Lincoln Educational Services Corporation (LINC)

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Lincoln Educational Services Corporation (LINC)

Q2 2008 Earnings Call

August 6, 2008 10:00 am ET


Dave Carney - Chairman and Chief Executive Officer

Shaun McAlmont - President and Chief Operating Officer

Cesar Ribeiro - Senior Vice President and Chief Financial Officer


Sara Gubins - Merrill Lynch & Co.

Gary Bisbee - Lehman Brothers

Amy Junker - Robert W. Baird

Kevin Doherty -Banc of America Securities



Welcome to the second quarter 2008 Lincoln Educational Services' earnings conference call. (Operator Instructions)

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 performances, 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.

I would like to turn the call over to David Carney, Chairman and CEO of Lincoln Educational Services.

David Carney

Welcome to the Lincoln Educational Services second quarter 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 second quarter results. We will then open the call for the question-and-answer session.

Now turning to our results from continuing operations, the second quarter was another strong quarter for the company as we continue to benefit from the continued growth initiative including new program offerings, program transplants, campus expansions, start-ups and strategic acquisitions. Along with the growth initiatives, we clearly are benefiting from the positive results from marketing and recruitment efforts and operating efficiencies. During the second quarter, we posted financial results and students start and enrollment growth that exceeded the same quarter a year ago as well as the guidance ranges that we provided on our first quarter call.

We reported earnings per share from the continuing operations of $0.05 in the second quarter versus $0.03 in the same quarter last year. Revenue was $85.1 million in the second quarter, up 13.8% year-over-year. Revenue growth was driven by a combination of new-student start growth of 20.9% during the quarter and a beginning carry-in population that was up 9.3% over the prior year. Now, turning to starts. Second quarter 2008 starts of 5,782 were up 20.9% versus the same quarter a year ago reflecting another strong quarter of year-over-year starts growth.

The strong performance was particularly gratifying as we experience positive start growth across all of our five verticals. We are also pleased with the early starts in the high school program principally in our destination schools which have multiple class starts of auto, diesel and related programs from June through September. We attribute the increased high school enrollment in the earlier classes to the effect over improved internal processes. We have made considerable progress in increasing the effectiveness of our organization including addressing key fundamental areas such as our student recruitment processes, sales organization and overall marketing efforts.

With respect to student recruitment, we have implemented various improvements of the financial aid packaging process as well as focus on increasing the stability and effectiveness of the admissions rep force. Our success in these areas resulted in our ability to achieve strong high school starts late in the second quarter principally at three of our destination campuses, in Nashville, Indianapolis, and Grand Prairie, Texas. Moreover, based on our visibility in the third quarter starts across all of our campuses, we are confident that total starts from this year's program which mainly spends the June through September timeframe will exceed prior year.

As we have discussed on previous calls, approximately 40% or over 10,000 of our annual starts occur in the third quarter and between 35% and 40% of those starts will come from our high school recruiting efforts. Needless to say, we are achieving our goals and the momentum is continued into the second half of the year. Moving to total student enrollment, total student enrollment at June 30 was 18,597, an increase of 14.7% over the prior year while average enrollment for the quarter was 18,540, up 12.3% from 16,509 to the same quarter a year ago.

During the second quarter, average enrollment increased in all of our verticals compared to last year. This marks the second consecutive quarter of year-over-year average enrollment growth across all product groups. We also started 2008 with an 8.5% carry-in population compared to 2007. That favorable trend has continued year-to-date as we begun the second quarter with 9.3% more students than in the prior year and then on the third quarter with 2,386 or 14.7% more students than last year.

I believe these points for the balance growth across the verticals as well as the benefit of new program additions to the product groups. As of June 30, 2008, the average enrollment of 18,540 was divided between Auto 35%, Skill Trades 14%, Health Sciences 32%, Hospitality Services 10% and Business and IT at 9%. We continue to add programs to each of our verticals such as Licensed Practical Nursing to Health Sciences which is quickly grown to over 15% of our Health Sciences enrollment.

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