Hello, and welcome to Universal Technical Institute’s Third 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 August 16, 2016 by dialing 412-317-0088 or 877-344-7529 and entering pass code 10090455. At this time, I would like to turn the conference 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 third quarter and then open the line for 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 21E of the Securities and Exchange Act of 1934 and Section 27A of the amended Securities Act of 1933. I will refer you to today’s news release for UTI’s 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 will make reference to EBITDA, so 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 would like to turn the call over to Kim McWaters, our Chairman and CEO.

Thank you, John. Good afternoon, everyone and thank you for joining our call. In a moment, Eugene is going to walk through our quarterly results that were released earlier this afternoon. In light of those results, I would like to provide a few comments regarding the macro environment, as well as how it has shaped our outlook and help define our plan for the future. Then I’ll talk about specific events in the quarter that I believe are key drivers and enablers for our future. As you all are likely aware, the macro environment remains extremely challenging for these three reasons. First, the very long and slow economic recovery with continued strength in the labor markets makes it challenging for us to get prospective students interested in pursuing an education over a job, a job that they can get now even if it is a low or no skilled job with low pay. Second, the continuous negative news cycle against for-profit schools makes it extremely difficult to convince prospective students and their families as well as key influencers that there are in fact good for-profit schools that offer students a viable alternative to the traditional college pass and that will prepare them for good careers. And last, the lingering impact of the recession combined with a barrage of negative news has created hypersensitivity to price and a growing uncertainty about the real value proposition of education. Our third quarter results demonstrate the impact of these macro pressures on our business as reflected in lower student interest measured by the number of inquiries we generate and the lower conversion rates from inquiries to new student starts. We believe that we can change the course of our business by overcoming these headwinds and that continues to be our primary focus. There are…

Thanks, Kim. We ended the quarter with an operating loss of $5.5 million, compared to $4 million in the same quarter last year. During the first nine months of 2016, our operating loss was $13.4 million, compared to operating income of $4 million in the first nine months of 2015. Year-to-date, operating income was negatively impacted by initial operating loss for our Long Beach campus of $2.1 million. But for the third quarter, our Long Beach campus broke-even and it should be accretive to earnings going forward. We begin the quarter with approximately 1,200 fewer students than we had the same time last year. And with the decline in our show rate of 290 basis points, starts decreased by 300 students this quarter, compared to prior year. 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%, compared to last year’s third quarter. The lower student populations partially offset by higher average revenue per student led the revenues of $88.3 million in the quarter representing a decrease of about 3% from last year. Average revenue per student was up from $7,000 to $7,400. And tuition excluded $4.2 million related to our proprietary loan program, compared to $5.1 million in the third quarter of 2015. Just as a reminder, we’ve recognized revenue from this program only when we actually receive payment. From the first nine months of 2016 revenues were approximately $260 million, down about 4% compared to $272 million for the same period last year. During that time period, tuition excluded $14.5 million related to our loan program, compared to $16.5 million for the first nine months of 2015. Advertising expense for the quarter was $8.7 million, which is a decrease of approximately $3.4 million,…

Thank you. We will now begin the question-and-answer session [Operator Instructions]. And our first question today comes from Barry Lucas of Gabelli & Company.

First in line. Thanks very much and good afternoon. Couple of quick ones. You touched on the change in compensation, Kim. And I’m just wondering about what type of Safe Harbor provisions you might have received either got or given all the same note of variety but controversy about incentive payments for recruiters.

Thanks, Barry. This is Eugene, I’ll answer that. Just to be clear, there are no Safe Harbors. The Safe Harbors were eliminated by the Department’s negotiated rule making several years ago, but they didn’t come out and clarify their language that incentive compensation can be based upon success in graduates. So we have obviously as we put our program in place, spend a lot of time and effort to make sure it is compliant and we believe that it fully is compliant, not only compliant with the law but with the spirit of what the Department wants in terms of compensating people, our mission’s people on finding quality applicants that will succeed in school and succeed in graduating and getting good jobs and benefiting our industry customers.

Great. Thanks, Eugene. Maybe you could talk about the complimentary verticals if you will that where you could introduce courses to existing campuses relatively quickly and get capacity utilization up?

Sure. We have two programs that we’ve talked about that are new programs to UTI, specifically welding and CNC machining. Both of those have – are ready to go from our standpoint. The curriculums are ready. They have been approved by the States and they’ve been approved by the creditors. We are awaiting final approval from the Department of Education which knock on wood, we will receive pretty soon. Once that is received, we will move to actually open up the enrollment process for those and we expect to teach both of those at our initial campus hopefully in the first quarter – the early first quarter of 2017. And then assuming that those go according to plan, we would then roll them out to some of the additional campuses. I don’t want to leave the impression that we will roll them out to all campuses, but we certainly intend to teach them beyond the single campus where they will each be starting.

Okay. Thank you. Last one for me is you’ve sort of modified the investment program for the balance of the year, but you’ve also talked about smaller campuses, metro areas which support the smaller box. How are you thinking about cap spend and number of campuses you’d like to or think you could open either in fiscal 2017 or 2018 or however you want to describe that?

Well, what I could do and what I’d like to do are two different things. We’d like to wave a wand and have at least three or four more campuses that are reasonably in line with the size of the Dallas campus and the Long Beach campus. We have geographies, and in some cases specific sites identified for those locations, but I think in reality from a de novo standpoint, and Kim mentioned that there’s always the opportunity to be opportunistic and look for properties that are available from an acquisition standpoint. But assuming that those don’t materialize from a de novo standpoint, I think we will clearly identify and announce in the later part of 2016, openings for 2017 certainly one campus potentially, a second campus; and as we spoke about with our investment from our friends at Coliseum, I think there is a great deal of belief in the Long Beach and Dallas models. And clearly there’s a desire to get the curriculum closer to our potential students were we already are advertising. We already have goods on the ground to try to enroll students. And to the extent that we can put campuses in high density areas where we can draw it very well either on existing students and/or from some of our competitors, that’s a model that has worked very well for us in the past, and that we intend to pursue aggressively in 2017.

Great. Thanks very much for that.

Thank you, Barry.

[Operator Instructions] And with no other further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Kim McWaters for any closing remarks.

Thank you, Laura, and thank you Barry for your questions. We appreciate everyone tuning into our quarterly results and we look forward to sharing our next quarter and year-end result at the end of November. And at that point in time, as Eugene mentioned, we will provide greater clarity around our business plans for the future. Thank you and have a great evening.

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