Q3 2021 Lincoln Educational Services Corp Earnings Call
Good day, ladies and gentlemen, welcome to the Ellington indications Services' third quarter 'twenty, One earnings conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
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As a reminder, this conference call is being recorded.
I would now like to hand, the conference over to Michael <unk>, Sir you may begin.
Thank you Blue and good morning, everyone before the market opened today Lincoln educational services issued a news release reporting financial results for the third quarter ended September 32021 the.
The release is available on the Investor Relations portion of the company's corporate website at Www Dot Lincoln Tech Edie.
Joining us today on the call are Scott Shaw, our president and CEO, and Brian Meyers Chief Financial Officer.
Today's call is being broadcast live on the company's website and a replay of the call will be archived on the company's website.
Statements made by Lincoln's management on today's call regarding the company's business that are not historical facts may be forward looking statements as determined identified in federal securities laws.
The words May will expect believe anticipate project plan intend estimate and continue as well as similar expressions are intended to identify forward looking statements.
We're looking statements 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 or events and are subject to a number of uncertainties risks and other influences many of which are beyond the company's control that may influence the accuracy of the statements and the projections upon which the segment and statements are based factors that may affect the companys results.
<unk> include but are not limited to the risks and uncertainties discussed in the risk factors section of the annual report on Form 10-Q, and the quarterly report on Form 10-Q filed with Securities and Exchange Commission.
Forward looking statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to the future results or events.
We're looking statements are qualified in their entirety by this cautionary statement and Lincoln undertakes no obligation to publicly revise or update any forward looking statements, whether as a result of new information future events or otherwise after the date thereof, now electric call over Scott Shaw, our president and CEO of Lincoln Educational services.
Please go ahead.
Thank you Michael and good morning, everyone. Thank you for joining our call to discuss Lincoln educational Services' recent financial performance and corporate developments.
Our third quarter financial performance came in better than we were expecting when we last talked with you in August our students starts were better than plan and graduate placements continued to be exceptionally high due to the persistent increasing demand from corporate America for our skilled graduates we continue to expand our corporate partnerships initiate.
The launch of our new and enhanced automotive curriculum in mid October and continue to invest in various programs and strategies designed to foster growth over the short and long term our.
Our financial results were impressive we grew the top line, 13% grew operating income nearly 50%. Despite some inflationary pressures and more than doubled the amount of cash generated from operations to some $16 million.
As of September 30, our unrestricted cash position was up some 200% over the same period a year ago. This figure includes none of the net proceeds from the sale leaseback transaction, which was recorded in the fourth quarter.
For the past several quarters, our team has demonstrated a commendable ability to respond to the rapidly evolving dynamics introduced to our operations due to the COVID-19 pandemic for instance, we discussed last quarter, how high school closures during the past academic year had severely restricted our ability to meet with students on.
Campus and as a result, we expected our third quarter starts to be off as compared to our strong third quarter 2020 start level in August we anticipated third quarter 2021 overall starts could be down several hundred students temporarily interrupted our string of quarterly student start growth. However, our team worked with our camp.
Management to implement a variety of special initiatives and the result was a sharp reduction in the actual start decline overall student starts during the third quarter declined by only 80 students. Obviously a marked improvement from our outlook in August the activities.
These in programs implemented in August and September have carried over into October and as we speak with you today, we believe we will achieve 7% to 8% start growth for the full year.
Last quarter. We also outlined actions we were pursuing to unlock value in our owned real estate, while eliminating our bank debt through non dilutive transactions in September we reported on agreements for two such transactions one of which.
Closed a little over a week ago, the sale leaseback transaction of our Denver in Grand Prairie properties was completed for a total sales price of $46 5 million in turn we've extended our commitment to these two markets and campuses by entering into 20 year leases for both facilities by all measures both campuses are.
Consistently among our most successful and the proceeds from the sale leaseback transaction has gone to strengthening the entire Lincoln organization in two ways first on October 29, we repaid the entire outstanding balance of our bank debt, which stood at nearly $17 million second we increased our free and available cash.
Cash by approximately $28 5 million.
Vastly enhanced balance sheet now provides ample resources to fund our strategies to prudently expand Lincoln's ability to help American employers attract trained employees while at the same time, helping American workers gain the skills needed to fill high paying stable career opportunities. The balance sheet also provides additional.
Financial strength to weather any potential interruptions to our operations like we experienced in March of 2020 due to COVID-19.
A second transaction to unlock the recognized value of our real estate assets and capitalize on the strong commercial real estate market involved an agreement to sell our Nashville facility, which we also announced in September. This transaction is expected to close during the first quarter of 2022 and should increase our cash position by approximately 30.
$4 million is part of a long term effort on Lincoln's part to build on our tremendous success in Nashville, as we execute our plan to develop a more efficient facility to support our long term growth initiatives in this dynamic market.
After the Nashville property sale closes we will continue to occupy our present facility until we complete the development of the new campus.
Some of the proceeds from the real estate transactions will fund our internal growth strategies. For example by the time, we open the doors of the new Nashville campus, we expect to invest about $15 million. In addition, we have selected a market for our first de Novo campus in over a decade and remain on target to open this new campus by the end of 2022.
We're about a year from now we also have identified five additional markets, where our corporate partners have expressed an interest in or entering and we have determined that there are good growth prospects our balance sheet now puts us in a position to thoroughly evaluate these opportunities as well as execute on those we believe can generate a suitable return on <unk>.
Our investment.
We also continued to invest in our existing programs and curriculums to ensure we are using the latest training tools to educate our students on our latest technologies and skills for instance, the October launch of our new core automotive curriculum as I mentioned earlier provides even more hands on skilled training and introduces highly engaging video animation.
<unk> in the game and gamification of exercises. In addition to the new electronic resources. We've also added more hands on exercises that will increase the skills of our graduates thus, making them even more valuable to their employer further we've incorporated more training for electric vehicles with even more to come as our.
<unk> fleet of cars and trucks increasingly becomes electric our philosophy is to provide our students with the best training and opportunities that we can over six years ago. We saw the benefit of requiring all automotive students to have a laptop on the first day of class since they were using them in the dealerships on a daily basis and since new and.
Engaging curriculum could be delivered on these laptops. We are now moving to the next level that further leverages advances in technology. This new curriculum should be fully rolled out to all of the automotive campuses by the end of next year.
Demand for our graduates by employers and the placement of our graduates into well paying positions continues to improve as the economy rebounds more than ever the pressure builds within corporate America to identify new and innovative ways to recruit train talent to which workforce to meet growing demand as well as fill each company's skills gap given.
Our proven track record of helping companies find as well as retain that talent interest from corporations to form partnerships to help them recruit and train personnel to help them narrow their skills gap and meet the increased demand for their goods and services continues to grow.
During the quarter, we launched our innovative program with Republic services with Lincoln, providing training to republics employees at their state of the art Dallas facility, rather than at Lincoln campus. The 12 week, 100% employee paid medium to heavy truck training program assist Lincoln Tech graduates with the transition into the Republic services.
Organization as well as serves to Upskill existing Republic employees. This is another example, how we seek to help our corporate partners develop the skills needed to meet their growing demand, while providing our graduates and others with exciting stable career opportunities. The Republic partnership also illustrates the creativity and custom.
<unk> Lincoln is uniquely positioned to provide corporate partners. We also continued to enhance our relationships with Oems. We opened a second VW program at our Indianapolis campus and we expanded our Mazda program to New Jersey and hosted a Mazda leadership team meeting in New York to discuss the challenges in finding talent.
And how we can work together to assist Mazda and building their technician pool as they continue to experience growth.
I'd be remiss in my remarks, if I did not address the challenges that we like so many other companies are facing with rising costs from our vendors and challenges in hiring new faculty on top of this we have the added stress of vaccine mandates in various states and now for our entire organization, possibly starting in the new year, given the shortages of supplies in.
Workers anything no matter, how small can negatively impact our operations with that said, though we are aggressively managing the situation and taking steps to find and hire the talent we need to continue to offer the superior education for which Lincoln is known.
Our countdown continues to our 70 <unk> anniversary on November 11th.
This is appropriate given its also veterans day and Lincoln was originally founded to provide new skill sets to veterans returning home from World War two four.
For the past 75 years, we've provided the training required for students seeking essential and high in demand careers.
We previously noted that as part of our celebration of our 70 <unk> anniversary, we've increased the scholarship opportunities at Lincoln to $75 million over the next five years, we think it's fitting way to celebrate our 75 years of putting students first as well as being prudent student stewards of our shareholders' investment.
This scholarship funding is helping to lessen our students burden as a trained for careers that should enable them to become productive contributors to our national economic well being in growth and we are in an excellent position to meet the training and skills development needs of our corporate partners and our students for another 75 years.
These are my prepared remarks for this morning, I'd like to now turn the call over to Brian for a review of our third quarter financial highlights and specific updated guidance Brian.
Thanks, Scott Good morning, and thank you for joining us before I begin I would like to thank all of our veterans, both past and present for their service and commitment to the security of our Great Nation Veterans day is particularly important for us at Lincoln since so many of our students alumni and instructed serve have served in the military.
This morning, I am pleased to highlight our solid financial results for the third quarter and provide additional details on the two transformational real estate transaction, including Scott's remarks.
On October 29, we closed on the sale leaseback agreement of our Denver in Grand Prairie properties and simultaneously entered into a 20 year Triple net lease agreement for each property, resulting in annual rent expense of approximately $3 2 million in connection with the sell these properties, we anticipate recording a gain of approximately <unk> <unk>.
$92 million in Q4 in summary, this transaction significantly strengthens our balance sheet and give it gives us greater flexibility to pursue our growth plans.
We currently have zero debt outstanding resulting in annualized interest expense savings of approximately 800000. In addition, with the net proceeds from this transaction our cash balance has increased to nearly $80 million as of the end of October.
With the repayment with the repayment of our <unk>.
Tired of term loan balance.
Current credit facilities left with a small line of credit with availability of about $10 million. As a result, we are negotiating a new credit facility to further increase our availability and financial flexibility with more favorable terms reflective of our stronger financial position.
The second strategic real estate transactions or the sale of Nashville, Tennessee property. The buyer is continuing to work through the due diligence process and based on our agreement.
We expect to close in the first quarter of 2022 with the estimated gain on the sale of $29 million.
As Scott mentioned, we expect to increase efficiencies in the new location and anticipate a seamless transition without any material financial impact.
Now turning to our financial results for the third quarter, our revenue for the quarter was $89 1 million up $10 3 million or 13% over prior year comparable quarter. The increase was the result of it.
And eight 3% increase in our average student population driven by our nine months stock growth of eight 8%. In addition to a four 3% increase in average revenue per student quarter over quarter.
Students starts for the third quarter, continuing our strong trend of approximately 5500 comparable to prior year. While this quarter's number is 80 students below last year's quarter.
These starts are comparable against a 15, 3% start growth in the prior year, which was our strongest stock growth percentage achieved in all of 2020.
Through the first three quarters of the year. Our total starts have increased eight 8% and our ending student population has increased six 4% or approximately 800 students can power compared to prior year.
Turning to total operating expenses, we experienced an increase of $7 4 million or 10, 9% to $75 $4 million driven by several factors, including increases in instructional expenses of $2 million driven in part by inflationary pressures on instructional salaries.
Two to instruction constructive shortages, coupled with our largest student population resulted in higher book in total expense.
Facility expenses of 900000 due to normalized student housing expenses as COVID-19 restrictions lesson.
Additional marketing investment of 800000 to drive our Q3 results and $1 million more corporate expenses, mainly due to incentive and stock based compensation tied in part to our improved financial performance.
Please note, although operating expenses increased for the quarter. They have decreased slightly as a percentage of revenue when compared to prior year.
In terms of our bottom line results consolidated operating income for the quarter improved by $1 9 million to $5 7 million and adjusted EBITDA increased by $2 1 million to $8 4 million, including the add back of non stock compensation expense.
Turning to a brief overview of our balance sheet as a reminder, at the end of the third quarter. In 2020, we had approximately $11 $5 million of Undistributed Cares Act funds, which we've excluded for comparison purposes in my remarks.
Cash flow from operations more than doubled to $16 7 million from $6 8 million in the prior year comparable period.
And we had a net cash balance of $31 3 million for the current quarter.
<unk> net debt balance of $1 5 million at September 32020 can clarify our net debt net cash is calculated using cash and cash equivalent balance both the short term and long term portion of the credit facility.
Finally, we are refining our guidance for 2021.
For 2021 full year based on the results of the nine months plus our outlook for the fourth quarter.
Based on our strong ending population we continue to have revenue growth in Q4, which allows us to increase our outlook for full year revenue growth to be between 12% to 14%.
We expect student.
We expect starts in the fourth quarter to remain strong and be in line with prior year. As a result full year stock growth is anticipated in the range of 7% to 8% and.
And finally, adjusted EBITDA, we expect to exceed our expectations for the first nine months we.
We have exceeded our expectations for the first nine months of the year in the fourth quarter, we plan to increase our investments in marketing and growth initiatives, resulting in adjusted EBITDA for the quarter being comparable to last year's strong performance.
For the full year, we expect adjusted EBITDA in the range of 35% to $37 million at the high end of our prior outlook.
These results exclude the estimated $22 million on the sale related to the sale leaseback transaction and associated expenses resulted from the debt retirement in the fourth quarter.
This concludes my remarks, we look forward to sharing our Q4 and full year results with you in March thank.
Thank you all for your time today I'll now turn the call back over to the operator, so we can take your questions operator.
Thank you at this time to ask a question you will need to press star one on your telephone keypad again that is star one to ask a question.
To be drawing a question just press the pound key.
Please standby will compile the Q&A roster.
Your first question comes from the line of Alex Paris from Barrington Research. Your line is now open.
Hey, guys congrats on the beat and raise and thanks for taking my questions.
Good morning, Alex.
So starting with the starts.
In line or better than expected.
Transportation and skilled trades were flat healthcare and other professions were down four 8% we expected.
A tough comp here in the third quarter I am wondering if you can kind of compare and contrast.
Why was healthcare and other professions weaker was it related to challenges in hiring instructors, which you referred to as inflationary cost pressures.
Yes, Alex.
We have seen especially on the nursing side, a lot more pressure on finding and attracting and retaining our nurses and so that does have some impact on our student population, especially enrolling in bringing on new students.
It was also just timing of when that starts to take place.
Third quarter hops schools had a little bit less.
Then last year, but overall I mean in general we know health care is going to be strong, but there will be these probably quarterly blips along the way.
Alright, and then that makes sense and that's kind of in keeping with a lot of the other comments from the other for profit post secondary education companies now your full year guidance for starts.
Suggest fourth quarter starts at the low end of that range of flat.
And at the high end of that range up 4% to 5%, because you're saying, 7% to 8% for the full year.
If my math is right there.
Where would you expect the greater starts growth to be between the two segments transportation or.
Health care.
Well your math is correct.
I'd say it there'll be it will.
Probably more on the transportation side.
So a little bit stronger growth on transportation side year over year persists.
Okay.
And then I Wonder if you can make a comment and retention how is retention than going here in recent quarters.
Sure well, we've had a big attention to retention, because obviously with COVID-19 and students going remotely who was a change in everyone's academic experience. We continue to be holding at the levels that we've been at in the last couple of quarters. So we're striving to turn that around we do want to get back to where we were pre COVID-19.
<unk>, which is about four percentage points higher than where we are today. So we continue to work on that and continue to work on training and focus on students who are struggling more with some of the remote aspects of what they are dealing with today, but we feel very confident given trends that we've seen by certain actions that we've taken that we should be able to overcome.
Challenges.
Great.
Just ask one more question about start say I forgot to ask.
How did states look throughout the quarter like on a monthly basis was their strengths going into the end of the quarter weakness about the same and then I Wonder if you could give us any comment about the month of October.
Sure.
Again, our guidance is our guidance for the full year. So we've kind of factored all that in it varies kind of month to month, just with certain months. We just naturally have more starts planned but overall demand is remaining robust meaning we have more leads today than we did last year and so it is up so.
As part of our challenge to be perfectly honest is that as the economy reopens. Our students are more engaged with the economy and a year ago, everyone was trapped in their homes and therefore, we were able to frankly interact with our students very quickly and they were far more engaged and wanting to get.
Started in your education now that the economy is open again, we still have strong as I said stronger demand frankly than last year as far as interest, but our conversions are a little bit softer than they were 12 months ago. So that's to be expected I think until we're going back more to the conversion rates that we experienced pre COVID-19.
Great that makes sense and then I guess the last question inflationary cost cost pressure across the board I suppose you've kind of pointed out nursing instructors and things like that but.
What has been the impact on marketing.
Cost per lead cost per start.
Notwithstanding the comments you just made on conversion herbalist, just talk about the cost of leads yes, I'd say everything's up I don't think Brian we've seen any.
Spence category go down.
So everything is up so cost per leads are certainly up and so then we constantly are.
Adjusting our marketing spend to be in those areas that provide us with the greatest return so that we can offset cost.
As much as possible, but certainly there is there is definitely cost decrease cost excuse me increases across the board.
Scott said.
Marketing cost per start was up for Q3 for the total year, we are slightly down but as he alluded to in the <unk>.
Q4, we are anticipating to be slightly up again.
Good Okay, I think I understand and then I guess the last question is youre not ready at this point to identify the state or the location of the new campus planned for 2022.
Thats correct until we sign the lease.
We're not going to announce it so once that happens we will gladly tell you.
Great well. Thank you very much for answering my questions I'll get back in the queue.
Thanks Al.
Thank you. Your next question comes from the line of Steven Frankel from Colliers. Your line is now open.
Good morning, like follow up on the health care starts.
Yes.
Surprise.
If they were down is this shortage of faculty something thats going to prevent you from <unk>.
Growing those starts over the next few quarters until you get fully staffed up or do you think this is a timing issue and if we get out another quarter or two that business, it's going to return to more normal growth pattern and then on a related issue.
Where are we in the <unk>.
Students ability to do their practical to get into the clinical settings.
Sure. So there is somewhat related so besides the fact of being challenged in getting faculty, which we're addressing and overcoming we've also though mandated that every nursing student at the entrance to our program be vaccinated simply because all the clinical sites are mandated.
They are being vaccinated, so instead of I'll say, taking the risk of bringing someone on and hoping they'll get vaccinated. While they are with US to then go into clinical sites, we've taken the step of requiring every student.
Entering our LPN program to be vaccinated from the get go which has kind of reduced some of the.
Ability of certain students to enter our programs I view that as a temporary change is obviously, a greater and greater percentage of the population gets vaccinated. This.
Will become less of an issue, but with that kind of mandate that we've just put in in the last couple of months I would think that there would be probably some pressure on the starts for those students in the next quarter or so.
We all know that there's a huge demand for nurses a huge shortage for nurses. So many we have so many more students that want to become nurses that you can't pass our entrance exams. So im not worried about the long term.
Demand for that career.
Okay, and then just remind us how DNA changes once you finish all these transactions what's kind of the run.
On rate on a quarterly basis of DNA.
That's a good question so.
Fourth quarter, it's going to be about $1 7 million for the fourth quarter, our depreciation and the run rate.
<unk>.
I think it should be can be one second.
Mostly on the sale leaseback and will that reduce our depreciation expense almost 1 million and a half annually.
Nashville, as you know, we're going to be recording a very large gain it's on the books.
Not too high when natural closes it will be only a few hundred thousand dollars depreciation savings, but for the sale leaseback its approximately $1 5 million annualized.
Okay, great. Thank you.
Yes.
As a reminder to ask a question. Please press star one again that is star one to ask a question.
Question comes from the line of Tony Gleason from <unk> Capital. Your line is now open.
Good morning, good morning.
Nice job on the quarter in the past year, certainly has been a challenging environment for the business.
I have two questions.
One is certainly been a.
Brilliant job of monetizing the real estate.
The dollars are a real well for me.
I'm kind of wondering if you could do something equally brilliant with the proceeds.
I look at the numbers that you have.
<unk> provided us with to the year.
Looks like it's about.
We talked about more than a dollar a share.
Right.
Seven.
It's pretty cheap like seven times pretax earnings.
So my first question is what are the impediments to repurchasing, maybe 10 or 20% of the outstanding stock.
When it's so cheap.
That'd be my first question I think.
I believe you would still leave plenty of capital for the expansion that you've outlined so.
One question two has to do with.
Long term estimated earnings power.
I'm wondering what your rough.
And that would be utilization of the campuses now.
What it could be and what kind of earnings power you think the enterprise can deliver if youre doing a good.
A good job in a challenging environment.
Interestingly <unk>.
The answers thank you.
Sure well I'll start.
With the second one first I mean, given the capacity that we.
Sure.
Utilized at 50% today, so in theory without spending any more capex. The facilities that we have today could double the EBITDA that we have today as long as we could attract enough students to achieve that.
With regards to the capital I mean, obviously the board constantly looks at this and necessity and evaluate this and they'd have to make the decision about what they want to do with regards to how to best deploy the capital as of right now our focus is on a couple of fronts, one opening up new campuses too.
It's investing in the campuses that we have in replicating programs to make the campuses as robust and as healthy as possible three we do look at acquisition opportunities as they come around.
And so we will continue to do that where it makes sense and where it's prudent and we're buy versus build makes a better return for our shareholders and finally also we do want to have good resources on hand, we obviously COVID-19 no one anticipated that was a very disruptive force.
But we also have a more challenging regulatory environment out there and who knows if there is another event like COVID-19. If the government will be as generous to us as they were in this past cycle. So the board is very focused on making sure that there's enough wherewithal for a company to continue to grow as well as to be prudent.
With regards to just having a solid balance sheet, so that disruptions of any kind.
Cause the company any arm and we'll review what you asked about I am sure from time to time, if they think that that's a better use of the proceeds.
Okay.
Thanks, that's helpful I guess.
I look at that.
$80 million and net cash, which is 50% of the market cap.
It strikes me as.
Certainly quite vulnerable for a takeover of the company.
Using 50% of the company to pay for itself.
So I'm just.
I appreciate having the flexibility and things but.
Yes.
Yes.
I, just think about that money in to.
The third point you made about acquisitions is there anything out there that could be as cheap as Lincoln is now.
At seven times pre tax earnings accompany.
Accompany that.
Presumably know really well so the risk profile is quite low.
Is it is it.
Is it possible you could find something cheaper than that.
I think it is possible that we could find something cheaper than us because I think we are too cheap.
Our focus is trying to get that we agree.
To get that multiple up to be much more reflective of what we are able to achieve what we have achieved and where we're going so along those lines and acquisition could help in some of that.
In some of those attributes there to make us more strategic more valuable and help us grow the bottom line.
But I couldnt agree with you more the market certainly doesn't seem too.
Give us the right value at this stage.
Hello.
Would you.
B.
Willing to have a chop further after.
After the call.
Talk about a little bit further.
Definitely agree with you.
And it is certainly in a very.
<unk>.
Flexible position now.
Deploying our capital.
Yeah.
Certainly.
Into <unk>.
Significant long term investment.
Growing.
The campuses and the capacity and filling the capacity shrinking the equity.
Is there any like single in Parliament, you could point to.
<unk> on the board that would not support the idea of a share repurchase.
Well I think the only impediment as that we see lots of other opportunities and the board is looking for the long term future and growth opportunities.
I'll just say it that way so while this is the.
Conversation has certainly come up.
It's one that we see greater opportunities again for creating something.
Frankly that doesn't exist in this country and thats more of a national chain that can better serve large corporations out there.
So the vision that they have for the company I think is much more expensive than where we are today.
And then hopefully achieve that.
Would you mind, if I give you a call they need today tomorrow, and just follow up a little bit further yes, no problem whatsoever and enjoyed the conversation.
Thanks, So much for your time and welcome so great job sure.
As a reminder to ask a question. Please press star one and please limit yourself to one question and a follow up. Your next question comes from the line of Fred Sharma from B Riley. Your line is now open.
Hi, good morning congratulations.
Good solid results, especially.
I had a couple of questions.
Firstly on the starts growth I know that you had guided Q3 down because of high school starts were going to be weaker.
Can you give a little bit more color on where the high school starts should not as weak.
Adults.
Caution pick it up pick up a lot more in and how does that sort of trending for the rest of the year.
Sure.
This may be a little more detail then you're certainly than what we normally would provide but on the high school side, we have.
Roughly 90 to 100 high school reps that go around and visit the high schools and collect leads from visiting classrooms.
We also though due to their efforts obviously their students at sometimes don't respond or fill out the lead cards, there and eventually come to us maybe later.
In their recruitment process, what we saw was a larger increase in the high school students coming to us through our marketing initiatives versus through our sales force and it's usually the sales force that gives us that long term window because they are out there today recruiting for next summer. So we have a good sense.
For who they are and when they're going to start the <unk>.
Ones that come to us through our marketing efforts tend to come more last minute.
So we had a pickup in those which was somewhat driven by some of the actions we were taking to drive more high school volume given the fact that we werent able to get into the high schools, but we just didn't have as clear a window into those students.
That was really what helped.
Help us enable what we achieved in the third quarter.
And does that change the dynamic going forward and how you approach marketing and sales reps versus.
Marketing efforts.
Well, it's something we yes, it's a very good question and something we constantly look at and we know that there is a balance.
But at the same time, we also know given the challenges that we have and given the challenges that our employers have of attracting students.
We feel that the in person.
Component of our high school researches good just overall marketing and getting the word out about these programs. It is something we look at but we certainly see value in having that salesforce out there still so we will continue to deploy that.
Got it and then.
My other question is on the new diesel Tech.
Facility the training facility Republic services.
And the incredible really good move that's a 12 week program do you expect.
What are you expecting revenue contribution from a program like that and do you would you expect more of these going forward because.
This moves you away from title four dependence is all 100% imported pages that is that correct.
That is correct I guess I don't want to share exactly what the dollar amounts are just for.
For competitive reasons, but I can tell you it's in I'd say the.
Hundreds of thousands of dollars a year for what we do today.
And then the objective is to also expand with them offering additional training to hopefully add hundreds of thousands of dollars more so the objective would be to hopefully find business partners.
<unk> between 500000 to a million and a half each and continue to hopefully build that out over time.
Got it and then lastly, just last question on the inflationary pressures.
Do you think these inflationary pressures are.
Charles a toy on your.
Construction costs facility costs and does that impact you.
Tuition rates going forward.
Are you able to pass these through if you think these are going to be.
Somewhat more permanent.
I do think that they are more permanent and it's just so hard to predict I mean, we have such a strange workforce economy right now with the.
The great resignation going on people not taking jobs 10 million jobs out there is still 4 million people unemployed.
These things just don't add up to me.
But certainly as of right now there certainly seems to be a lot of focus.
On wages going up and so I don't see that declining right now and certainly as we look into next year, we're going to factor that in as far as pricing, we will have a slight tuition increase which should help us enable us to cover a lot of it but probably won't cover.
All of it.
We have to be sensitive to those issues as well.
While we're probably maybe warranted and raising tuition a lot more than we planned to theirs.
Theres, just a lot of focus and attention on that area. So we'll be doing it prudently to make sure that we're covering our cost as much as we can.
And we will just be constantly addressing and looking for ways to frankly.
Some more efficient so we can not impact the bottom line.
Great. Thank you again for taking my questions and again brilliant job on the on the real estate rationalization sale leasebacks that really concludes your liquidity without diluting any shareholder.
Account.
Any share count again, congratulations thanks, so I'll take it offline.
Thanks Raj appreciate it thanks.
Your next question comes from the line of Justin Putnam Atlanta. Your line is now open.
Good morning, and congratulations on.
Operations also transformed the balance sheet.
I had a few questions about capital allocation, but they were actually pretty much addressed earlier.
An earlier caller so.
Just look forward to hearing more update on that I think they call or hit the Melanie head, yes look forward to speaking with you all in the future. Thank you okay. Thanks, Justin Thanks.
Speakers I see no further questions at this time I would like to turn the conference back to Scott Shaw.
Thank you operator as always I want to thank our shareholders for your continued interest and support I also want to thank all of our faculty and staff for their unrelenting dedication to our students many of whom have faced greater diversity due to the pandemic I'm very proud of the Lincoln Tech family and I'm always uplifted by their stories of changing lives no matter the challenge.
<unk>, our adversity, our students face we change People's lives and I could not be more honored and proud to work with so many individuals who consistently go above and beyond to serve our students. We had an excellent first nine months of the year and we remain on track to achieve our goals. We are excited about the future and its potential is.
We continue to implement growth strategies and make the investments needed to expand opportunities for both our students and shareholders. In the years ahead I continue to believe we have a unique story to tell and the recent real estate transactions and operating performance make our story much more compelling, Brian and I will be meeting.
<unk> over the next few weeks during our Barrington non deal Roadshow next week and the Canaccord non deal Roadshow in December Brian and I look forward to sharing our 2021 fourth quarter <unk>.
Full year results with you in March until then stay safe.
This concludes today's conference call. Thank you for participating and have a wonderful day you may all disconnect.
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