Q1 2020 Earnings Call
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Station there will be a question answer session to ask a question during the session you'll need to press Star then one or your telephone.
Please be advised of todays conference is being recorded.
Sure acquire any further assistance. Please press Star then zero I'd now like to hand, the conference over to your speaking today Mr. Michael Bolivia. Thank you. Please go ahead.
Thank you Jimmy and good morning, everyone before the market open today Lincoln educational services. She this release reporting financial results for the first quarter ended March 31, 2020, as well as recent corporate development. The release is available on the Investor Relations portion of the company's corporate website at Www Dot we can tell.
Dot E.D. you.
Joining us today on the call or Scott Shaw, President and CEO, and brine Myers Chief Financial Officer.
Today's call it being broadcast live on the company's website in a replay of the call will be archived on the company's website statements made by Lincoln's management on todays call regarding the company's business that are not historical facts, maybe forward looking statement as a term is identified in federal securities laws toward may well expect.
Believe anticipate project plan intend estimate and continue as well or similar expressions are intended to identify forward looking statement.
Oh look statement should not be read as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance where event.
And are subject to a number of uncertainties risks and other influences many of which are beyond the company's control. The may influence the accuracy of a statement in the projections upon which the segment and statements are based.
Factors that may affect the company's results include but not limited to the risks and uncertainties discussed in the risk factor section of the annual report on form 10-K, and quarterly report on form 10-Q filed with Securities Exchange Commission.
Forward looking statements are based on the information available at the time those statements were made and management's good faith belief is at the time with respect to the future events. All forward looking statements are qualified in their entirety by this cautionary statements like undertakes no obligation to publicly revise or update any forward looking statements whether as a result of.
Information future event or otherwise after the date there.
Now like turn call over Scott Shaw, President and CEO of Lincoln Educational services. Scott. Please go ahead. Thank you Michael and good morning, everyone in light of what is an extremely challenging period in our country. We appreciate your taking time to join our call. This morning.
We have our entire board of directors, we hope impacted the cobot 19 pandemic on you and your families has been has limited as possible, especially from a helped perspective.
Also like to acknowledge the innumerable contributions being made by Lincoln graduates serving on the front lines in an effort to contain the virus, we thank them as well all the frontline responders in the communities, where we operate for their service.
Well many of you know the history of Lincoln Tech I'd like to take a moment to describe who we are as a company.
In 1946, our founder Warren Davies had a clear vision to serve our returning World War, two servicemen and women by providing them with hands on skills to support their families and build a better post War war.
For more beginning we possess the spirit of optimism dedication and service and over the years. We've added resiliency adaptability encourage it is the some of these qualities that has enabled us to effectively respond to the cobot 19 pandemic.
Furthermore, we've always believed that our graduates where the nation's unsung heroes, making significant contributions to the economy in their communities fine, but now its official approximately 90% of our students are pursuing careers that the U.S. department of Homeland security deems as a central critical load.
Extra workers from our licensed practical nursing and Allied health care graduates, who are testing people for the virus or helping them recover tour auto in diesel technicians, keeping the does the delivery trucks running our graduates are following their passion, while serving our society.
Encourage you to visit our web site Lincoln Tech de you click on our media Gallery to watch it two minute video saluting, our health care graduates, who sent us message a images of themselves on the front lines, along with words of encouragement in thanks.
I will later discuss our successful transition from on ground to distance learning, but first I want to share with you our robust first quarter results, which reaffirmed the power of our actions to solve the skills gap.
Despite this disruption in the cobot 19 containment effort, which were Lincoln meant rapidly executing the distance curriculum delivery format.
Cross 22 campuses, we had an exceptional quarter, we grew revenue by a healthy 10.7%. Our transportation is still skilled trades segment, and our health care and other professions segment. Each grew nearly identical rates for the period or average student population ended up by 6.6% This increased gross.
Substantially improved operating margins as we began to realize the planned operating leverage from various operating expense reductions and margin enhancement strategies over the last several years.
Both our transportation and skilled trade segment, and our health care and other professions segment. Each generated operating income that was more than double prior year results.
We've highlighted in the past our business model achieves high operating leverage as evidenced by our more than 70% improvement in profitability for the quarter. In addition, we achieved growth in both key outcome metrics for retention and placement rates, which improved 2.3% and 1.7% respectively for the quarter all.
All in all an excellent start to the year.
Now I'd like to discuss how we have successfully responded to the cobot 19 pandemic and our positive outlook on the future of Lincoln Tech.
And the latter half of March we implemented a plan to comply with federal state and local requirements to successfully means all of our programs to a distance education format.
Actions were two pronged first to take action for the safety and security of all students and employees and second so rapidly transition from on ground distance education.
On March 17th we announced our plans to switch to distance education and within 10 days, we had moved all programs online more amazingly, although over 11300 students only several hundred opted not to make the switch. This is a huge testament to the quality and capability.
Of our instructors, even though students would temporarily not had the opportunity to work in our hands on shops and labs or a clinical sites. They still chose to remain enrolled and continue to gain skills in insights from our real world trained instructors and speaking of our instructors last week was instructor and nursery appreciation week and.
Every Lincoln campus celebrated in honored are incredible educators.
The teams response as well as the students engagement was quite heartening technology with sex successfully leveraged to develop online course curriculum to ensure students could continue their studies from the safety of their homes are instructors embraced distance education and all of our employees working remotely having been provided with the equipment and technique.
Algae needed to perform their day to day duties, all measures being taken or in compliance with the regulations and guidelines put in place by federal state and local authorities across the nation. In addition, all student services, including admissions financial aid and career services are fully functioning remotely while campuses are closed.
In order to execute this transition to the distance curriculum delivery format. The management team developed new methods and processes in extraordinary short period of time, and then gained rapid regulatory approval. Many of our accrediting bodies and states are providing temporary solutions that enable students and most programs to graduate on time the reason.
From this exceptionally coordinated and well executed effort is that in addition to our average population rising 6.6% as of March 30, Onest 2020, our April Thirtyth level is up 8% from a year ago. So despite all the uncertainty and disruption caused by the cobot 19 pandemic our population continues to grow.
No.
However, we understand that not everything can be talk from a distance and so each week more students, especially those in our health care programs. We just stage in their education, when they need to be at a clinical site to gain the critical hands on skills needed for graduation.
Until now most clinical sites were closed and so each week. The number of leave of absence students was increasing as of May 1st We had 375 students who had suspended their education for this reason.
To address this issue we've received approval from the Accreditors and states do you simulations to deliver the required skills and other education required skills and our education team will be launching the simulations over the coming weeks. In addition, each week new clinical sites are reopening and as a result, we expect our el always to stay.
Belies didn't even decline in the near term.
It may 1st total leave of absence is are still below 10% of our end of period population as compared to rates in excess of 20% as reported by other educators in our space.
Well the cobot 19 pandemic has caused all of us to be more self reflective I believe it will be transformational for Lincoln and they're very short period of time, we have learned to deliver education services in a totally different way that provides enhancements to the student experience, while providing the opportunity for our company to drive down costs.
These opportunities are currently being examined and evaluated and would prove and would improve our ability to execute our longer term growth strategies as well as further improves the return on investment for all students.
Well I'm going to let Bryan go through the financial dynamics of our first quarter I'd like to focus on our student start growth, which has been the driving force behind our return to profitability.
You may recall that through the fourth quarter of 2019 Lincoln had generated nine consecutive quarters of student start growth. This metric is a primary factor behind our first quarter revenue growth of 10.7%.
As we entered March we were honor roll in appeared as though we would report the 10th consecutive quarter of student start growth. In fact starts were up 13.9% through February.
Our class calendars are not aligned across all 22 campuses and 15 plus programs. So literally every week, we may have a class start somewhere in our system, but at the same time, we don't have starts in every program every month. Unfortunately, the latter half a March included a fair number of start age which had to be postponed due to our CFO.
Using of campuses and the transitioning to distance learning. The good news is that we were able to reschedule. Most of these students to start over the next three months. Moreover, we successfully transitioned our admissions process from one being heavily focused on bringing students into our facilities to see all the equipment and training aides to Q1.
On being a 100% remote.
Our admissions teams have done an outstanding job with this transition as evidenced by April's robust start number of over 850, new students. This is our largest number of starts in April and over 10 years. Approximately 200. These students were scheduled to start in March which means that approximately 650 students started.
With the new remote admissions process and most had never been on a Lincoln campus.
Well the marketing landscape remains fluid as we all adjust to life, while being in locked down we're seeing strong response to our messaging the numbers students signing enrollment in green agreements continues to be up over last year. The demand by students for our central career offerings is strong and the productivity of our admissions teams has increased.
Also we are seeing increasing interest in our health care programs with so much attention being brought to the dire need for more healthcare workers, both because of the cobot 19 pandemic and overall need that existed previously.
Lincoln is ready and has always been ready to bridge this skills gap with our accelerated programs in real world experience teachers to rapidly train eager and talented students again to the success of our distance curriculum delivery format. We are actively enrolling providing financial aid educating and placing students.
Into rewarding careers across all of our programs.
With the passage of the Corona virus aid relief and economic Security Act or cares Act the federal government and the department of education recognize that students are being adversely affected by the disruption caused by cobot 19.
Lincoln move swiftly to apply for appropriate federal grants as a result, Lincoln will will receive a total of 27.4 million from the cares Act. The first 50% will go directly to our students and so far we have received about 10 million of the 13.7 million allocated to students. These funds are being.
Sent to students and as soon as the remaining 3.7 million arise we will distribute those funds as well.
As prescribed in the act. These students funds are being distributed to eligible students to offset the additional life expenses incurred as a result of cobot 19.
Lincoln will receive the second 13.7 million in funding sometime over the coming months and these funds may be used both for students and as reimbursement for some of the expenses incurred to implement our distance delivery format.
We are very grateful to the department of education for recognizing that students had been adversely affected by this disruption caused by the pandemic and providing these grants through the cares Act.
The Lincoln team has already begun planning to reopen campuses as soon as permitted and today. We are announcing that we expect seven campuses to be opened by June 1st our primary objective will be do ensure the safety of our students in staff, we will follow local and federal guidelines, including but not limited to social distancing no more than.
Nine students per one instructor staggered times for don't different classes and daily sanitizing of our campuses with campuses in 14 different states, we expect our return to vary by state.
Now I'd like to address our decisions today to withdrawal our for full year guidance that we provided back in February for the first two months of the quarter. We were well ahead of our internal budget and as a result of quickly migrating our students and faculty to the distant delivery format, we achieved double digit revenue growth and sharply improved profitability compared to the.
We'll go period as I mentioned earlier, our average student population at the ended the quarter was up 6.6% and advanced 8% at the end of April However, as we look out at the remainder of the year the lack of clarity as to when we will be able to reopen our campuses and what limitations will be imposed to ensure the safety of both.
Our students in our staff creates a tremendous challenge in forecasting our financial performance.
As a result at this time, we have withdrawn our previously disclosed full year 2020 guidance a decision we will reevaluate when our operating environment becomes clear.
Over the longer term given the dramatic rise in the unemployment rate, we anticipate demand for our programs will increase even further as it hasn't past economic downturns as the unemployed seek new paths to a better career.
Throughout the nearly 75 years of Lincoln's operations, we have seen increases in Leeds enrollment and student population during rises in unemployment and economic downturns and early analysis of our lead data from the past two months indicates that they are on the rise during the last recession between 2007 in 2000 and.
10, we saw consistent increases in Leeds enrollments in student population that Pete two and half years after the recession started.
However, given the dramatic an unprecedented rising unemployment during the past two months, one could imagine a much faster ramp up in our student population.
Obviously, we have to have campuses opened before we can service increased demand, but based on our early analysis. It appears that our marketing programs are working and once campuses are open we can turn our full attention to satisfying increased demand remember the same 22 campuses that we have today had approximately 18000.
As in students and generated over 80 million of EBITDA back in 2010 at the peak of the last recession, we are ready to serve the needs of any displaced worker looking to secure solid skills, which can provide a rewarding a central career with a lifetime of opportunity.
Due to the lack of visibility is one our campuses will will reopen and the full extent of what measures we will need to adopt to ensure they can operate safely under social distancing guidelines.
We.
Okay.
Apologize since that's the end of my remarks, I'll turn it over to Brian.
Thanks, Scott and good morning, everyone as Scott indicated our first quarter results were strong. Despite the challenges created by the Kobin 18 pandemic in March we're very pleased that we achieved positive EBITDA quarter for the first time in over five years.
We entered 2020 with positive momentum as our beginning population was higher by approximately 760 more suited.
And the prior year then during the pre covert period through February this momentum continue as students starts finish 14% ahead of last year. However in March the impact of impact from covered 19 for its clear force class starts scheduled for the latter part of the month to be postponed.
As a result, we ended the quarter with 2716 start down about 150 or 5% compared to the prior year.
Subsequently in April we more than made up for the first quarter shortfall, achieving a 30% start growth over April 2018.
We finished the quarter with 10900, a 47 active students 267, more or 2.5% higher than last year. This population increase grows. The 591 students were 5.5%. When we include units on leave of absence due to covert 19 circumstances.
Which I will discuss shortly in more detail.
Now turning to the financial highlights for the quarter.
First revenue increased 6.7 million were 10.7% driven by 6.6% increase in average student population and a 3.7% increase in average revenue per student.
Largest increase in average student population occurred in our health care and other professional segment up 12.5%, while our transportation and skilled trade segment increased 3.7%.
In March we anticipate the Kobin 19, we'd have an impact on our first quarter results as we incurred additional kobin 18 related expenses and experienced a small revenue decline.
As a result, we probably implemented measures to reduce expenses in order to mitigate the loss of revenue in subsequent quarters.
Second operating loss was reduced by 3.5 million were 72.3% primarily driven by revenue growth. We generated an overall operating leverage of approximately 50% on our 6.7 million increase in revenue.
We leverage our large amounts are fixed costs as population of revenue grows with minimum related incremental expenditures, resulting in more revenue contributed to operating income.
On a segment level operating leverage was approximately 60% at 50% for transportation skilled trade segment, and our healthcare and other professional segment respectively.
Third as mentioned, we had positive EBITDA of 500000 compared to negative EBITDA of 2.8 million in the prior year to first quarter is historically, our weakest quarter or the year in terms of EBITDA profitability. So this performance is especially encouraging.
Now turning to operating expenses.
There was an increase of 3.3 million or 4.8% to 71.4 million domain contributing factors were bad debt expense and instructional expenses, resulting from.
From a larger student population.
Bad debt expense for the quarter was was higher as accounts receivable group, primarily due to our revenue growth coupled with a delay in total for disbursements decline in collections in the second half from March mainly related to financial hardships due to covert 19 pandemic.
As a result, we're working with our students to provide financial relief and support during the healthcare crisis. Most recently as the environment began to stabilize we have seen an approved billing collections towards normalized levels.
In regard to corporate expenses and other costs, we had expenses of 8.2 million or 500000 over the prior year quarter. The increase is primarily due to increases in salaries and benefit expenses and approximately 700000 of expenses incurred as as a result of Covidien 18 part.
Finally, offsetting these costs were nonrecurring strategic initiative expenses incurred in prior year.
Now in terms of liquidity as of March 30, Onest, we had approximately 30.7 million of liquidity comprised of cash on hand of 9.7 million and a 21 million in availability under our credit agreement.
The care Zach will provide significant additional liquidity in 2020 through the following provisions first we've elected to defer the employer FICA payroll tax through the end of 2020 equating to an estimated 3 million.
50% or defer to mental will be paid by December 30, Onest 2021, and the remaining 50% will be paid by December 30, Onest 2022.
Second we are following current guidelines, which ways our obligation to return title for funds for any student that which rose during a payment period for a period ever more enrollment to to covert 19, we estimate saving over 1 million per month through at least through 32 to 2020.
As mentioned, we anticipate receiving a totaled 27.4 million from the care Zack higher education emergency really fun.
The majority of these funds will be used to provide financial support to our students.
In addition per guidance from the Department of Education, We anticipate a portion of these funds to be used towards offsetting costs incurred as a result of cobot 19, including costs associated with transitioning to and from our online platform.
And finally, we are currently value evaluating the mainstream lending program.
For the fourth midsize companies affected by Cobot 19, as a potential source of additional liquidity if needed.
Also were pleased to announce that we have been given some rent relief in the second quarter. Thanks to certain landlords workers Lincoln to support a story Kobin 19 pandemic.
Now expanding on the revenue impact from Kobin 19, first as Scott mentioned as of the quarter at 97% of our student population was active in the dial 325 students were under leave of absence suited Coburn 19, while this number increase to around 1000 students since March we expect a number to decline in the coming weeks.
As a reminder, revenue recognition suspended on leave of absence students until they are able to resume their education.
Second as noted earlier programs, such as welding and Cosmetology, which requires a majority of hands on training have been decelerated, while online as such these programs are being extended to allow students more time to complete their hands on labs. Accordingly revenue daily rate on these students were adjusted downward to reflect the longer.
Period over the longer period.
For the most part we anticipate this revenue to be recovered during 2020.
During the quarter, we continue to focus on plans to grow our business as we completed the Buildout of one welding program and made significant progress on the second.
However, certain program expansions were delayed due to covert 19 circumstances. Additionally, we decided to postpone other capital expenditure projects through the second half of the year in order to preserve cash and gain greater clarity about financials and our business landscape.
Keep in mind as we can you just as we continue to grow our business additional offering costs will be incurred which will temporarily cause operation leveraged to go down slightly however, as new programs are launched and grow our ability to leverage our growing revenue into higher margins will return.
And lastly, a reminder, our 2020 guidance due to the lack of visibility as what our campus will reopen and the full extent of what will be needed to adopt to ensure they operate safely under social distinct guidelines, we were drawing our 2020 guidance.
Thank you for your time today and with that I'll turn the call back over to the operator, So we can take your questions operator.
Thank you as a reminder to ask a question you will need to press Star then one on your touched on telephone to withdraw your question from the Q. Please press the pound key.
Please standby will be compile the kunaev roster.
Our first question comes from Alex Paris, with Barrington Research. Your line is now open.
Hi, guys.
Hi, Alex.
Congratulations on a really strong quarter I think you top thanks.
We should top my expectations on all metrics.
With the exception of starch and despite incurring those additional costs related to co. Good.
I guess I'll begin with starts.
Starts where we're very strong up 13.6% through February.
Obviously for the quarter. It was down 5% you took a hit in the month.
March.
My expectation is I thought you'd growth starts 3.2% for the quarter. So the delta is really about 200 students.
Now you say April you are up 30% to 850.
Just a point of clarification.
Those 200.
That didn't start in late March started in April I am assuming and what do you still had 650 new search right.
That's correct.
And.
You made any changes to your market it seems like a really good number.
Subscription fluids bye.
Kobin and on the rising unemployment, but.
Are you changing your marketing message changing your marketing mediums I think you have competitors I don't recall the other day that got some of the typical places they advertise life's work should things since you're not getting play that had to ship it or your marketing to elsewhere.
Yes, I wouldn't say that ours have been maybe as dramatic as that but certainly with marketing in general we're constantly reevaluating, it's a very fluid marketplace, and certainly one seeing more and more social media coming to into.
Playing a bigger part so our team is constantly reevaluating and constantly looking for those channels that are going to be the most productive. So thats just an ongoing thing I would say that one of the things that has changed though rich.
Is that people are at home so when they expressed an interest frankly, they're not as distracted by those things and have more time to spend with our admissions people and I think as a result of that.
Our admissions people are able to convey what we do and how we do it and the student seem to be very responsive to that so I would say, it's a lot of its due to the improvement that we're seeing just in the conversations that we're having with the interested parties, but marketing is always constantly evolving.
And then this is also sort of a remarkable starts number in the month of April given all this and uncertainty related to close it I'm assuming these new starch because campuses are closed had the started on line and that's really the tour. These students from started.
Yes, thats have been really one of the most exciting aspects of all this is not only are they starting online but for the first time, we have students have never been on one of our campuses kind of as I referenced our typical process would be to encourage come students to come to our campuses. So they can see how robust the facilities are and these.
Our students who are visiting our campuses live we obviously had videos and images up on our website, so they get to exposed to it.
But again, it's very encouraging news both for this period as well as we look to the future to figure out ways to further enhance how we reached students.
Okay, Great and then moving to Ela ways I think you said in the press release, you had 324 weeks leave of absence as of March 31st.
And now you have about 1000, so it looks like you're adding 150.
We are so yes, yes and.
And why is that.
I am assuming in some cases theres no online classes available for these students that are enrolled in their program. So they have no choice but.
Just stop and then I would assume two there's others that say what I will just what your campus. Your open again I'll take the leave of absence.
Yes, so so what's happening because certainly on the health care side external ships and being and clinical sites is a part of the curriculum and required for them to get.
Reached graduation, and in those instances, we've been able to work with the states in the creditors to replace the on ground with simulation and Thats being rolled out over the next couple of weeks and so students that aren't able to go to a clinical site will be able to do the simulation to get the hands on skills and knowledge.
That they need at the same time, though we are seeing every week even in certain states like here in New Jersey that is very much lockdown mode for cobot 19, even more doctors offices in hospitals are opening up and each day frankly more of our students are able to get back inside one of these facilities to do there.
Cynical work and so thats very reassuring as why in why we think it will decrease going forward the number of people in L. always.
So so that's how we can number is.
Based on everything that we know now and a gradual reopening of the economy is that alloway numbers sort of a peak or within.
Within.
You know very closely.
Yes, I would say that maybe goes up another 300, and but then I believe it's going to start dropping as well by that amount certainly by June 1st.
And then they'll come off a little a.
If they can do.
Stimulation, if they could get into the clinic and then if they could get into the campus rates. So as those things correct.
Come on we will start to see those low wage come off and not only to the students get to continue their education, but you get to resume recognizing the revenue associated with their enrollment.
Correct for the severance schools that are coming due to come back on on June June 1st.
Soon as they come back we'll start recognizing the revenue for that and they'll start coming off of the Elouise.
Although the also recognize revenue for the ones during the simulations you're going to clinical sites. Besides the seven that are reopening.
Gotcha.
And then speaking of reopening you said in the press release Dallas is reopening this week, which I assume it's the Grand Prairie campus.
And you will have seven in total open by June 1st.
What's next what's next after Grand Prairie.
We have Nashville, Denver, East Windsor, and New Britain in Shelton and then our Indianapolis campus. So again, that's based off of what we know today. Some days some days. These local officials tweak what they think but based off of what we know today. That's the starting date we anticipate.
With probably Nashville, and Grand Prairie, starting next Monday.
And then what is your thoughts for the rest of the cancer. So that'll be seven of your 22, what about the yes.
Other 15, what's your based on what you know today.
What would be next after that.
When should we have all these campuses open I know difficult, what's probably easier to say what will be last.
So I'm guessing Unfortunately, New Jersey, and New York, where we have seven campuses.
Would probably be last just given the severity, but with that said we are looking to see what we can do to accelerate that because in new Jersey, 100% of our students are 98% of them are in programs that are deemed to be essential infrastructure workers. According to homeland security in.
If you go on our website you will see pictures of our students we have lots of nerve LP ends in people and Allied health field, who were frankly truly on the front lines testing people for the cobot virus in so in a state thats looking for more support and in the healthcare field, we believe that way.
We provide a very important resource to the state. So we're trying to accelerate that process, but nothing's given but I would think that New Jersey, New York would be last and then the other states should come in up online and we're hoping over the following 30 days so by July Onest.
We anticipate our hope that if not every campus. The vast majority of our campuses are reopened it's just hard to know at this time.
Okay. So.
So not only in near the peak and low wage and I know youve withdrawn guidance, but.
But I suspect Q2 would also be the bottom in terms of its impact on your financials driven by the yellow is right because you're going to have.
They'll start to come back.
And.
And with most campuses open by July I would think we're going to back to somewhat normal operations I realize it's going to be.
Inefficiencies like nine to one student teacher ratios and things like but.
Is it reasonable to assume that second quarter, what kind of be the trough.
I would say so it's typically our trough in just given the scenario that you just laid out.
I think thats very logical.
For our revenue compared to prior yes, I would definitely agree expenses might drag along a little bit longer than that making up some overtime and with the nine to one teacher ratio that you mentioned, so that could be additional expenses and when we get more clarity on the other portion of the carriers that at the company can use maybe we can offset some of the.
Those costs as well for a transition is students from online.
Gotcha and then.
I guess lastly.
Given that it looks like based on what we know now Q2 being the trial.
The ample liquidity that you have.
Looking over the valley to the other side.
You should not only get back to normal, but you should derive benefit from the rise in unemployment.
And I would assume.
Given your success with the online programs.
Should we expect a.
Different approach to business going forward, maybe blended programs more so bottom line and the curriculum.
Definitely going forward, we're looking at that and creating and valuation that as we speak obviously it takes a long time to get the approvals and to get it fully design, but certainly this experience has proven to us that our students are very receptive to it and many are looking forward to a blood.
Ended program.
It will help us in our planning for the future create greater capacity for us, which means we can frankly have potentially smaller campuses and be more efficient.
As well as just the fact that everyone within Lincoln is working remotely.
And working just as effectively as they were before that can cause other opportunities for us to look for ways of delivering services to our students in a more effective way. So this is a really news assays.
Who knows how.
Dramatic this whole thing has been but for us as an organization, what we're going to take away from it will be very powerful I believe and help us good going forward.
And lastly, I guess based on everything that you know now it seems kind of rollout as you expect additional surgeons and.
Yes.
Two.
Store, providing guidance when you report next time.
Gladly as soon as we have some greater clarity, we will gladly provide guidance.
Okay, great. Thank you for Sq answering my questions appreciate it.
Thanks, Alex.
Thank you.
As a reminder to ask your question you'll need to press Star then one on your touched on telephone to withdraw your question press. The pound key. Our next question comes from Rohit Sharma with B. Riley FBR. Your line is now open.
Hi, Good morning, Scott, Brian Thank you for taking.
My questions. So I just wanted to.
Go forward in the same plan I think you stocks with great more in any color on.
Are they happening in one.
Hi, Graham more than the other or and.
How's that.
How would you explain the success and starts.
Sure it's happening it's having across the board there are always programs that one particular month might be stronger than the next but theres nothing that I would say really sticks out except that I would say we are seeing going forward some increased demand for our health care side.
That's just getting a lot so much attention I guess with the everyone's seeing what's happening in the news that that is certainly helping us.
And we just certain programs do remain very robust welding remains very popular.
Skilled trades programs remain popular.
But there's nothing really that jumps out as being like this is the only thing that's driving our growth, it's pretty spread out right and specifically to start increases in April.
2020 over 2018 were split 50 50 between transportation hops easily the numbers start so we've got segment.
Got into any indications or early indication that I know, it's early for fall quarter starts to get us sort of sense, because I know thats. Your is that your biggest quarter anything indicating.
Now today that Youre fall quarter starts are.
Intact or will probably show.
Yes.
Because of the weaker economy, and higher unemployment and any sort of indications on that today.
Yes, what I can share is that indications are good right now so it's still preliminary but certainly things are on the positive side definitely not on the negative side as far as interest coming in enrollments things of that nature, we still have a long ways to go between now and all.
I guess September October but.
But as of right now things are definitely on the positive side.
Got it and on the other ways again.
A remarkable given.
Some of your competitors are showing higher alloys are these how are the lowest here split are they.
One particular program more than the other or there well split across broke.
It's about 50 50 between hops and our auto and skilled trade side.
And then.
And so on hop side, it really does the medical programs that we have the which had these extra and ships on the auto side. It's really just it's kind of spread out across all the programs wherever we had an extra ownership.
Or there was some additional hands on training that they needed to take because the welding students are impacted but they're in our population, we're just earning less revenue on them, while they're in our population.
There are the students as Brian mentioned as well as or cosmetology students that were most anxious to get back into our campuses. The good news is as I mentioned, the 70 campuses that we're going to open up.
All of our largest welding programs I believe are in those campuses. So that will be a good benefit to those students there'll be able to get back on track, we'll be able to earn more revenue on them and they will be able to graduate sooner rather than later.
Got it thank you and so.
My.
Question on the expense levels.
Any.
Variability in your expense levels, given the fact that you can't recognize revenue.
During during the last quarter and this quarters. So on the other ways in any do you have levers to pull.
To control expenses.
Can you talk a little bit about that.
Yes.
In March.
We only lost I would say less than a half a million dollars worth the revenue due to the starts that we didn't get at the ended a month and people going onto the.
The yellow ways, but that's really you know we did have some like tools expenses associated with the starts come down consumables have been weighed down.
The most part a lot of that'll just be timing because.
While the students are online or not earning revenue we won't have the those expenses, but that's more timing marketing was down.
Pay for clicks has been a little bit down we were able to push out some our production to later half of the year, So marketing there some savings there as well but.
I mentioned art will have significant red savings almost about a half a million dollars.
Month of.
In the second quarter due to our Lloyd's working with us and actually.
To their credit.
Asking for to rent at all for the two months not even making up for it a lot of all landlords. So thats going to be a lot lot of savings there and then there is.
Savings.
Due to travel you know our policies as well, which is over almost over $100000 a month. So as we're online and not having you know on ground campuses. So there was a lot of savings there. Fortunately, we did for low about 100 employees as well.
So there are ways and you know in the month of April.
Fences due to what I mentioned came in the you know.
Very favorable to our internal budget and prior year as well.
So I know that you pulled guidance.
Is it fair is that you understanding that they did you should be able to make back to this missed revenue displace revenue within this year I mean, I mean, given given where what you think is the schedule right now all of the campuses reopening I mean, it is that fair assumption.
Yes, that's well that's we're assuming now obviously with the social distance, saying you know all that's going to play a role into that but we definitely believe at least the people on the yellow ways.
Today, we will make up all that revenue this year.
We got to see how the social distance, saying and.
Our facilities will be open longer you know trying to get to students in there to complete their own their clinicals, well, they're labs as well.
Got it. Thank you. Thank you may and my question to answer I'll take it offline. Thanks.
Okay. Thank you. Thanks, Ross Thanks for joining our call.
Sure.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to Scott Shaw for any closing remarks.
Thank you operator in closing I'd like to say that in my over 18 years with Lincoln I've never seen our organization more aligned and motivated to serve our students. We enter 2020 with tremendous momentum student population had been growing for nine consecutive quarters and whats continue to grow increased population and cost controls the navy.
Lincoln to dramatically increase profitability in the first quarter. Despite the negative impact of closing down campuses due to cobot 19, the organization rapidly rallied to move all programs and operations to a distance delivery model, which enabled us to continue to grow our population over prior year, even through April we are now implementing play.
Chance to reopen campuses as soon as permitted with seven campuses, representing about 40% of our students expected to open by June 1st and as we look to the fall in beyond we expect our population will grow as more and more displaced workers seek a better opportunity through a Lincoln Tech education, while the cobot 19 pandemic continues.
You create uncertainty in the near term Lincoln's future remains bright and we will be sharing our story with investors through virtual non deal road shows over the coming weeks, we look forward to updating you on our progress in August until then stay safe have a great day.
Ladies and gentlemen, thanks for your participation on today's conference. This does conclude your programming you may now disconnect.
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