Lincoln Educational Services(US:LINC)2022-11-07 18:07Financial Data and Key Metrics Changes - Revenue for Q3 2022 increased by 3.1% or $2.7 million to $91.8 million, driven by a 5.9% increase in average revenue per student, which offset a 2.7% decline in average population [55][60] - Consolidated operating expenses rose to $86.9 million, up 4.3% year-over-year, primarily due to increased staffing levels and additional rent expenses [57][58] - Adjusted EBITDA for Q3 was $7.4 million, reflecting the impact of non-cash stock compensation and other adjustments [59] Business Line Data and Key Metrics Changes - Enrollments and graduation rates remained strong across 22 campuses, although starts during Q3 declined by 500 students compared to the previous year [11][44] - The new hybrid teaching model began contributing to topline performance, with expectations for further efficiencies as more programs transition to this model [10][17] Market Data and Key Metrics Changes - The company is experiencing a tight labor market, which has affected student starts, with a noted decline across various programs [39][105] - The demand for skilled students remains strong, with corporate partnerships helping to fill the skills gap in essential positions [21][45] Company Strategy and Development Direction - The company is focused on centralizing and automating its financial aid process and rolling out a new hybrid curriculum to improve student experience and operational efficiency [12][14] - A new campus is being established in the Atlanta area, with plans to open in Q3 2023, as part of a strategy to develop at least five new campuses nationally within five years [23][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from a low unemployment economy and rising interest rates but remains optimistic about growth opportunities and operational efficiencies [39][45] - The company expects to see positive growth in student starts for Q4, despite a decline in Q3, with a focus on improving retention and placement rates [40][106] Other Important Information - The company terminated a $15 million credit facility to enhance flexibility in cash management and investment opportunities [48][50] - The closure of the Somerville campus is expected to have a minimal financial impact, as it has been one of the smallest in terms of revenue and profitability [51][52] Q&A Session Summary Question: How did the third quarter results compare to expectations? - Management indicated that results were in line with expectations, although new student starts were slightly lower than anticipated due to postponed starts at the Somerville campus [64][65] Question: What is the outlook for student starts in Q4? - Management expressed confidence in a strong increase in student starts for Q4, projecting growth of about 6% to 7% [66][67] Question: Can you clarify the impact of the Series A preferred stock conversion? - Management confirmed that approximately 5.3 million shares would be converted, eliminating $304,000 in preferred dividends quarterly [70][72] Question: What is the strategic reasoning behind closing the Somerville campus? - The decision was based on overlapping opportunities with the Lincoln, Rhode Island campus and the lack of attractive growth prospects for the Somerville location [86][87] Question: How does the new hybrid model differ from the previous COVID-era model? - The new hybrid model is designed for optimal blended learning, allowing for shorter in-person sessions and better utilization of faculty, compared to the reactive model implemented during COVID [110][111]