Good day, ladies and gentlemen and welcome to the Q1 2015 Lincoln Educational Services Earnings Conference Call. My name is Kate and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of today’s conference. [Operator Instructions] As a reminder, this call is being recorded. And now, I would like to turn the call over to Doug Sherk. Please proceed.

Thank you, Kate and good morning everyone. Before the open of the market today, Lincoln Educational Services issued a press release announcing its first quarter 2015 financial results. The release is available on the Investor Relations portion of the company’s corporate website at www.lincolnedu.com. Before we get started during the course of this conference call, the company will make forward-looking statements about its future plans, objectives, beliefs, expectations and prospects. For this purpose, any statements made today that are not statements of historical facts maybe deemed to be forward-looking statements. These forward-looking statements are not guarantees of future actions, outcomes, results or performance. By their nature, these forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statements. A discussion of the risks and uncertainties that affect Lincoln’s business is contained in the company’s SEC filings particularly under the heading Risk Factors and in the press release issued this morning. Copies of these documents are available online from the SEC or on the Lincoln website. These forward-looking statements are made only as of the date this conference call was initially held and the company assumes no obligation and does not intend to update these forward-looking statements after the date of this conference call whether as a result of new information, future events, developments, changes in assumptions or otherwise. And now, I would like to turn the call over to Shaun McAlmont, CEO of Lincoln Educational Services.

Thank you, Doug and good morning everyone. Joining me on the call today is Scott Shaw, President and Chief Operating Officer and Brian Meyers, Chief Financial Officer. This morning, I will open the call with an overview of the progress we have made since we talked to you on our year end call less than 2 months ago. Scott will review his vision for leading Lincoln – Lincoln under the leadership transition plan that we announced this morning and Brian will focus his comments on our segment financial performance as well as other key financial metrics, included or updated in our financial guidance and then we will open up the call for your questions. During 2014, our team executed a number of actions to improve our financial performance. And during the first quarter, we began to see the benefits of those actions. We generated results that were consistent with the outlook we provided back in March. Overall, revenue was slightly down, but we generated substantially improved profitability. We completed the transition to segment reporting and we continue to take additional cost out of the system, while at the same time continuing to invest in technology, equipment and programs that distinguish Lincoln by providing students with the enhanced skills education needed by American employers. We also continue to examine non-dilutive ways to build financial resources and we have made some real progress in that area, which Scott will report on in a minute. Finally, we completed the leadership transition plan announced this morning. While we have more work to do, our team significantly reduced our overall operating loss while doubling operating income from our transportation and skilled trades segment and generating a 25% reduction in the operating loss of our healthcare and other profession segment. While reduced unemployment rates are impacting…

Thank you very much, Shaun. I have enjoyed working with you during the past 5 years and I am excited about the potential for Lincoln as we move into the next chapter of our company’s development. I would like to begin my remarks today by articulating our 100-day plan and then our longer term initiatives to return the company to growth. Then I will conclude my prepared remarks with some notes on our improved operating performance during the first quarter. This organization has always focused on delivering a strong return on investment for our students, while being a leader in maintaining regulatory compliance. It’s my full intention to maintain and build on this 69-year reputation, while at the same time returning our company to profitability. Over the next 100 days, our team has three key initiatives. First we expect to replace the existing credit facility with a new, larger lower-cost facility that provides the company with long-term financial stability. We have received several letters of intent offering relatively attractive terms. And we are focused on moving to a definitive agreement with one of these institutions shortly. As we finalize terms, we will issue a news release announcing the new facility. The second initiative that we expect to implement are more efficiencies at the corporate and campus level made possible by our move to segmentation as well as the completion of a thorough review of our corporate cost structure. This component of our plan will enable us to further improve profitability while at the same time maintaining the level of student experience and training that has led many of our corporate partners to tell us that Lincoln students are the best prepared for the job. By moving to segments we are better able to align our resources with our opportunities. We…

Thank you, Scott. I will focus my comments on our segment results for the first quarter as well as some key financial metrics and our revised financial guidance for 2015. As mentioned this morning, our transportation and skilled trades segment performance in the first quarter was solid. We increased revenue nearly 1% to $44.8 million from $44.5 million quarter-over-quarter and we increased operating income $5 million as compared to $2.3 million in the first quarter of 2014. Starts in this segment were down a total of 3.9% to approximately 1,800, which we believe is due to the improving employment rate that has been reported nationally as well as in many of the key geographies where we operate. Our healthcare and other professions segment reported 7.6% decline in revenue from a year ago. However, our efforts to contain cost reduced our operating loss by 25.8%. Revenue for this segment was $31.3 million versus $33.9 million in the first quarter of 2014 and our operating loss was $5.5 million as compared to $0.7 million during the last year’s first quarter. Starts for this segment, was approximately 1,700. This represented a 10.5% decrease from the year ago quarter. We have implemented a number of actions to improve this segment. For instance, we began adding blended and adaptive learning programs to the curriculum to enhance the student experience. Finally, our transitional segment, which is only comprised of the Fern Park, Florida campus, generated an operating loss of $0.7 million versus $0.5 million last year due to the anticipated revenue decline from ceasing new enrollments during the first quarter as this campus will close during the first quarter of 2016. Corporate expenses declined 6.4% to $9.2 million compared to $9.8 million in the prior quarter. This positive trend relates to lower salary and benefit compensation.…

Thank you. [Operator Instructions] I am pleased to invite your first question which comes from the line of Alex Paris, Barrington Research. Please go ahead.

Good morning, guys.

Good morning, Alex.

Good morning.

I have a number of questions, but I will just start with two. First of all, with the new segmentation, how many schools are in each, how many – I know you have one in the transition, how do the other schools breakout?

Sure, Alex. It’s Scott. There are 12 in the automotive segment and 18 in the healthcare and other profession segment.

Okay, good. And then I think several quarters ago, you gave a breakdown that said 10 of your campuses had positive starts, I think that was third quarter, I don’t know if you gave a similar number in the fourth quarter, would you care to offer a little color there?

Sure. The only, I guess, the color I will give is that certainly the transportation segment is much healthier segment and as it shows growth kind of across all the campuses, more of the softness is definitely proportionately to the healthcare segment.

Okay. Yet starts were down 3.9% for the transportation group, the 12 campuses as a whole.

That’s correct.

So, were there a couple of campuses in there that were particularly negative?

No, nothing particularly negative and nothing particularly positive, there were ones that were positive and we are moving forward. Again in total, we are talking maybe 100 students as far as our whole swing goes. So, it just takes a couple at each campus.

Yes. And then I wonder you have been doing a lot in terms of streamlining the organization, taking out excess capacity, reducing costs. Can you quantify for that – quantify that for us like on an annual cost savings basis what have you done – what do you see left to do or how much more can you get this year?

Sure. I mean, I think that last year we said that we probably achieved around $12 million to $14 million of cost reductions. This year, we are looking at making additional cost reductions not at the same magnitude of that level.

Okay. And then one last one, credit facility it’s $20 million now un-drawn, you are going to have something significantly larger, is this with alternative lenders and is it going to be securitized, I suppose secured by real estate?

That is correct, yes.

And on the order of magnitude, do you think you will double that line of credit or more?

We are looking to hopefully double the line of credit.

Okay. And then just a bookkeeping question, are you going to provide us with some historical restatements by segment? Are you just going to report it on a quarter-by-quarter basis?

So, we just don’t report on a quarter-by-quarter basis. I know that’s a little bit frustrating for you all for your models, but that’s the way we are going to just proceed at this point.

Okay, fair enough. Thank you very much.

Thanks, Alex.

Thank you for your questions. [Operator Instructions] And your next question comes from the line of Doug Ruth. Please go ahead and that’s from Lenox Financial Services

Hi, thank you for the transparency. It’s very much appreciated. Could you – in the past you had told us that there were six problem schools and that four of the six were fairly close to breaking even, is there any update, is there any additional color you could give us on that?

Sure. Doug, it’s Scott and welcome to the call. Yes, the color is that I mean we just spoke to you I guess last two months ago, so there hasn’t been dramatic movement, but as you can see in the first quarter, our performance is better at the bottom line. And so we are seeing improvements in those campuses but it still it takes sometime to get them all to be where we need them to be.

One of the things, it’s difficult for us is we hear about the increased need for healthcare workers, but then were hearing Lincoln struggle with your healthcare segment, could you off a little color or commentary on how we reconcile those two different things?

Sure. I meant it’s a good question and one we think about often also I mean I don’t think it’s too – when I would look at some of the landscape out there, I would see others having some similar challenges as we do. But in the healthcare side, certainly on the employer side the demand is still very strong, it’s really getting to people in the front door. And there is overall more competition on the healthcare segment. And so given that there is just overall softness, I think we are all suffering a little bit. But as Brian mentioned, we do believe that by enhancing our curriculum and making our programs more flexible by having blended learnings that will appeal to more people especially the single moms who enter the healthcare field and that will help us going forward.

Okay. Is there an exit strategy or an exit date maybe for the Hartford campus?

Well, our desire would be do it as quickly as possible, but like I mentioned in our remarks we are really not controlling that process. It’s really the landlord needs to find a buyer for their property and that could take some time.

And are – is Lincoln somehow involved in helping with marketing a bit?

Sure. Yes we are.

Okay. Well, thank you for answering the questions. And again thank you for the improved disclosure and transparency that gives all of us some further comfort.

Great. Thanks, Doug.

Thank you for your question. I would now like to turn the call over to management for closing remarks.

Great. Thank you all for joining in the call today. As you can see we are making progress in many areas with a strong quarter, but the market remains uncertain. We have successfully executed a succession plan that will enable us to build off our strengths or bringing in new ideas and direction. We continue to rationalize our business as we operate in a choppy environment characterized by strong demand by employers and uncertainty by prospective students. Our goal is to strengthen our balance sheet in the near-term so that we can further invest for long-term growth. We remain very committed to our students in maintaining our leadership role within our industry. And finally, before we end the call, I would like to once again thank Shaun and Alexis, our Chairman for their leadership during this very challenging time. Thank you all again and we look forward to updating you on our next call.

Okay. Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect now. Good day.