Lincoln Educational Services Corp (LINC) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2011 Lincoln Educational Services Corporation earnings conference call. My name is Kim and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session at the end of today's conference. (Operator Instructions).

As a reminder, this call is being recorded. I would now like to turn the call over to your host for today's conference, Mister Shaun McAlmont, President and CEO. Please proceed, Mister McAlmont.

Thanks, Kim, and good morning, everyone. Joining me today is Cesar Ribeiro, our Chief Financial Officer.

Let me begin this morning by reading the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The statements in this presentation concerning Lincoln Educational Services Corporation's future prospects are forward-looking statements that involve risks and uncertainties. There can be no assurance of future results will be achieved and actual results may differ materially from forecasts, estimates, and summary information contained in this presentation.

Important factors that could cause actual results to differ materially are included but not limited to those listed in Lincoln Educational Services Corporation's Annual Report on Form 10-K for the year ended December 31, 2010 and other periodic reports filed with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement.

This morning, I will provide an overview of our operations and Cesar will review our second-quarter financial performance and provide our outlook for the third quarter and the year and then we will take your questions.

As an overview, we continue to operate our institutions with the ultimate goal of improving our student success outcomes, which in simple terms to us means graduation, placement, and debt repayment success for our students. The current regulatory environment has shifted and so the success metrics are in sharper focus.

Additionally, we feel that the prolonged negative economic environment is impacting our predominant student demographic more than the overall population. These two forces have impacted our incoming new student population more than we expected, which will result in our revenue estimate decreasing to $500 million to $525 million in that range in 2011.

This said, our efforts to comply with regulatory changes has improved our retention. It has lowered our regulatory risk, it has lowered our higher risk ATB student population below the 10% level, averted a 90/10 issue for some of our campuses and keeps us minimally impacted by the finalized gainful employment regulations.

Overall, while there are fewer students, we are succeeding in staying regulatory sound, focused on student success, and continually acclimating to the many factors affecting our industry. We continue to execute our plan of reducing our higher risk ATB students in the second quarter with the intent of long-term improvements in graduation placement and repayment rates.

As you may recall, last year at this time ATB students were approximately 13% of our population. We have reduced the ATB population to 9.4% of our overall population, which equates to about 2,000 fewer ATB students in our schools this year. Our target was to move below the 10% mark for the ATB students for the entire Company, which we felt was a level where we could improve outcomes for these students. This decrease in higher risk students has also aided in improving our new student retention performance.

In addition, during the first half of the year we executed steps to manage our 90/10 ratios considering the high use of Title IV student aid at some of our institutions and the elimination of the Stafford remedy in July 2011, all without significantly increasing tuition. Adjustments included program structure, length, and other financing adjustments resulting in keeping our most challenged students eligible for Title IV aid.

These important retrenchment efforts have and will continue to impact our new students' starts and reduce our profitability in the short term. However, in this new environment we feel we are making the right decisions for our students and for the long-term viability of our institutions. While our visibility continues to be limited, we expect gradual improvement in student starts. We currently expect that the decline in student starts we have been experiencing over the past four quarters will be behind us sometime in early 2012 as we stabilize our new student admissions performance and benefit from easier year-over-year comparisons.

The decline in current year student starts will have a negative impact on our 2012 revenue and profitability. Accordingly, we are managing expenses to ensure that we maintain profitability on the assumption that our revenues reach a low point of $450 million to $500 million in 2012.

We are optimistic regarding the long-term view of the Company as we anticipate an eventual end to this uncertain environment. We ultimately expect to emerge from these challenging times as an even stronger company and a leading provider of vocational and technical programs in this country. Moreover, we believe the demand will always exist for vocational and technical training in areas like nursing, medical office, automotive, and the skilled trades.

Now in regards to our new student admissions. New student starts trended downward in the second quarter by 47.8%, which is greater than we anticipated.

As I mentioned earlier, we reduced our ATB population significantly. We removed ATB advertising and screened these students through a higher test passing score in a mandatory pre-orientation, which has resulted in the decrease. We saw the impact of other admissions process changes while affordability issues also continued to affect student starts.

These issues are somewhat amplified as we continue to be impacted by tough economic conditions affecting the country. And we continue to require more of a cash commitment from students on a monthly basis to address long-term 90/10 levels.

Overall, we believe our year-over-year start decline can be attributed in large part to affordability. We estimate that the impact of the actions we have taken has decreased new student starts by approximately 40%, while affordability remains a larger part of the decline at 60%.

Regarding high school admissions and our high school recruitment program. The high school teams around the country have recruited and enrolled about 12,000 high school [teachers] this year versus 14,000 last year or a 14% reduction in enrollment volume year to date. The primary cause of this softness in our estimation is again affordability on the part of parents who are choosing not to take on debt at this time on behalf of their dependent children.

Regarding incentive compensation changes. The finalized incentive compensation rule caused some early uncertainty for admissions staff when first announced by the department and may have temporarily affected productivity, especially in conjunction with other internal changes we made to our admissions processes affecting high risk student acceptance criteria. We finalized compensation adjustments for our admissions personnel in the second quarter and we feel that our approach in removing graduation incentives and adjusting base salaries was extremely fair.

We have extended this methodology of fixed-rate compensation to all campus-based personnel on their close working relationships with students. While this is a conservative take on the incentive compensation rule, we believe it is prudent to remove incentives from anyone working directly with students or who manage a campus. We feel that our methodology resulted in competitive salaries for our representatives and campus-based staff.

In regards to market demand, based on what we are currently experiencing there is continued market interest in our programs. The volume of inquiries decreased year over year due to reduced marketing spending and some economic impact. Year-to-date, inquiries have declined approximately 15% while enrollment volume had declined 29.5% year to date compared to a 42.9% decline for new starts year to date.

Interest and demand have decreased at a slower rate than student starts. We attribute this decline in start rates primarily to affordability.

Our advertising cost metrics reflect some of the strain we are seeing on new student starts. Our cost per start for the second quarter increased by 65% against prior year, based on lower starts and increased spending. Another important metric is our cost per inquiry, which decreased actually to $75 per inquiry this period versus $80 per inquiry last period last year as we shifted advertising channels.

Of our total inquiries for the quarter 52% came from online aggregators, approximately 10% from TV and other sources, and the remaining 38% from search terms and organic web sources. We focused on reducing the volume of inquiries from aggregators and have seen some progress to date. Our efforts will become more aggressive in this area over the coming quarters; however, we will do it in ways that maintain a certain volume of overall inquiries.

In regards to student persistence, as I mentioned earlier, we have seen improvements in new student persistence within the first 90 days especially in our schools where we made the earliest changes to high-risk student admissions. We realize the 5% improvement in the interrupt rate for new students over a 90-day period. Our overall Company interrupt rate improved by 80 basis points despite attrition caused by financial aid structure and program length changes related to 90/10 management.

Regarding job placement, we invested in our placement services in 2009 and early 2010 as we began working against a headwind caused by a prolonged economic downturn. At the beginning of 2011, we replaced the leadership in this area and instituted additional training and performance tracking systems to assist graduates in finding employment.

Furthermore, all incented eligible corporate managers have a career placement outcome as a part of their incentive plan to ensure we are all focused on supporting our campuses and students in this important process. Our final placement rate for 2010 is 71% compared to the prior year's 75%.

Regarding cohort default and repayment rates, improving defaults and repayment rates is a key to long-term Company objectives. Ultimately improved graduation rates and strong financial responsibility training for students will be the long-term solution in this area. While we strive to improve the cohort default rates for each of our institutions, the current economic climate, combined with the demographics of the students that we traditionally serve, makes this objective even more challenging.

As a result, we have increased our default management personnel to help enhance the financial literacy of our students and graduates with the goal of helping students stay current in their loan payments as well as engaging third-party consultants to assist those institutions who have historically had the highest cohort default rates.

In regards to our growth-related actions, we will continue to manage our initiatives, focused on new campus locations, expansions, online programs, and acquisitions. However, our efforts have moderated as we negotiate a changing environment.

In late 2011, we will see some incremental contributions of our three new campuses in Columbus, Cleveland, and Hartford. In addition, we opened our new expanded Denver facility in July. We continue to proceed with our plans to develop regionally accredited online degree programs predominantly in the health sciences. Our program approvals have slowed in conjunction with the tightened regionally accrediting process. However, we have made great strides in this area with the New England Association of Schools and Colleges.

We also continue to seek out acquisition opportunities that will provide long-term growth, scale, and diversification opportunities for the Company.

In summary, we are confident in what we do as a company and the hundreds of thousands of Lincoln graduate success stories since 1946 strengthens that confidence. In 2011, certain aspects of our Company will change; however the pride, ever, and focus of our staff and faculty will not. We feel that shareholder value is tied directly to student value. This critical relationship will be strengthened by the many efforts we are making.

As we look out over the year, we will manage our expenses; however, not to the detriment of our long-term goals to improve student performance. In the short term, we will see margin contraction as we have mentioned in previous calls.

In addition, will continue to build the foundation of this Company by renovating and relocating facilities that we feel will benefit our long-term plans. We will selectively add student services, staffing, and places with the greatest need to assist students outside of the classroom. We will evaluate our online opportunity based on the regulatory landscape and build online programs to support our vocational base. We will seek out startup locations and acquisition opportunities, using a filter based on the quality metrics we are aspiring to.

Finally, we have made an incredible number of changes in a relatively short period of time, which we felt was the right thing to do for the long-term performance of the Company; and we feel that Lincoln can emerge from this period as the leader in vocational and technical education in this country.

Now I'll turn the call over to Cesar for a financial review including our outlook for the third quarter and year. Cesar.

Thank you, Shaun. Good morning, everyone.

As we disclosed in our press release earlier this morning and as Shaun stated in his prepared remarks, student starts in the second quarter of 2011 proved to be more challenging than we originally anticipated. The current economic environment coupled with numerous changes that we have made to our business model to ensure compliance with existing 90/10 and cohort default rules, all significantly impacted the number of new student starts at the first half of the year. We expect that this trend will begin to gradually improve in the second half of the year as our three new schools, our online offerings and our new program offerings at our relocated Denver campus will start to contribute to student starts.

The deterioration in new student start numbers we experienced over the last four quarters resulted in us commencing the second quarter of 2011 with approximately 4,700 less students than we had on April 1, 2010. These factors resulted in a decrease in our average population for the second quarter of 2011 of 20.2% which led to revenue declining by 16.1% or approximately $24.6 million as compared to the second quarter of 2010. The decrease in revenue for the quarter was somewhat offset as a result of annual tuition increases, which averaged about 3%.

The decrease in student starts has also impacted our capacity utilization, which decreased on a same school basis to 55% from 73% in the second quarter of 2010. This decrease in capacity utilization produced approximately 770 basis points of negative leverage as our operating margin decreased to 7.3% for the second quarter of 2011 from 15% in the second quarter of 2010.

Other key highlights in the quarter include earnings per diluted share decreased 56% to $0.22 from $0.50 in the second quarter of 2010. We generated negative free cash flow of $8.1 million up from negative free cash flow of $5.5 million in the second quarter of 2010. We paid a $0.25 quarterly dividend on June 30, 2011. We finished the quarter with $30.3 million in cash and cash equivalents, and no borrowings outstanding on our credit agreement. Bad debt for the quarter was 5.8% of revenue as compared to 6.6% for the second quarter of 2010. Improvement in bad debt reflects a continued effort to improve financial aid processing through centralized administration.

Average revenue per student increased 5.2% for the second quarter of 2011 to $5,189 from -- $5,189 from $4,934 in the second quarter of 2010. Increase in average revenue is due to tuition increases which averaged 3% during the year and from structural changes we made to some of our program offerings. [Cost per start] as Shaun mentioned increased 65% for the second quarter of 2011 to $5,385 from $3,262 in the second quarter of 2011. Cost per start has been negatively impacted by our decision to limit the number of ATB students we will enroll in our schools and the other changes we made to our business model to ensure compliance with the 90/10 and cohort default rules.

Net accounts receivable at June 30, 2011, were $26 million as compared to $40.5 million at December 31, 2010. This decrease in net accounts receivable is primarily due to the improved cash collections previously mentioned and a decrease in overall student starts.

Net property and equipment grew to $180.9 million at June 30, 2011, as compared to $172.4 million at December 31, 2010. Capital expenditures for 2011 include certain expenditures that are being carried forward from 2010 and are expected to range between 8% and 10% of revised revenue.

Now turning to our loan program. Loan commitments to our students, net of interest that will be due on the loans to maturity as of June 30, 2011, were $14.4 million as compared to loan commitments of $15.4 million at December 31, 2010. For 2011, we expect that these loan commitments will increase by $5 million to $10 million as we have created financing gaps for many of our programs to ensure our continued compliance with the 90/10 ratios.

Shareholders equity at June 30, 2011, was $239.6 million, up from $222.5 million at December 31, 2010. Shareholders equity at June 30, 2011, reflects accrued dividends of approximately $5.6 million.

I will finish my prepared remarks by providing our current outlook for the year 2011 and for the third quarter. Our guidance is based on our current expectations and reflects the changes we previously discussed to our business model. As a result of a larger-than-anticipated decrease in both first-quarter and second-quarter student starts and projected decrease in third-quarter new student starts, we are revising our previously issued guidance.

We now expect revenue of $500 million to $525 million representing a decrease of approximately 18% to 20%, 22% over 2010. We are actively managing all of our expenses in our cost structure to better align them to our expectations for student population. However, the impact of the greater-than-anticipated decrease in student starts in the first half of the year, and projected starts for the third quarter, are causing us to adjust our previous diluted EPS guidance.

We are lowering our previous full-year diluted EPS guidance range to $1.00 to $1.25, representing a decrease of approximately 55% to 64% from 2010. We now expect a decrease in expected student starts of 30% to 35% over 2010. Student starts are expected to decline at a lower rate in the second half of the year. Our forecast includes the opening of the three campuses in 2011, and the expansion of our program offerings at our relocated Denver campus.

For the third quarter of 2011 we expect revenues of $125 million to $130 million, representing a decrease of approximately 24% over the third quarter of 2010, and diluted EPS of $0.08 to $0.12, representing a decrease of approximately 87% over the third quarter of 2010. Guidance for the third quarter of 2011 is based on an expected decrease in student starts 30% to 35% over the same period in 2010.

And finally, our Board of Directors has set the record in payment dates for the dividend for the third quarter of 2011. A cash dividend of $0.25 per share will be payable on September 30, 2011, to shareholders of record on September 15, 2011.

In conclusion, while we continue to operate in a challenging and difficult environment, we are confident that the actions we have taken will benefit not only our students but our Company in the long-term. We will continue to balance our growth objectives with our responsibility to deliver quality education and to enhance student outcomes.

Now we will open the call to your questions. With that said, I would like to turn the call back over to the operator. Kim?

(Operator Instructions). Gary Bisbee with Barclays Capital.

Hello. Thanks for -- I found a lot of good disclosures in your commentary. Can you just give us a sense of the Delta in the starts this quarter versus the guidance you gave last quarter? Is it probably appropriate to assume that most of that difference is just the overall demand environment deteriorating? Or do you think that some of the changes you have made actually had a somewhat bigger impact than you might have expected?

Let me tackle that question. Cesar can jump in as he sees fit.

Our visibility really has been somewhat limited in this environment. We essentially forecast based on our inquiry rate or our lead flow, the enrollments we see and the actual starts we have had in the period all against historical start trends, then we try to forecast forward. As we looked at our inquiries in the second quarter, they had decreased at about 15%, while enrollments declined at about 29% which in the past might equate to starts following anywhere between 30% to 35% decline based on those numbers.

I think we were surprised by a steeper decline in starts compared to increased enrollment so -- which was essentially attributed to enrolled students having issues either financing or an additional cash pay etc., but under the umbrella of affordability issues.

We looked at a number of things. The compensation process changes, all of the other internal impact changes that we felt; but ultimately we found that the Delta came from affordability issues more so than what we had predicted as far as our own admissions process changes.

Okay, thanks. And then Cesar, you made a comment that you have created financing gaps in some programs to alleviate the 90/10 pressure. Has that been done largely through price increases or is there anything else that you have done to accomplish that?

No, we have not done any price increases. What we have done is we actually shrank the delivery of those programs. So in other words, the program that maybe would have been delivered over two academic years is now being delivered over one academic year and thereby causing a gap between the amount of finance that the student can avail themselves to versus tuition.

And so, we are funding that difference and that is why we expect our commitments to go up as we forcibly create these gaps. So, as you can imagine, in the past, students were either fully funded, sometimes funded over 100% and they would come to school. Today, we are creating these gaps which actually requires them to make payments.

So that is part of that 40% of the changes we have made. That is also impacting student starts.

Then, just a last quick one. Any thoughts on the dividend given the challenges? It seems to me it might be better to conserve your cash and reduce that somewhat. Any thoughts on how the Board's head might be thinking about that right now?

Well, yes, I think based on the forecast that we have put out, we are strong believers in the dividend. And our intent is to continue to provide a dividend, obviously subject to the rest of the year performance. But based on the guidance that we gave of $1.00 to $1.25, our expectations would be that the dividend would be continued.

Thank you.

Jeff Silber with BMO Capital Markets.

Thanks so much. I just wanted to drill down into your different verticals. If you can give us some comments or any color, are you seeing the same trends across all verticals? Are some performing better or worse than others? Thanks.

I'll start off. I mean I -- we are seeing the trends across the Company. No one vertical is sticking out any more than any other.

Yes. I would just -- they are pretty close. I would say that the Educational Group might be a little bit slightly worse but that is because we put a little bit more changes in that group than we did with some of the Lincoln Tech Group. But they are not very far off. So the trends are across the Company.

Okay. Great. In your remarks, you commented briefly on a review of the new gainful employment regulations and potential compliance. Again, if you can provide a little bit more color. Are you going to need to restructure or change any of the programs in order to comply?

Gary, based on the data that we have, I think I'll say a substantial amount of our programs passed, based on the information we have. There might be a few programs that might fail the 12% test, but we do not have enough information on the repayment rate.

So to the extent that those programs might not pass, we would have to restructure them. But we are only talking about two or three programs in the Company and again, we don't know what happens when we combine them all across multiple institutions. We don't have the -- that data available.

So based on our analysis, the impact is minimal, if any.

And just a quick numbers question. What share count and tax rate are embedded in your guidance for both 3Q and for the full year? Thanks.

The share count is about $22.6 million, 40.5% is the effective tax rate.

All right. Thanks. Appreciate it.

David Chu with Bank of America Merrill Lynch.

Good morning. Your fiscal 2011 guidance implies a wide range for 4Q starts from down in the mid teens to actually turning positive. It seems a little bit unrealistic that starts could turn positive as quickly as 4Q. But just any commentary on when you think starts could actually turn positive?

Well, again, based on what I am looking at, I don't expect starts to turn positive in Q4. I will tell you that right off the bat. I would expect that the rate of decline to slow considerably, but we would expect that starts will start to turn positive in early 2012.

Early 2012. And I guess, what gives you confidence that it would turn positive that quickly?

Well, when you say that quickly, I mean this is four consecutive quarters and we have had significant declines and starts not only in the first quarter, the second quarter, and we are projecting the third quarter. So we do believe that we are seeing a bottom and we do believe that all the changes that we have put in place will phase themselves out and we will start to benefit from the new environment.

So I mean that is where our confidence comes in as well as the new campuses that will start to contribute to starts. So it is a combination of those factors.

Obviously, we do have limited visibility, but we don't expect to continue to be dropping 30%, 40% start next year up against the 40% already dropped in the first quarter of this year.

And, David, just a little more color, remember we have made a number of changes over the last year, year and a half. And as we thought, we've started to see conversion rates start to slowly improve as we acclimate to all of these changes that were made quite early in the process, especially according to when some of the Department of Ed rules were announced and then went into place.

So I think that there is a level of comfort on the part of the admissions representatives that are allowing them to perform in this new environment a little better. And in addition, we will have the contribution of new campuses in the expanded Denver facility and to Cesar's point, next year we will have the full-year contribution of those incremental starts as well.

Got it. One more, if I may. Can you discuss how these recent changes to address 90/10, specifically the cash collection, new cash collection policies and shorter duration of programs is impacting retention at this time?

Yes. Where we actually implemented, we actually saw retention get worse, too, for existing students. And so we actually think our retention could have been much better had it not been for a lot of those changes that we made.

However, when we measure new student retention, so students that didn't come in with the old habits, we have seen a much better improvement in the students.

How much of an impact did it have on the current students? I mean could you provide like a numerical --?

It is hard to quantify what exactly the reason was. But obviously we implemented a lot of changes including a lot of finance changes, including students having to go to classes longer, taking 16 credits versus 12 credits. So there are a lot of changes that we made that obviously impacted student retention for those students that were already in-house. But I'm not sure that we can adequately quantify how much that was.

Right and I'll just say that despite some of the retention deterioration we saw for existing students who went to the new financing model, we still had an 80 basis points improvement total Company in student retention. So you can see how the new student efforts have offset some of the continuing student impact retention-wise.

Okay. Thank you.

Amy Junker with Robert W. Baird.

Just a clarification on 2012. Assuming the worst case revenues you mentioned in the release, does -- when you say maintained profitability, that is kind of your goal, does that mean maintaining a stable operating margin? Or do you just mean positive profit dollars?

Both. I think our intent is with managing based on the guidance we gave, obviously revenues can re -- go anywhere from $450 million to $500 million in 2012 and our intent is to position the Company so that we run a $450 million to $550 million profitable business.

Great. And then one last question on revenue first unit, just I'm sorry if I missed this if you addressed it, but so it was up 5% in the quarter yet you only increased prices 3%. What drove that upside?

It is changes to programs. So for to the extent that you had a program that you were delivering over a longer period, we now shrank the delivery of that program so we are recognizing some -- in some programs revenue faster.

So you would expect that, it sounds like, to continue for the next few quarters. Is that right?

That is correct.

Okay. Great. Thank you.

Scott Schneeberger with Oppenheimer.

Good morning. Just following up on those questions. For 2012, is that a formal guidance the $450 million to $500 million in revenue or is that a run rate of a particular low water mark for a quarter?

No. I believe, based on where we are today and based on what we see as the -- based on 30% to 35% decline in student starts that we are projecting for 2011, we would expect 2012 assuming that starts stabilized to come in somewhere around there on the revenue side; and we have very little expectations for 2012. But we do expect it to start to stabilize. And based on that, we think that this Company will -- revenues will bottom out somewhere in 2012 of $450 million to $500 million and so what we are doing as a management team here is managing the Company as making those assumptions and aligning our cost structure to those goals.

Thanks. And could you address timing and target areas for expense management with regard to those last comments? Thanks.

Well, we are looking at obviously every cost structure in the Company. Obviously as you know, not too long ago we had 37,000 students. We finished the quarter with 22,000 students. Obviously our people needs to be aligned to our student enrollments. We have done that continuously. We have always done that as a company. We don't wait six months and then take a lot of people. We do that as we go along.

So it is aligning personnel to student services and student population as well as taking a look at future investments. And we are not -- we are making sure our investment dollars get us the biggest return for our dollars.

A couple more. I will ask them both. One, is there a new ATB target that you are thinking about? Or are you content where you are right now under 10%? And then the second question is, what are your thoughts with regard to growth initiatives, given your financial flexibility at this point in time? Just expansion, new campuses perhaps in 2012, how are you thinking about that? Thanks.

Let me just -- I'll start, Scott. As far as ATB, just a little bit of history. Remember we started about a year and a half ago by increasing test scores, the academic hurdle and then actually putting in a pre-orientation as a behavioral mark. We were somewhere around 13% last year. We are at 9.7% today.

Our ultimate goal was to get below 10% and stay somewhere in the range between 8% to 10%. I think that is where we are going to be long term. And so our processes are really set up to keep us in that range. We look at it on a school by school basis, region by region and total Company. So you can expect that we will be somewhere in the 8% to 10% range long term.

As far as growth initiatives, I would say that we ultimately will continue looking at new campus opportunities to open green fields, etc. We are always looking for acquisitions that can assist us with our long-term goals of being the market leader in vocational technical programs. And to achieve that goal, it is going to acquire some scale. So we are looking at meaningful acquisitions to help us do that.

And then also new programs. We continue to look at new programs, but all of our new programs, new campus initiatives and other growth initiatives are being looked at through a different filter in this environment. So they all have to go through a feasibility process that is focused on demand, making sure that the demand is there wherever we go.

If the program requires external sites etc. that we have got ample opportunity for those student services steps and then, ultimately, placement opportunity needs to be of keen focus for us. So we will continue to look at programs like LPN, replicating dental programs across the Company, health information technology, etc. But the combination of all of those initiatives we feel will allow us to continue to grow as a company even though some of those efforts have moderated while we look at feasibility. They are going to be the foundation of our growth moving forward.

Yes and from a financial point of view, I guess you have to remember we have zero, we have no leverage in our balance sheet. So we have a $150 million facility available to us and if we needed to, we could get more. So we are confident that we can leverage our balance sheet if we needed to, to make all of the growth investment that we would deem appropriate to make sure that when we come out of this, we are back in a growth mode with better outcomes.

Okay. Thanks.

(Operator Instructions). It doesn't look like there are any further questions at this time.

Okay. Thank you, Kim.

Let me just make some closing remarks. I really want to thank everybody for joining the call today. As you can see we have taken some important steps to manage our Company for longer term success. We've been very clear in informing the market about our efforts to actively reduce our risk in this environment and we forecasted a period of retrenchment as regulatory rules have changed. Some remedies have been removed and economic pressures prevail.

Still, we opened new campuses, we launched programs although at a measured pace, but ultimately to ensure the longer term growth profitability and compliance for our Company. And to ensure longer term growth, as I mentioned, we intend to seek acquisition opportunities to achieve scale and ultimately position ourselves as the leader in vocational technical training in the country.

Finally, we feel that our differentiating factor will be a strong relationship with the labor markets that we serve, especially through key national relationships and the continued ability to produce a skilled workforce in these markets.

We look forward to updating all of you on our next call. Thank you very much and have a great day.

Thank you for your participation on today's conference. This concludes the presentation. You may now disconnect and have a great day.