Good morning. At this time, I would like to welcome everyone to the Second Quarter 2019 Lincoln Educational Services Earnings Conference Call.I would now like to turn the conference over to Michael Polyviou. Please go ahead.

Thank you, Liz, and good morning, everyone.Before the market opened today, Lincoln Educational Services issued its release reporting financial results for the second quarter ended June 30, 2019. The release is available on the Investor Relations portion of the Company’s corporate website, at www.lincolntech.edu.Joining us today on the call are Scott Shaw, 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 this call will be archived on the Company’s website.Statements made by Lincoln’s management today, during today’s call regarding the Company’s business that are not historical facts may be forward-looking statements as the term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, planned, intend, estimate, and continue as well as 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 and may influence the accuracy of the statements in 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 the 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 the time with respect to the 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 thereof.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 the progress our team continues to make towards consistent growth and profitability. The favorable operating trends we discussed during our Q1 call in May, including consistent same school student start growth, increasing student graduation and placement rates, increasing operating leverage and strong cost containment continued through the second quarter, and when combined with our outlook for the remainder of the year, enable us to reaffirm all of our guidance for the year with the key objective to achieve GAAP profitability in 2019.Earlier this morning, we reported our seventh consecutive quarter of student starts growth. Starts were up 3.6% and the growth was balanced with the Transportation Skill Trades segment up 3.5% and our Healthcare and Other Professions segment growing 3.7%.Despite the low unemployment rate, which typically can mean a downturn in our enrollments, we are achieving consistent growth for a number of reasons. First, we continue to invest in productive marketing channels, which expand consumer awareness and attract interested students. Second, more and more students and parents are questioning the value of an expense of four-year degree with a lot of debt and maybe not great job prospects. More importantly, some guidance counselors are even becoming more receptive to directing students to career technical training over a four-year school. This shift, I assure you, is still in its intense, but I’m encouraged nonetheless.Finally, the demand by employers for skilled technicians remains as robust as we have seen. And I believe that our partnerships with Fortune 500 companies and others is also helping us to grow. Over the past two weeks, I attended three different events with three different partners, and the message was loud and clear, we need more skilled employees and we have come…

Thanks, Scott, and good morning, everyone.I would like to begin my comments with highlights from our second quarter performance, offer some comments regarding our segment performance during the period, and then conclude with a review of our 2019 guidance, which as Scott noted, we are reiterating this morning.To begin, revenue for the quarter improved $2.5 million, or 4% over the prior year, and on a same school basis, revenue was higher by $3.9 million, or 6.6%. Our student starts and average student population on a same school basis were up 3.6% and 5.8%, respectively, over the prior year.Successful execution of our strategies to drive growth have now led to seven consecutive quarters of student start growth. This is a very important accomplishment for the Company, given the challenges in the industry and is reflective of a strong commitment and effort by our team to provide an exceptional educational experience for our students, while improving the Company’s financial strength.We continued to make additional marketing investments during the quarter, which we believe will continue the favorable student start trend for the remainder of the year. As a result, the cost per start was up slightly during the quarter. However, the cost per start for the first half of the year is down, which is demonstrating both marketing effectiveness and improved returns on our marketing investments. Also, we improved our cash flow as we were cash flow positive from operations for the quarter and increased cash flow from operations for the three and six months ended June 30, 2019 by approximately $2.4 million and $1.5 million, respectively, compared to the same period of prior year. Historically, we have generated strong cash flow in the second half of the year, and we anticipate the same trend to recur this year, which led us to…

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

Good morning, guys. Congratulations on the beat.

Thanks, Alex. Good morning.

So, I have a couple of questions based on your prepared comments. First of all with regard to student graduation and placement rates. Can you quantify those a bit on a percentage basis? Do you -- I think, one time, you at least gave placement rates.

Yes. Basically, the graduation rates are around 65% to 66% and our placement rates are 80% to 81%.

And those are improvements over last year?

Yes. We’ve been increasing them anywhere from 50 to 150 basis points. It varies quarter-to-quarter, Alex. But, that’s in the range.

Got you. And then, congrats on a growing number of corporate sponsors, the addition of Mazda. Would you mind just as a review kind of rattling some of those, offer us at least maybe by segment Transportation and then Hospitality?

Sure. Unfortunately, I can’t rattle off any major ones in the Hospitality side. So, right now, the major ones are all in the Transportation and Skilled Trades. We have Audi, VW, Johnson Controls, Hussman, Chrysler, Mazda, those are the major ones, Bridgestone, Firestone, Mercedes we’re doing some work for as well as doing things with the Penske Automotive in the trucking side and a number of others.

Great. And then, you are in advanced discussions with more new partners that I presume you hope to announce before year end?

Yes. Absolutely.

Okay. And then, you said this fall you are going to introduce the welding program to a seventh campus. And then if I got this right too, hospitality programs this fall.

Yes. The hospitality programs are just two massage therapy programs, Hand & Stone and Massage Envy have come to us in local markets looking for massage therapists. And so, there’ll be some more programs maybe tapping out around 50 or 60 students each, one in the Boston market, one in the New Jersey market.

Great. And then, for next year, I think, you are just kind of going fast for me, three to five more skilled trade programs in 2020. Are these additional programs or just transplanted programs into additional campuses.

Transplanted programs with maybe one new additional one. We’re evaluating plumbing basically in any campus where we have electrical and HVAC plumbing is kind of a natural. We’re still trying to evaluate to find out how incremental plumbing would be, or would it cannibalize some of our programs. But, that be the only new one, but we’re looking to replicate the HVAC, electrical and welding programs. We see opportunities frankly in several markets for those.

And then, you submitted the degree granting application in New Jersey, you got six campuses in New Jersey. Realistically, how long is that approval process? I realize, there are moving parts. And then, once received, what do you think this allows you to do specifically?

Sure. It will definitely take us a year to get it. And assuming we get it -- the big thing that we are driving for is to launch an RN program in New Jersey. We have three hospitality campuses. In order to offer RN, you need to be degree-granting. 99% of our LPNs all want to become RNs. So, we have a great base of people that want to become RNs that we can reach out to, but also, it’s the largest portion of the healthcare field. New Jersey needs more nurses. So, we see a great opportunity if we can launch that. In addition, we would then be able to offer degree-granting to some of our automotive diesel and skilled trades programs as we do in certain other states. And there is always a segment of the population that does prefer to earn a degree. So, that would just help us gain more market share in those areas as well.

Okay, understood. And then, as we enter the third quarter here, obviously a big primary intake for high school related students. What has been the trend in high school enrollments over the last couple of years, and what are your expectations for this year? And then, what percentage of new student enrollment in the third quarter on the transportation side comes from high school grads?

I’ll have to get back to you on that last point, just to make sure I give you the factual. In general, I know high school overall is about 20% of our population for the full year. But, I’ll have to get back to for specifically what it will be in the third quarter, Alex. But, basically, high school for us has been incrementally growing for the last 24 months. And so, it’s in the low single digits. And that’s mainly from penetrating some new markets and having some greater productivity. The high school market is a challenging market; it’s a very expensive market to reach, but it’s a very important market for us. As I said, about 20% of our students come from that market. And what we are seeing, I think I mentioned in my prepared remarks, and again, it’s very, very preliminary and it’s certainly -- the shift hasn’t changed. But I’m hearing more of our high school guidance counselors talk about the fact that they are seeing some positive momentum as far as people being more willing to consider a career technical education. As you know, one of the reasons why we have the skills gap is everyone is being pushed to go to four-year school. And as that hasn’t proven to be the panacea for everyone, people are giving career technical education some second thoughts.So, I am very optimistic about where that will go in the future. But overall, as I said, the high school market remains about 20% of our population.

Great. And then, lastly, I just wanted to talk a bit about free cash flow. I think you said in the prepared comments you expect positive cash flow for the year, and that would be an improvement year-over-year. You used cash in the first half, you generate cash in the second half, generally is how it works. With third quarter I believe being the most significant producer of cash flow from operations and then the fourth quarter, maybe a slight decline from the third quarter, but still quite robust. Is that expectation the same? And do you expect to generate more cash flow from operations in the second half of ‘19 versus the second half of ‘18?

Yes. I’ll let Brian address that.

So, Alex, this year, we are forecasting to have actually slightly higher cash flow from operations in the fourth quarter versus the third quarter. and as I mentioned in my prepared remarks, we are actually slightly cash flow positive for the second quarter this year, a few $100,000, but it was slightly positive, which is a significant improvement to the $2.3 million in the prior year in that quarter. So, in the second half year, we are anticipating a strong cash flow. Last year, we used cash flow from operations about $2 million, so we should have significant improvement over that.

Okay. And then, will the 10-Q be filed today or tomorrow?

It will be filed today.

Okay. I’ll look for that. Thank you very much. And again, congrats on the strong quarter.

Okay. Thanks, Alex, for your questions.

[Operator instructions] I am showing no further questions in queue at this time. I’d like to turn the call back over to Mr. Shaw for closing remarks.

Thank you all for joining our call today and learning more about Lincoln. For over 70 years, we’ve been a leader in career technical education and training, and we believe our best years are to come. To all the Lincoln employees who are on the call, I thank you for your tireless support of our students. And to our shareholders, we look forward to updating you on our progress after the third quarter. Have a great day.

Ladies and gentlemen, thank you for your participating in today’s conference. This concludes the program, and you may now disconnect. Everyone, have a great day.