Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lincoln Educational Services Corp reported a strong start to 2024 with a 15.3% increase in student starts and nearly 20% revenue growth.
- The company has successfully doubled its adjusted net income and has increased full-year guidance for revenue, adjusted EBITDA, and adjusted net income.
- Implementation of the Lincoln 10.0 hybrid instructional platform has led to instructional efficiencies and is expected to be used in teaching approximately 65% of classes by year-end.
- The opening of a new campus in East Point, Georgia, and plans for additional campuses align with the company's growth strategy and are generating positive student enrollment numbers.
- Lincoln Educational Services Corp has secured a significant new contract with Container Maintenance Corporation worth approximately $6 million over five years, expanding their service offerings beyond traditional student-focused programs.
Negative Points
- The company faces uncertainties and risks that could affect future performance, as noted in the forward-looking statements disclaimer.
- While the Lincoln 10.0 platform is enhancing flexibility and efficiency, the full impact on graduation rates and long-term student success is yet to be fully realized.
- Significant capital expenditures of $65 million to $70 million are planned for the year, which could impact financial stability if not managed carefully.
- The company's reliance on corporate partnerships and new program success could pose risks if expected profitability or operational goals are not met.
- Marketing expenses are expected to remain high, which could impact profitability if the cost per start begins to rise or if the returns on marketing investment decrease.
Q & A Highlights
Q: Congratulations on the strong start to the year and the higher guidance. Could you provide additional color on Lincoln 10.0 and its effect on Q1 and the rest of the year? What should we expect in terms of marketing expense over the balance of the year?
A: (Scott Shaw - President, Chief Executive Officer, Director) Lincoln 10.0 is being well received and is contributing to our growth, not just in student starts but also in operating leverage. The program's flexibility is appealing, and the ongoing discussions about the value of college education are also benefiting us. Regarding marketing expenses, we plan to maintain a similar level to Q1, focusing on opportunities that provide a good return on investment.
Q: How quickly will Lincoln 10.0 drive up graduation rates? Will it be material to this year or more likely to impact with the full-year rollout in 2025?
A: (Scott Shaw - President, Chief Executive Officer, Director) We've already seen improvements in retention and graduation rates since starting Lincoln 10.0 about 15 months ago. We're currently at a 70% graduation rate, which is our target. We expect incremental improvements, particularly in our evening programs due to the accelerated nature of Lincoln 10.0.
Q: Regarding the Q2 revenue outlook, given the outperformance in Q1, should we expect Q2 to be roughly flat with Q1?
A: (Brian Meyers - Chief Financial Officer, Executive Vice President, Treasurer) Yes, the seasonality suggests that Q2 will be roughly flat with Q1.
Q: Can you provide details on the new partnership with Container Maintenance Corporation? How did this partnership come about, and how will the training be conducted since it's not at your campuses?
A: (Scott Shaw - President, Chief Executive Officer, Director) This partnership emerged from our ongoing interactions with the shipping industry. We developed a curriculum initially for another company, which led to this opportunity. We will establish training sites at several of their locations, hire staff, and use our curriculum to upskill their employees. This allows us to extend our training beyond our current student base and leverage our capabilities.
Q: What are the financial highlights from Q1 2024, and how have they influenced the updated outlook for the year?
A: (Brian Meyers - Chief Financial Officer, Executive Vice President, Treasurer) Q1 saw a 20% increase in revenue to $103.4 million and a 15% increase in student starts. Adjusted EBITDA for Q1 was approximately $6.5 million, nearly tripling from the previous year. Based on these results, we've raised our full-year revenue forecast to between $418 million and $428 million and adjusted EBITDA to between $37 million and $42 million.
Q: Could you discuss the impact of the new East Point, Georgia campus on the company's performance and expectations?
A: (Brian Meyers - Chief Financial Officer, Executive Vice President, Treasurer) The East Point campus started with 29 students and contributed $90,000 in revenue for Q1. While its impact was minimal this quarter, the campus is generating strong interest and enrollments, trending above our expectations, and is expected to contribute more significantly moving forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
