Good day, ladies and gentlemen, and welcome to the Lincoln Educational Services Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to turn the call over to Mr. Michael Polyviou. Sir, you may begin. .

Thank you, Bloop, and good morning, everyone. Before the market opened today, Lincoln Educational Services issued its news release reporting financial results for the third quarter ended September 30, 2021. 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 the call will be archived on the company’s website.

Statements made by Lincoln’s management on 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, plan, 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 that may influence the accuracy of the statements and the projections upon which the segment and 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 report on Form 10-Q filed with the Securities and Exchange Commission.

Forward-looking statements are based on the information available at the time those statements are made and management’s good faith belief as of the time with respect to future results or 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 would 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 to discuss Lincoln Educational Services recent financial and corporate development. Our third quarter financial performance came in better than we were expecting when we last talked with you in August.

Our student starts were better than planned and graduate placements continue to be exceptionally high due to a persistent increasing demand from corporate America for our skilled graduates.

We continued to expand our corporate partnerships, initiate the launch of our new and enhanced automotive curriculum in mid-October and continued to invest in various programs and strategies designed to foster growth over the short and long-term. Our financial results were impressive.

We grew the top-line 13%, grew operating income nearly 50% despite some inflationary pressures and more than doubled the amount of cash we generated from operations to some $16 million. As of September 30, our unrestricted cash position was up some 200% over the same period a year ago.

This figure includes none of the net proceeds from the sale leaseback transaction, which was recorded in the fourth quarter. For the past several quarters, our team has demonstrated a commendable ability to respond to the rapidly evolving dynamics introduced to our operations due to the COVID-19 pandemic.

For instance, we discussed last quarter how high school closures during the past academic year had severely restricted our ability to meet with students on campus and as a result, we expected our third quarter starts to be up as compared to our strong third quarter 2020 start level.

In August, we anticipated third quarter 2021 overall starts could be down several hundred students temporarily interrupting our string of quarterly student start growth. However, our team worked with our campus management to implement a variety of special initiatives and the result was a sharp reduction in the actual start decline.

Overall student starts during the third quarter declined by only 80 students, obviously a marked improvement from our outlook in August. The activities and programs implemented in August and September have carried over into October, and as we speak with you today, we believe we will achieve 7% to 8% start growth for the full year.

Last quarter, we also outlined actions we were pursuing to unlock value in our owned real estate while eliminating our bank debt through non-dilutive transactions. In September, we’ve reported on agreements for two such transactions, one of which closed a little over a week ago.

The sale leaseback transaction of our Denver and Grand Prairie properties was completed for a total sales price of $46.5 million. In turn, we’ve extended our commitment to these two markets and campuses by entering into 20 year leases for both facilities.

By all measures, both campuses are consistently among our most successful and the proceeds from the sale leaseback transaction has gone to strengthening the entire Lincoln organization in two ways. First, on October 29, we’ve repaid the entire outstanding balance of our bank debt, which stood at nearly $17 million.

Second, we increased our free and available cash by approximately $28.5 million.

Our vast re-enhanced balance sheet now provides ample resources to fund our strategies to prudently expand Lincoln’s ability to help American employers attract trained employees, while at the same time helping American workers gain the skills needed to fill high paying stable career opportunities.

The balance sheet also provides additional financial strength to weather any potential interruptions to our operations like we experienced in March of 2020 due to COVID-19.

A second transaction to unlock the unrecognized value of our real estate assets and capitalize from the strong commercial real estate market involved an agreement to sell our Nashville facility, which we also announced in September.

This transaction is expected to close during the first quarter of 2022 and should increase our cash position by approximately $34 million.

It is part of a long-term effort on Lincoln’s part to build on our tremendous success in Nashville, as we execute a plan to develop a more efficient facility to support our long-term growth initiatives in this dynamic market.

After the Nashville property sale closes, we will continue to occupy our present facility until we complete the development of the new campus. Some of the proceeds from the real estate transactions will fund our internal growth strategies. For example, by the time we open the doors of the new Nashville campus, we expect to invest about $15 million.

In addition, we have selected a market for our first de novo campus in over a decade and remain on target to open this new campus by the end of 2022, or about a year from now.

We also have identified five additional markets where our corporate partners have expressed an interest in our entering and we have determined that there are good growth prospects.

Our balance sheet now puts us in a position to thoroughly evaluate these opportunities, as well as execute on those we believe can generate a suitable return on our investment.

We also continue to invest in our existing programs and curriculums to ensure we are using the latest training tools to educate our students on the latest technologies and skills.

For instance, the October launch of our new core automotive curriculum I mentioned earlier provides even more hands on skilled training and introduces highly engaging video animation and gamification of exercises.

In addition to the new electronic resources, we have also added more hands on exercises that will increase the skills of our graduates, thus making them even more valuable to their employer. Further, we’ve incorporated more training for electric vehicles with even more to come as our nation’s fleet of cars and trucks increasingly becomes electric.

Our philosophy is to provide our students with the best training and opportunities that we can.

Over six years ago, we saw the benefit of requiring all automotive students to have a laptop on the first day of the class since they were using them in the dealerships on a daily basis, and since new and engaging curriculum could be delivered on these laptops. We are now moving to the next level that further leverages advances in technology.

This new curriculum should be fully rolled out to all the automotive campuses by the end of next year. Demand for our graduates by employers in the placement of our graduates into well paying positions continues to improve as the economy rebounds.

More than ever, the pressure builds within corporate America to identify new and innovative ways to recruit, train talent to its workforce to meet growing demand, as well as fill each company’s skills gap.

Given our proven track record of helping companies find as well as retain that talent, interest from corporations to form partnerships to help them recruit and train personnel to help them narrow their skills gap and meet the increased demand for their goods and services continues to grow.

During the quarter, we launched our innovative program with Republic Services with Lincoln providing training to Republic’s employees at their state-of-the-art Dallas facility, rather than at a Lincoln campus.

The 12-week, 100% employee paid medium to heavy truck training program assists Lincoln Tech graduates with the transition into the Republic’s services organization, as well as serves to upskill existing Republic employees.

This is another example of how we seek to help our corporate partners develop the skills needed to meet their growing demand, while providing our graduates and others with exciting stable career opportunities. The Republic partnership also illustrates the creativity and customization Lincoln is uniquely positioned to provide corporate partners.

We also continue to enhance our relationships with OEMs.

We opened a second DW program at our Indianapolis campus and we expanded our Mazda program to New Jersey and hosted a Mazda Leadership Team Meeting in New York to discuss the challenges in finding talent and how we can work together to assist Mazda in building their technician pool as they continue to experience growth.

I would be remised in my remarks if I did not address the challenges that we, like so many other companies are facing with rising cost from our vendors and challenges in hiring new faculty. On top of this, we have the added stress of vaccine mandates in various states and now for our entire organization possibly starting in the New Year.

Given the shortages of supplies and workers, anything, no matter how small can negatively impact our operations. With that said though, we are aggressively managing the situation and taking steps to find and hire the talent we need to continue to offer the superior education for which Lincoln is known.

Our countdown continues to our 75th Anniversary on November 11th. This is appropriate given it is also Veteran’s Day and Lincoln was originally founded to provide new skill sets to veterans returning home from World War 2. For the past 75 years, we have provided the training required for students seeking essential and high in demand careers.

We’ve previously noted that as part of our celebration of our 75th Anniversary, we’ve increased the scholarship opportunities at Lincoln’s $75 million over the next five years. We think it’s a fitting way to celebrate our 75 years of putting students first, as well as being prudent student - stewards of our shareholders’ investment.

This scholarship funding is helping to lessen our students’ burden as they train for careers that should enable them to become productive contributors to our national economic well-being and growth. And we are in an excellent position to meet the training and skill development needs of our corporate partners and our students for another 75 years.

These are my prepared remarks for this morning. I would like to now turn the call over to Brian for a review of our third quarter financial highlights and specific updated guidance.

Brian?.

Thanks, Scott. Good morning and thank you for joining us. Before I begin, I would like to thank all our veterans both past and present for their service and commitment to the security of our great nation.

Veteran’s Day is particularly important for us at Lincoln since so many of our students are alumni and instructors serve or have served in the military.

This morning, I am pleased to highlight our solid financial results for the third quarter and provide additional details on the two transformational real estate transaction included in Scott’s remarks.

On October 29th, we closed on the sale leaseback agreement of our Denver and Grand Prairie properties and simultaneously entered into a 20 year triple net lease agreement for each property resulting in an annual rent expense of approximately $3.2 million in connection with the sale lease properties we anticipate recording a gain of approximately $22 million in Q4.

In summary, this transaction significantly strengthens our balance sheet and gives us greater flexibility to pursue our growth plans. We currently have zero debt outstanding resulting in annualized interest expense savings of approximately $800,000.

In addition, with the net proceeds from this transaction, our cash balance has increased to nearly $80 million as of the end of October. With the repayment of our entire term loan balance, our current credit facilities with a small line of credit with availability of about $10 million.

As a result, we are negotiating a new credit facility to further increase our availability and financial flexibility with more favorable terms reflective of our stronger financial position. The second strategic real estate transaction is the sales of Nashville, Tennessee property.

The buyer is continuing to work through their due diligence process and based on agreement, we expect to close in the first quarter of 2022 with an estimated gain on the sale of $29 million. As Scott mentioned, we expect to increase efficiencies in the new location and anticipate a seamless transition without any material financial impacts.

Now turning to our financial results for the third quarter. Our revenue for the quarter was $89.1 million, up $10.3 million or 13% over prior year comparable quarters.

The increase was the result of an 8.3% increase in our average student population driven by our nine month start growth of 8.8% in addition to a 4.3% increase in average revenue per student quarter-over-quarter.

Student starts for the third quarter continued our strong trend of approximately 5500, comparable to prior year, while this quarter’s number is 80 students below last year’s fourth quarter. These starts are comparable against a 15.3% start growth in the prior year, which was our strongest start growth percentage achieved in all of 2020.

Through the first three quarters of the year, our total starts have increased 8.8% and our ending student population has increased 6.4% or approximately 800 students compared to prior year. Turning to total operating expenses.

We experienced an increase of $7.4 million or 10.9% to $75.4 million driven by several factors including, increases in instructional expenses of $2 million, driven in part by inflationary pressures on instructional salaries through instructor shortages coupled with our largest student population resulting in higher booking total expense.

Higher facility expenses of $900,000 due to normalized student housing expenses as COVID restrictions lessened. Additional marketing investment of $800,000 to drive our Q3 results and $1 million more corporate expenses, mainly due to incentive and stock-based compensation paid in part to improved financial performance.

Please note, although our operating expenses increased for the quarter, they have decreased slightly as a percentage of revenue when compared to prior year.

In terms of our bottom-line results, consolidated operating income for the quarter improved by $1.9 million to $5.7 million and adjusted EBITDA increased by $2.1 million to $8.4 million including the add back of non-stock compensation expense. Turning to a brief overview of our balance sheet.

As a reminder, at the end of the third quarter in 2020, we had approximately $11.5 million of undistributed CARES ACT fund, which we’ve excluded for comparison purposes in my remarks.

Cash flow from operations more than doubled to $16.7 million from $6.8 million in the prior year comparable period and we had a net cash balance of $31.3 million for the current quarter compared to a net debt balance of $1.5 million at September 30, 2020.

You can clarify our net debt to net cash is calculated using cash and cash equivalent balance, less both the short-term and long-term portion of the credit facility. Finally, we are refining our guidance for 2021 full year based on the results of the nine months plus our outlook for the fourth quarter.

Based on our strong ending population, we continued to have revenue growth in Q4, which allows us to increase our outlook for full year revenue growth to be between 12% to 14%. We expect student – we expect starts in the fourth quarter to remain strong and be in line with prior year.

As a result, full year start growth is anticipated in the range of 7% to 8%. And finally, adjusted EBITDA, we expect to exceed our expectations for the first nine months of the year – we have exceeded our expectations for the first nine months of the year.

In the fourth quarter, we plan to increase our investments in marketing and growth initiatives resulting in an adjusted EBITDA for the quarter being comparable to last year’s strong performance. Accordingly, for the full year, we expect adjusted EBITDA in the range of $35 million to $37 million at the high end of our prior outlook.

These results exclude the estimated $22 million on the sale related to the sale leaseback transactions and associated expenses resulted from the debt retirement in the fourth quarter. This concludes my remarks. We look forward to sharing our Q4 and full year results with you in March. Thank you all for your time today.

I’ll now turn the call back over to the operator, so we can take your questions.

Operator?.

Your first question comes from the line of Alex Paris from Barrington Research. Your line is now open..

Hi guys. Congrats on the beat and race and thanks for taking my questions. .

Good morning. Alex. .

Good morning, Alex. .

So, starting with the starts in line or better than expected. Transportation and skill trades were flat. Healthcare and other professions were down 4.8%. We expected a tough comp here in the third quarter.

I am wondering if you can kind of compare and contrast why was healthcare and other professions weaker? Was it related to challenges in hiring instructors, which you referred to as inflationary cost pressures?.

Yes, Alex. Yes, we definitely have seen especially on the nursing side a lot more pressure on finding and attracting and retaining our nurses. And so that does have some impact on our student population, especially enrolling and bringing on new students.

Some of it was also just timing of when the starts take place where the third quarter hops schools had the little bit less than last year. But overall, I mean, in general, we know healthcare is going to be strong, but there will be these probably, quarterly blips along the way. .

Right. And then, that makes sense and it’s kind of in keeping with the lot of other comments from the other for-profit post-secondary education companies.

Now your full year guidance for starts suggests fourth quarter starts at the low end of that range or flat and at the high end of that range up 4% to 5%, because you are saying 7% to 8% for the full year.

If my math is right there, where would you expect the greater starts growth to be between the two segments, transportation or healthcare?.

Well, your math is correct and I would say, it will be probably a little bit more on the transportation side. .

So, a little bit stronger growth on transportation side year-over-year versus thoughts. Okay. And then, I wonder as you make a comment on retention.

How has retention been going here in recent quarters?.

Sure. Well, we’ve had a big attention to retention, because obviously with COVID and students going remotely, it was a change in everyone’s academic experience. We continue to be holding at kind of the levels that we’ve been in the last couple quarters.

So, we are striving to turn that around with we do want to get back to where were pre-COVID, which is about four percentage points higher than where we are today. So, we continue to work on that. Continue to work on training and focus on students who are struggling more with some of the remote aspects of what they are dealing with today.

But we feel very confident given trends that we’ve seen and by certain actions that we’ve taken that we should be able to overcome those challenges. .

Great. And let me just ask one more question about starts. I forgot to ask.

How did starts work throughout the quarter? Like on a monthly basis, was there strength going into the end of the quarter? Weakness about the same, and then, I wonder if you could give us any comment about the month of October?.

Sure. Well, I mean, again our guidance is our guidance for the full year. So we’ve kind of factored all that in. It varies kind of month-to-month, just with certain with months, we naturally have more starts planned. But overall demand is remaining robust. I mean, we have more leads today than we did last year. And so, it is up.

So, as part of our challenge to be perfectly honest is that, as the economy has reopened, our students are more engaged with the economy and a year ago as one was trapped in their homes and therefore, we were able to frankly interact with our students very quickly and they were far more engaged in wanting to get started in their education.

Now that the economy has opened again, we still have strong – as I said, stronger demand frankly thank last year as far as interest, but our conversions are a little bit softer than they were 12 months ago. So, that’s to be expected I think and so we’re going back more to the conversion rates that we experienced pre-COVID. .

Great. That makes sense. And then, I guess the last question. Inflationary cost pressure across the board I suppose and you kind of pointed out nursing instructors and things like that.

But what has been the impact on marketing, cost per lead, cost per start, notwithstanding the comments you just made on conversion, just talk about the cost of leads?.

Yes. I would say, everything is up. I don’t think Brian, we’ve seen any expense category go down. So, everything is up. So cost per leads are certainly up and so then we constantly are adjusting our marketing spend to be in those areas to provide us with greatest returns that we can offset cost as much as possible.

But certainly there is definitely cost decrease – excuse me, cost increases across the board. .

But as Scott said, for marketing cost per start was up for Q3, for the total year as we are slightly down. But as he alluded to in the Q4, we are anticipating it to be slightly up again. .

Good. Okay. I think I understand.

And then, I guess, the last question is, you are not ready at this point to identify the state or the location of the new campus planned for 2022?.

That’s correct. Until we sign a lease, we are not going to announce it. So once that happens, we will gladly tell you. .

Great. Well, thank you very much for answering my questions. I’ll get back in the queue. .

Thanks, Alex. .

Thanks, Alex. .

Thank you. Your next question comes from the line of Steven Frankel from Colliers. Your line is open. .

Hey. Good morning. I like to follow-up on the healthcare starts.

I was surprised that they were down shortage of faculties something that’s going to prevent you from growing those starts over the next few quarters until you get fully staffed up or do you think this is a timing issue and if we get out any quarter or two, that business is going to return to more normal growth pattern? And then, a related issue, where are we in the students’ ability to do their practicals to get into the clinical settings?.

Sure. So, they are somewhat related. So, besides the fact they are being challenged in getting faculty, which we are addressing and overcoming, we’ve also now mandated that every nursing student at the entrance to our program be vaccinated simply because all the clinical sites are mandated that they are being vaccinated.

So instead of, I’ll say, taking the risk of bringing someone on and hoping they’ll get vaccinated while they are with us to then going to clinical sites, we’ve taken the step of requiring every student entering our LPN program to be vaccinated from the get go, which has kind of reduced some of the ability of certain students to enter our programs.

I view that as a temporary change as obviously greater and greater percentage of the population gets vaccinated, this will become less of an issue, but with that kind of mandate that we’ve just put in, in the last couple months, I would think that there would be probably some pressure on the starts for those students in the next quarter or so.

But we all know that there is a huge demand for nurses, a huge shortage for nurses. So many, we have so many more students that want to become nurses that can’t have their entrance exams. So I am not worried about the long-term demand for that career. .

Okay.

And then, just for modeling, how D&A changes once you finish all these planned actions, what’s kind of the runrate on a quarterly basis of D&A?.

That’s a good question. So, in the fourth quarter, it’s going to be about $1.7 million for the fourth quarter our depreciation and the runrate, I think it should be – give me one second, mostly on the sale leaseback, it will reduce our depreciation expense, almost $1.5 million annually.

Nashville, as you know, we are going to be reporting a very large gain is on the books. So, not too high when Nashville closes. It will be only a few $100,000 depreciation savings. But for the sale leaseback, it’s approximately $1.5 million annualized. .

Okay. Great. Thank you. .

Welcome. .

Thank you. Your next question comes from the line of Tony Gleason from Carnegie Lake Capital. Your line is now open. .

Good morning. .

Good morning. Nice job on the quarter and the past year. Certainly has been a challenging environment for the business. I have two questions. One is, you’ve certainly done a brilliant job at monetizing the real estate. The dollars are real wow for me. I am kind of wondering if you could do something equally brilliant with the proceeds.

So, you know what? I look at the numbers that you have provided us with for the year. It looks like it’s about pre-tax about more than $1 a share and so, it starts at $7. That’s a pretty cheap, like seven times pre-tax earnings.

So my first question is, what are the impediments to repurchasing, maybe 10% or 20% of the outstanding stock when I say cheap? That will be my first question. I think, I believe you’ve still leave plenty of capital for the expansions that you’ve outlined. So, that’s question one. Question two has to do with long-term estimated earnings power.

I am wondering what your rough estimate would be of the utilization of the campuses now? What it could be? What kind of earnings power do you think that the enterprise can deliver if you are doing a good job in a challenging environment? So, if you are interested in the answers. Thank you. .

Sure. Well, I’ll start with the second one first, I mean, given the capacity that we’re underutilized at 50% today. So, in theory without spending any more CapEx, the facilities that we have today could double the EBITDA that we have today. It’s almost we could attract enough students to achieve that.

With regards to the capital, I mean, obviously, the Board constantly looks at this and assesses this and evaluates this and they have to make the decision about what they want to do with regards to how to best deploy the capital. As of right now, our focus is on a couple of fronts. One, opening up new campuses.

Two, it’s investing in the campuses that we have and replicating programs to make the campuses as robust and as healthy as possible. Three, we do look at acquisition opportunities as they come around and so we will continue to do that where it makes sense and where it’s prudent and where buy versus build makes a better return for our shareholders.

And finally also, we do want to have good resources on hand. We obviously, COVID, no one anticipated that. It was a very disruptive force. But we also have a more challenging regulatory environment out there and who knows, if there is another event like COVID, if the government will be as generous to us as they were in this past cycle.

So the Board is very focused on making sure that there is enough wherewithal for our company to continue to grow, as well as to be prudent with regards to just having a solid balance sheet. So that disruptions of any kind don’t cause the company any harm.

And the review, what you asked about, I am sure from time-to-time, if they think that that’s a better use of the proceeds. .

Thanks. That’s helpful. I guess the – I look at the $80 million in net cash, which is 50% of the market cap, so it me strikes me as certainly, quite vulnerable for a takeover of the company using 50% of that company to take for itself.

So I am just – I appreciate having a flexibility in things, but I just think about that money and to the third point you made about acquisitions, is there anything out there that could be as cheap as Lincoln is now at seven times pre-tax earnings, a company that you presumably know really well. So the risk profile is quite low.

Is it possible you could find something cheaper than that?.

Well, I don’t think it’s possible that we could find something cheaper than us as I think we are too cheap. So, our focus is trying to get that. .

Yes, we agree. .

To get that multiple up to be much more reflective of what we are able to achieve. What we have achieved and where we are going. So, along those lines and acquisition could help in some of that – in some of those attributes there to make us a more strategic, more valuable and help us grow the bottom-line. But I couldn’t agree with you more.

The market certainly doesn’t seem to give us the right value at this stage. .

Great. Okay, well, would you be willing to have a chat further after the call, just talk about a little bit further? I guess, I agree with you and you are certainly in a very flexible position now.

And deploying the capital here can certainly make the sense to a significant long-term investment by growing the capitals and the capacity and filling the capacity and shrinking the equity.

And just, is there any, like single impediment you could point to on the board that would not support the idea of a share repurchase?.

Well, I think that the only impediment is that we see lots of other opportunities and the Board is looking for the long-term future and growth opportunities, obviously, at that way.

So, while, this conversation has certainly come up, it’s one that we see greater opportunities again for creating something, frankly, that doesn’t exists in this country and that’s more of a national chain that can better serve large corporations out there.

So, the vision that they have for the company I think is much more expansive than where we are today and we are going to hopefully achieve that. .

Okay.

So, would you mind if I call maybe today, tomorrow and just follow-up that a little bit further?.

Yes. No problem whatsoever. I would enjoy the conversations. .

That’s super. Thanks so much for your time. I really appreciate. Great job. .

Sure. .

Your next question comes from the line of Raj Sharma from B. Riley. Your line is now open. .

Hi. Good morning. Congratulations on the good solid results, especially. I had a couple questions. Firstly, on the starts growth, I know that you had guided Q3 down, because of high school instruction going be weaker.

Could you give us a little bit more color on where the high school instruction not as weak and/or did the adults portion pick it up – pick up a lot more and how is that sort of trending for the rest of the year?.

Sure. This maybe a little more detailed and you are certainly than what we normally would provide. But on the high school side, we had roughly 90 to 100 high school reps that go around and visit the high schools and collect leads from visiting classrooms.

We also though do their efforts, obviously, there is students that sometimes don’t respond or fill out the lead cards there and eventually come to us maybe later in their recruitment process.

What we saw was a larger increase in high school students coming to us through our marketing initiatives versus through our sales force, excuse me, the sales force that gives us that long-term window, because they are out there today recruiting for next summer. So, we have a good sense for who they are and when they are going to start.

Once they come to us through our marketing efforts tend to come more last minute.

And so, we had a pickup in those, which was somewhat driven by some of the actions we were taking to drive more high school volume given the fact that we weren’t able to get into the high school, but we just didn’t have as clear window into those students and then that was really what help us enable what we achieved in the third quarter. .

And does that change the dynamic going forward and how you approach marketing, sales reps versus marketing efforts?.

Well, it’s something we can’t….

Upon high schools..

Yes. It’s a very good question, something we constantly look at and we know that there is a balance.

But at the same time, we also know, given the challenges that we have and given the challenges that our employers have of attracting students, we feel that the in-person component of our high school research is good just overall marketing and getting the word out about these programs. It is something we look at.

But we certainly see value in having that sales force out there still. So, we will continue to deploy that. .

Got it. And then, just my other question is on the new diesel tech facility, the training facility at Republic Services, that’s an incredible – really good move. And that’s a 12-week program.

Do you expect – what do you expect in revenue contribution from a program like that? And do you – would you expect more of these going forward, because this moves you away from Title IV dependence just all 100% employer paid.

Is that correct?.

That is correct. I guess, I don’t want to share exactly what the dollar amounts are just for competitive reasons. But I can tell you, it’s in, let’s say the hundreds of thousands of dollars a year for what we do today.

And then, the objective is to also expand with them offering additional training to hopefully add hundreds of thousands of dollars more. So, the objective would be to hopefully find business partners contributing between $500,000 to $1.5 million each and continue to hopefully build that out over time. .

Got it. And then, lastly, just last question.

On the inflationary pressures, do you think these inflationary pressures are transitory on your instruction cost, facility cost and does that impact your tuition rates going forward? Are you able to pass these through if you think these are going to be somewhat more permanent?.

Yes. I do think that they are more permanent. I mean, it’s just so hard to predict. I mean, we have such a strange workforce economy right now with the great resignation going on. People not taking jobs. 10 million jobs out there. So four million people unemployed. A lot of these things just don’t add up to me.

But certainly, as of right now, there certainly seems to be a lot of focus on wages going up. And so I don’t see that declining right now and certainly as we look to next year, we are going to factor that in. As far as pricing, we will have a slight tuition increase which should help enable us to cover a lot of it. But probably won’t cover all of it.

We have to be sensitive to those issues as well, because while we are probably maybe warranted in raising tuitions a lot more than we plan to, there is just a lot of focus and attention on that area.

So, we will be doing it prudently to make sure that we are covering our cost as much as we can and we will just be constantly addressing and looking for ways to frankly, become more efficient. So we cannot impact the impact the bottom-line. .

Great. Thank you, again for taking my questions and again, brilliant job on the real estate rationalizations, sale leasebacks. It really includes your liquidity without diluting any shareholder count – any share count. Again, congratulations. Thanks. I’ll take it offline. Thanks. .

Yes. Thanks, Raj. .

Thank you. .

Your next question comes from the line of Justyn Putnam from Talanta. Your line is now open. .

Yes. Good morning and congratulations on the operations and also transforming the balance sheet. So, I have a few questions about capital allocation, but they were actually pretty much addressed by an earlier caller. So, can just look forward to hearing more update on that. I think the caller had known.

So, look forward to speaking with you in the future. Thank you. .

Okay. Thanks, Justyn. .

Thanks. .

Speakers, I see no further questions at this time. I would now like to turn the conference back to Scott Shaw. .

Alright. Thank you, operator. As always, I want to thank our shareholders for your continued interest and support. I also want to thank all of our faculty and staff for their unrelenting dedication to our students, many of whom have faced great adversity due to the pandemic.

I am very proud of the Lincoln Tech family and I am always uplifted by their stories of changing lives, no matter that challenges our adversities our students face. We change people’s lives and I could not be more honored and proud to work with so many individuals who consistently go above and beyond to serve our students.

We had an excellent first nine months of the year and we remain on track to achieve our goals. We are excited about the future and its potential as we continue to implement growth strategies, and make the investments needed to expand opportunities for both our students and shareholders in the years ahead.

I continue to believe we have a unique story to tell and the recent real estate transaction and operating performance make our story much more compelling. Brian and I will be meeting investors over the next few weeks during the Barrington Non-Deal Roadshow next week and the Canaccord Non-Deal Roadshow in December.

Brian and I look forward to sharing our 2021 fourth quarter and full year results with you in March. Until then, stay safe. .

This concludes today’s conference call. Thank you for participating and have a wonderful day. You may all disconnect..