LINC

Lincoln Educational Services Corporation (LINC)

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Lincoln Educational Services Corporation (LINC)

Q3 2008 Earnings Call

November 5, 2008 11:00 am ET

Executives

David F. Carney - Chairman of the Board, Chief Executive Officer

Shaun McAlmont - President and Chief Operating Officer

Cesar Ribeiro - Senior Vice President and Chief Financial Officer

Analysts

Sara Gubins - Merrill Lynch

Kevin Doherty - Banc of America Securities

Jeff Silver - BMO Capital Market

Amy Junker - Robert W. Baird

Gary Bisbee - Barclays Capital

Trace Urdan - Signal Hill Group

Jennifer Charles - Credit Suisse

Presentation

Operator

Good morning and welcome to the third quarter 2008 Lincoln Educational Services’ Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session and we ask that you please limit your questions to no more than one and one follow up. This conference call is being webcast and an audio version of the call will be available on the Company’s website for ninety days. As a reminder, this conference is being recorded for replay purposes.

Before we begin today’s call, the Company would like to remind everyone that this conference call may contain certain forward-looking statements relating to future events, future financial performance, strategies, expectations, competitive environment, regulations, and availability of resources. Such forward-looking statements are based upon current expectations that involve risks and uncertainties. Actual results my differ materially from those stated in any forward looking statements based on a number of factors and other risks, which are more specifically identified in Lincoln’s filings with the SEC.

And now I would like to turn the call over to Mr. David Carney, Chairman and CEO of Lincoln Educational Services. Please go ahead, David.

David Carney

Thank you, Beatrice. Good morning to everyone on the call and welcome to the Lincoln Educational Services’ third quarter 2008 earnings conference call. Joining me today is Shaun McAlmot, our President and Chief Operating Officer and well as Cesar Ribeiro, our Senior Vice President and Chief Financial Officer.

Following my remarks, Shaun will provide an update on operations and Cesar will provide a detailed review of our third quarter results. We will then open the call for the question-and-answer session.

Now turning to our results from continuing operation, during the third quarter we continue to benefit from our strength in organization and numerous growth initiatives, including program diversification, expanded degree offerings, effective program replication, and campus expansions. We built upon the existing momentum of our business and once again delivered strong results across many of our key metrics. Revenue from continuing operations was $100.5 million in the third quarter, up 16.1% year-over-year. This revenue growth was driven by the combination of new student starts growth of 8.6% during the third quarter and a beginning carry in population was 14% ahead of prior year. We reported earnings per share from continuing operations of $0.22 in the third quarter versus $0.17 in the same quarter last year.

Now I would like to turn to our starts. The starts during the third quarter were 10,564, up 8.6% compared to the same quarter a year ago and above our guidance of 5% to 7% reflecting the ongoing benefits of our program diversification and improved marketing efforts. Our growth in starts during the third quarter from the adult market excluding starts from our high school program which I will comment on in a moment, were up 17.5% largely driven by the success of our health sciences programs including LPN and growth in our skill trades, hospitality services and online. We continue to experience strong demand for these programs and expect this to continue in the fourth quarter and into 2009.

Now let me turn back to our high school program which as you know is still largely automotive and represents about 70% of the high school program starts for the year. During the third quarter this year, our high school starts were below prior year but entirely due to the early high school starts which occurred in the second quarter this year. On our last call, I discussed the fact that we had about 300 more student starts in our auto destination schools this year in the second quarter versus prior year which we attribute to improved processes. Therefore when you eliminate the timing differences between years for our high school program starts and look at the June to October time frame which captures all of our high school starts, we will be up about 5% over prior year which we are pleased with given the current issues surrounding the auto industry.

Now moving to total student enrollment; total student enrollment in September 30 reached a record of 22,404, an increase of 15.1% over the prior year. While average enrollment for the quarter was 20,665 up 13.6% from 18,185 for the same quarter a year ago. Average enrollment increased in all five of our verticals during the third quarter compared to last year marking the third consecutive quarter we achieved growth across all of our product groups. We also continued to benefit from a higher carry-in population during the third quarter. As you may recall, we started 2008 with 8.5% higher carry-in population compared to 2007. That trend has continued throughout the year as we began the third quarter with 14.7% more students more than the prior year and entered the fourth quarter with 2900 students or 15.1% more students than last year. This strong carry-in population growth can be attributed to our program diversification and the balanced growth we are experiencing across our verticals.

As of September 30, 2008 the average enrollment of 20,665 was divided between auto 37% which increased from 35% in the second quarter , skill trades 13%, health sciences a strong 31%, hospitality services 10% and business and IT 9%.

I would now like to take a few moments and update you on the progress we have made executing on our growth opportunities which included diversified program mix, building out our online platform, and the further roll-out of our expanded degrees, acquisitions and new campuses and campus expansions.

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