John Jenson - Vice President and Corporate Controller Kimberly J. McWaters - Chairman and Chief Executive Officer Eugene S. Putnam - President, Chief Financial Officer and Principal Accounting Officer

Good afternoon, and welcome to Universal Technical Institute's First Quarter 2015 Conference Call. [Operator Instructions] 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, 2015, by dialing (412) 317-0088 or (877) 344-7529 and entering the passcode 10059712. At this time, I'd 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'll 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 21E of the Securities and Exchange Act of 1934 and Section 27A of the amended Securities Act of 1933. I'll 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'll make reference to 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. And now, I'd like to turn the call over to Kim McWaters, our Chairman and Chief Executive. Kim? Kimberly J. McWaters: Thank you, John. Good afternoon, and thank you for joining our call today. We're very pleased to report a good quarter with significantly improved financial results, driven by operating efficiencies and cost management. We are encouraged by continued growth in the demand for our graduates, reflected by strong placement rates and higher starting wages. We're proud to announce that we've launched our Diesel Technology and blended learning program in Orlando and are ready to launch a new welding elective in Sacramento. And last, that we're making good progress on our next campus in Long Beach. Our focus remains squarely centered on rebuilding student enrollments, specifically on how we can better articulate our value proposition by diminishing perceived risk and increasing the perceived value of pursuing a UTI education. To us, the benefit of the UTI education is obvious. A career in the transportation industry that is significantly better than the kinds of jobs available to students without an education. But it is not that simple for a generation of students, who are understandably adverse to risk and looking for some guarantees in life. We certainly cannot guarantee employment, but employers growing engagement in our student recruitment efforts and their willingness to help more students pay for a UTI education, will certainly enhance our value proposition and positively impact student enrollment in the future. Up to this point, employers have focused their marketing and recruitment efforts on our graduates. But because of the demand and competition for our graduates is now, so great, and there is simply not a sufficient supply of graduates to meet their needs, employers are increasingly recognizing the need to invest in marketing to prospective students. This is how employer demand will drive student demand, giving graduates access to great jobs, while helping them cover the cost of tuition. I will discuss this more when we talk about our marketing and admissions efforts, later in the call. But first, let's take a minute for Eugene to review the quarter's results. Eugene S. Putnam: Thanks, Kim. Our continued efforts to control costs resulted in an operating income of $5.6 million for the quarter. That's a significant improvement compared to operating income of $3.1 million in the same period last year. We began the quarter with approximately 800 fewer students that we had at this time in 2014. Our show rate was up, 830 basis points, but as expected new student starts were down 13.6% due to a lower volume of new student schedule to start, leading to a decline in average student population of approximately 5.8%. The lower student populations, offset by higher average revenue per student, led to revenues of $95.7 million in the quarter, which were down 1.4% from last year. Average revenue per student was up from $6,300 to $6,600 per student. Tuition excluded $5.7 million related to our loan program compared to $6.3 million in the first quarter of 2014. And just as a reminder, we recognize that revenue for this program when we actually receive payments. Managing expenses continues to be a very important focus, while we're working to increase our student populations. During the past year, we implemented key process improvements and technology solutions to operate more efficiently and effectively in the current business environment. We have and we will continue to manage our variable costs to appropriately align with our student populations. During the quarter, we implemented the second phase of a restructuring completed in October. Combined with the first phase, which was completed in September, approximately 100 employees were affected. We incurred severance costs in the first quarter of approximately $1.2 million pretax, related to this restructuring. Despite an increase in severance costs of $900,000, comp and related costs were down $1.5 million in the first quarter compared to last year. And we anticipate the restructuring will result in savings of approximately $9.4 million during 2015. Advertising expense was $10.1 million for the quarter, that's up from $8.7 million last year. And as a percentage of revenue, advertising expense was 10.6% compared to 9% for the same period last year. Bad debt expense as a percentage of revenue was 1% in the first quarter compared to 1.4% last year. And finally, we generated $11.1 million in EBITDA in Q1, that's up from $8.9 million last year. Our first quarter net income of $3.1 million or $0.12 per diluted share compares favorably to net income of $1.7 million or $0.07 per diluted share in the first quarter last year. And the pretax severance costs, referred to earlier, negatively impacted earnings per share by approximately $0.03 this quarter. The provision for income taxes for the quarter was $2.2 million or 42% of pretax income, compared to $1.6 million or 48% last year. While the impact this quarter was minimal, I'll remind you that in future periods we likely will experience variability in our income tax expense and rate depending on the price of our common stock and the timing of expiration, exercise, investing of past stock-based compensation awards. This variability could result in income tax rates that are substantially different from the federal statutory and/or our historical tax rates due to these noncash charges. If our stock price remains relatively consistent with the last quarter's average price, the impact of any adjustments to the deferred tax asset and related income tax expense for the full year is expected to be in the range of $700,000 to $1.2 million. Finally, looking at our balance sheet, we had cash, cash equivalents and investments of roughly $91 million at the end of the first quarter compared to $96 million last year. During the first quarter, we generated cash from operations of $2 million, compared with $9.5 million last year. And we continue to have no long-term debt on our balance sheet. During this quarter, we invested $3.7 million in fixed assets, which was up from $2.9 million last year, as we purchased new and replacement training equipment necessary for our ongoing operations as well as expanding our offerings by adding our diesel curriculum to our Orlando campus. Finally, we returned $2.5 million to shareholders during the quarter through dividend payments. With that, I'll turn it over to Kim for some details on our marketing and admissions efforts. Kimberly J. McWaters: Thanks, Eugene. Let's start first with the key operating metrics for marketing and admissions. Overall, the trends improved. During the quarter inquiries were down 12% year-over-year, but this is an improvement from the nearly 20% declines, we've seen over the past several quarters. Applications were down 14% year-over-year, slightly lagging the improvement in inquiry generation, but better than the 20-plus percent declines we saw in the last 2 quarters of 2014. We're encouraged with improving trends, and we're excited that service technician jobs are more plentiful than ever and starting wages continue to increase. So why have we not seen an increase in student enrollment? The short answer is we do believe that the demand on the back end for our graduates will eventually drive the front-end demand from prospective students. Let me explain why I believe it hasn't happened yet, and why we believe it will happen. First and foremost, we are a countercyclical business. During a period of economic recovery, when more jobs become available and is very typical for prospective students to choose work over education. That has been happening for several years, but we expect that to moderate as new job growth flows. Further, we expect that many who accepted low-skill jobs out of desperation over the past 5 years will eventually, become disenchanted with their decision and begin to explore options for a better future, including an education that provides a path to a better career, where they can make a good living doing something they love. As consumer confidence builds, family incomes continue to rise and household equity improves, prospective students will be more willing and able to invest in their education. To take advantage of those trends, we must help both students and their key influencers understand there is a great return on their educational investment. That when they invest in their UTI education today, our employers will provide them with a career tomorrow, a job that they could not get without going to school. We have long thought the issue of affordability has been the greatest barrier to a UTI education, and we have implemented a number of solutions to address it, such as scholarships, relocation, housing grants, shorter less-expensive programs and proprietary loans. Yet, we really haven't seen the growth we hoped for as a result, and in fact we have seen some diminishing returns on certain scholarship programs. Now this doesn't mean that affordability isn't an issue, it is. But we believe what we are hearing from students is that the issue with going back to school is less about simply being able to afford tuition and more about whether the benefits of an education is worth quitting their job, spending money and taking out student loans. It is really a question of risk, reward for them. Due to the Great Recession of 2008, the perceived risk of financing and education increased dramatically and the perceived value of an education diminished significantly. As families learned the downside of debt, inability to pay bills, foreclosures on homes and had to sacrifice some quality of life to pay down credit cards, they became very leery of more debts, specifically student loans. At the same time, the perceived value of an education diminished. For profit schools were tarnished by the regulatory PRSL, while other headlines highlighted the number of college graduates, who were unable to get jobs or working as barista's at the local coffee shop. So when you think about it, no wonder students and their families have chosen the low risk, decent return alternative, a job -- any job instead of going to school. So it's very important that we engage these students and their families and demonstrate that there is a great return on a UTI education, while minimizing the perceived risk with financing their education. We've done research with our students and our prospects to determine what they need to consider an investment in education. What we found is that they're looking for guarantees and return for their educational investment, they want a job and a salary guarantee. They do not want to incur debt without any assurance of employment. Think about it. If you buy a house, you get a mortgage at the same time, the benefit and liability go together. No one requires you to take on a mortgage without knowing whether you will be successful in finding a house or not. If that were the case, we would expect many fewer mortgages to be incurred and home sales would diminish. Yet, when it comes to education, we ask students to take on debt without any assurance of employment. Although our placement rates are 88%, we cannot guarantee jobs or wages. In fact, regulations require that we explicitly state that we cannot guarantee jobs or salaries. As such, you'll find that disclaimer allover our advertising and promotional collateral. This disclaimer reinforces the students perceived risk of not getting a job. This is why it's so critical and why we are so excited that employers, who are basically ready to guarantee a job to those with the UTI education are working with us to help prospective students and their families understand the type of job opportunity that awaits them, their earning potential and the financial support available to help pay for their education. Working together with employers, we can address the risk-reward dilemma and solve the affordability question for them. Up until now, employers marketed their employment opportunities to our graduates. They now understand that if they want any chance of getting a graduate on the back end, they must be willing to help build the pipeline of future techs on the front end. We are excited with their outpouring of support and believe that when a student sees the opportunity to work with a specific employer in their hometown, once they graduate, and they know that they'll have support to help pay for their tuition once employed, we believe we will have come a long way toward delivering on the guarantee they see. As our new strategy marketing campaign and tools gain more traction and more and more employers equip our admissions reps with the tools to recruit future techs for their businesses, we expect to see the back end of the business drive the front end. Not only will this drive increased interest in the employer, it will drive increased interest in UTI, a sense of urgency for the student to get an education and then an incentive to do well in school and graduate, so that they can go to work for an employer who is willing to hire them and help them with their student loans. This will translate into more increased enrollments, graduates and technicians place. We believe the trends we saw in the first quarter are just the beginning of an increase in student interest levels. Google reported education queries up 3% year-over-year in the last quarter, after 1 year of no growth. And of particular interest to us was that automotive program queries were up 9%. Yes, the inquiry acquisition environment remains quite challenging, competitive and expensive, but we're gaining some traction in the number of initiatives. Despite unfavorable trends in TV viewership and overall ad impressions, we're pleased with the results of our new TV commercial and media strategy. We've invested in technology and strengthened our data analytics capability, which lets us target on media mix and ad spend to quality prospects. We have tested and are launching additional advertising and promotional materials, with messaging that resonates with prospective students at this point in the economic recovery cycle. We have improved our digital and mobile capability in response to student preference and emerging trends and are encouraged with what we're seeing from these changes. Our next challenge is to improve conversion rates from inquiry to application. The combination of the improvement in marketing efforts and the willingness and ability of employers to market directly to prospective students should help our admissions steam, help their students turn their interest into action. We believe we will see year-over-year growth in application and new student starts in the latter part of this year as these efforts gain traction, and we lap the anniversary of the increased registration fee in April. Finally, we are investing in initiatives targeted at key influencers, such as teachers, counselors and parents. We have specific materials and strategies to help parents understand the process. We have testimonials from parents speaking to the concerns they have, how they overcame? And how happy their son or daughter is now, working in a career they love. In addition, we've launched our Success marketing campaign in the high schools that highlights the success of our graduates. This campaign opens the eyes of counselors, teachers and administrators to the value of a technical education and the difference that UTI education has made not only for our students, but for their students. The campaign creates alignment with UTI and high school educators and counselors by highlighting our common goal, the success of students. Before I turn it over to Eugene, let me just say that we are impatient to return to growth, and are working very hard to accelerate it for our employers, our students and for you, our shareholders. With that, I'll turn it over to Eugene to provide an update on student outcomes, our new campus as well as our industry relationship. Eugene S. Putnam: Thanks, again, Kim. While we are continuing our efforts to manage the business efficiently and to reduce costs where appropriate, we believe our path to growth includes bringing our education to reach more students in markets. Construction is underway and on schedule for our new campus location in Long Beach, California, which is scheduled to open later this summer. As we have discussed, similar to our Dallas campus expansion, this additional Southern California campus will enable us to provide convenient access to prospective students, already being reached through our large national marketing and admissions footprint, in markets where there is already pent-up demand as well. Based upon our experience in Dallas, we believe this is one of the highest return investments that we can make. Additionally, we are teaching our new "state of the industry" blended learning curriculum at our campuses in Avondale, Dallas, Sacramento and as mentioned now, in Orlando as well. We completed our expansion in Orlando to include diesel and launched our new curriculum just last month. And with limited marketing and awareness just building in the market, the first 2 diesel programs are already at capacity. Finally, we continue to work with our industry partners to expand, renew and extend relationships. Our industry relationships continued to be a very important market differentiator for us and are becoming even more important in assisting students financially in the pursuit of their education. Turning to affordability for our students, we continue to offer scholarships, a proprietary loan program and are engaging our OEM partners to assist in sharing the UTI opportunity with potential students. Our industry partners, driven by the demand they're experiencing for new technicians, had become increasingly more willing to participate in assisting students with their education. Many offer a tuition reimbursement program that will help students payback their loans once they become employed and are working. And beyond tuition reimbursement, we're partnering with large employer groups who are interested in offering more financial assistance to our students and graduates to help offset education-related costs such as relocation, housing assistance, tool reimbursements et cetera. We believe these commitments will help close the gap between employer demand and student enrollments. Additionally, our loan program continues to help students who are well qualified to attend UTI, but have a gap in their financing after completing their financial-aid packaging process. This quarter, we extended approximately $7.2 million in loans under the program as compared to approximately $10.2 million in the same period last year. The average individual loan amount under this program, during 2015, has been about $4,400. And during the first quarter, we recorded approximately $1.1 million in revenue and interest from cash payments received, which was up nicely from $700,000 last year. In addition to offering this program, we continue to offer both merit-based and need-based scholarships as well as scholarships for certain groups of students, such as our military veterans. At the end of the quarter, approximately 36% of students in the school were benefiting from the UTI scholarship or discount. These discounts and scholarships reduced tuition revenue in the quarter by 3.4% compared to 3.1% last year. And most importantly, let me now turn to the continued success, we're seeing in graduate employment. In the first quarter, our overall consolidated graduated employment rate was higher by nearly 3 percentage points from last year. All of our programs experienced increases from last year's employment rate. And we also continue to see growth in overall starting wages for our graduates, reflecting the increased demand that we've been talking about. Of the first quarter graduates, 100% of the students in the motorcycle program and approximately 57% of students in auto diesel programs graduated with manufacturer-specific training. Typically these students that graduate with this training in automotive diesel find employment quicker, and have the potential to earn a higher starting wage as well as seeing their wages ramp-up more quickly. Additionally, our employers and industry partners benefit by hiring UTI graduates with higher levels of training and who are better equipped to go right to work. Lastly, before I discuss our guidance, for those of you that have not seen the 8-K that we filed earlier this week, we did announce the appointment of Deloitte & Touche as our new independent accounting firm. Finally, let me take a minute now to talk about our outlook for 2015. Although we had a very strong first quarter, our guidance for the full year ended September 30 remains relatively unchanged at this time, with the exception of capital expenditures. We expect new student starts as well as our average student population to be down in the mid-single digits. And while annual tuition increases will slightly offset the decline in average students, we expect revenue to decline approximately 3% to 4% for the year. But despite these lower revenues, with the efficiency improvements we have made and the excluding the impact of the pre-opening costs of our Long Beach campus, we expect to see year-over-year growth in operating income. During the second half of the year, we expect to see year-over-year growth in both new student applications as well as starts, which should have a very positive impact on 2016. Capital expenditures are expected to be approximately $35 million in 2015, of which approximately $13 million will be attributable to the new Long Beach campus and an additional $11 million is attributable to potentially buying a portion -- a significant portion of our Houston campus as well as making some additional capital improvements. Finally, due to the seasonality of our business and normal fluctuations, I would remind you to be -- to expect volatility within our quarterly results, excuse me. And now Gary, I think we're ready to open the line for questions, please.

[Operator Instructions] As I'm showing no questions, I'd like to turn the conference back over to Kim McWaters for any closing remarks. Kimberly J. McWaters: Thank you, it sounds like we have little competition for our earnings call report out. So I appreciate you tuning in and reviewing our prepared remarks. We appreciate your time and interest in Universal Technical Institute, and we look forward to second quarter 2015 earnings call, which is scheduled for the first part of May. Have a great evening.

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