Lincoln Educational Services Corporation Stock

Hello, and welcome to the Lincoln Educational Services Second Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to Michael Polyviou. You may begin.

Thank you, Towanda. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results for the first quarter -- excuse me, for the second quarter ending June 30, 2026, as well as recent corporate development. 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, CEO and President; and Brian Meyers, Chief Financial Officer and Executive Vice President. 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 ask questioners to limit themselves to two questions and then re-queue to ask any additional questions. In advance, we thank you for our operation.

Now I'd like to the call over to Scott Shaw, CEO and President of Lincoln Educational Services. Scott, please go ahead.

Thank you, Michael, and good morning, everyone. Thank you for joining us today to recap the progress Lincoln has made towards achieving our goals for 2026 as well as continued progress towards the 2030 targets we communicated earlier this year. We had a strong second quarter as we generated 22.4% revenue growth, 42.4% adjusted EBITDA growth and increased net income 25% over prior year quarter levels. We also realized a $22 million improvement in operating cash flow for the quarter and further boosted our liquidity and resources to execute our growth strategies with the expansion of our credit facility. As a result of our performance during the quarter and first half of the year and current trends, we are reiterating our full year guidance while we increase our capital expenditure outlook to advance strategic growth initiatives. Brian will share -- sorry, Brian will review our guidance in full during his comments.

Lincoln Tech is leading the way in an evolving skilled trades marketplace as we have for the past 80 years. As a recognized leader of education and training services for safe and demand rewarding careers in the skilled trades, transportation and health care fields, we are benefiting from the continuously expanding interest across America as the demand for skilled workers exceeds supply. We have focused our strategies on simplifying operations to maximize graduate opportunities and skilled trades, which have the highest demand. Our focused programs are for trades expected to remain in high demand as the effects of artificial intelligence deployment impacts white collar and other jobs across the country.

During the first quarter of this year, we achieved student start growth of nearly 20%, and we expected second quarter start growth to moderate to approximately half this rate, while enrollments for the quarter did grow at approximately 9%, our start growth slowed to 1%. Throughout the quarter, we identified changes in our leads and took action to ensure that prospective students were receiving accurate information to make the best decision for their future. With that said, the environment is dynamic as students utilize new AI tools in search for new career opportunities. The good news is that our strong brand and outcomes continues to drive up our organic leads and changes we are making to our website and other digital communications will further enable the large language models to better recognize and highlight our differentiation and superior outcomes.

As we look to our second half, we see positive signs that our actions are improving our lead generation results. As per our start calendar, we had very few classes starting in July, but we have a very robust August, which we are expecting to be our company's largest in history. Given what we have achieved in the first half of the year, and what looks like a return to robust growth in the third quarter, we remain confident in our full year student start growth guidance of 10% to 14%. A contributing factor to August projected strong starts is our reinvigorated high school recruiting platform. Last summer, we started an overhaul and expansion of our high school recruiting team, given renewed interest by students, parents and even guidance counselors in the skilled trades. At present, we expect our high school starts in the third quarter to be up more than 15%. While we see improvement this year from these investments, we expect even more growth next year as the teams build on their relationships and reach even more prospective students.

During the quarter, we continued to execute our new campus development projects in Hicksville, New York and Rowlett, Texas. Hicksville remains on schedule to begin enrollment during the fourth quarter of this year, while Rowlett should begin enrolling students in the first quarter of next year. Our efforts to identify suitable facilities in our underserved markets remain at a high pace. And during the quarter, we added another leg to our new market development strategy with the signing of a lease for our focused program campus in Suitland, Maryland. At 36,000 square feet of space, the Suitland campus is approximately 50% of the size of our traditional campus facility and will initially offer electrical systems technology and heating, ventilation and air conditioning programs to meet the exploding demand for employees trained in the skilled trade areas in the metropolitan Washington, D.C. area. The Suitland campus is our second in Maryland, and we are hopeful it will generate similar marketing synergies that we continue to generate in the Metropolitan Atlanta market with our East Point and [ Marietta campuses. The focused program development strategy being deployed in Suitland expected to involve a $10 million capital investment versus our traditional campus development investment of approximately $25 million and should produce about $5 million of EBITDA within three years. We are already building out the facility and planned to open during the fourth quarter of 2027.

With the development of the Focus campus initiative, we've increased our expansion opportunities within and beyond the top 25 MSAs. I'm also pleased to announce that we are finalizing a lease for a 90,000 square foot facility in [ Tempe, Arizona, which is our first campus in Arizona. We expect it to open by the first quarter of 2028 to serve the greater Phoenix market. This campus will be similar to our Hicksville and Rowlett campuses, offering automotive, electrical, HVAC and welding. Meanwhile, our other growth initiatives continue to progress. We've recently added another member to our corporate development team and are advancing discussions with several corporations involved in developing the data center infrastructure needed to support the growing demands of AI organizations. Not only are our employees trained and electrical, HVAC and welding needed to build the centers, the electrical and HVAC trades are needed to maintain the centers to high-performance standards.

Given Lincoln Tech's track record at enrolling, supporting, graduating and placing students, we are excited about helping corporations maximize their potential through providing exceptionally trained skilled trade employees. Our leadership in skilled trades training is increasingly being recognized by third parties. For instance, in July, our Melrose Park, Illinois campus was included in USA TODAY's America's top vocational schools for 2026. It was the second year in a row Melrose Park achieved inclusion in the list and comes after 81% of the campuses 600 graduates were hired for careers in their field. The USA TODAY survey evaluates career training schools based on five criteria, including graduation rate graduate salaries, diversity within the student body, anticipated years to pay off the program costs and social mobility. In addition, our Grand Prairie Texas campus was named a School of Excellence by the Accrediting Commission of Career Schools and Colleges, recognizing the campus' outstanding performance during its reaccreditation renewal.

Earlier, I mentioned the success of our direct high school student recruiting efforts. In addition, we continue to generate substantial interest in our high school share program, where students attend Lincoln classes during their junior and senior years and then continue after high school to gain their certificate in less time, which accelerates their entry into a rewarding career. The list of interested school districts gets longer as we await funding decisions on some two dozen requested share proposals we have submitted to districts. If the proposals are accepted and funded, this will be another positive contributor to 2027.

We continue to realize operating efficiencies across our Lincoln 10.0 hybrid teaching platform by providing students flexibility to those needing to balance work and life while earning their certificate or degree. We have achieved this flexibility by combining hands-on learning at campus facilities with a component of classroom work delivered through online instruction, which reduces the time needed to complete many of our curriculum and accelerates our graduates to their highly rewarding careers. While our Lincoln 10.0 hybrid teaching platform continues to realize instructional efficiencies for the company, our instructors and our students, we're also continuing to invest some of the savings gained from these efficiencies back into our campuses with expanded programs, processes and staffing to continuously drive improved student outcomes.

Emotional and life support to help students face the challenges they experienced in pursuing a new career while holding down a job and/or raising a family are offered, and we believe this service is positively impacting our student retention rate at our programs open for more than a year, helping to build our already high graduation rate. Striving to provide the best education and training for safe, rewarding and in-demand careers continues to drive our entire organization forward. Achieving this quest has put us in a position to approach $600 million in revenue for the full year. Our momentum as well as the availability of resources from our recently increased credit facility brings us another step closer to achieving our 2030 objectives of $850 million in revenue and $150 million of EBITDA as we continue to expand our leadership position.

After 80 years of providing high-quality, life-changing career education, we have amassed an unmatched combination of longevity, scale and proven experience. By continuing to execute our strategies to expand our network of schools and replicating our most in-demand programs at our existing campuses, we are providing a unique proven model to help America close its chronic and severe skills gap by meeting the growing demand for more talented men and women to enter the skilled trades. We have aggressively worked to increase the visibility of our message by those who can benefit from our training and career preparation and are constantly assessing how we can improve on our delivery. We've made substantial progress on this front in the past several weeks and are excited about the prospects for the second half of the year.

Before I turn the call over to Brian, I'd like to note we will be continuing our investor outreach efforts over the next few months by attending conferences and conducting non-deal road shows and other events with our covering analysts. We will be participating at the Barrington and Lake Street conferences in September as well as a fireside chat with Northland.

Now I'll turn the call over to Brian Meyers, so he can review the financial highlights for the second quarter and first half of 2026 and review our reiterated 2026 guidance. Brian?

Thank you, Scott, and good morning, everyone. I'll begin with a few recent developments, then review our second quarter 2026 financial results and discuss our outlook for the remainder of the year. As a reminder, during last year's second quarter earnings call, we noted that a change for our Lincoln 10.0 academic calendar shifted a star class that would typically have occurred in late June to July 1, 2025. To provide a more consistent comparison, we adjusted our second quarter 2025 student start to include that class. Accordingly, the second quarter 2026 starts discussed today are compared with those adjusted numbers.

Starting with recent developments. As discussed on our last call, we have amended our credit facility in April significantly increasing our financial flexibility by more than doubling the revolving credit facility capacity to $125 million. As Scott mentioned, in June, we expanded our growth initiatives to include a new focused program campus model when we announced the lease of our new facility in Suitland, Maryland, which further expands our presence in Washington, D.C. metropolitan area. Subsequent to year-end, we also completed quarter end. We also completed the acquisition of the building housing our Melrose Park, Illinois campus, which we had previously leased. I'll provide more details on these transactions shortly.

Now let's turn to our second quarter financial results. Our growing student population continue to drive strong revenue growth and EBITDA margin expansion in the second quarter. Operating income and net income also increased, although as previously communicated at a slower rate than our EBITDA due to the higher depreciation expense of our recent capital investments. Demand for our programs remains strong with our ending student population increasing by approximately 1,800 students or 10% year-over-year across our 22 campuses. Revenue increased 22.4% to $142.6 million during the quarter, marking more than three consecutive years of sustained double-digit quarterly revenue growth. The increase is primarily driven by a 14.5% growth in our average student population.

As Scott noted, while we are reiterating our full year student stock growth guidance, our start rate was lower than expected during the second quarter. Despite high double -- high single-digit enrollments in line with our expectations heading into the quarter, a lower percentage of converted to starts. As a result, student starts increased 1% during the quarter and the lower stock volume contributed to a higher cost per start. In response, we have implemented actions to improve conversion to enrollment to start. While student start growth was softer than expected during the quarter, the impact was largely offset by a stronger retention among existing students. Through June, student attrition has improved by approximately 150 basis points compared with the prior year. These favorable retention trends kept our student population in line with expectations and supported our 22.4% revenue increase during the quarter. They also contributed to the strong student population, which is up over 10% compared to last year as we enter the third quarter supporting continued revenue growth.

Looking ahead, we believe the actions we have taken, which Scott reviewed are gaining traction and early third quarter performance is encouraging. We currently expect student starts to return to low double-digit year-over-year growth in the third quarter, supported by improved lead trends, our investment in high school recruitment and strong enrollment conversion metrics. As Scott mentioned, these encouraging trends could result in one of the largest start classes in the company's history this month. We were also seeing a greater percentage of students at our upcoming Star class complete the financial aid package process earlier in the enrollment cycle. Historically, since our package earlier have converted their stocks at a higher rate. This encouraging trend combined with our broader initiatives to improve enrollment to stock conversion supports our confidence in our third quarter's student start outlook. It also reinforces our full year stock growth guidance of 10% to 14%.

Operating expenses increased $22.6 million to $139.2 million, broadly in line with our revenue growth. These increased expenses were consistent with our budgeted expectations, reflecting our larger student population, continuing investments in growth initiatives, higher depreciation associated with our new facilities and the timing of book and toll expense. Adjusted EBITDA increased 42.4% to $12.7 million. As a reminder, our calculation of adjusted EBITDA no longer add back the losses related to new campuses in their preopening and initial year of operations. We incurred new campus losses of $3.1 million in the second quarter compared to losses of $1.3 million in the prior year quarter. Despite these additional investments, our adjusted EBITDA margin expanded slightly compared to the prior year. Net income was $1.9 million, up from $1.5 million in the prior year. Diluted EPS was $0.06 based on approximately 31.4 million weighted average diluted shares outstanding.

As a reminder, due to the seasonality of our business, we typically generate most of our annual profits during the second half of the year. Year-to-date, capital expenditures totaled approximately $33.2 million, of which $29.1 million is reflected in the statement of cash flows. Spending that occurred in the second quarter was below plan primarily due to the timing of permits and weather-related delays, which shifted a significant portion of the planned expenditures into the third quarter. We do not anticipate these timing differences to result in any significant delays to our opening of our new campuses.

Turning now to the balance sheet and financing activities. Building on the positive operating cash flow we generated in the first quarter, cash flow from operations totaled $26.6 million for the 6 months ended June 30, 2026, and compared with a use of $8.1 million in the prior year period, an improvement of nearly $35 million. We ended the quarter in a strong financial position with $44.2 million in cash and $99 million of availability under our expanded credit facility. This represents total liquidity of $143.2 million with $26 million of debt outstanding under the facility. The Focus Program campus model, we are creating in Suitland, Maryland, requires an estimate of $10 million in capital investments, which is less than half of the traditional campus build-out is projected to deliver an IRR of over 30% with a [indiscernible] to payback than our larger model campus due to a shorter construction time. At full ramp, the Suitland campus is expected to generate more than $50 million in revenue and $5 million in adjusted EBITDA and EBITDA. This compared to a traditional campus requiring approximately $25 million capital investments and generating $30 million in revenue and $10 million in EBITDA at full ramp. The acquisition in July of our Melrose Park, Illinois property for $18.8 million was funded with $15 million in new mortgage financing. When the property became available, we took the opportunity to secure an important long-term CapEx assets while improving our cash flow as the mortgage payments are now lower than our previously rent expense.

Turning to our full year outlook. We are reiterating our guidance for all metrics except capital expenditures. We continue to expect revenue of $590 million to $600 million, adjusted EBITDA of $76 million to $80 million, net income of $23 million to $26 million, diluted EPS of $0.74 to $0.83 and student stock growth of 10% to 14%. As mentioned earlier, beginning in 2026, our calculation of adjusted EBITDA no longer excludes preopening and first year losses from new campuses. More quarterly, our guidance now includes approximately $10 million in new campus losses, which continues to be in line with our expectations and excludes only noncash stock-based compensation.

As we go to our capital expenditures guidance, we are increasing it from $70 million to $75 million to $95 million to $100 million. The increase reflects the $18 million purchase of the Melrose Park property and the anticipated 2026 spend of our Suitland, Maryland campus. Growth initiatives represent approximately 75% of our planned capital expenditures, underscoring our continued focus on expanding capacity and supporting future enrollment. As additional campus locations are announced, we will update our capital expenditure plans accordingly.

In closing, we remain focused on executing our growth strategies and achieving our 2030 objectives of $850 million in revenue and $150 million of adjusted EBITDA. We appreciate the dedication of our team and their continued commitment to delivering our high-quality education and strong outcomes for our students.

With that, we'll turn the call over to the operator for questions. Operator?

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

I have a couple and they are related. First question, given the announcements of UTI in the trade school space last week also, you deferred by having a stronger health -- high school start season. than they. But I'm also wondering about shift from auto diesel to skilled trades, which your competitor noted last week. And then also, our employers hiring more potential students directly. Some of these announcements that we have all seen in the press, quasi apprenticeship programs, they get paid while they're getting their training, maybe you can compare and contrast the two different approaches.

Sure. So first on high school, I mean, as I mentioned in my remarks, I mean, last year, we made a concerted effort to invest more in our high school market. We have about 20% of our students that are historically coming to us right out of high school. Some of our competitors have more than that. So we saw an opportunity to gain more growth by expanding that, especially in a time when the high school students and faculty and parents and guidance counselors are all more receptive to our message. So we did change our approach. We bolstered our team, and we continue to invest in that place -- in high school recruiting efforts. And we expect, as I said, to have really strong August start. A lot of that growth is coming from high school, and we expect that to continue. And we expect, frankly, next year to have more growth because the high school marketplace really requires talented individuals that remain employed with you as they build relationships at these high schools and the longer and stronger those relationships are, the more success you will have. And we're starting to see that. And with regards to skilled trades versus automotive, I mean, for the last, frankly, a couple of years, we've been seeing a continual shift with more interest in the skilled trades. And I think we've shared this a little bit, but today, when you look at our population, we're about 60% skilled trades, 20% health care and 20% automotive. And our skilled trades, I mean, we've been doing sealed trades for 80 years. HVAC started back in 1946. So I think we have a really good handle on the trades and our trades are, frankly, our most profitable business, both as a margin as well as absolute dollar contributions to the bottom line. So as that trend has continued, that has benefited us, frankly, as an organization. And part of our focused campus model is frankly to help leverage that opportunity because it's a lot easier for us to find facilities that we can open up an HVAC and electrical programs than facilities that have automotive and welding as well. That requires some additional height capacity and other things for those other two programs. So anyway, long story short, trades are very important to us. Trades are critical to our further growth, and we do quite well with them. And then I forget, Alex, you had a third part to your question.

Apprenticeship.

Apprenticeship.

Yes, apprenticeship. Historically, your competition came from community colleges, but their capacity constrained. I'm wondering what sort of competition you're seeing from employers directly hiring and training.

Yes. So I've read about it. We haven't seen the impact of that or really taking hold at any material way as far as how it might be impacting us. We are certainly having more and more discussions with our existing employers as well as finding new employers because I'm fully on board that companies should be supporting students while they're with us and certainly after us with helping them with their financing of their indication. But we're also just seeing such strong demand on the back side. I mean we're forming a new -- we formed a new partnership with an organization that supports AI. They started off they want to hire 10 students a week from us, but they want to ramp it up to 20 as quickly as possible, and they're paying between $70,000 and $100,000 for our graduates, which is just an incredible opportunity for people. The only reason why I just mentioned that is that there is going to be more and more opportunity, I think, to tap into our existing employers and future companies that we connect with to help finance our students' education. But long story short, we have not seen anything that indicates that somehow the apprenticeship model is, I'll say, taking a big piece of the pie in any stretch of imagination.

Okay. And then my related follow-up and last question, I promise, is I think there's some deliberate language in the press release, our start growth for the quarter has slowed to 1% as fewer enrolled students than expected attended the first-day class. This is what we've set called the show rate. You have a conversion from a lead to an application and then a conversion from an application to a start. So it sounds like that's where the issue is. Can you explain that a little bit? And what are you doing differently with enrollment counselors to improve that enrolled student to start.

Sure. Yes. So as we said there, we had about 9% increase in enrollment. And unfortunately, based off the start rates had held to where they've been historically, we would have had 9% growth in our starts. The softness comes from multiple sources. One Brian mentioned, we're doing a much better job with packaging our students, getting on the financial aid. The sooner students know what they how they're going to pay for their education, the more certain they are to start with us. So we're definitely working on that. We're also working with our admissions folks as well as some of our educators to stay in contact with students, stitching events, making sure that they know that this is a good opportunity for them that they can complete the education so that they end up starting with us. There are also other touch points we are enhancing and making more broadly available to students. But I also will tell you, there was an event that kind of kicked in and happened and impacted us, and it will exist going forward, but I'm anticipating that it will be less. And what happened is, as you know, the government did require students to start repaying their loans back in May. And what that has resulted in is now that we're more than, let's say, 9, 10 months later, those students, some of them have defaulted. And defaulted students are not allowed or do not have the ability to take on any more title or funds. So we did see a few percentage points of our students no longer be able to start with us because as we were packaging them, they couldn't get a more financial aid, which, as you know, we have a lot of adult students that have gone to community colleges or other paths. And unfortunately, I guess they got conditioned like a lot of people over the last 5 years that you didn't have to repay your debt. And then when the government required them to repay their debts, they ended up defaulting. So I'm assuming that, that wave -- initial wave is going to be the biggest impact there, and then that should lessen over time. But that was also one of the factors, Alex, that softened our start rate in the second quarter.

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

Did want to touch back on the student starts growth for the quarter? And can you just talk about the dynamic of the increasing usage of AI search. How much of the start softness in the quarter do you think was directly attributed to that? And then also, I guess, kind of how much of a headwind from that are you baking into the back half of the year here?

Sure. So the AI, it's tough to know exactly what the exact impact was. I mean, we certainly saw some of our lead volume slow down a bit in the quarter. AI incredible technology, but in many regards, it's as good as the prompts you give it. And when we do a lot of searching on our own, just to understand how they interpret what people are typing in. The good news is we see that Lincoln Tech pops up more times than not as a great opportunity for people. However, with that said, we also see that sometimes the AI models are simplistic and what they look at is the cost in which case they may highlight a community college over us. Now as we all know, there's a lot of benefits for coming to a school like ours. First, our graduation rates are 2x to 3x that of community college if you're an adult looking to change your life, you might have to wait until September or January to start in a community college versus start within 30 days of reaching out to us. These models don't tell you that you may have to start off just taking Gen Ed courses before you can get into the skilled trade programs that you want. My point being is they're not necessarily getting the full picture. So what we're doing is trying to change what's available on our website so that these large language models can give students a better insight into what a career or opportunity Lincoln versus other things. And we're starting to see some improvement in the leads because of that and some additional attraction to us. At the end of the day, though, we have a superior product, and we know our product, frankly, today is better than it's ever been. The challenge as you -- we are facing and some others is just getting in front of the people to make sure that they understand that. And so we're going to continue to work with our vendors, continue to tweak our websites to make all the data is readily available as possible for the large language models to read. And as we just said, we do see a much stronger August than we've ever seen before. So I interpret that as we are making progress, but there's still more work to be done.

Got it. Okay. And then lastly for me, just on revenue growth of north of 22% on enrollment growth of about 9%, it kind of implies a meaningful revenue per student uptick. I guess could you just kind of walk us through, I guess, how much of that gap is tuition pricing? Or if you guys have pricing power here with just kind of the strong demand versus program mix shift or anything else that we could be missing on that front?

Hi, Luke. Yes, so tuition increases are 2% to 3% historically. We look at all our programs and programs that are a little bit more demand, get a little bit higher tuition going forward and some are -- there's competition, everything else, it could be a little bit lower. So it is -- it does average 2% to 3%. But what happened in the quarter is that we got a benefit from that one start that happened in July of last year that we pro forma-ed for into 2025 into the second quarter. So we got a couple of days of revenue from that, but we also got all the book and tool revenue from that, a lot of the tool revenue we earn when we give it out. So about half of the -- I'll say, the increase came from that additional start class, the shift in start class the other half was for tuition increases that helped our revenue per student.

But just to be clear, our tuition increases on average is around 2% to 3% kind of across the board for all of our programs.

[Operator Instructions] Our next question comes from the line of Steven Frankel with Rosenblatt Securities.

Scott, I'd like to go back at this Q2 start issue 1 more time. And maybe going parse it this way. How much of the shortfall was a leads issue versus a process issue, like you talked about maybe either default or not getting financial aid done at the right time?

Yes. So well, as I said, from a numbers perspective, we had 9% increase in enrollment. So if the start rate had held, we would have had 9% growth in starts, and that was kind of rise in line with what we anticipated. With that said, we also were anticipating, frankly, more enrollment growth from the lead volume that we had been seeing in the prior quarter. So overall, some -- the leads started to lessen within the quarter which frankly lessened the absolute number of enrollments were hoping to possibly achieve. But as far as the exact number, again, the 9% to 1%, those are process. Those are the fact that some of the defaulted students couldn't start from -- they defaulted someone from taking out loans at another institution and then the processing of the financial aid for our students just to get more through the door as well as there's always something else that I'm just basing that off of what we know. But certainly, there could be some changes because of the AI that maybe the students that we have enrolled have some different perspectives on things. We were not 100% sure. All I can tell you is that the growth that we're seeing and anticipating in Q3 certainly tells me that we've solved part of that problem. And we're going to continue to work to make sure that we can be as robust as possible because we just know from talking to employers that demand is greater than it's ever been. And from, frankly, talking to prospective students, we know there's a strong interest.

Okay. And then in terms of that Q3 strength. High school is typically what percentage of the overall starts in Q3?

About 40%.

Okay. And are the leads back to growing where you want them in Q3, or do you still have this AI leads issue that you have to work through?

There's still AI issues we have to work through. And again, changes happen all the time. Sometimes, Google would change their algorithms and everything is moving smoothly, and then you have to figure out how you readjust to it. Our world was turned upside down during COVID. We figured out how to adjust to it. This is just another one of those instances where the playing field changed, and we're taking action to correct it, and we are very confident that we can overcome it simply because our product is so strong, and I believe our brand is so strong. So it's an opportunity ahead of us, but things are not -- we're not. I can't say that things are the same as what they were 12 months ago, but I do anticipate things getting better. I mean also these AI models have to generate income as well. We're already seeing that chat GBT starting to offer paid advertising. And I think as they start, I'll say, behaving much more like Google, we'll certainly have a benefit from that and be able to, I'll say, have a more level playing field going forward.

Okay. Just to sum up, your leads are now back to growing year-over-year as you look at Q3 and into Q4?

Yes. Yes. I mean, our leads grew -- don't forget, our leads grew also in the second quarter. It's just that the rate of growth was less. We continue to see continued progress across the board.

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

Following up on the new student starts. The -- curious to know if this was kind of system-wide, or if you noticed any concentrations in certain regions of the company's operations?

Yes, good question. No, it was basically system-wide. With that said, our East Point campus just continues to be robustly growing. But overall, it was kind of across the board and across the board by program. There wasn't anything to discern, Eric, from what was happening as if there was regional or programmatic issues of any kind?

And then you did call out a highlight the retention, anything that you've been able to determine as far as what's behind the better-than-expected retention?

Oh, sure. I mean, we've put in a number of programs to help improve our retention. And our goal is to get to 70% graduation rates. We're at about 200 basis points this year higher in our retention than we were last year. And it all comes down to providing better customer service. We've put more student service advisers in all of our campuses, so that they can interact with students and help them. When, frankly, life gets in the way. Sometimes they might have a car breakdown. They can't get to school. So we help them find a car pool, other issues might pop up. And just by being attentive and on top of it and making sure that students know that we're there to support them, gives them a lot more confidence and makes them more successful. But yes, we have a number of initiatives that our education team has been implementing over the last 14 months to make this happen, and we anticipate further growth and improvement next year.

[Operator Instructions] Our next question comes from the line of Griffin Boss with B. Riley Securities.

So first, I want to start off. Scott, you talked about the opportunity to partner with more AI companies in order to help supply that funnel of labor required for not only data center build-out, but data center maintenance over the next few years. Can you just dig more into that opportunity in that employer pipeline?

Sure. So I mean Johnson Controls has been a longtime partner of ours, and we've done things with them with their fire and alarm systems, and now we're doing things with them for both the building of data centers as well as training for the maintenance of those data centers. So since that's a name that we've always talked about, I'm happy to share that. But we also have a number of other companies that have come to us that, I'll say, for competitive reasons, I'm not going to give their names out at this point who are looking to hire students. We have another organization in the AI field that's looking to, frankly, pay us, frankly, a fair amount of money per student that we place with them. We have another organization that's looking to create a specialized training program so that our students can slide more easily into their organization, all around AI infrastructure. So it's just that we're reaching out to more companies as well as more companies are coming to us as they see the value of our, I'll say, national -- somewhat national footprint, but also the program is the same across our platform, which makes it very easy for these larger companies to understand what the quality is of our students and what their skill sets are. So it's just a very robust market, which is fortunate for us and for our students.

Got it. So that will be exciting to see more developments in the coming quarters. And then just one more follow-up for me, and maybe for Brian here. Given the higher CapEx in for the year. How, if at all, does that change? How you're thinking about the carryover of that revolver from quarter-to-quarter historically? You've kind of looked to pay down any outstanding amounts at the end of the year? Is that going to change, or is that still the expectation going forward?

So now with the -- I'll say this, we announced that we're going to have a mortgage outstanding of $15 million that we took. So that will be outstanding at the end of the year. And now we'll be slightly free cash flow negative. So I would say about maybe at the end of the year about like $20 million worth of -- well, actually gave me 1 second on with that. Yes, about like $20 million or so outstanding on the credit agreement, including the $15 million.

Our next question comes from the line of Eric Wold with Texas Capital Securities.

I want to go back to the conversion rate from the enrollment starts. What kind of what level would you say you're back to now in terms of the start to enrollment kind of ratio versus where it's been historically? And kind of what are you assuming in the back half of the year guidance, reaffirm guidance, you assume that kind of that, that conversion rate kind of gets back to historical levels, or do you think there's still be some pressure on that in the back half of the year?

No. We think that it will certainly get better than what we had in the second quarter. I can tell you our next start, frankly, occurs tomorrow. And so then a week from tomorrow, we'll know exactly what the numbers are. But I can tell you that as we've gone through orientation over the last week, we are not seeing, I'll say, as much fall off as what we saw in the second quarter. So to me, that gives me greater confidence that things are moving in the right direction and that we will have this robust start in August. So it's just a matter of like a lot of things, just constantly staying on top of things and not taking anything for granted and really making sure that we are communicating with our students frankly, in a more robust way in order to drive that start rate back up.

Got it. And then any update on could you kind of expanding kind of the breadth of kind of slots during the week for the hybrid offering kind of get more options, more availability for students that may not be kind of work with the current scale?

I pardon. Could you just say the question again? I didn't hear it all. I apologize.

Sure. Just any update on kind of offering additional slots kind of with the new hybrid offering into additional purities of a week that may work with students that kind of [indiscernible]

Yes. So we have a few -- we have the three sessions a day. So in the morning, afternoon and evening. And we do have two campuses now, maybe have a weekend shift utilizing Friday, Saturday, Sunday, just because there was a need and opportunity to do so. So it's still, as I said, maybe a 2 or 3 campuses with one program. But we have that flexibility as demand increases, or we reach capacity at certain locations with certain programs, we still have a lever to open up to enable us to grow without spending more capital. With that said, I did highlight our East Point campus, and we're in the next, hopefully, 30 days, going to open up an additional 15,000 square feet that we had to build at that campus, which will add about 500 students of capacity. We just see that campus continue to be extremely robust, frankly, despite the fact that there's been some new competition come into the marketplace. If anything, we've seen their marketing spend drive more leads to us, because it just highlights to me that there's such an untapped large market out there for students to go into the trades, but they just need to be made aware of these opportunities. So more marketing dollars that go towards it, I think, helps the whole industry. Just like the advertising for apprenticeships and other programs that are out there just brings more awareness overall. And there's such a shortage and such a need that I see it just frankly benefiting us. And it's -- I don't know, things today remain as robust as as exciting as I've ever seen them.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Scott for closing remarks.

Thank you, operator, and thank you all for joining us today as we reviewed our strong progress. While Lincoln is benefiting from both macro operating environment trends and our own consistent execution of growth initiatives at our existing campuses and new facilities, we are also demonstrating our ability to react quickly and successfully to changing dynamics within the market. I could not be more bullish on the need for skilled trade professionals and desire by prospective students to enter the field. Our investments in our operations, our students and our organization continue to create numerous opportunities to generate increasing levels of shareholder returns over several years. Of course, our success is only made possible by the commitment and dedication of our faculty and staff and the success of our students. I'd like to thank our shareholders for their support and our entire team for their dedication to achieving our goals. Thank you all again, and have a great day.

That concludes today's conference call. You may now disconnect.

Good day, and welcome to the Lincoln Educational Services First Quarter 2026 Earnings 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, Mr. Michael Polyviou. Please go ahead.

Thank you, Sherry. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results for the first quarter ended March 31, 2026, 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, CEO and President; and Brian Meyers, Chief Financial Officer and Executive Vice President. 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 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 projection on which segment and statements are based.

Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on 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 the entirety by this cautionary statement, and Lincoln undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise after the date thereof. [Operator Instructions]

Now I'd like to turn the call over to Scott Shaw, CEO and President of Lincoln Educational Services. Scott, please go ahead.

Thank you, Michael, and good morning, everyone. Thank you for joining us today to recap our outstanding first quarter. As we reported during our Investor Day presentation on May -- I'm sorry, March 19, we expected a strong first quarter, and we did achieve 19.5% student start growth. Fully half of the student start growth came from our organic operations, meaning those campuses and programs opened before 2025. We believe this metric is a solid proof point that Lincoln Tech is leading the way in an evolving skilled trades marketplace.

As a recognized leader of education and training services for safe in-demand rewarding careers, we are clearly benefiting from the expanding interest across America in skilled trades training as employer demand for skilled workers continues to exceed supply. Some of this interest is driven by the growing concerns about the negative impact of artificial intelligence on white-collar jobs, especially in the technology and finance fields. A greater contributor is the attention created by the robust salaries, bringing you solidly into the middle class and ever-increasing employer opportunities.

These factors are helping to drive the skilled trades and the placement of Lincoln Tech graduates in rewarding long-term careers like HVAC, electrical automotive technician welding in health care. At Lincoln, we have focused our strategies on simplifying operations to maximize opportunities at both existing campuses and at new greenfield campuses. Our successful execution during the first quarter led to 22.5% revenue growth, nearly 85% adjusted EBITDA growth and more than doubling our net income. Attesting to the improving efficiencies we are generating throughout our operations, we also generated cash from operations during the first quarter for the first time in 10 years.

Our financial performance as well as the current trends in our business are leading us to increase our 2026 guidance, which Brian will review in a few minutes. The campus relocations and openings executed in 2025 to address underserved markets are all meeting our expectations, and all the program expansions at existing campuses are contributing to our strong start growth. In February, we launched the most recent program expansion with the opening of electrical program at our South Plainfield, New Jersey campus. In addition, as we previously reported, we began reenrolling new students at our Paramus nursing program in January, which contributed to overall health care starts increasing 5% after declining in the fourth quarter.

Our Hicksville, New York and Roulette, Texas new campus development projects remain on schedule. Hicksville is scheduled to begin enrollment during the fourth quarter, while Roulette should begin enrolling students in the first quarter of 2027. Our efforts to identify suitable locations to expand into other underserved U.S. markets remains at a high pace and we are hopeful we will be able to report additional greenfield location expansions when we report our second quarter results in early August. Our other growth initiatives continue to be implemented, negotiations with existing corporate partners to expand customized tailored education and training programs are underway and we are constantly exploring new partnerships with a variety of corporate and governmental organizations, the most recent being the agreement we signed with New Jersey Transit under which our workforce link division is providing diesel and electrical systems training to New Jersey transit technicians at New Jersey maintenance facilities.

We also have several projects underway to build our high school starts to increase veteran enrollment, both of which are designed to generate longer-term results beginning in 2027. For instance, we have expanded investments in targeted high school initiatives that are leading to greater interest among students, parents and school districts. At the same time and further reflecting the evolving marketplace, high schools are reaching out to us to explore how to offer our skilled trades programs to their students under what we call our high school share program, students attend Lincoln classes during their junior and senior years and then continue after high school to gain their certificate in less time, which accelerates their entry into a rewarding career.

There are currently more than 2 dozen requested high school share proposals under review by school districts, all of whom are keenly interested in offering quality skilled trades programs but are waiting to see if they have dollars in their budgets to fund the programs. This is another initiative that is likely to see progress as we move into 2027. Meanwhile, we are expanding our efforts to educate government officials on the benefits of our education and training to their constituents. For instance, in April, we were honored to host Secretary of Education Linda McMahon at our Shelton, Connecticut campus where our HVAC electrical LPN and medical assistant students demonstrated some of the skills they have acquired while attending Lincoln Tech.

The current administration is a huge proponent of skilled trade training and keen to understand how students can learn the in-demand rewarding skills needed to close the skills gap in America our leadership and results for our students are helping governments at all levels, understand the possibilities. At the state and regional level, we were also honored to host Connecticut Governor, Ned Lamont, at our new Britain campus where we experienced Lincoln Tech's role in training electricians and HVAC technicians. And in Maryland, we worked with the state to hold our third career quest. You may recall last year, we helped fund a high school career event that was attended by 500 high school students. This year, the event attracted more than 1,700 students.

Just another example of the expanding interest in skilled training in-demand rewarding and safe careers and Lincoln Tech's leadership role in helping students achieve their goals. We believe our Lincoln 10.0 hybrid teaching platform continues to play a major role in our growth, the platform provides students flexibility to those needing to balance work and life while earning their certificate or degree. We've achieved this flexibility by combining hands-on learning at campus facilities with a component of classroom work delivered through online instruction which reduces the time needed to complete many of our curriculums and accelerates our graduates to their highly rewarding careers.

We have realized instructional efficiencies, space efficiencies and organizational productivity through Lincoln 10.0 during the first quarter and fully anticipate this trend continuing throughout the remainder of the year. While our Lincoln 10.0 hybrid teaching platform continues to realize increasing levels of instructional efficiencies for the company, our instructors and our students, we are also investing some of the gains from these efficiencies in programs and processes to continuously drive improved student outcomes. For instance, we are providing emotional and life support to help students face the challenges they experienced in pursuing a new career while holding down a job and/or raising a family, this service has positively impacted our student retention rate at our programs opened for more than a year, helping to build on our already high graduation rates.

The strong start to the year illustrates the substantial progress we have made towards achieving our objective of providing the best education and training for safe, rewarding and in-demand careers -- it has also enabled us to raise our guidance, which Brian will review in a moment. We now see achieving $600 million in revenue for the full year as a growing possibility. Our momentum as well as the availability of resources from our recently increased credit facility brings us another step closer to achieving our 2030 objectives laid out during our Investor Day presentation on March 19 of $850 million in revenue and $150 million of adjusted EBITDA as we continue to expand on our leadership position.

After 80 years of providing high-quality, life-changing career education, we've amassed an unmatched combination of longevity, scale and proven experience. By continuing to execute our strategies to expand our network of schools and replicating our most in-demand programs at our existing campuses, we are providing a unique proven model to help America close its chronic and severe skills gap by meeting the growing demand for more talented men and women to enter the skilled trades.

Before I turn the call over to Brian, I'd like to note we will be continuing our investor outreach efforts over the next few months by attending conferences and conducting nondeal road shows with our covering analysts. Tomorrow, we'll be attending the Needham Technology Media and Consumer Conference in New York City. The following week, we will be attending the LD Micro Invitational and B. Riley Institutional Conference both in Los Angeles, next month, we will be attending the Rosenblatt Securities Conference, East Coast IDEAS Conference and the Northland Securities Conference.

Additionally, we will be doing a West Coast non-deal roadshow with Barrington Securities and a non-deal roadshow with Texas Capital in New York City at the end of June. I believe this level of activity reflects the rising interest in the Lincoln Tech story from investors attracted to our track record and growth profile.

Now I'll turn the call over to Brian Meyers, so he can review the financial highlights for the fourth quarter and full year 2025 and our 2026 guidance. Brian?

Thank you, Scott, and good morning, everyone. I'll first provide an overview of our financial results for the first quarter of 2026 and then turn to our updated outlook for the remainder of the year. Our first quarter results exceeded internal expectations driven by strong student start growth and improved operating efficiency.

This combination led to strong growth across all our key metrics and increased profitability, reflecting continued execution across the business and the scalability of our operating model. Our growth reflecting the continued momentum in our business and when combined with our first quarter performance enables us to raise our full year outlook across all key metrics. Beginning with student starts, we continue to see strong sustained demand with starts increasing by 19.5% in the quarter.

This growth represents more than 5,500 new students starting across our 22 campuses. As a result, our ending population increased by approximately 2,800 students, almost 18% higher than prior year. As Scott mentioned, we are particularly proud of our continued organic growth, which accounted for about half of the total increase in student starts during the first quarter. Our measurement of organic growth includes new campuses and programs and operations over 1 year.

Looking at the composition of student growth our transportation and skilled trades programs representing approximately 80% of our total population grew starts by nearly 24%. Meanwhile, our health care and other professionals programs. which account for roughly 20% of the total population source starts increased by 5%. Revenue increased 22.5% and to $144 million, marking 3 years of consecutive double-digit quarterly revenue growth. The growth was largely driven by an 18.2% increase in average student population and a 3.6% increase in revenue per student. Operating expenses were $137.6 million compared to $114.1 million in the prior year quarter and while -- and were in line with our expectations. The increased expense reflects both higher student population and our implementation of our ongoing growth initiatives.

Education service and facility expenses increased from $47.4 million to $58.4 million. However, when excluding the $3.9 million increase in depreciation tied to our recent investments, these expenses were 35.4% of revenue as compared to 37.3% of revenue in the prior year quarter. The improvement was mainly driven by instructional efficiencies. In marketing and sales, while total spend increased cost per start excluding new schools slightly declined, reflecting a strong return on investment.

Partially offsetting this improvement are higher cost and books and tools primarily driven due to increased laptop pricing as we do not intend to pass these incremental course on to students, the rise of lab top cost is expected to result in an incremental impact of approximately $750,000 per quarter for the remainder of the year. SG&A expenses also improved to 55% of revenue from 56.9%, supported by lower bad debt expense which declined to 9.5% of revenue from 10.1%, reflecting stronger financial aid processing and cash collections.

This was the fifth consecutive quarter in which we saw a reduction in bad debt expense as a percentage of revenue compared to the prior year. Adjusted EBITDA increased 84.7% and to $15.5 million. As a reminder, our adjusted EBITDA no longer adds back the losses related to new campuses in their preopening and initial year of operations. We incurred new campus losses of $2.8 million in the first quarter. Total margin expanded to nearly 11% compared to 7% in the prior year.

On our revenue growth this quarter, we generated an incremental EBITDA margin of approximately 27%, which increased to roughly 40%, excluding new campuses. Net income was $4.4 million, which more than doubled compared to prior year. EPS was $0.14 per diluted share based on approximately 31.3 million weighted average diluted shares outstanding. Net income margin benefited from a lower effective tax rate of approximately 22%, driven by a discrete tax benefit related to stock vesting. We expect the tax rate to normalize to around 9% in future quarters.

Lastly, turning to the balance sheet. We also delivered an exceptional strong quarter driven by solid capital structure and continued improvement in cash generation. Historically, the first quarter has been a period where we use cash from operations. However, this quarter marks the first time in many years that we generated positive operating cash flow during this period. Cash flow from operations totaled $4.6 million compared to compared with the use of $8.4 million in the prior period, a $13 million increase compared to 2025.

Now turning to our full year guidance. Our strong first quarter performance, higher student population and continued momentum gives us confidence to raise our outlook for the year. We now expect revenue of $590 million to $600 million, adjusted EBITDA of $76 million to $80 million, net income of $23 million to $26 million, diluted EPS of $0.74 to $0.83, student stock growth of 10% to 14%. Notably, the high end of our prior guidance now represents the low end of our updated outlook.

As mentioned earlier, beginning in 2026, adjusted EBITDA no longer excludes preopening and first year operating losses from new campuses. As a result, our guidance now includes approximately $10 million in new campus losses and excludes only non-care stock-based compensation. Lastly, capital expenditure guidance remains unchanged at $70 million to $75 million. Planned expenditures include Hicksville and Roulette future campuses, program expansions and ongoing maintenance investments. Growth initiatives accounted for approximately 65% of our total CapEx. During the first quarter, capital expenditures totaled approximately $15 million, coming in below plan due to the timing of certain expenditures shifting into the second quarter. When additional campus locations are announced, we will update our capital expenditure plans.

Finally, I'd like to note that subsequent to quarter end, in April, we entered into an amendment to our credit facility that significantly enhanced our financial flexibility. In April, we increased our revolving line of credit from $60 million to $125 million, and the process secured more favorable terms. The amended facility provides us with additional capacity and flexibility to support our growth strategy, including investments in new campuses and program expansions while also positioning us to pursue future corporate development opportunities as they may arise. Prior to this amendment, we ended the first quarter with $72 million in total liquidity with $16.7 million of cash and just $5 million of debt outstanding.

In closing, we are highly encouraged by our strong start to the year and remain focused on achieving our long-term 2030 objectives including $850 million of revenue and $150 million of adjusted EBITDA as outlined at our Investor Day in March. We thank our entire team for their continued commitment and strong execution. With that, I'll turn the call over to the operator for questions. Operator?

[Operator Instructions] And our first question will come from the line of Luke Horton with Northland Capital Markets.

Congrats on a really nice quarter here to start the year. Just wanted to start off with the organic growth. You said about half of that or 19.5% student starts growth was organic in the quarter. Just wondering, as you're thinking about the 2026 guidance, if you could give some details around assumptions for organic growth versus new campuses?

Sure. So I mean, last year, if you look at the full year, about half of our growth was from organic means. This year, we had anticipated probably be about the same, Luke, as we look for the full year, it's about half of the growth could be from organic sources.

Okay. Got it. And then, obviously, on the skilled trade side, the programs like auto, HVAC welding and electrical, continue to be some major contributors. Just wondering if there's any programs you guys don't offer that you've looked at getting into maybe like an aviation or robotics type programs.

Sure. Yes, we're always looking for new opportunities. The one that everyone always throws out is plumbing but plumbing is just they're very, very few schools out there doing it. And so -- and we haven't heard from our employers that there's a huge need. It seems like that is satisfied through other means. But we are continue to explore if there could be components that could be included in our program.

But aviation is certainly a nice business, very similar to fixing cars and trucks, just larger vehicles that could be something, not necessarily robotics, but in general, there's a whole area around megatronics, which is kind of a combination of electronics, it's hydraulics, it's pneumatics, it's PLCs, things that run factories or other sorts of equipment that need to be repaired and maintained to keep factories running and distribution centers running.

So those are some of the things that we're looking at, whether or not they'll be full programs or maybe some sort of short program we are looking for new opportunities to continue trying to solve the skills gap challenge that's out there.

One moment for our next question. And that will come from the line of Eric Martinuzzi with Lake Street Capital.

It was good to see the HOPS starts turned positive at 5%. I think you said at the Investor Day that really your new campus focus was going to be on the skilled trades and transportation. Is there any expectation that maybe some of the new facilities that you would be getting into would have expansion capabilities for health care and other.

Absolutely. I mean just as a reminder, the new Levittown campus we just opened up has about 12,000 of undeveloped square foot feet that we could put something else in. Our new Houston campus also has about the same amount. So we do have some space in some of these newer facilities to add health care and/or additional programs.

And the overall, again, plan for health care is obviously, we all know, health care is a growing sector of the economy, huge need, what we're trying to do is make sure that our health care program is as profitable as possible before we expand it, and we actually made really good progress on that this quarter. For the first time, our nursing programs were profitable in the first quarter, frankly, since pre-COVID. So we are making progress. And once we achieve a level of profitability that we're comfortable with, you do hope to expand those programs into other campuses.

And was the recovery of Paramus, are there milestones that the State of New Jersey is looking for you to hit? Or is it just you've got the green...

Yes, sorry about that. Yes, we had the full green light. In fact, the graduation rate in Paramus is over 90% for the NCLEX exams. So as a company, we average, frankly, at 89.5% or 89.4% last year. So we're safely well above the benchmark and there's no other restrictions or notification that we need to give the state.

Okay. You said grad rate, but I think you meant pass rate?

Yes, thank you for clarifying that. You are correct. It's the NCLEX pass rate.

[Operator Instructions] Our next question will come from the line of Griffin Boss with B. Riley Securities.

So first, I just want to start off on the expanded credit facility that more than doubled as you discussed. Just curious, if that changes your calculus going forward when you gave your 2030 targets to the investor, you talked about 6 potential new campus openings between '27 and '29, so 2 per year. But do you have any expectation that maybe you can you can add on to that and maybe do a third campus perhaps in any one of those years? Or are you still just trying to be methodical with 2 per year?

Well, yes, we're still focused on 2 per year, but we do have the flexibility to add more to that. I think as we've said in the past, we have searches going on in about a dozen different markets. And one we're able to find a facility that meets our needs is a little bit out of our control, but we do think we can basically almost find one every 6 months, but there could be opportunities that we find more -- we could find them faster in which case we do have greater flexibility to take advantage of that. But the overall plan right now still remains about 2 a year.

Okay. Understood. And then just one other housekeeping for me, model related. You mentioned the timing for certain CapEx pushing to the second quarter. So is the expectation here in terms of cadence that 2Q might be the heaviest CapEx spend quarter and maybe kind of trailing off in 3Q and 4Q to get to that $70 million, $75 million target.

Yes, exactly. It's probably almost half of our CapEx spend is right now, we think is going to happen in Q2.

[Operator Instructions] I'm showing no questions in the queue at this time. I would now like to turn -- actually, we do have a follow-up from Luke Horton with Northland Capital.

Just wanted to jump back in here on student starts going into 2Q. I know last year, there was kind of a cohort of students that was pushed into 2Q that will no longer be included. Could you just remind us of what to expect here for Q2 and Q3 starts as we lap the kind of weird calendar year from last year?

Go ahead, Brian.

Right. So if you remember last year, there was a start that occurred in the first week of July that we moved into Q2 when we report. So when we report Q2 next year, it will be that the July 2025 start will be moved into Q2. So it will be apples and apples comparison for Q2. So the start that occurred, I think it was like 2,700 students that happened in July, and we're going to pro forma that into Q2 of 2025, and it's going to naturally occur this year at the end of June. And for the next 5 years, that's tough to always be in the second quarter.

Okay. So you'll be reporting it out on an apples-to-apples basis. So no, it shouldn't be any big surprises there?

No. Correct. No problem.

I'm showing no further questions in the queue at this time. I would like to turn the call back over to Mr. Scott Shaw for any closing remarks.

Thank you, operator, and thank you all for joining us today as we reviewed our significant Q1 progress and increased our financial guidance for 2026. Lincoln is benefiting from both macro operating environment trends and our own consistent execution of growth initiatives at our existing campuses and new facilities. Our investments in our operations, our students and our organization continue to create numerous opportunities to generate increasing levels of shareholder returns over several years. Of course, our success is only made possible by the commitment and dedication of our faculty and staff and the success of our students.

I'd like to thank our shareholders for their support and our entire team for their dedication to achieving our goals. Thank you all again, and have a great day.

This concludes today's program. Thank you all for participating. You may now disconnect.

Good morning. Excited to have everyone here at our National Auto Diesel College for our second Investor Day. We're excited as Nashville is a very impressive college and it's state-of-the-art and part of the state of the art and this is this little fancy screen here. So as you can see, we have an "oh, they turn the lights off in the auto shop. They're supposed to have that on".

But in any event, you can see that what we've built here is a state-of-the-art facility with all the latest equipment, that's the way we're moving as a company. We want to make sure that our students have the skills needed to be successful out there in the marketplace. And this is a really exciting time for us. So if we could just start the presentation oh, that's me. That would be great. Safe harbor. I know you've all read this before, but I do want to welcome you. This year is our 80th anniversary. There's very few schools out there in this country that have the longevity that we do, and there's really no one else that's been focused on the trades. We started in 1946, training people to fix automatic transmissions in HVAC, and we're still doing that today, and we've expanded it into other trades. And we're only focused on those trades that we believe provide a high-quality of education and a great career opportunity.

The difference, besides the fact that we had this beautiful facility and all of our new facilities look as robust as this one. But at the end of the day, lots of people can build nice facilities, lots of people can put in professional equipment, but what they can't do is replicate our people. I think that we have a strong focus on people, all the time, whether it's our students there, over 19,000 students and over 2,700 employees. We're going to make an environment where everyone can be successful. And this is, I believe, one of our great differentiators. I have back there, the head of my HR team, Steve Ace, he's not presenting, but I can tell you that the HR department at Lincoln always gets part of the highest ratings out there, and they do such a good job for us, and are really the backbone of our success.

What unites us is our mission, and this is the statement that if you walk this campus or any campus, you'll see this on the walls, but it's just not a [indiscernible]. We want people to be living and breathing this day in and day out. We're going to be focused on providing superior education. We want to be the best. We're going to be focused on in-demand careers, and then this is where the people really come in. It's got to be a supportive environment. Our students oftentimes have jobs. Our students oftentimes have families. They're all looking to change their lives. And they're with us for over 80 -- I'm sorry, 800 hours a year. So there's lots of opportunities for us to be successful, also lots of opportunities maybe not to be successful with them. And we want to make sure that all of our students are successful and it's our people that are going to make that difference and make it all come together.

And then what drives them to come to Lincoln is the fact that we do change lives. People that are joining our organization are very much believers that they can make a difference in people's lives, whether it's the admissions folks or the education folks or career services folks, even the people at our reception desk, people love what we do here and have a great sense of pride.

Two years ago was our first Investor Day, and I'm highlighting a lot of the points that we conveyed because all these things we have achieved, all these things still exist, and we're moving beyond that. So we are very much and always will be focused on having a strong regulatory record, making sure that we're compliant, making sure we have great outcomes. And our outcomes, as I mentioned 2 years ago and showed, we are twice as good as a community college. And I just raised that point because a lot of people always ask me what makes you different? And what you do is when you come to Lincoln, you get a rich experience and you're going to have a much more likelihood of graduating, which means you have a much more likelihood of getting a job, and that's what we're all about.

We also gave you some guidance around where we thought we'd be in 2027, and Brian will share with you that we basically will be there this year, so whole year earlier. So things are going really well for us. As I mentioned, we do want to be the best. We've narrowed our focus to do that. And for each of the major programs we're in, we want to be the industry leader. And we do that by having this talented instructors. And Gina Zaffino, our Head of Academics, is going to share with you more things that we're doing to further strengthen our instructors. For the most part, a lot of people always ask me, most of our instructors are full time. They're not part time. They're not adjunct. They're part of the Lincoln fabric, and we continue to invest in them.

We also shared with you the Lincoln 10.0 model, which is the way we're becoming more efficient. It's also the way that we are offering more access for students. 30% of the education is online and the rest is on ground, that we'll share with you. It hasn't rolled out yet exactly everywhere, and there is a typo on a slide, which is my fault for missing. We does show that we have Lincoln 10.0 in our nursing program, and we don't have it there yet, but it is our expectation to get there. So we'll be correcting that slide and reposting that.

We are constantly investing in marketing. And the good news is we're getting a good return on that, and we'll have Scott Watkins sharing what he's doing and how we're doing that as the marketing world is constantly evolving. And as long as we continue to get that good return, that enables us to continue to invest, which helps drive our growth.

A while back, we struggled to get financing. And so Brian Meyers had the great idea of liquidating our real estate that we had to build a war chest, so we could make investments. Today, our company is thriving today. Good to say that we have great liquidity. We ended the year with no debt. We have a bank facility that is going to be increasing in size. So we have the wherewithal to continue to grow our business. And frankly, we could accelerate that growth.

And then finally, it's a highly fragmented market that we're in. We've achieved great growth in the 2 years since now, but we're still less than 2.5% market share when you look at how many people need to be employed in these fields that we're offering training. So great opportunities for us to continue to grow.

We only get there though, as I said, with people. So this is my senior management team. 2 years ago, the average tenure with Lincoln was 18 years, it's now 17 years as we're bringing in some new talent, but Brian Meyers has been by my side for most of all that time. We brought in Chad Nice, our COO. He's been the person driving so much of our growth the program replications, the new campuses, making sure that we have the quality that we need. That we also have here, I mentioned Steve Ace, who's not presenting, but has many years of tenure with us, Steve. Gina Zaffino is also new. She's head of academics, huge responsibility. She has to make sure that our programs are engaging that they meet industry needs just to make sure that all the faculty members are trained and robust and can engage with our students and she has to make sure that we're compliant in everything that we're doing.

Jay Rasmussen is here today. He'll be presenting on admissions. Jay has rich experience a long time with us. He started off as an admissions person in the high school field. He became a campus President of one campus. Campus President another campus. We brought them to corporate, and now he leads all of our admissions efforts on the adult side. And so he has great experience. We also, just on the new side, we did bring in a new CIO, and Neil has been helping us, and you'll hear everyone really mention AI since it's a part of everyone's life, and he's really been helping us transform in that area. We also have two other people that aren't on this list, who are presenting. We have Scott Watkins, who's Head of our Marketing. Scott has been with us 1.5 years. He's been navigating for us the digital environment and doing quite well for us. I'll be sharing who our students are and how he goes out to market.

And we also have Jen Hash with us. She's been -- she reminded me thankfully, that she's been at Lincoln for over 22 years. And she was also in the admissions area, became a senior admissions rep, became a Director of admissions, a Senior Director of admissions, ran a campus President for us in Denver, and then we brought her to corporate. She's bringing that same passion and knowledge and process with admissions is very process oriented, and she's bringing all that to our career services to make us that much more robust.

I'm also fortunate, I think, to have a great board to support us. And we've been able to, I'll say, bring new talent on to our Board. Jim Burke has been with us since 1999. He has lots of experience in the for-profit area, but we've also expanded the Board. We have great representation across the board of [indiscernible] skill sets. We have people that are from education, people in marketing, people from health care, people from transportation, and as I always like to say, are right there in the middle there, Carlton Rose is a graduate of ours from the Indianapolis campus, and he retired 2 years ago, has been President of all of UPS and every piece of equipment that you UPS has across the world. So a great testament of what people can achieve.

And what my board has in unison is they all believe in the power of education. Many of them have been first people and their families to go to postsecondary education, and advance their skills. So we're all united on that goal. We always want to be the best and to be the best, you really have to have a quality metric. And these are the three key quality metrics that our a creditor looks for. And so these are the ones that we're focused on as a company. And so we're going to constantly grow our business thoughtfully, at the same time, we're going constantly invest to ensure that we can achieve these goals. Right now, we're not at these levels, but we're not far away for graduation rates, we're in the high 60s, for placement, we're in the mid-80s and improving. And I would put down student recommendation. That's the toughest one, frankly, for us. Our creditors come in and they survey our students, and they survey a number of questions. And basically, they come up with a student satisfaction. I'm very proud to say that when they survey our students on that metric, it's over 85%. But there is one question there, would you recommend? And that number is a little bit less because that's a little tougher threshold to make because you might be happy with your education, but would you be so happy that you're going to recommend someone. And that's the one we're driving for. So we know we can get 85% of our students to say, yes, I would highly recommend this, we'll be in a good place. We're close, but we're not there yet.

So to execute, we've been simplifying our business. When you look back at 2011, we had 6 brands. We had 40 different programs. Of those 40 programs, we had over 169 variations, and we had 250 days throughout the year that a start was taking place at a Lincoln Tech campus. That is very -- that's a lot to manage and it's not scalable. So we've changed our focus. We've narrowed our focus. We're down to 3 brands, 1 of which is Nashville Auto Diesel College. The other 2 are Lincoln College of Technology, it's a degree granting or Lincoln Tech, if it's a nondegree granting school. We're down to 13 programs with only 35 variations. And as we streamline our nursing program that will become even less. And we only have 20 days in the year when we have a start taking place.

Long story short, we're much more aligned, and we've simplified the business, so we could be more scalable, which becomes more efficient for everyone. As well as we want to be the best because quality endures, more people will come to us, keeps us safe from a compliance standpoint, and it makes for a very exciting dynamic place to work and people really appreciate that as well.

So I've been at Lincoln for 25 years, and I really have never seen as aligned organization as we have today as much opportunity as we have today. It's very exciting as we have here, our first quarter is a little bit more robust than we were anticipating, which is good news. We're starting off the year ahead of the curve. We're not going to change any guidance as we speak. We feel very good about things. As you also know, we're very much a second half company. We're at the most starts in all of our profitability coming -- and as the year continues to mature, we'll be revisiting this and obviously adjusting as need be. But overall, things are going very, very well for us, and I feel we're very well positioned.

And with that, I'm going to turn the presentation over to Scott Watkins, our Head of Marketing.

Thank you, Scott. Good morning, everyone. As Scott mentioned, my name is Scott Watkins, I'm the Vice President of Marketing. And today, I'm going to cover with you an overview of our total marketing strategy and how marketing, working closely with admissions has created a scalable engine for attracting students. I'm also going to talk about the current demand, the current environment that we're in for demand, who our students are, why they choose Lincoln. And then I'll take you through a typical journey that a student would go through to become a student.

So our overall strategy, we're very data-driven, and we look at this from a full funnel strategy. So as our students are -- and again, I will take you through this. But as our students are exploring things possibly on social media, we want to be there early in the funnel, all the way through to that final decision to become a student. We focus some of the key drivers we focus on, high-intent search. So we're dependent on paid search right now, that is still a big driver and a big channel for us as these students learn more about these careers and they start to search, we want to be there in front of the searches. So we do a lot of keyword research, so high intent searches are very important.

Another driver of the social platforms and video platforms, YouTube, Instagram, Tik Tok early in this process when students aren't sure what they want to do after high school, they start looking on these platforms, we want to be there. So we create content that introduces the trades to them. And then again, we create more content to follow them through the entire journey.

AI, like most of you, you probably been experimenting with the AI tools and platforms out there. Our students are no different. So we create content that is not only optimize further search engines, but for the AI models now as well. We're seeing a shift to some extent of people using the AI models for search instead of maybe a Google, right? There's a little shift there. So we create content that is also optimized for the AI large language models. And then finally, I would say another key driver retargeting. For those of you who don't know, retargeting is a type of campaign, if you were to come to our website or click on one of our ads and go to a landing page, but you did not fill out a form. We can actually follow you throughout your journey on the internet to different sites with a display ad or a different ways to basically reinforce the Lincoln Tech brand. So we do a lot of that.

And then our CRM, we're leveraging the tools and technologies there for communications. So a lot of e-mails go out to our students and SMS. Like most of you, they're carrying a phone in their pocket. So SMS is a very effective way to get in front of them.

The demand, the current environment right now, there is a demand for skilled careers, and that's continuing to rise. Some of the drivers there. Obviously, there's shortages for skilled labor. That creates not only in the trades, but also in the health sciences. So that's a driver for us. The 4-year traditional schools, a lot of skepticism there. When you look at the cost, some of these 4-year degrees can run you $200,000, $300,000 to maybe get a job when you graduate. So skepticism there creates opportunity for the trades. A broader social acceptance, these careers can be very successful. I know two people that have started out HVAC in Electrical, both of them went on to start their own companies. So there are tremendous opportunities moving forward in these long-term careers.

Also there's a lot of infrastructure investment and industrial investment, need skilled labor. So that is helping drive demand. So at this point, we're not in the situation where we have to create demand. The demand is there. We're trying to capture as efficiently as possible. So when we have to manufacture demand, that is a little more costly. So now we're in a position where we're just trying to capture that as efficiently as we can. So as we market to our students, it's important that we knew who they are, what motivates them, what drives them, and we try and build persona, student personas for not only every program, but every campus and every campus at every program, for instance.

Our campus in Atlanta is vastly different than our campus in Indi from a student population standpoint. So we look at each campus and we build a persona of everything we can find and learn about these students, helps us know how they think, how they -- what's important to them, we create content that resonates with them. So this is a sample, an overview of a typical student. High school graduates looking for career alternatives, often balancing life, right, family, work, financial responsibilities, they're motivated for long-term careers, usually because of this family responsibilities, and they're seeking to improve and increase their income and their economic mobility.

We know they spend a lot of time online. 26 hours per week, 98% of them own a smartphone. They're connected. So I won't go through all these stats, but the ones on the left, they're mobile. They watch videos on their phone. They are researching for information on their phone. It's always with them. It's easy for them to just pull something up, search for it, so we want to create content for that phone. So when we shoot video, we're shooting it both ways. We're shooting it for vertical for the social platforms as well as horizontally for YouTube and other channels like that.

Streaming is now becoming more important. Cable cutters, A lot of people are cutting their traditional cable and using streaming services. Our students are no different. 68%, you see there streaming, audio streaming, so Pandora, Spotify. Podcasts are also interesting. We're keeping an eye on that. That is growing in importance. Podcaster have very loyal listeners. They come back to every show. So we're exploring podcasts, probably all noticed in the last presidential election, there was a lot of money being spent in podcast advertising. Again, a very loyal base that shows up every episode.

Social platforms, as you would expect, YouTube, Instagram, TikTok, those are the primary social channels. Again, we're creating content on those channels. We're not ignoring the other ones. We just know the students are on TikTok, again, the channels that grow the most, the fastest growing the ones you hear about, that's because of this age group of our potential students. They're the ones making making moves as far as increasing the use of these platforms. And then when it comes to search, search is still a very important thing for us. Again, we are seeing some people shifting to AI models. So we're in the process now of going through some focus groups with our students, prospective students to see how much they're using AI and how they're using it. So we are still seeing users in search, Google. Google is a primary one. We do advertise on Yahoo! and Bing. But Google is still the primary driver.

Why are students choosing us? Jay Rasmussen will cover this a little bit more, but we're very student, our career-focused career outcomes. So career-focused training. We work with employers to train how they want, how they want their skilled laborers to operate and work within their industries. Hands-on learning. Again, they're helping us build practical and modern training programs. I'm sorry, next faster path to careers. Again, we're working with these educators and our employers to get career-ready skills. So as soon as they graduate, they are ready to step into these jobs and roles and career outcomes. We're really focused on that with our career services team, and we have strong employer relationships that students can see, and that is very important when it comes to career fairs. So most of our campuses, we operate career fairs, several times throughout the year. Students have an opportunity to meet employers, potentially interview. The career services team that works with them, helps them as far as resumes, interviewing tip. So we are very career focused.

And then finally, this is what a typical journey would look like for our students. So early on in the process, they may not be sure where they want to go after high school, what they want to do. So they start looking. They're on their social platforms. They're looking at videos. So how we impact that is we create content. We're very much a content-driven department. Videos, blogs, our students again are on their phone. So we create a lot of video content. We do right content, that's for search engines, for AI models. So when they're looking, we want to be there early in the process, introducing the trades to them. As they start to say, okay, this is of interest to me. Then they're doing a little more career research. That's where we may show up in search engines. We focus career guides, we'll produce career guides. So when they're looking, those show up Arlene pages also speak to the career opportunities that they have. The next step would be looking at schools.

Okay, they decided trade is something I'm interested, maybe it's HVAC maybe it's electrical. Now where -- where do I go for that training. So they start comparing schools, maybe it's a training program and a certification program. We want to be there again in that moment. So we create content focused on that, student success stories, our retargeting campaigns will show these different opportunities, whether it's a graduate highlighted, we have a lot of former graduates, highlights success stories. So we'll show those in a retargeting ad, brings them back to reinforce this is a strong opportunity for me.

The next part comes the enrollment decision. Where do we go from here? Is Lincoln Tech right for me. So in this stage, they may fill out a request for information form. This is where admission enters the conversation, and they do their job, working with these students, moving them through the funnel. They may schedule a campus visit, get the students here to see these facilities. When you see these facilities, it makes sense. There's a lot of opportunity and these are state-of-the-art facilities, so you know you're working with latest technology.

And then finally, from the career launch standpoint, we have graduations, employer placement, industry certifications. Our job is, from a career services standpoint, is the end result is to get these kids a job, career placement. So employer partnerships, career services and our alumni success stories. That's how we get in front and resonate with our students in that point, in the journey. That is what a typical journey will look like. Jay is going to cover a little bit more about why students choose us.

So on that note, I would like to introduce Jay Rasmussen, our Senior Vice President of Admissions.

Thank you, Scott, and good morning, everyone. I'm the Senior Vice President of emissions. My name is Jay Rasmussen, and I am the father of a graduate from Lincoln Tech. So I get a chance to talk to you a little bit about our people and about our students, which is the most important thing to me. First off, our purpose and admissions is unique because we are not the typical sale business. We don't sell cars. We don't sell boats. We don't sell houses. We sell opportunities to be successful to our students that are looking for a career change and a life change. It's really difficult because a lot of these students just have this defined success and they have not achieved their success yet. So we get a chance to sell the American Dream, which is super cool, to think about it for a minute.

We impact not just on student attending, but we impact generation. There's articles out there that say, 80% of children whose parents attended a postsecondary education, their children too will attend a post-secondary education at 80%. That's so cool. We impact generations of people. And in the end, we provide them with the knowledge to succeed and to be successful in their specific careers. So I want to say I'm proud of the work we do in admissions, and the help that we provide to our students. It's an honor and a privilege to not only work with our students and each and every one of them regardless of their challenges, but with all of my employees as well.

So let me tell you a little bit about our students, right? We put them in three categories. They don't need to be. We just choose to put them in three categories. First off, we have 22% of our student body enrolled directly out of high school. Those are our high school students. These are prospects that are currently in high school. They're within 1 year of graduation. And we put them in two other refiner buckets. We call them HSO and HSPs. It's just how the leader inquiry comes to us. One, in HSP is a high school presenter, which they go and they work in the local markets. They do presentations like this with our students and their classrooms in high school, and they collect up inquiries of interested students and then they reach out to them and attempt to recruit them.

On the other side, we have the HSO side. These are the students that find us just like the adult does, through the marketing efforts that Scott and team provide. They locate us, we collect up their inquiry, and then we put them through the process. Our adult side makes up about 73% of our overall student body. This is our biggest portion. It's the most successful portion. These students have graduated high school and are out in the working field traditionally, and they've discovered that they are not where they want to be in life. And a lot of our students thought I'm going to try it this way. I'm going to try a traditional school. I'm going to try a traditional 4-year school. I'm going to go to work, I'm going to do whatever. And they've discovered that this isn't suiting their definition of success. So they look to us to help them be successful.

Many of them have spent a lot of time in the workforce, and it just isn't working in their favor. They're losing ground. The last part, which I am a veteran as well. I served 12 years on active duty and served in Desert Storm and Desert Shield is 5% of our students many of you know, this is how we grew up as Lincoln Tech servicing veterans returning for more and giving them a skill set that they could use to enter the civilian workforce. I'm proud of this part, and I want this to be a bigger part of Lincoln Tech. Our veterans, although only about 5% of our students right now, as we now have our curriculum approved to accept those students based on government regulations, we'll look to expand that a little bit. Veterans have a lot of the skill sets that we look for. The working world and business world, like a veteran. They have good skills, work ethic, responsibility, loyalty, et cetera. And -- but they don't have the skill set that mirrors up with industry or the business world in the civilian life. Look at their career fields. They don't even to line up. We're here to help them.

So these are our applications. Our applications we call them enrollments or applications. Obviously, you can see from the chart on the left that our demand is robust, and admissions still needs to guide our students through the process, however. Even though we have robust applications, there are students that have fear, uncertainty and even sometimes self-esteem issues with attending. I look at this as the caretakers. We're the ones that are going to help them solve all their challenges. It can be as simple as transportation and getting back and forth to school. It can be as difficult as how am I going to pay for this. I need to find a second job, et cetera. We're going to help them solve those smaller issues that prevent them from attending and graduating. Obviously, the application is a critical first step, and it actually shows their first piece of commitment in the process. Some of our applicants have challenges that get in the way of attending. These can be life challenges, a flat tire, accident with a car, hospitalization of a family member. And these challenges are real and they get in the way. We call these life challenges.

Our prospects, however, also must complete several other tasks to attend financial aid, background checks, testing, et cetera, and they all are different based on program. But our application trends and our inquiry trends show strong growth year-over-year. Here's a look at it by our channels. As I explained earlier, we talked about our veteran students or adult students and our high school students. And as you can see, all of our channels are growing at a similar rate. However, new campuses will contribute to some of our overall growth, but we also need to ensure that we have organic growth. We're looking at the high school and the veteran channels as high opportunities for us at the moment. They both give us a chance to delve into field, add some investment and increase oversight as well as personnel, and we can see growth in those two channels.

We do know that our [indiscernible] program will have to hold down as it is now, the bulk of the load. But we have some areas of opportunity for our future. This will also by adding staff to these channels, it will provide a broader awareness of our Lincoln story. And I believe we should share with everybody everywhere. Actually the mic guy, I tried to get RGR from them and see if he had somebody who wanted to go to school. We should share it daily with everybody. And I will.

So let's talk about our start trends over time. The two charts show obviously extreme growth over the last few years. Our inquiry flow, the bottom chart, obviously, positive. And also, as Scott had mentioned earlier, we're projecting a pretty good quarter here in the first quarter, somewhere around 19% to 20% growth. So since COVID, our starts have accelerated, and you can see that from the chart -- we've added some increased capacity to support that, obviously, new campuses, new program offerings, replications will help us. Market conditions are positive. Scott mentioned this and so did Mr. Shaw. They're moving in our direction. We have favorable press now the positive media exposure that we get. We have the K-12 institutions that talk about us differently. We're not the last resort. We're looked at as a an opportunity for students to go get a professional career and enter the workforce. Our inquiry trends have exceeded our expectations, and they continue to show positive momentum in 2025, and we expect that to continue.

Let me talk a little bit about what keeps me awake at night. I need to make sure that our admissions team are successful for the future. What that means is I need to ensure that the 6 drivers are key to keeping our success. When we grow at rates like we're growing, the numbers are important, but the people are also important to drive those numbers, and it's my job to ensure that they're doing it successfully. We need to work on culture and keep our culture happy. Keep our culture working positively. I need to make good quality decisions along the way. We need to have a durable team, meaning it's durability for time and not only that, but work-life balance. We need to continue to develop our employees and train our leaders, build trust and then we need to define what success is for them and what that metric is. So we're looking to ensure that our team stays healthy and active. Obviously, AI has been a big talk of the town recently. And so we're going to leverage some of the AI world as well. We're dipping our tail in, and we're looking at certain things, but some of these we're using some of these we're just testing. We're looking at a website search, and what that would be is just like ChatGPT, you go on and you ask the question and it gives you the answer. So instead of filtering through 500 pages on my website, and just ask the question, what is it cost to go to [indiscernible] for the automotive program and they'll give you an answer.

We currently do call monitoring. Call monitoring will flag issues with our reps, and we search to make sure that they're staying compliant with what they're saying with the applicants. It also can identify trends that may be positive, things that we're saying, right, things that help things that may be a new market is looking at and wanting to hear about. We're looking at a rep assistant. Rep assistant could be someone that's just standing by. You have a question as a rep, you want to know about a policy or procedure, specific applicant, you can ask that rep assistant and get some help. We also, right now, are doing self-scheduling. We're seeing great opportunities here. Many of us have probably purchased something online. I remember when I got my first computer. Someone said, you'll buy things online someday, I said, "Hey, no, I'm not buying anything online. I would never buy anything like. And now we buy a car and houses online. And I think some of our students wish to be self-service that way as well, and they would like to go through the process alone with our support, obviously, in the back.

We'd never leave them on the caretaking side. Anyone that applies, anyone that would enroll anyone that would take our program with a more self-service centered process would obviously have our care taking. And we're also going to do care taking through videos, and sending letters and automations that we're currently using. And the last part is self-service, as I mentioned earlier, I'd like them to have the ability to walk through the entire process as they see fit through the admissions process and financial aid if they want to do it by themselves.

So growth in 2026 and beyond. As the trades continue to gain favorable press and growing support from the K-12 leaders, we intend to capture some of this momentum and positive reinforcement from outside of our institutions, the things we've been saying for years are now finally being heard. So high school will continue increasing our investment on that side of the house. we'll be adding oversight. We'll be adding staff members, and we're expecting that channel to grow. On the adult side, that's our core program. It's obviously delivered solid results over the past 10 years. And on a same-school basis, it's grown our student population to its highest level ever. This is a highly functioning team and we'll continue to benefit from their results overall. We still need to continue to rely on them for durability, drive and consistency. And as I said earlier, our veterans, obviously, we have some opportunity there. Now the curriculum is approved, and we are going to add some oversight and some staffing to cover those parts.

And so with that, I'm pleased at what our admissions team is doing. I'm proud of everything they do on a daily basis. And I'm honored to be a head of a team that gets to effectuate change every single day. And with that, I'm going to turn it over to Gina Zaffino, Senior Vice President of Education.

Hello. Good morning. I'm Gina Zaffino. I'm our Senior Vice President of Education. So I'm going to talk a little bit about our graduation trends, as Scott said, we've maintained graduation trends in the high 60s except for our COVID year, but we've maintained in the high 60s, close to 70%, and you can see in '25, we've dipped just a little bit. That's because of all of our amazing growth and trying to keep up with demand. But we've put some excellent strategies in place to help turn that corner. And if you see in our blue chart over here, you can see early indicators are showing that we're already having a positive trend in graduation with our latest February graduation rates being the highest so far. I want to talk a little bit about those strategies. So some of the things we've done in the department is one we've put a lot of efficiencies in for flexibility and reduced administrative burdens.

Our standardized academic delivery, our hybrid model offers our students a lot of flexibility. But then we've also standardized our structure and our operations to reduce administrative burden, so our campus personnel can focus on students. Part of our standardized structure is we've put in dedicated retention coaches at every one of our locations. These are individuals who are focused on academic success helping to identify early at-risk indicators for students, helping with advising, making targeted approaches for outreach strategies, but their goal is really to help our students be academically successful. In addition to this, we've put in dedicated student services at every one of our campuses. And they are really people that help with the nonacademic needs. And it's really the nonacademic needs that challenge our students more than the academics. It's life. It could be transportation, as Jay said, it could be health issues. It could be child care. It could be all the things going on in their world.

So we've put folks in to help them with the resources whether it's financial literacy or helping them find transportation, but we have dedicated people now to help them with their nonacademic needs. And one of the other things, and I'll talk a little bit more in my presentation that we've done is put stronger emphasis on our faculty. In addition to our students' life challenges, we're competing every day with all the business of their life that they want to make a choice to come into our doors every single day. They don't have to walk in every day. But our faculty of the closest people to our students. So it's very important that we have very engaging caring trained faculty. So we've put a very robust faculty training and development plan in place, which I will talk about more, and then our campus equipment.

Last year, we did a big investment in all of our campus equipment to make sure that our students are learning on the most innovative modern campus equipment. You'll see when you tour the campus today, because having good equipment makes the class more engaging. It makes it fun. It makes it exciting, makes our students want to be here. So this chart just showing you basically where we're at with our hybrid completion, and this is the one Scott referred to, there's a little typo. Nursing is not a check mark yet. That's a 2027. That's in progress. So we'll fix that slide and get that sent back out.

But basically, it's showing you everything that is complete as far as our hybrid model. You'll see that we have our new campuses listed. Obviously, they are not in the hybrid model yet. They're not built yet. And also the other one that we're working on is our Connecticut schools. You'll see East Windsor, New Britain and Shelton. We will be rolling there skilled trades into the hybrid model this summer. And the 4 elements of basically our instructional model are discovery. So we give our students preassigned work to do at home. This is part of their asynchronous work that they do at home. And this is where they can use simulations, gamification, but what we want them to do is we know our students are used to being on phones playing. What we want them to do is do some of their own discovery, figure out some of their learning their own way by doing games, by doing -- it's sort of a virtual way of doing some of the hands-on stuff. They come to school the next day. This is where they'll get a discussion in a demo from their teachers. So teacher will go over anything that's challenging or maybe they need some more help on and their homework.

And then from there, they go right out to the shop and they spend the majority of their time now taking what they learned in their simulations and in their demos and now they're putting their hands on the real stuff and doing it. And then, of course, we have assessments to assess whether or not they are effectively learning. So one of the areas that we've really invested in a lot of time and resources is developing our instructors. Like I said, our instructors have the closest touch points to our students and they're with them the longest. In our industry, we're generally hiring people who are trades people, who we put right into the classroom as instructors, and they don't always have instructional training. They may have been training on the job for 20 years, but being in a classroom with 25 students is very different. So we've developed -- we've developed 2 really good programs. And I'll say, 2, even talking to other educators in our same space, this is one of the biggest challenges is training trades folks, men and women to be teachers in the classroom. So we've developed two things.

One is what I would say is one of the best programs out there, our onboarding program, which is a little bit of a boot camp for new instructors. And what it does is it mimics our hybrid model. So it's 5 weeks, and we have our teachers do preassigned work, demos, synchronous, asynchronous, and then we put them in the classroom. And then we give them 1 year of ongoing training, but that 5-week boot camp is how we really turn them into instructors.

We've also developed a program that we call Ladder, which is a growth path in compensation program for our instructors, meaning we have certain metrics in there where they can get better, they can enhance their own skills. And as they get better student outcomes, we have growth paths for them. All of our -- we rolled these things out last year, we've had a huge increase in , I should say, a decrease in turnover, but we've had a huge impact on faculty turnover. Good trained faculty make for a much better student experience. This is just a picture of some of our cutting-edge tools and equipment. When you do your tour today, you'll be able to put your hands on some of this stuff, but this is some of our automotive trainers. You can see very modern, very cutting edge. When you go out and look at it, you might want to touch them. That's what we want our students to do, put their fingers on things and touch them. Our equipment is very fun. I myself like to play on it. And then, of course, we're also leveraging AI and education. We have right now what we call our AI study body, which when our students are doing their asynchronous work, -- this gives them real-time targeted feedback that gives them instantaneous feedback, letting them know where they need to study more what they got wrong, and it actually shows them where to go in their studies, whether it's their simulations or their books to actually improve on those skills for better student outcomes and a better academic success. And basically, our commitment is really to support the whole student just beyond instruction right -- we want a holistic model. We know our students have challenges. We know they come to us to change their lives. We want our students to stay with us, we want them to graduate. We want them to get jobs.

And so our model is to give them a great classroom experience, the best faculty -- we want modern tools and equipment that are going to mimic what they're going to do in the real world. We want good advising and support, and we want to help them with all their nonacademic needs. We want to help them with their outreach. We want to help them with -- through our outreach strategies. We want to help them get the resources they need to remove barriers and obstacles so that they can come here every day, graduate and get a job. We remind our students why they came to why they're here. We know why we're here. We talked about it all the time. Our whole leadership team knows why we're here. Our job is to remind them why they're here and to remove as many obstacles as we can so they can graduate.

And with that, I will turn it over to Jenn Hash, VP of Career Services.

Good morning, everyone. I'm Jenn Hash, VP of Career Services, and I'm excited to share with you what we do in Career Services at Lincoln Tech. So as Jay mentioned before, we're in a unique business. We do not sell a product. our graduates are actually our product. They are the measurement of our impact and our success. And then our customers are employers, our employer partners that have critical workforce needs and they're looking for that skill, job-ready talent and we're the bridge between education and opportunity in career services. We're the last touch point between our students and our employers as we go from their preparation at Lincoln Tech into placement. And with placement -- every placement, it doesn't just impact that student. We are impacting families, we're impacting our workforce. We're impacting our communities. And we're also changing the trajectory of that student's life with that career and that opportunity.

And what we've seen over the years is the traditional route is a great route for some, but it's not the route for everyone, and having the support of K-12 now, we hear the need, the skilled trades gap, that's what we are here to do to help assist with that. So our success over the years, we have increased our graduates of 45% over the last decade. We had over 11,000 graduates across our campuses last year and our highest placement placement rate on record of 82.8%, and we're very proud of that. And it's everybody at the campus is working together to make that happen. And when you look at how we place graduates, this is something I want to emphasize. It's not just placing them in a job. We have to place them in their program of study. So we're looking for them to be able to use their education and place them in a career that uses that education throughout their time. And that's something that sets us apart, and we're very proud of. It's something that's definitely different than the traditional route.

Now growing, we also have to grow our staff. We've grown our staff 18% over the last 2 years. We have over 100 dedicated career services personnel at our various campuses. And we're doing this because we are in the people business. We still need to build those relationships with our students as well as our employers. And with our students, they come in to us and the they have a little bit of lack of self-confidence. And even though they build their skills throughout their time at Lincoln Tech, their confidence doesn't always build with that. And so our career services advisers are there to help guide them along the way. We also did put in a new industry relations division last year in Career Services. And the reason for that is we are growing. We're 22 campuses. We continue to grow, and we need to make sure we have a national footprint on our employer partners. We are very good at our employer partnership at the local level, and so we're bringing this to the national level. Also with when Jay talked about admissions, we're not just recruiting students to come to Lincoln Tech not live in the areas that we have campuses. We're recruiting nationwide. So having those nationwide employer partnerships are very important to us.

And then our employee link. This is our national premier partners. These are employers that want to give back to Lincoln. They also want to be in front of our students very early in their education. So these employer partners, they'll have tuition reimbursement, scholarships, early hire opportunities and donations to our campuses to make that partnership stronger. So how Career Services prepares. We do not start at graduation. We start at the very beginning. At enrollment, our career services advisers are working with students through orientation throughout their entire life cycle, and how we work with them, resume writing, interview prep. -- education management. We want to make sure that they understand what the workforce is looking for we can give students all the skills in the world, but if they can't interview and apply for a job and showcase their skills, they're not going to receive that opportunity. So that is what our career services department does.

Our curriculum, we're in alignment with what's going on in the industry. We have advisory board meetings that look at what does the industry need? And if we need to change our curriculum, we will do that. Education and career services are in lockstep with each other. Our instructors know what our employers are looking for our career services advisers know what is going on in our classroom so we can portray that to our industry partners. And the focus on professionalism. Again, we can train on skills. We are very good at that at Lincoln Tech. But our employers are looking for professionalism. They're looking for students that can show up to work. They're looking for reliability, that critical thinking, being able to have that the communication with with employers and with customers. Most of our students are graduates, they're going to go into areas where they're actually focused with customers, HVAC technicians. You've all had them in your homes. They're usually selling you something. We need to make sure that they can have those conversations with their customers. So those are the types of things that we do all throughout career services.

And it doesn't stop a graduation. We are going to work with our graduates through their placement as well as if they want to upscale if they're changing locations, we will work with them throughout their lifetime. So the demand, obviously, it is there. We focus on 3 essential industries, skilled trades, transportation and health care. With skilled trades, you have your HVAC technicians, your electricians, your welders, and those are a broad area. So HVAC, yes, you have your commercial and your residential. But you'll also have the chillers at the grocery store that keep your perishable foods called you need HVAC technicians for that.

Electrical. We think of electricians, but even everybody here today, that's the low voltage side of it. So you're looking for people to keep your infrastructure with home theater networks, fire alarm systems, security systems, that's all within our electrical program. and then welding. Our infrastructure, it's old here. We have to make sure we're building our infrastructure up. So definitely, that skilled trades gap, we're filling that with our graduates. Transportation has always been a core with Lincoln Tech with automotive dealerships, independent shops, collision repair, diesel fleets, again, filling that gap and then health care. Health care is not going away. It's accelerating. We have an aging workforce as well as we have many people that need this service. So having those allied health care individuals and patient care.

And we talk about AI. These are things that AI cannot take away. You're not going to have a robot working on an HVAC system at somebody's house. You're not going to have for Allied Health, you need that patient care, you need that individual touch. So we're in a recession-proof industry as well as we're in an AI proof industry. And then our employers. They come back to us because we do have a long history, 80 years, 80 years at Lincoln Tech. We have graduates that are ready day one. These aren't graduates that need to -- they're able to go into an entry-level job with skills and know what they're doing. We also have 10 graduations a year. So we're able to supply graduates out into the workforce all throughout the year and not those 2 times a year and definitely a proven track record with what we've done. So strategic focus.

One of the things we look at is where are these industries evolving in the sectors that are evolving. We're focused on mission-critical industries supporting those 24/7 operations, including data centers. Our electrical and HVAC programs align directly with what is going to be needed in these industries. The partnerships with high demand, working with new types of industries like AV integrator industries that don't understand that we have the talent that can support their job needs. The national approach is consistent. We want to make sure that every graduate at every 1 of our campuses, whether it's Nashville, Denver, New Jersey, that they have the same opportunities of all of our other graduates as well as our employers have that same opportunity no matter where we're at. Our programs definitely align with what is needed in the industry, and we are able to change if we need to, depending on market research. And the great part about this is our graduates or position for high demand, high wage careers with long-term growth potential.

Lincoln Tech has always on this. We have always focused on the trades, transportation, health care. We didn't just get into this because this is something that's hot right now. This is something that's our backbone and core. So with that, I would like to bring Chad is, our COO.

Thank you, Jen. Thank you, everybody, for coming out today. As the newest member of the senior leadership team, I feel that I have a very unique perspective on the world I've worked for some really great companies. I was with strategic ad for about 12 years, and I also worked for Fidelity Investments and also Goldman Sachs. And if it's not obvious to you guys, this is a special place. And what makes this place extremely special is there are 6 things that need to be in existence for greatness to happen. And the first 3 are you need to be at the right place at the right time with the right offering. Check, check, check. But so is everybody else in our space. They're all at the right place at the right time with the right offering. What makes this place different is we have a simple plan that's easy to understand. We have an exceptional management team, and we have the ability to execute, and we've proven that over and over again. And that's what makes this place really special.

So I'm going to talk a little bit about our growth strategy. We don't have a fancy name for it because it doesn't need to have a fancy name for it because it's simple. It's 4 very simple things that we're doing. We're going to continue to build new campuses, just like the one you see here. And for those of you that attended our Investor Day in East Point back in 2024, just like the East Point campus. And we have a simple model that we replicate over and over and over again, and it's very consistent in its outcomes and its performance. We will continue to replicate our most in-demand programs. So these are the most in-demand programs with the best outcomes, also with the best financial outcomes, and we'll put them everywhere that we don't have them where we have space to do it. And that will only -- we can only do that for so long because eventually you'll run out of places and space to put those.

But the one that most companies overlook when they're growing is an eye on organic growth. So not only are we growing our new programs, not only are we growing our new locations, but our core business is very, very healthy. And Brian will talk a little bit more about that. And the good news about our core business is it's not even close to being at capacity. And I'll talk a little bit more about this on a future slide. We're only running at about 57% of our capacity. So if we didn't build any more buildings, and we didn't do anything else, but we just figured out a way to fill all the open capacity we have, we're only about halfway full, just a little bit halfway. We could almost double the size of the company without doubling or without changing our footprint. And that's a really unique position. And the way we're planning on doing that is we're going to increase our marketing efforts that we've been doing. We've made a large investment in our high school recruitment.

In fact, we actually have our high school recruitment leaders, Jeff Mickey and Anthony, sitting over here on the right-hand side. So they're the ones that are driving our new high school recruitment programs. We've made also investments in military, and Jay talked a little bit about that. That's a huge opportunity for Lincoln Tech. It's core to who we've always been. It's how we started, and there's a lot of opportunity there to serve way more veterans than we have. And we're also seeking degree granting in New Jersey, Connecticut and New York, and that's also going to help us better serve the veterans as well as the ability down the road to potentially offer RN. And then when you look at our portfolio, when you just group our programs into the 3 simplistic groups they are, which is health care, transportation and skilled trades, you can see that skilled trades makes up the bulk of who we are and what we do.

And 5 to 7 years ago, that wasn't the case. We were a transportation school. But the skilled trades have grown and grown and the popularity has grown and grown. The area that we're going to focus on in this sector is health care, and Jen touched a little bit on that in her comments. And Scott has talked about that our nursing program, our LPM program isn't as profitable as we'd like it to be. We're working on that, and we have a plan in place of exactly how we're going to do that. And once we prove to ourselves and others that it's as profitable as we want it to be, we're going to replicate it. And that will become one of the program replication programs you'll see show up in that second box.

Now I want to talk a little bit about our instructional model. So those who were with us in 2024 saw these slides before at East Point and Scott has talked about this in numerous of the earnings call. And this is what ultimately led to our what we call Lincoln 10.0 model. So our legacy model is very simple. It was a 100% residency model, students came to school 5 days a week, 6.5 hours a day, and they studied with us. And there were a lot of limitations with that model. One is it takes a lot of time and commitment for students. They have to be with us, 6.5 hours a day, 5 days a week. And Jay talked a lot about the fact that the bulk of our students are adult learners. These are people that have lives, they have bills, they have families, they need to work. So to have them locked up in a building, learning for 6.5 hours is time away from earning money that they need to do that while they're going to school.

The other thing that it didn't allow us to do is provide much scalability and efficiency with our instructional model. So think about this. If you have 3 shifts a day and 2 of them are at 6.5 hours and this evening shift is at 3 hours, to teach 1 cohort you would need at minimum 2.5 faculty to teach just 1 cohort or more likely 3 full-time faculty. And that's just not scalable. Like in my world, anytime you scale, you should be -- you start to be able to bend that cost curve of cost. We call it the cost to teach 1 student in 1 month. And this model never gave you that scalability because every -- you can only have so many students, you'd have to have 1 professor and it was a fixed ratio.

So we went to what we lovingly know. We did put a marketing name on this one, Lincoln 10.0. And the reason why it was called 10.0 is when we designed it, we want it to be 10x better than what we had before. And what this model does, is -- so this is our current hybrid learning model and essentially students come to school 4 days a week, not 5 days a week. They -- so they have 8 hours of online learning, and they have 4 days that they come for 4 hours per day, from a student perspective, this gives them all day Friday, all day, Saturday, all day Sunday to work, or it gives them because they're only in school for 4 hours a day, 4 days a week. It gives them alternative times to work in the morning, afternoon, evening. So it gives them that flexibility for Lincoln Tech, what this allows us to do is because it's only 4 hours of teaching now in this world, you could take 1 instructor and have them teach the morning cohort, have that same instructor teach the afternoon cohort. So now you could teach this same cohort of students with a minimum of 1.5 faculty or, let's say, 2 full timers. So way more efficient.

And over the past few years, we have gotten a lot of efficiency out of this model. We've driven a lot of cost efficiency out of here. So this has been a real game changer, not to mention to recruit and retain faculty. This has been a very effective tool for Gina and her team because now we're trying to convince people that have access to unlimited overtime who are paid extremely well out in the field to come and teach and maybe not make quite as much. And so now we can at least say to those people, well, the nice thing is you have a 3-day weekend every single weekend. You're teaching 4 days a week, Monday through Thursday. If you want to go out in industry and supplement your income with that, you can go ahead and do that. Or if you're further along in your career and you want to do this more as kind of your retirement career, this is a great opportunity. So this was a game changer for the organization in driving efficiency.

Now I just want to talk a little bit about this capacity to further explain this. So the way we think about capacity is you could just say we could take every single classroom we have -- let's assume every classroom at Lincoln Tech and every campus had exactly 30 seats. We could do the math and say, well, there's 30 seats times x number of classrooms times 3 shifts a day, and that would be your theoretical max capacity, right? But that's not practical. So we developed a practical capacity model, and we said, okay, we're not going to fill 100% of the seats for all 3 shifts, that's probably unrealistic. So let's say it's 80%. Let's call that our practical capacity limit. Then what these charts show is how much capacity we have by shift just based on our practical capacity, limiting everything to 80%, and so our morning shift is our busiest shift. So we're at 1/3 capacity throughout our system right now. Our afternoon has a lot of capacity. We're only 38%, and our evening is at 51 and when you sum it all up, we're at 57%. And -- and then if we ever got into a situation, which we haven't done yet, we don't do anything Friday, Saturday and Sunday. We could start to run weekend cohorts if we wanted to.

Right now, they're at 0% capacity because we don't utilize the buildings. So if you extrapolate all that out, our actual capacity based on our 80% practical capacity, we're only running at about 1/3 of what we could do. If we could fill up all the seats and no weekends, we could triple our business in our exact footprint, without adding 1 more building. So that just gives us a little bit more insight to that.

And then this is another way to kind of visualize over on the right-hand side. So our class size ratio is currently running at 18:1. When we -- before Lincoln Tech, it was -- sorry, before Lincoln 10.0 it was roughly at about 12:1. So that shows the efficiency we've driven out of running this hybrid model and really focusing on filling the ships and the seats. And so we have, again, another 12 students that we could put in and, again, fill up capacity. And if you think about that, the extra margin of each incremental student is really the cost of acquisition. It's basically consumable costs, and it's a fraction of the teacher cost. -- said more simply, it's about $0.85 to $0.90 on the dollar fall straight to the bottom line for each incremental student that you add in there. So there's a lot of leverage in this business, even in my previous life at Strategic Ed. There's a ton of leverage. The beauty is there's a lot of upside, great leverage when you're going up, and when you're coming down, leverage gets de-leveraged really fast. So it's a highly leveraged business.

And Scott, I know Brian will talk a little bit more about kind of our revenue projections and our EBITDA projections. But we've made a lot of progress with our margins. And you might be looking at our current midpoint guidance. I know some of you have asked questions around this that, hey, it looks kind of like what it was last year. And we've mentioned that we've made big investments in high school and military and things like that. And that was all before we started talking about what our Q1 is now shaping up to be. So I'm sure, over time, we'll provide a little bit more guidance around that as well. And then while we're executing our very simplistic 4-point strategy, which doesn't have a marketing name -- we are also focused on non-Title IV sources. And we're doing this for a few reasons that -- that should be obvious to everyone.

So one is we always have to be conscientious of 90:10 and we need to be good stewards of the organization that's been here for 80 years, and we will continue to do that and look for opportunities to drive 10 side money. But we're also looking to do things to lower the cost of education for our students, which also coincidentally help on the 90-10. But more importantly, they help our students and lower the cost to come to Lincoln Tech. And then the third area that we are strategically focused on is workforce training. So this is stuff outside of core Lincoln Tech and what we do. This is companies coming to us saying, Hey, we have a need. You guys teach in these areas, and we have a group of people that have this skill set and they need this skill set. And we're not in the education business. You guys are, can you come on site and can you teach this workforce that has this skill set and get them to here. So we have different relationships like with container management corporation and a newer 1 with New Jersey Transit where we're doing exactly that, and we'll continue to pursue those opportunities. And then the very last thing I wanted to talk about is just our high school share program. So this works very similar to what is done between high schools and community colleges.

Commonly [indiscernible] dual enrollment programs in the traditional higher ed space. So the way our program works is we have relationships with high schools, mainly in New Jersey, at least as of right now, but we're working on others around the country, where students go to traditional school, meaning they're high school in the morning and do their gen ads. And think of it like A lot of us are probably my age, Gen Xers, I'm just going to say Gen Z, but I'm not a Gen Z. We would have known it as you go to [indiscernible] in the afternoon. Well, those [indiscernible] schools are all gone. So what they do is instead of sending them to historically would have been known as [indiscernible] schools, they bust the kids to our school in the afternoon. And those students attend our like automotive program in the afternoon. And during their junior year, they'll amass 3 of the 11 classes that are required in, let's say, the automotive program, and then your senior year, they'll complete the next 3 classes. And this is all paid for by the school district. So the school district pays us pretty much the same price we would have gotten for our retail tuition.

The benefit for the students is that when they graduate, not only do they get their high school diploma but now they're a little bit over halfway through a Lincoln Tech program, and all they have to do is enroll at Lincoln Tech, complete 5 programs for less than half the price and they're on their way in less than half the time, it would have taken if they would have graduated on the traditional route.

So with that, I'm going to turn it over to Brian Meyers to finish up on the finance side. Thank you.

Good morning, everyone. So I'd like to start by recapping the plan we laid out that we outlined in our last Investor Day in March of 2024. At that Investor Day, we laid out that we're projecting to have 2027 revenue of $540 million. Our midpoint of our 2026 guidance has us at $585 million. So we're already a year ahead of schedule on $45 million more than what we were projecting to do in 2027. And all three of our growth drivers are doing well for us. We're getting nice growth from our base, from our new programs at our new campuses and our campus relocations.

For adjusted EBITDA, the 2027 projection has been restated for our new guidance that now just adds back noncash stock-based compensation. So that new number is $78 million we said we were going to do for 2027. And our 2026 midpoint of our guidance has us at $74 million. So we're already 95% there, a year earlier. And what's important to note is that in 2025, we opened up our new Houston school opened up in Q4, and then we also relocated our Nashville school this school and our [indiscernible] school. And as they begin to scale in 2026, we should -- it will really help us exceed that, easily exceed that 2027 number.

We are showing strong growth in all our guidance metrics. Our EBITDA is growing 30%. Our net income is growing at 8%. Our net income is lagging a little bit to our EBITDA growth, and that's due to our depreciation expense from our recent growth initiatives. But as those growth initiatives scale up, we should start seeing our same level of growth from our net income as we are from our EBITDA as well. We are projecting to have about $72 million of CapEx, and it's important to note that 70% of that is for our growth initiatives, our new campuses of $51 million.

And on this slide, 2025 has been restated the numbers do reflect our new guidance methodology, which adds back again, noncash stock-based compensation, and we did have a onetime item in 2025 for pension expense.

Now for our first growth driver, which is our organic growth. As you heard earlier that we are benefiting from the macro environment, were growing interest in skilled trades, people are questioning, I think Scott mentioned that people are questioning for your college education, the value there as well as for AI that it's impacting a lot of the white-collar jobs. Our model that we're talking that I'll show in a little bit, does assume a very, I would say, a conservative 5% growth in our base. And what is I think I would like to let you know what our base is or what we call organic growth that Chad was saying, is just campuses that were opened prior to our March 2024 Investor Day. So when we talk about our organic growth, we're talking about all campuses that are open as of March of 2024. So that is our investor -- that's what we're calling our organic growth. So our model does assume a 5% growth, and we'll get that from 2% to 3% tuition increases, higher enrollments. And as Chad mentioned, we have a lot of capacity at our campuses. So when we start increasing our population, we'll start getting great operating leverage.

And we'll start -- as Gina mentioned and Chad rolling out our Hybrid Learning Model, so getting -- we'll still get efficiencies from that. And we do, as Scott said earlier that we are skinning down our program. So we're constantly looking at our programs, at our existing campuses that are underperforming to put them -- the replacement with the higher demand, more profitable programs. So our second growth is coming from our new campuses that we announced in our campus relocations. So we have announced, we we have announced 4 new campuses and 2 campus relocations. And they have been -- all the ones that launched have been performing very strong for us. We did invest -- make capital investments in these campuses of $140 million, all of which will be paid for by the end of 2026. Additionally, on our new campus, excluding our East Point campus, at 2025 on a combined basis, they had negative EBITDA of $7 million. So as the scale up, you can see that it will have some nice growth there. And all these campuses as they scale up from 2025, they should be producing another $100 million worth of revenue and all these campuses combined should have about $50 million worth of EBITDA.

And one thing I want to mention is the strong performance our East Point campus. East Point campus opened in Q1 of 2024. And by the third quarter, it already reached positive EBITDA. And what we thought it was going to do, what we projected it to do in 2027, it did that in 2 years earlier in 2025, reaching $8 million worth of EBITDA. So that was very strong for us. So based on the strong performance of our recent launches, we do have a new campus model based on the success of our lounges. A couple of things I want to point out is that for our new campus openings, it takes us 21 months from signing to opening up a new campus. So when the model year 1 is 9 months, of preopening and year 2 is 12 months. So that's how you come up with the 21 months from lease signing to having starts.

Each new campus will cost us between $20 million and $25 million. And all our growth initiatives that we do internally, we try to have a minimum return on our investment of 20%. And our new campuses have been producing more like 30%. So we're getting a very nice strong return on our new campus.

In our third area of growth, which you heard from Chad, that we're looking to build 2 new campuses a year. We're looking to spend between $50 million and $55 million each year, and building out to 2 new campus is flexible depending on market demand and site availability. So it is a little bit fluid. But again, we're looking to spend about $50 million to $55 million each year. All that is looking to be self-funded. By 2030, our future new campuses, you'll see are projected to produce about $90 million worth of revenue and about $20 million worth of EBITDA. And our start-up costs for each of these campuses in each year is about $10 million of losses, in each year. That will all be included in our EBITDA.

So now for our revenue, our revenue plan for 2030. So a point of our guidance for 2026 is at $585 million, and we're planning on getting -- by 2030, getting to $850 million, from those 3 growth drivers of our campus relocations and new campuses that we already announced our organic growth and our future new campuses. By the end of 2026, including our Hicksville campus, that's going to be opened up in Q4 of this year. We'll end this year with 23 campuses. And then our next new campus will be in Q1 of 2027, which will be our [indiscernible] Texas campus. So we'll have 24 opening campuses. So you could see that the middle red box there. That just shows all our growth initiatives announced to date, all our new campuses and our campus relocations. So we are going to have future new campuses, but even without that, we will be able to still do $760 million. And each year, we're projecting to have a 10% growth year-over-year.

For our adjusted EBITDA growth right now at the midpoint for 2026, our midpoint is at $74 million, and we're looking to more than double that to $150 million by 2030. That is an annual growth rate of 20% each year. And you could see that even without any future new campuses, we'll still grow by 90% at $140 million. So again, that middle bar, it just is all campuses that were announced to date and all growth initiatives. That's why it only has 24 new campuses. So now our future new campuses that by 2030, we're hoping to sign 9 new leases and open up 6 additional campuses. And as Chad mentioned, right now, we're projecting to have about a 13% margin, and we're looking to grow that margin each year by 150 basis points to 18%. And again, you could see where we're getting the growth from the relocations, the new campuses, our organic growth and our future campuses.

By 2030, we're looking to triple from what we're projecting to be for 2026, triple our net income to $60 million, also almost triple our diluted EPS to $1.90. Each year, we're looking to spend about $75 million to $80 million in CapEx which $50 million to $55 million will be related to our new campus build-out. We're going to continue to have a very strong balance sheet where well, by 2030, be generating over $50 million worth of free cash flow. We should have over $100 million of cash on hand. And each year from 2026 to 2030 we might have to borrow during the year, but we're projecting right now to have no borrowings at any year-end because we're very seasonal, in the second half of the year, we do generate a lot of cash. So we're projecting to have no borrowings at year-end. And I think as Scott mentioned, we're very well positioned right now to more than double our existing credit facility to [indiscernible] of our future growth.

With that, I'll turn the back over to Scott.

Thanks, Brian. So I think you can see that we have a lot of great momentum. I really do believe that this is a great time for Lincoln. No one else has our longevity, our 80-year history. No one else has been in the trades. As long as we've been in the trades, we do provide a quality of product, and we're going to be constantly focused on that. We want to drive profitability, but we want to drive our outcomes. That's going to lead to long-term success for us. We are constantly having more people come to us. There's more interest whether it's employers, as like Jenn Hash mentioned, or it's frankly the high schools that for years kept us out and now they want to embrace us. There's a lot of new opportunities ahead for Lincoln Tech. And given the strong balance sheet that we have, we are well positioned to continue to grow our business, and at the end of the day, I do believe that our people are the difference and so we're going to continue to make investments to make sure that we hold on to our people, give them great futures, and really make them as happy as can be, because happy employees make for happy students, which makes all of us happy.

So with that, we're going to turn it over to questions.

So the question was, what's the process for getting degree granting status?

Because just so you all know, the way that the rules work lots of times life goes faster than the government, and we are not allowed to -- or I should say another way, vets are not allowed to take a diploma online program and get -- take advantage of their benefits. So in states like New Jersey, where we have 6 campuses, in Connecticut, where we have 3 campuses and in New York, where we have 1 campus today, and soon we'll have 2 campuses. We're seeking degree-granting status, and that should be hoping, it will be within 12 months for New Jersey and Connecticut. For New York, it's a process that I've heard anywhere from 1 to 5 years. Our application is in front of them. Our senator that represents us in our district has already voiced how this needs to accelerate, but I can't tell you exactly when New York will be. But I feel pretty confident that we're going to get New York and New Jersey -- we get Connecticut and New Jersey in the next 12 months.

Okay. And then on nursing, maybe update us on your journey there?

So as Chad said, our objective is, again, we want to be the best at everything that we do. We have nursing at 7 of our campuses. Our [indiscernible] rates last year averaged 95%. So we're in very solid footing there, but it's not a big contributor to our EBITDA. So we're reorganizing the program as -- even though the slide says we're in Lincoln 10.0, we're not in Lincoln 10.0 yet. We're going to move to Lincoln 10.0, which will add efficiencies to us. We're changing how we're compensating some of our nurses to help drive profitability there. I'm hoping that within 18 months, you will see what the profitable model is, and we'll be transitioning our campuses over into Lincoln 10.0. I can tell you that in all the projections that we're giving to you, we're basically assuming nothing's happening with nursing beyond where they are today.

I just wanted to ask on the organic growth I guess what is the biggest hurdle to filling excess capacity, excluding even if you were to go through Friday, Saturday, Sunday classes, just with that existing capacity because obviously, demand is so robust it should seem like you can fill that pretty quickly? Or is it a geographical thing with certain campuses or I guess any color there?

Well, demand is definitely robust, but we literally have hundreds of thousands of leads come in. So we are constant -- even though everyone thinks trades are wonderful. Everyone knows it's the trade, you just open your doors, and they come in. It's not that easy. We have to be constantly out in front of these people constantly reminding them what the opportunity is as well as not everyone knows who we are. We just had a meeting down in Trenton with a group of the state senators and assembly people. And here we are, we've been in -- I'm sorry, I've been in New Jersey 80 years. And some of them didn't know who we are. We think everyone knows who we are, but there's a lot of people out there that still haven't gotten the message. So that's what it is.

It's really getting in front of people, letting them know about the opportunity. The good news is more people are receptive to that we still have to get in front of them. So it will be nice but consistent growth, mainly a marketing initiative. I believe so.

Yes, I was explaining to one of the other -- I think -- I was explaining to one of the other folks this morning that when students come to us like it's a little bit different than traditional college students that are, when we all went to high school and everybody wants to go to college, people are pretty like motivated dead set, you're like, "Yes, I can do it, and I'll go college and I'll apply our students aren't like that, right? They come to us and they're not as self-confident as you think they would be.

The good news is the ones that come to us are the most self-confident of the least self-confident people. But that doesn't mean they just come to us like, yes, I want to do this. They still have a lot of reservations and a lot of doubts like, can I do this? Can I afford it? Like is this really what -- like can I be successful at this? So it takes a lot of handholding, it takes a lot of convincing them like, no, you can do it. Like it doesn't matter where you came from. The human brain works same whether you're wealthy, not wealthy, whether you're -- whatever your racial background is, but we have to overcome a lot of self doubts in people, and that's probably one of the biggest hurdles. It's not that there's not demand out there. It's that the people that come to you, they still have reservations whether they think they can actually do it. And the biggest issue are things like transportation and affordability because like I said, they have -- some of them have kids and they have real bills, and it's like how am I going to go to school and still pay for my apartment and feed my kids. I mean there's -- there's a lot of food and security out there. So it's a bit more complex than people think in trying to -- trust me. We would want to fill up all the seats tomorrow. If it were that easy, we would have done it.

I'm sorry, I skipped the slide just to kind of summarize that. So this was a comment from one of our admissions people, when we were asking like why do you enjoy working at Lincoln Tech? And this kind of summarizes it here from the emissions perspective, they can see the excitement in the student size. They also see a little bit of despair or uncertainty. And so it's really from an admission standpoint is really getting them over that hurdle that they can be the success that they all want to be.

Thanks. Scott, a question on Lincoln 10.0. 30% of the coursework is online. Is that asynchronous? Or are there any live classes? And then second how do you settle on 30%. Could it be 40%? You don't need the capacity. You have a lot of excess capacity, but could 40% of it be online for some programs?

It's a very good question, something we debated. We're a hands-on institution. People come to us. The biggest complaint from our students, we want more hands-on. But we don't want to take that away from them. At the same time, we know there's stuff that they can learn online, there's theory, there's things of that nature. So we want to make it, I'll say, enough where it builds in flexibility for their lives as well as enough of the content that can be really almost maybe -- better done online, but we wanted to maximize the online experience. I don't know, Chad, anything...

Yes, I was going to say, I think it also goes back to what I was talking about, about the vulnerability of some of our students. And if you're already scared, nervous, do I think I can do this, even though like my kid is 20 years old and his whole life, he grew up on online learning, even a public school system. Students still go through that, they come out and they're like, "I'm not an online learner. They'll come and tell us, I don't want online. I don't like that. It's not how I learn. So we just felt if we tried to push -- if we went too far with online, we would only probably push more and more people away.

Great. That's helpful. And then it seems to me high school is a great opportunity. Veteran is a big opportunity, but so is high school. What have you been doing there differently, say, from 2 and 3 and 4 years ago? And how big could it get? And how -- and what is the structure of that enrollment counselor force? Are they out in the field? Do they get compensated the same way for inbound calls for adults, things like.

I'm not going to let Jeff speak, our Head of High School. He would gladly take the stage right here. So we have time limits, so I'm going to address that question. So what we've done is, first of all, we brought in new leadership. We have a dedicated resource for high school before Jay was overseeing most of it. His business and our business is growing very well. So we want to bring additional resources to put additional focus has a deeper approach, broader approach. He comes with a lot of experience. He comes with, I'll say, a fan base who has been following him to Lincoln Tech. So we're getting a lot of good talent.

We are increasing some of the compensation. The reality is we were a training ground for a lot of other people's high school initiatives. But now with the receptivity that we're seeing from high schools reaching out to us, parents of high schoolers being more inclined to send students to us, we're going to really lean into that. And so we're putting more resources, hiring better people, paying them with better wages and increasing the number of high school reps that we have out there to take advantage of all that.

And I was just going to say one other thing about that. So what's different about the high school model versus the adult model that Jay runs -- the marketing team feeds Jay's team with inquiries. They just come in and Jay's team works all of those inquiries. In the high school model, there are no inquiries that are generated from the web. These are human beings that go out school to school to school and they make presentation after presentation after presentation, and they generate their own leads. So they're their own marketing engine. They're doing everything on their own. So not only do they generate their own leads. They work their own leads, they enroll their own leads. So it's a totally different role.

And during the school season from, let's say, August to May, these folks are on the road all the time. They're just traveling one school to another to another. They do hundreds and hundreds and hundreds of presentations during the school season. So it's a totally different job, and it requires a very different compensation, which we didn't have it dialed in right. And that caused a lot of turnover. And think of -- if you're a high school counselor, you're very protective of your kids. And if 1 week from Lincoln Tech shows up Jay. And then a year later, it's Chad and a year later, it's Scott. You start to think to yourself I don't know if Lincoln Tech is where I want to send my kids because I keep seeing different faces all the time. So it's a model that you have to have people that are dedicated to it, and they have to be in these roles a long period of time and create these long-standing relationships with the high schools, and that's what we're doing, but it takes a little time.

[indiscernible] from competitors? That's the next question.

Most of them, yes.

Raj Sharma, Texas Capital Bank. Fantastic to be here at the new campus. I wanted to just follow on, on the high school share program. It seems like an excellent program. And I think you mentioned the reimbursement model, how well established is the reimbursement model from the high schools? Is there a pushback? How do you do that? Because that's pretty critical.

Yes, I'll take it. So it is critical, and that's why it works so well in New Jersey right now. New Jersey funds, high school at a much higher level than many other states. So it works very well for us. The problem is you have to negotiate with every kind of school district, which makes it less scalable and it's harder to implement, but we're out there probably in about -- while we have like 48 different school districts, both in New Jersey and outside that have expressed an interest. Now it's really trying to determine, can they afford it? And can we make something viable work for them, and every school district, we have to negotiate something a little bit different. So it's a great opportunity.

Again, it those speaks to me about the desire by more people to come into the trades -- and we're just trying to figure out how we can meet that need at all different levels, whether it's in high school or post-high school. So it's still small, like in New Jersey, we have maybe 128 students, last year is about 60 students, hoping to maybe double it this year, and then we're looking to bring it in some other states. And it's a great model. The -- it's so into the administrators say, "Wow, this student is doing so well. We're just surprised. Well, because he's doing something he likes or she, I mean, they're engaged before they might have just been kind of, I hate to say, sitting around doing something that's really unproductive. So it's trying to meet people's needs, but it's difficult.

So how tough do you foresee this to be because the biggest part of the reticence is going to be from the parents who want to do this and of course, from the school district, too.

Yes. So that's all things, you've got to market. If you get parents really pushing behind it, that can get school districts to change their mind, but they also have limited budgets. We benefited in New Jersey in certain regards, was they were sending students across the border to New York, and all their programs now are full. So they said, sorry, New Jersey, you can't come. So now we're filling that gap and they're far more receptive, and some constant marketing and letting people know that this exists, but it's a great way. dual enrollment. 20% of the people in community college are dual enrollment. They're in high school. So we're just trying to replicate that model.

And then my other question was on the same vein, reducing dependence on Title IV corporate programs. any new on the horizon and how do you see that?

Well, I see it as a huge, huge opportunity. And I somewhat get -- I tell you in [indiscernible], frustrated with a lot of our corporate partners. They just -- they think that our product is like buying something at Home Depot off the shelf, but they're going to get exactly what they want, when they want it at the price they want, and that they're all screening that they need more talent. Well, that's only going to come if you partner with people like us and you frankly have to pay some money to train people. So with regards to that and with regards to corporations, we're seeing more people come to us.

It's just -- it takes a long time to make that decision. We're looking at bringing in more resources in that area to add more focus, add more skills to open up more doors. I know the doors are there. We've just hired a marketing person to help us craft what the value proposition is for things like that nature. So that's on the training side. Jen and her team are bringing on resources to make sure that the employers that are currently hiring our students are getting more involved in offering better benefits, more tuition reimbursement, more plans, hopefully, to provide scholarship. We have certain companies that do start providing scholarship 6 months in. It was a interviewed a student and they like what they see, and they kind of want to lock them in. So we're just trying to encourage as much of that as possible.

Great. And my last question is really more for Brian as well. Just on the projections, the 2030 EBITDA with the new programs is $150 million. There's not much of a difference from the $140 million without the programs. And obviously, that's because of the run rate. Can you talk about what the run rate of by 2030, that implies a run rate revenues for the programs have already been opened but have -- but they're now contributing peak revenues and EBITDA. Can you talk about that? And then the follow-on question of that is, when do we expect your CapEx to fall off in the sense of, hey, we've built all the campuses.

I'll take the latter right now for the foreseeable future, unless market demand changes, we're going to keep the CapEx between $75 million and $80 million and looking to build 2 new campuses, which is a little bit flexible based on demand and based on site availability. So that will keep going. As far as the run rate, we do have a slide in there that shows that each campus, we're expecting to get to $30 million worth of revenue by year 4, I believe, of opening 4 or 5 of opening.

And each one to generate $8 million to $10 million of EBITDA.

Yes, and $10 million worth of EBITDA.

Yes. So you can do the math and see...

Correct. Yes, it'll be 9 leases, 6 open, so a full run rate will be 6x the $30 million or $60 million.

Before [indiscernible] we take your question. We do have a question coming from the virtual audience. Scott and team with the desire to involve more veterans combined with President in DoD's publicly communicated plans to revamp our naval fleet, is there potentially a large opportunity to train veterans to student in shipbuilding? How quickly can new programs be added to the Lincoln offering based on ever-changing labor needs of the country?

Sure. So well, I mean, I think what I was probably referring to is the government is looking to revamp the submarine fleet, they need to build 3 subs a year starting next year, and they forecast the need for 250,000 skilled trades people, of which a good number are electricians, welders, and even HVAC techs. So we've been having discussions. I know Jen and her team have been discussions with the different providers, whether they're -- it's electric boat as far as a large employer in Connecticut, where we have a strong presence, to down to smaller firms that are providing all the parts that go into this. So it's not necessarily needing to bring vets into it. We're happy to bring vets into that workforce, but we're constantly trying to get in front of all these organizations that need talented skilled trades, electricians, HVAC techs out there. I don't know, Jen, what else you want to share on that?

Yes. So we're in talks with many organizations that with the Department of Defense and building our fleet up. One of the things we see is everybody wants someone with 3 to 5 years of experience. And obviously, we have entry-level tech. So looking to see how we can up-skill our techs and our graduates quicker and also maritime weldings a little bit different than the welding we teach to see if that's something we want to get into as well.

So I just want to jump back to the leads discussion. Scott, you mentioned you guys get hundreds of thousands of leads. I think it was on one of Jay's slide that showed the trajectory for this year, which looks relatively similar to years past, maybe slightly north of 50,000 so far in the first couple of months. But I'm curious what designate to lead. Is that everybody that interacts with Lincoln via the marketing initiatives or high school students that express interest?

And then second kind of part of that is 19% starts growth for the first quarter is really robust. Is that a function of greater intent by these leads or better conversion of the leads that you have or just overall demand?

It's probably Scott, more than me, but our leads come from several different sources. So we also -- we have the high school leads that we talked about earlier. We have our rep generator referral leads, which those are the leads that we generate ourselves through asking a prospect that they know to the outset who might be interested.

And then we also have the marketing generated leads which are dozens of channels as well. Demand does look like it's similar to prior year. And however, it is an uptick. It's an early measurement of my chart there, as you saw for 2026. I think that the lead base is there for our start growth and our projected start growth, and the 19% is proving that we have the availability there still to grow.

And we do focus on conversion. That is important. All leads are not the same. Channels are not the same. So we -- that's how we measure the quality of the lead conversion. So we are seeing improved conversions early on. I'll attribute that to admissions on that side, we're certainly doing what we can. But we do focus on that. It's cost per start from a lead source is much more important than a cost per lead.

There's a healthy tension between marketing and admissions -- and they are currently focused on bringing in more leads. But again, we want to bring in quality leads. -- because you could have flat leads and actually get better performance if they're better sourced leads.

And so Scott and his team are constantly looking to do that for us. And Jay and his team are constantly training these people to improve their conversion rates. So even when things might slow down, we can still drive growth. In particular, for the first quarter, the surprise growth really came from the organic side. We're just seeing more robustness there than we thought. The new programs are delivering what we anticipated, but it's really the core business, which is growing faster than we might have budgeted.

And would you say that stronger growth did that ramp up in the last month since your earnings call? Or was that similar to what you were talking about in the earnings call as well?

It's continuing trends. Sometimes we just can't believe what we see. So we're very cautious in how we project and we'll take the upside.

Eric Martinuzzi from Lake Street Capital Markets. My question is for Gena. It's regarding the graduation rates. You talked about there was a slight decline in the last couple of years, but then there's been some reversal. The issues that you guys talked about, the reason that students drop out mental health, financial issues, transportation, was -- have you done kind of the after action surveys with those students that didn't graduate, do you have access to them to really figure out was it a student-specific issue? Or was it maybe a Lincoln issue with maybe quality of education or facilities?

Yes, it's a good question. I don't know if we do surveys for students that haven't graduated. Something that we could do. But we noticed from talking to our students, we know what the issues are. We know where we need to help them. That's why we've made so many changes, right? We know that our students tell us when they leave, why they're leaving right? It could be -- they're not always honest, but always going to say, I'm leaving because I have a mental health issue or I'm leaving because it's financial, but they generally tell us when they're talking to their Dean, this is why I'm leaving. So we can look at the trends as to why they're leaving. So this is what kind of triggered the areas that we need to focus on. As far as after the fact, I need to look into that. But again, we know why they're leaving. They tell us when they're leaving and why. And so that's the areas that we focused in on.

So those focused efforts you feel like that's what's caused the reversal?

Absolutely. Absolutely, yes. Because again, we're focusing and the reason that they're telling us why they're leaving, right? I don't have transportation. I don't have childcare they're letting us know why they're leaving, how honest they are in those discussions. I don't know because, again, some things might be embarrassing for them to talk about. But that's where we did focus our efforts on why are our students dropping and what are the most important things. And again, most of the reasons why they're dropping were nonacademic.

Was there any -- as far as amongst the 22, 23 campuses, any trends by geography or problem campuses?

I don't know if I'd say campus, but program, you can see trends in programs, right? So our allied help with a lot of child care, right, where other -- you can definitely see the trends between skilled trades and allied health.

But we do -- when we survey our students to get a sense of what do they like, what they don't like. And we definitely know that they want more training aids and better training aids and the Brian mentioned, we put more money into that, and we'll continue to make more investments. But it's almost no matter what you do, you still can never satisfy them when we moved into this facility. I don't know if you ever saw the old Nashville, we still didn't get 100% of people. Wow, this is fantastic. They still had I don't like where my parking spot is. Who knows what the issue is. It's very tough to fully satisfy them no matter what you do.

But the issues tend to be life issues that get in the way, which is why we track attendance, and we reach out to them when they're not attending because we know if that starts repeating, there's something there that they're missing. As Gina has said, though, lots of times, people are very private and they're embarrassed to say why they're struggling. That's why we try to create an environment where people feel free to talk about what their challenges are. They can find someone here that they can talk to so they can try to help them. we can't solve everyone's problems, especially we don't know what they are, but we do try to solve as many problems as we can, but it's life issues. It's a boyfriends, girlfriends, it's children, losing jobs, spouse changing a job, all these sorts of things that are the #1 driver.

Sure, some might be dissatisfied with the education. But the at least some say, boy, this is a lot harder than I thought because it's an accelerated pace that we're putting people and some people still have this mindset of vocational school, this will be easy. Well, it isn't. So there are multiple ways, and it varies by campus and by program, and we just have to stay on top of it to make sure that we can get all those people over the finish line.

Okay. And last question, maybe for Chad. But you got new campuses per year particular areas of the country that you're going to be focused on as you investigate where our services and the greatest demand and then programs whether it's skilled trades or transportation or health care, what's the focus?

Yes, no problem. Yes. So let me answer the latter first. So the program offerings will be, for the most part, what we call our full-service campus program offering. It's the big 4, it's auto, it's welding HVAC and electrical, that will be how we'll open up most of our new campuses. And then as far as location, we're obviously looking in markets that have high needs. We have certain metrics that we're looking for populations of students between the age of 18 and 44 that have high school education, but don't have college education. Things that are very attractive to us are markets we've already been in.

I know Scott has talked publicly on the calls about the scalability of opening up a second campus in an existing market because you get to leverage your marketing dollars. So you'll probably see us look at some of our bigger metro markets as opportunities for additional campuses as well as some new markets.

I guess I want to touch on the health care side of the business. So I think, obviously, baked into the expansion strategy for opening new campuses -- is going to skilled trades campuses. Have you guys thought about at all on the health care side of opening any campuses? And could you just kind of remind us your footprint of how many of your campuses offer health care programs?

Sure. So when you look at the investor deck, you'll see on Gina's slide, where we have medical assisting, which we have at more campuses than licensed practical nursing. So today, we have licensed practical nursing in only 7 campuses they would be 3 campuses in New Jersey, 2 Connecticut and 1 Allentown, Pennsylvania. We -- sorry, we're 1 in Rhode Island. So maybe I miscounted somewhere but that should be 7. And then we have MA at those same campuses, but we also have medical assisting in East Windsor. We have it in Indianapolis. We have it in Chicago. We have it in Marietta, and as of now, I believe that's all the only places where we have it.

So we're -- as Chad said, we're expanding our real heritage is automotive and skilled trades. That's also where we have, I think, the greatest advantage and also where we have the greatest brand recognition. Health care, though, as Gina and Jen said is also growing. I mean, there's a huge need out there in certain of our markets, especially in the Northeast, I think that we do have some competitive advantage and could see expanding our opportunity there and ensuring that those programs are the best that they can be. But as of right now, we're going to continue to invest more in the skilled trades in automotive because I think we just have a better competitive advantage there overall.

And maybe one other thing on that is when and if we get to a place that we decide we do want to expand some of the health care programs, even though we're opening up our campuses like Houston or like a Levittown or even the new [indiscernible], there's extra space in those campuses that we're not building out. So it just gives us the opportunity to either use it as additional space should any of our existing programs grow too big, or if we decide we want to put health care in. So we're not thinking it as like we would build separate health care campuses, we would just put the programs in existing campuses where we have space.

Anything else. If not, I appreciate everyone's time and interest for those that are here in Nashville, we are very excited to give you a tour, so you can see this facility, and I will be out in California at the ROTH Conference. I'll be attending, Brian and I had a number of other conferences over the next 60 days. So if you have more questions or want to meet us, please do so. Also, I encourage anyone to come visit any of our campuses. You can reach out to Brian or anyone else. We can set up a visit. I think if you see what we do and who we do it for and how we do it, you'll have a much richer appreciation both for who we are as well as I think what our opportunity is. So thank you all very much.

Ladies and gentlemen, thank you for standing by. Welcome to the Fourth 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 turn the conference over to Michael Polyviou, please go ahead.

Thank you, Michelle. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued new to recording financial results for the fourth quarter and full year ended December 31, 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, CEO and President; and Brian Meyers, Chief Financial Officer and Executive Vice President. Today's call will be recorded and is being broadcast live on the company's website, and a replay of the call will be archived on the company's website as well.

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 us 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 they influence the accuracy of the statement and projection upon which the segmented savings 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 this cautionary statement, and Lincoln undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, after the date thereof.

One other housekeeping matter. [Operator Instructions] Now I'd like to turn the call over to Scott Shaw, CEO and President. Scott, please go ahead.

Thank you, Michael, and good morning, everyone. Thank you for joining us today to recap our exceptional fourth quarter and full year operating and financial performance as well as introduce our guidance for 2026.

Lincoln Tech is riding the building interest across America and skilled trades training as employer demand for skilled workers continues to exceed supply and the public's questioning of the value of the traditional 4-year college education continues to grow.

In addition, concerns about the negative impact of artificial intelligence on white collar jobs, the growing awareness of the robust salaries that solidly bring you into the middle class and ever-increasing employer opportunities have fostered demand for training in the skilled trades.

While we read about tens of thousands of jobs being eliminated by major corporations around the country, the placement of Lincoln Tech graduates in rewarding long-term careers like HVAC, electrical, automotive technician Welding and health care has hit recent highs and shows no signs of letting up.

At Lincoln, we have focused our strategies on maximizing our opportunities in this increasingly receptive environment. The successful execution of these strategies has resulted in solid growth throughout our core operations while new programs at existing campuses and new greenfield campuses have expanded our growth.

Together, these factors led us to exceed our financial guidance for 2025 and have set the stage for consistent long-term growth and shareholder returns in the years ahead. During the fourth quarter of 2025, we achieved 15.7% student start growth, and we have now grown student starts for 13 consecutive quarters.

While the new campus openings and program replications at existing campuses meaningfully contributed to the overall increase student starts at our programs operating for more than 1 year, grew by 4% on a same campus and same program basis.

This core growth was a major contributor to our near doubling of net income and a 51.7% increase in adjusted EBITDA during the fourth quarter. We also generated double-digit increases in total student population and total revenue over last year's fourth quarter.

During 2025, we completed the most ambitious expansion in our company's recent history. We relocated our Nashville, Tennessee campus, which has been operating for more than 100 years to a new state-of-the-art facility at Tapa Hill over -- looking the city.

Once our existing automotive technician and welding programs were relocated to the new campus, we introduced our HVAC and electrical programs to the Nashville market and renamed the campus, the Nashville Auto-Diesel College. This impressive facility will host our upcoming Investor Day in less than a month on March 19.

We also relocated our Philadelphia campus and its highly successful automotive technician program to a new facility in Levittown, Pennsylvania, which is just as impressive as our Nashville campus. This 90,000 square foot building now houses newly opened HVAC electrical and welding programs as well as the automotive program and provides Lincoln Tech with ample space to grow over the coming years to help Pennsylvania employers meet demand for skilled workers.

Ten days ago, we celebrated the campuses initial success in classes with a grand opening attended by local and regional government and corporate leaders. Our third campus opening during 2025 occurred in our newest market, Houston, Texas, where facility matching those in Nashville and Levittown began classes in late September.

The Houston campus is our second greenfield expansion during the past decade and adds to our presence in the Texas market where some 240,000 new jobs demanding skilled trades training are expected to be created over the next 6 years.

We held the grand opening of the Houston campus last Wednesday, and like all the campuses opened in 2025, the initial enrollments are meeting or exceeding expectations and are expected to be a major contributor to our continued start growth in 2026.

Our new campus development efforts were expanded during 2025, and we now aim to initiate 2 new campus projects each year. In 2026, we are focusing on developing new campuses in Hicksville, New York and Roulette, Texas. Hicksville is on schedule to open during the fourth quarter of this year, while Roulette is expected to begin classes in the first quarter of 2027.

Both campuses will provide HVAC, electrical, automotive technician and welding training programs and expand Lincoln's presence in growing metropolitan locations. In the case of Hicksville, it's Metropolitan New York where we have a very successful automotive technician and electrical program in Queens.

In the case of Rallette, it's Metropolitan Dallas, where our Grand Prairie campus has been one of our most successful operations. The adding of a second campus in an underserved growing metropolitan market has been a most successful strategy for Lincoln, first executed at our East Point campus in Atlanta, which opened in 2024.

The demand for our programs at East Point exceeded our initial expectations. And in 2025, we signed a lease to build out an additional 10,000 square feet of space at that facility. We expect to complete this expansion in 2026. In addition to new campuses, we have successfully executed the bulk of our program replication strategy at existing campuses.

However, in January 2026, we opened an electrical program at our Plainfield, New Jersey campus, which was the 12th replication at an existing campus during the past 2 years. Like new campuses, these replications are significant contributors to our 15% start growth during 2025 and our outlook for continued start growth in 2026.

However, I want to emphasize that our core business is also very strong with approximately half of this year's growth coming from campuses and programs that have been open for more than a year. We believe our Lincoln 10.0 hybrid teaching platform is also playing a major role in this growth by providing flexibility to our students who often need to balance work in life while earning their certificate or degree.

We have achieved this flexibility by combining hands-on learning at campus facilities with a component of classroom work delivered through online instruction which reduces the time needed to complete many of our curriculums and accelerates our graduates to their highly rewarding careers.

We have realized instructional efficiencies and organizational productivity through Lincoln 10.0 and anticipate this trend continuing during 2026. Meanwhile, we continue to evaluate opportunities to expand into other underserved U.S. markets and build on our core operations growth.

For instance, we've expanded investments in targeted high school initiatives that are leading to greater interest among students, parents and school districts. At the same time and further reflecting the shift in mindset, high schools are reaching out to us to explore how to offer our skilled trades programs to their students under what we call our high school share program, students attend Lincoln classes during their junior and senior year of high school, and then continue after high school to gain their certificate in less time, which accelerates their entry into a rewarding career.

Our corporate partnerships are also important sources of additional profitability and hiring opportunities for our students. A couple of weeks ago, we signed an agreement with New Jersey Transit under which our workforce Link division will provide diesel and electrical systems training to New Jersey transit technicians at New Jersey maintenance facilities.

In addition, we expanded our highly successful partnership with Johnson Controls, with a new initiative that will provide technicians for their growing data center AI business and container Maintenance Corporation also reached out to expand training to even more of their workforce.

Landing new accounts while expanding existing relationships clearly demonstrates Lincoln Tech's ability to deliver high ROI training to employers desperate to grow their workforce. The opportunity ahead for our workforce link division is to effectively communicate the value proposition that we provide so we can meaningfully capture more business. Our 2026 guidance illustrates our confidence in continuing the growth trends at both existing and recently launched operations going forward.

We now believe we could approach the $600 million revenue level for the full year. We have made great strides during 2025 at reducing our bad debt levels. This progress, along with our other operating efficiencies being realized throughout our operations presents the opportunity to build on the exceptional adjusted EBITDA growth we experienced during the past year while further enhancing the Lincoln student experience.

We have established a standard of excellence within our programs that meet or exceed all regulatory standards, and we've continued to build our student placement rate in rewarding long-term careers. Our outlook for the year ahead is robust, and we look forward to presenting a full 5-year road map during our Investor Day at our new Nashville campus on March 19.

For nearly 80 years, Lincoln has remained focused on delivering high-quality life-changing career education and no one else has our combination of longevity, scale and proven experience.

By continuing to execute our strategies to expand our network of schools and replicating our most in-demand programs at our existing campuses, we are well positioned to help America close its chronic and severe skills gap by meeting the growing demand for more talented men and women to enter the skilled trades.

Finally, I'd like to note aside from the Investor Day on March 19, we will be continuing our investor outreach efforts and continue to attend conferences and do non-deal road shows with our covering analysts.

Now I'll turn the call over to Brian Meyers, so he can review the financial highlights for the fourth quarter and full year 2025 and our 2026 guidance. Brian?

Thank you, Scott, and good morning, everyone. From a financial perspective, Lincoln achieved many milestones during 2025. Our performance has positioned the company to achieve strong growth and increasing profitability as reflected in our 2026 guidance in our long-term outlook.

As Scott said in his remarks, we had an excellent finish to an already strong year we outperformed our most recent guidance for revenue, net income and adjusted EBITDA while meeting start guidance with 15.2% growth year-over-year. I'll provide more detail on these results, but first, I'll start with our fourth quarter performance.

As a reminder, comparisons to the prior year will exclude the Transitional segment, which consists of our former [ Summerlin ] Las Vegas campus sold in late 2024. We Fourth quarter revenue grew by $25.2 million or 21.4% and to $142.9 million. This growth was driven by a 17% increase in average student population and a 3.7% increase in revenue per student.

We enrolled nearly 4,000 new students during Q4, representing stock growth of 15.7% and extending our track record of consistent year-over-year growth to 13 consecutive quarters. An important contributor to our overall stock growth in the quarter and throughout the year was our organic growth in starts, which accounted for approximately 4% of the growth.

This excludes new campuses and program expansions launched in 2024 and 2025 and highlights the strong demand for our existing programs. Average student population grew 17% and year-end population increased nearly 15% to 17,000, representing over 2,200 more students than the prior year.

This is one of several factors positioning us for another strong year of growth in 2026. Diving into the quarter's stock growth. Transportation and Skilled Trades, which represents about 80% of our STAR population generated stock growth of 23.4%, including strong organic growth of approximately 7.5%.

Healthcare and other professions represents approximately 20% of our population, and we saw our thoughts in this programs declined 2%, which was in line with our expectations. This reflects our strategic decision to exit our culinary program in December of 2024. We are pleased to report that enrollments for nursing students at Paramus resumed last month the ported new nursing starts at Paramus was another main factor, reducing starts in the HOPS programs last year.

Excluding the culinary program, Hotstar showed moderate growth as we continue to focus on strengthening our core offerings. Turning to expenses. Total operating expenses were $125.1 million, up $19 million, in line with expectations, reflecting higher costs to support our largest student population and growth initiatives. Depreciation expense increased $3.5 million due to our recent high level of growth-related capital investments in campus facilities.

Excluding depreciation, Education service and facility expenses improved to 33% of revenue from 34.7%, reflecting instructional efficiencies from a hybrid teaching model. SG&A expenses also demonstrated operating leverage improving to 49.8% of revenue from 51.6%.

This improvement was supported in part by lower bad debt expense as a percentage of revenue, which declined to 10.9% from 13.1%, reflecting enhancements to our financial process and stronger collections. Adjusted EBITDA increased 51.2% to $29.1 million including the Transitional segment.

This growth demonstrates the strong operating leverage we are building with EBITDA margin expanding more than 400 basis points to 20.4%. Lastly, net income increased over 70% up to $12.7 million or $0.40 per diluted share adjusted net income increased to $15.8 million or $0.50 per diluted share on 31.4 million diluted shares outstanding.

Now our full year results. Revenue grew 19.7% to $518.2 million, driven by a 17.9% growth in average student population. Total starts grew to approximately $21,000, up 15.2% with organic stock growth accounting for more than half of this increase. Adjusted EBITDA rose 60% to $67.1 million, including the Transitional segment and adjusted net income increased 64% to $28.4 million.

Consistent with our seasonality, the fourth quarter was our strongest cash-generating quarter. Operating cash flow totaled $59.3 million, more than double the prior year. We ended the year with nearly $29 million in cash and approximately $90 million in total liquidity with no debt outstanding.

Capital expenditures for 2025 totaled $88 million, of which $86.6 million is reflected on the statement of cash flow. Approximately 70% of total CapEx related to growth initiatives. We exceeded our CapEx guidance due to opportunities to accelerate construction activity at campuses under development, shifting spend from 2026 into 2025 while maintaining original campus opening time lines and budgets.

As part of our CapEx growth projects, we completed 2 campus relocations, which included the launch of a total of 5 new programs additionally completed 2 program expansions and added 4 new programs at our existing campuses. Within 3 years, we expect each of these programs to generate on average around $1 million in incremental EBITDA, contributing significantly to future profitability.

Looking ahead, based on our current trends and visibility we are providing the following guidance for 2026, revenue of $580 million to $590 million adjusted EBITDA of $72 million to $76 million; net income, $20 million to $23 million, diluted EPS $0.64 to $0.74 student stock growth of 8% to 13%, capital expenditures ranging from $70 million to $75 million.

Let me provide some additional context around our guidance. Historically, we excluded preopening costs as well as net operating losses during the first year of operations from new campuses as well as prelaunch expenses from program replications from adjusted EBITDA. Beginning in 2026, we will no longer make those adjustments.

Adjusted EBITDA will reflect only the add-back of noncash stock-based compensation. Historically, these excluded expenses totaled approximately $10 million in both 2024 and 2025. And we estimate to incur a similar amount of $10 million of expenses related to new campuses and program development in 2026 as we continue to invest in our growth initiatives especially our new campus openings in Hicksville, Long Island and Rolet, Texas.

While we will no longer exclude these investment expenses from our calculation of adjusted EBITDA, we will continue to provide investors with our expected levels of these expenses along with the actual amounts incurred each quarter. We believe this added transparency will help investors better understanding our operating results and the profitability of our active campuses.

All of our key financial metrics are expected to grow at a healthy pace in 2026. Revenue is expected to grow approximately 13% following the same seasonality as 2025. Starts are expected to generate high single-digit to low double-digit growth over the prior year period in each quarter.

Adjusted EBITDA growth is expected to be approximately 30% for 2026. Consistent with our seasonality, project to generate the highest adjusted EBITDA in the fourth quarter. The higher growth rate for adjusted EBITDA compared to our projected revenue growth reflects the operating leverage of our business model. Net income is projected to grow a little bit, a little more modestly by approximately 7.5% year-over-year trailing adjusted EBITDA growth due to significant increases in depreciation expense.

Depreciation is projected to increase to $33 million from $20.8 million in 2025. We anticipate total depreciation expense to be fairly even each quarter through the year. This increase reflects capital investments made in recent years reflect related to new campuses, campus relocations, new programs and program expansions -- over the past 3 years, these initiatives have accounted for the vast majority of our $185 million in net capital expenditures.

As new campus open and program scale, these investments will mature and begin generating returns, allowing net income growth to more closely align with our adjusted EBITDA performance. For the full year, we expect net income in the first half of the year to be comparable or slightly down from the prior year, mostly due to depreciation with growth in the second half of the year.

We anticipate the fourth quarter to be our strongest quarter of the year, a majority of our overall improvement. Regarding capital expenditures, we expect the majority of spend to occur in the first half of the year with approximately 70% allocated to growth initiatives, including new campuses and program expansions the remaining capital will be focused on enhancing our facilities, classrooms and training equipment to further improve the student experience.

While capital spending will remain at a robust level of $70 million to $75 million in 2026 and is now comparable to our adjusted EBITDA and operating cash flow, both of which have grown significantly. As a result, although we expect to utilize our credit facility during the year, based on our current announced campus expansion plans to date, we anticipate finished 2026 with no debt outstanding once again.

Net interest expense is expected to be approximately $5 million, primarily driven by increased borrowings. In terms of timing, we anticipate expenses to be relatively evenly distributed throughout the year with slightly higher levels in the second and third quarters.

Our income tax provision is expected to be approximately 29% of pretax income. Lastly, we forecast our diluted weighted average common shares outstanding to range from $31.1 million to $31.4 million for the quarter and approximately $31.2 million for the year.

In closing, we are proud of our 2025 performance and enter 2026 with strong momentum and confidence in our continued strength of our business. As Scott mentioned, we will be sharing our 5-year outlook at our Investor Day on March 19, our newly relocated Nashville, Tennessee campus.

I want to thank our Lincoln team for their dedication and commitment to delivering exceptional education while creating long-term value for both students and shareholders. Now I'll turn the call over to the operator for questions. Operator?

[Operator Instructions] And our first question will come from Alex Perez with Barrington Research.

Congrats on the strong finish to the year. Looking forward to Investor Day and the 5-year targets.

Thanks, Alex. So are we. .

Great. I'll focus my questions on demand, which continues to be very strong across the board from organic growth to new campuses and program replications. You made some allusion in your overall -- your prepared comments about increased investment in your high school initiatives. Can you maybe go over that with us a little bit?

Sure. Historically, we've been getting about 20% of our students from the high school market. And even though we've been doing that, but there have always been high schools that have been, I'll say, hesitant to let us in to talk to their students. .

And over the last 24 months, that has been changing. And so as the market is being far more receptive and as we're hearing more comments from high school parents and guidance counselors, that the trades really are important to them and their students.

We're basically investing and putting more talent out there to go out to more high schools to recruit more high school students. I think it's the right time. The mood is right, and we're going to lean into that as much as possible. And I'm anticipating that we'll start getting more growth.

We did grow our high school business this year. It will grow again next year. But I think the real kickers will come, frankly, in 2027 and 2028. Building high school teams is a long-term investment play -- as you know, you're meeting with students, you're meeting with guidance counselors in the fall and the spring and waiting for those students to then start in the summer.

And we've already made good progress, and we've established some new relationships but I really anticipate that, that's going to really ramp up much more so, as I said, 12 months and 24 months from now.

That makes sense, and that's great color. I appreciate that. And then my follow-up question, I guess, would be just looking at the results by program, as you said in the prepared comments, transportation and skilled trades were up 23% in the quarter and the year, down in the quarter and the year for health care and other professions.

I think you called out culinary program in 2024, which was eliminated and Paramus wasn't able to enroll new nursing students for a while. Maybe just a little bit more color on health care and other professions. If you exclude those 2, what is the balance of the health care and other professional business doing right now?

Yes. Thanks, Alex. And good points. So yes, well, first of all, in 2026, we expect that the health care sector will be growing as you mentioned, we are able to now reenroll at our Paramus campus.

So we'll be able to grow and enroll students at all 7 of our LPN campuses and kind of somewhat put that in perspective. We closed out 2025 with maybe 40 students in our LPN program at Paramus. And before we were stopped from enrolling students there, we had over 250 students at that campus.

So I'm anticipating that, that's going to start ramping up again, which is going to help us grow our health care sector. Also, as you mentioned, we did exit -- we've been exiting over the last couple of years. Programs that we know just don't provide the strongest ROI.

And so we exited well, everything basically in the hospitality area, which includes culinary. While we had great employers, as I've said in the past, whether it's Disney, Marriott, in various chains coming to hire are chefs. They just don't pay a lot. And the recent data that came out from the department in January that kind of highlighted it's their version of gainful employment.

I'm happy to say that all of our programs clearly passed the threshold, and that's due to the fact that, frankly, we just exited those programs that didn't do well, such as cosmetology and culinary but we're really poised for more growth. We've taken all the right moves, so it puts us in a good position.

And like I said, we're leaning into high school, we're also going to continue to lead into the skilled trades in automotive. We just continue to see interest in demand from employers and students in both of those areas.

That's great. If I were to have a third question, that would have been my last one, the earnings test. And you said, just to be clear, that all your programs pass the threshold?

That is correct. That is correct. .

Our next question will come from Luke Horton with Northland Capital.

Congrats on a really, really strong end of the year here. Just wanted to start with sort of the 2026 outlook. If you could dive into some of the some of the puts and takes or assumptions baked into that guide from an organic perspective versus new campuses, continued hybrid learning rollout? Just kind of your thoughts around the 26 guide? .

Sure. I'll start off, Brian, then you can fill in anything. We expect to see continued trends that we've experienced, as we mentioned, in 2025, about half of our growth was from organic business.

So that's growing existing programs at our existing campuses. I anticipate that, that's going to continue, maybe not at the same level that it did this year, just as the numbers keep getting bigger and bigger, but it will be meaningful.

And then second of all, we do see the prospect of all the programs that we've put in place and the new campuses that we're opening. So that really gives us the confidence to give you this guidance for starts.

And I'm anticipating that trends continue, we'll certainly be at the middle to the high end of that range. And then as you know, that's what drives everything else. It drives the revenue.

And given the efficiencies we have with our hybrid model and given where we are with the number of students in the classroom as we continue to increase those student teacher ratios as we continue to increase the density at our campuses, those additional dollars do drop to the bottom line.

And so we're using about a 30% number of additional revenue dropping to the bottom line, and that's what gives you the profitability. And that just flows through the income statement. I don't know, Brian, anything else?

Yes, you just about covered everything. The only thing I'll add is for the new campus is, let's say, Houston as well as our long -- our new Long Island campus that's come in the fourth quarter. Revenue for them is about 10%. And as I mentioned in my prepared remarks, they are anticipated to have losses that and some new programs of approximately about $10 million. So it's really not for 2026, adding to our profitability.

Okay. Got it. That's very helpful. And then just my follow-up would be on last call, you had mentioned that the East Point campus after outperforming expectations, you announced that incremental like 15,000 square foot expansion which could add about 500 student capacity.

I guess any update on that time line? And I guess, are you guys seeing any other opportunities to do this with existing campuses or -- or is there any relocation opportunities like you've done with Nashville and Philadelphia?

Sure. I'll take that. So the new space will open up later this year. So we'll start getting incremental bodies, students from that. So that's really going to help maybe a little bit in the fourth quarter of this year, but really more so in 2027 for the East Point campus.

I'll also just tell you that at both the Houston campus and the Leverton campus that we opened up in both of those facilities, we have about 10,000 to 15,000 square feet of space that we haven't yet built out so we can see what resonates in those markets to either grow our existing programs or to add new programs down the line.

As I mentioned last time at our Melrose campus, we did close out our collision program, which opened up space. Our collision program at that time had maybe 60 students or so in it. and we were able to close that down at 40 more welding booths to that location at an HVAC program as well as our third Tesla training center.

I can tell you that we are looking at doing a similar type of operation like that at our Grande Prairie campus, where we're going to scale back our collision program there to open up more space frankly, to continue to grow our electrical program. So there are select opportunities out there, and we just constantly just kind of look at the marketplace and see where the demand is, and we'll make adjustments accordingly. If that helps you.

Yes. No, super helpful. Makes sense. And looking forward to that Investor Day here next month. Look forward to seeing you there.

And the next question is going to come from Eric Martinuzzi with Lake Street.

Yes. I wanted to dive a little deeper on the CapEx spend here in 2027. You mentioned that it was essentially a pull forward of some of the spend that was planned for 2020. And was wondering if that was due to just sort of conservatism on the construction plans that you guys had in place or maybe a more favorable, more responsive regulatory approvals?

Yes. It'd be on the former side, I mean sometimes it's tough to gauge when certain things are going to get done and when certain permits are coming in. But the good news is that construction is moving along quite well.

And yes, some of the expenses that we were thinking were going to happen this year occurred in 2025. And that sets our -- frankly, our Hicksville campus up to be in a good position to help contribute to us in the fourth quarter of this year.

Okay. And you talked about the employer demand being healthy, specifically calling out New Jersey Transit and Johnson Controls. Just curious if you had any other anecdotes from recent conversations with employers as far as incremental demand versus, say, 6 months ago?

Yes. No. Well, I would just say kind of across the board, Eric. Our career services people are out there all the time. We've actually also brought on a gentleman to help us build more national relationships and all I can say is that people are seeing more opportunity and not less as we continue to penetrate each market and get deeper into it.

And so that really is very encouraging to us. because at the end of the day, as you know, our students are coming to us as they want to get a good solid career. And from everything that we're seeing, it's certainly not abating in any which way.

Got it.

And the next question will come from Steven Frankel with Rosenblatt.

Could you start by giving us the metrics for graduation rate and placement rate for 2025?

Sure. So our graduation rate, as we track it did decline by about 200 basis points to about 67.5%, if I'm not mistaken, and our placement rate increased by about 250 basis points to 82.8%, if I'm not mistaken.

Yes. Okay. Two quick questions there. One, in '25, what percentage of the incoming students came from high school? And where do you think these initiatives will take it? And then you talked about an interesting high school share program? How many locations is that currently ongoing today? .

Sure, Stephen. So again, about 20% of 2025 students basically came right out of high school and came to our schools where that's going to go. I know it's going to go higher. I don't have specific numbers because we're also going to be increasing our base.

But I wouldn't be surprised if we start seeing it, let's say, in the mid- depending on how successful we are, but also is reflective of how much we continue to grow our adult market, which remains very robust for us. with regard to the high school share program.

Right now, it's a -- I'll say this. We have about let's say, about 150 students in that program, and that's mainly in New Jersey since we have strong relationships there. However, we did bring on someone to help us grow this. And I can tell you that we literally have interest from dozens and dozens of school districts around the country as to what will materialize. It's hard to say.

These school districts are very difficult to, I'll say, work with, and they're not necessarily quick to work with us. but we love the idea because as you probably know or may know, 20% of people in community colleges are in high school. They're doing dual enrollment.

So we said, well, why can't we do the same thing with the trades and so for the students that we're serving today, if they start with us in -- I'm sorry, in their junior year they'll graduate having completed more than 50% of our program, which means if they were to enroll with us, they can continue their education, graduate in half the time with half the debt.

It's kind of a win-win situation. So it's a wonderful opportunity. It's still in its infancy, but we're certainly going to push it as much as we can because I think it's a win-win for everyone.

[Operator Instructions]

Our next question will come from Griffin Boss with B. Riley Securities.

Very solid results and guidance, and I appreciate the level of detail you provided today. So just 1 for me, I want to jump back to build on what Luke asked earlier regarding the guidance. Can you just kind of dig into how you're thinking about the revenue guide? Because if you look at the low end of the revenue guide implies about 12% year-over-year growth, really, really solid.

But then you look at starts and you got that wide 8% to 13% range. So kind of what are the puts and takes there in terms of, let's say, you hit the low end of the revenue guide 580, you got 12% growth and starts or 8% or something, what's accounting for the delta there?

I mean, are you anticipating 3% tuition increase for the year, which makes up that other 3% to 4% kind of?

Well, as we said in the past, we raised our tuition around 1% to 3% a year. We definitely want to stay at that level and not raise it more. If you look at our average revenue, that can fluctuate a little bit more than that, again, somewhat depending on program mix, but overall, I mean, you kind of -- you obviously did the math, you look at the numbers. There will be -- we feel very good about what we anticipate we'll be able to achieve -- we put numbers out there that we think are very achievable for us.

And I think as far as the starts go, certainly 8%, I'll say this, I'd be very disappointed if we end up at that level. But the world is never fully certain as you look to the future.

But it's certainly given where we are today, that certainly seems like that would be something meaningful without the change for us to be at that low level. I don't know, Brian, anything else you want to say.

The only thing I'll add, Griffin, is our -- we have a very robust carrying population that we're getting really good benefits from. I think it was like in my remarks, 2,200 more students were signed a year.

So that really sets us up for a very strong -- but also, we're also looking at scholarships. Scholarships, when we give us our internal scholarships out, they do start at a higher rate we might be looking to reduce that a little bit as well that we should get a boost from revenue as well.

Got it. Okay. Great color. Scott. And again, really pleased to see the solid results and looking forward to continuable in March has.

And the next question comes from Rajiv Sharma with Texas Capital.

Congratulations on a strong beat. And yes, also a really good guidance. Now my question is, you continue to grow your enrollments exceeding competitors in the space, the starts growth.

Can you give us any color on how the starts are faring geographically and also across auto, industrial or health care, sort of are you seeing a consistent growth pattern here? And do you expect to see that going on?

Yes. So I mean, good question. Certainly, geographically, we see opportunity kind of across the map. Certainly, our map, I can't say there's one area that's consistently better than another. So that's good for us.

As far as programs go, there's certainly a stronger interest, I'll say, in the skilled trades in automotive than for us in the health care side of our business. But we're just -- I mean I don't know Raj, how to explain it, but all I can say is we've narrowed our focus to really be in about 9 different programs.

Our goal is to really be the best in each of those programs. I think as we continue to concentrate and focus both from an academic standpoint, a curriculum development standpoint. It's giving us, I believe, short term and I'm hoping even long-term success and I hope that, that's going to also help frankly, our whole operation.

It builds, we believe, stronger relationships and opportunities with the employers. That helps our students. It could help us, as I mentioned, with our workforce link division. But we're trying to be very thoughtful, very concentrated focused on quality, focused on ensuring students have the skills that they need and making the learning environment as attractive as possible.

I will tell you, we had good growth in our student recommend rate for telling their friends, why don't you come to Lincoln. That's the best form of advertising we could have. And those are things that we're going to continue to foster because, a, we want to be the best and b, it helps our business thrive.

Yes. Great. And then just sort of bigger picture, the EBITDA growth has been fantastic. And you're getting about 13% EBITDA margins. Where overall, where can you expect those to trend to, and are those being held back, held down by your nursing health care-related I guess, promise and x of that, is that -- how do you see those trending? .

Well, as in our guidance and how we see things operating, I mean, I would anticipate that our EBITDA margins should continue to grow at the 150 to 250 basis points a year as we continue to grow our business. We get great operating leverage kind of across the board.

We obviously have a lot of fixed costs. But once you have that faculty member, once you have that classroom, and as long as you have additional capacity, driving more people into it is what drives those margins, and we still have a lot of room for growth. We're probably about around 60% of capacity utilization.

And as I've said to people in the past, that doesn't assume that we open up more capacity by doing weekends or other shifts that could add more capacity. So I anticipate the margins to continue to grow -- and I forget there was maybe another part to your question, but that's kind of the exciting part about where we see our future. revenue strong operating performance is strong and we anticipate our business is going to grow meaningfully at the top line, but even faster at the bottom line.

Great. Yes. And then just lastly, really looking forward to seeing you all at the Nashville campus. Would it be too much to expect Nashville campus performance to match what you guys did at East Point.

Well, I think that -- the difference is this, the East Point campus is truly a local serving campus. So it's all adults in high school students from that geography. Our Nashville camp is our most unique campus in that. It is certainly serving the local market, but it will also serve a much larger universe.

So it enroll students from, I believe, it's 9 or 11 neighboring states. And so that campus is much more focused on the high school market. And that is one of the areas that we're going to be really growing our high school market. So I anticipate that the national campus can become certainly as profitable as the East Point campus but the pace at which that happens will be a little bit different because as we've mentioned with the high school program, you do a lot of work, you grow it in the summer, you do a lot of work, and then you grow it again in the next summer.

Versus the East Point every month as we enroll new students, we're able to constantly build that population base. So I hope that helps you there.

Yes. Great. I'll end it there and again, congratulations on fantastic results.

Thank you I am showing no further questions at this time. I would now like to turn the call back over to Scott Shaw for closing remarks.

Thank you, operator, and thank you all for joining us today as we reviewed our continued progress and set forth financial guidance for 2026. Lincoln is benefiting from both macro operating environment trends, changes in public policy and our own consistent execution of growth initiatives at our existing campuses and new facilities.

Our investments in our operations, our students and our organization creates 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 and the success of our students.

I'd like to thank our shareholders for their support and our entire team for their dedication to achieving our goals. And I hope to see our analysts and investors at our Investor Day on March 19. Thank you all again, and have a great day.

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

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 to achieve after 3 years of operation.

Due to this exceptional growth, we have secured an additional 15,000 square feet of space immediately adjacent to our current facility to meet the increasing demand.

Meanwhile, in Nashville, the start of existing programs at the new campus exceeded our expectations. The expanded campus enabled the addition of electrical and HVAC programs, which also added to the momentum.

In Levittown, Pennsylvania, we completed the transfer of our automotive program from Philadelphia and have started our first classes in HVAC, welding, and electrical.

Finally, we began our first classes in our new Houston, Texas campus during the third quarter, and the response is also exceeding our pre-opening expectations.

East Point, Nashville, Levittown, and Houston are generating stronger and faster returns than we anticipated when we made these investments.

This both increases conviction in our greenfield and expansion strategy and is accelerating our growth, allowing us to fund our ambitious growth plans from operating cash flow supplemented with our credit facility for seasonal needs.

New campus development has driven about half of our recent start growth, and the implementation of our innovative Lincoln 10.0 hybrid teaching platform, increasing returns from marketing efforts, and the expansion or addition of programs have generated good, solid organic growth at existing campuses.

As a result, we are realizing increasing levels of instructional efficiencies, space efficiencies, and organizational productivity through Lincoln 10.0 and other initiatives.

Brian will provide more details on the progress we are making by leveraging our operating expenses to generate cash flow that is funding our expanded growth objectives in a few minutes.

As the overall national growth and new job creation slow, interest in skilled trade training as an alternative to the traditional 4-year college education continues to expand.

The federal government's actions impacting student loans have further fueled this interest, and our team is executing our updated growth strategies for the benefit of our students, corporate partners, instructors, and shareholders.

Last week, we announced plans to expand Lincoln's presence in Texas by developing a new state-of-the-art campus in Rowlett, Texas, a northern suburb of Dallas.

This new campus, our 24th nationwide, is located near major interstate highways 635 and 30 and will complement our highly successful Lincoln Tech campus in Grand Prairie, Texas, which is west of Dallas.

The new 88,000 square foot campus will have a capacity for over 1,600 students and will offer automotive, welding, electrical, and HVAC training when it opens at the beginning of 2017.

We have found that by having 2 strategically located campuses in growing metropolitan markets, we are able to leverage resources and enhance our ability to serve students, instructors, and corporate partners.

In Atlanta, our 2 campuses, located in Marietta and East Point, have both benefited from marketing and other corporate resources, resulting in higher-than-expected starts at both campuses.

We are hoping to generate similar leveraging opportunities in the Dallas market when the Rowlett campus opens.

Similarly, our new campus under development in Hicksville, Long Island, is progressing towards opening in late 2026 and will be our second campus in the metropolitan New York City area, where we have successfully operated our Queens campus for over 20 years.

With each new campus, our objective is to achieve $25 million to $30 million in annualized revenue and $7 million to $10 million in EBITDA for the fourth year of operation, if not sooner.

In addition to new campus development, program expansion or replication at existing campuses is contributing to Lincoln's growth.

We added or expanded 6 programs at existing campuses during 2024 and are well on the way to adding 5 more this year. In total, these 11 programs are a key contributor to our start growth.

Lincoln's partnerships with corporations throughout America have long been a contributor to our success.

Our tailored training for these companies helps them close the workforce skills gap while providing graduates with secure, rewarding career opportunities with advancement potential.

This year, many potential partners have extended decision-making timelines largely due to ongoing economic uncertainty.

However, during the third quarter, we did expand our innovative training program with CMC Corporation, under which we are training their employees at their facilities rather than at Lincoln campuses.

We signed our original 5-year agreement with the company in 2023 and believe our extended partnership with CMC illustrates the contribution we are making to closing their workforce skills gap.

Another key growth initiative at Lincoln involves our health care programs. Our new leadership for this segment is hard at work developing changes to our instructional model and improving operating effectiveness and efficiency.

One area of focus is to expand our offerings beyond the current LPN certificate so that students can earn RN degrees.

Such a development would substantially increase our addressable market in the nursing field. Meanwhile, last quarter, we talked about our efforts to regain enrollment status at our Paramus Nursing program.

We have now exceeded the graduation benchmark in this program for the past 12 months and have received approval from the State Board of Nursing to begin reenrolling students starting in January of 2026.

This is great news and is a testament to our ability to deliver quality nursing training across New Jersey. New Jersey, like most of the nation, faces a severe shortage of nurses at all levels, and we look forward to doing our part to lessen the shortage and bring greater and better nursing care to the state.

We also introduced you to our high school share program during our last call and have made some substantial progress with this initiative. For instance, at our Mahwah, New Jersey campus, the number of students enrolled through high school shares has doubled from last year.

More and more school districts in New Jersey, as well as other states where Lincoln operates, have inquired about implementing a share program at their schools.

Under this program, students attend Lincoln classes during their junior and senior years and then continue after high school to gain their certificate in less time, which accelerates their entry into rewarding careers.

With school districts under constant budgetary challenges, our initiative enables the continuation of skilled trades training within the high school while building our enrollment.

We are quite excited about the potential for this initiative. It, along with additional investments in our high school outreach programs, leads us to be optimistic about our opportunities to enroll more high school students graduating in the spring and summer of 2026.

In addition to these initiatives, we are also exploring expansion efforts through corporate development activities, including acquisitions and joint ventures.

Recently, several start-ups targeting skilled trades have contacted Lincoln to explore ways we could facilitate their strategy through our capabilities.

These discussions are in the early stage and require little, if any, of our development resources, but do illustrate the expanded interest in increasing skilled trades training in America to address the continuing skills gap.

While there is a decided focus on growth at Lincoln, we continue to make investments in people and processes to ensure that we deliver an exceptional learning experience for our students.

We want to be the best, and we want the best for our students. To achieve this goal, we are constantly evaluating new software, curriculum, and training aids.

In addition, we want our instructors to have industry-recognized credentials that ensure they have the most up-to-date knowledge in their field, so our students have an edge on their competition.

With technology ever changing, we are constantly in pursuit of what will help our students master the skills they desire to become the technicians, welders, and health care providers that will lead the next generation of skilled, hands-on professionals.

We believe one way to measure the effectiveness of our investments in people and processes is our graduation rate, as well as the employment of our graduates in their field of training.

Despite our growth in students, both metrics remain strong, and we are constantly evaluating ways to build on this success rate.

For nearly 80 years, Lincoln has remained focused on delivering high-quality, life-changing career education, and no one else has our combination of longevity, scale, and proven experience.

By continuing to expand our network of schools, replicating our most in-demand programs at our existing campuses while building new campuses in new and existing markets, we believe we will comfortably surpass the objectives established last year of approximately $550 million in revenue and approximately $90 million of adjusted EBITDA in 2027.

Therefore, today, we are increasing our targets, which Brian will review in more detail in a few moments. While we are always evaluating acquisitions that make strategic and financial sense for our company and our shareholders, our new 2027 milestones will be achieved organically through our existing operations and new campuses developed internally.

As I've discussed before, our country's existing severe skills gap will likely get worse before getting better, and we believe there are many significant underserved markets in America where employers and employees will benefit from our innovative and proven approach to skilled trades training.

Despite all this positive news and solid execution, it appears that the market still does not understand who we are and what we can become.

Furthermore, while others in our sector have had their businesses negatively impacted by internal execution challenges and the external environment, we at Lincoln Tech have not.

Consequently, I want to bring additional clarity to our story. First, while the government shutdown has been the longest in history, our students have continued to receive timely disbursements of federal aid used to finance their education at our schools.

The U.S. Department of Education reminded the higher education community of the minimal impact on students at the beginning of the shutdown, and our businesses have not been affected.

Second, we continue to see strong interest in our programs, and the current environment for us has not lessened. Third, the decline in our Healthcare segment is not meaningful, nor is it a concern.

We have been rationalizing our program offerings for the past several years to focus resources on our most in-demand programs to meet market demand as well as to ensure that we have the industry-leading curricula and training experiences that will set our students apart and give them an edge in the employment market.

Within our reported Healthcare segment, there are non-healthcare programs such as culinary and IT, as well as small allied health programs such as patient care tech and dental assisting.

We are selectively exiting these noncore programs, and we'll continue to do so when we see better opportunities for the classroom space. Our focus currently is on our licensed practical nursing and medical assisting programs.

And during this quarter, these grew by 2%, and this is without LPN starts at our Paramus campus, which will restart in a few months. As we have mentioned in the past, we are continuing to work on plans to offer registered nursing programs in the not-so-distant future.

Fourth, growth initiatives are meeting and exceeding our expectations and guidance. We are replicating our most successful programs wherever there is demand and we have space, and we are opening new campuses that our research tells us are underserved.

In simple terms, we are constantly looking to double down on our success. Our minimum expectation is for all of these investments to achieve a threshold 20% IRR on a fully burdened basis, including all direct costs needed to open and operate these facilities.

I'm very proud to say that to date, we have exceeded this threshold.

Fifth, we've been investing in our team to ensure that we have the talent to not only deliver on what we have announced to date, but also to enable us to capitalize on new opportunities as they arise.

One clear example of this is our significant refocus on growing our high school student population. Our recent high school results, along with the increased outreach by numerous high schools around the country who are asking for ways for us to help with vocational training, are clear indicators that the stigma of career technical training is lessening.

Students, parents, and even high school guidance counselors are more interested in the trades than ever before. To tap into this opportunity, over the past 7 months, we have hired new talent and are reinvigorating our high school recruiting strategy, and we are already seeing good results.

As many of you know, I have been with Lincoln Tech for nearly 25 years, and I believe that our organization has never been stronger nor has had as many growth opportunities as we have today.

Moreover, we have consistently proven to ourselves that we can capture opportunities. We have achieved what we have set out to achieve and continue to find new opportunities.

Recent survey results show that our employees have never been more engaged and satisfied. We are all working for the common good of our students so that they can graduate, launch their careers, and find satisfaction and pride.

As obstacles arise, and they always do, we find solutions. Our business is strong and our company is vibrant.

Finally, I'd like to note, we will be continuing our investor outreach during the remainder of the fourth quarter. This week, we have several virtual meetings scheduled by ThinkEquity.

Next week, we will be attending the Southwest IDEAS Conference in Dallas. And later this month, we will be in Montreal on November 26 with Barrington.

Next month, Brian will be attending Northland's Virtual Conference on December 16. Additionally, we will be hosting an Investor Analyst Day at our new Nashville campus on March 19, 2026, to showcase the site and review our long-term growth plan and operating objectives.

I urge you to contact Michael Polyviou if you would like to attend. Finally, with Veterans Day being observed tomorrow, I want to extend our appreciation to our military members and their families for their valued service and sacrifice to our country.

Now I'll turn the call over to Brian Meyers, so he can review some of our recent financial highlights and guidance. Brian?

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 population climbed to about 18,200 compared to 15,600 in the prior year.

Breaking down the composition of this quarter's start growth. Transportation and skilled trade programs delivered an 11.8% increase in starts, driven by continued strong demand as well as successful program additions and expansions.

Excluding the program launches in 2024 and 2025, we still achieved a robust 7.9% growth. 

As anticipated, our health care and other professional programs experienced a 13.7% decline in starts. Approximately half of this decline resulted from the discontinuation of the smaller programs, which we have determined are no longer part of our core program offering.

We continue to refine our program offerings to align with areas of strongest student interest and employer demand. As we sunset smaller programs, we will strengthen our core offerings while improving our profitability, particularly in our licensed practical nurse and medical assistant.

In addition, as Scott mentioned, we are pursuing degree-granting approval to offer a registered nurse program. 

Also, as noted, we will commence new enrollments in our LPM program at our Paramus campus beginning in January 2026. Turning to expenses. Total expenses were $135.1 million compared to $106.3 million in the prior year.

The increase was in line with our internal expectations and primarily driven by direct costs associated with the larger student population as well as ongoing investment in our growth initiatives.

From a profitability standpoint, our adjusted EBITDA grew by 65.1%, reaching $16.9 million, up from $10.2 million last year, which includes the Transitional segment. This improvement continues to highlight the operating leverage generated by several key initiatives. 

As Scott mentioned, these include efficiencies from our Lincoln 10.0 hybrid teaching model, which has contributed to lower instructional costs as a percentage of revenue and improved space utilization.

In addition, we are seeing improvement in bad debt expenses, which have declined as a percentage of revenue for three consecutive quarters. Net income for the quarter was $3.8 million compared to $4 million, including Transitional.

Adjusted net income was $6.3 million or $0.20 per diluted share compared to $4.1 million or $0.13 per diluted share, representing an increase of $2.2 million or 54.9%. Looking at our balance sheet. We ended the quarter with $65.5 million in total liquidity. 

This quarter, we generated $23.9 million in cash from operations. On a year-to-date basis, cash from operations totaled $15.8 million as reflected on our cash flow statement.

Due to our seasonality, most of our income and cash are generated in the second half of the year, with the highest level typically in Q4. We finished the quarter with $8 million in outstanding borrowings and $13.5 million in cash on hand.

Based on historical trends and an outlook for a strong fourth quarter cash flow, we are forecasting to end the year without any debt outstanding and a higher net cash balance. Now turning to capital expenditures. We continue to execute on our key expansion projects. 

The total capital expenditures were approximately $21.7 million for the quarter and $68.1 million for the first nine months of the year, as reflected on the cash flow statement.

The majority of our quarter's spending was tied to our growth initiatives, including two recent campus relocations and the build-out of our new Houston campus, which opened during Q3.

As Scott mentioned, we are excited to announce our fourth greenfield campus in Rowlett, Texas. The build-out is expected to take approximately one year with an anticipated opening in the first quarter of 2027.

We view the expansion as an important step in our growth strategy and are encouraged by the strong performance of our prior greenfield campuses. 

While new campuses require meaningful upfront investment and take approximately two years before they become operational, they are an exceptional growth driver for Lincoln.

These investments are expected to generate internal rates of return exceeding our 20% threshold. Our East Point campus, now in its second year of operation, is well on its way to delivering returns significantly above this threshold.

Looking ahead to the remainder of 2025. Based on our performance and strong momentum across our core growth drivers, we are raising our full-year guidance across all metrics.

We now expect revenue ranging from $505 million to $510 million, adjusted EBITDA in the range of $65 million to $67 million, net income ranging from $17 million to $19 million, student starts growth of 15% to 16% and capital expenditures unchanged at $75 million to $80 million. 

As a reminder, our guidance excludes stock-based compensation, one-time noncash pension termination expense expected in Q4, pre-opening and net operating losses from new and relocated campuses, and program expansions.

For more detailed guidance, please refer to our earnings release, which was filed earlier today. Beginning in 2026, we will no longer adjust our EBITDA for preopening costs and net operating losses from new campuses and program expansions as we currently do.

Going forward, adjusted EBITDA will reflect only the add-back of noncash stock-based compensation and other nonrecurring items. 

In our discussions of operating expenses, we'll continue to call out the losses incurred from campuses that have not yet commenced operation to provide investors with a clear understanding of the profitability of our current operations in future periods. 

While we will provide formal 2026 guidance during our fourth quarter earnings call in February, we can communicate today that based on our current growth, improving profitability and current investment plans, we expect our 2026 adjusted EBITDA under the revised methodology to exceed our 2025 guidance of $65 million to $67 million, which excludes approximately $10 million of add-backs for new campuses and program expansions.

Finally, looking ahead, we remain confident in our long-term growth trajectory. With respect to our previously communicated 2027 financial objective of $550 million in revenue and $90 million in adjusted EBITDA, we now expect to exceed both of these targets. 

Based on our current performance trends and strategic initiatives, we are projecting to achieve more than $600 million in revenue and over $90 million in adjusted EBITDA by 2027 without the benefit of adding back approximately $10 million of expenses for new campuses and program expansions that were included in our original long-term plan.

In closing, as our nation observes Veterans Day, I also want to extend our sincere gratitude to all members of our Lincoln community, students, instructors, and alumni who have served or are serving in the armed forces. 

And with that, I'll turn the call back over to the operator for your questions. Operator?

[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.