Lincoln Educational Services Corp (LINC) 2022 Q3 法說會逐字稿

The conference will begin shortly. Raise your hand during Q and A you can dial *11. Hello, and thank you for standing by. Welcome to the Q3 2022 Lincoln Educational Services Earnings Call. At this time, all participants on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star 1 on your telephone. I would now like to hand the conference over to your speaker for today, Michael [Polyviou]. You may begin.

Thank you, Towanda, and good morning, everyone. For the market opened today, Lincoln Educational Services issued its news release reporting financial results for the third quarter ended September 30, 2022. 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 under 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 the 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 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 welcome, everyone. Earlier today, we reported our third quarter results that were right in line with the expectations we laid out for you back in August. We continue to invest in the various components of our growth strategy and began to see the initial top line contribution from our new hybrid teaching model. Our investments in growth opportunities, along with wage and compensation inflation have impacted our earnings, but we do remain solidly profitable and expect this trend to continue.

In addition, enrollments and graduation rates remain strong across our 22 campuses and as we forecasted during our last call with you, starts during the third quarter did decline by 500 students as compared to a year ago period. Based on current trends and actual starts during October, we continue to expect fourth quarter student starts to increase at a solid rate. Brian will review all of our guidance for the full year during his remarks. Two major initiatives that we have talked about throughout 2022 are the centralization and automation of our financial aid process and the rollout of our new hybrid curriculum. Both initiatives will improve our students' experience and bring greater efficiencies to our company.

For example, the centralization and automation of our financial aid process should accelerate both the financial aid application and award process leading to a better start rate and thus more students. The centralization and automation of financial aid is an ongoing initiative requiring investment. However, it remains on schedule to be fully implemented by the end of 2022, and all signs are that we will realize a lowering of cost from this initiative during 2023. Our new hybrid teaching model provides greater flexibility for both students and faculty while once fully implemented, lowering our operating costs.

Not every program will be taught in the hybrid format, but all similar programs will be on a standardized calendar, which will assist with gaining efficiency across our campuses. We are not moving welding, culinary, nursing and cosmetology to the hybrid model. We are on track for this year's conversions and expect all remaining programs to be up and running by this time next year. As we've discussed in the past, this new model enables our students to work part time or manage other commitments while they pursue their Lincoln education, which will enable a higher percentage of students to successfully complete their education.

When implemented, it will also reduce our complexity and allow us to reduce expense in several key operational functions. We do expect to have approximately 40% of our programs converted to this new hybrid teaching model by the end of the year and all programs left to be converted by the end of 2023. Once existing programs are concluded and a majority of students are in the new hybrid model, we should start to see additional savings [and efficiencies] in 2024 and beyond. During the third quarter, we began to see the first tangible contributions in our top line performance from the new model, which provides certain classes and components digitally while others remain in the traditional classroom setting. Brian will provide a little more color when he reviews revenue during his remarks. 

During our last call, we discussed 3 new corporate partnerships with industry leaders in electrical-- Electric vehicle, automotive paints and coatings and collision repair segments. We are especially pleased to be partnering with Tesla, the world's leading electric vehicle manufacturer as we help them meet their growing technician needs as well as potentially work with them in other areas of their organization. They like the quality of our students and the breadth of our program offerings and locations, especially our electrician program since they view themselves as much more than just a car company. The Tesla agreement has moved quickly to roll out.

We are enrolling our first class with Lincoln Tech and Tesla employees and will commence training in mid-December at our Denver, Colorado campus. Our corporate partnership agreements help our partners fill the urgent skills gap they are experiencing in light of the nation's continued overall low unemployment rate and increasingly more difficult search for employee training solutions required to continue their respective corporate growth. While there has been much talk in the financial media and government circles of the negative impact on job creation from rising interest rates, there still is a shortage of workers for the type of essential skilled position Lincoln trains for. Our company has paved the way in terms of creating innovative customized training programs with our corporate partners and each year, a larger and larger percent of our students directly benefit from our partnerships.

Case in point, we recently celebrated the 20th graduating class from the Hussmann TechX center located within our Grand Prairie, Texas campus, an effort to help fill a projected 385,000 HVAC job openings nationwide by 2030. Since 2018, Lincoln has helped Hussman hire more than 200 new technicians across the country. Another major component of our growth strategy is the initiative to identify and create new campuses in markets prioritized by our corporate partners as well as potential partners. During the third quarter, we announced the creation of a second campus in the Metropolitan Atlanta area, one of the fastest-growing metropolitan areas in the country.

This new campus is strategically located in an area to serve students within the city limits as well as points south of downtown. We have begun the work to open the new campus and remain on schedule to do so during the third quarter of 2023. We expect to invest around 600,000 this year into the new campus and a total of $14 million in capital expenditures by the time we open in about a year. We continue to expect that within 4 years of its opening, the 56,000 square foot facility will be generating approximately $20 million in annual revenue and $5 million in annual EBITDA. The campus is being designed to be more cost efficient than our existing campuses, both in reduced square footage and personnel as we plan to benefit from our new hybrid curriculum as well as centralized services.

The campus will focus on providing training programs in automotive technology, electronic and electronic systems technology, welding and heating ventilation and air conditioning technology. As we previously noted, it is expected that these industries will create an estimated 84,000 new jobs in Georgia by 2028. Combined with our existing Marietta, Georgia campus north of Atlanta, Lincoln is positioning itself to be a major resource of trained students to meet this expected demand. The new Atlantic campus is the first result of a plan to develop a minimum of 5 new campuses nationally within the next 5 years.

Each campus is designed to serve a local metropolitan market with the vast majority of the students coming from within 30 miles of the school. The curriculum will be based on our new hybrid teaching model and new technologies will be incorporated [at a] enriched learning environment and student experience while giving our highly trained faculty tools to better track and monitor student success all to continue to drive our strong graduation and placement rates. 

Based on employer demand for skilled employees and job growth projections nationwide, we have already identified 10 new markets where we can open new automotive and skilled trades campuses as part of our long-term strategic plan. We plan to replicate the cost-efficient design of the new Atlanta facility into the new Nashville campus. As we have previously reported, our current facility in Nashville is under contract to be sold. Once that transaction closes, we will begin the process of transitioning our current operations to a new campus.

We've identified a new site, but are awaiting the closure of our current campuses sale before solidifying that transaction. Once we do close on our current campus sale, we will lease back the current facility until the build-out of the new one is completed. As we discussed on the last call, the buyer of the Nashville property continues to pursue local agency approvals and continues to make the monthly nonrefundable payments to Lincoln under the purchase contract, which, as of today, total approximately $400,000. At this point, we believe the transaction will close during the second quarter of 2023 for a purchase price of $34.5 million.

Our efforts to identify new campus locations has led us to identify some new opportunities to enhance value at some of our existing campuses. In fact, we are working on a new lease that will enable us to add automotive, electrical and HVAC to our Lincoln Rhode Island campus. We are very excited by this recent development, which will enable us to leverage our existing management team and market presence with 3 strong programs and give us our 14th auto program. The Lincoln Rhode Island location not only serves the state of Ireland, but also the greater Boston metropolitan region. In addition to Lincoln Rhode Island, we will also be adding skilled trades programs into other existing campuses, further leveraging existing management teams and market presence.

We will share numbers and locations during our year-end earnings call next year. Meanwhile, our constant evaluation of campuses has led us to closing our Summerville, Massachusetts facility at the end of next year. We were recently made aware of the building owner's decision to demolish the building and subsequently conducted a search in the Boston metropolitan region to move the campus, but were unsuccessful in finding the right location. As we've done in the past with campus closures, we are providing our current students with the opportunity to complete their program of study through December 2023, and our staff will deliver all the necessary student services, including employment assistance to graduates even after closing.

The campus offers medical assisting, dental assisting and massage and serves approximately 250 students. Brian will share more, he'll share some of the financial impact of this closing during his remarks in a few minutes. As we look to the end of 2022 and into 2023, we continue to face the headwinds of a low unemployment economy that is providing students with other job opportunities, concerns over taking on debt in a rising interest rate environment and inflation impact on transportation costs and our operating expenses. As I noted earlier, we generated growth in starts during October and expect positive growth for the fourth quarter. However, the decline in Q3 starts and earlier softness in Q2 means our performance will be soft in the first half of next year. But as we open the new campus and replicate programs, our second half should show much better in performance. We will share much more detail during our year-end call next year. 

Our transition to the new hybrid teaching model has higher temporary expenses as it requires additional faculty to complete the education of students that are operating under the old model, while the new model has started. Also centralizing and adding some automation to our financial aid process also has temporarily required additional people to be added to ensure no interruption to our business. In addition to incurring additional onetime costs, these 2 initiatives do generate some minor temporary inefficiencies in our business. As the initiatives come to completion, the one-time costs will go away and further efficiencies should be achieved.

Our financial aid initiative will be completed by year-end, and our hybrid teaching model rollout should be done by this time next year. We are very encouraged by the early results that we are getting from our campuses who have transitioned over to our new financial aid process and hybrid teaching model, the student experience and our operating efficiency both improved with these initiatives and Lincoln's ability to scale more rapidly will be increased. Once students do start, we've done an excellent job at retaining them and placing them in high-paying rewarding careers. Lincoln's overall student retention rate continued to advance during the third quarter and graduate [inaudible] rates also increased. As I noted earlier, the demand for our highly skilled students remained extremely strong.

This demand, along with our growing number of programs and corporate partnerships continues to generate strong interest in Lincoln training from prospective students. Despite these short-term challenges, we continue to be quite optimistic that our strategic growth initiatives will generate consistent long-term growth for all of our stakeholders. Now I'd like to turn the call over to Brian for a review of our third quarter financial results and outlook. Brian?

Thanks, Scott. Good morning, and thank you for joining us. Before I begin with Veterans Day later this week, I would like to take a moment to thank all our veterans both past and present, for their service and commitment to the security of our great Nation. Veterans Day is particularly important for us at Lincoln since emanating of our students, alumni and [inaudible] serve or have served in the military. This morning, I'd like to share a few key operational developments and then review our third quarter financial results. First, a couple of actions that was undertaken last week.

On November 4, the company terminated its $50 million credit facility, which had no debt outstanding. We can enter into this bank agreement several years ago when the company's cash position and financial performance were meaningfully lower. As a result, the bank agreement contained a number of provisions that place restrictions in terms of our flexibility to invest in both our growth initiatives as well as options for treasury management investments. Since the bank agreement was established, operations have generated over $50 million of cash flow. In addition, we executed a sale leaseback transaction, which generated net proceeds of approximately $45 million.

Consequently, we are in a very strong cash position, ending third quarter with nearly $7 million of net cash, despite having increased our investments in growth and opportunities initiated our stock repurchase program. The topics I will discuss shortly. [Determining] the agreement provides [Linkin] greater flexibility to pursue opportunities to invest our cash balance in higher yield short-term investments. Given current and expected interest rates, we are implementing a cash management strategy to generate higher returns on our cash assets. [Glenda] will continue to manage our outstanding letters of credit of $4 million on a cash collateralized basis.

In an interest-bearing account, this account and our money market accounts used to manage our immediate-term liquidity will now earn 3% interest annually. Also, as Scott mentioned, our Board of Directors approved a plan to close our Summerville, Massachusetts campus. In terms of the financial impact. This campus has consistently been one of our smallest in terms of revenue and profitability. For the 9 months ended September 30, 2022, campus revenues were $5.3 million, representing 2.1% of total revenue with an operating loss of $200,000. As a result, the closure of the campus is not expected to have a significant financial impact on the company.

Beginning with our fourth quarter, the financial results for the summer work campus, including the full year 2022 performance will be reclassified to and reported under our Transitional segment. For the full year of 2022, campus revenue will be approximately $7 million with an EBITDA loss of $500,000. Moreover, for 2023, we are projecting an EBITDA loss of approximately $3 million, which includes the additional expenses to complete the teach-out of the students and the other closing costs for the campus. As an update on our share repurchase plan, which we began in May, during the third quarter, we repurchased 668,000 shares for $4.2 million. Since the plan inception, we have repurchased close to 1.1 million shares for $6.7 million. As of the end of the quarter, we had $23.3 million remaining under our current share repurchase authorization.

Now turning to our financial results for the third quarter. We achieved revenue growth of 3.1% or $2.7 million to $91.8 million. The revenue growth was mainly attributed to a 5.9% increase in average revenue per student, which offset a 2.7 decline in average population. The average population impacted by a 9.2% decrease in [stats] for the third quarter. The higher revenue per student resulted from tuition increases, combined with a more efficient program delivery through the implementation of our new hybrid teaching model. The hybrid model delivers higher daily rates in certain programs as their overall duration can be shortened, particularly for our evening program.

We expect that the continued rollout of our new hybrid learning model will result in additional efficiencies. Our consolidated operating expenses were $86.9 million, up 4.3% over prior year. This increase is in line with our projections and was driven by 3 main areas: One, in structural costs increased largely due to higher staffing levels. We are currently operating with higher staffing at several of our campuses that have launched a hybrid teaching model as we provide instructions through both the new and traditional models for an interim period of time.

Facility expense went up due to the additional rent expense of $800,000 in connection with the sale leaseback transaction completed in 2021 and administrative expenses increased as a result of a couple of factors; salaries and benefit expenses due to salary increases in medical claims, severance expense due to better align our cost structure in certain areas and onetime items, including expenses to advance our growth and operational efficiencies totaling approximately $2 million.

Our adjusted EBITDA for Q3 was $7.4 million, which includes add-backs of noncash stock compensation, severance and the rent expense for the Atlanta, Georgia campus. For more details, please refer to the non-GAAP schedules in our Q3 earnings release. Lastly, I'll conclude my remarks by reiterating our full year guidance for 2022. Revenue between $340 million and $350 million; adjusted EBITDA between $25 million and $30 million; net income ranging between $10 million and $15 million, student stocks ranging from minus 3% to plus 3% and capital expenses ranging from $8 million to $11 million.

Our outlook for 2022 and beyond continues to be optimistic as we continue to stay on plan this year and see great growth opportunities and operational efficiencies in the horizon. We look forward to sharing more on our next call. With that, I want to thank our entire team for their continued effort and support. Now I'll turn the call back over to the operator so we can take your questions. Operator?

Thank you. As a reminder, to ask the question, you need to press *11 on your telephone. Our first question comes from the line of Alex Paris with Barrington.

Congratulations on the better-than-expected third quarter results. Thanks... Sure. Given that third quarter results were better than expected and you reiterated full year guidance, the implied guidance for Q4 is pretty wide. It's obviously a $10 million range from $83.5 million to $93.5 million on revenue. You had said in your prepared comments that pretty much everything was in line with expectations for the third quarter. With new student starts down 9.2%. Was that in line with your expectations? Or was it a little bit lower than my point estimate?

Right. So I think it was a little bit lower. One item was we didn't have starts in our Summerville campus in November and December -- November and December, I'm sorry, in October and September. So we postponed some starts there. But yes, it was slightly lower than our expectations due to the start rate as we talked about previously.

Got you. So that full year reaffirmed guidance suggests a big increase in new student starts in the fourth quarter, greater than 12% or 13% by my math. What gives you confidence that starts will be up so strong in the fourth quarter? I suspect part of it is the comp. But can you talk at all about your starts experience in October?

Sure. So as Scott mentioned in his comments that starts were very strong for October, and we are anticipating growth for the fourth quarter. But the growth for our stock guidance, it will be towards a little bit of the lower end of the guidance. Right now, we're anticipating, hopefully, there's an upside to about like 6% to 7% slot growth in Q4. The one thing that I misspoke when I talked about the full year guidance, it was a little bit higher because our summer world campus that would close it wasn't September. It was more in the fourth quarter that we had to take those starts out in November and December.

So just to be clear, in we're reiterating our guidance, as you just highlighted, one item with regards to starts will be probably at the mid- to lower end of our guidance.

Got you. And then the full year guidance for starts, just to be clear, was negative 3% to positive 3%. So you're saying for the full year, starts kind of flat, maybe slightly lower year-over-year to get to the numbers that you're guiding for revenue and adjusted [inaudible] and so on.

Okay, correct.

Good. And then one other question. I was thinking about the Series A preferred stock, 9.6%. I believe you could force conversion as soon as last week, November 4. What are your thoughts there?

Right. I think it was the first time, I believe it was November 14. And so we need 20 days of the stock price over the conversion price. I think it's like $5.31. I think as of today, we're like 10 days into that. So we are anticipating if we are able to convert. We will convert at the earliest possible points, that's our thinking right now.

What would be the implication of that? How many shares or how many common shares are covered by that conversion, as I recall, it's something over 5 million shares?

Yes, 5.3 billion shares will be converted and be distributed to the shareholders.

And then obviously, you won't have the $304,000 of preferred dividends every quarter once that occurs?

Correct.

Got you. Okay. That will do it for me for now. Thank you.

Please stand by for our next question. Our next question comes from the line of Steven Frankel with Wilson Black Securities.

Scott, could you talk a little bit about price increases. Maybe you could help us understand how much of that was? Just the mechanics of moving to hybrid learning versus actually raising tuition rates. And to the extent that you're actually raising tuition rates, kind of how much more headroom do you think you have in this environment?

Sure. Well, the increase that we are experiencing isn't tied to tuition increases. It's tied to the fact that our night program is now going to be in line with our day and afternoon programs in the new hybrid model. So historically, we've been teaching the same curriculum to our nighttime students, but over a longer period of time, which means you're earning less revenue per student per month, but in the new hybrid model, they're going to be delivered at the same pace as the morning and afternoon classes, which means the acceleration, there's an acceleration as we make this transition to the hybrid model in greater revenue. So it's not necessarily the tuition increases that we put in place back in last January that's creating this uptick.

Great. And then do we kind of see that for the next 3 quarters? Or is this kind of a one-time effect?

We should see that going into 2023 as well. As you mentioned, we are anticipating tuition increases of like 3% to 5% as well next year. So we should get the benefit of both going as more and more programs transition to the hybrid model because it's the night program as well as it does shrink some other programs, but only by a month, so it should -- It does increase our monthly revenue, as Scott said. So that should be with us, I would say, almost throughout 2023, and then it should flatten out.

Okay. And then with the changes in the online advertising market due to the economy, have you seen any meaningful reduction in your cost per lead?

No. We haven't seen anything due to, I guess, the economy. We're constantly looking at efficiencies and ways to lower our own costs. We anticipate as we speak to our vendors, as we are going through the budgeting process, we're hoping to see some softness coming up. But as of right now, I can't say that we see necessarily softness in the cost per lead because of just overall pricing. Anything that we see is, I'd say, more driven by some of the strategies we have in place.

Okay and could we have an update on your cash pay efforts?

So I mean the shorter-term programs are in particular, I would say that they are very slow to materialize in some of our cash pay programs. Let's say, our Kindig program is definitely off to a slow start. However, I'm excited to report that next week, the program will be featured on Dave's Show. The whole show is dedicated to the program. So, anticipating that, that will help drive some interest in demand. But it's basically the cash opportunities that we have are through our corporate partnerships now versus through any kind of shorter-term programs generating anything that's meaningful to us.

Okay. Great. That's all the questions I have for now.

Please stand by for our next question. Our next question comes from the line of Eric Martinuzzi with Lake Street.

Yes. I wanted to ask about the strategic thinking by the closing of the Summerville campus. I'm sure it wasn't done -- It was done after some deliberation. Curious to know if you had put more into it? Do you feel like you could have gotten that to a growth trajectory? A profitability profile where it could have been sustainable? Or was the cost of going after that, just not something that wanted to entertain?

Sure. Yes, it's really the latter. I mean, we definitely look to see what we could do in that marketplace with the programs and to be completely transparent, our Lincoln Rhode Island campus does overlap with our Summerville campus. If you were to look at both campuses and put a 30-mile radius around them, you'd see a [venn] diagram of overlapping opportunities there. So it's not as if we're going to be leaving the marketplace 100%, and we have a more attractive, I'll say, facility and rent structure in our Lincoln Rhode Island. And as we look for programs and opportunities in the Boston market, it's just -- they just didn't avail themselves to something that was as attractive as just growing, frankly, our Lincoln Rhode Island campus.

Okay. And as we look out to 2023, if we go back the past 3 quarters here and just kind of average it out, we're talking about negative on the student starts in the first 9 months of the year. Just curious, is that -- For the first half of 2023, you talked about the impact of the new student starts weighing on the front half. Should we be looking at negative revenue comps in the front half of '23?

Well, we're not giving any guidance as of yet on that subject. I mean, obviously, we will continue to have some of the benefit that we experienced this quarter as well. So I just -- We haven't refined it enough, and we haven't given that publicly as of yet.

Right. To your point, Eric, that our carrying population will be slightly down, but what will be offsetting that is the -- what we just talked about tuition increases as well as the rate increases that we're experiencing in our new hybrid model. So one kind of offsets the other, but we'll give out more guidance when we report our 2023 guidance.

But those tuition increases, those would be with new students?

Correct... A lagging effect of those. Yes.

Got you. Okay. And then the -- just looking kind of geographically on the student starts, did you notice any geographic pockets of strength as you looked across the 22 campuses.

We always certainly have certain campuses that always are performing maybe better than others. But overall, when you looked at it kind of across campus and across programs, there was a decrease. So there's definitely something broader taking place there. So I would say that where we see opportunity is frankly when we add new programs into campuses and at those campuses, even when there's some, I'll say, negative headwinds by adding the additional programs, you're always able to kind of further penetrate that market and get some growth but overall, I would just say there was definitely decreased kind of across the board in the third quarter. Nothing stood out one way or the other.

Okay. And then lastly, your headcount today or at the end of September, what was the head count? And where do you expect to finish out the year?

You're saying employee headcount or student headcount?

Employee headcount operating expense.

Well, I don't have that number in front of me. Typically, though, our headcount decreases a little bit between now and year-end. We're typically at our peak population right now and population will lower a bit by year-end, just naturally the way that students graduate. So I don't have that number, but we can get back to you with that.

But as well, we did take out some headcount in the third quarter, both at school and at corporate. But I don't have those numbers handy, but that's what you'll see in our add back to our adjusted EBITDA, there was some and there will be some more for severance in the fourth quarter as well.

I understand. Thank you.

I'm not showing any further questions in the queue. As a reminder, to ask the question, that will be *11 on your telephone mention. Our next question comes from the line of Raj Sharma with B. Riley.

Yes. So, the starts, it seems like -- I think you already pointed out, it seems like there's -- in 4Q looks to be a pretty substantial swing in start growth to get to the minus 3 to plus 3 starts. Is that that correct? And then can you comment a little bit on the interest in programs? What's causing this general decline? I know that you've pointed out the tight labor markets. Did you see any sort of changes in interest in programs or fall off in interest in programs? Or can you give more color around please?

Sure. So again, with regards to the guidance, as it comes to starts, would be the negative 3 to 0 that I'd be focusing in that range as far as where the fourth quarter is going to come out. As far as program demand and interest, as I kind of just stated, that it's really kind of across the board, Raj. There's nothing that really jumps out like no one wants to become a nurse anymore, no one wants to become an auto mechanic. There's kind of a weakness across the board. Typically, that does happen when unemployment is low.

What we're hoping to experience is the trend, which I think we've seen before, at least recently, I've seen where more people are opting for shorter, faster ways to get into the workforce regardless of the fact that there might be fewer people looking to make a change but then we have to affect demand by looking to replicate and add more programs into our campuses in our existing marketplaces to again get further penetration within an existing market to give us that growth.

We also anticipate that, hopefully, as we move to the hybrid model, the flexibility that, that gives students will enable more students to start. As we have the financial aid process up and running smoothly, again, more students that know exactly how they're going to pay for their education or more likely to start their education. So there are a number of ways that we can help overcome the low unemployment rate. Again, we anticipate that they should be kicking in, in 2023.

Our interest is still very strong with our leads and enrollments, it's really the start rate that's lagging a little bit behind, as we mentioned previously.

Got it. And just then on the new hybrid model. Could you provide some color on how this new hybrid model is different from what had been perhaps implemented at the beginning of COVID. When the COVID pandemic started, there was a hybrid model. How is this substantially different or from what has been in place for the last 2 years?

Sure. Well, the COVID model was a reaction to being forced to go remotely. So it's a matter of putting things online, just to be able to continue the students' education, which we ended up doing very well, which is why we were able to grow the population. But what we learned during that process is that certainly, our students are very receptive to doing blended learning. Then so we spent more time, okay, if we're going to enable all students that have blended learning going forward, how do we design something that's going to be optimal for us and optimal for them.

So, what the new model is, is basically students coming to us only 4 hours in the day compared to maybe 5 or 6 hours in the day and the rest being learned online. What it has enabled us to do, as we kind of referenced with regards to the pickup in revenue is we've now created 3 equal sessions; a morning session and afternoon session and an evening session, all of the same length. That's advantageous to students because sometimes our students do switch between sessions or their job may change and they maybe go from an evening to a night and now when that happens, there'll be no kind of change in our earnings per student when that takes place.

Also the way that it is structured, we can better utilize our faculty members to the extent we can populate students in the morning and afternoon, one in theory, one instructor can now teach 2 classes of students. So those are the efficiencies that we're hoping to gain as more programs roll out into this format, and we were starting able to enroll students into these various time sections of the day.

So, that will really help with our instructional efficiencies, but as well as we standardize a lot of start dates where in the past, we might have had 100 start dates and now we're bringing it down to 9. So that not only will create operational efficiencies in our business offers financial aid, but as well as marketing.

Got it... I'll take this off-line... Thank you.

Thank you. I see no further questions in the queue. I would now like to turn the call back over to Scott Shaw for closing remarks.

Thanks, operator, and thank you all for joining us today. I'm very pleased with our progress and excited by the numerous opportunities that we have for our company. At our core, we are improving our students' experience as evidenced by our improving graduation and placement rates. Our major initiatives around financial aid in our hybrid model are progressing as planned and will result in efficiencies and even better student outcomes.

Next year, we have the new Atlanta campus opening, along with multiple program replications which will enable us to better serve students and employers in several of our existing markets. And finally, we remain focused on prudently investing our capital to maximize shareholder value. I want to thank the Lincoln team for their constant commitment to our students and as Brian mentioned in his remarks, we want to thank all the men and women who have served and who continue to serve our country as we look to celebrate Veterans Day this Friday. Have a great day, and we look forward to speaking with you early next year.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.