Hello, and welcome to Universal Technical Institute's Second Quarter 2018 Conference Call. [Operator Instructions] At this time, all participants are in listen-only mode, and after today's prepared remarks, we will 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 May 15, 2018, by dialing 412-317-0088 or 877-344-7529 and entering the passcode 10119697. At this time, I'd like to turn the conference over to Ms. Jody Kent, Vice President of Communications and Public Affairs for Universal Technical Institute. Please go ahead.

Hello, and thanks for joining us. With me today are Kim McWaters, President and Chief Executive Officer; and Bryce Peterson, Chief Financial Officer. During the call today, we'll update you on our fiscal second quarter 2018 business highlights, our financial results, and our vision for the future. Then we will open the call 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 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 questions. During today's call, we'll refer 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 or loss. Before I turn the call over to Kim McWaters, I would like to inform you, UTI has provided a presentation that supplements today's second quarter 2018 financial results discussion. It can be accessed from the Investor Relations section of our Web site at uti.edu. It is now my pleasure to turn the call over to Kim McWaters.

Thank you, Jody. Good afternoon everyone, and thank you for joining us today. I'm excited to review recent trends and plans. There is growth demand across the nation for trade and technical education, in part due to a shift over the past year or two, a national dialogue about education's role in workforce development. In a country where over 40% of recent college graduates are underemployed parents, students, and increasingly policy makers are moving from a mantra of college for all to a focus on the skills needed to perform in the workplace. Two trends are driving this change. The first is a strong economy that has exacerbated a significant skill shortage, particularly for skilled trades and other technical occupations. These good jobs are going unfilled at the same time as many Americans are either underemployed or unskilled. In many cases there is a mismatch between what industry requires and what education is teaching. The second trend is a greater focus by parents and students on ensuring they are getting a good return on their educational investment. Many policy makers and thought leaders are starting to question whether graduating from a two-year or four-year college ensures the best employment outcomes. There is growing emphasis on the value of stackable credentials, certifications, and life-long learning, and less emphasis on the importance of college degrees. Employers are increasingly hiring from technical schools and boot camps, training on the job via apprenticeships, and sponsoring certificate programs. This is good news for UTI. In order to capitalize on these market trends and showcase the value of our industry-aligned education model and strong outcomes, we unveiled our transformation plan in March, supported by our engagement with the leader in education consulting. The plan is designed to drive new student new student starts, completions, and enhance overall student success. We expect to see the positive impact of this transformation plan on our operating metrics starting in the fourth quarter, with significant benefits to our financial performance starting in fiscal 2019. By fiscal 2020, we expect to generate approximately $30 million of annualized incremental operating income. As we lay the foundation for our return to profitable growth, we expect 2018 will be a year of transformational change in our business. Our transformation plan ties directly into our three primary and interconnected strategic goals. One, to grow new student enrollment and drive top line growth. Two, to capitalize on changes in the market environment and within our prospective student population. And three, to right-size our larger destination campuses to make the best use of our operating footprint, optimizing space balanced with interest in our programs. In the second quarter of 2018, we demonstrated traction in initiatives to support our first company objective, to grow new student enrollment and drive top line growth. Optimization of our marketing spend translated into healthy enquiry growth from our highest converting channel through our Web site, and year-over-year growth in total applications for the second quarter. While the military channel continues to face challenges, adult and high school application growth produced a 7% increase in total applications compared to the same period last year. This growth was supported in part by our tactical investments in rebuilding our new student pipeline through awareness-building media spend. We are pleased with the results thus far, and we expect to see continued improvement stemming from our investments in the third quarter. As a reminder, applications or students who have applied at UTI, they've signed an enrollment agreement, and are generally scheduled to start school within the next 12 months. Through our enroll-to-show efforts we hope to see more of those applications turn into starts in the months ahead. Our show rate initiative which started in the second-half of 2017, improved our show rate by 173 basis points in the first-half of 2018 as compared to the first-half of 2017. While we did lose some ground in the second quarter due to the volume of new initiatives as part of the transformation, we continued to drive improvement in our processes, and expect the initiatives will ultimately continue to increase our show rate. Given our enrollment growth and year-to-date show rate improvement, we believe we remain on track for student starts to grow in 2018 as compared to 2017. More than half of our starts for the year occur in Q4, and we are watching our pipeline closely. During the second quarter, starts were down as expected. This 2.7% or 50 starts year-over-year decline is solely attributed to the military channel, and reflects the continued base access pressures. In contrast, both high school and adult starts grew year-over-year. Start growth is a key driver of our performance, but so is retention. We have identified opportunities for improvement to cultivate higher retention and higher graduation rates. Last year, our retention was the highest it has been in seven years, but in the second quarter we saw retention rates increase an additional 105 basis points year-over-year. We believe that we still have ample opportunity to see retention rates trend higher through our transformation initiatives. As we evaluate the industry landscape and our first and second strategic objectives described before, our industry partnerships continue to be a compelling competitive advantage in attracting and retaining students, and partnering to upscale current technicians in the field. In the second quarter, we extended our agreement with Navistar for an additional three years. We look forward to the first graduating class of transitioning service members from our program with BMW on Camp Pendleton Marine Base in California. That is scheduled for June 15th. We continue to work with many manufacturers and national employers who select and trust UTI to train and upscale their current workforce. In addition, we continue to work with our partners to create solutions and offer front-end support to engage prospective students and their influencers at the high school level and to help us drive new student enrollment. Our partners work with us to demonstrate the value and return on investment of a UTI education by showcasing technician career opportunities in their own companies, and developing incentive packages to help students pay for their education. We are pleased an appreciative that thousands of employers are willing to invest in our graduates and help them pay back their student loan. At the end of the second quarter approximately 3,700 employer locations throughout the U.S. offered incentive programs to the UTI graduates they hire, with the vast majority of them now offering some form of tuition reimbursement. Along with benefiting our students, these programs are valuable to our employer partners because they allow them to attract and retain the best UTI graduates. To align with changing student preferences to live and work at home while pursuing skills training and support delivering technicians where our industry partners need them most, we continue our work to take UTI's education to strategically selected local markets. In this vein, we remain on track to open our third metro campus in Bloomfield, New Jersey this fall. We are working closely with our regulators to obtain all necessary approvals, and are on track to begin teaching on schedule. Community and employer response to the new campus has been overwhelmingly positive. Just this week and last, we posted three VIP hardhat preview tours at the new campus for local elected, education, business, and community leaders. Employer partners for the New Jersey and New York Metro Area have joined us on these tours, touting their strong demand for well-trained transportation technicians and their excitement to have a UTI campus coming to their backyard. On our next call we should be able to give you more specific details on the new campus, its opening date, and enrollment trends. Our third company objective is to right-size our larger destination campuses to make the best use of our operating footprint, optimizing space balanced with interest in our programs. The successful completion of the Houston and Rancho Cucamonga downsizing, which together are expected to optimize an additional 90,000 square feet, will provide approximately $1 million in run rate savings starting in fiscal '19. Total run rate savings from the real estate optimization efforts we started last year are now expected to range between $2.5 million and $3 million starting in fiscal '19. We continue to review opportunities to divest real estate and/or not renew leases, and explore subleasing options for existing capacity. We look forward to providing additional updates as these opportunities materialize. We have the highest confidence in the efforts and the initiatives underway as we drive our transformation. The strategic investments we're making this year are setting the stage for long-term profitable growth. I'd now like to turn the call over to Bryce for a review of our financials.

Thanks, Kim. I'll start with a review of our second quarter business metrics, and then discuss our financial results for the second quarter. Total starts were 1,819, down 50 starts or 2.7% versus the prior year. And as Kim mentioned earlier, this decline was driven primarily by continued base access challenges and reduced numbers of transitioning members in our military channel. Our average student enrollment for the second quarter was 10,394, compared to 10,876 last year, which represents a 4.4% decline. At the end of the second quarter, about 43% of the students in school were benefiting from a UTI scholarship, discount, or institutional grant, as compared to the 38% in the second quarter last year. The year-over-year increase was primarily driven by our institutional grant initiative. These scholarships and discounts reduced revenue by an additional 744,000 this quarter, as compared to the prior year. However, since beginning the institutional grant last year, the ROI on the program is well over 40%. For the second quarter of fiscal 2018, compared to the same quarter last year, revenue was $80.7 million compared to $82.5 million for the prior year period. While the year-over-year revenue variance resulted from the 4.4% decrease in the average student population, the year-to-date average revenue per student of 14,951 is up 2.4% versus prior year, primarily driven by the March 2017 tuition increase and improvements in our employer sponsored programs. Total operating expenses were $89.5 million, compared to $81.8 million for the prior year period. The increase was primarily attributable to planned increases in compensation costs, which were largely a result of our graduate-based incentive compensation program conversion for our admissions representatives, increases in contract services and advertising expense. These increases were aligned with our previously-announced strategic growth transformation. As a reminder, the transition period for our admissions compensation structure will continue through calendar year 2018. Netting the decline in revenue with the increase in operating expenses, our operating loss and net loss for the quarter was $8.8 million compared to operating increase of $0.7 million and net loss of $1.7 million for the prior year period. We recorded a preferred stock cash dividend of $1.3 million in both periods, which was related to our $70 million capital raise in June, 2016. Net loss available for distribution to common shareholders was $10.1 million or $0.40 per diluted share for the quarter, compared to $3 million or $0.12 per diluted share for the prior year period. EBITDA was a loss of $4 million in the quarter, compared to a $5.6 million gain for the prior year period. For the six months ended March 31, 2018, compared to the same period in 2017, revenue was $161.8 million, compared to $166.7 million for the prior year period. The year-over-year revenue variance resulted from 5.2% decrease in our average student population. Total operating expenses were $174.2 million, compared to $164.6 million for the prior year period. Operating loss was $12.4 million, compared to an operating income of $2.1 million. Net loss available for distribution to common shareholders was $12.6 million, or $0.50 per diluted share, compared to $6.1 million or $0.25 per diluted share for the prior year period. EBITDA was a loss of $3.2 million, compared to positive $11.9 million for the same period last year. Our early adoption of the new accounting standard on revenue recognition resulted in a non-cash increase to equity of approximately $37.2 million as of October 1, 2017. From a liquidity perspective, we had cash, cash equivalents, and investments of roughly $82.9 million at March 31, 2018, compared to $97.9 million at September 30, 2017. The decrease in cash was primarily attributable to planned CapEx investments. We are reaffirming our previously provided fiscal 2018 outlook. Student starts are still expected to grow on the low single-digits, average student population is still expected to be down in the mid single-digits. Revenue is still expected to range between $310 million and $320 million. Operating expenses are still expected to range between $348 million and $353 million. And operating loss is still expected between $28 million and $33 million. EBITDA is still expected to be negative, and capital expenditures are still expected to be between $24 million and $25 million. With that, I will turn it back over to Kim for a few final thoughts.

Thank you, Bryce. In the first-half of 2018, we continue to drive improvement in our student enrollment efforts demonstrated by the growth of quality increase and student applications. We look forward to keeping you all updated on the broad range of opportunities we are working hard to realize, our progress in New Jersey and the great things we are doing to help our students change their lives. I now like to open the call for questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Barry Lucas from Gabelli & Company. Please go ahead. Mr. Lucas, your line is open.

Well, it sounds like we're having technical difficulties, but we'll be happy to talk to Barry following the call.

[Operator Instructions] And again, we have Barry Lucas of Gabelli & Company. Please go ahead.

Let's try that again. Can you hear me now?

Yes. Hi, Barry.

Excellent. My bad, it was the old mute button. First question just on the numbers, Bryce, so I look at the G&A expense and the $7-ish million delta from a year ago. How much of that would you -- if you could break it down into the increase in ad spend versus other kind of contributors to the change, and is any part of that related to the consulting contract?

Yes. So, yes, a portion of that is related to the consulting contract for the transformation initiative. The increase in advertising spend was just over $2 million for the period in question. And so we've had some good progress from that investment. And then, as we alluded to in previous calls, a portion of that increase was related to the conversion costs for moving our admissions reps from the fixed to the variable pay.

Okay, thanks. And just could we go back, Kim, and talk about some of the bright spots that you see that may be giving you the confidence to talk about, applications were up. And if you could breakdown sort of where we are in enquiries, to applications, to show, and maybe a little bit more color on what's happening on those show rates?

Sure. So our goal is to increase enquires for the highest converting channels through our Web site. And we are doing that. So that is a positive indicator. A steady improvement in application growth, looking back last quarter it was roughly flat. This year or this quarter it's up. And so far in April we're seeing a similar trend. So when we think forward to second-half of the year and '19, that is a really key leading indicator of application growth. And we're really pleased to see that across high school and adults. When you look at the show rate and improvement, as I mentioned in my prepared remarks, we have a number of initiatives across enrollment, and show rate, and start really outreach to help our students ensure they're able to show to school as planned. And I think we had a bit of a distraction during the quarter as we launched a number of initiatives. So it's nothing that I'm concerned about because we're very focused on it. And I expect to see the trend continue throughout the remainder of the year and into '19, and that trend being improved show rates that we've been seeing for several quarters running.

Okay. When you talk about the show rate, are you distinguishing between the metro campuses and the legacy campuses, so that you know, if I would look at the older big boxes, are the show rates improving there, because we would assume that in the newer smaller schools the show rates are naturally going to be higher?

Yes, what you will see -- and every market is different, but generally students who live within a closer proximity to the campus are going to show at a higher rate. So, the higher the population it needs to relocate, the greater the pressure is on the show rates. So it's our mix shift. We should start to see improvement with our show rates.

All right. Okay, last one from me would be, I think I ask this every quarter, but had progress on the military channel appears you had some success at Camp Pendleton. Is that transferable or are you getting feedback that will help to open some military bases a little bit more?

We have received very positive feedback. I think it's pretty mature at this point to announce the next location or the next program launch, but generally it has been very positive for both BMW at the military base and in terms of our ability to access additional prospect students.

Okay, thank you very much.

You are welcome.

[Operator Instructions] I'm showing no further questions at this time. This concludes the question-and-answer session. I would like to turn the conference back over to Kim McWaters for any closing remarks.

Thank you, and thank you to all of those who are on the call. We look forward to our one-on-one investor call that follow-up to this quarter. And we look forward to updating everyone in a quarter from now as we progress through our transformation. Thank you.

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