Hello and welcome to Universal Technical Institute's Fourth Quarter 2015 Conference Call. [Operator Instructions] At this time all participants are in a listen-only-mode and after today's presentation we'll open the lines for questions. As a reminder, today's conference call is being recorded. A replay of the call will be available for 60 days at www.uti.edu or through December 10, 2015 by dialing 412-317-0088 or 877-344-7529 and entering passcode 10076-058. At this time, I would like to turn the conference call over to Mr. John Jenson, Vice President and Corporate Controller of Universal Technical Institute. Sir, please go ahead.

Hello and thank you for joining us. With me today are Kim McWaters, Chairman and CEO, and Eugene Putnam, President and CFO. During today's call, we will review the results of our fourth-quarter and fiscal year 2015, then we'll take your questions. Before we begin, we must remind everyone that except for historical information, today's call may contain forward-looking statements as defined by Section 21-E of the Securities Exchange Act of 1934 and Section 27-A of the Amended Securities Act of 1933. I'll refer you to today's news release for UTIs comments on that topic. The Safe Harbor statement in the release also applies to everything discussed during this conference call, including initial comments by management, as well as answers to your questions. During today's call, we'll make reference to adjusted EBITDA, which is a non-GAAP measure representing net income, exclusive of interest, income taxes, depreciation and amortization and goodwill impairment. The schedule provided in the earnings release reconciles adjusted EBITDA to the nearest corresponding GAAP measure, net income, or loss. Now I'd like to turn the call over to Kim McWaters, our Chairman and Chief Executive Officer. Kim?

Thank you, John. Hello, everyone, and thanks for joining us on the call today. During the call, we will review our fourth quarter and 2015 results. We will discuss the strategies that worked this year and gave us confidence about our future. And we will also talk about some of the lessons learned where we did not achieve desired results, and more importantly, what we're doing about it. Overall, we are pleased with the execution and implementation of a number of important strategies intended to improve the business. But we were disappointed that we did not achieve new student growth in the quarter, despite our laser focus and tremendous effort. While we believe we will see new student start growth in 2016, the shortfall in the quarter makes next year a bit more challenging financially. Thus, the dilemma we face going into 2016 was do we invest in our future, despite short-term earnings pressure or do we make deeper cuts to improve short-term operating results. We will answer that question in a moment. But first, let me comment on our financial results for the quarter and year. Our financial results certainly reflect the consequences of a declining student enrollment population. It also reflects the investment in our new Long Beach campus. Additionally, it includes the goodwill write-off of $12.4 million for our Phoenix motorcycle business. While the goodwill charge is a non-cash GAAP-required accounting treatment, it certainly impacted our reported EPS for the quarter and the year. Eugene will provide more details on this in just a moment. But first, I would like to spend a few minutes on our over-arching business strategy and annual operating plan for the year. Obviously, our goal this past year was to turn our business around by rebuilding our student enrollment. We focused on…

Thanks, Kim. We ended the quarter with an operating loss of $13.2 million, as compared to operating income of $3.9 million in the same quarter last year. As Kim mentioned, the loss was entirely attributable to two items, the initial operating loss for our Long Beach campus of $2.7 million and a goodwill impairment charge of $12.4 million. Excluding these two items, operating income was $1.8 million. We began the quarter with approximately 1,100 fewer students than we had at the same time last year. And despite a slight improvement in our show rate of 70 basis points, starts decreased by about 400 students this quarter as compared to the prior year. The combination of a lower beginning student population and a lower new student starts led to an overall decline in average student population of approximately 8% compared to last year's fourth quarter. The lower student populations, partially offset by higher average revenue per student, led to revenues of $90.7 million in the quarter, which we down 4.9% from last year. Average revenue per student was up from $6,800 to $7,100 per student, and tuition excluded, $4.6 million related to our loan program, compared to $4.8 million in the fourth quarter of 2014. And just as a reminder, we recognize revenue from this program only when payments are received. We ended the fiscal year with an operating loss of $9.2 million. Again, this loss included pre-opening costs and initial operating losses for the Long Beach campus of $4.4 million, and the goodwill impairment charge of $12.4 million. After these two items, operating income for the full year was $7.6 million, which was actually up from $6.3 million last year. For the year ended September 30th, revenues were approximately $363 million, down about 4.2% from $378 million for the same…

Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions] And our first question comes from Corey Greendale from First Analysis. Please go ahead with your question.

Hey, good afternoon.

Good afternoon, Corey.

So, forgive me, my questions are kind of on a bunch of scattered topics. But first question is, can you just address the 2016 guidance, the differential between the enrollment guidance and the revenue it sort of implies that you could see as much as 6 or 7 points positive from revenue per student. Can you just address what would account for that?

Well, I - that's a little high, but I do think we will see revenue increases in terms of revenue per student, Corey. It will be driven by a few things. One is normal tuition increases that tend to run 2.5% to 3%. And those have been - as you will recall, those get booked over time, and as students starts, they start at higher rates and that accrues to the revenue per student. A second impact is, as military students kind of flatten out in terms of - they've been growing over time, as they flatten out as the percentage of our student mix, that discount that they get, you don't get as much of it. So, the flattening of that adds to the revenue per student. And the third major bucket of that is in terms of the mix of students and the length of time they stay in school, the electives that they are taking, the manufacturer specific training that they are taking, as well as some of our CTG revenue. So those are the three buckets that incorporate higher revenue per student, which, as you correctly said, will help to offset some of that start decline and population decline.

Okay. So, it sounds like it actually could be a maybe 4% or 5% revenue per student increase, is that right?

Yes, I mean, I think if you look at the average students and some of the guidance that we gave there, and back in with a roughly 2% decline in revenue, that's not an unreasonable mix that you are getting to.

Okay. And then, Kim, I apologize, I didn't fully understand your commentary around the changes in the territories. And this may just be repetitive and my bad for not understanding. Could you just explain that in a little bit more detail the - what had changed, what you are changing now in reaction, and what the impact was?

Yes. So, two things, one is we consolidated territories last year, believing that we could reach the high school student with more cost-efficient marketing outreach. And what we learned is that we were not able to do so without having a presence in the territories. So, I believe last year we cut out approximately 13 field territories, and we intend to fill about seven of those. They are filled at this point in time. In addition, we had a number of, I'd say, large territories within close proximity to our campuses that were territories that had been held by a seasoned, tenured rep, and very good reps, who encountered illnesses that resulted in retirement. And while we did not intend on losing some of the key performers due to personal circumstances, our strategy was the increased marketing and expanded coverage by adjacent territories. Even though we prioritized the high schools, and reps did the best that they could to cover, this business is built on relationships. And if you cannot spend the time in those territories, especially in this environment, we know that we lost ground. And so, the changes in those territories is that we've shrunk some of the territories, and increased coverage so that we do not find ourselves in a situation like we faced last year with an inability to fully cover a large geographic territory of significant importance.

Okay. That helps a lot. Can you just give some sense of the order of magnitude, if you look at the decline in starts in the high school population, and how that compares to what you saw in the adult population?

Yes, I mean, it's still a more challenging environment for our adult students. If you look at -- let's see what our percentage was. The majority of our starts for our field representatives in the high school were down - they were down a couple hundred students on a base of about a little over 4,000 last year this time. I'm not fast enough to do the percentages in my head.

Corey, we can get that offline with you.

That's fine.

That does account for the vast majority of that quarter. But campus and our adult students, they were both down about the 5%. It was evenly distributed, it's just high school has a larger percentage there, in that quarter.

Got it. A couple real quick ones. Eugene, I apologize, I missed, you gave the advertising dollars, I think, in the quarter. Could you just repeat what that was?

Yes, I believe it was $11.9 million in the quarter, let me just make sure that was accurate.

It's $10.8 million.

$10.8 million, I'm sorry.

No problem.

11.9%.

Yes, got it. What tax rate should we use for next year, excluding the deferred tax impact?

Excluding the deferred tax impact, I would use something in the 40% range.

In the 40% range, okay. Great. Last quick one is, if you look at the comps, you have your easiest comps coming up in Q1. Do you think that you could see starts positive in Q1, or do you think it would be lot later in the year?

I don't think we will see starts positive in Q1. Primarily one of the main reasons is we have one less start date this Q1 than last year. But I don't expect to see positive starts in Q1, I expect positive starts later in the year.

Okay. Thank you for taking my questions.

You're welcome.

[Operator Instructions] Our next question comes from Jeff Silber from BMO Capital. Please go ahead with your question.

Thank you so much. Just a couple quick follow-up questions to Corey. You guys had talked about some of the changes you are making in the territory. I just want to understand, that's mostly focused just on high school students, so we really won't see much of an impact until next fall. Is that correct?

That is correct. We should start to see applications grow as a result, and the starts certainly are in the latter part of the year.

Okay. Great. Eugene, you had mentioned one less start date in the first quarter in fiscal '16 relative to fiscal '15. Any other calendar quirks like that for the rest of year?

I don't believe so.

Okay, great. And then just a numbers question. Is it possible to let us know what EPS would have been in the quarter, excluding the goodwill impairment?

Excluding just the goodwill impairment?

Were there any other one-time charges I've missed? I'm sorry.

The other thing that we backed out was Long Beach, because that was clearly a drag. There's a table in the press release that I think will do that, but in the third paragraph of the press release, the loss for the quarter was $0.32.

I've got it. I see it now. I'm sorry about that. I missed it in the press release, I appreciate it. Thank you so much.

No problem.

[Operator Instructions] At this time, I'm showing no additional questions. I'd like to turn the conference call back over to Ms. Kim McWaters for any closing remarks.

Thank you, Jeff and Corey, for your questions. We do appreciate all of your time and interest in Universal Technical Institute, and we look forward to updating you on our first quarter earnings call which is scheduled for February 4, 2016. Have a great day.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.