Lincoln Educational Services Corporation (LINC) Q3 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 Lincoln Educational Services Earnings Conference Call. My name is Celia, and I'll be your operator 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, Chief Executive Officer. Please proceed, sir.

Thank you, Celia, and good morning, everyone. Joining me on the call today is Cesar Ribeiro, our Chief Financial Officer; and Scott Shaw, our President and Chief Operating Officer. Let me begin this morning by reading the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements in this presentation concerning Lincoln'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 in Lincoln's Annual Report on Form 10-K for the year ended December 31, 2012 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 the company and our strategy. Scott will discuss our operations and Cesar will share our financial highlights and forecasts for the year. We'll then take your questions. There are 3 important points that I'd like listeners to take away from this call: first, we continue to see progress in our long-term strategy of continually improving student outcomes; secondly, our financial results were in line with our expectations for the quarter, and we continue to manage our expenses in ways that maintain quality educational offerings; and third, we are encouraged by moderating new student start declines in our continuing campuses. In regards to our strategy, by necessity, we have been squarely focused on positioning Lincoln to operate successfully under a revised sales methodology, also in an economic headwind and in a tough and changing federal, state and accrediting regulatory environment. We've managed a great amount of change while maintaining high student satisfaction, improving student outcomes, maintaining strong regulatory compliance, with virtually no legal exposure, and all while stabilizing new student starts. Our strategic execution over the past 3 years has given us confidence that our cohort default rates will not affect our ability to operate and will improve meaningfully in future periods. We have successfully managed our 90/10 threshold aggressively to levels below 80%. We've added barriers to entry and have improved our student completion rates well above 60%. Additionally, we've seen improved third-party certification scores for graduates taking licensure exams, and we added mentoring programs that weave through the entire student life cycle. We've also strategically closed campuses, which due to federal rule changes were not viable in the long term. More importantly, our admissions representatives have been operating without any incentive compensation, and currently, under revised Department of Education laws, which directly target for-profit education admissions. Based on our aforementioned improvements in all of our regulatory and student outcome objectives, we have a fortified operating platform that should withstand future external changes. Having reduced our regulatory risks, we are shifting the focus of our long-term strategy toward growth and are specifically targeting the following 5 growth-related areas: First, we'll increase our sales man power by approximately 10% over the next month to ensure we have enough sales capacity to drive growth. We'll reallocate resources to increase manpower in this area, without incremental spending. In addition, we are examining all aspects of our admissions process to assess how effective we are in presenting our product to a variety of consumers. Second, we'll launch new programs to achieve incremental student growth in certain locations. We anticipate seeing student enrollment in these programs beginning in 6 months, as the programs are developed and attain the required state, accrediting and federal approvals in order to be sold. Third, we've identified opportunities to improve our important enrollment-to-start rate through our use of automated systems for enrollment, a centralized financial aid approach and the use of tablet technology to assist students through the process more efficiently and effectively. In pilots we've conducted to-date, we're pleased to see start rates improve. Fourth, we'll increase new scholarships in the first quarter to ensure students who want to attend school can attend. We'll use these scholarships to assist students and parents in programs that have dynamics which have prohibited students from starting based on financial hardship. We'll also delay our scheduled first quarter tuition increases. Fifth, we'll marginal increase our investment in the first quarter to generate enough recruitment activity to achieve our sales goals. As I stated in our earnings release, we've seen improved performance in our ability to attract, enroll and start new students in approximately 1/3 of all of our schools as opposed to declines at most of our schools a year ago. And, although it's been difficult to forecast exact new student start trends, we expect continued improvement in our operations. In summary, having successfully navigated through heightened regulatory demands on our business and with the company scaled back to our core operations, we'll continue to manage our student outcomes in regulatory performance and we'll be squarely focused on driving growth. Now let me introduce Scott Shaw, who was promoted to President and Chief Operating Officer last year and currently manages our operations and many of the strategic initiatives mentioned earlier. He has been with the company for more than 10 years and has been primarily focused on administrative areas during his tenure. I'm very confident in Scott's abilities and he has shown great leadership over the past few years, as we've managed through a challenging period and now positioned the company to grow. Scott will join our call permanently and add color in a variety of operating areas during his report. Scott?

Good morning, and thank you, Shaun. I will begin with reviewing our organizational structure and major initiatives and then share more detail about a number of the 5 growth strategies for 2014 that Shaun outlined. We are focused on being the leading provider of middle skills training in each of our markets, and eventually, throughout the entire United States. We remain focused on 5 verticals: Automotive, Skilled Trade, Allied Health and Nursing, Hospitality, and Business and IT. If I exclude the 5 campuses that we are closing by the year end, we operate 33 campuses and 5 learning sites in 15 states; 8 campuses offer 1 vertical, 1 campus offers all 5, and the remainder of the campuses mainly offer 2 verticals. We feel very good about our decision to focus on middle skills opportunities, which are careers that require more than a high school education but less than a 4-year degree. Within the middle skills area, we seek job opportunities that cannot be exported and which typically require hands-on training. While the education level may be labeled middle skills, the jobs are high-skilled occupations demanding increasing levels of sophistication and understanding of technology. Today's companies wrestle with how to recruit and develop their trained workforce, and we see Lincoln uniquely positioned to meet both of these needs on a local and national basis. As a direct result of the current regulatory and economic environments, we have been continuously rationalizing our business in order to create a sustainable company with long-term growth opportunities. We have closed campuses that were no longer viable or had the opportunity to become profitable due to local market conditions. We have eliminated programs that have lost their appeal or that we deemed do not provide our students with a strong return on their investment. We have looked at our organizational structure and have eliminated layers of management in order to more successfully react to current market trends. In certain markets where we have multiple schools, we have consolidated select management positions, which has led to greater efficiency and improved communication between campuses. Simultaneously, we have continued to invest in our facilities and programs to further enhance the learning environment for our students. All of these changes in investments have strengthened our operations and laid the foundation for executing a strategy for growth. Our first task for creating a sustainable company was to build upon Lincoln's 65-year legacy for always being regulatory compliant. Two key focuses for 2013 have been strengthening our 90/10 ratio and lowering of our 3-year cohort default rates. We have achieved strong results in both categories. As Shaun mentioned, our 90/10 ratio remains below 80%, and we continually monitor this ratio and make adjustments to our programs to remain safely below the 90% threshold. With regard to our 3-year cohort default rates, we have invested meaningfully this year in systems and processes that enable us to closely track and forecast what our future rates will be. Moreover, we have expanded our financial literacy program, so that students, throughout their time with Lincoln, from orientation to after graduation, continually understand their responsibility for repaying their loans. Moreover, we want our students to know that they can reach out to us at anytime, if they have questions or concerns about their loans. We feel very confident that our focus in this very important area will result in 3-year rates continuing to decline and remain safely below the 30% threshold. In addition to the federal regulations, we have also continued to maintain strong compliance with state and numerous accrediting bodies. We've had more than 20 visits this year, and we have not had any significant findings or fines. To achieve these results, we continually review our policies and procedures to ensure that they agree with all current rules and regulations, and then we provide training both in-person and online to our employees. Maintaining a strong regulatory record is one of our key strategic objectives and is a foundation for this company. A second key strategic objective for creating long-term value and sustainability is to continually strengthen our outcomes, namely our graduation rates and placement rates. This objective clearly serves 2 purposes. With strong outcomes, we demonstrate our value to regulators and other public officials who have continually, in recent years, questioned the need and contribution of proprietary schools. By clearly demonstrating that our outcomes are better than alternative schools, we secure our place in the education sector. However, a more important objective for us is to create a product that is clearly superior, and thus, longer lasting. We want to give students a reason to select us beyond where we are located, what we offer, or our price. To achieve this, we have created the Lincoln Edge. In prior calls, Shaun has shared with you various elements of the Lincoln Edge program. In short, it is a list of activities and responsibilities for students and campus staff that creates a learning environment that is supportive, challenging, engaging and results-oriented. In developing the Lincoln Edge program, we analyzed all of the key reasons why students fail to complete their education and then addressed the failures with specific initiatives. As a result of the Lincoln Edge program, we have seen our retention rates improve for 6 consecutive quarters. Moreover, the mood on our campuses is better. Student satisfaction scores are higher. Faculty and students are more engaged in their classes. Even the support staff now feel that they play a role in each and every student's success. After graduation, comes the important role of placing students. We know that the #1 reason why students select Lincoln is to obtain a job to support themselves and their families. Over the past 24 months, we have greatly enhanced our placement process, and as a result, we have increased our placement rates for the past 2 years. The improvement over the past 2 years has been achieved by management changes and the utilization of a metric-driven placement process. Placement activities are clearly defined and tracked to maximize employer demand for our students. In addition, we have just completed the rollout to all of our campuses of the Career Edge program, which is a blended learning professional development tool. Career Edge is designed to help students enhance their professionalism and soft skills, which are attributes that employers are increasingly seeking in new hires. Given the initial positive feedback from students and the staff, we have used -- that have used the Career Edge platform, we feel very well-positioned to achieve our goal of even higher placement rates going forward. Lastly, and most importantly, we are focused on returning our company to profitability and growth. My discussion will focus on our continuing operations, which excludes ATB online and the 5 Southwestern campuses, which will close by year end. For the third quarter, as compared to the prior year, starts declined by 4.9% or 339 students. We are seeing a stabilization in starts with 10 campuses showing positive start growth for the quarter. With only 339 fewer starts than last year, it does not take too many more starts per campus to achieve a return to growth for the company, and we are focused on delivering these incremental starts with the 5-point growth strategy that Shaun outlined earlier. Our stabilization in starts is a result of improving our adult inquiry-to-start rate in 6 of our last 7 quarters, with the greatest improvement coming this past quarter, when we changed our marketing spend and scaled back on web-based initiatives. Web-based initiatives -- inquiries are high volume, but low converting. Starting in July, we cut our spend for these inquiries compared to prior year, and reallocated some of the dollars into our Eyes on Advertising initiative. The goal of this initiative is to create greater awareness for the Lincoln brand by placing advertising in areas that provides greatest exposure to prospective students as opposed to requiring people to search for our brand through third-party vendors and aggregators. As a result of this shift and other initiatives, we lowered our advertising spend in the third quarter and consciously received fewer inquiries, but more importantly, had slightly more media enrollments and starts at a lower cost per start. While our high school program was down for the quarter, we experienced strength in our destination high school program, and now just need to focus on our non-destination high school efforts. While responsiveness to advertising can fluctuate quarter-by-quarter, we are very encouraged by these results, and we'll continue to adjust our media mix for maximum benefit. We expect to also achieve even greater productivity from our admissions teams as a result of a number of enhancements to our admissions process, including greater use of our online application and financial aid portals, which will speed up the enrollment process, minimize paperwork for students and staff, and provide more immediate information that increases prospective student satisfaction. We've also introduced our new admissions delivery method that speaks to the iGeneration. Using interactive tablets, representatives engage potential students with videos narrated by Lincoln instructors, demonstrating training in the campuses, labs and classrooms. The tablets allow students to virtually tour our facility, experience life as a Lincoln student, and view graduate employer testimonials. The tablets are programmed for each individual campus's offerings, and the admissions representative can further customize each virtual tour based on the prospect's personalized interest. By the end of the year, all schools will have these tablets, making a significant restructuring in the way we engage our prospective students. The feedback from the pilot has been overwhelmingly positive. Videos are an excellent way to bring the excitement of our labs and classrooms directly to the student. By the end of the year, all reps will have tablets with videos showing students and faculty members discussing what happens in a Lincoln classroom. I encourage you to visit the website www.tourlincolntech.com to see a sample of the types of videos that a prospective student will see on the tablet while touring a campus. This site is actually an app designed by our -- designed for our Denver campus that you can download onto your phone or iPad. We will be creating additional apps for other Lincoln campuses throughout the coming months. The average population by vertical has shifted year-over-year, reflecting the stronger demand for automotive and skilled trades programs, which represented 57.1% of the population at the end of Q3 compared to 51.8% at the end of Q3 last year. We are definitely seeing strong interest by employers and industry in these 2 key verticals for both entry-level training opportunities as well as advanced training opportunities for existing employees. With regard to a latter point, we have begun offering skill enhancement training for General Motors technicians at our Denver campus, and we will expand that program to additional campuses over the next 2 quarters. Similar opportunities are arising from other OEMs and industries. Shaun mentioned that we will be rolling out several new programs in the coming months to further penetrate our markets and create growth. Last month, we had the grand opening of our Indianapolis and Grand Prairie CNC machining programs, which will have their first starts later this quarter. This program has received tremendous support from industry in the form of over $0.5 million of contributed equipment and a strong desire to hire our future graduates. We will continue to work with industries to meet skill gap needs on a local and national basis. In 2014, we expect to launch a third CNC machining program, a heavy equipment program, several allied health programs and our RN-to-BSN on-ground program at our Lincoln College of New England campus. We believe that our actions are working and that we are moving towards renewed growth and profitability. As Shaun outlined in his remarks, we have a 5-point plan for achieving growth, and over the coming quarters we will share with you the results of these actions. Already, we see our starts stabilizing with advertising and sales changes, which are producing greater results. In the meantime, we will continue to manage our costs while we rebuild our population. Our foundation is strong, and we are prepared to realize on the various initiatives that are underway. I will now turn the call over to Cesar.

Thank you, Scott. Good morning, everyone. As we disclosed in our press release earlier this morning, student starts decreased 7.3% for the quarter. Excluding the announced campus closures, which we stopped enrolling in 2012, ATB and online student starts were down 4.9% for the quarter. Although, new student starts were still down for the quarter, we continue to believe that we are beginning to experience stabilization in our starts. We started the third quarter of 2013 with approximately 3,000 less students than we had on July 1, 2012. This led to a decline in our average population for the third quarter of 2013 of 14.2%, which resulted in revenue declining by 13.3% or approximately $13.5 million as compared to the third quarter of 2012. Approximately, $4.4 million of this decrease was from the announced campus closures. The decrease in revenue for the quarter was somewhat offset as a result of annual tuition increases, which have averaged historically about 3%. The decrease in student starts also impacted our capacity utilization, which decreased to 37% from 41% in the third quarter of 2012. The decrease in capacity utilization produced significant negative leverage as our operating margin decreased to a negative 3.1% for the quarter from a positive 1.8% in the third quarter of 2012. Other key highlights in the quarter included: Loss per share from continuing operations was $0.10 for the third quarter of 2013 as compared to loss per share from continuing operations of $0.07 for the third quarter of 2012. Loss per share for the third quarter of 2013 and 2012 includes operating losses for the announced campus closures of $0.10 and $0.05 per share respectively for the third quarter 2013 and 2012 Free cash flow for the third quarter of 2013 was $3.3 million, an increase of $1.1 million from free cash flow of $2.1 million during the third quarter of 2012. We paid a $0.07 quarterly dividend on September 30, 2013. We finished the quarter with $6.3 million in cash and cash equivalents and no borrowings outstanding under our credit facility. Bad debt for the quarter decreased 4 -- to 4.5% of revenue as compared to 6% for the third quarter of 2012. Average revenue per student increased 1% for the third quarter of 2013, $5,804 from $5,745 in the third quarter of 2012. Cost per start decreased 10.8% for the third quarter of 2013 to $2,374 from $2,660 in the third quarter of 2012. Cost per start during the quarter was positively impacted by our change in media mix expenditures, mentioned by Scott. Net accounts receivable at September 30, 2013 were $31.5 million as compared to $23.5 million at December 31, 2012. This increases in net accounts receivable is primarily due to seasonality. Capital expenditures for 2013 are expected to be about 2% to 3% of revenue. Now turning to our loan program. As of September 30, 2013, the loan commitments to our students, net of interest that would be due on the loans-to-maturity, were $26.4 million as compared to loan commitments at $25 million at December 31, 2012. We finished the quarter with shareholders' equity of $176.4 million, down from $198.5 million at December 31, 2012. Shareholder's equity at September 30, 2013 reflects approximately $5 million of dividends paid. I'll finish my prepared remarks by providing our current outlook for the year. We are reaffirming our previously issued 2013 revenue and EPS guidance. For 2013, we continue to expect revenue of approximately $355 million and a diluted loss per share of $1. The full-year diluted loss per share includes approximately $0.60 to $0.65 per share loss related to the announced campus closures. We expect student starts from continuing operations, which excludes the announced campus closures, ability to benefit students and online to be down approximately 5% to 8% for the year as compared to 2012. And finally, the Board of Directors has set the record and payment dates for the dividends for the fourth quarter of 2013. The cash dividend of $0.07 per share will be payable on December 31, 2013 to shareholders of record on December 13, 2013. In conclusion, we continue to make progress with our initiatives and are optimistic that our focus on growth initiatives in the upcoming year will commence to pay dividends in the not too distant future. Now, we'll open the call to your questions. With that said, I like to turn the call back over to the operator. Operator?

[Operator Instructions] The first question comes from the line of Scott Schneeberger, Oppenheimer. Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: Could you guys address what you are doing with regard to pricing? I think, Shaun, you mentioned a delay of first quarter tuition increases, and then you mentioned scholarships. Are the scholarships going to be in any specific programs versus others and just with the overall strategy is there.

Yes, I'll start and then I'll hand it over to Scott and Cesar for a little more detail, if they see fit. But, yes, affordability continues to be one of the issues that consumers that are looking at our schools face. And so because of that, we've decided to address it in 2 ways: #1, to put a hold on our tuition increase for the first quarter, possibly the first and second quarter, and to assess if that helps consumer affordability; second, to avoid an overall just decrease in tuition, Scott, we're looking at targeted scholarships. And those scholarships will be targeted by either demographics, geography or program. And I think what we will do -- I mean we are in the process of assessing whether those will be most effective and which students they'll help, and we're doing that over the next month. They'll all be ready to launch for the recruitment class of first quarter 2014, which means any enrollments that are generated probably in the month of December moving forward. So, if -- really, really just to summarize my comments. We will probably outline those for you on our next call. But suffice it to say, we think that the scholarships will be meaningful and that they will actually help our enrollment. Cesar or Scott?

Yes, I guess, the only point I would add is that, again, we are deferring tuition increases, not necessarily across the board, but by geography and selected programs where we feel there are more affordability issues than others. And just like Shaun said, the same thing with scholarships; where there are more affordability issues, we will target selected scholarships to try to assess those students to be able to get an education. Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: Could you guys elaborate a bit on persistence what you're saying, what you're anticipating going forward?

Yes, I'll start and then let Scott give a little more detail. But we're very happy about what we've seeing in terms of persistence improvement. Scott mentioned our Lincoln Edge program, which really evolved from our early student engagement program and other steps that are focused on mentoring our students through the program. If you recall, when we had high numbers of ATB students, our goal was to always affect their ability to complete school because that completion rate was a proxy for loan repayment. That program, even though ATB students went away, became institutionalized, and we found that it helped students who've come in that have had different life circumstance challenges to progress to a point in school where they graduate at higher rates. We've seen our completion rate increase by about 10 percentage points based on that program over time. Scott?

Sure. As Shaun mentioned, I mean, it's a lot of initiatives underway to drive greater persistence. I mean, as a company, we're seeing improvement frankly across the board at almost every single campus, with total persistence improving overall. And the level of increase that we're looking for is around a 1% to 2% increase in our overall graduation rate per year, and where we seem to be tracking in that direction again for this year. Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: Thanks. And then lastly, Scott, thanks for the discussion on marketing and advertising. Could you just take us through that a little bit more? I'm curious about the timing on what you're doing. We saw a bit of a decrease in third quarter, might we see a pickup in the fourth or first, or how we should think about that going forward and just the overall plan with regard to the advertising strategy?

Sure. Again, we're constantly looking at the numbers and seeing where we're getting the best return on our investments. And as we were looking at where leads were coming from and what our productivity was, there definitely saw a weakness in inquiries coming from various aggregators and partners out there. And we just decided that the best thing for our students to convey the message of what we offer is to allow our admissions folks to spend more time with them. So in order to achieve that, we decided where can we cut out, something that's been less productive and consuming too much of their time, and it's really around these leads of what we call the web-based initiative leads. So by cutting back on those dollars, you cut back a lot of volume, which frankly frees up the admissions people to spend more time with the students to really explain what the value proposition is. And as our numbers showed and we noticed from our adult starts, we saw definitely a pickup in that area even though we had fewer inquiries than we did in the prior year, and we spent less money. So obviously, that's just a 1-quarter event. We started this... You asked about timing. We started this in July. But it's something that we're going to continue to do and we'll continue to refine where we allocate our dollars in order to get that message across to the students. Again, just in summary, we know that students that come in to our facilities are much more likely to start. And so, we are trying to create more opportunities for students to see exactly what we do by encouraging them to come in to our facilities, but also by having these videos I mentioned, so that students have a real sense for what's going on even before they walked into our doors. The objective is to continually connect with the students, show them the value proposition, show them what they can expect to experience when they join us, then hopefully, at the end of the day, as we continue to drive greater graduation placement rates, everyone will be much happier and better off.

Your next question comes from the line of David Chu, Merrill Lynch.

So based on your annual guidance, why is there such a wide forecast for 4Q starts, despite being in early November already?

Let me just go back just a little bit here. There have been times over the last few quarters where we have missed our guidance on the starts side, and I'll tell you, there is no question that on the forecasting we've really tried to stabilize that as have many of our industry peers have as well. Our metrics, David, as you know, the ones that serve as leading indicators really have shifted over time as the new rules have taken effect and as representatives operate under new performance criteria, and consumer buying behavior changes as well. So the new norms are becoming more evident to us and our teams are finding more reliable indicators to give us and our local managers better forecasting tools. So over time, we found that our forecasting is getting better just based on consumer behavior and our own leading indicators. So at this point in time, we also feel that because the numbers are so small -- I mean, relative to other quarters, the fourth quarters is our smallest enrollment. If that number swings by 50 students, that's 2 percentage points. And so that's the only reason, David. It leaves a little bit of room for that fluctuation. And we think that the fourth quarter will operate somewhat like the third quarter. But as Scott mentioned, we are essentially putting 5 different pieces of a revised strategy back in the place within the fourth quarter to affect the first quarter, which include increased spending again, et cetera. But that's essentially why the gap in -- the range in that forecast.

Cesar, can you provide 4Q '12 starts and average enrollment on a continuing operations basis?

I can provide starts. I do not have average enrollments. But total starts on a continuing operations basis, including -- excluding obviously the announced school closures, ATB and online, were 17,212.

And last question. So you guys spoke about trends improving in 1/3 of your campuses. Just wondering if there are certain characteristics unique to these schools either in terms of geography or program offerings?

Yes, it's interesting, David. I mean, many of our schools, as Scott mentioned in his prepared remarks, have a variety of programs. And so we have schools that have automotive programs, skilled trades, and we have 1 school that has all 5 verticals and a number of schools that have 2 verticals. And so on a school-by-school basis, we see a variety of performance metrics. I will say that there are certain programs that have shown different levels of success. For example, automotive and skilled trades have had less decline over the past couple of years as compared to non-auto. And that's probably the most distinct variation we have seen programmatically. In addition to that there are performance differences. The schools that have utilized some of the technology that we mentioned earlier, the centralized financial aid packaging process in addition to the various portals, those particular campuses have seen better efficiency in their enrollment process and better overall results. So what we -- what it gives us is, is confidence that there are certain performance metrics, systems and programs that have seen success and we are replicating elements that are successful, and making sure that we execute those in other schools as well. I would tell you that there are other programs that continue to struggle based on market demand, and those will become fewer, but we are also addressing those with some of the affordability metrics that Cesar described earlier.

Okay. And so, how long do you believe it will take to implement these operational changes at these other campuses?

I'll take a shot and I'll turn it over to Scott to talk about the more specific operational elements. But I'll say, David, that we really looked at this from a strategic perspective in those particular 5 areas, and the goal is to have the majority of those elements in place in 2013 to impact first and second quarter of 2014 primarily. I think that most of the technology -- while the technology already exists and is being utilized in certain places, we have increased the manpower in the centralized financial aid group, and we have other new programs in development. And so I would say that 90% of those initiatives will be in place for us to impact the first quarter of 2014. Scott?

Yes. Definitely, we are rolling everything out as we speak, and some areas have already had some of these changes. As Shaun mentioned, certainly by year end, everything from a marketing and sales perspective will be out there and then it's just a matter of how quickly the different campuses are able to roll it out through training and adoption. But as far as new ways of looking at financial aid and helping that process along, that will be rolled out by the end of the fourth quarter. New ways, as I mentioned, of having enhancing the experience for students. Every campus will have that technology and training by the end of the fourth quarter as well. And so we do anticipate that starting in the first quarter we'll start seeing impact of this, and hopefully, that should grow throughout the rest of the year.

Okay, and just one last quick one. And so, Scott, how much were leads down overall in 3Q on a year-over-year basis?

I don't have that directly in front of me. I know that our web initiative leads were down 60%. Let me just try to find. Hold on here. I have it here. For the quarter....

Hi, David. While Scott is looking for that number, I just wanted to reiterate that the fact that we made a contest decision to make sure that each representative had a manageable number of inquiries to work with. And so the higher volume inquiries that we talked about that convert at lower rates, were just a no-brainer to reduce. Moving forward, our goal really is to increase overall volume, but overall volume of the higher converting leads, which we believe we can do. Scott?

Yes, sure. So for the quarter, media leads were down 30%, and yes, at the same time, our enrollments were up and our starts were flat.

[Operator Instructions] At this time, with no further questions, I'll turn the call over to Mr. Shaun McAlmont for closing remarks. Please proceed sir.

As you can see through Scott's detailed operational report, Cesar's report as well, we're focused and we have been very busy executing on a number of initiatives, which are essentially working to continually stabilize the company's former declines and have positioned us well in a time of continued uncertainty. We have managed our existing strategy and are really moving our organization in a direction which we feel gives us a great opportunity to grow, while also maintaining the progress we've made in student outcomes and regulatory compliance. I'd like to thank you all for joining us today, and we look forward to updating you on our fourth quarter and year in March. Have a good day. And thank you, Celia.

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