Good day, everyone, and welcome to the Career Education Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. And please note that today's event is being recorded. I would now like to turn the conference over to Sam Gibbons of Investor Relations. 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 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 and non-GAAP measures are available within the Investor Relations section at careered.com. So with that, I'd like to turn the call over to Todd Nelson. Todd?

Thank you, Sam. Good afternoon, everyone, and thank you for joining us on today's call. We are pleased with the third quarter operating results, which I will cover shortly. Ashish will then provide more details around the financials and outlook before I provide some closing thoughts at the end of the call. For the quarter, we reported net income of $14.9 million or $0.21 per diluted share, while adjusted earnings, which include certain nonrecurring and significant noncash items were $0.25 per diluted share. Student enrollment at AIU and CTU continue to experience organic growth, which we believe is positively impacted by the organic investments made and operating efficiencies achieved in our student-serving processes and supported by consistent levels of prospective student interest for our programs. University Group total student enrollments increased 5.8% as compared to the third quarter of last year, and new student enrollments were up approximately 39%. The latter is a result of the organic growth at both AIU and CTU as well as the academic calendar redesign at AIU. Overall, we are continuing to meet our goal of sustainable responsible growth and are pleased with the operating and enrollment trends for the quarter. At CTU, new student enrollments grew 9% for the quarter, reflecting continued growth. The University has continued to increase its focus on employee training and development while streamlining its admissions and organizational structure to better serve our students. Prospective students interest and encouraging -- is encouraging, and we continue to experience solid execution within CTUs, Illinois and Arizona admissions and advising centers. CTU's admissions and advising centers in Arizona has now been fully operational for about a year. As employee tenure continues to further improve, and they gain training and experience, we expect to see incremental operating efficiencies from the team. Corporate partnerships have…

Thank you, Todd. I will start with a review of our third quarter results and then discuss our balance sheet and outlook before handing the call back to Todd for his closing remarks. All comparisons are versus the comparative prior year period unless otherwise stated. For the quarter just ended, total company operating income was $19.3 million, an improvement of approximately 325% as compared to operating income of $4.5 million. Adjusted operating income, which exclude certain nonrecurring and significant noncash items is more indicative of the underlying operating performance. This measure came in at $25.8 million for the quarter, an improvement of approximately 67% as compared to $15.5 million. Net income for the quarter was $14.9 million. Diluted EPS was $0.21 per share, while adjusted EPS, which, again, is more indicative of the underlying operating performance was $0.25 per share. Let me quickly discuss 2 of the adjusting items for the quarter, restructuring severance and unused space charges. Included in the quarter was approximately $1.9 million of severance charges related to the process reengineering of our University Group primarily with a nonstudent-serving operation. As an educational institution, we regularly evaluate and analyze ways to improve operations and redistribute resources to serve our students in the most efficient manner. A substantial portion of these operating efficiencies have been committed for reinvestments in student-serving processes. We also recorded $2.3 million of noncash charges to adjust sublease and other assumptions made in conjunction with previously recorded unused space charges related to close campuses. But more importantly, please note that these unused space charges are initially recorded with certain assumptions and, periodically, adjusted under specific accounting rules, but are typically noncash in the period they are recorded. As such, these do not impact our 2018 ending cash outlook, which remains unchanged from the prior…

Thanks, Ashish. In summary, we continue to execute well against our strategy to drive sustainable, responsible growth, while also making appropriate long-term investments in our universities. The education industry remains one of the largest sectors of our economy and postsecondary student enrollments are expected to see modest growth over the next few years. Key takeaways as we wrap up 2018 include, student interest for our programs remains encouraging driving incremental investments throughout the year to support and serve that interest. We believe these student-serving investments support new student enrollment growth, which fully support -- which further support our total student enrollments as we continue to focus on retention and academic outcomes. We believe our universities are aligned favorably with long-term postsecondary education trends, and we believe our programs should continue to represent compelling value to prospective students, as we continue to make technology enhancements across our organization. We expect to close the year on a good note and should have positive momentum entering into 2019 that will enable us to be strategic with respect to future capital allocation decisions. We feel good about the strength of our organization are continually striving to build a leadership position in postsecondary education. Thanks again for joining us today, and we will now open the call for any analyst questions.

[Operator Instructions]. And today' first question will be Peter Appert with Piper Jaffray.

This is Kevin Estok, in for Peter Appert. My first question actually is regarding your pricing strategies at AIU and CTU. I was wondering if -- so revenue decreased at both, and I guess, I was wondering if you could discuss the trend that we should expect going forward?

Well, again, revenues are affected a lot by the degree mix, and it also is affected by the number of students that are coming in as a result of corporate partnership, so that may cause some variability. The good news though as you see new student enrollment trends continues to go on the right direction. We also see, as you know, there is a lag for several quarters where you start to see total enrollment growth coming as well. And so, although, again, it's very difficult to predict that mix. We'll continue to manage that going forward to make sure that we're kind of providing that balance of growth versus the investment that's supporting the demand we're seeing.

And my second question is actually regarding cohort default rates. So this year, there was a bit of an uptick of both schools, both at AIU and CTU. And they're also a bit relatively high compared to industry peers. I was just wondering, if you could discuss, how you plan of reducing the CDR? And then, how much of a focus it is for management?

Sure. Well, and as you know, as you mentioned, the cohort default rate that is reported the final is for 2015, which is a very delayed effect, as you know, of the actual where we are today. And I would say that, again, it was based somewhat on the amount of focus and resources devoted in the past to bring that down from when you get your initial rates. But what we have done is renewed the emphasis. Our feeling is that this -- we should see in future years that coming down is certainly our focus. But, again, I think that it's a result of the work that's been done a while ago. And, obviously, since I've been here there's been a big shift in -- not really a big shift, but certainly a shift in priority to make sure that we have that going in the right direction, and feel confident that it will go in that direction.

[Operator Instructions]. And our next question will be Greg Pendy with Sidoti.

I guess, the first one -- I apologize if I missed it. But I think you said the new students at AIU, it would be down -- you're expecting it to be down in the fourth quarter, is that sequentially or year-over-year?

Year-over-year.

Year-over-year.

Yes. As we've said, we -- yes, then we also then see Q1 of '19 because again if this calendar redesign will be up significantly, and again it will more than offset what you see that downside in Q4.

Okay. Got it. And then just on the capital allocation you kind of mentioned potentially looking at acquisitions, can you just kind of comment, I guess, just overall how you -- right now you're running two different separate universities AIU and CTU. Is that kind of how you would continue to look at the strategy of a third as a separate university? And then these synergies would be more on the back-end processing side?

That's a really good question. And as we look at this, we see what we feel like that we're good at. I think we're good at managing quality universities and improving what we would consider the front-end process, but also the back office services. And at the same time, again, our expertise in delivering high-quality online education is, again, something we think we can deploy across other institutions. And so, obviously, we've seen that with CTU, and now with AIU, as things are improving there. And the ability to add and, again, be very selective, but adding high-quality institutions that would prefer to pursue regionally accredited institutions that are in possibly degree areas, whether it'd be different degree programs or a different part of the market that may be complementary to what we currently offer. Again, that's certainly not mandatory, but that's certainly something that would be part of that strategy. But, again, we are constantly seeing positive opportunities that are coming across, but in a very prudent way. We're very selective and careful, but again using and capitalizing on this infrastructure and expertise we have to look at some other partners to improve their operation and produce some additional growth and opportunity for students.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Todd Nelson for any closing remarks.

Again, we want to thank you for taking the time to join us this evening. And we really look forward to talking with you as we close up the fiscal year next quarter. Thank you very much.

Thank you.

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