Lincoln Educational Services Corporation (LINC)

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Lincoln Educational Services Corporation (LINC)

Q4 2008 Earnings Call

March 5, 2009 10:00 am ET


David F. Carney – Chairman & Chief Executive Officer

Shaun E. McAlmont – President & Chief Operating Officer

Cesar Ribeiro – Senior Vice President & Chief Financial Officer


[Unidentified Analyst] - Credit Suisse First Boston

Gary Bisbee - Barclays Capital

Jeffrey Silber - BMO Capital Markets

Trace Urdan - Signal Hill Group, LLC

David [Shoe] – Bank of America

[Gordon Lasy – Robert Beard]



Good morning ladies and gentlemen and welcome to the fourth quarter and year end 2008 Lincoln Educational Services earnings conference call. (Operator Instructions) This conference call is being webcast. An audio version of the call will be available on the company’s website for 90 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 and involve risks and uncertainties. Actual results may differ materially or 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 I would now like to turn the call over to Mr. David Carney, Chairman and CEO of Lincoln Educational Services. Please go ahead, David.

David F. Carney

Thank you Shane. Good morning everyone and welcome to the Lincoln Educational Services fourth quarter and year end 2008 earnings conference call. Joining me today is Shaun McAlmont, our President and Chief Operating Officer as 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 results. We will then open the call for the question-and-answer period.

And now turning to our results from continuing operations, revenue from continuing operations rose 18.9% to $107.3 million in the fourth quarter and included revenue of $1 million attributable to the acquisition of Briarwood. We benefited from a combination of strong carry in population as well as new student starts growth in the fourth quarter of 17.1%.

Net income from operations was $12.8 million and diluted earnings per share was $0.49 versus $0.37 in the fourth quarter of last year. However, diluted EPS from continuing operations for the fourth quarter of 2008 included $0.02 of charges related to the Baran acquisition which closed on January 20 of 2009. For the full year 2008, our revenue grew by 15% to $376.9 million compared to $327.8 million for 2007. Net income from continuing operations was $20.2 million compared to $13.8 million for 2007. Diluted EPS from continuing operations was $0.78 in 2008 compared to $0.53 for the year ended December 31, 2007. Again 2008 GPS of $0.78 included $0.02 of charges for the Baran acquisition.

Our performance during the fourth quarter capped off an outstanding year for Lincoln. We generated strong financial results, consistently strong starts in enrollment growth, and effectively advanced our various growth initiatives. We built upon the momentum and positive trends in our business and as a result we believe we are well positioned for sustainable growth and profitability as we move through 2009.

Now I’ll move to our start performance for the fourth quarter and the year. Starts during the fourth quarter were 5,200, up 17.1% compared to the same quarter a year ago and we generated start growth across all five verticals during the quarter. For the full year, starts totaled 27,175, up 12.4% over 2007. Our strong fourth quarter and full year starts growth reflect the benefit of a weakening economy, our diversified program offerings, and our strength and organization due to the many operational enhancements we implemented over the past three years.

Now let me cover our student enrollment. Student enrollment on a same school basis at December 31 reached a record of 21,116, an increase of 17.2% over the prior year while average enrollment for the quarter was 22,269, up 16.2% from 19,167 for the same quarter a year ago.

We also continued to benefit from a higher carry in population during the fourth quarter. As you may recall, we started 2008 with 1,400 more students than we had in 2007. That positive trend continued throughout the year and as a result we entered 2009 with 3,100 or 17.2% more students than 2008, excluding the effect of the recent acquisition.

This significantly larger carry in population can be attributed to continued strong growth across our product groups, especially in our Health Sciences programs. At December 31, 2008 our average enrollment of 22,269 was divided between Health Sciences 35%; Automotive 32%; Skilled Trades 14%; Business IT 10%; and Hospitality Services 9%. While all of our verticals experienced year-over-year start growth in the fourth quarter, Health Sciences has shown meaningful growth and is now our largest vertical.

Now I would like to take a minute and update you on the progress we made on our growth strategy during 2008 as well as our plans for 2009. Over the past several years, our strategy has focused on a combination of new program development; program replications; new campus openings; strategic acquisitions; and building additional capacity at existing campuses where demand for new programs supported it. During 2008 we continued to make progress by making a strategic acquisition; opening a new campus in an existing cluster; developing new programs, particularly for the online business; replicating programs like LPN; and adding capacity at several of our campuses offering Health Sciences programs.

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