Good day, ladies and gentlemen and welcome to the Lincoln Educational Services Q3 2017 Earnings Conference Call. At this time, all participants are in listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Doug Sherk. Mr. Sherk, you may begin.

Thank you, operator and good morning, everyone. Before the open of the market today, Lincoln Educational Services issued its third quarter 2017 financial results news release. The release is available on the Investor Relations portion of the company's corporate website at www.lincolnedu.com. Today's call is being broadcast live on the company's website and a replay of this call will also be archived on the company's website. Statements during today's call made by management of Lincoln Educational Services Corporation regarding Lincoln's business that are not historical facts may be forward-looking statements as that term is defined in the federal securities law. The words may, will, expect, believe, anticipate, project, plan, intend, estimate and continue and their opposites and similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at or by which such performance or results will be achieved, if at all. The company cautions you that these statements concern 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 statements are based. Factors which may affect the company's results include, but are not limited to the risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events. All forward-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 hereof. And now I'd like to turn the call over to Scott Shaw, President and Chief Executive Officer of Lincoln Educational Services.

Thank you, Doug and good morning, everyone. Thank you for joining our call to discuss our third quarter financial results as well as corporate development since we last talked with you in August. With me today is Brian Meyers, Lincoln's Chief Financial Officer. This morning we reported improved operating income for our total company excluding the transitional segment on a year-over-year basis for the quarter. We continue to execute our plan of strengthening our core asset while closing and divesting underperforming campuses. By the end of this year, we will complete the closure of our last two campuses and will enter 2018 without our transitional segment. This is a great accomplishment for the company and will make our financial statements much easier to follow in the future. As we've highlighted in our prior calls, we continue to operate in a challenging enrollment environment, while demand by employers is extremely strong and appears to be growing, the low unemployment rate means that fewer people are looking to switch careers or start a new career. With that said, our opportunities are tremendous. The silver tsunami of baby boomers retiring and increasing rate without new trained employees to replace them continues to face our country. Every month new employers are coming to Lincoln and asking us to help them with their workforce needs and from all that we've studied this need will continue to grow as more companies struggle to find their next generation of skilled employees. The common theme among the employers is that they cannot attract enough interest in their opportunities and they cannot attract enough people with the skills to be effective. Needless to say, Lincoln is focused on addressing both of these issues. The first challenge involves educating students, parents, guidance counselors and other decision-makers and influencers about the…

Thanks Scott and thank you all for joining us this morning. I'll begin my comments with a couple of highlights from our third quarter followed by a review of certain operating, financial performance highlights from our operating segments. First on August 14, the company completed the sale of two West Palm Beach, Florida properties, resulting in net proceeds of $15.3 million and a $1.5 million gain for the quarter. The sale proceeds were partially used to repay an $8 million short term loan collateralized by the West Palm Beach properties. Second, the company reduced its debt obligation by $15.5 million from their prior quarter. The repayment of the debt strengthens the company's balance sheet and will lower interest expense into the fourth quarter. As a result of the lower debt outstanding in combination with more favorable terms under the new credit facility, our net interest expense decreased by approximately $0.7 million or 50% quarter-over-quarter. Now regarding the segment's operating financial highlights. Our transportation of skilled trade segment revenue decreased slightly to $47.7 million for the three months ended September 30, 2017 at $47.9 in the prior year's comparable period. The decrease in revenue was properly driven by a 2.1% decrease in average student population, slightly offset by a 1.6% increase in average revenue per student compared to the prior year comparable period. Student starts for the quarter decreased by 74 students or 2.4% compared to the prior year comparable period. The overall decline in student starts was the result of the on the performance of our Indianapolis campus which decreased by 98 students. Excluding this campus, student starts for the quarter would have grown. Operating income for the transportation of skilled trade segment, remained essentially flat at $6.1 million for the three months ended September 30, 2017, as compared to…

Thank you. [Operator instructions] Our first question comes from the line of Alex Paris with Barrington Research. Your line is now open.

Good morning. This is Chris Howe, sitting in for Alex Paris.

Hi Chris.

Good morning, Chris.

Good morning. I had a question surrounding the two campuses at the healthcare and other professions that underperformed as well as the one campus within the transportation and skilled trades. Would you be able to provide just some more color on what happened at these campuses?

Sure. On the skilled trades campus, the issue is really focused around what we've discussed around the high school plan. It's in a market that's more dependent I'll say on high school than on its local or -- than on its local media and we had a shortfall there at that campus and so it seemed impact that one more. And then as far as on the healthcare side, it's really two different schools in two different markets and one of them is our regionally accredited school, which has had a mix of programs. I don't think there is anything of real note as to why it was down. It's just a competitive marketplace and the other one was down I think just because they had such a strong year last year for the comparable period.

Okay. That's helpful. And the one campus in the skilled trades, was that a high school destination?

It was.

It was. Okay. And then last quarter you had mentioned the centralization of the high school recruiting process or the effort going on there. Is that now complete and fully gaining traction?

Yes, yeah, absolutely. We've made changes from how we were operating last year and we've learned a lot in that process and so we now have the team in place, the reporting in place. We have new reports to attract different metrics and they're going to educated on that. And as I mentioned in my remarks, as we look through the first two months of September and October and look at our enrollments, we're running 10% ahead of last year. So that to me is a good sign of the changes that we've made are being effective.

Thank you. And then you had also mentioned previously that I guess simple, free to do or to flip the switch in staying more engaged or increasing an engagement with the students, since they are entering the funnel earlier when it comes to handing out scholarships. And what are you seeing there as it relates to the strong employment market, are you able to retain the students throughout the entire process or how are you working on that?

Yeah occasionally we'll have employers that may try to pick off if your question is about students leaving us early to go to the strong employment market. There are occasionally employers that might do that. We certainly discourage it both for the student's standpoint to finish their education, as well as we don't appreciate from the employer's. So occasionally we do have situations like that, but we're able to manage around it if that was your question Chris.

It was helpful, but it was some comments you had made last quarter just about -- it was in direct relation to scholarships and just how you were able to I guess package the student earlier in the process and staying engaged with them throughout that.

Yes, no, so that's why I was referring to -- maybe there was a change in financial aid, what you can now use as far as the information. So yes, so for last year, we were able to let students know much sooner in the process, what their financial aid package would be. They didn't have to wait for the following year's tax reports to come.

Okay. And then as far as 2018, would you be able to provide any very general color? You had mentioned profitability in 2018 that's still the goal I assume?

Ladies and gentlemen, please stand by. Your conference call will resume momentarily. Speakers you may resume your conference.

Hello, Chris, are you still there, it's Scott Shaw.

I am still here.

Okay. Don't know what happened there, but we seemed to have lost you for a minute. So, I think that you were asking about in the process of new students and getting them packaged and staying in touch with them and I guess also there is a component about the scholarships there and so that whole process is the same as last year, but we certainly have enhanced it. So again, were able to package students much sooner in the process and let them know what their financial obligations are. Obviously, we do give scholarships as well and so that's part of the packaging process and then I guess part of the secret always, since we are able to package them sooner or when the challenge is that just means you have to stay more engaged with the student throughout the process until they start the following summer. And so that was maybe one of the challenges we had last year, which we have now hopefully addressed by more communication and some different activities that we have lined up this year to keep those students engaged and for us to more constantly monitor their progress throughout the financial aid process.

And the one thing I'll add, we were able to as you mentioned flip the switch a little bit in Q3 and also into Q4 we did increase the scholarships, the amount of scholarships that we were giving out to the students and that did help with the start rate as well that we saw in the third quarter and going into the fourth quarter. So, we were able to do that.

Does that answer your question now, Chris?

It sure does. And I was cut off, but the next question was in regard to '20 are there any further transparency that you would be able to provide other than profitability, which I assume is still the target?

Speakers, you may resume.

Hi Bill, it's Scott Shaw. Sorry, not sure what happening with this line, but hopefully we have another line now.

Still here. Hello?

Yeah. I am here. Can you hear us?

Yes. Okay. My next question was just in line with 2018, is there any further transparency that you would be able to provide? I assume that profitability is still the target?

Yes, still the target and it's too early for us to provide any more guidance going into 2018 at this time.

Okay. And then I just have one last little question. You had mentioned the success that you're having at the BMW related program and the goal of doubling enrollment there. What would double enrollment there look like? How many students would that be?

Fair question, it will increase probably from about 30 students a year to 60 students.

Okay. Thank you for taking my questions.

No problem. Thank you.

Thank you. Our next question comes from the line of Bill Nasgovitz with Heartland Advisors. Your line is now open.

Yes, good morning.

Good morning, Bill.

What is your opinion of the [student] education transaction and what effect that might have on Lincoln?

Well I really don't, they're in a different sector than we expect that two big guys are consolidating. Probably makes a lot of sense to a degree that's flat. But I really don't know too much of what their strategy is and what they’ve announced, but let's see how it makes sense.

Okay. Thank you.

Thank you. [Operator instructions] And I am showing no further questions in queue at this time. I would like to turn the conference back over to Scott Shaw, President and CEO for closing remarks.

Thank you, operator. And thank you all for your patience as we had a little technical difficulty there. Again, we appreciate your participation on the call and your support of Lincoln and we look forward to updating you on our progress in early March. Hope you all have a great week. Thanks again. Bye, bye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You many now disconnect. Everyone have a great day.