Lincoln Educational Services Corporation (LINC) Q3 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Lincoln Educational Services Earnings Conference Call. My name is Jeff, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Shaun McAlmont, President and Chief Executive Officer. And you have the floor, sir.

Thank you, Jeff. Good morning, and welcome everyone. Joining me today here 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. Our 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 that future results will be achieved and actual results may differ materially from forecasts, estimates and summary information contained in this earnings release. Important factors that could cause actual results to differ materially are included, but not limited to, those listed in Lincoln's annual report on Form 10-K for the year ended December 31, 2011, and other periodic reports filed with the SEC. All forward-looking statements are qualified in their entirety by this cautionary statement. This morning, I'll provide an overview of our company's operations, and Cesar will then review our third quarter financial results and provide our outlook for the fourth quarter and the full year of 2011, and we'll then take your questions. Just as a quick overview of our company, that we're one of the largest vocational training institutions in the country and considered a leading provider of career-oriented postsecondary education. We offer recent high school graduates and working adults, degree and diploma programs in 5 areas of study and each one of those areas is specifically designed to appeal to and meet the educational objectives of our students, while also satisfying the criteria established by industry and employers. Now in more normal operating times, our program diversification limits dependence on any one industry for enrollment growth or placement, and it also broadens our opportunities for introducing new programs. We're in the process of rationalizing these areas of study to determine the best course for Lincoln's future. We have ceased enrollment in certain programs in favor of nursing, automotive, the skilled trades and some future manufacturing disciplines. As we assess our verticals, we will ensure the programs offered are sustainable. It might mean getting smaller before we grow again; however, we're confident Lincoln will be the leading national brand in skilled training. As of September 30, 2012, we enrolled 19,028 students in diploma programs at our 46 campuses and we enrolled an additional 536 students in short certificate programs at some of these campuses, but as well as our 5 training sites across 17 states. Our campuses primarily attract students from their local communities and surrounding areas, although our 5 destination campuses attract students from across the United States and in some cases, from abroad. We experienced significant declines in new student starts over the past 2 years as we implemented change after change to comply with new federal rules. We also managed the existing federal 90/10 and cohort default rates rules and we managed the decline of ATB students from our population and we've closed underperforming campuses. We have also laid off employees and worked in a cloud of uncertainty as a court of public opinion also weighed in based on political scrutiny focused on our industry. Although we still feel some of the fiscal pressures of last year's declines, we're becoming a more focused and disciplined company. We know there are most likely additional external changes to come over time and so we're positioning for future success. Moreover, we know that as we work with a smaller population, we increase the understanding of the new rules and we continue to see improvements in completion, placement and default rates, that Lincoln will emerge as a national leader in skilled training. Overall, we feel that our approach, which we have honed since 1946, has been sharpened based on a new reality for our industry. Our collective vocational expertise, the introduction of short cash-based programs and improving student performance metrics gives us confidence that we are on track toward our targets. As we stated previously, we introduced a pre-orientation program in 2010, which was designed to identify high-risk students. We added the early student engagement mentoring program in 2011, which in addition to the orientation program, is focused on improving completion rates through student support and early retention efforts. Our retention performance has improved for 5 consecutive quarters, giving us confidence that our completion rates will see the same improvement. We're focused on our student placement in terms of quality and quantity of working graduates. Ultimately, default rates will improve as student completion rates improve. We've branded the collection of these student services the Lincoln edge program, that will serve as a competitive advantage for the company long term. We ultimately expect to emerge from these challenging times an even stronger company, well positioned to address the skills gap in this country. Moreover, let me say again that we believe demand will always exist for Lincoln's programs in areas like nursing, paramedics, welding, automotive and other skilled trades. Let me now take a moment to address a few of the key areas related to our operations and I'll begin with cohort default rates, 90/10 and the recently closed campuses. In regards to our cohort default rates, on September 24, 2012, the Department of Education released final 3-year cohort default rates for federal fiscal year 2009. Our rates for the 2009 fiscal year under the new methodology ranged from 16.9% to 49.2%. For the 2009 federal fiscal year, 10 of our institutions had 3-year cohort default rates of at least 30%. One of these institutions had a rate above 40%. This institution has subsequently been merged with one of our other institutions. This new merged institution has a cohort default rate below the 30% threshold. While we strive to improve the cohort default rates for each of our institutions, the current economic climate, combined with the demographics of our 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. We've also engaged third party consultants to assist those institutions who have historically had the highest cohort default rates. In regards to the 90/10 rule. The Higher Education Act of 1965 as amended, or the HEA enacted in 2008, states that a proprietary institution will be ineligible to participate in Title IV programs if for any 2 consecutive fiscal years, it derives more than 90% of its cash basis revenue from Title IV programs. This is commonly known as the 90/10 rule. We've calculated that for our fiscal 2011, our institutions' 90/10 rule percentages ranged from 76.5% to 89.2%. To reinforce the 90/10 improvement component of our strategy, we acquired Florida Medical Training Institute in April. Although small, it will positively impact our 90/10 ratio as tuition revenue from students in these short training programs does not rely on federal funding. In regards to our recent campus closings. As we previously announced on July 31, 2012, we ceased operations at 7 of our campuses. The adjustments made to our business model to better align with the Department of Education's increased emphasis on student outcomes and our efforts to comply with the 90/10 rule and cohort default rates greatly impacted the population at these campuses. In addition, the current economic environment and regulatory changes under the Consolidated Appropriations Act of 2012, which eliminated the opportunity to enroll Ability to Benefit students, have made these campuses no longer viable. For 2012, these campuses were expected to contribute approximately $14.5 million in revenue and approximately 570 new student starts to the second half of 2012. Now in regards to our new student admissions. Student starts decreased 16.7% for the third quarter of 2012, as compared to the third quarter of 2011. Student starts in the third quarter were impacted by the 7 campuses being closed and Ability to Benefit students who were scheduled to start in the third quarter but started in the second quarter of 2012. In last quarter's call, I mentioned that we expected our third quarter decline because of these reasons. In addition, our high school new student starts were flat against prior year and considering the decline in Q3, we anticipate the full year new student starts decline to be in the area of 6%. And we see this as a stabilizing against the significant declines of last year and a major positive step toward our long-term rebuilding process. Our corporate and campus admissions teams have done an effective job in adjusting to recruitment in this new environment in a very compliant fashion. We've trained all of our representatives and managers and we have thoroughly on boarded new admissions personnel. We consistently test product and process knowledge, and we continue to aggressively mystery shop our teams. As we look forward, our fourth quarter will see a slight decline against prior year performance, primarily attributable to the lack of ATB starts and continuing affordability issues. This said, we're working to offset this impact through continued improvement in year-over-year conversions and the ramping up of our GED program. Now in regards to market demand. Lincoln directly addresses the skills gap in this country. We're not only different than our traditional counterparts but also unique within our sector, which we feel has fully gravitated away from its vocational roots. So to sustain long-term growth in this new environment, we will differentiate our offerings by focusing on this important sector within education by promoting our "Careers that Build America" campaign and adding additional Skilled Trades and training programs over time. Furthermore, success in this arena will require a keen ability to succeed with more challenged students who are attracted to these fields. In short, we feel that long-term demand characteristics for this training will continue to be strong. Moreover, we assert that because of this country's reliance on skilled labor, the competitive market dynamics for its vocational and skilled training will shift in our favor as we continue to add short-term training programs in different skilled fields. We're also very excited to attract new demographics through a natural entry to industry partnerships and related training in the growing manufacturing area. Year-to-date, our front-end demand characteristics in terms of new student inquiries adjusted correspondingly to our spending levels. We spent approximately 20% less and generated 27% fewer inquiries against prior year. In terms of enrollments, however, we improved our conversion of these inquiries to achieve 5.8% fewer starts for the 9-month period. Year-to-date, 25% of our advertising dollars were spent on TV, which generated about 11% of our inquiries for the quarter, while 55% of our spend was in web-based channels, which generated 75% of our new starts for the quarter. Looking forward and based on what we're currently experiencing, we believe market interest remains intact to achieve our goals. However, I should note that there are still affordability issues pushing start decisions out further than normal for some students and their families. Now in regards to student persistence, we've seen an improvement in overall student persistence in the third quarter and expect the positive trend to continue into Q4. This marks the fifth consecutive quarter we have seen improvements in retention as measured by our net interrupt rate. For Q3, our net interrupt rate was 8.5% versus 8.8% prior year, a 30 basis point improvement, excluding the closed schools. This continued improvement is driven by our early student engagement efforts, which are functioning well at all of our campuses in which we hope will start influencing graduation rate in 2013. This third quarter performance follows a 2011 full year improvement of 230 basis points and first half 2012 improvement of 300 basis points, all accomplished against a retention headwind caused by program structure and program length changes related to 90/10 management and other affordability issues faced by in-school students. Needless to say, we're very pleased with this performance and we continue working on executing our pre-orientation and early student engagement programs to ultimately benefit completion, placement and repayment rate outcomes for our students and the company. Our faculty has also done a great job in not only working with the students to meet industry certification benchmarks, but also in helping with orientations, mentoring and financial literacy. Regarding job placement, we've strengthened our placement leadership and services in 2011 and as we continue to work against high unemployment numbers across the country. We also added training and performance tracking systems to assist graduates in finding employment. Furthermore, we have added social networking elements to our training and services. Our job placement process is very straightforward in relation to the areas we train. However, in cases we identify any weakness in our process, we thoroughly investigate and make appropriate and immediate changes. Our final placement rates for 2011 was 72.2%, as compared to 71% in 2010. This improvement, although modest, gives us confidence in our ability to train students for vocational careers throughout the current economy. In summary, we believe that operational challenges we faced over the last 2 years are behind us, and we're beginning to see the benefits of our initiatives. We continue to experience improvement in student starts compared to the declines in 2011 and remain focused on our strategy of improving student outcomes, strong regulatory compliance and increasing the growth of new students. We continue to position Lincoln to become the nation's leading provider of skilled training. This industry has been faced with unprecedented challenges, yet our teams at Lincoln have managed each element of change in compliant and effective ways to the point that we have adapted early, and we now focus on our year-over-year improvement in a new operating model. We're still working with an academically challenged population; however, we are seeing successes every day. Now I'll turn the call over to Cesar for the financial review, including our outlook for the fourth quarter and year. Cesar?

Thank you, Shaun. Good morning, everyone. The current economic environment, combined with the regulatory changes under the Consolidated Appropriations Act, 2012, signed into law on December 23, 2011, which eliminated the opportunity to enroll Ability to Benefit students and the closure of 7 of our campuses, continue to impact new student enrollments. We expect that theses campuses will cease all operations by December 31, 2012, at which time that will be reflected as discontinued operations in our financial statements. We anticipate that the company will incur additional pretax charges during the fourth quarter of the year of approximately $4.5 million. For the 3 months ended September 30, 2012, the company incurred $2.4 million of charges, of which $600,000 was a reduction of revenue to shut down these facilities. The company anticipates that the impact of this decision will be accretive to earnings in 2013 by approximately $0.21 per share. Student starts for the third quarter of 2012 decreased 16.7%, as compared to the third quarter of 2011. Student starts in the third quarter were impacted by the 7 campuses being closed, the elimination of the opportunity to enroll Ability to Benefit students and students who were scheduled to start in the third quarter but started in the second quarter of 2012. We started 2012 with approximately 7,500 less students than we had in January 1, 2011. This resulted in a decline of our average population during 2012. For the third quarter of 2012, our average population declined 19.7%, which led to a decline in revenue of 15.7% or approximately $19.3 million as compared to the third quarter of 2011. 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 also impacted our same school capacity utilization, which decreased to 36% from 45% in the third quarter of 2011. The continual decrease in capacity utilization has produced significant negative leverage as our operating margin, which decreased to a negative 2.4% for the quarter from a negative 4.1% for the third quarter of 2011, primarily due to the impact of an impairment of goodwill on long-lived assets in the prior year. Other key highlights of the quarter included, loss per share of $0.07 for the third quarter of 2012, as compared to loss per share of $0.18 from the third quarter of 2011. Loss per share for the quarter includes charges of $2.4 million related to campus closings. Excluding these charges, per share results were breakeven for the quarter. We generated free cash flow of $2.1 million, an improvement from free cash flow of $1.5 million during the third quarter of 2011. We paid a $0.07 quarterly dividend on September 28, 2012. We finished the quarter with $20.4 million in cash and cash equivalents and no borrowings outstanding under our credit agreement. Bad debt for the quarter was 6.3% of revenue, as compared to 7.8% for the third quarter of 2012. Average revenue per student increased to 5.1% for the third quarter of 2012 to $5,712 from $5,437 in the third quarter of 2011. Average revenue per student increased primarily from tuition increases, which average 3% during the quarter and from changes to some of our program offerings, which shortened the delivery time of these programs, thus slightly accelerating revenue. Cost per start was essentially flat for the third quarter of 2012 at $2,761, as compared to $2,769 in the third quarter of 2011. Net accounts receivable as of September 30, 2012, were $25 million, as compared to $25.3 million at December 31, 2011. And capital expenditures for 2012 are expected to range from 4% to 5% of revenue. Now turning to our loan program. As of September 30, 2012, loan commitments to our students, net of interest that would be due on the loans to maturity, were $25.4 million as compared to loan commitments of $20.2 million at December 31, 2011. For 2012, we expect that these loans commitments will increase by $5 million to $6 million from 2011 levels. We finished the quarter with shareholders' equity of $211.1 million, down from $239 million at December 31, 2011. Shareholders' equity as of September 30, 2012, reflects $4.8 million of dividends paid. Now as far as our outlook, I'll finish my prepared remarks by providing our current outlook for the fourth quarter and for the full year. Our guidance is based on our current expectations and reflects the impact of the effect of the shutdown cost expected to be incurred, goodwill and long-lived assets impairment charges and the changes we made to our business in order to ensure that we are prepared to meet what we believe are the Department of Education's focus on improving student outcomes. For the fourth quarter of 2012, we expect revenues of $102 million to $104 million, representing a decrease of approximately 11% over the fourth quarter of 2011 and a loss per share after giving the effect of the shutdown costs expected to be incurred in the fourth quarter of 2012 of up to $0.06 per share. Guidance for the fourth quarter of 2012 is based on an expected decrease in starts of 8% over the prior-year period. For the full year, we now expect revenue of $412 million to $418 million, representing a decrease of approximately 19% over 2011 and a loss per share of $1.14 to $1.24. Guidance for the full year includes approximately $1.28 in charges related to the goodwill and long-lived asset impairment and the campuses shutdown costs. Expected starts for the year are now expected to be down approximately 6% versus prior year after giving the effect of the shutdowns. The Board of Directors have set the record and payment dates for the dividend for the fourth quarter of 2012. The cash dividend of $0.07 per share will be payable on December 31, 2012 to shareholders of record on December 14, 2012. In conclusion, we are beginning to see stabilization in our operations. While we expect the fourth quarter of the year to continue to be challenging, our expectations are that we will return to profitability in 2013. We will continue to balance our growth objectives with our responsibility to deliver quality education and to enhance student outcomes. And now, we will open the call to your questions. With that said, I would like to turn the call back to the operator. Operator?

[Operator Instructions] Your first question comes from the line of Gary Bisbee with Barclays Capital.

I guess the first question, the cost for the campus closures is somewhat less than I think you'd led us to believe a quarter ago. Is that because some of that it's being pushed out in the first half of next year or are you just doing a more efficient job now that you -- or have a better handle on what it's going to cost now?

No, Gary we're doing a better job. All cost will be incurred by December 31. There'll no cost pushed out to next year. We just were able to be successful in mitigating some of those costs. So I think as we had told you in the second quarter, we were hoping to reduce some of the cash outlay and those costs, and we have been successful.

Okay. And then just on the starts, it was, I think a little weaker than what you'd thought a quarter ago. Is that just a continuation of the difficult environment or anything in particular you'd point to? And associated with that, I think there was some more positive commentary here, but yet, the fourth quarter implied starts, I think is a little weaker. So how do we think about that?

Yes, Gary, I'll say that Q3 and Q4 will be impacted the same way. I mean we -- the ATB students situation that we have, moving ATB students out of the third quarter, I think the continued lack of enrolling ATB students, et cetera, all affects us against prior year. And then we had some slow school starts in the third quarter that we're taking out and also the fourth quarter. But our confidence in what's happening in admissions really comes from improved conversions from inquiry to starts and then also within that large conversion enrollment to start. Now I'll say that our confidence is tempered by the fact that we spent less. I mean we essentially spent about 20% less in Q3 than we did prior year, and we'll probably spend less in Q4. And that reduction in spending attributed to 27% fewer inquiries. So although the metrics look good within our admissions process, we did have to manage our expenses overall. Now we look to fully ramp up our spending in December for our January starts in Q1. But that's essentially the added impact that we saw on starts.

Okay. And then just one last one. I know you guys have a big basin in the New York and northern New Jersey area. First of all, I hope, personally you and all your employees are dealing with this storm fine. But how should we think about any temporary disruption or were any of the campuses hurt? Any thoughts on that?

Thank you for your comment and your concern. We're always amazed at the resilience of our personnel and our students, and we had about 20 campuses that were impacted, that were in the path of the storm in a 5 state area. Now I'm happy to report that there was no significant damage to any of our facilities, and our staff and students are fine for the most part. But like everyone else, everyone in the area is struggling with power and fuel issues, but all of our campuses are with power today, and having classes. Now I will also say that attendance was low last week in some of our schools that were open, that had power in the area. We'd see somewhere about 60% attendance, which we expected but that attendance has improved each day since the storm hit. But again, thanks for your concern, and we don't see any long-term impact from the storm on our schools.

Our next question comes from the line of Kelly Flynn with Credit Suisse.

Just a couple of questions. Can you just clarify the per share impact from the school closures for the fourth quarter? And also what's implied for the year?

Well, for the year, the per share impact from the school closures and the impairment write-downs of both goodwill and fixed asset is about $1.28.

Yes, that I understand but I'm trying to decouple them. That's actually why I asked the question.

For the school closures, there's about $4.5 million built into our fourth quarter estimates, which translates into somewhere around $0.13 a share.

Should we use the corporate tax rate on that?

Well, taxes have been a bit convoluted because of the non-deductibility of goodwill and other items. So fourth quarter taxes are going to continue to be convoluted. We hope to have everything sitting in discontinued ops. The rate on discontinued ops should be somewhere around the 35% rate, but the effective rate for the company should be around the 26% rate. So it's a little bit convoluted because of the nondeductibility of certain items.

Okay, great. And then, just a couple of follow-ups to Gary. Just on your comments about kind of spending less on marketing. Are you trying to say that the delta between what you expected the starts to be and what your new guidance calls for all relates to just spending less on marketing? I just want to make sure I understood that correctly.

Well, for the most part, it does, and I think that our individual schools will tell you the same. We have to manage our expenses in a certain way. In addition to that, Kelly, we're battling with just a barrage of political ads. And so at some point, for us, there is a diminishing return on spending at the levels we expected or spending up. And so in addition to managing that expense overall, we saw that as a prudent way to go. We feel that we can spend up and generate more inquiries, and we can convert them at better rates, but we will do that after the election time frame to prepare for our Q1 starts.

Okay, great. And then just a last quick one going back to Gary's question about Hurricane Sandy. Just to clarify, your guidance excludes all impact, potential impact from that, is that right?

That is correct. We don't expect to have any impact from Hurricane Sandy in our financial results.

And Kelly, just a point of clarity, in the case of the student misses some class work, in many of our schools we track the hours that students are actually being instructed. We provide makeup hours for them within the same period and so all of the schools have done it in the past. They're doing it now and so we don't see any impact.

Our next question comes from the line of Jeff Meuler with Robert W. Baird.

I guess if we look at the Q4 starts guidance, if you factor in the campus closures, as well as the ATB loss of Title IV eligibility for new students, on a same campus basis x the ATB impact, are starts running roughly flat year-over-year?

I'm sorry x ATB and...

x ATB and x the closure on the same campus basis. X ATB, are starts running roughly flat year-over-year in Q4. Is that what's implied by your guidance?

Well, close to flat, but I will say to Kelly's question earlier, that there is a delta there caused by reduced spending. So yes, if spending was at its last year's levels, we think that we would be flat.

Okay. And then as you look out to 2013, do you expect spending to be up, year-over-year? Just wondering given obviously, where cap u [ph] is, as well as where your conversion rates have been improving to, I guess why not philosophically spend more and try to drive more inquiries?

I'll just say this, we expect to spend at levels necessary to get hit our 2013 targets. And so in essence, we will spend up from current levels. I will say though that whenever we talk about spending up incrementally, there are some natural issues that we've got to be careful of. The types of inquiries that you typically get, the geography of where they're coming from, those kinds of factors have just limitations on them in terms of conversions. And so this is the natural balance to spending and conversions, and we'll always try to manage around that balance. But yes, that's the way we look at it. We try to consider where can we spent to have the best impact on our student population, and we'll do it. In some areas, we just can't.

Understood. And then just one last housekeeping question. There is a $2 million range in the revenue guidance for Q4 and a $6 million range for the full year, even though we're 3 quarters through. Just wondering if there's some sort of reason for that difference in terms of campus closures and they're not apples-to-apples? Or just as we do our model, which number we should we be shooting for?

I think that could be an oversight. I think you should be looking at that number we gave you for the full year.

For the full year, not for the fourth quarter?

Correct. I think the fourth -- well, there's a $2 million range and what we give you for the full year, I think that was...

$412 million to $418 million, which I think would imply $102.6 million to $108.6 million for Q4.

Yes, I would go with the fourth quarter guidance that we provided you.

With the fourth quarter guidance?

Yes.

Our next question comes from the line of David Chu with Bank of America Merrill Lynch.

Just alluding to the last question. Can you quantify what starts would have been on an underlying basis in 3Q x the school closures and pushing forward of ATB students?

Well, we have guidance of 10% down, so we were -- the impact of ATB and the closed schools would have been down 10%. So obviously, we came in 6.7% worse than that.

Okay. And in terms of cost, you guys have done a good job at bringing down cost considerably on a quarterly basis for several quarters. Just wondering how much more room there is along that front?

It becomes more difficult as we move forward. We were at the point where we still need to provide services to students that are there. So to take out more cost out of the business, we don't think is doable as it was in the past. However, with that said, I think what we said with our comments is, I think we've seen the worst is behind us, and we are in the rebuilding mode. And I think that the staffing level that we have still have ample room for growth and student starts. And so we are comfortable with those levels.

[Operator Instructions] Up next, we have Alex Paris with Barrington Research.

A couple of questions. First off, on plus loans, I think we talked about that before, that, that was having an impact either on affordability or ability to start. Did that continue into the third quarter? And a competitor of yours mentioned on their call last week that the department has encouraged those that have been turned down on plus loans to reapply. Your thoughts there as well.

Yes, it did continue into the third quarter. We still continue to see significant rejections on plus loan applications, which, obviously, greatly impacts our high school population or high school starts. Without those plus loans, a lot of students just can't come up with the financial aid to be able to attend the school. So that did impact us significantly in the third quarter. As far as reapplying, obviously, we will be reaching out to all of those students and asking them to accept a paid-in start, to try to reapply to see whether or not we can pick up some of those high school students into our fourth quarter. But as of now, we have not done so.

Okay. Did it affect starts more or did it impact your institutional starts more -- or institutional loans, I'm sorry?

No, it did not. It impacted starts more because our institutional loans have limits about what we will advance a student. And if a student applies for a $20,000 plus loan or $18,000 plus loan and that loan is denied, there just isn't -- we're not willing to provide those type of institutional loans, to provide that type of financing to our students. So it does impact starts when the students aren't able to obtain financing.

Okay. And then one question on the closed campuses, in your discussion of cohort default rates, in your discussions of 90/10, what was the 90/10 rate across these 7 schools? Were they at the higher end of range that you had given earlier, Shaun?

Well, a couple of them were, but I'll let Cesar talk more about the details.

Yes, there was about 2 or 3 of them that were at the higher end of the range, but again, these are part of other -- in other words, there's other campuses within that institution. Some were not. The primary reason why we closed these campuses was because of the fact that the loss of ATB students, or the opportunity to no longer enroll ATB students, combined with the current economic environment, really just made these campuses unattractable from a financial point of view. And so that's how we made that decision. It wasn't -- obviously, there was consideration given to 90/10 and cohort default rates, but I would tell you the primary reason we closed these campuses is we just did not see a way forward with these campuses would start producing positive returns under the current economic environment.

Ladies and gentlemen, since there are no further questions in queue, I'd now like to turn the call over to Mr. McAlmont for closing remarks.

Thanks, Jeff. In closing, let me reiterate our vision, which is really squarely focused on becoming the leading provider of skilled training in the country. Our mission is based on our students' career success and our strategy includes 3 key components to achieving the mission and vision. First, it's improving our student outcomes; second, maintaining a strong record of regulatory compliance; and third, returning to sustained new student start growth. As long as there are students seeking careers in the skilled trades and as long as traditional nonprofit educational institutions continue to ignore this need, there will be a segment of the population generating sustained long-term demand for the programs that Lincoln offers. Thank you, everybody, and we look forward to updating you on our next call.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.