Q2 2020 Lincoln Educational Services Corp Earnings Call
To participate on that portion of the calls you will need to press star one on your telephone. Please be advised of today's conference is being recorded if you require any further what's your sense. It's great start in cereal I would now hand, the conference over to your speaker today, Michael Polyviou with EBC. Please go ahead sorry.
Thank you Karen and good morning, everyone.
For the market open today Lincoln educational services issued its release reporting financial results for the second quarter ended June 30, 2020, as well as recent corporate development. The releases are available actuation portion of the company's website if.
W Dot Lincoln Tech Dawn you.
Joining us today I'm called Scott Shaw, President and CEO, Brian Myers, Chief Financial Officer, today's call is being broadcast live on company's website, a replay of the call will be archived companies' website.
Statements made by Lincoln's management on today's call regarding the company's business that are not just for historical facts.
So statement terms identified.
Award May well expect we anticipate drip plan intend estimate and continue as well or similar expressions are intended to identify forward looking statement.
Forward looking statements should not be read as a guarantee of future performance will result, the company cautions you that these statements reflect current expectations about the company's future performance or event and are subject to a number of uncertainties risks and other influences many of which are beyond the company's control than me influence the accuracy of the statement.
Projections upon which the segments.
Statements are based.
Factors that may affect the company's results include but are not limited to the risks and uncertainties discussed in the risk factor section of the annual report on form 10-K.
The quarterly report on form 10-Q vital Securities Exchange Commission.
Lets say, which are based on the information available at a time those statements were made and management's good faith belief that's half the time with respect to future event also look savings are qualified in their entirety by this cautionary statement Lincoln undertakes no obligation to publicly revise or update any forward looking statements whether as a result from new information.
Future events or otherwise after the date zero.
Now ill turn the call over Scott Shaw, President and CEO Lincoln Educational services Scott. Please go ahead.
Hey, Michael and good morning, everyone. Thank you for participating in our cold starts weakens continued operating and financial progress during the second quarter of 2020.
We hope that since we last talked with you in May the Pandemics impact on you and your families has been has limited as possible, especially from a health perspective.
Today I'm going to focus my opening remarks on how we've successfully managed through many of the challenges presented by the Cobot 19 pandemic to generate continued momentum within our organization I'll provide some comment on our short term outlook, although we're continuing to refrain from issuing guidance and update you on our growth initiatives.
And Brian will delve into our second quarter financial performance and then we will take your questions at Lincoln Tech our team, including our board of Directors management Faculty student in our corporate partners are actively.
And aggressively managing the challenges that presented to us by the pandemic as well as the resulting economic recession.
Today, we believe we've made the right decisions and have the extra executed our plans extremely well, while some uncertainties outside of our control remain we feel very good or the overall direction of our company what we're doing for our student and what we're doing for our shareholders from an operating perspective, we had an excellent second quarter we.
Fully executed on our plans to retain and support our diverse body of enrolled students. We grew student starts at a double digit rate. Our population is greater than last year. We generated positive net income for the first time in the second quarter in five years, we generated more cash in the quarter than last year, our debt levels are down in our lives.
What did he is 26 million greater than it was last year. At this time. In addition, we continued to strengthen our partnerships as employers increasingly turn to us to help them solve their skills gap challenges Terex Corporation, a global manufacturer of lifting immaterial processing products and services donated equipment to foster enhance.
It's diesel engine training at our Denver campus donation expands our partnership with Terex that promotes career opportunities for Lincoln student during their education and post graduation, we also just formed a partnership with Toyota or Columbia, Maryland campus and are already discussing expanding it to other Lincoln campuses.
And we are buttoning up on a proposal to provide training to a fortune 500 company at a new training facility that they just opened all in all a very strong and productive quarter for Lincoln Tech.
A recent achievements demonstrate our organizations flexibility in capability the entire team exhibited exceptional cooperation as we closed campuses to comply with local regulatory requirements transition to learning at all campuses entirely online and as of now reopened all 22 campuses our primary objective with the Rio.
Openings was and continues to be to ensure the safety of our students in staff.
Weve closely adhere to local and federal guidelines, including but not limited to social distancing where required no more than nine students for one instructor the wearing of masks, while on campus staggered times for different classes and daily Sanitizing out the campuses. Initially we brought back students who needed the hands on skills.
To complete their education and most of these students will be fully caught up by the end of this month.
Now we are providing all students with hands on training. So that they can progress that are normal pace through their program weve campuses, where students are back on campus a 100% the time, but most students are coming back onto campus for approximately 20% of their education and doing the rest online also to be clear the vast majority of our online training.
It's happening via live broadcast so students are interacting with their instructors just as they would if they were on campus.
We bring students back on campus in smaller groups. We're finding that the students are more engaged and we're able to cover more material in a shorter period of time all of these changes are leading us to explore how we offer our curriculum in the future. However, first we are seeking all necessary regulatory approvals to keep offering.
Occasion beyond December 30, Onest as you may recall the deal we stay tuned Accreditors gave all institutions temporary license to offer online training since we all were forced to shut down on ground learning.
However, since we don't expect this cobot situation to be ending by year end and we don't know with the current temporary licenses will be extended we've applied to offer hybrid distance education for all programs permanently.
Moreover, we are taking what we're learning about the good and the bad about distance learning in developing our new delivery model, which we expect will provide students with greater flexibility more engaging training and possibly lower expenses. We are still in the development stage, but im excited by the progress that we're making.
What has been particularly exciting during this tumultuous period, what's the willingness of our instructors to swiftly react in enthusiastically embraced the new instructional procedures.
Be them online or in the classroom and it was equally rewarding to see the student engagement, regardless of the learning format, but especially when they could get back in the lab our students loved the hands on training they receive an all of our curriculums is a key reason why they choose Lincoln over other schools I think are relatively low rate of leave about.
Since his during the quarter helps illustrate the engagement of our students as they move through our programs towards graduation.
From a financial perspective, while our revenue for the second quarter was down slightly as we had to slow or stop the progress of certain students who could not complete on ground lab work or visit clinical sites, we were able to reduce expenses to a greater extent, which resulted in increased profitability, Brian will share much more detail in his remarks, but ensure.
Sure well, we've had to make lots of operating changes to our business. We continue to make progress on our growth plans. Our transportation skill trade segment grew student starts by 13.5% over the second quarter of last year, which resulted in an increase in population of 2.3% or 170 students over prior year.
Our healthcare and other professions segment grew student starts 18.8% nor any population. This segment grew an impressive 17.9% for 640 students overall as we mentioned during our last call in May our leave of absence is had increased to approximately 1100 students, which was well below the 20%.
End of total student population levels reported by our peers, but high for a company we continuously reduce the leave of absence is and as of June Thirtyth. The overall total number was at 696 students or approximately 5.7% of our total population. This comparatively low number helps illustrate the level.
Student engagement across the Lincoln campuses, and our capabilities to rapidly pivot to a distance model and with many of the students or leave of absence is resuming their program. During the current third quarter. We usage, we should see a positive impact on our revenues as we finished the year as a reminder, when a student remains enrolled at Lincoln, but on a leave of absence.
We aren't booking revenue during that leave of absence.
A major factor behind our second quarter start growth was our successful transition of the admissions process from one being heavily focused on bringing students into our facilities to see all the equipment and training aides to one being 100% remote our admissions teams have done an outstanding job with this transition, which we continue to deploy.
Well the marketing landscape remains fluid as some regions, where we have campuses have reopened only to turn around in partially closed as cobot cases increased at high levels. Our messaging is generating strong response, the number of students signing enrollment agreements continues to be up over last year the demand by students for a central costs.
Their offerings is strong and their productivity of our admissions teams has increased.
Also the interest in our health care programs continues to build so much attention being brought to the dire need for more healthcare workers, both because of the covert 19 pandemic and overall need that existed previously.
Lincoln is ready and it has always been ready to bridge the skills gap with our accelerated programs in real world experience teachers to rapidly train eager and talented students.
When the pandemic forced us to close campuses in March.
Our team set out to proactively manage our operating costs.
You mentioned that our profitability increased in quarter I simply want to thank our organization for the quick response, we asked landlords for assistance and lowering rent curtailed travel Frole pros all new hires given the uncertainty and simply ask the campus is to be prudent with all expenses given our strong result, I'm happy to say that we achieved all of our goal.
Sales in this area.
With reopening of campuses the return of many of the students on leave of absence and the students start growth during the second quarter, we will be issuing more books and tools using more consumable supplies and occupying facilities that were vacant for up to three and a half months. In addition, we've deployed comprehensive social distancing measure.
Is that each campus in each classroom. The combined result of these development is that our operating costs in the third and fourth quarter are currently plan to increase over the second quarter.
In may the uncertainty surrounding the impacted the pandemic in our operations, let us to withdraw all for full year guidance. We provided back in February because we still face some of these uncertainties and a few others have been added to the mix, we will forego the opportunity to reinstate guidance. Today. However, during my remarks. This morning I have no.
Due to our outlook on a few of the operating cost metrics for the second half the year and Brian will offer additional comments during his remarks from a top line perspective, we've built into our operating strategies. The continued presence of cobot 19 for another 12 months.
At this point in time enrollments are increasing and as of today, we are operating under our new social distancing procedures at all campuses.
Longer term, we are continuing to pursue our growth strategies clung for new programs at existing campuses and perhaps a new campus. We just had a successful launch of an electrical program at our Queens campus and welding at our Melrose campuses. We also continue to explore tuck in opportunities that would facilitate additional growth, but nothing specific.
To report today, given the uncertainties caused by cobot and the upcoming election, we're being and will will remain prudent with using our cash, but we definitely expect to see opportunities arise that we will capitalize on.
I also want to highlight our recent changes that our board, but Austin the chairman of the governance and nomination Committee retired after serving more than 10 years on our board, but it was a former college president and actively involved with accreditation and he brought tremendous insights to our board discussions, especially around topics of curriculum and education.
We will miss his guidance and insights, but feel that dr., Michael platter will build on buds legacy with his own very unique background. Besides being a Harvard graduate with an MBJ for Morton Dr. platter has worked at or or at or with almost every form of post secondary institution, including Ivy League State schools Historic.
The black colleges and community colleges and most recently as the former President of Strayer University, we're excited and honored to have Dr. platter, joining our board.
Similarly, I could not be more thrilled to have Carlton rose joined our board Besides being a Lincoln Tech graduate cartoon Carlton is a highly respected professional and the transportation industry as the president of global fleet maintenance in engineering for U.P.S. Carlton overseas, a global workforce of over 8000 technicians.
And more than 380000 vehicles.
I will turn as remain active in involved with our schools often speaking to students and participating and scholarship events Carlton represents the true power of Lincoln Education.
We could not be more honored to have been now helping to lead the organization that help unlock has potential.
As we look out into next year, we announced in July that Jeremy Snapper had joined the Lincoln organization as an entrepreneur and residents and would work with our leadership team over the next six months to identify new opportunities around student acquisition curriculum delivery and job placement Jeremy as a well regarded thought leader in closing the middle skills gap keen on Lincoln team.
Leave closing this gap is a critical component to rebuilding Americas Middle class and we are actively working with Jeremy to flush out ideas that could be integrated into our operate operations beginning in 2021.
We continue to believe that with the dramatic rise in the unemployment rate and the increasing realization that many of the unemployed won't have jobs to come back to once the nations economy is fully reopened demand for our programs will increase even further as it hasn't past economic downturns as the unemployed seek new pads to it.
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. During the last recession between 2007 in 2010, we saw consistent increases in Leeds enrollments in student population that Pete two and half year.
Or is that the recession started.
However, given the dramatic and unprecedented rising unemployment during the past five months, we continue to imagine a much faster ramp up in our student population beginning in the fourth quarter of this year and continuing into 2021 remember the same 22 campuses that we have today had approximately 18000 students and.
Generated over $80 million EBITDA back in 2010 at the peak of the last recession, we are ready to serve the needs of any displaced work are looking to secure solid skills, which can provide a rewarding a central career with a lifetime of opportunity.
A key factor behind our success is our focus on training and education for essential critical infrastructure careers approximately 90% of our students are currently pursuing careers that meet the U.S. Department of Homeland security definition for central critical infrastructure workers. These are well paying stable career.
Is that are enabling our graduates to establish themselves soon after leaving Lincoln.
We also are proud of the diversity of our student body, which is preparing students from a broad range of racial ethnic ethnic social and economic background for those well paying stable careers I just referenced as a result, we're helping expand the country skilled labor force, while expanding the participation and our country's long term.
From economic growth as we enter the second half of 2020.
The Lincoln student body breakdown by racial background is 31% white, 30% Hispanic 20% African American and 10%. Other this diversity is helping set historically underrepresented groups on a path to economic success, which we view as a key component and narrowing the wealth gap that different grew.
Oops in this country currently experience as well as rebuilding the country's middle class.
Now I'd like to turn the call over to Brian for a review of our second quarter results and additional comments on our response to the pandemic Brian.
Thanks, Scott and good morning, everyone I want to start by thanking the entire Lincoln team for their tireless efforts during the quarter navigating through 19 pandemic challenges, we're very pleased with our strong financial performance and believe it highlights Lincoln Lincoln's distinguishing strength, including our diverse offerings of high demand Korea program.
And our success and quickly transitioning our programs emissions and education process first will remote delivery and now to a hybrid approach now that our campuses have reopened.
Notably as Scott mentioned, we achieved net income in the second quarter for the first time at over five years. Despite the challenges of these unprecedented times. This is an important achievement due to our seasonality, which in recent years has delivered net income almost exclusively in the second half of the year.
Net income was 800000, nearly a 4 million improvement for the quarter from from one year ago. Similar Similarly, EBITDA for the quarter was 3 million, representing a 3.2 million increase for the quarter compared to last year. The EBITDA improvement was driven by a higher efficiencies and cost.
Savings, which I will discuss in detail shortly.
We also had significant students start growth of 15.2% for the quarter over prior year upon Sony approximately 3430, new students in Q2. This very strong performance demonstrates that the underlying organic growth in our students start continues.
Our year to date.
New student starts are ahead of last year by 5.3% with the only interruption in growth over the past two and a half years coming in the first quarter when the pandemic interrupted starts in the month of March.
In addition, our positive trends with starts have continued into the third quarter with July starts ahead of prior year.
Moreover, our ending population increased by 7.5% or about 800 students. After excluding about 700 students who elected to take a leave of absence or alloway due to the pandemic about 30% of these students were out on leave of absence due to lack of exercise should sites and hands on.
Labs during the quarter that was necessary to complete their programs, we into and we anticipate the majority of these students to return in the third quarter.
As for the rest of the Elouise students, we are diligently working to reengage them now that our campuses have reopened and we can deliver a hybrid education experience any additional re entries would add through our robust rural robust population.
Another key highlight in Q2 was a positive cash flow from operations of 3.9 million metric is calculated excluding the additional contribution from the federal care Zach funds. We have received in the risks in response to the pandemic. This this is a significant improvements since we generated only 100000 cash flow from operations.
In Q2 of 2019.
Now, let me share some additional financial highlights, including the impact from the pandemic.
So successful transition to remote learning limited the overall financial impact from that pandemic as we experienced a slight revenue decrease that was more than offset by cost reduction in may and mainly attributed to our campuses being closed during the quarter.
More specifically revenue of 62.5 billion for the quarter was down slightly by 1.1 million compared to the prior year or two to three main factors. One revenue differ deferral of 900000 are related to programs lengthening of our cosmetology programs as well as or a few of our nursing programs while online.
We extended the linked to these programs by approximately two months and expect to recognize is deferred revenue during the second half of the year.
Two non tuition revenue reduction of 800000 in connection with student credits issue for dorms and meal fees. During our campus closures. We are we are waiting further guidance from the department of education, but didn't anticipate this to be recovered through the federal care Zac.
And three revenue was lower due to our alloy students since we do not recognized revenue on students out on alloway.
On the positive side revenue benefited from our largest student population during the quarter.
Also we had a positive results at our operating income level operating income was 1.2 million for the quarter, representing a 3.3 million increase over prior year.
This improved improvement resulted from lower operating expenses of approximately 4.4 million or 6.6% largely due to facilities instructional sales and marketing expenses.
Facilities expenses were lower by 2.1 billion, resulting from rent abatements for Q2 at several locations solely 500000, coupled with general facility cost savings during campus closures, we are very thankful to our landlords for inviting this rent relief.
Also in structural expenses decreased 1 million driven by savings in payroll expense and consumable supplies cincy, Susan students were mainly online throughout the quarter.
In addition sales expense decreased by 900000, resulting from a significant drop in our admissions reps travel travel expense combined with lower salaries due to furloughs.
And lastly, and lastly, marketing investments decreased about 500000 due to a timing shift from Q2, the Q3 production.
While we will while while we realize these cost savings in Q2 I want to underscore that we anticipate anticipate most operating expenses returning to normalized levels for the remainder of 2020 as operations also returned to a more normalized state.
We expect CERN certain sooner related expenses, such as consumables and books and tools to increase over prior year or two to higher active population. However to offset we anticipate ongoing savings and travel expense compared to prior year as we limit personnel travel for the safety of our employees and can.
Continuing to conduct emission processes remotely.
Phil our entire team remains highly focused on cost optimization to further improve our financial performance.
Lastly expenses.
Expense corporate expenses remained essentially flat at 6.4 million compared to prior year and interest expense decreased 500000 for the quarter over prior year to 300000, as a result of lower outstanding debt compared to a year ago and lower interest rates as a result of financing transaction, we completed in the fourth quarter of lift.
Sphere.
Now turning to liquidity as of June Thirtyth, we had approximately $32.5 billion of available funds compared to 6.5 billion a year ago. Our available funds at the end of Q2 consists of 21 billion of availability under our credit facility and 11.5 billion of net cash and cash equivalents.
Excluding the federal Cares Act funds.
The combination of our improved financial performance and the financing transaction that we completed in the fourth quarter of last year have allowed us to significantly strengthen our balance sheet.
As such we reduced debt by approximately 7 million, while increasing our restricted cash by over 5 million.
We generally we typically generate cash flow from operations in the second half of the year due to our seasonality and despite the pandemic. We believe this trend will continue in 2020.
In terms of the Federal Care Act funds, we have received a total of 27.4 million in two parts for the first part Lincoln has received 13.7 million earmarked for students to offset there additional expenses related to the disruption of school operation to date, we've distributed 11 play.
1 million to almost 13000 students and we expect to distribute the remainder of the funds over the next few months.
For the second part leasing Lincoln also received 13.7 million, which may be used for the company's costs associated associated with significant changes to the delivery of instructions as a result of into pandemic or towards additional aid to students for the purpose I did I just described.
As of June Thirtyth 2020, we utilize 1.3 million of these funds to cover eligible expenses, which which largely related to the purchase of laptops for us tenants for our students who otherwise did not have access to remote learning while our campuses workflows recorded we were 1.3 million.
In credit to expense to offset the impact of RPL year to date.
And lastly, we regarding our 2020 guidance during the first half of the year our year to date student enrollment metrics starts and population and profitability continued to exceed last year's levels. While we have provided an outlook for the second half of the year on some operating metrics. This morning, we are still experiencing.
Several operating variables that can hit continue to be impacted by them pandemic. Given these uncertainties, we have elected to postpone the guidance of 2012.
Postponed the issuance of our 2020 guidance and we'll continue to evaluate this decision as a year progresses.
Thank you for your time today and with that I'll turn the call back over the operator, so we can take your questions operator.
Thank you So reminder, ladies and gentlemen.
Question just start Juan.
Telephone keypad to withdraw your question press the pound tasking, please standby, while we composite cans.
Okay.
And our first question, Alex Paris with Barrington Research.
Hi, guys congratulations on a quarter.
Thanks, Alex Good morning, good morning.
I have a few questions.
Beginning with starch.
Got it starts were obviously quite strong in the quarter, we had expected that given your commentary on the last call that you got some lift from.
Related delays that push.
From.
Q1 to Q2.
Okay.
Come to pass as expected first off and second.
Have you noticed any lift in terms.
Two coal.
Yes.
So far I realize it's Mike.
Paul to urban phenomenon, but I'm wondering what you're seeing today, even which you seem to date.
Yes, I'll take that yes, we did get.
Some carryover as you mentioned from the first quarter into into the second quarter kind of as expected.
Enrollments remain very strong, but I can't say that I see a big uptick as of yet because of the unemployment levels I would anticipate that happening frankly later into the fall.
We see Theres still.
People I guess it stop but it may get screens reinstated that we're receiving the supplemental uninsureds.
Benefits.
It's summertime so people for navy enjoying the summertime and what I, what I anticipate is as the fall kicks in as summer comes to close as people realize it may be their jobs are not going to be there are come back or maybe the government second provide them with as much assistance.
We will start seeing more of an uptick but right now I see some strength in the healthcare side I think mainly because of just demand and interest in just theres lots of talk about healthcare, so thats, certainly up a little bit, but otherwise I don't see the big uptick that I know is coming right and the only thing I'll, let Alex we did get a little lift from starts.
Going from March into the second quarter, but our year to date starts are over prior year by over 5%.
Good point, Thank you and then inquiries or are strong what's been the productivity.
Okay.
Show rates.
Yes, what we're experiencing is that our teams are doing better. So from the standpoint, we are definitely are enrolling more students than we have in the past.
Because of the strong enrollment some of our show rates have gone down but all in all we're still growing our population, we're finding that the admissions folks frankly, just being able to operate virtually and speak with the student seem to be.
Converting more of the leads into enrollments at a much higher rate and thats driving overall growth for us and it's something that we're exploring and trying to understand so that we can continue that success going forward.
Great and then.
At the end of quarter, you had 696 students.
Low wage.
You are working down.
When do you expect that mill.
Good day ladies.
Hello, ladies will be completely restarted.
Yes, well I don't expect all of them to restart to be honest with you I would say that maybe up to two thirds of volume will finally, just not want to wait around for on ground opportunities I would anticipate at least about third of them are out there because of either they haven't had the chance to do as much on ground work as they were they.
We need to to graduate so I'd imagine definitely get leased a third of them back but the other two thirds.
Probably get some of them back, but I think some of them are just there just to adverse to doing things online. So it's all added all potential added population since we don't count it in our population today.
Correct and one thing I'll add is by the end of we're anticipating body ended the third quarter really to have very few students the left on L. away.
Got you, Okay all right.
And then.
All your campuses the reopened now which is great.
Obviously, there has been social distancing restrictions federal state local.
Yes.
Hi, good things been steadily.
Better.
Or are they about the same overhead.
Okay.
Yes, I'd say, there's been no changes in the restrictions that had been imposed on us.
What is getting better as our just execution of dealing with the social distancing and in bringing students in on multiple shifts and getting more.
As I will say getting better at bringing students on and having them do their training in the labs for shorter period of time, we've gotten much better that scheduling. So it's becoming more effective but we haven't experienced anything that either increased our ability to bring more students on or decrease the numbers too.
That we're bringing on to campus to date.
All right and then I guess my last question for now.
What are the long term implications of that on your business I think you've touched on it a bit.
Prepared comments blended learning.
Yes.
In Sweden recession will drive higher.
Higher starch.
Should drive higher retention in the future.
Maybe just a little additional commentary on what you.
Expected postcode that Lincoln.
Oh, yes, I think that we're going to emerge from this a much stronger better resilient company. We're definitely learning that we can do a lot more remotely than we ever thought we could do before we're definitely hearing from our students what aspects of distance learning they enjoy and as well as what aspects. They don't enjoy we know that going forward, we will definitely.
Have a blended curriculum, some sort and this whole.
Nightmare experience whatever you want to call. It is really opening our eyes to new potential opportunities.
Expectation is at Lincoln will be more efficient and we'll be doing things more virtually we'll be doing things in a better way and I think that it will attract new people to our to our education model I think it's going to be very positive once we get through all this.
Well, that's great. It sounds like the worst is behind you and the best is yet to come. So congratulations. Thank you for taking my questions.
Thanks, Alex Thanks cells.
Thank you. Our next question is some Raj Sharma with B. Riley.
Hi, Good morning, Rob Scott how are you doing.
Good relations congratulations on getting results I just wanted to understand the the revenues.
For Q2 little bit better I know that so the average quarterly tuition rate seems to be down year on year and as you guys noted.
Because of deferred revenue non solution costs low ways.
Can you help me understand what was the overall cobi impact on revenue would have been.
What would the revenue reporting.
Have been had we not had cold it.
On this level enrollment.
Hi, Rob ill take that first so as we disclose when we talked about.
Extending some are the graduation dates that was like 900000 as well as you know the housing for our own dormitories of another I think eight hundreds so that was like 1.7 million, but I don't have to you. If all the students that were alloway if we are.
Earned the revenue on those I don't have what the impact.
That would have been material yep yep.
So you would just I mean, I guess for the calculation you would assume that those will yellow ways that were absent.
It was a record those old there was no revenue recognition core most of the quarter Opex number two weeks in the quarter.
Right and the ending up 700 started with more Ela ways. You know they came down to 700, so we would either had more revenue or.
Correct.
So source of really good what.
Saw some really good.
Quarter, and how what they're looking for the fall quarter and also.
Could you help me a little bit what I show rates.
Okay go ahead I'll just start in my prepared remarks, we did.
Mentioned, we gave a little insight into July withdraw our thoughts are ahead of prior year July so thats a good metrics.
Yes, so thats about as much guidance as we're going to give but everything is moving in the right direction and looking very positive that's all I can say.
Right right. So the show rates are trending okay, as well I mean, I'm just trying to get.
A lot of uncertainty with students and so.
As a lot of reticence on their part to go through course work.
[music].
Yes, there may not as I mentioned in my remarks article, which offers to show rates are down a little but thats simply because of its somewhat them that are enrollments are up so much higher we're finding exceedingly high productivity with our admissions folks and so I wouldn't say that theres hesitation on students parts to come to us.
Any greater than it ever was in fact, our high school starts were quite strong for the quarter and as you may or may not know many of those high school students are relocating to come to us and we didnt, we frankly exceeded our high school budget. So we're seeing no real unusual hesitation whatsoever on site.
It is part.
Because of this covance situation.
And just last question so on the enrollments do you see.
Sort of a recessionary or unemployment rate related.
Pickup in starts you see there's a there's going be a lag or do you see that sort of happening.
Third quarter.
And the first quarter.
Yes my activity.
Yes, I definitely don't feel like we're seeing it yet.
I would expect it to happen certainly in the latter part of the fall.
Just given how things have happened in the past Odyssey.
This is a bit as a different situation.
But I definitely see strong interest, but I don't see something causing the spike that we saw during the last recession, but it did take several months for that to occur.
Great. Thank you so much again, congratulations and I'll take this offline.
Thanks Frank.
Right.
Thank you. Our next question is time, Steven Frankel with colleagues.
Good morning, good luck to try to get a little more insight into the pipeline. So.
Could you give us maybe some numbers on the growth in contracts and the growth and leads on a year over year basis.
Yeah, we don't we don't disclose that level of detail Steve.
Going forward.
All I can say is as Brian mentioned in his remarks, we had a very strong July.
And you see good indications going forward.
For growth.
In a nice level.
Consistent with growth was historically and I would anticipate that with the recession sinking in and definitely out there and as people get more and more comfortable.
For thinking about their future and maybe going back to school.
I would anticipate as as I just said later in the latter part of this year.
I am hoping are anticipating increased growth because of the recession.
Okay, and if you adopt blended learning it sounds like youre going to permanently adopt blended learning is that a material reduction in your.
And your fixed costs going forward.
Yes, Sir.
Yes, not not yet because obviously, we have all the existing fixed costs that we have what it does do though as we look to open new campuses. We can operate in a smaller footprint going forward simply because some of the education will be delivered online.
And obviously once it is rolled out there there could be some efficiencies I would anticipate receiving efficiencies, but it's not going to be I would say a meaningful number in the near term.
Okay and then.
You did a very good job knocking down the Ll AIDS.
In the in the quarter still some work to do but but good progress.
It is some of that a reflection of the fact that relative to your competitors you tend to have a larger commuter footprint than a destination.
Yeah, I think Thats Yep, I think thats exactly certainly one of the drivers to at our students are able to come into a campuses for 23456 hours a day and then return home.
So it's certainly would be more challenging if they had to make a commitment probably to relocate unpaid housing for an abbreviated day.
Okay and.
With that new model in the focused on online you made any changes to your marketing strategy, there the messaging or channels, you're using to attract potential new student.
No. We haven't made any changes due to online training or things of that nature as of yet. So we certainly are always looking at changing our channels and trying new things in order you tracked our existing students, but until it really becomes much more of a a part of who we are and we can articulate clearly the benefits and and why.
Hi student should be excited by it.
Basically continuing with our same form and messaging and our advertising, but as I said, we're constantly exploring new forms of social media other channels to in order to attract students and find where our future potential is.
And my last question.
It's the job market currently look like for those that are graduating this quarter next quarter or what should job board telling you.
Well, what we're seeing is that think orders are picking up and actually we just did a survey of a number of.
Of our employers and the ones that respond we actually just is two days ago and 70% of those that responded said, yes. They are hiring so we're seeing an uptick there certainly are certain markets in certain areas where.
I'll say the opportunities are less but overall.
We are seeing an uptick and we recently have had an uptick in our placement rates over the last couple of weeks. So I think that things are becoming back to more normal.
Great. Thank you so much.
Thank you.
Thank you and I, probably nine that ladies and gentlemen to ask a question you want me to press Star one on your telephone.
And our next question is kind of Austin model with Canaccord.
Hi, Thanks for taking my questions.
You mentioned shifting some marketing spend from Q2 to Q3 can you elaborate on that and also can you speak more broadly about the changes you're making to your marketing channels.
Sure. So that did change that we made was simply one on production, we're creating some new TV advertisement and just given the uncertainty we just figured we could a delayed the launch of those new TV ads. So we moved about 500000, Brian from the second quarter to the third quarter in production costs.
Overall for marketing.
What I can share with you is it's a day to day battle always trying to figure out what channels are working what channels or not obviously given the covance situation. We don't have events, taking place that used to be one of the sources of new leads that we would get and so we've reallocated resources there.
Probably mostly into more social media channels to get our word out to get more engaged with the students.
And try to get exposure wherever possible obviously, the internet is still driving the vast majority of all the marketing dollars that we're doing we have increased in certain markets, where we've seen opportunity some billboards and things of that nature and we're exploring some other new channels, there's lots of creativity out there for ways that people are looking.
To get.
People's attention in this new environment when people are maybe staying home more and not getting going out. So that's really about all I can share with you, but the one thing I'll add we did move some production into Q3, but we think there are some opportunities out there for marketing. So we look we will look to spend some.
Digital marketing versus Q2, and even versus Q3 of prior year as well.
Got it that's that's quite helpful.
And then my second question is given what we're seeing in healthcare sector right now and knowing theres a lot of demand for those professions going forward.
Can you talk a little about the trends you saw in your healthcare segment during the quarter and maybe how you expect that to trend going forward.
Yes, we're definitely seeing strong response, which I think is great for all of US who may need healthcare in the future certainly people that want to health and serve and help others get better seemed to be attracted to that sector and all the attention that is out there in the media about the need for healthcare workers incentive.
Scaring people away is certainly I'd say attracted a lot more people to us. So we're definitely seeing some ups upswing, there, especially around our our nursing programs and I would anticipate that that will continue going forward because even without the pandemic as we all know with the aging population. There is a strong need it's just such a great professor.
And for people because.
In work anywhere and they don't never seem to be unemployed.
Great. Thank you.
Yes, my pleasure thanks for the questions. Thank you.
Thank you and this concludes our DNA session part today.
Turn the call back to Scott Shaw for final remarks.
Thank you operator in closing during the second quarter, we began to rebuild momentum that the pandemic de railed in the first quarter. We've regained significant students start growth increased student population and achieved net income during the second quarter for the first time in five years, we reopened all campuses under rigid operating procedures to.
Protect our instructors and our students and we're growing enrollment as we head toward the fall as more and more displaced workers seek a better opportunity through a Lincoln Tech education. Furthermore, we're looking at new ways to do to deliver our industry recognized curriculum as technology needs change and we are exploring.
The new training opportunities and revenue streams also over the past six months, we've expanded our board both a number and talent while the cobot 19 pandemic continues to create uncertainty in the near term Lincoln's future remains bright.
Finally, I'd like to welcome our new shareholders and thank the shareholders, who have stayed with us over the past several years over the past three months Wall Street has begun to recognize our progress in our potential.
Our shares have risen approximately 100% since reporting our first quarter results on may 13th. Furthermore, our average daily trading volume has increased by nearly fourfold. We appreciate this new interest and look forward to updating all of our shareholders and team members on our progress in early November until then stay.
Safe and have a great day, thanks, everyone.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
[music].