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 five key strategies with that goal in mind. These strategies were primarily focused on improving the value proposition for prospective students and thereby improving the overall effectiveness of our marketing, admissions, and financing functions, as well as the educational offerings and employment opportunities for our students. Our first strategy was to strengthen our relationships with industry partners; second, to open a new campus and expand program offerings at our existing locations; third, to make UTI education more affordable and convenient for students; fourth, to shift perceptions and build advocacy with key policymakers, influencers and gatekeepers; and last, to operate the business as efficiently as possible with a strong focus on cost containment. These strategies were intended not only to grow new student starts, but to rebuild our average student population to ultimately train, graduate, and place more students in careers that are in high demand across the transportation, heavy equipment, power generation, and motorsports industry. Let's take just a minute to look at how we did with each of our strategies. This year, we certainly strengthened our relationship with industry partners. During the year, we added two new OEM relationships with Fiat Chrysler and KTM Motorcycles to our impressive list of manufacturer partners. We renewed and extended contracts with more than 10 of our OEM relationships, including Cummins, Ford, Mercedes-Benz, and Yamaha, just to name a few. We also renewed our relationship with NASCAR for another seven years. We added new strategic relationships with Roush Yates, Bosch, and WD-40, as well as expanded our relationship with Pennzoil. We redefined relationships with national employers like AutoNation, Penske Automotive, Hendrick Automotive Group, Ryder, and CarMax to provide career opportunities and tuition reimbursement for our graduates. As a reminder, our OEM relationships are critical to our business strategy, as they validate the company as a credible training partner, and that creates powerful differentiation in our marketing. The relationships with OEMs provide students with industry-relevant training and manufacturer-specific credentials and certifications that are of significant value to both our students and our employers. Manufacturer credentials help a student's earning potential grow higher and it also helps accelerate their career advancement. Our OEM partners invest millions of dollars in vehicles and equipment into our programs, driving our capital investment requirements lower. Last year, roughly half of our auto diesel students graduated from a manufacturer specific training program, up slightly from last year. In addition, our OEM partner sponsored 15% of those students through their programs. The number of students benefiting from manufacturer paid tuition is up about 45% compared with last year. Looking at our second strategy, to open new campuses and expand program offerings. We opened our second metro campus in Long Beach this past quarter to strong student demand. In fact, we started 26% more students than we had planned. This campus was largely based on the success of our Dallas campus, which predominately caters to a commuting population. And while this campus was a drag on margins during fiscal 2015, it will be accretive in 2016. We expect to announce the site of an additional new campus location later next year. As part of this strategic initiative, we also expanded our blended learning program and diesel technology program to our Orlando campus, and we announced two new programs, welding and CNC machining, to be offered late next year. Moving to strategy number three, which was a priority to make a UTI education more affordable and convenient for prospective students, thereby strengthening our value proposition. New campus openings, as well as our blended learning programs, make a UTI education more affordable and convenient by reducing the cost of relocation and allowing the students more free time during the day to work while attending school. To help students offset their educational cost, we also continued to offer both merit and need based scholarships, as well as tuition discounts for our military veterans. This year, our initiative to improve affordability really focused on engaging industry to participate in our tuition reimbursement programs and/or sponsor a student’s manufacturer specific training. As I mentioned earlier, tuition sponsorship for manufacturers is up about 45% this year, providing more students access to manufacturer certification and credentials at no cost. Perhaps what we're most excited about was the strategy to fully engage employers and the promotion of career opportunities available to prospective students by hosting future tech events at their businesses and formalizing their participation in our tuition reimbursement program. In this program, employers agree to reimburse student loans as a condition of employment. This type of offer clearly enhances the UTI value proposition and helps overcome the students' aversion to debt. We ended the year with more than 2,300 employer locations offering formalized tuition reimbursement plans and other incentives to our graduates, up almost 200% since the beginning of the year. In addition, employers are beginning to help us with student recruitment, giving prospective students and their influencer’s real world examples of the career opportunities available to people with the right training. For students who are averse to debt, and looking for a guarantee of a good job after they graduate, our employers are the most powerful ally in demonstrating the true value of our education. At the beginning of 2015, as more and more for-profit schools were being denied access to high schools and military bases, we launched our fourth strategy, an initiative designed to shift perceptions and to build advocacy among the leaders who influence our student’s decisions and make the policies that govern our Business. In return, we saw high schools once closed to all for-profit schools begin to open their doors to us. In key markets where we built relationships with the business, community, and political leaders, we saw perceptions of our education and its value start to turn. Further, we, along with others, have been making our voice heard in Washington and we were pleased to hear that the Department of Education reversed its 2011 ban on graduate-based compensation for admissions representatives. UTI has long believed that its compensation plans for admissions representatives should be based on student success, as measured by completion or graduation from a program of study. Now, for the first time in 4 years, it appears we will be able to return to a variable compensation plan for our admissions representatives, one that is aligned with student graduation and success. This is good for students, employers, and our business. Last, our fifth strategy was to operate this business as efficiently as possible, in light of the most challenging regulatory environment and the slowest economic recovery period that we've faced in our past 50 years of business. During the past five, from the peak of unemployment and the beginning of sweeping regulatory change, we have downsized and right sized the business to better align with our student populations as much as possible. Cost efficiency gains were offset by increased operating costs, driven largely by regulation. We knew some of the challenges we faced were cyclical and that we simply needed to weather the storm. But we also knew that some of the regulatory changes were permanent and that we needed to adapt to a new normal. This past year, knowing that unemployment was nearing the bottom and bound to stabilize, we continued to rationalize the business where we could and invest in those strategies intended to return the Company to growth. Many of our strategies gained traction, yet we did not realize the start growth as we had planned in the fourth quarter. In our quest to be efficient, we lost some effectiveness. I mentioned earlier we would discuss those initiatives that did not work as intended. This past year, we increased our marketing spend with the savings generated from reduced staffing levels across both our field and campus admissions teams. Staffing level reductions were enabled by efficiency gains, driven by process improvement and technology enhancements. What we learned is that the increased marketing spend did not effectively replace the admissions representatives' efforts in the high schools. We also learned that we could not effectively cover large, open territories when vacant for extended periods of time. The combination of the eliminated high school territories and several large unmanned territories equated to the negative variance we saw in the high school market last year. So for 2016, we have we rebuilt several of those territories and have divided some of the larger high school territories where we experienced vacancy for extended times due to illness this past year. This will provide for increased coverage of critical territories and reduce the risk of a territory being opened for extended periods of time. While it was an opportune time to learn whether we could use different, less expensive marketing strategies to reach the young high school students, we learned it did not work and that we need coverage in the field, not on the phones in a call center, to generate high school business. We also learned that no matter what we do, at the end of the cycle when the unemployment falls to its lowest level, it is difficult and costly to reach motivated students who are not already working. Thus despite efficient and effective marketing, our conversion rates continued to suffer requiring us to generate more inquiries at a higher price. Marketing continues to research the millennials and generation Z to more effectively market to and engage them on their smart devices. We continue to test and invest in new marketing efforts, and we are encouraged with the results. We finally begin to see inquiry growth year over year in the fourth quarter and believe sustained recovery in this area will help support the turnaround. We have unwound some well-intended process improvements for our admissions teams that ultimately did not deliver the results we expected. We've intended – I am sorry, we've invested in training and tools for the upcoming year, all of which are intended to strengthen the value proposition for our students and to improve the overall effectiveness of our marketing and admissions efforts. So while we were disappointed by our results in the fourth quarter with starts being down 6.3%, we're far from discouraged. We continue to believe in our long-term prospects, and we are confident that we are on the right track and we will see new student growth in 2016, setting the stage for a much improved fiscal 2017. That, however, requires continued investment in the future, when our student levels are at the lowest point we've seen in many years. While these strategies need time to take hold, the results we are seeing now gives us promise that these investments will translate into the measurable results we desire. If we cut back now, it will only delay our path to growth. So we move forward with confidence and give our business the fuel that is needed this year to deliver the results over the long haul. And with that, I'd like to turn it over to Eugene.

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 period last year. This year, tuition excluded $21.1 million related to our loan program, compared to $23.2 million last year. Our advertising expense was $10.8 million for the quarter, which was up from $9 million last year, and as a percentage of revenue, advertising expense was about 12% from the quarter compared to $9.4 million for the same period last year. We generated $4 million in adjusted EBITDA in Q4, compared to $9.2 million last year. And for the year, adjusted EBITDA was $24.1 million, compared to $29.1 million last year. Our fourth quarter reported loss was $9.8 million, or $0.41 per share, compared to $1.6 million of income or $0.06 per share, in the fourth quarter last year. And for the full year, our loss was $9.1 million or $0.38 per share, compared to net income of $2 million or $0.08 per share in 2014. Finally, the net income tax benefit for the quarter was $4.1 million, or about 29% of pretax loss. The income tax benefit for the year was $1.5 million, or 14.3% of pretax loss. The impact of non-cash adjustments to the deferred tax asset related to stock-based compensation this quarter was approximately $900,000 and $1.8 million for the year. It is likely we will continue to experience variability in income tax expense depending on the price of our common stock and the timing of expiration, exercise, and vesting of past stock-based compensation awards. Assuming our stock price remains relatively constant with its current trading price, the impact of any adjustments to the deferred tax asset and related income tax expense for the year ending September 30, 2016 is expected to be in the range of $1.4 million to $1.6 million. Turning to our balance sheet, we had cash, cash equivalents, and investments of roughly $59.2 million at the end of the year, compared to $96.1 million at the same time last year. The decline is primarily due to our investments this year in our new Long Beach campus, the lease termination, and an acquisition of the majority of our Houston campus, and some significant share repurchases. For the year, we generated cash from operations of $8.2 million versus $27 million last year. And for the year, we invested $29 million in fixed assets, which was up from $12 million last year, again, primarily due to the purchase of the majority of the buildings and land for our Houston campus and the construction of our new Long Beach campus. During the year, we returned $13.9 million to shareholders through dividend payments and share repurchases. Additionally, we declared a cash dividend of $0.02 per share, totaling approximately $0.5 million, which was paid to shareholders on October 5th of this year. While we are also 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 and markets. As Kim mentioned, we opened our new campus in Long Beach in August, with student enrollment ahead of pace to our original plan. And our industry relationships continue to be a very important market differentiator for us. We're very pleased with our new partnership with Fiat Chrysler, and are in the process of obtaining the necessary approvals to begin offering that program at our NASCAR campus in North Carolina. In addition, we partnered with Roush Yates to develop a comprehensive CNC machining and manufacturing technology program in response to the increase in demand for skilled CNC machinists. Finally, we've begun developing a welding technology program, as a new industrial training offering in alignment with our core programs. We believe that these programs will expand employment opportunities for new students and meet the brand standards of our industry customers. As Kim mentioned, we continue to offer scholarships, proprietary loan programs, and are approaching more employers and OEM partners to assist in sharing the UTI opportunity with potential students. Our loan program helps students who are well-qualified to attend UTI but have a gap in their financing after completing the financial aid packaging process. This year, we extended approximately $18.7 million in loans under the program compared to $22.2 million last year. The average individual loan amount this year was about $5,000. For the year, we recorded approximately $5.4 million from cash payments received, which was up from $3.5 million last year. In addition to offering this program, we continue to offer both merit-based and need-based scholarships, as well as tuition discounts for certain groups of students, specifically our military veterans. At the end of the quarter, approximately 35% of students in school were benefiting from a UTI scholarship or discount. These discounts reduced tuition revenue by in the quarter by approximately 3.8%. We are also pleased to report another year of consolidated employment rates of 88%, with seven of our campuses at 90% or greater. All of our programs, with the exception of collision repair, experienced increases from last year's employment rates. We also are continuing to see growth in overall starting wages for our graduates, reflecting the increased demand for our students. Of the fourth quarter 2015 graduates, approximately 41% of students in our auto and diesel programs graduated with manufacturer specific training. Typically, these students with this type of training find employment quicker and have the potential to earn a higher starting wage. Finally, let me take a minute to talk about our outlook for next year. For the full year ending September 30, 2016, we expect new student starts to be up in the low single digits. However, given the number of students currently in school and the timing of the anticipated start growth, we expect our average student population to be down in the mid to high single digits as a percentage compared with 2015. While annual tuition increases will slightly offset the decline in average students, we expect revenue to decline approximately 2%. To support new student growth for this year and in the future, we will continue to invest in growth opportunities during the year, which will result in lower operating income and minimal levels of EBITDA in 2016. Capital expenditures are expected to be in the range of $19.5 million to $20.5 million in 2016. And due to the seasonality of our business and normal fluctuations in our student population, we would expect volatility in our quarterly results. In closing, before we open up for questions, I'd like to take this opportunity to thank our employees for their dedication, their hard work, and their many contributions during the year. This has been a very difficult environment that we've been facing, and our folks have remained very dedicated and highly committed to our purpose. With that, operator, I think we are ready to open the line for questions.

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.