Legacy Education achieves 39.5% annual revenue growth and enhances strategic initiatives despite increased reserves for graduate payments.

OPERATOR - (00:02:16)

Good day and welcome to the Legacy Education fourth quarter and full fiscal year 2025 earnings conference call. Today's call is being recorded and broadcast live. It will also be archived on the Legacy Education website for future reference. To kick off our call, I will turn it over to Nicole Joseph, Senior Vice President of Legacy Education.

Nicole Joseph - Senior Vice President - (00:02:43)

Thank you and hello everyone. Legacy Education has issued a news release reporting its financial results and corporate developments for the fourth quarter and full fiscal year ended June 30, 2025. The release is available in the Investor Relations section of our corporate website at legacyed.com. Us today on the call are Leanne Roman, Chief Executive Officer and Brandon Pope, Chief Financial Officer. On today's earnings call, statements made by Legacy's management regarding the Company's business which are not historical facts, may be forward looking statements as 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 current expectations about the Company's future performance or events and are subject to a number of uncertainties, risk and other influences, many of which are beyond the Company's control that may influence the accuracy of the statements and projection upon which the 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 10K and the quarterly report on Form 10Q filed with the Securities and Exchange Commission. Forward looking statements are based on the information available at the time of 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 Legacy 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. I will now hand the call over to Leanne Roman, CEO of Legacy Education. Leanne to you.

Leanne Roman - Chief Executive Officer - (00:05:24)

Thanks Nicole and good afternoon everyone. Welcome to Legacy Education's fourth quarter and fiscal year 2025 earnings call. I'm joined by Brandon Pope, our Chief financial officer. Fiscal 2025 has been a pivotal year for Legacy Education, reinforcing our leadership in the essential healthcare education sector by delivering outstanding financial results and advancing initiatives that profoundly impact our our students, employers and communities. In a sector Grappling with over 1.8 million annual job openings through 2032 as projected by the Bureau of Labor Statistics, legacy is at the vanguard, equipping individuals with the skills to thrive in high demand health care roles. Our commitment to excellence in education not only drives personal success for our students, but also bolsters the nation's healthcare infrastructure, addressing acute workforce shortages with urgency and innovation. Starting with the fourth quarter, we delivered revenue of 17.9 million up 40.8% year over year, fueled by a 15.7% increase in new student starts. This performance caps a transformative fiscal year where revenue climbed 39.5% to 64.2 million, propelled by a 41.8% surge in enrollment to 3,101 students and a 26.9% rise and new student starts to 3,194. These achievements represent our 12th consecutive quarter of double digit revenue growth, demonstrating our team's exceptional execution and the enduring demand for our programs. Our graduate success stories underscore our impact with an 81.8% NCLEX pass rate, nursing and placement rates that are averaging 74.3% through assets and 74.6% through ABHEPs are accrediting agencies. We're producing job ready professionals in fields like nursing, diagnostic, medical, sonography and surgical technology, just to name a few. The seamless integration of the Contra Costa Medical Career College, has amplified our reach, adding 468 students and diversifying our offerings. We are energized by our strategic developments this year which are accelerating our momentum. We've secured approvals for three new degree programs and two certificate programs, expanding our curriculum to meet evolving market needs Achieving initial accreditation from the National League for Nursing Commission for Nursing Education Accreditation, otherwise known as nln CNEA for our RN to BSN track is a game changer. It's enhancing our nursing education portfolio and opening doors for more students to advance their careers. Additionally, I'm excited that we have strengthened our governance by appointing two new board members and establishing an advisory board bringing fresh expertise to guide our expansion and innovation efforts. These milestones are propelling us forward with renewed vigor. Our six California campuses located in Lancaster, Bakersfield, Temecula, Salinas, Pasadena and Antioch are ideally positioned and thriving healthcare hubs. Supported by our cutting edge hybrid learning model that blends advanced simulation technology with hands on training for optimal accessibility and outcomes. We're actively exploring additional branches and acquisitions to extend our transformative education even further. Financially, Q4 net income reached 1.2 million up 27.6% on expenses I want to directly address one item in Q4 we increased our accounts receivable (AR) reserve by approximately 700,000. This was to address the fact that we saw a softness in student payments related to our graduate students only. This 700,000 G&A expense charge is tied to graduated borrowers who fell behind in payments. I want to be clear we're not writing this off. Instead we're taking an increased reserve to be proactive and conservative. By addressing this in the fourth quarter, we want to demonstrate our commitment to transparency, discipline and protecting long term shareholder value. Brandon will cover this further in his remarks. Even with this charge in Q4 we capped off a year of record growth and momentum. For the full year, net income grew 7.5 million or $0.59 per diluted share and adjusted EBITDA increased 31.3% to 11 million. Our robust balance sheet featuring 20.3 million in cash and negligible debt empowers us to invest boldly in growth. I am immensely proud of our dedicated team for their role in these accomplishments which extend beyond numbers to real world change. With that, I want to pass this over to Brandon to for a deeper dive into our financials.

Brandon Pope - Chief Financial Officer - (00:12:37)

Brandon thank you Leanne in fiscal 2025 marked a year of exceptional financial and operational progress, highlighting our disciplined approach and scalable model. I'll begin with Q4 results followed by a full year compared to fiscal 2024. Drawing from our press release and Form 10K, our fourth quarter 2025 financial highlights begin with revenue which rose 40.8% to 17.9 million from 12.8 million. Driven by increased enrollment, net income increased to 1.2 million from 1 million last year and EBITDA was 2.1 million, up 133% from 0.9 million last year. In expenses, educational services is 9.4 million versus 8.5 million due to our increased staffing required to support increased enrollment, increased rents, increased externship fees and our investment into our new programs general and administrative was 6.3 million versus 3.3 million in prior year, reflecting our investment in marketing, professional fees as well as the increased AR reserve Leanne mentioned earlier, we increased our AR reserve from 5.0% to 9.8% due to our annual AR reserve analysis that indicated a slowness and graduate student payments. Although we have improved efficiencies in financial aid processing and active student payments while in school, we took a very conservative reserve to address this analysis for fiscal year 2025 financial operating results include revenue growth of 39.5% to 64.2 million from 46 million in the prior year supported by a 41.8% enrollment increase to 3,101 students and a 26.9% rise in new student starts to 3,194. Net income is up 47% 0.3% to 7.5 million or $0.59 per diluted share from 5.1 million or $0.53 per diluted share last year. EBITDA is up 61% to 10.4 million from 6.5 million and adjusted EBITDA is up 31.3 million to 11 million from 8.4 million last year in expenses. Educational expenses was 34.2 million versus 26.4 million due to our increased staffing required to support increased enrollment, increased rents externships and again our investment into our new programs. General and Administrative 19.3 million versus 13.3 13.0 million again due to increased marketing and professional fees and the aforementioned bad debt expense balance sheet. We have cash and cash equivalents exceeding 20.3 million. Working capital is 23.9 million. Our total assets are 69.2 million and stockholders equity at 41 million. Cash flow was 7.8 million generated from operating activities with minimal debt. Our solid financial position fuels strategic initiatives like program expansion and acquisitions. I'll now turn it over to Leanne CEO for our strategic outlook and closing remarks.

Leanne Roman - Chief Executive Officer - (00:16:03)

Thank you Brandon. As you can see, Legacy education is energized and ideally positioned to harness the vibrant opportunities in the healthcare education sector indispensable for tackling workforce gaps and enhancing community health. Our strategic roadmap is geared toward amplifying our influence and achieving enduring growth. We're going to continue the enrollment momentum through sophisticated digital marketing and robust employer collaborations. We'll capitalize on our 26.9% student starts growth focusing on our high potential regions. We're going to continue with our curriculum expansion. We're thrilled to roll out our newly approved 3 degree and 2 certificate programs alongside the prestigious NLN CNEA accreditation for our RN to BSN track. These breakthroughs are supercharging our nursing offerings and attracting top talent. We will continue to add new programs that are needed for the areas that we serve in our operational innovation. We continue with our hybrid model, enriching it with state of the art simulation and edtech boosts efficiency and student success while scaling seamlessly with our governance and expansion. I can't tell you how excited I am about the two new dynamic board members and our freshly formed advisory board. We're infusing expert insights to propel branching and M and A targeting, accretive opportunities to widen our footprint. All backed by our strong balance sheet in this resilient sector. Our adherence to Title IV funding requirements, strong compliance culture, a focus on superior outcomes and market aligned programs equip us to thrive amid regulatory shifts. Compliance is not just a requirement for us, it's a competitive advantage. As Washington advances the One Big Beautiful Bill, comprehensive legislation aimed at expanding access, workforce development and funding pathways, we believe legacy education is uniquely positioned to benefit. With our scale, our compliance record and proven ability to deliver job ready graduates. We stand at the intersection of policy support and market demand. The combination of the operational execution, compliance strength, human impact and policy tailwinds give us confidence that as we've moved into 2026, this will fuel our optimism for continued excellence. I'll turn the call over to the operator for some Q&As at this time. Operator.

OPERATOR - (00:19:31)

Thank you, Leigh Ann. We will begin the question and answer session where selected analysts and investors will be invited to ask questions. Our first question comes from Mike Grondal with Northland Securities. You may proceed with your question.

Mike Grondal - Equity Analyst at Northland Securities - (00:19:46)

Hey, Leanne and Brandon. Hey. What was the starts number in the quarter? I got the ending enrollment of 3,101, but what was the starts number just for the quarter?

Brandon Pope - Chief Financial Officer - (00:20:02)

723. 723, Mike. And it's great to hear from you out there.

Mike Grondal - Equity Analyst at Northland Securities - (00:20:10)

Okay. And the new programs, the three new degree programs and the two certification programs, when do those start and is there a rough range of revenue that cohort might deliver in 26 or 27? How do we think about those?

Leanne Roman - Chief Executive Officer - (00:20:35)

So, Mike, we don't give forward projections, but what I can tell you is that we did indicate in the press release that, you know, we anticipate starting these programs in October and we have built a pro forma budget. around those.

Mike Grondal - Equity Analyst at Northland Securities - (00:20:53)

Got it. I don't want to forward guidance or anything, but could those programs start 100 students next year? A couple hundred. Just I guess the size or the capacity that you've created, maybe that would be helpful too.

Leanne Roman - Chief Executive Officer - (00:21:15)

Sure. So we basically average in terms of NR starts for our degree granting programs that we can set up to 30 students in those starts. And so for each of our degree programs on the campuses to which we started, you know, you can reference the fact that, you know, when we open a class, we can set up to 30 students and those, and each of those degree granting classes, classes, we can do something very similar to that in our certificate programs.

Mike Grondal - Equity Analyst at Northland Securities - (00:21:47)

Got it. And how many starting dates throughout the year Is there just one or would these have a second start date?

Leanne Roman - Chief Executive Officer - (00:21:57)

Those typically at this information, our starts are located like on our website and part of like where the public can see. We typically start our degree programs. a couple of times a year. So about every four to six months we start our degree program and we start our certificate programs roughly about every eight weeks.

Mike Grondal - Equity Analyst at Northland Securities - (00:22:25)

Okay, that's helpful. And then the $700,000 reserve you talked about, can you give us a little bit of color? What is the outstanding balance that you took that against? Is that multiple millions of dollars? You took a $700,000 reserve. What was the balance? Roughly how many students in that cohort? A little more color there would be helpful.

Brandon Pope - Chief Financial Officer - (00:23:00)

Yeah, we do our analysis annually and conduct analysis of all of our students, whether they're active, inactive, and actually do it sometimes even at a program level. And we'd also do it on a grad level. And our experience is that grad students pay pretty timely. And so we don't really focus our efforts on that collection rate too much. We focus it on active students within our financial aid processing and payments while they're in school. But we did this analysis. We determined that there is a significant or not significant, a amount of graduate students who still make payments, who are making payments. Part of that is reflective in our balance sheet in a long term area, which increased about 600,000 to basically 1.9 million, I believe. And that is what that's based on. Total all grad students is about 2.5 million dollars. We reserve some of that regarding the statements that are slowing in their payments. So that's about what that reserve analysis indicated for us. Again, it is something that we look at. We'll probably look at every quarter now versus annually and see if we see any trends like that. It's a very conservative reserve estimate. That's why we didn't write it off. We just reserved for it. We have internal expectations of having a process within us to address this particular thing. And like anything we do, we'll attack that vigorously. And we believe that we will at least get enough to recover that reserve, if not more. But we thought it would be important to take a conservative approach to that reserve.

Mike Grondal - Equity Analyst at Northland Securities - (00:24:50)

Okay, and then one more just the tax rate came in at about 45%. I think we were at 28%. Any reason for the tax rate being so high and how does it look going forward?

Brandon Pope - Chief Financial Officer - (00:25:06)

Yeah, the tax rate wasn't 45, it was 31-32%. And that was had something had to do with a return to Provision adjustment last year. Last year was approximately 28% and really as we do the return of provision adjustment it should have been closer to 30, 30 and some change. And so this increase this year is representative of that for this fiscal year be around 30%.

Mike Grondal - Equity Analyst at Northland Securities - (00:25:36)

Okay. Okay, thank you.

OPERATOR - (00:25:41)

Thank you, Mike. Great question. Our next question comes from Jeffrey Cohen from Ladenburg Tallman. You may proceed with your question.

Jeffrey Cohen - Equity Analyst at Ladenburg Thalmann - (00:25:55)

Hi Leanne and Brendan. How are you?

Leanne Roman - Chief Executive Officer - (00:25:58)

Good, how are you?

Jeffrey Cohen - Equity Analyst at Ladenburg Thalmann - (00:26:00)

Pretty good. So a few questions. Firstly, I was hoping I'd hear the word cardiac or neuro. Any commentary there at all?

Leanne Roman - Chief Executive Officer - (00:26:13)

They are active programs which you know that we've already been enrolling in and we've added to our additional campuses. So cardiac is really doing well for us.

Jeffrey Cohen - Equity Analyst at Ladenburg Thalmann - (00:26:28)

Got it. So with now your seven facilities, are you capacity constrained at any point? I mean the growth rate is the growth rate. But are you shy on square footage? Do you need more buildings or square footage to accommodate the organic growth?

Leanne Roman - Chief Executive Officer - (00:26:52)

So we are where we have gotten the approvals in the Central coast campus. Remember we added 25,000 square feet to that and so we are definitely well positioned there. As you saw where Brandon talked about the increase in expenses and some of that was due to rent. That is where we have taken in our existing Lancaster Temecula locations and we have added additional square footage to support the lab additions that we are putting into for these new program approvals. The way that we're delivering the education and the hybrid model with we've taken on additional square footage for the labs but we've got things very well under control as it relates to the students are learning online and just coming into the labs.

Jeffrey Cohen - Equity Analyst at Ladenburg Thalmann - (00:27:52)

Okay, I got it. And any, I guess maybe a question for Brendan on Q4. I understand the AR 700k but were there any one timers in effect for that G and a number is a little bit higher than what we thought. Was there any one time or seasonal call outs there to speak of?

Brandon Pope - Chief Financial Officer - (00:28:12)

Yeah, there's some seasonality in that in professional fees that relates to legal, regulatory, audit and we also had some enhancements in our Student Information System (SIS). Things of that nature that are somewhat one time are seasonal in nature. That included in our margin reflective in our margin.

Jeffrey Cohen - Equity Analyst at Ladenburg Thalmann - (00:28:37)

Got it. And I know I'm going to get no forward looking statements out of you as far as revenues go. But maybe Brandon, you could remind us of the seasonality of your business and how that relates to each quarter and particularly the upcoming Q1 which is September quarter.

Brandon Pope - Chief Financial Officer - (00:28:59)

Yeah, you know, as you know we can't really do that but there's certainly seasonality involved when it, when it comes to our first and second quarter. Our first quarter generally, it's a pretty solid quarter. Our second quarter was in December, very seasonal because of the holidays. Generally that's a depressed quarter. And then we have pretty robust Q3 in the middle of Q4, so that seasonality will still continue. But we, you know, again, our growth rate can kind of, you can kind of presume a continued growth rate in, within the seasonality.

Jeffrey Cohen - Equity Analyst at Ladenburg Thalmann - (00:29:37)

Okay, I think that that helps. And the no, I think that does it for us on the question front. A solid readout and thank you for the commentary.

John - (00:29:52)

Thank you, John.

OPERATOR - (00:29:52)

Thank you. As there are no further questions, I will now turn the call back to Leanne Roman for closing remarks.

Leanne Roman - Chief Executive Officer - (00:30:04)

Thank you, operator, and thank you all for joining us. Fiscal 2025 was a landmark year for legacy education. With strong financials and the strategic leaps that affirm our commitment and a crucial sector beyond the metrics, we're catalyzing change, empowering thousands of students for fulfilling healthcare careers and fortifying essential services nationwide. I'd like to thank our passionate team, our students and our stakeholders. They're the driving force behind this success. And to our investors, your confidence inspires us. Were poised to innovate, expand and deliver exceptional value shaping a brighter future in healthcare education. I want to thank you again for being part of the legacy education journey and wish you a great rest of the day.

OPERATOR - (00:31:07)

Ladies and gentlemen, this concludes today's call. Thank you for joining us and have a great day.