John Jenson - Vice President and Corporate Controller Kim McWaters - Chairman and Chief Executive Officer Eugene Putnam - President and Chief Financial Officer

Peter Appert - Piper Jaffray Henry Chen - BMO Corey Greendale - First Analysis

Hello and welcome to the Universal Technical Institute’s Third Quarter 2015 Conference Call. [Operator Instructions] As a reminder, today’s conference is being recorded. A replay of the call will be available for 60 days at www.uti.edu or through August 20, 2015 by dialing 412-317-0088 or 877-344-7529 and entering the pass code 10069922. At this time, I would like to turn the conference over to Mr. John Jenson, Vice President Corporate Controller of Universal Technical Institute. Please go ahead, sir.

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 we will 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 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 the conference call, including initial comments by management as well as answers to questions. During today’s call, we will 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 would like to turn the call over to Kim McWaters, our Chairman and Chief Executive Officer. Kim?

Thank you, John and welcome to the call everyone. As we continue to see growth in the demand for UTI graduates, so have we seen greater career opportunities for our students and more employers willing to help them pay for school. This quarter we maintained our intense focus on rebuilding our student population to meet that demand. While making thoughtful investments in our gross strategy balanced with our ongoing work to manage cost and deliver operating efficiencies. I’m pleased to tell you that even in this tough environment our strategy is taking hold and driving recovery in many of our key front end metrics. Our primary objective during the quarter was centered on one thing, reversing the downward year-on-year trend in new student starts with the goal of delivering start growth in the second half of the year. I’m happy to say that after many quarter of decline we did see the trend turn around in the third quarter with new student starts relatively flat to last year. With the launch of our new campus slated to open this month in Long Beach, California, we remain cautiously optimistic that we can achieve new student growth in the fourth quarter. And while it’s currently too close for us to declare victory, we’re working hard to get there. Let me share with you at a high level the things that are helping drive our recovery as well as some of the challenges that may get harder to execute as fast and consistently and efficiently as we’d like. Over the last four quarters we’ve seen an improving trend in new student increase, applications and starts. With third quarter increase and application down just slightly and new student starts flat year-over-year. Total advertising expense for the quarter was approximately 14% of revenue up from 10% in the prior year. The increase was driven by higher advertising cost along with the deliberate increase in our advertising investment to drive incremental increase in the local market and applications in the second half of the year. Although we spent more in advertising this quarter, we still expect the advertising expense for the full year to equate to approximately 12% of revenue as we previously guided. The increase in advertising cost is driven largely by the consumer shift to mobile devices. The cost to win the mobile advertising market are increasing quarter-over-quarter and year-over-year at the same time our share of the mobile market is increasing. The lower supply of mobile ad space is the real driver of the increase in cost. The good news is this incremental spend in the quarter did generate a higher percentage of local increase and this population enrolls at a rate 50% higher than the average and shows to school at a rate 20% higher. A perfect example of the local market focus is what’s happening in Long Beach. This new campus will serve the local commuting population. Today enrollment for this campus is ahead of expectations. The first several start days are full and that has caused us to add sessions where we can to accommodate initial student demand. You may recall that we based the Long Beach campus model on the success we’ve had in Dallas and what a great market that has been for us. I’m also pleased to say that many of our summer and fall start days at Dallas have also been at capacity. The same is true in Orlando for our marine and automotive programs. Now, this is not the case everywhere, but we do believe it is a good sign and demonstrates that we’re beginning to see some recovery in the market and that our new campus model works. In addition, as demand for our graduates continues to grow, so does industry support for our students. Now, more than 2,200 employer locations across the US are offering tuition reimbursement plans for prospective students and graduates. And since the beginning of the year, we’ve grown the number of participating employers by 189%. When employers help students pay for their education, it goes a long way toward overcoming one of their biggest obstacles and that is affordability. Demand for our technicians and the success of so many of our graduates lets us powerfully demonstrate the value of UTI education. With the addition of Fiat Chrysler to our manufacture specific advanced training course offering, the big three US automakers along with more than 30 other industry leading brands are now part of the UTI family creating great job and long-term career opportunities for our students. At a time when negative headlines about our industry seem to dominate the news, we’re getting credit for our long held commitment to doing the right thing for students and for consistently delivering strong student outcomes. We are very proud that four of our campuses, Universal Technical Institute in Avondale, Rancho Cucamonga and Houston as well as our Motorcycle Mechanics Institute campus in Phoenix have been awarded the Accrediting Commission of Career Schools and Colleges School of Excellence Award for the 2014-15 academic year. Only 24 schools in the nation have received this prestigious award this year. While we’re encouraged by the trends and accomplishments we saw in this last quarter, communicating the strong return on invest that our education can provide for the perspective student continues to be our primary challenge and our top priority. In this environment we know we have to be thoughtful about the investments we make, but we also know we cannot simply wait for things to get better. So we will keep testing and trying new strategies to fuel our growth. As we saw in the third quarter some of these strategies will pay off, others will take time to deliver the types of returns we’re looking for and still others may not perform as we expect. We wish the road to recovery was a smooth ride, but we know there are still some bumps along the way. Nothing is happening as fast or efficiently as we’d like, but things are happening and we’re beginning to see our strategies gain traction. As we move into the fourth quarter and on to 2016, we’ll continue to focus on turning our business around, so we can help more students and more employers. We’ll continue to carefully manage our cost and improve operating efficiencies and we will continue to invest in the initiatives that can set us up for long-term results and returns. With that let’s hear from Eugene, who will give us a review of the third quarter’s results.

Thanks, Kim. As a reminder this is typically our weakest quarter of the fiscal year from a revenue and earnings standpoint. With that said, we ended the quarter with an operating loss of $4 million as compared to operating income of $1 million in the same quarter last year. Third quarter operating income was negatively impacted by preopening cost for our Long Beach campus of $1.4 million and severance charges of 400,000. We began the quarter with approximately 1,400 fewer students than we had at the same time last year. Now, despite fewer students scheduled to start in the quarter an improvement of 600 basis points in our share rate enabled us to achieve flat starts this quarter than the prior year. The combination of a lower beginning student population and flat new student starts led to an overall decline in average student population of approximately 9.7% versus last year’s third quarter. The lower student population offset somewhat by higher average revenue per student led to revenues of 85.1million in the quarter which were down 6.8% from last year. The average revenue per student was up from $6,800 to $7,000 per student. Tuition excluded, $5.1 million in the quarter related to our proprietary loan program compared to 5.6 in the third quarter of 2014. And as a reminder we’ve recognized revenue from this program only when we receive cash payments. For the first nine months ended June 30, revenues were approximately 272 million which is down about 4% compared to 283 million for the same period of last year. So for this year tuition excluded 16.5 million related to our loan program compared to 18.4 million last year. Advertising expense was 12.1 million which was up from 9.1 last year and as a percentage of revenue it was 14.2% for the quarter versus 10% in the same period last year. We generated 1.3 million in EBITDA in Q3 compared to 6.7 million last year and for the first nine months of the year, EBITDA was 20.1 million compared to 19.8 last year. Our third quarter net loss was $3 million or a loss of $0.12 per share compared to net income of 400,000 or $0.01 per share in the third quarter of last year. Year-to-date net income is $700,000 or $0.03 per share versus $500,000 or $0.02 last year at this time. The income tax benefit for the quarter was 1.3 million or about 31% of our pretax loss. Our provision for income tax year-to-date is 2.6 million or 79.2% of pretax income. The impact of non-cash adjustments to differed tax asset related to stock based compensation this quarter was approximately $100,000. As we mentioned before it’s likely we will continue to experience variability in income tax expense depending on the price of our common stock and the timing of expiration, exercises, investing on past stock based compensation awards. Assuming our stock price remains relatively consistent the impact of any adjustments to the differed tax asset and related income tax expense for the year ended September 30 is expected to be $1.5 million to $1.6 million. Turning to our balance sheet, we had cash, cash equivalents in investments of roughly $60 million at the end of the third quarter down from 90 million in this same period last year. Just as a reminder this decline is primarily due to our investments this in our new Long Beach campus, the lease termination and acquisition of our Houston campus and some significant share buybacks. In the nine months ended June 30, we used $200,000 of cash for operations compared with generating cash from operations of about $10 million last year. Year-to-date we’ve invested 21.7 million in fixed assets up from 7.8 million last year and we returned 2.4 million to shareholders during the quarter through dividend payments. Now, we’re also continuing our efforts to manage the business efficiently and to reduce cost where appropriate, we believe our path to growth includes bringing our education to reach more students and markets. As Kim mentioned, we’ll be opening our new Long Beach campus later this month with student enrollment ahead of pace to our original plan. Preopening cost have impacted operating income during the first nine months of the year by approximately $2 million and we anticipate operating income to be impacted in the fourth quarter negatively in the range of $2.8 million to $3.2 million. We currently estimate that about 140 students are scheduled to start at our first teach August 17 and we’re excited about that. Our industry relationships continue to be a very important market differentiator for us. We’re very pleased with our new partnership with Fiat Chrysler which was announced during the quarter. Preparations are under way to begin offering this program at our NASCAR Tech campus in North Carolina. In addition we’ve partnered with [indiscernible] to develop a comprehensive CNC machining and manufacture technology program in response to the increased demand for skilled technicians and machines’. Finally, this year we’ve began developing a welding technology program as a new industry training offering in alignment with our core programs. We believe that this program will expand employment opportunities for new students and incremental students and meet the brand standards for our industry customers. We also continue to offer scholarships, our loan program and are approaching more employers and OEM partners to assist ensuring the UTI opportunity with potential students. Our loan program helps students to who are well qualified to attend UTI, but have gap in their financing after completing the financial aid packaging process. This year we have extended approximately 14.3 million in loans under the program compared to about 18.5 million in the same period last year. The average individual loan amount under this program during 2015 was about $4,600. And year-to-date we’ve recorded approximately $4 million of revenue and interest from cash payments received which was up from 2.5 million last year. In addition to offering this program, we continue to offer both merit based and neat based scholarships as well as scholarships for certain groups of students such as out military veterans. At the end of the quarter approximately 37% of students in school were benefiting from a scholarship or discount as compared with 39% last year. These scholarships and discounts reduced tuition revenue in the quarter by 3.8% compared with 3.5% last year. Now, let me turn to the continued success we’re seeing in graduate employment. At the end of the third quarter our overall consolidated graduate employment rate was over a point higher compared to last year. All of our programs with the exception of collision repair 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 for our students. Finally, let me take a minute to talk about our outlook for the reminder of the year. Based on the results of the first nine months ended June 30, our guidance for the full year remains relatively unchanged. We expect revenue to decline for the full year of approximately 3% to 4%, however excluding the impact of the preopening cost of our new Long Beach campus we expect to see year-over-year growth in operating income. We also expect new student starts as well as our average student population to be down for the full year in the mid-single digits. And as Kim said, we’re cautiously optimistic that with a slight uptick in our current pacing we could see slight year-over-year growth in new student starts in the fourth quarter. Now, I’ll turn it back over to Kim.

Thanks, Eugene. In all we’re very pleased to see the progress we made in the last quarter. Yes, we’re still in the tough environment and we would certainly like our progress to be faster and smoother. But we are making progress, our strategy is taking hold and we believe we’re on the right track to deliver for our students, our industry customers and our investors. And now operator I think we’re ready to open the line for questions.

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] First question comes from Peter Appert from Piper Jaffray. Please go ahead.

Hi, thank you. So Eugene, couple of questions on the Long Beach campus. Just wanted to confirms, you said fourth quarter impacts specifically for the startup is 2.8 million to 3.2 million, is that correct?

That’s correct.

Okay, would that suggest that you’re probably going to be very close to breakeven or maybe in negative territory in terms of overall profitability in the fourth quarter, does that sound right?

That’s within the realm of possibilities, yes.

Okay and then can you remind me of just in terms of how the economics on new campus work in terms of the ramp?

Well, it’ll ramp up to be accretive to - we need to get to about 300 students on average for a quarter to be at accounting breakeven. So we would expect to hit that towards the later part of the first quarter of fiscal 2016. So I would say the first quarter will be close to breakeven and then accretive going forward from a P&L standpoint. We’ve always said we expect it to be - a new campus to be cumulative for cash breakeven somewhere in the second to third year.

Okay and that would imply then you should see a fairly significant inflection in your free cash flow in fiscal ‘16, is that fair?

Can you define what you mean by inflection?

A fairly significant step up in what the free cash flow number would look like next year.

Yeah, certainly it’s starting with the second quarter of 2016, the Long Beach campus will be net accretive to the ongoing cash flow that’s generated from, I’ll call the legacy of 11 campuses. So yes, it will start adding to whatever our cash flow position is in - certainly in Q2, potentially in Q1.

Do you have any thought -

I take that back. It will absolutely add to it in Q1 as well assuming that the student start at the pace that we believe it will.

Got it and do you have anything on the drawing board beyond Long Beach at this point that you can talk about?

Nothing to talk about, we’ve mentioned on past calls that we certainly believe in getting the campuses and the education closer to the consumer in more of a metro models, smaller type of campus like we have in Dallas and Long Beach. We are working on where a 13th location might be, but it’s premature to say where that would be at this point.

Okay and are you able to give specific numbers in terms of what the employment rate is this year versus last? You said up 1%, I’m wondering what the actual placement rate is and the average starting wage is?

Yeah, we don’t give it intra year just because it confuses people because of pacing, but I can tell you we’re - last year we finished at 88% and we’re on pace to surpass that this year from a consolidated basis. And I apologize I forgot the second part of your question.

It was on the wage rate.

Well, the starting wage rate. Remember we have several different curriculums, but the wage rate has been improving in the auto diesel curriculum which is our largest curriculum by - I believe it was about five percentage points on a year-over-year basis.

Okay great and one -

I’ll say it another way, wage is raised by about 5%. I believe the BLS data specifically for auto technicians, starting auto technicians range from about depending on the part of the country, $28,000 to $33,000, so that’s slightly dated, but you can do the math and figure out the order of magnitude there.

Got it and just one last thing, maybe Kim, the - it sounds like you’re feeling a little bit more optimistic on the underlying trends, but some of that I guess is currently the cost of the step up in advertising spending. I’m wondering if you have any just further thoughts on what seems to be this disconnect between the very attractive employment dynamics your students faced and the difficulty you’ve had in getting to the positive start numbers.

Well, I think for the past several years we’ve been talking about the negative headlines and certainly that does weigh on consumers, families, educators in terms of their influence over perspective students. So that as a macro factor still exists. I think we’ve seen behavior changes between - with the age group of 18 to 24 year old shifting more towards online and away from television and we have noticed that as they moved more away from television that it has been more difficult to get the younger students unless we are in the high schools in those markets, so we’ve seen some deterioration there. The demand for our graduates looking back over the last several decades is not correlated with front end enrollment as much as we would like, so I think that that’s just part of the model. It’s just more complex and compounded by the environment that we’re operating in. The other thing that we talked about on other calls is that the access to students has been restricted in the high schools and on military bases in ways that we’ve not seen before. So we are trying to reach this audience through the traditional methods such as TV and digital advertising as well as event marketing and we continue to have a strong presence at Monster Gym events and Supercars events where we can reach the young enthusiasts as well as the things that we’ve been talking about over the past several quarters about engaging industry in our employers and future tech events where we’re holding large gatherings of high school students and their families and educators and an employer’s place of business. In addition we’re bringing employers and our industry partners into campuses not for what I call a traditional career fair, but for an engaging conversation about the difference - our type of training and specifically advance training can make for these students. So I favor trying new and different, but we’re still fighting the headlines and we’re also fighting just the normal economic cycle and as I said on our last call I believe we’re getting to the end of that economic cycle where we will be able to reach students in a better way because they’re now raising their heads from the jobs that they can’t stand or that they took out of desperation and saying, I want to do something that I enjoy and I like and by the way it gives me a good income and career pathway. Now, I’ll give you one anecdotal piece of the information. Motorcycle as a program is something that tends to attract students who are more passionate than automotive or the others and we’ve seen steady increase in interest for the motorcycle programs from increase in applications and start rates that is largely driven by passion and to me that suggests that this other student is now stepping away from the job that is dead end or something that they don’t like in pursuing what they love and that to me shows that it’s the beginning of a cycle of recovery from an economic standpoint. Sorry for the long landed answer, but as you can imagine it’s pretty complex environment with all the factors that we’re dealing with.

Yeah, thanks Kim.

And the next question comes from Jeff Silber from BMO Capital Markets. Please go ahead.

Hi, good afternoon, it’s Henry Chen going in for Jeff. You touched upon this a little bit, but I was wondering if you could speak a little bit more to what’s driving the improvement in the number of starts that you’ve seen? Is it corporate related or is there anything specific that you’re doing that you could maybe touch upon? Thanks.

Well, I think as Kim mentioned things at the front end is the final in terms of communicating the opportunities for a career as an entry level technician or beginning to take hold as not only we continue to market but through career fairs and through the demand of the ultimate employers. So that is helping interest. I think from a ability to execute better we have as we’ve talked about in the past invested a lot of money and time in our systems and our processes to meet students and service students and some of it quite frankly is our newer campuses that help get out closer to the consumer. I think part of it is economic, part of it is our ability to execute and part of it is the awareness of the demand and what these careers can generate for a student that is not interested in going to a traditional four year liberal arts college.

Got it and what percentage of starts for the quarter were from high school versus some of the recent corporate partnerships that you’ve announced and launched?

The high school and military starts which we kind of combined for the quarter were about 40% of total starts. Obviously this coming quarter be a significantly higher percentage as our fourth quarter is traditionally, probably 70%, 80% high school students, high school and older.

Okay and the other 60%?

Well, that comes from the adult - what we would call the adult or the career changer channel, somebody that has traditionally been out of high school for greater than a year.

Got it, okay. Thank you.

You’re welcome.

[Operator Instructions] Next question comes from Corey Greendale from First Analysis. Please go ahead.

Hi, this is Ken Wang on for Corey. Thanks for taking my question.

Sure.

So just to begin, one thing I was looking at. It looks like the retention rate has been now sort of on a negative trend for this quarter and the prior quarter and then before that it was either flat or kind of on a positive trend. I’m just wondering what is kind of your view on that, going forward what’s that driving that and maybe what can we expect going forward.

Yeah, I would say it’s actually on a slight tick up this quarter from this quarter last year. So I think you need to be cautious about comparing it on a link quarter basis because of the - the great disparity in seasonality of when we start student. So I know something is look one way on a link quarter basis versus a year-over-year basis, but the persistence this quarter was slightly better than it was this quarter of last year. That said, it’s still not as strong as we would like it to be. So continued effort on trying to work with students prior to or as life changing events happen or getting them the right type of tutoring wherever necessary or being early to identify what might make them a candidate to leave school for whatever reasons and see if we can appropriately accommodate whatever that is. If they can’t do the work, that’s a different story. We don’t want people staying in school that can’t do the work, but those that can be successful and need some type of accommodation, it’s trying to insert ourselves into that process and provide the support as early as possible.

One of the other things, if I could just add to that is as we focus more on local markets and the students are within close proximity to our campus, they will tend to show to school at a higher rate, but they can be more easily distracted and so especially through the economy like that we’ve seen, out teams are very focused on ensuring that not only are we showing more students to school, but we’re retaining them and we need to continue to focus on that local opportunity. Students who relocate hundreds of miles are less likely to check out of school for a couple of weeks or take a break whereas the local ones it’s easy to do. So I think some of that was a mix in population as reflected in that, but the teams very focused on it and lastly I think there’s real opportunity there as we move into the next year or so.

Okay, sure. Thank you. That’s very helpful. And then sort of just looking at the pressure in just getting starts back to obviously where you would want them to be, it seems like really you’re kind of facing two pressures which are the negative media coverage on one hand and then on the other hand kind of pricing. And I guess what I’m wondering is sort of more on the pricing side, do you have any thoughts on kind of increasing scholarships or trying to do something on pricing just to encourage greater starts and greater overall enrollment.

Yeah, if I can let me talk a little bit about the strategy to engage the employers and our industry partners at a much greater level. Again in the past we talked about the demand for the graduates being so strong that employers are willing to reimburse them for their education and/or sponsor them. Historically that level of support has been offered to graduates as they consider a future employer, because the demand is so great and the need is strong across the country, the employers more than 2,000 of them as mentioned in our prepared remarks are partnering with our campuses and offering students in those areas to consider working for them and if they do they’re willing to support their education through our tuition reimbursement plan. To me that is the most important strategic change that we’ve been to implement and I believe it’s in its early stages at this point over what you might see elsewhere with scholarships and such. We do have those, in fact we - we put a lot of focus on understanding where scholarships make sense for the students who need it based financial need as well as on merit. And we don’t believe putting additional scholarship money out there at this point is the answer, it is engaging the support of industry and we’re very pleased with the way industry has stepped up. That sort of information to our admissions team is being distributed and they’ll be trained this summer as we go out into the high schools. I think it will be another key strategic differentiator and certainly of good assistance to our perspective students.

Okay, great. Thanks so much. That’s all I had.

Thank you.

Next question comes from Peter Appert from Piper Jaffray. Please go ahead.

I was hoping Eugene or Kim, could you give us an update on the legal and regulatory situation particularly any comments on the spin [ph] you got US attorney?

Sure Peter, unfortunately the update is nothing more than what we’ve already said in the 8-K that we released and I think for those of you that have interest about that you should assume that when we have something to report we will report it through the normal channels, but until that time we’ll continue to cooperate and meet whatever request the government might have, but we won’t really be providing any comments beyond that.

Okay, gaining full employment I can’t remember. I think you didn’t any failing programs, is that correct?

Are you talking about the kind of draft data that the department released?

Yeah.

That is correct. We had no failing programs with the [indiscernible] that that was some out dated information. So we eagerly await the release of the new information.

And anything else Eugene that you would call out that we should be thinking about in terms of regulatory environment?

Well, it’s still a very focused regulatory environment whether it’s the Department of Education or states, but there’s nothing that I would specifically point to. I will mention that since you raised it, you will see in our queue an update to our 90/10 calculation. The essence of the update is that we recently revised our methodology about what is really a very highly technical manner in which we treat stipends that are awarded to a student with a very specific set of circumstances. So to be transparent, we included detail about that change in the queue, but what I think is important for all of you to keep in mind is that we’ve remained well below the 19% threshold with all of our OPIDs [ph]. I think the range is 72% to 75%, but other than that there’s nothing that I would say is out of the norm or that we have to be conversing about from a regulatory standpoint.

Right, great. Thank you.

That concludes our question-and-answer session. I’d now like to turn the call back over to Kim McWaters for any closing remarks.

Thank you very much everyone for joining our call. We appreciate your time and interest in Universal Technical Institute and we look forward to our fourth quarter earnings call which is currently scheduled for December 1. Have a great evening.

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