Good afternoon and welcome to the Career Education Second Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. And I would now like to turn the conference over to Sam Gibbons. Please go ahead.

Thank you, Amy [ph]. Good afternoon everyone and thank you for joining us. With me on the call today is Todd Nelson, President and Chief Executive Officer; A.J. Cederoth, Chief Financial Officer; and Ashish Ghia, Vice President of Finance. This conference call is being webcast live within the Investor Relations at careered.com. A webcast replay will also be available on our site and you can always contact the Alpha IR Group for investor relations support. Let me remind you that this afternoon's earnings release and remarks made today include forward-looking statements as defined in Section 21E of the Securities and Exchange Act. These statements are based on assumptions made by an information currently available to Career Education and involve risks and uncertainties that could cause actual future results, performance and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include but are not limited to those factors identified in Career Education's annual report on Form 10-K for the year ended December 31, 2015, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the Company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or change circumstances, or for any other reason. In addition, today's remarks refer to non-GAAP financial measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The earnings release and slide presentation which accompany today's call and which contain financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures are available within the Investor Relations section at careered.com. So with that, I'd like to turn the call over to Todd Nelson. Todd?

Thank you, Sam. Good afternoon and thanks to everyone who's joining us on the call today. During the second quarter we continued to focus on and invest in our university institutions with the goal of further enhancing student retention and outcomes, and are pleased to report quarterly results that were ahead of our internal estimates. In fact, we are encouraged by the progress in our operating performance at AIU and CTU, while maintaining our commitment to students at our teach-out campuses. Net income for the quarter was $11.8 million, as compared to a net loss of $20.7 million in the prior-year quarter. Consolidated adjusted EBITDA, which we believe to be a useful indicator performance during the wind-down of our teach-outs, was $25.6 million during the quarter, compared to a negative $4.3 million in the second quarter last year. This performance was primarily driven by an increased revenue at our University Group on an aggregate basis, as well as continued progress on our teach-out plans. University Group revenue increased by 3% for the quarter, primarily driven by improved student retention with CTU and new enrollment growth at AIU. And operating income increased by 25% to $36.8 million, compared to $29.4 million in the prior-year quarter. Our second quarter also was marked with several ongoing initiatives and investments with the goal of improving student experiences both before and after they're enrolled in one of our programs. First, we have continued to enhance our mobile platform with added functionality and have further leveraged an integrated technologies like intellipath into our course offerings. Second, we've also leveraged technology to optimize our student intake processes aimed at improving overall onboarding experiences for students as they begin their academic sessions. Third, we've increased faculty interaction with our students, refocused our orientation processes for new students, and…

Thank you, Todd. As we review financial performance, I want to start with the results from the consolidated company and then review the segment results. On Slide 4 we've summarized the consolidated results for Q2 and year to date and provided a comparison to the same periods in the previous year. For the quarter, revenue was $182.6 million, which was down 15.8% year over year. And for year to date, revenue was $381.5 million, a 14% decline year over year, with the decline in revenue attributed primarily to the teach-out strategy at our culinary arts and transitional group segments. As you will see on the next slide, the University Group posted a 3% revenue increase for the quarter and a 3.9% increase year to date as compared to prior year. Operating income for the quarter and year to date was $17.3 million and $24.3 million, respectively, versus prior-year second quarter and year-to-date operating losses of $19.9 million and $44.3 million. The improvement in performance can be primarily attributed to lower operating cost in the current year, including the reduction of admissions and marketing costs associated with our teach-outs, as well as the non-recurrence of a $12.8 million restructuring charge that was recorded during the second quarter of 2015. We expect our operating cost for the second half of the year to trend lower as compared to the first half of 2016. However, the year-over-year differences will begin to normalize in the second half as the impact of our strategic initiatives, which began last year, annualized, and the initial economic benefits associated with announcing the teach-outs start to diminish notably, especially within our culinary art campuses. Consolidated adjusted EBITDA was $25.6 million and $38.8 million for the current quarter and year to date, respectively, as compared to negative consolidated adjusted EBITDA…

Thank you, A.J. In closing, when I joined the Company approximately a year ago, we had just laid out a strategy plan to transition our Company to a strong university platform with the potential to make a positive difference in students' lives through education. And today I'm encouraged by the progress that we have made thus far. First, I want to point out, our financial position and operating performance has improved over the past year. Number two, we have key leadership positions filled with some of the best talent in the industry. Three, our employees are motivated and focused with a clear vision to serve and educate our students. Four, our transitional and culinary arts campuses are well underway with their teach-out plans performing better than our internal estimates. Five, the success we are achieving has enabled us to invest more time, intellectual capital and dollars in various student-serving areas of our university platforms. And lastly, our university platforms continue to take positive steps to improve overall student experiences that will positively impact student retention and outcomes. We made substantial progress for each of these items while continuing to focus and serve the needs of our students with the goal of providing them with a quality education. There's still a lot of work to be done, however, I want to thank all of our employees, students and shareholders who have supported us as we continue to execute on our strategic initiatives. Again thank you for joining us this evening. And with that, I'll now open up the call for any analyst questions.

[Operator Instructions] Our first question comes from Peter Appert at Piper Jaffray.

Thanks. Good afternoon. So, Todd, I'm wondering what your expectations are, if you can be more specific rather in terms of your expectations for the second half EBITDA. Do you think the numbers can stay positive in the third and fourth quarter?

Well, as we said, we haven't really given a lot of direction quarter by -- excuse me, a lot of guidance on a quarter-by-quarter basis, Peter, but what we have tried to do is stay conservative and say that we believe that it will be a year-over-year increase over 2015. And the previous guidance was flat. And so again we feel positive about saying that, but we really haven't given any guidance beyond that.

Okay. Fair enough. With regard to the starts, the numbers at CTU, I'm noticing, a little bit weaker quarter to quarter, AIU obviously better. Anything you'd call out in terms of the trends at either school?

No, other than, again, what we've said in the past is we've really tried to focus this year more on total enrolment, because our feelings are that we -- our retention is not where it should have been, so we want to continue to focus on that this year. And we want to make sure that we have the most efficient onboarding process, and so we've really worked to try and improve that. And in that process it's one of those things that we think, from a positive point of view, that we continue to see strong inquiry flow, and our view of that is we're going to continue to focus on total enrolment, but with the potential that we'll start to see again new students at CTU turn flat to positive and that at AIU we, as we said in the past, we think that we're going to continue to see good things there as well.

Thank you. And then, Todd, there's been a lot of discussion in the industry about changes, various companies are changing their marketing approaches, marketing channels. Can you talk about what you guys are doing in that regard?

Well, I think, like we heard from several folks in our industry, all of us would like to increase the number of organic leads that we generate, and inquiries, and we're going to continue to focus on that as well. But we also believe it's important, as we do receive aggregator leads, that we work there to make sure that we are implementing, and with them working with policies, that make sure that it's done correctly and in a positive way. And that's been the majority of our dollars had been spent in those areas. And we feel like that we have a process that's allowing us to really focus on the higher-quality leads.

Okay. And then last thing, maybe for A.J., the -- how should we think about the trend in total operating cost over the next few quarters, maybe even going into 2017, if you could talk about that.

Sure, Peter. I think what you'll see is our costs will continue to improve. We put in place last year a deliberate strategy to eliminate costs throughout the organization while focusing on what we're delivering to the students and not impacting that. We still have opportunities there. But you'll -- overall cost within transitional will stay relatively flat, but you'll see a decline in revenue which is the impact there to the bottom line. And then there's still opportunities I think as we move forward within our corporate costs to improve some costs there.

I would assume that the total operating expense number for the second quarter, I shouldn't just, you know, assume that's a run rate number, right, because of the seasonality in the business.

That's correct.

Okay. I think I'm good. Thank you guys.

Thanks, Peter.

Because there are no further questions, this concludes the question-and-answer session and the conference. Thank you for attending today's presentation. You may now disconnect.