Hello and welcome to Universal Technical Institute's First Quarter 2016 Conference Call. [Operator Instructions] At this time, all participants are in a listen-only-mode and after today's presentation we'll open up 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 February 15, 2016 by dialing 412-317-0088 or 877-344-7529 and entering the passcode 10079-751. 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. Please go ahead.

Hello and thanks 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 first quarter and 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. The schedule provided in the earnings release reconciles EBITDA to the nearest corresponding GAAP measure, net income, or loss. And 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. In a moment, Eugene will walk you through the details of our first quarter results. But first, I’d like to provide a bit of context for the quarter. As we mentioned on our last earnings call, we operate in a very difficult environment with continued economic and regulatory headwinds. This is clearly apparent in our enrolment trends and business results for the past several years as external forces have proved strong than our internal forces. While we know that 2016 financial results will reflect the cumulative effect of these negative forces from prior years, it also reflects our belief in our future and the essential investments required to create it. For the quarter, we have an operating loss of $2.2 million, driven by lower student populations at our campuses, as well as the opening of our new Long Beach campus, which accounted for $1.4 million of the loss. Clearly, our financial results were not what any of us would like, but they were in line with our expectations given our commitment to invest in the business and grow our student population despite depressed student enrolment and revenues at this time. Against that backdrop, we are focused on implementing the strategies we believe can return us to growth, while managing the business as cost efficiently as possible without negative consequence to our educational quality, our student outcomes, and new student growth. To that end, we continue to partner and align our educational programs with leading OEMs to strengthen the overall value proposition for our students. Last quarter, we renewed agreements with four of those OEMs, including BMW, Ford, Porsche, and Volvo. We are so pleased that many more of our industry partners and employers are helping perspective…

Thanks Kim. We ended the quarter with an operating loss of $2.2 million as compared to operating income $5.6 million in last year. First quarter operating income was negatively impacted by initial operating losses for our Long Beach campus of $1.4 million. We began the quarter with approximately 1,300 fewer students than we have the same time last year. With a slight decline in our show rate of 120 basis points, starts decreased by 100 students this quarter as compared to the prior year, but were higher than our plan for the quarter. The combination of the lower beginning student population and lower new student starts led to an overall decline in average student population of approximately 8% versus last year. The lower student population partially offset by higher average revenue per student led to revenues of $89.9 million for the quarter, which were down 6.2% from last year. The average revenue per student was up from 6,600 to 6,800. Tuition excluded $5.7 million relating to our proprietary loan program during each period. As a reminder, we recognize revenue for this program when we receive payment. Advertising expense was $10.4 million for the quarter, up slightly from $10.1 million last year. And as a percentage of revenue, advertising expense was 11.6% for this quarter versus 10.6% last year. We generated $2.9 million in EBITDA in Q1 compared to $11.1 million last year. Our first quarter net loss was $1.7 million or $0.07 per diluted share compared to net income or $3.1 million or $0.12 per diluted share last year. The income tax benefit for the quarter was $900,000 or roughly 36% of pretax loss compared to a provision of 2.2% or 42% of pretax income last year. The impact of non-cash adjustments to the deferred tax asset related to stock…

We will now begin the question-and-answer session [Operator Instructions]. The first question comes from Peter Appert of Piper Jaffray. Please go ahead.

So I think Eugene last quarter you had talked about expectation of minimal levels of EBITDA this year in terms of your guidance. Is it still how you are thinking?

I actually figure I maybe I ran through it too quickly, but I think I did say and it's in the press release. Yes, we still expect minimal levels of EBITDA for the full year.

So in terms of the sequential change in terms of your expectations of start cost, I think you’re talking about upload single digit last quarter, now we’re talking about down low to mid single digits. Anything you’d call out in particular in terms of changed dynamics that might account for deterioration in the outlook?

I think since we spoke last quarter, we’ve seen continued pressure in our military channel. That impacts us in a couple ways. Obviously it takes longer for military students now to start school. Any time you have a longer period between the signing of an enrolment agreement and students starting to school, that creates pressure on show rates, because we know live events happen and the commitment is not as strong as it is when there is a shorter period of time. And I think the other factor is as our military enrolments stabilize in terms of the percentage when they have been growing in the past what that has caused is they have been the greatest, the highest, rate of show rate and as that mix changes a little bit, that put some pressure on show rates. So, I think since 60-90 days ago, we’ve seen two changes that have led to the softening of the guidance; one is, some pressure on that show rate, specifically within the military channel; and two, the enrolments as Kim spoke to, while doing better than last year have not led it to the level that we wanted in the first quarter of this year. Now there is still opportunity for us to recover some of that. But as we look at our crystal ball right now, we haven’t seen the building and the pipeline to the extent that we had hoped to 90 days ago.

And then I know, I should know this, but I’ve forgotten. In terms of the access to military basis, what’s changed there?

Well, what changed, there was some guidance that came out relative to one of our, not direct competitors, but was just say the largest four profit institution in the country and that caused a tightening through executive order and Department of Defense regulations and interpretations of when and how you can get on military basis. Now, we have worked diligently to overcome some of that and we’ve had success with some of that. But it is still on a year-over-year and even quarter-on-quarter basis a struggle to get our ability to explain the potential careers and the value of those careers to potential students that are exiting the military. It's a shame but that’s the way the regulations are right now.

So you’re interpreting it, I’d say, that it's a blanket ban as opposed to something specific to UTI?

It is clearly not something specific to UTI, back then as I said, I think we are through our good outcomes having some success in getting some access, but it's not as good as it was.

And then last thing, in terms of the plans beyond Long Beach, what’s the time frame in terms of your thought process on another new location?

I think the earliest that would be, would be the summer, in terms of an opening would be the summer of 2017. Obviously, depending upon what state you’re going through and what the regulatory process is for approval of that, some states take longer than others. But from a whiteboard planning purposes, I’d say summer, late summer or 2017 with some type of announcement from us given guidance to that in summer 2016.

And should we assume that you would need to see some better stabilization in terms of the underlying fundamentals of the existing business before you would go forward with new locations?

Not necessarily. I think if we continue to see what we’re seeing with Long Beach, which is our most recent one, that would prove out the hypothesis that in getting education closer to the students and closer to employer demand continues to work, we continue to believe that that’s the case though, while I would certainly like to see the stabilization and growth in the legacy campuses. I wouldn’t necessarily say that that’s an absolute requirement prior to moving forward.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Kim McWaters, Chairman and CEO, for any closing remarks.

Thank you. Thank you, Peter for your questions and to all of those listening. We appreciate your time and interest in the Universal Technical Institute and we look forward to our second quarter earnings call, which is currently scheduled for April 28th, and we will update you then. For now, have a great day. Thanks.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.