Good day, everyone. And welcome to the Career Education Corporation’s Second Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] And please note that today’s event is being recorded. I would now like to turn the conference over to Sam Gibbons. Please go ahead.

Thank you, William. Good afternoon, everyone and thank you for joining us. With me on the call today is Todd Nelson, President and Chief Executive Officer; and Ashish Ghia, Senior Vice President and Chief Financial Officer. This conference call is being webcast live within the Investor Relations section at careered.com. A webcast replay will also be available on our site and you can always contact the Alpha IR Group for investor relations support. Let me remind you that this afternoon’s earnings release and remarks made today include forward-looking statements as defined in Section 21E of the Securities Exchange Act. These statements are based on assumptions made by and the information currently available to Career Education and involve risks and uncertainties that could cause actual future results, performance, and business prospects and opportunities to differ materially from those expressed in or implied by these statements. These risks and uncertainties include, but are not limited to those factors identified in Career Education’s annual report on Form 10-K for the year ended December 31, 2017, and other filings with the Securities and Exchange Commission. Except as expressly required by the securities laws, the company undertakes no obligation to update those factors or any forward-looking statements to reflect future events, developments or changed circumstances or for any other reason. In addition, today’s remarks refer to non-GAAP financial measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The earnings release and slide presentation, which accompany today’s call and which contain financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures, are available within the Investor Relations section at www.careered.com. So, with that, I’d like to turn the call over to Todd Nelson. Todd?

Thanks, Sam. Good afternoon, everyone, and thank you for joining us on today’s call. I’ll begin with a review of the second quarter operating results, which came in at the high end of our expectations. Ashish will then provide more details around the financials and outlook before I provide some closing thoughts to end the call. We continue to experience growth through the first half of 2018 and the positive momentum and operating metrics and enrollment trends is expected to continue into the third quarter. Our focus on leveraging data and technology enhancing student experiences and investing in student-serving processes has positively impacted enrollment trends across both universities and we believe will further improve student retention and academic outcomes. With the transformation substantially complete, we are confident that the company is well-positioned to achieve sustainable and responsible growth. Second quarter 2018 total company adjusted operating income improved to $23.8 million, as compared to $14.6 million, primarily driven by the substantial completion of our teach-out process. This has enabled us to further prioritize resources towards meeting the increased student interest, we are experiencing. In fact, our universities have incrementally invested in student-serving processes and initiatives across their Illinois and Arizona centers. At CTU, new student enrollments for the quarter increased 5.8% versus the prior year. Student interest remains strong and we are focused on helping them navigate through their on-boarding and orientation process as they acclimate to the university. Total enrollments, which typically lag new enrollment growth grew 3.3% for the quarter, the highest growth in over six quarters. The opening of our Arizona center last fall partly contributed to this enrollment growth in addition to our previously discussed ongoing initiatives. Additionally, our academics and advising functions are leveraging technology and have increased their student outreach with robust orientation and student…

Thank you, Todd. Today, I will start with a review of our second quarter results and then discuss the balance sheet and outlook before handing the call back to Todd for his closing remarks. Total company operating income was $11.3 million for the quarter, an improvement of 24.2%, as compared to $9.1 million in the prior year. Our adjusted operating income, which excludes significant legal settlements, unused space charges and depreciation was $23.8 million for the quarter, as compared to $14.6 million in the prior year. This improvement in performance was primarily driven by reduced operating costs at the teach-out campuses. Also included in the quarter was an increase of $6 million in legal settlement expenses, which were partially offset with a recovery of $2.5 million for past claims, a substantial portion of this recovery along with other operating efficiencies have been committed to incremental investments in students serving operations that Todd mentioned earlier. In fact, staffing for our universities is up approximately 9% versus the prior year, while marketing efficiencies, if any, will be more muted in future quarters. We have relatively optimized our overall spend and are now looking to opportunistically increase our marketing investments. This strength made by some quarterly variability in our performance. But we remain confident variability in our performance while we remain confident in our full-year outlook provided last quarter. Second quarter University Group revenue improved by $4.4 million or 3.2% to $141.8 million as compared to the prior year, both universities contributed to this revenue growth primarily driven by the positive momentum in our enrollment trends. CTU experienced revenue growth of $2.1 million or 2.3%, while revenues at AIU grew by $2.4 million or 5.1% versus the prior year. Also impacting AIU’s current quarter revenue before additional revenue generating days as compared to…

Thanks, Ashish. The education industry remains one of the biggest sectors of our economy and post-secondary enrollments are expected to see growth over the next few years. We have completed a good first half of 2018 and are well-positioned to continue meeting our objectives for sustainable and responsible growth. A few key points to note include first overall operating metrics and trends are in line with or better than our expectations. Two, we have accelerated our investments in student-serving processes and initiatives. And three, there will be a strong focus on data technology and academic quality. To wrap up, our operating performance is allowing and encouraging us to accelerate growth investments and technology enhancements that should align our university with favorable long-term demand trends in post-secondary education. We are taking a measured approach to balance our objectives of responsible and sustainable growth with our commitments to improve student experiences retention and academic outcomes, and remain confident in the long-term academic value proposition of our universities. Thank you again for joining us today and we’ll now open the call for any analyst questions.

[Operator Instructions] And our first question today will be Peter Appert with Piper Jaffray. Please go ahead.

Thanks. Good afternoon. Todd, I believe you said something along the lines of potentially less room for incremental marketing efficiency going forward. I was just hoping you could expand on that and what the implications of that might be.

Well, exactly, I think, Ashish, comment on it, but the bottomline is this we have had significant as you know decreases in our overall marketing spend and as a percentage of revenue, so we have been encourage by that. And what we are seeing now is opportunities to invest in, because the demand continues, certainly, is something we want in and take advantage of that. But I would just say that, being careful to not, I guess, to not expect those types of decreases, because again, where we started. I don’t know, Ashish, do you want to add to that?

I think that is correct, Peter, what we are referring to is as you can see in the second quarter, our advertising expenses are pretty much flat to second quarter last, but the first quarter or the last quarter where we had significant efficiencies, so that is all we are trying to point out.

Okay. Student acquisition costs for the university? Do you see any significant changes there?

Well, again, I think we are doing things to become more efficient, but we’ll need to see how that plays out. But as of now, we are not projecting any significant decreases in that.

And then, Peter, one more thing to add here, also recall that we also mentioned that in addition to decreasing efficiencies, we are also trying to reinvest back into our marketing spend. So, that will be another reason why our year-over-year spend may not be significantly lower.

And I will just add one thing, because the main -- that cost is divided between admissions cost and advertising and as you know, we have been investing significantly in adding enrolment staff after several years of being flat and so it does take a little bit of time to ramp up. So, again, I think it’s -- we are encouraged by the fact that we are still experiencing the demand to support adding more enrolment staff.

Right. Understood. And then, apologies if I might have missed this in your comments. I know the retention metrics are distorted because of the scheduling changes. Could you just comment on what you’re seeing in terms of retention trends at AIU specifically?

Yeah. Again, what we are seeing is again, they’ve implemented several changes that we believe in time are going to allow them to see retention in particular. They’ve gone through, as Peter referred to before, as the model and that’s something that we found from our past history, those types of models were more effective. It just takes a little bit of time for them to actually get fully implemented and then to convert from the old process. That’s what I see. Ashish, you want to add anything to that?

No. I think, that is correct, Peter. And as long as we continue to translate the new enrolment growth into total enrolments, which is what we expect in Q3, our retention efforts are being supported by the initiatives. So I think we feel good about it.

And any comments on the relative profitability of CTU versus AIU. I know you’ve talked about this in the past in terms of the needing to get to scale at AIU, but just thoughts on ability to narrow the margin gap between the two universities?

Well, I think you have two things going on there. One is, CTU is continuing to grow. So, that will certainly take long, so to close the gap which is a good thing. But I -- if you just look at kind of the fundamental attributes of AIU, they’re similar to CTU, they’re similarly priced, they have, as you know, the same type of accreditation, good leadership of all. And so, our view of that is, again, as you continue to make that investment, which we are doing, we think in time again that we’ll be able to certainly get to -- we hope to be able to get to where CTU is. Again, CTU is a moving target, because they’re growing. So it’s hard to know exactly when and how long, but we certainly feel that has the possibility.

Right. Great. Thanks, gentlemen.

Thanks, Peter.

Thank you, Peter.

And the next questioner will be Greg Pendy with Sidoti. Please go ahead.

Hey, guys. Thanks for taking my questions. I guess, just one question just on the guidance. I am assuming just if it’s not surfacing in the third quarter, you’ve now completely cycled through your unused space charges, is that fair to say?

Yeah. That is correct. We have mainly cycled through our unused space charges as it relates to our teach-outs.

Okay. Great. And then, I guess, just one bigger picture just on the growth, you mentioned that it was the best you’ve seen in six quarters at CTU. Is there anything to specifically call out, you mentioned corporate partnerships, but what type of students or what are the areas of strength that you’re seeing?

Well, I think, we see it across the board. I mean, obviously, some of those ebbs and flows depending on what you’re -- again, what’s happening in the market, but it’s really across the board. I think that in addition to obviously the things that we have mentioned, the fact that we continue to add enrollment staff based on the demand, based on the inquiries that we are getting, that’s driving the growth and we have been able to invest in adding enrollment staff whereas in the past we -- CTU is relatively flat.

Okay. That’s helpful. Thanks.

You bet.

And at this time, we are showing no further questions. So, I’ll turn the call back to Todd Nelson for any closing comments.

Well, we just want to again thank everybody for joining us and we look forward to speaking with you again next quarter. Thank you.

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