personal interaction and support.
I think there's—go ahead.
You're obviously better at what you do than community colleges in general, but especially here now, we're seeing them really leaning into the trades.
Yes. Yeah.
Are there ways to just partnership and have one consecutive run it for? I mean, when they admit, we're just not good, but they're in the schools to drive students.
I would like to think so. It's very difficult, but I wouldn't say anything's out of the picture. I can tell you that high schools wouldn't touch us with a 10-foot pole. We've had in New Jersey three high schools come to us to build them a trade school and run it for them, which three years ago they wouldn't even answer a call, and now they're calling us. The world is changing. We do have greater capabilities and skills and also resources to make it happen versus a lot of the community colleges. A lot of different states are much more constrained in their resources. I think it's a possibility. We are trying to work with them, but everyone has their fiefdoms, and no one wants to accept,
you know, whatever. It's challenging. What else?
You look like you want to ask a question.
I want to ask you, chair, one question about the institutional investors that are tracking what you're doing to attract more.
Sure. Yeah. We're about 72% or 73% owned by institutional investors, about 13% owned by insiders, and then the rest are, you know, I guess mom-and-pop type investors. We've been very much focused on institutional investing. I have more analysts covering me than any other for-profit education group out there. We have six different analysts, so try to lean on them to go out and do non-deal roadshows and things of that nature. I always thought that given technology and I figured their people's models would—we would just pop up on their screen as far as low debt, growth, profitability. It does not seem to work that easily. It seems like there is still a lot of pressing the flesh to get out there to get people to become aware of you. Trying to do more of that. Go ahead
You kind of mentioned the distribution of your HVAC, property costs, rentals, rentables. Is it similar exposure to those industries? Like if we're looking at snack economics, is it kind of the same correlation to that?
I would say that the correlation is really demand is what's causing that. It was three years ago we were mainly an auto school, and now skilled trades has taken over because there's so much interest both from employers and from students, as well as we've opened up more of them, to be honest. We've opened up—it's a lot easier for me to replicate HVAC or electrical program than to replicate an automotive program. I need a building like this with high ceilings that you can have lifts versus I could put in a generic office building an HVAC program or electrical program.
It's a little easier, which is why we've now become more of a skilled trade school than an automotive school. The business, you know, our whole business model is where's the demand, and then we just grow for where the demand is. Demand will change. We used to train people to be drafters when I first came, but CAD, you know, someone who draws with their hands. CAD does everything now, so you don't teach drafting anymore. What else?
Yes, sir.
As one of the biggest worries, is there opportunities that you see partners in community colleges?
Yeah. I think that there are. As I said, some of them don't want to do it. Some community colleges don't offer trades, and a lot of community colleges want to become four-year schools as it's higher up on the food chain and more prestigious. I can't say that I'm out there knocking on the doors a lot because there hasn't been anyone to answer those doors. Right now, we just see other opportunities that are growing more. Frankly, I'm leaning more into the high school side because that's a real win for us because 20% of the people in community college today are in high school. They're doing dual credit programs, and there's no one really on a—certainly not on a national scale available to partner with people in the trades. We're working with more and more high schools. If a student comes to us, we have programs that we've been running in New Jersey for a while. They come their junior year, they stay with us two years, they'll complete six of our 11 automotive programs, courses.
They can then enroll in us and graduate in five months at less than half the cost. We've been paid by the state to train them while they're in high school. It's a win-win scenario. We're making the same amount of money. They're coming out, getting a certificate in half the time at half the cost. If I could do that in every state, that would be a win.
What else?
Yes. Capital allocation. Right now, I mean, we are spending a lot of capital. It's all—80% of our capital is going into growth. Our maintenance CapEx is around 2%, but we're probably spending 4% right now. The reality is, is from 2012 to 2018, we were shutting down campuses. We used to have 46. Between rules and regulations and changing markets, we had to get out of schools. We spent $100 million doing that.
We did it, though, in the right way, which is why I'm standing in front of you today, and we're growing. My objective is to—oh, so where I was going with that is we're spending maybe 4% of revenue because there are bathrooms and other things that were neglected in that decade period that we need to bring up to speed just to make it a nicer experience for our students. As I said, we'll open up two campuses. As I also said, in 2027, we will be completely operating cash flow. We'll have excess cash flow beyond these investments. The priority would be to, frankly, build a cash balance. If you look at most proprietary schools, they do have a large cash balance. That just provides you with cushion because we are highly regulated.
Depending on what the administration is, you know, what they try to do is squeeze you on cash. If you have a large cash balance, you can negotiate with them and work with them and make them see the light. It just builds in cushion. We used to pay a dividend at one time. I wouldn't mind paying a dividend. I'm the largest, you know, individual shareholder at the company, and nice dividend would be nice. We did buy back stock when the stock was down at $5, $6 a share. Sometimes they were highly regulated. Things come out in the industry. People all get scared, and the stock price drops. I could see using cash to buy back stock if something like that happened. Right now, it's focused on growth. Yes.
What is a typical tuition cost and makeup of the—yeah.
$30,000 roughly is kind of the average out there. That includes your books, tools. Everyone gets a laptop since they have some online work. 70% of our students get some form of a Pell Grant, which is free money. It maxes out around $7,200 a year. Some of our programs, you might get a year and a half's worth of Pell Grant.
You could get up to maybe $10,000. The rest, they'll either borrow from the government or we do lend. We don't lend money. We lend credit to about 30% of our students with an average balance of about $7,000. Our students in total, when they graduate, the average debt, including ours and the federal government, is $14,000. That translates into a $150 payment a month for a 10-year loan, which is what they are. They're all 10-year loans. For our loan, we charge 1%, 100 basis points more than whatever the federal government's charging. We're not charging, you know, credit card rates, but we want them to take the government money out before they come to us asking for money.
What else?