Good day, ladies and gentlemen. And welcome to the Second Quarter 2018, Lincoln Educational Services Earnings Conference call. At this time everyone is in a listen only mode, later we will conduct a question and answer session and instructions will follow at that time [Operator Instructions]. As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference, Michael Polyviou of the EVC Group. You may begin, sir.

Thank you, Amanda. And good morning everyone. Before the market opened today, Lincoln Educational Services issued its release reporting the financial results for the second quarter and six months ended June 30, 2018. The release is available on the Investor Relations portion of the company's corporate website at www.lincolntech.edu. 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 made by Lincoln’s management during today’s call regarding the company’s business that are not historical facts may be forward-looking statements as that term is identified in the Federal Securities Law. The words may, will, expect, believe, anticipate, project, plan, intend, estimate and continue 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. 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 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 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. Now I’d like to turn the call over to Scott Shaw, President and CEO of Lincoln Educational Services. Scott please go ahead.

Thank you, Michael, and good morning, everyone. Thank you for joining our call today to discuss our second quarter operating and financial results, with me is Brian Meyers, our Chief Financial Officer. When we last talked with you in May we reported that we believe that for the first time in many years overall starts for Lincoln campuses operating as of January 1, would grow for the year and we also stated that we believe that students starts would pick up in the second quarter as compared to the year ago period. I’m very proud and needless to say very pleased to report that as they say in baseball our student starts in Q2 knocked the cover of the ball. This morning we reported student starts for the second quarter grew at an overall rate of 11.6%, the second quarter start growth represents a third consecutive quarter of students start growth for our company starts for the first six months excluding transitional are up 6.8% we’ve not experienced similar growth in approximately 10 years. Our three consecutive quarter of student start growth coupled with improved retention rates has enabled us to grow our population for the first time since 2010. Overall our ending population of about 10,400 students is up some 350 students from a year ago. Growing our population and starting off 2019 with more students then we had in 2018 is central to our plan to return to profitability in 2019. While markets can change our results to date clearly position us to achieve our goal of profitability and I'd like to highlight that all this growth is happening without opening new locations. As I mentioned, our student start growth for the quarter was 11.6%. This growth was driven by a 21.1% increase in student starts in our…

Thanks Scott and good morning everyone. I would like to begin my comments with highlights from the second quarter 2018, later I'll discuss the operating highlights for the individual segments and briefly review our updated 2018 guidance, including our improved outlook for operating income. To begin revenue and operating income on a same school basis was up approximately 1.9 million and 2.2 million over the prior year respectively. We attribute the increase in operating income to increase revenue and our ability to manage expenses in order to maximize profits. Second, as Scott discussed total student starts were up 11.6% over the prior year, including the 21.1% growth in our healthcare segment and a 7.5% growth in our transportation and skilled trades segment. Both segments have demonstrated remarkable improvements and continue to exhibit positive spot momentum. Third although we started 2018 with approximately 130 fewer students than in January 2017 as a result of our sales team's efforts in marketing initiatives we have not only eliminated the carry in population deficit but we have exceeded last year's population at this time by almost 350 students. We’re thankful to our entire team for continued to improve our stock performance, and for achieving stock growth for the last three consecutive quarters, resulting in an overall 8% increase in stock growth. We are very pleased with our performance and considering the report from our peers and challenges presented by the ongoing low unemployment rates. Lastly I like to mention that on July 9 of this year, we entered into a sales agreement with for our last property located in West Palm Beach, Florida. This sale is anticipated to close at the end of August for a cash purchase price of approximately 2.6 million. The net proceeds received from this transaction will be remitted to…

[Operator Instructions] And our first question comes from the line of Alex Paris of Barrington Research. Your line is now open.

So way to go on the third consecutive increase in starts, obviously a strong leading indicator for total student enrollment down the road. I got a number of questions and I might be a little bit all over but it looks like healthcare and other professions had a 55% contribution margin to the operating income line on the incremental revenue. Would you expect the same contribution margin on transportation and skilled trades once that turns positive year-over-year greater or less and why.

It's probably in line with that, typically Alex we see 40% to 70% it all depends on local issues or where the individual campuses are but definitely something around 50%, a little bit North of that I think is very consistent to what we done in the past.

Then it looks like with regard to the increased investments in marketing where those primarily focused on healthcare and other professions or were they balanced between the two.

They were definitely balanced between the two, mean we're constantly looking, trying to find out where the students are and how best to communicate our message and how best to reach them, as well as constantly enhancing the sales efforts of our teams to make sure that students and their parents know the full value of what a Lincoln education can provide. So it's constantly changing, constantly being evaluated and it's just very rewarding to see the results kick in as strongly as they did in the second quarter.

Sorry, one thing to note is that on the marketing side the cost per student is actually going down. So it's actually the incremental more spend is working.

All the cost for incremental students, the recruiting cost is lower.

Correct.

And then what did you say the strength was, I think you said that from a curriculum standpoint, it was a skilled trades and heavy equipment within transportation.

Heavy equipment and also and Allied Health programs for the quarter.

Okay Allied Health, how did nursing do in the quarter?

Nursing actually was down a little but that's only just because of timing of when the starts are. I feel very confident about nursing demand that's definitely not an issue.

Right, so we would expect to see better growth in nursing in the third quarter then due to the timing shift.

But some of the timing shifts are also on an annual basis, just given the class sizes and how they flow through depending on the campus oddly enough certain campuses have say one more start in one year than they do the other, so it's really a mix of different timings of the quarters and the years. But again nursing remains very robust.

We do lose one nursing stock for 2018 versus '17 it will come back in '19.

And then what did you say about high school student starts. It was a better result this year versus last year.

Yes, last year I think you probably recall in the second quarter, we came up short with our high school destination plan, which was disappointing to us and we made some adjustments and changes and this year the plan executed for the second quarter and it seems to be on track for the third quarter. So that's very good as well, nice to see that the changes are taking place and we're getting more high school students as well.

Is there anything uniquely different that you're doing in high school than last year? Are you getting more cooperation from guidance counselors are you making more presentations within the high school? Give me a little bit more color there if you don't mind.

No problem, it's really hard really Alex to pinpoint it down to one thing, for high school you really need to execute on everything and everything means making sure that you have as many presentations in high schools as possible, you have the right people giving those presentations you're following up as quickly as possible with those individuals and you're providing them with the right information so that their parents and they can make the right decision and hate to say it but we basically have improved on all those things. Provided more marketing materials, provided faster response times, provided more training on and everything just clicked.

Great and then switching to a financial question, it looks like on a free cash flow consumption basis you burned less cash in the first half than you did in the first half last year, but more importantly first half is usually a cash usage period and the second half you generate cash. What would you expect to be at year-end versus year-end last year?

Call it net of the loan because understand we do that borrowing at the end of the year, so where it is the last, I will talk about we are anticipating cash flow from operations to be positive this year and that will be the first time in a number of years if you remember last year we lost over cash flow from operations we lost $11 million this year we're expecting to be slightly positive our capital expenditures are going to be around $6 million so our free cash flow, our cash position will be down about a million dollars from last year, we should still finish out with more cash than our debt at the end of the year. But as far as cash is probably roughly about the same as last year we should finish up.

Okay, and then I guess last question and I can get back in the queue within transportation and skill trades you called out skilled and you called out heavy equipment how about auto diesel and I'm assuming that was not as robust and why.

And that is correct, and I don’t have the answer frankly as to why that is the case again it's difficult to pick which segments going to be the most robust in one period, we just do continue to see strength across our skilled trades segment our program offerings and in certain markets auto and diesel are definitely not as strong. However with that said, the placement rates are still doing exceptionally well and the partnerships are still coming in that area, but it does remain more of a challenge, compared to our other programs to attract students into those programs but again I’m not worried about that in the long term in the least, either.

And when they were down, they were only slightly down.

Correct

Less than 50 students in auto.

Correct.

Thank you. [Operator Instructions] And I’m showing no further questions at this time. I would like to turn the conference back over to Scott Shaw for any closing remarks.

Thank you very much operator and again, thank you all for joining us this morning were really pleased with our results, we feel like things have started to turn the corner for us and we look forward to updating you in November with our third quarter results. Have a great rest of your summer and thanks again for joining us. Bye, bye.

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