LINC

Lincoln Educational Services Corporation (LINC)

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Industry: Consumer Services
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Lincoln Educational Services Corporation (LINC)

Q1 2009 Earnings Call

May 6, 2009 10:00 am ET

Executives

David F. Carney – Executive Chairman

Shaun E. McAlmont – President and Chief Executive Officer

Cesar Ribeiro – Senior Vice President and Chief Financial Officer

Analysts

Kelly Flynn - Credit Suisse

Gary Bisbee - Barclays Capital

Jeffrey Silber - BMO Capital Markets

Kevin Doherty - Banc of America-Merrill Lynch

[Amy Younker] – Robert W. Baird

Trace Urdan - Signal Hill Group, LLC

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the first quarter 2009 Lincoln Educational Services earnings conference call. (Operator Instructions) This conference call is being webcast and 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 that involve risks and uncertainties. Actual results may 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, Executive Chairman of Lincoln Educational Services. Please go ahead David.

David F. Carney

Thank you. Good morning everyone and welcome to our first quarter earnings conference call. Joining me today is Shaun McAlmont our President and Chief Executive Officer, as well as Cesar Ribeiro our Senior Vice President and Chief Financial Officer. Following my remarks Shaun will provide an update on our operations including our 2009 priorities, and Cesar will provide an overview of our first quarter results. We’ll then open the call for the question-and-answer session.

Now turning to our results from continuing operations. During the first quarter our revenues, net income and operating margin all grew meaningfully as we once again generated strong new student starts and enrollment growth while demonstrating the benefits of the operating leverage in our business model. Revenue from continuing operations rose 41.1% to $118.6 million in the first quarter and on a same school basis revenue increased by 27.3% to $107 million. Net income from operations was $5.8 million and diluted earnings per share was $0.22 versus $0.02 in the first quarter of last year.

Now let me turn to our starts and enrollment metrics. We generated new student start growth for the tenth consecutive quarter and experienced growth across all five of our verticals. New student start growth was 42.4% for the quarter and 35.1% on a same school basis, which illustrates the success we have had in strengthening our operations and expanding [audio impairment]. Student enrollments on a same school basis at March 31, 2009 were 23,144, an increase of 24.4% while average enrollment for the quarter was 22,597, up from 18,459 for the same quarter a year ago.

The year-over-year increase in end of quarter enrollment and average enrollment occurred across all five verticals. The average enrollment of 22,597 as of March 31, 2009 is divided between Health Sciences 36%, Automotive 31%, Skilled Trades 14%, our Business and IT tempered Hospitality Services 9%. We’re very pleased with our operating and financial results which were driven by the hard work and dedication of our employees across our schools as well as our ability to provide our students with high quality education programs aimed at preparing them to secure careers in high demand career fields, a formidable value proposition in today’s market.

We believe the successful execution of our strategic plan has resulted in a significant improvement in both the operating and financial fundamentals of our business, as well as our long term growth profile. We have continuously diversified our program mix and expanded the breadth of our offerings in verticals which possess attractive employment prospects. We have also worked to expand the depth of our degree offerings through internal program development as well as strategic acquisitions. Together these efforts have allowed us to grow our addressable market considerably while also extending the student lifecycle.

At the same time, we have significantly improved efficiencies across our operations, fostering an environment characterized by enhanced productivity and accountability. During the past three years we have strengthened virtually every aspect of our organization with an eye on making our programs more valuable to prospective students while also improving our ability to generate returns from our business. We believe these efforts have put us in a position to maximize the current macro environment which is driving more students to seek quality education and training to better compete in today’s more competitive job market.

Our mission going forward which Shaun will discuss in detail is centered on continuing to execute against our strategic plan, principally strengthening and rolling out high value program offerings with an emphasis on increasing our degree options and regionally accredited online offerings, replicating fast growing programs such as LPN, Licensed Practical Nursing, across our campus footprint and further branding our schools under the Lincoln umbrella. At the same time we will further strengthen our career development and placement resources given the highly competitive job market and we will continue to operate with intense focus on regulatory compliance, an area where we have an outstanding track record.

As we grow our business and maintain the focus on operating efficiently, we remain well positioned to grow our margins over time. We also believe our efforts to expand our addressable market and extend the student lifecycle, principally through degree programs, will support our growth profile as the economy begins to recover and the overall volume of students entering training moderates.

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