Lincoln Educational Services Corporation (LINC) Q4 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2018 Lincoln Educational Services Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. I would like to introduce your host for today's conference, Mr. Michael Polyviou. Sir, please go ahead.

Thank you, Michelle, and good morning, everyone. Before the market opened today, Lincoln Educational Services issued release reporting financial results for the fourth quarter and full year ended December 31, 2018. The release is available on the Investor Relations portion of the Company's corporate website at www.lincolntech.edu. Today's call is being broadcast live on the Company's website, and a replay of this call will be archived on the Company's website. Statements made by Lincoln's management team during today's call regarding the Company's business that are not historical facts may be forward-looking statements as the term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, planned, intend, estimate and continue and 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 projections upon which statements are based. Factors that may affect the Company's results include, but are not limited to, the risks and uncertainty discussed in the Risk Factors section of the Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on information available at the time those statements are made and/or management's good-faith beliefs 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. 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 good morning, everyone. Thank you for joining our call today to discuss our fourth quarter and full year operating and financial results. With me is Brian Meyers, our Chief Financial Officer. The positive trend we’ve reported throughout the year continued in the fourth quarter. I am pleased to announce that we generated consistent growth and achieved all of the operating goals for 2018. We are seeing an improvement in our bottom-line and the initiatives and actions we have implemented are bearing fruit and have positioned Lincoln for long-term success. We’ve reported fourth quarter student starts from same-school operations grew 12.1% and for the full year, our student starts grew by 7.7%. More importantly, we have achieved growth in both segments for the past five quarters and we are projecting to achieve growth in both segments for this upcoming quarter. These strong and consistent results demonstrates solid execution and momentum across the entire organization. So how despite the unprecedented period of high employment and perhaps the most challenging operating environment the industry has ever seen, have we maintained such positive momentum? The answer is through hard work and commitment of everyone at Lincoln to deliver on our mission of helping students acquire skills and find employment in high-demand fields. The skills gap is real and companies continue to seek opportunities to work with us to help them solve their workforce needs. In response to this demand, we launched - and marketing efforts broadened our reach and initiated new partnerships. All of these actions along with greater training of our employees have all contributed to our success. We are continuing to execute on a similar plan which we believe will deliver profitability in 2019 and position us well to capitalize on the surging growth we expect when the economy is more favorable to our business. However, I want to remind you the large disparity between employer demand and the skills possessed by potential employees still exists and getting wider. We are and have been a reliable source for these skilled employees, so we continue to receive increasing requests from employers and organizations to help fill their void of skilled employees. Our footprint and breadth of programs is unique and provides us with scale that many employers find attractive. Our plan is to build on this foundation to attract more employers and students. As we have said repeatedly, a four-year college degree is no longer a guarantee of success. We are leveraging the skills gap and providing students with alternative paths to college in order for them to obtain a solid middle-class career. Our Q4 results and for that matter, the results over the past few quarters clearly demonstrate that we are and continue to capitalize on these trends. We are building a stronger and leaner and more impactful company that benefits our key stakeholders, students, employers and shareholders. Our consistent student start growth and better retention are driving our improved operating results. Furthermore, our diversification of programs and locations has been helpful in achieving consistent performance. During the quarter, our Transportation and Skilled Trades segment student starts accelerated by more than 6% for Q4 and nearly 7% for the full year. Growth for the quarter was driven by strong enrollments with our adult students and growth for the year was supported by strong growth with our high school students. Very few school organizations still have a high school organization, because of the cost, but we definitely see benefits from a force of over 90 representatives visiting high schools to share the benefits of a Lincoln Tech Education. I believe we raise the awareness of the Lincoln Tech name in the communities while bringing success to the eventual students. Our activities motivate other students to consider our courses and if not now, perhaps later in life when they are seeking to improve the quality of their lives and achieve their life’s dreams. Another factor for growth came from launching several new skilled trades programs within the segment, as well as continued strong growth of existing programs. It appears that more students are getting the message that there are great opportunities within skilled trades either because of our marketing or because of the increasing awareness of the skills gap. Regardless of the reason, we will continue to expand our industry partnerships in this area. These partnerships enable us to give our students advanced industry skills that make them more employable and usually at higher wages. Our partnerships with Hussman and Johnson Controls are meeting our combined expectation and during the quarter, we were also working with Fujitsu to develop a program focused on ductless air conditioners more common internationally but becoming more popular here in the U.S. Our corporate partners provide us with cutting-edge technology that we put into our classrooms and labs branding which helps create greater awareness, numerous employment opportunities to improve placement and higher paying careers for our students. The demand for our Healthcare and Other Profession segment was strong in the fourth quarter as well. If you recall that Q3 performance shows slight improvement year-over-year, but in the fourth quarter, we experienced a 19% increase in student starts compared to last year’s Q4 and for the full year, this segment increased 9.5%. The overall demand for healthcare workers is strong across the country. Our largest program is our Licensed Practical Nursing program which is probably our most academically challenging program. We are very fortunate to have excellent faculty in this program as well as highly dedicated students. The demand to become a nurse at any level is high and I am confident in saying that without Lincoln Tech, there would be thousands of fewer LPNs in this country simply because the other schools lack the capacity to meet demand. Moreover, even with strong growth in our LPN population, the quality of our education remains very high with over 86% of students passing the NCLEX exam. We achieved our goals in 2018 and I believe we are in a much stronger position today to meet our objectives for 2019, both operationally and financially. Our confidence stems from our consistent performance over the past five quarters and from the fact that we started 2019 with more than 750 students over the prior year. This higher population coupled with further growth will result in profitability for 2019. We continued to diligently control cost during the fourth quarter. Operating income for the Transportation and Skilled Trades segment was essentially flat and our HOP segment increased 23% compared to last year. Overall, while our marketing cost increased approximately $0.5 million over the fourth quarter of 2017, we are seeing this desired impact reflected by our increased starts. Excluding our former Lincoln College of New England School at Southington, our administrative costs remain flat compared to prior year. Having completed the teach-out of LCNE as of December 31 of 2018, we will no longer incur any losses in 2019. Most importantly, the majority of the students were migrated to a neighboring school with little to no disruption to their course work. I do want to take a moment to highlight that whenever Lincoln Tech has been faced with the challenge of having to close a campus, we have always acted with our students’ best interest at heart. We work with students to help accelerate their graduation date, or work with neighboring schools to find opportunities for students to transfer as seemingly less as possible. And if there are no good options, we will refund the students’ tuition. I am proud of our team and the steadfast commitment to always do what is right. Returning to cost controls, we also continue to find opportunities to lower our lease costs either through re-negotiation or reducing our square footage and we have identified several opportunities to lower our fixed cost over the next twelve months and greatly benefit our bottom-line in 2019. From an accreditation perspective, we successfully transferred seven campuses from ACIS to ACCCSC in 2018 and had strong results in our re-accreditation visits. For the first time in many decades, all of our schools are now accredited by the same organization and this should help us further reduce our cost and gain more efficiencies. Furthermore, the process for launching new programs will be more streamlined also adding to better efficiencies. Switching to outcomes. Continuously improving our outcomes is at the heart of everything that we do and we made progress in the quarter and the year with both of our retention rate and placement rate. Our students are investing their time and money with us and we take that responsibility seriously. We’ve created new reports that allow us quickly assess teacher performance and student engagement and by continuously monitoring these reports and taking corrective actions, we’ve been able to improve retention, meaning that, an even higher percentage of students graduate. Our Career Services teams also made great progress in 2018. Our overall placement rate for the year improved 2.2% to 81.4% with an 83% rate in our Transportation segment and a 78% rate in HOPs. Demand by employers exceeds our graduates, but unfortunately not every student wants to travel or relocate for a job and thus our placement rates are not as high as they could be. Nonetheless, we know we can improve our placement rates and we will continue to focus on achieving a company-wide placement rate of 85% in the near-term. Also, we continue to see more employers providing students with various incentives to attract them to their companies. For example, more of our students are receiving signing bonuses, student loan repayment programs and other benefits. This allows them to realize an ROI far quicker than students getting degrees at four-year colleges. In summary, 2018 was a solid year as we executed several initiatives that we had guided to previously. Improving our students’ experience and strengthening our operating structure allowed us to report five consecutive quarters of solid start growth and we continue to make progress with our starts, our population, our retention rates and our placement rates while simultaneously controlling our costs. We are successfully navigating the macro headwinds and our performance today in Q1 remains strong and as such, we anticipate student start growth of approximately 5%. Now I’d like to turn the call over to Brian for a review of our fourth quarter and full year financial results. Brian?

Thanks, Scott, and good morning, everyone. Excuse me. Sorry. As Scott mentioned, we reported sustained momentum throughout the year that achieved all of our 2018 operating and financial targets, which I’ll discuss later. I will also take some time to discuss our upcoming 2019 guidance, but first I would like to begin with highlights from our fourth quarter performance. To begin, revenue for the quarter improved by $2.7 million or 4% over the prior year and on a same-school basis, revenue was higher by $4.8 million or 7.5% over the prior year. Second, total student starts were up 11.6% over the prior year and 12.1% on a same-school basis. The increase in student starts represents the fifth consecutive quarter with start growth, which we attributed to continued investments in marketing, our improved high school admissions program and process. As mentioned earlier, based on the first two months of 2019, we expect student starts growth of approximately 5% for the first quarter. This would represent our sixth consecutive quarter of start growth. Most notably, our 2019 carrying population exceeded prior year by approximately 750 students, which will help drive profitability expectations for 2019. Third, we continue to drive marketing initiatives resulting in approximately $500,000 of additional spend in the fourth quarter of 2018 compared to the fourth quarter of the prior year, while marketing investments are up, the cost to obtain prospective students has remained relatively flat when compared to the prior year quarter indicating that the marketing dollars are providing return on our investment and should continue to yield start growth during 2019. We are confident that the increased marketing investment has been a strong contributor to our continuous start growth, especially in the adult population. Fourth, as of December 31, 2018, we successfully taught out our Lincoln College of New England campus at Southington, Connecticut. And as part of the teach-out we partnered with growing calls to accept our students which minimized student disruption and eliminated the need for student refunds. Incidentally, the largest closing cost associated with the campus closure was $1.6 million of lease expense, since the lease expires on February 1, 2020. All costs associated with the closing were incurred or recorded for in 2018, therefore there will be no P&L impact in 2019 for this campus. As a reminder, all financial results for this campus has been included in transitional segment for both the current and prior periods. Fifth, bad debt expense for the quarter increased mainly due to higher accounts receivable balances. The increase in accounts receivable is primarily driven by one, higher revenue and student population, higher receivables from graduates due to internal loans with deferred payment plans, and a shift in program mix during the year from a longer duration programs to more condensed programs. And lastly, yesterday, March 5th, we entered into our fourth amendment of the credit agreement with Sterling National Bank. The amendment provides the company with an additional $5 million of working capital needs through October of this year. In addition, the amendment comforts facility one from a revolving line of credit to a term loan extends the maturity of the credit agreement for five years until March 31, 2020 and revises the financial covenants to better align with our projected results for 2019. As of December 31, 2018, the facility one balance was $22.7 million after repaying approximately $2.3 million during the quarter. The repayment funds were derived from the sale of our West Palm Beach property during Q3 of 2018. Proceeds from the sale were originally held in a restricted cash account with Sterling National Bank. In addition, I’ll note on that a new term loan, principal payments are payable monthly through July – payable monthly from July through December each year correspond to a seasonality of our business. Accordingly, principal payments for 2019 will occur between the months of July through December. Now turning to our segment performance for the fourth quarter of 2018. Our Transportation and Skilled Trades segment revenue increased by $2.4 million or 5.1% to $49.4 million for the three months ended December 31, 2018 from $47 million in the prior year comparable period. The increase in revenue is primarily attributed to five consecutive quarters of student start growth, most notably a 6.6% increase in student starts in the current quarter, which helped drive a 5.1% increase in average student population. Operating income remained relatively flat at $8.9 million and $9 million for the fourth quarter of 2018 and 2017 respectively. Now turning to our HOP segment. Revenue increased by $2.4 million or 4% to $19.6 million from $17.2 million in the prior year comparable period. The increase in revenue was mainly attributed to five consecutive quarters of start growth, which drove a 9.8% increase in average student population and an increase in average revenue per student. Operating income increased to $3.7 million for the quarter from $3 million in the prior year. Lastly, our Transitional segment revenue, which includes the Lincoln College of New England at Southington, Connecticut campus in the current quarter and an additional five campuses in the prior year was $1.1 million, compared to $3.2 million in the prior year period. Operating loss was $3.1 million and $1.2 million for the current and prior year quarter respectively. Corporate and other costs were $3.8 million for the three months ended December 31, 2018, as compared to $3 million in the prior year comparable period. The $800,000 increase was primarily driven by an increase in salaries and benefits. Finally, I like to reiterate that we achieved our 2018 guidance provide an overview of the actual results compared to our increased guidance reported in Q3. As a reminder, all 2018 guidance excludes the Transitional segment. First, we anticipate revenue to increase 3% to 6% and we achieved 5.1% increase. Second, student starts were projected to increase 5% to 7% and I am pleased to announce that student starts increased by 7.7%. Third, we anticipated that our 2018 year-end population will be greater than that of the prior year. Accordingly, we ended 2018 with approximately 750 more students over prior year. Lastly, operating income was anticipated to be between $1 million and $3 million. I am happy to announce that we achieved operating income of $2 million. Now I would like to introduce 2019 guidance as following: first, we anticipate revenue in students starts to increase by 3% to 5% excluding the Transitional segment in 2018. Second, we expect to achieve our approximately $2 million of net income. And finally, we expect 2018 EBITDA to be approximately $12 million. With that, I’ll now turn the call back over to the operator, so we can take your questions. Operator?

[Operator Instructions] Our first question comes from the line of Alex Paris with Barrington Research. Your line is open. Please go ahead.

Hi guys.

Good morning, Alex.

Good morning, Alex.

Congrats on the strong finish to the year. I feel compelled to point that there was an erroneous headline on FactSet saying that you reported $0.20 versus a consensus of one, $0.33 that was my estimate. My estimate was actually $0.22 on an apples-to-apples basis. The $0.33 was excluding Transition and if you adjust for my transitional estimate, I was a little low on the loss. The loss is a little bit greater than I had modeled. That would have been exactly on my estimate. So, congrats.

Thanks, Alex. Appreciate that.

Yes, I mean, sometimes headlines come out and they are misleading. But – so, with LCNE taught out with Lincoln College of New England taught out, as of 12/31, we are done with Transitional, unless you anticipate other campuses moving into that in 2019, what’s your thought there?

We anticipate nothing moving into Transitional in 2019. We are done.

Okay, congrats on that as well. So we expect a pretty clean P&L going forward?

Correct.

Okay. Got a couple of other questions. Marketing costs were up $500,000 year-over-year in the fourth quarter. I believe they are up $1 million year-over-year in the third quarter. What were they up year-over-year for the full year? And do you expect a similar level of marketing investment in 2019?

Marketing was up approximately a $2.8 million for same-school basis. For Transitional it was like $2.4 million in total. But it actually, what we said for the quarter for marketing stands for the year as well that, our cost per start were actually down slightly. So we are getting return on our investment even though the marketing spend was higher.

But to answer your question as far as for 2019, we are not anticipating it to be as great, I don’t believe, but, we will continue to invest in the marketing area as long as we continue to see a good solid cost per start, which is what we’ve achieved so far.

Great. And then, speaking of which, what’s involved with the increased marketing spend. Are you spending it in the same places? Are you spending it in new places? What’s going on there?

Sure, it’s a most of it in the evolving theme quarter-by-quarter. Certainly, last year we launched some new TV advertising and some new ads out there. We continue to experiment and put resources behind social media and in the website. We continue to refine our website and make it more impactful and easier to find. So, I can’t tell you it’s one specific thing. It’s really, if I’d reach out to my marketing people, they’d give me a laundry list of different activities. Again, though we focus on making sure that we can assess the return on those investments as best as possible, which obviously in marketing can be difficult. And we then adjust, based on what we are seeing, we then adjust the dollar amounts either for different programs or different markets or in different channels to the best of our abilities and all I can tell you is that our results are working very well for us right now.

Great. And then, with the HOPs schools now all transitioned to ACCSC, yes, you’ve talked about new programs. What new programs have you launched? Or have you launched any new programs so far given that accreditation? And then, secondly, do you anticipate launching additional new programs in 2019?

Yes, so, in the schools that were in Transition, we really didn’t launch anything until we got that accreditation which obviously we got towards the end of last year. So, programs that we are looking to launch, frankly, we’ve had demand by employers in two markets to relaunch a massage therapy program, which again – it wouldn’t be a large program. But maybe, I’d say, 60 student program as long as we can find employment for them with, I’ll say, real companies, we will continue to support that program. And again, several companies that come to us looking for massage therapist. We also revamped our entry-level IT program to be more focused on providing industry-recognized certifications and that’s in about four or five of our healthcare schools and we will probably roll it out to another one or two this year as well.

Okay. And then, moving to guidance, you said revenue growth of 3% to 5% and starts growth of 3% to 5% for the full year. Given your starts growth of over 12% on a same-school basis in the fourth quarter, why so low for the coming year? Is it conservatism? I am sure, it’s a little bit tougher comp, but how would you rationalize that?

Sure, well, some of it is always a little bit of timing from quarter-to-quarter depending on when the start dates fall. So, our strong growth in the fourth quarter is somewhat attributable to the fact that the third quarter was less. And so, when you look at it overall, the number I think we came out around 10% for the full year. As we look to the future, again, maybe some of it’s conservatism. Again, we are projecting 5% overall for the first quarter of 2019 and I just think that that’s a good number for us to be looking at going forward for the year.

But the official guidance is 3% to 5% for starts for the full year, correct?

Correct, it’s 3% to 5%, yes.

Okay. Just want to be clear, correct. And then, all of this guidance, is this comparing against GAAP revenue for example or is it comparing against same-school revenue, when you say, up 3% to 5% year-over-year?

Same-school is schools Transitional for starts ahead for revenue.

Okay. And then, let’s see, EBITDA up $12 million in 2018 versus $4.5 million just reported. If I am not mistaken. What’s the – just couple small things. What’s the D&A assumption that goes into EBITDA?

Right. So from – that is approximately about $8 million for 2019.

Okay. And then, how about taxes? Taxes is, you got obviously loss carry-forwards. What should be the tax assumption for 2019?

Right, yes. It’s still just miscellaneous state taxes, but due to a deferred tax liability, it’s going to increase slightly from 2018 into 2019. It should be under $400,000 or roughly about $350,000.

Great. And then, I guess, that’s good for me now. Again, thanks very much. Strong finish to the year and guidance in line or better than the expectations for 2019.

Great.

Thanks, Alex for your questions.

Thank you. And our next question comes from the line of Bill Nasgovitz with Heartland Advisors. Your line is open. Please go ahead.

Good morning. Congratulations. See…

Thanks, Bill.

Thanks, Bill.

Your starts were up 12%, almost 12%. So, could you talk a little bit about retention? But before that, Fujitsu, so that’s a new name? Is that someone recently added then?

Yes, well, on that point, yes, Fujitsu is headquartered here in New Jersey and so we have had – and having conversations with them for a while and they approached us because they are looking to enhance their – basically, their technical sales force. And so, we are working with them on developing a program that will give our students in our HVAC program, I guess, advanced training on their ductless systems, which our systems are becoming more and more popular to put into homes and as well as office buildings with as the name suggests. You don’t need to have a lot of duct work. And so, it’s easy to install and it can be very, very efficient, as well, as you can just put the air conditioning or heating exactly in the space that you need. So, it’s a new opportunity. We are working on finalizing the program with them. But it will be launched in 2019.

And what kind of potential might be there over the next several years?

Well, again, this would be a program where we are just frankly enhancing our existing HVAC program. So, it will be incorporated into what we offer already. But I believe it – we will further enhance the proactiveness of that program, simply because, the more applicable the skills are that our students receive, the better the jobs are that they get, as well as Fujitsu will be giving us some equipment. So our labs will look that much more attractive and overall, Bill, it should just help us continue to grow the HVAC business, which is this past year had meaningful growth. So, it’s unlike, it’s not like a BMW set program, it’s a separate revenue driving program. It’s an enhancement to our overall program, but with a major brand.

Okay, okay. So, you mentioned placements getting up to 81.4% and with a goal of getting to 85%, how does it compare with our peers - the competition?

I mean, it compares very well. If you look at, there are certainly people that are slightly higher than us. And there are people that are certainly lower than us. I definitely look at it and want to be the best out there possible. Certainly, if you look at the healthcare side, that always tends to be a lower percentage than on the Transportation and Skilled Trades side, but if I look at our peers, I see them – I’ll say this, when I look at the top performing companies, I see them in that mid-80% level.

Okay. So, are we in the top half then or in both?

Well, absolutely.

Healthcare. That sounds great. Okay, thank you.

Sure, no problem. Thanks.

Thanks, for your questions.

[Operator Instructions] Our next question comes from the line of Justyn Putnam with Talanta Group. Your line is open. Please go ahead.

Thank you. Good morning.

Morning, Justyn.

Morning, Justyn.

Brian, real quick. What’s the restricted cash balance at the year end?

What was the question?

Restricted cash balance at year end.

It was – in current restricted cash we had approximately $16.8 million and in long-term restricted cash, we had about $11.6 million.

Okay. And that’s not included – that’s not broken out in your consolidated balance sheet, right? That’s not.

It is not. It will be in our K when we file it, which will be filed hopefully by Monday.

So at the end of the year, pretty much no net debt, I guess, which is what we are looking for?

Right. Yes, we were in net debt position less than $3 million.

Okay, great. And my next question is, it’s great to see continued demand for your programs and your efforts to fill those needs, that’s showing some great progress there. But now we’re seeing some sustained growth, I was wondering if I could get a sense of what you think your kind of incremental constitution margin is for new students coming in now? I think we talked about that in the past, but I was just going to see what results are announced?

Sure. I mean, again, that is where we see benefit going into the future. Historically, we’ve seen numbers ranging from 30% to 70% depending on where we are in the cycle and where individual campuses are. I certainly would anticipate focusing on the lower level of that range going forward and that’s kind of what we are assuming in our guidance.

And then the operating margin numbers that you are looking at, I mean, you are talking about 30% to 70%.

Correct, correct, yes.

On operating, okay. All right. So, then, that leads to my next question is, it looks like, again, still low noise in your number in 2018 and it’s great moving toward getting pretty clean picture in the earnings power of the business in 2019. But it looks like in 2018, your EBITDA excluding Transitional was somewhere in the $10.4 million range. Does that sound about right?

It does. $4.5 million.

Okay. And then, so, the midpoint of your guidance for 2019 is, about $10.5 million in additional revenues. So, with the contribution margin that you just mentioned, it seems like, and that’s like your guidance seems a little bit conservative. I don’t know, is there anything else going on in the business that we should be thinking about that might push us toward the lower-end there?

Sure, I mean, I think that, there are real things that are pushing at the lower end and the biggest one is really frankly are wages with the full employment market that exists out there. It’s definitely putting pressure on wages as we look to find and replace faculty members in particular. So, it’s kind of a – just the nature of the beast with such low unemployment rate and skills got that exists out there. So, I think that that for the near-term will put some pressure. But the good news is there still will be that incremental money dropping to the bottom-line.

Okay. So, at the lowest number that you cited 30% incremental margins, $10 million of revenue, that’s pushing the $3 million in additional operating income. I think you are only looking for $1.5 million in additional EBITDA for your guidance. So, maybe some opportunity there, I guess, right?

Maybe some opportunity.

Right, because, to your numbers, once you exclude Transitional segment and I guess, this year it was about $10.5 million versus the $12 million, but yes.

Yes, right.

Okay. Moving on, my last question is, you mentioned some facility right-sizing opportunities. I guess, what you mentioned in the past, I think it was Hartford – I think you taught that out it was year-and-a-half or so ago, and not the one you are still carrying some lease expense on, but will expiring this year. Is that correct?

That is correct. We have some dorms in the Hartford area that will be expiring, I believe around September of this year. And we basically carry a negative million bucks a year on those dorms. So that will definitely be going away, but we also see some other opportunities as well for lease savings.

Okay. The Hartford number presumably has been your guidance, right, on the way?

It I, but as Scott mentioned, and so, we only get the benefit for three months with it expiring at the end of September.

Okay. Great. And then the other lease opportunities, are they in your guidance as well, or is that potential additional upsides?

That could be, there is couple of we are working on now. So that could be a potential upside.

Okay. Great. That’s my questions. Thank you.

Yes, great. Thanks, Justyn.

Thanks, Justyn.

Thank you. And I am showing no further questions at this time and I would like to turn the conference back over to Scott Shaw for any closing remarks.

Thank you, all for joining us this morning. 2018 truly represented a strong year for Lincoln. We improved our retention rate, our placement rate. We achieved five quarters of growth in both segments. We entered 2019 with over 750 more students. We brought all of our campuses under one accreditor and maintained our strong regulatory record. And finally, we are positioned to become profitable in 2019. And we achieved all this while continually finding ways for our students to achieve real world skills that will launch them into rewarding careers. We have students machining parts for NASA and the International Space Station and for Indy Race Cars. Four of the Top-10 diesel students at a recent national truck technician competition were Lincoln Tech students. Our nursing students have the opportunity to learn in leading hospitals and clinics and have even helped to save lives while learning. For over 70 years, Lincoln Tech has been a leader in career technical education and we will never rest on our laurels, but rather continually seek ways to unlock our full potential as we help our students put their potential to work. Thank you all again and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.